<PAGE>
As Filed with the Securities and
Exchange Commission on April 30, 1999
Registration Statement No. 2-32094
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Post-Effective Amendment No. 42 X
-- -----
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No.__ _____
(Check appropriate box or boxes)
CG VARIABLE ANNUITY ACCOUNT II
Group Variable Annuities for Retirement Plans
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(Exact Name of Registrant)
Connecticut General Life Insurance Company
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(Name of Depositor)
900 Cottage Grove Road, Bloomfield, Connecticut 06002
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(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: 860-726-5832
Susan L. Cooper, Counsel
Connecticut General Life Insurance Company
900 Cottage Grove Road, Bloomfield, CT 06002
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(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: Continuous
--------------------
It is proposed that this filing will become effective (check appropriate space)
immediate upon filing pursuant to paragraph (b) of Rule 486
---
x on April 30, 1999 pursuant to paragraph (b) of Rule 486
---
60 days after filing pursuant to paragraph (a) of Rule 486
---
on (date) pursuant to paragraph (a) of Rule 486
---
The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Rule 24f-2. The Rule 24f-2 Notice for the
most recent fiscal year was filed on February 28, 1999.
<PAGE>
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Overview of the CG Variable Annuity Account-II
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Connecticut General Life Insurance Company
April 30, 1999
The following is an overview of the key features that you should consider and
know before investing in Variable Annuity Account-II. You should also read the
complete information on subsequent pages of the prospectus which accompanies
this overview. Please read the prospectus carefully.
1. Group Variable Annuities for Retirement Plans
The Group Variable Annuities for Retirement Plans offered by Connecticut General
Life Insurance Company are designed to be used in connection with retirement
annuity plans adopted by employers. These plans give you an opportunity to
invest for your retirement or other long-term purposes.
Group variable annuities have two periods-the accumulation period and a payout
period called the annuity period. The payments you make during the accumulation
period are deposited in an accumulation account in our Variable Annuity Account-
II (VAA-II) until you withdraw them. Your contributions, along with any earnings
that accumulate, are distributed in a series of payments to you or a beneficiary
during the annuity period. You may also choose to receive a lump sum payment
depending on your specific needs.
2. The Accumulation Period
The accumulation period is when the payments that you make are used to purchase
shares in an investment fund with a principal objective of long-term capital
growth. Your payments, less sales and administration charges, are used to
purchase shares called "accumulation units" at the current value, less any
expenses.
3. The Fund
The investment fund's assets consist mostly of a portfolio of common stocks. The
fund seeks to match the performance of the Standard & Poor's 500 Composite Stock
Price Index. The value of the investments held in the fund change daily and can
go up or down over short or even extended periods.
Historically, funds such as ours with a diversified portfolio of common stocks
indexed to the Standard & Poor's 500 have performed well when held for an
extended period of time. However, past performance is not a guarantee of future
performance. The investment risk is assumed by those who choose to participate
in our Group Variable Annuities for Retirement Plans.
4. Performance of CG Variable Annuity Account-II
The value of accumulation units will vary depending on the performance of the
fund. The following historical data for accumulation unit values show the values
for the periods shown. Past performance is not a guarantee of future
performance.
1
<PAGE>
Overview of the CG Variable Annuity Account-II
<TABLE>
<CAPTION>
SCHEDULE OF SELECTED PER-UNIT DATA
DECEMBER 31,
--------------------------------------------------------------------------------------------------
Group Contracts: 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of year $175.514 $132.033 $108.072 $79.187 $78.857 $76.776 $74.305 $54.193 $56.570 $43.939
End of year 225.298 175.514 132.033 108.072 79.187 78.857 76.776 74.305 54.193 56.570
--------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase in net asset
value resulting from
operations $49.784 $43.481 $23.961 $28.885 $0.330 $2.081 $2.471 $20.112 $(2.377) $12.631
======== ======= ======= ======= ======= ======= ======= ======= ======= =======
Accumulation units outstanding:
End of year 5,514 6,213 6,185 6,864 6,819 6,987 8,563 8,692 8,926 8,766
======== ======= ======= ======= ======= ======= ======= ======= ======= =======
Individual contracts:
Variable annuity contracts:
Net asset value:
Beginning of year $151.764 $114.738 $94.390 $69.507 $69.564 $68.068 $66.208 $48.529 $50.915 $39.747
End of year 193.841 151.764 114.738 94.390 69.507 69.564 66.068 66.208 48.529 50.915
--------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in net asset value
resulting from operations $42.077 $37.026 $20.348 $24.883 $(0.057) $1.496 $1.860 $17.679 $(2.386) $11.168
======== ======= ======= ======= ======= ======= ======= ======= ======= =======
Accumulation units outstanding:
End of year 7,818 8,474 8,484 8,566 8,823 11,050 11,433 12,288 15,540 21,582
======== ======= ======= ======= ======= ======= ======= ======= ======= =======
Flexible annuity contracts:
Net asset value:
Beginning of year $142.594 $108.183 $89.312 $65.997 $66.282 $65.084 $63.528 $46.728 $49.195 $38.553
End of year 181.493 142.594 108.183 89.312 65.997 66.282 65.084 63.528 49.728 49.195
--------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in net asset value
resulting from operations $38.899 $34.411 $18.871 $23.315 $(0.285) $1.198 $1.556 $16.800 $(2.467) $10.662
======== ======= ======= ======= ======= ======= ======= ======= ======= =======
Accumulation units outstanding:
End of year 18,811 19,316 22,410 26,647 27,762 30,391 33,228 35,732 46,807 51,040
======== ======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
Financial Statements: The financial statements of VAA-II and CG Life are
included in the Statement of Additional Information.
2
<PAGE>
Overview of the CG Variable Annuity Account-II
5. Expenses
VAA-II has an annual administrative expense that will not exceed $20 and will
normally be somewhat lower. From each of your payments, we will deduct a sales
charge to cover servicing costs. The sales charge will not exceed 15%. A
mortality risk fee of .20% and an expense fee of .05% also will be charged to
your separate account under a contract having 50 or more participants. For a
contract having than 50 participants, these fees are equivalent to an annual
rate of 0.50% (0.40% for mortality risks and 0.10% for expenses).
The following expense table lists the transaction expenses and the approximate
annual expenses related to investments in VAA-II.
<TABLE>
<CAPTION>
CONTRACT OWNER TRANSACTION EXPENSES Less Than 50 Participants 5O or More Participants
<S> <C> <C>
Sales Load Imposed on Purchases (maximum)
(as a percentage of purchase payments) 15% 15%
Deferred Sales Load (as a percentage of
purchase payments or amount surrendered) 0% 0%
Maximum Surrender Fees $20.00 $20.00
Maximum Exchange Fee 0% 0%
MAXIMUM ANNUAL ADMINISTRATIVE EXPENSE $20.00 $20.00
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality Risk Fees .40% .20%
Expense Fees .10% .05%
Total Separate Account Annual Expenses .50% .25%
FUND ANNUAL EXPENSES*
(as a percentage of fund average net assets)
Management Fees (maximum) .35%
Other Expenses (maximum) .19%
Total Fund Annual Expenses (maximum) .54%
</TABLE>
3
<PAGE>
Overview of the CG Variable Annuity Account-II
The following examples show the accumulated amount of these expenses on a one
time $1,000 investment, assuming a 5% rate of return over the stated investment
period.
<TABLE>
<CAPTION>
EXAMPLES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
You would pay the following expenses
on a $1,000 investment, assuming a
5% annual rate on assets, and you
surrender or annuitize your contract
at the of the applicable time period
provided:
(1) the contract had 50 or more participants: $177.11 $191.60 $206.48 $245.61
(2) the contract had less than 50 participants: $172.23 $198.17 $270.59 $270.59
You would pay the following expenses on a
$1000 investment, assuming a 5% annual return
on assets and you do not surrender your
contract at the end of the applicable period,
provided:
(1) the contract had 50 or more participants $157.11 $171.90 $186.48 $225.61
(2) the contract had less than 50 participants $159.23 $178.17 $197.84 $250.59
</TABLE>
The purpose of the Expense Table is to assist the contractholder in
understanding the costs and expenses that a contractholder will bear directly or
indirectly. See the section entitled "Deductions and Expenses" for further
specific information regarding expenses. For the purposes of the Examples,
assume reinvestment of all dividends and distributions. The Examples should not
be considered a representation of past or future expenses. Actual expenses may
be greater or less than those shown.
*The fund annual expenses do not flow through directly to the contractholder;
amounts credited are net of these expenses.
6. The Annuity Period (Payout Period)
During the annuity period, the assets you have accumulated in the investment
fund are paid out according to the method you select from a range of payout
options (all of these options assume you are the owner and the annuitant)
including: (1) payments during your lifetime, but if you die before an elected
guaranteed period of 120 months or 180 months, payment will continue to your
beneficiary for the remainder of the guaranteed period; or (2) payments during
your lifetime and upon your death, payments in an amount you elect to your
contingent annuitant during that person's lifetime.
7. Death Benefits
In the event of your death during the accumulation period, we will pay death
proceeds to a beneficiary you name according to one or a combination of the
following options: (1) make a cash payment in the amount of the current value of
your accumulation account less the annual administrative charge; (2) apply the
current value of the accumulation account to start a variable annuity for the
beneficiary providing the value of the account meets certain minimum
requirements; and/or (3) transfer the accumulation account to an associated
fixed-dollar contract. The amount of death benefit proceeds will be reduced by
any applicable state and federal taxes.
Your beneficiary must elect any of the above described options within the period
ending on the later of the first anniversary of your death, or the date which is
three months after we receive proof of the death. If no designated beneficiary
survives you or no other designation is provided, your surviving spouse will be
the beneficiary, if living. Otherwise, death benefit proceeds will be paid in
equal shares to your surviving children; or in the event there are no children,
to the executor or administrator of your estate.
<PAGE>
Overview of the CG Variable Annuity Account-II
8. Redemptions
You may surrender your value in VAA-II in whole or in part, for cash before age
59 1/2 according to the rules of your plan, normally upon your separation from
service, death, disability, or in case of financial hardship. The sales charge
for a redemption will not exceed 15%. Income tax may be assessed in the event of
certain early withdrawals.
9. Taxes
Any earnings on your account are not taxed until you withdraw them. If you are
under the age of 59 1/2 when you withdraw money, you may be charged a 10%
federal tax penalty on the taxable amounts surrendered. Cash redemptions
generally are taxed as ordinary income and may be subject to an additional tax.
Annuity payments are taxed as ordinary income. You also may incur state income
or estate taxes which are not covered here.
5
<PAGE>
CG Variable Annuity Account-II
Group Variable Annuities for Retirement Plans
Offered by:
Connecticut General Life Insurance Company ("CG Life")
Hartford, Connecticut 06152
(860) 726-6000
This prospectus contains information about the Group Variable Annuities for
Retirement Plans offered by Connecticut General Life Insurance Company ("CG
Life") that you should know before investing. This contract is not available in
all states.
Additional information about the Group Variable Annuities for Retirement Plans
is available in a Statement of Additional Information, also dated April 30,
1999. You may order it for free by writing:
Connecticut General Life Insurance Company, LDS-HO5D
P.O. Box 2975
Hartford, CT 06104
or by calling (860) 534-2175
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
This prospectus must be accompanied by the current prospectus of CIGNA Variable
Products S&P 500 Index Fund*. You should keep both of these prospectuses for
future reference.
*"Standard & Poor's(R)," "S&P 500 (R)", "Standard & Poor's 500" and "500" are
trademarks of the Standard & Poor's Corporation (S&P) and have been licensed for
use by CG Life. The S&P 500 Index Fund is not sponsored, endorsed, sold or
promoted by S&P, and S&P makes no representation regarding the advisability of
investing in the Fund.
6
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Most Commonly Used Terms........................................ 8
General Description of the Group Variable Annuities............. 9
Contract for Retirement Plans and CG Variable Annuity
Account-II Accumulation Period.................................. 9
CIGNA Variable Products S&P 500 Index Fund...................... 10
Voting Rights................................................... 10
Deductions and Expenses of VAA-II............................... 11
The Annuity Period.............................................. 14
Forms of Variable Annuities..................................... 15
Death Benefits.................................................. 16
Non-Assignability of Benefits................................... 17
Contract Purchases and Values................................... 17
Annuity Service Center.......................................... 19
Redemptions..................................................... 19
Transfers....................................................... 20
Tax Information................................................. 20
Legal Proceedings............................................... 22
Connecticut General Life Insurance Company...................... 22
Year 2000 Preparedness.......................................... 23
Table of Contents of the Statement of
Additional Information.......................................... 24
</TABLE>
We have not given anyone else permission to give out information on Variable
Annuity Account-II other than that which is included in this prospectus. We do
not intend to solicit participation in variable annuity contracts in any state
or jurisdiction where they are unlawful.
7
<PAGE>
MOST COMMONLY USED TERMS
This prospectus is written in plain English to make it as understandable as
possible. The technical terms listed below are discussed in the text. We define
them here for your ease in understanding them.
Accumulation Account: An account we establish for you under a contract to which
we credit your net annual payments.
Accumulation Unit: A unit of measurement used to determine the value of your
account before annuity payments begin.
Annuitant: Any natural person designated in a contract as the measuring life
for annuity payout options involving life contingencies. This person is normally
the recipient of annuity payments.
Annuity Payment: Periodic payments made to an Annuitant under a contract.
Annuity Payment Date: The date Annuity Payments begin under a contract and the
same day of each month thereafter.
Annuity Unit: A unit of measurement used to determine the amount of the Annuity
Payments.
Contract: The Group Variable Annuities Contract for Retirement Plans.
Contractholder: The entity (or person) to which a contract will be issued. This
is normally an employer of Participants or an organization representing
employers or Participants.
Fund: CIGNA Variable Products S&P 500 Index Fund, a series of shares of CIGNA
Variable Products Group, a Massachusetts business trust, registered under the
Investment Company Act of 1940 as a diversified, open-end management company, or
shares of another registered open-end investment company substituted for it.
Fund Shares: Shares of the fund.
Net Annual Payment: The amount of payments you make annually less the sales
charge and the maximum annual administration charge.
Participant: An employee for whom payments have been or are being made under
the contract according to the plan and for any individual for whom an annuity
has not yet been effected under the contract.
Plan: A retirement plan under which benefits are to be provided under a
contract.
Purchase Payment: The dollar amount paid to CG Life by or on behalf of the
Contractholder. "The net purchase payment" is the purchase payment reduced by a
sales charge and any applicable state premium taxes.
Separate Account: The separate account is the CG Variable Annuity Account-II
(VAA-II) we established under Connecticut law to receive payments under the
contract offered by this prospectus.
Valuation Date: Each day as of which the Accumulation Unit value and Annuity
Unit value are determined.
Valuation Period: Each business day the New York Stock Exchange is open for
trading or any other day on which there is a sufficient degree of trading in the
portfolio securities of the separate account to materially affect the
accumulation unit value and the annuity unit value.
Variable Annuity: A series of periodic payments, the amount of which will
increase or decrease to reflect the investment experience of VAA-II.
8
<PAGE>
CG Variable Annuity Account-II
GENERAL DESCRIPTION OF THE GROUP VARIABLE ANNUITIES CONTRACT FOR RETIREMENT
PLANS AND CG VARIABLE ANNUITY ACCOUNT-II (VAA-II)
We will normally issue a contract called a "Group Variable Annuities Contract
For Retirement Plans" as a part of a non-tax qualified retirement plan or trust
of an employer or an organization representing employers or participants, called
the contractholder. The contract provides certain rights during the accumulation
period, the annuity period and upon the death of participants or annuitants.
The annuity contract promises to pay you as a participant, or someone else you
designate, income in the form of annuity payments beginning on a certain date.
Prior to receiving annuity payments, your annuity is in the accumulation period
and you are investing in it. Once you or a designated beneficiary begin
receiving annuity payments, the annuity is in the payout period called the
annuity period. Your investments benefit from tax deferral since you are not
taxed on any earnings until you withdraw them from the account.
The plan or trust under which you participate in VAA-II, may limit your rights
in connection with VAA-II. For example, although the contract allows you to
redeem all or part of your value in the account prior to the time annuity
payments begin, the plan or trust may not allow you to exercise this right. Also
the contract provides for minimum annual payments on your behalf and these
payments may not exceed amounts provided in the plan. You should refer to
provisions of your retirement plan or trust in connection with VAA-II.
We will issue you a certificate that will describe the benefits to which you are
entitled under the contract at the time that your first annuity payment becomes
payable, or earlier, if required by law. The certificate will describe the
benefits to which you are entitled under the contract.
The general objective of VAA-II is for you to build an investment to provide you
or a beneficiary with a variable annuity which will furnish relatively level
annuity payments during periods when the economy is stable and to provide
increased payments during inflationary and growth periods. We cannot, however,
guarantee that this objective will be achieved.
The contract we have with the contractholder may change from time to time by
agreement. Any changes, however, will not adversely affect your account unless
you consent to the changes.
ACCUMULATION PERIOD
During the accumulation period, you make a minimum annual payment in VAA-II. All
of your payments less any sale or administration charges are credited to an
accumulation account we establish for you. Your payments are used to purchase
shares, at the current value of those shares less any expenses, in an investment
fund with a principal objective of long-term growth of capital. The amount of
money you are able to accumulate in your accumulation account depends on the
investment performance of the fund.
9
<PAGE>
CG Variable Annuity Account-II
During the accumulation period, you as the participant have the right to:
. change the beneficiary for death proceeds;
. redeem all or part of your accumulation account;
. change the annuity payout option;
. change the death benefit payout option;
. transfer contract values to/from an associated fixed-dollar contract we issue;
. instruct us as to voting of fund shares;
. change the date annuity payments begin;
. change the payee to receive annuity payments.
CIGNA VARIABLE PRODUCTS S&P 500 INDEX FUND
The CIGNA Variable Products S&P 500 Index Fund, called the fund, is a separate
series of shares of CIGNA Variable Products Group, a Massachusetts business
trust established in 1988. The fund operates as a diversified, open-end
management investment company and is treated as a regulated investment
management company for federal income tax purposes. Its sole purpose is to serve
as the funding vehicle for the investment moneys paid by holders of variable
annuities we issue. CIGNA Corporation is the sponsor of the trust. Shares of the
fund are offered only to eligible purchasers sold at net asset value, without
the costs of a sales load, sales charge or selling commission.
All VAA-II earnings are reinvested in additional shares of the fund, at net
asset value. Deductions and redemptions are made by redeeming fund shares at
their current net asset value. Fund shares are held by State Street Bank and
Trust Company, Boston, Massachusetts, the fund's custodian.
The fund's prospectus accompanies this prospectus and contains a more complete
description of its investment objectives. Before participating in VAA-II, you
should read it carefully. You may obtain additional copies of it by writing
CIGNA Investments, Inc., 900 Cottage Grove Road, Bloomfield, Connecticut 06002.
VOTING RIGHTS
State Street Bank and Trust Company, as custodian of the fund share held in VAA-
II, votes fund shares held in VAA-II at regular and special meetings of fund
shareholders. It follows voting instructions received from those having voting
interest in the fund shares as outlined in our contact with the contractholder.
The number of fund shares to which you have voting interest is determined by the
trust not more than 90 days prior to the meeting of the fund shareholders. The
custodian will solicit voting instructions by written communication at least 10
days prior to the meeting.
During the accumulation period, you have the voting interest in the fund shares
attributable to your accumulation account. You can determine the shares
attributable to your account by dividing the accumulation account value by the
net asset value of one fund share.
During the annuity period, the person entitled to annuity payments has the
voting interest in the fund shares. The number of fund shares held in VAA-II
which are attributable to each variable annuity is determined by dividing the
remaining shares for that variable annuity by the net asset value of one fund
share. The reserves for the variable annuity used to determine the fund shares
will decrease as the annuity is paid out.
10
<PAGE>
CG Variable Annuity Account-II
Fund shares for which no timely instructions are received; will be voted in
proportion to the instructions which are received under the contract.
All fund proxy material will be mailed to the last known address of each person
having voting interest in fund shares. It will be accompanied by a form, which
may be used to give voting instructions to the State Street Bank and Trust
Company, P.O. Box 2351, Boston, Massachusetts 02107, the custodian.
If we determine, that by law, fund shares held in VAA-II need not be voted
according to instructions received from persons having the voting interest
described above, then we may vote those fund shares.
DEDUCTIONS AND EXPENSES OF VAA-II
VAA-II has the following deductions and expenses:
Administrative Expenses: Administrative and record keeping expenses of VAA-II
include such items as salaries, rent, postage, telephone, office equipment,
legal and audit fees and expenses of managing the account. As compensation for
these expenses, we deduct an expense charge from the contract value each
December 1, and on the date an accumulation account is canceled for the
following reasons;
. in order to effect an annuity;
. as a result of a complete redemption; or
. in the event of all transfers except transfers to the participant's account in
an associated fixed-dollar contract, which is not described in this
prospectus.
The charge is made by canceling the number of accumulation units equal in value
to the charge.
The amount of this expense charge is established in the contract. It is based
upon our appraisal of the administrative costs. If you are enrolled under an
associated fixed-dollar contract as well as a VAA-II contract, the combined
expense charge under both contracts will not exceed $20 per year. We will
equitably allocate the combined expense charge between the two contracts.
If you are enrolled only under a VAA-II contract, the expense charge will not
exceed $20 annually and will normally be somewhat lower. If, during the 12-month
period preceding a December 1, you have made no payments and no redemption or
transfer payments have been made, then the annual expense charge on the December
1 will not exceed $5.
11
<PAGE>
CG Variable Annuity Account-II
No expense charge will be made on the date an accumulation account is canceled
if the cancellation occurs:
. on or prior to the valuation date which follows a December 1; or
. as a result of a transfer to your account in an associated contract.
Similarly, no expense charge will be made on the first December 1 following your
first payments, if the amount of the payments is less than $100.
Premium Taxes: Any premium tax due on your payments will be deducted from the
accumulation account. Some jurisdictions charge premium taxes, which presently
range from 1.00% to 3.00%. Many jurisdictions, however, charge no premium tax.
Sales Charge: We will deduct a sales charge to cover servicing costs from each
of your payments. We determine the amount of this charge according to the
following schedule: It will not exceed 15%.
Percentage of Aggregate Payment
Payments Received During To Be Deducted
------------------------------ --------------------------------
1st year Participant is
enrolled under Plan 15%
Subsequent years 5%
The balance of the payments will be credited, in the form of accumulation units,
to your VAA-II accumulation account.
The following table illustrates the effect of these deductions:
<TABLE>
<CAPTION>
Total Charge as a
$10 Monthly Total Sales Sales Charge as a Percentage of Aggregate
Payments Payments Charge Percentage of Total Payments Net Annual Payments*
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 year $ 120 $ 18.00 15.00% 46.34%
6 years 720 48.00 6.67 30.43
12 years 1,440 84.00 5.83 29.03
$100 Monthly
Payments
- ---------------------------------------------------------------------------------------------------
1 year $ 1,200 $180.00 15.00% 20.00%
6 years 7,200 480.00 6.67 9.09
12 years 14,400 840.00 5.83 8.11
</TABLE>
*The aggregate Net Annual Payments are equal to total payments less the sales
charge and the maximum annual administration charge.
12
<PAGE>
CG Variable Annuity Account-II
During the first year an employer's plan is in effect, an employer may make a
single payment on behalf of its participant's, in addition to periodic payments
on behalf of its participants. This payment may result from the transfer of
funds to the contract from a preexisting plan or for payment from past service
credits on behalf of eligible participants. We will deduct a sales charge from
such single payment as follows:
<TABLE>
<CAPTION>
Percentage of Sales Charge as a Percentage
Amount of Payment Deduction of the Net Amount Invested
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
$ 2,000 but less than $ 50,000 5.00% 5.26%
50,000 but less than 100,000 4.00 4.17
100,000 but less than 250,000 3.00 3.09
250,000 but less than 500,000 2.00 2.04
500,000 but less than 1,000,000 1.50 1.52
1,000,000 and over 1.00 1.01
</TABLE>
*Assuming the payment to be the minimum shown in each bracket in the column
entitled "Amount of Payment."
This table assumes no applicable state premium taxes and no change in the sales
or administration charge. We reserve the right after the first five years to
raise the charges with respect to future payments, in which event, the figures
shown above would not be applicable.
We assume the risk that the sales charge may not cover the actual servicing
costs.
Mortality and Expense Deduction: Annuity payments reflect the investment
performance of the fund. They are not affected by adverse mortality experience
or by any excess in the actual sales and administrative expenses over the
expense deductions provided in the contract. We assume the risk that:
. annuity payments will continue for a longer period than anticipated because
the annuitant lives longer than expected; and
. the sales charge and administration charge may be insufficient to cover the
actual costs of these items.
For assuming these risks, we make a deduction at the end of each valuation
period from the current market value of the account of each participant and
annuitant.
The amount of this deduction is equivalent to an annual rate of 0.25% (0.20% for
mortality risk and 0.05% for expenses),under a contract having 50 or more
participants. For a contract having fewer than 50 participants, it is equivalent
to an annual rate of 0.50% (0.40% for mortality risks and 0.10% for expenses).
If the number of participants for whom payments are being made falls below 50
for 24 consecutive months beginning on a December 1, the annual rate of the
charge may be increased to 0.50% at the end of the period. If on any December 1,
the number of participants is 50 or more, the charge will be reduced from 0.50%
to 0.25% on that date.
13
<PAGE>
CG Variable Annuity Account-II
Any change in the mortality and expense charge under the contract will not
affect annuity unit values prior to the date of the change. After the fifth
anniversary of the effective date of the contract, we may change the mortality
and expense charges.
VAA-II does not share in the surplus of CG Life. However, we may allocate some
portion of any excess as an experience rating credit, although we are not
required to do so. If we elect to offer this credit, we will credit your account
for the following contract year in one of three ways:
. by reducing either the sales charge or the annual administration charge, or
both; or
. by crediting a number of additional accumulation units or annuity units to
your account, less any required premium taxes, but without any sales charge; or
. by reducing future payments to be made by the employer.
Servicing Fees: We pay servicing fees to certain broker-dealers who agree to
provide ongoing administrative services. The charges for this service are
included in the sales charge.
You may want to refer to the Expense Summary Table on page 3 of the Overview for
a listing of the expenses related to investment in VAA-II.
Changes in Expenses: After the fifth anniversary, we may change the sales
charge, the annual administration charge, the mortality and expense charge and
the annuity purchase rates. We do not expect to recover any amount above the
accumulated expenses in administering the contract through the administration
charge. Any changes will become effective 90 days after notice has been given to
the contractholder. We will give you notice of any changes.
THE ANNUITY PERIOD (PAYOUT PERIOD)
During the annuity period, the annuitant has the right to:
. change the payee to receive annuity payments during his or her lifetime;
. change the beneficiary under any annuity payout option which provides for a
death benefit upon the annuitant's death, this change may only be made during
the annuitant's lifetime;
. instruct us as to voting of fund shares.
The level of annuity payments is based on:
. the annuitant's adjusted age as specified in tables in the contract;
. the type of payout option selected; and
. the investment performance of the fund shares.
Adverse mortality experience or an increase in our expenses in excess of the
charges under the contract will not affect the amount of your payments. If we
are required by law, we may deduct amounts for income taxes from annuity
payments.
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<PAGE>
CG Variable Annuity Account-II
Annuity Commencement Date: Annuity payments will begin on the first day of the
month you select. The selection of an annuity payment date may be affected by
the terms of the plan or trust under which you participate in VAA-II. If we do
not receive a notice at our Annuity Service Center by the annuity payment date
preceding your 75th birthday, a variable life annuity with monthly payments
certain for 120 and 180 months will be started for you on the following payment
date.
Annuity Payout Options: You may elect to have annuity payments made under any
one of the annuity payout options described below. In addition, the payout
options may be selected by you for payment of the death proceeds during the
accumulation period or upon the death of the annuitant. A change of option is
permitted if made at least 30 days before the annuity payments are to begin. If
you do not select an option, we will make annuity payments in accordance with
Option 1 (Variable Life Annuity with Monthly Payments Certain for 120 or 180
Months) below.
We will make annuity payments monthly, except:
a. If the value of your account is at least $3,500, we may pay, your
accumulation account value, less the expense charge in lieu of a variable
annuity, or;
b. If after the annuity payments have started, the amount of the monthly
payments falls below $10, we may change the frequency of payments to intervals
that will result in payments of at least $10.
Once annuity payments have begun, the variable annuity cannot be surrendered for
a cash payment.
FORMS OF VARIABLE ANNUITIES
Option 1- Variable Life Annuity with Monthly Payments Certain for 120 or 180
Months: This variable annuity provides monthly payments to you during your
lifetime. Also, at your death, if monthly payments have been made for less than
the period of either 120 or 180 months as you elected, annuity payments will
continue during the remainder of the period to your designated beneficiary.
However, if you are married and your beneficiary is not your spouse, your spouse
must consent to this beneficiary designation in a written, notarized statement.
Option 2- Contingent Annuitant Variable Annuity: This variable annuity provides
payments to you during your lifetime. Also, upon your death, the monthly payment
which would have been payable to you had you survived will be paid in the same
amount, or 66 2/3% or 50% as you elect, to any person designated by you as your
contingent annuitant during that person's lifetime. If the contingent annuitant
dies before you, no more benefits will be paid. For contingent annuitants other
than your spouse, you must deliver a valid waiver and your spouse must consent.
We may offer other forms of variable annuities in addition to those described
here. Such variable annuities may not conflict with this prospectus or the
contract. However, any form of variable annuity is limited by the terms of the
plan and by tax laws.
15
<PAGE>
CG Variable Annuity Account-II
Determination of Monthly Annuity Payments: The Statement of Additional
Information describes how we determine the first and subsequent annuity
payments. Each contract contains tables indicating the dollar amount of the
first monthly annuity payment which can be purchased with each $1,000 of value
accumulated under the contract. These tables include an "assumed investment
return" which is the annual rate of return, expressed as a percentage of what
the contract assumes the fund's assets will achieve each year.
This assumed return is the measuring point for subsequent annuity payments. If
the actual net investment rate on an annual basis equals the assumed investment
return, the annuity payments will remain constant. If the actual net investment
rate exceeds the assumed investment return, the annuity payments will increase
proportionally. If the actual rate is less than the assumed investment return,
annuity payments will decrease.
The contractholder selects the assumed investment return from a range we have
available. It is used to determine the purchase rates for all annuities under
the contract. Assumed investment returns of 3% to 5% are normally available and
may be changed by amendment to the contract.
DEATH BENEFITS
Accumulation Period: If you die during the accumulation period, your designated
beneficiary may, elect any one, or a combination of the options described below,
unless you or the deceased beneficiary have provided otherwise. This election
will be effective on the later of the date it is received or the date due proof
of your death or the death of the beneficiary is received by us at our Annuity
Service Center.
Option A- Receive a lump sum cash payment equal in amount to the accumulation
account value less the annual administrative charge.
Option B- Start a variable annuity for the beneficiary subject to the following:
(1) the value of the accumulation account or the portion which is to be applied
to start an annuity must be at least $3,500;
(2) the beneficiary must be a natural person;
(3) the annuity payments may not extend over a period exceeding the life
expectancy of the beneficiary; and
(4) the initial annuity payment must amount to at least $10.
Option C- Transfer the accumulation account value to an associated fixed-dollar
contract. The purpose of the transfer should be for starting an annuity under
such associated contract subject to the provisions discussed under Option B
above.
16
<PAGE>
CG Variable Annuity Account-II
We will reduce the amount of death benefit proceeds by any applicable state
premium taxes and by any required income tax withholdings.
If you die before age 65, the death payment will at least be equal to the total
payments you made into the account prior to any deductions, reduced by any
redemptions or transfers.
A beneficiary must make an election of any of the options described above within
the period ending on the later of the first anniversary of your death or the
deceased beneficiary, or the date which is three months after we receive proof
of the death. If no election has been made by the end of this period, we will
make the cash payment described in Option A, effective on the date the period
expires. In no event, however, if an annuitant dies before the annuity starts,
may his or her entire remaining interest be distributed later than five years
after his or her death, unless:
. this distribution starts to a designated beneficiary no later than one year
following the annuitant's death and is payable over the life or life expectancy
of the beneficiary; or
. the designated beneficiary is the surviving spouse and is treated as the
annuitant for distribution purposes;
If an annuitant dies on or after the date his or her annuity payments start, no
payment will be payable except as a lump sum or as may be provided under the
form of annuity started unless;
. the distribution starts to a designated beneficiary no later than one year
following the annuitant's death and is payable over the life or life expectancy
of the beneficiary; or
. the designated beneficiary is the surviving spouse and is treated as the
annuitant for distribution purposes.
The annuitant may elect that any annuity payments to which the beneficiary
becomes entitled will be paid in one sum. In the absence of this election and
unless otherwise provided by the annuitant, a beneficiary who becomes entitled
to annuity payments may chose to have the remainder of the payments be paid in
one sum.
NON-ASSIGNABILITY OF BENEFITS
Any benefits payable to you or your beneficiary may not be assigned, alienated
or otherwise subject to attachment, garnishment or other legal process, except
following a qualified domestic relations order.
CONTRACT PURCHASES AND VALUES
How to Purchase a Contract: Group Variable Annuities are sold to contractholders
primarily by people who are licensed insurance agents or brokers for CG Life who
are authorized by law to sell life and other forms of insurance and variable
annuities. These individuals may be registered representatives of CIGNA
Financial Services, Inc. which is a broker-dealer, or through other licensed
broker-dealers.
17
<PAGE>
CG Variable Annuity Account-II
A contract may be purchased when a completed application and other required
forms are delivered to the soliciting agent who will forward them to us.
If the application is complete and correct when we receive it, and if all other
required information has been received at our Annuity Service Center, we will
issue the contract and deliver it to the contractholder within six weeks.
Purchase Payment: The minimum initial purchase payment is $10,000 for a
contractholder and $240 for each participant. There is a minimum requirement of
10 participants. After a contract is issued, the contractholder may make
purchase payments by sending checks directly to our Annuity Service Center. Each
participant is required to make a minimum payment annually.
We may reject any purchase payment if it is less than the minimum amount or not
in proper order.
Preauthorized checks allow us to draw checks on a routine basis, usually
monthly, from a bank account. If a check is dishonored for any reason, we will
not give you credit for the purchase payment. Neither CG Life nor CIGNA
Financial Services, Inc. assumes any liability for wrongful dishonor by the bank
you select, however, we may agree to indemnify a bank for certain liabilities
associated with the checking procedure.
A salary reduction plan authorizes your employer to take deductions of a set
amount from your salary and send these amounts to us as purchase payments. We
assume no liability for any amounts deducted until they are received in full at
our Annuity Service Center.
Application of Net Purchase Payments: We will reduce a purchase payment by a
sales charge and any applicable state premium tax to determine the net purchase
payment. When a contract is purchased we will determine the net purchase payment
within two business days. If any of the required material is incomplete,
incorrect, or if the purchase payment has not been made, than we may delay
issuing a contract or crediting a subsequent purchase payment.
Crediting Accumulation Units: Accumulation units represent the value of your
VAA-II account. We credit accumulation units to your account each time we
receive a purchase payment. We determine the number of accumulation units
credited to your account is determined by dividing the net purchase payment by
the accumulation unit value at that time. The number of accumulation units will
not change because of a subsequent change in the value of the unit, but the
dollar value of an accumulation unit will vary to reflect the investment
experience of the fund shares underlying the account.
Value of an Accumulation Unit: The original value of an accumulation unit is
established at $1 as of the date the fund shares were first purchased. We
determine the value of the accumulation units by multiplying the value of an
accumulation unit for the immediately preceding valuation date, by a net
investment factor for the valuation period ending on that date we value. The
value of accumulation units change based on an investment factor. The investment
factor is based on the investment performance of the fund.
18
<PAGE>
CG Variable Annuity Account-II
The gross investment rate is equal to the investment income for the valuation
period, plus capital gains and minus capital losses for the period, whether
realized or unrealized, divided by the value of the assets at the beginning of
the valuation period. The gross investment rate may be positive or negative.
Right to Cancel: The contractholder may cancel the contract by delivering or
mailing a written notice or sending a telegram to us at our Annuity Service
Center and returning the contract before midnight of the 10th day after the date
of receipt of notice of cancellation. We will return all amounts due to the
contractholder within 7 days after receipt of the notice of cancellation and the
returned contract. The contractholder bears the investment risk with respect to
amounts allocated to the separate account for the period from the date the
purchase payment was credited to the contract, to the date we receive the
returned contract. Cancellation entitles the contractholder to an amount equal
to:
. the difference between the amount of the purchase payment, including any
contract fees and other charges, and the amount allocated to the separate
account; plus
. the value of the accumulation account of the contractholder on the date we
receive the returned contract.
ANNUITY SERVICE CENTER
Please direct all inquiries to: CIGNA Annuity Service Center, P.O. Box 724257,
Atlanta, Georgia 31139. Any notices or elections will only be effective when we
receive them in writing at our Annuity Service Center.
Reports: We will send you, and each beneficiary for whom an accumulation account
is maintained, an annual statement showing the number of accumulation units
credited to you or the beneficiary and the accumulation unit value. In addition,
we will send each person having voting rights in VAA-II, required reports or
prospectuses covering the account and the fund.
REDEMPTIONS
We will honor any written cash payment within seven days after we receive the
request at our Annuity Service Center. We may only defer this payment for:
. when the New York Stock Exchange is closed( other than customary weekend and
holiday closings) or during which trading on the Exchange is restricted;
. when an emergency precludes disposal of securities held in the fund makes it
unreasonably difficult to determine the value of the fund's net assets, or;
. when the Securities and Exchange Commission permits for the protection of
security holders.
19
<PAGE>
CG Variable Annuity Account-II
Your retirement plan and the Retirement Equity Act restrict when you can make a
cash withdrawal. If you become eligible for a cash payment under the plan, we
will, upon receipt of your election, at our Annuity Service Center reduce your
accumulation account by the number of accumulation units. We calculate this by
dividing the amount of the requested cash payment by the accumulation unit value
for the valuation period in which the election becomes effective. Normally, the
circumstances under which you can make such an election is restricted under your
retirement plan to separation from service or break-in service rules.
Your accumulation account will be canceled upon termination of your employment
or at the time a cash payment is made. An amount equal to the account's value
(if the value of your account under any associated contract does not exceed
$500), will be paid after we deduct the administration charge. If redemptions
apply they also will be deducted.
If your accumulation account is canceled as a result of a redemption, no further
payments will be made to that account without our consent unless you have an
associated contract.
You may not elect to redeem your value in the contract once an annuity has
started, unless specifically provided for under the annuity payout option you
select.
Amounts you withdraw prior to the annuity commencement date may be subject to an
additional income tax and immediate taxation of amounts attributable to
investment gain.
TRANSFERS
Transfer Payments to the Group Variable Annuity Contract: If you are covered
under an associated fixed-dollar contract, you may make transfer payments from
these contracts to your VAA-II accumulation account.
Transfer payments from the associated fixed-dollar contract may be subject to
further restrictions in the associated contract. Amounts transferred will be
credited to your accumulation account without charge.
Transfer Payments from the Group Variable Annuity Contract: If we issue an
associated fixed-dollar contract, you may request that we cancel all or part of
your accumulated account and transfer all or part of its value, to your account
in the associated contract, without any administration charge. The plan may
limit the frequency of these transfers.
Participants and beneficiaries who are thinking of making a transfer should
carefully consider their annuity objectives and the investment objectives of
fund shares. Frequent transfers may not be consistent with the long-term
objectives of the contract.
TAX INFORMATION
Because of the complexity of the law and the fact that tax results are different
for each person, you should consult a qualified tax advisor concerning all tax
matters related to VAA-II. The following information regarding federal taxes is
general and not meant to cover all tax questions you might have. State income or
estate tax considerations are not covered here. Also, this discussion only
relates to tax laws now in effect.
20
<PAGE>
CG Variable Annuity Account-II
Federal Tax Status: CG Life is taxed as a life insurance company under IRS
regulations. The operations of VAA-II are part of the total operations of CG
Life and are not taxed separately. Investment gains of VAA-II are not taxable to
you or the contractholder until they are received as a cash redemption or as
annuity payments. Cash redemptions generally are taxed as ordinary income in the
year received, and may be subject to an additional tax under certain
circumstances. Annuity payments are taxed as ordinary income. At the time of
retirement annuity payments may be taxed at a lower rate due to the reduced
income and a larger exemption.
Because VAA-II has been designed so as to qualify as a qualified variable
annuity contract for federal income tax purposes, you are able to defer federal
income taxes on increases in the value of your contributions until such time as
withdrawals are made in the form of annuity payments or as a death benefit.
The IRS requires that the assets in variable annuity contracts be "adequately
diversified". We believe that the structure of the separate account for VAA-II
satisfies the requirements of this regulation.
Non-Tax Qualified Contracts: A non-tax qualified contract is a contract which is
purchased by an individual for his or her own purpose and is not a part of any
tax qualified retirement plans. It also may be a contract issued to a retirement
plan or plan of deferred compensation which is a non-tax qualified plan. The tax
status of the annuitant or participant is determined by provisions of the plan
and/or provisions of the Internal Revenue Code.
Under provisions of the Tax Reform Act of 1986, a non-tax qualified contract
which is held by a person who is not a natural person, such as a corporation or
a trust, is not treated as an annuity contract for federal income tax purposes.
The income on the contract during the taxable year will be treated as ordinary
income. Certain exceptions apply to non-tax qualified contracts held by an
employer on the termination of a plan described in section 401(a) or 403(a) of
the Internal Revenue Code or purchased as immediate annuities. Thus ownership of
a non-tax qualified contract by non-natural persons who do not qualify for the
statutory exceptions results in denial of tax deferral on increases in the value
of the contract.
Taxation of payments under annuity contracts is governed under Section 72 of the
Internal Revenue Code. Under current provisions, amounts received under a non-
tax qualified contract made upon the death of the annuitant or as non-periodic
payments after the annuity has started, are first attributable to any investment
gains credited to the contract over the tax payer's basis, if any, in the
contract. These amounts will be treated as income and subject to federal taxes.
As additional 10% tax will be imposed if the withdrawal is made before age 59
1/2 . The penalty tax will not be imposed, regardless of age, if the amount
received is one of a series of nearly equal periodic payments, made at least
annually, during the life or life expectancy of the person being paid. The
requirement for "substantially equal" periodic payments is met when the number
of accumulation units taken out of the fund is nearly the same. Also, the
additional tax will not be made if the withdrawal follows the death of the
annuitant, or is related to the annuitant's "total disability". Where the
contractholder is an individual who is other than the annuitant, the Internal
Revenue Code provides that the penalty tax is applied to the taxable portion of
payments that must be made under the contract following the annuitant's
death.
21
<PAGE>
CG Variable Annuity Account-II
If the contractholder transfers the contract to another person as a gift, the
Internal Revenue Code provides that the contractholder will incur taxable income
at the time of the transfer. The amount of the taxable income is equal to the
excess, if any, of the cash surrender value of the contract over the
contractholder's cost basis at the time of the gift. An exception is allowed for
certain transfers between spouses.
Annuity payments made after the annuity has started are generally taxed to the
recipient as they are received. A part of the payment is a return of investment
in the contract, if any, and is non-taxable. Another portion is a return of
income and is subject to ordinary income tax. An "exclusion ratio" is used to
determine the non-taxable and taxable portions of each payment. The exclusion
ratio continues until such time that the taxpayer recovers his or her basis in
the contract. After that, all payments are treated as taxable income.
Taxation of the Separate Account: Under current Internal Revenue Code
provisions, we pay no taxes on the investment income and capital gains of the
separate account. Accordingly, we currently make no adjustments for federal
income taxes or benefits in connection with VAA-II. If the IRS regulations
change in this regard, we will make necessary changes to stay in compliance.
Tax Withholding and Reporting: We may be required under federal income tax law
to withhold certain amounts from your payments. If we receive a periodic annuity
payment, we may be required to withhold amounts as if you were receiving wages
as an employee and we were your employer.
Also, we may be required to withhold amounts unless you elect against
withholding in a manner prescribed by the U.S. Treasury Department. The
withholding requirements will not apply to the portion of a payment which is
reasonably believed not to be included in gross income for federal tax purposes.
We will give you a written explanation of the rollover options and related rules
prescribed by the Secretary of the Treasury. We also are required to report
information on full and partial distributions as well as annuity payments on
forms required by law. We may also be required to report information on
distributions to taxing authorities.
State Regulations: We are subject to the laws of the State of Connecticut
governing insurance companies and to regulation by the Connecticut Commissioner
of Insurance. We file annual statements with the state, and other states and
jurisdictions covering our operation. Our books and assets are subject to review
or examination by the Commissioner or his or her agents at all times. State
insurance examiners conduct a full examination of our operation periodically.
Connecticut law does not involve supervision of our investment management or
policy, however.
LEGAL PROCEEDINGS
There are no material legal proceedings to which VAA-II is a party or which
would materially or adversely affect it.
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
We are a stock life insurance company known as Connecticut General Life
Insurance Company, chartered by the State of Connecticut on June 22, 1865. We
are licensed to write life insurance, annuities and accident and health
insurance in all 50 states, the District of Columbia, Puerto Rico, Taiwan and
certain Canadian provinces. We are located at 900 Cottage Grove Road,
Bloomfield, Connecticut, and have a mailing address of P.O. Box 2975, Hartford,
Connecticut 06104. We conduct administrative processing of retirement plan
accounts invested in VAA-II at our CIGNA Annuity Service Center, P.O. Box
724257, Atlanta, Georgia 31139.
22
<PAGE>
CG Variable Annuity Account-II
Connecticut General Life Insurance Company is a wholly owned subsidiary of
Connecticut General Corporation. Connecticut General Corporation is wholly owned
subsidiary of CIGNA Holdings, Inc., which in turn, is a wholly owned subsidiary
of CIGNA Corporation, an insurance and financial service holding company.
Under Connecticut insurance law, the income, gains or losses of VAA-II are
credited to or charged against the assets of the fund without regard to other
income gains or losses of CG Life. Similarly, the assets in VAA-II are not
charged with any liabilities arising out of any other business conducted by CG
Life. All obligations arising under VAA-II, including the promise to make
annuity payments, are general corporate obligations of CG Life, with all of our
assets available to meet these obligations and expenses.
YEAR 2000 PREPAREDNESS
Many existing computer programs are unable to recognize dates after December 31,
1999. While Year 2000 computer problems could have a negative impact on the
operations and investments of VAA-II or relating to the contract, we are working
to avoid such problems and to obtain assurances from our service providers that
they are taking similar steps. No assurances, though can be provided. You may
find further information about our Year 2000 preparedness in the filings of
CIGNA Corporation, our parent company, which have been filed with the Securities
and Exchange Commission.
23
<PAGE>
TABLE OF CONTENTS
OF THE STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information includes a description of the following
items:
1. General Information and History
2. Services
3. Purchase of Securities Being Offered
4. Principal Underwriters
5. Annuity Payments
6. Financial Statements
. Variable Annuity Account-II
. CG Life
To obtain a copy of the Statement of Additional Information for the Group
Variable Annuities For Retirement Plans Contract, detach and mail this form to:
Connecticut General Life Insurance Company
Legislative Document Services-HO5D
P.O. Box 2975
Hartford, CT 06104
I have been furnished with a Prospectus of CG Life VAA-II dated April 30,
1999, describing the Group Variable Annuities for Retirement Plans Contract.
Please send me a copy of the Statement of Additional Information pertaining to
it.
Name:
----------------------------------------------
(Please Print)
Mailing Address:
----------------------------------------------
Street or P.O. Box
----------------------------------------------
City State Zip Code
Date:
------------------------------------------------
24
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
CG VARIABLE ANNUITY ACCOUNT II
X GROUP VARIABLE ANNUITIES FOR RETIREMENT PLANS (the "Contract")
---------
issued by
Connecticut General Life Insurance Company ("CG Life")
Hartford, CT 06152
Telephone No. 860-726-6000
This Statement of Additional Information is not a prospectus, but should be read
in conjunction with the Prospectus for the Contract offered by CG Life through
its CG Variable Annuity Account II. The prospectus has the same date as this
Statement of Additional Information. A copy of the Prospectus may be obtained
by writing to Connecticut General Life Insurance Company, LDS-HO5D, P.O. Box
2975, Hartford, Connecticut 06104.
April 30, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEMS PAGE
- ----- ----
<S> <C>
General Information and History 1
Services 1
Purchase of Securities Being Offered 2
Underwriters 3
Annuity Payments 3
Financial Statements 4
</TABLE>
<PAGE>
GENERAL INFORMATION AND HISTORY
CG Life is a stock life insurance company specially chartered by the State of
Connecticut on June 22, 1865. It is licensed to write life insurance,
annuities, and accident and health insurance in all fifty states, the District
of Columbia, Puerto Rico, Taiwan and certain Canadian provinces. Its Home
Office is located at 900 Cottage Grove Road, Bloomfield, Connecticut and its
mailing address is Hartford, Connecticut 06152.
The financial statements of CG Life which are part of this Statement of
Additional Information are to be considered only to the extent that they bear
upon the ability of CG Life to meet its obligations under the Contract, which
include death benefits and its assumption of the mortality and expense charges.
CG Life is a wholly owned subsidiary of Connecticut General Corporation("CGC").
CGC is a wholly owned subsidiary of CIGNA Holdings, Inc. which, in turn, is a
wholly owned subsidiary of CIGNA Corporation, an insurance and financial
services holding company organized to effect the combination of CGC and INA
Corporation, (Insurance Company of North America), which became effective March
30, 1982. CIGNA Corporation is publicly held and, as of the date of this
prospectus, has no information that any person or concern beneficially owns more
than five percent of the outstanding Common stock, except as reported on one
Schedule 13G received in February 1999.
Security Ownership of CIGNA:
- ----------------------------
CIGNA advises that Sanford C. Bernstein & Co., Inc. ("Sanford Bernstein"), 767
Fifth Avenue, New York, NY 10153, reported that as of December 31, 1998 it held
18,836,626 shares, or 9.1%, of the outstanding common stock of CIGNA. Sanford
Bernstein also reported sole voting power as to 10,300,452, shared voting power
as to 2,248,782, and sole dispositive power as to 18,836,626 of these shares.
Wellington Management Company, LLP ("Wellington"), 75 State Street, Boston, MA
02109, reported that as of December 31, 1998 it held 11,704,980 shares, or
5.67%, of the outstanding common stock of CIGNA. Wellington also reported sole
voting power as to none, shared voting power as to 1,492,130, and shared
dispositive power as to all of these shares.
SERVICES
Safekeeping of Assets:
- ---------------------
All assets of the Separate Account are held in custody for safekeeping by the
Separate Account. The assets of the Separate Account Division will be kept
physically segregated and held separate and apart from assets of other
subdivisions. Shares of CIGNA Variable Products S & P 500 Index Fund (The
"Fund"), if issued, may be left on deposit with the shareholder servicing agent
of the Fund. The Separate Account will maintain a record of all purchases and
redemptions for shares of the Fund by the Separate Account. Additional
protection for the assets of the Separate Account is afforded by the Insurance
Company's fidelity bond, presently in the amount of $50 million, covering all
officers and employees of the Insurance Company.
1
<PAGE>
The Custodian:
- -------------
CG Life executed an agreement as of April 30, 1975 with State Street Bank and
Trust Company ("State Street Bank"), pursuant to which Fund shares and other
assets credited to VAA-II will be held in the custody of State Street Bank.
State Street Bank is a Massachusetts trust company having its principal place of
business at Boston, Massachusetts 02107.
The Agreement of Custodianship provides that State Street Bank will purchase
Fund shares at their net asset value with net payments received from CG Life.
Purchases will be made by the Custodian at the net asset value of Fund shares
determined as of the end of the valuation period in which the payments are
received by CG Life. State Street Bank will reinvest all cash distributions
of the Fund and effect redemptions of Fund shares in accordance with
instructions from persons having voting rights in respect of Fund shares (see
"Voting Rights"). In addition, State Street Bank will be responsible for
maintaining appropriate records with respect to all transactions in Fund shares
relative to VAA-II.
The agreement requires State Street Bank to have at all times an aggregate
capital, surplus, and undivided profits of not less than $2,000,000 and
prohibits resignation by State Street Bank until (a) VAA-II has been completely
liquidated and the proceeds of such liquidation properly distributed or (b) a
successor custodian bank having the qualifications enumerated above shall have
agreed to serve as custodian. Subject to these conditions the Agreement of
Custodianship may be terminated by either party upon 30 days of written notice.
For its service as custodian, State Street Bank will be paid a fee to be agreed
upon from time to time by State Street Bank and CG Life. The fee shall be paid
by CG Life and in no event may State Street Bank charge or collect against or
from the property held by it pursuant to the Agreement of Custodianship any of
its fees or expenses without the prior written consent of CG Life. In addition,
CG Life has agreed to indemnify State Street Bank for any liability arising in
connection with its services as custodian so long as such liability is not
attributable to the negligence or bad faith of State Street Bank.
Independent Accountants:
- -----------------------
PricewaterhouseCoopers LLP acts as independent accountants for CG Variable
Annuity Accounts and CG Life. Its offices are at One Financial Plaza, Hartford,
CT 06103. As independent accountants, PricewaterhouseCoopers LLP annually
performs an audit of the financial statements of the CG Variable Annuity Account
II and CG Life.
PURCHASE OF SECURITIES BEING OFFERED
The Contract is sold primarily by persons who are insurance agents of or brokers
for CG Life authorized by applicable law to sell life and other forms of
personal insurance and who are similarly authorized to sell variable annuities.
These persons may be registered representatives of CIGNA Financial Services,
Inc. ("CFS") Hartford, Connecticut, a broker-dealer registered under the
Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc. CFS is organized under the laws of Connecticut and is a
wholly owned subsidiary of Connecticut General Corporation, which is wholly
owned by CIGNA Holdings, Inc., which is in turn a wholly owned subsidiary of
CIGNA Corporation. Effective December 1, 1997, CFS replaced CIGNA Financial
Advisors, Inc. as the principal underwriter for the contracts. The Contract may
also be sold through other broker-dealers registered under the Securities
Exchange Act of 1934 whose representatives are authorized by applicable law to
sell variable annuity contracts.
-2-
<PAGE>
UNDERWRITERS
(a) The principal underwriter of the Contract is CIGNA Financial Services, Inc.
("CFS") Hartford, CT, a broker-dealer registered under the Securities
Exchange Act of 1934 and a member of the National Association of Securities
Dealers, Inc.
(b) The Contract is offered on a continuing basis.
(c) The following table sets forth the aggregate amount of administrative
charges paid to CG Life, for each of the calendar years 1995 to 1998, with
respect to VAA-II, Group Variable Annuities for Retirement Plans. Payments
to CG Life are made through the General Account. In prior years, payments
were made through VAA-II.
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1998 $ 598
1997 $ 323
1996 $ 435
1995 $ 424
</TABLE>
ANNUITY PAYMENTS
Annuity Payments - General:
- --------------------------
As described in the Prospectus, Annuity Payments will be determined on the basis
of (i) the table specified in the Contract which reflects the adjusted age of
the Annuitant, (ii) the type of annuity payout option selected, and (iii) the
investing performance of the underlying Fund Shares. The amount of Annuity
Payments will not be adversely affected by adverse mortality experience or any
increase in the expenses of CG Life in excess of the charges specified in the
Contract. If CG Life is required to withhold certain amounts from annuity
payments in compliance with Federal or State Law relating to collection of
income taxes at the source of payment, the amount so required will be deducted
from each payment.
Determination of Monthly Annuity Payments:
- -----------------------------------------
The Contract contains tables indicating the dollar amount of the first monthly
Annuity Payment which can be purchased with each $1,000 of value accumulated
under the Contract. These tables include an "assumed investment return," which
is the annual rate of return, expressed as a percentage, that the Contract
assumes assets invested in the underlying Fund will achieve each year. The
assumed investment return is the measuring point for subsequent Annuity
Payments. If the actual net investment rate (on an annual basis) equals the
assumed investment return and remains constant, the Annuity Payments will remain
constant. If the actual net investment rate exceeds the assumed investment
return, the Annuity Payments will increase at a rate equal to the amount of such
excess. Conversely, if the actual rate is less than the assumed investment
return, Annuity payments will decrease.
-3-
<PAGE>
The selection of the assumed investment return is made by the Contractholder
from a range made available by CG Life, and is used to determine the purchase
rates for all annuities effected under the Contract. Assumed investment returns
of from 3% to 5% are normally available.
The assumed investment return may be changed, by amendment of the Contract, with
respect to annuities effected on or after the date of change.
To determine the amount of the first monthly Variable Annuity payment, the
amount available to effect the Variable Annuity is multiplied by the appropriate
annuity purchase rate from the table specified in the Contract.
Each monthly Variable Annuity payment thereafter is determined by multiplying
the amount of Annuity Units attributable to the Annuitant by the value of an
Annuity Unit for the Valuation Date immediately preceding the payment date.
FINANCIAL STATEMENTS
The following pages set forth the financial statements of:
(a) Connecticut General Life Insurance Company
CG Variable Annuity Account II
(b) Connecticut General Life Insurance Company
Consolidated Financial Statements
<PAGE>
Report of
Independent Accountants
To the Board of Directors and Participants of
CG Variable Annuity Account II of
Connecticut General Life
Insurance Company
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the selected
per unit data and ratio present fairly, in all material respects, the financial
position of CG Variable Annuity Account II (the "Account") of Connecticut
General Life Insurance Company at December 31, 1998, the results of its
operations and the changes in its net assets and the selected per unit data and
ratio for each of the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and selected per unit data and
ratio (hereafter referred to as "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 of these
financial statements in accordance with generally accepted auditing standards
which 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
Hartford, Connecticut
February 19, 1999
<PAGE>
CG VARIABLE ANNUITY ACCOUNT II
Statement of Assets and Liabilities
December 31, 1998
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investment in CIGNA Variable Products S&P 500 Index Fund
at net asset value, 461,704 shares at $19.73 per share
(cost $6,160,253; net unrealized appreciation $2,949,167) $9,109,420
----------
Total assets 9,109,420
----------
Liabilities:
Payable to Connecticut General Life Insurance Company 96,110
----------
Total liabilities 96,110
----------
Net Assets $9,013,310
==========
</TABLE>
<TABLE>
<CAPTION>
Net Assets Represented By:
Accumulation Unit
Units Value
------------ -----
<S> <C> <C> <C>
Group contracts: 5,514 $225.298 $1,242,293
Individual contracts:
Variable annuity contracts 7,818 193.841 1,515,449
Flexible annuity contracts 18,811 181.493 3,414,065
Reserve for variable annuity contracts
in distribution period 2,841,503
----------
$9,013,310
==========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CG VARIABLE ANNUITY ACCOUNT II
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year ended December 31, 1998 1997
---------- ----------
<S> <C> <C>
From Operations:
Investment Income--net $ 113,706 $ 90,243
Realized gain on investments--net 469,340 354,582
Change in unrealized appreciation
on investments--net $1,481,115 1,411,389
---------- ----------
Increase in net assets resulting
from operations 2,064,161 1,856,214
---------- ----------
From Unit Transactions:
Participant contributions-net 10,048 174,747
Withdrawal of funds on terminated
contracts-net (396,562) (256,923)
Annuity benefit distributions (512,335) (433,003)
Mortality guarantee adjustment (284,476) (37,613)
Equalization adjustment 3,631 (3)
Decrease in net assets derived ---------- -----------
from unit transactions (1,179,694) (552,795)
---------- -----------
Increase in Net Assets 884,467 1,303,419
Net Assets:
Beginning of year 8,128,843 6,825,424
---------- ----------
End of year $9,013,310 $8,128,843
========== ==========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CG VARIABLE ANNUITY ACCOUNT II
Statement of Operations
<TABLE>
<CAPTION>
Year ended December 31, 1998 1997
----------- -----------
<S> <C> <C>
Investment Income:
Dividends $ 199,619 $ 154,455
Expenses:
Mortality and expense risk 85,913 64,212
----------- -----------
Investment Income--Net 113,706 90,243
----------- -----------
Realized Gain on Investments:
Proceeds from sale of shares 1,028,620 1,134,685
Cost of shares sold 626,933 956,797
----------- -----------
Realized gain from security
transactions--net 401,687 177,888
Capital gains distribution 67,653 176,694
----------- -----------
Realized Gain on
Investments--Net 469,340 354,582
----------- -----------
Unrealized Appreciation
On Investments:
Beginning of year 1,468,052 56,663
End of year 2,949,167 1,468,052
----------- -----------
Change in Unrealized Appreciation
on Investments--Net 1,481,115 1,411,389
----------- -----------
Increase In Net Assets
Resulting From Operations--Net $ 2,064,161 $ 1,856,214
=========== ===========
Ratio Of Net Investment Income to Average
Net Assets 1.327% 1.207%
Number of Accumulation Units Outstanding
At End Of Year 32,143 34,003
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CG VARIABLE ANNUITY ACCOUNT II
Notes to Financial Statements
The Account is registered as a Unit Investment Trust under the Investment
Company Act of 1940, as amended. The operations of the Account are part of the
operations of Connecticut General Life Insurance Company (CG Life). These
financial statements have been prepared in conformity with generally accepted
accounting principles, and reflect management's estimates and assumptions, such
as those regarding fair market value and reserve assumptions, that affect
recorded amounts. Actual results could differ from those estimates. Significant
estimates are discussed throughout the Notes to Financial Statements. Certain
reclassifications have been made to prior years' amounts to conform with the
1998 presentation.
1. The following is a summary of significant accounting policies consistently
applied in the preparation of the Account's financial statements:
A. The investment in CIGNA Variable Products S&P 500 Index Fund (Fund)
shares is valued at the closing net asset value per share as determined by
the Fund on December 31, 1998. The Fund was organized by CG Life in 1968.
B. The amount of the reserve for contracts in the distribution period is
determined by actuarial assumptions which meet statutory requirements. Gains
or losses resulting from actual mortality experience, the full
responsibility for which is assumed by CG Life, are offset by transfers to
or from CG Life.
C. Investment transactions are accounted for on the trade date (date the
order to buy or sell is executed), and income is recorded on the ex-dividend
date. Cost of investments sold is determined on the basis of the last-in,
first-out method.
D. The operations of the Account are included in, and taxed as part of CG
Life as a life insurance company. Under Internal Revenue Code Section 817
there is no taxable income attributable to the Account.
2. Under the terms of the annuity contracts, the Individual participant can
elect either a fixed or variable annuity benefit at retirement. The Group
participant can elect either a fixed or variable annuity benefit during the
accumulation phase and at retirement. The assets providing for the variable
annuity benefit will be invested in the Fund, and the fixed annuity contract
will be purchased from the Account's sponsor, CG Life. There were no transfers
from accumulation period to distribution period during 1998 or 1997.
3. The cost of investments represents the accumulated cost of Fund shares
purchased by the Account at net asset value with net participant contributions
received and from reinvestment of all distributions made by the Fund.
4. Participant contributions are net of premium taxes (if any) and sales load
of $598 and $325 for the years ended December 31, 1998 and 1997, respectively.
These amounts are deducted from participant contributions and paid to CG Life in
accordance with the contract. Mortality and expense risk charges, which
generally range from 0.25% to 0.50%, depending on contract size, are also paid
to CG Life.
5. Withdrawal of funds on terminated contracts is net of administrative charges
of $394 and $455 for the years ended December 31, 1998 and 1997, respectively.
These amounts are paid to CG Life in accordance with the contract.
6. Contracts are sold primarily by persons who are insurance agents of or
brokers for CG Life authorized by applicable law to sell life and other forms of
personal insurance and who are similarly authorized to sell variable annuities.
These persons are for the most part registered representatives of CIGNA
Financial Services, Inc.
<PAGE>
CG VARIABLE ANNUITY ACCOUNT II
Notes to Financial Statements (Continued)
7. ACCUMULATION UNITS INFORMATION
<TABLE>
<CAPTION>
SCHEDULE OF SELECTED PER-UNIT DATA
------------------------------------------------------
December 31,
------------------------------------------------------
Group Contracts: 1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value:
--------------------------------------
Beginning of year $175.514 $132.033 $108.072 $ 79.187 $ 78.857
End of year 225.298 175.514 132.033 108.072 79.187
-------- ------- ------- ------- -------
Net increase in net asset value
resulting from operations $ 49.784 $43.481 $ 23.961 $28.885 $ 0.330
======== ======= ======= ======= =======
Accumulation units outstanding:
--------------------------------------
End of year 5,514 6,213 6,185 6,864 6,819
======== ======= ======= ======= =======
Individual Contracts:
Variable annuity contracts:
Net asset value:
--------------------------------------
Beginning of year $151.764 $114.738 $ 94.390 $ 69.507 $ 69.564
End of year 193.841 151.764 114.738 94.390 69.507
-------- -------- ------- ------- -------
Net increase (decrease) in net asset
value resulting from operations $ 42.077 $ 37.026 $ 20.348 $ 24.883 $ (0.057)
======== ======= ======= ======= =======
Accumulation units outstanding:
--------------------------------------
End of year 7,818 8,474 8,484 8,566 8,823
======== ======= ======= ======= =======
Flexible annuity contracts:
Net asset value:
--------------------------------------
Beginning of year $142.594 $108.183 $ 89.312 $ 65.997 $ 66.282
End of year 181.493 142.594 108.183 89.312 65.997
-------- -------- ------- ------- -------
Net increase (decrease) in net asset
value resulting from operations $ 38.899 $ 34.411 $ 18.871 $ 23.315 $(0.285)
======== ======= ======= ======= =======
Accumulation units outstanding:
--------------------------------------
End of year 18,811 19,316 22,410 26,647 27,762
======== ======= ======= ======= =======
</TABLE>
8. DIVERSIFICATION REQUIREMENTS
Under the provisions of Section 817(h) of the Internal Revenue Code (Code), a
variable annuity contract, other than a contract issued in connection with
certain types of employee benefit plans, will not be treated as an annuity
contract for federal tax purposes for any period for which the investments of
the segregated asset account on which the contract is based are not adequately
diversified. The Code provides that the "adequately diversified" requirement may
be met if the underlying investments satisfy either a statutory safe harbor test
or diversification requirements, as set forth in regulations issued by the
Secretary of the Treasury.
The Secretary of the Treasury has issued regulations under Section 817(h) of the
Code. CG Life believes that the Account satisfies the current requirements of
the regulations, and it intends that the Account will continue to meet such
requirements.
<PAGE>
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
Connecticut General Life Insurance Company
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, comprehensive income and changes in
shareholder's equity and of cash flows present fairly, in all material respects,
the financial position of Connecticut General Life Insurance Company and its
subsidiaries at December 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1998, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICEWATERHOUSECOOPERS LLP
February 9, 1999
<PAGE>
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(In millions)
- -------------------------------------------------------------------------------------
For the years ended December 31, 1998 1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Premiums and fees $ 5,683 $ 5,376 $ 5,314
Net investment income 2,637 3,139 3,199
Realized investment gains 93 45 37
Other revenues 427 10 9
------- ------- -------
Total revenues 8,840 8,570 8,559
------- ------- -------
BENEFITS, LOSSES AND EXPENSES
Benefits, losses and settlement expenses 5,802 5,917 6,069
Policy acquisition expenses 44 122 143
Other operating expenses 1,763 1,618 1,477
------- ------- -------
Total benefits, losses and expenses 7,609 7,657 7,689
-------- ------- -------
INCOME BEFORE INCOME TAXES 1,231 913 870
------- ------- -------
Income taxes (benefits):
Current 636 347 394
Deferred (211) (49) (81)
------- ------- -------
Total taxes 425 298 313
------- ------- -------
NET INCOME $ 806 $ 615 $ 557
- ------------------------------------------------=====================================
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
2
<PAGE>
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
(In millions, except per share amounts)
- --------------------------------------------------------------------------------------------------------------
As of December 31, 1998 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost, $16,820; $20,962) $18,067 $22,323
Mortgage loans 8,875 10,090
Equity securities, at fair value (cost, $62; $75) 47 54
Policy loans 6,091 7,146
Real estate 712 749
Other long-term investments 159 166
Short-term investments 85 173
------------- --------------
Total investments 34,036 40,701
Cash and cash equivalents 1,026 923
Accrued investment income 494 602
Premiums and accounts receivable 939 811
Reinsurance recoverables 7,278 1,271
Deferred policy acquisition costs 187 834
Property and equipment 365 291
Deferred income taxes 865 653
Goodwill and other intangibles 730 474
Other assets 236 276
Separate account assets 34,648 29,217
- -----------------------------------------------------------------------------------------------------------------
Total assets $80,804 $76,053
- ----------------------------------------------------------------------------=====================================
LIABILITIES
Contractholder deposit funds $30,614 $30,449
Future policy benefits 8,286 8,224
Unpaid claims and claim expenses 1,286 1,225
Unearned premiums 162 260
------------- --------------
Total contractholder and insurance
liabilities 40,348 40,158
Accounts payable, accrued expenses and
other liabilities 2,523 2,428
Current income taxes 65 -
Separate account liabilities 34,340 29,021
- -----------------------------------------------------------------------------------------------------------------
Total liabilities 77,276 71,607
- -----------------------------------------------------------------------------------------------------------------
CONTINGENCIES - NOTE 13
SHAREHOLDER'S EQUITY
Common stock (6 shares issued and outstanding) 30 30
Additional paid-in capital 1,072 766
Net unrealized appreciation, fixed maturities 243 282
Net unrealized (depreciation), equity securities (25) (26)
Net translation of foreign currencies 2 2
---------- --------
Accumulated other comprehensive income 220 258
Retained earnings 2,206 3,392
- -----------------------------------------------------------------------------------------------------------------
Total shareholder's equity 3,528 4,446
- -----------------------------------------------------------------------------------------------------------------
Total liabilities and shareholder's equity $80,804 $76,053
- ----------------------------------------------------------------------------=====================================
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
3
<PAGE>
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND CHANGES IN
SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
(In millions)
- ----------------------------------------------------------------------------------------------------------------
For the years ended December 31, 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------
Compre- Share- Compre- Share- Compre- Share-
hensive holder's hensive holder's hensive holder's
Income Equity Income Equity Income Equity
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common stock $ 30 $ 30 $ 30
Additional paid-in capital 1,072 766 766
Accumulated other comprehensive
income - beginning of year 258 191 478
Net unrealized appreciation
(depreciation) - fixed maturities $ (39) (39) $ 69 69 $ (276) (276)
Net unrealized appreciation
(depreciation) - equity securities 1 1 (1) (1) (12) (12)
--------- --------- ---------
Net unrealized appreciation
(depreciation) on securities (38) 68 (288)
Net translation of foreign
currencies - - (1) (1) 1 1
--------- --------- ---------
Other comprehensive
(loss) income (38) 67 (287)
--------- --------- ---------
Accumulated other comprehensive
income - end of year 220 258 191
--------- --------- ---------
Retained earnings - beginning of year 3,392 3,177 3,220
Net income 806 806 615 615 557 557
Dividends declared (1,992) (400) (600)
--------- --------- ---------
Retained earnings - end of year 2,206 3,392 3,177
- ----------------------------------------------------------------------------------------------------------------
TOTAL COMPREHENSIVE
INCOME AND
SHAREHOLDER'S EQUITY $ 768 $3,528 $ 682 $4,446 $ 270 $4,164
- ------------------------------------------======================================================================
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
4
<PAGE>
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(In millions)
- --------------------------------------------------------------------------------------------------------------
For the years ended December 31, 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 806 $ 615 $ 557
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Insurance liabilities 67 78 57
Reinsurance recoverables (7) 68 (11)
Premiums and accounts receivable (179) 106 77
Deferred income taxes, net (211) (49) (82)
Other assets (339) (54) 43
Deferred policy acquisition costs (12) (97) (92)
Accounts payable, accrued expenses,
other liabilities and current income taxes 149 41 (113)
Depreciation and goodwill amortization 113 88 94
Gain on sale of business (418) - -
Other, net (50) (99) (151)
------- ------- -------
Net cash (used in) provided by operating activities (81) 697 379
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from investments sold:
Fixed maturities 2,869 1,583 1,589
Mortgage loans 1,052 807 640
Equity securities 15 14 13
Real estate 98 401 345
Policy loans 382 - -
Other (primarily short-term investments) 6,724 6,447 3,613
Investment maturities and repayments:
Fixed maturities 2,797 2,394 2,634
Mortgage loans 421 601 630
Investments purchased:
Fixed maturities (3,881) (4,339) (3,834)
Mortgage loans (1,611) (1,426) (1,300)
Equity securities (7) (9) (3)
Policy loans - (13) (207)
Other (primarily short-term investments) (7,652) (6,296) (3,930)
Net cash from disposition of business 1,295 - -
Other, net (274) (102) (94)
------- ------- -------
Net cash provided by investing activities 2,228 62 96
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Contractholder deposit funds:
Deposits and interest credited 7,050 7,634 7,260
Withdrawals and benefit payments (7,106) (7,023) (7,135)
Dividends paid to parent (1,992) (400) (600)
Other, net 4 (47) -
------- ------- -------
Net cash (used in) provided by financing activities (2,044) 164 (475)
- --------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 103 923 -
Cash and cash equivalents, beginning of year 923 - -
- --------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 1,026 $ 923 $ -
- --------------------------------------------------------------------------====================================
Supplemental Disclosure of Cash Information:
Income taxes paid, net of refunds $ 520 $ 402 $ 385
Interest paid $ 3 $ 5 $ 7
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
5
<PAGE>
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS
Connecticut General Life Insurance Company and its subsidiaries (the Company)
provide insurance and related financial services throughout the United States
and in many locations worldwide. Principal products and services include group
health and life insurance and retirement and investment products and services.
The Company is a wholly-owned subsidiary of Connecticut General Corporation,
which is an indirect wholly-owned subsidiary of CIGNA Corporation (CIGNA).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) Basis of Presentation: The consolidated financial statements include the
accounts of the Company and all significant subsidiaries. These consolidated
financial statements have been prepared in conformity with generally accepted
accounting principles, and reflect management's estimates and assumptions, such
as those regarding medical costs and interest rates, that affect the recorded
amounts. Significant estimates used in determining contractholder and insurance
liabilities, related reinsurance recoverables, and valuation allowances for
investment assets are discussed throughout the Notes to Financial Statements.
Certain reclassifications have been made to prior years' amounts to conform with
the 1998 presentation.
B) Recent Accounting Pronouncements: The Company adopted Statement of
Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an
Enterprise and Related Information," as of December 31, 1998. SFAS No. 131
changes the way segments are structured and requires additional segment
disclosures. Prior period information has been restated based on the new
requirements. See Note 11 for additional information.
In 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
requires that derivatives be reported on the balance sheet at fair value.
Changes in fair value are recognized in net income or, for derivatives which are
hedging market risk related to future cash flows, in the accumulated other
comprehensive income section of shareholders' equity. Implementation is required
by the first quarter of 2000, with the cumulative effect of adoption reflected
in net income and accumulated other comprehensive income, as appropriate. The
Company has not determined the effect or timing of implementation of this
pronouncement.
The American Institute of Certified Public Accountants (AICPA) issued
Statement of Position (SOP) 97-3, "Accounting by Insurance and Other Enterprises
for Insurance-Related Assessments," in 1997. SOP 97-3 provides guidance on the
recognition and measurement of liabilities for guaranty fund and other
insurance-related assessments. Implementation of this pronouncement, which is
required by the first quarter of 1999 with the cumulative effect of adopting the
SOP reflected in net income, is not expected to have a material effect on
results of operations, liquidity or financial condition.
In 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 specifies the types
of costs that must be capitalized and amortized over the software's expected
useful life and the types of costs which must be immediately recognized as
expense. Implementation of this pronouncement is required by the first quarter
of 1999 and is not expected to have a material effect on results of operations,
liquidity or financial condition.
In 1998, the AICPA issued SOP 98-7, "Deposit Accounting: Accounting for
Insurance and Reinsurance Contracts That Do Not Transfer Insurance Risk." SOP
98-7 provides guidance on the deposit method of accounting for insurance and
reinsurance contracts that do not transfer insurance risk, except for long-
duration life and health contracts. Implementation is required by the first
quarter of 2000, with the cumulative effect of adopting the SOP reflected in net
income in the year of adoption. The Company has not determined the effect or
timing of implementation of this pronouncement.
C) Financial Instruments: In the normal course of business, the Company
enters into transactions involving various types of financial instruments,
including investments such as fixed maturities and equity securities and off-
balance sheet financial instruments such as investment and loan commitments and
financial guarantees. These instruments are subject to risk of loss due to
interest rate and market fluctuations and most have credit risk. The
6
<PAGE>
Company evaluates and monitors each financial instrument individually and, where
appropriate, uses certain derivative instruments or obtains collateral or other
forms of security to minimize risk of loss.
Financial instruments that are subject to fair value disclosure requirements
(insurance contracts, real estate, goodwill and taxes are excluded) are carried
in the financial statements at amounts that approximate fair value, except for
mortgage loans and contractholder deposit funds (non-insurance products). For
these financial instruments, the fair value was not materially different from
the carrying amount as of December 31, 1998 and 1997. Fair values of off-balance
sheet financial instruments as of December 31, 1998 and 1997 were not material.
Fair values for financial instruments are estimates that, in many cases, may
differ significantly from the amounts that could be realized upon immediate
liquidation. In cases where market prices are not available, estimates of fair
value are based on discounted cash flow analyses which utilize current interest
rates for similar financial instruments with comparable terms and credit
quality. The fair value of liabilities for contractholder deposit funds was
estimated using the amount payable on demand, and for those not payable on
demand, discounted cash flow analyses.
D) Investments: Investments in fixed maturities, which are classified as
available-for-sale and carried at fair value, include bonds; asset-backed
securities, including collateralized mortgage obligations (CMOs); and redeemable
preferred stocks. Fixed maturities are considered impaired and written down to
fair value when a decline in value is considered to be other than temporary.
Mortgage loans are carried principally at unpaid principal balances, net of
valuation reserves. Mortgage loans are considered impaired when it is probable
that the Company will not collect all amounts according to the contractual terms
of the loan agreement. If impaired, a valuation reserve is utilized to record
any change in the fair value of the underlying collateral below the carrying
value of the mortgage loan.
Fixed maturities and mortgage loans that are delinquent or restructured to
modify basic financial terms, typically to reduce the interest rate and, in
certain cases, extend the term, are placed on non-accrual status. Net investment
income on such investments is recognized only when payment is received.
Real estate investments are either held for the production of income or held
for sale. Real estate investments held for the production of income are carried
at depreciated cost less any write-downs to fair value. Depreciation is
generally calculated using the straight-line method based on the estimated
useful lives of these assets.
Real estate investments held for sale are generally those which are acquired
through the foreclosure of mortgage loans. The Company's policy is to
rehabilitate, re-lease and sell foreclosed properties, which generally takes two
to four years or less if circumstances indicate that an immediate sale is in the
best interests of the Company or policyholders. At the time of foreclosure,
properties are valued at fair value less estimated costs to sell and
reclassified from mortgage loans to real estate held for sale. Subsequent to
foreclosure, these investments are carried at the lower of cost or current fair
value less estimated costs to sell and are no longer depreciated. Adjustments to
the carrying value as a result of changes in fair value subsequent to
foreclosure are recorded as valuation reserves. The Company considers several
methods in determining fair value for real estate, with emphasis placed on the
use of discounted cash flow analyses and, in some cases, the use of third-party
appraisals.
Equity securities and short-term investments are classified as available-for-
sale. Equity securities, which include common and non-redeemable preferred
stocks, are carried at fair value. Short-term investments are carried at fair
value, which approximates cost.
Policy loans are generally carried at unpaid principal balances.
Realized investment gains and losses result from sales, investment asset
write-downs and changes in valuation reserves. Realized investment gains and
losses do not include amounts attributable to experience-rated pension
policyholders' contracts and participating life policies (policyholder share).
Realized investment gains and losses are based upon specific identification of
the investment assets.
Unrealized investment gains and losses for investments carried at fair value
are included in shareholder's equity net of policyholder-related amounts and
deferred income taxes.
See Note 4(F) for a discussion of the Company's accounting policies for
derivative financial instruments.
E) Cash and Cash Equivalents: Short-term investments with a maturity of three
months or less at the time of purchase are reported as cash equivalents.
F) Reinsurance Recoverables: Reinsurance recoverables are estimates of amounts
to be received from reinsurers, including amounts under reinsurance agreements
with affiliated companies. Allowances are established for amounts estimated to
be uncollectible. See Notes 3 and 9.
G) Deferred Policy Acquisition Costs: Acquisition costs consist of
commissions, premium taxes and other costs, which vary with, and are primarily
related to, the production of revenues. Acquisition costs for universal life
products and contractholder deposit funds are deferred and amortized in
proportion to the present value of total
7
<PAGE>
estimated gross profits over the expected lives of the contracts. Acquisition
costs for annuity and other individual life insurance products are deferred and
amortized, generally in proportion to the ratio of annual revenue to the
estimated total revenues over the contract periods.
Deferred policy acquisition costs are reviewed to determine if they are
recoverable from future income, including investment income. If such costs are
estimated to be unrecoverable, they are expensed unless such costs are estimated
to be unrecoverable as a result of treating unrealized investment gains and
losses as though they had been realized. If so, a deferred acquisition cost
valuation allowance may be established or adjusted, with a comparable offset in
net unrealized appreciation (depreciation).
H) Property and Equipment: Property and equipment are carried at cost less
accumulated depreciation. When applicable, cost includes interest and real
estate taxes incurred during construction and other construction-related costs.
Depreciation is calculated principally on the straight-line method based on the
estimated useful lives of the assets. Accumulated depreciation was $490 million
and $448 million at December 31, 1998 and 1997, respectively.
I) Goodwill and Other Intangibles: Goodwill represents the excess of the cost
of businesses acquired over the fair value of their net assets. Other intangible
assets primarily represent purchased customer lists and provider contracts.
Goodwill and other intangibles are amortized over periods not exceeding 40
years. Goodwill and other intangibles are written down when not recoverable
based on analysis of historical and estimated future income or undiscounted
estimated cash flows of the related businesses. Amortization periods are revised
if it is estimated that the remaining period of benefit of the goodwill has
changed. Accumulated amortization was $143 million and $113 million at December
31, 1998 and 1997, respectively.
J) Other Assets: Other assets consists of various insurance-related assets,
principally ceded unearned premiums, reinsurance deposits and other amounts due
from affiliated companies.
K) Separate Accounts: Separate account assets and liabilities are principally
carried at market value and represent policyholder funds maintained in accounts
having specific investment objectives. The investment income, gains and losses
of these accounts generally accrue to the policyholders and, therefore, are not
included in the Company's revenues and expenses.
L) Contractholder Deposit Funds: Liabilities for contractholder deposit funds
consist of deposits received from customers and investment earnings on their
fund balances, less administrative charges and, for universal life fund
balances, mortality charges.
M) Future Policy Benefits: Future policy benefits are liabilities for life,
health and annuity products. Such liabilities are established in amounts
adequate to meet the estimated future obligations of policies in force. These
liabilities are computed using premium assumptions for group annuity policies
and the net level premium method for individual life policies, and are based
upon estimates as to future investment yield, mortality and withdrawals that
include provisions for adverse deviation. Future policy benefits for individual
life insurance and annuity policies are computed using interest rates ranging
from 2% to 11%, generally graded down from 1 to 20 years. Mortality, morbidity,
and withdrawal assumptions are based on either the Company's own experience or
various actuarial tables.
N) Unpaid Claims and Claim Expenses: Liabilities for unpaid claims and claim
expenses are estimates of payments to be made on reported and incurred but not
reported insurance claims.
O) Unearned Premiums: Premiums for group life and accident and health
insurance are reported as earned on a pro-rata basis over the contract period.
The unexpired portion of these premiums is recorded as unearned premiums.
P) Other Liabilities: Other liabilities consist principally of postretirement
and postemployment benefits and various insurance-related liabilities, including
amounts related to reinsurance contracts and guaranty fund assessments that can
be reasonably estimated.
Q) Translation of Foreign Currencies: Foreign operations primarily utilize the
local currencies as their functional currencies, and assets and liabilities are
translated at the rates of exchange as of the balance sheet date. The
translation gain or loss on such functional currencies, net of applicable taxes,
is generally reflected in shareholder's equity. Revenues and expenses are
translated at the average rates of exchange prevailing during the year.
R) Premium and Fees, Revenues and Related Expenses: Premiums for group life
and accident and health insurance are recognized as revenue on a pro-rata basis
over their contract periods. Benefits, losses and settlement expenses are
recognized when incurred.
Revenues for investment-related products consist of net investment income and
contract fees assessed against the fund balances during the period. Net
investment income represents investment income on assets supporting investment-
related products and is recognized as earned. Contract fees are based upon
related administrative
8
<PAGE>
expenses and are assessed ratably over the contract year. Benefit expenses for
investment-related products primarily consist of amounts credited in accordance
with contract provisions.
Premiums for individual life insurance as well as individual and group annuity
products, excluding universal life and investment-related products, are
recognized as revenue when due. Benefits, losses and settlement expenses are
matched with premiums.
Revenues for universal life products consist of net investment income and
mortality, administration and surrender fees assessed against the fund balances
during the period. Net investment income represents investment income on assets
supporting universal life products and is recognized as earned. Fees for
mortality are recognized ratably over the policy year. Administration fees are
recognized as services are provided, and surrender charges are recognized as
earned. Benefit expenses for universal life products consist of benefit claims
in excess of fund balances, which are recognized when claims are filed, and
amounts credited in accordance with contract provisions.
S) Participating Business: Certain life insurance policies contain dividend
payment provisions that enable the policyholder to participate in a portion of
the earnings of the Company's business. The participating insurance in force
accounted for approximately 7% of total life insurance in force at December 31,
1998, 1997 and 1996.
T) Income Taxes: The Company and its domestic subsidiaries are included in
the consolidated United States federal income tax return filed by CIGNA. In
accordance with a tax sharing agreement with CIGNA, the provision for federal
income tax is computed as if the Company were filing a separate federal income
tax return, except that benefits arising from tax credits and net operating and
capital losses are allocated to those subsidiaries producing such attributes to
the extent they are utilized in CIGNA's consolidated federal income tax
provision.
Deferred income taxes are generally recognized when assets and liabilities
have different values for financial statement and tax reporting purposes. See
Note 7 for additional information.
NOTE 3 - DISPOSITION
As of January 1, 1998, the Company sold its individual life insurance and
annuity business for cash proceeds of $1.4 billion. The sale resulted in an
after-tax gain of $773 million of which $202 million was recognized upon closing
of the sale. Since the principal agreement to sell this business is in the form
of an indemnity reinsurance arrangement, the remaining $571 million of the gain
was deferred and is being recognized at the rate that earnings from the business
sold would have been expected to emerge, primarily over fifteen years on a
declining basis. The Company recognized $66 million of the deferred gain in
1998.
Revenues for this business were $972 million and $926 million for the years
ended December 31, 1997 and 1996, respectively, and net income was $102 million
and $67 million for the same periods. Also, as part of the transaction, the
Company recorded a reinsurance recoverable from the purchaser of $5.8 billion
for insurance liabilities retained, and transferred invested assets of $5.4
billion along with other assets and liabilities associated with the business.
The sales agreement provides for the possibility of certain adjustments;
however, any future adjustments are not expected to be material to results of
operations, liquidity or financial condition.
The Company paid a dividend of $1.4 billion to its parent in January 1998,
having received prior approval of both the disposition and the dividend from the
Connecticut Insurance Department (the Department).
9
<PAGE>
NOTE 4 - INVESTMENTS
A) Fixed Maturities: Fixed maturities are net of cumulative write-downs of
$22 million and $36 million, including policyholder share, as of December 31,
1998 and 1997, respectively.
The amortized cost and fair value by contractual maturity periods for fixed
maturities, including policyholder share, as of December 31, 1998 were as
follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Amortized Fair
(In millions) Cost Value
- -----------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 979 $ 999
Due after one year through five years 3,960 4,110
Due after five years through ten years 3,512 3,723
Due after ten years 2,665 3,348
Asset-backed securities 5,704 5,887
- -----------------------------------------------------------------------------
Total $ 16,820 $ 18,067
- ----------------------------------------------===============================
</TABLE>
Actual maturities could differ from contractual maturities because issuers
may have the right to call or prepay obligations with or without call or
prepayment penalties. Also, the Company may extend maturities in some cases.
Gross unrealized appreciation (depreciation) for fixed maturities, including
policyholder share, by type of issuer was as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Amortized Unrealized Unrealized Fair
(In millions) Cost Appreciation Depreciation Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
At December 31, 1998:
Federal government bonds $ 568 $ 407 $ - $ 975
State and local government bonds 145 20 - 165
Foreign government bonds 147 7 (9) 145
Corporate securities 10,256 733 (94) 10,895
Asset-backed securities 5,704 217 (34) 5,887
- ----------------------------------------------------------------------------------------------
Total $ 16,820 $ 1,384 $ (137) $ 18,067
- -------------------------------------------===================================================
At December 31, 1997:
Federal government bonds $ 1,361 $ 294 $ - $ 1,655
State and local government bonds 178 22 (2) 198
Foreign government bonds 143 7 (1) 149
Corporate securities 13,027 860 (123) 13,764
Asset-backed securities 6,253 317 (13) 6,557
- ----------------------------------------------------------------------------------------------
Total $ 20,962 $ 1,500 $ (139) $ 22,323
- -------------------------------------------===================================================
</TABLE>
Asset-backed securities include investments in CMOs as of December 31, 1998
of $2.0 billion carried at fair value (amortized cost, $2.0 billion), compared
with $2.3 billion carried at fair value (amortized cost, $2.3 billion) as of
December 31, 1997. Certain of these securities are backed by Aaa/AAA-rated
government agencies. All other CMO securities have high quality ratings through
use of credit enhancements provided by subordinated securities or mortgage
insurance from Aaa/AAA-rated insurance companies. CMO holdings are concentrated
in securities with limited prepayment, extension and default risk, such as
planned amortization class bonds. The Company's investments in interest-only and
principal-only CMOs, which are subject to interest rate risk due to accelerated
prepayments, represented approximately .05% and .10% of total CMO investments at
December 31, 1998 and 1997, respectively.
At December 31, 1998, contractual fixed maturity investment commitments were
$34 million. The majority of investment commitments are for the purchase of
investment grade fixed maturities, bearing interest at a fixed market rate, and
require no collateral. These commitments are diversified by issuer and maturity
date, and it is estimated that approximately 59% will be disbursed in 1999.
10
<PAGE>
B) Mortgage Loans and Real Estate: The Company's mortgage loans and real
estate investments are diversified by property type and location and, for
mortgage loans, by borrower. Mortgage loans are collateralized by the related
properties and generally are less than 75% of the property's value at the time
the original loan is made.
At December 31, the carrying values of mortgage loans and real estate
investments, including policyholder share, were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
(In millions) 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C>
Mortgage loans $ 8,875 $ 10,090
-------- --------
Real estate:
Held for sale 326 339
Held for production of income 386 410
-------- --------
Total real estate 712 749
- -----------------------------------------------------------------------------
Total $ 9,587 $ 10,839
- ----------------------------------------------===============================
</TABLE>
At December 31, mortgage loans and real estate investments comprised the
following property types and geographic regions:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
(In millions) 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C>
Property type:
Retail facilities $ 3,145 $ 4,153
Office buildings 3,814 3,984
Apartment buildings 1,283 1,311
Hotels 450 498
Other (primarily industrial) 895 893
- -----------------------------------------------------------------------------
Total $ 9,587 $ 10,839
- ----------------------------------------------===============================
Geographic region:
Central $ 3,051 $ 3,484
Pacific 2,683 2,962
Middle Atlantic 1,510 1,821
South Atlantic 1,348 1,458
New England 995 1,114
- -----------------------------------------------------------------------------
Total $ 9,587 $ 10,839
- ----------------------------------------------===============================
</TABLE>
Mortgage Loans
At December 31, 1998, scheduled mortgage loan maturities were as follows:
1999 - $.9 billion; 2000 - $.9 billion; 2001 - $.8 billion; 2002 - $1.0 billion;
2003 - $1.6 billion; and $3.7 billion thereafter. Actual maturities could differ
from contractual maturities because borrowers may have the right to prepay
obligations with or without prepayment penalties; the maturity date may be
extended; and loans may be refinanced. During 1998 and 1997, the Company
refinanced at current market rates approximately $126 million and $135 million,
respectively, of its mortgage loans relating to borrowers that were unable to
obtain alternative financing.
At December 31, 1998, contractual commitments to extend credit under
commercial mortgage loan agreements amounted to approximately $492 million, most
of which were at a fixed market rate of interest. These commitments are
generally expected to be disbursed within three months, and are diversified by
property type and geographic region.
At December 31, 1998, the Company's impaired mortgage loans were $156
million, including $24 million before valuation reserves totaling $6 million,
and $132 million which had no valuation reserves. At December 31, 1997, the
Company's impaired mortgage loans were $375 million, including $152 million
before valuation reserves totaling $44 million, and $223 million which had no
valuation reserves.
11
<PAGE>
During the year ended December 31, changes in reserves for impaired mortgage
loans, including policyholder share, were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
(In millions) 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C>
Reserve balance - January 1 $ 44 $ 94
Transfers to foreclosed real estate (21) (30)
Charge-offs upon sales (9) (47)
Net increase (decrease) in valuation reserves (8) 27
- ------------------------------------------------------------------------------
Reserve balance - December 31 $ 6 $ 44
- ----------------------------------------------------==========================
</TABLE>
During 1998 and 1997, impaired mortgage loans, before valuation reserves,
averaged approximately $285 million and $597 million, respectively. Interest
income recorded and cash received on these loans were approximately $12 million
and $34 million in 1998 and 1997, respectively.
Real Estate
During 1998, 1997 and 1996, non-cash investing activities included real
estate acquired through foreclosure of mortgage loans, which totaled $32
million, $81 million and $107 million, respectively
Valuation reserves and cumulative write-downs related to real estate,
including policyholder share, were $171 million and $169 million as of December
31, 1998 and 1997, respectively.
Net income for 1998 and 1997 included net investment income of $8 million
and $9 million, respectively, for real estate held for sale. Write-downs upon
foreclosure and changes in valuation reserves were not material for 1998 and
1997.
C) Short-Term Investments and Cash Equivalents: Short-term investments and
cash equivalents, in the aggregate, primarily included debt securities,
principally corporate securities of $963 million at December 31, 1998 and, for
1997, principally corporate securities of $520 million and federal government
securities of $443 million.
D) Net Unrealized Appreciation (Depreciation) of Investments: Unrealized
appreciation (depreciation) for investments carried at fair value as of December
31 was as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
(In millions) 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C>
Unrealized appreciation:
Fixed maturities $ 1,384 $ 1,500
Equity securities 10 8
-------- --------
1,394 1,508
-------- --------
Unrealized depreciation:
Fixed maturities (137) (139)
Equity securities (25) (29)
-------- --------
(162) (168)
-------- --------
Less policyholder-related amounts 880 931
-------- --------
Shareholder net unrealized appreciation 352 409
Less deferred income taxes 134 153
- ------------------------------------------------------------------------------
Net unrealized appreciation $ 218 $ 256
- ----------------------------------------------------==========================
</TABLE>
The components of net unrealized appreciation (depreciation) on investments
for the year ended December 31 were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
(In millions) 1998 1997 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized appreciation (depreciation)
on investments held, net of taxes of
$48, $37 and $(151), respectively $ 89 $ 69 $ (280)
Less gains realized in net income, net
of taxes of $68, $ - , and $3, in 1998,
1997 and 1996, respectively 127 1 8
- ----------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) $ (38) $ 68 $ (288)
- ----------------------------------------------------====================================
</TABLE>
12
<PAGE>
E) Non-Income Producing Investments: At December 31, the carrying values of
investments, including policyholder share, that were non-income producing during
the preceding 12 months were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(In millions) 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Fixed maturities $ 22 $ 28
Mortgage loans 2 -
Real estate 68 141
- --------------------------------------------------------------------------------
Total $ 92 $ 169
- ---------------------------------------------------------=======================
</TABLE>
F) Derivative Financial Instruments: The Company's investment strategy is to
manage the characteristics of investment assets, such as duration, yield,
currency and liquidity, to reflect the underlying characteristics of the related
insurance and contractholder liabilities, which vary among the Company's
principal product lines. In connection with this investment strategy, the
Company's use of derivative instruments, including interest rate and currency
swaps, purchased options and futures contracts, is generally limited to hedging
applications to minimize market risk.
Hedge accounting treatment requires a probability of high correlation between
the changes in the market value or cash flows of the derivatives and the hedged
assets or liabilities. Under hedge accounting, the changes in market value or
cash flows of the derivatives and the hedged assets or liabilities are
recognized in net income in the same period. If the Company's use of derivatives
does not qualify for hedge accounting treatment, the derivative is recorded at
fair value and changes in its fair value are recognized in net income without
considering changes in the hedged asset or liability.
The Company routinely monitors, by individual counterparty, exposure to credit
risk associated with swap and option contracts and diversifies the portfolio
among approved dealers of high credit quality. Futures contracts are exchange-
traded and, therefore, credit risk is limited since the exchange assumes the
obligations. The Company manages legal risks by following industry standardized
documentation procedures and by monitoring legal developments.
Underlying contract, notional or principal amounts associated with derivatives
at December 31 were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(In millions) 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Interest rate swaps $ 158 $ 265
Currency swaps 193 248
Purchased options 878 833
Written options 1,087 -
Futures 233 75
- --------------------------------------------------------------------------------
</TABLE>
Under interest rate swaps, the Company agrees with other parties to
periodically exchange the difference between variable rate and fixed rate asset
cash flows to provide stable returns for related liabilities. The Company uses
currency swaps (primarily Canadian dollars, Swiss francs, German marks, Japanese
yen and pounds sterling) to match the currency of investments to that of the
associated liabilities. Under currency swaps, the parties exchange principal and
interest amounts in two relevant currencies using agreed-upon exchange amounts.
The net interest cash flows from interest rate and currency swaps are
recognized currently as an adjustment to net investment income, and the fair
value of these swaps is reported as an adjustment to the related investments.
Using purchased options to reduce the effect of changes in interest rates or
equity indexes on liabilities, the Company pays an up-front fee to receive cash
flows from third parties when interest rates or equity indexes vary from
specified levels. Purchased options that qualify for hedge accounting are
recorded consistent with the related liabilities, at amortized cost plus
adjustments based on current equity indexes, and income is reported as an
adjustment to benefit expense. Purchased options that qualify for hedge
accounting are reported in other assets, and fees paid are amortized to benefit
expense over their contractual periods. Purchased options with underlying
notional amounts of $82 million at December 31, 1997 that are designated as
hedges, but do not qualify for hedge accounting, are reported in other long-term
investments at fair value with changes in fair value recognized as realized
investment gains and losses. There were no such options at December 31, 1998.
The Company also writes reinsurance contracts that are accounted for as
written options. The Company receives fees to pay for specified unfavorable
changes in variable annuity account values based on underlying mutual fund
investments when account holders elect to receive periodic income payments.
These written options, along with
13
<PAGE>
options purchased to minimize the risks assumed, are reported at fair value in
other liabilities and other assets, respectively. Changes in fair value are
recognized in other revenues, or other operating expenses if there is a net
loss. Fair values of written and related purchased options during 1998 and as of
December 31, 1998 were not material.
Interest rate futures are used to temporarily hedge against the changes in
market values of bonds and mortgage loans to be purchased or sold. Under futures
contracts, changes in the contract values are settled in cash daily with the
exchange on which the instrument is traded. These changes in contract values are
deferred and recorded as adjustments to the carrying value of the related bond
or mortgage loan. Deferred gains and losses are amortized into net investment
income over the life of the investments purchased or are recognized in full as
realized investment gains and losses if investments are sold. Gains and losses
on futures contracts deferred in anticipation of investment purchases were
immaterial at December 31, 1998 and 1997.
The effects of interest rate and currency swaps, purchased and written options
and futures on the components of net income for 1998, 1997 and 1996 were not
material.
As of December 31, 1998 and 1997, the Company's variable interest rate
investments consisted of approximately $0.6 billion and $0.7 billion of fixed
maturities, respectively. As of December 31, 1998 and 1997, the Company's fixed
interest rate investments consisted of $17 billion and $21.6 billion,
respectively, of fixed maturities, and $8.9 billion and $10.1 billion,
respectively, of mortgage loans.
G) Other: As of December 31, 1998 and 1997, the Company had no concentration
of investments in a single investee exceeding 10% of shareholder's equity.
NOTE 5 - INVESTMENT INCOME AND GAINS AND LOSSES
A) Net Investment Income: The components of net investment income, including
policyholder share, for the year ended December 31 were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(In millions) 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities $1,386 $1,648 $1,647
Equity securities 1 8 -
Mortgage loans 739 885 921
Policy loans 459 532 548
Real estate 142 183 227
Other long-term investments 19 17 23
Short-term investments 18 28 35
------ ------ ------
2,764 3,301 3,401
Less investment expenses 127 162 202
- --------------------------------------------------------------------------------
Net investment income $2,637 $3,139 $3,199
- ---------------------------------------------------=============================
</TABLE>
Net investment income attributable to policyholder contracts, which is
included in the Company's revenues and is primarily offset by amounts included
in benefits, losses and settlement expenses, was approximately $1.6 billion for
1998 and $1.7 billion for 1997 and 1996. Net investment income for separate
accounts, which is not reflected in the Company's revenues, was $1.5 billion ,
$1.4 billion and $1.1 billion for 1998, 1997 and 1996, respectively.
As of December 31, 1998, fixed maturities and mortgage loans on non-accrual
status, including policyholder share, were $142 million and $97 million,
including restructured investments of $76 million and $93 million, respectively.
As of December 31, 1997, fixed maturities and mortgage loans on non-accrual
status, including policyholder share, were $143 million and $153 million,
including restructured investments of $81 million and $137 million,
respectively. If interest on these investments had been recognized in accordance
with their original terms, net income would have been increased by $5 million,
$7 million and $15 million in 1998, 1997 and 1996, respectively.
14
<PAGE>
B) Realized Investment Gains and Losses: Realized gains (losses) on
investments, excluding policyholder share, for the year ended December 31 were
as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(In millions) 1998 1997 1996
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities $ 34 $ (3) $ 11
Equity securities 3 4 1
Mortgage loans 22 4 (12)
Real estate 10 28 15
Other 24 12 22
------ ------ ------
93 45 37
Less income taxes 33 8 17
- -------------------------------------------------------------------------
Net realized investment gains $ 60 $ 37 $ 20
- ---------------------------------------------------======================
</TABLE>
Realized investment gains and losses include impairments in the value of
investments, net of recoveries, of $(5) million, $25 million and $40 million in
1998, 1997 and 1996, respectively.
Realized investment gains for separate accounts, which are not reflected in
the Company's revenues, were $494 million, $489 million and $305 million for
1998, 1997 and 1996 respectively. Realized investment gains attributable to
policyholder contracts, which also are not reflected in the Company's revenues,
were $201 million, $76 million and $82 million for 1998, 1997 and 1996,
respectively.
Sales of available-for-sale fixed maturities and equity securities, including
policyholder share, for the year ended December 31 were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(In millions) 1998 1997 1996
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Proceeds from sales $5,677 $3,978 $4,236
Gross gains on sales $ 238 $ 95 $ 146
Gross losses on sales $ (55) $ (151) $ (70)
- -------------------------------------------------------------------------
</TABLE>
NOTE 6 - SHAREHOLDER'S EQUITY AND DIVIDEND RESTRICTIONS
The Department recognizes as net income and surplus (shareholder's equity)
those amounts determined in conformity with statutory accounting practices
prescribed or permitted by the Department, which may differ from generally
accepted accounting principles. As of December 31, 1998, there were no
permitted accounting practices utilized by the Company that were materially
different from those prescribed by the Department.
Capital stock of the Company at December 31, 1998 and 1997 consisted of
5,978,322 shares of common stock authorized, issued and outstanding (par value
$5).
The Company's statutory net income was $824 million, $417 million and $611
million for 1998, 1997 and 1996, respectively. Statutory surplus was $1.8
billion at December 31, 1998 and $2.2 billion at December 31, 1997. The
Connecticut Insurance Holding Company Act limits the amount of annual dividends
or other distributions available to shareholders of Connecticut insurance
companies without the Department's prior approval. During 1998, the Company
paid dividends of $2.0 billion to its parent, all of which received prior
approval from the Department in accordance with requirements (see Note 3 -
Disposition). During 1997, the Company paid dividends of $400 million to its
parent, of which $100 million received prior approval from the Department in
accordance with requirements. Under current law, the maximum dividend
distribution that may be made by the Company during 1999 without prior approval
is $839 million. The amount of restricted net assets as of December 31, 1998
was approximately $2.7 billion.
NOTE 7 - INCOME TAXES
The Company's net deferred tax asset of $865 million and $653 million as of
December 31, 1998 and 1997, respectively, reflects management's belief that the
Company's taxable income in future years will be sufficient to realize the net
deferred tax asset based on the Company's earnings history and its future
expectations. In determining the adequacy of future taxable income, management
considered the future reversal of its existing taxable temporary differences and
available tax planning strategies that could be implemented, if necessary.
15
<PAGE>
In accordance with the Life Insurance Company Income Tax Act of 1959, a
portion of the Company's statutory income was not subject to current income
taxation but was accumulated in an account designated Policyholders' Surplus
Account. Under the Tax Reform Act of 1984, no further additions may be made to
the Policyholders' Surplus Account for tax years ending after December 31, 1983.
The balance in the account of approximately $450 million at December 31, 1998
would result in a tax liability of $158 million only if distributed to the
shareholder or if the account balance exceeded a prescribed maximum. No income
taxes have been provided on this amount because, in management's opinion, the
likelihood that these conditions will be met is remote. See Note 13 for a
discussion of potential legislation regarding this matter.
CIGNA's federal income tax returns are routinely audited by the Internal
Revenue Service, and provisions are made in CIGNA's financial statements in
anticipation of the results of these audits. CIGNA resolved all issues relative
to the Company arising out of audits for 1991 through 1993, which resulted in an
increase to net income of $13 million in 1997.
In management's opinion, adequate tax liabilities have been established for
all years. Income taxes and deferred tax balances for the year ended December
31, 1998 reflect state income taxes.
The tax effects of temporary differences which give rise to deferred income
tax assets and liabilities as of December 31 were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(In millions) 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Other insurance and contractholder liabilities $ 119 $ 400
Employee and retiree benefit plans 214 196
Deferred gain on sale of business 290 -
Investments, net 356 262
Policy acquisition expenses 111 -
Other - 63
----- -----
Total deferred tax assets 1,090 921
----- -----
Deferred tax liabilities:
Policy acquisition expenses - 38
Depreciation 67 77
Unrealized appreciation on investments 134 153
Other 24 -
----- -----
Total deferred tax liabilities 225 268
- -------------------------------------------------------------------------------
Net deferred income tax asset $ 865 $ 653
- ----------------------------------------------------------=====================
</TABLE>
The components of income taxes for the year ended December 31 were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(In millions) 1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Current taxes:
U.S. income $ 617 $ 344 $ 391
Foreign income 5 3 3
State income 14 - -
----- ----- -----
636 347 394
----- ----- -----
Deferred taxes (benefits):
U.S. income (205) (49) (81)
State income (6) - -
----- ----- -----
(211) (49) (81)
- -------------------------------------------------------------------------------
Total income taxes $ 425 $ 298 $ 313
- ------------------------------------------=====================================
</TABLE>
State income taxes were not material in years prior to 1998.
16
<PAGE>
Total income taxes for the year ended December 31 differs from the amount
computed using the nominal federal income tax rate of 35% for the following
reasons:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
(In millions) 1998 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Tax expense at nominal rate $ 431 $ 320 $ 305
Tax-exempt interest income (4) (5) (5)
Dividends received deduction (13) (7) (7)
Amortization of goodwill 5 4 4
State income tax (net of federal income tax benefit) 5 - -
Resolved federal tax audit issues - (13) -
Other 1 (1) 16
- -----------------------------------------------------------------------------
Total income taxes $ 425 $ 298 $ 313
- --------------------------------------------------------=====================
</TABLE>
NOTE 8 - PENSION AND OTHER POSTRETIREMENT BENEFITS PLANS
A) Pension and Other Postretirement Benefit Plans: The Company provides
pension and certain health care and life insurance benefits to eligible retired
employees and agents, spouses and other eligible dependents through various
plans. The expenses of retirement plans are allocated to the Company along with
other benefit cost allocations.
Pension benefits are provided through a plan sponsored by CIGNA covering most
domestic employees and by a separate pension plan for former agents. CIGNA
funds the pension plans at least at the minimum amount required by the Employee
Retirement Income Security Act of 1974. Allocated pension cost for the Company
was $19 million, $24 million and $26 million in 1998, 1997 and 1996,
respectively. The plans had deposits with the Company totaling approximately
$2.8 billion and $2.5 billion at December 31, 1998 and 1997, respectively.
Expense for postretirement benefits other than pensions allocated to the
Company totaled $2 million for 1998 and 1997 and $9 million for 1996. The
other postretirement benefit liability included in accounts payable, accrued
expenses and other liabilities as of December 31, 1998 and 1997 was $387
million and $412 million, including no net intercompany payables for 1998 and
$39 million for 1997 for services provided by affiliates' employees.
B) Capital Accumulation Plans: CIGNA sponsors various capital accumulation
plans in which employee contributions on a pre-tax basis (401(k)) are
supplemented by CIGNA matching contributions. These contributions are
invested, at the election of the employee, in one or more of the following
investments: CIGNA common stock fund, several CIGNA and non-CIGNA mutual funds,
and a fixed-income fund. In addition, beginning in 1999, CIGNA may provide
additional matching contributions, depending on its annual performance, which
would be invested in the CIGNA common stock fund. The Company's allocated
expense for such plans totaled $22 million for 1998, $15 million for 1997 and
$16 million for 1996.
NOTE 9 - REINSURANCE
In the normal course of business, the Company enters into agreements,
primarily relating to short-duration contracts, to assume and cede reinsurance
with other insurance companies. Reinsurance is ceded primarily to limit losses
from large exposures and to permit recovery of a portion of direct losses,
although ceded reinsurance does not relieve the originating insurer of primary
liability. The Company evaluates the financial condition of its reinsurers and
monitors concentrations of credit risk arising from similar geographic regions,
activities, or economic characteristics of its reinsurers. In connection with
the sale of the Company's individual life insurance and annuity business (as
discussed in Note 3), the reinsurance recoverable from Lincoln National
Corporation at December 31, 1998 was $6.0 billion.
Failure of reinsurers to indemnify the Company, as a result of reinsurer
insolvencies and disputes, could result in losses. As of December 31, 1998 and
1997 there were no allowances for uncollectible amounts. Future charges for
unrecoverable reinsurance may materially affect results of operations in future
periods; however, such amounts are not expected to have a material adverse
effect on the Company's liquidity or financial condition.
17
<PAGE>
The effects of reinsurance on net earned premiums and fees for the year ended
December 31 were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
(In millions) 1998 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Short-duration contracts
Premiums and fees:
Direct $3,763 $3,119 $2,940
Assumed 286 255 135
Ceded (237) (266) (166)
- -----------------------------------------------------------------------------
Net earned premiums and fees $3,812 $3,108 $2,909
- -----------------------------------------------------========================
Long-duration contracts
Premiums and fees:
Direct $1,998 $1,979 $1,997
Assumed 564 522 601
Ceded (691) (233) (193)
- -----------------------------------------------------------------------------
Net earned premiums and fees $1,871 $2,268 $2,405
- -----------------------------------------------------========================
</TABLE>
The effects of reinsurance on written premiums and fees for short-duration
contracts were not materially different from the amounts shown in the above
table. Benefits, losses and settlement expenses for 1998, 1997 and 1996 were
net of reinsurance recoveries of $699 million, $340 million and $359 million,
respectively.
For the year ended December 31, 1998, ceded premiums and reinsurance
recoveries associated with the individual life insurance and annuity business
sold were $741 million and $550 million, respectively.
NOTE 10 - LEASES AND RENTALS
Rental expenses for operating leases, principally with respect to buildings,
amounted to $42 million, $76 million and $68 million in 1998, 1997 and 1996,
respectively.
As of December 31, 1998, future net minimum rental payments under non-
cancelable operating leases were $168 million, payable as follows: 1999 - $41
million; 2000 - $29 million; 2001 - $22 million; 2002 - $19 million; and $57
million thereafter.
NOTE 11 - SEGMENT INFORMATION
Operating segments are based on the Company's internal reporting structure
and generally reflect differences in products. The Company presents segment
information as follows:
. Employee Health Care, Life and Disability Benefits, which combines the
Company's Health Care and Group Insurance divisions, offers traditional
indemnity and cost containment products and services as well as alternative
funding arrangements, such as administrative services only and minimum
premium plans.
. Employee Retirement Benefits and Investment Services provides investment
products and professional services primarily to sponsors of qualified
pension, profit-sharing and retirement savings plans. This segment also
provides certain corporate and variable life insurance products.
Other Operations consist of gain recognition related to the sale of the
individual life insurance and annuity business (and, for prior years, results of
the sold business, see Note 3), corporate life insurance on which policy loans
are outstanding (also called leveraged corporate life insurance), reinsurance
operations, settlement annuity business and certain new business initiatives.
The Company uses operating income (net income excluding after-tax realized
investment results) to measure the financial results of its segments. Operating
income is determined on a basis consistent with the accounting policies for the
consolidated financial statements, except that interest expense on corporate
debt is not allocated to segments. The Company allocates substantially all other
corporate general, administrative and systems expenses to segments on systematic
bases. Income taxes are generally computed as if each segment were filing
separate income tax returns.
18
<PAGE>
The Company's operations are not materially dependent on one or a few
customers, brokers or agents. Summarized segment financial information for the
year ended and as of December 31 was as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
(In millions) 1998 1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Employee Health Care, Life
and Disability Benefits
Premiums and fees and other revenues $ 5,012 $ 4,307 $ 4,256
Net investment income 290 286 291
-------- -------- --------
Segment revenues 5,302 4,593 4,547
Income tax expense 114 108 126
Operating income 195 190 189
Assets under management:
Invested assets 3,519 3,761 3,281
Separate account 1,702 1,440 1,176
-------- -------- --------
Total $ 5,221 $ 5,201 $ 4,457
- -------------------------------------------------------------------------------------
Employee Retirement Benefits
and Investment Services
Premiums and fees and other revenues $ 239 $ 205 $ 257
Net investment income 1,605 1,653 1,686
-------- -------- --------
Segment revenues 1,844 1,858 1,943
Income tax expense 113 99 86
Operating income 245 229 185
Assets under management:
Invested assets 20,511 20,759 20,303
Separate account 30,717 26,678 20,604
-------- -------- --------
Total $ 51,228 $ 47,437 $ 40,907
- -------------------------------------------------------------------------------------
Other Operations
Premiums and fees and other revenues $ 859 $ 874 $ 810
Net investment income 742 1,200 1,222
-------- -------- --------
Segment revenues 1,601 2,074 2,032
Income tax expense 165 83 84
Operating income 306 159 163
Assets under management:
Invested assets 10,006 16,181 16,193
Separate account 2,229 1,099 775
-------- -------- --------
Total $ 12,235 $ 17,280 $ 16,968
- -------------------------------------------------------------------------------------
Realized Investment Gains
Realized investment gains $ 93 $ 45 $ 37
Income tax expense 33 8 17
-------- -------- --------
Realized investment gains (losses),
net of taxes $ 60 $ 37 $ 20
- -------------------------------------------------------------------------------------
Total
Premiums and fees and other revenues $ 6,110 $ 5,386 $ 5,323
Net investment income 2,637 3,139 3,199
Realized investment gains 93 45 37
--------- -------- --------
Total revenues 8,840 8,570 8,559
Income tax expense 425 298 313
Operating income 746 578 537
Realized investment gains (losses),
net of taxes 60 37 20
Net income 806 615 557
Assets under management:
Invested assets 34,036 40,701 39,777
Separate account 34,648 29,217 22,555
-------- -------- --------
Total $ 68,684 $ 69,918 $ 62,332
- -------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
Premiums and fees and other revenues by product type for the year ended
December 31 were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(In millions) 1998 1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Medical and Dental Indemnity $3,566 $2,883 $2,726
Group Life 1,363 1,355 1,467
Other 1,181 1,148 1,130
- ---------------------------------------------------------------------------
Total premiums and fees and other revenues $6,110 $5,386 $5,323
- -----------------------------------------------------======================
</TABLE>
For the year ended December 31, 1998, 1997 and 1996, the change in net
translation of foreign currencies reflects increases of $2 million for 1998 and
1997, and $3 million for 1996.
Premiums and fees and other revenues by geographic region for the year ended
December 31 were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(In millions) 1998 1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $6,068 $5,356 $5,291
Foreign 42 30 32
- ---------------------------------------------------------------------------
Total premiums and fees and other revenues $6,110 $5,386 $5,323
- -----------------------------------------------------======================
</TABLE>
The Company's aggregate foreign exchange transaction losses and foreign long-
lived assets for the year ended and as of December 31, 1998, 1997 and 1996 were
not material.
NOTE 12- RELATED PARTY TRANSACTIONS
The Company has assumed the settlement annuity and group pension business
written by Life Insurance Company of North America (LINA), an affiliate.
Reserves held by the Company with respect to this business were $1.7 billion at
December 31, 1998 and 1997.
The Company cedes long-term disability business to LINA. Reinsurance
recoverables from LINA at December 31, 1998 and 1997 were $834 million and $869
million, respectively.
Effective January 1, 1998, the Company assumed insurance reserves totaling $85
million, along with a corresponding amount of invested and other assets, under a
coinsurance arrangement assigned from Healthsource Insurance Company, an
affiliate. In addition, the Company was assigned the responsibility for
administering self-funded employee benefit plan products from Healthsource
Provident Administrators, Inc. (HPA), another affiliate. As part of this
assignment, net assets of approximately $304 million were transferred to the
Company from HPA.
The Company had lines of credit available from affiliates totaling $600
million at December 31, 1998 and 1997. All borrowings are payable upon demand
with interest rates equivalent to CIGNA's average monthly short-term borrowing
rate plus 1/4 of 1%. Interest expense was $1.5 million, $0.2 million and $1.0
million for 1998, 1997 and 1996, respectively. As of December 31, 1998 and
1997, there were no borrowings outstanding under such lines.
The Company extended lines of credit to affiliates totaling $600 million at
December 31, 1998 and 1997. All loans are payable upon demand with interest
rates equivalent to CIGNA's average monthly short-term borrowing rate. There
were no amounts outstanding as of December 31, 1998 or 1997.
The Company, together with other CIGNA subsidiaries, has entered into a
pooling arrangement known as the CIGNA Corporate Liquidity Account (the Account)
for the purpose of maximizing earnings on funds available for short-term
investments. Withdrawals from the Account, up to the total amount of the
participant's investment in the Account, are allowed on a demand basis. As of
December 31, 1998 and 1997, the Company had a balance in the Account of $1.1
billion and $484 million, respectively.
CIGNA allocates to the Company its share of operating expenses incurred at the
corporate level. The Company also allocates a portion of its operating expenses
to affiliated companies on whose behalf it performs certain administrative
services.
NOTE 13 - CONTINGENCIES
A) Financial Guarantees: The Company is contingently liable for financial
guarantees provided in the ordinary course of business on the repayment of
principal and interest on certain industrial revenue bonds. The contractual
amounts of financial guarantees reflect the Company's maximum exposure to credit
loss in the event of nonperformance. To limit the Company's exposure in the
event of default of any guaranteed obligation, various
20
<PAGE>
programs are in place to ascertain the creditworthiness of guaranteed parties
and to monitor this status on a periodic basis.
The industrial revenue bonds guaranteed directly by the Company have remaining
maturities of up to 17 years. The guarantees provide for payment of debt service
only as it becomes due; consequently, an event of default would not cause an
acceleration of scheduled principal and interest payments. The principal amount
of the bonds guaranteed by the Company at December 31, 1998 and 1997 was $85
million and $202 million, respectively. Revenues in connection with industrial
revenue bond guarantees are derived principally from equity participations in
the related projects and are included in net investment income as earned.
During 1998, 1997 and 1996, this income was not material. Loss reserves for
financial guarantees are established when a default has occurred or when the
Company believes that a loss has been incurred. There were no losses for
industrial revenue bonds in 1998, 1997 or 1996.
The Company has entered into specialty life reinsurance contracts that
guarantee payments for specified unfavorable changes in variable annuity account
values based on underlying mutual fund investments if account holders expire or
elect to receive periodic income payments. For those accounts with mortality
risk, reserves are established in amounts adequate to meet the estimated future
obligations using various assumptions as to equity market conditions, premiums,
mortality and lapse rates, including provision for adverse deviation. As of
December 31, 1998 and 1997, the amount of recorded liabilities was $52 million
and $29 million, respectively. Although these guarantees may adversely affect
the Company's results of operations in future periods, they are not expected to
have a material adverse effect on the Company's liquidity or financial
condition.
The Company also guarantees a minimum level of benefits for certain separate
account contracts and, in the event that separate account assets are
insufficient to fund minimum policy benefits, the Company is obligated to fund
the difference. As of December 31, 1998 and 1997, the amount of minimum benefit
guarantees for separate account contracts was $5.1 billion and $4.6 billion,
respectively. Reserves in addition to the separate account liabilities are
established when the Company believes a payment will be required under one of
these guarantees. No such reserves were required as of December 31, 1998 and
1997. Guarantee fees are part of the overall management fee charged to separate
accounts and are recognized in income as earned.
Although the ultimate outcome of any loss contingencies arising from the
Company's financial guarantees may adversely affect results of operations in
future periods, they are not expected to have a material adverse effect on the
Company's liquidity or financial condition.
B) Regulatory and Industry Developments: The Company's businesses are subject
to a changing social, economic, legal, legislative and regulatory environment
that could affect them. Some of the changes include initiatives to restrict
insurance pricing and the application of underwriting standards and revise
federal tax laws. Some of the more significant issues are discussed below.
In early 1999, the Administration proposed a federal budget that would
eliminate the deferral of taxation of certain statutory income of life insurance
companies. As discussed in Note 7, the Company has not provided taxes on $450
million of such income. If the budget provision is enacted, the Company will
record additional income tax expense of $158 million to reflect this liability.
The proposed federal budget also would limit the deduction of interest expense
on the general indebtedness of corporations owning non-leveraged corporate life
insurance policies covering the lives of officers, employees or directors. If
this latter provision is enacted as proposed, the Company does not anticipate
that it will have a material effect on its consolidated results of operations,
liquidity, or financial condition, although it could have a material adverse
effect on the results of operations of the Employee Retirement Benefits and
Investment Services segment.
In 1996, Congress passed legislation that phases out over a three-year period
the tax deductibility of policy loan interest for most leveraged corporate life
insurance products. For 1998 and 1997, revenues of $556 million and $591
million, respectively, and net income of $42 million and $44 million,
respectively, were from leveraged corporate life insurance products that are
affected by this legislation. The Company does not expect this legislation to
have a material adverse effect on its consolidated results of operations,
liquidity or financial condition.
In 1998, the NAIC adopted standardized statutory accounting principles. Since
these principles have not been adopted by most of the insurance departments of
various jurisdictions in which the Company's insurance subsidiaries are
domiciled, the timing and effects of implementation have not yet been
determined.
The Company is contingently liable for possible assessments under regulatory
requirements pertaining to potential insolvencies of unaffiliated insurance
companies and other insurance-related assessments. Mandatory assessments, which
are subject to statutory limits, can be partially recovered through a reduction
in future premium taxes in some states. The Company recorded no pre-tax charges
for 1998, and $17 million and $26 million for 1997
21
<PAGE>
and 1996, respectively, for estimated guaranty fund and other insurance-related
assessments before giving effect to future premium tax recoveries. Although
future assessments and payments may adversely affect results of operations in
future periods, such amounts are not expected to have a material adverse effect
on the Company's liquidity or financial condition.
The eventual effect on the Company of the changing environment in which it
operates remains uncertain.
C) Litigation: The Company is routinely engaged in litigation incidental to
its business. While the outcome of all litigation involving the Company,
including insurance-related litigation, cannot be determined, litigation is not
expected to result in losses that differ from recorded reserves by amounts that
would be material to results of operations, liquidity or financial condition.
22
<PAGE>
REGISTRATION STATEMENT
ON
FORM N-4
Part C: OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
The following financial statements and exhibits are included as part of this
registration statement:
(a) Financial Statements:
--------------------
Part A: None
------
Part B:
------
(i) Registrant:
Report of Independent Accountants.
Statement of Assets and Liabilities, as of
December 31, 1998.
Statements of Changes in Net
Assets, Years ended December 31, 1998 and December 31, 1997.
Statements of Operations, Years ended December 31, 1998 and December
31, 1997.
Notes to Financial Statements.
(ii) Depositor:
Report of Independent Accountants.
Consolidated Statements of Income and Retained Earnings for the
three Years ended December 31, 1998.
Consolidated Balance Sheets as of December 31, 1998 and December 31,
1997.
Consolidated Statements of Cash Flows for the three Years ended
December 31, 1998.
Notes to Consolidated Financial Statements.
(b) Exhibits:
--------
(6) Charter and Bylaws of Connecticut General Life Insurance
Company, filed herewith.
(10) Consent of Independent Accountants is filed herewith.
<PAGE>
Item 25. Directors and Officers of the Depositor
- ------- ---------------------------------------
The list called for by this Item 25 is filed herewith, as attachment (I).
Item 26. Persons Controlled by or Under Common
- ------- -------------------------------------
Control with the Depositor or Registrant
-----------------------------------------
CIGNA Corporation is publicly held and, as of the date of this prospectus, has
no information that any person or concern beneficially owns more than five
percent of the outstanding Common Stock, except as reported on one Schedule 13G
received in February 1998. CIGNA advises that Sanford C. Bernstein & Co., Inc.
("Sanford Bernstein"), 767 Fifth Avenue, New York, NY 10153, reported that as of
December 31, 1998 it held 18,836,626 shares, or 9.1%, of the outstanding common
stock of CIGNA. Sanford Bernstein also reported sole voting power as to
10,300,452, shared voting power as to 2,248,782, and sole dispositive power as
to 18,836,626 of these shares. Wellington Management Company, LLP
("Wellington"), 75 State Street, Boston, MA 02109, reported that as of December
31, 1998 it held 11,704,980 shares, or 5.67%, of the outstanding common stock of
CIGNA. Wellington also reported sole voting power as to none, shared voting
power as to 1,492,130, and shared dispositive power as to all of these shares.
The list called for by this Item 26 is filed herewith, as attachment (II).
Item 27. Number of Contractholders
- ------- -------------------------
As of December 31, 1998, the number of contractholders of CG Variable Annuity
Account II, Group Variable Annuities for Retirement Plans was 7.
Item 28. Indemnification
- ------- ---------------
(a) The Depositor: The information called for by this item 28 is filed
-------------
herewith, as attachment (III).
(b) The Principal Underwriter: The information called for by this item 28
-------------------------
is filed herewith, as attachment (IV).
Item 29. Principal Underwriter:
- ------- ---------------------
(a) The principal underwriter for the Contract issued by the Registrant is
CIGNA Financial Services, Inc. Other investment companies for which
CIGNA Financial Services, Inc. act as principal underwriters are as
follows:
- CG Variable Annuity Account I-Group Tax Deferred Variable
Annuities
- CG Variable Annuity Account I-Group Variable Annuities for
Qualified Retirement Plans
- CG Variable Annuity Separate Account
- CG Variable Annuity Separate Account II
- CG Variable Life Insurance Separate Account I
- CG Variable Life Insurance Separate Account II
- CG Variable Life Insurance Separate Account A
- CG Corporate Insurance Variable Life Insurance Account 02
- CIGNA Variable Annuity Separate Account I
- CIGNA Funds Group
- CIGNA Institutional Funds Group
<PAGE>
(b) The directors and officers of CIGNA Financial Services, Inc.:
OWNERSHIP: CONNECTICUT GENERAL CORPORATION-100%
<TABLE>
<CAPTION>
Directors
Business Address*
----------------
<S> <C>
Willard S. Bashan
David J. Castellani
Bryon D. Oliver
Mark A. Parsons
Kenneth A. Pouch, Jr.
David C. Scheinerman
Officers
----------------
Willard S. Bashan President
David J. Castellani Vice President
Alan F. Monbaron Vice President,
Assistant Treasurer,
Chief Financial Officer,
Compliance Officer
Mark A. Parsons Vice President, Chief Counsel
Stephen C. Stachelek Vice President, Treasurer
Julia M. Kozlowski Assistant Vice President
Robin A. Leavitt Assistant Vice President
David C. Kopp Secretary
Thomas L. Pierce Assistant Secretary
David M. Porcello Assistant Secretary
Margaret I. Whiteman Assistant Secretary
Pamela S. Williams Assistant Secretary
Marie C. Bynum Assistant Treasurer
Joy B. Erickson Assistant Treasurer
Assistant Compliance Officer
</TABLE>
*Address for all is 280 Trumbull Street., One Commercial Plaza,
Hartford, Connecticut 06103
Item 30. Location of Accounts and Records
- ------- --------------------------------
Books and other documents required to be maintained by Section 31(a) of the
Investment a Company Act of 1940, and Rules 31a-1 to 31a-3 thereunder are
maintained by CG Life at its Annuity Service Center, and records relating to
Shareholders are maintained by State Street Bank and Trust, P. O. Box 2351,
Boston, Massachusetts 02107.
Item 31. Management Services
- ------- -------------------
Not Applicable.
Item 32. Undertakings
- ------- ------------
Not Applicable.
<PAGE>
DIRECTORS AND OFFICERS OF CONNECTICUT GENERAL
Attachment (I)
The following list of directors and officers of Connecticut General Life
Insurance Company ("Connecticut General") includes a brief statement of the
principal business experience during the last five years of each director.
Correspondence with any director or officer may be addressed to Hartford, CT
06152 and will be delivered to the office of Connecticut General at 900 Cottage
Grove Road, Bloomfield, CT 06002.
Thomas C. Jones, Director and President (Principal Executive Officer)
President, CIGNA Investment Management, CIGNA Companies; Director and
President, CIGNA Life Insurance Company. Previously, Director, Connecticut
General Corporation; President, CIGNA Individual Insurance, CIGNA
Companies; President CIGNA Reinsurance-Property & Casualty, CIGNA
Companies; Executive Vice President and Director, NAC RE CORPORATION.
Harold W. Albert, Director
Chief Counsel, CIGNA Investment Management, CIGNA Companies; Director,
CIGNA Life Insurance Company.
Carol M. Olsen, Director and Senior Vice President
Senior Vice President and Director, CIGNA Life Insurance Company; Senior
Vice President, CIGNA Health Corporation; Senior Vice President, CIGNA
HealthCare, CIGNA Companies. Previously, Senior Vice President, CIGNA
International, CIGNA Companies.
John E. Pacy, Director and Senior Vice President
Senior Vice President, CIGNA HealthCare, CIGNA Companies; Senior Vice
President, CIGNA Health Corporation. Previously, Senior Manager-IT
Infrastructure, Digital Equipment Corporation; Technology Management
Officer, Digital Equipment Corporation.
Robert W. Burgess, Director
Senior Vice President and Chief Financial Officer, CIGNA Investment
Management, CIGNA Companies; Director, CIGNA Life Insurance Company.
John G. Day, Director and Chief Counsel
Senior Vice President and Chief Counsel, Insurance Law and Investment Law,
CIGNA Companies; Chief Counsel, Connecticut General Corporation; Director
and Chief Counsel, CIGNA Life Insurance Company.
Joseph M. Fitzgerald, Director and Senior Vice President
Senior Vice President of Underwriting, CIGNA HealthCare, CIGNA Companies.
H. Edward Hanway, Director and Chairman of the Board
President, CIGNA HealthCare, CIGNA Companies; Director and Chairman of the
Board, CIGNA Life Insurance Company. Previously, President, CIGNA
International Division, CIGNA Companies; Senior Vice President, Insurance
Company of North America; Vice President of Planning and Business Control,
CIGNA Companies.
<PAGE>
Patricia L. Rowland, Director and Senior Vice President Senior Vice President,
CIGNA HealthCare, CIGNA Companies; Senior Vice President and Director,
CIGNA Health Corporation. Previously, President, International
Rehabilitation Associates, Inc.; Senior Vice President, Connecticut
General.
Marc L. Preminger, Director,Senior Vice President and Chief Financial Officer
Senior Vice President and Chief Financial Officer, CIGNA HealthCare, CIGNA
Companies; Director, CIGNA Life Insurance Company. Previously, Vice
President and Head of Corporate Accounting and Planning, CIGNA Corporation;
Chief Financial Officer, CIGNA Group Insurance-Life, Accident Disability,
CIGNA Companies; Actuary and Controller, INA Life Insurance Company of New
York; Senior Vice President, Chief Financial Officer and Actuary, Life
Insurance Company of North America; Vice President, Connecticut General.
W. Allen Schaffer, M.D., Director and Senior Vice President
Senior Vice President, CIGNA HealthCare, CIGNA Companies; President, CIGNA
Health Corporation.
Robert E. Wahlman, Vice President (Principal Accounting Officer)
Chief Accounting Officer, Connecticut Operations, CIGNA Companies; Vice
President, CIGNA Life Insurance Company. Previously, Director of Accounting
and Regulatory Policy, Bank One Corporation.
Susan L. Copper - Corporate Secretary
Stephen C. Stachelek - Treasurer
Andrew G. Helming - Secretary
<PAGE>
Page 1 Attachment (II)
CIGNA CORPORATION
SUBSIDIARIES AND AFFILIATES
(AS OF 12/31/98)
1667 K STREET PARTNERSHIP
6000 FAIRVIEW ASSOCIATES, L.L.C.
6010 FAIRVIEW ASSOCIATES, L.L.C.
6100 FAIRVIEW ASSOCIATES
ABLES & LOCKER, P.C.
AFIA FINANCE CORPORATION
AIC HOLDINGS INC.
AIRPARK ASSOCIATES
ALIC, INCORPORATED
ALL-NET PREFERRED PROVIDERS, INC.
ALLIED INSURANCE COMPANY
AMAZONAS COMPANIA ANONIMA DE SEGUROS
AMERICAN ADJUSTMENT COMPANY, INC.
AMERICAN CULTURAL ALLIANCE
AMERICAN LENDERS FACILITIES, INC.
AMICO ASSISTENCIA MEDICA A INDUSTRIA E COMERCIO LTDA
ANF PARTNERS #1
ARABIA CIGNA INSURANCE COMPANY LIMITED E.C.
ASSUREX DEVELOPMENT CORPORATION
ATLANTIC EMPLOYERS INSURANCE COMPANY
BANCO EXCEL ECONOMICO S.A.
BANKERS STANDARD FIRE AND MARINE COMPANY
BANKERS STANDARD INSURANCE COMPANY
BASCOM, BUDISH & CEMAN, S.C.
BENEFITS ACCESS INC.
BERNADETTE A. DUNCAN, ATTORNEY-AT-LAW, A PROFESSIONAL CORP.
BLODGET & HAZARD LIMITED
BROOK ARBOR COMPANY L.L.C
C&D GROVES
CAL PORTFOLIO VI, L.L.C.
CB PARTNERS
CENTER CITY REALTY, L.L.C.
CENTER HARBOR L.L.C.
CG 6 L.L.C.
CG INDIVIDUAL TAX BENEFITS PAYMENTS, INC.
CG LIFE PENSION BENEFITS PAYMENTS, INC.
CG LINA PENSION BENEFITS PAYMENTS, INC.
<PAGE>
Page 2
As of 12/31/98
CG MICHIGAN PROPERTIES, L.L.C.
CG TRUST COMPANY
CGLIC-BOC LIMITED PARTNERSHIP
CGTSC SUGAR CREEK PARTNERS, L.P.
CHAPPARAL PARTNERS
CIGNA ACCIDENT AND FIRE INSURANCE COMPANY, LTD.
CIGNA ADVISORY PARTNERS, INC.
CIGNA ARGENTINA COMPANIA DE SEGUROS. S.A.
CIGNA BENEFITS PROCESSING IRELAND, LTD.
CIGNA BRASIL EMPREENDIMENTOS LTDA.
CIGNA BRASIL PARTICIPACOES LTDA.
CIGNA CBO 1996-1 (DELAWARE) CORP.
CIGNA CBO 1996-1-LTD
CIGNA CHINA INVESTMENT FUND LDC
CIGNA COMMUNITY CHOICE, INC.
CIGNA COMPANIA DE SEGUROS (CHILE) SA
CIGNA COMPANIA DE SEGUROS DE VIDA (CHILE) SA
CIGNA CONFERENCE FACILITIES, INC.
CIGNA CORPORATION
CIGNA DENTAL HEALTH OF CALIFORNIA, INC.
CIGNA DENTAL HEALTH OF COLORADO, INC.
CIGNA DENTAL HEALTH OF DELAWARE, INC.
CIGNA DENTAL HEALTH OF FLORIDA, INC.
CIGNA DENTAL HEALTH OF ILLINOIS, INC.
CIGNA DENTAL HEALTH OF KANSAS, INC.
CIGNA DENTAL HEALTH OF KENTUCKY, INC.
CIGNA DENTAL HEALTH OF MARYLAND, INC.
CIGNA DENTAL HEALTH OF NEW JERSEY, INC.
CIGNA DENTAL HEALTH OF NEW MEXICO, INC.
CIGNA DENTAL HEALTH OF NORTH CAROLINA, INC.
CIGNA DENTAL HEALTH OF OHIO, INC.
CIGNA DENTAL HEALTH OF PENNSYLVANIA, INC.
CIGNA DENTAL HEALTH OF TEXAS, INC.
CIGNA DENTAL HEALTH PLAN OF ARIZONA, INC.
CIGNA DENTAL HEALTH, INC.
CIGNA DIRECT MARKETING COMPANY, INC.
CIGNA DULLESTOWN L.LC.
CIGNA EASTERN EUROPEAN CORPORATE SERVICES SP.Z.O.O.
CIGNA EMPLOYERS INSURANCE COMPANY
CIGNA EXCESS AND SURPLUS INSURANCE SERVICES, INC. (PA)
<PAGE>
Page 3
As of 12/31/98
CIGNA EXCESS AND SURPLUS INSURANCE SERVICES, INC. (CA)
CIGNA EXCESS AND SURPLUS INSURANCE SERVICES, INC. (GA)
CIGNA EXCESS AND SURPLUS INSURANCE SERVICES, INC. (IL)
CIGNA FEDERAL BENEFITS, INC.
CIGNA FINANCIAL FUTURES, INC.
CIGNA FINANCIAL INSTITUTION SOLUTIONS, INC.
CIGNA FINANCIAL PARTNERS, INC.
CIGNA FINANCIAL SERVICES, INC.
CIGNA FIRE UNDERWRITERS INSURANCE COMPANY
CIGNA FOUNDATION
CIGNA FUND MANAGERS LIMITED
CIGNA FUNDING LIMITED PARTNERSHIP
CIGNA FUNDS GROUP
CIGNA G.B. HOLDINGS, LTD.
CIGNA HEALTH CORPORATION
CIGNA HEALTHCARE BENEFITS, INC.
CIGNA HEALTHCARE MID-ATLANTIC, INC.
CIGNA HEALTHCARE OF ARIZONA, INC.
CIGNA HEALTHCARE OF CALIFORNIA, INC.
CIGNA HEALTHCARE OF COLORADO, INC.
CIGNA HEALTHCARE OF CONNECTICUT, INC.
CIGNA HEALTHCARE OF DELAWARE, INC.
CIGNA HEALTHCARE OF FLORIDA, INC.
CIGNA HEALTHCARE OF GEORGIA, INC.
CIGNA HEALTHCARE OF ILLINOIS, INC.
CIGNA HEALTHCARE OF LOUISIANA, INC.
CIGNA HEALTHCARE OF MASSACHUSETTS, INC.
CIGNA HEALTHCARE OF NEW JERSEY, INC.
CIGNA HEALTHCARE OF NEW YORK, INC.
CIGNA HEALTHCARE OF NORTH CAROLINA, INC.
CIGNA HEALTHCARE OF NORTHERN NEW JERSEY, INC.
CIGNA HEALTHCARE OF OHIO, INC.
CIGNA HEALTHCARE OF OKLAHOMA, INC.
CIGNA HEALTHCARE OF PENNSYLVANIA, INC.
CIGNA HEALTHCARE OF ST. LOUIS, INC.
CIGNA HEALTHCARE OF TENNESSEE, INC.
CIGNA HEALTHCARE OF TEXAS, INC.
CIGNA HEALTHCARE OF UTAH, INC.
CIGNA HEALTHCARE OF VIRGINIA, INC.
CIGNA HIGH INCOME SHARES
CIGNA HOLDINGS, INC.
CIGNA HOTEL ASSOCIATES-1 LIMITED PARTNERSHIP
<PAGE>
Page 4
As of 12/31/98
CIGNA INDEMNITY INSURANCE COMPANY
CIGNA INFORMATION SERVICES, INC.
CIGNA INSTITUTIONAL FUNDS GROUP
CIGNA INSURANCE ASIA PACIFIC LIMITED
CIGNA INSURANCE COMPANY
CIGNA INSURANCE COMPANY LIMITED
CIGNA INSURANCE COMPANY OF CANADA
CIGNA INSURANCE COMPANY OF EUROPE S.A.-N.V.
CIGNA INSURANCE COMPANY OF ILLINOIS
CIGNA INSURANCE COMPANY OF OHIO
CIGNA INSURANCE COMPANY OF PUERTO RICO
CIGNA INSURANCE COMPANY OF TEXAS
CIGNA INSURANCE COMPANY OF THE MIDWEST
CIGNA INSURANCE NEW ZEALAND LIMITED
CIGNA INSURANCE SINGAPORE LIMITED
CIGNA INTEGRATEDCARE, INC.
CIGNA INTERNATIONAL CORPORATION
CIGNA INTERNATIONAL FINANCE INC.
CIGNA INTERNATIONAL HOLDINGS, LTD.
CIGNA INTERNATIONAL INSURANCE COMPANY OF HONG KONG LIMITED
CIGNA INTERNATIONAL INSURANCE MANAGERS, LTD
CIGNA INTERNATIONAL INVESTMENT ADVISORS AUSTRALIA LIMITED
CIGNA INTERNATIONAL INVESTMENT ADVISORS K.K.
CIGNA INTERNATIONAL INVESTMENT ADVISORS L.T.D.
CIGNA INTERNATIONAL STRATEGIC FUNDS, L.P.
CIGNA INVESTMENT ADVISORY COMPANY, INC.
CIGNA INVESTMENT GROUP, INC.
CIGNA INVESTMENTS, INC.
CIGNA ITALY-SOCIETA A RESPONSABILITA LIMITATA
CIGNA LEVERAGED CAPITAL FUND, INC.
CIGNA LIFE INSURANCE COMPANY
CIGNA LIFE INSURANCE COMPANY OF CANADA
CIGNA LIFE INSURANCE COMPANY OF EUROPE S.A.-N.V.
CIGNA LIFE INSURANCE NEW ZEALAND LIMITED
CIGNA LLOYDS INSURANCE COMPANY
CIGNA MANAGED CARE BENEFITS COMPANY
CIGNA MARKETING GROUP, C.A.
CIGNA MEZZANINE CAPITAL, INC.
CIGNA MEZZANINE HOLDINGS II, INC.
CIGNA MEZZANINE HOLDINGS, INC.
CIGNA MEZZANINE PARTNERS II, L.P.
CIGNA MEZZANINE PARTNERS III, INC.
CIGNA MEZZANINE PARTNERS III,.L.P.
CIGNA MORTGAGE SECURITIES, INC.
<PAGE>
Page 5
As of 12/31/98
CIGNA OVERSEAS HOLDINGS, INC.
CIGNA OVERSEAS INSURANCE COMPANY LTD
CIGNA PRINTING, INC.
CIGNA PROPERTIES, INC.
CIGNA PROPERTY AND CASUALTY INSURANCE COMPANY
CIGNA RAILROAD INSURANCE BROKERS, INC.
CIGNA RE CORPORATION
CIGNA REAL ESTATE FUND S LIMITED PARTNERSHIP
CIGNA REAL ESTATE FUND T LIMITED PARTNERSHIP
CIGNA REAL ESTATE, INC.
CIGNA REALTY RESOURCES, INC.-FIFTH
CIGNA REALTY RESOURCES, INC.-FIFTEENTH
CIGNA REALTY RESOURCES, INC.-TWELFTH
CIGNA SALUD ISAPRE, S.A.
CIGNA SEGUROS DE COLOMBIA S.A.
CIGNA SERVICES U.K. LIMITED
CIGNA SERVICOS LTDA
CIGNA STU S.A.
CIGNA STU ZYCIE S.A.
CIGNA SUPERANNUATION PTY. LIMITED
CIGNA THAI COMPANY LIMITED
CIGNA UK RETIREMENT SAVINGS PLAN
CIGNA VARIABLE PRODUCTS GROUP
CIGNA WORLDWIDE INSURANCE COMPANY
COLUMBUS SQUARE SHOPPING CENTER COMPANY
COMPANIA ANONIMA DE SEGUROS "AVILA"
CONGEN PROPERTIES, INC.
CONNECTICUT GENERAL BENEFIT PAYMENTS, INC.
CONNECTICUT GENERAL CORPORATION
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
CONNECTICUT GENERAL REALTY INVESTORS-III LIMITED PARTNERSHIP
CONNECTICUT GENERAL REALITY RESOURCES, INC.-FOURTH
CONNECTICUT SUGAR CREEK L.L.C.
CONTEMPORARY MANAGEMENT ASSOCIATES, INC.
COTTAGE GROVE CABLE I, L.L.C.
COTTAGE GROVE CABLE II, L.L.C.
COTTAGE GROVE CABLE III, L.L.C.
COTTAGE GROVE CABLE IV, L.L.C.
COTTAGE GROVE VESSELS, INC.
COVER DIRECT, INC.
COVER-ALL TECHNOLOGIES, INC.
CRUSADER INSURANCE COMPANY (GHANA) LIMITED
<PAGE>
Page 6
As of 12/31/98
DEBBOLI, MILLMAN, SPIEGEL & ASSOCIATES
DELPANAMA S.A.
DISABILITY CLAIM SERVICES, INC.
DON CE SAR RESORT HOTEL, LTD.
DRAPER'S CG, L.L.C.
EMPLOYEE BENEFIT PLAN ADMINISTRATION, INC.
EMPRESA GUATEMALTECA CIGNA DE SEGUROS, SOCIEDAD ANONIMA
ENGINEERED DATA PRODUCTS, INC.
ERNEST LINSDELL LIMITED
ESIS INTERNATIONAL ASESORIAS LIMITADA
ESIS INTERNATIONAL, INC.
ESIS, INC.
EXCEL CIGNA SEGURADORA S.A.
EXCESS AND SURPLUS INSURANCE SERVICES, INC.
FALKLAND PARTNERS
FIRE, EQUITY AND GENERAL INSURANCE COMPANY LIMITED
GLENDALE ASSOCIATES
GLENDALE LIMITED PARTNERSHIP ASSOCIATES-II
GLENDALE OHRBACH'S ASSOCIATES
GLOBAL PORTFOLIO STRATEGIES, INC.
GLOBAL SURETY NETWORK, INC.
GPM GAS GATHERING L.L.C.
GRACE BROADCASTING LIMITED PARTNERSHIP
GRANCOL ASESORAMIENTO Y SERVICIOS LTDA
GREAT TRAILS BROADCASTING CORPORATION
GREYLANDS BUSINESS PARK, PHASE 2
HAZARD CENTER ASSOCIATES
HCW OIL INCOME FUND (DEVONIAN)
HEALTHSOURCE ARKANSAS PREFERRED, INC.
HEALTHSOURCE ARKANSAS VENTURES, INC.
HEALTHSOURCE BENEFITS, INC.
HEALTHSOURCE CONNECTICUT, INC.
HEALTHSOURCE CORPORATE SERVICES, INC.
HEALTHSOURCE EMPLOYER SERVICES, INC.
HEALTHSOURCE HEALTH PLANS, INC.
HEALTHSOURCE HMO OF NEW YORK, INC.
HEALTHSOURCE INDIANA INSURANCE COMPANY
HEALTHSOURCE INDIANA MANAGED CARE PLAN, INC.
HEALTHSOURCE INNOVATIVE MEDICAL MANAGEMENT, INC.
HEALTHSOURCE INSURANCE COMPANY
HEALTHSOURCE INSURANCE GROUP, INC.
HEALTHSOURCE INSURANCE SERVICES, INC.
<PAGE>
Page 7
As of 12/31/98
HEALTHSOURCE KENTUCKY, INC.
HEALTHSOURCE MAINE PREFERRED, INC.
HEALTHSOURCE MAINE, INC.
HEALTHSOURCE MANAGEMENT, INC.
HEALTHSOURCE MASSACHUSETTS, INC.
HEALTHSOURCE METROPOLITAN NEW YORK HOLDING COMPANY, INC.
HEALTHSOURCE NEW HAMPSHIRE, INC.
HEALTHSOURCE NEW YORK, INC.
HEALTHSOURCE NEW YORK/NEW JERSEY, INC.
HEALTHSOURCE NORTH CAROLINA ADMINISTRATORS, INC.
HEALTHSOURCE NORTH CAROLINA, INC.
HEALTHSOURCE OHIO PREFERRED, INC.
HEALTHSOURCE OHIO, INC.
HEALTHSOURCE PREFERRED, OF NEW YORK, INC.
HEALTHSOURCE PREFERRED, INC.
HEALTHSOURCE PROPERTIES, INC.
HEALTHSOURCE, RX, INC.
HEALTHSOURCE SOUTH CAROLINA, INC.
HEALTHSOURCE SOUTH, INC.
HEALTHSOURCE SYRACUSE, INC.
HEALTHSOURCE TENNESSEE PREFERRED, INC.
HEALTHSOURCE, INC.
HOUSTON PROPERTIES L.L.C.
HS NORTH TEXAS VENTURES, INC.
ILLINOIS UNION INSURANCE COMPANY
INA CORPORATION
INA FINANCIAL CORPORATION
INA HIMAWARI LIFE INSURANCE CO., LTD.
INA HOLDINGS CORPORATION
INA INVESTMENT SECURITIES, INC.
INA LIFE INSURANCE COMPANY OF NEW YORK
INA REINSURANCE COMPANY LTD.
INA SEGURADORA S.A.
INA SURPLUS INSURANCE COMPANY
INA TAX BENEFITS REPORTING, INC.
INAC CORP.
INAC CORP. PF CALIFORNIA
INCAN HOLDINGS LTD.
INAMAR INSURANCE UNDERWRITING AGENCY, INC.
INAMAR INSURANCE UNDERWRITING AGENCY, INC. OF MASSACHUSETTS
INAMAR INSURANCE UNDERWRITING AGENCY, INC. OF OHIO
INAMAR INSURANCE UNDERWRITING AGENCY, INC. OF TEXAS
<PAGE>
Page 8
As of 12/31/98
INAPRO, INC.
INDEMNITY INSURANCE COMPANY OF NORTH AMERICA
INDI SERVICIOS C.-LTDA
INSTITUTIONAL REGIONAL MALL DEVELOPERS
INSURANCE COMPANY OF NORTH AMERICA
INSURANCE COMPANY OF NORTH AMERICA (U.K.) LIMITED
INTERNATIONAL REHABILITATION ASSOCIATES, INC.
INTERSTONE/CGL PARTNERS, L.P.
INTRACORP, INC.
INVERSIONES CONTINENTAL, S.A. DE C. V.
INVERSIONER INA LIMITADA
JACOMO PRIMARY CARE, P.C.
JOHN D. WENDLER LAW OFFICERS, P.C.
K. RUTH LARSON, ATTORNEY-AT-LAW, A PROFESSIONAL CORP
KILL CENTER IRVINE NO. 2. PARTNERSHIP
LA POSITIVA, COMPANIA NACIONAL DE SEGUROS SOCIEDAD ANONIMA
LAW OFFICES OF F. ROSS ADKINS, A PROFESSIONAL CORPORATION
LAW OFFICES OF FRANKLIN L. NOLTA, A PROFESSIONAL CORP
LAW OFFICES OF HOWARD S. ROBIN, P.C.
LAW OFFICES OF JOSEPH M. KENNEDY, P.C.
LAW OFFICES OF LAUREL F. MCMENAMIN, A PROFESSIONAL CORP
LAW OFFICES OF MARIA K. MENDROS, P.C.
LAW OFFICES OF MICHAEL R. VACCARO, PC.C
LAW OFFICES OF PETER J. GORELICK, P.C.
LEE GRAHAM KAROSEN, ATTORNEY-AT-LAW, A PROFESSIONAL CORP
LEGACY VILLAGE ASSOCIATES, LTD.
LIFE INSURANCE COMPANY OF NORTH AMERICA
LINA BENEFIT PAYMENTS, INC.
LOVELACE HEALTH SYSTEMS, INC.
LP ASSOCIATES
LPA ASSOCIATES
LPB ASSOCIATES
LPC ASSOCIATES
LPD ASSOCIATES
LPY ASSOCIATES
LPZ ASSOCIATES
MAINE ASSOCIATES
MALROSIAN, INC.
MANN & SHAPPELL, P.C.
MARITIME GENERAL INSURANCE COMPANY, LIMITED
MARKETDYNE INTERNATIONAL, INC.
MCC BEHAVIORAL CARE OF CALIFORNIA, INC.
<PAGE>
Page 9
As of 12/31/98
MCC BEHAVIORAL CARE OF TEXAS
MCC BEHAVIORAL CARE, INC.
MCC INDEPENDENT PRACTICE ASSOCIATION OF GREATER NEW YORK, INC.
MCCANDLESS SAN TOMAS NO. 1
MCCANDLESS SAN TOMAS NO. 2
METROPOLIS GENERAL PARTNERSHIP
MNH MALL, LLC
NEW ORLEANS RIVERWALK ASSOCIATES
NOESKE, ABBO AND ASSOCIATES, P.C.
NORTH CENTRAL TEXAS INDEPENDENT PRACTICE ASSOCIATION, P.A.
OPENCONNECT SYSTEMS, INC.
ORCHARD GLEN VENTURE
P.T. ASURANSI CIGNA INDONESIA
P.T. ASURANSI NIAGA CIGNA LIFE
PACIFIC EMPLOYERS INSURANCE COMPANY
PALMER PLAZA LIMITED
PARKVILLE PRIMARY CARE, P.C.
PCGP, INC.
PCIB CIGNA LIFE INSURANCE CORPORATION
PDCN LEGAL MANAGEMENT COMPANY, INC.
PERDANA CIGNA INSURANCE BERHAD
PHILIPPINE HEALTHCARE PROVIDERS, INC.
PHYSICIANS' HEALTH SYSTEMS, INC.
POWELL AND ARRIGHI, A PROFESSIONAL LAW CORPORATION
PROGRESSIVE PARTNERS (FORT STREET)
PROGRESSIVE PARTNERS (WING WO TAI BUILDING)
PROVIDENT HEALTH CARE PLANS, INC.
PSYCHOLOGICAL MANAGED CARE CONSULTANT, P.C.
PUEBLO MALL LIMITED PARTNERSHIP
QUEBEC STREET INVESTMENTS, INC.
R&b METRO CENTER ASSOCIATES
RAIN AND HAIL INSURANCE SERVICE INCORPORATED
REASEGURADORO NUEVO MUNDO S.A.
RECOVERY SERVICES INTERNATIONAL, INC.
REGIONAL MALL-CII, L.P.
REGIONAL MALL DEVELOPMENT PARTNERS LIMITED PARTNERSHIP
REINSURANCE SOLUTIONS INTERNATIONAL, L.L.C.
RETAIL/INSTITUTIONAL JOINT VENTURE
RIDGEDALE JOINT VENTURE
RIDGEDALE REIT PARTNERSHIP
RIDGEDALE REIT, INC.
<PAGE>
Page 10
As of 12/31/98
RIVERSIDE SOUTH FORTY L.L.C.
ROSADO GRANDE, INC.
ROSS LOOS HOSPITAL, INC.
RSI HEALTH CARE RECOVERY INC.
SADDLEBACK ASSOCIATES
SADDLEBACK II ASSOCIATES
SAFIRE PRIVATE LIMITED
SAN TOMAS NO. 1 LIMITED PARTNERSHIP
SAR AT SHAWNEE RIDGE, L.L.C.
SAR LEGACY, L.L.C.
SECON PROPERTIES
SEGURO AZTECA, S.A.
SEGUROS CIGNA, S.A.
SEGUROS COMERCIAL AMERICA, S.A. DE C.V.
SHOREBREEZE ASSOCIATES
SILVER BROOK REAL ESTATE DEVELOPMENT COMPANY
SOUTH BAY TECH CENTER ASSOCIATES
SOUTH BAY/VIADEL ORO
SOUTHLAND JOINT VENTURE
SOUTHLAND REIT PARTNERSHIP
SOUTHLAND REIT, INC.
SPRADLEY & COKER, INC.
SWIFT CREEK JOINT VENTURE
TEL-DRUG, INC.
TEMPLE INSURANCE COMPANY LIMITED
THE BOLINGER LAW FIRM, A PROFESSIONAL CORPORATION
THE DANIEL F. LACAVA LAW FIRM, P.A.
THE FIFTH AND RACE COMPANY LIMITED PARTNERSHIP
THE HAYES LAW FIRM, P.A.
THE HERZOG LAW FIRM, P.C.
THE HONE LAW FIRM, P.C.
THE LAW FIRM OF STEVEN L. SIDNEY, A PROFESSIONA LCORPORATION
THE MACLAUGHLIN LAW FIRM, P.C.
THE MORGAN STANLEY LEVERAGED EQUITY FUND L.P.
THE MORGAN STANLEY LEVERAGED MEZZANINE FUND L.P.
THE MORGAN STANLEY LEVERAGED SENIOR DEBT FUND L.P.
THE PETER G. STASSUN LAW FIRM, P.A.
THE ROBERT R. HARRIS LAW FIRM, P.C.
THE TULSA CORPORATION
TRANSWESTERN/CG II L.L.C.
TRANSWESTERN/CONNECTICUT PARTNERS GP I L.L.C.
<PAGE>
Page 11
As of 12/31/98
TRANSWESTERN/CONNECTICUT PARTNERS I L.P.
TRILOG, INC.
UNIMED S.A. ISAPRE MEDICA
VICTORIA HALL COMPANY LIMITED
WARNER NEWHOPE ASSOCIATES
WATERFORD PARTNERSHIP
WESTFORD OFFICE VENTURE
WOOD HILLS ASSOCIATES
WORCESTER CENTER JOINT VENTURE
<PAGE>
Attachment (III)
STATEMENT
---------
The undersigned, Vice President and Principal Accounting Officer of the
depositor, Connecticut General Life Insurance Company, pursuant to Rule 27d-2(a)
(2) under the Investment Company Act of 1940, as amended, certifies as follows:
The fiscal year of the depositor, Connecticut General Life Insurance Company,
extends from January 1 through December 31. During the most recent complete
fiscal year (January 1, 1998 through December 31, 1998), and from January 1,
1999 to date, said insurance company has, continuously and at all times, met the
requirements of paragraph (a)(1) of Rule 27d-2 under the Investment Company Act
of 1940, as amended.
/s/ Robert E. Wahlman
---------------------
Robert E. Wahlman
Vice President
(Principal Accounting
Officer)
<PAGE>
Attachment (IV)
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it meets all the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) or 486(b) under the Securities
Act of 1933 and has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Bloomfield
and State of Connecticut on the 15th day of February, 1999.
By: Connecticut General Life Insurance Company
(Depositor)
By: /s/ Thomas C. Jones
-------------------------------------------
Thomas C. Jones
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Date Signature Title
- ---- --------- -----
<S> <C> <C>
1/15/99 /s/ Thomas C. Jones President (Principal
- ------- ------------------------- Executive Officer) and
Thomas C. Jones Director
1/14/99 /s/ John Wilkinson Vice President and Actuary
- ------- ------------------------- (Principal Financial
John Wilkinson Officer)
1/14/99 /s/ Robert E. Wahlman Vice President
- ------- ------------------------- (Principal Accounting Officer)
Robert E. Wahlman
1/14/99 /s/ Andrew G. Helming Secretary
- ------- ------------------------
Andrew G. Helming
1/14/99 /s/ Harold W. Albert Director
- ------- -------------------------
Harold W. Albert
1/27/99 /s/ H. Edward Hanway Director
- ------- -------------------------
H. Edward Hanway
1/20/99 /s/ Carol M. Olsen Director
- ------- -------------------------
Carol M. Olsen
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Date Signature Title
- ---- --------- -----
<S> <C> <C>
1/15/99 /s/ Robert W. Burgess Director
- ------- --------------------------
Robert W. Burgess
1/20/99 /s/ John G. Day Director
- ------- --------------------------
John G. Day
1/20/99 /s/ John E. Pacy Director
- ------- --------------------------
John E. Pacy
1/20/99 /s/ Joseph M. Fitzgerald Director
- ------- --------------------------
Joseph M. Fitzgerald
1/27/99 /s/ Marc L. Preminger Director
- ------- ---------------------------
Marc L. Preminger
1/20/99 /s/ Patricia L. Rowland Director
- ------- ---------------------------
Patricia L. Rowland
1/20/99 /s/ W. Allen Schaffer, M.D. Director
- ------- ---------------------------
W. Allen Schaffer, M.D.
</TABLE>
<PAGE>
Exhibit Index
(b) Exhibits
(6) Charter and Bylaws of Connecticut General Life Insurance Company,
filed herewith.
(10) Consent of Independent Accountants, filed herewith.
<PAGE>
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
Exhibit 6
CERTIFICATE OF BYLAWS
This is to certify that, effective July 25, 1983, the bylaws of Connecticut
General Life Insurance Company were amended to read as follows:
=================
ARTICLE 1
The annual meeting of the stockholders shall be held on the fourth Monday in
April or on such other date as the directors may designate and at such place as
they may determine. All other meetings of the stockholders shall be held at such
times and places as the directors may determine. A written or printed notice of
any meeting shall be mailed to each stockholder at least ten days prior to the
meeting.
ARTICLE 2
The number and terms of office of the directors shall be determined from time to
time by the board of directors. No person shall be elected as a director after
attaining the age of 70 years. The compensation of directors shall be as
determined by the directors.
ARTICLE 3
The directors shall hold meetings at such times and places as they may
determine. Special meetings of the directors may be called by the chairman of
the board and shall be called by the chairman of the board or in his absence by
another director upon request in writing of the president or of any three
directors. One-third of the total number of directors shall constitute a quorum.
Action of the directors shall be by majority vote of the directors present.
ARTICLE 4
The directors shall determine the order of their business and their rules of
order and they shall preserve a written record of their doings.
<PAGE>
ARTICLE 5
The directors, by resolution adopted by a majority of the entire board, may
appoint from their number one or more committees, each consisting of two or more
directors and each of which, to the extent provided in such resolution, shall
have all the authority of the board. A majority of the members of a committee
shall constitute a quorum.
ARTICLE 6
The directors shall choose from among their number a chairman of the board and
shall elect a president, one or more vice presidents and one or more
secretaries, including a corporate secretary. They may also authorize the
chairman of the board, the president or other designated officers to appoint
such officers, other than the chairman of the board, the president and the
corporate secretary, with such titles, duties and powers as the appointing
officer may deem desirable.
ARTICLE 7
All loans and purchases for investment shall be authorized or approved by the
directors or by an authorized committee of the board.
ARTICLE 8
Real estate may be sold by the president or a vice president or an assistant
vice president and the instrument of conveyance shall be executed by the
president or a vice president or an assistant vice president and by a secretary
or an assistant secretary or an investment officer or an assistant investment
officer.
The sale of real estate where either the cost or the sale price exceeds
$1,000,000 shall be authorized or approved by the directors or an authorized
committee of the board, and all sales of real estate shall be reported to the
directors or an authorized committee of the board.
The president or a vice president or an assistant vice president or a secretary
or an assistant secretary or an investment officer or an assistant investment
officer is authorized to execute releases (or to execute powers authorizing
specific releases), assignments, or other instruments relating to mortgages,
trust deeds, judgment liens, or other liens, and to execute leases or other
contracts relating to real estate, and the president or a vice president or an
assistant vice president may delegate to others by written instrument authority
to execute leases.
<PAGE>
ARTICLE 9
The sale or other disposition of any investments other than those specifically
provided for in Article 8 shall be authorized or approved by the directors or an
authorized committee of the board.
The president or a vice president or an assistant vice president or a secretary
or an assistant secretary or an investment officer or an assistant investment
officer is authorized to execute any instruments necessary in connection with
the purchase or the sale or other disposition of any investments other than
those specifically provided for in Article 8 and to execute any agreements
relating to any such investments.
The directors or an authorized committee of the board may at any time and from
time to time enlarge, restrict or in any way modify the authorizations granted
in Article 8 and 9.
ARTICLE 10
Auditors shall be chosen at each annual meeting of the stockholders and their
compensation shall be as determined by the directors.
ARTICLE 11
Transfers of stock shall be made only upon the books of the company. A transfer
agent may be employed.
===================
I further certify that the above bylaws are now in full force and effect, and
that I am an official of Connecticut General Life Insurance Company with the
title indicated.
Dated at Bloomfield, Connecticut this day of ,
19 .
------------------------------------------
Signature of Official
------------------------------------------
Title
<PAGE>
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
BOARD OF DIRECTORS
JULY 30, 1998
Amendment of Bylaws
- -------------------
RESOLVED: That a new Article 12 is added to the Bylaws of the Company, as
follows:
ARTICLE 12
Subject to the conditions set forth below, the company shall indemnify any
individual who is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative, or investigative and whether formal or
informal (a "Proceeding"), other than a Proceeding by or in the right of the
company, because such individual is or was a director, officer or employee of
the company, against liability incurred in the Proceeding (including the
obligation to pay a judgement, settlement, penalty, fine, and reasonable
expenses incurred with respect to a Proceeding), if such individual conducted
himself in good faith and such individual reasonably believed, in the case of
conduct in such individual's official capacity, that his conduct was in the best
interests of the company and, in all other cases, that his conduct was at least
not opposed to the best interests of the company, and, in the case of a criminal
proceeding, such individual had no reasonable cause to believe his conduct was
unlawful. Such indemnification shall be made only as properly authorized for a
specific Proceeding upon a determination that such indemnification is
permissible, as provided by applicable law. Such indemnification shall include
payment for reasonable expenses (including counsel fees) incurred in advance of
the final disposition of such Proceeding if such individual delivers to the
company (1) a written affirmation of his good faith belief that he has met the
relevant standard of conduct described above, (2) his written undertaking to
repay any funds advanced if it is ultimately determined that such individual has
not met the relevant standard of conduct described above, and (3) his written
agreement to certain additional terms and conditions, in such form as may be
deemed to be appropriate by or on behalf of the company. The foregoing
provisions shall not be exclusive of other rights to which such individual may
be entitled as a matter of law. Also, the rights granted by this paragraph shall
not apply in connection with any Proceeding initiated or instigated directly or
indirectly, in whole or in part, by or on behalf of such individual, unless the
Proceeding was authorized by the Board of Directors of the company.
The rights granted by the foregoing paragraph shall not extend to an individual
who is or was an agent of the company, nor to an individual (whether or not such
individual is or was a director, officer or employee of the company) who is or
was serving at the company's request as a director, officer, partner, trustee,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise. In any such case, or in the case of a Proceeding by or in the
right of the company, or if the individual engaged in conduct for which broader
indemnification is permitted under the certificate of incorporation or charter
or under applicable law, the company may, but shall not be obligated to,
indemnify such individual, except or unless as legally required, whether by
statue or otherwise.
<PAGE>
Charter
of
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
----------------------------
Consisting of Connecticut Special Act No. 173 of 1947 and the amendments made by
Special Act No. 530 of 1953, Special Act No. 76 of 1959, Special Act No. 358 of
1963 and Special Act No. 351 of 1967.
This document also contains the Resolution of the General Assembly of
Connecticut, approved June 22, 1865, under which Connecticut General Life
Insurance Company was organized June 26, 1865, together with all amendments to
date.
October 27, 1967
<PAGE>
Charter
of
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
SECTION 1. Connecticut General Life Insurance Company shall continue
under that name, a body corporate, with power to purchase or otherwise acquire,
have, hold and enjoy lands, tenements, hereditaments, chattels, bonds, stocks,
monies, choses in action and property and effects of every kind, and the same to
sell, grant, demise, alien and convey and to loan, invest and reinvest any of
such assets in any manner now or hereafter permitted in the case of any other
corporation now or hereafter chartered by Connecticut and empowered to do a life
insurance business; to sue and be sued and to plead and be impleaded in all
courts of law and equity; to have and to hold and to change at pleasure a common
seal, and to ordain and to put into execution and to change at pleasure by-laws
consistent with the laws of this state and of the United States.
SEC. 2. The business of the corporation shall be life insurance,
endowments, annuities, accident insurance, health insurance and any other
business or type of business which any other corporation now or hereafter
chartered by Connecticut and empowered to do a life insurance business may now
or hereafter lawfully do; and the corporation is specifically empowered to
accept and to cede reinsurance of any such risks or hazards. The corporation may
exercise such powers outside of Connecticut to the extent permitted by the laws
of the particular jurisdiction. Policies or other contracts may be issued
stipulated to be with or without participation in profits; and they may be with
or without seal.
SEC. 3. The capital stock of the corporation shall be not less than
three million dollars and may from time to time be increased when and as
authorized by the stockholders and, unless the stockholders otherwise authorize,
shall be divided into shares of the par value of five dollars each. The capital
stock of the corporation shall be transferable in accordance with the bylaws;
and a transfer agent may be employed.
SEC. 4. The annual meeting of the stockholders of the corporation shall
be held at such time during the first half of each year and upon such notice as
may be determined from time to time either by or in accordance with the by-laws.
If the corporation shall fail to hold its annual meeting at the time specified
for the meeting in any year or shall fail to elect directors thereat, the
corporation shall not be dissolved nor shall its rights be impaired thereby, but
a special meeting of the stockholders shall be called; and at such meeting
directors to fill the places of the directors whose terms shall have expired may
be
2
<PAGE>
elected and any other proper business may be transacted. At all meetings of the
stockholders each stockholder shall be entitled to vote in person or by an
attorney duly authorized by a written proxy, each share of stock represented at
the meeting shall be entitled to one vote and the stockholders represented at
the meeting shall constitute a quorum.
SEC. 5. The corporate office shall be at Hartford or at some other town
in Connecticut and the corporation may establish and maintain other offices and
agencies in other towns of Connecticut and elsewhere. The property and affairs
of the corporation shall be managed by a board of not less than nine directors,
the number and the terms of office to be determined from time to time by the
board of directors in accordance with the by-laws, provided no director shall be
elected for a longer term than five years. The directors shall be chosen by
ballot by the stockholders except that if any vacancy occurs in the board of
directors such vacancy may be filled by the remaining directors for the
unexpired portion of the term, and if the number of directors is increased by
vote of the board of directors between meetings of stockholders, the additional
directors, not to exceed three, may be chosen by the board of directors for
terms expiring with the next annual meeting thereafter. Unless the bylaws
provide otherwise, five directors shall constitute a quorum. Directors serving
on the date of the acceptance of this act shall continue to serve forth terms
for which they were elected.
SEC. 6. The directors of the corporation shall choose from among their
number a president and shall elect one or more vice presidents, one or more
secretaries and such other officers as they may deem desirable. The president
shall be elected to hold office until the next annual meeting, but he may
continue to serve until his successor shall have been chosen; and the other
officers may be elected for like or for different terms and they may be removed
at any time at the pleasure of the directors.
SEC. 7. Connecticut General Life Insurance Company is authorized to
adopt a plan of exchange under the terms of which the shares of its issued and
outstanding capital stock shall be exchanged for shares of Connecticut General
Insurance Corporation on a basis which shall be specified in the plan of
exchange. No such exchange shall be effected unless the plan of exchange is
first adopted by the board of directors of Connecticut General Life Insurance
Company and approved by the affirmative vote of the holders of at least
two-thirds of the voting power of the outstanding shares of its capital stock,
nor unless there has been filed in the office of the secretary of the state a
certificate setting forth the plan of exchange and the stockholder vote thereon,
and a copy of a certificate of the insurance commissioner stating that he has
approved and authorized the plan of exchange as provided in section 38-35 of the
general statutes. Any shareholder of Connecticut General Life Insurance Company
who objects to the plan of exchange shall have the right to be paid the value of
all
3
<PAGE>
shares of Connecticut General Life Insurance Company owned by him (but excluding
such value as is attributable to his interest as a beneficiary under the CG
Stockholders Trust and for which he is entitled to be compensated by Aetna
Insurance Company) in accordance with the provisions of section 33-374 of the
general statutes. For purposes of section 33-374, such shareholder shall be
deemed to be designated in subsection (c) of section 33-373 of the general
statutes; and Connecticut General Life Insurance Company shall have all the
rights and obligations of a "corporation" under section 33-374, provided the
term "corporation," as used in said section, shall refer only to Connecticut
General Life Insurance Company and the third sentence of section 33-374(h) shall
have no application. Except as may be otherwise provided in the plan of
exchange, and except as to shares for which payment must be made pursuant to the
two previous sentences, on the date on which the exchange becomes effective, all
certificates representing shares of the issued and outstanding stock of
Connecticut General Life Insurance Company shall automatically and without any
physical transfer or deposit be deemed for all purposes to be certificates
representing shares of the issued and outstanding stock of Connecticut General
Insurance Corporation.
SEC. 8. The charter of the Connecticut General Life Insurance Company,
incorporated by a resolution approved June 22, 1865, as amended, is hereby
further amended to read as above; and this act shall be valid as an amendment to
the charter of the corporation and shall constitute the charter of the
corporation if, within two years after its passage, it shall be accepted at a
meeting of the corporation duly warned and held for that purpose and an attested
copy of such acceptance filed in the office of the secretary of the state.
Special Act No. 173 of 1947 approved May 28, 1947; Certificate of Acceptance
filed February 3, 1948.
Special Act No. 536 of 1953 approved July 1, 1953; Certificate of Acceptance
filed February 23, 1954.
Special Act No. 76 of 1959 approved May 11, 1959; Certificate of Acceptance
filed January 26, 1960.
Special Act No. 358 of 1963 approved June 27, 1963; Certificate of Acceptance
filed March 10, 1964.
Special Act No. 351 of 1967 approved June 28, 1967; Certificate of Acceptance
filed October 27, 1967.
---------------------------
4
<PAGE>
STATE OF CONNECTICUT, GENERAL ASSEMBLY,
May Session, A. D. 1865.
Incorporating the Connecticut General Life Insurance Company.
Upon the petition of Edwin D. Tiffany and others, praying for an act of
incorporation:
Resolved by this Assembly, SEC. 1. That Edwin D. Tiffany, Henry C. Deming,
John C. Palmer, Jonathan B. Bunce, George S. Gilman, Ebenezer N. Kellogg, John
A. Butler, Henry J. Johnson and George D. Jewett, with all others that may
become associated with them as stockholders, as hereinafter provided, and their
successors, be and they are hereby created a body corporate, for the purpose of
life insurance, and other purposes hereinafter mentioned, by the name of the
Connecticut General Life Insurance Company, and by that name are empowered to
purchase, have, hold and enjoy lands, tenements, hereditaments, chattels,
stocks, choses in action, and effects of every kind, and the same to sell,
grant, demise, aliene and convey; to sue and be sued, plead and be impleaded in
all courts of law and equity; to have and hold a common seal, and the same to
change at pleasure; and to ordain and put into execution by-laws and
regulations, as they may deem proper for the well ordering of said corporation,
and the transaction of its business: provided such by-laws and regulations be
consistent with the laws of this state and of the United States.
SEC. 2. The capital stock of said corporation shall not be less than five
hundred thousand dollars, and may be increased by vote of the stockholders, at
any time, to one million of dollars; the shares of the capital stock to be of
the value of one hundred dollars each; upon which ten dollars shall be paid upon
each share at the time it is subscribed for, as hereinafter provided, and ten
dollars additional shall be paid upon each share of stock subscribed for, to
said corporation, within twenty days from the time of the organization of said
company, and the remaining eighty dollars per share shall, within twenty days
from the organization of said company, be paid into the treasury of said
corporation, or be secured to be- paid, either by mortgage of real estate, or by
such indorsed promissory notes as shall be approved by the directors of said
company.
SEC. 3. The capital stock of said company shall be transferable according
to their by-laws; and if any subscriber to said stock shall fail to pay his
subscription or secure the same to be paid as aforesaid for the space of thirty
days after the same shall become due, and if, upon the increase of the capital
stock of said company, any subscriber to the same shall fail to pay the
installments as called for by the directors of said company for the space of
thirty days after the same shall become due, then said stock of such delinquent
subscriber shall be sold by the directors
5
<PAGE>
at public auction upon at least fifteen days notice of such sale by publication
in some newspaper published in Hartford, and the proceeds of said sale shall be
first applied to the expenses of said sale and payment of the installments due
upon the stock, and the balance of proceeds, if any, shall be refunded to the
owner of said stock. The delinquent stockholders may be notified in such way as
the by-laws may provide of the maturity of the installments. The stock, sold in
manner above provided for, shall entitle the purchaser to all the rights of a
stockholder, to the extent of shares so Purchased.
SEC. 4. The business of said corporation shall be life insurance and
annuities, and contracts of insurance may be made, providing for all risks,
hazards, guarantees and contingencies to which life insurance is applicable,
conferring endowments and granting and purchasing annuities upon such conditions
and for such periods of time as may be determined by said corporation; and said
company may procure such re-insurance of their risks as may be deemed desirable.
Policies may be issued, stipulated to be with or without participation in
profits, and all dividends which shall be allotted to such participating
policies which are not claimed and called for within two years after the same
shall have been declared shall be forfeited to said company.
SEC. 5. Said company may issue policies upon lives for the benefit of and
payable to married women; and all contracts of insurance, so beneficial to
married women, whether made with said married women or with other persons in
their behalf, shall be, if so expressed in the policy, the sole and separate
estate of said married woman, and may be made payable at the maturity of said
policies, in case of previous death of said married women, to their children;
and the discharge of said policies by said married women, or their assigns and
their children (or their guardians, if minors), in case of death of said married
women, shall be a valid discharge of said contracts.
SEC. 6. The office of said company shall be located at Hartford, and its
affairs shall be managed by not less than seven nor more than twenty directors
(their number to be determined by the by-laws), to be chosen by ballot from
among and by the stockholders, a majority of whom shall be residents of this
state, which directors first chosen shall hold office until the first Tuesday in
May next ensuing the date of their election, and until others are chosen to
supply their places; and the annual meetings for the choice of directors shall,
after the first election, be holden at the city of Hartford on the first Tuesday
in May, or on such other day in the month of May as shall be determined by the
by-laws of said corporation. Each share of stock represented by the holder or
his proxy shall be entitled to one vote in the choice of directors.
SEC. 7. If it shall so happen that a choice of directors shall not be made
at the time of any annual meeting, said corporation
6
<PAGE>
shall not be thereby dissolved, but an election may be had within one year
thereafter at some time signified by the directors last chosen. Public notice by
order of the directors shall always be given at least ten days previous to any
meeting of the stockholders in a newspaper printed at Hartford. The president
may call a special meeting of stockholders at the request of five of the
directors.
SEC. 8. To carry out the provisions of this charter, and to organize the
said corporation, Edwin D. Tiffany, Jonathan B. Bunce and George S. Gilman are
authorized and appointed to receive subscriptions to the capital stock thereof
and the payment of the first installment thereon, and when three thousand shares
of said stock shall have been subscribed for, and the first installment has been
paid thereon, upon their said Tiffany, Bunce and Gilman's call, by notice
published in a newspaper printed in Hartford ten days before the time of said
meeting, the subscribers may meet at the time and place named in said call, and
adopt such by-laws, rules and regulations as they may deem proper, in compliance
with this act; and said subscribers may at said meeting elect a board of
directors in the manner aforesaid, to hold office as above provided; and when
the by-laws have been adopted, and the board of directors have been organized by
the choice of a president and secretary, the said corporation may exercise all
the power conferred by this act.
SEC. 9. The directors may choose a president, vice-president and secretary,
and appoint such other officers, clerks and agents, and establish such agencies
in this state and elsewhere as shall be by them deemed advisable for conducting
the business of said company; fix their compensation, and take bonds of any and
all of them for the faithful discharge of their duties, and may make such
covenants and agreements as may be deemed necessary, and such contracts and
agreements signed either by the president or secretary shall be binding on said
company. The president and vice-president shall be chosen from the board of
directors, and may hold their appointments for one year, and until others are
chosen in their places; the other officers and employees of said company may be
removed, and new ones appointed at the pleasure of the directors. In the absence
or disability of the president and vice-president, the directors may choose a
president pro tempore, and in case a vacancy occurs in the board of directors,
the remaining directors may fill such vacancy.
SEC. 10. All policies or other contracts of insurance authorized by this
act may be made with or without the seal of said corporation, and shall be
signed by the president or vice-president and the secretary, and when so signed
and executed shall be binding and obligatory upon said corporation, according to
the true intent and meaning of said policies and contracts.
SEC. 11. The capital stock acquired monies and personal estate of said
corporation may be invested, at the discretion of
7
<PAGE>
the directors, in loans upon real estate, in bonds and mortgages, in loans upon
or purchase of United States notes and bonds, bank stocks or bonds issued by
states or by municipal or other corporations, or may be loaned upon indorsed
promissory notes not having more than twelve months to run; and the same may be
called in and re-invested under the provisions of this act; and it shall be the
duty of said corporation to make an annual report to the general assembly,
containing a full and accurate statement of its condition and affairs.
SEC. 12. This act shall take effect from the day of its passage, and may
be altered, amended or repealed at the pleasure of the general assembly; and
nothing contained therein shall be so construed as to authorize said company to
engage in the business of banking.
Approved, June 22, 1865.
--------------------
STATE OF CONNECTICUT, GENERAL ASSEMBLY.
January Session, A. D. 1873.
Authorizing the Connecticut General Life Insurance Company to Reduce its
Capital Stock.
Upon the petition of the Connecticut General Life Insurance Company for
reduction of its capital stock:
Resolved by this Assembly. SECTION 1. That power and authority be, and
hereby are, given to the Connecticut General Life Insurance Company to reduce
its capital stock, from time to time, to any amount not less than $125,000, by
reducing the number of shares, or the par value of the shares, of the respective
stockholders of said company, pro rata, and to return that portion of the
capital represented by stock notes to the respective stockholders whenever the
stockholders and directors shall so elect, and to return the cash portion of
said capital authorized by this act whenever the assets of said company shall
show a net surplus by the official valuation of the insurance department of this
state, exclusive of its capital stock, of the sum of twenty-five thousand
dollars, and a majority of the stockholders shall so vote, at a meeting or
meetings duly warned and held for acting on said subject, and said stockholders'
vote shall have been approved by a vote of at least two-thirds of the directors
of said company.
SEC. 2. Whenever the stockholders and directors of said company shall have
voted any reduction of the capital stock as aforesaid the directors shall
immediately cause a certificate of said action, signed by their president in the
name and behalf of said company, and countersigned by their secretary, and under
the
8
<PAGE>
corporate seal of said company, and acknowledged in the manner required by law
for conveyance of land, to be filed in the office of the secretary of this state
for record, and thereupon the charter of said company shall be deemed to be
amended in respect to the amount of its capital, and the number or the par value
of its shares, so as to conform to the said reduction voted and certified to the
secretary of state; and said company shall, with such reduced capital, possess
the same rights, and be subject to the same liabilities, that it possessed or
was subject to at the time of said reduction.
SEC. 3. After said reduction of capital as aforesaid said company, by a
majority vote of its directors, may require each stockholder to return his
original certificate of stock held by him, and in lieu thereof shall issue new
certificates of stock for such number of shares, or of such par value as said
stockholders shall be entitled to in the proportion that the reduced capital
shall bear to the capital before said reduction; and said company shall
reimburse and pay each stockholder the par value of the reduced amount of his
stock in said company by first returning to him, or endorsing as paid on his
stock-note or notes held by the company the amount of said reduction if said
notes equal said reduction; and, in case said notes do not equal the amount of
said reduction, shall pay the balance in cash upon surrender of the original
certificate of stock.
Approved, June 19, 1873.
(Certificate of Acceptance filed February 28, 1874.)
--------------------
STATE OF CONNECTICUT, GENERAL ASSEMBLY,
January Session, A. D. 1911.
[Senate Joint Resolution No. 51.]
[27.]
AMENDING THE CHARTER OF THE CONNECTICUT GENERAL LIFE INSURANCE COMPANY.
Resolved by this Assembly. SECTION 1. That the annual meeting of the
Connecticut General Life Insurance Company, after the year 1911, shall be holden
at the city of Hartford on the first Tuesday of February, or on such other day
in the month of February as shall be determined by the bylaws of said
corporation.
SEC. 2. Said corporation is hereby authorized and empowered to insure
persons against loss of life or personal injury resulting
9
<PAGE>
from any cause, and against loss resulting from disabilities caused by disease.
SEC. 3. The affairs of said corporation shall be managed by not less than
nine nor more than fifteen directors, the number thereof to be determined by the
by-laws, a majority of whom shall be residents of this state, and who shall be
chosen by ballot from among and by the stockholders in manner following: at the
next annual meeting after the acceptance of this amendment the stockholders
shall elect not less than three nor more than five directors to serve for the
term of one year, not less than three nor more than five directors to serve for
the term of two years, and not less than three nor more than five directors to
serve for the term of three years; and annually thereafter not less than three
nor more than five directors shall be elected to hold office for the term of
three years. Whenever any vacancy shall occur in the board of directors by the
death or resignation of a director, such vacancy may be filled by the remaining
directors for the remainder of the term for which such director was elected.
SEC. 4. So much of the resolution incorporating said company, approved
June 22, 1865, as is inconsistent herewith is hereby, repealed.
Approved, March 9, 1911.
(Certificate of Acceptance filed June 1, 1911.)
--------------------
STATE OF CONNECTICUT, GENERAL ASSEMBLY,
January Session, A. D. 1921.
[House Bill No. 510.]
[101.]
AN ACT AMENDING THE CHARTER OF THE CONNECTICUT GENERAL LIFE INSURANCE COMPANY.
Be it enacted by the Senate and House of Representatives in General Assembly
convened:
SECTION 1. The Connecticut General Life Insurance Company, incorporated
under resolution approved June 22, 1865, is hereby authorized to increase its
capital stock to an amount not exceeding in the aggregate the sum of five
million dollars.
SEC. 2. This act shall become operative as an amendment to the charter of
the Connecticut General Life Insurance Company if within one year after its
approval it shall be accepted at a meeting of
10
<PAGE>
said corporation duly warned and held for that purpose and an attested copy of
such acceptance filed in the office of the secretary of the state.
Approved, April 13, 1921.
(Certificate of Acceptance filed February 9, 1922.)
--------------------
STATE OF CONNECTICUT, GENERAL ASSEMBLY,
January Session, A. D. 1929.
[Substitute for Senate Bill No. 207.]
[96.]
AN ACT AMENDING THE CHARTER OF THE CONNECTICUT GENERAL LIFE INSURANCE COMPANY.
Be it enacted by the Senate and House of Representatives in General Assembly
convened:
SECTION 1. The Connecticut General Life Insurance Company, incorporated by
resolution approved June 22, 1865, from time to time, may change the par value
and number of shares of its issued and outstanding capital stock, provided the
par value shall be not less than ten dollars for each share and the aggregate
par value be not altered by such change; but no such change shall be valid
unless approved by a vote of at least two-thirds of the stock represented at a
meeting of the stockholders duly warned and held for that purpose nor unless a
majority of the directors shall make, sign and swear to and file in the office
of the secretary of the state a certificate stating that such change has been
duly approved by the stockholders and setting forth a copy of the vote of the
stockholders, which vote shall show the details of such change.
SEC. 2. Said corporation may, from time to time, and to the amount of
capital stock authorized by its charter, issue shares of stock with the same par
value as that of its then outstanding capital stock.
SEC. 3. This act shall be valid as an amendment to the charter of said
corporation if, within one year after its passage, it shall be accepted at a
meeting of said corporation duly warned and held
11
<PAGE>
for that purpose and an attested copy of such acceptance filed in the office of
the secretary of the state.
Approved, April 18, 1929.
(Certificate of Acceptance filed November 18, 1929.)
--------------------
STATE OF CONNECTICUT, GENERAL ASSEMBLY,
January Session, A. D. 1941.
[Senate Bill No. 694.]
[480.]
AN ACT AMENDING THE CHARTER OF THE CONNECTICUT GENERAL LIFE INSURANCE COMPANY.
Be it enacted by the Senate and House of Representatives in General Assembly
convened:
SECTION 1. The Connecticut General Life Insurance Company incorporated
under a resolution approved June 22, 1865, is authorized to increase its capital
stock to an amount not exceeding in the aggregate the sum of ten million
dollars.
SEC. 2. The Connecticut General Life Insurance Company is authorized to
subscribe for, purchase, hold or dispose of capital stock of the Connecticut
General Casualty Insurance Company and the Connecticut General Insurance
Company.
SEC. 3. This act shall be valid as an amendment to the charter of said
corporation if, within two years after its passage, it shall be accepted at a
meeting of said corporation duly warned and held for that purpose and an
attested copy of such acceptance filed in the office of the secretary of the
state.
Approved, June 24, 1941.
(Certificate of Acceptance filed February 3, 1942.)
--------------------
12
<PAGE>
STATE OF CONNECTICUT, GENERAL ASSEMBLY,
January Session, A. D. 1947.
[Substitute for Senate Bill No. 639.]
[173.]
AN ACT AMENDING THE CHARTER OF THE CONNECTICUT GENERAL LIFE INSURANCE COMPANY.
SECTION 1. Connecticut General Life Insurance Company shall continue
under that name, a body corporate, with power to purchase or otherwise acquire,
have, hold and enjoy lands, tenements, hereditaments, chattels, bonds, stocks,
monies, choses in action and property and effects of every kind, and the same to
sell, grant, demise, alien and convey and to loan, invest and reinvest any of
such assets in any manner now or hereafter permitted in the case of any other
corporation now or hereafter chartered by Connecticut and empowered to do a life
insurance business; to sue and be sued and to plead and be impleaded in all
courts of law and equity; to have and to hold and to change at pleasure a common
seal, and to ordain and to put into execution and to change at pleasure by-laws
consistent with the laws of this state and of the United States.
SEC. 2. The business of the corporation shall be life insurance,
endowments, annuities, accident insurance, health insurance and any other
business or type of business which any other corporation now or hereafter
chartered by Connecticut and empowered to do a life insurance business may now
or hereafter lawfully do; and the corporation is specifically empowered to
accept and to cede reinsurance of any such risks or hazards. The corporation may
exercise such powers outside of Connecticut to the extent permitted by the laws
of the particular jurisdiction. Policies or other contracts may be issued
stipulated to be with or without participation in profits; and they may be with
or without seal.
SEC. 3. The capital stock of the corporation shall be not less than
three million dollars and may from time to time be increased when and as
authorized by the stockholders to any sum not exceeding in the aggregate twenty
million dollars and, unless the stockholders otherwise authorize, shall be
divided into shares of the par value of ten dollars each. The capital stock of
the corporation shall be transferable in accordance with the by-laws; and a
transfer agent may be employed.
SEC. 4. The annual meeting of the stockholders of the corporation
shall be held at such time during the first half of
13
<PAGE>
each year and upon such notice as may be determined from time to time either by
or in accordance with the by-laws. If the corporation shall fail to hold its
annual meeting at the time specified for the meeting in any year or shall fail
to elect directors thereat, the corporation shall not be dissolved nor shall its
rights be impaired thereby, but a special meeting of the stockholders shall be
called; and at such meeting directors to fill the places of the directors whose
terms shall have expired may be elected and any other proper business may be
transacted. At all meetings of the stockholders each stockholder shall be
entitled to vote in person or by an attorney duly authorized by a written proxy,
each share of stock represented at the meeting shall be entitled to one vote and
the stockholders represented at the meeting shall constitute a quorum.
SEC. 5. The corporate office shall be at Hartford but the corporation
may establish and maintain other offices and agencies in other towns of
Connecticut and elsewhere. The property and affairs of the corporation shall be
managed by a board of not less than nine directors, the number from time to time
to be determined either by or in accordance with the by-laws. The directors
shall be chosen by ballot from among and by the stockholders and shall be
divided into three classes. At each annual meeting one class of directors shall
be elected, each director so elected to hold office for a term expiring with the
third annual meeting thereafter, but he may continue to serve until his
successor shall have been chosen. In the event of an increase in the number of
directors the term of any such additional director shall expire at the same time
as the terms of the other members of the class to which he shall have been
assigned. When any vacancy shall occur in the board of directors such vacancy
may be filled by the remaining directors for the unexpired portion of the term.
Unless the by-laws provide otherwise, three directors shall constitute a quorum.
Directors serving on the date of the acceptance of this act shall continue to
serve for the terms for which they were elected.
SEC. 6. The directors of the corporation shall choose from among their
number a president and shall elect one or more vice presidents, one or more
secretaries and such other officers as they may deem desirable. The president
shall be elected to hold office until the next annual meeting, but he may
continue to serve until his successor shall have been chosen; and the other
officers may be elected for like or for different terms and they may be removed
at any time at the pleasure of the directors.
SEC. 7. The charter of the Connecticut General Life Insurance Company,
incorporated by a resolution approved June 22, 1865, as amended, is hereby
further amended to read as above; and this act shall be valid as an amendment to
the charter of the corporation and shall constitute the charter of the
corporation if, within two years after its passage, it shall be accepted at a
meeting of the corporation duly warned and held for that purpose and an attested
14
<PAGE>
copy of such acceptance filed in the office of the secretary of the state.
Approved, May 28, 1947.
(Certificate of Acceptance filed February 3, 1948.)
--------------------
STATE OF CONNECTICUT, GENERAL ASSEMBLY,
January Session, A. D. 1953.
[Substitute for Senate Bill No. 462.]
[536.]
AN ACT AMENDING THE CHARTER OF THE CONNECTICUT GENERAL LIFE INSURANCE COMPANY.
SECTION 1. Section 3 of number 173 of the special acts of 1947 is
amended to read as follows: The capital stock of the corporation shall be not
less than three million dollars and may from time to time be increased when and
as authorized by the stockholders to any sum not exceeding in the aggregate
fifty million dollars and unless the stockholders otherwise authorize, shall be
divided into shares of the par value of ten dollars each. The capital stock of
the corporation shall be transferable in accordance with the by-laws; and a
transfer agent may be employed.
SEC. 2. Section 5 of said act is amended to read as follows: The
corporate office shall be at Hartford or at some other town in Connecticut and
the corporation may establish and maintain other offices and agencies in other
towns of Connecticut and elsewhere. The property and affairs of the corporation
shall be managed by a board of not less than nine directors, the number from
time to time to be determined either by or in accordance with the by-laws. The
directors shall be chosen by ballot from among and by the stockholders and shall
be divided into three classes. At each annual meeting one class of directors
shall be elected, each director so elected to hold office for a term expiring
with the third annual meeting thereafter, but he may continue to serve until his
successor shall have been chosen. In the event of an increase in the number of
directors the term of any such additional director shall expire at the same time
as the terms of the other members of the class to which he shall have been
assigned. When any vacancy shall occur in the board of directors such vacancy
may be filled by the remaining directors for the unexpired portion of the term.
Unless the by-laws provide otherwise, three directors shall constitute a quorum.
Directors serving on the date of the acceptance
15
<PAGE>
of this act shall continue to serve for the terms for which they were elected.
SEC. 3. This act shall be valid as an amendment to the charter of the
corporation if, within two years after its passage, it shall be accepted at a
meeting of the corporation duly warned and held for that purpose and an attested
copy of such acceptance filed in the office of the secretary of the state.
Approved, July 1, 1953.
(Certificate of Acceptance filed February 23, 1954.)
--------------------
STATE OF CONNECTICUT, GENERAL ASSEMBLY,
January Session, A. D. 1959.
[Substitute for House Bill No. 2655.]
[76.]
AN ACT AMENDING THE CHARTER OF CONNECTICUT GENERAL LIFE INSURANCE COMPANY,
CONCERNING THE BOARD OF DIRECTORS.
SECTION 1. Section 5 of the charter of the Connecticut General Life
Insurance Company, incorporated under a resolution approved June 22, 1865, as
amended by number 173 of the special acts of 1947, and section 2 of number 536
of the special acts of 1953, is amended to read as follows: The corporate office
shall be at Hartford or at some other town in Connecticut and the corporation
may establish and maintain other offices and agencies in other towns of
Connecticut and elsewhere. The property and affairs of the corporation shall be
managed by a board of not less than nine directors, the number and the terms of
office to be determined from time to time by the board of directors in
accordance with the by-laws, provided no director shall be elected for a longer
term than five years. The directors shall be chosen by ballot from among and by
the stockholders except that if any vacancy shall occur in the board of
directors such vacancy may be filled by the remaining directors for the
unexpired portion of the term, and if the number of directors shall be increased
by vote of the board of directors between meetings of stockholders the
additional directors, not to exceed three, may be chosen by the board of
directors for terms expiring with the next annual meeting thereafter. Unless the
by-laws provide otherwise, five directors shall constitute a quorum. Directors
serving on the date of the acceptance of this act shall continue to serve for
the terms for which they were elected.
16
<PAGE>
SEC. 2. This act shall be valid as an amendment to the charter of the
corporation if, within two years after its passage, it shall be accepted at a
meeting of the corporation duly warned and held for that purpose and an attested
copy of such acceptance filed in the office of the secretary of the state.
Approved May 11, 1959.
(Certificate of Acceptance filed January 26, 1960.)
--------------------
STATE OF CONNECTICUT, GENERAL ASSEMBLY,
January Session, A. D. 1963
[House Bill No. 3699.]
[358.]
AN ACT CONCERNING THE CAPITAL STOCK OF CONNECTICUT GENERAL LIFE INSURANCE
COMPANY.
SECTION 1. Section 3 of the charter of the Connecticut General Life
Insurance Company is amended to read as follows: The capital stock of the
corporation shall be not less than three million dollars and may from time to
time be increased when and as authorized by the stockholders and, unless the
stockholders otherwise authorize, shall be divided into shares of the par value
of five dollars each. The capital stock of the corporation shall be transferable
in accordance with the bylaws; and a transfer agent may be employed.
SEC. 2. This act shall be valid as an amendment to the charter of the
corporation if, within two years after its passage, it shall be accepted at a
meeting of the corporation duly warned and held for that purpose and an attested
copy of such acceptance filed in the office of the secretary of the state.
Approved June 27, 1963.
(Certificate of Acceptance filed March 10, 1964.)
--------------------
17
<PAGE>
STATE OF CONNECTICUT, GENERAL ASSEMBLY,
January Session, A. D. 1967
[Substitute for House Bill No. 2626.]
[351.]
AN ACT AMENDING THE CHAPTER OF CONNECTICUT GENERAL LIFE INSURANCE COMPANY.
SECTION 1. The charter of Connecticut General Life Insurance Company
is amended by inserting immediately after section 6 the following new section 7:
Connecticut General Life Insurance Company is authorized to adopt a plan of
exchange under the terms of which the shares of its issued and outstanding
capital stock shall be exchanged for shares of Connecticut General Insurance
Corporation on a basis which shall be specified in the plan of exchange. No such
exchange shall be effected unless the plan of exchange is first adopted by the
board of directors of Connecticut General Life Insurance Company and approved by
the affirmative vote of the holders of at least two-thirds of the voting power
of the outstanding shares of its capital stock, nor unless there has been filed
in the office of the secretary of the state a certificate setting forth the plan
of exchange and the stockholder vote thereon, and a copy of a certificate of the
insurance commissioner stating that he has approved and authorized the plan of
exchange as provided in section 38-35 of the general statutes. Any shareholder
of Connecticut General Life Insurance Company who objects to the plan of
exchange shall have the right to be paid the value of all shares of Connecticut
General Life Insurance Company owned by him (but excluding such value as is
attributable to his interest as a beneficiary under the CG Stockholders Trust
and for which he is entitled to be compensated by Aetna Insurance Company) in
accordance with the provisions of section 33-374 of the general statutes. For
purposes of section 33-374, such shareholder shall be deemed to be designated in
subsection (c) of section 33-373 of the general statutes; and Connecticut
General Life Insurance Company shall have all the rights and obligations of a
"corporation" under section 33-374, provided the term "corporation," as used in
said section, shall refer only to Connecticut General Life Insurance Company and
the third sentence of section 33-374(h) shall have no application. Except as may
be otherwise provided in the plan of exchange, and except as to shares for which
payment must be made pursuant to the two previous sentences, on the date on
which the exchange becomes effective, all certificates representing shares of
the issued and outstanding stock of Connecticut General Life Insurance Company
shall automatically and without any physical transfer or deposit be deemed for
all purposes to be certificates representing shares of the issued and
outstanding stock of Connecticut General Insurance Corporation.
18
<PAGE>
SEC. 2. The charter of Connecticut General Life Insurance Company, as
amended by number 173 of the special acts of 1947, is amended by renumbering
present section 7 as section 8.
SEC. 3. Section I of number 76 of the special acts of 1959, being
section 5 of the charter of Connecticut General Life Insurance Company, is
amended to read as follows: The corporate office shall be at Hartford or at some
other town in Connecticut and the corporation may establish and maintain other
offices and agencies in other towns of Connecticut and elsewhere. The property
and affairs of the corporation shall be managed by a board of not less than nine
directors, the number and the terms of office to be determined from time to time
by the board of directors in accordance with the bylaws, provided no director
shall be elected for a longer term than five years. The directors shall be
chosen by ballot by the stockholders except that if any vacancy occurs in the
board of directors such vacancy may be filled by the remaining directors for the
unexpired portion of the term, and if the number of directors is increased by
vote of the board of directors between meetings of stockholders, the additional
directors, not to exceed three, may be chosen by the board of directors for
terms expiring with the next annual meeting thereafter. Unless the bylaws
provide otherwise, five directors shall constitute a quorum. Directors serving
on the date of the acceptance of this act shall continue to serve for the terms
for which they were elected.
SEC. 4. This act shall be valid as an amendment to the charter of the
corporation if, within two years after its passage, it is accepted at a meeting
of the corporation duly warned and held for that purpose and an attested copy of
such acceptance is filed in the office of the secretary of the state.
Approved June 28, 1967.
(Certificate of Acceptance filed October 27, 1967.)
--------------------
19
<PAGE>
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
Attachment to Certificate
-------------------------
Amending Certificate of Incorporation (Charter)
-----------------------------------------------
RESOLVED: That Section 5 of the Corporation's Charter is hereby amended to read
as follows:
"The corporate office shall be at Bloomfield, Connecticut or at some
other place within or without the State of Connecticut and the
corporation may establish and maintain other offices and agencies in
other locations within or without the State. The property and affairs
of the corporation shall be managed under the direction of a board of
not less than nine directors, the number and the terms of office to be
determined from time to time by the board of directors in accordance
with the bylaws, provided no directors shall be elected for a longer
term than five years. The directors shall be chosen by ballot by the
stockholders except that, if any vacancy occurs in the board of
directors, such vacancy may be filled by the remaining directors for
the unexpired portion of the term, and if the number of directors is
increased by vote of the board of directors between meetings of
stockholders, the additional directors may be chosen by the board of
directors for terms expiring with the next annual meeting thereafter.
Unless the bylaws provide for a lesser or greater quorum as may be
permitted by law, a majority of the authorized number of directors, as
fixed by the board of directors from time to time, shall constitute a
quorum."
RESOLVED: That Section 6 of the Corporation's Charter is hereby amended to read
as follows:
"The directors of the corporation shall elect a president, one or more
vice presidents, one or more secretaries, including a corporate
secretary, and such other officers as they may deem desirable. If
authorized by the board of directors, the chairman of the board, the
president and other designated officers shall each have the power to
appoint such officers, other than the chairman of the board, the
president and the corporate secretary, as the appointing officer may
deem desirable. The president shall be elected to hold office until
the next annual meeting, but he may continue to service until his
successors has been chosen; and the other officers may be elected or
appointed for like or different terms and they may be removed at any
time at the pleasure of the directors or, in the case of appointed
officers only, of the appointing officer."
<PAGE>
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
Attachment to Certificate of Amendment
to Certificate of Incorporation (Charter)
RESOLVED: That Section 1 of the Charter is hereby amended by substituting the
word "bylaws" for the word "by-laws".
RESOLVED: That the first sentence of Section 4 of the Charter is hereby amended
to read as follows:
The annual meeting of the stockholders of the corporation shall be held at
such time and place as may be determined from time to time either by or in
accordance with the bylaws.
RESOLVED: That Section 6 of the Charter is hereby deleted, and a new Section 6
is substituted in place thereof, to read as follows:
SEC. 6. The personal liability of a person who is or was a director of the
corporation to the corporation or its stockholders for monetary damages for
breach of duty as a director shall be limited to the amount of compensation
received by the director for serving the corporation during the year of the
violation if such breach did not (a) involve a knowing and culpable
violation of law by the director, (b) enable the director of an associate,
as defined in Section 33-840 of the Connecticut Business Corporation Act as
in effect on the effective date hereof or as it may be amended from time to
time (the "Act"), to receive an improper personal economic gain, (c) show a
lack of good faith and a conscious disregard for the duty of the director
to the corporation under circumstances in which the director was aware that
his conduct or omission created an unjustifiable risk of serious injury to
the corporation, (d) constitute a sustained and unexcused pattern of
inattention that amounted to an abdication of the director's duty to the
corporation, or (e) create liability under Section 33-757 of the Act. This
Section 6 shall not limit or preclude the liability of a person who is or
was a director for any act or omission occurring prior to the effective
date hereof. Any lawful repeal or modification of the Section 6 or the
adoption of any provision inconsistent herewith by the board of directors
and the stockholders of the corporation shall not, with respect to a person
who is or was a director, adversely affect any limitation or liability,
right or protection existing at or prior to the effective date of such
repeal, modification or adoption of a provision inconsistent herewith. The
limitation of liability of any person who is or was a director provided for
in this Section 6 shall not be exclusive of any other limitation or
elimination of liability contained in, or which may be provided to any such
person under Connecticut law as in effect on the effective date hereof or
as thereafter amended.
RESOLVED: That Section 7 of the Charter is hereby deleted, and a new Section 7
is substituted in place thereof, to read as follows:
SEC. 7. The corporation may indemnify or advance expenses to a person who
is or was a director, officer, employee or agent of the corporation, or who
is or was serving at the corporation's request as a director, officer,
partner, trustee, employee or agent of another corporation, a partnership,
joint venture, trust, an employee benefit plan or other entity, to the
extent permitted under Connecticut law as in effect on the effective date
hereof or as thereafter amended, including, pursuant to Section 33-636
(b)(5) of the Act, for liability of any such person for any actions taken,
or any failure to take any actions, except for conduct as set out in items
(a) through (e) of Section 6, above. The corporation shall indemnify or
advance expenses to any such person to the full extent as required in the
bylaws of the corporation, as amended from time to time, and the
corporation shall not be required pursuant to Section 33-771(e) of the Act
to indemnify or advance expenses to its directors, nor shall the
corporation be required pursuant to Section 33-776(d) of the Act to
indemnify and advance expenses to its officers, employees or agents who are
not directors.
RESOLVED: That Section 8 of the Charter is hereby deleted.
<PAGE>
Attachment to Certificate of Amendment to Certificate of Incorporation (Charter)
RESTATED CHARTER
OF
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
SECTION 1. Connecticut General Life Insurance Company shall continue under that
name, a body corporate, with power to purchase or otherwise acquire, have, hold
and enjoy lands, tenements, hereditaments, chattels, bonds, stocks, monies,
choses in action and property and effects of every kind, and the same to sell,
grant, demise, alien and convey and to loan, invest and reinvest any of such
assets in any manner now or hereafter permitted in the case of any other
corporation now or hereafter chartered by Connecticut and empowered to do a life
insurance business; to sue and be sued and to plead and be impleaded in all
courts of law and equity; to have and to hold and to change at pleasure a common
seal, and to ordain and to put into execution and to change at pleasure bylaws
consistent with the laws of this state and of the United States.
SEC. 2. The business of the corporation shall be life insurance, endowments,
annuities, accident insurance, health insurance and any other business or type
of business which any other corporation now or hereafter chartered by
Connecticut and empowered to do a life insurance business may now or hereafter
lawfully do; and the corporation is specifically empowered to accept and to cede
reinsurance of any such risks or hazards. The corporation may exercise such
powers outside of Connecticut to the extent permitted by the laws of the
particular jurisdiction. Policies or other contracts may be issued stipulated to
be with or without participation in profits; and they may be with or without
seal.
SEC. 3. The capital stock of the corporation shall be not less than three
million dollars and may from time to time be increased when and as authorized by
the stockholders and, unless the stockholders otherwise authorize, shall be
divided into shares of the par value of five dollars each. The capital stock of
the corporation shall be transferable in accordance with the bylaws; and a
transfer agent may be employed.
SEC. 4. The annual meeting of the stockholders of the corporation shall be held
at such time and place as may be determined from time to time either by or in
accordance with the bylaws. If the corporation shall fail to hold its annual
meeting at the time specified for the meeting in any year or shall fail to elect
directors thereat, the corporation shall not be dissolved nor shall its rights
be impaired thereby, but a special meeting of the stockholders shall be called;
and at such meeting directors to fill the places of the directors whose terms
shall have expired may be elected and any other proper business may be
transacted. At all meetings of the stockholders each stockholder shall be
entitled to vote in person or by an attorney duly authorized by a written proxy,
each share of stock represented at the meeting shall be entitled to one vote and
the stockholders represented at the meeting shall constitute a quorum.
SEC. 5. The corporate office shall be at Bloomfield, Connecticut or at some
other place within or without the State of Connecticut and the corporation may
establish and maintain other offices and agencies in other locations within or
without the State. The property and affairs of the corporation shall be managed
under the direction of a board of not less than nine directors, the number and
terms of office to be determined from time to time by the board of directors in
accordance with the bylaws, provided no director shall be elected for a longer
term than five years. The directors shall be chosen by ballot by the
stockholders except that, if any vacancy occurs in the board of directors, such
vacancy may be filled by the remaining directors for the unexpired portion of
the term, and if the number of directors is increased by vote of the board of
directors between meetings of stockholders, the additional directors may be
chosen by the board of directors for terms expiring with the next annual meeting
thereafter. Unless the bylaws provide for a lesser or greater quorum as may be
permitted by law, a majority of the authorized number of directors, as fixed by
the board of directors from time to time, shall constitute a quorum.
<PAGE>
SEC. 6. The personal liability of a person who is or was a director of the
corporation to the corporation or its stockholders for monetary damages for
breach of duty as a director shall be limited to the amount of compensation
received by the director for serving the corporation during the year of the
violation if such breach did not (a) involve a knowing and culpable violation of
law by the director, (b) enable the director or an associate, as defined in
Section 33-840 of the Connecticut Business Corporation Act as in effect on the
effective date hereof or as it may be amended from time to time (the "Act"), to
receive an improper personal economic gain, (c) show a lack of good faith and a
conscious disregard for the duty of the director to the corporation under
circumstances in which the director was aware that his conduct or omission
created an unjustifiable risk of serious injury to the corporation, (d)
constitute a sustained and unexcused pattern of inattention that amounted to an
abdication of the director's duty to the corporation, or (e) create liability
under Section 33-757 of the Act. This Section 6 shall not limit or preclude the
liability of a person who is or was a director for any act or omission occurring
prior to the effective date hereof. Any lawful repeal or modification of this
Section 6 or adoption of any provision inconsistent herewith by the board of
directors and the stockholders of the corporation shall not, with respect to a
person who is or was a director, adversely affect any limitation of liability,
right or protection existing at or prior to the effective date of such repeal,
modification or adoption of a provision inconsistent herewith. The limitation of
liability of any person who is or was a director provided for in this Section 6
shall not be exclusive of any other limitation or elimination of liability
contained in, or which may be provided to any such person under, Connecticut law
as in effect on the effective date hereof or as thereafter amended.
SEC. 7. The corporation may indemnify or advance expenses to a person who is or
was a director, officer, employee or agent of the corporation, or who is or was
serving at the corporation's request as a director, officer, partner, trustee,
employee or agent of another corporation, a partnership, joint venture, trust,
an employee benefit plan or other entity, to the extent permitted under
Connecticut law as in effect on the effective date hereof or as thereafter
amended, including, pursuant to Section 33-636(b)(5) of the Act, for liability
of any such person for any actions taken, or any failure to take any actions,
except for conduct as set out in items (a) through (e) of Section 6, above. The
corporation shall indemnify or advance expenses to any such person to the full
extent as required in the bylaws of the corporation, as amended from time to
time, and the corporation shall not be required pursuant to Section 33-771(e) of
the Act to indemnify or advance expenses to its directors, nor shall the
corporation be required pursuant to Section 33-776(d) of the Act to indemnify
and advance expenses to its officers, employees or agents who are not directors.
Approved, October 1, 1998
(Certificate of Acceptance filed March 23, 1999)
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
Exhibit 10
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 42 to the registration
statement on Form N-4 (the "Registration Statement") of our reports dated
February 19, 1999 and February 9, 1999, relating to the financial statements and
selected per unit data and ratio of CG Variable Annuity Account II and the
financial statements of Connecticut General Life Insurance Company,
respectively, which appear in such Statement of Additional Information, and to
the incorporation by reference of our reports into the Prospectus which
constitutes part of this Registration Statement. We also consent to the
reference to us under the heading "Independent Accountants" in such "Statement
of Additional Information".
/s/PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Hartford, Connecticut
April 26, 1999
