<PAGE>
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As filed with the Securities and Exchange Commission on August 12, 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. 10 [X]
---------
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 93 [X]
--------
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 August 12, 1998, pursuant to paragraph (b)(1)(v) of Rule 485
---
60 days after filing pursuant to paragraph (a)(1) of rule 485
---
<PAGE>
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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>
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CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
N-4 Item No. Prospectus Heading
- ---------------------- ----------------------------
1. Cover Page Cover Page
2. Definitions Glossary of Special Terms
3. Synopsis or Highlights Summary
4. Condensed Financial Information Accumulation Unit Values; Yield
Information
5. General Description of Registrant, QP Variable Account Depositor, and
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
Annuity Contracts of Benefits; The Variable Account
"A" Contract and Separate Account
Two (Variable Account "A")
8. Annuity Period Payment of Benefits
9. Death Benefit Payment of Benefits; Operation of
the Contract
10. Purchases and Contract Value Operation of the Contract
11. Redemptions Payment of Benefits
12. Taxes Federal Tax Considerations
13. Legal Proceedings Miscellaneous - Are there any
material legal proceedings
affecting the Separate Account?
14. Table of Contents of the Statement Table of Contents of the Statement
of Additional Information of Additional Information
<PAGE>
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HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO (VARIABLE ACCOUNT "A")
P. O. Box 5085
Hartford, Connecticut 06102-5085
Telephone: (800) 862-6668 (Contract Owners)
(800) 862-7715 (Investment Consultants)
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 Sub-Account - shares of Class IA of Hartford Advisers HLS
Fund, Inc. ("Hartford Advisers Fund")
Capital Appreciation Fund - shares of Class IA of Hartford Capital
Sub-Account Appreciation HLS Fund, Inc., ("Hartford
Capital Appreciation Fund")
Bond Fund Sub-Account - shares of Class IA of Hartford Bond HLS Fund,
Inc. ("Hartford Bond Fund")
International Opportunities - shares of Class IA of Hartford International
Fund Sub-Account Opportunities HLS Fund, Inc. ("Hartford
International Opportunities")
Money Market Fund - shares of Class IA of Hartford Money Market
Sub-Account HLS Fund, Inc.("Hartford Money Market Fund")
Mortgage Securities Fund - shares of Class IA of Hartford Mortgage
Securities Sub-Account HLS Fund, Inc. ("Hartford Mortgage Securities
Fund")
Stock Fund Sub-Account - shares of Class IA of Hartford Stock HLS
Fund, Inc. ("Hartford Stock Fund")
<PAGE>
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Index Fund Sub-Account - shares of Class IA of Hartford Index HLS
Fund, Inc. ("Hartford Index Fund")
Dividend & Growth Fund - shares of Class IA of Hartford Dividend &
Sub-Account Growth HLS Fund, Inc. ("Hartford Dividend &
Growth Fund")
International Advisers Fund - shares of Class IA of Hartford International
Sub-Account Advisers HLS Fund, Inc. ("Hartford
International Advisers Fund")
MidCap Fund Sub-Account - shares of Class IA of Hartford MidCap HLS
Fund, Inc. ("Hartford MidCap Fund")
Small Company Fund - shares of Class IA Hartford Small Company HLS
Sub-Account Fund, Inc. ("Hartford Small Company Fund")
Growth and Income Fund - shares of Class IA of Hartford Growth and
Sub-Account Income HLS Fund, Inc. ("Hartford Growth and
Income 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 50
of this Prospectus. The Statement of Additional Information is incorporated by
reference to this Prospectus.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, ANY BANK, NOR ARE THEY FEDERALLY
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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: August 12, 1998
Statement of Additional Information Dated: August 12, 1998
<PAGE>
-7-
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
GLOSSARY OF SPECIAL TERMS. . . . . . . . . . . . . . . . . . . . . . . 10
FEE TABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ACCUMULATION UNIT VALUES . . . . . . . . . . . . . . . . . . . . . . . 14
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
VARIABLE ACCOUNT "A" CONTRACT AND SEPARATE ACCOUNT
TWO SEPARATE ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . 18
What are the Variable Account "A" Contracts?. . . . . . . . . . . 18
Who can buy these Contracts?. . . . . . . . . . . . . . . . . . . 19
What is the Separate Account and how does it operate? . . . . . . 19
May I transfer assets between Sub-Accounts? . . . . . . . . . . . 21
OPERATION OF THE CONTRACT. . . . . . . . . . . . . . . . . . . . . . . 21
How is my Purchase Payment credited?. . . . . . . . . . . . . . . 21
What size Purchase Payments must I make?. . . . . . . . . . . . . 22
What if I am not satisfied with my purchase?. . . . . . . . . . . 22
May I assign or transfer my Contract? . . . . . . . . . . . . . . 22
How do I know what my Contract is worth?. . . . . . . . . . . . . 22
How is the Accumulation Unit value determined?. . . . . . . . . . 22
How are the underlying Fund shares valued?. . . . . . . . . . . . 23
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PAYMENT OF BENEFITS. . . . . . . . . . . . . . . . . . . . . . . . . . 23
What would my Beneficiary receive as a death benefit? . . . . . . 23
How can a Contract be redeemed or surrendered?. . . . . . . . . . 24
Can payment of the redemption or surrender value ever be postponed
beyond the seven day period?. . . . . . . . . . . . . . . . . . . 25
May I surrender once Annuity payments have started? . . . . . . . 25
May I reinvest after a redemption?. . . . . . . . . . . . . . . . 25
How do I elect an Annuity Commencement Date and form of Annuity?. 26
What is the minimum amount that I may select as an Annuity Payment? 26
What are the available Annuity options under the Contracts? . . . 26
How are Variable Annuity payments determined? . . . . . . . . . . 28
CHARGES UNDER THE CONTRACT . . . . . . . . . . . . . . . . . . . . . . 29
How are the sales charges under the Contracts made? . . . . . . . 29
Is there ever a time when the sales charges do not apply? . . . . 29
What do the sales charges cover?. . . . . . . . . . . . . . . . . 30
What is the mortality and expense risk charge?. . . . . . . . . . 30
Are there any administrative charges? . . . . . . . . . . . . . . 31
How much are the deductions for Premium Taxes?. . . . . . . . . . 31
HARTFORD LIFE INSURANCE COMPANY AND THE FUNDS. . . . . . . . . . . . . 32
What is Hartford? . . . . . . . . . . . . . . . . . . . . . . . . 32
What are the Funds? . . . . . . . . . . . . . . . . . . . . . . . 32
<PAGE>
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FEDERAL TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . 35
What are some of the federal tax consequences which affect
these Contracts?. . . . . . . . . . . . . . . . . . . . . . . . . 35
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
What are my voting rights?. . . . . . . . . . . . . . . . . . . . 42
Will other Contracts be participating in the Separate Account?. . 42
How are the Contracts sold? . . . . . . . . . . . . . . . . . . . 42
Who is the custodian of the Separate Account's assets?. . . . . . 43
Are there any material legal proceedings affecting the
Separate Account? . . . . . . . . . . . . . . . . . . . . . . . . 43
Is Hartford relying on any experts as to any portion of
this Prospectus?. . . . . . . . . . . . . . . . . . . . . . . . . 43
How may I get additional information? . . . . . . . . . . . . . . 43
APPENDIX I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION. . . . . . . 50
<PAGE>
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GLOSSARY OF SPECIAL TERMS
ACCUMULATION PERIOD: The period before the commencement of Annuity payments.
ACCUMULATION UNIT: An accounting unit of measure used to calculate values
before Annuity payments begin.
ANNUITANT: The person upon whose life the Contract is issued.
ANNUITY: A series of payments for life, or for life with a minimum number of
payments or a determinable sum guaranteed, or for a joint lifetime and
thereafter during the lifetime of the survivor or for payments for a designated
period.
ANNUITY COMMENCEMENT DATE: The date on which Annuity payments are to commence.
ANNUITY PERIOD: The period following the commencement of Annuity payments.
ANNUITY UNIT: An accounting unit of measure used to calculate the value of
Annuity payments.
BENEFICIARY: The person(s) designated to receive Contract values in the event
of the Annuitant's death.
CODE: The Internal Revenue Code of 1986, as amended.
COMMISSION: 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 32 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.
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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.
<PAGE>
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<TABLE>
<CAPTION>
Hartford Life Insurance Company
SUMMARY
Contract Owner Transaction Expense
(All Sub Accounts)
<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%
Eighth Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0%
Annual Contract Fee(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $25
Annual Expenses Separate Account (as a percentage of average account value)
Mortality and Expense Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . 1000%
</TABLE>
Annual Fund Operating Expense
(as a percentage of net assets)
<TABLE>
<CAPTION>
Total Fund
Management Other Operating
Fees Expenses Expenses
---- -------- --------
<S> <C> <C> <C>
Hartford Bond Fund. . . . . . . . . . . . . . . . . . . 0490% 0020% 0510%
Hartford Stock Fund . . . . . . . . . . . . . . . . . . 0430% 0020% 0450%
Hartford Money Market Fund. . . . . . . . . . . . . . . 0425% 0015% 0440%
Hartford Advisers Fund. . . . . . . . . . . . . . . . . 0610% 0020% 0630%
Hartford Capital Appreciation Fund. . . . . . . . . . . 0620% 0020% 0640%
Hartford Mortgage Securities Fund . . . . . . . . . . . 0425% 0025% 0450%
Hartford Index Fund . . . . . . . . . . . . . . . . . . 0375% 0015% 0390%
Hartford International Opportunities Fund . . . . . . . 0680% 0090% 0770%
Hartford Dividend & Gowth Opportunities Fund. . . . . . 0660% 0020% 0680%
Hartford International Advisers Fund. . . . . . . . . . 0750% 0120% 0870%
Hartford MidCap Fund. . . . . . . . . . . . . . . . . . 0750% 0040% 0790%
Hartford Small Company Fund . . . . . . . . . . . . . . 0750% 0020% 0770%
Hartford Growth and Income Fund(4) . . . . . . . . . . 0520% 0150% 0670%
</TABLE>
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(1) Length of time from premium payment
(2) The annual contract fee is a single $25 charge on a Contract It is
deducted proportionally from the investment options in use at the time of the
charge Pursuant to requirements of the 1940 Act, the policy fees has been
reflected in theExamples by a method intended to show th eaverage impact of the
policy fee on an investment in the Separate Account The Policy Fee is deducted
only when the accumulated value is $50,000 or less In the Example, the annual
contract fee is approximated as a 006% annual asset charge based on the
experience of the Contracts
(3) Hartford MidCap Fund is a new Fund: Operating expenses are based on
annualized estimates of such expenses to be incurred in the current fiscal year,
(4) Hartford Growth and Income Fund is a new Fund. Operating expenses are based
on annualized estimates of such expenses to be incurred in the current fiscal
year HL Investment Advsiors, Inc has agreed to waive its fees for the Growth
and Income Fund until the assets of the Fund (excluding assets contributed by
companies affiliated with HL Investment Advisors, Inc) frist reach $20 million
Absent this waiver, the investment advisory fee would be 0575% annually and
total fund operating expense ratio would be 0900% (annualized).
<PAGE>
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<TABLE>
<CAPTION>
Hartford Life Insurance Company Director Variable Annuity
EXAMPLE
If you surrender your contract at If you annuitize at the end of the
the end of the applicable time period: applicable time period:
You would pay the following expenses You would pay the following expenses
on a $1,000 investment, assuming a 5% on a $1,000 investment, assuming a 5%
annual return on assets: annual return on assets:
SubAccount 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>
Hartford Bond Fund. . . . . . . . . . . . . . $70 $88 $106 $187 $15 $49 $85 186
Hartford Stock Fund . . . . . . . . . . . . . 69 86 102 180 15 47 82 179
Hartford Money Market Fund. . . . . . . . . . 69 85 102 179 15 47 81 178
Hartford Advisers Fund. . . . . . . . . . . . 71 91 112 200 17 53 91 199
Hartford Capital Appreciation Fund. . . . . . 71 92 112 201 17 53 92 200
Hartford Mortgage Securities Fund . . . . . . 69 86 102 180 15 47 82 179
Hartford Index Fund . . . . . . . . . . . . . 69 84 99 173 14 45 79 173
Hartford International Opportunities Fund . . 73 96 119 215 18 57 99 215
Hartford Dividend & Growth Fund . . . . . . . 72 93 115 205 17 54 94 205
Hartford International Advisers Fund. . . . . 74 99 125 226 19 60 104 225
Hartford MidCap Fund. . . . . . . . . . . . . 73 96 n/a n/a 18 58 n/a n/a
Hartford Small Company Fund. . . . . . . . . 73 96 119 215 18 57 99 215
Hartford Growth and Income Fund . . . . . . . 72 93 n/a n/a 17 54 n/a n/a
<CAPTION>
If you do not surrender your
contract:
You would pay the following expenses
on a $1,000 investment, assuming a 5%
annual return on assets:
SubAccount 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Hartford Bond Fund. . . . . . . . . . . . . . $16 $50 $86 187
Hartford Stock Fund . . . . . . . . . . . . . 15 48 82 180
Hartford Money Market Fund. . . . . . . . . . 15 47 82 179
Hartford Advisers Fund. . . . . . . . . . . . 17 53 92 200
Hartford Capital Appreciation Fund. . . . . . 17 54 92 201
Hartford Mortgage Securities Fund . . . . . . 15 48 82 180
Hartford Index Fund . . . . . . . . . . . . . 15 46 79 173
Hartford International Opportunities Fund . . 19 58 99 215
Hartford Dividend & Growth Fund . . . . . . . 18 55 95 205
Hartford International Advisers Fund. . . . . 20 61 105 226
Hartford MidCap Fund. . . . . . . . . . . . . 19 58 n/a n/a
Hartford Small Company Fund. . . . . . . . . 19 58 99 215
Hartford Growth and Income Fund . . . . . . . 18 55 n/a n/a
</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 passed or future
expenses and actual expenses may be greater or less than those shown
<PAGE>
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Director One
Hartford Life Insurance Company Separate Account Two
ACCUMULATION UNIT VALUES
(For an accumulation unit outstanding throughout the period)
The following information, insofar as it relates to the period ended December
31, 1997, has been examined by Arthur Andersen LLP, independent public
accountants, whose report thereon is included in the Statement of Additional
information, which is incorporated by reference to this Prospectus
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------
6/1998 1997 1996 1995 1994 1993
------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
BOND FUND SUB-ACCOUNT - NON-QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 4023 $ 3649 $ 3560 $ 3035 $ 3191 $ 2924
Accumulation unit value at end of period. . . . . . . . . . $ 4174 $ 4023 $ 3649 $ 3560 $ 3035 $ 3191
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 1,961 1,879 2,005 2,377 2,747 3,449
BOND FUND SUB-ACCOUNT - QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 4085 $ 3705 $ 3615 $ 3082 $ 3240 $ 2969
Accumulation unit value at end of period. . . . . . . . . . $ 4238 $ 4085 $ 3705 $ 3615 $ 3082 $ 3240
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 232 276 286 331 387 493
STOCK FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 8493 $ 6530 $ 5303 $ 3994 $ 4112 $ 3633
Accumulation unit value at end of period. . . . . . . . . . $ 10256 $ 8493 $ 6530 $ 5303 $ 3994 $ 4112
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 3,090 3,173 3,407 4,081 3,744 4,033
STOCK FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 8882 $ 6829 $ 5546 $ 4177 $ 4301 $ 3799
Accumulation unit value at end of period. . . . . . . . . . $ 10726 $ 8882 $ 6829 $ 5546 $ 4177 $ 4301
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 826 848 830 940 1,015 1,043
MONEY MARKET FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 2572 $ 2466 $ 2369 $ 2262 $ 2198 $ 2157
Accumulation unit value at end of period. . . . . . . . . . $ 2626 $ 2572 $ 2466 $ 2369 $ 2262 $ 2198
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 11,980 12,010 13,211 10,105 14,167 15,270
MONEY MARKET FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 2571 $ 2465 $ 2368 $ 2261 $ 2197 $ 2156
Accumulation unit value at end of period. . . . . . . . . . $ 2626 $ 2571 $ 2465 $ 2368 $ 2261 $ 2197
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 781 979 1,362 1,178 1,194 1,160
ADVISERS FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 5351 $ 4341 $ 3761 $ 2960 $ 3074 $ 2766
Accumulation unit value at end of period. . . . . . . . . . $ 6147 $ 5351 $ 4341 $ 3761 $ 2960 $ 3074
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 10,575 11,223 12,469 13,796 15,417 17,371
ADVISERS FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 5351 $ 4341 $ 3761 $ 2960 $ 3074 $ 2766
Accumulation unit value at end of period. . . . . . . . . . $ 6147 $ 5351 $ 4341 $ 3761 $ 2960 $ 3074
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 3,286 3,353 3,531 4,045 4,661 5,005
CAPITAL APPRECIATION GROWTH FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 8151 $ 6729 $ 5631 $ 4367 $ 4303 $ 3598
Accumulation unit value at end of period. . . . . . . . . . $ 9069 $ 8151 $ 6729 $ 5631 $ 4367 $ 4303
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 2,040 2,279 2,634 3,859 2,983 3,032
CAPITAL APPRECIATION GROWTH FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 8154 $ 6732 $ 5633 $ 4369 $ 4305 $ 3599
Accumulation unit value at end of period. . . . . . . . . . $ 9073 $ 8154 $ 6732 $ 5633 $ 4369 $ 4305
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 833 859 888 891 938 1,026
MORTGAGE SECURITIES FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 2692 $ 2495 $ 2398 $ 2085 $ 2140 $ 2033
Accumulation unit value at end of period. . . . . . . . . . $ 2769 $ 2692 $ 2495 $ 2398 $ 2085 $ 2140
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 6,249 6,914 8,165 9,957 11,297 14,186
MORTGAGE SECURITIES FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 2692 $ 2495 $ 2398 $ 2085 $ 2140 $ 2033
Accumulation unit value at end of period. . . . . . . . . . $ 2769 $ 2692 $ 2495 $ 2398 $ 2085 $ 2140
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 635 695 755 1,001 1,432 2,005
INTERNATIONAL OPPORTUNITIES FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 1497 $ 1507 $ 1348 $ 1195 $ 1230 $ 0929
Accumulation unit value at end of period. . . . . . . . . . $ 1739 $ 1497 $ 1507 $ 1348 $ 1195 $ 1230
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 239 314 374 403 557 410
INTERNATIONAL OPPORTUNITIES FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 1497 $ 1507 $ 1348 $ 1195 $ 1230 $ 0929
Accumulation unit value at end of period. . . . . . . . . . $ 1739 $ 1497 $ 1507 $ 1348 $ 1195 $ 1230
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 1,472 1,518 1,951 1,765 2,439 1,473
DIVIDEND & GROWTH FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period. . . . . . . $ 2170 $ 1661 $ 1366 $ 1011 $ - -
Accumulation unit value at end of period. . . . . . . . . . $ 2395 $ 2170 $ 1661 $ 1366 $ 1011 -
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 1,823 1,710 1,241 665 335 -
DIVIDEND & GROWTH FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period. . . . . . . $ 2170 $ 1662 $ 1366 $ 1011 $ - -
Accumulation unit value at end of period. . . . . . . . . . $ 2395 $ 2170 $ 1662 $ 1366 $ 1011 -
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 448 391 291 61 37 -
INTERNATIONAL ADVISERS FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period. . . . . . . $ 1328 $ 1271 $ 1149 $ - - -
Accumulation unit value at end of period. . . . . . . . . . $ 1489 $ 1328 $ 1271 $ 1149 - -
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 187 223 348 30 - -
INTERNATIONAL ADVISERS FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period. . . . . . . $ 1328 $ 1271 $ 1149 $ - - -
Accumulation unit value at end of period. . . . . . . . . . $ 1489 $ 1328 $ 1271 $ 1149 - -
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 19 37 19 10 - -
INDEX FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period. . . . . . . $ 1472 $ 1121 $ - $ - - -
Accumulation unit value at end of period. . . . . . . . . . $ 1721 $ 1472 $ 1121 $ - - -
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 746 557 106 0 - -
INDEX FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period. . . . . . . $ 1472 $ 1121 $ - $ - - -
Accumulation unit value at end of period. . . . . . . . . . $ 1721 $ 1472 $ 1121 $ - - -
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 147 103 39 0 - -
SMALL COMPANY FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period. . . . . . . $ 1251 $ 1067 $ - $ - - -
Accumulation unit value at end of period. . . . . . . . . . $ 1355 $ 1251 $ 1067 $ - - -
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 426 377 110 0 - -
SMALL COMPANY FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period. . . . . . . $ 1251 $ 1067 $ - $ - - -
Accumulation unit value at end of period. . . . . . . . . . $ 1355 $ 1251 $ 1067 $ - - -
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 129 100 10 0 - -
MIDCAP FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period. . . . . . . $ 1098 $ - $ - $ - - -
Accumulation unit value at end of period. . . . . . . . . . $ 1285 $ 1098 $ - $ - - -
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 126 34 - 0 - -
MIDCAP FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period. . . . . . . $ 1098 $ - $ - $ - - -
Accumulation unit value at end of period. . . . . . . . . . $ 1285 $ 1098 $ - $ - - -
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 14 12 - 0 - -
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------
1992 1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
BOND FUND SUB-ACCOUNT - NON-QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 2798 $ 2270 $ 2261 $ 2037 $ 1912 $ 1932 $ -
Accumulation unit value at end of period. . . . . . . . . . $ 2924 $ 2798 $ 2270 $ 2261 $ 2037 $ 1913 $ 1932
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 3,618 4,101 4,099 5,021 5,670 6,927 9,698
BOND FUND SUB-ACCOUNT - QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 2842 $ 2465 $ 2296 $ 2069 $ 1942 $ 1962 $ -
Accumulation unit value at end of period. . . . . . . . . . $ 2969 $ 2842 $ 2465 $ 2296 $ 2069 $ 1942 $ 1962
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 557 598 741 764 1,217 877 1,157
STOCK FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 3334 $ 2702 $ 2840 $ 2275 $ 1931 $ 1851 $ -
Accumulation unit value at end of period. . . . . . . . . . $ 3633 $ 3334 $ 2702 $ 2840 $ 2275 $ 1931 $ 1851
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 4,383 4,389 4,551 5,298 5,948 7,728 7,980
STOCK FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 3487 $ 2826 $ 2970 $ 2379 $ 2020 $ 1936 $ -
Accumulation unit value at end of period. . . . . . . . . . $ 3799 $ 3487 $ 2826 $ 2970 $ 2380 $ 2020 $ 1936
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 985 1,110 1,013 1,315 1,268 1,921 1,608
MONEY MARKET FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 2102 $ 2002 $ 1871 $ 1731 $ 1628 $ 1544 $ -
Accumulation unit value at end of period. . . . . . . . . . $ 2157 $ 2102 $ 2002 $ 1871 $ 1731 $ 1628 $ 1544
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 19,145 25,059 31,519 32,349 35,576 40,613 39,728
MONEY MARKET FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 2101 $ 2001 $ 1870 $ 1730 $ 1628 $ 1544 $ -
Accumulation unit value at end of period. . . . . . . . . . $ 2156 $ 2101 $ 2001 $ 1870 $ 1731 $ 1628 $ 1544
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 2,542 3,959 4,837 4,761 5,337 4,016 1,342
ADVISERS FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 2579 $ 2164 $ 2159 $ 1791 $ 1585 $ 1510
Accumulation unit value at end of period. . . . . . . . . . $ 2766 $ 2579 $ 2164 $ 2159 $ 1791 $ 1585 $ 1510
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 18,273 19,355 21,074 23,782 25,816 31,606 26,453
ADVISERS FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 2579 $ 2164 $ 2159 $ 1791 $ 1585 $ 1510
Accumulation unit value at end of period. . . . . . . . . . $ 2766 $ 2579 $ 2164 $ 2159 $ 1791 $ 1585 $ 1510
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 5,231 5,513 6,012 7,020 7,627 10,231 8,764
CAPITAL APPRECIATION GROWTH FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 3106 $ 2036 $ 2308 $ 1878 $ 1503 $ 1588
Accumulation unit value at end of period. . . . . . . . . . $ 3598 $ 3106 $ 2036 $ 2308 $ 1878 $ 1503 $ 1588
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 3,803 3,521 2,204 4,038 2,655 3,235 3,957
CAPITAL APPRECIATION GROWTH FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 3107 $ 2037 $ 2309 $ 1879 $ 1503 $ 1588
Accumulation unit value at end of period. . . . . . . . . . $ 3599 $ 3107 $ 2037 $ 2309 $ 1879 $ 1503 $ 1588
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 859 915 793 992 1,041 1,436 1,831
MORTGAGE SECURITIES FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 1963 $ 1728 $ 1591 $ 1420 $ 1323 $ 1302
Accumulation unit value at end of period. . . . . . . . . . $ 2033 $ 1963 $ 1728 $ 1591 $ 1420 $ 1323 $ 1302
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 17,449 20,875 23,365 26,763 32,866 38,214 55,175
MORTGAGE SECURITIES FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 1963 $ 1728 $ 1591 $ 1420 $ 1323 $ 1302
Accumulation unit value at end of period. . . . . . . . . . $ 2033 $ 1963 $ 1728 $ 1591 $ 1420 $ 1323 $ 1302
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 3,646 4,104 4,668 5,094 5,678 5,978 8,895
INTERNATIONAL OPPORTUNITIES FUND SUB-ACCOUNT NON- QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 0982 $ 0878 $ -
Accumulation unit value at end of period. . . . . . . . . . $ 0929 $ 0982 $ 0878 - - - -
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 174 105 33 - - - -
INTERNATIONAL OPPORTUNITIES FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period. . . . . . . $ 0982 $ 0878 $ -
Accumulation unit value at end of period. . . . . . . . . . $ 0929 $ 0982 $ 0878 - - - -
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . 254 127 34 - - - -
DIVIDEND & GROWTH FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period. . . . . . . - - - - - - -
Accumulation unit value at end of period. . . . . . . . . . - - - - - - -
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . - - - - - - -
DIVIDEND & GROWTH FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period. . . . . . . - - - - - - -
Accumulation unit value at end of period. . . . . . . . . . - - - - - - -
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . - - - - - - -
INTERNATIONAL ADVISERS FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period. . . . . . . - - - - - - -
Accumulation unit value at end of period. . . . . . . . . . - - - - - - -
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . - - - - - - -
INTERNATIONAL ADVISERS FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period. . . . . . . - - - - - - -
Accumulation unit value at end of period. . . . . . . . . . - - - - - - -
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . - - - - - - -
INDEX FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period. . . . . . . - - - - - - -
Accumulation unit value at end of period. . . . . . . . . . - - - - - - -
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . - - - - - - -
INDEX FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period. . . . . . . - - - - - - -
Accumulation unit value at end of period. . . . . . . . . . - - - - - - -
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . - - - - - - -
SMALL COMPANY FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period. . . . . . . - - - - - - -
Accumulation unit value at end of period. . . . . . . . . . - - - - - - -
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . - - - - - - -
SMALL COMPANY FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period. . . . . . . - - - - - - -
Accumulation unit value at end of period. . . . . . . . . . - - - - - - -
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . - - - - - - -
MIDCAP FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period. . . . . . . - - - - - - -
Accumulation unit value at end of period. . . . . . . . . . - - - - - - -
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . - - - - - - -
MIDCAP FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period. . . . . . . - - - - - - -
Accumulation unit value at end of period. . . . . . . . . . - - - - - - -
Number accumulation units outstanding at end of period
(in thousands). . . . . . . . . . . . . . . . . . . . . . - - - - - - -
</TABLE>
(a) Inception date August 1, 1986
(b) Inception date May 1, 1987
(c) Inception date July 2, 1990
(d) Inception date March 8, 1994
(e) Inception date March 1, 1995
(f) Inception date August 9, 1996
(g) Inception date July 15, 1997
<PAGE>
-15-
SUMMARY
A. CONTRACTS OFFERED
Individual and group tax-deferred variable annuity Contracts (see "C.
Taxation of Annuities in General," page 37). 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 21).
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 35 and Appendix I
commencing on page 44).
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 22).
D. UNDERLYING INVESTMENTS FOR CONTRACTS
The investment options are the Hartford Advisers Fund, Hartford Capital
Appreciation Fund, Hartford Bond Fund, Hartford Mortgage Securities
Fund, Hartford Stock Fund, Hartford Money Market Fund, Hartford Index
Fund, Hartford Dividend & Growth Fund, Hartford International Advisers
Fund, Hartford MidCap Fund, Hartford Small Company Fund and Hartford
Growth and Income 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
<PAGE>
-16-
any event, will not exceed the aggregate amount of the Purchase
Payments made to a Contract. (See "Charges Under the Contract"
commencing on page 29.) 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 29.)
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 29.)
3. ANNUAL MAINTENANCE FEE
The Contracts provide for an administrative charge to be deducted from
the value of the Contract in the amount of $25.00 each Contract Year.
Contracts with a Contract Value of $50,000 or more at time of Contract
Anniversary will not be assessed this fee. (See "Are there any
administrative charges?" commencing on page 31.)
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 30.)
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 31.)
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
<PAGE>
-17-
terminate the Contract in its entirety. (See "How can a Contract be
redeemed or surrendered?" commencing on page 24.)
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 23.)
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 26).
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 42).
<PAGE>
-18-
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 pages 2 and 3 prior to reading this Prospectus to
familiarize yourself with the terms being used.
VARIABLE ACCOUNT "A" CONTRACT AND
SEPARATE ACCOUNT TWO SEPARATE ACCOUNT
What are the Variable Account "A" Contracts?
The Contract is an individual or group tax-deferred variable annuity
Contract designed for retirement planning purposes. There are no
deductions from your Purchase Payments (except for premium taxes, if
applicable) so your entire Purchase Payment is put to work in the
investment Sub-Account(s) of your choice. Currently, there are 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.
<PAGE>
-19-
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").
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
<PAGE>
-20-
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.
<PAGE>
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May I transfer assets between Sub-Accounts?
Yes, you may transfer the values of your Sub-Account allocations from one
or more Sub-Accounts to another free of charge, subject to the terms and
conditions of the Contracts. Transfers by telephone may be made by calling
(800) 862-6668.
The right to reallocate Contract Values between the Sub-Accounts is subject
to modification if 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.
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.
<PAGE>
-22-
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 37.)
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
<PAGE>
-23-
value per share of the corresponding Fund at the end of the Valuation
Period (plus the per share amount of any dividends or capital gains by that
Fund if the ex-dividend date occurs in the Valuation Period then ended)
divided by the net asset value per share of the corresponding Fund at the
beginning of the Valuation Period and subtracting from that amount the
amount of any charges assessed during the Valuation Period then ending.
You should refer to the Prospectus for each of the Funds which accompanies
this Prospectus for a description of how the assets of each Fund are valued
since each determination has a direct bearing on the Accumulation Unit
value of the Sub-Account and therefore the value of a Contract.
How are the underlying Fund shares valued?
The shares of the Fund are valued at net asset value on a daily basis. A
complete description of the valuation method used in valuing Fund shares
may be found in the accompanying Prospectus of the Funds.
PAYMENT OF BENEFITS
What would my Beneficiary receive as a death benefit?
The Contracts provide that in the event the Annuitant or Contract Owner
dies before the selected Annuity Commencement Date or the Annuitant's age
75 (whichever occurs first) the Minimum Death Benefit payable on such
Contract will be the greater of (a) the Termination Value of the Contract
determined as of the day written proof of death of such person is received
by Hartford, or (b) 100% of the total Purchase Payments made to such
Contract, reduced by any prior surrenders.
The Minimum Death Benefit may be taken by the Beneficiary in a single sum,
in which case payment will be made within seven days of receipt of proof of
death by 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 26)
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
<PAGE>
-24-
determined?" commencing on page 28.
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.
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
<PAGE>
-25-
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 35.)
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 35.)
<PAGE>
-26-
How do I elect an Annuity Commencement Date and form of Annuity?
You select an Annuity Commencement Date and an Annuity option which may be
on a fixed or variable basis, or a combination thereof. The Annuity
Commencement Date will not normally be deferred beyond the Annuitant's 75th
birthday. An Annuity Commencement Date beyond the Annuitant's 75th
birthday is available under certain circumstances.
The Annuity Commencement Date and/or the Annuity option may be changed from
time to time, but any such change must be made at least 30 days prior to
the date on which Annuity payments are scheduled to begin.
The Contract contains the five optional Annuity forms described below.
Options 2, 3 and 5 are available with respect to Qualified Plans only if
the guaranteed payment period is less than the life expectancy of the
Annuitant at the time the option becomes effective. Such life expectancy
shall be computed on the basis of the annuity table then in use by
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.
<PAGE>
-27-
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
<PAGE>
-28-
remaining balance of proceeds will be paid in one sum to the Beneficiary or
Beneficiaries designated.
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.
- --------------------------------------------------------------------------------
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 22) 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
<PAGE>
-29-
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 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?
<PAGE>
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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
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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.
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. The Annual Maintenance Fee is $25.00 per
Contract Year. The deduction will be made pro rata from each Sub-Account
under a Contract.
How much are the deductions for premium taxes?
A deduction is also made for premium tax, if applicable. Certain states
impose a premium tax, ranging up to 4.00% upon annuity considerations
received by insurance companies. On any Contract subject to a premium tax,
the tax will be deducted, as provided under applicable law, either from the
Purchase Payment when received or from the amount applied to effect an
Annuity at the time Annuity payments commence.
On August 4, 1991, the Pennsylvania General Assembly passed a law which
imposes a 2% premium tax on all non-qualified annuity premium received
after July 1, 1991. 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.
<PAGE>
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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>
- ------------------------------------------------------------------------------
Rating Agency Effective Rating Basis of Rating
Date of Rating
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
A.M. Best and Company, 9/9/97 A+ Financial soundness and
Inc. Operating performance
- ------------------------------------------------------------------------------
Standard and Poor's 1/23/98 AA Claims paying ability
- ------------------------------------------------------------------------------
Duff & Phelps 1/23/98 AA+ Claims paying ability
- ------------------------------------------------------------------------------
</TABLE>
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 International Advisers Fund, Hartford
MidCap Fund, Hartford Small Company Fund, Hartford Stock Fund and Hartford
Growth and Income 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 Index Fund, Hartford Mortgage Securities Fund and Hartford Money
Market Fund.
A full description of the Funds, their investment policies and
restrictions, risks, charges and expenses and all other aspects of their
operation is contained in the accompanying Funds' Prospectus which should
be read in conjunction with this Prospectus before investing and in
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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 HLS FUND, INC.
To achieve maximum long term total rate of return consistent with prudent
investment risk by investing in common stock and other equity securities,
bonds and other debt securities, and money market instruments. The
investment adviser will vary the investments of the Fund among equity and
debt securities and money market instruments depending upon its analysis of
market trends. Total rate of return consists of current income, including
dividends, interest and discount accruals and capital appreciation.
HARTFORD BOND HLS FUND, INC.
To achieve maximum current income consistent with preservation of capital
by investing primarily in fixed-income securities.
HARTFORD CAPITAL APPRECIATION HLS FUND, INC.
To achieve growth of capital by investing in securities selected solely on
the basis of potential for capital appreciation; income, if any, is an
incidental consideration.
HARTFORD DIVIDEND AND GROWTH HLS FUND, INC.
Seeks a high level of current income consistent with growth of capital and
reasonable investment risk.
HARTFORD GROWTH AND INCOME HLS FUND
Seeks growth of capital and current income by investing primarily in equity
securities with earnings growth potential and steady or rising dividends.
HARTFORD INDEX HLS FUND, INC.
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 & Porrt'' 500 Composite Stock Price Index.*
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HARTFORD INTERNATIONAL ADVISERS HLS FUND, INC.
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 eb traded in non-U.S. markets.
HARTFORD MIDCAP HLS FUND, INC.
Seeks to achieve long-term capital growth through capital appreciation by
investing primarily in equity securities.
HARTFORD MONEY MARKET HLS FUND, INC.
To achieve maximum current income consistent with liquidity and
preservation of capital by investing in money market securities.
HARTFORD MORTGAGE SECURITIES HLS FUND, INC.
To achieve maximum current income consistent with safety of principal and
maintenance of liquidity by investing primarily in mortgage-related
securities issued by the Government National Mortgage Association ("GNMA").
HARTFORD SMALL COMPANY HLS FUND, INC.
Seeks growth of capital by investing primarily in equity securities on the
basis of potential for capital appreciation.
HARTFORD STOCK HLS FUND, INC.
To achieve long-term capital growth primarily through capital appreciation,
with income a secondary consideration, by investing in equity-type
securities.
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* "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.
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.
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
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detailed information, a qualified tax adviser should always be consulted.
The discussion here and in the Appendix, commencing on page 44, 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
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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 22.) 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.
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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 592.
2. Distributions made on or after the death of the
Contract Holder or where the Contract Holder is not an
individual, the death of the primary Annuitant.
3. Distributions attributable to a recipient's becoming
disabled.
4. A distribution that is part of a scheduled series of
substantially equal periodic payments for the life (or
life expectancy) of the recipient (or the joint lives
or life expectancies of the recipient and the
recipient's Beneficiary).
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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,
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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.
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 44 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.
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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 wholly-owned subsidiaries of Hartford. 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
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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.
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.
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3. Deferred Compensation Plans for Tax-Exempt Organizations and State and
Local Governments
Employees may contribute on a before tax basis to the Deferred Compensation
Plan of their employer in accordance with the employer's Plan and Section
457 of the Code. Section 457 places limitations on contributions to
Deferred Compensation Plans maintained by a State ("State" means a State, a
political sub-division of a State, and an agency or instrumentality of a
State or political sub-division of a State) or other tax-exempt
organization. Generally, the limitation is 33 1/3% of includable
compensation (25% of gross compensation) or $7,500, whichever is less. The
plan may also provide for additional contributions during the three taxable
years ending before normal retirement age of a Participant for a total of
up to $15,000 per year for such three years.
An employee electing to participate in a plan should understand that his
rights and benefits are governed strictly by the terms of the plan, that he
is in fact a general creditor of the employer under the terms of the plan,
that the employer is legal owner of any Contract issued with respect to the
plan and that the employer as owner of the Contract(s) retains all voting
and redemption rights which may accrue to the Contract(s) issued with
respect to the plan. The participating employee should look to the terms
of his plan for any charges in regard to participating therein other than
those disclosed in this Prospectus.
4. Individual Retirement Annuities ("IRA's")
Starting in 1987, individuals may contribute and deduct the lesser of
$2,000 or 100 percent of their compensation to an IRA. In the case of a
spousal IRA, the maximum deduction is the lesser of $2,250 or 100 percent
of compensation. The deduction for contributions is phased out between
$40,000 and $50,000 of adjusted gross income (AGI) for a married individual
(and between $25,000 and $35,000 for single individuals) if either the
individual or his or her spouse is an active Participant in any Section
401(a), 403(a), 403(b) or 408(k) plan regardless of whether the
individual's interest is vested.
To the extent deductible contributions are not allowed, individuals may
make designated non-deductible contributions to an IRA, subject to the
above limits.
B. Distributions
1. Pension and Profit-Sharing Plans, Tax-Sheltered Annuities, Individual
Retirement Annuities.
Annuity payments made under the Contracts are taxable under Section 72 of
the Code as ordinary income, in the year of receipt, to the extent that
they exceed the "excludable amount." The investment in the Contract is the
aggregate amount of the contributions made by or on behalf of an employee
which were included as a part of his taxable income and not deducted.
Thus, annual premiums deducted for an IRA are not included in the
investment in
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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.
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2. Deferred Compensation Plans for Tax-Exempt Organizations and State and
Local Governments
Generally, in order to avoid a penalty tax, annuity payments, periodic
payments or annual distributions MUST commence by April 1 of the calendar
year following the year in which the Participant attains age 70 1/2. The
entire interest of the Participant must be distributed beginning no later
than this required beginning date over a period which may not extend beyond
a maximum of the lives or life expectancies of the Participant and a
designated Beneficiary. Each annual distribution must equal or exceed a
"minimum distribution amount" which is determined by dividing the account
balance by the applicable life expectancy. With respect to a section
403(b) plan, this account balance is based upon earnings and contributions
after December 31, 1986. In addition, minimum distribution incidental
benefit rules may require a larger annual distribution based upon dividing
the entire account balance as of the close of business on the last day of
the previous calendar year by a factor promulgated by the Internal Revenue
Service which ranges from 26.2 (at age 70) to 1.8 (at age 115). Special
rules apply to require that distributions be made to Beneficiaries after
the death of the Participant. A penalty tax of up to 50% of the amount
which should be distributed may be imposed by the Internal Revenue Service
for failure to make such distribution.
Upon receipt of any monies pursuant to the terms of a Deferred Compensation
Plan for a tax-exempt organization, state or local government under Section
457 of the Code, such monies are taxable to such employee as ordinary
income in the year in which received.
C. Federal Income Tax Withholding
The portion of a distribution which is taxable income to the recipient will
be subject to federal income tax withholding, pursuant to Section 3405 of
the Internal Revenue Code. The application of this provision is summarized
below:
1. Eligible Rollover Distributions
a. The Unemployment Compensation Amendments Act of 1992 requires that
federal income taxes be withheld from certain distributions from
tax-qualified retirement plans and from tax-sheltered annuities under
Section 403(b). These provisions DO NOT APPLY to distributions from
individual retirement annuities under section 408(b) or from deferred
compensation programs under section 457.
b. If any portion of a distribution is an "eligible rollover
distribution", the law requires that 20% of that amount be withheld.
This amount is sent to the IRS as withheld income taxes. The
following types of payments DO NOT constitute an eligible rollover
distribution (and, therefore, the mandatory withholding rules will not
apply):
<PAGE>
-48-
- the non-taxable portion of the distribution;
- distributions which are part of a series of equal (or
substantially equal) payments made at least annually for your
lifetime, (or your life expectancy) or your lifetime and your
Beneficiary's lifetime (or life expectancies), or for a period of
ten years or more;
- required minimum distributions made pursuant to section 401(a)(9)
of the IRC.
c. However, these mandatory withholding requirements do not apply in the
event of all or portion of an eligible rollover distribution is paid
in a "direct rollover". A director rollover is the direct payment of
an eligible rollover distribution or portion thereof to an individual
retirement arrangement or annuity (IRA) or to another qualified
employer plan. IF A DIRECT ROLLOVER IS ELECTED, NO INCOME TAX WILL BE
WITHHELD.
d. If any portion of a distribution is not an eligible rollover
distribution but is taxable, the mandatory withholding rules described
above do not apply. In this case, the voluntary withholding rules
described below apply.
2. Non-Eligible Rollover Distributions
a. Non-Periodic Distributions
The portion of a non-periodic distribution which constitutes taxable
income will be subject to federal income tax withholding unless the
recipient elects not to have taxes withheld. If an election not to
have taxes withheld is not provided, 10% of the taxable distribution
will be withheld as federal income tax. Election forms will be
provided at the time distributions are requested.
b. Periodic Distributions (distributions payable over a period greater
than one year)
The portion of a periodic distribution which constitutes taxable
income will be subject to federal income tax withholding as if the
recipient were married claiming three exemptions. A recipient may
elect not to have income taxes withheld or have income taxes withheld
at a different rate by providing a completed election form. Election
forms will be provided at the time distributions are requested.
3. Any distribution from plans described in A.3 above is subject to the
regular wage withholding rules.
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO (VARIABLE ACCOUNT "A")
This Statement of Additional Information is not a Prospectus. The information
contained herein should be read in conjunction with the Prospectus.
To obtain a Prospectus, send a written request to Hartford Life Insurance
Company, Attn: Individual Annuity Services, P.O. Box 5085, Hartford, Connecticut
06102-5085.
Date of Prospectus: August 11, 1998
Date of Statement of Additional Information: August 11, 1998
<PAGE>
-49-
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY . . . . . . . . . . . . 50
SAFEKEEPING OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . 51
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . 51
DISTRIBUTION OF CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . 51
SUBSTITUTION OF OTHER SHARES AS AN UNDERLYING
INVESTMENT MEDIUM OF THE CONTRACTS . . . . . . . . . . . . . . . . . . 51
ANNUITY PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
A. Annuity Payments . . . . . . . . . . . . . . . . . . . . . . 52
B. Electing the Annuity Commencement Date and Form of Annuity . 53
C. Optional Annuity Forms . . . . . . . . . . . . . . . . . . . 53
OPTION 1: Life Annuity. . . . . . . . . . . . . . . . . . . 53
OPTION 2: Life Annuity With 120, 180 or 240 Monthly
Payments Certain. . . . . . . . . . . . . . . . . 54
OPTION 3: Unit Refund Life Annuity. . . . . . . . . . . . . 54
OPTION 4: Joint and Last Survivor Annuity . . . . . . . . . 55
OPTION 5: Payments for a Designated Period. . . . . . . . . 55
D. The Annuity Unit and Valuation . . . . . . . . . . . . . . . 56
E. Determination of Amount of First Monthly Annuity Payment-Fixed
and Variable . . . . . . . . . . . . . . . . . . . . . . . . 56
F. Amount of Second and Subsequent Monthly Annuity Payments . . 57
G. Date and Time of Annuity Payments. . . . . . . . . . . . . . 57
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 58
<PAGE>
-50-
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 53).
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 23 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>
-51-
<TABLE>
<CAPTION>
HARTFORD RATINGS
- --------------------------------------------------------------------------------
RATING AGENCY EFFECTIVE RATING BASIS OF RATING
DATE OF
RATING
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
A.M. Best and 9/9/97 A+ Financial soundness
Company, Inc. and operating
performance.
- --------------------------------------------------------------------------------
Standard and 1/23/98 AA Claims paying ability
Poor's
- --------------------------------------------------------------------------------
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>
-52-
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 29 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>
-53-
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>
-54-
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.
<TABLE>
<CAPTION>
Illustration of Annuity Payments
Individual Age 65, Life Annuity
With 120 Payments Certain
-------------------------
<S> <C>
1. Net amount applied 13,978.25
2. Initial monthly income per $1,000 of payment applied 6.24
3. Initial monthly payment (1x2-1,000) 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
</TABLE>
For the purpose of this illustration, purchase is assumed to have been made
on the fifth business day preceding the first payment date. In determining
the second and subsequent payments the Annuity Unit value of the fifth
business day, preceding the Annuity due date is used.
OPTION 3: Unit Refund Life Annuity
This Annuity option is an Annuity payable monthly during the lifetime of
the Annuitant terminating with the last payment due prior to the death of
the Annuitant except that an additional payment will be made to the
Beneficiary or Beneficiaries if (a) below exceeds (b) below:
total amount applied under the option
at the Annuity Commencement Date
(a) =
----------------------------------------------------------------
Annuity Unit value at the Annuity Commencement Date
<PAGE>
-55-
(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>
-56-
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).
<TABLE>
<CAPTION>
ILLUSTRATION OF CALCULATION OF ANNUITY UNIT VALUE
-------------------------------------------------
<S> <C>
1. Net Investment Factor for period .011225
2. Adjustment for 4% Assumed Rate of Net Investment Return .999892
3. 2x(1+1.000000) 1.011116
4. Annuity Unit value, beginning of period .995995
5. Annuity Unit value, end of period (3x4) 1.007066
</TABLE>
E. Determination of Amount of First Monthly Annuity Payment-Fixed and Variable
When Annuity payments are to commence, the value of the contract is
determined as the product of the value of the Accumulation Unit credited to
each Sub-Account as of the close of business on the fifth business day
preceding the date the first Annuity payment is due and the number of
Accumulation Units credited to each Sub-Account as of the date the Annuity
is to commence.
The contract contains tables indicating the dollar amount of the first
monthly payment under the optional forms of Annuity for each $1,000 of
value of a Sub-Account under a contract. The first monthly payment varies
according to the form of Annuity selected. The contracts contains Annuity
tables derived from the 1971 Individual Annuity Mortality table with an
assumed interest rate ("A.I.R.") of 4.00% per annum. The total first
monthly Annuity payment, fixed and variable, is determined by multiplying
the value (expressed in thousands of dollars) of a Sub-Account (less any
applicable Premium Taxes) by the amount of the first monthly payment per
$1,000 of value obtained from the tables in the contracts.
The 4.00% interest rate assumed in the mortality tables would produce level
Annuity payments if the net investment rate remained constant at 4.00%. In
fact, payments will vary up or down in the proportion that the net
investment rate varies up or down from 4.00%. A higher assumed interest
rate may produce a higher initial payment but more slowly rising and more
rapidly falling subsequent payments than would a 4.00% interest rate
assumption. An
<PAGE>
-57-
alternate A.I.R. of 5.00% is available on an optional basis.
F. Amount of Second and Subsequent Monthly Annuity Payments
The amount of the first monthly Annuity payment, determined as described
above, is divided by the value of an Annuity Unit for the appropriate
Sub-Account as of the close of business on the fifth business day preceding
the day on which the payment is due in order to determine the number of
Annuity Units represented by the first payment. This number of Annuity
Units remains fixed during the Annuity Period, and in each subsequent month
the dollar amount of the Annuity payment is determined by multiplying this
fixed number of Annuity Units by the then current Annuity Unit value.
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>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- ------------
<S> <C> <C> <C>
Assets:
Investments:
Hartford Bond HLS Fund, Inc.
Shares 274,351,826
Cost $ 282,848,787
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . $ 299,574,636 -
Hartford Stock HLS Fund, Inc.
Shares 369,110,058
Cost $ 1,248,163,004
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - $ 2,218,411,610
HVA Money Market HLS Fund, Inc.
Shares 273,245,455
Cost $ 273,245,455
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Hartford Advisers HLS Fund, Inc.
Shares 1,564,731,303
Cost $ 2,813,334,981
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Hartford Capital Appreciation HLS Fund, Inc.
Shares 424,829,645
Cost $ 1,335,408,438
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Hartford Mortgage Securities HLS Fund, Inc.
Shares 165,765,244
Cost $ 178,806,792
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Hartford Index HLS Fund, Inc.
Shares 163,732,581
Cost $ 334,772,112
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Hartford International Opportunities HLS Fund, Inc.
Shares 308,430,571
Cost $ 359,393,312
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Hartford Dividend and Growth HLS Fund, Inc.
Shares 425,087,826
Cost $ 670,635,581
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Due From Hartford Life Insurance Company . . . . . . . . . . . . . . . 167,320 1,417,158
Receivable from fund shares sold ... . . . . . . . . . . . . . . . . . 28 2,198,473
-------------- ---------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299,741,984 2,222,027,241
-------------- ---------------
Liabilities:
Due to Hartford Life Insurance Company ... . . . . . . . . . . . . . . 28 2,198,490
Payable for fund shares purchased .. . . . . . . . . . . . . . . . . . 167,389 1,416,518
-------------- ---------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 167,417 3,615,008
-------------- ---------------
Net Assets (variable annuity contract liabilities) . . . . . . . . . . $ 299,574,567 $ 2,218,412,233
-------------- ---------------
-------------- ---------------
<CAPTION>
MONEY MARKET ADVISERS
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
Assets:
Investments:
Hartford Bond HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Hartford Stock HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
HVA Money Market HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . $ 273,245,455 -
Hartford Advisers HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - $ 4,411,057,345
Hartford Capital Appreciation HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Hartford Mortgage Securities HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Hartford Index HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Hartford International Opportunities HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Hartford Dividend and Growth HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Due From Hartford Life Insurance Company . . . . . . . . . . . . . . . 12,021,999 1,429,322
Receivable from fund shares sold ... . . . . . . . . . . . . . . . . . 4 9,282
------------- ---------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285,267,458 4,412,495,949
------------- ---------------
Liabilities:
Due to Hartford Life Insurance Company ... . . . . . . . . . . . . . . 63 9,286
Payable for fund shares purchased .. . . . . . . . . . . . . . . . . . 12,016,849 1,429,973
------------- ---------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 12,016,912 1,439,259
------------- ---------------
Net Assets (variable annuity contract liabilities) . . . . . . . . . . $ 273,250,546 $ 4,411,056,690
------------- ---------------
------------- ---------------
<CAPTION>
CAPITAL MORTGAGE
APPRECIATION SECURITIES
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
Assets:
Investments:
Hartford Bond HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Hartford Stock HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
HVA Money Market HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Hartford Advisers HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Hartford Capital Appreciation HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,967,903,101 -
Hartford Mortgage Securities HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - $ 184,433,393
Hartford Index HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Hartford International Opportunities HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Hartford Dividend and Growth HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Due From Hartford Life Insurance Company . . . . . . . . . . . . . . . - 5,080
Receivable from fund shares sold ... . . . . . . . . . . . . . . . . . 5,063,588 49,146
--------------- --------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,972,966,689 184,487,619
--------------- --------------
Liabilities:
Due to Hartford Life Insurance Company ... . . . . . . . . . . . . . . 5,063,724 44,228
Payable for fund shares purchased .. . . . . . . . . . . . . . . . . . - 5,744
--------------- --------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 5,063,724 49,972
--------------- --------------
Net Assets (variable annuity contract liabilities) . . . . . . . . . . $ 1,967,902,965 $ 184,437,647
--------------- --------------
--------------- --------------
<CAPTION>
INTERNATIONAL
INDEX OPPORTUNITES
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
Assets:
Investments:
Hartford Bond HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Hartford Stock HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
HVA Money Market HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Hartford Advisers HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Hartford Capital Appreciation HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Hartford Mortgage Securities HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Hartford Index HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . $ 540,322,921 -
Hartford International Opportunities HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - $ 436,532,274
Hartford Dividend and Growth HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . - -
Due From Hartford Life Insurance Company . . . . . . . . . . . . . . . - 147,930
Receivable from fund shares sold ... . . . . . . . . . . . . . . . . . 4,317,133 21
------------- -------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 544,640,054 436,680,225
------------- -------------
Liabilities:
Due to Hartford Life Insurance Company ... . . . . . . . . . . . . . . 4,316,630 21
Payable for fund shares purchased .. . . . . . . . . . . . . . . . . . - 147,768
------------- -------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 4,316,630 147,789
------------- -------------
Net Assets (variable annuity contract liabilities) . . . . . . . . . . $ 540,323,424 $ 436,532,436
------------- -------------
------------- -------------
<CAPTION>
DIVIDEND
AND GROWTH
FUND
SUB-ACCOUNT
-----------
<S> <C>
Assets:
Investments:
Hartford Bond HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . -
Hartford Stock HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . -
HVA Money Market HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . -
Hartford Advisers HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . -
Hartford Capital Appreciation HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . -
Hartford Mortgage Securities HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . -
Hartford Index HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . -
Hartford International Opportunities HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . -
Hartford Dividend and Growth HLS Fund, Inc.
Shares
Cost $
Market Value ... . . . . . . . . . . . . . . . . . . . . . . . . . $ 887,890,293
Due From Hartford Life Insurance Company . . . . . . . . . . . . . . . 1,237,179
Receivable from fund shares sold ... . . . . . . . . . . . . . . . . . 219
-------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 889,127,691
-------------
Liabilities:
Due to Hartford Life Insurance Company ... . . . . . . . . . . . . . . 179
Payable for fund shares purchased .. . . . . . . . . . . . . . . . . . 1,236,824
-------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 1,237,003
-------------
Net Assets (variable annuity contract liabilities) . . . . . . . . . . $ 887,890,688
-------------
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL SMALL
ADVISERS COMPANY
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C> <C>
ASSETS:
Investments:
International Advisers HLS Fund, Inc
Shares 61,881,580
Cost $ 70,787,595
Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 71,030,153 -
Small Company HLS Fund, Inc.
Shares 73,770,170
Cost $ 88,417,890
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - $ 95,073,594
MidCap HLS Fund, Inc.
Shares 19,753,832
Cost $ 23,323,701
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Smith Barnery Cash Portfolio
Shares 507,488
Cost $ 507,488
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Smith Barney Appreciation HLS Fund
Shares 12,197
Cost $ 86,545
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Smith Barney Government Portfolio
Shares 37,836
Cost $ 37,836
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
BB&T Growth & Income HLS Fund
Shares 1,296,442
Cost $ 15,494,763
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
AM South Equity Income HLS Fund
Shares 1,479,914
Cost $ 16,020,201
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Mentor VIP Capital Growth Fund
Shares 585,140
Cost $ 7,249,872
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Mentor VIP Perpetual International Fund
Shares 298,806
Cost $ 3,980,762
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Mentor VIP Growth Fund
Shares 327,691
Cost $ 3,900,720
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Dividends... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Due From Hartford Life Insurance Company.. . . . . . . . . . . . . . . 172,530 182,932
Receivable from fund shares sold.. . . . . . . . . . . . . . . . . . . 9 4,837
------------- -------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,202,692 95,261,363
------------- -------------
LIABILITIES:
Due to Hartford Life Insurance Company.. . . . . . . . . . . . . . . . 8 4,841
Payable for fund shares purchased... . . . . . . . . . . . . . . . . . 172,503 182,005
------------- -------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 172,511 186,846
------------- -------------
Net Assets (variable annuity contract liabilities).. . . . . . . . . . $ 71,030,181 $ 95,074,517
------------- -------------
------------- -------------
<CAPTION>
SMITH BARNEY
MIDCAP CASH
FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
ASSETS:
Investments:
International Advisers HLS Fund, Inc
Shares
Cost $
Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Small Company HLS Fund, Inc.
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
MidCap HLS Fund, Inc.
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,424,760 -
Smith Barnery Cash Portfolio
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - $ 507,489
Smith Barney Appreciation HLS Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Smith Barney Government Portfolio
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
BB&T Growth & Income HLS Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
AM South Equity Income HLS Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Mentor VIP Capital Growth Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Mentor VIP Perpetual International Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Mentor VIP Growth Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Dividends... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1,108
Due From Hartford Life Insurance Company.. . . . . . . . . . . . . . . 91,778 27,028
Receivable from fund shares sold.. . . . . . . . . . . . . . . . . . . 17 -
------------- ----------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,516,555 535,625
------------- ----------
LIABILITIES:
Due to Hartford Life Insurance Company.. . . . . . . . . . . . . . . . 17 54
Payable for fund shares purchased... . . . . . . . . . . . . . . . . . 91,788 27,259
------------- ----------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 91,805 27,313
------------- ----------
Net Assets (variable annuity contract liabilities).. . . . . . . . . . $ 26,424,750 $ 508,312
------------- ----------
------------- ----------
<CAPTION>
SMITH BARNEY SMITH BARNEY
APPRECIATION GOVERNMENT
FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
ASSETS:
Investments:
International Advisers HLS Fund, Inc
Shares
Cost $
Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Small Company HLS Fund, Inc.
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
MidCap HLS Fund, Inc.
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Smith Barnery Cash Portfolio
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Smith Barney Appreciation HLS Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 188,391 -
Smith Barney Government Portfolio
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - $ 37,837
BB&T Growth & Income HLS Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
AM South Equity Income HLS Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Mentor VIP Capital Growth Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Mentor VIP Perpetual International Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Mentor VIP Growth Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Dividends... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 90
Due From Hartford Life Insurance Company.. . . . . . . . . . . . . . . 3,058 -
Receivable from fund shares sold.. . . . . . . . . . . . . . . . . . . 14 7
---------- ---------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191,528 37,934
---------- ---------
LIABILITIES:
Due to Hartford Life Insurance Company.. . . . . . . . . . . . . . . . 71 29
Payable for fund shares purchased... . . . . . . . . . . . . . . . . . - -
---------- ---------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 71 29
---------- ---------
Net Assets (variable annuity contract liabilities).. . . . . . . . . . $ 191,457 $ 37,905
---------- ---------
---------- ---------
<CAPTION>
BB&T
GROWTH AM SOUTH
& INCOME EQUITY INCOME
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
ASSETS:
Investments:
International Advisers HLS Fund, Inc
Shares
Cost $
Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Small Company HLS Fund, Inc.
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
MidCap HLS Fund, Inc.
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Smith Barnery Cash Portfolio
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Smith Barney Appreciation HLS Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Smith Barney Government Portfolio
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
BB&T Growth & Income HLS Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,114,772 -
AM South Equity Income HLS Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - $ 16,338,256
Mentor VIP Capital Growth Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Mentor VIP Perpetual International Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Mentor VIP Growth Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Dividends... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Due From Hartford Life Insurance Company.. . . . . . . . . . . . . . . 30,265 155,087
Receivable from fund shares sold.. . . . . . . . . . . . . . . . . . . - -
------------- -------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,145,037 16,493,343
------------- -------------
LIABILITIES:
Due to Hartford Life Insurance Company.. . . . . . . . . . . . . . . . - -
Payable for fund shares purchased... . . . . . . . . . . . . . . . . . 30,264 155,085
------------- -------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 30,264 155,085
------------- -------------
Net Assets (variable annuity contract liabilities).. . . . . . . . . . $ 16,114,773 $ 16,338,258
------------- -------------
------------- -------------
<CAPTION>
MENTOR VIP MENTOR VIP
CAPITAL PERPETUAL
GROWTH INTERNATIONAL
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
ASSETS:
Investments:
International Advisers HLS Fund, Inc
Shares
Cost $
Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Small Company HLS Fund, Inc.
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
MidCap HLS Fund, Inc.
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Smith Barnery Cash Portfolio
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Smith Barney Appreciation HLS Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Smith Barney Government Portfolio
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
BB&T Growth & Income HLS Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
AM South Equity Income HLS Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Mentor VIP Capital Growth Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,460,540 -
Mentor VIP Perpetual International Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - $ 4,111,574
Mentor VIP Growth Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Dividends... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Due From Hartford Life Insurance Company.. . . . . . . . . . . . . . . - -
Receivable from fund shares sold.. . . . . . . . . . . . . . . . . . . 98,798 83,849
------------ ------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,559,338 4,195,423
------------ ------------
LIABILITIES:
Due to Hartford Life Insurance Company.. . . . . . . . . . . . . . . . - -
Payable for fund shares purchased... . . . . . . . . . . . . . . . . . 98,797 83,849
------------ ------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 98,797 83,849
------------ ------------
Net Assets (variable annuity contract liabilities).. . . . . . . . . . $ 7,460,541 $ 4,111,574
------------ ------------
------------ ------------
<CAPTION>
MENTOR VIP
GROWTH
FUND
SUB-ACCOUNT
-----------
<S> <C>
ASSETS:
Investments:
International Advisers HLS Fund, Inc
Shares
Cost $
Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . -
Small Company HLS Fund, Inc.
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . -
MidCap HLS Fund, Inc.
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . -
Smith Barnery Cash Portfolio
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . -
Smith Barney Appreciation HLS Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . -
Smith Barney Government Portfolio
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . -
BB&T Growth & Income HLS Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . -
AM South Equity Income HLS Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . -
Mentor VIP Capital Growth Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . -
Mentor VIP Perpetual International Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . -
Mentor VIP Growth Fund
Shares
Cost $
Market Value.. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,804,498
Dividends... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -
Due From Hartford Life Insurance Company.. . . . . . . . . . . . . . . -
Receivable from fund shares sold.. . . . . . . . . . . . . . . . . . . 36,688
------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,841,186
------------
LIABILITIES:
Due to Hartford Life Insurance Company.. . . . . . . . . . . . . . . . -
Payable for fund shares purchased... . . . . . . . . . . . . . . . . . 36,688
------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 36,688
------------
Net Assets (variable annuity contract liabilities).. . . . . . . . . . $ 3,804,498
------------
------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND STOCK MONEY MARKET
FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ------------
<S> <C> <C> <C>
Investment income:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 645,656 $ 589,340 $ 6,957,458
Expenses:
Mortality and expense undertakings . . . . . . . . . . . . . . . . . . . . . . (1,649,162) (12,300,273) (1,622,503)
------------ ------------ ------------
Net investment income (loss) . . . . . . . . . . . . . . . . . . . . . . . (1,003,506 (11,710,933) 5,334,955
------------ ------------ ------------
Capital gains income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 63,980,079 2,860
------------ ------------ ------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) on security transactions . . . . . . . . . . . . . . 13,648 912,013 -
Net unrealized appreciation (depreciation) of investments during the period . 10,557,241 316,267,943 -
------------ ------------ ------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . 10,570,889 317,179,956 -
------------ ------------ ------------
Net increase (decrease) in net assets resulting from operations . . . . $ 9,567,383 $369,449,102 $ 5,337,815
------------ ------------ ------------
------------ ------------ ------------
<CAPTION>
CAPITAL MORTGAGE
ADVISERS APPRECIATION SECURITIES
FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ------------
<S> <C> <C> <C>
Investment income:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,115,083 $ 358,544 $ 1,277,609
Expenses:
Mortality and expense undertakings . . . . . . . . . . . . . . . . . . . . . . (25,072,649) (11,605,936) (1,142,835)
------------ ------------ ------------
Net investment income (loss) . . . . . . . . . . . . . . . . . . . . . . . (22,957,566 (11,247,392) 134,774
------------ ------------ ------------
Capital gains income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,914,844 114,733,928 -
------------ ------------ ------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) on security transactions . . . . . . . . . . . . . . 706,749 1,248,455 200,665
Net unrealized appreciation (depreciation) of investments during the period . 444,982,824 90,105,099 4,733,317
------------ ------------ ------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . 445,689,573 91,353,554 4,933,982
------------ ------------ ------------
Net increase (decrease) in net assets resulting from operations . . . . $553,646,851 $194,840,090 $ 5,068,756
------------ ------------ ------------
------------ ------------ ------------
<CAPTION>
INTERNATIONAL DIVIDEND
INDEX OPPORTUNITES AND GROWTH
FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ------------
<S> <C> <C> <C>
Investment income:
Dividends .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 360,205 $ 228,147 $ 1,369,745
Expenses:
Mortality and expense undertakings . . . . . . . . . . . . . . . . . . . . . . (2,983,992) (2,558,675) (4,915,736)
------------ ------------ ------------
Net investment income (loss) . . . . . . . . . . . . . . . . . . . . . . . (2,623,787 (2,330,528) (3,545,991)
------------ ------------ ------------
Capital gains income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,662,058 25,347,181 25,624,259
------------ ------------ ------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) on security transactions . . . . . . . . . . . . . . (13,535) 29,082 7,142
Net unrealized appreciation (depreciation) of investments during the period .. 64,764,545 36,516,907 50,869,639
------------ ------------ ------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . 64,751,010 36,545,989 50,876,781
------------ ------------ ------------
Net increase (decrease) in net assets resulting from operations. . . .. $ 72,789,281 $ 59,562,642 $ 72,955,049
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL SMALL
ADVISERS COMPANY MIDCAP
FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ------------
<S> <C> <C> <C>
Investment income:
Dividends .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,551,901 $ - $ 330
Expenses:
Mortality and expense undertakings . . . . . . . . . . . . . . . . . . . . . . (394,753) (517,245) (107,105)
------------ ------------ ------------
Net investment income (loss) . . . . . . . . . . . . . . . . . . . . . . . 6,157,148 (517,245) (106,775)
------------ ------------ ------------
Capital gains income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,559,601 1,255,431 -
------------ ------------ ------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) on security transactions . . . . . . . . . . . . . . (12,625) (8,770) 4,690
Net unrealized appreciation (depreciation) of investments during the period. . (762,318) 5,248,642 2,764,162
------------ ------------ ------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . (774,943) 5,239,872 2,768,852
------------ ------------ ------------
Net increase (decrease) in net assets resulting from operations . . . . $ 6,941,806 $ 5,978,058 $ 2,662,077
------------ ------------ ------------
------------ ------------ ------------
<CAPTION>
SMITH BARNEY SMITH BARNEY SMITH BARNEY
CASH APPRECIATION GOVERNMENT
PORTFOLIO FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ------------
<S> <C> <C> <C>
Investment income:
Dividends .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,561 $ 65 $ 927
Expenses:
Mortality and expense undertakings . . . . . . . . . . . . . . . . . . . . . . (2,506) (909) (186)
------------ ------------ ------------
Net investment income (loss) . . . . . . . . . . . . . . . . . . . . . . . 10,055 (844) 741
------------ ------------ ------------
Capital gains income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 3,058 -
------------ ------------ ------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) on security transactions . . . . . . . . . . . . . . - 91 -
Net unrealized appreciation (depreciation) of investments during the period. . - 18,655 -
------------ ------------ ------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . - 18,746 -
------------ ------------ ------------
Net increase (decrease) in net assets resulting from operations . . . . $ 10,055 $ 20,960 $ 741
------------ ------------ ------------
------------ ------------ ------------
<CAPTION>
BB&T MENTOR VIP
GROWTH AM SOUTH CAPITAL
& INCOME EQUITY INCOME GROWTH
FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ------------
<S> <C> <C> <C>
Investment income:
Dividends .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 82,504 $ 108,240 $ -
Expenses:
Mortality and expense undertakings . . . . . . . . . . . . . . . . . . . . . . (68,124) (56,273) (12,150)
------------ ------------ ------------
Net investment income (loss) . . . . . . . . . . . . . . . . . . . . . . . 14,380 51,967 (12,150)
------------ ------------ ------------
Capital gains income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - -
------------ ------------ ------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) on security transactions . . . . . . . . . . . . . . 172 - (766)
Net unrealized appreciation (depreciation) of investments during the period. . 210,524 285,859 210,668
------------ ------------ ------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . 210,696 285,859 209,902
------------ ------------ ------------
Net increase (decrease) in net assets resulting from operations . . . . $ 225,076 $ 337,826 $ 197,752
------------ ------------ ------------
------------ ------------ ------------
<CAPTION>
MENTOR VIP
PERPETUAL MENTOR VIP
INTERNATIONAL GROWTH
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C>
Investment income:
Dividends .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ -
Expenses:
Mortality and expense undertakings . . . . . . . . . . . . . . . . . . . . . . (6,560) (6,501)
------------ ------------
Net investment income (loss) . . . . . . . . . . . . . . . . . . . . . . . (6,560) (6,501)
------------ ------------
Capital gains income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
------------ ------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) on security transactions . . . . . . . . . . . . . . 213 (206)
Net unrealized appreciation (depreciation) of investments during the period. . 130,811 (96,222)
------------ ------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . 131,024 (96,428
------------ ------------
Net increase (decrease) in net assets resulting from operations. . . . . $ 124,464 $ (102,929)
------------ ------------
------------ ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
BOND STOCK MONEY MARKET ADVISERS
FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).. . . . . . . . . . . $ (1,003,506) $ (11,710,933) $ 5,334,955 $ (22,957,566)
Capital gains income . . . . . . . . . . . . . . . - 63,980,079 2,860 130,914,844
Net realized gain(loss) on security
transactions . . . . . . . . . . . . . . . . . . 13,648 912,013 - 706,749
Net unrealized appreciation(depreciation) of
investments during the period. . . . . . . . . . 10,557,241 316,267,943 - 444,982,824
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from operations. . . . . . . . . . . . . . . . . 9,567,383 369,449,102 5,337,815 553,646,851
--------------- --------------- --------------- ---------------
UNIT TRANSACTIONS:
Purchases. . . . . . . . . . . . . . . . . . . . . 20,336,580 110,346,469 13,823,409 199,984,169
Net transfers. . . . . . . . . . . . . . . . . . . 35,059,991 45,065,130 28,125,267 103,889,741
Surrenders . . . . . . . . . . . . . . . . . . . . (10,755,244) (61,292,844) (41,057,413) (148,814,379)
Net annuity transactions . . . . . . . . . . . . . (14,910) 149,059 (16,561) 1,078,714
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from unit transactions . . . . . . . . . . . . . 44,626,417 94,267,814 874,702 156,138,245
--------------- --------------- --------------- ---------------
Total increase (decrease) in net assets. . . . . . 54,193,800 463,716,916 6,212,517 709,785,096
NET ASSETS:
Beginning of period. . . . . . . . . . . . . . . . 245,380,767 1,754,695,317 267,038,029 3,701,271,594
--------------- --------------- --------------- ---------------
End of period. . . . . . . . . . . . . . . . . . . $ 299,574,567 $ 2,218,412,233 $ 273,250,546 $ 4,411,056,690
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND
APPRECIATION SECURITIES INDEX OPPORTUNITES AND GROWTH
FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) . . . . . . $ (11,247,392) $ 134,774 $ (2,623,787) $ (2,330,528) $ (3,545,991)
Capital gains income . . . . . . . . . . 114,733,928 - 10,662,058 25,347,181 25,624,259
Net realized gain(loss) on security
transactions . . . . . . . . . . . . . 1,248,455 200,665 (13,535) 29,082 7,142
Net unrealized appreciation(depreciation)
of investments during the period . . . 90,105,099 4,733,317 64,764,545 36,516,907 50,869,639
--------------- ------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations. . . . . . . 194,840,090 5,068,756 72,789,281 59,562,642 72,955,049
--------------- ------------- ------------- ------------- -------------
UNIT TRANSACTIONS:
Purchases. . . . . . . . . . . . . . . . 94,864,435 4,658,654 39,199,605 9,551,331 94,274,260
Net transfers. . . . . . . . . . . . . . 3,067,445 (492,048) 33,299,927 (12,149,839) 72,770,280
Surrenders . . . . . . . . . . . . . . . (58,952,406) (15,869,073) (16,123,873) (13,624,393) (21,716,252)
Net annuity transactions . . . . . . . . 175,233 (42,293) 2,668 147,237 383,485
--------------- ------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from unit transactions . . . 39,154,707 (11,744,760) 56,378,327 (16,075,664) 145,711,773
--------------- ------------- ------------- ------------- -------------
Total increase (decrease) in net assets. 233,994,797 (6,676,004) 129,167,608 43,486,978 218,666,822
NET ASSETS:
Beginning of period. . . . . . . . . . . 1,733,908,168 191,113,651 11,155,816 393,045,458 669,223,866
--------------- ------------- ------------- ------------- -------------
End of period. . . . . . . . . . . . . . $ 1,967,902,965 $ 184,437,647 $ 540,323,424 $ 436,532,436 $ 887,890,688
--------------- ------------- ------------- ------------- -------------
--------------- ------------- ------------- ------------- -------------
</TABLE>
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
U.S.
GOVERNMENT
BOND STOCK MONEY MARKET ADVISERS MONEY MARKET
FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).. . . . . . . . . $ 10,349,134 $ (2,890,041) $ 10,558,627 $ 36,403,121 $ 2,019
Capital gains income . . . . . . . . . . . . . - 64,909,605 792 129,600,221 -
Net realized gain(loss) on security
transactions . . . . . . . . . . . . . . . . 17,262 1,176,996 - 2,159,454 -
Net unrealized appreciation(depreciation) of .
investments during the period. . . . . . . . 10,119,718 315,737,284 - 501,068,905 -
-------------- -------------- -------------- -------------- --------------
Net increase (decrease) in net assets
resulting from operations. . . . . . . . . . 20,486,114 378,933,844 10,559,419 669,231,701 2,019
-------------- -------------- -------------- -------------- --------------
UNIT TRANSACTIONS:
Purchases. . . . . . . . . . . . . . . . . . . 28,788,526 208,829,884 56,766,167 364,832,050 -
Net transfers. . . . . . . . . . . . . . . . . 19,102,654 45,780,800 (9,782,834) 27,406,992 (88,379)
Surrenders . . . . . . . . . . . . . . . . . . (18,300,042) (92,238,226) (68,418,264) (206,501,208) (9,133)
Net annuity transactions . . . . . . . . . . . 325,387 633,517 12,261 725,608 (21,870)
-------------- -------------- -------------- -------------- --------------
Net increase (decrease) in net assets
resulting from unit transactions . . . . . . 29,916,525 163,005,975 (21,422,670) 186,463,442 (119,382)
-------------- -------------- -------------- -------------- --------------
Total increase (decrease) in net assets. . . . 50,402,639 541,939,819 (10,863,251) 855,695,143 (117,363)
NET ASSETS:
Beginning of period. . . . . . . . . . . . . . 194,978,128 1,212,755,498 277,901,280 2,845,576,451 117,363
-------------- -------------- -------------- -------------- --------------
End of period. . . . . . . . . . . . . . . . . $ 245,380,767 $1,754,695,317 $ 267,038,029 $3,701,271,594 $ -
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND
APPRECIATION SECURITIES INDEX OPPORTUNITES AND GROWTH
FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).. . . . . . . . . $ (10,930,508) $ 9,013,463 $ 492,907 $ (1,529,162) $ 3,234,554
Capital gains income . . . . . . . . . . . . . 103,244,397 - 21,612,566 29,748,890 9,959,170
Net realized gain(loss) on security
transactions . . . . . . . . . . . . . . . . 413,746 28,917 243,148 29,653 (4,003)
Net unrealized appreciation(depreciation) of
investments during the period. . . . . . . . 190,913,008 5,074,541 65,120,869 (32,127,237) 111,067,791
-------------- -------------- -------------- -------------- --------------
Net increase (decrease) in net assets
resulting from operations. . . . . . . . . . 283,640,643 14,116,921 87,469,490 (3,877,856) 124,257,512
-------------- -------------- -------------- -------------- --------------
UNIT TRANSACTIONS:
Purchases. . . . . . . . . . . . . . . . . . . 194,562,087 7,925,304 65,766,703 38,595,370 159,109,767
Net transfers. . . . . . . . . . . . . . . . . (11,521,643) (9,594,437) 26,458,731 (16,075,692) 87,528,713
Surrenders . . . . . . . . . . . . . . . . . . (87,759,430) (17,575,723) (18,692,668) (26,504,799) (20,331,098)
Net annuity transactions . . . . . . . . . . . 361,130 (3,307) 190,331 66,746 349,515
-------------- -------------- -------------- -------------- --------------
Net increase (decrease) in net assets
resulting from unit transactions . . . . . . 95,642,144 (19,248,163) 73,723,097 (3,918,375) 226,656,897
-------------- -------------- -------------- -------------- --------------
Total increase (decrease) in net assets. . . . 379,282,787 (5,131,242) 161,192,587 (7,796,231) 350,914,409
NET ASSETS:
Beginning of period. . . . . . . . . . . . . . 1,354,625,381 196,244,893 249,963,229 400,841,689 318,309,457
-------------- -------------- -------------- -------------- --------------
End of period. . . . . . . . . . . . . . . . . $1,733,908,168 $ 191,113,651 $ 411,155,816 $ 393,045,458 $ 669,223,866
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
</TABLE>
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
INTERNATIONAL SMALL SMITH BARNEY SMITH BARNEY
ADVISERS COMPANY MIDCAP CASH APPRECIATION
FUND FUND FUND PORTFOLIO FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) . . . . . . . . $ 6,157,148 $ (517,245) $ (106,775) $10,055 $ (844)
Capital gains income . . . . . . . . . . . . 1,559,601 1,255,431 - - 3,058
Net realized gain(loss) on security
transactions . . . . . . . . . . . . . . . (12,625) (8,770) 4,690 - 91
Net unrealized appreciation(depreciation)
of investments during the period . . . . . (762,318) 5,248,642 2,764,162 - 18,655
-------------- ------------ ------------ ------------- -------------
Net increase (decrease) in net assets
resulting from operations. . . . . . . . . 6,941,806 5,978,058 2,662,077 10,055 20,960
-------------- ------------ ------------ ------------- -------------
UNIT TRANSACTIONS:
Purchases. . . . . . . . . . . . . . . . . . 5,288,304 11,281,407 7,135,470 - -
Net transfers. . . . . . . . . . . . . . . . 3,214,333 8,751,066 7,827,967 - -
Surrenders . . . . . . . . . . . . . . . . . (1,857,322) (2,327,420) (374,654) (10,755) (76)
Net annuity transactions . . . . . . . . . . 20,687 (2,229) - - -
-------------- ------------ ------------ ------------- -------------
Net increase (decrease) in net assets
resulting from unit transactions . . . . . 6,666,002 17,702,824 14,588,783 (10,755) (76)
-------------- ------------ ------------ ------------- -------------
Total increase (decrease) in net assets. . . 13,607,808 23,680,882 17,250,860 (700) 20,884
NET ASSETS:
Beginning of period. . . . . . . . . . . . . 57,422,373 71,393,635 9,173,890 509,012 170,573
-------------- ------------ ------------ ------------- -------------
End of period. . . . . . . . . . . . . . . . $ 71,030,181 $ 95,074,517 $ 26,424,750 $ 508,312 $ 191,457
-------------- ------------ ------------ ------------- -------------
-------------- ------------ ------------ ------------- -------------
<CAPTION>
BB&T MENTOR VIP MENTOR VIP
SMITH BARNEY GROWTH AM SOUTH CAPITAL PERPETUAL MENTOR VIP
GOVERNMENT & INCOME EQUITY INCOME GROWTH INTERNATIONAL GROWTH
PORTFOLIO FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) . . . . . . $ 741 $ 14,380 $ 51,967 $ (12,150) $ (6,560) $ (6,501)
Capital gains income . . . . . . . . . . - - - - - -
Net realized gain(loss) on security
transactions . . . . . . . . . . . . . - 172 - (766) 213 (206)
Net unrealized appreciation(depreciation)
of investments during the period . . . - 210,524 285,859 210,668 130,811 (96,222)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations. . . . . . . 741 225,076 337,826 197,752 124,464 (102,929)
----------- ----------- ----------- ----------- ----------- -----------
UNIT TRANSACTIONS:
Purchases. . . . . . . . . . . . . . . . - 7,220,583 10,132,350 6,180,305 3,181,732 3,434,841
Net transfers. . . . . . . . . . . . . . - 2,439,282 3,609,722 1,087,330 807,860 475,646
Surrenders . . . . . . . . . . . . . . . - (247,588) (133,556) (4,846) (2,482) (3,060)
Net annuity transactions.. . . . . . . . - - - - - -
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets. .
resulting from unit transactions . . . - 9,412,277 13,608,516 7,262,789 3,987,110 3,907,427
----------- ----------- ----------- ----------- ----------- -----------
Total increase (decrease) in net assets. 741 9,637,353 13,946,342 7,460,541 4,111,574 3,804,498
NET ASSETS:
Beginning of period. . . . . . . . . . . 37,164 6,477,420 2,391,916 - - -
----------- ----------- ----------- ----------- ----------- -----------
End of period. . . . . . . . . . . . . . $ 37,905 $16,114,773 $16,338,258 $ 7,460,541 $ 4,111,574 $ 3,804,498
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INTERNATIONAL SMALL SMITH BARNEY
ADVISERS COMPANY MIDCAP CASH
FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) . . . . . . . . $ 1,035,994 $ (457,120) $ (12,661) $ 21,390
Capital gains income . . . . . . . . . . . . 110,732 3,307,195 - -
Net realized gain(loss) on security
transactions . . . . . . . . . . . . . . . 13,808 (36,223) (2,185) -
Net unrealized appreciation(depreciation)
of investments during the period . . . . . 118,913 1,332,603 336,895 -
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations. . . . . . . . . 1,279,447 4,146,455 322,049 21,390
------------- ------------- ------------- -------------
UNIT TRANSACTIONS:
Purchases. . . . . . . . . . . . . . . . . . 18,887,741 24,742,079 2,088,623 -
Net transfers. . . . . . . . . . . . . . . . 9,531,179 30,544,670 6,774,154 -
Surrenders . . . . . . . . . . . . . . . . . (2,110,213) (1,630,264) (10,936) (93,309)
Net annuity transactions.. . . . . . . . . . 25,045 44,603 - -
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from unit transactions . . . . . . 26,333,752 53,701,088 8,851,841 (93,309)
------------- ------------- ------------- -------------
Total increase (decrease) in net assets. . . 27,613,199 57,847,543 9,173,890 (71,919)
NET ASSETS:
Beginning of period... . . . . . . . . . . . 29,809,174 13,546,092 - 580,931
------------- ------------- ------------- -------------
End of period. . . . . . . . . . . . . . . . $ 57,422,373 $ 71,393,635 $ 9,173,890 $ 509,012
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
<CAPTION>
BB&T
SMITH BARNEY SMITH BARNEY GROWTH AM SOUTH
APPRECIATION GOVERNMENT & INCOME EQUITY INCOME
FUND PORTFOLIO FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).. . . . . . . . $ 687 $ 1,594 $ 22,704 $ 1,732
Capital gains income . . . . . . . . . . . . 22,341 - 662 -
Net realized gain(loss) on security
transactions. . . . . . . . . . . . . . . 6,810 - - -
Net unrealized appreciation(depreciation). .
of investments during the period. . . . . 8,816 - 409,485 32,195
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . 38,654 1,594 432,851 33,927
------------- ------------- ------------- -------------
UNIT TRANSACTIONS:
Purchases. . . . . . . . . . . . . . . . . . - - 5,104,417 2,100,608
Net transfers. . . . . . . . . . . . . . . . - - 1,006,220 259,438
Surrenders . . . . . . . . . . . . . . . . . (40,942) (4,272) (66,068) (2,057)
Net annuity transactions . . . . . . . . . . - - - -
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from unit transactions . . . . . (40,942) (4,272) 6,044,569 2,357,989
------------- ------------- ------------- -------------
Total increase (decrease) in net assets. . . (2,288) (2,678) 6,477,420 2,391,916
NET ASSETS:
Beginning of period. . . . . . . . . . . . . 172,861 39,842 - -
------------- ------------- ------------- -------------
End of period. . . . . . . . . . . . . . . . $ 170,573 $ 37,164 $ 6,477,420 $ 2,391,916
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
<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>
This page intentionally left blank.
<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.
(13) Not applicable.
(14) 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>
(15) Copy of Power of Attorney.
(16) Organizational Chart.
Item 25. Directors and Officers of the Depositor
NAME POSITION WITH HARTFORD
- ---------------------- ----------------------
Dong H. Ahn Vice President
Wendell J. Bossen Vice President
Gregory A. Boyko Senior Vice President, Chief Financial Officer,
and Treasurer, Director*
Peter W. Cummins Senior Vice President
Ann M. de Raismes Senior Vice President
Timothy M. Fitch Vice President and Actuary
David T. Foy Vice President
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
David N. Levenson Vice President
Steven M. Maher Vice President and Actuary
William B. Malchodi, Jr. Vice President
Raymond J. Marra Vice President
<PAGE>
NAME POSITION WITH HARTFORD
- ---------------------- ----------------------
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*
Unless otherwise indicated, the principal business address of each the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
*Denotes Board of Directors.
Item 26. Persons Controlled By or Under Common Control with the Depositor or
Registrant
See Exhibit 15 incorporated herein.
Item 27. Number of Contract Owners
<PAGE>
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 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
<PAGE>
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
(b) Directors and Officers of HSD
Name and Principal Positions and Offices
Business Address With Underwriter
------------------ ---------------------
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
<PAGE>
Lynda Godkin Senior Vice President, General
Counsel and Corporate Secretary
Donald E. Waggaman, Jr. Treasurer
George R. Jay Controller
Unless otherwise indicated, the principal business address of
each the above individuals is P.O. Box 2999, Hartford, CT
06104-2999.
Item 30. Location of Accounts and Records
All of the accounts, books, records or other documents required to be
kept by Section 31(a) of the Investment Company Act of 1940 and rules
thereunder, are maintained by Hartford at 200 Hopmeadow Street,
Simsbury, Connecticut 06089.
Item 31. Management Services
All management contracts are discussed in Part A and Part B of this
Registration Statement.
Item 32. Undertakings
(a) The Registrant hereby undertakes to file a post-effective
amendment to this Registration Statement as frequently as is
necessary to ensure that the audited financial statements in the
Registration Statement are never more than 16 months old so long
as payments under the variable annuity Contracts may be accepted.
(b) The Registrant hereby undertakes to include either (1) as part of
any application to purchase a Contract offered by the Prospectus,
a space that an applicant can check to request a Statement of
Additional Information, or (2) a post card or similar written
communication affixed to or included in the Prospectus that the
applicant can remove to send for a Statement of Additional
Information.
(c) The Registrant hereby undertakes to deliver any Statement of
Additional Information and any financial statements required to
be made available under this Form promptly upon written or oral
request.
(d) Hartford hereby represents that the aggregate fees and charges
under the Contract are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks
assumed by Hartford.
<PAGE>
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 11th day of August, 1998.
HARTFORD LIFE INSURANCE COMPANY -
SEPARATE ACCOUNT TWO (VARIABLE ACCOUNT "A")
(Registrant)
*By: /s/ Thomas M. Marra *By: /s/ Marianne O'Doherty
------------------------------------------- ----------------------
Thomas M. Marra, Executive Vice President Marianne O'Doherty
and Director, Individual Life and Annuity Attorney-in-Fact
Division, Director
HARTFORD LIFE INSURANCE COMPANY
(Depositor)
*By: /s/ Thomas M. Marra
-------------------------------------------
Thomas M. Marra, Executive Vice President
and Director, Individual Life and Annuity
Division, Director
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,
Chief Financial Officer & Treasurer, Director *
John P. Ginnetti, Executive Vice
President, Director *
Lynda Godkin, Senior Vice President,
General Counsel & Corporate Secretary, Director*
Thomas M. Marra, Executive Vice *By: /s/ Marianne O'Doherty
President, Director * -----------------------
Lowndes A. Smith, President & Marianne O'Doherty
Chief Operating Officer, Director * Attorney-In-Fact
Raymond P. Welnicki, Senior Vice
President, Director *
Lizabeth H. Zlatkus, Senior Vice President, Dated: August 11, 1998
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>
August 10, 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>
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
August 10, 1998
<PAGE>
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>
<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>
