<PAGE>
As filed with the Securities and Exchange Commission on April 13 , 1999.
File No. 33-19945
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
-----
Post-Effective Amendment No. 12 [X]
-----
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 116 [X]
-----
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO
(Exact Name of Registrant)
HARTFORD LIFE INSURANCE COMPANY
(Name of Depositor)
P. O. BOX 2999
HARTFORD, CT 06104-2999
(Address of Depositor's Principal Offices)
(860) 843-4891
(Depositor's Telephone Number, Including Area Code)
Brian Lord, ESQ.
HARTFORD LIFE
P. O. BOX 2999
HARTFORD, CT 06104-2999
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
-----
X on May 3, 1999 pursuant to paragraph (b) of Rule 485
-----
60 days after filing pursuant to paragraph (a)(1) of Rule 485
-----
on ___________, 1998 pursuant to paragraph (a)(1) of Rule 485
-----
this post-effective amendment designates a new effective date for a
----- previously
<PAGE>
- --------------------------------------------------------------------------------
filed post-effective amendment.
PURSUANT TO RULE 24F-2(a)(1) UNDER THE INVESTMENT COMPANY ACT OF 1940, THE
REGISTRANT HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES.
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
N-4 ITEM NO. PROSPECTUS HEADING
---------------------------------------------------------------------------
1. Cover Page Hartford Life and Annuity Insurance
Company, The Separate Account
2. Definitions Definitions
3. Synopsis or Highlights Highlights
4. Condensed Financial Accumulation Unit Values
Information
5. General Description of General Contract Information
Registrant
6. Deductions The Contract: Charges and Fees
7. General Description of The Contract
Annuity Contracts
8. Annuity Period Annuity Payouts
9. Death Benefit The Contract: Death Benefit
10. Purchases and Contract Value The Contract
11. Redemptions The Contract: Surrenders
12. Taxes Federal Tax Considerations
13. Legal Proceedings Other Information: Legal Matters &
Experts
14. Table of Contents of the Table of Contents to
Statement of Additional Statement of Additional
Information Information Hartford
15. Cover Page Part B; Statement of Additional
Information
<PAGE>
16. Table of Contents Table of Contents
17. General Information and History Description of Hartford Life and
Annuity Insurance Company
18. Services None
19. Purchase of Securities Distribution of Contracts
being Offered
20. Underwriters Distribution of Contracts
21. Calculation of Performance Data Calculation of Yield and Return
22. Annuity Payments Annuity Payouts
23. Financial Statements Financial Statements
24. Financial Statements and Financial Statements and Exhibits
Exhibits
25. Directors and Officers of the Directors and Officers of the
Depositor Depositor
26. Persons Controlled by or Under Persons Controlled by or Under
Common Control with the Common Control with the Depositor
Depositor or Registrant or Registrant
27. Number of Contract Owners Number of Contract Owners
28. Indemnification Indemnification
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Location of Accounts and Records
Records
31. Management Services Management Services
32. Undertakings Undertakings
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
The Director
SEPARATE ACCOUNT TWO
P. O. BOX 5085
Hartford, Connecticut 06102-5085
Telephone: 1-800-862-6668 (Contract Owners)
1-800-862-7155 (Registered Representatives)
This Prospectus describes information you should know before you purchase Series
I of The Director variable annuity. Please read it carefully.
The Director variable annuity is a contract between you and Hartford Life
Insurance Company where you agree to make at least one Premium Payment to us and
we agree to make a series of Annuity Payouts at a later date. This Annuity is a
flexible premium, tax-deferred, variable annuity offered to both individuals and
groups. It is:
- - Flexible, because you may add Premium Payments at any time.
- - Tax-deferred, which means you don't pay taxes until you take money out or
until we start to make Annuity Payouts.
- - Variable, because the value of your Annuity will fluctuate with the
performance of the underlying funds.
At the time you purchase your Annuity, you allocate your Premium Payment to
"Sub-Accounts". These are subdivisions of our Separate Account, an account that
keeps your Annuity assets separate from our company assets. The Sub-Accounts
then purchase shares of mutual funds set up exclusively for variable annuity or
variable life insurance products. These funds are not the same mutual funds
that you buy through your stockbroker or through a retail mutual fund. They may
have similar investment strategies and the same portfolio managers as retail
mutual funds. This Annuity offers you Funds with investment strategies ranging
from conservative to aggressive and you may pick those Funds that meet your
investment goals and risk tolerance. The Sub-Accounts and the Funds are listed
below:
- - Advisers Sub-Account which purchases shares of Class IA of Hartford
Advisers HLS Fund, Inc.
- - Bond Sub-Account which purchases shares of Class IA of Hartford Bond HLS
Fund, Inc.
- - Capital Appreciation Sub-Account which purchases shares of Class IA of
Hartford Capital Appreciation HLS Fund, Inc.
- - Dividend and Growth Sub-Account which purchases shares of Class IA of
Hartford Dividend and Growth HLS Fund, Inc.
- - Global Leaders Sub-Account which purchases shares of Class IA of Hartford
Global Leaders HLS Fund.
- - Growth and Income Sub-Account which purchases shares of Class IA of
Hartford
1
<PAGE>
Growth and Income HLS Fund.
- - High Yield Sub-Account which purchases shares of Class IA of Hartford High
Yield HLS Fund.
- - Index Sub-Account which purchases shares of Class IA of Hartford Index HLS
Fund, Inc.
- - International Advisers Sub-Account which purchases shares of Class IA of
Hartford International Advisers HLS Fund, Inc.
- - International Opportunities Sub-Account which purchases shares of Class IA
of Hartford International Opportunities HLS Fund, Inc.
- - MidCap Sub-Account which purchases shares of Class IA of Hartford MidCap
HLS Fund, Inc.
- - Money Market Sub-Account which purchases shares of Class IA of Hartford
Money Market HLS Fund, Inc.
- - Mortgage Securities Sub-Account that purchases shares of Class IA of
Hartford Mortgage Securities HLS Fund, Inc.
- - Small Company Sub-Account which purchases shares of Class IA of Hartford
Small Company HLS Fund, Inc.
- - Stock Sub-Account which purchases of Class IA of Hartford Stock HLS Fund,
Inc.
If you decide to buy this Annuity, you should keep this prospectus for your
records. You can also call us at 1-800-862-6668 to get a Statement of
Additional Information, free of charge. The Statement of Additional Information
contains more information about this Annuity and, like this prospectus, is filed
with the Securities and Exchange Commission ("SEC"). We have included the Table
of Contents for the Statement of Additional Information at the end of this
prospectus.
Although we file the prospectus and the Statement of Additional information with
the SEC, the SEC doesn't approve or disapprove these securities or determine if
the information is truthful or complete. Anyone who represents that the SEC
does these things may be guilty of a criminal offense.
This Prospectus and the Statement of Additional Information can also be obtained
from the SEC's website (HTTP://WWW.SEC.GOV).
This Annuity IS NOT:
- - A bank deposit or obligation
- - Federally insured
- - Endorsed by any bank or governmental agency
This Annuity may not be available for sale in all states.
Prospectus Dated: May 3, 1999
2
<PAGE>
Statement of Additional Information Dated: May 3, 1999
3
<PAGE>
TABLE OF CONTENTS
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Fee Table. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Annual Fund Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . .10
Accumulation Unit Values . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
General Contract Information . . . . . . . . . . . . . . . . . . . . . . . . .19
Hartford Life Insurance Company . . . . . . . . . . . . . . . . . . . . .19
The Separate Account. . . . . . . . . . . . . . . . . . . . . . . . . . .19
The Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Performance Related Information. . . . . . . . . . . . . . . . . . . . . . . .24
The Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Purchases and Contract Value. . . . . . . . . . . . . . . . . . . . . . .25
Charges and Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Death Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Surrenders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Annuity Payouts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Other Programs Available . . . . . . . . . . . . . . . . . . . . . . . . . . .38
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Legal Matters and Experts . . . . . . . . . . . . . . . . . . . . . . . .43
More Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
4
<PAGE>
Federal Tax Considerations . . . . . . . . . . . . . . . . . . . . . . . . . .43
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
Taxation of Hartford and the Separate Account . . . . . . . . . . . . . .44
Taxation of Annuities -- General Provisions
Affecting Purchasers Other Than Qualified Retirement Plans . . . . . .44
Federal Income Tax Withholding. . . . . . . . . . . . . . . . . . . . . .51
General Provisions Affecting Qualified
Retirement Plans . . . . . . . . . . . . . . . . . . . . . . . . . . .51
Annuity Purchases By Nonresident Aliens and
Foreign Corporations . . . . . . . . . . . . . . . . . . . . . . . . .51
Appendix I - Information Regarding Tax-Qualified Plans . . . . . . . . . . . .52
Table of Contents to Statement of Additional Information . . . . . . . . . . .56
5
<PAGE>
DEFINITIONS
These terms are capitalized when used throughout this prospectus. Please refer
to these defined terms if you have any questions as you read your prospectus.
ACCOUNT: Any of the Sub-Accounts.
ACCUMULATION UNITS: If you allocate your Premium Payment to any of the
Sub-Accounts, we will convert those payments into Accumulation Units in the
selected Sub-Accounts. Accumulation Units are valued at the end of each
Valuation Day and are used to calculate the value of your Contract prior to
Annuitization.
ACCUMULATION UNIT VALUE: The daily price of Accumulation Units on any Valuation
Day.
ADMINISTRATIVE OFFICE OF THE COMPANY: Our location and overnight mailing address
is: 200 Hopmeadow Street, Simsbury, Connecticut 06089. Our standard mailing
address is: Investment Product Services, P.O. Box 5085, Hartford, CT 06102-5085.
ANNIVERSARY VALUE: The value equal to the Contract Value as of a Contract
Anniversary, increased by the dollar amount of any Premium Payments made since
that anniversary and reduced by the dollar amount of any partial Surrenders
since that anniversary.
ANNUAL MAINTENANCE FEE: An annual $25 charge deducted on each Contract
Anniversary or full Surrender, if the Surrender occurs before the Contract
Anniversary.
ANNUAL WITHDRAWAL AMOUNT: This is the amount you can Surrender per Contract Year
without paying a Contingent Deferred Sales Charge. This amount is
non-cumulative, meaning that it cannot be carried over from one year to the
next.
ANNUITANT: The person on whose life the Contract is based. The Annuitant may
not be changed after your Contract is issued.
ANNUITY COMMENCEMENT DATE: The date we start to make Annuity Payouts.
ANNUITY PAYOUT: The money we pay out after the Annuity Commencement Date for the
duration and frequency you select.
ANNUITY PAYOUT OPTION: Any of the options available for payout after the Annuity
Commencement Date or death of the Contract Owner or Annuitant.
ANNUITY UNIT: The unit of measure we use to calculate the value of your Annuity
Payouts under a variable dollar amount Annuity Payout Option.
ANNUITY UNIT VALUE: The daily price of Annuity Units on any Valuation Day.
6
<PAGE>
BENEFICIARY: The person(s) entitled to receive a Death Benefit upon the death
of the Contract Owner or Annuitant.
CODE: The Internal Revenue Code of 1986, as amended.
COMMUTED VALUE: The present value of any remaining guaranteed Annuity Payouts.
CONTINGENT DEFERRED SALES CHARGE: The deferred sales charge that may apply when
you make a full or partial Surrender.
CONTRACT ANNIVERSARY: The anniversary of the date we issued your Contract. If
the Contract Anniversary falls on a Non-Valuation Day, then the Contract
Anniversary will be the next Valuation Day.
CONTRACT OWNER OR YOU: The owner or holder of this Annuity. We do not
capitalize "you" in the prospectus.
CONTRACT VALUE: The total value of the Accounts on any Valuation Day.
CONTRACT YEAR: Any 12 month period between Contract Anniversaries, beginning
with the date the Contract was issued.
DEATH BENEFIT: The amount payable after the Contract Owner or the Annuitant
dies.
DOLLAR COST AVERAGING: A program that allows you to systematically make
transfers between Sub-Accounts available in your Contract.
GENERAL ACCOUNT: This account includes all our company assets other than the
assets in our separate accounts. These assets are subject to the creditors of
Hartford.
HARTFORD, WE OR OUR: Hartford Life Insurance Company. Only Hartford is a
capitalized term in the prospectus.
JOINT ANNUITANT: The person on whose life Annuity Payouts are based if the
Annuitant dies after Annuitization. You may name a Joint Annuitant only if your
Annuity Payout Option provides for a survivor. The Joint Annuitant may not be
changed.
NET INVESTMENT FACTOR: This is used to measure the investment performance of a
Sub-Account from one Valuation Day to the next, and is also used to calculate
your Annuity Payout amount.
NON-VALUATION DAY: Any day the New York Stock Exchange is not open for trading.
PAYEE: The person or party you designate to receive Annuity Payouts.
7
<PAGE>
PREMIUM PAYMENT: Money sent to us to be invested in your Annuity.
PREMIUM TAX: A tax charged by a state or municipality on Premium Payments.
REQUIRED MINIMUM DISTRIBUTION: A federal requirement that individuals age 70 1/2
and older must take a distribution from their tax-qualified retirement account
by December 31, each year. For employer sponsored Qualified Contracts, the
individual must begin taking distributions at the age of 70 1/2 or upon
retirement, whichever comes later.
SUB-ACCOUNT VALUE: The value on or before the Annuity Calculation Date, which is
determined on any day by multiplying the number of Accumulation Units by the
Accumulation Unit Value for that Sub-Account.
SURRENDER: A complete or partial withdrawal from your Contract.
SURRENDER VALUE: The amount we pay you if you terminate your Contract before the
Annuity Commencement Date. The Surrender Value is equal to the Contract Value
minus any applicable charges.
VALUATION DAY: Every day the New York Stock Exchange is open for trading.
Values of the Separate Account are determined as of the close of the New York
Stock Exchange, generally 4:00 p.m. Eastern Time.
VALUATION PERIOD: The time span between the close of trading on the New York
Stock Exchange from one Valuation Day to the next.
8
<PAGE>
FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES (ALL SUB-ACCOUNTS)
<TABLE>
<S> <C>
Sales Load Imposed on Purchases (as a percentage of Premium
Payments). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .None
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$0
Deferred Sales Load (as a percentage of amounts withdrawn)
First Year (1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6%
Second Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5%
Third Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4%
Fourth Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3%
Fifth Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2%
Sixth Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1%
Seventh Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0%
Eighth Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0%
Annual Maintenance Fee (2) . . . . . . . . . . . . . . . . . . . . . . . . . $25
Annual Expenses-Separate Account (as percentage of average
account value)
Mortality and Expense Risk. . . . . . . . . . . . . . . . . . . . . .1.000%
</TABLE>
(1) Length of time from premium payment.
(2) The Annual Maintenance 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 Annual
Maintenance Fee has been reflected in the Examples by a method intended to
show the "average" impact of the Annual Maintenance Fee on an investment in
the Separate Account. The Annual Maintenance Fee is deducted only when the
accumulated value is less than $50,000. In the Example, the Annual
Maintenance Fee is approximated as a 0.05% annual asset charge based on the
experience of the Contracts.
Director Select
9
<PAGE>
ANNUAL FUND OPERATING EXPENSES
(As a percentage of net assets)
<TABLE>
<CAPTION>
OTHER TOTAL FUND
MANAGEMENT EXPENSES OPERATING
FEES EXPENSES
INCLUDING INCLUDING
WAIVERS WAIVERS
<S> <C> <C> <C>
Hartford Bond HLS Fund 0.482% 0.021% 0.503%
Hartford Stock HLS Fund 0.439% 0.018% 0.457%
Hartford Money Market HLS Fund 0.433% 0.015% 0.448%
Hartford Advisers HLS Fund 0.616% 0.018% 0.634%
Hartford Capital Appreciation HLS Fund 0.623% 0.019% 0.642%
Hartford Mortgage Securities HLS Fund 0.432% 0.030% 0.462%
Hartford Index HLS Fund 0.382% 0.019% 0.401%
Hartford International Opportunities HLS Fund 0.681% 0.090% 0.771%
Hartford Dividend & Growth HLS Fund 0.641% 0.018% 0.659%
Hartford International Advisers HLS Fund 0.755% 0.108% 0.863%
Hartford MidCap HLS Fund 0.759% 0.034% 0.793%
Hartford Small Company HLS Fund 0.753% 0.019% 0.772%
Hartford Growth and Income HLS Fund 0.767% 0.040% 0.807%
Hartford Global Leaders HLS Fund (1) 0.487% 0.120% 0.607%
Hartford High Yield HLS Fund (1) 0.487% 0.035% 0.522%
</TABLE>
(1) Hartford Global Leaders HLS Fund and Hartford High Yield HLS Fund are new
Funds. "Total Fund Operating Expenses" are based on annualized estimates of such
expenses to be incurred in the current fiscal year. HL Investment Advisors,
Inc. has agreed to waive its fees for these until the assets of the Funds
(excluding assets contributed by companies affiliated with HL Investment
Advisors, Inc.) reach $20 million. Before this waiver, the Management Fee and
Total Fund Operating Expenses would be:
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER OPERATING
FEES EXPENSES EXPENSES
<S> <C> <C> <C>
Hartford Global Leaders Fund 0.775% 0.120% 0.895%
Hartford High Yield Fund 0.775% 0.035% 0.810%
</TABLE>
(1) Each of Mentor Perpetual International Portfolio, Mentor Capital Growth
Portfolio, and Mentor Growth Portfolio is a new mutual fund. Operating
expenses are estimated based on the expenses
10
<PAGE>
the Portfolios expect to incur during their first year of operation.
(2) Each of Mentor Perpetual International Portfolio, Mentor Capital Growth
Portfolio, and Mentor Growth Portfolio has adopted a distribution plan
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Under the plans, a Portfolio may pay fees at an annual rate of up
to 0.25% of the Portfolio's average daily net assets. None of the
Portfolios currently make payments under the plans, though they may do so
at any time in the future.
(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.
11
<PAGE>
EXAMPLE
<TABLE>
<CAPTION>
If you surrender your Contract at the end If you annuitize your Contract at the end
of the applicable time period, you would pay of the applicable time period, you would pay
the following expenses on a $1,000 investment, the following expenses on a $1,000 investment,
assuming a 5% annual return on assets: assuming a 5% annual return on assets:
Sub-Account 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 $70 $85 $103 $186 $15 $49 $85 $185
Fund
Hartford Stock 69 84 101 181 15 47 82 180
Fund
Hartford Money 69 84 100 180 15 47 82 179
Market Fund
Hartford Advisors 71 89 110 200 17 53 92 200
Fund
Hartford Capital 71 90 111 201 17 53 92 201
Appreciation
Fund
Hartford Mortgage 69 84 101 181 15 48 82 181
Fund
Hartford Index 69 82 98 175 14 46 79 174
Fund
Hartford 73 94 117 215 18 57 99 215
International
Opportunities
Fund
Hartford Dividend 72 90 111 203 17 54 93 202
& Growth Fund
Hartford 74 97 122 225 19 60 104 225
International
Advisors Fund
Hartford Midcap 73 94 119 218 18 58 100 217
Fund
Hartford Small 73 94 117 215 18 57 99 215
Company Fund
Hartford Growth & 73 95 119 219 19 58 101 219
Income Fund
Hartford High 70 86 n/a n/a 16 49 n/a n/a
Yield Fund
Hartford Global 71 89 n/a n/a 16 52 n/a n/a
Leaders Fund
<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:
SUB-ACCOUNT 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Hartford Bond $16 $49 $85 $186
Fund
Hartford Stock 15 48 83 181
Fund
Hartford Money 15 48 82 180
Market FUND
Hartford Advisors 17 53 92 200
Fund
Hartford Capital 17 54 93 201
Appreciation
Fund
Hartford Mortgage 15 48 83 181
Fund
Hartford Index 15 46 80 175
Fund
Hartford 19 58 99 215
International
Opportunities
Fund
Hartford Dividend 18 54 93 203
& Growth Fund
Hartford 20 61 104 225
International
Advisors Fund
Hartford Midcap 19 58 101 218
Fund
Hartford Small 19 58 99 215
Company Fund
Hartford Growth & 19 59 101 219
Income Fund
Hartford High 16 50 n/a n/a
Yield Fund
Hartford Global 17 53 n/a n/a
Leaders Fund
</TABLE>
The purpose of this table is to assist the Contract Owner in understanding
various costs and expenses that a Contract Owner will bear directly or
indirectly. The table reflects expenses of the Separate Account and underlying
Funds. Premium taxes may also be applicable.
This EXAMPLE should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.
12
<PAGE>
ACCUMULATION UNIT VALUES
(For an accumulation unit outstanding throughout the period)
The following information has been derived from the audited financial
statements of the separate account, which have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report
with respect thereto, and should be read in conjunction with those statements
which are included in the Statement of Additional Information, which is
incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C> <C>
BOND FUND SUB-ACCOUNT - NON-QUALIFIED
Accumulation unit value at beginning of period...................... (a) $ 4.023 $ 3.649 $ 3.560
Accumulation unit value at end of period............................ $ 4.307 $ 4.023 $ 3.649
Number accumulation units outstanding at end of period
(in thousands).................................................... 1,962 1,879 2,005
BOND FUND SUB-ACCOUNT - QUALIFIED
Accumulation unit value at beginning of period...................... (a) $ 4.085 $ 3.705 $ 3.615
Accumulation unit value at end of period............................ $ 4.374 $ 4.085 $ 3.705
Number accumulation units outstanding at end of period
(in thousands).................................................... 233 276 286
STOCK FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period...................... (a) $ 8.493 $ 6.530 $ 5.303
Accumulation unit value at end of period............................ $ 11.224 $ 8.493 $ 6.530
Number accumulation units outstanding at end of period
(in thousands).................................................... 2,913 3,173 3,407
STOCK FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period...................... (a) $ 8.882 $ 6.829 $ 5.546
Accumulation unit value at end of period............................ $ 11.738 $ 8.882 $ 6.829
Number accumulation units outstanding at end of period
(in thousands).................................................... 803 848 830
MONEY MARKET FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period...................... (a) $ 2.572 $ 2.466 $ 2.369
Accumulation unit value at end of period............................ $ 2.681 $ 2.572 $ 2.466
Number accumulation units outstanding at end of period
(in thousands).................................................... 9,019 12,010 13,211
MONEY MARKET FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period...................... (a) $ 2.571 $ 2.465 $ 2.368
Accumulation unit value at end of period............................ $ 2.679 $ 2.571 $ 2.465
Number accumulation units outstanding at end of period
(in thousands).................................................... 612 979 1,362
ADVISERS FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period...................... (a) $ 5.351 $ 4.341 $ 3.761
Accumulation unit value at end of period............................ $ 6.604 $ 5.351 $ 4.341
Number accumulation units outstanding at end of period
(in thousands).................................................... 9,942 11,223 12,469
ADVISERS FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period...................... (a) $ 5.351 $ 4.341 $ 3.761
Accumulation unit value at end of period............................ $ 6.604 $ 5.351 $ 4.341
Number accumulation units outstanding at end of period
(in thousands).................................................... 3,191 3,353 3,531
CAPITAL APPRECIATION GROWTH FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period...................... (a) $ 8.151 $ 6.729 $ 5.631
Accumulation unit value at end of period............................ $ 9.319 $ 8.151 $ 6.729
Number accumulation units outstanding at end of period
(in thousands).................................................... 2,433 2,279 2,634
<CAPTION>
------------------------------------------------------
1995 1994 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BOND FUND SUB-ACCOUNT - NON-QUALIFIED
Accumulation unit value at beginning of period.................. (a) $ 3.035 $ 3.191 $ 2.924 2.798
Accumulation unit value at end of period........................ $ 3.560 $ 3.035 $ 3.191 2.924
Number accumulation units outstanding at end of period
(in thousands)................................................ 2,377 2,747 3,449 3,618
BOND FUND SUB-ACCOUNT - QUALIFIED
Accumulation unit value at beginning of period.................. (a) $ 3.082 $ 3.240 $ 2.969 2.842
Accumulation unit value at end of period........................ $ 3.615 $ 3.082 $ 3.240 2.969
Number accumulation units outstanding at end of period
(in thousands)................................................ 331 387 493 557
STOCK FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period.................. (a) $ 3.994 $ 4.112 $ 3.633 3.334
Accumulation unit value at end of period........................ $ 5.303 $ 3.994 $ 4.112 3.633
Number accumulation units outstanding at end of period
(in thousands)................................................ 4,081 3,744 4,033 4383
STOCK FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period.................. (a) $ 4.177 $ 4.301 $ 3.799 3.487
Accumulation unit value at end of period........................ $ 5.546 $ 4.177 $ 4.301 3.799
Number accumulation units outstanding at end of period
(in thousands)................................................ 940 1,015 1,043 985
MONEY MARKET FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period.................. (a) $ 2.262 $ 2.198 $ 2.157 2.102
Accumulation unit value at end of period........................ $ 2.369 $ 2.262 $ 2.198 2.157
Number accumulation units outstanding at end of period
(in thousands)................................................ 10,105 14,167 15,270 19,145
MONEY MARKET FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period.................. (a) $ 2.261 $ 2.197 $ 2.156 2.101
Accumulation unit value at end of period........................ $ 2.368 $ 2.261 $ 2.197 2.156
Number accumulation units outstanding at end of period
(in thousands)................................................ 1,178 1,194 1,160 2,542
ADVISERS FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period.................. (a) $ 2.960 $ 3.074 $ 2.766 2.579
Accumulation unit value at end of period........................ $ 3.761 $ 2.960 $ 3.074 2.766
Number accumulation units outstanding at end of period
(in thousands)................................................ 13,796 15,417 17,371 18273
ADVISERS FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period.................. (a) $ 2.960 $ 3.074 $ 2.766 2.579
Accumulation unit value at end of period........................ $ 3.761 $ 2.960 $ 3.074 2.766
Number accumulation units outstanding at end of period
(in thousands)................................................ 4,045 4,661 5,005 5231
CAPITAL APPRECIATION GROWTH FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period.................. (a) $ 4.367 - -
Accumulation unit value at end of period........................ $ 5.631 $ 4.367 - -
Number accumulation units outstanding at end of period
(in thousands)................................................ 3,859 2,983 - -
<CAPTION>
--------------------------------------------------
1991 1990 1989 1988
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BOND FUND SUB-ACCOUNT - NON-QUALIFIED
Accumulation unit value at beginning of period.................. (a) 2.27 2.261 2.037 1.912
Accumulation unit value at end of period........................ 2.798 2.27 2.261 2.037
Number accumulation units outstanding at end of period
(in thousands)................................................ 4,101 4,099 5,021 5,670
BOND FUND SUB-ACCOUNT - QUALIFIED
Accumulation unit value at beginning of period.................. (a) 2.465 2.296 2.069 1.942
Accumulation unit value at end of period........................ 2.842 2.465 2.296 2.069
Number accumulation units outstanding at end of period
(in thousands)................................................ 598 741 764 1,217
STOCK FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period.................. (a) 2.702 2.84 2.275 1.931
Accumulation unit value at end of period........................ 3.334 2.702 2.84 2.275
Number accumulation units outstanding at end of period
(in thousands)................................................ 4389 4551 5298 5948
STOCK FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period.................. (a) 2.826 2.97 2.379 2.02
Accumulation unit value at end of period........................ 3.487 2.826 2.97 2.379
Number accumulation units outstanding at end of period
(in thousands)................................................ 1110 1013 1315 1268
MONEY MARKET FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period.................. (a) 2.002 1.871 1.731 1.628
Accumulation unit value at end of period........................ 2.102 2.002 1.871 1.731
Number accumulation units outstanding at end of period
(in thousands)................................................ 25059 31519 32349 35576
MONEY MARKET FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period.................. (a) 2.001 1.87 1.731 1.628
Accumulation unit value at end of period........................ 2.101 2.001 1.87 1.731
Number accumulation units outstanding at end of period
(in thousands)................................................ 3959 4837 4761 5337
ADVISERS FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period.................. (a) 2.164 2.159 1.791 1.585
Accumulation unit value at end of period........................ 2.579 2.164 2.159 1.791
Number accumulation units outstanding at end of period
(in thousands)................................................ 19355 21074 23782 25816
ADVISERS FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period.................. (a) 2.164 2.159 1.791 1.585
Accumulation unit value at end of period........................ 2.579 2.164 2.159 1.791
Number accumulation units outstanding at end of period
(in thousands)................................................ 5513 6012 7020 7627
CAPITAL APPRECIATION GROWTH FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period.................. (a) - - - -
Accumulation unit value at end of period........................ - - - -
Number accumulation units outstanding at end of period
(in thousands)................................................ - - - -
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C> <C>
CAPITAL APPRECIATION GROWTH FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period...................... (a) $ 8.154 $ 6.732 $ 5.633
Accumulation unit value at end of period............................ $ 9.323 $ 8.154 $ 6.732
Number accumulation units outstanding at end of period
(in thousands).................................................... 775 859 888
MORTGAGE SECURITIES FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period...................... (a) $ 2.692 $ 2.495 $ 2.398
Accumulation unit value at end of period............................ $ 2.845 $ 2.692 $ 2.495
Number accumulation units outstanding at end of period
(in thousands).................................................... 5,584 6,914 8,165
MORTGAGE SECURITIES FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period...................... (a) $ 2.692 $ 2.495 $ 2.398
Accumulation unit value at end of period............................ $ 2.845 $ 2.692 $ 2.495
Number accumulation units outstanding at end of period
(in thousands).................................................... 484 695 755
INTERNATIONAL OPPORTUNITIES FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period...................... (c) $ 1.497 $ 1.507 $ 1.348
Accumulation unit value at end of period............................ $ 1.676 $ 1.497 $ 1.507
Number accumulation units outstanding at end of period
(in thousands).................................................... 1,314 314 374
INTERNATIONAL OPPORTUNITIES FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period...................... (c) $ 1.497 $ 1.507 $ 1.348
Accumulation unit value at end of period............................ $ 1.677 $ 1.497 $ 1.507
Number accumulation units outstanding at end of period
(in thousands).................................................... 197 1,518 1,951
DIVIDEND & GROWTH FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period...................... (d) $ 2.170 $ 1.661 $ 1.366
Accumulation unit value at end of period............................ $ 2.501 $ 2.170 $ 1.661
Number accumulation units outstanding at end of period
(in thousands).................................................... 1,616 1,710 1,241
DIVIDEND & GROWTH FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period...................... (d) $ 2.170 $ 1.662 $ 1.366
Accumulation unit value at end of period............................ $ 2.501 $ 2.170 $ 1.662
Number accumulation units outstanding at end of period
(in thousands).................................................... 418 391 291
INTERNATIONAL ADVISERS FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period...................... (e) $ 1.328 $ 1.271 $ 1.149
Accumulation unit value at end of period............................ $ 1.491 $ 1.328 $ 1.271
Number accumulation units outstanding at end of period
(in thousands).................................................... 201 223 348
INTERNATIONAL ADVISERS FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period...................... (e) $ 1.328 $ 1.271 $ 1.149
Accumulation unit value at end of period............................ $ 1.491 $ 1.328 $ 1.271
Number accumulation units outstanding at end of period
(in thousands).................................................... 23 37 19
INDEX FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period...................... (b) $ 1.472 $ 1.121 $ 1.000
Accumulation unit value at end of period............................ $ 1.867 $ 1.472 $ 1.121
Number accumulation units outstanding at end of period
(in thousands).................................................... 570 557 106
INDEX FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period...................... (b) $ 1.472 $ 1.121 $ 1.000
Accumulation unit value at end of period............................ $ 1.867 $ 1.472 $ 1.121
Number accumulation units outstanding at end of period
(in thousands).................................................... 146 103 39
SMALL COMPANY FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period...................... (f) $ 1.251 $ 1.067 $ 1.000
Accumulation unit value at end of period............................ $ 1.382 $ 1.251 $ 1.067
Number accumulation units outstanding at end of period
(in thousands).................................................... 3,670 377 110
<CAPTION>
------------------------------------------------------
1995 1994 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
CAPITAL APPRECIATION GROWTH FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period.............. (a) $ 4.369 $ 1.764 $ 1.736 $ 1.698
Accumulation unit value at end of period.................... $ 5.633 $ 4.369 $ 1.764 $ 1.736
Number accumulation units outstanding at end of period
(in thousands)............................................ 891 938 38 84
MORTGAGE SECURITIES FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period.............. (a) $ 2.085 $ 4.303 $ 3.598 $ 3.106
Accumulation unit value at end of period.................... $ 2.398 $ 2.085 $ 4.303 $ 3.598
Number accumulation units outstanding at end of period
(in thousands)............................................ 9,957 11,297 3,032 3,803
MORTGAGE SECURITIES FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period.............. (a) $ 2.085 $ 4.305 $ 3.599 $ 3.107
Accumulation unit value at end of period.................... $ 2.398 $ 2.085 $ 4.305 $ 3.599
Number accumulation units outstanding at end of period
(in thousands)............................................ 1,001 1,432 1,026 859
INTERNATIONAL OPPORTUNITIES FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period.............. (c) $ 1.195 $ 2.140 $ 2.033 $ 1.963
Accumulation unit value at end of period.................... $ 1.348 $ 1.195 $ 2.140 $ 2.033
Number accumulation units outstanding at end of period
(in thousands)............................................ 403 557 14,186 17449
INTERNATIONAL OPPORTUNITIES FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period.............. (c) $ 1.195 $ 2.140 $ 2.033 $ 1.963
Accumulation unit value at end of period.................... $ 1.348 $ 1.195 $ 2.140 $ 2.033
Number accumulation units outstanding at end of period
(in thousands)............................................ 1,765 2,439 2,005 3646
DIVIDEND & GROWTH FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period.............. (d) $ 1.011 $ 1.000 $ 0.929 $ 0.982
Accumulation unit value at end of period.................... $ 1.366 $ 1.011 $ 1.230 $ 0.929
Number accumulation units outstanding at end of period
(in thousands)............................................ 665 335 410 174
DIVIDEND & GROWTH FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period.............. (d) $ 1.011 $ 1.000 $ 0.929 $ 0.982
Accumulation unit value at end of period.................... $ 1.366 $ 1.011 $ 1.230 0.929
Number accumulation units outstanding at end of period
(in thousands)............................................ 61 37 1,473 254
INTERNATIONAL ADVISERS FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period.............. (e) $ 1.000 - - -
Accumulation unit value at end of period.................... $ 1.149 - - -
Number accumulation units outstanding at end of period
(in thousands)............................................ 30 - - -
INTERNATIONAL ADVISERS FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period.............. (e) $ 1.000 -
Accumulation unit value at end of period.................... $ 1.149 - - -
Number accumulation units outstanding at end of period
(in thousands)............................................ 10 - - -
INDEX FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period.............. (b) $ - - - -
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.............. (b) $ - - - -
Accumulation unit value at end of period.................... $ - - - -
Number accumulation units outstanding at end of period
(in thousands)............................................ - - - -
SMALL COMPANY FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period.............. (f) $ - - -
Accumulation unit value at end of period.................... $ - - - -
Number accumulation units outstanding at end of period
(in thousands)............................................ - - - -
<CAPTION>
--------------------------------------------------
1991 1990 1989 1988
---- ---- ---- ----
<S> <C> <C> <C> <C>
CAPITAL APPRECIATION GROWTH FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period.............. (a) $ 1.624 $ 1.525 $ 1.420 $ 1.341
Accumulation unit value at end of period.................... $ 1.698 $ 1.624 $ 1.525 $ 1.420
Number accumulation units outstanding at end of period
(in thousands)............................................ 124 125 143 165
MORTGAGE SECURITIES FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period.............. (a) $ 2.036 $ 2.308 $ 1.878 $ 1.503
Accumulation unit value at end of period.................... $ 3.106 $ 2.036 $ 2.308 $ 1.878
Number accumulation units outstanding at end of period
(in thousands)............................................ 3,521 2,204 4,038 2,655
MORTGAGE SECURITIES FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period.............. (a) $ 2.037 $ 2.309 $ 1.879 $ 1.503
Accumulation unit value at end of period.................... $ 3.107 $ 2.037 $ 2.309 $ 1.879
Number accumulation units outstanding at end of period
(in thousands)............................................ 915 793 992 1,041
INTERNATIONAL OPPORTUNITIES FUND SUB-ACCOUNT NON-QUALIFIED
Accumulation unit value at beginning of period.............. (c) $ 1.728 $ 1.591 $ 1.420 $ 1.323
Accumulation unit value at end of period.................... $ 1.963 $ 1.728 $ 1.591 $ 1.420
Number accumulation units outstanding at end of period
(in thousands)............................................ 20875 23365 26763 32866
INTERNATIONAL OPPORTUNITIES FUND SUB-ACCOUNT QUALIFIED
Accumulation unit value at beginning of period.............. (c) $ 1.728 $ 1.591 $ 1.420 $ 1.323
Accumulation unit value at end of period.................... $ 1.963 $ 1.728 $ 1.591 $ 1.420
Number accumulation units outstanding at end of period
(in thousands)............................................ 4104 4668 5094 5678
DIVIDEND & GROWTH FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period.............. (d) $ 0.878 $ 1.000
Accumulation unit value at end of period.................... $ 0.982 $ 0.878 - -
Number accumulation units outstanding at end of period
(in thousands)............................................ 105 33 - -
DIVIDEND & GROWTH FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period.............. (d) $ 0.878 $ 1.000
Accumulation unit value at end of period.................... 0.982 0.878 - -
Number accumulation units outstanding at end of period
(in thousands)............................................ 127 34 - -
INTERNATIONAL ADVISERS FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period.............. (e) - - - -
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.............. (e) - - - -
Accumulation unit value at end of period.................... - - - -
Number accumulation units outstanding at end of period
(in thousands)............................................ - - - -
INDEX FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period.............. (b) - - - -
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.............. (b) - - - -
Accumulation unit value at end of period.................... - - - -
Number accumulation units outstanding at end of period
(in thousands)............................................ - - - -
SMALL COMPANY FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period.............. (f) - - - -
Accumulation unit value at end of period.................... - - - -
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C> <C>
SMALL COMPANY FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period...................... (f) $ 1.251 $ 1.067 $ -
Accumulation unit value at end of period............................ $ 1.382 $ 1.251 $ 1.067
Number accumulation units outstanding at end of period
(in thousands).................................................... 228 100 10
MIDCAP FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period...................... (g) $ 1.098 $ 1.000 $ -
Accumulation unit value at end of period............................ $ 1.376 $ 1.098 $ -
Number accumulation units outstanding at end of period
(in thousands).................................................... 243 34 -
MIDCAP FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period...................... (g) $ 1.098 $ 1.000 -
Accumulation unit value at end of period............................ $ 1.376 $ 1.098 -
Number accumulation units outstanding at end of period
(in thousands).................................................... 90 12 -
GROWTH AND INCOME FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period...................... (h) $ 1.000 - -
Accumulation unit value at end of period............................ $ 1.184 - -
Number accumulation units outstanding at end of period
(in thousands).................................................... 10 - -
GROWTH AND INCOME FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period...................... (h) $ 1.000 - -
Accumulation unit value at end of period............................ $ 1.184 - -
Number accumulation units outstanding at end of period
(in thousands).................................................... 181 - -
GLOBAL LEADERS FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period...................... (i) $ 1.000 - -
Accumulation unit value at end of period............................ $ 1.316 - -
Number accumulation units outstanding at end of period
(in thousands).................................................... 10 - -
GLOBAL LEADERS FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period...................... (i) $ 1.000 - -
Accumulation unit value at end of period............................ $ 1.316 - -
Number accumulation units outstanding at end of period
(in thousands).................................................... 10 - -
HIGH YIELD FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period...................... (i) $ 1.000 - -
Accumulation unit value at end of period............................ $ 1.036 - -
Number accumulation units outstanding at end of period
(in thousands).................................................... 10 - -
HIGH YIELD FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period...................... (i) $ 1.000 - -
Accumulation unit value at end of period............................ $ 1.036 - -
Number accumulation units outstanding at end of period
(in thousands).................................................... 16 - -
<CAPTION>
------------------------------------------------------
1995 1994 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SMALL COMPANY FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period.............. (f) $ - - - -
Accumulation unit value at end of period.................... $ - - - -
Number accumulation units outstanding at end of period
(in thousands)............................................ - - - -
MIDCAP FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period.............. (g) $ - - - -
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.............. (g) - - -
Accumulation unit value at end of period.................... - - - -
Number accumulation units outstanding at end of period
(in thousands)............................................ - - - -
GROWTH AND INCOME FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period.............. (h) - - - -
Accumulation unit value at end of period.................... - - - -
Number accumulation units outstanding at end of period
(in thousands)............................................ - - - -
GROWTH AND INCOME FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period.............. (h) - - - -
Accumulation unit value at end of period.................... - - - -
Number accumulation units outstanding at end of period
(in thousands)............................................ - - - -
GLOBAL LEADERS FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period.............. (i) - - - -
Accumulation unit value at end of period.................... - - - -
Number accumulation units outstanding at end of period
(in thousands)............................................ - -
GLOBAL LEADERS FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period.............. (i) - -
Accumulation unit value at end of period.................... - -
Number accumulation units outstanding at end of period
(in thousands)............................................ - -
HIGH YIELD FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period.............. (i) - -
Accumulation unit value at end of period.................... - -
Number accumulation units outstanding at end of period
(in thousands)............................................ - -
HIGH YIELD FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period.............. (i) - -
Accumulation unit value at end of period.................... - -
Number accumulation units outstanding at end of period
(in thousands)............................................ - -
<CAPTION>
--------------------------------------------------
1991 1990 1989 1988
---- ---- ---- ----
<S> <C> <C> <C> <C>
SMALL COMPANY FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period.............. (f) - - - -
Accumulation unit value at end of period.................... - - - -
Number accumulation units outstanding at end of period
(in thousands)............................................ - - - -
MIDCAP FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period.............. (g) - - - -
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.............. (g) - - - -
Accumulation unit value at end of period.................... - - - -
Number accumulation units outstanding at end of period
(in thousands)............................................ - - - -
GROWTH AND INCOME FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period.............. (h) - - - -
Accumulation unit value at end of period.................... - - - -
Number accumulation units outstanding at end of period
(in thousands)............................................ - - - -
GROWTH AND INCOME FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period.............. (h) - - - -
Accumulation unit value at end of period.................... - - - -
Number accumulation units outstanding at end of period
(in thousands)............................................ - - - -
GLOBAL LEADERS FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period.............. (i)
Accumulation unit value at end of period....................
Number accumulation units outstanding at end of period
(in thousands)............................................
GLOBAL LEADERS FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period.............. (i)
Accumulation unit value at end of period....................
Number accumulation units outstanding at end of period
(in thousands)............................................
HIGH YIELD FUND SUB-ACCOUNT (NON-QUALIFIED)
Accumulation unit value at beginning of period.............. (i)
Accumulation unit value at end of period....................
Number accumulation units outstanding at end of period
(in thousands)............................................
HIGH YIELD FUND SUB-ACCOUNT (QUALIFIED)
Accumulation unit value at beginning of period.............. (i)
Accumulation unit value at end of...........................
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.
(h) Inception date June 1, 1998.
(i) Inception date September 30, 1998.
16
<PAGE>
HIGHLIGHTS
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You must complete our application or order request and submit it to us for
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certain retirement plans.
- - For a limited time, usually within ten days after you receive your
Contract, you may cancel your Annuity without paying a Contingent Deferred
Sales Charge. You may bear the investment risk for your Premium Payment
prior to our receipt of your request for cancellation.
WHAT TYPE OF SALES CHARGE WILL I PAY?
You don't pay a sales charge when you purchase your Annuity. We may charge you
a Contingent Deferred Sales Charge when you partially or fully Surrender your
Annuity. The Contingent Deferred Sales Charge will depend on the length of time
the Premium Payment you made has been in your Annuity. If the amount you paid
has been in your Annuity:
- - For Contract Year One, the charge is 6%.
- - For Contract Year Two, the charge is 5%.
- - For Contract Year Three, the charge is 4%.
- - For Contract Year Four, the charge is 3%
- - For Contract Year Five, the charge is 2%
- - For Contract Year Six, the charge is 1%.
- - For Contract Year Seven and beyond the charge is 0%
You won't be charged a Contingent Deferred Sales Charge on:
- - The Annual Withdrawal Amount
- - Premium Payments or earnings that have been in your Annuity for more than
six years.
- - Distributions made due to death
- - Most payments we make to you as part of your Annuity Payout
IS THERE AN ANNUAL MAINTENANCE FEE?
We deduct this $25.00 fee each year on your Contract Anniversary or upon full
Surrender, if the Surrender occurs before the Contract Anniversary.
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WHAT CHARGES WILL I PAY ON AN ANNUAL BASIS?
In addition to the Annual Maintenance Fee, you pay two different types of
charges each year. The first type of charge is the fee you pay for insurance.
This charge is:
A mortality and expense risk charge that is subtracted daily and is equal to an
annual charge of 1.00% of your Contract Value invested in the Funds.
The second type of charge is the fee you pay for the Funds.
Currently, Fund charges range from 0.42% to 0.90% annually of the average daily
value of the amount you have invested in the Funds. See the Annual Fund
Operating Expenses table for more complete information and the Funds'
prospectuses accompanying this prospectus.
CAN I TAKE OUT ANY OF MY MONEY?
You may Surrender all or part of the amounts you have invested at any time
before we start making Annuity Payouts, or after Annuity Payouts begin under the
Payment for a Designated Period Annuity Payout Option.
- - You may have to pay tax on the money you take out and, if you Surrender
before you are age 59 1/2, you may have to pay an income tax penalty.
- - You may have to pay a Contingent Deferred Sales Charge on the money you
Surrender.
WILL HARTFORD PAY A DEATH BENEFIT?
There is a Death Benefit if the Contract Owner or the Annuitant die before we
begin to make Annuity Payouts. The Death Benefit will be calculated as of the
date we receive a certified death certificate or other legal document acceptable
to us and, if death occurs prior to the decedent's 90th birthday, will be the
greater of:
- - The total Premium Payments you have made to us minus any amounts you have
Surrendered, or
- - The Contract Value of your Annuity
If death occurs after the decedent's 90th birthday, the Death Benefit will be
the Contract Value.
This Death Benefit amount will remain invested in the Sub-Accounts according to
your last instructions and will fluctuate with the performance of the underlying
Funds.
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WHAT ANNUITY PAYOUT OPTIONS ARE AVAILABLE?
When it comes time for us to make payouts, you may choose one of the following
Annuity Payout Options: Option 1 - Life Annuity, Option 2 - Life Annuity with
120, 180 or 240 Monthly Payments Certain, Option 3 - Unit Refund Life Annuity
Option 4 - Joint and Last Survivor Life Annuity and Option 5: Payments For a
Designated Period. We may make other Annuity Payout Options available at any
time.
You must begin to take payouts by the fifteenth day of the month following the
Annuitant's 90th birthday. If you do not tell us what Annuity Payout Option you
want before that time, we will make fixed monthly payments under Option 2 - Life
Annuity with 120 Monthly Payments Certain.
GENERAL CONTRACT INFORMATION
HARTFORD LIFE INSURANCE COMPANY
Hartford Life Insurance Company 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 as well as the District of Columbia and Puerto Rico. We were
originally incorporated under the laws of Massachusetts on June 5, 1902, and
subsequently redomiciled to Connecticut. Our offices are located in Simsbury,
Connecticut; however, our mailing address is P.O. Box 5085, Hartford, CT
06102-5085. We are ultimately controlled by The Hartford Financial Services
Group, Inc., one of the largest financial service providers in the United
States.
HARTFORD'S RATINGS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Rating Agency Effective Rating Basis of Rating
Date of Rating
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A.M. Best and Company, Inc. 9/9/97 A+ Financial soundness and
operating performance.
- ------------------------------------------------------------------------------------------
Standard & Poor's 1/23/98 AA Insurer financial strength
- ------------------------------------------------------------------------------------------
Duff & Phelps 1/23/98 AA+ Claims paying ability
- ------------------------------------------------------------------------------------------
</TABLE>
THE SEPARATE ACCOUNT
The Separate Account is where we set aside and invest the assets of some of our
annuity contracts, including this Contract. The Separate Account was established
on June 2, 1986 and is registered as a unit investment trust under the
Investment Company Act of 1940. This registration does not involve supervision
by the SEC of the management or the investment practices of the Separate Account
or Hartford. The
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Separate Account meets the definition of "Separate Account" under federal
securities law. This Separate Account holds only assets for variable annuity
contracts. The Separate Account:
- - Holds assets for your benefit and the benefit of other Contract Owners, and
the persons entitled to the payouts described in the Contract.
- - Is not subject to the liabilities arising out of any other business
Hartford may conduct.
- - Is not affected by the rate of return of Hartford's General Account or by
the investment performance of any of Hartford's other Separate Accounts.
- - May be subject to liabilities from a Sub-Account of the Separate Account
that holds assets of other variable annuity contracts offered by the
Separate Account, which are not described in this Prospectus.
- - Is credited with income and gains, and takes losses, whether or not
realized, from the assets it holds.
We do not guarantee the investment results of the Separate Account. There is no
assurance that the value of your Annuity will equal the total of the payments
you make to us.
THE FUNDS
All of the Funds are sponsored and administered by Hartford Life Insurance
Company. HL Investment Advisors, Inc. ("HL Advisors") serves as the investment
adviser to each of the Funds. Wellington Management Company, LLP ("Wellington
Management") and The Hartford Investment Management Company ("HIMCO") serve as
sub-investment advisors and provide day to day investment services.
Each Fund, except for the Hartford Global Leaders HLS Fund, the Hartford Growth
and Income HLS Fund and the Hartford High Yield HLS Fund, is a separate Maryland
corporation registered with the Securities and Exchange Commission as an
open-end management investment company. The Hartford Global Leaders HLS Fund,
the Hartford Growth and Income HLS Fund and the Hartford High Yield HLS Fund are
diversified series of Hartford Series Fund, Inc., a Maryland corporation, also
registered with the Securities and Exchange Commission as an open-end management
investment company. The shares of each Fund have been divided into Class IA and
Class IB. Only Class IA shares are available in this Annuity.
We do not guarantee the investment results of any of the underlying Funds.
Since each underlying Fund has different investment objectives, each is subject
to different risks. These risks and the Funds' expenses, policies and
procedures are more fully described in the accompanying Funds' prospectus and
Statement of Additional Information, which you may order from us. The Funds'
prospectus should be read in
20
<PAGE>
conjunction with this prospectus before investing.
The Funds may not be available in all states. In addition, if you want to
allocate Premium Payments or transfer Contract Value to any Funds added to this
Annuity after March 10, 1994, you must sign an amendment to your Contract which
is called an Amendatory Rider before you can invest in the new Funds. The
Amendatory Rider gives Contract Owners the ability to invest in new underlying
funds, but it also changes some of the terms of your Contract, including how
often you are able to transfer between Sub-Accounts.
The investment goals of each of the Funds are as follows:
HARTFORD ADVISERS HLS FUND - Seeks maximum long-term total rate of return by
investing in common stocks and other equity securities, bonds and other debt
securities, and money market instruments. Sub-advised by Wellington Management.
HARTFORD BOND HLS FUND - Seeks maximum current income consistent with
preservation of capital by investing primarily in fixed-income securities. Up to
20% of the total assets of this Fund may be invested in debt securities rated in
the highest category below investment grade ("Ba" by Moody's Investor
Services, Inc. or "BB" by Standard & Poor's) or, if unrated, are determined to
be of comparable quality by the Fund's investment adviser. Securities rated
below investment grade are commonly referred to as "high yield-high risk
securities" or "junk bonds." For more information concerning the risks
associated with investing in such securities, please refer to the section in the
accompanying prospectus for the Funds entitled "Hartford Bond HLS Fund, Inc. -
Investment Policies." Sub-advised by HIMCO.
HARTFORD CAPITAL APPRECIATION HLS FUND - Seeks growth of capital by investing in
equity securities selected solely on the basis of potential for capital
appreciation. Sub-advised by Wellington Management.
HARTFORD DIVIDEND AND GROWTH HLS FUND - Seeks a high level of current income
consistent with growth of capital and reasonable investment risk. Sub-advised by
Wellington Management.
HARTFORD GLOBAL LEADERS HLS FUND - Seeks growth of capital by investing
primarily in equity securities issued by U.S. company and non-U.S. companies.
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 rising dividends.
HARTFORD HIGH YIELD HLS FUND - Seeks high current income buy investing in
non-grade
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<PAGE>
fixed-income securities. Growth of capital is a secondary objective.
HARTFORD INDEX HLS FUND - Seeks to provide investment results that approximate
the price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock Price
Index. * Sub-advised by HIMCO.
HARTFORD INTERNATIONAL ADVISERS HLS FUND - Seeks maximum long-term total return
consistent with prudent investment risk by investing in a portfolio of equity,
debt and money market securities. Securities in which the Fund invests primarily
will be denominated in non-U.S. currencies and will be traded in non-U.S.
markets. Sub-advised by Wellington Management.
HARTFORD INTERNATIONAL OPPORTUNITIES HLS FUND - Seeks growth of capital by
investing primarily in equity securities issued by non-U.S. companies.
Sub-advised by Wellington Management.
HARTFORD MIDCAP HLS FUND - Seeks to achieve long-term capital growth through
capital appreciation by investing primarily in equity securities. Sub-advised by
Wellington Management.
HARTFORD MORTGAGE SECURITIES HLS FUND - Seeks maximum current income consistent
with safety of principal and maintenance of liquidity by investing primarily in
mortgage-related securities, including securities issued by the Government
National Mortgage Association. Sub-advised by HIMCO.
HARTFORD SMALL COMPANY HLS FUND - Seeks growth of capital by investing primarily
in equity securities selected on the basis of potential for capital
appreciation. Sub-advised by Wellington Management.
HARTFORD STOCK HLS FUND - Seeks long-term growth by investing primarily in
equity securities. Sub-advised by Wellington Management.
HARTFORD MONEY MARKET HLS FUND - Seeks maximum current income consistent with
liquidity and preservation of capital. Sub-advised by HIMCO.
* "STANDARD & POOR'S," "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.
MIXED AND SHARED FUNDING - Shares of the Funds may be sold to our other separate
accounts and our insurance company affiliates or other unaffiliated insurance
companies to serve as the underlying investment for both variable annuity
contracts and variable life
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<PAGE>
insurance policies, a practice known as "mixed and shared funding." As a result,
there is a possibility that a material conflict may arise between the interests
of Contract Owners, and of owners of other contracts whose contract values are
allocated to one or more of these other separate accounts investing in any one
of the Funds. In the event of any such material conflicts, we will consider what
action may be appropriate, including removing the Fund from the Separate Account
or replacing the Fund with another underlying fund. There are certain risks
associated with mixed and shared funding, as disclosed in the Funds' prospectus.
VOTING RIGHTS - We are the legal owners of all Fund shares held in the Separate
Account and we have the right to vote at the Fund's shareholder meetings. To
the extent required by federal securities laws or regulations, we will:
- - Notify you of any Fund shareholders' meeting if the shares held for your
Contract may be voted.
- - Send proxy materials and a form of instructions that you can use to tell us
how to vote the Fund shares held for your Contract.
- - Arrange for the handling and tallying of proxies received from Contract
Owners.
- - Vote all Fund shares attributable to your Contract according to
instructions received from you, and
- - Vote all Fund shares for which no voting instructions are received in the
same proportion as shares for which instructions have been received.
If any federal securities laws or regulations, or their present interpretation,
change to permit us to vote Fund shares on our own, we may decide to do so. You
may attend any Shareholder Meeting at which shares held for your Contract may be
voted. After we begin to make payouts to you, the number of votes you have will
decrease.
SUBSTITUTIONS, ADDITIONS, OR DELETIONS OF FUNDS - We reserve the right, subject
to any applicable law, to make certain changes to the Funds offered under Your
Contract. We may, in our sole discretion, establish new Funds. New Funds will
be will be made available to existing Contract Owners as we determine
appropriate. We may also close one or more Funds to additional Payments or
transfers from existing Sub-Accounts.
We reserve the right to eliminate the shares of any of the Funds for any reason
and to substitute shares of another registered investment company for the shares
of any Fund already purchased or to be purchased in the future by the Separate
Account. To the extent required by the Investment Company Act of 1940 (the "1940
Act"), substitutions of shares attributable to your interest in a Fund will not
be made until we have the approval of the Commission and we have notified you of
the change.
In the event of any substitution or change, we may, by appropriate endorsement,
make any changes in the Contract necessary or appropriate to reflect the
substitution or
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<PAGE>
change. If we decide that it is in the best interest of the contracts owners,
the Separate Account may be operated as a management company under the 1940 Act
or any other form permitted by law, may be de-registered under the 1940 Act in
the event such registration is no longer required, or may be combined with one
or more other Separate Accounts.
PERFORMANCE RELATED INFORMATION
The Separate Account may advertise certain performance-related information
concerning the Sub-Accounts. Performance information about a Sub-Account is
based on the Sub-Account's past performance only and is no indication of future
performance.
When a Sub-Account advertises its STANDARDIZED TOTAL RETURN, it will usually be
calculated for one year, five years, and ten years or some other relevant
periods if the Sub-Account has not been in existence for at least ten years.
Total return is measured by comparing the value of an investment in the
Sub-Account at the beginning of the relevant period to the value of the
investment at the end of the period.
The Separate Account may also advertise NON-STANDARD TOTAL RETURNS THAT PRE-DATE
THE INCEPTION DATE OF THE SEPARATE ACCOUNT. These non-standardized total
returns are calculated by assuming that the Sub-Accounts have been in existence
for the same periods as the underlying Funds and by taking deductions for
charges equal to those currently assessed against the Sub-Accounts. These
non-standardized returns must be accompanied by standardized total returns.
If applicable, the Sub-Accounts may advertise YIELD IN ADDITION TO TOTAL RETURN.
The yield will be computed in the following manner: The net investment income
per unit earned during a recent one month period is divided by the unit value on
the last day of the period. This figure includes the recurring charges at the
Separate Account level including the Annual Maintenance Fee.
The Money Market Fund Sub-Account may advertise YIELD AND EFFECTIVE YIELD. The
yield of a Sub-Account is based upon the income earned by the Sub-Account over a
seven-day period and then annualized, i.e. the income earned in the period is
assumed to be earned every seven days over a 52-week period and stated as a
percentage of the investment. Effective yield is calculated similarly but when
annualized, the income earned by the investment is assumed to be reinvested in
Sub-Account units and thus compounded in the course of a 52-week period. Yield
and effective yield include the recurring charges at the Separate Account level
including the Annual Maintenance Fee.
The Separate Account may also disclose YIELD for periods prior to the date the
Separate Account commenced operations. For these periods, performance
information for the Sub-Accounts will be calculated based on the performance of
the underlying
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<PAGE>
Funds and the assumption that the Sub-Accounts were in existence for the same
periods as those of the underlying Funds, with a level of charges equal to those
currently assessed against the Sub-Accounts. These disclosures will be
accompanied by yield for periods as of the inception date of the Separate
Account.
We may provide information on various topics to Contract Owners and prospective
Contract Owners in advertising, sales literature or other materials. These
topics may include the relationship between sectors of the economy and the
economy as a whole and its effect on various securities markets, investment
strategies and techniques (such as systematic investing, Dollar Cost Averaging
and asset allocation), the advantages and disadvantages of investing in
tax-deferred and taxable instruments, customer profiles and hypothetical
purchase scenarios, financial management and tax and retirement planning, and
other investment alternatives, including comparisons between the Contract and
the characteristics of and market for such alternatives.
THE CONTRACT
PURCHASES AND CONTRACT VALUE
WHAT TYPES OF CONTRACTS ARE AVAILABLE?
The Contract is an individual tax-deferred variable annuity contract. It is
designed for retirement planning purposes and may be purchased by any individual
or trust, including:
- - Any trustee or custodian for a retirement plan qualified under Sections
401(a) or 403(a) of the Code;
- - Individual Retirement Annuities adopted according to Section 408 of the
Code;
- - Employee pension plans established for employees by a state, a political
subdivision of a state, or an agency of either a state or a political
subdivision of a state, and
- - Certain eligible deferred compensation plans as defined in Section 457 of
the Code.
The examples above represent Qualified Contracts, as defined by the Code. In
addition, individuals and trusts can also purchase Contracts that are not part
of a tax qualified retirement plan. These are known as Non-Qualified Contracts.
HOW DO I PURCHASE A CONTRACT?
You may purchase a Contract by completing and submitting an application or an
order request along with an initial Premium Payment. For most Contracts, the
minimum Premium Payment is $2,000. For additional Premium Payments, the minimum
Premium Payment is $500. Under certain situations, we may allow smaller Premium
Payments, for example, if you enroll in our InvestEase Program or are part of
certain tax qualified retirement plans. Prior approval is required for Premium
Payments of
25
<PAGE>
$1,000,000 or more.
You and your Annuitant must not be older than age 75 on the date that your
Contract is issued. You must be of legal age in the state where the Contract is
being purchased or a guardian must act on your behalf.
HOW ARE PREMIUM PAYMENTS APPLIED TO MY CONTRACT?
Your initial Premium Payment will be invested within two Valuation Days of our
receipt of a properly completed application or an order request and the Premium
Payment. Subsequent Premium Payments are priced on the same Valuation Day they
are received. If we receive your Premium Payment on a Non-Valuation Day, the
amount will be invested on the next Valuation Day. Unless we receive new
instructions, we will invest the Premium Payment based on your last allocation
instructions. We will send you a confirmation when we invest your Premium
Payment.
If the request or other information accompanying the Premium Payment is
incomplete when received, we will hold the money in a non-interest bearing
account for up to five Valuation Days while we try to obtain complete
information. If we cannot obtain the information within five Valuation Days, we
will return the Premium Payment and explain why the Premium Payment could not be
processed, unless you authorize us to keep the Premium Payment until the
necessary information is received.
CAN I CANCEL MY CONTRACT AFTER I PURCHASE IT?
We want you to be satisfied with the Contract you have purchased. We urge you
to closely examine its provisions. If for any reason you are not satisfied with
your Contract, simply return it with a written request for cancellation that
indicates your tax-withholding instructions, within ten days after you receive
the Contract. In some states, you may be allowed more time to cancel your
Contract. We will not deduct any Contingent Deferred Sales Charges during this
time. We may require additional information, including a signature guarantee,
before we can cancel your Contract.
You bear the investment risk from the time the Contract is issued until we
receive your complete cancellation request.
The amount we pay you upon cancellation depends on the requirements of the state
where you purchased your Contract, the method of purchase, the type of Contract
you purchased and your age.
HOW IS THE VALUE OF MY CONTRACT CALCULATED BEFORE THE ANNUITY COMMENCEMENT DATE?
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The Contract Value is the sum of all Sub-Accounts. There are two things that
affect your Sub-Account value: (1) the number of Accumulation Units and (2) the
Accumulation Unit Value. The Sub-Account value is determined by multiplying the
number of Accumulation Units by the Accumulation Unit Value. Therefore, on any
Valuation Day your Contract Value reflects the investment performance of the
Sub-Accounts and will fluctuate with the performance of the underlying Funds.
When Premium Payments are credited to your Sub-Accounts, they are converted into
Accumulation Units by dividing the amount of your Premium Payments, minus any
Premium Taxes, by the Accumulation Unit Value for that day. The more Premium
Payments you put into your Contract, the more Accumulation Units you will own.
You decrease the number of Accumulation Units you have by requesting Surrenders,
transferring money out of an Account, submitting a Death Benefit claim or by
annuitizing your Contract.
To determine the current Accumulation Unit Value, we take the prior Valuation
Day's Accumulation Unit Value and multiply it by the Net Investment Factor for
the current Valuation Day.
The Net Investment Factor is used to measure the investment performance of a
Sub-Account from one Valuation Day to the next. The Net Investment Factor for
each Sub-Account equals:
- - The net asset value per share of each Fund held in the Sub-Account at the
end of the current Valuation Day divided by
- - The net asset value per share of each Fund held in the Sub-Account at the
end of the prior Valuation Day; minus
- - The daily mortality and expense risk charge adjusted for the number of days
in the period, and any other applicable charge.
We will send you a statement in each calendar quarter, which tells you how many
Accumulation Units you have, their value and your total Contract Value.
CAN I TRANSFER FROM ONE SUB-ACCOUNT TO ANOTHER?
TRANSFERS BETWEEN SUB-ACCOUNTS - You may transfer from one Sub-Account to
another before and after the Annuity Commencement Date at no extra charge.
Your transfer request will be processed on the day that it is received as
long as it is received on a Valuation Day before the close of the New York
Stock Exchange. Otherwise, your request will be processed on the following
Valuation Day. We will send you a confirmation when we process your
transfer. You are responsible for verifying transfer confirmations and
promptly advising us of any errors within 30 days of receiving the
confirmation.
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SUB-ACCOUNT TRANSFER RESTRICTIONS - Whether or not any transfer restrictions
apply to your Contract depends on whether you signed an amendment to your
Contract called an Amendatory Rider. The Rider allows you to invest in certain
underlying Funds. This Rider also amended your Contract to add some
restrictions on your ability to do Sub-Account transfers. If you signed the
Amendatory Rider, we reserve the right to limit the number of transfers to 12
per Contract Year, with no transfers occurring on consecutive Valuation Days. We
also have the right to restrict transfers if we believe that the transfers could
have an adverse effect on other Contract Owners. In all states except New York,
Florida, Maryland and Oregon, we may:
- - Require a minimum time period between each transfer,
- - Limit the dollar amount that may be transferred on any one Valuation Day,
and
- - Not accept transfer requests from an agent acting under a power of attorney
for more than one Contract Owner.
We may also have a restriction in place that involves individuals who act as
a power of attorney for multiple Contract Owners. If the total value of the
Contract Owner's Accounts total more than $2 million, we will not accept
transfer instructions from the power of attorney unless the power of attorney
has entered into a Third Party Transfer Services Agreement with us.
Some states may have different restrictions.
CHARGES AND FEES
There are 4 charges and fees associated with the Contract:
1. THE CONTINGENT DEFERRED SALES CHARGE
The Contingent Deferred Sales Charge covers some of the expenses relating to the
sale and distribution of the Contract, including commissions paid to registered
representatives and the cost of preparing sales literature and other promotional
activities.
We assess a Contingent Deferred Sales Charge when you request a full or partial
Surrender. The percentage of the Contingent Deferred Sales Charge is based on
how long your Premium Payments have been in the Contract. The Contingent
Deferred Sales Charge will not exceed the total amount of the Premium Payments
made. Each Premium Payment has its own Contingent Deferred Sales Charge
schedule. Premium Payments are Surrendered in the order in which they were
received. The longer you leave your Premium Payments in the Contract, the lower
the Contingent Deferred Sales Charge will be when you Surrender.
The Contingent Deferred Sales Charge is a percentage of the amount Surrendered
and
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is equal to:
<TABLE>
<CAPTION>
Number of Contingent
years from Deferred Sales
Premium Charge
Payment
<S> <C>
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 or more 0%
</TABLE>
THE FOLLOWING SURRENDERS ARE NOT SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE:
- - ANNUAL WITHDRAWAL AMOUNT: During the first six years from each Premium
Payment, you may, each Contract Year after the first Contract Year, take
partial Surrenders up to 10% of the total Premium Payments. If you do not
take 10% one year, you may not take more than 10% the next year.
- - SURRENDERS MADE FROM PREMIUM PAYMENTS INVESTED FOR MORE THAN SEVEN YEARS.
After the sixth Contract Year, you may take the total of: (a) all of your
earnings, and (b) all Premium Payments held in your Contract for more than
six years, and (c) 10% of Premium Payments made during the last six years.
UNDER THE FOLLOWING SITUATIONS, THE CONTINGENT DEFERRED SALES CHARGE IS WAIVED:
- - For Required Minimum Distributions. This allows Annuitants who are age
70 1/2 or older, with a Contract held under an Individual Retirement
Account, to Surrender an amount equal to the Required Minimum Distribution
for the Contract without a Contingent Deferred Sales Charge. All requests
for Required Minimum Distributions must be in writing.
- - On or after the Annuitant's 75th birthday.
THE FOLLOWING SITUATIONS ARE NOT SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE:
- - Upon death of the Annuitant or Contract Owner.
- - Upon Annuitization. We will charge a Contingent Deferred Sales Charge if
the Contract is fully Surrendered during the Contingent Deferred Sales
Charge period
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<PAGE>
under an Annuity Payout Option which allows Surrenders.
- - Upon cancellation during the Right to Cancel Period
2. MORTALITY AND EXPENSE RISK CHARGE
For assuming mortality and expense risks under the Contract, we deduct a daily
charge at the rate of 1.00% per year of Sub-Account Value (estimated at .85% for
mortality and .15% for expense). The mortality and expense risk charge is broken
into charges for mortality risks and for an expense risk:
- - MORTALITY RISK - There are two types of mortality risks that we assume,
those made while your Premium Payments are accumulating and those made once
Annuity Payouts have begun
During the period your Premium Payments are accumulating, we are required
to cover any difference between the Death Benefit paid and the Surrender
Value. These differences may occur during periods of declining value or in
periods where the Contingent Deferred Sales Charges would have been
applicable. The risk that we bear during this period is that actual
mortality rates, in aggregate, may exceed expected mortality rates.
Once Annuity Payouts have begun, we may be required to make Annuity Payouts
as long as the Annuitant is living, regardless of how long the Annuitant
lives. We would be required to make these payments if the Payout Option
chosen is the Life Annuity, Life Annuity With Payments for a Period Certain
or Joint and Last Survivor Life Annuity Payout Option. The risk that we
bear during this period is that the actual mortality rates, in aggregate,
may be lower than the expected mortality rates.
- - EXPENSE RISK - We also bear an expense risk that the Contingent Deferred
Sales Charges and the Annual Maintenance Fee collected before the Annuity
Commencement Date may not be enough to cover the actual cost of selling,
distributing and administering the Contract.
Although variable Annuity Payouts will fluctuate with the performance of the
underlying Fund selected, your Annuity Payouts will NOT be affected by (a) the
actual mortality experience of our Annuitants, or (b) our actual expenses if
they are greater than the deductions stated in the Contract. Because we cannot
be certain how long our Annuitants will live, we charge this percentage fee
based on the mortality tables currently in use. The mortality and expense risk
charge enables us to keep our commitments and to pay you as planned.
3. ANNUAL MAINTENANCE FEE
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The Annual Maintenance Fee is a flat fee that is deducted from your Contract
Value to reimburse us for expenses relating to the maintenance of the Contract
and the Sub-Accounts. The annual $25 charge is deducted on each Contract
Anniversary, or upon full Surrender if the Surrender occurs before the Contract
Anniversary, proportionately from each Sub-Account in which you are invested.
4. PREMIUM TAXES
We deduct Premium Taxes, if required, by a state or other government agency.
Some states collect the taxes when Premium Payments are made; others collect at
Annuitization. Since we pay Premium Taxes when they are required by applicable
law, we may deduct them from your Contract when we pay the taxes, upon
Surrender, or on the Annuity Commencement Date. The Premium Tax rate varies by
state or municipality. Currently, the maximum rate charged by any state is 3.5%
and 4% in Puerto Rico.
WE MAY OFFER, IN OUR DISCRETION, REDUCED FEES AND CHARGES INCLUDING, BUT NOT
LIMITED TO CONTINGENT DEFERRED SALES CHARGES, THE MORTALITY AND EXPENSE RISK
CHARGE, AND THE ANNUAL MAINTENANCE FEE, FOR CERTAIN CONTRACTS (INCLUDING
EMPLOYER SPONSORED SAVINGS PLANS) WHICH RESULT IN COST AND EXPENSE SAVINGS.
REDUCTIONS IN THESE FEES AND CHARGES WILL NOT BE UNFAIRLY DISCRIMINATORY AGAINST
ANY CONTRACT OWNER.
DEATH BENEFIT
WHAT IS THE DEATH BENEFIT AND HOW IS IT CALCULATED?
The Death Benefit is the amount we will pay upon the death of the Contract Owner
or the Annuitant. The Death Benefit is calculated when we receive a certified
death certificate or other legal document acceptable to us.
The calculated Death Benefit will remain invested in the same Accounts,
according to the Contract Owner's last instructions until we receive complete
written settlement instructions from the Beneficiary. Therefore, the Death
Benefit amount will fluctuate with the performance of the underlying Funds.
When there is more than one Beneficiary, we will calculate the Accumulation
Units for each Sub-account for each Beneficiary's portion of the proceeds.
If death occurs before the Annuity Commencement Date and the descendant's 90th
birthday, the Death Benefit is the greatest of:
- - The Contract Value or
- - 100% of all Premium Payments paid into the Contract minus any partial
Surrenders.
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If death occurs after the decedent's 90th birthday, the Death Benefit is the
Contract Value on the date the death certificate or other legal document
acceptable to us is received.
WHO WILL RECEIVE THE DEATH BENEFIT?
We will distribute the Death Benefit to the Beneficiary upon the death of the
Contract Owner or Annuitant.
HOW IS THE DEATH BENEFIT PAID?
The Death Benefit may be taken in one lump sum or under any of the Annuity
Payout Options then being offered by us. On the date we receive complete
instructions from the Beneficiary, we will compute Death Benefit amount to be
paid out or applied to a selected Annuity Payout Option. When there is more than
one Beneficiary, we will calculate the Death Benefit amount for each
Beneficiary's portion of the proceeds and then pay it out or apply it to a
selected Annuity Payout Option according to each Beneficiary's instructions. If
we receive the complete instructions on a Non-Valuation Day, computations will
take place on the next Valuation Day.
REQUIRED DISTRIBUTIONS: If the Contract Owner dies before the Annuity
Commencement Date, the Death Benefit must be distributed within five years after
death. The Beneficiary can choose any Annuity Payout Option that results in
complete Annuity Payout within five years.
If the Contract Owner dies on or after the Annuity Commencement Date under an
Annuity Payout Option with a Death Benefit, any remaining value must be
distributed at least as rapidly as under the payment method being used as of the
Contract Owner's death.
If the Contract Owner is not an individual (e.g. a trust), then the original
Annuitant will be treated as the Contract Owner in the situations described
above and any change in the original Annuitant will be treated as the death of
the Contract Owner.
WHAT SHOULD THE BENEFICIARY CONSIDER?
Alternatives to the Required Distributions: The selection of an Annuity Payout
Option and the timing of the selection will have an impact on the tax treatment
of the Death Benefit. To receive favorable tax treatment, the Annuity Payout
Option selected: (a) cannot extend beyond the Beneficiary's life or life
expectancy, and (b) must begin within one year of the date of death.
If these conditions are NOT met, the Death Benefit will be treated as a lump sum
payment for tax purposes. This sum will be taxable in the year in which it is
considered received.
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SPOUSAL CONTRACT CONTINUATION - If the Beneficiary is the Contract Owner's
spouse, the Beneficiary may elect to continue the Contract as the contract
owner, receive the death benefit in one lump sum payment or elect an Annuity
Payout Option. The spousal continuation is available once for each Contract.
SURRENDERS
WHAT KINDS OF SURRENDERS ARE AVAILABLE?
FULL SURRENDERS BEFORE THE ANNUITY COMMENCEMENT DATE: When you Surrender your
Contract before the Annuity Commencement Date, the Surrender Value of the
Contract will be made in a lump sum payment. The Surrender Value is the
Contract Value minus any applicable Premium Taxes, Contingent Deferred Sales
Charges and the Annual Maintenance Fee. The Surrender Value may be more or less
than the amount of the Premium Payments made to a Contract.
PARTIAL SURRENDERS BEFORE THE ANNUITY COMMENCEMENT DATE: You may request a
partial Surrender of Contract Values at any time before the Annuity Commencement
Date. There are two restrictions:
- - The partial Surrender amount must be at least equal to $100, our current
minimum for partial Surrenders, and
- - The Contract must have a minimum Contract Value of $500 after the
Surrender. The minimum Contract Value in New York must be $1000 after the
Surrender. We reserve the right to close your Contract and pay the full
Surrender Value if the Contract Value is under $500 after the Surrender.
If your Contract was issued in Texas, a remaining value of $500 is not
required to continue the Contract if Premium Payments were made in the
last two Contract Years.
FULL SURRENDERS AFTER THE ANNUITY COMMENCEMENT DATE: You may Surrender your
Contract on or after the Annuity Commencement Date only if you selected the
Payment For a Designated Period Annuity Payout Option. Under this option, we
pay you the Commuted Value of your Contract minus any applicable Contingent
Deferred Sales Charges. The Commuted Value is determined on the day we receive
your written request for Surrender.
PARTIAL SURRENDERS ARE ALLOWED AFTER THE ANNUITY COMMENCEMENT DATE IF YOU
SELECTED THE PAYMENTS FOR A DESIGNATED PERIOD ANNUITY PAYOUT OPTION, BUT CHECK
WITH YOUR TAX ADVISER FIRST, BECAUSE THERE MAY BE ADVERSE TAX CONSEQUENCES.
HOW DO I REQUEST A SURRENDER?
Requests for full Surrenders must be in writing. Requests for partial
Surrenders can be
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made in writing or by telephone. We will send your money within seven days of
receiving completed instructions. However, we may postpone payment of
Surrenders whenever: (a) the New York Stock Exchange is closed, except for
holidays or weekends, or trading on the New York Stock Exchange is restricted by
the Securities and Exchange Commission, (b) the SEC permits postponement and so
orders, or (c) the SEC determines that an emergency exists to restrict
valuation.
WRITTEN REQUESTS - To request a full or partial Surrender, complete a Surrender
Form or send us a letter, signed by you, stating:
- the dollar amount that you want to receive, either before or after we
withhold taxes and deduct for any applicable charges,
- your tax withholding amount or percentage, if any, and
- your mailing address.
For a partial Surrender, specify the Accounts that you want your Surrender to
come from, otherwise, the Surrender will be taken in proportion to the value in
each Account.
WHAT SHOULD BE CONSIDERED ABOUT TAXES?
There are certain tax consequences associated with Surrenders:
PRIOR TO AGE 59 1/2: If you make a Surrender prior to age 59 1/2, there may be
adverse tax consequences including a 10% federal income tax penalty on the
taxable portion of the Surrender payment. Surrendering before age 59 1/2 may
also affect the continuing tax-qualified status of some Contracts.
WE DO NOT MONITOR SURRENDER REQUESTS. TO DETERMINE WHETHER A SURRENDER IS
PERMISSIBLE, WITH OR WITHOUT FEDERAL INCOME TAX PENALTY, PLEASE CONSULT YOUR
PERSONAL TAX ADVISER.
MORE THAN ONE CONTRACT ISSUED IN THE SAME CALENDAR YEAR:
If you own more than one contract issued by us or our affiliates in the same
calendar year, then these contracts may be treated as one contract for the
purpose of determining the taxation of distributions prior to the Annuity
Commencement Date. Please consult your tax adviser for additional information.
WE ENCOURAGE YOU TO CONSULT WITH YOUR TAX ADVISER BEFORE MAKING ANY SURRENDERS.
PLEASE SEE THE "FEDERAL TAX CONSIDERATIONS" SECTION FOR MORE INFORMATION.
ANNUITY PAYOUTS
THIS SECTION DESCRIBES WHAT HAPPENS WHEN WE BEGIN TO MAKE REGULAR ANNUITY
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PAYOUTS FROM YOUR CONTRACT. YOU, AS THE CONTRACT OWNER, SHOULD ANSWER FIVE
QUESTIONS:
1. When do you want Annuity Payouts to begin?
2. What Annuity Payout Option do you want to use?
3. How often do you want to receive Annuity Payouts?
4. What is the Assumed Investment Return?
5. Do you want Annuity Payouts to be fixed or variable or a combination?
Please check with your financial advisor to select the Annuity Payout Option
that best meets your income needs.
1. WHEN DO YOU WANT ANNUITY PAYOUTS TO BEGIN?
You select an Annuity Commencement Date when you purchase your Contract or at
any time before you begin receiving Annuity Payouts. You may change the Annuity
Commencement Date by notifying us within thirty days prior to the date. The
Annuity Commencement Date cannot be deferred beyond the 15th day of the month of
the Annuitant's 90th birthday.
The Annuity Calculation Date is when the amount of your Annuity Payout is
determined. This occurs within five Valuation Days before your selected Annuity
Commencement Date.
All Annuity Payouts, regardless of frequency, will occur on the same day of the
month as the Annuity Commencement Date. After the initial payout, if an Annuity
Payout date falls on a Non-Valuation Day, the Annuity Payout is computed on the
prior Valuation Day. If the Annuity Payout date does not occur in a given month
due to a leap year or months with only 28 days (i.e. the 31st), the Annuity
Payout will be computed on the last Valuation Day of the month.
2. WHICH ANNUITY PAYOUT OPTION DO YOU WANT TO USE?
Your Contract contains the Annuity Payout Options described below. The Annuity
Proceeds Settlement Option, is an option that can be elected by the Beneficiary
after the death of the Contract Owner and is described in the "Death Benefit"
section. We may at times offer other Annuity Payout Options.
OPTION 1: LIFE ANNUITY - We make Annuity Payouts as long as the Annuitant is
living. When the Annuitant dies, we stop making Annuity Payouts. A Payee would
receive only one Annuity Payout if the Annuitant dies after the first payout,
two Annuity Payouts if the Annuitant dies after the second payout, and so forth.
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OPTION 2 - LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS CERTAIN - We make
monthly Annuity Payouts during the lifetime of the Annuitant but Annuity Payouts
are at least guaranteed for a minimum of 120, 180 or 240 months, as you elect.
If, at the death of the Annuitant, Annuity Payouts have been made for less than
the minimum elected number of months, then the Commuted Value as of the date of
the Annuitant's death will be paid in one sum to the Beneficiary.
OPTION 3 - UNIT REFUND LIFE ANNUITY - We make monthly Annuity Payouts during the
lifetime of the Annuitant. Upon the death of the Annuitant, the Beneficiary may
receive an excess payment. We determine if an excess payment is due by dividing
(a) by (b), where (a) is equal to the amount available for this Annuity Payout
Option on the Annuity Commencement Date divided by the Annuity Unit Value on the
Annuity Commencement Date and (b) is equal to the number of Annuity Units
represented by each monthly Annuity Payout already made multiplied by the number
of Annuity Payouts made.
If that amount is a positive number, we then multiply the excess payment by the
Annuity Unit Value as of the date we receive a certified death certificate or
other legal document acceptable to us. That amount is then paid to the
Beneficiary.
OPTION 4- JOINT AND LAST SURVIVOR LIFE ANNUITY - We will make Annuity Payouts as
long as the Annuitant and Joint Annuitant are living. When one Annuitant dies,
we continue to make Annuity Payouts to the other Annuitant until that second
Annuitant dies. When choosing this option, you must decide what will happen to
the Annuity Payouts after the first Annuitant dies. You must select Annuity
Payouts that:
- Remain the same at 100%, or
- Decrease to 66.67%, or
- Decrease to 50%.
For variable Annuity Payouts, these percentages represent Annuity Units; for
fixed Annuity Payouts, they represent actual dollar amounts. The percentage will
also impact the Annuity Payout amount we pay while both Annuitants are living.
If you pick a lower percentage, your original Annuity Payouts will be higher
while both Annuitants are alive.
OPTION 5 - PAYMENTS FOR A DESIGNATED PERIOD - We will make Annuity Payouts for
the number of years that you select. You can select between 5 years and 30
years.
IMPORTANT INFORMATION:
- YOU CANNOT SURRENDER YOUR CONTRACT ONCE ANNUITY PAYOUTS BEGIN, UNLESS
YOU HAVE SELECTED THE PAYMENTS FOR A DESIGNATED PERIOD ANNUITY PAYOUT
OPTION. A CONTINGENT DEFERRED SALES CHARGE MAY BE DEDUCTED.
- For Non-Qualified Contracts, If you do not elect an Annuity Payout
Option,
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fixed Annuity Payouts will automatically begin on the Annuity
Commencement Date under the Life Annuity with 120 Monthly Payments
Certain Annuity Payout Option.
- For Qualified Contracts and Contracts issued in Texas, if you do not
elect an Annuity Payout Option, fixed Annuity Payouts will begin
automatically on the Annuity Commencement Date, under the Annuity
Payout Option 1 - Life Annuity.
3. HOW OFTEN DO YOU WANT THE PAYEE TO RECEIVE ANNUITY PAYOUTS?
In addition to selecting an Annuity Commencement Date and an Annuity Payout
Option, you must also decide how often you want the Payee to receive Annuity
Payouts. You may choose to receive Annuity Payouts:
- monthly,
- quarterly,
- semi-annually, or
- annually.
Once you select a frequency, it cannot be changed. If you do not make a
selection, the Payee will receive monthly Annuity Payouts. You must select a
frequency that results in an Annuity Payout of at least $20. If the amount
falls below $20, we have the right to change the frequency to bring the
Annuity Payout up to at least $20.
4. WHAT IS THE ASSUMED INVESTMENT RETURN?
The Assumed Investment Return is the investment return used to calculate
variable Annuity Payouts. The Assumed Investment Return for your Annuity is 4%,
or in the case of some Contracts, 5%. The first Annuity Payout will be based
upon your Assumed Investment Return. The remaining Annuity Payouts will
fluctuate based on the actual investment results of the Sub-Accounts.
5. DO YOU WANT ANNUITY PAYOUTS TO BE FIXED-DOLLAR AMOUNT, VARIABLE-DOLLAR
AMOUNT OR A COMBINATION?
You may choose an Annuity Payout Option with fixed-dollar amounts, variable-
dollar amounts or a combination depending on your income needs.
FIXED-DOLLAR AMOUNT ANNUITY PAYOUTS - Once a fixed-dollar amount Annuity Payout
begins, you cannot change your selection to receive variable-dollar amount
Annuity Payout. You will receive equal fixed-dollar amount Annuity Payouts
throughout the Annuity Payout period. Fixed-dollar amount Annuity Payout
amounts are determined by multiplying the Contract Value, minus any applicable
Premium Taxes, by an Annuity rate. The annuity rate is set by us and is not less
than the rate specified in the fixed-
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dollar amount Annuity Payout Option tables in your Contract.
VARIABLE-DOLLAR AMOUNT ANNUITY PAYOUTS - A variable-dollar amount Annuity Payout
based on the investment performance of the Sub-Accounts. The variable-dollar
amount Annuity Payouts may fluctuate with the performance of the underlying
Funds. To begin making variable-dollar amount Annuity Payouts, we convert the
first Annuity Payout amount to a set number of Annuity Units and then price
those units to determine the Annuity Payout amount. The number of Annuity Units
that determines the Annuity Payout amount remains fixed unless you transfer
units between Sub-Accounts.
The dollar amount of the first variable Annuity Payout depends on:
- the Annuity Payout Option chosen,
- the Annuitant's attained age and gender (if applicable),and,
- the applicable annuity purchase rates based on the 1983a Individual
Annuity Mortality table
- the Assumed Investment Return
The total amount of the first variable-dollar amount Annuity Payout is
determined by dividing the Contract Value minus any applicable Premium Taxes,
by $1,000 and multiplying the result by the payment factor defined in the
Contract for the selected Annuity Payout Option.
The dollar amount of each subsequent variable-dollar amount Annuity Payout is
equal to the total of:
Annuity Units for each Sub-Account multiplied by Annuity Unit Value for each
Sub-Account.
The Annuity Unit Value of each Sub-Account for any Valuation Period is equal to
the Accumulation Unit Value Net Investment Factor for the current Valuation
Period multiplied by the Annuity Unit factor, multiplied by the Annuity Unit
Value for the preceding Valuation Period.
COMBINATION ANNUITY PAYOUTS - You may choose to receive a combination of
fixed-dollar amount and variable-dollar amount annuity payouts as long as they
total 100% of your Annuity Payout. For example, you may choose to receive 40%
fixed-dollar amount and 60% variable-dollar amount to meet your income needs.
OTHER PROGRAMS AVAILABLE
INVESTEASE PROGRAM - InvestEase is an electronic transfer program that allows
you to have money automatically withdrawn from your checking or savings account,
and invested in your Contract. It is available for Premium Payments made after
your initial
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Premium Payment. The minimum amount for each transfer is $50. You can elect to
have transfers occur either monthly or quarterly, and they can be made into any
Account available in your Contract.
DOLLAR COST AVERAGING PROGRAM - You may choose to make systematic transfers from
one Sub-Account to other Sub-Accounts. You may only have one Dollar Cost
Averaging Program in place at any one time.
AUTOMATIC INCOME PROGRAM - The Automatic Income Program allows you to Surrender
up to 10% of your total Premium Payments each Contract Year. We can Surrender
from the Accounts you select systematically on a monthly, quarterly, semiannual,
or annual basis. The Automatic Income Program may change based on your
instructions after your sixth Contract Year.
ASSET ALLOCATION PROGRAM - Asset Allocation is a program that allows you to
choose an allocation for your Sub-Accounts to help you reach your investment
goals. Some Contracts offer model allocations with pre-selected Sub-Accounts
and percentages that have been established for each type of investor - ranging
from conservative to aggressive. Over time, Sub-Account performance may cause
your Contract's allocation percentages to change, but under the Asset Allocation
Program, your Sub-Account allocations are rebalanced to the percentages in the
current model you have chosen. You can transfer freely between allocation
models up to twelve times per year. You can also allocate a portion of your
investment to Sub-Accounts that may not be part of the model. You can only
participate in one asset allocation model at a time.
ASSET REBALANCING - Asset Rebalancing is another type of asset allocation
program in which you customize your Sub-Accounts to meet your investment needs.
You select the Sub-Accounts and the percentages you want allocated to each
Sub-Account. Based on the frequency you select, your model will automatically
rebalance to the original percentages chosen. You can transfer freely between
models up to twelve times per year. You can also allocate a portion of your
investment to Sub-Accounts that are not part of the model. You can only
participate in one asset rebalancing model at a time.
OTHER INFORMATION
ASSIGNMENT - Ownership of this Contract is generally assignable. However, if the
Contract is issued to a tax qualified retirement plan, it is possible that the
ownership of the Contract may not be transferred or assigned. An assignment of
a Non-Qualified Contract may subject the Contract Values or Surrender Value to
income taxes and certain penalty taxes.
CONTRACT MODIFICATION - The Annuitant may not be changed. We may modify the
Contract, but no modification will effect the amount or term of any Contract
unless a
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modification is required to conform the Contract to applicable Federal or State
law. No modification will effect the method by which Contract Values are
determined.
HOW CONTRACTS ARE SOLD: Hartford Securities Distribution Company, Inc. ("HSD")
serves as Principal Underwriter for the securities issued with respect to the
Separate Account. HSD is registered with the Securities and Exchange Commission
under the Securities Exchange Act of 1934 as a Broker-Dealer and is a member of
the National Association of Securities Dealers, Inc. HSD is an affiliate of
ours. Our parent company indirectly owns 100% of HSD. The principal business
address of HSD is the same as ours. The securities will be sold by individuals
who represent us as insurance agents and who are registered representatives of
Broker-Dealers that have entered into distribution agreements with HSD.
Commissions will be paid by Hartford and will not be more than 6% of Premium
Payments. From time to time, Hartford may pay or permit other promotional
incentives, in cash or credit or other compensation.
Broker-dealers or financial institutions are compensated according to a schedule
set forth by HSD and any applicable rules or regulations for variable insurance
compensation. Compensation is generally based on Premium Payments made by
policyholders or Contract Owners. This compensation is usually paid from the
sales charges described in this Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not effect the amounts paid by the policyholders or Contract
Owners to purchase, hold or Surrender variable insurance products.
YEAR 2000
IN GENERAL The Year 2000 issue relates to the ability or inability of computer
hardware, software and other information technology (IT) systems, as well as
non-IT systems, such as equipment and machinery with imbedded chips and
microprocessors, to properly process information and data containing or related
to dates beginning with the year 2000 and beyond. The Year 2000 issue exists
because, historically, many IT and non-IT systems that are in use today were
developed years ago when a year was identified using a two-digit date field
rather than a four-digit date field. As information and data containing or
related to the century date are introduced to date sensitive
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systems, these systems may recognize the year 2000 as "1900", or not at all,
which may result in systems processing information incorrectly. This, in turn,
may significantly and adversely affect the integrity and reliability of
information databases of IT systems, may cause the malfunctioning of certain
non-IT systems, and may result in a wide variety of adverse consequences to a
company. In addition, Year 2000 problems that occur with third parties with
which a company does business, such as suppliers, computer vendors, distributors
and others, may also adversely affect any given company.
The integrity and reliability of Hartford's IT systems, as well as the
reliability of its non-IT systems, are integral aspects of Hartford's business.
Hartford issues insurance policies, annuities, mutual funds and other financial
products to individual and business customers, nearly all of which contain date
sensitive data, such as policy expiration dates, birth dates and premium payment
dates. In addition, various IT systems support communications and other systems
that integrate Hartford's various business segments and field offices. Hartford
also has business relationships with numerous third parties that affect
virtually all aspects of Hartford's business, including, without limitation,
suppliers, computer hardware and software vendors, insurance agents and brokers,
securities broker-dealers and other distributors of financial products, many of
which provide date sensitive data to Hartford, and whose operations are
important to Hartford's business.
INTERNAL YEAR 2000 EFFORTS AND TIMETABLE Beginning in 1990, Hartford began
working on making its IT systems Year 2000 ready, either through installing new
programs or replacing systems. Since January 1998, Hartford's Year 2000 efforts
have focused on the remaining Year 2000 issues related to IT and non-IT systems
in all of Hartford's business segments. These Year 2000 efforts include the
following five main initiatives: (1) identifying and assessing Year 2000 issues;
(2) taking actions to remediate IT and non-IT systems so that they are Year 2000
ready; (3) testing IT and non-IT systems for Year 2000 readiness; (4) deploying
such remediated and tested systems back into their respective production
environments; and (5) conducting internal and external integrated testing of
such systems. As of December 31, 1998, Hartford substantially completed
initiatives (1) through (4) of its internal Year 2000 efforts. Hartford has
begun initiative (5) and management currently anticipates that such activity
will continue into the fourth quarter of 1999.
THIRD PARTY YEAR 2000 EFFORTS AND TIMETABLE Hartford's Year 2000 efforts
include assessing the potential impact on Hartford of third parties' Year 2000
readiness. Hartford's third party Year 2000 efforts include the following three
main initiatives: (1) identifying third parties which have significant business
relationships with Hartford, including, without limitation, insurance agents,
brokers, third party administrators, banks and other distributors and servicers
of financial products, and inquiring of such third parties regarding their Year
2000 readiness; (2) evaluating such third parties' responses
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to Hartford's inquiries; and (3) based on the evaluation of third party
responses (or a third party's failure to respond) and the significance of the
business relationship, conducting additional activities with respect to third
parties as determined to be necessary in each case. These activities may include
conducting additional inquiries, more in-depth evaluations of Year 2000
readiness and plans, and integrated IT systems testing. Hartford has completed
the first third party initiative and, as of early 1999, had substantially
completed evaluating third party responses received. Hartford has begun
conducting the additional activities described in initiative (3) and management
currently anticipates that it will continue to do so through the end of 1999.
However, notwithstanding these third party Year 2000 efforts, Hartford does not
have control over these third parties and, as a result, Hartford cannot
currently determine to what extent future operating results may be adversely
affected by the failure of these third parties to adequately address their Year
2000 issues.
YEAR 2000 COSTS The costs of Hartford's Year 2000 program that were incurred
through the year ended December 31, 1997 were not material to Hartford's
financial condition or results of operations. The after-tax costs of Hartford's
Year 2000 efforts for the year ended December 31, 1998 were approximately $3
million. Management currently estimates that after-tax costs related to the Year
2000 program to be incurred in 1999 will be less than $10 million. These costs
are being expensed as incurred.
RISKS AND CONTINGENCY PLANS If significant Year 2000 problems arise, including
problems arising with third parties, failures of IT and non-IT systems could
occur, which in turn could result in substantial interruptions in Hartford's
business. In addition, Hartford's investing activities are an important aspect
of its business and Hartford may be exposed to the risk that issuers of
investments held by it will be adversely impacted by Year 2000 issues. Given
the uncertain nature of Year 2000 problems that may arise, especially those
related to the readiness of third parties discussed above, management cannot
determine at this time whether the consequences of Year 2000 related problems
that could arise will have a material impact on Hartford's financial condition
or results of operations.
Hartford is in the process of developing certain contingency plans so that if,
despite its Year 2000 efforts, Year 2000 problems ultimately arise, the impact
of such problems may be avoided or minimized. These contingency plans are being
developed based on, among other things, known or reasonably anticipated
circumstances and potential vulnerabilities. The contingency planning also
includes assessing the dependency of Hartford's business on third parties and
their Year 2000 readiness. Hartford currently anticipates that internal and
external contingency plans will be substantially complete by the end of the
second quarter of 1999. However, in many contexts, Year 2000 issues are dynamic,
and ongoing assessments of business functions, vulnerabilities and risks must be
made. As such, new contingency plans may be needed in the future and/or
existing plans may need to be modified as circumstances warrant.
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LEGAL MATTERS AND EXPERTS
There are no material legal proceedings pending to which the Separate Account is
a party.
Counsel with respect to federal laws and regulations applicable to the issue and
sale of the Contracts and with respect to Connecticut law is Lynda Godkin,
Senior Vice President, General Counsel and Corporate Secretary, Hartford Life
Insurance Company, P.O. Box 2999, Hartford, Connecticut 06104-2999.
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 upon 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.
MORE INFORMATION
You may call your Representative if you have any questions or write or call us
at the address below:
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)
FEDERAL TAX CONSIDERATIONS
WHAT ARE SOME OF THE FEDERAL TAX CONSEQUENCES WHICH AFFECT THESE CONTRACTS?
A. GENERAL
Since federal tax law is complex, the tax consequences of purchasing this
contract will vary depending on your situation. You may need tax or legal advice
to help you determine whether purchasing this contract is right for you.
Our general discussion of the tax treatment of this contract is based on our
understanding of federal income tax laws as they are currently interpreted. A
detailed
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description of all federal income tax consequences regarding the purchase of
this contract cannot be made in the prospectus. We also do not discuss state,
municipal or other tax laws that may apply to this contract. For detailed
information, you should consult with a qualified tax adviser familiar with your
situation.
B. TAXATION OF HARTFORD AND THE SEPARATE ACCOUNT
The Separate Account is taxed as part of Hartford which is taxed as a life
insurance company in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, the Separate Account will not be taxed as a
"regulated investment company" under subchapter M of Chapter 1 of the Code.
Investment income and any realized capital gains on the assets of the Separate
Account are reinvested and are taken into account in determining the value of
the Accumulation and Annuity Units (See "Value of Accumulation Units"). 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 RETIREMENT PLANS
Section 72 of the Code governs the taxation of annuities in general.
1. NON-NATURAL PERSONS, CORPORATIONS, ETC. Code Section 72 contains provisions
for contract owners which are not natural persons. Non-natural persons
include corporations, trusts, limited liability companies, partnerships and
other types of legal entities. The tax rules for contracts owned by
non-natural persons are different from the rules for contracts owned by
individuals. For example, the annual net increase in the value of the
contract is currently includible 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 are additional exceptions from current inclusion
for:
- certain annuities held by structured settlement companies,
- certain annuities held by an employer with respect to a terminated
qualified retirement plan and
- certain immediate annuities.
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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 a non-natural person, the primary annuitant is
treated as the contract owner in applying mandatory distribution rules.
These rules require that certain distributions be made upon the death of
the contract owner. A change in the primary annuitant is also 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.
a. DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
i. Total premium payments less amounts received which were
not includable in gross income equal the "investment in
the contract" under Section 72 of the Code.
ii. To the extent that the value of the Contract (ignoring any
surrender charges except on a full surrender) exceeds the
"investment in the contract," such excess constitutes the
"income on the contract."
iii. Any amount received or deemed received prior to the
Annuity Commencement Date (e.g., upon a partial surrender)
is deemed to come first from any such "income on the
contract" and then from "investment in the contract," and
for these purposes such "income on the contract" shall be
computed by reference to any aggregation rule in
subparagraph 2.c. below. As a result, any such amount
received or deemed received (1) shall be includable in
gross income to the extent that such amount does not
exceed any such "income on the contract," and (2) shall
not be includable in gross income to the extent that such
amount does exceed any such "income on the contract." If
at the time that any amount is received or deemed received
there is no "income on the contract" (e.g., because the
gross value of the Contract does not exceed the
"investment in the contract" and no aggregation rule
applies), then such amount
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received or deemed received will not be includable in
gross income, and will simply reduce the "investment in
the contract."
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 received for
purposes of this subparagraph a. and the next subparagraph
b.
v. In general, the transfer of the Contract, without full and
adequate consideration, will be treated as an amount
received for purposes of this subparagraph a. and the next
subparagraph b. 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 periodically after the Annuity Commencement Date are
includable in gross income to the extent the payments exceed the
amount determined by the application of the ratio of the
"investment in the contract" to the total amount of the payments
to be made after the Annuity Commencement Date (the "exclusion
ratio").
i. When the total of amounts excluded from income by
application of the exclusion ratio is equal to the
investment in the contract as of the Annuity Commencement
Date, any additional payments (including surrenders) will
be entirely includable in gross income.
ii. If the annuity payments cease by reason of the death of
the Annuitant and, as of the date of death, the amount of
annuity payments excluded from gross income by the
exclusion ratio does not exceed the investment in the
contract as of the Annuity Commencement Date, then the
remaining portion of unrecovered investment shall be
allowed as a deduction for the last taxable year of the
Annuitant.
iii. Generally, nonperiodic amounts received or deemed received
after the Annuity Commencement Date are not entitled to
any exclusion ratio and shall be fully includable in gross
income. However, upon a full surrender after such date,
only the excess of the amount received (after any
surrender charge) over the remaining "investment in the
contract" shall be includable in gross income (except to
the extent that the aggregation rule referred to in the
next subparagraph c. may apply).
c. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS. Contracts issued
after October 21, 1988 by the same
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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
under subparagraph 2.a., above, 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. 10% PENALTY TAX -- 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 10% penalty tax will not apply to the following
distributions (exceptions vary based upon the precise plan
involved):
1. Distributions made on or after the date the recipient
has attained the age of 59 1/2.
2. Distributions made on or after the death of the holder
or where the 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 (not less
frequently than annually) for the life (or life
expectancy) of the recipient (or the joint lives or
life expectancies of the recipient and the recipient's
designated Beneficiary).
5. Distributions of amounts which are allocable to
the "investment in the contract" prior to August
14, 1982 (see next subparagraph e.).
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 received or deemed received prior to
the Annuity
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Commencement Date shall be deemed to come (1) first from the
amount of the "investment in the contract" prior to August 14,
1982 ("pre-8/14/82 investment") carried over from the prior
Contract, (2) then from the portion of the "income on the
contract" (carried over to, as well as accumulating in, the
successor Contract) that is attributable to such pre-8/14/82
investment, (3) then from the remaining "income on the contract"
and (4) last from the remaining "investment in the contract."
As a result, to the extent that such amount received or deemed
received does not exceed such pre-8/14/82 investment, such amount
is not includable in gross income., In addition, to the extent
that such amount received or deemed received does not exceed the
sum of (a) such pre-8/14/82 investment and (b) the "income on the
contract" attributable thereto, such amount is not subject to the
10% penalty tax. In all other respects, amounts received or
deemed received from such post-exchange Contracts are generally
subject to the rules described in this subparagraph 3.
f. REQUIRED DISTRIBUTIONS
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i. Death of Contract Owner or Primary Annuitant
Subject to the alternative election or spouse beneficiary
provisions in ii or iii below:
1. If any Contract Owner dies on or after the Annuity
Commencement Date and before the entire interest in the
Contract has been distributed, the remaining portion of such
interest shall be distributed at least as rapidly as under
the method of distribution being used as of the date of such
death;
2. If any Contract Owner dies before the Annuity Commencement
Date, the entire interest in the Contract will be
distributed within 5 years after such death; and
3. If the Contract Owner is not an individual, then for
purposes of 1. or 2. above, the primary annuitant under the
Contract shall be treated as the Contract Owner, and any
change in the primary annuitant shall be treated as the
death of the Contract Owner. The primary annuitant is the
individual, the events in the life of whom are of primary
importance in affecting the timing or amount of the payout
under the Contract.
ii. Alternative Election to Satisfy Distribution Requirements
If any portion of the interest of a Contract Owner described in
i. above is payable to or for the benefit of a designated
beneficiary, such beneficiary may elect to have the portion
distributed over a period that does not extend beyond the life or
life expectancy of the beneficiary. The election must be made
and payments must begin within a year of the death.
iii. Spouse Beneficiary
If any portion of the interest of a Contract Owner is payable to
or for the benefit of his or her spouse, and the Annuitant or
Contingent Annuitant is living, such spouse shall be treated as
the Contract Owner of such portion for purposes of section i.
above. This spousal continuation shall apply only once for this
contract.
3. DIVERSIFICATION REQUIREMENTS. The Code requires that investments supporting
your contract be adequately diversified. Code Section 817 provides that a
variable annuity contract will not be treated as an annuity contract for
any period during which the investments made by the separate account or
underlying fund are not adequately diversified. If a contract is not
treated as an annuity contract, the contract owner will be subject to
income tax on annual increases in cash value.
The Treasury Department's diversification regulations require, among other
things, that:
- no more than 55% of the value of the total assets of the segregated
asset account underlying a variable contract is represented by any one
investment,
- no more than 70% is represented by any two investments,
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- no more than 80% is represented by any three investments and
- no more than 90% is represented by any four investments.
In determining whether the diversification standards are met, all
securities of the same issuer, all interests in the same real property
project, and all interests in the same commodity are each treated as a
single investment. In the case of government securities, each government
agency or instrumentality is treated as a separate issuer.
A separate account must be in compliance with the diversification standards
on the last day of each calendar quarter or within 30 days after the
quarter ends. If an insurance company inadvertently fails to meet the
diversification requirements, the company may still comply within a
reasonable period and avoid the taxation of contract income on an ongoing
basis. However, either the company or the contract owner must agree to pay
the tax due for the period during which the diversification requirements
were not met.
We monitor the diversification of investments in the separate accounts and
test for diversification as required by the Code. We intend to administer
all contracts subject to the diversification requirements in a manner that
will maintain adequate diversification.
4. OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT. In order for a variable
annuity contract to qualify for tax deferral, assets in the separate
accounts supporting the contract must be considered to be owned by the
insurance company and not by the contract owner. It is unclear under what
circumstances an investor is considered to have enough control over the
assets in the separate account to be considered the owner of the assets for
tax purposes.
The IRS has issued several rulings discussing investor control. These
rulings say that certain incidents of ownership by the contract owner, such
as the ability to select and control investments in a separate account,
will cause the contract owner to be treated as the owner of the assets for
tax purposes.
In its explanation of the diversification regulations, the Treasury
Department recognized that the temporary regulations "do not provide
guidance concerning the circumstances in which investor control of the
investments of a segregated asset account may cause the investor, rather
than the insurance company, to be treated as the owner of the assets in the
account." The explanation further indicates that "the temporary regulations
provide that in appropriate cases a segregated asset account may include
multiple sub-accounts, but do not specify the extent to which policyholders
may direct their investments to particular sub-accounts without being
treated as the owners of the underlying assets. Guidance on this and other
issues will be provided in regulations or revenue rulings under Section
817(d), relating to the definition of variable contract."
The final regulations issued under Section 817 did not provide guidance
regarding investor control, and as of the date of this prospectus, guidance
has yet to be issued. We do not know if additional guidance will be
issued. If guidance is issued, we do not know if it will have a
retroactive effect.
Due to the lack of specific guidance on investor control, there is some
uncertainty about when
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a contract owner is considered the owner of the assets for tax purposes.
We reserve the right to modify the contract, as necessary, to prevent you
from being considered the owner of assets in the separate account.
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 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 there is no election to waive withholding, 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 QUALIFIED RETIREMENT PLANS
The Contract may be used for a number of qualified retirement plans. If the
Contract is being purchased with respect to some form of qualified retirement
plan, please refer to Appendix I 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.
F. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal income
tax consequences to annuity purchasers that are U.S. citizens or residents.
Purchasers that are not U.S. citizens or residents will generally be subject to
U.S. federal income tax and withholding on annuity distributions at a 30% rate,
unless a lower treaty rate applies. In addition, purchasers may be subject to
state premium tax, other state and/or municipal taxes, and taxes that may be
imposed by the purchaser's country of citizenship or residence. Prospective
purchasers are advised to consult with a qualified tax adviser regarding U.S.,
state, and foreign taxation with respect to an annuity purchase.
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APPENDIX I - INFORMATION REGARDING TAX-QUALIFIED PLANS
The tax rules applicable to tax-Qualified Contract Owners, including
restrictions on contributions and distributions, taxation of distributions and
tax penalties, vary according to the type of plan as well as the terms and
conditions of the plan itself. Various tax penalties may apply to contributions
in excess of applicable limits, distributions prior to age 59 1/2 (subject to
certain exceptions), distributions which do not conform to applicable
commencement and minimum distribution rules, and certain other transactions with
respect to tax-qualified plans. Therefore, this summary does not attempt to
provide more than general information about the tax rules associated with use of
a Contract by a tax-qualified retirement plan. Contract Owners, plan
participants and beneficiaries are cautioned that the rights and benefits of any
person to benefits may be controlled by the terms and conditions of the
tax-qualified retirement plan itself, regardless of the terms and conditions of
a Contract, but that Hartford is not bound by the terms and conditions of such
plans to the extent such terms conflict with a Contract, unless Hartford
specifically consents to be bound. Additionally, some tax-qualified retirement
plans are subject to distribution and other requirements that are not
incorporated into Hartford's administrative procedures. Contract Owners,
participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions comply with applicable law.
Because of the complexity of these rules, owners, participants and beneficiaries
are encouraged to consult their own tax advisors as to specific tax
consequences.
A. TAX-QUALIFIED PENSION OR PROFIT-SHARING PLANS Provisions of the Code
permit eligible employers to establish tax-qualified pension or profit sharing
plans (described in Section 401(a) and 401(k), if applicable, and exempt from
taxation under Section 501(a) of the Code), and Simplified Employee Pension
Plans (described in Section 408(k)). Such plans are subject to limitations on
the amount that may be contributed, the persons who may be eligible to
participate and the time when distributions must commence. Employers intending
to use these Contracts in connection with tax-qualified pension or
profit-sharing plans should seek competent tax and other legal advice.
B. TAX SHELTERED ANNUITIES UNDER SECTION 403(b) Section 403(b) of the
Code permits public school employees and employees of certain types of
charitable, educational and scientific organizations, as specified in Section
501(c)(3) of the Code, to purchase Annuity Contracts, and, subject to certain
limitations, to exclude such contributions from gross income. Generally, such
contributions may not exceed the lesser of $10,000 (indexed) or 20% of an
employee's "includable compensation" for such employee's most recent full year
of employment, subject to other adjustments. Special provisions under the Code
may allow some employees to elect a different overall limitation.
Tax-sheltered Annuity programs under Section 403(b) are subject to a PROHIBITION
AGAINST DISTRIBUTIONS FROM THE CONTRACT ATTRIBUTABLE TO CONTRIBUTIONS MADE
PURSUANT TO A SALARY REDUCTION AGREEMENT, unless such distribution is made:
(1) After the participating employee attains age 59 1/2;
(2) Upon separation from service;
(3) Upon death or disability; or
(4) In the case of hardship (and in the case of hardship, any income
attributable to such contributions may not be distributed).
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Generally, the above restrictions do not apply to distributions attributable to
cash values or other amounts held under a Section 403(b) Contract as of December
31, 1988.
C. DEFERRED COMPENSATION PLANS UNDER SECTION 457 Employees and
independent Contractors performing services for eligible employers may have
contributions made to an Eligible 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 Eligible Deferred
Compensation Plans maintained by a State or other tax-exempt organization.
For these purposes, the term "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. Generally, the limitation is 33 1/3% of includable
compensation (typically 25% of gross compensation) or, for 1998, $8,000
(indexed), whichever is less. Such a plan may also provide for additional
"catch-up" deferrals during the three taxable years ending before a
Participant attains normal retirement age.
An employee electing to participate in an Eligible Deferred Compensation Plan
should understand that his or her rights and benefits are governed strictly by
the terms of the plan and that the employer is the legal owner of any Contract
issued with respect to the plan. The employer, as owner of the Contract(s),
retains all voting and redemption rights that may accrue to the Contract(s)
issued with respect to the plan. The participating employee should look to the
terms of his or her plan for any charges in regard to participating therein
other than those disclosed in this Prospectus. Participants should also be
aware that effective August 20, 1996, the Small Business Job Protection Act of
1996 requires that all assets and income of an Eligible Deferred Compensation
Plan established by a governmental employer which is a State, a political
subdivision of a State, or any agency or instrumentality of a State or political
subdivision of a State, must be held in trust (or under certain specified
Annuity Contracts or custodial Accounts) for the exclusive benefit of
participants and their beneficiaries. Special transition rules apply to such
Eligible governmental Deferred Compensation Plans already in existence on August
20, 1996, and provide that such plans need not establish a trust before January
1, 1999. However, this requirement of a trust does not apply to amounts under
an Eligible Deferred Compensation Plan of a tax-exempt (non-governmental)
organization, and such amounts will be subject to the claims of such tax-exempt
employer's general creditors.
In general, distributions from an Eligible Deferred Compensation Plan are
prohibited under Section 457 of the Code unless made after the participating
employee attains age 70 1/2, separates from service, dies, or suffers an
unforeseeable financial emergency. Present federal tax law does not allow
tax-free transfers or rollovers for amounts accumulated in a Section 457 plan
except for transfers to other Section 457 plans in limited cases.
D. INDIVIDUAL RETIREMENT ANNUITIES UNDER SECTION 408 Section 408 of the Code
permits eligible individuals to establish individual retirement programs through
the purchase of Individual Retirement Annuities ("IRAs"). IRAs are subject to
limitations on the amount that may be contributed, the contributions that may be
deducted from taxable income, the persons who may be eligible and the time when
distributions may commence. Also, distributions from certain qualified plans
may be "rolled-over" on a tax-deferred basis into an IRA.
The Contracts may be offered as SIMPLE IRAs in connection with a SIMPLE IRA plan
of an
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employer. Special rollover rules apply to SIMPLE IRAs. Amounts can be rolled
over from one SIMPLE IRA to another SIMPLE IRA. However, amounts can be rolled
over from a SIMPLE IRA to a regular IRA only after two years have expired since
the participant first commenced participation in your employer's SIMPLE IRA
plan. Amounts cannot be rolled over to a SIMPLE IRA from a qualified plan or a
regular IRA. Hartford is a non-designated financial institution.
Beginning in 1998, the Contracts may be offered as ROTH IRAs under Section 408A
of the Code. Contributions to a ROTH IRA are not deductible. Subject to
special limitations, a regular IRA may be converted into a ROTH IRA or a
distribution from a regular IRA may be rolled over to a ROTH IRA. However, a
conversion or a rollover from a regular IRA to a ROTH IRA is not excludable from
gross income. If certain conditions are met, qualified distributions from a
ROTH IRA are tax-free.
E. FEDERAL TAX PENALTIES AND WITHHOLDING Distributions from retirement plans
are generally taxed under Section 72 of the Code. Under these rules, a portion
of each distribution may be excludable from income. The excludable amount is
the portion of the distribution that bears the same ratio as the after-tax
contributions bear to the expected return.
1. PREMATURE DISTRIBUTION Distributions from a tax-qualified plan before the
Participant attains age 59 1/2 are generally subject to an additional penalty
tax equal to 10% of the taxable portion of the distribution. The 10% penalty
does not apply to distributions made after the employee's death, on Account of
disability, for eligible medical expenses and distributions in the form of a
life Annuity and, except in the case of an IRA, certain distributions after
separation from service after age 55. For these purposes, a life Annuity means
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).
In addition, effective for distributions made from an IRA after December 31,
1997, there is no such penalty tax on distributions that do not exceed the
amount of certain qualifying higher education expenses, as defined by Section
72(t)(7) of the Code, or which are qualified first-time home buyer distributions
meeting the requirements of Section 72(t)(8) of the Code.
If you are a participant in a SIMPLE IRA plan, you should be aware that the 10%
penalty tax discussed above is increased to 25% with respect to non-exempt
premature distributions made from your SIMPLE IRA during the first two years
following the date you first commenced participation in any SIMPLE IRA plan of
your employer.
MINIMUM DISTRIBUTION TAX IF the amount distributed is less than the minimum
required distribution for the year, the Participant is subject to a 50% tax on
the amount that was not properly distributed.
An individual's interest in a tax-qualified retirement plan generally must be
distributed, or begin to be distributed, not later than April 1 of the calendar
year following the later of (i) the calendar year in which the individual
attains age 70 1/2 or (ii) the calendar year in which the individual retires
from service with the employer sponsoring the plan ("required beginning date").
However, the required beginning date for an individual who is a five (5) percent
owner (as defined in the Code), or who is the owner of an IRA, is April 1 of the
calendar year
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following the calendar year in which the individual attains age 70 1/2. The
entire interest of the Participant must be distributed beginning no later than
the required beginning date over a period that may not extend beyond a maximum
of the life expectancy of the Participant and a designated Beneficiary. Each
annual distribution must equal or exceed a "minimum distribution amount" which
is determined by dividing the Account balance by the applicable life expectancy.
This Account balance is generally based upon the Account value as of the close
of business on the last day of the previous calendar year. In addition, minimum
distribution incidental benefit rules may require a larger annual distribution.
If an individual dies before reaching his or her required beginning date, the
individual's entire interest must generally be distributed within five years of
the individual's death. However, this rule will be deemed satisfied, if
distributions begin before the close of the calendar year following the
individual's death to a designated Beneficiary (or over a period not extending
beyond the life expectancy of the Beneficiary). If the Beneficiary is the
individual's surviving spouse, distributions may be delayed until the individual
would have attained age 70 1/2.
If an individual dies after reaching his or her required beginning date or after
distributions have commenced, the individual's interest must generally be
distributed at least as rapidly as under the method of distribution in effect at
the time of the individual's death.
3. WITHHOLDING In general, distributions from IRAs and plans described in
Section 457 of the Code are subject to regular wage withholding rules. Periodic
distributions from other tax-qualified retirement plans that are made for a
specified period of 10 or more years or for the life or life expectancy of the
participant (or the joint lives or life expectancies of the participant and
Beneficiary) are generally subject to federal income tax withholding as if the
recipient were married claiming three exemptions. The recipient of periodic
distributions may generally elect not to have withholding apply or to have
income taxes withheld at a different rate by providing a completed election
form.
Other distributions from such other tax-qualified retirement plans are generally
subject to mandatory income tax withholding at the flat rate of 20% unless such
distributions are:
a) The non-taxable portion of the distribution;
b) Required minimum distributions; or
c) Direct transfer distributions.
Direct transfer distributions are direct payments to an IRA or to another
eligible retirement plan under Code section 401(a)(31).
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TABLE OF CONTENTS
TO
STATEMENT OF ADDITIONAL INFORMATION
SECTION PAGE
-------
Description of Hartford Life Insurance Company
Safekeeping of Assets
Independent Public Accountants
Distribution of Contracts
Calculation of Yield and Return
Performance Comparisons
Financial Statements
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This form must be completed for all tax-sheltered annuities.
SECTION 403(b)(11) ACKNOWLEDGMENT FORM
The Hartford Variable Annuity Contract that you have recently purchased is
subject to certain restrictions imposed by the Tax Reform Act of 1986.
Contributions to the Contract after December 31, 1988 and any increases in cash
value after December 31, 1988 may not be distributed to you unless you have:
a. Attained age 59 1/2,
b. Separated from service,
c. Died, or
d. Become disabled.
Distributions of post December 31, 1988 contributions (excluding any income
thereon) may also be made if you have experienced a financial hardship.
Also, there may be a 10% penalty tax for distributions made prior to age 59 1/2
because of financial hardship or separation from service.
Also, please be aware that your 403(b) Plan may also offer other financial
alternatives other than the Hartford Variable Annuity. Please refer to your
Plan.
Please complete the following and return to:
Hartford Life Insurance Company
Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
- ---------------------------------------------
Name of Contract Owner/Participant
Address
City or Plan/School District
Date:
Contract No:
Signature:
57
<PAGE>
---------------
To obtain a Statement of Additional Information, please complete the form below
and mail to:
Hartford Life Insurance Company
Attn: Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
Please send a Statement of Additional Information to me at the following
address:
- ------------------------------------------------
Name
- ------------------------------------------------
Address
- ------------------------------------------------
City/State Zip Code
---------------
58
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO
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: May 3, 1999
Date of Statement of Additional Information: May 3, 1999
Form HV-1878-7
Printed in U.S.A.
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
[S] [C]
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY . . . . . . . . . . . . . . .
SAFEKEEPING OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . .
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . .
DISTRIBUTION OF CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . .
SUBSTITUTION OF OTHER SHARES AS AN UNDERLYING
INVESTMENT MEDIUM OF THE CONTRACTS . . . . . . . . . . . . . . . . . . . . .
ANNUITY PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Electing the Annuity Commencement Date and Form of Annuity . . . . . .
C. Optional Annuity Forms . . . . . . . . . . . . . . . . . . . . . . . .
OPTION 1: Life Annuity . . . . . . . . . . . . . . . . . . . . . . . .
OPTION 2: Life Annuity With 120, 180 or 240 Monthly Payments
Certain. . . . . . . . . . . . . . . . . . . . . . . . . . .
OPTION 3: Unit Refund Life Annuity . . . . . . . . . . . . . . . . . .
OPTION 4: Joint and Last Survivor Annuity. . . . . . . . . . . . . . .
OPTION 5: Payments for a Designated Period . . . . . . . . . . . . . .
D. The Annuity Unit and Valuation . . . . . . . . . . . . . . . . . . . .
E. Determination of Amount of First Monthly Annuity Payment-Fixed
and Variable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F. Amount of Second and Subsequent Monthly Annuity Payments . . . . . . .
G. Date and Time of Annuity Payments. . . . . . . . . . . . . . . . . . .
2
<PAGE>
CALCULATION OF YIELD AND RETURN. . . . . . . . . . . . . . . . . . . . . . .
PERFORMANCE COMPARISONS. . . . . . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
<PAGE>
INTRODUCTION
The individual and group tax-deferred variable annuity contracts described in
the Prospectus are designed to provide Annuity benefits to individuals who have
established or wish to establish retirement programs which may or may not
qualify for special federal income tax treatment. The Annuitant under these
contracts may receive Annuity benefits in accordance with the annuity option
selected and the retirement program, if any, under which the contracts have been
purchased. Annuity payments under a contract will begin on a particular future
date which may be selected at any time under the contract or automatically when
the Annuitant reaches age 75. There are several alternative annuity payment
options available under the contract (see "Optional Annuity Forms," ).
The Purchase Payments under a contract, less any applicable premium taxes, will
be applied to the Separate Account. Accordingly, the new Purchase Payment under
the contract will be applied to purchase interests in one or more of the
Advisers Fund, Capital Appreciation Fund, Bond Fund, International
Opportunities Fund, Money Market Fund, Mortgage Securities Fund, Stock Fund,
Index Fund, Dividend & Growth Fund, International Advisers, MidCap Fund, Small
Company Fund and Growth and Income Fund, High Yield Fund and Global Leaders 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 Us 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" in the Prospectus).
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY
Hartford Life Insurance Company 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. We were originally incorporated
under the laws of Massachusetts on June 5, 1902, and subsequently redomiciled to
Connecticut. Our offices are located in Simsbury, Connecticut; however, our
mailing address is P.O. Box 2999, Hartford, CT 06104-2999. We are ultimately
controlled by The Hartford Financial Services Group, Inc., one of the largest
financial service providers in the United States.
4
<PAGE>
HARTFORD'S RATINGS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Rating Agency Effective Rating Basis of Rating
Date of Rating
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
A.M. Best and Company, Inc. 1/1/99 A+ Financial performance
- -------------------------------------------------------------------------------
Standard & Poor's 6/1/98 AA Insurer financial
- -------------------------------------------------------------------------------
Duff & Phelps 12/21/98 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 accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports. The principal business address of Arthur
Andersen LLP is One Financial Plaza, Hartford, Connecticut 06103.
DISTRIBUTION OF CONTRACTS
Hartford Securities Distribution Company, Inc. ("HSD") serves as principal
underwriter for the securities issued with respect to the Separate Account and
will offer the Contracts on a continued basis.
HSD is an affiliate of Hartford. Both HSD and Hartford are ultimately
controlled by The Hartford Financial Services Group, Inc. The principal business
address of HSD is the same as Hartford.
The securities will be sold by salespersons of 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 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").
Hartford currently pays HSD underwriting commissions for its role as principal
underwriter of all variable annuities associated with this Separate Account.
For the past three years, the aggregate dollar amount of underwriting
commissions paid to HSD in
5
<PAGE>
its role as principal underwriter has been: 1998: $61,629,500; 1997:
$64,851,026; and 1996: $59,896,541. For the applicable time periods, HSD has
retained none of these commissions.
SUBSTITUTION OF OTHER SHARES AS UNDERLYING
INVESTMENT MEDIUM OF THE CONTRACTS
If the shares of the Fund(s) become unavailable, then subject to obtaining the
prior approval of the Commission, other shares that are generally comparable in
character and quality may be substituted for the shares issued by the Fund whose
shares have become unavailable. Such substitution may include shares previously
purchased or may affect only shares to be purchased.
Before any substitution may be made:
(l) An order of the Commission approving such substitution under the provisions
of Section 26(b) of the Investment Company Act of 1940, as amended, shall
first be obtained;
(2) Written notice of the proposed substitution shall have been given to the
Contract Owners describing the new shares and notifying them that unless
they surrender their contracts for termination within 30 days or determine
to substitute the shares of the other Funds, they will conclusively be
deemed to have authorized the substitution; and
(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), we are
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
6
<PAGE>
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," in the Prospectus).
The Annuitant will be paid the value of a fixed number of Annuity Units
each month. The value of such units and the amounts of the monthly
Variable Annuity payments will, however, reflect investment income
occurring after retirement, and thus the payments will vary with the
investment experience of the Fund shares selected.
B. Electing the Annuity Commencement Date and Form of Annuity
The Contract Owner selects an Annuity Commencement Date and an Annuity
option which may be on a fixed or variable basis, or a combination thereof.
The Annuity Commencement Date will not normally be deferred beyond the
Annuitant's 75th birthday. An Annuity Commencement Date beyond the
Annuitant's 75th birthday is available under certain circumstances.
The Annuity Commencement Date and/or the Annuity option may be changed from
time to time, but any such change must be made at least 30 days prior to
the date on which Annuity payments are scheduled to begin.
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
Internal Revenue Service, or if none is prescribed, the mortality table
then in use by us.
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 Hartford to make certain that Annuity payments are based
on the investment alternative best suited to the Contract Owner's needs for
retirement.
7
<PAGE>
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, we
have has the right to change the frequency of payment to such intervals as
will result in Annuity payments of at least $20.00.
C. Optional Annuity Forms
OPTION 1: Life Annuity
A life Annuity is an Annuity payable during the lifetime of the Annuitant
and terminating with the last monthly payment preceding the death of the
Annuitant. This option offers the maximum level of monthly payments of any
of the options since there is no guarantee of a minimum number of payments
nor a provision for a death benefit payable to a Beneficiary.
It would be possible under this option for an Annuitant to receive only one
Annuity payment if he died prior to the due date of the second Annuity
payment, two if he died before the due date of the third Annuity payment,
etc.
OPTION 2: Life Annuity with 120, 180 or 240 Monthly Payments Certain
This Annuity option is an Annuity payable monthly during the lifetime of an
Annuitant with the provision that if, at the death of the Annuitant,
payments have been made for less than 120, 180 or 240 months, as elected,
then the present value (computed on the basis of 4.00% interest compounded
annually) as of the date of the Annuitant's death at the current dollar
amount at the date of death of any remaining guaranteed monthly payments
will be paid in one sum to the Beneficiary or Beneficiaries designated
unless other provisions will have been made and approved by Us.
Illustration of Annuity Payments
Individual Age 65, Life Annuity
With 120 Payments Certain
-------------------------
<TABLE>
<S> <C>
1. Net amount applied 13,978.25
2. Initial monthly income per $1,000 of payment applied 6.24
3. Initial monthly payment (1x2-1,000) 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>
8
<PAGE>
For the purpose of this illustration, purchase is assumed to have been made
on the fifth business day preceding the first payment date. In determining
the second and subsequent payments the Annuity Unit value of the fifth
business day, preceding the Annuity due date is used.
OPTION 3: Unit Refund Life Annuity
This Annuity option is an Annuity payable monthly during the lifetime of
the Annuitant terminating with the last payment due prior to the death of
the Annuitant except that an additional payment will be made to the
Beneficiary or Beneficiaries if (a) below exceeds (b) below:
total amount applied under the option
at the Annuity Commencement Date
(a) =
-----------------------------------------------------------------
Annuity Unit value at the Annuity Commencement Date
(b) = number of Annuity Units represented x number of monthly
by monthly Annuity payment made Annuity payments made
The amount of the additional payments will be determined by multiplying
such excess by the Annuity Unit value as of the date that proof of death is
received by Us.
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.
9
<PAGE>
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 Us.
Option 5 is an option that does not involve life contingencies and thus no
mortality guarantee. Charges made during the Accumulation Period for the
mortality undertaking under the contracts thus provide no real benefit to a
Contract Owner.
Under Option 5, the Contract Owner or Annuitant, as appropriate, may, at
any time, surrender the contract and receive, within seven days, the
current value of the account.
- --------------------------------------------------------------------------------
Under any of the Annuity options above, excluding Option 5 (on a variable
basis), no surrenders are permitted after Annuity payments commence.
- --------------------------------------------------------------------------------
D. The Annuity Unit and Valuation
The value of the Annuity Unit for each Sub-Account in the Separate Account
for any day is determined by multiplying the value for the preceding day by
the product of (1) the net investment factor (see, "How is the Accumulation
Unit Value Determined?," in 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>
10
<PAGE>
E. Determination of Amount of First Monthly Annuity Payment-Fixed and Variable
When Annuity payments are to commence, the value of the contract is
determined as the product of the value of the Accumulation Unit credited to
each Sub-Account as of the close of business on the fifth business day
preceding the date the first Annuity payment is due and the number of
Accumulation Units credited to each Sub-Account as of the date the Annuity
is to commence.
The contract contains tables indicating the dollar amount of the first
monthly payment under the optional forms of Annuity for each $1,000 of
value of a Sub-Account under a contract. The first monthly payment varies
according to the form of Annuity selected. The contracts contains Annuity
tables derived from the 1971 Individual Annuity Mortality table with an
assumed interest rate ("A.I.R.") of 4.00% per annum. The total first
monthly Annuity payment, fixed and variable, is determined by multiplying
the value (expressed in thousands of dollars) of a Sub-Account (less any
applicable Premium Taxes) by the amount of the first monthly payment per
$1,000 of value obtained from the tables in the contracts.
The 4.00% interest rate assumed in the mortality tables would produce level
Annuity payments if the net investment rate remained constant at 4.00%. In
fact, payments will vary up or down in the proportion that the net
investment rate varies up or down from 4.00%. A higher assumed interest
rate may produce a higher initial payment but more slowly rising and more
rapidly falling subsequent payments than would a 4.00% interest rate
assumption. An alternate A.I.R. of 5.00% is available on an optional
basis.
F. Amount of Second and Subsequent Monthly Annuity Payments
The amount of the first monthly Annuity payment, determined as described
above, is divided by the value of an Annuity Unit for the appropriate
Sub-Account as of the close of business on the fifth business day preceding
the day on which the payment is due in order to determine the number of
Annuity Units represented by the first payment. This number of Annuity
Units remains fixed during the Annuity Period, and in each subsequent month
the dollar amount of the Annuity payment is determined by multiplying this
fixed number of Annuity Units by the then current Annuity Unit value.
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.
11
<PAGE>
CALCULATION OF YIELD AND RETURN
YIELD OF THE MONEY MARKET FUND SUB-ACCOUNT. As summarized in the Prospectus
under the heading "Performance Related Information," the yield of the Money
Market Fund Sub-Account for a seven-day period (the "base period") will be
computed by determining the "net change in value" (calculated as set forth
below) of a hypothetical account having a balance of one accumulation unit of
the Sub-Account at the beginning of the period, subtracting a hypothetical
charge reflecting deductions from Contract Owner accounts, and dividing the
difference by the value of the account at the beginning of the base period to
obtain the base period return, and then multiplying the base period return by
365/7 with the resulting yield figure carried to the nearest hundredth of one
percent. Net changes in value of a hypothetical account will include net
investment income of the account (accrued daily dividends as declared by the
underlying funds, less daily expense charges of the account) for the period, but
will not include realized gains or losses or unrealized appreciation or
depreciation on the underlying fund shares.
The effective yield is calculated by compounding the base period return by
adding 1, raising the sum to a power equal to 365/7 and subtracting 1 from the
result, according to the following formula:
365/7
Effective Yield = [(Base Period Return + 1) ] - 1
THE MONEY MARKET FUND SUB-ACCOUNT'S YIELD AND EFFECTIVE YIELD WILL VARY IN
RESPONSE TO FLUCTUATIONS IN INTEREST RATES AND IN THE EXPENSES OF THE
SUB-ACCOUNT. THE CURRENT YIELD AND EFFECTIVE YIELD REFLECT RECURRING CHARGES ON
THE SEPARATE ACCOUNT LEVEL, INCLUDING THE MAXIMUM ANNUAL MAINTENANCE FEE.
The yield and effective yield for the seven day period ending December 31, 1998
for the Money Market Fund Sub-Account was as follows ($30 Annual Maintenance
Fee):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SUB-ACCOUNT YIELD EFFECTIVE YIELD
- --------------------------------------------------------------------------------
<S> <C> <C>
Money Market * 3.77% 3.84%
- --------------------------------------------------------------------------------
</TABLE>
* Yield and effective yield for the seven day period ending December 31, 1998.
YIELDS OF BOND FUND, HIGH YIELD FUND, AND MORTGAGE SECURITIES FUND SUB-ACCOUNTS.
As summarized in the Prospectus under the heading "Performance Related
Information," yields of the above Sub-Accounts will be computed by annualizing a
recent month's net investment income, divided by a Fund share's net asset value
on the last trading day of that month. Net changes in the value of a
hypothetical account will assume the change in the underlying mutual fund's "net
asset value per share" for the same period in addition to the daily expense
charge assessed, at the sub-account level for the respective period. The
Sub-Accounts' yields will vary
12
<PAGE>
from time to time depending upon market conditions and, the composition of the
underlying funds' portfolios. Yield should also be considered relative to
changes in the value of the Sub-Accounts' shares and to the relative risks
associated with the investment objectives and policies of the underlying Fund.
THE YIELD REFLECTS RECURRING CHARGES ON THE SEPARATE ACCOUNT LEVEL, INCLUDING
THE ANNUAL MAINTENANCE FEE.
Yield calculations of the Sub-Accounts used for illustration purposes reflect
the interest earned by the Sub-Accounts, less applicable asset charges assessed
against a Contract Owner's account over the base period. Yield quotations based
on a 30 day period were computed by dividing the dividends and interests earned
during the period by the maximum offering price per unit on the last day of the
period, according to the following formula:
Example:
6
Current Yield Formula for the Sub-Account 2[((A-B)/(CD) + 1) - 1]
Where A = Dividends and interest earned during the period.
B = Expenses accrued for the period (net of reimbursements).
C = The average daily number of units outstanding during the period
that were entitled to receive dividends.
D = The maximum offering price per unit on the last day of the period.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
SUB-ACCOUNT YIELD
- ---------------------------------------------------------------------
<S> <C>
Bond ** 5.13%
- ---------------------------------------------------------------------
High Yield ** 8.09%
- ---------------------------------------------------------------------
Mortgage Securities ** 5.36%
- ---------------------------------------------------------------------
</TABLE>
** Yield quotation based on a 30 day period ended December 31, 1998.
At any time in the future, yields and total return may be higher or lower than
past yields and there can be no assurance that any historical results will
continue.
The method of calculating yields described above for these Sub-Accounts differs
from the method used by the Sub-Accounts prior to May 1, 1988. The denominator
of the fraction used to calculate yield was previously the average unit value
for the period calculated. That denominator will hereafter be the unit value of
the Sub-Accounts on the last trading day of the period calculated.
CALCULATION OF TOTAL RETURN. As summarized in the Prospectus under the heading
"Performance Related Information," total return is a measure of the change in
value of an investment in a Sub-Account over the period covered. The formula
for total return used herein includes three steps: (1) calculating the value of
the hypothetical initial
13
<PAGE>
investment of $1,000 as of the end of the period by multiplying the total number
of units owned at the end of the period by the unit value per unit on the last
trading day of the period; (2) assuming redemption at the end of the period and
deducting any applicable contingent deferred sales charge and (3) dividing this
account value for the hypothetical investor by the initial $1,000 investment and
annualizing the result for periods of less than one year. Total return will be
calculated for one year, five years and ten years or some other relevant periods
if a Sub-Account has not been in existence for at least ten years.
The following are the standardized average annual total return quotations for
the Sub-Accounts for the fiscal year ended December 31, 1998. No information is
included for the Global Leaders Fund, Growth and Income Fund, and High Yield
Fund Sub-Accounts because as of December 31, 1998, the Sub-Account had not
commenced operations.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SUB-ACCOUNT INCEPTION 1 YEAR 5 YEAR 10 YEAR SINCE
DATE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Advisers 3/31/83 14.92% 14.11% 12.21% N/A
- --------------------------------------------------------------------------------
Bond 8/31/77 -1.43% 3.41% 5.85% N/A
- --------------------------------------------------------------------------------
Capital Appreciation 4/2/84 5.83% 14.44% 15.89% N/A
- --------------------------------------------------------------------------------
Dividend & Growth 3/8/94 6.76% N/A N/A 18.76%
- --------------------------------------------------------------------------------
Global Leaders 9/30/98 N/A N/A N/A 23.05%
- --------------------------------------------------------------------------------
Growth and Income 5/29/98 N/A N/A N/A 9.85%
- --------------------------------------------------------------------------------
High Yield 9/30/98 N/A N/A N/A -4.95%
- --------------------------------------------------------------------------------
Index 5/1/87 18.29% 19.94% 15.58% N/A
- --------------------------------------------------------------------------------
International Advisers 3/1/95 3.72% N/A N/A 8.09%
- --------------------------------------------------------------------------------
International Opportunities 7/2/90 3.53% 3.64% N/A 3.80%
- --------------------------------------------------------------------------------
MidCap 7/30/97 16.82% N/A N/A 18.55%
- --------------------------------------------------------------------------------
Money Market 6/30/80 -4.28% 1.24% 2.25% N/A
- --------------------------------------------------------------------------------
Mortgage Securities 1/1/85 -2.84% 3.11% 5.26% N/A
- --------------------------------------------------------------------------------
Small Company 8/9/96 2.01% N/A N/A 10.23%
- --------------------------------------------------------------------------------
Stock 8/31/77 23.65% 19.97% 15.64% N/A
- --------------------------------------------------------------------------------
</TABLE>
In addition to the standardized total return, the Sub-Account may advertise a
non-standardized total return. This figure will usually be calculated for one
year, five years, and ten years or other periods. Non-standardized total return
is measured in the same manner as the standardized total return described above,
except that the contingent deferred sales charge and the Annual Maintenance Fee
are not deducted and the time periods used to calculate the return are based on
the inception of the underlying Funds. Therefore, non-standardized total return
for a Sub-Account is higher than standardized total return for a Sub-Account.
The following are the non-standardized annualized total return quotations for
the Sub-Accounts for the fiscal year ended December 31, 1998.
14
<PAGE>
NON-STANDARDIZED ANNUALIZED TOTAL RETURN THAT PRE-DATE THE INCEPTION
DATE OF THE SEPARATE ACCOUNT FOR YEAR ENDED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SUB-ACCOUNT INCEPTION 1 YEAR 5 YEAR 10 YEAR SINCE
DATE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Advisers 3/31/83 23.42% 16.53% 13.94% N/A
- --------------------------------------------------------------------------------
Bond 8/31/77 7.07% 6.18% 7.77% N/A
- --------------------------------------------------------------------------------
Capital Appreciation 4/2/84 14.33% 16.71% 17.37% N/A
- --------------------------------------------------------------------------------
Dividend & Growth 3/8/94 15.26% N/A N/A 20.94%
- --------------------------------------------------------------------------------
Global Leaders 9/30/98 N/A N/A N/A 31.55%
- --------------------------------------------------------------------------------
Growth and Income 5/29/98 N/A N/A N/A 18.35%
- --------------------------------------------------------------------------------
High Yield 9/30/98 N/A N/A N/A 3.55%
- --------------------------------------------------------------------------------
Index 5/1/87 26.79% 22.14% 17.19% N/A
- --------------------------------------------------------------------------------
International Advisers 3/1/95 12.22% N/A N/A 10.96%
- --------------------------------------------------------------------------------
International Opportunities 7/2/90 12.03% 6.39% N/A 6.27%
- --------------------------------------------------------------------------------
MidCap 7/30/97 25.32% N/A N/A 25.16%
- --------------------------------------------------------------------------------
Money Market 6/30/80 4.22% 4.05% 4.47% N/A
- --------------------------------------------------------------------------------
Mortgage Securities 1/1/85 5.66% 5.85% 7.20% N/A
- --------------------------------------------------------------------------------
Small Company 8/9/96 10.51% N/A N/A 14.48%
- --------------------------------------------------------------------------------
Stock 8/31/77 32.15% 22.24% 17.30% N/A
- --------------------------------------------------------------------------------
</TABLE>
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. Each Sub-Account may from time to time include its
total return in advertisements or in information furnished to present or
prospective shareholders. Each Sub-Account may from time to time include its
yield and total return in advertisements or information furnished to present or
prospective shareholders. Each Sub-Account may from time to time include in
advertisements its total return (and yield in the case of certain Sub-Accounts)
the ranking of those performance figures relative to such figures for groups of
other annuities analyzed by Lipper Analytical Services and Morningstar, Inc. as
having the same investment objectives.
The total return and yield may also be used to compare the performance of the
Sub-Accounts against certain widely acknowledged outside standards or indices
for stock and bond market performance. The Standard & Poor's Composite Index of
500 Stocks (the "S&P 500") is a market value-weighted and unmanaged index
showing the changes in the aggregate market value of 500 stocks relative to the
base period 1941-43. The S&P 500 is composed almost entirely of common stocks
of companies listed on the New York Stock Exchange, although the common stocks
of a few companies listed on the American Stock Exchange or traded
over-the-counter are included. The 500 companies represented include 400
industrial, 60 transportation and 40 financial services concerns. The S&P 500
represents about 80% of the market value of all issues traded on the New York
Stock Exchange.
The NASDAQ-OTC Composite Price Index (The "NASDAQ Index") is a market
15
<PAGE>
value-weighted and unmanaged index showing the changes in the aggregate market
value of approximately 3,500 stocks relative to the base measure of 100.00 on
February 5, 1971. The NASDAQ Index is composed entirely of common stocks of
companies traded over-the-counter and often through the National Association of
Securities Dealers Automated Quotations ("NASDAQ") system. Only those
over-the-counter stocks having only one market maker or traded on exchanges are
excluded.
The Morgan Stanley Capital International EAFE Index (the "EAFE Index") is an
unmanaged index, which includes over 1,000 companies representing the stock
markets of Europe, Australia, New Zealand, and the Far East. The EAFE Index is
weighted by market capitalization, and therefore, it has a heavy representation
in countries with large stock markets, such as Japan.
The Shearson Lehman Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted
issues are not included in the SL Government Index.
The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized rating
agency.
The Composite Index for Hartford Advisers HLS Fund is comprised of the S&P 500
(55%), the Lehman Government/Corporate Bond Index (35%), both mentioned above,
and 90 Day U.S. Treasury Bills (10%).
16
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-1
- --------------------------------------------------------------------------------
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 statements of assets and liabilities of
Hartford Life Insurance Company Separate Account Two (Bond Fund, Stock Fund,
Money Market Fund, Advisers Fund, Capital Appreciation Fund, Mortgage Securities
Fund, Index Fund, International Opportunities Fund, Dividend and Growth Fund,
International Advisers Fund, Small Company Fund, MidCap Fund, Smith Barney Cash
Portfolio, Smith Barney Appreciation Fund, Smith Barney Government Portfolio,
BB&T Growth & Income Fund, AmSouth Equity Income Fund, Mentor VIP Capital Growth
Fund, Mentor VIP Perpetual International Fund, and Mentor VIP Growth Fund)
(collectively, the Account) as of December 31, 1998, and the related statements
of operations and the statements of changes in net assets for the periods
presented. 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 the Account as of December 31,
1998, and the results of their operations and the changes in their net assets
for the periods presented in conformity with generally accepted accounting
principles.
Hartford, Connecticut
February 16, 1999 ARTHUR ANDERSEN LLP
<PAGE>
SA-2 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS
Fund, Inc. - Class
IA
Shares 349,618,159
Cost $365,928,024
Market Value....... $377,820,108 --
Hartford Stock HLS
Fund, Inc. - Class
IA
Shares 380,740,509
Cost $1,321,699,321
Market Value....... -- $2,498,292,052
Hartford Money Market
HLS Fund, Inc. -
Class IA
Shares 342,816,331
Cost $342,816,331
Market Value....... -- --
Hartford Advisers HLS
Fund, Inc. - Class
IA
Shares
1,646,987,741
Cost $3,054,571,935
Market Value....... -- --
Hartford Capital
Appreciation HLS
Fund, Inc. - Class
IA
Shares 417,240,558
Cost $1,302,905,756
Market Value....... -- --
Hartford Mortgage
Securities HLS Fund,
Inc. - Class IA
Shares 175,411,395
Cost $189,578,583
Market Value....... -- --
Hartford Index HLS
Fund, Inc. - Class
IA
Shares 174,516,110
Cost $371,361,315
Market Value....... -- --
Hartford
International
Opportunities HLS
Fund, Inc. - Class
IA
Shares 294,203,798
Cost $340,518,189
Market Value....... -- --
Hartford Dividend and
Growth HLS Fund,
Inc. - Class IA
Shares 451,028,566
Cost $725,280,325
Market Value....... -- --
Due from Hartford Life
Insurance Company..... 204,248 389,733
Receivable from fund
shares sold........... -- --
------------ --------------
Total Assets........... 378,024,356 2,498,681,785
------------ --------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- --
Payable for fund shares
purchased............. 204,309 389,945
------------ --------------
Total Liabilities...... 204,309 389,945
------------ --------------
Net Assets (variable
annuity contract
liabilities).......... $377,820,047 $2,498,291,840
------------ --------------
------------ --------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-3
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY CAPITAL MORTGAGE
MARKET FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ------------------ ---------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS
Fund, Inc. - Class
IA
Shares 349,618,159
Cost $365,928,024
Market Value....... -- -- -- -- --
Hartford Stock HLS
Fund, Inc. - Class
IA
Shares 380,740,509
Cost $1,321,699,321
Market Value....... -- -- -- -- --
Hartford Money Market
HLS Fund, Inc. -
Class IA
Shares 342,816,331
Cost $342,816,331
Market Value....... $342,816,331 -- -- -- --
Hartford Advisers HLS
Fund, Inc. - Class
IA
Shares
1,646,987,741
Cost $3,054,571,935
Market Value....... -- $4,916,675,095 -- -- --
Hartford Capital
Appreciation HLS
Fund, Inc. - Class
IA
Shares 417,240,558
Cost $1,302,905,756
Market Value....... -- -- $1,985,681,614 -- --
Hartford Mortgage
Securities HLS Fund,
Inc. - Class IA
Shares 175,411,395
Cost $189,578,583
Market Value....... -- -- -- $190,242,955 --
Hartford Index HLS
Fund, Inc. - Class
IA
Shares 174,516,110
Cost $371,361,315
Market Value....... -- -- -- -- $ 623,101,394
Hartford
International
Opportunities HLS
Fund, Inc. - Class
IA
Shares 294,203,798
Cost $340,518,189
Market Value....... -- -- -- -- --
Hartford Dividend and
Growth HLS Fund,
Inc. - Class IA
Shares 451,028,566
Cost $725,280,325
Market Value....... -- -- -- -- --
Due from Hartford Life
Insurance Company..... -- 662,986 10,643,121 -- 267,176
Receivable from fund
shares sold........... 19,488,693 -- -- 412,430 --
------------ -------------- ------------------ ---------------- --------------
Total Assets........... 362,305,024 4,917,338,081 1,996,324,735 190,655,385 623,368,570
------------ -------------- ------------------ ---------------- --------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 19,483,630 -- -- 408,162 --
Payable for fund shares
purchased............. -- 664,510 10,643,361 -- 267,984
------------ -------------- ------------------ ---------------- --------------
Total Liabilities...... 19,483,630 664,510 10,643,361 408,162 267,984
------------ -------------- ------------------ ---------------- --------------
Net Assets (variable
annuity contract
liabilities).......... $342,821,394 $4,916,673,571 $1,985,681,374 $190,247,223 $ 623,100,586
------------ -------------- ------------------ ---------------- --------------
------------ -------------- ------------------ ---------------- --------------
<CAPTION>
INTERNATIONAL DIVIDEND AND
OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------- ---------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS
Fund, Inc. - Class
IA
Shares 349,618,159
Cost $365,928,024
Market Value....... -- --
Hartford Stock HLS
Fund, Inc. - Class
IA
Shares 380,740,509
Cost $1,321,699,321
Market Value....... -- --
Hartford Money Market
HLS Fund, Inc. -
Class IA
Shares 342,816,331
Cost $342,816,331
Market Value....... -- --
Hartford Advisers HLS
Fund, Inc. - Class
IA
Shares
1,646,987,741
Cost $3,054,571,935
Market Value....... -- --
Hartford Capital
Appreciation HLS
Fund, Inc. - Class
IA
Shares 417,240,558
Cost $1,302,905,756
Market Value....... -- --
Hartford Mortgage
Securities HLS Fund,
Inc. - Class IA
Shares 175,411,395
Cost $189,578,583
Market Value....... -- --
Hartford Index HLS
Fund, Inc. - Class
IA
Shares 174,516,110
Cost $371,361,315
Market Value....... -- --
Hartford
International
Opportunities HLS
Fund, Inc. - Class
IA
Shares 294,203,798
Cost $340,518,189
Market Value....... $398,604,075 --
Hartford Dividend and
Growth HLS Fund,
Inc. - Class IA
Shares 451,028,566
Cost $725,280,325
Market Value....... -- $974,440,901
Due from Hartford Life
Insurance Company..... -- 122,495
Receivable from fund
shares sold........... 364,279 --
------------------- ---------------
Total Assets........... 398,968,354 974,563,396
------------------- ---------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 364,240 --
Payable for fund shares
purchased............. -- 122,730
------------------- ---------------
Total Liabilities...... 364,240 122,730
------------------- ---------------
Net Assets (variable
annuity contract
liabilities).......... $398,604,114 $974,440,666
------------------- ---------------
------------------- ---------------
</TABLE>
<PAGE>
SA-4 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
INTERNATIONAL SMALL MIDCAP SMITH BARNEY
ADVISERS FUND COMPANY FUND FUND CASH PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
International
Advisers HLS Fund,
Inc. - Class IA
Shares 65,678,237
Cost $75,055,437
Market Value....... $75,837,939 -- -- --
Small Company HLS
Fund, Inc. - Class
IA
Shares 93,203,695
Cost $112,102,718
Market Value....... -- $123,132,800 -- --
MidCap HLS Fund, Inc.
- Class IA
Shares 32,171,652
Cost $39,368,682
Market Value....... -- -- $46,303,243 --
Smith Barney Cash
Portfolio
Shares 486,806
Cost $486,806
Market Value....... -- -- -- $486,808
Smith Barney
Appreciation Fund
Shares 13,052
Cost $99,509
Market Value....... -- -- -- --
Smith Barney
Government Portfolio
Shares 34,357
Cost $34,357
Market Value....... -- -- -- --
BB&T Growth & Income
Fund
Shares 1,782,787
Cost $21,373,783
Market Value....... -- -- -- --
AmSouth Equity Income
Fund
Shares 1,999,203
Cost $21,507,113
Market Value....... -- -- -- --
Mentor VIP Capital
Growth Portfolio
Shares 1,375,385
Cost $16,981,499
Market Value....... -- -- -- --
Mentor VIP Perpetual
International
Portfolio
Shares 771,760
Cost $10,211,028
Market Value....... -- -- -- --
Mentor VIP Growth
Portfolio
Shares 913,633
Cost $9,860,193
Market Value....... -- -- -- --
Due from Hartford Life
Insurance Company..... 37,942 8,326,029 197,604 26,345
Receivable from fund
shares sold........... -- -- -- --
-------------- ------------- ------------ ---------------
Total Assets........... 75,875,881 131,458,829 46,500,847 513,153
-------------- ------------- ------------ ---------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- -- -- --
Payable for fund shares
purchased............. 37,943 8,325,756 198,464 26,450
-------------- ------------- ------------ ---------------
Total Liabilities...... 37,943 8,325,756 198,464 26,450
-------------- ------------- ------------ ---------------
Net Assets (variable
annuity contract
liabilities).......... $75,837,938 $123,133,073 $46,302,383 $486,703
-------------- ------------- ------------ ---------------
-------------- ------------- ------------ ---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-5
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMITH BARNEY SMITH BARNEY BB&T GROWTH & AMSOUTH EQUITY MENTOR
APPRECIATION FUND GOVERNMENT PORTFOLIO INCOME FUND INCOME FUND CAPITAL GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ --------------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
International
Advisers HLS Fund,
Inc. - Class IA
Shares 65,678,237
Cost $75,055,437
Market Value....... -- -- -- -- --
Small Company HLS
Fund, Inc. - Class
IA
Shares 93,203,695
Cost $112,102,718
Market Value....... -- -- -- -- --
MidCap HLS Fund, Inc.
- Class IA
Shares 32,171,652
Cost $39,368,682
Market Value....... -- -- -- -- --
Smith Barney Cash
Portfolio
Shares 486,806
Cost $486,806
Market Value....... -- -- -- -- --
Smith Barney
Appreciation Fund
Shares 13,052
Cost $99,509
Market Value....... $199,776 -- -- -- --
Smith Barney
Government Portfolio
Shares 34,357
Cost $34,357
Market Value....... -- $34,356 -- -- --
BB&T Growth & Income
Fund
Shares 1,782,787
Cost $21,373,783
Market Value....... -- -- $23,711,070 -- --
AmSouth Equity Income
Fund
Shares 1,999,203
Cost $21,507,113
Market Value....... -- -- -- $22,511,025 --
Mentor VIP Capital
Growth Portfolio
Shares 1,375,385
Cost $16,981,499
Market Value....... -- -- -- -- $18,677,728
Mentor VIP Perpetual
International
Portfolio
Shares 771,760
Cost $10,211,028
Market Value....... -- -- -- -- --
Mentor VIP Growth
Portfolio
Shares 913,633
Cost $9,860,193
Market Value....... -- -- -- -- --
Due from Hartford Life
Insurance Company..... -- -- 29,049 -- 11,902
Receivable from fund
shares sold........... 117 31 -- 30,849 --
-------- ------- ----------------- --------------- ---------------
Total Assets........... 199,893 34,387 23,740,119 22,541,874 18,689,630
-------- ------- ----------------- --------------- ---------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 106 30 -- 30,853 --
Payable for fund shares
purchased............. -- -- 29,053 -- 11,898
-------- ------- ----------------- --------------- ---------------
Total Liabilities...... 106 30 29,053 30,853 11,898
-------- ------- ----------------- --------------- ---------------
Net Assets (variable
annuity contract
liabilities).......... $199,787 $34,357 $23,711,066 $22,511,021 $18,677,732
-------- ------- ----------------- --------------- ---------------
-------- ------- ----------------- --------------- ---------------
<CAPTION>
MENTOR PERPETUAL MENTOR
INTERNATIONAL GROWTH
SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------
<S> <C> <C>
ASSETS:
Investments:
International
Advisers HLS Fund,
Inc. - Class IA
Shares 65,678,237
Cost $75,055,437
Market Value....... -- --
Small Company HLS
Fund, Inc. - Class
IA
Shares 93,203,695
Cost $112,102,718
Market Value....... -- --
MidCap HLS Fund, Inc.
- Class IA
Shares 32,171,652
Cost $39,368,682
Market Value....... -- --
Smith Barney Cash
Portfolio
Shares 486,806
Cost $486,806
Market Value....... -- --
Smith Barney
Appreciation Fund
Shares 13,052
Cost $99,509
Market Value....... -- --
Smith Barney
Government Portfolio
Shares 34,357
Cost $34,357
Market Value....... -- --
BB&T Growth & Income
Fund
Shares 1,782,787
Cost $21,373,783
Market Value....... -- --
AmSouth Equity Income
Fund
Shares 1,999,203
Cost $21,507,113
Market Value....... -- --
Mentor VIP Capital
Growth Portfolio
Shares 1,375,385
Cost $16,981,499
Market Value....... -- --
Mentor VIP Perpetual
International
Portfolio
Shares 771,760
Cost $10,211,028
Market Value....... $10,812,357 --
Mentor VIP Growth
Portfolio
Shares 913,633
Cost $9,860,193
Market Value....... -- $10,470,235
Due from Hartford Life
Insurance Company..... 15,306 67,722
Receivable from fund
shares sold........... -- --
----------------- --------------
Total Assets........... 10,827,663 10,537,957
----------------- --------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- --
Payable for fund shares
purchased............. 15,308 67,727
----------------- --------------
Total Liabilities...... 15,308 67,727
----------------- --------------
Net Assets (variable
annuity contract
liabilities).......... $10,812,355 $10,470,230
----------------- --------------
----------------- --------------
</TABLE>
<PAGE>
SA-6 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GROWTH AND
INCOME FUND
SUB-ACCOUNT
------------
<S> <C>
ASSETS:
Investments:
Hartford Growth and
Income HLS Fund -
Class IA
Shares 5,269,425
Cost $5,509,163
Market Value....... $6,249,337
Hartford High Yield
HLS Fund - Class IA
Shares 1,911,536
Cost $1,953,422
Market Value....... --
Hartford Global
Leaders HLS Fund -
Class IA
Shares 466,167
Cost $588,674
Market Value....... --
Mitchell Hutchins
Growth & Income
Portfolio
Shares 673
Cost $9,994
Market Value....... --
Mitchell Hutchins
Strategic Income
Portfolio
Shares 808
Cost $9,994
Market Value....... --
Mitchell Hutchins
Tactical Allocation
Portfolio
Shares 705
Cost $9,995
Market Value....... --
Investment Income
Receivable............ --
Due from Hartford Life
Insurance Company..... --
Receivable from fund
shares sold........... 67,470
------------
Total Assets........... 6,316,807
------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 67,470
Payable for fund shares
purchased............. --
------------
Total Liabilities...... 67,470
------------
Net Assets (variable
annuity contract
liabilities).......... $6,249,337
------------
------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-7
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH GLOBAL MITCHELL HUTCHINS GROWTH MITCHELL HUTCHINS STRATEGIC
YIELD FUND LEADERS FUND AND INCOME PORTFOLIO INCOME PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Growth and
Income HLS Fund -
Class IA
Shares 5,269,425
Cost $5,509,163
Market Value....... -- -- -- --
Hartford High Yield
HLS Fund - Class IA
Shares 1,911,536
Cost $1,953,422
Market Value....... $1,943,548 -- -- --
Hartford Global
Leaders HLS Fund -
Class IA
Shares 466,167
Cost $588,674
Market Value....... -- $599,110 -- --
Mitchell Hutchins
Growth & Income
Portfolio
Shares 673
Cost $9,994
Market Value....... -- -- $ 9,973 --
Mitchell Hutchins
Strategic Income
Portfolio
Shares 808
Cost $9,994
Market Value....... -- -- -- $9,849
Mitchell Hutchins
Tactical Allocation
Portfolio
Shares 705
Cost $9,995
Market Value....... -- -- -- --
Investment Income
Receivable............ -- -- 746 122
Due from Hartford Life
Insurance Company..... 47,113 -- -- --
Receivable from fund
shares sold........... -- 73,610 6 5
------------ ------------- ------- ------
Total Assets........... 1,990,661 672,720 10,725 9,976
------------ ------------- ------- ------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- 73,610 6 5
Payable for fund shares
purchased............. 47,114 -- -- --
------------ ------------- ------- ------
Total Liabilities...... 47,114 73,610 6 5
------------ ------------- ------- ------
Net Assets (variable
annuity contract
liabilities).......... $1,943,547 $599,110 $10,719 $9,971
------------ ------------- ------- ------
------------ ------------- ------- ------
<CAPTION>
MITCHELL HUTCHINS TACTICAL
ALLOCATION PORTFOLIO
SUB-ACCOUNT
---------------------------
<S> <C>
ASSETS:
Investments:
Hartford Growth and
Income HLS Fund -
Class IA
Shares 5,269,425
Cost $5,509,163
Market Value....... --
Hartford High Yield
HLS Fund - Class IA
Shares 1,911,536
Cost $1,953,422
Market Value....... --
Hartford Global
Leaders HLS Fund -
Class IA
Shares 466,167
Cost $588,674
Market Value....... --
Mitchell Hutchins
Growth & Income
Portfolio
Shares 673
Cost $9,994
Market Value....... --
Mitchell Hutchins
Strategic Income
Portfolio
Shares 808
Cost $9,994
Market Value....... --
Mitchell Hutchins
Tactical Allocation
Portfolio
Shares 705
Cost $9,995
Market Value....... $10,502
Investment Income
Receivable............ 69
Due from Hartford Life
Insurance Company..... --
Receivable from fund
shares sold........... 6
-------
Total Assets........... 10,577
-------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 6
Payable for fund shares
purchased............. --
-------
Total Liabilities...... 6
-------
Net Assets (variable
annuity contract
liabilities).......... $10,571
-------
-------
</TABLE>
<PAGE>
SA-8 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------- ---------- ---------------
<S> <C> <C> <C>
DEFERRED ANNUITY CONTRACTS IN THE
ACCUMULATION PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Bond Fund Qualified 1.00%........ 232,939 $ 4.373600 $ 1,018,782
Bond Fund Non-Qualified 1.00%.... 1,961,849 4.307093 8,449,866
Bond Fund 1.25%.................. 162,500,684 2.257591 366,860,082
Bond Fund .25%................... 55,518 1.533539 85,139
Bond Fund........................ 306,878 1.030758 316,317
Stock Fund Qualified 1.00%....... 802,936 11.737647 9,424,579
Stock Fund Non-Qualified 1.00%... 2,912,842 11.223740 32,692,982
Stock Fund 1.25%................. 403,629,126 6.065754 2,448,314,988
Stock Fund .25%.................. 1,056,753 3.251658 3,436,199
Stock Fund....................... 849,480 1.036706 880,661
Money Market Fund Qualified
1.00%........................... 612,050 2.679268 1,639,846
Money Market Fund Non-Qualified
1.00%........................... 9,019,394 2.680536 24,176,811
Money Market Fund 1.25%.......... 183,614,324 1.715714 315,029,666
Money Market Fund .25%........... 373,199 1.299644 485,026
Money Market Fund................ 725,403 1.016497 737,370
Advisers Fund Qualified 1.00%.... 3,191,360 6.604239 21,076,505
Advisers Fund Non-Qualified
1.00%........................... 9,942,207 6.604240 65,660,718
Advisers Fund 1.25%.............. 1,095,048,448 4.397886 4,815,898,238
Advisers Fund .25%............... 1,220,271 2.502440 3,053,655
Advisers Fund.................... 1,915,141 1.035292 1,982,730
Capital Appreciation Fund
Qualified 1.00%................. 774,553 9.322862 7,221,051
Capital Appreciation Fund
Non-Qualified 1.00%............. 2,433,361 9.318523 22,675,331
Capital Appreciation Fund
1.25%........................... 352,482,012 5.525767 1,947,733,468
Capital Appreciation Fund .25%... 2,264,988 2.712640 6,144,097
Capital Appreciation Fund........ 271,922 0.984021 267,577
Mortgage Securities Fund
Qualified 1.00%................. 484,096 2.844764 1,377,139
Mortgage Securities Fund
Non-Qualified 1.00%............. 5,584,466 2.844767 15,886,504
Mortgage Securities Fund 1.25%... 78,025,873 2.210954 172,511,615
Mortgage Securities Fund .25%.... 14,431 1.458457 21,047
Mortgage Securities Fund......... 10,000 1.022300 10,223
Index Fund 1.00%................. 146,209 1.866581 272,911
Index Fund Non-Qualified 1.00%... 569,781 1.866580 1,063,542
Index Fund 1.25%................. 131,578,849 4.712432 620,056,376
Index Fund .25%.................. 212,284 3.080896 654,025
Index Fund....................... 249,634 1.044934 260,851
International Opportunities Fund
Qualified 1.00%................. 197,097 1.676915 330,515
International Opportunities Fund
Non-Qualified 1.00%............. 1,314,169 1.676023 2,202,578
International Opportunities Fund
1.25%........................... 240,089,691 1.641190 394,032,800
International Opportunities Fund
.25%............................ 681,620 1.874113 1,277,433
International Opportunities
Fund............................ 140,095 0.924280 129,487
Dividend and Growth Fund
Qualified 1.00%................. 417,549 2.500875 1,044,238
Dividend and Growth Fund
Non-Qualified 1.00%............. 1,616,066 2.500878 4,041,584
Dividend and Growth Fund 1.25%... 391,151,359 2.470981 966,527,576
Dividend and Growth Fund .25%.... 250,697 2.592664 649,973
Dividend and Growth Fund......... 523,054 1.008273 527,381
International Advisers Fund
Sub-Account 1.00%............... 23,172 1.490549 34,539
International Advisers Fund
Non-Qualified 1.00%............. 201,485 1.490538 300,321
International Advisers Fund
1.25%........................... 50,971,459 1.476317 75,250,031
International Advisers Fund
.25%............................ 39,807 1.534052 61,066
International Advisers Fund...... 80,466 0.971292 78,156
Small Company Fund 1.00%......... 227,701 1.382431 314,781
Small Company Fund Non-Qualified
1.00%........................... 3,669,917 1.382433 5,073,414
Small Company Fund 1.25%......... 85,431,351 1.374218 117,401,300
Small Company Fund .25%.......... 61,838 1.407436 87,033
Small Company Fund............... 100,223 0.975195 97,737
MidCap Fund Sub-Account 1.00%
Qualified....................... 89,724 1.375964 123,457
MidCap Fund Sub-Account 1.00%
Non-Qualified................... 242,882 1.375969 334,198
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-9
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------- ---------- ---------------
<S> <C> <C> <C>
INDIVIDUAL SUB-ACCOUNTS --
(CONTINUED)
MidCap Fund 1.25%................ 33,348,056 $ 1.371074 $ 45,722,653
MidCap Fund 1.00% Qualified...... 29,907 1.390711 41,592
MidCap Fund...................... 79,150 1.016841 80,483
Smith Barney Cash Portfolio
Qualified 1.00%................. 52,115 2.889398 150,581
Smith Barney Cash Portfolio
Non-Qualified 1.00%............. 112,418 2.989930 336,122
Smith Barney Appreciation
Qualified 1.00%................. 18,002 11.098045 199,787
Smith Barney Government Portfolio
Qualified 1.00%................. 13,202 2.602409 34,357
BB&T Growth and Income Fund...... 17,799,083 1.332151 23,711,066
AMSouth Equity Income Fund 1.00%
Qualified....................... 19,801,638 1.135502 22,484,800
Mentor Capital Growth Fund....... 17,370,611 1.075249 18,677,732
Mentor Perpetual International
Fund............................ 9,747,833 1.109206 10,812,355
Mentor Growth Fund............... 11,540,088 0.907292 10,470,230
Growth and Income Fund........... 181,057 1.183528 214,286
Growth and Income Fund........... 10,000 1.183500 11,835
Growth and Income Fund........... 4,982,306 1.181798 5,888,079
Growth and Income Fund........... 16,550 1.188761 19,674
Growth and Income Fund........... 105,902 1.090282 115,463
High Yield Fund.................. 15,798 1.035511 16,359
High Yield Fund.................. 10,000 1.035500 10,355
High Yield Fund.................. 1,832,207 1.034881 1,896,116
High Yield Fund.................. 10,000 1.037462 10,375
High Yield Fund.................. 10,000 1.034245 10,342
Global Leaders Fund.............. 10,000 1.315500 13,155
Global Leaders Fund.............. 10,000 1.315500 13,155
Global Leaders Fund.............. 415,660 1.314733 546,482
Global Leaders Fund.............. 10,000 1.317944 13,179
Global Leaders Fund.............. 10,000 1.313892 13,139
Mitchell Hutchins Growth and
Income Portfolio................ 10,000 1.071942 10,719
Mitchell Hutchins Strategic
Income Portfolio................ 10,000 0.997127 9,971
Mitchell Hutchins Tactical
Allocation Portfolio............ 10,000 1.057099 10,571
---------------
SUB-TOTAL INDIVIDUAL
SUB-ACCOUNTS.................... 12,628,840,528
---------------
ANNUITY CONTRACTS IN THE ANNUITY
PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Bond Fund Non-Qualified 1.00%.... 19,762 4.307092 85,115
Bond Fund 1.25%.................. 445,052 2.257591 1,004,746
Stock Fund Non-Qualified 1.00%... 25,544 11.223888 286,703
Stock Fund 1.25%................. 536,739 6.065754 3,255,728
Money Market Fund Qualified
1.00%........................... 648 2.679268 1,736
Money Market Fund Non-Qualified
1.00%........................... 85,788 2.680536 229,959
Money Market Fund 1.25%.......... 303,652 1.715714 520,980
Advisers Fund Qualified 1.00%.... 2,600 6.604240 17,172
Advisers Fund Non-Qualified
1.00%........................... 74,716 6.604240 493,441
Advisers Fund 1.25%.............. 1,930,726 4.397886 8,491,112
Capital Appreciation Fund
Non-Qualified 1.00%............. 18,217 9.318439 169,754
Capital Appreciation Fund
1.25%........................... 266,044 5.525767 1,470,096
Mortgage Securities Fund
Non-Qualified 1.00%............. 58,753 2.844767 167,139
Mortgage Securities Fund 1.25%... 123,728 2.210954 273,556
Index Fund 1.25%................. 168,253 4.712432 792,881
International Opportunities Fund
Non-Qualified 1.00%............. 6,240 1.676024 10,459
International Opportunities Fund
1.25%........................... 378,288 1.641190 620,842
Dividend and Growth Fund 1.25%... 667,716 2.470981 1,649,914
International Advisers Fund
1.25%........................... 77,101 1.476317 113,825
Small Company Fund 1.25%......... 115,562 1.374218 158,808
AMSouth Equity Income Fund....... 23,092 1.135502 26,221
---------------
SUB-TOTAL INDIVIDUAL
SUB-ACCOUNTS.................... 19,840,187
---------------
GRAND TOTAL........................ $12,648,680,715
---------------
---------------
</TABLE>
<PAGE>
SA-10 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $17,912,357 $ 18,915,114
EXPENSES:
Mortality and expense
undertakings.......... (3,795,666) (26,197,986)
----------- ------------
Net investment income
(loss).............. 14,116,691 (7,282,872)
----------- ------------
CAPITAL GAINS INCOME..... -- 63,980,079
----------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (17,730) (1,720,391)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 5,723,478 522,612,064
----------- ------------
Net gain (loss) on
investments......... 5,705,748 520,891,673
----------- ------------
Net increase
(decrease) in net
assets resulting
from operations..... $19,822,439 $577,588,880
----------- ------------
----------- ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-11
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY CAPITAL MORTGAGE
MARKET FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- -------------- ------------------ ---------------- --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $15,550,709 $ 97,214,065 $ 10,528,844 $11,949,822 $ 5,084,024
EXPENSES:
Mortality and expense
undertakings.......... (3,714,561) (53,193,739) (22,767,506) (2,304,989) (6,407,798)
----------- -------------- ------------------ ---------------- --------------
Net investment income
(loss).............. 11,836,148 44,020,326 (12,238,662) 9,644,833 (1,323,774)
----------- -------------- ------------------ ---------------- --------------
CAPITAL GAINS INCOME..... -- 130,914,844 114,733,928 -- 10,662,058
----------- -------------- ------------------ ---------------- --------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- 1,826,471 (4,786,085) 473,273 (704,518)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 709,363,622 140,386,292 (228,914) 110,953,813
----------- -------------- ------------------ ---------------- --------------
Net gain (loss) on
investments......... -- 711,190,093 135,600,207 244,359 110,249,295
----------- -------------- ------------------ ---------------- --------------
Net increase
(decrease) in net
assets resulting
from operations..... $11,836,148 $ 886,125,263 $238,095,473 $ 9,889,192 $ 119,587,579
----------- -------------- ------------------ ---------------- --------------
----------- -------------- ------------------ ---------------- --------------
<CAPTION>
INTERNATIONAL DIVIDEND AND
OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------- ----------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 5,223,310 $ 15,429,535
EXPENSES:
Mortality and expense
undertakings.......... (5,034,289) (10,513,724)
------------------- ----------------
Net investment income
(loss).............. 189,021 4,915,811
------------------- ----------------
CAPITAL GAINS INCOME..... 25,347,181 25,624,259
------------------- ----------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 1,455,876 (465,941)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 17,463,831 82,775,505
------------------- ----------------
Net gain (loss) on
investments......... 18,919,707 82,309,564
------------------- ----------------
Net increase
(decrease) in net
assets resulting
from operations..... $44,455,909 $ 112,849,634
------------------- ----------------
------------------- ----------------
</TABLE>
<PAGE>
SA-12 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
INTERNATIONAL SMALL MIDCAP SMITH BARNEY
ADVISERS FUND COMPANY FUND FUND CASH PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $6,551,901 $ -- $ 330 $24,990
EXPENSES:
Mortality and expense
undertakings.......... (840,602) (1,090,110) (320,350) (5,044)
-------------- ------------- ------------ -------
Net investment income
(loss).............. 5,711,299 (1,090,110) (320,020) 19,946
-------------- ------------- ------------ -------
CAPITAL GAINS INCOME..... 1,559,601 1,255,431 -- --
-------------- ------------- ------------ -------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (62,176) 1,445,433 (3,698) --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (222,372) 9,623,019 6,597,665 --
-------------- ------------- ------------ -------
Net gain (loss) on
investments......... (284,548) 11,068,452 6,593,967 --
-------------- ------------- ------------ -------
Net increase
(decrease) in net
assets resulting
from operations..... $6,986,352 $11,233,773 $ 6,273,947 $19,946
-------------- ------------- ------------ -------
-------------- ------------- ------------ -------
</TABLE>
* From inception, March 2, 1998 to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-13
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMITH BARNEY SMITH BARNEY BB&T GROWTH & AMSOUTH EQUITY MENTOR
APPRECIATION FUND GOVERNMENT PORTFOLIO INCOME FUND INCOME FUND CAPITAL GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
------------------ --------------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 2,368 $1,842 $ 218,179 $ 313,398 $ --
EXPENSES:
Mortality and expense
undertakings.......... (1,842) (377) (189,383) (178,806) (85,499)
------- ------ ----------------- --------------- ---------------
Net investment income
(loss).............. 526 1,465 28,796 134,592 (85,499)
------- ------ ----------------- --------------- ---------------
CAPITAL GAINS INCOME..... 15,116 -- -- -- --
------- ------ ----------------- --------------- ---------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 51 -- 1,013 4,124 (4,500)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 17,076 -- 1,927,801 971,715 1,696,228
------- ------ ----------------- --------------- ---------------
Net gain (loss) on
investments......... 17,127 -- 1,928,814 975,839 1,691,728
------- ------ ----------------- --------------- ---------------
Net increase
(decrease) in net
assets resulting
from operations..... $32,769 $1,465 $1,957,610 $1,110,431 $1,606,229
------- ------ ----------------- --------------- ---------------
------- ------ ----------------- --------------- ---------------
<CAPTION>
MENTOR PERPETUAL MENTOR
INTERNATIONAL GROWTH
SUB-ACCOUNT* SUB-ACCOUNT*
----------------- -------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $-- $--
EXPENSES:
Mortality and expense
undertakings.......... (51,799) (44,785)
-------- -------------
Net investment income
(loss).............. (51,799) (44,785)
-------- -------------
CAPITAL GAINS INCOME..... -- --
-------- -------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 1,684 (1,365)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 601,328 610,042
-------- -------------
Net gain (loss) on
investments......... 603,012 608,677
-------- -------------
Net increase
(decrease) in net
assets resulting
from operations..... $551,213 $563,892
-------- -------------
-------- -------------
</TABLE>
* From inception, March 2, 1998 to December 31, 1998.
<PAGE>
SA-14 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
GROWTH AND
INCOME FUND
SUB-ACCOUNT**
--------------
<S> <C>
INVESTMENT INCOME:
Dividends.............. $ 23,830
EXPENSES:
Mortality and expense
undertakings.......... (17,863)
--------------
Net investment income
(loss).............. 5,967
--------------
CAPITAL GAINS INCOME..... --
--------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (2,267)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 740,175
--------------
Net gain (loss) on
investments......... 737,908
--------------
Net increase
(decrease) in net
assets resulting
from operations..... $743,875
--------------
--------------
</TABLE>
** From inception, June 1, 1998 to December 31, 1998.
*** From inception, September 30, 1998 to December 31, 1998.
**** From inception, December 16, 1998 to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-15
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH GLOBAL MITCHELL HUTCHINS GROWTH MITCHELL HUTCHINS STRATEGIC
YIELD FUND LEADERS FUND AND INCOME PORTFOLIO INCOME PORTFOLIO
SUB-ACCOUNT*** SUB-ACCOUNT*** SUB-ACCOUNT**** SUB-ACCOUNT****
--------------- --------------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 34,816 $ 789 $ 44 $ 116
EXPENSES:
Mortality and expense
undertakings.......... (2,794) (317) (6) (5)
--------------- ------- ----- -----
Net investment income
(loss).............. 32,022 472 38 111
--------------- ------- ----- -----
CAPITAL GAINS INCOME..... -- 16,340 702 6
--------------- ------- ----- -----
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (287) 1,084 -- --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (9,874) 10,436 (20) (145)
--------------- ------- ----- -----
Net gain (loss) on
investments......... (10,161) 11,520 (20) (145)
--------------- ------- ----- -----
Net increase
(decrease) in net
assets resulting
from operations..... $ 21,861 $28,332 $720 $ (28)
--------------- ------- ----- -----
--------------- ------- ----- -----
<CAPTION>
MITCHELL HUTCHINS TACTICAL
ALLOCATION PORTFOLIO
SUB-ACCOUNT****
---------------------------
<S> <C>
INVESTMENT INCOME:
Dividends.............. $ 13
EXPENSES:
Mortality and expense
undertakings.......... (6)
-----
Net investment income
(loss).............. 7
-----
CAPITAL GAINS INCOME..... 56
-----
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 507
-----
Net gain (loss) on
investments......... 507
-----
Net increase
(decrease) in net
assets resulting
from operations..... $570
-----
-----
</TABLE>
** From inception, June 1, 1998 to December 31, 1998.
*** From inception, September 30, 1998 to December 31, 1998.
**** From inception, December 16, 1998 to December 31, 1998.
<PAGE>
SA-16 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 14,116,691 $ (7,282,872)
Capital gains income... -- 63,980,079
Net realized gain
(loss) on security
transactions.......... (17,730) (1,720,391)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 5,723,478 522,612,064
------------ --------------
Net increase (decrease)
in net assets
resulting from
operations............ 19,822,439 577,588,880
------------ --------------
UNIT TRANSACTIONS:
Purchases.............. 41,906,997 201,628,213
Net transfers.......... 95,280,889 107,789,657
Surrenders for benefit
payments and fees..... (24,892,187) (143,970,482)
Net annuity
transactions.......... 321,142 560,255
------------ --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 112,616,841 166,007,643
------------ --------------
Net increase (decrease)
in net assets......... 132,439,280 743,596,523
NET ASSETS:
Beginning of period.... 245,380,767 1,754,695,317
------------ --------------
End of period.......... $377,820,047 $2,498,291,840
------------ --------------
------------ --------------
</TABLE>
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 10,349,134 $ (2,890,041)
Capital gains income... -- 64,909,605
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
------------ --------------
UNIT TRANSACTIONS:
Purchases.............. 28,788,526 208,829,884
Net transfers.......... 19,102,654 45,780,800
Surrenders for benefit
payments and fees..... (18,300,042) (92,238,226)
Net annuity
transactions.......... 325,387 633,517
------------ --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 29,916,525 163,005,975
------------ --------------
Net increase (decrease)
in net assets......... 50,402,639 541,939,819
NET ASSETS:
Beginning of period.... 194,978,128 1,212,755,498
------------ --------------
End of period.......... $245,380,767 $1,754,695,317
------------ --------------
------------ --------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-17
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY CAPITAL MORTGAGE
MARKET FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ------------------ ---------------- --------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 11,836,148 $ 44,020,326 $ (12,238,662) $ 9,644,833 $ (1,323,774)
Capital gains income... -- 130,914,844 114,733,928 -- 10,662,058
Net realized gain
(loss) on security
transactions.......... -- 1,826,471 (4,786,085) 473,273 (704,518)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 709,363,622 140,386,292 (228,914) 110,953,813
------------ -------------- ------------------ ---------------- --------------
Net increase (decrease)
in net assets
resulting from
operations............ 11,836,148 886,125,263 238,095,473 9,889,192 119,587,579
------------ -------------- ------------------ ---------------- --------------
UNIT TRANSACTIONS:
Purchases.............. 34,983,693 374,759,005 143,597,572 9,146,977 67,409,255
Net transfers.......... 123,126,442 280,406,929 (12,597,119) 8,722,639 58,996,655
Surrenders for benefit
payments and fees..... (94,130,526) (329,416,389) (117,626,736) (28,665,195) (34,320,175)
Net annuity
transactions.......... (32,392) 3,527,169 304,016 39,959 271,456
------------ -------------- ------------------ ---------------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 63,947,217 329,276,714 13,677,733 (10,755,620) 92,357,191
------------ -------------- ------------------ ---------------- --------------
Net increase (decrease)
in net assets......... 75,783,365 1,215,401,977 251,773,206 (866,428) 211,944,770
NET ASSETS:
Beginning of period.... 267,038,029 3,701,271,594 1,733,908,168 191,113,651 411,155,816
------------ -------------- ------------------ ---------------- --------------
End of period.......... $342,821,394 $4,916,673,571 $1,985,681,374 $190,247,223 $ 623,100,586
------------ -------------- ------------------ ---------------- --------------
------------ -------------- ------------------ ---------------- --------------
<CAPTION>
INTERNATIONAL DIVIDEND AND
OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 189,021 $ 4,915,811
Capital gains income... 25,347,181 25,624,259
Net realized gain
(loss) on security
transactions.......... 1,455,876 (465,941)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 17,463,831 82,775,505
------------------- ---------------
Net increase (decrease)
in net assets
resulting from
operations............ 44,455,909 112,849,634
------------------- ---------------
UNIT TRANSACTIONS:
Purchases.............. 16,804,591 141,279,121
Net transfers.......... (27,399,853) 99,305,048
Surrenders for benefit
payments and fees..... (28,546,428) (49,052,200)
Net annuity
transactions.......... 244,437 835,197
------------------- ---------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (38,897,253) 192,367,166
------------------- ---------------
Net increase (decrease)
in net assets......... 5,558,656 305,216,800
NET ASSETS:
Beginning of period.... 393,045,458 669,223,866
------------------- ---------------
End of period.......... $398,604,114 $ 974,440,666
------------------- ---------------
------------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
MONEY CAPITAL MORTGAGE
MARKET FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ------------------ ---------------- --------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 10,558,627 $ 36,403,121 $ (10,930,508) $ 9,013,463 $ 492,907
Capital gains income... 792 129,600,221 103,244,397 -- 21,612,566
Net realized gain
(loss) on security
transactions.......... -- 2,159,454 413,746 28,917 243,148
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 501,068,905 190,913,008 5,074,541 65,120,869
------------ -------------- ------------------ ---------------- --------------
Net increase (decrease)
in net assets
resulting from
operations............ 10,559,419 669,231,701 283,640,643 14,116,921 87,469,490
------------ -------------- ------------------ ---------------- --------------
UNIT TRANSACTIONS:
Purchases.............. 56,766,167 364,832,050 194,562,087 7,925,304 65,766,703
Net transfers.......... (9,782,834) 27,406,992 (11,521,643) (9,594,437) 26,458,731
Surrenders for benefit
payments and fees..... (68,418,264) (206,501,208) (87,759,430) (17,575,723) (18,692,668)
Net annuity
transactions.......... 12,261 725,608 361,130 (3,307) 190,331
------------ -------------- ------------------ ---------------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (21,422,670) 186,463,442 95,642,144 (19,248,163) 73,723,097
------------ -------------- ------------------ ---------------- --------------
Net increase (decrease)
in net assets......... (10,863,251) 855,695,143 379,282,787 (5,131,242) 161,192,587
NET ASSETS:
Beginning of period.... 277,901,280 2,845,576,451 1,354,625,381 196,244,893 249,963,229
------------ -------------- ------------------ ---------------- --------------
End of period.......... $267,038,029 $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>
OPERATIONS:
Net investment income
(loss)................ $ (1,529,162) $ 3,234,554
Capital gains income... 29,748,890 9,959,170
Net realized gain
(loss) on security
transactions.......... 29,653 (4,003)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (32,127,237) 111,067,791
------------------- ---------------
Net increase (decrease)
in net assets
resulting from
operations............ (3,877,856) 124,257,512
------------------- ---------------
UNIT TRANSACTIONS:
Purchases.............. 38,595,370 159,109,767
Net transfers.......... (16,075,692) 87,528,713
Surrenders for benefit
payments and fees..... (26,504,799) (20,331,098)
Net annuity
transactions.......... 66,746 349,515
------------------- ---------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (3,918,375) 226,656,897
------------------- ---------------
Net increase (decrease)
in net assets......... (7,796,231) 350,914,409
NET ASSETS:
Beginning of period.... 400,841,689 318,309,457
------------------- ---------------
End of period.......... $393,045,458 $ 669,223,866
------------------- ---------------
------------------- ---------------
</TABLE>
<PAGE>
SA-18 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
INTERNATIONAL SMALL MIDCAP SMITH BARNEY
ADVISERS FUND COMPANY FUND FUND CASH PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 5,711,299 $ (1,090,110) $ (320,020) $ 19,946
Capital gains income... 1,559,601 1,255,431 -- --
Net realized gain
(loss) on security
transactions.......... (62,176) 1,445,433 (3,698) --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (222,372) 9,623,019 6,597,665 --
-------------- ------------- ------------ ---------------
Net increase (decrease)
in net assets
resulting from
operations............ 6,986,352 11,233,773 6,273,947 19,946
-------------- ------------- ------------ ---------------
UNIT TRANSACTIONS:
Purchases.............. 9,244,144 17,606,410 13,468,482 --
Net transfers.......... 5,996,311 27,369,558 18,368,378 --
Surrenders for benefit
payments and fees..... (3,894,672) (4,568,343) (982,314) (42,255)
Net annuity
transactions.......... 83,430 98,040 -- --
-------------- ------------- ------------ ---------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 11,429,213 40,505,665 30,854,546 (42,255)
-------------- ------------- ------------ ---------------
Net increase (decrease)
in net assets......... 18,415,565 51,739,438 37,128,493 (22,309)
NET ASSETS:
Beginning of period.... 57,422,373 71,393,635 9,173,890 509,012
-------------- ------------- ------------ ---------------
End of period.......... $75,837,938 $123,133,073 $ 46,302,383 $486,703
-------------- ------------- ------------ ---------------
-------------- ------------- ------------ ---------------
</TABLE>
* From inception, March 2, 1998 to December 31, 1998.
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INTERNATIONAL SMALL MIDCAP SMITH BARNEY
ADVISERS FUND COMPANY FUND FUND CASH PORTFOLIO
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 for benefit
payments and fees..... (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)
-------------- ------------- ------------- ---------------
Net 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
-------------- ------------- ------------- ---------------
-------------- ------------- ------------- ---------------
</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>
HARTFORD LIFE INSURANCE COMPANY SA-19
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMITH BARNEY SMITH BARNEY BB&T GROWTH & AMSOUTH EQUITY MENTOR
APPRECIATION FUND GOVERNMENT PORTFOLIO INCOME FUND INCOME FUND CAPITAL GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
------------------ --------------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 526 $ 1,465 $ 28,796 $ 134,592 $ (85,499)
Capital gains income... 15,116 -- -- -- --
Net realized gain
(loss) on security
transactions.......... 51 -- 1,013 4,124 (4,500)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 17,076 -- 1,927,801 971,715 1,696,228
-------- ------- ----------------- --------------- ---------------
Net increase (decrease)
in net assets
resulting from
operations............ 32,769 1,465 1,957,610 1,110,431 1,606,229
-------- ------- ----------------- --------------- ---------------
UNIT TRANSACTIONS:
Purchases.............. -- -- 9,760,778 14,622,450 11,672,774
Net transfers.......... -- -- 6,090,057 5,094,816 5,647,677
Surrenders for benefit
payments and fees..... (3,555) (4,272) (574,799) (733,985) (248,948)
Net annuity
transactions.......... -- -- -- 25,393 --
-------- ------- ----------------- --------------- ---------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (3,555) (4,272) 15,276,036 19,008,674 17,071,503
-------- ------- ----------------- --------------- ---------------
Net increase (decrease)
in net assets......... 29,214 (2,807) 17,233,646 20,119,105 18,677,732
NET ASSETS:
Beginning of period.... 170,573 37,164 6,477,420 2,391,916 --
-------- ------- ----------------- --------------- ---------------
End of period.......... $199,787 $34,357 $23,711,066 $22,511,021 $18,677,732
-------- ------- ----------------- --------------- ---------------
-------- ------- ----------------- --------------- ---------------
<CAPTION>
MENTOR PERPETUAL MENTOR
INTERNATIONAL GROWTH
SUB-ACCOUNT* SUB-ACCOUNT*
----------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ (51,799) $ (44,785)
Capital gains income... -- --
Net realized gain
(loss) on security
transactions.......... 1,684 (1,365)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 601,328 610,042
----------------- -------------
Net increase (decrease)
in net assets
resulting from
operations............ 551,213 563,892
----------------- -------------
UNIT TRANSACTIONS:
Purchases.............. 6,236,230 6,771,031
Net transfers.......... 4,185,922 3,215,967
Surrenders for benefit
payments and fees..... (161,010) (80,660)
Net annuity
transactions.......... -- --
----------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 10,261,142 9,906,338
----------------- -------------
Net increase (decrease)
in net assets......... 10,812,355 10,470,230
NET ASSETS:
Beginning of period.... -- --
----------------- -------------
End of period.......... $10,812,355 $10,470,230
----------------- -------------
----------------- -------------
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY SMITH BARNEY BB&T GROWTH & AMSOUTH EQUITY U.S. GOVERNMENT
APPRECIATION FUND GOVERNMENT PORTFOLIO INCOME FUND INCOME FUND MONEY MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT** SUB-ACCOUNT*** SUB-ACCOUNT
------------------ --------------------- ----------------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 687 $ 1,594 $ 22,704 $ 1,732 $ 2,019
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 2,019
-------- ------- ----------------- --------------- ----------
UNIT TRANSACTIONS:
Purchases.............. -- -- 5,104,417 2,100,608 --
Net transfers.......... -- -- 1,006,220 259,438 (88,379)
Surrenders for benefit
payments and fees..... (40,942) (4,272) (66,068) (2,057) (9,133)
Net annuity
transactions.......... -- -- -- -- (21,870)
-------- ------- ----------------- --------------- ----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (40,942) (4,272) 6,044,569 2,357,989 (119,382)
-------- ------- ----------------- --------------- ----------
Net increase (decrease)
in net assets......... (2,288) (2,678) 6,477,420 2,391,916 (117,363)
NET ASSETS:
Beginning of period.... 172,861 39,842 -- -- 117,363
-------- ------- ----------------- --------------- ----------
End of period.......... $170,573 $37,164 $ 6,477,420 $ 2,391,916 $--
-------- ------- ----------------- --------------- ----------
-------- ------- ----------------- --------------- ----------
</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.
<PAGE>
SA-20 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
GROWTH AND
INCOME FUND
SUB-ACCOUNT**
--------------
<S> <C>
OPERATIONS:
Net investment income
(loss)................ $ 5,967
Capital gains income... --
Net realized gain
(loss) on security
transactions.......... (2,267)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 740,175
--------------
Net increase (decrease)
in net assets
resulting from
operations............ 743,875
--------------
UNIT TRANSACTIONS:
Purchases.............. 1,325,581
Net transfers.......... 4,236,085
Surrenders for benefit
payments and fees..... (56,204)
Net annuity
transactions.......... --
--------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 5,505,462
--------------
Net increase (decrease)
in net assets......... 6,249,337
NET ASSETS:
Beginning of period.... --
--------------
End of period.......... $6,249,337
--------------
--------------
</TABLE>
** From inception, June 1, 1998 to December 31, 1998.
*** From inception, September 30, 1998 to December 31, 1998.
**** From inception, December 16, 1998 to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-21
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH GLOBAL MITCHELL HUTCHINS GROWTH MITCHELL HUTCHINS STRATEGIC
YIELD FUND LEADERS FUND AND INCOME PORTFOLIO INCOME PORTFOLIO
SUB-ACCOUNT*** SUB-ACCOUNT*** SUB-ACCOUNT**** SUB-ACCOUNT****
--------------- --------------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 32,022 $ 472 $ 38 $ 111
Capital gains income... -- 16,340 702 6
Net realized gain
(loss) on security
transactions.......... (287) 1,084 -- --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (9,874) 10,436 (20) (145)
--------------- --------------- ------- ------
Net increase (decrease)
in net assets
resulting from
operations............ 21,861 28,332 720 (28)
--------------- --------------- ------- ------
UNIT TRANSACTIONS:
Purchases.............. 226,463 114,768 10,000 10,000
Net transfers.......... 1,697,571 456,296 -- --
Surrenders for benefit
payments and fees..... (2,348) (286) (1) (1)
Net annuity
transactions.......... -- -- -- --
--------------- --------------- ------- ------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,921,686 570,778 9,999 9,999
--------------- --------------- ------- ------
Net increase (decrease)
in net assets......... 1,943,547 599,110 10,719 9,971
NET ASSETS:
Beginning of period.... -- -- -- --
--------------- --------------- ------- ------
End of period.......... $1,943,547 $599,110 $10,719 $9,971
--------------- --------------- ------- ------
--------------- --------------- ------- ------
<CAPTION>
MITCHELL HUTCHINS TACTICAL
ALLOCATION PORTFOLIO
SUB-ACCOUNT****
---------------------------
<S> <C>
OPERATIONS:
Net investment income
(loss)................ $ 7
Capital gains income... 56
Net realized gain
(loss) on security
transactions.......... --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 507
-------
Net increase (decrease)
in net assets
resulting from
operations............ 570
-------
UNIT TRANSACTIONS:
Purchases.............. 10,000
Net transfers.......... --
Surrenders for benefit
payments and fees..... 1
Net annuity
transactions.......... --
-------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 10,001
-------
Net increase (decrease)
in net assets......... 10,571
NET ASSETS:
Beginning of period.... --
-------
End of period.......... $10,571
-------
-------
</TABLE>
** From inception, June 1, 1998 to December 31, 1998.
*** From inception, September 30, 1998 to December 31, 1998.
**** From inception, December 16, 1998 to December 31, 1998.
<PAGE>
SA-22 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
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 those dividends from the Funds which are characterized as
capital gains under tax regulations.
b) SECURITY VALUATION--The investments in shares of the Funds are valued at
the closing net asset value per share as determined by the appropriate
Fund as of December 31, 1998.
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:
Deduction and Charges -- Certain amounts are deducted from the Contracts, as
described below:
a) MORTALITY AND EXPENSE RISK CHARGES--The Company will make deductions at a
maximum annual rate of 1.50% of the Contract's value for the mortality
and expense risks which the Company undertakes.
b) TAX EXPENSE CHARGE--If applicable, the Company will make deductions at a
maximum rate of 4.0% of the Contract's value to meet premium tax
requirements. An additional tax charge based on a percentage of the
Contract's value may be assessed to partial withdrawals or surrenders.
These expenses are reflected in surrenders for benefit payments and fees
on the accompanying statements of changes in net assets.
c) ANNUAL MAINTENANCE FEE--An annual maintenance fee in the amount of $30
may be deducted from the Contract's value each contract year. However,
this fee is not applicable to contracts with values of $50,000 or more,
as determined on the most recent contract anniversary. These expenses are
reflected in surrenders for benefit payments and fees on the accompanying
statements of changes in net assets.
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>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES F-1
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life Insurance Company:
We have audited the accompanying Consolidated Balance Sheets of Hartford Life
Insurance Company and subsidiaries as of December 31, 1998 and 1997, and the
related Consolidated Statements of Income, Changes in Stockholder's Equity and
Cash Flows for each of the three years in the period ended December 31, 1998.
These Consolidated Financial Statements and the schedules referred to below are
the responsibility of Hartford Life Insurance Company's management. Our
responsibility is to express an opinion on these 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, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998 in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the 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 26, 1999
<PAGE>
F-2 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1998 1997 1996
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Premiums and other considerations............... $2,218 $1,637 $1,705
Net investment income........................... 1,759 1,368 1,397
Net realized capital (losses) gains............. (2) 4 (213)
------ ------ ------
Total revenues................................ 3,975 3,009 2,889
------ ------ ------
Benefits, claims and expenses
Benefits, claims and claim adjustment
expenses....................................... 1,911 1,379 1,535
Amortization of deferred policy acquisition
costs.......................................... 431 335 234
Dividends to policyholders...................... 329 240 635
Other expenses.................................. 766 586 427
------ ------ ------
Total benefits, claims and expenses........... 3,437 2,540 2,831
------ ------ ------
Income before income tax expense................ 538 469 58
Income tax expense.............................. 188 167 20
------ ------ ------
Net income........................................ $ 350 $ 302 $ 38
------ ------ ------
------ ------ ------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES F-3
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER
31,
-----------------
1998 1997
------- -------
<S> <C> <C>
(IN MILLIONS,
EXCEPT FOR SHARE
DATA)
Assets
Investments
Fixed maturities, available for sale, at fair
value (amortized cost of $14,505 and
$13,885)....................................... $14,818 $14,176
Equity securities, at fair value................ 31 180
Policy loans, at outstanding balance............ 6,684 3,756
Other investments, at cost...................... 264 47
------- -------
Total investments............................. 21,797 18,159
Cash............................................ 17 54
Premiums receivable and agents' balances........ 17 18
Reinsurance recoverables........................ 1,257 6,114
Deferred policy acquisition costs............... 3,754 3,315
Deferred income tax............................. 464 348
Other assets.................................... 695 682
Separate account assets......................... 90,262 69,055
------- -------
Total assets.................................. $118,263 $97,745
------- -------
------- -------
Liabilities
Future policy benefits.......................... $ 3,595 $ 3,059
Other policyholder funds........................ 19,615 21,034
Other liabilities............................... 2,094 2,254
Separate account liabilities.................... 90,262 69,055
------- -------
Total liabilities............................. 115,566 95,402
------- -------
Stockholder's Equity
Common stock -- 1,000 shares authorized, issued
and outstanding, par value $5,690.............. 6 6
Capital surplus................................. 1,045 1,045
Accumulated other comprehensive income
Net unrealized capital gains on securities,
net of tax................................... 184 179
------- -------
Total accumulated other comprehensive
income....................................... 184 179
------- -------
Retained earnings............................... 1,462 1,113
------- -------
Total stockholder's equity.................... 2,697 2,343
------- -------
Total liabilities and stockholder's equity...... $118,263 $97,745
------- -------
------- -------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
F-4 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME
---------------
NET UNREALIZED
CAPITAL GAINS
(LOSSES) ON TOTAL
COMMON CAPITAL SECURITIES, RETAINED STOCKHOLDER'S
STOCK SURPLUS NET OF TAX EARNINGS EQUITY
------ -------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
1998
Balance, December 31, 1997.............. $6 $ 1,045 $179 $1,113 $2,343
Comprehensive income
Net income............................ -- -- -- 350 350
------
Other comprehensive income, net of tax
(1):
Changes in net unrealized capital
gains on securities (2).............. -- -- 5 -- 5
------
Total other comprehensive income........ 5
------
Total comprehensive income 355
------
Dividends............................... -- -- -- (1) (1)
--
------ ----- ----------- ------
Balance, December 31, 1998.......... $6 $ 1,045 $184 $1,462 $2,697
--
------ ----- ----------- ------
1997
Balance, December 31, 1996.............. $6 $ 1,045 $ 30 $ 811 $1,892
Comprehensive income
Net income............................ -- -- -- 302 302
------
Other comprehensive income, net of tax
(1):
Changes in net unrealized capital
gains on securities (2).............. -- -- 149 -- 149
------
Total other comprehensive income........ 149
------
Total comprehensive income 451
--
------ ----- ----------- ------
Balance, December 31, 1997.......... $6 $ 1,045 $179 $1,113 $2,343
--
------ ----- ----------- ------
1996
Balance, December 31, 1995.............. $6 $ 1,007 $(57) $ 773 $1,729
Comprehensive income
Net income............................ -- -- -- 38 38
------
Other comprehensive income, net of tax
(1):
Changes in net unrealized capital
gains on securities (2).............. -- -- 87 -- 87
------
Total other comprehensive income........ 87
------
Total comprehensive income............ 125
------
Capital contribution.................... -- 38 -- -- 38
--
------ ----- ----------- ------
Balance, December 31, 1996.......... $6 $ 1,045 $ 30 $ 811 $1,892
--
--
------ ----- ----------- ------
------ ----- ----------- ------
</TABLE>
- ---------
(1) Net unrealized capital gain on securities is reflected net of tax of $3,
$80 and $47, as of December 31, 1998, 1997 and 1996, respectively.
(2) There was no reclassification adjustment for after-tax gains (losses)
realized in net income for the years ended December 31, 1998 and 1997. December
31, 1996 is net of a $142 reclassification adjustment for after-tax losses
realized in net income.
See Notes to Consolidated Financial Statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES F-5
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
------------------------------
1998 1997 1996
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Operating Activities
Net income............................ $ 350 $ 302 $ 38
Adjustments to reconcile net income to
net cash provided by operating
activities
Depreciation and amortization......... (23) 8 14
Net realized capital losses (gains)... 2 (4) 213
Decrease in premiums receivable and
agents' balances..................... 1 119 10
(Decrease) increase in other
liabilities.......................... (79) 223 577
Change in receivables, payables, and
accruals............................. 83 107 (22)
Increase (decrease) in accrued
taxes................................ 60 126 (91)
(Increase) decrease in deferred income
taxes................................ (118) 40 (102)
Increase in deferred policy
acquisition costs.................... (439) (555) (572)
Increase in future policy benefits.... 536 585 101
(Increase) decrease in reinsurance
recoverables and other related
assets............................... (2) 21 (146)
-------- -------- --------
Net cash provided by operating
activities......................... 371 972 20
-------- -------- --------
Investing Activities
Purchases of investments.............. (6,061) (6,869) (5,854)
Sales of investments.................. 4,901 4,256 3,543
Maturity of investments............... 1,761 2,329 2,693
-------- -------- --------
Net cash provided by (used for)
investing activities............... 601 (284) 382
-------- -------- --------
Financing Activities
Capital contribution.................. -- -- 38
Net disbursements for investment and
universal life-type contracts charged
against policyholder accounts........ (1,009) (677) (443)
-------- -------- --------
Net cash used for financing
activities......................... (1,009) (677) (405)
-------- -------- --------
Net (decrease) increase in cash....... (37) 11 (3)
Cash -- beginning of year............. 54 43 46
-------- -------- --------
Cash -- end of year................... $ 17 $ 54 $ 43
-------- -------- --------
-------- -------- --------
Supplemental Disclosure of Cash Flow
Information:
Net Cash Paid During the Year for:
Income taxes.......................... $ 263 $ 9 $ 189
Noncash Investing Activities:
Due to the recapture of an in force block of business previously ceded
to MBL Life Assurance Co. of New Jersey, reinsurance recoverables of
$4,546 were exchanged for the fair value of assets comprised of
$4,354 in policy loans and $192 in other assets.
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
F-6 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
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 ("Hartford Life Insurance Company" or
the "Company"), Hartford Life and Annuity Insurance Company (ILA) and 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). Pursuant to an initial
public offering (the "IPO") on May 22, 1997, Hartford Life sold 26 million
shares of Class A Common Stock 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 outstanding promissory notes and line of credit with
the remaining $160 contributed by Hartford Life to HLA to support growth in its
core businesses. Hartford Life became a publicly traded company upon the sale of
26 million shares representing approximately 18.6% of the equity ownership in
Hartford Life. 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, HLA, the Company is a leading financial services and
insurance 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 disability insurance
that is directly written by the Company and is substantially ceded to its
parent, HLA, and (d) corporate owned life insurance.
2. SUMMARY OF 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 November 1998, the Emerging Issues Task Force (EITF) reached consensus on
Issue No. 98-15, "Structured Notes Acquired for a Specific Investment Strategy".
This EITF issue requires companies to account for structured notes acquired for
a specific investment strategy, as a unit. Affected companies that entered into
these notes prior to September 25, 1998 are required to either restate prior
period financial statements to conform with the prescribed unit accounting model
or disclose the related impact on earnings for all periods presented and
cumulatively over the life of the instruments had the registrant accounted for
the structure as a unit. Based upon recently prescribed current generally
accepted accounting principles for such types of transactions entered into after
September 24, 1998, there was no additional earnings impact to the Company
related to combined structured note transactions. As of December 31, 1998, the
Company does not hold any combined structured notes.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities". The new standard establishes
accounting and reporting guidance for derivative instruments, including certain
derivative instruments embedded in other contracts. The standard requires, among
other things, that all derivatives be carried on the balance sheet at fair
value. The standard also specifies hedge accounting criteria under which a
derivative can qualify for special accounting. In order to receive special
accounting, the derivative instrument must qualify as either
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES F-7
- --------------------------------------------------------------------------------
a hedge of the fair value or the variability of the cash flow of a qualified
asset or liability. Special accounting for qualifying hedges provides for
matching the timing of gain or loss recognition on the hedging instrument with
the recognition of the corresponding changes in value of the hedged item. SFAS
No. 133 will be effective for fiscal years beginning after June 15, 1999.
Initial application for Hartford Life Insurance Company will begin for the first
quarter of the year 2000. While Hartford Life Insurance Company is currently in
the process of quantifying the impact of SFAS No. 133, the Company is reviewing
its derivative holdings in order to take actions needed to minimize potential
volatility, while at the same time maintaining the economic protection needed to
support the goals of its business.
In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) No. 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use". The SOP provides
guidance on accounting for the costs of internal use software and in determining
whether the software is for internal use. The SOP defines internal use software
as software that is acquired, internally developed, or modified solely to meet
internal needs and identifies stages of software development and accounting for
the related costs incurred during the stages. This statement is effective for
fiscal years beginning after December 15, 1998 and is not expected to have a
material impact on the Company's financial condition or results of operations.
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income", which establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. The objective of this statement is to report a measure of
all changes in equity of an enterprise that result from transactions and other
economic events of the period other than transactions with owners. Comprehensive
income is the total of net income and all other nonowner changes in equity.
Accordingly, the Company has reported comprehensive income in the Consolidated
Statements of Changes in Stockholder's Equity.
In December 1997, the AICPA issued 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.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information". The new standard requires public
business enterprises to disclose certain financial and descriptive information
about reportable operating segments in annual financial statements and in
condensed financial statements of interim periods. Operating segments are
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and assessing performance. SFAS No. 131 also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The Company adopted SFAS No. 131 in 1998.
For additional information, see Note 13.
On November 14, 1996, the 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 FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities" which is
effective for transfers and servicing of financial 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. Adoption of SFAS No. 125 did not have a material
effect on the Company's financial condition or results of operations.
Effective January 1, 1996, Hartford Life Insurance 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. 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 investment products and universal life-type policies consist of
policy charges for policy administration, cost of insurance and surrender
charges assessed to policy account balances and are recognized in the period in
which services are provided. Premiums for traditional life insurance policies
are recognized as revenues when they are due from policyholders.
<PAGE>
F-8 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
(D) FUTURE POLICY BENEFITS AND OTHER POLICYHOLDER FUNDS
Liabilities for future policy benefits are computed by the net level premium
method using interest rate assumptions varying from 3% to 11% and withdrawal and
mortality assumptions appropriate at the time the policies were issued.
Liabilities for universal life-type and investment contracts are stated at
policyholder account values before surrender charges.
(E) INVESTMENTS
Hartford Life Insurance 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 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. 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. Net realized capital gains
and losses, excluding those related to immediate participation guaranteed
contracts, 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 additional impairment, if necessary.
(F) DERIVATIVE INSTRUMENTS
Hartford Life Insurance 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. Hartford Life Insurance 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 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. For a discussion
of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"
issued in June 1998, see (b) Changes in Accounting Principles.
Derivative instruments must be designated at inception as a hedge and
measured for effectiveness both at inception and on an ongoing basis. Hartford
Life Insurance Company's correlation threshold for hedge designation is 80% to
120%. If correlation, which is assessed monthly and measured based on a rolling
three month average, falls outside the 80% to 120% range, 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
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES F-9
- --------------------------------------------------------------------------------
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.
(G) SEPARATE ACCOUNTS
Hartford Life Insurance Company maintains separate account assets and
liabilities which are reported at fair value. Separate account assets are
segregated from other investments. Separate accounts reflect two categories of
risk assumption: non-guaranteed separate accounts, wherein the policyholder
assumes the investment risk and rewards, and guaranteed separate account assets,
wherein the Company contractually guarantees either a minimum return or account
value to the policyholder.
(H) 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, usually 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
charges, mortality and expense margins. Actual gross profits can vary from
management's estimates resulting in increases or decreases in the rate of
amortization. Management periodically updates these estimates, when appropriate,
and evaluates the recoverability of the deferred acquisition cost asset. When
appropriate, management revises its assumptions on the estimated gross profits
of these contracts and the cumulative amortization for the books of business are
re-estimated and adjusted by a cumulative charge or credit to income.
Acquisition costs and their related deferral are included in the Company's
other expenses as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Commissions.......................... $ 1,069 $ 976 $ 848
Deferred acquisition costs........... (891) (862) (823)
Other................................ 588 472 402
--------- --------- ---------
Total other expenses............. $ 766 $ 586 $ 427
--------- --------- ---------
--------- --------- ---------
</TABLE>
(I) DIVIDENDS TO POLICYHOLDERS
Certain life insurance policies contain dividend payment provisions that
enable the policyholder to participate in the earnings on that participating
block of business. The participating insurance in force accounted for 71%, 55%
and 44% in 1998, 1997 and 1996, respectively, of total insurance in force.
3. INVESTMENTS AND DERIVATIVE INSTRUMENTS
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Interest income from fixed
maturities......................... $ 952 $ 932 $ 918
Interest income from policy loans... 789 425 477
Income from other investments....... 32 26 15
--------- --------- ---------
Gross investment income............. 1,773 1,383 1,410
Less: Investment expenses........... 14 15 13
--------- --------- ---------
Net investment income............... $ 1,759 $ 1,368 $ 1,397
--------- --------- ---------
--------- --------- ---------
</TABLE>
(B) COMPONENTS OF NET REALIZED CAPITAL (LOSSES) GAINS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1998 1997 1996
--------- ----- ---------
<S> <C> <C> <C>
Fixed maturities......................... $ (28) $ (7) $ (201)
Equity securities........................ 21 12 2
Real estate and other.................... 5 (1) (4)
Less: Decrease in liability to
policyholders for realized capital
gains................................... -- -- (10)
--------- --- ---------
Net realized capital (losses) gains...... $ (2) $ 4 $ (213)
--------- --- ---------
--------- --- ---------
</TABLE>
<PAGE>
F-10 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
(C) NET UNREALIZED CAPITAL (LOSSES) GAINS ON EQUITY SECURITIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Gross unrealized capital gains.............. $ 2 $ 14 $ 13
Gross unrealized capital losses............. (1) -- (1)
--- --- ---
Net unrealized capital gains................ 1 14 12
Deferred income tax expense................. -- 5 4
--- --- ---
Net unrealized capital gains, net of tax.... 1 9 8
Balance -- beginning of year................ 9 8 1
--- --- ---
Net change in unrealized capital gains on
equity securities.......................... $ (8) $ 1 $ 7
--- --- ---
--- --- ---
</TABLE>
(D) NET UNREALIZED CAPITAL GAINS (LOSSES) ON FIXED MATURITIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Gross unrealized capital gains.......... $ 421 $ 371 $ 386
Gross unrealized capital losses......... (108) (80) (341)
Unrealized capital gains credited to
policyholders.......................... (32) (30) (11)
--------- --------- ---------
Net unrealized capital gains............ 281 261 34
Deferred income tax expense............. 98 91 12
--------- --------- ---------
Net unrealized capital gains, net of
tax.................................... 183 170 22
Balance -- beginning of year............ 170 22 (58)
--------- --------- ---------
Net change in unrealized capital gains
(losses) on fixed maturities........... $ 13 $ 148 $ 80
--------- --------- ---------
--------- --------- ---------
</TABLE>
(E) FIXED MATURITY INVESTMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U. S. Government and Government agencies and authorities
(guaranteed and sponsored)...................................... $ 121 $ 2 $ -- $ 123
U. S. Government and Government agencies and authorities
(guaranteed and sponsored) -- asset backed...................... 1,001 23 (8) 1,016
States, municipalities and political subdivisions................ 165 8 -- 173
International governments........................................ 393 26 (7) 412
Public utilities................................................. 844 33 (3) 874
All other corporate including international...................... 5,469 260 (42) 5,687
All other corporate -- asset backed.............................. 4,155 58 (42) 4,171
Short-term investments........................................... 1,847 -- -- 1,847
Certificates of deposit.......................................... 510 11 (6) 515
---------- ----- ----------- ----------
Total fixed maturities....................................... $14,505 $421 $(108) $14,818
---------- ----- ----------- ----------
---------- ----- ----------- ----------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U. S. Government and Government agencies and authorities
(guaranteed and sponsored)...................................... $ 217 $ 3 $ (1) $ 219
U. S. Government and Government 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>
The amortized cost and estimated fair value of fixed maturity investments as
of December 31, 1998 by estimated maturity year are shown below. Expected
maturities differ from contractual maturities due to call or prepayment
provisions. Asset backed securities, including mortgage backed securities and
collateralized mortgage obligations, are distributed to maturity year based on
the Company's estimates of the rate of future prepayments of principal over the
remaining lives of the securities. These estimates are developed using
prepayment speeds provided in broker
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES F-11
- --------------------------------------------------------------------------------
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......................... $ 3,047 $ 3,116
Over one year through five years......... 4,796 4,843
Over five years through ten years........ 3,242 3,318
Over ten years........................... 3,420 3,541
----------- -----------
Total................................ $ 14,505 $ 14,818
----------- -----------
----------- -----------
</TABLE>
Sales of fixed maturities, excluding short-term fixed maturities, for the
years ended December 31, 1998, 1997 and 1996 resulted in proceeds of $3.2
billion, $4.2 billion and $3.5 billion, gross realized capital gains of $103,
$169 and $87, gross realized capital losses (including writedowns) of $131, $176
and $298, respectively. In 1996, gross realized capital losses includes an other
than temporary impairment of $137 related to the Company's block of guaranteed
investment contract business written prior to 1995 which could not recover to
amortized cost prior to sale. Sales of equity security investments for the years
ended December 31, 1998, 1997 and 1996 resulted in proceeds of $35, $132 and $74
and gross realized capital gains of $21, $12 and $2, respectively, and no gross
realized capital losses for all periods.
(F) CONCENTRATION OF CREDIT RISK
The Company is not exposed to any significant concentration of credit risk
in fixed maturities of a single issuer greater than 10% of stockholder's equity.
(G) DERIVATIVE INSTRUMENTS
Hartford Life Insurance 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.
Hartford Life Insurance 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.
Hartford Life Insurance Company's derivative program is monitored by an
internal compliance unit and is reviewed by senior management and Hartford
Life's Finance Committee of the Board of Directors. 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 $6.2 billion and $6.5 billion ($3.9 billion and $4.6 billion related to
the Company's investments, $2.3 billion and $1.9 billion on the Company's
liabilities) as of December 31, 1998 and 1997, respectively.
The tables below provide a summary of derivative instruments held by
Hartford Life Insurance Company as of December 31, 1998 and 1997, segregated by
major investment and liability category:
<PAGE>
F-12 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 -- AMOUNT HEDGED (NOTIONAL AMOUNTS)
----------------------------------------------------------------------------------
FOREIGN
TOTAL ISSUED PURCHASED INTEREST CURRENCY TOTAL
CARRYING CAPS & CAPS & FUTURES RATE SWAPS NOTIONAL
ASSETS HEDGED VALUE FLOORS FLOORS (2) SWAPS (3) AMOUNT
- ----------------------------------- -------- -------- ---------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset backed securities (excluding
inverse floaters and
anticipatory)..................... $ 5,163 $ -- $ 188 $ 3 $ 885 $-- $ 1,076
Inverse floaters (1)............... 24 44 55 -- -- -- 99
Anticipatory (4)................... -- -- -- -- 235 -- 235
Other bonds and notes.............. 7,683 461 597 18 1,300 90 2,466
Short-term investments............. 1,948 -- -- -- -- -- --
-------- -------- ---------- --- ---------- --- ----------
Total fixed maturities......... 14,818 505 840 21 2,420 90 3,876
Equity securities, policy loans and
other investments................. 6,979 -- -- -- -- -- --
-------- -------- ---------- --- ---------- --- ----------
Total investments.............. $ 21,797 505 840 21 2,420 90 3,876
Other policyholder funds....... $ 19,615 1,100 50 -- 1,195 -- 2,345
-------- -------- ---------- --- ---------- --- ----------
Total derivative instruments --
notional value................ $ 1,605 $ 890 $ 21 $ 3,615 $90 $ 6,221
-------- -------- ---------- --- ---------- --- ----------
Total derivative instruments --
fair value.................... $ (6) $ 19 $ -- $ 27 $(7) $ 33
-------- -------- ---------- --- ---------- --- ----------
-------- -------- ---------- --- ---------- --- ----------
</TABLE>
<TABLE>
<CAPTION>
1997 -- AMOUNT HEDGED (NOTIONAL AMOUNTS)
--------------------------------------------------------------------------
FOREIGN
TOTAL ISSUED PURCHASED INTEREST CURRENCY TOTAL
CARRYING CAPS & CAPS & RATE SWAPS NOTIONAL
ASSETS HEDGED VALUE FLOORS FLOORS FUTURES (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
Other policyholder funds....... $ 21,034 10 150 -- 1,747 -- 1,907
-------- ------- ------------ --- --------- --- -------
Total derivative instruments --
notional value................ $ 1,019 $ 2,094 $ 50 $ 3,251 $ 91 $6,505
-------- ------- ------------ --- --------- --- -------
Total derivative instruments --
fair value.................... $ (8) $ 23 $ -- $ 19 $ (6 ) $ 28
-------- ------- ------------ --- --------- --- -------
-------- ------- ------------ --- --------- --- -------
</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, 1998 and 1997, approximately 5% and 44% ,
respectively, of the notional futures contracts expire within one year.
(3) As of December 31, 1998 and 1997, approximately 11% and 16%,
respectively, of foreign currency swaps expire within one year.
(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. As of December 31, 1998 and 1997, the Company had no
deferred gains for interest rate swaps. During 1998, $1.5 in deferred gains were
basis adjusted.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES F-13
- --------------------------------------------------------------------------------
The following is a reconciliation of notional amounts by derivative type and
strategy as of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 MATURITIES/ DECEMBER 31, 1998
NOTIONAL AMOUNT ADDITIONS TERMINATIONS (1) NOTIONAL AMOUNT
----------------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
BY DERIVATIVE TYPE
Caps......................................... $1,239 $1,000 $ 327 $1,912
Floors....................................... 1,864 -- 1,281 583
Swaps/Forwards............................... 3,342 1,838 1,475 3,705
Futures...................................... 50 8 37 21
Options...................................... 10 -- 10 --
------- -------- ------- -------
Total.................................... $6,505 $2,846 $3,130 $6,221
------- -------- ------- -------
BY STRATEGY
Liability.................................... $1,907 $1,099 $ 661 $2,345
Anticipatory................................. -- 242 7 235
Asset........................................ 1,805 1,260 667 2,398
Portfolio.................................... 2,793 245 1,795 1,243
------- -------- ------- -------
Total.................................... $6,505 $2,846 $3,130 $6,221
------- -------- ------- -------
------- -------- ------- -------
</TABLE>
- ---------
(1) During 1998, the Company had no significant gains or losses on
terminations of hedge positions using derivative financial instruments.
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS 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. Hartford
Life Insurance Company uses the following methods and assumptions in estimating
the fair value of each class of financial instrument.
Fair value for fixed maturities and marketable equity securities
approximates those quotations published by applicable stock exchanges or
received from other reliable sources.
For policy loans, carrying amounts approximate fair value.
Fair value for other invested assets primarily consist of partnerships and
trusts that are based on external market valuations from partnership and trust
management as well as mortgage loans where carrying amounts approximate fair
value.
Other policyholder funds fair value information is determined by estimating
future cash flows, discounted at the current market rate.
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 periodic comparison to dealer quoted prices.
The carrying amount and fair values of Hartford Life Insurance Company's
financial instruments as of December 31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
------------------ ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- ------- --------- -------
<S> <C> <C> <C> <C>
ASSETS
Fixed maturities..................................... $ 14,818 $14,818 $ 14,176 $14,176
Equity securities.................................... 31 31 180 180
Policy loans......................................... 6,684 6,684 3,756 3,756
Other investments.................................... 264 309 47 91
LIABILITIES
Other policyholder funds (1)......................... $ 11,709 $11,726 $ 11,769 $11,755
</TABLE>
- ---------
(1) Excludes corporate owned life insurance and universal life insurance
contracts.
<PAGE>
F-14 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
5. SEPARATE ACCOUNTS
Hartford Life Insurance Company maintained separate account assets and
liabilities totaling $90.3 billion and $69.1 billion as of December 31, 1998 and
1997, respectively, which are reported at fair value. Separate account assets,
which are segregated from other investments, reflect two categories of risk
assumption: non-guaranteed separate accounts totaling $80.6 billion and $58.6
billion as of December 31, 1998 and 1997, respectively, wherein the policyholder
assumes the investment risk, and guaranteed separate accounts totaling $9.7 and
$10.5 billion as of December 31, 1998 and 1997, respectively, wherein Hartford
Life Insurance Company contractually guarantees either a minimum return or
account value to the policyholder. Included in non-guaranteed separate account
assets were policy loans totaling $1.8 billion and $1.9 billion as of December
31, 1998 and 1997, 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 and other revenues were $908, $699 and $538
in 1998, 1997 and 1996, respectively. The guaranteed separate accounts include
fixed market value adjusted (MVA) individual annuity and modified guaranteed
life insurance. The average credited interest rate on these contracts was 6.6%
and 6.5% as of December 31, 1998 and 1997, respectively. The assets that support
these liabilities were comprised of $9.5 billion and $10.2 billion in fixed
maturities as of December 31, 1998 and 1997, respectively. 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 $40 and $119 in carrying value and $3.5 billion and
$3.0 billion in notional amounts as of December 31, 1998 and 1997, respectively.
6. STATUTORY RESULTS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Statutory net income................ $ 211 $ 214 $ 144
--------- --------- ---------
Statutory surplus................... $ 1,676 $ 1,441 $ 1,207
--------- --------- ---------
--------- --------- ---------
</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 1999 is estimated to be $168.
Hartford Life Insurance Company and its domestic insurance subsidiaries
prepare their statutory financial statements in accordance with accounting
practices prescribed by the State of Connecticut. Prescribed statutory
accounting practices include publications of the National Association of
Insurance Commissioners, as well as state laws, regulations, and general
administrative rules.
7. STOCK COMPENSATION PLANS
Hartford Life Insurance Company's employees are included in the 1997
Hartford Life, Inc. Incentive Stock Plan (the "Plan"), which was adopted during
the second quarter of 1997. 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 million
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 Hartford
Life, Inc. 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 121,943 and
54,316 shares under the ESPP in 1998 and 1997, respectively. The weighted
average fair value of the discount under the ESPP was $13.80 per share in 1998
and $9.63 per share in 1997.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES F-15
- --------------------------------------------------------------------------------
8. POSTRETIREMENT BENEFIT AND SAVINGS PLANS
(A) PENSION PLANS
Hartford Life Insurance 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 $6 in 1998 and $5
in both 1997 and 1996.
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 1998, 1997 and 1996.
The assumed rate in the per capita cost of health care (the health care
trend rate) was 7.8% for 1998, decreasing ratably to 5.0% in the year 2003.
Increasing the health care trend rates by one percent per year would have an
immaterial impact on the accumulated postretirement benefit obligation and the
annual expense. To the extent that the actual experience differs from the
inherent assumptions, the effect will be amortized over the average future
service of 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 Hartford Life Insurance Company for the above-mentioned
plan was approximately $4 and $2 in 1998 and 1997, respectively.
9. REINSURANCE
Hartford Life Insurance 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,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Gross premiums...................... $ 2,722 $ 2,164 $ 2,138
Assumed............................. 150 159 190
Ceded............................... (654) (686) (623)
--------- --------- ---------
Net premiums and other
considerations................... $ 2,218 $ 1,637 $ 1,705
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company ceded approximately $128, $76 and $100 of group life premium to
HLA in 1998, 1997 and 1996, respectively, representing $38.4 billion, $33.6
billion and $33.3 billion of insurance in force, respectively. The Company ceded
$383, $339 and $318 of accident and health premium to HLA in 1998, 1997 and
1996, respectively. The Company assumed $82, $89 and $101 of premium in 1998,
1997 and 1996, respectively, representing $7.4 billion, $8.2 billion and $8.5
billion of individual life insurance in force, respectively, from HLA.
Life reinsurance recoveries, which reduce death and other benefits,
approximated $97, $158 and $140 for the years ended December 31, 1998, 1997 and
1996, respectively.
Hartford Life Insurance Company has no significant reinsurance-related
concentrations of credit risk.
10. 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 own 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. It is the intention of The
Hartford and its non-life subsidiaries to file a single consolidated Federal
income tax return. The life insurance companies will file a separate
consolidated federal income tax return. The Company's effective tax rate was
35%, 36% and 35% in 1998, 1997 and 1996, respectively.
<PAGE>
F-16 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Income tax expense is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Current.................................. $ 307 $ 162 $ 118
Deferred................................. (119) 5 (98)
--------- --------- ---------
Income tax expense..................... $ 188 $ 167 $ 20
--------- --------- ---------
--------- --------- ---------
</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,
---------------------------------
1998 1997 1996
--------- --------- -----
<S> <C> <C> <C>
Tax provision at the U.S. Federal
statutory rate........................... $ 188 $ 164 $ 20
Other..................................... -- 3 --
--------- --------- ---
Total................................... $ 188 $ 167 $ 20
--------- --------- ---
--------- --------- ---
</TABLE>
Deferred tax assets (liabilities) include the following as of December 31:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Tax basis deferred policy acquisition costs.... $ 751 $ 639
Financial statement deferred policy acquisition
costs and reserves............................ 103 69
Employee benefits.............................. 4 8
Net unrealized capital gains on securities..... (98) (96)
Investments and other.......................... (296) (272)
--------- ---------
Total........................................ $ 464 $ 348
--------- ---------
--------- ---------
</TABLE>
Hartford Life Insurance Company had a current tax payable of $65 and $64 as
of December 31, 1998 and 1997, respectively.
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, based on current tax law,
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, 1998 was $104.
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, 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 $47, $34 and $40 in 1998, 1997 and 1996,
respectively. Management believes that the methods used are reasonable.
12. COMMITMENTS AND CONTINGENT LIABILITIES
(A) LITIGATION
Hartford Life Insurance 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, at the
present time the Company does not anticipate that the ultimate liability arising
from such pending or threatened litigation, after consideration of provisions
made for potential losses and costs of defense, will have a material adverse
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. Part of the assessments
paid by the Company and its subsidiaries pursuant to these laws may be used as
credits for a portion of the associated premium taxes. The Company paid guaranty
fund assessments of approximately $9, $15 and $11 in 1998, 1997 and 1996,
respectively, of which $4, $4 and $5, respectively, were estimated to be
creditable against premium taxes.
(C) LEASES
The rent paid to Hartford Fire for space occupied by the Company was $7 in
both 1998 and 1997 and $3 in 1996. Future minimum rental commitments are as
follows:
<TABLE>
<S> <C>
1999............. $ 7
2000............. 12
2001............. 12
2002............. 13
2003............. 13
Thereafter....... 74
---------
Total.......... $ 131
---------
---------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES F-17
- --------------------------------------------------------------------------------
Rental expense is recognized on a level basis over the term of the primary
sublease, which expires on December 31, 2009, and amounted to approximately $9
in both 1998 and 1997 and $8 in 1996.
(D) TAX MATTERS
Hartford Life's federal income tax returns are routinely audited by the
Internal Revenue Service. Hartford Life is currently under audit for the years
1993 through 1995, with the audit for the years 1996 through 1997 expected to
begin during early 1999. Management believes that adequate provision has been
made in the financial statements for items that may result from tax examinations
and other tax related matters.
(E) INVESTMENTS
As of December 31, 1998, Hartford Life Insurance Company held $71 of asset
backed securities securitized and serviced by Commercial Financial Services,
Inc. (CFS) of which $50 were included in the Company's general account and $21
in the Company's guaranteed separate account. In October 1998, the Company
became aware of allegations of improper activities at CFS. On December 11, 1998,
CFS filed for protection under Chapter 11 of the Bankruptcy Code. As of December
31, 1998, CFS continues to service the asset backed securities, which remain
current on payments of principal and interest, however, the Company does not
expect to recover all of its principal investment. Based upon information
available in the fourth quarter 1998, the Company recognized a $25, after-tax,
writedown related to its holdings in CFS of which $18 was related to the
Company's general account assets. The ultimate realizable amount depends on the
outcome of the bankruptcy of CFS and these estimates are therefore subject to
material change as new information becomes available. The Company is presently
unable to determine the amount of further potential loss, if any, related to the
securities.
13. SEGMENT INFORMATION
Hartford Life Insurance Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information", during the fourth quarter of
1998. This statement replaces SFAS No. 14, "Financial Reporting for Segments of
a Business Enterprise", and establishes new standards for reporting information
about operating segments in annual financial statements and in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
This statement requires that the reportable operating segments be based on the
Company's internal operations. On this basis, Hartford Life Insurance Company's
segments represent strategic operations which offer different products and
services as well as serve different markets.
Hartford Life Insurance Company is organized into three reportable operating
segments which include Investment Products, Individual Life and Corporate Owned
Life Insurance (COLI). Investment Products offers individual variable annuities,
fixed market value adjusted (MVA) annuities and fixed and variable immediate
annuities, mutual funds, deferred compensation and retirement plan services,
structured settlement contracts and other special purpose annuity contracts.
Individual Life sells a variety of life insurance products, including variable
life, universal life, interest-sensitive whole life and term life insurance.
COLI primarily offers variable products used by employers to fund non-qualified
benefits or other post-employment benefit obligations as well as leveraged COLI.
The Company includes in "Other" corporate items not directly allocable to any of
its reportable operating segments as well as certain employee benefit products
including group life and disability insurance that is directly written by the
Company and is substantially ceded to its parent, HLA.
The accounting policies of the reportable operating segments are the same as
those described in the summary of significant accounting policies in Note 2.
Hartford Life Insurance Company evaluates performance of its segments based on
revenues, net income and the segment's return on allocated capital. The Company
charges direct operating expenses to the appropriate segment and allocates the
majority of indirect expenses to the segments based on an intercompany expense
arrangement. Intersegment revenues are not significant and primarily occur
between corporate and the operating segments. These amounts include interest
income on allocated surplus and the amortization of net realized capital gains
and losses through net investment income utilizing the duration of the segment's
investment portfolios. The Company's revenues are primarily derived from
customers within the United States. The Company's long-lived assets primarily
consist of deferred policy acquisition costs and deferred tax assets from within
the United States. The following table outlines summarized financial information
concerning the Company's segments. The information for 1997 and 1996 has been
restated to conform to the 1998 presentation.
<TABLE>
<CAPTION>
INVESTMENT INDIVIDUAL
1998 PRODUCTS LIFE COLI OTHER TOTAL
- ------------------------------------------------------- --------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Total revenues......................................... $ 1,779 $ 543 $ 1,567 $ 86 $ 3,975
Net investment income.................................. 736 181 793 49 1,759
Amortization of deferred policy acquisition costs...... 326 105 -- -- 431
Income tax expense (benefit)........................... 145 35 12 (4) 188
Net income (loss)...................................... 270 64 24 (8) 350
Assets................................................. 87,207 5,228 22,631 3,197 118,263
</TABLE>
<PAGE>
F-18 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INDIVIDUAL
1997 PRODUCTS LIFE COLI OTHER TOTAL
- ------------------------------------------------------- --------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Total revenues......................................... $ 1,510 $ 487 $ 980 $ 32 $ 3,009
Net investment income.................................. 739 164 429 36 1,368
Amortization of deferred policy acquisition costs...... 250 83 -- 2 335
Income tax expense..................................... 111 30 15 11 167
Net income............................................. 206 55 27 14 302
Assets................................................. 72,288 4,914 17,800 2,743 97,745
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT INDIVIDUAL
1996 PRODUCTS LIFE COLI OTHER TOTAL
- ------------------------------------------------------- --------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Total revenues......................................... $ 1,002 $ 440 $ 1,360 $ 87 $ 2,889
Net investment income.................................. 684 153 480 80 1,397
Amortization of deferred policy acquisition costs...... 174 60 -- -- 234
Income tax expense (benefit)........................... (42 ) 24 11 27 20
Net income (loss)...................................... (77 ) 44 26 45 38
Assets................................................. 57,410 3,753 14,222 2,377 77,762
</TABLE>
14. QUARTERLY RESULTS FOR 1998 AND 1997 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
-------------------- -------------------- -------------------- --------------------
1998 1997 1998 1997 1998 1997 1998 1997
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues........................... $ 915 $ 651 $ 721 $ 645 $ 826 $ 679 $ 1,513 $ 1,034
Benefits, claims and expenses...... 787 550 591 536 688 550 1,371 904
Net income......................... 83 63 85 74 89 81 93 84
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES F-19
- --------------------------------------------------------------------------------
SCHEDULE I -- SUMMARY OF INVESTMENTS -- OTHER THAN INVESTMENTS IN AFFILIATES
AS OF DECEMBER 31, 1998
(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. Government and Government agencies
and authorities (guaranteed and
sponsored)................................ $ 121 $ 123 $ 123
U. S. Government and Government agencies
and authorities (guaranteed and sponsored)
-- asset backed........................... 1,001 1,016 1,016
States, municipalities and political
subdivisions.............................. 165 173 173
Foreign governments........................ 393 412 412
Public utilities........................... 844 874 874
All other corporate including
international............................. 5,469 5,687 5,687
All other corporate -- asset backed........ 4,155 4,171 4,171
Short-term investments..................... 1,847 1,847 1,847
Certificates of deposit...................... 510 515 515
------- ------- -------
Total fixed maturities....................... 14,505 14,818 14,818
------- ------- -------
Equity Securities
Common Stocks
Industrial and miscellaneous............... 30 31 31
------- ------- -------
Total equity securities...................... 30 31 31
------- ------- -------
Total fixed maturities and equity
securities.................................. 14,535 14,849 14,849
------- ------- -------
Policy Loans................................. 6,684 6,684 6,684
------- ------- -------
Other Investments
Mortgage loans on real estate.............. 206 207 206
Other invested assets...................... 58 102 58
------- ------- -------
Total other investments...................... 264 309 264
------- ------- -------
Total investments............................ $21,483 $21,842 $21,797
------- ------- -------
------- ------- -------
</TABLE>
<PAGE>
F-20 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
DEFERRED
POLICY FUTURE OTHER PREMIUMS NET
ACQUISITION POLICY POLICYHOLDER AND OTHER INVESTMENT
SEGMENT COSTS BENEFITS FUNDS CONSIDERATIONS INCOME
- --------------------------------------------- ----------- --------- ---------- --------------- ---------
<S> <C> <C> <C> <C> <C>
1998
Investment Products.......................... $2,823 $2,407 $ 9,194 $1,043 $ 736
Individual Life.............................. 931 466 2,307 363 181
Corporate Owned Life Insurance............... -- 225 8,097 774 793
Other........................................ -- 497 17 38 49
----------- --------- ---------- ------ ---------
Consolidated operations...................... $3,754 $3,595 $19,615 $2,218 $1,759
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
1997
Investment Products.......................... $2,478 $2,070 $ 9,620 $ 771 $ 739
Individual Life.............................. 837 392 2,182 323 164
Corporate Owned Life Insurance............... -- 56 9,259 551 429
Other........................................ -- 541 (27) (8) 36
----------- --------- ---------- ------ ---------
Consolidated operations...................... $3,315 $3,059 $21,034 $1,637 $1,368
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
1996
Investment Products.......................... $2,030 $1,526 $10,140 $ 537 $ 684
Individual Life.............................. 730 346 2,160 287 153
Corporate Owned Life Insurance............... -- -- 9,823 880 480
Other........................................ -- 602 11 1 80
----------- --------- ---------- ------ ---------
Consolidated operations...................... $2,760 $2,474 $22,134 $1,705 $1,397
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
<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>
1998
Investment Products.......................... $ -- $ 670 $326 $ -- $ 368
Individual Life.............................. (1) 262 105 -- 77
Corporate Owned Life Insurance............... -- 924 -- 329 278
Other........................................ (1) 55 -- -- 43
----------- ----------- ----- ----- -----
Consolidated operations...................... $ (2) $1,911 $431 $329 $ 766
----------- ----------- ----- ----- -----
----------- ----------- ----- ----- -----
1997
Investment Products.......................... $ -- $ 677 $250 $ -- $ 266
Individual Life.............................. -- 242 83 -- 77
Corporate Owned Life Insurance............... -- 439 -- 240 259
Other........................................ 4 21 2 -- (16)
----------- ----------- ----- ----- -----
Consolidated operations...................... $ 4 $1,379 $335 $240 $ 586
----------- ----------- ----- ----- -----
----------- ----------- ----- ----- -----
1996
Investment Products.......................... $(219) $ 744 $175 $ -- $ 203
Individual Life.............................. -- 245 59 -- 68
Corporate Owned Life Insurance............... -- 545 -- 634 144
Other........................................ 6 1 -- 1 12
----------- ----------- ----- ----- -----
Consolidated operations...................... $(213) $1,535 $234 $635 $ 427
----------- ----------- ----- ----- -----
----------- ----------- ----- ----- -----
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES F-21
- --------------------------------------------------------------------------------
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, 1998
Life insurance in force........................... $326,400 $ 200,782 $ 18,289 $143,907 12.7%
Premiums and other considerations
Life insurance and annuities.................... $ 2,329 $ 271 $ 142 $ 2,200 6.5%
Accident and health insurance................... 393 383 8 18 44.4%
-------- -------------- ------- --------
Total premiums and other considerations........... $ 2,722 $ 654 $ 150 $ 2,218 6.8%
-------- -------------- ------- --------
-------- -------------- ------- --------
For the year ended December 31, 1997
Life insurance in force......................... $245,487 $ 178,771 $ 33,156 $ 99,872 33.2%
Premiums and other considerations
Life insurance and annuities.................... $ 1,818 $ 340 $ 157 $ 1,635 9.6%
Accident and health insurance................... 346 346 2 2 100.0%
-------- -------------- ------- --------
Total premiums and other considerations........... $ 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%
Premiums and other considerations
Life insurance and annuities.................... $ 1,801 $ 298 $ 169 $ 1,672 10.1%
Accident and health insurance................... 337 325 21 33 63.6%
-------- -------------- ------- --------
Total premiums and other considerations........... $ 2,138 $ 623 $ 190 $ 1,705 11.1%
-------- -------------- ------- --------
-------- -------------- ------- --------
</TABLE>
<PAGE>
PART C
<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.
(15) Copy of Power of Attorney.
(16) Organizational Chart.
- -------------------------
(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>
-2-
Item 25. Directors and Officers of the Depositor
- ------------------------------------------------------------------------------
NAME POSITION WITH HARTFORD
- ------------------------------------------------------------------------------
Wendell J. Bossen Vice President
- ------------------------------------------------------------------------------
Gregory A. Boyko Senior Vice President, Director*
- ------------------------------------------------------------------------------
Peter W. Cummins Senior Vice President
- ------------------------------------------------------------------------------
Timothy M. Fitch Vice President
- ------------------------------------------------------------------------------
Mary Jane B. Fortin Vice President & Chief Accounting Officer
- ------------------------------------------------------------------------------
David T. Foy Senior Vice President & Treasurer
- ------------------------------------------------------------------------------
Lynda Godkin Senior Vice President, General Counsel and
Corporate Secretary, Director*
- ------------------------------------------------------------------------------
Lois W. Grady Senior Vice President
- ------------------------------------------------------------------------------
Stephen T. Joyce Vice President
- ------------------------------------------------------------------------------
Michael D. Keeler Vice President
- ------------------------------------------------------------------------------
Robert A. Kerzner Senior Vice President
- ------------------------------------------------------------------------------
Thomas M. Marra Executive Vice President, Director*
- ------------------------------------------------------------------------------
Joseph J. Noto Vice President
- ------------------------------------------------------------------------------
Craig R. Raymond Senior Vice President and Chief Actuary
- ------------------------------------------------------------------------------
Donald A. Salama Vice President
- ------------------------------------------------------------------------------
Lowndes A. Smith President and Chief Executive Officer, 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
Filed herewith as Exhibit 16.
<PAGE>
-3-
Item 27. Number of Contract Owners
As of March 31, 1999 there were 220,051 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 employee or officer 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 director or officer 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.
<PAGE>
-4-
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Item 29. Principal Underwriters
(a) HSD acts as principal underwriter for the following investment
companies:
Hartford Life Insurance Company - Separate Account One
Hartford Life Insurance Company - Separate Account Two
Hartford Life Insurance Company - Separate Account Two (DC Variable
Account I)
Hartford Life Insurance Company - Separate Account Two (DC Variable
Account II)
Hartford Life Insurance Company - Separate Account Two (QP Variable
Account)
Hartford Life Insurance Company - Separate Account Two (Variable
Account "A")
Hartford Life Insurance Company - Separate Account Two (NQ Variable
Account)
Hartford Life Insurance Company - Putnam Capital Manager Trust
Separate Account
Hartford Life Insurance Company - Separate Account Three
Hartford Life Insurance Company - Separate Account Five
Hartford Life Insurance Company - Separate Account Seven
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
Royal Life Insurance Company - Separate Account One
Royal Life Insurance Company - Separate Account Two
Alpine Life Insurance Company - Separate Account One
Alpine Life Insurance Company - Separate Account Two
<PAGE>
-5-
(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
Thomas M. Marra Executive Vice President, Director
Robert A. Kerzner Executive Vice President
Peter W. Cummins Senior Vice President
Lynda Godkin Senior Vice President, General Counsel and
Corporate Secretary
David T. Foy 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.
<PAGE>
-6-
(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.
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 12th
day of April, 1999.
HARTFORD LIFE INSURANCE COMPANY -
SEPARATE ACCOUNT TWO (VARIABLE ACCOUNT "A")
(Registrant)
*By: Thomas M. Marra *By: /s/ Brian Lord
--------------------------------------------- --------------------
Thomas M. Marra, Executive Vice President Brian Lord
Attorney-In-Fact
HARTFORD LIFE INSURANCE COMPANY
(Depositor)
*By: Thomas M. Marra
---------------------------------------------
Thomas M. Marra, Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons and in the
capacity and on the date indicated.
Gregory A. Boyko, Senior Vice President,
Director *
Lynda Godkin, Senior Vice President,
General Counsel & Corporate Secretary, Director*
Thomas M. Marra, Executive Vice *By: /s/ Brian Lord
President, Director * --------------------
Lowndes A. Smith, President & Brian Lord
Chief Operating Officer, Director * Attorney-In-Fact
David M. Znamierowski, Senior Vice President,
Director* April 12, 1999
--------------
<PAGE>
EXHIBIT INDEX
9. Opinion and Consent of Lynda Godkin, Senior Vice President, General
Counsel and Corporate Secretary.
(10) Consent of Arthur Andersen LLP, Independent Public Accountants.
(15) Copy of Power of Attorney.
(16) Organizational Chart.
<PAGE>
EXHIBIT 9
[LOGO]
Hartford Life
April 12, 1999 LYNDA GODKIN
SENIOR VICE PRESIDENT, GENERAL
COUNSEL & CORPORATE SECRETARY
LAW DEPARTMENT
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.
<PAGE>
Board of Directors
Hartford Life Insurance Company
April 12, 1999
Page 2
I hereby consent to the filing of this opinion as an exhibit to the Form N-4
registration statement for the Contracts and the Account.
Sincerely yours,
/s/ Lynda Godkin
Lynda Godkin
<PAGE>
EXHIBIT 10
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
Registration Statement File No. 33-19945 for Hartford Life Insurance Company
Separate Account Two on Form N-4.
/s/ Arthur Andersen LLP
Hartford, Connecticut
April 12, 1999
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
POWER OF ATTORNEY
-----------------
Gregory A. Boyko
David T. Foy
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, Christine Repasy,
Marianne O'Doherty, Thomas S. Clark and Brian Lord 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 under the Securities Act of 1933 and/or the Investment Company Act of
1940, and do hereby ratify any such signatures heretofore made by such
persons.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney for
the purpose herein set forth.
/s/ Gregory A. Boyko Dated as of January 15, 1999
- ------------------------------
Gregory A. Boyko
/s/ David T. Foy Dated as of January 15, 1999
- ------------------------------
David T. Foy
/s/ Lynda Godkin Dated as of January 15, 1999
- ------------------------------
Lynda Godkin
/s/ Thomas M. Marra Dated as of January 15, 1999
- ------------------------------
Thomas M. Marra
/s/ Lowndes A. Smith Dated as of January 15, 1999
- ------------------------------
Lowndes A. Smith
/s/ Raymond P. Welnicki Dated as of January 15, 1999
- ------------------------------
Raymond P. Welnicki
/s/ Lizabeth H. Zlatkus Dated as of January 15, 1999
- ------------------------------
Lizabeth H. Zlatkus
/s/ David M. Znamierowski Dated as of January 15, 1999
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David M. Znamierowski
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ORGANIZATIONAL CHART
<TABLE>
<CAPTION>
<S> <C>
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(DELAWARE)
|
---------------------------------------------
NUTMEG INSURANCE COMPANY |
(CONNECTICUT) THE HARTFORD INVESTMENT
| MANAGEMENT COMPANY
HARTFORD FIRE INSURANCE COMPANY (DELAWARE)
(CONNECTICUT) |
| |
HARTFORD ACCIDENT AND INDEMNITY COMPANY HARTFORD INVESTMENT
(CONNECTICUT) SERVICES, INC.
| (CONNECTICUT)
HARTFORD LIFE, INC.
(DELAWARE)
|
HARTFORD LIFE & ACCIDENT INSURANCE COMPANY
(CONNECTICUT)
|
|
|
-------------------------------------------------------------------------------------------------------------------------
| | | | | | | | |
ITT HARTFORD LIFE | | | | | | HLIC PLANCO
INTERNATIONAL LTD. | | | | | | CANADA FINANCIAL
(CONNECTICUT) | | | | | | HOLDINGS, INC. SERVICES,
| | | | | | | (CANADA) INCORPORATED
| | | | | | | | (PENNSYLVANIA)
| | | | | | | | |
| | ALPINE LIFE HARTFORD FINANCIAL HARTFORD LIFE HARTFORD AMERICAN | |
| | INSURANCE SERVICES LIFE INSURANCE COMPANY FINANCIAL MATURITY LIFE | |
| | COMPANY INSURANCE CO. (CONNECTICUT) SERVICES, LLC INSURANCE COMPANY | |
| | (CONNECTICUT) (CONNECTICUT) | (DELAWARE) (CONNECTICUT) | PLANCO, INC.
| | | | | | (PENNSYLVANIA)
| | ------------------------------------- | AML FINANCIAL, INC. |
HARTFORD CALMA | | | | | (CONNECTICUT) |
COMPANY | ROYAL LIFE HARTFORD HARTFORD | HARTFORD
(FLORIDA) | INSURANCE INTERNATIONAL LIFE AND | LIFE INSURANCE
| COMPANY LIFE REASSURANCE ANNUITY INSURANCE | COMPANY
| OF AMERICA CORP. COMPANY | OF CANADA
|(CONNECTICUT) (CONNECTICUT) (CONNECTICUT) | (CANADA)
| | |
| | |
| ITT HARTFORD |
| LIFE, LTD. |
| (BERMUDA) |
| |
| |
----------| ---------------------------------------------------------------------------------------------
| | | | | |
INTERNATIONAL MS FUND HL INVESTMENT HARTFORD HARTFORD SECURITIES HARTFORD COMP. EMP.
CORPORATE AMERICA 1993-K ADVISORS, LLC EQUITY SALES DISTRIBUTION BENEFITS SERVICE
MARKETING GROUP, INC. SPE, INC. (CONNECTICUT) COMPANY, INC. COMPANY, INC. COMPANY
(CONNECTICUT) (DELAWARE) | (CONNECTICUT) (CONNECTICUT) (CONNECTICUT)
| |
| |
THE EVERGREEN HARTFORD INVESTMENT
GROUP, INC. FINANCIAL SERVICES
(NEW YORK) COMPANY
(DELAWARE)
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<TABLE>
<S> <C>
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(DELAWARE)
|
NUTMEG INSURANCE COMPANY
(CONNECTICUT)
|
HARTFORD FIRE INSURANCE COMPANY
(CONNECTICUT)
|
----------------------------------------------------------------------------------------------------------------------------
| | |
| | ITT HARTFORD LIFE
| | -------INTERNATIONAL LTD.
| | | (CONNECTICUT)
| | | |
| | | ITT HARTFORD
| | | ----SUDAMERICANA
| | | | HOLDING S.A.
| | | | (ARGENTINA)
| | | |------------------------------------------------------
| | | | | |
| | | | HARTFORD GALICIA INSTITUTO DE
| | | | SEGUROS VIDA COMPANIA SALTA COMPANIA DE
| | | |--------DE VIDA DE SEGUROS S.A. SEGUROS DE VIDA S.A.
| | | | (URUGUAY) (ARGENTINA) (ARGENTINA)
| | | |
| | ICATU | | ITT HARTFORD
| | HARTFORD | |-----SEGUROS DE VIDA
| | SEGUROS S.A.----------| | (ARGENTINA)
| | (BRAZIL) | |
| | | | |
| | | | | ITT HARTFORD
| | -- ----------| | |------SEGUROS DE
| | | | | | RETIRO S.A.
| | | | | | (ARGENTINA)
|-----------|----------------|---------------|---|--------------------------------------------------------------------------
| | | | | |
| | | ICATU HARTFORD | | CONSULTORA DE CAPITALES
| | | FUNDO DE PENSAO | | S.A. SOCIEDAD GERENTE
| | | (BRAZIL) | |----DE FONDOS COMUNES
| | | | | | DE ENVERSION
| | | | | | (ARGENTINA)
| | | ICATU HARTFORD | |
| | | CAPITALIZACAO S.A. | | CLARIDAD
| | | (BRAZIL) | | ADMINISTRADORA DE
| | | | | |---FONDOS DE JUBILACIONES
| | | BRAZILCAP | | Y PENSIONES S.A.
| | | CAPITALIZACAO S.A. | | (ARGENTINA)
| | | (BRAZIL) | |
| | | | |
| | -------------------------- | |
| |--------------- | | |
| | | | |
HARTFORD FIRE HARTFORD FIRE | | |------- SEGPOOL S.A.
INTERNATIONAL------------INTERNATIONAL, LTD. | | | (ARGENTINA)
(GERMANY) GMBH (CONNECTICUT) | | |
(WEST GERMANY) | | |
| | |
ICATU HARTFORD | | | THESIS S.A.
ADMINISTRACAO | | |-------- (ARGENTINA)
DE BENEFICIOS LTDA-- | | |
(BRAZIL) | |
| |
----------------- |
| |
CAB |--------- U.O.R., S.A.
CORPORATION (ARGENTINA)
(BRITISH VIRGIN ISLANDS)
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<TABLE>
<S> <C>
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(DELAWARE)
|
NUTMEG INSURANCE COMPANY
(CONNECTICUT)
|
HARTFORD FIRE INSURANCE COMPANY
(CONNECTICUT)
|
- --------------------------------------------------------------------------------------------------------------------------------|
| |
THE HARTFORD INTERNATIONAL |
|-----------------------------------------------------------------------FINANCIAL SERVICES GROUP, INC. |
| | | (DELAWARE) |
| | | ----------------------|----------------- |
| | | | | | | |
ZWOLSCHE | | ITT HARTFORD LONDON AND | HARTFORD |
ALGEMEENE N.V. | | INTERNATIONAL, LTD. EDINBURGH | EUROPE, INC. |
(NETHERLANDS) | | (U.K.) INSURANCE GROUP, LTD.| (DELAWARE) |
| | | (U.K.) | |
| | | | | |
| | | ------------- | |
| | | | | |
| ITT ASSURANCES HARTFORD INTERNATIONAL | LONDON AND --ITT ERCOS |
| S.A. INSURANCE CO., N.V. |--- EDINBURGH DE SEGUROS Y |
| ZWOLSCHE ALGEMEENE (FRANCE) (BELGIUM) | INSURANCE CO., LTD. REASEGUROS S.A.|
|----SCHADEVERZEKERING | | (U.K.) (SPAIN) |
--------| N.V.----------------------------------- | | | |
| | (NETHERLANDS) | | | | |
Z.A. | | | | EXCESS INSURANCE |
- --VERZEKERINGEN | | | | COMPANY LTD. |
| N.V. | ZWOLSCHE ALGEMEENE | | | (U.K.) |
| (BELGIUM) |------HERVERZEKERING B.V. | | | |
| | -----| (NETHERLANDS) | | | LONDON AND |
| | | | | | |--- EDINBURGH LIFE |
| Z.A. LUX S.A. | | | | ASSURANCE CO., LTD. |
| (LUXEMBURG) | ZWOLSCHE ALGEMEENE | | | (U.K.) |
| |--LEVENS-VERZEKERING N.V.------------ | | | |
| | (NETHERLANDS) | | | | |
- ----------------|------------------------------------|------------|------|--------------|---------------------------------------|
| | | | | | |
| -------- | | | | |
| | | | | | | |
| ZWOLSCHE | ZWOLSCHE ALGEMEENE ZWOLSCHE ALGEMEENE | | | |
| ALGEMEENE |-----HYPOTHEKEN N.V. BELEGGINGEN III B.V. | | | |
| EUROPA B.V. | (NETHERLANDS) (NETHERLANDS) | | | |
| (NETHERLANDS) | ---------- | | |
- --------| | | | | |
| EXPLOITATIEMAAT- BELEGGINGSMAAT- | | |
|----- SCHAPPIJ SCHAPPIJ | | |
| BUIZERDLAAN B.V. BUIZERDLAAN B.V. | | |
| (NETHERLANDS) (NETHERLANDS) | | |
| | | |
| | | -----
| HOLLAND | |-------------------------- |
|---- BELEGGINGSGROEP B.V. | | | |
(NETHERLANDS) | |----------------- | |
| -------| | | |
| | | | | |
| | | | | |
F.A. KNIGHT | MACALISTER & LONDON AND | HARTFORD FIRE
& SON N.V. | DUNDAS, LTD. EDINBURGH | INTERNATIONAL
(BELGIUM) | (SCOTLAND) TRUSTEES, LTD. | SERVICIOS
| (U.K.) | (SPAIN)
------------------------- -----------
| | |
FENCOURT QUOTEL LONDON AND
PRINTERS, LTD. INSURANCE EDINBURGH
(U.K.) SYSTEMS, LTD. SERVICES, LTD.
(U.K.) (U.K.)
|
EUROSURE
INSURANCE
MARKETING, LTD.
(U.K.)
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