<PAGE>
As filed with the Securities and Exchange Commission on September 29, 1998
File No. 33-19945
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. _11_ [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. _94_
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: (860) 843-6733
MARIANNE O'DOHERTY
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 September 30, 1998, pursuant to paragraph (b)(1)(v) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of rule 485
___ on _________, 1998, pursuant to paragraph (a)(1) of Rule 485
___ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
PURSUANT TO RULE 24F-2(a) UNDER THE INVESTMENT COMPANY ACT OF 1940, THE
REGISTRANT HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES.
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
N-4 Item No. Prospectus Heading
----------------- ------------------------
1. Cover Page Cover Page
2. Definitions Glossary of Special Terms
3. Synopsis or Highlights Summary
4. Condensed Financial Information Accumulation Unit Values; Yield
Information
5. General Description of QP Variable Account Depositor, and
Registrant, Contract Portfolio Companies 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 of
Annuity Contracts 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
<PAGE>
HARTFORD
LIFE INSURANCE COMPANY
[LOGO]
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 ("Hartford").
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 Hartford.
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 -- shares of Class IA of Hartford Advisers HLS
Sub-Account Fund, Inc. ("Hartford Advisers Fund")
Bond Fund Sub-Account -- shares of Class IA of Hartford Bond HLS Fund,
Inc. ("Hartford Bond Fund")
Capital Appreciation -- shares of Class IA of Capital Appreciation HLS
Fund Sub-Account Fund, Inc., ("Hartford Capital Appreciation
Fund")
Dividend & Growth Fund -- shares of Class IA of Hartford Dividend & Growth
Sub-Account HLS Fund, Inc. ("Hartford Dividend & Growth
Fund")
Global Leaders Fund -- shares of Class IA of Hartford Global Leaders
Sub-Account HLS Fund, Inc. ("Hartford Global Leaders Fund")
Growth and Income Fund -- shares of Class IA of Hartford Growth and Income
Sub-Account HLS Fund, Inc. ("Hartford Growth and Income
Fund")
High Yield Fund -- shares of Class IA of Hartford High Yield HLS
Sub-Account Fund, Inc. ("Hartford High Yield Fund")
Index Fund Sub-Account -- shares of Class IA of Hartford Index HLS Fund,
Inc. ("Hartford Index Fund")
International Advisers -- shares of Class IA of Hartford International
Fund Sub-Account Advisers HLS Fund, Inc. ("Hartford International
Advisers Fund")
International -- shares of Class IA of Hartford International
Opportunities Fund Opportunities HLS Fund, Inc. ("Hartford
Sub-Account International Opportunities")
MidCap Fund Sub-Account -- shares of Class IA of Hartford MidCap HLS Fund,
Inc. ("Hartford MidCap Fund")
Money Market Fund -- shares of Class IA of Hartford Money Market HLS
Sub-Account Fund, Inc. ("Hartford Money Market Fund")
Mortgage Securities Fund -- shares of Class IA of Hartford Mortgage
Sub-Account Securities Sub-Account HLS Fund, Inc. ("Hartford
Mortgage Securities Fund")
Small Company Fund -- shares of Class IA Hartford Small Company HLS
Sub-Account Fund, Inc. ("Hartford Small Company Fund")
Stock Fund Sub-Account -- shares of Class IA of Hartford Stock HLS Fund,
Inc. ("Hartford Stock 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: Individual
Annuity Services, P.O. Box 5085, Hartford, Connecticut 06102-5085. The Table
of Contents for the Statement of Additional Information may be found on page
27 of this Prospectus. The Statement of Additional Information is incorporated
by reference to this Prospectus.
------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------------------------------------------------------------
------------------------------------------------------------------------------
VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED
BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY; THEY ARE SUBJECT
TO THE INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
------------------------------------------------------------------------------
------------------------------------------------------------------------------
THIS PROSPECTUS AND OTHER INFORMATION ABOUT THE SEPARATE ACCOUNT REQUIRED TO
BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION CAN BE FOUND AT THE
COMMISSION'S WEB SITE (HTTP:// WWW.SEC.GOV).
------------------------------------------------------------------------------
Prospectus Dated: September 30, 1998
Statement of Additional Information Dated: September 30, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
------------------------------------------------------------------------ ----
<S> <C>
GLOSSARY OF SPECIAL TERMS............................................... 3
FEE TABLES.............................................................. 4
SUMMARY................................................................. 6
ACCUMULATION UNIT VALUES................................................ ??
INTRODUCTION............................................................ 7
VARIABLE ACCOUNT "A" CONTRACT AND SEPARATE ACCOUNT TWO SEPARATE
ACCOUNT.............................................................. 8
What are the Variable Account "A" Contracts?.......................... 8
Who can buy these Contracts?.......................................... 8
What is the Separate Account and how does it operate?................. 9
May I transfer assets between Sub-Accounts?........................... 9
OPERATION OF THE CONTRACT............................................... 10
How is my Purchase Payment credited?.................................. 10
What size Purchase Payments must I make?.............................. 10
What if I am not satisfied with my purchase?.......................... 10
May I assign or transfer my Contract?................................. 10
How do I know what my Contract is worth?.............................. 10
How is the Accumulation Unit value determined?........................ 10
How are the underlying Fund shares valued?............................ 11
PAYMENT OF BENEFITS..................................................... 11
What would my Beneficiary receive as a death benefit?................. 11
How can a Contract be redeemed or surrendered?........................ 11
Can payment of the redemption or surrender value ever be postponed
beyond the seven day period?......................................... 12
May I surrender once Annuity payments have started?................... 12
May I reinvest after a redemption?.................................... 12
How do I elect an Annuity Commencement Date and form of Annuity?...... 12
What is the minimum amount that I may select as an Annuity Payment?... 13
What are the available Annuity options under the Contracts?........... 13
How are Variable Annuity payments determined?......................... 14
CHARGES UNDER THE CONTRACT.............................................. 14
How are the sales charges under the Contracts made?................... 14
Is there ever a time when the sales charges do not apply?............. 15
What do the sales charges cover?...................................... 15
What is the mortality and expense risk charge?........................ 15
Are there any administrative charges?................................. 16
How much are the deductions for premium taxes?........................ 16
HARTFORD LIFE INSURANCE COMPANY AND THE FUNDS........................... 16
What is Hartford?..................................................... 16
What are the Funds?................................................... 17
FEDERAL TAX CONSIDERATIONS.............................................. 19
What are some of the federal tax consequences which affect these
Contracts?........................................................... 19
MISCELLANEOUS........................................................... 22
What are my voting rights?............................................ 22
Will other Contracts be participating in the Separate Account?........ 22
How are the Contracts sold?........................................... 22
Who is the custodian of the Separate Account's assets?................ 22
Are there any material legal proceedings affecting the Separate
Account?............................................................. 22
How are Year 2000 issues being addressed?............................. 23
Is Hartford relying on any experts as to any portion of this
Prospectus?.......................................................... 23
How may I get additional information?................................. 23
APPENDIX I.............................................................. 24
TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION............... 27
</TABLE>
2
<PAGE>
GLOSSARY OF SPECIAL TERMS
ACCUMULATION PERIOD: The period before the commencement of Annuity payments.
ACCUMULATION UNIT: An accounting unit of measure used to calculate values before
Annuity payments begin.
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: The 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 17 of this Prospectus and any
additional Funds which may be made available from time to time.
GENERAL ACCOUNT: The General Account of Hartford in which reserves are
maintained for Fixed Annuities during the Annuity Period.
HARTFORD: Hartford Life Insurance Company.
PREMIUM TAX: A tax on premiums charged by a state or municipality.
PURCHASE PAYMENT: The payment made to Hartford pursuant to the terms of the
Contract.
SEPARATE ACCOUNT: The Hartford 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.
3
<PAGE>
FEE TABLE
SUMMARY
Contract Owner Transaction Expenses
(All Sub-Accounts)
<TABLE>
<S> <C>
Sales Load Imposed on Purchases (as a percentage of premium
payments)....................................................... None
Exchange Fee...................................................... $ 0
Deferred Sales Load (as a percentage of amounts withdrawn)
First Year (1)................................................ 6%
Second Year................................................... 5%
Third Year.................................................... 4%
Fourth Year................................................... 3%
Fifth Year.................................................... 2%
Sixth Year.................................................... 1%
Seventh Year.................................................. 0%
Annual Maintenance Fee (2)........................................ $ 25
Annual Expenses -- Separate Account (as percentage of average
account value)
Mortality and Expense Risk.................................... 1.250%
</TABLE>
- ---------
(1) Length of time from premium payment.
(2) The Annual Maintenance Fee is a single $25 charge on Contracts issued after
February 15, 1984. For Contracts issued between May 2, 1983, and February
15, 1984, there is a single $35 charge applied the first year and a $25
charge applied for each Contract Year thereafter. The Annual Maintenance Fee
is deducted proportionally from the investment options in use at the time of
the charge. Pursuant to requirements of the Investment Company Act of 1940,
the Annual Maintenance Fee has been reflected in the Examples by a method
intended to show the "average" impact of the Annual Maintenance Fee on an
investment in the Separate Account. In the Example, the Annual Maintenance
Fee is approximately a 0.08% annual asset charge based on the experience of
the Contracts.
Annual Fund Operating Expenses
(as a percentage of net assets)
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER OPERATING
FEES EXPENSES EXPENSES
---------- -------- ----------
<S> <C> <C> <C>
Hartford Advisers Fund.......................... 0.635% 0.020% 0.655%
Hartford Bond Fund.............................. 0.515% 0.020% 0.535%
Hartford Capital Appreciation Fund.............. 0.645% 0.020% 0.665%
Hartford Dividend & Growth Fund................. 0.685% 0.020% 0.705%
Hartford Global Leaders Fund (1)................ 0.200% 0.200% 0.400%
Hartford Growth and Income Fund (1)............. 0.200% 0.150% 0.350%
Hartford High Yield Fund (1).................... 0.200% 0.150% 0.350%
Hartford Index Fund............................. 0.400% 0.015% 0.415%
Hartford International Advisers Fund............ 0.775% 0.120% 0.895%
Hartford International Opportunities Fund....... 0.705% 0.090% 0.795%
Hartford MidCap Fund............................ 0.775% 0.040% 0.815%
Hartford Money Market Fund...................... 0.450% 0.015% 0.465%
Hartford Mortgage Securities Fund............... 0.450% 0.025% 0.475%
Hartford Small Company Fund..................... 0.775% 0.020% 0.795%
Hartford Stock Fund............................. 0.455% 0.020% 0.475%
</TABLE>
- ---------
(1) Hartford Growth and Income Fund, Hartford Global Leaders Fund and Hartford
High Yield Fund are new Funds. "Total Fund Operating Expenses" are based on
annualized estimates of such expenses to be incurred in the current fiscal
year. HL Investment Advisors, Inc. has agreed to waive its fees for these
until the assets of the Funds (excluding assets contributed by companies
affiliated with HL Investment Advisors, Inc.) reach $20 million. Absent this
waiver, the "Management Fees" and "Total Fund Operating Expenses" would have
been:
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT FEES OPERATING EXPENSES
------------------ --------------------
<S> <C> <C>
Hartford Growth and Income Fund................................................. 0.750% 0.900%
Hartford Global Leaders Fund.................................................... 0.750% 0.950%
Hartford High Yield Fund........................................................ 0.750% 0.900%
</TABLE>
4
<PAGE>
EXAMPLE
<TABLE>
<CAPTION>
If you surrender your Contract If you annuitize your Contract If you do not surrender your
at the end of the applicable at the end of the applicable Contract, you would pay the
time period you would pay the time period you would pay the following expenses on a $1,000
following expenses on a $1,000 following expenses on a $1,000 investment, assuming a 5%
investment, assuming a 5% investment, assuming a 5% annual return on assets:
annual return on assets: annual return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- -------- ------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Advisers Fund............ $ 71 $ 92 $ 113 $ 203 $ 17 $ 54 $ 93 $ 202 $ 17 $ 54 $ 93 $ 203
Bond Fund................ 70 88 107 189 16 50 86 189 16 50 87 189
Capital Appreciation
Fund................... 72 92 114 204 17 54 93 203 18 54 94 204
Dividend & Growth Fund... 72 94 116 208 17 55 95 207 18 56 96 208
Global Leaders Fund...... 69 94 N/A N/A 14 56 N/A N/A 15 56 N/A N/A
Growth and Income Fund... 68 92 N/A N/A 14 54 N/A N/A 14 54 N/A N/A
High Yield Fund.......... 68 92 N/A N/A 14 54 N/A N/A 14 54 N/A N/A
Index Fund............... 69 85 101 176 15 46 80 175 15 47 81 176
International Advisers
Fund................... 74 100 126 229 19 61 105 228 20 62 106 229
International
Opportunities Fund..... 73 97 121 218 18 58 100 217 19 59 101 218
MidCap Fund.............. 73 97 N/A N/A 19 59 N/A N/A 19 59 N/A N/A
Money Market Fund........ 70 86 103 182 15 48 83 181 16 48 83 182
Mortgage Securities
Fund................... 70 87 104 183 15 48 83 182 16 49 84 183
Small Company Fund....... 73 97 121 218 18 58 100 217 19 59 101 218
Stock Fund............... 70 87 104 183 15 48 83 182 16 49 84 183
</TABLE>
The purpose of this table is to assist the Contract Owner in understanding
various costs and expenses that a Contract Owner will bear directly or
indirectly. The table reflects expenses of the Separate Account and underlying
Funds. Premium taxes may also be applicable.
This EXAMPLE should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.
5
<PAGE>
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 Hartford for its approval. A
Contract Owner may at any time, within 10 days of delivery of a Contract sold
hereunder, return the Contract to Hartford 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 10).
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 19 and Appendix I commencing on
page 24).
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 10.)
D. UNDERLYING INVESTMENTS FOR CONTRACTS
The investment options are the Hartford Advisers Fund, Hartford Bond Fund,
Hartford Capital Appreciation Fund, Hartford Dividend & Growth Fund, Hartford
Global Leaders Fund, Hartford Growth and Income Fund, Hartford High Yield Fund,
Hartford Index Fund, Hartford International Advisers Fund, Hartford MidCap Fund,
Hartford Money Market Fund, Hartford Mortgage Securities Fund, Hartford Small
Company Fund and Hartford Stock Fund 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 14.) In the event of 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 15.)
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 15.)
3. ANNUAL MAINTENANCE FEE
The Contracts provide for an administrative charge to be deducted from the
value of the Contract. For Contracts issued between May 2, 1983 and February
14, 1984, there is a single $35.00 charge applied the first year and a $25.00
charge applied for each Contract Year thereafter. For Contracts issued
beginning February 15, 1984, the Annual Maintenance Fee is a single $25.00
charge. (See "Are there any administrative charges?" commencing on page 16.)
6
<PAGE>
4. MORTALITY AND EXPENSE RISKS
For assuming the mortality and expense risks under the Contracts, Hartford
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 15.)
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 16.)
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, Hartford may terminate the Contract in its entirety.
(See "How can a Contract be redeemed or surrendered?" commencing on page 11.)
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 11.)
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 12). However, Hartford 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, Hartford shall vote such interest in the same
proportion as shares of the Fund for which instructions have been received by
Hartford (see "What are my voting rights?" commencing on page 22).
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 Hartford 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 page 3 prior to reading this Prospectus to familiarize
yourself with the terms being used.
7
<PAGE>
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 thirteen Sub-Accounts, each investing in a different
underlying Fund with its own distinct investment objectives. More Sub-Accounts
may be made available by Hartford 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
Hartford.
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.
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 Hartford 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, Hartford 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").
8
<PAGE>
WHAT IS THE SEPARATE ACCOUNT AND HOW DOES IT OPERATE?
The Separate Account was established on June 2, 1986, in accordance with
authorization by the Board of Directors of Hartford (On March 31, 1988, Variable
Account A was transferred to Separate Account Two and became a series thereof.)
It is the separate account in which Hartford sets aside and invests the assets
attributable to the Contracts sold under this Prospectus. Although the Separate
Account is an integral part of Hartford, it is registered as a unit investment
trust under the Investment Company Act of 1940. This registration does not,
however, involve Commission supervision of the management or the investment
practices or policies of the Separate Account or Hartford.
Under Connecticut law, the assets of the Separate Account attributable to
the Contracts offered under this Prospectus are held for the benefit of the
owners of, and the persons entitled to payments under, those Contracts. Also, in
accordance with the Contracts, the assets in the Separate Account attributable
to Contracts participating in the Separate Account are not chargeable with
liabilities arising out of any other business Hartford may conduct. So, you will
not be affected by the rate of return of Hartford's general account, nor by the
investment performance of any of Hartford's other separate accounts.
Your 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.
Hartford does not guarantee the investment results of the Sub-Accounts or
any of the underlying investments. There is no assurance that the value of a
Contract during the years prior to retirement or the aggregate amount of the
Variable Annuity payments will equal the 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.
Hartford reserves the right, subject to compliance with the law, to
substitute the shares of any other registered investment company for the shares
of any Fund held by the Separate Account. Substitution may occur if shares of
the Fund(s) become unavailable or due to changes in applicable law or
interpretations of law. Current law requires notification to you of any such
substitution and approval of the Commission. Hartford 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.
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 Hartford 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 Hartford 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.
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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
Hartford. 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.
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, Hartford 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 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.
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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 Hartford, or (b) 100%
of the total Purchase Payments made to such Contract, reduced by any prior
surrenders.
The calculated Death Benefit will remain invested in the Separate Account in
accordance with the last allocation instructions given by the Contract Owner
until the proceeds are paid or Hartford receives new settlement instructions
from the Beneficiary. During the time period between Hartford's receipt of
written notification of Due Proof of Death and Hartford's receipt of the
complete settlement instructions, the calculated Death Benefit will remain
invested in the Sub-Account(s) previously elected by the Contract Owner and will
be subject to market fluctuations. The Minimum Death Benefit may be taken by the
Beneficiary in a single sum, in which case payment will be made within seven
days of receipt of proof of death by Hartford, unless subject to postponement as
explained below. In lieu of payment in one sum, the Beneficiary may elect that
the amount be applied under any one of the optional Annuity forms (see "What are
the available Annuity options under the Contracts?" commencing on page 13)
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 Hartford
and within one year after the death of such person by written notice to
Hartford. The proceeds due on death may be applied to provide variable payments,
fixed payments, or a combination of variable and fixed payments.
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 14.
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 Hartford 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 Hartford
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.
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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%.
HARTFORD 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 19.)
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 Hartford 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 Commission; (b) the Commission
permits postponement and so orders; or (c) the 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 19.)
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
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annuity table then in use by Hartford. 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, Hartford 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 Hartford 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, Hartford has the right to change the frequency of
payment to intervals that will result in payments of at least $20.00.
WHAT ARE THE AVAILABLE ANNUITY OPTIONS UNDER THE 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.
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 Hartford.
OPTION 4: JOINT AND LAST SURVIVOR ANNUITY
An Annuity payable monthly during the joint lifetime of the Annuitant and a
designated second person, and thereafter during the remaining lifetime of the
survivor, ceasing with the last payment prior to the death of the survivor.
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.
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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 HARTFORD.
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UNDER ANY OF THE ANNUITY OPTIONS ABOVE, EXCLUDING OPTION 5 (ON A VARIABLE
BASIS), NO SURRENDERS ARE PERMITTED AFTER ANNUITY PAYMENTS COMMENCE.
- --------------------------------------------------------------------------------
Hartford 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 10) 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.
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
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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 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 Hartford 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) Hartford's actual
mortality experience among Annuitants before or after retirement or (b)
Hartford's actual expenses, if greater than the deductions provided for in the
Contracts because of the expense and mortality undertakings by Hartford.
For assuming these risks under the Contracts, Hartford will make a daily
charge 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. Hartford reserves the right to
increase these and other charges subject to Security and Exchange Commission
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 Hartford under the Contracts,
assuming the selection of one of the forms of life Annuities, is to make monthly
Annuity payments (determined in accordance with the Annuity table and other
provisions contained in the 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. Hartford also assumes the liability for payment of the Minimum Death
Benefit provided under the Contract.
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The mortality undertakings are based on Hartford's determination of expected
mortality rates among all Annuitants. If actual experience among Annuitants
during the Annuity payment period deviates from Hartford's actuarial
determination of expected mortality rates among Annuitants because, as a group,
their longevity is longer than anticipated, Hartford must provide amounts from
its general funds to fulfill its Contract obligations. In that event, a loss
will fall on Hartford. 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, Hartford 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, Hartford 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, Hartford 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, Hartford 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. For Contracts issued between May 2, 1983 and February 14, 1984,
there is a single $35.00 charge applied the first year and a $25.00 charge
applied for each Contract Year thereafter. For Contracts issued beginning
February 15, 1984, the Annual Maintenance Fee is a single $25.00 charge. 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. Hartford 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.
HARTFORD LIFE INSURANCE COMPANY
AND THE FUNDS
WHAT IS HARTFORD?
Hartford is a stock life insurance company engaged in the business of
writing life insurance, both individual and group, in all states of the United
States and the District of Columbia. Hartford was originally incorporated under
the laws of Massachusetts on June 5, 1902, and was subsequently redomiciled to
Connecticut. Its offices are located in Simsbury, Connecticut; however, its
mailing address if P.O. Box 2999, Hartford, CT 06104-2999. Hartford is
ultimately controlled by The Hartford Financial Services Group, Inc., one of the
largest financial service providers in the United States.
HARTFORD RATINGS
<TABLE>
<CAPTION>
EFFECTIVE
RATING AGENCY DATE OF RATING RATING BASIS OF RATING
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
A.M. Best and Company, Inc. 9/9/97 A+ Financial soundness and operating performance.
- ------------------------------------------------------------------------------------------------
Standard and Poor's 1/23/98 AA Insurer financial strength
- ------------------------------------------------------------------------------------------------
Duff & Phelps 1/23/98 AA+ Claims paying ability
- ------------------------------------------------------------------------------------------------
</TABLE>
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WHAT ARE THE 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 Hartford. HL Investment Advisors, Inc. ("HL Advisors") serves as the
investment adviser to each of the Hartford Funds.
Wellington Management Company, LLP serves as sub-investment adviser for
Hartford Advisers Fund, Hartford Capital Appreciation Fund, Hartford Dividend
and Growth Fund, Hartford Global Leaders Fund, Hartford Growth and Income Fund,
Hartford International Advisers Fund, Hartford MidCap Fund, Hartford Small
Company Fund and Hartford Stock Fund.
In addition, HL Advisors has entered into an investment services agreement
with The Hartford Investment Management Company ("HIMCO"), pursuant to which
HIMCO will provide certain investment services to Hartford Bond Fund, Hartford
High Yield Fund, Hartford Index Fund, Hartford Money Market Fund and Hartford
Mortgage Securities Fund.
A full description of the Funds, their investment policies and restrictions,
risks, charges and expenses and all other aspects of their operation is
contained in the accompanying Funds' Prospectus which should be read in
conjunction with this Prospectus before investing and in the Funds' Statement of
Additional Information which may be ordered from Hartford. The Funds may not be
available in all states and to all contract versions. In some cases, your
contract may have to be amended to add certain funds. Please contact Hartford or
your registered representative for further information.
The investment objectives of each of the Funds are as follows:
HARTFORD ADVISERS FUND
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.
HARTFORD BOND FUND
To achieve maximum current income consistent with preservation of capital by
investing primarily in fixed-income securities.
HARTFORD CAPITAL APPRECIATION FUND
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 DIVIDEND AND GROWTH FUND
Seeks a high level of current income consistent with growth of capital and
reasonable investment risk.
HARTFORD GLOBAL LEADERS FUND
Seeks growth of capital by investing primarily in equity securities issued
by U.S. companies and non-U.S. companies.*
HARTFORD GROWTH AND INCOME FUND
Seeks growth of capital and current income by investing primarily in equity
securities with earnings growth potential and steady or rising dividends.
HARTFORD HIGH YIELD FUND
Seeks high current income by investing in non-invetment grade fixed-income
securities. Growth of capital is a secondary objective.*
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HARTFORD INDEX FUND
Seeks to provide investment results which approximate the price and yield
performance of publicly-traded common stocks in the aggregate, as represented by
the Standard & Poor's 500 Composite Stock Price Index.*
HARTFORD INTERNATIONAL ADVISERS FUND
Seeks maximum long-term total return consistent with prudent investment risk
by investing in a portfolio of equity, debt and money market securities.
Securities in which the Fund invests primarily will be denominated in non-U.S.
currencies and will be traded in non-U.S. markets.
HARTFORD MIDCAP FUND
Seeks to achieve long-term capital growth through capital appreciation by
investing primarily in equity securities.
HARTFORD MONEY MARKET FUND
To achieve maximum current income consistent with liquidity and preservation
of capital by investing in money market securities.
HARTFORD MORTGAGE SECURITIES FUND
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 SMALL COMPANY FUND
Seeks growth of capital by investing primarily in equity securities on the
basis of potential for capital appreciation.
HARTFORD STOCK FUND
To achieve long-term capital growth primarily through capital appreciation,
with income a secondary consideration, by investing in equity-type securities.
It is conceivable that in the future it may be disadvantageous for variable
annuity separate accounts and variable life insurance separate accounts to
invest in the Funds simultaneously. Although Hartford and the Funds do not
currently foresee any such disadvantages either to variable annuity Contract
Owners or 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.
*"STANDARD & POOR'S-REGISTERED TRADEMARK-", "S&P-REGISTERED TRADEMARK-", "S&P
500-REGISTERED TRADEMARK-", "STANDARD & POOR'S 500." AND "500" ARE TRADEMARKS OF
THE MCGRAW-HILL COMPANIES, INC AND HAVE BEEN LICENSED FOR USE BY HARTFORD. THE
INDEX FUND IS NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY STANDARD & POOR'S AND
STANDARD & POOR'S MAKES NO REPRESENTATION REGARDING THE ADVISABILITY OF
INVESTING IN THE INDEX FUND.
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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 24, is based on Hartford's
understanding of current federal income tax laws as they are currently
interpreted.
B. TAXATION OF HARTFORD AND THE SEPARATE ACCOUNT
The Separate Account is taxed as part of Hartford which is taxed as a life
insurance company in accordance with the Internal Revenue Code. Accordingly, the
Separate Account will not be taxed as a "regulated investment company" under
subchapter M of the Code. Investment income and any realized capital gains on
the assets of the Separate Account are reinvested and are taken into account in
determining the value of the Accumulation and Annuity Units. (See "How is the
Accumulation Unit value determined?" commencing on page 10.) 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.
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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.
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. Hartford 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.
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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).
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, 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
Hartford 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 Hartford, Hartford will
automatically withhold 10% of the taxable distribution.
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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 24 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.
MISCELLANEOUS
WHAT ARE MY VOTING RIGHTS?
Hartford will notify you of any Fund shareholders' meeting if the shares
held for your account may be voted at such meetings. Hartford will also send
proxy materials and a form of instruction by means of which you can instruct
Hartford with respect to the voting of the Fund shares held for your account.
In connection with the voting of Fund shares held by it, Hartford will
arrange for the handling and tallying of proxies received from Contract Owners.
Hartford as such, shall have no right, except as hereinafter provided, to vote
any Fund shares held by it hereunder which may be registered in its name or the
names of its nominees. Hartford will, however, vote the Fund shares held by it
in accordance with the instructions received from the Contract Owners for whose
accounts the Fund shares are held. If a Contract Owner desires to attend any
meeting at which shares held for the Contract Owner's benefit may be voted, the
Contract Owner may request Hartford to furnish a proxy or otherwise arrange for
the exercise of voting rights with respect to the Fund shares held for such
Contract Owner's account. In the event that the Contract Owner gives no
instructions or leaves the manner of voting discretionary, Hartford will vote
such shares of the appropriate Fund 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 affiliates of Hartford. Hartford's parent company
indirectly owns 100% of both HESCO and HSD. The principal business address of
HESCO and HSD is the same as Hartford.
The securities will be sold by salespersons of HESCO, and subsequently, HSD,
who represent Hartford as insurance and Variable Annuity agents and who are
registered representatives or Broker-Dealers who have entered into distribution
agreements with HESCO, and subsequently HSD.
HESCO is registered with the Commission under the Securities and Exchange
Act of 1934 as a Broker-Dealer and is a member of the NASD. HSD will be
registered with the Commission under the Securities Exchange Act of 1934 as a
Broker-Dealer and will become a member of the NASD.
WHO IS THE CUSTODIAN OF THE SEPARATE ACCOUNT'S ASSETS?
Hartford is the custodian of the Separate Account's assets.
ARE THERE ANY MATERIAL LEGAL PROCEEDINGS AFFECTING THE SEPARATE ACCOUNT?
No.
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HOW ARE YEAR 2000 ISSUES BEING ADDRESSED?
The Year 2000 issue relates to the ability or inability of computer systems
to properly process information and data containing or related to dates
beginning with the year 2000 and beyond. The Year 2000 issue exists because,
historically, many computer systems that are in use today were developed years
ago when a year was identified using a two-digit field rather than a four-digit
field. As information and data containing or related to the century date are
introduced to computer hardware, software and other systems, date sensitive
systems may recognize the year 2000 as 1900, or not at all, which may result in
computer systems processing information incorrectly. This, in turn, may
significantly and adversely affect the integrity and reliability of information
databases and may result in a wide variety of adverse consequences to a company.
In addition, Year 2000 problems that occur with third parties with which a
company does business, such as suppliers, computer vendors and others, may also
adversely affect any given company.
As an insurance and financial services company, Hartford has thousands of
individual and business customers that have purchased or invested in insurance
policies, annuities, mutual funds and other financial products. Nearly all of
these policies and products contain date sensitive data, such as policy
expiration dates, birth dates, premium payments dates and the like. In addition,
Hartford has business relationships with numerous third parties that affect
virtually all aspects of its business, including, without limitation, suppliers,
computer hardware and software vendors, insurance agents and brokers, securities
broker-dealers and other distributors of financial products.
Beginning in 1990, Hartford began working on making its computer systems
Year 2000 ready, either by installing new programs or by replacing systems. In
January 1998, Hartford commenced a company-wide program to further identify,
assess and remediate the impact of Year 2000 problems in all of Hartford's
business segments. Hartford currently anticipates that this internal program
will be substantially completed by the end of 1998, and testing of computer
systems will continue through 1999.
In addition, as part of its Year 2000 program, Hartford is identifying third
parties with which it has significant business relations in order to attempt to
assess any potential impact on Hartford as a result of such third-party Year
2000 issues and remediation plans. Hartford currently anticipates that it will
substantially complete this evaluation by the end of 1998, and will conduct
systems testing with certain third parties through 1999. Hartford does not have
control over these third parties and, as a result, Hartford cannot currently
determine to what extent future operating results may be adversely affected by
the failure of these third parties to successfully address their Year 2000
issues. Hartford will continue to assess Year 2000 risk exposures related to its
own operations and its third-party relationships and is in the process of
developing contingency plans.
The costs of addressing the Year 2000 issue that have been incurred through
the six months ended June 30, 1998 have not been material to Hartford's
financial condition or results of operations. Hartford will continue to incur
costs related to its Year 2000 efforts and does not anticipate that the costs to
be incurred will be material to its financial condition or results of
operations.
ARE YOU RELYING ON ANY EXPERTS AS TO ANY PORTION OF THIS PROSPECTUS?
The audited financial statements and financial statement schedules included
in this registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance on the authority of said firm as
experts in giving said reports. The principal business address of Arthur
Andersen LLP is One Financial Plaza, Hartford, Connecticut 06103.
HOW MAY I GET ADDITIONAL INFORMATION?
Inquiries will be answered by calling your representative or by writing:
Hartford Life Insurance Company
Attn: Individual Annuity Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Telephone: (800) 862-6668 (Contract Owners)
(800) 862-7155 (Investment Consultants)
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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.
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.
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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 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.
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
25
<PAGE>
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): 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.
26
<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: Individual Annuity Services, P.O. Box 5085, Hartford, Connecticut
06102-5085.
Date of Prospectus: September 30, 1998
Date of Statement of Additional Information: September 30, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SECTION
- -------
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 . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
<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 Hartford Advisers Fund, Hartford Capital Appreciation Fund,
Hartford Bond Fund, Hartford International Opportunities Fund, Hartford Money
Market Fund, Hartford Mortgage Securities Fund, Hartford Stock Fund, Hartford
Index Fund, Hartford Dividend & Growth Fund, Hartford International Advisers,
Hartford MidCap Fund, Hartford Small Company Fund and Hartford Growth and
Income 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 ("Hartford") is a stock life insurance
company engaged in the business of writing life insurance, both individual
and group, in all states of the United States and the District of Columbia.
HL was originall incorporated under the laws of Massachusetts on June 5,
1902, and was subsequently redomiciled to Connecticut. Its offices are
located in Simsbury, Connecticut; however, its mailing address if P. O. Box
2999, Hartford, CT 06104-2999. Hartford is ultimately controlled by The
Hartford Financial Services Group, Inc., one of the largest financial service
providers in the United States.
<PAGE>
HARTFORD RATINGS
<TABLE>
<CAPTION>
EFFECTIVE
RATING AGENCY DATE OF RATING RATING BASIS OF RATING
- ------------- ------------- ------ ---------------
<S> <C> <C> <C>
A.M. Best and Company, Inc. 9/9/97 A+ Financial soundness and operating performance.
Standard and Poor's 1/23/98 AA Insurer financial strength
Duff & Phelps 1/23/98 AA+ Claims paying ability
</TABLE>
SAFEKEEPING OF ASSETS
The assets of the Separate Account are held by Hartford under a safekeeping
arrangement.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited financial statements and financial statement schedules included
in this registration statement have been audited by Arthur Andersen LLP,
independent public accounts, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm
as experts in giving said reports. The principal busines address of Arthur
Andersen LLP is One Financial Plaza, Hartford, Connecticut 06103.
DISTRIBUTION OF CONTRACTS
Hartford Securities Distribution Company, Inc. ("HSD") serves as principal
underwriter for the securities issued with respect to the Separate Account
and will offer the Contracts on a continued basis.
HSD is a wholly-owned subsidiaries of HL. The principal business address of
HSD is the same as Hartford.
The securities will be sold by salespersons of 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 HSD.
HSD is registered with the Securities and Exchange Commission under the
Securities and Exchange Act of 1934 as a Broker-Dealer and is a member of the
National Association of Securities Dealers, Inc. ("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
<PAGE>
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
(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,
<PAGE>
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.
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.
<PAGE>
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.
Illustration of Annuity Payments
Individual Age 65, Life Annuity
With 120 Payments Certain
-------------------------
1. Net amount applied 13,978.25
2. Initial monthly income per $1,000 of payment applied 6.24
3. Initial monthly payment (1x2-1,000) 87.22
4. Annuity Unit value .953217
5. Number of monthly Annuity Units (3-4) 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
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
<PAGE>
(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:
$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.
<PAGE>
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).
Illustration of Calculation of Annuity Unit Value
--------------------------------------------------
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
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.
<PAGE>
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.
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 (the Account) as of December 31,
1997, and the related statement of operations for the year then ended and
statements of changes in net assets for each of the two years in the period then
ended. These financial statements are the responsibility of the Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hartford Life Insurance Company
Separate Account Two as of December 31, 1997, the results of its operations for
the year then ended and the changes in its net assets for each of the two years
in the period then ended in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 16, 1998
<PAGE>
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<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ------------
<S> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund, Inc.
Shares 233,750,856
Cost $ 239,212,290
Market Value....................................... $245,380,897 -- --
Hartford Stock Fund, Inc.
Shares 342,491,362
Cost $1,100,714,577
Market Value....................................... -- $1,754,695,243 --
HVA Money Market Fund, Inc.
Shares 267,032,906
Cost $ 267,032,906
Market Value....................................... -- -- $267,032,906
Hartford Advisers Fund, Inc.
Shares 1,464,839,883
Cost $2,548,538,776
Market Value....................................... -- -- --
Hartford Capital Appreciation Fund, Inc.
Shares 393,201,702
Cost $1,191,518,665
Market Value....................................... -- -- --
Hartford Mortgage Securities Fund, Inc.
Shares 176,335,636
Cost $ 190,215,927
Market Value....................................... -- -- --
Hartford Index Fund, Inc.
Shares 142,876,568
Cost $ 270,370,922
Market Value....................................... -- -- --
Hartford International Opportunities Fund, Inc.
Shares 303,637,818
Cost $ 352,424,043
Market Value....................................... -- -- --
Hartford Dividend and Growth Fund, Inc.
Shares 342,782,937
Cost $ 502,839,651
Market Value....................................... -- -- --
Due from Hartford Life Insurance Company............. 509,273 3,595 34,153,395
Receivable from fund shares sold..................... 239 13,285,824 4
------------ -------------- ------------
Total Assets......................................... 245,890,409 1,767,984,662 301,186,305
------------ -------------- ------------
LIABILITIES:
Due to Hartford Life Insurance Company............... 240 13,285,750 74
Payable for fund shares purchased.................... 509,402 3,595 34,148,202
------------ -------------- ------------
Total Liabilities.................................... 509,642 13,289,345 34,148,276
------------ -------------- ------------
Net Assets (variable annuity contract liabilities)... $245,380,767 $1,754,695,317 $267,038,029
------------ -------------- ------------
------------ -------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL MORTGAGE
ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ----------------- --------------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund, Inc.
Shares 233,750,856
Cost $ 239,212,290
Market Value....................................... -- -- -- --
Hartford Stock Fund, Inc.
Shares 342,491,362
Cost $1,100,714,577
Market Value....................................... -- -- -- --
HVA Money Market Fund, Inc.
Shares 267,032,906
Cost $ 267,032,906
Market Value....................................... -- -- -- --
Hartford Advisers Fund, Inc.
Shares 1,464,839,883
Cost $2,548,538,776
Market Value....................................... $3,701,278,316 -- -- --
Hartford Capital Appreciation Fund, Inc.
Shares 393,201,702
Cost $1,191,518,665
Market Value....................................... -- $1,733,908,230 -- --
Hartford Mortgage Securities Fund, Inc.
Shares 176,335,636
Cost $ 190,215,927
Market Value....................................... -- -- $191,109,211 --
Hartford Index Fund, Inc.
Shares 142,876,568
Cost $ 270,370,922
Market Value....................................... -- -- -- $411,157,188
Hartford International Opportunities Fund, Inc.
Shares 303,637,818
Cost $ 352,424,043
Market Value....................................... -- -- -- --
Hartford Dividend and Growth Fund, Inc.
Shares 342,782,937
Cost $ 502,839,651
Market Value....................................... -- -- -- --
Due from Hartford Life Insurance Company............. 452,648 7,173 99,310 --
Receivable from fund shares sold..................... 549 13,688,014 142,887 6,849,126
-------------- ----------------- --------------- ------------
Total Assets......................................... 3,701,731,513 1,747,603,417 191,351,408 418,006,314
-------------- ----------------- --------------- ------------
LIABILITIES:
Due to Hartford Life Insurance Company............... 434 13,688,077 144,327 6,850,498
Payable for fund shares purchased.................... 459,485 7,172 93,430 --
-------------- ----------------- --------------- ------------
Total Liabilities.................................... 459,919 13,695,249 237,757 6,850,498
-------------- ----------------- --------------- ------------
Net Assets (variable annuity contract liabilities)... $3,701,271,594 $1,733,908,168 $191,113,651 $411,155,816
-------------- ----------------- --------------- ------------
-------------- ----------------- --------------- ------------
<CAPTION>
INTERNATIONAL DIVIDEND AND
OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------ -------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund, Inc.
Shares 233,750,856
Cost $ 239,212,290
Market Value....................................... -- --
Hartford Stock Fund, Inc.
Shares 342,491,362
Cost $1,100,714,577
Market Value....................................... -- --
HVA Money Market Fund, Inc.
Shares 267,032,906
Cost $ 267,032,906
Market Value....................................... -- --
Hartford Advisers Fund, Inc.
Shares 1,464,839,883
Cost $2,548,538,776
Market Value....................................... -- --
Hartford Capital Appreciation Fund, Inc.
Shares 393,201,702
Cost $1,191,518,665
Market Value....................................... -- --
Hartford Mortgage Securities Fund, Inc.
Shares 176,335,636
Cost $ 190,215,927
Market Value....................................... -- --
Hartford Index Fund, Inc.
Shares 142,876,568
Cost $ 270,370,922
Market Value....................................... -- --
Hartford International Opportunities Fund, Inc.
Shares 303,637,818
Cost $ 352,424,043
Market Value....................................... $393,046,097 --
Hartford Dividend and Growth Fund, Inc.
Shares 342,782,937
Cost $ 502,839,651
Market Value....................................... -- $ 669,224,723
Due from Hartford Life Insurance Company............. 3,770 1,032,701
Receivable from fund shares sold..................... 108,721 182
------------------ -------------
Total Assets......................................... 393,158,588 670,257,606
------------------ -------------
LIABILITIES:
Due to Hartford Life Insurance Company............... 109,361 147
Payable for fund shares purchased.................... 3,769 1,033,593
------------------ -------------
Total Liabilities.................................... 113,130 1,033,740
------------------ -------------
Net Assets (variable annuity contract liabilities)... $393,045,458 $ 669,223,866
------------------ -------------
------------------ -------------
</TABLE>
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
INTERNATIONAL SMALL
ADVISERS FUND COMPANY FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- ------------
<S> <C> <C>
ASSETS:
Investments:
Hartford International Advisers Fund, Inc.
Shares 48,879,214
Cost $56,417,985
Market Value....................................... $57,422,859 --
Hartford Small Company Fund, Inc.
Shares 59,385,385
Cost $69,986,701
Market Value....................................... -- $71,393,763
Hartford MidCap Fund, Inc.
Shares 8,067,718
Cost $ 8,836,979
Market Value....................................... -- --
Smith Barney Cash Portfolio
Shares 507,910
Cost $ 507,910
Market Value....................................... -- --
Smith Barney Appreciation Fund
Shares 12,256
Cost $ 87,371
Market Value....................................... -- --
Smith Barney Government Portfolio
Shares 37,076
Cost $ 37,076
Market Value....................................... -- --
BB&T Growth & Income Fund
Shares 545,238
Cost $ 6,067,937
Market Value....................................... -- --
AmSouth Equity Income Fund
Shares 233,814
Cost $ 2,359,717
Market Value....................................... -- --
Dividend Receivable.................................. -- --
Due from Hartford Life Insurance Company............. 25,458 175,566
Receivable from fund shares sold..................... 9 16
------------- ------------
Total Assets......................................... 57,448,326 71,569,345
------------- ------------
LIABILITIES:
Due to Hartford Life Insurance Company............... 8 19
Payable for fund shares purchased.................... 25,945 175,691
------------- ------------
Total Liabilities.................................... 25,953 175,710
------------- ------------
Net Assets (variable annuity contract liabilities)... $57,422,373 $71,393,635
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
SMITH BARNEY
SMITH BARNEY SMITH BARNEY GOVERNMENT
MIDCAP FUND CASH PORTFOLIO APPRECIATION FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------------- ----------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford International Advisers Fund, Inc.
Shares 48,879,214
Cost $56,417,985
Market Value....................................... -- -- -- --
Hartford Small Company Fund, Inc.
Shares 59,385,385
Cost $69,986,701
Market Value....................................... -- -- -- --
Hartford MidCap Fund, Inc.
Shares 8,067,718
Cost $ 8,836,979
Market Value....................................... $9,173,875 -- -- --
Smith Barney Cash Portfolio
Shares 507,910
Cost $ 507,910
Market Value....................................... -- $507,912 -- --
Smith Barney Appreciation Fund
Shares 12,256
Cost $ 87,371
Market Value....................................... -- -- $170,562 --
Smith Barney Government Portfolio
Shares 37,076
Cost $ 37,076
Market Value....................................... -- -- -- $37,076
BB&T Growth & Income Fund
Shares 545,238
Cost $ 6,067,937
Market Value....................................... -- -- -- --
AmSouth Equity Income Fund
Shares 233,814
Cost $ 2,359,717
Market Value....................................... -- -- -- --
Dividend Receivable.................................. -- 1,205 -- 96
Due from Hartford Life Insurance Company............. 48,940 26,690 -- --
Receivable from fund shares sold..................... 1 162 120 24
----------- -------- -------- -------
Total Assets......................................... 9,222,816 535,969 170,682 37,196
----------- -------- -------- -------
LIABILITIES:
Due to Hartford Life Insurance Company............... 1 200 109 32
Payable for fund shares purchased.................... 48,925 26,757 -- --
----------- -------- -------- -------
Total Liabilities.................................... 48,926 26,957 109 32
----------- -------- -------- -------
Net Assets (variable annuity contract liabilities)... $9,173,890 $509,012 $170,573 $37,164
----------- -------- -------- -------
----------- -------- -------- -------
<CAPTION>
BB&T AMSOUTH
GROWTH AND EQUITY
INCOME FUND INCOME FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- -------------
<S> <C> <C>
ASSETS:
Investments:
Hartford International Advisers Fund, Inc.
Shares 48,879,214
Cost $56,417,985
Market Value....................................... -- --
Hartford Small Company Fund, Inc.
Shares 59,385,385
Cost $69,986,701
Market Value....................................... -- --
Hartford MidCap Fund, Inc.
Shares 8,067,718
Cost $ 8,836,979
Market Value....................................... -- --
Smith Barney Cash Portfolio
Shares 507,910
Cost $ 507,910
Market Value....................................... -- --
Smith Barney Appreciation Fund
Shares 12,256
Cost $ 87,371
Market Value....................................... -- --
Smith Barney Government Portfolio
Shares 37,076
Cost $ 37,076
Market Value....................................... -- --
BB&T Growth & Income Fund
Shares 545,238
Cost $ 6,067,937
Market Value....................................... $6,477,421 --
AmSouth Equity Income Fund
Shares 233,814
Cost $ 2,359,717
Market Value....................................... -- $2,391,912
Dividend Receivable.................................. -- --
Due from Hartford Life Insurance Company............. 11,400 6,464
Receivable from fund shares sold..................... -- --
----------- -------------
Total Assets......................................... 6,488,821 2,398,376
----------- -------------
LIABILITIES:
Due to Hartford Life Insurance Company............... -- --
Payable for fund shares purchased.................... 11,401 6,460
----------- -------------
Total Liabilities.................................... 11,401 6,460
----------- -------------
Net Assets (variable annuity contract liabilities)... $6,477,420 $2,391,916
----------- -------------
----------- -------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------- --------- --------------
DEFERRED ANNUITY CONTRACTS IN THE ACCUMULATION
PERIOD:
<S> <C> <C> <C>
INDIVIDUAL SUB-ACCOUNTS:
Bond Fund Qualified 1.00%....................... 276,322 $ 4.084713 $ 1,128,696
Bond Fund Non-Qualified 1.00%................... 1,879,248 4.022607 7,559,476
Bond Fund 1.25%................................. 111,586,155 2.113753 235,865,570
Bond Fund .25%.................................. 57,428 1.421542 81,636
Stock Fund Qualified 1.00%...................... 848,097 8.882260 7,533,018
Stock Fund Non-Qualified 1.00%.................. 3,172,838 8.493415 26,948,230
Stock Fund 1.25%................................ 372,753,860 4.601624 1,715,273,108
Stock Fund .25%................................. 1,113,935 2.442242 2,720,499
Money Market Fund Qualified 1.00%............... 979,465 2.570693 2,517,904
Money Market Fund Non-Qualified 1.00%........... 12,009,970 2.571915 30,888,622
Money Market Fund 1.25%......................... 140,796,551 1.650311 232,358,097
Money Market Fund .25%.......................... 412,812 1.237665 510,923
Advisers Fund Qualified 1.00%................... 3,353,386 5.351192 17,944,612
Advisers Fund Non-Qualified 1.00%............... 11,223,033 5.351192 60,056,604
Advisers Fund 1.25%............................. 1,012,471,703 3.572368 3,616,921,513
Advisers Fund .25%.............................. 1,064,392 2.012508 2,142,097
Capital Appreciation Fund Qualified 1.00%....... 858,728 8.154392 7,002,405
Capital Appreciation Fund Non-Qualified 1.00%... 2,279,033 8.150600 18,575,486
Capital Appreciation Fund 1.25%................. 351,188,619 4.845288 1,701,610,001
Capital Appreciation Fund .25%.................. 2,365,382 2.354942 5,570,337
Mortgage Securities Fund Qualified 1.00%........ 694,613 2.692454 1,870,214
Mortgage Securities Fund Non-Qualified 1.00%.... 6,914,379 2.692454 18,616,647
Mortgage Securities Fund 1.25%.................. 81,142,537 2.097829 170,223,167
Mortgage Securities Fund .25%................... 15,250 1.370090 20,891
Index Fund 1.00%................................ 102,566 1.472201 150,998
Index Fund Non-Qualified 1.00%.................. 557,157 1.472201 820,247
Index Fund 1.25%................................ 109,836,846 3.726058 409,258,459
Index Fund .25%................................. 216,268 2.411839 521,604
International Opportunities Fund Qualified
1.00%.......................................... 314,039 1.496781 470,048
International Opportunities Fund Non-Qualified
1.00%.......................................... 1,518,024 1.496728 2,272,069
International Opportunities Fund 1.25%.......... 264,642,015 1.468965 388,749,858
International Opportunities Fund .25%........... 733,875 1.660294 1,218,449
Dividend and Growth Fund Qualified 1.00%........ 390,646 2.169750 847,604
Dividend and Growth Fund Non-Qualified 1.00%.... 1,710,116 2.169750 3,710,524
Dividend and Growth Fund 1.25%.................. 308,682,099 2.149172 663,410,924
Dividend and Growth Fund .25%................... 268,881 2.232593 600,302
International Advisers Fund Sub-Account 1.00%... 37,492 1.328248 49,796
International Advisers Fund Non-Qualified
1.00%.......................................... 223,145 1.328248 296,392
International Advisers Fund 1.25%............... 43,216,995 1.318862 56,997,252
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------- --------- --------------
INDIVIDUAL SUB-ACCOUNTS -- (CONTINUED)
<S> <C> <C> <C>
International Advisers Fund .25%................ 39,807 $ 1.356789 $ 54,010
Hartford Small Company 1.00%.................... 99,533 1.250966 124,512
Hartford Small Company Non-Qualified 1.00%...... 377,483 1.250966 472,218
Hartford Small Company 1.25%.................... 56,706,183 1.246631 70,691,687
Hartford Small Company .25%..................... 48,170 1.264068 60,890
MidCap Fund Sub-Account 1.00% Qualified......... 12,789 1.098000 14,042
MidCap Fund Sub-Account 1.00% Non-Qualified..... 34,465 1.098000 37,843
MidCap Fund Sub-Account 1.25%................... 8,305,640 1.096832 9,109,892
MidCap Fund Sub-Account 1.00% Qualified......... 10,996 1.101485 12,113
Smith Barney Shearson Daily Dividend, Inc.
Qualified 1.00%................................ 53,613 2.777393 148,906
Smith Barney Shearson Daily Dividend, Inc.
Non-Qualified 1.00%............................ 125,291 2.874151 360,106
Smith Barney Shearson Appreciation Fund, Inc.
Qualified 1.00%................................ 18,335 9.303319 170,573
Smith Barney Shearson Gov't and Agencies, Inc.
Qualified 1.00%................................ 14,846 2.503304 37,164
BB&T Growth and Income Fund Sub-Account......... 5,443,658 1.189902 6,477,420
Am South Fund Sub-Account 1.00% Qualified....... 2,337,620 1.023227 2,391,916
--------------
TOTAL ACCUMULATION PERIOD......................... 9,503,477,571
--------------
ANNUITY CONTRACTS IN THE ANNUITY PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Bond Fund Non-Qualified 1.00%................... 14,968 4.022607 60,210
Bond Fund 1.25%................................. 324,152 2.113753 685,179
Stock Fund Non-Qualified 1.00%.................. 11,832 8.493415 100,494
Stock Fund 1.25%................................ 460,700 4.601624 2,119,968
Money Market Fund Qualified 1.00%............... 11,497 2.570693 29,553
Money Market Fund Non-Qualified 1.00%........... 75,465 2.571915 194,090
Money Market Fund 1.25%......................... 326,508 1.650311 538,840
Advisers Fund Qualified 1.00%................... 3,304 5.351192 17,680
Advisers Fund Non-Qualified 1.00%............... 57,148 5.351192 305,810
Advisers Fund 1.25%............................. 1,087,032 3.572368 3,883,278
Capital Appreciation Fund Non-Qualified 1.00%... 2,576 8.150600 20,996
Capital Appreciation Fund 1.25%................. 232,998 4.845288 1,128,942
Mortgage Securities Fund Non-Qualified 1.00%.... 72,723 2.692454 195,803
Mortgage Securities Fund 1.25%.................. 89,106 2.097829 186,929
Index Fund 1.25%................................ 108,562 3.726058 404,508
International Opportunities Fund 1.25%.......... 228,075 1.468965 335,034
Dividend and Growth Fund 1.25%.................. 304,541 2.149172 654,512
International Advisers Fund 1.25%............... 18,897 1.318862 24,923
Hartford Small Company 1.25%.................... 35,558 1.246631 44,328
--------------
TOTAL ANNUITY PERIOD.............................. 10,931,077
--------------
GRAND TOTAL....................................... $9,514,408,648
--------------
--------------
</TABLE>
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------ -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................................ $12,961,364 $ 16,077,936 $13,797,570
EXPENSES:
Mortality and expense undertakings................... (2,612,230) (18,967,977) (3,238,151)
----------- ------------ -----------
Net investment income (loss)....................... 10,349,134 (2,890,041) 10,559,419
----------- ------------ -----------
CAPITAL GAINS INCOME................................... -- 64,909,605 --
----------- ------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on security transactions.... 17,262 1,176,996 --
Net unrealized appreciation (depreciation) of
investments during
the period.......................................... 10,119,718 315,737,284 --
----------- ------------ -----------
Net gain (loss) on investments..................... 10,136,980 316,914,280 --
----------- ------------ -----------
Net increase (decrease) in net assets resulting
from operations................................... $20,486,114 $378,933,844 $10,559,419
----------- ------------ -----------
----------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT CAPITAL MORTGAGE
ADVISERS FUND MONEY MARKET FUND APPRECIATION FUND SECURITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ----------------- ----------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................................ $ 77,714,905 $2,646 $ 8,543,668 $11,347,408
EXPENSES:
Mortality and expense undertakings................... (41,311,784) (627) (19,474,176) (2,333,945)
------------- ------ ----------------- ---------------
Net investment income (loss)....................... 36,403,121 2,019 (10,930,508) 9,013,463
------------- ------ ----------------- ---------------
CAPITAL GAINS INCOME................................... 129,600,221 -- 103,244,397 --
------------- ------ ----------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on security transactions.... 2,159,454 -- 413,746 28,917
Net unrealized appreciation (depreciation) of
investments during
the period.......................................... 501,068,905 -- 190,913,008 5,074,541
------------- ------ ----------------- ---------------
Net gain (loss) on investments..................... 503,228,359 -- 191,326,754 5,103,458
------------- ------ ----------------- ---------------
Net increase (decrease) in net assets resulting
from operations................................... $ 669,231,701 $2,019 $283,640,643 $14,116,921
------------- ------ ----------------- ---------------
------------- ------ ----------------- ---------------
<CAPTION>
INTERNATIONAL DIVIDEND AND
INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................................ $ 4,750,804 $ 3,651,850 $ 9,408,629
EXPENSES:
Mortality and expense undertakings................... (4,257,897) (5,181,012) (6,174,075)
----------- ------------------ ------------
Net investment income (loss)....................... 492,907 (1,529,162) 3,234,554
----------- ------------------ ------------
CAPITAL GAINS INCOME................................... 21,612,566 29,748,890 9,959,170
----------- ------------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on security transactions.... 243,148 29,653 (4,003)
Net unrealized appreciation (depreciation) of
investments during
the period.......................................... 65,120,869 (32,127,237) 111,067,791
----------- ------------------ ------------
Net gain (loss) on investments..................... 65,364,017 (32,097,584) 111,063,788
----------- ------------------ ------------
Net increase (decrease) in net assets resulting
from operations................................... $87,469,490 $ (3,877,856) $124,257,512
----------- ------------------ ------------
----------- ------------------ ------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS -- (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
INTERNATIONAL SMALL
ADVISERS FUND COMPANY FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................................ $1,605,717 $ 32,487
EXPENSES:
Mortality and expense undertakings................... (569,723) (489,607)
------------- ------------
Net investment income (loss)......................... 1,035,994 (457,120)
------------- ------------
CAPITAL GAINS INCOME................................... 110,732 3,307,195
------------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on security transactions.... 13,808 (36,223)
Net unrealized appreciation (depreciation) of
investments during the period....................... 118,913 1,332,603
------------- ------------
Net gain (loss) on investments..................... 132,721 1,296,380
------------- ------------
Net increase (decrease) in net assets resulting
from operations................................... $1,279,447 $4,146,455
------------- ------------
------------- ------------
</TABLE>
* From inception, July 15, 1997, to December 31, 1997.
** From inception, June 3, 1997, to December 31, 1997.
*** From inception, October 23, 1997, to December 31, 1997.
The accompanying notes are an integral part of these financial statements.
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMITH BARNEY
SMITH BARNEY SMITH BARNEY GOVERNMENT
MIDCAP FUND CASH PORTFOLIO FUND APPRECIATION FUND PORTFOLIO
SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------------- ----------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................................ $ 8,146 $26,755 $ 2,394 $1,998
EXPENSES:
Mortality and expense undertakings................... (20,807) (5,365) (1,707) (404)
------------ ------- ------- ------
Net investment income (loss)......................... (12,661) 21,390 687 1,594
------------ ------- ------- ------
CAPITAL GAINS INCOME................................... -- -- 22,341 --
------------ ------- ------- ------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on security transactions.... (2,185) -- 6,810 --
Net unrealized appreciation (depreciation) of
investments during the period....................... 336,895 -- 8,816 --
------------ ------- ------- ------
Net gain (loss) on investments..................... 334,710 -- 15,626 --
------------ ------- ------- ------
Net increase (decrease) in net assets resulting
from operations................................... $322,049 $21,390 $38,654 $1,594
------------ ------- ------- ------
------------ ------- ------- ------
<CAPTION>
BB&T AMSOUTH
GROWTH AND EQUITY INCOME
INCOME FUND FUND
SUB-ACCOUNT** SUB-ACCOUNT***
------------- ----------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................................ $ 43,938 $ 4,389
EXPENSES:
Mortality and expense undertakings................... (21,234) (2,657)
------------- -------
Net investment income (loss)......................... 22,704 1,732
------------- -------
CAPITAL GAINS INCOME................................... 662 --
------------- -------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on security transactions.... -- (1)
Net unrealized appreciation (depreciation) of
investments during the period....................... 409,485 32,196
------------- -------
Net gain (loss) on investments..................... 409,485 32,195
------------- -------
Net increase (decrease) in net assets resulting
from operations................................... $432,851 $33,927
------------- -------
------------- -------
</TABLE>
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss)......................... $ 10,349,134 $ (2,890,041) $ 10,558,627
Capital gains income................................. -- 64,909,605 792
Net realized gain (loss) on security transactions.... 17,262 1,176,996 --
Net unrealized appreciation (depreciation) of
investments during the period....................... 10,119,718 315,737,284 --
------------ -------------- -------------
Net increase (decrease) in net assets resulting from
operations.......................................... 20,486,114 378,933,844 10,559,419
------------ -------------- -------------
UNIT TRANSACTIONS:
Purchases............................................ 28,788,526 208,829,884 56,766,167
Net transfers........................................ 19,102,654 45,780,800 (9,782,834)
Surrenders........................................... (18,300,042) (92,238,226) (68,418,264)
Net annuity transactions............................. 325,387 633,517 12,261
------------ -------------- -------------
Net increase (decrease) in net assets resulting from
unit transactions................................... 29,916,525 163,005,975 (21,422,670)
------------ -------------- -------------
Total increase (decrease) in net assets.............. 50,402,639 541,939,819 (10,863,251)
NET ASSETS:
Beginning of period.................................. 194,978,128 1,212,755,498 277,901,280
------------ -------------- -------------
End of period........................................ $245,380,767 $1,754,695,317 $ 267,038,029
------------ -------------- -------------
------------ -------------- -------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
MONEY
BOND FUND STOCK FUND MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- -------------
OPERATIONS:
Net investment income (loss)......................... $ 9,645,789 $ 3,458,346 $ 9,260,160
Capital gains income................................. -- 36,500,208 --
Net realized gain (loss) on security transactions.... (221,405) 1,221,317 --
Net unrealized (depreciation) appreciation of
investments during the period....................... (5,160,742) 171,537,514 --
------------ -------------- -------------
Net increase (decrease) in net assets resulting from
operations.......................................... 4,263,642 212,717,385 9,260,160
------------ -------------- -------------
UNIT TRANSACTIONS:
Purchases............................................ 25,740,584 167,200,796 69,939,055
Net transfers........................................ (16,696,613) 28,419,235 66,601,560
Surrenders........................................... (15,363,352) (50,578,919) (52,603,716)
Net annuity transactions............................. 63,477 (84,340) (175,109)
------------ -------------- -------------
Net (decrease) increase in net assets resulting from
unit transactions................................... (6,255,904) 144,956,772 83,761,790
------------ -------------- -------------
Total (decrease) increase in net assets.............. (1,992,262) 357,674,157 93,021,950
NET ASSETS:
Beginning of period.................................. 196,970,390 855,081,341 184,879,330
------------ -------------- -------------
End of period........................................ $194,978,128 $1,212,755,498 $ 277,901,280
------------ -------------- -------------
------------ -------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT CAPITAL MORTGAGE
ADVISERS FUND MONEY MARKET FUND APPRECIATION FUND SECURITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ----------------- ----------------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)......................... $ 36,403,121 $ 2,019 $ (10,930,508) $ 9,013,463
Capital gains income................................. 129,600,221 -- 103,244,397 --
Net realized gain (loss) on security transactions.... 2,159,454 -- 413,746 28,917
Net unrealized appreciation (depreciation) of
investments during the period....................... 501,068,905 -- 190,913,008 5,074,541
-------------- ----------------- ----------------- ---------------
Net increase (decrease) in net assets resulting from
operations.......................................... 669,231,701 2,019 283,640,643 14,116,921
-------------- ----------------- ----------------- ---------------
UNIT TRANSACTIONS:
Purchases............................................ 364,832,050 -- 194,562,087 7,925,304
Net transfers........................................ 27,406,992 (88,379) (11,521,643) (9,594,437)
Surrenders........................................... (206,501,208) (9,133) (87,759,430) (17,575,723)
Net annuity transactions............................. 725,608 (21,870) 361,130 (3,307)
-------------- ----------------- ----------------- ---------------
Net increase (decrease) in net assets resulting from
unit transactions................................... 186,463,442 (119,382) 95,642,144 (19,248,163)
-------------- ----------------- ----------------- ---------------
Total increase (decrease) in net assets.............. 855,695,143 (117,363) 379,282,787 (5,131,242)
NET ASSETS:
Beginning of period.................................. 2,845,576,451 117,363 1,354,625,381 196,244,893
-------------- ----------------- ----------------- ---------------
End of period........................................ $3,701,271,594 $-- $1,733,908,168 $191,113,651
-------------- ----------------- ----------------- ---------------
-------------- ----------------- ----------------- ---------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
U.S. GOVERNMENT CAPITAL MORTGAGE
ADVISERS FUND MONEY MARKET FUND APPRECIATION FUND SECURITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ----------------- ----------------- ---------------
OPERATIONS:
Net investment income (loss)......................... $ 42,565,178 $ 4,826 $ (6,448,058) $ 10,591,830
Capital gains income................................. 52,150,764 -- 66,515,678 --
Net realized gain (loss) on security transactions.... 1,838,982 -- 2,074,856 (435,321)
Net unrealized (depreciation) appreciation of
investments during the period....................... 271,199,538 -- 145,316,093 (2,802,442)
-------------- ----------------- ----------------- ---------------
Net increase (decrease) in net assets resulting from
operations.......................................... 367,754,462 4,826 207,458,569 7,354,067
-------------- ----------------- ----------------- ---------------
UNIT TRANSACTIONS:
Purchases............................................ 317,249,591 -- 189,467,703 8,471,412
Net transfers........................................ (5,375,317) (10,049) (3,020,837) (18,731,894)
Surrenders........................................... (148,652,281) (5,248) (57,537,694) (18,950,990)
Net annuity transactions............................. (7,328) (12,789) 159,816 (68,468)
-------------- ----------------- ----------------- ---------------
Net (decrease) increase in net assets resulting from
unit transactions................................... 163,214,665 (28,086) 129,068,988 (29,279,940)
-------------- ----------------- ----------------- ---------------
Total (decrease) increase in net assets.............. 530,969,127 (23,260) 336,527,557 (21,925,873)
NET ASSETS:
Beginning of period.................................. 2,314,607,324 140,623 1,018,097,824 218,170,766
-------------- ----------------- ----------------- ---------------
End of period........................................ $2,845,576,451 $ 117,363 $1,354,625,381 $196,244,893
-------------- ----------------- ----------------- ---------------
-------------- ----------------- ----------------- ---------------
<CAPTION>
INTERNATIONAL DIVIDEND AND
INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------------ -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss)......................... $ 492,907 $ (1,529,162) $ 3,234,554
Capital gains income................................. 21,612,566 29,748,890 9,959,170
Net realized gain (loss) on security transactions.... 243,148 29,653 (4,003)
Net unrealized appreciation (depreciation) of
investments during the period....................... 65,120,869 (32,127,237) 111,067,791
------------ ------------------ -------------
Net increase (decrease) in net assets resulting from
operations.......................................... 87,469,490 (3,877,856) 124,257,512
------------ ------------------ -------------
UNIT TRANSACTIONS:
Purchases............................................ 65,766,703 38,595,370 159,109,767
Net transfers........................................ 26,458,731 (16,075,692) 87,528,713
Surrenders........................................... (18,692,668) (26,504,799) (20,331,098)
Net annuity transactions............................. 190,331 66,746 349,515
------------ ------------------ -------------
Net increase (decrease) in net assets resulting from
unit transactions................................... 73,723,097 (3,918,375) 226,656,897
------------ ------------------ -------------
Total increase (decrease) in net assets.............. 161,192,587 (7,796,232) 350,914,409
NET ASSETS:
Beginning of period.................................. 249,963,229 400,841,689 318,309,457
------------ ------------------ -------------
End of period........................................ $411,155,816 $393,045,458 $ 669,223,866
------------ ------------------ -------------
------------ ------------------ -------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
INTERNATIONAL DIVIDEND AND
INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------------ -------------
OPERATIONS:
Net investment income (loss)......................... $ 1,647,249 $ 2,504,471 $ 2,622,394
Capital gains income................................. 3,111,887 9,391,222 2,783,157
Net realized gain (loss) on security transactions.... 136,100 91,388 (4,854)
Net unrealized (depreciation) appreciation of
investments during the period....................... 34,189,219 27,779,181 37,804,713
------------ ------------------ -------------
Net increase (decrease) in net assets resulting from
operations.......................................... 39,084,455 39,766,262 43,205,410
------------ ------------------ -------------
UNIT TRANSACTIONS:
Purchases............................................ 45,748,598 41,231,155 98,719,762
Net transfers........................................ 19,409,151 19,333,907 69,845,165
Surrenders........................................... (10,550,651) (21,132,233) (8,446,511)
Net annuity transactions............................. (31,502) 8,570 153,439
------------ ------------------ -------------
Net (decrease) increase in net assets resulting from
unit transactions................................... 54,575,596 39,441,399 160,271,855
------------ ------------------ -------------
Total (decrease) increase in net assets.............. 93,660,051 79,207,661 203,477,265
NET ASSETS:
Beginning of period.................................. 156,303,178 321,634,028 114,832,192
------------ ------------------ -------------
End of period........................................ $249,963,229 $400,841,689 $ 318,309,457
------------ ------------------ -------------
------------ ------------------ -------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INTERNATIONAL SMALL
ADVISERS FUND COMPANY FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)......................... $ 1,035,994 $ (457,120)
Capital gains income................................. 110,732 3,307,195
Net realized gain (loss) on security transactions.... 13,808 (36,223)
Net unrealized appreciation (depreciation) of
investments during the period....................... 118,913 1,332,603
------------- ------------
Net increase (decrease) in net assets resulting from
operations.......................................... 1,279,447 4,146,455
------------- ------------
UNIT TRANSACTIONS:
Purchases............................................ 18,887,741 24,742,079
Net transfers........................................ 9,531,179 30,544,670
Surrenders........................................... (2,110,213) (1,630,264)
Net annuity transactions............................. 25,045 44,603
------------- ------------
Net increase (decrease) in net assets resulting from
unit transactions................................... 26,333,752 53,701,088
------------- ------------
Total increase (decrease) in net assets.............. 27,613,199 57,847,543
NET ASSETS:
Beginning of period.................................. 29,809,174 13,546,092
------------- ------------
End of period........................................ $57,422,373 $71,393,635
------------- ------------
------------- ------------
* From inception, July 15, 1997 to December 31, 1997.
** From inception, June 3, 1997 to December 31, 1997.
*** From inception, October 23, 1997 to December 31, 1997.
STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
INTERNATIONAL SMALL
ADVISERS FUND COMPANY FUND
SUB-ACCOUNT SUB-ACCOUNT****
---------- ------------
OPERATIONS:
Net investment income (loss)......................... $ 644,546 $ (17,678)
Capital gains income................................. 595,787 --
Net realized gain on security transactions........... (3,562) 922
Net unrealized (depreciation) appreciation of
investments during the period....................... 708,119 74,459
---------- ----------
Net increase (decrease) in net assets resulting from
operations.......................................... 1,944,890 57,703
---------- ----------
UNIT TRANSACTIONS:
Purchases............................................ 10,618,419 4,333,960
Net transfers........................................ 10,257,798 9,203,248
Surrenders........................................... (609,471) (48,819)
Net annuity transactions............................. -- --
---------- ----------
Net increase (decrease) in net assets resulting from
unit transactions................................... 20,266,746 13,488,389
---------- ----------
Total increase (decrease) in net assets.............. 22,211,636 13,546,092
NET ASSETS:
Beginning of period.................................. 7,597,538 --
---------- ----------
End of period........................................ $29,809,174 $13,546,092
---------- ----------
---------- ----------
</TABLE>
**** From inception, August 9, 1996 to December 31, 1996.
The accompanying notes are an integral part of these financial statements.
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMITH BARNEY
SMITH BARNEY SMITH BARNEY GOVERNMENT
MIDCAP FUND CASH PORTFOLIO APPRECIATION FUND PORTFOLIO
SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------------- ----------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)......................... $ (12,661) $ 21,390 $ 687 $ 1,594
Capital gains income................................. -- -- 22,341 --
Net realized gain (loss) on security transactions.... (2,185) -- 6,810 --
Net unrealized appreciation (depreciation) of
investments during the period....................... 336,895 -- 8,816 --
------------ -------- -------- -------
Net increase (decrease) in net assets resulting from
operations.......................................... 322,049 21,390 38,654 1,594
------------ -------- -------- -------
UNIT TRANSACTIONS:
Purchases............................................ 2,088,623 -- -- --
Net transfers........................................ 6,774,154 -- -- --
Surrenders........................................... (10,936) (93,309) (40,942) (4,272)
Net annuity transactions............................. -- -- -- --
------------ -------- -------- -------
Net increase (decrease) in net assets resulting from
unit transactions................................... 8,851,841 (93,309) (40,942) (4,272)
------------ -------- -------- -------
Total increase (decrease) in net assets.............. 9,173,890 (71,919) (2,288) (2,678)
NET ASSETS:
Beginning of period.................................. -- 580,931 172,861 39,842
------------ -------- -------- -------
End of period........................................ $9,173,890 $509,012 $170,573 $37,164
------------ -------- -------- -------
------------ -------- -------- -------
* From inception, July 15, 1997 to December 31, 1997.
** From inception, June 3, 1997 to December 31, 1997.
*** From inception, October 23, 1997 to December 31, 1997.
STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
SMITH BARNEY SMITH BARNEY
CASH SMITH BARNEY GOVERNMENT
PORTFOLIO APPRECIATION FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------------ ----------------
OPERATIONS:
Net investment income (loss)......................... $ 22,053 $ 15,035 $ 1,646
Capital gains income................................. -- -- --
Net realized gain on security transactions........... -- 174 --
Net unrealized (depreciation) appreciation of
investments during the period....................... -- 11,776 --
--------- ------- -------
Net increase (decrease) in net assets resulting from
operations.......................................... 22,053 26,985 1,646
--------- ------- -------
UNIT TRANSACTIONS:
Purchases............................................ 25 -- --
Net transfers........................................ -- -- --
Surrenders........................................... (10,494) (2,558) (4,273)
Net annuity transactions............................. -- -- --
--------- ------- -------
Net increase (decrease) in net assets resulting from
unit transactions................................... (10,469) (2,558) (4,273)
--------- ------- -------
Total increase (decrease) in net assets.............. 11,584 24,427 (2,627)
NET ASSETS:
Beginning of period.................................. 569,347 148,434 42,469
--------- ------- -------
End of period........................................ $ 580,931 $172,861 $ 39,842
--------- ------- -------
--------- ------- -------
<CAPTION>
BB&T
GROWTH AND AMSOUTH EQUITY
INCOME FUND INCOME FUND
SUB-ACCOUNT** SUB-ACCOUNT***
------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)......................... $ 22,704 $ 1,732
Capital gains income................................. 662 --
Net realized gain (loss) on security transactions.... -- --
Net unrealized appreciation (depreciation) of
investments during the period....................... 409,485 32,195
------------- ---------------
Net increase (decrease) in net assets resulting from
operations.......................................... 432,851 33,927
------------- ---------------
UNIT TRANSACTIONS:
Purchases............................................ 5,104,417 2,100,608
Net transfers........................................ 1,006,220 259,438
Surrenders........................................... (66,068) (2,057)
Net annuity transactions............................. -- --
------------- ---------------
Net increase (decrease) in net assets resulting from
unit transactions................................... 6,044,569 2,357,989
------------- ---------------
Total increase (decrease) in net assets.............. 6,477,420 2,391,916
NET ASSETS:
Beginning of period.................................. -- --
------------- ---------------
End of period........................................ $6,477,420 $2,391,916
------------- ---------------
------------- ---------------
* From inception, July 15, 1997 to December 31, 1997.
** From inception, June 3, 1997 to December 31, 1997.
*** From inception, October 23, 1997 to December 31, 19
STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
------------ ------------------ ---------
OPERATIONS:
Net investment income (loss).........................
Capital gains income.................................
Net realized gain on security transactions...........
Net unrealized (depreciation) appreciation of
investments during the period.......................
Net increase (decrease) in net assets resulting from
operations..........................................
UNIT TRANSACTIONS:
Purchases............................................
Net transfers........................................
Surrenders...........................................
Net annuity transactions.............................
Net increase (decrease) in net assets resulting from
unit transactions...................................
Total increase (decrease) in net assets..............
NET ASSETS:
Beginning of period..................................
End of period........................................
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION:
Separate Account Two (the Account) is a separate investment account within
Hartford Life Insurance Company (the Company) and is registered with the
Securities and Exchange Commission (SEC) as a unit investment trust under the
Investment Company Act of 1940, as amended. Both the Company and the Account are
subject to supervision and regulation by the Department of Insurance of the
State of Connecticut and the SEC. The Account invests deposits by variable
annuity contractholders of the Company in various mutual funds (the Funds) as
directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting principles
in the investment company industry:
a) SECURITY TRANSACTIONS -- Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments sold is
determined on the basis of identified cost. Dividend and capital gains income
are accrued as of the ex-dividend date. Capital gains income represents
dividends from the Funds which are characterized as capital gains under tax
regulations.
b) SECURITY VALUATION -- The investment in shares of the Hartford, Smith
Barney, BB&T and AmSouth mutual funds are valued at the closing net asset value
per share as determined by the appropriate Fund as of December 31, 1997.
c) FEDERAL INCOME TAXES -- The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as an
insurance company under the Internal Revenue Code. Under current law, no federal
income taxes are payable with respect to the operations of the Account.
d) USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported amounts
of income and expenses during the period. Operating results in the future could
vary from the amounts derived from management's estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
a) MORTALITY AND EXPENSE UNDERTAKINGS -- The Company, as issuer of variable
annuity contracts, provides the mortality and expense undertakings and, with
respect to the Account, receives a maximum annual fee of up to 1.25% of the
Account's average daily net assets.
b) DEDUCTION OF ANNUAL MAINTENANCE FEE -- Annual maintenance fees are
deducted through termination of units of interest from applicable contract
owners' accounts, in accordance with the terms of the contracts.
4. HARTFORD U.S. GOVERNMENT MONEY
MARKET FUND:
On June 27, 1997, the Hartford U.S. Government Money Market Fund was merged
with the HVA Money Market Fund. Accordingly, all contractholder account values
held in the Hartford U.S. Government Money Market Fund were exchanged for
equivalent account values of HVA Money Market Fund on June 27, 1997.
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life Insurance Company:
We have audited the accompanying Consolidated Balance Sheets of Hartford Life
Insurance Company (the "Company") and subsidiaries as of December 31, 1997 and
1996, and the related Consolidated Statements of Income, Stockholder's Equity
and Cash Flows for each of the three years in the period ended December 31,
1997. These consolidated financial statements and the schedules referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Hartford Life
Insurance Company and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in Index to
Consolidated Financial Statements and Schedules are presented for the purpose of
complying with the Securities and Exchange Commission's rules and are not part
of the basic financial statements. These schedules have been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
January 27, 1998
<PAGE>
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1997 1996 1995
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Premiums and other considerations............... $1,637 $1,705 $1,487
Net investment income........................... 1,368 1,397 1,328
Net realized capital gains (losses)............. 4 (213) (11)
------ ------ ------
Total revenues................................ 3,009 2,889 2,804
------ ------ ------
Benefits, claims and expenses
Benefits, claims and claim adjustment
expenses....................................... 1,379 1,535 1,422
Amortization of deferred policy acquisition
costs.......................................... 335 234 199
Dividends to policyholders...................... 240 635 675
Other expenses.................................. 586 427 317
------ ------ ------
Total benefits, claims and expenses........... 2,540 2,831 2,613
------ ------ ------
Income before income tax expense................ 469 58 191
Income tax expense.............................. 167 20 62
------ ------ ------
Net income........................................ $ 302 $ 38 $ 129
------ ------ ------
------ ------ ------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER
31,
-----------------
1997 1996
------- -------
<S> <C> <C>
(IN MILLIONS,
EXCEPT FOR SHARE
DATA)
Assets
Investments
Fixed maturities, available for sale, at fair
value (amortized cost of $13,885 and
$13,579)....................................... $14,176 $13,624
Equity securities, at fair value................ 180 119
Policy loans, at outstanding balance............ 3,756 3,836
Other investments, at cost...................... 47 56
------- -------
Total investments............................. 18,159 17,635
Cash............................................ 54 43
Premiums receivable and agents' balances........ 18 137
Accrued investment income....................... 330 407
Reinsurance recoverables........................ 6,325 6,259
Deferred policy acquisition costs............... 3,315 2,760
Deferred income tax............................. 348 474
Other assets.................................... 352 357
Separate account assets......................... 69,055 49,690
------- -------
Total assets.................................. $97,956 $77,762
------- -------
------- -------
Liabilities
Future policy benefits.......................... $ 3,270 $ 2,474
Other policyholder funds........................ 21,034 22,134
Other liabilities............................... 2,254 1,572
Separate account liabilities.................... 69,055 49,690
------- -------
Total liabilities............................. 95,613 75,870
------- -------
Stockholder's Equity
Common stock -- 1,000 shares authorized, issued
and outstanding, par value $5,690.............. 6 6
Additional paid in capital...................... 1,045 1,045
Net unrealized capital gains on securities, net
of tax......................................... 179 30
Retained earnings............................... 1,113 811
------- -------
Total stockholder's equity.................... 2,343 1,892
------- -------
Total liabilities and stockholder's equity...... $97,956 $77,762
------- -------
------- -------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
NET UNREALIZED
CAPITAL GAINS
ADDITIONAL (LOSSES) ON TOTAL
COMMON PAID IN SECURITIES, RETAINED STOCKHOLDER'S
STOCK CAPITAL NET OF TAX EARNINGS EQUITY
------ -------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
Balance, December 31, 1994.............. $6 $ 826 $(654) $ 644 $ 822
Net income............................ -- -- -- 129 129
Capital contribution.................. -- 181 -- -- 181
Change in net unrealized capital gains
(losses) on securities, net of tax... -- -- 597 -- 597
--
------ ------ ----------- ------
Balance, December 31, 1995.............. 6 1,007 (57) 773 1,729
Net income............................ -- -- -- 38 38
Capital contribution.................. -- 38 -- -- 38
Change in net unrealized capital gains
(losses) on securities, net of tax... -- -- 87 -- 87
--
------ ------ ----------- ------
Balance, December 31, 1996.............. 6 1,045 30 811 1,892
Net income............................ -- -- -- 302 302
Change in net unrealized capital gains
(losses) on securities, net of tax... -- -- 149 -- 149
--
------ ------ ----------- ------
Balance, December 31, 1997.............. $6 $1,045 $179 $1,113 $2,343
--
--
------ ------ ----------- ------
------ ------ ----------- ------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
------------------------------
1997 1996 1995
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Operating Activities
Net income............................ $ 302 $ 38 $ 129
Adjustments to reconcile net income to
cash provided by operating activities
Depreciation and amortization......... 8 14 21
Net realized capital (gains) losses... (4) 213 11
Decrease (increase) in deferred income
taxes................................ 40 (102) (172)
Increase in deferred policy
acquisition costs.................... (555) (572) (379)
Decrease (increase) in premiums
receivable and agents' balances...... 119 10 (81)
Decrease (increase) in accrued
investment income.................... 77 (13) (16)
Decrease (increase) in other assets... 52 (132) (177)
(Increase) decrease in reinsurance
recoverables......................... (416) 179 (35)
Increase (decrease) in liabilities for
future policy benefits............... 796 (92) 483
Increase in other liabilities......... 379 477 281
-------- -------- --------
Cash provided by operating
activities......................... 798 20 65
-------- -------- --------
Investing Activities
Purchases of fixed maturity
investments.......................... (6,231) (5,747) (6,228)
Sales of fixed maturity investments... 4,232 3,459 4,845
Maturities and principal paydowns of
fixed maturity investments........... 2,329 2,693 1,741
Net sales (purchases) of other
investments.......................... 24 (107) (871)
Net (purchases) sales of short-term
investments.......................... (638) 84 (24)
-------- -------- --------
Cash (used for) provided by
investing activities............... (284) 382 (537)
-------- -------- --------
Financing Activities
Capital contribution.................. -- 38 --
Net (disbursements for) receipts from
investment and universal life-type
contracts (charged against) credited
to policyholder accounts............. (503) (443) 498
-------- -------- --------
Cash (used for) provided by
financing activities............... (503) (405) 498
-------- -------- --------
Increase (decrease) in cash........... 11 (3) 26
Cash -- beginning of year............. 43 46 20
-------- -------- --------
Cash -- end of year................... $ 54 $ 43 $ 46
-------- -------- --------
-------- -------- --------
Supplemental Disclosure of Cash Flow
Information:
Net Cash Paid During the Year for:
Income taxes.......................... $ 9 $ 189 $ 162
Noncash Financing Activities:
Capital contribution.................. $ -- $ -- $ 181
-------- -------- --------
-------- -------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN MILLIONS EXCEPT PER SHARE DATA UNLESS OTHERWISE STATED)
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
These consolidated financial statements include Hartford Life Insurance
Company and its wholly-owned subsidiaries (the "Company"), ITT Hartford Life and
Annuity Insurance Company ("ILA") and ITT Hartford International Life
Reassurance Corporation ("HLRe"), formerly American Skandia Life Reinsurance
Corporation. The Company is a wholly-owned subsidiary of Hartford Life and
Accident Insurance Company ("HLA"), a wholly-owned subsidiary of Hartford Life,
Inc. ("Hartford Life"). Hartford Life is a direct subsidiary of Hartford
Accident and Indemnity Company ("HA&I"), an indirect subsidiary of The Hartford
Financial Services Group, Inc. ("The Hartford"). On February 10, 1997, Hartford
Life filed a registration statement, as amended, with the Securities and
Exchange Commission relating to an Initial Public Offering ("IPO") of the
Hartford Life's Class A Common Stock. Pursuant to the IPO on May 22, 1997,
Hartford Life sold to the public 26 million shares at $28.25 per share and
received net proceeds of $687. Of the proceeds, $527 was used to retire debt
related to Hartford Life's outstanding promissory notes and line of credit with
the remaining $160 contributed by Hartford Life to HLA to support growth in its
core businesses.
On December 19, 1995, ITT Industries, Inc. (formerly ITT Corporation)
("ITT") distributed all the outstanding shares of capital stock of The Hartford
to ITT stockholders of record on such date. As a result, The Hartford became an
independent, publicly traded company.
Along with its parent, the Company is a leading insurance and financial
services company which provides (a) investment products such as individual
variable annuities and fixed market value adjusted annuities, deferred
compensation and retirement plan services and mutual funds for savings and
retirement needs; (b) life insurance for income protection and estate planning;
and (c) employee benefits products such as group life and group disability
insurance and corporate owned life insurance.
2. SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
These consolidated financial statements present the financial position,
results of operations and cash flows of the Company. All material intercompany
transactions and balances between the Company, its subsidiaries and affiliates
have been eliminated. The consolidated financial statements are prepared on the
basis of generally accepted accounting principles which differ materially from
the statutory accounting practices prescribed by various insurance regulatory
authorities.
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The most
significant estimates include those used in determining deferred policy
acquisition costs and the liability for future policy benefits and other
policyholder funds. Although some variability is inherent in these estimates,
management believes the amounts provided are adequate.
Certain reclassifications have been made to prior year financial information
to conform to the current year presentation.
(B) CHANGES IN ACCOUNTING PRINCIPLES
In December 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") No. 97-3 "Accounting by Insurance
and Other Enterprises for Insurance Related Assessments". This SOP provides
guidance on accounting by insurance and other enterprises for assessments
related to insurance activities. Specifically, the SOP provides guidance on when
a guaranty fund or other assessment should be recognized, how to measure the
liability, and what information should be disclosed. This SOP will be effective
for fiscal years beginning after December 15, 1998. Adoption of SOP 97-3 is not
expected to have a material impact on the Company's financial condition or
results of operations.
On November 14, 1996, the Emerging Issues Task Force ("EITF") reached a
consensus on Issue No. 96-12, "Recognition of Interest Income and Balance Sheet
Classification of Structured Notes". This EITF issue requires companies to
record income on certain structured securities on a retrospective interest
method. The Company adopted EITF No. 96-12 for structured securities acquired
after November 14, 1996. Adoption of EITF No. 96-12 did not have a material
effect on the Company's financial condition or results of operations.
In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities"
which is effective for transfers and servicing of financial
<PAGE>
- --------------------------------------------------------------------------------
assets and extinguishments of liabilities occurring after December 31, 1996.
This statement established criteria for determining whether transferred assets
should be accounted for as sales or secured borrowings. Subsequently, in
December 1996, the FASB issued SFAS No. 127, "Deferral of Effective Date of
Certain Provisions of FASB Statement No. 125", which defers the effective date
of certain provisions of SFAS No. 125 for one year. Adoption of SFAS No. 125 is
not expected to have a material effect on the Company's financial condition or
results of operations.
Effective January 1, 1996, the Company adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of". This statement establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. Adoption of SFAS No. 121 did not
have a material effect on the Company's financial condition or results of
operations.
The Company's cash flows were not impacted by these changes in accounting
principles.
(C) REVENUE RECOGNITION
Revenues for universal life-type policies and investment products consist of
policy charges for the cost of insurance, policy administration and surrender
charges assessed to policy account balances and are recognized in the period in
which services are provided. Premiums for traditional life insurance and
disability policies are recognized as revenues when they are due from
policyholders.
(D) FUTURE POLICY BENEFITS AND OTHER POLICYHOLDER FUNDS
Liabilities for future policy benefits are computed by the net level premium
method using interest rate assumptions varying from 3% to 11% and withdrawal and
mortality assumptions appropriate at the time the policies were issued. Health
reserves, which are the result of sales of group long-term and short-term
disability, stop loss, Medicare Supplement and individual disability products,
are stated at amounts determined by estimates on individual cases and estimates
of unreported claims based on past experience. Liabilities for universal
life-type and investment contracts are stated at policyholder account values
before surrender charges.
(E) POLICYHOLDER REALIZED CAPITAL GAINS AND LOSSES
Realized capital gains and losses on security transactions associated with
the Company's immediate participation guaranteed contracts are excluded from
revenues and deferred over the expected maturity of the securities, since under
the terms of the contracts the realized gains and losses will be credited to
policyholders in future years as they are entitled to receive them.
(F) INVESTMENTS
The Company's investments in fixed maturities include bonds and commercial
paper which are considered "available for sale" and accordingly are carried at
fair value with the after-tax difference from cost reflected as a component of
Stockholder's Equity designated "Net unrealized capital gains (losses) on
securities, net of tax". Equity securities, which include common and
non-redeemable preferred stocks, are carried at fair values with the after-tax
difference from cost reflected in Stockholder's Equity. Policy loans are carried
at outstanding balance which approximates fair value. Net realized capital gains
and losses, after deducting pension policyholders' share, are reported as a
component of revenue and are determined on a specific identification basis.
The Company's accounting policy for impairment requires recognition of an
other than temporary impairment charge on a security if it is determined that
the Company is unable to recover all amounts due under the contractual
obligations of the security. In addition, for securities expected to be sold, an
other than temporary impairment charge is recognized if the Company does not
expect the fair value of a security to recover to cost or amortized cost prior
to the expected date of sale. Once an impairment charge has been recorded, the
Company then continues to review the other than temporarily impaired securities
for appropriate valuation on an on-going basis.
During 1996, it was determined that certain individual securities within the
investment portfolio supporting the Company's block of guaranteed rate contract
business written prior to 1995 ("Closed Book GRC") could not recover to
amortized cost prior to sale. Therefore, an other than temporary impairment loss
of $88, after-tax, was recorded.
(G) DERIVATIVE INSTRUMENTS
The Company uses a variety of derivative instruments including swaps, caps,
floors, forwards and exchange traded financial futures and options as part of an
overall risk management strategy. These instruments are used as a means of
hedging exposure to price, foreign currency and/ or interest rate risk on
planned investment purchases or existing assets and liabilities. The Company
does not hold or issue derivative instruments for trading purposes. The
Company's accounting for derivative instruments used to manage risk is in
accordance with the concepts established in SFAS No. 80, "Accounting for Futures
Contracts", SFAS No. 52, "Foreign Currency Translation", AICPA SOP 86-2,
"Accounting for Options" and various EITF pronouncements. Written options are
used, in all cases in conjunction with other assets and derivatives, as part of
the Company's asset and liability management strategy. Derivative instruments
are carried at values consistent with the asset or liability being hedged.
Derivative instruments used to hedge fixed maturities or equity securities are
carried at fair value
<PAGE>
- --------------------------------------------------------------------------------
with the after-tax difference from cost reflected in Stockholder's Equity.
Derivative instruments used to hedge other invested assets or liabilities are
carried at cost.
Derivative instruments must be designated at inception as a hedge and
measured for effectiveness both at inception and on an on-going basis. The
Company's minimum correlation threshold for hedge designation is 80%. If
correlation, which is assessed monthly and measured based on a rolling three
month average, falls below 80%, hedge accounting will be terminated. Derivative
instruments used to create a synthetic asset must meet synthetic accounting
criteria including designation at inception and consistency of terms between the
synthetic and the instrument being replicated. Consistent with industry
practice, synthetic instruments are accounted for like the financial instrument
it is intended to replicate. Derivative instruments which fail to meet risk
management criteria, subsequent to acquisition, are marked to market with the
impact reflected in the Consolidated Statements of Income.
Gains or losses on financial futures contracts entered into in anticipation
of the investment of future receipt of product cash flows are deferred and, at
the time of the ultimate investment purchase, reflected as an adjustment to the
cost basis of the purchased asset. Gains or losses on futures used in invested
asset risk management are deferred and adjusted into the cost basis of the
hedged asset when the contract futures are closed, except for futures used in
duration hedging which are deferred and basis adjusted on a quarterly basis. The
basis adjustments are amortized into net investment income over the remaining
asset life.
Open forward commitment contracts are marked to market through Stockholder's
Equity. Such contracts are accounted for at settlement by recording the purchase
of the specified securities at the previously committed price. Gains or losses
resulting from the termination of forward commitment contracts before the
delivery of the securities are recognized immediately in the Consolidated
Statements of Income as a component of net investment income.
The cost of options entered into as part of a risk management strategy are
basis adjusted to the underlying asset or liability and amortized over the
remaining life of the option. Gains or losses on expiration or termination are
adjusted into the basis of the underlying asset or liability and amortized over
the remaining asset life.
Interest rate swaps involve the periodic exchange of payments without the
exchange of underlying principal or notional amounts. Net receipts or payments
are accrued and recognized over the life of the swap agreement as an adjustment
to investment income. Should the swap be terminated, the gain or loss is
adjusted into the basis of the asset or liability and amortized over the
remaining life. Should the hedged asset be sold or liability terminated without
terminating the swap position, any swap gains or losses are immediately
recognized in net investment income. Interest rate swaps purchased in
anticipation of an asset purchase ("anticipatory transaction") are recognized
consistent with the underlying asset components such that the settlement
component is recognized in the Consolidated Statements of Income while the
change in market value is recognized as an unrealized capital gain or loss.
Premiums paid on purchased floor or cap agreements and the premium received
on issued cap or floor agreements (used for risk management) are adjusted into
the basis of the applicable asset and amortized over the asset life. Gains or
losses on termination of such positions are adjusted into the basis of the asset
or liability and amortized over the remaining asset life. Net payments are
recognized as an adjustment to income or basis adjusted and amortized depending
on the specific hedge strategy.
Forward exchange contracts and foreign currency swaps are accounted for in
accordance with SFAS No. 52. Changes in the spot rate of instruments designated
as hedges of the net investment in a foreign subsidiary are reflected in the
cumulative translation adjustments component of Stockholder's Equity. Cash flows
from futures, options, and swaps, accounted for as hedges, are included with the
cash flows of the item being hedged.
(H) SEPARATE ACCOUNTS
The Company maintains separate account assets and liabilities which are
reported at fair value. Separate account assets are segregated from other
investments, and investment income and gains and losses accrue directly to the
policyholders. Separate accounts reflect two categories of risk assumption:
non-guaranteed separate accounts, wherein the policyholder assumes the
investment risk, and guaranteed separate account assets, wherein the Company
contractually guarantees either a minimum return or account value to the
policyholder.
(I) DEFERRED POLICY ACQUISITION COSTS
Policy acquisition costs, which include commissions and certain underwriting
expenses associated with acquiring business, are deferred and amortized over the
estimated lives of the contracts, generally 20 years. Generally, acquisition
costs are deferred and amortized using the retrospective deposit method. Under
the retrospective deposit method, acquisition costs are amortized in proportion
to the present value of expected gross profits from surrender charges,
investment, mortality and expense margins. Actual gross profits can vary from
management's estimates resulting in increases or decreases in the rate of
amortization. Management periodically updates these estimates, when appropriate,
and evaluates the recoverability of the deferred acquisition cost asset. When
appropriate, management revises its assumptions on the estimated gross profits
of these contracts and the cumulative amortization
<PAGE>
- --------------------------------------------------------------------------------
for the books of business are reestimated and adjusted by a cumulative charge or
credit to income.
The Company's other expenses include the following:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Commissions........................... $ 976 $ 848 $ 619
Deferred acquisition costs............ (862) (823) (618)
Other................................. 472 402 316
--------- --------- ---------
Total other expenses.............. $ 586 $ 427 $ 317
--------- --------- ---------
--------- --------- ---------
</TABLE>
(J) DIVIDENDS TO POLICYHOLDERS
Certain life insurance policies contain dividend payment provisions that
enable the policyholder to participate in the earnings of the life insurance
subsidiaries of the Company. The participating insurance in force accounted for
55%, 44%, and 41% in 1997, 1996, and 1995, respectively, of total insurance in
force.
3. INITIAL PUBLIC OFFERING
On February 10, 1997, Hartford Life filed a registration statement, as
amended, with the Securities and Exchange Commission, relating to the IPO of
Hartford Life's Class A Common Stock. Pursuant to the IPO on May 22, 1997,
Hartford Life sold to the public 26 million shares at $28.25 per share and
received proceeds, net of offering expenses, of $687. Of the proceeds, $527 was
used to retire debt related to Hartford Life's promissory notes outstanding and
line of credit. The remaining $160 was contributed by Hartford Life to HLA to
support growth in its core businesses. The 26 million shares sold in the
Offering represent approximately 18.6% of the equity ownership in Hartford Life
and approximately 4.4% of the combined voting power of Hartford Life's Class A
and Class B Common Stock. The Hartford owns all of the 114 million outstanding
shares of Class B Common Stock of Hartford Life, representing approximately
81.4% of the equity ownership in Hartford Life and approximately 95.6% of the
combined voting power of Hartford Life's Class A and Class B Common Stock.
Holders of Class A Common Stock generally have identical rights to the holders
of Class B Common Stock except that the holders of Class A Common Stock are
entitled to one vote per share while holders of Class B Common Stock are
entitled to five votes per share on all matters submitted to a vote of Hartford
Life's stockholders.
4. INVESTMENTS AND DERIVATIVE INSTRUMENTS
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Interest income from fixed
maturities......................... $ 932 $ 918 $ 996
Interest income from policy loans... 425 477 342
Income from other investments....... 26 15 1
--------- --------- ---------
Gross investment income............. 1,383 1,410 1,339
Less: Investment expenses........... 15 13 11
--------- --------- ---------
Net investment income............... $ 1,368 $ 1,397 $ 1,328
--------- --------- ---------
--------- --------- ---------
</TABLE>
(B) COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------------
1997 1996 1995
----- --------- ---------
<S> <C> <C> <C>
Fixed maturities......................... $ (7) $ (201) $ 23
Equity securities........................ 12 2 (6)
Real estate and other.................... (1) (4) (25)
Less: Increase in liability to
policyholders for realized capital
gains................................... -- (10) (3)
--- --------- ---------
Net realized capital gains (losses)...... $ 4 $ (213) $ (11)
--- --------- ---------
--- --------- ---------
</TABLE>
(C) NET UNREALIZED CAPITAL GAINS (LOSSES) ON EQUITY SECURITIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Gross unrealized capital gains.............. $ 14 $ 13 $ 4
Gross unrealized capital losses............. -- (1) (2)
--- --- ---
Net unrealized capital gains................ 14 12 2
Deferred income tax expense................. 5 4 1
--- --- ---
Net unrealized capital gains, net of tax.... 9 8 1
Balance -- beginning of year................ 8 1 (6)
--- --- ---
Net change in unrealized capital gains
(losses) on equity securities.............. $ 1 $ 7 $ 7
--- --- ---
--- --- ---
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
(D) NET UNREALIZED CAPITAL GAINS (LOSSES) ON FIXED MATURITIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Gross unrealized capital gains................................... $ 371 $ 386 $ 529
Gross unrealized capital losses.................................. (80) (341) (569)
Unrealized capital (gains) losses credited to policyholders...... (30) (11) (52)
----- ----- -----
Net unrealized capital gains (losses)............................ 261 34 (92)
Deferred income tax expense (benefit)............................ 91 12 (34)
----- ----- -----
Net unrealized capital gains (losses), net of tax................ 170 22 (58)
Balance -- beginning of year..................................... 22 (58) (648)
----- ----- -----
Net change in unrealized capital gains (losses) on fixed
maturities...................................................... $ 148 $ 80 $ 590
----- ----- -----
----- ----- -----
</TABLE>
(E) FIXED MATURITY INVESTMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U.S. gov't and gov't agencies and authorities
(guaranteed and sponsored)...................................... $ 217 $ 3 $ (1) $ 219
U.S. gov't and gov't agencies and authorities
(guaranteed and sponsored) -- asset backed...................... 1,175 64 (35) 1,204
States, municipalities and political subdivisions................ 211 7 (1) 217
International governments........................................ 376 20 (3) 393
Public utilities................................................. 871 26 (3) 894
All other corporate including international...................... 5,033 200 (25) 5,208
All other corporate -- asset backed.............................. 4,091 41 (8) 4,124
Short-term investments........................................... 1,318 -- -- 1,318
Certificates of deposit.......................................... 593 10 (4) 599
---------- ----- ----- ----------
Total fixed maturities....................................... $13,885 $371 $(80) $14,176
---------- ----- ----- ----------
---------- ----- ----- ----------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U.S. gov't and gov't agencies and authorities
(guaranteed and sponsored)...................................... $ 166 $ 12 $ (3) $ 175
U.S. gov't and gov't agencies and authorities
(guaranteed and sponsored) -- asset backed...................... 1,970 161 (128) 2,003
States, municipalities and political subdivisions................ 373 6 (11) 368
International governments........................................ 281 12 (4) 289
Public utilities................................................. 877 12 (8) 881
All other corporate including international...................... 4,656 120 (107) 4,669
All other corporate -- asset backed.............................. 3,601 49 (59) 3,591
Short-term investments........................................... 1,655 14 (21) 1,648
---------- ----- ----------- ----------
Total fixed maturities....................................... $13,579 $386 $(341) $13,624
---------- ----- ----------- ----------
---------- ----- ----------- ----------
</TABLE>
The amortized cost and estimated fair value of fixed maturity investments at
December 31, 1997 by estimated maturity year are shown below. Expected
maturities differ from contractual maturities due to call or prepayment
provisions. Asset backed securities, including MBS and CMO's, are distributed to
maturity year based on the Company's estimates of the rate of future prepayments
of principal over the remaining lives of the securities. These estimates are
developed using prepayment speeds provided in broker consensus data. Such
estimates are derived from prepayment speeds experienced at the interest rate
levels projected for the applicable underlying collateral and can be expected to
vary from actual experience.
MATURITY
<TABLE>
<CAPTION>
AMORTIZED
COST FAIR VALUE
----------- -----------
<S> <C> <C>
One year or less......................... $ 2,838 $ 2,867
Over one year through five years......... 5,528 5,595
Over five years through ten years........ 3,094 3,156
Over ten years........................... 2,425 2,558
----------- -----------
Total................................ $ 13,885 $ 14,176
----------- -----------
----------- -----------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Sales of fixed maturities, excluding short-term fixed maturities, for the
years ended December 31, 1997, 1996 and 1995 resulted in proceeds of $4.2
billion, $3.5 billion and $4.8 billion, gross realized capital gains of $169,
$87 and $91, gross realized capital losses (including writedowns) of $176, $298
and $72, respectively. Sales of equity security investments for the years ended
December 31, 1997, 1996 and 1995 resulted in proceeds of $132, $74 and $64,
gross realized capital gains of $12, $2 and $28 and gross realized capital
losses of $0, $0 and $59, respectively.
(F) CONCENTRATION OF CREDIT RISK
Excluding investments in U.S. government and agencies, the Company has not
invested in the securities of a single issuer in amounts greater than 10% of
stockholder's equity at December 31, 1997.
(G) DERIVATIVE INSTRUMENTS
The Company utilizes a variety of derivative instruments, including swaps,
caps, floors, forwards and exchange traded futures and options, in accordance
with Company policy and in order to achieve one of three Company approved
objectives: to hedge risk arising from interest rate, price or currency exchange
rate volatility; to manage liquidity; or, to control transactions costs. The
Company utilizes derivative instruments to manage market risk through four
principal risk management strategies: hedging anticipated transactions, hedging
liability instruments, hedging invested assets and hedging portfolios of assets
and/or liabilities. The Company does not trade in these instruments for the
express purpose of earning trading profits.
The Company maintains a derivatives counterparty exposure policy which
establishes market-based credit limits, favors long-term financial stability and
creditworthiness, and typically requires credit enhancement/credit risk reducing
agreements. Credit risk is measured as the amount owed to the Company based on
current market conditions and potential payment obligations between the Company
and its counterparties. Credit exposures are quantified weekly and netted, and
collateral is pledged to or held by the Company to the extent the current value
of derivatives exceed exposure policy thresholds.
The Company's derivative program is monitored by an internal compliance unit
and is reviewed by senior management and Hartford Life's Finance Committee.
Notional amounts, which represent the basis upon which pay or receive amounts
are calculated and are not reflective of credit risk, pertaining to derivative
financial instruments (excluding the Company's guaranteed separate account
derivative investments), totaled $6.5 billion and $9.9 billion ($4.6 billion and
$7.4 billion related to the Company's investments, $1.9 billion and $2.5 billion
on the Company's liabilities) at December 31, 1997 and 1996, respectively.
The table below provides a summary of derivative instruments held by the
Company at December 31, 1997 and 1996, segregated by major investment and
liability category:
<TABLE>
<CAPTION>
1997 -- AMOUNT HEDGED (NOTIONAL AMOUNTS)
----------------------------------------------------------------------------------
PURCHASED
CAPS, FOREIGN
TOTAL ISSUED FLOORS INTEREST CURRENCY TOTAL
CARRYING CAPS & AND FUTURES RATE SWAPS NOTIONAL
ASSETS HEDGED VALUE FLOORS OPTIONS (2) SWAPS (3) AMOUNT
- ----------------------------------- -------- -------- ---------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset backed securities (excluding
inverse floaters and
anticipatory)..................... $ 5,253 $ 500 $ 1,404 $ 28 $ 221 $-- $ 2,153
Inverse floaters (1)............... 75 47 80 -- 25 -- 152
Anticipatory (4)................... -- -- -- -- -- -- --
Other bonds and notes.............. 7,531 462 460 22 1,258 91 2,293
Short-term investments............. 1,317 -- -- -- -- -- --
-------- -------- ---------- --- ---------- --- ----------
Total fixed maturities......... 14,176 1,009 1,944 50 1,504 91 4,598
Equity securities, policy loans and
other investments................. 3,983 -- -- -- -- -- --
-------- -------- ---------- --- ---------- --- ----------
Total investments.............. $ 18,159 $ 1,009 $ 1,944 $ 50 $ 1,504 $91 $ 4,598
Long term debt................. -- -- -- -- -- -- --
Other policy claims............ -- 10 150 -- 1,747 -- 1,907
-------- -------- ---------- --- ---------- --- ----------
Total derivatives -- notional
value........................... $ -- $ 1,019 $ 2,094 $ 50 $ 3,251 $91 $ 6,505
-------- -------- ---------- --- ---------- --- ----------
Total derivatives -- fair value.... $ -- $ (8) $ 23 $ -- $ 19 $(6) $ 28
-------- -------- ---------- --- ---------- --- ----------
-------- -------- ---------- --- ---------- --- ----------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 --AMOUNT HEDGED (NOTIONAL AMOUNTS)
--------------------------------------------------------------------------
FOREIGN
TOTAL ISSUED PURCHASED INTEREST CURRENCY TOTAL
CARRYING CAPS & CAPS, FLOORS RATE SWAPS NOTIONAL
ASSETS HEDGED VALUE FLOORS AND OPTIONS FUTURES (2) SWAPS (3) AMOUNT
- ----------------------------------- -------- ------- ------------ ----------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset backed securities (excluding
inverse floaters and
anticipatory)..................... $ 5,242 $ 500 $ 2,454 $ -- $ 941 $ -- $3,895
Inverse floaters (1)............... 352 98 856 -- 346 -- 1,300
Anticipatory (4)................... -- -- -- 132 -- -- 132
Other bonds and notes.............. 7,369 425 440 5 1,079 125 2,074
Short-term investments............. 661 -- -- -- -- -- --
-------- ------- ------------ ----- --------- -------- -------
Total fixed maturities......... 13,624 1,023 3,750 137 2,366 125 7,401
Equity securities, policy loans and
other investments................. 4,011 -- -- -- 19 -- 19
-------- ------- ------------ ----- --------- -------- -------
Total investments.............. $ 17,635 $ 1,023 $ 3,750 $ 137 $ 2,385 $ 125 $7,420
Long term debt................. -- -- -- -- -- -- --
Other policy claims............ -- 10 150 -- 2,351 -- 2,511
-------- ------- ------------ ----- --------- -------- -------
Total derivatives -- notional
value......................... $ -- $ 1,033 $ 3,900 $ 137 $ 4,736 $ 125 $9,931
-------- ------- ------------ ----- --------- -------- -------
Total derivatives -- fair
value......................... $ -- $ (10) $ 38 $ -- $ 2 $ (9 ) $ 21
-------- ------- ------------ ----- --------- -------- -------
-------- ------- ------------ ----- --------- -------- -------
</TABLE>
- ---------
(1) Inverse floaters are variations of collateralized mortgage obligations
("CMO's") for which the coupon rates move inversely with an index rate such as
the London interbank offered rate ("LIBOR"). The risk to principal is considered
negligible as the underlying collateral for the securities is guaranteed or
sponsored by government agencies. To address the volatility risk created by the
coupon variability, the Company uses a variety of derivative instruments,
primarily interest rate swaps, caps and floors.
(2) As of December 31, 1997 and 1996, over 44% and 39% , respectively, of
the notional futures contracts expire within one year.
(3) As of December 31, 1997 and 1996, over 16% and 42%, respectively, of
foreign currency swaps expire within one year; the balance matures over the
succeeding 9 years.
(4) Deferred gains and losses on anticipatory transactions are included in
the carrying value of fixed maturities in the Consolidated Balance Sheets. At
the time of the ultimate purchase, they are reflected as a basis adjustment to
the purchased asset. At December 31, 1997, the Company had $0 deferred gains and
losses. At December 31, 1996, the Company had $0.9 in net deferred gains for
futures, interest rate swaps and purchased options of which $2.0 was basis
adjusted in 1997.
The following is a reconciliation of notional amounts by derivative type and
strategy as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 MATURITIES/ DECEMBER 31, 1997
NOTIONAL AMOUNT ADDITIONS TERMINATIONS (1) NOTIONAL AMOUNT
----------------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
BY DERIVATIVE TYPE
Caps......................................... $1,755 $ 14 $ 530 $1,239
Floors....................................... 3,168 28 1,332 1,864
Swaps/Forwards............................... 4,861 941 2,460 3,342
Futures...................................... 137 131 218 50
Options...................................... 10 -- -- 10
------- -------- ------- -------
Total.................................... $9,931 $1,114 $4,540 $6,505
------- -------- ------- -------
BY STRATEGY
Liability.................................... $2,511 $ 191 $ 795 $1,907
Anticipatory................................. 132 4 136 --
Asset........................................ 2,112 739 1,046 1,805
Portfolio.................................... 5,176 180 2,563 2,793
------- -------- ------- -------
Total.................................... $9,931 $1,114 $4,540 $6,505
------- -------- ------- -------
------- -------- ------- -------
</TABLE>
- ---------
(1) During 1997, the Company had no significant gains or losses on terminations
of hedge positions using derivative financial instruments.
<PAGE>
- --------------------------------------------------------------------------------
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 "Disclosure about Fair
Value of Financial Instruments" requires disclosure of fair value information of
financial instruments. For certain financial instruments where quoted market
prices are not available, other independent valuation techniques and assumptions
are used. Because considerable judgment is used, these estimates are not
necessarily indicative of amounts that could be realized in a current market
exchange. SFAS No. 107 excludes certain financial instruments from disclosure,
including insurance contracts.
For cash, short-term investments, accounts receivable, policy loans,
mortgage loans and other liabilities, carrying amounts on the Consolidated
Balance Sheets approximate fair value.
Fair value for fixed maturities and marketable equity securities are based
upon quoted market prices. Fair value for securities that are not publicly
traded are analytically determined. These amounts are disclosed in Note 4 of
Notes to Consolidated Financial Statements.
The fair value of derivative financial instruments, including swaps, caps,
floors, futures, options and forward commitments, is determined using a pricing
model which is validated through quarterly comparison to dealer quoted prices.
Amounts are disclosed in Note 4 of Notes to Consolidated Financial Statements.
Fair value for partnerships and trusts are based on external market
valuations from partnership and trust management.
Other policy claims and benefits payable fair value information is
determined by estimating future cash flows, discounted at the current market
rate.
The carrying amount and fair values of the Company's financial instruments
at December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------ ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- ------- --------- -------
<S> <C> <C> <C> <C>
ASSETS
Fixed maturities..................................... $ 14,176 $14,176 $ 13,624 $13,624
Equity securities.................................... 180 180 119 119
Policy loans......................................... 3,756 3,756 3,836 3,836
Mortgage loans....................................... -- -- 2 2
Investments in partnerships, trusts and other........ 47 91 54 104
LIABILITIES
Other policy benefits................................ $ 11,769 $11,755 $ 11,707 $11,469
</TABLE>
6. SEPARATE ACCOUNTS
The Company maintained separate account assets and liabilities totaling
$69.1 billion and $49.7 billion at December 31, 1997 and 1996, respectively,
which are reported at fair value. Separate account assets are segregated from
other investments and net investment income and net realized capital gains and
losses accrue directly to the policyholder. Separate accounts reflect two
categories of risk assumption: non-guaranteed separate accounts totaling $58.6
billion and $39.4 billion at December 31, 1997 and 1996, respectively, wherein
the policyholder assumes the investment risk, and guaranteed separate accounts
totaling $10.5 and $10.3 billion at December 31, 1997 and 1996, respectively,
wherein the Company contractually guarantees either a minimum return or account
value to the policyholder. Included in the non-guaranteed category were policy
loans totaling $1.9 billion and $2.0 billion at December 31, 1997 and 1996,
respectively. Net investment income (including net realized capital gains and
losses) and interest credited to policyholders on separate account assets are
not reflected in the Consolidated Statements of Income.
Separate account management fees were $699, $538 and $387 in 1997, 1996 and
1995, respectively. The guaranteed separate accounts include fixed market value
adjusted individual annuity and modified guaranteed life insurance. The average
credited interest rate on these contracts was 6.52% at December 31, 1997. The
assets that support these liabilities were comprised of $10.2 billion in fixed
maturities as of December 31, 1997. The portfolios are segregated from other
investments and are managed to minimize liquidity and interest rate risk. In
order to minimize the risk of disintermediation associated with early
withdrawals, fixed MVA annuity and modified guaranteed life insurance contracts
carry a graded surrender charge as well as a market value adjustment. Additional
investment risk is hedged using a variety of derivatives which totaled $119 in
carrying value and $3.0 billion in notional amounts as of December 31, 1997.
<PAGE>
- --------------------------------------------------------------------------------
7. INCOME TAX
Hartford Life and The Hartford have entered into a tax sharing agreement
under which each member in the consolidated U.S. Federal income tax return will
make payments between them such that, with respect to any period, the amount of
taxes to be paid by the Company, subject to certain adjustments, generally will
be determined as though the Company were filing separate Federal, state and
local income tax returns.
As long as The Hartford continues to beneficially own, directly or
indirectly, at least 80% of the combined voting power and 80% of the value of
the outstanding capital stock of Hartford Life, the Company will be included for
Federal income tax purposes in the affiliated group of which The Hartford is the
common parent. To the extent allowed by law, it is the intention of The Hartford
and its subsidiaries to continue to file a single consolidated Federal income
tax return. The Company will continue to remit (receive from) The Hartford a
current income tax provision (benefit) computed in accordance with such tax
sharing agreement. The Company's effective tax rate was 36%, 35% and 32% in
1997, 1996 and 1995, respectively.
Income tax expense is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------
1997 1996 1995
---- ------ ------
<S> <C> <C> <C>
Current...................................... $119 $ 122 $ 211
Deferred..................................... 48 (102) (149)
---- ------ ------
Income tax expense......................... $167 $ 20 $ 62
---- ------ ------
---- ------ ------
</TABLE>
A reconciliation of the tax provision at the U.S. Federal statutory rate to
the provision for income taxes is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1997 1996 1995
--------- ----- -----
<S> <C> <C> <C>
Tax provision at the U.S. Federal statutory
rate...................................... $ 164 $ 20 $ 67
Tax-exempt income.......................... -- -- (3)
Foreign tax credit......................... -- -- (4)
Other...................................... 3 -- 2
--------- --- ---
Total.................................... $ 167 $ 20 $ 62
--------- --- ---
--------- --- ---
</TABLE>
Deferred tax assets include the following at December 31:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Tax return deferred acquisition costs............ $ 639 $ 514
Financial statement deferred acquisition costs
and reserves.................................... (366) (242)
Employee benefits................................ 5 8
Net unrealized capital gains on securities....... (96) (16)
Investments and other............................ 166 210
--------- ---------
Total.......................................... $ 348 $ 474
--------- ---------
--------- ---------
</TABLE>
Income taxes paid were $9, $189 and $162 in 1997, 1996 and 1995,
respectively. The Company had a current tax payment of $27 due to The Hartford
at December 31, 1997 and a tax refund due from The Hartford of $72 at December
31, 1996.
Prior to the Tax Reform Act of 1984, the Life Insurance Company Income Tax
Act of 1959 permitted the deferral from taxation of a portion of statutory
income under certain circumstances. In these situations, the deferred income was
accumulated in a "Policyholders' Surplus Account" and will be taxable in the
future only under conditions which management considers to be remote; therefore,
no Federal income taxes have been provided on this deferred income. The balance
for tax return purposes of the Policyholders' Surplus Account as of December 31,
1997 was $37.
8. POSTRETIREMENT BENEFIT AND SAVINGS PLANS
(A) PENSION PLANS
The Company's employees are included in The Hartford's noncontributory
defined benefit pension plans. These plans provide pension benefits that are
based on years of service and the employee's compensation during the last ten
years of employment. The Company's funding policy is to contribute annually an
amount between the minimum funding requirements set forth in the Employee
Retirement Income Security Act of 1974, as amended, and the maximum amount that
can be deducted for U.S. Federal income tax purposes. Generally, pension costs
are funded through the purchase of the Company's group pension contracts. The
cost to the Company was approximately $5, $5 and $2 in 1997, 1996 and 1995,
respectively.
The Company also provides, through The Hartford, certain health care and
life insurance benefits for eligible retired employees. A substantial portion of
the Company's employees may become eligible for these benefits upon retirement.
The Company's contribution for health care benefits will depend on the retiree's
date of retirement and years of service. In addition, the plan has a defined
dollar cap which limits average Company contributions. The Company has prefunded
a portion of the health care and life insurance obligations through trust funds
where such prefunding can be accomplished on a tax effective basis.
Postretirement health care and life insurance benefits expense, allocated by The
Hartford, was immaterial to the results of operations for 1997, 1996 and 1995,
respectively.
The assumed rate in the per capita cost of health care (the health care
trend rate) was 8.5% for 1997, decreasing ratably to 6.0% in the year 2001.
Increasing the health care trend rates by one percent per year would have an
immaterial impact on the accumulated postretirement benefit obligation and the
annual expense. To the extent that the actual experience differs from the
inherent assumptions,
<PAGE>
- --------------------------------------------------------------------------------
the effect will be amortized over the average future service of covered
employees.
(B) INVESTMENT AND SAVINGS PLAN
Substantially all employees of the Company are eligible to participate in The
Hartford's Investment and Savings Plan. Under this plan, designated
contributions, which may be invested in Class A Common Stock of Hartford Life or
certain other investments, are matched, up to 3% of compensation, by the
Company. The cost to the Company for the above-mentioned plans was approximately
$2 in 1997.
9. STOCK COMPENSATION PLANS
During the second quarter of 1997, Hartford Life adopted the 1997 HLI
Incentive Stock Plan (the "Plan"). Under the Plan, options granted may be either
non-qualified options or incentive stock options qualifying under Section 422A
of the Internal Revenue Code. The aggregate number of shares of Class A Common
Stock which may be awarded in any one year shall be subject to an annual limit.
The maximum number of shares of Class A Common Stock which may be granted under
the Plan in each year shall be 1.5% of the total issued and outstanding shares
of Hartford Life Class A Common Stock and treasury stock as reported in the
Annual Report on Hartford Life's Form 10-K for the preceding year plus unused
portions of such limit from prior years. In addition, no more than 5,000,000
shares of Class A Common Stock shall be cumulatively available for awards of
incentive stock options under the Plan, and no more than 20% of the total number
of shares on a cumulative basis shall be available for restricted stock and
performance shares.
All options granted have an exercise price equal to the market price of
Hartford Life's stock on the date of grant and an option's maximum term is ten
years. Certain nonperformance based options become exercisable upon the
attainment of specified market price appreciation of Hartford Life's common
shares or at seven years after the date of grant, while the remaining
nonperformance based options become exercisable over a three year period
commencing with the date of grant.
Also included in the Plan are long term performance awards which become
payable upon the attainment of specific performance goals achieved over a three
year period.
During the second quarter of 1997, Hartford Life established the HLI
Employee Stock Purchase Plan ("ESPP"). Under this plan, eligible employees of
Hartford Life and the Company may purchase Class A Common Stock of Hartford Life
at a 15% discount from the lower of the market price at the beginning or end of
the quarterly offering period. Hartford Life may sell up to 2,700,000 shares of
stock to eligible employees. Hartford Life sold 54,316 shares under the ESPP in
1997.
10. REINSURANCE
The Company cedes insurance to other insurers, including its parent HLA, in
order to limit its maximum loss. Such transfer does not relieve the Company of
its primary liability. The Company also assumes insurance from other insurers.
Failure of reinsurers to honor their obligations could result in losses to the
Company. The Company evaluates the financial condition of its reinsurers and
monitors concentration of credit risk.
Net premiums and other considerations were comprised of the following:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Gross premiums............................... $ 2,164 $ 2,138 $ 1,545
Assumed...................................... 159 190 591
Ceded........................................ (686) (623) (649)
--------- --------- ---------
Net premiums and other considerations...... $ 1,637 $ 1,705 $ 1,487
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company ceded approximately $76, $100 and $101 of group life premium in
1997, 1996 and 1995, respectively, representing $33.6 billion, $33.3 billion and
$32.3 billion of insurance in force, respectively. The Company ceded $339, $318
and $320 of accident and health premium to HLA in 1997, 1996 and 1995,
respectively. The Company assumed $89, $101 and $103 of premium in 1997, 1996
and 1995, respectively, representing $8.2 billion, $8.5 billion and $8.5 billion
of individual life insurance in force, respectively, from HLA.
Life reinsurance recoveries, which reduce death and other benefits,
approximated $158, $140 and $220 for the years ended December 31, 1997, 1996 and
1995, respectively.
As of December 31, 1997, the Company had reinsurance recoverables of $5.0
billion from Mutual Benefit Life Assurance Corporation ("Mutual Benefit"),
supported by assets in a security trust of $5.0 billion (including policy loans
and accrued interest of $4.5 billion). The risk of Mutual Benefit becoming
insolvent is mitigated by the reinsurance agreement's requirement that the
assets be kept in a security trust with the Company as sole beneficiary. The
Company has no other significant reinsurance-related concentrations of credit
risk.
11. RELATED PARTY TRANSACTIONS
Transactions of the Company with HA&I and its affiliates relate principally
to tax settlements, reinsurance, insurance coverage, rental and service fees,
payment of dividends and capital contributions. In addition, certain affiliated
insurance companies purchased group annuity contracts from the Company to fund
pension costs and claim annuities to settle casualty claims. Substantially all
general insurance expenses related to the Company, including rent and employee
benefit plan expenses, are initially paid by The Hartford. Direct expenses are
allocated to the Company using specific identification, and indirect expenses
are allocated using other applicable methods. Indirect expenses include those
for corporate areas which,
<PAGE>
- --------------------------------------------------------------------------------
depending on type, are allocated based on either a percentage of direct expenses
or on utilization. Indirect expenses allocated to the Company by The Hartford
were $34, $40, and $45 in 1997, 1996 and 1995, respectively. Management believes
that the methods used are reasonable.
The rent paid to Hartford Fire for space occupied by the Company was $7 in
1997, and $3 in 1996 and 1995. The Company expects to pay annual rent of $7 in
1998 and 1999, respectively, $12 in 2000 and 2001, respectively, $13 in 2002 and
$87 thereafter, over the remaining term of the sublease, which expires on
December 31, 2009. Rental expense is recognized over a level basis over the term
of the sublease and amounted to approximately $9 in 1997 and $8 in 1996 and
1995.
12. STATUTORY RESULTS
The domestic insurance subsidiaries of Hartford Life prepare their statutory
financial statements in accordance with accounting practices prescribed by the
State of Connecticut Insurance Department. Prescribed statutory accounting
practices include publications of the National Association of Insurance
Commissioners ("NAIC"), as well as state laws, regulations, and general
administrative rules.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Statutory net income......................... $ 214 $ 144 $ 112
------ ------ ------
Statutory surplus............................ $1,441 $1,207 $1,125
------ ------ ------
------ ------ ------
</TABLE>
A significant percentage of the consolidated statutory surplus is
permanently reinvested or is subject to various state regulatory restrictions
which limit the payment of dividends without prior approval. The total amount of
statutory dividends which may be paid by the insurance subsidiaries of the
Company in 1998 is estimated to be $144.
13. COMMITMENTS AND CONTINGENT LIABILITIES
(A) LITIGATION
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for monetary and punitive damages have
been asserted. Although there can be no assurances, management, at the present
time, does not anticipate that the ultimate liability arising from such pending
or threatened litigation will have a material effect on the financial condition
or operating results of the Company.
(B) GUARANTY FUNDS
Under insurance guaranty fund laws in each state, the District of Columbia
and Puerto Rico, insurers licensed to do business can be assessed by state
insurance guaranty associations for certain obligations of insolvent insurance
companies to policyholders and claimants. Recent regulatory actions against
certain large life insurers encountering financial difficulty have prompted
various state insurance guaranty associations to begin assessing life insurance
companies for the deemed losses. Most of these laws do provide, however, that an
assessment may be excused or deferred if it would threaten an insurer's solvency
and further provide annual limits on such assessments. A large part of the
assessments paid by the Company's insurance subsidiaries pursuant to these laws
may be used as credits for a portion of the Company's insurance subsidiaries'
premium taxes. The Company paid guaranty fund assessments of approximately $15,
$11 and $10 in 1997, 1996 and 1995, respectively, of which $4, $5, and $6 were
estimated to be creditable against premium taxes.
14. BUSINESS SEGMENT INFORMATION
The Company, along with its parent, sells financial products such as fixed
and variable annuities, retirement plan services, and life and disability
insurance on both an individual and a group basis. The Company divides its core
businesses into three segments: Annuity, Individual Life Insurance, and Employee
Benefits. The Company also maintains a Guaranteed Investment Contracts segment,
which is primarily comprised of guaranteed rate contract business written prior
to 1995 and a Corporate Operation. The Annuity segment offers individual
variable annuities and fixed market value adjusted annuities, deferred
compensation and retirement plan services, mutual funds, investment management
services and other financial products. The Individual Life Insurance segment
sells a variety of individual life insurance products, including variable life,
universal life, interest-sensitive whole life, and term life policies. The
Employee Benefits segment sells group insurance products, including group life,
group short and long-term disability and corporate owned life insurance, and
engages in certain international operations. The Guaranteed Investment Contracts
segment sells a limited amount of guaranteed investment contracts and contains
Closed Book GRC. Through its Corporate Operation, the Company reports items that
are not directly allocable to any of its business segments. Included in the
Corporate Operation are unallocated income and expense and certain other items
not directly allocable to any segment. Net realized capital gains and losses are
recognized in the period of realization, but are allocated to the segments
utilizing durations of the segment portfolios.
<PAGE>
- --------------------------------------------------------------------------------
The following table outlines revenues, operating income and assets by
business segment:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Annuity.............................................. $ 1,269 $ 968 $ 759
Individual Life Insurance............................ 487 440 383
Employee Benefits.................................... 972 1,366 1,273
Guaranteed Investment Contracts...................... 241 34 337
Corporate Operation.................................. 40 81 52
-------- -------- --------
Total revenues..................................... $ 3,009 $ 2,889 $ 2,804
-------- -------- --------
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)
Annuity.............................................. $ 317 $ 226 $ 171
Individual Life Insurance............................ 85 68 56
Employee Benefits.................................... 53 44 37
Guaranteed Investment Contracts...................... -- (346) (103)
Corporate Operation.................................. 14 66 30
-------- -------- --------
Total income before income tax expense............. $ 469 $ 58 $ 191
-------- -------- --------
-------- -------- --------
ASSETS
Annuity $ 69,152 $ 52,877 $ 39,732
Individual Life Insurance............................ 4,918 3,753 3,173
Employee Benefits.................................... 18,196 14,708 13,494
Guaranteed Investment Contracts...................... 3,347 4,533 6,069
Corporate Operation.................................. 2,343 1,891 1,729
-------- -------- --------
Total assets....................................... $ 97,956 $ 77,762 $ 64,197
-------- -------- --------
-------- -------- --------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
SCHEDULE I -- SUMMARY OF INVESTMENTS OTHER THAN INVESTMENTS IN AFFILIATES
AS OF DECEMBER 31, 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
AMOUNT AT
WHICH
FAIR SHOWN ON
TYPE OF INVESTMENT COST VALUE BALANCE SHEET
- --------------------------------------------- ------- ------- --------------
<S> <C> <C> <C>
Fixed Maturities
Bonds and Notes
U. S. gov't and gov't agencies and
authorities (guaranteed and sponsored) $ 217 $ 219 $ 219
U. S. gov't and gov't agencies and
authorities (guaranteed and sponsored) --
asset-backed.............................. 1,175 1,204 1,204
States, municipalities and political
subdivisions.............................. 211 217 217
International governments.................. 376 393 393
Public utilities........................... 871 894 894
All other corporate including
international............................. 5,033 5,208 5,208
All other corporate -- asset-backed........ 4,091 4,124 4,124
Short-term investments..................... 1,318 1,318 1,318
Certificates of deposit...................... 593 599 599
------- ------- -------
Total fixed maturities....................... 13,885 14,176 14,176
------- ------- -------
Equity Securities
Common Stocks
Public utilities........................... -- -- --
Banks, trusts and insurance companies...... -- -- --
Industrial and miscellaneous............... 166 180 180
Nonredeemable preferred stocks............. -- -- --
------- ------- -------
Total equity securities...................... 166 180 180
------- ------- -------
Total fixed maturities and equity
securities.................................. 14,051 14,356 14,356
------- ------- -------
Real Estate.................................. -- -- --
Other Investments
Mortgage loans on real estate.............. -- -- --
Policy loans............................... 3,756 3,756 3,756
Investments in partnerships, trusts and
other..................................... 47 91 47
------- ------- -------
Total other investments...................... 3,803 3,847 3,803
------- ------- -------
Total investments............................ $17,854 $18,203 $18,159
------- ------- -------
------- ------- -------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
FUTURE
POLICY
BENEFITS,
UNPAID OTHER
DEFERRED CLAIMS POLICY
POLICY AND CLAIM CLAIMS AND PREMIUMS NET
ACQUISITION ADJUSTMENT BENEFITS AND OTHER INVESTMENT
SEGMENT COSTS EXPENSES PAYABLE CONSIDERATIONS INCOME
- --------------------------------------------- ----------- --------- ---------- --------------- ---------
<S> <C> <C> <C> <C> <C>
1997
Annuity...................................... $2,478 $2,070 $ 6,838 $ 769 $ 500
Individual Life Insurance.................... 837 392 2,182 323 164
Employee Benefits............................ -- 780 9,232 541 431
Guaranteed Investment Contracts.............. -- -- 2,782 2 239
Corporate Operation.......................... -- 28 -- 2 34
----------- --------- ---------- ------ ---------
Consolidated operations...................... $3,315 $3,270 $21,034 $1,637 $1,368
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
1996
Annuity...................................... $2,030 $1,526 $ 6,016 $ 535 $ 433
Individual Life Insurance.................... 730 346 2,160 287 153
Employee Benefits............................ -- 574 9,834 881 485
Guaranteed Investment Contracts.............. -- -- 4,124 2 251
Corporate Operation.......................... -- 28 -- -- 75
----------- --------- ---------- ------ ---------
Consolidated operations...................... $2,760 $2,474 $22,134 $1,705 $1,397
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
1995
Annuity...................................... $1,561 $1,314 $ 5,661 $ 319 $ 400
Individual Life Insurance.................... 615 706 1,932 246 137
Employee Benefits............................ 12 325 9,285 922 351
Guaranteed Investment Contracts.............. -- 28 5,720 -- 377
Corporate Operation.......................... -- -- -- -- 63
----------- --------- ---------- ------ ---------
Consolidated operations...................... $2,188 $2,373 $22,598 $1,487 $1,328
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
<CAPTION>
NET BENEFITS, AMORTIZATION
REALIZED CLAIMS AND OF DEFERRED
CAPITAL CLAIM POLICY
GAINS ADJUSTMENT ACQUISITION DIVIDENDS TO OTHER
SEGMENT (LOSSES) EXPENSES COSTS POLICYHOLDERS EXPENSES
- --------------------------------------------- ----------- ----------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
1997
Annuity...................................... $ -- $ 445 $250 $ -- $ 257
Individual Life Insurance.................... -- 242 83 -- 77
Employee Benefits............................ -- 425 2 240 252
Guaranteed Investment Contracts.............. -- 232 -- -- 9
Corporate Operation.......................... 4 35 -- -- (9)
----------- ----------- ----- ----- -----
Consolidated operations...................... $ 4 $1,379 $335 $240 $ 586
----------- ----------- ----- ----- -----
----------- ----------- ----- ----- -----
1996
Annuity...................................... $ -- $ 412 $174 $ -- $ 156
Individual Life Insurance.................... -- 245 59 -- 68
Employee Benefits............................ -- 546 -- 635 141
Guaranteed Investment Contracts.............. (219) 332 1 -- 47
Corporate Operation.......................... 6 -- -- -- 15
----------- ----------- ----- ----- -----
Consolidated operations...................... $(213) $1,535 $234 $635 $ 427
----------- ----------- ----- ----- -----
----------- ----------- ----- ----- -----
1995
Annuity...................................... $ -- $ 317 $117 $ -- $ 114
Individual Life Insurance.................... -- 203 70 -- 54
Employee Benefits............................ -- 424 -- 675 137
Guaranteed Investment Contracts.............. -- 453 12 -- 15
Corporate Operation.......................... (11) 25 -- -- (3)
----------- ----------- ----- ----- -----
Consolidated operations...................... $ (11) $1,422 $199 $675 $ 317
----------- ----------- ----- ----- -----
----------- ----------- ----- ----- -----
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
SCHEDULE IV -- REINSURANCE
(IN MILLIONS)
<TABLE>
<CAPTION>
CEDED TO ASSUMED FROM PERCENTAGE
GROSS OTHER OTHER NET OF AMOUNT
AMOUNT COMPANIES COMPANIES AMOUNT ASSUMED TO NET
-------- -------------- -------------- -------- ---------------
<S> <C> <C> <C> <C> <C>
For the year ended December 31, 1997
Life insurance in force........................... $245,487 $ 178,771 $ 33,156 $ 99,872 33.2%
Insurance revenues
Life insurance and annuities.................... 1,818 340 157 1,635 9.6%
Accident and health insurance................... 346 346 2 2 100.0%
-------- -------------- ------- --------
Total insurance revenues.......................... $ 2,164 $ 686 $ 159 $ 1,637 9.7%
-------- -------------- ------- --------
-------- -------------- ------- --------
For the year ended December 31, 1996
Life insurance in force......................... $177,094 $ 106,146 $ 31,957 $102,905 31.1%
Insurance revenues
Life insurance and annuities.................... 1,801 298 169 1,672 10.1%
Accident and health insurance................... 337 325 21 33 63.6%
-------- -------------- ------- --------
Total insurance revenues.......................... $ 2,138 $ 623 $ 190 $ 1,705 11.1%
-------- -------------- ------- --------
-------- -------------- ------- --------
For the year ended December 31, 1995
Life insurance in force......................... $182,716 $ 112,774 $ 26,996 $ 96,938 27.8%
Insurance revenues
Life insurance and annuities.................... 1,232 325 574 1,481 38.8%
Accident and health insurance................... 313 324 17 6 283.3%
-------- -------------- ------- --------
Total insurance revenues.......................... $ 1,545 $ 649 $ 591 $ 1,487 39.7%
-------- -------------- ------- --------
-------- -------------- ------- --------
</TABLE>
<PAGE>
PART 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) Resolution of the Board of Directors of Hartford Life Insurance
Company ("Hartford") authorizing the establishment of the
Separate Account.(1)
(2) Not applicable.
(3) (a) Principal Underwriting Agreement.1
(b) Form of Dealer Agreement.1
(4) Form of the Variable Annuity Contract.1
(5) Form of Application.1
(6) (a) Restated Certificate of Incorporation of Hartford.(2)
(b) Bylaws of Hartford.2
(7) Not applicable.
(8) Not Applicable.
(9) Opinion and Consent of Lynda Godkin, Senior Vice President,
General Counsel and Corporate Secretary.
(10) Consent of Arthur Andersen LLP, Independent Public Accountants.
(11) No financial statements are omitted.
(12) Not applicable.
- -------------------------
(1) Incorporated by reference to Post Effective Amendment No. 9, to the
Registration Statement File No. 33-19945, dated May 1, 1995.
(2) Incorporated by reference to Post Effective Amendment No.19, to the
Registration Statement File No. 33-73570, dated April 14, 1997.
<PAGE>
(13) Not applicable.
(14) Not Applicable.
(15) Copy of Power of Attorney.
(16) Organizational Chart.
Item 25. Directors and Officers of the Depositor
<TABLE>
<CAPTION>
NAME POSITION WITH HARTFORD
- ---- -----------------------
<S> <C>
Dong H. Ahn Vice President
Wendell J. Bossen Vice President
Gregory A. Boyko Senior Vice President, Director*
Peter W. Cummins Senior Vice President
Ann M. de Raismes Senior Vice President
Timothy M. Fitch Vice President and Actuary
David T. Foy Senior Vice President and Treasurer
Bruce D. Gardner Vice President
J. Richard Garrett Vice President and Assistant Treasurer
John P. Ginnetti Executive Vice President & Director of
Asset Management Services, Director*
William A. Godfrey, III Senior Vice President
Lynda Godkin Senior Vice President, General Counsel
and Corporate Secretary, Director*
Lois W. Grady Senior Vice President
Christopher Graham Vice President
Mark E. Hunt Vice President
Stephen T. Joyce Vice President
Michael D. Keeler Vice President
Robert A. Kerzner Senior Vice President
</TABLE>
<TABLE>
<CAPTION>
NAME POSITION WITH HARTFORD
- ---- -----------------------
<S> <C>
David N. Levenson Vice President
Steven M. Maher Vice President and Actuary
William B. Malchodi, Jr. Vice President
Raymond J. Marra Vice President
Thomas M. Marra Executive Vice President and Director,
Individual Life and Annuity Division, Director*
Robert F. Nolan Senior Vice President
Joseph J. Noto Vice President
C. Michael O'Halloran Vice President
Lawrence M. O'Rourke Vice President
Daniel E. O'Sullivan Vice President
Craig R. Raymond Senior Vice President and Chief Actuary
Mary P. Robinson Vice President
Donald A. Salama Vice President
Timothy P. Schiltz Vice President
Lowndes A. Smith President and Chief Executive Officer,
Director*
Keith A. Stevenson Vice President
Edward A. Sweeney Vice President
Judith V. Tilbor Vice President
Raymond P. Welnicki Senior Vice President and Director,
Employee Benefit Division, Director*
Walter C. Welsh Senior Vice President
Lizabeth H. Zlatkus Senior Vice President, Director*
David M. Znamierowski Senior Vice President, Director*
</TABLE>
Unless otherwise indicated, the principal business address of each the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
*Denotes Board of Directors.
<PAGE>
Item 26. Persons Controlled By or Under Common Control with the Depositor or
Registrant
See Exhibit 15 incorporated herein.
Item 27. Number of Contract Owners
As of June 30, 1998 there were 198,354 Contract Owners.
Item 28. Indemnification
Under Section 33-772 of the Connecticut General Statutes, unless
limited by its certificate of incorporation, the Registrant must
indemnify a director who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party
because he is or was a director of the corporation against reasonable
expenses incurred by him in connection with the proceeding.
The Registrant may indemnify an individual made a party to a
proceeding because he is or was a director against liability incurred
in the proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of
the Registrant, and, with respect to any criminal proceeding, had no
reason to believe his conduct was unlawful. Conn. Gen. Stat. Section
33-771(a). Additionally, pursuant to Conn. Gen. Stat. Section 33-776,
the Registrant may indemnify officers and employees or agents for
liability incurred and for any expenses to which they becomes subject
by reason of being or having been an employees or officers of the
Registrant. Connecticut law does not prescribe standards for the
indemnification of officers, employees and agents and expressly states
that their indemnification may be broader than the right of
indemnification granted to directors.
The foregoing statements are specifically made subject to the detailed
provisions of Section 33-770 et seq.
Notwithstanding the fact that Connecticut law obligates the Registrant
to indemnify a only a director that was successful on the merits in a
suit, under Article VIII, Section 1 of the Registrant's bylaws, the
Registrant must indemnify both directors and officers of the
Registrant for (1) any claims and liabilities to which they become
subject by reason of being or having been a directors or officers of
the company and legal and (2) other expenses incurred in defending
against such claims, in each case, to the extent such is consistent
with statutory provisions.
Additionally, the directors and officers of Hartford and Hartford
Securities Distribution Company, Inc. ("HSD") are covered under a
directors and officers liability insurance policy issued to The
Hartford Financial Services Group, Inc. and its subsidiaries. Such
policy will reimburse the Registrant for any payments that it shall
make to directors and officers pursuant to law and will, subject to
certain exclusions contained in the policy, further pay any other
costs, charges and expenses
<PAGE>
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, or otherwise, 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.
Item 29. Principal Underwriters
(a) HSD acts as principal underwriter for the following investment
companies:
Hartford Life Insurance Company - Separate Account One
Hartford Life Insurance Company - Separate Account Two
Hartford Life Insurance Company - Separate Account Two (DC Variable
Account I)
Hartford Life Insurance Company - Separate Account Two (DC Variable
Account II)
Hartford Life Insurance Company - Separate Account Two (QP Variable
Account)
Hartford Life Insurance Company - Separate Account Two (Variable
Account "A")
Hartford Life Insurance Company - Separate Account Two (NQ Variable
Account)
Hartford Life Insurance Company - Putnam Capital Manager Trust
Separate Account
Hartford Life Insurance Company - Separate Account Three
Hartford Life Insurance Company - Separate Account Five
Hartford Life and Annuity Insurance Company - Separate Account One
Hartford Life and Annuity Insurance Company - Putnam Capital Manager
Trust Separate Account Two
Hartford Life and Annuity Insurance Company - Separate Account
Three
Hartford Life and Annuity Insurance Company - Separate Account Five
Hartford Life and Annuity Insurance Company - Separate Account Six
American Maturity Life Insurance Company - Separate Account AMLVA
<PAGE>
(b) Directors and Officers of HSD
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address With Underwriter
---------------- ----------------------
<S> <C>
Lowndes A. Smith President and Chief Executive Officer, Director
John P. Ginnetti Executive Vice President, Director
Thomas M. Marra Executive Vice President, Director
Peter W. Cummins Senior Vice President
Lynda Godkin Senior Vice President, General Counsel and
Corporate Secretary
Donald E. Waggaman, Jr. Treasurer
George R. Jay Controller
</TABLE>
Unless otherwise indicated, the principal business address of
each the above individuals is P.O. Box 2999, Hartford, CT
06104-2999.
Item 30. Location of Accounts and Records
All of the accounts, books, records or other documents required to be
kept by Section 31(a) of the Investment Company Act of 1940 and rules
thereunder, are maintained by Hartford at 200 Hopmeadow Street,
Simsbury, Connecticut 06089.
Item 31. Management Services
All management contracts are discussed in Part A and Part B of this
Registration Statement.
Item 32. Undertakings
(a) The Registrant hereby undertakes to file a post-effective
amendment to this Registration Statement as frequently as is
necessary to ensure that the audited financial statements in the
Registration Statement are never more than 16 months old so long
as payments under the variable annuity Contracts may be accepted.
(b) The Registrant hereby undertakes to include either (1) as part of
any application to purchase a Contract offered by the Prospectus,
a space that an applicant can check to request a Statement of
Additional Information, or (2) a post card or similar written
communication affixed to or included in the Prospectus that the
applicant can remove to send for a Statement of Additional
Information.
(c) The Registrant hereby undertakes to deliver any Statement of
Additional Information and any financial statements required to
be made available under this Form promptly upon written or oral
request.
<PAGE>
(d) Hartford hereby represents that the aggregate fees and charges
under the Contract are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks
assumed by Hartford.
The Registrant is relying on the no-action letter issued by the
Division of Investment Management to American Counsel of Life
Insurance, Ref. No. IP-6-88, November 28, 1988. The Registrant has
complied with conditions one through four of the no-action letter.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets 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 State of Connecticut on this
15th day of September , 1998.
HARTFORD LIFE INSURANCE COMPANY -
SEPARATE ACCOUNT TWO (VARIABLE ACCOUNT "A")
(Registrant)
*By: *By:
----------------------------------------- ------------------------
Thomas M. Marra, Executive Vice President Marianne O'Doherty
Attorney-in-Fact
HARTFORD LIFE INSURANCE COMPANY
(Depositor)
*By:
-----------------------------------------
Thomas M. Marra, Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons and in the
capacity and on the date indicated.
Gregory A. Boyko, Senior Vice President,
Director *
John P. Ginnetti, Executive Vice
President, Director *
Lynda Godkin, Senior Vice President,
General Counsel & Corporate Secretary, Director*
Thomas M. Marra, Executive Vice *By:
President, Director * -----------------
Lowndes A. Smith, President & Marianne O'Doherty
Chief Operating Officer, Director * Attorney-In-Fact
Raymond P. Welnicki, Senior Vice
President, Director * Dated: September 15, 1998
Lizabeth H. Zlatkus, Senior Vice President,
Director *
David M. Znamierowski, Senior Vice President,
Director*
<PAGE>
EXHIBIT INDEX
(9) Opinion and Consent of Lynda Godkin, Senior Vice President, General
Counsel and Corporate Secretary.
(10) Consent of Arthur Andersen LLP, Independent Public Accountants.
(15) Copy of Power of Attorney.
(16) Organizational Chart.
<PAGE>
Exhibit 9
September 15, 1998 LYNDA GODKIN
Senior Vice President, General Counsel &
Corporate Secretary
Board of Directors
Hartford Life Insurance Company
200 Hopmeadow Street
Simsbury, CT 06089
RE: SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
FILE NO. 33-19945
Dear Sir/Madam:
I have acted as General Counsel to Hartford Life Insurance Company (the
"Company"), a Connecticut insurance company, and Hartford Life Insurance Company
Separate Account Two (the "Account") in Connecticut with the registration of an
indefinite amount of securities in the form of variable annuity contracts (the
"Contracts") with the Securities and Exchange Commission under the Securities
Act of 1933, as amended. I have examined such documents (including the Form N-4
registration statement) and reviewed such questions of law as I considered
necessary and appropriate, and on the basis of such examination and review, it
is my opinion that:
1. The Company is a corporation duly organized and validly existing as a stock
life insurance company under the laws of the State of Connecticut and is
duly authorized by the Insurance Department of the State of Connecticut to
issue the Contacts.
2. The Account is a duly authorized and existing separate account established
pursuant to the provisions of Section 38a-433 of the Connecticut Statutes.
3. To the extent so provided under the Contracts, that portion of the assets
of the Account equal to the reserves and other contract liabilities with
respect to the Account will not be chargeable with liabilities arising out
of any other business that the Company may conduct.
4. The Contracts, when issued as contemplated by the Form N-4 Registration
Statement, will constitute legal, validly issued and binding obligations of
the Company.
I hereby consent to the filing of this opinion as an exhibit to the Form N-4
registration statement for the Contracts and the Account.
Sincerely yours,
/s/ Lynda Godkin
Lynda Godkin
<PAGE>
Exhibit 10
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
Registration Statement File No. 33-19945 for Hartford Life Insurance Company
Separate Account Two on Form N-4.
Hartford, Connecticut
September 28, 1998
<PAGE>
Exhibit 15
HARTFORD LIFE INSURANCE COMPANY
POWER OF ATTORNEY
-----------------
Gregory A. Boyko
John P. Ginnetti
Lynda Godkin
Thomas M. Marra
Lowndes A. Smith
Raymond P. Welnicki
Lizabeth H. Zlatkus
David M. Znamierowski
do hereby jointly and severally authorize Lynda Godkin, Marianne O'Doherty,
and Leslie T. Soler to sign as their agent, any Registration Statement,
pre-effective amendment, post-effective amendment and any application for
exemptive relief of the Hartford Life Insurance Company and Hartford Life and
Accident Insurance Company under the Securities Act of 1933 and/or the
Investment Company Act of 1940.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney for
the purpose herein set forth.
/s/ Gregory A. Boyko Dated as of March 16, 1998
- --------------------------------------- --------------------------
Gregory A. Boyko
/s/ John P. Ginnetti Dated as of March 16, 1998
- --------------------------------------- --------------------------
John P. Ginnetti
/s/ Lynda Godkin Dated as of March 16, 1998
- --------------------------------------- --------------------------
Lynda Godkin
/s/ Thomas M. Marra Dated as of March 16, 1998
- --------------------------------------- --------------------------
Thomas M. Marra
/s/ Lowndes A. Smith Dated as of March 16, 1998
- --------------------------------------- --------------------------
Lowndes A. Smith
/s/ Raymond P. Welnicki Dated as of March 16, 1998
- --------------------------------------- --------------------------
Raymond P. Welnicki
/s/ Lizabeth H. Zlatkus Dated as of March 16, 1998
- --------------------------------------- --------------------------
Lizabeth H. Zlatkus
/s/ David M. Znamierowski Dated as of March 16, 1998
- --------------------------------------- --------------------------
David M. Znamierowski
<PAGE>
Exhibit 16
<TABLE>
<CAPTION>
<S> <C>
THE HARTFORD
The Hartford Financial Services Group, Inc.
(Delaware)
|
- -------------------------------------------------------------------------------------------------------------
Nutmeg Insurance Company The Hartford Investment
(Connecticut) Management Company
| (Delaware)
Hartford Fire Insurance Company |
(Connecticut) Hartford Investment
| Services, Inc.
Hartford Accident and Indemnity Company (Connecticut)
(Connecticut)
|
Hartford Life, Inc.
(Delaware)
|
Hartford Life and Accident Insurance Company
(Connecticut)
|
|
|
- -------------------------------------------------------------------------------------------------------------
Alpine Life Hartford Financial Hartford Life American Maturity ITT Hartford Canada
Insurance Services Life Insurance Company Life Insurance Holdings, Inc.
Company Insurance Co. (Connecticut) Company (Canada)
(New Jersey) (Connecticut) | (Connecticut) |
| | |
| AML Financial, Inc. |
| (Connecticut) Hartford Life
| Insurance Company
| of Canada
| (Canada)
|
|
- -------------------------------------------------------------------------------------------------------------
Hartford Life and Annuity ITT Hartford International Hartford Financial Services Royal Life
Insurance Company Life Reassurance Corporation Corporation Insurance
(Connecticut) (Connecticut) (Delaware) Company of
| | America
| | (Connecticut)
| |
ITT Hartford Life, Ltd. |
(Bermuda) |
|
|
- -------------------------------------------------------------------------------------------------------------
MS Fund HL Funding HL Investment Hartford Hartford Securities Hartford-Comp. Emp.
America Company, Inc. Advisors, Inc. Equity Sales Distribution Benefit Service
1993-K, Inc. (Connecticut) (Connecticut) Company, Inc. Company, Inc. Company
(Delaware) | (Connecticut) (Connecticut) (Connecticut)
|
Hartford Investment
Financial Services
Company
(Delaware)
</TABLE>
