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STAG VARIABLE LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICIES
ITT HARTFORD LIFE AND ANNUITY INSURANCE
COMPANY
P.O. BOX 2999
HARTFORD, CONNECTICUT 06104-2999
[LOGO] TELEPHONE: 1-800-243-5433
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This Prospectus describes a flexible premium variable life insurance policy (the
"Policies", and each individually a "Policy") offered by ITT Hartford Life and
Annuity Insurance Company ("Hartford") to applicants age 80 and under. For a
given amount of Death Benefit chosen, the Policy Owner has considerable
flexibility in selecting the timing and amount of premium payments. In addition,
the Policy Owner can select a Guarantee Period, of from one to ten years, during
which additional guarantees are provided. Among these is the guarantee that the
Death Benefit will be no less than the initial Face Amount and the Policy will
not lapse as long as certain Scheduled Premiums are paid or are provided for by
favorable investment experience. Unscheduled Premium payments are also allowed.
The Guarantee Period selected by You will affect the benefits provided by the
Policy. In general, the longer the Guarantee Period is, the higher the front-end
sales loads and surrender charges are. However, the advantages of a longer
Guarantee Period include lower cost of insurance rates and lower mortality and
expense risk rates. See "Summary -- Guarantee Period," page 7, for more details.
Sales agents can provide prospective purchasers with individualized sales
illustrations which reflect all the fees and charges associated with the Policy
options selected.
The Policies provide for a Death Benefit payable at the Insured's death. The
Policy Owner may select one of three Death Benefit options; a fixed amount equal
to the Face Amount, a variable amount equal to the Face Amount plus the Account
Value, or a variable amount equal to the Face Amount plus a return of Scheduled
Premiums.
Under all three options, the Policies have Cash Values which increase with the
payment of each premium and which decrease to reflect fees and charges made by
the Hartford. These fees and charges vary depending on the Face Amount of the
Policy, the age of the Insured, the level of the premiums paid, and the length
of the Guarantee Period.
If a Policy is surrendered during the first two Policy Years, the Policy Owner
may be entitled to a refund of excess sales loads in addition to the Cash
Surrender Value.
There is no guaranteed minimum Cash Value for a Policy. The Cash Value of a
Policy will also vary up or down to reflect the investment experience of the
Funds to which the Net Premium(s) has been allocated and the Policy Owner bears
the investment risk for all amounts so allocated.
The initial Net Premium will be allocated to Hartford Money Market Sub-Account
and after the Right to Examine Period has expired, to one or more of the
Sub-Accounts or to the Fixed Account as specified in the Policy Owner's
application. The Funds underlying the Sub-Accounts presently are: Hartford
Advisers Fund, Inc., Hartford Capital Appreciation Fund, Inc., Hartford Bond
Fund, Inc., Hartford Dividend and Growth Fund, Inc., Hartford Index Fund, Inc.,
Hartford International Opportunities Fund, Inc., Hartford Mortgage Securities
Fund, Inc., Hartford Stock Fund, Inc., and HVA Money Market Fund, Inc. (the
"Hartford Funds") of Hartford Mutual Funds, each of which is managed by HL
Investment Advisors, Inc.: Putnam VT Diversified Income Fund, Putnam VT Global
Asset Allocation Fund, Putnam VT Global Growth Fund, Putnam VT Growth and Income
Fund, Putnam VT High Yield Fund, Putnam VT Money Market Fund, Putnam VT New
Opportunities Fund, Putnam VT U.S. Government and High Quality Bond Fund, Putnam
VT Utilities Growth and Income Fund, and Putnam VT Voyager Fund (the "Putnam
Funds") of Putnam Variable Trust, each of which is managed by Putnam Investment
Management, Inc. ("Putnam Management"), and the VIP Equity-Income Portfolio and
the VIP Overseas Portfolio of the Variable Insurance Products Fund and the VIP
II Asset Manager Portfolio of the Variable Insurance Products Fund II, each of
which is managed by Fidelity Management & Research Company (the "Fidelity VIP
Funds," and collectively with the Hartford Funds and the Putnam Funds, the
"Funds").
These Policies are subject to a front-end sales load and surrender charge which
are set forth in the sections entitled "Deduction from the Premium" and
"Deductions and Charges from the Account Value" on page 18. In addition, there
are examples on pages 21 and 22 to help you in your selection of a Guarantee
Period.
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MAXIMUM FRONT-END SALES LOADS ARE 50% OF THE PREMIUMS PAID IN THE FIRST POLICY
YEAR, 11% IN YEARS 2 THROUGH 10 AND 3% IN YEARS 11 AND LATER. THE MAXIMUM
SURRENDER CHARGE UNDER THE POLICY IS 110% OF THE PREMIUM PAID IN THE FIRST
POLICY YEAR. HOWEVER, ACTUAL CHARGES MAY BE LESS. SEE "DETAILED DESCRIPTION OF
POLICY BENEFITS AND PROVISIONS -- DEDUCTIONS FROM THE PREMIUM -- FRONT-END SALES
LOAD" ON PAGE 16, "DETAILED DESCRIPTION OF POLICY BENEFITS AND PROVISIONS --
DEDUCTIONS AND CHARGES FROM THE ACCOUNT VALUE -- SURRENDER CHARGES" ON PAGE 20,
AND "DETAILED DESCRIPTION OF POLICY BENEFITS AND PROVISIONS -- CASH VALUES --
LOAD REFUND" ON PAGE 12 FOR MORE DETAILS.
IT MAY NOT BE ADVANTAGEOUS TO PURCHASE FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
AS A REPLACEMENT FOR YOUR CURRENT LIFE INSURANCE OR IF YOU ALREADY OWN A
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY.
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THIS PROSPECTUS IS VALID ONLY IF ACCOMPANIED BY THE CURRENT PROSPECTUSES OF THE
APPLICABLE ELIGIBLE FUNDS WHICH CONTAIN A FULL DESCRIPTION OF THOSE FUNDS. ALL
PROSPECTUSES SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
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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.
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THE DATE OF THIS PROSPECTUS IS MAY 1, 1997
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2 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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TABLE OF CONTENTS
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GLOSSARY OF SPECIAL TERMS............................................. 4
SUMMARY............................................................... 6
DETAILED DESCRIPTION OF POLICY BENEFITS AND PROVISIONS................ 10
General............................................................. 10
Premiums............................................................ 10
Premium Payment Flexibility....................................... 10
Scheduled Premiums................................................ 11
Unscheduled Premiums.............................................. 11
Allocation of Premium Payments.................................... 11
Accumulation Units................................................ 11
Accumulation Unit Values.......................................... 11
Premium Limitation................................................ 12
Cash Values......................................................... 12
Amount Payable on Surrender of the Policy......................... 12
Load Refund....................................................... 12
Partial Withdrawals............................................... 12
Transfers of Account Value.......................................... 12
Amount and Frequency of Transfers................................. 12
Transfers to or from Sub-Accounts................................. 13
Transfers from the Fixed Account.................................. 13
Dollar Cost Averaging Option...................................... 13
Policy Loans........................................................ 13
Loan Interest..................................................... 14
Credited Interest................................................. 14
Preferred Loan.................................................... 14
Loan Repayments................................................... 14
Termination Due to Excessive Indebtedness......................... 14
Effect of Loans on Account Value.................................. 14
Death Benefit....................................................... 14
Death Benefit Options............................................. 14
Option Change..................................................... 14
Death Benefit Guarantee........................................... 14
Minimum Death Benefit............................................. 14
Increases and Decreases in Face Amount............................ 15
Benefits at Maturity................................................ 15
Lapse and Reinstatement............................................. 15
Policy Surplus.................................................... 15
Lapse and Grace Period............................................ 15
Reinstatement..................................................... 16
Automatic Premium Loan Option..................................... 16
The Right to Examine or Exchange the Policy......................... 16
Surrender/Continuation Options...................................... 17
Option Descriptions............................................... 17
Valuation of Payments and Transfers................................. 17
Application for a Policy............................................ 18
Reduced Charges for Eligible Groups............................... 18
Deductions from the Premium......................................... 18
Front End Sales Load.............................................. 18
Premium Related Tax Charge........................................ 18
Deductions and Charges from the Account Value....................... 18
Monthly Deduction Amounts......................................... 18
Surrender Charges................................................. 20
Examples of Front-End Sales Loads and Surrender Charges........... 20
Charges Against the Funds......................................... 22
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ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 3
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Taxes............................................................. 23
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THE COMPANY........................................................... 23
SEPARATE ACCOUNT VL I................................................. 24
General............................................................. 24
Funds............................................................... 24
Hartford Funds.................................................... 24
Putnam Funds...................................................... 24
Fidelity VIP Funds................................................ 25
Investment Adviser.................................................. 26
Hartford Funds.................................................... 26
Putnam Funds...................................................... 26
Fidelity VIP Funds................................................ 27
THE FIXED ACCOUNT..................................................... 27
OTHER MATTERS......................................................... 27
Voting Rights....................................................... 27
Statements to Policy Owners......................................... 28
Limit on Right to Contest........................................... 28
Misstatement as to Age.............................................. 28
Payment Options..................................................... 28
Beneficiary......................................................... 28
Assignment........................................................ 29
Dividends......................................................... 29
SUPPLEMENTAL BENEFITS................................................. 29
Deduction Amount Waiver Rider....................................... 29
Accidental Death Benefit Rider...................................... 29
Increase in Coverage Option Rider................................... 29
Maturity Date Extension Rider....................................... 29
EXECUTIVE OFFICERS AND DIRECTORS...................................... 30
DISTRIBUTION OF THE POLICIES.......................................... 31
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS.......................... 31
FEDERAL TAX CONSIDERATIONS............................................ 31
General............................................................. 31
Taxation of Hartford and the Separate Account....................... 32
Income Taxation of Policy Benefits.................................. 32
Modified Endowment Contracts........................................ 32
Estate and Generation Skipping Taxes................................ 33
Diversification Requirements........................................ 33
Ownership of the Assets in the Separate Account..................... 33
Life Insurance Purchased for Use in Split Dollar Arrangements....... 34
Federal Income Tax Withholding...................................... 34
Non-Individual Ownership of Policies................................ 34
Other............................................................... 34
Life Insurance Purchases by Nonresident Aliens and Foreign
Corporations.......................................................... 34
LEGAL PROCEEDINGS..................................................... 34
EXPERTS............................................................... 34
REGISTRATION STATEMENT................................................ 35
LEGAL MATTERS......................................................... 35
APPENDIX A -- ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES AND
SURRENDER VALUES...................................................... 36
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THE POLICIES MAY NOT BE AVAILABLE IN ALL STATES.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER OR OTHER PERSON IS AUTHORIZED
TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED ON.
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4 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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GLOSSARY OF SPECIAL TERMS
As used in this Prospectus, the following terms have the indicated meanings:
ACCOUNT VALUE: Value used to determine certain Policy benefits and charges.
ACCUMULATION UNIT: An accounting unit of measure used to calculate the value of
a Sub-Account.
ANNUAL SCHEDULED PREMIUM AND/OR SCHEDULED PREMIUMS: The amount of premiums
selected by You within limits established under the Policy.
ATTAINED AGE: The Issue Age plus the number of fully completed Policy Years.
CASH SURRENDER VALUE: Cash Value less all Indebtedness.
CASH VALUE: The Account Value less all remaining surrender charges, if any.
CODE: The Internal Revenue Code of 1986, as amended.
DATE OF ISSUE: The date from which the provisions governing the suicide and
incontestability are measured.
DEATH BENEFIT: The Death Benefit Option in effect determines how the Death
Benefit is calculated. The three Death Benefit Options provided are described in
the Death Benefit section of this Prospectus.
DEATH PROCEEDS: The amount which We will pay on the death of the Insured. This
amount equals the Death Benefit less any Indebtedness.
FACE AMOUNT: On the Policy Date, the Face Amount equals the initial Face Amount.
Thereafter it may change in accordance with the terms of the Policy.
FIXED ACCOUNT: Portion of Account Value invested in Hartford's general account.
FIXED ACCOUNT MINIMUM CREDITED RATE: The minimum rate credited to amounts
allocated to the Fixed Account.
FUNDS: The registered open-end management investment companies in which assets
of the Separate Account may be invested.
GUARANTEE PERIOD: The period, selected by You, from one to ten Policy Years,
during which additional Policy guarantees are provided. Among these is the
guarantee that if Scheduled Premiums are paid, the Death Benefit will be no less
than the initial Face Amount regardless of the investment performance of the
Sub-Accounts. See "Summary -- Guarantee Period," page 7.
GUIDELINE ANNUAL PREMIUM: The level annual premium payment necessary to provide
the future benefits under the Policy through maturity, based on certain
assumptions specified under the Federal securities laws. These assumptions
include mortality charges based on the 1980 CSO Table, an assumed annual net
rate of return of 5% per year, and deduction of the fees and charges specified
in the Policy. For purposes of the Policy, the Guideline Annual Premium is used
only in limiting front-end sales loads and surrender charges.
HARTFORD (ALSO WE, US, OUR OR THE COMPANY): ITT Hartford Life and Annuity
Insurance Company.
IN WRITING: In a written form satisfying to Us.
INDEBTEDNESS: The outstanding loan on the Policy, including any interest due or
accrued.
INSURED: The person on whose life the Policy is issued.
ISSUE AGE: As of the Policy Date, the Insured's age on his/ her last birthday.
LOAN ACCOUNT: An account established for any amounts transferred from the Fixed
Account and Sub-Accounts as a result of loans. Amounts are held as collateral
and are credited with interest at the Fixed Account Minimum Credited Rate.
Amounts are not subject to the investment experience of the Separate Account.
MATURITY DATE: The date on which the Policy will mature.
MONTHLY ACTIVITY DATE: The Policy Date and the same date in each succeeding
month as the Policy Date except that whenever the Monthly Activity Date falls on
a date other than a Valuation Day, the Monthly Activity Date will be deemed the
next Valuation Day.
MONTHLY DEDUCTION AMOUNT: The fees and charges deducted from the Account Value
on the Monthly Activity Date.
NATIONAL SERVICE CENTER: Located in Minneapolis, Minnesota.
NET PREMIUM: The amount of premium actually credited to the Account Value.
POLICY: The flexible premium variable life insurance contract issued by Hartford
described in this Prospectus.
POLICY ANNIVERSARY: An anniversary of the Policy Date. Similarly, Policy Years
are measured from the Policy Date.
POLICY DATE: The date from which Policy Anniversaries and Policy Years are
determined.
POLICY OWNER (ALSO YOU, YOUR): The person having rights to benefits under the
Policy during the lifetime of the Insured; the Policy Owner may or may not be
the Insured.
POLICY SURPLUS: An amount which We calculate for each Policy Year during the
Guarantee Period to determine whether or not payment of a Scheduled Premium is
required and is calculated as described in "Policy Surplus" on page 15.
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ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 5
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POLICY YEARS: Annual periods computed from the Policy Date.
PRO RATA BASIS: An allocation method based on the proportion of the Account
Value in the Fixed Account and each Sub-Account.
SCHEDULED PREMIUM: Amount of premium shown on Your specifications.
SEPARATE ACCOUNT (ALSO "SEPARATE ACCOUNT VL I"): An account established by
Hartford to separate the assets funding the Policies from other assets of
Hartford; in this case, "Separate Account VL I."
SUB-ACCOUNT: The subdivisions of the Separate Account.
TARGET ACCOUNT VALUE: The Account Value, determined at issue, that would result
on each Policy Anniversary assuming all annual Scheduled Premiums were paid when
due (including the one due on that anniversary for the next Policy Year), a 6%
net yield on assets (after fund level charges are deducted but before the
mortality and expense risk charge is deducted) and current cost of insurance and
expense charges.
UNSCHEDULED PREMIUMS: Any premium payment other than a Scheduled Premium
Payment.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. The
value of the Separate Account is determined at the close of the New York Stock
Exchange (currently 4:00 p.m. Eastern Time) on such days.
VALUATION PERIOD: The period between the close of business on successive
Valuation Days.
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6 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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SUMMARY
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The flexible premium variable life insurance Policies offered by this
Prospectus are funded by the Fixed Account and Separate Account VL I, a separate
account established by Hartford pursuant to Connecticut insurance law and
organized as a unit investment trust registered under the Investment Company Act
of 1940. The Separate Account is presently comprised of 22 sub-accounts (the
"Sub-Accounts" and each individually a "Sub-Account"), each of which invests
exclusively in one of the underlying Funds. If an initial premium is submitted
with an application for a Policy, the Net Premium will be allocated, to the
Hartford Money Market Sub-Account. At a later date the values in the Hartford
Money Market Sub-Account will be allocated to one or more of the Sub-Accounts or
the Fixed Account as specified in the Policy Owner's application. This later
date is the latest of 45 days after the application is signed, ten days after We
receive the premium and the date We receive the final requirement to put the
Policy in force. The Policies are credited with units ("Accumulation Units") in
each selected Sub-Account, the assets of which are invested in the applicable
Fund. A Policy Owner may transfer amounts invested among the Sub-Accounts and
the Fixed Account subject to a transfer charge, if applicable. See "Detailed
Description of Policy Benefits and Provisions -- Transfers of Account Value,"
page 12.
The Policies are first and foremost life insurance policies with death
benefits, cash values, and other features traditionally associated with life
insurance. The Policies are called "flexible premium" because, once the desired
level and pattern of Death Benefits have been determined, a Policy Owner has
considerable flexibility in the selection of the timing and amount of premium to
be paid. The Policies are called "variable" because, unlike the fixed benefits
of an ordinary whole life insurance policy, the Cash Value will, and the Death
Benefit may increase or decrease depending on the investment experience of the
Funds to which the Net Premium(s) has been allocated. However, as long as the
Policy remains in force, no partial withdrawals occur, and there are no requests
to increase or decrease the Face Amount, the Death Benefit will never be less
than the initial Face Amount. See "Detailed Description of Policy Benefit and
Provisions -- Death Benefit," page 14.
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POLICY DESIGN OPTIONS
The options in the Policy are structured to give a prospective purchaser and
his or her sales agent the ability to select a Policy tailor-made for the
purchaser's specific life insurance needs.
The Policy options which provide such flexibility fall into four major
categories:
1. Death Benefit Options -- These allow the Policy Owner to select various
levels and patterns of Death Benefit payments.
2. Premium Options -- Once the Policy Owner has decided on the appropriate
Death Benefit, he or she then has considerable flexibility in determining
the desired premium schedule.
3. Guarantee Period Options -- The Policy Owner also has the ability to choose
a Guarantee Period from one to ten years. During this period, additional
contractual guarantees are provided. Among these is the guarantee that the
Death Benefit will be no less than the initial Face Amount and the Policy
will not lapse as long as certain Scheduled Premiums selected by the Policy
Owner are paid or provided for by favorable investment experience.
4. Investment Options -- The Policy Owner has the choice of allocating the
Policy's Account Value among nine or less of the Policy's 23 investment
options. These include the 22 variable Sub-Accounts and the Fixed Account.
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DEATH BENEFIT
The Policies provide for three Death Benefit options. These can be level and
equal to the Face Amount, a Face Amount plus Return of Account Value Death
Benefit or a Face Amount plus Return of Scheduled Premium Death Benefit. At the
death of the Insured, we will pay the Death Proceeds to the Beneficiary. The
Death Proceeds equal the Death Benefit less any Indebtedness under the Policy.
See "Detailed Description of Policy Benefits and Provision -- Death Benefit,"
page 14.
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PREMIUM
You have considerable flexibility as to when and in what amounts You pay
premiums.
Prior to issue, You can choose the level of the Scheduled Premiums, within a
range determined by Hartford based on the Face Amount of the Policy, the
Insured's sex (except where unisex rates apply) and Issue Age, and the Insured's
risk classification.
During the Guarantee Period, Hartford will guarantee that the Policy will
not lapse, regardless of the investment experience of the Funds, if You pay the
Scheduled Premiums when due. In addition, Unscheduled Premium Payments are
allowed during the Guarantee Period.
Even if You do not pay all Scheduled Premiums due during the Guarantee
Period, the Policy will stay in force as
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ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 7
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long as the Policy Surplus exceeds any Indebtedness under the Policy.
After the Guarantee Period, You may change Your Scheduled Premiums to any
level You desire, and Unscheduled Premium Payments are still allowed. Once the
Guarantee Period has expired, the Policy will not lapse as long as the Cash
Surrender Value is sufficient to cover the Monthly Deduction Amounts.
No premium payment will be accepted which causes the Policy to not meet the
tax qualification guidelines for life insurance under the Internal Revenue Code
of 1986, as amended.
There are circumstances, usually if a Policy Owner wants to refund future
benefits in seven years or less, when the Policy may become a Modified Endowment
Contract under federal tax law. If it does, loans and other predeath
distributions are includable in gross income on an income-first basis. A 10%
penalty tax may be imposed on income distributed before the insured attains age
59 1/2. Prospective purchasers and Policy Owners are advised to consult a
qualified tax adviser before taking steps that may affect whether the Policy
becomes a Modified Endowment Contract. See "Federal Tax Considerations --
Modified Endowment Contracts," page 32, for a discussion of the "seven pay
test."
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GUARANTEE PERIOD
The Guarantee Period selected by You will affect the benefits provided by
the Policy. In general, the longer the Guarantee Period is, the higher the
front-end sales loads and surrender charges are. However, the advantages of a
longer Guarantee Period include:
a. a longer period during which Your Death Benefit is guaranteed, regardless of
the investment experience of the Sub-Accounts,
b. a longer period during which Your current administrative fees are guaranteed
(as a result, the longer the Guarantee Period is, the lower the guaranteed
administrative fees are),
c. a longer period during which Your current cost of insurance rates are
guaranteed (as a result, the longer the Guarantee Period is, the lower the
guaranteed cost of insurance rates are),
d. lower current cost of insurance rates,
e. lower mortality and expense risk rates.
In addition, if you choose a Guarantee Period longer than five years, You
may be given the right to purchase additional coverage, subject to limitations,
without any evidence of insurability. See "Supplemental Benefits," page 29.
Due to the way the different charges and fees depend on different factors,
such as the length of the Guarantee Period, it is difficult to anticipate the
net effect of these charges on the Policy values without a sales illustration.
Once a purchaser, in consultation with his or her sales agent, has decided on a
combination of Policy features, (such as Face Amount, level of Scheduled
Premiums, Guarantee Period, and the Issue Age and sex of Insured) the sales
agent will provide that purchaser with an illustration which reflects the
charges and benefits of that particular combination and a summary of Policy
charges and fees. In addition, these illustrations are available for any
allowable combination of benefits which a prospective purchaser may request.
For more information concerning front-end sales loads, see page 18,
surrender charges, see page 18, cost of insurance charges, see page 19, and
mortality and expense risk charges, see page 19.
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SEPARATE ACCOUNT VL I
Separate Account VL I is a separate account established by Hartford pursuant
to the insurance laws of the State of Connecticut and organized as a registered
unit investment trust under the Investment Company Act of 1940. Separate Account
VL I is presently comprised of 22 Sub-Accounts, each of which invests
exclusively in one of the Funds. Each Hartford Fund is organized as a
corporation under the laws of the State of Maryland and is a diversified
open-end management investment company registered under the Investment Company
Act of 1940. The Putnam Funds are portfolios of Putnam Variable Trust (formerly
named Putnam Capital Manager Trust), a Massachusetts business trust organized on
September 24, 1987 that is an open-end, series investment company with multiple
portfolios or funds registered under the Investment Company Act of 1940. The
Fidelity VIP Funds are portfolios of the Variable Insurance Products Fund and
the Variable Insurance Products Fund II, two diversified open-end management
investment companies, each with multiple portfolios and organized as a
Massachusetts business trust. The VIP Equity-Income Portfolio and VIP Overseas
Portfolio are portfolios of the Variable Insurance Products Fund, organized on
November 13, 1981. The VIP II Asset Manager Portfolio is a portfolio of the
Variable Insurance Products Fund II, organized on March 21, 1988. Registration
under the Investment Company Act of 1940 does not involve supervision of the
management or investment practices or policies by the Commission. The shares of
the Funds are sold to the Separate Account and to other separate accounts of
Hartford or its affiliates which fund similar annuity or life insurance
products.
Currently, the Funds are Hartford Advisers Fund, Inc., Hartford Capital
Appreciation Fund, Inc., Hartford Bond
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8 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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Fund, Inc., Hartford Dividend and Growth Fund, Inc., Hartford Index Fund, Inc.,
Hartford International Opportunities Fund, Inc., Hartford Mortgage Securities
Fund, Inc., Hartford Stock Fund, Inc., and HVA Money Market Fund, Inc.
(hereinafter the "Hartford Funds"), Putnam VT Diversified Income Fund, Putnam VT
Global Asset Allocation Fund, Putnam VT Global Growth Fund, Putnam VT Growth and
Income Fund, Putnam VT High Yield Fund, Putnam VT Money Market Fund, Putnam VT
New Opportunities Fund, Putnam VT U.S. Government and High Quality Bond Fund,
Putnam VT Utilities Growth and Income Fund, and Putnam VT Voyager Fund
(hereinafter the "Putnam Funds"), and the VIP Equity-Income Portfolio, VIP
Overseas Portfolio and VIP II Asset Manager Portfolio (hereinafter the "Fidelity
VIP Funds"). Applicants should read the prospectus for each of the Funds
accompanying this Prospectus in connection with the purchase of a Policy. The
investment objectives of each of the Funds are as set forth in "Separate Account
VL I," page 24.
The investment adviser for the Hartford Funds is HL Investment Advisors,
Inc. ("HL Advisors"), a wholly-owned subsidiary of Hartford. HL Advisors retains
Wellington Investment Management, L.L.P. ("Wellington Management") as an
investment sub-adviser with respect to certain of the Hartford Funds. In
addition, HL Advisors has entered an investment services agreement with Hartford
Investment Management Company, Inc. (HIMCO) for the provision of investment
services for certain of the Hartford Funds. The Putnam Funds are advised by
Putnam Investments Management Inc., a subsidiary of Putnam Investments, Inc. The
Fidelity VIP Funds are managed by Fidelity Management & Research Company. See
"Separate Account VL I," page 24.
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FIXED ACCOUNT
Premium payments and Cash Values allocated to the Fixed Account become part
of the general assets of the Hartford. Hartford invests the assets of the
general account in accordance with applicable law governing the investments of
insurance company general accounts.
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DEDUCTIONS FROM THE PREMIUM
Before the allocation of the premium to the Account Value, a deduction as a
percentage of premium is made for the front-end sales load and premium taxes.
The amount of each premium allocated to the Account Value is Your Net Premium.
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FRONT-END SALES LOAD
The front-end sales load portion of the premium deduction is based on the
level of Scheduled Premiums, the length of the Guarantee Period, and the amount
of any Unscheduled Premiums paid.
The maximum front-end sales load percentages are 50% of the premiums paid in
the first Policy Year, 11% in Policy Years 2 through 10, and 3% in Policy Years
11 and later.
For all Guarantee Periods, the maximum amount of premium paid in any Policy
Year subject to a front-end sales load is the Guideline Annual Premium. In
addition, if Scheduled Premiums are less than the Guideline Annual Premium, the
maximum amount of premium paid in the first Policy Year subject to a front-end
sales load is the Scheduled Premium.
The actual schedule of front-end sales loads for any given Policy is
specified in that Policy.
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PREMIUM RELATED TAX CHARGE
We deduct a percentage of each premium to cover premium-based taxes assessed
against Hartford by a state or other governmental entity. This percentage will
vary by locale depending on the tax rates in effect there. The range is
generally between 0% and 4%.
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DEDUCTIONS AND CHARGES FROM
THE ACCOUNT VALUE
We will subtract amounts from Your Account Value to provide for the Monthly
Deduction Amount. These will be taken on a Pro Rata Basis from the Fixed Account
and Sub-Accounts on each Monthly Activity Date.
The Monthly Deduction Amount equals:
(a) the cost of insurance; plus
(b) the charges for additional benefits provided by rider, if any; plus
(c) the charges for "special" insurance class rating, if any; plus
(d) the monthly administrative fee, plus
(e) the mortality and expense risk charge.
Hartford may also set up a provision for income taxes against the assets of
the Separate Account. See "Detailed Description of Policy Benefits and
Provisions -- Deductions and Charges From the Account Value -- Taxes," page 23,
and "Federal Tax Considerations," page 31.
For Policy Years one through twenty, the mortality and expense risk charge
ranges from 1.40% annually for a Policy with a one-year Guarantee Period and
decreases as the Guarantee Period gets longer to .60% on a Policy with a ten-
year Guarantee Period. After the twentieth Policy Year, the mortality and
expense risk charge for all Policies will equal .60% annually.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 9
- --------------------------------------------------------------------------------
Prospective purchasers should review the prospectuses for the Funds which
accompany this Prospectus for a description of the charges assessed against the
assets of each of the Funds.
- ---------------------------------------------------
SURRENDER CHARGES
A contingent deferred sales load ("Surrender Charge") is assessed against
the Account Value of a Policy if the Policy lapses or is surrendered during the
first nine Policy Years. The amount of the Surrender Charge applicable during
the first Policy Year is established by Hartford based on the premiums and the
length of the Guarantee Period chosen by the Policy Owner. Subject to certain
limits imposed by state insurance law, the Surrender Charge decreases by an
equal amount each Policy Year until it reaches zero during the tenth Policy
Year.
The actual schedule of Surrender Charges for any given Policy is set forth
in that Policy. In addition, sales agents will provide, upon request, the
schedule of Surrender Charges which would apply under any given circumstances.
- ---------------------------------------------------
LIMITS ON FRONT-END SALES
LOADS AND SURRENDER CHARGES
Certain state insurance laws and regulations limit the front-end sales loads
and Surrender Charges which can be assessed on these Policies. The front-end
sales loads and Surrender Charges assessed in these Policies comply with these
limitations.
Front-end sales loads and Surrender Charges which cover expenses relating to
the sale and distribution of the Policies may be reduced for certain sales of
the Policies under circumstances which may result in savings of such sales and
distribution expenses.
- ---------------------------------------------------
CASH VALUE
As with many other types of insurance policies, each Policy will have a cash
value ("Cash Value"). The Cash Value of the Policy will increase or decrease to
reflect the interest credited to the Fixed Account and Loan Account, investment
experience of the Sub-Accounts applicable to the Policy and deductions for the
Monthly Deduction Amount. There is no minimum guaranteed Cash Value and the
Policy Owner bears the risk of the investment in the Funds. See "Detailed
Description of the Policy Benefits and Provisions -- Cash Values," page 12.
- ---------------------------------------------------
POLICY LOANS
A Policy Owner may obtain a cash loan from Hartford. The loan is secured by
the Policy. At the time a loan is requested, the Indebtedness (including the
currently applied for loan) may not exceed 90% of the Cash Value. See "Detailed
Description of Policy Benefits and Provisions -- Policy Loans," page 13.
- ---------------------------------------------------
CHARGES AGAINST THE FUNDS
The Separate Account purchases shares of the Funds at net asset value. The
net asset value of the Fund shares reflects investment advisory fees and
administrative and other expenses already deducted from the assets of the Funds.
These charges are described herein. See "Detailed Description of Policy Benefits
and Provisions -- Deductions and Charges from the Account Value -- Charges
Against the Funds," page 22.
The following table shows total fund operating expenses for the year ending
December 31, 1996 for the Funds:
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER OPERATING
FUND NAME FEES EXPENSES EXPENSES
- --------------------------- --------------- ------------ ------------
<S> <C> <C> <C>
Hartford Advisers Fund..... 0.615% 0.017% 0.632%
Hartford Bond Fund......... 0.490% 0.030% 0.520%
Hartford Capital
Appreciation Fund........ 0.629% 0.017% 0.646%
Hartford Dividend and
Growth Fund.............. 0.709% 0.017% 0.726%
Hartford Index Fund........ 0.374% 0.019% 0.393%
Hartford International
Opportunities Fund....... 0.691% 0.095% 0.786%
Hartford Mortgage
Securities Fund.......... 0.424% 0.029% 0.453%
Hartford Stock Fund........ 0.441% 0.016% 0.457%
HVA Money Market Fund...... 0.423% 0.021% 0.444%
Putnam VT Diversified
Income Fund.............. 0.70% 0.13% 0.83%
Putnam VT Global Asset
Allocation Fund.......... 0.68% 0.15% 0.83%
Putnam VT Global Growth
Fund..................... 0.60% 0.16% 0.76%
Putnam VT Growth and Income
Fund..................... 0.49% 0.05% 0.54%
Putnam VT High Yield Fund.. 0.68% 0.08% 0.76%
Putnam VT Money Market Fund
(1)...................... 0.45% 0.10% 0.55%
Putnam VT New Opportunities
Fund..................... 0.63% 0.09% 0.72%
Putnam VT US Government and
High Quality Bond Fund... 0.62% 0.07% 0.69%
Putnam VT Utilities Growth
and Income Fund (2)...... 0.69% 0.09% 0.78%
Putnam VT Voyager Fund..... 0.57% 0.06% 0.63%
Fidelity VIP Equity-Income
Portfolio................ 0.51% 0.07% 0.58%
Fidelity VIP Overseas
Portfolio................ 0.76% 0.17% 0.93%
Fidelity VIP II Asset
Manager Portfolio (3).... 0.64% 0.10% 0.74%
</TABLE>
- ------------------------------
(1) Other expenses for Putnam VT Money Market Fund have been restated to reflect
the cost of certain insurance purchased by the Fund. See "Putnam VT Money
Market Fund -- Insurance" in the Fund's prospectus accompanying this
Prospectus. Actual other expenses and total Fund operating expenses were
0.08% and 0.53%, respectively.
<PAGE>
10 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
(2) On July 11, 1996, shareholders approved an increase in the fees payable to
Putnam Management under the management contract for Putnam VT Utilities
Growth and Income Fund. The management fees and total expenses shown in the
table have been restated to reflect the increase. Actual management fees and
total expenses were 0.64% and 0.73%, respectively.
(3) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds have entered into
arrangements with their custodian and transfer agent whereby interest earned
on uninvested cash balances was used to reduce custodian and transfer agent
expenses. Absent these reductions, the total operating expenses presented in
the table would have been 0.56% for Fidelity VIP Equity Income Portfolio,
0.92% for Fidelity VIP Overseas Portfolio and 0.73% for Fidelity VIP II
Asset Manager Portfolio.
- ----------------------------------------------------------------
THE RIGHT TO EXAMINE
THE POLICY
An applicant has a limited right to return his or her Policy for
cancellation. If the applicant returns the Policy within ten days after delivery
of the Policy, or within 45 days after completion of the application, whichever
is latest (subject to applicable state regulation), Hartford will return to the
applicant, within seven days thereafter, the greater of the premium paid, less
any Indebtedness, or the sum of (1) the Account Value, less any Indebtedness, on
the date the returned Policy is received by Hartford or its agent and (2) any
deductions under the Policy or by the Funds for taxes, charges or fees.
- ---------------------------------------------------
SURRENDER/CONTINUATION OPTIONS
At any time prior to the Maturity Date, provided the Policy has a Cash
Surrender Value, You may generally choose to have the Cash Surrender Value
applied under one of the following options:
OPTION A -- Surrender for Cash
OPTION B -- Continue as Extended Term Insurance
OPTION C -- Continue as Paid-Up Insurance
See "Detailed Description of Policy Benefits and Provisions --
Surrender/Continuation Options," page 17.
- ---------------------------------------------------
TAX CONSEQUENCES
The current Federal tax law generally excludes all Death Benefit payments
from the gross income of the Policy beneficiary. See "Federal Tax
Considerations," page 31.
- ---------------------------------------------------
DETAILED DESCRIPTION OF POLICY
BENEFITS AND PROVISIONS
- -------------------------------- GENERAL
This Prospectus describes a flexible premium variable life insurance policy
where the Policy Owner has considerable flexibility in selecting the timing and
amount of premium payments. In addition, the Policy Owner can select a Guarantee
Period, from one to ten years, during which additional guarantees are provided
such as the guarantee that the Death Benefit will be no less than the initial
Face Amount and the Policy will not lapse as long as certain Scheduled Premiums
are paid or are provided for by favorable investment experience. As stated
below, Unscheduled Premium payments are also allowed.
- ---------------------------------------------------
PREMIUMS
PREMIUM PAYMENT FLEXIBILITY
A significant feature of the Policy is that it gives You the ability to pay
amounts greater or less than the Scheduled Premiums.
Prior to issue, You can choose the level of the Scheduled Premiums, within a
range determined by Hartford, based on the Face Amount of the Policy, the
Insured's sex (except where unisex rates apply), age at issue, and the Insured's
risk classification.
During the Guarantee Period, Hartford will guarantee that the Policy will
not lapse, regardless of the investment experience of the Funds, if You pay the
Scheduled Premiums when due and the Indebtedness never exceeds the Cash Value.
In addition, Unscheduled Premium payments are allowed during the Guarantee
Period.
Even if You do not pay all Scheduled Premiums due during the Guarantee
Period, the Policy will stay in force as long as the Policy Surplus exceeds the
Indebtedness in the Policy.
After the Guarantee Period, You may change your Scheduled Premiums to any
level you desire, and Unscheduled Premium payments are still allowed. Once the
Guarantee Period has expired, the Policy will not lapse as long as the Cash
Surrender Value is sufficient to cover the Monthly Deduction Amounts.
See, also, "-- Lapse and Reinstatement," page 15, for more details.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 11
- --------------------------------------------------------------------------------
SCHEDULED PREMIUMS
You have the right to pay Scheduled Premiums annually, semiannually,
quarterly, or monthly. The first Scheduled Premium is due on the Policy Date.
During the Guarantee Period, each Scheduled Premium after the first is due at
the expiration of the period for which the preceding Scheduled Premium was paid.
A Scheduled Premium may be paid at any time prior to its due date, subject to
the premium limitations set forth by the Internal Revenue Code (see "-- Premiums
- -- Premium Limitation," page 12).
During the Guarantee Period, if all Scheduled Premiums are paid when due and
if Indebtedness does not exceed the Cash Value, the Policy will not terminate
due to insufficient Cash Surrender Value, regardless of the investment
experience of the Funds.
During the Guarantee Period, if You fail to pay a Scheduled Premium when
due, and if, on the premium due date and for the rest of that Policy Year, the
Policy Surplus exceeds the Indebtedness, payment of that Scheduled Premium will
not be required in that year or in any future Policy Year. The Policy will not
terminate due to this nonpayment. However, future Scheduled Premiums during the
Guarantee Period will be required unless the Policy Surplus continues to exceed
the Indebtedness in those future Policy Years. In addition, as is true with any
premium, Your Account Value and Policy Surplus in future years will be larger if
You make the premium payment than if You do not.
For example, to determine whether or not non-payment of a Scheduled Premium
in the second Policy Year would result in a lapse, You would compare the actual
Account Value on the first Policy Anniversary to the first Target Account Value.
If the actual Account Value was equal to or greater than the Target Account
Value and the Indebtedness remained less than this Policy Surplus, failure to
pay any Scheduled Premiums due in the second Policy Year would not result in a
lapse.
After the Guarantee Period, the Company will send reminder notices for the
Owner to pay Scheduled Premiums during the Insured's lifetime. Payment of the
Scheduled Premium may not be sufficient to keep the Policy in force after the
end of the Guarantee Period.
UNSCHEDULED PREMIUMS
Any premium We receive under the Policy in an amount different from the
Scheduled Premium will be considered an Unscheduled Premium. Unscheduled
Premiums of at least $50.00 can be made at any time while the Policy is in
force.
ALLOCATION OF PREMIUM PAYMENTS
The initial Net Premium will be allocated to the Hartford Money Market
Sub-Account on the later of the Policy Date or the date We receive the premium.
The value in this Hartford Money Market Sub-Account will then be allocated
to the Fixed Account and Sub-Accounts according to the premium allocation
specified in the application on the latest of 45 days after the application is
signed, ten days after We receive the premium and the date We receive the final
requirement to put the Policy in force.
Any additional Net Premiums received by Us prior to such date will be
allocated to the Hartford Money Market Fund Sub-Account.
Upon written request, You may change the Net Premium allocation. Portions
allocated to the Fixed Account and Sub-Accounts must be whole percentages of 10%
or more. Subsequent Net Premiums will be allocated to the Fixed Account and
Sub-Accounts according to Your most recent instructions, subject to the
following. The Account Value may be allocated to no more than nine of these. If
We receive a premium and Your most recent allocation instructions would violate
this requirement, We will allocate the Net Premium to the Fixed Account and Sub-
Accounts according to Your previous premium allocation.
The Policy Owner receives several different types of notification as to what
his or her current premium allocation is. The initial allocation chosen by the
Policy Owner is shown in the Policy. And, each transactional confirmation
received after a premium payment will show how that Net Premium has been
allocated. In addition, each quarterly statement summarized the current premium
allocation in effect for that Policy.
ACCUMULATION UNITS
Net Premiums allocated to the Sub-Accounts are used to credit Accumulation
Units to those Sub-Accounts.
The number of Accumulation Units in each Sub-Account to be credited to a
Policy (including the initial allocation to Hartford Money Market Sub-Account)
and the amount credited to the Fixed Account will be determined first by
multiplying the Net Premium by the appropriate allocation percentage to
determine the portion to be invested in the Fixed Account or Sub-Account. Each
portion to be invested in a Sub-Account is then divided by the then Accumulation
Unit Value of that particular Sub-Account next computed following receipt of the
payment.
ACCUMULATION UNIT VALUES
The Accumulation Unit Value for each Sub-Account will vary to reflect the
investment experience of the applicable Fund and will be determined on each
Valuation Day by multiplying the Accumulation Unit Value of the particular
Sub-Account on the preceding Valuation Day by a Net Investment Factor for that
Sub-Account for the Valuation Period then ended. The Net Investment Factor for
each of the Sub-Accounts is equal to the net asset value per share of the
corresponding Fund at the end of the Valuation Period
<PAGE>
12 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
(plus the per share amount of any dividend or capital gain distributions paid by
that Fund in the Valuation Period then ended) divided by the net asset value per
share of the corresponding Fund at the beginning of the Valuation Period.
All valuations in connection with a Policy, e.g., with respect to
determining Cash Value and Account Value and in connection with Policy loans, or
calculation of Death Benefits, or with respect to determining the number of
Accumulation Units to be credited to a Policy with each premium payment, other
than the initial premium payment, will be made on the date the request or
payment is received by Hartford at the National Service Center if such date is a
Valuation Day; otherwise such determination will be made on the next succeeding
date which is a Valuation Day.
PREMIUM LIMITATION
If premiums are received which would cause the Policy to fail to meet the
definition of a life insurance policy in accordance with the Internal Revenue
Code, We will refund the excess premium payments. We will refund such premium
payments and interest thereon within 60 days after the end of a Policy Year.
Except for Scheduled Premiums that are required, a premium payment that
results in an increase in the Death Benefit greater than the amount of the
premium will be accepted only after We approve evidence of insurability.
- ---------------------------------------------------
CASH VALUES
As with traditional life insurance, each Policy will have a Cash Value. The
Cash Value is equal to the Account Value less any remaining Surrender Charges.
There is no minimum guaranteed Cash Value.
The Account Value of a Policy changes on a daily basis and will be computed
on each Valuation Day. The Account Value will vary to reflect the investment
experience of the Sub-Accounts, and the interest credited to the Fixed Account
and Loan Account as well as the Monthly Deduction Amounts.
The Account Value of a particular Policy is related to the net asset value
of the Funds invested in by the Sub-Accounts, if any, to which Net Premiums on
the Policy have been allocated. The Account Value in the Sub-Accounts on any
Valuation Day is calculated by multiplying the number of Accumulation Units in
each Sub-Account as of the Valuation Day by the current Accumulation Unit Value
of that Sub-Account and then summing the result for all the Sub-Accounts. The
Account Value of a Policy equals the Account Value in the Sub-Accounts plus the
value of the Fixed Account and Loan Account. The Cash Value is the Account Value
minus any remaining Surrender Charge. The Cash Surrender Value which is the net
amount available upon surrender of the Policy, is the Cash Value less any
Indebtedness. See "-- Premiums -- Accumulation Unit Values," page 11.
AMOUNT PAYABLE ON SURRENDER OF THE POLICY
As long as the Policy is in effect, a Policy Owner may elect, without the
consent of the beneficiary (provided the designation of beneficiary is not
irrevocable), to fully surrender the Policy. Upon surrender, the Policy Owner
will receive the Cash Surrender Value determined as of the day Hartford receives
the Policy Owner's written request or the date requested by the Policy Owner,
whichever is later. The Cash Surrender Value equals the Cash Value less any
Indebtedness. The Policy will terminate on the date of receipt of the written
request, or the date the Policy Owner requests the surrender to be effective,
whichever is later.
LOAD REFUND
If a Policy is surrendered during the first two Policy Years, the Policy
Owner may be entitled to payment of a refund in addition to the Cash Surrender
Value.
The refund will be equal to the excess, if any, of the sum of the actual
front-end sales load charged to-date plus the Surrender Charge assessed upon
Surrender over:
1. the sum of 30% of payments in aggregate amount less than or equal to one
Guideline Annual Premium plus 10% of payments in aggregate amount greater
than one Guideline Annual Premium but not more than two Guideline Annual
Premiums; and
2. 9% of each payment made in excess of two Guideline Annual Premiums.
PARTIAL WITHDRAWALS
After the Guarantee Period, partial withdrawals are allowed. The minimum
partial withdrawal allowed is $500.00. The maximum partial withdrawal is the
Cash Surrender Value, less $1,000.00. Up to one (1) partial withdrawal is
allowed per month (i.e., between any successive Monthly Activity Dates). The
Face Amount is reduced by the amount of the Partial Withdrawal. Unless specified
otherwise, the Partial Withdrawal will be deducted on a Pro Rata Basis from the
Fixed Account and the Sub-Accounts. Currently, Hartford does not impose a
partial withdrawal charge. However, Hartford reserves the right to impose a
partial withdrawal charge of up to $50.
- ---------------------------------------------------
TRANSFERS OF ACCOUNT VALUE
AMOUNT AND FREQUENCY OF TRANSFERS
Upon request and as long as the Policy is in effect, You may transfer
amounts among the Fixed Account and Sub-Accounts. Transfers may be made by
written request or by calling our National Service Center toll free at
1-800-231-5453. Transfers by telephone may be made by the agent of record or by
the attorney-in-fact pursuant to a
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 13
- --------------------------------------------------------------------------------
power of attorney. Telephone transfers may not be permitted in some states. The
policy of Hartford and its agents and affiliates is that they will not be
responsible for losses resulting from acting upon telephone requests reasonably
believed to be genuine. We will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine; otherwise, We may be liable
for any losses due to unauthorized or fraudulent instructions. The procedures We
follow for transactions initiated by telephone include requirements that callers
provide certain identifying information for themselves ( if not the Policy
Owner) and the Policy Owner. All transfer instructions by telephone are tape
recorded.
The amounts which may be transferred and the number of transfers will be
limited by Our rules then in effect.
Currently there are no restrictions on transfers other than those described
below. There is no charge currently for the first four (4) transfers in any
Policy Year. Each subsequent transfer is subject to a $25 Transfer Charge.
We reserve the right at a future date to limit the size of transfers and
remaining balances, and to limit the number and frequency of transfers.
TRANSFERS TO OR FROM SUB-ACCOUNTS
In the event of a transfer from a Sub-Account, the number of Accumulation
Units credited to the Sub-Account from which the transfer is made will be
reduced.
The reduction will be determined by dividing:
1. the amount transferred by,
2. the Accumulation Unit Value for that Sub-Account on the Valuation Day, We
receive Your request for transfer In Writing.
In the event of a transfer to a Sub-Account, We will increase the number of
Accumulation Units credited to the Sub-Account. The increase will equal:
1. the amount transferred divided by,
2. the Accumulation Unit Value for that Sub-Account determined on the Valuation
Day, We receive Your request for transfer In Writing.
TRANSFERS FROM THE FIXED ACCOUNT
In addition to the conditions above, transfers from the Fixed Account are
subject to the following:
(a) the transfer must occur during the 30-day period following each Policy
Anniversary; and
(b) if the Accumulated Value in Your Fixed Account exceeds $1,000, the amount
transferred in any Policy Year may be no larger than 25% of the Accumulated
Value in the Fixed Account on the date of transfer.
DOLLAR COST AVERAGING OPTION
You may elect to allocate Your Net Premiums among the Sub-Accounts and the
Fixed Account pursuant to the dollar cost averaging (DCA) option. If You choose
the DCA option, Net Premiums will be deposited into the Hartford Money Market
Sub-Account. Each month, amounts will be withdrawn from that Sub-Account and
allocated to the other investment options according to Your allocation
instructions. The transfer date will be the monthly anniversary of Your first
transfer under Your initial DCA election. The first transfer will commence
within five (5) business days after Hartford receives Your initial election,
either In Writing or by telephone subject to the telephone transfer procedures
described above. The dollar amount will be allocated to the investment options
that You specify, in the proportions that You specify. If, on any transfer date,
Your Cash Value allocated to the Hartford Money Market Account is less than the
amount You have elected to transfer, Your DCA program will end. You may also
cancel Your DCA election by notice to Hartford In Writing or by calling Our
National Service Center at 1-800-231-5453.
The main objective of a DCA program is to minimize the impact of short term
price fluctuations. Since the same dollar amount is transferred to other
investment options at set intervals, DCA allows You to purchase more
Accumulation Units when prices are low and fewer Accumulation Units when prices
are high. Therefore, a lower average cost per Accumulation Unit may be achieved
over the long term. A DCA program allows Policy Owners to take advantage of
market fluctuations. However, it is important to understand that a DCA program
does not assure a profit or protect against loss in a declining market. Policy
Owners who choose the DCA option should be individuals who have the financial
ability to continue making investments through periods of low price levels.
- ---------------------------------------------------
POLICY LOANS
As long as the Policy is in effect, a Policy Owner may obtain, without the
consent of the beneficiary (provided the designation of beneficiary is not
irrevocable), a cash loan from Hartford. The total Indebtedness at the time of
the new loan (including the accrued interest on prior loans plus the currently
applied for loan) may not exceed 90% of the Cash Value.
The amount of each loan will be transferred on a Pro Rata Basis from the
Fixed Account and each of the Sub-Accounts (unless the Policy Owner specifies
otherwise) to the Loan Account. The Loan Account is a mechanism used to ensure
that any outstanding Indebtedness remains fully secured by the Account Value.
<PAGE>
14 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
LOAN INTEREST
Interest will accrue daily on the Indebtedness at the Policy Loan Interest
Rate indicated in the Policy. The difference between the value of the Loan
Account and the Indebtedness will be transferred on a Pro Rata Basis from the
Fixed Account and Sub-Accounts to the Loan Account on each Monthly Activity
Date.
CREDITED INTEREST
Loan Accounts, other than those attributable to Preferred Loans (as
described in the subsection entitled "Policy Loans -- Preferred Loans," on page
14), will be credited with interest in the following manner. During the first
ten Policy Years, any amounts in the Loan Account will be credited with interest
at a rate of 2% (in most states). For Policy Years eleven and beyond, the Loan
Account will be credited with interest at a rate equal to 3% (in most states).
PREFERRED LOAN
If, any time after the tenth Policy Anniversary, the Cash Value exceeds the
total of all premiums paid since issue, a Preferred Loan is available. The
amount available for a Preferred Loan is the amount by which the Cash Value
exceeds total premiums paid. For Policy Years eleven and beyond, the amount of
the Loan Account which equals a Preferred Loan will be credited with interest at
a rate of 4% (in most states). The amount of Indebtedness that qualifies as a
Preferred Loan is determined on each Monthly Activity Date.
LOAN REPAYMENTS
You can repay any part of or the entire Indebtedness at any time.
The amount of loan repayment will be deducted from the Loan Account and will
be allocated among the Fixed Account and Sub-Accounts in the same percentage as
premiums are allocated.
TERMINATION DUE TO EXCESSIVE INDEBTEDNESS
If total Indebtedness equals or exceeds the Cash Value, the Policy will
terminate 61 days after We have mailed notice to Your last known address and
that of any assignees of record. If sufficient loan repayment if not made by the
end of this 61 day period, the Policy will end without value.
EFFECT OF LOANS ON ACCOUNT VALUE
A loan, whether or not repaid, will have a permanent effect on the Account
Value because the investment results of each Sub-Account will apply only to the
amount remaining in such Sub-Accounts. In addition, the rate of interest
credited to the Fixed Account will usually be different than the rate credited
to the Loan Account. The longer a loan is outstanding, the greater the effect is
likely to be. The effect could be favorable or unfavorable. If the Fixed Account
and Sub-Accounts earn more than the annual interest rate for funds held in the
Loan Account, a Policy Owner's Account Value will not increase as rapidly as it
would have had no loan been made. If the Fixed Account and Sub-Accounts earn
less than the Loan Account, the Policy Owner's Account Value will be greater
than it would have been had no loan been made. Also, if not repaid, the
aggregate amount of the outstanding Indebtedness will reduce the Death Proceeds
and Cash Surrender Value otherwise payable.
- ---------------------------------------------------
DEATH BENEFIT
The Policies provide for the payment of the Death Proceeds to the named
beneficiary when the Insured under the Policy dies. The Death Proceeds payable
to the beneficiary equal the Death Benefit less any Indebtedness. The Death
Benefit depends on the Death Benefit Option selected by You.
DEATH BENEFIT OPTIONS
There are three Death Benefit Options: the Level Death Benefit Option, the
Return of Account Value Death Benefit Option and the Return of Premium Death
Benefit Option. Subject to the Minimum Death Benefit described below, the Death
Benefits under each option are:
1. Under the Level Death Benefit Option, the Death Benefit is the Face Amount.
2. Under the Return of Account Value Death Benefit Option, the Death Benefit is
the Face Amount plus the Account Value.
3. Under the Return of Premium Death Benefit Option, the Death Benefit is the
Face Amount plus the sum of the Scheduled Premiums paid.
OPTION CHANGE
After the Guarantee Period, You may change the Return of Premium Death
Benefit Option or Return of Account Value Death Benefit Option to the Level
Death Benefit Option. If that option change is elected, the Face Amount will
become that amount available as a Death Benefit immediately prior to the option
change.
DEATH BENEFIT GUARANTEE
During the Guarantee Period, if all Scheduled Premiums are paid when due and
if Indebtedness does not exceed the Cash Value, the Policy will not terminate
due to insufficient Cash Surrender Value, regardless of the investment
experience of the Funds.
MINIMUM DEATH BENEFIT
Notwithstanding the above, there is a minimum Death Benefit equal to the
Account Value multiplied by a specified percentage. This percentage varies
according to the Insured's Issue Age, Attained Age, sex (where unisex rates are
not used), and insurance class and are specified in the Policy.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 15
- --------------------------------------------------------------------------------
EXAMPLES OF THE MINIMUM DEATH BENEFIT:
<TABLE>
<CAPTION>
A B
---------- ----------
<S> <C> <C>
Face Amount............................ $ 100,000 $ 100,000
Account Value on Date of Death......... 46,500 34,000
Specified Percentage................... 250% 250%
Death Benefit Option................... Level Level
</TABLE>
In Example A, the minimum Death Benefit equals $116,250, i.e., the greater
of $100,000 (the Face Amount) or $116,250 (the Account Value at the Date of
Death of $46,500, multiplied by the specified percentage of 250%). This amount
less any outstanding Indebtedness constitutes the Death Proceeds which We would
pay to the beneficiary.
In Example B, the death benefit is $100,000, i.e., the greater of $100,000
(the Face Amount) or $85,000 (the Account Value of $34,000 multiplied by the
specified percentage of 250%).
All or part of the Death Proceeds may be paid in cash or applied under a
"Payment Option." See "Other Matters -- Payment Options," page 28.
INCREASES AND DECREASES IN FACE AMOUNT
At any time after the Guarantee Period, You may request a change in the Face
Amount by writing to Us.
The minimum Face Amount for an increase or decrease will be based on Our
rules then in effect.
All requests to increase the Face Amount must be applied for on a new
application and accompanied by the Policy. All requests will be subject to
evidence of insurability satisfactory to Us. Any increase approved by Us will be
effective on the date shown on the new Policy specifications page provided that
the deduction for the cost of insurance for the first month is made. The monthly
administrative fee on the first Monthly Activity Date on or after the effective
date of the increase will reflect a charge for the increase.
A decrease in the Face Amount will be effective on the Monthly Activity Date
following the date we receive the request. The remaining Face Amount must not be
less than Our minimum rules then in effect. Decreases will be applied:
(a) to the most recent increase; then
(b) successively to each prior increase; and then
(c) to the initial Face Amount.
If You ask to decrease Your Face Amount below the initial Face Amount, We
will deduct a portion of any remaining Surrender Charge from Your Account Value.
This will be done on a Pro Rata Basis. Your Surrender Charge will be reduced by
the same amount.
The amount of the reduction will be equal to:
(a) the initial Face Amount minus the requested Face Amount, times
(b) the Surrender Charge on the date of the request to change the Face Amount,
divided by
(c) the initial Face Amount.
We reserve the right to limit the number of increases or decreases made
under the Policy to no more than one in any 12 month period.
- ---------------------------------------------------
BENEFITS AT MATURITY
If the Insured is living on the "Maturity Date" (the anniversary of the
Policy Date on which the Insured is attained age 100), on surrender of the
Policy to Hartford, Hartford will pay to the Policy Owner the Cash Surrender
Value. On the Maturity Date, the Policy will terminate and Hartford will have no
further obligations under the Policy.
- ---------------------------------------------------
LAPSE AND REINSTATEMENT
POLICY SURPLUS
We use the Policy Surplus to determine whether or not a Policy will
terminate if Scheduled Premiums are not paid when due. If the Policy Surplus is
greater than zero for a Policy Year, the Scheduled Premiums may not be required.
If, however, the Policy Surplus for a Policy Year during the Guarantee Period is
zero, all Scheduled Premiums due in that year are required.
Here is how We determine the Policy Surplus.
The Policy Surplus for the first Policy Year is zero.
The Policy Surplus for each subsequent Policy Year is (a) minus (b), but
never less than zero where:
(a) is the Account Value at the end of the previous Policy Year; and
(b) is the Target Account Value for the previous Policy Year. The Target Account
Values are shown in the Policy.
Once determined for a given Policy Year, the Policy Surplus remains constant
for the entire Policy Year.
LAPSE AND GRACE PERIOD
During the Guarantee Period: If, on any given Monthly Activity Date the
Policy Surplus for that Policy Year is zero or less than the Indebtedness, all
Scheduled Premiums due in that Policy Year, on or before that date are required
to keep the Policy in force. For any such required Scheduled Premium not paid on
or before its due date, We will allow a grace period which ends 61 days after
that Monthly Activity Date. During this time the Policy will continue in force.
If any such required Scheduled Premium is not paid by the
<PAGE>
16 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
end of this grace period, the Policy will terminate except as provided under the
non-forfeiture options or unless You have elected the Automatic Premium Loan
Option and there is sufficient Cash Value to cover the amounts due.
After the Guarantee Period: The Policy may terminate 61 days after a Monthly
Activity Date on which the Cash Surrender Value is less than zero. The 61-day
period is the grace period. If sufficient premium is not paid by the end of the
grace period, the Policy will terminate without value. The Company will mail the
Policy Owner and any assignee written notice of the amount of premium that will
be required to continue the Policy in force at least 61 days before the end of
the grace period. The premiums required will be no greater then the amount
required to pay three Monthly Deduction Amounts as of the day the grace period
began. If that premium is not paid by the end of the grace period, the Policy
will terminate.
REINSTATEMENT
Prior to the death of the Insured, and unless the Policy has been
surrendered for cash, the Policy may be reinstated prior to the Maturity Date,
provided:
(a) You make Your request within five years;
(b) satisfactory evidence of insurability is submitted;
(c) You pay all overdue required Scheduled Premiums, if any; and
(d) if, at the time of reinstatement, the Guarantee Period has expired, and, if
the amount paid in is insufficient to reinstate the Policy, sufficient
premium must be paid to:
(i) cover all Monthly Deduction Amounts that are due and unpaid during
the grace period, and
(ii) keep the Policy in force for three months after the date of
reinstatement.
The Face Amount of the reinstated Policy cannot exceed the Face Amount at
the time of lapse. The Account Value on the reinstatement date will reflect:
(a) The Account Value at the time of termination; plus
(b) Net Premiums attributable to premiums paid at the time of reinstatement;
minus
(c) a charge to reflect the benefits, if any, provided under the extended term
or reduced paid-up options.
The Surrender Charges for the reinstated Policy will be the same as they
would have been on the original Policy had no lapse and subsequent reinstatement
taken place.
Upon reinstatement, any Indebtedness at the time of termination must be
repaid or carried over to the reinstated Policy.
AUTOMATIC PREMIUM LOAN OPTION
If You elect this option, We will automatically process a Policy loan to pay
any Scheduled Premium which is due and not paid by the end of its grace period
following the due date. You may elect this option in the application or by
requesting it In Writing while no Scheduled Premium is outstanding beyond its
due date. In most states, Automatic Premium Loans will be treated as Preferred
Loans.
The Automatic Premium Loan Option will not be available if:
(a) You have revoked the election In Writing; or
(b) the loan amount needed to pay any unpaid Scheduled Premium would exceed the
Cash Surrender Value on the most recent Scheduled Premium due date.
In either instance, the surrender/continuation options will apply as of the
end of the grace period.
In most states, if You have outstanding Indebtedness pursuant to this
option, Hartford will allow You to restore the Death Benefit at the end of the
Guarantee Period to the amount that it would have equaled had no Indebtedness
been incurred pursuant to this option. In such case, Hartford will not require
You to provide evidence of insurability. To accomplish this removal of
Indebtedness, Hartford will reduce Your Account Value, and the amount of
Indebtedness outstanding at the end of the Guarantee Period, by the sum of the
Policy loan incurred pursuant to the Automatic Premium Loan Option, plus all
interest accrued thereon. There will be no reduction in the Face Amount of Your
Policy as a result of this adjustment.
If You have outstanding Indebtedness pursuant to the Automatic Premium Loan
Option at the end of the Guarantee Period and You have not previously elected to
restore the Death Benefit at the end of a Guarantee Period as described above,
Hartford will assume that You have elected to restore the Death Benefit at the
end of the Guarantee Period then in effect. Hartford will notify You at least
thirty days prior to the Policy Anniversary occurring at the end of such
Guarantee Period that it will make such adjustment unless You instruct Hartford
not to make this adjustment.
- ---------------------------------------------------
THE RIGHT TO EXAMINE OR EXCHANGE THE POLICY
An applicant has a limited right to return a Policy for cancellation. If the
Policy is returned, by mail or personal delivery to Hartford or to the agent who
sold the Policy, to be canceled within ten days after delivery of the Policy to
the Policy Owner, within 10 days of Hartford's mailing or personal delivery of a
Notice of Right to Withdraw or within 45 days of completion of the Policy
application (whichever is later, and subject to applicable state regulation),
Hartford will return to the applicant, within seven days thereafter, the greater
of the premium paid, less any Indebtedness, or the sum of (1) the Account Value,
less any Indebtedness, on the
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 17
- --------------------------------------------------------------------------------
date the returned Policy is received by Hartford or its agent and (2) any
deductions under the Policy or by the Funds for taxes, charges or fees.
Once the Policy is in effect, it may be exchanged during the first 24 months
after its issuance, for a non-variable life insurance policy offered by Us or an
affiliate on the life of the Insured. No evidence of insurability will be
required. The new policy will have an amount at risk which equals or is less
than the amount ar risk in effect on the date of exchange. Premiums under the
new policy will be based on the same risk classifications as this Policy. An
exchange of the Policy under these circumstances should be a tax-free
transaction under Section 1035 of the Internal Revenue Code.
- ---------------------------------------------------
SURRENDER/CONTINUATION OPTIONS
At any time prior to the Maturity Date, provided the Policy has a Cash
Surrender Value, You may choose to have the Cash Surrender Value applied under
one of the following options:
OPTION A -- Surrender for Cash
OPTION B -- Continue as Extended Term Insurance
OPTION C -- Continue as Paid-Up Insurance
In addition, if during the Guarantee Period:
(a) a Scheduled Premium which is required is not paid by the end of the grace
period; and
(b) the Automatic Premium Loan Option is not elected or not available due to
insufficient Cash Surrender Value,
You may choose one of the above options. You may notify Us of Your choice In
Writing within 61 days after the due date of the outstanding Scheduled Premium.
In the absence of such notification, We will automatically apply the Cash
Surrender Value to option B unless the insurance class shown in your Policy is
"special" in which case the automatic option will be option C. If the Policy has
no Cash Surrender Value, it will terminate at the end of the grace period.
WHEN EFFECTIVE -- The effective date of this benefit will be the earlier of:
(a) the date We receive Your request; or
(b) the end of the grace period.
When a surrender/continuation option becomes effective, all benefit riders
attached to the Policy will terminate unless otherwise provided in the rider.
OPTION DESCRIPTIONS
OPTION A -- Surrender for Cash
If You choose this option, You must surrender the Policy to Us. We will pay
You the Cash Surrender Value at the time of surrender, and Our liability under
the Policy will cease.
OPTION B -- Continue as Extended Term Insurance.
This option is not available unless the insurance class shown in the Policy
is "standard" or "preferred." If you choose this option, the extended term
insurance Death Benefit will be the Death Benefit in effect on the effective
date of the non-forfeiture benefit less any Indebtedness. The term period will
begin on the effective date of this benefit and will extend for a period of time
equal to that which the Cash Surrender Value will provide as a net single
premium at the Insured's then Attained Age. At the end of that term period, Our
liability under the Policy will cease. We will pay You any Cash Surrender Value
not used to provide extended term insurance.
OPTION C -- Continue as Paid-Up Insurance.
If You choose this option, the Policy will continue as paid-up life
insurance. The amount of paid-up life insurance will be calculated using the
Cash Surrender Value of the Policy as a net single premium as of the effective
date of this benefit at the then Attained Age of the Insured. The Company
reserves the right to require evidence of insurability or limit the amount of
the benefit if the paid-up amount exceeds the Death Benefit in effect on the
effective date of this benefit. We will pay You any Cash Surrender Value not
used to provide paid-up insurance.
If the Policy is continued under option B or option C above, the Cash
Surrender Value available within 30 days after any Policy Anniversary will not
be less than the Cash Value on such Policy Anniversary minus any Indebtedness.
- ---------------------------------------------------
VALUATION OF PAYMENTS AND TRANSFERS
We value the Policy on every Valuation Day.
We will pay Death Proceeds, Cash Surrender Values, partial withdrawal
proceeds, and loan amounts attributable to the Sub-Accounts within seven (7)
days after We receive all the information needed to process the payment unless
the New York Stock Exchange is closed for other than a regular holiday or
weekend, trading is restricted by the Securities and Exchange Commission (SEC)
or that the SEC declares that an emergency exists.
<PAGE>
18 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Hartford may defer payment of any amounts not attributable to the
Sub-Accounts for up to six months from the date on which we receive the request.
- ---------------------------------------------------
APPLICATION FOR A POLICY
Individuals wishing to purchase a Policy must submit an application to
Hartford. Within limits, an applicant may choose the Scheduled Premiums and the
initial Face Amount and the Guarantee Period. Policies generally will be issued
only on the lives of Insureds age 80 and under who supply evidence of
insurability satisfactory to Hartford. Acceptance is subject to Hartford's
underwriting rules and Hartford reserves the right to reject an application for
any reason. No change in the terms or conditions of a Policy will be made
without the consent of the Policy Owner.
The Policy will be effective on the Policy Date only after Hartford has
received all outstanding delivery requirements and received the initial premium.
The Policy Date is the date used to determine all future cyclical transactions
on the Policy, e.g., Monthly Activity Date and Policy Years.
REDUCED CHARGES FOR ELIGIBLE GROUPS
Certain of the charges and deductions described below may be reduced for
Policies issued in connection with a specific plan in accordance with Our rules
in effect as of the date an application for a Policy is approved. To qualify for
such a reduction, a plan must satisfy certain criteria as to, for example, size
of the plan, expected number of participants and anticipated premium payment
from the plan. Generally, the sales contacts and effort, administrative costs
and mortality cost per Policy vary based on such factors as the size of the
plan, the purposes for which Policies are purchased and certain characteristics
for the plan's members. The amount of reduction and the criteria for
qualification will reflect in the reduced sales effort and administrative costs
resulting from, and the different mortality experience expected as a result of,
sales to qualifying plans. We may modify from time to time on a uniform basis
both the amounts of reductions and the criteria for qualification. Reductions in
these charges will not be unfairly discriminatory against any person, including
the affected Policy Owners invested in the Separate Account.
- ---------------------------------------------------
DEDUCTIONS FROM THE PREMIUM
Before the allocation of the premium payment to the Account Value, a
deduction as a percentage of premium is made for the front-end sales load and
premium taxes. The amount of each premium allocated to the Account Value is Your
Net Premium.
FRONT END SALES LOAD
The front-end sales load portion of the premium deduction is based on the
level of Scheduled Premiums, the length of the Guarantee Period, and the amount
of any Unscheduled Premiums paid.
The maximum front-end sales load percentages for Policies are 50% of the
premiums paid in the first Policy Year, 11% in Policy Years 2 through 10, and 3%
in Policy Years 11 and later.
For all Guarantee Periods, the maximum amount of premium paid in any Policy
Year that is subject to a front-end sales load is the Guideline Annual Premium.
In addition, if Scheduled Premiums are less than the Guideline Annual Premiums,
the maximum amount of premium paid in the first Policy Year subject to a
front-end sales load is the Scheduled Premium.
The actual schedule of front-end sales loads for any given Policy is
specified in that Policy.
Generally, the shorter the Guarantee Period, the lower the front-end sales
loads. The levels range from those for the ten-year Guarantee Period cited above
to 0% on a contract with a One Year Guarantee Period. However, there are other
contractual charges that are lower for longer Guarantee Periods. See "Summary --
Guarantee Period," page 7, for a further description.
For an example of the effect of Front-End Sales Loads, see "-- Deductions
and Charges from the Account Value -- Examples of Front-End Sales Loads and
Surrender Charges," page 20.
PREMIUM RELATED TAX CHARGE
We deduct a percentage of each premium to cover premium-based taxes assessed
against Hartford by a state or other governmental entity. This percentage will
vary by locale depending on the tax rates in effect there. The range is
generally between 0% and 4%.
- ---------------------------------------------------
DEDUCTIONS AND CHARGES FROM
THE ACCOUNT VALUE
MONTHLY DEDUCTION AMOUNTS
On the Policy Date and on each subsequent Monthly Activity Date, Hartford
will deduct an amount (the "Monthly Deduction Amount") from the Account Value to
cover certain charges and expenses incurred in connection with a Policy. Each
Monthly Deduction Amount will be deducted on a Pro Rata Basis from the Fixed
Account and each of the Sub-Accounts. The Monthly Deduction Amount will vary
from month to month.
The Monthly Deduction Amount equals:
(a) the charge for the cost of insurance; plus
(b) the charges for additional benefits provided by rider, if any; plus
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 19
- --------------------------------------------------------------------------------
(c) the charges for "special" insurance class rating, if any; plus
(d) the monthly administrative fee; plus
(e) the mortality and expense risk charge
(a)COST OF INSURANCE CHARGE
The charge for the cost of insurance is equal to:
(i) the cost of insurance rate per $1,000; multiplied by
(ii) the amount at risk; divided by
(iii) $1,000
The amount at risk equals the Death Benefit less the Account Value on that
date, prior to assessing the Monthly Deduction Amount.
The cost of insurance charge is to cover Hartford's anticipated mortality
costs. For standard risks, the cost of insurance rate will not exceed those
based on the 1980 Commissioners Standard Ordinary Mortality Table. A table
of guaranteed cost of insurance rates per $1,000 will be included in each
Policy; however, Hartford reserves the right to use rates less than those
shown in the table. Substandard risks will be charged a higher cost of
insurance rate that will not exceed rates based on a multiple of the 1980
Commissioners Standard Ordinary Mortality Table. The multiple will be based
on the Insured's risk class. Hartford will determine the cost of insurance
rate at the start of each Policy Year. Any changes in the cost of insurance
rate will be made uniformly for all Insureds in the same risk class.
Because the Account Value and the Death Benefit Amount under a Policy may
vary from month to month, the cost of insurance charge may also vary on each
Monthly Activity Date.
(b)RIDER CHARGE
If the Policy includes riders, a charge is made applicable to the riders
from the Account Value on each Monthly Activity Date.
The charge applicable to these riders is to compensate Hartford for
anticipated cost of providing these benefits and are specified on the
applicable rider.
The riders available are described on page 29 under "Supplemental
Benefits" section.
(c)SPECIAL CLASS CHARGE
A charge for a special insurance class rating of the Insured may be made
against the Account Value, if applicable. This charge is to compensate
Hartford for the additional mortality risk associated with individuals in
these classes.
(d)MONTHLY ADMINISTRATIVE FEE AND OTHER EXPENSE CHARGES
AGAINST SUB-ACCOUNTS
Hartford will assess a monthly administrative charge to compensate
Hartford for administrative costs in connection with the Policies. This
charge will be $8.33 per month initially and is guaranteed never to exceed
that level during the Guarantee Period. After the Guarantee Period, this
charge is guaranteed never to exceed $12.00 per month. This charge covers
the average expected cost for these expenses.
In addition, in the first Policy Year, there is a monthly first year
charge to compensate Hartford for the up-front costs to underwrite and issue
a policy. This additional first year charge, subject to certain maximums, is
equal to $8.33 per month plus an amount that varies by issue age and the
initial Face Amount (IFA). This additional first Policy Year charge and the
maximums are summarized in the chart below for some sample ages.
<TABLE>
<CAPTION>
MAXIMUM MONTHLY
ISSUE AGE ADDITIONAL FIRST YEAR MONTHLY CHARGE AMOUNT
- --------- ---------------------------------------- ---------------
<C> <S> <C>
25 $8.33 plus $.0333 per $1,000 of IFA $ 50.00
35 $8.33 plus $.0375 per $1,000 of IFA $ 54.17
45 $8.33 plus $.0417 per $1,000 of IFA $ 62.50
55 $8.33 plus $.0625 per $1,000 of IFA $ 62.50
65 $8.33 plus $.0708 per $1,000 of IFA $ 62.50
</TABLE>
(e)MORTALITY AND EXPENSE RISK CHARGE
A charge is made for mortality and expense risks assumed by Hartford. This
charge is allocated to Hartford's general account. Hartford may profit from
this charge. See, also, "-- Cash Values," page 12.
The mortality and expense risk charge for any Monthly Activity Date is
equal to:
(i) the mortality and expense risk rate; multiplied by
(ii) the portion of the Account Value allocated to the Sub-Account on the
Monthly Activity Date prior to assessing the Monthly Deduction Amount.
During the first twenty Policy Years, the longer the Guarantee Period, the
lower the mortality and expense risk charge rate. Specifically, for Policy
Years one through twenty, the mortality and expense risk charge rate ranges
from 1.40% annually for a Policy with a one-year Guarantee Period, and
decreases as the length of the Guarantee Period increases, to .60% on a
Policy with a ten-year Guarantee Period. After the twentieth Policy Year, it
is expected that the mortality and expense risk charge rate for all Policies
will equal .60% annually. However, Hartford reserves the right to continue
the mortality and expense risk charge rate at the level in effect during
Policy Years one through twenty, except for Policies with a one year
Guarantee Period, for which Hartford reserves the right to charge a
mortality and expense risk rate charge of .90%. There are other contractual
charges that are higher for longer
<PAGE>
20 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Guarantee Periods. See "Summary -- Guarantee Period," page 7, for a fuller
description.
The mortality risk assumed is that the actual cost of insurance charges
specified in the Policy will be insufficient to meet actual claims. Hartford
also assumes the risk of the Death Benefit Guarantee during the Guarantee
Period. See "-- Death Benefit -- Death Benefit Guarantee," page 14. The
expense risk assumed is that expenses incurred in issuing and administering
the Policies will exceed the administrative charges set in the Policy.
For Policies with a one-year Guarantee Period, Hartford also incurs an
expense risk that the costs associated with distributing the Policies will
be greater than the proceeds from any sales charges deducted under the
Policies.
SURRENDER CHARGES
A Surrender Charge is assessed against the Account Value of a Policy if the
Policy lapses or is surrendered during the first nine Policy Years. The amount
of the Surrender Charge applicable during the first Policy Year is established
by Hartford based on the premiums paid during the first Policy Year and the
length of the Guarantee Period chosen by the Policy Owner. Subject to certain
limits imposed by state insurance law, the Surrender Charge decreases by an
equal amount each Policy Year until it reaches zero during the tenth Policy
Year.
Specifically, the maximum first year Surrender Charge under a Policy is
equal to the sum of (i) a specified percentage of the Scheduled Premium up to
the Guideline Annual Premium and (ii) 5% of the excess, of the first year
premium over the Guideline Annual Premium. The longer the Guarantee Period, the
higher the percentage is which is used in the preceding calculation. This
percentage is equal to 110% with respect to Policies with a ten-year Guarantee
Period and decreases as the Guarantee Period chosen decreases to 10% for
Policies with a one-year Guarantee Period. However, there are other contractual
charges that are lower for longer Guarantee Periods. See "Summary -- Guarantee
Period," page 7, for a fuller description.
The actual schedule of Surrender Charges for any given Policy is set forth
in that Policy. In addition, sales agents will provide, upon request, the
schedule of Surrender Charges which would apply under any given circumstances.
Generally, the total sales load under the Policy will not exceed 180% of the
Guideline Annual Premium, or 9% of the sum of the Guideline Annual Premium that
would be paid over a 20-year period. In cases where the anticipated life
expectancy of the Insured named in the Policy is less than 20 years, the total
sales load will not exceed 9% of the sum of the Guideline Annual Premiums for
the shorter period.
For an example of the effect of Surrender Charges, see "-- Examples of
Front-End Sales Loads and Surrender Charges," below.
EXAMPLES OF FRONT-END SALES LOADS AND SURRENDER CHARGES
An example of the actual front-end sales loads and Surrender Charge schedule
as well as and the impact of the sales load refund, if any (see "-- Cash Values
- -- Load Refund," page 12), for a Policy with a ten-year Guarantee Period is
shown below. This example uses the same specific information (i.e., Issue Age,
Face Amount, premium level, etc.) as the illustration on page 21 of this
Prospectus.
<TABLE>
<S> <C>
Death Benefit Option: Level
Face Amount: $250,000
Guarantee Period: 10 years
Charges Assumed: Current
Issue Age/Sex/Class: 45/Male/Preferred
Scheduled Premium: $4,000.00 per year
Guideline Annual Premium: $4,819.38
Assumed Gross Annual Investment Return: 0%
</TABLE>
The "Total Cumulative Sales Load If Surrendered" column on the far right
represents the sum of all loads which would have been assessed since the issue
of the Policy assuming a surrender of the Policy at the end of the corresponding
Policy Year.
This is:
a) The sum of the Cumulative Front-End Sales Load, plus
b) The actual Surrender Charge for that Policy Year, minus
c) The Sales Load Refund, if any, applicable to that Policy year. (See " --
Cash Values -- Load Refund," page 12.)
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 21
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Additional Charges/Credits if Surrendered -- Ten Year Guarantee Period
<TABLE>
<CAPTION>
SURRENDER CHARGES
- ---------------------------------------------------------------------------------------
CUMULATIVE TOTAL
FRONT-END MAXIMUM YEAR END ACTUAL SALES CUMULATIVE
POLICY SALES SURRENDER ACCOUNT SURRENDER LOAD SALES LOAD IF
YEAR LOAD CHARGE VALUE CHARGE REFUND SURRENDERED**
- ---------- ----------- ----------- --------- ----------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
1 2,000 4,400 1,232 1,232 2,032 1,200
2 2,440 3,911 4,074 3,911 4,590 1,791
3 2,880 3,422 6,764 3,422 0 6,302
4 3,320 2,933 9,345 2,933 0 6,253
5 3,760 2,444 11,843 2,444 0 6,204
6 4,200 1,956 14,274 1,956 0 6,156
7 4,640 1,467 16,645 1,467 0 6,107
8 5,080 978 18,971 978 0 6,058
9 5,520 489 21,246 489 0 6,009
10 5,960 0 23,456 0 0 5,960
11 6,080 0 25,850 0 0 6,080
</TABLE>
* The Actual Surrender Charge assessed is the smaller of:
a) The contractual maximum surrender charge, or
b) Policy Year-End Account Value.
**Assumes a surrender of the Policy at the end of that Policy Year.
An example of the actual Front-End Sales Loads and Surrender Charge schedule
as well as the impact of the sales load refund, if any (see "-- Cash Values --
Load Refund," page 12), for a Policy with a one-year Guarantee Period is shown
below. This example uses the same specific information (i.e., Issue Age, Face
Amount, premium level) as the illustration on page 20 of this Prospectus.
<TABLE>
<S> <C>
Death Benefit Option: Level
Face Amount: $250,000
Guarantee Period: 1 Year
Charges Assumed: Current
Issue Age/Sex/Class: 45/Male/Preferred
Scheduled Premium: $4,000.00 per year
Guideline Annual Premium: $4,819.38
Assumed Hypothetical Gross Annual Investment
Return: 0%
</TABLE>
The "Total Cumulative Sales Load If Surrendered" column on the far right
represents the sum of all loads which would have been assessed since the issue
of the Policy assuming a surrender of the Policy at the end of the corresponding
Policy Year.
This is:
a) The sum of the Cumulative Front-End Sales Load, plus
b) The Actual Surrender Charge for that Policy Year, minus
c) The Sales Load Refund, if any, applicable to that Policy Year. (See "-- Cash
Values -- Load Refund," page 12.)
<PAGE>
22 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Additional Charges/Credits if Surrendered -- One Year Guarantee Period
<TABLE>
<CAPTION>
SURRENDER CHARGES
-----------------------------------------------------------------------------
CUMULATIVE TOTAL
FRONT-END MAXIMUM YEAR END ACTUAL SALES CUMULATIVE
SALES SURRENDER ACCOUNT SURRENDER LOAD SALES LOAD IF
POLICY YEAR LOAD CHARGE VALUE CHARGE REFUND SURRENDERED**
---------------------- --------- -------- --------- ------ -------------
<S> <C> <C> <C> <C> <C> <C>
1 0 400 3,169 400 0 400
2 0 355 6,361 355 0 355
3 0 311 9,381 311 0 311
4 0 267 12,273 267 0 267
5 0 222 15,067 222 0 222
6 0 178 17,780 178 0 178
7 0 133 20,422 133 0 133
8 0 89 23,008 89 0 89
9 0 44 25,529 44 0 44
10 0 0 27,976 0 0 0
11 0 0 30,273 0 0 0
</TABLE>
* The Actual Surrender Charge assessed is the smaller of:
a) The contractual maximum surrender charge, or
b) Policy Year-End Account Value.
**Assumes a surrender of the Policy at the end of that Policy Year.
CHARGES AGAINST THE FUNDS
The investment advisers charge the Funds a daily investment management fee
as compensation for services. The following Table shows the fee charged for each
Fund available for investment by Policy Owners.
<TABLE>
<CAPTION>
ANNUAL INVESTMENT MANAGEMENT AS A
HARTFORD FUNDS PERCENTAGE OF AVERAGE DAILY NET ASSETS
- -------------------------------------------------------------------------- --------------------------------------------------------
<S> <C>
Hartford Capital Appreciation Fund, Inc.,
Hartford Advisers Fund, Inc.,
Hartford International Opportunities Fund, Inc.,
Hartford Dividend and Growth Fund, Inc.................................. .575% of the first $250 million of average net assets
.525% of the next $250 million of average net assets
.475% of the next $250 million of average net assets
.425% of any amount over $1.0 billion
Hartford Bond Fund, Inc.
Hartford Stock Fund, Inc................................................ .325% of the first $250 million of average net assets
.300% of the next $250 million of average net assets
.275% of the next $250 million of average net assets
.250% of any amount over $1.0 billion
Hartford Index Fund, Inc.................................................. .20% of average net assets
Hartford Mortgage Securities Fund, Inc.
HVA Money Market Fund, Inc.............................................. .25% of average net assets
</TABLE>
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 23
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL INVESTMENT MANAGEMENT AS A
PUTNAM FUNDS PERCENTAGE OF AVERAGE DAILY NET ASSETS
- -------------------------------------------------------------------------- --------------------------------------------------------
Putnam VT Diversified Income Fund,
Putnam VT Global Asset Allocation Fund,
Putnam VT High Yield Fund,
Putnam VT New Opportunities Fund,
Putnam VT Utilities Growth and Income Fund
Putnam VT Voyager Fund.................................................. .70% of the first $500 million of average net assets
.60% of the next $500 million of average net assets
.55% of the next $500 million of average net assets
.50% of the next $5 billion of average net assets
.475% of the next $5 billion of average net assets
.44% of the next $5 billion of average net assets
.43% of any excess thereafter
<S> <C>
Putnam VT Money Market Fund............................................... .45% of the first $500 million of average net assets
.35% of the next $500 million of average net assets
.30% of the next $500 million of average net assets
.25% of the next $5 billion of average net assets
.225% of the next $5 billion of average net assets
.205% of the next $5 billion of average net assets
.19% of the next $5 billion of average net assets
.18% of any excess thereafter
Putnam VT Growth and Income Fund Putnam VT U.S. Government and High
Quality Bond Fund....................................................... .65% of the first $500 million of average net assets
.55% of the next $500 million of average net assets
.50% of the next $500 million of average net assets
.45% of the next $5 billion of average net assets
.425% of the next $5 billion of average net assets
.405% of the next $5 billion of average net assets
.39% of the next $5 billion of average net assets
.38% of any excess thereafter
Putnam VT Global Growth Fund.............................................. .60% of average net assets
<CAPTION>
ANNUAL INVESTMENT MANAGEMENT AS A
FIDELITY FUNDS PERCENTAGE OF AVERAGE DAILY NET ASSETS
- -------------------------------------------------------------------------- --------------------------------------------------------
<S> <C>
VIP Equity-Income Portfolio............................................... .52%
VIP Overseas Portfolio.................................................... .77%
VIP II Asset Manager Portfolio............................................ .72%
</TABLE>
TAXES
Currently, no charge is made to the Separate Account for federal, state, and
local taxes that may be attributable to the Separate Account. A change in the
applicable federal, state or local tax laws which impose tax on Hartford and/or
the Separate Account may result in a charge against the Policy in the future.
Charges for other taxes, if any, attributable to the Separate Account may also
be made.
- ---------------------------------------------------
THE COMPANY
ITT Hartford Life and Annuity Insurance Company ("Hartford") is a stock life
insurance company engaged in the business of writing life insurance and
annuities, both individual and group, in all states of the United States and the
District of Columbia, except New York. On January 1, 1998, Hartfords name will
change to Hartford Life and Annuity Insurance Company. Hartford was originally
incorporated under the laws of Wisconsin on January 9, 1956, and was
subsequently redomiciled to Connecticut. Its offices are located in Simsbury,
Connecticut; however, its mailing address is P.O. Box 2999, Hartford, CT
06104-2999. Hartford is a subsidiary of Hartford Fire Insurance Company, one of
the largest multiple lines insurance carriers in the United States. Hartford is
ultimately owned by ITT Hartford Group, Inc., a Delaware corporation. Subject to
shareholder approval on May 2, 1997, the name of ITT Hartford Group, Inc. will
change to The Hartford Financial Services Group, Inc.
Hartford is rated A+ (superior) by A.M. Best and Company, Inc., on the basis
of its financial soundness and operating performance. Hartford is rated AA by
Standard & Poor's and AA+ by Duff and Phelps on the basis of its claims paying
ability. These ratings do not apply to the investment performance of the
Sub-Accounts of the Separate Account. The ratings apply to Hartfords ability to
meet its insurance obligations, including those described in this Prospectus.
<PAGE>
24 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- ---------------------------------------------------
SEPARATE ACCOUNT VL I
- -------------------------------- GENERAL
The Separate Account is a separate account of Hartford established on June
8, 1995 pursuant to the insurance laws of the State of Connecticut and organized
as a unit investment trust registered with the Securities and Exchange
Commission under the Investment Company Act of 1940. Under Connecticut law, the
assets of the Separate Account are held exclusively for the benefit of Policy
Owners and persons entitled to payments under the Policies. The assets for the
Separate Account are not chargeable with liabilities arising out of any other
business which Hartford may conduct.
- ---------------------------------------------------
FUNDS
The assets of each Sub-Account of the Separate Account are invested
exclusively in one of the Funds. A Policy Owner may allocate Net Premiums among
the Sub-Accounts. Policy Owners should review the following brief descriptions
of the investment objectives of each of the Funds in connection with that
allocation. There is no assurance that any Fund will achieve its stated
objectives. Policy Owners are also advised to read the prospectus for each of
the Funds accompanying this Prospectus for more detailed information.
HARTFORD FUNDS
HARTFORD ADVISERS FUND, INC.
Seeks maximum long term total rate of return consistent with prudent
investment risk by investing in common stock and other equity securities, bonds
and other debt securities, and money market instruments.
HARTFORD BOND FUND, INC.
Seeks maximum current income consistent with preservation of capital by
investing primarily in fixed-income securities. Up to 20% of the total assets of
this Fund may be invested in debt securities rated in the highest category below
investment grade ("Ba" by Moody's Investor Services, Inc. or "BB" by Standard &
Poor's) or, if unrated, are determined to be of comparable quality by the Fund's
investment adviser. Securities rated below investment grade are commonly
referred to as "high yield-high risk securities" or "junk bonds." For more
information concerning the risks associated with investing in such securities,
please refer to the section entitled "Hartford Bond Fund, Inc. -- Investment
Policies" in the prospectus for the Hartford Funds accompanying this Prospectus.
HARTFORD CAPITAL APPRECIATION FUND, INC.
Seeks growth of capital by investing in securities selected solely on the
basis of potential for capital appreciation; income, if any, is an incidental
consideration.
HARTFORD DIVIDEND AND GROWTH FUND, INC.
Seeks a high level of current income consistent with growth of capital and
reasonable investment risk.
HARTFORD INDEX FUND, INC.
Seeks to provide investment results which approximate the price and yield
performance of publicly-traded common stocks in the aggregate, as represented by
the Standard & Poor's 500 Composite Stock Price Index.*
HARTFORD INTERNATIONAL OPPORTUNITIES FUND, INC.
Seeks long-term total rate of return consistent with prudent investment risk
through investment primarily in equity securities issued by non-U.S. companies.
HARTFORD MORTGAGE SECURITIES FUND, INC.
Seeks maximum current income consistent with safety of principal and
maintenance of liquidity by investing primarily in mortgage-related securities,
including securities issued by the Government National Mortgage Association.
HARTFORD STOCK FUND, INC.
Seeks long-term capital growth primarily through capital appreciation, with
income a secondary consideration, by investing primarily in equity securities.
HVA MONEY MARKET FUND, INC.
Seeks maximum current income consistent with liquidity and preservation of
capital.
PUTNAM FUNDS
PUTNAM VT DIVERSIFIED INCOME FUND
Seeks high current income consistent with capital preservation by investing
in the following three sectors of the fixed income securities markets: a U.S.
Government Sector, a High Yield Sector (which invests primarily in securities
commonly known as "junk bonds"), and an International Sector. See the special
considerations for investments in high yield securities described in the Fund
prospectus.
PUTNAM VT GLOBAL ASSET ALLOCATION FUND
Seeks a high level of long-term total return consistent with preservation of
capital by investing in U.S. equities, international equities, U.S. fixed income
securities, and international fixed income securities.
* "STANDARD & POOR'S-REGISTERED TRADEMARK-", "S&P-REGISTERED TRADEMARK-", "S&P
500-REGISTERED TRADEMARK-", "STANDARD & POOR'S 500", AND "500" ARE TRADEMARKS
OF THE MCGRAW-HILL COMPANIES, INC. AND HAVE BEEN LICENSED FOR USE BY HARTFORD
LIFE INSURANCE COMPANY. THE HARTFORD INDEX FUND, INC. ("INDEX FUND") IS NOT
SPONSORED, ENDORSED, SOLD OR PROMOTED BY STANDARD & POOR'S AND STANDARD &
POOR'S MAKES NO REPRESENTATION REGARDING THE ADVISABILITY OF INVESTING IN THE
INDEX FUND.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 25
- --------------------------------------------------------------------------------
PUTNAM VT GLOBAL GROWTH FUND
Seeks capital appreciation through a globally diversified portfolio of
common stocks.
PUTNAM VT GROWTH AND INCOME FUND
Seeks capital growth and current income by investing primarily in common
stocks that offer potential for capital growth, current income, or both.
PUTNAM VT HIGH YIELD FUND
Seeks high current income and, when consistent with this objective, a
secondary objective of capital growth, by investing primarily in high-yielding,
lower-rated fixed income securities constituting a diversified portfolio which
Putnam Management believes does not involve undue risk to income or principal.
See the special considerations for investments in high yield securities
described in the Fund prospectus.
PUTNAM VT MONEY MARKET FUND
Seeks as high a rate of current income as Putnam Management believes is
consistent with preservation of capital and maintenance of liquidity by
investing in high-quality money market instruments.
PUTNAM VT NEW OPPORTUNITIES FUND
Seeks long-term capital appreciation by investing principally in common
stocks of companies in sectors of the economy which Putnam Management believes
possess above-average long-term growth potential.
PUTNAM VT U.S. GOVERNMENT AND HIGH QUALITY BOND FUND
Seeks current income consistent with preservation of capital by investing
primarily in securities issued or guaranteed as to principal and interest by the
U.S. Government or by its agencies or instrumentalities and in other debt
obligations rated at least A by a nationally recognized securities rating agency
such as Standard & Poor's or Moody's Investors Service, Inc. or, if not rated,
determined by Putnam Management to be of comparable quality.
PUTNAM VT UTILITIES GROWTH AND INCOME FUND
Seeks capital growth and current income by concentrating its investments in
debt and equity securities issued by companies in the public utilities
industries.
PUTNAM VT VOYAGER FUND
Seeks capital appreciation by investing primarily in common stocks of
companies that Putnam Management believes have potential for capital
appreciation that is significantly greater than that of market averages.
FIDELITY VIP FUNDS
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Seeks reasonable income by investing primarily in income-producing equity
securities. In choosing these securities, the Portfolio will also consider the
potential for capital appreciation. The Portfolio's goal is to achieve a yield
which exceeds the composite yield on the securities comprising the Standard &
Poor's Daily Stock Price Index of 500 Common Stocks.
In addition, the Portfolio may invest in high yield, lower-rated securities
(commonly referred to as "junk bonds") which are subject to greater risk than
investments in higher-rated securities. For a further discussion of lower-rated
securities, see "Risks of Lower-Rated Debt Securities" in the Fidelity
prospectus for this Portfolio.
FIDELITY VIP OVERSEAS PORTFOLIO
Seeks long-term growth of capital primarily through investments in foreign
securities and provides a means for aggressive investors to diversify their own
portfolios by participating in companies and economies outside of the United
States.
In addition, the Portfolio may invest in high yield, lower-rated securities
(commonly referred to as "junk bonds") which are subject to greater risk than
investments in higher-rated securities. For a further discussion of lower-rated
securities, see "Risks of Lower-Rated Debt Securities" in the Fidelity
prospectus for this Portfolio.
FIDELITY VIP II ASSET MANAGER PORTFOLIO
Seeks high total return with reduced risk over the long-term by allocating
its assets among stocks, bonds and short-term fixed-income instruments.
In addition, the Portfolio may invest in high yield, lower-rated securities
(commonly referred to as "junk bonds") which are subject to greater risk than
investments in higher-rated securities. For a further discussion of lower-rated
securities, see "Risks of Lower-Rated Debt Securities" in the Fidelity
prospectus for this Portfolio.
The Hartford Funds are organized as corporations under the laws of the State
of Maryland and are registered as diversified open-end management companies
under the Investment Company Act of 1940. The Putnam Funds are portfolios of the
Putnam Variable Trust, which is organized as a business trust under the laws of
Massachusetts and is an open-end series investment company under the Investment
Company Act of 1940. The Fidelity VIP Funds are a series of two diversified
open-end management investment companies, each with multiple portfolios and
organized as a Massachusetts business trust. The VIP Equity-Income Portfolio and
VIP Overseas Portfolio are portfolios of the Variable Insurance Products Fund.
The VIP II Asset Manager Portfolio is a portfolio of the Variable Insurance
<PAGE>
26 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Products Fund II. Each Fund continually issues an unlimited number of full and
fractional shares of beneficial interest in the Fund. Such shares are offered to
separate accounts, including the Separate Account, established by Hartford or
one of its affiliated companies specifically to fund the Policies and other
policies issued by Hartford or its affiliates as permitted by the Investment
Company Act of 1940.
It is conceivable that in the future it may be disadvantageous for variable
life insurance separate accounts and variable annuity separate accounts to
invest in the Funds simultaneously. Although neither Hartford nor the Funds
currently foresee any such disadvantages either to variable life insurance
policy owners or to variable annuity policy owners, the Board of Directors
intend for the Hartford Funds and the Board of Trustees for the Putnam Funds,
and the Board of Trustees for the Fidelity VIP Funds (collectively the "Board")
to monitor events in order to identify any material conflicts between such
Policy Owners and to determine what action, if any, should be taken in response
thereto. If the Boards were to conclude that separate funds should be
established for variable life and variable life insurance separate accounts,
Hartford will bear the attendant expenses.
All investment income of and other distributions to each Sub-Account of the
Separate Account arising from the applicable Fund are reinvested in shares of
that Fund at net asset value. The income and both realized gains or losses on
the assets of each Sub-Account of the Separate Account are therefore separate
and are credited to or charged against the Sub-Account without regard to income,
gains or losses from any other Sub-Account or from any other business of
Hartford. Hartford will purchase shares in the Funds in connection with premium
payments allocated to the applicable Sub-Account in accordance with Policy
Owners directions and will redeem shares in the Funds to meet Policy obligations
or make adjustments in reserves, if any. The Funds are required to redeem Fund
shares at net asset value and generally to make payment within seven days.
Hartford reserves the right, subject to compliance with the law as then in
effect, to make additions to, deletions from, or substitutions for the Separate
Account and its Sub-Accounts which fund the Policies. If shares of any of the
Funds should no longer be available for investment, or if, in the judgment of
Hartford's management, further investment in shares of any Fund should become
inappropriate in view of the purposes of the Policies, Hartford may substitute
shares of another Fund for shares already purchased, or to be purchased in the
future, under the Policies. No substitution of securities will take place
without notice to and consent of Policy Owners and without prior approval of the
Securities and Exchange Commission to the extent required by the Investment
Company Act of 1940. Subject to Policy Owner approval, if required, Hartford
also reserves the right to end the registration under the Investment Company Act
of 1940 of the Separate Account or any other separate accounts of which it is
the depositor which may fund the Policies.
Each Fund is subject to certain investment restrictions which may not be
changed without the approval of a majority of the shareholders of the Fund. See
the prospectus for each of the Funds accompanying this Prospectus.
- ---------------------------------------------------
INVESTMENT ADVISER
HARTFORD FUNDS
The investment adviser for each of the Hartford Funds is HL Investment
Advisors, Inc. ("HL Advisors"), Hartford Plaza, Hartford, Connecticut 06115. HL
Advisors provides investment advice and, in general, supervises the management
and investment program of the Hartford Funds pursuant to an Investment Advisory
Agreement entered into with each of these Funds, for which HL Advisors receives
a fee.
HL Advisors has entered into an investment services agreement with HIMCO, an
affiliate of Hartford organized under Connecticut law, pursuant to which HIMCO
provides certain investment services to Hartford Bond Fund, Hartford Index Fund,
Hartford Mortgage Securities Fund and HVA Money Market Fund.
Wellington Management serves as the investment sub-adviser to Hartford
Advisers Fund, Hartford Capital Appreciation Fund, Hartford Dividend and Growth
Fund, Hartford International Opportunities Fund and Hartford Stock Fund.
Wellington Management is a professional investment counseling firm which
provides investment services to investment companies, other institutions and
individuals. Wellington Management is organized as a private Massachusetts
partnership and its predecessor organizations have provided investment advisory
services to investment companies since 1933 and to investment counseling clients
since 1960. See the prospectus for each of the Hartford Funds accompanying this
Prospectus for a more complete description of HL Investment, HIMCO and
Wellington Management, and their respective fees.
PUTNAM FUNDS
Putnam Management, One Post Office Square, Boston, Massachusetts, 02109,
serves as the investment manager for the Putnam Funds. An affiliate, Putnam
Advisory Company, Inc., manages domestic and foreign institutional accounts and
mutual funds. Another affiliate, Putnam Fiduciary Trust Company, provides
investment advice to institutional clients under its banking and fiduciary
policies. Putnam Management and its affiliates are wholly-owned subsidiaries of
Marsh & McLennan Companies, Inc., a publicly owned holding company whose
principal businesses are international insurance brokerage and employee benefit
consulting.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 27
- --------------------------------------------------------------------------------
FIDELITY VIP FUNDS
The Fidelity VIP Funds are managed by Fidelity Management & Research Company
("Fidelity Management"), whose principal business address is 82 Devonshire
Street, Boston, Massachusetts. Fidelity Management is one of America's largest
investment management organizations. It is composed of a number of different
companies, which provide a variety of financial services and products. Fidelity
Management is the original Fidelity company, founded in 1946. It provides a
number of mutual funds and other clients with investment research and portfolio
management services. Various Fidelity companies perform certain activities
required to operate Variable Insurance Products Fund and Variable Insurance
Products Fund I.
- ---------------------------------------------------
THE FIXED ACCOUNT
THAT PORTION OF THE POLICY RELATING TO THE FIXED ACCOUNT IS NOT REGISTERED
UNDER THE SECURITIES ACT OF 1933 ("1933 ACT") AND THE FIXED ACCOUNT IS NOT
REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940
("1940 ACT"). ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTERESTS THEREIN
ARE SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT,
AND THE DISCLOSURE REGARDING THE FIXED ACCOUNT HAS NOT BEEN REVIEWED BY THE
STAFF OF THE SECURITIES AND EXCHANGE COMMISSION. THE FOLLOWING DISCLOSURE ABOUT
THE FIXED ACCOUNT MAY BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF
THE FEDERAL SECURITIES LAWS REGARDING THE ACCURACY AND COMPLETENESS OF
DISCLOSURE.
Premium payments and Cash Values allocated to the Fixed Account become a
part of the general assets of Hartford. Hartford invests the assets of the
general account in accordance with applicable law governing the investments of
insurance company general accounts.
The Fixed Account Minimum Credited Rate is shown in the Policy. Currently,
Hartford guarantees that it will credit interest at a rate of not less than 4%
per year, compounded annually, to amounts allocated to the Fixed Account under
the Policies. Hartford may credit interest at a rate in excess of the Fixed
Account Minimum Credited Rate, however, Hartford is not obligated to credit any
interest in excess of the Fixed Account Minimum Credited Rate. There is no
specific formula for the determination of excess interest credits. Some of the
factors that the Company may consider in determining whether to credit excess
interest to amounts allocated to the Fixed Account and the amount thereof, are
general economic trends, rates of return currently available and anticipated on
the Company's investments, regulatory and tax requirements and competitive
factors. ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN
EXCESS OF THE FIXED ACCOUNT MINIMUM CREDITED RATE WILL BE DETERMINED IN THE SOLE
DISCRETION OF THE COMPANY. THE POLICY OWNER ASSUMES THE RISK THAT INTEREST
CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE FIXED ACCOUNT MINIMUM
CREDITED RATE.
- ---------------------------------------------------
OTHER MATTERS
- -------------------------------- VOTING RIGHTS
In accordance with its view of presently applicable law, Hartford will vote
the shares of the Funds at regular and special meetings of the shareholders of
the Funds in accordance with instructions from Policy Owners (or the assignee of
the Policy, as the case may be) having a voting interest in the Separate
Account. The number of shares held in the Separate Account which are
attributable to each Policy Owner is determined by dividing the Policy Owner's
interest in each Sub-Account by the net asset value of the applicable shares of
the Funds. Hartford will vote shares for which no instructions have been given
and shares which are not attributable to Policy Owners (i.e., shares owned by
Hartford) in the same proportion as it votes shares for which it has received
instructions. If the Investment Company Act of 1940 or any rule promulgated
thereunder should be amended, however, or if Hartford's present interpretation
should change and, as a result, Hartford determines it is permitted to vote the
shares of the Funds in its own right, it may elect to do so.
The voting interests of the Policy Owner (or the assignee) in the Funds will
be determined as follows: Policy Owners may cast one vote for each full or
fractional Accumulation Unit owned under the Policy and allocated to a
Sub-Account the assets of which are invested in the particular Fund on the
record date for the shareholder meeting for that Fund. If, however, a Policy
Owner has taken a loan secured by the Policy, amounts transferred from the Sub-
Account(s) to the Loan Account(s) in connection with the Indebtedness (see
"Detailed Description of Policy Benefits and Provisions -- Policy Loans," page
13) will not be considered in determining the voting interests of the Policy
Owner. Policy Owners should review the prospectuses for the Funds which
accompany this Prospectus to determine matters on which shareholders may vote.
Hartford may, when required by state insurance regulatory authorities,
disregard voting instructions if the instructions require that the shares be
voted so as to cause a change in the sub-classification or investment objective
of one or more of the Funds or to approve or disapprove an
<PAGE>
28 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
investment advisory policy for the Funds. In addition, Hartford itself may
disregard voting instructions in favor of changes initiated by a Policy Owner in
the investment policy or the investment adviser of the Funds if Hartford
reasonably disapproves of such changes. A change would be disapproved only if
the proposed change is contrary to state law or prohibited by state regulatory
authorities. In the event Hartford does disregard voting instructions, a summary
of that action and the reasons for such action will be included in the next
periodic report to Policy Owners.
- ---------------------------------------------------
STATEMENTS TO POLICY OWNERS
We will send You a statement at least once each Policy Year, showing:
(a) the current Account Value, Cash Value and Face Amount;
(b) the premiums paid, Monthly Deduction Amounts and loans since the last
report;
(c) the amount of any Indebtedness;
(d) notifications required by the provisions of the Policy; and
(e) any other information required by the insurance department of the state
where the Policy was delivered.
- ---------------------------------------------------
LIMIT ON RIGHT TO CONTEST
Hartford may not contest the validity of the Policy after it has been in
effect during the Insured's lifetime for two years from the Issue Date. If the
Policy is reinstated, the two-year period is measured from the date of
reinstatement. Any increase in the Face Amount as a result of a premium payment
is contestable for two years from its effective date. In addition, if the
Insured commits suicide in the two-year period, or such period as specified in
state law, the benefit payable will be limited to the premiums paid less any
Indebtedness and partial withdrawals.
- ---------------------------------------------------
MISSTATEMENT AS TO AGE
If the age of the Insured is incorrectly stated, the amount of Death Benefit
will be appropriately adjusted as specified in the Policy.
- ---------------------------------------------------
PAYMENT OPTIONS
Proceeds under the Policies may be paid in a lump sum or may be applied to
one of Hartford's payment options. The minimum amount that may be placed under a
payment option is $5,000 unless Hartford consents to a lesser
amount. Once payments under options 2, 3 or 4 commence, no surrender of the
Policy may be made for the purpose of receiving a lump sum settlement in lieu of
the life insurance payments. The following options are available under the
Policies.
FIRST OPTION -- Interest Income
Payments of interest at the rate we declare, but not less than 3 1/2% per
year, on the amount applied under this option.
SECOND OPTION -- Income of Fixed Amount
Equal payments of the amount chosen until the amount applied under this
option, with interest of not less than 3 1/2% per year, is exhausted. The final
payment will be for the balance remaining.
THIRD OPTION -- Payments for a Fixed Period
An amount payable monthly for the number of years selected which may be from
1 to 30 years.
FOURTH OPTION -- Life Income
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.
LIFE ANNUITY WITH 120 MONTHLY PAYMENTS CERTAIN -- an annuity providing
monthly income to the annuitant for a fixed period of 120 months and for as
long thereafter as the annuitant shall live.
The Tables in the Policy provide for guaranteed dollar amounts of monthly
payments for each $1,000 applied under the four payment options. Under the
fourth option, the amount of each payment will depend upon the age of the
annuitant at the time the first payment is due. If any periodic payment due any
payee is less than $200, Hartford may make payments less often.
The Table for the fourth option is based on the 1983 Individual Annuity
Mortality Table set back one year and a net investment rate of 3.5% per annum.
The Tables for the first, second and third options are based on a net investment
rate of 3.5% per annum. Hartford may, however, 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 four payment options.
Hartford will make any other arrangements for income payments as may be
agreed on.
- ---------------------------------------------------
BENEFICIARY
The applicant names the beneficiary in the application for the Policy. The
Policy Owner may change the beneficiary (unless irrevocably named) during the
Insured's lifetime by
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 29
- --------------------------------------------------------------------------------
written request to Hartford. If no beneficiary is living when the Insured dies,
the Death Proceeds will be paid to the Policy Owner if living; otherwise to the
Policy Owner's estate.
- ---------------------------------------------------
ASSIGNMENT
The Policy may be assigned as collateral for a loan or other obligation.
Hartford is not responsible for any payment made or action taken before receipt
of written notice of such assignment. Proof of interest must be filed with any
claim under a collateral assignment.
- ---------------------------------------------------
DIVIDENDS
No dividends will be paid under the Policies.
- ---------------------------------------------------
SUPPLEMENTAL BENEFITS
The following supplemental benefits, which are subject to the restrictions
and limitations set forth therein, may be included in a Policy.
- ---------------------------------------------------
DEDUCTION AMOUNT WAIVER RIDER
Subject to certain age and underwriting restrictions, the Policy may include
a Deduction Amount Waiver Rider. This rider provides for the waiver of the
Policy's Monthly Deduction Amounts in the event of total disability prior to the
Insured reaching Attained Age 65 and continuing for at least six months. The
number of Monthly Deduction Amounts waived depends on the Insured's Attained Age
when the disability began. If this rider is added, the Monthly Deduction Amounts
will be increased to include the charges for this rider.
- ---------------------------------------------------
ACCIDENTAL DEATH BENEFIT RIDER
Subject to certain age and underwriting requirements, the Policy may include
an Accidental Death Benefit Rider.
This rider provides for an increase in the amount paid upon the death of the
Insured if the death results from an accident.
If this rider is added, the Monthly Deduction Amounts will be increased to
include the charges for this rider.
- ---------------------------------------------------
INCREASE IN COVERAGE OPTION RIDER
Subject to certain age and underwriting requirements, the Policy may include
an Increase in Coverage Option Rider.
This rider gives the Owner the guaranteed right to purchase a new flexible
premium variable life insurance policy on the life of the Insured, without
evidence of insurability, if certain conditions are met. These conditions
include:
1. the original Policy has been in force for five years,
2. the Insured's Attained Age is less than 80, and
3. the Account Value of the original Policy is sufficient to "pay-up" the
policy under assumptions defined in the rider.
The Face Amount of the new policy will be equal to the Face Amount times a
percentage. This percentage depends on the Insured's age, sex (except where
unisex rates are used), and insurance class. The Scheduled Premium fee for the
new policy is based on the Scheduled Premium for the original policy.
- ---------------------------------------------------
MATURITY DATE EXTENSION RIDER
We will extend the Maturity Date (the date on which the Policy will mature)
to the date of the Insured's death, regardless of the age of the Insured.
Certain Death Benefit and premium restrictions apply. See "Federal Tax
Considerations -- Income Taxation of Policy Benefits," page 32.
<PAGE>
30 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
POSITION WITH HARTFORD LIFE, OTHER BUSINESS PROFESSION, VOCATION OR EMPLOYMENT
NAME, AGE YEAR OF ELECTION FOR PAST 5 YEARS; OTHER DIRECTORSHIPS
- -------------------------------- ------------------------------------- ----------------------------------------------------------
<S> <C> <C>
Wendell J. Bossen, 63 Vice President, 1995** Vice President (1992-Present), Hartford Life Insurance
Company; Executive Vice President (1984) Mutual Benefit.
Gregory A. Boyko, 45 Vice President, 1995 Vice President & Controller (1995-Present), Hartford Life
Insurance Company; Chief Financial Officer (1994-1995),
IMG American Life; Senior Vice President (1992-1994),
Connecticut Mutual Life Insurance Company.
Peter W. Cummins, 60 Vice President, 1993 Vice President, Individual Annuity Operations
(1989-Present), Hartford.
Ann M. deRaismes, 46 Vice President, 1994 Vice President (1994-Present); Assistant Vice President
(1992-1994); Director of Human Resources (1991-1997),
Hartford Life Insurance Company.
James R. Dooley, 60 Vice President, 1973 Vice President, Director Information Services
(1973-Present), Hartford.
Timothy M. Fitch, 44 Vice President, 1995 Vice President, (1995-Present); Assistant Vice President
(1993-1995); Director (1991-1993), Hartford Life
Insurance Company.
Bruce D. Gardner, 46 Director, 1991* Vice President (1996-Present); General Counsel and
Corporate Secretary (1991-1995), Hartford Life Insurance
Company.
Joseph H. Gareau, 50 Executive Vice President & Senior Vice President & Chief Investment Officer
Chief Investment Officer, 1993 (1992-1993), Hartford; Senior Vice President & Chief
Director, 1993* Investment Officer (1992), Hartford Insurance Group.
Donald J. Gillette, 51 Vice President, 1993 Vice President, Director of Marketing (1991-Present),
Hartford.
Lynda Godkin, 43 General Counsel, 1996 Associate General Counsel and Corporate Secretary
Corporate Secretary, 1995 (1995-1996); Assistant General Counsel and Secretary
(1994-1995); Counsel (1990-1994), Hartford Life
Insurance Company.
Lois W. Grady, 52 Vice President, 1993 Assistant Vice President (1988-1993), Hartford Life
Insurance Company.
David A. Hall, 43 Senior Vice President & Senior Vice President & Actuary (1993-Present), Hartford.
Actuary, 1993
Robert A. Kerzner, 45 Vice President, 1994 Vice President (1994-Present); Regional Vice President
(1991-1994), Hartford.
William B. Malchodi, Jr., 46 Vice President, 1994 Vice President (1994-Present); Director of Taxes
Director of Taxes, 1992 (1992-Present), Hartford Insurance Group.
Thomas M. Marra, 38 Executive Vice President & Senior Vice President & Director, Individual Life and
Director, Individual Life Annuity Division (1993-1996); Director of Individual
and Annuity Division, 1996 Director, Annuities (1991-1993), Hartford.
1994*
Steven L. Mattieson, 52 Vice President, 1984 Vice President, Director of New Business (1984-Present),
Hartford.
Joseph J. Noto, 45 Vice President, 1989 President and Director (1994-Present), American Maturity
Life Insurance Company; Vice President (1989-Present),
Hartford Life Insurance Company.
</TABLE>
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 31
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITION WITH HARTFORD LIFE, OTHER BUSINESS PROFESSION, VOCATION OR EMPLOYMENT
NAME, AGE YEAR OF ELECTION FOR PAST 5 YEARS; OTHER DIRECTORSHIPS
- -------------------------------- ------------------------------------- ----------------------------------------------------------
<S> <C> <C>
Craig D. Raymond, 36 Vice President, 1993 Assistant Vice President (1992-1993); Actuary (1989-1994),
Chief Actuary, 1994 Hartford Life Insurance Company.
David T. Schrandt, 49 Vice President, 1987 Vice President, Treasurer and Controller (1987-Present),
Treasurer, 1987 Hartford.
Lowndes A. Smith, 57 President, 1989 President & Chief Operating Officer (1989-Present),
Chief Executive Officer, 1993 Hartford Life Insurance Company.
Director, 1985*
Lizabeth H. Zlatkus, 37 Vice President, 1994 Vice President, Director Business Operaitons
Director, 1994* (1994-Present), Assistant Vice President, Director
Executive Operations (1992-1994), Hartford Life
Insurance Company.
</TABLE>
- ------------------------
* Denotes date of election to Board of Directors.
** ITT Hartford Affiliated Company.
Unless otherwise indicated, the principal business address of each the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
- ---------------------------------------------------
DISTRIBUTION OF THE POLICIES
Hartford intends to sell the Policies in all jurisdictions where it is
licensed to do business. The Policies will be sold by life insurance sales
representatives who represent Hartford and who are registered representatives of
Hartford Equity Sales Company, Inc. ("HESCO"), 200 Hopmeadow Street, Simsbury,
Connecticut 06089, or certain other registered Broker-Dealers. Any sales
representative or employee will have been qualified to sell variable life
insurance policies under applicable Federal and State laws. Each Broker-Dealer
is registered with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 and all are members of the National Association of
Securities Dealers, Inc. HESCO is the principal underwriter for the Policies.
During the first Policy Year, the maximum sales commission payable to Hartford
agents, independent registered insurance brokers, and other registered Broker-
Dealers is 45% of the premiums paid up to a target premium and 5% of any excess.
In Policy Years 2 through 10, agent commissions will not exceed 5.5% of premiums
paid. For Policy Years 11 and later, the agent commissions will not exceed 2% of
the premiums paid. In addition, expense allowances may be paid. The sales
representative may be required to return all or a portion of the commissions
paid if the Policy terminates prior to the second Policy Anniversary.
- ---------------------------------------------------
SAFEKEEPING OF THE SEPARATE
ACCOUNT'S ASSETS
The assets of the Separate Account are held by Hartford. The assets of the
Separate Account are kept physically segregated and held separate and apart from
the general account of Hartford. Hartford maintains records of all purchases and
redemptions of shares of the Funds. Additional protection for the assets of the
Separate Account is afforded by Hartford's blanket fidelity bond issued by Aetna
Casualty and Surety Company, in the aggregate amount of $50 million, covering
all of the officers and employees of Hartford.
- ---------------------------------------------------
FEDERAL TAX CONSIDERATIONS
- -------------------------------- GENERAL
SINCE THE TAX LAW IS COMPLEX AND SINCE TAX CONSEQUENCES WILL VARY ACCORDING
TO THE ACTUAL STATUS OF THE POLICY OWNER INVOLVED AND THE TYPE OF PLAN UNDER
WHICH THE POLICY IS PURCHASED, LEGAL AND TAX ADVICE MAY BE NEEDED BY A PERSON,
TRUSTEE OR OTHER ENTITY CONTEMPLATING THE PURCHASE OF A POLICY DESCRIBED HEREIN.
It should be understood that any detailed description of the federal income
tax consequences regarding the purchase of these Policies 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 of federal tax
considerations is based upon Hartford's
<PAGE>
32 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
understanding of existing federal income tax laws as they are currently
interpreted.
- ---------------------------------------------------
TAXATION OF HARTFORD AND
THE SEPARATE ACCOUNT
The Separate Account is taxed as a part of Hartford which is taxed as a life
insurance company under Subchapter L of the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, the Separate Account will not be taxed as a
"regulated investment company" under Subchapter M of the Code. Investment income
and realized capital gains on the assets of the Separate Account (the underlying
Funds) are reinvested and are taken into account in determining the value of the
Accumulation Units As a result, such investment income and realized capital
gains are automatically applied to increase reserves under the Policy. (See
"Detailed Description of Policy Benefits and Provisions -- Premiums --
Accumulation Unit Values," page 11).
Hartford does not expect to incur any federal income tax on the earnings or
realized capital gains attributable to the Separate Account. Based upon this
expectation, no charge is currently being made to the Separate Account for
federal income taxes. If Hartford incurs income taxes attributable to the
Separate Account or determines that such taxes will be incurred, it may assess a
charge for such taxes against the Separate Account.
- ---------------------------------------------------
INCOME TAXATION OF POLICY BENEFITS
For federal income tax purposes, the Policies should be treated as life
insurance policies under Section 7702 of the Code. The death benefit under a
life insurance policy is generally excluded from the gross income of the
beneficiary. Also, a life insurance Policy Owner is generally not taxed on
increments in the policy value until the Policy is partially or completely
surrendered. Section 7702 limits the amount of premiums that may be invested in
a Policy that is treated as life insurance. Hartford intends to monitor premium
levels to assure compliance with the Section 7702 requirements.
Hartford also believes that any loan received under a Policy will be treated
as Indebtedness of the Policy Owner, and that no part of any loan under a Policy
will constitute income to the Policy Owner. A surrender or assignment of the
Policy may have tax consequences depending upon the circumstances. Policy Owners
should consult a qualified tax adviser concerning the effect of such changes.
During the first fifteen Policy Years, an "income first" rule generally
applies to distributions of cash required to be made under Code Section 7702
because of a reduction in benefits under the Policy.
The Maturity Date Extension Rider allows a Policy Owner to extend the
Maturity Date to the date of the death of the insured. If the Maturity Date of
the Policy is extended by rider, Hartford believes that the Policy will continue
to be treated as a life insurance contract for federal income tax purposes after
the scheduled Maturity Date. However, due to the lack of specific guidance on
this issue, the result is not certain. If the Policy is not treated as a life
insurance contract for federal income tax purposes after the scheduled Maturity
Date, among other things, the Death Proceeds may be taxable to the recipient.
The Policy Owner should consult a qualified tax adviser regarding the possible
adverse tax consequences resulting from an extension of the scheduled Maturity
Date.
- ---------------------------------------------------
MODIFIED ENDOWMENT CONTRACTS
Code Section 7702A applies an additional test, the "seven-pay" test, to life
insurance contracts. The seven-pay test provides that premiums cannot be paid at
a rate more rapidly than that allowed by the payment of seven annual premiums
using specified computational rules described in Section 7702A(c). A modified
endowment contract (MEC) is a life insurance policy that either: (i) satisfies
the Section 7702 definition of life insurance, but fails the seven-pay test of
Section 7702A or (ii) is exchanged for a MEC.
If the Policy satisfies the seven-pay test at issuance, distributions and
loans made thereafter will not be subject to the MEC rules, unless the Policy is
changed materially. The seven-pay test will be applied anew at any time the
Policy undergoes a material change, which includes an increase in the Face
Amount. In addition, if there is a reduction in benefits under the Policy within
the first seven years, the seven-pay test is applied as if the Policy had
initially been issued at the reduced benefit level. Any reduction in benefits
attributable to the nonpayment of premiums will not be taken into account for
purposes of the seven-pay test if the benefits are reinstated within 90 days
after the reduction.
A policy that is classified as a MEC is eligible for certain aspects of the
beneficial tax treatment accorded to life insurance. That is, the death benefit
is excluded from income and increments in value are not subject to current
taxation. However, if the contract is classified as a MEC then withdrawals from
the contract will be considered first as withdrawals of income and then as a
recovery of premium payments. Thus, withdrawals will be includible in income to
the extent the contract value exceeds the investment in the contract. The amount
of any loan (including unpaid interest thereon) under the contract will be
treated as a withdrawal from the contract for tax purposes. In addition, if the
Owner assigns or pledges any portion of the value of a contract (or agrees to
assign or pledge any portion), then such portion will be treated as a withdrawal
from the contract for tax purposes. Taxable withdrawals are subject to an
additional 10% tax, with certain exceptions. The Owner's
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 33
- --------------------------------------------------------------------------------
investment in the contract is increased by the amount includible in income with
respect to such assignment, pledge, or loan, though it is not affected by any
other aspect of the assignment, pledge, or loan (including its release or
repayment).
Generally, only distributions and loans made in the first year in which a
policy becomes a MEC, and in subsequent years, are taxable. However,
distributions and loans made in the two years prior to a policys failing the
seven-pay test are deemed to be in anticipation of failure and are subject to
tax.
Before assigning, pledging, or requesting a loan under a contract that is a
MEC, an Owner should consult a qualified tax adviser.
All MEC policies that are issued within any calendar year to the same policy
owner by one company or its affiliates are treated as one MEC policy for the
purpose of determining the taxable portion of any loan or distribution.
Hartford has instituted procedures to monitor whether a Policy may become
classified as a MEC after issue.
- ---------------------------------------------------
ESTATE AND GENERATION SKIPPING TAXES
When the Insured dies, the Death Proceeds will generally be includible in
the Policy Owner's estate for purposes of federal estate tax if the Insured
owned the Policy. If the Policy Owner was not the Insured, the fair market value
of the Policy would be included in the Policy Owner's estate upon the Policy
Owner's death. The Policy would not be includible in the Insured's estate if the
Insured neither retained incidents of ownership at death nor had given up
ownership within three years before death.
Federal estate tax is integrated with federal gift tax under a unified rate
schedule. In general, estates of less than $600,000 will not incur a federal
estate tax liability. In addition, an unlimited marital deduction may be
available for federal estate and gift tax purposes. The unlimited marital
deduction permits the deferral of taxes until the death of the surviving spouse.
If the Policy Owner (whether or not he or she is the Insured) transfers
ownership of the Policy to someone two or more generations younger, the transfer
may be subject to the generation skipping transfer tax, the taxable amount being
the value of the Policy. The generation-skipping transfer tax provisions
generally apply to transfers which would be subject to the gift and estate tax
rules. Individuals are generally allowed an aggregate generation skipping
transfer exemption of $1 million. Because these rules are complex, the Policy
Owner should consult with a qualified tax adviser for specific information if
ownership is passing to younger generations.
- ---------------------------------------------------
DIVERSIFICATION REQUIREMENTS
Section 817 of the Code provides that a variable life insurance contract
(other than a pension plan policy) will not be treated as a life insurance
contract for any period during which the investments made by the separate
account or underlying fund are not adequately diversified in accordance with
regulations prescribed by the Treasury Department. If a Policy is not treated as
a life insurance contract, the Policy Owner will be subject to income tax on the
annual increases in cash value.
The Treasury Department has issued diversification regulations which
generally require, among other things, that no more than 55% of the value of the
total assets of the segregated asset account underlying a variable contract is
represented by any one investment, no more than 70% is represented by any two
investments, no more than 80% is represented by any three investments, and no
more than 90% is represented by any four investments. In determining whether the
diversification standards are met, all securities of the same issuer, all
interests in the same real property project, and all interests in the same
commodity are each treated as a single investment. In addition, in the case of
government securities, each government agency or instrumentality shall be
treated as a separate issuer.
A separate account must be in compliance with the diversification standards
on the last day of each calendar quarter or within 30 days after the quarter
ends. If an insurance company inadvertently fails to meet the diversification
requirements, the company may comply within a reasonable period and avoid the
taxation of policy income on an ongoing basis. However, either the company or
the Policy Owner must agree to pay the tax due for the period during which the
diversification requirements were not met.
Hartford monitors the diversification of investments in the separate
accounts and tests for diversification as required by the Code. Hartford intends
to administer all contracts subject to the diversification requirements in a
manner that will maintain adequate diversification.
- ---------------------------------------------------
OWNERSHIP OF THE ASSETS IN
THE SEPARATE ACCOUNT
In order for a variable life insurance contract to qualify for tax deferral,
assets in the segregated asset accounts supporting the variable contract must be
considered to be owned by the insurance company and not by the variable contract
owner. The Internal Revenue Service ("IRS") has issued several rulings which
discuss investor control. The IRS has ruled that incidents of ownership by the
contract owner, such as the ability to select and control investments in a
separate account, will cause the contract owner to be treated as the owner of
the assets for tax purposes.
<PAGE>
34 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Further, in the explanation to the temporary Section 817 diversification
regulations, the Treasury Department noted that the temporary regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor, rather
than the insurance company, to be treated as the owner of the assets in the
account." The explanation further indicates that "the temporary regulations
provide that in appropriate cases a segregated asset account may include
multiple sub-accounts, but do not specify the extent to which policyholders may
direct their investments to particular sub-accounts without being treated as the
owners of the underlying assets. Guidance on this and other issues will be
provided in regulations or revenue rulings under section 817(d), relating to the
definition of variable contract." The final regulations issued under Section 817
did not provide guidance regarding investor control, and as of the date of this
Prospectus, no other such guidance has been issued. Further, Hartford does not
know if or in what form such guidance will be issued. In addition, although
regulations are generally issued with prospective effect, it is possible that
regulations may be issued with retroactive effect. Due to the lack of specific
guidance regarding the issue of investor control, there is necessarily some
uncertainty regarding whether a Policy Owner could be considered the owner of
the assets for tax purposes. Hartford reserves the right to modify the Policies,
as necessary, to prevent Policy Owners from being considered the owners of the
assets in the separate accounts.
- ---------------------------------------------------
LIFE INSURANCE PURCHASED FOR USE IN
SPLIT DOLLAR ARRANGEMENTS
On January 26, 1996, the IRS released a technical advice memorandum ("TAM")
on the taxability of life insurance policies used in certain split dollar
arrangements. A TAM, issued by the National Office of the IRS, provides advice
as to the internal revenue laws, regulations, and related statutes with respect
to a specific set of facts and a specific taxpayer. In the TAM, among other
things, the IRS concluded that an employee was subject to current taxation on
the excess of the cash surrender value of the policy over the premiums to be
returned to the employer. Purchasers of life insurance policies to be used in
split dollar arrangements are strongly advised to consult with a qualified tax
adviser to determine the tax treatment resulting from such an arrangement.
- ---------------------------------------------------
FEDERAL INCOME TAX WITHHOLDING
If any amounts are deemed to be current taxable income to the Policy Owner,
such amounts will be subject to federal income tax withholding and reporting,
pursuant to the Code.
- ---------------------------------------------------
NON-INDIVIDUAL OWNERSHIP OF POLICIES
Legislation has recently been proposed which would limit certain of the tax
advantages now afforded non-individual owners of life insurance contracts.
Prospective Policy Owners which are not individuals should consult a qualified
tax adviser to determine the status of this proposed legislation and its
potential impact on the purchaser.
- ---------------------------------------------------
OTHER
Federal estate tax, state and local estate, inheritance and other tax
consequences of ownership, or receipt of Policy proceeds depend on the
circumstances of each Policy Owner or beneficiary. A qualified tax adviser
should be consulted to determine the impact of these taxes.
- ---------------------------------------------------
LIFE INSURANCE PURCHASES BY NONRESIDENT
ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal
income tax consequences to life insurance purchasers that are U.S. citizens or
residents. Purchasers that are not U.S. citizens or residents will generally be
subject to U.S. federal income tax and withholding on taxable distributions from
life insurance policies at a 30% rate, unless a lower treaty rate applies. In
addition, purchasers may be subject to state and/or municipal taxes and taxes
that may be imposed by the purchaser's country of citizenship or residence.
Prospective purchasers are advised to consult with a qualified tax adviser
regarding U.S. state, and foreign taxation with respect to a life insurance
policy purchase.
- ---------------------------------------------------
LEGAL PROCEEDINGS
There are no pending material legal proceedings to which the Separate
Account is a party.
- ---------------------------------------------------
EXPERTS
The audited financial statements included in this Prospectus and elsewhere
in the registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports. Reference is made to said report on the
statutory-basis financial statements of ITT Hartford Life and Annuity Insurance
Company which states the statutory-basis financial statements are presented in
accordance with statutory accounting practices prescribed or permitted by the
National Association of Insurance Commissioners and the
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 35
- --------------------------------------------------------------------------------
State of Connecticut Insurance Department, not presented in accordance with
generally accepted accounting principles. Reference is made to said report on
the statutory-basis financial statements of ITT Hartford Life and Annuity
Insurance Company (the Depositor), which includes an explanatory paragraph with
respect to the change in valuation method in determining aggregate reserves for
future benefits in 1994, as discussed in Note 1 of Notes to Statutory Financial
Statements. The principal business address of Arthur Andersen LLP is One
Financial Plaza, Hartford, CT 06103.
The hypothetical Policy illustrations have been approved by Ken A. McCullum,
FSA, MAAA, Director of Individual Life Product Development, and are included in
this Prospectus in reliance upon his opinion as to their reasonableness.
- ---------------------------------------------------
REGISTRATION STATEMENT
A registration statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933 as amended. This Prospectus does not
contain all information set forth in the registration statement, its amendments
and exhibits, to all of which reference is made for further information
concerning the Separate Account, Hartford, and the Policies.
- ---------------------------------------------------
LEGAL MATTERS
Legal matters in connection with the issue and sale of the flexible premium
variable life insurance polices described in this Prospectus and the
organization of Hartford, its authority to issue the Policies under Connecticut
law and the validity of the forms of the Policies under Connecticut law and
legal matters relating to the federal securities and income tax laws have been
passed on by Lynda Godkin, General Counsel of Hartford Life Insurance Companies.
<PAGE>
36 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX A
ILLUSTRATION OF DEATH BENEFITS, ACCOUNT
VALUES AND CASH SURRENDER VALUES
The following tables illustrate how the Death Benefits, Account Values and Cash
Surrender Values of a Policy may change with the investment experience of the
Separate Account. The tables show how the Death Benefits, Account Values and
Cash Surrender Values of a Policy issued to an Insured of a given age would vary
over time if the investment return on the assets held in each Fund were a
uniform, gross annual rate of 0%, 6% and 12%. The Death Benefits, Account Values
and Cash Surrender Values would be different from those shown if the gross
annual investment returns averaged 0%, 6% and 12% over a period of years, but
fluctuated above and below those averages for individual Policy Years. The
tables assume that no Policy loans are made and that no partial withdrawals have
been made. The tables are also based on the assumption that the Owner has not
requested an increase or decrease in the Face Amount and that no fund transfers
have been made in any Policy Year.
The tables on pages 37 to 45 illustrate a Policy issued to a Male Insured,
Age 45 in the Preferred Premium Class with an Initial Face Amount of $250,000
and a Scheduled Premium that is paid at the beginning of each Policy Year. The
Death Benefits, Account Values and Cash Surrender Values would be lower if the
Insured was a smoker or in a special class since the cost of insurance charges
would increase.
The tables reflect the fact that the net return on the assets held in the
Sub-Accounts is lower than the gross after-tax return of the Funds. This is
because these tables assume an investment management fee and other estimated
Fund expenses totaling 0.70%. The 0.70% figure is based on an average of the
current management fees and expenses of the available twenty-two Funds, taking
into account any applicable expense caps or reimbursement arrangements. Actual
fees and expenses of the Funds associated with a Policy may be more or less than
0.70%, will vary from year to year, and will depend on how the Account Value is
allocated.
As their headings indicate, the tables reflect the deductions of current
contractual charges and guaranteed contractual charges for a single gross
interest rate. These charges include the monthly charge to the Account for
assuming mortality and expense risks, the monthly administrative charge, and the
monthly mortality charge. All tables assume a charge of 2.00% for taxes
attributable to premiums and reflect the fact that no charges against the
Account are currently made for federal, state or local taxes attributable to the
Policy.
Each table also shows the amount to which the premiums would accumulate if
an amount equal to those premiums were invested to earn interest, after taxes,
at 5% compounded annually.
Upon request, Hartford will furnish a comparable illustration based on a
proposed Policy's specific circumstances.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 37
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
GUARANTEE PERIOD: 10 YEARS
$250,000 FACE AMOUNT
ISSUE AGE 45 MALE PREFERRED
$4,000 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.70% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 4,200 1,232 --*** 250,000 1,232 --*** 250,000
2 8,610 4,074 163*** 250,000 4,074 163*** 250,000
3 13,241 6,764 3,342 250,000 6,764 3,342 250,000
4 18,103 9,345 6,411 250,000 9,345 6,411 250,000
5 23,208 11,843 9,398 250,000 11,843 9,398 250,000
6 28,568 14,274 12,318 250,000 14,274 12,318 250,000
7 34,196 16,645 15,178 250,000 16,645 15,178 250,000
8 40,106 18,971 17,994 250,000 18,971 17,994 250,000
9 46,312 21,246 20,757 250,000 21,246 20,757 250,000
10 52,827 23,456 23,456 250,000 23,456 23,456 250,000
11 59,669 25,850 25,850 250,000 24,932 24,932 250,000
12 66,852 28,102 28,102 250,000 26,215 26,215 250,000
13 74,395 30,190 30,190 250,000 27,297 27,297 250,000
14 82,314 32,117 32,117 250,000 28,157 28,157 250,000
15 90,630 33,884 33,884 250,000 28,773 28,773 250,000
16 99,361 35,385 35,385 250,000 29,115 29,115 250,000
17 108,530 36,726 36,726 250,000 29,156 29,156 250,000
18 118,156 37,906 37,906 250,000 28,850 28,850 250,000
19 128,264 38,913 38,913 250,000 28,147 28,147 250,000
20 138,877 39,747 39,740 250,000 26,999 26,999 250,000
25 200,454 39,821 39,821 250,000 12,667 12,667 250,000
35 279,043 30,239 30,239 250,000 -- -- 250,000
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
*** IF YOU SURRENDER YOUR POLICY DURING THE FIRST TWO POLICY YEARS, YOU WILL
RECEIVE A REFUND IN ADDITION TO THE CASH VALUES SHOWN. THE REFUND PLUS THE
CASH VALUE WOULD BE $2,032 IN YEAR ONE AND $4,753 IN YEAR TWO. THESE VALUES
REFLECT FRONT-END SALES LOADS OF 50% IN YEAR 1, 11% IN YEARS 2 THROUGH 10
AND 3% THEREAFTER. THE SURRENDER CHARGE EFFECTIVE IN ANY YEAR CAN BE
DETERMINED BY SUBTRACTING THE CASH SURRENDER VALUE FROM THE ACCOUNT VALUE.
</TABLE>
THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
38 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
GUARANTEE PERIOD: 10 YEARS
$250,000 FACE AMOUNT
ISSUE AGE 45 MALE PREFERRED
$4,000 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.30% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 4,200 1,325 --*** 250,000 1,325 --*** 250,000
2 8,610 4,435 523*** 250,000 4,435 523** 250,000
3 13,241 7,570 4,148 250,000 7,570 4,148 250,000
4 18,103 10,778 7,845 250,000 10,778 7,845 250,000
5 23,208 14,087 11,643 250,000 14,087 11,643 250,000
6 28,568 17,519 15,563 250,000 17,519 15,563 250,000
7 34,196 21,085 19,618 250,000 21,085 19,618 250,000
8 40,106 24,808 23,830 250,000 24,808 23,830 250,000
9 46,312 28,688 28,200 250,000 28,688 28,200 250,000
10 52,827 32,722 32,722 250,000 32,722 32,722 250,000
11 59,669 37,186 37,186 250,000 36,279 36,279 250,000
12 66,852 41,760 41,760 250,000 39,852 39,852 250,000
13 74,395 46,430 46,430 250,000 43,436 43,436 250,000
14 82,314 51,207 51,207 250,000 47,017 47,017 250,000
15 90,630 56,101 56,101 250,000 50,580 50,580 250,000
16 99,361 61,026 61,026 250,000 54,103 54,103 250,000
17 108,530 66,085 66,085 250,000 57,565 57,565 250,000
18 118,156 71,290 71,290 250,000 60,934 60,934 250,000
19 128,264 76,646 76,646 250,000 64,173 64,173 250,000
20 138,877 82,162 82,162 250,000 67,247 67,247 250,000
25 200,454 111,781 111,781 250,000 78,904 78,904 250,000
35 279,043 145,617 145,617 250,000 77,492 77,492 250,000
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
*** IF YOU SURRENDER YOUR POLICY DURING THE FIRST TWO POLICY YEARS, YOU WILL
RECEIVE A REFUND IN ADDITION TO THE CASH VALUES SHOWN. THE REFUND PLUS THE
CASH VALUE WOULD BE $2,125 IN YEAR ONE AND $5,113 IN YEAR TWO. THESE VALUES
REFLECT FRONT-END SALES LOADS OF 50% IN YEAR 1, 11% IN YEARS 2 THROUGH 10
AND 3% THEREAFTER. THE SURRENDER CHARGE EFFECTIVE IN ANY YEAR CAN BE
DETERMINED BY SUBTRACTING THE CASH SURRENDER VALUE FROM THE ACCOUNT VALUE.
</TABLE>
THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTACT WOULD ALSO BE DIFFERENT
FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 6%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 39
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
GUARANTEE PERIOD: 10 YEARS
$250,000 FACE AMOUNT
ISSUE AGE 45 MALE PREFERRED
$4,000 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.30% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 4,200 1,418 --*** 250,000 1,418 --*** 250,000
2 8,610 4,807 895*** 250,000 4,807 895*** 250,000
3 13,241 8,434 5,011 250,000 8,434 5,011 250,000
4 18,103 12,372 9,438 250,000 12,372 9,438 250,000
5 23,208 16,681 14,237 250,000 16,681 14,237 250,000
6 28,568 21,420 19,464 250,000 21,420 19,464 250,000
7 34,196 26,642 25,176 250,000 26,642 25,176 250,000
8 40,106 32,417 31,440 250,000 32,417 31,440 250,000
9 46,312 38,799 38,310 250,000 38,799 38,310 250,000
10 52,827 45,843 45,843 250,000 45,843 45,843 250,000
11 59,669 53,915 53,915 250,000 53,042 53,042 250,000
12 66,852 62,773 62,773 250,000 60,901 60,901 250,000
13 74,395 72,491 72,491 250,000 69,502 69,502 250,000
14 82,314 83,181 83,181 250,000 78,929 78,929 250,000
15 90,630 94,965 94,965 250,000 89,281 89,281 250,000
16 99,361 107,905 107,905 250,000 100,668 100,668 250,000
17 108,530 122,236 122,236 250,000 113,227 113,227 250,000
18 118,156 138,131 138,131 250,000 127,109 127,109 250,000
19 128,264 155,618 155,618 250,000 142,486 142,486 250,000
20 138,877 174,773 174,773 250,000 159,244 159,244 250,000
25 200,454 300,798 300,798 250,000 265,815 265,815 250,000
35 279,043 495,973 495,973 250,000 420,068 420,068 250,000
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
*** IF YOU SURRENDER YOUR POLICY DURING THE FIRST TWO POLICY YEARS, YOU WILL
RECEIVE A REFUND IN ADDITION TO THE CASH VALUES SHOWN. THE REFUND PLUS THE
CASH VALUE WOULD BE $2,218 IN YEAR ONE AND $5,485 IN YEAR TWO. THESE VALUES
REFLECT FRONT-END SALES LOADS OF 50% IN YEAR 1, 11% IN YEARS 2 THROUGH 10
AND 3% THEREAFTER. THE SURRENDER CHARGE EFFECTIVE IN ANY YEAR CAN BE
DETERMINED BY SUBTRACTING THE CASH SURRENDER VALUE FROM THE ACCOUNT VALUE.
</TABLE>
THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
40 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: RETURN OF ACCOUNT VALUE
GUARANTEE PERIOD: 10 YEARS
$250,000 FACE AMOUNT
ISSUE AGE 45 MALE PREFERRED
$4,500 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.70% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 4,725 1,466 --*** 251,466 1,466 --*** 251,466
2 9,686 4,727 327*** 254,727 4,727 327*** 254,727
3 14,896 7,820 3,970 257,820 7,820 3,970 257,820
4 20,365 10,789 7,489 260,789 10,789 7,489 260,789
5 26,109 13,660 10,910 263,660 13,660 10,910 263,660
6 32,139 16,450 14,250 266,450 16,450 14,250 266,450
7 38,471 19,164 17,514 269,164 19,164 17,514 269,164
8 45,120 21,820 20,720 271,820 21,820 20,720 271,820
9 52,101 24,409 23,859 274,409 24,409 23,859 274,409
10 59,431 26,916 26,916 276,916 26,916 26,916 276,916
11 67,127 29,621 29,621 279,621 28,603 28,603 278,603
12 75,208 32,154 32,154 282,154 30,059 30,059 280,059
13 83,694 34,487 34,487 284,487 31,276 31,276 281,276
14 92,604 36,623 36,623 286,623 32,229 32,229 282,229
15 101,959 38,562 38,562 288,562 32,897 32,897 282,897
16 111,782 40,177 40,177 290,177 33,245 33,245 283,245
17 122,096 41,593 41,593 291,593 33,246 33,246 283,246
18 132,926 42,806 42,806 292,806 32,854 32,854 282,854
19 144,297 43,803 43,803 293,803 32,020 32,020 282,020
20 156,237 44,576 44,576 294,576 30,699 30,699 280,699
25 225,511 43,527 43,527 293,527 15,404 15,404 265,404
35 313,924 31,575 31,575 281,575 -- -- --
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
*** IF YOU SURRENDER YOUR POLICY DURING THE FIRST TWO POLICY YEARS, YOU WILL
RECEIVE A REFUND IN ADDITION TO THE CASH VALUES SHOWN. THE REFUND PLUS THE
CASH VALUE WOULD BE $2,366 IN YEAR ONE AND $4,772 IN YEAR TWO. THESE VALUES
REFLECT FRONT-END SALES LOADS OF 50% IN YEAR 1, 11% IN YEARS 2 THROUGH 10
AND 3% THEREAFTER. THE SURRENDER CHARGE EFFECTIVE IN ANY YEAR CAN BE
DETERMINED BY SUBTRACTING THE CASH SURRENDER VALUE FROM THE ACCOUNT VALUE.
</TABLE>
THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 41
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: RETURN OF ACCOUNT VALUE
GUARANTEE PERIOD: 10 YEARS
$250,000 FACE AMOUNT
ISSUE AGE 45 MALE PREFERRED
$4,500 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.30% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 4,725 1,574 --*** 251,574 1,574 --*** 251,574
2 9,686 5,141 741*** 255,141 5,141 741*** 255,141
3 14,896 8,746 4,896 258,746 8,746 4,896 258,746
4 20,365 12,432 9,132 262,432 12,432 9,132 262,432
5 26,109 16,230 13,480 266,230 16,230 13,480 266,230
6 32,139 20,158 17,958 270,158 20,158 17,958 270,158
7 38,471 24,231 22,581 274,231 24,231 22,581 274,231
8 45,120 28,468 27,368 278,468 28,468 27,368 278,468
9 52,101 32,870 32,320 282,870 32,870 32,320 282,870
10 59,431 37,428 37,428 287,428 37,428 37,428 287,428
11 67,127 42,446 42,446 292,446 41,395 41,395 291,395
12 75,208 47,558 47,558 297,558 45,332 45,332 295,332
13 83,694 52,735 52,735 302,735 49,225 49,225 299,225
14 92,604 57,982 57,982 307,982 53,045 53,045 303,045
15 101,959 63,299 63,299 313,299 56,760 56,760 306,760
16 111,782 68,557 68,557 318,557 60,328 60,328 310,328
17 122,096 73,875 73,875 323,875 63,709 63,709 313,709
18 132,926 79,251 79,251 329,251 66,842 66,842 316,842
19 144,297 84,672 84,672 334,672 69,660 69,660 319,660
20 156,237 90,127 90,127 340,127 72,095 72,095 322,095
25 225,511 116,169 116,169 366,169 76,129 76,129 326,129
35 313,924 136,250 136,250 386,250 55,925 55,925 305,925
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
*** IF YOU SURRENDER YOUR POLICY DURING THE FIRST TWO POLICY YEARS, YOU WILL
RECEIVE A REFUND IN ADDITION TO THE CASH VALUES SHOWN. THE REFUND PLUS THE
CASH VALUE WOULD BE $2,474 IN YEAR ONE AND $5,186 IN YEAR TWO. THESE VALUES
REFLECT FRONT-END SALES LOADS OF 50% IN YEAR 1, 11% IN YEARS 2 THROUGH 10
AND 3% THEREAFTER. THE SURRENDER CHARGE EFFECTIVE IN ANY YEAR CAN BE
DETERMINED BY SUBTRACTING THE CASH SURRENDER VALUE FROM THE ACCOUNT VALUE.
</TABLE>
THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 6%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
42 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: RETURN OF ACCOUNT VALUE
GUARANTEE PERIOD: 10 YEARS
$250,000 FACE AMOUNT
ISSUE AGE 45 MALE PREFERRED
$4,500 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.30% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 4,725 1,681 --*** 251,681 1,681 --*** 251,681
2 9,686 5,569 1,169*** 255,569 5,569 1,169*** 255,569
3 14,896 9,736 5,886 259,736 9,736 5,886 259,736
4 20,365 14,258 10,958 264,258 14,258 10,958 264,258
5 26,109 19,198 16,448 269,198 19,198 16,448 269,198
6 32,139 24,615 22,415 274,615 24,615 22,415 274,615
7 38,471 30,567 28,917 280,567 30,567 28,917 280,567
8 45,120 37,127 36,027 287,127 37,127 36,027 287,127
9 52,101 44,349 43,799 294,349 44,349 43,799 294,349
10 59,431 52,288 52,288 302,288 52,288 52,288 302,288
11 67,127 61,337 61,337 311,337 60,253 60,253 310,253
12 75,208 71,202 71,202 321,202 68,843 68,843 318,843
13 83,694 81,939 81,939 331,939 78,112 78,112 328,112
14 92,604 93,639 93,639 343,639 88,103 88,103 338,103
15 101,959 106,404 106,404 356,404 98,865 98,865 348,865
16 111,782 120,208 120,208 370,208 110,442 110,442 360,442
17 122,096 135,290 135,290 385,290 122,884 122,884 372,884
18 132,926 151,779 151,779 401,779 136,232 136,232 386,232
19 144,297 169,809 169,809 419,809 150,523 150,523 400,523
20 156,237 189,531 189,531 439,531 165,803 165,803 415,803
25 225,511 318,535 318,535 568,535 259,241 259,241 509,241
35 313,924 517,815 517,815 767,815 385,156 385,156 635,156
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
*** IF YOU SURRENDER YOUR POLICY DURING THE FIRST TWO POLICY YEARS, YOU WILL
RECEIVE A REFUND IN ADDITION TO THE CASH VALUES SHOWN. THE REFUND PLUS THE
CASH VALUE WOULD BE $2,581 IN YEAR ONE AND $5,614 IN YEAR TWO. THESE VALUES
REFLECT FRONT-END SALES LOADS OF 50% IN YEAR 1, 11% IN YEARS 2 THROUGH 10
AND 3% THEREAFTER. THE SURRENDER CHARGE EFFECTIVE IN ANY YEAR CAN BE
DETERMINED BY SUBTRACTING THE CASH SURRENDER VALUE FROM THE ACCOUNT VALUE.
</TABLE>
THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 43
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: RETURN OF PREMIUM
GUARANTEE PERIOD: 10 YEARS
$250,000 FACE AMOUNT
ISSUE AGE 45 MALE PREFERRED
$4,500 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.70% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 4,725 1,629 --*** 254,500 1,629 --*** 254,500
2 9,686 4,916 844*** 259,000 4,916 844*** 259,000
3 14,896 8,031 4,468 263,500 8,031 4,468 263,500
4 20,365 11,016 7,962 268,000 11,016 7,962 268,000
5 26,109 13,896 11,351 272,500 13,896 11,351 272,500
6 32,139 16,688 14,652 277,000 16,688 14,652 277,000
7 38,471 19,398 17,871 281,500 19,398 17,871 281,500
8 45,120 22,041 21,023 286,000 22,041 21,023 286,000
9 52,101 24,609 24,100 290,500 24,609 24,100 290,500
10 59,431 27,086 27,086 295,000 27,086 27,086 295,000
11 67,127 29,718 29,718 299,500 28,622 28,622 299,500
12 75,208 32,159 32,159 304,000 29,885 29,885 304,000
13 83,694 34,376 34,376 308,500 30,859 30,859 308,500
14 92,604 36,367 36,367 313,000 31,507 31,507 313,000
15 101,959 38,128 38,128 317,500 31,792 31,792 317,500
16 111,782 39,511 39,511 322,000 31,663 31,663 322,000
17 122,096 40,647 40,647 326,500 31,071 31,071 326,500
18 132,926 41,525 41,525 331,000 29,940 29,940 331,000
19 144,297 42,123 42,123 335,500 28,184 28,184 335,500
20 156,237 42,423 42,423 340,000 25,714 25,714 340,000
25 225,511 37,048 37,048 362,500 -- -- --
35 313,924 14,078 14,078 385,000 -- -- --
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
*** IF YOU SURRENDER YOUR POLICY DURING THE FIRST TWO POLICY YEARS, YOU WILL
RECEIVE A REFUND IN ADDITION TO THE CASH VALUES SHOWN. THE REFUND PLUS THE
CASH VALUE WOULD BE $2,361 IN YEAR ONE AND $5,595 IN YEAR TWO. THESE VALUES
REFLECT FRONT-END SALES LOADS OF 50% IN YEAR 1, 11% IN YEARS 2 THROUGH 10
AND 3% THEREAFTER. THE SURRENDER CHARGE EFFECTIVE IN ANY YEAR CAN BE
DETERMINED BY SUBTRACTING THE CASH SURRENDER VALUE FROM THE ACCOUNT VALUE.
</TABLE>
THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
44 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: RETURN OF PREMIUM
GUARANTEE PERIOD: 10 YEARS
$250,000 FACE AMOUNT
ISSUE AGE 45 MALE PREFERRED
$4,500 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.30% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 4,725 1,746 --*** 254,500 1,746 --*** 254,500
2 9,686 5,353 1,281*** 259,000 5,353 1,281*** 259,000
3 14,896 8,995 5,432 263,500 8,995 5,432 263,500
4 20,365 12,717 9,663 268,000 12,717 9,663 268,000
5 26,109 16,548 14,003 272,500 16,548 14,003 272,500
6 32,139 20,509 18,473 277,000 20,509 18,473 277,000
7 38,471 24,612 23,085 281,500 24,612 23,085 281,500
8 45,120 28,880 27,862 286,000 28,880 27,862 286,000
9 52,101 33,312 32,803 290,500 33,312 32,803 290,500
10 59,431 37,901 37,901 295,000 37,901 37,901 295,000
11 67,127 42,921 42,921 299,500 41,837 41,837 299,500
12 75,208 48,033 48,033 304,000 45,731 45,731 304,000
13 83,694 53,210 53,210 308,500 49,564 49,564 308,500
14 92,604 58,458 58,458 313,000 53,305 53,305 313,000
15 101,959 63,777 63,777 317,500 56,916 56,916 317,500
16 111,782 69,039 69,039 322,000 60,350 60,350 322,000
17 122,096 74,366 74,366 326,500 63,557 63,557 326,500
18 132,926 79,757 79,757 331,000 66,463 66,463 331,000
19 144,297 85,202 85,202 335,500 68,986 68,986 335,500
20 156,237 90,693 90,693 340,000 71,036 71,036 340,000
25 225,511 117,175 117,175 362,500 70,404 70,404 362,500
35 313,924 138,179 138,179 385,000 31,287 31,287 385,000
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
*** IF YOU SURRENDER YOUR POLICY DURING THE FIRST TWO POLICY YEARS, YOU WILL
RECEIVE A REFUND IN ADDITION TO THE CASH VALUES SHOWN. THE REFUND PLUS THE
CASH VALUE WOULD BE $2,478 IN YEAR ONE AND $6,032 IN YEAR TWO. THESE VALUES
REFLECT FRONT-END SALES LOADS OF 50% IN YEAR 1, 11% IN YEARS 2 THROUGH 10
AND 3% THEREAFTER. THE SURRENDER CHARGE EFFECTIVE IN ANY YEAR CAN BE
DETERMINED BY SUBTRACTING THE CASH SURRENDER VALUE FROM THE ACCOUNT VALUE.
</TABLE>
THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 6%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 45
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: RETURN OF PREMIUM
GUARANTEE PERIOD: 10 YEARS
$250,000 FACE AMOUNT
ISSUE AGE 45 MALE PREFERRED
$4,500 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.30% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH
POLICY AT 5% INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 4,725 1,863 --*** 254,500 1,863 --*** 254,500
2 9,686 5,805 1,733*** 259,000 5,805 1,733*** 259,000
3 14,896 10,029 6,466 263,500 10,029 6,466 263,500
4 20,365 14,611 11,557 268,000 14,611 11,557 268,000
5 26,109 19,618 17,073 272,500 19,618 17,073 272,500
6 32,139 25,111 23,075 277,000 25,111 23,075 277,000
7 38,471 31,152 29,625 281,500 31,152 29,625 281,500
8 45,120 37,815 36,797 286,000 37,815 36,797 286,000
9 52,101 45,162 44,653 290,500 45,162 44,653 290,500
10 59,431 53,252 53,252 295,000 53,252 53,252 295,000
11 67,127 62,461 62,461 299,500 61,416 61,416 299,500
12 75,208 72,536 72,536 304,000 70,272 70,272 304,000
13 83,694 83,549 83,549 308,500 79,898 79,898 308,500
14 92,604 95,617 95,617 313,000 90,367 90,367 313,000
15 101,959 108,867 108,867 317,500 101,766 101,766 317,500
16 111,782 123,335 123,335 322,000 114,191 114,191 322,000
17 122,096 139,283 139,283 326,500 127,759 127,759 326,500
18 132,926 156,899 156,899 331,000 142,593 142,593 331,000
19 144,297 176,385 176,385 335,500 158,844 158,844 335,500
20 156,237 197,974 197,974 348,109 176,698 176,698 340,000
25 225,511 340,685 340,685 531,980 294,635 294,635 460,073
35 313,924 561,701 561,701 791,523 466,175 466,175 656,912
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
*** IF YOU SURRENDER YOUR POLICY DURING THE FIRST TWO POLICY YEARS, YOU WILL
RECEIVE A REFUND IN ADDITION TO THE CASH VALUES SHOWN. THE REFUND PLUS THE
CASH VALUE WOULD BE $2,596 IN YEAR ONE AND $6,484 IN YEAR TWO. THESE VALUES
REFLECT FRONT-END SALES LOADS OF 50% IN YEAR 1, 11% IN YEARS 2 THROUGH 10
AND 3% THEREAFTER. THE SURRENDER CHARGE EFFECTIVE IN ANY YEAR CAN BE
DETERMINED BY SUBTRACTING THE CASH SURRENDER VALUE FROM THE ACCOUNT VALUE.
</TABLE>
THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
46 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
GUARANTEE PERIOD: 1 YEAR
$250,000 FACE AMOUNT
ISSUE AGE: 45 MALE PREFERRED
$4,000 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.70% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED ----------------------------------- -----------------------------------
END OF AT 5% CASH CASH
POLICY INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------------- ------------- ----------- ----------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 4,200 3,151 2,751 250,000 3,151 2,751 250,000
2 8,610 6,310 5,955 250,000 5,882 5,526 250,000
3 13,241 9,282 8,971 250,000 8,494 8,183 250,000
4 18,103 12,112 11,846 250,000 10,986 10,719 250,000
5 23,208 14,831 14,609 250,000 13,352 13,130 250,000
6 28,568 17,457 17,280 250,000 15,583 15,405 250,000
7 34,196 20,000 19,867 250,000 17,671 17,538 250,000
8 40,106 22,475 22,386 250,000 19,605 19,516 250,000
9 46,312 24,875 24,831 250,000 21,371 21,327 250,000
10 52,827 27,190 27,190 250,000 22,957 22,957 250,000
11 59,669 29,346 29,346 250,000 24,350 24,350 250,000
12 66,852 31,337 31,337 250,000 25,539 25,539 250,000
13 74,395 33,140 33,140 250,000 26,518 26,518 250,000
14 82,314 34,761 34,761 250,000 27,268 27,268 250,000
15 90,630 36,200 36,200 250,000 27,768 27,768 250,000
16 99,361 37,345 37,345 250,000 27,990 27,990 250,000
17 108,530 38,313 38,313 250,000 27,908 27,908 250,000
18 118,156 39,100 39,100 250,000 27,479 27,479 250,000
19 128,264 39,698 39,698 250,000 26,656 26,656 250,000
20 138,877 40,098 40,098 250,000 25,392 25,392 250,000
25 200,454 40,788 40,788 250,000 11,227 11,227 250,000
30 279,043 31,885 31,885 250,000 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK CHARGES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK CHARGES.
THESE VALUES REFLECT FRONT-END SALES LOADS OF 0% IN ALL YEARS. THE SURRENDER
CHARGE EFFECTIVE IN ANY YEAR CAN BE DETERMINED BY SUBTRACTING THE CASH
SURRENDER VALUE FROM THE ACCOUNT VALUE.
THE DEATH BENEFIT MAY, AND ACCOUNT VALUES AND CASH SURRENDER VALUES WILL,
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 47
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
GUARANTEE PERIOD: 1 YEAR
$250,000 FACE AMOUNT
ISSUE AGE: 45 MALE PREFERRED
$4,000 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.30% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED ----------------------------------- -----------------------------------
END OF AT 5% CASH CASH
POLICY INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------------- ------------- ----------- ----------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 4,200 3,361 2,961 250,000 3,361 2,961 250,000
2 8,610 6,928 6,572 250,000 6,486 6,130 250,000
3 13,241 10,507 10,196 250,000 9,669 9,358 250,000
4 18,103 14,144 13,877 250,000 12,909 12,643 250,000
5 23,208 17,869 17,647 250,000 16,203 15,980 250,000
6 28,568 21,706 21,528 250,000 19,539 19,362 250,000
7 34,196 25,664 25,531 250,000 22,913 22,780 250,000
8 40,106 29,766 29,677 250,000 26,312 26,224 250,000
9 46,312 34,008 33,964 250,000 29,726 29,681 250,000
10 52,827 38,387 38,387 250,000 33,140 33,140 250,000
11 59,669 42,835 42,835 250,000 36,543 36,543 250,000
12 66,852 47,351 47,351 250,000 39,926 39,926 250,000
13 74,395 51,916 51,916 250,000 43,282 43,282 250,000
14 82,314 56,539 56,539 250,000 46,594 46,594 250,000
15 90,630 61,226 61,226 250,000 49,844 49,844 250,000
16 99,361 65,881 65,881 250,000 53,008 53,008 250,000
17 108,530 70,614 70,614 250,000 56,062 56,062 250,000
18 118,156 75,428 75,428 250,000 58,971 58,971 250,000
19 128,264 80,327 80,327 250,000 61,692 61,692 250,000
20 138,877 85,315 85,315 250,000 64,188 64,188 250,000
25 200,454 116,776 116,776 250,000 73,949 73,949 250,000
30 279,043 153,444 153,444 250,000 69,025 69,025 250,000
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK CHARGES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK CHARGES.
THESE VALUES REFLECT FRONT-END SALES LOADS OF 0% IN ALL YEARS. THE SURRENDER
CHARGE EFFECTIVE IN ANY YEAR CAN BE DETERMINED BY SUBTRACTING THE CASH
SURRENDER VALUE FROM THE ACCOUNT VALUE.
THE DEATH BENEFIT MAY, AND ACCOUNT VALUES AND CASH SURRENDER VALUES WILL,
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 6%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
48 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
GUARANTEE PERIOD: 1 YEAR
$250,000 FACE AMOUNT
ISSUE AGE: 45 MALE PREFERRED
$4,000 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.30% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED ----------------------------------- -----------------------------------
END OF AT 5% CASH CASH
POLICY INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------------- ------------- ----------- ----------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 4,200 3,571 3,171 250,000 3,571 3,171 250,000
2 8,610 7,571 7,215 250,000 7,116 6,760 250,000
3 13,241 11,834 11,523 250,000 10,945 10,634 250,000
4 18,103 16,434 16,167 250,000 15,085 14,818 250,000
5 23,208 21,434 21,212 250,000 19,560 19,338 250,000
6 28,568 26,894 26,716 250,000 24,395 24,217 250,000
7 34,196 32,870 32,736 250,000 29,619 29,486 250,000
8 40,106 39,427 39,339 250,000 35,262 35,173 250,000
9 46,312 46,621 46,577 250,000 41,358 41,313 250,000
10 52,827 54,505 54,505 250,000 47,944 47,944 250,000
11 59,669 63,082 63,082 250,000 55,066 55,066 250,000
12 66,852 72,426 72,426 250,000 62,779 62,799 250,000
13 74,395 82,603 82,603 250,000 71,152 71,152 250,000
14 82,314 93,717 93,717 250,000 80,251 80,251 250,000
15 90,630 105,877 105,877 250,000 90,156 90,156 250,000
16 99,361 119,136 119,136 250,000 100,957 100,957 250,000
17 108,530 133,714 133,714 254,356 112,762 112,762 250,000
18 118,156 149,615 149,615 277,077 125,694 125,694 250,000
19 128,264 166,878 166,878 301,046 139,896 139,896 252,371
20 138,877 185,619 185,619 326,385 155,302 155,302 273,077
25 200,454 318,737 318,737 497,708 256,840 256,840 401,056
30 279,043 524,886 524,886 739,645 401,491 401,491 565,763
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK CHARGES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK CHARGES.
THESE VALUES REFLECT FRONT-END SALES LOADS OF 0% IN ALL YEARS. THE SURRENDER
CHARGE EFFECTIVE IN ANY YEAR CAN BE DETERMINED BY SUBTRACTING THE CASH
SURRENDER VALUE FROM THE ACCOUNT VALUE.
THE DEATH BENEFIT MAY, AND ACCOUNT VALUES AND CASH SURRENDER VALUES WILL,
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 49
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: RETURN OF ACCOUNT VALUE
GUARANTEE PERIOD: 1 YEAR
$250,000 FACE AMOUNT
ISSUE AGE: 45 MALE PREFERRED
$4,500 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.70% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED ----------------------------------- -----------------------------------
END OF AT 5% CASH CASH
POLICY INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------------- ------------- ----------- ----------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 4,725 3,625 3,175 253,625 3,625 3,175 253,625
2 9,686 7,241 6,8412 57,241 6,802 6,402 256,802
3 14,896 10,647 10,297 260,647 9,838 9,488 259,838
4 20,365 13,890 13,590 263,890 12,731 12,431 262,731
5 26,109 17,001 16,751 267,001 15,475 15,225 265,475
6 32,139 19,999 19,799 269,999 18,057 17,857 268,057
7 38,471 22,893 22,743 272,893 20,470 20,320 270,470
8 45,120 25,701 25,601 275,701 22,700 22,600 272,700
9 52,101 28,414 28,364 278,414 24,731 24,681 274,731
10 59,431 31,020 31,020 281,020 26,548 26,548 276,548
11 67,127 33,435 33,435 283,435 28,136 18,136 278,136
12 75,208 35,652 35,652 285,652 29,484 29,484 279,484
13 83,694 37,641 37,641 287,641 30,585 30,585 280,585
14 92,604 39,408 39,408 289,408 31,415 31,415 281,415
15 101,959 40,951 40,951 290,951 31,956 31,956 281,956
16 111,782 42,138 42,138 292,138 32,176 32,176 282,176
17 122,096 43,108 43,108 293,108 32,050 32,050 282,050
18 132,926 43,855 43,855 293,855 31,535 31,535 281,535
19 144,297 44,370 44,370 294,370 30,585 30,585 280,585
20 156,237 44,645 44,645 294,645 29,159 29,159 279,159
25 225,511 44,242 44,242 294,242 14,241 14,241 264,241
30 313,924 32,894 32,894 282,894 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK CHARGES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK CHARGES.
THESE VALUES REFLECT FRONT-END SALES LOADS OF 0% IN ALL YEARS. THE SURRENDER
CHARGE EFFECTIVE IN ANY YEAR CAN BE DETERMINED BY SUBTRACTING THE CASH
SURRENDER VALUE FROM THE ACCOUNT VALUE.
THE DEATH BENEFIT MAY, AND ACCOUNT VALUES AND CASH SURRENDER VALUES WILL,
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
50 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: RETURN OF ACCOUNT VALUE
GUARANTEE PERIOD: 1 YEAR
$250,000 FACE AMOUNT
ISSUE AGE: 45 MALE PREFERRED
$4,500 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.30% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED ----------------------------------- -----------------------------------
END OF AT 5% CASH CASH
POLICY INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------------- ------------- ----------- ----------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 4,725 3,864 3,414 253,864 3,864 3,414 253,864
2 9,686 7,943 7,543 257,943 7,491 7,091 257,491
3 14,896 12,041 11,691 262,041 11,180 10,830 261,180
4 20,365 16,201 15,901 266,201 14,928 14,628 264,928
5 26,109 20,454 20,204 270,454 18,727 18,477 268,727
6 32,139 24,820 24,620 274,820 22,565 22,365 272,565
7 38,471 29,310 29,160 279,310 26,431 26,281 276,431
8 45,120 33,946 33,846 283,946 30,307 30,207 280,307
9 52,101 38,722 38,672 288,722 34,175 34,125 284,175
10 59,431 43,629 43,629 293,629 38,014 38,014 288,014
11 67,127 48,584 48,584 298,584 41,804 41,804 291,804
12 75,208 53,575 53,575 303,575 45,525 45,525 295,525
13 83,694 58,571 58,571 308,571 49,161 49,161 299,161
14 92,604 63,571 63,571 313,571 52,683 52,683 302,683
15 101,959 68,570 68,570 318,570 56,057 56,057 306,057
16 111,782 73,426 73,426 323,426 59,242 59,242 309,242
17 122,096 78,270 78,270 328,270 62,197 62,197 312,197
18 132,926 83,090 83,090 333,090 64,860 64,860 314,860
19 144,297 87,872 87,872 337,872 67,166 67,166 317,166
20 156,237 92,601 92,601 342,601 69,048 69,048 319,048
25 225,511 120,053 120,053 370,053 71,824 71,824 321,824
30 313,924 141,905 141,905 391,905 50,165 50,165 300,165
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK CHARGES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK CHARGES.
THESE VALUES REFLECT FRONT-END SALES LOADS OF 0% IN ALL YEARS. THE SURRENDER
CHARGE EFFECTIVE IN ANY YEAR CAN BE DETERMINED BY SUBTRACTING THE CASH
SURRENDER VALUE FROM THE ACCOUNT VALUE.
THE DEATH BENEFIT MAY, AND ACCOUNT VALUES AND CASH SURRENDER VALUES WILL,
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 6%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 51
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: RETURN OF ACCOUNT VALUE
GUARANTEE PERIOD: 1 YEAR
$250,000 FACE AMOUNT
ISSUE AGE: 45 MALE PREFERRED
$4,500 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.30% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED ----------------------------------- -----------------------------------
END OF AT 5% CASH CASH
POLICY INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------------- ------------- ----------- ----------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 4,725 4,103 3,653 254,103 4,103 3,653 254,103
2 9,686 8,675 8,275 258,675 8,208 7,808 258,208
3 14,896 13,551 13,201 263,551 12,636 12,286 262,636
4 20,365 18,805 18,505 268,805 17,409 17,109 267,409
5 26,109 24,501 24,251 274,501 22,553 22,303 272,553
6 32,139 30,702 30,502 280,702 28,088 27,888 278,088
7 38,471 37,464 37,314 287,464 34,040 33,890 284,040
8 45,120 44,857 44,757 294,857 40,430 40,330 290,430
9 52,101 52,932 52,882 302,932 47,282 47,232 297,282
10 59,431 61,741 61,741 311,741 54,618 54,618 304,618
11 67,127 71,264 71,264 321,264 62,468 62,468 312,468
12 75,208 81,558 81,558 331,558 70,862 70,862 320,862
13 83,694 92,663 92,663 342,663 79,841 79,841 329,841
14 92,604 104,657 104,657 354,657 89,433 89,433 339,433
15 101,959 117,623 117,623 367,623 99,670 99,670 349,670
16 111,782 131,508 131,508 381,508 110,576 110,576 360,576
17 122,096 146,542 146,542 396,542 122,182 122,182 372,182
18 132,926 162,826 162,826 412,826 134,504 134,504 384,504
19 144,297 180,469 180,469 430,469 147,552 147,552 397,552
20 156,237 199,588 199,588 449,588 161,345 161,345 411,345
25 225,511 336,127 336,127 586,127 248,835 248,835 498,835
30 313,924 547,896 547,896 797,896 362,941 362,941 612,941
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK CHARGES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK CHARGES.
THESE VALUES REFLECT FRONT-END SALES LOADS OF 0% IN ALL YEARS. THE SURRENDER
CHARGE EFFECTIVE IN ANY YEAR CAN BE DETERMINED BY SUBTRACTING THE CASH
SURRENDER VALUE FROM THE ACCOUNT VALUE.
THE DEATH BENEFIT MAY, AND ACCOUNT VALUES AND CASH SURRENDER VALUES WILL,
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
52 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: RETURN OF PREMIUM
GUARANTEE PERIOD: 1 YEAR
$250,000 FACE AMOUNT
ISSUE AGE: 45 MALE PREFERRED
$4,300 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.70% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED ----------------------------------- -----------------------------------
END OF AT 5% CASH CASH
POLICY INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------------- ------------- ----------- ----------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 4,515 3,433 3,003 254,300 3,433 3,003 254,300
2 9,256 6,857 6,475 258,600 6,416 6,034 258,600
3 14,234 10,074 9,739 262,900 9,257 8,922 262,900
4 19,460 13,127 12,840 267,200 11,951 11,664 267,200
5 24,948 16,045 15,807 271,500 14,490 14,251 271,500
6 30,711 18,850 18,659 275,800 16,861 16,670 275,800
7 36,761 21,548 21,405 280,100 19,05 218,908 280,100
8 43,114 24,157 24,061 284,400 21,044 20,949 284,400
9 49,785 26,667 26,619 288,700 22,821 22,773 288,700
10 56,789 29,065 29,065 293,000 24,359 24,359 293,000
11 64,144 31,259 31,259 297,300 25,638 25,638 297,300
12 71,866 33,240 33,240 301,600 26,637 26,637 301,600
13 79,974 34,971 34,971 305,900 27,342 27,342 305,900
14 88,488 36,453 36,453 310,200 27,719 27,719 310,200
15 97,427 37,678 37,678 314,500 27,733 27,733 314,500
16 106,814 38,493 38,493 318,800 27,336 27,336 318,800
17 116,669 39,042 39,042 323,100 26,482 26,482 323,100
18 127,018 39,312 39,312 327,400 25,097 25,097 327,400
19 137,884 39,281 39,281 331,700 23,103 23,102 331,700
20 149,293 38,932 38,932 336,000 20,411 20,411 336,000
25 215,488 33,515 33,515 357,500 -- -- --
30 299,971 10,674 10,674 379,000 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK CHARGES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK CHARGES.
THESE VALUES REFLECT FRONT-END SALES LOADS OF 0% IN ALL YEARS. THE SURRENDER
CHARGE EFFECTIVE IN ANY YEAR CAN BE DETERMINED BY SUBTRACTING THE CASH
SURRENDER VALUE FROM THE ACCOUNT VALUE.
THE DEATH BENEFIT MAY, AND ACCOUNT VALUES AND CASH SURRENDER VALUES WILL,
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 53
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: RETURN OF PREMIUM
GUARANTEE PERIOD: 1 YEAR
$250,000 FACE AMOUNT
ISSUE AGE: 45 MALE PREFERRED
$4,300 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.30% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED ----------------------------------- -----------------------------------
END OF AT 5% CASH CASH
POLICY INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------------- ------------- ----------- ----------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 4,515 3,660 3,230 254,300 3,660 3,230 254,300
2 9,256 7,526 7,144 258,600 7,071 6,689 258,600
3 14,234 11,401 11,066 262,900 10,533 10,198 262,900
4 19,460 15,328 15,041 267,200 14,040 13,753 267,200
5 24,948 19,336 19,097 271,500 17,585 17,346 271,500
6 30,711 23,447 23,256 275,800 21,153 20,962 275,800
7 36,761 27,673 27,529 280,100 24,732 24,589 280,100
8 43,114 32,032 31,937 284,400 28,304 28,208 284,400
9 49,785 36,522 36,475 288,700 31,847 31,779 288,700
10 56,789 41,133 41,133 293,000 35,338 35,338 293,000
11 64,144 45,780 45,780 297,300 38,753 38,753 297,300
12 71,866 50,453 50,453 301,600 42,070 42,070 301,600
13 79,974 55,119 55,119 305,900 45,268 45,268 305,900
14 88,488 59,778 59,778 310,200 48,310 48,310 310,200
15 97,427 64,426 64,426 314,500 51,159 51,159 314,500
16 106,814 68,920 68,920 318,800 53,760 53,760 318,800
17 116,669 73,388 73,388 323,100 56,061 56,061 323,100
18 127,018 77,821 77,821 327,400 57,984 57,984 327,400
19 137,884 82,202 82,202 331,700 59,439 59,439 331,700
20 149,293 86,516 86,516 336,000 60,333 60,333 336,000
25 215,488 111,491 111,491 357,500 54,169 54,169 357,500
30 299,971 130,484 130,484 379,000 6,043 6,043 379,000
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK CHARGES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK CHARGES.
THESE VALUES REFLECT FRONT-END SALES LOADS OF 0% IN ALL YEARS. THE SURRENDER
CHARGE EFFECTIVE IN ANY YEAR CAN BE DETERMINED BY SUBTRACTING THE CASH
SURRENDER VALUE FROM THE ACCOUNT VALUE.
THE DEATH BENEFIT MAY, AND ACCOUNT VALUES AND CASH SURRENDER VALUES WILL,
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 6%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
54 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: RETURN OF PREMIUM
GUARANTEE PERIOD: 1 YEAR
$250,000 FACE AMOUNT
ISSUE AGE: 45 MALE PREFERRED
$4,300 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.30% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
ACCUMULATED ----------------------------------- -----------------------------------
END OF AT 5% CASH CASH
POLICY INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------------- ------------- ----------- ----------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 4,515 3,887 3,457 254,300 3,887 3,457 254,300
2 9,256 8,223 7,840 258,600 7,754 7,372 258,600
3 14,234 12,839 12,504 262,900 11,918 11,583 262,900
4 19,460 17,808 17,521 267,200 16,402 16,115 267,200
5 24,948 23,196 22,957 271,500 21,230 20,991 271,500
6 30,711 29,063 28,872 275,800 26,421 26,230 275,800
7 36,761 35,466 35,323 280,100 32,002 31,858 280,100
8 43,114 42,475 42,379 284,400 37,995 37,899 284,400
9 49,785 50,142 50,094 288,700 44,426 44,378 288,700
10 56,789 58,522 58,522 293,000 51,322 51,322 293,000
11 64,144 67,602 67,602 297,300 58,719 58,719 297,300
12 71,866 77,450 77,450 301,600 66,657 66,657 301,600
13 79,974 88,120 88,120 305,900 75,187 75,187 305,900
14 88,488 99,708 99,708 310,200 84,357 84,357 310,200
15 97,427 112,316 112,316 314,500 94,221 94,221 314,500
16 106,814 125,951 125,951 318,800 104,835 104,835 318,800
17 116,669 140,851 140,851 323,100 116,271 116,271 323,100
18 127,018 157,166 157,166 327,400 128,600 128,600 327,400
19 137,884 175,060 175,060 331,700 141,907 141,907 331,700
20 149,293 194,718 194,718 342,384 156,300 156,300 336,000
25 215,488 335,067 335,067 523,207 256,481 256,481 400,495
30 299,971 552,426 552,426 778,452 402,823 402,823 567,640
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK CHARGES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK CHARGES.
THESE VALUES REFLECT FRONT-END SALES LOADS OF 0% IN ALL YEARS. THE SURRENDER
CHARGE EFFECTIVE IN ANY YEAR CAN BE DETERMINED BY SUBTRACTING THE CASH
SURRENDER VALUE FROM THE ACCOUNT VALUE.
THE DEATH BENEFIT MAY, AND ACCOUNT VALUES AND CASH SURRENDER VALUES WILL,
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 55
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
ITT Hartford Life and Annuity Insurance Company:
We have audited the accompanying statutory-basis balance sheets of ITT Hartford
Life and Annuity Insurance Company (a Connecticut Corporation and wholly owned
subsidiary of Hartford Life Insurance Company) (the Company) as of December 31,
1996 and 1995, and the related statutory-basis statements of income, changes in
capital and surplus, and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
statutory-basis financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The Company presents its financial statements in conformity with statutory
accounting practices as described in Note 1 of notes to statutory-basis
financial statements. When statutory-basis financial statements are presented
for purposes other than for filing with a regulatory agency, generally accepted
auditing standards require that an auditors' report on them state whether they
are presented in conformity with generally accepted accounting principles. The
accounting practices used by the Company vary from generally accepted accounting
principles as explained and quantified in Note 1. In our opinion, because the
differences in accounting practices as described in Note 1 are material, the
statutory-basis financial statements referred to above do not present fairly, in
accordance with generally accepted accounting principles, the financial position
of the Company as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996.
However, in our opinion, the statutory-basis financial statements referred to
above present fairly, in all material respects, the financial position of the
Company as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 1996
in conformity with statutory accounting practices as described in Note 1.
As discussed in Note 1 of notes to statutory financial statements, during 1994,
the Company changed its valuation method in determining aggregate reserves for
future benefits.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 10, 1997
<PAGE>
56 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATUTORY BASIS STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
($000)
<S> <C> <C> <C>
Revenues
Premiums and Annuity Considerations.... $ 250,244 $ 165,792 $ 442,173
Annuity and Other Fund Deposits........ 1,897,347 1,087,661 608,685
Net Investment Income.................. 98,441 78,787 29,012
Commissions and Expense Allowances on
Reinsurance Ceded..................... 370,637 183,380 154,527
Reserve Adjustment on Reinsurance
Ceded................................. 3,864,395 1,879,785 1,266,926
Other Revenues......................... 161,906 140,796 41,857
---------- ---------- ----------
Total Revenues....................... 6,642,970 3,536,201 2,543,180
---------- ---------- ----------
Benefits and Expenses
Death and Annuity Benefits............. 60,111 53,029 7,948
Surrenders and Other Benefit
Payments.............................. 276,720 221,392 181,749
Commissions and Other Expenses......... 491,720 236,202 186,303
Increase in Reserves for Future
Benefits.............................. 27,351 94,253 416,748
Increase in Liability for Premium and
Other Deposit Funds................... 207,156 460,124 182,934
Net Transfers to Separate Accounts..... 5,492,964 2,414,669 1,541,419
---------- ---------- ----------
Total Benefits and Expenses.......... 6,556,022 3,479,669 2,517,101
---------- ---------- ----------
Net Gain from Operations Before Federal
Income Tax Expense...................... 86,948 56,532 26,079
Federal Income Tax Expense............. 19,360 14,048 24,038
---------- ---------- ----------
Net Gain from Operations................. 67,588 42,484 2,041
Net Realized Capital Gains (Losses).... 407 374 (2)
---------- ---------- ----------
Net Income............................... $ 67,995 $ 42,858 $ 2,039
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 57
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATUTORY BASIS BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------
1996 1995
----------- ----------
<S> <C> <C>
($000)
Assets
Bonds........................................... $ 1,268,480 $1,226,489
Common Stocks................................... 44,996 39,776
Policy Loans.................................... 28,853 22,521
Cash and Short-Term Investments................. 176,830 173,304
Other Invested Assets........................... 2,858 13,432
----------- ----------
Total Cash and Invested Assets................ 1,522,017 1,475,522
----------- ----------
Investment Income Due and Accrued............... 14,555 18,021
Premium Balances Receivable..................... 373 402
Receivables from Affiliates..................... 257 8,182
Other Assets.................................... 19,099 25,907
Separate Account Assets......................... 14,619,324 7,324,910
----------- ----------
Total Assets.................................. $16,175,625 $8,852,944
----------- ----------
----------- ----------
Liabilities
Aggregate Reserves for Future Benefits.......... $ 571,970 $ 542,082
Policy and Contract Claims...................... 6,806 8,223
Liability for Premium and Other Deposit Funds... 1,155,143 948,361
Asset Valuation Reserve......................... 7,442 8,010
Payable to Affiliates........................... 10,022 3,682
Other Liabilities............................... (498,195) (220,658)
Separate Account Liabilities.................... 14,619,324 7,324,910
----------- ----------
Total Liabilities............................. 15,872,512 8,614,610
----------- ----------
Capital and Surplus
Common Stock.................................... 2,500 2,500
Gross Paid-In and Contributed Surplus........... 226,043 226,043
Unassigned Funds................................ 74,570 9,791
----------- ----------
Total Capital and Surplus..................... 303,113 238,334
----------- ----------
Total Liabilities and Capital and Surplus....... $16,175,625 $8,852,944
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
58 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATUTORY BASIS STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
--------- --------- --------
<S> <C> <C> <C>
($000)
Capital and Surplus -- Beginning of
Year................................... $ 238,334 $ 91,285 $ 88,693
--------- --------- --------
Net Income............................ 67,995 42,858 2,039
Change in Net Unrealized Capital
(Losses) Gains on Common Stocks...... (5,171) 1,709 (133)
Change in Asset Valuation Reserve..... 568 (5,588) (1,356)
Change in Non-Admitted Assets......... 1,387 (1,944) (8,599)
Change in Reserve (Valuation Basis)... -- -- 10,659
Aggregate Write-ins for Surplus....... -- 8,080 (18)
Dividends to Shareholder.............. -- (10,000) --
Paid-In Surplus....................... -- 111,934 --
--------- --------- --------
Change in Capital and Surplus....... 64,779 147,049 2,592
--------- --------- --------
Capital and Surplus -- End of Year...... $ 303,113 $ 238,334 $ 91,285
--------- --------- --------
--------- --------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 59
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATUTORY BASIS STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
($000)
Operations
Premiums, Annuity Considerations and
Other Fund Deposits.................. $ 2,147,627 $ 1,253,511 $ 1,050,493
Net Investment Income................. 106,178 78,328 24,519
Other Revenues........................ 4,396,892 2,253,466 1,515,700
----------- ----------- -----------
Total Revenues...................... 6,650,697 3,585,305 2,590,712
----------- ----------- -----------
Benefits Paid......................... 338,998 277,965 181,205
Federal Income Taxes Paid on
Operations........................... 28,857 208,423 20,634
Other Expenses........................ 6,254,139 2,664,385 1,832,905
----------- ----------- -----------
Total Benefits and Expenses......... 6,621,994 3,150,773 2,034,744
----------- ----------- -----------
Net Cash from Operations............ 28,703 434,532 555,968
----------- ----------- -----------
Proceeds from Investments
Bonds................................. 871,019 287,941 87,747
Common Stocks......................... 72,100 52 --
Other................................. 10 28 40
----------- ----------- -----------
Total Investment Proceeds........... 943,129 288,021 87,787
----------- ----------- -----------
Taxes (Paid) Received on Capital (Gains)
Losses................................. (936) (226) 96
Paid-In Surplus......................... -- 111,934 --
Other Cash Provided..................... 41,998 28,199 30,554
----------- ----------- -----------
Total Proceeds...................... 1,012,894 862,460 674,405
----------- ----------- -----------
Cost of Investments Acquired
Bonds................................. 914,523 720,521 595,181
Common Stocks......................... 82,495 35,794 808
Miscellaneous Applications............ 130 2,146 2,523
----------- ----------- -----------
Total Investments Acquired.......... 997,148 758,461 598,512
----------- ----------- -----------
Other Cash Applied
Dividends Paid to Shareholders........ -- 10,000 --
Other................................. 12,220 5,007 24,813
----------- ----------- -----------
Total Other Cash Applied............ 12,220 15,007 24,813
----------- ----------- -----------
Total Applications................ 1,009,368 773,468 623,325
----------- ----------- -----------
Net Change in Cash and Short-Term
Investments............................ 3,526 88,992 51,080
Cash and Short-Term Investments,
Beginning of Year...................... 173,304 84,312 33,232
----------- ----------- -----------
Cash and Short-Term Investments, End of
Year................................... $ 176,830 $ 173,304 $ 84,312
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
60 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
- ---------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
ITT Hartford Life and Annuity Insurance Company ("ILA" or "the Company"),
formerly known as ITT Life Insurance Corporation, is a wholly owned subsidiary
of Hartford Life Insurance Company ("HLIC"), which is an indirect subsidiary of
Hartford Life, Inc. ("Hartford Life"), which is ultimately owned by ITT Hartford
Group, Inc. ("The Hartford"), formerly a wholly owned subsidiary of ITT
Corporation ("ITT"). On February 10, 1997, The Hartford announced its plans to
sell up to 20% of Hartford Life to the public. On December 19, 1995, ITT
Corporation distributed all the outstanding shares of The Hartford to ITT
shareholders of record in an action known herein as the "Distribution". As a
result of the Distribution, The Hartford became an independent, publicly traded
company. During 1996, ILA re-domesticated from the State of Wisconsin to the
State of Connecticut.
ILA offers a complete line of ordinary and universal life insurance,
individual annuities and certain supplemental accident and health benefit
coverages.
BASIS OF PRESENTATION
The accompanying ILA statutory-basis financial statements were prepared in
conformity with statutory accounting practices prescribed or permitted by the
National Association of Insurance Commissioners ("NAIC") and the State of
Connecticut Department of Insurance.
The preparation of financial statements in conformity with statutory
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 reported period. Actual
results could differ from those estimates.
Statutory accounting practices and generally accepted accounting principles
("GAAP") differ in certain significant respects. These differences principally
involve:
(1) treatment of policy acquisition costs (commissions, underwriting and
selling expenses, premium taxes, etc.) which are charged to expense when
incurred for statutory purposes rather than on a pro-rata basis over the
expected life of the policy;
(2) recognition of premium revenues, which for statutory purposes are
generally recorded as collected or when due during the premium paying period
of the contract and which for GAAP purposes, generally, for universal life
policies and investment products, are only recorded for policy charges for
the cost of insurance, policy administration and surrender charges assessed
to policy account balances. Also, for GAAP purposes, premiums for
traditional life insurance policies are recognized as revenues when they are
due from policyholders and the retrospective deposit method is used in
accounting for universal life and other types of contracts where the payment
pattern is irregular or surrender charges are a significant source of
profit. The prospective deposit method is used for GAAP purposes where
investment margins are the primary source of profit;
(3) development of liabilities for future policy benefits, which for
statutory purposes predominantly use interest rate and mortality assumptions
prescribed by the NAIC which may vary considerably from interest and
mortality assumptions used for GAAP financial reporting;
(4) providing for income taxes based on current taxable income (tax return)
only for statutory purposes, rather than establishing additional assets or
liabilities for deferred Federal income taxes to recognize the tax effect
related to reporting revenues and expenses in different periods for
financial reporting and tax return purposes;
(5) excluding certain GAAP assets designated as non-admitted assets (e.g.,
past due agents' balances and furniture and equipment) from the balance
sheet for statutory purposes by directly charging surplus;
(6) establishing accruals for post-retirement and post-employment health
care benefits on an option basis, using a twenty year phase-in approach,
whereas GAAP liabilities are required to be recorded;
(7) establishing a formula reserve for realized and unrealized losses due to
default and equity risk associated with certain invested assets (Asset
Valuation Reserve); as well as the deferral and amortization of realized
gains and losses, motivated by changes in interest rates during the period
the asset is held, into income over the remaining life to maturity of the
asset sold (Interest Maintenance Reserve); whereas on a GAAP basis, no such
formula reserve is required and
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 61
- --------------------------------------------------------------------------------
realized gains and losses are recognized in the period the asset is sold;
(8) the reporting of reserves and benefits net of reinsurance ceded, where
risk transfer has taken place; whereas on a GAAP basis, reserves are
reported gross of reinsurance with reserve credits presented as recoverable
assets;
(9) the reporting of fixed maturities at amortized cost, whereas GAAP
requires that fixed maturities be classified as "held-to-maturity",
"available-for-sale" or "trading", based on the Company's intentions with
respect to the ultimate disposition of the security and its ability to
affect those intentions. The Company's fixed maturities were classified on a
GAAP basis as "available-for- sale" and accordingly, those investments were
reflected at fair value with the corresponding impact included as a
component of Stockholder's Equity designated as "Net unrealized capital
(loss)/ gain on investments, net of tax". For statutory reporting purposes,
Net Unrealized Capital Losses (Gains) on Common Stocks represent unrealized
losses (gains) on common stock reported at fair value; and
(10) separate account liabilities are valued on the Commissioner's Annuity
Reserve Valuation Method ("CARVM"), with the surplus generated recorded as a
liability to the general account (and a contra liability on the balance
sheet of the general account), whereas GAAP liabilities are valued at
account value.
As of and for the years ended December 31, 1996, 1995 and 1994, the
significant differences between statutory and GAAP basis net income and capital
and surplus for the Company are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
GAAP Net Income................ $ 41,202 $ 38,821 $ 23,295
Amortization and deferral of
policy acquisition costs...... (341,572) (174,341) (117,863)
Change in unearned revenue
reserve....................... 55,504 32,300 24,494
Deferred taxes................. 2,090 2,801 (9,267)
Separate accounts.............. 306,978 146,635 75,941
Other, net..................... 3,793 (3,358) 5,439
----------- ----------- -----------
Statutory Net Income........... $ 67,995 $ 42,858 $ 2,039
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
GAAP Capital and Surplus....... $ 503,887 $ 455,541 $ 199,785
Deferred policy acquisition
costs......................... (938,114) (596,542) (422,201)
Unearned revenue reserve....... 130,148 74,644 42,344
Deferred taxes................. 12,823 1,493 13,257
Separate accounts.............. 640,101 333,123 186,488
Asset valuation reserve........ (7,442) (8,010) (2,422)
Unrealized gain (loss) on
bonds......................... 5,112 (1,696) 21,918
Adjustment relating to Lyndon
contribution (see Note 3)..... (41,277) (41,277) --
Other, net..................... (2,125) 21,058 52,116
----------- ----------- -----------
Statutory Capital and
Surplus....................... $ 303,113 $ 238,334 $ 91,285
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
AGGREGATE RESERVES AND LIABILITIES FOR PREMIUM AND OTHER DEPOSIT FUNDS
Aggregate reserves for payment of future life, health and annuity benefits
were computed in accordance with actuarial standards. Reserves for life
insurance policies are generally based on the 1958 and 1980 Commissioner's
Standard Ordinary Mortality Tables and various valuation rates ranging from 2.5%
to 5%. Accumulation and on-benefit annuity reserves are based principally on
individual annuity tables at various rates ranging from 2.5% to 8.75% and using
CARVM. Accident and health reserves are established using a two year preliminary
term method and morbidity tables based on Company experience.
ILA has established separate accounts to segregate the assets and
liabilities of certain annuity contracts that must be segregated from the
Company's general assets under the terms of the contracts. The assets consist
primarily of marketable securities reported at market value. Premiums, benefits
and expenses of these contracts are reported in the Statutory Basis Statements
of Income.
During 1994, the Company changed the valuation method on aggregate reserves
for future benefits resulting in a $10.7 million increase in surplus. The new
valuation method is in accordance with presently accepted actuarial standards.
INVESTMENTS
Investments in bonds are carried at amortized cost. Bonds which are deemed
ineligible to be held at amortized cost by the NAIC Securities Valuation Office
("SVO")are carried at the appropriate SVO published value. When a permanent
reduction in the value of publicly traded securities occurs, the decrease is
reported as a realized loss and the carrying value is adjusted accordingly.
Common stocks are carried at market value with the difference from cost
reflected in surplus. Other invested assets are generally recorded at fair
value.
<PAGE>
62 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Changes in net unrealized capital (losses)/gains on common stocks are
reported as (reductions)/additions of surplus. The Asset Valuation Reserve
("AVR") is designed to provide a standardized reserving process for realized and
unrealized losses due to default and equity risks associated with invested
assets. The reserve decreased by $568 in 1996 and increased by $5,588 and $1,356
in 1995 and 1994, respectively. Additionally, the Interest Maintenance Reserve
("IMR") captures net realized capital gains and losses, net of applicable income
taxes, resulting from changes in interest rates and amortizes these gains or
losses into income over the remaining life of the mortgage loan or bond sold.
Realized capital gains and losses, net of taxes not included in IMR are reported
in the Statutory Basis Statements of Income. Realized investment gains and
losses are determined on a specific identification basis. The amount of net
capital gains reclassified from the IMR was $1,413 and $39 in 1996 and 1995,
respectively, and the amount of net capital losses was $67 in 1994. The amount
of income amortized was $392, $256 and $114 in 1996, 1995 and 1994,
respectively.
OTHER LIABILITIES
The amount reflected in other liabilities includes a receivable from the
separate accounts of $640 million and $333 million as of December 31, 1996 and
1995, respectively. The balances are classified in accordance with NAIC
accounting practices.
- ---------------------------------------------------
2. INVESTMENTS
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Interest income from
bonds.................... $ 89,940 $ 76,100 $ 28,335
Interest income from
policy loans............. 1,846 1,504 454
Interest and dividends
from other investments... 7,864 2,288 1,069
--------- --------- ---------
Gross investment income... 99,650 79,892 29,858
Less: investment
expenses................. 1,209 1,105 846
--------- --------- ---------
Net investment income..... $ 98,441 $ 78,787 $ 29,012
--------- --------- ---------
--------- --------- ---------
</TABLE>
(B) COMPONENTS OF NET UNREALIZED CAPITAL (LOSSES) GAINS ON COMMON STOCKS
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Gross unrealized capital gains
at end of year............... $ 713 $ 1,724 $ 75
Gross unrealized capital
losses at end of year........ (4,160) -- (60)
--------- --------- ---------
Net unrealized capital
(losses) gains............... (3,447) 1,724 15
Balance at beginning of
year......................... 1,724 15 148
--------- --------- ---------
Change in net unrealized
capital (losses) gains on
common stocks................ $ (5,171) $ 1,709 $ (133)
--------- --------- ---------
--------- --------- ---------
</TABLE>
(C) COMPONENTS OF NET UNREALIZED CAPITAL (LOSSES) GAINS ON BONDS AND SHORT-TERM
INVESTMENTS
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Gross unrealized
capital gains at end
of year............... $ 11,821 $ 22,251 $ 986
Gross unrealized
capital losses at end
of year............... (3,842) (1,374) (34,718)
---------- ---------- ----------
Net unrealized capital
gains (losses) after
tax................... 7,979 20,877 (33,732)
Balance at beginning of
year.................. 20,877 (33,732) 5,232
---------- ---------- ----------
Change in net
unrealized capital
(losses) gains on
bonds and short-term
investments........... $ (12,898) $ 54,609 $ (38,964)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
(D) COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Bonds and short-term
investments.................... $ 2,756 $ 156 $ (101)
Common stocks................... 0 52 0
Real estate and other........... 0 0 34
--------- --------- ---------
Realized capital gains
(losses)....................... 2,756 208 (67)
Capital gains taxes (benefit)... 936 (205) 2
--------- --------- ---------
Net realized capital gains
(losses) after tax............. 1,820 413 (69)
Less: IMR capital gains
(losses)....................... 1,413 39 (67)
--------- --------- ---------
Net realized capital gains
(losses)....................... $ 407 $ 374 $ (2)
--------- --------- ---------
--------- --------- ---------
</TABLE>
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 63
- --------------------------------------------------------------------------------
(E) OFF-BALANCE SHEET INVESTMENTS
The Company had no significant financial instruments with off-balance sheet
risk as of December 31, 1996 and 1995.
(F) CONCENTRATION OF CREDIT RISK
Excluding U.S. government and government agency investments, the Company is
not exposed to any significant concentration of credit risk.
(G) BONDS, SHORT-TERM AND COMMON STOCK INVESTMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
------------------------------------------------
GROSS UNREALIZED
AMORTIZED -------------------- FAIR
COST GAINS LOSSES VALUE
------------ --------- --------- ------------
<S> <C> <C> <C> <C>
U.S. government and government agencies and authorities:
(Guaranteed and sponsored)............................................. $ 58,761 $ 6 $ (195) $ 58,572
(Guaranteed and sponsored) -- asset-backed............................. 78,237 1,477 (609) 79,105
States, municipalities and political subdivisions........................ 25,958 163 (2) 26,119
International governments................................................ 7,447 205 -- 7,652
Public utilities......................................................... 70,116 396 (424) 70,088
All other corporate...................................................... 410,530 6,357 (1,355) 415,532
All other corporate -- asset-backed...................................... 485,953 2,654 (1,081) 487,526
Short-term investments................................................... 148,094 -- (66) 148,028
Certificates of deposit.................................................. 83,378 563 (110) 83,831
Parents, subsidiaries and affiliates..................................... 48,100 -- -- 48,100
------------ --------- --------- ------------
Total bonds and short-term investments................................. $ 1,416,574 $ 11,821 $ (3,842) $ 1,424,553
------------ --------- --------- ------------
------------ --------- --------- ------------
Common stock -- unaffiliated............................................. $ 13,064 $ 713 $ 0 $ 13,777
Common stock -- affiliated............................................... 35,379 0 4,160 31,219
------------ --------- --------- ------------
Total common stocks...................................................... $ 48,443 $ 713 $ 4,160 $ 44,996
------------ --------- --------- ------------
------------ --------- --------- ------------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995
----------------------------------------------------
GROSS UNREALIZED
AMORTIZED ------------------------ FAIR
COST GAINS LOSSES VALUE
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
U.S. government and government agencies and authorities:
(Guaranteed and sponsored)........................................... $ 44,268 $ 14 $ (248) $ 44,034
(Guaranteed and sponsored) -- asset-backed........................... 176,160 4,644 (682) 180,122
States, municipalities and political subdivisions...................... 16,948 38 (6) 16,980
International governments.............................................. 5,402 441 -- 5,843
Public utilities....................................................... 108,083 1,652 (90) 109,645
All other corporate.................................................... 374,058 8,145 (248) 381,955
All other corporate -- asset-backed.................................... 410,197 5,841 (89) 415,949
Short-term investments................................................. 139,011 18 -- 139,029
Certificates of deposit................................................ 91,373 1,458 (11) 92,820
------------ ----------- ----------- ------------
Total bonds and short-term investments............................... $ 1,365,500 $ 22,251 $ (1,374) $ 1,386,377
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
Common stock -- unaffiliated........................................... $ 2,668 $ 555 $ -- $ 3,223
Common stock -- affiliated............................................. 35,384 1,169 -- 36,553
------------ ----------- ----------- ------------
Total common stocks.................................................. $ 38,052 $ 1,724 $ -- $ 39,776
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
</TABLE>
The amortized cost and estimated market value of bonds and short-term
investments at December 31, 1996 by management's anticipated maturity are shown
below. Asset-backed securities are distributed to maturity year based on ILA's
estimate of the rate of future prepayments of principal
<PAGE>
64 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
over the remaining life of the securities. Expected maturities differ from
contractual maturities reflecting borrowers' rights to call or prepay their
obligations.
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED FAIR
MATURITY COST VALUE
- ------------------------------ ------------ ------------
<S> <C> <C>
Due in one year or less....... $ 478,095 $ 478,852
Due after one year through
five years................... 622,805 623,105
Due after five years through
ten years.................... 259,479 265,681
Due after ten years........... 56,195 56,915
------------ ------------
Total....................... $ 1,416,574 $ 1,424,553
</TABLE>
Proceeds from sales of investments in bonds and short-term investments
during 1996, 1995 and 1994 were $668,078, $313,961 and $117,912, respectively,
resulting in gross realized gains of $3,675, $1,419 and $518, respectively, and
gross realized losses of $919, $1,263 and $619, respectively, before transfers
to IMR. The Company had realized gains of $52 during 1995 from a capital gain
distribution.
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS
BALANCE SHEET ITEMS (IN MILLIONS):
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Assets
Bonds and short-term
investments......... $ 1,417 $ 1,425 $ 1,366 $ 1,386
Common stocks........ 45 45 40 40
Policy loans......... 29 29 23 23
Other invested
assets.............. 3 3 13 13
Liabilities
Liabilities on
investment
contracts........... $ 1,245 $ 1,191 $ 1,031 $ 981
</TABLE>
The carrying amounts for policy loans approximates fair value. The
liabilities are determined by forecasting future cash flows and discounting the
forecasted cash flows at current market rates.
- ---------------------------------------------------
3. RELATED PARTY TRANSACTIONS
Transactions between the Company and its affiliates within The Hartford
relate principally to tax settlements, reinsurance, service fees, capital
contributions and payments of dividends.
On June 30, 1995, the assets of Lyndon Insurance Company were contributed to
ILA. As a result, ILA received approximately $365 million in bonds and short-
term investments, common stocks and cash, $28 million in policy reserves, $187
million of current tax liability, $26 million in IMR, $8 million in AVR (offset
by an aggregate write-in to surplus), and $4 million of other liabilities. The
assets in excess of liabilities of $112 million were recorded as an increase to
paid-in surplus.
For additional information, see Note 5.
- ---------------------------------------------------
4. FEDERAL INCOME TAXES
The Company and The Hartford have entered into a tax sharing agreement under
which each member in the consolidated U.S. Federal income tax return will make
payments between them such that, with respect to any period, the amount of taxes
to be paid by the Company, subject to certain adjustments, generally will be
determined as though the Company were to file separate federal, state and local
income tax returns.
As long as The Hartford continues to beneficially own, directly or
indirectly, at least 80% of the combined voting power and 80% of the value of
the outstanding capital stock of Hartford Life, the Company will be included for
Federal income tax purposes in the consolidated group of which The Hartford is
the common parent. It is the current intention of The Hartford and its
subsidiaries to continue to file a single consolidated Federal income tax
return. The Company will continue to remit (receive from) The Hartford a current
income tax provision (benefit) computed in accordance with such tax sharing
agreement. Federal income taxes paid by the Company were $29,792, $215,921 and
$20,538 in 1996, 1995 and 1994, respectively. The effective tax rate was 22%,
25% and 92% in 1996, 1995 and 1994, respectively. The following schedule
provides a reconciliation of the tax provision at the U.S. Federal Statutory
rate to Federal income tax expense (in millions).
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- -----
<S> <C> <C> <C>
Tax provision at U.S. Federal statutory rate..... $ 30 $ 20 $ 9
Tax deferred acquisition costs................... 27 8 8
Statutory to tax reserve differences............. -- 3 5
Unrealized (gain)/loss on separate accounts...... (21) (13) 2
Investments and other............................ (17) (4) --
--------- --------- ---
Federal income tax expense....................... $ 19 $ 14 $ 24
--------- --------- ---
--------- --------- ---
</TABLE>
- ---------------------------------------------------
5. CAPITAL AND SURPLUS AND SHAREHOLDER
DIVIDEND RESTRICTIONS
The maximum amount of dividends which can be paid, without prior approval,
by State of Connecticut insurance companies to shareholders is subject to
restrictions relating to statutory surplus. Dividends are paid as determined by
the Board of Directors and are not cumulative. No dividends were paid in 1996 or
1994. ILA paid dividends of $10 million to its parent, HLIC, in 1995. As a
result of the Distribution by ITT, the assets of ITT Lyndon Insurance
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 65
- --------------------------------------------------------------------------------
Company (Lyndon) were contributed to ILA in June 1995. Substantially all the
business was removed from Lyndon prior to the contribution. The amount of assets
which exceeded liabilities at the contribution date ($112 million) was included
in paid-in surplus.
- ---------------------------------------------------
6. PENSION PLANS AND OTHER POST-RETIREMENT
AND POST-EMPLOYMENT BENEFITS
The Company's employees are included in The Hartford's non-contributory
defined benefit pension plans. These plans provide pension benefits that are
based on years of service and the employee's compensation during the last ten
years of employment. The Company's funding policy is to contribute annually an
amount between the minimum funding requirements set forth in the Employee
Retirement Income Security Act of 1974 and the maximum amount that can be
deducted for Federal income tax purposes. Generally, pension costs are funded
through the purchase of HLIC's group pension contracts. Pension expense was
$358, $1,034, and $1,211 in 1996, 1995 and 1994, respectively. Liabilities for
the plan are held by The Hartford.
The Company also participates in The Hartford's Investment and Savings Plan,
which includes a deferred compensation option under IRC section 401(k) and an
ESOP allocation under IRC section 404(k). The liabilities for these plans are
included in the financial statements of The Hartford. The cost to ILA was not
material in 1996, 1995 and 1994.
The Company's employees are included in The Hartford's contributory defined
health care and life insurance benefit plans. These plans provide health care
and life insurance benefits for retired employees. Substantially all employees
may become eligible for those benefits if they reach normal or early retirement
age while still working for the Company. The Company has prefunded a portion of
the health care and life insurance obligations through trust funds where such
prefunding can be accomplished on a tax effective basis. Amounts allocated by
The Hartford for post-retirement health care and life insurance benefits expense
(not including provisions for accrual of post-retirement benefit obligations)
are immaterial. The assumed rate of future increases in the per capita cost of
health care (the health care trend rate) was 9.3% for 1996, decreasing ratably
to 6% in the year 2001. Increasing the health care trend rates by one percent
per year would have an immaterial impact on the accumulated post-retirement
benefit obligation and the annual expense. The cost to ILA was not material in
1996, 1995 and 1994.
Post-employment benefits are primarily comprised of obligations to provide
medical and life insurance to employees on long-term disability. Post-employment
benefit expense was not material in 1996, 1995 and 1994.
- ---------------------------------------------------
7. REINSURANCE
The Company cedes insurance to non-affiliated insurers in order to limit its
maximum loss. Such transfer does not relieve ILA of its primary liability. ILA
also assumes insurance from other insurers.
Life insurance net retained premiums were comprised of the following:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Direct premiums................... $ 226,612 $ 159,918 $ 133,180
Premiums assumed.................. 33,817 13,299 960
Premiums ceded.................... (10,185) (7,425) 308,033
---------- ---------- ----------
Premiums and annuity
considerations................... $ 250,244 $ 165,792 $ 442,173
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The Company ceded to a third party, on a modified coinsurance basis, 80% of
the variable annuity business written in 1994. The ceded business includes both
general and separate account liabilities. As a result of the agreement, in
December 1994, ILA transferred approximately $1,352 million in assets and
liabilities. The financial impact of the cession was an increase of
approximately $15 million to net income and surplus in 1994.
In November 1994, the Company ceded, on a modified coinsurance basis, 30% of
the separate account variable annuity business distributed by Paine Webber to
Paine Webber Life Insurance Company ("PWLIC"). As a result of the agreement, ILA
transferred approximately $24 million in assets and liabilities to PWLIC. The
financial impact of the cession was an increase of approximately $765 to net
income and surplus in 1994.
In October 1994, the agreement, effective December 1990, which required ILA
to coinsure 90% of all existing and new business, excluding variable annuity
business, written by the Company to HLIC, was terminated. As a result of the
termination, ILA received approximately $430 million in assets and liabilities
from HLIC. The impact of the transaction was a decrease of approximately $15
million to net income and surplus in 1994.
In November 1993, ILA acquired, through an assumption reinsurance
transaction, substantially all of the individual fixed and variable annuity
business of Hartford Life and Accident, an affiliate. As a result of this
transaction, the assets and liabilities of the Company increased approximately
$1 billion, substantially all of which was transferred to the separate accounts
of the Company. The remaining assets and liabilities (approximately $41 million)
were transferred in October 1995. The impact of these transactions on net income
and surplus was not significant.
<PAGE>
66 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- ---------------------------------------------------
8. SEPARATE ACCOUNTS
The Company maintains separate account assets and liabilities totaling $14.6
billion and $7.3 billion at December 31, 1996 and 1995, respectively. Separate
account assets are reported at fair value and separate account liabilities are
determined in accordance with CARVM, which approximates the market value less
applicable surrender charges. Separate account assets are segregated from other
investments, the policyholder assumes the investment risk, and the investment
income and gains and losses accrue directly to the policyholder. Separate
account management fees, net of minimum guarantees, were $144 million, $72
million and $42 million in 1996, 1995 and 1994, respectively, and are recorded
as a component of other revenues on the Statutory Basis Statements of Income.
- ---------------------------------------------------
9. COMMITMENTS AND CONTINGENCIES
As of December 31, 1996 and 1995, the Company had no material contingent
liabilities, nor had the Company committed any surplus funds for any contingent
liabilities or arrangements. The Company is involved in various legal actions
which have arisen in the normal course of its business. In the opinion of
management, the ultimate liability with respect to such lawsuits as well as
other contingencies is not considered to be material in relation to the results
of operations and financial position of the Company.
Under insurance guaranty 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 ILA under these
laws cannot be reasonably estimated. Most of the 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. ILA paid guaranty
fund assessments of $1,262, $1,684 and $583 in 1996, 1995 and 1994,
respectively. ILA incurred guaranteed fund expense of $548, $0 and $0 in 1996,
1995 and 1994, respectively.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 67
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ITT Hartford Life and Annuity Insurance Company
Separate Account Variable Life One and to the
Owners of Units of Interest Therein:
We have audited the accompanying statement of assets and liabilities of the Bond
Fund Sub-Account, Stock Fund Sub-Account, Money Market Fund Sub-Account,
Advisers Fund Sub-Account, Capital Appreciation Fund Sub-Account, Mortgage
Securities Fund Sub-Account, Index Fund Sub-Account, International Opportunities
Fund Sub-Account, Dividend and Growth Fund Sub-Account, Fidelity VIP Equity
Income Portfolio Sub-Account, Fidelity VIP Overseas Portfolio Sub-Account and
Fidelity VIP II Asset Manager Portfolio Sub-Account (constituting ITT Hartford
Life and Annuity Insurance Company Separate Account Variable Life One) (the
Accounts) as of December 31, 1996, and the related statements of operations and
changes in net assets for the period from inception, October 3, 1996, to
December 31, 1996. These financial statements are the responsibility of the
Accounts' management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Bond Fund Sub-Account,
Stock Fund Sub-Account, Money Market Fund Sub-Account, Advisers Fund
Sub-Account, Capital Appreciation Fund Sub-Account, Mortgage Securities Fund
Sub-Account, Index Fund Sub-Account, International Opportunities Fund
Sub-Account, Dividend and Growth Fund Sub-Account, Fidelity VIP Equity Income
Portfolio Sub-Account, Fidelity VIP Overseas Portfolio Sub-Account and Fidelity
VIP II Asset Manager Portfolio Sub-Account (constituting ITT Hartford Life and
Annuity Insurance Company Separate Account Variable Life One) as of December 31,
1996, the results of its operations and the changes in its net assets for the
period from inception, October 3, 1996, to December 31, 1996, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 14, 1997
<PAGE>
68 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Separate Account Variable Life One
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Investments:
Hartford Bond Fund,
Inc.
Shares 1,145
Cost $1,132
Market Value......... $ 1,144 -- -- --
Hartford Stock Fund,
Inc.
Shares 298
Cost $1,173
Market Value......... -- $ 1,234 -- --
HVA Money Market Fund,
Inc.
Shares 411,950
Cost $411,950
Market Value: -- -- $ 411,950 --
Hartford Advisers Fund,
Inc.
Shares 486
Cost $1,007
Market Value......... -- -- -- $ 1,055
Hartford Capital
Appreciation Fund,
Inc.
Shares 692
Cost $2,664
Market Value......... -- -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 971
Cost $1,014
Market Value......... -- -- -- --
Hartford Index Fund,
Inc.
Shares 478
Cost $1,074
Market Value......... -- -- -- --
Hartford International
Opportunities Fund,
Inc.
Shares 3,027
Cost $4,190
Market Value......... -- -- -- --
Hartford Dividend and
Growth Fund, Inc.
Shares 2,863
Cost $4,419
Market Value......... -- -- -- --
Fidelity VIP Equity
Income Portfolio
Shares 85
Cost $1,730
Market Value......... -- -- -- --
Fidelity VIP Overseas
Portfolio
Shares 55
Cost $1,000
Market Value......... -- -- -- --
Fidelity VIP II Asset
Manager Portfolio
Shares 62
Cost $1,000
Market Value......... -- -- -- --
Due from ITT Hartford
Life and Annuity
Insurance Company..... -- -- 227,457 --
Receivable from shares
sold.................. -- -- -- --
----------- ----------- ----------- -------------
Total Assets........... 1,144 1,234 639,407 1,055
----------- ----------- ----------- -------------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company..... -- -- -- --
Payable for fund shares
purchased -- -- 227,391 --
----------- ----------- ----------- -------------
Total Liabilities...... -- -- 227,391 --
----------- ----------- ----------- -------------
Net Assets (variable
annuity contract
liabilities).......... $ 1,144 $ 1,234 $ 412,016 $ 1,055
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
GROUP SUB-ACCOUNTS:
Units Owned by
Participants.......... 927 690 350,368 674
Unit Price............. $1.233518 $1.789555 $1.175949 $ 1.563874
</TABLE>
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 69
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ----------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments:
Hartford Bond Fund,
Inc.
Shares 1,145
Cost $1,132
Market Value......... -- -- -- -- --
Hartford Stock Fund,
Inc.
Shares 298
Cost $1,173
Market Value......... -- -- -- -- --
HVA Money Market Fund,
Inc.
Shares 411,950
Cost $411,950
Market Value: -- -- -- -- --
Hartford Advisers Fund,
Inc.
Shares 486
Cost $1,007
Market Value......... -- -- -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 692
Cost $2,664
Market Value......... $ 2,710 -- -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 971
Cost $1,014
Market Value......... -- $ 1,025 -- -- --
Hartford Index Fund,
Inc.
Shares 478
Cost $1,074
Market Value......... -- -- $ 1,139 -- --
Hartford International
Opportunities Fund,
Inc.
Shares 3,027
Cost $4,190
Market Value......... -- -- -- $ 4,258 --
Hartford Dividend and
Growth Fund, Inc.
Shares 2,863
Cost $4,419
Market Value......... -- -- -- -- $ 4,431
Fidelity VIP Equity
Income Portfolio
Shares 85
Cost $1,730
Market Value......... -- -- -- -- --
Fidelity VIP Overseas
Portfolio
Shares 55
Cost $1,000
Market Value......... -- -- -- -- --
Fidelity VIP II Asset
Manager Portfolio
Shares 62
Cost $1,000
Market Value......... -- -- -- -- --
Due from ITT Hartford
Life and Annuity
Insurance Company..... -- -- -- -- --
Receivable from shares
sold.................. -- -- -- -- --
----------------- --------------- ----------- ---------- ------------
Total Assets........... 2,710 1,025 1,139 4,258 4,431
----------------- --------------- ----------- ---------- ------------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company..... -- -- -- -- --
Payable for fund shares
purchased -- -- -- -- --
----------------- --------------- ----------- ---------- ------------
Total Liabilities...... -- -- -- -- --
----------------- --------------- ----------- ---------- ------------
Net Assets (variable
annuity contract
liabilities).......... $ 2,710 $ 1,025 $ 1,139 $ 4,258 $ 4,431
----------------- --------------- ----------- ---------- ------------
----------------- --------------- ----------- ---------- ------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
GROUP SUB-ACCOUNTS:
Units Owned by
Participants.......... 1,552 828 650 2,846 2,924
Unit Price............. $ 1.745910 $ 1.237827 $1.752378 $1.496455 $1.515489
<CAPTION>
FIDELITY VIP FIDELITY VIP II
FIDELITY VIP OVERSEAS ASSET MANAGER
EQUITY INCOME PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------------- ------------- ------------------
<S> <C> <C> <C>
ASSETS
Investments:
Hartford Bond Fund,
Inc.
Shares
Cost
Market Value......... -- -- --
Hartford Stock Fund,
Inc.
Shares
Cost
Market Value......... -- -- --
HVA Money Market Fund,
Inc.
Shares
Cost
Market Value: -- -- --
Hartford Advisers Fund,
Inc.
Shares
Cost
Market Value......... -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares
Cost
Market Value......... -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares
Cost
Market Value......... -- -- --
Hartford Index Fund,
Inc.
Shares
Cost
Market Value......... -- -- --
Hartford International
Opportunities Fund,
Inc.
Shares
Cost
Market Value......... -- -- --
Hartford Dividend and
Growth Fund, Inc.
Shares
Cost
Market Value......... -- -- --
Fidelity VIP Equity
Income Portfolio
Shares
Cost
Market Value......... $ 1,784 -- --
Fidelity VIP Overseas
Portfolio
Shares
Cost
Market Value......... -- $ 1,044 --
Fidelity VIP II Asset
Manager Portfolio
Shares
Cost
Market Value......... -- -- $ 1,050
Due from ITT Hartford
Life and Annuity
Insurance Company..... 12 -- --
Receivable from shares
sold.................. -- -- --
---------- ------------- ----------
Total Assets........... 1,796 1,044 1,050
---------- ------------- ----------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company..... -- -- --
Payable for fund shares
purchased 12 -- --
---------- ------------- ----------
Total Liabilities...... 12 -- --
---------- ------------- ----------
Net Assets (variable
annuity contract
liabilities).......... $ 1,784 $ 1,044 $ 1,050
---------- ------------- ----------
---------- ------------- ----------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
GROUP SUB-ACCOUNTS:
Units Owned by
Participants.......... 1,302 859 832
Unit Price............. $ 1.370219 $1.215706 $1.261761
</TABLE>
<PAGE>
70 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT VARIABLE LIFE ONE
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION, OCTOBER 3, 1996, TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 17 $ 3 $ 137 $ 7
--- --- ----- ---
Net investment income
(loss).............. 17 3 137 7
--- --- ----- ---
CAPITAL GAINS INCOME..... -- -- -- --
--- --- ----- ---
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- -- -- --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 12 61 -- 48
--- --- ----- ---
Net realized and
unrealized gain
(loss) on
investments......... 12 61 -- 48
--- --- ----- ---
Net increase
(decrease) in net
assets resulting
from operations..... $ 29 $ 64 $ 137 $ 55
--- --- ----- ---
--- --- ----- ---
</TABLE>
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 71
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ----------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 3 $ 14 $ 5 $ 8 $ 11
--- --- --- --- ---
Net investment income
(loss).............. 3 14 5 8 11
--- --- --- --- ---
CAPITAL GAINS INCOME..... -- -- -- -- --
--- --- --- --- ---
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- -- -- -- --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 46 11 65 68 12
--- --- --- --- ---
Net realized and
unrealized gain
(loss) on
investments......... 46 11 65 68 12
--- --- --- --- ---
Net increase
(decrease) in net
assets resulting
from operations..... $ 49 $ 25 $ 70 $ 76 $ 23
--- --- --- --- ---
--- --- --- --- ---
<CAPTION>
FIDELITY VIP FIDELITY VIP FIDELITY VIP II
EQUITY INCOME OVERSEAS ASSET MANAGER
PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------- ----------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ -- $ -- $ --
--- --- ---
Net investment income
(loss).............. -- -- --
--- --- ---
CAPITAL GAINS INCOME..... -- -- --
--- --- ---
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- -- --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 54 44 50
--- --- ---
Net realized and
unrealized gain
(loss) on
investments......... 54 44 50
--- --- ---
Net increase
(decrease) in net
assets resulting
from operations..... $ 54 $ 44 $ 50
--- --- ---
--- --- ---
</TABLE>
<PAGE>
72 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Separate Account Variable Life One
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM INCEPTION, OCTOBER 3, 1996, TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 17 $ 3 $ 137 $ 7
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 12 61 -- 48
----------- ----------- ----------- ------
Net increase (decrease)
in net assets
resulting from
operations............ 29 64 137 55
----------- ----------- ----------- ------
UNIT TRANSACTIONS:
Purchases.............. 1,000 1,000 436,756 1,000
Net transfers.......... 115 170 (18,268) --
Surrenders............. -- -- (2,162) --
Cost of insurance...... -- -- (4,447) --
----------- ----------- ----------- ------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,115 1,170 411,879 1,000
----------- ----------- ----------- ------
Total increase
(decrease) in net
assets................ 1,144 1,234 412,016 1,055
NET ASSETS:
Beginning of period.... -- -- -- --
----------- ----------- ----------- ------
End of period.......... $1,144 $1,234 $ 412,016 $1,055
----------- ----------- ----------- ------
----------- ----------- ----------- ------
</TABLE>
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 73
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPTIAL MORTGAGE INTERNATIONAL DIVIDEND AND
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ----------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 3 $ 14 $ 5 $ 8 $ 11
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 46 11 65 68 12
------ ------ ----------- ------ ------
Net increase (decrease)
in net assets
resulting from
operations............ 49 25 70 76 23
------ ------ ----------- ------ ------
UNIT TRANSACTIONS:
Purchases.............. 1,000 1,000 1,000 1,000 1,000
Net transfers.......... 1,661 -- 69 3,182 3,436
Surrenders............. -- -- -- -- (11)
Cost of insurance...... -- -- -- -- (17)
------ ------ ----------- ------ ------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 2,661 1,000 1,069 4,182 4,408
------ ------ ----------- ------ ------
Total increase
(decrease) in net
assets................ 2,710 1,025 1,139 4,258 4,431
NET ASSETS:
Beginning of period.... -- -- -- -- --
------ ------ ----------- ------ ------
End of period.......... $2,710 $1,025 $1,139 $4,258 $4,431
------ ------ ----------- ------ ------
------ ------ ----------- ------ ------
<CAPTION>
FIDELITY VIP FIDELITY VIP FIDELITY VIP II
EQUITY INCOME PORTFOLIO OVERSEAS PORTFOLIO ASSET MANAGER PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------------- ------------------ -----------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ --$ -$- --$
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 54 44 50
------ ------ ------
Net increase (decrease)
in net assets
resulting from
operations............ 54 44 50
------ ------ ------
UNIT TRANSACTIONS:
Purchases.............. 1,000 1,000 1,000
Net transfers.......... 760 -- --
Surrenders............. (13) -- --
Cost of insurance...... (17) -- --
------ ------ ------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,730 1,000 1,000
------ ------ ------
Total increase
(decrease) in net
assets................ 1,784 -- --
NET ASSETS:
Beginning of period.... -- -- --
------ ------ ------
End of period.......... $1,784 $1,044 $1,050
------ ------ ------
------ ------ ------
</TABLE>
<PAGE>
74 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT VARIABLE LIFE ONE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- ---------------------------------------------------
1. ORGANIZATION:
Separate Account Variable Life One (the Account) is a separate investment
account within ITT Hartford Life and Annuity Insurance Company (the Company) and
is registered with the Securities and Exchange Commission (SEC) as a unit
investment trust under the Investment Company Act of 1940, as amended. The
Account consists of twenty two sub-accounts. These financial statements include
twelve sub-accounts which invest solely in Hartford Mutual Funds and Fidelity
Mutual Funds (the Funds). The other ten sub-accounts, which invest in the Putnam
Variable Trust Funds, are presented in separate financial statements. Both the
Company and the Account are subject to supervision and regulation by the
Department of Insurance of the State of Connecticut and the SEC. The Account
invests deposits by variable life contractholders of the Company in the Funds as
directed by the contractholders.
- ---------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting principles
in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividends and
capital gains income are accrued as of the ex-dividend date. Capital
gains income represents dividends from the Funds which are characterized
as capital gains under tax regulations.
b) SECURITY VALUATION--The investment in shares of the funds are valued at
the closing net asset value per share as determined by the appropriate
Fund as of December 31, 1996.
c) FEDERAL INCOME TAXES--The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as
an insurance company under the Internal Revenue Code. Under current law,
no federal income taxes are payable with respect to the operations of
the Account.
d) USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the financial statements and
the reported amounts of income and expenses during the period. Operating
results in the future could vary from the amounts derived from
management's estimates.
- ---------------------------------------------------
3.ADMINISTRATION OF THE ACCOUNT AND
RELATED CHARGES:
In accordance with the terms of the contracts, the Company makes deductions
for mortality and expense undertakings, cost of insurance, administrative fees,
and state premium taxes. These charges are deducted through termination of units
of interest from applicable contractholders' accounts in accordance with the
terms of the contracts.
<PAGE>
62 ITT Hartford Life and Annuity Insurance Company
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT VARIABLE LIFE ONE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- ---------------------------------------------------
1. ORGANIZATION:
Separate Account Variable Life One (the Account) is a separate investment
account with ITT Hartford Life and Annuity Insurance Company (the Company) and
is registered with the Securities and Exchange Commission (SEC) as a unit
investment trust under the Investment Company Act of 1940, as amended. The
Account consists of twenty two sub-accounts. These financial statements include
ten sub-accounts which invest solely in the Putnam Variable Trust Funds (the
Funds). The other twelve sub-accounts, which invest in Hartford Mutual Funds and
Fidelity Mutual Funds, are presented in separate financial statements. Both the
Company and the Account are subject to supervision and regulation by the
Department of Insurance of the State of Connecticut and the SEC. The Account
invests deposits by variable life contractholders of the Company in the Funds as
directed by the contractholders.
- ---------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting principles
in the investment company industry:
A) SECURITY TRANSACTIONS -- Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividends and capital
gains income are accrued as of the ex-dividend date. Capital gains income
represents dividends from the Funds which are characterized as capital
gains under tax regulations.
B) SECURITY VALUATION -- The investments in shares of the Funds are valued
at the closing net asset value per share as determined by the appropriate
Fund as of December 31, 1996.
C) FEDERAL INCOME TAXES -- The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as an
insurance company under the Internal Revenue Code. Under current law, no
federal income taxes are payable with respect to the operations of the
Account.
D) USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported
amounts of income and expenses during the period. Operating results in
the future could vary from the amounts derived from management's
estimates.
- ---------------------------------------------------
3. ADMINISTRATION OF THE ACCOUNT AND
RELATED CHARGES:
In accordance with the terms of the contracts, the Company makes deductions
for mortality and expense undertakings, cost of insurance, administrative fees,
and state premium taxes. These charges are deducted through termination of units
of interest from applicable contract owners' accounts, in accordance with the
terms of the contracts.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 75
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ITT Hartford Life and Annuity Insurance Company
Putnam Capital Manager Trust Separate
Account Variable Life One and to
the Owners of Units of Interest therein:
We have audited the accompanying statement of assets and liabilities of
Diversified Income Fund Sub-Account, Global Asset Allocation Fund Sub-Account,
Global Growth Fund Sub-Account, Growth and Income Fund Sub-Account, High Yield
Fund Sub-Account, New Opportunities Fund Sub-Account, Money Market Fund
Sub-Account, U.S. Government and High Quality Bond Fund Sub-Account, Utilities
Growth and Income Fund Sub-Account and Voyager Fund Sub-Account (ITT Hartford
Life and Annuity Insurance Company Putnam Capital Manager Trust Separate Account
Variable Life One) (the Account) as of December 31, 1996, and the related
statements of operations and changes in net assets for the period from
inception, October 3, 1996, to December 31, 1996. These financial statements are
the responsibility of the Account's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Diversified Income Fund
Sub-Account, Global Asset Allocation Fund Sub-Account, Global Growth Fund
Sub-Account, Growth and Income Fund Sub-Account, High Yield Fund Sub-Account,
New Opportunities Fund Sub-Account, Money Market Fund Sub-Account, U.S.
Government and High Quality Bond Fund Sub-Account, Utilities Growth and Income
Fund Sub-Account and Voyager Fund Sub-Account (constituting ITT Hartford Life
and Annuity Insurance Company Putnam Capital Manager Trust Separate Account
Variable Life One) as of December 31, 1996, the results of its operations and
the changes in its net assets for the period from inception, October 3, 1996, to
December 31, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 14, 1997
<PAGE>
76 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Putnam Capital Manager Trust Separate Account Variable Life One
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
GLOBAL
ASSET
DIVERSIFIED ALLOCATION GLOBAL
INCOME FUND FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investments:
Putnam VT Diversified
Income Fund
Shares 91
Cost $1,000
Market Value......... $ 1,030 -- --
Putnam VT Global Asset
Allocation Fund
Shares 63
Cost $1,046
Market Value......... -- $ 1,094 --
Putnam VT Global Growth
Fund
Shares 96
Cost $1,562
Market Value......... -- -- $ 1,615
Putnam VT Growth and
Income Fund
Shares 184
Cost $4,486
Market Value......... -- -- --
Putnam VT High Yield
Fund
Shares 79
Cost $1,000
Market Value......... -- -- --
Putnam VT Money Market
Fund
Shares 1,012
Cost $1,012
Market Value......... -- -- --
Putnam VT New
Opportunities Fund
Shares 58
Cost $1,057
Market Value......... -- -- --
Putnam VT U.S.
Government and High
Quality Bond Fund
Shares 328
Cost $4,320
Market Value......... -- -- --
Putnam VT Utilities
Growth and Income Fund
Shares 73
Cost $1,000
Market Value......... -- -- --
Putnam VT Voyager Fund
Shares 72
Cost $2,375
Market Value......... -- -- --
Due from ITT Hartford
Life and Annuity
Insurance Company.....
------------- ----------- -----------
Total Assets........... 1,030 1,094 1,615
------------- ----------- -----------
LIABILITIES:
Payable for fund shares
purchased............. -- -- --
------------- ----------- -----------
Total Liabilities...... -- -- --
------------- ----------- -----------
Net Assets (variable
annuity contract
liabilities).......... $ 1,030 $ 1,094 $ 1,615
------------- ----------- -----------
------------- ----------- -----------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
GROUP SUB-ACCOUNTS:
Units Owned by
Participants.......... 85 71 102
Unit Price............. $12.064581 $15.301933 $15.897325
GRAND TOTAL:
Contract Liability..... $ 1,030 $ 1,094 $ 1,615
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 77
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S.
GOVERNMENT
AND HIGH UTILITIES
GROWTH AND HIGH YIELD MONEY NEW QUALITY BOND GROWTH AND
INCOME FUND FUND MARKET FUND OPPORTUNITIES FUND FUND INCOME FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ----------------- ----------------- ------------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Putnam VT Diversified
Income Fund
Shares 91
Cost $1,000
Market Value......... -- -- -- -- -- --
Putnam VT Global Asset
Allocation Fund
Shares 63
Cost $1,046
Market Value......... -- -- -- -- -- --
Putnam VT Global Growth
Fund
Shares 96
Cost $1,562
Market Value......... -- -- -- -- -- --
Putnam VT Growth and
Income Fund
Shares 184
Cost $4,486
Market Value......... $ 4,520 -- -- -- -- --
Putnam VT High Yield
Fund
Shares 79
Cost $1,000
Market Value......... -- $ 1,025 -- -- -- --
Putnam VT Money Market
Fund
Shares 1,012
Cost $1,012
Market Value......... -- -- $ 1,012 -- -- --
Putnam VT New
Opportunities Fund
Shares 58
Cost $1,057
Market Value......... -- -- -- $ 995 -- --
Putnam VT U.S.
Government and High
Quality Bond Fund
Shares 328
Cost $4,320
Market Value......... -- -- -- -- $ 4,331 --
Putnam VT Utilities
Growth and Income Fund
Shares 73
Cost $1,000
Market Value......... -- -- -- -- -- $ 1,073
Putnam VT Voyager Fund
Shares 72
Cost $2,375
Market Value......... -- -- -- -- -- --
Due from ITT Hartford
Life and Annuity
Insurance Company.....
------------- ----------------- ----------------- ------------------ ------------ ------------
Total Assets........... 4,520 1,025 1,012 995 4,331 1,073
------------- ----------------- ----------------- ------------------ ------------ ------------
LIABILITIES:
Payable for fund shares
purchased............. -- -- -- -- -- --
------------- ----------------- ----------------- ------------------ ------------ ------------
Total Liabilities...... -- -- -- -- -- --
------------- ----------------- ----------------- ------------------ ------------ ------------
Net Assets (variable
annuity contract
liabilities).......... $ 4,520 $ 1,025 $ 1,012 $ 995 $ 4,331 $ 1,073
------------- ----------------- ----------------- ------------------ ------------ ------------
------------- ----------------- ----------------- ------------------ ------------ ------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
GROUP SUB-ACCOUNTS:
Units Owned by
Participants.......... 254 71 865 67 346 72
Unit Price............. $17.812315 $14.470063 $ 1.170296 $14.831271 $12.504679 $14.812870
GRAND TOTAL:
Contract Liability..... $ 4,520 $ 1,025 $ 1,012 $ 995 $ 4,331 $ 1,073
<CAPTION>
VOYAGER FUND
SUB-ACCOUNT
------------
<S> <C>
ASSETS:
Investments:
Putnam VT Diversified
Income Fund
Shares
Cost
Market Value......... --
Putnam VT Global Asset
Allocation Fund
Shares
Cost
Market Value......... --
Putnam VT Global Growth
Fund
Shares
Cost
Market Value......... --
Putnam VT Growth and
Income Fund
Shares
Cost
Market Value......... --
Putnam VT High Yield
Fund
Shares
Cost
Market Value......... --
Putnam VT Money Market
Fund
Shares
Cost
Market Value......... --
Putnam VT New
Opportunities Fund
Shares
Cost
Market Value......... --
Putnam VT U.S.
Government and High
Quality Bond Fund
Shares
Cost
Market Value......... --
Putnam VT Utilities
Growth and Income Fund
Shares
Cost
Market Value......... --
Putnam VT Voyager Fund
Shares
Cost
Market Value......... $ 2,347
Due from ITT Hartford
Life and Annuity
Insurance Company.....
------------
Total Assets........... 2,347
------------
LIABILITIES:
Payable for fund shares
purchased............. --
------------
Total Liabilities...... --
------------
Net Assets (variable
annuity contract
liabilities).......... $ 2,347
------------
------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
GROUP SUB-ACCOUNTS:
Units Owned by
Participants.......... 128
Unit Price............. $18.327403
GRAND TOTAL:
Contract Liability..... $ 2,347
</TABLE>
<PAGE>
78 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Putnam Capital Manager Trust Separate Account Variable Life One
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION OCTOBER 3, 1996 TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
GLOBAL
ASSET
DIVERSIFIED ALLOCATION GLOBAL
INCOME FUND FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ -- $ -- $ --
--- --- ---
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 30 48 53
--- --- ---
Net increase (decrease)
in net assets
resulting from
operations............ $ 30 $ 48 $ 53
--- --- ---
--- --- ---
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 79
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S.
GOVERNMENT
AND HIGH UTILITIES
GROWTH AND HIGH YIELD MONEY NEW QUALITY BOND GROWTH AND
INCOME FUND FUND MARKET FUND OPPORTUNITIES FUND FUND INCOME FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ----------------- ----------------- ------------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ -- $ -- $ 12 $ -- $ -- $ --
--- --- --- ----- --- ---
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 34 25 -- (62) 11 73
--- --- --- ----- --- ---
Net increase (decrease)
in net assets
resulting from
operations............ $ 34 $ 25 $ 12 $ (62) $ 11 $ 73
--- --- --- ----- --- ---
--- --- --- ----- --- ---
<CAPTION>
VOYAGER FUND
SUB-ACCOUNT
------------
<S> <C>
INVESTMENT INCOME:
Dividends.............. $ --
-----
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (28)
-----
Net increase (decrease)
in net assets
resulting from
operations............ $ (28)
-----
-----
</TABLE>
<PAGE>
80 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Putnam Capital Manager Trust Separate Account Variable Life One
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM INCEPTION OCTOBER 3, 1996 TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
GLOBAL ASSET
DIVERSIFIED ALLOCATION GLOBAL
INCOME FUND FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------- -----------
<S> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ -- $ -- $ --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 30 48 53
----------- ------ -----------
Net increase (decrease)
in net assets
resulting from
operations............ 30 48 53
----------- ------ -----------
UNIT TRANSACTIONS:
Purchases.............. 1,000 1,000 1,000
Net transfers.......... -- 46 562
Surrenders.............
Cost of insurance......
----------- ------ -----------
Net increase in net
assets resulting from
unit transactions..... 1,000 1,046 1,562
----------- ------ -----------
Total increase in net
assets................ 1,030 1,094 1,615
NET ASSETS:
Beginning of period....
----------- ------ -----------
End of period.......... $ 1,030 $ 1,094 $ 1,615
----------- ------ -----------
----------- ------ -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 81
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S.
GOVERNMENT
AND HIGH UTILITIES
GROWTH AND HIGH YIELD MONEY NEW QUALITY BOND GROWTH AND
INCOME FUND FUND MARKET FUND OPPORTUNITIES FUND FUND INCOME FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ----------------- ----------------- ------------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ -- $ -- $ 12 $ -- $ -- $ --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 34 25 (62) 11 73
------ ------ ------ ------ ------ ------
Net increase (decrease)
in net assets
resulting from
operations............ 34 25 12 (62) 11 73
------ ------ ------ ------ ------ ------
UNIT TRANSACTIONS:
Purchases.............. 1,000 1,000 1,000 1,000 1,000 1,000
Net transfers.......... 3,515 -- -- 57 3,320
Surrenders............. (12)
Cost of insurance...... (17)
------ ------ ------ ------ ------ ------
Net increase in net
assets resulting from
unit transactions..... 4,486 1,000 1,000 1,057 4,320 1,000
------ ------ ------ ------ ------ ------
Total increase in net
assets................ 4,520 1,025 1,012 995 4,331 1,073
NET ASSETS:
Beginning of period....
------ ------ ------ ------ ------ ------
End of period.......... $ 4,520 $ 1,025 $ 1,012 $ 995 $ 4,331 $ 1,073
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
<CAPTION>
VOYAGER FUND
SUB-ACCOUNT
------------
<S> <C>
OPERATIONS:
Net investment income
(loss)................ $ --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (28)
------
Net increase (decrease)
in net assets
resulting from
operations............ (28)
------
UNIT TRANSACTIONS:
Purchases.............. 1,000
Net transfers.......... 1,375
Surrenders.............
Cost of insurance......
------
Net increase in net
assets resulting from
unit transactions..... 2,375
------
Total increase in net
assets................ 2,347
NET ASSETS:
Beginning of period....
------
End of period.......... $ 2,347
------
------
</TABLE>
<PAGE>
82 ITT Hartford Life and Annuity Insurance Company
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT VARIABLE LIFE ONE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- ---------------------------------------------------
1. ORGANIZATION:
Separate Account Variable Life One (the Account) is a separate investment
account with ITT Hartford Life and Annuity Insurance Company (the Company) and
is registered with the Securities and Exchange Commission (SEC) as a unit
investment trust under the Investment Company Act of 1940, as amended. The
Account consists of twenty two sub-accounts. These financial statements include
ten sub-accounts which invest solely in the Putnam Variable Trust Funds (the
Funds). The other twelve sub-accounts, which invest in Hartford Mutual Funds and
Fidelity Mutual Funds, are presented in separate financial statements. Both the
Company and the Account are subject to supervision and regulation by the
Department of Insurance of the State of Connecticut and the SEC. The Account
invests deposits by variable life contractholders of the Company in the Funds as
directed by the contractholders.
- ---------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting principles
in the investment company industry:
A) SECURITY TRANSACTIONS -- Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividends and capital
gains income are accrued as of the ex-dividend date. Capital gains income
represents dividends from the Funds which are characterized as capital
gains under tax regulations.
B) SECURITY VALUATION -- The investments in shares of the Funds are valued
at the closing net asset value per share as determined by the appropriate
Fund as of December 31, 1996.
C) FEDERAL INCOME TAXES -- The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as an
insurance company under the Internal Revenue Code. Under current law, no
federal income taxes are payable with respect to the operations of the
Account.
D) USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported
amounts of income and expenses during the period. Operating results in
the future could vary from the amounts derived from management's
estimates.
- ---------------------------------------------------
3. ADMINISTRATION OF THE ACCOUNT AND
RELATED CHARGES:
In accordance with the terms of the contracts, the Company makes deductions
for mortality and expense undertakings, cost of insurance, administrative fees,
and state premium taxes. These charges are deducted through termination of units
of interest from applicable contract owners' accounts, in accordance with the
terms of the contracts.
