<PAGE>
FILE NO. 33-19948
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
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FORM N-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PRE-EFFECTIVE AMENDMENT NO. / /
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POST-EFFECTIVE AMENDMENT NO. 9 /X/
AND/OR
REGISTRATION STATEMENT
UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 10
(check appropriate box or boxes)
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO (QP VARIABLE ACCOUNT)
(Exact Name of Registrant)
HARTFORD LIFE INSURANCE COMPANY
(Name of Depositor)
P.O. Box 2999
Hartford, CT 06104-2999
(Address of Depositor's Principal Offices)
Depositor's Telephone Number: (203) 843-8847
RODNEY J. VESSELS, ESQUIRE
P.O. Box 2999
Hartford, CT 06104-2999
(Name and Address of Agent for Service)
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APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to paragrah (b) of Rule 485
/X/ on May 1, 1995 pursuant to paragraph (b)(1)(v) of Rule 485
/ / 60 days after filing pursuant to paragraph (a)(1) of Rule 485
/ / on May 1, 1995 pursuant to paragraph (a)(1) of Rule 485
/ / 75 days after filing pursuant to paragraph (a)(2) of Rule 485
/ / on May 1, 1995 pursuant to paragraph (a)(2) of Rule 485
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CALCULATION OF REGISTRATION FEE UNDER SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES BEING OFFERING AGGREGATE REGISTRATION
BEING REGISTERED REGISTERED PRICE PER UNIT OFFERING PRICE FEE
<S> <C> <C> <C> <C>
Hartford Life Insurance Pursuant to Regulation 270.24f-2
Company Separate Account Two under the Investment Company
(QP Variable Account) Act of 1940, Registrant has
Units of Interest previously elected to register
an indefinite number of units
of interest in this Separate
Account.
</TABLE>
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RULE 24F-2 NOTICE FOR THE REGISTRANT'S MOST RECENT FISCAL YEAR WILL BE FILED
ON OR ABOUT FEBRUARY 28, 1995
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<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(A)
<TABLE>
<CAPTION>
N-4 ITEM NO. PROSPECTUS HEADING
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<C> <S> <C>
1. Cover Page........................................... Cover Page
2. Definitions.......................................... Glossary of Special Terms
3. Synopsis or Highlights............................... Summary
4. Condensed Financial Information...................... Accumulation Unit Values; Yield Information
5. General Description of Registrant, Depositor, and
Portfolio Companies................................ QP Variable Account Contract and Separate Account Two;
Hartford Life Insurance Company and the Funds;
Miscellaneous
6. Deductions........................................... Charges Under the Contract
7. General Description of Variable Annuity Contracts.... Operation of the Contract
Payment of Benefits; QP Variable Account Contract and
Separate Account Two
8. Annuity Period....................................... Payment of Benefits
9. Death Benefit........................................ Payment of Benefits; Operation of the Contract
10. Purchases and Contract Value......................... Operation of the Contract
11. Redemptions.......................................... Payment of Benefits
12. Taxes................................................ Federal Tax Considerations
13. Legal Proceedings.................................... Miscellaneous -- Are there any material legal proceedings
affecting the Separate Account?
14. Table of Contents of the Statement of Additional
Information........................................ Table of Contents of the Statement of Additional
Information
</TABLE>
<PAGE>
HARTFORD
LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO (VARIABLE ACCOUNT QP)
[LOGO]
The variable annuity Contracts (the "Contract" or "Contracts") described
in this Prospectus are designed for purchase for retirement planning purposes
only.
The Contracts are issued by Hartford Life Insurance Company ("HL").
Payments for the Contracts will be held in a series of Hartford Life Insurance
Company Separate Account Two ("Variable Account QP" or the "Separate
Account")of HL.
The Contracts are designed for use in conjunction with Qualified Pension
and Profit-Sharing Plans, HR-10 Plans, Tax-Deferred Annuity Plans (for public
school teachers and employees and employees of certain other tax-exempt and
qualifying employers), deferred compensation plans for state and local
governments (the Contract reserves for which are afforded qualified plan
reserve treatment) and Individual Retirement Annuities or Accounts ("IRA's").
The following Sub-Accounts are available under the Contracts. Opposite
each Sub-Account is the name of the underlying investment for that Account.
Bond Fund Sub-Account -- shares of Hartford Bond Fund, Inc. ("Bond
Fund") (formerly the Fixed Income Fund)
Stock Fund Sub-Account -- shares of Hartford Stock Fund, Inc. ("Stock
Fund")
Money Market Fund -- shares of HVA Money Market Fund, Inc. ("Money
Sub-Account* Market Fund")*
* (not available under Contracts issued on or after December 7, 1981)
This Prospectus sets forth the information concerning the Separate Account
that investors ought to know before investing. This Prospectus should be kept
for future reference. Additional information about the Separate Account has
been filed with the Securities and Exchange Commission and is available
without charge upon request. To obtain the Statement of Additional Information
send a written request to Hartford Life Insurance Company, Attn: RPVA
Administration, P.O. Box 2999, Hartford, CT 06104-2999. The Table of Contents
for the Statement of Additional Information may be found on page of this
Prospectus. The Statement of Additional Information is incorporated by
reference to this Prospectus.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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Prospectus Dated: May 1, 1995
Statement of Additional Information Dated: May 1, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
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<S> <C>
GLOSSARY OF SPECIAL TERMS............................................. 3
FEE TABLE............................................................. 5
SUMMARY............................................................... 10
ACCUMULATION UNIT VALUES.............................................. 12
INTRODUCTION.......................................................... 13
THE QP VARIABLE ACCOUNT CONTRACT AND SEPARATE ACCOUNT TWO
(QP VARIABLE ACCOUNT)............................................... 13
What is the Variable Account QP Contract?........................... 13
Who can buy these Contracts?........................................ 13
What is the Separate Account and how does it operate?............... 13
OPERATION OF THE CONTRACT............................................. 14
How is a Contribution credited?..................................... 14
May I make changes in the amounts of my Contributions?.............. 15
Are there any limits on Contributions?.............................. 15
May I transfer assets between Sub-Accounts?......................... 15
May I obtain a Contract in exchange for another Contract?........... 15
What happens if a Contract Owner fails to make Contributions?....... 16
May I assign or transfer my Contract?............................... 16
How do I know what my account is worth?............................. 16
How is the Accumulation Unit value determined?...................... 16
How are the underlying Fund shares valued?.......................... 16
PAYMENT OF BENEFITS................................................... 17
What would my Beneficiary receive as death proceeds?................ 17
How can a Contract be redeemed or surrendered?...................... 17
Is a partial termination of a Contract allowed?..................... 18
Can payment of the redemption or surrender value ever be postponed
by HL
beyond the seven day period?...................................... 19
May I surrender once Annuity payments have started?................. 19
May I reinvest after a redemption?.................................. 19
Can a Contract be suspended by a Contract Owner?.................... 19
How do I elect an Annuity Commencement Date and Form of Annuity?.... 19
What is the minimum amount that I may select for an Annuity
payment?.......................................................... 20
What are the available Annuity Options under the Contract?.......... 20
How are Annuity payments determined?................................ 21
Can a Contract be modified?......................................... 22
CHARGES UNDER THE CONTRACT............................................ 23
How are the charges under these Contracts made?..................... 23
Are there any differences in charges made?.......................... 24
What is the mortality and expense risk charge?...................... 24
Are there any administrative charges?............................... 25
How much are deductions for Premium Taxes on these Contracts?....... 25
HARTFORD LIFE INSURANCE COMPANY AND THE FUNDS......................... 25
What is HL?......................................................... 25
What are the Funds?................................................. 25
FEDERAL TAX CONSIDERATIONS............................................ 26
What are some of the federal tax consequences which affect these
Contracts?........................................................ 26
MISCELLANEOUS......................................................... 30
What are my voting rights?.......................................... 30
Will other Contracts be participating in this Separate Account?..... 30
How are the Contracts sold?......................................... 30
Who is the custodian of the Separate Account's assets?.............. 31
Are there any material legal proceedings affecting the Separate
Account?.......................................................... 31
Are you relying on any experts as to any portion of this
Prospectus?....................................................... 31
How may I get additional information?............................... 31
APPENDIX.............................................................. 32
TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION............. 37
</TABLE>
***** The purpose to the fee tables is to assist Contract Owners in
understanding the various costs and expenses which a Contract Owner will
bear. These tables reflect the expenses of the Separate Account and
Portfolio Company (in underlying mutual funds). Premium tax may also be
applicable.
2
<PAGE>
GLOSSARY OF SPECIAL TERMS
ACCUMULATION PERIOD: The period before the commencement of Annuity payments.
ACCUMULATION UNIT: An accounting unit of measure used to calculate values before
Annuity payments begin.
ACTIVE LIFE FUND: A term used to describe the sum of all Participants'
Individual Account value(s) in the Separate Account under a Contract during the
Accumulation Period.
ANNUAL CONTRACT FEE: A fee charged for establishing and maintaining a
Participant's Individual Account under a Contract.
ANNUITANT: A Participant on whose behalf Annuity payments are to be made under a
Contract.
ANNUITY: A series of payments for life, or for life with a minimum number of
payments or a determinable sum guaranteed, or for a joint lifetime and
thereafter during the lifetime of the survivor, or for payments for a designated
period.
ANNUITY COMMENCEMENT DATE: The date on which Annuity payments are to commence.
ANNUITY PERIOD: The period following the commencement of Annuity payments.
ANNUITY UNIT: An accounting unit of measure in the Separate Account used to
calculate the amount of Variable Annuity payments.
BENEFICIARY: The person(s) designated to receive Contract values in the event of
the Participant's or Annuitant's death.
CODE: The Internal Revenue Code of 1986, as amended.
COMMISSION: Securities and Exchange Commission.
CONTRACT OWNER: The Employer or entity owning the Contract.
CONTRACT YEAR: A period of 12 months commencing with the effective date of the
Contract or with any anniversary thereof.
CONTRIBUTION(S): The amount(s) paid or transferred to HL on behalf of
Participant(s).
FIXED ANNUITY: An Annuity providing for guaranteed payments which remain fixed
in amount throughout the payment period and which do not vary with the
investment experience of a separate account.
FUNDS: Currently, the Funds described commencing on page of this Prospectus.
GENERAL ACCOUNT: The General Account of the Hartford Life Insurance Company in
which reserves are maintained for Fixed Annuities during the Annuity Period.
HL: Hartford Life Insurance Company.
MINIMUM DEATH BENEFIT: The minimum amount payable upon the death of Participant
prior to age 65 and before Annuity payments have commenced.
PARTICIPANT: A person for whom an Individual Account has been establlished.
PARTICIPANT'S CONTRACT YEAR: A period of twelve (12) months commencing with the
Date of Coverage of a Participant and each successive 12 month period
thereafter.
PARTICIPANT'S INDIVIDUAL ACCOUNT: An account to which the Separate Account
Accumulation Units held by the Contract Owner on behalf of Participant under the
Contract are allocated.
PREMIUM TAX: A tax charged by a state or municipality on premiums, purchase
payments or Contract values.
QUALIFIED PLAN: A voluntary plan of an Employer which qualifies for special tax
treatment under Section 401 of the Internal Revenue Code.
SEPARATE ACCOUNT: The HL Separate Account entitled "Hartford Life Insurance
Company Separate Account Two".
SUB-ACCOUNT: Accounts established within the Separate Account with respect to a
Fund.
3
<PAGE>
VALUATION DAY: Every day the New York Stock Exchange is open for business
exclusive of the following national and local business holidays: Lincoln's
Birthday, Martin Luther King Day, Columbus Day, Veteran's Day, and the day after
Thanksgiving. The value of the Separate Account is determined at the close of
the New York Stock Exchange (currently 4:00 p.m. Eastern Time) on such days.
VALUATION PERIOD: The period between successive Valuation Days.
VARIABLE ACCOUNT OP: A series of Separate Account Two.
VARIABLE ANNUITY: An Annuity providing for payments varying in amount in
accordance with the investment experience of the assets held in the underlying
securities of the Separate Account.
4
<PAGE>
SUMMARY
A. CONTRACTS OFFERED
The Contracts are designed for use in conjunction with Qualified Pension and
Profit-Sharing Plans, HR-10 Plans, Tax-Deferred Annuity Plans (for public school
teachers and employees and employees of certain other tax-exempt and qualifying
employers), deferred compensation plans for state and local governments (the
Contract reserves for which are afforded qualified plan reserve treatment) and
IRA's.
B. DEDUCTIONS FOR SALES CHARGES
Each periodic payment made under the Contracts will be subject to a sales
charge deduction and a deduction of .75% of each payment for the Minimum Death
Benefit provided by HL. (See, "How are the charges in these Contracts made?"
page .) A further deduction will be made for any Premium Taxes that may be due
(see "How much are deductions for Premium Taxes on these Contracts?" on page
).
C. MINIMUM DEATH BENEFITS
A Minimum Death Benefit is provided in the event of death of the Participant
under a Participant's Individual Account prior to the earlier of the
Participant's 65th birthday or the Annuity Commencement Date (see "What would my
Beneficiary receive as death proceeds?" commencing on page ).
D. ANNUITY OPTIONS
The Annuity Commencement Date will not be deferred beyond the Participant's
75th birthday or such earlier date may be required by applicable law and/or
regulation. If a Contract Owner does not elect otherwise, HL reserves the right
to begin Annuity payments at age 65 under an option providing for a life Annuity
with 120 monthly payments certain (see "What are the available Annuity options
under the Contract?" on page ). However, HL will not assume responsibility in
determining or monitoring minimum distributions beginning at age 70 1/2.
E. DEDUCTIONS FOR PREMIUM TAXES
Deductions will be made as appropriate, for the payment of any Premium Taxes
that may be levied against the Contract. The range is generally between 0% and
4.00%, (see "Charges Under The Contract" commencing on page ).
F. ASSET CHARGE IN THE SEPARATE ACCOUNT
For assuming the mortality and expense risks under the Contracts, HL will
make a daily charge against the value of the Contract held in the Separate
Account at the rate of 1.00% per annum on the Bond Fund and Stock Fund
Sub-Accounts and .375% per annum on the Money Market Fund Sub-Account. (See
"What is the Mortality and Expense Risk Charge?" on page .)
G. ANNUAL CONTRACT FEE
An Annual Contract Fee will be charged against the value of each
Participant's Individual Account under a Contract at the end of each calendar
year and at the time of full surrender of account values. The Annual Contract
Fee is set at $10.00 per year on all Contracts. No Contract fee deduction will
be made during the Annuity payment period. (See "Charges Under The Contract"
commencing on page .)
H. MINIMUM PAYMENT
The minimum Contribution that may be made each month on behalf of a
Participant's Individual Account under a Contract is $30.00 unless the Contract
Owner provides otherwise.
5
<PAGE>
I. VOTING RIGHTS OF CONTRACT OWNERS
Contract Owners and/or vested Participants will have the right to vote on
matters affecting the underlying Fund to the extent that proxies are solicited
by such Fund. If a Contract Owner does not vote, HL shall vote such interest in
the same proportion as shares of the Fund for which instructions have been
received by HL (see "What are my voting rights?" on page ).
6
<PAGE>
ACCUMULATION UNIT VALUES
(FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE PERIOD)
The folllowing information for each of the five years in the period ended
December 31, 1993, has been examined by Arthur Andersen LLP, Independent public
accountants, whose report thereon is included in the Statement of Additional
Information, which is Incorporated by reference to this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
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1994 1993 1992 1991 1990 1989 1988 1987 1986
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
QP VARIABLE ACCOUNT (1.00%)
BOND FUND SUB-ACCOUNT
Accumulation unit value at beginning of period....... $3.795 $3.478 $3.328 $2.887 $2.690 $2.423 $2.275 $2.298 $2.069
Accumulation unit value at end of period............. $3.609 $3.795 $3.478 $3.328 $2.887 $2.690 $2.423 $2.275 $2.298
Number accumulation units outstanding
at end of period (in thousands)..................... 1,668 1,854 1,978 2,151 2,316 2,643 3,393 3,948 4,964
QP VARIABLE ACCOUNT (1.00%)
STOCK FUND SUB-ACCOUNT
Accumulation unit value at beginning of period....... $7.192 $6.353 $5.831 $4.726 $4.966 $3.979 $3.378 $3.237 $2.911
Accumulation unit value at end of period............. $6.986 $7.192 $6.353 $5.831 $4.726 $4.966 $3.979 $3.378 $3.237
Number accumulation units outstanding
at end of period (in thousands)..................... 4,284 4,669 4,890 5,296 5,847 6,576 8,528 9,889 12,384
QP VARIABLE ACCOUNT (.825%)
STOCK FUND SUB-ACCOUNT
Accumulation unit value at beginning of period....... $5.756 $5.076 $4.650 $3.763 $3.947 $3.157 $2.675 $2.559 $2.297
Accumulation unit value at end of period............. $5.601 $5.756 $5.076 $4.650 $3.763 $3.947 $3.157 $2.675 $2.559
Number accumulation units outstanding
at end of period (in thousands)..................... 1,435 1,506 1,607 1,726 1,979 2,173 1,416 2,735 3,020
QP VARIABLE ACCOUNT (.375%)
MONEY MARKET FUND SUB-ACCOUNT
Accumulation unit value at beginning of period....... $2.706 $2.639 $2.556 $2.419 $2.246 $2.066 $1.931 $1.820 $1.711
Accumulation unit value at end of period............. $2.803 $2.706 $2.639 $2.556 $2.419 $$2.246 $2.066 $1.931 $1.820
Number accumulation units outstanding
at end of period (in thousands)..................... 2 4 9 28 25 52 169 153 565
<CAPTION>
1985 1984 1983 1982 1981 1980
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
QP VARIABLE ACCOUNT (1.00%)
BOND FUND SUB-ACCOUNT
Accumulation unit value at beginning of period....... $1.733 $1.546 $1.520 $1.202 $1.100 $1.046
Accumulation unit value at end of period............. $2.069 $1.733 $1.546 $1.520 $1.202 $1.100
Number accumulation units outstanding
at end of period (in thousands)..................... 5,684 5,747 6,730 11,960 12,369 11,925
QP VARIABLE ACCOUNT (1.00%)
STOCK FUND SUB-ACCOUNT
Accumulation unit value at beginning of period....... $2.236 $2.246 $1.992 $1.659 $1.666 $1.283
Accumulation unit value at end of period............. $2.911 $2.236 $2.246 $1.992 $1.659 $1.666
Number accumulation units outstanding
at end of period (in thousands)..................... 14,964 16,508 17,555 25,140 22,045 15,756
QP VARIABLE ACCOUNT (.825%)
STOCK FUND SUB-ACCOUNT
Accumulation unit value at beginning of period....... $1.762 $1.766 $1.564 $1.221 -- --
Accumulation unit value at end of period............. $2.297 $1.762 $1.766 $1.564 -- --
Number accumulation units outstanding
at end of period (in thousands)..................... 3,316 3,961 4,510 5,691 -- --
QP VARIABLE ACCOUNT (.375%)
MONEY MARKET FUND SUB-ACCOUNT
Accumulation unit value at beginning of period....... $1.583 $1.435 $1.317 $1.163 $1.009 $1.000
Accumulation unit value at end of period............. $1.711 $1.583 $1.435 $1.317 $1.163 $1.009
Number accumulation units outstanding
at end of period (in thousands)..................... 744 860 1,296 2,751 1,345
</TABLE>
7
<PAGE>
INTRODUCTION
This Prospectus has been designed to provide you with all the necessary
information to make a decision on purchasing Contracts issued in conjunction
with Qualified Pension and Profit-Sharing Plans, HR-10 Plans, Tax-Deferred
Annuity Plans (for public school teachers and employees and employees of certain
other tax-exempt and qualifying employers), deferred compensation plans for
state and local governments (the Contract reserves for which are afforded
qualified plan reserve treatment) and IRA's. This Prospectus describes only the
elements of the Contracts pertaining to the variable portion of the Contract.
The Contracts may contain a General Account Option which is not described in
this Prospectus. Please read the Glossary of Special Terms on pages and
prior to reading this Prospectus to familiarize yourself with the terms being
used.
THE QP VARIABLE ACCOUNT CONTRACT AND
SEPARATE ACCOUNT TWO (QP VARIABLE ACCOUNT)
WHAT IS THE VARIABLE ACCOUNT QP CONTRACT?
The Contracts, which may be issued on an individual or group basis, are
designed for use only with plans which qualify for special tax treatment under
a particular section of the Internal Revenue Code, such as tax-deferred
annuity plans for public school teachers and employees and employees of
certain other tax-exempt organizations; pension and profit-sharing plans;
IRA's, plans for self-employed individuals (HR-10's), and deferred
compensation plans for State and local governments.
The group Contracts are issued on an allocated and non-allocated basis.
There are three forms of allocated Contracts. One form is a group Contract
issued on a variable accumulation only basis. The other forms are individual
and group Contracts which permit both fixed and variable accumulations, as
does the non-allocated Contract.
The group allocated Contracts will cover all present and future Participants
under the Contract. A Participant under certain allocated Contracts will
receive a certificate which evidences participation in the Plan. There are no
individual allocations for Participants under the non-allocated Contracts. The
group variable only accumulation Contracts provide that Contributions made
during the accumulation period may only be invested on a variable basis,
although Annuity payments may be selected on a variable basis, a fixed basis
or a combination of both. The terms and conditions of the Contract are
essentially the same as are applicable to other allocated group Contracts
described in this Prospectus.
Contract Owners who have purchased a prior series of Contracts may continue
to make Contributions to such Contracts subject to the terms and conditions of
their Contracts. New Participants may be added to existing Contracts of the
prior series but no new Contracts of that series will be issued. Prior
Contract Owners are referred to the Appendix for a description of such earlier
Contracts.
WHO CAN BUY THESE CONTRACTS?
The Contracts are designed for use in conjunction with Qualified Pension and
Profit Sharing Plans, HR-10 Plans, Tax Deferred Annuity Plans (for public
school teachers and employees and employees of certain other tax exempt and
qualifying employers), deferred compensation plans for state and local
governments (the Contract reserves for which are afforded qualified plan
reserve treatment) and IRA's.
WHAT IS THE SEPARATE ACCOUNT AND HOW DOES IT OPERATE?
The Separate Account was established on June 2, 1986, in accordance with
authorization by the Board of Directors of HL (On March 31, 1988, QP Variable
Account was transferred to Separate Account Two and became a series thereof.)
It is the separate account in which HL sets aside and invests the assets
attributable to the Contracts sold under this Prospectus. Although the
Separate Account is an integral part of HL, it is registered as a unit
investment trust under the Investment Company Act of 1940. This registration
does not, however, involve Securities and Exchange Commission supervision of
the management or the investment practices or policies of the Separate Account
or HL.
8
<PAGE>
Under Connecticut law, the assets of the Separate Account attributable to
the Contracts offered under this Prospectus are held for the benefit of the
owners of, and the persons entitled to payments under, those Contracts. Also,
in accordance with the Contracts, the assets in the Separate Account
attributable to Contracts participating in the Separate Account are not
chargeable with liabilities arising out of any other business HL may conduct.
So, you will not be affected by the rate of return of HL's general account,
nor by the investment performance of any of HL's other separate accounts.
Your investment is allocated to one or more Sub-Accounts of the Separate
Account. Each Sub-Account is invested exclusively in the assets of one
underlying Fund. Net Purchase Payments and proceeds of transfers between
Sub-Accounts are applied to purchase shares in the appropriate Fund at net
asset value determined as of the end of the Valuation Period during which the
payments were received or the transfer made. All distributions from the Fund
are reinvested at net asset value. The value of your investment during the
Accumulation Period will therefore vary in accordance with the net income and
fluctuation in the individual investments within the underlying Fund portfolio
or portfolios. During the Variable Annuity payout period, both your annuity
payments and reserve values will vary in accordance with these factors.
HL DOES NOT GUARANTEE THE INVESTMENT RESULTS OF THE SUB-ACCOUNTS OR ANY OF
THE UNDERLYING INVESTMENTS. THERE IS NO ASSURANCE THAT THE VALUE OF A CONTRACT
DURING THE YEARS PRIOR TO RETIREMENT OR THE AGGREGATE AMOUNT OF THE VARIABLE
ANNUITY PAYMENTS WILL EQUAL THE TOTAL OF PURCHASE PAYMENTS MADE UNDER THE
CONTRACT. SINCE EACH UNDERLYING FUND HAS DIFFERENT INVESTMENT OBJECTIVES, EACH
IS SUBJECT TO DIFFERENT RISKS. THESE RISKS ARE MORE FULLY DESCRIBED IN THE
ACCOMPANYING FUND PROSPECTUS.
HL reserves the right, subject to compliance with the law, to substitute the
shares of any other registered investment company for the shares of any Fund
held by the Separate Account. Substitution may occur if shares of the Fund(s)
become unavailable or due to changes in applicable law or interpretations of
law. Current law requires notification to you of any such substitution and
approval of the Securities and Exchange Commission. HL also reserves the
right, subject to compliance with the law to offer additional Sub-Accounts
with differing investment objectives.
The Separate Account may be subject to liabilities arising from series whose
assets are attributable to other variable annuity Contracts or variable life
insurance policies offered by the Separate Account which are not described in
this Prospectus.
HL may offer additional Separate Account options from time to time under
these Contracts. Such new options will be subject to the then in effect
charges, fees, and or transfer restrictions for the Contracts for such
additional separate accounts.
OPERATION OF THE CONTRACT
HOW IS A CONTRIBUTION CREDITED?
Contributions are payable to HL by the Contract Owners on behalf of the
Participant's Individual Accounts under the Contract for the number of years
and in the intervals selected, all as set forth in the Contract.
The net Contributions to Participant's Individual Accounts under a Contract
are applied to purchase Accumulation Units of the selected Sub-Accounts. In
order to reflect such contribution on behalf of a Participant, except with
respect to an initial Contribution, there is credited to each Participant's
Individual Account under a Contract such number of Sub-Account Accumulation
Units as shall be determined by dividing the net contribution by the
appropriate variable Accumulation Unit value next computed following receipt
of the payment by the HL at its home office, P. O. Box 2999, Hartford, CT
06104-2999. With respect to an initial Contribution, the net Contribution is
credited to the Participant's Individual Account within two business days of
receipt of a properly completed application and the initial Contribution. If
an application or any other information is incomplete when received, the net
Contribution will be credited to the Participant's Individual Account within
five business days. If an initial Contribution is not credited within five
business days, it will be immediately returned unless you have been informed
of the delay and request that the Contribution not be returned. Subsequent
payments cannot be credited on the same day of receipt unless they are
accompanied by adequate instructions.
9
<PAGE>
The number of Sub-Account Accumulation Units will not change because of a
subsequent change in the Accumulation Unit's value, but the dollar value of
the Accumulation Unit will vary to reflect the investment experience of the
appropriate Fund shares.
MAY I MAKE CHANGES IN THE AMOUNTS OF MY CONTRIBUTIONS?
The minimum Contribution that may be made at any one time on behalf of a
Participant under a Contract is $30 unless the Contract Owner provides for a
lower amount. The Contract permits the allocation of Contributions in
multiples of 10% of each Contribution among the several Sub-Accounts of
Separate Account Two. The minimum amount that may be allocated to any
Sub-Account in the Separate Account shall not be less than $10. Such changes
must be requested in writing and will be effected as of the date the request
is received by HL at its home office, P. O. Box 2999, Hartford, CT 06104-2999.
ARE THERE ANY LIMITS ON CONTRIBUTIONS?
With respect to all Contracts, HL reserves the right to limit any increase
in the Contributions made to a Participant's Individual Account under a
Contract to not more than three times the total Contributions made on behalf
of such account during the initial 12 consecutive months of the Account's
existence under the Contract at the present guaranteed deduction rates.
Increases in excess of those described will be accepted only with the consent
of HL and subject to the deductions then being made for sales charges, the
Minimum Death Benefit and for provision of mortality and expense undertaking.
MAY I TRANSFER ASSETS BETWEEN SUB-ACCOUNTS?
Yes, you may transfer the values of your Sub-Account allocations from one or
more Sub-Accounts to another subject to the terms and conditions of the
Contracts.
The following transfer restrictions apply to Contracts issued or amended on
or after May 1, 1992.
Transfers of assets presently held in the General Account, or which were
held in the General Account at any time during the preceding 3 months, to the
Money Market Fund Sub-Account or to the U.S. Government Money Market
Sub-Account are prohibited.
Similarly, transfers of assets presently held in the Money Market Fund
Sub-Account or U.S. Government Money Market Sub-Account, or which were held in
either of these two Sub-Accounts or the General Account during the preceding 3
months, to the General Account are prohibited.
The right, with respect to both the Contract Owner and a Participant's
Individual Account, to transfer monies between Sub-Accounts is subject to
modification if HL determines, in its sole opinion, that the exercise of that
right by the Contract Owner/Participant is, or would be, to the disadvantage
of other Contract Owners/Participants. Any modification could be applied to
transfers to or from the same or all of the Sub-Accounts and could include,
but not be limited to, the requirement of a minimum time period between each
transfer, not accepting transfer requests of an agent acting under a power of
attorney on behalf of more than one Participant or Contract Owner, or limiting
the dollar amount that may be transferred between Sub-Accounts by a Contract
Owner/Participant at any one time.
Such restrictions may be applied in any manner reasonably designed to
prevent any use of the transfer right which is considered by HL to be to the
disadvantage of other Contract Owners/Participants. Such transfers must be
requested in writing and will be effected as of the date the request is
received by HL at its home office, P. O. Box 2999, Hartford, CT 06104-2999.
MAY I OBTAIN A CONTRACT IN EXCHANGE FOR ANOTHER CONTRACT?
Owners of policies of life insurance and annuity Contracts issued by any
other Hartford Insurance Group company or ITT affiliated company issuing such
Contracts or policies, as well as any Beneficiary, annuity Contract
Participant or Annuitant under any such policy or Contract, may apply any and
all of any such policy or Contract proceeds, payable upon the surrender or
maturity of any such policy or Contract, to a group or individual Contract
with no deductions being made for sales expenses or the Minimum Death Benefit
guarantee. The Minimum Death Benefit provision of the Contract will not be
applicable to the proceeds of a policy or Contract invested in such a Contract
purchased pursuant to the provisions of this
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<PAGE>
section. Any sums thus applied will not be taken into consideration in
determining the particular sales charges to be applied in the case of
subsequent Contributions. Subsequent Contributions will, however, be subject
to sales charge and Minimum Death Benefit guarantee deductions.
WHAT HAPPENS IF A CONTRACT OWNER FAILS TO MAKE CONTRIBUTIONS?
On Contracts other than flexible funding deferred annuity Contracts, a
Contract will be deemed paid-up within 30 days after any anniversary date of
the Contract if the Contract Owner has not remitted a Contribution to HL
during the preceding 12 month period. Effective with a change of the Contract
to paid-up status, no further Contributions will be accepted by HL and each
Participant's Individual Account will be considered an inactive account until
the commencement of Annuity payments or until the value of the Participant's
Individual Account is disbursed or applied in accordance with the termination
provisions (see "How can a Contract be redeemed or surrendered?" on page ).
Once a Contract has been placed on a paid-up status it may not be reinstated.
Persons receiving Annuity payments at the time of any change to paid-up status
will continue to receive their payments.
Individual flexible funding deferred annuity Contracts may be reinstated to
an active status at any time prior to the selected Annuity Commencement Date
by the payment of one Purchase Payment.
MAY I ASSIGN OR TRANSFER MY CONTRACT?
Some forms of Qualified Plans prohibit the assignment of a Contract or any
interest therein. No assignment will be effective until a copy has been filed
at the offices of HL at Hartford, Connecticut, prior to settlement for HL's
liability under the Contract. HL assumes no responsibility for the validity of
any such assignments. Participants may not assign their individual account
interests.
HOW DO I KNOW WHAT MY ACCOUNT IS WORTH?
The value of the Accumulation Units in the Separate Account representing an
interest in the appropriate Fund shares that are held under the Contract were
initially established on the date that Contributions were first contributed to
the appropriate Sub-Account of the Separate Account. The value of the
respective Accumulation Units for any subsequent day is determined by
multiplying the Accumulation Unit value for the preceding day by the net
investment factor of the appropriate investment accounts, as appropriate (see
"How is the Accumulation Unit value determined?" below).
The value of a Participant's Individual Account under a Contract at any time
prior to the commencement of Annuity payments can be determined by multiplying
the total number of Sub-Account Accumulation Units credited to a Participant's
Individual Account by the current Accumulation Unit value for the appropriate
Sub-Account. There is no assurance that the value in any of the Sub-Accounts
will equal or exceed the Contributions made by the Contract Owner to such
Sub-Accounts.
HOW IS THE ACCUMULATION UNIT VALUE DETERMINED?
The Accumulation Unit value for each Sub-Account will vary to reflect the
investment experience of the applicable Fund and will be determined on each
"Valuation Day" by multiplying the Accumulation Unit value of the particular
Sub-Account on the preceding Valuation Day by a "Net Investment Factor" for
that Sub-Account for the Valuation Period then ended. The Net Investment
Factor for each of the Sub-Accounts is equal to the net asset value per share
of the corresponding Fund at the end of the Valuation Period (plus the per
share amount of any dividends or capital gains by that Fund if the ex-dividend
date occurs in the Valuation Period then ended) divided by the net asset value
per share of the corresponding Fund at the beginning of the Valuation Period
and subtracting from that amount the amount of any charges assessed during the
Valuation Period then ending. You should refer to the Prospectuses for each of
the Funds which accompany this Prospectus for a description of how the assets
of each Fund are valued since each determination has a direct bearing on the
Accumulation Unit value of the Sub-Account and therefore the value of a
Contract.
HOW ARE THE UNDERLYING FUND SHARES VALUED?
The shares of the Fund are valued at net asset value on a daily basis. A
complete description of the valuation method used in valuing Fund shares may
be found in the accompanying Prospectus of each Fund.
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PAYMENT OF BENEFITS
WHAT WOULD MY BENEFICIARY RECEIVE AS DEATH PROCEEDS?
The Contracts provide that in the event the Participant dies before the
selected Annuity Commencement Date or the Participant's age 65 (whichever
occurs first) the Minimum Death Benefit payable on such Contract will be the
greater of (a) the value of the Participant's Account determined as of the day
written proof of death of such person is received by HL, or (b) 100% of the
total Contributions made to such Contract, reduced by any prior partial
surrenders.
The Minimum Death Benefit may be taken by the Beneficiary in a single sum,
in which case payment will be made within seven days of receipt of proof of
death by HL, unless subject to postponement as explained below. In lieu of
payment in one sum, the Beneficiary may elect that the amount be applied under
any one of the optional Annuity forms provided. (See "What are the available
Annuity options under the Contract?" on page .)
An election to receive Death Benefits under a form of Annuity must be made
prior to a lump sum settlement with HL and within one year after the death by
written notice to HL at its home office, P.O. Box 2999, Hartford, Connecticut,
06104-2999.
Benefit proceeds due on death may be applied to provide variable payments,
fixed payments, or a combination of variable and fixed payments. No election
to provide Annuity payments will become operative unless the initial Annuity
payment is at least $20.00 on either a variable or fixed basis, or $20.00 on
each basis when a combination benefit is elected. The manner in which the
Annuity payments are determined and in which they may vary from month to month
are the same as applicable to a Participant's Individual Account after
retirement.
HOW CAN A CONTRACT BE REDEEMED OR SURRENDERED?
THERE ARE CERTAIN RESTRICTIONS ON SECTION 403(B) TAX-SHELTERED ANNUITIES. AS
OF DECEMBER 31, 1988, ALL SECTION 403(B) ANNUITIES HAVE LIMITS ON FULL AND
PARTIAL SURRENDERS. CONTRIBUTIONS TO THE CONTRACT MADE AFTER DECEMBER 31, 1988
AND ANY INCREASES IN CASH VALUE AFTER DECEMBER 31, 1988 MAY NOT BE DISTRIBUTED
UNLESS THE CONTRACT OWNER/EMPLOYEE HAS (A) ATTAINED AGE 59 1/2, (B) TERMINATED
EMPLOYMENT, (C) DIED, (D) BECOME DISABLED, OR (E) EXPERIENCED FINANCIAL
HARDSHIP.
DISTRIBUTIONS DUE TO FINANCIAL HARDSHIP OR SEPARATION FROM SERVICE MAY STILL
BE SUBJECT TO A PENALTY TAX OF 10%.
HL WILL NOT ASSUME ANY RESPONSIBILITY IN DETERMINING WHETHER A WITHDRAWAL IS
PERMISSIBLE WITH OR WITHOUT TAX PENALTY, IN ANY PRACTICAL SITUATION; OR IN
MONITORING WITHDRAWAL REQUESTS REGARDING PRE OR POST JANUARY 1, 1989 ACCOUNT
VALUES.
INDIVIDUAL CONTRACTS
At any time prior to the Annuity Commencement Date, the Contract Owner,
subject to any IRS provisions applicable thereto, has the right to surrender
the value of the Contract in whole or in part.
In the event of a complete surrender of the Contract Owner's interest under
an individual Contract, then after deduction of the Annual Contract Fee (see
"Are there any administrative charges?" on page ), the following options
shall be available:
1. The termination value of the individual Contract may be applied to
provide for fixed or variable Annuity payments or a combination thereof
commencing immediately under the selected Annuity option (see "What are
the available Annuity options under the Contract?" on page ).
2. The termination value of the individual Contract may be taken in the
form of a lump sum cash settlement. The amount received will be
determined by the value of the Individual Account next computed after
receipt by HL at its home office, P. O. Box 2999, Hartford, CT 06104-2999
of a written request for complete surrender. The value of the Individual
Account may be more or less than the amount of Contributions made to the
Contract.
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3. The Contract Owner may partially surrender an Individual Account under
an individual Contract and receive the amount requested as determined by
the value of the account next computed after receipt by HL at its home
office, P.O. Box 2999, Hartford, CT 06104-2999 of a written request for a
partial surrender.
Any such full or partial surrender described above may affect the continuing
tax qualified status of some accounts or plans and may result in adverse tax
consequences to the Contract Owner. The Contract Owner, therefore, should
consult with his tax advisor before undertaking any such surrender.
GROUP CONTRACTS
On termination of Contributions to a group Contract by the Contract Owner on
behalf of a Participant's Individual Account prior to the selected Annuity
Commencement Date for such Account, the Contract Owner will have the following
options:
1. To continue a Participant's Individual Account in force under the
Contract. Under this option, when the selected Annuity Commencement Date
arrives, the Participant will begin to receive Annuity payments under the
selected Annuity option under the Contract. (See "What are the available
Annuity options under the Contract?" on page ). At any time in the
interim, the Contract Owner or the Participant as appropriate, may
surrender the Individual Account for a lump sum cash settlement in
accordance with 4. below.
2. To provide Annuity payments immediately. The Accumulation Unit values in
a Participant's Individual Account may be applied to provide for fixed or
variable Annuity payments, or a combination thereof, commencing
immediately, under the selected Annuity Option (see "What are the
available Annuity options under the Contract?" on page ).
3. To continue to make Contributions under an individual variable annuity
Contract of the type then being issued by HL. In this event, the value of
a Participant's Individual Account will be transferred into an individual
Contract without any deductions being made, but subject to the deductions
applicable to such individual Contract as to any subsequent payments.
4. To surrender a Participant's Individual Accounts under the Contract for
a lump sum cash settlement. In this event, the Annual Contract Fee will
be deducted as described on page . On any variable account the amount
received will be the net termination value determined by the Accumulation
Unit values of the Account next computed after receipt by HL at its home
office, P. O. Box 2999, Hartford, CT 06104-2999 of a written request for
complete surrender.
IS A PARTIAL TERMINATION OF A CONTRACT ALLOWED?
If any partial termination request exceeds 90% of the present value of a
Participant's Individual Account or of the Active Life Fund under a Contract
at the time of a request for withdrawal, such request will be considered a
request for complete termination of that Account or Contract, and no further
Contributions may be made for that Participant's Individual Account or
Contract. A request for a partial termination must specify the allocation of
the partial termination between fixed and variable accounts and if from the
variable accounts, the allocation among the Sub-Accounts. If no allocation is
specified, the requested amount is taken out of all applicable Sub-Accounts on
a pro rata basis.
Repayment of any partial termination may be made at any time before one
month prior to the date on which Annuity payments are to begin on the
Participant's Individual Account. While no deduction will be made for sales or
Minimum Death Benefit expenses, HL may apply its then current Annuity rates to
any such repayment.
Except as specified above, no partial termination will directly affect
future requirements that the Contract Owner make stipulated payments or
Contributions to the Contract, nor the maturity date of the Contract or of a
Participant's Individual Account. If the Contract Owner has a plan calling for
stipulated periodic payments or Contributions, he may repay amounts received
upon any such partial termination at the same time that he makes stipulated
payments or Contributions, provided that the amount repaid is at least $30.00.
In making any such repayment the Contract Owner shall specify in writing that
such a repayment is being made, as well as how the repayment is to be
reallocated among Sub-Accounts, otherwise appropriate sales and other expenses
shall apply to such amounts.
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Payment on request for any partial termination will be made within seven
days of receipt of the written request by HL unless subject to postponement as
explained below.
CAN PAYMENT OF THE REDEMPTION OR SURRENDER VALUE EVER BE POSTPONED BY HL BEYOND
THE SEVEN DAY PERIOD?
Yes. It may be postponed whenever (a) the New York Stock Exchange is closed,
except for holidays or weekends, or trading on the New York Stock Exchange is
restricted as determined by the Securities and Exchange Commission; (b) the
Securities and Exchange Commission permits postponement and so orders; or (c)
the Securities and Exchange Commission determines that an emergency exists
making valuation of the amounts or disposal of securities not reasonably
practicable.
Except for the above situations, payment on any request for surrender will
be made as soon as possible and in any event no later than seven days after
the written request is received by HL.
MAY I SURRENDER ONCE ANNUITY PAYMENTS HAVE STARTED?
Except with respect to Option 5 (on a variable payout), once Annuity
payments have commenced for an Annuitant, no surrender of the Annuity benefit
can be made for the purpose of receiving a lump sum settlement in lieu
thereof. Any surrender out of Option 5 will be subject to contingent deferred
sales charges, if applicable.
MAY I REINVEST AFTER A REDEMPTION?
Variable annuity Contract Owners who have redeemed the value of their
variable Contracts in full shall have the right to reinvest the proceeds of
redemption in a new variable annuity Contract without any deduction being made
for sales charges provided that such reinvestment is effected within 30 days
after such redemption. This reinvestment privilege shall not be available to
any Contract Owner who has previously exercised the privilege.
CAN A CONTRACT BE SUSPENDED BY A CONTRACT OWNER?
A group Contract may be suspended by the Contract Owner by giving written
notice of such suspension to HL at its home office in Hartford, Connecticut at
least 90 days prior to the effective date of such suspension.
A Contract will be suspended automatically on its anniversary if the
Contract Owner fails to assent to any modification of a Contract, as described
under the caption "Can a Contract be modified?" which modifications would have
become effective on or before that anniversary. Upon suspension, Contributions
will continue to be accepted by HL under the Contract, and subject to the
terms thereof, as they are applicable to Participant's Individual Accounts
under the Contracts prior to such suspension, but no Contributions will be
accepted on behalf of any new Participant's Individual Account. Annuitants at
the time of any suspension will continue to receive their Annuity payments.
The suspension of a Contract will not preclude the Contract Owner's applying
existing Participant's Individual Accounts under Separate Account Two, as
appropriate, to the purchase of Fixed or Variable Annuity benefits.
HOW DO I ELECT AN ANNUITY COMMENCEMENT DATE AND FORM OF ANNUITY?
The Contract Owner selects an Annuity Commencement Date and an Annuity
option (see below). The Annuity Commencement Date may not be deferred beyond a
Participant's 75th birthday or such earlier date may be required by applicable
law and/or regulation. The Annuity Commencement Date and/or the Annuity option
may be changed from time to time, but any such change must be made at least 30
days prior to the date on which Annuity payments are scheduled to begin.
The Contracts contain five optional Annuity forms, which may be selected on
either a fixed or variable annuity basis, or a combination thereof. If a
Contract Owner does not elect otherwise, HL reserves the right to begin
Annuity payments at age 65 under Option 2 with 120 monthly payments certain.
However, HL will not assume responsibility in determining or monitoring
minimum distribution beginning at age 70 1/2.
When an Annuity is effected under a Contract, unless otherwise specified,
General Account Accumulation Units will be applied to provide a Fixed Annuity
and Separate Account Sub-Account Accumulation Units will be applied to provide
a Variable Annuity.
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The Contract Owner should consider the question of allocation of Contract
values among the Fixed Income Fund Sub-Account, the Stock Fund Sub-Account and
the General Account to make certain that annuity payments are based on the
investment alternative best suited to the Contract Owner's needs. Annuity
payments may not be based on the Money Market Fund Sub-Account. Unless
otherwise directed by a Contract Owner, such interest shall be transferred to
the Fixed Income Fund Sub-Account and Stock Fund Sub-Account, and allocated to
such Sub-Accounts in the same proportion as such interests are held in the
Participant's Individual Account.
WHAT IS THE MINIMUM AMOUNT THAT I MAY SELECT FOR AN ANNUITY PAYMENT?
The minimum Annuity payment is $20.00. No election may be made which results
in a first payment of less than $20.00. If at any time Annuity payments are or
become less than $20.00, HL has the right to change the frequency of payment
to intervals that will result in payments of at least $20.00.
WHAT ARE THE AVAILABLE ANNUITY OPTIONS UNDER THE CONTRACT?
OPTION 1: LIFE ANNUITY
A Life Annuity is an Annuity payable during the lifetime of the Annuitant
and terminating with the last monthly payment preceding the death of the
Annuitant. Life Annuity options (options 1-4) offers the maximum level of
monthly payments of any of the options since there is no guarantee of a
minimum number of payments nor a provision for a death benefit payable to a
Beneficiary.
It would be possible under this option for an Annuitant to receive only one
Annuity payment if he died prior to the due date of the second Annuity
payment, two if he died before the due date of the third Annuity payment, etc.
*OPTION 2: LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS CERTAIN
This Annuity Option is an Annuity payable monthly during the lifetime of an
Annuitant with the provision that if, at the death of the Annuitant, payments
have been made for less than 120, 180 or 240 months, as elected, then the
present value as of the date of the Participant's death at the current dollar
amount at the date of death of any remaining guaranteed monthly payments will
be paid in one sum to the Beneficiary or Beneficiaries designated unless other
provisions will have been made and approved by HL.
*OPTION 3: UNIT REFUND LIFE ANNUITY
This Annuity option is an Annuity payable monthly during the lifetime of the
Annuitant terminating with the last payment due prior to the death of the
Annuitant except that an additional payment will be made to the Beneficiary or
Beneficiaries if (a) below exceeds (b) below:
total amount applied under the option
(a) = at the Annuity Commencement Date
------------------------------------------------------------------
Annuity Unit value at the Annuity Commencement Date
number of Annuity Units represented number of monthly
(b) = by monthly Annuity payment made X Annuity payments made
The amount of the additional payments will be determined by multiplying such
excess by the Annuity Unit value as of the date that proof of death is
received by HL.
OPTION 4: JOINT AND LAST SURVIVOR ANNUITY
An Annuity payable monthly during the joint lifetime of the Annuitant and a
designated second person, and thereafter during the remaining lifetime of the
survivor, ceasing with the last payment prior to the death of the survivor.
It would be possible under this Option for an Annuitant and designated
second person in the event of the common or simultaneous death of the parties
to receive only one payment in the event of death prior to the due date for
the second payment and so on.
*OPTION 5: PAYMENTS FOR A DESIGNATED PERIOD
An amount payable monthly for the number of years selected which may be from
one to thirty years. Under this Option, the Contract Owner or Annuitant may,
at any time, surrender the Account and receive, within seven days, the current
value of the account.
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In the event of the Annuitant's death prior to the end of the designated
period, any then remaining balance of proceeds will be paid in one sum to the
Beneficiary or Beneficiaries designated unless other provisions will have been
made and approved by HL.
* On Qualified Plans, Options 2, 3 and 5 are available only if the
guaranteed payment period is less than the life expectancy of the Annuitant at
the time the option becomes effective. Such life expectancy shall be computed
on the basis of the mortality table prescribed by the IRS, or if none is
prescribed, the mortality table then in use by HL.
- - --------------------------------------------------------------------------------
Under any of the Annuity options above, except Option 5 (on a variable basis),
no surrenders are permitted after Annuity payments commence.
- - --------------------------------------------------------------------------------
HOW ARE ANNUITY PAYMENTS DETERMINED?
The value of the Annuity Unit for each Sub-Account in the Separate Account
for any day is determined by multiplying the value for the preceding day by
the product of (1) the net investment factor (see "How is the Accumulation
Unit value determined?" commencing on page ) for the day for which the
Annuity Unit value is being calculated, and (2) a factor to neutralize the
assumed net investment rate discussed below.
When Annuity payments are to commence, the value of the Contract is
determined as the product of the value of the Accumulation Unit credited to
each Sub-Account as of the close of business on the fifth business day
preceding the date the first Annuity payment is due and the number of
Accumulation Units credited to each Sub-Account as of the date the Annuity is
to commence.
The Contract contains tables indicating the dollar amount of the first
monthly payment under the optional forms of Annuity for each $1,000 of value
of a Sub-Account under a Contract. The first monthly payment varies according
to the form of Annuity selected. The Contract contains Annuity tables derived
from the 1983a Individual Annuity Mortality Table with an assumed interest
rate ("A.I.R.") of 4.00% or 5.00% per annum. The total first monthly Annuity
payment, is determined by multiplying the value (expressed in thousands of
dollars) of a Sub-Account (less any applicable Premium Taxes) by the amount of
the first monthly payment per $1,000 of value obtained from the tables in the
Contract. With respect to fixed annuities only, the current rate will be
applied if it is higher than the rate under the tables in the Contracts.
The A.I.R. assumed in the mortality tables would produce level Annuity
payments if the net investment rate remained constant. In fact, payments will
vary up or down in the proportion that the net investment rate varies up or
down from the A.I.R. A higher assumed interest rate may produce a higher
initial payment but more slowly rising and more rapidly falling subsequent
payments than would a lower interest rate assumption.
The amount of the first monthly Annuity payment, determined as described
above, is divided by the value of an Annuity Unit for the appropriate
Sub-Account as of the close of business on the fifth business day preceding
the day on which the payment is due in order to determine the number of
Annuity Units represented by the first payment. This number of Annuity Units
remains fixed during the Annuity Period, and in each subsequent month the
dollar amount of the Annuity payment is determined by multiplying this fixed
number of Annuity Units by the then current Annuity Unit value.
The Annuity payments will be made on the date selected. The Annuity Unit
value used in calculating the amount of the Annuity payments will be based on
an Annuity Unit value determined as of the close of business on a day not more
than the fifth business day preceding the date of the Annuity payment.
In order to comply with the requirements of the Supreme Court decision dated
July 6, 1983, in the case of Norris vs. Arizona Governing Committee, HL will,
with respect to all Contracts which have been issued with sex distinct rates,
increase the guaranteed Annuity rates provided for females under the Contracts
to the guaranteed Annuity rate provided for males. Thus, there will no longer
be any sex distinct Annuity rates with respect to those Contracts. With
respect to new Contracts, Annuity rates will be based on a guaranteed Annuity
rate table which is identical for both males and females.
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Here is an example of how the rates work:
ILLUSTRATION OF ANNUITY PAYMENTS: (UNISEX) AGE 65, LIFE ANNUITY
WITH 120 PAYMENTS CERTAIN
<TABLE>
<C> <S> <C>
1. Net amount applied............................................... $ 139,782.50
2. Initial monthly income per $1,000 of payment applied............. 6.13
3. Initial monthly payment (1 X 2 DIVIDED BY 1,000)................ 856.87
4. Annuity Unit Value............................................... 3.125
5. Number of monthly annuity units (3 DIVIDED BY 4)................ 274.198
6. Assume annuity unit value for second month equal to.............. 2.897
7. Second monthly payment (6 X 5)................................... 794.35
8. Assume annuity unit value for third month equal to............... 3.415
9. Third month payment (8 X 5)...................................... 936.39
</TABLE>
The above figures are simply to illustrate the calculation of a variable
annuity and have no bearing on the actual record of any Separate Account.
CAN A CONTRACT BE MODIFIED?
HL reserves the right to modify the Contract, but only if such modification:
(i) is necessary to make the Contract or the Separate Account comply with any
law or regulation issued by a governmental agency to which HL is subject; or
(ii) is necessary to assure continued qualification of the Contract under the
Code or other federal or state laws relating to retirement annuities or
annuity Contracts; or (iii) is necessary to reflect a change in the operation
of the Separate Account or the Sub-Account(s); or (iv) provides additional
Separate Account options; or (v) withdraws Separate Account options. In the
event of any such modification HL will provide notice to the Contract Owner or
to the payee(s) during the Annuity period. HL may also make appropriate
endorsement in the Contract to reflect such modification.
INDIVIDUAL CONTRACTS
The Contracts may, subject to any federal and state regulatory restrictions,
be modified at any time by written agreement between the Contract Owner and
HL. No modification will affect the amount or term of any Annuities begun
prior to the effective date of the modification, unless it is required to
conform the Contract to, or give the Contract Owner the benefit of, any
federal or state statutes or any rule or regulation of the U.S. Treasury
Department or Internal Revenue Service.
GROUP CONTRACTS
The Contracts may be modified at any time by written agreement between the
Contract Owner and HL. No modification will affect the amount or term of any
Annuities begun prior to the effective date of the modification, unless it is
required to conform the Contract to, or give the Contract Owner the benefit
of, any federal or state statutes or any rule or regulations of the U.S.
Treasury Department or the Internal Revenue Service.
On and after the fifth anniversary of any Contract HL may change, from time
to time, any or all of the terms of the group Contract by giving 90 days
advance notice to the Contract Owner, except that the mortality and Minimum
Death Benefit undertakings and the deductions for sales expenses and the
Annual Contract Fee which are applicable at the time a Participant's
Individual Account is established under the Contract will continue to be
applicable except as limited below.
HL may also modify the Contract at any time with respect to deductions and
undertakings enumerated in the preceding paragraph on Contributions to a
Participant's Individual Account in any year in excess of three times the
total Contributions actually made to such account during its initial 12
consecutive months of participation under the Contract. The deductions and
undertakings applicable to such excess Contributions when first made will
continue to be applicable to such excess Contributions each and every year
they are made.
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CHARGES UNDER THE CONTRACT
HOW ARE THE CHARGES UNDER THESE CONTRACTS MADE?
COMBINATION INDIVIDUAL AND GROUP ALLOCATED CONTRACTS
These Contracts are issued on an individual and group basis and provide for
fixed (General Account) and variable (Separate Account) accumulations and
annuity payouts and are generally referred to as "combination Contracts."
Contributions made on behalf of a Participant's Individual Account pursuant to
the terms of the allocated combination Contracts are subject to the following
deductions:
<TABLE>
<CAPTION>
AGGREGATE CONTRIBUTION
AMOUNT TO THE FIXED PORTION REPRESENTING TOTAL DEDUCTION
INCOME FUND AND STOCK TOTAL SALES MINIMUM DEATH AS % OF NET
FUND SUB-ACCOUNTS ONLY* DEDUCTIONS EXPENSES BENEFIT AMOUNT INVESTED
- - ---------------------------------------------------------- -------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
On the first $2,500....................................... 7.00% 6.25% .75 % 7.53%
On the next $47,500....................................... 3.50% 2.75% .75 % 3.63%
On the next $50,000....................................... 2.00% 1.25% .75 % 2.04%
On the excess over $100,000............................... 1.00% .25% .75 % 1.01%
<FN>
* This illustration does not assume the payment of any Premium Taxes. The Money
Market Fund Sub- Account is not available under these Contracts.
</TABLE>
Notwithstanding the above, when an employer making application for a group
allocated Contract where the annualized stipulated purchase payments with
respect to all Participants is expected to equal or approximate $250,000 at
the end of the second anniversary of the Contract, the sales and Minimum Death
Benefits deduction on the aggregate Contributions up to and including $2,500
with respect to each Participant shall be at the rate of 5% rather than 7%.
GROUP VARIABLE ONLY CONTRACTS
These Contracts are issued on a group basis only and provide for variable
(Separate Account) accumulations only during the Accumulation Period under the
Contract and for fixed (General Account) and variable (Separate Account)
annuity payouts during the Annuity Period. The Money Market Fund Sub-Account
was available under this type of Contract prior to December 7, 1981 only.
<TABLE>
<CAPTION>
AGGREGATE CONTRIBUTION
AMOUNT TO THE FIXED PORTION REPRESENTING TOTAL DEDUCTION
INCOME FUND AND STOCK TOTAL SALES MINIMUM DEATH AS % OF NET
FUND SUB-ACCOUNTS ONLY* DEDUCTIONS EXPENSES BENEFIT AMOUNT INVESTED
- - ---------------------------------------------------------- -------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
On the first $2,500....................................... 5.00% 4.25% .75 % 5.26%
On the next $47,000....................................... 3.50% 2.75% .75 % 3.63%
On the next $50,000....................................... 2.00% 1.25% .75 % 2.04%
On the excess of $100,000................................. 1.00% .25% .75 % 1.01%
<FN>
* This illustration does not assume the payment of any Premium Taxes. No
deductions for sales expenses or the Minimum Death Benefit are made against
contributions to the Money Market Fund Sub-Account.
</TABLE>
Under the schedules shown above, all amounts contributed on behalf of a
Participant's Individual Account are aggregated to determine if a particular
level of deductions has been reached. Thus, if a Contribution has been made on
behalf of a Participant's Account in the amount of $100.00 and total
Contributions of $2,450 have already been made on a Participant's behalf, the
first $50.00 of the Contribution will be subject to a deduction of 7.00% (as
in 1. above) and the remainder to a percentage of 3.50%.
COMBINATION NON-ALLOCATED GROUP CONTRACTS
A non-allocated group annuity Contract is offered which is designed for use
in conjunction with certain qualified pension and profit-sharing plans where
the employer has Contracted out the administration of the Plan. The Contracts
provide for both fixed (General Account) and variable (Separate Account)
accumulations and annuity payouts and are thus another form of combination
Contract.
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<PAGE>
The Contracts provide for a Contract fee charge of $100 per year and a scale
of sales charges as follows:
<TABLE>
<S> <C>
On the first $5,000.............................................. 5.00%
On the next $45,000.............................................. 3.50%
On the next $50,000.............................................. 2.00%
On the excess over $100,000...................................... 1.25%
</TABLE>
The Contracts will be issued to an employer or the trustee(s) or custodian
of an employer's pension or profit-sharing plan. All Contributions are held
under the Contract, as directed by the Contract Owner. There are no individual
allocations under the Contracts for individual Participants in an employer's
plan.
With the exception of the Minimum Death Benefit provision, which is not
available on this Contract, and the charges described above, the new group
Contracts have essentially the same terms and provisions as the other
Contracts described in this Prospectus.
HL makes the deductions for the Contracts as described above pursuant to the
terms of the various agreements among the custodian, the principal
underwriter, and HL. Contract distribution expenses may exceed the deduction
for sales expenses described above. To the extent that they do, they will be
borne by HL.
ARE THERE ANY DIFFERENCES IN CHARGES MADE?
The group Contracts provide for experience rating. In order to experience
rate a Contract, actual sales and administrative costs applicable to a
particular Contract are determined. If the costs exceed the amounts deducted
for such expenses, no additional deduction will be made. If, however, the
amounts deducted for such expenses exceed actual costs, HL, in its discretion,
may allocate all, a portion, or none of such excess as an experience rating
credit. If such an allocation is made, the experience credit will be made, as
considered appropriate: (1) by reduction in the amount deducted from
subsequent contributions for sales expenses; (2) by the crediting of a number
of additional Accumulation Units or Annuity Units, as applicable, without
deduction of any sales or other expenses therefrom; (3) by waiver of the
Annual Contract Fees; or (4) by a combination of the above. Experience rating
credits have been given on certain cases.
Where use of the Contract is appropriate, variable annuity Contracts issued
by HL may be purchased without a charge for sales or Minimum Death Benefit
expenses by members of the board and officers of the Funds, or by any trust,
pension, profit-sharing or other benefit plan for any such person or persons.
WHAT IS THE MORTALITY AND EXPENSE RISK CHARGE?
Although variable Annuity payments made under the Contracts will vary in
accordance with the investment performance of the underlying Fund shares held
in the Sub-Account(s) (note that variable Annuity payments may not be based on
the Money Market Fund Sub-Account), the payments will not be affected by (a)
HL's actual mortality experience among Annuitants after retirement or (b) HL's
actual expenses, if greater than the deductions provided for in the Contracts
because of the expense and mortality undertakings by HL.
For assuming these risks under the Contracts, HL will make a daily charge
against all Contract values held in the Separate Account at the rate of 1.00%
per annum on the Fixed Income Fund and Stock Fund Sub-Accounts and .375% per
annum on the Money Market Fund Sub-Account. Such charges may not be changed on
existing Contracts.
The mortality undertaking provided by HL under the Contracts, assuming the
selection of one of the forms of life Annuities, is to make monthly Annuity
payments (determined in accordance with the annuity table and other provisions
contained in the Contracts) to Contract Owners on Participants' Individual
Accounts regardless of how long a Participant may live, and regardless of how
long all Annuitants as a group may live. This undertaking assures a Contract
Owner that neither the longevity of a Participant nor an improvement in life
expectancy generally will have any adverse effect on the monthly Annuity
payments it will receive under the Contract. It thus relieves the Contract
Owner from the risk that Participants will outlive funds accumulated.
The mortality undertaking is based on HL's actuarial determination of
expected mortality rates among all Annuitants. If actual experience among
Annuitants deviates from HL's actuarial determination of expected
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<PAGE>
mortality rates among Annuitants because, as a group, their longevity is
longer than anticipated, HL must provide amounts from its general funds to
fulfill its Contract obligations. In that event, a loss will fall on HL.
Conversely, if longevity among Annuitants is lower than anticipated, a gain
will result to HL.
ARE THERE ANY ADMINISTRATIVE CHARGES?
There will be an Annual Contract Fee deduction from the value of each
Participant's Individual Account under the Contracts in the amount of $10.00.
The Annual Contract Fee will be deducted from the value of each such Account
on the last business day of each calendar year; provided, however, that if the
value of a Participant's Individual Account is redeemed in full at any time
before the last business day of the year, then the Annual Contract Fee charge
will be deducted from the proceeds of such redemption. No deduction for the
Annual Contract Fee will be made during the Annuity Period under the
Contracts.
In the event that the Contributions made on behalf of a Participant are
allocated partially to the General Account and partially to the Separate
Account, the Annual Contract Fee will be charged against the Separate Account
and General Account on a pro rata basis.
HOW MUCH ARE THE DEDUCTIONS FOR PREMIUM TAXES ON THESE CONTRACTS?
A deduction is also made for Premium Taxes, if applicable, imposed by a
state or other governmental entity. Certain states impose a Premium Tax,
currently ranging up to 3.5%. Some states assess the tax at the time purchase
payments are made; others assess the tax at the time of annuitization. HL will
pay Premium Taxes at the time imposed under applicable law. At its sole
discretion, HL may deduct Premium Taxes at the time the taxes are paid, the
Contract is surrendered, or the Contract annuitizes.
HARTFORD LIFE INSURANCE COMPANY
AND THE FUNDS
WHAT IS HL?
Hartford Life Insurance Company was originally incorporated under the laws
of Massachusetts on June 5, 1902. It was subsequently redomiciled to
Connecticut. It is a stock life insurance company engaged in the business of
writing health and life insurance, both ordinary and group, in all states of
the United States and the District of Columbia. The offices of HL are located
in Simsbury, Connecticut; however, its mailing address is P.O. Box 2999,
Hartford, CT 06104-2999. Hartford Life is ultimately 100% owned by Hartford
Fire Insurance Company, one of the largest multiple line insurance carriers in
the United States. Hartford Fire Insurance Company is a subsidiary of ITT
Corporation. HL has an A++ (superior) rating from A.M. Best and Company, Inc.
on the basis of its financial soundness and operating performance, the highest
ratings provided by this service. HL has an AA+ rating from Standard & Poor's
and Duff and Phelps highest rating (AAA) on the basis of its claims paying
ability.
These ratings do not apply to the performance of the Separate Account.
However, the Contractual obligations under this variable annuity are the
general corporate obligations of Hartford Life. These ratings do apply to
Hartford Life's ability to meet its insurance obligations under the Contract.
WHAT ARE THE FUNDS?
Hartford Stock Fund, Inc. was organized on March 11, 1976. Hartford Bond
Fund, Inc. and HVA Money Market Fund, Inc. were organized on December 1, 1982.
All of the Funds were incorporated under the laws of the State of Maryland and
are collectively referred to as the "Funds."
The investment objectives of each of the Funds are as follows:
Hartford Bond Fund, Inc.
To achieve maximum current income consistent with preservation of capital by
investing primarily in fixed-income securities.
20
<PAGE>
Hartford Stock Fund, Inc.
To achieve long-term capital growth primarily through capital appreciation,
with income a secondary consideration, by investing in equity-type securities.
HVA Money Market Fund, Inc. *
To achieve maximum current income consistent with liquidity and preservation
of capital by investing in money market securities. (* This Fund is not
available under Contracts issued on or after December 7, 1981.)
ALL FUNDS
The Funds are available only to serve as the underlying investment for the
variable life insurance and variable annuity Contracts issued by Hartford
Life.
It is conceivable that in the future it may be disadvantageous for variable
annuity separate accounts and variable life insurance separate accounts to
invest in the Funds simultaneously. Although HL and the Funds do not currently
foresee any such disadvantages either to variable annuity Contract Owners or
variable life insurance Policyowners, the Funds' Board of Directors intends to
monitor events in order to identify any material conflicts between such
Contract Owners and Policyowners and to determine what action, if any, should
be taken in response thereto. If the Board of Directors of the Funds were to
conclude that separate funds should be established for variable life and
variable annuity separate accounts, the variable annuity Contract Owners would
not bear any expenses attendant to the establishment of such separate funds,
but variable annuity Contract Owners and variable life insurance Policyowners
would no longer have the economies of scale resulting from a larger combined
fund.
HL reserves the right, subject to compliance with the law, to substitute the
shares of any other registered investment company for the shares of any Fund
held by the Separate Account. Substitution may occur if shares of the Fund(s)
become unavailable or due to changes in applicable law or interpretations of
law. Current law requires notification to you of any such substitution and
approval of the Securities and Exchange Commission. HL also reserves the
right, subject to compliance with the law to offer additional Funds with
differing investment objectives.
The Hartford Investment Management Company serves as investment manager for
Hartford Stock Fund pursuant to an Investment Management Agreement between
each, and serves as Investment Adviser for HVA Money Market Fund and Hartford
Bond Fund pursuant to an Investment Advisory Agreement between each.
Wellington Management Co. serves as sub-investment adviser to Hartford Stock
Fund pursuant to a Sub-Investment Advisory Agreement between Wellington and
HIMCO on behalf of the fund.
A full description of the Funds, their investment policies and restrictions,
risks, charges and expenses and all other aspects of their operations is
contained in the accompanying Funds' Prospectus which should be read in
conjunction with this Prospectus before investing, and in the Funds' Statement
of Additional Information which may be ordered from HL.
FEDERAL TAX CONSIDERATIONS
WHAT ARE SOME OF THE FEDERAL TAX CONSEQUENCES WHICH AFFECT THESE CONTRACTS?
A. GENERAL
SINCE THE TAX LAW IS COMPLEX AND SINCE TAX CONSEQUENCES WILL VARY ACCORDING
TO THE ACTUAL STATUS OF THE CONTRACT OWNER INVOLVED AND THE TYPE OF PLAN UNDER
WHICH THE CONTRACT IS PURCHASED, LEGAL AND TAX ADVICE MAY BE NEEDED BY A
PERSON, EMPLOYER OR OTHER ENTITY CONTEMPLATING THE PURCHASE OF A CONTRACT
DESCRIBED HEREIN.
It should be understood that any detailed description of the federal income
tax consequences regarding the purchase of these Contracts cannot be made in
this Prospectus and that special tax rules may be applicable with respect to
certain purchase situations not discussed herein. For detailed information, a
qualified tax adviser should always be consulted. This discussion is based on
HL's understanding of current federal income tax laws as they are currently
interpreted.
21
<PAGE>
B. TAXATION OF HL AND THE SEPARATE ACCOUNT
The Separate Account is taxed as part of HL which is taxed as a life
insurance company in accordance with the Internal Revenue Code. Accordingly,
the Separate Account will not be taxed as a "regulated investment company"
under subchapter M, Chapter 1 of the Code. Investment income and any realized
capital gains on the assets of the Separate Account are reinvested and are
taken into account in determining the value of the Accumulation and Annuity
Units. (See "How is the Accumulation Unit value determined?" commencing on
page .) As a result, such investment income and realized capital gains are
automatically applied to increase reserves under the Contract.
No taxes are due on interest, dividends and short-term or long-term capital
gains earned by the Separate Account with respect to qualified or
non-qualified Contracts.
C. INFORMATION REGARDING TAX QUALIFIED PLANS
THE TAX REFORM ACT OF 1986 AND THE TECHNICAL AND MISCELLANEOUS REVENUE ACT
OF 1988 HAVE MADE SUBSTANTIAL CHANGES TO QUALIFIED PLANS. YOU SHOULD CONSULT
YOUR TAX ADVISER TO FULLY ADDRESS ALL CHANGES AND THE TECHNICAL AND
MISCELLANEOUS REVENUE ACT OF 1988 AND THEIR EFFECT ON QUALIFIED PLANS.
1. CONTRIBUTIONS
A. PENSION, PROFIT-SHARING AND SIMPLIFIED EMPLOYEE PENSION PLANS
Contributions to pension or profit-sharing plans (described in Section
401(a) and 401(k), if applicable, and exempt from taxation under Section
501(a) of the Code), and Simplified Employee Pension Plans (described in
Section 408(k)), which do not exceed certain limitations prescribed in the
Code are fully tax-deductible to the employer. Such contributions are not
currently taxable to the covered employees, and increases in the value of
Contracts purchased with such contributions are not subject to taxation until
received by the covered employees or their Beneficiaries in the form of
Annuity payments or other distributions.
B. TAX-DEFERRED ANNUITY PLANS FOR PUBLIC SCHOOL TEACHERS AND EMPLOYERS AND
EMPLOYEES OF CERTAIN TAX-EXEMPT ORGANIZATIONS
Contributions to tax-deferred annuity plans (described in Section 403(a) and
403(b) of the Code) by employers are not includable within the employee's
income to the extent those contributions do not exceed the lesser of $9,500 or
the exclusion allowance. Generally, the exclusion allowance is equal to 20% of
the employee's includable compensation for his most recent full year of
employment multiplied by the number of years of his service, less the
aggregate amount contributed by the employer for Annuity Contracts which were
not included within the gross income of the employee for any prior taxable
year. There are special provisions which may allow an employee of an
educational institution, a hospital or a home health service agency to elect
an overall limitation different from the limitation described above.
C. DEFERRED COMPENSATION PLANS FOR TAX-EXEMPT ORGANIZATIONS AND STATE AND
LOCAL GOVERNMENTS
Employees may contribute on a before tax basis to the Deferred Compensation
Plan of their employer in accordance with The employer's Plan and Section 457
of the Code. Section 457 places limitations on contributions to Deferred
Compensation Plans maintained by a State ("State" means a State, a political
sub-division of a State, and an agency or instrumentality of a State or
political sub-division of a State) or other tax-exempt organization.
Generally, the limitation is 33 1/3% of includable compensation (25% of gross
compensation) or $7,500, whichever is less. The plan may also provide for
additional contributions during the three taxable years ending before normal
retirement age of a Participant for a total of up to $15,000 per year for such
three years.
An employee electing to participate in a plan should understand that his
rights and benefits are governed strictly by the terms of the plan, that he is
in fact a general creditor of the employer under the terms of the plan, that
the employer is legal owner of any Contract issued with respect to the plan
and that the employer as owner of the Contract(s) retains all voting and
redemption rights which may accrue to the Contract(s) issued with respect to
the Plan. The participating employee should look to the terms of his plan for
any charges in regard to participating therein other than those disclosed in
this Prospectus.
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<PAGE>
D. INDIVIDUAL RETIREMENT ANNUITIES ("IRA'S")
Individuals may contribute and deduct the lesser of $2,000 or 100 percent of
their compensation to an IRA. In the case of a spousal IRA, the maximum
deduction is the lesser of $2,250 or 100 percent of compensation. The
deduction for contributions is phased out between $40,000 and $50,000 of
adjusted gross income (AGI) for a married individual (and between $25,000 and
$35,000 for single individuals) if either the individual or his or her spouse
is an active Participant in any Section 401(a), 403(a), 403(b) or 408(k) plan
regardless of whether the individual's interest is vested.
To the extent deductible contributions are not allowed, individuals may make
designated non-deductible contributions to an IRA, subject to the above
limits.
2. DISTRIBUTIONS
A. PENSION AND PROFIT-SHARING PLANS, TAX-SHELTERED ANNUITIES, INDIVIDUAL
RETIREMENT ANNUITIES.
Annuity payments made under the Contracts are taxable under Section 72 of
the Code as ordinary income, in the year of receipt, to the extent that they
exceed the "excludable amount." The investment in the Contract is normally the
aggregate amount of the contributions made by or on behalf of an employee
which were included as a part of his taxable income and not deducted. Thus,
annual premiums deducted for an IRA are not included in the investment in the
Contract. The employee's investment in the Contract is divided by the expected
number of payments to be made under the Contract. The amount so computed
constitutes the "excludable amount," which is the amount of each annuity
payment considered a return of investment in each year and, therefore, not
taxable. Once the employee's investment in the Contract is recouped, the full
amount of each payment will be fully taxable. If the employee dies prior to
recouping his or her investment in the Contract, a deduction is allowed for
the last taxable year. The rules for determining the excludable amount are
contained in Section 72 of the Code.
Generally, distributions or withdrawals prior to age 59 1/2 may be subject
to an additional income tax of 10% of the amount includable in income. This
additional tax does not apply to distributions made after the employee's
death, on account of disability and distributions in the form of a life
annuity and, except in the case of an IRA, certain distributions after
separation from service at or after age 55, and certain distributions for
eligible medical expenses. A life annuity is defined as a scheduled series of
substantially equal periodic payments for the life or life expectancy of the
Participant (or the joint lives or life expectancies of the Participant and
Beneficiary). The taxation of withdrawals and other distributions varies
depending on the type of distribution and the type of plan from which the
distribution is made. With respect to tax-deferred annuity Contracts under
Section 403(b), contributions to the Contract made after December 31, 1988 and
any increases in cash value after that date may not be distributed prior to
attaining age 59 1/2, separation from service, death or disability.
Contributions (but not earnings) made after December 31, 1988 may also be
distributed by reason of financial hardship.
B. DEFERRED COMPENSATION PLANS FOR TAX-EXEMPT ORGANIZATIONS AND STATE AND
LOCAL GOVERNMENTS
Generally, in order to avoid a penalty tax, annuity payments, periodic
payments or annual distributions must commence by April 1 of the calendar year
following the year in which the Participant attains age 70 1/2. Minimum
distributions under Section 457 Deferred Compensation Plan may be further
deferred if the Participant remains employed. The entire interest of the
Participant must be distributed beginning no later than this required
beginning date over a period which may not extend beyond a maximum of the
lives or life expectancies of the Participant and a designated Beneficiary.
Each annual distribution must equal or exceed a "minimum distribution amount"
which is determined by dividing the account balance by the applicable life
expectancy. This account balance is generally based upon the account value as
of the close of business on the last day of the previous calendar year. In
addition, minimum distribution incidental benefit rules may require a larger
annual distribution based upon dividing the account balance by a factor
promulgated by the Internal Revenue Service which ranges from 26.2 (at age 70)
to 1.8 (at age 115). Special rules apply to require that distributions be made
to Beneficiaries after the death of the Participant. A penalty tax of up to
50% of the amount which should be distributed may be imposed by the Internal
Revenue Service for failure to make such distribution.
If the Contract Owner is a Section 457 plan, certain distributions are
required to be made upon the death of a Participant. In the event of the death
of a Participant prior to the Annuity Commencement Date, the entire interest
in the Participant's Contract must be distributed within 5 years after the
Participant's death and in the event of the Participant's death which occurs
on or after the Annuity Commencement Date, any remaining interest in the
Contract must be paid at least as rapidly as under the method of distribution
in
23
<PAGE>
effect at the time of death; except that if the benefit is payable over a
period not extending beyond the life expectancy of the beneficiary or over the
life of the beneficiary, such distribution must commence within one year of
the date of death.
Upon receipt of any monies pursuant to the terms of a Deferred Compensation
Plan for a tax-exempt organization, state or local government under Section
457 of the Code, such monies are taxable to such employee as ordinary income
in the year in which received.
D. FEDERAL INCOME TAX WITHHOLDING
The portion of a distribution which is taxable income to the recipient will
be subject to federal income tax withholding, pursuant to Section 3405 of the
Internal Revenue Code. The application of this provision is summarized below:
1. ELIGIBLE ROLLOVER DISTRIBUTIONS
a. The Unemployment Compensation Amendments Act of 1992 requires that
federal income taxes be withheld from certain distributions from tax-qualified
retirement plans and from tax-sheltered annuities under Section 403(b). These
provisions DO NOT APPLY to distributions from individual retirement annuities
under section 408(b) or from deferred compensation programs under section 457.
b. If any portion of a distribution is an "eligible rollover distribution",
the law requires that 20% of that amount be withheld. This amount is sent to
the IRS as withheld income taxes. The following types of payments DO NOT
constitute an eligible rollover distribution (and, therefore, the mandatory
withholding rules will not apply):
- the non-taxable portion of the distribution;
- distributions which are part of a series of equal (or substantially equal)
payments made at least annually for your lifetime (or your life
expectancy), or your lifetime and your beneficiary's lifetime (or life
expectancies), or for a period of ten years or more;
- required minimum distributions made pursuant to section 401(a)(9) of the
IRC.
c. However, these mandatory withholding requirements do not apply in the
event of all or a portion of any eligible rollover distribution is paid in a
"direct rollover". A direct rollover is the direct payment of an eligible
rollover distribution or portion thereof to an individual retirement
arrangement or annuity (IRA) or to another qualified employer plan. IF A
DIRECT ROLLOVER IS ELECTED, NO INCOME TAX WILL BE WITHHELD.
d. If any portion of a distribution is not an eligible rollover distribution
but is taxable, the mandatory withholding rules described above do not apply.
In this case, the voluntary withholding rules described below apply.
2. NON-ELIGIBLE ROLLOVER DISTRIBUTIONS
A. NON-PERIODIC DISTRIBUTIONS
The portion of a non-periodic distribution which constitutes taxable income
will be subject to federal income tax withholding unless the recipient elects
not to have taxes withheld. If an election not to have taxes withheld is not
provided, 10% of the taxable distribution will be withheld as federal income
tax. Election forms will be provided at the time distributions are requested.
B. PERIODIC DISTRIBUTIONS (DISTRIBUTIONS PAYABLE OVER A PERIOD GREATER THAN
ONE YEAR)
The portion of a periodic distribution which constitutes taxable income will
be subject to federal income tax withholding as if the recipient were married
claiming three exemptions. A recipient may elect not to have income taxes
withheld or have income taxes withheld at a different rate by providing a
completed election form. Election forms will be provided at the time
distributions are requested.
C. ANY DISTRIBUTION FROM PLANS DESCRIBED IN SECTION 457 OF THE INTERNAL
REVENUE CODE IS SUBJECT TO THE REGULAR WAGE WITHHOLDING RULES.
E. DIVERSIFICATION REQUIREMENTS
Section 817 of the Code provides that a variable annuity Contract (other
than a pension plan Contract) will not be treated as an annuity for any period
during which the investments made by the separate account or underlying fund
are not adequately diversified in accordance with regulations prescribed by
the Treasury. If a Contract is not treated as an annuity, the Contract Owner
will be subject to income tax on the annual
24
<PAGE>
increases in cash value. The Treasury has issued diversification regulations
which, among other things, require that no more than 55% of the assets of
mutual fund (such as the HL mutual funds) underlying a variable annuity
Contract, be invested in any one investment. In determining whether the
diversification standards are met, each United States Government Agency or
instrumentality shall be treated as a separate issuer. If the diversification
standards are not met, non-pension Contract Owners will be subject to current
tax on the increase in cash value in the Contract.
F. NON-NATURAL PERSONS, CORPORATIONS
The annual increase in the value of the Contract is currently includable in
gross income of a non-natural person. There is an exception for annuities held
by structured settlement companies and annuities held by an employer with
respect to a terminated pension plan. A non-natural person which is a
tax-exempt entity for federal tax purposes will not be subject to income tax
as a result of this provision.
MISCELLANEOUS
WHAT ARE MY VOTING RIGHTS?
HL shall notify the Contract Owner of any Fund shareholders' meeting if the
shares held for the Contract Owner's accounts may be voted at such meetings.
HL shall also send proxy materials and a form of instruction by means of which
the Contract Owner can instruct HL with respect to the voting of the Fund
shares held for the Contract Owner's account. In connection with the voting of
Fund shares held by it, HL shall arrange for the handling and tallying of
proxies received from Contract Owners. HL as such, shall have no right, except
as hereinafter provided, to vote any Fund shares held by it hereunder which
may be registered in its name or the names of its nominees. HL will, however,
vote the Fund shares held by it in accordance with the instructions received
from the Contract Owners for whose accounts the Fund shares are held. If a
Contract Owner desires to attend any meeting at which shares held for the
Contract Owner's benefit may be voted, the Contract Owner may request HL to
furnish a proxy or otherwise arrange for the exercise of voting rights with
respect to the Fund shares held for such Contract Owner's account. In the
event that the Contract Owner gives no instructions or leaves the manner of
voting discretionary, HL will vote such shares of the appropriate Fund,
including any of its own shares, in the same proportion as shares of that Fund
for which instructions have been received.
Every Participant under a group Contract who has a full (100%) vested
interest under a group Contract, shall receive proxy material and a form of
instruction by means of which Participants may instruct the Contract Owner
with respect to the number of votes attributable to his individual
participation under a group Contract.
A Contract Owner or Participant, as appropriate, is entitled to one full or
fractional vote for each full or fractional Accumulation or Annuity Unit
owned. The Contract Owner has voting rights throughout the life of the
Contract. The vested Participant has voting rights for as long as
participation in the Contract continues. Voting rights attach only to Separate
Account interests.
During the Annuity period under a Contract the number of votes will decrease
as the assets held to fund Annuity benefits decrease.
WILL OTHER CONTRACTS BE PARTICIPATING IN THIS SEPARATE ACCOUNT?
In addition to the Contracts described in this Prospectus, it is
contemplated that other forms of group or individual annuities may be sold
providing benefits which vary in accordance with the investment experience of
the Separate Account.
HOW ARE THE CONTRACTS SOLD?
Hartford Equity Sales Company, Inc. ("HESCO") currently serves as Principal
Underwriter for the securities issued with respect to the Separate Account.
Hartford Securities Distribution Company, Inc. ("HSD") will replace HESCO as
principal underwriter upon approval by the Commission, the National Association
of Securities Dealers, Inc. ("NASD") and applicable state regulatory
authorities.
Both HESCO and HSD are wholly-owned subsidiaries of HL. The principal
business address of HESCO and HSD is the same as HL.
25
<PAGE>
The securities will be sold by salespersons of HESCO, and subsequently, HSD,
who represent HL as insurance and Variable Annuity agents and who are
registered representatives or Broker-Dealers who have entered into
distribution agreements with HESCO, and subsequently HSD.
HESCO is registered with the Commission under the Securities and Exchange
Act of 1934 as a Broker-Dealer and is a member of the NASD. HSD will be
registered with the Commission under the Securities Exchange Act of 1934 as a
Broker-Dealer and will become a member of the NASD.
WHO IS THE CUSTODIAN OF THE SEPARATE ACCOUNT'S ASSETS?
HL is the custodian of the Separate Account's assets.
ARE THERE ANY MATERIAL LEGAL PROCEEDINGS AFFECTING THE SEPARATE ACCOUNT?
No.
ARE YOU RELYING ON ANY EXPERTS AS TO ANY PORTION OF THIS PROSPECTUS?
The financial statements and schedules included in this prospectus and
elsewhere in the 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 accounting and auditing.
HOW MAY I GET ADDITIONAL INFORMATION?
Inquiries will be answered by calling your representative or writing:
Hartford Life Insurance Company
Attn: RPVA Administration
P.O. Box 2999
Hartford, CT 06104-2999
26
<PAGE>
APPENDIX
PRIOR FRONT END LOAD CONTRACTS
Such Contracts are no longer being issued. Contract Owners may continue to
make contributions to those Contracts. The Contracts differ from those described
previously in this Prospectus as described below.
INDIVIDUAL FRONT END LOAD CONTRACTS
A. DEDUCTIONS FOR SALES EXPENSES, MINIMUM DEATH BENEFIT AND ADMINISTRATIVE
EXPENSES.
Purchase Payments made pursuant to the terms of the individual Contracts are
subject to a deduction of 8.5%. Of the 8.5%, 6% is for sales expense, 1.75% is
for administrative expense and .75% is for the minimum death benefit.
There are no maintenance fees or transfer fees.
Administrative and Sales Expenses - The charge for administrative and sales
expense is paid to HL for providing administrative personnel, services,
equipment, facilities and office space for the proper administration of the
Contracts, and sales activities, including field office expense.
B. OPTIONS AVAILABLE TO ANNUITANT
Unless prohibited by an endorsement to the Contract, the Annuity
Commencement Date may be the first day of any month between the Annuitant's 50th
and 75th birthdays, but in the absence of a written election to the contrary, HL
reserves the right to begin Annuity payments at age 65.
Unless prohibited by an endorsement to the Contract, the Contract Owner may
elect to have the Termination Value applied on the Annuity Commencement Date
under any one of the six Annuity Options described below, but in the absence of
such election the Termination Value on the Annuity Commencement Date will be
applied under the Second Option to provide a Life Annuity with 120 Monthly
Payments Guaranteed. The Termination Value applied is determined on the basis of
the accumulation unit value on the fifth business day preceding the date annuity
payments commence.
Election of any of these options including any optional Annuity Commencement
Date must be made by notice in writing to HL at its Home Office at least 30 days
prior to the date such election is to become effective.
Date of Payment--The first payment under the Deposit Option shall be made at
the end of the period selected, measured from the date of approval of the claim
for settlement. The first payment under any other option shall be made
immediately upon approval of claim for settlement, and subsequent payments shall
be made periodically in accordance with the manner of payment elected.
C. OPTIONS AVAILABLE TO BENEFICIARY
The Contract Owner, or in the case the Contract Owner shall not have done
so, the Beneficiary after the death of the Annuitant, may elect in lieu of
payment in one sum, that any amount or part thereof due by HL under the Contract
to the Beneficiary be applied under any of the Options described below. Such
election must be made within one year after the death of the Annuitant by
written notice to HL at its Home Office.
D. ANNUITY OPTIONS
First Option--Life Annuity
An annuity payable monthly during the lifetime of payee, ceasing with the
last payment due prior to the death of the payee.
Second Option--Life Annuity with 120, 180 or 240 Monthly Payments Guaranteed
An annuity payable monthly during the lifetime of the payee including the
guarantee that if, at the death of the payee, payments have been made for less
than 120 months, 180 months or 240 months (as selected), payments shall be
continued to the Beneficiary during the remainder of the selected period. If
the Beneficiary dies while receiving payments under this option or if no
Beneficiary is designated, a lump sum payment shall be made.
26
<PAGE>
Third Option--Unit Refund Life Annuity
An annuity payable monthly during the lifetime of the payee ceasing with the
last payment due prior to the death of the payee, provided that, at the death
of the payee, the Beneficiary will receive an additional payment of the then
dollar value of the number of annuity units equal to the excess, if any, of
(a) over (b) where (a) is the total amount applied under the option divided by
the annuity unit value at the effective date of annuity payments and (b) is
the number of annuity units represented by each payment multiplied by the
number of payments made.
Fourth Option--Joint and Last Survivor Life Annuity
An annuity payable monthly during the joint lifetime of the payee and a
secondary payee, and thereafter during the remaining lifetime of the survivor,
ceasing with the last payment prior to the death of the survivor.
Fifth Option--Payments for a Designated Period
An amount payable monthly for the number of years selected which may be from
1 to 30 years.
Sixth Option--Payments of a Specified Dollar Amount
The amount due may be paid in equal annual, semi-annual, quarterly or
monthly installments of a designated dollar amount (not less than $75.00 per
annum per $1,000 of the original amount due) until the remaining balance is
less than the amount of one installment. To determine the remaining balance in
either Account at the end of any valuation period such balance at the end of
the previous period is decreased by the amount of any installment paid during
the period and the result multiplied by the net investment factor for the
period. If the remaining balance at any time is less than the amount of one
installment, such balance will be paid and will be the final payment under the
option.
Deposit Option--Investment Income
The amount due may be left on deposit with HL in its General Account and a
sum will be paid annually, semi-annually, quarterly or monthly, as selected,
which shall be equal to the net investment rate for the period multiplied by
the amount remaining on deposit.
E. ALLOCATION OF ANNUITY
At the time election of one of the first five Annuity Options is made, the
person electing the option may further elect to have the Termination Value
(amount due) applied to provide a variable annuity, a fixed dollar annuity or a
combination of both. An election of the Sixth Option may specify that the net
investment factor for the Separate Account or the General Account is to apply or
the amount due may be split between the two Accounts. If no election is made to
the contrary, that portion of the amount due from the Separate Account shall be
applied to provide a variable annuity and that portion of the amount due from
the General Account shall be applied to provide a fixed dollar annuity. Election
of the Deposit Option shall constitute election of fixed income.
F. CONTRIBUTIONS
The minimum contribution under the Contract is $20.00.
GROUP FRONT END LOAD CONTRACTS
A. DEDUCTIONS FOR SALES EXPENSES AND MINIMUM DEATH BENEFIT
Purchase Payments made pursuant to the terms of the group Contracts are
subject to a deduction of 6%. Of the 6%, 5.25% is for sales expense and .75% is
for the minimum death benefit.
Administrative and Sales Expenses--The charge for administrative and sales
expense is paid to HL for providing administrative personnel, services,
equipment, facilities and office space for the proper administration of the
Contracts and sales activities, including field office expense.
27
<PAGE>
B. ELECTION OF OPTIONAL ANNUITIES
A Participant may elect to have his payments made under any of the Optional
Annuity Forms provided such election is received in writing by HL at its Home
Office at least 30 days prior to his Annuity Commencement Date. If no such
election is given to HL, the Annuity will be a Life Annuity with 120 Payments
Guaranteed as described in Option 2.
C. OPTIONAL ANNUITY FORMS
Option 1--Life Annuity
An annuity payable monthly during the lifetime of the Annuitant and
terminating with the last monthly payment preceding the death of the
Annuitant.
Option 2--Life Annuity with 120 or 180 Monthly Payments Guaranteed
An annuity payable monthly during the lifetime of the Annuitant with the
guarantee that if, at the death of the Annuitant, payments have been made for
less than 120 or 180 months, as elected, annuity payments will be continued
during the remainder of said period to the Beneficiary or Beneficiaries
designated by the Participant. If no Beneficiary is designated, or if a
Beneficiary dies while receiving annuity payments, the present value, computed
as of the date notice of death is received in writing by HL at its home
office, of the guaranteed number of annuity payments remaining after receipt
of such notice and to which the deceased would have been entitled had he not
died, computed on the basis of the selected Assumed Interest Rate, compounded
annually, shall be paid in a lump sum in accordance with the provisions of the
Contract. The annuity unit value for the day on which notice of death is
received at HL's Home Office shall be used for the purposes of determining the
lump sum payment.
Option 3--Unit Refund Life Annuity
An annuity payable monthly during the lifetime of the Annuitant, terminating
with the last payment due prior to the death of the Annuitant, provided that
an additional payment will be made in an amount equal to the annuity unit
value, as of the date that notice of death is received in writing by HL at its
Home Office, multiplied by a number equal to the excess, if any, of (a) over
(b), where (a) is the total amount applied under the option, divided by the
annuity unit value at the Annuity Commencement Date, and (b) is the product of
the number of annuity units represented by each payment and the number of
payments made.
Option 4--Joint and Last Survivor Annuity
An annuity payable monthly during the joint lifetime of the Annuitant and a
designated second person and thereafter during the remaining lifetime of the
survivor.
All payments under any of these options will be determined in accordance
with the Contracts. The Company reserves the right to require proof
satisfactory to it of the age of an Annuitant and any joint Annuitant prior to
making the first payment under any of these options.
D. CONTRIBUTIONS
The minimum contribution under the Contract is $20.00.
28
<PAGE>
This form must be completed for all tax sheltered annuities.
SECTION 403(B)(11) ACKNOWLEDGMENT FORM
The Hartford variable annuity Contract which you have recently purchased is
subject to certain restrictions imposed by the Tax Reform Act of 1986.
Contributions to the Contract after December 31, 1988 and any increases in cash
value after December 31, 1988 may not be distributed to you unless you have:
a. attained age 59 1/2
b. terminated employment
c. died, or
d. become disabled.
Distributions of post December 31, 1988 contributions may also be made if
you have experienced a financial hardship.
Also, there may be a 10% penalty tax for distributions made because of
financial hardship or separation from service.
Also, please be aware that your 403(b) Plan may also offer other financial
alternatives other than the Hartford variable annuity. Please refer to your
Plan.
Please complete the following and return to:
Hartford Life Insurance Company
Attn: RPVA Administration
P.O. Box 2999
Hartford, CT 06104-2999
Name of Contract Owner/Participant _____________________________________________
Address ________________________________________________________________________
City or Plan/School District ___________________________________________________
Date: __________________________________________________________________________
29
<PAGE>
To Obtain a Statement of Additional
Information, please complete the form below and
mail to:
Hartford Life Insurance Company
Attn: RPVA Administration
P.O. Box 2999
Hartford, CT 06104-2999
Please send a Statement of Additional
Information for the PCM Capital Manager to me at
the following address:
_________________________________________
(name)
_________________________________________
(street)
_________________________________________
(city/state) (zip code)
30
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- - ---------------------------------------------------------------------- ----
<S> <C>
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY........................ 3
SAFEKEEPING OF ASSETS................................................. 3
INDEPENDENT PUBLIC ACCOUNTANTS........................................ 3
DISTRIBUTION OF CONTRACTS............................................. 3
ANNUITY PERIOD........................................................ 3
A. Annuity Payments................................................. 3
B. Electing the Annuity Commencement Date and Form of Annuity....... 4
C. Optional Annuity Forms........................................... 4
Option 1: Life Annuity........................................ 4
Option 2: Life Annuity With 120, 180 or 240 Monthly Payments
Certain....................................................... 4
Option 3: Unit Refund Life Annuity............................ 5
Option 4: Joint and Last Survivor Annuity..................... 5
Option 5: Payments for a Designated Period.................... 6
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS.............................. 7
FINANCIAL STATEMENTS.................................................. 8
</TABLE>
31
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO (QP VARIABLE ACCOUNT)
This Statement of Additional Information is not a Prospectus. The
information contained herein should be read in conjunction with the Prospectus.
To obtain a Prospectus, send a written request to Hartford Life Insurance
Company, Attn: RPVA Administration, P.O. Box 2999, Hartford, CT 06104-2999.
Date of Prospectus: May 1, 1995
Date of Statement of Additional Information: May 1, 1995
Form HV-1880-8
Printed in U.S.A.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- - ---------------------------------------------------------------------- ----
<S> <C>
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY........................ 3
SAFEKEEPING OF ASSETS................................................. 3
INDEPENDENT PUBLIC ACCOUNTANTS........................................ 3
DISTRIBUTION OF CONTRACTS............................................. 3
ANNUITY PERIOD........................................................ 3
A. Annuity Payments................................................. 3
B. Electing the Annuity Commencement Date and Form of Annuity....... 4
C. Optional Annuity Forms........................................... 4
Option 1: Life Annuity........................................ 4
Option 2: Life Annuity With 120, 180 or 240 Monthly Payments
Certain....................................................... 4
Option 3: Unit Refund Life Annuity............................ 5
Option 4: Joint and Last Survivor Annuity..................... 5
Option 5: Payments for a Designated Period.................... 6
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS.............................. 7
FINANCIAL STATEMENTS.................................................. 8
</TABLE>
2
<PAGE>
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY
Hartford Life Insurance Company ("HL") was originally incorporated under the
laws of Massachusetts on June 5, 1902. It was subsequently redomiciled to
Connecticut. It is a stock life insurance company engaged in the business of
writing health and life insurance, both ordinary and group, in all states of the
United States and the District of Columbia. The offices of HL are located in
Simsbury, Connecticut; however its mailing address is P. O. Box 2999, Hartford,
Connecticut 06104-2999. Hartford Life is ultimately 100% owned by Hartford Fire
Insurance Company, one of the largest multiple lines insurance carriers in the
United States. Hartford Fire Insurance Company is a subsidiary of ITT
Corporation.
SAFEKEEPING OF ASSETS
HL holds the assets of the Separate Account in its custody for safekeeping
and performs those services normally performed by a custodian.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, independent public accountants, periodically audits the
Separate Account and annually certifies all of the financial statements of the
Separate Account. The financial statements included in this Statement of
Additional Information have been audited by Arthur Andersen LLP as indicated in
their report with respect thereto, and are included herein in reliance upon the
report of said firm as experts in accounting and auditing.
DISTRIBUTION OF CONTRACTS
Hartford Equity Sales Company, Inc. ("HESCO") currently serves as Principal
Underwriter for the securities issued with respect to the Separate Account.
Hartford Securities Distribution Company, Inc. ("HSD") will replace HESCO as
principal underwriter upon approval by the Commission, the National Association
of Securities Dealers, Inc. ("NASD") and applicable state regulatory
authorities.
Both HESCO and HSD are wholly-owned subsidiaries of HL. The principal
business address of HESCO and HSD is the same as HL.
The securities will be sold by salespersons of HESCO, and subsequently, HSD,
who represent HL as insurance and Variable Annuity agents and who are registered
representatives or Broker- Dealers who have entered into distribution agreements
with HESCO, and subsequently HSD.
HESCO is registered with the Commission under the Securities and Exchange
Act of 1934 as a Broker-Dealer and is a member of the NASD. HSD will be
registered with the Commission under the Securities Exchange Act of 1934 as a
Broker-Dealer and will become a member of the NASD.
The offering of the Separate Account Contracts is continuous.
ANNUITY PERIOD
A. ANNUITY PAYMENTS
Variable Annuity payments are determined on the basis of (1) a mortality
table set forth in the Contracts which reflects the age of the Annuitant and
the type of Annuity payment option selected, and (2) the investment
performance of the investment medium selected.
Fixed Annuity payments will be no less than those calculated at rates based
on the annuity tables contained in the Contracts.
3
<PAGE>
The amount of the Annuity payments will not be affected by adverse mortality
experience or by an increase in expenses in excess of the expense deduction
for which provision has been made (see "Charges Under the Contract,"
commencing on page 19 of the Prospectus).
The Annuitant will be paid the value of a fixed number of Annuity Units each
month. The value of such units and the amounts of the monthly Variable Annuity
payments will, however, reflect investment income occurring after retirement,
and thus the payments will vary with the investment experience of the Fund
shares selected.
<TABLE>
<CAPTION>
ILLUSTRATION OF CALCULATION OF ANNUITY UNIT VALUE
<C> <S> <C>
1. Net Investment Factor for period.............................. .000498
2. Adjustment for 4% Assumed Rate of Net Investment Return....... .999892
3. 2 X (1 + 1.000000)............................................ 1.000390
4. Annuity Unit value, beginning of period....................... .995995
5. Annuity Unit value, end of period (3 X 4)..................... .996383
</TABLE>
B. ELECTING THE ANNUITY COMMENCEMENT DATE AND FORM OF ANNUITY
The Contract Owner selects an Annuity Commencement Date, usually between a
Participant's 50th and 75th birthdays, and an Annuity option. The Annuity
Commencement Date may not be deferred beyond the Annuitant's 75th birthday or
such earlier date may be required by applicable law and/or regulation. The
Annuity Commencement Date and/or the Annuity option may be changed from time
to time, but any such change must be made at least 30 days prior to the date
on which Annuity payments are scheduled to begin. Annuity payments will be
made on the first business day of each month.
The Contracts contain the five optional Annuity forms described below, which
may be selected on either a Fixed or Variable Annuity basis, or a combination
thereof. If a Contract Owner does not elect otherwise. HL reserves the right
to begin Annuity payments at age 65 under Option 2 with 120 monthly payments
certain. However, HL will not assume responsibility in determining or
monitoring minimum distribution beginning at age 70 1/2.
The minimum Annuity payment is $20. No election may be made which results in
a first payment of less than $20. If at any time Annuity payments are or
become less than $20.00, HL has the right to change the frequency of payment
to such intervals as will result in payments of at least $20.00.
C. OPTIONAL ANNUITY FORMS
OPTION 1: LIFE ANNUITY
A life Annuity is an Annuity payable during the lifetime of the Annuitant
and terminating with the last monthly payment preceding the death of the
Annuitant. Life Annuity options (options 1-4) offer the maximum level of
monthly payments of any of the options since there is no guarantee of a
minimum number of payments nor a provision for a death benefit payable to a
Beneficiary.
It would be possible under this option for an Annuitant to receive only one
Annuity payment if he died prior to the due date of the second Annuity
payment, two if he died before the due date of the third Annuity payment, etc.
*OPTION 2: LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS CERTAIN
This Annuity option is an Annuity payable monthly during the lifetime of an
Annuitant with the provision that if, at the death of the Annuitant, payments
have been made for less than 120, 180 or 240 months, as elected, then the
present value as of the date of the Participant's death at the current dollar
amount at the date of death of any remaining guaranteed monthly payments will
be paid in one sum to the Beneficiary or Beneficiaries designated unless other
provisions will have been made and approved by HL.
4
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATION OF ANNUITY PAYMENTS
INDIVIDUAL AGE 65, LIFE ANNUITY WITH 120 PAYMENTS CERTAIN
<C> <S> <C>
1. Net amount applied.......................................... 13,978.25
2. Initial monthly income per $1,000 of payment applied........ 5.93
3. Initial monthly payment (1 X 2 - 1,000)..................... 82.89
4. Annuity Unit value.......................................... .953217
5. Number of monthly Annuity Units (3-4)....................... 86.959
6. Assume Annuity Unit value for second month equal to......... .963723
7. Second monthly payment (6 X 5).............................. 83.80
8. Assume Annuity Unit value for third month equal to.......... .964917
9. Third month payment (8 X 5)................................. 83.91
</TABLE>
For the purpose of this illustration, purchase is assumed to have been made
on the 5th business day preceding the first payment date. In determining the
second and subsequent payments the Annuity Unit value of the 5th business day,
preceding the Annuity due date is used.
*OPTION 3: UNIT REFUND LIFE ANNUITY
This Annuity option is an Annuity payable monthly during the lifetime of the
Annuitant terminating with the last payment due prior to the death of the
Annuitant except that an additional payment will be made to the Beneficiary or
Beneficiaries if (a) below exceeds (b) below:
total amount applied under the option
(a) = at the Annuity Commencement Date
------------------------------------------------------------------
Annuity Unit value at the Annuity Commencement Date
number of Annuity Units represented number of monthly
(b) = by monthly Annuity payment made X Annuity payments made
The amount of the additional payments will be determined by multiplying such
excess by the Annuity Unit value as of the date that proof of death is
received by HL.
For example, if $20,000 were applied to the purchase of an Annuity under
this option, the value of an Annuity Unit was $1.25 on the Annuity
Commencement Date, the number of Annuity Units represented by each monthly
payment was 91.68 (the number applicable to an individual electing this option
to commence at age 65), 60 monthly Annuity payments were made prior to the
date of death, and the value of an Annuity Unit on the date of receipt of
proof of an Annuitant's death was $1.50, the amount paid to the Beneficiary
would be $15,748.80, computed as follows:
$20,000
------- - (91.68 X 60) = 10,499.200
$1.25
or
16,000.000 - 5,599.800 = 10,499.200
10,499.200 X $1.50 = $15,748.80
OPTION 4: JOINT AND LAST SURVIVOR ANNUITY
An Annuity payable monthly during the joint lifetime of the Annuitant and a
designated second person, and thereafter during the remaining lifetime of the
survivor, ceasing with the last payment prior to the death of the survivor.
It would be possible under this Option for an Annuitant and designated
second person in the event of the common or simultaneous death of the parties
to receive only one payment in the event of death prior to the due date for
the second payment and so on.
5
<PAGE>
*OPTION 5: PAYMENTS FOR A DESIGNATED PERIOD
An amount payable monthly for the number of years selected which may be from
one to thirty years. Under this Option, the Contract Owner or Annuitant may,
at any time, surrender the Account and receive, within seven days, the current
value of the account.
In the event of the Annuitant's death prior to the end of the designated
period, any then remaining balance of proceeds will be paid in one sum to the
Beneficiary or Beneficiaries designated unless other provisions will have been
made and approved by HL.
* ON QUALIFIED PLANS, OPTIONS 2, 3 AND 5 ARE AVAILABLE ONLY IF THE GUARANTEED
PAYMENT PERIOD IS LESS THAN THE LIFE EXPECTANCY OF THE ANNUITANT AT THE TIME
THE OPTION BECOMES EFFECTIVE. SUCH LIFE EXPECTANCY SHALL BE COMPUTED ON THE
BASIS OF THE MORTALITY TABLE PRESCRIBED BY THE IRS, OR IF NONE IS PRESCRIBED,
THE MORTALITY TABLE THEN IN USE BY HL.
6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life Insurance Company
Separate Account Two and to the
Owners of Units of Interest therein:
We have audited the accompanying statement of assets and liabilities of
Hartford Life Insurance Company Separate Account Two as of December 31, 1994,
and the related statement of operations for the year then ended and statement of
changes in net assets for each of the two years in the period then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits 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 financial statements referred to above present fairly,
in all material respects, the financial position of Hartford Life Insurance
Company Separate Account Two as of December 31, 1994, the results of its
operations for the year then ended and the changes in its net assets for each of
the two years in the period then ended in conformity with generally accepted
accounting principles.
Hartford, Connecticut
February 10, 1995 Arthur Andersen LLP
7
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS & LIABILITIES
DECEMBER 31, 1994
<TABLE>
<CAPTION>
U.S.
GOVERNMENT
MONEY MONEY MARKET
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund, Inc.
Shares 172,229,725
Cost $ 176,180,319
Market Value................... $159,488,170 -- -- -- --
Hartford Stock Fund, Inc.
Shares 230,631,116
Cost $ 615,215,162
Market Value................... -- $646,103,848 -- -- --
HVA Money Market Fund, Inc.
Shares 241,684,272
Cost $ 241,684,272
Market Value................... -- -- $241,684,272 -- --
Hartford Advisers Fund, Inc.
Shares 1,125,337,358
Cost $1,820,221,520
Market Value................... -- -- -- $1,801,079,934 --
Hartford U.S. Government Money
Market Fund, Inc.
Shares 1,211,232
Cost$ 1,211,232
Market Value................... -- -- -- -- $1,211,232
Hartford Aggressive Growth Fund,
Inc.
Shares 221,151,687
Cost $ 581,410,587
Market Value................... -- -- -- -- --
Hartford Mortgage Securities
Fund, Inc.
Shares 216,900,409
Cost $ 233,653,118
Market Value................... -- -- -- -- --
Hartford Index Fund, Inc.
Shares 62,005,461
Cost $ 85,135,111
Market Value................... -- -- -- -- --
Hartford International
Opportunities Fund, Inc.
Shares 255,913,841
Cost $ 287,607,489
Market Value................... -- -- -- -- --
Hartford Dividend and Growth
Fund, Inc.
Shares 30,033,209
Cost $ 30,342,155
Market Value................... -- -- -- -- --
Calvert Socially Responsive
Series, Inc.
Shares 688,923
Cost $ 985,530
Market Value................... -- -- -- -- --
Smith Barney Shearson Daily
Dividend Fund, Inc.
Shares 645,916
Cost $ 645,916
Market Value................... -- -- -- -- --
Smith Barney Shearson
Appreciation Fund, Inc.
Shares 11,551
Cost$ 74,714
Market Value................... -- -- -- -- --
Smith Barney Shearson Government
and Agencies Fund
Shares 48,101
Cost$ 48,101
Market Value................... -- -- -- -- --
Dividends Receivable............. -- -- -- -- --
Due from Hartford Life Insurance
Company........................ 67,001 493,463 -- 694,443 9,658
Receivable from fund shares
sold........................... -- -- 416,033 -- --
------------ ------------ ------------ -------------- --------------
Total Assets..................... 159,555,171 646,597,311 242,100,305 1,801,774,377 1,220,890
------------ ------------ ------------ -------------- --------------
LIABILITIES:
Due to Hartford Life Insurance
Company........................ -- -- 411,062 -- --
Payable for fund shares
purchased...................... 67,024 494,846 -- 693,465 9,289
------------ ------------ ------------ -------------- --------------
Total Liabilities................ 67,024 494,846 411,062 693,465 9,289
------------ ------------ ------------ -------------- --------------
Net Assets (variable annuity
contract liabilities).......... $159,488,147 $646,102,465 $241,689,243 $1,801,080,912 $1,211,601
------------ ------------ ------------ -------------- --------------
------------ ------------ ------------ -------------- --------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
8
<PAGE>
<TABLE>
<CAPTION>
MORTGAGE INTERNATIONAL SOCIALLY
AGGRESSIVE SECURITIES OPPORTUNITIES DIVIDEND AND RESPONSIVE
GROWTH FUND FUND INDEX FUND FUND GROWTH FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------- ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund, Inc.
Shares 172,229,725
Cost $ 176,180,319
Market Value................... -- -- -- -- -- --
Hartford Stock Fund, Inc.
Shares 230,631,116
Cost $ 615,215,162
Market Value................... -- -- -- -- -- --
HVA Money Market Fund, Inc.
Shares 241,684,272
Cost $ 241,684,272
Market Value................... -- -- -- -- -- --
Hartford Advisers Fund, Inc.
Shares 1,125,337,358
Cost $1,820,221,520
Market Value................... -- -- -- -- -- --
Hartford U.S. Government Money
Market Fund, Inc.
Shares 1,211,232
Cost$ 1,211,232
Market Value................... -- -- -- -- -- --
Hartford Aggressive Growth Fund,
Inc.
Shares 221,151,687
Cost $ 581,410,587
Market Value................... $632,467,289 -- -- -- -- --
Hartford Mortgage Securities
Fund, Inc.
Shares 216,900,409
Cost $ 233,653,118
Market Value................... -- $213,512,425 -- -- -- --
Hartford Index Fund, Inc.
Shares 62,005,461
Cost $ 85,135,111
Market Value................... -- -- $94,384,095 -- -- --
Hartford International
Opportunities Fund, Inc.
Shares 255,913,841
Cost $ 287,607,489
Market Value................... -- -- -- $300,880,462 -- --
Hartford Dividend and Growth
Fund, Inc.
Shares 30,033,209
Cost $ 30,342,155
Market Value................... -- -- -- -- $29,855,712 --
Calvert Socially Responsive
Series, Inc.
Shares 688,923
Cost $ 985,530
Market Value................... -- -- -- -- -- $ 992,739
Smith Barney Shearson Daily
Dividend Fund, Inc.
Shares 645,916
Cost $ 645,916
Market Value................... -- -- -- -- -- --
Smith Barney Shearson
Appreciation Fund, Inc.
Shares 11,551
Cost$ 74,714
Market Value................... -- -- -- -- -- --
Smith Barney Shearson Government
and Agencies Fund
Shares 48,101
Cost$ 48,101
Market Value................... -- -- -- -- -- --
Dividends Receivable............. -- -- -- -- -- 31,623
Due from Hartford Life Insurance
Company........................ 670,264 -- -- 34,067 169,314 7,760
Receivable from fund shares
sold........................... -- 72,115 122,769 -- -- --
------------ ------------- ------------ ------------- ------------ -----------
Total Assets..................... 633,137,553 213,584,540 94,506,864 300,914,529 30,025,026 1,032,122
------------ ------------- ------------ ------------- ------------ -----------
LIABILITIES:
Due to Hartford Life Insurance
Company........................ -- 67,937 122,812 -- -- --
Payable for fund shares
purchased...................... 668,624 -- -- 34,906 169,722 7,784
------------ ------------- ------------ ------------- ------------ -----------
Total Liabilities................ 668,624 67,937 122,812 34,906 169,722 7,784
------------ ------------- ------------ ------------- ------------ -----------
Net Assets (variable annuity
contract liabilities).......... $632,468,929 $213,516,603 $94,384,052 $300,879,623 $29,855,304 $1,024,338
------------ ------------- ------------ ------------- ------------ -----------
------------ ------------- ------------ ------------- ------------ -----------
<CAPTION>
SMITH
BARNEY
SMITH BARNEY SMITH SHEARSON
SHEARSON BARNEY GOVERNMENT
DAILY SHEARSON AND
DIVIDEND APPRECIATION AGENCIES
FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ---------- -----------
<S> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund, Inc.
Shares 172,229,725
Cost $ 176,180,319
Market Value................... -- -- --
Hartford Stock Fund, Inc.
Shares 230,631,116
Cost $ 615,215,162
Market Value................... -- -- --
HVA Money Market Fund, Inc.
Shares 241,684,272
Cost $ 241,684,272
Market Value................... -- -- --
Hartford Advisers Fund, Inc.
Shares 1,125,337,358
Cost $1,820,221,520
Market Value................... -- -- --
Hartford U.S. Government Money
Market Fund, Inc.
Shares 1,211,232
Cost$ 1,211,232
Market Value................... -- --
Hartford Aggressive Growth Fund,
Inc.
Shares 221,151,687
Cost $ 581,410,587
Market Value................... -- -- --
Hartford Mortgage Securities
Fund, Inc.
Shares 216,900,409
Cost $ 233,653,118
Market Value................... -- -- --
Hartford Index Fund, Inc.
Shares 62,005,461
Cost $ 85,135,111
Market Value................... -- -- --
Hartford International
Opportunities Fund, Inc.
Shares 255,913,841
Cost $ 287,607,489
Market Value................... -- -- --
Hartford Dividend and Growth
Fund, Inc.
Shares 30,033,209
Cost $ 30,342,155
Market Value................... -- -- --
Calvert Socially Responsive
Series, Inc.
Shares 688,923
Cost $ 985,530
Market Value................... -- -- --
Smith Barney Shearson Daily
Dividend Fund, Inc.
Shares 645,916
Cost $ 645,916
Market Value................... $645,916 -- --
Smith Barney Shearson
Appreciation Fund, Inc.
Shares 11,551
Cost$ 74,714
Market Value................... -- $117,210 --
Smith Barney Shearson Government
and Agencies Fund
Shares 48,101
Cost$ 48,101
Market Value................... -- -- $48,101
Dividends Receivable............. -- -- 8
Due from Hartford Life Insurance
Company........................ -- -- --
Receivable from fund shares
sold........................... 1,130 30 195
------------ ---------- -----------
Total Assets..................... 647,046 117,240 48,304
------------ ---------- -----------
LIABILITIES:
Due to Hartford Life Insurance
Company........................ 1,130 19 211
Payable for fund shares
purchased...................... -- -- --
------------ ---------- -----------
Total Liabilities................ 1,130 19 211
------------ ---------- -----------
Net Assets (variable annuity
contract liabilities).......... $645,916 $117,221 $48,093
------------ ---------- -----------
------------ ---------- -----------
</TABLE>
9
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ ---------- ---------------
<S> <C> <C> <C>
DEFERRED ANNUITY CONTRACTS IN THE ACCUMULATION PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Bond Fund Qualified 1.00%................................................. 386,894 $ 3.081636 $ 1,192,266
Bond Fund Non-Qualified 1.00%............................................. 2,747,334 3.034781 8,337,557
Bond Fund 1.25%........................................................... 85,397,157 1.606681 137,205,990
Bond Fund .25%............................................................ 130,046 1.048603 136,367
Stock Fund Qualified 1.00%................................................ 1,015,114 4.177385 4,240,521
Stock Fund Non-Qualified 1.00%............................................ 3,743,893 3.994491 14,954,948
Stock Fund 1.25%.......................................................... 248,563,344 2.180436 541,976,464
Stock Fund .25%........................................................... 1,226,382 1.123066 1,377,308
Money Market Fund Qualified 1.00%......................................... 1,193,859 2.261057 2,699,383
Money Market Fund Non-Qualified 1.00%..................................... 14,166,909 2.262124 32,047,305
Money Market Fund 1.25%................................................... 138,396,161 1.462471 202,400,371
Money Market Fund .25%.................................................... 186,512 1.064380 198,520
Advisers Fund Qualified 1.00%............................................. 4,660,625 2.959828 13,794,648
Advisers Fund Non-Qualified 1.00%......................................... 15,416,951 2.959828 45,631,522
Advisers Fund 1.25%....................................................... 858,013,683 1.990804 1,708,137,073
Advisers Fund .25%........................................................ 1,344,430 1.088404 1,463,283
U.S. Government Money Market Fund Qualified 1.00%......................... 20,769 1.810814 37,609
U.S. Government Money Market Fund 1.25%................................... 48,432 1.408971 68,240
Aggressive Growth Fund Qualified 1.00%.................................... 938,226 4.368563 4,098,699
Aggressive Growth Fund Non-Qualified 1.00%................................ 2,983,029 4.366578 13,025,628
Aggressive Growth Fund 1.25%.............................................. 220,935,895 2.615288 577,810,995
Aggressive Growth Fund .25%............................................... 2,691,355 1.233577 3,319,994
Mortgage Securities Fund Qualified 1.00%.................................. 1,431,871 2.084988 2,985,434
Mortgage Securities Fund Non-Qualified 1.00%.............................. 11,296,904 2.084988 23,553,908
Mortgage Securities Fund 1.25%............................................ 112,417,272 1.636791 184,003,579
Mortgage Securities Fund .25%............................................. 105,417 1.037405 109,360
Index Fund 1.25%.......................................................... 50,799,238 1.749714 88,884,138
Index Fund .25%........................................................... 205,039 1.099141 225,367
International Opportunities Fund Qualified 1.00%.......................... 556,691 1.194697 665,077
International Opportunities Fund Non-Qualified 1.00%...................... 2,439,349 1.194654 2,914,179
International Opportunities Fund 1.25%.................................... 246,259,349 1.181321 290,911,341
International Opportunities Fund .25%..................................... 1,080,735 1.295734 1,400,346
Dividend and Growth Fund Qualified 1.00%.................................. 36,668 1.011382 37,085
Dividend and Growth Fund Non-Qualified 1.00%.............................. 335,338 1.011382 339,155
Dividend and Growth Fund 1.25%............................................ 29,145,963 1.009335 29,418,040
Dividend and Growth Fund .25%............................................. 59,971 1.017552 61,024
Smith Barney Shearson Daily Dividend, Inc. Qualified 1.00%................ 96,101 2.458044 236,221
Smith Barney Shearson Daily Dividend, Inc. Non-Qualified 1.00%............ 161,059 2.543759 409,695
Smith Barney Shearson Appreciation Fund, Inc. Qualified 1.00%............. 23,909 4.902844 117,221
Smith Barney Shearson Government and Agencies, Inc. Qualified 1.00%....... 21,677 2.218682 48,093
---------------
Sub-total Individual Sub-Accounts......................................... 3,940,473,954
---------------
GROUP SUB-ACCOUNTS:
Bond Fund Qualified 1.00% QP.............................................. 1,668,221 3.609357 6,021,205
Bond Fund 1.25% DCII...................................................... 1,122,768 3.499674 3,929,323
Bond Fund .15% DCII....................................................... 305,816 3.261226 997,336
Stock Fund Qualified 1.00% QP............................................. 4,283,748 6.985679 29,924,886
Stock Fund Qualified .825% QP............................................. 1,435,480 5.600682 8,039,665
Stock Fund Non-Qualified 1.00% NQ......................................... 88,837 5.481096 486,923
Stock Fund Non-Qualified .825% NQ......................................... 890,205 5.610519 4,994,510
Stock Fund 1.25% DCII..................................................... 3,884,750 6.771260 26,304,653
Stock Fund .15% DCII...................................................... 858,147 5.201059 4,463,271
Money Market Fund Qualified .375% QP...................................... 2,095 2.802645 5,871
Money Market Fund 1.25% DCII.............................................. 905,063 2.511791 2,273,329
Money Market Fund .15% DCII............................................... 265,801 2.416025 642,182
Advisers Fund 1.25% DCII.................................................. 8,279,212 2.875723 23,808,720
Advisers Fund .15% DCII................................................... 528,996 3.268187 1,728,857
U.S. Government Money Market Fund 1.25% DCII.............................. 483,107 1.758459 849,524
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
10
<PAGE>
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ ---------- ---------------
GROUP SUB-ACCOUNTS -- (CONTINUED)
<S> <C> <C> <C>
U.S. Government Money Market Fund .15% DCII............................... 37,301 $ 2.003628 $ 74,738
Aggressive Growth Fund 1.25% DCII......................................... 6,922,578 4.256870 29,468,515
Aggressive Growth Fund .15% DCII.......................................... 599,956 4.785486 2,871,082
Mortgage Securities Fund 1.25% DCII....................................... 993,777 2.033647 2,020,991
Mortgage Securities Fund .15% DCII........................................ 78,285 2.268923 177,623
Index Fund 1.25% DCII..................................................... 2,375,877 1.737856 4,128,933
Index Fund .15% DCII...................................................... 216,621 1.875849 406,348
International Opportunities Fund 1.25% DCII............................... 3,640,068 1.181488 4,300,697
International Opportunities Fund .15% DCII................................ 333,919 1.241199 414,460
Socially Responsive Fund 1.25% DCII....................................... 692,817 1.417414 982,008
---------------
Sub-total Group Sub-Accounts.............................................. 159,315,650
---------------
TOTAL ACCUMULATION PERIOD................................................... 4,099,789,604
---------------
ANNUITY CONTRACTS IN THE ANNUITY PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Bond Fund Non-Qualified 1.00%............................................. 704 3.034781 2,138
Bond Fund 1.25%........................................................... 129,039 1.606681 207,325
Stock Fund Non-Qualified 1.00%............................................ 7,925 3.994491 31,657
Stock Fund 1.25%.......................................................... 191,847 2.180436 418,310
Money Market Fund Qualified 1.00%......................................... 20,342 2.261057 45,994
Money Market Fund Non-Qualified 1.00%..................................... 129,600 2.262124 293,172
Money Market Fund 1.25%................................................... 434,331 1.462471 635,196
Advisers Fund Qualified 1.00%............................................. 5,523 2.959828 16,347
Advisers Fund Non-Qualified 1.00%......................................... 75,862 2.959828 224,538
Advisers Fund 1.25%....................................................... 786,775 1.990804 1,566,314
U.S. Government Money Market Fund Qualified 1.00%......................... 25,034 1.810814 45,331
Aggressive Growth Fund Non-Qualified 1.00%................................ 5,273 4.366578 23,026
Aggressive Growth Fund 1.25%.............................................. 53,426 2.615288 139,725
Mortgage Securities Fund Qualified 1.00%.................................. 8,740 2.084988 18,223
Mortgage Securities Fund Non-Qualified 1.00%.............................. 118,956 2.084988 248,021
Mortgage Securities Fund 1.25%............................................ 82,741 1.636791 135,429
Index Fund 1.25%.......................................................... 26,043 1.749714 45,568
International Opportunities Fund 1.25%.................................... 132,984 1.181321 157,097
---------------
Sub-total Individual Sub-Accounts......................................... 4,253,411
---------------
GROUP SUB-ACCOUNTS:
Bond Fund Qualified 1.00% QP.............................................. 91,006 3.609357 328,473
Bond Fund 1.25% DCII...................................................... 308,096 3.499674 1,078,236
Bond Fund 1.00% DCII...................................................... 14,445 3.595086 51,932
Stock Fund Qualified 1.00% QP............................................. 233,773 6.985679 1,633,062
Stock Fund Qualified .825% QP............................................. 54,011 5.600682 302,500
Stock Fund Non-Qualified 1.00% NQ......................................... 728 5.481096 3,988
Stock Fund Non-Qualified .825% NQ......................................... 65,133 5.610519 365,428
Stock Fund 1.25% DCII..................................................... 964,557 6.771260 6,531,268
Stock Fund 1.00% DCII..................................................... 4,948 6.963798 34,458
Stock Fund .15% DCII...................................................... 3,585 5.201059 18,646
Money Market Fund 1.25% DCII.............................................. 178,327 2.511791 447,919
Advisers Fund 1.25% DCII.................................................. 1,609,483 2.875723 4,628,427
Advisers Fund .15% DCII................................................... 24,841 3.268187 81,184
U.S. Government Money Market Fund 1.25% DCII.............................. 77,431 1.758459 136,159
Aggressive Growth Fund 1.25% DCII......................................... 402,001 4.256870 1,711,264
Mortgage Securities Fund 1.25% DCII....................................... 129,833 2.033647 264,035
Index Fund 1.25% DCII..................................................... 399,168 1.737856 693,697
International Opportunities Fund 1.25% DCII............................... 98,542 1.181488 116,426
Socially Responsive Fund 1.25% DCII....................................... 29,864 1.417414 42,330
---------------
Sub-total Group Sub-Accounts.............................................. 18,469,432
---------------
TOTAL ANNUITY PERIOD........................................................ 22,722,843
---------------
GRAND TOTAL................................................................. $ 4,122,512,447
---------------
---------------
</TABLE>
11
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
U.S.
GOVERNMENT
MONEY MONEY MARKET
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends........................ $ 10,129,126 $ 13,298,486 $ 8,730,379 $ 57,979,079 $ 42,603
EXPENSES:
Mortality and expense
undertakings................... (1,981,904) (7,426,331) (2,661,371) (21,578,163) (13,685)
------------ ------------ ------------ -------------- -------------
Net investment income (loss)... 8,147,222 5,872,155 6,069,008 36,400,916 28,918
------------ ------------ ------------ -------------- -------------
Capital gains income............. 3,020,067 34,722,942 -- 47,447,226 --
------------ ------------ ------------ -------------- -------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on
security transactions.......... (421,917) (203,916) -- 414,315 --
Net unrealized appreciation
(depreciation) of investments
during the period.............. (19,519,205) (59,765,259) -- (154,737,742) --
------------ ------------ ------------ -------------- -------------
Net gains (losses) on
investments.................. (19,941,122) (59,969,175) -- (154,323,427) --
------------ ------------ ------------ -------------- -------------
Net increase (decrease) in net
assets resulting from
operations................... $ (8,773,833) $(19,374,078) $ 6,069,008 $ (70,475,285) $ 28,918
------------ ------------ ------------ -------------- -------------
------------ ------------ ------------ -------------- -------------
</TABLE>
* From Inception, March 8, 1994, to December 31, 1994.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
12
<PAGE>
<TABLE>
<CAPTION>
MORTGAGE INTERNATIONAL SOCIALLY
AGGRESSIVE SECURITIES OPPORTUNITIES DIVIDEND AND RESPONSIVE
GROWTH FUND FUND INDEX FUND FUND GROWTH FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT
--------------- ------------- ------------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends........................ $ 2,216,268 $ 15,801,876 $ 2,259,862 $ 3,567,586 $ 419,546 $ 31,623
EXPENSES:
Mortality and expense
undertakings................... (6,812,975) (2,897,906) (1,104,316) (3,151,951) (135,382) (11,158)
--------------- ------------- ------------- ------------ ------------ ---------
Net investment income (loss)... (4,596,707) 12,903,970 1,155,546 415,635 284,164 20,465
--------------- ------------- ------------- ------------ ------------ ---------
Capital gains income............. 42,093,901 1,176,728 -- -- -- --
--------------- ------------- ------------- ------------ ------------ ---------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on
security transactions.......... 316,913 (2,117,604) 177,595 (38,119) 1,622 (180)
Net unrealized appreciation
(depreciation) of investments
during the period.............. (28,599,970) (19,218,450) (1,319,890) (9,418,006) (486,442) (59,462)
--------------- ------------- ------------- ------------ ------------ ---------
Net gains (losses) on
investments.................. (28,283,057) (21,336,054) (1,142,295) (9,456,125) (484,820) (59,642)
--------------- ------------- ------------- ------------ ------------ ---------
Net increase (decrease) in net
assets resulting from
operations................... $ 9,214,137 $ (7,255,356) $ 13,251 $(9,040,490) $ (200,656) $(39,177)
--------------- ------------- ------------- ------------ ------------ ---------
--------------- ------------- ------------- ------------ ------------ ---------
<CAPTION>
SMITH
SMITH BARNEY
BARNEY SMITH SHEARSON
SHEARSON BARNEY GOVERNMENT
DAILY SHEARSON AND
DIVIDEND APPRECIATION AGENCIES
FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------- -------- -------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends........................ $24,231 $ 1,969 $1,757
EXPENSES:
Mortality and expense
undertakings................... (6,845) (1,226) (488)
-------- -------- -------
Net investment income (loss)... 17,386 743 1,269
-------- -------- -------
Capital gains income............. -- 6,550 --
-------- -------- -------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on
security transactions.......... -- (476) --
Net unrealized appreciation
(depreciation) of investments
during the period.............. -- (9,210) --
-------- -------- -------
Net gains (losses) on
investments.................. -- (9,686) --
-------- -------- -------
Net increase (decrease) in net
assets resulting from
operations................... $17,386 $(2,393) $1,269
-------- -------- -------
-------- -------- -------
</TABLE>
13
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
U.S.
GOVERNMENT
MONEY MONEY MARKET
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ------------ --------------- ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 8,147,222 $ 5,872,155 $ 6,069,008 $ 36,400,916 $ 28,918
Capital gains income............. 3,020,067 34,722,942 -- 47,447,226 --
Net realized gain (loss) on
security transactions.......... (421,917) (203,916) -- 414,315 --
Net unrealized appreciation
(depreciation) of investments
during the period.............. (19,519,205) (59,765,259) -- (154,737,742) --
------------ ------------ ------------ --------------- ------------
Net increase (decrease) in net
assets resulting from
operations..................... (8,773,833) (19,374,078) 6,069,008 (70,475,285) 28,918
------------ ------------ ------------ --------------- ------------
UNIT TRANSACTIONS:
Purchases........................ 29,721,918 105,127,448 72,433,601 419,190,064 205,153
Net transfers.................... (10,176,062) 20,445,965 10,951,538 14,104,761 (151,291)
Surrenders....................... (11,477,200) (25,527,779) (33,930,464) (88,886,489) (65,287)
Net annuity transactions......... 284,001 1,000,538 596,459 2,114,613 (29,641)
------------ ------------ ------------ --------------- ------------
Net increase (decrease) in net
assets resulting from unit
transactions................... 8,352,657 101,046,172 50,051,134 346,522,949 (41,066)
------------ ------------ ------------ --------------- ------------
Total increase (decrease) in net
assets......................... (421,176) 81,672,094 56,120,142 276,047,664 (12,148)
NET ASSETS:
Beginning of period.............. 159,909,323 564,430,371 185,569,101 1,525,033,248 1,223,749
------------ ------------ ------------ --------------- ------------
End of period.................... $159,488,147 $646,102,465 $241,689,243 $ 1,801,080,912 $1,211,601
------------ ------------ ------------ --------------- ------------
------------ ------------ ------------ --------------- ------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1993
<CAPTION>
U.S.
GOVERNMENT
MONEY MONEY MARKET
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ------------ --------------- ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 7,572,358 $ 8,308,344 $ 2,813,416 $ 25,701,741 $ 18,672
Capital gains income............. 99,084 18,638,665 -- 20,817,465 --
Net realized gain (loss) on
security transactions.......... 215,618 447,050 -- 182,805 --
Net unrealized appreciation
(depreciation) of investments
during the period.............. 1,690,700 30,785,479 -- 65,119,250 --
------------ ------------ ------------ --------------- ------------
Net increase (decrease) in net
assets resulting from
operations..................... 9,577,760 58,179,538 2,813,416 111,821,261 18,672
------------ ------------ ------------ --------------- ------------
UNIT TRANSACTIONS:
Purchases........................ 64,035,095 163,937,277 83,799,945 714,972,050 194,811
Net transfers.................... 4,924,354 25,227,185 (35,854,970) 105,616,425 (65,248)
Surrenders....................... (6,989,348) (15,906,440) (25,784,152) (50,149,218) (212,373)
Net annuity transactions......... 343,986 669,968 118,488 968,114 72,905
------------ ------------ ------------ --------------- ------------
Net increase (decrease) in net
assets resulting from unit
transactions................... 62,314,087 173,927,990 22,279,311 771,407,371 (9,905)
------------ ------------ ------------ --------------- ------------
Total increase (decrease) in net
assets......................... 71,891,847 232,107,528 25,092,727 883,228,632 8,767
NET ASSETS:
Beginning of period.............. 88,017,476 332,322,843 160,476,376 641,804,616 1,214,982
------------ ------------ ------------ --------------- ------------
End of period.................... $159,909,323 $564,430,371 $185,569,101 $ 1,525,033,248 $1,223,749
------------ ------------ ------------ --------------- ------------
------------ ------------ ------------ --------------- ------------
</TABLE>
* From Inception, March 8, 1994, to December 31, 1994.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
14
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
MORTGAGE INTERNATIONAL SOCIALLY
AGGRESSIVE SECURITIES OPPORTUNITIES DIVIDEND AND RESPONSIVE
GROWTH FUND FUND INDEX FUND FUND GROWTH FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT
--------------- ------------- ------------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ (4,596,707) $ 12,903,970 $ 1,155,546 $ 415,635 $ 284,164 $ 20,465
Capital gains income............. 42,093,901 1,176,728 -- -- -- --
Net realized gain (loss) on
security transactions.......... 316,913 (2,117,604) 177,595 (38,119) 1,622 (180)
Net unrealized appreciation
(depreciation) of investments
during the period.............. (28,599,970) (19,218,450) (1,319,890) (9,418,006) (486,442) (59,462)
--------------- ------------- ------------- ------------- ------------ -----------
Net increase (decrease) in net
assets resulting from
operations..................... 9,214,137 (7,255,356) 13,251 (9,040,490) (200,656) (39,177)
--------------- ------------- ------------- ------------- ------------ -----------
UNIT TRANSACTIONS:
Purchases........................ 147,740,784 19,118,960 11,954,835 93,762,262 13,185,613 376,701
Net transfers.................... 33,684,129 (49,453,490) (438,563) 55,977,196 17,422,326 (75,712)
Surrenders....................... (18,517,067) (20,146,010) (3,246,522) (7,306,583) (551,979) (19,945)
Net annuity transactions......... 396,915 137,102 59,473 (104,557) -- 4,610
--------------- ------------- ------------- ------------- ------------ -----------
Net increase (decrease) in net
assets resulting from unit
transactions................... 163,304,761 (50,343,438) 8,329,223 142,328,318 30,055,960 285,654
--------------- ------------- ------------- ------------- ------------ -----------
Total increase (decrease) in net
assets......................... 172,518,898 (57,598,794) 8,342,474 133,287,828 29,855,304 246,477
NET ASSETS:
Beginning of period.............. 459,950,031 271,115,397 86,041,578 167,591,795 -- 777,861
--------------- ------------- ------------- ------------- ------------ -----------
End of period.................... $ 632,468,929 $213,516,603 $94,384,052 $ 300,879,623 $29,855,304 $1,024,338
--------------- ------------- ------------- ------------- ------------ -----------
--------------- ------------- ------------- ------------- ------------ -----------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1993
<CAPTION>
MORTGAGE INTERNATIONAL SOCIALLY
AGGRESSIVE SECURITIES OPPORTUNITIES DIVIDEND AND RESPONSIVE
GROWTH FUND FUND INDEX FUND FUND GROWTH FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT
--------------- ------------- ------------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 1,600,110 $ 12,652,275 $ 799,021 $ (291,109) $ 14,203 $ 13,390
Capital gains income............. 3,197,599 -- -- -- -- --
Net realized gain (loss) on
security transactions.......... 1,188,667 109,955 25,192 (11,820) (75) --
Net unrealized appreciation
(depreciation) of investments
during the period.............. 49,594,313 (1,569,545) 4,591,529 23,588,342 26,706 --
--------------- ------------- ------------- ------------- ------------ -----------
Net increase (decrease) in net
assets resulting from
operations..................... 55,580,689 11,192,685 5,415,742 23,285,413 40,834 13,390
--------------- ------------- ------------- ------------- ------------ -----------
UNIT TRANSACTIONS:
Purchases........................ 195,275,139 95,499,459 30,471,477 67,601,208 302,593 --
Net transfers.................... 22,666,403 (19,922,573) 879,825 46,857,348 1,511 (89,601)
Surrenders....................... (8,251,678) (18,992,076) (2,314,111) (1,636,768) (44,747) (5,845)
Net annuity transactions......... 576,660 (52,421) 30,208 268,086 4,631 --
--------------- ------------- ------------- ------------- ------------ -----------
Net increase (decrease) in net
assets resulting from unit
transactions................... 210,266,524 56,532,389 29,067,399 113,089,874 263,988 (95,446)
--------------- ------------- ------------- ------------- ------------ -----------
Total increase (decrease) in net
assets......................... 265,847,213 67,725,074 34,483,141 136,375,287 304,822 (82,056)
NET ASSETS:
Beginning of period.............. 194,102,818 203,390,323 51,558,437 31,216,508 473,039 814,037
--------------- ------------- ------------- ------------- ------------ -----------
End of period.................... $ 459,950,031 $271,115,397 $86,041,578 $ 167,591,795 $ 777,861 $ 731,981
--------------- ------------- ------------- ------------- ------------ -----------
--------------- ------------- ------------- ------------- ------------ -----------
<CAPTION>
SMITH
SMITH BARNEY
BARNEY SMITH SHEARSON
SHEARSON BARNEY GOVERNMENT
DAILY SHEARSON AND
DIVIDEND APPRECIATION AGENCIES
FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 17,386 $ 743 $ 1,269
Capital gains income............. -- 6,550 --
Net realized gain (loss) on
security transactions.......... -- (476) --
Net unrealized appreciation
(depreciation) of investments
during the period.............. -- (9,210) --
----------- ----------- ----------
Net increase (decrease) in net
assets resulting from
operations..................... 17,386 (2,393) 1,269
----------- ----------- ----------
UNIT TRANSACTIONS:
Purchases........................ -- 50 --
Net transfers.................... (18,624) 2,681 --
Surrenders....................... (84,827) (2,515) (6,354)
Net annuity transactions......... -- -- --
----------- ----------- ----------
Net increase (decrease) in net
assets resulting from unit
transactions................... (103,451) 216 (6,354)
----------- ----------- ----------
Total increase (decrease) in net
assets......................... (86,065) (2,177) (5,085)
NET ASSETS:
Beginning of period.............. 731,981 119,398 53,178
----------- ----------- ----------
End of period.................... $645,916 $117,221 $48,093
----------- ----------- ----------
----------- ----------- ----------
SMITH
SMITH BARNEY
BARNEY SMITH SHEARSON
SHEARSON BARNEY GOVERNMENT
DAILY SHEARSON AND
DIVIDEND APPRECIATION AGENCIES
FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 459 $ 1,816 $ 901
Capital gains income............. 3,734 -- --
Net realized gain (loss) on
security transactions.......... 234 (1,362) --
Net unrealized appreciation
(depreciation) of investments
during the period.............. 3,565 4,504 --
----------- ----------- ----------
Net increase (decrease) in net
assets resulting from
operations..................... 7,992 4,958 901
----------- ----------- ----------
UNIT TRANSACTIONS:
Purchases........................ 50 -- --
Net transfers.................... -- -- --
Surrenders....................... (1,830) (55,563) (4,573)
Net annuity transactions......... -- -- --
----------- ----------- ----------
Net increase (decrease) in net
assets resulting from unit
transactions................... (1,780) (55,563) (4,573)
----------- ----------- ----------
Total increase (decrease) in net
assets......................... 6,212 (50,605) (3,672)
NET ASSETS:
Beginning of period.............. 113,186 50,605 56,850
----------- ----------- ----------
End of period.................... $119,398 $ -- $53,178
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
15
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
1. ORGANIZATION:
Separate Account Two (the Account) is a separate investment account within
Hartford Life Insurance Company (the Company) and is registered with the
Securities and Exchange Commission (SEC) as a unit investment trust under the
Investment Company Act of 1940, as amended. Both the Company and the Account are
subject to supervision and regulation by the Department of Insurance of the
State of Connecticut and the SEC.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting principles
in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividend and capital
gains income are accrued as of the ex-dividend date.
b) SECURITY VALUATION--The investment in shares of the Hartford, Shearson
and Calvert Socially Responsive Series mutual funds are valued at the
closing net asset value per share as determined by the appropriate Fund
as of December 31, 1994.
c) FEDERAL INCOME TAXES--The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as an
insurance company under the Internal Revenue Code. Under current law, no
federal income taxes are payable with respect to the operations of the
Account.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
a) MORTALITY AND EXPENSE UNDERTAKINGS--The Company, as issuer of variable
annuity contracts, provides the mortality and expense undertakings and,
with respect to the Account, receives a maximum annual fee of 1.25% of
the Account's average daily net assets.
b) DEDUCTION OF ANNUAL MAINTENANCE FEE--Annual maintenance fees are
deducted through termination of units of interest from applicable
contract owners' accounts, in accordance with the terms of the contracts.
16
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life Insurance Company and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Hartford Life
Insurance Company (a Connecticut corporation and wholly-owned subsidiary of
Hartford Life and Accident Insurance Company) and subsidiaries as of December
31, 1994 and 1993, and the related consolidated statements of income,
stockholder's equity and cash flow for each of the three years in the period
ended December 31, 1994. 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 consolidated 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial position of
Hartford Life Insurance Company and subsidiaries as of December 31, 1994 and
1993, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994 in conformity with generally
accepted accounting principles.
As discussed in the accompanying notes to the consolidated financial statements,
the Company adopted new accounting standards promulgated by the Financial
Accounting Standards Board, changing its methods of accounting, as of January 1,
1994, for debt and equity securities, and, effective January 1, 1992, for
postretirement benefits other than pensions and postemployment benefits.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedules listed in the
Index to Consolidated Financial Statements and Schedules are presented for
purposes of complying with the Securities and Exchange Commission's rules and
are not a required part of the basic consolidated financial statements. These
schedules have been subjected to the auditing procedures applied in the audits
of the basic consolidated 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 consolidated financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
January 30, 1995
F-2
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1994 1993 1992
<S> <C> <C> <C>
REVENUES:
Premiums and other considerations $1,100 $ 747 $ 259
Net investment income 1,292 1,051 907
Net realized gains on investments 7 16 5
------ ------ ------
2,399 1,814 1,171
BENEFITS, CLAIMS AND EXPENSES:
Benefits, claims and claim
adjustment expenses 1,405 1,046 797
Amortization of deferred policy
acquisition costs 145 113 55
Dividends to policyholders 419 227 47
Other insurance expenses 227 210 138
------ ------ ------
2,196 1,596 1,037
INCOME BEFORE INCOME TAX AND
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES 203 218 134
Income tax expense 65 75 45
------ ------ ------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES 138 143 89
Cumulative effect of changes in
accounting principles net of tax benefit of $7 - - (13)
------ ------ ------
NET INCOME $ 138 $ 143 $ 76
------ ------ ------
------ ------ ------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-3
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
1994 1993
-------- --------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities, available for sale, at fair
value in 1994 and at amortized cost in 1993
(amortized cost, $14,464 in 1994; fair
value, $12,845 in 1993) $13,429 $12,597
Equity securities, at fair value 68 90
Mortgage loans, at outstanding principal balance 316 228
Policy loans, at outstanding balance 2,614 1,397
Other investments 107 40
------- -------
16,534 14,352
Cash 20 1
Premiums and amounts receivable 160 327
Reinsurance recoverable 5,466 5,532
Accrued investment income 378 241
Deferred policy acquisition costs 1,809 1,334
Deferred income tax 590 114
Other assets 83 101
Separate account assets 22,809 16,284
------- -------
$47,849 $38,286
------- -------
------- -------
LIABILITIES AND STOCKHOLDER'S EQUITY
Future policy benefits $1,890 $1,659
Other policyholder funds 21,328 18,234
Other liabilities 1,000 916
Separate account liabilities 22,809 16,284
------- -------
47,027 37,093
Common stock - authorized 1,000 shares, $5,690
par value, issued and outstanding 1,000 shares 6 6
Capital surplus 826 676
Unrealized losses on securities, net of tax (654) (5)
Retained earnings 644 516
------- -------
822 1,193
------- -------
$47,849 $38,286
------- -------
------- -------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-4
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN MILLIONS)
<TABLE>
<CAPTION>
UNREALIZED
GAINS(LOSSES) TOTAL
COMMON CAPITAL ON RETAINED STOCKHOLDER'S
STOCK SURPLUS SECURITIES EARNINGS EQUITY
----- ------- ---------- -------- ------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1991 $ 6 $ 439 $ 1 $ 297 $ 743
Net Income 76 76
Capital Contribution - 25 - - 25
Excess of assets over liabilities on
reinsurance assumed from affiliate - 34 - - 34
Change in unrealized losses on equity
securities, net of tax - - (1) - (1)
------ ------- ------- ------- -------
BALANCE, DECEMBER 31, 1992 6 498 0 373 877
------ ------- ------- ------- -------
Net Income - - - 143 143
Capital Contribution - 180 - - 180
Excess of assets over liabilities on
reinsurance assumed from affiliate - (2) - - (2)
Change in unrealized losses on equity
securities, net of tax - - (5) - (5)
------ ------- ------- ------- -------
BALANCE, DECEMBER 31, 1993 6 676 (5) 516 1,193
------ ------- ------- ------- -------
Net Income - - - 138 138
Capital Contribution - 150 - - 150
Dividends Paid - - - (10) (10)
Change in unrealized losses on securities,
net of tax * - - (649) - (649)
------ ------- ------- ------- -------
BALANCE, DECEMBER 31, 1994 $ 6 $ 826 $ (654) $ 644 $ 822
------ ------- ------- ------- -------
------ ------- ------- ------- -------
<FN>
* The 1994 change in unrealized losses on securities, net of tax, includes a
gain of $91 due to adoption of SFAS #115 as discussed in note 1b to the
consolidated financial statements.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-5
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASHFLOW
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES:
NET INCOME $ 138 $ 143 $ 76
Cumulative effect of accounting changes - - 13
Adjustments to net income:
Net realized investment gains before tax (7) (16) (5)
Net policyholder investment losses
(gains) before tax 5 (15) (15)
Net deferred policy acquisition costs (441) (292) (278)
Net amortization of premium (discount) on
fixed maturities 41 2 (16)
Deferred income tax benefits (128) (121) (14)
(Increase) decrease in premiums and
amounts receivable 10 (28) (14)
Increase in accrued investment income (106) (4) (116)
Decrease(increase) in other assets 101 (36) 88
Decrease(increase) in reinsurance
recoverable 75 (121) 0
Increase in liability for future policy
benefits 224 360 527
Increase in other liabilities 191 176 92
-------- --------- --------
CASH PROVIDED BY OPERATING ACTIVITIES 103 48 338
-------- --------- --------
INVESTING ACTIVITIES:
Purchases of fixed maturity investments (9,127) (12,406) (8,948)
Proceeds from sales of fixed maturity
investments 5,708 8,813 5,728
Maturities and principal paydowns of
long-term investments 1,931 2,596 1,207
Net purchases of other investments (1,338) (206) (106)
Net sales (purchases) of short-term
investments 135 (564) 221
-------- --------- --------
CASH USED FOR INVESTING ACTIVITIES (2,691) (1,767) (1,898)
-------- --------- --------
FINANCING ACTIVITIES:
Net receipts from investment and UL-type
contracts credited to policyholder account
balances 2,467 1,513 1,512
Capital contribution 150 180 25
Excess of assets over liabilities on
reinsurance assumed from affiliate - - 34
Dividends paid (10) - -
-------- --------- --------
CASH PROVIDED BY FINANCING
ACTIVITIES 2,607 1,693 1,571
-------- --------- --------
NET INCREASE(DECREASE) IN CASH 19 (26) 11
Cash at beginning of period 1 27 16
-------- --------- --------
CASH AT END OF PERIOD $ 20 $ 1 $ 27
-------- --------- --------
-------- --------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-6
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN MILLIONS)
1. SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION:
These consolidated financial statements include Hartford Life
Insurance Company (the Company or HLIC) and its wholly-owned
subsidiaries, ITT Hartford Life and Annuity Company (ILA) and ITT
Hartford International Life Reassurance Corporation (HLR), formerly
American Skandia Life Reinsurance Corporation. HLIC is a wholly-owned
subsidiary of Hartford Life and Accident Insurance Company (HLA).
The Company is ultimately owned by Hartford Fire Insurance Company
(Hartford Fire), which is ultimately owned by ITT Hartford Group,
Inc., a subsidiary of ITT Corporation (ITT).
The consolidated financial statements are prepared in conformity with
generally accepted accounting principles which differ in certain
material respects from the accounting practices prescribed or
permitted by various insurance regulatory authorities.
Certain reclassifications have been made to prior year financial
statements to conform to current year classifications.
(B) CHANGES IN ACCOUNTING PRINCIPLES:
Effective January 1, 1992, the Company adopted Statement of Financial
Accounting Standards (SFAS)No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions" and SFAS No. 112,
Employers' Accounting for Postemployment Benefits", using the
immediate recognition method. Accordingly, a cumulative adjustment
(through December 31, 1991) of $7 after-tax has been recognized at
January 1, 1992.
Effective January 1, 1994, the Company adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities".
The new standard requires, among other things, that fixed maturities
be classified as "held-to-maturity", "available-for-sale" or "trading"
based on the Company's intentions with respect to the ultimate
disposition of the security and its ability to effect those
intentions. The classification determines the appropriate accounting
carrying value (cost basis or fair value) and, in the case of fair
value, whether the adjustment impacts Stockholder's Equity directly or
is reflected in the Consolidated Statements of Income. Investments in
equity securities had previously been recorded at fair value with the
corresponding impact included in Stockholder's Equity. Under SFAS No.
115, the Company's fixed maturities are classified as "available for
sale" and accordingly, these investments are reflected at fair value
with the corresponding impact included as a component of Stockholder's
Equity designated as "Unrealized Loss on Securities, Net of Tax."
As with the underlying investment security, unrealized gains and
losses on derivative financial instruments are considered in
determining the fair value of the portfolios. The impact of adoption
was an increase to stockholder's equity of $91.
The Company's cash flows were not impacted by these changes in
accounting principles.
(C) REVENUE RECOGNITION:
Revenues for universal life policies and investment products consist
of policy charges for the cost of insurance,
F-7
<PAGE>
policy administration and surrender charges assessed to policy account
balances. Premiums for traditional life insurance policies are
recognized as revenues when they are due from policyholders. Deferred
acquisition costs are amortized using the retrospective deposit method
for universal life and other types of contracts where the payment
pattern is irregular or surrender charges are a significant source of
profit and the prospective deposit method is used where investment
margins are the primary source of profit.
(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, mortality and morbidity assumptions which vary by
plan, year of issue and policy durations and include a provision for
adverse deviation. Liabilities for universal life insurance and
investment products represent policy account balances before
applicable surrender charges.
(E) POLICYHOLDER REALIZED GAINS AND LOSSES:
Realized gains and losses on security transactions associated with the
Company's immediate participation guaranteed contracts are excluded
from revenues, 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) DEFERRED POLICY ACQUISITION COSTS:
Policy acquisition costs, including commissions and certain
underwriting expenses associated with acquiring traditional life
insurance products, are deferred and amortized over the lesser of the
estimated or actual contract life. For universal life insurance and
investment products, acquisition costs are being amortized generally
in proportion to the present value of expected gross profits from
surrender charges, investment, mortality and expense margins.
(G) INVESTMENTS:
Investments in fixed maturities are classified as available for sale
and accordingly reflected at fair value with the corresponding impact
of unrealized gains and losses, net of tax, included as a component of
stockholder's equity. Securities and derivative instruments,
including swaps, caps, floors, futures, forward commitments and
collars, are based on dealer quotes or quoted market prices for the
same or similar securities. While the Company has the ability and
intent to hold all fixed income securities until maturity, due to
contract obligations, interest rates and tax laws, portfolio activity
occurs. These trades are motivated by the need to optimally position
investment portfolios in reaction to movements in capital markets or
distribution of policyholder liabilities. When an other than temporary
reduction in the value of publicly traded securities occurs, the
decrease is reported as a realized loss and the carrying value is
adjusted accordingly. Real estate is carried at cost less accumulated
depreciation. Equity securities, which include common stocks, are
carried at market value with the after-tax difference from cost
reflected in stockholder's equity. Realized investment gains and
losses, after deducting life and pension policyholders share are
reported as a component of revenue and are determined on a specific
identification basis.
(H) DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses a variety of derivative financial instruments as part
of an overall risk management strategy. These instruments, including
swaps, caps, collars and exchange traded financial futures, 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
financial instruments for trading purposes. 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. Gains
or losses on futures purchased in anticipation of the future receipt
of product cash flows are deferred and, at the time of the ultimate
purchase, reflected as a basis adjustment to the purchased asset.
Gains or losses on futures used in invested asset risk management are
deferred and adjusted into the basis of the hedged asset when the
contract is closed. The basis adjustments are amortized into
investment income over the remaining asset life.
F-8
<PAGE>
Open forward commitment contracts are marked to market through
Stockholder's Equity. Such contracts are recorded at settlement by
recording the purchase of the specified securities at the previously
committed price. Gains or losses resulting from the termination of
the forward commitment contracts before the delivery of the securities
are recognized immediately in the income statement as a component of
investment income.
The Company's accounting for interest rate swaps and purchased or
written caps, floors, and options used to manage risk is in accordance
with the concepts established in SFAS 80, "Accounting for Futures
Contracts", the American Institute of Certified Public Accountants
Statement of Position 86-2, "Accounting for Options" and various EITF
pronouncements, except for written options which are written in all
cases in conjunction with other assets and derivatives as part of an
overall risk management strategy. Such synthetic instruments are
accounted for as hedges. Derivatives, used as part of a risk
management strategy, must be designated at inception and have
consistency of terms between the synthetic instrument and the
financial instrument being replicated. Synthetic instrument
accounting, consistent with industry practice, provides that the
synthetic asset is accounted for like the financial instrument it is
intended to replicate. Interest rate swaps and purchased or written
caps, floors and options which fail to meet management criteria are
accounted for at fair market value with the impact reflected in net
income.
Interest rate swaps involve the periodic exchange of payments without
the exchange of underlying principal or notional amounts. Net
payments are recognized as an adjustment to income. Should the swap
be terminated, the gains or losses are adjusted into the basis of the
asset or liability and amortized over the remaining life. The basis
of the underlying asset or liability is adjusted to reflect changing
market conditions such as prepayment experience. Should the asset be
sold or liability terminated, the gains or losses on the terminated
position are immediately recognized in earnings. Interest rate swaps
purchased in anticipation of an asset purchase ("anticipatory
transaction") are recognized consistent with the underlying asset
components. That is, the settlement component is recognized in the
Statement of Income while the change in market is recognized as an
unrealized 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,
as well as the net payments, 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.
Forward exchange contracts and foreign currency swaps are accounted
for in accordance with SFAS 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 adjustment
component of stockholder's equity.
(I) RELATED PARTY TRANSACTIONS:
Transactions of the Company with its parent and affiliates relate
principally to tax settlements, insurance coverage, rental and service
fees and 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 expenses, are initially paid by Hartford Fire. Direct
expenses are allocated to the Company using specific identification
and indirect expenses are allocated using other applicable methods.
The rent paid to Hartford Fire for the space occupied by the Company
was $3 in 1994, 1993, and 1992 respectively. The Company expects to
pay rent of $3 in 1995, 1996, 1997,1998, and 1999 respectively and
$60 thereafter, over the contract life of the lease.
See also Note (4) for the related party coinsurance agreements.
F-9
<PAGE>
2. INVESTMENTS
(A) COMPONENTS OF NET INVESTMENT INCOME:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Interest income $1,247 $1,007 $894
Income from other investments 54 53 15
------ ------ ------
GROSS INVESTMENT INCOME 1,301 1,060 909
Less: investment expenses 9 9 2
------ ------ ------
NET INVESTMENT INCOME $1,292 $1,051 $907
------ ------ ------
------ ------ ------
</TABLE>
(B) UNREALIZED GAINS (LOSSES) ON EQUITY SECURITIES:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Gross unrealized gains $ 2 $ 3 $ 2
Gross unrealized losses (11) (11) (2)
Deferred income tax expense (benefit) (3) (3) 0
------ ------ ------
NET UNREALIZED LOSSES AFTER TAX (6) (5) 0
Balance at beginning of year (5) 0 1
------ ------ ------
CHANGE IN NET UNREALIZED LOSSES ON
EQUITY SECURITIES $ (1) $ (5) $(1)
------ ------ ------
------ ------ ------
</TABLE>
(C) UNREALIZED GAINS (LOSSES) ON FIXED MATURITIES:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Gross unrealized gains $ 150 $ 538 $ 521
Gross unrealized losses (1,185) (290) (302)
-------- ------ ------
NET UNREALIZED (LOSSES) GAINS (1,035) 248 219
Unrealized losses credited to policyholders 37 0 0
Deferred income tax expense (benefit) (350) 87 75
-------- ------ ------
NET UNREALIZED (LOSSES) GAINS AFTER TAX (648) 161 144
Balance at beginning of year 161 144 297
-------- ------ ------
CHANGE IN NET UNREALIZED (LOSSES)GAINS ON
FIXED MATURITIES $ (809) $ 17 $(153)
-------- ------ ------
-------- ------ ------
</TABLE>
(D) COMPONENTS OF NET REALIZED GAINS:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Fixed maturities $(34) $(12) $20
Equity securities (11) 0 3
Real estate and other 47 43 (3)
Less: (decrease)increase in liability
to policyholders for realized gains (5) 15 15
------ ------ ------
NET REALIZED GAINS $ 7 $ 16 $ 5
------ ------ ------
------ ------ ------
</TABLE>
F-10
<PAGE>
(E) DERIVATIVE INVESTMENTS:
A summary of investments, segregated by major category along with the
types of derivatives and their respective notional amounts, are as
follows as of December 31, 1994 :
<TABLE>
<CAPTION>
SUMMARY OF INVESTMENTS
AS OF DECEMBER 31, 1994
(CARRYING AMOUNTS)
ISSUED CAPS, PURCHASED
TOTAL CARRYING NON- FLOORS & CAPS, FLOORS FUTURES SWAPS
VALUE DERIVATIVE OPTIONS (B) & OPTIONS (C) (D) (F)
-------------- ---------- ------------ ------------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Asset Backed Securities $5,670 $5,690 $(31) $24 $0 $(13)
Inverse Floaters (A) 474 482 (9) 4 0 (3)
Anticipatory (E) (30) 0 0 2 0 (32)
-------- ------- ------ ------ ------ ------
TOTAL ASSET BACKED SECURITIES 6,114 6,172 (40) 30 0 (48)
Other Bonds and Notes 6,533 6,606 0 0 0 (73)
Short-Term Investments 782 782 0 0 0 0
-------- ------- ------ ------ ------ ------
TOTAL FIXED MATURITIES 13,429 13,560 (40) 30 0 (121)
Other Investments 3,105 3,105 0 0 0 0
-------- ------- ------ ------ ------ ------
TOTAL INVESTMENTS $16,534 $16,665 $(40) $30 $0 $(121)
-------- ------- ------ ------ ------ ------
-------- ------- ------ ------ ------ ------
</TABLE>
SUMMARY OF INVESTMENTS IN DERIVATIVES
AS OF DECEMBER 31, 1994
(NOTIONAL AMOUNTS)
<TABLE>
<CAPTION>
ISSUED CAPS, PURCHASED
TOTAL NOTIONAL FLOORS, & CAPS, FLOORS, FUTURES SWAPS
AMOUNT OPTIONS (B) & OPTIONS (C) (D) (F)
-------------- ------------ ------------- -------- ------
<S> <C> <C> <C> <C> <C>
Asset Backed Securities $4,244 $1,311 $2,546 $75 $312
Inverse Floaters (A) 1,129 277 63 3 786
Anticipatory (E) 835 0 209 101 525
------- ------- ------- ------- -------
TOTAL ASSET BACKED 6,208 1,588 2,818 179 1,623
Other Bonds and Notes 670 0 72 74 524
Short-Term Investments 0 0 0 0 0
------- ------- ------- ------- -------
TOTAL FIXED MATURITIES 6,878 1,588 2,890 253 2,147
Other Investments 16 0 3 0 13
------- ------- ------- ------- -------
TOTAL INVESTMENTS $6,894 $1,588 $2,893 $253 $2,160
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
F-11
<PAGE>
A summary of the notional and fair value of derivatives with off Balance Sheet
risk as of December 31, 1993 is as follows:
<TABLE>
<CAPTION>
ISSUED SWAPS, CAPS
FLOORS AND COLLARS FUTURES FORWARDS TOTAL
------------------ ------- -------- -----
<S> <C> <C> <C> <C>
Notional $7,015 $1,792 $91 $8,898
Fair Value $(4) $0 $1 $(3)
</TABLE>
(A) Inverse floaters, which are variations of CMO's for which the coupon
rates move inversely with an index rate (e.g. 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 and issued floors.
(B) Comprised primarily of caps ($1,459) with a weighted average strike
rate of 7.7% (ranging from 6.8% to 10.2%). Over 70% mature in 1997
and 1998. Issued floors total $125 with a weighted average strike
rate of 8.3% and mature in 2004.
(C) Comprised of purchased floors ($1,856), purchased options and collars
($633) and purchased caps ($404). The floors have a weighted average
strike price of 5.8% (ranging from 4.8% and 6.6%) and over 85% mature
in 1997 and 1998. The options and collars generally mature in 1995
and 2002. The caps have a weighted average strike price of 7.2%
(ranging from 4.5% and 8.9%) and over 66% mature in 1997 through
1999.
(D) Over 95% of futures contracts expire before December 31, 1995.
(E) Deferred gains and losses on anticipatory transactions are included in
the carrying value of bond investments 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, 1994,
these were $(33) million in net deferred losses for futures, interest
rate swaps and purchased options.
(F) The following table summarizes the maturities of interest rate and
foreign currency swaps outstanding at December 31, 1994 and the
related weighted average interest pay rate or receive rate assuming
current market conditions:
MATURITY OF SWAPS ON INVESTMENTS AS OF DECEMBER 31, 1994
<TABLE>
<CAPTION>
MATURITY
DERIVATIVE TYPE 1995 1996 1997 1998 1999 2000+ TOTAL LAST
--------------- ---- ---- ---- ---- ---- ----- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST RATE SWAPS:
PAY FIXED/RECEIVE VARIABLE:
Notional Value $0 $15 $50 $0 $446 $268 $779 2004
Weighted Average Pay Rate 0.0% 5.0% 7.2% 0.0% 8.2% 7.8% 7.9%
Weighted Average Receive Rate 0.0% 6.4% 5.7% 0.0% 7.5% 6.5% 7.0%
PAY VARIABLE/RECEIVE FIXED:
Notional Value $311 $50 $100 $25 $175 $100 $761 2002
Weighted Average Pay Rate 5.1% 5.3% 5.5% 5.3% 5.4% 6.0% 5.4%
Weighted Average Receive Rate 8.0% 8.0% 7.5% 4.0% 4.5% 7.2% 6.9%
PAY VARIABLE/RECEIVE DIFFERENT VARIABLE:
Notional Value $95 $50 $18 $15 $5 $232 $415 2005
Weighted Average Pay Rate 4.2% 6.4% 6.8% 6.2% 0.0% 6.0% 5.7%
Weighted Average Receive Rate 9.1% 6.3% 9.5% 6.4% 0.0% 6.3% 7.1%
TOTAL INTEREST RATE SWAPS $406 $115 $168 $40 $626 $600 $1,955 2004
Total Weighted Average Pay Rate 4.9% 5.7% 6.1% 5.6% 7.4% 6.8% 6.5%
Total Weighted Average Receive Rate 8.2% 7.1% 7.2% 4.9% 6.7% 6.5% 7.0%
FOREIGN CURRENCY SWAPS $35 $46 $29 $15 $10 $70 $205 2002
TOTAL SWAPS $441 $161 $197 $55 $636 $670 $2,160 2005
</TABLE>
F-12
<PAGE>
In addition to risk management through derivative financial
instruments pertaining to the investment portfolio, interest rate
sensitivity related to certain Company liabilities was altered
primarily through interest rate swap agreements. The notional amount
of the liability agreements in which the Company generally pays one
variable rate in exchange for another, was $1.7 billion and $1.3
billion at December 31, 1994 and 1993 respectively. The weighted
average pay rate is 6.2%; the weighted average receive rate is 6.6% ,
and these agreements mature at various times through 2004.
(F) CONCENTRATION OF CREDIT RISK:
The Company has a reinsurance recoverable of $4.4 billion from
Mutual Benefit Life Assurance Corporation (Mutual Benefit). 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. Excluding investments in U.S.
government and agencies, the Company has no other significant
concentrations of credit risk.
The Company currently owns $39.2 million par value of Orange County,
California Pension Obligation Bonds, $17.1 million of which it
continues to carry as available for sale under FASB 115 and $22.1
million which are included in the Separate Account Assets. While
Orange County is currently operating under Protection of Chapter 9 of
the Federal Bankruptcy Laws, the Company believes it is probable that
it will collect all amounts due under the contractual terms of the
bonds and that the bonds are not permanently or other than temporarily
impaired.
As of December 31, 1994 the Company owned $66.1 million of Mexican
bonds, $52.3 million of which are payable in Mexican pesos but are
fully hedged back to U.S. dollars, and $13.8 million of U.S. Dollar
Denomination Mexican bonds. The primary risks associated with these
securities is a default by the Mexican government or imposition of
currency controls that prevent conversion of Mexican pesos to U.S.
dollars. The Company believes both of these risks are remote.
(G) FIXED MATURITIES:
The schedule below details the amortized cost and fair values of the
Company's fixed maturities by component, along with the gross
unrealized gains and losses:
<TABLE>
<CAPTION>
1994
----
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
--------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Government and government
agencies and authorities:
- - - guaranteed and sponsored $1,516 $1 $(87) $1,430
- - - guaranteed and sponsored
- asset backed 4,256 78 (571) 3,763
States, municipalities and
political subdivisions 148 1 (12) 137
International governments 189 1 (14) 176
Public utilities 531 1 (32) 500
All other corporate 3,717 38 (297) 3,458
All other corporate
- asset backed 2,442 30 (121) 2,351
Short-term investments 1,665 0 (51) 1,614
------- ----- -------- -------
TOTAL $14,464 $150 $(1,185) $13,429
------- ----- -------- -------
------- ----- -------- -------
</TABLE>
F-13
<PAGE>
<TABLE>
<CAPTION>
1993
----
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ------
<S> <C> <C> <C> <C>
U.S. Government and government
agencies and authorities:
- - - guaranteed and sponsored $ 1,637 $ 15 $ (12) $ 1,640
- - - guaranteed and sponsored
- asset backed 4,070 235 (219) 4,086
States, municipalities and
political subdivisions 73 9 0 82
International governments 100 5 (3) 102
Public utilities 423 20 (2) 441
All other corporate 3,598 180 (42) 3,736
All other corporate
- asset backed 1,806 74 (12) 1,868
Short-term investments 890 0 0 890
-------- ------- -------- --------
TOTAL $12,597 $ 538 $ (290) $12,845
-------- ------- -------- --------
-------- ------- -------- --------
</TABLE>
The amortized cost and estimated fair value of fixed maturity
investments at December 31, 1994, by maturity, are shown below. Asset
backed securities are distributed to maturity year based on the
Company's estimate of the rate of future prepayments of principal over
the remaining life of the securities. Expected maturities differ from
contractual maturities reflecting the borrowers' rights to call or
prepay their obligations.
<TABLE>
<CAPTION>
AMORTIZED COST ESTIMATED FAIR VALUE
-------------- --------------------
MATURITY
- - --------
<S> <C> <C>
Due in one year or less $ 2,214 $ 2,183
Due after one year through five years 7,000 6,647
Due after five years through ten years 3,678 3,334
Due after ten years 1,572 1,265
--------- ---------
$14,464 $13,429
--------- ---------
--------- ---------
</TABLE>
Sales of fixed maturities excluding short-term fixed maturities for
the years ended 1994, 1993, and 1992 resulted in proceeds of $5,708,
$8,813, and $5,728, respectively, resulting in gross realized gains of
$71, $192, and $140, and gross realized losses of $100, $219, and
$135, respectively, not including policyholder gains and losses.
Sales of equity securities and other investments for the years ended
December 31, 1994, 1993, and 1992 resulted in proceeds of $159, $127
and $7, respectively, resulting in gross realized gains of $3, $0, and
$3, and gross realized losses of $14, $0, and $0, respectively, not
including policyholder gains and losses.
F-14
<PAGE>
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS NOT DISCLOSED ELSEWHERE :
BALANCE SHEET ITEMS:
<TABLE>
<CAPTION>
1994 1993
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- ------ -------- ------
<S> <C> <C> <C> <C>
ASSETS
Other invested assets:
Policy loans $2,614 $2,614 $1,397 $1,397
Mortgage loans 316 316 228 228
Investments in partnership
and trusts 36 42 14 34
Miscellaneous 67 67 22 63
LIABILITIES
Other policy claims and
benefits $13,001 $12,374 $11,140 $11,415
</TABLE>
The following methods and assumptions were used to estimate the fair
value of each class of financial instrument:policy and mortgage loan
carrying amounts approximate fair value; investments in partnerships
and trusts are based on external market valuations from partnership
and trust management; and other policy claims and benefits payable are
determined by estimating future cash flows discounted at the current
market rate.
3. INCOME TAX
The Company is included in ITT's consolidated U.S. Federal income tax
return and remits to (receives from) ITT a current income tax
provision (benefit) computed in accordance with the tax sharing
arrangements between ITTand its insurance subsidiaries. The
effective tax rate was 32% in 1994, and approximates the U.S.
statutory tax rates of 35% in 1993 and 34% in 1992. The provision for
income taxes was as follows:
<TABLE>
<CAPTION>
INCOME TAX EXPENSE:
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current $185 $ $ 190 $ $ 124
Deferred (120) (115) (79)
------- -------- --------
$ 65 $ $ 75 $ $ 45
------- -------- --------
------- -------- --------
</TABLE>
F-15
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
TAX PROVISION AT U.S. STATUTORY RATE $71 $76 $46
Tax-exempt income (3) 0 0
Foreign tax credit (1) 0 0
Other (2) (1) (1)
----- ----- -----
PROVISION FOR INCOME TAX $ 65 $75 $45
----- ----- -----
----- ----- -----
</TABLE>
Income taxes paid were $ 244 , $301 and $36 in 1994, 1993, and 1992
respectively. The current taxes due from or (to) Hartford Fire were $46,
and $19 in 1994 and 1993 respectively.
Deferred tax assets include the following:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Tax deferred acquisition cost $284 $158
Book deferred acquisition costs and reserves (134) (30)
Employee benefits 7 7
Unrealized loss on "available for sale"
securities 353 3
Investments and other 80 (24)
------- -------
$590 $114
------- -------
------- -------
</TABLE>
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, 1994 was $24.
4. REINSURANCE
The Company cedes insurance to non-affiliated insurers 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. Group life and accident and health insurance business is
substantially reinsured to affiliated companies.
Life insurance net retained premiums were comprised of the following:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Gross premiums $1,316 $1,135 $680
Reinsurance assumed 299 93 30
Reinsurance ceded 515 481 451
------- ------- -----
NET RETAINED PREMIUMS $1,100 $747 $259
------- ------- -----
------- ------- -----
</TABLE>
F-16
<PAGE>
Life reinsurance recoveries, which reduced death and other benefits, for
the years ended December 31, 1994, 1993 and 1992 approximated $164, $149,
and $73, respectively.
In December 1994, the Company assumed from a third party approximately
$500 million of corporate owned life insurance reserves on a coinsurance
basis. Also in December 1994, ILA ceded to ITT Lyndon Insurance Company
$1 billion in individual fixed and variable annuities on a modified
coinsurance basis. These transactions did not have a material impact on
consolidated net income.
In October 1994, HLR recaptured approximately $500 million of corporate
owned life insurance from a third party reinsurer. Subsequent to this
transaction, HLIC and HLR restructured their coinsurance agreement from
coinsurance to modified coinsurance, with the assets and policy liabilities
placed in the separate account. In May 1994, HLIC assumed and reinsured
the life insurance policies and the individual annuities of Pacific
Standard with reserves and account values of approximately $400 million.
The Company received cash and investment grade assets to support the life
insurance and individual annuity contract obligations assumed.
In June 1993, the Company assumed and partially reinsured the annuity, life
and accident and sickness insurance policies of Fidelity Bankers Life
Insurance Company in Receivership for Conservation and Rehabilitation, with
account values of $3.2 billion. The Company received cash and investment
grade assets to assume insurance and annuity contract obligations.
Substantially all of these contracts were placed in the Company's separate
accounts.
In November 1993, ILA acquired, through an assumption reinsurance
transaction, substantially all of the individual fixed and variable annuity
business of HLA. As a result of this transaction, the assets and
liabilities of the company increased approximately $1 billion. The excess
of liabilities assumed over assets received, of $2, was recorded as a
decrease to capital surplus. The impact on consolidated net income was not
significant.
On November 4, 1992, the Company entered into a definitive agreement
whereby the Company assumed the contract obligations of Mutual Benefit Life
Assurance Corporation's (Mutual Benefit) individual corporate owned life
insurance (COLI) contracts. The Company received $5.6 billion in cash and
invested assets, $5.3 billion of which were policy loans, from Mutual
Benefit for assuming the contract obligations. Simultaneously, the Company
coinsured approximately 84% of the contract obligations back to Mutual
Benefit, HLR and an unaffiliated reinsurer. In August 1993, the Company
received assets of $300 million for assuming the group COLI contract
obligations of Mutual Benefit, through an assumption reinsurance
transaction. Under the terms of the agreement, the Company coinsured back
75% of the liabilities to Mutual Benefit. All assets supporting Mutual
Benefit's reinsurance liability to HLIC are placed in a "security trust",
with Hartford Life as the sole beneficiary. The impact on 1992
consolidated net income was not significant.
In 1992, all ordinary individual life insurance written and in force in
HLA was assumed by HLIC. As a result of this transaction, the assets of
HLIC increased by approximately $437, liabilities increased approximately
$403. The excess of assets over liabilities of $34 was recorded as an
increase in capital.
5. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
The Company's employees are included in Hartford Fire'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 and the
maximum amount that can be deducted for 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 $2, $3
and $2 in 1994, 1993 and 1992, respectively.
The Company provides 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.
Effective January 1, 1992, the Company adopted SFAS No. 106, using the
immediate recognition method for all benefits accumulated to date. As of
June 1992, the Company amended its plans, effective January 1, 1993,
whereby 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 amendments increased deductibles and set a defined dollar cap which
F-17
<PAGE>
limits average company contributions. The effect of these changes is not
material. 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 Hartford Fire, was $1, $1,
and $1, for 1994, 1993, and 1992 respectively.
The assumed rate of future increases in the per capita cost of health care
(the health care trendrate) was 11% for 1994, decreasing ratably to 6 %
in the year 2001. Increasing the health care trend rates by one percent
per year would have an immaterial impact on the accumulated postretirement
benefit obligation and the annual expense. The assumed weighted average
discount rate was 8.5%. To the extent that the actual experience differs
from the inherent assumptions, the effect will be amortized over the
average future service of the covered employees.
6. BUSINESS SEGMENT INFORMATION
The reportable segments and product groups of HLIC and its subsidiaries are:
INDIVIDUAL LIFE AND ANNUITIES (ILAD)
- - -Individual life
- - -Fixed and variable retirement annuities
ASSET MANAGEMENT SERVICES (AMS)
- - -Group Pension Plans products and services
- - -Deferred Compensation Plans products and services
- - -Structured Settlements and lottery annuities
SPECIALTY
- - -Corporate Owned Life Insurance (COLI) and HLR
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
REVENUES:
ILAD $691 $595 $305
AMS 789 794 770
Specialty 919 425 96
------- ------- -------
$2,399 $1,814 $1,171
------- ------- -------
------- ------- -------
INCOME BEFORE INCOME TAX:
ILAD $139 $129 $73
AMS 38 71 56
Specialty 26 18 5
------- ------- -------
$203 $218 $134
------- ------- -------
------- ------- -------
IDENTIFIABLE ASSETS:
ILAD $26,668 $19,147 $9,474
AMS 13,334 12,416 11,198
Specialty 7,847 6,723 5,910
------- ------- -------
$47,849 $ 38,286 $ 26,582
------- ------- -------
------- ------- -------
</TABLE>
7. STATUTORY NET INCOME AND SURPLUS
Substantially all of the statutory surplus is permanently reinvested or is
subject to dividend restrictions relating to various state regulations
which limit the payment of dividends without prior approval.
Statutory net income and surplus as of December 31 were:
F-18
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Statutory net income $58 $63 $65
Statutory surplus $941 $812 $614
</TABLE>
The Company prepares its 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.
8. SEPARATE ACCOUNTS:
The Company maintains separate account assets and liabilities totaling
$22.8 billion and $16.3 billion at December 31, 1994 and 1993, respectively
which are reported at fair value. Separate account assets are segregated
from other investments and are not subject to claims that arise out of any
other business of the Company. Investment income and gains and losses of
separate accounts accrue directly to the policyholder. Separate accounts
reflect two categories of risk assumption: non-guaranteed separate
accounts totaling $14.8 billion and $11.5 billion at December 31, 1994 and
1993, respectively, wherein the policyholder assumes the investment risk,
and guaranteed separate account assets totaling $8.0 billion and $4.8
billion at December 31, 1994 and 1993, respectively, wherein the Company
contractually guarantees either a minimum return or account value to the
policyholder. Investment income (including investment gains and losses) on
separate account assets are not reflected in the Consolidated Statements of
Income. Separate account management fees, net of minimum guarantees, were
$256, $189, and $92, in 1994, 1993, and 1992, respectively.
The guaranteed separate accounts include modified guaranteed individual
annuity, and modified guaranteed life insurance. The average credit
interest rate on these contracts is 6.44%. The assets that support these
liabilities are comprised of $7.5 billion in bonds and $.5 billion in
policy loans. The portfolios are segregated from other investments and
are managed so as to minimize liquidity and interest rate risk. In order
to minimize the risk of disintermediation associated with early
withdrawals, individual 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 total $(16.2) million in carrying value and $3.2 billion
in notional amounts.
9. COMMITMENTS AND CONTINGENCIES
In August 1994, HLIC renewed a two year note purchase facility agreement
which in certain instances obligates the Company to purchase up to $100
million in collateralized notes from a third party. The Company is
receiving fees for this commitment. At December 31, 1994, the Company has
not purchased any notes under this agreement.
In March 1987, HLIC guaranteed the commercial mortgages (principal and
accrued interest) that were sold under a pooling and servicing agreement of
the same date. Mortgages aggregating approximately $53.0million were sold
in this transaction, and the remaining balance on these loans is $21.1
million. There was no impact on operations due to this guarantee.
Under insurance guaranty fund laws in most states, insurers doing business
therein can be assessed up to prescribed limits for policyholder losses
incurred by insolvent companies. The amount of any future assessments on
HLIC under these laws cannot be reasonably estimated. Most of these laws
do provide, however, that an assessment may be excused or deferred if it
would threaten an insurer's own financial strength. Additionally, guaranty
fund assessments are used to reduce state premium taxes paid by the Company
in certain states.
The Company is involved in various legal actions, some of which involve
claims for substantial amounts. In the opinion of management the ultimate
liability with respect to such lawsuits, as well as other contingencies, is
not considered material in relation to the consolidated financial position
of the Company.
F-19
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. Financial Statement and Exhibits
(a) All financial statements are included in Part A and Part B of the
Registration Statement.
(b) (1) Resolution establishing the Separate Account is filed herewith.
(2) Not applicable. HL maintains custody of all assets pursuant to an
exemptive order granted on December 1, 1981.
(3) Exhibit 3, the Underwriting Agreement, is filed herewith.
(4) Form of Contract to be filed by amendment.
(5) Form of Application to be filed by amendment.
(6) (a)
Restated Certificate of Incorporation of Hartford Life Insurance
Company is filed herewith.
(b) Bylaws of Hartford Life Insurance Company are filed herewith.
(7) Not applicable.
(8) Not applicable.
(9) Not applicable.
(10) Consent of Arthur Andersen & Co. is filed herewith.
(11) Not applicable.
(12) Not applicable.
(13) Not applicable.
17
<PAGE>
ITEM 25. Directors and Officers of the Depositor
<TABLE>
<S> <C>
Louis J. Abdou Vice President
David H. Annis Vice President
Paul J. Boldischar,
Jr. Vice President
Wendell J. Bossen Vice President
Peter W. Cummins Vice President
Juliana B. Dalton Vice President
Ann M. deRaismes Vice President
Allen Douma, M.D. Medical Director
Donald R. Frahm Chairman & CEO
Bruce D. Gardner General Counsel & Secretary
Joseph H. Gareau Executive Vice President &
Chief Investment Officer
Richard J. Garrett Vice President & Treasurer
John P. Ginnetti Executive Vice President and
Director Asset Management
Services
Lynda Godkin Assistant General Counsel &
Secretary
Lois W. Grady Vice President
David A. Hall Senior Vice President & Actuary
Joseph Kanarek Vice President
Kevin J. Kirk Vice President
Andrew W. Kohnke Vice President
Stephen M. Maher Vice President & Actuary
William B. Malchodi, Vice President & Director of
Jr. Taxes
Thomas M. Marra Senior Vice President & Actuary
and Director Individual Life
and Annuity Division
David J. McDonald Senior Vice President
Kevin A. North Vice President
Joseph J. Noto Vice President
Leonard E. Odell, Jr. Senior Vice President
Michael C. O'Halloran Vice President & Senior
Associate General Counsel
Craig R. Raymond Vice President & Chief Actuary
Lowndes A. Smith President & Chief Operating
Officer
Edward J. Sweeney Vice President
James E. Trimble Vice President & Actuary
Raymond P. Welnicki Senior Vice President
James T. Westervelt Senior Vice President & Group
Comptroller
Lizabeth H. Zlatkus Vice President
Donald J. Znamierowski Vice President
Unless otherwise indicated, the principal business
address of each the above individuals is P.O. Box 2999,
Hartford, CT 06104-2999.
</TABLE>
ITEM 26. Persons Controlled By or Under Common Control with the Depositor or
Registrant
See Exhibit 26 attached hereto.
ITEM 27. Number of Contracts
As of December 31, 1994, there were Contract Owners of qualified
contracts and no Contract Owners of non-qualified contracts.
18
<PAGE>
ITEM 28. Indemnification
Under Section 33-320a of the Connecticut General Statutes, the Registrant
must indemnify a director or officer against judgments, fines, penalties,
amounts paid in settlement and reasonable expenses, including attorneys'
fees, for actions brought or threatened to be brought against him in his
capacity as a director or officer when it is determined by certain
disinterested parties that he acted in good faith and in a manner he
reasonably to be in the best interest of the Registrant. In any criminal
action or proceeding, it also must be determined that the director or
officer had no reason to believe his conduct was unlawful. The director or
officer must also be indemnified when he is successful on the merits in the
defense of a proceeding or in circumstances where a court determines that he
is fairly and reasonably entitled to be indemnified, and the court approves
the amount. In shareholders derivative suits, the director or officer must
be finally adjudged not to have breached his duty to the Registrant or a
court must determine that he is fairly and reasonably entitled to be
indemnified and must approve the amount. In a claim based upon the
director's or officer's purchase or sale of the Registrant's securities, the
director or officer may obtain indemnification only if a court determines
that, in view of all the circumstances, he is fairly and reasonably entitled
to be indemnified, and then for such amount as the court shall determine.
The foregoing statements are specifically made subject to the detailed
provisions of Section 33-320a.
The directors and officers of HL and HESCO are covered under a directors and
officer liability insurance policy issued to ITT Corporations 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 and other
costs, charges and expenses and settlements and judgments arising from any
proceedings 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 liability arising from acts that are deemed to be uninsurable.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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.
ITEM 29. Principal Underwriters
(a) HESCO acts as principal underwriter for the following investment
companies:
Hartford Life Insurance Company - DC Variable Account I
Hartford Life Insurance Company - Separate Account Two (DC Variable
Account II)
Hartford Life Insurance Company - Separate Account Two (Variable Account
"A")
Hartford Life Insurance Company - Separate Account Two (NQ Variable
Account)
Hartford Life Insurance Company - Separate Account One
Hartford Life Insurance Company - Separate Account Two
Hartford Money Market Fund, Inc.
Hartford Life Insurance Company - Separate Account Three
ITT Hartford Life and Annuity Insurance Company - Separate Account Three
Hartford Life Insurance Company - Separate Account Five
ITT Hartford Life and Annuity Insurance Company - Separate Account Five
ITT Hartford Life and Annuity Insurance Company - Separate Account Six
Hartford Life Insurance Company Separate Account VL I
19
<PAGE>
(b) Directors and Officers of HESCO
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICE
BUSINESS ADDRESS WITH UNDERWRITER
- - ------------------------------ ---------------------
<S> <C>
Donald E. Waggaman, Jr. Treasurer
Bruce D. Gardner Secretary
George R. Jay Controller
Lowndes A. Smith President
</TABLE>
ITEM 30. Location of Accounts and Records
Accounts and records are maintained by HL.
ITEM 31. Management Services
None
ITEM 32. Undertakings
(a) The Registrant hereby undertakes to file a post-effective amendment to
this registration statement as frequently as is necessary to ensure that
the audited financial statements in the registration statement are never
more than 16 months old so long as payments under the variable annuity
contracts may be accepted.
(b) The Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space
that an applicant can check to request a Statement of Additional
Information, or (2) a post card or similar written communication affixed
to or included in the prospectus that the applicant can remove to send
for a Statement of Additional Information.
(c) The Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available
under this Form promptly upon written or oral request.
The Registrant is relying on the no-action letter issued by the Division of
Investment Management to American Council of Life Insurance, Ref. No. IP-6-88,
November 28, 1988. The Registrant has complied with the four provisions of the
no-action letter.
20
<PAGE>
HARTFORD LIFE INSURANCE COMPANY, INC.
AND
HARTFORD LIFE AND ACCIDENT INSURANCE COMPANY, INC.
POWER OF ATTORNEY
Donald R. Frahm
Bruce D. Gardner
Joseph H. Gareau
John P. Ginnetti
Thomas M. Marra
Leonard E. Odell, Jr.
Lowndes A. Smith
Raymond P. Welnicki
Lizabeth H. Zlatkus
Donald J. Znamierowski
do hereby jointly and severally authorize Bruce D. Gardner and/or Rodney J.
Vessels to sign as their agent, any Registration Statement, pre-effective
amendment, and any post-effective amendment of the Hartford Life Insurance
Company, Inc. and Hartford Life and Accident Insurance Company, Inc. under the
Securities Act of 1933 and/or the Investment Company Act of 1940.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney for the
purpose herein set forth.
<TABLE>
<C> <S> <C>
/s/ DONALD R. FRAHM Dated: ---------------------------------------
- - ---------------------------------------------
Donald R. Frahm
/s/ BRUCE D. GARDNER Dated: ---------------------------------------
- - ---------------------------------------------
Bruce D. Gardner
/s/ JOHN P. GINNETTI Dated: ---------------------------------------
- - ---------------------------------------------
John P. Ginnetti
/s/ THOMAS M. MARRA Dated: December 9, 1994
- - --------------------------------------------- ---------------------------------------
Thomas M. Marra
/s/ LEONARD E. ODELL, JR. Dated: December 2, 1994
- - --------------------------------------------- ---------------------------------------
Leonard E. Odell, Jr.
/s/ LOWNDES A. SMITH Dated: ---------------------------------------
- - ---------------------------------------------
Lowndes A. Smith
/s/ RAYMOND P. WELNICKI Dated: ---------------------------------------
- - ---------------------------------------------
Raymond P. Welnicki
/s/ LIZABETH H. ZLATKUS Dated: ---------------------------------------
- - ---------------------------------------------
Lizabeth H. Zlatkus
/s/ DONALD J. ZNAMIEROWSKI Dated: December 8, 1994
- - --------------------------------------------- ---------------------------------------
Donald J. Znamierowski
</TABLE>
21
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities Act
Rule 485(b) for effectiveness of this Registration Statement and has caused this
Registration Statement to be signed on its behalf, in the City of Hartford, and
State of Connecticut on this 27th day of April, 1995.
HARTFORD LIFE INSURANCE COMPANY--
SEPARATE ACCOUNT TWO
(QP VARIABLE ACCOUNT)
(Registrant)
*By: *By: /s/ RODNEY J. VESSELS
-------------------------------- --------------------------------
John P. Ginnetti, Rodney J. Vessels
Senior Vice President Attorney-in-Fact
HARTFORD LIFE INSURANCE COMPANY
(Depositor)
*By: --------------------------------
John P. Ginnetti,
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons and in the
capacity and on the date indicated.
Donald R. Frahm, Chairman and Chief
Executive Officer, Director*
Bruce D. Gardner, General Counsel
Corporate Secretary, Director*
Joseph H. Gareau, Executive Vice
President and Chief Investment
Officer, Director*
John P. Ginnetti, Senior Vice
President, Director*
Thomas M. Marra, Senior Vice *By: /s/ RODNEY J. VESSELS
President, Director* ---------------------------------
Rodney J. Vessels
Attorney-In-Fact
Leonard E. Odell, Jr., Senior Vice
President,
Director*
Lowndes A. Smith, President, Chief Dated: April 27, 1995
Operating Officer, Director* ---------------------------------
Raymond P. Welnicki, Senior Vice
President, Director*
Lizabeth H. Zlatkus, Vice President
Director*
Donald J. Znamierowski, Vice President
Comptroller, Director*
22
<PAGE>
CERTIFICATION
I, John F. Ginnetti, Secretary of Hartford Life Insurance Company, hereby
certify that the attached is a true copy of a resolution adopted by the
Board of Directors of said Company on June 2, 1986.
/s/ John F. Ginnetti
---------------------------------------
June 13, 1986
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
CONSENT
The undersigned, being all of the Directors of Hartford Life Insurance
Company, hereby consent to the following resolution, such action to have the
same force and effect as if taken at a meeting duly called and held for such
purpose:
RESOLVED, That Hartford Life Insurance Company is hereby authorized to
establish a new separate account to be designated "Separate Account
Two" (the "Account") and to issue variable annuity contracts with
reserves for such contracts being segregated in such Account.
FURTHER RESOLVED, That the officers of Hartford Life Insurance Company
are hereby authorized and directed to take all actions necessary to:
(1) Comply with applicable state and federal laws and regulations
applicable to the establishment and operation of the Account;
(2) Establish, from time to time, the terms and conditions pursuant
to which interests in the Account will be sold to contract owners;
(3) Establish all procedures, standards and arrangements necessary or
appropriate for the operation of the Account including, but not
limited to, the establishment of the investment policies of the
Account; and
(4) Transfer funds to the Account, up to a maximum of $100,000 to
provide for its efficient operation, all on such terms and for
such periods as said officers deem to be necessary or appropriate.
/s/ Edward N. Bennett /s/ R. Fred Richardson
- - ------------------------------------- -------------------------------------
/s/ Joel P. Brightman /s/ Lowndes A. Smith
- - ------------------------------------- -------------------------------------
/s/ Larry A. Lance /s/ Donald R. Sondergeld
- - ------------------------------------- -------------------------------------
/s/ Leroy C. Thomas
------------------------------------
Dated: June 2, 1986
<PAGE>
EXHIBIT 3
PRINCIPAL UNDERWRITER AGREEMENT
THIS AGREEMENT, dated as of the 1st day of April, 1988, made by and between
HARTFORD LIFE INSURANCE COMPANY ("the Hartford"), a corporation organized and
existing under the laws of the State of Connecticut, and HARTFORD EQUITY SALES
COMPANY, INC. ("HESCO"), a corporation organized and existing under the laws
of the State of Connecticut,
WITNESSETH:
WHEREAS, the Board of Directors of the Hartford has made provision for the
establishment of separate accounts within the Hartford in accordance with the
laws of the State of Connecticut, which separate accounts were organized and are
established and registered as unit investment trust investment companies with
the Securities and Exchange Commission under the Investment Company Act of 1940,
as amended, and which are designated Hartford Life Insurance Company DC Variable
Account-I, Hartford Life Insurance Company Separate Account Two (DC Variable
Account-II), Hartford Life Insurance Company Separate Account Two (Variable
Account A), Hartford Life Insurance Company Separate Account Two (QP Variable
Account) and Hartford Life Insurance Company Separate Account Two (NQ Variable
Account), (referred to collectively as the "Separate Accounts"); and
WHEREAS, HESCO offers to the public certain Individual and Group Annuity
Contracts (the "Contracts") issued by the Hartford with respect to the Separate
Accounts and which are registered under the Securities Act of 1933, as amended;
and
WHEREAS, the Contracts authorize the Contract Owners of such Contracts to
direct that part or all of the net purchase payments to their Contract shall be
invested in shares of one or more of the underlying mutual funds which are
sponsored by the Hartford ("the Fund or Funds"). The Funds are registered as
open-end, diversified, management investment companies under the Investment
Company Act of 1940, as amended; and
WHEREAS, HESCO has previously agreed to act as distributor in connection
with offers and sales of the Contracts under the terms and conditions set forth
in this Distribution Agreement.
NOW THEREFORE, in consideration of the mutual agreements made herein, the
Hartford and HESCO agree as follows:
I.
HESCO'S DUTIES
1. HESCO, as principal underwriter for the Contracts, will use its best
efforts to effect offers and sales of the Contracts through broker-dealers that
are members of the National Association of Securities Dealers, Inc. and whose
registered representatives are duly licensed as insurance agents of the
Hartford. HESCO is responsible for compliance with all applicable requirements
of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934,
as amended, and the Investment Company Act of 1940, as
<PAGE>
amended, and the rules
and regulations thereunder, and all other applicable laws, rules and regulations
thereunder, and all other applicable laws, rules and regulations relating to the
sales and distribution of the Contracts, the need for which arises out of its
duties as principal underwriter of said Contracts and relating to the creation
of the Separate Accounts.
2. HESCO agrees that it will not use any prospectus, sales literature, or
any other printed matter or material or offer for sale or sell any Contract if
any of the foregoing in any way represent the duties, obligations, or
liabilities of the Hartford as being greater than, or different from, such
duties, obligations and liabilities as are set forth in this Agreement, as it
may be amended from time to time.
3. HESCO agrees that it will utilize the then currently effective
prospectuses relating to the Separate Accounts' variable annuity contracts in
connection with its selling efforts.
As to the other types of sales materials, HESCO agrees that it will use only
sales materials which conform to the requirements of federal and state insurance
laws and regulations and which have been filed, where necessary, with the
appropriate regulatory authorities.
4. HESCO agrees that it or its duly designated agent shall maintain records
of the name and address of, and the securities issued by the Separate Accounts
and held by, every holder of any security issued pursuant to this Agreement, as
required by Section 26(a)(4) of the Investment Company Act of 1940, as amended.
5. HESCO's services pursuant to this Agreement shall not be deemed to be
exclusive, and it may render similar services and act as an underwriter,
distributor, or dealer for other investment companies in the offering of their
shares.
6. In the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of its obligations and duties hereunder on the part of HESCO,
HESCO shall not be subject to liability to the Separate Accounts or to any
Contract Owner or party in interest under a Contract for any act or omission in
the course, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security.
II.
1. The Separate Accounts reserve the right at any time to suspend or limit
the public offering of variable annuity contracts upon thirty days' written
notice to HESCO, except where the notice period may be shortened because of
legal action taken by any regulatory agency.
2. The Separate Accounts agree to advise HESCO immediately:
(a) Of any request by the Securities and Exchange Commission for
amendment of its Securities Act registration statements or for additional
information;
<PAGE>
(b) Of the issuance by the Securities and Exchange Commission of any
stop order suspending the effectiveness of the Securities Act registration
statement relating to the Separate Accounts or of the initiation of any
proceedings for that purpose;
(c) Of the happening of any material event, if known, which makes untrue
any statement in said Securities Act registration statements or which
requires change therein in order to make any statement therein not
misleading.
The Separate Accounts will furnish to HESCO such information with respect to
the Separate Accounts and the variable annuity contracts in such form and signed
by such of its officers and directors of the Separate Accounts as HESCO may
reasonably request and will warrant that the statements therein contained when
so signed will be true and correct. The Separate Accounts will also furnish,
from time to time, such additional information regarding the Separate Accounts'
financial condition as HESCO may reasonably request.
III.
COMPENSATION
For providing the principal underwriting functions on behalf of the Separate
Accounts, HESCO shall be entitled to receive compensation as agreed upon from
time to time by the Hartford and HESCO.
IV.
RESIGNATION AND REMOVAL OF
PRINCIPAL UNDERWRITER
HESCO may resign as Principal Underwriter hereunder, upon 120 days' prior
written notice to the Hartford. However, such resignation shall not become
effective until either the Separate Accounts have been completely liquidated and
the proceeds of the liquidation distributed through the Separate Accounts to the
Contract Owners or a successor Principal Underwriter has been designated and has
accepted its duties.
V.
MISCELLANEOUS
1. This Agreement may not be assigned by any of the parties hereto without
the written consent of the other party.
2. All notices and other communications provided for hereunder shall be in
writing and shall be delivered by hand or mailed first class, postage pre-paid,
addressed as follows:
(a) If to the Hartford -- Hartford Life Insurance Company, P.O. Box
2999, Hartford, Connecticut 06104-2999
(b) If to HESCO -- Hartford Equity Sales Company, Inc., Hartford,
Connecticut 06104-2999
or to such other address as HESCO, or the Hartford shall designate by written
notice to the other.
<PAGE>
3. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which shall be deemed one
instrument, and an executed copy of this Agreement and all amendments hereto
shall be kept on file by the Hartford and shall be open to inspection at any
time during the business hours of the Hartford.
4. This Agreement shall inure to the benefit of and be binding upon the
successor of the parties hereto.
5. This Agreement shall be construed and governed by and according to the
laws of the State of Connecticut.
6. This Agreement may be amended from time to time by the mutual agreement
and consent of the parties hereto.
7. This Amended and Restated Agreement shall supersede all prior agreements
among the parties hereto relating to the same subject matter.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
(SEAL) HARTFORD LIFE INSURANCE COMPANY
Attest:
- - ------------------------------------ By----------------------------------
Vice President
(SEAL) HARTFORD EQUITY SALES COMPANY, INC.
Attest:
- - ------------------------------------ By----------------------------------
Vice President
<PAGE>
EXHIBIT 6(A)
RESTATED CERTIFICATE OF INCORPORATION
HARTFORD LIFE INSURANCE COMPANY
This Restated Certificate of Incorporation gives effect to the amendment of
the Certificate of Incorporation of the corporation and otherwise purports
merely to restate all those provisions already in effect. This Restated
Certificate of Incorporation has been adopted by the Board of Directors and by
the sole shareholder.
Section 1. The name of the corporation is Hartford Life Insurance
Company and it shall have all the powers granted by the general
statutes, as now enacted or hereinafter amended to corporations formed
under the Stock Corporation Act.
Section 2. The corporation shall have the purposes and powers to write
any and all forms of insurance which any other corporation now or
hereafter chartered by Connecticut and empowered to do an insurance
business may now or hereafter may lawfully do; to accept and to cede
reinsurance; to issue policies and contracts for any kind or
combinations of kinds of insurance; to issue policies or contracts
either with or without participation in profits; to acquire and hold any
or all of the shares or other securities of any insurance corporation;
and to engage in any lawful act or activity for which corporations may
be formed under the Stock Corporation Act. The corporation is authorized
to exercise the powers herein granted in any state, territory or
jurisdiction of the United States or in any foreign country.
Section 3. The capital with which the corporation shall commence
business shall be an amount not less than one thousand dollars. the
authorized capital shall be two million five hundred thousand dollars
divided into one thousand shares of common capital stock with a par
value of twenty-five hundred dollars each.
We hereby declare, under the penalties of false statement that the
statements made in the foregoing Certificate are true.
Dated: February 10, 1982 HARTFORD LIFE INSURANCE COMPANY
By:-------------------------------
Attest:
- - --------------------------------------
<PAGE>
EXHIBIT 6(B)
By-Laws
of the
HARTFORD LIFE INSURANCE COMPANY
As passed and effective
February 13, 1978
and amended on
July 13, 1978
January 5, 1979
and
February 29, 1984
<PAGE>
-1-
ARTICLE I
Name - Home Office
Section 1. This corporation shall be named HARTFORD LIFE INSURANCE COMPANY.
Section 2. The principal place of business and Home Office shall be in
the City of Hartford, Connecticut.
ARTICLE II
Stockholders' Meetings - Notice - Quorum - Right to Vote
Section 1. All meetings of the Stockholders shall be held at the
principal business office of the Company unless the Directors shall otherwise
provide and direct.
Section 2. The annual meeting of the Stockholders shall be held on such
day and at such hour as the Board of Directors may decide. For cause the
Board of Directors may postpone or adjourn such annual meeting to any other
time during the year.
Section 3. Special meetings of the Stockholders may be called by the Board
of Directors, the Executive Committee, the Chairman of the Board, the
President or any Vice President.
Section 4. Notice of Stockholders' meetings shall be mailed to each
Stockholder, at his address as it appears on the records of the Company, at
least seven days prior to the meeting. The notice shall state the place, date
and time of the meeting and shall specify all matters proposed to be acted
upon at the meeting.
Section 5. At each annual meeting the Stockholders shall choose Directors
as hereinafter provided.
Section 6. Each Stockholder shall be entitled to one vote for each share
of stock held by him at all meetings of the Company. Proxies may be
authorized by written power of attorney.
Section 7. Holders of one-half of the whole amount of the stock issued and
outstanding shall constitute a quorum.
<PAGE>
-2-
Section 8. Each Stockholder shall be entitled to a certificate of stock
which shall be signed by the President or a Vice President, and either the
Treasurer or an Assistant Treasurer of the Company, and shall bear the seal of
the Company, but such signatures and seal may be facsimile if permitted by
the laws of the State of Connecticut.
ARTICLE III
Directors - Meetings - Quorum
Section 1. The property, business and affairs of the Company shall be
managed by a board of not less than three nor more than twenty Directors, who
shall be chosen by ballot at each annual meeting. Vacancies occurring between
annual meetings may be filled by the Board of Directors by election. Each
Director shall hold office until the next annual meeting of Stockholders and
until his successor is chosen and qualified.
Section 2. Meetings of the Board of Directors may be called by the
direction of the Chairman of the Board, the President, or any three Directors.
Section 3. Three days' notice of meetings of the Board of Directors shall
be given to each Director, either personally or by mail or telegraph, at his
residence or usual place of business, but notice may be waived, at any time,
in writing.
Section 4. One third of the number of existing directorships, but not
less than two Directors, shall constitute a quorum.
ARTICLE IV
Election of Officers - Duties of Board of
Directors and Executive Committee
Section 1. The President shall be elected by the Board of Directors. The
Board of Directors may also elect one of its members to serve as Chairman of
the Board of Directors. The Chairman of the Board, or an individual appointed
by him, shall have authority to appoint all other officers, except as stated
herein, including one or more Vice Presidents and Assistant Vice Presidents,
the Treasurer
<PAGE>
-3-
and one or more Associate or Assistant Treasurers, one or more Secretaries
and Assistant Secretaries and such other Officers as the Chairman of the
Board may from time to time designate. All Officers of the Company shall hold
office during the pleasure of the Board of Directors. The Directors may
require any Officer of the Company to give security for the faithful
performance of his duties.
Section 2. The Directors may fill any vacancy among the officers by
election for the unexpired term.
Section 3. The Board of Directors may appoint from its own number an
Executive Committee of not less than five Directors. The Executive Committee
may exercise all powers vested in and conferred upon the Board of Directors
at any time when the Board is not in session. A majority of the members of
said Committee shall constitute a quorum.
Section 4. Meetings of the Executive Committee shall be called whenever
the Chairman of the Board, the President or a majority of its members shall
request. Forty-eight hours' notice shall be given of meetings but notice may
be waived, at any time, in writing.
Section 5. The Board of Directors shall annually appoint from its own
number a Finance Committee of not less than three Directors, whose duties
shall be as hereinafter provided.
Section 6. The Board of Directors may, at any time, appoint such other
Committees, not necessarily from its own number, as it may deem necessary for
the proper conduct of the business of the Company, which Committees shall have
only such powers and duties as are specifically assigned to them by the Board
of Directors or the Executive Committee.
Section 7. The Board of Directors may make contributions, in such amounts
as it determines to be reasonable, for public welfare or for charitable,
scientific or educational purposes, subject to the limits and restrictions
imposed by law and to such rules and regulations consistent with law as it
makes.
ARTICLE V
Officers
Chairman of the Board
Section 1. The Chairman of the Board shall preside at the meetings of the
Board of Directors and the Executive Committee and, in the absence of the
Chairman of the Finance Committee, at the meetings of the Finance Committee.
In the absence or inability of the Chairman of the Board to so preside, the
President shall preside in his place.
<PAGE>
-4-
President
Section 2. The President, under the supervision and control of the
Chairman of the Board, shall have general charge and oversight of the
business and affairs of the Company. The President shall preside at the
meetings of the Stockholders. He shall be a member of and shall preside at
all meetings of all Committees not referred to in Section 1 of this ARTICLE
except that he may designate a Chairman for each such other Committee.
Section 3. In the absence or inability of the President to perform his
duties, the Chairman of the Board may designate a Vice President to exercise
the powers and perform the duties of the President during such absence or
inability.
Secretary
Section 4. The Secretary of the Corporation shall keep a record of all
the meetings of the Company, of the Board of Directors and of the Executive
Committee, and he shall discharge all other duties specifically required of
the Secretary by law. The other Secretaries and Assistant Secretaries shall
perform such duties as may be assigned to them by the Board of Directors or
by their senior officers and any Secretary or Assistant Secretary may affix
the seal of the Company and attest it and the signature of any officer to any
and all instruments.
Treasurer
Section 5. The Treasurer shall keep, or cause to be kept, full and
accurate accounts of the Company. He shall see that the funds of the Company
are disbursed as may be ordered by the Board of Directors or the Finance
Committee. He shall have charge of all moneys paid to the Company and on
deposit to the credit of the Company or in any other properly authorized
name, in such banks or depositories as may be designated in a manner provided
by these by-laws. He shall also discharge all other duties that may be
required of him by law.
Other Officers
Section 6. The other officers shall perform such duties as may be
assigned to them by the President or the Board of Directors.
<PAGE>
-5-
ARTICLE VI
Finance Committee
Section 1. If a Finance Committee is established it shall be the duty of
that committee to supervise the investment of the funds of the Company in
securities in which insurance companies are permitted by law to invest, and
all other matters connected with the management of investments. If no Finance
Committee is established this duty shall be performed by the Board of
Directors.
Section 2. All loans or purchases for the investment and reinvestment of
the funds of the Company shall be submitted for approval to the Finance
Committee, if not specifically approved by the Board of Directors.
Section 3. Sale or transfer of any stocks or bonds shall be made upon
authorization of the Finance Committee unless specifically authorized by the
Board of Directors.
Section 4. Transfers of stock and registered bonds, deeds, leases,
releases, sales, mortgages chattel or real, assignments or partial releases
of mortgages chattel or real, and in general all instruments of defeasance
of property and all agreements or contracts affecting the same, except
discharges of mortgages and entries to foreclose the same as hereinafter
provided, shall be authorized by the Finance Committee or the Board of
Directors, and be executed jointly for the Company by two persons, to wit:
The Chairman of the Board, the President or a Vice President, and a
Secretary, the Treasurer or an Assistant Treasurer, but may be acknowledged
and delivered by either one of those executing the instrument; provided,
however, that either a Secretary, the Treasurer, or an Assistant Treasurer
alone, when authorized as aforesaid, or any person specially authorized by
the Finance Committee as attorney for the Company, may make entry to
foreclose any mortgage, and a Secretary, the Treasurer or an Assistant
Treasurer alone is authorized, without the necessity of further authority, to
discharge by deed or otherwise any mortgage on payment to the Company of the
principal, interest and all charges due.
Section 5. The Finance Committee may fix times and places for regular
meetings. No notice of regular meetings shall be necessary. Reasonable notice
shall be given of special meetings but the action of a majority of the
Finance Committee at any meeting shall be valid notwithstanding any defect in
the notice of such meeting.
<PAGE>
-6-
Section 6. In the absence of specific authorization from the Board of
Directors or the Finance Committee, the Chairman of the Board, the President,
a Vice President or the Treasurer shall have the power to vote or execute
proxies for voting any shares held by the Company.
ARTICLE VII
Funds
Section 1. All monies belonging to the Company shall be deposited to the
credit of the Company, or in such other name as the Finance Committee, the
Chairman of the Finance Committee or such executive officers as are
designated by the Board of Directors shall direct, in such bank or banks as
may be designated from time to time by the Finance Committee, the Chairman of
the Finance Committee, or by such executive officers as are designated by the
Board of Directors. Such monies shall be drawn only on checks or drafts
signed by any two executive officers of the Company, provided that the Board
of Directors may authorize the withdrawal of such monies by check or draft
signed with the facsimile signature of any one or more executive officers,
and provided further, that the Finance Committee may authorize such
alternative methods of withdrawals as it deems proper.
The Board of Directors, the President, the Chairman of the Finance
Committee, a Vice President, or such executive officers as are designated by
the Board of Directors may authorize withdrawal of funds by checks or drafts
drawn at offices of the Company to be signed by Managers, General Agents or
employees of the Company, provided that all such checks or drafts shall be
signed by two such authorized persons, except checks or drafts used for the
payment of claims or losses which need be signed by only one such
authorized person, and provided further that the Board of Directors of the
Company or executive officers designated by the Board of Directors may impose
such limitations or restrictions upon the withdrawal of such funds as it
deems proper.
<PAGE>
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ARTICLE VIII
Indemnity of Directors and Officers
Section 1. The Company shall indemnify and hold harmless each Director
and officer now or hereafter serving the Company, whether or not then in
office, from and against any and all claims and liabilities to which he may
be or become subject by reason of his being or having been a Director or
officer of the Company, or of any other company which he serves as a Director
or officer at the request of the Company, to the extent such is consistent
with the statutory provisions pertaining to indemnification, and shall
provide such further indemnification for legal and/or all other expenses
reasonably incurred in connection with defending against such claims and
liabilities as is consistent with statutory requirements.
ARTICLE IX
Amendment of ByLaws
Section 1. The Directors shall have power to adopt, amend and repeal such
bylaws as may be deemed necessary or appropriate for the management of the
property and affairs of the Company.
Section 2. The Stockholders at any annual or special meeting may amend or
repeal these bylaws or adopt new ones if the notice of such meeting contains
a statement of the proposed alteration, amendment, repeal or adoption, or the
substance thereof.
<PAGE>
2
ARTICLE I
Name - Home Office
Section 1. This corporation shall be named Hartford Life Insurance
Company.
Section 2. The principal place of business and Home Office shall be in
the City of Hartford, Connecticut.
ARTICLE II
Stockholders' Meetings - Notice- Quorum - Right to Vote
Section 1. All meetings of the Stockholders shall be held at the
principal business office of the Company unless the Directors shall otherwise
provide and direct.
Section 2. The annual meeting of the Stockholders shall be held on such
day and at such hour as the Board of Directors may decide. For cause the
Board of Directors may postpone or adjourn such annual meeting to any other
time during the year.
Section 3. Special meetings of the Stockholders may be called by the
Board of Directors, the Executive Committee, the Chairman of the Board, the
President or any Vice President.
Section 4. Notice of Stockholders' meetings shall be mailed to each
Stockholder, at his address as it appears on the records of the Company, at
least seven days prior to the meeting. The notice shall state the place, date
and time of the meeting and shall specify all matters proposed to be acted
upon at the meeting.
Section 5. At each annual meeting the Stockholders shall choose Directors
as hereinafter provided.
Section 6. Each Stockholder shall be entitled to one vote for each share
of stock held by him at all meetings of the Company. Proxies may be
authorized by written power of attorney.
Section 7. Holders of one-half of the whole amount of the stock issued
and outstanding shall constitute a quorum.
<PAGE>
3
Section 8. Each Stockholder shall be entitled to a certificate of stock
which shall be signed by the President or a Vice President, and either the
Treasurer or an Assistant Treasurer of the Company, and shall bear the seal
of the Company, but such signatures and seal may be facsimile if permitted by
the laws of the State of Connecticut.
ARTICLE III
Directors - Meetings - Quorum
Section 1. The property, business and affairs of the Company shall be
managed by a board of not less than three nor more than twenty Directors, who
shall be chosen by ballot at each annual meeting. Vacancies occurring between
annual meetings may be filled by the Board of Directors by election. Each
Director shall hold office until the next annual meeting of Stockholders and
until his successor is chosen and qualified.
Section 2. Meetings of the Board of Directors may be called by the
direction of the Chairman of the Board, the President, or any three Directors.
Section 3. Three days' notice of meetings of the Board of Directors shall
be given to each Director, either personally or by mail or telegraph, at his
residence or usual place of business, but notice may be waived, at any time,
in writing.
Section 4. One third of the number of existing directorships, but not
less than two Directors, shall constitute a quorum.
ARTICLE IV
Election of Officers - Duties of Board of
Directors and Executive Committee
Section 1. The Board of Directors shall annually elect a Chairman of the
Board, a President, a Secretary of the Corporation and a Treasurer. It may
elect such Vice Presidents, other Secretaries, Assistant Secretaries,
Assistant Treasurers and such other officers as it may determine. All
officers of the Company shall hold office during the pleasure of the Board of
Directors.
<PAGE>
4
Section 2. The Directors may fill any vacancy among the officers by
election for the unexpired term.
Section 3. The Board of Directors may appoint from its own number an
Executive Committee of not less than five Directors. The Executive Committee
may exercise all powers vested in and conferred upon the Board of Directors
at any time when the Board is not in session. A majority of the members of
said Committee shall constitute a quorum.
Section 4. Meetings of the Executive Committee shall be called
whenever the Chairman of the Board, the President or a majority of its
members shall request. Forty-eight hours' notice shall be given of meetings
but notice may be waived, at any time, in writing.
Section 5. The Board of Directors may annually appoint from its own number
a Finance Committee of not less than three Directors, whose duties shall be
as hereinafter provided.
Section 6. The Board of Directors may, at any time, appoint such other
Committees, not necessarily from its own number, as it may deem necessary for
the proper conduct of the business of the Company, which Committees shall
have only such powers and duties as are specifically assigned to them by the
Board of Directors or the Executive Committee.
Section 7. the Board of Directors may make contributions, in such amounts
as it determines to be reasonable, for public welfare or for charitable,
scientific or educational purposes, subject to the limits and restrictions
imposed by law and to such rules and regulations consistent with law as it
makes.
ARTICLE V
Officers
Chairman of the Board
Section 1. The Chairman of the Board shall preside at the meetings of the
Board of Directors and the Executive Committee and, in the
<PAGE>
5
absence of the Chairman of the Finance Committee, at the meetings of the
Finance Committee. In the absence or inability of the Chairman of the Board
to so preside, the President shall preside in his place.
President
Section 2. The President, under the supervision and control of the Chairman
of the Board, shall have general charge and oversight of the business and
affairs of the Company. The President shall preside at the meetings of the
Stockholders. He shall be a member of and shall preside at all meetings of
all Committees not referred to in Section 2 of this ARTICLE except that he
may designate a Chairman for each such other Committee.
Section 3. In the absence or inability of the President to perform his
duties, the Chairman of the Board may designate a Vice President to exercise
the powers and perform the duties of the President during such absence or
inability.
Secretary
Section 4. The Secretary of the Corporation shall keep a record of all the
meetings of the Company, of the Board of Directors and of the Executive
Committee, and he shall discharge all other duties specifically required of
the Secretary by law. The other Secretaries and the Assistant Secretaries
shall perform such duties as may be assigned to them by the Board of
Directors or by their senior officers and any Secretary or Assistant Secretary
may affix the seal of the Company and attest it and the signature of any
officer to any and all instruments.
Treasurer
Section 5. The Treasurer shall keep, or cause to be kept, full and accurate
accounts of the Company. He shall see that the funds of the Company are
disbursed as may be ordered by the Board of Directors or the Finance
Committee. He shall have charge of all moneys paid to the Company and on
deposit to the credit of the Company or in any other properly authorized
name, in such banks or depositories as may be designated in a manner provided
by these bylaws. He shall also discharge all other duties that may be required
of him by law.
<PAGE>
6
Other Officers
Section 6. The other officers shall perform such duties as may be assigned
to them by the President or the Board of Directors.
ARTICLE VI
Finance Committee
Section 1. If a Finance Committee is established it shall be the duty of the
committee to supervise the investment of the funds of the Company in
securities in which insurance companies are permitted by law to invest, and
all other matters connected with the management of investments. If no Finance
Committee is established, this duty shall be performed by the Board of
Directors.
Section 2. All loans or purchases for the investment and reinvestment
of the funds of the Company shall be submitted for approval to the Finance
Committee, if not specifically approved by the Board of Directors.
Section 3. Sale or transfer of any stocks or bonds shall be made upon
authorization of the Finance Committee unless specifically authorized by the
Board of Directors.
Section 4. Transfers of stock and registered bonds, deeds, leases, releases,
sales, mortgages chattel or real, assignments or partial releases of
mortgages chattel or real, and in general all instruments of defeasance of
property and all agreements or contracts affecting the same, except
discharges of mortgages and entries to foreclose the same as hereinafter
provided, shall be authorized by the Finance Committee or the Board of
Directors, and be executed jointly for the Company by two persons, to wit:
the Chairman of the Board, the President or a Vice President, and a
Secretary, the Treasurer or an Assistant Treasurer, but may be acknowledged
and delivered by either one of those executing the instrument; provided,
however, that either a Secretary, the Treasurer, or an Assistant Treasurer
alone, when authorized as aforesaid, or any person specifically authorized by
the Finance Committee as attorney for the Company, may make entry to
foreclose any mortgage, and a Secretary, the Treasurer or an Assistant
Treasurer alone is authorized, without the necessity of further authority, to
discharge by deed or otherwise any mortgage on payment to the Company of the
principal, interest and all charges due.
<PAGE>
7
Section 5. The Finance Committee may fix times and places for regular
meetings. No notice of regular meetings shall be necessary. Reasonable notice
shall be given of special meetings but the action of a majority of the
Finance Committee at any meeting shall be valid notwithstanding any defect in
the notice of such meeting.
Section 6. In the absence of specific authorization from the Board of
Directors or the Finance Committee, the Chairman of the Board, the
President, a Vice President or the Treasurer shall have the power to vote or
execute proxies for voting any shares held by the Company.
ARTICLE VII
Funds
Section 1. All monies belonging to the Company shall be deposited to the
credit of the Company, or in such other name as the Finance Committee, the
Chairman of the Finance Committee or such executive officers as are
designated by the Board of Directors shall direct, in such bank or banks as
may be designated from time to time by the Finance Committee, the Chairman of
the Finance Committee or by such executive officers as are designated by the
Board of Directors. Such monies shall be drawn only on checks or drafts
signed by any two executive officers of the Company, provided that the Board
of Directors may authorize the withdrawal of such monies by check or draft
signed with the facsimile signature of any one or more executive officers,
and provided further, that the Finance Committee may authorize such
alternative methods of withdrawal as it deems proper.
The Board of Directors, the President, the Chairman of the Finance Committee,
a Vice President, or such executive officers as are designated by the Board
of Directors may authorize withdrawal of funds by checks or drafts drawn at
offices of the Company to be signed by Managers, General Agents or employees
of the Company, provided that all such checks or drafts shall be signed by
two such authorized persons, except checks or drafts used for the payment of
claims or losses which need be signed by only one such authorized person, and
provided further that the Board of Directors of the Company or executive
officers designated by the Board of Directors may impose such limitations or
restrictions upon the withdrawal of such funds as it deems proper.
<PAGE>
8
ARTICLE VIII
Indemnity of Directors and Officers
Section 1. The Company shall indemnify and hold harmless each Director and
officer now or hereafter serving the Company, whether or not then in office,
from and against any and all claims and liabilities to which he may be or
become subject by reason of his being or having been a director or officer of
the Company, or of any other company which he serves as a director or officer
at the request of the Company, to the extent such is consistent with
statutory provisions pertaining to indemnification, and shall provide such
further indemnification for legal and/or all other expenses reasonably
incurred in connection with defending against such claims and liabilities as
is consistent with statutory requirements.
ARTICLE IX
Amendment of Bylaws
Section 1. The Directors shall have power to adopt, amend and repeal such
bylaws as may be deemed necessary or appropriate for the management of the
property and affairs of the Company.
Section 2. The Stockholders at any annual or special meeting may amend or
repeal these bylaws or adopt new ones if the notice of such meeting contains
a statement of the proposed alteration, amendment, repeal or adoption, or
the substance thereof.
<PAGE>
1.0 FUND PARTICIPATION AGREEMENT
1.1 This Agreement, effective January 1, 1989, by and among Hartford
Life Insurance Company, a Connecticut stock life insurance
corporation with principal offices at 200 Mopmeadow Street,
Simsbury, Connecticut 06089 ("Hartford"). Acacia Capital
Corporation, a registered investment company with principal
offices at 51 Louisiana Avenue, N.W., Washington, D.C. 20001, (the
"Fund"), and Calvert Asset Management Company, Inc., registered
investment advisor to the Fund, with principal offices at 4550
Montgomery Avenue, Bethesda, Maryland 20814 ("Calvert").
1.2 In consideration of the promises, representations, warranties,
covenants, agreements and conditions contained herein, and in
order to set forth the terms and conditions of the transactions
contemplated hereby and the mode of carrying the same into effect;
and intending to be legally bound, the parties hereto agree to
the provisions set forth below.
2.0 THE VARIABLE ANNUITY CONTRACT AND THE SEPARATE ACCOUNT
2.1 Hartford shall maintain a variable annuity contract (the
"Contract") designed to provide, under current law, the benefits
of a tax-deferred accumulation of income for retirement and other
purposes.
2.2 Purchase payments for the Contracts shall be invested by Hartford
in a separate account or accounts. Such payments will constitute
the assets of the separate account and shall be invested, as
directed by purchasers, in certain open-end diversified
management companies registered under the Investment Company Act
of 1940 ("1940 Act").
2.3 One of the open-end diversified management companies is the Fund,
an open-end diversified management investment company with eight
separate series, registered under the 1940 Act. Each series is a
separate investment portfolio with distinct investment objectives.
2.4 Hartford will offer one or more of the series of the Fund,
including the Calvert Socially Responsible Series (the "Series"),
through the separate account
<PAGE>
to its Contract Owners, except that Hartford agrees not to offer
any series of the Fund until the exemptive order referenced in
Section 3.2.3 of this Agreement has been granted by the Securities
and Exchange Commission ("SEC"). Hartford will determine in its
discretion what separate account or accounts will offer the Series.
2.5 Hartford will use the name "Hartford Socially Responsive Fund" in
its marketing and sales literature when referring to the Series,
and agrees to indicate in such literature that "the investment
adviser of the Fund is Calvert Asset Management Company, Inc."
2.5.1 Hartford will use its best efforts to market and promote
the Series for its Contracts, and will market and promote
the Series in all of its markets, if the plan permits this
type of fund.
2.5.2 In marketing its Contracts, Hartford will comply with all
applicable State and Federal laws. Hartford and its agents
shall make no representations or warranties concerning the
Fund or Series shares except those contained in the then
current prospectuses of the Fund and in the Fund's current
printed sales literature. Copies of all advertising and
sales literature describing or concerning the Fund which
is prepared by Hartford or its agents for use in marketing
its Contracts (except those for internal or broker/dealer
use only) will be sent to Calvert when such material is
released to the public, agents or brokers or is submitted to
the Securities and Exchange Commission ("SEC"), National
Association of Securities Dealer, Inc. ("NASD"), or other
regulatory body for review. Hartford shall be responsible
for compliance with any state or federal filing or review
requirements concerning advertising and sales literature.
2.5.3 Hartford and its agents will not oppose voting
recommendations from Calvert or the Fund's Board of
Directors or interfere with the solicitation of proxies for
the Fund shares held for Hartford Contract Owners, unless
Hartford deems such recommendations detrimental to it or to
its Contract Owners. Hartford agrees to provide pass-through
voting privileges to all Hartford Contract Owners and to
assure that each of its separate accounts
<PAGE>
participating in the Fund calculates voting privileges in a
manner consistent with all other separate accounts of any
insurance company investing in the Fund, as required by the
exemptive order referenced in Section 3.2.3 of this
Agreement.
2.5.4 Hartford will responsible for reporting to the Fund's
Board of Directors any potential or existing conflicts
among the interests of the contract owners of all separate
accounts investing in the Fund, and to assist the Board by
providing it with all information reasonably necessary for
the Board to consider any issues raised. The Fund's Board of
Directors is responsible for monitoring any conflict of
interest situation. Hartford and the other relevant
insurance companies will be responsible for taking remedial
action in the event of a Board determination of an
irreconcilable material conflict and to bear the cost of
such remedial action and these responsibilities will be
carried out with a view only to the interests of contract
owners. For purposes of this Section 2.5.4, a majority of
the disinterested members of the Fund's Board shall
determine whether or not any proposed action adequately
remedies any irreconcilable material conflict, but in no
event will the Fund or Calvert be required to establish a
new funding medium for any variable contract. Hartford shall
not be required by this section to establish a new funding
medium for any variable contract if an offer to do so has
been declined by vote of a majority of contract owners
materially adversely affected by the irreconcilable material
conflict.
2.6 Hartford will bear the costs of, and have the primary
responsibility for:
2.6.1 Registering the Contracts and the separate account with the
SEC, including any Application for Exemptive Relief
necessary for the separate account to buy Fund shares;
2.6.2 Developing all policy forms, application forms,
confirmations and other administrative forms or documents
and filing such of these as are necessary to comply with the
requirements of all insurance laws and regulations in each
state in which the contracts are offered;
<PAGE>
2.6.3 Administration of the Contracts and the separate account,
including all policyholder service and communication
activities;
2.6.4 Preparing and approving all marketing and sales literature
involving the sale of Fund shares to the Hartford's separate
account;
2.6.5 Printing and distributing to Hartford Contract Owners
copies of the current prospectuses, statements of additional
information (as requested by Contract Owners) and periodic
reports for the separate account and the Fund;
2.6.6 Preparing and filing any reports or other filings as may be
required under state insurance laws or regulations with
respect to the contracts or the separate account; and
2.6.7 Reimbursing the Fund up to $1500 for the cost of obtaining
a separate audit opinion for the 1988 fiscal year for the
Series, distinct from the other seven series; and further,
Hartford agrees that for every year thereafter, it will
engage in good faith negotiations with Calvert and the Fund
regarding such reimbursement by Hartford.
3.0 THE SERIES
3.1 The Fund and Calvert shall make available shares of the Series as
the underlying investment media for Hartford Contract Owners.
3.2 Calvert shall bear the costs of, and subject to review by
Hartford, shall have, or shall cause the Fund and the Series to
assume, the primary responsibility for:
3.2.1 Registering the Fund with the SEC including a separate
prospectus for the Series which does not reference the other
seven series of the Fund. The costs of printing and
distributing such prospectus to Hartford Contract Owners
shall be borne by Hartford as provided in Section 2.6.5
above.
3.2.2 Preparing, producing and maintaining the effectiveness of
such registration statements for the Fund as are required
under federal and state securities laws, and clearing such
registration statements through the SEC and pursuant to the
securities laws and regulations in each state in which the
contracts are offered;
<PAGE>
3.2.3 Preparing and filing an Application for Exemptive Relief
requesting appropriate exemptive relief from the relevant
provisions of the 1940 Act ("Application") and clearing such
Application through the SEC, thereby permitting Hartford
contracts to use the Fund as an underlying investment
alternative for its variable annuity contracts.
3.2.4 Operating and maintaining the Fund in accordance with
applicable law, including the diversification standards of
the Internal Revenue Code of 1986 applicable to variable
annuity contracts;
3.2.5 Preparing and filing any reports or other filings as may be
required with respect to the Fund under federal or state
securities laws;
3.2.6 Providing Hartford with the daily net asset values of the
Fund by 6:00 p.m. E.S.T. on each day the New York Stock
Exchange is open.
3.2.7 Providing Hartford with camera-ready copy necessary for the
printing of the periodic shareholder reports for the Fund.
3.3 The Fund or Calvert shall maintain records in accordance with the
Investment Company Act of 1940 or other statutes, rules and
regulations applicable to the Fund's operation in connection with
the performance of its duties. Hartford shall have the right to
access such records, upon reasonable notice and during business
hours, in order to respond to regulatory requirements, inquiries,
complaints or judicial proceedings. Records of all transactions
with respect to the Contracts shall be retained for a period of
not less than six (6) years from each transaction.
3.4 The parties or their duly authorized independent auditors have
the right under this Agreement to perform on-site audits of
records pertaining to the Contracts and the Fund, at such
frequencies as each shall determine, upon reasonable notice and
during normal business hours. At the request of the other, each
will make available to the other's auditors and/or representatives
of the appropriate regulatory agencies, all requested records,
data, and access to operating procedures.
4.0 INDEMNIFICATION
4.1 Hartford shall indemnify and hold the Fund and Calvert and each
of their respective directors,
<PAGE>
officers, employees and agents harmless from any liability or
expense (including reasonable attorneys' fees) arising from any
failure of Hartford or the separate account to fulfill its
respective obligations under this Agreement.
4.2 The Fund and Calvert shall indemnify and hold Hartford and its
directors, officers, employees and agents harmless from all
liabilities or expenses (including reasonable attorneys' fees)
arising from any failure of the Fund or Calvert to fulfill its
respective obligations under this Agreement and Calvert shall
indemnify and hold such parties harmless from a failure of the
Fund's investment adviser to manage the Fund in compliance with
the diversification requirements of the Internal Revenue Code of
1986, as amended, or any regulations thereunder.
5.0 COST AND EXPENSES
5.1 Except for costs and expenses for which indemnification is
required pursuant to section 4.0 or as otherwise agreed by the
parties in specific instances or, as set forth herein, the
parties shall each pay their respective costs and expenses
incurred by them in connection with this Agreement.
6.0 TERM OF AGREEMENT
6.1 The term of this Agreement shall be indefinite unless terminated
pursuant to Section 7 of this Agreement.
7.0 TERMINATION
7.1 This Agreement will terminate:
7.1.1 At the option of any party upon six months' prior written
notice to the other parties, but no party may terminate
this Agreement prior to January 1, 1990. If a party
notifies the other parties that it intends to terminate
this Agreement, the affected parties shall immediately
file with the SEC such documents, if any, as are necessary
to permit the offering of shares of the Series to Hartford
Contract Owners to be discontinued; or
7.1.2 Upon assignment of this Agreement unless the assignment is
made with the written consent of the other party.
<PAGE>
7.1.3 In the event of termination of this Agreement pursuant to
this Section 7.0, the provisions of Sections 4.0, 5.0, and
8.0 shall survive such termination.
8.0 GENERAL PROVISIONS
8.1 This Agreement is the complete and exclusive statement of the
agreement between the parties as to the subject matter hereof
which supersedes all proposals or agreements, oral or written,
and all other communications between the parties related to the
subject matter of this Agreement.
8.2 This Agreement can only be modified by a written agreement duly
signed by the persons authorized to sign agreements on behalf of
the respective party.
8.3 If any provision or provisions of this Agreement shall be held
to be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any
way be affected of be impaired thereby.
8.4 This Agreement and the rights, duties and obligations of the
parties hereto shall not be assignable by either party hereto
without the prior written consent of the other.
8.5 Any controversy relating to this Agreement shall be determined
by arbitration in Washington, D.C. in accordance with the
Commercial Arbitration rules of the American Arbitration
Association using arbitrators who will follow substantive rules
of law. The dispute shall be determined by an arbitrator
acceptable to both parties who shall be selected within seven
(7) days of filing of notices of intention to arbitrate.
Otherwise, the dispute shall be determined by a panel of three
arbitrators selected as follows: Within seven (7) days of filing
notice of intention to arbitrate, each party will appoint one
arbitrator. These two arbitrators will then name a third
arbitrator, who shall be an attorney admitted before the bar of
any state of the United State, to preside over the panel. If
either party fails to appoint an arbitrator, or if the two
arbitrators do not name a third arbitrator within seven (7)
days, either party may request the American Arbitration
Association to appoint the necessary arbitrator(s) pursuant to
Rule 13 of the Commercial Arbitration Rules. Each party will pay
its own cost and expenses. All testimony shall be transcribed.
The award of the panel shall be accompanied by findings of fact
and a statement of
<PAGE>
reasons for the decision. All parties agree to be bound by the
results of this arbitration; judgment upon the award so rendered
may be entered and enforced in any court of competent
jurisdiction. To the extent reasonably practicable, both parties
agree to continue performing their respective obligations under
this Agreement while the dispute is being resolved. Nothing
contained in this subsection shall prohibit either party from
seeking equitable relief without resorting to arbitration under
such circumstances as said party reasonably believes that its
interests hereunder and in its property may be compromised. All
matters relating to such arbitration shall be maintained in
confidence.
8.6 No waiver by either party of any default by the other in the
performance of any promise, term or condition of this Agreement
shall be construed to be a waiver by such party of any other or
subsequent default in performance of the same or any other
covenant, promise, term or condition of this Agreement. No prior
transactions or dealings between the parties shall be deemed to
establish any custom or usage waiving or modifying any provision
hereof.
8.7 No liability shall result to any party, nor shall any party be
deemed to be in default hereunder, as the result of delay in its
performance or from its non-performance hereunder caused by
circumstances beyond its control, including but not limited to:
act of God, act or war, riot, epidemic; fire; flood or other
disaster; or act of government. Nevertheless, the party shall be
required to be diligent in attempting to remove such cause or
causes.
8.8 Each of the parties will act as an independent contractor under
the terms of this Agreement and neither is now, or in the
future, an agent or a legal representative of the other for any
purpose. Neither party has any right or authority to supervise
or control the activities of the other party's employees in
connection with the performance of this Agreement or to assign
or create any application of any kind, express or implied, on
behalf of the other party or to bind it in any way, to accept
any service of process upon it or to receive any notice of any
nature whatsoever on its behalf.
8.9 This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Connecticut.
<PAGE>
8.10 Nothing herein shall prevent either party from participating in
any proceeding before any regulatory authority having
jurisdiction over any matter relating to this Agreement, the
Contracts, the separate account or the Fund which may affect the
parties to it. The parties shall each give the others prompt
notice of any such proceeding.
8.11 In all matters relating to the preparation, review, prior
approval and filing of documents, the parties shall cooperate in
good faith. Neither party shall unreasonably withhold its
consent with respect to the filing of any document with any
federal or state regulatory authority having jurisdiction over
the Contracts, the separate account or the Fund.
8.12 Captions contained in this Agreement are for reference purposes
only and do not constitute part of this Agreement.
8.13 All notices which are required to be given or submitted pursuant
to this Agreement shall be in writing and shall be sent by
registered or certified mail, return receipt requested, to the
addresses set forth below:
President Secretary
Hartford Life Acacia Capital Corporation
Insurance Company 4550 Montgomery Avenue
200 Hopmeadow Street Suite 1000 N
Simsbury, CT 06089 Bethesda, MD 20814
or to such other address as the parties may from time to time
designate. Any notice of one party refused by the other shall be
deemed received as of the date of said refusal.
8.14 Each party hereto shall promptly notify the other in writing of
any claims, demands or actions having any bearing on this
Agreement.
8.15 Each party agrees to perform its obligations hereunder in
accordance with all applicable laws, rules and regulations now
or hereafter in effect.
8.16 In the event of a material breach by either party of any of the
provisions of this Agreement, the injured party, in addition to
any other remedies available to it under law, shall be entitled
to seek an injunction restraining the other party from the
performance of acts which constitute a breach of this Agreement,
and such other party agrees not to raise adequacy of legal
remedies as a defense thereof.
<PAGE>
8.17 If this Agreement is terminated for other than default, it is
specifically agreed that neither party shall be entitled to
compensation of any kind except as specifically set forth herein.
8.18 In any litigation or arbitration between the parties, the
prevailing party shall be entitled to reasonable attorneys' fees
and all costs of proceedings incurred in enforcing this
Agreement.
8.19 This Agreement shall be binding upon and inure to the benefit of
the parties hereto, their successors and permitted assigns.
8.20 Each party represents that it has full power and authority to
enter into and perform this Agreement, and the person signing
this Agreement on behalf of it has been properly authorized and
empowered to enter into this Agreement. Each party further
acknowledges that it has read this Agreement, understands it,
and agrees to be bound by it.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
ACACIA CAPITAL CORPORATION HARTFORD LIFE INSURANCE COMPANY
BY: /s/ Clifton S. Sorrell, Jr. BY: /s/ Charles A. Clinton
---------------------------- -----------------------
Clifton S. Sorrell, Jr. Charles A. Clinton
President Vice President
CALVERT ASSET MANAGEMENT
COMPANY, INC.
BY: /s/ Reno J. Martini
---------------------
Reno J. Martini
Vice President
swb6.5
<PAGE>
Exhibit (b)(10)
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
Registration Statement File No. 33-19948 on Form N-4 for Hartford Life
Insurance Company.
Hartford, Connecticut
April 21, 1995
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