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File No. 33-88786
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-1
AMENDMENT NO. 2 TO REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
HARTFORD LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
CONNECTICUT
(State or other jurisdiction of incorporation or organization)
6355
(Primary Standard Industrial Classification Code Number)
06-094148
(I.R.S. Employer Identification Number)
P.O. BOX 2999
HARTFORD, CONNECTICUT 06104-2999
(Address of Principal Executive Office)
SCOTT K. RICHARDSON, ESQ.
ITT HARTFORD LIFE INSURANCE COMPANIES
P.O. BOX 2999
HARTFORD, CONNECTICUT 06104-2999
(860) 843-7563
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Approximate date of commencement of proposed sale to the public:
The Annuity covered by this registration statement is to be issued from time to
time after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [X]
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CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Each Class Amount to Offering Aggregate Amount of
of Securities to be be Price Offering Registration
Registered Registered per Unit Price Fee
- - ---------- ---------- -------- ----- ------
<S> <C> <C> <C> <C>
Deferred Annuity
Contracts & * * $2,000,000,000* PAID
Participating
Interests Therein
</TABLE>
*The maximum aggregate offering price is estimated solely for the purpose of
determining the registration fee. The amount being registered and the proposed
maximum offering price per unit are not applicable in that these contracts are
not issued in predetermined amounts or units.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
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HARTFORD LIFE INSURANCE COMPANY
Cross Reference Sheet Pursuant to
Regulation S-K, Item 501(b)
FORM S-1 ITEM NUMBER AND CAPTION HEADING IN PROSPECTUS
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus......... Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus............................ Inside Front Cover
3. Summary Information, Risk Factors and Description of Contracts;
Ratio of Earnings to Fixed Charges............. Financial Statements
4. Use of Proceeds................................ Investments by Hartford
Life
5. Determination of Offering Price................ Not Applicable
6. Dilution....................................... Not Applicable
7. Selling Security Holders....................... Not Applicable
8. Plan of Distribution........................... Distribution of Contracts
9. Description of Securities to be Registered..... Description of Contracts
10. Interests and Named Experts and Counsel........ Not Applicable
11. Information with Respect to the Registrant..... The Company; Executive
Officers and Directors;
Executive Compensation;
Financial Statements;
Legal Proceedings
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................... Not Applicable
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[LOGO]
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<TABLE>
<S> <C>
CRC-REGISTERED TRADEMARK-
HARTFORD LIFE INSURANCE COMPANY COMPOUNDRATE
P.O. Box 5085 CONTRACT
Hartford, CT 06102-5085 MODIFIED
Telephone: 1-800-862-6668 GUARANTEED
ANNUITY
CONTRACTS
</TABLE>
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This Prospectus describes participating interests in a group deferred annuity
Contract and individual deferred annuity Contracts. Both are designed and
offered to provide retirement programs for you if you are an eligible
individual. With respect to the Group Contract, eligible individuals include
persons who have established Accounts with certain broker-dealers which have
entered into a distribution agreement to offer participating interests in the
Contract, and members of other eligible groups. (See "Distribution of
Contracts," page 14.) An individual deferred annuity Contract is offered in
certain states and certain trusts. Certain Qualified Plans may also purchase the
Contract. (See Appendix A).
For a description of individual Contracts issued in certain states where this
revised Contract has not been approved, see Appendix B. Participation in a Group
Contract will be separately accounted for by the issuance of a Certificate
evidencing your interest under the Contract. Participation in an Individual
Contract is evidenced by the issuance of an Individual Annuity Contract. The
Certificate and Individual Annuity Contract are hereafter referred to as the
"Contract".
A minimum single purchase payment of at least $5,000 for Non-Qualified Contracts
($2,000 for Qualified Contracts) must accompany the application for a Contract.
Hartford Life Insurance Company ("Hartford Life") reserves the right to limit
the maximum single purchase payment amount. No additional payment is permitted
on a Contract although eligible individuals may purchase more than one Contract.
(See "Application and Purchase Payment," page 7.)
Purchase payments become part of the general assets of Hartford Life. Hartford
Life intends generally to invest proceeds from the Contracts in investment-grade
securities. (See "Investments by Hartford Life," page 14.)
- - --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- - --------------------------------------------------------------------------------
MUTUAL FUNDS AND INSURANCE PRODUCTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY ANY BANK, NOR ARE THEY INSURED BY THE FDIC; THEY ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
- - --------------------------------------------------------------------------------
The date of this Prospectus is May 1, 1996.
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Upon application, or purchase order, you select an initial Guarantee Period
from among those then offered by Hartford Life. (See, "Initial and Subsequent
Guarantee Periods," page 7 and "Establishment of Guarantee Rates and Current
Rates," page 8.) Your purchase payment (less surrenders and less applicable
premium taxes, if any) will earn interest at the Initial Guarantee Rate which is
an Annual Effective Rate of Interest. Interest is credited daily to Your account
using the Compound Interest Method. (See "Accumulation Period -- Initial and
Subsequent Guarantee Periods," page 7.)
At the end of each Guarantee Period, a subsequent Guarantee Period of the
same duration will begin unless, within the thirty day period preceding the end
of such Guarantee Period, you elect a different duration from among those
offered by us at that time. In no event may subsequent Guarantee Periods extend
beyond the Annuity Commencement Date then in effect.
The Account Value as of the first day of each subsequent Guarantee Period
will earn interest at the Subsequent Guarantee Rate. HARTFORD LIFE'S MANAGEMENT
WILL MAKE THE FINAL DETERMINATION AS TO GUARANTEE RATES TO BE DECLARED. WE
CANNOT PREDICT NOR CAN WE GUARANTEE FUTURE GUARANTEE RATES. (See, "Initial and
Subsequent Guarantee Periods," page 7 and "Establishment of Guarantee Rates and
Current Rates," page 8.)
Subject to certain restrictions, partial and total surrenders are permitted.
However, such surrenders may be subject to a surrender charge and/or a Market
Value Adjustment. A full or partial surrender made preceding the end of a
Guarantee Period will be subject to a Market Value Adjustment. Except as
described below, the surrender charge will be deducted from any partial or full
surrender made before the end of the seventh Contract Year. The surrender charge
will be equal to seven percent of the Gross Surrender Value in the first
Contract Year, and be reduced by one percentage point for each of the next six
Contract Years. FOR A SURRENDER MADE AT THE END OF THE INITIAL GUARANTEE PERIOD,
NO SURRENDER CHARGE WILL BE APPLIED PROVIDED SUCH SURRENDER OCCURS ON OR AFTER
THE END OF THE THIRD CONTRACT YEAR. FOR A SURRENDER MADE AT THE END OF ANY OTHER
GUARANTEE PERIOD, NO SURRENDER CHARGE WILL BE APPLIED PROVIDED SUCH SURRENDER
OCCURS ON OR AFTER THE END OF THE FIFTH CONTRACT YEAR. A REQUEST FOR SURRENDER
AT THE END OF A GUARANTEE PERIOD MUST BE RECEIVED IN WRITING WITHIN 30 DAYS
PRECEDING THE END OF THE GUARANTEE PERIOD. A MARKET VALUE ADJUSTMENT WILL NOT BE
APPLIED.
No surrender charges will be applicable to the application of your Account
Value to purchase an annuity on the Annuity Commencement Date. A Market Value
Adjustment will be applied if the Annuity Commencement Date is not at the end of
a Guarantee Period. To elect an Annuity Option you must notify us at least 30
days before the Annuity Commencement Date.
In addition, we will send you any interest that has been credited during the
prior twelve months if you so request in writing. No surrender charge or Market
Value Adjustment will be imposed on such interest payments. Any such surrender
may, however, be subject to tax. (See, "Surrenders," page 9 and "Federal Tax
Considerations," page 15.)
The Market Value Adjustment reflects the relationship between the Current
Rate for the duration remaining in the Guarantee Period at the time you request
the surrender and the applicable Guarantee Rate being applied to your Account
Value. Since Current Rates are based in part upon the investment yields
available to Hartford Life (see "Investments By Hartford Life," page 14), the
effect of the Market Value Adjustment will be closely related to the levels of
such yields. It is possible, therefore, that, should such yields increase
significantly from the time you purchased your Contract, the amount you would
receive upon a full surrender of your Contract may be less than your original
purchase payment. If such yields should decrease significantly, the amount you
would receive upon a full surrender may be more than your original purchase
payment.
We may defer payment of any partial or full surrender for a period not
exceeding 6 months from the date of our receipt of your written notice of
surrender or the period permitted by state insurance law, if less, but such a
deferral of payment will be for a period greater than thirty days only under
highly unusual circumstances. Interest of at least 4 1/2% per annum will be paid
on any amounts deferred for more than 30 days if Hartford Life chooses to
exercise this deferral right. (See, "Payment Upon Partial or Full Surrender,"
page 12.)
On the Annuity Commencement Date specified by you, Hartford Life will make a
lump-sum payment or start to pay a series of payments based on the Annuity
Options selected by you. (See, "Annuity Period," page 12.)
The Contract provides for a Death Benefit. If the Annuitant dies before the
Annuity Commencement Date and there is no designated Contingent Annuitant
surviving, or if the Participant dies before the Annuity Commencement Date, the
Death Benefit will be payable to the Beneficiary as determined under the
Contract Control Provisions. With regard to Joint Participants, at the first
death of a Joint Participant preceding the Annuity Commencement Date, the
Beneficiary will be the surviving Participant notwithstanding that the
Designated Beneficiary may be different. The Death Benefit is calculated as of
the date we receive written notification of Due Proof of Death at the offices of
Hartford Life.
2
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The Death Benefit will equal the Account Value. If the named Beneficiary is
the spouse of the Participant and the Annuitant is living, the spouse may elect,
in lieu of receiving the Death Benefit, to become the Participant and continue
the Contract. (See, "Death Benefit," page 11.)
A deduction will be made for Premium Taxes for Contracts sold in certain
states. (See "Premium Taxes," page 11.)
Certain special provisions apply only with respect to Contracts issued in
the states of California, Michigan, Missouri, New York, Oregon, South Carolina,
Texas, Virginia and Wisconsin. These are set forth in detail in Appendix B.
For Contracts issued as individual retirement annuities, Hartford Life will
refund the purchase payment to the Participant if the Contract is returned to
Hartford Life within seven days after Contract delivery.
AVAILABLE INFORMATION
Hartford Life is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "1934 Act"), as amended, and in accordance therewith
files reports and other information with the Securities and Exchange Commission
(the "Commission"). Such reports and other information can be inspected and
copied at the public reference facilities of the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. and at the Commission's Regional Offices
located at 75 Park Place, New York, New York and Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
materials also can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
Hartford Life has filed registration statements (the "Registration
Statements") with the Commission under the Securities Act of 1933 relating to
the Contracts offered by this Prospectus. This Prospectus has been filed as a
part of the Registration Statements and does not contain all of the information
set forth in the Registration Statements and exhibits thereto, and reference is
hereby made to such Registration Statements and exhibits for further information
relating to Hartford Life and the Contracts. The Registration Statements and the
exhibits thereto may be inspected and copied, and copies can be obtained at
prescribed rates, in the manner set forth in the preceding paragraph.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Annual Report on Form 10-K for the year ended December 31, 1995
heretofore filed by Hartford Life with the Commission under the 1934 Act is
incorporated by reference in this Prospectus.
Any statement contained in a document incorporated by reference herein shall
be deemed modified or superseded hereby to the extent that a statement contained
in a later-filed document or herein shall modify or supersede such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of the Prospectus.
Hartford Life will furnish, without charge, to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person, a
copy of the document referred to above which has been incorporated by reference
in the Prospectus, other than exhibits to such document (unless such exhibits
are specifically incorporated by reference in the Prospectus). Requests for such
document should be directed to Hartford Life, c/o Individual Annuity Services,
P.O. Box 5085, Hartford, Connecticut, 06102-5085, telephone 1-800-862-6668.
3
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GLOSSARY OF SPECIAL TERMS
In this Prospectus "We," "Us" and "Our" refer to Hartford Life Insurance
Company. With respect to a group deferred annuity Contract, "You," "Yours," and
"Participant" refer to a person/persons who has/have been issued a Certificate.
With respect to an individual annuity Contract, "You," "Yours," and
"Participant" refer to a person/persons who has/have been issued a Contract.
In addition, as used in this Prospectus, the following terms have the indicated
meanings:
ACCOUNT VALUE: As of any date, the Account Value is the sum of the purchase
payment and all interest earned to date less the sum of the Gross Surrender
Value of any surrenders made to that date.
ANNUAL EFFECTIVE RATE OF INTEREST: At the beginning of a year, the rate of
return an investment will earn during that year, where interest is not paid
until the end of the year (i.e., no surrenders or interest withdrawals are made
during the year). If interest withdrawals are taken more frequently than
annually, the total interest for a given year will be less than the Annual
Effective Rate of Interest times the Account Value at the beginning of the year.
ANNUITANT: The person upon whose life the Contract is issued.
ANNUITY COMMENCEMENT DATE: The date designated in the Contract or otherwise by
the Participant on which annuity payments are to start.
BENEFICIARY: The person entitled to receive benefits per the terms of the
Contract in case of the death of the Annuitant or the Participant, or Joint
Participant, as applicable.
COMPOUND INTEREST METHOD: The process of interest being reinvested to earn
additional interest on a daily basis. This method results in an exponential
calculation of daily interest.
CONTRACT: For a group Contract, the Certificate evidencing a participating
interest in the group annuity Contract as set forth in this Prospectus. Any
reference in this Prospectus to Contract includes the underlying group annuity
Contract. For an Individual Contract, the individual annuity Contract.
CONTRACT DATE: The effective date of participation under the group annuity
Contract as designated in the Contract or date of issue of an individual annuity
Contract.
CONTRACT YEAR: A continuous 12 month period commencing on the Contract Date and
each anniversary thereof.
CONTINGENT ANNUITANT: The person so designated by the Participant, who upon the
Annuitant's death, prior to the Annuity Commencement Date, becomes the
Annuitant.
CURRENT RATE: The applicable interest rate contained in a schedule of rates
established by us from time to time for various durations.
GUARANTEE PERIOD: The period for which either an Initial or Subsequent Guarantee
Rate is credited.
GROSS SURRENDER VALUE: As of any date, that portion of the Account Value
specified by you for a full or a partial surrender.
HARTFORD LIFE: Hartford Life Insurance Company.
INITIAL GUARANTEE RATE: The rate of interest credited and compounded annually
during the initial Guarantee Period.
IN WRITING: A written form satisfactory to us and received at our offices
Attention: Individual Annuity Services, P.O. Box 5085, Hartford, Connecticut
06102-5085.
NET SURRENDER VALUE: The amount payable to you on a full or partial surrender
under the Contract after the application of any Contract charges and/or Market
Value Adjustment.
NON-QUALIFIED CONTRACT: A Contract which is not classified as a tax-qualified
retirement plan using pre-tax dollars under the Internal Revenue Code.
QUALIFIED CONTRACT: A Contract which qualifies as a tax-qualified retirement
plan using pre-tax dollars under the Internal Revenue Code, such as an
employer-sponsored Section401(k) plan or an eligible state deferred compensation
plan under Section457.
SUBSEQUENT GUARANTEE RATE: The rate of interest established by us for the
applicable subsequent Guarantee Period.
4
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DESCRIPTION OF CONTRACTS................................................ 7
A. Application and Purchase Payment................................... 7
B. Accumulation Period................................................ 7
1. Initial and Subsequent Guarantee Periods......................... 7
2. Establishment of Guarantee Rates and Current Rates............... 8
3. Surrenders....................................................... 9
(a) General....................................................... 9
(b) Surrender Charge.............................................. 10
(c) Market Value Adjustment....................................... 10
(d) Special Surrenders............................................ 11
4. Guarantee Period Exchange Option................................. 11
5. Premium Taxes.................................................... 11
6. Death Benefit.................................................... 11
7. Payment upon Partial or Full Surrender........................... 12
C. Annuity Period..................................................... 12
1. Electing the Annuity Commencement Date and Form of Annuity....... 12
2. Change of Annuity Commencement Date or Annuity Option............ 12
3. Annuity Options.................................................. 12
4. Annuity Payment.................................................. 13
5. Death of Annuitant After Annuity Commencement Date............... 13
INVESTMENTS BY HARTFORD LIFE............................................ 14
AMENDMENT OF CONTRACTS.................................................. 14
ASSIGNMENT OF CONTRACTS................................................. 14
DISTRIBUTION OF CONTRACTS............................................... 14
FEDERAL TAX CONSIDERATIONS.............................................. 15
A. General............................................................ 15
B. Taxation of Hartford Life.......................................... 15
C.Taxation of Annuities -- General Provisions Affecting Purchasers
Other than Qualified Retirement Plans............................... 15
1. Non-Natural Persons, Corporations, Etc........................... 15
2. Other Contract Owners (Natural Persons).......................... 15
a. Distributions Prior to the Annuity Commencement Date........... 16
b. Distributions After Annuity Commencement Date.................. 16
c. Aggregation of Two or More Annuity Contracts................... 16
d. 10% Penalty Tax -- Applicable to Certain Withdrawals and
Annuity Payments.................................................. 17
e.Special Provisions Affecting Contracts Obtained through a
Tax-Free Exchange of Other Annuity or Life Insurance Contracts
Purchased Prior to August 14, 1982.............................. 17
f. Required Distributions......................................... 17
D. Information Regarding Tax Qualified Plans.......................... 18
1. Qualified Retirement Plans....................................... 18
2. Tax Sheltered Annuities under Section 403(b)..................... 18
3. Deferred Compensation Plans under Section 457.................... 18
4. Individual Retirement Annuities under Section 408................ 19
5. Tax Penalties.................................................... 19
a. Premature Distributions........................................ 19
b. Minimum Distribution Tax....................................... 19
c. Excess Distribution Tax........................................ 19
d. Withholding.................................................... 20
E. Federal Income Tax Withholding..................................... 20
1. Eligible Rollover Distribution................................... 20
2. Non-Eligible Rollover Distributions.............................. 20
a. Non-Periodic Distributions..................................... 20
b. Periodic Distributions......................................... 21
</TABLE>
5
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<S> <C>
THE COMPANY............................................................. 21
A. Business of Hartford Life Insurance Company....................... 21
B. Selected Financial Data........................................... 23
C. Management Discussion and Analysis of Financial Condition and
Results of Operations................................................ 24
1. Results of Operations............................................ 24
2. Division Information............................................. 25
D. Reinsurance....................................................... 25
E. Reserves.......................................................... 25
F. Investments....................................................... 26
G. Competition........................................................ 26
H. Employees......................................................... 26
I. Properties........................................................ 26
J. State Regulation.................................................. 26
EXECUTIVE OFFICERS AND DIRECTORS........................................ 28
EXECUTIVE COMPENSATION.................................................. 30
LEGAL PROCEEDINGS....................................................... 32
EXPERTS................................................................. 32
APPENDIX A (MODIFIED GUARANTEED ANNUITY FOR QUALIFIED PLANS)............ 33
APPENDIX B (SPECIAL PROVISIONS FOR INDIVIDUAL CONTRACTS ISSUED IN THE
STATES OF CALIFORNIA, MICHIGAN, MISSOURI, NEW YORK, OREGON, SOUTH
CAROLINA, TEXAS, VIRGINIA AND WISCONSIN)............................. 34
APPENDIX C (MARKET VALUE ADJUSTMENT).................................... 35
FINANCIAL STATEMENTS....................................................
</TABLE>
6
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DESCRIPTION OF CONTRACTS
A. APPLICATION AND PURCHASE PAYMENT
To apply for a Contract, you must complete an application form or an order
to purchase. This application must be submitted to Hartford Life Insurance
Company ("Hartford Life") along with your purchase payment for its approval.
The Contracts are issued within a reasonable time after the payment of a
single purchase payment. You may not contribute additional purchase payments to
a Contract in the future. You may, however, purchase additional Contracts, if
you are an eligible individual, at then prevailing Guarantee Rates and terms.
The minimum purchase payment in relation to a Contract is $5,000 for
Non-Qualified Contracts ($2,000 for Qualified Contracts). Hartford Life retains
the right to limit the amount of the maximum purchase payment.
Your purchase payment becomes part of our general assets and is credited to
an account we establish for you. We will generally confirm your purchase payment
in writing within five business days of receipt. You start earning interest on
your account the day the purchase payment is applied.
In the event that your application or an order to purchase is not properly
completed, we will attempt to contact you in writing or by telephone. We will
return the purchase payment three weeks after its receipt by us if the
application or an order to purchase has not, by that time, been properly
completed.
B. ACCUMULATION PERIOD
1. INITIAL & SUBSEQUENT GUARANTEE PERIODS
Upon application, you will select the duration of your Initial Guarantee
Period from among those durations offered by us. The duration you select will
determine your Initial Guarantee Rate. Your Purchase Payment (less surrenders
and less applicable premium taxes, if any) will earn interest at the Initial
Guarantee Rate which is an Annual Effective Rate of Interest. Interest is
credited daily to Your account using the Compound Interest Method. With compound
interest, the total investment of principal and interest earned to date is
invested at all times. You continue to earn interest on interest already earned.
However, when withdrawals are made during the year, interest on the amount of
the withdrawals is lost for the remainder of the year.
Set forth below is an illustration of how interest will be credited to your
Account Value during each Guarantee Period. For the purpose of this example we
have made the assumptions as indicated.
NOTE: THE FOLLOWING EXAMPLE ASSUMES NO SURRENDERS OF ANY AMOUNT OR
PRE-AUTHORIZED PAYMENT OF INTEREST DURING THE ENTIRE FIVE YEAR PERIOD. A MARKET
VALUE ADJUSTMENT OR SURRENDER CHARGE MAY APPLY TO ANY SUCH INTERIM SURRENDER
(SEE "SURRENDERS," PAGE 9). THE HYPOTHETICAL INTEREST RATES ARE ILLUSTRATIVE
ONLY AND ARE NOT INTENDED TO PREDICT FUTURE INTEREST RATES TO BE DECLARED UNDER
THE CONTRACT. ACTUAL INTEREST RATES DECLARED FOR ANY GIVEN TIME MAY BE MORE OR
LESS THAN THOSE SHOWN.
7
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EXAMPLE OF COMPOUNDING AT THE INITIAL GUARANTEE RATE
<TABLE>
<S> <C>
Beginning Account Value: $50,000
Guarantee Period: 5 years
Guarantee Rate: 5.50% per annum
</TABLE>
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<CAPTION>
END OF CONTRACT YEAR: YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
- - -------------------------------------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Beginning Account Value $ 50,000.00
X (1+Guarantee Rate) 1.055
-------------
$ 52,750.00
Account Value at end of $ 52,750.00
Contract Year 1 1.055
-------------
X (1+Guarantee Rate) $ 55,651.25
Account Value at end of $ 55,651.25
Contract Year 2 1.055
-------------
X (1+Guarantee Rate) $ 58,712.07
Account Value at end of $ 58,712.07
Contract Year 3 1.055
-------------
X (1+Guarantee Rate) $ 61,941.23
Account Value at end of $ 61,941.23
Contract Year 4 1.055
-------------
X (1+Guarantee Rate) $ 65,348.00
Account Value at end of Guarantee Period $ 65,348.00
Total Interest Credited in Guarantee Period -- $65,348.00 -- 50,000.00 = $15,348.00
-------------
Account Value at end of Guarantee Period -- $50,000.00 + 15,348.00 = $65,348.00
Account Value after 180 days from the Contract Date --
$50,000(1.055)180/365 = $51,337.77
</TABLE>
Unless you elect to make a surrender (see "Surrenders," page 9), a
subsequent Guarantee Period will automatically commence at the end of a
Guarantee Period. Each subsequent Guarantee Period will be the same duration as
the previous Guarantee Period unless you elect in writing on any day within the
thirty day period preceding the end of the current Guarantee Period, a Guarantee
Period of a different duration from among those offered by us at that time.
In no event may subsequent Guarantee Periods extend beyond the Annuity
Commencement Date then in effect. For example, if you are age 62 upon the
expiration of a Guarantee Period and you have chosen age 65 as an Annuity
Commencement Date, we will provide a three year Guarantee Period to equal the
number of years remaining before your Annuity Commencement Date. Your Account
Value will then earn interest at a Guarantee Rate which we have declared for
that duration. The Guarantee Rate for the Guarantee Period automatically applied
in these circumstances may be higher or lower than the Guarantee Rate for longer
durations.
The Account Value at the beginning of any subsequent Guarantee Period will
be equal to the Account Value at the end of the Guarantee Period just ending.
This Account Value (less surrenders made since the beginning of the subsequent
Guarantee Period) will earn interest compounded annually at the Subsequent
Guarantee Rate.
Within thirty days preceding the end of a Guarantee Period, we will notify
you of the expiry of the current rate guarantee period.
2. ESTABLISHMENT OF GUARANTEE RATES AND CURRENT RATES
You will know the Initial Guarantee Rate for the Guarantee Period you choose
at the time you purchase your Contract. Under certain circumstances, Hartford
Life may offer a rate in excess of the Guarantee Rate for the first year only of
a subsequent Guarantee Period. Current Rates will be established periodically
along with the Guarantee Rates which will be applicable to subsequent Guarantee
Periods. After the end of each Contract Year, we will send you a statement which
will show (a) your Account Value as of the end of the
8
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preceding Contract Year, (b) all transactions regarding your Contract during the
Contract Year, (c) your Account Value at the end of the current Contract Year,
and (d) the rate of interest being credited to your Contract.
Hartford Life has no specific formula for determining the rate of interest
that it will declare as Current Rates or Guarantee Rates in the future. The
determination of Current Rates and Guarantee Rates will be reflective of
interest rates available on the types of debt instruments in which Hartford Life
intends to invest the proceeds attributable to the Contracts. (See "Investments
by Hartford Life," page 14.) In addition, Hartford Life's Management may also
consider various other factors in determining Current Rates and Guarantee Rates
for a given period, including, regulatory and tax requirements; sales
commissions and administrative expenses borne by Hartford Life; general economic
trends; and competitive factors. HARTFORD LIFE'S MANAGEMENT WILL MAKE THE FINAL
DETERMINATION AS TO CURRENT AND GUARANTEE RATES TO BE DECLARED. WE CANNOT
PREDICT NOR CAN WE GUARANTEE FUTURE CURRENT RATES OR GUARANTEE RATES.
3. SURRENDERS
(a) GENERAL
Full surrenders may be made under a Contract at any time. Partial surrenders
may only be made if:
i. the Gross Surrender Value is at least $1,000.00; and
ii. the remaining Account Value after the Gross Surrender Value has been
deducted is at least $5,000.00.
In the case of all surrenders, the Account Value will be reduced by the
Gross Surrender Value on the Surrender Date and the Net Surrender Value
will be payable to you. The Net Surrender Value equals:
(A - B) x C, where:
A = the Gross Surrender Value,
B = the surrender charge plus any unpaid premium tax, (see pages 10 and
11),
C = the Market Value Adjustment (see page 10).
Hartford Life will, upon request, inform you of the amount payable upon a
full or partial surrender.
Any full, partial or special surrender may be subject to tax. (See "Federal
Tax Considerations," page 15.)
THERE ARE CERTAIN RESTRICTIONS ON SECTION 403(B) TAX-SHELTERED ANNUITIES. AS
OF DECEMBER 31, 1988, ALL SECTION 403(B) ANNUITIES HAVE LIMITS ON FULL AND
PARTIAL SURRENDERS. CONTRIBUTIONS TO THE CONTRACT MADE AFTER DECEMBER 31, 1988
AND ANY INCREASES IN CASH VALUE AFTER DECEMBER 31, 1988 MAY NOT BE DISTRIBUTED
UNLESS THE CONTRACT OWNER/ EMPLOYEE HAS: (A) ATTAINED AGE 59 1/2, (B) TERMINATED
EMPLOYMENT, (C) DIED, (D) BECOME DISABLED OR (E) EXPERIENCED FINANCIAL HARDSHIP.
DISTRIBUTIONS DUE TO FINANCIAL HARDSHIP OR SEPARATION FROM SERVICE MAY STILL
BE SUBJECT TO A PENALTY TAX OF 10%.
HARTFORD LIFE WILL NOT ASSUME ANY RESPONSIBILITY IN DETERMINING WHETHER A
WITHDRAWAL IS PERMISSIBLE, WITH OR WITHOUT TAX PENALTY, IN ANY PARTICULAR
SITUATION OR IN MONITORING WITHDRAWAL REQUESTS REGARDING PRE OR POST JANUARY 1,
1989 ACCOUNT VALUES.
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(b) SURRENDER CHARGE
No deduction for a sales charge is made from the purchase payment when
received. A surrender charge, however, may be deducted from the Gross Surrender
Value (before application of any Market Value Adjustment) of any partial or full
surrender made before the end of the seventh Contract Year. The amount of any
surrender charge is computed as a percentage of the Gross Surrender Value. The
chart below indicates the percentage charge applied during the specified
Contract Year:
<TABLE>
<CAPTION>
CONTRACT YEAR CHARGE AS PERCENTAGE OF
IN WHICH SURRENDER IS MADE GROSS SURRENDER VALUE
- - --------------------------- ------------------------
<S> <C>
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
Thereafter 0%
</TABLE>
No surrender charge will be made for surrenders after Contract Year 7 or
certain surrenders effective at the end of a Guarantee Period. (See, "Special
Surrenders," page 11).
The surrender charge may be reduced if You are surrendering to purchase a
variable annuity contract issued by Hartford Life or an affiliate of Hartford
Life.
The above specified surrender charges will apply to partial or full
surrenders, irrespective of the length of the Guarantee Period selected. For
example, assume a Participant designates an initial Guarantee Period of five
years. Further assume the Participant takes no action to change the duration of
the second Guarantee Period, resulting in a second Guarantee Period also with a
duration of five years. In this hypothetical case, any surrenders the
Participant makes during the sixth Contract Year will be subject to a
two-percent surrender charge even though the Participant could have made a
surrender up to the Account Value at the end of the initial five year Guarantee
Period which would not have been subject to a surrender charge. (See "Special
Surrenders," page 11.)
(c) MARKET VALUE ADJUSTMENT
The amount payable on a partial or full surrender made preceding the end of
any Guarantee Period may be adjusted up or down by the application of the Market
Value Adjustment. Where applicable, the Market Value Adjustment is applied to
Gross Surrender Value, net of any surrender charge.
In the case of either a partial or full surrender, the Market Value
Adjustment will reflect the relationship between the Current Rate for the
duration remaining in the Guarantee Period at the time you request the
surrender, and the Guarantee Rate then applicable to your Contract.
Generally, if your Guarantee Rate is lower than the applicable Current Rate,
then the application of the Market Value Adjustment will result in a lower
payment upon surrender.
Similarly, if your Guarantee Rate is higher than the applicable Current
Rate, the application of the Market Value Adjustment will result in a higher
payment upon surrender.
For example, assume you purchase a Contract and select an initial Guarantee
Period of ten years and our Guarantee Rate for that duration is 8% per annum.
Assume at the end of seven years you make a partial surrender. If the three year
Current Rate is then 6%, the amount payable upon partial surrender will increase
after the application of the Market Value Adjustment. On the other hand, if such
Current Rate is higher than your Guarantee Rate, for example, 10%, the
application of the Market Value Adjustment will cause a decrease in the amount
payable to you upon this partial surrender.
Since Current Rates are based in part upon the investment yields available
to Hartford Life (see, "Investments By Hartford Life," page 14), the effect of
the Market Value Adjustment will be closely related to the levels of such
yields. It is theoretically possible, therefore, that, should such yields
increase significantly from the time you purchased your Contract, coupled with
the application of the surrender charges, the amount you would receive upon a
full surrender of your Contract could be less than your original purchase
payment.
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The formula for calculating the Market Value Adjustment is set forth in
Appendix C to this Prospectus, which also contains an additional illustration of
the application of the Market Value Adjustment.
(d) SPECIAL SURRENDERS
For a surrender made at the end of the initial guarantee period, no
surrender charge will be applied provided such surrender occurs on or after the
end of the third Contract Year. For a surrender made at the end of any other
Guarantee Period, no surrender charge will be applied provided such surrender
occurs on or after the end of the fifth Contract Year. A request for surrender
at the end of a Guarantee Period must be received in writing during the 30 day
period preceding the end of that Guarantee Period.
No surrender charges will be applicable to the application of your Account
Value to purchase an annuity on the Annuity Commencement Date. A Market Value
Adjustment will be applied if the Annuity Commencement Date is not at the end of
a Guarantee Period. To elect an Annuity Option you must notify us at least 30
days before the end of that Guarantee Period.
In addition, we will send you any interest that has been credited during the
prior twelve months if you so request in writing. No surrender charge or Market
Value Adjustment will be imposed on such interest payments. Any such surrender
may, however, be subject to tax.
For certain tax-qualified plans, we reserve the right to offer by rider an
extended surrender privilege, without imposing a surrender charge or market
value adjustment.
4. GUARANTEE PERIOD EXCHANGE OPTION
Once each Contract Year you may elect to transfer from your current rate
guarantee period into a new rate guarantee period of a different duration. A
Market Value Adjustment will be applied to your current Account Value at the
time of transfer. There will be no surrender charge for this exchange. However,
surrender charges will continue to be based on time elapsed from the original
Contract Date. We reserve the right to charge a fee of up to $50 for such
transfers, but do not impose a transfer charge as of the date of this
Prospectus.
5. PREMIUM TAXES
A deduction is also made for premium taxes, if applicable, imposed by a
state or other governmental entity. Certain states impose a premium tax,
currently ranging up to 3.5%. Some states assess the tax at the time purchase
payments are made; others assess the tax at the time of annuitization. Hartford
Life will pay premium taxes at the time imposed under applicable law. At its
sole discretion, Hartford Life may deduct premium taxes at the time Hartford
Life pays such taxes to the applicable taxing authorities, upon surrender, or
when annuity payments commence.
6. DEATH BENEFIT
If the Annuitant dies before the Annuity Commencement Date and there is no
designated Contingent Annuitant surviving, or if the Participant dies before the
Annuity Commencement Date, the Death Benefit will be payable to the Beneficiary
as determined under the Contract Control Provisions. With regard to Joint
Participants, at the first death of a Joint Participant preceding the Annuity
Commencement Date, the Beneficiary will be the surviving Participant
notwithstanding that the Designated Beneficiary may be different. The Death
Benefit is calculated as of the date we receive written notification of Due
Proof of Death at the offices of Hartford Life. The Death Benefit will equal the
Account Value.
The Death Benefit may be taken in one sum, to be paid within six months
after the date we receive Due Proof of Death, or under any of the Annuity
Options available under the Contract, provided, however, that: (a) in the event
of the death of any Participant prior to the Annuity Commencement Date, any
Annuity Option selected must provide that any amount payable as a Death Benefit
will be distributed within 5 years of the date of death; and (b) in the event of
the death of any Participant or Annuitant which occurs on or after the Annuity
Commencement Date, any remaining interest in the Contract will be paid at least
as rapidly as under the method of distribution in effect at the time of death,
or, if the benefit is payable over a period not extending beyond the life
expectancy of the Beneficiary or over the life of the Beneficiary, such
distribution must commence within one year of the date of death. Notwithstanding
the foregoing, in the event of the Participant's death where the sole
Beneficiary is the spouse of the Participant and the Annuitant or Contingent
Annuitant is living, such spouse may elect, in lieu of receiving the Death
Benefit, to be treated as the Participant.
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<PAGE>
If the Contract is owned by a corporation or other non-individual, the Death
Benefit payable upon the death of the Annuitant preceding the Annuity
Commencement Date will be payable only as one sum or under the same Annuity
Options and in the same manner as if an individual Contract Owner died on the
date of the Annuitant's death.
7. PAYMENT UPON PARTIAL OR FULL SURRENDER
We may defer payment of any partial or full surrender for a period not
exceeding 6 months from date of our receipt of your notice of surrender or the
period permitted by state insurance law, if less. Only under highly unusual
circumstances will we defer a surrender payment more than thirty days, and if we
defer payment for more than 30 days, we will pay interest of at least 4 1/2% per
annum on the amount deferred. While all circumstances under which we could defer
payment upon surrender may not be foreseeable at this time, such circumstances
could include, for example, a time of an unusually high surrender rate among
Participants, accompanied by a radical shift in interest rates. If we intend to
withhold payment for more than thirty days, we will notify you in writing. We
will not, however, defer payment for more than thirty days for any surrender
which is to be effective at the end of any Guarantee Period.
C. ANNUITY PERIOD
1. ELECTING THE ANNUITY COMMENCEMENT DATE AND FORM OF ANNUITY
Upon application for a Contract, you select an Annuity Commencement Date.
Within 30 days preceding your Annuity Commencement Date you may elect to have
all or a portion of your Net Surrender Value paid in a lump sum on your Annuity
Commencement Date. Alternatively, or with respect to any portion of your Net
Surrender Value not paid in a lump sum, you may elect, at least 30 days
preceding the Annuity Commencement Date, to have your Account Value with a
Market Value Adjustment, if applicable, or a portion thereof multiplied by the
Market Value Adjustment (less applicable premium taxes, if any) applied on the
Annuity Commencement Date under any of the Annuity Options described below. In
the absence of such election, Account Value with a Market Value Adjustment, if
applicable, will be applied on the Annuity Commencement Date under the Second
Option to provide a life annuity with 120 monthly payments certain. This
Contract may not be surrendered for its Termination Value after the commencement
of annuity payments, except with respect to Option Six.
2. CHANGE OF ANNUITY COMMENCEMENT DATE OR ANNUITY OPTION
You may change the Annuity Commencement Date and/or the Annuity Option from
time to time, but any such change must be made in writing and received by us at
least 30 days preceding the scheduled Annuity Commencement Date. Also, the
proposed Annuity Commencement Date may not be beyond the later of the
Annuitant's 90th birthday, except in certain states where the proposed Annuity
Commencement Date may not be beyond the Annuitant's 85th birthday.
3. ANNUITY OPTIONS
Any one of the following Annuity Options may be elected:
FIRST OPTION -- LIFE ANNUITY
An annuity payable monthly during the lifetime of the Annuitant, and
terminating with the last monthly payment due preceding the death of the
Annuitant. It would be possible under this Option for an Annuitant to receive
only one Annuity payment if he died preceding the due date of the second Annuity
payment, two payments if he died before the due date of the third Annuity
payment and so on.
SECOND OPTION -- LIFE ANNUITY WITH 120, 180, OR 240 MONTHLY PAYMENTS CERTAIN
An annuity providing monthly income to the Annuitant for a fixed period of
120 months, 180 months, or 240 months (as selected), and for as long thereafter
as the Annuitant shall live.
THIRD OPTION -- CASH REFUND LIFE ANNUITY
An annuity payable monthly during the lifetime of the Annuitant provided
that, at the death of the Annuitant, the Beneficiary will receive an additional
payment equal to (a) minus (b) where (a) is the Account Value applied on the
Annuity Commencement Date under this Option and (b) is the dollar amount of
annuity payments already paid.
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<PAGE>
FOURTH OPTION -- JOINT AND LAST SURVIVOR LIFE 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 preceding the death of the survivor. It
would be possible under this Option for the 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 preceding the due date for the
second payment and so on.
FIFTH OPTION -- PAYMENTS FOR A DESIGNATED PERIOD
An amount payable monthly for the number of years selected which may be from
5 to 30 years.
The Tables in the Contract provide for guaranteed dollar amounts of monthly
payments for each $1,000 applied under the five Annuity Options. Under the
First, Second, or Third Options, the amount of each payment will depend upon the
age and sex of the Annuitant at the time the first payment is due. Under the
Fourth Option, the amount of each payment will depend upon the sex of both
payees and their ages at the time the first payment is due.
The Tables for the First, Second, Third and Fourth Options are based on the
1983a Individual Annuity Mortality Table with ages set back one year and a net
investment rate of 4% per annum.
The table for the Fifth Option is based on a net investment rate of 4% per
annum. We may, from time to time, at our discretion if mortality appears more
favorable and interest rates justify, apply other tables which will result in
higher monthly payments for each $1,000 applied under one or more of the five
Annuity Options.
SIXTH OPTION -- ANNUITY PROCEEDS SETTLEMENT OPTION
Proceeds from the Death Benefit may be left with Hartford Life for a period
not to exceed five years from the date of the Participant's death preceding the
Annuity Commencement Date. The proceeds will remain in the same Guarantee Period
and continue to earn the same interest rate as at the time of death. If the
Guarantee Period ends before the end of the five year period, the Beneficiary
may elect a new Guarantee Period with a duration closest to but not to exceed
the time remaining in the period of five years from the date of the
Participant's death. Full or partial surrenders may be made at any time. In the
event of surrenders, the remaining value will equal the proceeds left with
Hartford Life, minus any surrenders, plus any interest earned. A Market Value
Adjustment will be applied to all surrenders except those occurring at the end
of a Guarantee Period.
4. ANNUITY PAYMENT
The first payment under any Annuity Option will be made following the
Annuity Commencement Date. Subsequent payments will be made on the same day in
accordance with the manner of payment selected.
The option elected must result in a payment of an amount at least equal to
the minimum payment amount according to Hartford Life's rules then in effect. If
at any time payments are less than the minimum payment amount, Hartford Life has
the right to change the frequency to an interval resulting in a payment at least
equal to the minimum. If any amount due is less than the minimum per year,
Hartford Life may make other arrangements that are equitable to the Annuitant.
Once annuity payments have commenced, no surrender of the annuity benefit
(including benefits under the Fifth Option) can be made for the purpose of
receiving a lump sum settlement in lieu thereof.
5. DEATH OF ANNUITANT AFTER ANNUITY COMMENCEMENT DATE
In the event of the death of the Annuitant after the Annuity Commencement
Date, the present values on the date of death of the current dollar amount of
any remaining guaranteed payments will be paid in one sum to the Beneficiary
designated by you unless other provisions shall have been made and approved by
us. Calculations of such present value will be based on the interest rate that
is used by us to determine the amount of each certain payment.
13
<PAGE>
INVESTMENTS BY HARTFORD LIFE
Assets of Hartford Life must be invested in accordance with the requirements
established by applicable state laws regarding the nature and quality of
investments that may be made by life insurance companies and the percentage of
their assets that may be committed to any particular type of investment. In
general, these laws permit investments, within specified limits and subject to
certain qualifications, in federal, state, and municipal obligations, corporate
bonds, preferred and common stocks, real estate mortgages, real estate and
certain other investments. (See page 10 for percentage breakdown of investments
of Hartford Life.)
Contract reserves will be accounted for in a non-unitized separate account.
Contract Owners have no priority claims on assets accounted for in this separate
account. All assets of Hartford Life, including those accounted for in this
separate account, are available to meet the guarantees under the Annuity and are
available to meet the general obligations of Hartford Life.
Nonetheless, in establishing Guarantee Rates and Current Rates, Hartford
Life intends to take into account the yields available on the instruments in
which it intends to invest the proceeds from the Contracts. (See, "Establishment
of Guarantee Rates and Current Rate," page 8.) Hartford Life's investment
strategy with respect to the proceeds attributable to the Contracts will
generally be to invest in investment-grade debt instruments having durations
tending to match the applicable Guarantee Periods.
Investment-grade debt instruments in which Hartford Life intends to invest
the proceeds from the Contracts include:
Securities issued by the United States Government or its agencies or
instrumentalities, which issues may or may not be guaranteed by the United
States Government.
Debt securities which have an investment grade, at the time of purchase,
within the four highest grades assigned by Moody's Investors Services, Inc.
(Aaa, Aa, A or Baa), Standard & Poor's Corporation (AAA, AA, A or BBB) or any
other nationally recognized rating service.
Other debt instruments, including but not limited to, issues of or
guaranteed by banks or bank holding companies and corporations, which
obligations, although not rated by Moody's or Standard & Poor's are deemed by
Hartford Life's management to have an investment quality comparable to
securities which may be purchased as stated above.
While the foregoing generally describes our investment strategy with respect
to the proceeds attributable to the Contracts, we are not obligated to invest
the proceeds attributable to the Contract according to any particular strategy,
except as may be required by Connecticut and other state insurance laws.
AMENDMENT OF CONTRACTS
We reserve the right to amend the Contracts to meet the requirements of
applicable federal or state laws or regulations. We will notify you in writing
of any such amendments.
ASSIGNMENT OF CONTRACT
Your rights as evidenced by a Contract may be assigned as permitted by
applicable law. An assignment will not be binding upon us until we receive
notice from you in writing. We assume no responsibility for the validity or
effect of any assignment. You should consult your tax adviser regarding the tax
consequences of an assignment.
DISTRIBUTION OF CONTRACTS
The Contracts are sold by certain independent broker-dealers registered
under the Securities Exchange Act of 1934 to persons who have established an
account with the broker-dealer. In addition, the Contracts may
14
<PAGE>
be offered to members of certain other eligible groups or certain individuals.
Hartford Life will pay a maximum commission of 5% for the sale of a Contract.
From time to time, customers of certain Broker-Dealers may be offered special
initial Guarantee Rates and negotiated commissions.
The securities may also be sold directly to employees of Hartford Life and
Hartford Fire Insurance Company, the ultimate parent of Hartford Life. The
securities will be credited with an additional 2% of the employee's purchase
payment by Hartford Life. This additional percentage of purchase payment in no
way affects present or future charges, rights, benefits or current values of
other Contract Owners.
Hartford Securities Distribution Company, Inc. ("HSD") serves as principal
underwriter for the Contracts. HSD is a wholly-owned subsidiary of Hartford
Life. The principal business address of HSD is the same as Hartford Life. HSD is
registered with the Commission under the Securities Exchange Act of 1934 as a
Broker-Dealer and is a member of the National Association of Securities Dealers,
Inc.
FEDERAL TAX CONSIDERATIONS
A. GENERAL
SINCE THE TAX LAW IS COMPLEX AND SINCE TAX CONSEQUENCES WILL VARY ACCORDING
TO THE ACTUAL STATUS OF THE PARTICIPANT INVOLVED, LEGAL AND TAX ADVICE MAY BE
NEEDED BY A PERSON, EMPLOYER OR OTHER ENTITY CONTEMPLATING THE PURCHASE OF A
CONTRACT DESCRIBED IN THIS PROSPECTUS.
It should be understood that any detailed description of the federal income
tax consequences regarding the purchase of the Contracts cannot be made in this
Prospectus and that special tax rules may be applicable with respect to certain
purchase situations not discussed herein. In addition, no attempt is made here
to consider any applicable state or other tax laws. For detailed information, a
qualified tax adviser should always be consulted. This discussion is based upon
Hartford Life's understanding of Federal income tax laws as they are currently
interpreted.
B. TAXATION OF HARTFORD LIFE
Hartford Life is taxed as a life insurance company under the Internal
Revenue Code ("Code"). The assets underlying the Contracts will be owned by
Hartford Life. The income earned on such assets will be Hartford Life's income.
C.TAXATION OF ANNUITIES -- GENERAL PROVISIONS AFFECTING PURCHASERS OTHER THAN
QUALIFIED RETIREMENT PLANS
Section 72 of the Internal Revenue Code governs the taxation of annuities
in general.
1. NON-NATURAL PERSONS, CORPORATIONS, ETC. Section 72 contains provisions
for Contract Owners which are non-natural persons. Non-natural persons include
corporations, trusts, and partnerships. The annual net increase in the value of
the Contract is currently includable in the gross income of a non-natural person
unless the non-natural person holds the Contract as an agent for a natural
person. There is an exception from current inclusion for certain annuities held
by structured settlement companies, certain annuities held by an employer with
respect to a terminated qualified retirement plan and certain immediate
annuities. A non-natural person which is a tax-exempt entity for Federal tax
purposes will not be subject to income tax as a result of this provision.
If the Contract Owner is not an individual, the primary Annuitant shall be
treated as the Contract Owner for purposes of making distributions which are
required to be made upon the death of the Contract Owner. If there is a change
in the primary Annuitant, such change shall be treated as the death of the
Contract Owner.
2. OTHER CONTRACT OWNERS (NATURAL PERSONS). A Contract Owner is not taxed on
increases in the value of the Contract until an amount is received or deemed
received, e.g., in the form of a lump sum payment (full or partial value of a
Contract) or as Annuity payments under the settlement option elected.
The provisions of Section 72 of the Code concerning distributions are
summarized briefly below. Also summarized are special rules affecting
distributions from Contracts obtained in a tax-free exchange for other annuity
contracts or life insurance contracts which were purchased preceding August 14,
1982.
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<PAGE>
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
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 insurer (or affiliated insurer) to the same
Contract Owner within the same calendar year (other than certain contracts held
in connection with a tax-qualified retirement arrangement) will be treated as
one annuity Contract for the purpose of determining the taxation of
distributions preceding 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 Life
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 preceding 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.
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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 for the life (or life expectancy) of the recipient (or
the joint lives or life expectancies of the recipient and the
recipient's Beneficiary).
5. Distributions of amounts which are allocable to 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 preceding the Annuity 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
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 and payments must begin within a year of the
death.
17
<PAGE>
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.
D. 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 specified limits, to distributions in excess of specified limits,
distributions which do not satisfy certain requirements and certain other
transactions with respect to qualified plans. Accordingly, this summary provides
only general information about the tax rules associated with use of the Contract
by a qualified plan. Contract owners, plan participants and beneficiaries are
cautioned that the rights and benefits of any person to benefits are controlled
by the terms and conditions of the plan regardless of the terms and conditions
of the Contract. Some qualified plans are subject to distribution and other
requirements which are not incorporated into Hartford Life's administrative
procedures. 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.
1. QUALIFIED PENSION PLANS. Provisions of the Code permit eligible employers
to establish 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 and the time when distributions must commence.
Corporate employers intending to use these contracts in connection with such
plans should seek competent advice.
2. 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 specified in Section 501(c)(3) of the
Code to purchase annuity contracts, and, subject to certain limitations, exclude
such contributions from gross income. Generally, such contributions may not
exceed the lesser of $9,500 or 20% of the employees "includable compensation"
for his most recent full year of employment, subject to other adjustments.
Special provisions 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:
(a) after the participating employee attains age 59 1/2;
(b) upon separation from service;
(c) upon death or disability, or
(d) in the case of hardship.
The above restrictions apply to distributions of employee contributions made
after December 31, 1988, earnings on those contributions, and earnings on
amounts attributable to employee contributions held as of December 31, 1988.
They do not apply to distributions of any employer or other after-tax
contributions, employee contributions made on or before December 31, 1988, and
earnings credited to employee contributions before December 31, 1988.
3. DEFERRED COMPENSATION PLANS UNDER SECTION 457. Employees and independent
contractors performing services for such employers may contribute on a before
tax basis to the Deferred Compensation Plan of their employer in accordance with
the employer's plan and Section 457 of the Code. Section 457 places limitations
on contributions to Deferred Compensation Plans maintained by a State ("State"
means a State, a political sub-division of a State, and an agency or
instrumentality of a State or political sub-division of a State) or other
tax-exempt organization. Generally, the limitation is 33 1/3% of includable
compensation (25% of gross compensation) or $7,500, whichever is less. The plan
may also provide for additional "catch-up" deferrals during the three taxable
years ending before a Participant attains normal retirement age.
An employee electing to participate in a plan should understand that his
rights and benefits are governed strictly by the terms of the plan, that the
employer is legal owner of any contract issued with respect to the plan
18
<PAGE>
and that deferred amounts will be subject to the claims of the employer's
creditors. The employer as owner of the contract(s) retains all voting and
redemption rights which may accrue to the contract(s) issued with respect to the
plan. The participating employee should look to the terms of his plan for any
charges in regard to participating therein other than those disclosed in this
Prospectus.
Distributions from a Section 457 Deferred Compensation Plan are prohibited
unless made after the participating employee attains the age specified in the
plan, separates from service, dies, becomes permanently and totally disabled 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.
4. 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.
5. TAX PENALTIES. 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 which bears the same ratio as the after-tax contributions bear to
the expected return.
a. PREMATURE DISTRIBUTION. Distributions from a qualified plan before the
Participant attains age 59 1/2 are generally subject to an additional
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 and distributions in the form of a life
annuity and, except in the case of an IRA, certain distributions after
separation from service at or after age 55 and certain distributions
for eligible medical expenses. A life annuity is defined as a scheduled
series of substantially equal periodic payments for the life or life
expectancy of the Participant (or the joint lives or life expectancies
of the Participant and Beneficiary).
b. 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 retirement plan must generally be
distributed or begin to be distributed not later than April 1 of the
calendar year in which the individual attains age 70 1/2 ("required
beginning date"). The required beginning date with respect to certain
government plans may be further deferred. The entire interest of the
Participant must be distributed beginning no later than this required
beginning date over a period which may not extend beyond a maximum of
the life expectancy of the Participant and a designated Beneficiary.
Each annual distribution must equal or exceed a "minimum distribution
amount" which is determined by dividing the account balance by the
applicable life expectancy. This account balance is generally based
upon the account value as of the close of business on the last day of
the previous calendar year. 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 individuals 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.
c. EXCESS DISTRIBUTION TAX. If the aggregate distributions from all IRAs
and certain other qualified plans in a calendar year exceed the greater
of (i) $150,000, or (ii) $112,500 as indexed for inflation ($155,000 as
of January 1, 1996), a penalty tax of 15% is generally imposed on the
excess portion of the distribution.
19
<PAGE>
d. WITHHOLDING. Periodic distributions from a qualified plan lasting for a
period of 10 or more years are generally subject to voluntary income
tax withholding. 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. Otherwise, the
amount withheld on such distributions is determined at the rate
applicable to wages as if the recipient were married claiming three
exemptions.
Nonperiodic distributions from an IRA are subject to income tax
withholding at a flat 10% rate. The recipient may elect not to have
withholding apply.
Nonperiodic distributions from other qualified plans are generally
subject to mandatory income tax withholding at the flat rate of 20%
unless such distributions are:
(1) the non-taxable portion of the distribution;
(2) required minimum distributions;
(3) eligible rollover distributions.
Eligible rollover distributions are direct payments to an IRA or to
another qualified employer plan.
Any distribution from plans described in Section 457 of the Code is
subject to regular wage withholding rules.
E. FEDERAL INCOME TAX WITHHOLDING
The portion of a distribution which is taxable income to the recipient will
be subject to federal income tax withholding, pursuant to Section 3405 of the
Internal Revenue Code. The application of this provision is summarized below:
1. ELIGIBLE ROLLOVER DISTRIBUTION
a. The Unemployment Compensation Amendments Act of 1992 requires that
federal income taxes be withheld from certain distributions from tax-qualified
retirement plans and from tax-sheltered annuities under Section 403(b). These
provisions do not apply to distributions from individual retirement annuities
under section 408(b) or from deferred compensation programs under section 457.
b. If any portion of a distribution is an "eligible rollover distribution,"
the law requires that 20% of that amount be withheld. This amount is sent to the
IRS as withheld income taxes. The following types of payments DO NOT constitute
an eligible rollover distribution and, therefore, the mandatory withholding
rules will not apply:
-- the non-taxable portion of the distribution;
-- distributions which are part of a series of equal (or substantially
equal) payments made at least annually for your lifetime (or your life
expectancy), or your lifetime and your Beneficiary's lifetime (or life
expectancies), or for a period of ten years or more;.
-- required minimum distributions made pursuant to section 401(a)(9) of the
IRC.
c. However, these mandatory withholding requirements do not apply in the
event of all or a portion of an eligible rollover distribution is paid in a
"direct rollover". A direct rollover is the direct payment of an eligible
rollover distribution or portion thereof to an individual retirement arrangement
or annuity (IRA) or to another qualified employer plan. IF A DIRECT ROLLOVER IS
ELECTED, NO INCOME TAX WILL BE WITHHELD.
d. If any portion of a distribution is not an eligible rollover distribution
but is taxable, the mandatory withholding rules described above do not apply. In
this case, the voluntary withholding rules described below apply.
2. NON-ELIGIBLE ROLLOVER DISTRIBUTIONS
a. NON-PERIODIC DISTRIBUTIONS
The portion of a non-periodic distribution which constitutes taxable income
will be subject to federal income tax withholding unless the recipient elects
not to have taxes withheld. If an election not to have taxes withheld is not
provided, 10% of the taxable distribution will be withheld as federal income
tax. Election forms will be provided at the time distributions are requested.
20
<PAGE>
b. PERIODIC DISTRIBUTIONS (DISTRIBUTIONS PAYABLE OVER A PERIOD GREATER THAN
ONE YEAR)
The portion of a periodic distribution which constitutes taxable income will
be subject to federal income tax withholding as if the recipient were married
claiming three exemptions. A recipient may elect not to have income taxes
withheld or have income taxes withheld at a different rate by providing a
completed election form. Election forms will be provided at the time
distributions are requested.
c. Any distribution from plans described in Section 457 of the IRC is
subject to the regular wage withholding rules.
THE COMPANY
A. BUSINESS OF HARTFORD LIFE INSURANCE COMPANY
Hartford Life Insurance Company ("Hartford Life" or the "Company") was
organized in 1902 and is incorporated under the laws of the State of
Connecticut. It is a direct subsidiary of Hartford Life and Accident Insurance
Company ("HLA") and is ultimately a wholly-owned subsidiary of Hartford Fire
Insurance Company ("Hartford Fire") which is ultimately a subsidiary of ITT
Hartford Group, Inc. ("ITT Hartford Group"), formerly a wholly-owned subsidiary
of ITT Corporation. On December 19, 1995, ITT Corporation distributed all of the
outstanding shares of ITT Hartford Group to ITT Corporation shareholders of
record in an action known herein as the "Distribution". As a result of the
Distribution, ITT Hartford became an independent, publicly traded company.
Hartford Life is the parent of ITT Hartford Life and Annuity Insurance Company
("ILA"), formerly ITT Life Insurance Corporation, and ITT Hartford International
Life Reassurance Corporation ("HLRe"), formerly American Skandia Life
Reinsurance Corporation, which was purchased in 1993.
Hartford Life provides for the insurance and retirement needs of millions of
Americans and has been among the fastest-growing major life insurance companies
in the United States for the past several years as measured by assets. At
December 31, 1995, Hartford Life's total assets of $64.2 billion included 22.4%
of fixed maturities and 56.5% of separate accounts with the remainder
representing equity securities, cash, mortgage loans, policy loans, reinsurance
recoverables and other assets. Hartford Life is engaged in a business that is
highly competitive due to the large number of stock and mutual life insurance
companies and other entities marketing insurance products. There are
approximately 2,000 stock, mutual, and other types of insurers in the life
insurance business in the United States. In the June 26, 1995 edition of
NATIONAL UNDERWRITER LIFE-HEALTH INSURANCE magazine, Hartford Life ranked 12th
among all life insurance companies in the United States based upon total assets.
A.M. Best assigned Hartford Life its second highest ranking classification, A+,
as of December 31, 1994.
The reportable divisions of Hartford Life and its subsidiaries are:
Individual Life and Annuity
Asset Management Services
Specialty Insurance Operations
Revenue, income before taxes and identifiable assets by reportable division
are set forth in Note 6 in Notes to Consolidated Financial Statements.
The following is a description of Hartford Life's key products and services,
distribution methods, competition and certain other relative data for each of
its reportable divisions.
INDIVIDUAL LIFE AND ANNUITY ("ILAD")
Hartford Life is a leader in the annuity marketplace, selling both variable
and fixed products through a wide distribution of broker-dealers, financial and
other institutions. Hartford Life was the number one writer of variable
annuities for 1995 (excluding TIAA-CREF) with an 11.0% market share according to
VARDS (Variable Annuity Research and Data Service). The individual annuity
market is highly competitive with insurance companies and other financial
institutions selling similar products. Selection depends on fund performance,
the array of fund and product options, product design, credited rates and a
company's financial strength ratings.
21
<PAGE>
Hartford Life earns fees for managing ILAD assets and maintaining
policyholders' accounts. The policyholder has a variety of fund and product
choices, some of which are managed internally; however, most of the investment
funds are managed by Wellington Management Company, Putnam, NBD First Chicago,
Fidelity, Twentieth Century or Dean Witter.
New sales of individual annuities reached $6.9 billion in 1995 bringing
assets under management to $31.0 billion as of December 31, 1995. Of the total
assets under management, $21.0 billion relate to variable annuities with $18.8
billion of these assets held in separate accounts where the policyholder selects
the investment vehicle and bears the risk of asset performance, and $2.2 billion
of these assets, representing the fixed option, held in the general account. The
remaining $10.0 billion of assets under management, in the Individual Annuity
line of business, are in guaranteed separate accounts. The guaranteed separate
account products offer fixed rate guarantees if held to maturity, but are market
value adjusted, and the majority of which have no minimum guarantees should
policyholders withdraw early. The guaranteed rates, when held to maturity, range
from 3.0% to 9.3% with durations from one to ten years. These guarantees are
supported by the general account of Hartford Life. Deposits to these fixed and
variable annuity accumulation accounts are subject to withdrawal restrictions
and to surrender charges which dissipate on a sliding scale, usually within
seven policy years. Fixed and variable annuity policyholder reserves are held at
account value. The minimum death benefits associated with some 1994 and 1995
annuity sales were reinsured to a third party. Guaranteed policyholders' account
balances are primarily held at market value with amounts held for deferred
expenses.
Products sold by the Individual Life line of business include: universal
life, traditional and interest sensitive whole life, term, modified guaranteed
life, and variable life. These products are primarily sold through life
professionals, broker-dealers, and property-casualty agents, assisted by
Hartford Life's own sales offices or other marketing groups. Hartford Life
competes primarily in the up-scale estate and business planning markets.
Significant competition comes from large, financially strong insurers based on
price, product, credit quality, and quality of distribution systems. Some of
these products permit borrowing against the accumulated cash surrender value of
the policy. As of December 31, 1995, the outstanding policy loan balance on
individual life policies was $236 million. Universal life and interest sensitive
whole life reserves are set equal to premiums collected, plus interest credited,
less charges. Other fixed death benefit reserves are based on assumed investment
yield, persistency, mortality and morbidity per commonly used actuarial tables,
expenses, and margins for adverse deviation. Hartford Life reinsures all
individual life business written by HLA. The maximum retention on any one
individual life is $1.25 million.
ASSET MANAGEMENT SERVICES ("AMS")
This division offers retirement products and services to employer groups
marketed to plan administrators through a direct sales force, assisted by home
office personnel. The services include managing assets and acting as plan
administrator for plans qualified under sections 401(k), 403(b) and 457 of the
Internal Revenue Code. The division markets several products for which the
investments and reserves are held in separate accounts. AMS reported total
assets of $14.0 billion as of December 31, 1995, of which $4.0 billion were
separate account assets. The separate account options include Twentieth Century
funds, Fidelity and Hartford Life's own funds which are managed by Wellington
Management Company or are internally managed. Investment performance relative to
non-guaranteed separate account products is borne by the participants. For group
pension products and services, competition is significant from a number of
financial institutions, including other insurance companies, based on rate and
credit quality.
The Guaranteed Rate Contract ("GRC") line of business offers fixed or
indexed rates that are guaranteed for a specific period. The GRC line of
business results have been negatively impacted by lower investment earnings on
mortgage-backed securities due to prepayments experienced in excess of assumed
levels. The GRC line of business was also affected by the interest rate rise in
1994 when the duration of assets lengthened relative to that of the liabilities.
Hartford Life has positioned itself to enhance its competitive position in the
401(k) full service and group tax deferred annuity markets. The Section 457 plan
market is a mature market for which growth is primarily achieved through
takeover business from competing companies and through increased contributions
from existing participants.
SPECIALTY INSURANCE OPERATIONS
Hartford Life's Corporate Owned Life Insurance ("COLI") line of business is
a leader in the market. Through the purchase of COLI, corporations are able to
use the favorable tax treatment of life insurance to efficiently fund a variety
of employee benefit liabilities such as postretirement health care and
non-qualified benefit programs. The Company also sees significant growth
opportunities in the rapidly expanding market for funding non-qualified benefit
programs. Current legislative proposals would phase out the deductibility of
22
<PAGE>
interest on policy loans under COLI, thus eliminating all future sales of
leveraged COLI; however, it should not affect variable COLI product sales or
inforce. Through its specialty insurance subsidiary, HLRe, focus is on niche
reinsurance markets and not on traditional reinsurance products where
competition is often based solely on price. Products and services are generally
geared to developing, underwriting and marketing innovative financial solutions
to customers who use reinsurance to manage financial risk. Specialty Insurance
Operations has growth opportunities through variable COLI and other
non-qualified deferred compensation vehicles, reinsurance and international
acquisitions.
In order to diversify its risk exposure and seek above average profits in
its Specialty Insurance Operations division, the Company, through its parent,
HLA, initiated an international expansion strategy. In June 1994, HLA completed
its initial international investment outside North America by joint venturing
with an Argentine insurance company, Cenit Seguros, S.A. Through this joint
venture, HLA operates several subsidiaries devoted to life insurance, retirement
annuities, mutual funds, life insurance brokerage and pensions and expects to
make further investments in South America. In 1995, HLRe expanded its activity
into Argentina by providing reinsurance to a developing life insurance market.
Additionally, Hartford Life and HLA, have an Employee Benefits division
("EBD") which markets group life, group short and long-term managed disability,
stop loss and supplementary medical coverage to employers and employer-sponsored
plans. It also offers voluntary accidental death and dismemberment, travel and
special risk coverage primarily to associations. EBD also offers disability
underwriting administration and claims processing services to other insurers and
self-insured employer plans. These products are sold through brokers, licensed
agents and third party administrators through an internal sales force. The
markets for group life and disability are highly competitive based on price and
quality of services. All of this business is reinsured to HLA.
B. SELECTED FINANCIAL DATA
The following selected financial data for Hartford Life, its subsidiaries
and affiliated companies should be read in conjunction with the consolidated
financial statements and notes thereto included in this Prospectus beginning on
page 23.
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES
Premiums and other considerations................................. $ 1,487 $ 1,100 $ 747 $ 259 $ 158
Net investment income............................................. 1,328 1,292 1,051 907 753
Net realized (losses) gains....................................... (11) 7 16 5 11
--------- --------- --------- --------- ---------
Total Revenues.................................................. 2,804 2,399 1,814 1,171 922
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
BENEFITS, CLAIMS AND EXPENSES
Benefits, claims and claim adjustment expenses.................... 1,422 1,405 1,046 797 689
Dividends to policyholders........................................ 675 419 227 47 1
Amortization of deferred policy acquisition costs................. 199 145 113 55 40
Other insurance expenses.......................................... 317 227 210 138 96
--------- --------- --------- --------- ---------
Total Benefits, Claims and Expenses............................. 2,613 2,196 1,596 1,037 826
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
INCOME BEFORE INCOME TAX EXPENSE.................................... 191 203 218 134 96
Income tax expense................................................ 62 65 75 45 32
--------- --------- --------- --------- ---------
Income before cumulative effect of changes in accounting
principles....................................................... 129 138 143 89 64
Cumulative effect of changes in accounting principles net of tax
benefits of $7................................................... 0 0 0 (13) 0
NET INCOME.......................................................... $ 129 $ 138 $ 143 $ 76 $ 64
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
23
<PAGE>
C.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION (DOLLAR AMOUNTS IN MILLIONS)
1. RESULTS OF OPERATIONS
1995 COMPARED TO 1994
<TABLE>
<CAPTION>
ILAD AMS SPECIALTY TOTAL
-------------------- -------------------- -------------------- ---------
1995 1994 1995 1994 1995 1994 1995
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues...................................... $ 797 $ 691 $ 734 $ 789 $ 1,273 $ 919 $ 2,804
Benefits, claims, expenses and taxes.......... 642 595 786 765 1,247 901 2,675
--------- --------- --------- --------- --------- --------- ---------
Net Income (Loss)............................. $ 155 $ 96 ($ 52) $ 24 $ 26 $ 18 $ 129
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
1994
---------
<S> <C>
Revenues...................................... $ 2,399
Benefits, claims, expenses and taxes.......... 2,261
---------
Net Income (Loss)............................. $ 138
---------
---------
</TABLE>
INDIVIDUAL LIFE & ANNUITY ("ILAD")
Revenues of $797 in 1995 increased by $106, or 15%, over 1994 as a result of
several factors. In the Individual Annuity line of business, deposits on fixed
and variable annuity contracts (which are not recorded as revenues) and strong
market value appreciation in policyholder accounts increased the assets in this
line of business 52% to $31 billion. Asset growth resulted in a corresponding
increase in policy charges which are based primarily as a percentage of assets.
This division has been the market leader in sales of individual variable annuity
contracts in each of the last three years. In the Individual Life line of
business, the full year benefits of the Pacific Standard assumption reinsurance
agreement (described below), in conjunction with new business sales, have
enabled premiums and other considerations (net of reinsurance and acquisitions)
to grow 15% over 1994. In addition, significant expense savings have resulted
from the consolidation of several functions in the Minneapolis and Simsbury
locations. The combination of the above items resulted in earnings growth of 61%
for the total reportable division.
In 1994, the division assumed life and annuity policies from Pacific
Standard Life Insurance Company, adding $219 million of life and $181 million of
annuity assets. In 1993, ILAD assumed $3.2 billion in fixed and variable annuity
assets and $0.9 billion of modified guaranteed life insurance from Fidelity
Bankers Life Insurance Company. The significant growth from these assumptions
along with new deposits from fixed and variable annuity sales of $7.0 billion in
1994 and $4.2 billion in 1993 increased assets under management. The management
and maintenance fees and cost of insurance associated with this growing
policyholder base were the source of ILAD's increased revenues and net income.
ASSET MANAGEMENT SERVICES ("AMS")
With revenues down 7% and a net loss, after-tax, of $52, AMS's 1995 results
were significantly below that of the prior year. This operating decline was
primarily due to the results of the GRC line of business, which offers fixed or
indexed rates that are guaranteed for a specific period. The GRC line of
business results have been negatively impacted by lower investment earnings on
mortgage-backed securities due to prepayments experienced in excess of assumed
levels. The GRC line of business results were also affected by the interest rate
rise in 1994 when the duration of assets lengthened relative to that of the
liabilities. The impact of these factors, which resulted in a $68 loss in 1995,
is expected to decline 10% to 25% per year over the next two years and will run
out in its entirety by the end of the year 2000. Hedging and other funding
strategies have been developed to address potential future liquidity needs.
Excluding the losses described above, AMS net income was $16 in 1995 as
compared with $23 in 1994. Although 1995 results were below the historic high of
1994, management does not expect this trend to continue.
SPECIALTY INSURANCE OPERATIONS
Specialty Operations reported net income of $26 in 1995 representing a 44%
increase over its 1994 net income of $18 and represents over 20% of the
Company's total 1995 net income. The increase in 1995 net income was primarily
due to substantial growth in the existing COLI line of business.
Total division revenues of $1,273 in 1995 increased by $354 to 39% over 1994
levels and were driven by substantial increases in COLI sales. In 1994, this
reportable division began to offer a variable COLI product which accounted for
nearly 69% of all new 1995 sales.
24
<PAGE>
1994 COMPARED TO 1993
ILAD
ILAD is the largest of Hartford Life's segments in terms of assets under
management and net income. The annuity line continues to be a leader in the
industry (see business section). In 1994, the segment assumed life and annuity
policies from Pacific Standard Life Insurance Company, adding $219 million of
annual life premiums and $181 million of annuity assets. In 1993, ILAD assumed
$3.2 billion in fixed and variable annuity assets and $.9 billion of modified
guaranteed life insurance from Fidelity Bankers Life Insurance Company. The
significant growth from these assumptions along with new deposits from fixed and
variable annuity sales of $7.0 billion in 1994 and $4.2 billion in 1993
increased assets under management, but are not reported as revenues. The
management and maintenance fees and cost of insurance associated with this
growing policyholder base were the source of ILAD's increased revenues and net
income. The growth in this segment has caused the ratio of benefits, claims and
expenses to average assets under management has declined from 3.6% in 1993 to
2.6% in 1994.
AMS
Sales in the AMS segment have been strong relative to its competitors.
Market share has grown in its key products. Consistent with industry experience,
1994 investment income declined due to interest rate drops which occurred
through the latter part of 1993. This particularly impacted the GRC line which
experienced prepayments in excess of expectations. Though most of the underlying
mortgage-backed securities for GRC were PAC CMO's (planned amortization class
collateralized mortgage obligations) which fall into the lower end of the
investment risk spectrum for this investment class, offering some prepayment
protection and less market volatility, the portfolio was not completely
insulated, which contributed to the drop in net income in 1994.
Although income for this line will continue to be impacted from these
prepayments, hedging strategies are in place that limit volatility against
future interest rate movements.
SPECIALTY INSURANCE OPERATIONS
Specialty is growing in size from revenue and net income perspectives
relative to the total Company and in comparison to the prior year. The segment
assumed a large block of COLI business in 1994. Life insurance in force has
grown from this assumption and from new sales to $39.5 billion in 1994 from
$16.7 billion in 1993. Hartford Life's Specialty segment is one of the
industry's leading underwriters and reinsurers of COLI products.
2. DIVISION INFORMATION
For division information, see Note 6 to Notes to Consolidated Financial
Statements
D. REINSURANCE
Hartford Life cedes insurance to non-affiliated insurers in order to limit
its maximum loss. Such transfer does not relieve Hartford Life of its primary
liability. Hartford Life also assumes insurance from other insurers. Group life
and health insurance is substantially reinsured to affiliated companies.
E. RESERVES
In accordance with the insurance laws and regulations under which Hartford
Life operates, it is obligated to carry on its books, as liabilities,
actuarially determined reserves to meet its obligations on its outstanding life
insurance contracts and reserves for its universal life and investment
contracts. Reserves for life insurance contracts are based on mortality and
morbidity tables in general use in the United States modified to reflect Company
experience. These reserves are computed at amounts that, with additions from
premiums to be received, and with interest on such reserves compounded annually
at certain assumed rates, will be sufficient to meet Hartford Life's policy
obligations at their maturities or in the event of an insured's death. Reserves
for universal life insurance and investment products represent policy account
balances before applicable surrender charges. In the accompanying financial
statements these life insurance reserves are determined in accordance with
generally accepted accounting principles, which may vary from statutory
requirements.
25
<PAGE>
F. INVESTMENTS
Consistent with the nature of the Company's policyholder obligations,
invested assets are primarily intermediate to long-term taxable fixed maturity
investments and collateralized mortgage obligations (CMO's). The majority of the
investment income earned in the Company's investment portfolios is credited to
policyholders (group pension contractholders and individual life and annuity
policyholders). The investment objective is to maximize after-tax yields
consistent with acceptable risk while maintaining appropriate liquidity and
matching policyholder liabilities.
Investments in fixed maturities include bonds which are carried at fair
market value. Significant portfolio activity may occur to match contract
obligations and not for the purpose of trading. The impact on net income and
portfolio yields as a result of these sales has not been significant.
G. COMPETITION
Hartford Life is engaged in a business that is highly competitive due to the
large number of stock and mutual life insurance companies and other entities
marketing insurance products. There are approximately 2,000 stock, mutual, and
other types of insurers in the life insurance business in the United States. In
the June 26, 1995 edition of NATIONAL UNDERWRITER LIFE-HEALTH INSURANCE
magazine, Hartford Life ranked 12th among all life insurance companies in the
United States based upon total assets. A.M. Best assigned Hartford Life its
second highest ranking classification, A+, as of December 31, 1994.
H. EMPLOYEES
As of December 31, 1995, Hartford Life and HLA have 3,045 direct employees,
1,741 of whom are employed at the home office in Simsbury, Connecticut, and
1,304 of whom are employed at various branch offices throughout the United
States, Canada and elsewhere. ILA employs 381 people in Minneapolis, Minnesota,
and HLRe has 19 employees in Westport, Connecticut.
I. PROPERTIES
Hartford Life occupies office space leased by Hartford Fire. Expenses
associated with these offices are allocated on a direct and indirect basis to
the Life subsidiaries by Hartford Fire.
J. REGULATION
The insurance business of Hartford Life is subject to comprehensive and
detailed regulation and supervision throughout the United States. The laws of
the various jurisdictions establish supervisory agencies with broad
administrative powers with respect to licensing to transact business, overseeing
trade practices, licensing agents, approving policy forms, establishing reserve
requirements, fixing maximum interest rates on life insurance policy loans and
minimum rates for accumulation of surrender values, and regulating the type and
amounts of investments permitted. In addition, several states, including
Connecticut, regulate affiliated groups of insurers, such as Hartford Life,
under insurance holding company legislation. Under such laws, intercompany
transfers of assets and dividend payments from insurance subsidiaries may be
subject to prior notice or approval, depending on the size of such transfers and
payments in relation to the financial positions of the companies.
The National Association of Insurance Commissioners ("NAIC") has established
solvency laws that relate an insurance company's capital requirements to the
risks inherent in its overall operations. These new rules are known as Risk
Based Capital ("RBC"). As of December 31, 1995, Hartford Life's risk based
capital result was better than the NAIC requirements.
Although the Federal government does not directly regulate the business of
insurance, Federal initiatives often have an impact on the business in a variety
of ways. Current and proposed Federal measures which may significantly affect
the insurance business include: removal of barriers preventing banks from
engaging in the insurance business, limits to medical testing for insurability,
changes in Medicare coverage, ERISA regulations and Social Security, tax law
changes affecting the taxation of insurance companies, tax treatment of
insurance products and its impact on the relative desirability of various
personal investment vehicles and proposed legislation to prohibit the use of
gender in determining insurance and pension rates and benefits. Current
legislative proposals would phase out the deductibility of interest on policy
loans under COLI, thus eliminating all future sales of leveraged COLI; however,
the current proposals would not affect variable COLI product sales or inforce
which accounted for approximately 69% of 1995 sales.
26
<PAGE>
Each insurance company is required to file detailed annual reports with
supervisory agencies in each of the jurisdictions in which it does business and
its operations and accounts are subject to examination by such agencies at
regular intervals. Hartford Life prepares its statutory financial statements in
accordance with accounting practices prescribed or permitted by the State of
Connecticut Insurance Department. Prescribed statutory accounting practices
include publications of the NAIC, as well as state laws, regulations, and
general administrative rules. In accordance with the insurance laws and
regulations under which Hartford Life operates, it is obligated to carry on its
books, as liabilities, actuarially determined reserves to meet its obligations
on its outstanding life insurance contracts and reserves for its universal life
and investment contracts. Reserves for life insurance contracts are based on
mortality and morbidity tables in general use in the United States modified to
reflect actual experience. These reserves are computed at amounts that, with
additions from premiums to be received, and with interest on such reserves
compounded annually at certain assumed rates, will be sufficient to meet
Hartford Life's policy obligations at their maturities or in the event of an
insured's death. Reserves for universal life insurance and investment products
represent policy account balances before applicable surrender charges. In the
accompanying financial statements these life insurance reserves are determined
in accordance with generally accepted accounting principles, which may vary from
statutory requirements.
27
<PAGE>
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
POSITION WITH OTHER BUSINESS PROFESSION,
HARTFORD LIFE, VOCATION OR EMPLOYMENT FOR
NAME, AGE YEAR OF ELECTION PAST 5 YEARS; OTHER DIRECTORSHIPS
- - ------------------------------- --------------------------------- ---------------------------------------------
<S> <C> <C>
Louis J. Abdou, 53 Vice President, 1987 Vice President (1987-Present), Hartford Life.
Wendell J. Bossen, 62 Vice President, 1992** President (1992-Present), International
Corporate Marketing Group, Inc.; Executive
Vice President (1984-1992), Mutual Benefit.
Gregory A. Boyko, 44 Vice President, 1995 Vice President and Controller (1995-Present),
Hartford Life; Chief Financial Officer
(1994-1995), IMG American Life; Senior Vice
President (1992-1994), Connecticut Mutual
Life Insurance Company.
Peter W. Cummins, 59 Vice President, 1989 Vice President, Individual Annuity Operations
(1989-Present), Hartford Life.
Ann M. deRaismes, 45 Vice President, 1994 Vice President (1994-Present); Assistant Vice
President (1992); Director of Human
Resources (1991-Present), Hartford Life.
Timothy M. Fitch, 43 Vice President, 1995 Vice President (1995-Present); Assistant Vice
President (1993); Director (1991), Hartford
Life.
Donald R. Frahm, 64 Chairman and Chief Executive Chairman and Chief Executive Officer of the
Officer, 1988 Hartford Insurance Group (1988-Present).
Director, 1988*
Bruce D. Gardner, 45 Vice President, 1996 Vice President (1996-Present); General
Counsel and Director, 1994* Corporate
Secretary (1991-1996), Hartford Life.
Joseph H. Gareau, 49 Executive Vice President Executive Vice President and Chief Investment
and Chief Investment Officer, (1993-Present), Hartford Life;
Officer, 1993 Senior Vice President and Chief Investment
Director, 1993* Officer (1992), ITT Hartford's
Property-Casualty Companies.
J. Richard Garrett, 51 Treasurer, 1994 Treasurer (1994-Present); Vice President
Vice President, 1993 (1993-Present) Hartford Life; Treasurer
(1977), Hartford Insurance Group.
John P. Ginnetti, 50 Executive Vice President, 1994 Executive Vice President and Director Asset
Management Services (1994-Present); Senior
Vice President, (1988), Hartford Life.
Lynda Godkin, 42 Assoc. General Counsel, Corporate Associate General Counsel and Corporate
Secretary, 1995 Secretary (1995-Present); Assistant General
Counsel and Secretary (1994); Counsel
(1990), Hartford Life.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH OTHER BUSINESS PROFESSION,
HARTFORD LIFE, VOCATION OR EMPLOYMENT FOR
NAME, AGE YEAR OF ELECTION PAST 5 YEARS; OTHER DIRECTORSHIPS
- - ------------------------------- --------------------------------- ---------------------------------------------
Lois W. Grady, 51 Vice President, 1993 Vice President (1993-Present); Assistant Vice
President (1988), Hartford Life.
<S> <C> <C>
David A. Hall, 42 Senior Vice President and Senior Vice President and Actuary
Actuary, 1992 (1992-Present), Hartford Life.
Joseph Kanarek, 48 Vice President, 1991 Vice President (1991-Present), Hartford Life.
Robert A. Kerzner, 44 Vice President, 1994 Vice President (1994-Present); Regional Vice
President (1991); Life Sales Manager (1990),
Hartford Life.
Kevin J. Kirk, 44 Vice President, 1992 Vice President (1992-Present); Assistant Vice
President; Assistant Director, Asset
Management Services (1985); Hartford Life.
Andrew W. Kohnke, 47 Vice President, 1992 Vice President (1992-Present); Assistant Vice
President (1989), Hartford Life.
Steven M. Maher, 41 Vice President and Actuary, 1993 Vice President and Actuary (1993-Present);
Assistant Vice President (1987), Hartford
Life.
William B. Malchodi, Jr., 45 Vice President, 1994 Director or Vice President (1994-Present); Director of
Taxes, 1992 Taxes (1992-Present); Assistant General
Counsel and Assistant Director of Taxes
(1986), Hartford Insurance Company.
Thomas M. Marra, 37 Executive Vice President, 1996 Executive Vice President and Director
Director, 1994* Individual Life and Annuity Division
(1996-Present); Senior Vice President and
Director, Individual Life and Annuity
Division (1993-1996); Director of Individual
Annuities (1991), Hartford Life.
Robert F. Nolan, 41 Vice President, 1995 Vice President (1995-Present), Assistant Vice
President Hartford Life; Manager Public
Relations (1986), Aetna Life and Casualty
Insurance Company.
Joseph J. Noto, 44 Vice President, 1989 Vice President (1989-Present), Hartford Life.
Leonard E. Odell, Jr., 51 Senior Vice President, 1994 Senior Vice President (1994-Present); Vice
Director, 1994* President and Chief Actuary (1982), Hartford
Life.
Michael C. O'Halloran, 49 Vice President, 1994 Associate Vice President (1994-Present); Senior
General Counsel, 1988 Associate General Counsel and Director
(1988-Present), Law Department, Hartford
Fire Insurance Company.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH OTHER BUSINESS PROFESSION,
HARTFORD LIFE, VOCATION OR EMPLOYMENT FOR
NAME, AGE YEAR OF ELECTION PAST 5 YEARS; OTHER DIRECTORSHIPS
- - ------------------------------- --------------------------------- ---------------------------------------------
Craig D. Raymond, 35 Vice President, 1993 Chief Vice President and Chief Actuary
Actuary, 1994 (1994-Present); Vice President (1993);
Assistant Vice President (1992); Actuary
(1989-1994), Hartford Life.
<S> <C> <C>
Lowndes A. Smith, 56 President and Chief Operating President and Chief Operating Officer
Officer, 1989 Director, 1981* (1989-Present), Hartford Life; Senior Vice
President and Group Controller (1987),
Hartford Insurance Group.
Edward J. Sweeney, 39 Vice President, 1993 Vice President (1993-Present); Chicago
Regional Manager (1985-1993), Hartford Life.
James E. Trimble, 39 Vice President and Actuary, 1990 Vice President (1990-Present); Assistant Vice
President (1987-1990), Hartford Life.
Raymond P. Welnicki, 47 Senior Vice President, 1993 Senior Vice President (1994-Present); Vice
Director, 1994* President (1993), Hartford Life; Board of
Directors, Ethix Corp., formerly employed by
Aetna Life & Casualty.
Walter C. Welsh, 49 Vice President, 1995 Vice President (1995-Present); Assistant Vice
President (1993), Hartford Life.
James J. Westervelt, 49 Senior Vice President, Group Senior Vice President and Group Controller
Controller, 1994 (1994-Present); Vice President and Group
Controller (1989), Hartford Insurance Group.
Lizabeth H. Zlatkus, 37 Vice President, 1994 Director, Vice President (1994-Present); Assistant Vice
1994* President (1992); Hartford Life; formerly
Director, Hartford Insurance Group.
</TABLE>
- - ------------------------
* Denotes date of election to Board of Directors.
** ITT Hartford Affiliated Company.
EXECUTIVE COMPENSATION
Executive officers of Hartford Life Insurance Company also serve one or more
affiliated companies of Hartford Life Insurance Company. Allocations have been
made as to each individual's time devoted to his duties as an executive officer
of Hartford Life. The following tables provide information on executive
compensation paid to the Chief Operating Officer and the five most highly
compensated executive officers of Hartford Life whose allocated compensation
exceeded $100,000 in 1995. Directors of Hartford Life receive no compensation in
addition to their compensation as employees of Hartford Life.
30
<PAGE>
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------------------------------
AWARDS
ANNUAL COMPENSATION SECURITIES PAYOUTS ALL
NAME AND ----------------------- UNDERLYING LTIP OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) PAYOUTS ($)(1) COMPENSATION ($)
- - ---------------------------------- ---- ---------- ---------- ----------- -------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
DONALD R. FRAHM 1995 38,640 16,851 5,959 46,080 3,467
CHAIRMAN AND CHIEF EXECUTIVE
OFFICER 1994 36,213 17,280 5,959 -- 1,381
1993 34,560 17,920 4,401 -- 1,307
LON A. SMITH 1995 243,530 130,526 35,733 170,400 21,978
PRESIDENT AND CHIEF OPERATING
OFFICER 1994 189,333 113,600 35,733 -- 7,638
1993 158,567 82,360 31,249 -- 6,132
JOHN P. GINNETTI 1995 245,250 223,178 6,583 78,480 25,444
EXECUTIVE VICE PRESIDENT 1994 158,050 147,150 18,103 -- --
1993 134,288 39,894 8,996 -- 35,113
PETER W. CUMMINS 1995 182,698 -- 1,665 39,696 320,865
VICE PRESIDENT 1994 118,654 -- 2,081 -- 391,171
1993 102,300 -- 1,819 -- 217,708
THOMAS M. MARRA 1995 160,800 258,084 8,093 27,336 17,739
EXECUTIVE VICE PRESIDENT 1994 113,096 131,052 20,140 -- --
1993 81,472 -- 2,949 -- 71,103
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
NUMBER OF % OF TOTAL PRICE APPRECIATION
SECURITIES OPTIONS FOR OPTION TERM
UNDERLYING GRANTED ($) (2)
OPTIONS TO EMPLOYEES EXERCISE PRICE EXPIRATION ------------------
NAME GRANTED (#) IN 1995 ($/SHARE) DATE 5% 10%
- - -------------------------------- ----------- -------------- -------------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Donald R. Frahm 5,959 0.005 43.22 5/11/2005 161,965 410,454
Lon A. Smith 35,733 0.032 43.22 5/11/2005 971,235 2,461,320
John P. Ginnetti 6,583 0.006 43.22 5/11/2005 178,930 453,448
Peter W. Cummins 1,665 0.001 43.22 5/11/2005 45,248 114,668
Thomas M. Marra 8,093 0.007 43.22 5/11/2005 219,970 557,450
</TABLE>
(1) Percentages indicated are based on options to purchase a total of 1,129,120
shares of common stock granted to 235 employees during 1995.
(2) At the end of the term of the options granted in 1995, the projected price
of a share of common stock would be $70.40 and $112.10 at assumed annual
appreciation rates of 5% and 10%.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS AT FISCAL YEAR-END IN-THE- MONEY OPTIONS HELD
ON VALUE (#) AT FISCAL YEAR-END ($)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---------------------------- ----- ------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald R. Frahm 1,749 98,571 10,360 5,959 155,140 30,748
Lon A. Smith 9,670 678,155 80,148 35,733 1,362,804 184,385
John P. Ginnetti -- -- 9,032 21,651 137,061 263,323
Peter W. Cummins -- -- 1,905 3,659 28,508 38,462
Thomas M. Marra -- -- 8,678 22,503 116,094 229,932
</TABLE>
31
<PAGE>
LEGAL PROCEEDINGS
Hartford Life and its subsidiaries are involved in pending and threatened
litigation in which claims for monetary damages are asserted. Management, after
consultation with legal counsel, does not anticipate the ultimate liability
arising from such pending or threatened litigation to have a material effect on
the results of operations and financial position of Hartford Life.
EXPERTS
The financial statements and schedules included in this registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance on the authority of said firm as experts in
accounting and auditing in giving said report. Reference is made to said reports
of Hartford Life Insurance Company which includes an explanatory paragraph with
respect to the adoption of a new accounting standard changing the methods of
accounting for debt and equity securities. The principal business address of
Arthur Andersen LLP is One Financial Plaza, Hartford, Connecticut 06103.
32
<PAGE>
APPENDIX A
MODIFIED GUARANTEED ANNUITY
FOR QUALIFIED PLANS
The CRC-Registered Trademark- (Compound Rate Contract) Annuity for Qualified
Plans is a group deferred annuity Contract under which one or more purchase
payments may be made. Plans eligible to purchase the Contract are pension and
profit-sharing plans qualified under 401(a) of the Internal Revenue Code, Keogh
Plans and eligible state deferred compensation plans under 457 of the Code
("Qualified Plans").
To apply for a Group Annuity Contract, the trustee or other applicant need
only complete an application for the Group Annuity Contract and make its initial
purchase payment. A Group Annuity Contract will then be issued to the applicant
and subsequent Purchase Payments may be made subject to the same $2,000 minimum
applicable to qualified purchasers of Certificates. While no Certificates are
issued, each purchase payment and the Account established thereby, are confirmed
to the Contract Owner. The initial and subsequent purchase payments operate to
establish Accounts under the Group Annuity Contract in the same manner as
non-qualified purchases. Each Account will have its own Initial and Subsequent
Guarantee Periods and Guaranteed Rates. Surrenders under the Group Annuity
Contract may be made at the election of the Contract Owner, from one or more of
the Accounts established under the Contract. Account surrenders are subject to
the same limitations, adjustments and charges as surrenders made under a
certificate (see "Surrenders", page 9). Net Surrender Values may be withdrawn or
applied to purchase annuities for the Contract Owners' Qualified Plan
Participants.
Because there are no individual participant accounts, the Qualified Group
Annuity Contract issued in connection with a Qualified Plan does not provide for
death benefits. Annuities purchased for Qualified Plan Participants may provide
for a payment upon the death of the Annuitant depending on the option chosen
(see "Annuity Options", page 12). Additionally, since there are no Annuitants
prior to the actual purchase of an Annuity by the Contract Owner, the provisions
regarding the Annuity Commencement Date are not applicable.
33
<PAGE>
APPENDIX B
SPECIAL PROVISIONS FOR INDIVIDUAL CONTRACTS ISSUED IN THE STATE OF CALIFORNIA,
MICHIGAN, MISSOURI, NEW YORK, OREGON, SOUTH CAROLINA, TEXAS, VIRGINIA AND
WISCONSIN
The following provision, among others, applies only to individual Contracts
issued in the State of California, Michigan, Missouri, New York, Oregon, South
Carolina, Texas, Virginia and Wisconsin:
(1) The Contract Owner has the right to request, in writing, a surrender of
the Contract within ten (10) days after it was purchased. In such event,
in California, Michigan, Missouri, New York, Oregon, Texas, Virginia and
Wisconsin, Hartford Life will pay the Contract Owner an amount equal to
the sum of (a) the Account Value on the date the written request for
surrender was received multiplied by the Market Value Adjustment formula
and (b) any charges deducted from the Purchase Payment. In Missouri and
South Carolina, the Contract will be cancelled and any premium paid will
be refunded in full.
34
<PAGE>
APPENDIX C
MARKET VALUE ADJUSTMENT
The formula which will be used to determine the Market Value Adjustment is:
[( 1 + I )/ ( 1 + J )](N/12)
I = The Guarantee Rate in effect for the Current Guarantee Period
(expressed as a decimal, e.g., 1% = .01)
J = The Current Rate (expressed as a decimal, e.g., 1% = .01) in effect for
durations equal to the number of years remaining in the current
Guarantee Period (years are rounded to the next highest number of
years).
N = The number of complete months from the surrender date to the end of the
current Guarantee Period.
EXAMPLE OF MARKET VALUE ADJUSTMENT
<TABLE>
<S> <C>
Beginning Account Value: $50,000
Guarantee Period: 5 Years
Guarantee Rate: 5.50% per annum
Full Surrender: Middle of Contract Year 3
EXAMPLE 1:
Gross Surrender Value at middle
of
Contract Year 3 = 50,000 (1.055)2.5 = 57,161.18
Net Surrender Value at middle of
Contract Year 3 = [57,161.18 - (0.05) x 57,161.18]
x Market Value Adjustment
= $54,303.12 x Market Value Adjustment
Market Value Adjustment
I = 0.055
J = 0.061
N = 30
Market Value Adjustment = [(1 + I)/(1 + J)]N/12
= (1.055/1.061)30/12
= 0.985922
Net Surrender Value at middle of
Contract Year 3 = $54,303.12 x 0.985922
= $53,538.64
EXAMPLE OF MARKET VALUE ADJUSTMENT
Beginning Account Value: $50,000
Guarantee Period: 5 Years
Guarantee Rate: 5.50% per annum
Full Surrender: Middle of Contract Year 3
EXAMPLE 2:
Gross Surrender Value at middle
of
Contract Year 3 = 50,000 (1.055)2.5 = 57,161.18
Net Surrender Value at middle of
Contract Year 3 = [57,161.18 - (0.05) x 57,161.18]
x Market Value Adjustment
= $54,303.12 x Market Value Adjustment
</TABLE>
35
<PAGE>
<TABLE>
<S> <C>
Market Value Adjustment
I = 0.055
J = 0.050
N = 30
Market Value Adjustment = [(1 + I)/(1 + J)]N/12
= (1.055/1.05)30/12
= 1.011947
Net Surrender Value at middle of
Contract Year 3 = $54,303.12 x 1.011947
= $54,951.88
</TABLE>
This example does not include any applicable taxes.
36
<PAGE>
<TABLE>
<CAPTION>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
<S> <C>
Report of Management F-1
Report of Independent Public Accountants F-2
Consolidated Statements of Income for the three years ended December 31, 1995 F-3
Consolidated Balance Sheets as of December 31, 1995 and 1994 F-4
Consolidated Statements of Stockholder's Equity for the three years ended December 31, 1995 F-5
Consolidated Statements of Cash Flows for the three years ended December 31, 1995 F-6
Notes to Consolidated Financial Statements F-7 thru F-18
Summary of Investments (Other than Investments in Affiliates) S-1
Supplemental Insurance Information S-2
Reinsurance S-3
</TABLE>
All schedules not listed above have been omitted because they are not
applicable or the amounts are insignificant, immaterial or the information has
been otherwise supplied in the financial statements or notes thereto.
REPORT OF MANAGEMENT
The management of Hartford Life Insurance Company and subsidiaries is
responsible for the preparation and integrity of the information contained in
the accompanying consolidated financial statements and other sections of the
Annual Report. The consolidated financial statements are prepared in
accordance with generally accepted accounting principles, and, where necessary,
include amounts that are based on management's informed judgments and
estimates. Management believes these statements present fairly Hartford
Life's financial position and results of operations, and that any other
information contained in the Annual Report is consistent with the financial
statements.
Management has made available Hartford Life's financial records to
Arthur Andersen LLP, independent public accountants, in order for them to
perform an audit of Hartford Life's consolidated financial statements. Their
report appears on Page F-2.
An essential element in meeting management's responsibilities is Hartford
Life's system of internal controls. These controls, which include
accounting controls and the internal auditing program, are designed to
provide reasonable assurance that assets are safeguarded, and transactions
are properly authorized, executed and recorded. The controls, which are
documented and communicated to employees in the form of written codes of
conduct and policies and procedures, provide for the careful selection of
personnel and for appropriate division of responsibility. Management
continually monitors for compliance, while Hartford Life's internal auditors
independently assess the effectiveness of the controls and make
recommendations for improvement. Also, Arthur Andersen LLP took into
consideration Hartford Life's system of internal controls in determining the
nature, timing, and extent of its audit and tests.
Another important element is management's recognition of its responsibility
for fostering a strong, ethical climate, thereby ensuring that Hartford
Life's affairs are transacted according to the highest standards of personal
and professional conduct. Hartford Life has a long-standing reputation of
integrity in business conduct and utilizes communication and education to
create and fortify a strong compliance culture.
The Audit Committee of the Board of Directors of ITT Hartford, composed of
non-employee directors, meets periodically with the external and internal
auditors to evaluate the effectiveness of the work performed by them in
discharging their respective responsibilities and to ensure their
independence and free access to the Committee.
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life Insurance Company and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Hartford Life
Insurance Company (a Connecticut corporation and wholly-owned subsidiary of
Hartford Life and Accident Insurance Company) and subsidiaries as of December
31, 1995 and 1994, and the related consolidated statements of income,
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1995. 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
consolidated financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Hartford Life Insurance Company and subsidiaries as of December 31, 1995 and
1994, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
As discussed in Note 1 in Notes to Consolidated Financial Statements, Hartford
Life Insurance Company adopted new accounting standards promulgated by the
Financial Accounting Standards Board, changing its methods of accounting, as of
January 1, 1994, for debt and equity securities.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedules listed in
the Index to Consolidated Financial Statements and Schedules are presented for
purposes of complying with the Securities and Exchange Commission's rules and
are not a required part of the basic consolidated financial statements. These
schedules have been subjected to the auditing procedures applied in the audits
of the basic consolidated financial statements and, in our opinion, fairly
state in all material respects the financial data required to be set forth
therein in relation to the basic consolidated financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
January 24, 1996
F-2
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS)
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------
- - --------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
------- ------- ------
<S> <C> <C> <C>
REVENUES
Premiums and other considerations $1,487 $1,100 $747
Net investment income 1,328 1,292 1,051
Net realized (losses) gains (11) 7 16
------ ------ -----
TOTAL REVENUES 2,804 2,399 1,814
------ ------ -----
BENEFITS, CLAIMS AND EXPENSES
Benefits, claims and claim
adjustment expenses 1,422 1,405 1,046
Dividends to policyholders 675 419 227
Amortization of deferred policy
acquisition costs 199 145 113
Other insurance expense 317 227 210
------ ------ -----
TOTAL BENEFITS, CLAIMS AND EXPENSES 2,613 2,196 1,596
------ ------ -----
INCOME BEFORE INCOME TAX EXPENSE 191 203 218
Income tax expense 62 65 75
------ ------ -----
NET INCOME $129 $138 $143
------ ------ -----
------ ------ -----
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
F-3
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
AS OF DECEMBER 31,
------------------
1995 1994
------- --------
ASSETS
<S> <C> <C>
Investments
Fixed maturities
available for sale, at market value
(amortized cost of $14,440 and $14,464) $14,400 $13,429
Equity securities, at market value
(cost of $61 and $76) 63 68
Mortgage loans, at outstanding balance 265 316
Policy loans, at outstanding balance 3,381 2,614
Other investments, at cost 156 107
------- -------
TOTAL INVESTMENTS 18,265 16,534
Cash 46 20
Premiums and amounts receivable 165 160
Reinsurance recoverable 6,221 5,466
Accrued investment income 394 378
Deferred policy acquisition costs 2,188 1,809
Deferred income tax 420 590
Other assets 234 83
Separate account assets 36,264 22,809
------- -------
TOTAL ASSETS $64,197 $47,849
------- -------
------- -------
LIABILITIES
Future policy benefits $2,373 $1,890
Other policyholder funds 22,598 21,328
Other liabilities 1,233 1,000
Separate account liabilities 36,264 22,809
------- -------
TOTAL LIABILITIES 62,468 47,027
------- -------
Commitments and contingencies (Note 9)
STOCKHOLDER'S EQUITY
Common stock
Authorized 1,000 shares, $5,690 par value
Issued and outstanding 1,000 shares 6 6
Additional paid-in capital 1,007 826
Retained earnings 773 644
Unrealized loss on investments, net of tax (57) (654)
------- -------
TOTAL STOCKHOLDER'S EQUITY 1,729 822
------- -------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $64,197 $47,849
------- -------
------- -------
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
F-4
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN MILLIONS)
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
UNREALIZED LOSS TOTAL
COMMON ADDITIONAL RETAINED ON INVESTMENTS, STOCKHOLDER'S
STOCK PAID-IN-CAPITAL EARNINGS NET OF TAX EQUITY
------ --------------- -------- --------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 $6 $498 $373 $0 $877
Net income - - 143 - 143
Capital contribution - 180 - - 180
Excess of assets over liabilities
on reinsurance assumed from affiliate - (2) - - (2)
Change in unrealized loss on investments, net of tax - - - (5) (5)
------ --------------- -------- --------------- -------------
BALANCE, DECEMBER 31, 1993 6 676 516 (5) 1,193
------ --------------- -------- --------------- -------------
Net income - - 138 - 138
Capital contribution - 150 - - 150
Dividend paid - - (10) - (10)
Change in unrealized loss on investments, net of tax* - - - (649) (649)
------ --------------- -------- --------------- -------------
BALANCE, DECEMBER 31, 1994 6 826 644 (654) 822
------ --------------- -------- --------------- -------------
Net income - - 129 - 129
Capital contribution - 181 - - 181
Change in unrealized loss on investments, net of tax - - - 597 597
------ --------------- -------- --------------- -------------
BALANCE, DECEMBER 31, 1995 $6 $1,007 $773 ($57) $1,729
------ --------------- -------- --------------- -------------
------ --------------- -------- --------------- -------------
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(*) The 1994 change in unrealized loss on investments, net of tax, included an
unrealized gain of $91 due to adoption of SFAS No. 115 as discussed in Note 1(b)
of Notes to Consolidated Financial Statements.
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
F-5
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------
1995 1994 1993
------------- -------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $129 $138 $143
Adjustments to net income:
Net realized (losses) gains 11 (7) (16)
(Decrease) increase in liability to policyholders for realized gains (3) 5 (15)
Net amortization of premium on fixed maturities 21 41 2
Provision for deferred income taxes (172) (128) (121)
Increase in deferred policy acquisition costs (379) (441) (292)
(Increase) decrease in premiums and amounts receivable (81) 10 (28)
Increase in accrued investment income (16) (106) (4)
(Increase) decrease in other assets (177) 101 (36)
(Increase) decrease in reinsurance recoverable (35) 75 (121)
Increase in liability for future policy benefits 483 224 360
Increase in other liabilities 281 191 176
------------- -------------- -------------
CASH PROVIDED BY OPERATING ACTIVITIES 62 103 48
------------- -------------- -------------
INVESTING ACTIVITIES
Purchases of fixed maturities investments (6,228) (9,127) (12,406)
Proceeds from sales of fixed maturities investments 4,848 5,708 8,813
Maturities and principal paydowns of fixed maturities investments 1,741 1,931 2,596
Net purchases of other investments (871) (1,338) (206)
Net (purchases)/sales of short-term investments (24) 135 (564)
------------- -------------- -------------
CASH USED FOR INVESTING ACTIVITIES (534) (2,691) (1,767)
------------- -------------- -------------
FINANCING ACTIVITIES
Net receipts from investment and UL-type contracts credited to
policyholder account balances 498 2,467 1,513
Capital contribution 0 150 180
Dividends paid 0 (10) 0
------------- -------------- -------------
CASH PROVIDED BY FINANCING ACTIVITIES 498 2,607 1,693
------------- -------------- -------------
NET INCREASE (DECREASE) IN CASH 26 19 (26)
Cash at beginning of year 20 1 27
------------- -------------- -------------
CASH AT END OF YEAR $46 $20 $1
------------- -------------- -------------
------------- -------------- -------------
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
F-6
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN MILLIONS)
1. SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
These consolidated financial statements include Hartford Life Insurance Company
and its wholly-owned subsidiaries ("Hartford Life" or the "Company"), ITT
Hartford Life and Annuity Insurance Company ("ILA") and ITT Hartford
International Life Reassurance Corporation ("HLRe"), formerly American Skandia
Life Reinsurance Corporation. Hartford Life is a wholly-owned subsidiary of
Hartford Life and Accident Insurance Company ("HLA"). Hartford Life is
ultimately owned by Hartford Fire Insurance Company ("Hartford Fire"), which is
ultimately owned by ITT Hartford Group, Inc. ("ITT Hartford"), formerly a
subsidiary of ITT Corporation ("ITT"). On December 19, 1995, ITT Corporation
distributed all of the outstanding shares of ITT Hartford Group to ITT
Corporation Shareholders of record in an action known herein as the
"Distribution". As a result of the Distribution, ITT Hartford became an
independent publicly traded company.
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
Company offers life, annuity, pension, and disability insurance products.
These products are distributed and marketed by multiple distribution channels
which include broker-dealers, agents and banks, as well as a captive sales
force. Hartford Life conducts business primarily in the United States and is
licensed to write business in all 50 states. The Company is headquartered in
Simsbury, Connecticut and has 3,045 direct employees.
The consolidated financial statements are prepared in conformity with generally
accepted accounting principles which differ in certain material respects from
the accounting practices prescribed or permitted by various insurance
regulatory authorities.
(B) CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1994, Hartford Life adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". The new standard requires, among other things,
that securities be classified as "held-to-maturity", "available-for-sale" or
"trading" based on Hartford Life's intentions with respect to the ultimate
disposition of the security and its ability to effect those intentions. The
classification determines the appropriate accounting carrying value (cost basis
or fair value) and, in the case of fair value, whether the adjustment impacts
Stockholder's Equity directly or is reflected in the Consolidated Statements of
Income. Investments in equity securities had previously been and continue to
be recorded at fair value with the corresponding impact included in
Stockholder's Equity. Under SFAS No. 115, Hartford Life's fixed maturities
are classified as "available-for-sale" and accordingly, these investments are
reflected at fair value with the corresponding impact included as a component
of Stockholder's Equity designated as "Unrealized loss on investments, net of
tax." As with the underlying investment security, unrealized gains and losses
on derivative financial instruments are considered in determining the fair
value of the portfolios. The impact of adoption was an increase to
Stockholder's Equity of $91. Hartford Life's cash flows were not impacted by
this change in accounting principle.
(C) REVENUE RECOGNITION
Revenues for universal life policies and investment products consist of policy
charges for the cost of insurance, policy administration and surrender charges
assessed to policy account balances. Premiums for traditional life insurance
policies are recognized as revenues when they are due from policyholders.
Deferred acquisition costs are amortized using the retrospective deposit method
for universal life and other types of contracts where the payment pattern is
irregular or surrender charges are a significant source of profit and the
prospective deposit method is used where investment margins are the primary
source of profit.
F-7
<PAGE>
(D) FUTURE POLICY BENEFITS AND OTHER POLICYHOLDER FUNDS
Liabilities for future policy benefits are computed by the net level premium
method using interest rate assumptions varying from 3% to 11% and withdrawal,
mortality and morbidity assumptions which vary by plan, year of issue and
policy durations and include a provision for adverse deviation. Other
policyholder funds which represent liabilities for universal life insurance and
investment products reflect policy account balances before applicable surrender
charges.
(E) POLICYHOLDER REALIZED GAINS AND LOSSES
Realized gains and losses on security transactions associated with Hartford
Life's immediate participation guaranteed contracts are excluded from
revenues, since under the terms of the contracts the realized gains and losses
will be credited to policyholders in future years as they are entitled to
receive them.
(F) DEFERRED POLICY ACQUISITION COSTS
Policy acquisition costs, including commissions and certain underwriting
expenses associated with acquiring traditional life insurance products, are
deferred and amortized over the lesser of the estimated or actual contract
life. For universal life insurance and investment products, acquisition costs
are being amortized generally in proportion to the present value of expected
gross profits from surrender charges, investment, mortality and expense
margins.
(G) INVESTMENTS
Hartford Life's investments in fixed maturities include bonds, redeemable
preferred stock and commercial paper which are classified as "available-for-
sale" and accordingly are carried at market value with the after-tax difference
from cost reflected as a component of Stockholder's Equity designated
"Unrealized loss on investments, net of tax". Equity securities, which include
common and non-redeemable preferred stocks, are carried at market value with
the after-tax difference from cost reflected in Stockholder's Equity. Realized
investment gains and losses, after deducting life and pension policyholders'
share, are reported as a component of revenue and are determined on a specific
identification basis.
(H) DERIVATIVE FINANCIAL INSTRUMENTS
Hartford Life uses a variety of derivative financial instruments including,
swaps, caps, floors, options, forwards and exchange traded financial futures 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. Hartford
Life does not hold or issue derivative financial instruments for trading
purposes. Hartford Life's accounting for derivative financial 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", American Institute of Certified Public Accountants Statement of
Position 86-2, "Accounting for Options" and various Emerging Issues Task Force
pronouncements. Written options are in all cases used in conjunction with other
assets and derivatives as part of an overall risk management strategy.
Derivative instruments are carried at values consistent with the asset or
liability being hedged. Derivatives used to hedge fixed maturities or equities
are carried at fair value with the after-tax difference from cost reflected in
Stockholder's Equity. Derivatives used to hedge other invested assets or
liabilities are carried at cost.
Derivatives, used as part of a risk management strategy, must be designated at
inception as a hedge and measured for effectiveness both at inception and on an
ongoing basis. Hartford Life's minimum correlation threshold for hedge
designation is 80%. If correlation, which is assessed monthly and measured
based on a rolling three month average, falls below 80%, hedge accounting will
be terminated. Derivatives 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. Synthetic
instrument accounting, consistent with industry practice, provides that the
synthetic asset is accounted for like the financial instrument it is intended
to replicate. Derivatives which fail to meet risk management criteria 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 future receipt of product cash flows are deferred and, at the time of
the ultimate purchase, reflected as a basis adjustment to the purchased
asset. Gains or losses on futures used in invested asset risk management are
deferred and adjusted into the basis of the hedged asset when the contract
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 investment income over the remaining asset life.
F-8
<PAGE>
Open forward commitment contracts are marked to market through Stockholder's
Equity. Such contracts are recorded at settlement by recording the purchase of
the specified securities at the previously committed price. Gains or losses
resulting from the termination of the forward commitment contracts before the
delivery of the securities are recognized immediately in the 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 hedge. 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 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 earnings. 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 gain or loss.
Premiums paid on purchased floor or cap agreements and the premium received on
issued floor or cap 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.
(I) RELATED PARTY TRANSACTIONS
Transactions of Hartford Life with its parent and affiliates relate principally
to tax settlements, insurance coverage, rental and service fees and payment of
dividends and capital contributions. In addition, certain affiliated insurance
companies purchased group annuity contracts from Hartford Life to fund pension
costs and claim annuities to settle casualty claims.
On June 30, 1995, the assets of Lyndon Insurance Company ("Lyndon") were
contributed to ILA. As a result, ILA received approximately $365 in fixed
maturities, equity securities and cash, $26 in receivables, $187 of current
tax liability, $20 in deferred tax liability, and $3 of other liabilities.
The excess of assets over liabilities of $181 were recorded as an increase to
paid-in capital.
Substantially all general insurance expenses related to Hartford Life,
including rent expenses, are initially paid by Hartford Fire. Direct expenses
are allocated to Hartford Life using specific identification and indirect
expenses are allocated using other applicable methods.
The rent paid to Hartford Fire for the space occupied by Hartford Life was $3
in 1995, 1994, and 1993 respectively. Hartford Life expects to pay rent of $3
in 1996, 1997, 1998, 1999, and 2000, respectively and $57 thereafter, over the
contract life of the lease.
(J) DIVIDEND TO POLICYHOLDERS
Dividends to policyholders primarily represent those amounts paid to corporate
owned life insurance ("COLI") policyholders. These dividend liabilities, which
appear as other policyholder funds on the Consolidated Balance Sheets, are
recorded when approved by the board of directors.
See Note (4) for the related party coinsurance agreements.
F-9
<PAGE>
2. INVESTMENTS
(a) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
<S> <C> <C> <C>
1995 1994 1993
------ ------ ------
Interest income $1,338 $1,247 $1,007
Income from other investments 1 54 53
------ ------ ------
GROSS INVESTMENT INCOME 1,339 1,301 1,060
Less: Investment expenses 11 9 9
------ ------ ------
NET INVESTMENT INCOME $1,328 $1,292 $1,051
------ ------ ------
------ ------ ------
(b) UNREALIZED GAINS/(LOSSES) ON EQUITY SECURITIES
As of December 31,
--------------------------
1995 1994 1993
------ ------ ------
Gross unrealized gains $4 $2 $3
Gross unrealized losses (2) (11) (11)
Deferred income tax expenses/(benefit) 1 (3) (3)
------ ------ ------
NET UNREALIZED GAINS (LOSSES) AFTER TAX 1 (6) (5)
Balance at the beginning of the year (6) (5) (0)
------ ------ ------
CHANGE IN NET UNREALIZED GAINS (LOSSES) ON EQUITY SECURITIES $7 ($1) ($5)
------ ------ ------
------ ------ ------
(c) UNREALIZED GAINS/(LOSSES) IN FIXED SECURITIES
As of December 31,
--------------------------
1995 1994 1993
------ ------ ------
Gross unrealized gains $529 $150 $538
Gross unrealized losses (569) (1,185) (290)
Unrealized (losses)/gains credited to policyholder (52) 37 0
Deferred income tax (benefit)/expense (34) (350) 87
------ ------ ------
NET UNREALIZED (LOSSES) GAINS AFTER TAX (58) (648) 161
Balance at the beginning of the year (648) 161 144
------ ------ ------
CHANGE IN NET UNREALIZED GAINS(LOSES)
ON FIXED MATURITIES $590 ($809) $17
------ ------ ------
------ ------ ------
(d) COMPONENTS OF NET REALIZED GAINS/(LOSSES)
Year ended December 31,
--------------------------
1995 1994 1993
------ ------ ------
Fixed maturities $23 ($34) ($12)
Equity securities (6) (11) 0
Real estate and other (25) 47 43
Less: (decrease)/increase in liability to policyholders
for realized gains (3) 5 (15)
------ ------ ------
NET REALIZED (LOSSES) GAINS ($11) $7 $16
------ ------ ------
------ ------ ------
</TABLE>
F-10
<PAGE>
(e) DERIVATIVE INVESTMENTS
A summary of investments, segregated by major category along with the types of
derivatives and their respective notional amounts, are as follows as of
December 31, 1995 :
<TABLE>
<CAPTION>
SUMMARY OF INVESTMENTS
AS OF DECEMBER 31, 1995
(CARRYING AMOUNT)
Caps, Floors & Options Foreign
Carrying ----------------------- Currency
Value Non-Derivative Issued(b) Purchased(c) Futures(d) Swaps(f) Swaps
-------- ----------- -------- ----------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset-backed securities $5,764 $5,752 ($1) $30 $0 ($17) $0
Inverse floaters(a) 711 794 (30) 16 0 (69) 0
Anticipatory(e) 0 0 0 0 0 0 0
-------- ----------- -------- ----------- --------- -------- -------
TOTAL ASSET-BACKED SECURITIES 6,475 6,546 (31) 46 0 (86) 0
Other bonds and notes 7,118 7,165 (1) 0 0 (22) (24)
Short-term investments 807 807 0 0 0 0 0
-------- ----------- -------- ----------- --------- -------- -------
TOTAL FIXED MATURITIES 14,400 14,518 (32) 46 0 (108) (24)
Other investments 3,865 3,865 0 0 0 0 0
-------- ----------- -------- ----------- --------- -------- -------
TOTAL INVESTMENTS $18,265 $18,383 ($32) $46 $0 ($108) ($24)
-------- ----------- -------- ----------- --------- -------- -------
-------- ----------- -------- ----------- --------- -------- -------
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF INVESTMENTS
AS OF DECEMBER 31, 1995
(NOTIONAL AMOUNT)
(EXCLUDING LIABILITY HEDGES)
Caps, Floors & Options Foreign
Notional ---------------------- Currency
Amount Issued(b) Purchased(c) Futures(d) Swaps(f) Swaps
-------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Asset-backed securities $3,863 $118 $3,133 $322 $290 $0
Inverse floaters(a) 1,601 560 354 6 681 0
Anticipatory(e) 238 0 0 213 25 0
-------- --------- --------- ---------- --------- ---------
TOTAL ASSET-BACKED SECURITIES 5,702 678 3,487 541 996 0
Other bonds and notes 1,365 33 66 322 757 187
Short-term investments 0 0 0 0 0 0
-------- --------- --------- ---------- --------- ---------
TOTAL FIXED MATURITIES 7,067 711 3,553 863 1,753 187
Other investments 18 0 0 0 18 0
-------- --------- --------- ---------- --------- ---------
TOTAL INVESTMENTS $7,085 $711 $3,553 $863 $1,771 $187
-------- --------- --------- ---------- --------- ---------
-------- --------- --------- ---------- --------- ---------
</TABLE>
(a) Inverse floaters are variations of CMO's for which the coupon rates
move inversely with an index rate (e.g. LIBOR). The risk to principal is
considered negligible as the underlying collateral for the securities is
guaranteed or sponsored by government agencies. To address the volatility
risk created by the coupon variability, Hartford Life uses a variety of
derivative instruments, primarily interest rate swaps and issued floors.
(b) Includes issued caps $475 with a weighted average strike rate of 8.5%
(ranging from 7.0% to 10.4%) and over 85% mature in 2000 through 2004. Issued
floors totaled $236, have a weighted average strike rate of 8.1% (ranging
from 5.3% to 10.9%) and mature through 2007 with 76% maturing by 2004.
(c) Comprised of purchased floors of $1.8 billion and purchased caps of $1.7
billion. The floors have a weighted average strike price of 5.8% (ranging from
3.7% to 6.8%) and over 85% mature in 1997 through 1999. The caps have a
weighted average strike price of 7.5% (ranging from 4.5% and 10.1%) and over
82% mature in 1997 through 1999.
(d) Over 95% of futures contracts expire before December 31, 1996.
(e) Deferred gains and losses on anticipatory transactions are included in the
carrying value of bond investments in the consolidated balance sheets. At the
time of the ultimate purchase, they are reflected as a basis adjustment to the
purchased asset. At December 31, 1995, there were $5.3 in net deferred losses
for futures, interest rate swaps and purchased options.
(f) The following table summarizes the maturities by notional value of interest
rate swaps outstanding at December 31, 1995 and the related weighted average
interest pay rate or receive rate assuming current market conditions:
F-11
<PAGE>
<TABLE>
<CAPTION>
MATURITY OF SWAPS ON INVESTMENTS
AS OF DECEMBER 31, 1995
LAST
1996 1997 1998 1999 2000 THEREAFTER TOTAL MATURITY
---- ---- ---- ---- ---- ---------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST RATE SWAPS
PAY FIXED/RECEIVE VARIABLE
Notional Value $15 $50 $0 $453 $31 $229 $778 2004
Weighted Average Pay Rate 5.0% 7.2% 0.0% 8.1% 7.1% 7.8% 7.8%
Weighted Average Receive Rate 5.8% 5.9% 0.0% 5.8% 5.7% 5.9% 5.9%
PAY VARIABLE/RECEIVE FIXED
Notional Value $100 $68 $25 $25 $35 $190 $443 2007
Weighted Average Pay Rate 5.9% 8.6% 5.9% 0.0% 5.9% 5.4% 5.4%
Weighted Average Receive Rate 2.4% 7.9% 4.0% 0.0% 6.5% 6.9% 6.9%
PAY VARIABLE/RECEIVE DIFFERENT VARIABLE
Notional Value $50 $18 $36 $12 $200 $234 $550 2004
Weighted Average Pay Rate 5.8% 0.0% 3.7% 3.5% 4.5% 16.3% 5.7%
Weighted Average Receive Rate 5.4% 0.0% 5.6% 5.2% 6.8% 5.9% 6.4%
TOTAL INTEREST RATE SWAPS $165 $136 $61 $490 $266 $653 $1,771 2007
WEIGHTED AVERAGE PAY RATE 5.8% 7.8% 4.6% 7.6% 5.0% 7.3% 6.9%
WEIGHTED AVERAGE RECEIVE RATE 3.6% 7.2% 4.9% 5.4% 6.6% 6.3% 5.8%
</TABLE>
(g) The following table reconciles the derivative notional amounts by derivative
type and by strategy:
<TABLE>
<CAPTION>
BY DERIVATIVE TYPE
----------------------------------------------------------------------
12/31/94 MATURITIES/ 12/31/95
NOTIONAL AMOUNT ADDITIONS TERMINATIONS NOTIONAL AMOUNT
--------------- --------- ------------ ---------------
<S> <C> <C> <C> <C>
Caps $1,861 $2,666 $2,343 $2,184
Floors 2,131 237 188 2,180
Swaps/Collars/Forwards/Options 4,374 1,355 2,163 3,566
Futures 253 6,125 5,515 863
--------------- --------- ------------ ---------------
TOTAL $8,619 $10,383 $10,209 $8,793
--------------- --------- ------------ ---------------
--------------- --------- ------------ ---------------
BY STRATEGY
----------------------------------------------------------------------
12/31/94 MATURITIES/ 12/31/95
NOTIONAL AMOUNT ADDITIONS TERMINATIONS NOTIONAL AMOUNT
--------------- ---------- ------------ ---------------
Liability $1,725 $729 $746 $1,708
Anticipatory 626 1,564 1,952 238
Asset 3,048 3,153 3,217 2,984
Portfolio 3,220 4,937 4,294 3,863
--------------- ---------- ------------ --------------
TOTAL $8,619 $10,383 $10,209 $8,793
--------------- ---------- ------------ --------------
--------------- ---------- ------------ --------------
</TABLE>
In addition to risk management through derivative financial instruments
pertaining to the investment portfolio, interest rate sensitivity related to
certain Company liabilities was altered primarily through interest rate swap
agreements. The notional
F-12
<PAGE>
amount of the liability agreements in which Hartford Life generally pays one
variable rate in exchange for another, was $1.7 billion at December 31, 1995 and
1994 respectively. The weighted average pay rate is 5.9%; the weighted average
receive rate is 6.0% , and these agreements mature at various times through
2001.
(F) CONCENTRATION OF CREDIT RISK
Hartford Life has a reinsurance recoverable of $5.6 billion from Mutual Benefit
Life Assurance Corporation (Mutual Benefit). The risk of Mutual Benefit
becoming insolvent is mitigated by the reinsurance agreement's requirement that
the assets be kept in a security trust with Hartford Life as sole beneficiary.
Excluding investments in U.S. government and agencies, Hartford Life has no
other significant concentrations of credit risk.
Included in fixed maturity investments at December 31, 1995 were $39 of
Orange County, California Pension Obligation Bonds, $17 of which were carried
in the general account and $22 which were included in Hartford Life's
guaranteed separate accounts. During 1995 all interest payments due were
received. While Orange County is currently operating under Protection of
Chapter 9 of the Federal Bankruptcy Laws, Hartford Life believes the bonds
are not impaired other than on a temporary basis.
(G) FIXED MATURITIES
The schedule below details the amortized cost and fair values of Hartford Life's
fixed maturities by component, along with the gross unrealized gains and losses:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,1995
--------------------------------------------------
GROSS UNREALIZED
AMORTIZED --------------------- MARKET
COST GAINS LOSSES VALUE
---------- ------- ------ -----
<S> <C> <C> <C> <C>
U.S. Government and government agencies and
authorities;
Guaranteed and sponsored $502 $4 ($9) $497
Guaranteed and sponsored-asset backed 3,568 210 (387) 3,391
State, municipalities and political subdivisions 201 4 (3) 202
International governments 291 19 (4) 306
Public utilities 949 29 (2) 976
All other corporate-asset backed 3,065 76 (55) 3,086
All other corporate 5,056 187 (109) 5,134
Short-term investments 808 0 0 808
---------- ------- ----- -----
TOTAL INVESTMENTS $14,440 $529 ($569) $14,440
---------- ------- ----- -----
---------- ------- ----- -----
AS OF DECEMBER 31,1994
--------------------------------------------------
GROSS UNREALIZED
AMORTIZED --------------------- MARKET
COST GAINS LOSSES VALUE
---------- ------- ------ -----
U.S. Government and government agencies
and authorities;
Guaranteed and sponsored $1,516 $1 ($87) $1,430
Guaranteed and sponsored-asset backed 4,256 78 (571) 3,763
State, municipalities and political subdivisions 148 1 (12) 137
International governments 189 1 (14) 176
Public utilities 531 1 (32) 500
All other corporate-asset backed 2,442 30 (121) 2,351
All other corporate 3,717 38 (297) 3,458
Short-term investments 1,665 0 (51) 1,614
--------- ------- -------- -------
TOTAL INVESTMENTS $14,464 $150 ($1,185) $13,429
--------- ------- -------- -------
--------- ------- -------- -------
</TABLE>
F-13
<PAGE>
The amortized cost and estimated fair value of fixed maturities at December 31,
1995, by maturity, are shown below. Asset backed securities are distributed to
maturity year based on estimates of the rate of future prepayments of principal
over the remaining life of the securities. Expected maturities differ from
contractual maturities reflecting the borrowers' rights to call or prepay their
obligations.
<TABLE>
<CAPTION>
AMORTIZED MARKET
COST VALUE
---------- ---------
<S> <C> <C>
Due in one year or less $3,146 $3,133
Due after one year through five years 6,373 6,316
Due after five years through ten years 3,609 3,644
Due after ten years 1,312 1,307
---------- ---------
TOTAL $14,440 $14,400
---------- ---------
---------- ---------
</TABLE>
Sales of fixed maturities excluding short-term fixed maturities for the years
ended December 31, 1995, 1994, and 1993 resulted in proceeds of $4,848, $5,708,
and $8,813, respectively, resulting in gross realized gains of $91, $71, and
$192, respectively, and gross realized losses of $72, $100, and $219,
respectively, not including policyholder gains and losses. Sales of equity
securities and other investments for the years ended December 31, 1995, 1994,
and 1993 resulted in proceeds of $64, $159, and $127, respectively, resulting in
gross realized gains of $28, $3, and $0, respectively, and gross realized losses
of $59, $14, $0, respectively, not including policyholder gains and losses.
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995 AS OF DECEMBER 31, 1994
----------------------- -----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
ASSETS
Fixed maturities $14,400 $14,400 $13,429 $13,429
Equity securities 63 63 68 68
Policy loans 3,381 3,381 2,614 2,614
Mortgage loans 265 265 316 316
Investments in partnerships and trusts 94 97 36 42
Miscellaneous 62 62 67 67
LIABILITIES
Other policy claims and benefits $12,727 $12,767 $13,001 $12,374
</TABLE>
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument: fair value for fixed maturities and equity
securities approximate those quotations published by applicable stock exchanges
or are received from other reliable sources; policy and mortgage loan carrying
amounts approximate fair value; investments in partnerships and trusts are based
on external market valuations from partnership and trust management; and other
policy claims and benefits payable are determined by estimating future cash
flows discounted at the current market rate.
3. INCOME TAX
Hartford Life is included in ITT Hartford Group's consolidated U.S. Federal
income tax return and remits to (receives from) ITT Hartford Group, Inc. a
current income tax provision (benefit) computed in accordance with the tax
sharing arrangements between its insurance subsidiaries. The effective tax
rate was 32% in 1995 and 1994, and approximates the U.S. statutory tax rate
of 35% in 1993.
F-14
<PAGE>
The provision for income taxes was as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
INCOME TAX EXPENSES
Current $211 $185 $190
Deferred (149) (120) (115)
------- ------- -------
TOTAL $62 $65 $75
------- ------- -------
------- ------- -------
INCOME TAX PROVISION
Tax provision at U.S. statutory rate $67 $71 $76
Tax-exempt income (3) (3) 0
Foreign tax credit (4) (1) 0
Other 2 (2) (1)
------- ------- -------
PROVISION FOR INCOME TAX $62 $65 $75
------- ------- -------
------- ------- -------
</TABLE>
Income taxes paid were $162, $244, and $301 in 1995, 1994, and 1993
respectively. The current taxes due from Hartford Fire were $8 and $46 in 1995
and 1994, respectively.
Deferred tax assets(liabilities) include the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Tax deferred acquisition costs $410 $284
Book deferred acquisition costs and reserves 138 (134)
Employee benefits 8 7
Unrealized net loss on investments 32 353
Investments and other (168) 80
--------- ---------
TOTAL DEFERRED TAX ASSET $420 $590
--------- ---------
--------- ---------
</TABLE>
Prior to the Tax Reform Act of 1984, the Life Insurance Company Income Tax Act
of 1959 permitted the deferral from taxation of a portion of statutory income
under certain circumstances. In these situations, the deferred income was
accumulated in a "Policyholders' Surplus Account" and will be taxable in the
future only under conditions which management considers to be remote; therefore,
no Federal income taxes have been provided on this deferred income. The balance
for tax return purposes of the Policyholders' Surplus Account as of December 31,
1995 was $37.
4. REINSURANCE
Hartford Life cedes insurance to non-affiliated insurers in order to limit its
maximum loss. Such transfer does not relieve Hartford Life of its primary
liability. Hartford Life also assumes insurance from other insurers. Group
life and accident and health insurance business is substantially reinsured to
affiliated companies.
Life insurance net retained premiums were comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Gross premiums $1,545 $1,316 $1,135
Insurance assumed 591 299 93
Insurance ceded 649 515 481
------- ------- -------
NET RETAINED PREMIUMS $1,487 $1,100 $747
------- ------- -------
------- ------- -------
</TABLE>
F-15
<PAGE>
Life reinsurance recoveries, which reduced death and other benefits, for the
years ended December 31, 1995, 1994 and 1993 approximated $220, $164, and $149,
respectively.
In December 1994, Hartford Life assumed from a third party approximately $500
of corporate owned life insurance reserves on a coinsurance basis. In
December 1995, this block of business was reinsured to HLRe utilizing
modified coinsurance, with the assets and policy liabilities placed in a
separate account. In October 1994, HLRe recaptured approximately $500 of
corporate owned life insurance from a third party reinsurer. Subsequent to
this transaction, Hartford Life and HLRe restructured their coinsurance
agreement from coinsurance to modified coinsurance, with the assets and
policy liabilities placed in the separate account. These transactions did not
have a material impact on consolidated net income.
Also in December 1994, ILA ceded to a third party $1.0 billion in individual
fixed and variable annuities on a modified coinsurance basis. In December 1995,
Hartford Life ceded approximately $1.2 billion in individual variable annuities
on a modified coinsurance basis to a third party. These transactions did not
have a material impact on consolidated net income.
In May 1994, Hartford Life assumed the life insurance policies and the
individual annuities of Pacific Standard with reserves and account values of
approximately $400. Hartford Life received cash and investment grade assets
to support the life insurance and individual annuity contract obligations
assumed.
In November 1993, ILA acquired, through an assumption reinsurance
transaction, substantially all of the individual fixed and variable annuity
business of HLA. As a result of this transaction, the assets and liabilities
of Hartford Life increased approximately $1 billion. The excess of
liabilities assumed over assets received, of $2, was recorded as a decrease
to capital surplus. The remaining $41 in assets and liabilities were
transferred in October 1995. The impact on consolidated net income was not
significant.
In August 1993, Hartford Life received assets of $300 for assuming the group
COLI contract obligations of Mutual Benefit Life Insurance Company, through
an assumption reinsurance transaction. Under the terms of the agreement,
Hartford Life coinsured back 75% of the liabilities to Mutual Benefit Life
Insurance Company. All assets supporting Mutual Benefit's reinsurance
liability to Hartford Life are placed in a "security trust", with Hartford
Life as the sole beneficiary. The impact on 1993 consolidated net income was
not significant.
5. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
Hartford Life's employees are included in Hartford Fire's noncontributory
defined benefit pension plans. These plans provide pension benefits that are
based on years of service and the employee's compensation during the last ten
years of employment. Hartford Life's funding policy is to contribute annually
an amount between the minimum funding requirements set forth in the Employee
Retirement Income Security Act of 1974 and the maximum amount that can be
deducted for Federal income tax purposes. Generally, pension costs are funded
through the purchase of Hartford Life's group pension contracts. The cost to
Hartford Life was approximately $2, $2, and $3 in 1995, 1994 and 1993,
respectively.
Hartford Life provides certain health care and life insurance benefits for
eligible retired employees. A substantial portion of Hartford Life's employees
may become eligible for these benefits upon retirement. Hartford Life'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. Hartford Life has prefunded a
portion of the health care and life insurance obligations through trust funds
where such prefunding can be accomplished on a tax effective basis.
Postretirement health care and life insurance benefits expense, allocated by
Hartford Fire were immaterial for 1995, 1994, and 1993 respectively.
The assumed rate of future increases in the per capita cost of health care (the
health care trend rate) was 10.1% for 1995, decreasing ratably to 6.0% in the
year 2001. Increasing the health care trend rates by one percent per year would
have an immaterial impact on the accumulated postretirement benefit obligation
and the annual expense. To the extent that the actual experience differs from
the inherent assumptions, the effect will be amortized over the average future
service of the covered employees.
F-16
<PAGE>
6. BUSINESS SEGMENT INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
REVENUES
Individual Life and Annuity $797 $691 $595
Asset Management Services 734 789 794
Specialty Insurance Operations 1,273 919 425
------ ------ ------
TOTAL REVENUES $2,804 $2,399 $1,814
------ ------- ------
------ ------- ------
- - ---------------------------------------------------------------
- - ---------------------------------------------------------------
YEAR ENDED DECEMBER 31
------------------------
1995 1994 1993
------ ------- -----
INCOME BEFORE INCOME TAX EXPENSE
Individual Life and Annuity $236 $139 $129
Asset Management Services (79) 38 71
Specialty Insurance Operations 34 26 18
------ ------ ------
TOTAL INCOME BEFORE INCOME
TAX EXPENSE $191 $203 $218
------ ------ ------
------ ------ ------
- - ---------------------------------------------------------------
- - ---------------------------------------------------------------
YEAR ENDED DECEMBER 31
---------------------------
1995 1994 1993
------- ------- -------
IDENTIFIABLE ASSETS
Individual Life and Annuity $36,741 $26,668 $19,147
Asset Management Services 13,962 13,334 12,416
Specialty Insurance Operations 13,494 7,847 6,723
------- ------- -------
TOTAL IDENTIFIABLE ASSETS $64,197 $47,849 $38,286
------- ------- -------
------- ------- -------
</TABLE>
7. STATUTORY NET INCOME AND SURPLUS
Substantially all of the statutory surplus is permanently reinvested or is
subject to dividend restrictions relating to various state regulations which
limit the payment of dividends without prior approval. Statutory net income
and surplus as of December 31 were:
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
Statutory net income $112 $58 $63
Statutory surplus $1,125 $941 $812
</TABLE>
8. SEPARATE ACCOUNTS
Hartford Life maintains separate account assets and liabilities totaling $36.3
billion and $22.8 billion at December 31, 1995 and 1994, respectively which
are reported at fair value. Separate account assets are segregated from other
investments and investment income and gains and losses accrue directly to the
policyholder. Separate accounts reflect two categories of risk assumption:
non-guaranteed separate accounts totaling $25.9 billion and $14.8 billion at
December 31, 1995 and 1994, respectively, wherein the policyholder assumes the
investment risk, and guaranteed separate account assets totaling $10.4 billion
and $8.0 billion at December 31, 1995 and 1994, respectively, wherein Hartford
Life contractually guarantees either a minimum return or account value to the
policyholder. Included in the non-guaranteed category are policy loans
totaling $1.7 billion and $0.5 billion at December 31, 1995 and 1994,
respectively. Investment income (including investment 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, net of minimum guarantees, were $387, $256, and $189, in
1995, 1994, and 1993, respectively.
F-17
<PAGE>
The guaranteed separate accounts include modified guaranteed individual
annuity, and modified guaranteed life insurance. The average credit interest
rate on these contracts is 6.62%. The assets that support these liabilities
were comprised of $10.4 billion in bonds at December 31, 1995. The portfolios
are segregated from other investments and are managed so as to minimize
liquidity and interest rate risk. In order to minimize the risk of
disintermediation associated with early withdrawals, individual annuity and
modified guaranteed life insurance contracts carry a graded surrender charge
as well as a market value adjustment. Additional investment risk is hedged
using a variety of derivatives which totaled $133 million in carrying value
and $2.7 billion in notional amounts at December 31, 1995.
9. COMMITMENTS AND CONTINGENCIES
In August 1994, Hartford Life renewed a two year note purchase facility
agreement which in certain instances obligates Hartford Life to purchase up to
$100 million in collateralized notes from a third party. Hartford Life is
receiving fees for this commitment. At December 31, 1995, Hartford Life had
not purchased any notes under this agreement.
Under insurance guaranty fund laws in most states, insurers doing business
therein can be assessed up to prescribed limits for policyholder losses
incurred by insolvent companies. The amount of any future assessments on
Hartford Life under these laws cannot be reasonably estimated. Most of these
laws do provide, however, that an assessment may be excused or deferred if it
would threaten an insurer's own financial strength. Additionally, guaranty
fund assessments are used to reduce state premium taxes paid by the Company in
certain states. Hartford Life paid guaranty fund assessments of approximately
$10, $8 and $6 in 1995, 1994, and 1993, respectively.
Hartford Life is involved in various legal actions, some of which involve
claims for substantial amounts. In the opinion of management the ultimate
liability with respect to such lawsuits, as well as other contingencies, is
not considered material in relation to the consolidated financial position of
Hartford Life.
F-18
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Not applicable.
Item 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article VIII, Section 1 of the By-laws of Hartford Life Insurance Company
provides for indemnification of Directors and Officers as follows:
"Section 1. The Company shall indemnify and hold harmless each Director
and Officer now or hereafter serving the Company, whether or not then in
office, from and against any and all claims and liabilities to which he
may be or become subject by reason of his being or having been a Director
or Officer of the Company, or of any other company which he serves as a
Director or Officer at the request of the Company, to the extent such is
consistent with statutory provisions pertaining to indemnification, and
shall provide such further indemnification for legal and/or all other
expenses reasonably incurred in connection with defending against such
claims and liabilities as is consistent with statutory requirements."
Item 15. RECENT SALES OF UNREGISTERED SECURITIES
Not applicable.
Item 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibit
Number Description Method of Filing
------ ----------- ----------------
1 Underwriting Agreement Filed with this Registration
Statement
3(a) Articles of Incorporation Incorporated by reference to
Amendment No. 1, to the
Registration Statement File
No. 88786, dated April 28,
1995.
3(b) By-laws Incorporated by reference as
stated above.
4(a) Group Annuity Contract Incorporated by reference as
stated above.
<PAGE>
- 2 -
4(b) Group Annuity Certificate Incorporated by reference as
Individual Certificate stated above.
4(c) Individual Annuity Contract Incorporated by reference as
stated above.
5 Opinion re: legality Filed with this Registration
Statement.
23 Consents of experts Filed with this Registration
Statement.
25 Power of Attorney Filed with this Registration
Statement.
Item 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
i. To include any Prospectus required by section 10(a)(3) of the
securities Act of 1933;
ii. To reflect in the Prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
iii. To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement, including (but not limited to) any
addition or deletion of a managing underwriter;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the registration statement is on Form S-3 or Form
S-8, and the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the registration pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration
<PAGE>
- 3 -
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and where applicable, each
filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Hartford, State of
Connecticut on this 22 day of April, 1996.
HARTFORD LIFE INSURANCE COMPANY
By /s/ Lynda Godkin
---------------------------
Lynda Godkin
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
date indicated.
Donald R. Frahm, Chairman and
Chief Executive Officer, Director *
Bruce D. Gardner, Vice President,
Director *
Joseph H. Gareau, Executive Vice
President and Chief Investment
Officer, Director *
John P. Ginnetti, Executive Vice
President, Director *
Thomas M. Marra, Executive Vice *By: /s/ Lynda Godkin
President, Director * ------------------------------
Lynda Godkin
Attorney-in-Fact
Leonard E. Odell, Jr., Senior
Vice President, Director *
Dated: April 22, 1996
Lowndes A. Smith, President,
Chief Operating Officer,
Director *
Raymond P. Welnicki, Senior Vice
President, Director *
Lizabeth H. Zlatkus, Vice President
Director *
(CRC/HL/88786)
<PAGE>
[Exhibit 1]
PRINCIPAL UNDERWRITER AGREEMENT
THIS AGREEMENT, dated as of the June 26, 1995, made by and between HARTFORD LIFE
INSURANCE COMPANY ("HLIC"), a corporation organized and existing under the laws
of the State of Connecticut, and HARTFORD SECURITIES DISTRIBUTION COMPANY, INC.
("HSD"), a corporation organized and existing under the laws of the State of
Connecticut,
WITNESSETH:
WHEREAS, the Board of Directors of HLIC has registered interests in an
individual and group annuity Contract, designated Current Rate Compounding
Annuity Contract (referred to as the "Contract") with the Securities and
Exchange Commission under the Securities Act of 1933 ("1933 Act"), as amended;
and
WHEREAS, HSD has previously agreed to act as distributor in connection with
offers and sales of the Contract under the terms and conditions set forth in
this Principal Underwriter Agreement.
NOW THEREFORE, in consideration of the mutual agreements made herein, HLIC and
HSD agree as follows:
I.
HSD'S DUTIES
1. HSD, as successor principal underwriter to Hartford Equity Sales Company,
Inc. for the Contract, will use its best efforts to effect offers and sales
of the Contract through broker-dealers that are members of the National
Association of Securities Dealers, Inc. and whose registered
representatives are duly licensed as insurance agents of HLIC. HSD is
responsible for compliance with all applicable requirements of the 1933
Act, as amended, and the rules and regulations relating to the sales and
distribution of the Contract, the need for which arises out of its duties
as principal underwriter of said Contract.
2. HSD agrees that it will not use any prospectus, sales literature, or any
other printed matter or material or offer for sale or sell the Contract if
any of the foregoing in any way represent the duties, obligations, or
liabilities of HLIC as being greater than, or different from, such duties,
obligations and liabilities as are set forth in this Agreement, as it may
be amended from time to time.
3. HSD agrees that it will utilize the then currently effective prospectus
relating to the Contract in connection with its selling efforts.
As to the other types of sales materials, HSD agrees that it will use only
sales materials which conform to the requirements of federal and state
insurance laws and regulations and which have
<PAGE>
been filed, where necessary, with the appropriate regulatory authorities.
4. HSD agrees that it or its duly designated agent shall maintain records as
required by the Securities and Exchange Act of 1934, as amended.
5. HSD's services pursuant to this Agreement shall not be deemed to be
exclusive, and it may render similar services and act as an underwriter,
distributor, or dealer for other investment companies in the offering of
their shares.
6. In the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of its obligations and duties hereunder on the part of
HSD, HSD shall not be subject to liability under a Contract for any act or
omission in the course, or connected with, rendering services hereunder.
II.
1. HLIC reserves the right at any time to suspend or limit the public offering
of the Contract upon 30 days' written notice to HSD, except where the
notice period may be shortened because of legal action taken by any
regulatory agency.
2. HLIC agrees to advice HSD immediately:
(a) Of any request by the Securities and Exchange Commission for amendment
of its 1933 Act registration statement or for additional information;
(b) Of the issuance by the Securities and Exchange Commission of any stop
order suspending the effectiveness of the 1933 Act registration
statement relating to units of interest issued with respect to the
Contract or of the initiation of any proceedings for that purpose;
(c) Of the happening of any material event, if known, which makes untrue
any statement in said 1933 Act registration statement or which
requires a change therein in order to make any statement therein not
misleading.
HLIC will furnish to HSD such information with respect to the Contract
in such form and signed by such of its officers and directors as HSD
may reasonably request and will warrant that the statements therein
contained when so signed will be true and correct. HLIC will also
furnish, from time to time, such additional information regarding
HLIC's financial condition as HSD may reasonably request.
<PAGE>
III.
COMPENSATION
In accordance with an Expense Reimbursement Agreement between HLIC and HSD, HLIC
is obligated to reimburse HSD for all operating expenses associated with the
services provided on behalf of HLIC under this Principal Underwriter Agreement.
No additional compensation is payable in excess of that required under the
Expense Reimbursement Agreement.
IV.
RESIGNATION AND REMOVAL OF PRINCIPAL UNDERWRITER
HSD may resign as a Principal Underwriter hereunder, upon 120 days' prior
written notice to HLIC. However, such resignation shall not become effective
until a successor Principal Underwriter has been designated and has accepted its
duties. HLIC may remove HSD as Principal Underwriter at any time by written
notice.
V.
MISCELLANEOUS
1. This Agreement may not be assigned by any of the parties hereto without the
written consent of the other party.
2. All notices and other communications provided for hereunder shall be in
writing and shall be delivered by hand or mailed first class, postage
prepaid, addressed as follows:
(a) If to HLIC - Hartford Life Insurance Company, P.O. Box 2999,
Hartford, Connecticut 06104.
(b) If to HSD - Hartford Securities Distribution Company, Inc., P.O.
Box 2999, Hartford, Connecticut 06104.
or to such other address as HSD or HLIC shall designate by written notice
to the other.
3. This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original and all of which shall be deemed one
instrument, and an executed copy of this Agreement and all amendments
hereto shall be kept on file by HLIC and shall be open to inspection any
time during the business hours of the HLIC.
4. This Agreement shall inure to the benefit of and be binding upon the
successor of the parties hereto.
<PAGE>
5. This Agreement shall be construed and governed by and according to the laws
of the State of Connecticut.
6. This Agreement may be amended from time to time by the mutual agreement and
consent of the parties hereto.
7. (a) This Agreement shall become effective June 26, 1995 and shall continue
in effect for a period of two years from that date and, unless sooner
terminated in accordance with 7(b) below, shall continue in effect
from year to year thereafter provided that its continuance is
specifically approved at least annually by a majority of the members
of the Board of Directors of HLIC.
(b) This Agreement (1) may be terminated at any time, without the payment
of any penalty, either by a vote of a majority of the members of the
Board of Directors of HLIC on 60 days' prior written notice to HSD;
(2) shall immediately terminate in the event of its assignment and (3)
may be terminated by HSD on 60 days' prior written notice to HLIC, but
such termination will not be effective until HLIC shall have an
agreement with one or more persons to act as successor principal
underwriter of the Contract. HSD hereby agrees that it will continue
to act as successor principal underwriter until its successor or
successors assume such undertaking.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
(Seal) HARTFORD LIFE INSURANCE COMPANY
BY: /s/ Thomas M. Marra
----------------------------
Thomas M. Marra
Senior Vice President
Attest: HARTFORD SECURITIES DISTRIBUTION
COMPANY, INC.
/s/ Lynda Godkin BY: /s/ George Jay
- - ------------------------- ----------------------------
Lynda Godkin George Jay
Secretary Controller
<PAGE>
[Exhibit 5]
March 15, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE:
MODIFIED GUARANTEED ANNUITY CONTRACTS REGISTRATION STATEMENT ("CONTRACT")
HARTFORD LIFE INSURANCE COMPANY ("COMPANY")
FILE NO. 33-88786
Dear Sirs:
This opinion is furnished in connection with the registration under the
Securities Act of 1933, as amended, of a certain group Deferred Annuity Contract
(the "Contract") that will be offered and sold by Hartford Life Insurance
Company ("HLIC") and certain units of interest to be issued in connection with
the Contract.
1. HLIC was duly organized and is a validly existing corporation under the laws
of the State of Connecticut.
2. The form of Group and Individual Deferred Annuity contracts that will be
issued by HLIC have been filed in states where it is eligible for approval and
upon issuance will be valid and binding upon HLIC.
I hereby consent to the use of this opinion as an exhibit to the Securities Act
Registration Statement on Form S-1 and to the reference to my name under the
heading "Legal Opinions" in the prospectus included in the Securities Act
Registration Statement.
Very truly yours,
/s/ Lynda Godkin
Lynda Godkin
Associate General Counsel & Secretary
<PAGE>
[Exhibit 23]
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. 88786 for Hartford Life Insurance Company on
Form S-1.
/s/ Arthur Andersen LLP
Hartford, Connecticut
April 26, 1996
<PAGE>
Exhibit 9
HARTFORD LIFE INSURANCE COMPANY, INC.
AND
HARTFORD LIFE AND ACCIDENT INSURANCE COMPANY, INC.
POWER OF ATTORNEY
Donald R. Frahm
Bruce D. Gardner
Joseph H. Gareau
John P. Ginnetti
Thomas M. Marra
Leonard E. Odell, Jr.
Lowndes A. Smith
Raymond P. Welnicki
Lizabeth H. Zlatkus
do hereby jointly and severally authorize Lynda Godkin and/or Scott K.
Richardson 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, Inc. and Hartford Life and Accident
Insurance Company, Inc. under the Securities Act of 1933 and/or the Investment
Company Act of 1940.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney for the
purpose herein set forth.
/s/ Donald R. Frahm Dated: 10/19/95
- - ----------------------------------- ---------------------
Donald R. Frahm
/s/ Bruce D. Gardner Dated: 10/19/95
- - ----------------------------------- ---------------------
Bruce D. Gardner
/s/ Joseph H. Gareau Dated: 10/19/95
- - ----------------------------------- ---------------------
Joseph H. Gareau
/s/ John P. Ginnetti Dated: 10/26/95
- - ----------------------------------- ---------------------
John P. Ginnetti
/s/ Thomas M. Marra Dated: 10/19/95
- - ----------------------------------- ---------------------
Thomas M. Marra
/s/ Leonard E. Odell, Jr. Dated: 10/20/95
- - ----------------------------------- ---------------------
Leonard E. Odell, Jr.
/s/ Lowndes A. Smith Dated: 10/19/95
- - ----------------------------------- ---------------------
Lowndes A. Smith
<PAGE>
/s/ Raymond P. Welnicki Dated: 10/24/95
- - ----------------------------------- ---------------------
Raymond P. Welnicki
/s/ Lizabeth H. Zlatkus Dated: 10/20/95
- - ----------------------------------- ---------------------
Lizabeth H. Zlatkus
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life Insurance Company and Subsidiaries:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Hartford Life Insurance Company and
subsidiaries included in this registration statement and have issued our
report thereon dated January 24, 1996. Our audits were made for the purpose
of forming an opinion on the basic consolidated financial statements taken as
a whole. The accompanying schedules are the responsibility of the Company's
management and are presented for purposes of complying with the Securities
and Exchange Commission's rules and are not part of the basic consolidated
financial statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic consolidated financial
statements and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
Our report on the financial statements includes an explanatory paragraph with
respect to the change in the methods of accounting for debt and equity
securities as discussed in Note 1 to the consolidated financial statements.
Hartford, Connecticut
January 24, 1996
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE I - SUMMARY OF INVESTMENTS (OTHER THAN INVESTMENTS IN AFFILIATES)
AS OF DECEMBER 31, 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------------------------------
FAIR REPORTED ON
COST VALUE BALANCE SHEET
-------------- ------------- -----------------
<S> <C> <C> <C>
FIXED MATURITIES
Bonds
U.S. Government and government agencies and authorities
Guaranteed and sponsored $502 $497 $497
Guaranteed and sponsored - asset backed 3,568 3,391 $3,391
States, municipalities and political subdivisions 201 202 $202
International governments 291 306 $306
Public utilities 949 976 $976
All other corporate 5,056 5,134 $5,134
All other corporate - asset backed 3,065 3,086 $3,086
Short-term investments 808 808 $808
---------- --------- ---------
TOTAL FIXED MATURITIES $14,440 $14,400 $14,400
EQUITY SECURITIES
Common stocks - industrial, miscellaneous and all other 61 63 63
TOTAL FIXED MATURITIES AND EQUITY SECURITIES $14,501 $14,463 $14,463
POLICY LOANS 3,381 3,381 3,381
MORTGAGE LOANS 265 265 265
OTHER INVESTMENTS 156 159 156
--------- -------- -------
TOTAL INVESTMENTS $18,303 $18,268 $18,265
--------- -------- -------
--------- -------- -------
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
Fair value for stocks and bonds approximate those quotations published by
applicable stock exchanges or are received from other reliable sources. The
fair value for short-term investments approximates cost.
Policy and mortgage loans carrying amounts approximate fair value.
S-1
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE III - SUPPLEMENTAL INSURANCE INFORMATION
(in millions)
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------------------------
Amort. of
Deferred Future Other Premiums and Net Benefits, Claims Deferred Other
Policy Policy Policyholder Other Investment and Claim Adj. Policy Insurance
Acq. Costs Benefits Funds Considerations Income Expenses Acq. Costs Expenses
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
As of December 31, 1995 Year ended December 31, 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Individual Life and Annuity $2,088 $706 $4,371 $514 $283 $277 $176 $108
Asset Management Services 87 1,169 8,942 51 683 722 23 68
Specialty Insurance
Operations 13 498 9,285 922 351 423 0 816
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
TOTAL $2,188 $2,373 $22,598 $1,487 $1,317 $1,422 $199 $992
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
As of December 31, 1994 Year ended December 31, 1994
Individual Life and
Annuity $1,708 $582 $4,257 $492 $199 $334 $137 $80
Asset Management Services 101 845 10,160 39 750 695 8 48
Specialty Insurance
Operations 0 463 6,911 569 350 376 0 518
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
TOTAL $1,809 $1,890 $21,328 $1,100 $1,299 $1,405 $145 $646
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
As of December 31, 1993 Year ended December 31, 1993
Individual life and Annuity $1,237 $428 $3,535 $423 $172 $249 $97 $120
Asset Management Services 97 703 9,026 35 759 662 16 45
Specialty Insurance
Operations 0 528 5,673 289 136 135 0 272
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
TOTAL $1,334 $1,659 $18,234 $747 $1,067 $1,046 $113 $437
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
- - -----------------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Investment income is allocated to the reportable division based on each
division's share of investable funds or on a direct basis, where applicable,
including realized capital gains and losses.
Benefits, claims and claims adjustment expenses include the increase in
liability for future policy benefits and death, disability and other contract
benefits payments.
Other insurance expenses are allocated to the division based upon specific
identification, where possible.
S-2
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE IV - REINSURANCE
(in millions)
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------
Percentage of
Gross Ceded to Assumed from Net Amount Assumed
Amount Other Companies Other Companies Amount to Net Amount
-------- ----------------- ----------------- -------- ----------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
LIFE INSURANCE IN FORCE $182,716 $112,774 $26,996 $96,938 27.8%
PREMIUMS AND OTHER CONSIDERATIONS
Individual Life and Annuity $549 $163 $122 $508 24.0%
Asset Management Services 51 0 0 51 0.0%
Specialty Insurance Operations 632 162 452 922 49.0%
313 324 17 6 283.3%
-------- ----------------- ----------------- --------
TOTAL $1,545 $649 $591 $1,487 39.7%
-------- ----------------- ----------------- --------
-------- ----------------- ----------------- --------
YEAR ENDED DECEMBER 31, 1994
LIFE INSURANCE IN FORCE $136,929 $87,553 $35,016 $84,392 41.5%
PREMIUMS AND OTHER CONSIDERATIONS
Individual Life and Annuity $448 $71 $106 $483 21.9%
Asset Management Services 39 0 0 39 0.0%
Specialty Insurance Operations 521 140 188 569 33.0%
Accident and Health 308 304 5 9 55.6%
-------- ----------------- ----------------- --------
TOTAL $1,316 $515 $299 $1,100 27.2%
-------- ----------------- ----------------- --------
-------- ----------------- ----------------- --------
YEAR ENDED DECEMBER 31, 1993
LIFE INSURANCE IN FORCE $93,099 $71,415 $27,067 $48,751 55.5%
PREMIUMS AND OTHER CONSIDERATIONS
Individual Life and Annuity $417 $85 $91 $423 21.5%
Asset Management Services 25 0 0 25 0.0%
Specialty Insurance Operations 386 97 0 289 0.0%
Accident and Health 307 299 2 10 20.0%
-------- ----------------- ----------------- --------
TOTAL $1,135 $481 $93 $747 12.4%
-------- ----------------- ----------------- --------
-------- ----------------- ----------------- --------
</TABLE>
S-3
