<PAGE>
STAG VARIABLE LIFE
SEPARATE ACCOUNT VL I
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
P.O. BOX 2999
HARTFORD, CONNECTICUT 06104-2999
[LOGO] Telephone: 1-800-231-5453
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This Prospectus describes information you should know before you purchase the
Stag Variable Life insurance policy. Please read it carefully.
Stag Variable Life is a contract between you and Hartford Life and Annuity
Insurance Company. You agree to make sufficient premium payments to us, and we
agree to pay a death benefit to your beneficiary. The policy is a flexible
premium variable life insurance policy. It is:
X Flexible premium, because you may add payments to your policy after the first
payment.
X Variable, because the value of your life insurance policy will fluctuate with
the performance of the investment options you select and the Fixed Account.
The following Sub-Accounts are available under the policy:
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SUB-ACCOUNT PURCHASES SHARES OF:
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<S> <C> <C>
Hartford Advisers Fund Sub-Account -- Class IA of Hartford Advisers HLS Fund, Inc.
Hartford Bond Fund Sub-Account -- Class IA of Hartford Bond HLS Fund, Inc.
Hartford Capital Appreciation Fund -- Class IA of Hartford Capital Appreciation HLS Fund, Inc.
Sub-Account
Hartford Dividend and Growth Fund -- Class IA of Hartford Dividend and Growth HLS Fund, Inc.
Sub-Account
Hartford Growth and Income Fund Sub-Account -- Class IA of Hartford Growth and Income HLS Fund of
Hartford Series Fund, Inc.
Hartford Index Fund Sub-Account -- Class IA of Hartford Index HLS Fund, Inc.
Hartford International Advisers Fund -- Class IA of Hartford International Advisers HLS Fund, Inc.
Sub-Account
Hartford International Opportunities Fund -- Class IA of Hartford International Opportunities HLS Fund,
Sub-Account Inc.
Hartford MidCap Fund Sub-Account -- Class IA of Hartford MidCap HLS Fund, Inc.
Hartford Mortgage Securities Fund -- Class IA of Hartford Mortgage Securities HLS Fund, Inc.
Sub-Account
Hartford Money Market Fund Sub-Account -- Class IA of Hartford Money Market HLS Fund, Inc.
Hartford Small Company Fund Sub-Account -- Class IA of Hartford Small Company HLS Fund, Inc.
Hartford Stock Fund Sub-Account -- Class IA of Hartford Stock HLS Fund, Inc.
Putnam VT Asia Pacific Growth Fund -- Class IA of Putnam VT Asia Pacific Growth Fund of the
Sub-Account Putnam Variable Trust
Putnam VT Diversified Income Fund -- Class IA of Putnam VT Diversified Income Fund of Putnam
Sub-Account Variable Trust
Putnam VT Global Asset Allocation Fund -- Class IA of Putnam VT Global Asset Allocation Fund of
Sub-Account Putnam Variable Trust
Putnam VT Global Growth Fund Sub-Account -- Class IA of Putnam VT Global Growth Fund of Putnam
Variable Trust
Putnam VT Growth and Income Fund Sub-Account -- Class IA of Putnam VT Growth and Income Fund of Putnam
Variable Trust
Putnam VT Health Sciences Fund Sub-Account -- Class IA of Putnam VT Health Sciences Fund of Putnam
Variable Trust
Putnam VT High Yield Fund Sub-Account -- Class IA of Putnam VT High Yield Fund of Putnam Variable
Trust
Putnam VT Income Fund Sub-Account (formerly -- Class IA of Putnam VT Income Fund of Putnam Variable Trust
known as Putnam VT U.S. Government and
High Quality Bond Fund Sub-Account)
Putnam VT International Growth Fund -- Class IA of Putnam VT International Growth Fund of Putnam
Sub-Account Variable Trust
Putnam VT International Growth and Income -- Class IA of Putnam VT International Growth and Income Fund
Fund Sub-Account of Putnam Variable Trust
Putnam VT International New Opportunities -- Class IA of Putnam VT International New Opportunities Fund
Fund Sub-Account of Putnam Variable Trust
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUB-ACCOUNT PURCHASES SHARES OF:
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Putnam VT Investors Fund Sub-Account -- Class IA of Putnam VT Investors Fund of Putnam Variable
Trust
<S> <C> <C>
Putnam VT Money Market Fund Sub-Account -- Class IA of Putnam VT Money Market Fund of Putnam Variable
Trust
Putnam VT New Opportunities Fund Sub-Account -- Class IA of Putnam VT New Opportunities Fund of Putnam
Variable Trust
Putnam VT New Value Fund Sub-Account -- Class IA of Putnam VT New Value Fund of Putnam Variable
Trust
Putnam VT OTC & Emerging Growth Fund -- Class IA of Putnam VT OTC & Emerging Growth Fund of Putnam
Sub-Account Variable Trust
Putnam VT The George Putnam Fund of Boston -- Class IA of Putnam VT The George Putnam Fund of Boston of
Sub-Account Putnam Variable Trust
Putnam VT Utilities Growth and Income Fund -- Class IA of Putnam VT Utilities Growth and Income Fund of
Sub-Account Putnam Variable Trust
Putnam VT Vista Fund Sub-Account -- Class IA of Putnam VT Vista Fund of Putnam Variable Trust
Putnam VT Voyager Fund Sub-Account -- Class IA of Putnam VT Voyager Fund of Putnam Variable
Trust
Fidelity VIP Equity-Income Portfolio -- Fidelity VIP Equity-Income Portfolio of Variable Insurance
Sub-Account Products Fund
Fidelity VIP Overseas Portfolio Sub-Account -- Fidelity VIP Overseas Portfolio of Variable Insurance
Products Fund
Fidelity VIP II Asset Manager Portfolio -- Fidelity VIP II Asset Manager Portfolio of Variable
Sub-Account Insurance Products Fund II
</TABLE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The policy may not be available for sale in all states.
This Prospectus can also be obtained from the Securities and Exchange
Commission's website (HTTP://WWW.SEC.GOV).
This life insurance policy IS NOT:
- a bank deposit or obligation
- federally insured
- endorsed by any bank or governmental agency
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PROSPECTUS DATED: MAY 3, 1999
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 3
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TABLE OF CONTENTS
<TABLE>
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PAGE
----
<S> <C>
SUMMARY OF BENEFITS AND RISKS......................................... 4
FEE TABLES............................................................ 5
ABOUT US.............................................................. 7
Hartford Life and Annuity Insurance Company......................... 7
Separate Account VL I............................................... 7
The Funds........................................................... 7
CHARGES AND DEDUCTIONS................................................ 11
YOUR POLICY........................................................... 14
PREMIUMS.............................................................. 17
DEATH BENEFITS AND POLICY VALUES...................................... 19
MAKING WITHDRAWALS FROM YOUR POLICY................................... 20
LOANS................................................................. 21
LAPSE AND REINSTATEMENT............................................... 22
TAXES................................................................. 23
LEGAL PROCEEDINGS..................................................... 26
OTHER MATTERS......................................................... 26
GLOSSARY OF SPECIAL TERMS............................................. 28
WHERE YOU CAN FIND MORE INFORMATION................................... 28
</TABLE>
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4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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SUMMARY OF BENEFITS
AND RISKS
BENEFITS OF YOUR POLICY
FLEXIBILITY -- The policy is designed to be flexible to meet your specific
life insurance needs. You have the flexibility to choose death benefit options,
investment options, Guarantee Periods, and premiums you pay.
DEATH BENEFIT -- While the policy is inforce and when the insured dies, we
pay a death benefit to your beneficiary. You select one of three death benefit
options:
X LEVEL OPTION: The death benefit equals the current Face Amount.
X RETURN OF ACCOUNT VALUE OPTION: The death benefit is the current Face Amount
plus the Account Value of your policy;
X RETURN OF PREMIUM OPTION: The death benefit is the current Face Amount plus
the sum of the scheduled premiums paid.
The death benefit is reduced by any money you owe us, such as outstanding
loans, loan interest, or unpaid charges. You may change your death benefit
option under certain circumstances. You may increase or decrease the Face Amount
on your policy under certain circumstances.
GUARANTEE PERIOD OPTIONS -- You have the ability to choose a Guarantee
Period of one to ten years. During the Guarantee Period, additional contractual
guarantees are provided, including 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 provided for by favorable investment
experience.
INVESTMENT OPTIONS -- You may invest in up to 9 different investment choices
within your policy, from a choice of 36 investment options and a Fixed Account.
You may transfer money among your investment choices, subject to restrictions.
PREMIUM PAYMENTS -- You have the flexibility to choose how you pay premiums.
You choose a schedule of premiums when you purchase the policy. You may change
your scheduled premiums, or pay additional premium, subject to certain
limitations.
RIGHT TO EXAMINE YOUR POLICY -- You have a limited right to return the
policy for cancellation after purchase. See "Making Withdrawals From Your Policy
- -- Right to Examine a Policy."
RIGHT TO EXCHANGE YOUR POLICY -- During the first 24 months after your
policy is issued, you may exchange it, without submitting proof of insurability,
for a non-variable life insurance policy offered by us on the life of the
insured.
SURRENDER -- You may surrender your policy at any time prior to the maturity
date for its Cash Surrender Value. You may apply the Cash Surrender Value to a
continuation option as extended term insurance or paid-up insurance. (See "Risks
of Your Policy," below).
LOANS -- You may take a loan on the policy. The policy secures the loan.
SETTLEMENT OPTIONS -- You or your beneficiary may choose to receive the
proceeds of the policy over a period of time by using one of several settlement
options.
OPTIONAL COVERAGE -- You may add other coverages to your policy. See "Your
Policy -- Other Benefits."
WHAT DOES YOUR PREMIUM PAY FOR?
Your premium pays for three things. It pays for insurance coverage, it acts
as an investment in the Sub-Accounts, and it pays for sales loads and other
charges.
RISKS OF YOUR POLICY
INVESTMENT PERFORMANCE -- The value of your policy will fluctuate with the
performance of the investment options you choose. Your investment options may
decline in value, or they may not perform to your expectations. Your policy
values in the Sub-Accounts are not guaranteed.
UNSUITABLE FOR SHORT-TERM SAVINGS -- The policy is designed for long term
financial planning. You should not purchase the policy if you will need the
premium payment in a short time period.
RISK OF LAPSE -- Your policy could terminate if the value of the policy
becomes too low to support the policy's monthly charges, or if you do not pay
your scheduled premium. If this occurs, we will notify you in writing. You will
then have a 61-day grace period to pay additional amounts to prevent the policy
from terminating.
WITHDRAWAL LIMITATIONS -- After the Guarantee Period, partial withdrawals
are allowed. The minimum allowed is $500, and the maximum allowed is the Cash
Surrender Value minus $1,000. One partial withdrawal is allowed per month.
Withdrawals will reduce your policy's death benefit, and may be subject to a
surrender charge.
TRANSFER LIMITATIONS -- We reserve the right to limit the size of transfers
and remaining balances, and to limit the number and frequency of transfers among
your investment options and the Fixed Account.
LOANS -- Taking a loan from your policy may increase the risk that your
policy will lapse, will have a permanent
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 5
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effect on the policy's Account Value, and will reduce the death proceeds.
ADVERSE TAX CONSEQUENCES -- You may be subject to income tax if you receive
any loans, withdrawals or other amounts from the policy, and you may be subject
to a 10% penalty tax. Under certain circumstances (usually if you prefund future
benefits in seven years or less), your policy may become a modified endowment
policy under federal tax law. If these circumstances were to occur, loans and
other pre-death distributions are includable in gross income on an income first
basis, and may be subject to a 10% penalty (unless you have attained age
59 1/2). You should consult with a tax adviser before taking steps that may
affect whether your policy becomes a modified endowment policy. See "Taxes."
FEE TABLES
The following tables describe the MAXIMUM fees and expenses that you will
pay when buying, owning, and surrendering the policy. The first table describes
the maximum fees and expenses that you will pay at the time that you buy the
policy, surrender the policy, or transfer cash value between investment options.
TRANSACTION FEES
<TABLE>
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POLICIES FROM WHICH
CHARGE WHEN CHARGE IS DEDUCTED AMOUNT DEDUCTED CHARGE IS DEDUCTED
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<S> <C> <C> <C> <C>
Front-end sales load When you pay premium. Policy Percent All
Year
1 50%
2-10 11%
11+ 3%
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Premium Related Tax When you pay premium. A percent of premium which varies by your All
Charge state and municipality of residence. The range
of premium tax charge is generally between 0%
and 4%.
This rate will change if your state or
municipality changes its premium tax charges.
It may change if you change your state or
municipality of residence.
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Surrender Charges When you surrender your The amount of the surrender charge in the Policies surrendered
policy or if your policy first policy year is established by Hartford during the first nine
lapses. based on the premiums paid during the first policy years, or if the
policy year and the length of the Guarantee policy lapses.
Period. Subject to certain limits imposed by
state insurance laws, the surrender charge
decreases by an equal amount each policy year
until it reaches zero during the tenth policy
year.
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Face Amount Increase On the first Monthly $100 Policies where the owner
Fee Activity Date on or after has made an increase in
the effective date of the the Face Amount.
Face Amount increase.
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</TABLE>
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6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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<TABLE>
<CAPTION>
POLICIES FROM WHICH
CHARGE WHEN CHARGE IS DEDUCTED AMOUNT DEDUCTED CHARGE IS DEDUCTED
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<S> <C> <C> <C> <C>
Transfer Fees When you make a transfer $25 per transfer. Those policies with more
after the first transfer than one transfer per
in any month. month.
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Withdrawal Charge When you take a $50 per withdrawal. Those policies where the
withdrawal. owner has made a
withdrawal.
</TABLE>
The next table describes the MAXIMUM fees and expenses that you will pay
periodically during the time that you own the policy, not including Fund fees
and expenses.
CHARGES OTHER THAN FUND OPERATING EXPENSES
<TABLE>
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POLICIES FROM WHICH
CHARGE WHEN CHARGE IS DEDUCTED AMOUNT DEDUCTED CHARGE IS DEDUCTED
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<S> <C> <C> <C>
Cost of Insurance Monthly. The charge is the maximum cost of All
Charges insurance rate times the net
amount at risk. Maximum cost of
insurance rates are
individualized, depending on the
insured's issue age, sex,
insurance class, substandard
ratings, and age of the policy.
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Mortality and Expense Monthly. For policy years 1 through 20, the All
Risk Charge charge 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 policy year 20, the charge
for all policies is expected to
equal .60% annually. However,
Hartford reserves the right to
continue the charge at the level
in effect during policy years 1
through 20, except for policies
with a one year Guarantee Period,
for which Hartford reserves the
right to charge a mortality and
expense risk rate of .90%.
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Administrative Charge Monthly. $8.33 during the Guarantee Period All
$12 after the Guarantee Period
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Issue Charge Monthly. $8.33, plus an amount that varies All
by the insured's issue age and the
initial Face Amount
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Special Class Charge Monthly. Individualized based on the Only those Policies with benefits
insured's special insurance class rated for a special class.
rating.
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Rider Charges Monthly. Individualized based on optional Only those policies with benefits
rider selected. provided by rider.
</TABLE>
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 7
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The next table describes the Fund fees and expenses that you will pay
periodically during the time that you own the policy. The table shows the
minimum and maximum fees and expenses charged by any of the Funds. More detail
concerning each Fund's fees and expenses is contained in the prospectus for each
Fund.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
POLICIES FROM WHICH
CHARGE WHEN CHARGE IS DEDUCTED AMOUNT DEDUCTED CHARGE IS DEDUCTED
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<S> <C> <C> <C>
Management Fees Daily net asset values of a Fund 0.382% - 1.200% All Policies, for those Sub-
reflect Management Fees already Accounts selected by you.
deducted from assets of the Fund.
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Other Expenses Daily net asset values of a Fund 0.018% - 0.420% All Policies, for those Sub-
reflect Other Expenses already Accounts selected by you.
deducted from the assets of the
Fund.
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Total Fund Annual Total of Management Fees and Other 0.401% - 1.620% All Policies, for those Sub-
Expenses Expenses shown above. Daily net Accounts selected by you.
asset values of a Fund reflect
Total Fund Annual Operating
Expenses already deducted from
assets of the Fund.
</TABLE>
ABOUT US
HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY
Hartford Life and Annuity Insurance Company 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, the District of
Columbia and Puerto Rico, except New York. On January 1, 1998, Hartford's name
changed from ITT Hartford Life and Annuity Insurance Company to Hartford Life
and Annuity Insurance Company. We were originally incorporated under the laws of
Wisconsin on January 9, 1956, and subsequently redomiciled to Connecticut. Our
offices are located in Simsbury, Connecticut; however, our mailing address is
P.O. Box 2999, Hartford, CT 06104-2999. We are ultimately controlled by The
Hartford Financial Services Group, Inc., one of the largest financial service
providers in the United States.
HARTFORD'S RATINGS
<TABLE>
<CAPTION>
EFFECTIVE DATE
RATING AGENCY OF RATING RATING BASIS OF RATING
- ----------------------------------- -------------- ------ -----------------------------------
<S> <C> <C> <C>
A.M. Best and Company, Inc......... 1/1/99 A+ Financial performance
Standard & Poor's.................. 6/1/98 AA Insurer financial strength
Duff & Phelps...................... 12/21/98 AA+ Claims paying ability
</TABLE>
SEPARATE ACCOUNT VL I
The Sub-Accounts are subdivisions of our separate account, called Separate
Account VL I. The Separate Account exists to keep your life insurance policy
assets separate from our company assets. As such, the investment performance of
the Separate Account is independent from the investment performance of
Hartford's other assets. Hartford's other assets are utilized to pay you
insurance obligations under the policy. Your assets in the Separate Account are
held exclusively for your benefit and may not be used for any other liability of
Hartford. Separate Account VL I was established on June 8, 1995 under the laws
of Connecticut.
THE FUNDS
The Sub-Accounts of the Separate Account purchase shares of mutual funds set
up exclusively for variable annuity and variable life insurance products. These
funds are not the same mutual funds that you buy through your stockbroker or
through a retail mutual fund, but they may have similar investment strategies
and the same portfolio managers as retail mutual funds. You choose the Sub-
Accounts that meet your investment style.
We do not guarantee the investment results of any of the underlying Funds.
Since each underlying Fund has different investment objectives, each is subject
to different risks. These risks and the Funds' expenses are described in the
prospectuses for the Funds, which are attached to this
<PAGE>
8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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Prospectus, and the Funds' Statements of Additional Information, which may be
ordered from us. You should read the following investment objectives and the
prospectuses for each of the Funds listed below for detailed information about
each Fund before investing. All Funds may not be available in all states.
You may also allocate some or all of your premium payments to the "Fixed
Account," which pays a declared interest rate. See "The Fixed Account."
HARTFORD ADVISERS HLS FUND -- Seeks maximum long-term total rate of return
by investing in common stocks and other equity securities, bonds and other debt
securities, and money market instruments. Sub-advised by Wellington Management.
HARTFORD BOND HLS FUND -- Seeks maximum current income consistent with
preservation of capital by investing primarily in investment grade fixed-income
securities. Up to 20% of the total assets of this Fund may be invested in debt
securities rated in the highest category below investment grade ("Ba" by Moody's
Investor Services, Inc. or "BB" by Standard & Poor's) or, if unrated, are
determined to be of comparable quality by the Fund's investment adviser.
Securities rated below investment grade are commonly referred to as "high
yield-high risk securities" or "junk bonds." For more information concerning the
risks associated with investing in such securities, please refer to the section
in the accompanying prospectus for the Funds entitled "Hartford Bond HLS Fund,
Inc." Sub-advised by HIMCO.
HARTFORD CAPITAL APPRECIATION HLS FUND -- Seeks growth of capital by
investing in equity securities selected solely on the basis of potential for
capital appreciation. Sub-advised by Wellington Management.
HARTFORD DIVIDEND AND GROWTH HLS FUND -- Seeks a high level of current
income consistent with growth of capital by investing primarily in dividend
paying equity securities. Sub-advised by Wellington Management.
HARTFORD GROWTH AND INCOME HLS FUND -- Seeks growth of capital and current
income by investing primarily in equity securities with earnings growth
potential and steady or rising dividends. Sub-advised by Wellington Management.
HARTFORD INDEX HLS FUND -- Seeks to provide investment results which
approximate the price and yield performance of publicly-traded common stocks in
the aggregate, as represented by the Standard & Poor's 500 Composite Stock Price
Index.* Sub-advised by HIMCO.
HARTFORD INTERNATIONAL ADVISERS HLS FUND -- Seeks maximum long-term total
return by investing in a portfolio of equity, debt and money market securities.
Securities in which the Fund invests primarily will be denominated in non-U.S.
currencies and will be traded in non-U.S. markets. Sub-advised by Wellington
Management.
HARTFORD INTERNATIONAL OPPORTUNITIES HLS FUND -- Seeks growth of capital by
investing primarily in equity securities issued by non-U.S. companies.
Sub-advised by Wellington Management.
HARTFORD MIDCAP HLS FUND -- Seeks to achieve long-term capital growth
through capital appreciation by investing primarily in equity securities of
companies with market capitalizations within the range represented by the
Standard & Poor's MidCap 400 Index. Sub-advised by Wellington Management.
HARTFORD MONEY MARKET HLS FUND -- Seeks maximum current income consistent
with liquidity and preservation of capital. Sub-advised by HIMCO.
HARTFORD MORTGAGE SECURITIES HLS FUND -- Seeks maximum current income
consistent with safety of principal and maintenance of liquidity by investing
primarily in mortgage-related securities, including securities issued by the
Government National Mortgage Association. Sub-advised by HIMCO.
HARTFORD SMALL COMPANY HLS FUND -- Seeks growth of capital by investing
primarily in equity securities within a range represented by the Russell 2000
Index selected on the basis of potential for capital appreciation. Sub-advised
by Wellington Management.
HARTFORD STOCK HLS FUND -- Seeks long-term growth of capital by investing
primarily in equity securities. Sub-advised by Wellington Management.
PUTNAM VT ASIA PACIFIC GROWTH FUND -- Seeks capital appreciation by
investing primarily in securities of companies located in Asia and in the
Pacific Basin. The fund's investments will normally include common stocks,
preferred stocks, securities convertible into common stocks or preferred stocks,
and warrants to purchase common stocks or preferred stocks.
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 and Investment Grade Sector,
a High Yield Sector (which invests primarily in securities commonly known as
"junk bonds"), and an International Sector. See the special considerations for
* "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 AND ANNUITY 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>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 9
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investments in high yield securities described in the Fund prospectus.
PUTNAM VT THE GEORGE PUTNAM FUND OF BOSTON -- Seeks to provide a balanced
investment composed of a well-diversified portfolio of stocks and bonds which
will produce both capital growth and current income.
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.
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 HEALTH SCIENCES FUND -- Seeks capital appreciation by investing
primarily in common stocks and other securities of companies in the health
sciences industries.
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
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 INCOME FUND (FORMERLY KNOWN AS PUTNAM VT U.S. GOVERNMENT AND HIGH
QUALITY BOND FUND) -- Seeks high current income consistent with what Putnam
Management believes to be prudent risk. The Fund will normally invest mostly in
bonds and other debt securities, and, to a lesser degree, in preferred stocks.
PUTNAM VT INTERNATIONAL GROWTH FUND -- Seeks capital appreciation by
investing primarily in equity securities of companies located in a country other
than the United States.
PUTNAM VT INTERNATIONAL GROWTH AND INCOME FUND -- Seeks capital growth, and
a secondary objective of high current income by investing primarily in common
stocks that Putnam Management believes offer potential for capital growth and
may, when consistent with its investment objectives, invest in common stocks
that Putnam Management believes offer potential for current income. Under normal
market conditions, the fund expects to invest substantially all of its assets in
securities principally traded on markets outside the United States.
PUTNAM VT INTERNATIONAL NEW OPPORTUNITIES FUND -- Seeks long term capital
appreciation by investing in companies that have above-average growth prospects
due to the fundamental growth of their market sector. Under normal market
conditions, the fund expects to invest substantially all of its total assets,
other than cash or short-term investments held pending investment, in common
stocks, preferred stocks, convertible preferred stocks, convertible bonds and
other equity securities principally traded in securities markets outside the
United States.
PUTNAM VT INVESTORS FUND -- Seeks long-term growth of capital and any
increased income that results from this growth by investing primarily in common
stocks that Putnam Management believes afford the best opportunity for capital
growth over the long term.
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 NEW VALUE FUND -- Seeks long-term capital appreciation by
investing primarily in common stocks that Putnam Management believes are
undervalued at the time of purchase and have the potential for long-term capital
appreciation.
PUTNAM VT OTC & EMERGING GROWTH FUND -- Seeks capital appreciation by
investing primarily in common stocks that Putnam Management believes have
potential for capital appreciation significantly greater than that of market
averages.
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 VISTA FUND -- Seeks capital appreciation by investing in a
diversified portfolio of common stocks which Putnam Management believes have the
potential for above-average capital appreciation.
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 EQUITY-INCOME PORTFOLIO -- Seeks reasonable income by investing
primarily in income-producing equity
<PAGE>
10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
securities. In choosing these securities, the Portfolio Manager 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 Index 500.
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.
International funds have increased economic and political risks as they are
exposed to events and factors in the various world markets. These risks may be
greater for funds that invest in emerging markets.
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 money market 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.
INVESTMENT ADVISERS -- HL Investment Advisors, LLC is investment adviser for
the Hartford Funds. Wellington Management Company, LLP ("Wellington Management")
is investment sub-adviser for Hartford Advisers HLS Fund, Inc., Hartford Capital
Appreciation HLS Fund, Inc., Hartford Dividend and Growth HLS Fund, Inc.,
Hartford Growth and Income HLS Fund, Hartford International Advisers HLS Fund,
Inc., Hartford International Opportunities HLS Fund, Inc., Hartford MidCap HLS
Fund, Inc., Hartford Small Company HLS Fund, Inc., and Hartford Stock HLS Fund,
Inc. The Hartford Investment Management Company, Inc. ("HIMCO") is investment
sub-adviser for Hartford Bond HLS Fund, Inc., Hartford Index HLS Fund, Inc.,
Hartford Mortgage Securities HLS Fund, Inc., and Hartford Money Market HLS Fund,
Inc. Each Hartford Fund, except for the Hartford Growth and Income HLS Fund, is
a separate Maryland corporation registered with the Securities and Exchange
Commission as an open-end management investment company. The Hartford Growth and
Income HLS Fund is a diversified series of Hartford Series Fund, Inc., a
Maryland corporation, also registered with the Securities and Exchange
Commission as an open-end management investment company. The shares of each Fund
have been divided into Class IA and Class IB. Only Class IA shares are available
in this policy.
Putnam Investment Management, Inc. ("Putnam Management") serves as the
investment manager for the Putnam Funds. Putnam Management is ultimately
controlled by Marsh & McLennan Companies, Inc., a publicly owned holding company
whose principal businesses are international insurance brokerage and employee
benefit consulting.
Fidelity Management & Research Company is investment adviser for the
Fidelity VIP Funds.
MIXED AND SHARED FUNDING -- Shares of the Funds may be sold to our other
separate accounts and our insurance company affiliates or other unaffiliated
insurance companies to serve as the underlying investment for both variable
annuity contracts and variable life insurance policies, a practice known as
"mixed and shared funding." As a result, there is a possibility that a material
conflict may arise between the interests of policy owners, and of owners of
other contracts whose contract values are allocated to one or more of these
other separate accounts investing in any one of the Funds. In the event of any
such material conflicts, we will consider what action may be appropriate,
including removing the Fund from the Separate Account or replacing the Fund with
another underlying fund. There are certain risks associated with mixed and
shared funding, as disclosed in the prospectuses for the Funds.
VOTING RIGHTS -- For Sub-Accounts in which you have invested, we will notify
you of shareholder's meetings of the Funds purchased by those Sub-Accounts. We
will send you proxy materials and instructions for you to vote the shares held
for your benefit by those Sub-Accounts. We will arrange for the handling and
tallying of proxies received from you or other policy owners. If you give no
instructions, we will vote those shares in the same proportion as shares for
which we received instructions.
THE FIXED ACCOUNT
You may allocate amounts to the Fixed Account. The Fixed Account is not a
part of the Separate Account, but is a part of our general assets. As such, the
Fixed Account (and this description of the Fixed Account) is not subject to the
same securities laws as the Separate Account.
The Fixed Account credits at least 4% per year. We are not obligated to, but
may, credit more than 4% per year. If we do, such rates are determined at our
sole discretion. You assume the risk that, at any time, the Fixed Account may
credit no more than 4%.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 11
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CHARGES AND DEDUCTIONS
DEDUCTIONS FROM PREMIUM
Before your premium is allocated to the Sub-Accounts and/or the Fixed
Account, we deduct a percentage from your premium for a sales load and a premium
tax charge. The amount allocated after the deductions is called your Net
Premium.
FRONT-END SALES LOAD -- We deduct a front-end sales load from each premium
you pay. The front-end sales load is based on:
1) the level of scheduled premiums;
2) the length of the Guarantee Period; and
3) the amount of any unscheduled premiums paid.
The maximum front-end sales load is:
- - 50% in the first policy year;
- - 11% in policy years 2 through 10;
- - 3% in policy years 11 and on.
For all Guarantee Periods, the maximum amount of premiums 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 Premium,
the maximum amount of premiums 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 load. The levels range from those for the ten-year Guarantee
Period described above to 0% on a policy with a one year Guarantee Period.
However, there are other charges under the Policies that are lower for longer
Guarantee Periods.
PREMIUM TAX CHARGE -- We deduct a premium tax charge from each premium you
pay. The premium tax charge covers taxes assessed against us by a state and/or
other governmental entity. The range of such charge generally is between 0% and
4%.
DEDUCTIONS FROM ACCOUNT VALUE
MONTHLY DEDUCTION AMOUNTS -- Each month we will deduct an amount from your
Account Value to pay for the benefits provided by your policy. This amount is
called the Monthly Deduction Amount and equals the sum of:
(1) the charge for the cost of insurance;
(2) the charges for additional benefits provided by rider, if any;
(3) the charges for "special" insurance class rating, if any;
(4) the monthly administrative fee; and
(5) the mortality and expense risk charge
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
On any Monthly Activity Date, 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 our 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, we
reserve the right to use rates less than those shown in such 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. We 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 your Account Value and death benefit amount may vary from month to
month, the cost of insurance charge may also vary on each Monthly Activity Date.
RIDER CHARGE -- If your policy includes riders, a charge applicable to the
riders is made from the Account Value each month. The charge applicable to these
riders is to compensate Hartford for the anticipated cost of providing these
benefits and is specified on the applicable rider. For a description of the
riders available, see "Your Policy -- Supplemental Benefits."
SPECIAL CLASS CHARGE -- A charge for a special insurance class rating of an
insured may be made, if applicable, against the Account Value. This charge
compensates Hartford for the additional mortality risk associated with
individuals in such special classes.
MONTHLY ADMINISTRATIVE CHARGE AND ISSUE CHARGE -- We will assess a monthly
administrative charge to compensate us for administrative costs. This charge
covers average expected cost. The monthly administrative charge will be $8.33
per month initially and is guaranteed never to exceed that level during the
Guarantee Period. After the Guarantee Period, the charge is guaranteed never to
exceed $12 per month.
<PAGE>
12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Additionally, we assess a monthly charge in the first policy year to
compensate us for the up-front costs of underwriting and issuing a policy.
Subject to certain maximum levels, such charge currently is equal to $8.33 per
month, plus an amount that varies by issue age and the policy's initial Face
Amount. The monthly issue charge and the maximum levels of such charge for some
sample issue ages are summarized in the following chart:
<TABLE>
<CAPTION>
MAXIMUM
MONTHLY
ISSUE AGE MONTHLY FIRST POLICY YEAR ISSUE 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>
- ---------
* "IFA" refers to initial Face Amount
MORTALITY AND EXPENSE RISK CHARGE -- We deduct a mortality and expense risk
charge each month from your Account Value. 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 20 policy years, the longer the Guarantee Period is, the
lower the mortality and expense risk charge rate will be. For policy years 1
through 20, 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 policy year 20, the mortality and expense risk charge
rate for all policies is expected to equal .60% annually. However, we reserve
the right to continue the mortality and expense risk charge rate at the level in
effect during policy years 1 through 20, except for policies with a one year
Guarantee Period, for which we reserve the right to charge a mortality and
expense risk rate of .90%. There are other contractual charges that are higher
for longer Guarantee Periods.
The mortality and expense risk charge compensates us for mortality and
expense risks assumed under the policies. The mortality risk assumed is that the
cost of insurance charges are insufficient to meet actual claims. The expense
risk assumed is that the expense incurred in issuing, distributing and
administering the policies exceed the administrative charges and sales loads
collected. Hartford may keep any difference between cost it incurs and the
charges it collects.
SURRENDER CHARGES -- A surrender charge is assessed against the Account
Value if your policy lapses or is surrendered during the first nine policy
years. The amount of such surrender charge in the first policy year is
established by us based on the premiums paid during the first policy year and
the length of the Guarantee Period. Subject to certain limits imposed by state
insurance laws, 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 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 used
to calculate the first year surrender charge. Such percentage equals 110% with
respect to policies with a ten-year Guarantee Period and decreases as the
selected Guarantee Period decreases to 10% for policies with a one-year
Guarantee Period. There are other lower contractual charges applicable to longer
Guarantee Periods.
The schedule of surrender charges for a policy is set forth in that policy.
Additionally, your sales agent, upon request, will provide a schedule of
surrender charges which would apply under any given circumstances.
EXAMPLES OF FRONT-END SALES LOADS AND SURRENDER CHARGES -- The following is
an example of the actual front-end sales loads and surrender charge schedule for
a policy with a ten year Guarantee Period. The example uses the same specific
information (i.e., issue age, Face Amount, premium level, etc.) as the
illustration on page 9 of the Statement of Additional Information.
<TABLE>
<S> <C>
Death Benefit Option: Level
Face Amount: $250,000
Guarantee Period: 10 years
Charges Assumed: Current
Issue Age/Gender/Class: 45/Male/Preferred Plus
Scheduled Premium: $4,000 per year
Guideline Annual Premium: $4,819.38
Assumed Gross Annual Investment Return: 0%
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 13
- --------------------------------------------------------------------------------
The "Total Cumulative Sales Load If Surrendered" column on the far right of
the table below represents the sum of all loads which would have been assessed
since the issuance of the policy assuming a surrender of the policy at the end
of the corresponding policy year.
This is:
(1) the sum of the cumulative front-end sales load, plus
(2) the actual surrender charge for that policy year.
ADDITIONAL CHARGES/CREDITS IF SURRENDERED -- TEN YEAR GUARANTEE PERIOD
<TABLE>
<CAPTION>
CUMULATIVE TOTAL
FRONT-END MAXIMUM YEAR END ACTUAL CUMULATIVE
SALES SURRENDER ACCOUNT SURRENDER SALES LOAD IF
POLICY YEAR LOAD CHARGE VALUE CHARGE* SURRENDERED**
- --------------- ----------- ----------- --------- ----------- --------------
<S> <C> <C> <C> <C> <C>
1 $ 2,000 $ 4,400 $ 1,274 $ 1,274 $ 3,274
2 2,440 3,911 4,172 3,911 6,351
3 2,880 3,422 6,928 3,422 6,302
4 3,320 2,933 9,582 2,933 6,253
5 3,760 2,444 12,157 2,444 6,204
6 4,200 1,956 14,669 1,956 6,156
7 4,640 1,467 17,122 1,467 6,107
8 5,080 978 19,532 978 6,058
9 5,520 489 21,890 489 6,009
10 5,960 0 21,187 0 5,960
11 6,080 0 26,679 0 6,080
</TABLE>
* The Actual Surrender Charge assessed is the lesser of:
(a) The contractual maximum surrender charge, or
(b) Account Value at the end of the policy year.
** Assumes a surrender of the policy at the end of that policy year.
An example of the actual front-end sales load and surrender charge schedule
for a policy with a one year Guarantee Period is shown below. The example uses
the same specific information (i.e., issue age, Face Amount, premium level) as
the illustration on page 12 of the Statement of Additional Information.
<TABLE>
<S> <C>
Death Benefit Option: Level
Face Amount: $250,000
Guarantee Period: 1 Year
Charges Assumed: Current
Issue Age/Gender/Class: 45/Male/Preferred Plus
Scheduled Premium: $4,000 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 of
the table below 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.
<PAGE>
14 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
ADDITIONAL CHARGES IF SURRENDERED -- ONE YEAR GUARANTEE PERIOD
<TABLE>
<CAPTION>
CUMULATIVE TOTAL
FRONT-END MAXIMUM YEAR END ACTUAL CUMULATIVE
SALES SURRENDER ACCOUNT SURRENDER SALES LOAD IF
POLICY YEAR LOAD CHARGE VALUE CHARGE* SURRENDERED**
- --------------- ----------- ----------- --------- ----------- --------------
<S> <C> <C> <C> <C> <C>
1 $ 0 $ 400 $ 3,195 $ 400 $ 400
2 0 355 6,415 355 355
3 0 311 9,457 311 311
4 0 267 12,363 267 267
5 0 222 15,163 222 222
6 0 178 17,872 178 178
7 0 133 20,500 133 133
8 0 89 23,057 89 89
9 0 44 25,542 44 44
10 0 0 27,942 0 0
11 0 0 30,194 0 0
</TABLE>
* The Actual Surrender Charge assessed is the lesser of:
(a) The contractual maximum surrender charge, or
(b) Account Value at the end of the policy year.
** Assumes a surrender of the policy at the end of that policy year.
CHARGES FOR THE FUNDS
The investment performance of each Fund reflects the management fee that the
Fund pays to its investment manager as well as other operating expenses that the
Fund incurs. Investment management fees are generally daily fees computed as a
percentage of a Fund's average daily net assets as an annual rate. Please read
the prospectus for each Fund for complete details.
YOUR POLICY
CONTRACT RIGHTS
POLICY OWNER, OR "YOU" -- As long as your policy is in force, you may
exercise all rights under the policy while either of the insureds is alive and
no beneficiary has been irrevocably named.
BENEFICIARY -- You name the beneficiary in your application for the policy.
You may change the beneficiary (unless irrevocably named) while the insured is
alive by notifying us in writing. If no beneficiary is living when the insured
dies, the death benefit will be paid to you if living; or, otherwise, to your
estate.
ASSIGNMENT -- You may assign your policy. Until you notify us in writing, no
assignment will be effective against us. We are not responsible for the validity
of any assignment.
STATEMENTS -- We will send you a statement at least once each year, showing:
(a) the current Account Value, Cash Surrender Value and Face Amount;
(b) the premiums paid, monthly deduction amounts and any loans since your last
statement;
(c) the amount of any Indebtedness;
(d) any notifications required by the provisions of your policy; and
(e) any other information required by the Insurance Department of the state
where your policy was delivered.
CONTRACT LIMITATIONS
ALLOCATIONS TO SUB-ACCOUNTS AND THE FIXED ACCOUNT -- You may allocate
amounts to a maximum of nine (9) Sub-Accounts, or eight (8) Sub-Accounts and the
Fixed Account.
TRANSFERS OF ACCOUNT VALUE -- You may transfer amounts among the Fixed
Account and the Sub-Accounts subject to a charge described below. You may
request transfers in writing or by calling us at 1-800-231-5453. Transfers by
telephone may be made by your agent of record or by your attorney-in-fact
pursuant to a power of attorney. Telephone transfers may not be permitted in
some states. We will not be responsible for losses that result from acting upon
telephone requests reasonably believed to be genuine. We will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
The procedures we follow for transactions initiated by telephone include
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 15
- --------------------------------------------------------------------------------
requiring callers to provide certain identifying information. All transfer
instructions communicated to us by telephone are tape recorded.
You may make one transfer per calendar month free of charge, excluding any
transfers made pursuant to your enrollment in the Dollar Cost Averaging Program.
Each subsequent transfer in excess of one per calendar month will be subject to
a transfer charge of up to $25. We reserve the right to limit at a future date
the size of transfers and remaining balances and to limit the number and
frequency of transfers.
TRANSFERS FROM THE FIXED ACCOUNT -- Except for transfers made under the
Dollar Cost Averaging Program, any transfers from the Fixed Account must occur
during the 30-day period following each policy anniversary, and, if your
accumulated value in the Fixed Account exceeds $1,000, the amount transferred
from the Fixed Account in any policy year may not exceed 25% of the accumulated
value in the Fixed Account on the transfer date.
DEFERRAL OF PAYMENTS -- We may defer payment of any Cash Surrender Values,
withdrawals and loan amounts which are not from the Sub-Accounts for up to six
months from the date of the request. If we defer payment for more than 30 days,
we will pay you interest.
CHANGES TO CONTRACT OR SEPARATE ACCOUNT
MODIFICATION OF POLICY -- The only way the policy may be modified is by a
written agreement signed by our President, or one of our Vice Presidents,
Secretaries, or Assistant Secretaries.
SUBSTITUTION OF FUNDS -- We reserve the right to substitute the shares of
any other registered investment company for the shares of any Fund already
purchased or to be purchased in the future by the Separate Account provided that
the substitution has been approved by the Securities and Exchange Commission.
CHANGE IN OPERATION OF THE SEPARATE ACCOUNT -- The operation of the Separate
Account may be modified to the extent permitted by law, including deregistration
under the securities laws.
SEPARATE ACCOUNT TAXES -- Currently, no charge is made to the Separate
Account for federal, state and local taxes that may be allocable 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, allocable to
the Separate Account may also be made.
OTHER BENEFITS
DOLLAR COST AVERAGING PROGRAM -- You may elect to allocate your Net Premiums
among the Sub-Accounts and the Fixed Account pursuant to the Dollar Cost
Averaging (DCA) program. If you choose the DCA program, your Net Premiums will
be deposited into the Hartford Money Market Sub-Account or the Fixed Account.
Amounts will be transferred monthly to the other investment options in
accordance with your premium allocation instructions. 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 Account Value allocated to the
Dollar Cost Averaging program is less than the amount you have elected to
transfer, your DCA program will terminate.
You may cancel your DCA election by notice in writing or by calling us at
1-800-231-5453. We reserve the right to change or discontinue the DCA program.
The main objective of a DCA program is to minimize the impact of short-term
price fluctuations. The DCA program allows you to take advantage of market
fluctuations. Since the same dollar amount is transferred to your selected
investment options at set intervals, the DCA program 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. However, it is important to understand that the DCA program
does not assure a profit or protect against loss in a declining market.
SUPPLEMENTAL BENEFITS -- The following supplemental benefits are among the
options that may be included in a policy by rider, subject to the restrictions
and limitations set forth therein. Charges for the riders increase the Monthly
Deduction Amount.
- - DEDUCTION AMOUNT WAIVER RIDER. We will waive Monthly Deduction Amounts if the
insured becomes totally disabled prior to age 65 for at least six months.
- - ACCIDENTAL DEATH BENEFIT RIDER. We will increase the death proceeds if the
insured dies from an accident.
- - INCREASE IN COVERAGE OPTION RIDER. We will guarantee you the 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:
(a) the original policy has been in force for five years,
(b) the insured's attained age is less than 80, and
(c) the Account Value of the original policy is sufficient to "pay up" the new
policy under assumptions defined in the rider.
The Face Amount of the new policy will be equal to the Face Amount,
multiplied by a percentage which
<PAGE>
16 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
depends on the insured's age, gender (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 to the date of
death of the insured, regardless of the age of the insured, subject to certain
death benefit and premium restrictions.
SETTLEMENT OPTIONS -- Proceeds under your policy may be paid in a lump sum
or may be applied to one of our four settlement options. The minimum amount that
may be placed under a settlement option is $5,000 (unless we consent to a lesser
amount), subject to our then-current rules. Once payments under the Second
Option, the Third Option or the Fourth Option begin, no surrender may be made
for a lump sum settlement in lieu of the life insurance payments. The following
payment options are available to you or your beneficiary. If a payment option is
not selected, proceeds will be paid in a lump sum. Your beneficiary may choose a
settlement.
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 one 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 policy provides 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,
we may make payments less often.
The table for the Fourth Option is based on the 1983a Individual Annuity
Mortality Table, set back one year and with 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. We 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.
Other arrangements for income payments may be agreed upon.
SURRENDER/CONTINUATION OPTIONS -- At any time prior to the maturity date,
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, you may choose one of the above options if, during the
Guarantee Period:
(a) a required scheduled premium 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 notify us in writing of your choice within 61 days after the due
date for the outstanding scheduled premium. If you do not notify us, we will
automatically apply the Cash Surrender Value to Option B, or, Option C if the
insurance class shown in your policy is "special." If your policy has no Cash
Surrender Value, it will terminate at the end of the grace period.
The effective date of the surrender/continuation options will be the earlier
of the date we receive your election request in writing or the end of the grace
period. When a surrender/continuation option becomes effective, all benefit
riders attached to a policy will terminate, unless otherwise provided in the
rider.
The following are descriptions of each option:
OPTION A -- SURRENDER FOR CASH -- If you choose Option A, you must surrender
your 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 -- CONTINUATION OF POLICY AS EXTENDED TERM INSURANCE -- Option B is
not available unless the insurance class shown in your policy is "standard" or
"preferred." If you choose Option B, 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 will begin on the effective date of
Option B 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
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 17
- --------------------------------------------------------------------------------
insured's then attained age. At the end of such term, we will pay you any Cash
Surrender Value not used to provide extended term insurance, and our liability
under the policy will cease.
OPTION C -- CONTINUATION OF POLICY AS PAID-UP INSURANCE -- If you choose
Option C, your policy will continue as paid-up life insurance. The amount of
paid-up life insurance will be calculated using the Cash Surrender Value of your
policy as a net single premium as of the effective date of this benefit at the
insured's then-attained age. Hartford reserves the right to require evidence of
insurability or limit the amount of Option C if the paid-up amount exceeds the
death benefit in effect on the effective date of Option C. We will pay you any
Cash Surrender Value not used to provide paid-up insurance.
If your policy is continued under Option B or Option C, as described 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.
BENEFITS AT MATURITY -- If the insured is living on the "maturity date" (the
anniversary of the policy date on which the insured attained age 100), we will
pay the Cash Surrender Value to you upon surrender of the policy to us. On the
maturity date, the policy will terminate and Hartford will have no further
obligations under the policy.
CLASS OF PURCHASERS
REDUCED CHARGES FOR ELIGIBLE GROUPS -- Certain of the charges and deductions
described above may be reduced for policies issued in connection with a specific
plan, in accordance with our rules in effect as of the date the application for
a policy is approved. To qualify for such a reduction, a plan must satisfy
certain criteria, e.g., as to 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 of the plan's members. The amount of reduction and
the criteria for qualification will be reflected 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.
PREMIUMS
APPLICATION FOR A POLICY -- To purchase a policy you must submit an
application to us. Within limits, you may choose the initial Face Amount,
scheduled premiums, 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 us. Acceptance is subject to our underwriting rules
and we reserve the right to reject an application for any reason. No change in
the terms or conditions of a policy will be made without your consent. The
minimum initial premium is the amount required to keep the policy in force for
one month, but not less than $50.
Your policy will be effective on the policy date only after we receive all
outstanding delivery requirements and the initial premium payment. The policy
date is the date used to determine all future cyclical transactions on the
policy, such as Monthly Activity Date and policy years.
PREMIUM PAYMENT FLEXIBILITY -- You have the ability to pay amounts greater
or less than your scheduled premiums. Prior to policy issue, you can choose the
level of the scheduled premiums, within a range determined by Hartford, based on
the Face Amount and the insured's gender (except where unisex rates apply),
issue age and risk classification.
During the Guarantee Period, Hartford will guarantee that your policy will
not lapse, regardless of the investment experience of the Funds, provided that
you pay the scheduled premiums when due and Indebtedness never exceeds the Cash
Value. In addition, unscheduled premiums are allowed during the Guarantee
Period. Even if you do not pay all scheduled premiums due during the Guarantee
Period, your policy will stay in force as long as the Policy Surplus exceeds
Indebtedness. After the Guarantee Period, you may change your scheduled premiums
to any level you desire. Unscheduled premiums will continue to be allowed.
Additionally, once the Guarantee Period has expired, your policy will not lapse
as long as the Cash Surrender Value is sufficient to cover the Monthly Deduction
Amounts. For more details, see "Lapse and Reinstatement."
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
initial premium payment 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 in the
Code.
During the Guarantee Period, your policy will not terminate due to
insufficient Cash Value, regardless of the investment experience of the Funds,
provided all scheduled premiums are paid when due and if Indebtedness does not
exceed the Cash Value.
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18 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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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 Indebtedness, payment of such scheduled premium will not
be required in that year or in any future policy year. Your policy will not
terminate due to such nonpayment. However, future scheduled premiums during the
Guarantee Period will be required unless the Policy Surplus continues to exceed
Indebtedness in future policy years. In addition, as is true with any premium,
your Account Value and Policy Surplus in future years will be greater if you
make the premium payment.
For example, to determine whether or not non-payment of a scheduled premium
in policy year 2 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 equals or is greater than the Target Account Value and
Indebtedness remained less than the Policy Surplus, failure to pay any scheduled
premiums due in policy year 2 would not result in a lapse.
After the Guarantee Period, Hartford will send you reminder notices to pay
scheduled premiums during the insured's lifetime. Payment of the scheduled
premium may not be sufficient to keep your policy in force after the end of the
Guarantee Period.
UNSCHEDULED PREMIUMS -- Any premium payment we receive in an amount
different from the scheduled premium will be considered an unscheduled premium.
Unscheduled premiums of at least $50 can be made at any time while a policy is
in force.
You may pay additional premiums at any time prior to the scheduled maturity
date, subject to the following limitations:
- - The minimum premium that we will accept is $50 or the amount required to keep
the policy in force.
- - We reserve the right to refund any excess premiums that would cause the policy
to fail to meet the definition of life insurance under the Internal Revenue
Code.
- - We reserve the right to require evidence of insurability for any premium
payment that results in an increase in the death benefit greater than the
amount of the premium.
- - Any premium payment in excess of $1,000,000 is subject to our approval.
ALLOCATION OF PREMIUM PAYMENTS -- The initial Net Premium (and any
additional Net Premiums received by us before the end of the right to examine
period) will be allocated to the Hartford Money Market Sub-Account on the later
of the policy date or the date we receive your premium payment.
We will then allocate the Account Value in the Hartford Money Market
Sub-Account to the Fixed Account and the Sub-Accounts according to the premium
allocation specified in your policy application upon the expiration of the right
to examine policy period, or the date we receive the final requirement to put
the policy in force, whichever is later.
You may change your premium allocation upon request in writing. Allocations
must be in whole percentages. Subsequent Net Premiums will be allocated to the
Fixed Account and the Sub-Accounts according to your most recent written
instructions as long as the number of investment choices does not exceed nine
(9), and the percentage you allocate to each Sub-Account and/or the Fixed
Account is in whole percentages. If we receive a premium payment with a premium
allocation instruction that does not comply with the above rules, we will
allocate the Net Premium pro rata based on the values of your existing
investment choices.
You will receive several different types of notifications as to what your
current premium allocation is. Each transaction confirmation received after we
receive a premium payment will show how a Net Premium has been allocated.
Additionally, each quarterly statement summarizes the current premium allocation
in effect for your policy.
ACCUMULATION UNITS -- Net Premiums allocated to the Sub-Accounts are used to
credit accumulation units to such Sub-Accounts.
The number of accumulation units in each Sub-Account to be credited to a
policy (including the initial allocation to the Hartford Money Market
Sub-Account) and the amount to be credited to the Fixed Account will be
determined, first, by multiplying the Net Premium by the appropriate allocation
percentage in order to determine the portion of Net Premiums or transferred
Account Value to be invested in the Fixed Account or the Sub-Account. Each
portion of the Net Premium or transferred Account Value to be invested in a
Sub-Account is then divided by the accumulation unit value in a particular
Sub-Account next computed following its receipt. The resulting figure is the
number of accumulation units to be credited to each Sub-Account.
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 the net
investment factor for that Sub-Account for the Valuation Period then ended. The
net investment factor for each of the Sub-Accounts is equal to the net asset
value per share of the corresponding Fund at the end of the Valuation Period
(plus the per share amount of any dividend or capital gain distributions paid by
that Fund in the Valuation Period then ended) divided by
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 19
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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 Account Value, in connection with policy loans, or in 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
us at the National Service Center, provided such date is a Valuation Day;
otherwise such determination will be made on the next succeeding date which is a
Valuation Day.
ACCOUNT VALUES -- Each policy will have an Account Value. There is no
minimum guaranteed Account 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, the interest credited to the Fixed Account and
the Loan Account, and the Monthly Deduction Amounts, Net Premiums paid, and any
withdrawals taken.
A policy's Account Value is related to the net asset value of the Funds
associated with 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, first, multiplying the number of accumulation units in each
Sub-Account as of the Valuation Day by the then current value of the
accumulation units in that Sub-Account and then totaling the result for all of
the Sub-Accounts. A policy's Account Value equals the policy's value in all of
the Sub-Accounts, the Fixed Account, and the Loan Account. A policy's Cash Value
is equal to the Account Value less any applicable surrender charges. A policy's
Cash Surrender Value, which is the net amount available upon surrender of the
policy, is the Cash Value less any Indebtedness. See "Accumulation Unit Values,"
above.
We will pay death proceeds, Cash Surrender Values, partial withdrawals, and
loan amounts allocable to the Sub-Accounts within seven 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 Commission or the Commission declares that an emergency
exists.
DEATH BENEFITS AND
POLICY VALUES
DEATH BENEFIT -- Your policy provides for the payment of the death proceeds
to the named beneficiary upon receipt of due proof of the death of the insured.
Your policy will be effective on the policy date only after we receive all
outstanding delivery requirements and the initial premium payment. You must
notify us in writing as soon as possible after the death of the insured. The
death proceeds payable to the beneficiary equal the death benefit less any
Indebtedness and less any due and unpaid Monthly Deduction Amount occurring
during a grace period. The death benefit depends on the death benefit option you
select.
DEATH BENEFIT OPTIONS -- There are three death benefit options: the Level
Death Benefit Option ("Option A"), the Return of Account Value Death Benefit
Option ("Option B") and the Return of Premium Death Benefit Option ("Option C").
Subject to the minimum death benefit described below, the death benefit under
each option is as follows:
1. Under Option A, the current Face Amount.
2. Under Option B, the current Face Amount plus the Account Value.
3. Under Option C, the current 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 you do, the Face Amount will become the
amount available as a death benefit immediately prior to the Death Benefit
Option change.
DEATH BENEFIT GUARANTEE -- During the Guarantee Period, your policy will not
terminate due to insufficient Cash Surrender Value, regardless of the investment
experience of the Funds, provided all scheduled premiums are paid when due and
Indebtedness does not exceed the Cash Value.
The Guarantee Period you select will affect the benefits provided by your
policy. Generally, the longer the Guarantee Period is, the higher 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, the lower the
guaranteed administrative fees;
(c) a longer period during which your current cost of insurance rates are
guaranteed. As a result, the longer the Guarantee Period, the lower the
guaranteed cost of insurance rates;
(d) lower current cost of insurance rates; and
(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 without any evidence of insurability,
additional coverage, subject to limitations.
<PAGE>
20 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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Because 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 such charges on policy values without a sales illustration. After
consultation with your sales agent, once you decide on a combination of policy
features, (e.g., Face Amount, level of scheduled premiums, Guarantee Period, and
the insured's issue age and gender) the sales agent will provide you with an
illustration which reflects the charges and benefits of that particular
combination, and includes a summary of policy charges and fees. In addition,
such illustrations are available for any permissible combination of benefits
which you may request.
MINIMUM DEATH BENEFIT -- Your policy has a minimum death benefit. We will
automatically increase the death benefit so that it will never be less than the
Account Value multiplied by the minimum death benefit percentage for the then
current year. This percentage varies according to the policy year and each
insured's issue age, sex (where unisex rates are not used) and insurance class.
EXAMPLES OF MINIMUM DEATH BENEFIT:
<TABLE>
<CAPTION>
A B
---------- ----------
<S> <C> <C>
Face Amount............................ $ 100,000 $ 100,000
Account Value.......................... 46,500 34,000
Specified Percentage................... 250% 250%
Death Benefit Option................... Level Level
</TABLE>
In Example A, the 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 payable 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%).
UNSCHEDULED INCREASES AND DECREASES IN FACE AMOUNT -- At any time after the
Guarantee Period, you may request in writing to change the Face Amount. The
minimum amount by which the Face Amount can be increased or decreased is based
on our rules then in effect.
We reserve the right to limit the number of increases or decreases made
under a policy to no more than one in any 12 month period.
All requests to increase the Face Amount must be applied for on a new
application and accompanied by your policy. All requests will be subject to
evidence of insurability satisfactory to us. Any increase approved by us will be
effective on the Monthly Activity Date shown on the new policy specifications
page, provided that the Monthly Deduction Amount for the first month after the
effective date of the increase 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 your request in writing. The remaining Face Amount
must not be less than that specified in our minimum rules then in effect.
Decreases in Face Amount will be applied as follows:
(a) to the most recent increase in the Face Amount; then
(b) successively to each prior increase in Face Amount; then
(c) to the initial Face Amount.
If you ask to decrease the Face Amount of your policy below the initial Face
Amount, we will deduct, on a pro rata basis, a portion of any remaining
surrender charge from your Account Value. The amount of the reduction will be
equal to:
(a) the initial Face Amount, minus the requested Face Amount, multiplied by
(b) the surrender charge on the date of the request to change the Face Amount,
divided by
(c) the initial Face Amount.
Your surrender charge will be reduced by the same amount.
CHARGES AND CONTRACT VALUES -- Your contract values decrease due to the
deduction of policy charges. Contract values may increase or decrease depending
on investment performance; investment expenses and fees reduce the investment
performance of the Sub-Accounts. Fluctuations in your account value may have an
effect on your death benefit. If your contract lapses, the contract terminates
and no death benefit will be paid.
MAKING WITHDRAWALS FROM
YOUR POLICY
SURRENDER -- Provided your policy has a Cash Surrender Value, you may
surrender your policy to us. We will pay you the Cash Surrender Value. Our
liability under the policy will cease as of the date of your request for
surrender, or the date you request to have your policy surrendered, if later.
PARTIAL WITHDRAWALS -- After the Guarantee Period, partial withdrawals are
allowed. The minimum partial withdrawal allowed is $500. The maximum partial
withdrawal is the Cash Surrender Value, minus $1,000. One partial withdrawal is
allowed per month (between any successive Monthly Activity Dates). The Face
Amount is reduced by the
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 21
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amount of the partial withdrawal. Unless specified otherwise, a partial
withdrawal will be deducted pro rata from the Fixed Account and the
Sub-Accounts.
We do not currently impose a partial withdrawal charge. However, we reserve
the right to impose in the future a partial withdrawal charge of up to $50.
RIGHT TO EXAMINE A POLICY -- You have a limited right to return your policy
for cancellation. You may deliver or mail the policy to us or to the agent from
whom it was purchased any time during your free look period. Your free look
period ends the later of 10 days after you receive your policy, 10 days after we
deliver to you a Notice of Right to Withdraw, or 45 days after you sign the
application for your policy (or longer in some states). In such event, the
policy will be rescinded and we will pay an amount equal to the greater of the
premiums paid for the policy less any Indebtedness or the sum of: i) the Account
Value less any Indebtedness, on the date the returned policy is received by us
or the agent from whom it was purchased; and, ii) any deductions under the
policy or charges associated with the Separate Account. If your policy is
replacing another policy, your free look period and the amount paid to you upon
the return of your policy vary by state.
RIGHT TO EXCHANGE A POLICY -- During the first 24 months after its issuance,
you may exchange your policy for a non-variable life insurance policy on the
life of the insured offered by us or an affiliate. No evidence of insurability
will be required. The new policy will have an amount at risk which equals or is
less than the amount at risk in effect on the date of exchange. Premiums under
the new policy will be based on the same risk classifications as the policy for
which the new policy was exchanged. An exchange of a policy under such
circumstances should be a tax-free transaction under Section 1035 of the Code.
LOANS
AVAILABILITY OF LOANS -- At any time while the policy is in force, you may
borrow against the policy by assigning it as sole security to us. Any new loan
taken together with any existing Indebtedness may not exceed 90% of the Cash
Value on the date we grant a loan.
Unless you specify otherwise, all loan amounts will be transferred on a pro
rata basis from the Fixed Account and each of the Sub-Accounts to the Loan
Account.
If total Indebtedness equals or exceeds the Cash Value on any Monthly
Activity Date, the policy will then go into default. See "Lapse and
Reinstatement."
INTEREST CHARGED ON INDEBTEDNESS -- Interest will accrue daily on the
Indebtedness at the policy loan rate. Because the interest charged on
Indebtedness may exceed the rate credited to the Loan Account, the Indebtedness
may grow faster than the Loan Account. If this happens, any difference between
the value of the Loan Account and the Indebtedness will be transferred on each
Monthly Activity Date from the Fixed Account and Sub-Accounts to the Loan
Account on a pro rata basis. Policy loan rates are shown in the policy.
CREDITED INTEREST -- Any amounts in the Loan Account will be credited with
interest at an annual rate of 2% (in most states) during the first ten policy
years. Thereafter, the rate will be 3% (in most states). For preferred loans,
the rate is 4% (in most states).
PREFERRED LOAN -- If, at any time after the tenth policy anniversary, the
Cash Value exceeds the total of all premiums paid since issue, a Preferred Loan
will be available. The amount available for a Preferred Loan is the amount by
which the Cash Value exceeds total premiums paid. For policy years 11 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 by Hartford on
each Monthly Activity Date.
LOAN REPAYMENTS -- You can repay all or any part of your Indebtedness at any
time. The amount of policy loan repayment will be deducted from the Loan Account
and will be allocated among the Fixed Account and the Sub-Accounts in the same
percentage as premium payments are allocated.
TERMINATION DUE TO EXCESSIVE INDEBTEDNESS -- If total Indebtedness equals or
exceeds Cash Value under your policy, your policy will terminate 61 days after
we have mailed notice to your last known address and to the last known address
of any assignees of record. If sufficient loan repayment is not made by the end
of such 61 day period, your policy will terminate without value.
EFFECT OF LOANS ON ACCOUNT VALUE -- A loan, whether or not repaid, will have
a permanent effect on your Account Value. This effect occurs 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 on your Account Value
is likely to be. Such effect could be favorable or unfavorable. If the Fixed
Account and the Sub-Accounts earn more than the annual interest rate for funds
held in the Loan Account, your Account Value will not increase as rapidly as it
would have had no loan been made. If the Fixed Account and the Sub-Accounts earn
less than the Loan Account, then your Account Value will be greater than it
would have been had no loan been made. Additionally, if not repaid, the
aggregate amount of the outstanding Indebtedness will reduce the death proceeds
and the Cash Surrender Value otherwise payable.
<PAGE>
22 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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LAPSE AND REINSTATEMENT
POLICY SURPLUS -- We use the Policy Surplus to determine whether 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. However, if the Policy Surplus for a policy year during the
Guarantee Period is zero, all scheduled premiums due in that year are required
to be paid.
The Policy Surplus is determined as follows:
(a) The Policy Surplus for the first policy year is zero.
(b) The Policy Surplus for each subsequent policy year is (x) minus (y), but
never less than zero where (x) is the Account Value at the end of the
previous policy year; and (y) is the target Account Value, as shown in the
policy, for the previous policy year.
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 the Policy Surplus
for a policy year is less than the Indebtedness or is zero on any given Monthly
Activity Date, all scheduled premiums due in that policy year, on or before that
date the Monthly Activity Date are required to be paid in order to keep the
policy in force. With respect to any required scheduled premium not paid on or
before its due date, we will allow a grace period which ends 61 days after the
applicable Monthly Activity Date. During the grace period, the policy will
continue in force. If any such required scheduled premium is not paid by the end
of the grace period, the policy will terminate except as provided under the
non-forfeiture options set forth in the policy or unless you have elected the
Automatic Premium Loan Option (see "-- Automatic Premium Loan Option," below)
and there is sufficient Cash Value to cover the scheduled premium amounts due.
After the Guarantee Period, a 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 payments are not made by the
end of the grace period, a policy will terminate without value. Hartford will
mail you and any assignee under the policy written notice of the amount of
premium payments required to continue the policy in force at least 61 days
before the end of the grace period. The amount of premiums required to be paid
will be no greater then the amount, as of the date the grace period began,
deducted from Account Value in payment of three Monthly Deduction Amounts. If
such premiums are not paid by the end of the grace period, the policy will
terminate.
REINSTATEMENT -- Prior to the death of the insured, a policy may be
reinstated prior to the maturity date, provided such policy has not been
surrendered for cash, and provided further that:
(a) you make your reinstatement request within five years from the policy
termination date;
(b) you submit satisfactory evidence of insurability;
(c) you pay all overdue required scheduled premiums, if any; and
(d) if the Guarantee Period has expired at the time of policy reinstatement and
if the amount paid in is insufficient to reinstate the policy, sufficient
premiums 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 policy reinstatement date will
reflect:
(1) the Account Value at the time of termination; plus
(2) Net Premiums attributable to premiums paid at the time of reinstatement;
minus
(3) 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
of such policy taken place. Any Indebtedness at the time of termination must be
repaid upon reinstatement of the policy or carried over to the reinstated
policy.
AUTOMATIC PREMIUM LOAN OPTION -- If you elect the Automatic Premium Loan
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 such option in your policy application or by request in writing,
provided no scheduled premium is outstanding beyond its due date. In most
states, automatic premium loans will be treated as Preferred Loans. See "Loans
- -- Preferred Loan."
The Automatic Premium Loan Option will not be available if:
(a) you have revoked the election of such option 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.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 23
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In most states, if you have outstanding Indebtedness pursuant to the
Automatic Premium Loan Option, we 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 such option. In such case, we will not
require you to provide evidence of insurability. To remove any such outstanding
Indebtedness, we 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,
we will assume that you have elected to restore the death benefit at the end of
the Guarantee Period then in effect. We will notify you that we will make such
adjustment unless you instruct us not to make this adjustment. Such notification
will be made at least 30 days prior to the policy anniversary occurring at the
end of such Guarantee Period
TAXES
GENERAL
Since federal tax law is complex, the tax consequences of purchasing this
policy will vary depending on your situation. You may need tax or legal advice
to help you determine whether purchasing this policy is right for you.
Our general discussion of the tax treatment of this policy is based on our
understanding of federal income tax laws as they are currently interpreted. A
detailed description of all federal income tax consequences regarding the
purchase of this policy cannot be made in the prospectus. We also do not discuss
state, municipal or other tax laws that may apply to this policy. For detailed
information, you should consult with a qualified tax adviser familiar with your
situation.
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
"Premiums -- Accumulation Unit Values").
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 contracts under Section 7702 of the Code. The death benefit under a
life insurance contract is generally excluded from the gross income of the
beneficiary. Also, a life insurance policy owner is generally not taxed on
increments in the contract 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.
<PAGE>
24 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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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 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 policy's 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 policy 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.
The federal estate tax is integrated with the federal gift tax under a
unified rate schedule and unified credit which shelters up to $650,000 (for
1999) from the estate and gift tax. The Taxpayer Relief Act of 1997 gradually
raises the credit over the next seven years to $1,000,000. 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 as adjusted for inflation. 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
The Code requires that investments supporting your policy be adequately
diversified. Code Section 817 provides that a variable life insurance contract
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. If a contract is not treated as a life insurance contract, the
policy owner will be subject to income tax on annual increases in cash value.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 25
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The Treasury Department's diversification regulations require, among other
things, that:
- - no more than 55% of the value of the total assets of the segregated asset
account underlying a variable contract is represented by any one investment,
- - no more than 70% is represented by any two investments,
- - no more than 80% is represented by any three investments and
- - no more than 90% is represented by any four investments.
In determining whether the diversification standards are met, all securities
of the same issuer, all interests in the same real property project, and all
interests in the same commodity are each treated as a single investment. In the
case of government securities, each government agency or instrumentality is
treated as a separate issuer.
A separate account must be in compliance with the diversification standards
on the last day of each calendar quarter or within 30 days after the quarter
ends. If an insurance company inadvertently fails to meet the diversification
requirements, the company may still comply within a reasonable period and avoid
the taxation of contract income on an ongoing basis. However, either the company
or the policy owner must agree to pay the tax due for the period during which
the diversification requirements were not met.
We monitor the diversification of investments in the separate accounts and
test for diversification as required by the Code. We intend to administer all
policies 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 separate accounts supporting the contract must be considered to be
owned by the insurance company and not by the policy owner. It is unclear under
what circumstances an investor is considered to have enough control over the
assets in the separate account to be considered the owner of the assets for tax
purposes.
The IRS has issued several rulings discussing investor control. These
rulings say that certain incidents of ownership by the policy owner, such as the
ability to select and control investments in a separate account, will cause the
policy owner to be treated as the owner of the assets for tax purposes.
In its explanation of the diversification regulations, the Treasury
Department recognized that the temporary regulations "do not provide guidance
concerning the circumstances in which investor control of the investments of a
segregated asset account may cause the investor, rather than the insurance
company, to be treated as the owner of the assets in the account." The
explanation further indicates that "the temporary regulations provide that in
appropriate cases a segregated asset account may include multiple sub-accounts,
but do not specify the extent to which policyholders may direct their
investments to particular sub-accounts without being treated as the owners of
the underlying assets. Guidance on this and other issues will be provided in
regulations or revenue rulings under Section 817(d), relating to the definition
of variable contract."
The final regulations issued under Section 817 did not provide guidance
regarding investor control, and as of the date of this prospectus, guidance has
yet to be issued. We do not know if additional guidance will be issued. If
guidance is issued, we do not know if it will have a retroactive effect.
Due to the lack of specific guidance on investor control, there is some
uncertainty about when a policy owner is considered the owner of the assets for
tax purposes. We reserve the right to modify the policy, as necessary, to
prevent you from being considered the owner of assets in the separate account.
TAX DEFERRAL DURING ACCUMULATION PERIOD
Under existing provisions of the Code, except as described below, any
increase in an owner's Investment Value is generally not taxable to the policy
owner unless amounts are received (or are deemed to be received) under the
policy prior to the insured's death. If the policy is surrendered or matures,
the amount received will be includable in the policy owner's income to the
extent that it exceeds the policy owner's "investment in the contract." (If
there is any debt at the time of a surrender, then such debt will be treated as
an amount distributed to the owner.) The "investment in the contract" is the
aggregate amount of premium payments and other consideration paid for the
policy, less the aggregate amount received previously under the policy to the
extent such amounts received were excluded from gross income. Whether partial
withdrawals (or other such amounts deemed to be distributed) from the policy
constitute income to the policy owner depends, in part, upon whether the policy
is considered a modified endowment contract for Federal income tax purposes.
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
<PAGE>
26 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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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
In certain circumstances, the Code limits the application of specific tax
advantages to individual owners of life insurance contracts. Prospective policy
owners which are not individuals should consult a qualified tax adviser to
determine the 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.
OTHER MATTERS
YEAR 2000
IN GENERAL -- The Year 2000 issue relates to the ability or inability of
computer hardware, software and other information technology (IT) systems, as
well as non-IT systems, such as equipment and machinery with imbedded chips and
microprocessors, to properly process information and data containing or related
to dates beginning with the year 2000 and beyond. The Year 2000 issue exists
because, historically, many IT and non-IT systems that are in use today were
developed years ago when a year was identified using a two-digit date field
rather than a four-digit date field. As information and data containing or
related to the century date are introduced to date sensitive systems, these
systems may recognize the year 2000 as "1900", or not at all, which may result
in systems processing information incorrectly. This, in turn, may significantly
and adversely affect the integrity and reliability of information databases of
IT systems, may cause the malfunctioning of certain non-IT systems, and may
result in a wide variety of adverse consequences to a company. In addition, Year
2000 problems that occur with third parties with which a company does business,
such as suppliers, computer vendors, distributors and others, may also adversely
affect any given company.
The integrity and reliability of Hartford's IT systems, as well as the
reliability of its non-IT systems, are integral aspects of Hartford's business.
Hartford issues insurance policies, annuities, mutual funds and other financial
products to individual and business customers, nearly all of which contain date
sensitive data, such as policy expiration dates, birth dates and premium payment
dates. In addition, various IT systems support communications and other systems
that integrate Hartford's various business segments and field offices. Hartford
also has business relationships with numerous third parties that affect
virtually all aspects of Hartford's business, including, without limitation,
suppliers, computer hardware and software vendors, insurance agents and brokers,
securities broker-dealers and other distributors of financial products, many of
which provide date sensitive data to Hartford, and whose operations are
important to Hartford's business.
INTERNAL YEAR 2000 EFFORTS AND TIMETABLE -- Beginning in 1990, Hartford
began working on making its IT systems Year 2000 ready, either through
installing new programs or replacing systems. Since January 1998, Hartford's
Year 2000 efforts have focused on the remaining Year 2000 issues related to IT
and non-IT systems in all of Hartford's business segments. These Year 2000
efforts include the following five main initiatives: (1) identifying and
assessing Year 2000 issues; (2) taking actions to remediate IT and non-IT
systems so that they are Year 2000 ready; (3) testing IT and non-IT systems for
Year 2000 readiness; (4) deploying such
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 27
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remediated and tested systems back into their respective production
environments; and (5) conducting internal and external integrated testing of
such systems. As of December 31, 1998, Hartford substantially completed
initiatives (1) through (4) of its internal Year 2000 efforts. Hartford has
begun initiative (5) and management currently anticipates that such activity
will continue into the fourth quarter of 1999.
THIRD PARTY YEAR 2000 EFFORTS AND TIMETABLE -- Hartford's Year 2000 efforts
include assessing the potential impact on Hartford of third parties' Year 2000
readiness. Hartford's third party Year 2000 efforts include the following three
main initiatives: (1) identifying third parties which have significant business
relationships with Hartford, including, without limitation, insurance agents,
brokers, third party administrators, banks and other distributors and servicers
of financial products, and inquiring of such third parties regarding their Year
2000 readiness; (2) evaluating such third parties' responses to Hartford's
inquiries; and (3) based on the evaluation of third party responses (or a third
party's failure to respond) and the significance of the business relationship,
conducting additional activities with respect to third parties as determined to
be necessary in each case. These activities may include conducting additional
inquiries, more in-depth evaluations of Year 2000 readiness and plans, and
integrated IT systems testing. Hartford has completed the first third party
initiative and, as of early 1999, had substantially completed evaluating third
party responses received. Hartford has begun conducting the additional
activities described in initiative (3) and management currently anticipates that
it will continue to do so through the end of 1999. However, notwithstanding
these third party Year 2000 efforts, Hartford does not have control over these
third parties and, as a result, Hartford cannot currently determine to what
extent future operating results may be adversely affected by the failure of
these third parties to adequately address their Year 2000 issues.
YEAR 2000 COSTS -- The costs of Hartford's Year 2000 program that were
incurred through the year ended December 31, 1997 were not material to
Hartford's financial condition or results of operations. The after-tax costs of
Hartford's Year 2000 efforts for the year ended December 31, 1998 were
approximately $3 million. Management currently estimates that after-tax costs
related to the Year 2000 program to be incurred in 1999 will be less than $10
million. These costs are being expensed as incurred.
RISKS AND CONTINGENCY PLANS -- If significant Year 2000 problems arise,
including problems arising with third parties, failures of IT and non-IT systems
could occur, which in turn could result in substantial interruptions in
Hartford's business. In addition, Hartford's investing activities are an
important aspect of its business and Hartford may be exposed to the risk that
issuers of investments held by it will be adversely impacted by Year 2000
issues. Given the uncertain nature of Year 2000 problems that may arise,
especially those related to the readiness of third parties discussed above,
management cannot determine at this time whether the consequences of Year 2000
related problems that could arise will have a material impact on Hartford's
financial condition or results of operations.
Hartford is in the process of developing certain contingency plans so that
if, despite its Year 2000 efforts, Year 2000 problems ultimately arise, the
impact of such problems may be avoided or minimized. These contingency plans are
being developed based on, among other things, known or reasonably anticipated
circumstances and potential vulnerabilities. The contingency planning also
includes assessing the dependency of Hartford's business on third parties and
their Year 2000 readiness. Hartford currently anticipates that internal and
external contingency plans will be substantially complete by the end of the
second quarter of 1999. However, in many contexts, Year 2000 issues are dynamic,
and ongoing assessments of business functions, vulnerabilities and risks must be
made. As such, new contingency plans may be needed in the future and/or existing
plans may need to be modified as circumstances warrant.
<PAGE>
28 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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GLOSSARY OF SPECIAL TERMS
ACCOUNT VALUE: the total of all amounts in the Fixed Account, Loan Account and
Sub-Accounts.
CASH SURRENDER VALUE: the Cash Value less all Indebtedness.
CASH VALUE: the Account Value less any applicable Surrender Charges.
FACE AMOUNT: an amount we use to determine the Death Benefit. On the policy
date, the Face Amount equals the initial Face Amount shown in your policy.
Thereafter, it may change under the terms of the policy.
FIXED ACCOUNT: part of our general account to which all or a portion of the
Account Value may be allocated.
FUNDS: the registered open-end management companies in which assets of the
Separate Account may be invested.
GUARANTEE PERIOD: The period you select, of one to ten policy years, during
which additional guarantees are provided. These guarantees include the guarantee
that if scheduled premiums are paid, the death benefit will not be less than the
initial Face Amount regardless of the investment performance of the
Sub-Accounts.
GUIDELINE ANNUAL PREMIUM: The level annual premium payment necessary to provide
the future benefits under a policy through maturity, based on certain
assumptions specified under federal securities laws. These assumptions include
mortality charges based on the 1980 Commissioners' Standard Ordinary Mortality
Smoker or Nonsmoker Table, age last birthday, an assumed annual net rate of
return of 5% per year, and deduction of the fees and charges specified in a
Policy. For purposes of the policies, the Guideline Annual Premium is used only
in limiting front-end sales loads and surrender charges.
INDEBTEDNESS: all loans taken on the policy, plus any interest due or accrued
minus any loan repayments.
LOAN ACCOUNT: an account established for any amounts transferred from the Fixed
Account and Sub-Accounts as a result of loans. The amounts in the Loan Account
are credited with interest and are not subject to the investment experience of
any Sub-Accounts.
MONTHLY ACTIVITY DATE: the policy date and the same date in each succeeding
month as the policy date. However, whenever the Monthly Activity Date falls on a
date other than a Valuation Day, the Monthly Activity Date will be deemed to be
the next Valuation Day.
NET PREMIUM: the amount of premium credited to Account Value. It is premium paid
minus the sales load and premium tax charge.
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.
SEPARATE ACCOUNT: an account which has been established by us to separate the
assets funding the variable benefits for the class of contracts to which the
policy belongs from our other assets.
SUB-ACCOUNT: the subdivisions of the Separate Account.
SURRENDER CHARGE: a charge that may be assessed if you surrender your policy or
the Face Amount is decreased.
TARGET ACCOUNT VALUE: The Account Value, determined at policy 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.
VALUATION DAY: the date on which a Sub-Account is valued. This occurs every day
the New York Stock Exchange is open for trading.
WE, US, OUR: Hartford Life and Annuity Insurance Company, sometimes referred to
as "Hartford."
YOU, YOUR: the owner of the policy.
WHERE YOU CAN FIND MORE INFORMATION
You can call us at 1-800-231-5453 to ask us questions, or to get a Statement
of Additional Information, free of charge. The Statement of Additional
Information contains more information about this life insurance policy and, like
this prospectus, is filed with the Securities and Exchange Commission. You
should read the Statement of Additional Information because you are bound by the
terms contained in it.
We file other information with the Securities and Exchange Commission. You
may read and copy any document we file at the SEC's public reference room in
Washington, DC 20549-6009. Please call the SEC at 1-800-SEC-0330 for further
information. Our SEC filings are also available to the public at the SEC's web
site at http://www.sec.gov.
<PAGE>
PART B
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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STATEMENT OF ADDITIONAL INFORMATION
SEPARATE ACCOUNT VL I
This Statement of Additional Information is not a prospectus. We will send
you a prospectus if you write us at P.O. Box 2999, Hartford, CT 06104-2999, or
if you call us at 1-800-231-5453.
DATE OF PROSPECTUS: MAY 3, 1999
DATE OF STATEMENT OF ADDITIONAL INFORMATION: MAY 3, 1999
<PAGE>
2 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GENERAL INFORMATION AND HISTORY....................................... 3
SERVICES.............................................................. 6
EXPERTS............................................................... 6
DISTRIBUTION OF THE POLICIES.......................................... 6
ADDITIONAL INFORMATION ABOUT CHARGES.................................. 7
ILLUSTRATION OF BENEFITS.............................................. 8
FINANCIAL STATEMENTS.................................................. SA-1
</TABLE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION 3
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GENERAL INFORMATION
AND HISTORY
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY ("HARTFORD") -- Hartford Life
and Annuity Insurance Company 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, the District of Columbia and Puerto Rico,
except New York. On January 1, 1998, Hartford's name changed from ITT Hartford
Life and Annuity Insurance Company to Hartford Life and Annuity Insurance
Company. We were originally incorporated under the laws of Wisconsin on January
9, 1956, and subsequently redomiciled to Connecticut. Our offices are located in
Simsbury, Connecticut; however, our mailing address is P.O. Box 2999, Hartford,
CT 06104-2999. We are ultimately controlled by The Hartford Financial Services
Group, Inc., one of the largest financial service providers in the United
States.
Hartford Life and Annuity Insurance Company is controlled by Hartford Life
Insurance Company, which is controlled by Hartford Life & Accident Insurance
Company, which is controlled by Hartford Life Inc., which is controlled by
Hartford Accident & Indemnity Company, which is controlled by Hartford Fire
Insurance Company, which is controlled by Nutmeg Insurance Company, which is
controlled by The Hartford Financial Services Group, Inc. Each of these
companies is engaged in the business of insurance and financial services.
The following table shows a brief description of the business experience of
officers and directors of Hartford Life and Annuity Insurance Company:
<TABLE>
<CAPTION>
POSITION WITH HARTFORD; OTHER BUSINESS PROFESSION, VOCATION OR EMPLOYMENT
NAME YEAR OF ELECTION FOR PAST FIVE YEARS; OTHER DIRECTORSHIPS
- --------------------------- ------------------------------------- ----------------------------------------------------------------
<S> <C> <C>
Wendell J. Bossen Vice President, 1995** Vice President (1992-Present), Hartford Life and Accident
Insurance Company; Vice President (1992-Present), Hartford
Life Insurance Company; President (1992-Present),
International Corporate Marketing Group, Inc.
Gregory A. Boyko Senior Vice President, Vice President & Controller (1995-1997), Hartford Life Insurance
Director, 1997* Company; Director (1997-Present); Senior Vice President
(1997-Present), Chief Financial Officer & Treasurer
(1997-1998); Vice President & Controller (1995-1997), Hartford
Life and Accident Insurance Company; Director (1997-Present);
Senior Vice President, Chief Financial Officer & Treasurer
(1997-Present); Vice President and Controller (1995-1997),
Hartford Life Insurance Company; Senior Vice President, Chief
Financial Officer & Treasurer (1997-Present), Hartford Life,
Inc.; Chief Financial Officer (1994-1995), IMG American Life;
Senior Vice President (1992-1994), Connecticut Mutual Life
Insurance Company.
Peter W. Cummins Senior Vice President, 1997 Vice President (1993-1997), Hartford; Senior Vice President,
(1997-Present); Vice President (1989-1997), Hartford Life and
Accident Insurance Company; Senior Vice President
(1997-Present); Vice President (1989-1997); Senior Vice
President (1997-Present); Vice President (1989-1997), Hartford
Life Insurance Company.
Timothy M. Fitch Vice President, 1995 Vice President (1995-Present); Actuary (1994-Present); Assistant
Actuary, 1997 Vice President (1992-1995), Hartford Life and Accident
Insurance Company; Vice President (1995-Present); Actuary
(1994-Present); Assistant Vice President (1992-1995), Hartford
Life Insurance Company.
</TABLE>
<PAGE>
4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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<TABLE>
<CAPTION>
POSITION WITH HARTFORD; OTHER BUSINESS PROFESSION, VOCATION OR EMPLOYMENT
NAME YEAR OF ELECTION FOR PAST FIVE YEARS; OTHER DIRECTORSHIPS
- --------------------------- ------------------------------------- ----------------------------------------------------------------
<S> <C> <C>
Mary Jane B. Fortin Vice President & Chief Accounting Vice President & Chief Accounting Office (1998-Present),
Officer, 1998 Hartford Life Insurance Company; Vice President & Chief
Accounting Officer, (1998-Present), Royal Life Insurance
Company of America; Vice President & Chief Accounting Officer
(1998-Present) Alpine Life Insurance Company; Chief Accounting
Officer (1997-Present), Hartford Life, Inc.; Director, Finance
(1995-1997), Value Health, Inc.; Senior Manager (1993-1995),
Coopers and Lybrand; Audit Manager (1993-1996) Arthur Andersen
& Co.
David T. Foy Senior Vice President & Senior Vice President (1998-Present), Vice President (1998),
Treasurer, 1998 Assistant Vice President (1995-1998), Hartford; Senior Vice
President (1998-Present), Hartford Life and Accident Insurance
Company; Director, Strategic Planning Corporate Finance
(1995-1996), IA Product Development (1994-1995), Hartford;
Various Actuarial Roles (1989-1993) Milliman & Robertson
Lynda Godkin Senior Vice President, 1997 Assistant General Counsel and Secretary (1994-1995), Hartford;
General Counsel, 1996 Director (1997-Present); Senior Vice President (1997-Present);
Corporate Secretary, 1996 General Counsel (1996-Present); Corporate Secretary
Director, 1997* (1995-Present); Associate General Counsel (1995-1996);
Assistant General Counsel and Secretary (1994-1995); Counsel
(1990-1994), Hartford Life and Accident Insurance Company;
Senior Vice President (1997-Present); General Counsel
(1996-Present); Corporate Secretary (1995-Present); Director
(1997-Present); Associate General Counsel (1995-1996);
Assistant General Counsel and Secretary (1994-1995); Counsel
(1990-1994), Hartford Life Insurance Company; Vice President
and General Counsel (1997-Present), Hartford Life, Inc.
Lois W. Grady Senior Vice President, 1998 Vice President (1994-1998), Hartford; Senior Vice President
Vice President, 1994 (1998-Present); Vice President (1993-1997); Assistant Vice
President (1987-1993), Hartford Life and Accident Insurance
Company; Senior Vice President (1998-Present); Vice President
(1994-1997); Assistant Vice President (1987-1994), Hartford
Life Insurance Company.
Stephen T. Joyce Vice President, 1997 Assistant Vice President (1995-1997), Hartford; Assistant Vice
President (1994-1997), Hartford Life and Accident Insurance
Company; Vice President (1997-Present); Assistant Vice
President (1994-1997), Hartford Life Insurance Company.
Michael D. Keeler Vice President, 1998 Vice President (1998-Present); Hartford Life and Accident
Insurance Company; Vice President (1995-1997), Providian
Insurance; Supervisor/ Manager (1985-1995), U.S. West
Communications.
</TABLE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION 5
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<TABLE>
<CAPTION>
POSITION WITH HARTFORD; OTHER BUSINESS PROFESSION, VOCATION OR EMPLOYMENT
NAME YEAR OF ELECTION FOR PAST FIVE YEARS; OTHER DIRECTORSHIPS
- --------------------------- ------------------------------------- ----------------------------------------------------------------
<S> <C> <C>
Robert A. Kerzner Senior Vice President, 1998 Senior Vice President (1998-Present); Vice President
Vice President, 1997 (1994-1998), Hartford; Senior Vice President (1998-Present);
Vice President (1994-1997); Regional Vice President
(1991-1994), Hartford Life Insurance Company.
Thomas M. Marra Executive Vice President, 1996 Senior Vice President (1993-1996); Director of Individual
Director, Individual Life and Annuities (1991-1993), Hartford; Director (1994-Present);
Annuity Division, 1993 Executive Vice President (1995-Present); Director, Individual
Director, 1994* Life and Annuity Division (1994-Present); Senior Vice
President (1994-1995); Vice President (1989-1994); Actuary
(1987-1997), Hartford Life and Accident Insurance Company;
Director (1994-Present); Executive Vice President
(1995-Present); Director, Individual Life and Annuity Division
(1994-Present); Senior Vice President (1994-1995); Vice
President (1989-1994); Actuary (1987-1995), Hartford Life
Insurance Company; Executive Vice President, Individual Life
and Annuities (1997-Present), Hartford Life, Inc.
Steven L. Matthieson Vice President, 1984 Director of New Business (1984-1997), Hartford.
Craig R. Raymond Senior Vice President, 1997 Vice President (1993-1997); Assistant Vice President
Chief Actuary, 1994 (1992-1993); Actuary (1989-1994), Hartford; Senior Vice
President (1997-Present); Chief Actuary (1995-Present); Vice
President (1993-1997); Actuary (1990-1995), Hartford Life and
Accident Insurance Company; Senior Vice President
(1997-Present); Chief Actuary (1994-Present); Vice President
(1993-1997); Assistant Vice President (1992-1993); Actuary
(1989-1994), Hartford Life Insurance Company; Vice President
and Chief Actuary (1997-Present), Hartford Life, Inc.
Lowndes A. Smith President, 1989 Chief Operating Officer (1989-1997), Hartford; Director
Chief Executive Officer, 1997 (1981-Present); President (1989-Present); Chief Executive
Director, 1985* Officer (1997-Present); Chief Operating Officer (1989-1997),
Hartford Life and Accident Insurance Company; Director
(1981-Present); President (1989-Present), Chief Executive
Officer (1997-Present); Chief Operating Officer (1989-1997),
Hartford Life Insurance Company; Chief Executive Officer and
President and Director (1997-Present), Hartford Life, Inc.
David M. Znamierowski Senior Vice President, 1997 Vice President (1997) Senior Vice President (1997) Director,
Director, 1998 Risk Management Strategy (1996) Director (1998), Hartford;
Director (1998-Present); Senior Vice President (1997-Present);
Hartford Life and Accident Insurance Company; Vice President,
Investment Strategy (1997-Present), Hartford Life, Inc.; Vice
President, Investment Strategy & Policy (1991-1996), Aetna
Life and Casualty.
</TABLE>
- ---------
* Denotes date of election to Board of Directors of Hartford.
** Affiliated Company of The Hartford Financial Services Group, Inc.
Unless otherwise indicated, the principal business address of each of the
above individuals is P.O. Box 2999, Hartford, CT 06104-2999.
<PAGE>
6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT VL I was established as a separate account under
Connecticut law on June 8, 1995. The Separate Account is classified as a unit
investment trust registered with the Securities and Exchange Commission under
the Investment Company Act of 1940.
SERVICES
SAFEKEEPING OF ASSETS -- Title to the assets of the Separate Account is held
by Hartford. The assets are kept physically segregated and are held separate and
apart from Hartford's general corporate assets. Records are maintained of all
purchases and redemptions of Fund shares held in each of the Sub-Accounts.
EXPERTS
INDEPENDENT PUBLIC ACCOUNTANTS -- The audited financial statements included
in this registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports. Reference is made to the report on the statutory
financial statements of Hartford Life and Annuity Insurance Company which states
the statutory financial statements are presented in accordance with statutory
accounting practices prescribed or permitted by the National Association of
Insurance Commissioners and the State of Connecticut Insurance Department, and
are not presented in accordance with generally accepted accounting principles.
The principal business address of Arthur Andersen LLP is One Financial Plaza,
Hartford, Connecticut 06103.
ACTUARIAL EXPERT -- The hypothetical Policy illustrations included in this
Statement of Additional Information and the registration statement with respect
to the Separate Account have been approved by Kenneth A. McCullum, FSA, MAAA,
Assistant Vice President and Director, Individual Life Product Development, for
Hartford, and are included in reliance upon his opinion as to their
reasonableness.
DISTRIBUTION OF POLICIES
Hartford Equity Sales Company, Inc. ("HESCO") serves as principal
underwriter for the policies and will offer the policies on a continuous basis.
HESCO is controlled by Hartford and is located at the same address as Hartford.
HESCO is registered with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc. ("NASD").
The policies will be sold by salespersons who represent Hartford as
insurance agents and who are registered representatives of HESCO or certain
other registered broker-dealers who have entered into distribution agreements
with HESCO.
During the first Policy Year, the maximum sales commission payable to
Hartford agents, independent registered insurance brokers, and other registered
broker-dealers will be 45% of the premiums paid up to a target premium and 5% of
any excess. In Policy Years 2 through 10, sales commissions will not exceed 5.5%
of premiums paid. For Policy Years 11 and later, sales commissions will not
exceed 2% of the premiums paid. In addition, expense allowances may be paid. A
sales representative may be required to return all or a portion of the
commissions paid if a Policy sold by such sales representative terminates prior
to such Policy's second Policy anniversary.
Broker-dealers or financial institutions are compensated according to a
schedule set forth by HESCO and any applicable rules or regulations for variable
insurance compensation. Compensation is generally based on premium payments.
This compensation is usually paid from the sales charges described in the
Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HESCO, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or other financial institutions based
on total sales by the broker-dealer or financial institution of insurance
products. These payments, which may be different for broker-dealers or financial
institutions, will be made by HESCO, its affiliates or Hartford out of their
assets and will not affect the amounts paid by the policy owner to purchase,
hold or surrender variable insurance products.
The following table shows officers and directors of HESCO:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES
- ----------------------- ----------------------------------------
<S> <C>
Lowndes A. Smith President and Chief Executive Officer,
Director
Thomas M. Marra Executive Vice President, Director
Peter W. Cummins Senior Vice President
Lynda Godkin Senior Vice President, General Counsel
and Corporate Secretary
Donald E. Waggaman, Jr. Treasurer
George R. Jay Controller
</TABLE>
ADDITIONAL INFORMATION
ABOUT CHARGES
SALES LOAD -- The front-end load portion of a deduction from premiums is
based on the level of Scheduled
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION 7
- --------------------------------------------------------------------------------
premiums, the length of the Guarantee Period, and the amount of any Unscheduled
Premiums Paid.
The maximum front-end sales load percentages for the policies are 50% of the
premiums paid in the first Policy Year, 11% in Policy Years 2 through 10, and 3%
thereafter.
For all Guaranteed Periods, the maximum amount of premiums 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
Premium, the maximum amount of amount of premiums 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
load. The levels range from those for the ten-year Guarantee Period described
above to 0% on a policy with a One Year Guarantee Period. However, there are
other charges under the policies that are lower for longer Guarantee Periods.
The front-end load under the policies may be used to cover expenses related
to the sale and distribution of the policies.
REDUCED CHARGES FOR ELIGIBLE GROUPS -- Certain of the charges and deductions
described above may be reduced for policies issued in connection with a specific
plan, in accordance with our rules in effect as of the date the application for
a policy is approved. To qualify for such a reduction, a plan must satisfy
certain criteria, e.g., as to 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 of the plan's members. The amount of reduction and
the criteria for qualification will be reflected 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 Separate
Account VL I.
UNDERWRITING PROCEDURES -- To purchase a policy you must submit an
application to us. Within limits, you may choose the Scheduled Premiums and the
initial Face Amount and the Guarantee Period in the policy application. Policies
generally will be issued only on the lives of insureds age 80 and under who
supply evidence of insurability satisfactory to us. Acceptance is subject to our
underwriting rules and we reserve the right to reject an application for any
reason. No change in the terms or conditions of a policy will be made without
your consent.
The cost of insurance charge is to cover our 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 we
reserve the right to use rates less than shown in such 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 on the Insured's risk class. We 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.
INCREASES IN FACE AMOUNT -- At any time after the Guarantee Period, you may
request in writing to change the Face Amount. The minimum amount by which the
Face Amount can be increased is based on our rules then in effect.
All requests to increase the Face Amount must be applied for on a new
application and shall be accompanied by Your existing policy. All such 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 cost of insurance deduction for the 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.
<PAGE>
8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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. They show how the Death Benefit, Account Value and Cash
Surrender Value 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 was a uniform,
gross annual rate of 0%, 6% and 12%. The Death Benefit, Account Value and Cash
Surrender Value 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. They
assume that no Policy loans or partial withdrawals have been made. The
illustrations are also based on the assumption that the Policy Owner has not
requested an increase or a decrease in the Face Amount and that no transfers
among the Funds have been made in any Policy Year.
The tables 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 the illustrations assume an investment management fee and other
estimated Fund expenses totaling 0.71%. The 0.71% figure is based on an average
of the current management fees and expenses of the 36 available 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
0.71%, will vary from year to year, and will depend on how the Account Value is
allocated.
As the headings indicate, the illustrations reflect the deductions of
current contractual charges and guaranteed contractual charges for a single
gross interest rate. Those charges include the monthly mortality and expense
risk charge, the monthly administrative charge, and the monthly mortality
charge. All illustrations assume a charge of 2.00% for taxes attributable to
premiums and reflect the fact that no charges against the Separate Account are
currently made for federal, state or local taxes attributable to the Policies.
Each illustration also shows the amount to which premiums would accumulate
if an amount equal to such premiums was invested to earn interest, after taxes,
at a rate of 5%, compounded annually.
Upon request, Hartford will furnish a comparable illustration based on a
proposed Policy's specific circumstances.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION 9
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
GUARANTEE PERIOD: 10 YEARS
$250,000 FACE AMOUNT
ISSUE AGE 45 MALE PREFERRED PLUS
$4,000 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.71% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% 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 1,274 0 250,000 1,274 0 250,000
2 8,610 4,172 261 250,000 4,172 261 250,000
3 13,241 6,928 3,506 250,000 6,928 3,506 250,000
4 18,103 9,582 6,649 250,000 9,582 6,649 250,000
5 23,208 12,157 9,713 250,000 12,157 9,713 250,000
6 28,568 14,669 12,714 250,000 14,669 12,714 250,000
7 34,196 17,122 15,656 250,000 17,122 15,656 250,000
8 40,106 19,532 18,554 250,000 19,532 18,554 250,000
9 46,312 21,890 21,401 250,000 21,890 21,401 250,000
10 52,827 24,187 24,187 250,000 24,187 24,187 250,000
11 59,669 26,679 26,679 250,000 25,668 25,668 250,000
12 66,852 29,036 29,036 250,000 26,955 26,955 250,000
13 74,395 31,243 31,243 250,000 28,042 28,042 250,000
14 82,314 33,303 33,303 250,000 28,907 28,907 250,000
15 90,630 35,215 35,215 250,000 29,529 29,529 250,000
16 99,361 36,886 36,886 250,000 29,878 29,878 250,000
17 108,530 38,411 38,411 250,000 29,927 29,927 250,000
18 118,156 39,788 39,788 250,000 29,630 29,630 250,000
19 128,264 41,009 41,009 250,000 28,939 28,939 250,000
20 138,877 42,068 42,068 250,000 27,803 27,803 250,000
25 200,454 43,755 43,755 250,000 13,571 13,571 250,000
30 279,043 36,996 36,996 250,000 -- -- --
</TABLE>
<TABLE>
<C> <S>
* 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.
THE DEATH BENEFIT MAY, AND THE 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>
10 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 PLUS
$4,000 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.29% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% 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 1,369 0 250,000 1,369 0 250,000
2 8,610 4,539 628 250,000 4,539 628 250,000
3 13,241 7,749 4,327 250,000 7,749 4,327 250,000
4 18,103 11,043 8,110 250,000 11,043 8,110 250,000
5 23,208 14,447 12,003 250,000 14,447 12,003 250,000
6 28,568 17,982 16,027 250,000 17,982 16,027 250,000
7 34,196 21,659 20,193 250,000 21,659 20,193 250,000
8 40,106 25,500 24,522 250,000 25,500 24,522 250,000
9 46,312 29,504 29,016 250,000 29,504 29,016 250,000
10 52,827 33,672 33,672 250,000 33,672 33,672 250,000
11 59,669 38,285 38,285 250,000 37,289 37,289 250,000
12 66,852 43,025 43,025 250,000 40,924 40,924 250,000
13 74,395 47,882 47,882 250,000 44,576 44,576 250,000
14 82,314 52,869 52,869 250,000 48,230 48,230 250,000
15 90,630 57,994 57,994 250,000 51,870 51,870 250,000
16 99,361 63,183 63,183 250,000 55,476 55,476 250,000
17 108,530 68,531 68,531 250,000 59,029 59,029 250,000
18 118,156 74,051 74,051 250,000 62,496 62,496 250,000
19 128,264 79,751 79,751 250,000 65,842 65,842 250,000
20 138,877 85,642 85,642 250,000 69,033 69,033 250,000
25 200,454 117,780 117,780 250,000 81,496 81,496 250,000
30 279,043 155,708 155,708 250,000 81,595 81,595 250,000
</TABLE>
<TABLE>
<C> <S>
* 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.
THE DEATH BENEFIT MAY, AND THE 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>
STATEMENT OF ADDITIONAL INFORMATION 11
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
GUARANTEE PERIOD: 10 YEARS
$250,000 FACE AMOUNT
ISSUE AGE 45 MALE PREFERRED PLUS
$4,000 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.29% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% 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 1,464 0 250,000 1,464 0 250,000
2 8,610 4,918 1,006 250,000 4,918 1,006 250,000
3 13,241 8,628 5,206 250,000 8,628 5,206 250,000
4 18,103 12,667 9,734 250,000 12,667 9,734 250,000
5 23,208 17,093 14,648 250,000 17,093 14,648 250,000
6 28,568 21,964 20,009 250,000 21,964 20,009 250,000
7 34,196 27,335 25,868 250,000 27,335 25,868 250,000
8 40,106 33,275 32,297 250,000 33,275 32,297 250,000
9 46,312 39,839 39,350 250,000 39,839 39,350 250,000
10 52,827 47,088 47,088 250,000 47,088 47,088 250,000
11 59,669 55,395 55,395 250,000 54,437 54,437 250,000
12 66,852 64,519 64,519 250,000 62,464 62,464 250,000
13 74,395 74,542 74,542 250,000 71,253 71,253 250,000
14 82,314 85,579 85,579 250,000 80,892 80,892 250,000
15 90,630 97,753 97,753 250,000 91,481 91,481 250,000
16 99,361 111,139 111,139 250,000 103,136 103,136 250,000
17 108,530 125,966 125,966 250,000 115,998 115,998 250,000
18 118,156 142,416 142,416 250,000 130,226 130,226 250,000
19 128,264 160,697 160,697 250,000 146,010 146,010 250,000
20 138,877 181,045 181,045 250,000 163,588 163,588 250,000
25 200,454 321,208 321,208 372,602 287,165 287,165 333,112
30 279,043 551,256 551,256 589,844 489,170 489,170 523,412
</TABLE>
<TABLE>
<C> <S>
* 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.
THE DEATH BENEFIT MAY, AND THE 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>
12 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 PLUS
$4,000 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.71% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% 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 3,195 2,795 250,000 3,195 2,795 250,000
2 8,610 6,415 6,060 250,000 5,935 5,579 250,000
3 13,241 9,457 9,146 250,000 8,555 8,244 250,000
4 18,103 12,363 12,096 250,000 11,055 10,788 250,000
5 23,208 15,163 14,941 250,000 13,428 13,206 250,000
6 28,568 17,872 17,694 250,000 15,666 15,488 250,000
7 34,196 20,500 20,366 250,000 17,761 17,628 250,000
8 40,106 23,057 22,968 250,000 19,701 19,612 250,000
9 46,312 25,542 25,498 250,000 21,474 21,429 250,000
10 52,827 27,942 27,942 250,000 23,065 23,065 250,000
11 59,669 30,194 30,194 250,000 24,464 24,464 250,000
12 66,852 32,292 32,292 250,000 25,659 25,659 250,000
13 74,395 34,216 34,216 250,000 26,644 26,644 250,000
14 82,314 35,970 35,970 250,000 27,399 27,399 250,000
15 90,630 37,554 37,554 250,000 27,905 27,905 250,000
16 99,361 38,871 38,871 250,000 28,133 28,133 250,000
17 108,530 40,026 40,026 250,000 28,057 28,057 250,000
18 118,156 41,016 41,016 250,000 27,635 27,635 250,000
19 128,264 41,833 41,833 250,000 26,818 26,818 250,000
20 138,877 42,470 42,470 250,000 25,561 25,561 250,000
25 200,454 44,760 44,760 250,000 11,447 11,447 250,000
30 279,043 38,664 38,664 250,000 -- -- --
</TABLE>
<TABLE>
<C> <S>
* 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.
THE DEATH BENEFIT MAY, AND THE 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>
STATEMENT OF ADDITIONAL INFORMATION 13
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
GUARANTEE PERIOD: 1 YEAR
$250,000 FACE AMOUNT
ISSUE AGE 45 MALE PREFERRED PLUS
$4,000 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.29% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% 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 3,407 3,007 250,000 3,407 3,007 250,000
2 8,610 7,039 6,684 250,000 6,544 6,188 250,000
3 13,241 10,697 10,386 250,000 9,739 9,428 250,000
4 18,103 14,423 14,157 250,000 12,992 12,725 250,000
5 23,208 18,249 18,026 250,000 16,297 16,075 250,000
6 28,568 22,190 22,012 250,000 19,646 19,469 250,000
7 34,196 26,262 26,129 250,000 23,033 22,900 250,000
8 40,106 30,480 30,391 250,000 26,446 26,357 250,000
9 46,312 34,848 34,803 250,000 29,873 29,828 250,000
10 52,827 39,357 39,357 250,000 33,301 33,301 250,000
11 59,669 43,952 43,952 250,000 36,718 36,718 250,000
12 66,852 48,632 48,632 250,000 40,116 40,116 250,000
13 74,395 53,380 53,380 250,000 43,487 43,487 250,000
14 82,314 58,207 58,207 250,000 46,816 46,816 250,000
15 90,630 63,118 63,118 250,000 50,083 50,083 250,000
16 99,361 68,031 68,031 250,000 53,264 53,264 250,000
17 108,530 73,046 73,046 250,000 56,338 56,338 250,000
18 118,156 78,169 78,169 250,000 59,266 59,266 250,000
19 128,264 83,401 83,401 250,000 62,009 62,009 250,000
20 138,877 88,752 88,752 250,000 64,528 64,528 250,000
25 200,454 122,682 122,682 250,000 74,452 74,452 250,000
30 279,043 163,309 163,309 250,000 69,828 69,828 250,000
</TABLE>
<TABLE>
<C> <S>
* 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.
THE DEATH BENEFIT MAY, AND THE 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>
14 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 PLUS
$4,000 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.29% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% 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 3,619 3,219 250,000 3,619 3,219 250,000
2 8,610 7,689 7,333 250,000 7,179 6,823 250,000
3 13,241 12,040 11,729 250,000 11,025 10,714 250,000
4 18,103 16,744 16,478 250,000 15,182 14,915 250,000
5 23,208 21,866 21,644 250,000 19,677 19,454 250,000
6 28,568 27,461 27,283 250,000 24,532 24,354 250,000
7 34,196 33,587 33,454 250,000 29,779 29,646 250,000
8 40,106 40,308 40,219 250,000 35,446 35,357 250,000
9 46,312 47,683 47,639 250,000 41,569 41,524 250,000
10 52,827 55,766 55,766 250,000 48,183 48,183 250,000
11 59,669 64,571 64,571 250,000 55,337 55,337 250,000
12 66,852 74,173 74,173 250,000 63,085 63,085 250,000
13 74,395 84,643 84,643 250,000 71,495 71,495 250,000
14 82,314 96,085 96,085 250,000 80,636 80,636 250,000
15 90,630 108,612 108,612 250,000 90,586 90,586 250,000
16 99,361 122,288 122,288 250,000 101,437 101,437 250,000
17 108,530 137,328 137,328 250,000 113,299 113,299 250,000
18 118,156 153,896 153,896 250,000 126,291 126,291 250,000
19 128,264 172,178 172,178 250,000 140,564 140,564 250,000
20 138,877 192,386 192,386 250,000 156,298 156,298 250,000
25 200,454 340,818 340,818 395,348 271,308 271,308 314,718
30 279,043 584,184 584,184 625,077 457,550 457,550 489,578
</TABLE>
<TABLE>
<C> <S>
* 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.
THE DEATH BENEFIT MAY, AND THE 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>
STATEMENT OF ADDITIONAL INFORMATION 15
- --------------------------------------------------------------------------------
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% (-0.71% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% 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 1,241 0 250,000 1,241 0 250,000
2 8,610 4,093 182 250,000 4,093 182 250,000
3 13,241 6,792 3,370 250,000 6,792 3,370 250,000
4 18,103 9,381 6,448 250,000 9,381 6,448 250,000
5 23,208 11,888 9,443 250,000 11,888 9,443 250,000
6 28,568 14,327 12,371 250,000 14,327 12,371 250,000
7 34,196 16,706 15,239 250,000 16,706 15,239 250,000
8 40,106 19,039 18,062 250,000 19,039 18,062 250,000
9 46,312 21,321 20,832 250,000 21,321 20,832 250,000
10 52,827 23,537 23,537 250,000 23,537 23,537 250,000
11 59,669 25,939 25,939 250,000 25,021 25,021 250,000
12 66,852 28,197 28,197 250,000 26,311 26,311 250,000
13 74,395 30,291 30,291 250,000 27,400 27,400 250,000
14 82,314 32,223 32,223 250,000 28,266 28,266 250,000
15 90,630 33,996 33,996 250,000 28,889 28,889 250,000
16 99,361 35,503 35,503 250,000 29,238 29,238 250,000
17 108,530 36,850 36,850 250,000 29,286 29,286 250,000
18 118,156 38,035 38,035 250,000 28,987 28,987 250,000
19 128,264 39,048 39,048 250,000 28,293 28,293 250,000
20 138,877 39,880 39,880 250,000 27,152 27,152 250,000
25 200,454 39,992 39,992 250,000 12,872 12,872 250,000
30 279,043 30,452 30,452 250,000 -- -- --
</TABLE>
<TABLE>
<C> <S>
* 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.
THE DEATH BENEFIT MAY, AND THE 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>
16 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% (5.29% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% 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 1,335 0 250,000 1,335 0 250,000
2 8,610 4,455 544 250,000 4,455 544 250,000
3 13,241 7,602 4,180 250,000 7,602 4,180 250,000
4 18,103 10,821 7,888 250,000 10,821 7,888 250,000
5 23,208 14,141 11,697 250,000 14,141 11,697 250,000
6 28,568 17,584 15,628 250,000 17,584 15,628 250,000
7 34,196 21,162 19,695 250,000 21,162 19,695 250,000
8 40,106 24,897 23,919 250,000 24,897 23,919 250,000
9 46,312 28,790 28,301 250,000 28,790 28,301 250,000
10 52,827 32,836 32,836 250,000 32,836 32,836 250,000
11 59,669 37,312 37,312 250,000 36,406 36,406 250,000
12 66,852 41,899 41,899 250,000 39,992 39,992 250,000
13 74,395 46,582 46,582 250,000 43,591 43,591 250,000
14 82,314 51,373 51,373 250,000 47,187 47,187 250,000
15 90,630 56,282 56,282 250,000 50,766 50,766 250,000
16 99,361 61,221 61,221 250,000 54,305 54,305 250,000
17 108,530 66,296 66,296 250,000 57,785 57,785 250,000
18 118,156 71,516 71,516 250,000 61,173 61,173 250,000
19 128,264 76,888 76,888 250,000 64,432 64,432 250,000
20 138,877 82,421 82,421 250,000 67,528 67,528 250,000
25 200,454 112,137 112,137 250,000 79,328 79,328 250,000
30 279,043 146,111 146,111 250,000 78,177 78,177 250,000
</TABLE>
<TABLE>
<C> <S>
* 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.
THE DEATH BENEFIT MAY, AND THE 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>
STATEMENT OF ADDITIONAL INFORMATION 17
- --------------------------------------------------------------------------------
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% (11.29% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% 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 1,429 0 250,000 1,429 0 250,000
2 8,610 4,829 918 250,000 4,829 918 250,000
3 13,241 8,469 5,047 250,000 8,469 5,047 250,000
4 18,103 12,421 9,488 250,000 12,421 9,488 250,000
5 23,208 16,746 14,301 250,000 16,746 14,301 250,000
6 28,568 21,500 19,545 250,000 21,500 19,545 250,000
7 34,196 26,740 25,274 250,000 26,740 25,274 250,000
8 40,106 32,534 31,557 250,000 32,534 31,557 250,000
9 46,312 38,937 38,448 250,000 38,937 38,448 250,000
10 52,827 46,003 46,003 250,000 46,003 46,003 250,000
11 59,669 54,098 54,098 250,000 53,226 53,226 250,000
12 66,852 62,982 62,982 250,000 61,112 61,112 250,000
13 74,395 72,728 72,728 250,000 69,743 69,743 250,000
14 82,314 83,449 83,449 250,000 79,203 79,203 250,000
15 90,630 95,266 95,266 250,000 89,590 89,590 250,000
16 99,361 108,242 108,242 250,000 101,016 101,016 250,000
17 108,530 122,612 122,612 250,000 113,619 113,619 250,000
18 118,156 138,555 138,555 250,000 127,550 127,550 250,000
19 128,264 156,274 156,274 250,000 142,996 142,996 250,000
20 138,877 176,005 176,005 250,000 160,187 160,187 250,000
25 200,454 312,347 312,347 362,323 281,295 281,295 326,302
30 279,043 536,068 536,068 573,593 479,676 479,676 513,254
</TABLE>
<TABLE>
<C> <S>
* 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.
THE DEATH BENEFIT MAY, AND THE 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>
18 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% (-0.71% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% 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 3,160 2,760 250,000 3,160 2,760 250,000
2 8,610 6,329 5,973 250,000 5,900 5,545 250,000
3 13,241 9,309 8,998 250,000 8,521 8,210 250,000
4 18,103 12,147 11,881 250,000 11,021 10,754 250,000
5 23,208 14,874 14,651 250,000 13,395 13,173 250,000
6 28,568 17,507 17,330 250,000 15,634 15,456 250,000
7 34,196 20,057 19,924 250,000 17,729 17,596 250,000
8 40,106 22,538 22,449 250,000 19,669 19,580 250,000
9 46,312 24,945 24,900 250,000 21,443 21,398 250,000
10 52,827 27,265 27,265 250,000 23,035 23,035 250,000
11 59,669 29,427 29,427 250,000 24,434 24,434 250,000
12 66,852 31,423 31,423 250,000 25,629 25,629 250,000
13 74,395 33,232 33,232 250,000 26,615 26,615 250,000
14 82,314 34,858 34,858 250,000 27,370 27,370 250,000
15 90,630 36,301 36,301 250,000 27,876 27,876 250,000
16 99,361 37,451 37,451 250,000 28,105 28,105 250,000
17 108,530 38,424 38,424 250,000 28,029 28,029 250,000
18 118,156 39,216 39,216 250,000 27,607 27,607 250,000
19 128,264 39,818 39,818 250,000 26,790 26,790 250,000
20 138,877 40,223 40,223 250,000 25,533 25,533 250,000
25 200,454 40,943 40,943 250,000 11,418 11,418 250,000
30 279,043 32,080 32,080 250,000 -- -- --
</TABLE>
<TABLE>
<C> <S>
* 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.
THE DEATH BENEFIT MAY, AND THE 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>
STATEMENT OF ADDITIONAL INFORMATION 19
- --------------------------------------------------------------------------------
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% (5.29% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% 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 3,371 2,971 250,000 3,371 2,971 250,000
2 8,610 6,948 6,592 250,000 6,506 6,150 250,000
3 13,241 10,537 10,226 250,000 9,700 9,389 250,000
4 18,103 14,185 13,918 250,000 12,950 12,684 250,000
5 23,208 17,920 17,698 250,000 16,254 16,032 250,000
6 28,568 21,767 21,589 250,000 19,602 19,424 250,000
7 34,196 25,736 25,603 250,000 22,986 22,853 250,000
8 40,106 29,848 29,759 250,000 26,397 26,308 250,000
9 46,312 34,102 34,057 250,000 29,822 29,777 250,000
10 52,827 38,491 38,491 250,000 33,247 33,247 250,000
11 59,669 42,950 42,950 250,000 36,663 36,663 250,000
12 66,852 47,477 47,477 250,000 40,057 40,057 250,000
13 74,395 52,053 52,053 250,000 43,426 43,426 250,000
14 82,314 56,687 56,687 250,000 46,751 46,751 250,000
15 90,630 61,385 61,385 250,000 50,015 50,015 250,000
16 99,361 66,052 66,052 250,000 53,193 53,193 250,000
17 108,530 70,796 70,796 250,000 56,263 56,263 250,000
18 118,156 75,623 75,623 250,000 59,187 59,187 250,000
19 128,264 80,535 80,535 250,000 61,925 61,925 250,000
20 138,877 85,535 85,535 250,000 64,439 64,439 250,000
25 200,454 117,078 117,078 250,000 74,327 74,327 250,000
30 279,043 153,857 153,857 250,000 69,633 69,633 250,000
</TABLE>
<TABLE>
<C> <S>
* 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.
THE DEATH BENEFIT MAY, AND THE 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>
20 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% (11.29% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% 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 3,582 3,182 250,000 3,582 3,182 250,000
2 8,610 7,593 7,237 250,000 7,138 6,782 250,000
3 13,241 11,868 11,557 250,000 10,980 10,668 250,000
4 18,103 16,481 16,214 250,000 15,132 14,865 250,000
5 23,208 21,495 21,272 250,000 19,622 19,399 250,000
6 28,568 26,970 26,792 250,000 24,471 24,294 250,000
7 34,196 32,961 32,827 250,000 29,712 29,579 250,000
8 40,106 39,535 39,447 250,000 35,372 35,283 250,000
9 46,312 46,747 46,702 250,000 41,487 41,442 250,000
10 52,827 54,649 54,649 250,000 48,093 48,093 250,000
11 59,669 63,247 63,247 250,000 55,237 55,237 250,000
12 66,852 72,612 72,612 250,000 62,975 62,975 250,000
13 74,395 82,813 82,813 250,000 71,373 71,373 250,000
14 82,314 93,950 93,950 250,000 80,499 80,499 250,000
15 90,630 106,137 106,137 250,000 90,435 90,435 250,000
16 99,361 119,424 119,424 250,000 101,269 101,269 250,000
17 108,530 134,034 134,034 250,000 113,111 113,111 250,000
18 118,156 150,130 150,130 250,000 126,082 126,082 250,000
19 128,264 167,895 167,895 250,000 140,330 140,330 250,000
20 138,877 187,543 187,543 250,000 156,037 156,037 250,000
25 200,454 332,352 332,352 385,528 270,857 270,857 314,194
30 279,043 569,602 569,602 609,474 456,830 456,830 488,808
</TABLE>
<TABLE>
<C> <S>
* 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.
THE DEATH BENEFIT MAY, AND THE 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>
Hartford Life and Annuity Insurance Company SA-1
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To 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 statements of assets and liabilities of
Hartford Life and Annuity Insurance Company Separate Account Variable Life One
(Bond Fund, Stock Fund, Money Market Fund, Advisers Fund, Capital Appreciation
Fund, Mortgage Securities Fund, Index Fund, International Opportunities Fund,
Dividend and Growth Fund, Fidelity VIP Equity-Income Fund, Fidelity VIP Overseas
Fund, Fidelity VIP II Asset Manager Fund, Growth and Income Fund, International
Advisers Fund, Small Company Fund, and MidCap Fund) (collectively, the Account)
as of December 31, 1998, and the related statements of operations and the
statements of changes in net assets for the periods presented. These financial
statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Account as of December 31,
1998, and the results of their operations and the changes in their net assets
for the periods presented in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 16, 1999
<PAGE>
SA-2 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT VARIABLE LIFE ONE
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS
Fund, Inc. - Class
IA
Shares 1,859,522
Cost $1,961,050
Market Value....... $ 2,009,520 -- --
Hartford Stock HLS
Fund, Inc. - Class
IA
Shares 2,751,972
Cost $15,443,622
Market Value....... -- $ 18,057,519 --
Hartford Money Market
HLS Fund, Inc. -
Class IA
Shares 25,796,373
Cost $25,796,373
Market Value....... -- -- $ 25,796,373
Hartford Advisers HLS
Fund, Inc. - Class
IA
Shares 2,938,878
Cost $8,019,628
Market Value....... -- -- --
Hartford Capital
Appreciation HLS
Fund, Inc. - Class
IA
Shares 3,585,142
Cost $15,550,948
Market Value....... -- -- --
Hartford Mortgage
Securities HLS Fund,
Inc. - Class IA
Shares 608,233
Cost $669,509
Market Value....... -- -- --
Hartford Index HLS
Fund, Inc. - Class
IA
Shares 3,042,284
Cost $9,431,173
Market Value....... -- -- --
Hartford
International
Opportunities HLS
Fund, Inc. - Class
IA
Shares 4,336,343
Cost $5,697,915
Market Value....... -- -- --
Hartford Dividend and
Growth HLS Fund,
Inc. - Class IA
Shares 4,333,353
Cost $8,735,254
Market Value....... -- -- --
Due from Hartford Life
& Annuity Insurance
Company............... -- 36,742 2,586,454
Receivable from fund
shares sold........... 25 -- --
-------------- -------------- --------------
Total Assets........... 2,009,545 18,094,261 28,382,827
-------------- -------------- --------------
LIABILITIES:
Due to Hartford Life &
Annuity Insurance
Company............... 41 -- --
Payable for fund shares
purchased............. -- 37,028 2,585,351
-------------- -------------- --------------
Total Liabilities...... 41 37,028 2,585,351
-------------- -------------- --------------
Net Assets (variable
life contract
liabilities).......... $ 2,009,504 $ 18,057,233 $ 25,797,476
-------------- -------------- --------------
-------------- -------------- --------------
Units Owned by
Participants.......... 1,352,909 5,754,715 19,784,827
Unit Values............ $ 1.485321 $ 3.137815 $ 1.303902
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-3
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND
APPRECIATION SECURITIES INDEX OPPORTUNITIES AND GROWTH
ADVISERS FUND FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------- --------------- -------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS
Fund, Inc. - Class
IA
Shares 1,859,522
Cost $1,961,050
Market Value....... -- -- -- -- -- --
Hartford Stock HLS
Fund, Inc. - Class
IA
Shares 2,751,972
Cost $15,443,622
Market Value....... -- -- -- -- -- --
Hartford Money Market
HLS Fund, Inc. -
Class IA
Shares 25,796,373
Cost $25,796,373
Market Value....... -- -- -- -- -- --
Hartford Advisers HLS
Fund, Inc. - Class
IA
Shares 2,938,878
Cost $8,019,628
Market Value....... $8,773,294 -- -- -- -- --
Hartford Capital
Appreciation HLS
Fund, Inc. - Class
IA
Shares 3,585,142
Cost $15,550,948
Market Value....... -- $ 17,061,980 -- -- -- --
Hartford Mortgage
Securities HLS Fund,
Inc. - Class IA
Shares 608,233
Cost $669,509
Market Value....... -- -- $ 659,660 -- -- --
Hartford Index HLS
Fund, Inc. - Class
IA
Shares 3,042,284
Cost $9,431,173
Market Value....... -- -- -- $ 10,862,331 -- --
Hartford
International
Opportunities HLS
Fund, Inc. - Class
IA
Shares 4,336,343
Cost $5,697,915
Market Value....... -- -- -- -- $5,875,125 --
Hartford Dividend and
Growth HLS Fund,
Inc. - Class IA
Shares 4,333,353
Cost $8,735,254
Market Value....... -- -- -- -- -- $ 9,362,148
Due from Hartford Life
& Annuity Insurance
Company............... 56,120 71,090 1 -- 8,547 61,290
Receivable from fund
shares sold........... -- -- -- 59,331 -- --
---------------- --------------- -------------- -------------- ---------------- --------------
Total Assets........... 8,829,414 17,133,070 659,661 10,921,662 5,883,672 9,423,438
---------------- --------------- -------------- -------------- ---------------- --------------
LIABILITIES:
Due to Hartford Life &
Annuity Insurance
Company............... -- -- -- 59,974 -- --
Payable for fund shares
purchased............. 56,258 71,362 -- -- 8,652 61,707
---------------- --------------- -------------- -------------- ---------------- --------------
Total Liabilities...... 56,258 71,362 -- 59,974 8,652 61,707
---------------- --------------- -------------- -------------- ---------------- --------------
Net Assets (variable
life contract
liabilities).......... $8,773,156 $ 17,061,708 $ 659,661 $ 10,861,688 $5,875,020 $ 9,361,731
---------------- --------------- -------------- -------------- ---------------- --------------
---------------- --------------- -------------- -------------- ---------------- --------------
Units Owned by
Participants.......... 3,614,682 6,917,191 458,077 3,651,309 3,457,586 4,023,410
Unit Values............ $ 2.427089 $ 2.466566 $ 1.440067 $ 2.974738 $ 1.699168 $ 2.326815
</TABLE>
<PAGE>
SA-4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT VARIABLE LIFE ONE
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP
EQUITY-INCOME OVERSEAS
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
---------------- --------------
<S> <C> <C>
ASSETS:
Investments:
Fidelity VIP
Equity-Income
Portfolio
Shares 252,738
Cost $6,042,615
Market Value....... $6,424,588 --
Fidelity VIP Overseas
Portfolio
Shares 174,735
Cost $3,340,244
Market Value....... -- $ 3,503,442
Fidelity VIP II Asset
Manager Portfolio
Shares 54,516
Cost $923,808
Market Value....... -- --
Hartford Growth and
Income HLS Fund -
Class IA
Shares 59,644
Cost $64,739
Market Value....... -- --
Hartford
International
Advisers HLS Fund,
Inc. - Class IA
Shares 5,199
Cost $5,764
Market Value....... -- --
Hartford Small
Company HLS Fund,
Inc. - Class IA
Shares 103,221
Cost $113,208
Market Value....... -- --
Hartford MidCap HLS
Fund, Inc. - Class
IA
Shares 50,672
Cost $63,516
Market Value....... -- --
Due from Hartford Life
& Annuity Insurance
Company............... 103,278 2,774
Receivable from fund
shares sold........... -- --
---------------- --------------
Total Assets........... 6,527,866 3,506,216
---------------- --------------
LIABILITIES:
Due to Hartford Life &
Annuity Insurance
Company............... -- --
Payable for fund shares
purchased............. 103,371 2,809
---------------- --------------
Total Liabilities...... 103,371 2,809
---------------- --------------
Net Assets (variable
life contract
liabilities).......... $6,424,495 $ 3,503,407
---------------- --------------
---------------- --------------
Units Owned by
Participants.......... 3,279,115 2,291,066
Unit Values............ $ 1.959216 $ 1.529160
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-5
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY VIP II
ASSET MANAGER GROWTH AND INTERNATIONAL SMALL COMPANY MIDCAP
PORTFOLIO INCOME FUND ADVISERS FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------- -------------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Fidelity VIP
Equity-Income
Portfolio
Shares 252,738
Cost $6,042,615
Market Value....... -- -- -- -- --
Fidelity VIP Overseas
Portfolio
Shares 174,735
Cost $3,340,244
Market Value....... -- -- -- -- --
Fidelity VIP II Asset
Manager Portfolio
Shares 54,516
Cost $923,808
Market Value....... $ 990,008 -- -- -- --
Hartford Growth and
Income HLS Fund -
Class IA
Shares 59,644
Cost $64,739
Market Value....... -- $ 70,735 -- -- --
Hartford
International
Advisers HLS Fund,
Inc. - Class IA
Shares 5,199
Cost $5,764
Market Value....... -- -- $ 6,003 -- --
Hartford Small
Company HLS Fund,
Inc. - Class IA
Shares 103,221
Cost $113,208
Market Value....... -- -- -- $ 136,367 --
Hartford MidCap HLS
Fund, Inc. - Class
IA
Shares 50,672
Cost $63,516
Market Value....... -- -- -- -- $ 72,930
Due from Hartford Life
& Annuity Insurance
Company............... 57 -- -- -- --
Receivable from fund
shares sold........... -- -- -- 3,353 3,343
---------------- -------------- ---------------- ---------------- --------------
Total Assets........... 990,065 70,735 6,003 139,720 76,273
---------------- -------------- ---------------- ---------------- --------------
LIABILITIES:
Due to Hartford Life &
Annuity Insurance
Company............... -- -- -- 3,354 3,344
Payable for fund shares
purchased............. 64 -- -- -- --
---------------- -------------- ---------------- ---------------- --------------
Total Liabilities...... 64 -- -- 3,354 3,344
---------------- -------------- ---------------- ---------------- --------------
Net Assets (variable
life contract
liabilities).......... $ 990,001 $ 70,735 $ 6,003 $ 136,366 $ 72,929
---------------- -------------- ---------------- ---------------- --------------
---------------- -------------- ---------------- ---------------- --------------
Units Owned by
Participants.......... 565,270 61,456 5,958 126,692 66,076
Unit Values............ $1.751379 $1.150984 $1.007480 $1.076363 $ 1.103726
</TABLE>
<PAGE>
SA-6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT VARIABLE LIFE ONE
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
-------------- --------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 94,731 $ 133,161
-------------- --------------
CAPITAL GAINS INCOME..... -- 103,525
-------------- --------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 9,305 (98)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 38,190 2,521,917
-------------- --------------
Net gain (loss) on
investments......... 47,495 2,521,819
-------------- --------------
Net increase
(decrease) in net
assets resulting
from operations..... $142,226 $ 2,758,505
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-7
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX OPPORTUNITIES
FUND FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- -------------- --------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $445,803 $169,656 $ 88,276 $37,142 $ 84,654 $ 74,346
--------------- -------------- --------------- ------- -------------- --------
CAPITAL GAINS INCOME..... -- 63,605 250,090 -- 53,874 99,646
--------------- -------------- --------------- ------- -------------- --------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- 4,573 39,470 (871) (922) (741)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 731,402 1,421,650 (8,524) 1,330,595 214,444
--------------- -------------- --------------- ------- -------------- --------
Net gain (loss) on
investments......... -- 735,975 1,461,120 (9,395) 1,329,673 213,703
--------------- -------------- --------------- ------- -------------- --------
Net increase
(decrease) in net
assets resulting
from operations..... $445,803 $969,236 $ 1,799,486 $27,747 $ 1,468,201 $387,695
--------------- -------------- --------------- ------- -------------- --------
--------------- -------------- --------------- ------- -------------- --------
<CAPTION>
DIVIDEND
AND GROWTH
FUND
SUB-ACCOUNT
--------------
<S> <C>
INVESTMENT INCOME:
Dividends.............. $137,525
--------------
CAPITAL GAINS INCOME..... 62,013
--------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 1,074
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 561,829
--------------
Net gain (loss) on
investments......... 562,903
--------------
Net increase
(decrease) in net
assets resulting
from operations..... $762,441
--------------
--------------
</TABLE>
<PAGE>
SA-8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT VARIABLE LIFE ONE
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP
EQUITY-INCOME OVERSEAS
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
---------------- --------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 14,647 $ 7,173
-------- --------------
CAPITAL GAINS INCOME..... 52,127 21,143
-------- --------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 690 (6,944)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 333,233 162,234
-------- --------------
Net gain (loss) on
investments......... 333,923 155,290
-------- --------------
Net increase
(decrease) in net
assets resulting
from operations..... $400,697 $183,606
-------- --------------
-------- --------------
</TABLE>
* From inception, August 3, 1998, to December 31, 1998
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-9
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY VIP II
ASSET MANAGER GROWTH AND INTERNATIONAL SMALL COMPANY MIDCAP
PORTFOLIO INCOME FUND ADVISERS FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT*
---------------- --------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 6,411 $ 267 --$ $-- -$-
------- ------ ----- ------- ------
CAPITAL GAINS INCOME..... 19,232 -- -- -- --
------- ------ ----- ------- ------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 68 14 5 235 191
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 58,568 5,996 239 23,159 9,414
------- ------ ----- ------- ------
Net gain (loss) on
investments......... 58,636 6,010 244 23,394 9,605
------- ------ ----- ------- ------
Net increase
(decrease) in net
assets resulting
from operations..... $84,279 $6,277 $244 $23,394 $9,605
------- ------ ----- ------- ------
------- ------ ----- ------- ------
</TABLE>
* From inception, August 3, 1998, to December 31, 1998
<PAGE>
SA-10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT VARIABLE LIFE ONE
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 94,731 $ 133,161
Capital gains income... -- 103,525
Net realized gain
(loss) on security
transactions.......... 9,305 (98)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 38,190 2,521,917
-------------- --------------
Net increase (decrease)
in net assets
resulting from
operations............ 142,226 2,758,505
-------------- --------------
UNIT TRANSACTIONS:
Purchases.............. 683,210 3,513,223
Net transfers.......... 571,074 10,950,874
Surrenders for benefit
payments and fees..... (31,817) (207,585)
Net loan activity...... (7,510) (178,910)
Cost of insurance...... (110,589) (599,935)
-------------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,104,368 13,477,667
-------------- --------------
Net increase (decrease)
in net assets......... 1,246,594 16,236,172
NET ASSETS:
Beginning of period.... 762,910 1,821,061
-------------- --------------
End of period.......... $ 2,009,504 $ 18,057,233
-------------- --------------
-------------- --------------
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 26,909 $ 11,815
Capital gains income... -- 558
Net realized gain
(loss) on security
transactions.......... 148 (109)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 10,267 91,919
-------------- --------------
Net increase (decrease)
in net assets
resulting from
operations............ 37,324 104,183
-------------- --------------
UNIT TRANSACTIONS:
Purchases.............. 58,303 110,273
Net transfers.......... 674,390 1,673,468
Surrenders for benefit
payments and fees..... (6,137) (12,105)
Net loan activity...... 11,825 (221)
Cost of insurance...... (13,939) (55,771)
-------------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 724,442 1,715,644
-------------- --------------
Net increase (decrease)
in net assets......... 761,766 1,819,827
NET ASSETS:
Beginning of period.... 1,144 1,234
-------------- --------------
End of period.......... $762,910 $ 1,821,061
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-11
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX OPPORTUNITIES
FUND FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- -------------- --------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 445,803 $ 169,656 $ 88,276 $ 37,142 $ 84,654 $ 74,346
Capital gains income... -- 63,605 250,090 -- 53,874 99,646
Net realized gain
(loss) on security
transactions.......... -- 4,573 39,470 (871) (922) (741)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 731,402 1,421,650 (8,524) 1,330,595 214,444
--------------- -------------- --------------- -------------- -------------- ----------------
Net increase (decrease)
in net assets
resulting from
operations............ 445,803 969,236 1,799,486 27,747 1,468,201 387,695
--------------- -------------- --------------- -------------- -------------- ----------------
UNIT TRANSACTIONS:
Purchases.............. 95,425,381 1,751,574 3,507,330 37,276 2,118,676 1,309,658
Net transfers.......... (72,076,036) 5,691,550 9,794,312 550,267 6,100,193 3,666,828
Surrenders for benefit
payments and fees..... (411,072) (489,261) (187,213) (5,125) (112,773) (64,967)
Net loan activity...... (3,001,765) (71,056) (101,857) (7,079) (209,775) (30,352)
Cost of insurance...... (1,609,252) (229,420) (489,408) (31,183) (280,128) (165,473)
--------------- -------------- --------------- -------------- -------------- ----------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 18,327,256 6,653,387 12,523,164 544,156 7,616,193 4,715,694
--------------- -------------- --------------- -------------- -------------- ----------------
Net increase (decrease)
in net assets......... 18,773,059 7,622,623 14,322,650 571,903 9,084,394 5,103,389
NET ASSETS:
Beginning of period.... 7,024,417 1,150,533 2,739,058 87,758 1,777,294 771,631
--------------- -------------- --------------- -------------- -------------- ----------------
End of period.......... $ 25,797,476 $ 8,773,156 $ 17,061,708 $659,661 $ 10,861,688 $5,875,020
--------------- -------------- --------------- -------------- -------------- ----------------
--------------- -------------- --------------- -------------- -------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX OPPORTUNITIES
FUND FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- -------------- --------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 105,975 $ 16,534 $ 9,163 $ 3,444 $ 14,934 $ 6,510
Capital gains income... -- 584 10,410 -- 4,291 14,471
Net realized gain
(loss) on security
transactions.......... -- (232) 716 28 463 (828)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 22,216 89,337 (1,336) 100,497 (37,302)
--------------- -------------- --------------- ------- -------------- ----------------
Net increase (decrease)
in net assets
resulting from
operations............ 105,975 39,102 109,626 2,136 120,185 (17,149)
--------------- -------------- --------------- ------- -------------- ----------------
UNIT TRANSACTIONS:
Purchases.............. 26,348,230 17,300 308,974 1,853 68,957 176,177
Net transfers.......... (17,219,898) 1,125,736 2,397,785 76,873 1,641,927 650,101
Surrenders for benefit
payments and fees..... (76,531) (8,960) (23,361) (640) (13,070) (15,973)
Net loan activity...... (2,085,251) (2,510) 6,968 7,850 (7,681) 88
Cost of insurance...... (460,124) (21,190) (63,644) (1,339) (34,163) (25,871)
--------------- -------------- --------------- ------- -------------- ----------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 6,506,426 1,110,376 2,626,722 84,597 1,655,970 784,522
--------------- -------------- --------------- ------- -------------- ----------------
Net increase (decrease)
in net assets......... 6,612,401 1,149,478 2,736,348 86,733 1,776,155 767,373
NET ASSETS:
Beginning of period.... 412,016 1,055 2,710 1,025 1,139 4,258
--------------- -------------- --------------- ------- -------------- ----------------
End of period.......... $ 7,024,417 $ 1,150,533 $ 2,739,058 $87,758 $ 1,777,294 $ 771,631
--------------- -------------- --------------- ------- -------------- ----------------
--------------- -------------- --------------- ------- -------------- ----------------
</TABLE>
<PAGE>
SA-12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT VARIABLE LIFE ONE
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
DIVIDEND FIDELITY VIP
AND GROWTH EQUITY-INCOME
FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
-------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 137,525 $ 14,647
Capital gains income... 62,013 52,127
Net realized gain
(loss) on security
transactions.......... 1,074 690
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 561,829 333,233
-------------- ----------------
Net increase (decrease)
in net assets
resulting from
operations............ 762,441 400,697
-------------- ----------------
UNIT TRANSACTIONS:
Purchases.............. 2,087,615 1,026,458
Net transfers.......... 5,745,039 4,607,992
Surrenders for benefit
payments and fees..... (95,097) (66,082)
Net loan activity...... (128,288) (40,966)
Cost of insurance...... (288,431) (150,445)
-------------- ----------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 7,320,838 5,376,957
-------------- ----------------
Net increase (decrease)
in net assets......... 8,083,279 5,777,654
NET ASSETS:
Beginning of period.... 1,278,452 646,841
-------------- ----------------
End of period.......... $ 9,361,731 $6,424,495
-------------- ----------------
-------------- ----------------
</TABLE>
* From inception, August 3, 1998, to December 31, 1998
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
DIVIDEND FIDELITY VIP
AND GROWTH EQUITY-INCOME
FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
-------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)..................... $ 12,804 $ 374
Capital gains income........ 815 1,882
Net realized gain (loss) on
security transactions...... 360 1,671
Net unrealized appreciation
(depreciation) of
investments during the
period..................... 65,053 48,686
-------------- --------
Net increase (decrease) in
net assets resulting from
operations................. 79,032 52,613
-------------- --------
UNIT TRANSACTIONS:
Purchases................... 62,971 43,181
Net transfers............... 1,157,823 579,483
Surrenders for benefit
payments and fees.......... (7,195) (11,517)
Net loan activity........... 3,918 (3,459)
Cost of insurance........... (22,528) (15,244)
-------------- --------
Net increase (decrease) in
net assets resulting from
unit transactions.......... 1,194,989 592,444
-------------- --------
Net increase (decrease) in
net assets................. 1,274,021 645,057
NET ASSETS:
Beginning of period......... 4,431 1,784
-------------- --------
End of period............... $ 1,278,452 $646,841
-------------- --------
-------------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-13
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP II
OVERSEAS ASSET MANAGER GROWTH AND INTERNATIONAL SMALL COMPANY
PORTFOLIO PORTFOLIO INCOME FUND ADVISERS FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT*
-------------- ---------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 7,173 $ 6,411 $ 267 -$- $--
Capital gains income... 21,143 19,232 -- -- --
Net realized gain
(loss) on security
transactions.......... (6,944) 68 14 5 235
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 162,234 58,568 5,996 239 23,159
-------------- -------- ------- ------ --------
Net increase (decrease)
in net assets
resulting from
operations............ 183,606 84,279 6,277 244 23,394
-------------- -------- ------- ------ --------
UNIT TRANSACTIONS:
Purchases.............. 686,112 229,316 3,992 1,111 4,285
Net transfers.......... 2,484,394 567,140 62,775 4,904 114,315
Surrenders for benefit
payments and fees..... (24,102) (8,417) (315) (126) (1,068)
Net loan activity...... (25,210) 5,364 -- -- (3,356)
Cost of insurance...... (74,993) (21,314) (1,994) (130) (1,204)
-------------- -------- ------- ------ --------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 3,046,201 772,089 64,458 5,759 112,972
-------------- -------- ------- ------ --------
Net increase (decrease)
in net assets......... 3,229,807 856,368 70,735 6,003 136,366
NET ASSETS:
Beginning of period.... 273,600 133,633 -- -- --
-------------- -------- ------- ------ --------
End of period.......... $ 3,503,407 $990,001 $70,735 $6,003 $136,366
-------------- -------- ------- ------ --------
-------------- -------- ------- ------ --------
<CAPTION>
MIDCAP
FUND
SUB-ACCOUNT*
---------------
<S> <C>
OPERATIONS:
Net investment income
(loss)................ $--
Capital gains income... --
Net realized gain
(loss) on security
transactions.......... 191
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 9,414
-------
Net increase (decrease)
in net assets
resulting from
operations............ 9,605
-------
UNIT TRANSACTIONS:
Purchases.............. 5,632
Net transfers.......... 62,276
Surrenders for benefit
payments and fees..... (433)
Net loan activity...... (3,343)
Cost of insurance...... (808)
-------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 63,324
-------
Net increase (decrease)
in net assets......... 72,929
NET ASSETS:
Beginning of period.... --
-------
End of period.......... $72,929
-------
-------
</TABLE>
<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP II
OVERSEAS ASSET MANAGER
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
-------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)..................... $ 373 $ 66
Capital gains income........ 1,481 165
Net realized gain (loss) on
security transactions...... (138) 28
Net unrealized appreciation
(depreciation) of
investments during the
period..................... 919 7,582
-------------- --------
Net increase (decrease) in
net assets resulting from
operations................. 2,635 7,841
-------------- --------
UNIT TRANSACTIONS:
Purchases................... 22,743 8,385
Net transfers............... 257,320 121,381
Surrenders for benefit
payments and fees.......... (3,860) (1,502)
Net loan activity........... (12) --
Cost of insurance........... (6,270) (3,522)
-------------- --------
Net increase (decrease) in
net assets resulting from
unit transactions.......... 269,921 124,742
-------------- --------
Net increase (decrease) in
net assets................. 272,556 132,583
NET ASSETS:
Beginning of period......... 1,044 1,050
-------------- --------
End of period............... $273,600 $133,633
-------------- --------
-------------- --------
</TABLE>
<PAGE>
SA-14 Hartford Life and Annuity Insurance Company
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT VARIABLE LIFE ONE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. ORGANIZATION:
Separate Account Variable Life One (the Account) is a separate investment
account within 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. 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 various
mutual funds (the Funds), as directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting principles
in the investment company industry:
a) SECURITY TRANSACTIONS -- Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments sold is
determined on the basis of identified cost. Dividend and capital gains income is
accrued as of the ex-dividend date. Capital gains income represents those
dividends from the Funds which are characterized as capital gains under tax
regulations.
b) SECURITY VALUATION -- The investments in shares of the Funds are valued
at the closing net asset value per share as determined by the appropriate Fund
as of December 31, 1998.
c) FEDERAL INCOME TAXES -- The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as an
insurance company under the Internal Revenue Code. Under current law, no federal
income taxes are payable with respect to the operations of the Account.
d) USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported amounts
of income and expenses during the period. Operating results in the future could
vary from the amounts derived from management's estimates.
3. ADMINISTRATION OF THE ACCOUNT AND
RELATED CHARGES:
a) DEDUCTIONS AND CHARGES FROM THE ACCOUNT VALUE -- On the policy date and
on each subsequent monthly activity date, the Company will deduct from the
Account an amount to cover mortality and expense risk charges, cost of
insurance, administrative charges and any other benefits provided by the rider.
These charges, which may vary from month to month in accordance with the terms
of the contracts, are deducted through termination of units of interest from
applicable contract owners' accounts.
<PAGE>
SA-1 Hartford Life and Annuity Insurance Company
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To 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 statements of assets and liabilities of
Hartford Life and Annuity Insurance Company Putnam Capital Manager Trust
Separate Account Variable Life One (Asia Pacific Growth, Diversified Income, The
George Putnam Fund of Boston, Global Asset Allocation, Global Growth, Growth and
Income, Health Sciences, High Yield, International Growth, International Growth
and Income, International New Opportunities, Investors, Money Market, New
Opportunities, New Value, OTC & Emerging Growth, U.S. Government and High
Quality Bond, Utilities Growth and Income, Vista, and Voyager), (collectively,
the Account) as of December 31, 1998, and the related statements of operations
and the statements of changes in net assets for the periods presented. These
financial statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our 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 Account as of December 31,
1998, and the results of their operations and the changes in their net assets
for the periods presented in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 15, 1999
<PAGE>
SA-2 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT VARIABLE LIFE ONE
STATEMENTS OF ASSETS & LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASIA THE GEORGE
PACIFIC DIVERSIFIED PUTNAM FUND
GROWTH INCOME OF BOSTON
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investments:
Putnam VT Asia Pacific
Growth Fund
Shares 286
Cost $ 2,272
Market Value......... $2,382 $ -- $--
Putnam VT Diversified
Income Fund
Shares 65,475
Cost $ 694,428
Market Value......... -- 686,832 --
Putnam VT The George
Putnam Fund of Boston
Shares 9,375
Cost $ 94,351
Market Value......... -- -- 96,373
Putnam VT Global Asset
Allocation Fund
Shares 54,016
Cost $ 982,423
Market Value......... -- -- --
Putnam VT Global Growth
Fund
Shares 370,679
Cost $6,691,738
Market Value......... -- -- --
Putnam VT Growth and
Income Fund
Shares 272,903
Cost $7,422,063
Market Value......... -- -- --
Putnam VT Health
Sciences Fund
Shares 13,911
Cost $ 137,023
Market Value......... -- -- --
Putnam VT High Yield
Fund
Shares 187,419
Cost $2,348,503
Market Value......... -- -- --
Putnam VT International
Growth Fund
Shares 17,578
Cost $ 225,468
Market Value......... -- -- --
Putnam VT International
Growth and Income Fund
Shares 15,021
Cost $ 182,548
Market Value......... -- -- --
Due from Hartford Life
Insurance Company..... -- 3,229 4,564
Receivable from fund
shares sold........... -- -- --
----------- ----------- -----------
Total Assets........... 2,382 690,061 100,937
----------- ----------- -----------
LIABILITIES:
Due to Hartford Life
Insurance Company -- -- --
Payable for fund shares
purchased -- 3,228 4,547
----------- ----------- -----------
Total Liabilities...... -- 3,228 4,547
----------- ----------- -----------
Net Assets (variable
life contract
liabilities).......... $2,382 $686,833 $96,390
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-3
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL
ASSET GLOBAL
ALLOCATION GROWTH
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
ASSETS:
Investments:
Putnam VT Asia Pacific
Growth Fund
Shares 286
Cost $ 2,272
Market Value......... $ -- $ --
Putnam VT Diversified
Income Fund
Shares 65,475
Cost $ 694,428
Market Value......... -- --
Putnam VT The George
Putnam Fund of Boston
Shares 9,375
Cost $ 94,351
Market Value......... -- --
Putnam VT Global Asset
Allocation Fund
Shares 54,016
Cost $ 982,423
Market Value......... 1,023,610 --
Putnam VT Global Growth
Fund
Shares 370,679
Cost $6,691,738
Market Value......... -- 7,517,360
Putnam VT Growth and
Income Fund
Shares 272,903
Cost $7,422,063
Market Value......... -- --
Putnam VT Health
Sciences Fund
Shares 13,911
Cost $ 137,023
Market Value......... -- --
Putnam VT High Yield
Fund
Shares 187,419
Cost $2,348,503
Market Value......... -- --
Putnam VT International
Growth Fund
Shares 17,578
Cost $ 225,468
Market Value......... -- --
Putnam VT International
Growth and Income Fund
Shares 15,021
Cost $ 182,548
Market Value......... -- --
Due from Hartford Life
Insurance Company..... 34 19,420
Receivable from fund
shares sold........... -- --
----------- -----------
Total Assets........... 1,023,644 7,536,780
----------- -----------
LIABILITIES:
Due to Hartford Life
Insurance Company -- --
Payable for fund shares
purchased -- 19,690
----------- -----------
Total Liabilities...... -- 19,690
----------- -----------
Net Assets (variable
life contract
liabilities).......... $ 1,023,644 $ 7,517,090
----------- -----------
----------- -----------
<CAPTION>
INTERNATIONAL
GROWTH HEALTH INTERNATIONAL GROWTH AND
AND INCOME SCIENCES HIGH YIELD GROWTH INCOME
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Putnam VT Asia Pacific
Growth Fund
Shares 286
Cost $ 2,272
Market Value......... $ -- $ -- $ -- $ -- $ --
Putnam VT Diversified
Income Fund
Shares 65,475
Cost $ 694,428
Market Value......... -- -- -- -- --
Putnam VT The George
Putnam Fund of Boston
Shares 9,375
Cost $ 94,351
Market Value......... -- -- -- -- --
Putnam VT Global Asset
Allocation Fund
Shares 54,016
Cost $ 982,423
Market Value......... -- -- -- -- --
Putnam VT Global Growth
Fund
Shares 370,679
Cost $6,691,738
Market Value......... -- -- -- -- --
Putnam VT Growth and
Income Fund
Shares 272,903
Cost $7,422,063
Market Value......... 7,851,431 -- -- -- --
Putnam VT Health
Sciences Fund
Shares 13,911
Cost $ 137,023
Market Value......... -- 152,192 -- -- --
Putnam VT High Yield
Fund
Shares 187,419
Cost $2,348,503
Market Value......... -- -- 2,192,806 -- --
Putnam VT International
Growth Fund
Shares 17,578
Cost $ 225,468
Market Value......... -- -- -- 237,650 --
Putnam VT International
Growth and Income Fund
Shares 15,021
Cost $ 182,548
Market Value......... -- -- -- -- 183,863
Due from Hartford Life
Insurance Company..... 13,931 285 115 1,206 31
Receivable from fund
shares sold........... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total Assets........... 7,865,362 152,477 2,192,921 238,856 183,894
----------- ----------- ----------- ----------- -----------
LIABILITIES:
Due to Hartford Life
Insurance Company -- -- -- -- --
Payable for fund shares
purchased 14,269 284 117 1,210 38
----------- ----------- ----------- ----------- -----------
Total Liabilities...... 14,269 284 117 1,210 38
----------- ----------- ----------- ----------- -----------
Net Assets (variable
life contract
liabilities).......... $ 7,851,093 $152,193 $ 2,192,804 $237,646 $183,856
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
<PAGE>
SA-4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT VARIABLE LIFE ONE
STATEMENTS OF ASSETS & LIABILITIES (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
INTERNATIONAL
NEW MONEY
OPPORTUNITIES INVESTORS MARKET
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investments:
Putnam VT International
New Opportunities Fund
Shares 1,496
Cost $ 15,017
Market Value......... $17,186 $ -- $ --
Putnam VT Investors
Fund
Shares 13,799
Cost $ 147,202
Market Value......... -- 160,756 --
Putnam VT Money Market
Fund
Shares 527,966
Cost $ 527,966
Market Value......... -- -- 527,966
Putnam VT New
Opportunities Fund
Shares 250,312
Cost $5,427,645
Market Value......... -- -- --
Putnam VT New Value
Fund
Shares 1,384
Cost $ 16,210
Market Value......... -- -- --
Putnam VT OTC &
Emerging Growth Fund
Shares 2,991
Cost $ 26,639
Market Value......... -- -- --
Putnam VT U.S.
Government and High
Quality Bond Fund
Shares 107,804
Cost $1,425,849
Market Value......... -- -- --
Putnam VT Utilities
Growth & Income Fund
Shares 67,841
Cost $1,105,371
Market Value......... -- -- --
Putnam VT Vista Fund
Shares 3,199
Cost $ 39,649
Market Value......... -- -- --
Putnam VT Voyager Fund
Shares 220,466
Cost $8,653,660
Market Value......... -- -- --
Due from Hartford Life
Insurance Company..... -- 613 --
Receivable from fund
shares sold........... -- -- --
------------- ----------- -----------
Total Assets........... 17,186 161,369 527,966
------------- ----------- -----------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- -- 3
Payable for fund shares
purchased............. -- 609 --
------------- ----------- -----------
Total Liabilities...... -- 609 3
------------- ----------- -----------
Net Assets (variable
life contract
liabilities).......... $17,186 $160,760 $527,963
------------- ----------- -----------
------------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-5
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEW NEW
OPPORTUNITIES VALUE
SUB-ACCOUNT SUB-ACCOUNT
------------- -----------
<S> <C> <C>
ASSETS:
Investments:
Putnam VT International
New Opportunities Fund
Shares 1,496
Cost $ 15,017
Market Value......... $ -- $--
Putnam VT Investors
Fund
Shares 13,799
Cost $ 147,202
Market Value......... -- --
Putnam VT Money Market
Fund
Shares 527,966
Cost $ 527,966
Market Value......... -- --
Putnam VT New
Opportunities Fund
Shares 250,312
Cost $5,427,645
Market Value......... 6,523,133 --
Putnam VT New Value
Fund
Shares 1,384
Cost $ 16,210
Market Value......... -- 16,649
Putnam VT OTC &
Emerging Growth Fund
Shares 2,991
Cost $ 26,639
Market Value......... -- --
Putnam VT U.S.
Government and High
Quality Bond Fund
Shares 107,804
Cost $1,425,849
Market Value......... -- --
Putnam VT Utilities
Growth & Income Fund
Shares 67,841
Cost $1,105,371
Market Value......... -- --
Putnam VT Vista Fund
Shares 3,199
Cost $ 39,649
Market Value......... -- --
Putnam VT Voyager Fund
Shares 220,466
Cost $8,653,660
Market Value......... -- --
Due from Hartford Life
Insurance Company..... 31,990 1
Receivable from fund
shares sold........... -- --
------------- -----------
Total Assets........... 6,555,123 16,650
------------- -----------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- --
Payable for fund shares
purchased............. 32,112 --
------------- -----------
Total Liabilities...... 32,112 --
------------- -----------
Net Assets (variable
life contract
liabilities).......... $6,523,011 $16,650
------------- -----------
------------- -----------
<CAPTION>
OTC & U.S. GOVERNMENT UTILITIES
EMERGING AND HIGH GROWTH
GROWTH QUALITY BOND AND INCOME VISTA VOYAGER
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- --------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Putnam VT International
New Opportunities Fund
Shares 1,496
Cost $ 15,017
Market Value......... $-- $ -- $ -- $-- $ --
Putnam VT Investors
Fund
Shares 13,799
Cost $ 147,202
Market Value......... -- -- -- -- --
Putnam VT Money Market
Fund
Shares 527,966
Cost $ 527,966
Market Value......... -- -- -- -- --
Putnam VT New
Opportunities Fund
Shares 250,312
Cost $5,427,645
Market Value......... -- -- -- -- --
Putnam VT New Value
Fund
Shares 1,384
Cost $ 16,210
Market Value......... -- -- -- -- --
Putnam VT OTC &
Emerging Growth Fund
Shares 2,991
Cost $ 26,639
Market Value......... 30,183 -- -- -- --
Putnam VT U.S.
Government and High
Quality Bond Fund
Shares 107,804
Cost $1,425,849
Market Value......... -- 1,480,144 -- -- --
Putnam VT Utilities
Growth & Income Fund
Shares 67,841
Cost $1,105,371
Market Value......... -- -- 1,234,030 -- --
Putnam VT Vista Fund
Shares 3,199
Cost $ 39,649
Market Value......... -- -- -- 47,086 --
Putnam VT Voyager Fund
Shares 220,466
Cost $8,653,660
Market Value......... -- -- -- -- 10,108,374
Due from Hartford Life
Insurance Company..... 2 1,014 28 -- --
Receivable from fund
shares sold........... -- -- -- -- 22,235
----------- --------------- ----------- ----------- ------------
Total Assets........... 30,185 1,481,158 1,234,058 47,086 10,130,609
----------- --------------- ----------- ----------- ------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- -- -- 1 21,736
Payable for fund shares
purchased............. -- 1,015 12 -- --
----------- --------------- ----------- ----------- ------------
Total Liabilities...... -- 1,015 12 1 21,736
----------- --------------- ----------- ----------- ------------
Net Assets (variable
life contract
liabilities).......... $30,185 $1,480,143 $1,234,046 $47,085 $10,108,873
----------- --------------- ----------- ----------- ------------
----------- --------------- ----------- ----------- ------------
</TABLE>
<PAGE>
SA-6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT VARIABLE LIFE ONE
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
-------- ---------- -----------
Variable life contracts:
<S> <C> <C> <C>
Asia Pacific Growth Fund.................. 223 $10.693257 $ 2,382
Diversified Income Fund................... 53,755 12.777025 686,833
George Putnam Fund of Boston.............. 9,091 10.602638 96,390
Global Asset Allocation Fund.............. 49,232 20.792218 1,023,643
Global Growth Fund........................ 318,846 23.575913 7,517,090
Growth and Income Fund.................... 307,670 25.517876 7,851,093
Health Sciences Fund...................... 13,537 11.242853 152,193
High Yield Fund........................... 140,779 15.576208 2,192,804
International Growth Fund................. 24,286 9.785387 237,646
International Growth and Income Fund...... 18,822 9.768197 183,856
International New Opportunities Fund...... 2,137 8.042115 17,186
Investors Fund............................ 14,373 11.185169 160,760
Money Market Fund......................... 407,558 1.295432 527,963
New Opportunities Fund.................... 286,823 22.742256 6,523,011
New Value Fund............................ 1,569 10.611164 16,650
OTC & Emerging Growth Fund................ 2,802 10.773294 30,185
U.S. Government and High Quality Bond
Fund........................................ 100,651 14.705728 1,480,143
Utilities Growth & Income Fund............ 57,036 21.636249 1,234,046
Vista Fund................................ 4,437 10.611675 47,085
Voyager Fund.............................. 350,559 28.836430 10,108,873
-----------
Grand Total: $40,089,832
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
This page intentionally left blank.
<PAGE>
SA-8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT VARIABLE LIFE ONE
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASIA THE GEORGE
PACIFIC DIVERSIFIED PUTNAM FUND
GROWTH INCOME OF BOSTON
SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT*
----------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. -$- $ 2,718 $ 532
----- ----------- -----------
CAPITAL GAINS INCOME..... -- 1,154 --
----- ----------- -----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- 15 7
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 110 (9,453) 2,022
----- ----------- -----------
Net gain (loss) on
investments........... 110 (9,438) 2,029
----- ----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ $110 $(5,566) $2,561
----- ----------- -----------
----- ----------- -----------
</TABLE>
* From inception, August 3, 1998, to December 31, 1998.
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-9
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL
ASSET GLOBAL
ALLOCATION GROWTH
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 9,598 $ 66,009
----------- -----------
CAPITAL GAINS INCOME..... 41,227 330,045
----------- -----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 511 3,657
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 31,846 799,731
----------- -----------
Net gain (loss) on
investments........... 32,357 803,388
----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ $83,182 $1,199,442
----------- -----------
----------- -----------
<CAPTION>
INTERNATIONAL
GROWTH HEALTH INTERNATIONAL GROWTH AND
AND INCOME SCIENCES HIGH YIELD GROWTH INCOME
SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT*
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 36,061 $ 126 $ 34,276 $ 631 $2,027
----------- ----------- ----------- ----------- -----------
CAPITAL GAINS INCOME..... 235,404 -- 5,378 -- 4,882
----------- ----------- ----------- ----------- -----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 4,991 2 8,112 (2) (4)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 369,952 15,169 (176,046) 12,182 1,315
----------- ----------- ----------- ----------- -----------
Net gain (loss) on
investments........... 374,943 15,171 (167,934) 12,180 1,311
----------- ----------- ----------- ----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ $646,408 $15,297 $(128,280) $12,811 $8,220
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
<PAGE>
SA-10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT VARIABLE LIFE ONE
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
INTERNATIONAL
NEW MONEY
OPPORTUNITIES INVESTORS MARKET
SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT
------------ ------------ -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $-- $ 111 $10,171
------ ------------ -----------
Capital gains income... -- -- --
------ ------------ -----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 5 (1) --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 2,169 13,554 --
------ ------------ -----------
Net gain (loss) on
investments........... 2,174 13,553 --
------ ------------ -----------
Net increase (decrease)
in net assets
resulting from
operations............ $2,174 $13,664 $10,171
------ ------------ -----------
------ ------------ -----------
</TABLE>
* From inception, August 3, 1998, to December 31, 1998.
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-11
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEW
OPPORTUNITIES NEW VALUE
SUB-ACCOUNT SUB-ACCOUNT*
------------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $-- $131
------------- -----
Capital gains income... 25,739 25
------------- -----
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (50,616) 255
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 967,053 439
------------- -----
Net gain (loss) on
investments........... 916,437 694
------------- -----
Net increase (decrease)
in net assets
resulting from
operations............ $942,176 $850
------------- -----
------------- -----
<CAPTION>
OTC & U.S. GOVERNMENT UTILITIES
EMERGING AND HIGH GROWTH
GROWTH QUALITY BOND AND INCOME VISTA VOYAGER
SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT
------------ --------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 10 $61,358 $ 10,596 $-- $ 5,550
------ ------- ----------- ------ -----------
Capital gains income... -- 1,597 18,263 -- 135,426
------ ------- ----------- ------ -----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 769 2,773 (609) 4 1,139
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 3,544 12,767 84,719 7,437 1,302,791
------ ------- ----------- ------ -----------
Net gain (loss) on
investments........... 4,313 15,540 84,110 7,441 1,303,930
------ ------- ----------- ------ -----------
Net increase (decrease)
in net assets
resulting from
operations............ $4,323 $78,495 $112,969 $7,441 $ 1,444,906
------ ------- ----------- ------ -----------
------ ------- ----------- ------ -----------
</TABLE>
<PAGE>
SA-12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT VARIABLE LIFE ONE
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
THE GEORGE
ASIA PACIFIC DIVERSIFIED PUTNAM FUND
GROWTH INCOME OF BOSTON
SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT*
------------ ----------- ------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $-- $ 2,718 $ 532
------ ----------- ------------
CAPITAL GAINS INCOME..... -- 1,154 --
Net realized gain
(loss) on security
transactions.......... -- 15 7
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 110 (9,453) 2,022
------ ----------- ------------
Net increase (decrease)
in net assets
resulting from
operations............ 110 (5,566) 2,561
------ ----------- ------------
UNIT TRANSACTIONS:
Purchases.............. 1,025 85,364 26,333
Net transfers.......... 1,266 584,214 68,878
Surrenders............. (8) (6,589) (507)
Net loan activity...... -- (2) (39)
Cost of insurance...... (11) (13,198) (836)
------ ----------- ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 2,272 649,789 93,829
------ ----------- ------------
Total increase
(decrease) in net
assets................ 2,382 644,223 96,390
NET ASSETS:
Beginning of period.... -- 42,610 --
------ ----------- ------------
End of period.......... $2,382 $686,833 $96,390
------ ----------- ------------
------ ----------- ------------
</TABLE>
* From inception, August 3, 1998, to December 31, 1998.
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-13
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL
ASSET GLOBAL
ALLOCATION GROWTH
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 9,598 $ 66,009
----------- -----------
CAPITAL GAINS INCOME..... 41,227 330,045
Net realized gain
(loss) on security
transactions.......... 511 3,657
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 31,846 799,731
----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 83,182 1,199,442
----------- -----------
UNIT TRANSACTIONS:
Purchases.............. 197,777 1,777,192
Net transfers.......... 474,639 3,292,482
Surrenders............. (12,784) (99,324)
Net loan activity...... (591) (60,658)
Cost of insurance...... (29,489) (227,264)
----------- -----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 629,552 4,682,428
----------- -----------
Total increase
(decrease) in net
assets................ 712,734 5,881,870
NET ASSETS:
Beginning of period.... 310,910 1,635,220
----------- -----------
End of period.......... $ 1,023,644 $ 7,517,090
----------- -----------
----------- -----------
<CAPTION>
INTERNATIONAL
GROWTH HEALTH INTERNATIONAL GROWTH AND
AND INCOME SCIENCES HIGH YIELD GROWTH INCOME
SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT*
----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 36,061 $ 126 $ 34,276 $ 631 $ 2,027
----------- ------------ ----------- ----------- -----------
CAPITAL GAINS INCOME..... 235,404 -- 5,378 -- 4,882
Net realized gain
(loss) on security
transactions.......... 4,991 2 8,112 (2) (4)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 369,952 15,169 (176,046) 12,182 1,315
----------- ------------ ----------- ----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 646,408 15,297 (128,280) 12,811 8,220
----------- ------------ ----------- ----------- -----------
UNIT TRANSACTIONS:
Purchases.............. 1,520,697 43,812 465,319 9,271 17,634
Net transfers.......... 4,737,360 95,215 1,652,869 217,210 159,730
Surrenders............. (94,734) (539) (17,686) (739) (640)
Net loan activity...... (99,490) -- (12,272) -- (1)
Cost of insurance...... (257,615) (1,592) (51,815) (907) (1,087)
----------- ------------ ----------- ----------- -----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 5,806,218 136,896 2,036,415 224,835 175,636
----------- ------------ ----------- ----------- -----------
Total increase
(decrease) in net
assets................ 6,452,626 152,193 1,908,135 237,646 183,856
NET ASSETS:
Beginning of period.... 1,398,467 -- 284,669 -- --
----------- ------------ ----------- ----------- -----------
End of period.......... $ 7,851,093 $152,193 $ 2,192,804 $237,646 $183,856
----------- ------------ ----------- ----------- -----------
----------- ------------ ----------- ----------- -----------
</TABLE>
<PAGE>
SA-14 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT VARIABLE LIFE ONE
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
INTERNATIONAL
NEW MONEY
OPPORTUNITIES INVESTORS MARKET
SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT
------------ ------------ -----------
<S> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $-- $ 111 $ 10,171
CAPITAL GAINS INCOME..... -- -- --
Net realized gain
(loss) on security
transactions.......... 5 (1) --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 2,169 13,554 --
------------ ------------ -----------
Net increase (decrease)
in net assets
resulting from
operations............ 2,174 13,664 10,171
------------ ------------ -----------
UNIT TRANSACTIONS:
Purchases.............. 1,092 18,749 111,154
Net transfers.......... 14,115 131,102 294,105
Surrenders............. (71) (525) (4,383)
Net loan activity...... -- (2) (1,053)
Cost of insurance...... (124) (2,228) (9,256)
------------ ------------ -----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 15,012 147,096 390,567
------------ ------------ -----------
Total increase
(decrease) in net
assets................ 17,186 160,760 400,738
NET ASSETS:
Beginning of period.... -- -- 127,225
------------ ------------ -----------
End of period.......... $17,186 $160,760 $527,963
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
* From inception, August 3, 1998, to December 31, 1998.
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-15
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEW NEW
OPPORTUNITIES VALUE
SUB-ACCOUNT SUB-ACCOUNT
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ -- $ 131
CAPITAL GAINS INCOME..... 25,739 25
Net realized gain
(loss) on security
transactions.......... (50,616) 255
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 967,053 439
------------- ------------
Net increase (decrease)
in net assets
resulting from
operations............ 942,176 850
------------- ------------
UNIT TRANSACTIONS:
Purchases.............. 1,695,165 4,212
Net transfers.......... 2,990,857 12,066
Surrenders............. (78,215) (154)
Net loan activity...... (10,265) --
Cost of insurance...... (162,662) (324)
------------- ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 4,434,880 15,800
------------- ------------
Total increase
(decrease) in net
assets................ 5,377,056 16,650
NET ASSETS:
Beginning of period.... 1,145,955 --
------------- ------------
End of period.......... $6,523,011 $16,650
------------- ------------
------------- ------------
<CAPTION>
OTC & U.S. GOVERNMENT UTILITIES
EMERGING AND HIGH GROWTH
GROWTH QUALITY BOND AND INCOME VISTA VOYAGER
SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT
------------ --------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 10 $ 61,358 $ 10,596 $-- $ 5,550
CAPITAL GAINS INCOME..... -- 1,597 18,263 -- 135,426
Net realized gain
(loss) on security
transactions.......... 769 2,773 (609) 4 1,139
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 3,544 12,767 84,719 7,437 1,302,791
------------ --------------- ----------- ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 4,323 78,495 112,969 7,441 1,444,906
------------ --------------- ----------- ------------ ------------
UNIT TRANSACTIONS:
Purchases.............. 5,337 518,167 269,787 1,667 1,842,714
Net transfers.......... 21,258 (216,141) 641,807 38,890 5,859,152
Surrenders............. (231) (23,212) (7,600) (259) (104,683)
Net loan activity...... (1) (153) (8,087) -- (122,704)
Cost of insurance...... (501) (70,077) (34,433) (654) (253,931)
------------ --------------- ----------- ------------ ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 25,862 208,584 861,474 39,644 7,220,548
------------ --------------- ----------- ------------ ------------
Total increase
(decrease) in net
assets................ 30,185 287,079 974,443 47,085 8,665,454
NET ASSETS:
Beginning of period.... -- 1,193,064 259,603 -- 1,443,419
------------ --------------- ----------- ------------ ------------
End of period.......... $30,185 $1,480,143 $ 1,234,046 $47,085 $ 10,108,873
------------ --------------- ----------- ------------ ------------
------------ --------------- ----------- ------------ ------------
</TABLE>
<PAGE>
SA-16 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT VARIABLE LIFE ONE
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
GLOBAL
DIVERSIFIED ASSET GLOBAL
INCOME ALLOCATION GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- -----------
<S> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 99 $ 780 $ 7,355
CAPITAL GAINS INCOME..... 16 1,333 7,911
Net realized gain
(loss) on security
transactions.......... 273 46 727
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 1,827 9,293 25,838
----------- ----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 2,215 11,452 41,831
----------- ----------- -----------
UNIT TRANSACTIONS:
Purchases.............. 1,122 21,636 197,403
Net transfers.......... 39,712 284,558 1,455,386
Surrenders............. (348) (2,233) (24,833)
Net loan activity...... -- (16) 7,540
Cost of insurance...... (1,121) (5,581) (43,722)
----------- ----------- -----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 39,365 298,364 1,591,774
----------- ----------- -----------
Total increase
(decrease) in net
assets................ 41,580 309,816 1,633,605
NET ASSETS:
Beginning of period.... 1,030 1,094 1,615
----------- ----------- -----------
End of period.......... $42,610 $310,910 $ 1,635,220
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY SA-17
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH
AND INCOME HIGH YIELD
SUB-ACCOUNT SUB-ACCOUNT
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 2,061 $ 1,448
CAPITAL GAINS INCOME..... 5,017 168
Net realized gain
(loss) on security
transactions.......... 47 208
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 59,382 20,324
----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 66,507 22,148
----------- -----------
UNIT TRANSACTIONS:
Purchases.............. 58,290 9,010
Net transfers.......... 1,311,232 261,651
Surrenders............. (8,041) (2,778)
Net loan activity...... (2,944) (27)
Cost of insurance...... (31,097) (6,360)
----------- -----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,327,440 261,496
----------- -----------
Total increase
(decrease) in net
assets................ 1,393,947 283,644
NET ASSETS:
Beginning of period.... 4,520 1,025
----------- -----------
End of period.......... $ 1,398,467 $284,669
----------- -----------
----------- -----------
<CAPTION>
U.S. GOVERNMENT UTILITIES
MONEY NEW AND HIGH GROWTH
MARKET OPPORTUNITIES QUALITY BOND AND INCOME VOYAGER
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 1,772 $ -- $ 16,959 $ 165 $ 405
CAPITAL GAINS INCOME..... -- -- -- 225 8,720
Net realized gain
(loss) on security
transactions.......... -- (11,593) 549 65 8,423
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 128,498 41,518 43,867 151,950
----------- ------------- --------------- ----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 1,772 116,905 59,026 44,322 169,498
----------- ------------- --------------- ----------- -----------
UNIT TRANSACTIONS:
Purchases.............. -- 90,292 188,414 18,312 111,483
Net transfers.......... 127,202 989,240 981,563 206,398 1,206,671
Surrenders............. (810) (15,731) (15,612) (1,613) 2,463
Net loan activity...... -- (4,120) 7,877 (43) (4,450)
Cost of insurance...... (1,951) (31,626) (32,535) (8,846) (44,593)
----------- ------------- --------------- ----------- -----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 124,441 1,028,055 1,129,707 214,208 1,271,574
----------- ------------- --------------- ----------- -----------
Total increase
(decrease) in net
assets................ 126,213 1,144,960 1,188,733 258,530 1,441,072
NET ASSETS:
Beginning of period.... 1,012 995 4,331 1,073 2,347
----------- ------------- --------------- ----------- -----------
End of period.......... $127,225 $1,145,955 $1,193,064 $259,603 $ 1,443,419
----------- ------------- --------------- ----------- -----------
----------- ------------- --------------- ----------- -----------
</TABLE>
<PAGE>
SA-18 Hartford Life and Annuity Insurance Company
- --------------------------------------------------------------------------------
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT VARIABLE LIFE ONE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. ORGANIZATION:
Separate Account Variable Life One (the Account) is a separate investment
account within 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. 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 various
mutual funds (the Funds) as directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting principles
in the investment company industry:
a) SECURITY TRANSACTIONS -- Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments sold is
determined on the basis of identified cost. Dividend and capital gains income is
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, 1998.
c) FEDERAL INCOME TAXES -- The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as an
insurance company under the Internal Revenue Code. Under current law, no federal
income taxes are payable with respect to the operations of the Account.
d) USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported amounts
of income and expenses during the period. Operating results in the future could
vary from the amounts derived from management's estimates.
3. ADMINISTRATION OF THE ACCOUNT AND
RELATED CHARGES:
a) COST OF INSURANCE -- In accordance with terms of the contracts, the
Company makes deductions for costs of insurance to cover the Company's
anticipated mortality costs. Because a policy's account value and death benefit
may vary from month to month, the cost of insurance charges may also vary.
b) MORTALITY AND EXPENSE RISK CHARGE -- The Company, as issuer of variable
annuity contracts, provides the mortality and expense undertakings and, with
respect to the Account, receives a maximum annual fee of 1.40% of the Account's
average daily net assets. These expenses are reflected in surrenders on the
accompanying statements of changes in net assets.
c) ADMINISTRATIVE AND ISSUE CHARGES -- The Company assesses a monthly
administrative charge to compensate the Company for administrative costs in
connection with the policies. This charge covers the average expected cost for
these expenses at a maximum of $12 per month. Additionally, the Company assesses
a monthly charge in the first policy year for up-front costs of underwriting and
issuing a policy at a monthly maximum amount of $62.50. These expenses are
reflected in surrenders on the accompanying statements of changes in net assets.
d) DEDUCTION OF ANNUAL MAINTENANCE FEE -- Annual maintenance fees are
deducted through termination of units of interest from applicable contract
owners' accounts, in accordance with the terms of the contracts. These expenses
are reflected in surrenders on the accompanying statements of changes in net
assets.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY F-1
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Hartford Life and Annuity Insurance Company:
We have audited the accompanying statutory balance sheets of Hartford Life and
Annuity Insurance Company (a Connecticut Corporation and wholly owned subsidiary
of Hartford Life Insurance Company) (the Company) as of December 31, 1998 and
1997, and the related statutory statements of operations, changes in capital and
surplus, and cash flows for each of the three years in the period ended December
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these statutory
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 financial
statements. When statutory 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 of the effects of the matter discussed in the preceding
paragraph, the statutory financial statements referred to above do not present
fairly, in conformity with generally accepted accounting principles, the
financial position of the Company as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998.
However, in our opinion, the statutory financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 1998 and 1997, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1998 in
conformity with statutory accounting practices as described in Note 1.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
January 26, 1999
<PAGE>
F-2 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
BALANCE SHEETS
(STATUTORY BASIS)
($000)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
Assets
Bonds........................................... $ 1,453,792 $ 1,501,311
Common stocks................................... 40,650 64,408
Mortgage loans.................................. 59,548 85,103
Policy loans.................................... 47,212 36,533
Cash and short-term investments................. 469,955 309,432
Other invested assets........................... 2,188 20,942
----------- -----------
Total cash and invested assets................ 2,073,345 2,017,729
Investment income due and accrued............... 20,126 15,878
Premium balances receivable..................... 333 389
Receivables from affiliates..................... -- 1,269
Other assets.................................... 45,358 22,788
Separate account assets......................... 32,876,278 23,208,728
----------- -----------
Total Assets.................................. $35,015,440 $25,266,781
----------- -----------
----------- -----------
Liabilities
Aggregate reserves for future benefits.......... $ 579,140 $ 605,183
Policy and contract claims...................... 5,667 5,672
Liability for premium and other deposit funds... 2,011,672 1,795,149
Asset valuation reserve......................... 21,782 13,670
Payable to affiliates........................... 19,271 20,972
Other liabilities............................... (974,882) (754,393)
Separate account liabilities.................... 32,876,278 23,208,728
----------- -----------
Total liabilities............................. 34,538,928 24,894,981
----------- -----------
Capital and Surplus
Common stock.................................... 2,500 2,500
Gross paid-in and contributed surplus........... 226,043 226,043
Unassigned funds................................ 247,969 143,257
----------- -----------
Total capital and surplus..................... 476,512 371,800
----------- -----------
Total liabilities, capital and surplus............ $35,015,440 $25,266,781
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of
these statutory basis financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY F-3
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
(STATUTORY BASIS)
($000)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues
Premiums and annuity considerations............. $ 469,343 $ 296,645 $ 250,244
Annuity and other fund deposits................. 2,051,251 1,981,246 1,897,347
Net investment income........................... 129,982 102,285 98,441
Commissions and expense allowances on
reinsurance ceded.............................. 444,241 396,921 370,637
Reserve adjustment on reinsurance ceded......... 3,185,590 3,672,076 3,864,395
Other revenues.................................. 458,190 288,632 161,906
----------- ----------- -----------
Total revenues................................ 6,738,597 6,737,805 6,642,970
----------- ----------- -----------
Benefits and expenses
Death and annuity benefits...................... 43,390 66,176 60,194
Disability and other benefit payments........... 6,114 7,316 6,555
Surrenders...................................... 739,663 454,417 270,165
Commissions and other expenses.................. 666,515 564,077 491,637
Increase (Decrease) in aggregate reserves for
future benefits................................ (26,043) 33,213 27,351
Increase in liability for premium and other
deposit funds.................................. 216,523 640,006 207,156
Net transfers to separate accounts.............. 4,956,007 4,914,980 5,492,964
----------- ----------- -----------
Total benefits and expenses................... 6,602,169 6,680,185 6,556,022
----------- ----------- -----------
Net gain from operations
Before federal income tax (benefit) expense..... 136,428 57,620 86,948
Federal income tax (benefit) expense............ 35,887 (14,878) 19,360
----------- ----------- -----------
Net gain from operations.......................... 100,541 72,498 67,588
Net realized capital gains, after tax........... 2,085 1,544 407
----------- ----------- -----------
Net income........................................ $ 102,626 $ 74,042 $ 67,995
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of
these statutory basis financial statements.
<PAGE>
F-4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
(STATUTORY BASIS)
($000)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Common stock,
Beginning and end of year....................... $ 2,500 $ 2,500 $ 2,500
----------- ----------- -----------
Gross paid-in and contributed surplus,
Beginning and end of year....................... $ 226,043 $ 226,043 $ 226,043
----------- ----------- -----------
Unassigned funds
Balance, beginning of year...................... $ 143,257 $ 74,570 $ 9,791
Net income...................................... 102,626 74,042 67,995
Change in net unrealized capital gains (losses)
on common stocks and other invested assets..... 1,688 2,186 (5,171)
Change in asset valuation reserve............... (8,112) (6,228) 568
Change in non-admitted assets................... (1,277) (1,313) 1,387
Credit on reinsurance ceded..................... 9,787 -- --
----------- ----------- -----------
Balance, end of year............................ $ 247,969 $ 143,257 $ 74,570
----------- ----------- -----------
Capital and surplus,
End of year..................................... $ 476,512 $ 371,800 $ 303,113
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of
these statutory basis financial statements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY F-5
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
(STATUTORY BASIS)
($000)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Operations
Premiums and annuity considerations............. $ 2,520,655 $ 2,277,874 $ 2,147,627
Investment income............................... 127,425 101,991 106,178
Other income.................................... 4,092,964 4,381,718 4,396,892
----------- ----------- -----------
Total income.................................. 6,741,044 6,761,583 6,650,697
----------- ----------- -----------
Benefits paid................................... 790,051 529,733 338,998
Federal income taxes (received) paid on
operations..................................... 25,780 (14,499) 28,857
Other expenses.................................. 5,859,063 5,754,725 6,254,139
----------- ----------- -----------
Total benefits and expenses................... 6,674,894 6,269,959 6,621,994
----------- ----------- -----------
Net cash from operations...................... 66,150 491,624 28,703
----------- ----------- -----------
Proceeds from investments
Bonds........................................... 633,926 614,413 871,019
Common stocks................................... 34,010 11,481 72,100
Mortgage loans.................................. 85,275 -- --
Other........................................... 127 152 10
----------- ----------- -----------
Net investment proceeds....................... 753,338 626,046 943,129
----------- ----------- -----------
Taxes paid on capital gains..................... -- -- 936
Other cash provided............................. 1,269 -- 41,998
----------- ----------- -----------
Total proceeds................................ 820,757 1,117,670 1,012,894
----------- ----------- -----------
Cost of investments acquired
Bonds........................................... 586,913 848,267 914,523
Common stocks................................... 7,012 28,302 82,495
Mortgage loans.................................. 59,702 85,103 --
Other........................................... 1,168 18,548 130
----------- ----------- -----------
Total investments acquired.................... 654,795 980,220 997,148
----------- ----------- -----------
Other cash applied
Other........................................... 5,439 4,848 12,220
----------- ----------- -----------
Total other cash applied...................... 5,439 4,848 12,220
----------- ----------- -----------
Total applications............................ 660,234 985,068 1,009,368
----------- ----------- -----------
Net change in cash and short-term investments..... 160,523 132,602 3,526
Cash and short-term investments, beginning of
year............................................. 309,432 176,830 173,304
----------- ----------- -----------
Cash and short-term investments, end of year...... $ 469,955 $ 309,432 $ 176,830
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of
these statutory basis financial statements.
<PAGE>
F-6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(STATUTORY BASIS)
DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
Hartford Life and Annuity Insurance Company ("ILA" or "the Company"),
formerly known as ITT Hartford Life and Annuity Insurance Company, is a wholly
owned subsidiary of Hartford Life Insurance Company ("HLIC"), which is an
indirect subsidiary of Hartford Life, Inc. ("HLI"), which is majority owned by
The Hartford Financial Services Group, Inc. ("The Hartford"), formerly a wholly
owned subsidiary of ITT Corporation ("ITT"). On February 10, 1997, HLI filed a
registration statement, as amended, with the Securities and Exchange Commission
relating to the initial public offering of HLI Class A Common Stock (the
"Offering"). Pursuant to the Offering on May 22, 1997, HLI sold to the public 26
million shares, representing 18.6% of the equity ownership of HLI. 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"), the State of
Connecticut Department of Insurance and the State of Wisconsin for the 1996
period, as applicable. Certain prior year amounts and balances have been
reclassified to conform with current year presentation.
Current prescribed statutory accounting practices include accounting
publications of the National Association of Insurance Commissioners ("NAIC"), as
well as state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass accounting practices approved by State
Insurance Departments. The Company does not follow any permitted statutory
accounting practices that have a material effect on statutory surplus, statutory
net income or risk-based capital.
Final approval of the NAIC's proposed "Comprehensive Guide" on statutory
accounting principles was distributed in 1998. The requirements are effective
January 1, 2001, and are not expected to have a material impact on statutory
surplus of the Company.
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. The most significant estimates
include those used in determining the liability for aggregate reserves for
future benefits and the liability for premium and other deposit funds. Although
some variability is inherent in these estimates, management believes the amounts
provided are adequate.
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 for GAAP purposes;
(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, for universal life policies and
investment products, generally, 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;
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY F-7
- --------------------------------------------------------------------------------
(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.,
negative Interest Maintenance Reserve, 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 currently, or using a twenty year phase-in approach, whereas GAAP
liabilities are recorded upon adoption of the applicable standard;
(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 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;
as well as, the accounting for retroactive reinsurance which is immediately
charged to surplus for statutory accounting purposes whereas GAAP precludes
immediate gain recognition unless the ceding enterprise's liability to its
policyholders is extinguished; as well as reinsurance ceded that fails to
meet GAAP risk transfer guidelines would result in deposit accounting for
GAAP where as for statutory, reserves ceded and assumed would be reflected
in the statutory basis statements of operations;
(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 bonds were classified on a GAAP basis
as "available-for-sale" and accordingly, those investments and common stocks
were reflected at fair value with the corresponding impact included as a
component of Stockholder's Equity designated as "Net unrealized capital
gains (losses) on securities net of tax". For statutory reporting purposes,
Change in Net Unrealized Capital Gains (Losses) on Common Stocks and Other
Invested Assets includes the change in unrealized gains (losses) 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, the significant differences
between Statutory and GAAP basis net income and capital and surplus for the
Company are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
GAAP Net Income.................... $ 74,525 $ 58,050 $ 41,202
Amortization and deferral of policy
acquisition costs, net............ (331,882) (345,657) (341,571)
Change in unearned revenue
reserve........................... 22,131 4,641 55,504
Deferred taxes..................... 2,476 47,092 2,090
Separate accounts.................. 259,287 282,818 306,978
Asset impairments and
write-downs....................... 17,250 -- --
Benefit reserve adjustment......... 32,759 24,666 (1,013)
Deposit accounting for Lyndon
reinsurance (Note 3).............. 24,627 -- --
Other, net......................... 1,453 2,432 4,805
------------ ------------ ------------
Statutory Net Income............... $ 102,626 $ 74,042 $ 67,995
------------ ------------ ------------
------------ ------------ ------------
GAAP Capital and Surplus........... $ 648,097 $ 570,469 $ 503,887
Deferred policy acquisition
costs............................. (1,615,653) (1,283,771) (938,114)
Unearned revenue reserve........... 156,920 134,789 130,148
Deferred taxes..................... 68,936 64,522 12,823
Separate accounts.................. 1,183,642 924,355 640,101
Asset impairments and
write-downs....................... 17,250 -- --
Unrealized gains on bonds.......... (26,119) (21,451) (7,978)
Benefit reserve adjustment......... 65,029 16,378 7,035
Asset valuation reserve............ (21,782) (13,670) (7,442)
Adjustment relating to Lyndon
contribution (Note 3)............. -- (23,671) (36,126)
Other, net......................... 192 3,850 (1,221)
------------ ------------ ------------
Statutory Capital and Surplus...... $ 476,512 $ 371,800 $ 303,113
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
As more fully described in Note 3, Lyndon Insurance Company (Lyndon) was
contributed to the Company on June 30, 1995. The GAAP net assets contributed
exceeded the statutory basis net assets by $41,277 as of December 31, 1995,
relating primarily to statutory reserves for future
<PAGE>
F-8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
benefits, GAAP deposit accounting receivables and deferred tax liabilities. In
1998, the majority of the former Lyndon's assumed business was recaptured by the
unaffiliated direct writer.
AGGREGATE RESERVES FOR FUTURE BENEFITS AND LIABILITY 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 6%. 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 operations.
INVESTMENTS
Investments in bonds are carried at amortized cost. Bonds that 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.
Short-term investments consist of money market funds and are stated at cost,
which approximates fair value. Common stocks are carried at fair value with the
current year change in the difference from cost reflected in surplus. Other
invested assets are generally recorded at fair value.
The Company uses a variety of derivative financial instruments as part of an
overall risk management strategy. These instruments, including interest rate and
foreign currency swaps, caps, and floors are used as a means of hedging exposure
to price, foreign currency and/or interest rate risk on planned investment
purchases or existing assets and liabilities. The Company does not hold or issue
derivative financial instruments for trading purposes. Derivatives must be
designated at inception as a hedge measured for effectiveness both at inception
and on an ongoing basis. The Company's correlation threshold for hedge
designation is 80% to 120%. If correlation, which is assessed monthly and
measured based on a rolling three month average, falls outside the 80% to 120%
range, hedge accounting will be terminated.
Interest rate swaps involve the periodic exchange of payments without the
exchange of underlying principal or notional amounts. Net receipts or payments
are accrued and recognized over the life of the swap agreement as an adjustment
to net investment income. Should the swap be terminated the gains or losses are
adjusted into the basis of the asset or liability and amortized over the
remaining life. Should the hedged asset be sold or liability terminated without
terminating the swap position, any swap gains or losses are immediately
recognized in net investment income. Interest rate swaps purchased in
anticipation of an asset purchase ("anticipatory transaction") are recognized
consistent with the underlying asset components such that the settlement
component is recognized in the statutory basis statements of operations while
the change in market value is recognized as an unrealized gain or loss. Foreign
currency swaps are similar to interest rate swaps except there is an initial
exchange of principal in two currencies and an agreement to re-exchange the
currencies at a future date, at an agreed upon exchange rate.
Premiums paid on purchased floor or cap agreements and the premium received
on issued cap or floor agreements (used for risk management) are adjusted into
the basis of the applicable asset and amortized over the asset life. Gains or
losses on termination of such positions are adjusted into the basis of the asset
or liability and amortized over the remaining asset life. Net payments are
recognized as an adjustment to income or basis adjusted and amortized depending
on the specific hedge strategy.
Derivatives used to create a synthetic asset must meet synthetic accounting
criteria, including designation at inception and consistency of terms between
the synthetic and the instrument being replicated. Consistent with industry
practice, synthetic instruments are accounted for like the financial instrument
they are intended to replicate. Derivatives which fail to meet risk management
criteria subsequent to acquisition, are accounted for at fair market value with
the impact reflected in the statutory basis statements of operations.
Open forward commitment contracts are marked to market through surplus. Such
contracts are accounted for at settlement by recording the purchase of specified
securities at the previously committed price. Gains or losses resulting from
termination of the forward commitment contracts before the delivery of the
securities are recognized immediately in the statutory basis statements of
operations as a component of Net Realized Capital Gains, after tax.
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 increased $8,112 and $6,228
in 1998 and 1997, respectively and decreased $(568) in 1996. Additionally, the
Interest Maintenance Reserve ("IMR") captures net realized capital gains and
losses, net
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY F-9
- --------------------------------------------------------------------------------
of applicable income taxes, resulting from changes in interest rates and
amortizes these gains or losses into income over the life of the mortgage loan
or bond sold. The IMR balance as of December 31, 1998 and December 31, 1997 was
$452 and $(193), respectively and is reflected in Other Liabilities and as a
component of non-admitted assets in Unassigned Funds for each of the years then
ended. For the years ended December 31, 1998, 1997 and 1996, amortization of IMR
is included in Other Revenues and was $(207), $(85) and $(392), respectively.
Realized capital gains and losses, net of taxes not included in IMR are reported
in the statutory basis statements of operations. Realized investment gains and
losses are determined on a specific identification basis.
OTHER LIABILITIES
The amount reflected in other liabilities includes a receivable from the
separate accounts of $1,187 million and $923 million as of December 31, 1998 and
1997, respectively. The balances are classified in accordance with NAIC
prescribed practices.
MORTGAGE LOANS
Mortgage loans, which are carried at cost and approximate fair value,
include investments in assets backed by mortgage loan pools.
2. INVESTMENTS:
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ---------
<S> <C> <C> <C>
Interest income from bonds and
short-term investments.......... $ 123,370 $ 100,475 $ 89,940
Interest income from policy
loans........................... 3,133 1,958 1,846
Interest and dividends from other
investments..................... 4,482 1,005 7,864
---------- ---------- ---------
Gross investment income.......... 130,985 103,438 99,650
Less: investment expenses........ 1,003 1,153 1,209
---------- ---------- ---------
Net investment income............ $ 129,982 $ 102,285 $ 98,441
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
(B) COMPONENTS OF NET UNREALIZED CAPITAL GAINS (LOSSES) ON COMMON STOCKS
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Gross unrealized capital gains.. $ 2,204 $ 537 $ 713
Gross unrealized capital
losses......................... (1,871) (1,820) (4,160)
--------- --------- ---------
Net unrealized capital
(losses)/gains................. 333 (1,283) (3,447)
Balance, beginning of year...... (1,283) (3,447) 1,724
--------- --------- ---------
Change in net unrealized capital
gains (losses) on Common
stocks......................... $ 1,616 $ 2,164 $ (5,171)
--------- --------- ---------
--------- --------- ---------
</TABLE>
(C) COMPONENTS OF NET UNREALIZED CAPITAL GAINS (LOSSES) ON BONDS AND SHORT-TERM
INVESTMENTS
<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- ----------
<S> <C> <C> <C>
Gross unrealized capital
gains........................ $ 10,905 $ 23,357 $ 11,821
Gross unrealized capital
losses....................... (833) (1,906) (3,842)
---------- --------- ----------
Net unrealized capital
gains........................ 10,072 21,451 7,979
Balance, beginning of year.... 21,451 7,979 20,877
---------- --------- ----------
Change in net unrealized
capital gains on bonds and
short-term investments....... $ (11,379) $ 13,472 $ (12,898)
---------- --------- ----------
---------- --------- ----------
</TABLE>
(D) COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Bonds and short-term investments.... $ 1,314 $ (120) $ 2,756
Common stocks....................... 1,624 -- --
Real estate and other............... (1) 114 --
--------- --------- ---------
Realized capital (losses) gains..... 2,937 (6) 2,756
Capital gains (benefit) tax......... -- (831) 936
--------- --------- ---------
Net realized capital gains.......... 2,937 825 1,820
Amounts transferred to IMR.......... 852 (719) 1,413
--------- --------- ---------
Net realized capital gains.......... $ 2,085 $ 1,544 $ 407
--------- --------- ---------
--------- --------- ---------
</TABLE>
(E) OFF-BALANCE SHEET INVESTMENTS
The Company had no significant financial instruments with off-balance sheet
risk as of December 31, 1998.
(F) CONCENTRATION OF CREDIT RISK
The Company has invested in securities of a single issuer, Bankers Trust
Corporation, in an amount greater than 10% of the Company's statutory capital
and surplus. The statement value of this investment was $105,221 as of December
31, 1998. The NAIC ratings on these holdings were 1z and 2. Excluding this and
U.S. government and government agency investments, the Company had no other
significant concentrations of credit risk as of December 31, 1998.
<PAGE>
F-10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
(G) BONDS, SHORT-TERM INVESTMENTS AND COMMON STOCKS
<TABLE>
<CAPTION>
1998
------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. government and government agencies and authorities:
-- Guaranteed and sponsored.................................... $ 4,982 $ 35 $ (2) $ 5,015
-- Guaranteed and sponsored -- asset-backed.................... 75,615 -- -- 75,615
States, municipalities and political subdivisions................ 10,402 415 -- 10,817
International governments........................................ 7,466 568 -- 8,034
Public utilities................................................. 94,475 1,330 (39) 95,766
All other corporate.............................................. 607,679 8,473 (792) 615,360
All other corporate -- asset-backed.............................. 505,900 -- -- 505,900
Short-term investments........................................... 343,783 -- -- 343,783
Certificates of deposit.......................................... 130,216 84 -- 130,300
Parents, subsidiaries and affiliates............................. 117,057 -- -- 117,057
---------- ---------- ---------- ----------
Total bonds and short-term investments........................... $1,897,575 $10,905 $(833) $1,907,647
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Common stock -- unaffiliated................................. $ 4,933 $ 290 $ (50) $ 5,173
Common stock -- affiliated................................... 35,384 1,914 (1,821) 35,477
--------- ---------- ---------- ----------
Total common stocks.......................................... $40,317 $2,204 $(1,871) $40,650
--------- ---------- ---------- ----------
--------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
1997
------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. government and government agencies and authorities:
-- Guaranteed and sponsored.................................... $ 11,114 $ 55 $ (51) $ 11,118
-- Guaranteed and sponsored -- asset-backed.................... 55,506 1,056 (269) 56,293
States, municipalities and political subdivisions................ 26,404 329 -- 26,733
International governments........................................ 7,609 500 -- 8,109
Public utilities................................................. 73,024 754 (132) 73,646
All other corporate.............................................. 517,715 14,110 (704) 531,121
All other corporate -- asset-backed.............................. 630,069 5,005 (739) 634,335
Short-term investments........................................... 277,330 33 (8) 277,355
Certificates of deposit.......................................... 93,770 1,515 (3) 95,282
Parents, subsidiaries and affiliates............................. 86,100 -- -- 86,100
---------- ---------- ---------- ----------
Total bonds and short-term investments........................... $1,778,641 $23,357 $(1,906) $1,800,092
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Common stock -- unaffiliated................................. $30,307 $537 $ -- $30,844
Common stock -- affiliated................................... 35,384 -- (1,820) 33,564
--------- ----- ---------- ----------
Total common stocks.......................................... $65,691 $537 $(1,820) $64,408
--------- ----- ---------- ----------
--------- ----- ---------- ----------
</TABLE>
The amortized cost and estimated fair value of bonds and short-term
investments as of December 31, 1998 by estimated maturity year are shown below.
Asset-backed securities, including mortgage backed securities and
collaterialized mortgage obligations, are distributed to maturity year based on
ILA's estimates of the rate of future prepayments of principal over the
remaining lives of the securities. Expected maturities differ from contractual
maturities due to call or repayment provisions.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
MATURITY COST FAIR VALUE
- ----------------------------------- ------------ ------------
<S> <C> <C>
One year or less................... $ 788,845 $ 792,826
Over one year through five years... 689,025 692,811
Over five years through ten
years............................. 308,661 310,357
Over ten years..................... 111,044 111,653
------------ ------------
Total.............................. $ 1,897,575 $ 1,907,647
------------ ------------
------------ ------------
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY F-11
- --------------------------------------------------------------------------------
Proceeds from sales and maturities of investments in bonds and short-term
investments during 1998, 1997 and 1996 were $1,354,563, $1,435,820 and
$1,139,073, respectively, resulting in gross realized gains of $1,705, $964 and
$3,675, respectively, and gross realized losses of $391, $1,084 and $919,
respectively, before transfers to IMR.
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS BALANCE SHEET ITEMS (IN MILLIONS):
<TABLE>
<CAPTION>
1998 1997
-------------------------- --------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Bonds and short-term
investments..................... $ 1,898 $ 1,908 $ 1,779 $ 1,800
Common stocks.................... 41 41 64 64
Policy loans..................... 47 47 37 37
Mortgage loans................... 60 60 85 85
Other invested assets............ 2 2 21 21
LIABILITIES
Liabilities on investment
contracts....................... $ 2,053 $ 2,129 $ 1,911 $ 1,835
</TABLE>
The estimated fair value of bonds and short-term investments was determined
by the Company primarily using NAIC market values. The carrying amounts for
policy loans approximates fair value. The fair value of mortgage loans was
determined by discounting future expected cash flows using interest rates
currently being offered for similar loans. The fair value of liabilities on
investment contracts is determined by forecasting future cash flows and
discounting the forecasted cash flows at current market interest rates.
3. AGGREGATE RESERVES FOR FUTURE BENEFITS
The Company's existing reserves consist of life, health, annuity and
supplementary contracts. The Company cedes and assumes insurance to and from
non-affiliated insurers in order to limit its maximum loss. Such transfers do
not relieve the Company or the unaffiliated reinsured of their primary
liabilities. The Company cedes to RGA Reinsurance Company and its affiliate
Employers Reassurance Corporation, on a modified coinsurance basis, 80% of the
variable annuity business written since 1994 and 100% of the variable life and
variable universal life excess sales load refund obligation effective 1998.
There were no material reinsurance recoverables from reinsurers outstanding as
of, and for the years ended, December 31, 1998 and 1997.
A summary of reinsurance information as of and for the years ended December
31, follows:
<TABLE>
<CAPTION>
1998 DIRECT ASSUMED CEDED NET
- ----------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Premium and Annuity
Considerations.................... $ 483,328 $ 24,954 $ (38,939) $ 469,343
Death, Annuity, Disability and
Other Benefits.................... $ 64,331 $ 1,574 $ (16,401) $ 49,504
Surrenders......................... $ 739,663 $ -- $ -- $ 739,663
Aggregate Reserves for Future
Benefits.......................... $ 713,425 $ -- $ (134,285) $ 579,140
Policy and Contract Claims......... $ 5,895 $ 85 $ (313) $ 5,667
<CAPTION>
1997 DIRECT ASSUMED CEDED NET
- ----------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Premium and Annuity
Considerations.................... $ 266,427 $ 51,630 $ (21,412) $ 296,645
Death, Annuity, Disability and
Other Benefits.................... $ 79,779 $ 839 $ (7,126) $ 73,492
Surrenders......................... $ 454,417 $ -- $ -- $ 454,417
Aggregate Reserves for Future
Benefits.......................... $ 651,820 $ -- $ (46,637) $ 605,183
Policy and Contract Claims......... $ 5,861 $ 157 $ (346) $ 5,672
<CAPTION>
1996 DIRECT ASSUMED CEDED NET
- ----------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Premium and Annuity
Considerations.................... $ 226,612 $ 33,817 $ (10,185) $ 250,244
Death, Annuity, Disability and
Other Benefits.................... $ 34,950 $ 35,138 $ (3,339) $ 66,749
Surrenders......................... $ 270,165 $ -- $ -- $ 270,165
</TABLE>
In connection with the distribution described in Note 1, on June 30, 1995,
the assets of Lyndon were contributed to the Company. The statutory basis assets
in excess of statutory basis liabilities was approximately $112 million and was
reflected as an increase in Gross Paid-In and Contributed Surplus at December
31, 1995. In 1998, the majority of former Lyndon's assumed business was
recaptured by the unaffiliated direct writer. A ceding commission of $25,622 and
change in reserve of $26,404 for the year ended December 31, 1998, is reflected
in Other Revenue and Increase/(Decrease) in Aggregate Reserves for Future
Benefits in the statutory basis statements of operations, respectively.
<PAGE>
F-12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Analysis of Annuity Actuarial Reserves and Deposit Liabilities by Withdrawal
Characteristics as of December 31, 1998 (including general and separate account
liabilities) are as follows:
<TABLE>
<CAPTION>
% OF
SUBJECT TO DISCRETIONARY WITHDRAWAL: AMOUNT TOTAL
- --------------------------------------- ------------- ---------
<S> <C> <C>
With market value adjustment........... $ 4,563 0.0%
At book value less current surrender
charge of 5% or more.................. 1,378,056 4.1%
At market value........................ 31,087,511 93.8%
------------- ---------
Total with adjustment or at market
value................................. 32,470,130 97.9%
At book value without adjustment
(minimal or no charge or
adjustment)........................... 665,159 2.0%
Not subject to discretionary
withdrawal............................ 19,739 0.1%
------------- ---------
Reinsurance ceded...................... 33,155,028
Total, net......................... $ 33,155,028
-------------
-------------
</TABLE>
4. RELATED PARTY TRANSACTIONS:
Transactions between the Company and its affiliates within The Hartford
relate principally to tax settlements, reinsurance, rental and service fees,
capital contributions and payments of dividends. The Company has also invested
in bonds of its affiliates, Hartford Financial Services Corporation and HL
Investment Advisors, Inc., and common stock of its subsidiary, ITT Hartford
Life, LTD.
5. 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 filing separate Federal, state and local
income tax returns.
As long as The Hartford continues to own at least 80% of the combined voting
power and 80% of the value of the outstanding capital stock of HLI, 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 intention of The Hartford and
its non-life subsidiaries to file a single consolidated Federal income tax
return. The life insurance companies will file a separate consolidated Federal
income tax return. Federal income taxes (received) paid by the Company for
operations and capital gains were $25,780, $(14,499) and $29,793 in 1998, 1997
and 1996, respectively. The effective tax rate was 26%, (26)% and 22% in 1998,
1997 and 1996, respectively.
The Company is currently under audit by the Internal Revenue Service (IRS)
for the three year tax period ending 1995. The audit is not yet complete. As of
December 31, 1998, the Company does not currently expect any material
adjustments to arise from this audit.
The following schedule provides a reconciliation of the tax provision at the
U.S. Federal Statutory rate to Federal income tax (benefit) expense (in
millions):
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Tax provision at U.S. Federal statutory
rate..................................... $ 48 $ 20 $ 30
Tax deferred acquisition costs............ 25 25 27
Statutory to tax reserve differences...... 8 1 --
Unrealized gain on separate accounts...... (41) (44) (21)
Investments and other..................... (4) (17) (17)
--------- --------- ---------
Federal income tax (benefit) expense...... $ 36 $ (15) $ 19
--------- --------- ---------
--------- --------- ---------
</TABLE>
6.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 generally
restricted to the greater of 10% of surplus as of the preceding December 31st or
the net gain from operations for the previous year. Dividends are paid as
determined by the Board of Directors and are not cumulative. No dividends were
paid in 1998, 1997 and 1996. The amount available for dividend in 1999 is
$100,541.
7. PENSION PLANS AND OTHER POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS:
HLI'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. HLI's funding policy is to contribute annually an amount between the
minimum funding requirements set forth in the Employee Retirement Income
Security Act of 1974, as amended, and the maximum amount that can be deducted
for U.S. Federal income tax purposes. Generally, pension costs are funded
through the purchase of affiliated group pension contracts. The cost to HLI was
approximately $9,000 in 1998 and $7,000 in both 1997 and 1996.
HLI also provides, through The Hartford, certain health care and life
insurance benefits for eligible retired employees. A substantial portion of
HLI's employees may become eligible for these benefits upon retirement. HLI's
contribution for health care benefits will depend on the retiree's date of
retirement and years of service. In addition, the plan has a defined dollar cap
which limits average company contributions. HLI has prefunded a portion of the
health care and life insurance obligations through trust funds where such
prefunding can be accomplished on a tax effective basis. Postretirement health
care and life insurance
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY F-13
- --------------------------------------------------------------------------------
benefits expense, allocated by The Hartford, was immaterial to the results of
operations for 1998, 1997 and 1996.
The assumed rate in the per capita cost of health care (the health care
trend rate) was 7.8% for 1998, decreasing ratably to 5.0% in the year 2003.
Increasing the health care trend rates by one percent per year would have an
immaterial impact on the accumulated postretirement benefit obligation and the
annual expense. To the extent that the actual experience differs from the
inherent assumptions, the effect will be amortized over the average future
service of covered employees.
8. SEPARATE ACCOUNTS:
The Company maintains separate account assets and liabilities totaling $32.9
billion and $23.2 billion as of December 31, 1998 and 1997, 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
$360 million, $252 million and $144 million in 1998, 1997 and 1996,
respectively, and are recorded as a component of other revenues on the statutory
basis statements of operations.
9. COMMITMENTS AND CONTINGENCIES:
As of December 31, 1998, 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 pending and threatened litigation in
the normal course of its business in which claims for monetary and punitive
damages have been asserted. Although there can be no assurances, at the present
time the Company does not anticipate that the ultimate liability arising from
such pending or threatened litigation, after consideration of provisions made
for potential losses and costs of defense, will have a material adverse effect
on the statutory capital and surplus of the Company.
As discussed in Note 5, issues may potentially be raised by the IRS in
future audits of open years. Management does not believe that possible audit
adjustments will have a material effect on the statutory capital and surplus of
the Company.
Under insurance guaranty fund laws in each state, insurers licensed to do
business 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 $1,043, $1,544 and $1,262 in 1998, 1997 and
1996, respectively. ILA incurred guaranteed fund expense of $548 in 1998, 1997
and 1996.
