<PAGE>
Registration No. 333-60515
As Filed with the Securities and Exchange Commission on November 24, 1998
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM
N-8B-2
A. Exact name of trust: ICMG Registered Variable Life Separate Account A
B. Name of depositor: Hartford Life Insurance Company
C. Complete address of depositor's principal executive offices:
P.O. Box 2999
Hartford, Connecticut 06104-2999
D. Name and complete address of agent for service:
Leslie T. Soler, Esq.
Hartford Life Insurance Company
P.O. Box 2999
Hartford, Connecticut 06104-2999
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b) of Rule 485
___ on _____________, 1998, pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on _____________, 1998, pursuant to paragraph (a)(1) of Rule 485
___ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
E. Title and amount of securities being registered:
Pursuant to Rule 24f-2 under the Investment Company Act of 1940,
the Registrant hereby declares that an indefinite amount of its
Group Flexible Premium Variable Life Insurance Policies is being
registered under the Securities Act of 1933.
F. Approximate date of proposed public offering:
As soon as practicable after the effective date of this
Registration Statement.
This registrant hereby amends this Registration Statement on such dates as
may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1993 or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
RECONCILIATION AND TIE BETWEEN
FORM N-8B-2 AND PROSPECTUS
ITEM NO. OF
FORM N-8B-2 CAPTION IN PROSPECTUS
- ----------- ---------------------
1. Cover page
2. Cover page
3. Not applicable
4. Hartford; Distribution of the Group Policy
5. Summary - The Separate Account
6. The Separate Account
7. Not required by Form S-6
8. Not required by Form S-6
9. Legal Proceedings
10. Summary; The Funds; Detailed Description of Certificate
Benefits and Provisions; Other Matters - Voting Rights,
Dividends
11. Summary; The Funds
12. Summary; The Funds
13. Deductions and Charges from Investment Value;
Distribution of the Group Policy; Federal Tax
Considerations
14. Detailed Description of Certificate Benefits and
Provisions - Enrollment for a Certificate
15. Detailed Description of Certificate Benefits and
Provisions - Allocation of Premium Payments
16. The Funds; Detailed Description of Certificate Benefits
and Provisions - Allocation of Premium Payments
17. Summary; Detailed Description of Certificate Benefits
and Provisions - Values Under the Certificate,
Surrender of the Certificate, The Right to Examine the
Certificate
18. The Funds; Detailed Description of Certificate Benefits
and Provisions - Deductions and Charges from Investment
Value; Federal Tax Considerations
19. Other Matters - Statements to Owners
20. Not applicable
21. Detailed Description of Certificate Benefits and
Provisions - Loans
<PAGE>
22. Not applicable
23. Safekeeping of the Separate Account Assets
24. Other Matters - Assignment
25. Hartford
26. Not applicable
27. Hartford
28. Hartford; Executive Officers and Directors
29. Hartford
30. Not applicable
31. Not applicable
32. Not applicable
33. Not applicable
34. Not applicable
35. Distribution of the Group Policy
36. Not required by Form S-6
37. Not applicable
38. Distribution of the Group Policy
39. Hartford; Distribution of the Group Policy
40. Not applicable
41. Hartford; Distribution of the Group Policy
42. Not applicable
43. Not applicable
44. Detailed Description of Certificate Benefits and
Provisions - Allocation of Premium Payments
45. Not applicable
46. Detailed Description of Certificate Benefits and
Provisions - Values Under the Certificate
47. The Funds
48. Cover page; Hartford
49. Not applicable
50. The Separate Account
<PAGE>
51. Summary; Hartford; Detailed Description of Certificate
Benefits and Provisions
52. The Funds - General
53. Federal Tax Considerations
54. Not applicable
55. Not applicable
56. Not required by Form S-6
57. Not required by Form S-6
58. Not required by Form S-6
59. Not required by Form S-6
<PAGE>
PART I
<PAGE>
OMNISOURCE -SM-
GROUP FLEXIBLE PREMIUM VARIABLE LIFE
INSURANCE POLICIES
HARTFORD LIFE INSURANCE COMPANY
P.O. BOX 2999
HARTFORD, CONNECTICUT 06104-2999
[LOGO] TELEPHONE: 1-800-861-1408
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Prospectus describes a group flexible premium variable life insurance
policy (the "Group Policies," and each individually a "Group Policy") and
certificates of insurance (the "Certificates," and each individually a
"Certificate") offered by Hartford Life Insurance Company ("Hartford"). The
Certificates are designed to provide lifetime insurance coverage to the
Insured(s) named in the Certificates, and maximum flexibility in connection with
premium payments and the Death Benefit, together with an opportunity to
participate in the investment experience of ICMG Registered Variable Life
Separate Account A. For a given amount of Death Benefit chosen, the Owner has
considerable flexibility in selecting the timing and amount of premium payments.
In addition to the Initial Premium payment, additional premium payments are also
allowed.
Group Policies may be issued to a Participating Employer or to a trust that is
adopted by a Participating Employer. Eligible employees of Participating
Employers may own Certificates issued under their respective Participating
Employer's Group Policy. The Owners possess all rights and interests under the
Group Policy. The Owners are provided with the Certificates, which describe each
Owner's rights, benefits, and options under the Group Policy.
Sales agents can provide prospective purchasers with individualized sales
illustrations which reflect all the fees and charges associated with the
Certificate options selected.
The Certificates provide for a Death Benefit, pursuant to which Death Proceeds
are payable at the Insured's death. You may select one of two Death Benefit
options. Death Benefit Option A is an amount equal to the larger of (1) the Face
Amount and (2) the Variable Insurance Amount. Death Benefit Option B is an
amount equal to the larger of (1) the Face Amount plus the Cash Value and (2)
the Variable Insurance Amount. The Death Proceeds payable to the Beneficiary
equal the Death Benefit less any Debt outstanding under the Certificate plus any
rider benefits payable.
The Investment Value of a Certificate will also vary up or down to reflect the
investment experience of the Investment Divisions to which Net Premiums have
been allocated. The Owner bears the investment risk for all amounts so
allocated.
The Portfolios underlying the Investment Divisions presently are: shares of
Class IA of the Hartford Capital Appreciation HLS Fund, Inc. ("Hartford Capital
Appreciation Fund"), shares of Class IA of the Hartford Bond HLS Fund, Inc.
("Hartford Bond Fund") and shares of Class IA of the Hartford Money Market HLS
Fund, Inc. ("Hartford Money Market Fund"), the Limited Maturity Bond Portfolio,
the Balanced Portfolio and the Partners Portfolio of Neuberger & Berman Advisers
Management Trust; the VIP High Income Portfolio, the VIP Equity-Income Portfolio
and the VIP Overseas Portfolio of Variable Insurance Products Fund; the VIP II
Asset Manager Portfolio of Variable Insurance Products Fund II; the Alger
American Small Capitalization Portfolio and the Alger American Growth Portfolio
of The Alger American Fund; the J.P. Morgan Bond Portfolio, the J.P. Morgan
Equity Portfolio, the J.P. Morgan Small Company Portfolio and the J.P. Morgan
International Equity Portfolio of J.P. Morgan Series Trust II; the Fixed Income
Portfolio, the High Yield Portfolio, the Equity Growth Portfolio, the Value
Portfolio, the Global Equity Portfolio and the Emerging Markets Equity Portfolio
of Morgan Stanley Universal Funds, Inc.; and the EAFE-Registered Trademark-
Equity Index Fund, Equity 500 Index Fund and the Small Cap Index Fund of the BT
Insurance Funds Trust.
- --------------------------------------------------------------------------------
IT MAY NOT BE ADVANTAGEOUS TO PURCHASE FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
AS A REPLACEMENT FOR YOUR CURRENT LIFE INSURANCE OR IF YOU ALREADY OWN A
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY.
- --------------------------------------------------------------------------------
THIS PROSPECTUS IS VALID ONLY IF ACCOMPANIED BY THE CURRENT PROSPECTUSES OF THE
AVAILABLE UNDERLYING FUNDS WHICH CONTAIN A FULL DESCRIPTION OF THOSE FUNDS. ALL
PROSPECTUSES SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
- --------------------------------------------------------------------------------
THIS PROSPECTUS AND OTHER INFORMATION ABOUT THE SEPARATE ACCOUNT REQUIRED TO BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION CAN BE FOUND AT THE
COMMISSION'S WEB SITE (HTTP://WWW.SEC.GOV).
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
THE DATE OF THIS PROSPECTUS IS DECEMBER 21, 1998.
<PAGE>
2 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SPECIAL TERMS......................................................... 4
SUMMARY............................................................... 6
HARTFORD.............................................................. 9
THE SEPARATE ACCOUNT.................................................. 9
THE FUNDS............................................................. 10
General............................................................. 10
Hartford Funds.................................................... 10
Neuberger & Berman Advisers Management Trust...................... 10
Variable Insurance Products Fund and Variable Insurance Products
Fund II.......................................................... 11
The Alger American Fund........................................... 11
J.P. Morgan Series Trust II....................................... 11
Morgan Stanley Universal Funds, Inc............................... 11
BT Insurance Funds Trust.......................................... 11
The Portfolios...................................................... 12
DETAILED DESCRIPTION OF CERTIFICATE BENEFITS AND PROVISIONS........... 14
General............................................................. 14
Issuance of a Certificate........................................... 14
Premiums............................................................ 14
Premium Payment Flexibility....................................... 14
Allocation of Premium Payments.................................... 15
Accumulation Units................................................ 15
Accumulation Unit Values.......................................... 15
Premium Limitation................................................ 15
Values Under the Certificate........................................ 16
Surrender of the Certificate........................................ 16
Partial Withdrawals............................................... 16
Transfers Among Investment Divisions................................ 16
Amount and Frequency of Transfers................................. 16
Transfers to or from Investment Divisions......................... 16
Asset Rebalancing................................................. 17
Procedures for Telephone Transfers................................ 17
Valuation of Payments and Transfers................................. 17
Processing of Transactions........................................ 17
Loans............................................................... 17
Loan Interest..................................................... 17
Credited Interest................................................. 18
Loan Repayments................................................... 18
Termination Due to Excessive Debt................................. 18
Effect of Loans on Investment Value............................... 18
Death Benefit....................................................... 18
Minimum Death Benefit Testing Procedures.......................... 18
Death Benefit Options............................................. 18
Option Change..................................................... 18
Payment Options................................................... 19
Legal Developments Regarding Income Payments...................... 19
Beneficiary....................................................... 19
Increases and Decreases in Face Amount............................ 19
Benefits at Maturity................................................ 20
Termination of Participation in the Group Policy.................... 20
Lapse and Reinstatement While the Group Policy Is In Effect......... 20
Lapse and Grace Period............................................ 20
Reinstatement..................................................... 20
Enrollment for a Certificate........................................ 20
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 3
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
The Right to Examine the Certificate................................ 20
<S> <C>
Deductions from Premium............................................. 21
Front-End Sales Load.............................................. 21
Premium Related Tax Charge........................................ 21
DAC Tax Charge.................................................... 21
Deductions and Charges from Investment Value........................ 21
Monthly Deduction Amount.......................................... 21
Mortality and Expense Risk Charge................................... 22
Taxes............................................................... 22
OTHER MATTERS......................................................... 22
Additions, Deletions or Substitutions of Investments................ 22
Voting Rights....................................................... 23
Our Rights.......................................................... 23
Statements to Owners................................................ 23
Limit on Right to Contest........................................... 24
Misstatement as to Age or Sex....................................... 24
Assignment.......................................................... 24
Dividends........................................................... 24
Experience Credits.................................................. 24
SUPPLEMENTAL BENEFITS................................................. 24
Maturity Date Extension Rider....................................... 24
EXECUTIVE OFFICERS AND DIRECTORS...................................... 24
DISTRIBUTION OF THE GROUP POLICY...................................... 29
SAFEKEEPING OF THE SEPARATE ACCOUNT ASSETS............................ 29
FEDERAL TAX CONSIDERATIONS............................................ 30
General............................................................. 30
Taxation of Hartford and the Separate Account....................... 30
Income Taxation of Certificate Benefits............................. 30
Modified Endowment Contracts........................................ 30
Diversification Requirements........................................ 31
Federal Income Tax Withholding...................................... 31
Other Tax Considerations............................................ 31
PERFORMANCE RELATED INFORMATION....................................... 31
LEGAL PROCEEDINGS..................................................... 32
YEAR 2000............................................................. 32
EXPERTS............................................................... 33
REGISTRATION STATEMENT................................................ 33
FINANCIAL STATEMENTS.................................................. 33
APPENDIX A -- ILLUSTRATIONS OF DEATH BENEFIT, CASH VALUE AND CASH
SURRENDER VALUE..................................................... 34
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS.............................. 57
</TABLE>
THE GROUP POLICIES MAY NOT BE AVAILABLE IN ALL STATES.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER OR OTHER PERSON IS AUTHORIZED
TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED ON.
<PAGE>
4 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SPECIAL TERMS
As used in this Prospectus, the following terms have the indicated meanings:
ACCUMULATION UNIT: An accounting unit of measure used to calculate the value of
an Investment Division.
ADJUSTABLE LOAN INTEREST RATE: The interest rate charged on Loans that is
adjusted from time to time by Hartford. The method of calculation of the
Adjustable Loan Interest Rate is described later in this Prospectus.
ATTAINED AGE: The Issue Age plus the period since the Coverage Date.
BENEFICIARY: The person so designated by the Owner in the Certificate.
CASH SURRENDER VALUE: The Cash Value, less Debt, less any charges accrued but
not yet deducted.
CASH VALUE: The Investment Value plus the Loan Account Value.
CERTIFICATE: The form evidencing and describing the Owner's rights, benefits,
and options under the Group Policy. The Certificate will describe, among other
things, (i) the benefits payable upon the death of the named Insured, (ii) to
whom the benefits are payable and (iii) the limits and other terms of the Group
Policy as they pertain to the Insured.
CERTIFICATE ANNIVERSARY: An anniversary of the Coverage Date.
CHARGE DEDUCTION DIVISION: An Investment Division from which all charges are
deducted if so designated in the Enrollment Form or later elected.
CODE: The Internal Revenue Code of 1986, as amended.
COVERAGE DATE: The date insurance under the Certificate is effective as to an
Insured and from which Coverage Months and Coverage Years are determined.
COVERAGE MONTH(S): The 1-month period and each successive 1-month period
following the Coverage Date.
COVERAGE YEAR(S): The 12-month period and each sucessive 12-month period
following the Coverage Date.
CUSTOMER SERVICE CENTER: The service area of Hartford Life Insurance Company.
DEATH BENEFIT: The Death Benefit option in effect determines how the Death
Benefit is calculated. The two Death Benefit options are described under
"Detailed Description of Certificate Benefits and Provisions -- Death Benefit."
DEATH PROCEEDS: The Death Benefit less outstanding Debt plus any rider benefits
payable.
DEBT: The aggregate amount of outstanding Loans, plus any interest accrued at
the Adjustable Loan Interest Rate.
ENROLLMENT FORM: The form required to be filled out prior to issuance of a
Certificate. The specific form used will depend on the underwriting
classification and plan design.
FACE AMOUNT: The minimum Death Benefit as long as the Certificate is in force.
It is specified at issue and may be changed after issue on request, or due to a
change in Death Benefit option or a partial withdrawal.
FUNDS: The registered open-end management investment companies in which assets
of the Investment Divisions of the Separate Account may be invested. Currently,
the Funds include: (i) Hartford Capital Appreciation Fund; (ii) Hartford Bond
Fund; (iii) Hartford Money Market Fund ((i)-(iii) are each a "Hartford Fund" and
collectively the "Hartford Funds" and are managed by HL Investment Advisors,
Inc. ("HL Advisors")); (iv) Neuberger & Berman Advisers Management Trust
("Neuberger & Berman AMT"), managed by Neuberger & Berman Management
Incorporated ("N&B Management"); (v) Variable Insurance Products Fund ("VIP"),
managed by Fidelity Management & Research Company ("FMR"); (vi) Variable
Insurance Products Fund II ("VIP II"), managed by FMR; (vii) The Alger American
Fund ("Alger American Fund"), managed by Fred Alger Management, Inc. ("Alger
Management"); (viii) J.P. Morgan Series Trust II ("J.P. Morgan Series Trust"),
managed by J.P. Morgan Investment Management Inc. ("J.P. Morgan"); (ix) Morgan
Stanley Universal Funds, Inc. ("MSUF"), managed by either Morgan Stanley Asset
Management Inc. ("MSAM") or Miller Anderson & Sherrerd, LLP ("MAS"); and (x) BT
Insurance Funds Trust, managed by Bankers Trust Global Investment Management, a
unit of Bankers Trust Company ("Bankers Trust").
GENERAL ACCOUNT: The assets of Hartford other than the assets of Our separate
accounts.
GRACE PERIOD: The 61-day period, measured in calendar days, following the date
We mail to the Owner notice that the Cash Surrender Value is insufficient to pay
the charges due. Unless the Owner has given Us written notice of the termination
in advance of the date of termination of any Certificate, insurance will
continue in force during this period.
GROUP POLICY: The group flexible premium variable life insurance policy issued
by Hartford and described in this Prospectus.
HARTFORD (ALSO REFERRED TO AS "WE," "US," "OUR"): Hartford Life Insurance
Company.
IN WRITING: In a written form satisfactory to Us.
INITIAL PREMIUM: The amount of premium initially payable shown in Your
Certificate.
INSURED: The person on whose life the Certificate is issued. The Insured is
identified in the Certificate.
INVESTMENT DIVISION: A separate division of the Separate Account which invests
exclusively in the shares of a specified Portfolio of a Fund. The Separate
Account currently offers 25 Investment Divisions: (i) the Hartford Capital
Appreciation Investment Division, (ii) the Hartford Bond Investment Division,
(iii) the Hartford Money Market Investment Division, (iv) the N&B AMT Limited
Maturity Bond Investment Division, (v) the N&B AMT Balanced Investment Division,
(vi) the N&B AMT Partners Investment Division, (vii) the
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 5
- --------------------------------------------------------------------------------
Fidelity VIP High Income Investment Division, (viii) the Fidelity VIP
Equity-Income Investment Division, (ix) the Fidelity VIP Overseas Investment
Division, (x) the Fidelity VIP II Asset Manager Investment Division, (xi) the
Alger American Small Capitalization Investment Division, (xii) the Alger
American Growth Investment Division, (xiii) the J.P. Morgan Bond Investment
Division, (xiv) the J.P. Morgan Equity Investment Division, (xv) the J.P. Morgan
Small Company Investment Division, (xvi) the J.P. Morgan International
Opportunities Investment Division, (xvii) the MS Fixed Income Investment
Division, (xviii) the MS High Yield Investment Division, (xix) the MS Equity
Growth Investment Division, (xx) the MS Value Investment Division, (xxi) the MS
Global Equity Investment Division, (xxii) the MS Emerging Markets Equity
Investment Division, (xxiii) the BT EAFE-Registered Trademark- Equity Index
Investment Division, (xxiv) BT Equity 500 Index Investment Division, and (xxv)
the BT Small Cap Index Investment Division.
INVESTMENT VALUE: The sum of the values of assets in the Investment Divisions
under the Certificate.
ISSUE AGE: The Insured's age on the birthday nearest to the Coverage Date.
LOAN: Any amount borrowed against the Investment Value under a Certificate.
LOAN ACCOUNT: That portion of Hartford's General Account to which amounts are
transferred as a result of a Loan. The Loan Account is credited with interest
and does not participate in the investment experience of the Separate Account.
LOAN ACCOUNT VALUE: The amounts of the Investment Value transferred to (or from)
the General Account to secure Loans, plus interest accrued at the daily
equivalent of an annual rate equal to the Adjustable Loan Interest Rate actually
charged, reduced by not more than 1%.
MATURITY DATE: The date on which an Insured's coverage matures as shown in the
Certificate. We will pay the Cash Surrender Value, if any, if the Insured is
living on the Maturity Date, upon surrender of the Certificate to Hartford.
MONTHLY DEDUCTION AMOUNT: The fees and charges deducted from the Investment
Value on the Processing Date.
NET AMOUNT AT RISK: The Death Benefit less the Cash Value.
NET PREMIUM: The amount of premium actually credited to the Investment
Divisions.
NYSE: The New York Stock Exchange.
OWNER (ALSO REFERRED TO AS "YOU" OR "YOUR"): The person or legal entity so
designated in the Enrollment Form or as subsequently changed. The Owner may be
someone other than the Insured. The Owner possesses all rights under the Group
Policy with respect to the Certificate.
PARTICIPATING EMPLOYER: An employer, or a trust sponsored by an employer, to
which Hartford issues the Group Policy described in this Prospectus.
PORTFOLIO: A Hartford Fund or a separate mutual fund, series or portfolio of the
remaining Funds. There are currently 25 Portfolios available under the Group
Policy: the Hartford Capital Appreciation Fund, Inc., Hartford Bond Fund, Inc.
and Hartford Money Market Fund, Inc.; the Limited Maturity Bond Portfolio ("N&B
AMT Limited Maturity Bond Portfolio"), Balanced Portfolio ("N&B AMT Balanced
Portfolio") and Partners Portfolio ("N&B AMT Partners Portfolio") of Neuberger &
Berman AMT; the VIP High Income Portfolio, VIP Equity-Income Portfolio and VIP
Overseas Portfolio of VIP, the VIP II Asset Manager Portfolio of VIP II; the
Alger American Small Capitalization Portfolio and Alger American Growth
Portfolio of Alger American Fund; the J.P. Morgan Bond Portfolio, J.P. Morgan
Equity Portfolio, J.P. Morgan Small Company Portfolio and J.P. Morgan
International Opportunities Portfolio of J.P. Morgan Series Trust; the Fixed
Income Portfolio ("MS Fixed Income Portfolio"), High Yield Portfolio ("MS High
Yield Portfolio"), Equity Growth Portfolio ("MS Equity Growth Portfolio"), Value
Portfolio ("MS Value Portfolio"), Global Equity Portfolio ("MS Global Equity
Portfolio"), and Emerging Markets Equity Portfolio ("MS Emerging Markets Equity
Portfolio") of MSUF; the EAFE-Registered Trademark- Equity Index Fund ("BT EAFE"
Equity Index Fund"), Equity 500 Index Fund ("BT Equity 500 Index Fund") and
Small Cap Index Fund ("BT Small Cap Index Fund") of BT Insurance Funds Trust.
PRO RATA BASIS: An allocation method based on the proportion of the Investment
Value in each Investment Division.
PROCESSING DATE(S): The day(s) on which We deduct charges from the Investment
Value. The first Processing Date is the Coverage Date. There is a Processing
Date each month. Later Processing Dates are on the same calendar day as the
Coverage Date, or on the last day of any month which has no such calendar day.
PROCESSING PERIOD: The period from the Coverage Date to the next Processing
Date, and thereafter, the period from one Processing Date to the next.
SEC: The U.S. Securities and Exchange Commission.
SEPARATE ACCOUNT: ICMG Registered Variable Life Separate Account A, an account
established by Hartford to separate the assets funding the Group Policies from
other assets of Hartford.
VALUATION DAY: Each business day that Hartford and each of the Funds value their
respective investment portfolios. A business day is any day the NYSE is open for
trading or any day the SEC requires mutual funds, unit investment trusts or
other investment portfolios to be valued. The value of the Separate Account is
determined at the close of the NYSE (generally 4:00 p.m. Eastern Time) on such
days.
VALUATION PERIOD: The period between the close of business on successive
Valuation Days.
VARIABLE INSURANCE AMOUNT: The Cash Value multiplied by the applicable variable
insurance factor provided in the Certificate.
VIP: Variable Insurance Products Fund.
VIP II: Variable Insurance Products Fund II.
<PAGE>
6 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SUMMARY
THE GROUP POLICY
The Group Policies, and the Certificates, offered by this Prospectus are
funded by the Separate Account, a separate account established by Hartford
pursuant to Connecticut insurance law and organized as a unit investment trust
registered under the Investment Company Act of 1940 (the "1940 Act"). The
Separate Account has 25 Investment Divisions dedicated to the Group Policies,
each of which invests solely in a corresponding Portfolio of the Funds.
Depending upon the state of issuance of Your Certificate and the applicable
provisions of Your Certificate, Your initial Net Premium will, when Your
Certificate is issued, either be (1) invested in the Hartford Money Market
Investment Division during the right to examine period or (2) invested
immediately in Your chosen Investment Divisions, upon Our receipt thereof. IF
YOUR INITIAL NET PREMIUM IS INVESTED IMMEDIATELY IN YOUR CHOSEN INVESTMENT
DIVISIONS, YOU WILL BEAR FULL INVESTMENT RISK FOR ANY AMOUNTS ALLOCATED TO THE
INVESTMENT DIVISIONS DURING THE RIGHT TO EXAMINE PERIOD. Please note that this
automatic immediate investment feature only applies if Your Certificate so
specifies. Please check with Your agent to determine the status of Your
Certificate. You must fill out and send Us the appropriate form In Writing or
comply with other designated Hartford procedures if You would like to change how
subsequent Net Premiums are allocated. See "Allocation of Premium Payments,"
page 15.
Pursuant to the Certificates, each selected Investment Division is credited
with Accumulation Units and each selected Investment Division's assets are
invested in the applicable underlying Portfolio. Subject to certain
restrictions, an Owner may transfer amounts among the available Investment
Divisions. See "Detailed Description of Certificate Benefits and Provisions --
Transfers Among Investment Divisions," page 16.
The Group Policies are life insurance policies and the Certificates
evidencing an Owner's interest in the Group Policies provide for death benefits,
cash values, and other features traditionally associated with life insurance.
The Group Policies are "flexible premium" because, once the desired level and
pattern of the Death Benefit have been determined, a purchaser has considerable
flexibility in the selection of the timing and amount of premium to be paid. The
Group Policies are called "variable" because, unlike the fixed benefits of an
ordinary whole life insurance policy, the Investment Value under a Certificate
will, and the Death Benefit may, increase or decrease depending on the
investment experience of the Investment Divisions to which the Net Premiums have
been allocated. See "Detailed Description of Certificate Benefits and Provisions
- -- Death Benefit," page 18.
DEATH BENEFIT
The Certificates provide for two Death Benefit options. Under Death Benefit
Option A, the Death Benefit is an amount equal to the larger of (1) the Face
Amount and (2) the Variable Insurance Amount. Under Death Benefit Option B, the
Death Benefit is an amount equal to the larger of (1) the Face Amount plus the
Cash Value and (2) the Variable Insurance Amount. We will pay the Death Proceeds
to the Beneficiary upon proof of death of the Insured before the Maturity Date.
The Death Proceeds equal the Death Benefit less outstanding Debt plus any rider
benefits payable under the Certificate. See "Detailed Description of Certificate
Benefits and Provisions -- Death Benefit," page 18.
PREMIUM
You have considerable flexibility as to when and in what amounts You pay
premiums.
No premium payment will be accepted which causes the Certificate to fail to
meet the tax qualification guidelines for life insurance under the Code.
GENERAL ACCOUNT
Amounts allocated to the Loan Account to secure a Loan become part of the
General Account assets of Hartford. Hartford invests the assets of the General
Account in accordance with applicable law governing the investments of insurance
company general accounts. See "Detailed Description of Certificate Benefits and
Provisions -- Loans," page 17.
DEDUCTIONS FROM PREMIUM
Prior to the allocation of premiums to the selected Investment Divisions, a
deduction as a percentage of premium is made for the front-end sales load, state
and local premium taxes, and the Deferred Acquisition Cost ("DAC") tax charge.
The amount of each premium allocated among the Investment Divisions is Your Net
Premium.
FRONT-END SALES LOAD
When We receive a Premium Payment, We deduct a front-end sales load. The
current front-end sales load is 6.75% of any premium paid for Coverage Years 1
through 7 and 4.75% of any premium paid in Coverage Years 8 and later. The
maximum front-end sales load is 9% of any premium paid for Coverage Years 1
through 7 and 7% of any premium paid in Coverage Years 8 and later.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 7
- --------------------------------------------------------------------------------
The front-end sales load covers expenses relating to the sale and
distribution of the Certificates and may be reduced for certain sales of the
Certificates under circumstances which result in savings of such sales and
distribution expenses. For more information concerning the front-end sales load,
see "Detailed Description of Certificate Benefits and Provisions -- Deductions
from Premium," page 21.
LIMITS ON FRONT-END SALES LOAD
Certain insurance laws and regulations limit the front-end sales load which
can be assessed against the Certificates. The front-end sales load assessed in
the Certificates complies with these limitations.
PREMIUM RELATED TAX CHARGE
We deduct a percentage of each premium to cover taxes assessed against
Hartford by various states, municipalities and other jurisdictions that are
attributable to premiums. The percentage actually deducted will vary by locale
depending on the tax rates in effect there. The range is generally between 0%
and 4%.
DAC TAX CHARGE
Hartford deducts 1.25% of each premium to cover a federal premium tax
assessed against Hartford. This charge is reasonable in relation to Hartford's
federal income tax burden, under Code Section 848, resulting from the receipt of
premiums. We will adjust the charge based on changes in the applicable tax law.
DEDUCTIONS AND CHARGES
FROM INVESTMENT VALUE
As with many other types of insurance policies, each Certificate will have
an Investment Value. The Investment Value of the Certificate will increase or
decrease to reflect the investment experience of the chosen Investment
Divisions, deductions for the Monthly Deduction Amount and any amounts
transferred from the Investment Divisions into the Loan Account. There is no
minimum guaranteed Investment Value and the Owner bears the risk of the
investment in the underlying Portfolios. See "Detailed Description of
Certificate Benefits and Provisions -- Deductions and Charges from Investment
Value," page 21.
We will subtract amounts from Your Investment Value to provide for the
Monthly Deduction Amount. These will be taken from the Charge Deduction
Division, as specified in the Certificate. If there is insufficient Investment
Value in the Charge Deduction Division:
(1) Hartford will apply the Investment Value of the Charge Deduction Division to
the charges due and set the Investment Value in the Charge Deduction
Division to zero; and
(2) any additional amount due will be deducted from the remaining Investment
Divisions on a Pro Rata Basis.
If no Charge Deduction Division is selected, any amounts due will be taken
on a Pro Rata Basis from Your chosen Investment Divisions on each Processing
Date.
The Monthly Deduction Amount equals:
(a) the administrative expense charge; plus
(b) the charges for cost of insurance; plus
(c) the charges for additional benefits provided by rider, if any.
Hartford may also set up a provision for income taxes imposed on the assets
of the Separate Account. See "Deductions and Charges from Investment Value,"
page 21, and "Federal Tax Considerations," page 30.
MORTALITY AND EXPENSE RISK CHARGE
A charge is made for mortality and expense risks assumed by Hartford.
Hartford currently deducts a daily charge for Coverage Years 1 through 10 at an
effective annual rate of .65% of the value of each Investment Division's assets
and for Coverage Years 11 and later at an effective annual rate of .50% of each
Investment Division's assets. In no event will the charge exceed .65% of an
Investment Division's assets on an annual basis.
CHARGES AGAINST THE FUNDS
The Separate Account purchases Fund shares at net asset value. The net asset
value of those shares reflects investment advisory fees and administrative and
other expenses deducted from the assets of the Portfolios. Applicants should
review the prospectuses for the Funds which accompany this Prospectus for a
description of the charges assessed against the assets of each of the
Portfolios.
<PAGE>
8 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
The following table shows annual operating expenses after waivers or
reimbursements for 1997:
ANNUAL PORTFOLIO OPERATING EXPENSES AFTER WAIVERS AND/OR REIMBURSEMENTS
(as a percentage of net assets)
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT OTHER OPERATING
PORTFOLIO NAME FEE EXPENSES EXPENSES(1)
- ---------------------------------------- ---------- -------- ------------
<S> <C> <C> <C>
Hartford Capital Appreciation Fund...... 0.645% 0.020% 0.665%
Hartford Bond Fund...................... 0.515% 0.020% 0.535%
Hartford Money Market Fund.............. 0.450% 0.015% 0.465%
N&B AMT Limited Maturity Bond Portfolio
(2).................................... 0.650% 0.120% 0.770%
N&B AMT Balanced Portfolio (2).......... 0.850% 0.190% 1.040%
N&B AMT Partners Portfolio (2).......... 0.800% 0.060% 0.860%
VIP High Income Portfolio (3)........... 0.590% 0.120% 0.710%
VIP Equity-Income Portfolio (3)......... 0.500% 0.080% 0.580%
VIP Overseas Portfolio (3).............. 0.750% 0.170% 0.920%
VIP II Asset Manager Portfolio (3)...... 0.550% 0.100% 0.650%
Alger American Small Capitalization
Portfolio.............................. 0.850% 0.040% 0.890%
Alger American Growth Portfolio......... 0.750% 0.040% 0.790%
J.P. Morgan Bond Portfolio (4).......... 0.300% 0.450% 0.750%
J.P. Morgan Equity Portfolio (4)........ 0.400% 0.500% 0.900%
J.P. Morgan Small Company Portfolio
(4).................................... 0.600% 0.550% 1.150%
J.P. Morgan International Opportunities
Portfolio (4).......................... 0.600% 0.600% 1.200%
MS Fixed Income Portfolio (5)........... 0.000% 0.700% 0.700%
MS High Yield Portfolio (5)............. 0.000% 0.800% 0.800%
MS Equity Growth Portfolio (5).......... 0.000% 0.850% 0.850%
MS Value Portfolio (5).................. 0.000% 0.850% 0.850%
MS Global Equity Portfolio (5).......... 0.000% 1.150% 1.150%
MS Emerging Markets Equity Portfolio
(5).................................... 0.000% 1.750% 1.750%
BT EAFE-Registered Trademark- Equity
Index Fund (6)......................... 0.020% 0.630% 0.650%
BT Equity 500 Index Fund (6)............ 0.000% 0.300% 0.300%
BT Small Cap Index Fund (6)............. 0.000% 0.450% 0.450%
</TABLE>
- ---------
(1) Management Fee generally represents the fees paid to the investment adviser
or its affiliate for investment and administrative services provided. Other
Expenses are expenses (other than Management Fees) which are deducted from
the fund including legal, accounting and custodian fees. For complete
description of the nature of the services provided in consideration of the
operating expenses deducted, please see the Fund prospectuses.
(2) Neuberger & Berman AMT is divided into Portfolios, each of which invests all
of its net investable assets in a corresponding series of Advisers Managers
Trust. The figures reported under Management Fee include the aggregate of
the administration fees paid by the Portfolio and the management fee paid by
its corresponding series of Advisers Managers Trust. Similarly, Other
Expenses includes all other expenses of the Portfolio and its corresponding
series of Advisers Managers Trust.
(3) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds have entered into
arrangements with their custodian and transfer agent whereby credits
realized, as a result of uninvested cash balances were used to reduce
custodian expenses. Including these reductions, the total operating expenses
presented in the table would have been 0.710% for VIP High Income Portfolio,
0.570% for VIP Equity-Income Portfolio, 0.900% for VIP Overseas Portfolio,
and 0.640% for VIP II Asset Manager Portfolio.
(4) Pursuant to a voluntary agreement, fees and expenses were reimbursed to the
extent expenses exceeded .75%, .90%, 1.15% and 1.20% of the average daily
net assets of J.P. Morgan Bond Portfolio, J.P. Morgan Equity Portfolio, J.P.
Morgan Small Company Portfolio and J.P. Morgan International Opportunities
Portfolio, respectively. Without such reimbursement, Management Fees, Other
Expenses and Total Operating Expenses would have been as follows:
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT OTHER OPERATING
PORTFOLIO FEE EXPENSES EXPENSES
- ---------------------------------------------------------------------------------------- ------------ ----------- -----------
<S> <C> <C> <C>
J.P Morgan Bond Portfolio............................................................... 0.300% 1.610% 1.910%
J.P. Morgan Equity Portfolio............................................................ 0.400% 1.910% 2.310%
J.P. Morgan Small Company Portfolio..................................................... 0.600% 3.210% 3.810%
J.P. Morgan International Opportunities Portfolio....................................... 0.600% 3.650% 4.250%
</TABLE>
(5) With respect to the MS Fixed Income, MS High Yield, MS Equity Growth, MS
Value, MS Global Equity and MS Emerging Markets Equity Portfolios, the
investment adviser has voluntarily agreed to waive its investment advisory
fees and to reimburse the Portfolios if such fees would cause their
respective Total Operating Expenses to exceed those set forth in
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 9
- --------------------------------------------------------------------------------
the table above. Absent such reductions, it is estimated that Management
Fees, Other Expenses and Total Operating Expenses for the Portfolios would
have been as follows:
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT OTHER OPERATING
PORTFOLIO FEE EXPENSES EXPENSES
- ---------------------------------------- ---------- -------- ------------
<S> <C> <C> <C>
MS Fixed Income Portfolio............... 0.400% 1.310% 1.710%
MS High Yield Portfolio................. 0.500% 1.180% 1.680%
MS Equity Growth Portfolio.............. 0.550% 1.500% 2.050%
MS Value Portfolio...................... 0.550% 1.320% 1.870%
MS Global Equity Portfolio.............. 0.800% 1.630% 2.430%
MS Emerging Markets Equity Portfolio.... 1.250% 2.870% 4.120%
</TABLE>
(6) Without expense waivers and reimbursements, the Management Fees, Other
Expenses and the Total Operating Expenses for BT EAFE-Registered Trademark-
Equity Index Fund, BT Equity 500 Index Fund and BT Small Cap Index Fund
would have been as follows:
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT OTHER OPERATING
PORTFOLIO FEE EXPENSES EXPENSES
- ---------------------------------------------------------------------------------------- ------------ ----------- -----------
<S> <C> <C> <C>
BT EAFE-Registered Trademark- Equity Index.............................................. 0.450% 2.300% 2.750%
BT Equity 500 Index..................................................................... 0.200% 2.580% 2.780%
BT Small Cap Index...................................................................... 0.350% 2.920% 3.270%
</TABLE>
LOANS
An Owner may obtain a cash Loan from Hartford. The Loan is secured by the
Owner's Certificate. The maximum Loan amount is equal to the sum of the Cash
Surrender Value plus outstanding Debt, multiplied by .90, less outstanding Debt.
See "Detailed Description of Certificate Benefits and Provisions -- Loans," page
17.
THE RIGHT TO EXAMINE THE CERTIFICATE
An applicant has a limited right to return his or her Certificate. Subject
to applicable state regulations, if the applicant returns the Certificate within
10 calendar days after delivery of the Certificate Hartford will return to the
applicant, within seven days thereafter, either (i) the premium paid or (ii) the
Cash Value under the Certificate plus charges deducted. See "The Right to
Examine the Certificate," page 20.
TAX CONSEQUENCES
The current federal tax law generally excludes all Death Benefit payments
from the gross income of the Beneficiary under the Certificate. See "Federal Tax
Considerations," page 30.
There are circumstances when the Certificate may become a Modified Endowment
Contract under Federal tax law. If it does, Loans and other pre-death
distributions are includable in gross income on an income-first basis. A 10%
penalty tax may be imposed on income distributed before the insured attains age
59 1/2. Prospective purchasers and Owners are advised to consult a qualified tax
adviser before taking steps that may affect whether the Certificate becomes a
Modified Endowment Contract. Hartford has instituted procedures to monitor
whether a Certificate may become a Modified Endowment Contract after issue. See
"Federal Tax Considerations -- Modified Endowment Contracts" for a discussion of
the "seven-pay" test, page 30.
HARTFORD
Hartford Life Insurance Company ("Hartford") is a stock life insurance
company engaged in the business of writing life insurance, both individual and
group, in all states of the United States and the District of Columbia. Hartford
was originally incorporated under the laws of Massachusetts on June 5, 1902, and
was subsequently redomiciled to Connecticut. Its offices are located in
Simsbury, Connecticut; however, its mailing address is P.O. Box 2999, Hartford,
CT 06104-2999. Hartford is ultimately controlled by The Hartford Financial
Services Group, Inc., one of the largest financial service providers in the
United States.
Hartford is rated A+ (superior) by A.M. Best and Company, Inc., on the basis
of its financial soundness and operating performance. Hartford is rated AA by
Standard & Poor's on the basis of its insurer financial strength and AA+ by Duff
and Phelps on the basis of its claims paying ability. These rating do not apply
to the investment performance of the Investment Divisions. The rating apply to
Hartford's ability to meet its insurance obligations, including those described
in this Prospectus.
THE SEPARATE ACCOUNT
The insurance benefits under the Group Policies are provided through
investments made in ICMG Registered Variable Life Separate Account A, a separate
account established by Hartford on April 14, 1998, under the insurance laws of
the State of Connecticut, pursuant to a resolution of Hartford's Board of
Directors. The Separate Account is organized as a unit investment trust and is
registered with the SEC under the 1940 Act. Such registration does not
<PAGE>
10 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
signify that the SEC supervises the management or the investment practices or
policies of the Separate Account. The Separate Account meets the definition of a
"separate account" under the federal securities laws.
Under Connecticut law, the assets of the Separate Account are held
exclusively for the benefit of Owners and persons entitled to payments under the
Group Policies and the Certificates and owners of any other policies which may
be available through the Separate Account. The assets of the Separate Account
are owned by Hartford and the obligations under the Group Policies and the
Certificates are obligations of Hartford. These assets are held separately from
the other assets of Hartford and income, gains and losses incurred on the assets
in the Separate Account, whether or not realized, are credited to or charged
against the Separate Account without regard to other income, gains or losses of
Hartford (except to the extent that assets in the Separate Account exceed the
reserves and other liabilities of the Separate Account). Therefore, the
investment performance of the Separate Account is entirely independent of the
investment performance of the General Account assets or any other separate
account maintained by Hartford.
The Separate Account has 25 Investment Divisions dedicated to the Group
Policies, each of which invests solely in a corresponding Portfolio of the
Funds. Additional Investment Divisions may be established at the discretion of
Hartford. The Separate Account may include other divisions which will not be
available under the Group Policies.
THE FUNDS
GENERAL
The shares of the Portfolios are sold by the Funds to the Separate Account.
The assets of the Separate Account attributable to the Group Policies are
invested exclusively in the Investment Divisions. An Owner may allocate Net
Premium payments among the Investment Divisions. Owners should review the brief
descriptions of the investment objectives of each of the Portfolios in
connection with that allocation. See "The Funds -- The Portfolios," page 12.
Each Fund continually issues an unlimited number of full and fractional
shares of beneficial interest in the relevant Portfolios. In addition to being
offered to the Separate Account, each Fund's shares are or may be offered to
other separate accounts funding variable annuity contracts and variable life
insurance policies issued by Hartford or its affiliates and to separate accounts
of other insurance companies. It is conceivable that in the future it may become
disadvantageous for both variable annuity and variable life insurance separate
accounts or for separate accounts of other life insurance companies to invest in
shares of the Funds simultaneously. Although neither Hartford nor any of the
Funds currently foresees any such disadvantage, each Fund's Board of Directors
or Board of Trustees, as applicable (collectively, the "Boards"), will monitor
events in order to identify any material conflict between different variable
annuity and variable life owners and to determine what action, if any, should be
taken in response thereto, including the possible withdrawal of the Separate
Account's participation in any of the Funds. Material conflicts could result
from such things as (1) changes in state insurance law, (2) changes in federal
income tax law, (3) changes in the investment management of any Portfolio, or
(4) differences between voting instructions given by variable annuity and
variable life owners. If the Boards were to conclude that separate underlying
funds should be established for variable annuity and variable life insurance
separate accounts, Hartford will bear the attendant expenses.
All investment income of, and other distributions to, each Investment
Division arising from the applicable Portfolio are reinvested in shares of that
Portfolio at net asset value. Hartford will purchase Portfolio shares in
connection with Net Premium payments allocated to the applicable Investment
Division in accordance with Owners' instructions and will redeem Portfolio
shares to meet obligations under the Group Policies and the Certificates or make
adjustments in reserves, if any. The Funds are required to redeem Portfolio
shares at net asset value and generally to make payment within seven (7)
calendar days.
Applicants should read the Fund prospectuses accompanying this Prospectus in
connection with the purchase of a Certificate.
HARTFORD FUNDS
The Separate Account currently invests in three Funds sponsored by Hartford
that are available as part of OmniSource-SM- -- the Hartford Capital
Appreciation Fund, the Hartford Bond Fund and the Hartford Money Market Fund.
Each Hartford Fund is a separate diversified open-end management investment
company registered under the 1940 Act and organized as a Maryland corporation.
HL Investment Advisors, Inc. ("HL Advisors") serves as the investment
adviser to each of the Hartford Funds. In addition, HL Advisors has entered an
investment services agreement with The Hartford Investment Management Company
("HIMCO"), pursuant to which HIMCO will provide certain investment services to
Hartford Bond Fund and Hartford Money Market Fund. Wellington Management
Company, LLP ("Wellington Management") serves as sub-investment adviser for
Hartford Capital Appreciation Fund.
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
The Separate Account currently invests in Neuberger & Berman AMT, a
diversified open-end management investment company registered under the 1940 Act
and organized as a Delaware business trust. Neuberger & Berman AMT consists of
several portfolios, including the Limited Maturity
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 11
- --------------------------------------------------------------------------------
Bond Portfolio, Balanced Portfolio and Partners Portfolio available as part of
OmniSource-SM-.
Each portfolio of Neuberger & Berman AMT invests its assets in its
corresponding series of the Advisers Managers Trust, which is also an open-end
management investment company registered under the 1940 Act and is organized as
a New York common law trust. The investment performance of the Limited Maturity
Bond Portfolio, Balanced Portfolio and Partners Portfolio will directly
correspond with the investment performance of the corresponding series of the
Advisers Managers Trust. This "Master/Feeder Fund" structure is different from
that of many other investment companies which directly acquire and manage their
own portfolios of securities.
Neuberger & Berman Management Inc. serves as the investment manager of each
series of Advisers Managers Trust, as administrator of each portfolio of
Neuberger & Berman AMT, and as distributor of the shares of each portfolio of
Neuberger & Berman AMT. Neuberger & Berman, LLC serves as the sub-adviser for
each series of Advisers Managers Trust.
VARIABLE INSURANCE PRODUCTS FUND AND VARIABLE INSURANCE PRODUCTS FUND II (EACH,
A "FIDELITY FUND" AND COLLECTIVELY,
THE "FIDELITY FUNDS")
The Separate Account currently invests in both Fidelity Funds. The Fidelity
Funds are diversified, open-end management investment companies organized as
Massachusetts business trusts by Fidelity Management & Research Company ("FMR")
and registered under the 1940 Act. The Fidelity Funds consist of several
investment portfolios, including the VIP High Income Portfolio, VIP Equity-
Income Portfolio, VIP Overseas Portfolio and VIP II Asset Manager Portfolio
available as part of OmniSource-SM-.
The Fidelity Funds are each managed by FMR. FMR is one of America's largest
investment management organizations. It is composed of a number of different
companies, which provide a variety of financial services and products. FMR is
the original Fidelity company, founded in 1946. It provides a number of mutual
funds and other clients with investment research and portfolio management
services.
THE ALGER AMERICAN FUND
The Separate Account currently invests in shares of The Alger American Fund,
a diversified open-end management investment company registered under the 1940
Act and organized as a Massachusetts business trust. The Alger American Fund
consists of six series, including the Alger American Small Capitalization and
Alger American Growth Portfolios available as part of OmniSource-SM-.
The Alger American Fund is managed by Alger Management, a subsidiary of Fred
Alger & Company, Incorporated, which is in turn a subsidiary of Alger
Associates, Inc., a financial services holding company. Alger Management has
been in the business of providing investment advisory services since 1964.
J.P. MORGAN SERIES TRUST II
The Separate Account currently invests in shares of J.P. Morgan Series
Trust, a diversified open-end management investment company registered under the
1940 Act and organized as a Delaware business trust. J.P. Morgan Series Trust
consists of five portfolios, including the J.P. Morgan Bond, J.P. Morgan Equity,
J.P. Morgan Small Company and J.P. Morgan International Opportunities Portfolios
available as part of OmniSource-SM-.
Each Portfolio of J.P. Morgan Series Trust is advised by J.P. Morgan
Investment Management Inc., a wholly-owned subsidiary of J.P. Morgan & Co.
Incorporated which is a bank holding company with a long history of service as
adviser, underwriter and lender to an extensive roster of major companies and as
financial adviser to national governments.
MORGAN STANLEY UNIVERSAL FUNDS, INC.
The Separate Account currently invests in shares of MSUF, an open-end
management investment company registered under the 1940 Act and organized as a
corporation under the laws of the State of Maryland. MSUF consists of 17
portfolios, including the Fixed Income, High Yield, Equity Growth, Value, Global
Equity and Emerging Markets Equity Portfolios available as part of
OmniSource-SM-.
The investment adviser for Equity Growth, Global Equity and Emerging Markets
Equity Portfolios is MSAM, a wholly-owned subsidiary of Morgan Stanley Dean
Witter & Co., which is a publicly owned global financial services corporation.
The investment adviser for Fixed Income, High Yield and Value Portfolios is MAS,
which is indirectly wholly-owned by Morgan Stanley Dean Witter & Co.
BT INSURANCE FUNDS TRUST
The Separate Account currently invests in the BT Insurance Funds Trust, a
diversified open-end management investment company registered under the 1940 Act
and organized as a Massachusetts business trust. BT Insurance Funds Trust
consists of six series, including the EAFE-Registered Trademark--Equity Index
Fund, the Equity 500 Index Fund and the Small Cap Index Fund available as part
of OmniSource-SM-.
BT Insurance Funds Trust has retained the services of Bankers Trust Global
Investment Management, a unit of Bankers Trust, as investment manager. Bankers
Trust conducts a variety of general banking and trust activities and is a major
wholesaler supplier of financial services to the international and domestic
institutional markets.
<PAGE>
12 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
THE PORTFOLIOS
HARTFORD CAPITAL APPRECIATION FUND
Hartford Capital Appreciation Fund seeks to achieve growth of capital by
investing in equity securities selected solely on the basis of potential for
capital appreciation.
HARTFORD BOND FUND
Hartford Bond Fund seeks to achieve maximum current income consistent with
preservation of capital by investing primarily in fixed-income securities. Up to
20% of the total assets of the Portfolio may be invested in debt securities
rated in the highest category below investment grade ("Ba" by Moody's Investor
Services, Inc. or "BB" by Standard & Poor's) or, if unrated, are determined to
be of comparable quality by the Portfolio's investment adviser. Securities rated
below investment grade are commonly referred to as "high yield-high risk
securities" or "junk bonds." For more information concerning the risks
associated with investing in such securities, please refer to the section in the
accompanying prospectus for the Hartford Funds entitled "High Yield -- High Risk
Debt Securities."
HARTFORD MONEY MARKET FUND
Hartford Money Market Fund seeks to achieve maximum current income
consistent with liquidity and preservation of capital.
LIMITED MATURITY BOND PORTFOLIO
N&B AMT Limited Maturity Bond Portfolio seeks to achieve the highest current
income consistent with low risk to principal and liquidity; and secondarily,
total return. This Portfolio invests in a diversified portfolio primarily
consisting of short to intermediate term U.S. government and agency securities
and investment grade debt securities issued by financial institutions,
corporations, and others. The Portfolio may invest up to 10% of its net assets,
measured at the time of investment, in fixed-income securities that are below
investment grade.
BALANCED PORTFOLIO
N&B AMT Balanced Portfolio seeks to achieve long-term capital growth and
reasonable current income without undue risk to principal. It is anticipated
that the Portfolio's investment program will normally be managed so that
approximately 60% of its total assets will be invested in common and preferred
stocks and the remaining assets will be invested in debt securities, primarily
investment grade. However, depending on the investment manager's views regarding
current market trends, the common stock portion of its portfolio investments may
be adjusted downward to as low as 50% or upward to as high as 70%. At least 25%
of its assets will be invested in fixed income securities.
PARTNERS PORTFOLIO
N&B AMT Partners Portfolio seeks to achieve capital growth. This Portfolio's
investment approach is to invest principally in common stocks of medium to large
capitalization established companies, using a value-oriented investment approach
designed to increase capital with reasonable risk. Its investment program seeks
securities believed to be undervalued based on strong fundamentals such as low
price-to-earnings ratios, consistent cash flow and the company's track record
through all parts of the market cycle.
VIP HIGH INCOME PORTFOLIO
VIP High Income Portfolio seeks high current income primarily through
investments in all types of income-producing debt securities, preferred stocks
and convertible securities. Although the Portfolio has no limits on the quality
and maturity of its investments, its strategy typically leads to longer-term,
lower-quality, fixed-income securities. These domestic and foreign investments
may present the risk of default or may be in default.
VIP EQUITY-INCOME PORTFOLIO
VIP Equity-Income Portfolio seeks reasonable income by investing primarily
in income-producing equity securities. In choosing these securities, the
Portfolio will also consider the potential for capital appreciation. This
Portfolio's goal is to achieve a yield which exceeds the composite yield on the
securities comprising the Standard & Poor's Composite Index of 500 Stocks
(commonly referred to as "S&P 500"). The Portfolio may invest in high yielding,
lower-rated securities (commonly referred to as "junk bonds") which are subject
to greater risk than investments in higher-rated securities.
VIP OVERSEAS PORTFOLIO
VIP Overseas Portfolio seeks long-term growth of capital primarily through
investments in foreign securities and provides a means for aggressive investors
to diversify their own portfolios by participating in companies and economies
outside of the United States. International investing involves increased or
additional risks compared to investing primarily in domestic equity securities.
VIP II ASSET MANAGER PORTFOLIO
VIP II Asset Manager Portfolio seeks high total return with reduced risk
over the long term by allocating its assets among domestic and foreign stocks,
bonds and short-term instruments.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
Alger American Small Capitalization Portfolio seeks long-term capital
appreciation by investing in a diversified, actively managed portfolio of equity
securities, primarily of companies with total market capitalization within the
range of companies included in the Russell 2000 Growth Index or the S&P SmallCap
600 Index, updated quarterly.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 13
- --------------------------------------------------------------------------------
ALGER AMERICAN GROWTH PORTFOLIO
Alger American Growth Portfolio seeks long-term capital appreciation by
investing in a diversified, actively managed portfolio of equity securities,
primarily of companies with total market capitalization of $1 billion or
greater.
J.P. MORGAN BOND PORTFOLIO
J.P. Morgan Bond Portfolio seeks high total return consistent with moderate
risk of capital and maintenance of liquidity. Although the net asset value of
the Portfolio will fluctuate, the Portfolio attempts to preserve the value of
its investments to the extent consistent with its objective. Under normal market
conditions, 65% of the Portfolio's, assets will be invested in bonds, debentures
and other debt instruments. The Portfolio may invest up to 20% of its assets in
securities denominated in foreign currencies and may invest without limitation
in U.S. dollar-denominated securities of foreign issuers.
J.P. MORGAN EQUITY PORTFOLIO
J.P. Morgan Equity Portfolio seeks high total return from a portfolio
comprised of selected equity securities. The Portfolio invests primarily in the
common stock of large and medium capitalization U.S. companies.
J.P. MORGAN SMALL COMPANY PORTFOLIO
J.P. Morgan Small Company Portfolio seeks high total return from a portfolio
of equity securities of small companies. The Portfolio invests at least 65% of
the value of its total assets in the common stock of small U.S. companies
primarily with market capitalizations less than $1 billion.
J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO
J.P. Morgan International Opportunities Portfolio seeks high total return
from a portfolio of equity securities of foreign corporations. Under normal
market conditions, the Portfolio will invest in a minimum of three different
foreign countries.
FIXED INCOME PORTFOLIO
MS Fixed Income Portfolio seeks above average total return over a market
cycle of three to five years by investing in a diversified portfolio of U.S.
government and agency securities, corporate bonds, foreign bonds, mortgage-
backed securities of domestic issuers, and other fixed income securities and
derivatives. Under normal circumstances, the Portfolio will invest at least 65%
of its total assets in fixed income securities, not more than 20% of which will
be below investment grade (commonly referred to as "high yield securities" or
"junk bonds").
HIGH YIELD PORTFOLIO
MS High Yield Portfolio seeks above average total return over a market cycle
of three to five years by investing at least 65% of its total assets in high
yield securities of U.S. and foreign issuers including corporate bonds and other
fixed income securities. The Portfolio expects to achieve its objective through
maximizing current income, although it may seek capital growth opportunities
when consistent with its objective.
EQUITY GROWTH PORTFOLIO
MS Equity Growth Portfolio seeks long-term capital appreciation by investing
primarily in growth-oriented common and preferred stocks, convertible
securities, rights and warrants to purchase common stocks, depositary receipts
and other equity securities. Under normal circumstances, the Portfolio will
invest at least 65% of its total assets in equity securities.
VALUE PORTFOLIO
MS Value Portfolio seeks above average total return over a market cycle of
three to five years by investing primarily in common and preferred stocks,
convertible securities, rights and warrants to purchase common stocks, ADRs and
other equity securities of companies with equity capitalizations usually greater
than $300 million. Under normal circumstances, the Portfolio will invest at
least 65% of its total assets in equity securities. The Portfolio may invest up
to 5% of its total assets in foreign equity securities (other than ADRs).
GLOBAL EQUITY PORTFOLIO
MS Global Equity Portfolio seeks long-term capital appreciation by investing
primarily in common and preferred stocks, convertible securities, and rights and
warrants to purchase common stocks, depositary receipts and other equity
securities of issuers throughout the world, including issuers in the United
States and emerging market countries. Under normal circumstances, at least 65%
of the total assets of the Portfolio will be invested in equity securities. At
least 20% of the Portfolio's total assets will be invested in common stocks of
U.S. issuers and the remaining equity position will be invested in at least
three countries other than the United States.
EMERGING MARKET EQUITY PORTFOLIO
MS Emerging Markets Equity Portfolio seeks long-term capital appreciation by
investing primarily in common and preferred stocks, convertible securities,
rights and warrants to purchase common stocks, sponsored or unsponsored ADRs and
other equity securities of emerging market country issuers. Under normal
circumstances, at least 65% of the Portfolio's total assets will be invested in
emerging market country equity securities.
EAFE-REGISTERED TRADEMARK- EQUITY INDEX FUND
BT EAFE-Registered Trademark- Equity Index Fund seeks to replicate as
closely as possible (before deduction for expenses) the total return of the
Europe, Australia, Far East Index (the "EAFE Index"), a capitalization-weighted
index containing approximately 1,100 equity securities of companies located
outside the United States, by investing in a statistically selected sample of
the equity securities included in the EAFE Index.
<PAGE>
14 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
It will invest primarily in equity securities of business enterprises organized
and domiciled outside of the United States or for which the principal trading
market is outside the United States.
EQUITY 500 INDEX FUND
BT Equity 500 Index Fund seeks to replicate as closely as possible (before
deduction for expenses) the total return of the Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500"), an index emphasizing large-capitalization
stocks. It will include the common stock of those companies included in the S&P
500, other than Bankers Trust New York Corporation, selected on the basis of
computer-generated statistical data, that are deemed representative of the
industry diversification of the entire S&P 500.
SMALL CAP INDEX FUND
BT Small Cap Index Fund seeks to replicate as closely as possible (before
deduction for expenses) the total return of the Russell 2000 Small Stock Index
(the "Russell 2000"), an index consisting of 2,000 small-capitalization common
stocks. It will include the common stock of companies included in the Russell
2000, on the basis of computer-generated statistical data, that are deemed
representative of the industry diversification of the entire Russell 2000.
There is no assurance that any Portfolio will achieve its stated objectives.
Owners are also advised to read the prospectuses for each of the Funds
accompanying this Prospectus for more detailed information. Each Fund is subject
to certain investment restrictions which may not be changed without the approval
of a majority of the shareholders of the Fund. See the accompanying prospectuses
for each of the Funds.
DETAILED DESCRIPTION
OF CERTIFICATE BENEFITS
AND PROVISIONS
GENERAL
This Prospectus describes a flexible premium group variable life insurance
policy where the Owner has considerable flexibility in selecting the timing and
amount of premium payments.
ISSUANCE OF A CERTIFICATE
Certificates will only be offered to eligible employees when provided by the
Participating Employer. Individuals wishing to purchase a Certificate must
complete an Enrollment Form In Writing, which must be received by Our Customer
Service Center before a Certificate will be issued. A Certificate will not be
issued with a specified Face Amount of less than the minimum Face Amount.
Acceptance is subject to Hartford's underwriting rules then in effect. Hartford
reserves the right to reject an Enrollment Form for any reason permitted by law.
There are two circumstances under which a Certificate may be issued with a
backdated Coverage Date. The first involves Group Policy rollovers from Section
1035 exchanges under the Code. Backdating will occur in order to prevent a gap
in coverage under the Certificate. Charges and deductions (other than those of
the Portfolios) will be made for the period the Coverage Date is backdated;
however, the Owner will not experience investment return during that time.
Backdating will also occur when an application accompanied by the Initial
Premium is received by Us but issuance of a Certificate is subject to Our
insurance underwriting requirements. The initial Net Premium will be allocated
to the Hartford Money Market Investment Division during the underwriting period.
See "Premiums -- Allocation of Premium Payments" below. If the Insured meets Our
underwriting requirements, a Certificate will be issued with a backdated
Coverage Date. Charges and deductions (other than those of the Portfolios) will
be made for the backdated period. If the Insured does not meet Our underwriting
requirements, no Certificate will be issued and no coverage will have been in
effect. A conditional receipt will be given to the applicant reflecting receipt
of the Initial Premium and outlining any interim coverage in effect until the
Certificate is either issued or declined.
Backdating may only be permitted in certain states.
PREMIUMS
PREMIUM PAYMENT FLEXIBILITY -- A significant feature of the Certificate is
that once the desired level and pattern of
the Death Benefit have been determined, the Owner has considerable flexibility
in the selection of the timing and amount of premiums to be paid and can choose
the level of premiums, within a range determined by Hartford, based on the Face
Amount of the Certificate, the Insured's sex (except where unisex rates apply),
Issue Age, and the Insured's risk classification.
A minimum Initial Premium, as set forth in the Certificate, is due on the
Coverage Date. Unless determined otherwise by Hartford, the amount of the
minimum Initial Premium is the amount which, after the deductions for sales
load, state premium tax, and DAC tax charge, is sufficient (disregarding
investment performance) to pay twelve (12) times the first Monthly Deduction
Amount. Thereafter, additional premiums may be paid at any time, subject to the
premium limitations set forth by the Code as indicated in the section entitled
"Premium Limitation," page 15. You have the right to pay additional premiums of
at least $500.00 at any time.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 15
- --------------------------------------------------------------------------------
ALLOCATION OF PREMIUM PAYMENTS -- If the state of issue of Your Certificate
requires that We return Your Initial Premium, We will allocate the initial Net
Premium when Your Certificate is issued to the Hartford Money Market Investment
Division until the expiration of the right to examine period. Upon the
expiration of the right to examine period, the initial Net Premium will, at a
later date, be invested according to Your initial allocation instructions
(except that any accrued interest will remain in the Hartford Money Market
Investment Division if it is selected as an initial allocation option). This
later date is the later of ten (10) calendar days after We receive the Initial
Premium and the date We receive the final requirement to put the Certificate in
force. The Certificates are credited with units ("Accumulation Units") in each
selected Investment Division, the assets of which are invested in the
corresponding underlying Portfolio. An Owner may transfer funds among the
Investment Divisions subject to certain restrictions. See "Detailed Description
of Certificate Benefits and Provisions -- Transfers Among Investment Divisions,"
page 16. Any additional premiums received by Us prior to such date will be
allocated to the Hartford Money Market Investment Division.
Alternatively, if the state of issue of Your Certificate provides for Our
return of the Certificate's Cash Value to the Owner, We will allocate the
initial Net Premium immediately among Your chosen Investment Divisions. IN THAT
CASE YOU WILL BEAR FULL INVESTMENT RISK FOR ANY AMOUNTS ALLOCATED TO THE
INVESTMENT DIVISIONS DURING THE RIGHT TO EXAMINE PERIOD. (Please note that this
automatic immediate investment feature only applies if Your Certificate so
specifies. Please check with Your agent to determine the status of Your
Certificate.)
Upon written request, You may change the Net Premium allocation. Portions
alltocated to the Investment Divisions must be whole percentages of 5% or more.
Subsequent Net Premiums will be allocated among Investment Divisions according
to Your most recent instructions, subject to the following. If We receive a
premium and Your most recent allocation instructions would violate the 5%
requirement, We will allocate the Net Premium among the Investment Divisions
according to Your previous premium allocation. If the asset rebalancing option
is in effect, Net Premiums will be allocated accordingly until that option is
terminated. See "Transfers Among Investment Divisions -- Asset Rebalancing,"
page 17.
The Owner will receive several different types of notification as to what
his or her current premium allocation is. The initial allocation chosen by the
Owner on the Enrollment Form is shown in the Certificate. In addition, every
transactional confirmation generated after a premium payment is received will
show how that premium has been allocated. A Certificate's annual statement will
also summarize the current premium allocation in effect for that Certificate.
ACCUMULATION UNITS -- Net Premiums allocated to the Investment Divisions are
used to credit Accumulation Units under the Certificate.
The number of Accumulation Units in each Investment Division to be credited
under the Certificate (including the initial allocation to the Hartford Money
Market Investment Division) will be determined first by multiplying the Net
Premium by the appropriate allocation percentage to determine the portion to be
invested in the Investment Division. Each portion to be invested in an
Investment Division is then divided by the Accumulation Unit Value of that
particular Investment Division next computed following receipt of the payment.
Deductions made for the Monthly Deduction Amount on each Processing Date will
reduce the number of Accumulation Units under the Certificate. See "Deductions
and Charges from Investment Value -- Monthly Deduction Amount," page 21.
ACCUMULATION UNIT VALUES -- The Accumulation Unit value for each Investment
Division will vary daily to reflect the investment experience of the applicable
Portfolio, as well as the daily deduction for mortality and expense risks, and
will be determined on each Valuation Day by multiplying the Accumulation Unit
value of the particular Investment Division on the preceding Valuation Day by a
net investment factor for that Investment Division for the Valuation Period then
ended. The net investment factor for each of the Investment Divisions is equal
to the net asset value per share of the corresponding Portfolio at the end of
the Valuation Period (plus the per share amount of any dividend or capital gain
distributions paid by that Portfolio in the Valuation Period then ended) divided
by the net asset value per share of the corresponding Portfolio at the beginning
of the Valuation Period, less the daily deduction for the mortality and expense
risks assumed by Hartford.
All valuations in connection with a Certificate, e.g., with respect to
determining Cash Value and Investment Value, or calculating the Death Benefit,
or with respect to determining the number of Accumulation Units to be credited
to a Certificate with each premium payment, other than the Initial Premium, will
be made on the date the request or payment is received by Hartford at the
Customer Service Center if such date is a Valuation Day; otherwise such
determination will be made on the next succeeding date which is a Valuation Day.
PREMIUM LIMITATION -- If premiums are received which would cause the
Certificate to fail to meet the definition of a life insurance policy in
accordance with the Code, We will refund the excess premium payments. We will
refund such premium payments and interest thereon within sixty (60) days after
the end of a Coverage Year.
A premium payment that results in an increase in the Death Benefit greater
than the amount of the premium will be accepted only after We approve evidence
of insurability.
<PAGE>
16 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
VALUES UNDER THE CERTIFICATE
As with traditional life insurance, each Certificate will have a Cash
Surrender Value. The Cash Surrender Value is equal to the Cash Value, less Debt,
less any charges accrued but not deducted. There is no minimum guaranteed Cash
Surrender Value. The Cash Value equals the value in the Investment Divisions
plus the Loan Account Value.
Each Certificate will also have an Investment Value. The Investment Value of
a Certificate changes on a daily basis and will be computed on each Valuation
Day. The Investment Value will vary to reflect the investment experience of the
Investment Divisions, Monthly Deduction Amounts and any amounts transferred to
the Loan Account to secure a Loan.
The Investment Value of a particular Certificate is related to the net asset
value of the Portfolios associated with the Investment Divisions to which Net
Premiums on the Certificate have been allocated. The total Investment Value in
the Investment Divisions on any Valuation Day is calculated by multiplying the
number of Accumulation Units in each Investment Division as of the Valuation Day
by the current Accumulation Unit value of that Investment Division and then
summing the result for all the Investment Divisions. The Investment Value equals
the sum of the values of the assets in the Investment Divisions. See "Premiums
- -- Accumulation Unit Values," page 15.
SURRENDER OF THE CERTIFICATE
At any time prior to the Maturity Date, provided the Certificate is in
effect and has a Cash Surrender Value, the Owner may choose, without the consent
of the Beneficiary (provided the designation of the Beneficiary is not
irrevocable) to surrender the Certificate and receive the full Cash Surrender
Value from Us. To surrender a Certificate, You must submit a request for
surrender In Writing. We will determine the Cash Surrender Value as of the
Valuation Day We receive the request In Writing at Our Customer Service Center,
or the date requested by the Owner, whichever is later.
The Cash Surrender Value, which is the net amount available upon surrender
of the Certificate, equals the Cash Value, less Debt, less any charges accrued
but not yet deducted. The Certificate will terminate on the date of receipt of
the written request, or the date the Owner requests the surrender to be
effective, whichever is later.
The Cash Surrender Value may be paid in cash or allocated to any other
payment option agreed upon by Us.
PARTIAL WITHDRAWALS -- At any time before the Maturity Date, and subject to
Hartford's rules then in effect, up to twelve (12) partial withdrawals are
allowed per Coverage Year; however, only one (1) partial withdrawal is allowed
between any successive Processing Dates. The minimum partial withdrawal allowed
is $500.00. The maximum partial withdrawal is an amount equal to the sum of the
Cash Surrender Value plus outstanding Debt, multiplied by .90, less outstanding
Debt. Hartford currently imposes a charge for processing partial withdrawals
which is the lesser of 2% of the amount withdrawn or $25.00. A partial
withdrawal will reduce the Cash Surrender Value, Cash Value and Investment
Value. Any partial withdrawal will have a permanent effect on the Cash Surrender
Value and may have a permanent effect on the Death Benefit payable. If Death
Benefit Option A is in effect, the Face Amount is reduced by the amount of the
partial withdrawal. Unless specified otherwise, partial withdrawals will be
deducted on a Pro Rata Basis from the Investment Divisions. Requests for partial
withdrawals must be made In Writing to Us. The effective date of a partial
withdrawal will be the Valuation Day We receive the request In Writing at Our
Customer Service Center. A 10% penalty tax may be imposed on income distributed
before the insured attains age 59 1/2. See "Federal Tax Considerations --
Modified Endowment Contracts," page 30.
TRANSFERS AMONG INVESTMENT DIVISIONS
AMOUNT AND FREQUENCY OF TRANSFERS -- Upon request and as long as the
Certificate is in effect, You may transfer amounts among the Investment
Divisions, without charge, up to twelve (12) times per Coverage Year. Transfers
in excess of twelve (12) per Coverage Year will be subject to a charge of $50
per transfer deducted from the amount of the transfer. Transfer requests must be
In Writing on a form approved by Hartford or by telephone in accordance with
established procedures. The amounts which may be transferred will be limited by
Our rules then in effect. Currently, the minimum value of Accumulation Units
that may be transferred from one Investment Division to another is the lesser of
(i) $500 or (ii) the total value of the Accumulation Units in the Investment
Division. The value of the remaining Accumulation Units in the Investment
Division must equal at least $500. If, after an ordered transfer, the value of
the remaining Accumulation Units in an Investment Division would be less than
$500, the entire value will be transferred.
Currently there are no restrictions on transfers other than those described
herein. Hartford reserves the right in the future to impose additional
restrictions on transfers.
TRANSFERS TO OR FROM INVESTMENT DIVISIONS -- In the event of a transfer from
an Investment Division, the number of Accumulation Units credited to the
Investment Division from which the transfer is made will be reduced. The
reduction will be determined by dividing:
1. the amount transferred by,
2. the Accumulation Unit value for that Investment Division on the Valuation
Day We receive Your request for transfer In Writing.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 17
- --------------------------------------------------------------------------------
In the event of a transfer to an Investment Division, We will increase the
number of Accumulation Units credited thereto. The increase will equal:
1. the amount transferred divided by,
2. the Accumulation Unit value for that Investment Division determined on the
Valuation Day We receive Your request for transfer In Writing.
ASSET REBALANCING -- Subject to Our rules then in effect, an Owner may
authorize Hartford to automatically reallocate Investment Value periodically in
order to maintain a particular percentage allocation among the Investment
Divisions as selected by the Owner ("Asset Rebalancing"). The Investment Value
held in each Investment Division will increase or decrease in value at different
rates during the relevant period. Asset Rebalancing is intended to reallocate
Investment Value from those Investment Divisions that have increased in value to
those that have decreased in value.
To elect Asset Rebalancing, a request In Writing must be received by
Hartford. If Asset Rebalancing is elected, all Investment Value must be included
in the automatic reallocation. The percentages selected under Asset Rebalancing
will override any prior percentage allocations chosen by the Owner and all
future Net Premiums will be allocated accordingly. All transfers made pursuant
to Asset Rebalancing on the same day will count as one (1) transfer toward the
twelve (12) transfers permitted without charge per Coverage Year. Once elected,
an Owner may instruct Hartford In Writing at any time to terminate the option.
In addition, any transfer made outside of Asset Rebalancing will terminate the
option.
PROCEDURES FOR TELEPHONE TRANSFERS -- Owners may effect telephone transfers
in two ways. All Owners may directly contact a customer service representative.
Owners may in the future also request access to an electronic service known as a
Voice Response Unit (VRU). The VRU will permit the transfer of monies among the
Investment Divisions and change of the allocation of future payments. All Owners
intending to conduct telephone transfers through the VRU will be asked to
complete a Telephone Authorization Form.
Hartford will undertake reasonable procedures to confirm that instructions
communicated by telephone are genuine. Before a customer service representative
accepts any request, the caller will be asked for his or her social security
number and address. All calls will also be recorded. A Personal Identification
Number (PIN) will be assigned to all Owners who request VRU access. The PIN is
selected by and known only to the Owner. Proper entry of the PIN is required
before any transactions will be allowed through the VRU. Furthermore, all
transactions performed over the VRU, as well as with a customer service
representative, will be confirmed by Hartford through a written letter.
Moreover, all VRU transactions will be assigned a unique confirmation number
which will become part of the Certificate's history. Hartford is not liable for
any loss, cost or expense for action on telephone instructions which are
believed to be genuine in accordance with these procedures.
VALUATION OF PAYMENTS AND TRANSFERS
We value the Certificate on every Valuation Day.
We will generally pay Death Proceeds, Cash Surrender Values, partial
withdrawals, and Loan amounts attributable to the Investment Divisions within
seven (7) calendar days after We receive all the information needed to process
the payment unless the NYSE is closed for other than a regular holiday or
weekend, trading is restricted by the SEC or the SEC declares that an emergency
exists.
Hartford may defer payment of any amounts not attributable to the Investment
Divisions for up to six months from the date on which We receive the request.
PROCESSING OF TRANSACTIONS -- Generally, transactions initiated by an Owner
will be processed only on a Valuation Day. Requests received by Hartford on a
Valuation Day before the close of trading on the NYSE (generally 4:00 p.m.
Eastern Time) will be processed as of that day, except as otherwise indicated in
this Prospectus. Those requests received after the close of the NYSE will be
processed as of the next Valuation Day.
LOANS
As long as the Certificate is in effect, an Owner may obtain, without the
consent of the Beneficiary (provided the designation of Beneficiary is not
irrevocable), a cash Loan from Hartford. The maximum Loan amount is equal to the
sum of the Cash Surrender Value plus outstanding Debt, multiplied by .90, less
outstanding Debt.
The amount of each Loan will be transferred on a Pro-Rata Basis from each of
the Investment Divisions (unless the Owner specifies otherwise) to the Loan
Account. The Loan Account is the mechanism used to ensure that any outstanding
Debt remains fully secured by the Investment Value.
LOAN INTEREST -- Interest will accrue daily on outstanding Debt at the
Adjustable Loan Interest Rate indicated in the Certificate. The difference
between the value of the Loan Account and any outstanding Debt will be
transferred from the Investment Divisions to the Loan Account on each
Certificate Anniversary. Interest payments are due as shown in the Certificate.
If interest is not paid within 5 days of its due date, it will be added to the
amount of the Loan as of its due date.
The maximum Adjustable Loan Interest Rate We may charge for Loans is the
greater of 5% and the Published Monthly Average for the calendar month two
months prior to the date on which the Adjustable Loan Interest Rate is
<PAGE>
18 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
determined. The Published Monthly Average means the "Moody's Corporate Bond
Yield Average -- Monthly Average Corporate" as published by Moody's Investors
Service, Inc. or any successor to that service. If that monthly average is no
longer published, a substitute average will be used.
CREDITED INTEREST -- Amounts in the Loan Account for Coverage Years 1
through 10 will be credited with interest at a rate equal to the Adjustable Loan
Interest Rate then in effect, minus 1%. Amounts in the Loan Account for Coverage
Years 11 and later will be credited with interest at a rate equal to the
Adjustable Loan Interest Rate then in effect, minus .20%.
LOAN REPAYMENTS -- You can repay any part of or the entire Loan at any time.
The amount of the Loan repayment will be allocated to Your chosen Investment
Divisions on a Pro Rata Basis, determined as of the date of the Loan repayment.
Unless specified otherwise, additional premium payments received by Hartford
during the period when a Loan is outstanding will be treated as Loan repayments.
TERMINATION DUE TO EXCESSIVE DEBT -- If total Debt outstanding equals or
exceeds the Cash Surrender Value, the Certificate will terminate thirty-one (31)
calendar days after We have mailed notice to Your last known address and that of
any assignees of record. If sufficient Loan repayment is not made by the end of
this 31-day period, the Certificate will terminate without value.
EFFECT OF LOANS ON INVESTMENT VALUE -- A Loan, whether or not repaid, will
have a permanent effect on the Investment Value because the investment results
of each Investment Division will apply only to the amount remaining in such
Investment Divisions. The longer a Loan is outstanding, the greater the effect
is likely to be. The effect could be favorable or unfavorable. If the Investment
Divisions earn more than the annual interest rate for funds held in the Loan
Account, an Owner's Investment Value will not increase as rapidly as it would
have had no Loan been made. If the Investment Divisions earn less than the Loan
Account, the Owner's Investment Value will be greater than it would have been
had no Loan been made. Also, if not repaid, the aggregate amount of outstanding
Debt will reduce the Death Proceeds and Cash Surrender Value otherwise payable.
DEATH BENEFIT
As long as the Certificate remains in force, the Certificate provides for
the payment of the Death Proceeds to the named Beneficiary when the Insured
under the Certificate dies. The Death Proceeds payable to the Beneficiary equal
the Death Benefit less any Debt outstanding under the Certificate plus any rider
benefits payable. The Death Benefit depends on the Death Benefit option You
select and is determined as of the date of the death of the Insured.
MINIMUM DEATH BENEFIT TESTING PROCEDURES -- Section 7702 of the Code defines
alternative testing procedures, the guideline premium test ("GPT") and the cash
value accumulation test ("CVAT") in order to meet the definition of life
insurance under the Code. See "Federal Tax Considerations -- Income Taxation of
Certificate Benefits," page 30. Each Certificate must qualify under either the
GPT or the CVAT. Prior to issue, the Owner chooses the procedure under which a
Certificate will qualify. Once either the GPT or the CVAT is chosen to test a
Certificate, it cannot be changed while the Certificate is in force.
Under both testing procedures, there is a minimum Death Benefit required at
all times equal to the Variable Insurance Amount. The factors used to determine
the Variable Insurance Amount depend on the testing procedure chosen and are set
forth in the Certificate.
Under the GPT, there is also a maximum amount of premium which may be paid
with respect to each Certificate.
Use of the CVAT can be advantageous if an Owner intends to maximize the
total amount of premiums paid under a Certificate. An offsetting consideration,
however, is that the factors used to determine the Variable Insurance Amount are
higher under the CVAT, which can result in a higher Death Benefit over time and
thus, a higher total cost of insurance.
DEATH BENEFIT OPTIONS -- Regardless of the minimum death benefit testing
procedure chosen, there are two Death Benefit options: Death Benefit Option A
and Death Benefit Option B.
1. Under Death Benefit Option A, the Death Benefit is the greater of (a) the
Face Amount and (b) the Variable Insurance Amount.
2. Under Death Benefit Option B, the Death Benefit is the greater of (a) the
Face Amount plus the Cash Value and (b) the Variable Insurance Amount.
Regardless of which Death Benefit option You select, the maximum amount
payable under such option will be the Death Proceeds.
OPTION CHANGE -- While the Certificate is in force, You may change the Death
Benefit option selected under a Certificate by making a request In Writing
during the lifetime of the Insured. If the change is from Death Benefit Option A
to Death Benefit Option B, satisfactory evidence of insurability must be
provided to Hartford. The Face Amount after the change will be equal to the Face
Amount before the change, less the Cash Value on the effective date of the
change. If the change is from Death Benefit Option B to Death Benefit Option A,
the Face Amount after the change will be equal to the Face Amount before the
change plus the Cash Value on the effective date of change. Any
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 19
- --------------------------------------------------------------------------------
change in the selection of a Death Benefit option will become effective at the
beginning of the Coverage month following Hartford's approval of such change. We
will notify You that the change has been made.
All or part of the Death Proceeds may be paid in cash or applied under one
of the payment options described below.
PAYMENT OPTIONS -- Death Proceeds under the Certificate may be paid in a
lump sum or may be applied to one of Hartford's payment options. The minimum
amount that may be placed under a payment option is $5,000 unless Hartford
consents to a lesser amount. Once payments under payment options 2, 3 or 4
commence, no surrender of the Certificate may be made for the purpose of
receiving a lump sum settlement in lieu of the life insurance payments. The
following options are available under the Certificates:
FIRST OPTION -- Interest Income
Payments of interest at the rate We declare, but not less than 3% per year,
on the amount applied under this option.
SECOND OPTION -- Income of Fixed Amount
Equal payments of the amount chosen until the amount applied under this
option, with interest of not less than 3% per year, is exhausted. The final
payment will be for the balance remaining.
THIRD OPTION -- Payments for a Fixed Period
An amount payable monthly for the number of years selected which may be from
1 to 30 years.
FOURTH OPTION -- Life Income
LIFE ANNUITY -- an annuity payable monthly during the lifetime of the
Annuitant and terminating with the last monthly payment due preceding the
death of the Annuitant. Under this option, it is possible that only one
monthly annuity payment would be made, if the Annuitant died before the
second monthly annuity payment was due.
LIFE ANNUITY WITH 120 MONTHLY PAYMENTS CERTAIN -- an annuity providing
monthly income to the Annuitant for a fixed period of 120 months and for
as long thereafter as the Annuitant shall live.
The fourth payment option is based on the 1983a Individual Annuity Mortality
Table set back one year and a net investment rate of 3% per annum. The amount of
each payment under this option will depend upon the age of the Annuitant at the
time the first payment is due. If any periodic payment due any payee is less
than $200, Hartford may make payments less often. The first, second and third
payment options are based on a net investment rate of 3% per annum. Hartford
may, however, from time to time, at Our discretion if mortality appears more
favorable and interest rates justify, apply other tables which will result in
higher monthly payments for each $1,000 applied under one or more of the four
payment options.
Hartford will make any other arrangements for income payments as may be
agreed on.
LEGAL DEVELOPMENTS REGARDING INCOME PAYMENTS -- In those states affected by
the 1983 Supreme Court decision in Arizona Governing Committee v. Norris, income
payment options involving life income are based on unisex actuarial tables. In
addition, legislation has previously been introduced in Congress which, had it
been enacted, would have required the use of tables that do not vary on the
basis of sex for some or all annuities. Currently, several states have enacted
such laws.
BENEFICIARY -- The Owner names the Beneficiary in the Enrollment Form for
the Certificate. The Owner may change the Beneficiary (unless irrevocably named)
during the Insured's lifetime by written request to Hartford. If no Beneficiary
is living when the Insured dies, the Death Proceeds will be paid to the Owner if
living; otherwise to the Owner's estate.
INCREASES AND DECREASES IN FACE AMOUNT -- The minimum Face Amount of the
Certificate is $50,000. At any time after purchasing a Certificate, the Owner
may request a change in the Face Amount by making a request In Writing to
Hartford and directing such request to Hartford's Customer Service Center.
All requests to increase the Face Amount must be applied for on a new
Enrollment Form. All requests will be subject to evidence of insurability
satisfactory to Hartford and subject to Our rules then in effect. Any increase
approved by Us will be effective on the Processing Date following the date We
approve the request. The Monthly Deduction Amount on the first Processing Date
on or after the effective date of the increase will reflect a charge for the
increase. A decrease in the Face Amount will be effective on the first
Processing Date following the date We receive the request. Decreases must reduce
the Face Amount by at least $25,000, and the remaining Face Amount must not be
less than $50,000. Decreases will be applied:
(a) to the most recent increase; then
(b) successively to each prior increase, and then
(c) to the initial Face Amount.
We reserve the right to limit the number of Face Amount increases or
decreases made under the Certificate to no more than one in any twelve (12)
month period.
<PAGE>
20 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
BENEFITS AT MATURITY
If the Insured is living on the Maturity Date, on surrender of the
Certificate to Hartford, Hartford will pay to the Owner the Cash Surrender Value
on the date the Certificate is surrendered. However, on the Maturity Date, the
Certificate will terminate and Hartford will have no further obligations under
the Certificate.
TERMINATION OF PARTICIPATION
IN THE GROUP POLICY
Participation in the Group Policy may be terminated by Hartford or the
Participating Employer. The party initiating the termination must provide notice
of such termination to each Owner of record, at his or her last known address,
at least fifteen (15) days prior to the date of termination. In the event of
such termination, no new Enrollment Forms for new Insureds will be accepted on
or after the date notice of discontinuance is received or sent by Hartford,
whichever is applicable, nor will any new Certificates be issued. If premium
payments are discontinued, Hartford will continue insurance coverage under the
Certificate as long as the Cash Surrender Value is sufficient to cover the
charges due. This continuation of insurance will not continue the coverage under
the Certificate beyond Attained Age 100, nor will it continue any optional
benefit rider beyond the Certificate's date of termination. If the Group Policy
is discontinued or amended to discontinue the eligible class to which an Insured
belongs (and if the coverage on the Insured is not transferred to another
insurance carrier), any Certificate then in effect will remain in force under
the discontinued Group Policy, provided it is not canceled or surrendered by the
Owner, subject to Hartford's qualifications then in effect. Certificate premiums
will then be payable by the Owner Directly to Us.
LAPSE AND REINSTATEMENT WHILE
THE GROUP POLICY IS IN EFFECT
LAPSE AND GRACE PERIOD -- A Grace Period will follow the date We mail notice
to the Owner that the Cash Surrender Value is insufficient to pay the charges
due under the Certificate. Unless the Owner has given Hartford written notice of
termination in advance of the date of termination of the Certificate, insurance
will continue in force during the Grace Period. The Owner will be liable to
Hartford for all charges due under the Certificate then unpaid for the period
the Certificate remains in force.
In the event that total Debt outstanding equals or exceeds the Cash
Surrender Value, the Certificate will terminate thirty-one (31) calendar days
after We have mailed notice to Your last known address and that of any assignees
of record. If sufficient Loan repayment is not made by the end of this 31-day
period, the Certificate will terminate without value.
REINSTATEMENT -- Prior to the death of the Insured, and unless (i) the Group
Policy is terminated (see "Termination of Participation in the Group Policy"
above) or (ii) the Certificate has been surrendered for cash, the Certificate
may be reinstated prior to the Maturity Date, provided:
(a) you make Your request within three (3) years of the date of lapse; and
(b) satisfactory evidence of insurability is submitted.
We will not require evidence of insurability, however, if You reinstate Your
Certificate within one month after the end of the Grace Period, provided that
the Insured is alive.
To reinstate Your Certificate, you must remit a premium payment large enough
to keep the coverage under the Certificate in force for at least three (3)
months following the date of reinstatement. The Face Amount of the reinstated
Certificate cannot exceed the Face Amount at the time of lapse. The Investment
Value on the reinstatement date will reflect:
(a) The Investment Value at the time of termination; plus
(b) Net Premiums attributable to premiums paid at the time of reinstatement.
Upon reinstatement, any Debt at the time of termination must be repaid or
carried over to the reinstated Certificate.
ENROLLMENT FOR A CERTIFICATE
Individuals wishing to purchase a Certificate must submit an Enrollment Form
to Hartford. Within limits, an applicant may choose the Initial Premium and the
initial Face Amount. A Certificate generally will be issued only on the lives of
Insureds Attained Age 79 and under who supply evidence of insurability
satisfactory to Hartford. Acceptance is subject to Hartford's underwriting rules
and Hartford reserves the right to reject an Enrollment Form for any reason. No
change in the terms or conditions of a Certificate will be made without the
consent of the Owner.
The Certificate will be effective on the Coverage Date only after Hartford
has received all outstanding delivery requirements and received the Initial
Premium. The Coverage Date is the date used to determine all future cyclical
transactions on the Certificate, e.g., Processing Date, Coverage Months and
Coverage Years.
THE RIGHT TO EXAMINE THE CERTIFICATE
An Owner has a limited right to return a Certificate. Subject to applicable
state regulation, if the Certificate is returned, by mail or personal delivery
to Hartford or to the agent who sold the Certificate, to be canceled within ten
(10) calendar days after delivery of the Certificate to the Owner, Hartford will
return either (i) the total amount of
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 21
- --------------------------------------------------------------------------------
premiums or (ii) the Cash Value plus charges deducted under the Certificate to
the Owner within seven (7) days. If the state where Your Certificate is issued
requires that We return Your Initial Premium, We will allocate Your initial Net
Premium to the Hartford Money Market Investment Division. If the state of issue
of Your Certificate provides for Our return of the Certificate's Cash Value to
the Owner, We will allocate the initial Net Premium immediately among Your
chosen Investment Divisions.
DEDUCTIONS FROM PREMIUM
Before allocating the Net Premium to the Investment Divisions, a deduction
as a percentage of premium is made for the front-end sales load, premium taxes
and the DAC tax charge. The amount of each premium allocated to the Investment
Divisions is Your Net Premium.
FRONT-END SALES LOAD -- The current front-end sales load is 6.75% of any
premium paid for Coverage Years 1 through 7 and 4.75% of any premium paid in
Coverage Years 8 and later. The maximum front-end sales load is 9% of any
premium paid in Coverage Years 1 through 7 and 7% of any premium paid in
Coverage Years 8 and later.
Front-end sales loads cover expenses related to the sale and distribution of
the Certificates. The front-end sales load may be reduced for certain sales of
the Certificates under circumstances which result in a saving of such sales and
distribution expenses. To qualify for such a reduction, a plan must satisfy
certain criteria as to, for example, the expected number of Owners and the
anticipated Face Amount of all Certificates under the plan. Generally, the sales
contacts and effort and administrative costs per Certificate vary based on such
factors as the size of the plan, the purpose for which Certificates are
purchased and certain characteristics of the plan's members. The amount of
reduction and the criteria for qualification are related to the reduced sales
effort and administrative costs resulting from sales to qualifying plans.
Hartford may modify from time to time on a uniform basis both the amounts of
reductions and the criteria for qualification. Reductions in these charges will
not be unfairly discriminatory against any person, including the affected Owners
funded by the Separate Account.
PREMIUM RELATED TAX CHARGE -- We deduct a percentage of each premium to
cover state and local taxes assessed against Hartford that are attributable to
premiums. This percentage will vary by locale depending on the tax rates in
effect there. The range of premium taxes actually deducted by Hartford currently
ranges from 0% to 4%.
DAC TAX CHARGE -- Hartford deducts 1.25% of each premium to cover a federal
premium tax assessed against Hartford. This charge is reasonable in relation to
Hartford's federal income tax burden, under Section 848 of the Code, resulting
from the receipt of premiums. We will adjust this charge based on changes in the
applicable tax law.
DEDUCTIONS AND CHARGES
FROM INVESTMENT VALUE
MONTHLY DEDUCTION AMOUNT -- On the Coverage Date and on each subsequent
Processing Date, Hartford will deduct the Monthly Deduction Amount from the
Investment Value to cover certain charges and expenses incurred in connection
with a Certificate. The Monthly Deduction Amount will vary from month to month.
It will be taken from the Charge Deduction Division, if designated in the
Enrollment Form for the Certificate or later elected.
If a Charge Deduction Division has been designated but the Investment Value
in the Charge Deduction Division is less than that required to cover all charges
due on such date:
(1) Hartford will apply the Investment Value of the Charge Deduction Division to
the charges due and set the Investment Value in the Charge Deduction
Division to zero; and
(2) any additional amount due will be allocated among the remaining Investment
Divisions on a Pro Rata Basis.
If no Charge Deduction Division has been designated or elected, any amounts
due will be allocated among the Owner's chosen Investment Divisions on a Pro
Rata Basis.
The Monthly Deduction Amount equals:
(a) the administrative expense charge; plus
(b) the charges for cost of insurance; plus
(c) the charges for additional benefits provided by rider, if any.
(A) Monthly Administrative Fee and Other Expense Charges
Hartford will assess a monthly administrative charge to compensate
Hartford for administrative costs in connection with the Certificates. This
charge will be $5 per Coverage Month initially and is guaranteed never to
exceed $10.00 per Coverage Month.
(B) Cost of Insurance Charge
The charge for the cost of insurance is equal to:
(i) the cost of insurance rate per $1,000; multiplied by
(ii) the Net Amount at Risk; divided by
(iii) $1,000.
The Net Amount at Risk equals the Death Benefit less the Cash Value on
that date.
<PAGE>
22 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
The cost of insurance charge is to cover Hartford's anticipated mortality
costs. Hartford uses various underwriting procedures, including medical
underwriting procedures, depending on the characteristics of the group to
which the Group Policies are issued. The current cost of insurance rates
for standard risks may be equal to or less than the 1980 Commissioners
Standard Ordinary Mortality Table. Substandard risks will be charged a
higher cost of insurance rate that will not exceed rates based on a
multiple of the 1980 Commissioners Standard Ordinary Mortality Table. The
multiple will be based on the Insured's risk class. The use of simplified
underwriting and guaranteed issue procedures may result in the cost of
insurance charges being higher for some individuals than if medical
underwriting procedures were used.
Cost of insurance rates are based on the age, sex (except where unisex
rates apply), and rate class of the Insured and group mortality
characteristics and the particular characteristics (such as the rate class
structure) under the Group Policy that are agreed to by Hartford and the
Participating Employer. The actual monthly cost of insurance rates will be
based on Hartford's expectations as to future experience. Hartford will
determine the cost of insurance rate at the start of each Coverage Year. Any
changes in the cost of insurance rate will be made uniformly for all
Insureds in the same risk class.
The rate class of an Insured affects the cost of insurance rate. Hartford
and the Participating Employer will agree to the number of classes and
characteristics of each class. The classes may vary by smokers and
nonsmokers, active and retired status, and/or any other nondiscriminatory
classes agreed to by the Participating Employer. Where smoker and non-smoker
divisions are provided, an Insured who is in the nonsmoker division of a
rate class will have a lower cost of insurance than an Insured in the smoker
division of the same rate class, even if each Insured has an identical
Certificate.
Because the Cash Value and the Death Benefit Amount under a Certificate
may vary from month to month, the cost of insurance charge may also vary on
each Processing Date.
(C) Rider Charge
If the Certificate includes riders, a charge is deducted from the
Investment Value on each Processing Date. The applicable charge is specified
on the rider and is to compensate Hartford for the anticipated cost of
providing the benefits thereunder.
The riders available under the Certificate are described on page 24 under
"Supplemental Benefits."
MORTALITY AND EXPENSE RISK CHARGE
A charge is made for mortality and expense risks assumed by Hartford.
Hartford currently deducts a daily charge for Coverage Years 1 through 10 at an
effective annual rate of .65% of the value of each Investment Division's assets
and for Coverage Years 11 and later at an effective annual rate of .50% of an
Investment Division's assets. In no event will the charge exceed .65% of an
Investment Division's assets on an annual basis. See also "Premiums --
Accumulation Unit Values," page 15.
The mortality and expense risk charge is equal to:
(i) the mortality and expense risk rate; multiplied by
(ii) the portion of the Cash Value allocated to the Investment Divisions and
the Loan Account.
The mortality risk assumed is that the actual cost of insurance charges
specified in the Certificate will be insufficient to meet actual claims. The
expense risk assumed is that expenses incurred in issuing and administering the
Certificates will exceed the administrative charges set forth therein.
If these charges are insufficient to cover actual costs and assumed risks,
the loss will fall on Hartford. Conversely, if the charge proves more than
sufficient, any excess will be added to Hartford's surplus.
TAXES
Currently, no charge is made to the Separate Account for federal, state, and
local taxes that may be attributable to the Separate Account. A change in the
applicable federal, state or local tax laws which impose tax on Hartford and/or
the Separate Account may result in a charge against the Certificates in the
future. Charges for other taxes, if any, attributable to the Separate Account
may also be made.
OTHER MATTERS
ADDITIONS, DELETIONS OR
SUBSTITUTIONS OF INVESTMENTS
Hartford reserves the right, subject to compliance with the law as then in
effect, to make additions to, deletions from, or substitutions for the Separate
Account and the Investment Divisions which fund the Group Policies. If shares of
any of the Portfolios should no longer be available for investment, or if, in
the judgment of Hartford's management, further investment in shares of any
Portfolio should become inappropriate in view of the purposes of the Group
Policies, Hartford may substitute shares of another Portfolio for shares already
purchased, or to be purchased in the
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 23
- --------------------------------------------------------------------------------
future, under the Group Policies. No substitution of securities will take place
without notice to and consent of Owners and without prior approval of the SEC to
the extent required by the 1940 Act. Subject to Owner approval, if required,
Hartford also reserves the right to end the registration under the 1940 Act of
the Separate Account or any other separate accounts of which it is the depositor
which may fund the Group Policy.
VOTING RIGHTS
In accordance with its view of presently applicable law, Hartford will vote
the shares of the Funds at regular and special meetings of the shareholders of
the Funds in accordance with instructions from Owners (or the assignee of the
Certificates, as the case may be) having a voting interest in the Separate
Account. The number of shares held in the Separate Account which are
attributable to each Owner is determined by dividing the Owner's interest in
each Investment Division by the net asset value of the applicable shares of the
Funds. Hartford will vote shares for which no instructions have been given and
shares which are not attributable to Owners (i.e., shares owned by Hartford) in
the same proportion as it votes shares for which it has received instructions.
If the 1940 Act or any rule promulgated thereunder should be amended, however,
or if Hartford's present interpretation should change and, as a result, Hartford
determines it is permitted to vote the shares of the Funds in its own right, it
may elect to do so.
The voting interests of the Owners (or the assignees) in the Funds will be
determined as follows: Owners may cast one vote for each full or fractional
Accumulation Unit owned under their respective Certificates and allocated to an
Investment Division the assets of which are invested in the particular Fund on
the record date for the shareholder meeting for that Fund. If, however, an Owner
has taken a Loan secured by the Certificate, amounts transferred from the
Investment Division(s) to the Loan Account(s) in connection with the Loan (see
"Detailed Description of Certificate Benefits and Provisions -- Loans," page 17)
will not be considered in determining the voting interests of the Owner. Owners
should review the prospectuses for the Funds which accompany this Prospectus to
determine matters on which shareholders may vote.
Hartford may, when required by state insurance regulatory authorities,
disregard voting instructions if the instructions require that the shares be
voted so as to cause a change in the sub-classification or investment objective
of one or more of the Funds or to approve or disapprove an investment advisory
policy for the Funds. In addition, Hartford itself may disregard voting
instructions in favor of changes initiated by an Owner in the investment policy
or the investment adviser of the Funds if Hartford reasonably disapproves of
such changes. A change would be disapproved only if the proposed change is
contrary to state law or prohibited by state regulatory authorities. In the
event Hartford does disregard voting instructions, a summary of that action and
the reasons for such action will be included in the next periodic report to
Owners.
OUR RIGHTS
We reserve the right to take certain actions in connection with Our
operations and the operations of the Separate Account. These actions will be
taken in accordance with applicable laws (including obtaining any required
approval of the SEC). If necessary, We will seek approval by Owners.
Specifically, We reserve the right to:
- - Add or remove any Investment Division;
- - Create new separate accounts;
- - Combine the Separate Account with one or more other separate accounts;
- - Operate the Separate Account as a management investment company under the 1940
Act or in any other form permitted by law;
- - Deregister the Separate Account under the 1940 Act;
- - Manage the Separate Account under the direction of a committee or discharge
such committee at any time;
- - Transfer the assets of the Separate Account to one or more other separate
accounts; and
- - Restrict or eliminate any of the voting rights of Owners or other persons who
have voting rights as to the Separate Account.
Hartford also reserves the right to change the name of the Separate Account.
We have reserved all rights to the name of Hartford Life Insurance Company
or any part of it. We may allow the Separate Account and other entities to use
Our name or part of it, but We may also withdraw this right.
STATEMENTS TO OWNERS
We will send You a statement at least once each Coverage Year, showing:
(a) the current Cash Value, Cash Surrender Value and Face Amount;
(b) the premiums paid, Monthly Deduction Amounts and Loans since the last
report;
(c) the amount of any outstanding Debt;
(d) notifications required by the provisions of the Certificate; and
(e) any other information required by the Insurance Department of the State
where the Certificate was delivered.
<PAGE>
24 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
LIMIT ON RIGHT TO CONTEST
Hartford may not contest the validity of the Certificate after it has been
in effect during the Insured's lifetime for two years from the Issue Date. If
the Certificate is reinstated, the two-year period is measured from the date of
reinstatement. Any increase in the Face Amount as a result of a premium payment
is contestable for two years from its effective date. In addition, if the
Insured commits suicide in the two-year period, or such period as specified in
state law, the Death Benefit payable will be limited to the premiums paid less
any outstanding Debt and partial withdrawals.
MISSTATEMENT AS TO AGE OR SEX
If the age or sex of the Insured is incorrectly stated, the amount of all
benefits payable will be appropriately adjusted, as specified in the
Certificate.
ASSIGNMENT
The Certificate may be assigned as collateral for a loan or other
obligation. Hartford is not responsible for any payment made or action taken
before receipt of written notice of such assignment. Proof of interest must be
filed with any claim under a collateral assignment.
DIVIDENDS
No dividends will be paid under the Certificates.
EXPERIENCE CREDITS
The Certificates issued under a Group Policy may be eligible for experience
credits due to administrative savings. The amount of any experience credit may
be paid in cash or applied to and used to increase the Investment Value.
SUPPLEMENTAL BENEFITS
The following supplemental benefit may in the future be included in a
Certificate, subject to the restrictions and limitations set forth therein.
MATURITY DATE EXTENSION RIDER
We will extend the Maturity Date (the date on which the Certificate will
mature), to the date of death of the Insured. Certain Death Benefit and premium
restrictions apply. See "Federal Tax Considerations -- Income Taxation of
Certificate Benefits," page 30.
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
POSITION WITH HARTFORD LIFE, OTHER BUSINESS PROFESSION, VOCATION OR EMPLOYMENT
NAME, AGE YEAR OF ELECTION FOR PAST 5 YEARS; OTHER DIRECTORSHIPS
- -------------------------------- ------------------------------------- ----------------------------------------------------------
<S> <C> <C>
Ahn, Dong H., 37 Vice President, 1998 Vice President (1998-Present), Hartford Life and Accident
Insurance Company, Director Small Business Priority
Accounts (1995-present), Hartford; Director of Accounts
Management and Employee Benefits (1985-1995), Traveler's
Insurance Company.
Bossen, Wendell J., 64 Vice President, 1992** Vice President (1992-Present), Hartford Life and Accident
Insurance Company; President (1992-Present),
International Corporate Marketing Group, Inc.; Executive
Vice President (1984-1992), Mutual Benefit.
Boyko, Gregory A., 46 Senior Vice President, Chief Vice President and Controller (1995-1997), Hartford;
Financial Officer & Director (1997-Present); Senior Vice President, Chief
Treasurer, 1997 Financial Officer & Treasurer (1997-Present); Vice
Director, 1997* President & Controller (1995-1997), Hartford Life and
Accident Insurance Company; Senior Vice President, Chief
Financial Officer & Treasurer (1997-Present), Hartford
Life, Inc.; Chief Financial Officer (1994-1995), IMG
American Life; Senior Vice President (1992-1994),
Connecticut Mutual Life Insurance Company.
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 25
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITION WITH HARTFORD LIFE, OTHER BUSINESS PROFESSION, VOCATION OR EMPLOYMENT
NAME, AGE YEAR OF ELECTION FOR PAST 5 YEARS; OTHER DIRECTORSHIPS
- -------------------------------- ------------------------------------- ----------------------------------------------------------
<S> <C> <C>
Cummins, Peter W., 60 Senior Vice President, 1997 Vice President (1989-1997); Director of Broker Dealer
Sales-ILAD (1989-1992), Hartford; Senior Vice President
(1997-Present) Vice President (1989-1997); Director of
Broker Dealer Sales-ILAD (1989-1991), Hartford Life and
Accident Insurance Company.
deRaismes, Ann M., 47 Senior Vice President, 1997 Vice President (1994-1997); Assistant Vice President
Director of Human Resources, (1992-1994); Hartford; Senior Vice President
1991 (1997-Present); Director of Human Resources
(1991-Present); Vice President (1994-1997); Assistant
Vice President (1992-1994); Hartford Life and Accident
Insurance Company; Vice President, Human Resources
(1997-Present), Hartford Life, Inc.
Fitch, Timothy M., 45 Vice President, 1995 Assistant Vice President (1992-1995), Hartford; Vice
Actuary, 1994 President (1995-Present); Actuary (1994-Present);
Assistant Vice President (1992-1995), Hartford Life and
Accident Insurance Company.
Foy, David T., 31 Vice President, 1998 Senior Vice President (1998-present), Vice President
(1998), Assistant Vice President (1995-1998), Hartford;
Vice President (1998-Present), Hartford Life and
Accident Insurance Company; Director, Strategic Planning
Corporate Finance (1995-1996), IA Product Development
(1994-1995), Hartford; Various Actuarial Roles
(1989-1993), Milliman & Robertson.
Gardner, Bruce D., 47 Vice President, 1995 Director (1994-1997); General Counsel & Corporate
Secretary (1991-1995), Hartford; Vice President
(1995-1997); Director (1995-1997); General Counsel &
Corporate Secretary (1991-1995), Hartford Life and
Accident Insurance Company.
Garrett, J. Richard, 53 Vice President, 1993 Treasurer (1986-1997), Hartford; Vice President
Assistant Treasurer, 1997 (1993-Present); Assistant Treasurer (1997-Present);
Treasurer (1983-1997), Hartford Life and Accident
Insurance Company; Treasurer (1977), The Hartford
Financial Services Group.
Ginnetti, John P., 52 Executive Vice President Senior Vice President-Individual Life and Annuity Division
and Director, Asset (1988-1994), Hartford; Director (1988-Present); Director
Management Services, 1994 (1988-Present); Executive Vice President & Director,
Director, 1988* Asset Management Services (1994-Present); Senior Vice
President-Individual Life and Annuity Division
(1988-1994), Hartford Life and Accident Insurance
Company; Executive Vice President, Asset Management,
Hartford Life, Inc. (1997-Present).
Godfrey, III, William A., 41 Senior Vice President, 1997 Senior Vice President (1997-Present), Hartford; Senior
Vice President (1997-Present), Hartford Life and
Accident Insurance Company; Vice President Information
Technology (1997-Present), Hartford Life, Inc.
</TABLE>
<PAGE>
26 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITION WITH HARTFORD LIFE, OTHER BUSINESS PROFESSION, VOCATION OR EMPLOYMENT
NAME, AGE YEAR OF ELECTION FOR PAST 5 YEARS; OTHER DIRECTORSHIPS
- -------------------------------- ------------------------------------- ----------------------------------------------------------
<S> <C> <C>
Godkin, Lynda, 44 Senior Vice President, 1997 Associate General Counsel (1995-1996); Assistant General
General Counsel, 1996 Counsel and Secretary (1994-1995), Counsel (1990-1994),
Corporate Secretary, 1995 Hartford; Director (1997-Present); Senior Vice President
Director, 1997* (1997-Present); General Counsel (1996-Present);
Corporate Secretary (1995-Present); Associate General
Counsel (1995-1996); Assistant General Counsel and
Secretary (1994-1995); Counsel (1990-1994), Hartford
Life and Accident Insurance Company; Vice President and
General Counsel (1997-Present), Hartford Life, Inc.
Grady, Lois W., 53 Senior Vice President, 1998 Vice President (1993-1998); Assistant Vice President
Vice President, 1993 (1987-1993), Hartford; Senior Vice President (1998);
Vice President (1993-1997); Assistant Vice President
(1987-1993), Hartford Life and Accident Insurance
Company.
Graham, Christopher, 47 Vice President, 1997 Vice President (1996-Present), Hartford; Vice President,
Senior Vice President New Business and Claims
(1993-1996), National Life of Vermont.
Hunt, Mark E., 37 Vice President, 1998 Assistant Vice President (1997-1998), Hartford; Vice
President (1998-Present), Assistant Vice President
(1997-1998), Hartford Life and Accident Insurance
Company; Director Asset Allocation/Asset Liability
Management Senior Investment Officer, Associate Actuary,
Assistant Actuary, Senior Actuary Associate, Connecticut
Mutual Life (1987-1996).
Joyce, Stephen T., 39 Vice President, 1997 Director of Annuity Bank Distribution (1990-Present),
Assistant Vice President (1994-1997), Hartford;
Assistant Vice President (1994-1997), Hartford Life and
Accident Insurance Company.
Keeler, Michael D., 37 Vice President, 1998 Vice President (1998-Present); Hartford Life and Accident
Insurance Company; Vice President (1995-1997), Providian
Insurance; Supervisor, Manager (1985-1995), U.S. West
Communications.
Kerzner, Robert A., 46 Senior Vice President, 1998 Vice President (1995-1998); Regional Vice President
Vice President, 1997 (1991-1994), Hartford, Vice President (1994-1997),
Hartford Life and Accident Insurance Company.
Levenson, David N., 31 Vice President, 1998 Assistant Vice President (1995-Present), Director and
Assistant Vice President (1995-1997) Hartford; Vice
President, Fidelity Investments (1994-1995); Actuary
(1990-1994) Aetna Life and Casualty.
Maher, Steven M., 43 Vice President, 1992 Assistant Vice President (1987-1992), Hartford; Vice
Actuary, 1987 President (1993-Present); Actuary (1987-Present);
Assistant Vice President (1987-1983), Hartford Life and
Accident Insurance Company.
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 27
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITION WITH HARTFORD LIFE, OTHER BUSINESS PROFESSION, VOCATION OR EMPLOYMENT
NAME, AGE YEAR OF ELECTION FOR PAST 5 YEARS; OTHER DIRECTORSHIPS
- -------------------------------- ------------------------------------- ----------------------------------------------------------
<S> <C> <C>
Malchodi, Jr., William B., 50 Vice President, 1994 Director of Taxes, Hartford (1991-1998); Director of Taxes
(1992-1998), Hartford Life and Accident Insurance
Company.
Marra, Raymond J., 37 Vice President, 1998 Assistant Vice President (1997-Present), Hartford; Vice
President (1998-Present), Assistant Vice President
(1994-1997), Hartford Life and Accident Insurance
Company.
Marra, Thomas M., 39 Executive Vice President, 1995 Senior Vice President (1994-1995); Vice President
Director, Individual Life (1989-1994); Actuary (1987-1995), Hartford; Director
and Annuity Division, 1994 (1994-Present); Executive Vice President (1995-Present);
Director, 1994* Senior Vice President (1994-1995); Director, Individual
Life and Annuity Division (1994-Present); Actuary
(1987-1997), Hartford Life and Accident Insurance
Company; Executive Vice President, Individual Life and
Annuities (1997-Present), Hartford Life Inc.
Nolan, Jr., Robert F., 43 Senior Vice President, 1997 Vice President (1995-1997); Assistant Vice President
(1992-1995), Hartford; Vice President (1995-1997);
Assistant Vice President (1992-1995), Hartford Life and
Accident Insurance Company; Vice President, Corporate
Relations (1997-Present), Hartford Life, Inc.; Manager,
Public Relations (1986), Aetna Life and Casualty
Insurance Company.
Noto, Joseph J., 46 Vice President, 1989 Executive Vice President & Chief Operating Officer
(1997-Present); Director (1994-Present); President
(1994-1997), American Maturity Life Insurance Company;
Vice President (1989-1997), Hartford Life and Accident
Insurance Company.
O'Halloran, C. Michael, 51 Vice President, 1994 Senior Associate General Counsel (1988-1997), Hartford;
Vice President (1994-Present); Senior Associate General
Counsel (1988-1997), Hartford Life and Accident
Insurance Company; Corporate Secretary (1997-Present),
Hartford Life, Inc.; Vice President (1994-Present);
Senior Associate General Counsel (1988-Present);
Director of Corporate Law (1994-Present), The Hartford
Financial Services Group.
O'Sullivan, Daniel E., 43 Vice President, 1998 Vice President (1998-Present), Hartford Life and Accident
Insurance Company; Director Strategic Initiatives Group
Specialty Risks (1996-1997), Hartford; Vice President
(1991-1996), Aetna Life Insurance and Annuity Co.
Raymond, Craig R., 37 Senior Vice President, 1997 Vice President (1993-1997); Assistant Vice President
Chief Actuary, 1994 (1992-1993); Actuary (1990-1994), Hartford; Senior Vice
President (1997-Present); Chief Actuary (1995-Present);
Vice President (1993-1997); Actuary (1990-1995),
Hartford Life and Accident Insurance Company; Vice
President and Chief Actuary (1997-Present), Hartford
Life, Inc.
</TABLE>
<PAGE>
28 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITION WITH HARTFORD LIFE, OTHER BUSINESS PROFESSION, VOCATION OR EMPLOYMENT
NAME, AGE YEAR OF ELECTION FOR PAST 5 YEARS; OTHER DIRECTORSHIPS
- -------------------------------- ------------------------------------- ----------------------------------------------------------
<S> <C> <C>
Robinson, Mary P., 38 Vice President, 1998 Assistant Vice President (1995-1998), Hartford; Assistant
Vice President(1995-1998), Hartford Life and Accident
Insurance Company, Director BMS (1995-1996), Director
Priority Account Segment (1994-1995), Hartford.
Salama, Donald A., 50 Vice President, 1997 Vice President (1997-Present), Hartford Life and Accident
Insurance Company; Principal and Director of
Institutional Sales (1995-1998), The Vanguard Group;
Senior Vice President (1994-1995), Mercantile
Bancorporation; Vice President (1988-1994), Bankers
Trust Company.
Schlitz, Timothy P., 37 Vice President, 1997 Assistant Vice President (1994-1997), Hartford, Vice
President (1997-Present); Assistant Vice President
(1994-1997), Hartford Life and Accident Insurance
Company; Consulting Actuary (1992-1993), Milliman &
Robertson, Inc.; Consulting Actuary (1988-1992) Chalke
Incorporated.
Smith, Lowndes A., 58 President, 1989 Chief Operating Officer (1989-1997), Hartford; Director
Chief Executive Officer, 1997 (1981-Present); President (1989-Present); Chief
Director, 1981* Executive Officer (1997-Present); Chief Operating
Officer (1989-1997), Hartford Life and Accident
Insurance Company; Chief Executive Officer and President
and Director (1997-Present), Hartford Life, Inc.
Stevenson, Keith A., 44 Vice President, 1998
Sweeney, Edward A., 51 Vice President, 1993 Chicago Regional Manager (1985-1993), Hartford; Vice
President (1993-Present), Hartford Life and Accident
Insurance Company.
Tilbor, Judith V., 46 Vice President, 1998 Assistant Vice President (1994-1998), Hartford; Vice
President (1998-Present), Assistant Vice President
(1994-1998), Hartford Life and Accident Insurance
Company.
Welnicki, Raymond P., 49 Senior Vice President & Vice President (1993-1994), Hartford; Director
Director, Employee Benefit (1994-Present); Senior Vice President (1995-Present);
Division, 1994 Director, Employee Benefit Division (1997-Present); Vice
Director, 1994* President (1993-1995), Hartford Life and Accident
Insurance Company; Senior Vice President, Employee
Benefits (1997-Present), Hartford Life, Inc., Board of
Directors, Ethix Corp.
Welsh, Walter, C., 51 Senior Vice President, 1997 Vice President (1995-1997); Assistant Vice President
(1992-1995), Hartford; Senior Vice President
(1997-Present); Vice President (1995-1997); Assistant
Vice President (1992-1995), Hartford Life and Accident
Insurance Company; Vice President Government Affairs
(1997-Present), Hartford Life, Inc.
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 29
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITION WITH HARTFORD LIFE, OTHER BUSINESS PROFESSION, VOCATION OR EMPLOYMENT
NAME, AGE YEAR OF ELECTION FOR PAST 5 YEARS; OTHER DIRECTORSHIPS
- -------------------------------- ------------------------------------- ----------------------------------------------------------
<S> <C> <C>
Zlatkus, Lizabeth H., 39 Senior Vice President, 1997 Vice President (1994-1997); Assistant Vice President
Director, 1994* (1992-1994), Hartford; Director (1994-Present); Senior
Vice President (1997-Present); Vice President
(1994-1997); Assistant Vice President (1992-1994),
Hartford Life and Accident Insurance Company; Vice
President, Group Life and Disability (1997-Present),
Hartford Life, Inc.
Znamierowski, David M., 38 Senior Vice President, 1997 Vice President (1997), Hartford; Director (1998-Present);
Director, Risk Management Senior Vice President (1997-Present); Hartford Life and
Strategy, 1996 Accident Insurance Company; Vice President, Investment
Director, 1998* Strategy (1997-Present), Hartford Life, Inc.; Vice
President, Investment Strategy & Policy (1991-1996),
Aetna Life and Casualty.
</TABLE>
- ---------
* Denotes date of election to Board of Directors of Hartford.
** Affiliated Company of The Hartford Financial Services Group, Inc.
Unless otherwise indicated, the principal business address of each the above
individuals is P.O. Box 2999, Hartford,CT 06104-2999.
DISTRIBUTION OF
THE GROUP POLICY
Hartford intends to sell the Group Policy in all jurisdictions where it is
licensed to do business. The Group Policy will be sold by life insurance sales
representatives who represent Hartford and who are registered representatives of
Hartford Equity Sales Company, Inc. ("HESCO"), or certain other registered
broker-dealers. Any sales representative or employee will have been qualified to
sell variable life insurance policies under applicable federal and state laws.
Each broker-dealer is registered with the SEC under the Securities Exchange Act
of 1934 and all are members of the National Association of Securities Dealers,
Inc. HESCO is the principal underwriter for the Group Policy. The maximum sales
commission payable to Hartford agents, independent registered insurance brokers,
and other registered broker-dealers is 6% of the premiums paid. In addition,
expense allowances, service fees and asset-based trail commissions may be paid.
The sales representative may be required to return all or a portion of the
commissions paid if a Certificate terminates prior to the second Certificate
Anniversary.
Broker-dealers or financial institutions are compensated according to a
schedule set forth by HESCO and any applicable rules or regulations for variable
insurance compensation. Compensation is generally based on premium payments made
by policyholders or contract owners. This compensation is usually paid from the
sales charges described in this Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HESCO, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HESCO, its affiliates or Hartford out of their own
assets and will not affect the amounts paid by the policyholders or contract
owners to purchase, hold or surrender variable insurance products.
SAFEKEEPING OF THE SEPARATE
ACCOUNT ASSETS
The assets of the Separate Account are held by Hartford. The assets of the
Separate Account are kept physically segregated and held separate and apart from
the General Account of Hartford. Hartford maintains records of all purchases and
redemptions of shares of the Fund. Additional protection for the assets of the
Separate Account is afforded by Hartford's blanket fidelity bond issued by Aetna
Casualty and Surety Company, in the aggregate amount of $50 million, covering
all of the officers and employees of Hartford.
<PAGE>
30 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
FEDERAL TAX CONSIDERATIONS
GENERAL
SINCE THE TAX LAW IS COMPLEX AND SINCE TAX CONSEQUENCES WILL VARY ACCORDING
TO THE ACTUAL STATUS OF THE OWNER INVOLVED AND THE TYPE OF PLAN UNDER WHICH THE
GROUP POLICY IS PURCHASED, LEGAL AND TAX ADVICE MAY BE NEEDED BY A PERSON,
TRUSTEE OR OTHER ENTITY CONTEMPLATING THE PURCHASE OF A GROUP POLICY DESCRIBED
HEREIN.
It should be understood that any detailed description of the Federal income
tax consequences regarding the purchase of the Group Policy cannot be made in
this Prospectus and that special tax rules may be applicable with respect to
certain purchase situations not discussed herein. In addition, no attempt is
made here to consider any applicable state or other tax laws. For detailed
information, a qualified tax adviser should always be consulted. This discussion
of Federal tax considerations is based upon Hartford's understanding of current
Federal income tax laws as they are currently interpreted.
TAXATION OF HARTFORD AND
THE SEPARATE ACCOUNT
The Separate Account is taxed as a part of Hartford, which is taxed as a
life insurance company under Part 1 of Subchapter L of Chapter 1 of the Internal
Revenue Code ("Code"). Accordingly, the Separate Account will not be taxed as a
"regulated investment company" under Subchapter M of the Code. Investment income
and realized capital gains on the assets of the Separate Account (the underlying
Investment Divisions) are reinvested and are taken into account in determining
the value of the Accumulation Units (see "Detailed Description of Certificate
Benefits and Provisions -- Values Under the Certificate," on page 16). As a
result, such investment income and realized capital gains are automatically
applied to increase reserves under the Certificate.
Hartford does not expect to incur any Federal income tax on the earnings or
realized capital gains attributable to the Separate Account. Based upon these
expectations, no charge is currently being made to the Separate Account for
Federal income taxes. If Hartford incurs income taxes attributable to the
Separate Account or determines that such taxes will be incurred, it may assess a
charge for taxes against the Separate Account.
INCOME TAXATION OF CERTIFICATE BENEFITS
For Federal income tax purposes, the Certificates should be treated as life
insurance policies under Section 7702 of the Code. The death benefit under a
life insurance policy is excluded from the gross income of the Beneficiary.
Also, a life insurance policy owner is not taxed on increments in the policy
value until the policy is partially or completely surrendered. Section 7702
limits the amount of premiums that may be invested in a policy that is treated
as life insurance. Hartford intends to monitor premium levels to assure
compliance with the Section 7702 standards.
During the first fifteen policy years, an "income first" rule generally
applies to any distribution of cash that is required under Code Section 7702
because of a reduction in benefits under the Certificate.
Hartford also believes that any Loan received under a Certificate will be
treated as Debt of the Owner, and that no part of any Loan under a Certificate
will constitute income to the Owner. A surrender or assignment of the
Certificate may have tax consequences depending upon the circumstances. Owners
should consult qualified tax advisers concerning the effect of such changes.
Federal, state, and local estate tax, inheritance, and other tax
consequences of ownership or receipt of Certificate proceeds depend on the
circumstances of each Owner or Beneficiary.
The Maturity Date Extension Rider allows an Owner to extend the Maturity
Date to the date of the death of the Insured. Although Hartford believes that
the Certificate will continue to be treated as a life insurance contract for
federal income tax purposes after the scheduled Maturity Date, due to the lack
of specific guidance on this issue, this result is not certain. If the
Certificate is not treated as a life insurance contract for federal income tax
purposes after the Maturity Date, among other things, the Death Proceeds may be
taxable to the recipient. The Owner should consult a competent tax adviser
regarding the possible adverse tax consequences resulting from an extension of
the scheduled Maturity Date.
MODIFIED ENDOWMENT CONTRACTS
Code Section 7702A applies an additional test, the "seven-pay" test, to life
insurance contracts. A modified endowment contract is a life insurance policy
which satisfies the Section 7702 definition of life insurance but fails the
seven-pay test of Section 7702A. A policy fails the seven-pay test if the
accumulated amount paid into the Certificate at any time during the first seven
Coverage Years exceeds the sum of the net level premiums that would have been
paid up to that point if the Certificate provided for paid-up future benefits
after the payment of seven level annual premiums. Computational rules for the
seven-pay test are described in Section 7702A(c).
A policy that is classified as a modified endowment contract is eligible for
certain aspects of the beneficial tax
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 31
- --------------------------------------------------------------------------------
treatment accorded to life insurance. That is, the death benefit is excluded
from income and increments in value are not subject to current taxation.
However, withdrawals and loans from a modified endowment policy are treated
first as income, then as a recovery of basis. Taxable withdrawals are subject to
a 10% additional tax, with certain exceptions. Generally, only distributions and
loans made in the first year in which a policy becomes a modified endowment
policy, and in subsequent years, are taxable. However, distributions and loans
made in the two years prior to a policy's failing the seven-pay test are deemed
to be in anticipation of failure and are subject to tax.
If the Certificate satisfies the seven-pay test for seven years,
distributions and loans made thereafter will not be subject to the modified
endowment policy rules, unless the Certificate is changed materially. The
seven-pay test will be applied anew at any time the Certificate undergoes a
material change, which includes an increase in the Face Amount.
All modified endowment policies that are issued within any calendar year to
the same policy owner by one company or its affiliates shall be treated as one
modified endowment policy for the purpose of determining the taxable portion of
any loan or distribution.
Hartford has instituted procedures to monitor whether a Certificate may
become a modified endowment contract after issue.
DIVERSIFICATION REQUIREMENTS
Section 817 of the Code provides that a variable life insurance policy
(other than a pension plan policy) will not be treated as a life insurance
policy for any period during which the investments made by the separate account
underlying the policy are not adequately diversified in accordance with
regulations prescribed by the Treasury. If a policy is not treated as a life
insurance policy, the policy owner will be subject to income tax on the annual
increases in cash value. The Treasury has issued diversification regulations
which, among other things, generally require that no more than 55% of the value
of the total assets of the segregated asset account (such as the Funds)
underlying a variable contract is represented by any one investment, no more
than 70% is represented by any two investments, no more than 80% is represented
by any three investments, and no more than 90% is represented by any four
investments. In determining whether the diversification standards are met, all
securities of the same issuer, all interests in the same real property project,
and all interests in the same commodity are each treated as a single investment.
In addition, in the case of government securities, each government agency or
instrumentality shall be treated as a separate issuer. If the diversification
standards are not met, non-pension policy owners will be subject to current tax
on the increase in cash value in the policy.
A separate account must be in compliance with the diversification standards
on the last day of each calendar quarter or within 30 days after the quarter
ends. If an insurance company inadvertently fails to meet the diversification
requirements, the company may comply within a reasonable period and avoid the
taxation of policy income on an ongoing basis. However, either the company or
Owner must agree to pay the tax due for the period during which the
diversification standards were not met. The amount required to be paid shall be
an amount based upon the tax that would have been owed by the policy owner if
they were treated as receiving the income on the policy for such period or
periods.
FEDERAL INCOME TAX WITHHOLDING
If any amounts are deemed to be current taxable income to the Owner, such
amounts will be subject to Federal income tax withholding and reporting,
pursuant to Section 3405 of the Internal Revenue Code.
OTHER TAX CONSIDERATIONS
Qualified tax advisers should be consulted concerning the estate and gift
tax consequences of Certificate ownership and distributions under federal, state
and local law.
PERFORMANCE RELATED INFORMATION
The Separate Account may advertise certain performance related information
concerning its Investment Divisions. Performance information about an Investment
Division is based on the Investment Division's past performance only and is no
indication of future performance.
Each Investment Division may include total return in advertisements, sales
literature, and other promotional materials. When an Investment Division
advertises its total return, it will usually be calculated for one year, five
years, and ten years or some other relevant periods if the Investment Division
has not been in existence for at least ten years. Total return may also be
calculated for the most recent fiscal quarter and for the period since
underlying fund inception. Total return is measured by comparing the value of an
investment in the Investment Division at the beginning of the relevant period to
the value of the investment at the end of the period.
The Investment Divisions investing in the Hartford Bond Fund, N&B AMT
Limited Maturity Bond Portfolio, J.P. Morgan Bond Portfolio, MS Fixed Income
Portfolio, and MS High Yield Portfolio may advertise yield in addition to total
return. The yield will be computed in the following manner: The net investment
income per unit earned during a recent one month period is divided by the unit
value on
<PAGE>
32 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
the last day of the period. This figure reflects the Certificate charges
described below.
The Investment Division investing in the Hartford Money Market Fund may
advertise yield and effective yield. The yield of an Investment Division is
based upon the income earned by the Investment Division over a seven-day period
and then annualized, i.e., the income earned in the period is assumed to be
earned every seven days over a 52-week period and stated as a percentage of the
investment. Effective yield is calculated similarly, but when annualized, the
income earned by the investment is assumed to be reinvested in Division units
and thus compounded in the course of a 52-week period. Yield reflects the
Certificate charges described below.
Total return for an Investment Division includes deductions for the maximum
sales load charge, mortality and expense risk charge, DAC tax charge, and the
administrative expense charge, and is therefore lower than total return at the
Portfolio level, where there are no comparable charges. The performance results
do not reflect the cost of insurance or any state or local premium taxes. If
these charges were included, the total return figures would be lower. Total
return may also be calculated to include deductions for Separate Account
charges, but not include deductions for the sales load charge, DAC tax charge or
any state or local premium taxes. If reflected, the total return figures would
reduce the performance quoted. Yield for an Investment Division includes all
recurring charges (except sales charges) and is therefore lower than yield at
the Portfolio level, where there are no comparable charges.
Hartford may provide information on various topics to current and
prospective Owners in advertising, sales literature or other materials. These
topics may include the relationship between sectors of the economy and the
economy as a whole and its effect on various securities markets, investment
strategies and techniques (such as value investing, dollar cost averaging and
asset allocation), plan and trust arrangements, the advantages and disadvantages
of investing in tax-advantaged and taxable instruments, current and prospective
Owner profiles and hypothetical purchase scenarios, financial management and tax
and retirement planning, and investment alternatives, including comparisons
between the Certificates and the characteristics of and market for such
alternatives.
LEGAL PROCEEDINGS
There are no material legal proceedings pending to which the Separate
Account is a party.
YEAR 2000
The Year 2000 issue relates to the ability or inability of computer systems
to properly process information and data containing or related to dates
beginning with the year 2000 and beyond. The Year 2000 issue exists because,
historically, many computer systems that are in use today were developed years
ago when a year was identified using a two-digit field rather than a four-digit
field. As information and data containing or related to the century date are
introduced to computer hardware, software and other systems, date sensitive
systems may recognize the year 2000 as 1900, or not at all, which may result in
computer systems processing information incorrectly. This, in turn, may
significantly and adversely affect the integrity and reliability of information
databases and may result in a wide variety of adverse consequences to a company.
In addition, Year 2000 problems that occur with third parties with which a
company does business, such as suppliers, computer vendors and others, may also
adversely affect any given company.
As an insurance and financial services company, Hartford has thousands of
individual and business customers that have purchased or invested in insurance
policies, annuities, mutual funds and other financial products. Nearly all of
these policies and products contain date sensitive data, such as policy
expiration dates, birth dates, premium payments dates and the like. In addition,
Hartford has business relationships with numerous third parties that affect
virtually all aspects of its business, including, without limitation, suppliers,
computer hardware and software vendors, insurance agents and brokers, securities
broker-dealers and other distributors of financial products.
Beginning in 1990, Hartford began working on making its computer systems
Year 2000 ready, either by installing new programs or by replacing systems. In
January 1998, Hartford commenced a company-wide program to further identify,
assess and remediate the impact of Year 2000 problems in all of Hartford's
business segments. Hartford currently anticipates that this internal program
will be substantially completed by the end of 1998, and testing of computer
systems will continue through 1999.
In addition, as part of its Year 2000 program, Hartford is identifying third
parties with which it has significant business relations in order to attempt to
assess any potential impact on Hartford as a result of such third-party Year
2000 issues and remediation plans. Hartford currently anticipates that it will
substantially complete this evaluation by the end of 1998, and will conduct
systems testing with certain third parties through 1999. Hartford does not have
control over these third parties and, as a result, Hartford cannot currently
determine to what extent future operating results may be adversely affected by
the failure of these third parties to successfully address their Year 2000
issues. Hartford will continue to assess Year 2000 risk exposures related to its
own operations and its third-party relationships and is in the process of
developing contingency plans.
The costs of addressing the Year 2000 issue that have been incurred through
the six months ended June 30, 1998
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 33
- --------------------------------------------------------------------------------
have not been material to Hartford's financial condition or results of
operations. Hartford will continue to incur costs related to its Year 2000
efforts and does not anticipate that the costs to be incurred will be material
to its financial condition or results of operations.
EXPERTS
The audited financial statements and financial statement schedules included
in this registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports. The principal business address of Arthur
Andersen LLP is One Financial Plaza, Hartford, Connecticut 06103.
The hypothetical illustrations included in this Prospectus and Registration
Statement have been approved by Pauline Gyllenhammer, ASA, MAAA, Senior
Actuarial Associate, are included in reliance upon her opinion as to their
reasonableness.
REGISTRATION STATEMENT
A registration statement has been filed with the SEC under the Securities
Act of 1933, as amended. This Prospectus does not contain all information set
forth in the registration statement, its amendments and exhibits, to all of
which reference is made for further information concerning the Separate Account,
Hartford, the Group Policies and the Certificates.
FINANCIAL STATEMENTS
No financial statements are included for the Separate Account. As of the
date of this Prospectus, the Separate Account had not yet commenced operations,
had no assets or liabilities, and had received no income or incurred any
expense. The financial statements of Hartford that are included and should be
considered only as bearing upon Hartford's ability to meet its contractual
obligations under the Policy. There has been no adverse material change in
Hartford's financial position since the dates of the audited financial
statements. In addition to the audited financial statement for the year ended
December 31, 1997, Hartford has provided unaudited financial statements for the
period ended September 30, 1998.
<PAGE>
34 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
APPENDIX A
ILLUSTRATIONS OF DEATH BENEFIT, CASH VALUE
AND CASH SURRENDER VALUE
The following tables illustrate how the Death Benefit, Cash Value and Cash
Surrender Value of a Group Policy may change with the investment experience of
the Separate Account. The tables show how the Death Benefit, Cash Value and Cash
Surrender Value of a Certificate issued to an Insured of a given age would vary
over time if the investment return on the assets held in each Portfolio were a
uniform, gross annual rate of 0%, 6% and 12%. The Death Benefit, Cash Value and
Cash Surrender Value would be different from those shown if the gross annual
investment returns averaged 0%, 6% and 12% over a period of years, but
fluctuated above and below those averages for individual Coverage Years. The
tables assume that no Loans are made and that no partial withdrawals have been
made. The tables are also based on the assumption that the Owner has not
requested an increase or decrease in the Face Amount and that no transfers have
been made in any Coverage Years.
The tables on pages 35 to 46 illustrate a Certificate issued to a Male
Insured, Age 45 in the Medical Non-Smoker Class with an Initial Face Amount of
$250,000. The Death Benefit, Cash Value and Cash Surrender Value would be lower
if the Insured was a smoker or in a special class since the cost of insurance
charges would increase.
The tables reflect the fact that the net return on the assets held in the
Investment Divisions is lower than the gross after-tax return of the Portfolios.
This is because these tables assume an investment management fee and other
estimated Portfolio expenses totaling 0.82%. The 0.82% figure is based on an
average of the current management fees and expenses of the available 25
Portfolios, taking into account any applicable expense caps or reimbursement
arrangements. Actual fees and expenses of the Portfolios associated with a
Certificate may be more or less than 0.82%, will vary from year to year, and
will depend on how the Cash Value is allocated.
As their headings indicate, the tables reflect the deductions of current
contractual charges and guaranteed contractual charges for a single gross
interest rate. These charges include the front-end sales load, the daily charge
to the Separate Account for assuming mortality and expense risks, and the
monthly administrative expense and cost of insurance charges. All tables assume
a charge of 2.00% for taxes attributable to premiums, a 1.25% charge for the
federal DAC tax and reflect the fact that no charges against the Separate
Account are currently made for federal, state or local taxes attributable to the
Group Policy or Certificate.
Each table also shows the amount to which the premiums would accumulate if
an amount equal to those premiums were invested to earn interest, after taxes,
at 5% compounded annually.
Upon request, Hartford will furnish a comparable illustration based on a
proposed Certificate's specific circumstances.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 35
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
LEVEL DEATH BENEFIT OPTION
ISSUE AGE 45 MALE MEDICAL NON-SMOKER
$14,102 PREMIUM PAID FOR 7 YEARS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0.00% (-0.82% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED ----------------------------------- -----------------------------------
END OF AT 5% CASH CASH
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ------------ ----------- --------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 14,807 12,242 12,242 250,000 11,000 11,000 250,000
2 30,355 24,223 24,223 250,000 21,805 21,805 250,000
3 46,680 35,952 35,952 250,000 32,418 32,418 250,000
4 63,821 47,463 47,463 250,000 42,846 42,846 250,000
5 81,819 58,776 58,776 250,000 53,088 53,088 250,000
6 100,717 70,004 70,004 250,000 63,152 63,152 250,000
7 120,560 81,059 81,059 250,000 73,031 73,031 250,000
8 126,588 79,409 79,409 250,000 70,438 70,438 250,000
9 132,917 77,737 77,737 250,000 67,726 67,726 250,000
10 139,563 76,033 76,033 250,000 64,873 64,873 250,000
11 146,541 74,390 74,390 250,000 61,866 61,866 250,000
12 153,868 72,678 72,678 250,000 58,682 58,682 250,000
13 161,561 70,874 70,874 250,000 55,309 55,309 250,000
14 169,639 68,973 68,973 250,000 51,725 51,725 250,000
15 178,121 66,967 66,967 250,000 47,906 47,906 250,000
16 187,027 64,783 64,783 250,000 43,817 43,817 250,000
17 196,378 62,477 62,477 250,000 39,414 39,414 250,000
18 206,197 60,032 60,032 250,000 34,640 34,640 250,000
19 216,507 57,434 57,434 250,000 29,429 29,429 250,000
20 227,332 54,664 54,664 250,000 23,710 23,710 250,000
25 290,140 37,293 37,293 250,000 -- -- --
30 370,300 10,376 10,376 250,000 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 0%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
36 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
LEVEL DEATH BENEFIT OPTION
ISSUE AGE 45 MALE MEDICAL NON-SMOKER
$14,102 PREMIUM PAID FOR 7 YEARS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6.00% (5.18% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED ----------------------------------- -----------------------------------
END OF AT 5% CASH CASH
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ------------ ----------- --------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 14,807 12,990 12,990 250,000 11,701 11,701 250,000
2 30,355 26,482 26,482 250,000 23,897 23,897 250,000
3 46,680 40,505 40,505 250,000 36,618 36,618 250,000
4 63,821 55,118 55,118 250,000 49,895 49,895 250,000
5 81,819 70,368 70,368 250,000 63,760 63,760 250,000
6 100,717 86,393 86,393 250,000 78,249 78,249 250,000
7 120,560 103,144 103,144 250,000 93,397 93,397 250,000
8 126,588 107,366 107,366 250,000 96,210 96,210 250,000
9 132,917 111,753 111,753 250,000 99,055 99,055 250,000
10 139,563 116,307 116,307 250,000 101,924 101,924 250,000
11 146,541 121,204 121,204 252,527 104,812 104,812 250,000
12 153,868 126,269 126,269 256,053 107,714 107,714 250,000
13 161,561 131,496 131,496 259,641 110,631 110,631 250,000
14 169,639 136,892 136,892 263,292 113,561 113,561 250,000
15 178,121 142,464 142,464 267,012 116,499 116,499 250,000
16 187,027 148,173 148,173 270,740 119,434 119,434 250,000
17 196,378 154,070 154,070 274,562 122,354 122,354 250,000
18 206,197 160,160 160,160 278,502 125,242 125,242 250,000
19 216,507 166,448 166,448 282,582 128,076 128,076 250,000
20 227,332 172,939 172,939 286,816 130,838 130,838 250,000
25 290,140 208,558 208,558 310,301 142,988 142,988 250,000
30 370,300 249,843 249,843 338,301 149,364 149,364 250,000
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 6%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 37
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
LEVEL DEATH BENEFIT OPTION
ISSUE AGE 45 MALE MEDICAL NON-SMOKER
$14,102 PREMIUM PAID FOR 7 YEARS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12.00% (11.18% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED -------------------------------------- ------------------------------------
END OF AT 5% CASH CASH
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ------------ ------------ ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 14,807 13,739 13,739 250,000 12,402 12,402 250,000
2 30,355 28,831 28,831 250,000 26,075 26,075 250,000
3 46,680 45,428 45,428 250,000 41,164 41,164 250,000
4 63,821 63,726 63,726 250,000 57,834 57,834 250,000
5 81,819 83,930 83,930 250,000 76,266 76,266 250,000
6 100,717 106,346 106,346 254,254 96,669 96,669 250,000
7 120,560 131,029 131,029 304,242 119,126 119,126 276,760
8 126,588 144,219 144,219 325,337 130,105 130,105 293,671
9 132,917 158,718 158,718 348,002 142,048 142,048 311,641
10 139,563 174,649 174,649 372,360 155,028 155,028 330,737
11 146,541 192,420 192,420 399,056 169,130 169,130 351,026
12 153,868 211,937 211,937 427,791 184,442 184,442 372,584
13 161,561 233,346 233,346 458,620 201,069 201,069 395,490
14 169,639 256,831 256,831 491,698 219,118 219,118 419,827
15 178,121 282,590 282,590 527,201 238,707 238,707 445,683
16 187,027 310,746 310,746 565,175 259,951 259,951 473,153
17 196,378 341,619 341,619 605,979 282,971 282,971 502,339
18 206,197 375,461 375,461 649,878 307,889 307,889 533,345
19 216,507 412,551 412,551 697,165 334,828 334,828 566,287
20 227,332 453,189 453,189 748,137 363,924 363,924 601,285
25 290,140 722,002 722,002 1,069,272 547,697 547,697 811,896
30 370,300 1,142,549 1,142,549 1,539,940 813,034 813,034 1,097,032
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 12%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
38 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
INCREASING DEATH BENEFIT OPTION
ISSUE AGE 45 MALE MEDICAL NON-SMOKER
$14,102 PREMIUM PAID FOR 7 YEARS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0.00% (-0.82% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED -------------------------------- --------------------------------
END OF AT 5% CASH CASH
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ------------- --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 14,807 12,231 12,231 262,264 10,947 10,947 261,056
2 30,355 24,182 24,182 274,238 21,643 21,643 271,772
3 46,680 35,848 35,848 285,928 32,083 32,083 282,233
4 63,821 47,263 47,263 297,364 42,267 42,267 292,438
5 81,819 58,442 58,442 308,562 52,184 52,184 302,378
6 100,717 69,533 69,533 319,660 61,833 61,833 312,049
7 120,560 80,416 80,416 330,561 71,194 71,194 321,434
8 126,588 78,583 78,583 328,730 68,061 68,061 318,310
9 132,917 76,716 76,716 326,866 64,786 64,786 315,047
10 139,563 74,801 74,801 324,955 61,348 61,348 311,623
11 146,541 72,923 72,923 323,074 57,733 57,733 308,022
12 153,868 70,948 70,948 321,107 53,924 53,924 304,229
13 161,561 68,849 68,849 319,018 49,913 49,913 300,235
14 169,639 66,621 66,621 316,800 45,685 45,685 296,025
15 178,121 64,258 64,258 314,448 41,224 41,224 291,583
16 187,027 61,664 61,664 311,874 36,499 36,499 286,880
17 196,378 58,922 58,922 309,144 31,477 31,477 281,883
18 206,197 56,016 56,016 306,252 26,113 26,113 276,547
19 216,507 52,934 52,934 303,184 20,357 20,357 270,823
20 227,332 49,658 49,658 299,925 14,159 14,159 264,662
25 290,140 29,569 29,569 279,945 -- -- --
30 370,300 626 626 251,175 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 0%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 39
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
INCREASING DEATH BENEFIT OPTION
ISSUE AGE 45 MALE MEDICAL NON-SMOKER
$14,102 PREMIUM PAID FOR 7 YEARS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6.00% (5.18% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED ----------------------------------- -----------------------------------
END OF AT 5% CASH CASH
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ------------ ----------- --------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 14,807 12,979 12,979 262,949 11,645 11,645 261,697
2 30,355 26,436 26,436 276,366 23,719 23,719 273,734
3 46,680 40,387 40,387 290,275 36,234 36,234 286,212
4 63,821 54,882 54,882 304,723 49,204 49,204 299,144
5 81,819 69,956 69,956 319,748 62,638 62,638 312,538
6 100,717 85,788 85,788 335,516 76,548 76,548 326,407
7 120,560 102,284 102,284 351,956 90,933 90,933 340,752
8 126,588 106,208 106,208 355,869 92,864 92,864 342,690
9 132,917 110,245 110,245 359,897 94,690 94,690 344,524
10 139,563 114,387 114,387 364,030 96,379 96,379 346,225
11 146,541 118,789 118,789 368,409 97,910 97,910 347,770
12 153,868 123,270 123,270 372,884 99,255 99,255 349,131
13 161,561 127,806 127,806 377,415 100,396 100,396 350,289
14 169,639 132,390 132,390 381,995 101,304 101,304 351,216
15 178,121 137,020 137,020 386,621 101,948 101,948 351,883
16 187,027 141,595 141,595 391,201 102,282 102,282 352,244
17 196,378 146,195 146,195 395,799 102,254 102,254 352,246
18 206,197 150,803 150,803 400,406 101,796 101,796 351,825
19 216,507 155,406 155,406 405,009 100,832 100,832 350,904
20 227,332 159,981 159,981 409,586 99,284 99,284 349,406
25 290,140 181,433 181,433 431,089 80,071 80,071 330,541
30 370,300 196,724 196,724 446,526 30,810 30,810 281,938
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 6%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
40 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
INCREASING DEATH BENEFIT OPTION
ISSUE AGE 45 MALE MEDICAL NON-SMOKER
$14,102 PREMIUM PAID FOR 7 YEARS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12.00% (11.18% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED ----------------------------------------- -------------------------------------
END OF AT 5% CASH CASH
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ------------ ------------- ----------- ------------ ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 14,807 13,727 13,727 263,631 12,343 12,343 262,336
2 30,355 28,781 28,781 278,570 25,879 25,879 275,768
3 46,680 45,294 45,294 294,955 40,726 40,726 290,500
4 63,821 63,448 63,448 312,966 57,015 57,015 306,664
5 81,819 83,426 83,426 332,786 74,884 74,884 324,395
6 100,717 105,576 105,576 354,746 94,490 94,490 343,850
7 120,560 129,993 129,993 378,966 115,992 115,992 365,186
8 126,588 142,892 142,892 391,762 125,899 125,899 375,025
9 132,917 157,076 157,076 405,834 136,645 136,645 385,698
10 139,563 172,663 172,663 421,299 148,289 148,289 397,264
11 146,541 190,058 190,058 438,536 160,911 160,911 409,801
12 153,868 209,173 209,173 457,501 174,591 174,591 423,388
13 161,561 230,160 230,160 478,324 189,429 189,429 438,126
14 169,639 253,211 253,211 501,195 205,528 205,528 454,115
15 178,121 278,537 278,537 526,323 222,998 222,998 471,465
16 187,027 306,273 306,273 557,039 241,948 241,948 490,285
17 196,378 336,701 336,701 597,255 262,491 262,491 510,690
18 206,197 370,055 370,055 640,521 284,746 284,746 532,795
19 216,507 406,610 406,610 687,125 308,830 308,830 556,720
20 227,332 446,662 446,662 737,361 334,878 334,878 582,597
25 290,140 711,598 711,598 1,053,863 500,718 500,718 747,343
30 370,300 1,126,078 1,126,078 1,517,740 743,048 743,048 1,002,599
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 12%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 41
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
LEVEL DEATH BENEFIT OPTION
ISSUE AGE 45 MALE MEDICAL NON-SMOKER
$6,000 PREMIUM PAID FOR 30 YEARS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0.00% (-0.82% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED ------------------------------- --------------------------------
END OF AT 5% CASH CASH
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ------------ --------- -------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,300 5,050 5,050 250,000 3,962 3,962 250,000
2 12,915 9,934 9,934 250,000 7,796 7,796 250,000
3 19,861 14,649 14,649 250,000 11,497 11,497 250,000
4 27,154 19,229 19,229 250,000 15,066 15,066 250,000
5 34,812 23,687 23,687 250,000 18,494 18,494 250,000
6 42,853 28,159 28,159 250,000 21,781 21,781 250,000
7 51,296 32,534 32,534 250,000 24,909 24,909 250,000
8 60,161 36,930 36,930 250,000 27,987 27,987 250,000
9 69,469 41,222 41,222 250,000 30,881 30,881 250,000
10 79,242 45,400 45,400 250,000 33,575 33,575 250,000
11 89,504 49,524 49,524 250,000 36,061 36,061 250,000
12 100,279 53,511 53,511 250,000 38,328 38,328 250,000
13 111,593 57,347 57,347 250,000 40,372 40,372 250,000
14 123,473 61,030 61,030 250,000 42,183 42,183 250,000
15 135,947 64,562 64,562 250,000 43,749 43,749 250,000
16 149,044 67,879 67,879 250,000 45,047 45,047 250,000
17 162,796 71,044 71,044 250,000 46,048 46,048 250,000
18 177,236 74,051 74,051 250,000 46,715 46,715 250,000
19 192,398 76,895 76,895 250,000 47,004 47,004 250,000
20 208,318 79,570 79,570 250,000 46,869 46,869 250,000
25 300,684 89,984 89,984 250,000 38,221 38,221 250,000
30 418,569 93,946 93,946 250,000 7,529 7,529 250,000
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 0%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
42 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
LEVEL DEATH BENEFIT OPTION
ISSUE AGE 45 MALE MEDICAL NON-SMOKER
$6,000 PREMIUM PAID FOR 30 YEARS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6.00% (5.18% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED ----------------------------------- ---------------------------------
END OF AT 5% CASH CASH
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ------------- ---------- --------- ------------ ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,300 5,364 5,364 250,000 4,237 4,237 250,000
2 12,915 10,873 10,873 250,000 8,594 8,594 250,000
3 19,861 16,532 16,532 250,000 13,071 13,071 250,000
4 27,154 22,380 22,380 250,000 17,675 17,675 250,000
5 34,812 28,439 28,439 250,000 22,404 22,404 250,000
6 42,853 34,854 34,854 250,000 27,261 27,261 250,000
7 51,296 41,530 41,530 250,000 32,239 32,239 250,000
8 60,161 48,607 48,607 250,000 37,461 37,461 250,000
9 69,469 55,970 55,970 250,000 42,801 42,801 250,000
10 79,242 63,627 63,627 250,000 48,252 48,252 250,000
11 89,504 71,685 71,685 250,000 53,819 53,819 250,000
12 100,279 80,060 80,060 250,000 59,503 59,503 250,000
13 111,593 88,758 88,758 250,000 65,312 65,312 250,000
14 123,473 97,802 97,802 250,000 71,255 71,255 250,000
15 135,947 107,217 107,217 250,000 77,339 77,339 250,000
16 149,044 116,981 116,981 250,000 83,563 83,563 250,000
17 162,796 127,175 127,175 250,000 89,928 89,928 250,000
18 177,236 137,829 137,829 250,000 96,431 96,431 250,000
19 192,398 148,970 148,970 252,910 103,070 103,070 250,000
20 208,318 160,511 160,511 266,204 109,848 109,848 250,000
25 300,684 224,484 224,484 333,997 146,534 146,534 250,000
30 418,569 299,755 299,755 405,886 190,827 190,827 258,677
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 6%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 43
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
LEVEL DEATH BENEFIT OPTION
ISSUE AGE 45 MALE MEDICAL NON-SMOKER
$6,000 PREMIUM PAID FOR 30 YEARS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12.00% (11.18% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED -------------------------------- ---------------------------------
END OF AT 5% CASH CASH
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ------------- --------- --------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,300 5,677 5,677 250,000 4,513 4,513 250,000
2 12,915 11,850 11,850 250,000 9,426 9,426 250,000
3 19,861 18,570 18,570 250,000 14,780 14,780 250,000
4 27,154 25,927 25,927 250,000 20,624 20,624 250,000
5 34,812 34,006 34,006 250,000 27,004 27,004 250,000
6 42,853 43,019 43,019 250,000 33,981 33,981 250,000
7 51,296 52,955 52,955 250,000 41,608 41,608 250,000
8 60,161 64,048 64,048 250,000 50,086 50,086 250,000
9 69,469 76,284 76,284 250,000 59,373 59,373 250,000
10 79,242 89,784 89,784 250,000 69,555 69,555 250,000
11 89,504 104,832 104,832 250,000 80,743 80,743 250,000
12 100,279 121,467 121,467 250,000 93,062 93,062 250,000
13 111,593 139,789 139,789 274,743 106,664 106,664 250,000
14 123,473 159,910 159,910 306,145 121,722 121,722 250,000
15 135,947 182,000 182,000 339,539 138,396 138,396 258,396
16 149,044 206,182 206,182 374,996 156,527 156,527 284,905
17 162,796 232,715 232,715 412,799 176,203 176,203 312,801
18 177,236 261,816 261,816 453,172 197,533 197,533 342,180
19 192,398 293,726 293,726 496,364 220,630 220,630 373,147
20 208,318 328,706 328,706 542,637 245,614 245,614 405,811
25 300,684 560,383 560,383 829,916 404,038 404,038 598,938
30 418,569 923,352 923,352 1,244,505 633,898 633,898 855,322
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 12%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
44 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
INCREASING DEATH BENEFIT OPTION
ISSUE AGE 45 MALE MEDICAL NON-SMOKER
$6,000 PREMIUM PAID FOR 30 YEARS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0.00% (-0.82% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED -------------------------------- --------------------------------
END OF AT 5% CASH CASH
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ------------- --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,300 5,046 5,046 255,070 3,942 3,942 254,041
2 12,915 9,916 9,916 259,955 7,734 7,734 257,846
3 19,861 14,606 14,606 264,660 11,372 11,372 261,497
4 27,154 19,147 19,147 269,213 14,852 14,852 264,990
5 34,812 23,551 23,551 273,628 18,165 18,165 268,316
6 42,853 27,967 27,967 278,044 21,305 21,305 271,471
7 51,296 32,273 32,273 282,358 24,252 24,252 274,434
8 60,161 36,583 36,583 286,678 27,110 27,110 277,309
9 69,469 40,769 40,769 290,875 29,740 29,740 279,958
10 79,242 44,819 44,819 294,936 32,120 32,120 282,358
11 89,504 48,783 48,783 298,907 34,237 34,237 284,498
12 100,279 52,572 52,572 302,711 36,077 36,077 286,361
13 111,593 56,162 56,162 306,317 37,633 37,633 287,940
14 123,473 59,547 59,547 309,719 38,891 38,891 289,223
15 135,947 62,725 62,725 312,914 39,835 39,835 290,193
16 149,044 65,599 65,599 315,813 40,437 40,437 290,823
17 162,796 68,253 68,253 318,485 40,664 40,664 291,081
18 177,236 70,672 70,672 320,924 40,473 40,473 290,925
19 192,398 72,845 72,845 323,118 39,814 39,814 290,305
20 208,318 74,756 74,756 325,050 38,640 38,640 289,173
25 300,684 79,599 79,599 330,030 23,720 23,720 274,513
30 418,569 74,006 74,006 324,636 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 0%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 45
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
INCREASING DEATH BENEFIT OPTION
ISSUE AGE 45 MALE MEDICAL NON-SMOKER
$6,000 PREMIUM PAID FOR 30 YEARS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6.00% (5.18% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED --------------------------------- ---------------------------------
END OF AT 5% CASH CASH
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ------------- ---------- --------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,300 5,359 5,359 255,357 4,215 4,215 254,295
2 12,915 10,854 10,854 260,841 8,526 8,526 258,597
3 19,861 16,484 16,484 266,459 12,927 12,927 262,991
4 27,154 22,283 22,283 272,244 17,419 17,419 267,475
5 34,812 28,271 28,271 278,216 21,993 21,993 272,042
6 42,853 34,607 34,607 284,522 26,644 26,644 276,686
7 51,296 41,180 41,180 291,076 31,353 31,353 281,391
8 60,161 48,123 48,123 297,997 36,230 36,230 286,263
9 69,469 55,315 55,315 305,168 41,134 41,134 291,165
10 79,242 62,754 62,754 312,585 46,039 46,039 296,070
11 89,504 70,528 70,528 320,331 50,932 50,932 300,963
12 100,279 78,540 78,540 328,323 55,789 55,789 305,824
13 111,593 86,769 86,769 336,533 60,600 60,600 310,638
14 123,473 95,219 95,219 344,965 65,343 65,343 315,388
15 135,947 103,895 103,895 353,621 69,995 69,995 320,047
16 149,044 112,704 112,704 362,419 74,518 74,518 324,581
17 162,796 121,735 121,735 371,432 78,866 78,866 328,944
18 177,236 130,981 130,981 380,659 82,983 82,983 333,081
19 192,398 140,437 140,437 390,097 86,799 86,799 336,922
20 208,318 150,092 150,092 399,735 90,246 90,246 340,401
25 300,684 200,723 200,723 450,306 99,598 99,598 349,996
30 418,569 252,661 252,661 502,251 85,961 85,961 336,887
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 6%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
46 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
INCREASING DEATH BENEFIT OPTION
ISSUE AGE 45 MALE MEDICAL NON-SMOKER
$6,000 PREMIUM PAID FOR 30 YEARS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12.00% (11.18% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED ---------------------------------- --------------------------------
END OF AT 5% CASH CASH
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ------------- ---------- --------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,300 5,672 5,672 255,643 4,490 4,490 254,547
2 12,915 11,829 11,829 261,758 9,351 9,351 259,376
3 19,861 18,514 18,514 268,397 14,616 14,616 264,606
4 27,154 25,812 25,812 275,642 20,320 20,320 270,271
5 34,812 33,799 33,799 283,569 26,496 26,496 276,407
6 42,853 42,703 42,703 292,393 33,186 33,186 283,052
7 51,296 52,489 52,489 302,102 40,421 40,421 290,239
8 60,161 63,378 63,378 312,905 48,370 48,370 298,136
9 69,469 75,341 75,341 324,774 56,952 56,952 306,663
10 79,242 88,476 88,476 337,807 66,206 66,206 315,859
11 89,504 103,031 103,031 352,238 76,188 76,188 325,777
12 100,279 119,005 119,005 368,088 86,951 86,951 336,472
13 111,593 136,516 136,516 385,464 98,566 98,566 348,013
14 123,473 155,721 155,721 404,522 111,105 111,105 360,471
15 135,947 176,793 176,793 425,431 124,642 124,642 373,921
16 149,044 199,827 199,827 448,294 139,246 139,246 388,432
17 162,796 225,114 225,114 473,385 154,990 154,990 404,077
18 177,236 252,878 252,878 500,932 171,940 171,940 420,922
19 192,398 283,365 283,365 531,182 190,165 190,165 439,036
20 208,318 316,844 316,844 564,400 209,741 209,741 458,494
25 300,684 540,277 540,277 800,140 331,491 331,491 579,515
30 418,569 891,524 891,524 1,201,606 502,933 502,933 750,014
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, MORTALITY AND EXPENSE RISK RATES, AND FRONT-END
SALES LOADS.
THE DEATH BENEFIT MAY, AND THE CASH VALUE AND CASH SURRENDER VALUE WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 12%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
47
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
THIRD QUARTER NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- ---------------
1998 1997 1998 1997
----- ----- ------ ------
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues
Premiums and other considerations............... $ 484 $ 360 $1,430 $ 993
Net investment income........................... 339 319 1,035 978
Net realized capital (losses) gains............. 3 -- (3) 4
----- ----- ------ ------
Total revenues................................ 826 679 2,462 1,975
----- ----- ------ ------
Benefits, claims and expenses
Benefits, claims and claim adjustment
expenses....................................... 353 318 1,100 970
Amortization of deferred policy acquisition
costs.......................................... 119 80 328 252
Dividends to policyholders...................... 61 47 177 119
Other insurance expenses........................ 155 105 461 295
----- ----- ------ ------
Total benefits, claims and expenses........... 688 550 2,066 1,636
----- ----- ------ ------
Income before income tax expense................ 138 129 396 339
Income tax expense.............................. 49 48 139 121
----- ----- ------ ------
Net income...................................... $ 89 $ 81 $ 257 $ 218
----- ----- ------ ------
----- ----- ------ ------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
48
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- -------------
(IN MILLIONS, EXCEPT
FOR SHARE DATA)
(UNAUDITED)
<S> <C> <C>
Assets
Investments
Fixed maturities, available for sale, at fair
value (amortized cost of $13,771 and
$13,885)....................................... $14,214 $14,176
Equity securities, at fair value................ 114 180
Policy loans, at outstanding balance............ 3,742 3,756
Other investments, at cost...................... 275 47
------------- -------------
Total investments............................. 18,345 18,159
Cash............................................ 86 54
Premiums and amounts receivable................. 22 18
Accrued investment income....................... 330 330
Reinsurance recoverables........................ 5,903 6,114
Deferred policy acquisition costs............... 3,674 3,315
Deferred income tax............................. 376 348
Other assets.................................... 332 352
Separate account assets......................... 76,725 69,055
------------- -------------
Total assets.................................. $105,793 $97,745
------------- -------------
------------- -------------
Liabilities
Future policy benefits.......................... $ 3,341 $ 3,059
Other policyholder funds........................ 20,684 21,034
Other liabilities............................... 2,331 2,254
Separate account liabilities.................... 76,725 69,055
------------- -------------
Total liabilities............................. 103,081 95,402
Stockholder's Equity
Common stock -- authorized, issued and
outstanding 1,000, par value $5,690............ 6 6
Capital surplus................................. 1,045 1,045
Accumulated other comprehensive income
Net unrealized capital gains on securities, net
of tax......................................... 291 179
Total accumulated other comprehensive income... 291 179
Retained earnings.............................. 1,370 1,113
------------- -------------
Total stockholder's equity.................... 2,712 2,343
------------- -------------
Total liabilities and stockholder's equity...... $105,793 $97,745
------------- -------------
------------- -------------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
49
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDER'S EQUITY
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
ACCUMULATED OTHER
COMPREHENSIVE INCOME
-----------------------------------------------------------------------------
NET UNREALIZED
CAPITAL GAINS ON TOTAL
COMMON SECURITIES, NET OF RETAINED STOCKHOLDER'S
STOCK CAPITAL SURPLUS TAX EARNINGS EQUITY
------ --------------- --------------------- ---------- -------------
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997................... $6 $1,045 $ 179 $1,113 $2,343
Comprehensive income
Net income................................. -- -- -- 257 257
Other comprehensive income, net of tax (1):
Changes in net unrealized capital gains
on securities (2)........................ -- -- 112 -- 112
Total other comprehensive income........... 112
Total comprehensive income................... 369
--
------ ----- ---------- ------
Balance, September 30, 1998.................. $6 $1,045 $ 291 $1,370 $2,712
--
--
------ ----- ---------- ------
------ ----- ---------- ------
NINE MONTHS ENDED SEPTEMBER 30, 1997
<CAPTION>
ACCUMULATED OTHER
COMPREHENSIVE INCOME
-----------------------------------------------------------------------------
NET UNREALIZED
CAPITAL GAINS ON TOTAL
COMMON SECURITIES, NET OF RETAINED STOCKHOLDER'S
STOCK CAPITAL SURPLUS TAX EARNINGS EQUITY
------ --------------- --------------------- ---------- -------------
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996................... $6 $1,045 $ 30 $ 811 $1,892
Comprehensive income
Net income................................. -- -- -- 218 218
Other comprehensive income, net of tax (1):
Changes in net unrealized capital gains
on securities (2)........................ -- -- 105 -- 105
Total other comprehensive income........... 105
Total comprehensive income 323
--
------ ----- ---------- ------
Balance, September 30, 1997.................. $6 $1,045 $ 135 $1,029 $2,215
--
--
------ ----- ---------- ------
------ ----- ---------- ------
</TABLE>
- ---------
(1) Net unrealized gain on securities is reflected net of tax of $60 and $57 as
of September 30, 1998 and 1997, respectively.
(2) Net of reclassification adjustment for (losses) gains realized in net income
of $(2) and $3 for the nine months ended September 30, 1998 and 1997,
respectively.
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
50
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1998 1997
-------- --------
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C>
Operating Activities
Net income............................ $ 257 $ 218
Adjustments to net income:
Depreciation and amortization......... (15) 5
Net realized capital losses (gains)... 3 (4)
Increase in deferred income taxes..... (90) (14)
Increase in deferred policy
acquisition costs.................... (359) (396)
(Increase) decrease in premiums and
amounts receivable................... (4) 3
Decrease in accrued investment
income............................... -- 48
Decrease in other assets.............. 65 169
Decrease (increase) in reinsurance
recoverables......................... 39 (310)
Increase in liability for future
policy benefits...................... 282 650
(Decrease) increase in other
liabilities.......................... (55) 131
-------- --------
Cash provided by operating
activities......................... 123 500
-------- --------
Investing Activities
Purchases of fixed maturity
investments.......................... (4,530) (4,628)
Sales of fixed maturity investments... 2,848 3,039
Maturities and principal paydowns of
fixed maturity investments........... 1,387 1,643
Net (purchases) sales of other
investments.......................... (89) 32
Net sales (purchases) of short-term
investments.......................... 492 (70)
-------- --------
Cash provided by investing
activities......................... 108 16
-------- --------
Financing Activities
Net disbursements for investment and
universal life-type contracts charged
against policyholder accounts........ (199) (506)
-------- --------
Cash used for financing activities.... (199) (506)
-------- --------
Increase in cash...................... 32 10
Cash -- beginning of period........... 54 43
-------- --------
Cash -- end of period................. $ 86 $ 53
-------- --------
Supplemental Disclosure of Cash Flow
Information:
Net Cash paid during the period for:
Income taxes.......................... $ 241 $ 31
-------- --------
-------- --------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
51
- --------------------------------------------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN MILLIONS EXCEPT FOR SHARE DATA UNLESS OTHERWISE STATED)
(UNAUDITED)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Hartford Life Insurance Company and subsidiaries (the "Company") have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and note disclosures which are normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to those rules and
regulations, although the Company believes that the disclosures made are
adequate to make the information presented not misleading. In the opinion of
management, these statements include all adjustments which were normal recurring
adjustments necessary to present fairly the financial position, results of
operations and cash flows for the periods presented. For a description of
significant accounting policies, see Note 2 of Notes to Consolidated Financial
Statements in the Company's 1997 Form 10-K Annual Report.
(B) CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income", which
establishes standards for reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. The objective
of this statement is to report a measure of all changes in equity of an
enterprise that result from transactions and other economic events of the period
other than transactions with owners. Comprehensive income is the total of net
income and all other nonowner changes in equity. Accordingly, the Company has
reported comprehensive income in the Condensed Consolidated Statement of Changes
in Stockholder's Equity.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) No. 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use". The SOP provides guidance on
accounting for the costs of internal use software and in determining whether the
software is for internal use. The SOP defines internal use software as software
that is acquired, internally developed, or modified solely to meet internal
needs and identifies stages of software development and accounting for the
related costs incurred during the stages. This statement is effective for fiscal
years beginning after December 15, 1998 and is not expected to have a material
impact on the Company's financial condition or results of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". The new standard
establishes accounting and reporting guidance for derivative instruments,
including certain derivative instruments embedded in other contracts. The
standard requires, among other things, that all derivatives be carried on the
balance sheet at fair value. The standard also specifies hedge accounting
criteria under which a derivative can qualify for special accounting. In order
to receive special accounting, the derivative instrument must qualify as either
a hedge of the fair value or the variability of the cash flow of a qualified
asset or liability. Special accounting for qualifying hedges provides for
matching the timing of gain or loss recognition on the hedging instrument with
the recognition of the corresponding changes in value of the hedged item. SFAS
No. 133 will be effective for fiscal years beginning after June 15, 1999.
Initial application for the Company will begin for the first quarter of the year
2000. The Company is currently in the process of quantifying the impact of SFAS
No. 133.
In September 1998, the Securities and Exchange Commission stated that until
the Emerging Issues Task Force (EITF) concludes its discussion regarding the
accounting for combined structured notes, affected companies that entered into
these notes prior to September 25, 1998 are required to either restate prior
period financial statements to conform with the recently prescribed unit
accounting model or disclose the related impact on earnings for all periods
presented and cumulatively over the life of the instruments had the registrant
accounted for the structure as a unit. Included in net income for the nine
months ended September 30, 1998 was $32 of after-tax net realized capital losses
and approximately $2 of after-tax net investment income related to a combined
structured note transaction, which was accounted for in accordance with then
current generally accepted accounting principles (GAAP). Had the transaction
been accounted for as a unit, based upon recently prescribed GAAP for such types
of transactions entered into after September 24, 1998, net income would have
been approximately $2 lower for the third quarter and $30 higher for the nine
months ended September 30, 1998.
NOTE 2. INITIAL PUBLIC OFFERING (IPO)
On February 10, 1997, the Company's indirect parent, Hartford Life, Inc.
(Hartford Life), filed a registration statement, as amended, with the Securities
and Exchange Commission, relating to the IPO of Hartford Life's Class A Common
Stock. Pursuant to the IPO on May 22, 1997, Hartford Life sold to the public 26
million shares at $28.25
<PAGE>
52
- --------------------------------------------------------------------------------
per share and received proceeds, net of offering expenses, of $687. Of the
proceeds, $527 was used to retire debt related to Hartford Life's promissory
notes outstanding and line of credit. The remaining $160 was contributed by
Hartford Life to Hartford Life and Accident Insurance Company, the Company's
direct parent, to support growth in its core businesses.
The 26 million shares sold in the IPO represented approximately 18.6% of the
equity ownership in Hartford Life and approximately 4.4% of the combined voting
power of Hartford Life's Class A and Class B Common Stock. Hartford Financial
Services Group, Inc., an indirect parent of Hartford Life, owns all of the 114
million outstanding shares of Class B Common Stock of Hartford Life,
representing approximately 81.4% of the equity ownership in Hartford Life and
approximately 95.6% of the combined voting power of Hartford Life's Class A and
Class B Common Stock. Holders of Class A Common Stock generally have identical
rights to the holders of Class B Common Stock except that the holders of Class A
Common Stock are entitled to one vote per share while holders of Class B Common
Stock are entitled to five votes per share on all matters submitted to a vote of
Hartford Life's stockholders.
NOTE 3. COMMITMENTS AND CONTINGENCIES
(A) LITIGATION
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for monetary and punitive damages have
been asserted. Although there can be no assurances, management, at the present
time, does not anticipate that the ultimate liability arising from such pending
or threatened litigation will have a material effect on the financial condition
or operating results of the Company.
(B) INVESTMENTS
As of September 30, 1998, the Company held $110 of asset-backed securities
securitized and serviced by Commercial Finance Services, Inc. (CFS). In October
1998, the Company became aware of allegations of improper activities at CFS. CFS
has engaged an independent accounting firm and outside legal counsel to
investigate these allegations. Currently, these securities are performing in
line with expectations. Based upon information available at this time, the
Company is presently unable to determine the amount of potential loss, if any,
related to the securities.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLAR AMOUNTS IN MILLIONS UNLESS OTHERWISE STATED)
Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) addresses the financial condition of the Company as of
September 30, 1998, compared with December 31, 1997, and its results of
operations for the third quarter and nine months ended September 30, 1998
compared with the equivalent 1997 periods. This discussion should be read in
conjunction with the MD&A in the Company's 1997 Form 10-K Annual Report.
Certain statements contained in this discussion, other than statements of
historical fact, are forward-looking statements. These statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and include estimates and assumptions related to economic,
competitive and legislative developments. These forward-looking statements are
subject to change and uncertainty which are, in many instances, beyond the
Company's control and have been made based upon management's expectations and
beliefs concerning future developments and their potential effect on Hartford
Life Insurance Company and subsidiaries (the "Company"). There can be no
assurance that future developments will be in accordance with management's
expectations or that the effect of future developments on the Company will be
those anticipated by management. Actual results could differ materially from
those expected by the Company, depending on the outcome of certain factors,
including those described in the forward-looking statements.
INDEX
<TABLE>
<S> <C>
Consolidated Results of
Operations:
Operating Summary............... 9
Annuity......................... 10
Individual Life Insurance....... 11
Employee Benefits............... 11
Guaranteed Investment
Contracts...................... 11
Regulatory Initiatives and
Contingencies.................. 12
Accounting Standards............ 13
Other Matters................... 13
</TABLE>
CONSOLIDATED RESULTS OF OPERATIONS:
OPERATING SUMMARY
<TABLE>
<CAPTION>
THIRD QUARTER ENDED
NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues................ $ 826 $ 679 $ 2,462 $ 1,975
Expenses................ 737 598 2,205 1,757
--------- --------- --------- ---------
Net Income............ $ 89 $ 81 $ 257 $ 218
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
The Company's insurance business operates in three principal segments:
Annuity, Individual Life Insurance, and Employee Benefits as well as a
Guaranteed Investments Contracts segment, which is primarily comprised of
business written prior to 1995. The Company also maintains a Corporate operation
through which it reports items that are not directly allocable to any of its
business segments.
<PAGE>
53
- --------------------------------------------------------------------------------
The Annuity segment focuses on the savings and retirement needs of the
growing number of individuals who are preparing for retirement or have already
retired. This segment consists of two areas of operation: Individual Annuity and
Group Annuity. The variety of products sold within this segment reflects the
diverse nature of the market. These include, in the Individual Annuity area,
individual variable annuities, fixed market value adjusted (MVA) annuities, and
mutual funds; and in the Group Annuity area, deferred compensation and
retirement plan services for municipal governments and corporations, structured
settlement contracts and other special purpose annuity contracts, and investment
management contracts. The Individual Life Insurance segment, which focuses on
the high end estate and business planning markets, sells a variety of life
insurance products, including variable life and universal life insurance. The
Employee Benefits segment consists of two areas of operation: Group Insurance
and Specialty Insurance. Through Group Insurance, the Company offers products
such as group life insurance, group short- and long-term disability and
accidental death and dismemberment. Substantially all of the Group Insurance
business directly written by the Company is ceded to its direct parent, Hartford
Life and Accident Insurance Company. Specialty Insurance primarily consists of
the Company's corporate owned life insurance (COLI) business. The Guaranteed
Investment Contracts segment consists of guaranteed rate contract (GRC) business
that is supported by assets held in either the Company's general account or a
guaranteed separate account and includes a closed block of guaranteed rate
contracts (Closed Book GRC). The Company decided in 1995, after a thorough
review of its GRC business, that it would significantly de-emphasize general
account GRC, choosing to focus its distribution efforts on other products sold
through other divisions. Management expects no material income or loss from the
Guaranteed Investment Contracts segment in the future.
Revenues increased $147, or 22%, and $487, or 25%, for the third quarter and
nine months ended September 30, 1998, respectively, compared to the equivalent
1997 periods. This increase was driven by higher fee income earned on growth in
separate account assets primarily related to the Annuity and Individual Life
Insurance segments, revenue growth due to new sales and renewals in the Employee
Benefits segment, as well as higher net investment income, partially offset by
decreasing revenues related to the declining block of Closed Book GRC. For a
discussion of combined structured note transactions and investment contingencies
see Notes 1 (b) and 3 (b), respectively, of Notes to Condensed Consolidated
Financial Statements.
Expenses increased $139, or 23%, and $448, or 25%, for the third quarter and
nine months ended September 30, 1998, respectively, compared to the same prior
year periods. This increase was due to higher benefits, claims, and claim
adjustment expenses, increased amortization of deferred policy acquisition costs
and increased operating expenses primarily related to growth in the Company's
principal operating segments.
Net income increased $8, or 10%, and $39, or 18%, for the third quarter and
nine months ended September 30, 1998, respectively, as compared to the same
periods in 1997 primarily due to revenue growth in both the Annuity and
Individual Life Insurance segments. These increases were partially offset by a
decrease in Employee Benefits earnings as a result of COLI.
SEGMENT RESULTS
The Company's reporting segments, consist of Annuity, Individual Life
Insurance, Employee Benefits, Guaranteed Investment Contracts and a Corporate
Operation.
Below is a summary of net income by segment.
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ --------------------
1998 1997 1998 1997
----- ----- --------- ---------
<S> <C> <C> <C> <C>
Annuity....................... $ 67 $ 56 $ 197 $ 148
Individual Life Insurance..... 16 15 44 38
Employee Benefits............. 6 8 18 23
Guaranteed Investment
Contracts.................... -- -- -- --
Corporate Operation........... -- 2 (2) 9
--- --- --------- ---------
Net Income.................. $89 $81 $ 257 $ 218
--- --- --------- ---------
--- --- --------- ---------
</TABLE>
The sections that follow analyze each segment's results.
ANNUITY
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues.................. $ 410 $ 336 $ 1,208 $ 924
Expenses.................. 343 280 1,011 776
--------- --------- --------- ---------
Net Income.............. $ 67 $ 56 $ 197 $ 148
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Revenues for the third quarter and nine months ended September 30, 1998
increased $74, or 22%, and $284, or 31%, respectively, compared to the
equivalent prior year periods. This increase was driven by Individual Annuity
revenues which increased $72, or 31%, and $255, or 41%, for the third quarter
and nine months ended September 30, 1998, respectively, as compared to the same
periods in 1997 primarily due to higher fee income earned on growth in
individual variable annuity account values. Despite the fact that the equity
market did not experience significant appreciation during the third quarter of
1998, the segment's assets under management have increased from prior year
levels. Average individual variable annuity account values grew $11.0 billion,
or 29%, to $49.7 billion as of September 30, 1998 from $38.7 billion as of
September 30,
<PAGE>
54
- --------------------------------------------------------------------------------
1997. This growth was the result of strong individual variable annuity sales of
$2.4 billion and $7.6 billion for the third quarter and nine months ended
September 30, 1998, respectively, compared to sales of $2.5 billion and $7.2
billion for the third quarter and nine months ended September 30, 1997,
respectively. In addition, Group Annuity revenues increased $2, or 2%, and $29,
or 10%, for the third quarter and nine months ended September 30, 1998,
respectively, over the equivalent prior periods, primarily due to higher fee
income and net investment income resulting from growth in assets under
management. Group Annuity average total account values grew $1.3 billion, or
13%, to $11.1 billion as of September 30, 1998 from $9.8 billion as of September
30, 1997, due to new deposits.
Expenses increased $63, or 23%, and $235, or 30%, for the third quarter and
nine months ended September 30, 1998, respectively, as compared to the same
prior year periods. Benefits, claims and claim adjustment expenses increased $6
and $68 for the third quarter and nine months ended September 30, 1998,
respectively, compared to the same periods in 1997 primarily due to increased
interest credited on Individual Annuity general account values. Average
Individual Annuity general account values increased $975, or 31%, to $4.1
billion at September 30, 1998 from $3.1 billion at September 30, 1997.
Amortization of deferred policy acquisition costs increased $26 and $64 for the
third quarter and nine months ended September 30, 1998, respectively, compared
to the same periods in 1997 as prior and current year sales remained strong. In
addition, for the third quarter and nine months ended September 30, 1998, other
business expenses increased $23 and $75, respectively, compared to prior year
periods, as a result of the continued growth in this segment.
Annuity net income increased $11, or 20%, and $49, or 33%, for the third
quarter and nine months ended September 30, 1998, respectively, as compared to
the same prior year periods as a result of revenue growth and continued
operating efficiencies.
INDIVIDUAL LIFE INSURANCE
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues.................... $ 137 $ 122 $ 401 $ 358
Expenses 121 107 357 320
--------- --------- --------- ---------
Net Income................ $ 16 $ 15 $ 44 $ 38
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Revenues for the third quarter and nine months ended September 30, 1998
increased $15, or 12%, and $43, or 12%, respectively, as compared to the
equivalent periods in 1997. This increase was primarily due to higher cost of
insurance charges and other fee income earned on the Company's growing block of
variable life insurance. Variable life average account values increased $447, or
57%, to $1.2 billion as of September 30, 1998 from $786 as of September 30, 1997
due to strong sales. Variable life product sales constituted $82, or 75%, of
total Individual Life Insurance new sales as of September 30, 1998, an increase
of $21, or 34%, compared to the same period in 1997.
Expenses increased $14, or 13%, and $37, or 12%, for the third quarter and
nine months ended September 30, 1998, respectively, as compared to the
equivalent period in 1997. This increase was primarily the result of higher
benefits, claims, and claim adjustment expenses and amortization of deferred
acquisition costs associated with the growth in this segment as well as
increased mortality experience during 1998.
Net income increased $1, or 7%, and $6, or 16%, for the third quarter and
nine months ended September 30, 1998, respectively, as compared to the same
period in 1997 as a result of strong sales and revenue growth.
EMPLOYEE BENEFITS
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues.................... $ 219 $ 150 $ 697 $ 471
Expenses.................... 213 142 679 448
--------- --------- --------- ---------
Net Income................ $ 6 $ 8 $ 18 $ 23
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Revenues increased $69, or 46%, and $226, or 48%, for the third quarter and
nine months ended September 30, 1998, respectively, as compared to the same
periods in 1997, as a result of an increase in fee income related to new sales
of variable COLI, and renewal premium on leveraged COLI. Expenses increased $71,
or 50%, and $231, or 52%, for the third quarter and nine months ended September
30, 1998, respectively, as compared to the same prior year periods, due to
higher expenses associated with variable COLI sales and leveraged COLI renewal
premium. Net income decreased $2, or 25%, and $5, or 22%, for the third quarter
and nine months ended September 30, 1998, respectively, as compared to the same
prior periods in 1997.
GUARANTEED INVESTMENT CONTRACTS
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ --------------------
1998 1997 1998 1997
----- ----- --------- ---------
<S> <C> <C> <C> <C>
Revenues...................... $ 35 $ 62 $ 125 $ 196
Expenses...................... 35 62 125 196
--- --- --------- ---------
Net Loss.................... $ -- $ -- $ -- $ --
--- --- --------- ---------
--- --- --------- ---------
</TABLE>
<PAGE>
55
- --------------------------------------------------------------------------------
This segment reported no net income for the third quarter and nine months
ended September 30, 1998 and 1997 consistent with management's expectations that
net income from Closed Book GRC in the years subsequent to 1996 will be
immaterial based on the Company's current projections for the performance of the
assets and liabilities associated with Closed Book GRC. However, no assurance
can be given that, under certain unanticipated economic circumstances which
result in the Company's assumptions being proven inaccurate, further losses in
respect of Closed Book GRC will not occur in the future.
REGULATORY INITIATIVES AND CONTINGENCIES
NAIC PROPOSALS
The National Association of Insurance Commissioners ("NAIC") adopted the
Codification of Statutory Accounting Principles ("SAP") in March, 1998. The
proposed effective date for the statutory accounting guidance is January 1,
2001. It is expected that the Company's domiciliary state will adopt SAP and the
Company will make the necessary changes required for implementation. These
changes are not anticipated to have a material impact on the statutory financial
statements of the Company.
YEAR 2000
IN GENERAL
The Year 2000 issue relates to the ability or inability of computer
hardware, software and other information technology (IT) systems, as well as
non-IT systems, such as equipment and machinery with imbedded chips and
microprocessors, to properly process information and data containing or related
to dates beginning with the year 2000 and beyond. The Year 2000 issue exists
because, historically, many IT and non-IT systems that are in use today were
developed years ago when a year was identified using a two-digit date field
rather than a four-digit date field. As information and data containing or
related to the century date are introduced to date sensitive systems, these
systems may recognize the year 2000 as "1900", or not at all, which may result
in systems processing information incorrectly. This, in turn, may significantly
and adversely affect the integrity and reliability of information databases of
IT systems, may cause the malfunctioning of certain non-IT systems, and may
result in a wide variety of adverse consequences to a company. In addition, Year
2000 problems that occur with third parties with which a company does business,
such as suppliers, computer vendors, distributors and others, may also adversely
affect any given company.
The integrity and reliability of the Company's IT systems, as well as the
reliability of its non-IT systems, are integral aspects of the Company's
business. The Company has thousands of individual and business customers that
have insurance policies, annuities, mutual funds and other financial products of
the Company. Nearly all of these policies and products contain date sensitive
data, such as policy expiration dates, birth dates, premium payment dates, and
the like. In addition, various IT systems support communications and other
systems that integrate the Company's various business segments and field
offices. The Company also has business relationships with numerous third parties
that affect virtually all aspects of the Company's business, including, without
limitation, suppliers, computer hardware and software vendors, insurance agents
and brokers, securities broker-dealers and other distributors of financial
products, many of which provide date sensitive data to the Company, and whose
operations are important to the Company's business.
INTERNAL YEAR 2000 EFFORTS AND TIMETABLE
Beginning in 1990, the Company began working on making its IT systems Year
2000 ready, either through installing new programs or replacing systems. Since
January 1998, the Company's Year 2000 efforts have focused on the remaining Year
2000 issues related to IT and non-IT systems in all of the Company's business
segments. These Year 2000 efforts include the following five main initiatives:
(1) identifying and assessing Year 2000 issues; (2) taking actions to remediate
IT and non-IT systems so that they are Year 2000 ready; (3) testing and
certifying IT and non-IT systems as Year 2000 ready; (4) deploying such
remediated and tested systems back into their respective production
environments; and (5) conducting internal and external integrated testing of
such systems. The Company currently anticipates that initiatives (1) through (4)
of its internal Year 2000 efforts will be substantially complete by the end of
1998, and that initiative (5) testing will begin in early 1999 and continue
through the end of 1999.
THIRD PARTY YEAR 2000 EFFORTS AND TIMETABLE
The Company's Year 2000 efforts include assessing the potential impact on
the Company of third Year 2000 readiness. The Company's third party Year 2000
efforts include the following three main initiatives: (1) identifying third
parties which have significant business relationships with the Company and
inquiring of such third parties regarding their Year 2000 readiness; (2)
evaluating such third parties' responses to the Company's inquiries; and (3)
based on the evaluation of third party responses and the significance of the
business relationship, conducting additional activities with third parties as
determined to be necessary in each case, which activities may include integrated
IT systems testing. The Company has completed the first third party initiative
and is in the process of evaluating third party responses received. The Company
currently anticipates that it will substantially complete the response
evaluation in early 1999 and that it will conduct the additional activities
described in initiative (3) beginning in early 1999 and continue through the end
of 1999 as necessary. However, notwithstanding these third party Year 2000
efforts, the Company does not have control over these third parties and, as a
result, the Company cannot currently determine to
<PAGE>
56
- --------------------------------------------------------------------------------
what extent future operating results may be adversely affected by the failure of
these third parties to adequately address their Year 2000 issues.
YEAR 2000 COSTS
The costs of the Company's Year 2000 program that have been incurred through
the year ended December 31, 1997 have not been material to the Company's
financial condition or results of operations. Management estimates that
after-tax costs related to the Year 2000 program to be incurred in 1998 and 1999
will be $4 in total, of which approximately $2 has been incurred as of September
30, 1998. These costs are being expensed as incurred and have not had, and are
not currently expected to have, a material impact on Hartford Life's financial
condition or results of operations.
RISKS AND CONTINGENCY PLANS
If significant Year 2000 problems arise, including problems arising with
third parties, failures of IT and non-IT systems could occur, which in turn
could result in substantial interruptions in the Company's business. Given the
uncertain nature of Year 2000 problems that may arise, especially those related
to the readiness of third parties discussed above, the Company cannot determine
at this time whether the consequences of Year 2000 related problems that could
arise will have a material impact on the Company's financial condition or
results of operations.
The Company is in the process of developing certain contingency plans so
that if, despite its Year 2000 efforts, Year 2000 problems ultimately arise, the
impact of such problems may be minimized. These contingency plans are being
developed based on, among other things, known or reasonably anticipated
circumstances and potential vulnerabilities. The contingency planning also
includes assessing the dependency of the Company's business on third parties and
their Year 2000 readiness. The Company currently anticipates that internal and
external contingency plans will be substantially complete by the end of the
second quarter of 1999. However, in many contexts, Year 2000 issues are dynamic,
and ongoing assessments of business functions, vulnerabilities and risks must be
made. As such, new contingency plans may be needed in the future and/or then
existing plans may need to be modified as circumstances warrant.
ACCOUNTING STANDARDS
For a discussion of accounting standards, see Note 1 of Notes to Condensed
Consolidated Financial Statements.
OTHER MATTERS
SUBSEQUENT EVENT
On November 10, 1998, Hartford Life, Inc. (Hartford Life), an indirect
parent of the Company, recaptured an in-force block of COLI business from MBL
Life Assurance Co. of New Jersey (MBL Life), as well as purchased the
outstanding interest in International Corporate Marketing Group (ICMG), which
was previously 40% owned by MBL Life. The transaction was consummated through
the assignment of a reinsurance arrangement between Hartford Life and MBL Life
to a Hartford Life subsidiary. Hartford Life originally assumed the life
insurance block in 1992 from Mutual Benefit Life Insurance Company (Mutual
Benefit Life), which was placed in court-supervised rehabilitation in 1991, and
reinsured a portion of those polices back to MBL Life. MBL Life, previously a
Mutual Benefit Life subsidiary, operates under the Rehabilitation Plan for
Mutual Benefit Life.
<PAGE>
57
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life Insurance Company:
We have audited the accompanying Consolidated Balance Sheets of Hartford Life
Insurance Company (the "Company") and subsidiaries as of December 31, 1997 and
1996, and the related Consolidated Statements of Income, Stockholder's Equity
and Cash Flows for each of the three years in the period ended December 31,
1997. These consolidated financial statements and the schedules referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Hartford Life
Insurance Company and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in Index to
Consolidated Financial Statements and Schedules are presented for the purpose of
complying with the Securities and Exchange Commission's rules and are not part
of the basic financial statements. These schedules have been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
January 27, 1998
<PAGE>
58
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1997 1996 1995
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Premiums and other considerations............... $1,637 $1,705 $1,487
Net investment income........................... 1,368 1,397 1,328
Net realized capital gains (losses)............. 4 (213) (11)
------ ------ ------
Total revenues................................ 3,009 2,889 2,804
------ ------ ------
Benefits, claims and expenses
Benefits, claims and claim adjustment
expenses....................................... 1,379 1,535 1,422
Amortization of deferred policy acquisition
costs.......................................... 335 234 199
Dividends to policyholders...................... 240 635 675
Other expenses.................................. 586 427 317
------ ------ ------
Total benefits, claims and expenses........... 2,540 2,831 2,613
------ ------ ------
Income before income tax expense................ 469 58 191
Income tax expense.............................. 167 20 62
------ ------ ------
Net income........................................ $ 302 $ 38 $ 129
------ ------ ------
------ ------ ------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
59
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER
31,
-----------------
1997 1996
------- -------
<S> <C> <C>
(IN MILLIONS,
EXCEPT FOR SHARE
DATA)
Assets
Investments
Fixed maturities, available for sale, at fair
value (amortized cost of $13,885 and
$13,579)....................................... $14,176 $13,624
Equity securities, at fair value................ 180 119
Policy loans, at outstanding balance............ 3,756 3,836
Other investments, at cost...................... 47 56
------- -------
Total investments............................. 18,159 17,635
Cash............................................ 54 43
Premiums receivable and agents' balances........ 18 137
Accrued investment income....................... 330 407
Reinsurance recoverables........................ 6,325 6,259
Deferred policy acquisition costs............... 3,315 2,760
Deferred income tax............................. 348 474
Other assets.................................... 352 357
Separate account assets......................... 69,055 49,690
------- -------
Total assets.................................. $97,956 $77,762
------- -------
------- -------
Liabilities
Future policy benefits.......................... $ 3,270 $ 2,474
Other policyholder funds........................ 21,034 22,134
Other liabilities............................... 2,254 1,572
Separate account liabilities.................... 69,055 49,690
------- -------
Total liabilities............................. 95,613 75,870
------- -------
Stockholder's Equity
Common stock -- 1,000 shares authorized, issued
and outstanding, par value $5,690.............. 6 6
Additional paid in capital...................... 1,045 1,045
Net unrealized capital gains on securities, net
of tax......................................... 179 30
Retained earnings............................... 1,113 811
------- -------
Total stockholder's equity.................... 2,343 1,892
------- -------
Total liabilities and stockholder's equity...... $97,956 $77,762
------- -------
------- -------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
60
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
NET UNREALIZED
CAPITAL GAINS
ADDITIONAL (LOSSES) ON TOTAL
COMMON PAID IN SECURITIES, RETAINED STOCKHOLDER'S
STOCK CAPITAL NET OF TAX EARNINGS EQUITY
------ -------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
Balance, December 31, 1994.............. $6 $ 826 $(654) $ 644 $ 822
Net income............................ -- -- -- 129 129
Capital contribution.................. -- 181 -- -- 181
Change in net unrealized capital gains
(losses) on securities, net of tax... -- -- 597 -- 597
--
------ ------ ----------- ------
Balance, December 31, 1995.............. 6 1,007 (57) 773 1,729
Net income............................ -- -- -- 38 38
Capital contribution.................. -- 38 -- -- 38
Change in net unrealized capital gains
(losses) on securities, net of tax... -- -- 87 -- 87
--
------ ------ ----------- ------
Balance, December 31, 1996.............. 6 1,045 30 811 1,892
Net income............................ -- -- -- 302 302
Change in net unrealized capital gains
(losses) on securities, net of tax... -- -- 149 -- 149
--
------ ------ ----------- ------
Balance, December 31, 1997.............. $6 $1,045 $179 $1,113 $2,343
--
--
------ ------ ----------- ------
------ ------ ----------- ------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
61
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
------------------------------
1997 1996 1995
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Operating Activities
Net income............................ $ 302 $ 38 $ 129
Adjustments to reconcile net income to
cash provided by operating activities
Depreciation and amortization......... 8 14 21
Net realized capital (gains) losses... (4) 213 11
Decrease (increase) in deferred income
taxes................................ 40 (102) (172)
Increase in deferred policy
acquisition costs.................... (555) (572) (379)
Decrease (increase) in premiums
receivable and agents' balances...... 119 10 (81)
Decrease (increase) in accrued
investment income.................... 77 (13) (16)
Decrease (increase) in other assets... 52 (132) (177)
(Increase) decrease in reinsurance
recoverables......................... (416) 179 (35)
Increase (decrease) in liabilities for
future policy benefits............... 796 (92) 483
Increase in other liabilities......... 379 477 281
-------- -------- --------
Cash provided by operating
activities......................... 798 20 65
-------- -------- --------
Investing Activities
Purchases of fixed maturity
investments.......................... (6,231) (5,747) (6,228)
Sales of fixed maturity investments... 4,232 3,459 4,845
Maturities and principal paydowns of
fixed maturity investments........... 2,329 2,693 1,741
Net sales (purchases) of other
investments.......................... 24 (107) (871)
Net (purchases) sales of short-term
investments.......................... (638) 84 (24)
-------- -------- --------
Cash (used for) provided by
investing activities............... (284) 382 (537)
-------- -------- --------
Financing Activities
Capital contribution.................. -- 38 --
Net (disbursements for) receipts from
investment and universal life-type
contracts (charged against) credited
to policyholder accounts............. (503) (443) 498
-------- -------- --------
Cash (used for) provided by
financing activities............... (503) (405) 498
-------- -------- --------
Increase (decrease) in cash........... 11 (3) 26
Cash -- beginning of year............. 43 46 20
-------- -------- --------
Cash -- end of year................... $ 54 $ 43 $ 46
-------- -------- --------
-------- -------- --------
Supplemental Disclosure of Cash Flow
Information:
Net Cash Paid During the Year for:
Income taxes.......................... $ 9 $ 189 $ 162
Noncash Financing Activities:
Capital contribution.................. $ -- $ -- $ 181
-------- -------- --------
-------- -------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
62
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN MILLIONS EXCEPT PER SHARE DATA UNLESS OTHERWISE STATED)
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
These consolidated financial statements include Hartford Life Insurance
Company and its wholly-owned subsidiaries (the "Company"), ITT Hartford Life and
Annuity Insurance Company ("ILA") and ITT Hartford International Life
Reassurance Corporation ("HLRe"), formerly American Skandia Life Reinsurance
Corporation. The Company is a wholly-owned subsidiary of Hartford Life and
Accident Insurance Company ("HLA"), a wholly-owned subsidiary of Hartford Life,
Inc. ("Hartford Life"). Hartford Life is a direct subsidiary of Hartford
Accident and Indemnity Company ("HA&I"), an indirect subsidiary of The Hartford
Financial Services Group, Inc. ("The Hartford"). On February 10, 1997, Hartford
Life filed a registration statement, as amended, with the Securities and
Exchange Commission relating to an Initial Public Offering ("IPO") of the
Hartford Life's Class A Common Stock. Pursuant to the IPO on May 22, 1997,
Hartford Life sold to the public 26 million shares at $28.25 per share and
received net proceeds of $687. Of the proceeds, $527 was used to retire debt
related to Hartford Life's outstanding promissory notes and line of credit with
the remaining $160 contributed by Hartford Life to HLA to support growth in its
core businesses.
On December 19, 1995, ITT Industries, Inc. (formerly ITT Corporation)
("ITT") distributed all the outstanding shares of capital stock of The Hartford
to ITT stockholders of record on such date. As a result, The Hartford became an
independent, publicly traded company.
Along with its parent, the Company is a leading insurance and financial
services company which provides (a) investment products such as individual
variable annuities and fixed market value adjusted annuities, deferred
compensation and retirement plan services and mutual funds for savings and
retirement needs; (b) life insurance for income protection and estate planning;
and (c) employee benefits products such as group life and group disability
insurance and corporate owned life insurance.
2. SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
These consolidated financial statements present the financial position,
results of operations and cash flows of the Company. All material intercompany
transactions and balances between the Company, its subsidiaries and affiliates
have been eliminated. The consolidated financial statements are prepared on the
basis of generally accepted accounting principles which differ materially from
the statutory accounting practices prescribed by various insurance regulatory
authorities.
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The most
significant estimates include those used in determining deferred policy
acquisition costs and the liability for future policy benefits and other
policyholder funds. Although some variability is inherent in these estimates,
management believes the amounts provided are adequate.
Certain reclassifications have been made to prior year financial information
to conform to the current year presentation.
(B) CHANGES IN ACCOUNTING PRINCIPLES
In December 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") No. 97-3 "Accounting by Insurance
and Other Enterprises for Insurance Related Assessments". This SOP provides
guidance on accounting by insurance and other enterprises for assessments
related to insurance activities. Specifically, the SOP provides guidance on when
a guaranty fund or other assessment should be recognized, how to measure the
liability, and what information should be disclosed. This SOP will be effective
for fiscal years beginning after December 15, 1998. Adoption of SOP 97-3 is not
expected to have a material impact on the Company's financial condition or
results of operations.
On November 14, 1996, the Emerging Issues Task Force ("EITF") reached a
consensus on Issue No. 96-12, "Recognition of Interest Income and Balance Sheet
Classification of Structured Notes". This EITF issue requires companies to
record income on certain structured securities on a retrospective interest
method. The Company adopted EITF No. 96-12 for structured securities acquired
after November 14, 1996. Adoption of EITF No. 96-12 did not have a material
effect on the Company's financial condition or results of operations.
In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities"
which is effective for transfers and servicing of financial
<PAGE>
63
- --------------------------------------------------------------------------------
assets and extinguishments of liabilities occurring after December 31, 1996.
This statement established criteria for determining whether transferred assets
should be accounted for as sales or secured borrowings. Subsequently, in
December 1996, the FASB issued SFAS No. 127, "Deferral of Effective Date of
Certain Provisions of FASB Statement No. 125", which defers the effective date
of certain provisions of SFAS No. 125 for one year. Adoption of SFAS No. 125 is
not expected to have a material effect on the Company's financial condition or
results of operations.
Effective January 1, 1996, the Company adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of". This statement establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. Adoption of SFAS No. 121 did not
have a material effect on the Company's financial condition or results of
operations.
The Company's cash flows were not impacted by these changes in accounting
principles.
(C) REVENUE RECOGNITION
Revenues for universal life-type policies and investment products consist of
policy charges for the cost of insurance, policy administration and surrender
charges assessed to policy account balances and are recognized in the period in
which services are provided. Premiums for traditional life insurance and
disability policies are recognized as revenues when they are due from
policyholders.
(D) FUTURE POLICY BENEFITS AND OTHER POLICYHOLDER FUNDS
Liabilities for future policy benefits are computed by the net level premium
method using interest rate assumptions varying from 3% to 11% and withdrawal and
mortality assumptions appropriate at the time the policies were issued. Health
reserves, which are the result of sales of group long-term and short-term
disability, stop loss, Medicare Supplement and individual disability products,
are stated at amounts determined by estimates on individual cases and estimates
of unreported claims based on past experience. Liabilities for universal
life-type and investment contracts are stated at policyholder account values
before surrender charges.
(E) POLICYHOLDER REALIZED CAPITAL GAINS AND LOSSES
Realized capital gains and losses on security transactions associated with
the Company's immediate participation guaranteed contracts are excluded from
revenues and deferred over the expected maturity of the securities, since under
the terms of the contracts the realized gains and losses will be credited to
policyholders in future years as they are entitled to receive them.
(F) INVESTMENTS
The Company's investments in fixed maturities include bonds and commercial
paper which are considered "available for sale" and accordingly are carried at
fair value with the after-tax difference from cost reflected as a component of
Stockholder's Equity designated "Net unrealized capital gains (losses) on
securities, net of tax". Equity securities, which include common and
non-redeemable preferred stocks, are carried at fair values with the after-tax
difference from cost reflected in Stockholder's Equity. Policy loans are carried
at outstanding balance which approximates fair value. Net realized capital gains
and losses, after deducting pension policyholders' share, are reported as a
component of revenue and are determined on a specific identification basis.
The Company's accounting policy for impairment requires recognition of an
other than temporary impairment charge on a security if it is determined that
the Company is unable to recover all amounts due under the contractual
obligations of the security. In addition, for securities expected to be sold, an
other than temporary impairment charge is recognized if the Company does not
expect the fair value of a security to recover to cost or amortized cost prior
to the expected date of sale. Once an impairment charge has been recorded, the
Company then continues to review the other than temporarily impaired securities
for appropriate valuation on an on-going basis.
During 1996, it was determined that certain individual securities within the
investment portfolio supporting the Company's block of guaranteed rate contract
business written prior to 1995 ("Closed Book GRC") could not recover to
amortized cost prior to sale. Therefore, an other than temporary impairment loss
of $88, after-tax, was recorded.
(G) DERIVATIVE INSTRUMENTS
The Company uses a variety of derivative instruments including swaps, caps,
floors, forwards and exchange traded financial futures and options as part of an
overall risk management strategy. These instruments are used as a means of
hedging exposure to price, foreign currency and/ or interest rate risk on
planned investment purchases or existing assets and liabilities. The Company
does not hold or issue derivative instruments for trading purposes. The
Company's accounting for derivative instruments used to manage risk is in
accordance with the concepts established in SFAS No. 80, "Accounting for Futures
Contracts", SFAS No. 52, "Foreign Currency Translation", AICPA SOP 86-2,
"Accounting for Options" and various EITF pronouncements. Written options are
used, in all cases in conjunction with other assets and derivatives, as part of
the Company's asset and liability management strategy. Derivative instruments
are carried at values consistent with the asset or liability being hedged.
Derivative instruments used to hedge fixed maturities or equity securities are
carried at fair value
<PAGE>
64
- --------------------------------------------------------------------------------
with the after-tax difference from cost reflected in Stockholder's Equity.
Derivative instruments used to hedge other invested assets or liabilities are
carried at cost.
Derivative instruments must be designated at inception as a hedge and
measured for effectiveness both at inception and on an on-going basis. The
Company's minimum correlation threshold for hedge designation is 80%. If
correlation, which is assessed monthly and measured based on a rolling three
month average, falls below 80%, hedge accounting will be terminated. Derivative
instruments used to create a synthetic asset must meet synthetic accounting
criteria including designation at inception and consistency of terms between the
synthetic and the instrument being replicated. Consistent with industry
practice, synthetic instruments are accounted for like the financial instrument
it is intended to replicate. Derivative instruments which fail to meet risk
management criteria, subsequent to acquisition, are marked to market with the
impact reflected in the Consolidated Statements of Income.
Gains or losses on financial futures contracts entered into in anticipation
of the investment of future receipt of product cash flows are deferred and, at
the time of the ultimate investment purchase, reflected as an adjustment to the
cost basis of the purchased asset. Gains or losses on futures used in invested
asset risk management are deferred and adjusted into the cost basis of the
hedged asset when the contract futures are closed, except for futures used in
duration hedging which are deferred and basis adjusted on a quarterly basis. The
basis adjustments are amortized into net investment income over the remaining
asset life.
Open forward commitment contracts are marked to market through Stockholder's
Equity. Such contracts are accounted for at settlement by recording the purchase
of the specified securities at the previously committed price. Gains or losses
resulting from the termination of forward commitment contracts before the
delivery of the securities are recognized immediately in the Consolidated
Statements of Income as a component of net investment income.
The cost of options entered into as part of a risk management strategy are
basis adjusted to the underlying asset or liability and amortized over the
remaining life of the option. Gains or losses on expiration or termination are
adjusted into the basis of the underlying asset or liability and amortized over
the remaining asset life.
Interest rate swaps involve the periodic exchange of payments without the
exchange of underlying principal or notional amounts. Net receipts or payments
are accrued and recognized over the life of the swap agreement as an adjustment
to investment income. Should the swap be terminated, the gain or loss is
adjusted into the basis of the asset or liability and amortized over the
remaining life. Should the hedged asset be sold or liability terminated without
terminating the swap position, any swap gains or losses are immediately
recognized in net investment income. Interest rate swaps purchased in
anticipation of an asset purchase ("anticipatory transaction") are recognized
consistent with the underlying asset components such that the settlement
component is recognized in the Consolidated Statements of Income while the
change in market value is recognized as an unrealized capital gain or loss.
Premiums paid on purchased floor or cap agreements and the premium received
on issued cap or floor agreements (used for risk management) are adjusted into
the basis of the applicable asset and amortized over the asset life. Gains or
losses on termination of such positions are adjusted into the basis of the asset
or liability and amortized over the remaining asset life. Net payments are
recognized as an adjustment to income or basis adjusted and amortized depending
on the specific hedge strategy.
Forward exchange contracts and foreign currency swaps are accounted for in
accordance with SFAS No. 52. Changes in the spot rate of instruments designated
as hedges of the net investment in a foreign subsidiary are reflected in the
cumulative translation adjustments component of Stockholder's Equity. Cash flows
from futures, options, and swaps, accounted for as hedges, are included with the
cash flows of the item being hedged.
(H) SEPARATE ACCOUNTS
The Company maintains separate account assets and liabilities which are
reported at fair value. Separate account assets are segregated from other
investments, and investment income and gains and losses accrue directly to the
policyholders. Separate accounts reflect two categories of risk assumption:
non-guaranteed separate accounts, wherein the policyholder assumes the
investment risk, and guaranteed separate account assets, wherein the Company
contractually guarantees either a minimum return or account value to the
policyholder.
(I) DEFERRED POLICY ACQUISITION COSTS
Policy acquisition costs, which include commissions and certain underwriting
expenses associated with acquiring business, are deferred and amortized over the
estimated lives of the contracts, generally 20 years. Generally, acquisition
costs are deferred and amortized using the retrospective deposit method. Under
the retrospective deposit method, acquisition costs are amortized in proportion
to the present value of expected gross profits from surrender charges,
investment, mortality and expense margins. Actual gross profits can vary from
management's estimates resulting in increases or decreases in the rate of
amortization. Management periodically updates these estimates, when appropriate,
and evaluates the recoverability of the deferred acquisition cost asset. When
appropriate, management revises its assumptions on the estimated gross profits
of these contracts and the cumulative amortization
<PAGE>
65
- --------------------------------------------------------------------------------
for the books of business are reestimated and adjusted by a cumulative charge or
credit to income.
The Company's other expenses include the following:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Commissions........................... $ 976 $ 848 $ 619
Deferred acquisition costs............ (862) (823) (618)
Other................................. 472 402 316
--------- --------- ---------
Total other expenses.............. $ 586 $ 427 $ 317
--------- --------- ---------
--------- --------- ---------
</TABLE>
(J) DIVIDENDS TO POLICYHOLDERS
Certain life insurance policies contain dividend payment provisions that
enable the policyholder to participate in the earnings of the life insurance
subsidiaries of the Company. The participating insurance in force accounted for
55%, 44%, and 41% in 1997, 1996, and 1995, respectively, of total insurance in
force.
3. INITIAL PUBLIC OFFERING
On February 10, 1997, Hartford Life filed a registration statement, as
amended, with the Securities and Exchange Commission, relating to the IPO of
Hartford Life's Class A Common Stock. Pursuant to the IPO on May 22, 1997,
Hartford Life sold to the public 26 million shares at $28.25 per share and
received proceeds, net of offering expenses, of $687. Of the proceeds, $527 was
used to retire debt related to Hartford Life's promissory notes outstanding and
line of credit. The remaining $160 was contributed by Hartford Life to HLA to
support growth in its core businesses. The 26 million shares sold in the
Offering represent approximately 18.6% of the equity ownership in Hartford Life
and approximately 4.4% of the combined voting power of Hartford Life's Class A
and Class B Common Stock. The Hartford owns all of the 114 million outstanding
shares of Class B Common Stock of Hartford Life, representing approximately
81.4% of the equity ownership in Hartford Life and approximately 95.6% of the
combined voting power of Hartford Life's Class A and Class B Common Stock.
Holders of Class A Common Stock generally have identical rights to the holders
of Class B Common Stock except that the holders of Class A Common Stock are
entitled to one vote per share while holders of Class B Common Stock are
entitled to five votes per share on all matters submitted to a vote of Hartford
Life's stockholders.
4. INVESTMENTS AND DERIVATIVE INSTRUMENTS
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Interest income from fixed
maturities......................... $ 932 $ 918 $ 996
Interest income from policy loans... 425 477 342
Income from other investments....... 26 15 1
--------- --------- ---------
Gross investment income............. 1,383 1,410 1,339
Less: Investment expenses........... 15 13 11
--------- --------- ---------
Net investment income............... $ 1,368 $ 1,397 $ 1,328
--------- --------- ---------
--------- --------- ---------
</TABLE>
(B) COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------------
1997 1996 1995
----- --------- ---------
<S> <C> <C> <C>
Fixed maturities......................... $ (7) $ (201) $ 23
Equity securities........................ 12 2 (6)
Real estate and other.................... (1) (4) (25)
Less: Increase in liability to
policyholders for realized capital
gains................................... -- (10) (3)
--- --------- ---------
Net realized capital gains (losses)...... $ 4 $ (213) $ (11)
--- --------- ---------
--- --------- ---------
</TABLE>
(C) NET UNREALIZED CAPITAL GAINS (LOSSES) ON EQUITY SECURITIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Gross unrealized capital gains.............. $ 14 $ 13 $ 4
Gross unrealized capital losses............. -- (1) (2)
--- --- ---
Net unrealized capital gains................ 14 12 2
Deferred income tax expense................. 5 4 1
--- --- ---
Net unrealized capital gains, net of tax.... 9 8 1
Balance -- beginning of year................ 8 1 (6)
--- --- ---
Net change in unrealized capital gains
(losses) on equity securities.............. $ 1 $ 7 $ 7
--- --- ---
--- --- ---
</TABLE>
<PAGE>
66
- --------------------------------------------------------------------------------
(D) NET UNREALIZED CAPITAL GAINS (LOSSES) ON FIXED MATURITIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Gross unrealized capital gains................................... $ 371 $ 386 $ 529
Gross unrealized capital losses.................................. (80) (341) (569)
Unrealized capital (gains) losses credited to policyholders...... (30) (11) (52)
----- ----- -----
Net unrealized capital gains (losses)............................ 261 34 (92)
Deferred income tax expense (benefit)............................ 91 12 (34)
----- ----- -----
Net unrealized capital gains (losses), net of tax................ 170 22 (58)
Balance -- beginning of year..................................... 22 (58) (648)
----- ----- -----
Net change in unrealized capital gains (losses) on fixed
maturities...................................................... $ 148 $ 80 $ 590
----- ----- -----
----- ----- -----
</TABLE>
(E) FIXED MATURITY INVESTMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U.S. gov't and gov't agencies and authorities
(guaranteed and sponsored)...................................... $ 217 $ 3 $ (1) $ 219
U.S. gov't and gov't agencies and authorities
(guaranteed and sponsored) -- asset backed...................... 1,175 64 (35) 1,204
States, municipalities and political subdivisions................ 211 7 (1) 217
International governments........................................ 376 20 (3) 393
Public utilities................................................. 871 26 (3) 894
All other corporate including international...................... 5,033 200 (25) 5,208
All other corporate -- asset backed.............................. 4,091 41 (8) 4,124
Short-term investments........................................... 1,318 -- -- 1,318
Certificates of deposit.......................................... 593 10 (4) 599
---------- ----- ----- ----------
Total fixed maturities....................................... $13,885 $371 $(80) $14,176
---------- ----- ----- ----------
---------- ----- ----- ----------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U.S. gov't and gov't agencies and authorities
(guaranteed and sponsored)...................................... $ 166 $ 12 $ (3) $ 175
U.S. gov't and gov't agencies and authorities
(guaranteed and sponsored) -- asset backed...................... 1,970 161 (128) 2,003
States, municipalities and political subdivisions................ 373 6 (11) 368
International governments........................................ 281 12 (4) 289
Public utilities................................................. 877 12 (8) 881
All other corporate including international...................... 4,656 120 (107) 4,669
All other corporate -- asset backed.............................. 3,601 49 (59) 3,591
Short-term investments........................................... 1,655 14 (21) 1,648
---------- ----- ----------- ----------
Total fixed maturities....................................... $13,579 $386 $(341) $13,624
---------- ----- ----------- ----------
---------- ----- ----------- ----------
</TABLE>
The amortized cost and estimated fair value of fixed maturity investments at
December 31, 1997 by estimated maturity year are shown below. Expected
maturities differ from contractual maturities due to call or prepayment
provisions. Asset backed securities, including MBS and CMO's, are distributed to
maturity year based on the Company's estimates of the rate of future prepayments
of principal over the remaining lives of the securities. These estimates are
developed using prepayment speeds provided in broker consensus data. Such
estimates are derived from prepayment speeds experienced at the interest rate
levels projected for the applicable underlying collateral and can be expected to
vary from actual experience.
MATURITY
<TABLE>
<CAPTION>
AMORTIZED
COST FAIR VALUE
----------- -----------
<S> <C> <C>
One year or less......................... $ 2,838 $ 2,867
Over one year through five years......... 5,528 5,595
Over five years through ten years........ 3,094 3,156
Over ten years........................... 2,425 2,558
----------- -----------
Total................................ $ 13,885 $ 14,176
----------- -----------
----------- -----------
</TABLE>
<PAGE>
67
- --------------------------------------------------------------------------------
Sales of fixed maturities, excluding short-term fixed maturities, for the
years ended December 31, 1997, 1996 and 1995 resulted in proceeds of $4.2
billion, $3.5 billion and $4.8 billion, gross realized capital gains of $169,
$87 and $91, gross realized capital losses (including writedowns) of $176, $298
and $72, respectively. Sales of equity security investments for the years ended
December 31, 1997, 1996 and 1995 resulted in proceeds of $132, $74 and $64,
gross realized capital gains of $12, $2 and $28 and gross realized capital
losses of $0, $0 and $59, respectively.
(F) CONCENTRATION OF CREDIT RISK
Excluding investments in U.S. government and agencies, the Company has not
invested in the securities of a single issuer in amounts greater than 10% of
stockholder's equity at December 31, 1997.
(G) DERIVATIVE INSTRUMENTS
The Company utilizes a variety of derivative instruments, including swaps,
caps, floors, forwards and exchange traded futures and options, in accordance
with Company policy and in order to achieve one of three Company approved
objectives: to hedge risk arising from interest rate, price or currency exchange
rate volatility; to manage liquidity; or, to control transactions costs. The
Company utilizes derivative instruments to manage market risk through four
principal risk management strategies: hedging anticipated transactions, hedging
liability instruments, hedging invested assets and hedging portfolios of assets
and/or liabilities. The Company does not trade in these instruments for the
express purpose of earning trading profits.
The Company maintains a derivatives counterparty exposure policy which
establishes market-based credit limits, favors long-term financial stability and
creditworthiness, and typically requires credit enhancement/credit risk reducing
agreements. Credit risk is measured as the amount owed to the Company based on
current market conditions and potential payment obligations between the Company
and its counterparties. Credit exposures are quantified weekly and netted, and
collateral is pledged to or held by the Company to the extent the current value
of derivatives exceed exposure policy thresholds.
The Company's derivative program is monitored by an internal compliance unit
and is reviewed by senior management and Hartford Life's Finance Committee.
Notional amounts, which represent the basis upon which pay or receive amounts
are calculated and are not reflective of credit risk, pertaining to derivative
financial instruments (excluding the Company's guaranteed separate account
derivative investments), totaled $6.5 billion and $9.9 billion ($4.6 billion and
$7.4 billion related to the Company's investments, $1.9 billion and $2.5 billion
on the Company's liabilities) at December 31, 1997 and 1996, respectively.
The table below provides a summary of derivative instruments held by the
Company at December 31, 1997 and 1996, segregated by major investment and
liability category:
<TABLE>
<CAPTION>
1997 -- AMOUNT HEDGED (NOTIONAL AMOUNTS)
----------------------------------------------------------------------------------
PURCHASED
CAPS, FOREIGN
TOTAL ISSUED FLOORS INTEREST CURRENCY TOTAL
CARRYING CAPS & AND FUTURES RATE SWAPS NOTIONAL
ASSETS HEDGED VALUE FLOORS OPTIONS (2) SWAPS (3) AMOUNT
- ----------------------------------- -------- -------- ---------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset backed securities (excluding
inverse floaters and
anticipatory)..................... $ 5,253 $ 500 $ 1,404 $ 28 $ 221 $-- $ 2,153
Inverse floaters (1)............... 75 47 80 -- 25 -- 152
Anticipatory (4)................... -- -- -- -- -- -- --
Other bonds and notes.............. 7,531 462 460 22 1,258 91 2,293
Short-term investments............. 1,317 -- -- -- -- -- --
-------- -------- ---------- --- ---------- --- ----------
Total fixed maturities......... 14,176 1,009 1,944 50 1,504 91 4,598
Equity securities, policy loans and
other investments................. 3,983 -- -- -- -- -- --
-------- -------- ---------- --- ---------- --- ----------
Total investments.............. $ 18,159 $ 1,009 $ 1,944 $ 50 $ 1,504 $91 $ 4,598
Long term debt................. -- -- -- -- -- -- --
Other policy claims............ -- 10 150 -- 1,747 -- 1,907
-------- -------- ---------- --- ---------- --- ----------
Total derivatives -- notional
value........................... $ -- $ 1,019 $ 2,094 $ 50 $ 3,251 $91 $ 6,505
-------- -------- ---------- --- ---------- --- ----------
Total derivatives -- fair value.... $ -- $ (8) $ 23 $ -- $ 19 $(6) $ 28
-------- -------- ---------- --- ---------- --- ----------
-------- -------- ---------- --- ---------- --- ----------
</TABLE>
<PAGE>
68
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 --AMOUNT HEDGED (NOTIONAL AMOUNTS)
--------------------------------------------------------------------------
FOREIGN
TOTAL ISSUED PURCHASED INTEREST CURRENCY TOTAL
CARRYING CAPS & CAPS, FLOORS RATE SWAPS NOTIONAL
ASSETS HEDGED VALUE FLOORS AND OPTIONS FUTURES (2) SWAPS (3) AMOUNT
- ----------------------------------- -------- ------- ------------ ----------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset backed securities (excluding
inverse floaters and
anticipatory)..................... $ 5,242 $ 500 $ 2,454 $ -- $ 941 $ -- $3,895
Inverse floaters (1)............... 352 98 856 -- 346 -- 1,300
Anticipatory (4)................... -- -- -- 132 -- -- 132
Other bonds and notes.............. 7,369 425 440 5 1,079 125 2,074
Short-term investments............. 661 -- -- -- -- -- --
-------- ------- ------------ ----- --------- -------- -------
Total fixed maturities......... 13,624 1,023 3,750 137 2,366 125 7,401
Equity securities, policy loans and
other investments................. 4,011 -- -- -- 19 -- 19
-------- ------- ------------ ----- --------- -------- -------
Total investments.............. $ 17,635 $ 1,023 $ 3,750 $ 137 $ 2,385 $ 125 $7,420
Long term debt................. -- -- -- -- -- -- --
Other policy claims............ -- 10 150 -- 2,351 -- 2,511
-------- ------- ------------ ----- --------- -------- -------
Total derivatives -- notional
value......................... $ -- $ 1,033 $ 3,900 $ 137 $ 4,736 $ 125 $9,931
-------- ------- ------------ ----- --------- -------- -------
Total derivatives -- fair
value......................... $ -- $ (10) $ 38 $ -- $ 2 $ (9 ) $ 21
-------- ------- ------------ ----- --------- -------- -------
-------- ------- ------------ ----- --------- -------- -------
</TABLE>
- ---------
(1) Inverse floaters are variations of collateralized mortgage obligations
("CMO's") for which the coupon rates move inversely with an index rate such as
the London interbank offered rate ("LIBOR"). The risk to principal is considered
negligible as the underlying collateral for the securities is guaranteed or
sponsored by government agencies. To address the volatility risk created by the
coupon variability, the Company uses a variety of derivative instruments,
primarily interest rate swaps, caps and floors.
(2) As of December 31, 1997 and 1996, over 44% and 39% , respectively, of
the notional futures contracts expire within one year.
(3) As of December 31, 1997 and 1996, over 16% and 42%, respectively, of
foreign currency swaps expire within one year; the balance matures over the
succeeding 9 years.
(4) Deferred gains and losses on anticipatory transactions are included in
the carrying value of fixed maturities in the Consolidated Balance Sheets. At
the time of the ultimate purchase, they are reflected as a basis adjustment to
the purchased asset. At December 31, 1997, the Company had $0 deferred gains and
losses. At December 31, 1996, the Company had $0.9 in net deferred gains for
futures, interest rate swaps and purchased options of which $2.0 was basis
adjusted in 1997.
The following is a reconciliation of notional amounts by derivative type and
strategy as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 MATURITIES/ DECEMBER 31, 1997
NOTIONAL AMOUNT ADDITIONS TERMINATIONS (1) NOTIONAL AMOUNT
----------------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
BY DERIVATIVE TYPE
Caps......................................... $1,755 $ 14 $ 530 $1,239
Floors....................................... 3,168 28 1,332 1,864
Swaps/Forwards............................... 4,861 941 2,460 3,342
Futures...................................... 137 131 218 50
Options...................................... 10 -- -- 10
------- -------- ------- -------
Total.................................... $9,931 $1,114 $4,540 $6,505
------- -------- ------- -------
BY STRATEGY
Liability.................................... $2,511 $ 191 $ 795 $1,907
Anticipatory................................. 132 4 136 --
Asset........................................ 2,112 739 1,046 1,805
Portfolio.................................... 5,176 180 2,563 2,793
------- -------- ------- -------
Total.................................... $9,931 $1,114 $4,540 $6,505
------- -------- ------- -------
------- -------- ------- -------
</TABLE>
- ---------
(1) During 1997, the Company had no significant gains or losses on terminations
of hedge positions using derivative financial instruments.
<PAGE>
69
- --------------------------------------------------------------------------------
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 "Disclosure about Fair
Value of Financial Instruments" requires disclosure of fair value information of
financial instruments. For certain financial instruments where quoted market
prices are not available, other independent valuation techniques and assumptions
are used. Because considerable judgment is used, these estimates are not
necessarily indicative of amounts that could be realized in a current market
exchange. SFAS No. 107 excludes certain financial instruments from disclosure,
including insurance contracts.
For cash, short-term investments, accounts receivable, policy loans,
mortgage loans and other liabilities, carrying amounts on the Consolidated
Balance Sheets approximate fair value.
Fair value for fixed maturities and marketable equity securities are based
upon quoted market prices. Fair value for securities that are not publicly
traded are analytically determined. These amounts are disclosed in Note 4 of
Notes to Consolidated Financial Statements.
The fair value of derivative financial instruments, including swaps, caps,
floors, futures, options and forward commitments, is determined using a pricing
model which is validated through quarterly comparison to dealer quoted prices.
Amounts are disclosed in Note 4 of Notes to Consolidated Financial Statements.
Fair value for partnerships and trusts are based on external market
valuations from partnership and trust management.
Other policy claims and benefits payable fair value information is
determined by estimating future cash flows, discounted at the current market
rate.
The carrying amount and fair values of the Company's financial instruments
at December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------ ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- ------- --------- -------
<S> <C> <C> <C> <C>
ASSETS
Fixed maturities..................................... $ 14,176 $14,176 $ 13,624 $13,624
Equity securities.................................... 180 180 119 119
Policy loans......................................... 3,756 3,756 3,836 3,836
Mortgage loans....................................... -- -- 2 2
Investments in partnerships, trusts and other........ 47 91 54 104
LIABILITIES
Other policy benefits................................ $ 11,769 $11,755 $ 11,707 $11,469
</TABLE>
6. SEPARATE ACCOUNTS
The Company maintained separate account assets and liabilities totaling
$69.1 billion and $49.7 billion at December 31, 1997 and 1996, respectively,
which are reported at fair value. Separate account assets are segregated from
other investments and net investment income and net realized capital gains and
losses accrue directly to the policyholder. Separate accounts reflect two
categories of risk assumption: non-guaranteed separate accounts totaling $58.6
billion and $39.4 billion at December 31, 1997 and 1996, respectively, wherein
the policyholder assumes the investment risk, and guaranteed separate accounts
totaling $10.5 and $10.3 billion at December 31, 1997 and 1996, respectively,
wherein the Company contractually guarantees either a minimum return or account
value to the policyholder. Included in the non-guaranteed category were policy
loans totaling $1.9 billion and $2.0 billion at December 31, 1997 and 1996,
respectively. Net investment income (including net realized capital gains and
losses) and interest credited to policyholders on separate account assets are
not reflected in the Consolidated Statements of Income.
Separate account management fees were $699, $538 and $387 in 1997, 1996 and
1995, respectively. The guaranteed separate accounts include fixed market value
adjusted individual annuity and modified guaranteed life insurance. The average
credited interest rate on these contracts was 6.52% at December 31, 1997. The
assets that support these liabilities were comprised of $10.2 billion in fixed
maturities as of December 31, 1997. The portfolios are segregated from other
investments and are managed to minimize liquidity and interest rate risk. In
order to minimize the risk of disintermediation associated with early
withdrawals, fixed MVA annuity and modified guaranteed life insurance contracts
carry a graded surrender charge as well as a market value adjustment. Additional
investment risk is hedged using a variety of derivatives which totaled $119 in
carrying value and $3.0 billion in notional amounts as of December 31, 1997.
<PAGE>
70
- --------------------------------------------------------------------------------
7. INCOME TAX
Hartford Life and The Hartford have entered into a tax sharing agreement
under which each member in the consolidated U.S. Federal income tax return will
make payments between them such that, with respect to any period, the amount of
taxes to be paid by the Company, subject to certain adjustments, generally will
be determined as though the Company were filing separate Federal, state and
local income tax returns.
As long as The Hartford continues to beneficially own, directly or
indirectly, at least 80% of the combined voting power and 80% of the value of
the outstanding capital stock of Hartford Life, the Company will be included for
Federal income tax purposes in the affiliated group of which The Hartford is the
common parent. To the extent allowed by law, it is the intention of The Hartford
and its subsidiaries to continue to file a single consolidated Federal income
tax return. The Company will continue to remit (receive from) The Hartford a
current income tax provision (benefit) computed in accordance with such tax
sharing agreement. The Company's effective tax rate was 36%, 35% and 32% in
1997, 1996 and 1995, respectively.
Income tax expense is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------
1997 1996 1995
---- ------ ------
<S> <C> <C> <C>
Current...................................... $119 $ 122 $ 211
Deferred..................................... 48 (102) (149)
---- ------ ------
Income tax expense......................... $167 $ 20 $ 62
---- ------ ------
---- ------ ------
</TABLE>
A reconciliation of the tax provision at the U.S. Federal statutory rate to
the provision for income taxes is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1997 1996 1995
--------- ----- -----
<S> <C> <C> <C>
Tax provision at the U.S. Federal statutory
rate...................................... $ 164 $ 20 $ 67
Tax-exempt income.......................... -- -- (3)
Foreign tax credit......................... -- -- (4)
Other...................................... 3 -- 2
--------- --- ---
Total.................................... $ 167 $ 20 $ 62
--------- --- ---
--------- --- ---
</TABLE>
Deferred tax assets include the following at December 31:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Tax return deferred acquisition costs............ $ 639 $ 514
Financial statement deferred acquisition costs
and reserves.................................... (366) (242)
Employee benefits................................ 5 8
Net unrealized capital gains on securities....... (96) (16)
Investments and other............................ 166 210
--------- ---------
Total.......................................... $ 348 $ 474
--------- ---------
--------- ---------
</TABLE>
Income taxes paid were $9, $189 and $162 in 1997, 1996 and 1995,
respectively. The Company had a current tax payment of $27 due to The Hartford
at December 31, 1997 and a tax refund due from The Hartford of $72 at December
31, 1996.
Prior to the Tax Reform Act of 1984, the Life Insurance Company Income Tax
Act of 1959 permitted the deferral from taxation of a portion of statutory
income under certain circumstances. In these situations, the deferred income was
accumulated in a "Policyholders' Surplus Account" and will be taxable in the
future only under conditions which management considers to be remote; therefore,
no Federal income taxes have been provided on this deferred income. The balance
for tax return purposes of the Policyholders' Surplus Account as of December 31,
1997 was $37.
8. POSTRETIREMENT BENEFIT AND SAVINGS PLANS
(A) PENSION PLANS
The Company's employees are included in The Hartford's noncontributory
defined benefit pension plans. These plans provide pension benefits that are
based on years of service and the employee's compensation during the last ten
years of employment. The Company's funding policy is to contribute annually an
amount between the minimum funding requirements set forth in the Employee
Retirement Income Security Act of 1974, as amended, and the maximum amount that
can be deducted for U.S. Federal income tax purposes. Generally, pension costs
are funded through the purchase of the Company's group pension contracts. The
cost to the Company was approximately $5, $5 and $2 in 1997, 1996 and 1995,
respectively.
The Company also provides, through The Hartford, certain health care and
life insurance benefits for eligible retired employees. A substantial portion of
the Company's employees may become eligible for these benefits upon retirement.
The Company's contribution for health care benefits will depend on the retiree's
date of retirement and years of service. In addition, the plan has a defined
dollar cap which limits average Company contributions. The Company has prefunded
a portion of the health care and life insurance obligations through trust funds
where such prefunding can be accomplished on a tax effective basis.
Postretirement health care and life insurance benefits expense, allocated by The
Hartford, was immaterial to the results of operations for 1997, 1996 and 1995,
respectively.
The assumed rate in the per capita cost of health care (the health care
trend rate) was 8.5% for 1997, decreasing ratably to 6.0% in the year 2001.
Increasing the health care trend rates by one percent per year would have an
immaterial impact on the accumulated postretirement benefit obligation and the
annual expense. To the extent that the actual experience differs from the
inherent assumptions,
<PAGE>
71
- --------------------------------------------------------------------------------
the effect will be amortized over the average future service of covered
employees.
(B) INVESTMENT AND SAVINGS PLAN
Substantially all employees of the Company are eligible to participate in The
Hartford's Investment and Savings Plan. Under this plan, designated
contributions, which may be invested in Class A Common Stock of Hartford Life or
certain other investments, are matched, up to 3% of compensation, by the
Company. The cost to the Company for the above-mentioned plans was approximately
$2 in 1997.
9. STOCK COMPENSATION PLANS
During the second quarter of 1997, Hartford Life adopted the 1997 HLI
Incentive Stock Plan (the "Plan"). Under the Plan, options granted may be either
non-qualified options or incentive stock options qualifying under Section 422A
of the Internal Revenue Code. The aggregate number of shares of Class A Common
Stock which may be awarded in any one year shall be subject to an annual limit.
The maximum number of shares of Class A Common Stock which may be granted under
the Plan in each year shall be 1.5% of the total issued and outstanding shares
of Hartford Life Class A Common Stock and treasury stock as reported in the
Annual Report on Hartford Life's Form 10-K for the preceding year plus unused
portions of such limit from prior years. In addition, no more than 5,000,000
shares of Class A Common Stock shall be cumulatively available for awards of
incentive stock options under the Plan, and no more than 20% of the total number
of shares on a cumulative basis shall be available for restricted stock and
performance shares.
All options granted have an exercise price equal to the market price of
Hartford Life's stock on the date of grant and an option's maximum term is ten
years. Certain nonperformance based options become exercisable upon the
attainment of specified market price appreciation of Hartford Life's common
shares or at seven years after the date of grant, while the remaining
nonperformance based options become exercisable over a three year period
commencing with the date of grant.
Also included in the Plan are long term performance awards which become
payable upon the attainment of specific performance goals achieved over a three
year period.
During the second quarter of 1997, Hartford Life established the HLI
Employee Stock Purchase Plan ("ESPP"). Under this plan, eligible employees of
Hartford Life and the Company may purchase Class A Common Stock of Hartford Life
at a 15% discount from the lower of the market price at the beginning or end of
the quarterly offering period. Hartford Life may sell up to 2,700,000 shares of
stock to eligible employees. Hartford Life sold 54,316 shares under the ESPP in
1997.
10. REINSURANCE
The Company cedes insurance to other insurers, including its parent HLA, in
order to limit its maximum loss. Such transfer does not relieve the Company of
its primary liability. The Company also assumes insurance from other insurers.
Failure of reinsurers to honor their obligations could result in losses to the
Company. The Company evaluates the financial condition of its reinsurers and
monitors concentration of credit risk.
Net premiums and other considerations were comprised of the following:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Gross premiums............................... $ 2,164 $ 2,138 $ 1,545
Assumed...................................... 159 190 591
Ceded........................................ (686) (623) (649)
--------- --------- ---------
Net premiums and other considerations...... $ 1,637 $ 1,705 $ 1,487
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company ceded approximately $76, $100 and $101 of group life premium in
1997, 1996 and 1995, respectively, representing $33.6 billion, $33.3 billion and
$32.3 billion of insurance in force, respectively. The Company ceded $339, $318
and $320 of accident and health premium to HLA in 1997, 1996 and 1995,
respectively. The Company assumed $89, $101 and $103 of premium in 1997, 1996
and 1995, respectively, representing $8.2 billion, $8.5 billion and $8.5 billion
of individual life insurance in force, respectively, from HLA.
Life reinsurance recoveries, which reduce death and other benefits,
approximated $158, $140 and $220 for the years ended December 31, 1997, 1996 and
1995, respectively.
As of December 31, 1997, the Company had reinsurance recoverables of $5.0
billion from Mutual Benefit Life Assurance Corporation ("Mutual Benefit"),
supported by assets in a security trust of $5.0 billion (including policy loans
and accrued interest of $4.5 billion). The risk of Mutual Benefit becoming
insolvent is mitigated by the reinsurance agreement's requirement that the
assets be kept in a security trust with the Company as sole beneficiary. The
Company has no other significant reinsurance-related concentrations of credit
risk.
11. RELATED PARTY TRANSACTIONS
Transactions of the Company with HA&I and its affiliates relate principally
to tax settlements, reinsurance, insurance coverage, rental and service fees,
payment of dividends and capital contributions. In addition, certain affiliated
insurance companies purchased group annuity contracts from the Company to fund
pension costs and claim annuities to settle casualty claims. Substantially all
general insurance expenses related to the Company, including rent and employee
benefit plan expenses, are initially paid by The Hartford. Direct expenses are
allocated to the Company using specific identification, and indirect expenses
are allocated using other applicable methods. Indirect expenses include those
for corporate areas which,
<PAGE>
72
- --------------------------------------------------------------------------------
depending on type, are allocated based on either a percentage of direct expenses
or on utilization. Indirect expenses allocated to the Company by The Hartford
were $34, $40, and $45 in 1997, 1996 and 1995, respectively. Management believes
that the methods used are reasonable.
The rent paid to Hartford Fire for space occupied by the Company was $7 in
1997, and $3 in 1996 and 1995. The Company expects to pay annual rent of $7 in
1998 and 1999, respectively, $12 in 2000 and 2001, respectively, $13 in 2002 and
$87 thereafter, over the remaining term of the sublease, which expires on
December 31, 2009. Rental expense is recognized over a level basis over the term
of the sublease and amounted to approximately $9 in 1997 and $8 in 1996 and
1995.
12. STATUTORY RESULTS
The domestic insurance subsidiaries of Hartford Life prepare their statutory
financial statements in accordance with accounting practices prescribed by the
State of Connecticut Insurance Department. Prescribed statutory accounting
practices include publications of the National Association of Insurance
Commissioners ("NAIC"), as well as state laws, regulations, and general
administrative rules.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Statutory net income......................... $ 214 $ 144 $ 112
------ ------ ------
Statutory surplus............................ $1,441 $1,207 $1,125
------ ------ ------
------ ------ ------
</TABLE>
A significant percentage of the consolidated statutory surplus is
permanently reinvested or is subject to various state regulatory restrictions
which limit the payment of dividends without prior approval. The total amount of
statutory dividends which may be paid by the insurance subsidiaries of the
Company in 1998 is estimated to be $144.
13. COMMITMENTS AND CONTINGENT LIABILITIES
(A) LITIGATION
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for monetary and punitive damages have
been asserted. Although there can be no assurances, management, at the present
time, does not anticipate that the ultimate liability arising from such pending
or threatened litigation will have a material effect on the financial condition
or operating results of the Company.
(B) GUARANTY FUNDS
Under insurance guaranty fund laws in each state, the District of Columbia
and Puerto Rico, insurers licensed to do business can be assessed by state
insurance guaranty associations for certain obligations of insolvent insurance
companies to policyholders and claimants. Recent regulatory actions against
certain large life insurers encountering financial difficulty have prompted
various state insurance guaranty associations to begin assessing life insurance
companies for the deemed losses. Most of these laws do provide, however, that an
assessment may be excused or deferred if it would threaten an insurer's solvency
and further provide annual limits on such assessments. A large part of the
assessments paid by the Company's insurance subsidiaries pursuant to these laws
may be used as credits for a portion of the Company's insurance subsidiaries'
premium taxes. The Company paid guaranty fund assessments of approximately $15,
$11 and $10 in 1997, 1996 and 1995, respectively, of which $4, $5, and $6 were
estimated to be creditable against premium taxes.
14. BUSINESS SEGMENT INFORMATION
The Company, along with its parent, sells financial products such as fixed
and variable annuities, retirement plan services, and life and disability
insurance on both an individual and a group basis. The Company divides its core
businesses into three segments: Annuity, Individual Life Insurance, and Employee
Benefits. The Company also maintains a Guaranteed Investment Contracts segment,
which is primarily comprised of guaranteed rate contract business written prior
to 1995 and a Corporate Operation. The Annuity segment offers individual
variable annuities and fixed market value adjusted annuities, deferred
compensation and retirement plan services, mutual funds, investment management
services and other financial products. The Individual Life Insurance segment
sells a variety of individual life insurance products, including variable life,
universal life, interest-sensitive whole life, and term life policies. The
Employee Benefits segment sells group insurance products, including group life,
group short and long-term disability and corporate owned life insurance, and
engages in certain international operations. The Guaranteed Investment Contracts
segment sells a limited amount of guaranteed investment contracts and contains
Closed Book GRC. Through its Corporate Operation, the Company reports items that
are not directly allocable to any of its business segments. Included in the
Corporate Operation are unallocated income and expense and certain other items
not directly allocable to any segment. Net realized capital gains and losses are
recognized in the period of realization, but are allocated to the segments
utilizing durations of the segment portfolios.
<PAGE>
73
- --------------------------------------------------------------------------------
The following table outlines revenues, operating income and assets by
business segment:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Annuity.............................................. $ 1,269 $ 968 $ 759
Individual Life Insurance............................ 487 440 383
Employee Benefits.................................... 972 1,366 1,273
Guaranteed Investment Contracts...................... 241 34 337
Corporate Operation.................................. 40 81 52
-------- -------- --------
Total revenues..................................... $ 3,009 $ 2,889 $ 2,804
-------- -------- --------
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)
Annuity.............................................. $ 317 $ 226 $ 171
Individual Life Insurance............................ 85 68 56
Employee Benefits.................................... 53 44 37
Guaranteed Investment Contracts...................... -- (346) (103)
Corporate Operation.................................. 14 66 30
-------- -------- --------
Total income before income tax expense............. $ 469 $ 58 $ 191
-------- -------- --------
-------- -------- --------
ASSETS
Annuity $ 69,152 $ 52,877 $ 39,732
Individual Life Insurance............................ 4,918 3,753 3,173
Employee Benefits.................................... 18,196 14,708 13,494
Guaranteed Investment Contracts...................... 3,347 4,533 6,069
Corporate Operation.................................. 2,343 1,891 1,729
-------- -------- --------
Total assets....................................... $ 97,956 $ 77,762 $ 64,197
-------- -------- --------
-------- -------- --------
</TABLE>
<PAGE>
74
- --------------------------------------------------------------------------------
SCHEDULE I -- SUMMARY OF INVESTMENTS OTHER THAN INVESTMENTS IN AFFILIATES
AS OF DECEMBER 31, 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
AMOUNT AT
WHICH
FAIR SHOWN ON
TYPE OF INVESTMENT COST VALUE BALANCE SHEET
- --------------------------------------------- ------- ------- --------------
<S> <C> <C> <C>
Fixed Maturities
Bonds and Notes
U. S. gov't and gov't agencies and
authorities (guaranteed and sponsored) $ 217 $ 219 $ 219
U. S. gov't and gov't agencies and
authorities (guaranteed and sponsored) --
asset-backed.............................. 1,175 1,204 1,204
States, municipalities and political
subdivisions.............................. 211 217 217
International governments.................. 376 393 393
Public utilities........................... 871 894 894
All other corporate including
international............................. 5,033 5,208 5,208
All other corporate -- asset-backed........ 4,091 4,124 4,124
Short-term investments..................... 1,318 1,318 1,318
Certificates of deposit...................... 593 599 599
------- ------- -------
Total fixed maturities....................... 13,885 14,176 14,176
------- ------- -------
Equity Securities
Common Stocks
Public utilities........................... -- -- --
Banks, trusts and insurance companies...... -- -- --
Industrial and miscellaneous............... 166 180 180
Nonredeemable preferred stocks............. -- -- --
------- ------- -------
Total equity securities...................... 166 180 180
------- ------- -------
Total fixed maturities and equity
securities.................................. 14,051 14,356 14,356
------- ------- -------
Real Estate.................................. -- -- --
Other Investments
Mortgage loans on real estate.............. -- -- --
Policy loans............................... 3,756 3,756 3,756
Investments in partnerships, trusts and
other..................................... 47 91 47
------- ------- -------
Total other investments...................... 3,803 3,847 3,803
------- ------- -------
Total investments............................ $17,854 $18,203 $18,159
------- ------- -------
------- ------- -------
</TABLE>
<PAGE>
75
- --------------------------------------------------------------------------------
SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
FUTURE
POLICY
BENEFITS,
UNPAID OTHER
DEFERRED CLAIMS POLICY
POLICY AND CLAIM CLAIMS AND PREMIUMS NET
ACQUISITION ADJUSTMENT BENEFITS AND OTHER INVESTMENT
SEGMENT COSTS EXPENSES PAYABLE CONSIDERATIONS INCOME
- --------------------------------------------- ----------- --------- ---------- --------------- ---------
<S> <C> <C> <C> <C> <C>
1997
Annuity...................................... $2,478 $2,070 $ 6,838 $ 769 $ 500
Individual Life Insurance.................... 837 392 2,182 323 164
Employee Benefits............................ -- 780 9,232 541 431
Guaranteed Investment Contracts.............. -- -- 2,782 2 239
Corporate Operation.......................... -- 28 -- 2 34
----------- --------- ---------- ------ ---------
Consolidated operations...................... $3,315 $3,270 $21,034 $1,637 $1,368
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
1996
Annuity...................................... $2,030 $1,526 $ 6,016 $ 535 $ 433
Individual Life Insurance.................... 730 346 2,160 287 153
Employee Benefits............................ -- 574 9,834 881 485
Guaranteed Investment Contracts.............. -- -- 4,124 2 251
Corporate Operation.......................... -- 28 -- -- 75
----------- --------- ---------- ------ ---------
Consolidated operations...................... $2,760 $2,474 $22,134 $1,705 $1,397
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
1995
Annuity...................................... $1,561 $1,314 $ 5,661 $ 319 $ 400
Individual Life Insurance.................... 615 706 1,932 246 137
Employee Benefits............................ 12 325 9,285 922 351
Guaranteed Investment Contracts.............. -- 28 5,720 -- 377
Corporate Operation.......................... -- -- -- -- 63
----------- --------- ---------- ------ ---------
Consolidated operations...................... $2,188 $2,373 $22,598 $1,487 $1,328
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
<CAPTION>
NET BENEFITS, AMORTIZATION
REALIZED CLAIMS AND OF DEFERRED
CAPITAL CLAIM POLICY
GAINS ADJUSTMENT ACQUISITION DIVIDENDS TO OTHER
SEGMENT (LOSSES) EXPENSES COSTS POLICYHOLDERS EXPENSES
- --------------------------------------------- ----------- ----------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
1997
Annuity...................................... $ -- $ 445 $250 $ -- $ 257
Individual Life Insurance.................... -- 242 83 -- 77
Employee Benefits............................ -- 425 2 240 252
Guaranteed Investment Contracts.............. -- 232 -- -- 9
Corporate Operation.......................... 4 35 -- -- (9)
----------- ----------- ----- ----- -----
Consolidated operations...................... $ 4 $1,379 $335 $240 $ 586
----------- ----------- ----- ----- -----
----------- ----------- ----- ----- -----
1996
Annuity...................................... $ -- $ 412 $174 $ -- $ 156
Individual Life Insurance.................... -- 245 59 -- 68
Employee Benefits............................ -- 546 -- 635 141
Guaranteed Investment Contracts.............. (219) 332 1 -- 47
Corporate Operation.......................... 6 -- -- -- 15
----------- ----------- ----- ----- -----
Consolidated operations...................... $(213) $1,535 $234 $635 $ 427
----------- ----------- ----- ----- -----
----------- ----------- ----- ----- -----
1995
Annuity...................................... $ -- $ 317 $117 $ -- $ 114
Individual Life Insurance.................... -- 203 70 -- 54
Employee Benefits............................ -- 424 -- 675 137
Guaranteed Investment Contracts.............. -- 453 12 -- 15
Corporate Operation.......................... (11) 25 -- -- (3)
----------- ----------- ----- ----- -----
Consolidated operations...................... $ (11) $1,422 $199 $675 $ 317
----------- ----------- ----- ----- -----
----------- ----------- ----- ----- -----
</TABLE>
<PAGE>
76
- --------------------------------------------------------------------------------
SCHEDULE IV -- REINSURANCE
(IN MILLIONS)
<TABLE>
<CAPTION>
CEDED TO ASSUMED FROM PERCENTAGE
GROSS OTHER OTHER NET OF AMOUNT
AMOUNT COMPANIES COMPANIES AMOUNT ASSUMED TO NET
-------- -------------- -------------- -------- ---------------
<S> <C> <C> <C> <C> <C>
For the year ended December 31, 1997
Life insurance in force........................... $245,487 $ 178,771 $ 33,156 $ 99,872 33.2%
Insurance revenues
Life insurance and annuities.................... 1,818 340 157 1,635 9.6%
Accident and health insurance................... 346 346 2 2 100.0%
-------- -------------- ------- --------
Total insurance revenues.......................... $ 2,164 $ 686 $ 159 $ 1,637 9.7%
-------- -------------- ------- --------
-------- -------------- ------- --------
For the year ended December 31, 1996
Life insurance in force......................... $177,094 $ 106,146 $ 31,957 $102,905 31.1%
Insurance revenues
Life insurance and annuities.................... 1,801 298 169 1,672 10.1%
Accident and health insurance................... 337 325 21 33 63.6%
-------- -------------- ------- --------
Total insurance revenues.......................... $ 2,138 $ 623 $ 190 $ 1,705 11.1%
-------- -------------- ------- --------
-------- -------------- ------- --------
For the year ended December 31, 1995
Life insurance in force......................... $182,716 $ 112,774 $ 26,996 $ 96,938 27.8%
Insurance revenues
Life insurance and annuities.................... 1,232 325 574 1,481 38.8%
Accident and health insurance................... 313 324 17 6 283.3%
-------- -------------- ------- --------
Total insurance revenues.......................... $ 1,545 $ 649 $ 591 $ 1,487 39.7%
-------- -------------- ------- --------
-------- -------------- ------- --------
</TABLE>
<PAGE>
PART II
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
Reconciliation and tie between items in N-8B-2 and Prospectus.
The prospectuses consisting of 76 pages.
The undertaking to file reports.
Representation of Reasonableness of Fees.
The undertaking pursuant to Rule 484(b)(1) under the Securities Act
of 1933.
The signatures.
Written consents of the following persons:
A. Pauline Gyllenhammer, FSA, MAAA (Exhibit 6)
B. Arthur Andersen LLP, Independent Public Accountants (Exhibit 7)
The following exhibits:
1. Copies of all exhibits required by paragraph A of instructions for
Exhibits to Form N-8B-2:
(1) Resolution of Board of Directors of Hartford Life Insurance
Company ("Hartford") authorizing the establishment of ICMG
Registered Variable Life Separate Account A.(1)
(2) Not applicable.
(3)(a) Principal Underwriting Agreement.(4)
(3)(b) Form of Selling Agreements.(5)
(3)(c) Not Applicable.
(4) Not Applicable.
(5) Form of Group Flexible Premium Life Insurance Policy and
Certificate for Group Flexible Premium Variable Life Insurance
Policy.(1)
(6)(a) Charter of Hartford.(2)
(6)(b) Bylaws of Hartford.(3)
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) Form of Enrollment Form for Certificate Issued Under Group
Flexible Premium Variable Life Insurance Policies.(4)
2. Opinion and Counsel of Lynda Godkin, Senior Vice President, General
Counsel and Corporate Secretary.
3. No financial statement has been omitted from the Prospectus pursuant to
Instruction 1(b) or (c) of Part I.
<PAGE>
4. Not applicable.
5. Not applicable.
6. Opinion and Consent of Pauline Gyllenhammer, FSA, MAAA.
7. Consent of Arthur Andersen LLP, Independent Public Accountants.
8. Copy of Power of Attorney.1
__________
(1) Incorporated by reference to the Initial filing to the Registration
Statement on Form S-6, File No. 333-60515, of Hartford Life
Insurance Company filed with the Securities and Exchange Commission
on August 3, 1998.
(2) Incorporated by reference to Post-Effective Amendment No. 4 to the
Registration Statement on Form S-6, File No. 33-83656, of Hartford
Life Insurance Company filed with the Securities and Exchange
Commission on April 14, 1997.
(3) Incorporated by reference to Post-Effective Amendment No. 3 to the
Registration Statement on Form S-6, File No. 33-83656, of Hartford
Life Insurance Company filed with the Securities and Exchange
Commission on May 1, 1996.
(4) Incorporated by reference to the Initial Filing to the Registration
Statement on Form S-6, File No. 33-63731, of Hartford Life and Annuity
Insurance Company filed with the Securities and Exchange Commission on
October 30, 1995.
(5) Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement on Form S-6, File No. 33-63731, of Hartford Life
and Annuity Insurance Company filed with the Securities and Exchange
Commission on May 21, 1996.
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file
with the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
UNDERTAKINGS AND REPRESENTATIONS AS REQUIRED BY RULE 6E-3(T)
1. Separate Account A meets the definition of "Separate Account" under
Rule 6e-3(T).
2. Hartford undertakes to keep and make available to the Commission upon
request any documents used to support any representations as to the
reasonableness of fees.
REPRESENTATION OF REASONABLENESS OF FEES
Hartford Life Insurance Company ("Hartford") hereby represents that the
aggregate fees and charges under the Policy are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks
assumed by Hartford.
UNDERTAKING ON INDEMNIFICATION
Under Section 33-772 of the Connecticut General Statutes, unless limited
by its certificate of incorporation, the Registrant must indemnify a director
who was wholly successful, on the merits or otherwise, in the defense of any
proceeding to which he was a party because he is or was a director of the
corporation against reasonable expenses incurred by him in connection with
the proceeding.
The Registrant may indemnify an individual made a party to a proceeding
because he is or was a director against liability incurred in the proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Registrant, and, with respect to any
criminal proceeding, had no reason to believe his conduct was unlawful. Conn.
Gen. Stat. Section 33-771(a). Additionally, pursuant to Conn. Gen. Stat.
Section 33-776, the Registrant may indemnify officers and employees or agents
for liability incurred and for any expenses to which they becomes subject by
reason of being or having been an employees or officers of the Registrant.
Connecticut law does not prescribe standards for the indemnification of
officers, employees and agents and expressly states that their
indemnification may be broader than the right of indemnification granted to
directors.
The foregoing statements are specifically made subject to the detailed
provisions of Section 33-770 et seq.
Notwithstanding the fact that Connecticut law obligates the Registrant
to indemnify only a director that was successful on the merits in a suit,
under Article VIII, Section 2 of the Registrant's bylaws, the Registrant must
indemnify both directors and officers of the Registrant who are parties or
threatened to be parties to a legal proceeding by reason of his being or
having been a director or officer of the Registrant for any expenses if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the company, and with respect to criminal
proceedings, had no reason to believe his conduct was unlawful. Unless
otherwise mandated by a court, no indemnification shall be made if such
officer or director is adjudged to be liable for negligence or misconduct in
the performance of his duty to the Registrant.
Additionally, the directors and officers of Hartford and Hartford Equity
Sales Company, Inc. ("HESCO") are covered under a directors and officers
liability insurance policy issued to The Hartford Financial Services Group,
Inc. and its subsidiaries. Such policy will reimburse the Registrant for any
payments that it shall make to directors and officers pursuant to law and
will, subject to certain exclusions contained in the policy, further pay any
other costs,
<PAGE>
charges and expenses and settlements and judgments arising from any
proceeding involving any director or officer of the Registrant in his past or
present capacity as such, and for which he may be liable, except as to any
liabilities arising from acts that are deemed to be uninsurable.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
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 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, and attested, all in the Town of
Simsbury, and State of Connecticut, on the 20th day of November, 1998.
ICMG REGISTERED VARIABLE LIFE
SEPARATE ACCOUNT A
(Registrant)
By: /s/ Gregory A. Boyko
-----------------------------------------
Gregory A. Boyko, Senior Vice President,
Director
HARTFORD LIFE INSURANCE COMPANY
(Depositor)
By: /s/ Gregory A. Boyko
-----------------------------------------
Gregory A. Boyko, Senior Vice President,
Director
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons and in the capacities and
on the dates indicated.
Gregory A. Boyko, Senior Vice President,
Director*
John P. Ginnetti, Executive Vice
President, Director*
Lynda Godkin, Senior Vice President, General
Counsel & Corporate Secretary, Director*
Thomas M. Marra, Executive Vice *By: /s/ Leslie T. Soler
President, Director* -----------------------
Lowndes A. Smith, President, Leslie T. Soler
Chief Operating Officer, Attorney-In-Fact
Director* Dated: November 20, 1998
Raymond P. Welnicki, Senior Vice
President, Director*
Lizabeth H. Zlatkus, Vice President
Director*
David M. Znamierowski, Senior Vice
President, Director*
<PAGE>
EXHIBIT INDEX
2. Opinion and Consent of Lynda Godkin, Senior Vice President,
General Counsel and Corporate Secretary.
6. Opinion and Consent of Pauline Gyllenhammer, FSA, MAAA.
7. Consent of Arthur Andersen LLP, Independent Public Accountants.
<PAGE>
EXHIBIT 2
[LOGO]
HARTFORD LIFE
November 20, 1998 LYNDA GODKIN, SENIOR VICE PRESIDENT,
GENERAL COUNSEL & CORPORATE SECRETARY
Board of Directors
Hartford Life Insurance Company
200 Hopmeadow Street
Simsbury, CT 06089
RE: ICMG REGISTERED VARIABLE LIFE SEPARATE ACCOUNT A
HARTFORD LIFE INSURANCE COMPANY
FILE NO. 333-60515
Dear Sir/Madam:
I have acted as General Counsel to Hartford Life Insurance Company (the
"Company"), a Connecticut insurance company, and Hartford Life Insurance
Company Separate Account Five (the "Account") in connection with the
registration of an indefinite amount of securities in the form of modified
single premium variable life insurance policy (the "Policies") with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended. I have examined such documents (including the Form S-6 Registration
Statement) and reviewed such questions of law as I considered necessary and
appropriate, and on the basis of such examination and review, it is my
opinion that:
1. The Company is a corporation duly organized and validly existing as a
stock life insurance company under the laws of the State of Connecticut
and is duly authorized by the Insurance Department of the State of
Connecticut to issue the Contracts.
2. The Account is a duly authorized and validly existing separate account
established pursuant to the provisions of Section 38a-433 of the
Connecticut Statutes.
3. To the extent so provided under the Policies, that portion of the assets
of the Account equal to the reserves and other contract liabilities with
respect to the Account will not be chargeable with liabilities arising
out of any other business that the Company may conduct.
4. The Policies, when issued as contemplated by the Form S-6 Registration
Statement, will constitute legal, validly issued and binding obligations
of the Company.
<PAGE>
Board of Directors
November 20, 1998
Page 2
I hereby consent to the filing of this opinion as an exhibit to the Form S-6
Registration Statement for the Policies and the Account.
Sincerely,
/s/ Lynda Godkin
Lynda Godkin
<PAGE>
EXHIBIT 6
[LOGO]
HARTFORD LIFE
Pauline Gyllenhammer, ASA, MAAA
Senior Actuarial Associate
November 20, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sir:
This opinion is furnished in connection with the Form S-6 Registration Statement
under the Securities Act of 1933, as amended ("Securities Act"), of a certain
group flexible premium variable life insurance policy (the "Policy") that will
be offered and sold by Hartford Life Insurance Company and certain units of
interest to be issued in connection with the Policy.
The hypothetical illustrations of the Policy used in the Form S-6 Registration
Statement accurately reflect reasonable estimates of projected performance of
the Policy under the stipulated rates of investment return, the contractual
expense deductions and guaranteed cost-of-insurance rates, and utilizing a
reasonable estimation for expected fund operating expenses.
I hereby consent to the use of this opinion as an exhibit to the Form S-6
Registration Statement and to the reference to my name under the heading
"Experts" in the Prospectus included as part of such Form S-6 Registration
Statement.
Very truly yours,
/s/ Pauline Gyllenhammer
Pauline Gyllenhammer, ASA, MAAA
Senior Actuarial Associate
<PAGE>
EXHIBIT 7
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our
report (and to all references to our Firm) included in or made a part of
this Registration Statement File No. 333-60515 for Hartford Life Insurance
Company ICMG Registered Variable Life Separate Account A on Form S-6.
/s/ Arthur Andersen LLP
Hartford, Connecticut
November 20, 1998
