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File No. 33-19945
Securities and Exchange Commission
Washington, D.C.
Form N-4
Registration Statement Under the Securities Act of 1933
Pre-Effective Amendment No.
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Post-Effective Amendment No. 9
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and/or
Registration Statement Under the Investment Company Act of 1940
Amendment No. 9
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(check appropriate box or boxes)
Hartford Life Insurance Company
Separate Account Two (Variable Account "A")
(Exact Name of Registrant)
Hartford Life Insurance Company
(Name of Depositor)
P.O. Box 2999
Hartford, CT 06104-2999
(Address of Depositor's Principal Offices)
Depositor's Telephone Number: (203) 843-8847
Rodney J. Vessels, Esq.
P.O. Box 2999
Hartford, CT 06104-2999
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
__X__ on (May 1, 1995) pursuant to paragraph (b)(1)(v) of Rule 485
_____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
_____ on May 1, 1995 pursuant to paragraph (a)(1) of Rule 485
_____ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
_____ on __________________ pursuant to paragraph (a)(2) of Rule 485
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Calculation of Registration Fee Under Securities Act of 1933
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Title of Amount Proposed Maximum Proposed Maximum Amount of
Securities Being Offering Aggregate Registration
Being Requested Registered Price Per Unit Offering Price Fee
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Hartford Life Insurance Pursuant to Regulation 270.24f-2 under Paid
Company Separate Account the Investment Company Act of 1940,
Two (Variable Account "A") Registrant has previously elected to
Units of Interest register an indefinite number of units
of interest in this Separate Account.
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The Rule 24f-2 Notice for the Registrant's most recent fiscal year will be filed
on or about February 28, 1995.
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CROSS REFERENCE SHEET
PURSUANT TO RULE 495(A)
N-4 Item No. Prospectus Heading
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1. Cover Page Cover Page
2. Definitions Glossary of Special Terms
3. Synopsis or Highlights Summary
4. Condensed Financial Information Accumulation Unit Values; Yield
Information
5. General Description of Registrant, QP Variable Account Depositor, and
Portfolio Companies Contract Contract and Separate Account
Two (Variable Account "A"); Hartford
Life Insurance Company and the Funds;
Miscellaneous
6. Deductions Charges Under the Contract
7. General Description of Variable Operation of the Contract; Payment
Annuity Contracts of Benefits; The Variable Account "A"
Contract and Separate Account Two
(Variable Account "A")
8. Annuity Period Payment of Benefits
9. Death Benefit Payment of Benefits; Operation of the
Contract
10. Purchases and Contract Value Operation of the Contract
11. Redemptions Payment of Benefits
12. Taxes Federal Tax Considerations
13. Legal Proceedings Miscellaneous - Are there any material
legal proceedings affecting the Separate
Account?
14. Table of Contents of the Statement Table of Contents of the Statement of
of Additional Information Additional Information
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HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO (VARIABLE ACCOUNT "A")
This Prospectus describes individual and group tax-deferred variable annuity
Contracts designed for retirement planning purposes.
The Contracts are issued by Hartford Life Insurance Company ("HL"). Payments
for the Contracts will be held in a series of Hartford Life Insurance Company
Separate Account Two (Variable Account "A" or the "Separate Account") of HL.
The following Sub-Accounts are available under the Contracts. Opposite each
Sub-Account is the name of the underlying investment for that Sub-Account.
Advisers Fund Sub-Account - shares of Hartford Advisers Fund, Inc.
("Advisers Fund")
Capital Appreciation Fund - shares of Hartford Capital Appreciation
Sub-Account Fund, Inc. ("Capital Appreciation Fund")
(formerly "Hartford Aggressive
Growth Fund, Inc.")
Bond Fund Sub-Account - shares of Hartford Bond Fund, Inc. ("Bond
Fund")
International Opportunities - shares of Hartford International Opportunities
Fund Sub-Account Fund, Inc. ("International Opportunities")
Money Market Fund - shares of HVA Money Market Fund, Inc.
Sub-Account ("Money Market Fund")
Mortgage Securities Fund - shares of Hartford Mortgage Securities
Sub-Account Fund, Inc. ("Mortgage Securities Fund")
Stock Fund Sub-Account - shares of Hartford Stock Fund, Inc. ("Stock
Fund")
U.S. Government Money - shares of Hartford U.S. Government Money
Market Fund Sub-Account Market Fund, Inc. ("U.S. Government Money Market
Fund")
This Prospectus sets forth the information concerning the Separate Account that
investors should know before investing. This Prospectus should be kept for
future reference. Additional information about the Separate Account has been
filed with the Securities and Exchange Commission and is available without
charge upon request. To obtain the Statement of Additional Information send a
written request to Hartford Life Insurance Company, Attn: RPVA Administration,
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P.O. Box 2999, Hartford, CT 06104-2999. The Table of Contents for the
Statement of Additional Information may be found on page ____ of this
Prospectus. The Statement of Additional Information is incorporated by
reference to this Prospectus.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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THIS PROSPECTUS IS NOT VALID UNLESS ATTACHED TO THE CURRENT PROSPECTUS OF THE
APPLICABLE ELIGIBLE FUNDS LISTED ABOVE WHICH CONTAINS A FULL DESCRIPTION OF
THOSE FUNDS. INVESTORS ARE ADVISED TO RETAIN THESE PROSPECTUSES FOR FUTURE
REFERENCE.
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Prospectus Dated: May 1, 1995
Statement of Additional Information Dated: May 1, 1995
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TABLE OF CONTENTS
SECTION PAGE
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GLOSSARY OF SPECIAL TERMS. . . . . . . . . . . . . . . . . . . . . . . . .
FEE TABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ACCUMULATION UNIT VALUES . . . . . . . . . . . . . . . . . . . . . . . . .
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VARIABLE ACCOUNT "A" CONTRACT AND SEPARATE ACCOUNT
TWO SEPARATE ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . .
What are the Variable Account "A" Contracts?. . . . . . . . . . . . .
Who can buy these Contracts?. . . . . . . . . . . . . . . . . . . . .
What is the Separate Account and how does it operate? . . . . . . . .
May I transfer assets between Sub-Accounts? . . . . . . . . . . . . .
OPERATION OF THE CONTRACT. . . . . . . . . . . . . . . . . . . . . . . . .
How is my Purchase Payment credited?. . . . . . . . . . . . . . . . .
What size Purchase Payments must I make?. . . . . . . . . . . . . . .
What if I am not satisfied with my purchase?. . . . . . . . . . . . .
May I assign or transfer my Contract? . . . . . . . . . . . . . . . .
How do I know what my Contract is worth?. . . . . . . . . . . . . . .
How is the Accumulation Unit value determined?. . . . . . . . . . . .
How are the underlying Fund shares valued?. . . . . . . . . . . . . .
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PAYMENT OF BENEFITS. . . . . . . . . . . . . . . . . . . . . . . . . . . .
What would my Beneficiary receive as a death benefit? . . . . . . . .
How can a Contract be redeemed or surrendered?. . . . . . . . . . . .
Can payment of the redemption or surrender value ever be postponed
beyond the seven day period?. . . . . . . . . . . . . . . . . . . . .
May I surrender once Annuity payments have started? . . . . . . . . .
May I reinvest after a redemption?. . . . . . . . . . . . . . . . . .
How do I elect an Annuity Commencement Date and form of Annuity?. . .
What is the minimum amount that I may select as an Annuity Payment? .
What are the available Annuity options under the Contracts? . . . . .
How are Variable Annuity payments determined? . . . . . . . . . . . .
CHARGES UNDER THE CONTRACT . . . . . . . . . . . . . . . . . . . . . . . .
How are the sales charges under the Contracts made? . . . . . . . . .
Is there ever a time when the sales charges do not apply? . . . . . .
What do the sales charges cover?. . . . . . . . . . . . . . . . . . .
What is the mortality and expense risk charge?. . . . . . . . . . . .
Are there any administrative charges? . . . . . . . . . . . . . . . .
How much are the deductions for Premium Taxes?. . . . . . . . . . . .
HARTFORD LIFE INSURANCE COMPANY AND THE FUNDS. . . . . . . . . . . . . . .
What is HL? . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What are the Funds? . . . . . . . . . . . . . . . . . . . . . . . . .
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FEDERAL TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . .
What are some of the federal tax consequences which affect these
Contracts?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What are my voting rights?. . . . . . . . . . . . . . . . . . . . . .
Will other Contracts be participating in the Separate Account?. . . .
How are the Contracts sold? . . . . . . . . . . . . . . . . . . . . .
Who is the custodian of the Separate Account's assets?. . . . . . . .
Are there any material legal proceedings affecting the Separate Account?
Is HL relying on any experts as to any portion of this Prospectus?. .
How may I get additional information? . . . . . . . . . . . . . . . .
TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION. . . . . . . . .
APPENDIX I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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GLOSSARY OF SPECIAL TERMS
ACCUMULATION PERIOD: The period before the commencement of Annuity payments.
ACCUMULATION UNIT: An accounting unit of measure used to calculate values
before Annuity payments begin.
ANNUITANT: The person upon whose life the Contract is issued.
ANNUITY: A series of payments for life, or for life with a minimum number of
payments or a determinable sum guaranteed, or for a joint lifetime and
thereafter during the lifetime of the survivor or for payments for a designated
period.
ANNUITY COMMENCEMENT DATE: The date on which Annuity payments are to commence.
ANNUITY PERIOD: The period following the commencement of Annuity payments.
ANNUITY UNIT: An accounting unit of measure used to calculate the value of
Annuity payments.
BENEFICIARY: The person(s) designated to receive Contract values in the event
of the Annuitant's death.
CODE: The Internal Revenue Code of 1986, as amended.
COMMISSION: Securities and Exchange Commission.
CONTRACT OWNER: The owner of the Contract, sometimes herein referred to as you.
CONTRACT YEAR: A period of 12 months commencing with the effective date of the
Contract or with any anniversary thereof.
FIXED ANNUITY: An Annuity providing for guaranteed payments which remain fixed
in amount throughout the payment period and which do not vary with the
investment experience of a separate account.
FUNDS: The Funds described commencing on page _____ of this Prospectus and any
additional Funds which may be made available from time to time.
GENERAL ACCOUNT: The General Account of HL in which reserves are maintained for
Fixed Annuities during the Annuity Period.
HL: Hartford Life Insurance Company.
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PREMIUM TAX: A tax on premiums charged by a state or municipality.
PURCHASE PAYMENT: The payment made to HL pursuant to the terms of the Contract.
SEPARATE ACCOUNT: The HL separate account entitled "Hartford Life Insurance
Company Separate Account Two".
SUB-ACCOUNT: Accounts established within the Separate Account with respect to a
Fund.
TERMINATION VALUE: The value of the Contract upon its termination prior to the
Annuity Commencement Date.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. The
value of the Separate Account is determined at the close of the New York Stock
Exchange (currently 4:00 p.m. Eastern Time) on such days.
VALUATION PERIOD: The period between the close of business on successive
Valuation Days.
VARIABLE ACCOUNT "A": A series of Hartford Life Insurance Company Separate
Account Two.
VARIABLE ANNUITY: An Annuity providing for payments varying in amount in
accordance with the investment experience of the assets held in the underlying
securities of the Separate Account.
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INSERT FEE TABLES
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SUMMARY
A. CONTRACTS OFFERED
Individual and group tax-deferred variable annuity Contracts (see "C.
Taxation of Annuities in General," page ____). The Contracts are purchased
by completing an application and submitting it to HL for its approval. A
Contract Owner may at any time, within 10 days of delivery of a Contract
sold hereunder, return the Contract to HL at its Home Office and the value
of the Contract (without deduction for any charges normally assessed
thereunder) will be refunded. The Contract Owner bears the investment
risk during such 10 day period (see "How is my Purchase Payment credited?"
page ____).
B. ELIGIBLE PURCHASERS
Any individual or any trustee or custodian for a retirement plan which
qualifies for special federal tax treatment under the Internal Revenue Code
(see "Federal Tax Considerations" commencing on page ____ and Appendix I
commencing on page ____).
C. MINIMUM PURCHASE AMOUNT
Generally, $1,000 for each Contract Year a Purchase Payment is made. (See
"What size Purchase Payments must I make?" page ____).
D. UNDERLYING INVESTMENTS FOR CONTRACTS
Shares of Hartford Advisers Fund, Inc., Hartford Capital Appreciation Fund,
Inc., Hartford Bond Fund, Inc., Hartford Mortgage Securities Fund, Inc.,
Hartford Stock Fund, Inc., Hartford U.S. Government Money Market Fund,
Inc., HVA Money Market Fund, Inc., and such other funds as shall be offered
from time to time.
E. CHARGES UNDER THE CONTRACTS
1. SALES EXPENSES
There is no deduction for sales expenses from a Purchase Payment.
Withdrawal of amounts held under a Contract may be subject to a
contingent deferred sales charge in a maximum amount of 6% of the
amount withdrawn. The rate of charge assessed against withdrawals
declines by 1% each year.
The maximum amount to which the contingent deferred sales charges may
be applied, in any event, will not exceed the aggregate amount of the
Purchase Payments made to a Contract. (See "Charges Under the
Contracts" commencing on page ___.) In the event of
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death of the Annuitant no such charges will be deducted.
Additionally, no such charges are payable if payments are made under
an Annuity option provided for in the Contract. (See "Is there ever a
time when the sales charges do not apply?" commencing on page __.)
2. WITHDRAWAL FEATURE
After the first Contract Year the contingent deferred sales charge
shall not be applied to withdrawals of up to 10% per year of the
Purchase Payments made to a Contract. Certain plans or programs may
have different withdrawal privileges. (See "Is there ever a time when
sales charges do not apply?" commencing on page ___.)
3. ANNUAL MAINTENANCE FEE
The Contracts provide for an administrative charge to be deducted from
the value of the Contract in the amount of $25.00 each Contract Year.
Contracts with a Contract Value of $50,000 or more at time of Contract
Anniversary will not be assessed this fee. (See "Are there any
administrative charges?" commencing on page ___.)
4. MORTALITY AND EXPENSE RISKS
For assuming the mortality and expense risks under the Contracts, HL
will make a 1.00% per annum charge against all Contract values held in
the Separate Account (See "What is the mortality and expense risk
charge?" commencing on page ___.)
5. PREMIUM TAXES
A deduction will be made for premium taxes for Contracts sold in
certain states. The range is generally between 0% and 4.00%. (See
"How much are the deductions for premium taxes?" commencing on
page ___.)
6. CHARGES BY THE FUNDS
The Funds are subject to certain fees, charges and expenses (see the
Prospectus for the Funds attached hereto).
F. LIQUIDITY
Subject to any applicable charges, the Contracts may be surrendered, or
portions of the value such Contracts may be withdrawn, at any time prior to
the Annuity Commencement Date. However, if less than $500 remains in a
Contract as a result of a withdrawal, HL may terminate the Contract in its
entirety. (See "How can a Contract be redeemed or surrendered?" commencing
on page ___.)
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G. MINIMUM DEATH BENEFITS
A minimum death benefit is provided in the event of death of the Annuitant
or Contract Owner prior to the Annuitant's 75th birthday. (See "What would
my Beneficiary receive as a death benefit?" commencing on page ___.)
H. ANNUITY OPTIONS
The Annuity Commencement Date will not normally be deferred beyond the
Annuitant's 75th birthday. An Annuity Commencement Date beyond the
Annuitant's 75th birthday is available under certain circumstances. If a
Contract Owner does not elect otherwise, Annuity Payments will begin
automatically at the Annuitant's age 75 under an option providing for a
life annuity with 120 monthly payments certain (see "How do I elect an
Annuity Commencement Date and Form of Annuity?" commencing on page ___).
However, HL will not assume responsibility in determining or monitoring
minimum distributions beginning at age 70 1/2.
I. VOTING RIGHTS OF CONTRACT OWNERS
Contract Owners will have the right to vote on matters affecting the
underlying Fund to the extent that proxies are solicited by such Fund. If
a Contract Owner does not vote, HL shall vote such interest in the same
proportion as shares of the Fund for which instructions have been received
by HL (see "What are my voting rights?" commencing on page ___).
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INTRODUCTION
This Prospectus has been designed to provide you with the necessary information
to make a decision on purchasing an individual or group tax-deferred variable
annuity Contract offered by HL in Variable Account "A", a series of Separate
Account Two. The Contracts do not allow for contributions to the General
Account during the Accumulation Period. However, during the Annuity Period you
may select a Fixed Annuity. This Prospectus describes only the elements of the
Contracts pertaining to the Separate Account except where reference to the
General Account is specifically made. Please read the Glossary of Special Terms
on pages 2 and 3 prior to reading this Prospectus to familiarize yourself with
the terms being used.
VARIABLE ACCOUNT "A" CONTRACT AND
SEPARATE ACCOUNT TWO SEPARATE ACCOUNT
What are the Variable Account "A" Contracts?
The Contract is an individual or group tax-deferred variable annuity
Contract designed for retirement planning purposes. There are no
deductions from your Purchase Payments (except for premium taxes, if
applicable) so your entire Purchase Payment is put to work in the
investment Sub-Account(s) of your choice. Currently, there are six
Sub-Accounts, each investing in a different underlying Fund with its own
distinct investment objectives. More Sub-Accounts may be made available by
HL at a later time. You pick the Sub-Account(s) with the investment
objectives that meet your needs. You may select one or more Sub-Accounts
and determine the percentage of your Purchase Payment that is put into each
Sub-Account. You may also transfer assets among the Sub-Accounts so that
your investment program meets your specific needs over time. There are
some limitations on the amounts in each Sub-Account. These limitations are
described later in this Prospectus. See "Charges Under the Contract" for a
description of the charges for redeeming a Contract and other charges made
under the Contract.
Generally, the Contract contains the five optional Annuity forms described
later in this Prospectus. Options 2, 3 and 5 are available with respect to
Qualified Plans only if the guaranteed payment period is less than the life
expectancy of the Annuitant at the time the option becomes effective. Such
life expectancy shall be computed on the basis of the Annuity table then in
use by HL.
The Contract Owner may select an Annuity Commencement Date and an Annuity
option which may be on a fixed or variable basis, or a combination thereof.
The Annuity Commencement Date will not normally be deferred beyond the
Annuitant's 75th birthday. An Annuity Commencement Date beyond the
Annuitant's 75th birthday is available under certain circumstances.
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The Annuity Commencement Date and/or the Annuity option may be changed from
time to time, but any such change must be made at least 30 days prior to
the date on which Annuity payments are scheduled to begin. If you do not
elect otherwise, payments will automatically begin at the Annuitant's age
75 under Option 2 with 120 monthly payments certain.
When an Annuity is effected under a Contract, unless otherwise specified,
variable values will be applied to provide a Variable Annuity based on
Contract values as they are held in the various Sub-Accounts under the
Contracts. Variable Annuity payments will vary in accordance with the
investment performance of the Sub-Accounts you have selected. You should
consider the question of allocation of Contract values among Sub-Accounts
of the Separate Account and the General Account of HL to make certain that
Annuity payments are based on the investment alternative best suited to
your needs for retirement. The Contract allows the Contract Owner to
change the Sub-Accounts on which payments are based after payments have
commenced. This important feature means you are no longer required to pick
a set of investment objectives in advance and hope they remain valid for
the rest of your life.
If at any time payments of a Variable or a Fixed Annuity are or become less
than $20.00 per payment, HL has the right to change the frequency of
payment to such intervals as will result in Annuity payments of at least
$20.00.
Who can buy these Contracts?
The individual and group variable annuity Contracts offered under this
Prospectus may be purchased by any individual ("Non-Qualified Contract") or
by an employer, trustee or custodian for a retirement plan qualified under
Sections 401(a) or 403(a) of the Internal Revenue Code, including plans
established by persons entitled to the benefits of the Self-Employed
Individuals Tax Retirement Act of 1962 as amended, "H.R. 10"; annuity
purchase plans adopted by public school systems and certain tax-exempt
organizations according to Section 403(b) of the Internal Revenue Code;
annuity purchase plans adopted according to Section 408 of the Internal
Revenue Code, including employee pension plans established for employees by
a state, a political subdivision of a state, or an agency or
instrumentality of either a state or a political subdivision of a state,
and certain eligible deferred compensation plans as defined in Section 457
of the Internal Revenue Code ("Qualified Contracts").
What is the Separate Account and how does it operate?
The Separate Account was established on June 2, 1986, in accordance with
authorization by the Board of Directors of HL (On March 31, 1988, Variable
Account "A" was transferred to Separate Account Two and became a series
thereof.) It is the separate account in which HL sets aside and invests
the assets attributable to the Contracts sold under this Prospectus.
Although the Separate Account is an integral part of HL, it is registered
as a unit investment trust under the Investment Company Act of 1940.
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This registration does not, however, involve Securities and Exchange
Commission supervision of the management or the investment practices or
policies of the Separate Account or HL.
Under Connecticut law, the assets of the Separate Account attributable to
the Contracts offered under this Prospectus are held for the benefit of the
owners of, and the persons entitled to payments under, those Contracts.
Also, in accordance with the Contracts, the assets in the Separate Account
attributable to Contracts participating in the Separate Account are not
chargeable with liabilities arising out of any other business HL may
conduct. So, you will not be affected by the rate of return of HL's
general account, nor by the investment performance of any of HL's other
separate accounts.
Your investment is allocated to one or more Sub-Accounts of the Separate
Account. Each Sub-Account is invested exclusively in the assets of one
underlying Fund. Net Purchase Payments and proceeds of transfers between
Sub-Accounts are applied to purchase shares in the appropriate Fund at net
asset value determined as of the end of the Valuation Period during which
the payments were received or the transfer made. All distributions from
the Fund are reinvested at net asset value. The value of your investment
during the Accumulation Period will therefore vary in accordance with the
net income and fluctuation in the individual investments within the
underlying Fund portfolio or portfolios. During the Variable Annuity
payout period, both your annuity payments and reserve values will vary in
accordance with these factors.
HL does not guarantee the investment results of the Sub-Accounts or any of
the underlying investments. There is no assurance that the value of a
Contract during the years prior to retirement or the aggregate amount of
the Variable Annuity payments will equal the total of Purchase Payments
made under the Contract. Since each underlying Fund has different
investment objectives, each is subject to different risks. These risks are
more fully described in the accompanying Fund Prospectus.
HL reserves the right, subject to compliance with the law, to substitute
the shares of any other registered investment company for the shares of any
Fund held by the Separate Account. Substitution may occur if shares of the
Fund(s) become unavailable or due to changes in applicable law or
interpretations of law. Current law requires notification to you of any
such substitution and approval of the Securities and Exchange Commission.
HL also reserves the right, subject to compliance with the law to offer
additional Sub-Accounts with differing investment objectives.
The Separate Account may be subject to liabilities arising from series
whose assets are attributable to other variable annuity Contracts or
variable life insurance policies offered by the Separate Account which are
not described in this Prospectus.
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May I transfer assets between Sub-Accounts?
Yes, you may transfer the values of your Sub-Account allocations from one
or more Sub-Accounts to another free of charge, subject to the terms and
conditions of the Contracts. Transfers by telephone may be made by calling
(800) 862-6668.
The right to reallocate Contract Values between the Sub-Accounts is subject
to modification if HL determines, in its sole opinion, that the exercise of
that right by one or more Contract Owners is, or would be, to the
disadvantage of other Contract Owners. Any modification could be applied
to transfers to or from some or all of the Sub-Accounts and could include,
but not be limited to, the requirement of a minimum time period between
each transfer, not accepting transfer requests of an agent acting under a
power of attorney on behalf of more than one Contract Owner, or limiting
the dollar amount that may be transferred between the Sub-Accounts by a
Contract Owner at any one time. Such restrictions may be applied in any
manner reasonably designed to prevent any use of the transfer right which
is considered by HL to be to the disadvantage of other Contract Owners.
Transfers between the Sub-Accounts may be made both before and after
Annuity payments commence provided that, the minimum allocation to any
Sub-Account may not be less than $300.
OPERATION OF THE CONTRACT
How is my Purchase Payment credited?
The balance of each Purchase Payment remaining after the deduction of any
applicable premium tax is credited to your Contract within two business
days of receipt of a properly completed application and the Purchase
Payment by HL. It will be credited to the Sub-Account(s) in accordance
with your written election. If your application or other information is
incomplete when received, the balance of each Purchase Payment, after
deduction of any applicable premium tax, will be credited to the
Sub-Account(s) elected within five business days of receipt. If the
initial Purchase Payment is not credited within five business days, the
Purchase Payment will be immediately returned unless you have been informed
of the delay and request that the Purchase Payment not be returned.
The number of accumulation units in each Sub-Account to be credited to a
Contract will be determined by dividing the portion of the Purchase Payment
being credited to each Sub-Account by the value of an Accumulation Unit in
that Sub-Account on that date.
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What size Purchase Payments must I make?
The minimum initial Purchase Payment is $2,000. Thereafter, the minimum
aggregate Purchase Payments for each Contract Year a Purchase Payment is
made is $2,000, subject to the requirement that no payment during a
Contract Year may be less than $500 and no amount contributed to a
Sub-Account under a Contract may be less than $300.
What if I am not satisfied with my purchase?
If you are not satisfied with your purchase you may surrender the Contract
by returning it within ten days after you receive it. A written request
for cancellation must accompany the Contract. In such event, HL will,
without deduction for any charges normally assessed thereunder, pay you an
amount equal to the sum of (i) the difference between the Purchase Payment
and the amounts allocated to the Separate Account under the Contract and
(ii) the value of the Contract on the date of surrender attributable to the
amounts so allocated. You bear the investment risk during such ten day
period.
May I assign or transfer my Contract?
Ownership of the Contracts described herein is generally assignable.
However, if the Contracts are issued pursuant to some form of Qualified
Plan, it is possible that the ownership of the Contracts may not be
transferred or assigned depending on the type of qualified retirement plan
involved. An assignment of a Non-Qualified Contract may subject the
assignment proceeds to income taxes and certain penalty taxes. (See
"Taxation of Annuities in General - Non-Tax Qualified Purchasers"
commencing on page ___.)
How do I know what my Contract is worth?
The value of your Contract at any time prior to the commencement of Annuity
payments can be determined by multiplying the total number of Accumulation
Units credited to your Contract in each Sub-Account by the then current
Accumulation Unit values for the applicable Sub-Account. You will be
advised at least semiannually of the number of Accumulation Units credited
to each Sub-Account, the current Accumulation Unit values and the total
value of your Contract.
How is the Accumulation Unit value determined?
The Accumulation Unit value for each Sub-Account will vary to reflect the
investment experience of the applicable Fund and will be determined on each
"Valuation Day" by multiplying the Accumulation Unit value of the
particular Sub-Account on the preceding
<PAGE>
- 20 -
Valuation Day by a "Net Investment Factor" for that Sub-Account for the
Valuation Period then ended. The Net Investment Factor for each of the
Sub-Accounts is equal to the net asset value per share of the corresponding
Fund at the end of the Valuation Period (plus the per share amount of any
dividends or capital gains by that Fund if the ex-dividend date occurs in
the Valuation Period then ended) divided by the net asset value per share
of the corresponding Fund at the beginning of the Valuation Period and
subtracting from that amount the amount of any charges assessed during the
Valuation Period then ending. You should refer to the Prospectus for each
of the Funds which accompanies this Prospectus for a description of how the
assets of each Fund are valued since each determination has a direct
bearing on the Accumulation Unit value of the Sub-Account and therefore the
value of a Contract.
How are the underlying Fund shares valued?
The shares of the Fund are valued at net asset value on a daily basis. A
complete description of the valuation method used in valuing Fund shares
may be found in the accompanying Prospectus of the Funds.
PAYMENT OF BENEFITS
What would my Beneficiary receive as a death benefit?
The Contracts provide that in the event the Annuitant or Contract Owner
dies before the selected Annuity Commencement Date or the Annuitant's age
75 (whichever occurs first) the Minimum Death Benefit payable on such
Contract will be the greater of (a) the Termination Value of the Contract
determined as of the day written proof of death of such person is received
by HL, or (b) 100% of the total Purchase Payments made to such Contract,
reduced by any prior surrenders.
The Minimum Death Benefit may be taken by the Beneficiary in a single sum,
in which case payment will be made within seven days of receipt of proof of
death by HL, unless subject to postponement as explained below. In lieu of
payment in one sum, the Beneficiary may elect that the amount be applied
under any one of the optional Annuity forms (see "What are the available
Annuity options under the Contracts?" commencing on page ___) provided
however, that in the event of the Contract Owner's death the Annuity form
must provide that any amount payable as a Death Benefit must be distributed
within 5 years of the date of death or, if the benefit is payable over a
period not extending beyond the life expectancy of the Beneficiary or over
the life of the Beneficiary, such distribution must commence within one
year of the date of death. Such selection must be made prior to a lump sum
settlement with HL and within one year after the death of such person by
written notice to HL. The proceeds due on death may be applied to provide
variable payments, fixed payments, or a combination of variable and fixed
payments.
<PAGE>
- 21 -
For a discussion of the manner in which Variable Annuity payments are
determined and may vary from month to month after retirement, see "How are
Variable Annuity payments determined?" commencing on page ____.
How can a Contract be redeemed or surrendered?
At any time prior to the Annuity Commencement Date, you have the right,
subject to any IRS provisions applicable thereto, to surrender the value of
the Contract in whole or in part.
In the event of a complete surrender of the Contract Owner's interest under
a Contract, after deduction of the Annual Maintenance Fee, the following
options shall be available:
1. The Termination Value of the Contract may be applied to provide for
Fixed or Variable Annuity payments or a combination thereof commencing
immediately under the selected Annuity option.
2. The Termination Value of the Contract may, subject to any applicable
deduction for contingent deferred sales charges be taken in the form
of a lump sum cash settlement. The amount received will be determined
by the value of the Contract next computed after receipt by HL of a
written request for complete surrender. The value of the Contract may
be more or less than the amount of the Purchase Payments made to the
Contract.
3. You may, subject to any applicable contingent deferred sales charges,
make a partial withdrawal from the Contract and receive the amount
requested as determined by the value of the Contract next computed
after receipt by HL of a written request for a partial surrender at
its home office, P.O. Box 2999, Hartford, CT 06104-2999. In
requesting a partial withdrawal you should specify the Sub-Account(s)
from which the partial withdrawal is to be taken. Otherwise, such
withdrawal will be effected on a pro rata basis. Any partial
surrender request which results in less than $1,000 in value being
left in the Contract shall be treated as a request for a full
surrender of the Contract.
THERE ARE CERTAIN RESTRICTIONS ON SECTION 403(b) TAX-SHELTERED ANNUITIES.
AS OF DECEMBER 31, 1988, ALL SECTION 403(b) ANNUITIES HAVE LIMITS ON FULL
AND PARTIAL SURRENDERS. CONTRIBUTIONS TO THE CONTRACT MADE AFTER DECEMBER
31, 1988 AND ANY INCREASES IN CASH VALUE AFTER DECEMBER 31, 1988 MAY NOT BE
DISTRIBUTED UNLESS THE CONTRACT OWNER/EMPLOYEE HAS (A) ATTAINED AGE 59 1/2,
(B) TERMINATED EMPLOYMENT, (C) DIED, (D) BECOME DISABLED, OR (E)
EXPERIENCED FINANCIAL HARDSHIP.
DISTRIBUTIONS DUE TO FINANCIAL HARDSHIP ON SEPARATION FROM SERVICE MAY
STILL BE SUBJECT TO A PENALTY TAX OF 10%.
<PAGE>
- 22 -
HL WILL NOT ASSUME ANY RESPONSIBILITY IN DETERMINING WHETHER A WITHDRAWAL
IS PERMISSIBLE, WITH OR WITHOUT TAX PENALTY, IN ANY PARTICULAR SITUATION;
OR IN MONITORING WITHDRAWAL REQUESTS REGARDING PRE OR POST JANUARY 1, 1989
ACCOUNT VALUES.
ANY SUCH FULL OR PARTIAL SURRENDER DESCRIBED ABOVE MAY AFFECT THE
CONTINUING TAX QUALIFIED STATUS OF SOME CONTRACTS OR PLANS AND MAY RESULT
IN ADVERSE TAX CONSEQUENCES TO THE CONTRACT OWNER. THE CONTRACT OWNER,
THEREFORE, SHOULD CONSULT WITH HIS TAX ADVISER BEFORE UNDERTAKING ANY SUCH
SURRENDER. (SEE "FEDERAL TAX CONSIDERATIONS" COMMENCING ON PAGE ___.)
Payment on any request for a full or partial surrender will be made as soon
as possible and in any event no later than seven days after the written
request is received by HL at its home office, P.O. Box 2999, Hartford, CT
06104-2999.
Can payment of a redemption, surrender or death benefit ever be postponed beyond
the seven day period?
Yes. There may be postponement whenever (a) the New York Stock Exchange is
closed, except for holidays or weekends, or trading on the New York Stock
Exchange is restricted as determined by the Securities and Exchange
Commission; (b) the Securities and Exchange Commission permits postponement
and so orders; or (c) the Securities and Exchange Commission determines
that an emergency exists making valuation of the amounts or disposal of
securities not reasonably practicable.
May I surrender once Annuity payments have started?
No. Surrenders are not permitted after Annuity payments commence EXCEPT
when payments for a designated period are selected as the Annuity option.
May I reinvest after a redemption?
If you have redeemed the value of your Contract in full, you have the right
to reinvest, within 30 days of such redemption, the full proceeds of any
such redemption and effect a reinstatement of your original Contract. Any
amounts deducted because of the contingent deferred sales charge will be
redeposited to the account. This reinvestment privilege is not available
if you have previously exercised the privilege. You should also be aware
that the original redemption may have income tax and/or tax penalty
implications. (See "Federal Tax Considerations," commencing on page ___.)
<PAGE>
- 23 -
How do I elect an Annuity Commencement Date and form of Annuity?
You select an Annuity Commencement Date and an Annuity option which may be
on a fixed or variable basis, or a combination thereof. The Annuity
Commencement Date will not normally be deferred beyond the Annuitant's 75th
birthday. An Annuity Commencement Date beyond the Annuitant's 75th
birthday is available under certain circumstances.
The Annuity Commencement Date and/or the Annuity option may be changed from
time to time, but any such change must be made at least 30 days prior to
the date on which Annuity payments are scheduled to begin.
The Contract contains the five optional Annuity forms described below.
Options 2, 3 and 5 are available with respect to Qualified Plans only if
the guaranteed payment period is less than the life expectancy of the
Annuitant at the time the option becomes effective. Such life expectancy
shall be computed on the basis of the annuity table then in use by HL. If
you do not elect otherwise, payments will automatically begin at the
Annuitant's age 75 under Option 2 with 120 monthly payments certain in most
states. However, HL will not assume responsibility in determining or
monitoring minimum distributions beginning at age 70 1/2.
When an Annuity is effected under a Contract, unless otherwise specified,
variable values will be applied to provide a Variable Annuity based on
Contract values as they are held in the various Sub-Accounts under the
Contracts. You should consider the question of allocation of Contract
values among Sub-Accounts of the Separate Account and the General Account
of HL to make certain that Annuity payments are based on the investment
alternative best suited to your needs for retirement.
What is the minimum amount that I may select for an Annuity payment?
The minimum Annuity payment is $20.00. No election may be made which
results in a first payment of less than $20.00. If at any time Annuity
payments are or become less than $20.00, HL has the right to change the
frequency of payment to intervals that will result in payments of at least
$20.00.
What are the available Annuity options under the Contracts?
Option 1: Life Annuity
A Life Annuity is an Annuity payable during the lifetime of the Annuitant
and terminating with the last monthly payment preceding the death of the
Annuitant. This option offers the maximum level of monthly payments of any
of the options since there is no guarantee of a minimum number of payments
nor a provision for a death benefit payable to a Beneficiary.
<PAGE>
- 24 -
It would be possible under this option for an Annuitant to receive only one
Annuity payment if he died prior to the due date of the second Annuity
payment, two if he died before the due date of the third Annuity payment,
etc.
*Option 2: Life Annuity with 120, 180 or 240 Monthly Payments Certain
This Annuity option is an Annuity payable monthly during the lifetime of an
Annuitant with the provision that if, at the death of the Annuitant,
payments have been made for less than 120, 180 or 240 months, as elected,
then the present value as of the date of the Annuitant's death, at the
current dollar amount of any remaining guaranteed monthly payments will be
paid in one sum to the Beneficiary or Beneficiaries designated.
*Option 3: Unit Refund Life Annuity
This Annuity option is an Annuity payable monthly during the lifetime of
the Annuitant provided that, at the death of the Annuitant, the Beneficiary
will receive an additional payment equal to the excess, if any, of (a) over
(b) where (a) is the total amount applied under the option at the Annuity
Commencement Date divided by the Annuity Unit value at the Annuity
Commencement Date and (b) is the number of Annuity Units represented by
each monthly Annuity payment made times the number of Annuity payments
made.
The amount of the additional payments will be determined by multiplying
such excess by the Annuity Unit value as of the date that proof of death is
received by HL.
Option 4: Joint and Last Survivor Annuity
An Annuity payable monthly during the joint lifetime of the Annuitant and a
designated second person, and thereafter during the remaining lifetime of
the survivor, ceasing with the last payment prior to the death of the
survivor.
It would be possible under this option for an Annuitant and designated
second person in the event of the common or simultaneous death of the
parties to receive only one payment in the event of death prior to the due
date for the second payment and so on.
*Option 5: Payments for a Designated Period
An amount payable monthly for the number of years selected which may be
from 5 to 30 years. Under this option, you may, at any time, surrender the
Contract and receive, within seven days, the current value of the Contract.
In the event of the Annuitant's death prior to the end of the designated
period, any then remaining balance of proceeds will be paid in one sum to
the Beneficiary or Beneficiaries designated.
<PAGE>
- 25 -
Option 5 is an option that does not involve life contingencies and thus no
mortality guarantee. Charges made during the Accumulation Period for the
mortality undertaking under the Contracts thus provide no real benefit to a
Contract Owner.
*On Qualified Plans, Options 2, 3 and 5 are available only if the
guaranteed payment period is less than the life expectancy of the Annuitant
at the time the option becomes effective. Such life expectancy shall be
computed on the basis of the mortality prescribed by the IRS, or if none is
prescribed, the mortality table then in use by HL.
- - -------------------------------------------------------------------------------
Under any of the Annuity options above, excluding Option 5 (on a variable
basis), no surrenders are permitted after Annuity payments commence.
- - -------------------------------------------------------------------------------
HL may offer other annuity options from time to time.
How are Variable Annuity payments determined?
The value of the Annuity Unit for each Sub-Account in the Separate Account
for any day is determined by multiplying the value for the preceding day by
the product of (1) the net investment factor (see "How is the Accumulation
Unit value determined?" commencing on page ___) for the day for which the
Annuity Unit value is being calculated, and (2) 0.999892 (a factor to
neutralize the assumed net investment rate of 4.00% per annum discussed
below).
When Annuity payments are to commence, the value of the Contract is
determined as the product of the value of the Accumulation Unit credited to
each Sub-Account as of the close of business on the fifth business day
preceding the date the first Annuity payment is due and the number of
Accumulation Units credited to each Sub-Account as of the date the Annuity
is to commence.
The Contract contains tables indicating the dollar amount of the first
monthly payment under the optional forms of Annuity for each $1,000 of
value of a Sub-Account under a Contract. The first monthly payment varies
according to the form of Annuity selected. The Contract contains Annuity
tables derived from the 1971 Individual Annuity Mortality Table with an
assumed interest rate ("A.I.R.") of 4.00% per annum. The total first
monthly Annuity payment, fixed and variable, is determined by multiplying
the value (expressed in thousands of dollars) of a Sub-Account (less any
applicable premium taxes) by the amount of the first monthly payment per
$1,000 of value obtained from the tables in the Contracts.
The 4.00% interest rate assumed in the mortality tables would produce level
Annuity payments if the net investment rate remained constant at 4.00%. In
fact, payments will vary up or down in the proportion that the net
investment rate varies up or down from 4.00%. A higher assumed interest
rate may produce a higher initial payment but more slowly rising and more
rapidly falling subsequent payments than would a 4.00% interest rate
assumption. An alternate A.I.R. of 5.00% is available on an optional
basis.
<PAGE>
- 26 -
The amount of the first monthly Annuity payment, determined as described
above, is divided by the value of an Annuity Unit for the appropriate
Sub-Account as of the close of business on the fifth business day preceding
the day on which the payment is due in order to determine the number of
Annuity Units represented by the first payment. This number of Annuity
Units remains fixed during the Annuity Period, and in each subsequent month
the dollar amount of the Annuity payment is determined by multiplying this
fixed number of Annuity Units by the then current Annuity Unit value.
The Annuity Unit value used in calculating the amount of the Annuity
payments will be based on an Annuity Unit value determined as of the close
of business on a day not more than the fifth business day preceding the
date of the Annuity payment.
CHARGES UNDER THE CONTRACT
How are the sales charges under the Contracts made?
No deduction is made for sales charges at the time a Purchase Payment is
allocated to the Separate Account and the Sub-Accounts thereunder.
Contingent deferred sales charges on Contracts will be assessed against any
partial surrender or Contract redemptions at the rate of six percent (6%)
during the Contract Year the Purchase Payment attributable to such values
is made, reducing by one percent (1%) each Contract Year thereafter. For
this purpose, Purchase Payments are deemed withdrawn first. Additionally,
Purchase Payments are deemed surrendered in the order in which they were
received. The maximum amount to which the contingent deferred sales
charges may be applied, in any event, will not exceed the aggregate amount
of the Purchase Payments made to a Contract.
In the case of a redemption in which you request a certain dollar amount be
withdrawn, the sales charge is deducted from the amount withdrawn and the
balance is paid to you. Example: You request a total withdrawal of $1,000
and the applicable sales load is 6%. Your Sub-Account(s) will be reduced
by $1,000 and you will receive $940 (i.e., the $1,000 total withdrawal less
the 6% sales charge). This is the method applicable on a full surrender of
your Contract. In the case of a partial redemption in which you request to
receive a specified amount, the sales charge will be calculated on the
total amount that must be withdrawn from your Sub-Account(s) in order to
provide you with the amount requested. Example: You request to receive
$1,000 and the applicable sales charge is 6%. Your Sub-Account(s) will be
reduced by $1,063.83 (i.e., a total withdrawal of $1,063.83 which results
in a $63.83 sales charge ($1,063.83 x 6%) and a net amount paid to you of
$1,000 as requested).
Is there ever a time when the sales charges do not apply?
Yes. After the Contract has been in force for a full Contract Year, a
Contract Owner may make a single partial surrender of Contract values of up
to 10% each Contract Year (on a non-cumulative basis) of the Purchase
Payments made under the Contract without the
<PAGE>
- 27 -
application of the contingent deferred sales charge described above.
Certain plans or programs may have different withdrawal privileges. Any
such withdrawal will be taken first from Contract Values other than
Purchase Payments and then from Purchase Payments. Any surrender of the
Contract Values in excess of such amount in any Contract Year during the
period when contingent deferred sales charges are operable with
respect to Contract Purchase Payments will be subject to the appropriate
charge as set forth above. Purchase Payments will be deemed to be
surrendered in the order in which they were received.
No contingent deferred sales charges otherwise applicable will be assessed
in the event of death of the Annuitant, death of the Contract Owner or if
payments are made under an Annuity option provided for under the Contract.
What do the sales charges cover?
The contingent deferred sales charges, when applicable, will be used to
cover expenses relating to the sale and distribution of the Contracts,
including commissions paid to any distribution organization and its sales
personnel, the cost of preparing sales literature and other promotional
activities. It is anticipated that gross commissions paid on the sale of
the Contracts will not exceed 4.50% of a Purchase Payment. To the extent
that these charges do not cover such distribution expenses they will be
borne by HL from its general assets, including surplus.
What is the mortality and expense risk charge?
Although Variable Annuity payments made under the Contracts will vary in
accordance with the investment performance of the underlying Fund shares
held in the Sub-Account(s), the payments will not be affected by (a) HL's
actual mortality experience among Annuitants before or after retirement or
(b) HL's actual expenses, if greater than the deductions provided for in
the Contracts because of the expense and mortality undertakings by HL.
For assuming these risks under the Contracts, HL will make a daily charge
at the rate of 1.00% per annum against all Contract values held in the
Separate Account (estimated at 0.85% for mortality and 0.15% for expense).
Such charges may not be changed on existing Contracts. HL reserves the
right to increase these and other charges subject to SEC approval on future
Contracts which it may issue with respect to the Separate Account,
provided, however, that such charges shall not exceed 1.50% per annum in
any event.
The mortality undertakings provided by HL under the Contracts, assuming the
selection of one of the forms of life Annuities, is to make monthly Annuity
payments (determined in accordance with the Annuity table and other
provisions contained in the Contract) to Contract Owners regardless of how
long a Contract Owner may live, and regardless of how long all Annuitants
as a group may live. HL also assumes the liability for payment of the
Minimum Death Benefit provided under the Contract.
<PAGE>
- 28 -
The mortality undertakings are based on HL's determination of expected
mortality rates among all Annuitants. If actual experience among
Annuitants during the Annuity payment period deviates from HL's actuarial
determination of expected mortality rates among Annuitants because, as a
group, their longevity is longer than anticipated, HL must provide amounts
from its general funds to fulfill its Contract obligations. In that event,
a loss will fall on HL. Also, in the event of the death of an Annuitant or
Contract Owner prior to the Annuitant's age 75 or the commencement of
Annuity payments, whichever is earlier, HL can, in periods of declining
value, experience a loss resulting from the assumption of the mortality
risk relative to the Minimum Death Benefit.
In providing an expense undertaking, HL assumes the risk that the
contingent deferred deductions for sales expenses and the Annual
Maintenance Fee for maintaining the Contracts prior to retirement may be
insufficient to cover the actual cost of providing such items.
Are there any administrative charges?
Each year, on the anniversary of the Contract, HL will deduct an Annual
Maintenance Fee, if applicable, from the value of the Contract to
reimburse it for expenses relating to the maintenance of the Contract
and the Sub-Account(s) thereunder. If during a Contract Year the Contract
is surrendered for its full value, HL will deduct the Annual Maintenance
Fee at the time of such surrender. The fee is a flat fee which will be
due in the full amount regardless of the time of the Contract Year that
Contract values are surrendered. The Annual Maintenance Fee is $25.00
per Contract Year. The deduction will be made pro rata from each
Sub-Account under a Contract.
How much are the deductions for premium taxes?
A deduction is also made for premium tax, if applicable. Certain states
impose a premium tax, ranging up to 4.00% upon annuity considerations
received by insurance companies. On any Contract subject to a premium tax,
the tax will be deducted, as provided under applicable law, either from the
Purchase Payment when received or from the amount applied to effect an
Annuity at the time Annuity payments commence.
On August 4, 1991, the Pennsylvania General Assembly passed a law which
imposes a 2% premium tax on all non-qualified annuity premium received
after July 1, 1991. HL will collect a 2% premium tax on surrenders up to
the amount of total premium paid, on all death benefit payments up to the
total amount of premium paid, and on all annuitization payments up to the
total amount of premium paid, on Contracts where the annuity premium was
originally received from residents of the state of Pennsylvania.
<PAGE>
- 29 -
HARTFORD LIFE INSURANCE COMPANY AND THE FUNDS
What is HL?
HL was originally incorporated under the laws of Massachusetts on June 5,
1902. It was subsequently redomiciled to Connecticut. It is a stock life
insurance company engaged in the business of writing health and life
insurance, both ordinary and group, in all states of the United States and
the District of Columbia. The offices of HL are located in Simsbury,
Connecticut; however, its mailing address is P.O. Box 2999, Hartford, CT
06104-2999. HL is ultimately 100% owned by Hartford Fire Insurance
Company, one of the largest multiple lines insurance carriers in the United
States. Hartford Fire is a subsidiary of ITT Corporation.
HL has an A++ (superior) rating from A.M. Best and Company, Inc. on the
basis of its financial soundness and operating performance, the highest
ratings provided by this service. HL has an AA+ rating from Standard &
Poor's and Duff and Phelps highest rating (AAA) on the basis of its claims
paying ability.
These ratings do not apply to the performance of the Separate Account.
However, the Contractual obligations under this variable annuity are the
general corporate obligations of HL. These ratings do apply to HL's
ability to meet its insurance obligations under the Contract.
What are the Funds?
Hartford Stock Fund, Inc. was organized on March 11, 1976. Hartford
Advisers Fund, Inc., Hartford Bond Fund, Inc. and HVA Money Market Fund,
Inc. were all organized on December 1, 1982. Hartford Capital Appreciation
Fund, Inc. was organized on September 20, 1983. Hartford Mortgage
Securities Fund, Inc. was organized on October 5, 1984. All of the Funds
were incorporated under the laws of the State of Maryland and are
collectively referred to as the "Funds."
The investment objectives of each of the Funds are as follows:
HARTFORD ADVISERS FUND, INC.
To achieve maximum long term total rate of return consistent with prudent
investment risk by investing in common stock and other equity securities,
bonds and other debt securities, and money market instruments. The
investment adviser will vary the investments of the Fund among equity and
debt securities and money market instruments depending upon its analysis of
market trends. Total rate of return consists of current income, including
dividends, interest and discount accruals and capital appreciation.
<PAGE>
- 30 -
HARTFORD CAPITAL APPRECIATION FUND, INC.
(formerly "Hartford Aggressive Growth Fund, Inc.")
To achieve growth of capital by investing in securities selected solely on
the basis of potential for capital appreciation; income, if any, is an
incidental consideration.
HARTFORD BOND FUND, INC.
To achieve maximum current income consistent with preservation of capital
by investing primarily in fixed-income securities.
HARTFORD MORTGAGE SECURITIES FUND, INC.
To achieve maximum current income consistent with safety of principal and
maintenance of liquidity by investing primarily in mortgage-related
securities issued by the Government National Mortgage Association ("GNMA").
HARTFORD STOCK FUND, INC.
To achieve long-term capital growth primarily through capital appreciation,
with income a secondary consideration, by investing in equity-type
securities.
HVA MONEY MARKET FUND, INC.
To achieve maximum current income consistent with liquidity and
preservation of capital by investing in money market securities.
The following Fund is available only for qualified Contracts issued prior to May
1, 1987:
HARTFORD U.S. GOVERNMENT MONEY MARKET FUND, INC.
To achieve maximum current income consistent with preservation of capital
by investing in short-term, marketable obligations issued or guaranteed by
the United States Government or by agencies or instrumentalities of the
United States Government whether or not they are guaranteed by the full
faith and credit of the federal government. The Fund was organized on
December 1, 1982 under the laws of the State of Maryland.
All Funds
The Funds are available only to serve as the underlying investment for the
variable annuity Contracts and for the variable life insurance Contracts
issued by HL.
<PAGE>
- 31 -
It is conceivable that in the future it may be disadvantageous for variable
annuity separate accounts and variable life insurance separate accounts to
invest in the Funds simultaneously. Although HL and the Funds do not
currently foresee any such disadvantages either to variable annuity
Contract Owners or to variable life insurance Policy Owners, the Funds'
Board of Directors intends to monitor events in order to identify any
material conflicts between such Contract Owners and Policy Owners and to
determine what action, if any, should be taken in response thereto. If the
Board of Directors of the Funds were to conclude that separate funds should
be established for variable life and variable annuity separate accounts,
the variable annuity Contract Owners would not bear any expenses attendant
to the establishment of such separate funds.
The Advisers Fund Sub-Account is not available under Contracts issued prior
to May 2, 1983 unless separately applied for by a Contract Owner. The
Capital Appreciation Fund Sub-Account is not available under Contracts
issued prior to May 1, 1984 unless separately applied for by a Contract
Owner. The Mortgage Securities Fund Sub-Account is not available under
Contracts issued prior to January 15, 1985 unless separately applied for
by a Contract Owner.
The Hartford Investment Management Company ("HIMCO") serves as investment
manager or adviser to each of the Funds. In addition, Wellington
Management ("Wellington") has served as sub-investment adviser to certain
of the Funds since August 1984.
HIMCO serves as investment manager for Hartford Advisers, Hartford
Capital Appreciation and Hartford Stock Funds pursuant to an Investment
Management Agreement between each. Wellington serves as sub-investment
adviser to each of these funds pursuant to a Sub-Investment Advisory
Agreement between Wellington and HIMCO on behalf of each fund.
HIMCO serves as the investment adviser to Hartford Bond Fund, Hartford
Mortgage Securities, Hartford U.S. Government Money Market and HVA Money
Market Funds pursuant to an Investment Advisory Agreement between these
funds and HIMCO.
A full description of the Funds, their investment policies and
restrictions, risks, charges and expenses and all other aspects of their
operation is contained in the accompanying Funds' Prospectus which should
be read in conjunction with this Prospectus before investing and in the
Funds' Statement of Additional Information which may be ordered from HL.
<PAGE>
- 32 -
Does HL have any interest in the Funds?
At December 31, 1994, certain HL group pension Contracts held director
interest in shares as follows:
<TABLE>
<CAPTION>
Percent of
Shares Total Shares
------ ------------
<S> <C> <C>
Hartford Advisers Fund, Inc. 10,709,364 0.56%
Hartford Capital Appreciation Fund, Inc. 5,313,800 1.31%
Hartford Index Fund, Inc. 9,462,900 9.14%
Hartford International Opportunities Fund, Inc. 5,547,408 1.16%
Hartford Mortgage Securities Fund, Inc. 16,249,689 5.26%
Hartford Stock Fund, Inc. 65,899 0.02%
</TABLE>
FEDERAL TAX CONSIDERATIONS
What are some of the federal tax consequences which affect these Contracts?
A. GENERAL
SINCE THE TAX LAW IS COMPLEX AND SINCE TAX CONSEQUENCES WILL VARY ACCORDING
TO THE ACTUAL STATUS OF THE CONTRACT OWNER INVOLVED AND THE TYPE OF PLAN
UNDER WHICH THE CONTRACT IS PURCHASED, LEGAL AND TAX ADVICE MAY BE NEEDED
BY A PERSON, EMPLOYER OR OTHER ENTITY CONTEMPLATING THE PURCHASE OF A
CONTRACT DESCRIBED HEREIN.
It should be understood that any detailed description of the federal income
tax consequences regarding the purchase of these Contracts cannot be made
in this Prospectus and that special tax rules may be applicable with
respect to certain purchase situations not discussed herein. In addition,
no attempt is made here to consider any applicable state or other tax laws.
For detailed information, a qualified tax adviser should always be
consulted. The discussion here and in the Appendix, commencing on page ,
is based on HL's understanding of current federal income tax laws as they
are currently interpreted.
B. TAXATION OF HL AND THE SEPARATE ACCOUNT
The Separate Account is taxed as part of HL which is taxed as a life
insurance company in accordance with the Internal Revenue Code.
Accordingly, the Separate Account will not be taxed as a "regulated
investment company" under subchapter M of the Code. Investment
<PAGE>
- 33 -
income and any realized capital gains on the assets of the Separate Account
are reinvested and are taken into account in determining the value of the
Accumulation and Annuity Units. (See "How is the Accumulation Unit value
determined?" commencing on page ___.) As a result, such investment income
and realized capital gains are automatically applied to increase reserves
under the Contract.
No taxes are due on interest, dividends and short-term or long-term capital
gains earned by the Separate Account with respect to qualified or
non-qualified Contracts.
C. TAXATION OF ANNUITIES -- GENERAL PROVISIONS AFFECTING PURCHASERS OTHER
THAN QUALIFIED PLANS
Section 72 of the Internal Revenue Code governs the taxation of annuities
in general.
1. NON-NATURAL PERSONS, CORPORATIONS, ETC. Section 72 contains
provisions for Contract Owners which are non-natural persons. Non-
natural persons include corporations, trusts, and partnerships. The
annual net increase in the value of the Contract is currently
includable in the gross income of a non-natural person unless the non-
natural person holds the Contract as an agent for a natural person.
There is an exception from current inclusion for certain annuities
held by structured settlement companies, certain annuities held by an
employer with respect to a terminated Qualified Plan and certain
immediate annuities. A non-natural person which is a tax-exempt
entity for Federal tax purposes will not be subject to income tax as a
result of this provision.
If the Contract Owner is not an individual, the primary Annuitant
shall be treated as the Contract Owner for purposes of making
distributions which are required to be made upon the death of the
Contract Owner. If there is a change in the primary Annuitant, such
change shall be treated as the death of the Contract Owner.
2. OTHER CONTRACT OWNERS (NATURAL PERSONS). A Contract Owner is not
taxed on increases in the value of the Contract until an amount is
received or deemed received, e.g., in the form of a lump sum payment
(full or partial value of a Contract) or as Annuity payments under the
settlement option elected.
The provisions of Section 72 of the Code concerning distributions are
summarized briefly below. Also summarized are special rules affecting
distributions from Contracts obtained in a tax-free exchange for other
annuity contracts or life insurance contracts which were purchased
prior to August 14, 1982.
<PAGE>
- 34 -
a. DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
i. Total premium payments less prior withdrawals which were not
includable in gross income equal the "investment in the
contract" under Section 72 of the Code.
ii. When the value of the Contract (ignoring any surrender
charges) exceeds the "investment in the contract," any
amount surrendered which is less than or equal to the
difference between such value of the Contract and the
"investment in the contract" will be included in gross
income.
iii. When such value of the Contract is less than or equal to the
"investment in the contract," any amount surrendered which
is less than or equal to the "investment in the contract"
shall be treated as a return of "investment in the contract"
and will not be included in gross income.
iv. The receipt of any amount as a loan under the Contract or
the assignment or pledge of any portion of the value of the
Contract shall be treated as an amount surrendered which
will be covered by the provisions in subparagraph ii. or
iii. above.
v. In general, the transfer of the Contract, without full and
adequate consideration, will be treated as an amount
surrendered which will be covered by the provisions in
subparagraph ii. or iii. above. This transfer rule does not
apply, however, to certain transfers of property between
spouses or incident to divorce.
b. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE. Annuity payments
made after the Annuity Commencement Date are includable in gross
income to the extent the payments exceed the amount determined by
the application of the ratio of the "investment in the contract"
to the total amount of the payments to be made after the Annuity
Commencement Date (the "exclusion ratio").
i. When the total of amounts excluded from income by
application of the exclusion ratio is equal to the
investment in the contract as of the Annuity Commencement
Date, any additional payments (including surrenders) will be
entirely includable in gross income.
ii. If the annuity payments cease by reason of the death of the
Annuitant and, as of the date of death, the amount of
annuity payments excluded from gross income by the exclusion
ratio does not exceed the investment in the contract as of
the Annuity Commencement Date, then the remaining portion of
unrecovered investment shall be allowed as a deduction for
the last taxable year of the Annuitant.
<PAGE>
- 35 -
iii. Certain distributions, such as surrenders made after the
Annuity Commencement Date, are not treated as annuity
payments, and shall be included in gross income.
c. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS.
Contracts issued after October 21, 1988 by the same insurer (or
affiliated insurer) to the same Contract Owner within the same
calendar year (other than certain contracts held in connection
with a tax-qualified retirement arrangement) will be treated as
one annuity Contract for the purpose of determining the taxation
of distributions prior to the Annuity Commencement Date. An
annuity contract received in a tax-free exchange for another
annuity contract or life insurance contract may be treated as a
new Contract for this purpose. HL believes that for any annuity
subject to such aggregation, the values under the Contracts and
the investment in the contracts will be added together to
determine the taxation of amounts received or deemed received
prior to the Annuity Commencement Date. Withdrawals will first
be treated as withdrawals of income until all of the income from
all such Contracts is withdrawn. As of the date of this
Prospectus, there are no regulations interpreting this provision.
d. PENALTY -- APPLICABLE TO CERTAIN WITHDRAWALS AND ANNUITY
PAYMENTS.
i. If any amount is received or deemed received on the Contract
(before or after the Annuity Commencement Date), the Code
applies a penalty tax equal to ten percent of the portion of
the amount includable in gross income, unless an exception
applies.
ii. The penalty will not apply to the following distributions
(exceptions vary based upon the precise plan involved):
1. Distributions made on or after the date the recipient
has attained the age of 59 1/2.
2. Distributions made on or after the death of the
Contract Holder or where the Contract Holder is not an
individual, the death of the primary Annuitant.
3. Distributions attributable to a recipient's becoming
disabled.
4. A distribution that is part of a scheduled series of
substantially equal periodic payments for the life (or
life expectancy) of the recipient (or the joint lives
or life expectancies of the recipient and the
recipient's Beneficiary).
<PAGE>
- 36 -
5. Distributions of amounts which are allocable to
"investments in the contract" made prior to August 14,
1982.
e. SPECIAL PROVISIONS AFFECTING CONTRACTS OBTAINED THROUGH A TAX-
FREE EXCHANGE OF OTHER ANNUITY OR LIFE INSURANCE CONTRACTS
PURCHASED PRIOR TO AUGUST 14, 1982.
If the Contract was obtained by a tax-free exchange of a life
insurance or annuity Contract purchased prior to August 14, 1982,
then any amount surrendered prior to the Annuity Commencement
Date which does not exceed the portion of the "investment in the
contract" (generally premiums paid into the prior Contract, less
amounts deemed received) prior to August 14, 1982, shall not be
included in gross income. In all other respects, the general
provisions apply to distributions from such Contracts.
f. REQUIRED DISTRIBUTIONS IN THE EVENT OF CONTRACT OWNER'S DEATH.
i. If any Contract Owner dies before the Annuity Commencement
Date, the entire interest must be distributed within five
years of the date of death; however, a portion or all of
such interest may be payable to a designated Beneficiary
over the life of such Beneficiary or for a period not
extending beyond the life expectancy of such Beneficiary
with payments starting within one year of the date of death.
ii. If any Contract Owner or Annuitant dies on or after the
Annuity Commencement Date and before the entire interest in
the Contract has been distributed, any remaining portion of
such interest must be distributed at least as rapidly as
under the method of distribution in effect at the time of
death.
iii. If a spouse is designated as a Beneficiary at the time of
the Contract Owner's death and there is a surviving
Annuitant or Contingent Annuitant, then such spouse will be
treated as the Contract Owner under subparagraph i. and ii.
above.
iv. If the Contract Owner is not an individual, the primary
Annuitant shall be treated as the Contract Owner under
subparagraphs i. and ii. above. If there is a change in the
primary Annuitant, such change shall be treated as the death
of the Contract Owner.
3. DIVERSIFICATION REQUIREMENTS.
Section 817 of the Code provides that a variable annuity contract
(other than certain contracts held in connection with a tax-qualified
retirement arrangement) will not be treated as an annuity contract for
any period during which the investments made by the separate account
or underlying fund are not adequately diversified in accordance with
regulations prescribed by the Treasury. If a Contract is not treated
as an annuity contract,
<PAGE>
- 37 -
the Contract Owner will be subject to income tax on the annual
increases in cash value. The Treasury has issued diversification
regulations which, among other things, require that no more than 55%
of the assets of a mutual fund (such as the HL mutual funds)
underlying a variable annuity contract, be invested in any one
investment. In determining whether the diversification standards are
met, each United States Government Agency or instrumentality shall be
treated as a separate issuer.
D. FEDERAL INCOME TAX WITHHOLDING
The portion of a distribution which is taxable income to the recipient will
be subject to Federal income tax withholding, pursuant to Section 3405 of
the Internal Revenue Code. The application of this provision is summarized
below:
1. NON-PERIODIC DISTRIBUTIONS
The portion of a non-periodic distribution which constitutes taxable income
will be subject to federal income tax withholding unless the recipient
elects not to have taxes withheld. If an election not to have taxes
withheld is not provided, 10% of the taxable distribution will be withheld
as federal income tax. Election forms will be provided at the time
distributions are requested. If the necessary election forms are not
submitted to HL, HL will automatically withhold 10% of the taxable
distribution.
2. PERIODIC DISTRIBUTIONS (DISTRIBUTIONS PAYABLE OVER A PERIOD GREATER
THAN ONE YEAR)
The portion of a periodic distribution which constitutes taxable income
will be subject to federal income tax withholding as if the recipient were
married claiming three exemptions. A recipient may elect not to have
income taxes withheld or have income taxes withheld at a different rate by
providing a completed election form. Election forms will be provided at
the time distributions are requested.
E. GENERAL PROVISIONS AFFECTING TAX-QUALIFIED PLANS
The Contract may be used for a number of qualified plans. If the contract
is being purchased with respect to some form of Qualified Plan, please
refer to Appendix I commencing on page ___ for information relative to the
types of plans for which it may be used and the general explanation of the
tax features of such plans.
<PAGE>
- 38 -
MISCELLANEOUS
What are my voting rights?
HL will notify you of any Fund shareholders' meeting if the shares held for
your account may be voted at such meetings. HL will also send proxy
materials and a form of instruction by means of which you can instruct HL
with respect to the voting of the Fund shares held for your account.
In connection with the voting of Fund shares held by it, HL will arrange
for the handling and tallying of proxies received from Contract Owners. HL
as such, shall have no right, except as hereinafter provided, to vote any
Fund shares held by it hereunder which may be registered in its name or the
names of its nominees. HL will, however, vote the Fund shares held by it
in accordance with the instructions received from the Contract Owners for
whose accounts the Fund shares are held. If a Contract Owner desires to
attend any meeting at which shares held for the Contract Owner's benefit
may be voted, the Contract Owner may request HL to furnish a proxy or
otherwise arrange for the exercise of voting rights with respect to the
Fund shares held for such Contract Owner's account. In the event that the
Contract Owner gives no instructions or leaves the manner of voting
discretionary, HL will vote such shares of the appropriate Fund in the same
proportion as shares of that Fund for which instructions have been
received. During the Annuity period under a Contract the number of votes
will decrease as the assets held to fund Annuity benefits decrease.
Will other Contracts be participating in the Separate Account?
In addition to the Contracts described in this Prospectus, it is
contemplated that other forms of group or individual variable annuities may
be sold providing benefits which vary in accordance with the investment
experience of the Separate Account.
How are the Contracts sold?
Hartford Equity Sales Company, Inc. ("HESCO") currently serves as Principal
Underwriter for the securities issued with respect to the Separate Account.
Hartford Securities Distribution Company, Inc. ("HSD") will replace HESCO
as principal underwriter upon approval by the Commission, the National
Association of Securities Dealers, Inc. ("NASD") and applicable state
regulatory authorities.
Both HESCO and HSD are wholly-owned subsidiaries of HL. The principal
business address of HESCO and HSD is the same as HL.
The securities will be sold by salespersons of HESCO, and subsequently,
HSD, who represent HL as insurance and Variable Annuity agents and who are
registered representatives or Broker-Dealers who have entered into
distribution agreements with HESCO, and subsequently HSD.
<PAGE>
- 39 -
HESCO is registered with the Commission under the Securities and Exchange
Act of 1934 as a Broker-Dealer and is a member of the NASD. HSD will be
registered with the Commission under the Securities Exchange Act of 1934 as
a Broker-Dealer and will become a member of the NASD.
Who is the custodian of the Separate Account's assets?
HL is the custodian of the Separate Account's assets.
Are there any material legal proceedings affecting the Separate Account?
No.
Are you relying on any experts as to any portion of this Prospectus?
The financial statements and schedules included in this prospectus and
elsewhere in the registration statement have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports
with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing.
How may I get additional information?
Inquiries will be answered by calling your representative or by writing:
Hartford Life Insurance Company
Attn: RPVA Administration
P.O. Box 2999
Hartford, Connecticut 06104-2999
<PAGE>
- 40 -
APPENDIX I
INFORMATION REGARDING TAX QUALIFIED PLANS
THE TAX REFORM ACT OF 1986 AND THE TECHNICAL AND MISCELLANEOUS REVENUE ACT OF
1988 HAVE MADE SUBSTANTIAL CHANGES TO QUALIFIED PLANS. SOME OF THESE CHANGES
WERE EFFECTIVE IN 1987 WHILE OTHERS WERE EFFECTIVE IN 1988. YOU SHOULD CONSULT
YOUR TAX ADVISER TO FULLY ADDRESS ALL CHANGES OCCURRING AS A RESULT OF THE TAX
REFORM ACT AND THE TECHNICAL AND MISCELLANEOUS ACT OF 1988 AND THEIR EFFECT ON
QUALIFIED PLANS.
A. Contributions
1. Pension, Profit-Sharing and Simplified Employee Pension Plans
Contributions to pension or profit-sharing plans (described in Section
401(a) and 401(k), if applicable, and exempt from taxation under Section
501(a) of the Code), and Simplified Employee Pension Plans (described in
Section 408(k)), which do not exceed certain limitations prescribed in the
Code are fully tax-deductible to the employer. Such contributions are not
currently taxable to the covered employees, and increases in the value of
Contracts purchased with such contributions are not subject to taxation
until received by the covered employees or their Beneficiaries in the form
of Annuity payments or other distributions.
2. Tax-Deferred Annuity Plans for Public School Teachers and Employers and
Employees of Certain Tax-Exempt Organizations
Contributions to tax-deferred annuity plans (described in Section 403(a)
and 403(b) of the Code) by employers are not includable within the
employee's income to the extent those contributions do not exceed the
lesser of $9,500 or the exclusion allowance. Generally, the exclusion
allowance is equal to 20% of the employee's includable compensation for his
most recent full year of employment multiplied by the number of years of
his service, less the aggregate amount contributed by the employer for
Annuity Contracts which were not included within the gross income of the
employee for any prior taxable year. There are special provisions which
may allow an employee of an educational institution, a hospital or a home
health service agency to elect an overall limitation different from the
limitation described above.
<PAGE>
- 41 -
3. Deferred Compensation Plans for Tax-Exempt Organizations and State and
Local Governments
Employees may contribute on a before tax basis to the Deferred Compensation
Plan of their employer in accordance with the employer's Plan and Section
457 of the Code. Section 457 places limitations on contributions to
Deferred Compensation Plans maintained by a State ("State" means a State, a
political sub-division of a State, and an agency or instrumentality of a
State or political sub-division of a State) or other tax-exempt
organization. Generally, the limitation is 33 1/3% of includable
compensation (25% of gross compensation) or $7,500, whichever is less. The
plan may also provide for additional contributions during the three taxable
years ending before normal retirement age of a Participant for a total of
up to $15,000 per year for such three years.
An employee electing to participate in a plan should understand that his
rights and benefits are governed strictly by the terms of the plan, that he
is in fact a general creditor of the employer under the terms of the plan,
that the employer is legal owner of any Contract issued with respect to the
plan and that the employer as owner of the Contract(s) retains all voting
and redemption rights which may accrue to the Contract(s) issued with
respect to the plan. The participating employee should look to the terms
of his plan for any charges in regard to participating therein other than
those disclosed in this Prospectus.
4. Individual Retirement Annuities ("IRA's")
Starting in 1987, individuals may contribute and deduct the lesser of
$2,000 or 100 percent of their compensation to an IRA. In the case of a
spousal IRA, the maximum deduction is the lesser of $2,250 or 100 percent
of compensation. The deduction for contributions is phased out between
$40,000 and $50,000 of adjusted gross income (AGI) for a married individual
(and between $25,000 and $35,000 for single individuals) if either the
individual or his or her spouse is an active Participant in any Section
401(a), 403(a), 403(b) or 408(k) plan regardless of whether the
individual's interest is vested.
To the extent deductible contributions are not allowed, individuals may
make designated non-deductible contributions to an IRA, subject to the
above limits.
B. Distributions
1. Pension and Profit-Sharing Plans, Tax-Sheltered Annuities, Individual
Retirement Annuities.
Annuity payments made under the Contracts are taxable under Section 72 of
the Code as ordinary income, in the year of receipt, to the extent that
they exceed the "excludable amount." The investment in the Contract is the
aggregate amount of the contributions made by or on behalf of an employee
which were included as a part of his taxable income and not deducted.
Thus, annual premiums deducted for an IRA are not included in the
investment in
<PAGE>
- 42 -
the Contract. The employee's investment in the Contract is divided by the
expected number of payments to be made under the Contract. The amount so
computed constitutes the "excludable amount," which is the amount of each
annuity payment considered a return of investment in each year and,
therefore, not taxable. Once the employee's investment in the Contract is
recouped, the full amount of each payment will be fully taxable. If the
employee dies prior to recouping his or her investment in the Contract, a
deduction is allowed for the last taxable year. The rules for determining
the excludable amount are contained in Section 72 of the Code.
Generally, distributions or withdrawals prior to age 59 1/2 may be subject
to an additional income tax of 10% of the amount includable in income.
This additional tax does not apply to distributions made after the
employee's death, on account of disability and distributions in the form of
a life annuity and, except in the case of an IRA, certain distributions
after separation from service at or after age 55, and certain distributions
for eligible medical expenses. A life annuity is defined as a scheduled
series of substantially equal periodic payments for the life or life
expectancy of the Participant (or the joint lives or life expectancies of
the Participant and Beneficiary). The taxation of withdrawals and other
distributions varies depending on the type of distribution and the type of
plan from which the distribution is made. With respect to tax-deferred
annuity Contracts under Section 403(b), contributions to the Contract made
after December 31, 1988 and any increases in cash value after that date may
not be distributed prior to attaining age 59 1/2, separation from service,
death or disability. Contributions (but not earnings) made after December
31, 1988 may also be distributed by reason of financial hardship.
Generally, in order to avoid a penalty tax, annuity payments, periodic
payments or annual distributions must commence by April 1 of the calendar
year following the year in which the Participant attains age 70 1/2.
Minimum distributions under a Section 457 Deferred Compensation Plan may be
further deferred if the Participant remains employed. The entire interest
of the Participant must be distributed beginning no later than this
required beginning date over a period which may not extend beyond a maximum
of the life expectancy of the Participant and a designated Beneficiary.
Each annual distribution must equal or exceed a "minimum distribution
amount" which is determined by dividing the account balance by the
applicable life expectancy. This account balance is generally based upon
the account value as of the close of business on the last day of the
previous calendar year. With respect to a Section 403(b) plan, this
account balance is based upon earnings and contributions after December 31,
1986. In addition, minimum distribution incidental benefit rules may
require a larger annual distribution based upon dividing the account
balance by a factor promulgated by the Internal Revenue Service which
ranges from 26.2 (at age 70) to 1.8 (at age 115). Special rules apply to
require that distributions be made to Beneficiaries after the death of the
Participant. A penalty tax of up to 50% of the amount which should be
distributed may be imposed by the Internal Revenue Service for failure to
make a distribution.
<PAGE>
- 43 -
2. Deferred Compensation Plans for Tax-Exempt Organizations and State and
Local Governments
Generally, in order to avoid a penalty tax, annuity payments, periodic
payments or annual distributions MUST commence by April 1 of the calendar
year following the year in which the Participant attains age 70 1/2. The
entire interest of the Participant must be distributed beginning no later
than this required beginning date over a period which may not extend beyond
a maximum of the lives or life expectancies of the Participant and a
designated Beneficiary. Each annual distribution must equal or exceed a
"minimum distribution amount" which is determined by dividing the account
balance by the applicable life expectancy. With respect to a section
403(b) plan, this account balance is based upon earnings and contributions
after December 31, 1986. In addition, minimum distribution incidental
benefit rules may require a larger annual distribution based upon dividing
the entire account balance as of the close of business on the last day of
the previous calendar year by a factor promulgated by the Internal Revenue
Service which ranges from 26.2 (at age 70) to 1.8 (at age 115). Special
rules apply to require that distributions be made to Beneficiaries after
the death of the Participant. A penalty tax of up to 50% of the amount
which should be distributed may be imposed by the Internal Revenue Service
for failure to make such distribution.
Upon receipt of any monies pursuant to the terms of a Deferred Compensation
Plan for a tax-exempt organization, state or local government under Section
457 of the Code, such monies are taxable to such employee as ordinary
income in the year in which received.
C. Federal Income Tax Withholding
The portion of a distribution which is taxable income to the recipient will
be subject to federal income tax withholding, pursuant to Section 3405 of
the Internal Revenue Code. The application of this provision is summarized
below:
1. Eligible Rollover Distributions
a. The Unemployment Compensation Amendments Act of 1992 requires that
federal income taxes be withheld from certain distributions from
tax-qualified retirement plans and from tax-sheltered annuities under
Section 403(b). These provisions DO NOT APPLY to distributions from
individual retirement annuities under section 408(b) or from deferred
compensation programs under section 457.
b. If any portion of a distribution is an "eligible rollover
distribution", the law requires that 20% of that amount be withheld.
This amount is sent to the IRS as withheld income taxes. The
following types of payments DO NOT constitute an eligible rollover
distribution (and, therefore, the mandatory withholding rules will not
apply):
<PAGE>
- 44 -
- the non-taxable portion of the distribution;
- distributions which are part of a series of equal (or
substantially equal) payments made at least annually for your
lifetime, (or your life expectancy) or your lifetime and your
Beneficiary's lifetime (or life expectancies), or for a period of
ten years or more;
- required minimum distributions made pursuant to section 401(a)(9)
of the IRC.
c. However, these mandatory withholding requirements do not apply in the
event of all or portion of an eligible rollover distribution is paid
in a "direct rollover". A director rollover is the direct payment of
an eligible rollover distribution or portion thereof to an individual
retirement arrangement or annuity (IRA) or to another qualified
employer plan. IF A DIRECT ROLLOVER IS ELECTED, NO INCOME TAX WILL BE
WITHHELD.
d. If any portion of a distribution is not an eligible rollover
distribution but is taxable, the mandatory withholding rules described
above do not apply. In this case, the voluntary withholding rules
described below apply.
2. Non-Eligible Rollover Distributions
a. Non-Periodic Distributions
The portion of a non-periodic distribution which constitutes taxable
income will be subject to federal income tax withholding unless the
recipient elects not to have taxes withheld. If an election not to
have taxes withheld is not provided, 10% of the taxable distribution
will be withheld as federal income tax. Election forms will be
provided at the time distributions are requested.
b. Periodic Distributions (distributions payable over a period greater
than one year)
The portion of a periodic distribution which constitutes taxable
income will be subject to federal income tax withholding as if the
recipient were married claiming three exemptions. A recipient may
elect not to have income taxes withheld or have income taxes withheld
at a different rate by providing a completed election form. Election
forms will be provided at the time distributions are requested.
3. Any distribution from plans described in A.3 above is subject to the
regular wage withholding rules.
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO (VARIABLE ACCOUNT "A")
This Statement of Additional Information is not a Prospectus. The information
contained herein should be read in conjunction with the Prospectus.
To obtain a Prospectus, send a written request to Hartford Life Insurance
Company, Attn: RPVA Administration, P.O. Box 2999, Hartford, CT 06104-2999.
Date of Prospectus: May 1, 1995
Date of Statement of Additional Information: May 1, 1995
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- - ------- ----
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY . . . . . . . . . . . . .
SAFEKEEPING OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . .
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . .
DISTRIBUTION OF CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . .
SUBSTITUTION OF OTHER SHARES AS AN UNDERLYING
INVESTMENT MEDIUM OF THE CONTRACTS . . . . . . . . . . . . . . . . . . .
ANNUITY PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . .
B. Electing the Annuity Commencement Date and Form of Annuity . . . .
C. Optional Annuity Forms . . . . . . . . . . . . . . . . . . . . . .
OPTION 1: Life Annuity. . . . . . . . . . . . . . . . . . . . . .
OPTION 2: Life Annuity With 120, 180 or 240 Monthly Payments Certain
OPTION 3: Unit Refund Life Annuity. . . . . . . . . . . . . . . .
OPTION 4: Joint and Last Survivor Annuity . . . . . . . . . . . .
OPTION 5: Payments for a Designated Period. . . . . . . . . . . .
D. The Annuity Unit and Valuation . . . . . . . . . . . . . . . . . .
E. Determination of Amount of First Monthly Annuity Payment-Fixed
and Variable . . . . . . . . . . . . . . . . . . . . . . . . . . .
F. Amount of Second and Subsequent Monthly Annuity Payments . . . . .
G. Date and Time of Annuity Payments. . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
INTRODUCTION
The individual and group tax-deferred variable annuity contracts described in
the Prospectus are designed to provide Annuity benefits to individuals who have
established or wish to establish retirement programs which may or may not
qualify for special federal income tax treatment. The Annuitant under these
contracts may receive Annuity benefits in accordance with the annuity option
selected and the retirement program, if any, under which the contracts have been
purchased. Annuity payments under a contract will begin on a particular future
date which may be selected at any time under the contract or automatically when
the Annuitant reaches age 75. There are several alternative annuity payment
options available under the contract (see "Optional Annuity Forms," commencing
on page ).
The Purchase Payments under a contract, less any applicable premium taxes, will
be applied to the Separate Account. Accordingly, the new Purchase Payment under
the contract will be applied to purchase interests in one or more of the
Advisers Fund, Capital Appreciation Fund, Bond Fund, Government Securities
Fund, Money Market Fund, Mortgage Securities Fund and Stock Fund Sub-Accounts.
Shares of the Funds are purchased by the Separate Account without the imposition
of a sales charge. The value of a contract depends on the value of the shares
of the Fund held by the Separate Account pursuant to that contract. As a
result, the Contract Owner bears the investment risk since market value of the
shares may increase or decrease.
There is no assurance that the value of the Contract Owner's contract at any
time will equal or exceed the Purchase Payments made. However, if the Annuitant
or Contract Owner should die prior to the commencement of annuity payments, the
contracts provide that a death benefit equal to the cash value of the contract
as of the date due proof of death is received by HL shall be payable. This
amount is the greater of (a) the Termination Value of the contract, or (b) 100%
of the total Purchase Payment for the contract, less any partial surrenders (See
"Payments of Benefits" on page ___ of the Prospectus).
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY
Hartford Life Insurance Company ("HL") was originally incorporated under the
laws of Massachusetts on June 5, 1902. It was subsequently redomiciled to
Connecticut. It is a stock life insurance company engaged in the business of
writing health and life insurance, both ordinary and group, in all states of the
United States and the District of Columbia. The offices of HL are located in
Simsbury, Connecticut; however its mailing address is P.O. Box 2999, Hartford,
Connecticut 06104-2999. HL is ultimately 100% owned by Hartford Fire Insurance
Company, one of the largest multiple lines insurance carriers in the United
States. Hartford Fire Insurance Company is a subsidiary of ITT Corporation.
SAFEKEEPING OF ASSETS
The assets of the Separate Account are held by HL under a safekeeping
arrangement.
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, independent public accountants, periodically audits the
Separate Account and annually certifies all of the financial statements of the
Separate Account. The financial statements included in this Statement of
Additional Information have been audited by Arthur Andersen LLP as indicated in
their report with respect thereto, and are included herein in reliance upon the
report of said firm as experts in accounting and auditing.
DISTRIBUTION OF CONTRACTS
Hartford Equity Sales Company, Inc. ("HESCO") currently serves as Principal
Underwriter for the securities issued with respect to the Separate Account.
Hartford Securities Distribution Company, Inc. ("HSD") will replace HESCO as
principal underwriter upon approval by the Commission, the National Association
of Securities Dealers, Inc. ("NASD") and applicable state regulatory
authorities.
Both HESCO and HSD are wholly-owned subsidiaries of HL. The principal business
address of HESCO and HSD is the same as HL.
The securities will be sold by salespersons of HESCO, and subsequently, HSD, who
represent HL as insurance and Variable Annuity agents and who are registered
representatives or Broker-Dealers who have entered into distribution agreements
with HESCO, and subsequently HSD.
HESCO is registered with the Commission under the Securities and Exchange Act of
1934 as a Broker-Dealer and is a member of the NASD. HSD will be registered
with the Commission under the Securities Exchange Act of 1934 as a Broker-Dealer
and will become a member of the NASD.
SUBSTITUTION OF OTHER SHARES AS UNDERLYING
INVESTMENT MEDIUM OF THE CONTRACTS
If the shares of the Fund(s) become unavailable, then subject to obtaining the
prior approval of the Commission, other shares that are generally comparable in
character and quality may be substituted for the shares issued by the Fund whose
shares have become unavailable. Such substitution may include shares previously
purchased or may affect only shares to be purchased.
Before any substitution may be made:
(l) An order of the Commission approving such substitution under the provisions
of Section 26(b) of the Investment Company Act of 1940, as amended, shall
first be obtained;
(2) Written notice of the proposed substitution shall have been given to the
Contract Owners describing the new shares and notifying them that unless
they surrender their contracts for termination within 30 days or determine
to substitute the shares of the other Funds, they will conclusively be
deemed to have authorized the substitution; and
<PAGE>
(3) In the case of substitution of new shares for shares previously purchased,
new shares having an aggregate net asset value at least equal to the
aggregate net asset value of the shares previously purchased, based on
their published or quoted bid price, shall be provided.
Unless a Contract Owner, within 30 days from the date of the substitution
notice, shall give written notice that he desires to surrender his contract for
termination (in which event no contingent deferred sales charges shall be
applicable) or to accept in substitution the shares of the other Fund(s), HL is
authorized to purchase the new shares, and, if the shares then held are to be
exchanged, to exchange the old shares for the new shares.
In the event of substitution, the Contract Owner is required to be advised in
writing within five days after such substitution is made and any expense of such
substitution shall be borne by the Contract Owner.
ANNUITY PERIOD
A. Annuity Payments
Variable Annuity payments are determined on the basis of (1) a mortality
table set forth in the contracts and the type of Annuity payment option
selected, and (2) the investment performance of the investment medium
selected. Fixed Annuity payments are based on the annuity tables contained
in the contracts.
The amount of the Annuity payments will not be affected by adverse
mortality experience or by an increase in expenses in excess of the expense
deduction for which provision has been made (see "Charges Under the
Contracts," commencing on page ___ of the Prospectus).
The Annuitant will be paid the value of a fixed number of Annuity Units
each month. The value of such units and the amounts of the monthly
Variable Annuity payments will, however, reflect investment income
occurring after retirement, and thus the payments will vary with the
investment experience of the Fund shares selected.
B. Electing the Annuity Commencement Date and Form of Annuity
The Contract Owner selects an Annuity Commencement Date and an Annuity
option which may be on a fixed or variable basis, or a combination thereof.
The Annuity Commencement Date will not normally be deferred beyond the
Annuitant's 75th birthday. An Annuity Commencement Date beyond the
Annuitant's 75th birthday is available under certain circumstances.
The Annuity Commencement Date and/or the Annuity option may be changed from
time to time, but any such change must be made at least 30 days prior to
the date on which Annuity payments are scheduled to begin.
<PAGE>
The contract contains the five optional Annuity forms described below.
Options 2, 3 and 5 are available with respect to Qualified Plans only if
the guaranteed payment period is less than the life expectancy of the
Annuitant at the time the option becomes effective. Such life expectancy
shall be computed on the basis of the Annuity table prescribed by the IRS,
or if none is prescribed, the mortality table then in use by HL.
If a Contract Owner does not elect otherwise, payments will automatically
begin at age 65 under Option 2 with 120 monthly payments certain.
When an Annuity is effected under a contract, unless otherwise specified,
variable values will be applied to provide a Variable Annuity based on
contract values as they are held in the various Sub-Accounts under the
contracts. The Contract Owner should consider the question of allocation
of contract values among Sub-Accounts of the Separate Account and the
General Account of HL to make certain that Annuity payments are based on
the investment alternative best suited to the Contract Owner's needs for
retirement.
If at any time payments with respect to an Annuitant's Account of a
Variable or a Fixed Annuity are or become less than $20.00 per payment, HL
has the right to change the frequency of payment to such intervals as will
result in Annuity payments of at least $20.00.
C. Optional Annuity Forms
OPTION 1: Life Annuity
A life Annuity is an Annuity payable during the lifetime of the Annuitant
and terminating with the last monthly payment preceding the death of the
Annuitant. This option offers the maximum level of monthly payments of any
of the options since there is no guarantee of a minimum number of payments
nor a provision for a death benefit payable to a Beneficiary.
It would be possible under this option for an Annuitant to receive only one
Annuity payment if he died prior to the due date of the second Annuity
payment, two if he died before the due date of the third Annuity payment,
etc.
OPTION 2: Life Annuity with 120, 180 or 240 Monthly Payments Certain
This Annuity option is an Annuity payable monthly during the lifetime of an
Annuitant with the provision that if, at the death of the Annuitant,
payments have been made for less than 120, 180 or 240 months, as elected,
then the present value (computed on the basis of 4.00% interest compounded
annually) as of the date of the Annuitant's death at the current dollar
amount at the date of death of any remaining guaranteed monthly payments
will be paid in one sum to the Beneficiary or Beneficiaries designated
unless other provisions will have been made and approved by HL.
<PAGE>
Illustration of Annuity Payments
Individual Age 65, Life Annuity
With 120 Payments Certain
-------------------------
<TABLE>
<S> <C>
1. Net amount applied 13,978.25
2. Initial monthly income per $1,000 of payment applied 6.24
3. Initial monthly payment (1x2 DIVIDED BY 1,000) 87.22
4. Annuity Unit value .953217
5. Number of monthly Annuity Units 91.501
6. Assume Annuity Unit value for second month equal to .963723
7. Second monthly payment (6x5) 88.18
8. Assume Annuity Unit value for third month equal to .964917
9. Third month payment (8x5) 88.29
</TABLE>
For the purpose of this illustration, purchase is assumed to have been made
on the fifth business day preceding the first payment date. In determining
the second and subsequent payments the Annuity Unit value of the fifth
business day, preceding the Annuity due date is used.
OPTION 3: Unit Refund Life Annuity
This Annuity option is an Annuity payable monthly during the lifetime of the
Annuitant terminating with the last payment due prior to the death of the
Annuitant except that an additional payment will be made to the Beneficiary
or Beneficiaries if (a) below exceeds (b) below:
total amount applied under the option
at the Annuity Commencement Date
(a) = _______________________________________________________________
Annuity Unit value at the Annuity Commencement Date
(b) = number of Annuity Units represented x number of monthly
by monthly Annuity payment made Annuity payments made
The amount of the additional payments will be determined by multiplying such
excess by the Annuity Unit value as of the date that proof of death is
received by HL.
For example, under a non-qualified contract, if $20,000 were applied to the
purchase of an Annuity under this option, the value of an Annuity Unit was
$1.25 on the Annuity Commencement Date, the number of Annuity Units
represented by each monthly payment was 126.080 (the number applicable to a
male electing this option to commence at age 75), 60 monthly Annuity payments
were made prior to the date of death, and the value of an Annuity Unit on the
date of receipt of proof of an Annuitant's death was $1.50, the amount paid
to the Beneficiary would be $12,652.80, computed as follows:
<PAGE>
$20,000
------- - (126.080 x 60) = $8,435.80
$1.25
or
$16,000 - $7,564.80 = $8,435.20
$8,435.20 x $1.50 = $12,652.80
OPTION 4: Joint and Last Survivor Annuity
An Annuity payable monthly during the joint lifetime of the Annuitant and a
designated second person, and thereafter during the remaining lifetime of the
survivor, ceasing with the last payment prior to the death of the survivor.
It would be possible under this option for an Annuitant and designated second
person in the event of the common or simultaneous death of the parties to
receive only one payment in the event of death prior to the due date for the
second payment and so on.
OPTION 5: Payments for a Designated Period
An amount payable monthly for the number of years selected which may be from
5 to 30 years. The current value of the amount held under this Option may be
redeemed in whole at any time.
In the event of the Annuitant's death prior to the end of the designated
period, any then remaining balance of proceeds will be paid in one sum to the
Beneficiary or Beneficiaries designated unless other provisions will have
been made and approved by HL.
Option 5 is an option that does not involve life contingencies and thus no
mortality guarantee. Charges made during the Accumulation Period for the
mortality undertaking under the contracts thus provide no real benefit to a
Contract Owner.
Under Option 5, the Contract Owner or Annuitant, as appropriate, may, at any
time, surrender the contract and receive, within seven days, the current
value of the account.
- - -------------------------------------------------------------------------------
Under any of the Annuity options above, excluding Option 5 (on a variable
basis), no surrenders are permitted after Annuity payments commence.
- - -------------------------------------------------------------------------------
D. The Annuity Unit and Valuation
The value of the Annuity Unit for each Sub-Account in the Separate Account
for any day is determined by multiplying the value for the preceding day by
the product of (1) the net investment factor (see page ___ of the Prospectus)
for the day for which the Annuity Unit value is being calculated, and (2)
0.999892 (a factor to neutralize the assumed net investment rate of 4.00% per
annum discussed in Section E. below).
<PAGE>
Illustration of Calculation of Annuity Unit Value
-------------------------------------------------
<TABLE>
<S> <C>
1. Net Investment Factor for period .011225
2. Adjustment for 4% Assumed Rate of Net Investment Return .999892
3. 2x(1+1.000000) 1.011116
4. Annuity Unit value, beginning of period .995995
5. Annuity Unit value, end of period (3x4) 1.007066
</TABLE>
E. Determination of Amount of First Monthly Annuity Payment-Fixed and Variable
When Annuity payments are to commence, the value of the contract is
determined as the product of the value of the Accumulation Unit credited to
each Sub-Account as of the close of business on the fifth business day
preceding the date the first Annuity payment is due and the number of
Accumulation Units credited to each Sub-Account as of the date the Annuity is
to commence.
The contract contains tables indicating the dollar amount of the first
monthly payment under the optional forms of Annuity for each $1,000 of value
of a Sub-Account under a contract. The first monthly payment varies
according to the form of Annuity selected. The contracts contains Annuity
tables derived from the 1971 Individual Annuity Mortality table with an
assumed interest rate ("A.I.R.") of 4.00% per annum. The total first monthly
Annuity payment, fixed and variable, is determined by multiplying the value
(expressed in thousands of dollars) of a Sub-Account (less any applicable
Premium Taxes) by the amount of the first monthly payment per $1,000 of value
obtained from the tables in the contracts.
The 4.00% interest rate assumed in the mortality tables would produce level
Annuity payments if the net investment rate remained constant at 4.00%. In
fact, payments will vary up or down in the proportion that the net investment
rate varies up or down from 4.00%. A higher assumed interest rate may
produce a higher initial payment but more slowly rising and more rapidly
falling subsequent payments than would a 4.00% interest rate assumption. An
alternate A.I.R. of 5.00% is available on an optional basis.
F. Amount of Second and Subsequent Monthly Annuity Payments
The amount of the first monthly Annuity payment, determined as described
above, is divided by the value of an Annuity Unit for the appropriate
Sub-Account as of the close of business on the fifth business day preceding
the day on which the payment is due in order to determine the number of
Annuity Units represented by the first payment. This number of Annuity Units
remains fixed during the Annuity Period, and in each subsequent month the
dollar amount of the Annuity payment is determined by multiplying this fixed
number of Annuity Units by the then current Annuity Unit value.
<PAGE>
G. Date and Time of Annuity Payments
The Annuity payments will be made on the first day of each month following
selection. The Annuity Unit value used in calculating the amount of the
Annuity payments will be based on an Annuity Unit value determined as of the
close of business on a day not more than the fifth business day preceding the
date of the Annuity payment.
<PAGE>
- - -------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- - -------------------------------------------------------------------------------
TO HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO AND TO THE
OWNERS OF UNITS OF INTEREST THEREIN:
- - -------------------------------------------------------------------------------
We have audited the accompanying statement of assets and liabilities of
Hartford Life Insurance Company Separate Account Two as of December 31, 1994,
and the related statement of operations for the year then ended and statement of
changes in net assets for each of the two years in the period then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Hartford Life Insurance
Company Separate Account Two as of December 31, 1994, the results of its
operations for the year then ended and the changes in its net assets for each of
the two years in the period then ended in conformity with generally accepted
accounting principles.
Hartford, Connecticut
February 10, 1995 Arthur Andersen LLP
37
<PAGE>
- - -------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- - -------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS & LIABILITIES
DECEMBER 31, 1994
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY U.S. GOVERNMENT
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND MONEY MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ------------ -------------- --------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund, Inc.
Shares 172,229,725
Cost $ 176,180,319
Market Value........................................ $159,488,170 -- -- -- --
Hartford Stock Fund, Inc.
Shares 230,631,116
Cost $ 615,215,162
Market Value........................................ -- $646,103,848 -- -- --
HVA Money Market Fund, Inc.
Shares 241,684,272
Cost $ 241,684,272
Market Value........................................ -- -- $241,684,272 -- --
Hartford Advisers Fund, Inc.
Shares 1,125,337,358
Cost $1,820,221,520
Market Value........................................ -- -- -- $1,801,079,934 --
Hartford U.S. Government Money Market Fund, Inc.
Shares 1,211,232
Cost $ 1,211,232
Market Value........................................ -- -- -- -- $1,211,232
Hartford Aggressive Growth Fund, Inc.
Shares 221,151,687
Cost $ 581,410,587
Market Value........................................ -- -- -- -- --
Hartford Mortgage Securities Fund, Inc.
Shares 216,900,409
Cost $ 233,653,118
Market Value........................................ -- -- -- -- --
Hartford Index Fund, Inc.
Shares 62,005,461
Cost $ 85,135,111
Market Value........................................ -- -- -- -- --
Hartford International Opportunities Fund, Inc.
Shares 255,913,841
Cost $ 287,607,489
Market Value........................................ -- -- -- -- --
Hartford Dividend and Growth Fund, Inc.
Shares 30,033,209
Cost $ 30,342,155
Market Value........................................ -- -- -- -- --
Calvert Socially Responsive Series, Inc.
Shares 688,923
Cost $ 985,530
Market Value........................................ -- -- -- -- --
Smith Barney Shearson Daily Dividend Fund, Inc.
Shares 645,916
Cost $ 645,916
Market Value........................................ -- -- -- -- --
Smith Barney Shearson Appreciation Fund, Inc.
Shares 11,551
Cost $ 74,714
Market Value........................................ -- -- -- -- --
Smith Barney Shearson Government and Agencies Fund
Shares 48,101
Cost $ 48,101
Market Value........................................ -- -- -- -- --
Dividends Receivable.................................. -- -- -- -- --
Due from Hartford Life Insurance Company.............. 67,001 493,463 -- 694,443 9,658
Receivable from fund shares sold...................... -- -- 416,033 -- --
------------ ------------ ------------ -------------- -----------
Total Assets.......................................... 159,555,171 646,597,311 242,100,305 1,801,774,377 1,220,890
------------ ------------ ------------ -------------- -----------
LIABILITIES:
Due to Hartford Life Insurance Company................ -- -- 411,062 -- --
Payable for fund shares purchased..................... 67,024 494,846 -- 693,465 9,289
------------ ------------ ------------ -------------- -----------
Total Liabilities..................................... 67,024 494,846 411,062 693,465 9,289
------------ ------------ ------------ -------------- -----------
Net Assets (variable annuity contract liabilities).... $159,488,147 $646,102,465 $241,689,243 $1,801,080,912 $1,211,601
------------ ------------ ------------ -------------- -----------
------------ ------------ ------------ -------------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
28
<PAGE>
<TABLE>
<CAPTION>
SMITH
BARNEY
SHEARSON
SMITH BARNEY SMITH BARNEY GOVERNMENT
DIVIDEND SHEARSON SHEARSON AND
AGGRESSIVE MORTGAGE INTERNATIONAL AND GROWTH SOCIALLY DAILY DIVIDEND APPRECIATION AGENCIES
GROWTH FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND FUND RESPONSIVE FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ --------------- ----------- ------------------ ----------- --------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
$632,467,289 -- -- -- -- -- -- -- --
-- $213,512,425 -- -- -- -- -- -- --
-- -- $94,384,095 -- -- -- -- -- --
-- -- -- $300,880,462 -- -- -- -- --
-- -- -- -- $29,855,712 -- -- -- --
-- -- -- -- -- $ 992,739 -- -- --
-- -- -- -- -- -- $ 645,916 -- --
-- -- -- -- -- -- -- $117,210 --
-- -- -- -- -- -- -- -- $48,101
-- -- -- -- -- 31,623 -- -- 8
670,264 -- -- 34,067 169,314 7,760 -- -- --
-- 72,115 122,769 -- -- -- 1,130 30 195
------------ --------------- ----------- ------------------ ----------- --------------- -------------- -------------- -----------
633,137,553 213,584,540 94,506,864 300,914,529 30,025,026 1,032,122 647,046 117,240 48,304
------------ --------------- ----------- ------------------ ----------- --------------- -------------- -------------- -----------
-- 67,937 122,812 -- -- -- 1,130 19 211
668,624 -- -- 34,906 169,722 7,784 -- -- --
------------ --------------- ----------- ------------------ ----------- --------------- -------------- -------------- -----------
668,624 67,937 122,812 34,906 169,722 7,784 1,130 19 211
------------ --------------- ----------- ------------------ ----------- --------------- -------------- -------------- -----------
$632,468,929 $213,516,603 $94,384,052 $300,879,623 $29,855,304 $1,024,338 $ 645,916 $117,221 $48,093
------------ --------------- ----------- ------------------ ----------- --------------- -------------- -------------- -----------
------------ --------------- ----------- ------------------ ----------- --------------- -------------- -------------- -----------
</TABLE>
29
<PAGE>
- - -------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- - -------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1994
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ ---------- ---------------
<S> <C> <C> <C>
DEFERRED ANNUITY CONTRACTS IN THE ACCUMULATION PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Bond Fund Qualified 1.00%............................................................. 386,894 $ 3.081636 $ 1,192,266
Bond Fund Non-Qualified 1.00%......................................................... 2,747,334 3.034781 8,337,557
Bond Fund 1.25%....................................................................... 85,397,157 1.606681 137,205,990
Bond Fund .25%........................................................................ 130,046 1.048603 136,367
Stock Fund Qualified 1.00%............................................................ 1,015,114 4.177385 4,240,521
Stock Fund Non-Qualified 1.00%........................................................ 3,743,893 3.994491 14,954,948
Stock Fund 1.25%...................................................................... 248,563,344 2.180436 541,976,464
Stock Fund .25%....................................................................... 1,226,382 1.123066 1,377,308
Money Market Fund Qualified 1.00%..................................................... 1,193,859 2.261057 2,699,383
Money Market Fund Non-Qualified 1.00%................................................. 14,166,909 2.262124 32,047,305
Money Market Fund 1.25%............................................................... 138,396,161 1.462471 202,400,371
Money Market Fund .25%................................................................ 186,512 1.064380 198,520
Advisers Fund Qualified 1.00%......................................................... 4,660,625 2.959828 13,794,648
Advisers Fund Non-Qualified 1.00%..................................................... 15,416,951 2.959828 45,631,522
Advisers Fund 1.25%................................................................... 858,013,683 1.990804 1,708,137,073
Advisers Fund .25%.................................................................... 1,344,430 1.088404 1,463,283
U.S. Government Money Market Fund Qualified 1.00%..................................... 20,769 1.810814 37,609
U.S. Government Money Market Fund 1.25%............................................... 48,432 1.408971 68,240
Aggressive Growth Fund Qualified 1.00%................................................ 938,226 4.368563 4,098,699
Aggressive Growth Fund Non-Qualified 1.00%............................................ 2,983,029 4.366578 13,025,628
Aggressive Growth Fund 1.25%.......................................................... 220,935,895 2.615288 577,810,995
Aggressive Growth Fund .25%........................................................... 2,691,355 1.233577 3,319,994
Mortgage Securities Fund Qualified 1.00%.............................................. 1,431,871 2.084988 2,985,434
Mortgage Securities Fund Non-Qualified 1.00%.......................................... 11,296,904 2.084988 23,553,908
Mortgage Securities Fund 1.25%........................................................ 112,417,272 1.636791 184,003,579
Mortgage Securities Fund .25%......................................................... 105,417 1.037405 109,360
Index Fund 1.25%...................................................................... 50,799,238 1.749714 88,884,138
Index Fund .25%....................................................................... 205,039 1.099141 225,367
International Opportunities Fund Qualified 1.00%...................................... 556,691 1.194697 665,077
International Opportunities Fund Non-Qualified 1.00%.................................. 2,439,349 1.194654 2,914,179
International Opportunities Fund 1.25%................................................ 246,259,349 1.181321 290,911,341
International Opportunities Fund .25%................................................. 1,080,735 1.295734 1,400,346
Dividend and Growth Fund Qualified 1.00%.............................................. 36,668 1.011382 37,085
Dividend and Growth Fund Non-Qualified 1.00%.......................................... 335,338 1.011382 339,155
Dividend and Growth Fund 1.25%........................................................ 29,145,963 1.009335 29,418,040
Dividend and Growth Fund .25%......................................................... 59,971 1.017552 61,024
Smith Barney Shearson Daily Dividend, Inc. Qualified 1.00%............................ 96,101 2.458044 236,221
Smith Barney Shearson Daily Dividend, Inc. Non-Qualified 1.00%........................ 161,059 2.543759 409,695
Smith Barney Shearson Appreciation Fund, Inc. Qualified 1.00%......................... 23,909 4.902844 117,221
Smith Barney Shearson Government and Agencies, Inc. Qualified 1.00%................... 21,677 2.218682 48,093
---------------
Sub-total Individual Sub-Accounts..................................................... 3,940,473,954
---------------
GROUP SUB-ACCOUNTS:
Bond Fund Qualified 1.00% QP.......................................................... 1,668,221 3.609357 6,021,205
Bond Fund 1.25% DCII.................................................................. 1,122,768 3.499674 3,929,323
Bond Fund .15% DCII................................................................... 305,816 3.261226 997,336
Stock Fund Qualified 1.00% QP......................................................... 4,283,748 6.985679 29,924,886
Stock Fund Qualified .825% QP......................................................... 1,435,480 5.600682 8,039,665
Stock Fund Non-Qualified 1.00% NQ..................................................... 88,837 5.481096 486,923
Stock Fund Non-Qualified .825% NQ..................................................... 890,205 5.610519 4,994,510
Stock Fund 1.25% DCII................................................................. 3,884,750 6.771260 26,304,653
Stock Fund .15% DCII.................................................................. 858,147 5.201059 4,463,271
Money Market Fund Qualified .375% QP.................................................. 2,095 2.802645 5,871
Money Market Fund 1.25% DCII.......................................................... 905,063 2.511791 2,273,329
Money Market Fund .15% DCII........................................................... 265,801 2.416025 642,182
Advisers Fund 1.25% DCII.............................................................. 8,279,212 2.875723 23,808,720
Advisers Fund .15% DCII............................................................... 528,996 3.268187 1,728,857
U.S. Government Money Market Fund 1.25% DCII.......................................... 483,107 1.758459 849,524
U.S. Government Money Market Fund .15% DCII........................................... 37,301 2.003628 74,738
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
30
<PAGE>
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ ---------- ---------------
GROUP SUB-ACCOUNTS -- (CONTINUED)
<S> <C> <C> <C>
Aggressive Growth Fund 1.25% DCII..................................................... 6,922,578 $4.256870 $29,468,515
Aggressive Growth Fund .15% DCII...................................................... 599,956 4.785486 2,871,082
Mortgage Securities Fund 1.25% DCII................................................... 993,777 2.033647 2,020,991
Mortgage Securities Fund .15% DCII.................................................... 78,285 2.268923 177,623
Index Fund 1.25% DCII................................................................. 2,375,877 1.737856 4,128,933
Index Fund .15% DCII.................................................................. 216,621 1.875849 406,348
International Opportunities Fund 1.25% DCII........................................... 3,640,068 1.181488 4,300,697
International Opportunities Fund .15% DCII............................................ 333,919 1.241199 414,460
Socially Responsive Fund 1.25% DCII................................................... 692,817 1.417414 982,008
---------------
Sub-total Group Sub-Accounts.......................................................... 159,315,650
---------------
TOTAL ACCUMULATION PERIOD............................................................... 4,099,789,604
---------------
ANNUITY CONTRACTS IN THE ANNUITY PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Bond Fund Non-Qualified 1.00%......................................................... 704 3.034781 2,138
Bond Fund 1.25%....................................................................... 129,039 1.606681 207,325
Stock Fund Non-Qualified 1.00%........................................................ 7,925 3.994491 31,657
Stock Fund 1.25%...................................................................... 191,847 2.180436 418,310
Money Market Fund Qualified 1.00%..................................................... 20,342 2.261057 45,994
Money Market Fund Non-Qualified 1.00%................................................. 129,600 2.262124 293,172
Money Market Fund 1.25%............................................................... 434,331 1.462471 635,196
Advisers Fund Qualified 1.00%......................................................... 5,523 2.959828 16,347
Advisers Fund Non-Qualified 1.00%..................................................... 75,862 2.959828 224,538
Advisers Fund 1.25%................................................................... 786,775 1.990804 1,566,314
U.S. Government Money Market Fund Qualified 1.00%..................................... 25,034 1.810814 45,331
Aggressive Growth Fund Non-Qualified 1.00%............................................ 5,273 4.366578 23,026
Aggressive Growth Fund 1.25%.......................................................... 53,426 2.615288 139,725
Mortgage Securities Fund Qualified 1.00%.............................................. 8,740 2.084988 18,223
Mortgage Securities Fund Non-Qualified 1.00%.......................................... 118,956 2.084988 248,021
Mortgage Securities Fund 1.25%........................................................ 82,741 1.636791 135,429
Index Fund 1.25%...................................................................... 26,043 1.749714 45,568
International Opportunities Fund 1.25%................................................ 132,984 1.181321 157,097
---------------
Sub-total Individual Sub-Accounts..................................................... 4,253,411
---------------
GROUP SUB-ACCOUNTS:
Bond Fund Qualified 1.00% QP.......................................................... 91,006 3.609357 328,473
Bond Fund 1.25% DCII.................................................................. 308,096 3.499674 1,078,236
Bond Fund 1.00% DCII.................................................................. 14,445 3.595086 51,932
Stock Fund Qualified 1.00% QP......................................................... 233,773 6.985679 1,633,062
Stock Fund Qualified .825% QP......................................................... 54,011 5.600682 302,500
Stock Fund Non-Qualified 1.00% NQ..................................................... 728 5.481096 3,988
Stock Fund Non-Qualified .825% NQ..................................................... 65,133 5.610519 365,428
Stock Fund 1.25% DCII................................................................. 964,557 6.771260 6,531,268
Stock Fund 1.00% DCII................................................................. 4,948 6.963798 34,458
Stock Fund .15% DCII.................................................................. 3,585 5.201059 18,646
Money Market Fund 1.25% DCII.......................................................... 178,327 2.511791 447,919
Advisers Fund 1.25% DCII.............................................................. 1,609,483 2.875723 4,628,427
Advisers Fund .15% DCII............................................................... 24,841 3.268187 81,184
U.S. Government Money Market Fund 1.25% DCII.......................................... 77,431 1.758459 136,159
Aggressive Growth Fund 1.25% DCII..................................................... 402,001 4.256870 1,711,264
Mortgage Securities Fund 1.25% DCII................................................... 129,833 2.033647 264,035
Index Fund 1.25% DCII................................................................. 399,168 1.737856 693,697
International Opportunities Fund 1.25% DCII........................................... 98,542 1.181488 116,426
Socially Responsive Fund 1.25% DCII................................................... 29,864 1.417414 42,330
---------------
Sub-total Group Sub-Accounts.......................................................... 18,469,432
---------------
TOTAL ANNUITY PERIOD.................................................................... 22,722,843
---------------
GRAND TOTAL............................................................................. $ 4,122,512,447
---------------
---------------
</TABLE>
31
<PAGE>
- - -------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- - -------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY U.S. GOVERNMENT
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND MONEY MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------- ------------ -------------- -----------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ 10,129,126 $ 13,298,486 $ 8,730,379 $ 57,979,079 $ 42,603
EXPENSES:
Mortality and expense undertakings.... (1,981,904) (7,426,331) (2,661,371) (21,578,163) (13,685)
------------- ------------- ------------ -------------- --------
Net investment income (loss)........ 8,147,222 5,872,155 6,069,008 36,400,916 28,918
------------- ------------- ------------ -------------- --------
Capital gains income.................. 3,020,067 34,722,942 -- 47,447,226 --
------------- ------------- ------------ -------------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... (421,917) (203,916) -- 414,315 --
Net unrealized appreciation
(depreciation) of investments during
the period........................... (19,519,205) (59,765,259) -- (154,737,742) --
------------- ------------- ------------ -------------- --------
Net gains (losses) on investments... (19,941,122) (59,969,175) -- (154,323,427) --
------------- ------------- ------------ -------------- --------
Net increase (decrease) in net
assets resulting from operations... $ (8,773,833) $(19,374,078) $ 6,069,008 $ (70,475,285) $ 28,918
------------- ------------- ------------ -------------- --------
------------- ------------- ------------ -------------- --------
<FN>
* From Inception, March 8, 1994, to December 31, 1994.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
32
<PAGE>
<TABLE>
<CAPTION>
SMITH
SMITH BARNEY
BARNEY SHEARSON
SHEARSON SMITH BARNEY GOVERNMENT
SOCIALLY DAILY SHEARSON AND
AGGRESSIVE MORTGAGE INTERNATIONAL DIVIDEND AND RESPONSIVE DIVIDEND APPRECIATION AGENCIES
GROWTH FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- --------------- ------------- ------------------ ------------ ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 2,216,268 $ 15,801,876 $ 2,259,862 $ 3,567,586 $ 419,546 $ 31,623 $24,231 $ 1,969 $1,757
(6,812,975) (2,897,906) (1,104,316) (3,151,951) (135,382) (11,158) (6,845) (1,226) (488)
------------- --------------- ------------- ------------------ ------------ ----------- ---------- ------------ -----------
(4,596,707) 12,903,970 1,155,546 415,635 284,164 20,465 17,386 743 1,269
------------- --------------- ------------- ------------------ ------------ ----------- ---------- ------------ -----------
42,093,901 1,176,728 -- -- -- -- -- 6,550 --
------------- --------------- ------------- ------------------ ------------ ----------- ---------- ------------ -----------
316,913 (2,117,604) 177,595 (38,119) 1,622 (180) -- (476) --
(28,599,970) (19,218,450) (1,319,890) (9,418,006) (486,442) (59,462) -- (9,210) --
------------- --------------- ------------- ------------------ ------------ ----------- ---------- ------------ -----------
(28,283,057) (21,336,054) (1,142,295) (9,456,125) (484,820) (59,642) -- (9,686) --
------------- --------------- ------------- ------------------ ------------ ----------- ---------- ------------ -----------
$ 9,214,137 $ (7,255,356) $ 13,251 $(9,040,490) $(200,656) $(39,177) $17,386 $(2,393) $1,269
------------- --------------- ------------- ------------------ ------------ ----------- ---------- ------------ -----------
------------- --------------- ------------- ------------------ ------------ ----------- ---------- ------------ -----------
</TABLE>
33
<PAGE>
- - -------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- - -------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY U.S. GOVERNMENT
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND MONEY MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 8,147,222 $ 5,872,155 $ 6,069,008 $ 36,400,916 $ 28,918
Capital gains income.................. 3,020,067 34,722,942 -- 47,447,226 --
Net realized gain (loss) on security
transactions......................... (421,917) (203,916) -- 414,315 --
Net unrealized appreciation
(depreciation) of investments during
the period........................... (19,519,205) (59,765,259) -- (154,737,742) --
------------- ------------- ------------- --------------- -----------------
Net increase (decrease) in net assets
resulting from operations............ (8,773,833) (19,374,078) 6,069,008 (70,475,285) 28,918
------------- ------------- ------------- --------------- -----------------
UNIT TRANSACTIONS:
Purchases............................. 29,721,918 105,127,448 72,433,601 419,190,064 205,153
Net transfers......................... (10,176,062) 20,445,965 10,951,538 14,104,761 (151,291)
Surrenders............................ (11,477,200) (25,527,779) (33,930,464) (88,886,489) (65,287)
Net annuity transactions.............. 284,001 1,000,538 596,459 2,114,613 (29,641)
------------- ------------- ------------- --------------- -----------------
Net increase (decrease) in net assets
resulting from unit transactions..... 8,352,657 101,046,172 50,051,134 346,522,949 (41,066)
------------- ------------- ------------- --------------- -----------------
Total increase (decrease) in net
assets............................... (421,176) 81,672,094 56,120,142 276,047,664 (12,148)
NET ASSETS:
Beginning of period................... 159,909,323 564,430,371 185,569,101 1,525,033,248 1,223,749
------------- ------------- ------------- --------------- -----------------
End of period......................... $159,488,147 $646,102,465 $241,689,243 $1,801,080,912 $1,211,601
------------- ------------- ------------- --------------- -----------------
------------- ------------- ------------- --------------- -----------------
- - -------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1993
- - -------------------------------------------------------------------------------
<CAPTION>
MONEY U.S. GOVERNMENT
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND MONEY MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 7,572,358 $ 8,308,344 $ 2,813,416 $ 25,701,741 $ 18,672
Capital gains income.................. 99,084 18,638,665 -- 20,817,465 --
Net realized gain (loss) on security
transactions......................... 215,618 447,050 -- 182,805 --
Net unrealized appreciation
(depreciation) of investments during
the period........................... 1,690,700 30,785,479 -- 65,119,250 --
------------- ------------- ------------- --------------- -----------------
Net increase (decrease) in net assets
resulting from operations............ 9,577,760 58,179,538 2,813,416 111,821,261 18,672
------------- ------------- ------------- --------------- -----------------
UNIT TRANSACTIONS:
Purchases............................. 64,035,095 163,937,277 83,799,945 714,972,050 194,811
Net transfers......................... 4,924,354 25,227,185 (35,854,970) 105,616,425 (65,248)
Surrenders............................ (6,989,348) (15,906,440) (25,784,152) (50,149,218) (212,373)
Net annuity transactions.............. 343,986 669,968 118,488 968,114 72,905
------------- ------------- ------------- --------------- -----------------
Net increase (decrease) in net assets
resulting from unit transactions..... 62,314,087 173,927,990 22,279,311 771,407,371 (9,905)
------------- ------------- ------------- --------------- -----------------
Total increase (decrease) in net
assets............................... 71,891,847 232,107,528 25,092,727 883,228,632 8,767
NET ASSETS:
Beginning of period................... 88,017,476 332,322,843 160,476,376 641,804,616 1,214,982
------------- ------------- ------------- --------------- -----------------
End of period......................... $159,909,323 $564,430,371 $185,569,101 $1,525,033,248 $1,223,749
------------- ------------- ------------- --------------- -----------------
------------- ------------- ------------- --------------- -----------------
<FN>
* From Inception, March 8, 1994, to December 31, 1994.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
34
<PAGE>
<TABLE>
<CAPTION>
SMITH
BARNEY
SMITH BARNEY SMITH SHEARSON
SHEARSON BARNEY GOVERNMENT
INTERNATIONAL SOCIALLY DAILY SHEARSON AND
AGGRESSIVE MORTGAGE OPPORTUNITIES DIVIDEND AND RESPONSIVE DIVIDEND APPRECIATION AGENCIES
GROWTH FUND SECURITIES FUND INDEX FUND FUND GROWTH FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- --------------- ------------- --------------- ------------ ------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ (4,596,707) $ 12,903,970 $ 1,155,546 $ 415,635 $ 284,164 $ 20,465 $ 17,386 $ 743 $ 1,269
42,093,901 1,176,728 -- -- -- -- -- 6,550 --
316,913 (2,117,604) 177,595 (38,119) 1,622 (180) -- (476) --
(28,599,970) (19,218,450) (1,319,890) (9,418,006) (486,442) (59,462) -- (9,210) --
------------- --------------- ------------- --------------- ------------ ------------- ------------ ----------- ----------
9,214,137 (7,255,356) 13,251 (9,040,490) (200,656) (39,177) 17,386 (2,393) 1,269
------------- --------------- ------------- --------------- ------------ ------------- ------------ ----------- ----------
147,740,784 19,118,960 11,954,835 93,762,262 13,185,613 376,701 -- 50 --
33,684,129 (49,453,490) (438,563) 55,977,196 17,422,326 (75,712) (18,624) 2,681 --
(18,517,067) (20,146,010) (3,246,522) (7,306,583) (551,979) (19,945) (84,827) (2,515) (6,354)
396,915 137,102 59,473 (104,557) -- 4,610 -- -- --
------------- --------------- ------------- --------------- ------------ ------------- ------------ ----------- ----------
163,304,761 (50,343,438) 8,329,223 142,328,318 30,055,960 285,654 (103,451) 216 (6,354)
------------- --------------- ------------- --------------- ------------ ------------- ------------ ----------- ----------
172,518,898 (57,598,794) 8,342,474 133,287,828 29,855,304 246,477 (86,065) (2,177) (5,085)
459,950,031 271,115,397 86,041,578 167,591,795 -- 777,861 731,981 119,398 53,178
------------- --------------- ------------- --------------- ------------ ------------- ------------ ----------- ----------
$632,468,929 $213,516,603 $94,384,052 $300,879,623 $29,855,304 $1,024,338 $ 645,916 $117,221 $48,093
------------- --------------- ------------- --------------- ------------ ------------- ------------ ----------- ----------
------------- --------------- ------------- --------------- ------------ ------------- ------------ ----------- ----------
<CAPTION>
SMITH
BARNEY
SMITH SHEARSON
SMITH BARNEY SMITH BARNEY BARNEY GOVERNMENT
INTERNATIONAL SOCIALLY SHEARSON SHEARSON SHEARSON AND
AGGRESSIVE MORTGAGE OPPORTUNITIES RESPONSIVE DAILY APPRECIATION HIGH INCOME AGENCIES
GROWTH FUND SECURITIES FUND INDEX FUND FUND FUND DIVIDEND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- --------------- ------------- --------------- ------------ ------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1,600,110 $ 12,652,275 $ 799,021 $ (291,109) $ 14,203 $ 13,390 $ 459 $ 1,816 $ 901
3,197,599 -- -- -- -- -- 3,734 -- --
1,188,667 109,955 25,192 (11,820) (75) -- 234 (1,362) --
49,594,313 (1,569,545) 4,591,529 23,588,342 26,706 -- 3,565 4,504 --
------------- --------------- ------------- --------------- ------------ ------------- ------------ ----------- ----------
55,580,689 11,192,685 5,415,742 23,285,413 40,834 13,390 7,992 4,958 901
------------- --------------- ------------- --------------- ------------ ------------- ------------ ----------- ----------
195,275,139 95,499,459 30,471,477 67,601,208 302,593 -- 50 -- --
22,666,403 (19,922,573) 879,825 46,857,348 1,511 (89,601) -- -- --
(8,251,678) (18,992,076) (2,314,111) (1,636,768) (44,747) (5,845) (1,830) (55,563) (4,573)
576,660 (52,421) 30,208 268,086 4,631 -- -- -- --
------------- --------------- ------------- --------------- ------------ ------------- ------------ ----------- ----------
210,266,524 56,532,389 29,067,399 113,089,874 263,988 (95,446) (1,780) (55,563) (4,573)
------------- --------------- ------------- --------------- ------------ ------------- ------------ ----------- ----------
265,847,213 67,725,074 34,483,141 136,375,287 304,822 (82,056) 6,212 (50,605) (3,672)
194,102,818 203,390,323 51,558,437 31,216,508 473,039 814,037 113,186 50,605 56,850
------------- --------------- ------------- --------------- ------------ ------------- ------------ ----------- ----------
$459,950,031 $271,115,397 $86,041,578 $167,591,795 $ 777,861 $ 731,981 $ 119,398 $ -- $53,178
------------- --------------- ------------- --------------- ------------ ------------- ------------ ----------- ----------
------------- --------------- ------------- --------------- ------------ ------------- ------------ ----------- ----------
</TABLE>
35
<PAGE>
- - -------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- - -------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
- - -------------------------------------------------------------------------------
1. ORGANIZATION:
Separate Account Two (the Account) is a separate investment account within
Hartford Life Insurance Company (the Company) and is registered with the
Securities and Exchange Commission (SEC) as a unit investment trust under the
Investment Company Act of 1940, as amended. Both the Company and the Account are
subject to supervision and regulation by the Department of Insurance of the
State of Connecticut and the SEC.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting principles
in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividend and capital
gains income are accrued as of the ex-dividend date.
b) SECURITY VALUATION--The investment in shares of the Hartford, Shearson
and Calvert Socially Responsive Series mutual funds are valued at the
closing net asset value per share as determined by the appropriate Fund
as of December 31, 1994.
c) FEDERAL INCOME TAXES--The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as an
insurance company under the Internal Revenue Code. Under current law, no
federal income taxes are payable with respect to the operations of the
Account.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
a) MORTALITY AND EXPENSE UNDERTAKINGS--The Company, as issuer of variable
annuity contracts, provides the mortality and expense undertakings and,
with respect to the Account, receives a maximum annual fee of 1.25% of
the Account's average daily net assets.
b) DEDUCTION OF ANNUAL MAINTENANCE FEE--Annual maintenance fees are
deducted through termination of units of interest from applicable
contract owners' accounts, in accordance with the terms of the contracts.
36
<PAGE>
ARTHUR ANDERSON LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life Insurance Company and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Hartford
Life Insurance Company (a Connecticut corporation and wholly-owned subsidiary
of Hartford Life and Accident Insurance Company) and subsidiaries as of
December 31, 1994 and 1993, and the related consolidated statements of income,
stockholder's equity and cash flow for each of the three years in the period
ended December 31, 1994. These consolidated financial statements and the
schedules referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Hartford Life Insurance Company and subsidiaries as of December
31, 1994 and 1993, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 1994 in
conformity with generally accepted accounting principles.
As discussed in the accompanying notes to the consolidated financial
statements, the Company adopted new accounting standards promulgated by the
Financial Accounting Standards Board, changing its methods of accounting,
as of January 1, 1994, for debt and equity securities, and, effective
January 1, 1992, for postretirement benefits other than pensions and
postemployment benefits.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedules listed in the
Index to Consolidated Financial Statements and Schedules are presented for
purposes of complying with the Securities and Exchange Commission's rules
and are not a required part of the basic consolidated financial statements.
These schedules have been subjected to the auditing procedures applied in
the audits of the basic consolidated financial statements and, in our
opinion, fairly state in all material respects the financial data required to
be set forth therein in relation to the basic consolidated financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
January 30, 1995
F-2
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in millions)
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES:
Premiums and other considerations $1,100 $ 747 $ 259
Net investment income 1,292 1,051 907
Net realized gains on investments 7 16 5
---------- ---------- ----------
2,399 1,814 1,171
BENEFITS, CLAIMS AND EXPENSES:
Benefits, claims and claim
adjustment expenses 1,405 1,046 797
Amortization of deferred policy
acquisition costs 145 113 55
Dividends to policyholders 419 227 47
Other insurance expenses 227 210 138
---------- ---------- ----------
2,196 1,596 1,037
INCOME BEFORE INCOME TAX AND
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES 203 218 134
Income tax expense 65 75 45
---------- ---------- ----------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES 138 143 89
Cumulative effect of changes in
accounting principles net of tax benefit of $7 -- -- (13)
---------- ---------- ----------
NET INCOME $ 138 $ 143 $ 76
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
As of December 31,
1994 1993
---------- ----------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities, available for sale, at fair value
in 1994 and at amortized cost in 1993 (amortized cost,
$14,464 in 1994; fair value, $12,845 in 1993) $ 13,429 $ 12,597
Equity securities, at fair value 68 90
Mortgage loans, at outstanding principal balance 316 228
Policy loans, at outstanding balance 2,614 1,397
Other investments 107 40
---------- ----------
16,534 14,352
Cash 20 1
Premiums and amounts receivable 160 327
Reinsurance recoverable 5,466 5,532
Accrued investment income 378 241
Deferred policy acquisition costs 1,809 1,334
Deferred income tax 590 114
Other assets 83 101
Separate account assets 22,809 16,284
---------- ----------
$ 47,849 $ 38,286
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Future policy benefits $ 1,890 $ 1,659
Other policyholder funds 21,328 18,234
Other liabilities 1,000 916
Separate account liabilities 22,809 16,284
---------- ----------
47,027 37,093
Common stock - authorized 1,000 shares, $5,690
par value,issued and outstanding 1,000 shares 6 6
Capital surplus 826 676
Unrealized losses on securities, net of tax (654) (5)
Retained earnings 644 516
---------- ----------
822 1,193
---------- ----------
$ 47,849 $ 38,286
---------- ----------
---------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(in millions)
<TABLE>
<CAPTION>
Unrealized
Gains (Losses) Total
Common Capital On Retained Stockholder's
Stock Surplus Securities Earnings Equity
------ ------- -------------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1991 $6 $439 $ 1 $297 $ 743
Net Income 76 76
Capital Contribution - 25 - 25
Excess of assets over liabilities on
reinsurance assumed from affiliate - 34 - - 34
Change in unrealized losses on equity
securities, net of tax - - (1) - (1)
------ ------- -------------- -------- -------------
BALANCE, DECEMBER 31, 1992 6 498 0 373 877
------ ------- -------------- -------- -------------
Net Income - - - 143 143
Capital Contribution - 180 - - 180
Excess of assets over liabilities on
reinsurance assumed from affiliate - (2) - - (2)
Change in unrealized losses on equity
securities, net of tax - - (5) - (5)
------ ------- -------------- -------- -------------
BALANCE, DECEMBER 31, 1993 6 676 (5) 516 1,193
------ ------- -------------- -------- -------------
Net Income - - - 136 138
Capital Contribution - 150 - - 150
Dividends Paid - - - (10) (10)
Change in unrealized losses on securities,
net of tax* - - (649) - (649)
------ ------- -------------- -------- -------------
BALANCE, DECEMBER 31, 1994 $6 $826 $(654) $644 $ 822
------ ------- -------------- -------- -------------
------ ------- -------------- -------- -------------
<FN>
* The 1994 change in unrealized losses on securities, net of tax, includes a
gain of $91 due to adoption of SFAS #115 as discussed in note 1b to the
consolidated financial statements.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH-FLOW
(in millions)
<TABLE>
<CAPTION>
For the Years Ended
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
NET INCOME $ 138 $ 143 $ 76
Cumulative effect of accounting changes - - 13
Adjustments to net income:
Net realized investment gains before tax (7) (16) (5)
Net policyholder investment losses (gains) before tax 5 (15) (15)
Net deferred policy acquisition costs (441) (292) (278)
Net amortization of premium (discount) on fixed maturities 41 2 (16)
Deferred income tax benefits (128) (121) (14)
(Increase) decrease in premiums and amounts receivable 10 (28) (14)
Increase in accrued investment income (106) (4) (116)
Decrease (increase) in other assets 101 (36) 88
Decrease (increase) in reinsurance recoverable 75 (121) 0
Increase in liabiity for future policy benefits 224 360 527
Increase in other liabilities 191 176 92
-------- -------- --------
CASH PROVIDED BY OPERATING ACTIVITIES 103 48 338
-------- -------- --------
INVESTING ACTIVITIES:
Purchases of fixed maturity investments (9,127) (12,406) (8,948)
Proceeds from sales of fixed maturity investments 5,708 8,813 5,728
Maturities and principal paydowns of long-term investments 1,931 2,596 1,207
Net purchases of other investments (1,338) (206) (106)
Net sales (purchases) of short-term investments 135 (564) 221
-------- -------- --------
CASH USED FOR INVESTING ACTIVITIES (2,691) (1,767) (1,898)
-------- -------- --------
FINANCING ACTIVITIES:
Net receipts from investment and UL-type contracts
credited to policyholder account balances 2,467 1,513 1,512
Capital contribution 150 180 25
Excess of assets over liabilities on reinsurance
assumed from affiliate - - 34
Dividends paid (10) - -
-------- -------- --------
CASH PROVIDED BY FINANCING ACTIVITIES 2,607 1,693 1,571
-------- -------- --------
NET INCREASE (DECREASE) IN CASH 19 (26) 11
Cash at beginning of period 1 27 16
-------- -------- --------
CASH AT END OF PERIOD $ 20 $ 1 $ 27
-------- -------- --------
-------- -------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in millions)
1. SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION:
These consolidated financial statements include Hartford Life
Insurance Company (the Company or HLIC) and its wholly-owned
subsidiaries, ITT Hartford Life and Annuity Company (ILA) and ITT
Hartford International Life Reassurance Corporation (HLR), formerly
American Skandia Life Reinsurance Corporation. HLIC is a wholly-owned
subsidiary of Hartford Life and Accident Insurance Company (HLA). The
Company is ultimately owned by Hartford Fire Insurance Company
(Hartford Fire), which is ultimately owned by ITT Hartford Group,
Inc., a subsidiary of ITT Corporation (ITT).
The consolidated financial statements are prepared in conformity with
generally accepted accounting principles which differ in certain
material respects from the accounting practices prescribed or
permitted by various insurance regulatory authorities.
Certain reclassifications have been made to prior year financial
statements to conform to current year classifications.
(b) CHANGES IN ACCOUNTING PRINCIPLES:
Effective January 1, 1992, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions" and SFAS No. 112,
"Employers' Accounting for Postemployment Benefits", using the
immediate recognition method. Accordingly, a cumulative adjustment
(through December 31, 1991) of $7 after-tax has been recognized at
January 1, 1992.
Effective January 1, 1994, the Company adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities".
The new standard requires, among other things, that fixed maturities
be classified as "held-to-maturity", "available-for-sale" or "trading"
based on the Company's intentions with respect to the ultimate
disposition of the security and its ability to effect those
intentions. The classification determines the appropriate accounting
carrying value (cost basis or fair value) and, in the case of fair
value, whether the adjustment impacts Stockholder's Equity directly or
is reflected in the Consolidated Statements of Income. Investments in
equity securities had previously been recorded at fair value with the
corresponding impact included in Stockholder's Equity. Under SFAS
No. 115, the Company's fixed maturities are classified as "available
for sale" and accordingly, these investments are reflected at fair
value with the corresponding impact included as a component of
Stockholder's Equity designated as "Unrealized Loss on Securities, Net
of Tax." As with the underlying investment security, unrealized gains
and losses on derivative financial instruments are considered in
determining the fair value of the portfolios. The impact of adoption
was an increase to stockholer's equity of $91.
The Company's cash flows were not impacted by these changes in
accounting principles.
(c) REVENUE RECOGNITION:
Revenues for universal life policies and investment products consist
of policy charges for the cost of insurance,
F-7
<PAGE>
policy administration and surrender charges assessed to policy account
balances. Premiums for traditional life insurance policies are
recognized as revenues when they are due from policyholders. Deferred
acquisition costs are amortized using the retrospective deposit method
for universal life and other types of contracts where the payment
pattern is irregular or surrender charges are a significant source of
profit and the prospective deposit method is used where investment
margins are the primary source of profit.
(d) FUTURE POLICY BENEFITS AND OTHER POLICYHOLDER FUNDS:
Liabilities for future policy benefits are computed by the net level
premium method using interest rate assumptions varying from 3% to 11%
and withdrawal, mortality and morbidity assumptions which vary by
plan, year of issue and policy durations and include a provision for
adverse deviation. Liabilities for universal life insurance and
investment products represent policy account balances before
applicable surrender charges.
(e) POLICYHOLDER REALIZED GAINS AND LOSSES:
Realized gains and losses on security transactions associated with the
Company's immediate participation guaranteed contracts are excluded
from revenues, since under the terms of the contracts the realized
gains and losses will be credited to policyholders in future years as
they are entitled to receive them.
(f) DEFERRED POLICY ACQUISITION COSTS:
Policy acquisition costs, including commissions and certain
underwriting expenses associated with acquiring traditional life
insurance products, are deferred and amortized over the lesser of the
estimated or actual contract life. For universal life insurance and
investment products, acquisition costs are being amortized generally
in proportion to the present value of expected gross profits from
surrender charges, investment, mortality and expense margins.
(g) INVESTMENTS:
Investments in fixed maturities are classified as available for sale
and accordingly reflected at fair value with the corresponding impact
of unrealized gains and losses, net of tax, included as a component of
stockholder's equity. Securities and derivative instruments, including
swaps, caps, floors, futures, forward commitments and collars, are
based on dealer quotes or quoted market prices for the same or similar
securities. While the Company has the ability and intent to hold all
fixed income securities until maturity, due to contract obligations,
interest rates and tax laws, portfolio activity occurs. These trades
are motivated by the need to optimally position investment portfolios
in reaction to movements in capital markets or distribution of
policyholder liabilities. When an other than temporary reduction in
the value of publicly traded securities occurs, the decrease is
reported as a realized loss and the carrying value is adjusted
accordingly. Real estate is carried at cost less accumulated
depreciation. Equity securities, which include common stocks, are
carried at market value with the after-tax difference from cost
reflected in stockholder's equity. Realized investment gains and
losses, after deducting life and pension policyholders share are
reported as a component of revenue and are determined on a specific
identification basis.
(h) DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses a variety of derivative financial instruments as part
of an overall risk management strategy. These instruments, including
swaps, caps, collars and exchange traded financial futures, are used
as a means of hedging exposure to price, foreign currency and/or
interest rate risk on planned investment purchases or existing assets
and liabilities. The Company does not hold or issue derivative
financial instruments for trading purposes. The Company's minimum
correlation threshold for hedge designation is 80%. If correlation,
which is assessed monthly and measured based on a rolling three month
average, falls below 80%, hedge accounting will be terminated. Gains
or losses on futures purchased in anticipation of the future receipt
of product cash flows are deferred and, at the time of the ultimate
purchase, reflected as a basis adjustment to the purchased asset.
Gains or losses on futures used in invested asset risk management are
deferred and adjusted into the basis of the hedged asset when the
contract is closed. The basis adjustments are amortized into
investment income over the remaining asset life.
F-8
<PAGE>
Open forward commitment contracts are marked to market through
Stockholder's Equity. Such contracts are recorded at settlement by
recording the purchase of the specified securities at the previously
committed price. Gains or losses resulting from the termination of the
forward commitment contracts before the delivery of the securities are
recognized immediately in the income statement as a component of
investment income.
The Company's accounting for interest rate swaps and purchased or
written caps, floors, and options used to manage risk is in accordance
with the concepts established in SFAS 80, "Accounting for Futures
Contracts", the American Institute of Certified Public Accountants
Statement of Position 86-2, "Accounting for Options" and various EITF
pronouncements, except for written options which are written in all
cases in conjunction with other assets and derivatives as part of an
overall risk management strategy. Such synthetic instruments are
accounted for as hedges. Derivatives, used as part of a risk
management strategy, must be designated at inception and have
consistency of terms between the synthetic instrument and the
financial instrument being replicated. Synthetic instrument
accounting, consistent with industry practice, provides that the
synthetic asset is accounted for like the financial instrument it is
intended to replicate. Interest rate swaps and purchased or written
caps, floors and options which fail to meet management criteria are
accounted for at fair market value with the impact reflected in
net income.
Interest rate swaps involve the periodic exchange of payments without
the exchange of underlying principal or notional amounts. Net payments
are recognized as an adjustment to income. Should the swap be
terminated, the gains or losses are adjusted into the basis of the
asset or liability and amortized over the remaining life. The basis of
the underlying asset or liability is adjusted to reflect changing
market conditions such as prepayment experience. Should the asset be
sold or liability terminated, the gains or losses on the terminated
position are immediately recognized in earnings. Interest rate swaps
purchased in anticipation of an asset purchase ("anticipatory
transaction") are recognized consistent with the underlying asset
components. That is, the settlement component is recognized in the
Statement of Income while the change in market is recognized as an
unrealized gain or loss.
Premiums paid on purchased floor or cap agreements and the premium
received on issued cap or floor agreements used for risk management,
as well as the net payments, are adjusted into the basis of the
applicable asset and amortized over the asset life. Gains or losses on
termination of such positions are adjusted into the basis of the asset
or liability and amortized over the remaining asset life.
Forward exchange contracts and foreign currency swaps are accounted
for in accordance with SFAS 52. Changes in the spot rate of
instruments designated as hedges of the net investment in a foreign
subsidiary are reflected in the cumulative translation adjustment
component of stockholder's equity.
(i) RELATED PARTY TRANSACTIONS:
Transactions of the Company with its parent and affiliates relate
principally to tax settlements, insurance coverage, rental and service
fees and payment of dividends and capital contributions. In addition,
certain affiliated insurance companies purchased group annuity
contracts from the Company to fund pension costs and claim annuities
to settle casualty claims.
Substantially all general insurance expenses related to the Company,
including rent expenses, are initially paid by Hartford Fire. Direct
expenses are allocated to the Company using specific identification
and indirect expenses are allocated using other applicable methods.
The rent paid to Hartford Fire for the space occupied by the Company
was $3 in 1994, 1993, and 1992 respectively. The Company expects to
pay rent of $3 in 1995, 1996, 1997, 1998, and 1999 respectively and
$60 thereafter, over the contract life of the lease.
See also Note (4) for the related party coinsurance agreements.
F-9
<PAGE>
2. INVESTMENTS
(a) COMPONENTS OF NET INVESTMENT INCOME:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------
1994 1993 1992
-------- ------ ------
<S> <C> <C> <C>
Interest income $ 1,247 $1,007 $ 894
Income from other investments 54 53 15
-------- ------ ------
GROSS INVESTMENT INCOME 1,301 1,060 909
Less: investment expenses 9 9 2
-------- ------ ------
NET INVESTMENT INCOME $ 1,292 $1,051 $ 907
-------- ------ ------
-------- ------ ------
- - -----------------------------------------------------------------------------
</TABLE>
(b) UNREALIZED GAINS (LOSSES) ON EQUITY SECURITIES:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------
1994 1993 1992
-------- ------ ------
<S> <C> <C> <C>
Gross unrealized gains $ 2 $ 3 $ 2
Gross unrealized losses (11) (11) (2)
Deferred income tax expense (benefit) (3) (3) 0
-------- ------ ------
NET UNREALIZED LOSSES AFTER TAX (6) (5) 0
Balance at beginning of year (5) 0 1
-------- ------ ------
CHANGE IN NET UNREALIZED LOSSES ON
EQUITY SECURITIES $ (1) $ (5) $ (1)
-------- ------ ------
-------- ------ ------
- - -----------------------------------------------------------------------------
</TABLE>
(c) UNREALIZED GAINS (LOSSES) ON FIXED MATURITIES:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------
1994 1993 1992
-------- ------ ------
<S> <C> <C> <C>
Gross unrealized gains $ 150 $ 538 $ 521
Gross unrealized losses (1,185) (290) (302)
-------- ------ ------
NET UNREALIZED (LOSSES) GAINS (1,035) 248 219
Unrealized losses credited to policyholders 37 0 0
Deferred income tax expense (benefit) (350) 87 75
-------- ------ ------
NET UNREALIZED (LOSSES) GAINS AFTER TAX (648) 161 144
Balance at beginning of year 161 144 297
-------- ------ ------
CHANGE IN NET UNREALIZED (LOSSES)
GAINS ON FIXED MATURITIES $ (809) $ 17 $(153)
-------- ------ ------
-------- ------ ------
- - -----------------------------------------------------------------------------
</TABLE>
(d) COMPONENTS OF NET REALIZED GAINS:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------
1994 1993 1992
-------- ------ ------
<S> <C> <C> <C>
Fixed maturities $ (34) $ (12) $ 20
Equity securities (11) 0 3
Real estate and other 47 43 (3)
Less: (decrease) increase in liability
to policyholders for realized gains (5) 15 15
-------- ------ ------
NET REALIZED GAINS $ 7 $ 16 $ 5
-------- ------ ------
-------- ------ ------
- - -----------------------------------------------------------------------------
</TABLE>
F-10
<PAGE>
(e) DERIVATIVE INVESTMENTS:
A summary of investments, segregated by major category along with the
types of derivatives and their respective notional amounts, are as
follows as of December 31, 1994:
SUMMARY OF INVESTMENTS
AS OF DECEMBER 31, 1994
(CARRYING AMOUNTS)
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------
Issued Caps, Purchased
Total Carrying Non- Floors & Caps, Floors Futures Swaps
Value Derivative Options (B) & Options (C) (D) (F)
-------------- ---------- ------------ ------------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Asset Backed Securities $ 5,670 $ 5,690 $(31) $24 $0 $ (13)
Inverse Floaters (A) 474 482 (9) 4 0 (3)
Anticipatory (E) (30) 0 0 2 0 (32)
-------------- ---------- ------------ ------------- ------- ------
TOTAL ASSET BACKED
SECURITIES 6,114 6,172 (40) 30 0 (48)
Other Bonds and Notes 6,533 6,606 0 0 0 (73)
Short-Term Investments 782 782 0 0 0 0
-------------- ---------- ------------ ------------- ------- ------
TOTAL FIXED MATURITIES 13,429 13,560 (40) 30 0 (121)
Other Investments 3,105 3,105 0 0 0 0
-------------- ---------- ------------ ------------- ------- ------
TOTAL INVESTMENTS $16,534 $16,665 $(40) $30 $0 $(121)
-------------- ---------- ------------ ------------- ------- ------
-------------- ---------- ------------ ------------- ------- ------
- - ----------------------------------------------------------------------------------------------------
</TABLE>
SUMMARY OF INVESTMENTS IN DERIVATIVES
AS OF DECEMBER 31, 1994
(NOTIONAL AMOUNTS)
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------
Issued Caps, Purchased
Total Notional Floors & Caps, Floors, Futures Swaps
Amount Options (B) & Options (C) (D) (F)
-------------- ------------ ------------- ------- -------
<S> <C> <C> <C> <C> <C>
Asset Backed Securities $4,244 $1,311 $2,546 $ 75 $ 312
Inverse Floaters (A) 1,129 277 63 3 786
Anticipatory (E) 835 0 209 101 525
-------------- ------------ ------------- ------- -------
TOTAL ASSET BACKED 6,208 1,588 2,818 179 1,623
Other Bonds and Notes 670 0 72 74 524
Short-Term Investments 0 0 0 0 0
-------------- ------------ ------------- ------- -------
TOTAL FIXED MATURITIES 6,878 1,588 2,890 253 2,147
Other Investments 16 0 3 0 13
-------------- ------------ ------------- ------- -------
TOTAL INVESTMENTS $6,894 $1,588 $2,893 $253 $2,160
-------------- ------------ ------------- ------- -------
-------------- ------------ ------------- ------- -------
- - -----------------------------------------------------------------------------------------
</TABLE>
F-11
<PAGE>
A summary of the notional and fair value of derivatives with off Balance
Sheet risk as of December 31, 1993 is as follows:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
Issued Swaps, Caps
Floors and Collars Futures Forwards Total
------------------ ------- -------- -------
<S> <C> <C> <C> <C>
Notional $7,015 $1,792 $91 $8,898
Fair Value $ (4) $ 0 $ 1 $ (3)
- - -------------------------------------------------------------------------------
</TABLE>
(A) Inverse floaters, which are variations of CMO's for which the
coupon rates move inversely with an index rate (e.g. LIBOR). The risk
to principal is considered negligible as the underlying collateral
for the securities is guaranteed or sponsored by government agencies.
To address the volatility risk created by the coupon variability, the
Company uses a variety of derivative instruments, primarily interest
rate swaps and issued floors.
(B) Comprised primarily of caps ($1,459) with a weighted average
strike rate of 7.7% (ranging from 6.8% to 10.2%). Over 70% mature in
1997 and 1998. Issued floors total $125 with a weighted average
strike rate of 8.3% and mature in 2004.
(C) Comprised of purchased floors ($1,856), purchased options and
collars ($633) and purchased caps ($404). The floors have a weighted
average strike price of 5.8% (ranging from 4.8% and 6.6%) and over
85% mature in 1997 and 1998. The options and collars generally mature
in 1995 and 2002. The caps have a weighted average strike price of
7.2% (ranging from 4.5% and 8.9%) and over 66% mature in 1997 through
1999.
(D) Over 95% of futures contracts expire before December 31, 1995.
(E) Deferred gains and losses on anticipatory transactions are
included in the carrying value of bond investments in the
consolidated balance sheets. At the time of the ultimate purchase,
they are reflected as a basis adjustment to the purchased asset. At
December 31, 1994, these were $(33) million in net deferred losses for
futures, interest rate swaps and purchased options.
(F) The following table summarizes the maturities of interest rate and
foreign currency swaps outstanding at December 31, 1994 and the
related weighted average interest pay rate or receive rate assuming
current market conditions:
Maturity of Swaps on Investments as of December 31, 1994
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------
Last
Derivative Type 1995 1996 1997 1998 1999 2000+ Total Maturity
--------------- ----- ----- ----- ----- ----- ----- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST RATE SWAPS:
PAY FIXED/RECEIVE VARIABLE:
Notional Value $ 0 $ 15 $ 50 $ 0 $446 $268 $ 779 2004
Weighted Average Pay Rate 0.0% 5.0% 7.2% 0.0% 8.2% 7.8% 7.9%
Weighted Average Receive Rate 0.0% 6.4% 5.7% 0.0% 7.5% 6.5% 7.0%
PAY VARIABLE/RECEIVE FIXED:
Notional Value $311 $ 50 $100 $ 25 $175 $100 $ 761 2002
Weighted Average Pay Rate 5.1% 5.3% 5.5% 5.3% 5.4% 6.0% 5.4%
Weighted Average Receive Rate 8.0% 8.0% 7.5% 4.0% 4.5% 7.2% 6.9%
PAY VARIABLE/RECEIVE DIFFERENT VARIABLE:
Notional Value $ 95 $ 50 $ 18 $ 15 $ 5 $232 $ 415 2005
Weighted Average Pay Rate 4.2% 6.4% 6.8% 6.2% 0.0% 6.0% 5.7%
Weighted Average Receive Rate 9.1% 6.3% 9.5% 6.4% 0.0% 6.3% 7.1%
TOTAL INTEREST RATE SWAPS $406 $115 $168 $ 40 $626 $600 $1,955 2004
Total Weighted Average Pay Rate 4.9% 5.7% 6.1% 5.6% 7.4% 6.8% 6.5%
Total Weighted Average Receive Rate 8.2% 7.1% 7.2% 4.9% 6.7% 6.5% 7.0%
FOREIGN CURRENCY SWAPS $ 35 $ 45 $ 29 $ 15 $ 10 $ 70 $ 205 2002
TOTAL SWAPS $441 $161 $197 $ 55 $636 $670 $2,160 2005
- - ------------------------------------------------------------------------------------------------------
</TABLE>
F-12
<PAGE>
In addition to risk management through derivative financial
instruments pertaining to the investment portfolio, interest rate
sensitivity related to certain Company liabilities was altered
primarily through interest rate swap agreements. The notional amount
of the liability agreements in which the Company generally pays one
variable rate in exchange for another, was $1.7 billion and $1.3
billion at December 31, 1994 and 1993 respectively. The weighted
average pay rate is 6.2%; the weighted average receive rate is 6.6%,
and these agreements mature at various times through 2004.
(f) CONCENTRATION OF CREDIT RISK:
The Company has a reinsurance recoverable of $4.4 billion from Mutual
Benefit Life Assurance Corporation (Mutual Benefit). The risk of
Mutual Benefit becoming insolvent is mitigated by the reinsurance
agreement's requirement that the assets be kept in a security trust
with the Company as sole beneficiary. Excluding investments in U.S.
government and agencies, the Company has no other significant
concentrations of credit risk.
The Company currently owns $39.2 million par value of Orange County,
California Pension Obligation Bonds, $17.1 million of which it
continues to carry as available for sale under FASB 115 and $22.1
million which are included in the Separate Account Assets. While
Orange County is currently operating under Protection of Chapter 9
of the Federal Bankruptcy Laws, the Company believes it is probable
that it will collect all amounts due under the contractual terms of
the bonds and that the bonds are not permanently or other than
temporarily impaired.
As of December 31, 1994 the Company owned $66.1 million of Mexican
bonds, $52.3 million of which are payable in Mexican pesos but are
fully hedged back to U.S. dollars, and $13.8 million of U.S. Dollar
Denomination Mexican bonds. The primary risks associated with these
securities is a default by the Mexican government or imposition of
currency controls that prevent conversion of Mexican pesos to U.S.
dollars. The Company believes both of these risks are remote.
(g) FIXED MATURITIES
The schedule below details the amortized cost and fair values of the
Company's fixed maturities by component, along with the gross
unrealized gains and losses:
<TABLE>
<CAPTION>
1994
----
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Government and government
agencies and authorities:
- guaranteed and sponsored $ 1,516 $ 1 $ (87) $ 1,430
- guaranteed and sponsored -
asset backed 4,256 78 (571) 3,763
States, municipalities and
political subdivisions 148 1 (12) 137
International governments 189 1 (14) 176
Public utilities 531 1 (32) 500
All other corporate 3,717 38 (297) 3,458
All other corporate-asset backed 2,442 30 (121) 2,351
Short-term investments 1,665 0 (51) 1,614
------- ---- ------- -------
TOTAL $14,464 $150 $(1,185) $13,429
------- ---- ------- -------
------- ---- ------- -------
</TABLE>
F-13
<PAGE>
<TABLE>
<CAPTION>
1993
----
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Government and government
agencies and authorities:
- guaranteed and sponsored $ 1,637 $ 15 $ (12) $ 1,640
- guaranteed and sponsored -
asset backed 4,070 235 (219) 4,086
States, municipalities and
political subdivisions 73 9 0 82
International governments 100 5 (3) 102
Public utilities 423 20 (2) 441
All other corporate 3,598 180 (42) 3,736
All other corporate-asset backed 1,806 74 (12) 1,868
Short-term investments 890 0 0 890
------- ---- ------- -------
TOTAL $12,597 $538 $ (290) $12,845
------- ---- ------- -------
------- ---- ------- -------
</TABLE>
The amortized cost and estimated fair value of fixed maturity
investments at December 31, 1994, by maturity, are shown below. Asset
backed securities are distributed to maturity year based on the
Company's estimate of the rate of future prepayments of principal over
the remaining life of the securities. Expected maturities differ from
contractual maturities reflecting the borrowers' rights to call or
prepay their obligations.
<TABLE>
<CAPTION>
MATURITY AMORTIZED COST ESTIMATED FAIR VALUE
-------- -------------- --------------------
<S> <C> <C>
Due in one year or less $ 2,214 $ 2,183
Due after one year through five years 7,000 6,647
Due after five years through ten years 3,678 3,334
Due after ten years 1,572 1,265
------- -------
$14,464 $13,429
------- -------
------- -------
</TABLE>
Sales of fixed maturities excluding short-term fixed maturities for
the years ended 1994, 1993, and 1992 resulted in proceeds of $5,708,
$8,813, and $5,728, respectively, resulting in gross realized gains of
$71, $192, and $140, and gross realized losses of $100, $219, and $135,
respectively, not including policyholder gains and losses. Sales of
equity securities and other investments for the years ended December
31, 1994, 1993, and 1992 resulted in proceeds of $159, $127 and $7,
respectively, resulting in gross realized gains of $3, $0, and $3, and
gross realized losses of $14, $0, and $0, respectively, not including
policyholder gains and losses.
F-14
<PAGE>
(h) FAIR VALUE OF FINANCIAL INSTRUMENTS NOT DISCLOSED ELSEWHERE:
BALANCE SHEET ITEMS:
<TABLE>
<CAPTION>
1993 1994
---- ----
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- -------- --------
<S> <C> <C> <C> <C>
ASSETS
Other invested assets:
Policy loans $ 2,614 $ 2,614 $ 1,397 $ 1,397
Mortgage loans 316 316 228 228
Investments in partnerships and trusts 36 42 14 34
Miscellaneous 67 67 22 63
LIABILITIES
Other policy claims and benefits $13,001 $12,374 $11,140 $11,415
</TABLE>
The following methods and assumptions were used to estimate the fair
value of each class of financial instrument: policy and mortgage loan
carrying amounts approximate fair value; investments in partnerships
and trusts are based on external market valuations from partnership
and trust management; and other policy claims and benefits payable are
determined by estimating future cash flows discounted at the current
market rate.
3. INCOME TAX
The Company is included in ITT's consolidated U.S. Federal income tax
return and remits to (receives from) ITT a current income tax
provision (benefit) computed in accordance with the tax sharing
arrangements between ITT and its insurance subsidiaries. The effective
tax rate was 32% in 1994, and approximates the U.S. statutory tax
rates of 35% in 1993 and 34% in 1992. The provision for income taxes
was as follows:
<TABLE>
<CAPTION>
INCOME TAX EXPENSE:
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Current $ 185 $ 190 $ 124
Deferred (120) (115) (79)
----- ----- -----
$ 65 $ 75 $ 45
----- ----- -----
----- ----- -----
</TABLE>
F-15
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
TAX PROVISION AT U.S. STATUTORY RATE $71 $76 $46
Tax-exempt income (3) 0 0
Foreign tax credit (1) 0 0
Other (2) (1) (1)
--- --- ---
PROVISION FOR INCOME TAX $65 $75 $45
--- --- ---
--- --- ---
</TABLE>
Income taxes paid were $244, $301 and $36 in 1994, 1993, and 1992
respectively. The current taxes due from or (to) Hartford Fire were
$46, and $19 in 1994 and 1993 respectively.
Deferred tax assets include the following:
<TABLE>
<CAPTION>
1994 1993
----- ----
<S> <C> <C>
Tax deferred acquisition cost $ 284 $158
Book deferred acquisition costs and reserves (134) (30)
Employee benefits 7 7
Unrealized loss on "available for sale" securities 353 3
Investments and other 80 (24)
----- ----
$ 590 $114
----- ----
----- ----
</TABLE>
Prior to the Tax Reform Act of 1984, the Life Insurance Company Income
Tax Act of 1959 permitted the deferral from taxation of a portion of
statutory income under certain circumstances. In these situations, the
deferred income was accumulated in a "Policyholders' Surplus Account"
and will be taxable in the future only under conditions which
management considers to be remote; therefore, no Federal income taxes
have been provided on this deferred income. The balance for tax return
purposes of the Policyholders' Surplus Account as of December 31, 1994
was $24.
4. REINSURANCE
The Company cedes insurance to non-affiliated insurers in order to
limit its maximum loss. Such transfer does not relieve the Company of
its primary liability. The Company also assumes insurance from other
insurers. Group life and accident and health insurance business is
substantially reinsured to affiliated companies.
Life insurance net retained premiums were comprised of the following:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ----
<S> <C> <C> <C>
Gross premiums $1,316 $1,135 $680
Reinsurance assumed 299 93 30
Reinsurance ceded 515 481 451
------ ------ ----
NET RETAINED PREMIUMS $1,100 $ 747 $259
------ ------ ----
------ ------ ----
</TABLE>
F-16
<PAGE>
Life reinsurance recoveries, which reduced death and other benefits, for
the years ended December 31, 1994, 1993 and 1992 approximated $164, $149,
and $73, respectively.
In December 1994, the Company assumed from a third party approximately
$500 million of corporate owned life insurance reserves on a
coinsurance basis. Also in December 1994, ILA ceded to ITT Lyndon
Insurance Company $1 billion in individual fixed and variable
annuities on a modified coinsurance basis. These transactions did not
have a material impact on consolidated net income.
In October 1994, HLR recaptured approximately $500 million of
corporate owned life insurance from a third party reinsurer.
Subsequent to this transaction, HLIC and HLR restructured their
coinsurance agreement from coinsurance to modified coinsurance, with
the assets and policy liabilities placed in the separate account. In
May 1994, HLIC assumed and reinsured the life insurance policies and
the individual annuities of Pacific Standard with reserves and account
values of approximately $400 million. The Company received cash and
investment grade assets to support the life insurance and individual
annuity contract obligations assumed.
In June 1993, the Company assumed and partially reinsured the annuity,
life and accident and sickness insurance policies of Fidelity Bankers
Life Insurance Company in Receivership for Conservation and
Rehabilitation, with account values of $3.2 billion. The Company
received cash and investment grade assets to assume insurance and
annuity contract obligations. Substantially all of these contracts
were placed in the Company's separate accounts.
In November 1993, ILA acquired, through an assumption reinsurance
transaction, substantially all of the individual fixed and variable
annuity business of HLA. As a result of this transaction, the assets
and liabilities of the company increased approximately $1 billion. The
excess of liabilities assumed over assets received, of $2, was
recorded as a decrease to capital surplus. The impact on consolidated
net income was not significant.
On November 4, 1992, the Company entered into a definitive agreement
whereby the Company assumed the contract obligations of Mutual Benefit
Life Assurance Corporation's (Mutual Benefit) individual corporate
owned life insurance (COLI) contracts. The Company received $5.6
billion in cash and invested assets, $5.3 billion of which were policy
loans, from Mutual Benefit for assuming the contract obligations.
Simultaneously, the Company coinsured approximately 84% of the
contract obligations back to Mutual Benefit, HLR and an unaffiliated
reinsurer. In August 1993, the Company received assets of $300 million
for assuming the group COLI contract obligations of Mutual Benefit,
through an assumption reinsurance transaction. Under the terms of the
agreement, the Company coinsured back 75% of the liabilities to Mutual
Benefit. All assets supporting Mutual Benefit's reinsurance liability
to HLIC are placed in a "security trust", with Hartford Life as the
sole beneficiary. The impact on 1992 consolidated net income was not
significant.
In 1992, all ordinary individual life insurance written and in force
in HLA was assumed by HLIC. As a result of this transaction, the
assets of HLIC increased by approximately $437, liabilities increased
approximately $403. The excess of assets over liabilities of $34 was
recorded as an increase in capital.
5. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
The Company's employees are included in Hartford Fire's
noncontributory defined benefit pension plans. These plans provide
pension benefits that are based on years of service and the employee's
compensation during the last ten years of employment. The Company's
funding policy is to contribute annually an amount between the minimum
funding requirements set forth in the Employee Retirement Income
Security Act of 1974 and the maximum amount that can be deducted for
Federal income tax purposes. Generally, pension costs are funded
through the purchase of the Company's group pension contracts. The
cost to the Company was approximately $2, $3 and $2 in 1994, 1993 and
1992, respectively.
The Company provides certain health care and life insurance benefits
for eligible retired employees. A substantial portion of the Company's
employees may become eligible for these benefits upon retirement.
Effective January 1, 1992, the Company adopted SFAS No. 106, using the
immediate recognition method for all benefits accumulated to date. As
of June 1992, the Company amended its plans, effective January 1,
1993, whereby the Company's contribution for health care benefits will
depend on the retiree's date of retirement and years of service. In
addition, the plan amendments increased deductibles and set a defined
dollar cap which
F-17
<PAGE>
limits average company contributions. The effect of these changes is
not material. The Company has prefunded a portion of the health care
and life insurance obligations through trust funds where such
prefunding can be accomplished on a tax effective basis.
Postretirement health care and life insurance benefits expense,
allocated by Hartford Fire, was $1, $1, and $1, for 1994, 1993 and
1992, respectively.
The assumed rate of future increases in the per capita cost of health
care (the health care trend rate) was 11% for 1994, decreasing ratably
to 6% in the year 2001. Increasing the health care trend rates by one
percent per year would have an immaterial impact on the accumulated
postretirement benefit obligation and the annual expense. The assumed
weighted average discount rate was 8.5%. To the extent that the actual
experience differs from the inherent assumptions, the effect will be
amortized over the average future service of the covered employees.
6. BUSINESS SEGMENT INFORMATION
The reportable segments and product groups of HLIC and its subsidiaries are:
INDIVIDUAL LIFE AND ANNUITIES (ILAD)
- Individual life
- Fixed and variable retirement annuities
ASSET MANAGEMENT SERVICES (AMS)
- Group Pension Plans products and services
- Deferred Compensation Plans products and services
- Structured Settlements and lottery annuities
SPECIALTY
- Corporate Owned Life Insurance (COLI) and HLR
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
REVENUES:
ILAD $ 691 $ 595 $ 305
AMS 789 794 770
Specialty 919 425 96
------- ------- -------
$ 2,399 $ 1,814 $ 1,171
------- ------- -------
------- ------- -------
INCOME BEFORE INCOME TAX:
ILAD $ 139 $ 129 $ 73
AMS 38 71 56
Specialty 26 18 5
------- ------- -------
$ 203 $ 218 $ 134
------- ------- -------
------- ------- -------
IDENTIFIABLE ASSETS:
ILAD $26,668 $19,147 $ 9,474
AMS 13,334 12,416 11,918
Specialty 7,847 6,723 5,910
------- ------- -------
$47,849 $38,286 $26,582
------- ------- -------
------- ------- -------
</TABLE>
7. STATUTORY NET INCOME AND SURPLUS
Substantially all of the statutory surplus is permanently reinvested
or is subject to dividend restrictions relating to various state
regulations which limit the payment of dividends without prior
approval.
Statutory net income and surplus as of December 31 were:
F-18
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Statutory net income $ 58 $ 63 $ 65
Statutory surplus $941 $812 $614
</TABLE>
The Company prepares its statutory financial statements in accordance
with accounting practices prescribed by the State of Connecticut
Insurance Department. Prescribed statutory accounting practices
include publications of the National Association of Insurance
Commissioners ("NAIC"), as well as state laws, regulations, and
general administrative rules.
8. SEPARATE ACCOUNTS:
The Company maintains separate account assets and liabilities totaling
$22.8 billion and $16.3 billion at December 31, 1994 and 1993,
respectively which are reported at fair value. Separate account assets
are segregated from other investments and are not subject to claims
that arise out of any other business of the Company.Investment income
and gains and losses of separate accounts accrue directly to the
policyholder. Separate accounts reflect two categories of risk
assumption: non-guaranteed separate accounts totaling $14.8 billion
and $11.5 billion at December 31, 1994 and 1993, respectively, wherein
the policyholder assumes the investment risk, and guaranteed separate
account assets totaling $8.0 billion and $4.8 billion at December 31,
1994 and 1993, respectively, wherein the Company contractually
guarantees either a minimum return or account value to the
policyholder. Investment income (including investment gains and
losses) on separate account assets are not reflected in the
Consolidated Statements of Income. Separate account management fees,
net of minimum guarantees, were $256, $189, and $92, in 1994, 1993,
and 1992, respectively.
The guaranteed separate accounts include modified guaranteed
individual annuity, and modified guaranteed life insurance. The
average credit interest rate on these contracts is 6.44%. The assets
that support these liabilities are comprised of $7.5 billion in bonds
and $.5 billion in policy loans. The portfolios are segregated from
other investments and are managed so as to minimize liquidity and
interest rate risk. In order to minimize the risk of disintermediation
associated with early withdrawals, individual annuity and modified
guaranteed life insurance contracts carry a graded surrender charge as
well as a market value adjustment. Additional investment risk is
hedged using a variety of derivatives which total $(16.2) million in
carrying value and $3.2 billion in notional amounts.
9. COMMITMENTS AND CONTINGENCIES
In August 1994, HLIC renewed a two year note purchase facility
agreement which in certain instances obligates the Company to purchase
up to $100 million in collateralized notes from a third party. The
Company is receiving fees for this commitment. At December 31, 1994,
the Company has not purchased any notes under this agreement.
In March 1987, HLIC guaranteed the commercial mortgages (principal and
accrued interest) that were sold under a pooling and servicing
agreement of the same date. Mortgages aggregating approximately $53.0
million were sold in this transaction, and the remaining balance on
these loans is $21.1 million. There was no impact on operations due to
this guarantee.
Under insurance guaranty fund laws in most states, insurers doing
business therein can be assessed up to prescribed limits for
policyholder losses incurred by insolvent companies. The amount of any
future assessments on HLIC under these laws cannot be reasonably
estimated. Most of these laws do provide, however, that an assessment
may be excused or deferred if it would threaten an insurer's own
financial strength. Additionally, guaranty fund assessments are used to
reduce state premium taxes paid by the Company in certain states.
The Company is involved in various legal actions, some of which
involve claims for substantial amounts. In the opinion of management
the ultimate liability with respect to such lawsuits, as well as other
contingencies, is not considered material in relation to the
consolidated financial position of the Company.
F-19
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) All financial statements are included in Part A and Part B of the
Registration Statement.
(b) (1) A copy of the resolution authorizing the Separate Account is
filed herein.
(2) Not applicable. HL maintains custody of all assets.
(3) Principal Underwriter Agreement is incorporated with this
Registration Statement.
(4) The form of the variable annuity contract to be filed by
amendment.
(5) The form of the application to be filed by amendment.
(6) (a) Restated Certificate of Incorporation of Hartford Life
Insurance Company is incorporated herein.
(b) Bylaws of Hartford Life Insurance Company are
incorporated herein.
(7) Not applicable.
(8) Not applicable.
(9) Not applicable.
(10) Consent of Arthur Andersen LLP is filed herewith.
(11) Not applicable.
(12) Not applicable.
(13) Not applicable.
<PAGE>
Item 25. Directors and Officers of the Depositor
EXECUTIVE OFFICERS AND DIRECTORS
OTHER BUSINESS
PROFESSION, VOCATION
OR EMPLOYMENT FOR
POSITION WITH HLIC, PAST 5 YEARS; OTHER
NAME, AGE YEAR OF ELECTION DIRECTORSHIPS
- - --------- ------------------ --------------------
Louis J. Abdou Vice President, 1987 Vice President (1987-Present),
52 Hartford Insurance Company.
David H. Annis, Vice President, 1994 Vice President (1994-Present);
43 Assistant Vice President
(1986-1994).
Paul J. Boldischar, Vice President, Senior Vice President and Jr.,
53 1992 Director, Operations ITT
Hartford Life and Annuity
Insurance Company, 1994;
Senior Vice President and
Director of National Service
Center, ITT Life Insurance
Corporation (1987-1992).
Wendell J. Bossen Vice President, 1992** President (1992-Present),
61 International Corporate
Marketing Group, Inc.;
Executive Vice President
(1984-1992), Mutual Benefit.
Peter W. Cummins Vice President, 1989 Vice President,Individual
57 Annuity Operations
(1989-Present), Hartford
Life Insurance Company.
Julianna B. Dalton Vice President, 1992 Vice President,
39 (1992-Present); Assistant Vice
President, (1989-1992);
Director of Research,
(1987-1989) Hartford Life
Insurance Company.
Ann M. deRaismes Vice President, 1994 Vice President, (1994);
44 Assistant Vice President
(1992-1994); Director of Human
Resources (1991-Present);
Assistant Director of Human
Resources (1987-1991),
Hartford Life Insurance
Company.
<PAGE>
Allen J. Duoma, M.D. Medical Director, Medical Director
49 1993 (1993-Present), Employee
Benefits Division, Hartford
Life Insurance Company;
Medical Director (1990-1993),
Travelers' Managed Disability
Services; Medical Director
(1988-1990), Center for
Corporate Health.
Donald R. Frahm Chairman and Chief Chairman and Chief Executive
63 Executive Officer, 1988 of the Hartford Insurance
Group (1988-Present).
Bruce D. Gardner General Counsel, 1991 General Counsel Corporate
44 and Coporate Secretary Secretary (1991-Present)
Corporate Secretary (1988-
Present); Associate General
Counsel (1988-1991); Counsel,
(1986-1988) Hartford Life
Insurance Company.
Joseph H. Gareau Executive Vice President Executive Vice President and
47 and Chief Investment Investment Officer,
Officer, 1993 (1993-Present), Hartford Life
Insurance Co; Senior Vice
President and Chief
Investment Officer
(1992-1993), ITT Hartford's
Property-Casualty Companies.
J. Richard Garrett Vice President, 1988 Vice President and Treasurer
49 & Treasurer (1988-Present), Hartford
Insurance Group.
John P. Ginnetti Executive Vice Executive Vice President,
48 President and Director 1994; Senior Vice President,
Asset Management (1988-1994); General Counsel
Services, 1994 and Corporate Secretary of
Hartford Life Insurance
Company (l982-1988).
Lois W. Grady Vice President, 1993 Vice President (1993-Present);
50 Assistant Vice President
(1988-1993), Hartford Life
Insurance Company.
David A. Hall Senior Vice President Senior Vice President and
40 and Actuary, 1992 and Actuary of Hartford Life
Insurance Company
(1992-Present).
<PAGE>
Joseph Kanarek Vice President, 1991 Vice President (1991-Present);
47 Director (1992-Present),
Hartford Life Insurance
Company.
Kevin L. Kirk Vice President, 1992 Vice President (1992-Present);
43 Assistant Vice President;
Assistant Director
(1985-1992), Asset Management
Services, Hartford Life
Insurance Company (1985-1992).
Andrew W. Kohnke Vice President, 1992 Vice President (1992-Present);
36 Assistant Vice President
(1989-1992); Investment
Officer (1987-1989), Hartford
Life Insurance Company.
Steven M. Maher Vice President and Vice President and Actuary
40 Actuary, 1993 (1993-Present); Assistant Vice
President (1987-1993),
Hartford Life Insurance
Company.
William B. Malchodi, Vice President and Director of Taxes (1992
Jr., 44 Director of Taxes, 1992 -Present), Hartford Insurance
Company
Thomas M. Marra Senior Vice President Senior Vice President, 1994;
36 and Actuary, 1994 Vice President (1989-1994);
Director, ILAD Director ofIndividual
Annuities (1991-Present);
Assistant Vice President
(1989); Actuary (1987-1989),
Hartford Life Insurance
Company.
David J. McDonald Senior Vice President, Senior Vice President and
58 1986 Director, Asset Management
Services (1986- Present); Vice
President (1980-1986),
Hartford Insurance Company.
Kevin A. North Vice President, 1991 Vice President, Hartford
42 Insurance Group and Director
of Real Estate (1991-Present);
Vice President and Deputy
Director of Real Estate
(1989-1991); Assistant Vice
President and Deputy Director
of Real Estate (1987-1989).
<PAGE>
Joseph J. Noto Vice President, 1989 Vice President (1989-Present),
42 Hartford Life Insurance
Company; Controller
(1983-1989), Personal Lines
Insurance Center; Vice
President (1986-1989),
Personal Lines Insurance
Center; Controller
(1987-1989), Personal Lines
Market Segment, Hartford Fire.
Leonard E. Odell, Jr. Senior Vice President, Senior Vice President
49 1994 Vice President (1982-1994);
Actuary (1976-1982), Hartford
Life Insurance Company.
Michael C.O'Halloran Vice President & Senior Vice President & Senior
46 Associate Associate General Counsel and
General Counsel, 1988 Director, (1988-Present), Law
Department, Hartford Fire
Insurance Company.
Craig D. Raymond Vice President and Vice President and Chief
33 Chief Actuary, 1994 Actuary, 1994; Vice President
and Actuary (1993-1994);
Assistant Vice President and
Actuary (1992-1993); Actuary
(1989-1992), Hartford Life
Insurance Company; Consultant,
Tillinghast/ Towers Ferrin
(1988-1989).
Lowndes A. Smith President and Chief President and Chief Operating
55 Operating Officer, 1989 Officer (1989-Present),
Hartford Life Insurance
Company; Senior Vice President
and Group Controller; Vice
President and Group Controller
(1980-1987), Hartford
Insurance Group.
Edward J. Sweeney Vice President, 1993 Vice President (1993-Present);
38 Chicago Regional Manager
(1985-1993), Hartford Life
Insurance Company.
James E. Trimble Vice President and Vice President (1990-Present);
38 Actuary, 1990 Assistant Vice President
(1987-1990), Hartford Life
Insurance Company.
<PAGE>
Raymond P. Welnicki, Senior Vice Senior Vice President 1994,
46 President, 1994 Vice President (1993-Present)
Hartford Life Insurance
Company; Board of Directors,
Ethix Corp., formerly employed
by Aetna Life & Casualty.
James J. Westervelt, Vice President and Vice President and Group
47 Group Controller, 1989 Controller (1989-Present);
Assistant Vice President and
Assistant Controller
(1983-1989), Hartford
Insurance Group.
Lizabeth H. Zlatkus, Vice President, 1994 Vice President (1994);
36 Asssistent Vice President
(1992-1994); Hartford Life
Insurance Company; formerly
Director, Hartford Insurance
Group.
Donald J.Znamierowski, Vice President and Vice President and Director of
60 Director of Strategic Strategic Operations, 1994;
Operations, 1994 Vice President and Comptroller
(1986-1994); Assistant Vice
President and Comptroller
(1976-1986); Director
(1976-1986), Hartford Life
Insurance Company, Hartford
Life & Accident Insurance
Company, ITT Hartford Life &
Annuity Insurance Company, and
Ally Canada.
____________________
* Denotes date of election to Board of Directors.
**ITT Hartford Affiliated Company.
Item 26. Persons Controlled By or Under Common Control with the Depositor or
Registrant
See Exhibit 26 attached hereto.
Item 27. Number of Contract Owners
As of December 31, 1994, there were ___ Contract Owners.
Item 28. Indemnification
Under Section 33-320a of the Connecticut General Statutes, the
Registrant must indemnify a director or officer against judgments,
fines, penalties, amounts paid in settlement and reasonable expenses,
including attorneys' fees, for actions brought or
<PAGE>
threatened to be brought against him in his capacity as a director or
officer when it is determined by certain disinterested parties that he
acted in good faith and in a manner he reasonably believed to be in
the best interests of the Registrant. In any criminal action or
proceeding, it also must be determined that the director or officer
had no reason to believe his conduct was unlawful. The director or
officer must also be indemnified when he is successful on the merits
in the defense of a proceeding or in circumstances where a court
determines that he is fairly and reasonably entitled to be
indemnified, and the court approves the amount. In shareholder
derivative suits, the director or officer must be finally adjudged not
to have breached his duty to the Registrant or a court must determine
that he is fairly and reasonably entitled to be indemnified and must
approve the amount. In a claim based upon the director's or officer's
purchase or sale of the Registrant's securities, the director or
officer may obtain indemnification only if a court determines that, in
view of all the circumstances, he is fairly and reasonably entitled to
be indemnified, and then for such amount as the court shall determine.
The foregoing statements are specifically made subject to the detailed
provisions of Section 33-320a.
The directors and officers of HL and HESCO are covered under a
directors and officers liability insurance policy issued to ITT
Corporation and its subsidiaries. Such policy will reimburse the
Registrant for any payments that it shall make to directors and
officers pursuant to law and will, subject to certain exclusions
contained in the policy, further pay any other costs, charges and
expenses and settlements and judgments arising from any proceeding
involving any director or officer of the Registrant in his past or
present capacity as such, and for which he may be liable, except as to
any liabilities arising from acts that are deemed to be uninsurable.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
<PAGE>
Item 29. Principal Underwriters
(a) HESCO acts as principal underwriter for the following investment
companies:
Hartford Life Insurance Company - DC Variable Account I
Separate Account Two (DC Variable Account II)
Separate Account Two (Variable Account "A")
Separate Account Two (NQ Variable Account)
Separate Account Two (QP Variable Account)
Separate Account One
Separate Account Two (Director)
Hartford Life Insurance Company - Putnam Capital Manager Trust
Separate Account
Hartford Money Market Fund, Inc.
Hartford Life Insurance Company - Separate Account Three
ITT Hartford Life and Annuity Insurance Company - Separate
Account Three
Hartford Life Insurance Company - Separate Account Five
ITT Hartford Life and Annuity Insurance Company - Separate
Account Five
ITT Hartford Life and Annuity Insurance Company - Separate
Account Six
Hartford Life Insurance Company Separate Account VL I
(b) Directors and Officers of HESCO
Name and Principal Positions and Offices
Business Address With Underwriter
------------------ --------------------
Donald E. Waggaman, Jr. Treasurer
Bruce D. Gardner Secretary
George R. Jay Controller
Lowndes A. Smith President
Item 30. Location of Accounts and Records
Accounts and records are maintained by HL.
Item 31. Management Services
None
Item 32. Undertakings
(a) The Registrant hereby undertakes to file a post-effective
amendment to this registration statement as frequently as is
necessary to ensure that the audited financial statements in the
registration statement are never more than 16 months old so long
as payments under the variable annuity contracts may be accepted.
(b) The Registrant hereby undertakes to include either (1) as part of
any application to purchase a contract offered by the Prospectus,
a space that an applicant can check to request a Statement of
Additional Information, or (2) a post card or similar written
communication affixed to or included in the Prospectus that the
applicant can remove to send for a Statement of Additional
Information.
(c) The Registrant hereby undertakes to deliver any Statement of
Additional Information and any financial statements required to
be made available under this Form promptly upon written or oral
request.
The Registrant is relying on the no-action letter issued by the
Division of Investment Management to American Council of Life
Insurance, Ref. No. IP-6-88, November 28, 1988. The Registrant
has complied with the four provisions of the no-action letter.
60s/1s
(HVA-VA-A)
<PAGE>
HARTFORD LIFE INSURANCE COMPANY, INC.
AND
HARTFORD LIFE AND ACCIDENT INSURANCE COMPANY, INC.
POWER OF ATTORNEY
Donald R. Frahm
Bruce D. Gardner
Joseph H. Gareau
John P. Ginnetti
Thomas M. Marra
Leonard E. Odell, Jr.
Lowndes A. Smith
Raymond P. Welnicki
Lizabeth H. Zlatkus
Donald J. Znamierowski
do hereby jointly and severally authorize Bruce D. Gardner and/or Rodney J.
Vessels to sign as their agent, any Registration Statement, pre-effective
amendment, and any post-effective amendment of the Hartford Life Insurance
Company, Inc., and Hartford Life and Accident Insurance Company, Inc. under the
Securities Act of 1933 and/or the Investment Company Act of 1940.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney for the
purpose herein set forth.
/s/ Donald R. Frahm Dated:
- - -------------------------------- --------------------------------
Donald R. Frahm
/s/ Bruce D. Gardner Dated:
- - -------------------------------- --------------------------------
Bruce D. Gardner
/s/ John P. Ginnetti Dated:
- - -------------------------------- --------------------------------
John P. Ginnetti
/s/ Thomas M. Marra Dated: 12-9-94
- - -------------------------------- --------------------------------
Thomas M. Marra
/s/ Leonard E. Odell, Jr. Dated: 12/2/94
- - -------------------------------- --------------------------------
Leonard E. Odell, Jr.
/s/ Lowndes A. Smith Dated:
- - -------------------------------- --------------------------------
Lowndes A. Smith
/s/ Raymond P. Welnicki Dated:
- - -------------------------------- --------------------------------
Raymond P. Welnicki
/s/ Lizabeth H. Zlatkus Dated:
- - -------------------------------- --------------------------------
Lizabeth H. Zlatkus
/s/ Donald J. Znamierowski Dated: 12/8/94
- - -------------------------------- --------------------------------
Donald J. Znamierowski
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company act of
1940, the Registrant certifies that it meets all the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and duly caused this Registration Statement to be signed
on its behalf, in the City of Hartford, and the State of Connecticut on this
1st day of May 1995.
HARTFORD LIFE INSURANCE COMPANY -
SEPARATE ACCOUNT TWO (VARIABLE ACCOUNT "A")
(Registrant)
* By:
--------------------------------------------
John P. Ginnetti, Senior Vice President
HARTFORD LIFE INSURANCE COMPANY
(Depositor)
* By:
---------------------------------------------
John P. Ginnetti, Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons and in the capacity and
on the date indicated.
Donald R. Frahm, Chairman and
Chief Executive Officer, Director *
Bruce D. Gardner, General Counsel
Corporate Secretary, Director *
Joseph H. Gareau, Executive Vice
President and Chief Investment
Officer, Director *
John P. Ginnetti, Senior Vice
President, Director *
Thomas M. Marra, Senior Vice * By: /s/ Rodney J. Vessels
President, Director * -----------------------------
Leonard E. Odell, Jr., Senior Rodney J. Vessels
Vice President, Director * Attorney-In-Fact
Lowndes A. Smith, President
Chief Operating Officer, Dated: 5/1/95
Director * -----------------------------
Raymond P. Welnicki, Senior Vice
President, Director *
Lizabeth H. Zlatkus, Vice President
Director *
Donald J. Znamierowski, Vice President
Comptroller, Director *
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE 1 - SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN AFFILIATES
DECEMBER 31, 1994
(IN MILLIONS)
<TABLE>
<CAPTION>
AMOUNT
SHOWN ON
BALANCE
TYPE OF INVESTMENT COST FAIR VALUE SHEET
------------------ ---------- ---------- ----------
<S> <C> <C> <C>
FIXED MATURITIES
BONDS
U.S. Government and government agencies
and authorities:
- guaranteed and sponsored $ 1,516 $ 1,429 $ 1,429
- guaranteed and sponsored - asset backed 4,256 3,763 3,763
States, municipalities and political subdivisions 148 137 137
International governments 189 176 176
Public utilities 531 500 500
All other corporate 3,717 3,458 3,458
All other corporate - asset backed 2,442 2,350 2,350
Short-term investments 1,665 1,616 1,616
------ ------ ------
TOTAL FIXED MATURITIES 14,464 13,429 13,429
EQUITY SECURITIES
Common Stocks - industrial, miscellaneous and all other 76 68 68
------ ------ ------
TOTAL FIXED MATURITIES AND EQUITY SECURITIES 14,540 13,497 13,497
Policy loans 2,614 2,614 2,614
Mortgage loans 316 316 316
Other investments 103 109 107
------ ------ ------
TOTAL INVESTMENTS $ 17,573 $ 16,536 $ 16,534
------ ------ ------
------ ------ ------
</TABLE>
Note: Fair values for stocks and bonds approximate those quotations published
by applicable stock exchanges or are received from other reliable
sources. The fair value for short - term investments approximates
cost.
Policy and mortgage loan carrying amounts approximate fair value.
S-1
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION
(IN MILLIONS)
<TABLE>
<CAPTION>
BENEFITS, AMORTIZ-
CLAIMS ATION OF
AND CLAIM DEFERRED
DEFERRED FUTURE OTHER PREMIUMS NET ADJUST- POLICY OTHER
POLICY POLICY POLICYHOL- AND OTHER INVESTMENT MENT ACQUISI- INSURANCE
ACQUISITION BENEFITS DER FUNDS CONSIDERA- INCOME EXPENSES TION EXPENSES
SEGMENT COSTS * * TIONS (1) (2) COSTS (3)
- - ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended
December 31,
1994
- - -------------
I LAD $ 1,708 $ 582 $ 4,257 $ 492 $ 199 $ 334 $ 137 $ 80
AMS 101 845 10,160 39 750 695 8 48
SPECIALTY 0 463 6,911 569 350 376 0 518
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 1,809 $ 1,890 $ 21,328 $ 1,100 $ 1,299 $ 1,405 $ 145 $ 646
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Year ended
December 31,
1993
- - -------------
I LAD $ 1,237 $ 428 $ 3,535 $ 423 $ 172 $ 249 $ 97 $ 120
AMS 97 703 9,026 35 759 662 16 45
SPECIALTY 0 528 5,673 289 136 135 0 272
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 1,334 $ 1,659 $ 18,234 $ 747 $ 1,067 $ 1,046 $ 113 $ 437
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Year ended
December 31,
1992
- - -------------
I LAD $ 698 $ 1,115 $ 1,004 $ 175 $ 127 $ 104 $ 49 $ 79
AMS 101 583 8,256 27 743 657 6 51
SPECIALTY 0 46 5,822 54 42 36 0 55
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 799 $ 1,744 $ 15,082 $ 256 $ 912 $ 797 $ 55 $ 185
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<FN>
(*) As Restated
(1) Investment income is allocated to the segments based on each segment's
share of investable funds or on a direct basis, where applicable, including
realized capital gains and losses.
(2) Benefits, claims and claim adjustment expenses includes the increase in
liability for future policy benefits and death, disability and other
contract benefit payments.
(3) Other insurance expenses are allocated to the segments based on specific
identification, where possible, and related activities, including dividends
to policyholders.
</TABLE>
S-2
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE IV - REINSURANCE
(IN MILLIONS)
<TABLE>
<CAPTION>
PERCENTAGE
CEDED TO ASSUMED OF AMOUNT
GROSS OTHER FROM OTHER NET ASSUMED
AMOUNT COMPANIES COMPANIES AMOUNT TO NET
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994
LIFE INSURANCE IN FORCE $ 136,929 $ 87,553 $ 35,016 $ 84,392 41.5%
--------- --------- --------- ---------
Premiums and other considerations
ILAD $ 448 $ 71 $ 106 $ 483 22.0%
AMS 39 0 0 39 0.0%
Specialty 521 140 188 569 33.0%
Accident and Health 308 304 5 9 55.6%
--------- --------- --------- ---------
TOTAL $ 1,316 515 299 1,100 27.2%
--------- --------- --------- ---------
--------- --------- --------- ---------
YEAR ENDED DECEMBER 31, 1993
LIFE INSURANCE IN FORCE $ 93,099 $ 71,415 $ 27,067 $ 48,751 55.5%
--------- --------- --------- ---------
Premiums and other considerations
ILAD $ 417 $ 85 $ 91 $ 423 21.5%
AMS 25 0 0 25 0.0%
Specialty 386 97 0 289 0.0%
Accident and Health 307 299 2 10 20.0%
--------- --------- --------- ---------
TOTAL $ 1,135 $ 481 $ 93 $ 747 12.4%
--------- --------- --------- ---------
--------- --------- --------- ---------
YEAR ENDED DECEMBER 31, 1992
LIFE INSURANCE IN FORCE $ 44,661 $ 64,207 $ 51,430 $ 31,884 161.3%
--------- ---------
Premiums and other considerations
ILAD $ 208 $ 71 $ 27 $ 164 16.5%
AMS 27 0 0 27 0.0%
Specialty 153 99 0 54 0.0%
Accident and Health 292 281 3 14 21.4%
--------- --------- --------- ---------
TOTAL $ 680 $ 451 $ 30 $ 259 37.9%
--------- --------- --------- ---------
</TABLE>
S-3
<PAGE>
CERTIFICATION
I, John P. Ginnetti, Secretary of Hartford Life Insurance Company, hereby
certify that the attached is a true copy of a resolution adopted by the
Board of Directors of said Company on June 2, 1986.
/s/ John P. Ginnetti
---------------------------------------
June 13, 1986
<PAGE>
Exhibit 1
HARTFORD LIFE INSURANCE COMPANY
CONSENT
The undersigned, being all of the Directors of Hartford Life Insurance
Company, hereby consent to the following resolution, such action to have the
same force and effect as if taken at a meeting duly called and held for such
purpose:
RESOLVED, That Hartford Life Insurance Company is hereby authorized to
establish a new separate account to be designated "Separate Account
Two" (the "Account") and to issue variable annuity contracts with
reserves for such contracts being segregated in such Account.
FURTHER RESOLVED, That the officers of Hartford Life Insurance Company
are hereby authorized and directed to take all actions necessary to:
(1) Comply with applicable state and federal laws and regulations
applicable to the establishment and operation of the Account;
(2) Establish, from time to time, the terms and conditions pursuant
to which interests in the Account will be sold to contract owners;
(3) Establish all procedures, standards and arrangements necessary or
appropriate for the operation of the Account including, but not
limited to, the establishment of the investment policies of the
Account; and
(4) Transfer funds to the Account, up to a maximum of $100,000 to
provide for its efficient operation, all on such terms and for
such periods as said officers deem to be necessary or appropriate.
/s/ Edward N. Bennett /s/ R. Fred Richardson
- - ------------------------------------- -------------------------------------
Edward N. Bennett R. Fred Richardson
/s/ Joel P. Brightman /s/ Lowndes A. Smith
- - ------------------------------------- -------------------------------------
Joel P. Brightman Lowndes A. Smith
/s/ Larry R. Lance /s/ Donald R. Sondergeld
- - ------------------------------------- -------------------------------------
Larry R. Lance Donald R. Sondergeld
/s/ DeRoy C. Thomas
------------------------------------
DeRoy C. Thomas
Dated: June 2, 1986
<PAGE>
EXHIBIT (b)3
PRINCIPAL UNDERWRITER AGREEMENT
THIS AGREEMENT, dated as of the 1st day of April, 1988, made by and
between HARTFORD LIFE INSURANCE COMPANY ("the Hartford"), a corporation
organized and existing under the laws of the State of Connecticut, and
HARTFORD EQUITY SALES COMPANY, INC. ("HESCO"), a corporation organized and
existing under the laws of the State of Connecticut,
WITNESSETH:
WHEREAS, the Board of Directors of the Hartford has made provision for
the establishment of separate accounts within the Hartford in accordance
with the laws of the State of Connecticut, which separate accounts were
organized and are established and registered as unit investment trust
investment companies with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended, and which are designated Hartford
Life Insurance Company DC Variable Account-I, Hartford Life Insurance
Company Separate Account Two (DC Variable Account-II), Hartford Life
Insurance Company Separate Account Two (Variable Account A), Hartford Life
Insurance Company Separate Account Two (QP Variable Account) and Hartford
Life Insurance Company Separate Account Two (NQ Variable Account), (referred
to collectively as the "Separate Accounts"); and
WHEREAS, HESCO offers to the public certain Individual and Group Annuity
Contracts (the "Contracts") issued by the Hartford with respect to the
Separate Accounts and which are registered under the Securities Act of 1933,
as amended; and
WHEREAS, the Contracts authorize the Contract Owners of such Contracts
to direct that part or all of the net purchase payments to their Contract
shall be invested in shares of one or more of the underlying mutual
funds which are sponsored by the Hartford ("the Fund or Funds"). The Funds
are registered as open-end, diversified, management investment companies
under the Investment Company Act of 1940, as amended; and
WHEREAS, HESCO has previously agreed to act as distributor in connection
with offers and sales of the Contracts under the terms and conditions set
forth in this Distribution Agreement.
NOW THEREFORE, in consideration of the mutual agreements made herein, the
Hartford and HESCO agree as follows:
I.
HESCO'S DUTIES
1. HESCO, as principal underwriter for the Contracts, will use its best
efforts to effect offers and sales of the Contracts through broker-dealers
that are members of the National Association of Securities Dealers, Inc. and
whose registered representatives are duly licensed as insurance agents of the
Hartford. HESCO is responsible for compliance with all applicable requirements
of the Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, and the Investment Company Act of 1940, as
<PAGE>
-2-
amended, and the rules and regulations thereunder, and all other applicable
laws, rules and regulations thereunder, and all other applicable laws, rules
and regulations relating to the sales and distribution of the Contracts, the
need for which arises out of its duties as principal underwriter of said
Contracts and relating to the creation of the Separate Accounts.
2. HESCO agrees that it will not use any prospectus, sales literature, or
any other printed matter or material or offer for sale or sell any Contract
if any of the foregoing in any way represent the duties, obligations, or
liabilities of the Hartford as being greater than, or different from, such
duties, obligations and liabilities as are set forth in this Agreement, as it
may be amended from time to time.
3. HESCO agrees that it will utilize the then currently effective
prospectuses relating to the Separate Accounts' variable annuity contracts in
connection with its selling efforts.
As to the other types of sales materials, HESCO agrees that it will use
only sales materials which conform to the requirements of federal and state
insurance laws and regulations and which have been filed, where necessary,
with the appropriate regulatory authorities.
4. HESCO agrees that it or its duly designated agent shall maintain
records of the name and address of, and the securities issued by the Separate
Accounts and held by, every holder of any security issued pursuant to this
Agreement, as required by Section 26(a)(4) of the Investment Company Act
of 1940, as amended.
5. HESCO's services pursuant to this Agreement shall not be deemed to be
exclusive, and it may render similar services and act as an underwriter,
distributor, or dealer for other investment companies in the offering of
their shares.
6. In the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of its obligations and duties hereunder on the part of
HESCO, HESCO shall not be subject to liability to the Separate Accounts or to
any Contract Owner or party in interest under a Contract for any act or
omission in the course, or connected with, rendering services hereunder or for
any losses that may be sustained in the purchase, holding or sale of any
security.
II.
1. The Separate Accounts reserve the right at any time to suspend or
limit the public offering of variable annuity contracts upon thirty days'
written notice to HESCO, except where the notice period may be shortened
because of legal action taken by any regulatory agency.
2. The Separate Accounts agree to advise HESCO immediately:
(a) Of any request by the Securities and Exchange Commission for
amendment of its Securities Act registration statements or for additional
information;
<PAGE>
-3-
(b) Of the issuance by the Securities and Exchange Commission of any
stop order suspending the effectiveness of the Securities Act
registration statement relating to the Separate Accounts or of the
initiation of any proceedings for that purpose;
(c) Of the happening of any material event, if known, which makes
untrue any statement in said Securities Act registration statements or
which requires change therein in order to make any statement therein not
misleading.
The Separate Accounts will furnish to HESCO such information with respect
to the Separate Accounts and the variable annuity contracts in such form and
signed by such of its officers and directors of the Separate Accounts as HESCO
may reasonably request and will warrant that the statements therein contained
when so signed will be true and correct. The Separate Accounts will also
furnish, from time to time, such additional information regarding the
Separate Accounts' financial condition as HESCO may reasonably request.
III.
COMPENSATION
For providing the principal underwriting functions on behalf of the
Separate Accounts, HESCO shall be entitled to receive compensation as agreed
upon from time to time by the Hartford and HESCO.
IV.
RESIGNATION AND REMOVAL OF
PRINCIPAL UNDERWRITER
HESCO may resign as Principal Underwriter hereunder, upon 120 days' prior
written notice to the Hartford. However, such resignation shall not become
effective until either the Separate Accounts have been completely liquidated
and the proceeds of the liquidation distributed through the Separate Accounts
to the Contract Owners or a successor Principal Underwriter has been
designated and has accepted its duties.
V.
MISCELLANEOUS
1. This Agreement may not be assigned by any of the parties hereto
without the written consent of the other party.
2. All notices and other communications provided for hereunder shall be
in writing and shall be delivered by hand or mailed first class, postage
pre-paid, addressed as follows:
(a) If to the Hartford -- Hartford Life Insurance Company,
P.O. Box 2999, Hartford, Connecticut 06104-2999
(b) If to HESCO -- Hartford Equity Sales Company, Inc.,
Hartford, Connecticut 06104-2999
or to such other address as HESCO, or the Hartford shall designate by written
notice to the other.
<PAGE>
-4-
3. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which shall be deemed one
instrument, and an executed copy of this Agreement and all amendments hereto
shall be kept on file by the Hartford and shall be open to inspection at any
time during the business hours of the Hartford.
4. This Agreement shall inure to the benefit of and be binding upon the
successor of the parties hereto.
5. This Agreement shall be construed and governed by and according to the
laws of the State of Connecticut.
6. This Agreement may be amended from time to time by the mutual
agreement and consent of the parties hereto.
7. This Amended and Restated Agreement shall supersede all prior
agreements among the parties hereto relating to the same subject matter.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
(SEAL) HARTFORD LIFE INSURANCE COMPANY
Attest:
/s/ John P. Ginnetti
- - ------------------------------------ By----------------------------------
Vice President
(SEAL) HARTFORD EQUITY SALES COMPANY, INC.
Attest:
/s/ John P. Ginnetti
- - ------------------------------------ By----------------------------------
Vice President
<PAGE>
EXHIBIT 6(A)
RESTATED CERTIFICATE OF INCORPORATION
HARTFORD LIFE INSURANCE COMPANY
This Restated Certificate of Incorporation gives effect to the amendment
of the Certificate of Incorporation of the corporation and otherwise purports
merely to restate all those provisions already in effect. This Restated
Certificate of Incorporation has been adopted by the Board of Directors and
by the sole shareholder.
Section 1. The name of the corporation is Hartford Life Insurance Company
and it shall have all the powers granted by the general statutes, as now
enacted or hereinafter amended to corporations formed under the Stock
Corporation Act.
Section 2. The corporation shall have the purposes and powers to write
any and all forms of insurance which any other corporation now or
hereafter chartered by Connecticut and empowered to do an insurance
business may now or hereafter may lawfully do; to accept and to cede
reinsurance; to issue policies and contracts for any kind or combinations
of kinds of insurance; to issue policies or contracts either with or
without participation in profits; to acquire and hold any or all of the
shares or other securities of any insurance corporation; and to engage in
any lawful act or activity for which corporations may be formed under the
Stock Corporation Act. The corporation is authorized to exercise the
powers herein granted in any state, territory or jurisdiction of the
United States or in any foreign country.
Section 3. The capital with which the corporation shall commence business
shall be an amount not less than one thousand dollars. The authorized
capital shall be two million five hundred thousand dollars divided into
one thousand shares of common capital stock with a par value of
twenty-five hundred dollars each.
We hereby declare, under the penalties of false statement that the
statements made in the foregoing Certificate are true.
Dated: February 10, 1982 HARTFORD LIFE INSURANCE COMPANY
By:-------------------------------
Attest:
/s/ Wm. A. McMahon
- - --------------------------------------
7342D
<PAGE>
EXHIBIT 6(B)
By-Laws
of the
HARTFORD LIFE INSURANCE COMPANY
As passed and effective
February 13, 1978
and amended on
July 13, 1978
January 5, 1979
and
February 29, 1984
<PAGE>
ARTICLE I
Name -- Home Office
Section 1. This corporation shall be named HARTFORD LIFE INSURANCE
COMPANY.
Section 2. The principal place of business and Home Office shall be in
the City of Hartford, Connecticut.
ARTICLE II
Stockholders' Meetings -- Notice -- Quorum - Right to Vote
Section 1. All meetings of the Stockholders shall be held at the
principal business office of the Company unless the Directors shall otherwise
provide and direct.
Section 2. The annual meeting of the Stockholders shall be held on such
day and at such hour as the Board of Directors may decide. For cause the
Board of Directors may postpone or adjourn such annual meeting to any other
time during the year.
Section 3. Special meetings of the Stockholders may be called by the
Board of Directors, the Executive Committee, the Chairman of the Board, the
President or any Vice President.
Section 4. Notice of Stockholders' meetings shall be mailed to each
Stockholder, at his address as it appears on the records of the Company, at
least seven days prior to the meeting. The notice shall state the place, date
and time of the meeting and shall specify all matters proposed to be acted
upon at the meeting.
Section 5. At each annual meeting the Stockholders shall choose Directors
as hereinafter provided.
Section 6. Each Stockholder shall be entitled to one vote for each share
of stock held by him at all meetings of the Company. Proxies may be
authorized by written power of attorney.
Section 7. Holders of one-half of the whole amount of the stock issued
and outstanding shall constitute a quorum.
<PAGE>
-2-
Section 8. Each Stockholder shall be entitled to a certificate of stock
which shall be signed by the President or a Vice President, and either the
Treasurer or an Assistant Treasurer of the Company, and shall bear the seal
of the Company, but such signatures and seal may be facsimile if permitted by
the laws of the State of Connecticut.
ARTICLE III
Directors -- Meetings -- Quorum
Section 1. The property, business and affairs of the Company shall be
managed by a board of not less than three nor more than twenty Directors, who
shall be chosen by ballot at each annual meeting. Vacancies occurring between
annual meetings may be filled by the Board of Directors by election. Each
Director shall hold office until the next annual meeting of Stockholders and
until his successor is chosen and qualified.
Section 2. Meetings of the Board of Directors may be called by the
direction of the Chairman of the Board, the President, or any three
Directors.
Section 3. Three days' notice of meetings of the Board of Directors shall
be given to each Director, either personally or by mail or telegraph, at his
residence or usual place of business, but notice may be waived, at any time,
in writing.
Section 4. One third of the number of existing directorships, but not
less than two Directors, shall constitute a quorum.
ARTICLE IV
Election of Officers -- Duties of Board of
Directors and Executive Committee
Section 1. The President shall be elected by the Board of Directors. The
Board of Directors may also elect one of its members to serve as Chairman of
the Board of Directors. The Chairman of the Board, or an individual appointed
by him, shall have authority to appoint all other officers, except as stated
herein, including one or more Vice Presidents and Assistant Vice Presidents,
the Treasurer
<PAGE>
-3-
and one or more Associate or Assistant Treasurers, one or more
Secretaries and Assistant Secretaries and such other Officers as the Chairman
of the Board may from time to time designate. All Officers of the Company
shall hold office during the pleasure of the Board of Directors. The
Directors may require any Officer of the Company to give security for the
faithful performance of his duties.
Section 2. The Directors may fill any vacancy among the officers by
election for the unexpired term.
Section 3. The Board of Directors may appoint from its own number an
Executive Committee of not less than five Directors. The Executive Committee
may exercise all powers vested in and conferred upon the Board of Directors
at any time when the Board is not in session. A majority of the members of
said Committee shall constitute a quorum.
Section 4. Meetings of the Executive Committee shall be called whenever
the Chairman of the Board, the President or a majority of its members shall
request. Forty-eight hours' notice shall be given of meetings but notice may
be waived, at any time, in writing.
Section 5. The Board of Directors shall annually appoint from its own
number a Finance Committee of not less than three Directors, whose duties
shall be as hereinafter provided.
Section 6. The Board of Directors may, at any time, appoint such other
Committees, not necessarily from its own number, as it may deem necessary for
the proper conduct of the business of the Company, which Committees shall
have only such powers and duties as are specifically assigned to them by the
Board of Directors or the Executive Committee.
Section 7. The Board of Directors may make contributions, in such amounts
as it determines to be reasonable, for public welfare or for charitable,
scientific or educational purposes, subject to the limits and restrictions
imposed by law and to such rules and regulations consistent with law as it
makes.
ARTICLE V
Officers
Chairman of the Board
Section 1. The Chairman of the Board shall preside at the meetings of the
Board of Directors and the Executive Committee and, in the absence of the
Chairman of the Finance Committee, at the meetings of the Finance Committee.
In the absence or inability of the Chairman of the Board to so preside, the
President shall preside in his place.
<PAGE>
-4-
President
Section 2. The President, under the supervision and control of the
Chairman of the Board, shall have general charge and oversight of the
business and affairs of the Company. The President shall preside at the
meetings of the Stockholders. He shall be a member of and shall preside at
all meetings of all Committees not referred to in Section 1 of this ARTICLE
except that he may designate a Chairman for each such other Committee.
Section 3. In the absence or inability of the President to perform his
duties, the Chairman of the Board may designate a Vice President to exercise
the powers and perform the duties of the President during such absence or
inability.
Secretary
Section 4. The Secretary of the Corporation shall keep a record of all
the meetings of the Company, of the Board of Directors and of the Executive
Committee, and he shall discharge all other duties specifically required of
the Secretary by law. The other Secretaries and Assistant Secretaries shall
perform such duties as may be assigned to them by the Board of Directors or
by their senior officers and any Secretary or Assistant Secretary may affix
the seal of the Company and attest it and the signature of any officer to any
and all instruments.
Treasurer
Section 5. The Treasurer shall keep, or cause to be kept, full and
accurate accounts of the Company. He shall see that the funds of the Company
are disbursed as may be ordered by the Board of Directors or the Finance
Committee. He shall have charge of all moneys paid to the Company and on
deposit to the credit of the Company or in any other properly authorized
name, in such banks or depositories as may be designated in a manner provided
by these by-laws. He shall also discharge all other duties that may be
required of him by law.
Other Officers
Section 6. The other officers shall perform such duties as may be
assigned to them by the President or the Board of Directors.
<PAGE>
-5-
ARTICLE VI
Finance Committee
Section 1. If a Finance Committee is established it shall be the duty of
that committee to supervise the investment of the funds of the Company in
securities in which insurance companies are permitted by law to invest, and
all other matters connected with the management of investments. If no Finance
Committee is established this duty shall be performed by the Board of
Directors.
Section 2. All loans or purchases for the investment and reinvestment of
the funds of the Company shall be submitted for approval to the Finance
Committee, if not specifically approved by the Board of Directors.
Section 3. Sale or transfer of any stocks or bonds shall be made upon
authorization of the Finance Committee unless specifically authorized by the
Board of Directors.
Section 4. Transfers of stock and registered bonds, deeds, leases,
releases, sales, mortgages chattel or real, assignments or partial releases
of mortgages chattel or real, and in general all instruments of defeasance
of property and all agreements or contracts affecting the same, except
discharges of mortgages and entries to foreclose the same as hereinafter
provided, shall be authorized by the Finance Committee or the Board of
Directors, and be executed jointly for the Company by two persons, to wit:
The Chairman of the Board, the President or a Vice President, and a
Secretary, the Treasurer or an Assistant Treasurer, but may be acknowledged
and delivered by either one of those executing the instrument; provided,
however, that either a Secretary, the Treasurer, or an Assistant Treasurer
alone, when authorized as aforesaid, or any person specially authorized by
the Finance Committee as attorney for the Company, may make entry to
foreclose any mortgage, and a Secretary, the Treasurer or an Assistant
Treasurer alone is authorized, without the necessity of further authority, to
discharge by deed or otherwise any mortgage on payment to the Company of the
principal, interest and all charges due.
Section 5. The Finance Committee may fix times and places for regular
meetings. No notice of regular meetings shall be necessary. Reasonable notice
shall be given of special meetings but the action of a majority of the
Finance Committee at any meeting shall be valid notwithstanding any defect in
the notice of such meeting.
<PAGE>
-6-
Section 6. In the absence of specific authorization from the Board of
Directors or the Finance Committee, the Chairman of the Board, the President,
a Vice President or the Treasurer shall have the power to vote or execute
proxies for voting any shares held by the Company.
ARTICLE VII
Funds
Section 1. All monies belonging to the Company shall be deposited to the
credit of the Company, or in such other name as the Finance Committee, the
Chairman of the Finance Committee or such executive officers as are
designated by the Board of Directors shall direct, in such bank or banks as
may be designated from time to time by the Finance Committee, the Chairman of
the Finance Committee, or by such executive officers as are designated by the
Board of Directors. Such monies shall be drawn only on checks or drafts
signed by any two executive officers of the Company, provided that the Board
of Directors may authorize the withdrawal of such monies by check or draft
signed with the facsimile signature of any one or more executive officers,
and provided further, that the Finance Committee may authorize such
alternative methods of withdrawals as it deems proper.
The Board of Directors, the President, the Chairman of the Finance
Committee, a Vice President, or such executive officers as are designated by
the Board of Directors may authorize withdrawal of funds by checks or drafts
drawn at offices of the Company to be signed by Managers, General Agents or
employees of the Company, provided that all such checks or drafts shall be
signed by two such authorized persons, except checks or drafts used for the
payment of claims or losses which need be signed by only one such
authorized person, and provided further that the Board of Directors of the
Company or executive officers designated by the Board of Directors may impose
such limitations or restrictions upon the withdrawal of such funds as it
deems proper.
<PAGE>
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ARTICLE VIII
Indemnity of Directors and Officers
Section 1. The Company shall indemnify and hold harmless each Director
and officer now or hereafter serving the Company, whether or not then in
office, from and against any and all claims and liabilities to which he may
be or become subject by reason of his being or having been a Director or
officer of the Company, or of any other company which he serves as a Director
or officer at the request of the Company, to the extent such is consistent
with the statutory provisions pertaining to indemnification, and shall
provide such further indemnification for legal and/or all other expenses
reasonably incurred in connection with defending against such claims and
liabilities as is consistent with statutory requirements.
ARTICLE IX
Amendment of ByLaws
Section 1. The Directors shall have power to adopt, amend and repeal such
bylaws as may be deemed necessary or appropriate for the management of the
property and affairs of the Company.
Section 2. The Stockholders at any annual or special meeting may amend or
repeal these bylaws or adopt new ones if the notice of such meeting contains
a statement of the proposed alteration, amendment, repeal or adoption, or the
substance thereof.
<PAGE>
2
ARTICLE I
Name -- Home Office
Section 1. This corporation shall be named Hartford Life Insurance
Company.
Section 2. The principal place of business and Home Office shall be in
the City of Hartford, Connecticut.
ARTICLE II
Stockholders' Meetings -- Notice -- Quorum -- Right to Vote
Section 1. All meetings of the Stockholders shall be held at the
principal business office of the Company unless the Directors shall otherwise
provide and direct.
Section 2. The annual meeting of the Stockholders shall be held on such
day and at such hour as the Board of Directors may decide. For cause the
Board of Directors may postpone or adjourn such annual meeting to any other
time during the year.
Section 3. Special meetings of the Stockholders may be called by the
Board of Directors, the Executive Committee, the Chairman of the Board, the
President or any Vice President.
Section 4. Notice of Stockholders' meetings shall be mailed to each
Stockholder, at his address as it appears on the records of the Company, at
least seven days prior to the meeting. The notice shall state the place, date
and time of the meeting and shall specify all matters proposed to be acted
upon at the meeting.
Section 5. At each annual meeting the Stockholders shall choose Directors
as hereinafter provided.
Section 6. Each Stockholder shall be entitled to one vote for each share
of stock held by him at all meetings of the Company. Proxies may be
authorized by written power of attorney.
Section 7. Holders of one-half of the whole amount of the stock issued
and outstanding shall constitute a quorum.
<PAGE>
3
Section 8. Each Stockholder shall be entitled to a certificate of stock
which shall be signed by the President or a Vice President, and either the
Treasurer or an Assistant Treasurer of the Company, and shall bear the seal
of the Company, but such signatures and seal may be facsimile if permitted by
the laws of the State of Connecticut.
ARTICLE III
Directors -- Meetings -- Quorum
Section 1. The property, business and affairs of the Company shall be
managed by a board of not less than three nor more than twenty Directors, who
shall be chosen by ballot at each annual meeting. Vacancies occurring between
annual meetings may be filled by the Board of Directors by election. Each
Director shall hold office until the next annual meeting of Stockholders and
until his successor is chosen and qualified.
Section 2. Meetings of the Board of Directors may be called by the
direction of the Chairman of the Board, the President, or any three Directors.
Section 3. Three days' notice of meetings of the Board of Directors shall
be given to each Director, either personally or by mail or telegraph, at his
residence or usual place of business, but notice may be waived, at any time,
in writing.
Section 4. One third of the number of existing directorships, but not
less than two Directors, shall constitute a quorum.
ARTICLE IV
Election of Officers -- Duties of Board of
Directors and Executive Committee
Section 1. The Board of Directors shall annually elect a Chairman of the
Board, a President, a Secretary of the Corporation and a Treasurer. It may
elect such Vice Presidents, other Secretaries, Assistant Secretaries,
Assistant Treasurers and such other officers as it may determine. All
officers of the Company shall hold office during the pleasure of the Board of
Directors.
<PAGE>
4
Section 2. The Directors may fill any vacancy among the officers by
election for the unexpired term.
Section 3. The Board of Directors may appoint from its own number an
Executive Committee of not less than five Directors. The Executive Committee
may exercise all powers vested in and conferred upon the Board of Directors
at any time when the Board is not in session. A majority of the members of
said Committee shall constitute a quorum.
Section 4. Meetings of the Executive Committee shall be called
whenever the Chairman of the Board, the President or a majority of its
members shall request. Forty-eight hours' notice shall be given of meetings
but notice may be waived, at any time, in writing.
Section 5. The Board of Directors may annually appoint from its own number
a Finance Committee of not less than three Directors, whose duties shall be
as hereinafter provided.
Section 6. The Board of Directors may, at any time, appoint such other
Committees, not necessarily from its own number, as it may deem necessary for
the proper conduct of the business of the Company, which Committees shall
have only such powers and duties as are specifically assigned to them by the
Board of Directors or the Executive Committee.
Section 7. The Board of Directors may make contributions, in such amounts
as it determines to be reasonable, for public welfare or for charitable,
scientific or educational purposes, subject to the limits and restrictions
imposed by law and to such rules and regulations consistent with law as it
makes.
ARTICLE V
Officers
Chairman of the Board
Section 1. The Chairman of the Board shall preside at the meetings of the
Board of Directors and the Executive Committee and, in the
<PAGE>
5
absence of the Chairman of the Finance Committee, at the meetings of the
Finance Committee. In the absence or inability of the Chairman of the Board
to so preside, the President shall preside in his place.
President
Section 2. The President, under the supervision and control of the
Chairman of the Board, shall have general charge and oversight of the
business and affairs of the Company. The President shall preside at the
meetings of the Stockholders. He shall be a member of and shall preside at
all meetings of all Committees not referred to in Section 2 of this ARTICLE
except that he may designate a Chairman for each such other Committee.
Section 3. In the absence or inability of the President to perform his
duties, the Chairman of the Board may designate a Vice President to exercise
the powers and perform the duties of the President during such absence or
inability.
Secretary
Section 4. The Secretary of the Corporation shall keep a record of all
the meetings of the Company, of the Board of Directors and of the Executive
Committee, and he shall discharge all other duties specifically required of
the Secretary by law. The other Secretaries and the Assistant Secretaries
shall perform such duties as may be assigned to them by the Board of
Directors or by their senior officers and any Secretary or Assistant Secretary
may affix the seal of the Company and attest it and the signature of any
officer to any and all instruments.
Treasurer
Section 5. The Treasurer shall keep, or cause to be kept, full and
accurate accounts of the Company. He shall see that the funds of the Company
are disbursed as may be ordered by the Board of Directors or the Finance
Committee. He shall have charge of all moneys paid to the Company and on
deposit to the credit of the Company or in any other properly authorized
name, in such banks or depositories as may be designated in a manner provided
by these bylaws. He shall also discharge all other duties that may be
required of him by law.
<PAGE>
6
Other Officers
Section 6. The other officers shall perform such duties as may be
assigned to them by the President or the Board of Directors.
ARTICLE VI
Finance Committee
Section 1. If a Finance Committee is established it shall be the duty of
that committee to supervise the investment of the funds of the Company in
securities in which insurance companies are permitted by law to invest, and
all other matters connected with the management of investments. If no Finance
Committee is established, this duty shall be performed by the Board of
Directors.
Section 2. All loans or purchases for the investment and reinvestment
of the funds of the Company shall be submitted for approval to the Finance
Committee, if not specifically approved by the Board of Directors.
Section 3. Sale or transfer of any stocks or bonds shall be made upon
authorization of the Finance Committee unless specifically authorized by the
Board of Directors.
Section 4. Transfers of stock and registered bonds, deeds, leases,
releases, sales, mortgages chattel or real, assignments or partial releases
of mortgages chattel or real, and in general all instruments of defeasance of
property and all agreements or contracts affecting the same, except
discharges of mortgages and entries to foreclose the same as hereinafter
provided, shall be authorized by the Finance Committee or the Board of
Directors, and be executed jointly for the Company by two persons, to wit:
the Chairman of the Board, the President or a Vice President, and a
Secretary, the Treasurer or an Assistant Treasurer, but may be acknowledged
and delivered by either one of those executing the instrument; provided,
however, that either a Secretary, the Treasurer, or an Assistant Treasurer
alone, when authorized as aforesaid, or any person specifically authorized by
the Finance Committee as attorney for the Company, may make entry to
foreclose any mortgage, and a Secretary, the Treasurer or an Assistant
Treasurer alone is authorized, without the necessity of further authority, to
discharge by deed or otherwise any mortgage on payment to the Company of the
principal, interest and all charges due.
<PAGE>
7
Section 5. The Finance Committee may fix times and places for regular
meetings. No notice of regular meetings shall be necessary. Reasonable notice
shall be given of special meetings but the action of a majority of the
Finance Committee at any meeting shall be valid notwithstanding any defect in
the notice of such meeting.
Section 6. In the absence of specific authorization from the Board of
Directors or the Finance Committee, the Chairman of the Board, the
President, a Vice President or the Treasurer shall have the power to vote or
execute proxies for voting any shares held by the Company.
ARTICLE VII
Funds
Section 1. All monies belonging to the Company shall be deposited to the
credit of the Company, or in such other name as the Finance Committee, the
Chairman of the Finance Committee or such executive officers as are
designated by the Board of Directors shall direct, in such bank or banks as
may be designated from time to time by the Finance Committee, the Chairman of
the Finance Committee or by such executive officers as are designated by the
Board of Directors. Such monies shall be drawn only on checks or drafts
signed by any two executive officers of the Company, provided that the Board
of Directors may authorize the withdrawal of such monies by check or draft
signed with the facsimile signature of any one or more executive officers,
and provided further, that the Finance Committee may authorize such
alternative methods of withdrawal as it deems proper.
The Board of Directors, the President, the Chairman of the Finance
Committee, a Vice President, or such executive officers as are designated by
the Board of Directors may authorize withdrawal of funds by checks or drafts
drawn at offices of the Company to be signed by Managers, General Agents or
employees of the Company, provided that all such checks or drafts shall be
signed by two such authorized persons, except checks or drafts used for the
payment of claims or losses which need be signed by only one such authorized
person, and provided further that the Board of Directors of the Company or
executive officers designated by the Board of Directors may impose such
limitations or restrictions upon the withdrawal of such funds as it deems
proper.
<PAGE>
8
ARTICLE VIII
Indemnity of Directors and Officers
Section 1. The Company shall indemnify and hold harmless each Director
and officer now or hereafter serving the Company, whether or not then in
office, from and against any and all claims and liabilities to which he may
be or become subject by reason of his being or having been a director or
officer of the Company, or of any other company which he serves as a director
or officer at the request of the Company, to the extent such is consistent
with statutory provisions pertaining to indemnification, and shall provide
such further indemnification for legal and/or all other expenses reasonably
incurred in connection with defending against such claims and liabilities as
is consistent with statutory requirements.
ARTICLE IX
Amendment of Bylaws
Section 1. The Directors shall have power to adopt, amend and repeal such
bylaws as may be deemed necessary or appropriate for the management of the
property and affairs of the Company.
Section 2. The Stockholders at any annual or special meeting may amend or
repeal these bylaws or adopt new ones if the notice of such meeting contains
a statement of the proposed alteration, amendment, repeal or adoption, or
the substance thereof.
<PAGE>
Arthur Andersen LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of
this Registration Statement File No. 33-19945 on Form N-4 for Hartford
Life Insurance Company.
Hartford, Connecticut
April 21, 1995
<PAGE>
1.0 FUND PARTICIPATION AGREEMENT
1.1 This Agreement, effective January 1, 1989, by and among Hartford
Life Insurance Company, a Connecticut stock life insurance
corporation with principal offices at 200 Hopmeadow Street,
Simsbury, Connecticut 06089 ("Hartford"), Acacia Capital
Corporation, a registered investment company with principal
offices at 51 Louisiana Avenue, N.W., Washington, D.C. 20001,
(the "Fund"), and Calvert Asset Management Company, Inc.,
registered investment advisor to the Fund, with principal offices
at 4550 Montgomery Avenue, Bethesda, Maryland 20814 ("Calvert").
1.2 In consideration of the promises, representations, warranties,
covenants, agreements and conditions contained herein, and in
order to set forth the terms and conditions of the transactions
contemplated hereby and the mode of carrying the same into
effect, and intending to be legally bound, the parties hereto
agree to the provisions set forth below.
2.0 THE VARIABLE ANNUITY CONTRACT AND THE SEPARATE ACCOUNT
2.1 Hartford shall maintain a variable annuity contract (the
"Contract") designed to provide, under current law, the benefits
of a tax-deferred accumulation of income for retirement and other
purposes.
2.2 Purchase payments for the Contracts shall be invested by Hartford
in a separate account or accounts. Such payments will constitute
the assets of the separate account and shall be invested, as
directed by purchasers, in certain open-end diversified
management companies registered under the Investment Company Act
of 1940 ("1940 Act").
2.3 One of the open-end diversified management companies is the Fund,
an open-end diversified management investment company with eight
separate series, registered under the 1940 Act. Each series is a
separate investment portfolio with distinct investment objectives.
2.4 Hartford will offer one or more of the series of the Fund,
including the Calvert Socially Responsible Series (the "Series"),
through the separate account
<PAGE>
to its Contract Owners, except that Hartford agrees not to offer
any series of the Fund until the exemptive order referenced in
Section 3.2.3 of this Agreement has been granted by the Securities
and Exchange Commission ("SEC"). Hartford will determine in its
discretion what separate account or accounts will offer the Series.
2.5 Hartford will use the name "Hartford Socially Responsive Fund" in
its marketing and sales literature when referring to the Series,
and agrees to indicate in such literature that "the investment
adviser of the Fund is Calvert Asset Management Company, Inc."
2.5.1 Hartford will use its best efforts to market and promote
the Series for its Contracts, and will market and promote
the Series in all of its markets, if the plan permits this
type of fund.
2.5.2 In marketing its Contracts, Hartford will comply with all
applicable State and Federal laws. Hartford and its agents
shall make no representations or warranties concerning the
Fund or Series shares except those contained in the then
current prospectuses of the Fund and in the Fund's current
printed sales literature. Copies of all advertising and
sales literature describing or concerning the Fund which
is prepared by Hartford or its agents for use in marketing
its Contracts (except those for internal or broker/dealer
use only) will be sent to Calvert when such material is
released to the public, agents or brokers or is submitted
to the Securities and Exchange Commission ("SEC"), National
Association of Securities Dealer, Inc. ("NASD"), or other
regulatory body for review. Hartford shall be responsible
for compliance with any state or federal filing or review
requirements concerning advertising and sales literature.
2.5.3 Hartford and its agents will not oppose voting
recommendations from Calvert or the Fund's Board of
Directors or interfere with the solicitation of proxies for
the Fund shares held for Hartford Contract Owners, unless
Hartford deems such recommendations detrimental to it or to
its Contract Owners. Hartford agrees to provide
pass-through voting privileges to all Hartford Contract
Owners and to assure that each of its separate accounts
<PAGE>
participating in the Fund calculates voting privileges in a
manner consistent with all other separate accounts of any
insurance company investing in the Fund, as required by the
exemptive order referenced in Section 3.2.3 of this
Agreement.
2.5.4 Hartford will be responsible for reporting to the Fund's
Board of Directors any potential or existing conflicts
among the interests of the contract owners of all separate
accounts investing in the Fund, and to assist the Board by
providing it with all information reasonably necessary for
the Board to consider any issues raised. The Fund's Board
of Directors is responsible for monitoring any conflict of
interest situation. Hartford and the other relevant
insurance companies will be responsible for taking remedial
action in the event of a Board determination of an
irreconcilable material conflict and to bear the cost of
such remedial action and these responsibilities will be
carried out with a view only to the interests of contract
owners. For purposes of this Section 2.5.4, a majority of
the disinterested members of the Fund's Board shall
determine whether or not any proposed action adequately
remedies any irreconcilable material conflict, but in no
event will the Fund or Calvert be required to establish a
new funding medium for any variable contract. Hartford
shall not be required by this section to establish a new
funding medium for any variable contract if an offer to do
so has been declined by vote of a majority of contract
owners materially adversely affected by the irreconcilable
material conflict.
2.6 Hartford will bear the costs of, and have the primary
responsibility for:
2.6.1 Registering the Contracts and the separate account with the
SEC, including any Application for Exemptive Relief
necessary for the separate account to buy Fund shares;
2.6.2 Developing all policy forms, application forms,
confirmations and other administrative forms or documents
and filing such of these as are necessary to comply with
the requirements of all insurance laws and regulations in
each state in which the contracts are offered;
<PAGE>
2.6.3 Administration of the Contracts and the separate account,
including all policyholder service and communication
activities;
2.6.4 Preparing and approving all marketing and sales literature
involving the sale of Fund shares to the Hartford's
separate account;
2.6.5 Printing and distributing to Hartford Contract Owners
copies of the current prospectuses, statements of
additional information (as requested by Contract Owners)
and periodic reports for the separate account and the Fund;
2.6.6 Preparing and filing any reports or other filings as may be
required under state insurance laws or regulations with
respect to the contracts or the separate account; and
2.6.7 Reimbursing the Fund up to $1500 for the cost of obtaining
a separate audit opinion for the 1988 fiscal year for the
Series, distinct from the other seven series; and further,
Hartford agrees that for every year thereafter, it will
engage in good faith negotiations with Calvert and the Fund
regarding such reimbursement by Hartford.
3.0 THE SERIES
3.1 The Fund and Calvert shall make available shares of the Series as
the underlying investment media for Hartford Contract Owners.
3.2 Calvert shall bear the costs of, and subject to review by
Hartford, shall have, or shall cause the Fund and the Series to
assume, the primary responsibility for:
3.2.1 Registering the Fund with the SEC including a separate
prospectus for the Series which does not reference the
other seven series of the Fund. The costs of printing and
distributing such prospectus to Hartford Contract Owners
shall be borne by Hartford as provided in Section 2.6.5
above.
3.2.2 Preparing, producing and maintaining the effectiveness of
such registration statements for the Fund as are required
under federal and state securities laws, and clearing such
registration statements through the SEC and pursuant to the
securities laws and regulations in each state in which the
contracts are offered;
<PAGE>
3.2.3 Preparing and filing an Application for Exemptive Relief
requesting appropriate exemptive relief from the relevant
provisions of the 1940 Act ("Application") and clearing
such Application through the SEC, thereby permitting
Hartford contracts to use the Fund as an underlying
investment alternative for its variable annuity contracts.
3.2.4 Operating and maintaining the Fund in accordance with
applicable law, including the diversification standards of
the Internal Revenue Code of 1986 applicable to variable
annuity contracts;
3.2.5 Preparing and filing any reports or other filings as may be
required with respect to the Fund under federal or state
securities laws;
3.2.6 Providing Hartford with the daily net asset values of the
Fund by 6:00 p.m. E.S.T. on each day the New York Stock
Exchange is open.
3.2.7 Providing Hartford with camera-ready copy necessary for the
printing of the periodic shareholder reports for the Fund.
3.3 The Fund or Calvert shall maintain records in accordance with the
Investment Company Act of 1940 or other statutes, rules and
regulations applicable to the Fund's operation in connection with
the performance of its duties. Hartford shall have the right to
access such records, upon reasonable notice and during business
hours, in order to respond to regulatory requirements, inquiries,
complaints or judicial proceedings. Records of all transactions
with respect to the Contracts shall be retained for a period of
not less than six (6) years from each transaction.
3.4 The parties or their duly authorized independent auditors have
the right under this Agreement to perform on-site audits of
records pertaining to the Contracts and the Fund, at such
frequencies as each shall determine, upon reasonable notice and
during normal business hours. At the request of the other, each
will make available to the other's auditors and/or
representatives of the appropriate regulatory agencies, all
requested records, data, and access to operating procedures.
4.0 INDEMNIFICATION
4.1 Hartford shall indemnify and hold the Fund and Calvert and each
of their respective directors,
<PAGE>
officers, employees and agents harmless from any liability or
expense (including reasonable attorneys' fees) arising from any
failure of Hartford or the separate account to fulfill its
respective obligations under this Agreement.
4.2 The Fund and Calvert shall indemnify and hold Hartford and its
directors, officers, employees and agents harmless from all
liabilities or expenses (including reasonable attorneys' fees)
arising from any failure of the Fund or Calvert to fulfill its
respective obligations under this Agreement and Calvert shall
indemnify and hold such parties harmless from a failure of the
Fund's investment adviser to manage the Fund in compliance with
the diversification requirements of the Internal Revenue Code of
1986, as amended, or any regulations thereunder.
5.0 COST AND EXPENSES
5.1 Except for costs and expenses for which indemnification is
required pursuant to section 4.0 or as otherwise agreed by the
parties in specific instances or, as set forth herein, the
parties shall each pay their respective costs and expenses
incurred by them in connection with this Agreement.
6.0 TERM OF AGREEMENT
6.1 The term of this Agreement shall be indefinite unless terminated
pursuant to Section 7 of this Agreement.
7.0 TERMINATION
7.1 This Agreement will terminate:
7.1.1 At the option of any party upon six months' prior written
notice to the other parties, but no party may terminate
this Agreement prior to January 1, 1990. If a party
notifies the other parties that it intends to terminate
this Agreement, the affected parties shall immediately
file with the SEC such documents, if any, as are necessary
to permit the offering of shares of the Series to Hartford
Contract Owners to be discontinued; or
7.1.2 Upon assignment of this Agreement unless the assignment is
made with the written consent of the other party.
<PAGE>
7.1.3 In the event of termination of this Agreement pursuant to
this Section 7.0, the provisions of Sections 4.0, 5.0, and
8.0 shall survive such termination.
8.0 GENERAL PROVISIONS
8.1 This Agreement is the complete and exclusive statement of the
agreement between the parties as to the subject matter hereof
which supersedes all proposals or agreements, oral or written,
and all other communications between the parties related to the
subject matter of this Agreement.
8.2 This Agreement can only be modified by a written agreement duly
signed by the persons authorized to sign agreements on behalf of
the respective party.
8.3 If any provision or provisions of this Agreement shall be held
to be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any
way be affected of be impaired thereby.
8.4 This Agreement and the rights, duties and obligations of the
parties hereto shall not be assignable by either party hereto
without the prior written consent of the other.
8.5 Any controversy relating to this Agreement shall be determined
by arbitration in Washington, D.C. in accordance with the
Commercial Arbitration rules of the American Arbitration
Association using arbitrators who will follow substantive rules
of law. The dispute shall be determined by an arbitrator
acceptable to both parties who shall be selected within seven
(7) days of filing of notices of intention to arbitrate.
Otherwise, the dispute shall be determined by a panel of three
arbitrators selected as follows: Within seven (7) days of filing
notice of intention to arbitrate, each party will appoint one
arbitrator. These two arbitrators will then name a third
arbitrator, who shall be an attorney admitted before the bar of
any state of the United States, to preside over the panel. If
either party fails to appoint an arbitrator, or if the two
arbitrators do not name a third arbitrator within seven (7)
days, either party may request the American Arbitration
Association to appoint the necessary arbitrator(s) pursuant to
Rule 13 of the Commercial Arbitration Rules. Each party will pay
its own cost and expenses. All testimony shall be transcribed.
The award of the panel shall be accompanied by findings of fact
and a statement of
<PAGE>
reasons for the decision. All parties agree to be bound by
the results of this arbitration; judgment upon the award so
rendered may be entered and enforced in any court of competent
jurisdiction. To the extent reasonably practicable, both
parties agree to continue performing their respective
obligations under this Agreement while the dispute is being
resolved. Nothing contained in this subsection shall prohibit
either party from seeking equitable relief without resorting to
arbitration under such circumstances as said party reasonably
believes that its interests hereunder and in its property may be
compromised. All matters relating to such arbitration shall be
maintained in confidence.
8.6 No waiver by either party of any default by the other in the
performance of any promise, term or condition of this Agreement
shall be construed to be a waiver by such party of any other or
subsequent default in performance of the same or any other
covenant, promise, term or condition of this Agreement. No prior
transactions or dealings between the parties shall be deemed to
establish any custom or usage waiving or modifying any provision
hereof.
8.7 No liability shall result to any party, nor shall any party be
deemed to be in default hereunder, as the result of delay in its
performance or from its non-performance hereunder caused by
circumstances beyond its control, including but not limited to:
act of God, act of war, riot, epidemic; fire; flood or other
disaster; or act of government. Nevertheless, the party shall be
required to be diligent in attempting to remove such cause or
causes.
8.8 Each of the parties will act as an independent contractor under
the terms of this Agreement and neither is now, or in the
future, an agent or a legal representative of the other for any
purpose. Neither party has any right or authority to supervise
or control the activities of the other party's employees in
connection with the performance of this Agreement or to assign
or create any application of any kind, express or implied, on
behalf of the other party or to bind it in any way, to accept
any service of process upon it or to receive any notice of any
nature whatsoever on its behalf.
8.9 This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Connecticut.
<PAGE>
8.10 Nothing herein shall prevent either party from participating in
any proceeding before any regulatory authority having
jurisdiction over any matter relating to this Agreement, the
Contracts, the separate account or the Fund which may affect the
parties to it. The parties shall each give the others prompt
notice of any such proceeding.
8.11 In all matters relating to the preparation, review, prior
approval and filing of documents, the parties shall cooperate in
good faith. Neither party shall unreasonably withhold its
consent with respect to the filing of any document with any
federal or state regulatory authority having jurisdiction over
the Contracts, the separate account or the Fund.
8.12 Captions contained in this Agreement are for reference purposes
only and do not constitute part of this Agreement.
8.13 All notices which are required to be given or submitted pursuant
to this Agreement shall be in writing and shall be sent by
registered or certified mail, return receipt requested, to the
addresses set forth below:
President Secretary
Hartford Life Acacia Capital Corporation
Insurance Company 4550 Montgomery Avenue
200 Hopmeadow Street Suite 1000 N
Simsbury, CT 06089 Bethesda, MD 20814
or to such other address as the parties may from time to time
designate. Any notice of one party refused by the other shall be
deemed received as of the date of said refusal.
8.14 Each party hereto shall promptly notify the other in writing of
any claims, demands or actions having any bearing on this
Agreement.
8.15 Each party agrees to perform its obligations hereunder in
accordance with all applicable laws, rules and regulations now
or hereafter in effect.
8.16 In the event of a material breach by either party of any of the
provisions of this Agreement, the injured party, in addition to
any other remedies available to it under law, shall be entitled
to seek an injunction restraining the other party from the
performance of acts which constitute a breach of this Agreement,
and such other party agrees not to raise adequacy of legal
remedies as a defense thereof.
<PAGE>
8.17 If this Agreement is terminated for other than default, it is
specifically agreed that neither party shall be entitled to
compensation of any kind except as specifically set forth herein.
8.18 In any litigation or arbitration between the parties, the
prevailing party shall be entitled to reasonable attorneys' fees
and all costs of proceedings incurred in enforcing this
Agreement.
8.19 This Agreement shall be binding upon and inure to the benefit of
the parties hereto, their successors and permitted assigns.
8.20 Each party represents that it has full power and authority to
enter into and perform this Agreement, and the person signing
this Agreement on behalf of it has been properly authorized and
empowered to enter into this Agreement. Each party further
acknowledges that it has read this Agreement, understands it,
and agrees to be bound by it.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
ACACIA CAPITAL CORPORATION HARTFORD LIFE INSURANCE COMPANY
BY: /s/ Clifton S. Sorrell, Jr. BY: /s/ Charles A. Clinton
---------------------------- -----------------------
Clifton S. Sorrell, Jr. Charles A. Clinton
President Vice President
CALVERT ASSET MANAGEMENT
COMPANY, INC.
BY: /s/ Reno J. Martini
---------------------
Reno J. Martini
Vice President
swb6.5
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