As filed with the Securities and Exchange Registration No. 333-56297
Commission on February 16, 1999 Registration No. 811-2512
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
- --------------------------------------------------------------------------------
POST-EFFECTIVE AMENDMENT NO. 4 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:
[X] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on ________________ pursuant to paragraph (b) of Rule 485
<PAGE>
VARIABLE ANNUITY ACCOUNT B
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
LOCATION - PROSPECTUS DATED AUGUST 19, 1998,
FORM N-4 AND AS AMENDED BY SUPPLEMENTS DATED OCTOBER 1,
ITEM NO. PART A (PROSPECTUS) 1998, DECEMBER 14, 1998 AND FEBRUARY 16, 1999
<S> <C> <C>
1 Cover Page........................................... Cover Page
2 Definitions.......................................... Definitions
3 Synopsis............................................. Prospectus Summary, and as amended; Fee Table, and
as amended
4 Condensed Financial Information...................... Condensed Financial Information, and as amended
5 General Description of Registrant, Depositor, and
Portfolio Companies.................................. The Company; Variable Annuity Account B; The
Funds, and as amended
6 Deductions and Expenses.............................. Charges and Deductions, and as amended
7 General Description of Variable Annuity Contracts....
Purchase; Miscellaneous
8 Annuity Period....................................... Annuity Period, and as amended
9 Death Benefit........................................ Death Benefit During Accumulation Period; Death
Benefit Payable During Annuity Period
10 Purchases and Contract Value......................... Purchase; Contract Valuation
11 Redemptions.......................................... Right to Cancel; Withdrawals
12 Taxes................................................ Tax Status
13 Legal Proceedings.................................... Miscellaneous - Legal Matters and Proceedings
14 Table of Contents of the Statement of Additional
Information.......................................... Contents of the Statement of Additional
Information
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOCATION - STATEMENT OF ADDITIONAL INFORMATION
FORM N-4 PART B (STATEMENT OF DATED AUGUST 19, 1998, AND AS AMENDED BY
ITEM NO. ADDITIONAL INFORMATION) SUPPLEMENT DATED FEBRUARY 16, 1999
<S> <C> <C>
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, and as amended
22 Annuity Payments..................................... Annuity Payments
23 Financial Statements................................. Financial Statements
</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>
PARTS A AND B
The Prospectus and Statement of Additional Information are incorporated in Parts
A and B, respectively, of this Post-Effective Amendment No. 4 by reference to
Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4 (File
No. 333-56297), as filed electronically on August 4, 1998 and declared effective
on August 19, 1998 and by reference to Prospectus Supplement dated October 1,
1998 as filed in Post-Effective Amendment No. 1 to the Registration Statement on
Form N-4 (File No. 333-56297), as filed electronically on September 14, 1998 and
declared effective on October 1, 1998 and by reference to Prospectus Supplement
dated December 14, 1998 as filed in Post-Effective Amendment No. 2 to the
Registration Statement on Form N-4 (File No. 333-56297), as filed electronically
on December 14, 1998 and declared effective on December 14, 1998.
A Prospectus Supplement and a Supplement to the Statement of Additional
Information each dated February 16, 1999 are included in Parts A and B,
respectively, of this Post-Effective Amendment No. 4.
<PAGE>
VARIABLE ANNUITY ACCOUNT B
Aetna Life Insurance and Annuity Company
Supplement dated February 16, 1999
to the Prospectus dated August 19, 1998
Aetna Variable Annuity--Group and Individual
Deferred Variable Annuity Contracts.
The information in this Supplement updates and amends the information contained
in the Prospectus dated August 19, 1998. You should read this Supplement along
with the Prospectus.
1. The following information replaces the first paragraph of the "Option
Packages" section on page 7 of the Prospectus:
There are currently three Option Packages that may be available under the
Contract. You select an Option Package in the Application.
2. "(May Not Be Available In All States)" is added to the beginning of "Option
Package III" column in the table on page 8 of the Prospectus.
3. The following information replaces the "Deferred Sales Charge" section on
page 11 of the Prospectus:
Deferred Sales Charge for withdrawals under each Contract (as a percentage
of each Purchase Payment withdrawn).
For Contracts issued outside of the State of New York:
<TABLE>
<CAPTION>
CONTRACTS OTHER THAN
ROTH IRA CONTRACTS: ROTH IRA CONTRACTS:
- -------------------------------------------------- -----------------------------------------------
Years From Receipt of Deferred Sales Completed Account Deferred Sales
Purchase Payment Charge Deduction Years Charge Deduction
- ----------------------------- ------------------ --------------------------- -----------------
<S> <C> <C> <C>
Less than 2 7% Less than 1 5%
2 or more but less than 4 6% 1 or more but less than 2 4%
4 or more but less than 5 5% 2 or more but less than 3 3%
5 or more but less than 6 4% 3 or more but less than 4 2%
6 or more but less than 7 3% 4 or more but less than 5 1%
7 or more 0% 5 or more 0%
</TABLE>
For Contracts issued in the State of New York:
<TABLE>
<CAPTION>
FOR ALL CONTRACTS
- -------------------------------------------------
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>
4. "(May Not Be Available In All States)" is added to the beginning of the
"Option Package III" section on page 11 of the Prospectus.
5. "For Contracts issued outside of the State of New York" is added to the top
of each of the Hypothetical Examples on pages 15-20.
6. For Contracts issued in the State of New York, the following Hypothetical
Examples are added before the "CONDENSED FINANCIAL INFORMATION" on page 21
of the Prospectus.
Form No.: X.56297-98-2
<PAGE>
For Contracts issued in the State of New York:
HYPOTHETICAL EXAMPLE: Option Package I
THIS EXAMPLE IS PURELY HYPOTHETICAL. YOU SHOULD NOT CONSIDER IT 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, we have converted the maximum maintenance fee of
$30.00 that can be deducted under the Contract to a percentage of assets equal
to 0.019%.
<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 shown, Value, or if you annuitize at the end
you would pay the following expenses, of the periods shown, you would pay the
including any applicable deferred following expenses (no deferred sales
sales charge: 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>
Aetna Balanced VP, Inc. $70 $ 85 $103 $187 $16 $50 $ 85 $187
Aetna Bond VP $69 $ 82 $ 98 $176 $15 $46 $ 80 $176
Aetna Growth VP $72 $ 91 $114 $208 $18 $56 $ 96 $208
Aetna Growth and Income VP $70 $ 85 $103 $186 $16 $49 $ 85 $186
Aetna Index Plus Large Cap VP $69 $ 84 $100 $181 $15 $48 $ 83 $181
Aetna International VP $75 $102 $132 $245 $22 $66 $114 $245
Aetna Money Market VP $67 $ 77 $ 90 $159 $13 $42 $ 72 $159
Aetna Real Estate Securities VP $73 $ 96 $121 $224 $19 $60 $104 $224
Aetna Small Company VP $73 $ 96 $121 $224 $19 $60 $104 $224
AIM V.I. Capital Appreciation Fund $71 $ 88 $107 $195 $17 $52 $ 90 $195
AIM V.I. Growth Fund $71 $ 89 $110 $201 $17 $54 $ 92 $201
AIM V.I. Growth & Income Fund $71 $ 88 $108 $196 $17 $52 $ 90 $196
AIM V.I. Value Fund $71 $ 88 $108 $198 $17 $53 $ 91 $198
Fidelity VIP Equity-Income Portfolio $70 $ 84 $102 $184 $16 $49 $ 84 $184
Fidelity VIP High Income Portfolio $71 $ 89 $109 $199 $17 $53 $ 91 $199
Fidelity VIP II Contrafund Portfolio $71 $ 89 $109 $199 $17 $53 $ 91 $199
Janus Aspen Aggressive Growth Portfolio $71 $ 90 $111 $204 $18 $54 $ 94 $204
Janus Aspen Balanced Portfolio $72 $ 92 $115 $211 $18 $57 $ 97 $211
Janus Aspen Growth Portfolio $71 $ 88 $108 $198 $17 $53 $ 91 $198
Janus Aspen Worldwide Growth Portfolio $71 $ 89 $110 $202 $17 $54 $ 93 $202
MFS Total Return Series $74 $ 97 $124 $229 $20 $62 $106 $229
Oppenheimer Aggressive Growth Fund $71 $ 89 $110 $201 $17 $54 $ 92 $201
Oppenheimer Growth & Income Fund $72 $ 92 $115 $211 $18 $57 $ 97 $211
Oppenheimer Strategic Bond Fund $72 $ 92 $115 $211 $18 $57 $ 97 $211
Portfolio Partners MFS Emerging Equities
Portfolio $72 $ 92 $114 $209 $18 $56 $ 96 $209
Portfolio Partners MFS Research Growth
Portfolio $72 $ 93 $116 $214 $18 $57 $ 98 $214
Portfolio Partners MFS Value Equity
Portfolio $73 $ 94 $119 $219 $19 $59 $101 $219
Portfolio Partners Scudder International
Growth Portfolio $74 $ 97 $124 $229 $20 $62 $106 $229
</TABLE>
* This Example would not apply if a non-lifetime variable Annuity Payout Option
is selected, and a lump sum payment is requested within three years after
Annuity Payments start, since the lump sum payment will be treated as a
withdrawal during the Accumulation Period and will be subject to any
deferred sales charge that would then apply. (Refer to Example A.)
Form No.: X.56297-98-2
<PAGE>
For Contracts issued in the State of New York:
HYPOTHETICAL EXAMPLE: Option Package II
THIS EXAMPLE IS PURELY HYPOTHETICAL. YOU SHOULD NOT CONSIDER IT 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 0.019%.
<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 shown, Value, or if you annuitize at the end
you would pay the following expenses, of the periods shown, you would pay the
including any applicable deferred following expenses (no deferred sales
sales charge: 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>
Aetna Balanced VP, Inc. $73 $ 94 $119 $219 $19 $59 $101 $219
Aetna Bond VP $72 $ 91 $114 $208 $18 $56 $ 96 $208
Aetna Growth VP $75 $100 $129 $240 $21 $65 $111 $240
Aetna Growth and Income VP $73 $ 94 $118 $218 $19 $58 $101 $218
Aetna Index Plus Large Cap VP $72 $ 93 $116 $214 $18 $57 $ 98 $214
Aetna International VP $78 $111 $147 $276 $25 $75 $129 $276
Aetna Money Market VP $70 $ 87 $106 $192 $16 $51 $ 88 $192
Aetna Real Estate Securities VP $76 $105 $137 $255 $23 $69 $119 $255
Aetna Small Company VP $76 $105 $137 $255 $23 $69 $119 $255
AIM V.I. Capital Appreciation Fund $74 $ 97 $123 $227 $20 $61 $105 $227
AIM V.I. Growth Fund $74 $ 98 $125 $233 $20 $63 $108 $233
AIM V.I. Growth & Income Fund $74 $ 97 $123 $228 $20 $62 $106 $228
AIM V.I. Value Fund $74 $ 97 $124 $229 $20 $62 $106 $229
Fidelity VIP Equity-Income Portfolio $73 $ 94 $118 $217 $19 $58 $100 $217
Fidelity VIP High Income Portfolio $74 $ 98 $124 $231 $20 $62 $107 $231
Fidelity VIP II Contrafund Portfolio $74 $ 98 $124 $231 $20 $62 $107 $231
Janus Aspen Aggressive Growth Portfolio $74 $ 99 $127 $236 $21 $64 $109 $236
Janus Aspen Balanced Portfolio $75 $101 $131 $243 $21 $66 $113 $243
Janus Aspen Growth Portfolio $74 $ 97 $124 $229 $20 $62 $106 $229
Janus Aspen Worldwide Growth Portfolio $74 $ 99 $126 $234 $20 $63 $108 $234
MFS Total Return Series $77 $107 $139 $260 $23 $71 $121 $260
Oppenheimer Aggressive Growth Fund $74 $ 98 $125 $233 $20 $63 $108 $233
Oppenheimer Growth & Income Fund $75 $101 $131 $243 $21 $66 $113 $243
Oppenheimer Strategic Bond Fund $75 $101 $131 $243 $21 $66 $113 $243
Portfolio Partners MFS Emerging Equities
Portfolio $75 $101 $130 $241 $21 $65 $112 $241
Portfolio Partners MFS Research Growth
Portfolio $75 $102 $132 $245 $22 $66 $114 $245
Portfolio Partners MFS Value Equity
Portfolio $76 $104 $134 $250 $22 $68 $116 $250
Portfolio Partners Scudder International
Growth Portfolio $77 $107 $139 $260 $23 $71 $121 $260
</TABLE>
* This Example would not apply if a non-lifetime variable Annuity Payout Option
is selected, and a lump sum payment is requested within three years after
Annuity Payments start, since the lump sum payment will be treated as a
withdrawal during the Accumulation Period and will be subject to any
deferred sales charge that would then apply. (Refer to Example A.)
Form No.: X.56297-98-2
<PAGE>
For Contracts issued in the State of New York:
HYPOTHETICAL EXAMPLE: Option Package III (If Available)
THIS EXAMPLE IS PURELY HYPOTHETICAL. YOU SHOULD NOT CONSIDER IT 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 0.019%.
<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 shown, Value, or if you annuitize at the end
you would pay the following expenses, of the periods shown, you would pay the
including any applicable deferred following expenses (no deferred sales
sales charge: 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>
Aetna Balanced VP, Inc. $74 $ 99 $126 $235 $20 $63 $109 $235
Aetna Bond VP $73 $ 96 $121 $224 $19 $60 $104 $224
Aetna Growth VP $76 $105 $137 $255 $23 $69 $119 $255
Aetna Growth and Income VP $74 $ 99 $126 $234 $20 $63 $108 $234
Aetna Index Plus Large Cap VP $74 $ 97 $124 $229 $20 $62 $106 $229
Aetna International VP $80 $116 $154 $290 $26 $80 $136 $290
Aetna Money Market VP $72 $ 91 $114 $208 $18 $56 $ 96 $208
Aetna Real Estate Securities VP $78 $110 $144 $271 $24 $74 $126 $271
Aetna Small Company VP $78 $110 $144 $271 $24 $74 $126 $271
AIM V.I. Capital Appreciation Fund $75 $101 $131 $243 $21 $66 $113 $243
AIM V.I. Growth Fund $76 $103 $133 $248 $22 $67 $115 $248
AIM V.I. Growth & Income Fund $75 $102 $131 $244 $21 $66 $113 $244
AIM V.I. Value Fund $75 $102 $132 $245 $22 $66 $114 $245
Fidelity VIP Equity-Income Portfolio $74 $ 98 $125 $233 $20 $63 $108 $233
Fidelity VIP High Income Portfolio $75 $102 $132 $246 $22 $67 $114 $246
Fidelity VIP II Contrafund Portfolio $75 $102 $132 $246 $22 $67 $114 $246
Janus Aspen Aggressive Growth Portfolio $76 $104 $135 $251 $22 $68 $117 $251
Janus Aspen Balanced Portfolio $77 $106 $138 $258 $23 $70 $120 $258
Janus Aspen Growth Portfolio $75 $102 $132 $245 $22 $66 $114 $245
Janus Aspen Worldwide Growth Portfolio $76 $103 $134 $249 $22 $68 $116 $249
MFS Total Return Series $78 $111 $147 $276 $25 $75 $129 $276
Oppenheimer Aggressive Growth Fund $76 $103 $133 $248 $22 $67 $115 $248
Oppenheimer Growth & Income Fund $77 $106 $138 $258 $23 $70 $120 $258
Oppenheimer Strategic Bond Fund $77 $106 $138 $258 $23 $70 $120 $258
Portfolio Partners MFS Emerging Equities
Portfolio $76 $105 $137 $256 $23 $70 $119 $256
Portfolio Partners MFS Research Growth
Portfolio $77 $107 $139 $260 $23 $71 $121 $260
Portfolio Partners MFS Value Equity
Portfolio $77 $108 $142 $265 $24 $72 $124 $265
Portfolio Partners Scudder International
Growth Portfolio $78 $111 $147 $276 $25 $75 $129 $276
</TABLE>
* This Example would not apply if a non-lifetime variable Annuity Payout Option
is selected, and a lump sum payment is requested within three years after
Annuity Payments start, since the lump sum payment will be treated as a
withdrawal during the Accumulation Period and will be subject to any
deferred sales charge that would then apply. (Refer to Example A.)
Form No.: X.56297-98-2
<PAGE>
7. The Condensed Financial Information section on page 21 of the Prospectus is
replaced with the following:
CONDENSED FINANCIAL INFORMATION
(Selected data for accumulation units outstanding throughout the period)
The condensed financial information presented below for the period ended
September 30, 1998 is derived from the unaudited interim financial statements
of the separate account. The financial statements for the period ended
September 30, 1998 are included in the February 16, 1999 supplement to the
Statement of Additional Information.
<TABLE>
<CAPTION>
Option Package II Option Package III
1.25% Total Charges 1.40% Total Charges
1998 1998
--------------------- --------------------
<S> <C> <C>
AETNA BALANCED VP, INC.
Value at beginning of period $ 9.276
Value at end of period $ 9.160
Increase (decrease) in value of accumulation unit(1) (1.25)%(2)
Number of accumulation units outstanding at end of period 3,234
AETNA INDEX PLUS LARGE CAP VP
Value at beginning of period $ 8.964
Value at end of period $ 8.740
Increase (decrease) in value of accumulation unit(1) (2.50)%(2)
Number of accumulation units outstanding at end of period 1,833
AETNA MONEY MARKET VP
Value at beginning of period $10.086
Value at end of period $10.086
Increase (decrease) in value of accumulation unit(1) 0.00%(2)
Number of accumulation units outstanding at end of period 2,479
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period $ 8.746
Value at end of period $ 8.542
Increase (decrease) in value of accumulation unit(1) (2.33)%(2)
Number of accumulation units outstanding at end of period 941
JANUS ASPEN BALANCED PORTFOLIO
Value at beginning of period $9.275
Value at end of period $9.110
Increase (decrease) in value of accumulation unit(1) (1.78)%(2)
Number of accumulation units outstanding at end of period 2,157
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period $ 8.027
Value at end of period $ 7.937
Increase (decrease) in value of accumulation unit(1) (1.12)%(2)
Number of accumulation units outstanding at end of period 1,018
</TABLE>
(1) The above figures are calculated by subtracting the beginning accumulation
unit value from the ending accumulation unit value, and dividing the
result by the beginning accumulation unit value.
(2) Reflects less than a full year of performance activity. Funds were first
received in this option during September 1998.
As of September 30, 1998, no contracts had been issued under Option Package I.
Accordingly, there is no condensed financial information for Option Package I
as of that date.
Form No.: X.56297-98-2
<PAGE>
8. The first paragraph and the tables in the "Deferred Sales Charge" section on
page 26 of the Prospectus are deleted and replaced with the following:
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 Purchase
Payments withdrawn from the Subaccounts and the Guaranteed Account or Fixed
Account. The deferred sales charge is based on the number of years which have
elapsed since the Purchase Payment was received, except for Roth IRAs issued
outside of the State of New York where the deferred sales charge is based on
the number of completed Account Years which have elapsed since the Account
Effective Date. 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 tables below. For
Roth IRAs issued outside of the State of New York, if the Purchase Payment is a
rollover from another contract issued by the Company or an affiliate where the
deferred sales charge has been waived, then the deferred sales charge is based
on the number of completed Account Years since the date of the initial payment
to the predecessor contract. The Company reserves the right to not accept any
rollover contribution to an existing contract.
For Contracts issued outside of the State of New York:
<TABLE>
<CAPTION>
CONTRACTS OTHER
THAN ROTH IRA CONTRACTS: ROTH IRA CONTRACTS:
- -------------------------------------------------- -----------------------------------------------
Years From Receipt of Deferred Sales Completed Account Deferred Sales
Purchase Payment Charge Deduction Years Charge Deduction
- ----------------------------- ------------------ --------------------------- -----------------
<S> <C> <C> <C>
Less than 2 7% Less than 1 5%
2 or more but less than 4 6% 1 or more but less than 2 4%
4 or more but less than 5 5% 2 or more but less than 3 3%
5 or more but less than 6 4% 3 or more but less than 4 2%
6 or more but less than 7 3% 4 or more but less than 5 1%
7 or more 0% 5 or more 0%
</TABLE>
For Contracts issued in the State of New York:
<TABLE>
<CAPTION>
FOR ALL CONTRACTS
- -------------------------------------------------
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>
9. "(May Not Be Available In All States)" is added to the beginning of the
"Option Package III" section on page 32 of the Prospectus.
10. "(May Not Be Available In All States)" is added to the beginning of the
"Transfers to Option Package III" column of the table on page 35 of the
Prospectus.
Form No.: X.56297-98-2
<PAGE>
VARIABLE ANNUITY ACCOUNT B
Aetna Life Insurance and Annuity Company
Supplement dated February 16, 1999 to the
Statement of Additional Information dated August 19, 1998
Aetna Variable Annuity - Group and Individual Deferred Variable Annuity
Contracts
o The section entitled "AVERAGE ANNUAL TOTAL RETURN QUOTATIONS -
Standardized and Non-Standardized" is deleted and replaced with the
following:
The tables below reflect the average annual standardized and
non-standardized total return quotation figures for the periods ended
September 30, 1998 for the variable investment options under the Contracts
issued by the Company. These returns reflect the maximum charges under the
Contract (i.e. Option Package III issued outside of New York) as described
under "General" above. The Company may also advertise returns based on
lower charges that may apply to particular Contracts under Option Packages
I and II and Option Package III issued in New York.
For the Subaccounts funded by the Portfolio Partners portfolios, two sets
of performance returns are shown for each Subaccount: one showing
performance based solely on the performance of the Portfolio Partners
portfolio from November 28, 1997, the date the Portfolio commenced
operations; and one quotation based on (a) performance through November
26, 1997 of the fund it replaced under many Company contracts, and (b)
after November 26, 1997, performance of the Portfolio Partners portfolio.
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 non-standardized performance, the "Since Inception" column shows
average annual total return since the Fund's inception date.
Form No. XSAI.56297-98
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Date Contributions
First Received
STANDARDIZED Under the Separate
Account
- ---------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 5 Year 10 Year Inception*
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Balanced VP, Inc. (2.25%) 11.65% 10.39% 06/30/1989
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(1) 0.91% 4.49% 7.56%
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP (2.11%) 17.53% 05/30/1997
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP(1) (13.94%) 13.68% 13.11%
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 2.30% 19.37% 10/31/1996
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna International VP (22.54%) 05/05/1998
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2) (2.24%) 3.06% 4.32%
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Real Estate Securities VP (16.39%) 05/06/1998
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP (23.61%) (2.47%) 05/30/1997
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio (9.07%) 16.34% 12/30/1994
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio (15.35%) 6.01% 06/30/1995
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio (3.91%) 16.45% 06/30/1995
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio (6.20%) 8.81% 10/31/1994
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 6.31% 17.29% 01/31/1995
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio (2.68%) 16.33% 07/29/1994
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio (4.91%) 21.47% 04/28/1995
- ---------------------------------------------------------------------------------------------------------------------------------
MFS Total Return Series (0.73%) 11.35% 05/31/1996
- ---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund (24.43%) (6.43%) 05/30/1997
- ---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Growth & Income Fund (17.51%) (2.49%) 05/30/1997
- ---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund (5.48%) (0.70%) 05/30/1997
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio (8.57%) 11/28/1997
- ---------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/Portfolio Partners
MFS Emerging Equities(3) (15.15%) 8.04% 8.04% 09/30/1993
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio (9.57%) 11/28/1997
- ---------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/
Portfolio Partners MFS Research
Growth(3) (20.12%) 1.63% 4.66% 08/31/1992
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio (5.13%) 11/28/1997
- ---------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/Portfolio Partners
MFS Value Equity(3) (10.32%) 9.62% 9.78% 11/30/1992
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International
Growth Portfolio (3.70%) 11/28/1997
- ---------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/
Portfolio Partners Scudder
International Growth(3) (10.26%) 6.98% 9.01% 08/31/1992
- ---------------------------------------------------------------------------------------------------------------------------------
</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) These Funds have been available through the Separate Account for more than
ten years.
(2) The current yield for the Subaccount for the 7-day period ended September
30, 1998 (on an annualized basis) was 3.94%. Current yield more closely reflects
current earnings than does total return. 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.
(3) The Fund first listed was replaced with the applicable Portfolio Partners
Portfolio after the close of business on November 26, 1997. The performance
shown is based on the performance of the replaced Fund until November 26, 1997,
and the performance of the applicable Portfolio Partners Portfolio after that
date. The replaced Fund may not have been available under all Contracts. The
"Date Contributions First Received Under Separate Account" refers to the
applicable date for the replaced Fund.
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Fund Inception
NON-STANDARDIZED Date
- ---------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 3 Years 5 Years 10 Years Inception**
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aetna Balanced VP, Inc. 4.03% 13.59% 12.07% 10.29% 04/03/1989
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(1) 7.16% 6.18% 5.06% 7.56%
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 4.16% 23.23% 12/13/1996
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP(1) (7.58%) 15.70% 14.07% 13.11%
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 8.54% 23.12% 09/16/1996
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna International VP 4.33% 12/22/1997
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2) 4.04% 3.99% 3.67% 4.32%
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Real Estate Securities VP (8.88%) 12/15/1997
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP (17.19%) 7.74% 12/27/1996
- ---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund (13.02%) 5.83% 11.82% 13.43% 05/05/1993
- ---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth Fund 1.97% 14.04% 13.79% 14.90% 05/05/1993
- ---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth and Income Fund (2.66%) 13.67% 15.86% 05/02/1994
- ---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund 1.17% 11.88% 14.90% 16.06% 05/05/1993
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio(1) (2.75%) 12.92% 14.11% 12.48%
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio(1) (8.99%) 6.46% 7.33% 9.18%
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 2.37% 14.98% 21.90% 01/03/1995
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 0.10% 7.01% 12.88% 14.45% 09/13/1993
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 12.53% 17.34% 13.76% 14.58% 09/13/1993
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 3.60% 15.79% 14.32% 14.61% 09/13/1993
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 1.38% 19.28% 18.53% 19.04% 09/13/1993
- ---------------------------------------------------------------------------------------------------------------------------------
MFS Total Return Series 5.54% 13.76% 16.01% 01/03/1995
- ---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund (1) (18.01%) 6.59% 7.39% 12.13%
- ---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Growth & Income Fund (11.13%) 19.45% 20.78% 07/06/1995
- ---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 0.82% 7.12% 5.56% 5.25% 05/03/1993
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities
Portfolio (1.68%) 11/28/1997
- ---------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/Portfolio Partners
MFS Emerging Equities(3) (8.79%) 0.31% 8.54% 15.80%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio (2.77%) 11/28/1997
- ---------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/
Portfolio Partners MFS Research
Growth(3) (13.72%) (4.98%) 2.28% 7.73%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 2.01% 11/28/1997
- ---------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/Portfolio Partners
MFS Value Equity(3) (3.99%) 8.95% 10.08% 11.11%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International
Growth Portfolio 3.55% 11/28/1997
- ---------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/
Portfolio Partners Scudder
International Growth(3) (3.94%) 7.41% 7.50% 9.95%
- ---------------------------------------------------------------------------------------------------------------------------------
</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 Fund's inception date.
(1) These Funds have been in operation for more than ten years.
(2) The current yield for the Subaccount for the 7-day period ended September
30, 1998 (on an annualized basis) was 3.94%. Current yield more closely reflects
current earnings than does total return. 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.
(3) The Fund first listed was replaced with the applicable Portfolio Partners
Portfolio after the close of business on November 26, 1997. The performance
shown is based on the performance of the replaced Fund until November 26, 1997,
and the performance of the applicable Portfolio Partners Portfolio after that
date. The replaced Fund may not have been available under all Contracts. The
"Fund Inception Date" refers to the applicable date for the replaced Fund. If no
date is shown, the replaced Fund has been in operation for more than ten years.
<PAGE>
o The following interim financial statements for Variable Annuity Account B
and Aetna Life Insurance and Annuity Company are added to the financial
statements contained in the Statement of Additional Information dated
August 19, 1998.
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Income
(millions)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- --------------------------------
(unaudited) (unaudited)
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenue:
Premiums $ 20.1 $ 19.2 $ 54.5 $ 53.4
Charges assessed against policyholders 81.3 70.6 243.3 188.5
Net investment income 217.2 218.7 645.4 654.3
Net realized capital gains 2.7 6.6 9.3 14.7
Other income 8.2 11.3 22.2 28.2
-------- -------- -------- --------
Total revenue 329.5 326.4 974.7 939.1
Benefits and expenses:
Current and future benefits 181.7 189.3 529.7 545.6
Operating expenses 76.5 69.8 227.0 204.3
Amortization of deferred policy acquisition costs 28.6 24.5 79.4 57.3
-------- -------- -------- --------
Total benefits and expenses 286.8 283.6 836.1 807.2
-------- -------- -------- --------
Income from continuing operations before income
taxes 42.7 42.8 138.6 131.9
Income taxes 9.5 10.6 37.7 36.0
-------- -------- -------- --------
Income from continuing operations 33.2 32.2 100.9 95.9
Income from discontinued operations, net of tax 24.5 19.2 61.8 49.0
-------- -------- -------- --------
Net income $ 57.7 $ 51.4 $ 162.7 $ 144.9
======== ======== ======== ========
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
<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>
September 30, 1998 December 31, 1997
------------------ -----------------
(unaudited)
<S> <C> <C>
Assets
- ------
Investments:
Debt securities available for sale, at fair value
(amortized cost: $11,655.7 and $12,912.2) $ 12,207.9 $ 13,463.8
Equity securities, available for sale:
Nonredeemable preferred stock (cost: $71.4 and $131.7) 73.9 147.6
Investment in affiliated mutual funds (cost: $119.9 and $78.1) 116.3 83.0
Common stock (cost: $0.3 and $0.2) 1.4 0.6
Short-term investments 23.1 95.6
Mortgage loans 12.7 12.8
Policy loans 521.5 469.6
----------- -----------
Total investments 12,956.8 14,273.0
Cash and cash equivalents 2,212.3 565.4
Short-term investments under securities loan agreement 652.9 -
Accrued investment income 165.3 163.0
Income taxes receivable 10.0 -
Premiums due and other receivables 68.8 63.7
Deferred policy acquisition costs 1,734.3 1,654.6
Reinsurance loan to affiliate 261.5 397.2
Other assets 50.9 46.8
Separate Accounts assets 24,773.6 22,982.7
---------- -----------
Total assets $ 42,886.4 $ 40,146.4
========== ===========
Liabilities and Shareholder's Equity
- ------------------------------------
Liabilities:
Future policy benefits $ 3,767.6 $ 3,785.7
Unpaid claims and claim expenses 34.0 38.0
Policyholders' funds left with the Company 11,230.1 11,121.5
---------- -----------
Total insurance reserve liabilities 15,031.7 14,945.2
Payables under securities loan agreement 652.9 -
Other liabilities 352.4 312.8
Income taxes:
Current - 12.4
Deferred 100.9 72.0
Separate Accounts liabilities 24,760.8 22,970.0
---------- -----------
Total liabilities 40,898.7 38,312.4
---------- -----------
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 86.1 92.9
Retained earnings 1,480.8 1,320.3
---------- -----------
Total shareholder's equity 1,987.7 1,834.0
---------- -----------
Total liabilities and shareholder's equity $ 42,886.4 $ 40,146.4
========== ===========
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
<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>
Nine Months Ended September 30,
--------------------------------------
(unaudited) (unaudited)
1998 1997
----------------- -----------------
<S> <C> <C>
Shareholder's equity, beginning of period $1,834.0 $1,609.5
Comprehensive income
Net income 162.7 144.9
Other comprehensive income, net of tax
Unrealized (losses) gains on securities ($(10.5),
$55.7, pretax, respectively ) (6.8) 36.2
-------- --------
Total comprehensive income 155.9 181.1
-------- --------
Other changes 0.8 3.7
Common stock dividends (3.0) (8.3)
-------- --------
Shareholder's equity, end of period $1,987.7 $1,786.0
======== ========
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
<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>
Nine Months Ended September 30,
--------------------------------------
(unaudited) (unaudited)
1998 1997
----------------- -----------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 162.7 $ 144.9
Adjustments to reconcile net income to net cash provided by
(used for) operating activities:
Increase in accrued investment income (2.3) (24.0)
Decrease (increase) in premiums due and other receivables 23.8 (8.8)
Increase in policy loans (51.9) (54.4)
Increase in deferred policy acquisition costs (79.7) (105.3)
Decrease in reinsurance loan to affiliate 135.7 153.9
Net increase in universal life account balances 176.9 224.1
Decrease in other insurance reserve liabilities (148.7) (165.5)
Net decrease in other liabilities and other assets (96.3) (122.4)
Increase (decrease) in income taxes 14.9 (3.9)
Net accretion of discount on investments (24.3) (51.9)
Net realized capital gains (10.0) (17.9)
--------- -----------
Net cash provided by (used for) operating activities 100.8 (31.2)
--------- -----------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale 5,680.9 3,828.5
Equity securities 120.7 61.3
Mortgage loans 0.2 0.1
Investment maturities and repayments of:
Debt securities available for sale 1,100.3 966.8
Short-term investments 166.1 43.2
Cost of investment purchases in:
Debt securities available for sale (5,416.9) (4,811.0)
Equity securities (93.7) (53.6)
Short-term investments (93.4) (120.1)
--------- -----------
Net cash provided by (used for) investing activities 1,464.2 (84.8)
--------- -----------
Cash Flows from Financing Activities:
Deposits and interest credited for investment contracts 1,144.6 1,230.2
Withdrawals of investment contracts (1,061.0) (925.8)
Capital contribution to Separate Account - (25.0)
Return of capital from Separate Account 1.3 -
Dividends paid to shareholder (3.0) (8.3)
--------- -----------
Net cash provided by financing activities 81.9 271.1
--------- -----------
Net increase in cash and cash equivalents 1,646.9 155.1
Cash and cash equivalents, beginning of period 565.4 459.1
--------- -----------
Cash and cash equivalents, end of period $ 2,212.3 $ 614.2
========= ===========
Supplemental cash flow information:
Income taxes paid, net $ 59.2 $ 68.7
========= ==========
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Condensed Notes to Consolidated Financial Statements
(Unaudited)
1) Basis of Presentation
---------------------
The consolidated financial statements include Aetna Life Insurance and
Annuity Company and its wholly owned subsidiary, Aetna Insurance Company of
America (collectively, the "Company"). On October 1, 1998, the Company sold
its individual life insurance operations to Lincoln National Corporation
("Lincoln") and accordingly, they are classified as Discontinued
Operations. (Please refer to Note 2 below). 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").
These consolidated financial statements have been prepared in accordance
with generally accepted accounting principles and are unaudited. Certain
reclassifications have been made to 1997 financial information to conform
to the 1998 presentation. These interim statements necessarily rely heavily
on estimates, including assumptions as to annualized tax rates. In the
opinion of management, all adjustments necessary for a fair statement of
results for the interim periods have been made. All such adjustments are of
a normal, recurring nature. The accompanying condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and related notes as presented in the Company's 1997
Annual Report on Form 10-K. Certain financial information that is normally
included in annual financial statements prepared in accordance with
generally accepted accounting principles, but that is not required for
interim reporting purposes, has been condensed or omitted.
2) Discontinued Operations - Individual Life Insurance
---------------------------------------------------
On October 1, 1998, the Company sold its domestic individual life insurance
business to Lincoln for $1 billion in cash, subject to adjustment as
provided by the related agreements. The transaction is generally in the
form of an indemnity reinsurance arrangement, under which Lincoln
contractually assumed from the Company certain policyholder liabilities and
obligations, although the Company remains directly obligated to
policyholders. Future policy benefit insurance reserves were approximately
$3 billion. Deferred policy acquisition costs related to the life policies
of $893 million were written off against the gain on the sale. Certain
invested assets related to and supporting the life policies were sold to
consummate the life sale and the Company recorded a reinsurance receivable
from Lincoln. The transaction will result in an after-tax gain on the sale
of approximately $95 million, the majority of which will be deferred and
amortized over approximately 15 years.
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Condensed Notes to Consolidated Financial Statements (continued)
(Unaudited)
2) Discontinued Operations - Individual Life Insurance (continued)
---------------------------------------------------------------
The operating results of the individual life business are presented as
Discontinued Operations. All prior year income statement data has been
restated to reflect the presentation as Discontinued Operations. Revenues
for the individual life segment were $160.5 million and $159.2 million for
the third quarters of 1998 and 1997, respectively, and $441.2 million and
$462.8 million for the nine months ended September 30, 1998 and 1997,
respectively. Net income was $24.5 million and $19.2 million for the third
quarters of 1998 and 1997, respectively, and $61.8 million and $49.0
million for the nine months ended September 30, 1998 and 1997,
respectively.
3) New Accounting Standards
------------------------
On January 1, 1998, the Company adopted Statement of Position ("SOP") 98-1,
Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use, issued by the American Institute of Certified Public
Accountants ("AICPA"). This statement requires that certain costs incurred
in developing internal-use computer software be capitalized, and provides
guidance for determining whether computer software is considered to be for
internal use. The Company will amortize these costs over a period of 3 to 5
years. Previously, the Company expensed the cost of internal-use computer
software as incurred. The adoption of this statement resulted in an
increase to net income of $.7 million and $4.1 million for the three and
nine months ended September 30, 1998, respectively.
Financial Accounting Standard ("FAS") No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, was
issued in September 1996 and provides accounting and reporting standards
for transfers of financial assets and extinguishments of liabilities. FAS
No. 125 was effective for 1997 financial statements, however, certain
provisions relating to accounting for repurchase agreements and securities
lending were not effective until January 1, 1998. The adoption of those
provisions effective in 1998 did not have a material effect on the
Company's financial position or results of operations.
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Condensed Notes to Consolidated Financial Statements (continued)
(Unaudited)
4) Future Application of Accounting Standards
------------------------------------------
In October 1998, the AICPA issued SOP 98-7, Deposit Accounting: Accounting
for Insurance and Reinsurance Contracts That Do Not Transfer Insurance
Risk, which provides guidance on how to account for all insurance and
reinsurance contracts that do not transfer insurance risk, except for
long-duration life and health insurance contracts. This statement is
effective for the Company's financial statements beginning January 1, 2000,
with early adoption permitted. The Company is currently evaluating the
impact of the adoption of this statement and the potential effect on its
financial position and results of operations.
In June 1998, the Financial Accounting Standards Board issued FAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. This standard
requires companies to record all derivatives on the balance sheet as either
assets or liabilities and measure those instruments at fair value. The
manner in which companies are to record gains or losses resulting from
changes in the values of those derivatives depends on the use of the
derivative and whether it qualifies for hedge accounting. This standard is
effective for the Company's financial statements beginning January 1, 2000,
with early adoption permitted. The Company is currently evaluating the
impact of the adoption of this statement and the potential effect on its
financial position or results of operations.
In December 1997, the AICPA issued SOP 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.
5) Financial Instruments
---------------------
The Company engages in hedging activities to manage interest rate risk.
Such hedging activities have principally consisted of using
off-balance-sheet instruments such as treasury futures. (See General
Account Investments of the Management's Analysis of the Results of
Operations and Note 3 of the Notes to the Financial Statements in the
Company's 1997 Annual Report on Form 10-K for a description of the
Company's hedging activities). The notional amounts, carrying values and
estimated fair values of the Company's open treasury futures as of
September 30, 1998 are $786.2 million, ($6.3) million, and ($6.3) million,
respectively. These open treasury futures were related to hedging the
interest rate risk on the assets supporting the individual life business
that was sold to Lincoln on October 1, 1998. (See Note 2 above for further
discussion on the sale of the individual life business).
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Condensed Notes to Consolidated Financial Statements (continued)
(Unaudited)
6) Additional Information - Accumulated Other Comprehensive Income
---------------------------------------------------------------
Changes in accumulated other comprehensive income related to changes in
unrealized gains on securities (excluding those related to experience rated
contractholders) were as follows:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------------------------------------------------------------------------------------
(Millions) 1998 1997
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Unrealized holding gains arising during the period (1) $15.5 $81.6
Less: reclassification adjustments for amortization of net investment
discounts and gains included in net income (2) 22.3 45.4
-------------------------------------------------------------------------------------------------------------
Net unrealized (loss)/gain on securities $(6.8) $36.2
=============================================================================================================
</TABLE>
(1) Pretax unrealized holding gains arising during the period were $23.8
million and $125.5 million for 1998 and 1997, respectively.
(2) Pretax reclassification adjustments for amortization of net investment
discounts and gains included in net income were $34.3 million and $69.8
million for 1998 and 1997, respectively.
7) Severance and Facilities Charges
--------------------------------
During 1996, the Company was allocated severance and facilities reserves
from Aetna to reflect actions taken or to be taken to reduce the level of
corporate expenses and other costs previously absorbed by Aetna's
property-casualty operations.
Also during 1996, the Company established severance and facilities reserves
in the Financial Services and Individual Life Insurance segments to reflect
actions taken or to be taken in order to make its businesses more
competitive.
Activity for the nine months ended September 30, 1998 within the severance
and facilities reserves (pretax, in millions) was as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
Reserve
-----------------------------------------------------------------------------------
<S> <C>
Balance at December 31, 1997 $ 20.8
Actions taken (1) (11.8)
--------
Balance at September 30, 1998 $ 9.0
-----------------------------------------------------------------------------------
</TABLE>
(1) Includes $7.4 million of severance-related actions and $1.6 million of
corporate allocation-related actions.
The Company's severance actions were substantially completed by September
30, 1998; and, an evaluation of any remaining reserves will take place in
the fourth quarter. The corporate allocation actions were substantially
completed in 1997.
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Condensed Notes to Consolidated Financial Statements (continued)
(Unaudited)
8) 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.
9) Dividends
---------
On January 30, 1998, the Company paid a $3.0 million dividend to HOLDCO. On
October 5, 1998, with prior approval from the Insurance Commissioner of the
State of Connecticut, the Company paid a dividend of $200 million to
HOLDCO. Additional dividends by the Company through December 31, 1998 will
require the approval of the Insurance Commissioner of the State of
Connecticut.
<PAGE>
Variable Annuity Account B
Statement of Assets and Liabilities - September 30, 1998 (Unaudited)
ASSETS:
Investments, at net asset value: (Note 1)
<TABLE>
<CAPTION>
Shares Cost Assets
------ ---- ------
<S> <C> <C> <C>
Aetna Ascent VP: 1,740,538 $24,489,653 $23,096,934
Aetna Balanced VP: 12,420,629 179,626,611 177,118,167
Aetna Bond VP: 6,337,117 82,103,500 85,170,858
Aetna Crossroads VP: 2,175,768 28,382,116 27,828,069
Aetna Get Fund, Series B: 1,565,938 18,465,288 18,806,913
Aetna Get Fund, Series C: 782,387 8,243,658 9,459,054
Aetna Growth and Income VP: 30,364,606 971,501,121 955,270,497
Aetna Growth VP: 1,923,207 22,428,390 20,962,957
Aetna High Yield VP: 22,155 238,217 218,665
Aetna Index Plus Large Cap VP: 3,744,761 56,745,845 55,909,284
Aetna Index Plus Mid Cap VP: 19,573 223,739 194,753
Aetna Index Plus Small Cap VP: 31,454 337,820 274,911
Aetna International VP: 62,939 735,274 663,381
Aetna Legacy VP: 2,814,173 34,313,873 34,248,489
Aetna Money Market VP: 11,909,568 156,002,593 157,380,177
Aetna Real Estate Securities VP: 78,399 759,152 718,916
Aetna Small Company VP: 1,343,123 17,354,974 14,760,923
Aetna Value Opportunity VP: 1,265,256 16,501,985 14,019,035
Alger American Funds:
Balanced Portfolio: 500,949 4,824,613 5,560,537
Income and Growth Portfolio: 1,253,647 11,733,088 13,551,925
Leveraged AllCap Portfolio: 510,176 10,894,659 13,494,163
American Century Investments:
Balanced Fund: 587,004 4,385,705 4,484,711
International Fund: 805,592 5,306,009 5,292,737
Calvert Social Balanced Portfolio: 780,846 1,614,505 1,605,420
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: 6,964,902 152,941,975 153,367,146
Growth Portfolio: 2,979,115 98,906,521 107,546,052
High Income Portfolio: 4,197,425 53,412,311 46,255,625
Overseas Portfolio: 817,702 15,906,656 13,884,588
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 1,122,497 18,665,227 18,072,195
Contrafund Portfolio: 6,568,996 121,946,794 129,934,739
Index 500 Portfolio: 940,015 104,387,761 109,398,897
Investment Grade Bond Portfolio: 487,002 5,776,893 6,262,842
Insurance Management Series:
American Leaders Fund II: 6,292,056 97,578,752 117,409,772
Equity Income Fund II: 2,055,762 24,875,226 25,018,622
Growth Strategies Fund II: 1,579,564 22,696,467 22,129,690
High Income Bond Fund II: 4,736,657 48,795,515 50,208,559
International Equity Fund II: 1,172,344 14,034,652 15,721,131
Prime Money Fund II: 8,885,716 8,885,716 8,885,716
U.S. Government Securities Fund II: 1,361,871 14,069,104 15,130,390
Utility Fund II: 2,009,732 23,416,121 28,779,369
Janus Aspen Series:
Aggressive Growth Portfolio: 1,945,371 45,227,467 39,860,651
Balanced Portfolio: 2,832,205 48,575,474 53,557,002
Flexible Income Portfolio: 1,499,707 17,687,441 18,386,405
</TABLE>
<PAGE>
Variable Annuity Account B
Statement of Assets and Liabilities - September 30, 1998
(Unaudited & continued):
<TABLE>
<CAPTION>
Shares Cost Assets
------ ---- ------
<S> <C> <C> <C>
Growth Portfolio: 2,755,960 $ 49,700,310 $ 50,819,901
Worldwide Growth Portfolio: 8,507,278 202,271,812 205,025,411
Lexington Emerging Markets Fund: 278,219 2,875,435 1,368,838
Lexington Natural Resources Trust Fund: 378,973 5,522,645 4,278,607
MFS Funds:
Total Return Series: 1,999,771 32,111,340 33,556,165
Worldwide Government Series: 163,168 1,670,945 1,749,162
Oppenheimer Funds:
Aggressive Growth Fund: 239,248 10,198,853 8,600,954
Global Securities Fund: 270,056 5,584,850 4,944,720
Growth & Income Fund: 1,577,065 33,117,791 27,078,200
Strategic Bond Fund: 2,142,975 10,977,377 10,779,162
Portfolio Partners, Inc. (PPI):
PPI MFS Emerging Equities Portfolio: 2,403,691 111,560,329 103,430,838
PPI MFS Research Growth Portfolio: 7,455,385 77,626,346 72,540,896
PPI MFS Value Equity Portfolio: 761,528 23,949,989 23,120,001
PPI Scudder International Growth Portfolio: 919,616 13,964,786 13,380,415
PPI T. Rowe Price Growth Equity Portfolio: 2,166,972 94,497,679 97,383,726
-------------- --------------
NET ASSETS $3,270,628,948 $3,277,957,863
============== ==============
</TABLE>
Net assets represented by:
Reserves for annuity contracts in accumulation and payment period: (Notes 1 and
5)
<TABLE>
<S> <C>
Aetna Ascent VP:
Annuity contracts in accumulation .............................................................. $ 23,096,934
Aetna Balanced VP:
Annuity contracts in accumulation .............................................................. 161,518,583
Annuity contracts in payment period ............................................................ 15,599,584
Aetna Bond VP:
Annuity contracts in accumulation .............................................................. 80,265,350
Annuity contracts in payment period ............................................................ 4,905,508
Aetna Crossroads VP:
Annuity contracts in accumulation .............................................................. 26,752,161
Annuity contracts in payment period ............................................................ 1,075,908
Aetna Get Fund, Series B:
Annuity contracts in accumulation .............................................................. 18,806,913
Aetna Get Fund, Series C:
Annuity contracts in accumulation .............................................................. 9,459,054
Aetna Growth and Income VP:
Annuity contracts in accumulation .............................................................. 825,936,899
Annuity contracts in payment period ............................................................ 129,333,598
Aetna Growth VP:
Annuity contracts in accumulation .............................................................. 20,368,827
Annuity contracts in payment period ............................................................ 594,130
Aetna High Yield VP:
Annuity contracts in accumulation .............................................................. 218,665
Aetna Index Plus Large Cap VP:
Annuity contracts in accumulation .............................................................. 55,047,666
Annuity contracts in payment period ............................................................ 861,618
Aetna Index Plus Mid Cap VP:
Annuity contracts in accumulation .............................................................. 194,753
</TABLE>
<PAGE>
Variable Annuity Account B
Statement of Assets and Liabilities - September 30, 1998
(Unaudited & continued):
<TABLE>
<S> <C>
Aetna Index Plus Small Cap VP:
Annuity contracts in accumulation ................... $ 274,911
Aetna International VP:
Annuity contracts in accumulation ................... 663,381
Aetna Legacy VP:
Annuity contracts in accumulation ................... 31,552,690
Annuity contracts in payment period ................. 2,695,799
Aetna Money Market VP:
Annuity contracts in accumulation ................... 157,117,740
Annuity contracts in payment period ................. 262,437
Aetna Real Estate Securities VP:
Annuity contracts in accumulation ................... 701,706
Annuity contracts in payment period ................. 17,210
Aetna Small Company VP:
Annuity contracts in accumulation ................... 14,566,581
Annuity contracts in payment period ................. 194,342
Aetna Value Opportunity VP:
Annuity contracts in accumulation ................... 14,019,035
Alger American Funds:
Balanced Portfolio:
Annuity contracts in accumulation ................... 5,560,537
Income and Growth Portfolio:
Annuity contracts in accumulation ................... 13,551,925
Leveraged AllCap Portfolio:
Annuity contracts in accumulation ................... 13,494,163
American Century Investments:
Balanced Fund:
Annuity contracts in accumulation ................... 4,484,711
International Fund:
Annuity contracts in accumulation ................... 5,292,737
Calvert Social Balanced Portfolio:
Annuity contracts in accumulation ................... 1,605,420
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
Annuity contracts in accumulation ................... 153,367,146
Growth Portfolio:
Annuity contracts in accumulation ................... 107,546,052
High Income Portfolio:
Annuity contracts in accumulation ................... 45,911,675
Annuity contracts in payment period ................. 343,950
Overseas Portfolio:
Annuity contracts in accumulation ................... 13,884,588
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio:
Annuity contracts in accumulation ................... 18,072,195
Contrafund Portfolio:
Annuity contracts in accumulation ................... 129,934,739
Index 500 Portfolio:
Annuity contracts in accumulation ................... 109,398,897
Investment Grade Bond Portfolio:
Annuity contracts in accumulation ................... 6,262,842
</TABLE>
<PAGE>
Variable Annuity Account B
Statement of Assets and Liabilities - September 30, 1998
(Unaudited & continued):
<TABLE>
<S> <C>
Insurance Management Series:
American Leaders Fund II:
Annuity contracts in accumulation ..... $ 117,364,848
Annuity contracts in payment period ... 44,924
Equity Income Fund II:
Annuity contracts in accumulation ..... 25,011,980
Annuity contracts in payment period ... 6,642
Growth Strategies Fund II:
Annuity contracts in accumulation ..... 22,129,690
High Income Bond Fund II:
Annuity contracts in accumulation ..... 50,208,559
International Equity Fund II:
Annuity contracts in accumulation ..... 15,721,131
Prime Money Fund II:
Annuity contracts in accumulation ..... 8,885,716
U.S. Government Securities Fund II:
Annuity contracts in accumulation ..... 15,130,390
Utility Fund II:
Annuity contracts in accumulation ..... 28,772,040
Annuity contracts in payment period ... 7,329
Janus Aspen Series:
Aggressive Growth Portfolio:
Annuity contracts in accumulation ..... 39,860,651
Balanced Portfolio:
Annuity contracts in accumulation ..... 53,557,002
Flexible Income Portfolio:
Annuity contracts in accumulation ..... 18,386,405
Growth Portfolio:
Annuity contracts in accumulation ..... 49,754,019
Annuity contracts in payment period ... 1,065,882
Worldwide Growth Portfolio:
Annuity contracts in accumulation ..... 202,196,827
Annuity contracts in payment period ... 2,828,584
Lexington Emerging Markets Fund:
Annuity contracts in accumulation ..... 1,368,838
Lexington Natural Resources Trust Fund:
Annuity contracts in accumulation ..... 4,278,607
MFS Funds:
Total Return Series:
Annuity contracts in accumulation ..... 33,556,165
Worldwide Government Series:
Annuity contracts in accumulation ..... 1,749,162
Oppenheimer Funds:
Aggressive Growth Fund:
Annuity contracts in accumulation ..... 8,600,954
Global Securities Fund:
Annuity contracts in accumulation ..... 4,944,720
Growth & Income Fund:
Annuity contracts in accumulation ..... 27,078,200
Strategic Bond Fund:
Annuity contracts in accumulation ..... 10,601,485
Annuity contracts in payment period ... 177,677
</TABLE>
<PAGE>
Variable Annuity Account B
Statement of Assets and Liabilities - September 30, 1998
(Unaudited & continued):
<TABLE>
<S> <C>
Portfolio Partners, Inc. (PPI):
PPI MFS Emerging Equities Portfolio:
Annuity contracts in accumulation ...... $ 102,789,354
Annuity contracts in payment period .... 641,484
PPI MFS Research Growth Portfolio:
Annuity contracts in accumulation ...... 72,540,896
PPI MFS Value Equity Portfolio:
Annuity contracts in accumulation ...... 22,387,937
Annuity contracts in payment period .... 732,064
PPI Scudder International Growth Portfolio:
Annuity contracts in accumulation ...... 13,368,015
Annuity contracts in payment period .... 12,400
PPI T. Rowe Price Growth Equity Portfolio:
Annuity contracts in accumulation ...... 97,359,558
Annuity contracts in payment period .... 24,168
--------------
$3,277,957,863
==============
</TABLE>
See Notes to Financial Statements
<PAGE>
Variable Annuity Account B
Statements of Operations and Changes in Net Assets
<TABLE>
<CAPTION>
Nine Month
Period Ended September 30,
1998 1997
----------------- -----------------
<S> <C> <C>
(Unaudited) (Unaudited)
INVESTMENT INCOME:
Income: (Notes 1, 3 and 5)
Dividends .............................................................. $ 134,568,725 $ 92,503,676
Expenses: (Notes 2 and 5)
Valuation Period Deductions ............................................ (31,107,243) (20,446,622)
-------------- --------------
Net investment income ................................................... 103,461,482 72,057,054
-------------- --------------
NET REALIZED AND UNREALIZED (LOSS) GAIN
ON INVESTMENTS:
Net realized gain on sales of investments: (Notes 1, 4 and 5)
Proceeds from sales .................................................... 1,014,289,382 407,504,790
Cost of investments sold ............................................... 917,072,592 383,844,129
-------------- --------------
Net realized gain ..................................................... 97,216,790 23,660,660
-------------- --------------
Net unrealized (loss) gain on investments: (Note 5)
Beginning of Period .................................................... 255,524,506 122,191,053
End of Period .......................................................... 7,328,915 515,222,103
-------------- --------------
Net change in unrealized (loss) gain .................................. (248,195,591) 393,031,050
-------------- --------------
Net realized and unrealized (loss) gain on investments .................. (150,978,801) 416,691,710
-------------- --------------
Net (decrease) increase in net assets resulting from operations ......... (47,517,319) 488,748,764
-------------- --------------
FROM UNIT TRANSACTIONS:
Net variable annuity contract purchase payments ....................... 377,613,292 437,091,855
Transfers from the Company for mortality guarantee adjustments .......... (1,054,765) (20,263)
Transfers from the Company's fixed account options ...................... 163,143,563 105,550,336
Redemptions by contract holders ......................................... (121,371,506) (60,162,998)
Annuity Payments ........................................................ (16,969,457) (11,288,033)
Other ................................................................... 1,671,199 1,534,945
-------------- --------------
Net increase in net assets from unit transactions (Note 5) ............ 403,032,325 472,705,841
-------------- --------------
Change in net assets .................................................... 355,515,006 961,454,605
NET ASSETS:
Beginning of Period ..................................................... 2,922,442,857 1,848,811,724
-------------- --------------
End of Period ........................................................... $3,277,957,863 $2,810,266,329
============== ==============
</TABLE>
See Notes to Financial Statements
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - September 30, 1998 (Unaudited):
1. Summary of Significant Accounting Policies
Variable Annuity Account B ("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 September 30, 1998:
Aetna Ascent VP
Aetna Balanced VP
Aetna Bond VP
Aetna Crossroads VP
Aetna GET Fund, Series B
Aetna GET Fund, Series C
Aetna Growth and Income VP
Aetna Growth VP
Aetna High Yield VP
Aetna Index Plus Large Cap VP
Aetna Index Plus Mid Cap VP
Aetna Index Plus Small Cap VP
Aetna International VP
Aetna Legacy VP
Aetna Money Market VP
Aetna Real Estate Securities VP
Aetna Small Company VP
Aetna Value Opportunity VP
Alger American Funds:
o Balanced Portfolio
o Income and Growth Portfolio
o Leveraged AllCap Portfolio
American Century Investments:
o Balanced Fund
o International Fund
Calvert Social Balanced Portfolio
Fidelity Investments Variable Insurance Products Fund:
o Equity-Income Portfolio
o Growth Portfolio
o High Income Portfolio
o Overseas Portfolio
Fidelity Investments Variable Insurance Products Fund II:
o Asset Manager Portfolio
o Contrafund Portfolio
o Index 500 Portfolio
o Investment Grade Bond Portfolio
Insurance Management Series:
o American Leaders Fund II
o Equity Income Fund II
o Growth Strategies Fund II
o High Income Bond Fund II
o International Equity Fund II
o Prime Money Fund II
o U.S. Government Securities Fund II
o Utility Fund II
Janus Aspen Series:
o Aggressive Growth Portfolio
o Balanced Portfolio
o Flexible Income Portfolio
o Growth Portfolio
o Worldwide Growth Portfolio
Lexington Emerging Markets Fund
Lexington Natural Resources Trust Fund
MFS Funds:
o Total Return Series
o World Government Series
Oppenheimer Funds:
o Aggressive Growth Fund
o Global Securities Fund
o Growth & Income Fund
o Strategic Bond Fund
Portfolio Partners, Inc. (PPI):
o PPI MFS Emerging Equities Portfolio
o PPI MFS Research Growth Portfolio
o PPI MFS Value Equity Portfolio
o PPI Scudder International Growth Portfolio
o PPI T. Rowe Price Growth Equity Portfolio
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - September 30, 1998 (Unaudited & continued):
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.
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 nine month period ended September 30, 1998 and
September 30, 1997 aggregated $1,520,783,191 and $1,014,289,382; $952,245,003
and $407,504,790, respectively.
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - September 30, 1998 (Unaudited & continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Period Ended September 30, 1998
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP: (1) $ 206,291 ($ 236,064) $ 4,551,003 $ 3,797,853 $ 753,150
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP: (2) 26,353,787 (1,556,330) 12,393,538 9,733,997 2,659,541
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP: (3) 1,663,769 (637,338) 32,245,202 30,992,510 1,252,692
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP: (4) 114,539 (261,200) 1,903,460 1,680,880 222,580
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Get Fund, Series B: 4,889,366 (243,727) 1,699,470 1,099,314 600,156
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Get Fund, Series C: 1,037,487 (96,765) 2,545,936 1,801,902 744,034
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP: (5) 21,698,016 (8,832,711) 78,225,231 61,199,366 17,025,865
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP: (6) 0 (113,104) 8,790,286 8,974,418 (184,132)
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna High Yield VP: (7) 155 (444) 32,755 32,602 153
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP: (8) 294,180 (414,374) 11,054,850 8,784,682 2,270,168
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Mid Cap VP: (9) 0 (645) 21,599 24,598 (2,999)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Small Cap VP: (10) 0 (898) 90,710 116,252 (25,542)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna International VP: (11) 517 (2,644) 2,133,455 2,172,763 (39,308)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP: (12) 119,358 (287,284) 2,074,146 1,885,101 189,045
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP: (13) 6,326,910 (1,211,542) 265,982,031 267,031,017 (1,048,986)
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Real Estate Securities VP: (14) 0 (1,905) 55,944 63,133 (7,189)
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<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 Period of Period Gain (Loss) Transactions of Period of Period
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1,034,430 ($ 1,392,719) ($ 2,427,149) $ 4,356,970
$ 20,443,736 $ 23,096,934
- -------------------------------------------------------------------------------------------------------------------
21,131,758 (2,508,444) (23,640,202) 10,459,250
150,761,384 161,518,583
12,080,737 15,599,584
- -------------------------------------------------------------------------------------------------------------------
781,718 3,067,358 2,285,640 7,687,623
69,236,488 80,265,350
3,681,984 4,905,508
- -------------------------------------------------------------------------------------------------------------------
704,161 (554,047) (1,258,208) 8,689,733
20,250,904 26,752,161
69,721 1,075,908
- -------------------------------------------------------------------------------------------------------------------
6,194,743 341,624 (5,853,119) (1,445,687)
20,859,924 18,806,913
- -------------------------------------------------------------------------------------------------------------------
2,144,550 1,215,395 (929,155) (2,225,654)
10,929,107 9,459,054
- -------------------------------------------------------------------------------------------------------------------
67,675,837 (16,230,623) (83,906,460) (13,597,363)
892,006,381 825,936,899
130,876,769 129,333,598
- -------------------------------------------------------------------------------------------------------------------
(945,071) (1,465,433) (520,362) 18,561,645
3,210,344 20,368,827
8,566 594,130
- -------------------------------------------------------------------------------------------------------------------
0 (19,552) (19,552) 238,353
0 218,665
- -------------------------------------------------------------------------------------------------------------------
1,342,384 (836,561) (2,178,945) 27,698,467
28,074,705 55,047,666
165,083 861,618
- -------------------------------------------------------------------------------------------------------------------
0 (28,986) (28,986) 227,383
0 194,753
- -------------------------------------------------------------------------------------------------------------------
0 (62,909) (62,909) 364,260
0 274,911
- -------------------------------------------------------------------------------------------------------------------
0 (71,894) (71,894) 776,710
0 663,381
- -------------------------------------------------------------------------------------------------------------------
556,022 (65,384) (621,406) 14,854,168
18,710,015 31,552,690
1,284,593 2,695,799
- -------------------------------------------------------------------------------------------------------------------
1,429,868 1,377,586 (52,282) 28,426,940
124,939,137 157,117,740
0 262,437
- -------------------------------------------------------------------------------------------------------------------
0 (40,235) (40,235) 768,245
0 701,706
0 17,210
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - September 30, 1998 (Unaudited & continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Period Ended September 30, 1998
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Small Company VP: (15) $ 57,812 ($ 126,396) $12,311,355 $12,861,955 ($ 550,600)
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP: (16) 105,659 (119,520) 4,951,547 5,057,370 (105,823)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Alger American Funds:
Balanced Portfolio: 486,973 (62,082) 830,154 668,985 161,169
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Income and Growth Portfolio: 1,467,662 (156,081) 2,174,215 1,433,177 741,038
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Leveraged AllCap Portfolio: 631,832 (152,406) 3,539,114 2,587,758 951,356
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
American Century Investments:
Balanced Fund: 593,854 (49,710) 457,471 409,014 48,457
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
International Fund: 390,912 (66,774) 813,014 629,786 183,228
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio: 0 (10,066) 566,469 479,841 86,628
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable
Insurance Products Fund:
Equity-Income Portfolio: 8,906,937 (1,584,673) 18,755,004 15,056,132 3,698,872
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio: 11,278,163 (994,587) 17,529,097 13,282,505 4,246,592
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
High Income Portfolio: 4,692,207 (506,129) 8,295,312 8,305,493 (10,181)
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------------------------------------------------
Overseas Portfolio: 1,031,834 (156,200) 23,106,700 22,442,525 664,175
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable
Insurance Products Fund II:
Asset Manager Portfolio: 1,595,388 (165,830) 1,682,975 1,544,166 138,809
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Contrafund Portfolio: 6,614,609 (1,264,802) 31,041,889 22,310,801 8,731,088
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Index 500 Portfolio: 3,204,277 (1,064,107) 19,258,700 13,738,289 5,520,411
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<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 Period of Period Gain (Loss) Transactions of Period of Period
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
($ 299,676) ($ 2,594,052) ($ 2,294,376) $ 11,567,354
$ 6,059,783 $ 14,566,581
47,346 194,342
- -----------------------------------------------------------------------------------------------------------------------
(545,082) (2,482,950) (1,937,868) 12,163,993
3,912,594 14,019,035
- -----------------------------------------------------------------------------------------------------------------------
691,602 735,924 44,322 (725,996)
5,656,151 5,560,537
- -----------------------------------------------------------------------------------------------------------------------
2,709,055 1,818,838 (890,217) (1,758,937)
14,148,460 13,551,925
- -----------------------------------------------------------------------------------------------------------------------
1,540,243 2,599,504 1,059,261 (3,275,889)
14,280,009 13,494,163
- -----------------------------------------------------------------------------------------------------------------------
462,379 99,005 (363,374) (387,746)
4,643,230 4,484,711
- -----------------------------------------------------------------------------------------------------------------------
361,821 (13,272) (375,093) (692,491)
5,852,955 5,292,737
- -----------------------------------------------------------------------------------------------------------------------
59,286 (9,084) (68,370) 625,891
971,337 1,605,420
- -----------------------------------------------------------------------------------------------------------------------
19,807,673 425,170 (19,382,503) 23,018,773
138,709,740 153,367,146
- -----------------------------------------------------------------------------------------------------------------------
14,584,513 8,639,531 (5,944,982) 18,559,317
80,401,549 107,546,052
- -----------------------------------------------------------------------------------------------------------------------
2,722,687 (7,156,686) (9,879,373) 16,672,722
35,217,837 45,911,675
68,542 343,950
- -----------------------------------------------------------------------------------------------------------------------
460,930 (2,022,067) (2,482,997) 1,823,133
13,004,643 13,884,588
- -----------------------------------------------------------------------------------------------------------------------
1,137,702 (593,031) (1,730,733) 6,491,486
11,743,075 18,072,195
- -----------------------------------------------------------------------------------------------------------------------
18,201,832 7,987,945 (10,213,887) 18,240,289
107,827,442 129,934,739
- -----------------------------------------------------------------------------------------------------------------------
10,882,841 5,011,136 (5,871,705) 30,623,249
76,986,772 109,398,897
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - September 30, 1998 (Unaudited & continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Period Ended September 30, 1998
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Grade Bond Portfolio: $ 342,576 ($ 66,916) $ 1,120,808 $ 1,075,718 $ 45,090
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Insurance Management Series:
American Leaders Fund II: 7,998,351 (1,339,967) 8,538,383 5,132,086 3,406,297
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------------------------------------------------
Equity Income Fund II: 129,452 (256,618) 1,364,798 1,120,109 244,689
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------------------------------------------------
Growth Strategies Fund II: 1,440,579 (263,718) 1,873,205 1,348,947 524,258
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
High Income Bond Fund II: 1,568,969 (560,762) 6,861,817 6,149,874 711,943
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
International Equity Fund II: 19,289 (179,817) 1,369,445 1,008,537 360,908
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Prime Money Fund II: 276,356 (79,793) 4,895,051 4,895,051 0
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund II: 228,386 (140,706) 2,797,329 2,624,699 172,630
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Utility Fund II: 1,743,305 (287,289) 2,000,845 1,472,945 527,900
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: 0 (398,316) 44,733,118 35,254,854 9,478,264
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Balanced Portfolio: 1,467,064 (439,170) 2,693,097 2,034,927 658,170
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio: 533,749 (128,196) 2,389,425 2,189,793 199,632
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio: 3,263,715 (492,057) 12,887,405 9,361,140 3,526,265
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 7,771,561 (2,033,324) 48,740,455 33,987,079 14,753,376
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund: 161,811 (23,241) 627,366 874,547 (247,181)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: 340,539 (50,145) 1,884,545 1,802,841 81,704
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<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 Period of Period Gain (Loss) Transactions of Period of Period
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 387,160 $ 485,949 $ 98,789 ($ 734,879)
$ 6,578,182 $ 6,262,842
- ----------------------------------------------------------------------------------------------------------------
30,111,589 19,831,020 (10,280,569) 775,998
116,800,911 117,364,848
48,751 44,924
- ----------------------------------------------------------------------------------------------------------------
911,406 143,397 (768,009) 5,730,537
19,938,571 25,011,980
0 6,642
- ----------------------------------------------------------------------------------------------------------------
3,558,451 (566,777) (4,125,228) 1,844,693
22,709,106 22,129,690
- ----------------------------------------------------------------------------------------------------------------
3,763,082 1,413,045 (2,350,037) (2,374,407)
53,212,853 50,208,559
- ----------------------------------------------------------------------------------------------------------------
938,501 1,686,479 747,978 826,745
13,946,028 15,721,131
- ----------------------------------------------------------------------------------------------------------------
0 0 0 1,158,666
7,530,487 8,885,716
- ----------------------------------------------------------------------------------------------------------------
513,199 1,061,285 548,086 1,125,210
13,196,784 15,130,390
- ----------------------------------------------------------------------------------------------------------------
5,801,015 5,363,247 (437,768) 930,363
26,302,858 28,772,040
0 7,329
- ----------------------------------------------------------------------------------------------------------------
4,594,517 (5,366,816) (9,961,333) 2,358,111
38,383,925 39,860,651
- ----------------------------------------------------------------------------------------------------------------
3,462,858 4,981,527 1,518,669 19,206,491
31,145,778 53,557,002
- ----------------------------------------------------------------------------------------------------------------
367,565 698,964 331,399 6,915,233
10,534,588 18,386,405
- ----------------------------------------------------------------------------------------------------------------
5,764,208 1,119,591 (4,644,617) 8,447,768
40,072,928 49,754,019
645,899 1,065,882
- ----------------------------------------------------------------------------------------------------------------
18,210,266 2,753,600 (15,456,666) 37,336,923
160,658,096 202,196,827
1,995,445 2,828,584
---------------------------------------------------------------------------------------------------------------
(709,548) (1,506,597) (797,049) (558,918)
2,833,416 1,368,838
---------------------------------------------------------------------------------------------------------------
177,872 (1,244,038) (1,421,910) (1,601,945)
6,930,364 4,278,607
---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Variable Annuity Account B
Notes to Financial Statements - September 30, 1998 (Unaudited & continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Period Ended September 30, 1998
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MFS Funds:
Total Return Series: $ 778,001 ($ 281,268) $ 1,306,423 $ 1,042,594 $ 263,829
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------------
Worldwide Government Series: 17,379 (16,111) 648,750 656,168 (7,418)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Funds:
Aggressive Growth Fund: 152,035 (79,214) 83,417,119 83,112,198 304,921
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------------
Global Securities Fund: 387,530 (48,568) 4,665,085 4,907,789 (242,704)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------------
Growth & Income Fund: 1,054,695 (251,097) 3,121,981 2,841,061 280,920
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------------
Strategic Bond Fund: 150,955 (71,977) 1,579,626 1,597,178 (17,552)
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners, Inc. (PPI):
PPI MFS Emerging Equities Portfolio: 321,152 (1,118,027) 60,680,819 53,959,293 6,721,526
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------------------------------------------------------
PPI MFS Research Growth Portfolio: 18,247 (759,798) 33,279,656 29,992,848 3,286,808
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------------
PPI MFS Value Equity Portfolio: 34,159 (196,523) 5,569,025 5,221,790 347,235
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------------------------------------------------------
PPI Scudder International Growth Portfolio: 29,626 (122,476) 93,655,297 91,998,294 1,657,003
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------------------------------------------------------
PPI T. Rowe Price Growth Equity Portfolio: 576,750 (1,045,811) 12,475,877 11,212,047 1,263,830
Annuity contracts in accumulation
Annuity contracts in payment period
- ------------------------------------------------------------------------------------------------------------------------------------
Total Variable Annuity Account B $134,568,725 ($ 31,107,243) $1,014,289,382 $917,072,592 $97,216,790
====================================================================================================================================
</TABLE>
(1) - Effective May 1, 1998, Aetna Ascent Variable Portfolio name changed to
Aetna Ascent VP.
(2) - Effective May 1, 1998, Aetna Investment Advisors Fund name changed to
Aetna Balanced Fund VP.
(3) - Effective May 1, 1998, Aetna Income Shares name changed to Aetna Bond
Fund VP.
(4) - Effective May 1, 1998, Aetna Crossroads Variable Portfolio name changed
to Aetna Crossroads VP.
(5) - Effective May 1, 1998, Aetna Variable Fund name changed to Aetna Growth
and Income VP.
(6) - Effective May 1, 1998, Aetna Variable Growth Portfolio name changed to
Aetna Growth VP.
(7) - Effective May 1, 1998, Aetna High Yield Portfolio name changed to Aetna
High Yield VP.
(8) - Effective May 1, 1998, Aetna Variable Index Plus Portfolio name changed
to Aetna Index Plus Large Cap VP.
(9) - Effective May 1, 1998, Aetna Index Plus Mid Cap Portfolio name changed
to Aetna Index Plus Mid Cap VP.
(10) - Effective May 1, 1998, Aetna Index Plus Small Cap Portfolio name changed
to Aetna Index Plus Small Cap VP.
(11) - Effective May 1, 1998, Aetna International Portfolio name changed to
Aetna International VP.
(12) - Effective May 1, 1998, Aetna Legacy Variable Portfolio name changed to
Aetna Legacy VP.
(13) - Effective May 1, 1998, Aetna Variable Encore Fund name changed to Aetna
Money Market VP.
(14) - Effective May 1, 1998, Aetna Real Estate Securities Portfolio name
changed to Aetna Real Estate Securities VP.
(15) - Effective May 1, 1998, Aetna Variable Small Company Portfolio name
changed to Aetna Small Company VP.
(16) - Effective May 1, 1998, Aetna Variable Capital Appreciation Portfolio
name changed to Aetna Value Opportunity VP.
<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 Period of Period Gain (Loss) Transactions of Period of Period
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1,975,149 $ 1,444,825 ($ 530,324) $ 14,352,049
$ 18,973,878 $ 33,556,165
- --------------------------------------------------------------------------------------------------------------------------
(5,937) 78,218 84,155 346,862
1,324,295 1,749,162
- --------------------------------------------------------------------------------------------------------------------------
133,786 (1,597,899) (1,731,685) 6,266,697
3,688,200 8,600,954
- --------------------------------------------------------------------------------------------------------------------------
(846) (640,129) (639,283) 2,806,808
2,680,937 4,944,720
465,927 (6,039,592) (6,505,519) 19,810,294 12,688,907 27,078,200
- --------------------------------------------------------------------------------------------------------------------------
(21,173) (198,216) (177,043) 7,802,078
3,092,701 10,601,485
0 177,677
- --------------------------------------------------------------------------------------------------------------------------
(753,832) (8,129,490) (7,375,658) 9,589,151
94,796,247 102,789,354
496,447 641,484
- --------------------------------------------------------------------------------------------------------------------------
(1,162,926) (5,085,450) (3,922,524) 8,051,033
65,867,130 72,540,896
- --------------------------------------------------------------------------------------------------------------------------
220,662 (829,988) (1,050,650) 8,558,099
15,049,606 22,387,937
378,075 732,064
- --------------------------------------------------------------------------------------------------------------------------
195,427 (584,371) (779,798) (54,103)
12,650,163 13,368,015
0 12,400
- --------------------------------------------------------------------------------------------------------------------------
1,797,922 2,886,044 1,088,122 5,330,577
90,170,258 97,359,558
0 24,168
- --------------------------------------------------------------------------------------------------------------------------
$255,524,506 $ 7,328,915 ($ 248,195,591) $403,032,325 $2,922,442,857 $3,277,957,863
==========================================================================================================================
</TABLE>
<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
- Unaudited Statement of Assets and Liabilities as of
September 30, 1998
- Unaudited Statements of Operations and Changes in Net Assets
for the nine-month periods ended September 30, 1998
and 1997
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
- Unaudited Consolidated Balance Sheets as of September 30,
1998
- Unaudited Consolidated Statements of Income for the three-
and nine-month periods ended September 30, 1998
and 1997
- Unaudited Consolidated Statements of changes in
Shareholder's Equity for the nine-month periods ended
September 30, 1998 and 1997
- Condensed 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) Broker-Dealer Agreement(2)
(3.2) Alternative Form of Wholesaling Agreement and Related Selling
Agreement(3)
<PAGE>
(4.1) Variable Annuity Contract (GM-VA-98)(2)
(4.2) Variable Annuity Contract Certificate (GMC-VA-98)(2)
(4.3) Endorsement (EVAGET98) to Variable Annuity Contract GM-VA-98 and
Variable Annuity Contract Certificate GMC-VA-98(4)
(5) Variable Annuity Contract Application(9.5.89-6(9/98))(5)
(6.1) Certificate of Incorporation of Aetna Life Insurance and Annuity
Company(6)
(6.2) Amendment of Certificate of Incorporation of Aetna Life
Insurance and Annuity Company(7)
(6.3) By-Laws as amended September 17, 1997 of Aetna Life Insurance
and Annuity Company(8)
(7) Not applicable
(8.1) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and AIM dated June 30, 1998(5)
(8.2) Service Agreement between Aetna Life Insurance and Annuity
Company and AIM effective June 30, 1998(5)
(8.3) Fund Participation Agreement by and among Aetna Life Insurance
and Annuity Company and Aetna Variable Fund, Aetna Variable
Encore Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna
GET Fund on behalf of each of its series, Aetna Generation
Portfolios, Inc. on behalf of each of its series, Aetna Variable
Portfolios, Inc. on behalf of each of its series, and Aeltus
Investment Management, Inc. dated as of May 1, 1998(2)
(8.4) Amendment dated November 9, 1998 to Fund Participation Agreement
by and among Aetna Life Insurance and Annuity Company and Aetna
Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares,
Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its
series, Aetna Generation Portfolios, Inc. on behalf of each of
its series, Aetna Variable Portfolios, Inc. on behalf of each of
its series, and Aeltus Investment Management, Inc. dated as of
May 1, 1998(9)
(8.5) Service Agreement between Aeltus Investment Management, Inc. and
Aetna Life Insurance and Annuity Company in connection with the
sale of shares of Aetna Variable Fund, Aetna Variable Encore
Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna GET
Fund on behalf of each of its series, Aetna Generation
Portfolios, Inc. on behalf of each of its series, and Aetna
Variable Portfolios, Inc. on behalf of each of its series dated
as of May 1, 1998(2)
(8.6) Amendment dated November 4, 1998 to Service Agreement between
Aeltus Investment Management, Inc. and Aetna Life Insurance and
Annuity Company in connection with the sale of shares of Aetna
Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares,
Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its
series, Aetna Generation Portfolios, Inc. on behalf of each of
its series and Aetna Variable Portfolios, Inc. on behalf of each
of its series dated as of May 1, 1998(9)
(8.7) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund and Fidelity
Distributors Corporation
<PAGE>
dated February 1, 1994 and amended on December 15, 1994,
February 1, 1995, May 1, 1995, January 1, 1996 and March 1,
1996(7)
(8.8) Fifth Amendment dated as of May 1, 1997 to the Fund
Participation Agreement between Aetna Life Insurance and Annuity
Company, Variable Insurance Products Fund and Fidelity
Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1,
1996 and March 1, 1996(10)
(8.9) Sixth Amendment dated November 6, 1997 to the Fund Participation
Agreement between Aetna Life Insurance and Annuity Company,
Variable Insurance Products Fund and Fidelity Distributors
Corporation dated February 1, 1994 and amended on December 15,
1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1,
1996 and May 1, 1997(11)
(8.10) Seventh Amendment dated as of May 1, 1998 to the Fund
Participation Agreement between Aetna Life Insurance and Annuity
Company, Variable Insurance Products Fund and Fidelity
Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1,
1996, March 1, 1996, May 1, 1997 and November 6, 1997(2)
(8.11) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund II and
Fidelity Distributors Corporation dated February 1, 1994 and
amended on December 15, 1994, February 1, 1995, May 1, 1995,
January 1, 1996 and March 1, 1996(7)
(8.12) Fifth Amendment, dated as of May 1, 1997, to the Fund
Participation Agreement between Aetna Life Insurance and Annuity
Company, Variable Insurance Products Fund II and Fidelity
Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1,
1996 and March 1, 1996(10)
(8.13) Sixth Amendment dated as of January 20, 1998 to the Fund
Participation Agreement between Aetna Life Insurance and Annuity
Company, Variable Insurance Products Fund II and Fidelity
Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1,
1996, March 1, 1996 and May 1, 1997(12)
(8.14) Seventh Amendment dated as of May 1, 1998 to the Fund
Participation Agreement between Aetna Life Insurance and Annuity
Company, Variable Insurance Products Fund II and Fidelity
Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1,
1996, March 1, 1996, May 1, 1997 and January 20, 1998(2)
(8.15) Service Agreement between Aetna Life Insurance and Annuity
Company and Fidelity Investments Institutional Operations
Company dated as of November 1, 1995(11)
(8.16) Amendment dated January 1, 1997 to Service Agreement between
Aetna Life Insurance and Annuity Company and Fidelity
Investments Institutional Operations Company dated as of
November 1, 1995(10)
<PAGE>
(8.17) Service Contract between Fidelity Distributors Corporation and
Aetna Life Insurance and Annuity Company dated May 2, 1997(9)
(8.18) Fund Participation Agreement among Janus Aspen Series and Aetna
Life Insurance and Annuity Company and Janus Capital Corporation
dated December 8, 1997(13)
(8.19) Amendment dated October 12, 1998 to Fund Participation Agreement
among Janus Aspen Series and Aetna Life Insurance and Annuity
Company and Janus Capital Corporation dated December 8, 1997(9)
(8.20) Service Agreement between Janus Capital Corporation and Aetna
Life Insurance and Annuity Company dated December 8, 1997(14)
(8.21) Fund Participation Agreement among MFS Variable Insurance Trust,
Aetna Life Insurance and Annuity Company and Massachusetts
Financial Services Company dated April 30, 1996, and amended on
September 3, 1996, March 14, 1997 and November 28, 1997(2)
(8.22) Fourth Amendment dated May 1, 1998 to the Fund Participation
Agreement by and among MSF Variable Insurance Trust, Aetna Life
Insurance and Annuity Company and Massachusetts Financial
Services Company dated April 30, 1996, and amended on September
3, 1996, March 14, 1997 and November 28, 1997(5)
(8.23) Fifth Amendment to Fund Participation Agreement by and among MSF
Variable Insurance Trust, Aetna Life Insurance and Annuity
Company and Massachusetts Financial Services Company dated April
30, 1996, and amended on September 3, 1996, March 14, 1997 and
November 28, 1997
(8.24) Fund Participation Agreement dated March 11, 1997 between Aetna
Life Insurance and Annuity Company and Oppenheimer Variable
Annuity Account Funds and Oppenheimer Funds, Inc.(15)
(8.25) Service Agreement effective as of March 11, 1997 between
Oppenheimer Funds, Inc. and Aetna Life Insurance and Annuity
Company(15)
(9) Opinion and Consent of Counsel
(10) Consent of Independent Auditors
(11) Not applicable
(12) Not applicable
(13) Schedule for Computation of Performance Data(5)
(14) Not applicable
(15.1) Powers of Attorney(5)
(15.2) Authorization for Signatures(3)
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 Registration Statement on Form N-4 (File No.
333-56297), as filed electronically on June 8, 1998 (Accession No.
0000950146-98-000983).
<PAGE>
3. 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).
4. Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 333-56297), as filed electronically on
September 14, 1998 (Accession No. 0000950146-98-001574).
5. Incorporated by reference to Pre-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 333-56297), as filed electronically on
August 4, 1998 (Accession No. 0000950146-98-001283).
6. 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).
7. 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).
8. 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).
9. Incorporated by reference to Post-Effective Amendment No. 2 to Registration
Statement on Form N-4 (File No. 333-56297), as filed electronically on
December 14, 1998 (Accession No. 0000950146-98-002092).
10. Incorporated by reference to Post-Effective Amendment No. 30 to
Registration Statement on Form N-4 (File No. 33-34370), as filed
electronically on September 29, 1997 (Accession No. 0000950146-97-001485).
11. Incorporated by reference to Post-Effective Amendment No. 16 to
Registration Statement on Form N-4 (File No. 33-75964), as filed
electronically on February 9, 1998 (Accession No. 0000950146-98-000179).
12. Incorporated by Reference to Post-Effective Amendment No. 7 to Registration
Statement on Form S-6 (File No. 33-75248), as filed electronically on
February 24, 1998 (Accession No. 0000950146-98-000267).
13. Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form N-4 (File No. 33-88720), as filed electronically on June
28, 1996 (Accession No. 0000928389-96-000136).
14. Incorporated by reference to Post-Effective Amendment No. 10 to
Registration Statement on Form N-4 (File No. 33-75992), as filed
electronically on December 31, 1997 (Accession No. 0000950146-97-001982).
15. 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).
<PAGE>
Item 25. Directors and Officers of the Depositor
<TABLE>
<CAPTION>
Name and Principal
Business Address* Positions and Offices with Depositor
<S> <C>
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, Treasurer and Corporate Controller
Therese M. Squillacote Vice President and Chief Compliance Officer
Kirk P. Wickman Vice President, General Counsel and Corporate Secretary
</TABLE>
* 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.
2 to Registration Statement on Form N-4 (File No. 333-56297), as filed
electronically on December 14, 1998 (Accession No. 0000950146-98-002092).
Item 27. Number of Contract Owners
As of December 31, 1998, there were 75,102 individuals holding interests in
variable annuity contracts funded through Variable Annuity Account B.
Item 28. Indemnification
Section 21 of Public Act No. 97-246 of the Connecticut General Assembly (the
"Act") provides that a corporation may provide indemnification of or advance
expenses to a director, officer, employee or agent only as permitted by Sections
33-770 to 33-778, inclusive, of the Connecticut General Statutes, as amended by
Sections 12 to 20, inclusive, of this Act. Reference is hereby made to Section
33-771(e) of the Connecticut General Statutes ("CGS") regarding indemnification
of directors and Section 33-776(d) of CGS 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, except to the extent that their certificate of incorporation expressly
provides otherwise, indemnify their directors, officers,
<PAGE>
employees and agents against "liability" (defined as the obligation to pay a
judgment, settlement, penalty, fine, including an excise tax assessed with
respect to an employee benefit plan, or reasonable expenses incurred with
respect to a proceeding) when (1) a determination is made pursuant to Section
33-775 that the party seeking indemnification has met the standard of conduct
set forth in Section 33-771 or (2) a court has determined that indemnification
is appropriate pursuant to Section 33-774. Under Section 33-775, the
determination of and the authorization for indemnification are made (a) by the
disinterested directors, as defined in Section 33-770(3); (b) by special
counsel; (c) by the shareholders; or (d) in the case of indemnification of an
officer, agent or employee of the corporation, by the general counsel of the
corporation or such other officer(s) as the board of directors may specify.
Also, Section 33-772 provides that a corporation shall 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
he was a director. In the case of a proceeding by or in the right of the
corporation or with respect to conduct for which the director, officer, agent or
employee was adjudged liable on the basis that he received a financial benefit
to which he was not entitled, indemnification is limited to reasonable expenses
incurred in connection with the proceeding against the corporation to which the
individual was named a party.
The statute does specifically authorize a corporation to procure indemnification
insurance on behalf of an individual who 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, only, 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. and as the principal underwriter and investment adviser for
Portfolio Partners, Inc. (all management investment companies
registered under the Investment Company Act of 1940 (1940 Act)).
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>
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. 333-56297) and has duly caused this
Post-Effective Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Hartford, State of Connecticut, on the
16th day of February, 1999.
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. 4 to the Registration Statement on Form N-4 (File No. 333-56297) has been
signed by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
Thomas J. McInerney* Director and President )
- ------------------------------------- (principal executive officer) )
Thomas J. McInerney )
)
Shaun P. Mathews* Director ) February
- ------------------------------------- )
Shaun P. Mathews ) 16, 1999
)
Catherine H. Smith* Director and Chief Financial Officer )
- ------------------------------------ )
Catherine H. Smith )
)
Deborah Koltenuk* Vice President, Treasurer and Corporate Controller )
- ------------------------------------- )
Deborah Koltenuk )
By: /s/ J. Neil McMurdie
----------------------
J. Neil McMurdie
*Attorney-in-Fact
</TABLE>
<PAGE>
VARIABLE ANNUITY ACCOUNT B
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
<S> <C> <C>
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 Broker-Dealer Agreement *
99-B.3.2 Alternative Form of Wholesaling Agreement and Related Selling Agreement *
99-B.4.1 Variable Annuity Contract (GM-VA-98) *
99-B.4.2 Variable Annuity Contract Certificate (GMC-VA-98) *
99-B.4.3 Endorsement (EVAGET98) to Variable Annuity Contract *
GM-VA-98 and Variable Annuity Contract Certificate
GMC-VA-98
99-B.5 Variable Annuity Contract Application (9.5.89-6(9/98)) *
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.8.1 Fund Participation Agreement between Aetna Life Insurance and Annuity Company and AIM *
dated June 30, 1998
99-B.8.2 Service Agreement between Aetna Life Insurance and Annuity Company and AIM effective *
June 30, 1998
99-B.8.3 Fund Participation Agreement by and among Aetna Life Insurance and Annuity Company and *
Aetna Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares, Aetna Balanced VP,
Inc., Aetna GET Fund on behalf of each of its series, Aetna Generation Portfolios, Inc.
on behalf of each of its series, Aetna Variable Portfolios, Inc. on behalf of each of
its series, and Aeltus Investment Management, Inc. dated as of May 1, 1998
</TABLE>
*Incorporated by reference
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
<S> <C> <C>
99-B.8.4 Amendment dated November 9, 1998 to Fund Participation Agreement by and among *
Aetna Life Insurance and Annuity Company and Aetna Variable Fund, Aetna Variable
Encore Fund, Aetna Income Shares, Aetna Balanced VP, Inc., Aetna GET Fund on
behalf of each of its series, Aetna Generation Portfolios, Inc. on behalf of each
of its series, Aetna Variable Portfolios, Inc. on behalf of each of its series,
and Aeltus Investment Management, Inc. dated as of May 1, 1998
99-B.8.5 Service Agreement between Aeltus Investment Management, Inc. and Aetna Life *
Insurance and Annuity Company in connection with the sale of shares of Aetna
Variable Fund, Aetna Variable Encore Fund, Aetna Income Shares, Aetna Balanced
VP, Inc., Aetna GET Fund on behalf of each of its series, Aetna Generation
Portfolios, Inc. on behalf of each of its series, and Aetna Variable Portfolios,
Inc. on behalf of each of its series dated as of May 1, 1998
99-B.8.6 Amendment dated November 4, 1998 to Service Agreement between Aeltus Investment *
Management, Inc. and Aetna Life Insurance and Annuity Company in connection with
the sale of shares of Aetna Variable Fund, Aetna Variable Encore Fund, Aetna
Income Shares, Aetna Balanced VP, Inc., Aetna GET Fund on behalf of each of its
series, Aetna Generation Portfolios, Inc. on behalf of each of its series and
Aetna Variable Portfolios, Inc. on behalf of each of its series dated as of May
1, 1998
99-B.8.7 Fund Participation Agreement between Aetna Life Insurance and Annuity Company, *
Variable Insurance Products Fund and Fidelity Distributors Corporation dated February
1, 1994 and amended on December 15, 1994, February 1, 1995, May 1, 1995, January 1,
1996 and March 1, 1996
99-B.8.8 Fifth Amendment dated as of May 1, 1997 to the Fund Participation Agreement *
between Aetna Life Insurance and Annuity Company, Variable Insurance Products
Fund and Fidelity Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996 and March 1,
1996
</TABLE>
*Incorporated by reference
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
<S> <C> <C>
99-B.8.9 Sixth Amendment dated November 6, 1997 to the Fund Participation Agreement *
between Aetna Life Insurance and Annuity Company, Variable Insurance Products
Fund and Fidelity Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1, 1996
and May 1, 1997
99-B.8.10 Seventh Amendment dated as of May 1, 1998 to the Fund Participation Agreement *
between Aetna Life Insurance and Annuity Company, Variable Insurance Products
Fund and Fidelity Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1, 1996,
May 1, 1997 and November 6, 1997
99-B.8.11 Fund Participation Agreement between Aetna Life Insurance and Annuity Company, *
Variable Insurance Products Fund II and Fidelity Distributors Corporation dated
February 1, 1994 and amended on December 15, 1994, February 1, 1995, May 1, 1995,
January 1, 1996, and March 1, 1996
99-B.8.12 Fifth Amendment, dated as of May 1, 1997, to the Fund Participation Agreement *
between Aetna Life Insurance and Annuity Company, Variable Insurance Products
Fund II and Fidelity Distributors Corporation dated February 1, 1994 and amended
on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996, and March
1, 1996
99.B-8.13 Sixth Amendment dated as of January 20, 1998 to the Fund Participation Agreement *
between Aetna Life Insurance and Annuity Company, Variable Insurance Products
Fund II and Fidelity Distributors Corporation dated February 1, 1994 and amended
on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1,
1996 and May 1, 1997
99-B.8.14 Seventh Amendment dated as of May 1, 1998 to the Fund Participation Agreement *
between Aetna Life Insurance and Annuity Company, Variable Insurance Products
Fund II and Fidelity Distributors Corporation dated February 1, 1994 and amended
on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996, March 1,
1996, May 1, 1997 and January 20, 1998
</TABLE>
*Incorporated by reference
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
<S> <C> <C>
99-B.8.15 Service Agreement between Aetna Life Insurance and Annuity Company and Fidelity *
Investments Institutional Operations Company dated as of November 1, 1995
99-B.8.16 Amendment dated January 1, 1997 to Service Agreement between Aetna Life Insurance *
and Annuity Company and Fidelity Investments Institutional Operations Company
dated as of November 1, 1995
99-B.8.17 Service Contract between Fidelity Distributors Corporation and Aetna Life *
Insurance and Annuity Company dated May 2, 1997
99-B.8.18 Fund Participation Agreement among Janus Aspen Series and Aetna Life Insurance *
and Annuity Company and Janus Capital Corporation dated December 8, 1997
99-B.8.19 Amendment dated October 12, 1998 to Fund Participation Agreement among Janus *
Aspen Series and Aetna Life Insurance and Annuity Company and Janus Capital
Corporation dated December 8, 1997
99-B.8.20 Service Agreement between Janus Capital Corporation and Aetna Life Insurance and *
Annuity Company dated December 8, 1997
99-B.8.21 Fund Participation Agreement among MFS Variable Insurance Trust, Aetna Life *
Insurance and Annuity Company and Massachusetts Financial Services Company dated April
30, 1996, and amended on September 3, 1996, March 14, 1997 and November 28, 1997
99-B.8.22 Fourth Amendment dated May 1, 1998 to the Fund Participation Agreement by and *
among MSF Variable Insurance Trust, Aetna Life Insurance and Annuity Company and
Massachusetts Financial Services Company dated April 30, 1996, and amended on
September 3, 1996, March 14, 1997 and November 28, 1997
99-B.8.23 Fifth Amendment to Fund Participation Agreement by and among MSF Variable
Insurance Trust, Aetna Life Insurance and Annuity Company and Massachusetts
Financial Services Company dated April 30, 1996, and amended on September 3, 1996,
March 14, 1997 and November 28, 1997
------------
</TABLE>
*Incorporated by reference
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
<S> <C> <C>
99-B.8.24 Fund Participation Agreement dated March 11, 1997 between Aetna Life Insurance *
and Annuity Company and Oppenheimer Variable Annuity Account Funds and
Oppenheimer Funds, Inc.
99-B.8.25 Service Agreement effective as of March 11, 1997 between Oppenheimer Funds, Inc. *
and Aetna Life Insurance and Annuity Company
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 *
</TABLE>
*Incorporated by reference
FIFTH AMENDMENT TO
PARTICIPATION AGREEMENT
THIS FIFTH AMENDMENT TO THE PARTICIPATION AGREEMENT ("Fifth Amendment")
is made and entered into as of the 1st day of May 1998, by and among MFS
VARIABLE INSURANCE TRUST, a Massachusetts business trust (the "Trust"), AETNA
LIFE INSURANCE AND ANNUITY COMPANY, a Connecticut corporation (the "Company") on
its own behalf and on behalf of each of the segregated asset accounts of the
Company set forth in Schedule A of the Original Agreement (hereinafter defined)
(the "Accounts") and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware
corporation ("MFS").
WITNESSETH
WHEREAS the Trust, the Company and MFS are parties to a Participation
Agreement dated April 30, 1996, as supplemented by First Amendment to
Participation Agreement dated September 3, 1996, Second Amendment to
Participation Agreement dated March 14, 1997, Third Amendment to Participation
Agreement dated November 28, 1997, and Fourth Amendment to Participation
Agreement dated as of May 1, 1998 (collectively the "Original Agreement"); and
WHEREAS the Trust, the Company and MFS now desire to modify the Original
Agreement.
NOW THEREFORE, in consideration of the premises and the mutual covenants and
promises expressed herein, the parties agree as follows:
1. Schedule A of the Original Agreement is hereby deleted and replaced with
Schedule A attached hereto;
2. The Original Agreement, as supplemented by this Fifth Amendment, is ratified
and confirmed; and
3. This Fifth Amendment may be executed in two or more counterparts, which
together shall constitute one instrument.
IN WITNESS WHEREOF, the parties have executed this Fifth Amendment as of the
date first above written.
AETNA LIFE INSURANCE AND ANNUITY COMPANY MFS VARIABLE INSURANCE TRUST
By its authorized officer, on behalf of the Portfolios. By its
authorized officer and not
individually,
By: /s/ Laurie M. LeBlanc By: /s/ James R. Bordewick, Jr.
--------------------- ---------------------------
Name: Laurie M. LeBlanc Name: James R. Bordewick, Jr.
Title: Vice President Title: Senior VP & Associate
General Counsel
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By: /s/ Jeffrey L. Shames
---------------------
Name: Jeffrey L. Shames
Title: Chairman, Chief Executive Officer
<PAGE>
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Name of Separate Account and Date Policies Funded by Portfolios Applicable to
Established by Board of Directors Separate Account Policies
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Variable Annuity Account B Variable Annuity World Governments Series
(Est. October 18, 1976) Total Return Series
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Variable Annuity Account C Variable Annuity World Governments Series
(Est. October 18, 1976) Total Return Series
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Variable Life Account B Variable Life World Governments Series
(Est. June 18, 1986) Total Return Series
- --------------------------------------------------------------------------------------------------------------
</TABLE>
151 Farmington Avenue
Hartford, CT 06156-3124
Julie E. Rockmore
Counsel
Law Division, RE4A
February 16, 1999 Investments & Financial Services
(860) 273-4686
Fax: (860) 273-8340
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Filing Desk
Re: Variable Annuity Account B of Aetna Life Insurance and Annuity Company
Post-Effective Amendment No. 4 to Registration Statement on Form N-4
Prospectus Title: Aetna Variable Annuity
File Nos.: 333-56297 and 811-02512
Gentlemen:
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 or those for whom I have supervisory
responsibility, have reviewed the N-4 Registration Statement, as amended to the
date hereof, and this Post-Effective Amendment No. 4. 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.
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.
<PAGE>
I consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
/s/ Julie E. Rockmore
Julie E. Rockmore
Counsel
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 incorporation by reference into this Registration
Statement (File No. 333-56297) on Form N-4 our reports dated February
3, 1998 and February 27, 1998.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
February 16, 1999
