<PAGE>
As filed with the Securities and Exchange Commission on April 17, 1997
File No. 33-19948
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
----
Post-Effective Amendment No. 11 [X]
----
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 76 [X]
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)
(860) 843-6733
(Depositor's Telephone Number, Including Area Code)
MARIANNE O'DOHERTY, ESQ.
HARTFORD LIFE INSURANCE COMPANIES
P.O. BOX 2999
HARTFORD, CT 06104-2999
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
---
X on May 1, 1997 pursuant to paragraph (b) of Rule 485
---
60 days after filing pursuant to paragraph (a)(1) of Rule 485
---
on May 1, 1997 pursuant to paragraph (a)(1) of Rule 485
---
___ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
PURSUANT TO RULE 24F-2(a)(1) UNDER THE INVESTMENT COMPANY ACT OF 1940, THE
REGISTRANT HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES. THE RULE 24F-2
NOTICE FOR THE REGISTRANT'S MOST RECENT FISCAL YEAR WAS FILED ON OR ABOUT
FEBRUARY 28, 1997.
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
-----------------------
N-4 Item No. Prospectus Heading
------------ ------------------
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, QP Variable Account Contract and
Depositor, and Portfolio Companies Separate Account Two; Hartford Life
Insurance Company and the Funds;
Miscellaneous
6. Deductions Charges Under the Contract
7. General Description of Variable Operation of the Contract
Annuity Contracts 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 Table of Contents of the Statement
of Additional Information of Additional Information
<PAGE>
15. Cover Page Part B; Statement of Additional
Information
16. Table of Contents Table of Contents
17. General Information and History Introduction
18. Services None
19. Purchase of Securities Distribution of Contracts
being Offered
20. Underwriters Distribution of Contracts
21. Calculation of Performance Data Calculation of Yield and Return
22. Annuity Payments Annuity Benefits
23. Financial Statements Financial Statements
24. Financial Statements and Financial Statements and
Exhibits Exhibits
25. Directors and Officers of the Directors and Officers of the
Depositor Depositor
26. Persons Controlled by or Under Persons Controlled by or Under
Common Control with the Depositor Common Control with the Depositor
or Registrant or Registrant
27. Number of Contract Owners Number of Contract Owners
28. Indemnification Indemnification
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Records Location of Accounts and Records
31. Management Services Management Services
32. Undertakings Undertakings
<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 ("Hartford").
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 Hartford.
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 Sub- -- shares of HVA Money Market Fund, Inc. ("Money
Account* Market Fund")Mdc
*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.
------------------------------------------------------------------------------
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.
------------------------------------------------------------------------------
Prospectus Dated: May 1, 1997
Statement of Additional Information Dated: May 1, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
------------------------------------------------------------------------ ----
<S> <C>
GLOSSARY OF SPECIAL TERMS............................................... 3
FEE TABLE............................................................... 5
SUMMARY................................................................. 10
ACCUMULATION UNIT VALUES................................................ 11
INTRODUCTION............................................................ 12
THE QP VARIABLE ACCOUNT CONTRACT AND
SEPARATE ACCOUNT TWO (QP VARIABLE ACCOUNT)........................... 12
What is the Variable Account QP Contract?............................. 12
Who can buy these Contracts?.......................................... 12
What is the Separate Account and how does it operate?................. 12
OPERATION OF THE CONTRACT............................................... 13
How is a Contribution credited?....................................... 13
May I make changes in the amounts of my Contributions?................ 14
Are there any limits on Contributions?................................ 14
May I transfer assets between Sub-Accounts?........................... 14
May I obtain a Contract in exchange for another Contract?............. 14
What happens if a Contract Owner fails to make Contributions?......... 15
May I assign or transfer my Contract?................................. 15
How do I know what my account is worth?............................... 15
How is the Accumulation Unit value determined?........................ 15
How are the underlying Fund shares valued?............................ 15
PAYMENT OF BENEFITS..................................................... 16
What would my Beneficiary receive as death proceeds?.................. 16
How can a Contract be redeemed or surrendered?........................ 16
Is a partial termination of a Contract allowed?....................... 17
Can payment of the redemption or surrender value ever be postponed by
Hartford beyond the seven day period?................................ 18
May I surrender once Annuity payments have started?................... 18
May I reinvest after a redemption?.................................... 18
Can a Contract be suspended by a Contract Owner?...................... 18
How do I elect an Annuity Commencement Date and Form of Annuity?...... 18
What is the minimum amount that I may select for an Annuity
payment?............................................................. 19
What are the available Annuity Options under the Contract?............ 19
How are Annuity payments determined?.................................. 20
Can a Contract be modified?........................................... 21
CHARGES UNDER THE CONTRACT.............................................. 22
How are the charges under these Contracts made?....................... 22
Are there any differences in charges made?............................ 23
What is the mortality and expense risk charge?........................ 23
Are there any administrative charges?................................. 24
How much are the deductions for Premium Taxes on these Contracts?..... 24
HARTFORD LIFE INSURANCE COMPANY AND THE FUNDS........................... 24
What is Hartford?..................................................... 24
What are the Funds?................................................... 25
FEDERAL TAX CONSIDERATIONS.............................................. 26
General............................................................... 26
Taxation of Hartford and the Separate Account......................... 26
Information Regarding Tax-Qualified Plans............................. 26
Diversification Requirements.......................................... 29
Ownership of the Assets in the Separate Account....................... 29
Non-Natural Persons, Corporations..................................... 30
Annuity Purchases by Nonresident Aliens and Foreign Corporations...... 30
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 -- PRIOR FRONT END LOAD CONTRACTS.............................. 32
TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION...............
</TABLE>
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 Participant's
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 Hartford on behalf of
Participant(s) or purchase payments by individuals pursuant to the terms of the
Contracts.
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 Hartford which consists of all assets of
Hartford other than those allocated to the Separate Accounts of Hartford.
HARTFORD: 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 established.
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 Hartford Separate Account entitled "Hartford Life
Insurance Company Separate Account Two".
3
<PAGE>
SUB-ACCOUNT: Accounts established within the Separate Account with respect to a
Fund.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. 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 QP: A series of Hartford Life Insurance Company 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>
FEE TABLE
Separate Account Two (QP Variable Account) -- Group Variable Only
Bond Fund Sub-Account 1.00%
Contract Owner Transaction Expenses
<TABLE>
<S> <C>
Sales Load (as a percentage of premium payments or amount
surrendered, as applicable)
On the first $2,500........................................... 5.000%
Exchange Fee...................................................... $ 0
Annual Contract Fee............................................... $ 10(1)
Annual Expenses--Separate Account (as a percentage of average
account value)
Mortality and Expense Risk Fees............................... 1.000%
---------
---------
Hartford Bond Fund Annual Expenses
(as a percentage of net assets)
Management Fees................................................... 0.490%
Other Expenses.................................................... 0.030%
Total (Portfolio Company) Annual Expenses......................... 0.520%
---------
---------
</TABLE>
- ------------
(1) The annual maintenance charge is a single $10 charge on a Contract. It is
deducted proportionally from the investment options in use at the time of
the charge. In the Example, the annual maintenance fee is approximated as a
0.04% annual asset charge based on the experience of the Contracts.
EXAMPLE
<TABLE>
<CAPTION>
If you surrender your Contract If you annuitize your Contract If you do not surrender your
at the end of the applicable at the end of the applicable Contract, you would pay the
time period, you would pay the time period, you would pay the following expenses on a $1,000
following expenses on a $1,000 following expenses on a $1,000 investment, assuming a 5%
investment, assuming a 5% investment, assuming a 5% annual return on assets:
annual return on assets: annual return on assets:
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- -------- ------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$66 $ 100 $ 136 $ 237 $ 66 $ 99 $ 135 $ 236 $ 66 $ 100 $ 136 $ 237
</TABLE>
5
<PAGE>
Separate Account Two (QP Variable Account) -- Combination Individual and Group
Allocated Contracts Bond Fund Sub-Account 1.00%
Contract Owner Transaction Expenses
<TABLE>
<S> <C>
Sales Load (as a percentage of premium payments or amount
surrendered, as applicable)
On the first $2,500........................................... 7.000%
Exchange Fee...................................................... $ 0
Annual Contract Fee............................................... $ 10(1)
Annual Expenses--Separate Account (as a percentage of average
account value)
Mortality and Expense Risk Fees............................... 1.000%
---------
---------
Hartford Bond Annual Expenses
(as a percentage of net assets)
Management Fees................................................... 0.490%
Other Expenses.................................................... 0.030%
Total (Portfolio Company) Annual Expenses......................... 0.520%
---------
---------
</TABLE>
- ------------
(1) The annual maintenance charge is a single $10 charge on a Contract. It is
deducted proportionally from the investment options in use at the time of
the charge. In the Example, the annual maintenance fee is approximated as a
0.04% annual asset charge based on the experience of the Contracts.
EXAMPLE
<TABLE>
<CAPTION>
If you surrender your Contract If you annuitize your Contract If you do not surrender your
at the end of the applicable at the end of the applicable Contract, you would pay the
time period, you would pay the time period, you would pay the following expenses on a $1,000
following expenses on a $1,000 following expenses on a $1,000 investment, assuming a 5%
investment, assuming a 5% investment, assuming a 5% annual return on assets:
annual return on assets: annual return on assets:
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- -------- ------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$86 $ 120 $ 156 $ 257 $ 86 $ 119 $ 155 $ 256 $ 86 $ 120 $ 156 $ 257
</TABLE>
6
<PAGE>
Separate Account Two (QP Variable Account -- Group Variable Only
Stock Fund Sub-Account 1.00%
Contract Owner Transaction Expenses
<TABLE>
<S> <C>
Sales Load (as a percentage of premium payments or amount
surrendered, as applicable)
On the first $2,500........................................... 5.000%
Exchange Fee...................................................... $ 0
Annual Contract Fee............................................... $ 10(1)
Annual Expenses--Separate Account (as a percentage of average
account value)
Mortality and Expense Risk Fees............................... 1.000%
---------
---------
Hartford Stock Annual Expenses
(as a percentage of net assets)
Management Fees................................................... 0.441%
Other Expenses.................................................... 0.016%
Total (Portfolio Company) Annual Expenses......................... 0.457%
---------
---------
</TABLE>
- ------------
(1) The annual maintenance charge is a single $10 charge on a Contract. It is
deducted proportionally from the investment options in use at the time of
the charge. In the Example, the annual maintenance fee is approximated as a
0.04% annual asset charge based on the experience of the Contracts.
EXAMPLE
<TABLE>
<CAPTION>
If you surrender your Contract If you annuitize your Contract If you do not surrender your
at the end of the applicable at the end of the applicable Contract, you would pay the
time period, you would pay the time period, you would pay the following expenses on a $1,000
following expenses on a $1,000 following expenses on a $1,000 investment, assuming a 5%
investment, assuming a 5% investment, assuming a 5% annual return on assets:
annual return on assets: annual return on assets:
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- -------- ------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$65 $ 98 $ 132 $ 230 $ 65 $ 97 $ 132 $ 230 $ 65 $ 97 $ 132 $ 230
</TABLE>
7
<PAGE>
Separate Account Two (QP Variable Account) -- Combination Individual and Group
Allocated Contracts Stock Fund Sub-Account 1.00%
Contract Owner Transaction Expenses
<TABLE>
<S> <C>
Sales Load (as a percentage of premium payments or amount
surrendered, as applicable)
On the first $2,500........................................... 7.000%
Exchange Fee...................................................... $ 0
Annual Contract Fee............................................... $ 10(1)
Annual Expenses--Separate Account (as a percentage of average
account value)
Mortality and Expense Risk Fees............................... 1.000%
---------
---------
Hartford Stock Annual Expenses
(as a percentage of net assets)
Management Fees................................................... 0.441%
Other Expenses.................................................... 0.016%
Total (Portfolio Company) Annual Expenses......................... 0.457%
---------
---------
</TABLE>
- ------------
(1) The annual maintenance charge is a single $10 charge on a Contract. It is
deducted proportionally from the investment options in use at the time of
the charge. In the Example, the annual maintenance fee is approximated as a
0.04% annual asset charge based on the experience of the Contracts.
EXAMPLE
<TABLE>
<CAPTION>
If you surrender your Contract If you annuitize your Contract If you do not surrender your
at the end of the applicable at the end of the applicable Contract, you would pay the
time period, you would pay the time period, you would pay the following expenses on a $1,000
following expenses on a $1,000 following expenses on a $1,000 investment, assuming a 5%
investment, assuming a 5% investment, assuming a 5% annual return on assets:
annual return on assets: annual return on assets:
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- -------- ------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$85 $ 118 $ 152 $ 250 $ 85 $ 117 $ 152 $ 249 $ 85 $ 118 $ 152 $ 250
</TABLE>
8
<PAGE>
Separate Account Two (QP Variable Account) -- Group Variable Only Contracts
Money Market Fund Sub-Account 1.00%
Contract Owner Transaction Expenses
(All Sub-Accounts)
<TABLE>
<S> <C>
Sales Load (as a percentage of premium payments or amount
surrendered, as applicable)
On the first $2,500........................................... 0.000%
Exchange Fee...................................................... $ 0
Annual Contract Fee (2)........................................... $ 0
Annual Expenses--Separate Account (as a percentage of average
account value)
Mortality and Expense Risk Fees............................... 1.000%
Hartford Bond Annual Operating Expenses
(as a percentage of net assets)
Management Fees................................................... 0.423%
Other Expenses.................................................... 0.021%
Total (Portfolio Company Annual Expenses.......................... 0.444%
---------
---------
</TABLE>
EXAMPLE
<TABLE>
<CAPTION>
If you surrender your Contract If you annuitize your Contract If you do not surrender your
at the end of the applicable at the end of the applicable Contract, you would pay the
time period, you would pay the time period, you would pay the following expenses on a $1,000
following expenses on a $1,000 following expenses on a $1,000 investment, assuming a 5%
investment, assuming a 5% investment, assuming a 5% annual return on assets:
annual return on assets: annual return on assets:
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- -------- ------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$15 $ 46 $ 79 $ 174 $ 15 $ 46 $ 79 $ 174 $ 15 $ 46 $ 79 $ 174
</TABLE>
9
<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 Hartford. (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, Hartford 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, Hartford 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
3.50%. (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, Hartford
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.
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, Hartford shall vote such
interest in the same proportion as shares of the Fund for which instructions
have been received by Hartford (see "What are my voting rights?" on page ).
10
<PAGE>
ACCUMULATION UNIT VALUES
(FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE PERIOD)
The following information, insofar as it relates to the period ended
December 31, 1996, 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,
---------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------- ------- ------- ------ ------ ------ ------ ------ ------ ------
QP VARIABLE ACCOUNT (1.00%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BOND FUND SUB-ACCOUNT
Accumulation unit value at
beginning of period............... $ 4.234 $ 3.609 $ 3.795 $3.478 $3.328 $2.887 $2.690 $2.423 $2.275 $2.298
Accumulation unit value at end of
period............................ $ 4.340 $ 4.234 $ 3.609 $3.795 $3.478 $3.328 $2.887 $2.690 $2.423 $2.275
Number accumulation units
outstanding at
end of period (in thousands)...... 1,157 1,430 1,668 1,854 1,978 2,151 2,316 2,643 3,393 3,948
QP VARIABLE ACCOUNT (1.00%)
STOCK FUND SUB-ACCOUNT
Accumulation unit value at
beginning of period............... $ 9.274 $ 6.986 $ 7.192 $6.353 $5.831 $4.726 $4.966 $3.979 $3.378 $3.237
Accumulation unit value at end of
period............................ $11.420 $ 9.274 $ 6.986 $7.192 $6.353 $5.831 $4.726 $4.966 $3.979 $3.378
Number accumulation units
outstanding at
end of period (in thousands)...... 3,372 3,837 4,284 4,669 4,890 5,296 5,847 6,576 8,528 9,889
QP VARIABLE ACCOUNT (.825%)
STOCK FUND SUB-ACCOUNT
Accumulation unit value at
beginning of period............... $ 7.448 $ 5.601 $ 5.756 $5.076 $4.650 $3.763 $3.947 $3.157 $2.675 $2.559
Accumulation unit value at end of
period............................ $ 9.188 $ 7.448 $ 5.601 $5.756 $5.076 $4.650 $3.763 $3.947 $3.157 $2.675
Number accumulation units
outstanding at
end of period (in thousands)...... 1,237 1,348 1,435 1,506 1,607 1,726 1,979 2,173 2,274
QP VARIABLE ACCOUNT (.375%)
MONEY MARKET FUND SUB-ACCOUNT
Accumulation unit value at
beginning of period............... $ 2.953 $ 2.803 $ 2.706 $2.639 $2.556 $2.419 $2.246 $2.066 $1.931 $1.820
Accumulation unit value at end of
period............................ $ 3.094 $ 2.953 $ 2.803 $2.706 $2.639 $2.556 $2.419 $2.246 $2.066 $1.931
Number accumulation units
outstanding at
end of period (in thousands)...... 2 2 2 4 9 28 25 52 169 153
</TABLE>
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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 Hartford (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 Hartford sets aside and invests
the assets attributable to the Contracts sold under this Prospectus. Although
the Separate Account is an integral part of Hartford, it is registered as a
unit investment trust under the Investment Company Act of 1940. The Separate
Account meets the definition of "separate account" under federal securities
law.
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 Hartford.
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<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 Hartford may
conduct. So, you will not be affected by the rate of return of Hartford's
general account, nor by the investment performance of any of Hartford's other
separate accounts.
Your contribution 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. Contributions 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.
HARTFORD 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 SUM OF ALL CONTRIBUTIONS 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.
Hartford 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.
Hartford also reserves the right, subject to compliance with the law to offer
additional Sub-Accounts with differing investment objectives, and to make
existing Sub-Account options unavailable under the contract in the future.
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.
Hartford 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 Hartford 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. The
number of Accumulation Units purchased is determined by dividing the
Contributions amount by the appropriate Accumulation Unit Value on the date
the Contribution is credited to the Participant's Individual Account. Initial
Contributions are credited to a Participant's Individual Account within two
days of receipt of a properly completed application and the initial
Contribution. Subsequent Contributions are credited to a Participant's
Individual Account on the date following receipt of the Contribution by
Hartford at its home office, P.O. Box 2999, Hartford, CT 06104-2999 (or other
address as directed). If an application, or any other information is
incomplete when received, Contributions 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.
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<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 the form and manner prescribed by Hartford.
ARE THERE ANY LIMITS ON CONTRIBUTIONS?
With respect to all Contracts, Hartford 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 Hartford 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 are prohibited.
Similarly, transfers of assets presently held in the Money Market Fund
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 Hartford 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 Hartford 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 Hartford 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
Hartford or any other affiliated company of Hartford 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 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.
14
<PAGE>
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 Hartford
during the preceding 12 month period. Effective with a change of the Contract
to paid-up status, no further Contributions will be accepted by Hartford 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 Hartford at Hartford, Connecticut, prior to settlement for
Hartford's liability under the Contract. Hartford 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 prospectus 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 for each of the Funds.
15
<PAGE>
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 Hartford, 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 Hartford, 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 Hartford and within one year after the
death by written notice to Hartford 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%.
HARTFORD 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 Hartford
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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<PAGE>
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 Hartford 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 Hartford. 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 Hartford 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, Hartford 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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<PAGE>
Payment on request for any partial termination will be made within seven
days of receipt of the written request by Hartford unless subject to
postponement as explained below.
CAN PAYMENT OF THE REDEMPTION OR SURRENDER VALUE EVER BE POSTPONED BY HARTFORD
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 Hartford.
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 Hartford 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 Hartford 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, Hartford reserves the right to begin
Annuity payments at age 65 under Option 2 with 120 monthly payments certain.
However, Hartford 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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<PAGE>
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, Hartford 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. This option offers the maximum level of monthly payments of any of
the other life options (Options 2-4) 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 Hartford.
*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 by number of monthly
(b) = each 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 Hartford.
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.
At the Annuitant's death, payments will continue to be made to the
contingent annuitant, if living for the remainder of the contingent
annuitant's life. When the Annuity is purchased, the Annuitant elects what
percentage (50%, 66 2/3%, or 100%) of the monthly annuity payment will
continue to be paid to the contingent annuitant.
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.
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<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 Hartford.
* 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 HARTFORD.
- --------------------------------------------------------------------------------
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 no earlier than 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 first monthly payment varies according to the form of Annuity selected.
The Contract cites 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 A.I.R. 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.
20
<PAGE>
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?
At any time Hartford reserves the right to modify the Contract, 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
Hartford 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 Hartford will provide
notice to the Contract Owner or to the payee(s) during the Annuity period.
Hartford 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
Hartford. 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 Hartford. 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 Hartford 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.
Hartford 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.
21
<PAGE>
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:
PORTION REPRESENTING
<TABLE>
<CAPTION>
TOTAL
AGGREGATE CONTRIBUTION DEDUCTIONS AS
AMOUNT TO THE FIXED % OF NET
INCOME FUND AND STOCK TOTAL SALES MINIMUM DEATH AMOUNT
FUND SUB-ACCOUNTS ONLY* DEDUCTION EXPENSES BENEFIT 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%
</TABLE>
* THIS ILLUSTRATION DOES NOT ASSUME THE PAYMENT OF ANY PREMIUM TAXES. THE MONEY
MARKET FUND SUB-ACCOUNT IS NOT AVAILABLE UNDER THESE CONTRACTS.
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.
PORTION REPRESENTING
<TABLE>
<CAPTION>
TOTAL
AGGREGATE CONTRIBUTION DEDUCTIONS AS
AMOUNT TO THE FIXED % OF NET
INCOME FUND AND STOCK TOTAL SALES MINIMUM DEATH AMOUNT
FUND SUB-ACCOUNTS ONLY* DEDUCTION EXPENSES BENEFIT 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%
</TABLE>
* 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.
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
22
<PAGE>
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.
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.
Hartford makes the deductions for the Contracts as described above pursuant
to the terms of the various agreements among the custodian, the principal
underwriter, and Hartford. Contract distribution expenses may exceed the
deduction for sales expenses described above. To the extent that they do, they
will be borne by Hartford.
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, Hartford, 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 Hartford 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)
Hartford's actual mortality experience among Annuitants after retirement or
(b) Hartford's actual expenses, if greater than the deductions provided for in
the Contracts because of the expense and mortality undertakings by Hartford.
For assuming these risks under the Contracts, Hartford 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.
23
<PAGE>
The mortality undertaking provided by Hartford 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 Hartford's actuarial determination of
expected mortality rates among all Annuitants. If actual experience among
Annuitants deviates from Hartford's actuarial determination of expected
mortality rates among Annuitants because, as a group, their longevity is
longer than anticipated, Hartford must provide amounts from its general funds
to fulfill its Contract obligations. In that event, a loss will fall on
Hartford. Conversely, if longevity among Annuitants is lower than anticipated,
a gain will result to Hartford.
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 3.50%. Some states assess the tax at the time purchase
payments are made; others assess the tax at the time of annuitization.
Hartford will pay Premium Taxes at the time imposed under applicable law. At
its sole discretion, Hartford 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 HARTFORD?
Hartford Life Insurance Company ("Hartford") is a stock life insurance
company engaged in the business of writing health and life insurance, both
individual and group, in all states of the United States and the District of
Columbia. Hartford was originally incorporated under the laws of Massachusetts
on June 5, 1902, and was subsequently redomiciled to Connecticut. Its offices
are located in Simsbury, Connecticut; however, its mailing address is P.O. Box
2999, Hartford, CT 06104-2999. Hartford is a subsidiary of Hartford Fire
Insurance Company, one of the largest multiple lines insurance carriers in the
United States. Hartford is ultimately owned by ITT Hartford Group, Inc., a
Delaware corporation. Subject to shareholder approval on May 2, 1997, the name
of ITT Hartford Group, Inc. will change to The Hartford Financial Services
Group, Inc.
Hartford is rated A+ (superior) by A.M. Best and Company, Inc., on the basis
of its financial soundness and operating performance. Hartford is rated AA by
Standard & Poor's and AA+ by Duff and Phelps, on the basis of its claims
paying ability. These ratings do not apply to the investment performance of
the Sub-Accounts of the Separate Account. The ratings apply to Hartford's
ability to meet its insurance obligations, including those described in this
Prospectus.
24
<PAGE>
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.
Seeks maximum current income consistent with preservation of capital by
investing primarily in fixed-income securities. Up to 20% of the total assets
of this Fund may be invested in debt securities rated in the highest category
below investment grade ("Ba" by Moody's Investor Services, Inc. or "BB" by
Standard & Poor's) or, if unrated, are determined to be of comparable quality
by the Fund's investment adviser. Securities rated below investment grade are
commonly referred to as "high yield-high risk securities: or "junk bonds." For
more information concerning the risks associated with investing in such
securities, please refer to the section in the accompanying prospectus for the
Funds entitled "Hartford Bond Fund, Inc. -- Investment Policies."
HARTFORD STOCK FUND, INC.
Seeks long-term capital growth primarily through capital appreciation, with
income a secondary consideration, by investing primarily in equity securities.
HVA MONEY MARKET FUND, INC.*
Seeks maximum current income consistent with liquidity and preservation of
capital.
* 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.
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 Hartford 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.
Hartford 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.
Hartford also reserves the right, subject to compliance with the law to offer
additional Funds with differing investment objectives.
All of the Funds are sponsored by Hartford and are incorporated under the
laws of the State of Maryland. HL Investment Advisors, Inc. ("HL Advisors")
serves as the investment adviser to each of the Funds.
Wellington Management Company, L.L.P. serves as sub-investment adviser to
Hartford Stock Fund.
In addition, HL Advisors has entered into an investment services agreement
with Hartford Investment Management Company, Inc. ("HIMCO"), pursuant to which
HIMCO will provide certain investment services to Hartford Bond Fund and HVA
Money Market Fund.
A full description of the Funds, their investment policies and restrictions,
risks, charges and expenses and all other aspects of their operation 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 Hartford. The Funds may
not be available in all states.
25
<PAGE>
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
Hartford's understanding of existing federal income tax laws as they are
currently interpreted.
B. TAXATION OF HARTFORD AND THE SEPARATE ACCOUNT
The Separate Account is taxed as part of Hartford which is taxed as a life
insurance company in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, the Separate Account will not be taxed as a
"regulated investment company" under subchapter M 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 rules applicable to tax qualified contract owners, including
restrictions on contributions and distributions, taxation of distributions and
tax penalties, vary according to the type of plan as well as the terms and
conditions of the plan itself. Various tax penalties may apply to
contributions in excess of specified limits, to distributions in excess of
specified limits, distributions which do not satisfy certain requirements and
certain other transactions with respect to qualified plans. Accordingly, this
summary provides only general information about the tax rules associated with
use of the Contract by a qualified plan. Contract owners, plan participants
and beneficiaries are cautioned that the rights and benefits of any person to
benefits are controlled by the terms and conditions of the plan regardless of
the terms and conditions of the Contract. Some qualified plans are subject to
distribution and other requirements which are not incorporated into Hartford's
administrative procedures. Owners, participants and beneficiaries are
responsible for determining that contributions, distributions and other
transactions comply with applicable law. Because of the complexity of these
rules, owners, participants and beneficiaries are encouraged to consult their
own tax advisers as to specific tax consequences.
1. QUALIFIED PENSION PLANS
Provisions of the Code permit eligible employers to establish 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)). Such plans are subject
to limitations on the amount that may be contributed, the persons who may be
eligible and the time when distributions must commence. Corporate employers
intending to use these contracts in connection with such plans should seek
competent advice.
2. TAX SHELTERED ANNUITIES UNDER SECTION 403(b)
Section 403(b) of the Code permits public school employees and employees of
certain types of charitable, educational and scientific organizations
specified in Section 501(c)(3) of the Code to purchase annuity
26
<PAGE>
contracts, and, subject to certain limitations, exclude such contributions
from gross income. Generally, such contributions may not exceed the lesser of
$9,500 or 20% of the employees "includable compensation" for his most recent
full year of employment, subject to other adjustments. Special provisions may
allow some employees to elect a different overall limitation.
Tax-sheltered annuity programs under Section 403(b) are subject to a
PROHIBITION AGAINST DISTRIBUTIONS FROM THE CONTRACT ATTRIBUTABLE TO
CONTRIBUTIONS MADE PURSUANT TO A SALARY REDUCTION AGREEMENT unless such
distribution is made:
(a) after the participating employee attains age 59 1/2;
(b) upon separation from service;
(c) upon death or disability, or
(d) in the case of hardship.
The above restrictions apply to distributions of employee contributions made
after December 31, 1988, earnings on those contributions, and earnings on
amounts attributable to employee contributions held as of December 31, 1988.
They do not apply to distributions of any employer or other after-tax
contributions, employee contributions made on or before December 31, 1988, and
earnings credited to employee contributions before December 31, 1988.
3. DEFERRED COMPENSATION PLANS UNDER SECTION 457
Employees and independent contractors performing services for such employers
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 (typically 25% of gross
compensation) or $7,500 (indexed), whichever is less. The plan may also
provide for additional "catch-up" deferrals during the three taxable years
ending before a Participant attains normal retirement age.
An employee electing to participate in a Deferred Compensation Plan should
understand that his or her rights and benefits are governed strictly by the
terms of the plan and that the employer is the legal owner of any contract
issued with respect to the plan. 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 or her plan for any charges in regard to participating therein
other than those disclosed in this Prospectus. Participants should also be
aware that effective August 20, 1996, the Small Business Job Protection Act of
1996 requires that all assets and income of an eligible Deferred Compensation
Plan established by a governmental employer which is a State, a political
subdivision of a State, or any agency or instrumentality of a State or
political subdivision of a State, must be held in trust (or under certain
specified annuity contracts or custodial accounts) for the exclusive benefit
of Participants and their Beneficiaries. Special transition rules apply to
such governmental Deferred Compensation Plans already in existence on August
20, 1996, and provide that such plans need not establish a trust before
January 1, 1999. However, this requirement does not apply to amounts under a
Deferred Compensation Plan of a tax-exempt (non-governmental) organization and
such amounts will be subject to the claims of such tax-exempt employer's
general creditors.
In general, distributions from a Section 457 Deferred Compensation Plan are
prohibited unless made after the participating employee attains the age
specified in the plan, separates from service, dies, or suffers an
unforeseeable financial emergency. Present federal tax law does not allow
tax-free transfers or rollovers for amounts accumulated in a Section 457 plan
except for transfers to other Section 457 plans in limited cases.
4. INDIVIDUAL RETIREMENT ANNUITIES UNDER SECTION 408
Section 408 of the Code permits eligible individuals to establish individual
retirement programs through the purchase of Individual Retirement Annuities
("IRAs"). IRAs are subject to limitations on the amount that may be
contributed, the contributions that may be deducted from taxable income, the
persons who may be eligible and the time when distributions may commence.
Also, distributions from certain qualified plans may be "rolled-over" on a
tax-deferred basis into an IRA.
27
<PAGE>
5. TAX PENALTIES
Distributions from retirement plans are generally taxed under Section 72 of
the Code. Under these rules, a portion of each distribution may be excludable
from income. The excludable amount is the portion of the distribution which
bears the same ratio as the after-tax contributions bear to the expected
return.
A. PREMATURE DISTRIBUTION
Distributions from a qualified plan before the Participant attains age
59 1/2 are generally subject to an additional tax equal to 10% of the taxable
portion of the distribution. The 10% penalty does not apply to distributions
made after the employee's death, on account of disability, for eligible
medical expenses 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. 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).
B. MINIMUM DISTRIBUTION TAX
If the amount distributed is less than the minimum required distribution for
the year, the Participant is subject to a 50% tax on the amount that was not
properly distributed.
An individual's interest in a retirement plan must generally be distributed,
or begin to be distributed, not later than April 1 of the calendar year
following the later of (i) the calendar year in which the individual attains
age 70 1/2 or (ii) the calendar year in which the individual retires from
service with the employer sponsoring the plan ("required beginning date").
However, the required beginning date for an individual who is a five (5)
percent owner (as defined in the Code), or who is the owner of an IRA, is
April 1 of the calendar year following the calendar year in which the
individual attains age 70 1/2. 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 life expectancy 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.
If an individual dies before reaching his or her required beginning date,
the individual's entire interest must generally be distributed within five
years of the individual's death. However, this rule will be deemed satisfied,
if distributions begin before the close of the calendar year following the
individual's death to a designated Beneficiary (or over a period not extending
beyond the life expectancy of the beneficiary). If the Beneficiary is the
individual's surviving spouse, distributions may be delayed until the
individual would have attained age 70 1/2.
If an individual dies after reaching his or her required beginning date or
after distributions have commenced, the individual's interest must generally
be distributed at least as rapidly as under the method of distribution in
effect at the time of the individual's death.
C. EXCESS DISTRIBUTION TAX
If the aggregate distributions from all IRAs and certain other qualified
plans in a calendar year exceed the greater of (i) $150,000, or (ii) $112,500
as indexed for inflation, a penalty tax of 15% is generally imposed on the
excess portion of the distribution.
D. WITHHOLDING
Periodic distributions from a qualified plan lasting for a period of 10 or
more years are generally subject to voluntary income tax withholding. The
recipient of periodic distributions may generally elect not to have
withholding apply or to have income taxes withheld at a different rate by
providing a completed election form. Otherwise, the amount withheld on such
distributions is determined at the rate applicable to wages as if the
recipient were married claiming three exemptions.
Nonperiodic distributions from an IRA are subject to income tax withholding
at a flat 10% rate. The recipient may elect not to have withholding apply.
Nonperiodic distributions from other qualified plans are generally subject
to mandatory income tax withholding at the flat rate of 20% unless such
distributions are:
1) the non-taxable portion of the distribution;
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2) required minimum distributions;
3) eligible rollover distributions.
Eligible rollover distributions are direct payments to an IRA or to another
qualified employer plan.
In general, distributions from plans described in Section 457 of the Code
are subject to regular wage withholding rules.
D. DIVERSIFICATION REQUIREMENTS
Section 817 of the Code provides that a variable annuity contract will not
be treated as an annuity contract 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 Department. If a
Contract is not treated as an annuity contract, the Contract Owner will be
subject to income tax on the annual increases in cash value.
The Treasury Department has issued diversification regulations which
generally require, among other things, that no more than 55% of the value of
the total assets of the segregated assets account underlying a variable
contract is represented by any one investment, no more than 70% is represented
by any two investment, no more than 80% is represented by any three
investments, and no more than 90% is represented by any four investments. In
determining whether the diversification standards are met, all securities of
the same issuer, all interests in the same real property project, and all
interests in the same commodity are each treated as a single investment. In
addition, in the case of government securities, each government agency or
instrumentality shall be treated as a separate issuer.
A separate account must be in compliance with the diversification standards
on the last day of each calendar quarter or within 30 days after the quarter
ends. If an insurance company inadvertently fails to meet the diversification
requirements, the company may comply within a reasonable period and avoid the
taxation of contract income on an ongoing basis. However, either the company
or the Contract Owner must agree to pay the tax due for the period during
which the diversification requirements were not met.
Hartford monitors the diversification of investments in the separate
accounts and tests for diversification as required by the Code. Hartford
intends to administer all contracts subject to the diversification
requirements in a manner that will maintain adequate diversification.
E. OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT
In order for a variable annuity contract to qualify for tax deferral, assets
in the segregated asset accounts supporting the variable contract must be
considered to be owned by the insurance company and not by the variable
contract owner. The Internal Revenue Service ("IRS") has issued several
rulings which discuss investor control. The IRS has ruled that incidents of
ownership by the contract owner, such as the ability to select and control
investments in a separate account, will cause the contract owner to be treated
as the owner of the assets for tax purposes.
Further, in the explanation to the temporary Section 817 diversification
regulations, the Treasury Department noted that the temporary regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor, rather
than the insurance company, to be treated as the owner of the assets in the
account." The explanation further indicates that "the temporary regulations
provide that in appropriate cases a segregated asset account may include
multiple sub-accounts, but do not specify the extent to which policyholders
may direct their investments to particular sub-accounts without being treated
as the owners of the underlying assets. Guidance on this and other issues will
be provided in regulations or revenue rulings under Section 817(d), relating
to the definition of variable contract." The final regulations issued under
Section 817 did not provide guidance regarding investor control, and as of the
date of this Prospectus, no other such guidance has been issued. Further,
Hartford does not know if or in what form such guidance will be issued. In
addition, although regulations are generally issued with prospective effect,
it is possible that regulations may be issued with retroactive effect. Due to
the lack of specific guidance regarding the issue of investor control, there
is necessarily some uncertainty regarding whether a Contract Owner could be
considered the owner of the assets for tax purposes. Hartford reserves the
right to modify the contracts, as necessary, to prevent Contract Owners from
being considered the owners of the assets in the separate accounts.
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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.
E. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal
income tax consequences to annuity purchasers that are U.S. citizens or
residents. Purchasers that are not U.S. citizens or residents will generally
be subject to U.S. federal income tax and withholding on annuity distributions
at a 30% rate, unless a lower treaty rate applies. In addition, purchasers may
be subject to state premium tax, other state and/or municipal taxes, and taxes
that may be imposed by the purchaser's country of citizenship or residence.
Prospective purchasers are advised to consult with a qualified tax adviser
regarding U.S., state, and foreign taxation with respect to an annuity
purchase.
MISCELLANEOUS
WHAT ARE MY VOTING RIGHTS?
Hartford 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. Hartford shall also send proxy materials and a form of instruction
by means of which the Contract Owner can instruct Hartford 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, Hartford shall arrange for the
handling and tallying of proxies received from Contract Owners. Hartford 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. Hartford 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 Hartford 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, Hartford 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 Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account.
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HSD is a wholly-owned subsidiary of Hartford. The principal business address
of HSD is the same as that of Hartford.
The securities will be sold by salespersons of HSD who represent Hartford as
insurance and Variable Annuity agents and who are registered representatives
of Broker-Dealers who have entered into distribution agreements with HSD.
HSD is registered with the Commission under the Securities Exchange Act of
1934 as a Broker-Dealer and is a member of the NASD.
WHO IS THE CUSTODIAN OF THE SEPARATE ACCOUNT'S ASSETS?
Hartford is the custodian of the Separate Account's assets.
ARE THERE ANY MATERIAL LEGAL PROCEEDINGS AFFECTING THE SEPARATE ACCOUNT?
There are no material legal proceedings pending to which the Separate
Account is a party. Counsel with respect to Federal laws and regulations
applicable to the issue and sale of the contracts and with respect to
Connecticut law is Lynda Godkin, General Counsel and Secretary, Hartford Life
Insurance Companies, P.O. Box 2999, Hartford, CT 06104-2999.
ARE YOU RELYING ON ANY EXPERTS AS TO ANY PORTION OF THIS PROSPECTUS?
The audited consolidated financial statements and financial statement
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
giving said reports. Reference is made to said report on the consolidated
financial statements of Hartford Life Insurance Company (the Depositor), which
includes an explanatory paragraph with respect to the change in method of
accounting for debt and equity securities as of January 1, 1994, as discussed
in Note 2 of Notes to Consolidated Financial Statements. The principal
business address of Arthur Andersen LLP is One Financial Plaza, Hartford,
Connecticut 06103.
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
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<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 Hartford 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, Hartford 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 Hartford 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 Hartford 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 Hartford 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),
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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.
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 Hartford 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 Hartford for providing administrative personnel, services,
equipment, facilities and office space for the proper administration of the
Contracts and sales activities, including field office expense.
33
<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 Hartford at its
Home Office at least 30 days prior to his Annuity Commencement Date. If no
such election is given to Hartford, 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 Hartford 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 Hartford'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 Hartford
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.
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<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: __________________________________________________________________________
<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 Variable Annuity Contract to
me at the following address:
_________________________________________
Name
_________________________________________
Address
_________________________________________
City/State Zip Code
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
------------------------------------------------------------------------ ----
<S> <C>
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY.......................... 2
SAFEKEEPING OF ASSETS................................................... 2
INDEPENDENT PUBLIC ACCOUNTANTS.......................................... 2
DISTRIBUTION OF CONTRACTS............................................... 2
CALCULATION OF YIELD AND RETURN.........................................
PERFORMANCE COMPARISONS.................................................
FINANCIAL STATEMENTS.................................................... 7
</TABLE>
<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, 1997
Date of Statement of Additional Information: May 1, 1997
33-19948
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY . . . . . . . . . . . . . .
SAFEKEEPING OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . .
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . .
DISTRIBUTION OF CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . .
CALCULATION OF YIELD AND RETURN. . . . . . . . . . . . . . . . . . . . . .
PERFORMANCE COMPARISONS. . . . . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY
Hartford Life Insurance Company ("Hartford") is a stock life insurance company
engaged in the business of writing health and life insurance, both individual
and group, in all states of the United States and the District of Columbia.
Hartford was originally incorporated under the laws of Massachusetts on June 5,
1902, and was subsequently redomiciled to Connecticut. Its offices are located
in Simsbury, Connecticut; however, its mailing address is P.O. Box 2999,
Hartford, CT 06104-2999. Hartford is a subsidiary of Hartford Fire Insurance
Company, one of the largest multiple lines insurance carriers in the United
States. Hartford is ultimately owned by ITT Hartford Group, Inc., a Delaware
corporation.
Hartford is rated A+ (superior) by A.M. Best and Company, Inc., on the basis of
its financial soundness and operating performance. Hartford is rated AA by
Standard & Poor's and AA+ by Duff and Phelps on the basis of its claims paying
ability. These ratings do not apply to the investment performance of the Sub-
Accounts of the Separate Account. The ratings apply to Hartford's ability to
meet its insurance obligations, including those described in this Prospectus.
SAFEKEEPING OF ASSETS
Title to the assets of the Separate Account is held by Hartford. These assets
are kept physically segregated and are held separate and apart from Hartford's
general corporate assets. Records are maintained of all purchases and
redemptions of Fund shares held in each of the Sub-Accounts.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited consolidated financial statements and financial statement 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 giving said reports.
Reference is made to said report on the consolidated financial statements of
Hartford Life Insurance Company (the Depositor), which includes an explanatory
paragraph with respect to the change in method of accounting for debt and equity
securities as of January 1, 1994, as discussed in Note 2 of Notes to
Consolidated Financial Statements. The principal business address of Arthur
Andersen LLP is One Financial Plaza, Hartford, Connecticut 06103.
DISTRIBUTION OF CONTRACTS
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account. HSD
is a wholly-owned subsidiary of Hartford. The principal business address of HSD
is the same as that of Hartford.
The securities will be sold by salespersons of HSD who represent Hartford as
insurance and Variable Annuity agents and who are registered representatives of
Broker-Dealers who have entered into distribution agreements with HSD.
HSD is registered with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 as a Broker-Dealer and is a member of the
National Association of Securities
<PAGE>
-2-
Dealers, Inc. ("NASD"). Compensation will be paid by Hartford to registered
representatives for the sale of Contracts up to a maximum of 5% on Contributions
and .50% annually on Participants' Individual Account Values. Sales
compensation may be reduced.
The offering of the Separate Account contracts is continuous.
CALCULATION OF YIELD AND RETURN
YIELDS OF HARTFORD BOND FUND SUB-ACCOUNTS. As summarized in the Prospectus
under the heading "Performance Related Information," yields of the Sub-Account
will be computed by annualizing a recent month's net investment income, divided
by a Fund share's net asset value on the last trading day of that month. Net
changes in the value of a hypothetical account will assume the change in the
underlying mutual funds "net asset value per share" for the same period in
addition to the daily expense charged assessed, at the sub-account level for the
respective period. The Bond Fund Sub-Account's yields will vary from time to
time depending upon market conditions and, the composition of the underlying
funds' portfolios. Yield should also be considered relative to changes in the
value of the Sub-Account's shares and to the relative risks associated with the
investment objectives and policies of the Bond Fund.
The yield reflects recurring charges on the Separate Account level, including
the Annual Contract Fee.
The Bond Fund Sub-Account's yield will vary from time to time depending upon
market conditions and, the composition of the underlying fund's portfolios.
Yield should also be considered relative to changes in the value of the
Sub-Account's shares and to the relative risks associated with the investment
objectives and policies of the Fund.
Bond Fund Sub-Account
Yield calculations of the Sub-Account used for illustration purposes reflect the
interest earned by the Sub-Account, less applicable asset charges assessed
against a Contract Owner's contract over the base period. The following is the
method used to determine the yield for the 30 day period ended December 31,
1996.
Example:
Current Yield Formula for the Sub-Account 2*[((A-B)/(C*D) + 1)6 - 1]
Where
A = Dividends and interest earned during the period.
B = Expenses accrued for the period (net of reimbursements).
<PAGE>
-3-
C = The average daily number of units outstanding during the period that
were entitled to receive dividends.
D = The maximum offering price per unit on the last day of the period.
Yield = 5.20%
At any time in the future, yields and total return may be higher or lower than
past yields and there can be no assurance that any historical results will
continue.
The method of calculating yields described above for this Sub-Account differs
from the method used by the Sub-Accounts prior to May 1, 1988. The denominator
of the fraction used to calculate yield was previously the average unit value
for the period calculated. That denominator will hereafter be the unit value of
the Sub-Account on the last trading day of the period calculated.
CALCULATION OF TOTAL RETURN. As summarized in the Prospectus under the heading
"Performance Related Information", total return is a measure of the change in
value of an investment in a Sub-Account over the period covered. The formula
for total return used herein includes three steps: (1) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of units owned at the end of the period by the unit
value per unit on the last trading day of the period; (2) assuming redemption at
the end of the period and deducting any applicable contingent deferred sales
charge and (3) dividing this account value for the hypothetical investor by the
initial $1,000 investment and annualizing the result for periods of less than
one year. Total return will be calculated for one year, five years and ten
years or some other relevant periods if a Sub-Account has not been in existence
for at least ten years.
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. Each Sub-Account may from time to time include its
total return in advertisements or in information furnished to present or
prospective shareholders. Each Sub-Account may from time to time include its
yield and total return in advertisements or information furnished to present or
prospective shareholders. Each Sub-Account may from time to time include in
advertisements its total return (and yield in the case of certain Sub-Accounts)
the ranking of those performance figures relative to such figures for groups of
other annuities analyzed by Lipper Analytical Services as having the same
investment objectives.
The total return and yield may also be used to compare the performance of the
Sub-Accounts against certain widely acknowledged outside standards or indices
for stock and bond market performance. The Standard & Poor's Composite Index of
500 Stocks (the "S&P 500") is a market value-weighted and unmanaged index
showing the changes in the aggregate market value
<PAGE>
-4-
of 500 stocks relative to the base period 1941-43. The S&P 500 is composed
almost entirely of common stocks of companies listed on the New York Stock
Exchange, although the common stocks of a few companies listed on the American
Stock Exchange or traded over-the-counter are included. The 500 companies
represented include 400 industrial, 60 transportation and 40 financial services
concerns. The S&P 500 represents about 80% of the market value of all issues
traded on the New York Stock Exchange.
The NASDAQ-OTC Price Index (the "NASDAQ Index") is a market value-weighted and
unmanaged index showing the changes in the aggregate market value of
approximately 3,500 stocks relative to the base measure of 100.00 on February 5,
1971. The NASDAQ Index is composed entirely of common stocks of companies
traded over-the-counter and often through the National Association of Securities
Dealers Automated Quotations ("NASDAQ") system. Only those over-the-counter
stocks having only one market maker or traded on exchanges are excluded.
The Shearson Lehman Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted
issues are not included in the SL Government Index.
The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized rating
agency.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
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, 1996 and 1995, and the related consolidated statements of income,
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1996. These consolidated financial statements and the
schedules referred to below are the responsibility of Hartford Life Insurance
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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Hartford Life Insurance Company and subsidiaries as of December 31, 1996 and
1995, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
As discussed in Note 2 of Notes to Consolidated Financial Statements, Hartford
Life Insurance Company adopted a new accounting standard promulgated by the
Financial Accounting Standards Board, changing its method of accounting, as of
January 1, 1994, for debt and equity securities.
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
February 10, 1997
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1996 1995 1994
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Premiums and other considerations............... $1,705 $1,487 $1,100
Net investment income........................... 1,397 1,328 1,292
Net realized capital (losses) gains............. (213) (11) 7
------ ------ ------
Total Revenues................................ 2,889 2,804 2,399
------ ------ ------
Benefits, Claims and Expenses
Benefits, claims and claim adjustment
expenses....................................... 1,535 1,422 1,405
Amortization of deferred policy acquisition
costs.......................................... 234 199 145
Dividends to policyholders...................... 635 675 419
Other insurance expenses........................ 427 317 227
------ ------ ------
Total Benefits, Claims and Expenses........... 2,831 2,613 2,196
------ ------ ------
Income before income tax expense................ 58 191 203
Income tax expense.............................. 20 62 65
------ ------ ------
Net income........................................ $ 38 $ 129 $ 138
------ ------ ------
------ ------ ------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of the above statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER
31,
-----------------
1996 1995
------- -------
<S> <C> <C>
(IN MILLIONS
EXCEPT SHARE
DATA)
Assets
Investments
Fixed maturities, available for sale, at fair
value (amortized cost $13,579 and $14,440)..... $13,624 $14,400
Equity securities, available for sale, at fair
value.......................................... 119 63
Policy loans, at outstanding balance............ 3,836 3,381
Mortgage loans, at outstanding balance.......... 2 265
Other investments, at cost...................... 54 156
------- -------
Total investments............................. 17,635 18,265
Cash............................................ 43 46
Premiums and amounts receivable................. 137 165
Accrued investment income....................... 407 394
Reinsurance recoverable......................... 6,066 6,221
Deferred policy acquisition costs............... 2,760 2,188
Deferred income tax............................. 474 420
Other assets.................................... 357 234
Separate account assets......................... 49,690 36,264
------- -------
Total assets.................................. $77,569 $64,197
------- -------
------- -------
Liabilities
Future policy benefits.......................... $ 2,281 $ 2,373
Other policyholder funds........................ 22,134 22,598
Other liabilities............................... 1,572 1,233
Separate account liabilities.................... 49,690 36,264
------- -------
Total liabilities............................. 75,677 62,468
------- -------
Stockholder's Equity
Common stock, $5,690 par value, 1,000 shares
authorized, issued and outstanding............. 6 6
Capital surplus................................. 1,045 1,007
Net unrealized capital gain (loss) on
investments, net of tax........................ 30 (57)
Retained earnings............................... 811 773
------- -------
Total stockholder's equity.................... 1,892 1,729
------- -------
Total liabilities and stockholder's equity...... $77,569 $64,197
------- -------
------- -------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of the above statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
NET UNREALIZED
CAPITAL GAIN
(LOSS) ON TOTAL
COMMON CAPITAL INVESTMENTS, RETAINED STOCKHOLDER'S
STOCK SURPLUS NET OF TAX EARNINGS EQUITY
------ -------------- -------------- -------- -------------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
Balance, December 31, 1993.............. $6 $ 676 $ (5) $516 $1,193
Net income............................ -- -- -- 138 138
Dividends declared on common stock.... -- -- -- (10) (10)
Capital contribution.................. -- 150 -- -- 150
Change in net unrealized capital loss
on investments, net of tax(1)........ -- -- (649) -- (649)
--
------ ------ -------- ------
Balance, December 31, 1994.............. 6 826 (654) 644 822
Net income............................ -- -- -- 129 129
Capital contribution.................. -- 181 -- -- 181
Change in net unrealized capital gain
on investments, net of tax........... -- -- 597 -- 597
--
------ ------ -------- ------
Balance, December 31, 1995.............. 6 1,007 (57) 773 1,729
Net income............................ -- -- -- 38 38
Capital contribution.................. -- 38 -- -- 38
Change in net unrealized capital gain
on investments, net of tax........... -- -- 87 -- 87
--
------ ------ -------- ------
Balance, December 31, 1996.............. $6 $1,045 $ 30 $811 $1,892
--
--
------ ------ -------- ------
------ ------ -------- ------
</TABLE>
- ------------------------
(1) The 1994 change in net unrealized capital loss on investments, net of tax,
includes a gain of $91 due to the adoption of SFAS No. 115 as discussed in
Note 2(b) of Notes to Consolidated Financial Statements.
The accompanying notes to consolidated financial statements are an integral part
of the above statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
(IN MILLIONS)
Operating Activities
Net income............................ $ 38 $ 129 $ 138
Adjustments to net income:
Net realized capital losses (gains) on
sale of investments.................. 213 11 (7)
Net amortization of premium on fixed
maturities........................... 14 21 41
Increase in deferred income taxes..... (102) (172) (128)
Increase in deferred policy
acquisition costs.................... (572) (379) (441)
Decrease (increase) in premiums and
amounts receivable................... 10 (81) 10
Increase in accrued investment
income............................... (13) (16) (106)
(Increase) decrease in other assets... (132) (177) 101
Decrease (increase) in reinsurance
recoverable.......................... 179 (35) 75
(Decrease) increase in liability for
future policy benefits............... (92) 483 224
Increase in other liabilities......... 477 281 191
-------- -------- --------
Cash provided by operating
activities......................... 20 65 98
-------- -------- --------
Investing Activities
Purchases of fixed maturity
investments.......................... (5,747) (6,228) (9,127)
Sales of fixed maturity investments... 3,459 4,845 5,713
Maturities and principal paydowns of
fixed maturity investments........... 2,693 1,741 1,931
Net purchase of other investments..... (107) (871) (1,338)
Net sales (purchases) of short-term
investments.......................... 84 (24) 135
-------- -------- --------
Cash provided by (used for)
investing activities............... 382 (537) (2,686)
-------- -------- --------
Financing Activities
Capital contribution.................. 38 -- 150
Dividends paid........................ -- -- (10)
Net (disbursements for) receipts from
investment and universal life-type
contracts (charged from) credited to
policyholder accounts................ (443) 498 2,467
-------- -------- --------
Cash (used for) provided by
financing activities............... (405) 498 2,607
-------- -------- --------
Net (decrease) increase in cash....... (3) 26 19
Cash--beginning of year............... 46 20 1
-------- -------- --------
Cash--end of year....................... $ 43 $ 46 $ 20
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of the above statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(IN MILLIONS)
- ---------------------------------------------------
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
These consolidated financial statements include Hartford Life Insurance
Company and its wholly-owned subsidiaries (the "Company"), ITT Hartford Life and
Annuity Insurance Company ("ILA") and ITT Hartford International Life
Reassurance Corporation ("HLRe"), formerly American Skandia Life Reinsurance
Corporation. The Company is a wholly-owned subsidiary of Hartford Life and
Accident Insurance Company ("HLA"), a wholly-owned subsidiary of Hartford Life,
Inc. ("Hartford Life"), a direct subsidiary of Hartford Accident and Indemnity
Company, an indirect subsidiary of ITT Hartford Group, Inc. ("The Hartford").
Hartford Life was formed on December 13, 1996 and capitalized on December 16,
1996 with the contribution of all the outstanding common stock of HLA. On
February 10, 1997, The Hartford, the ultimate parent of Hartford Life, announced
its intention to sell up to 20% of Hartford Life during the second quarter of
1997. Management believes that this transaction will not have a material impact
on the operations of the Company (See Note 11).
On December 19, 1995, ITT Industries, Inc. (formerly ITT Corporation)("ITT")
distributed all the outstanding shares of capital stock of The Hartford to ITT
stockholders of record on such date (the transactions relating to such
distribution are referred to herein as the "ITT Spin-off"). As a result of the
ITT Spin-off, The Hartford became an independent, publicly traded company.
The Company is a leading insurance and financial services company which
provides: (a) investment products such as individual variable annuities and
fixed market value adjusted annuities, deferred compensation plan services and
mutual funds for savings and retirement needs; (b) life insurance for income
protection and estate planning; and (c) employee benefits products such as
corporate owned life insurance.
- ---------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
These financial statements present the financial position, results of
operations and cash flows of the Company, and all material intercompany
transactions and balances between Hartford Life Insurance Company and its
subsidiaries have been eliminated. The consolidated financial statements are
prepared on a basis of generally accepted accounting principles which differ
materially from the statutory accounting prescribed by various insurance
regulatory authorities.
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(B) CHANGES IN ACCOUNTING PRINCIPLES
On November 14, 1996, the Emerging Issues Task Force ("EITF") reached a
consensus on Issue No. 96-12, "Recognition of Interest Income and Balance Sheet
Classification of Structured Notes". This Issue requires companies to record
income on certain structured securities on a retrospective interest method. The
Company adopted EITF No. 96-12 for structured securities acquired after November
14, 1996. Adoption of EITF No. 96-12 did not have a material effect on the
Company's financial condition or results of operations.
In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities".
This statement established criteria for determining whether transferred assets
should be accounted for as sales or secured borrowings. Subsequently, in
December 1996, the FASB issued SFAS No. 127, "Deferral of Effective Date of
Certain Provisions of FASB Statement No. 125", which defers the effective date
of certain provisions of SFAS No. 125 for one year. Adoption of SFAS No. 125 is
not expected to have a material effect on the Company's financial condition or
results of operations.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation", which is effective in 1996. As permitted by SFAS No. 123, the
Company continues to measure compensation costs of employee stock option plans
(relating to options on common stock of The Hartford) using the intrinsic value
method prescribed by Accounting Principles Board Opinion No. 25. As of February
10, 1997, the Company had not adopted an employee stock compensation plan.
Certain officers of the Company participate in The Hartford's stock option plan.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Compensation costs allocated by The Hartford to the Company, as well as pro
forma compensation costs as determined under SFAS No. 123, were immaterial to
the results of operations for 1996 and 1995.
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 securities 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
fair value difference from cost, net of tax, impacts stockholder's equity
directly or is reflected in the Consolidated Statements of Income. Investments
in equity securities had previously been and continue to be recorded at fair
value with the corresponding after-tax impact included in stockholder's equity.
Under SFAS No. 115, the Company's fixed maturity investments 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 "Net unrealized capital gain (loss) on investments, net of
tax." As with the underlying investment security, unrealized capital 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 million. The Company's cash flows were not impacted
by this change in accounting principle.
(C) REVENUE RECOGNITION
Revenues for universal life policies and investment products consist of
policy charges for the cost of insurance, policy administration and surrender
charges assessed to policy account balances and are recognized in the period in
which services are provided. Premiums for traditional life insurance policies
are recognized as revenues when they are due from policyholders.
(D) FUTURE POLICY BENEFITS AND OTHER POLICYHOLDER FUNDS
Liabilities for future policy benefits are computed by the net level premium
method using interest rate assumptions varying from 3% to 11% and withdrawal and
mortality assumptions appropriate at the time the policies were issued.
Liabilities for universal life-type and investment contracts are stated at
policyholder account values before surrender charges.
(E) DEFERRED POLICY ACQUISITION COSTS
Policy acquisition costs, including commissions and certain underwriting
expenses associated with acquiring business, are deferred and amortized over the
estimated lives of the contracts, generally 20 years. Generally, acquisition
costs are deferred and amortized using the retrospective deposit method. Under
the retrospective deposit method, acquisition costs are amortized in proportion
to the present value of expected gross profits from surrender charges,
investment, mortality and expense margins. Actual gross profits can vary from
management's estimates resulting in increases or decreases in the rate of
amortization. Management periodically updates these estimates, when appropriate,
and evaluates the recoverability of the deferred acquisition cost asset. When
appropriate, management revises its assumptions on the estimated gross profits
of these contracts and the cumulative amortization for the books of business are
reestimated and readjusted by a cumulative charge or credit to income.
(F) POLICYHOLDER REALIZED CAPITAL GAINS AND LOSSES
Realized capital gains and losses on security transactions associated with
the Company's immediate participation guaranteed contracts are excluded from
revenues and deferred, 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.
(G) FOREIGN CURRENCY TRANSLATION
Foreign currency translation gains and losses are reflected in stockholder's
equity. Balance sheet accounts are translated at the exchange rates in effect at
each year end and income statement accounts are translated at the average rates
of exchange prevailing during the year. The national currencies of international
operations are generally their functional currencies.
(H) INVESTMENTS
The Company's investments in fixed maturities include bonds, redeemable
preferred stock and commercial paper which are classified as
"available-for-sale" and accordingly are carried at fair value with the
after-tax difference from cost reflected as a component of stockholder's equity
designated as "Net unrealized capital gain (loss) on investments, net of tax".
Equity securities, which include common and non-redeemable preferred stocks, are
carried at fair value with the after-tax difference from cost reflected in
stockholder's equity. Policy and mortgage loans are each carried at their
outstanding balance which approximates fair value. Investments in partnerships
and trusts are carried at cost. Net realized capital gains (losses), after
deducting the policyholders' share, are reported as a component of revenue and
are determined on a specific identification basis.
The Company's accounting policy for impairment recognition requires
recognition of an other than temporary impairment charge on a security if it is
determined that the Company is unable to recover all amounts due under the
contractual obligations of the security. In addition, the Company has
established specific criteria to be used in the
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
impairment evaluation of an individual portfolio of assets. Specifically, if the
asset portfolio is supporting a runoff operation, is forced to be liquidated
prior to maturity to meet liability commitments, and has fair value below
amortized cost, which will not materially fluctuate as a result of future
interest rate changes, then an other than temporary impairment condition has
been determined to have occurred. Each individual security within that portfolio
is evaluated to determine whether or not it is impaired. Once an impairment
charge has been recorded, the Company then continues to review the individual
impaired securities for appropriate valuation on an ongoing basis.
During 1996, it was determined that certain individual securities within the
investment portfolio supporting the Company's closed block of guaranteed rate
contracts ("Closed Book GRC") were impaired. With the initiation of certain
hedge transactions, which eliminated the possibility that the fair value of the
Closed Book GRC investments would recover to their current amortized cost, an
other than temporary impairment loss of $88 after tax was determined to have
occurred and was recorded.
(I) DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses a variety of derivative financial instruments including
swaps, caps, floors, forwards and exchange traded financial futures and options
as part of an overall risk management strategy. These instruments are used as a
means of hedging exposure to price, foreign currency and/or interest rate risk
on anticipated investment purchases or existing assets and liabilities. The
Company does not hold or issue derivative financial instruments for trading
purposes. The Company's accounting for derivative financial instruments used to
manage risk is in accordance with the concepts established in SFAS No. 80,
"Accounting for Futures Contracts," SFAS No. 52, "Foreign Currency Translation",
American Institute of Certified Public Accountants Statement of Position 86-2,
"Accounting for Options", and various EITF pronouncements. Written options are,
in all cases, used in conjunction with other assets and derivatives as part of
the Company's asset/liability management strategies. Derivative instruments are
carried at values consistent with the asset or liability being hedged.
Derivatives used to hedge fixed maturities or equities are carried at fair value
with the after-tax difference from cost reflected in stockholder's equity.
Derivatives used to hedge other invested assets or liabilities are carried at
cost.
Derivatives must be designated at inception as a hedge and measured for
effectiveness both at inception and on an ongoing basis. The Company's minimum
correlation threshold for hedge designation is 80%. If correlation, which is
assessed monthly and measured based on a rolling three month average, falls
below 80%, hedge accounting will be terminated. Derivatives used to create a
synthetic asset must meet synthetic accounting criteria including designation at
inception and consistency of terms between the synthetic and the instrument
being replicated. Interest rate swaps are the primary type of derivatives used
to convert London interbank offered quotations for U.S. dollar deposits
("LIBOR") based variable rate instruments to fixed rate instruments. Synthetic
instrument accounting, consistent with industry practice, provides that the
synthetic asset is accounted for like the financial instrument it is intended to
replicate. Derivatives which fail to meet risk management criteria are marked to
market with the impact reflected in the Consolidated Statements of Income.
Gains or losses on financial futures contracts entered into in anticipation
of the future receipt of product cash flows are deferred and, at the time of the
ultimate purchase, reflected as an adjustment to the cost basis of the purchased
asset. Gains or losses on futures used in invested asset risk management are
deferred and adjusted into the cost basis of the hedged asset when the futures
contracts are closed, except for futures used in duration hedging which are
deferred and are adjusted into the cost basis on a quarterly basis. The
adjustments to the cost basis are amortized into investment income over the
remaining asset life.
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 Consolidated
Statements of Income as a component of net investment income.
The cost of purchased options and/or premiums received on covered written
options, entered into as part of an asset/liability management strategy, is/are
adjusted into the cost basis of the underlying asset or liability and amortized
over the remaining life of the hedge. Gains or losses on expiration or
termination of the hedge are adjusted into the basis of the underlying asset or
liability and amortized over the remaining asset life. The Company had no
written options as of December 31, 1996 and 1995.
Interest rate swaps involve the periodic exchange of payments without the
exchange of underlying principal or notional amounts. Net receipts or payments
are accrued and recognized over the life of the swap agreement as an adjustment
to income. Should the swap be terminated, the gain or loss is adjusted into the
basis of the asset or liability and amortized over the remaining life. Should
the hedged asset be sold or liability terminated without terminating the swap
position, any swap gains or losses are immediately recognized in earnings.
Interest rate swaps purchased in anticipation of an asset purchase (an
"anticipatory transaction") are recognized consistent with the underlying asset
components such that the settlement component is recognized in the Consolidated
Statements of Income while the change in market value is recognized as an
unrealized gain or loss.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Premiums paid on purchased floor or cap agreements and the premium received
on issued floor or cap agreements (used for risk management) are adjusted into
the basis of the applicable asset and amortized over the asset life. Gains or
losses on termination of such positions are adjusted into the basis of the asset
or liability and amortized over the remaining asset life. Net payments are
recognized as an adjustment to income or basis adjusted and amortized depending
on the specific hedge strategy.
Forward exchange contracts and foreign currency swaps are accounted for in
accordance with SFAS No. 52.
(J) RELATED PARTY TRANSACTIONS
Transactions of the Company with HLA and its affiliates relate principally
to tax settlements, reinsurance, 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 and employee
benefit plan expenses, are initially paid by Hartford Fire Insurance Company, an
indirect subsidiary of The Hartford ("Hartford Fire"). Direct expenses are
allocated to the Company using specific identification, and indirect expenses
are allocated using other applicable methods. Indirect expenses include those
for corporate areas which, depending on the type, are allocated based on either
a percentage of direct expenses or on utilization. Indirect expenses allocated
to the Company by Hartford Fire were $40, $45 and $41 in 1996, 1995 and 1994,
respectively. Management of the Company believes that the methods used are
reasonable. In addition, the Company was charged its share of costs allocated to
The Hartford by ITT prior to the ITT Spin-off, which were immaterial in 1995 and
1994. The Company had a receivable from The Hartford of $1 and a payable to The
Hartford of $2 at December 31, 1996 and 1995, respectively.
In 1996, the Company ceded approximately $33.3 billion of group life
insurance in force and $318 million of disability premium to HLA and assumed
$8.5 billion of individual life insurance in force from HLA.
On June 30, 1995, the ownership of ITT Lyndon Insurance Company was
transferred to the Company via a capital contribution of $181 million,
representing the net assets of the company. Also, in 1996, the Company received
a capital contribution of $37.5 million from its parent HLA.
(K) DIVIDENDS TO POLICYHOLDERS
Certain life insurance policies contain dividend payment provisions that
enable the policyholder to participate in the earnings of the life insurance
subsidiaries of the Company. The participating insurance in force accounted for
44%, 41%, and 43% in 1996, 1995, and 1994, respectively, of total life insurance
in force.
- ---------------------------------------------------
3. INVESTMENTS
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Interest income................ $ 1,452 $ 1,338 $ 1,247
(Losses) income from other
investments................... (42) 1 54
--------- --------- ---------
Gross investment income........ 1,410 1,339 1,301
Less: Investment expenses...... 13 11 9
--------- --------- ---------
Net investment income.......... $ 1,397 $ 1,328 $ 1,292
--------- --------- ---------
--------- --------- ---------
</TABLE>
(B) COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Fixed maturities............... $ (201) $ 23 $ (34)
Equity securities.............. 2 (6) (11)
Real estate and other.......... (4) (25) 47
Less: (Increase) decrease in
liability to policyholders for
realized capital gains
(losses)...................... (10) (3) 5
--------- --------- ---------
Net realized capital (losses)
gains......................... $ (213) $ (11) $ 7
--------- --------- ---------
--------- --------- ---------
</TABLE>
(C) NET UNREALIZED CAPITAL GAINS (LOSSES) ON EQUITY SECURITIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
----- ----- ---------
<S> <C> <C> <C>
Gross unrealized gains........... $ 13 $ 4 $ 2
Gross unrealized losses.......... (1) (2) (11)
--- --- ---------
Net unrealized capital gains
(losses)........................ 12 2 (9)
Deferred income tax liability
(asset)......................... 4 1 (3)
--- --- ---------
Net unrealized capital gains
(losses), after tax............. 8 1 (6)
Balance beginning of year........ 1 (6) (5)
--- --- ---------
Change in net unrealized capital
gains (losses) on investments... $ 7 $ 7 $ (1)
--- --- ---------
--- --- ---------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
(D) NET UNREALIZED CAPITAL GAINS (LOSSES) ON FIXED MATURITIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Gross unrealized gains..................................................................................... $ 386 $ 529
Gross unrealized losses.................................................................................... (341) (569)
Unrealized (gains) losses credited to policyholders........................................................ (11) (52)
--------- ---------
Net unrealized capital gains (losses)...................................................................... 34 (92)
Deferred income tax liability (asset)...................................................................... 12 (34)
--------- ---------
Net unrealized capital gains (losses), after tax........................................................... 22 (58)
Balance beginning of year.................................................................................. (58) (648)
--------- ---------
Change in net unrealized capital gains (losses) on investments............................................. $ 80 $ 590
--------- ---------
--------- ---------
<CAPTION>
1994
---------
<S> <C>
Gross unrealized gains..................................................................................... $ 150
Gross unrealized losses.................................................................................... (1,185)
Unrealized (gains) losses credited to policyholders........................................................ 37
---------
Net unrealized capital gains (losses)...................................................................... (998)
Deferred income tax liability (asset)...................................................................... (350)
---------
Net unrealized capital gains (losses), after tax........................................................... (648)
Balance beginning of year.................................................................................. 161
---------
Change in net unrealized capital gains (losses) on investments............................................. $ (809)
---------
---------
</TABLE>
(E) COMPONENTS OF FIXED MATURITIES INVESTMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
---------------------------------
GROSS UNREALIZED
AMORTIZED --------------------
COST GAINS LOSSES
----------- --------- ---------
<S> <C> <C> <C>
U.S. government and government agencies and authorities (guaranteed and sponsored)............ $ 166 $ 12 $ (3)
U.S. government and government agencies and authorities (guaranteed and
sponsored)--asset-backed..................................................................... 1,970 161 (128)
States, municipalities and political subdivisions............................................. 373 6 (11)
International governments..................................................................... 281 12 (4)
Public utilities.............................................................................. 877 12 (8)
All other corporate including international................................................... 4,656 120 (107)
All other corporate--asset-backed............................................................. 3,601 49 (59)
Short-term investments........................................................................ 1,655 14 (21)
----------- --------- ---------
Total fixed maturities.................................................................... $ 13,579 $ 386 $ (341)
----------- --------- ---------
----------- --------- ---------
<CAPTION>
AS OF DECEMBER 31, 1995
---------------------------------
GROSS UNREALIZED
AMORTIZED --------------------
COST GAINS LOSSES
----------- --------- ---------
<S> <C> <C> <C>
U.S. government and government agencies and authorities (guaranteed and sponsored)............ $ 502 $ 4 $ (9)
U.S. government and government agencies and authorities (guaranteed and
sponsored)--asset-backed..................................................................... 3,568 210 (387)
States, municipalities and political subdivisions............................................. 201 4 (3)
International governments..................................................................... 291 19 (4)
Public utilities.............................................................................. 949 29 (2)
All other corporate including international................................................... 3,065 76 (55)
All other corporate--asset-backed............................................................. 5,056 187 (109)
Short-term investments........................................................................ 808 -- --
----------- --------- ---------
Total fixed maturities.................................................................... $ 14,440 $ 529 $ (569)
----------- --------- ---------
----------- --------- ---------
<CAPTION>
FAIR
VALUE
---------
<S> <C>
U.S. government and government agencies and authorities (guaranteed and sponsored)............ $ 175
U.S. government and government agencies and authorities (guaranteed and
sponsored)--asset-backed..................................................................... 2,003
States, municipalities and political subdivisions............................................. 368
International governments..................................................................... 289
Public utilities.............................................................................. 881
All other corporate including international................................................... 4,669
All other corporate--asset-backed............................................................. 3,591
Short-term investments........................................................................ 1,648
---------
Total fixed maturities.................................................................... $ 13,624
---------
---------
FAIR
VALUE
---------
<S> <C>
U.S. government and government agencies and authorities (guaranteed and sponsored)............ $ 497
U.S. government and government agencies and authorities (guaranteed and
sponsored)--asset-backed..................................................................... 3,391
States, municipalities and political subdivisions............................................. 202
International governments..................................................................... 306
Public utilities.............................................................................. 976
All other corporate including international................................................... 3,086
All other corporate--asset-backed............................................................. 5,134
Short-term investments........................................................................ 808
---------
Total fixed maturities.................................................................... $ 14,400
---------
---------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
The amortized cost and fair value of fixed maturities at December 31, 1996,
by maturity, are shown below. Asset-backed securities, including mortgage-backed
securities and collateralized mortgage obligations, are distributed to maturity
year based on the Company's estimates of the rate of future prepayments of
principal over the remaining lives of such securities. These estimates are
developed using prepayment speeds reported in broker consensus data and can be
expected to vary from actual experience. Expected maturities differ from
contractual maturities due to call or prepayment provisions.
<TABLE>
<CAPTION>
MATURITY AMORTIZED COST FAIR VALUE
- -------------------------- -------------- -----------
<S> <C> <C>
One year or less.......... $ 2,632 $ 2,642
Over one year through five
years.................... 5,871 5,928
Over five years through
ten years................ 3,320 3,311
Over ten years............ 1,756 1,743
------- -----------
Total................. $ 13,579 $ 13,624
------- -----------
------- -----------
</TABLE>
Sales of fixed maturities excluding short-term fixed maturities for the
years ended December 31, 1996, 1995 and 1994 resulted in proceeds of $3,459,
$4,848 and $5,708, respectively, resulting in gross realized capital gains of
$87, $91 and $71, respectively, and gross realized capital losses (including
investment writedowns) of $298, $72 and $100, respectively, not including
policyholder gains and losses. Sales of equity securities for the years ended
December 31, 1996, 1995 and 1994 resulted in proceeds of $74, $64 and $159,
respectively, resulting in gross realized capital gains of $2, $28 and $3,
respectively, and gross realized capital losses of $0, $59 and $14,
respectively, not including policyholder gains and losses.
(F) CONCENTRATION OF CREDIT RISK
As of December 31, 1996, the Company had a reinsurance recoverable of $3.8
billion from Mutual Benefit Life Assurance Corporation ("Mutual Benefit"),
supported by assets in a security trust of $3.8 billion (including policy loans
of $3.3 billion). The risk of Mutual Benefit becoming insolvent is mitigated by
the reinsurance agreement's requirement that the assets be kept in a security
trust with the Company as sole beneficiary. Excluding investments in U.S.
government and agencies, the Company has no other significant concentrations of
credit risk in fixed maturities.
(G) DERIVATIVE INVESTMENTS
Derivatives play an important role in facilitating the management of
interest rate risk, creating opportunities to fund product obligations hedging
against indexation risks that affect the value of certain liabilities and
adjusting broad investment risk characteristics when dictated by significant
changes in market risks. As an end user of derivatives, the Company uses a
variety of derivative financial instruments, including swaps, caps, floors,
forwards and exchange traded financial futures and options in order to hedge
exposure to price, foreign currency and/or interest rate risk on anticipated
investment purchases or existing assets and liabilities. The notional amounts of
derivative contracts represent the basis upon which pay and receive amounts are
calculated and are not reflective of credit risk for derivative contracts.
Credit risk for derivative contracts is limited to the amounts calculated to be
due to the Company on such contracts. The Company believes it maintains prudent
policies regarding the financial stability and credit standing of its major
counterparties and typically requires credit enhancement provisions to further
limit its credit risk. Many of these derivative contracts are bilateral
agreements that are not assignable without the consent of the relevant
counterparty. Notional amounts pertaining to derivative financial instruments
totaled $9.9 billion and $8.8 billion at December 31, 1996 and 1995,
respectively ($7.4 billion and $7.1 billion related to life insurance
investments and $2.5 billion and $1.7 billion related to life insurance
liabilities at December 31, 1996 and 1995, respectively).
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
The following table summarizes the Company's derivatives, segregated by
major categories, as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
AMOUNTS HEDGED (NOTIONAL AMOUNTS) (EXCLUDING
LIABILITY HEDGES)
--------------------------------------------------
PURCHASED
TOTAL ISSUED CAPS OPTIONS,
CARRYING & CAPS &
1996 VALUE FLOORS(C) FLOORS(D) FUTURES(E)
- ------------------------------------------------------------------------ --------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Asset-backed securities (excluding inverse floaters and anticipatory)... $ 5,242 $ 500 $ 2,454 $ --
Inverse floaters(a)..................................................... 352 98 856 --
Anticipatory(g)......................................................... -- -- -- 132
Other bonds and notes................................................... 7,369 425 440 5
Short-term investments.................................................. 661 -- -- --
--------- ----------- ----------- -----
Total fixed maturities.............................................. 13,624 1,023 3,750 137
Equity securities, policy loans and other investments................... 4,011 -- -- --
--------- ----------- ----------- -----
Total investments................................................... $ 17,635 $ 1,023 $ 3,750 $ 137
--------- ----------- ----------- -----
--------- ----------- ----------- -----
Total derivatives-fair value(b)..................................... $ (10) $ 35 $ --
----------- ----------- -----
----------- ----------- -----
<CAPTION>
AMOUNTS HEDGED (NOTIONAL AMOUNTS) (EXCLUDING
LIABILITY HEDGES)
--------------------------------------------------
PURCHASED
TOTAL ISSUED CAPS OPTIONS,
CARRYING & CAPS &
1995 VALUE FLOORS(C) FLOORS(D) FUTURES(E)
- ------------------------------------------------------------------------ --------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Asset-backed securities (excluding inverse floaters and anticipatory)... $ 5,764 $ 118 $ 3,133 $ 322
Inverse floaters(a)..................................................... 711 560 354 6
Anticipatory(g)......................................................... -- -- -- 213
Other bonds and notes................................................... 7,118 33 66 322
Short-term investments.................................................. 807 -- -- --
--------- ----------- ----------- -----
Total fixed maturities.............................................. 14,400 711 3,553 863
Equity securities, policy loans and other investments................... 3,865 -- -- --
--------- ----------- ----------- -----
Total investments................................................... $ 18,265 $ 711 $ 3,553 $ 863
--------- ----------- ----------- -----
--------- ----------- ----------- -----
Total derivatives-fair value(b)..................................... $ (32) $ 46 $ --
----------- ----------- -----
----------- ----------- -----
<CAPTION>
INTEREST FOREIGN TOTAL
RATE CURRENCY NOTIONAL
1996 SWAPS(H) SWAPS(F) AMOUNT
- ------------------------------------------------------------------------ ----------- ----------- -----------
<S> <C> <C> <C>
Asset-backed securities (excluding inverse floaters and anticipatory)... $ 941 $ -- $ 3,895
Inverse floaters(a)..................................................... 346 -- 1,300
Anticipatory(g)......................................................... -- -- 132
Other bonds and notes................................................... 1,079 125 2,074
Short-term investments.................................................. -- -- --
----------- ----- -----------
Total fixed maturities.............................................. 2,366 125 7,401
Equity securities, policy loans and other investments................... 19 -- 19
----------- ----- -----------
Total investments................................................... $ 2,385 $ 125 $ 7,420
----------- ----- -----------
----------- ----- -----------
Total derivatives-fair value(b)..................................... $ (25) $ (9) $ (9)
----------- ----- -----------
----------- ----- -----------
INTEREST FOREIGN TOTAL
RATE CURRENCY NOTIONAL
1995 SWAPS(H) SWAPS(F) AMOUNT
- ------------------------------------------------------------------------ ----------- ----------- -----------
<S> <C> <C> <C>
Asset-backed securities (excluding inverse floaters and anticipatory)... $ 290 $ -- $ 3,863
Inverse floaters(a)..................................................... 681 -- 1,601
Anticipatory(g)......................................................... 25 -- 238
Other bonds and notes................................................... 757 187 1,365
Short-term investments.................................................. -- -- --
----------- ----- -----------
Total fixed maturities.............................................. 1,753 187 7,067
Equity securities, policy loans and other investments................... 18 -- 18
----------- ----- -----------
Total investments................................................... $ 1,771 $ 187 $ 7,085
----------- ----- -----------
----------- ----- -----------
Total derivatives-fair value(b)..................................... $ (108) $ (24) $ (118)
----------- ----- -----------
----------- ----- -----------
</TABLE>
- ------------------------
(a) Inverse floaters are variations of collateralized mortgage obligations
("CMOs") for which the coupon rates move inversely with an index rate such
as 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 purchased caps and floors.
(b) The fair value of derivative instruments including swaps, caps, floors,
futures, options and forward commitments, was determined using a pricing
model which is validated through quarterly comparison to dealer quoted
market prices, for 1996 and dealer quoted prices for 1995.
(c) The 1996 data includes issued caps of $433 with a weighted average strike
rate of 8.21% (ranging from 7.0% to 9.5%) and over 93% maturing in 2000
through 2005. In addition, issued floors totaled $590, had a weighted
average strike rate of 5.17% (ranging from 5.00% to 7.85%) with all of them
maturing by the end of 2005. The 1995 data includes issued caps of $475 with
a weighted average strike rate of 8.5% (ranging from 7.0% to 10.4%) and over
85% maturing in 2000 through 2004. In addition, issued floors totaled $236,
had a weighted average strike rate of 8.1% (ranging from 5.3% to 10.9%) and
mature through 2007, with 76% maturing by 2004.
(d) The 1996 data includes purchased floors of $2.4 billion and purchased caps
of $1.3 billion. The floors had a weighted average strike rate of 5.84%
(ranging from 3.70% to 7.85%) and over 87% mature in 1997 through 1999. The
options mature in 1997. The caps had a weighted average strike rate of 7.59%
(ranging from 4.40% to 10.125%) and over 76% mature in 1997 through 2001.
The 1995 data includes purchased floors of $1.8 billion and purchased caps
of $1.7 billion. The floors had a weighted average strike price of 5.8%
(ranging from 3.7% to 6.8%) and over 85% mature in 1997 through 1999. The
caps had a weighted average strike price of 7.5% (ranging from 4.5% and
10.1%) and over 82% mature in 1997 through 1999.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
(e) As of December 31, 1996 and 1995, over 39% and 95%, respectively, of the
notional futures contracts, expire within one year.
(f) As of December 31, 1996 and 1995, over 42% and 25%, respectively, of the
Company's foreign currency swaps, expire within one year; the balance mature
over the succeeding 4 to 5 years.
(g) 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, 1996, the Company had $1 million in
net deferred gains for futures, interest rate swaps and purchased options.
The Company expects to basis adjust $1 million of the deferred gains in
1997. At December 31, 1995, the Company had $5.3 million in net deferred
gains for futures, interest rate swaps and purchased options.
(h) The following table summarizes the maturities by notional value of interest
rate swaps outstanding at December 31, 1996 and 1995, and the related
weighted average interest pay rate or receive rate. The variable rates
represent spot rates (primarily 90 day LIBOR), as of December 31, 1996 and
1995. Such variable rates have been calculated assuming that the spot rates
remain unchanged throughout the life of the interest rate swaps.
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 2001
- ------------------------------------------------------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PAY FIXED/RECEIVE VARIABLE
Notional Value $-- $50 $125 $35 $125
Weighted Average Pay Rate -- 5.7 % 5.9 % 5.5 % 5.5%
Weighted Average Receive Rate -- 3.2 % -- 6.5 % 6.4%
PAY VARIABLE/RECEIVE FIXED
Notional Value $86 $25 $486 $74 $582
Weighted Average Pay Rate 7.5 % -- 6.4 % 6.7 % 7.0%
Weighted Average Receive Rate 5.6 % -- 5.6 % 5.7 % 6.2%
PAY VARIABLE/RECEIVE DIFFERENT VARIABLE
Notional Value $19 $15 $-- $200 $--
Weighted Average Pay Rate 5.9 % 5.7 % -- 6.4 % --
Weighted Average Receive Rate 3.7 % 5.5 % -- 5.0 % --
Total Interest Rate Swaps $105 $90 $611 $309 $707
Total Weighted Average Pay Rate 7.2 % 5.7 % 6.3 % 6.4 % 6.7%
Total Weighted Average Receive Rate 5.2 % 3.8 % 4.3 % 5.4 % 6.3%
<CAPTION>
1995 1996 1997 1998 1999 2000
- ------------------------------------------------------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PAY FIXED/RECEIVE VARIABLE
Notional Value $15 $50 $-- $453 $31
Weighted Average Pay Rate 5.0 % 7.2 % -- 8.1 % 7.1%
Weighted Average Receive Rate 5.8 % 5.9 % -- 5.8 % 5.7%
PAY VARIABLE/RECEIVE FIXED
Notional Value $100 $68 $25 $25 $35
Weighted Average Pay Rate 5.9 % 8.6 % 5.9 % -- 5.9%
Weighted Average Receive Rate 2.4 % 7.9 % 4.0 % -- 6.5%
PAY VARIABLE/RECEIVE DIFFERENT VARIABLE
Notional Value $50 $18 $36 $12 $200
Weighted Average Pay Rate 5.8 % -- 3.7 % 3.5 % 4.5%
Weighted Average Receive Rate 5.4 % -- 5.6 % 5.2 % 6.8%
Total Interest Rate Swaps $165 $136 $61 $490 $266
Total Weighted Average Pay Rate 5.8 % 7.8 % 4.6 % 7.6 % 5.0%
Total Weighted Average Receive Rate 3.6 % 7.2 % 4.9 % 5.4 % 6.6%
<CAPTION>
LATEST
1996 THEREAFTER TOTAL MATURITY
- ------------------------------------------------------------ ------------- ----------- -----------
<S> <C> <C> <C>
PAY FIXED/RECEIVE VARIABLE
Notional Value $170 $505 2003
Weighted Average Pay Rate 5.7 % 5.7 %
Weighted Average Receive Rate 6.9 % 4.7 %
PAY VARIABLE/RECEIVE FIXED
Notional Value $349 $1,602 2007
Weighted Average Pay Rate 6.9 % 6.8 %
Weighted Average Receive Rate 5.9 % 5.9 %
PAY VARIABLE/RECEIVE DIFFERENT VARIABLE
Notional Value $44 $278 2003
Weighted Average Pay Rate 12.9 % 7.4 %
Weighted Average Receive Rate 6.4 % 5.2 %
Total Interest Rate Swaps $563 $2,385 2007
Total Weighted Average Pay Rate 7.0 % 6.6 %
Total Weighted Average Receive Rate 6.3 % 5.5 %
LATEST
1995 THEREAFTER TOTAL MATURITY
- ------------------------------------------------------------ ------------- ----------- -----------
<S> <C> <C> <C>
PAY FIXED/RECEIVE VARIABLE
Notional Value $229 $778 2004
Weighted Average Pay Rate 7.8 % 7.8 %
Weighted Average Receive Rate 5.9 % 5.9 %
PAY VARIABLE/RECEIVE FIXED
Notional Value $190 $443 2007
Weighted Average Pay Rate 5.4 % 5.4 %
Weighted Average Receive Rate 6.9 % 6.9 %
PAY VARIABLE/RECEIVE DIFFERENT VARIABLE
Notional Value $234 $550 2004
Weighted Average Pay Rate 16.3 % 5.7 %
Weighted Average Receive Rate 5.9 % 6.4 %
Total Interest Rate Swaps $653 $1,771 2007
Total Weighted Average Pay Rate 7.3 % 6.9 %
Total Weighted Average Receive Rate 6.3 % 5.8 %
</TABLE>
In addition, interest rate sensitivity related to certain Company insurance
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 $2.4 billion and $1.7 billion at
December 31, 1996 and 1995, respectively. As of December 31, 1996, the weighted
average pay rate was 5.6% and the weighted average receive rate was 6.5%. These
agreements mature at various times through 2001.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
A reconciliation between notional amounts at December 31, 1995 and 1996 by
derivative type and strategy is as follows:
<TABLE>
<CAPTION>
BY DERIVATIVE TYPE
---------------------------------------------
12/31/95 MATURITIES/
NOTIONAL AMOUNT ADDITIONS TERMINATIONS
----------------- ----------- -------------
<S> <C> <C> <C>
Caps..................................................................... $ 2,184 $ 1,286 $ 1,715
Floors................................................................... 2,180 2,053 1,065
Options.................................................................. -- 10 --
Swaps/Forwards........................................................... 3,566 3,989 2,694
Futures.................................................................. 863 2,092 2,818
------ ----------- ------
Total................................................................ $ 8,793 $ 9,430 $ 8,292
------ ----------- ------
------ ----------- ------
<CAPTION>
BY STRATEGY
---------------------------------------------
12/31/95 MATURITIES/
NOTIONAL AMOUNT ADDITIONS TERMINATIONS
----------------- ----------- -------------
<S> <C> <C> <C>
Liability................................................................ $ 1,708 $ 1,940 $ 1,137
Anticipatory............................................................. 238 516 622
Asset.................................................................... 2,984 1,265 2,137
Portfolio................................................................ 3,863 5,709 4,396
------ ----------- ------
Total................................................................ $ 8,793 $ 9,430 $ 8,292
------ ----------- ------
------ ----------- ------
<CAPTION>
12/31/96
NOTIONAL AMOUNT
-----------------
<S> <C>
Caps..................................................................... $ 1,755
Floors................................................................... 3,168
Options.................................................................. 10
Swaps/Forwards........................................................... 4,861
Futures.................................................................. 137
------
Total................................................................ $ 9,931
------
------
12/31/96
NOTIONAL AMOUNT
-----------------
<S> <C>
Liability................................................................ $ 2,511
Anticipatory............................................................. 132
Asset.................................................................... 2,112
Portfolio................................................................ 5,176
------
Total................................................................ $ 9,931
------
------
</TABLE>
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF DECEMBER 31,
1996 1995
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
ASSETS
Fixed maturities............................................................. $ 13,624 $ 13,624 $ 14,400 $ 14,400
Equity securities............................................................ 119 119 63 63
Policy loans................................................................. 3,836 3,836 3,381 3,381
Mortgage loans............................................................... 2 2 265 265
Investments in partnerships and trust........................................ 48 48 94 97
Other........................................................................ 6 56 62 62
LIABILITIES
Other policy benefits........................................................ $ 11,707 $ 11,469 $ 12,727 $ 12,767
</TABLE>
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument: fair value for fixed maturities and
equity securities approximate those quotations published by applicable stock
exchanges or received from other reliable sources; policy and mortgage loan
carrying amounts approximate fair value; investments in partnerships and trusts
are based on external market valuations from partnership and trust managements;
fair value of derivative instruments, including swaps, caps, floors, futures,
and forward commitments, is determined by using a pricing model which is
validated through quarterly comparison to dealer quoted market prices; and other
policy benefits payable for investment type contracts are determined by
estimating future cash flows discounted at the year end market rate.
- ---------------------------------------------------
4. INCOME TAX
Hartford Life and The Hartford have entered into a tax sharing agreement
under which each member, including the Company, in the consolidated U.S. federal
income tax return will make payments between them such that, with respect to any
period, the amount of taxes to be paid by Hartford Life for the Company, subject
to certain adjustments, generally will be determined as though the Company were
to file separate federal, state and local income tax returns.
As long as The Hartford continues to beneficially own, directly or
indirectly, at least 80% of the combined voting power and 80% of the value of
the outstanding capital stock of Hartford Life, the Company will be included for
federal income tax purposes in the consolidated group of which The Hartford is
the common parent. It is the current intention of The Hartford and its
subsidiaries to continue to file a consolidated federal income tax return. The
Company will continue to remit to (receive from) The Hartford a current income
tax provision (benefit) computed in accordance with such tax sharing agreement.
The Company's effective tax rate was 35%, 32% and 32% in 1996, 1995 and 1994,
respectively.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Income tax expense was as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Current............................. $ 122 $ 211 $ 185
Deferred........................... (102) (149) (120)
--------- --------- ---------
Total............................ $ 20 $ 62 $ 65
--------- --------- ---------
--------- --------- ---------
</TABLE>
A reconciliation of the tax provision at the U.S. federal statutory rate to
the provision for income taxes was as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Tax provision at U.S. statutory
rate............................... $ 20 $ 67 $ 71
Tax-exempt income.................. -- (3) (3)
Foreign tax credit................. -- (4) (1)
Other.............................. -- 2 (2)
--------- --------- ---------
Total............................ $ 20 $ 62 $ 65
--------- --------- ---------
--------- --------- ---------
</TABLE>
Income taxes paid were $189, $162 and $244 in 1996, 1995 and 1994,
respectively. The current tax refund due from The Hartford to the Company was
$72 and $8 as of December 31, 1996 and 1995, respectively.
Deferred tax assets (liabilities) included the following:
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Tax return deferred acquisition costs......... $ 514 $ 410
Financial statement deferred acquisition costs
and reserves................................. (242) 138
Employee benefits............................. 8 8
Unrealized (gain) loss on investments......... (16) 32
Investments and other......................... 210 (168)
--------- ---------
Total..................................... $ 474 $ 420
--------- ---------
--------- ---------
</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 such circumstances, 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,
1996 was $37.
- ---------------------------------------------------
5. 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.
Life insurance net retained premiums were comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Gross premiums..................... $ 1,834 $ 1,545 $ 1,316
Insurance assumed.................. 173 591 299
Insurance ceded.................... (302) (649) (515)
--------- --------- ---------
Total.......................... $ 1,705 $ 1,487 $ 1,100
--------- --------- ---------
--------- --------- ---------
</TABLE>
Life reinsurance recoveries, which reduced death and other benefits, for the
years ended December 31, 1996, 1995 and 1994 approximated $140, $220 and $164,
respectively.
In December 1994, the Company ceded to a third party $1.0 billion in
individual fixed and variable annuities on a modified coinsurance basis. In
December 1995, the Company ceded approximately $1.2 billion in individual
variable annuities on a modified coinsurance basis to a third party. These
transactions did not have a material impact on consolidated net income.
In May 1994, the Company assumed the life insurance policies and the
individual annuities of Pacific Standard with reserves and account values of
approximately $434 million. The Company received cash and investment grade
assets to support the life insurance and individual annuity contract obligations
assumed.
- ---------------------------------------------------
6.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, as amended, 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 $5, $2 and $2 in 1996, 1995 and 1994,
respectively.
The Company also provides, through Hartford Fire, certain health care and
life insurance benefits for eligible retired employees. A substantial portion of
the Company's employees may become eligible for these benefits upon retirement.
The Company's contribution for health care benefits will depend on the retiree's
date of retirement and years of service. In addition, the plan has a defined
dollar cap which limits average Company contributions. The Company has prefunded
a portion of the health care and life insurance obligations through trust funds
where such prefunding can be accomplished on a tax effective basis.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Postretirement health care and life insurance benefits expense, allocated by The
Hartford, was immaterial for 1996, 1995 and 1994, respectively.
The assumed rate of future increases in the per capita cost of health care
(the health care trend rate) was 9.3% for 1996, decreasing ratably to 6.0% in
the year 2001. Increasing the health care trend rates by one percent per year
would have an immaterial impact on the accumulated postretirement benefit
obligation and the annual expense. To the extent that the actual experience
differs from the inherent assumptions, the effect will be amortized over the
average future service of the covered employees.
- ---------------------------------------------------
7. BUSINESS SEGMENT INFORMATION
The Company sells financial products such as fixed and variable annuities,
retirement plan services, and life insurance on both an individual and a group
basis. The Company divides its core businesses into three segments: Investment
Products, Individual Life Insurance and Employee Benefits. In addition, the
Company also maintains a corporate operation and also classifies certain of its
business as Runoff operations. The Investment Products segment offers individual
variable annuities and fixed market value adjusted annuities, deferred
compensation and retirement plan services, mutual funds, investment management
services and other financial products. The Individual Life Insurance segment
sells a variety of individual life insurance products, including variable life,
universal life, and interest-sensitive whole life policies. The Employee
Benefits segment sells corporate owned life insurance. Through its corporate
operation, the Company reports net investment income on assets representing
surplus not assigned to any of its business segments and certain other revenues
and expenses not specifically allocable to any of its business segments. The
Company's Runoff operations are comprised of Closed Book GRC. With the exception
of Closed Book GRC, net realized capital gains and losses are recognized in the
period of realization but are allocated to the segments utilizing durations of
the segment portfolios.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
REVENUES
Investment Products............... $ 1,013 $ 759 $ 594
Individual Life Insurance......... 440 383 375
Employee Benefits................. 1,366 1,273 919
Corporate Operations.............. 81 52 30
Runoff Operations................. (11) 337 481
--------- --------- ---------
Total Revenues.................. $ 2,889 $ 2,804 $ 2,399
--------- --------- ---------
--------- --------- ---------
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
INCOME BEFORE INCOME TAX EXPENSE
Investment Products............... $ 230 $ 172 $ 127
Individual Life Insurance......... 68 56 39
Employee Benefits................. 43 37 27
Corporate Operations.............. 65 16 8
Runoff Operations................. (348) (90) 2
--------- --------- ---------
Income Before Income Tax
Expense........................ $ 58 $ 191 $ 203
--------- --------- ---------
--------- --------- ---------
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
Investment Products............... $ 53,743 $ 40,624 $ 29,115
Individual Life Insurance......... 3,753 3,173 2,808
Employee Benefits................. 14,515 13,494 7,847
Corporate Operations.............. 1,891 1,729 822
Runoff Operations................. 3,667 5,177 7,257
--------- --------- ---------
Total Assets.................... $ 77,569 $ 64,197 $ 47,849
--------- --------- ---------
--------- --------- ---------
</TABLE>
- ---------------------------------------------------
8. STATUTORY NET INCOME AND SURPLUS
A significant percentage of the consolidated statutory surplus is
permanently reinvested or is subject to various state regulatory restrictions
which limit the payment of dividends without prior approval. The total amount of
statutory dividends which may be paid by the insurance subsidiaries of the
Company in 1997, without prior approval, is estimated to be $121 million.
Statutory net income and surplus as of and for the years ended December 31 were:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Statutory net income...... $ 144 $ 112 $ 58
Statutory surplus......... $ 1,207 $ 1,125 $ 941
</TABLE>
The insurance subsidiaries of the Company prepare their statutory financial
statements in accordance with accounting practices prescribed by the State of
Connecticut Insurance Department. Prescribed statutory accounting practices
include publications of the National Association of Insurance Commissioners
("NAIC"), as well as state laws, regulations, and general administrative rules.
- ---------------------------------------------------
9. SEPARATE ACCOUNTS
The Company maintained separate account assets and liabilities totaling
$49.7 billion and $36.3 billion at December 31, 1996 and 1995, respectively,
which are reported at fair value. Separate account assets are segregated from
other investments, and investment income and gains and losses accrue directly to
the policyholder. Separate accounts reflect two categories of risk assumption:
non-guaranteed separate accounts totaling $39.4 billion and $25.9 billion at
December 31, 1996 and 1995, respectively, wherein the policyholder assumes the
investment risk, and
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
guaranteed separate account assets totaling $10.3 billion at December 31, 1996
and 1995, wherein the Company contractually guarantees either a minimum return
or account value to the policyholder. Included in the non-guaranteed category
are policy loans totaling $2.0 billion and $1.7 billion at December 31, 1996 and
1995, respectively. Investment income (including investment gains and losses)
and interest credited to policyholders on separate account assets are not
reflected in the Consolidated Statements of Income. Separate account management
fees, net of minimum guarantees, were $538, $387 and $256 in 1996, 1995 and
1994, respectively.
The guaranteed separate accounts include modified guaranteed individual
annuity and modified guaranteed life insurance. The average credited interest
rate on these contracts was 6.53% at December 31, 1996. The assets that support
these liabilities were comprised of $10.2 billion in fixed maturities at
December 31, 1996. The portfolios are segregated from other investments and are
managed so as to minimize liquidity and interest rate risk. 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 totaled $0.1 billion in carrying value and $2.4
billion in notional amounts at December 31, 1996.
- ---------------------------------------------------
10. COMMITMENTS AND CONTINGENCIES
Under insurance guaranty fund laws existing in each state, the District of
Columbia and Puerto Rico, insurers licensed to do business can be assessed by
state insurance guaranty associations for certain obligations of insolvent
insurance companies to policyholders and claimants. Recent regulatory actions
against certain large life insurers encountering financial difficulty have
prompted various state insurance guaranty associations to begin assessing life
insurance companies for the deemed losses. Most of these laws do provide,
however, that an assessment may be excused or deferred if it would threaten an
insurer's solvency and further provide annual limits on such assessments. A
large part of the assessments paid by the Company's insurance subsidiaries
pursuant to these laws may be used as credits for a portion of the Company's
insurance subsidiaries' premium taxes. The Company paid guaranty fund
assessments of approximately $11, $10 and $8 in 1996, 1995 and 1994,
respectively, of which $5, $6 and $4 were estimated to be creditable against
premium taxes.
The Company is a defendant in various lawsuits arising in the ordinary
course of business. In the opinion of management, the resolution of these
matters is not expected to have a material adverse effect on the Company's
business, financial position, or results of operations.
The rent paid to Hartford Fire for the space occupied by the Company was $3
in 1996, 1995, and 1994. The Company expects to pay annual rent of $7 in 1997,
1998, and 1999, respectively, $12 in 2000 and 2001, and $96 thereafter, over the
remaining term of the sublease, which expires on December 31, 2009. Rental
expense is recognized on a level basis over the term of the sublease and
amounted to approximately $8 in 1996, 1995 and 1994.
- ---------------------------------------------------
11. SUBSEQUENT EVENTS
On February 10, 1997, Hartford Life filed a registration statement with the
Securities and Exchange Commission relating to the U.S. and international
offerings of shares of Class A common stock (the "Equity Offerings")
representing up to 20% ownership of Hartford Life. After completion of the
Equity Offerings, The Hartford would own all of the shares of Class B Common
Stock (after reclassification of Hartford Life's common stock into Class B
Common Stock prior to March 31, 1997). Hartford Life intends to use the
estimated net proceeds of the Equity Offerings to make a capital contribution to
its insurance subsidiaries, to reduce its third-party indebtedness and for other
general corporate purposes.
The Hartford has advised the Company that its current intent is to continue
to beneficially own at least 80% of Hartford Life, but it is under no
contractual obligation to do so, except for a limited period. Provided that The
Hartford continues to beneficially own at least 80% of the combined voting power
or the value of the outstanding capital stock of Hartford Life, Hartford Life
will be included for federal income tax purposes in the controlled group of
which The Hartford is the common parent. Each member of a controlled group is
jointly and severally liable for pension funding and pension termination
liabilities of each other member of the controlled group, as well as certain
benefit plan taxes. Accordingly, the Company could be liable for pension
funding, pension termination liabilities and certain other pension related
excise taxes as well as other taxes of another member of The Hartford controlled
group in the event any such liability is incurred, and not discharged, by such
other member.
In connection with the proposed Equity Offerings, Hartford Life plans to
enter into formal agreements, including a master intercompany agreement,
investment management agreements and a new tax sharing agreement, with The
Hartford covering such matters as corporate services, approval of certain
corporate activities, registration rights, owned and leased space, allocation of
expenses, taxes and liabilities, investment advisory services, use of trademarks
and certain other corporate matters. As part of the master intercompany
agreement, Hartford Life would agree to remit to The Hartford 30% of any shared
liabilities for which The Hartford is responsible in respect of the ITT
Spin-off, 30% of any taxes which may be assessed to The
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Hartford relating to the ITT Spin-off and will indemnify The Hartford for
certain other tax liabilities. As of December 31, 1996 there was no known
liability associated with the ITT Spin-off. Such agreements are meant to
maintain the relationship between Hartford Life and The Hartford in a manner
consistent in all material respects with past practice. As a result, management
believes these agreements should not have a material impact on the results of
operations of the Company.
In addition, under insurance company holding laws, agreements between
Hartford Life's insurance subsidiaries and The Hartford must be fair and
reasonable and may be subject to the approval of applicable insurance
commissioners. The agreements will be intended to maintain the relationship
between Hartford Life and The Hartford in a manner generally consistent with
past practices. However, none of these arrangements will result from
arm's-length negotiations and, therefore, the prices charged to Hartford Life
and its subsidiaries for services provided under these arrangements may be
higher or lower than prices that may be charged by third parties.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE I -- SUMMARY OF INVESTMENTS (OTHER THAN INVESTMENTS IN AFFILIATES)
AS OF DECEMBER 31, 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
ESTIMATED
FAIR
TYPE OF INVESTMENT COST VALUE
- ------------------------------------------------------------------------------------------------- --------- -----------
<S> <C> <C>
Fixed Maturities
Bonds and Notes
U.S. Government and government agencies and authorities
(guaranteed sponsored)........................................................................ $ 166 $ 175
U.S. Government and government agencies and authorities
(guaranteed sponsored)--asset-backed.......................................................... 1,970 2,003
States, municipalities and political subdivisions................................................ 373 368
International governments........................................................................ 281 289
Public utilities................................................................................. 877 881
All other corporate including international...................................................... 4,656 4,669
All other corporate--asset-backed................................................................ 3,601 3,591
Short-term investments........................................................................... 1,655 1,648
--------- -----------
Total Fixed Maturities........................................................................... $ 13,579 $ 13,624
Equity Securities
Common Stocks--industrial, miscellaneous, and all other.......................................... 110 119
Total Fixed Maturities and Equity Securities..................................................... $ 13,689 $ 13,743
Other Investments
Policy Loans..................................................................................... 3,836 3,836
Mortgage Loans................................................................................... 2 2
Investments in partnerships and trusts........................................................... 48 48
Futures, options, and miscellaneous.............................................................. 6 56
Total Other Investments.......................................................................... 3,892 3,942
--------- -----------
Total Investments................................................................................ $ 17,581 $ 17,685
--------- -----------
--------- -----------
<CAPTION>
AMOUNT AT
WHICH SHOWN
ON
TYPE OF INVESTMENT BALANCE SHEET
- ------------------------------------------------------------------------------------------------- -------------
<S> <C>
Fixed Maturities
Bonds and Notes
U.S. Government and government agencies and authorities
(guaranteed sponsored)........................................................................ $ 175
U.S. Government and government agencies and authorities
(guaranteed sponsored)--asset-backed.......................................................... 2,003
States, municipalities and political subdivisions................................................ 368
International governments........................................................................ 289
Public utilities................................................................................. 881
All other corporate including international...................................................... 4,669
All other corporate--asset-backed................................................................ 3,591
Short-term investments........................................................................... 1,648
-------------
Total Fixed Maturities........................................................................... $ 13,624
Equity Securities
Common Stocks--industrial, miscellaneous, and all other.......................................... 119
Total Fixed Maturities and Equity Securities..................................................... $ 13,743
Other Investments
Policy Loans..................................................................................... 3,836
Mortgage Loans................................................................................... 2
Investments in partnerships and trusts........................................................... 48
Futures, options, and miscellaneous.............................................................. 6
Total Other Investments.......................................................................... 3,892
-------------
Total Investments................................................................................ $ 17,635
-------------
-------------
</TABLE>
Note: The fair values for short-term investments approximate cost.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN MILLIONS)
<TABLE>
<CAPTION>
FUTURE POLICY
BENEFITS, UNPAID OTHER POLICY
CLAIMS AND CLAIMS AND
DEFERRED POLICY CLAIM ADJUSTMENT BENEFITS
SEGMENT ACQUISITION COSTS EXPENSES PAYABLE
- ---------------------------------------------------------------- ----------------- ------------------- ---------------
<S> <C> <C> <C>
1996
Investment Products............................................. $ 2,030 $ 1,554 $ 6,599
Individual Life Insurance....................................... 730 346 2,160
Employee Benefits............................................... -- 381 9,834
Corporate Operations............................................ -- -- --
Runoff Operations............................................... -- -- 3,541
------ ------ -------
Consolidated Operations......................................... $ 2,760 $ 2,281 $ 22,134
------ ------ -------
------ ------ -------
1995
Investment Products............................................. $ 1,561 $ 1,314 $ 6,204
Individual Life Insurance....................................... 615 706 1,932
Employee Benefits............................................... 12 325 9,285
Corporate Operations............................................ -- -- --
Runoff Operations............................................... -- 28 5,177
------ ------ -------
Consolidated Operations......................................... $ 2,188 $ 2,373 $ 22,598
------ ------ -------
------ ------ -------
1994
Investment Products............................................. $ 1,244 $ 895 $ 4,617
Individual Life Insurance....................................... 565 582 2,543
Employee Benefits............................................... -- 369 6,911
Corporate Operations............................................ -- -- --
Runoff Operations............................................... -- 44 7,257
------ ------ -------
Consolidated Operations......................................... $ 1,809 $ 1,890 $ 21,328
------ ------ -------
------ ------ -------
<CAPTION>
BENEFITS CLAIMS, AMORTIZATION OF
NET REALIZED AND CLAIM DEFERRED POLICY
CAPITAL (LOSSES) ADJUSTMENT ACQUISITION
SEGMENT GAINS EXPENSES COSTS
- ---------------------------------------------------------------- ----------------- ------------------- ---------------
<S> <C> <C> <C>
1996
Investment Products............................................. $ -- $ 451 $ 175
Individual Life Insurance....................................... -- 245 59
Employee Benefits............................................... -- 546 --
Corporate Operations............................................ 6 -- --
Runoff Operations............................................... (219) 293 --
------ ------ -------
Consolidated Operations......................................... $ (213) $ 1,535 $ 234
------ ------ -------
------ ------ -------
1995
Investment Products............................................. $ -- $ 349 $ 117
Individual Life Insurance....................................... -- 127 70
Employee Benefits............................................... -- 496 --
Corporate Operations............................................ (11) 33 --
Runoff Operations............................................... -- 417 12
------ ------ -------
Consolidated Operations......................................... $ (11) $ 1,422 $ 199
------ ------ -------
------ ------ -------
1994
Investment Products............................................. $ -- $ 383 $ 90
Individual Life Insurance....................................... -- 179 51
Employee Benefits............................................... -- 376 --
Corporate Operations............................................ 7 -- --
Runoff Operations............................................... -- 467 4
------ ------ -------
Consolidated Operations......................................... $ 7 $ 1,405 $ 145
------ ------ -------
------ ------ -------
<CAPTION>
PREMIUMS AND NET
OTHER INVESTMENT
SEGMENT CONSIDERATIONS INCOME
- ---------------------------------------------------------------- --------------- -----------
<S> <C> <C>
1996
Investment Products............................................. $ 536 $ 477
Individual Life Insurance....................................... 287 153
Employee Benefits............................................... 881 485
Corporate Operations............................................ -- 75
Runoff Operations............................................... 1 207
------ -----------
Consolidated Operations......................................... $ 1,705 $ 1,397
------ -----------
------ -----------
1995
Investment Products............................................. $ 319 $ 436
Individual Life Insurance....................................... 246 137
Employee Benefits............................................... 922 351
Corporate Operations............................................ -- 67
Runoff Operations............................................... -- 337
------ -----------
Consolidated Operations......................................... $ 1,487 $ 1,328
------ -----------
------ -----------
1994
Investment Products............................................. $ 263 $ 330
Individual Life Insurance....................................... 268 108
Employee Benefits............................................... 569 350
Corporate Operations............................................ -- 23
Runoff Operations............................................... -- 481
------ -----------
Consolidated Operations......................................... $ 1,100 $ 1,292
------ -----------
------ -----------
DIVIDENDS TO OTHER
SEGMENT POLICYHOLDERS EXPENSES
- ---------------------------------------------------------------- --------------- -----------
<S> <C> <C>
1996
Investment Products............................................. $ -- $ 156
Individual Life Insurance....................................... -- 68
Employee Benefits............................................... 635 143
Corporate Operations............................................ -- 16
Runoff Operations............................................... -- 44
------ -----------
Consolidated Operations......................................... $ 635 $ 427
------ -----------
------ -----------
1995
Investment Products............................................. $ -- $ 115
Individual Life Insurance....................................... -- 55
Employee Benefits............................................... 675 138
Corporate Operations............................................ -- 11
Runoff Operations............................................... -- (2)
------ -----------
Consolidated Operations......................................... $ 675 $ 317
------ -----------
------ -----------
1994
Investment Products............................................. $ -- $ (31)
Individual Life Insurance....................................... -- 107
Employee Benefits............................................... 419 100
Corporate Operations............................................ -- 43
Runoff Operations............................................... -- 8
------ -----------
Consolidated Operations......................................... $ 419 $ 227
------ -----------
------ -----------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE IV -- REINSURANCE
(IN MILLIONS)
<TABLE>
<CAPTION>
GROSS CEDED TO ASSUMED FROM NET
AMOUNT OTHER COMPANIES OTHER COMPANIES AMOUNT
---------- ---------------- ---------------- ----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1996
Life Insurance in Force............................... $ 177,094 $ 106,146 $ 31,957 $ 102,905
---------- -------- ------- ----------
Insurance Revenues
Life Insurance and Annuities........................ $ 1,801 $ 298 $ 169 $ 1,672
Accident and Health Insurance....................... 33 4 4 33
---------- -------- ------- ----------
Total................................................. $ 1,834 $ 302 $ 173 $ 1,705
---------- -------- ------- ----------
---------- -------- ------- ----------
For the Year Ended December 31, 1995
Life Insurance in Force............................... $ 182,716 $ 112,774 $ 26,996 $ 96,938
---------- -------- ------- ----------
Insurance Revenues
Life Insurance and Annuities........................ $ 1,232 $ 325 $ 574 $ 1,481
Accident and Health Insurance....................... 313 324 17 6
---------- -------- ------- ----------
Total................................................. $ 1,545 $ 649 $ 591 $ 1,487
---------- -------- ------- ----------
---------- -------- ------- ----------
For the Year Ended December 31, 1994
Life Insurance in Force............................... $ 136,929 $ 87,553 $ 35,016 $ 84,392
---------- -------- ------- ----------
Insurance Revenues
Life Insurance and Annuities........................ $ 1,008 $ 211 $ 294 $ 1,091
Accident and Health Insurance....................... 308 304 5 9
---------- -------- ------- ----------
Total................................................. $ 1,316 $ 515 $ 299 $ 1,100
---------- -------- ------- ----------
---------- -------- ------- ----------
<CAPTION>
PERCENTAGE OF
AMOUNT ASSUMED
TO NET
-----------------
<S> <C>
Year Ended December 31, 1996
Life Insurance in Force............................... 31.1%
Insurance Revenues
Life Insurance and Annuities........................ 10.1%
Accident and Health Insurance....................... 12.1%
Total................................................. 10.1%
For the Year Ended December 31, 1995
Life Insurance in Force............................... 27.8%
Insurance Revenues
Life Insurance and Annuities........................ 38.8%
Accident and Health Insurance....................... 283.3%
Total................................................. 39.7%
For the Year Ended December 31, 1994
Life Insurance in Force............................... 41.5%
Insurance Revenues
Life Insurance and Annuities........................ 26.9%
Accident and Health Insurance....................... 55.6%
Total................................................. 27.2%
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
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 (the Account) as of December 31,
1996, and the related statement of operations for the year then ended and
statements of changes in net assets for each of the two years in the period then
ended. These financial statements are the responsibility of the Account'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, 1996, 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.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 14, 1997
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Separate Account Two
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ------------
<S> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 209,901,213
Cost $213,818,503
Market Value......... $209,731,192 -- --
Hartford Stock Fund,
Inc.
Shares 325,077,171
Cost $942,043,980
Market Value......... -- $1,346,700,441 --
HVA Money Market Fund,
Inc.
Shares 282,828,485
Cost $282,828,485
Market Value......... -- -- $282,828,485
Hartford Advisers Fund,
Inc.
Shares 1,337,021,547
Cost $2,233,276,156
Market Value......... -- -- --
Hartford U.S.
Government Money
Market Fund, Inc.
Shares 1,592,137
Cost $1,592,137
Market Value......... -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 366,806,192
Cost $1,062,106,327
Market Value......... -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 189,233,708
Cost $203,956,416
Market Value......... -- -- --
Hartford Index Fund,
Inc.
Shares 111,179,449
Cost $184,665,755
Market Value......... -- -- --
Hartford International
Opportunities Fund,
Inc.
Shares 291,990,802
Cost $336,561,408
Market Value......... -- -- --
Hartford Dividend and
Growth Fund, Inc.
Shares 209,596,491
Cost $268,301,179
Market Value......... -- -- --
Due from Hartford Life
Insurance Company..... 389,971 -- 1,275,023
Receivable from fund
shares sold........... -- 1,214,364 --
------------ -------------- ------------
Total Assets........... 210,121,163 1,347,914,805 284,103,508
------------ -------------- ------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- 1,203,942 --
Payable for fund shares
purchased............. 391,131 -- 1,269,939
------------ -------------- ------------
Total Liabilities...... 391,131 1,203,942 1,269,939
------------ -------------- ------------
Net Assets (variable
annuity contract
liabilities).......... $209,730,032 $1,346,710,863 $282,833,569
------------ -------------- ------------
------------ -------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MORTGAGE INTERNATIONAL
U.S. GOVERNMENT CAPITAL SECURITIES OPPORTUNITIES
ADVISERS FUND MONEY MARKET FUND APPRECIATION FUND FUND INDEX 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 209,901,213
Cost $213,818,503
Market Value......... -- -- -- -- -- --
Hartford Stock Fund,
Inc.
Shares 325,077,171
Cost $942,043,980
Market Value......... -- -- -- -- -- --
HVA Money Market Fund,
Inc.
Shares 282,828,485
Cost $282,828,485
Market Value......... -- -- -- -- -- --
Hartford Advisers Fund,
Inc.
Shares 1,337,021,547
Cost $2,233,276,156
Market Value......... $2,900,708,354 -- -- -- -- --
Hartford U.S.
Government Money
Market Fund, Inc.
Shares 1,592,137
Cost $1,592,137
Market Value......... -- $1,592,137 -- -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 366,806,192
Cost $1,062,106,327
Market Value......... -- -- $1,435,800,482 -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 189,233,708
Cost $203,956,416
Market Value......... -- -- -- $199,787,272 -- --
Hartford Index Fund,
Inc.
Shares 111,179,449
Cost $184,665,755
Market Value......... -- -- -- -- $264,803,879 --
Hartford International
Opportunities Fund,
Inc.
Shares 291,990,802
Cost $336,561,408
Market Value......... -- -- -- -- -- $410,796,017
Hartford Dividend and
Growth Fund, Inc.
Shares 209,596,491
Cost $268,301,179
Market Value......... -- -- -- -- -- --
Due from Hartford Life
Insurance Company..... -- -- -- -- -- --
Receivable from fund
shares sold........... 7,791 3,686 505,615 6,461 195,459 294,275
--------------- ------------------- ----------------- ------------- ------------ -----------------
Total Assets........... 2,900,716,145 1,595,823 1,436,306,097 199,793,733 264,999,338 411,090,292
--------------- ------------------- ----------------- ------------- ------------ -----------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 9,064 3,303 505,676 2,327 196,318 294,299
Payable for fund shares
purchased............. -- -- -- -- -- --
--------------- ------------------- ----------------- ------------- ------------ -----------------
Total Liabilities...... 9,064 3,303 505,676 2,327 196,318 294,299
--------------- ------------------- ----------------- ------------- ------------ -----------------
Net Assets (variable
annuity contract
liabilities).......... $2,900,707,081 $1,592,520 $1,435,800,421 $199,791,406 $264,803,020 $410,795,993
--------------- ------------------- ----------------- ------------- ------------ -----------------
--------------- ------------------- ----------------- ------------- ------------ -----------------
<CAPTION>
DIVIDEND AND
GROWTH FUND
SUB-ACCOUNT
------------
<S> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares
Cost
Market Value......... --
Hartford Stock Fund,
Inc.
Shares
Cost
Market Value......... --
HVA Money Market Fund,
Inc.
Shares
Cost
Market Value......... --
Hartford Advisers Fund,
Inc.
Shares
Cost
Market Value......... --
Hartford U.S.
Government Money
Market Fund, Inc.
Shares
Cost
Market Value......... --
Hartford Capital
Appreciation Fund,
Inc.
Shares
Cost
Market Value......... --
Hartford Mortgage
Securities Fund, Inc.
Shares
Cost
Market Value......... --
Hartford Index Fund,
Inc.
Shares
Cost
Market Value......... --
Hartford International
Opportunities Fund,
Inc.
Shares
Cost
Market Value......... --
Hartford Dividend and
Growth Fund, Inc.
Shares
Cost
Market Value......... $324,333,800
Due from Hartford Life
Insurance Company..... 278,410
Receivable from fund
shares sold........... --
------------
Total Assets........... 324,612,210
------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... --
Payable for fund shares
purchased............. 278,289
------------
Total Liabilities...... 278,289
------------
Net Assets (variable
annuity contract
liabilities).......... $324,333,921
------------
------------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
CALVERT
RESPONSIBLY
INVESTED
BALANCED INTERNATIONAL SMALL SMITH BARNEY
PORTFOLIO ADVISERS FUND COMPANY FUND CASH PORTFOLIO CLASS A
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------- ------------- ----------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Calvert Responsibly
Invested Balanced
Portfolio
Shares 1,499,952
Cost $ 2,391,011
Market Value......... $2,660,914 -- -- --
Hartford International
Advisers Fund, Inc.
Shares 25,549,431
Cost $28,919,492
Market Value......... -- $29,805,457 -- --
Hartford Small Company
Fund, Inc.
Shares 12,669,842
Cost $13,471,629
Market Value......... -- -- $13,546,087 --
Smith Barney Cash
Portfolio Class A
Shares 580,242
Cost $ 580,242
Market Value......... -- -- -- $580,243
Smith Barney
Appreciation Fund,
Inc.
Shares 13,454
Cost $ 98,474
Market Value......... -- -- -- --
Smith Barney Government
Portfolio Class A
Shares 39,801
Cost $ 39,801
Market Value......... -- -- -- --
TCI Advantage Fund
Shares 27,440
Cost $ 166,872
Market Value......... -- -- -- --
TCI Growth Fund
Shares 111,230
Cost $ 1,287,905
Market Value......... -- -- -- --
Fidelity VIP Overseas
Portfolio
Shares 56,298
Cost $ 979,269
Market Value......... -- -- -- --
Fidelity VIP II Asset
Manager Portfolio
Shares 108,305
Cost $ 1,688,636
Market Value......... -- -- -- --
Fidelity VIP II
Contrafund Portfolio
Shares 402,873
Cost $ 5,743,454
Market Value......... -- -- -- --
Fidelity VIP Growth
Portfolio
Shares 225,301
Cost $ 6,630,047
Market Value......... -- -- -- --
Dividends receivable... -- -- -- 689
Due from Hartford Life
Insurance Company..... 20,342 233,723 306,594 --
Receivable from fund
shares sold........... -- -- -- 1,097
--------------- ------------- ------------- --------
Total Assets........... 2,681,256 30,039,180 13,852,681 582,029
--------------- ------------- ------------- --------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- -- -- 1,098
Payable for fund shares
purchased............. 20,027 230,006 306,589 --
--------------- ------------- ------------- --------
Total Liabilities...... 20,027 230,006 306,589 1,098
--------------- ------------- ------------- --------
Net Assets (variable
annuity contract
liabilities).......... $2,661,229 $29,809,174 $13,546,092 $580,931
--------------- ------------- ------------- --------
--------------- ------------- ------------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMITH BARNEY SMITH BARNEY FIDELITY VIP
APPRECIATION GOVERNMENT PORTFOLIO TCI TCI OVERSEAS
FUND CLASS A ADVANTAGE FUND GROWTH FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- -------------------- ------------------ --------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Calvert Responsibly
Invested Balanced
Portfolio
Shares 1,499,952
Cost $ 2,391,011
Market Value......... -- -- -- -- --
Hartford International
Advisers Fund, Inc.
Shares 25,549,431
Cost $28,919,492
Market Value......... -- -- -- -- --
Hartford Small Company
Fund, Inc.
Shares 12,669,842
Cost $13,471,629
Market Value......... -- -- -- -- --
Smith Barney Cash
Portfolio Class A
Shares 580,242
Cost $ 580,242
Market Value......... -- -- -- -- --
Smith Barney
Appreciation Fund,
Inc.
Shares 13,454
Cost $ 98,474
Market Value......... $ 172,850 -- -- -- --
Smith Barney Government
Portfolio Class A
Shares 39,801
Cost $ 39,801
Market Value......... -- $ 39,801 -- -- --
TCI Advantage Fund
Shares 27,440
Cost $ 166,872
Market Value......... -- -- $ 172,596 -- --
TCI Growth Fund
Shares 111,230
Cost $ 1,287,905
Market Value......... -- -- -- $ 1,138,990 --
Fidelity VIP Overseas
Portfolio
Shares 56,298
Cost $ 979,269
Market Value......... -- -- -- -- $1,060,645
Fidelity VIP II Asset
Manager Portfolio
Shares 108,305
Cost $ 1,688,636
Market Value......... -- -- -- -- --
Fidelity VIP II
Contrafund Portfolio
Shares 402,873
Cost $ 5,743,454
Market Value......... -- -- -- -- --
Fidelity VIP Growth
Portfolio
Shares 225,301
Cost $ 6,630,047
Market Value......... -- -- -- -- --
Dividends receivable... -- 56 -- -- --
Due from Hartford Life
Insurance Company..... -- -- 113 1,084 318
Receivable from fund
shares sold........... 123 17 -- -- --
--------------- ------- -------- --------------- ------------
Total Assets........... 172,973 39,874 172,709 1,140,074 1,060,963
--------------- ------- -------- --------------- ------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 112 32 -- -- --
Payable for fund shares
purchased............. -- -- 114 1,084 374
--------------- ------- -------- --------------- ------------
Total Liabilities...... 112 32 114 1,084 374
--------------- ------- -------- --------------- ------------
Net Assets (variable
annuity contract
liabilities).......... $ 172,861 $ 39,842 $ 172,595 $ 1,138,990 $1,060,589
--------------- ------- -------- --------------- ------------
--------------- ------- -------- --------------- ------------
<CAPTION>
FIDELITY VIP
FIDELITY VIP II II FIDELITY VIP
ASSET MANAGER CONTRAFUND GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- ------------- -------------
<S> <C> <C> <C>
ASSETS:
Investments:
Calvert Responsibly
Invested Balanced
Portfolio
Shares
Cost
Market Value......... -- -- --
Hartford International
Advisers Fund, Inc.
Shares
Cost
Market Value......... -- -- --
Hartford Small Company
Fund, Inc.
Shares
Cost
Market Value......... -- -- --
Smith Barney Cash
Portfolio Class A
Shares
Cost
Market Value......... -- -- --
Smith Barney
Appreciation Fund,
Inc.
Shares
Cost
Market Value......... -- -- --
Smith Barney Government
Portfolio Class A
Shares
Cost
Market Value......... -- -- --
TCI Advantage Fund
Shares
Cost
Market Value......... -- -- --
TCI Growth Fund
Shares
Cost
Market Value......... -- -- --
Fidelity VIP Overseas
Portfolio
Shares
Cost
Market Value......... -- -- --
Fidelity VIP II Asset
Manager Portfolio
Shares
Cost
Market Value......... $ 1,833,607 -- --
Fidelity VIP II
Contrafund Portfolio
Shares
Cost
Market Value......... -- $ 6,671,576 --
Fidelity VIP Growth
Portfolio
Shares
Cost
Market Value......... -- -- $ 7,015,865
Dividends receivable... -- -- --
Due from Hartford Life
Insurance Company..... 1,331 7,363 5,867
Receivable from fund
shares sold........... -- -- --
----------------- ------------- -------------
Total Assets........... 1,834,938 6,678,939 7,021,732
----------------- ------------- -------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- -- --
Payable for fund shares
purchased............. 923 7,344 5,867
----------------- ------------- -------------
Total Liabilities...... 923 7,344 5,867
----------------- ------------- -------------
Net Assets (variable
annuity contract
liabilities).......... $ 1,834,015 $ 6,671,595 $ 7,015,865
----------------- ------------- -------------
----------------- ------------- -------------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Separate Account Two
STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ --------- --------------
DEFERRED ANNUITY CONTRACTS IN THE ACCUMULATION
PERIOD:
<S> <C> <C> <C>
INDIVIDUAL SUB-ACCOUNTS:
Bond Fund Qualified 1.00%....................... 286,137 $3.705223 $ 1,060,201
Bond Fund Non-Qualified 1.00%................... 2,004,675 3.648889 7,314,837
Bond Fund 1.25%................................. 96,857,176 1.922173 186,176,248
Bond Fund .25%.................................. 58,462 1.279841 74,822
Stock Fund Qualified 1.00%...................... 829,845 6.828860 5,666,897
Stock Fund Non-Qualified 1.00%.................. 3,406,617 6.529899 22,244,866
Stock Fund 1.25%................................ 333,175,709 3.546656 1,181,659,627
Stock Fund .25%................................. 1,094,565 1.863616 2,039,847
Money Market Fund Qualified 1.00%............... 1,361,999 2.465145 3,357,527
Money Market Fund Non-Qualified 1.00%........... 13,210,943 2.466312 32,582,307
Money Market Fund 1.25%......................... 151,978,017 1.586516 241,115,556
Money Market Fund .25%.......................... 107,272 1.177980 126,364
Advisers Fund Qualified 1.00%................... 3,530,743 4.341094 15,327,287
Advisers Fund Non-Qualified 1.00%............... 12,468,636 4.341094 54,127,522
Advisers Fund 1.25%............................. 953,997,531 2.905301 2,771,649,980
Advisers Fund .25%.............................. 1,035,316 1.620437 1,677,664
U.S. Government Money Market Fund Qualified
1.00%.......................................... 13,096 1.964748 25,730
U.S. Government Money Market Fund 1.25%......... 46,108 1.520714 70,117
Capital Appreciation Fund Qualified 1.00%....... 887,736 6.732095 5,976,324
Capital Appreciation Fund Non-Qualified 1.00%... 2,634,097 6.728893 17,724,557
Capital Appreciation Fund 1.25%................. 330,579,796 4.010163 1,325,678,867
Capital Appreciation Growth Fund .25%........... 2,393,968 1.929665 4,619,555
Mortgage Securities Fund Qualified 1.00%........ 754,527 2.494635 1,882,270
Mortgage Securities Fund Non-Qualified 1.00%.... 8,165,242 2.494635 20,369,299
Mortgage Securities Fund 1.25%.................. 89,097,727 1.948580 173,614,049
Mortgage Securities Fund .25%................... 16,088 1.259955 20,270
Index Fund 1.00%................................ 38,885 1.121353 43,604
Index Fund Non-Qualified 1.00%.................. 105,698 1.121353 118,525
Index Fund 1.25%................................ 87,611,122 2.845170 249,268,537
Index Fund .25%................................. 208,930 1.823336 380,949
International Opportunities Fund Qualified
1.00%.......................................... 374,127 1.506694 563,694
International Opportunities Fund Non-Qualified
1.00%.......................................... 1,951,162 1.506641 2,939,701
International Opportunities Fund 1.25%.......... 266,961,904 1.482397 395,743,525
International Opportunities Fund .25%........... 796,396 1.658799 1,321,061
Dividend and Growth Fund Qualified 1.00%........ 291,489 1.661695 484,366
Dividend and Growth Fund Non-Qualified 1.00%.... 1,241,381 1.661695 2,062,797
Dividend and Growth Fund 1.25%.................. 190,957,704 1.650056 315,090,906
Dividend and Growth Fund .25%................... 278,866 1.697062 473,253
International Advisers Fund 1.00%............... 18,539 1.271482 23,572
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ --------- --------------
INDIVIDUAL SUB-ACCOUNTS -- (CONTINUED)
<S> <C> <C> <C>
International Advisers Fund Non-Qualified
1.00%.......................................... 347,573 $1.271482 $ 441,933
International Advisers Fund 1.25%............... 23,174,203 1.265665 29,330,778
International Advisers Fund .25%................ 10,000 1.289112 12,891
Hartford Small Company Fund 1.00%............... 10,000 1.067381 10,674
Hartford Small Company Fund Non-Qualified
1.00%.......................................... 109,746 1.067381 117,140
Hartford Small Company Fund 1.25%............... 12,562,718 1.066345 13,396,192
Hartford Small Company Fund .25%................ 20,632 1.070487 22,086
Smith Barney Cash Portfolio Class A Qualified
1.00%.......................................... 78,105 2.668734 208,440
Smith Barney Cash Portfolio Class A
Non-Qualified 1.00%............................ 134,883 2.761578 372,491
Smith Barney Appreciation Fund, Inc. Qualified
1.00%.......................................... 23,313 7.414916 172,861
Smith Barney Government Portfolio Class A
Qualified 1.00%................................ 16,556 2.406571 39,842
--------------
Sub-total Individual Sub-Accounts............... 7,088,822,408
--------------
GROUP SUB-ACCOUNTS:
Bond Fund Qualified 1.00% QP.................... 1,156,525 4.339730 5,019,007
Bond Fund 1.25% DCII............................ 1,655,052 4.186875 6,929,497
Bond Fund .15% DCII............................. 305,789 3.988350 1,219,594
Stock Fund Qualified 1.00% QP................... 3,371,997 11.419696 38,507,182
Stock Fund Qualified .825% QP................... 1,236,665 9.187655 11,362,056
Stock Fund Non-Qualified 1.00% NQ............... 84,854 8.960086 760,298
Stock Fund Non-Qualified .825% NQ............... 789,689 9.203794 7,268,133
Stock Fund 1.25% DCII........................... 4,885,027 11.016763 53,817,180
Stock Fund .15% DCII............................ 873,948 8.647926 7,557,838
Money Market Fund Qualified .375% QP............ 2,493 3.094168 7,714
Money Market Fund 1.25% DCII.................... 1,332,772 2.724852 3,631,605
Money Market Fund .15% DCII..................... 321,329 2.679247 860,920
Advisers Fund 1.25% DCII........................ 10,504,581 4.201072 44,130,500
Advisers Fund .15% DCII......................... 603,382 4.875465 2,941,770
U.S. Government Money Market Fund 1.25% DCII.... 586,557 1.898594 1,113,633
U.S. Government Money Market Fund .15% DCII..... 54,540 2.211389 120,609
Capital Appreciation Fund 1.25% DCII............ 10,979,149 6.532522 71,721,533
Capital Appreciation Fund .15% DCII............. 783,105 7.500897 5,873,989
Mortgage Securities Fund 1.25% DCII............. 1,140,765 2.421049 2,761,848
Mortgage Securities Fund .15% DCII.............. 143,045 2.761199 394,976
Index Fund 1.25% DCII........................... 4,377,886 2.848016 12,468,289
Index Fund .15% DCII............................ 354,223 3.118020 1,104,474
International Opportunities Fund 1.25% DCII..... 5,995,783 1.482607 8,889,390
International Opportunities Fund .15% DCII...... 437,734 1.592168 696,947
Dividend and Growth Fund........................ 3,874,337 1.484086 5,749,849
Calvert Responsibly Invested Balanced Portfolio
1.25% DCII..................................... 1,192,706 2.020652 2,410,043
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ --------- --------------
GROUP SUB-ACCOUNTS -- (CONTINUED)
<S> <C> <C> <C>
TCI Advantage Portfolio......................... 144,148 $1.134354 $ 163,515
TCI Growth Fund Portfolio....................... 1,107,888 1.021217 1,131,394
Fidelity VIP Overseas Portfolio................. 920,778 1.151840 1,060,589
Fidelity VIP II Asset Manager Portfolio......... 1,491,046 1.230019 1,834,015
Fidelity VIP II Contrafund Portfolio............ 5,069,393 1.316054 6,671,595
Fidelity VIP II Growth Portfolio................ 5,773,053 1.215278 7,015,865
--------------
Sub-total Group Sub-Accounts.................... 315,195,847
--------------
TOTAL ACCUMULATION PERIOD......................... 7,404,018,255
--------------
ANNUITY CONTRACTS IN THE ANNUITY PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Bond Fund Non-Qualified 1.00%................... 27 3.648889 99
Bond Fund 1.25%................................. 183,085 1.922173 351,921
Stock Fund Non-Qualified 1.00%.................. 9,504 6.529899 62,059
Stock Fund 1.25%................................ 305,133 3.546656 1,082,200
Money Market Fund Qualified 1.00%............... 12,037 2.465145 29,672
Money Market Fund Non-Qualified 1.00%........... 90,874 2.466312 224,124
Money Market Fund 1.25%......................... 293,556 1.586516 465,731
Advisers Fund Qualified 1.00%................... 4,038 4.341094 17,529
Advisers Fund Non-Qualified 1.00%............... 61,575 4.341094 267,305
Advisers Fund 1.25%............................. 863,489 2.905301 2,508,695
U.S. Government Money Market Fund Qualified
1.00%.......................................... 10,951 1.964748 21,515
Capital Appreciation Fund Non-Qualified 1.00%... 3,442 6.728893 23,158
Capital Appreciation Fund 1.25%................. 150,348 4.010163 602,921
Mortgage Securities Fund Non-Qualified 1.00%.... 80,072 2.494635 199,751
Mortgage Securities Fund 1.25%.................. 81,728 1.948580 159,253
Index Fund 1.25%................................ 53,288 2.845170 151,614
International Opportunities Fund 1.25%.......... 184,639 1.482397 273,708
Dividend and Growth Fund 1.25%.................. 120,079 1.650056 198,136
--------------
Sub-total Individual Sub-Accounts............... 6,639,391
--------------
GROUP SUB-ACCOUNTS:
Bond Fund Qualified 1.00% QP.................... 68,667 4.339730 297,996
Bond Fund 1.25% DCII............................ 290,717 4.186875 1,217,195
Bond Fund 1.00% DCII............................ 11,681 4.322597 50,493
Bond Fund .15% DCII............................. 4,544 3.988350 18,122
Stock Fund Qualified 1.00% QP................... 228,666 11.419696 2,611,302
Stock Fund Qualified .825% QP................... 50,529 9.187655 464,243
Stock Fund Non-Qualified 1.00% NQ............... 569 8.960086 5,099
Stock Fund Non-Qualified .825% NQ............... 50,740 9.203794 467,004
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ --------- --------------
GROUP SUB-ACCOUNTS -- (CONTINUED)
<S> <C> <C> <C>
Stock Fund 1.25% DCII........................... 997,034 $11.016763 $ 10,984,089
Stock Fund 1.00% DCII........................... 3,994 11.383947 45,472
Stock Fund .15% DCII............................ 12,196 8.647926 105,471
Money Market Fund 1.25% DCII.................... 158,559 2.724852 432,049
Advisers Fund 1.25% DCII........................ 1,889,915 4.201072 7,939,668
Advisers Fund .15% DCII......................... 24,441 4.875465 119,161
U.S. Government Money Market Fund 1.25% DCII.... 126,892 1.898594 240,916
Capital Appreciation Fund 1.25% DCII............ 537,157 6.532522 3,508,989
Capital Appreciation Fund .15% DCII............. 9,403 7.500897 70,528
Mortgage Securities Fund 1.25% DCII............. 160,959 2.421049 389,689
Index Fund 1.25% DCII........................... 440,396 2.848016 1,254,255
Index Fund .15% DCII............................ 4,097 3.118020 12,773
International Opportunities Fund 1.25% DCII..... 227,628 1.482607 337,483
International Opportunities Fund .15% DCII...... 19,146 1.592168 30,484
Dividend and Growth Fund........................ 185,039 1.484086 274,614
Calvert Responsibly Invested Balanced Portfolio
1.25% DCII..................................... 124,309 2.020652 251,186
TCI Advantage Fund.............................. 8,005 1.134354 9,080
TCI Growth Fund................................. 7,438 1.021217 7,596
--------------
Sub-total Group Sub-Accounts.................... 31,144,957
--------------
TOTAL ANNUITY PERIOD.............................. 37,784,348
--------------
GRAND TOTAL....................................... $7,441,802,603
--------------
--------------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Separate Account Two
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 12,893,843 $ 18,086,005 $12,430,899
EXPENSES:
Mortality and expense
undertakings.......... (2,481,229) (13,978,363) (2,990,459)
------------ ------------ -----------
Net investment income
(loss).............. 10,412,614 4,107,642 9,440,440
------------ ------------ -----------
CAPITAL GAINS INCOME..... -- 41,100,004 --
------------ ------------ -----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (262,277) 3,161,056 --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (5,517,884) 189,613,138 --
------------ ------------ -----------
Net realized and
unrealized gain
(loss) on
investments......... (5,780,161) 192,774,194 --
------------ ------------ -----------
Net increase
(decrease) in net
assets resulting
from operations..... $ 4,632,453 $237,981,840 $ 9,440,440
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT CAPITAL MORTGAGE
ADVISERS FUND MONEY MARKET FUND APPRECIATION FUND SECURITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- -------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 75,797,664 $ 73,159 $ 8,578,529 $13,309,238
EXPENSES:
Mortality and expense
undertakings.......... (32,375,755) (17,750) (15,329,687) (2,542,139)
------------- -------- ----------------- ---------------
Net investment income
(loss).............. 43,421,909 55,409 (6,751,158) 10,767,099
------------- -------- ----------------- ---------------
CAPITAL GAINS INCOME..... 53,115,059 -- 70,324,118 --
------------- -------- ----------------- ---------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 1,874,522 -- 2,065,427 (435,741)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 276,364,776 -- 154,074,827 (2,844,443)
------------- -------- ----------------- ---------------
Net realized and
unrealized gain
(loss) on
investments......... 278,239,298 -- 156,140,254 (3,280,184)
------------- -------- ----------------- ---------------
Net increase
(decrease) in net
assets resulting
from operations..... $ 374,776,266 $ 55,409 $219,713,214 $ 7,486,915
------------- -------- ----------------- ---------------
------------- -------- ----------------- ---------------
<CAPTION>
INTERNATIONAL DIVIDEND AND
INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 4,491,244 $ 7,252,292 $ 5,391,238
EXPENSES:
Mortality and expense
undertakings.......... (2,695,725) (4,681,021) (2,723,447)
------------ ------------------ ------------
Net investment income
(loss).............. 1,795,519 2,571,271 2,667,791
------------ ------------------ ------------
CAPITAL GAINS INCOME..... 3,292,866 9,589,596 2,810,352
------------ ------------------ ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 140,503 91,466 (3,931)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 36,167,970 28,439,913 38,471,770
------------ ------------------ ------------
Net realized and
unrealized gain
(loss) on
investments......... 36,308,473 28,531,379 38,467,839
------------ ------------------ ------------
Net increase
(decrease) in net
assets resulting
from operations..... $ 41,396,858 $40,692,246 $ 43,945,982
------------ ------------------ ------------
------------ ------------------ ------------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
STATEMENT OF OPERATIONS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
CALVERT SMITH BARNEY
RESPONSIBLY INVESTED INTERNATIONAL SMALL CASH PORTFOLIO
BALANCED PORTFOLIO ADVISERS FUND COMPANY FUND CLASS A
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT
-------------------- ------------- ------------------ -------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 57,279 $ 879,182 $ 9,954 $27,809
EXPENSES:
Mortality and expense
undertakings.......... (27,872) (234,636) (27,632) (5,756)
-------- ------------- ------- -------
Net investment income
(loss).............. 29,407 644,546 (17,678) 22,053
-------- ------------- ------- -------
CAPITAL GAINS INCOME..... 140,994 595,787 -- --
-------- ------------- ------- -------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 6,518 (3,562) 922 --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 78,661 708,119 74,459 --
-------- ------------- ------- -------
Net realized and
unrealized gain
(loss) on
investments......... 85,179 704,557 75,381 --
-------- ------------- ------- -------
Net increase
(decrease) in net
assets resulting
from operations..... $255,580 $1,944,890 $57,703 $22,053
-------- ------------- ------- -------
-------- ------------- ------- -------
</TABLE>
* From inception, August 9, 1996, to December 31, 1996.
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMITH BARNEY
GOVERNMENT FIDELITY VIP FIDELITY VIP II
SMITH BARNEY PORTFOLIO TCI TCI OVERSEAS ASSET MANAGER
APPRECIATION FUND CLASS A ADVANTAGE FUND GROWTH FUND PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- -------------- -------------- ----------- ------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $16,634 $2,077 $6,903 $ 100,570 $ 3,709 $ 27,849
EXPENSES:
Mortality and expense
undertakings.......... (1,599) (431) (1,529) (13,692) (8,486) (13,608)
------- ------ ------ ----------- ------------- --------
Net investment income
(loss).............. 15,035 1,646 5,374 86,878 (4,777) 14,241
------- ------ ------ ----------- ------------- --------
CAPITAL GAINS INCOME..... -- -- -- -- 4,080 --
------- ------ ------ ----------- ------------- --------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 174 -- (110) 527 985 (71)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 11,776 -- 4,528 (155,560) 77,918 126,112
------- ------ ------ ----------- ------------- --------
Net realized and
unrealized gain
(loss) on
investments......... 11,950 -- 4,418 (155,033) 78,903 126,041
------- ------ ------ ----------- ------------- --------
Net increase
(decrease) in net
assets resulting
from operations..... $26,985 $1,646 $9,792 $ (68,155) $78,206 $140,282
------- ------ ------ ----------- ------------- --------
------- ------ ------ ----------- ------------- --------
<CAPTION>
FIDELITY
FIDELITY VIP II VIP
CONTRAFUND GROWTH
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
--------------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 21,249 $ 73,883
EXPENSES:
Mortality and expense
undertakings.......... (56,903) (63,705)
--------------- -----------
Net investment income
(loss).............. (35,654) 10,178
--------------- -----------
CAPITAL GAINS INCOME..... -- 115,329
--------------- -----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (377) (6,795)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 910,896 420,263
--------------- -----------
Net realized and
unrealized gain
(loss) on
investments......... 910,519 413,468
--------------- -----------
Net increase
(decrease) in net
assets resulting
from operations..... $874,865 $538,975
--------------- -----------
--------------- -----------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Separate Account Two
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 10,412,614 $ 4,107,642 $ 9,440,440
Capital gains income... -- 41,100,004 --
Net realized gain
(loss) on security
transactions.......... (262,277) 3,161,056 --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (5,517,884) 189,613,138 --
------------ -------------- -------------
Net increase (decrease)
in net assets
resulting from
operations............ 4,632,453 237,981,840 9,440,440
------------ -------------- -------------
UNIT TRANSACTIONS:
Purchases.............. 27,446,873 174,128,189 70,557,174
Net transfers.......... (16,819,459) 27,816,288 67,229,895
Surrenders............. (16,860,465) (57,921,128) (52,794,253)
Net annuity
transactions.......... (32,192) (176,096) (239,109)
------------ -------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (6,265,243) 143,847,253 84,753,707
------------ -------------- -------------
Total increase
(decrease) in net
assets................ (1,632,790) 381,829,093 94,194,147
NET ASSETS:
Beginning of period.... 211,362,822 964,881,770 188,639,422
------------ -------------- -------------
End of period.......... $209,730,032 $1,346,710,863 $ 282,833,569
------------ -------------- -------------
------------ -------------- -------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
MONEY
BOND FUND STOCK FUND MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- -------------
OPERATIONS:
Net investment income
(loss)................ $ 9,356,706 $ 8,102,133 $ 9,540,693
Capital gains income... -- 26,305,598 --
Net realized gain
(loss) on security
transactions.......... 117,877 2,168,121 --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 18,122,724 184,154,644 --
------------ -------------- -------------
Net increase (decrease)
in net assets
resulting from
operations............ 27,597,307 220,730,496 9,540,693
------------ -------------- -------------
UNIT TRANSACTIONS:
Purchases.............. 18,860,293 101,236,958 48,515,026
Net transfers.......... 17,461,966 34,337,542 (83,703,644)
Surrenders............. (12,010,919) (38,089,217) (27,263,647)
Net annuity
transactions.......... (33,972) 563,526 (138,249)
------------ -------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 24,277,368 98,048,809 (62,590,514)
------------ -------------- -------------
Total increase
(decrease) in net
assets................ 51,874,675 318,779,305 (53,049,821)
NET ASSETS:
Beginning of period.... 159,488,147 646,102,465 241,689,243
------------ -------------- -------------
End of period.......... $211,362,822 $ 964,881,770 $ 188,639,422
------------ -------------- -------------
------------ -------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT CAPITAL MORTGAGE INTERNATIONAL
ADVISERS FUND MONEY MARKET FUND APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES 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)................ $ 43,421,909 $ 55,409 $ (6,751,158) $ 10,767,099 $ 1,795,519 $ 2,571,271
Capital gains income... 53,115,059 -- 70,324,118 -- 3,292,866 9,589,596
Net realized gain
(loss) on security
transactions.......... 1,874,522 -- 2,065,427 (435,741) 140,503 91,466
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 276,364,776 -- 154,074,827 (2,844,443) 36,167,970 28,439,913
--------------- ----------- ----------------- --------------- ------------- ------------------
Net increase (decrease)
in net assets
resulting from
operations............ 374,776,266 55,409 219,713,214 7,486,915 41,396,858 40,692,246
--------------- ----------- ----------------- --------------- ------------- ------------------
UNIT TRANSACTIONS:
Purchases.............. 322,583,889 216,658 200,411,434 9,051,920 47,675,352 43,044,896
Net transfers.......... (3,947,049) (124,960) 495,679 (19,016,015) 21,152,822 20,223,935
Surrenders............. (150,653,853) (77,729) (60,449,676) (19,091,976) (10,892,469) (21,614,763)
Net annuity
transactions.......... 730,038 (18,734) 658,118 (55,176) 75,085 141,714
--------------- ----------- ----------------- --------------- ------------- ------------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 168,713,025 (4,765) 141,115,555 (29,111,247) 58,010,790 41,795,782
--------------- ----------- ----------------- --------------- ------------- ------------------
Total increase
(decrease) in net
assets................ 543,489,291 50,644 360,828,769 (21,624,332) 99,407,648 82,488,028
NET ASSETS:
Beginning of period.... 2,357,217,790 1,541,876 1,074,971,652 221,415,738 165,395,372 328,307,965
--------------- ----------- ----------------- --------------- ------------- ------------------
End of period.......... $ 2,900,707,081 $1,592,520 $1,435,800,421 $199,791,406 $ 264,803,020 $410,795,993
--------------- ----------- ----------------- --------------- ------------- ------------------
--------------- ----------- ----------------- --------------- ------------- ------------------
U.S. GOVERNMENT CAPITAL MORTGAGE INTERNATIONAL
ADVISERS FUND MONEY MARKET FUND APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- -------------------- ----------------- --------------- ------------- ------------------
OPERATIONS:
Net investment income
(loss)................ $ 47,996,996 $ 56,945 $ (2,372,963) $ 11,548,045 $ 1,542,554 $ 1,106,594
Capital gains income... 21,614,744 -- 34,687,769 -- 38,706 2,695,768
Net realized gain
(loss) on security
transactions.......... 1,643,658 -- 2,276,572 (490,628) 969,630 (488,089)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 410,209,012 -- 168,562,628 18,815,991 34,721,169 32,521,726
--------------- ----------- ----------------- --------------- ------------- ------------------
Net increase (decrease)
in net assets
resulting from
operations............ 481,464,410 56,945 203,154,006 29,873,408 37,272,059 35,835,999
--------------- ----------- ----------------- --------------- ------------- ------------------
UNIT TRANSACTIONS:
Purchases.............. 189,985,618 247,760 164,142,420 9,787,879 22,856,837 27,669,493
Net transfers.......... (5,608,414) 17,612 104,275,366 (15,085,789) 14,885,934 (24,115,834)
Surrenders............. (110,192,361) (76,250) (29,551,158) (16,689,694) (4,088,509) (12,086,298)
Net annuity
transactions.......... 487,625 84,208 482,089 13,331 84,999 124,982
--------------- ----------- ----------------- --------------- ------------- ------------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 74,672,468 273,330 239,348,717 (21,974,273) 33,739,261 (8,407,657)
--------------- ----------- ----------------- --------------- ------------- ------------------
Total increase
(decrease) in net
assets................ 556,136,878 330,275 442,502,723 7,899,135 71,011,320 27,428,342
NET ASSETS:
Beginning of period.... 1,801,080,912 1,211,601 632,468,929 213,516,603 94,384,052 300,879,623
--------------- ----------- ----------------- --------------- ------------- ------------------
End of period.......... $ 2,357,217,790 $1,541,876 $1,074,971,652 $221,415,738 $ 165,395,372 $328,307,965
--------------- ----------- ----------------- --------------- ------------- ------------------
--------------- ----------- ----------------- --------------- ------------- ------------------
<CAPTION>
DIVIDEND AND
GROWTH FUND
SUB-ACCOUNT
-------------
<S> <C>
OPERATIONS:
Net investment income
(loss)................ $ 2,667,791
Capital gains income... 2,810,352
Net realized gain
(loss) on security
transactions.......... (3,931)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 38,471,770
-------------
Net increase (decrease)
in net assets
resulting from
operations............ 43,945,982
-------------
UNIT TRANSACTIONS:
Purchases.............. 99,649,393
Net transfers.......... 73,409,821
Surrenders............. (8,580,693)
Net annuity
transactions.......... 330,214
-------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 164,808,735
-------------
Total increase
(decrease) in net
assets................ 208,754,717
NET ASSETS:
Beginning of period.... 115,579,204
-------------
End of period.......... $324,333,921
-------------
-------------
DIVIDEND AND
GROWTH FUND
SUB-ACCOUNT
-------------
OPERATIONS:
Net investment income
(loss)................ $ 1,044,698
Capital gains income... --
Net realized gain
(loss) on security
transactions.......... 4,933
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 18,047,295
-------------
Net increase (decrease)
in net assets
resulting from
operations............ 19,096,926
-------------
UNIT TRANSACTIONS:
Purchases.............. 37,005,986
Net transfers.......... 31,702,670
Surrenders............. (2,159,189)
Net annuity
transactions.......... 77,507
-------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 66,626,974
-------------
Total increase
(decrease) in net
assets................ 85,723,900
NET ASSETS:
Beginning of period.... 29,855,304
-------------
End of period.......... $115,579,204
-------------
-------------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
CALVERT
RESPONSIBLY
INVESTED
BALANCED INTERNATIONAL SMALL SMITH BARNEY
PORTFOLIO ADVISERS FUND COMPANY FUND DAILY DIVIDEND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*** SUB-ACCOUNT
--------------- ------------- ------------------ -------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 29,407 $ 644,546 $ (17,678) $ 22,053
Capital gains income... 140,994 595,787 -- --
Net realized gain
(loss) on security
transactions.......... 6,518 (3,562) 922 --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 78,661 708,119 74,459 --
--------------- ------------- ------------------ --------
Net increase (decrease)
in net assets
resulting from
operations............ 255,580 1,944,890 57,703 22,053
--------------- ------------- ------------------ --------
UNIT TRANSACTIONS:
Purchases.............. 501,957 10,618,419 4,333,960 25
Net transfers.......... 86,346 10,257,798 9,203,248 --
Surrenders............. (81,242) (609,471) (48,819) (10,494)
Net annuity
transactions.......... 135,085 -- -- --
--------------- ------------- ------------------ --------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 642,146 20,266,746 13,488,389 (10,469)
--------------- ------------- ------------------ --------
Total increase
(decrease) in net
assets................ 897,726 22,211,636 13,546,092 11,584
NET ASSETS:
Beginning of period.... 1,763,503 7,597,538 -- 569,347
--------------- ------------- ------------------ --------
End of period.......... $ 2,661,229 $ 29,809,174 $13,546,092 $580,931
--------------- ------------- ------------------ --------
--------------- ------------- ------------------ --------
STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1995
CALVERT
RESPONSIBLY
INVESTED SMITH BARNEY
BALANCED INTERNATIONAL CASH PORTFOLIO SMITH BARNEY
PORTFOLIO ADVISERS FUND CLASS A APPRECIATION FUND
SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------- ------------------ -------------------
OPERATIONS:
Net investment income
(loss)................ $ 87,446 $ 164,074 $ 26,340 $ 1,041
Capital gains income... 50,438 -- -- 11,468
Net realized gain
(loss) on security
transactions.......... 1,044 6,279 -- 148
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 184,034 177,844 -- 20,104
--------------- ------------- ------------------ --------
Net increase (decrease)
in net assets
resulting from
operations............ 322,962 348,197 26,340 32,761
--------------- ------------- ------------------ --------
UNIT TRANSACTIONS:
Purchases.............. 394,157 2,632,312 -- 50
Net transfers.......... 19,199 4,663,681 (10,709) --
Surrenders............. (28,010) (46,652) (92,200) (1,598)
Net annuity
transactions.......... 30,857 -- -- --
--------------- ------------- ------------------ --------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 416,203 7,249,341 (102,909) (1,548)
--------------- ------------- ------------------ --------
Total increase
(decrease) in net
assets................ 739,165 7,597,538 (76,569) 31,213
NET ASSETS:
Beginning of period.... 1,024,338 -- 645,916 117,221
--------------- ------------- ------------------ --------
End of period.......... $ 1,763,503 $ 7,597,538 $ 569,347 $148,434
--------------- ------------- ------------------ --------
--------------- ------------- ------------------ --------
</TABLE>
* From inception, March 31, 1995, to December 31, 1995.
** From inception, July 1, 1995, to December 31, 1995.
*** From inception, August 9, 1996, to December 31, 1996.
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMITH BARNEY
GOVERNMENT TCI FIDELITY VIP FIDELITY VIP II
SMITH BARNEY PORTFOLIO ADVANTAGE TCI OVERSEAS ASSET MANAGER
APPRECIATION FUND CLASS A FUND GROWTH FUND PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- -------------- -------------- ----------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 15,035 $ 1,646 $ 5,374 $ 86,878 $ (4,777) $ 14,241
Capital gains income... -- -- -- -- 4,080 --
Net realized gain
(loss) on security
transactions.......... 174 -- (110) 527 985 (71)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 11,776 -- 4,528 (155,560) 77,918 126,112
-------- ------- -------------- ----------- ------------------ ------------------
Net increase (decrease)
in net assets
resulting from
operations............ 26,985 1,646 9,792 (68,155) 78,206 140,282
-------- ------- -------------- ----------- ------------------ ------------------
UNIT TRANSACTIONS:
Purchases.............. -- -- 52,991 278,606 196,292 268,755
Net transfers.......... -- -- 63,519 248,714 626,400 1,181,511
Surrenders............. (2,558) (4,273) (218) (13,223) (27,202) (95,811)
Net annuity
transactions.......... -- -- (410) (374) -- --
-------- ------- -------------- ----------- ------------------ ------------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (2,558) (4,273) 115,882 513,723 795,490 1,354,455
-------- ------- -------------- ----------- ------------------ ------------------
Total increase
(decrease) in net
assets................ 24,427 (2,627) 125,674 445,568 873,696 1,494,737
NET ASSETS:
Beginning of period.... 148,434 42,469 46,921 693,422 186,893 339,278
-------- ------- -------------- ----------- ------------------ ------------------
End of period.......... $172,861 $39,842 $172,595 $1,138,990 $1,060,589 $1,834,015
-------- ------- -------------- ----------- ------------------ ------------------
-------- ------- -------------- ----------- ------------------ ------------------
SMITH BARNEY FIDELITY
GOVERNMENT VIP FIDELITY VIP II FIDELITY VIP II
PORTFOLIO TCI TCI OVERSEAS ASSET MANAGER CONTRAFUND
CLASS A ADVANTAGE FUND GROWTH FUND PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT** SUB-ACCOUNT** SUB- ACCOUNT** SUB- ACCOUNT**
----------------- -------------- -------------- ----------- ------------------ ------------------
OPERATIONS:
Net investment income
(loss)................ $ 1,938 $ 549 $ (2,133) $ (491) $ (1,491) $ 19,233
Capital gains income... -- -- -- -- -- --
Net realized gain
(loss) on security
transactions.......... -- (90) 938 (240) 456 (577)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 1,195 6,645 3,459 18,860 17,225
-------- ------- -------------- ----------- ------------------ ------------------
Net increase (decrease)
in net assets
resulting from
operations............ 1,938 1,654 5,450 2,728 17,825 35,881
-------- ------- -------------- ----------- ------------------ ------------------
UNIT TRANSACTIONS:
Purchases.............. -- 15,135 30,024 21,829 32,160 89,641
Net transfers.......... -- 40,646 669,352 172,761 300,031 1,871,915
Surrenders............. (7,562) (19,236) (20,127) (10,425) (10,738) (11,744)
Net annuity
transactions.......... -- 8,722 8,723 -- -- --
-------- ------- -------------- ----------- ------------------ ------------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (7,562) 45,267 687,972 184,165 321,453 1,949,812
-------- ------- -------------- ----------- ------------------ ------------------
Total increase
(decrease) in net
assets................ (5,624) 46,921 693,422 186,893 339,278 1,985,693
NET ASSETS:
Beginning of period.... 48,093 -- -- -- -- --
-------- ------- -------------- ----------- ------------------ ------------------
End of period.......... $ 42,469 $46,921 $693,422 $ 186,893 $ 339,278 $1,985,693
-------- ------- -------------- ----------- ------------------ ------------------
-------- ------- -------------- ----------- ------------------ ------------------
<CAPTION>
FIDELITY
FIDELITY VIP II VIP
CONTRAFUND GROWTH
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
--------------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ (35,654) $ 10,178
Capital gains income... -- 115,329
Net realized gain
(loss) on security
transactions.......... (377) (6,795)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 910,896 420,263
--------------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 874,865 538,975
--------------- -----------
UNIT TRANSACTIONS:
Purchases.............. 928,554 1,249,738
Net transfers.......... 3,162,455 3,357,091
Surrenders............. (279,972) (334,425)
Net annuity
transactions.......... -- --
--------------- -----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 3,811,037 4,272,404
--------------- -----------
Total increase
(decrease) in net
assets................ 4,685,902 4,811,379
NET ASSETS:
Beginning of period.... 1,985,693 2,204,486
--------------- -----------
End of period.......... $6,671,595 $7,015,865
--------------- -----------
--------------- -----------
FIDELITY VIP
GROWTH
PORTFOLIO
SUB-ACCOUNT**
---------------
OPERATIONS:
Net investment income
(loss)................ $ (6,603)
Capital gains income... --
Net realized gain
(loss) on security
transactions.......... (2,056)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (34,445)
---------------
Net increase (decrease)
in net assets
resulting from
operations............ (43,104)
---------------
UNIT TRANSACTIONS:
Purchases.............. 120,267
Net transfers.......... 2,148,417
Surrenders............. (21,094)
Net annuity
transactions.......... --
---------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 2,247,590
---------------
Total increase
(decrease) in net
assets................ 2,204,486
NET ASSETS:
Beginning of period.... --
---------------
End of period.......... $2,204,486
---------------
---------------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- ---------------------------------------------------
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. The Account invests deposits by variable
annuity contractholders of the Company in various mutual funds (the Funds) as
directed by the contractholders.
- ---------------------------------------------------
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. Dividends and
capital gains income are accrued as of the ex-dividend date. Capital
gains income represents dividends from the Funds which are characterized
as capital gains under tax regulations.
b) SECURITY VALUATION--The investment in shares of the Hartford, Smith
Barney, TCI, Fidelity and Calvert Responsibily Invested Series mutual
funds are valued at the closing net asset value per share as determined
by the appropriate Fund as of December 31, 1996.
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.
d) USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the financial statements and
the reported amounts of income and expenses during the period. Operating
results in the future could vary from the amounts derived from
management's estimates.
- ---------------------------------------------------
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 up to
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.
<PAGE>
PART C
<PAGE>
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 of the Board of Directors of Hartford Life
Insurance Company ("Hartford") authorizing the establishment
of the Separate Account.(1)
(2) Not applicable.
(3) (a) Principal Underwriting Agreement.(2)
(b) Form of Dealer Agreement.(2)
(4) Copy of the Contract.(2)
(5) Form of Application.(2)
(6) (a) Articles of Incorporation of Hartford.
(b) Bylaws of Hartford.(2)
(7) Not applicable.
(8) Participation Agreement.(1)
(9) Opinion and Consent of Lynda Godkin, General Counsel.
(10) Consent of Arthur Andersen LLP, Independent Public
Accountants.
(11) No financial statements are omitted.
(12) Not applicable.
(13) Not applicable.
- -------------------
(1) Incorporated by reference to Post Effective Amendment No. 9, to the
Registration Statement File No. 33-19948, dated May 1, 1995.
(2) Incorporated by reference to Post Effective Amendment No. 10, to the
Registration Statement File No. 33-19948, dated May 1, 1996.
<PAGE>
-2-
(14) Not applicable.
(15) Copy of Power of Attorney.
(16) Organizational Chart.
Item 25. Directors and Officers of the Depositor
- --------------------------------------------------------------------------------
NAME POSITION WITH HARTFORD
- --------------------------------------------------------------------------------
Wendell J. Bossen Vice President
Gregory A. Boyko Vice President and Controller
Peter W. Cummins Vice President
Ann M. deRaismes Vice President
Timothy M. Fitch Vice President and Actuary
Bruce D. Gardner Vice President, Director*
Joseph H. Gareau Executive Vice President and Chief Investment
Officer, Director*
J. Richard Garrett Vice President and Treasurer
John P. Ginnetti Executive Vice President and Director, Asset
Management Services, Director*
Lynda Godkin General Counsel, and Corporate Secretary
Lois W. Grady Vice President
David A. Hall Senior Vice President and Actuary,
Robert A. Kerzner Vice President
Andrew W. Kohnke Vice President
Steven M. Maher Vice President and Actuary
William B. Malchodi, Jr. Vice President and Director of Taxes
Thomas M. Marra Executive Vice President and Director Individual
Life and Annuity Division, Director*
Robert F. Nolan Vice President
Joseph J. Noto Vice President
Leonard E. Odell, Jr. Senior Vice President, Director*
<PAGE>
-3-
- --------------------------------------------------------------------------------
NAME POSITION WITH HARTFORD
- --------------------------------------------------------------------------------
Craig D. Raymond Vice President and Chief Actuary
Lowndes A. Smith President and Chief Operating Officer, Director*
Edward J. Sweeney Vice President
Raymond P. Welnicki Senior Vice President and Director, Employee
Benefit Division, Director*
Walter C. Welsh Vice President
James J. Westervelt Senior Vice President and Group Controller
Lizabeth H. Zlatkus Vice President, Director*
- --------------------------------------------------------------------------------
Unless otherwise indicated, the principal business address of each the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
*Denotes Board of Directors.
Item 26. Persons Controlled By or Under Common Control with the Depositor or
Registrant
Filed herewith as Exhibit 16.
Item 27. Number of Contracts
As of April 4, 1997, there were 1,080 Contract Owners.
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
<PAGE>
-4-
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 Hartford and Hartford Securities
Distribution Company, Inc. ("HSD") are covered under a directors and
officer liability insurance policy issued to ITT Hartford Group, Inc.
and its subsidiaries. Such policy will reimburse the Registrant for
any payments that it shall make to directors and officers pursuant to
law and will, subject to certain exclusions contained in the policy,
further pay 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) HSD acts as principal underwriter for the following investment
companies:
Hartford Life Insurance Company - Separate Account One
Hartford Life Insurance Company - Separate Account Two
Hartford Life Insurance Company - Separate Account Two (DC Variable
Account I)
Hartford Life Insurance Company - Separate Account Two (DC Variable
Account II)
Hartford Life Insurance Company - Separate Account Two (QP Variable
Account)
Hartford Life Insurance Company - Separate Account Two (Variable
Account "A")
Hartford Life Insurance Company - Separate Account Two (NQ Variable
Account)
Hartford Life Insurance Company - Putnam Capital Manager Trust
Separate Account
Hartford Life Insurance Company - Separate Account Three
Hartford Life Insurance Company - Separate Account Five
ITT Hartford Life and Annuity Insurance Company -Separate Account One
ITT Hartford Life and Annuity Insurance Company - Putnam Capital
Manager Trust Separate Account Two
ITT Hartford Life and Annuity Insurance Company - Separate Account
Three
ITT Hartford Life and Annuity Insurance Company - Separate Account
Five
ITT Hartford Life and Annuity Insurance Company - Separate Account Six
American Maturity Life Insurance Company - Separate Account AMLVA
<PAGE>
-5-
(b) Directors and Officers of HSD
Name and Principal Positions and Offices
Business Address With Underwriter
------------------ ---------------------
Lowndes A. Smith President, Director
John P. Ginnetti Executive Vice President, Director
Thomas M. Marra Executive Vice President, Director
George R. Jay Controller
Peter W. Cummins Vice President
Donald E. Waggaman, Jr. Treasurer
Lynda Godkin Secretary
Michael Wilder Director
Unless otherwise indicated, the principal business address of each the
above individuals is P.O. Box 2999, Hartford, CT 06104-2999.
Item 30. Location of Accounts and Records
All of the accounts, books, records or other documents required to be
kept by Section 31(a) of the Investment Company Act of 1940 and rules
thereunder, are maintained by Hartford at 200 Hopmeadow Street,
Simsbury, Connecticut 06089.
Item 31. Management Services
All management contracts are discussed in Part A and Part B of this
registration statement.
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.
(d) Hartford hereby represents that the aggregate fees and charges
under the Contract
<PAGE>
-6-
are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by Hartford.
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 conditions one through four
of the no-action letter.
<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 10 day of April, 1997.
HARTFORD LIFE INSURANCE COMPANY -
SEPARATE ACCOUNT TWO (QP VARIABLE ACCOUNT)
(Registrant)
*By: /s/ John P. Ginnetti *By: /s/ Lynda Godkin
------------------------------------------ -------------------------
John P. Ginnetti, Executive Vice President Lynda Godkin
Attorney-in-Fact
HARTFORD LIFE INSURANCE COMPANY
(Depositor)
*By: /s/ John P. Ginnetti
------------------------------------------
John P. Ginnetti, Executive 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.
Bruce D. Gardner, Vice President,
Director *
Joseph H. Gareau, Executive Vice
President and Chief Investment
Officer, Director *
John P. Ginnetti, Executive Vice
President, Director *
Thomas M. Marra, Executive Vice *By: /s/ Lynda Godkin
--------------------
President, Director * Lynda Godkin
Leonard E. Odell, Jr., Senior Attorney-In-Fact
Vice President, Director *
Lowndes A. Smith, President,
Chief Operating Officer, Director * Dated: April 10, 1997
Raymond P. Welnicki, Senior Vice ----------------
President, Director *
Lizabeth H. Zlatkus, Vice President
Director *
<PAGE>
EXHIBIT INDEX
6. (a) Articles of Incorporation of Hartford
9. Opinion and Consent of Lynda Godkin, General Counsel
10. Consent of Arthur Andersen LLP, Independent Public Accountants
15. Copy of Power of Attorney
16. Organizational Chart
<PAGE>
FILING #0001681565 PG 04 OF 05 VOL B-00105
FILED 12/31/1996 10:21 AM PAGE 00680
SECRETARY OF THE STATE
CONNECTICUT SECRETARY OF THE STATE
HARTFORD LIFE INSURANCE COMPANY
CERTIFICATE AMENDING
RESTATED CERTIFICATE OF INCORPORATION
BY ACTIONS OF THE BOARD OF DIRECTORS AND THE SOLE SHAREHOLDER
1. The name of the Corporation is HARTFORD LIFE INSURANCE COMPANY.
2. The Restated Certificate of Incorporation of the Corporation is amended by
the following resolution of each of the Board of Directors and the Sole
Shareholder:
RESOLVED, that the Restated Certificate of Incorporation of the
Company, as supplemented and amended to date, is hereby further
amended by and adding the following Sections 4 and 5. All other
sections of the Restated Certificate of Incorporation shall
remain unchanged and continue in full force and effect.
"Section 4. The Board of Directors may, at any time, appoint
from among its own members such committees as it
may deem necessary for the proper conduct of the
business of the Company. The Board of Directors
shall be unrestricted as to the powers it may
confer upon such committees."
"Section 5. So much of the charter of said corporation, as
amended, as is inconsistent herewith is repealed,
provided that such repeal shall not invalidate or
otherwise affect any action taken pursuant to the
charter of the corporation, in accordance with its
terms, prior to the effective date of such
repeal."
3. The above resolutions were consented to by the Board of Directors and the
Sole Shareholder of the Corporation. The number of shares of the
Corporation's common capital stock entitled to vote thereon was 1,000 and
the vote required for adoption was 660 shares. The vote favoring adoption
was 1,000 shares, which was the greatest vote required to pass the
resolution.
<PAGE>
2
Dated at Simsbury, Connecticut this 30th day of December, 1996.
We hereby declare, under penalty of false statement, that the statements made in
the foregoing Certificate are true.
HARTFORD LIFE INSURANCE COMPANY
/s/ John P. Ginnetti
---------------------------------
John P. Ginnetti, Executive Vice
President
/s/ Lynda Godkin
---------------------------------
Lynda Godkin, Associate General Counsel
& Secretary
<PAGE>
3
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 issue cede
reinsurance; to issue policies and contracts for any kind
or combination of kinds of insurance; to 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.
<PAGE>
4
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 /s/ ROBERT B. GOODE, JR.
----------------------------
Attest:
/s/ WM. A. MCMAHON
- ----------------------
7342D
<PAGE>
THE [LOGO]
HARTFORD
April 10, 1997 Lynda Godkin
General Counsel & Secretary
Law Department
Board of Directors
Hartford Life Insurance Company
200 Hopmeadow Street
Simsbury, CT 06089
RE: SEPARATE ACCOUNT TWO (QP VARIABLE ACCOUNT)
HARTFORD LIFE INSURANCE COMPANY
FILE NO. 33-19948
Dear Sir/Madam:
I have acted as General Counsel to Hartford Life Insurance Company (the
"Company"), a Connecticut insurance company, and Hartford Life Insurance Company
Separate Account Two (the "Account") in connection with the registration of an
indefinite amount of securities in the form of variable annuity contracts (the
"Contracts") with the Securities and Exchange Commission under the Securities
Act of 1933, as amended. I have examined such documents (including the Form N-4
Registration Statement) and reviewed such questions of law as I considered
necessary and appropriate, and on the basis of such examination and review, it
is my opinion that:
1. The Company is a corporation duly organized and validly existing as a stock
life insurance company under the laws of the State of Connecticut and is
duly authorized by the Insurance Department of the State of Connecticut to
issue the Contracts.
2. The Account is a duly authorized and validly existing separate account
established pursuant to the provisions of Section 38a-433 of the
Connecticut Statutes.
3. To the extent so provided under the Contracts, that portion of the assets
of the Account equal to the reserves and other contract liabilities with
respect to the Account will not be chargeable with liabilities arising out
of any other business that the Company may conduct.
Hartford Life Insurance Companies
200 Hopmeadow Street
Simsbury, CT 06089
860 843 3153
860 843 8665 Fax
Mailing Address: P.O. Box 2999
Hartford, CT 06104-2999
Board of Directors
Hartford Life Insurance Company
<PAGE>
April 10, 1997
Page 2
4. The Contracts, when issued as contemplated by the Form N-4 Registration
Statement, will constitute legal, validly issued and binding obligations of
the Company.
I hereby consent to the filing of this opinion as an exhibit to the Form N-4
Registration Statement for the Contracts and the Account.
Sincerely,
/s/ Lynda Godkin
Lynda Godkin
<PAGE>
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 for Hartford Life Insurance Company
Separate Account Two (QP Variable Account) on Form N-4.
/s/Arthur Andersen LLP
Hartford, Connecticut
April 14, 1997
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
AND
HARTFORD LIFE AND ACCIDENT INSURANCE COMPANY
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
do hereby jointly and severally authorize Lynda Godkin, Marianne O'Doherty,
and Margaret E. Hankard to sign as their agent, any Registration Statement,
pre-effective amendment, post-effective amendment and any application for
exemptive relief of the Hartford Life Insurance Company and Hartford Life and
Accident Insurance Company 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.
/s/ Donald R. Frahm /s/Leonard E. Odell, Jr.
- --------------------------------------- ----------------------------------
Donald R. Frahm Leonard E. Odell, Jr.
/s/Bruce D. Gardner /s/Lowndes A. Smith
- --------------------------------------- ----------------------------------
Bruce D. Gardner Lowndes A. Smith
/s/Joseph H. Gareau /s/Raymond P. Welnicki
- --------------------------------------- ----------------------------------
Joseph H. Gareau Raymond P. Welnicki
/s/John P. Ginetti /s/Lizabeth H. Zlatkus
- --------------------------------------- ----------------------------------
John P. Ginnetti Lizabeth H. Zlatkus
/s/Thomas M. Marra
- ---------------------------------------
Thomas M. Marra
Dated: December 3, 1996
-------------------
<PAGE>
EXHIBIT 16
<TABLE>
<CAPTION>
<S><C>
ITT Hartford Group, Inc..
(Delaware)
|
- ----------------------------------------------------------------------------------------------------
Nutmeg Insurance Company The Hartford Investment
(Connecticut) Management Company
| (Delaware)
|
Hartford Fire Insurance Company
(Connecticut)
|
Hartford Accident and Indemnity Company
(Connecticut)
|
Hartford Life, Inc.
(Delaware)
|
Hartford Life and Accident Insurance Company
(Connecticut)
|
|
|
- -------------------------------------------------------------------------------------------------------------------
Alpine Life Hartford Financial Hartford Life American Maturity ITT Hartford Canada
Insurance Company Services Life Insurance Company Life Insurance Holdings, Inc.
(New Jersey) Insurance Co. (Connecticut) Company (Canada)
(Connecticut) | (Connecticut) |
| |
| |
| ITT Hartford Life
| Insurance Company
| of Canada
| (Canada)
|
|
- ------------------------------------------------------------------------------------------------------------------
ITT Hartford Life and Annuity ITT Hartford International Hartford Financial Services
Insurance Company Life Reassurance Corporation Corporation
(Connecticut) (Connecticut) (Delaware)
| |
| |
| |
ITT Hartford Life, Ltd. |
(Bermuda) |
|
|
- -----------------------------------------------------------------------------------------------------------------
MS Fund HL Funding HL Investment Hartford Hartford Securities ITT Comp. Emp.
America, Inc. Company, Inc. Advisors, Inc. Equity Sales Distribution Benefits Service
(Delaware) (Connecticut) (Connecticut) Company, Inc. Company, Inc. Company
(Connecticut) (Connecticut) (Connecticut)
</TABLE>
