As filed with the Securities and Exchange Registration No. 33-75248
Commission on July 29, 1997 Registration No. 811-4536
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- --------------------------------------------------------------------------------
FORM S-6
POST-EFFECTIVE AMENDMENT NO. 5 TO
REGISTRATION STATEMENT
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
- --------------------------------------------------------------------------------
Variable Life Account B of Aetna Life Insurance and Annuity Company
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RE4A, Hartford, Connecticut 06l56
Depositor's Telephone Number, including Area Code: (860) 273-4686
- --------------------------------------------------------------------------------
Julie E. Rockmore, Counsel
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RE4A, Hartford, Connecticut 06l56
(Name and Complete Address of Agent for Service)
- --------------------------------------------------------------------------------
It is proposed that this filing will become effective:
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ X ] on August 21, 1997 or as soon as practicable thereafter
pursuant to paragraph (a)(3) of Rule 485 (Request for
acceleration has been included with this filing)
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
registered an indefinite number of securities under the Securities Act of 1933.
Registrant filed a Rule 24f-2 Notice for the fiscal year ended December 31, 1996
on February 28, 1997.
<PAGE>
VARIABLE LIFE ACCOUNT B
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
Post-Effective Amendment No. 5 to
Registration Statement on Form S-6
Cross Reference Sheet
<TABLE>
<CAPTION>
Form N-8B-2
Item No. Part I (Prospectus Dated May 1, 1997, and as Amended by Supplement dated August 21, 1997)
<S> <C>
1 Cover Page, and as amended; The Separate Account; The Company
2 Cover Page, and as amended; The Separate Account; The Company
3 Not Applicable
4 Cover Page, and as amended; The Company; Additional Information - Distribution of the Policies
5 The Separate Account; The Company
6 The Separate Account; The Company
7 Not Applicable
8 Financial Statements, and as amended
9 Additional Information - Legal Matters
10 The Separate Account; Charges & Fees, and as amended; Policy Choices; Policy Values; Policy Rights;
Additional Information; Miscellaneous Policy Provisions
11 Allocation of Premiums, and as amended; Policy Choices
12 Cover Page, and as amended; Allocation of Premiums, and as amended
13 Charges & Fees, and as amended; Policy Choices; Term Insurance Rider; Additional Information - Distribution of
Policies
14 Policy Values; Miscellaneous Policy Provisions
15 Policy Summary; Allocation of Premiums, and as amended; Policy Choices; Policy Values
16 Policy Summary; Allocation of Premiums, and as amended; Policy Values
17 Policy Rights
18 Allocation of Premiums, and as amended; Policy Choices; Policy Rights
19 Additional Information
20 Not Applicable
21 Policy Rights - Policy Loans: Preferred and Nonpreferred
22 Not Applicable
23 Directors and Officers, and as amended
24 Miscellaneous Policy Provisions
25 The Company
26 Charges and Fees, and as amended
27 The Company
<PAGE>
<CAPTION>
Form N-8B-2
Item No. Part I (Prospectus Dated May 1, 1997, and as Amended by Supplement dated August 21, 1997))
<S> <C>
28 Directors and Officers, and as amended
29 The Company
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 The Company; Additional Information
36 Not Applicable
37 Not Applicable
38 Additional Information
39 See Item 25
40 See Item 26
41 See Item 27
42 See Item 28
43 Financial Statements, and as amended
44 Policy Values - Accumulation Unit Value; Financial Statements, and as amended
45 Not Applicable
46 The Separate Accounts; Policy Values
47 The Separate Accounts; Allocation of Premiums, and as amended; Policy Choices; Policy Values
48 Not Applicable
49 Not Applicable
50 Not Applicable
51 Cover Page, and as amended; Policy Choices; Policy Values
52 The Separate Account; Allocation of Premiums, and as amended
53 Tax Matters
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Financial Statements, and as amended
</TABLE>
<PAGE>
PART I
The Prospectus is incorporated into Part I of this Post-Effective Amendment No.
5 by reference to Post-Effective Amendment No. 4 to Registration Statement on
Form S-6 (File No. 33-75248), as filed electronically on April 22, 1997.
A Supplement to the Prospectus is included herein.
<PAGE>
Supplement to Prospectus Dated May 1, 1997
Corporate Variable Universal Life
Aetna Life Insurance and Annuity Company
Variable Life Account B
The prospectus dated May 1, 1997 is amended as follows:
Cover:
The following Funds will be replaced with the designated Substitute Funds
after the close of business of the New York Stock Exchange on November 26,
1997:
<TABLE>
<CAPTION>
Replaced Fund Substitute Fund
<S> <C>
Scudder Variable Life Investment Fund-- Portfolio Partners Scudder International
International Portfolio Class A Shares Growth Portfolio
American Century VP Capital Appreciation Portfolio Partners MFS Research Growth Portfolio
(Formerly TCI Growth)
Alger American Small Capitalization Portfolio Portfolio Partners MFS Emerging Equities Portfolio
Janus Aspen Short-Term Bond Portfolio Aetna Variable Encore Fund (money market)
</TABLE>
SUBJECT TO COMPLETION OR AMENDMENT
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
The Date of this Supplement is August 21, 1997
Form No. X75248-97
1
<PAGE>
Prospectus - Page 3
In the Section Allocation of Premiums, the Substitute Funds will take the
place of the Replaced Funds after the close of business of the New York Stock
Exchange on November 26, 1997. Any amounts allocated to the Replaced Funds will
automatically be allocated to the Substitute Funds after that date. The
following will be added:
Portfolio Partners Scudder International Growth Portfolio seeks long term
growth of capital primarily through a diversified portfolio of marketable
foreign equity securities.
Portfolio Partners MFS Emerging Equities Portfolio seeks long term growth
of capital by investing primarily in common stocks issued by companies that its
subadviser believes are early in their life cycle but which have the potential
to become major enterprises (emerging growth companies).
Portfolio Partners MFS Research Growth Portfolio seeks long term growth of
capital and future income by investing primarily in common stocks or securities
convertible into common stocks issued by companies that the subadviser believes
to possess better-than-average prospects for long-term growth, and, to a lesser
extent, in income-producing securities including bonds and preferred stock.
Aetna Life Insurance and Annuity Company serves as the investment adviser
to each Portfolio. Scudder, Stevens & Clark, Inc. serves as the subadviser to
the Scudder International Growth Portfolio, and Massachusetts Financial Services
Company serves as the subadviser to the MFS Emerging Equities and MFS Research
Growth Portfolios.
Prospectus - Page 10
The table under Charges & Fees--Charges Assessed Against the Underlying
Funds is amended by deleting the Replaced Funds and adding the following
Substitute Funds:
<TABLE>
<CAPTION>
Investment
Advisory Fees Other Expenses
(after expense (after expense Total Annual
reimbursement) reimbursement) Fund Expenses
<S> <C> <C> <C>
Portfolio Partners Scudder International Growth Portfolio ...... .80% .20% 1.00%(1)
Portfolio Partners MFS Emerging Equities Portfolio ............ .70%(2) .13% .83%(1)
Portfolio Partners MFS Research Growth Portfolio ............... .70%(2) .15% .85%(1)
</TABLE>
(1) The Company has agreed to reimburse the Fund for expenses and/or waive its
fees so that the aggregate expenses will not exceed this amount through April
30, 1999. Without such reimbursements or waivers, Total Annual Fund Expenses are
estimated to be as follows: 1.00% for the Scudder International Growth
Portfolio; .87% for the MFS Emerging Equities Portfolio; and .92% for the MFS
Research Growth Portfolio.
(2) The advisory fee is .70% of the first $500 million in assets and .65% on the
excess.
Prospectus - Page 30--Directors and Officers of the Company
The list of directors and officers under Directors and Officers of the
Company is amended by deleting Laura R. Estes, Creed R. Terry and Gail P.
Johnson from the list.
Prospectus - Page 42--Illustrations of Death Benefit, Total Account Values and
Surrender Values.
The tables have been revised as follows to reflect the applicable fund
expenses of the Substitute Funds instead of the Replaced Funds.
Illustrations of Death Benefit, Total Account Values and Surrender Values
The following tables illustrate how the Death Benefit, Total Account Values and
Surrender Values of a Policy change with the investment experience of the Fund.
The tables show how the Death Benefit, Total Account Values, and Surrender
Values of a Policy issued to an insured of a given age and a
2
<PAGE>
given premium would vary over time if the investment return on the assets held
in each Fund were a uniform, gross, after tax annual rate of 0%, 6%, and 12%,
respectively.
Tables I, II, V and VI illustrate Policies issued on a unisex basis, age 45, in
the preferred nonsmoker rate class. Tables III, IV, VII and VIII illustrate
Policies issued on a unisex basis, age 45 in the nonsmoker rate class. Tables I
through IV show values under the Guideline Premium Test for the definition of
life insurance, and Tables V through VIII show values under the Cash Value
Accumulation Test for the definition of life insurance. The Death Benefit,
Total Account Values, and Surrender Values would be different from those shown
if the gross annual investment rates of return averaged 0%, 6%, and 12%,
respectively, over a period of years, but fluctuated above and below those
averages for individual Policy Years.
The second column of each table shows the accumulated values of the premiums
paid at an assumed interest rate of 5%. The third through fifth columns
illustrate the Death Benefit of a Policy over the designated period. The sixth
through eighth columns illustrate the Total Account Values, while the ninth
through the eleventh columns illustrate the Surrender Values of each Policy
over the designated period. Tables I, III, V and VII assume that the maximum
Cost of Insurance allowable under the Policy is charged in all Policy Years.
These tables also assume that the maximum allowable mortality and expense risk
charge of 0.90% on an annual basis, the maximum allowable administrative
expense charge of 0.50% on an annual basis, and the maximum allowable premium
load of 10% up to the first year's Guaranteed Death Benefit Premium to age 80
and 5% over the Guaranteed Death Benefit Premium to age 80, are assessed in the
first Policy Year and 5% on all premiums in all Policy Years thereafter. Tables
II, IV, VI and VIII assume that the current scale of Cost of Insurance Rates
applies during all Policy Years. These tables also assume the current mortality
and expense risk charge of 0.70% on an annual basis for the first 10 Policy
Years and 0.20% for Policy Years 11 and thereafter, the current administrative
expense charge of 0.30% on an annual basis, and the current premium load of 7%
up to the first year's Guaranteed Death Benefit Premium to age 80 and 2% over
the Guaranteed Death Benefit Premium to age 80 are assessed in the first Policy
Year and 2% on all premium in all Policy Years thereafter.
The amounts shown for Death Benefit, Surrender Values, and Total Account Values
reflect the fact that the net investment return is lower than the gross, after
tax return on the assets held in each Fund as a result of expenses paid by each
Fund and Separate Account charges levied.
The values shown take into account the daily investment advisory fee and other
Fund expenses paid by each Fund. (See the individual prospectuses for each Fund
for more information.)
In addition, a charge for mortality and expense risks of 0.70% for Policy Years
1-10 and 0.20% beginning in Policy Year 11 and thereafter (0.90% maximum) and
administrative expenses of 0.30% (0.50% maximum) has also been reflected in the
values shown. After deduction of these amounts, the illustrated net annual
return is -2.06%, 3.94% and 9.94% on the maximum charge basis and -1.66%, 4.34%
and 10.34% on a current charge basis for Policy Years 1-10. The illustrated net
annual return is -1.16%, 4.84% and 10.84% on a current charge basis for Policy
Years 11 and thereafter.
A weighted average has been used for the illustrations assuming that the Policy
Owner has invested in the Funds as follows: 4% in Aetna Variable Fund; 8% in
Aetna Income Shares; 10% in Aetna Variable Encore Fund; 7% in Aetna Investment
Advisers Fund, Inc.; 20% in Fidelity's Variable Insurance Products
Fund--Equity-Income Portfolio; 8% in Fidelity's Variable Insurance Products
Fund--Growth Portfolio; 1% in Fidelity's Variable Insurance Products Fund--
Overseas Portfolio; 2% in Fidelity's Variable Insurance Products Funds II--
Asset Manager Portfolio; 9% in Fidelity's Variable
3
<PAGE>
Insurance Products Fund II--Contrafund Portfolio; 7% in the Janus Aspen
Aggressive Growth Portfolio; 3% in Janus Aspen Balanced Portfolio; 4% in Janus
Aspen Growth Portfolio; 5% in the Janus Aspen Worldwide Growth Portfolio; 7% in
Portfolio Partners MFS Emerging Equities Portfolio; 1% in Portfolio Partners
MFS Research Growth Portfolio, and 4% in Portfolio Partners Scudder
International Growth Portfolio.
The hypothetical values shown in the tables do not reflect any Separate Account
charges for federal income taxes, since we are not currently assessing such
charges. However, such charges may be made in the future, and in that event,
the gross annual investment rate of return would have to exceed 0%, 6%, or 12%
by an amount sufficient to cover the tax charges in order to produce the Death
Benefit, Total Account Values, and Surrender Values illustrated.
The tables illustrate the Policy Values that would result based upon the
hypothetical investment rates of return if premiums were paid as indicated, if
all Net Premiums were allocated to Variable Life Account B, and if no Policy
loans have been made. The tables are also based on the assumptions that the
Policyowner has not requested an increase or decrease in the Specified Amount
of the Policy, and no partial surrenders have been made.
Upon request, we will provide an illustration based upon the proposed Insured's
age, and underwriting classification, the Specified Amount or premium
requested, the proposed frequency of premium payments and any available riders
requested.
The hypothetical gross annual investment return assumed in such an illustration
will not exceed 12%.
4
<PAGE>
TABLE I
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
UNISEX ISSUE AGE 45
$5,244.00 ANNUAL GUARANTEED DEATH BENEFIT PREMIUM TO AGE 80
PREFERRED NONSMOKER RISK
FACE AMOUNT $500,000
SIMPLIFIED ISSUE
GUIDELINE PREMIUM TEST
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit Total Account Value Surrender Value
Accumulated Gross Annual Gross Annual Gross Annual
End of at Investment Returns of Investment Returns of Investment Returns of
Policy 5% Interest Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
Year Per Year Net -2.06% Net 3.94% Net 9.94% Net -2.06% Net 3.94% Net 9.94% Net -2.06% Net 3.94% Net 9.94%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,506 500,000 500,000 500,000 2,886 3,113 3,341 2,637 2,864 3,091
2 11,288 500,000 500,000 500,000 5,854 6,503 7,181 5,551 6,199 6,877
3 17,358 500,000 500,000 500,000 8,630 9,894 11,268 8,361 9,624 10,999
4 23,732 500,000 500,000 500,000 11,207 13,274 15,618 10,665 12,732 15,076
5 30,425 500,000 500,000 500,000 13,582 16,639 20,253 13,118 16,175 19,789
6 37,453 500,000 500,000 500,000 15,733 19,963 25,177 15,346 19,576 24,790
7 44,832 500,000 500,000 500,000 17,641 23,221 30,401 17,332 22,911 30,091
8 52,579 500,000 500,000 500,000 19,279 26,380 35,925 19,047 26,147 35,693
9 60,714 500,000 500,000 500,000 20,619 29,404 41,755 20,464 29,249 41,600
10 69,256 500,000 500,000 500,000 21,638 32,263 47,900 21,638 32,263 47,900
15 118,816 500,000 500,000 500,000 21,109 42,873 83,976 21,109 42,873 83,976
20 182,068 500,000 500,000 500,000 6,995 41,663 130,180 6,995 41,663 130,180
25 262,795 0 500,000 500,000 0 13,576 188,023 0 13,576 188,023
30 365,826 0 0 500,000 0 0 263,018 0 0 263,018
20 182,068 500,000 500,000 500,000 6,995 41,663 130,180 6,995 41,663 130,180
</TABLE>
If premiums are paid more frequently than annually, the Death Benefits,
Total Account Values, and Surrender Values would be less than those
illustrated. If a larger premium is paid, the Surrender Values as a percentage
of the Total Account Value will be greater than or equal to those illustrated.
If a smaller premium is paid, the Surrender Values as a percentage of the Total
Account value will be less than or equal to those illustrated.
Assumes no Policy loan has been made. Guaranteed cost of insurance rates
assumed. Maximum mortality and expense risk charges, administrative charges,
and premium load assumed.
These investment results are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the Policyowner's allocations and the Funds' rates
of return. The Total Account Value and Surrender Value for a Policy would be
different from those shown if the actual investment rates of return averaged
0%, 6%, and 12% over a period of years, but fluctuated above or below those
averages for individual Policy Years. No representations can be made that these
rates of return will definitely be achieved for any one year or sustained over
a period of time.
5
<PAGE>
TABLE II
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
UNISEX ISSUE AGE 45
$5,244.00 ANNUAL GUARANTEED DEATH BENEFIT PREMIUM TO AGE 80
PREFERRED NONSMOKER RISK
FACE AMOUNT $500,000
SIMPLIFIED ISSUE
GUIDELINE PREMIUM TEST
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit Total Account Value Surrender Value
Accumulated Gross Annual Gross Annual Gross Annual
End of at Investment Returns of Investment Returns of Investment Returns of
Policy 5% Interest Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
Year Per Year Net -1.66% Net 4.34% Net 10.34% Net -1.66% Net 4.34% Net 10.34% Net -1.66% Net 4.34% Net 10.34%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,506 500,000 500,000 500,000 3,477 3,727 3,977 3,070 3,320 3,570
2 11,288 500,000 500,000 500,000 7,084 7,818 8,583 6,623 7,357 8,122
3 17,358 500,000 500,000 500,000 10,557 12,011 13,590 10,130 11,584 13,163
4 23,732 500,000 500,000 500,000 13,895 16,310 19,038 13,354 15,768 18,496
5 30,425 500,000 500,000 500,000 17,098 20,716 24,973 16,633 20,252 24,509
6 37,453 500,000 500,000 500,000 20,165 25,235 31,448 19,778 24,848 31,061
7 44,832 500,000 500,000 500,000 23,106 29,878 38,527 22,797 29,568 38,217
8 52,579 500,000 500,000 500,000 25,901 34,629 46,255 25,669 34,397 46,023
9 60,714 500,000 500,000 500,000 28,575 39,522 54,730 28,420 39,367 54,575
10 69,256 500,000 500,000 500,000 31,093 44,523 63,996 31,093 44,523 63,996
15 118,816 500,000 500,000 500,000 41,762 72,411 127,851 41,762 72,411 127,851
20 182,068 500,000 500,000 500,000 46,745 103,064 232,421 46,745 103,064 232,421
25 262,795 500,000 500,000 500,000 44,659 136,747 410,565 44,659 136,747 410,565
30 365,826 500,000 500,000 765,453 28,712 169,887 715,377 28,712 169,887 715,377
20 182,068 500,000 500,000 500,000 46,745 103,064 232,421 46,745 103,064 232,421
</TABLE>
If premiums are paid more frequently than annually, the Death Benefits,
Total Account Values, and Surrender Values would be less than those illustrated.
If a larger premium is paid, the Surrender Values as a percentage of the Total
Account Value will be greater than or equal to those illustrated. If a smaller
premium is paid, the Surrender Values as a percentage of the Total Account Value
will be less than or equal to those illustrated.
Assumes no Policy loan has been made. Current cost of insurance rates
assumed. Current mortality and expense risk charges, administrative charges, and
premium load assumed. The current mortality and expense risk charge may be
reduced from .70% to .20% in Policy Years 11 and thereafter. Beginning in Policy
Years 11 and thereafter, the illustrated net annual return is -1.16%, 4.84% and
10.84%.
These investment results are illustrative only and should not be considered
a representation of past or future investment results. Actual investment results
may be more or less than those shown and will depend on a number of factors,
including the Policyowner's allocations and the Funds' rates of return. The
Total Account Value and Surrender Value for a Policy would be different from
those shown if the actual investment rates of return averaged 0%, 6%, and 12%
over a period of years, but fluctuated above or below those averages for
individual Policy Years. No representations can be made that these rates of
return will definitely be achieved for any one year or sustained over a period
of time.
6
<PAGE>
TABLE III
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
UNISEX ISSUE AGE 45
$6,444.00 ANNUAL GUARANTEED DEATH BENEFIT PREMIUM TO AGE 80
NONSMOKER RISK
FACE AMOUNT $500,000
GUARANTEED ISSUE
GUIDELINE PREMIUM TEST
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit Total Account Value Surrender Value
Accumulated Gross Annual Gross Annual Gross Annual
End of at Investment Returns of Investment Returns of Investment Returns of
Policy 5% Interest Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
Year Per Year Net -2.06% Net 3.94% Net 9.94% Net -2.06% Net 3.94% Net 9.94% Net -2.06% Net 3.94% Net 9.94%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 6,766 500,000 500,000 500,000 3,948 4,239 4,532 3,638 3,930 4,223
2 13,871 500,000 500,000 500,000 8,018 8,867 9,753 7,642 8,491 9,378
3 21,330 500,000 500,000 500,000 11,879 13,550 15,366 11,545 13,217 15,032
4 29,163 500,000 500,000 500,000 15,523 18,281 21,401 14,855 17,613 20,733
5 37,388 500,000 500,000 500,000 18,951 23,058 27,899 18,378 22,485 27,326
6 46,023 500,000 500,000 500,000 22,139 27,858 34,885 21,662 27,381 34,408
7 55,090 500,000 500,000 500,000 25,072 32,663 42,391 24,691 32,281 42,009
8 64,611 500,000 500,000 500,000 27,723 37,444 50,446 27,437 37,158 50,160
9 74,608 500,000 500,000 500,000 30,067 42,172 59,085 29,876 41,981 58,894
10 85,105 500,000 500,000 500,000 32,082 46,823 68,351 32,082 46,823 68,351
15 146,005 500,000 500,000 500,000 36,497 68,006 126,310 36,497 68,006 126,310
20 223,731 500,000 500,000 500,000 27,588 81,316 211,623 27,588 81,316 211,623
25 322,931 0 500,000 500,000 0 75,119 344,761 0 75,119 344,761
30 449,539 0 500,000 615,331 0 23,895 575,075 0 23,895 575,075
20 223,731 500,000 500,000 500,000 27,588 81,316 211,623 27,588 81,316 211,623
</TABLE>
If premiums are paid more frequently than annually, the Death Benefits,
Total Account Values, and Surrender Values would be less than those
illustrated. If a larger premium is paid, the Surrender Values as a percentage
of the Total Account Value will be greater than or equal to those illustrated.
If a smaller premium is paid, the Surrender Values as a percentage of the Total
Account Value will be less than or equal to those illustrated.
Assumes no Policy loan has been made. Guaranteed cost of insurance rates
assumed. Maximum mortality and expense risk charges, administrative charges,
and premium load assumed.
These investment results are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the Policyowner's allocations and the Funds' rates
of return. The Total Account Value and Surrender Value for a Policy would be
different from those shown if the actual investment rates of return averaged
0%, 6%, and 12% over a period of years, but fluctuated above or below those
averages for individual Policy Years. No representations can be made that these
rates of return will definitely be achieved for any one year or sustained over
a period of time.
7
<PAGE>
TABLE IV
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
UNISEX ISSUE AGE 45
$6,444.00 ANNUAL GUARANTEED DEATH BENEFIT PREMIUM TO AGE 80
NONSMOKER RISK
FACE ACCOUNT $500,000
GUARANTEED ISSUE
GUIDELINE PREMIUM TEST
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit Total Account Value Surrender Value
Accumulated Gross Annual Gross Annual Gross Annual
End of at Investment Returns of Investment Returns of Investment Returns of
Policy 5% Interest Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
Year Per Year Net -1.66% Net 4.34% Net 10.34% Net -1.66% Net 4.34% Net 10.34% Net -1.66% Net 4.34% Net 10.34%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 6,766 500,000 500,000 500,000 4,158 4,461 4,766 3,655 3,958 4,263
2 13,871 500,000 500,000 500,000 8,452 9,339 10,265 7,884 8,770 9,696
3 21,330 500,000 500,000 500,000 12,551 14,303 16,206 12,024 13,776 15,679
4 29,163 500,000 500,000 500,000 16,445 19,347 22,627 15,777 18,679 21,960
5 37,388 500,000 500,000 500,000 20,183 24,520 29,629 19,610 23,948 29,057
6 46,023 500,000 500,000 500,000 23,737 29,802 37,246 23,260 29,325 36,769
7 55,090 500,000 500,000 500,000 27,119 35,207 45,558 26,737 34,825 45,176
8 64,611 500,000 500,000 500,000 30,266 40,677 54,576 29,980 40,391 54,290
9 74,608 500,000 500,000 500,000 33,274 46,311 64,477 33,083 46,120 64,287
10 85,105 500,000 500,000 500,000 36,029 52,004 75,248 36,029 52,004 75,248
15 146,005 500,000 500,000 500,000 46,982 83,250 149,388 46,982 83,250 149,388
20 223,731 500,000 500,000 500,000 49,555 116,023 271,176 49,555 116,023 271,176
25 322,931 500,000 500,000 558,759 40,204 148,910 481,689 40,204 148,910 481,689
30 449,539 500,000 500,000 896,020 7,494 175,155 837,402 7,494 175,155 837,402
20 223,731 500,000 500,000 500,000 49,555 116,023 271,176 49,555 116,023 271,176
</TABLE>
If premiums are paid more frequently than annually, the Death Benefits,
Total Account Values, and Surrender Values would be less than those
illustrated. If a larger premium is paid, the Surrender Values as a percentage
of the Total Account Value will be less than or equal or those illustrated. If
a smaller premium is paid, the Surrender Values as a percentage of the Total
Account Value will be less than or equal to those illustrated.
Assumes no Policy loan has been made. Current cost of insurance rates
assumed. Current mortality and expense risk charges, administrative charges,
and premium load assumed. The current mortality and expense risk charge may be
reduced from .70% to .20% in Policy Years 11 and thereafter. Beginning in
Policy Years 11 and thereafter, the illustrated net annual return is -1.16%,
4.84% and 10.84%.
These investment results are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the Policyowner's allocations and the Fund's rates
of return. The Total Account Value and Surrender Value for a Policy would be
different from those shown if the actual investment rates of return averaged
0%, 6%, and 12% over a period of years, but fluctuated above or below those
averages for individual Policy Years. No representations can be made that these
rates of return will definitely be achieved for any one year or sustained over
a period of time.
8
<PAGE>
TABLE V
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
UNISEX ISSUE AGE 45
$5,244.00 ANNUAL GUARANTEED DEATH BENEFIT PREMIUM TO AGE 80
PREFERRED NONSMOKER RISK
FACE AMOUNT $500,000
SIMPLIFIED ISSUE
CASH VALUE ACCUMULATION TEST
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit Total Account Value Surrender Value
Accumulated Gross Annual Gross Annual Gross Annual
End of at Investment Returns of Investment Returns of Investment Returns of
Policy 5% Interest Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
Year Per Year Net -2.06% Net 3.94% Net 9.94% Net -2.06% Net 3.94% Net 9.94% Net -2.06% Net 3.94% Net 9.94%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,506 500,000 500,000 500,000 2,886 3,113 3,341 2,637 2,864 3,091
2 11,288 500,000 500,000 500,000 5,854 6,503 7,181 5,551 6,199 6,877
3 17,358 500,000 500,000 500,000 8,630 9,894 11,268 8,361 9,624 10,999
4 23,732 500,000 500,000 500,000 11,207 13,274 15,618 10,665 12,732 15,076
5 30,425 500,000 500,000 500,000 13,582 16,639 20,253 13,118 16,175 19,789
6 37,453 500,000 500,000 500,000 15,733 19,963 25,177 15,346 19,576 24,790
7 44,832 500,000 500,000 500,000 17,641 23,221 30,401 17,332 22,911 30,091
8 52,579 500,000 500,000 500,000 19,279 26,380 35,925 19,047 26,147 35,693
9 60,714 500,000 500,000 500,000 20,619 29,404 41,755 20,464 29,249 41,600
10 69,256 500,000 500,000 500,000 21,638 32,263 47,900 21,638 32,263 47,900
15 118,816 500,000 500,000 500,000 21,109 42,873 83,976 21,109 42,873 83,976
20 182,068 500,000 500,000 500,000 6,995 41,663 130,180 6,995 41,663 130,180
25 262,795 0 500,000 500,000 0 13,576 188,023 0 13,576 188,023
30 365,826 0 0 500,000 0 0 263,018 0 0 263,018
20 182,068 500,000 500,000 500,000 6,995 41,663 130,180 6,995 41,663 130,180
</TABLE>
If premiums are paid more frequently than annually, the Death Benefits,
Total Account Values, and Surrender Values would be less than those
illustrated. If a larger premium is paid, the Surrender Values as a percentage
of the Total Account Value will be greater than or equal to those illustrated.
If a smaller premium is paid, the Surrender Values as a percentage of the Total
Account Value will be less than or equal to those illustrated.
Assumes no Policy loan has been made. Guaranteed cost of insurance rates
assumed. Maximum mortality and expense risk charges, administrative charges,
and premium load assumed.
These investment results are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the Policyowner's allocations and the Funds' rates
of return. The Total Account Value and Surrender Value for a Policy would be
different from those shown if the actual investment rates of return averaged
0%, 6%, and 12% over a period of years, but fluctuated above or below those
averages for individual Policy Years. No representations can be made that these
rates of return will definitely be achieved for any one year or sustained over
a period of time.
9
<PAGE>
TABLE VI
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
UNISEX ISSUE AGE 45
$5,244.00 ANNUAL GUARANTEED DEATH BENEFIT PREMIUM TO AGE 80
PREFERRED NONSMOKER RISK
FACE AMOUNT $500,000
SIMPLIFIED ISSUE
CASH VALUE ACCUMULATION TEST
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit Total Account Value Surrender Value
Accumulated Gross Annual Gross Annual Gross Annual
End of at Investment Returns of Investment Returns of Investment Returns of
Policy 5% Interest Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
Year Per Year Net -1.66% Net 4.34% Net 10.34% Net -1.66% Net 4.34% Net 10.34% Net -1.66% Net 4.34% Net 10.34%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,506 500,000 500,000 500,000 3,477 3,727 3,977 3,070 3,320 3,570
2 11,288 500,000 500,000 500,000 7,084 7,818 8,583 6,623 7,357 8,122
3 17,358 500,000 500,000 500,000 10,557 12,011 13,590 10,130 11,584 13,163
4 23,732 500,000 500,000 500,000 13,895 16,310 19,038 13,354 15,768 18,496
5 30,425 500,000 500,000 500,000 17,098 20,716 24,973 16,633 20,252 24,509
6 37,453 500,000 500,000 500,000 20,165 25,235 31,448 19,778 24,848 31,061
7 44,832 500,000 500,000 500,000 23,106 29,878 38,527 22,797 29,568 38,217
8 52,579 500,000 500,000 500,000 25,901 34,629 46,255 25,669 34,397 46,023
9 60,714 500,000 500,000 500,000 28,575 39,522 54,730 28,420 39,367 54,575
10 69,256 500,000 500,000 500,000 31,093 44,523 63,996 31,093 44,523 63,996
15 118,816 500,000 500,000 500,000 41,762 72,411 127,851 41,762 72,411 127,851
20 182,068 500,000 500,000 500,000 46,745 103,064 232,421 46,745 103,064 232,421
25 262,795 500,000 500,000 652,403 44,659 136,747 407,752 44,659 136,747 407,752
30 365,826 500,000 500,000 991,412 28,712 169,887 688,480 28,712 169,887 688,480
20 182,068 500,000 500,000 500,000 46,745 103,064 232,421 46,745 103,064 232,421
</TABLE>
If premiums are paid more frequently than annually, the Death Benefits,
Total Account Values, and Surrender Values would be less than those
illustrated. If a larger premium is paid, the Surrender Values as a percentage
of the Total Account Value will be greater than or equal to those illustrated.
If a smaller premium is paid, the Surrender Values as a percentage of the Total
Account Value will be less than or equal to those illustrated.
Assumes no Policy loan has been made. Current cost of insurance rates
assumed. Current mortality and expense risk charges, administrative charges,
and premium load assumed. The current mortality and expense risk charge may be
reduced from .70% to .20% in Policy Years 11 and thereafter. Beginning in
Policy Years 11 and thereafter, the illustrated net annual return is -1.16%,
4.84% and 10.84%.
These investment results are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the Policyowner's allocations and the Funds' rates
of return. The Total Account Value and Surrender Value for a Policy would be
different from those shown if the actual investment rates of return averaged
0%, 6%, and 12% over a period of years, but fluctuated above or below those
averages for individual Policy Years. No representations can be made that these
rates of return will definitely be achieved for any one year or sustained over
a period of time.
10
<PAGE>
TABLE VII
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
UNISEX ISSUE AGE 45
$6,444.00 ANNUAL GUARANTEED DEATH BENEFIT PREMIUM TO AGE 80
NONSMOKER RISK
FACE AMOUNT $500,000
GUARANTEED ISSUE
CASH VALUE ACCUMULATION TEST
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit Total Account Value Surrender Value
Accumulated Gross Annual Gross Annual Gross Annual
End of at Investment Returns of Investment Returns of Investment Returns of
Policy 5% Interest Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
Year Per Year Net -2.06% Net 3.94% Net 9.94% Net -2.06% Net 3.94% Net 9.94% Net -2.06% Net 3.94% Net 9.94%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 6,766 500,000 500,000 500,000 3,948 4,239 4,532 3,638 3,930 4,223
2 13,871 500,000 500,000 500,000 8,018 8,867 9,753 7,642 8,491 9,378
3 21,330 500,000 500,000 500,000 11,879 13,550 15,366 11,545 13,217 15,032
4 29,163 500,000 500,000 500,000 15,523 18,281 21,401 14,855 17,613 20,733
5 37,388 500,000 500,000 500,000 18,951 23,058 27,899 18,378 22,485 27,326
6 46,023 500,000 500,000 500,000 22,139 27,858 34,885 21,662 27,381 34,408
7 55,090 500,000 500,000 500,000 25,072 32,663 42,391 24,691 32,281 42,009
8 64,611 500,000 500,000 500,000 27,723 37,444 50,446 27,437 37,158 50,160
9 74,608 500,000 500,000 500,000 30,067 42,172 59,085 29,876 41,981 58,894
10 85,105 500,000 500,000 500,000 32,082 46,823 68,351 32,082 46,823 68,351
15 146,005 500,000 500,000 500,000 36,497 68,006 126,310 36,497 68,006 126,310
20 223,731 500,000 500,000 500,000 27,588 81,316 211,623 27,588 81,316 211,623
25 322,931 0 500,000 550,159 0 75,119 343,849 0 75,119 343,849
30 449,539 0 500,000 773,010 0 23,895 536,812 0 23,895 536,812
20 223,731 500,000 500,000 500,000 27,588 81,316 211,623 27,588 81,316 211,623
</TABLE>
If premiums are paid more frequently than annually, the Death Benefits,
Total Account Values, and Surrender Values would be less than those
illustrated. If a larger premium is paid, the Surrender Values as a percentage
of the Total Account Value will be greater than or equal to those illustrated.
If a smaller premium is paid, the Surrender Values as a percentage of the Total
Account Value will be less than or equal to those illustrated.
Assumes no Policy loan has been made. Guaranteed cost of insurance rates
assumed. Maximum mortality and expense risk charges, administrative charges,
and premium load assumed.
These investment results are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the Policyowner's allocations and the Funds' rates
of return. The Total Account Value and Surrender Value for a Policy would be
different from those shown if the actual investment rates of return averaged
0%, 6%, and 12% over a period of years, but fluctuated above or below those
averages for individual Policy Years. No representations can be made that these
rates of return will definitely be achieved for any one year or sustained over
a period of time.
11
<PAGE>
TABLE VIII
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
UNISEX ISSUE AGE 45
$6,444.00 ANNUAL GUARANTEED DEATH BENEFIT PREMIUM TO AGE 80
NONSMOKER RISK
FACE AMOUNT $500,000
GUARANTEED ISSUE
CASH VALUE ACCUMULATION TEST
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit Total Account Value Surrender Value
Accumulated Gross Annual Gross Annual Gross Annual
End of at Investment Returns of Investment Returns of Investment Returns of
Policy 5% Interest Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
Year Per Year Net -1.66% Net 4.34% Net 10.34% Net -1.66% Net 4.34% Net 10.34% Net -1.66% Net 4.34% Net 10.34
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 6,766 500,000 500,000 500,000 4,158 4,461 4,766 3,655 3,958 4,263
2 13,871 500,000 500,000 500,000 8,452 9,339 10,265 7,884 8,770 9,696
3 21,330 500,000 500,000 500,000 12,551 14,303 16,206 12,024 13,776 15,679
4 29,163 500,000 500,000 500,000 16,445 19,347 22,627 15,777 18,679 21,960
5 37,388 500,000 500,000 500,000 20,183 24,520 29,629 19,610 23,948 29,057
6 46,023 500,000 500,000 500,000 23,737 29,802 37,246 23,260 29,325 36,769
7 55,090 500,000 500,000 500,000 27,119 35,207 45,558 26,737 34,825 45,176
8 64,611 500,000 500,000 500,000 30,266 40,677 54,576 29,980 40,391 54,290
9 74,608 500,000 500,000 500,000 33,274 46,311 64,477 33,083 46,120 64,287
10 85,105 500,000 500,000 500,000 36,029 52,004 75,248 36,029 52,004 75,248
15 146,005 500,000 500,000 500,000 46,982 83,250 149,388 46,982 83,250 149,388
20 223,731 500,000 500,000 500,000 49,555 116,023 271,176 49,555 116,023 271,176
25 322,931 500,000 500,000 752,805 40,204 148,910 470,503 40,204 148,910 470,503
30 449,539 500,000 500,000 1,121,921 7,494 175,155 779,112 7,494 175,155 779,112
20 223,731 500,000 500,000 500,000 49,555 116,023 271,176 49,555 116,023 271,176
</TABLE>
If premiums are paid more frequently than annually, the Death Benefits,
Total Account Values, and Surrender Values would be less than those
illustrated. If a larger premium is paid, the Surrender Values as a percentage
of the Total Account Value will be greater than or equal to those illustrated.
If a smaller premium is paid, the Surrender Values as a percentage of the Total
Account Value will be less than or equal to those illustrated.
Assumes no Policy loan has been made. Current cost of insurance rates
assumed. Current mortality and expense risk charges, administrative charges,
and premium load assumed. The current mortality and expense risk charge may be
reduced from .70% to .20% in Policy Years 11 and thereafter. Beginning in
Policy Years 11 and thereafter, the illustrated net annual return is -1.16%,
4.84% and 10.84%.
These investment results are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the Policyowner's allocations and the Funds' rates
of return. The Total Account Value and Surrender Value for a Policy would be
different from those shown if the actual investment rates of return averaged
0%, 6%, and 12% over a period of years, but fluctuated above or below those
averages for individual Policy Years. No representations can be made that these
rates of return will definitely be achieved for any one year or sustained over
a period of time.
12
<PAGE>
Financial Statements
Following are the unaudited financial statements as of March 31, 1997 for
Variable Life Account B and Aetna Life Insurance and Annuity Company.
VARIABLE LIFE ACCOUNT B
FINANCIAL STATEMENTS
Index
<TABLE>
<S> <C>
Statement of Assets and Liabilities as of March 31, 1997 (unaudited) ............... S-2
Statements of Operations and Changes in Net Assets for the three months
ended March 31, 1997 and March 31, 1996 (unaudited) .............................. S-4
Condensed Financial Information for the three months ended March 31, 1997 (unaudited) S-5
Notes to Financial Statements -- March 31, 1997 (unaudited) ......................... S-8
</TABLE>
S-1
<PAGE>
Variable Life Account B
Statement of Assets and Liabilities--March 31, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at net asset value: (Note 1)
Aetna Variable Fund; 2,960,415 shares (cost $89,278,680) ........................ $ 97,909,299
Aetna Income Shares; 1,045,713 shares (cost $13,363,458) ........................ 13,165,731
Aetna Variable Encore Fund; 1,227,381 shares (cost $15,807,543) .................. 15,746,491
Aetna Investment Advisers Fund, Inc.; 1,091,726 shares (cost $15,188,940) ......... 16,429,385
Aetna Ascent Variable Portfolio; 68,622 shares (cost $854,021) .................. 863,923
Aetna Crossroads Variable Portfolio; 16,359 shares (cost $197,046) ............... 196,092
Aetna Legacy Variable Portfolio; 4,996 shares (cost $56,579) ..................... 56,152
Alger American Small Capitalization Portfolio; 345,556 shares (cost $14,099,553) 12,460,754
American Century VP Capital Appreciation Fund; 652,426 shares (cost $6,893,822) ... 5,558,671
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio; 818,103 shares (cost $15,998,533) ..................... 15,683,029
Growth Portfolio; 187,282 shares (cost $5,537,815) .............................. 5,489,224
Overseas Portfolio; 32,503 shares (cost $569,345) .............................. 577,577
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio; 97,944 shares (cost $1,506,123) ........................ 1,461,329
Contrafund Portfolio; 527,095 shares (cost $8,030,087) ........................... 8,328,106
Janus Aspen Series:
Aggressive Growth Portfolio; 595,943 shares (cost $10,670,058) .................. 9,541,046
Balanced Portfolio; 287,055 shares (cost $4,047,436) ........................... 4,320,181
Growth Portfolio; 530,993 shares (cost $7,746,679) .............................. 8,278,181
Short-Term Bond Portfolio; 390,958 shares (cost $3,872,649) ..................... 3,944,763
Worldwide Growth Portfolio; 656,748 shares (cost $12,087,431) .................. 13,561,854
Scudder Variable Life Investment Fund--
International Portfolio; 847,331 shares (cost $10,042,514) ..................... 11,193,242
-------------
NET ASSETS (cost $235,848,312) ................................................... $244,765,030
=============
Net assets represented by:
Policyholders' account values: (Notes 1 and 5)
Aetna Variable Fund:
Policyholders' account values ................................................... $ 97,909,299
Aetna Income Shares:
Policyholders' account values ................................................... 13,165,731
Aetna Variable Encore Fund:
Policyholders' account values ................................................... 15,746,491
Aetna Investment Advisers Fund, Inc.:
Policyholders' account values ................................................... 16,429,385
Aetna Ascent Variable Portfolio:
Policyholders' account values ................................................... 863,923
Aetna Crossroads Variable Portfolio:
Policyholders' account values ................................................... 196,092
</TABLE>
S-2
<PAGE>
Variable Life Account B
Statement of Assets and Liabilities--March 31, 1997 (unaudited & continued):
Aetna Legacy Variable Portfolio:
Policyholders' account values .............................. $ 56,152
Alger American Small Capitalization Portfolio:
Policyholders' account values .............................. 12,460,754
American Century VP Capital Appreciation Fund:
Policyholders' account values .............................. 5,558,671
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
Policyholders' account values .............................. 15,683,029
Growth Portfolio:
Policyholders' account values .............................. 5,489,224
Overseas Portfolio:
Policyholders' account values .............................. 577,577
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio:
Policyholders' account values .............................. 1,461,329
Contrafund Portfolio:
Policyholders' account values .............................. 8,328,106
Janus Aspen Series:
Aggressive Growth Portfolio:
Policyholders' account values .............................. 9,541,046
Balanced Portfolio:
Policyholders' account values .............................. 4,320,181
Growth Portfolio:
Policyholders' account values .............................. 8,278,181
Short-Term Bond Portfolio:
Policyholders' account values .............................. 3,944,763
Worldwide Growth Portfolio:
Policyholders' account values .............................. 13,561,854
Scudder Variable Life Investment Fund--International Portfolio:
Policyholders' account values .............................. 11,193,242
-------------
$244,765,030
=============
See Notes to Financial Statements
S-3
<PAGE>
Variable Life Account B
Statements of Operations and Changes in Net Assets
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
(Unaudited) (Unaudited)
-------------------- -------------------
INVESTMENT INCOME:
<S> <C> <C>
Income: (Notes 1, 3 and 5)
Dividends ...................................................... $ 2,905,983 $ 359,401
Expenses: (Notes 2 and 5)
Valuation Period Deductions .................................... (335,872) (216,034)
------------ ------------
Net investment income .......................................... 2,570,111 143,367
------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on sales of investments: (Notes 1, 4 and 5)
Proceeds from sales ............................................. 15,319,304 3,428,998
Cost of investments sold ....................................... 14,300,603 3,005,963
------------ ------------
Net realized gain ............................................. 1,018,701 423,035
Net unrealized gain (loss) on investments: (Note 5)
Beginning of period ............................................. 14,132,669 4,391,574
End of period ................................................... 8,916,718 9,478,418
------------ ------------
Net change in unrealized gain (loss) ........................... (5,215,951) 5,086,844
------------ ------------
Net realized and unrealized gain (loss) on investments ......... (4,197,250) 5,509,879
------------ ------------
Net (decrease) increase in net assets resulting from operations (1,627,139) 5,653,246
------------ ------------
FROM UNIT TRANSACTIONS:
Variable life premium payments ................................. 32,286,413 21,128,211
Sales and administrative charges deducted by the Company ......... (1,105,628) (632,971)
Premiums allocated to the fixed account ........................ (706,230) (1,644,459)
------------ ------------
Net premiums allocated to the variable account .................. 30,474,555 18,850,781
Transfers to the Company for monthly deductions .................. (4,828,049) (3,306,575)
Redemptions by contract holders ................................. (2,187,917) (1,152,122)
Transfers on account of policy loans ........................... (187,877) (422,131)
Other ............................................................ (52,426) 43,265
------------ ------------
Net increase in net assets from unit transactions (Note 5) ...... 23,218,286 14,013,218
------------ ------------
Change in net assets ............................................. 21,591,147 19,666,464
NET ASSETS:
Beginning of period ............................................. 223,173,883 126,515,779
------------ ------------
End of period ................................................... $244,765,030 $146,182,243
============ ============
</TABLE>
See Notes to Financial Statements
S-4
<PAGE>
Variable Life Account B
Condensed Financial Information--Three Months Ended March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Value
Per Unit Increase
(Decrease)
in Value of Reserves
Beginning End of Accumulation at End
of Period Period Unit of Period
----------- --------- -------------------- ------------
<S> <C> <C> <C> <C>
Aetna Variable Fund:
Aetna Vest ........................ $34.932 $35.579 1.85% $52,790,404
Aetna Vest II ..................... 19.507 19.868 1.85% 15,918,571
Aetna Vest Plus .................. 16.389 16.692 1.85% 24,193,440
Aetna Vest Estate Protector ...... 11.675 11.896 1.89% 343,196
Corporate Specialty Market ...... 14.805 15.080 1.85% 4,663,688
Aetna Income Shares:
Aetna Vest ........................ $21.850 $21.739 (0.51%) 5,779,308
Aetna Vest II ..................... 14.691 14.616 (0.51%) 964,510
Aetna Vest Plus .................. 11.764 11.704 (0.51%) 1,573,435
Aetna Vest Estate Protector ...... 10.452 10.403 (0.47%) 110,600
Corporate Specialty Market ...... 11.354 11.297 (0.51%) 4,737,878
Aetna Variable Encore Fund:
Aetna Vest ........................ $16.577 $16.743 1.00% 2,617,424
Aetna Vest II ..................... 12.117 12.238 1.00% 162,807
Aetna Vest Plus .................. 11.388 11.502 1.00% 5,475,885
Aetna Vest Estate Protector ...... 10.333 10.441 1.04% 391,865
Corporate Specialty Market ...... 10.895 11.004 1.00% 7,098,510
Aetna Investment Advisers Fund, Inc.:
Aetna Vest ........................ $17.547 $17.424 (0.70%) 1,901,583
Aetna Vest II ..................... 17.742 17.618 (0.70%) 4,157,201
Aetna Vest Plus .................. 14.880 14.775 (0.70%) 6,002,453
Aetna Vest Estate Protector ...... 11.340 11.086 (2.24%) (1) 2,571
Corporate Specialty Market ...... 12.954 12.863 (0.70%) 4,365,577
Aetna Ascent Variable Portfolio:
Aetna Vest ........................ $11.828 $11.771 (0.48%) 135,740
Aetna Vest II ..................... 11.828 11.771 (0.48%) 99,315
Aetna Vest Plus .................. 11.828 11.771 (0.48%) 626,288
Aetna Vest Estate Protector ...... 11.886 11.789 (0.82%) (2) 2,580
Aetna Crossroads Variable
Portfolio:
Aetna Vest ........................ $11.474 $11.453 (0.18%) 28,023
Aetna Vest II ..................... 11.544 11.453 (0.79%) (1) 1,917
Aetna Vest Plus .................. 11.474 11.453 (0.18%) 165,657
Aetna Vest Estate Protector ...... 11.487 11.470 (0.14%) 495
Aetna Legacy Variable Portfolio:
Aetna Vest II ..................... $11.263 $11.076 (1.66%) (2) 9,557
Aetna Vest Plus .................. 11.118 11.076 (0.38%) 46,595
</TABLE>
S-5
<PAGE>
Variable Life Account B
Condensed Financial Information--Three Months Ended March 31, 1997 (unaudited &
continued)
<TABLE>
<CAPTION>
Increase
Value Per Unit (Decrease)
in Value of Reserves
Beginning End of Accumulation at End
of Period Period Unit of Period
----------- --------- -------------- ------------
<S> <C> <C> <C> <C>
Alger American Small
Capitalization Portfolio:
Aetna Vest ........................ $16.051 $14.113 (12.07%) 1,043,585
Aetna Vest II ..................... 16.052 14.114 (12.07%) 635,959
Aetna Vest Plus .................. 16.043 14.106 (12.07%) 5,680,005
Aetna Vest Estate Protector ...... 9.982 8.780 (12.04%) 253,395
Corporate Specialty Market ...... 13.201 11.607 (12.07%) 4,847,810
American Century VP Capital
Appreciation Fund:
Aetna Vest ........................ $12.534 $10.646 (15.06%) 840,154
Aetna Vest II ..................... 12.590 10.694 (15.06%) 310,402
Aetna Vest Plus .................. 12.419 10.548 (15.06%) 3,515,587
Aetna Vest Estate Protector ...... 9.511 8.082 (15.03%) 2,691
Corporate Specialty Market ...... 11.358 9.647 (15.06%) 889,837
Fidelity Investments Variable
Insurance Products Fund:
Equity-Income Portfolio:
Aetna Vest ........................ $10.871 $10.968 0.90% 87,359
Aetna Vest II ..................... 10.871 10.968 0.90% 48,971
Aetna Vest Plus .................. 10.871 10.968 0.90% 2,014,106
Aetna Vest Estate Protector ...... 10.883 10.985 0.93% 252,126
Corporate Specialty Market ...... 12.512 12.624 0.90% 13,280,467
Growth Portfolio:
Corporate Specialty Market ...... $11.255 $10.952 (2.69%) 5,489,224
Overseas Portfolio:
Corporate Specialty Market ...... $11.241 $11.578 2.99% 577,577
Fidelity Investments Variable
Insurance Products Fund II:
Asset Manager Portfolio:
Corporate Specialty Market ...... $12.022 $11.987 (0.30%) 1,461,329
Contrafund Portfolio:
Aetna Vest ........................ $11.525 $11.309 (1.88%) 305,794
Aetna Vest II ..................... 11.525 11.309 (1.88%) 94,053
Aetna Vest Plus .................. 11.525 11.309 (1.88%) 1,620,391
Aetna Vest Estate Protector ...... 11.538 11.326 (1.84%) 158,332
Corporate Specialty Market ...... 12.396 12.164 (1.88%) 6,149,536
Janus Aspen Series:
Aggressive Growth Portfolio:
Aetna Vest ........................ $16.153 $14.143 (12.44%) 737,026
Aetna Vest II ..................... 16.153 14.143 (12.44%) 458,338
</TABLE>
S-6
<PAGE>
Variable Life Account B
Condensed Financial Information--Three Months Ended March 31, 1997 (unaudited &
continued):
<TABLE>
<CAPTION>
Increase
Value Per Unit (Decrease)
in Value of Reserves
Beginning End of Accumulation at End
of Period Period Unit of Period
----------- --------- ----------------- -----------
<S> <C> <C> <C> <C>
Aetna Vest Plus .................. $16.153 $14.143 (12.44%) $3,517,794
Aetna Vest Estate Protector ...... 9.797 8.581 (12.41%) 311,336
Corporate Specialty Market ...... 12.120 10.611 (12.44%) 4,516,552
Balanced Portfolio:
Aetna Vest ........................ $13.966 $14.196 1.64% $ 97,246
Aetna Vest II ..................... 14.075 14.306 1.64% 84,618
Aetna Vest Plus .................. 13.960 14.189 1.64% 2,082,733
Aetna Vest Estate Protector ...... 11.101 11.288 1.68% 35,062
Corporate Specialty Market ...... 12.242 12.443 1.64% 2,020,522
Growth Portfolio:
Aetna Vest ........................ $14.898 $14.938 0.27% $ 541,273
Aetna Vest II ..................... 14.884 14.924 0.27% 1,002,167
Aetna Vest Plus .................. 14.863 14.903 0.27% 4,160,826
Aetna Vest Estate Protector ...... 10.857 10.890 0.31% 146,512
Corporate Specialty Market ...... 12.232 12.265 0.27% 2,427,403
Short-Term Bond Portfolio:
Aetna Vest ........................ $11.289 $11.397 0.95% $ 6,924
Aetna Vest II ..................... 11.277 11.385 0.95% 1,372
Aetna Vest Plus .................. 11.247 11.354 0.95% 273,539
Aetna Vest Estate Protector ...... 10.389 10.465 0.73% (1) 1,539
Corporate Specialty Market ...... 10.468 10.568 0.95% 3,661,389
Worldwide Growth Portfolio:
Aetna Vest ........................ $16.364 $17.339 5.96% $1,547,127
Aetna Vest II ..................... 16.368 17.344 5.96% 940,957
Aetna Vest Plus .................. 16.348 17.322 5.96% 6,185,375
Aetna Vest Estate Protector ...... 11.811 12.519 6.00% 310,828
Corporate Specialty Market ...... 13.459 14.262 5.96% 4,577,567
Scudder Variable Life Investment
Fund--International Portfolio:
Aetna Vest ........................ $14.543 $14.813 1.86% $2,402,152
Aetna Vest II ..................... 14.453 14.722 1.86% 675,216
Aetna Vest Plus .................. 14.373 14.640 1.86% 5,406,958
Aetna Vest Estate Protector ...... 10.898 11.105 1.90% 99,911
Corporate Specialty Market ...... 12.043 12.267 1.86% 2,609,005
</TABLE>
Notes to Condensed Financial Information:
(1)--Reflects less than a full year of performance activity. Funds were
first received in this option during January 1997.
(2)--Reflects less than a full year of performance activity. Funds were
first received in this option during February 1997.
S-7
<PAGE>
Variable Life Account B
Notes to Financial Statements--March 31, 1997 (Unaudited):
1. Summary of Significant Accounting Policies
Variable Life Account B ("Account") is a separate account established by
Aetna Life Insurance and Annuity Company and is registered under the
Investment Company Act of 1940 as a unit investment trust. The Account is
sold exclusively for use with variable life insurance product contracts as
defined under the Internal Revenue Code of 1986, as amended.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported therein. Although actual results
could differ from these estimates, any such differences are expected to be
immaterial to the net assets of the Account.
a. Valuation of Investments
Investments in the following Funds are stated at the closing net asset
value per share as determined by each fund on March 31, 1997:
Aetna Variable Fund Fidelity Investments Variable
Aetna Income Shares Insurance Products Fund II:
Aetna Variable Encore Fund [bullet] Asset Manager Portfolio
Aetna Investment Advisers Fund, Inc. [bullet] Contrafund Portfolio
Aetna Ascent Variable Portfolio Janus Aspen Series:
Aetna Crossroads Variable Portfolio [bullet] Aggressive Growth Portfolio
Aetna Legacy Variable Portfolio [bullet] Balanced Portfolio
Alger American Small Capitalization [bullet] Growth Portfolio
Portfolio [bullet] Short-Term Bond Portfolio
American Century VP Capital [bullet] Worldwide Growth Portfolio
Appreciation Fund Scudder Variable Life Investment
Fidelity Investments Variable Fund--International Portfolio
Insurance Products Fund:
[bullet] Equity-Income Portfolio
[bullet] Growth Portfolio
[bullet] Overseas Portfolio
b. Other
Other Investment transactions are accounted for on a trade date basis and
dividend income is recorded on the ex-dividend date. The cost of
investments sold is determined by specific identification.
c. Federal Income Taxes
The operations of the Account form a part of, and are taxed with, the total
operations of Aetna Life Insurance and Annuity Company ("Company") which is
taxed as a life insurance company under the Internal Revenue Code of 1986,
as amended.
2. Valuation Period Deductions
Deductions by the Account for mortality and expense risk charges are made
in accordance with the terms of the policies and are paid to the Company.
S-8
<PAGE>
Variable Life Account B
Notes to Financial Statements--March 31, 1997 (unaudited & continued):
3. Dividend Income
On an annual basis the Funds distribute substantially all of their taxable
income and realized capital gains to their shareholders. Distributions paid
to the Account are automatically reinvested in shares of the Funds. The
Account's proportionate share of each Fund's undistributed net investment
income (distributions in excess of net investment income) and accumulated
net realized gain (loss) on investments is included in net unrealized gain
(loss) on investments in the Statements of Operations and Changes in Net
Assets.
4. Purchases and Sales of Investments
The cost of purchases and proceeds from sales of investments other than
short-term investments for the three months ended March 31, 1997 and 1996
aggregated $41,107,702 and $15,319,304 and $17,583,396 and $3,428,998,
respectively.
S-9
<PAGE>
Variable Life Account B
Notes to Financial Statements--March 31, 1997 (unaudited & continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets--Three-Months Ended March 31, 1997
<TABLE>
<CAPTION>
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
------------ --------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Aetna Variable Fund:
PolicyHolder's account values ............... $ 0 $ (138,689) $ 2,085,493 $ 1,533,994 $ 551,499
Aetna Income Shares:
PolicyHolders' account values ............... 0 (19,010) 862,682 883,816 (21,134)
Aetna Variable Encore Fund:
PolicyHolder's account values ............... 372,968 (15,420) 5,214,143 5,282,921 (68,778)
Aetna Investment Advisers Fund, Inc.:
PolicyHolder's account values ............... 0 (23,413) 326,908 270,907 56,001
Aetna Ascent Variable Portfolio:
PolicyHolder's account values ............... 0 (1,012) 719,965 718,546 1,419
Aetna Crossroads Variable Portfolio:
PolicyHolder's account values ............... 0 (219) 151,692 151,595 97
Aetna Legacy Variable Portfolio:
PolicyHolder's account values ............... 0 (45) 31,294 31,283 11
Alger American Small Capitalization Portfolio:
PolicyHolder's account values ............... 0 (18,952) 1,610,023 1,464,966 145,057
American Century VP Capital Appreciation Fund:
PolicyHolder's account values ............... 132,455 (9,411) 628,578 573,692 54,886
Fidelity Investments Variable Insurance
Products Fund:
Equity-Income Portfolio:
PolicyHolder's account values ............... 1,485,715 (20,823) 95,203 90,944 4,259
Growth Portfolio:
PolicyHolder's account values ............... 192,233 (7,619) 105,973 100,096 5,877
Overseas Portfolio:
PolicyHolder's account values ............... 46,706 (768) 6,580 5,914 666
Fidelity Investments Variable Insurance
Products Fund II:
Asset Manager Portfolio:
PolicyHolder's account values ............... 175,953 (2,076) 36,869 35,726 1,143
Contrafund Portfolio:
PolicyHolder's account values ............... 235,708 (10,954) 181,301 150,422 30,879
Janus Aspen Series:
Aggressive Growth Portfolio:
PolicyHolder's account values ............... 0 (13,717) 2,488,643 2,394,608 94,035
Balanced Portfolio:
PolicyHolder's account values ............... 0 (5,499) 141,829 115,577 26,252
Growth Portfolio:
PolicyHolder's account values ............... 0 (11,143) 130,246 96,623 33,623
Short-Term Bond Portfolio:
PolicyHolder's account values ............... 0 (5,429) 30,221 29,518 703
Worldwide Growth Portfolio:
PolicyHolder's account values ............... 0 (16,324) 128,784 88,357 40,427
Scudder Variable Life Investment Fund -
International Portfolio:
PolicyHolder's account values ............... 264,245 (15,349) 342,877 281,098 61,779
----------- ----------- ------------ ------------ ----------
Total Variable Life Account B ............... $2,905,983 $ (335,872) $15,319,304 $14,300,603 $1,018,701
=========== =========== ============ ============ ==========
</TABLE>
S-10
<PAGE>
<TABLE>
<CAPTION>
Net Increase
Net Unrealized Net (Decrease) In
Gain (Loss) Change in Net Assets Net Assets
Beginning End Unrealized from Unit Beginning End
of Period of Period Gain (Loss) Transactions of Period of Period
- --------------- --------------- ---------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
$ 7,294,643 $ 8,630,619 $ 1,335,976 $ 3,288,887 $ 92,871,626 $ 97,909,299
(190,180) (197,727) (7,547) 33,635 13,179,787 13,165,731
106,394 (61,052) (167,446) 6,532,982 9,092,185 15,746,491
1,383,931 1,240,445 (143,486) 748,742 15,791,541 16,429,385
15,645 9,902 (5,743) 323,881 545,378 863,923
(191) (954) (763) 73,285 123,692 196,092
20 (427) (447) 42,670 13,963 56,152
172,057 (1,638,799) (1,810,856) 1,059,422 13,086,083 12,460,754
(146,911) (1,335,151) (1,188,240) 86,456 6,482,525 5,558,671
1,096,283 (315,504) (1,411,787) 2,315,452 13,310,213 15,683,029
294,867 (48,591) (343,458) 589,662 5,052,529 5,489,224
37,941 8,232 (29,709) 28,355 532,327 577,577
134,978 (44,794) (179,772) 55,895 1,410,186 1,461,329
730,883 298,019 (432,864) 1,593,647 6,911,690 8,328,106
249,074 (1,129,012) (1,378,086) 1,175,887 9,662,927 9,541,046
243,163 272,745 29,582 695,501 3,574,345 4,320,181
566,478 531,502 (34,976) 1,116,030 7,174,647 8,278,181
26,773 72,114 45,341 76,300 3,827,848 3,944,763
872,277 1,474,423 602,146 3,020,469 9,915,136 13,561,854
1,244,544 1,150,728 (93,816) 361,128 10,615,255 11,193,242
----------- ------------ ------------ ------------ ------------- -------------
$14,132,669 $ 8,916,718 $ (5,215,951) $23,218,286 $223,173,883 $244,765,030
=========== ============ ============ ============ ============= =============
</TABLE>
S-11
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
<TABLE>
<CAPTION>
Page
<S> <C>
Consolidated Statements of Income for the three months ended March 31, 1997 and 1996 F-2
(unaudited) .
Consolidated Balance Sheets as of March 31, 1997 (unaudited) and December 31, 1996 ...... F-3
Consolidated Statements of Changes in Shareholder's Equity for the three months ended
March 31, 1997 and 1996 (unaudited) ................................................ F-4
Consolidated Statements of Cash Flows for the three months ended March 31, 1997 and 1996
(unaudited) ........................................................................ F-5
Condensed Notes to Consolidated Financial Statements as of March 31, 1997 (unaudited) ... F-7
</TABLE>
F-1
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Income
(millions)
(unaudited)
3 Months Ended
March 31,
------------------
1997 1996
-------- -------
Revenue:
Premiums $ 52.3 $ 34.0
Charges assessed against policyholders 109.7 92.0
Net investment income 267.8 257.6
Net realized capital gains 5.0 14.9
Other income 9.7 12.2
------- -------
Total revenue 444.5 410.7
Benefits and expenses:
Current and future benefits 272.0 236.9
Operating expenses 78.2 87.2
Amortization of deferred policy acquisition costs 19.9 17.5
------- -------
Total benefits and expenses 370.1 341.6
Income before income taxes 74.4 69.1
Income taxes 24.0 20.6
------- -------
Net income $ 50.4 $ 48.5
======= =======
See Condensed Notes to Consolidated Financial Statements.
F-2
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Balance Sheets
(millions, except share data)
<TABLE>
<CAPTION>
(unaudited)
March 31, December 31,
Assets 1997 1996
- ------ ------------ -------------
<S> <C> <C>
Investments:
Debt securities, available for sale, at fair value
(amortized cost: $12,378.5 and $12,539.1) $12,428.6 $12,905.5
Equity securities, available for sale:
Non-redeemable preferred stock (cost: $141.3 and $107.6) 152.1 119.0
Investment in affiliated mutual funds (cost: $64.2 and $77.3) 67.9 81.1
Common stock (cost: $0.0 and $0.0) 0.1 0.3
Short-term investments 45.5 34.8
Mortgage loans 12.9 13.0
Policy loans 408.4 399.3
---------- ----------
Total investments 13,115.5 13,553.0
Cash and cash equivalents 758.9 459.1
Accrued investment income 185.3 159.0
Premiums due and other receivables 32.6 26.6
Deferred policy acquisition costs 1,560.1 1,515.3
Reinsurance loan to affiliate 593.7 628.3
Other assets 32.6 33.7
Separate Accounts assets 16,460.1 15,318.3
---------- ----------
Total assets $32,738.8 $31,693.3
========== ==========
Liabilities and Shareholder's Equity
- ------------------------------------
Liabilities:
Future policy benefits $ 3,613.3 $ 3,617.0
Unpaid claims and claim expenses 37.4 28.9
Policyholders' funds left with the Company 10,529.2 10,663.7
---------- ----------
Total insurance reserve liabilities 14,179.9 14,309.6
Other liabilities 392.8 354.7
Income taxes:
Current 29.1 20.7
Deferred 62.1 80.5
Separate Accounts liabilities 16,460.1 15,318.3
---------- ----------
Total liabilities 31,124.0 30,083.8
---------- ----------
Shareholder's equity:
Common stock, par value $50 (100,000 shares authorized; 55,000
shares issued and outstanding) 2.8 2.8
Paid-in capital 418.0 418.0
Net unrealized capital gains 13.6 60.5
Retained earnings 1,180.4 1,128.2
---------- ----------
Total shareholder's equity 1,614.8 1,609.5
---------- ----------
Total liabilities and shareholder's equity $32,738.8 $31,693.3
========== ==========
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
F-3
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Changes in Shareholder's Equity
(millions)
(unaudited)
3 Months Ended March 31,
-----------------------------
1997 1996
------------- -------------
Shareholder's equity, beginning of year $ 1,609.5 $ 1,583.0
Net change in unrealized capital gains (46.9) (75.9)
Net income 50.4 48.5
Other changes 1.8 -
--------- ---------
Shareholder's equity, end of period $ 1,614.8 $ 1,555.6
========= =========
See Condensed Notes to Consolidated Financial Statements.
F-4
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Cash Flows
(millions)
<TABLE>
<CAPTION>
(unaudited)
3 Months Ended March 31,
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 50.4 $ 48.5
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Increase in accrued investment income (26.3) (10.9)
(Increase) decrease in premiums due and other receivables (3.2) 0.5
Increase in policy loans (9.1) (6.0)
Increase in deferred policy acquisition costs (44.8) (34.3)
Decrease in reinsurance loan to affiliate 34.6 9.5
Net increase in universal life account balances 63.6 53.0
Decrease in other insurance reserve liabilities (22.0) (52.4)
Net decrease in other liabilities and other assets (4.9) (85.3)
Increase in income taxes 18.4 11.8
Net accretion of discount on investments (16.9) (16.9)
Net realized capital gains (5.0) (14.9)
---------- ----------
Net cash provided by (used for) operating activities 34.8 (97.4)
---------- ----------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale 1,380.4 1,634.8
Equity securities 14.8 48.7
Mortgage loans 0.1 --
Investment maturities and collections of:
Debt securities available for sale 227.4 255.4
Short-term investments 10.4 10.0
Cost of investment purchases in:
Debt securities available for sale (1,376.5) (1,918.0)
Equity securities (33.8) (26.1)
Short-term investments (21.1) (19.5)
---------- ----------
Net cash provided by (used for) investing activities 201.7 (14.7)
---------- ----------
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
F-5
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Cash Flows (Continued)
(millions)
<TABLE>
<CAPTION>
(unaudited)
3 Months Ended March 31,
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash Flows from Financing Activities:
Deposits and interest credited for investment contracts 390.2 429.9
Withdrawals of investment contracts (326.9) (332.0)
--------- ---------
Net cash provided by financing activities 63.3 97.9
--------- ---------
Net increase (decrease) in cash and cash equivalents 299.8 (14.2)
Cash and cash equivalents, beginning of period 459.1 568.8
--------- ---------
Cash and cash equivalents, end of period $ 758.9 $ 554.6
========= =========
Supplemental cash flow information:
Income taxes paid, net $ 9.4 $ 12.0
========= =========
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
F-6
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Condensed Notes to Consolidated Financial Statements
(unaudited)
1. Basis of Presentation
The consolidated financial statements include Aetna Life Insurance and Annuity
Company and its wholly owned subsidiaries, Aetna Insurance Company of America
and Aetna Private Capital, Inc. (collectively, the "Company"). Aetna Life
Insurance and Annuity Company is a wholly owned subsidiary of Aetna Retirement
Holdings, Inc. ("HOLDCO"). HOLDCO is a wholly owned subsidiary of Aetna
Retirement Services, Inc., whose ultimate parent is Aetna Inc. ("Aetna").
These consolidated financial statements have been prepared in accordance with
generally accepted accounting principles and are unaudited. Certain
reclassifications have been made to 1996 financial information to conform to
the 1997 presentation. These interim statements necessarily rely heavily on
estimates, including assumptions as to annualized tax rates. In the opinion of
management, all adjustments necessary for a fair statement of results for the
interim periods have been made. All such adjustments are of a normal, recurring
nature. The accompanying condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and related
notes as presented in the Company's 1996 Annual Report on Form 10-K. Certain
financial information that is normally included in annual financial statements
prepared in accordance with generally accepted accounting principles, but that
is not required for interim reporting purposes, has been condensed or omitted.
2. Future Application of Accounting Standards
Financial Accounting Standard ("FAS") No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, was issued in
June 1996 and provides accounting and reporting standards for transfers of
financial assets and extinguishments of liabilities.
FAS No. 125 is effective for 1997 financial statements; however, certain
provisions relating to accounting for repurchase agreements and securities
lending are not effective until January 1, 1998. Provisions effective in 1997
did not have a material effect on the Company's financial position or results
of operations. The Company does not expect adoption of this statement for
provisions effective in 1998 to have a material effect on its financial
position or results of operations.
3. Financial Instruments
The Company engages in hedging activities to manage interest rate and price
risks. Such hedging activities have principally consisted of using off-balance
sheet instruments such as futures and forward contracts and interest rate swap
agreements. There were no such contracts or agreements open as of March 31,
1997.
4. Severance and Facilities Charges
In the second quarter of 1996, the Company was allocated severance and
facilities reserves from Aetna to reflect actions taken or to be taken to
reduce the level of corporate expenses and other costs previously absorbed by
Aetna's property-casualty operations.
F-7
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Condensed Notes to Consolidated Financial Statements (Continued)
(unaudited)
4. Severance and Facilities Charges (Continued)
In the third quarter of 1996, the Company established severance and facilities
reserves in the Financial Services and Individual Life Insurance segments to
reflect actions taken or to be taken in order to make its businesses more
competitive.
Activity for the three months ended March 31, 1997 within the severance and
facilities reserves (pretax, in millions) and positions eliminated related to
such actions were as follows:
Reserve Positions
---------- ----------
Balance at December 31, 1996 ...... $ 47.9 524
Actions taken (1) .................. (10.9) (88)
-------- -----
Balance at March 31, 1997 ......... $ 37.0 436
======== =====
(1) Includes $6.3 million of the Company's severance-related actions and $3.9
million of corporate allocation-related actions.
The Company's severance actions are expected to be substantially completed by
March 31, 1998. The corporate allocation actions and vacating of certain leased
office space are expected to be substantially completed in 1997.
5. Related Party Transactions
Effective December 31, 1988, the Company entered into a reinsurance agreement
with Aetna Life Insurance Company ("Aetna Life") in which substantially all of
the non-participating individual life and annuity business written by Aetna
Life prior to 1981 was assumed by the Company. Effective January 1, 1997, this
agreement has been amended to transition (based on underlying investment
rollover in Aetna Life) from a modified coinsurance to a coinsurance
arrangement. As a result of this change, reserves will be ceded to the Company
from Aetna Life as investment rollover occurs and the loan previously
established will be reduced.
6. Litigation
The Company is involved in numerous lawsuits arising, for the most part, in the
ordinary course of its business operations. While the ultimate outcome of
litigation against the Company cannot be determined at this time, after
consideration of the defenses available to the Company and any related reserves
established, it is not expected to result in liability for amounts material to
the financial condition of the Company, although it may adversely affect
results of operations in future periods.
F-8
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
UNDERTAKING PURSUANT TO RULE 484
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
REPRESENTATION PURSUANT TO SECTION 26(e)(2)(A) OF
THE INVESTMENT COMPANY ACT OF 1940
Aetna Life Insurance and Annuity Company represents that the fees and charges
deducted under the policies covered by this registration statement, in the
aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by the insurance company.
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 5 TO
REGISTRATION STATEMENT
This Post-Effective Amendment No. 5 to Registration Statement No. 33-75248 is
comprised of the following papers and documents:
[bullet] The facing sheet.
<PAGE>
[bullet] One Corporate Variable Universal Life (Corporate VUL)
Prospectus Supplement consisting of 33 pages
[bullet] The undertaking to file reports
[bullet] The undertaking pursuant to Rule 484
[bullet] Representations pursuant to Section 26(e)(2)(A) of the Investment
Company Act of 1940
[bullet] The signatures
[bullet] Written consents of the following persons:
A. Consent of Counsel (included as part of Exhibit No. 2 below)
B. Actuarial Consent (included as part of Exhibit No. 6 below)
C. Consent of Independent Auditors (included as Exhibit No. 7
below)
<TABLE>
<CAPTION>
The following Exhibits:
<S> <C>
1. Exhibits required by paragraph A of instructions to exhibits for Form N-8B-2:
(1) Resolution establishing Variable Life Account B(1)
(2) Not Applicable
(3)(i) Form of Specialty Broker Agreement(2)
(3)(ii) Form of Life Insurance Broker-Dealer Agreements (10/94)(3)
(3)(iii) Restated and Amended Third Party Administration and Transfer Agent Agreement
(4) Not Applicable
(5)(i) Corporate VUL Policy (Containing information about Cash Value Accumulation Method of Death Benefit Options
(70180-93US))(4)
(5)(ii) Corporate VUL Policy (Containing Tables of percentages for the Guideline Premium Method for Death Benefit
Options (70182-93US)(4)
(5)(iii) Term Rider (70181-94US)) to Corporate VUL Policy 70182-93US(4)
(6)(i) Certificate of Incorporation and By-laws of Aetna Life Insurance and Annuity Company(5)
(6)(ii) Amendment of Certificate of Incorporation of Aetna Life Insurance and Annuity Company(6)
(7) Not Applicable
(8)(i) Fund Participation Agreement between Aetna Life Insurance and Annuity Company, Variable Insurance Products
Fund and Fidelity Distributors Corporation dated February 1, 1994 and amended on December 15, 1994,
February 1, 1995, May 1, 1995, January 1, 1996 and March 1, 1996(6)
(8)(ii) Fund Participation Agreement between Aetna Life Insurance and Annuity Company, Variable Insurance
Products Fund II and Fidelity Distributors Corporation dated February 1, 1994 and amended on December 15,
1994, February 1, 1995, May 1, 1995, January 1, 1996 and March 1, 1996(6)
(8)(iii) Service Agreement between Aetna Life Insurance and Annuity Company and Fidelity Investment Institutional
Operations Company dated November 1, 1995(7)
<PAGE>
(8)(iv) Fund Participation Agreement between Aetna Life Insurance and Annuity Company and Janus Aspen Series dated
April 19, 1994 and amended March 1, 1996(8)
(9) Not Applicable
(10.1) Form of Application for Corporate VUL Policy (38900-93)(9)
(10.2) Supplement (70268-97) to Form of Application for Corporate VUL Policy(10)
</TABLE>
2. Opinion and Consent of Counsel
3. Not Applicable
4. Not Applicable
5. See Item No. (27)
6 Actuarial Opinion and Consent
7. Consent of Independent Auditors
8. Copy of Power of Attorney(11)
(27) Financial Data Schedule
1. Incorporated by reference to Post-Effective Amendment No. 2 to Registration
Statement on Form S-6 (File No. 33-76004), as filed electronically on
February 16, 1996.
2. Incorporated by referenced to Pre-Effective Amendment No. 1 to Registration
Statement on Form S-6 (File No. 33-75248), as filed on June 8, 1994.
3. Incorporated by reference to Post-Effective Amendment No. 2 to Registration
Statement on Form S-6 (File No. 33-75248), as filed on April 25, 1995.
4. Incorporated by reference to Post-Effective Amendment No. 4 to Registration
Statement on Form S-6 (File No. 33-75248), as filed electronically on April
22, 1997.
5. Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form S-1 (File No. 33-60477), as filed electronically on April
15, 1996.
6. Incorporated by reference to Post-Effective Amendment No. 12 to
Registration Statement on Form N-4 (File No. 33-75964), as filed
electronically on February 11, 1997.
7. Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form N-4 (File No. 33-88720), as filed electronically on June
28, 1996.
8. Incorporated by reference to Post-Effective Amendment No. 5 to Registration
Statement on Form N-4 (File No. 33-75986), as filed electronically on April
12, 1996.
9. Incorporated by reference to Registration Statement on Form S-6 (File No.
33-75248), as filed on February 10, 1994.
10. Incorporated by reference to Registration Statement on Form S-6 (File No.
333-27337), as filed electronically on May 16, 1997.
11. Incorporated by reference to Post-Effective Amendment No. 8 to Registration
Statement on Form S-6 (File No. 33-76004), as filed electronically on July
14, 1997. In addition, a certified copy of the resolution adopted by the
Depositor's Board of Directors authorizing filings pursuant to a power of
attorney as required by Rule 478 under the Securities Act of 1933 is
incorporated by reference to Post-Effective Amendment No. 5 to Registration
Statement on Form N-4 (File No. 33-75986), as filed electronically on April
12, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Variable Life Account B of Aetna Life Insurance and Annuity Company has duly
caused this Post-Effective Amendment No. 5 to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, and the seal
of the Depositor to be hereunto affixed and attested, all in the City of
Hartford, and State of Connecticut, on the 29th day of July, 1997.
VARIABLE LIFE ACCOUNT B OF
AETNA LIFE INSURANCE AND
ANNUITY COMPANY
(Registrant)
(SEAL)
ATTEST: /s/ Karen A. Peddle
--------------------
Karen A. Peddle
Assistant Secretary
By: AETNA LIFE INSURANCE AND
ANNUITY COMPANY
(Depositor)
By: Daniel P. Kearney*
--------------------------------
Daniel P. Kearney
Principal Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 5 to the Registration Statement on Form N-4 (File No. 33-75248)
has been signed below by the following persons in the capacities indicated and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
Daniel P. Kearney* Director and President )
- ------------------------------------ (Principal Executive Officer)
Daniel P. Kearney )
)
Christopher J. Burns* Director ) July
- ------------------------------------ )
Christopher J. Burns ) 29, 1997
)
<PAGE>
J. Scott Fox* Director )
- ------------------------------------ )
J. Scott Fox )
)
Timothy A. Holt* Director )
- ------------------------------------ )
Timothy A. Holt )
)
John Y. Kim* Director )
- ------------------------------------ )
John Y. Kim )
)
Shaun P. Mathews* Director )
- ------------------------------------ )
Shaun P. Mathews )
)
Glen Salow* Director )
- ------------------------------------ )
Glen Salow )
)
Creed R. Terry* Director )
- ------------------------------------ )
Creed R. Terry )
)
Deborah Koltenuk* Vice President and Treasurer, Corporate Controller )
- ------------------------------------ )
Deborah Koltenuk )
</TABLE>
By: /s/ Kirk P. Wickman
--------------------------------
*Kirk P. Wickman
Attorney-in-Fact
<PAGE>
VARIABLE LIFE ACCOUNT B
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
- ----------- ------- ----
<S> <C> <C>
99-1.1 Resolution of the Board of Directors of Aetna Life Insurance and Annuity *
Company establishing Variable Life Account B
99-1.3(i) Form of Specialty Broker Agreement *
99-1.3(ii) Form of Life Insurance Broker-Dealer Agreements (10/94) *
99-1.3(iii) Restated and Amended Third Party Administration and Transfer Agent Agreement
---
99-1.5(i) Corporate VUL Policy (Containing information about Cash Value Accumulation *
Method of Death Benefit Options) (70180-93US)
99-1.5(ii) Corporate VUL Policy (Containing Tables of percentages for the Guideline *
Premium Method for Death Benefit Options) (70182-93US)
99-1.5(iii) Term Rider (70181-94US) to Corporate VUL Policy 70182-93US *
99-1.6(i) Certificate of Incorporation and By-laws of Depositor *
99-1.6(ii) Amendment of the Certificate of Incorporation of Aetna Life Insurance and *
Annuity Company
99-1.8(i) Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company, Variable Insurance Products Fund and
Fidelity Distributors Corporation dated February 1, 1994 and
amended on December 15, 1994, February 1, 1995, May 1, 1995,
January 1, 1996 and March 1, 1996
99-1.8(ii) Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company, Variable Insurance Products Fund II
and Fidelity Distributors Corporation dated February 1, 1994
and amended on December 15, 1994, February 1, 1995, May 1,
1995, January 1, 1996 and March 1, 1996
</TABLE>
*Incorporated by reference
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
- ----------- ------- ----
<S> <C> <C>
99-1.8(iii) Service Agreement between Aetna Life Insurance and Annuity Company and Fidelity *
Investment Institutional Operations Company dated November 1, 1995
99-1.8(iv) Fund Participation Agreement between Aetna Life Insurance and Annuity Company *
and Janus Aspen Series dated April 19, 1994 and amended March 1, 1996
99-1.10.1 Form of Application for Corporate VUL Policy (38900-93) *
99-1.10.2 Supplement (70268-97) to Form of Application for Corporate VUL Policy *
99-2 Opinion and Consent of Counsel
---
99-6 Actuarial Opinion and Consent
---
99-7 Consent of Independent Auditors
---
99-8 Copy of Power of Attorney *
27 Financial Data Schedule
---
</TABLE>
*Incorporated by reference
RESTATED AND AMENDED
THIRD PARTY ADMINISTRATION AND TRANSFER AGENT AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT ("Agreement") by and between Andesa TPA,
Inc. (hereafter called "Administrator"), a Pennsylvania corporation, and Aetna
Life Insurance and Annuity Company (hereinafter called "Carrier"), a Connecticut
corporation is effective as of January 1, 1994 ("Effective Date").
WHEREAS, Carrier intends to issue certain life insurance policies and related
riders on the forms set forth in the attached Schedule A (hereinafter called
"Policy") through producers (hereinafter called "Producer") to employers
(hereinafter called "Employer") or, in certain instances, to other entities such
as designated employees of an Employer; and
WHEREAS, both Administrator and Carrier desire that Administrator provide
Carrier, Producer and Employer with certain transfer agent and administrative
services in conjunction with each issued Policy; and
WHEREAS, Carrier wishes to ensure continuity of administrative services in the
event Administrator is unable to provide such services;
NOW, THEREFORE, intending to be legally bound, the parties agree as follows:
1. DEVELOPMENT SERVICES PROVIDED BY ADMINISTRATOR
a. In preparation for the performance of the ongoing services
outlined in Section 2 below, Administrator will perform certain
software modification, testing and other tasks from time to time
(collectively, the "Development Tasks") per Schedule B.
b. Whenever Carrier desires Administrator to perform additional
Development Tasks for a new product or service, Administrator will
prepare a schedule ("New Schedule") which includes a detailed
description of the new Development Tasks, the fees for the new
Development Tasks, the dates and sites for performance of the new
Development Tasks, a signature block for both parties to sign, and
the statement: "The parties agree that this schedule is governed
by the terms and conditions of the Third Party Administration and
Transfer Agent Agreement, as restated and amended, between the
parties, which shall apply to this schedule as if said terms and
conditions were fully set forth herein." Each New Schedule, when
signed by both parties, shall become part of this Agreement,
c. When Carrier desires Administrator to modify Development Tasks,
listed on Schedule B or any "New Schedule", Carrier will prepare a
Change Control Request ("CCR") with a control number followed by
an "M" indication that it is a modification request. The CCR will
contain a complete specification of the development task to
include
1
<PAGE>
algorithms, report formats, and examples as appropriate.
Administrator will return the CCR annotated with a time and cost
estimate. If the estimate is acceptable, the Carrier and
Administrator will agree on a mutually acceptable time table for
implementation of the modification and add the implementation
target date to the CCR. Both parties will sign the CCR with the
following statement; "The parties agree that this CCR is governed
by the terms and conditions of the current Third Party
Administration and Transfer Agent Agreement between the parties
which shall apply to this CCR as if said terms and conditions were
fully set forth herein."
d. Administrator and Carrier understand and agree that time is of the
essence in meeting the target dates set forth in Schedule B and
any New Schedule, and any, CCR, and will provide each other with
periodic updates.
2. ONGOING SERVICES PROVIDED BY ADMINISTRATOR
On the basis of employee data provided by Employer and policy data
provided by Carrier, and subject to all other terms and conditions of
this Agreement, Administrator shall provide the following ongoing
services for as long as this Agreement is in force:
a. Insurance Coverage Documents
Administrator, on behalf of Carrier and upon its instruction,
shall prepare a full, complete and correct Policy (including
without limit, insertion of a copy of the application received
from Carrier) for each person insured by an Employer, and transmit
each such Policy to the Producer designated by the Carrier for
delivery of the Policy to the Employer, unless otherwise
instructed by the Carrier. Administrator shall have no authority
to accept applications, underwrite, approve or effect insurance on
behalf of Carrier unless otherwise agreed to in writing by
Carrier.
b. Computation of Policy Values
Administrator shall record Policy transactions on a daily basis,
including the calculation of Policy values on variable universal
life insurance products shown on Schedule A ("VUL") where
underlying separate account units are purchased, sold, transferred
or surrendered, as set forth in Schedule C. On a monthly basis for
each person insured, coincident with the monthly anniversary of a
Policy, Administrator shall compute the Policy values set forth in
the attached Schedule C. Administrator shall also compute
information for determining underlying unit value of VUL on a
daily basis, as set forth in Schedule C.
c. Record Maintenance
2
<PAGE>
Administrator shall maintain and keep current records in
connection with each Policy with respect to: (i) the insured; (ii)
the owner ("Policy Owner"); (iii) any assignee; (iv) the
beneficiary and any contingent beneficiary; (v) any premium payor,
if other than the Policy Owner; and (vi) the premiums received and
the benefits payable by Carrier under such Policy. In further
thereto, Administrator shall maintain the records as set forth in
the attached Schedule G and provide access for Carrier, its
auditors and regulators to inspect such records upon the request
of Carrier. Administrator shall at all times maintain off-site,
back-up copies of such records at a mutually agreeable location.
Administrator understands and agrees that certain records for VUL
will be maintained by Administrator as a transfer agent ("Transfer
Agent") under the Securities Exchange Act of 1934, as amended, and
the rules thereunder, including but not limited Rule 17A-10(e).
Administrator also agrees that all records prepared or maintained
by Administrator relating to VUL are the property of Carrier and
its applicable separate account(s). In furtherance thereto,
Administrator shall prepare, maintain and surrender such records
to Carrier on and in accordance with its request.
d. Reporting
Administrator shall provide: (i) Carrier with the reports and data
as set forth in the attached Schedule D in machine readable format
acceptable to Carrier ("Interfaces"); (ii) the reports as set
forth in the attached Schedule E to certain Producers as may be
designated from time to time by Carrier (hereinafter called
"Servicing Agents") and (iii) Employer with reports as set forth
in the attached Schedule F. In the event an Employer is not the
Policy Owner, Carrier shall designate to whom the reports set
forth in Schedule F shall be provided.
Administrator shall maintain capability: (i) to provide
tax-reporting support to Carrier with respect to payments under
the Policies; and (ii) to accelerate processing schedules at the
request of Carrier.
e. Training Services
Administrator shall provide training at Administrator's office for
personnel of Carrier in the operation of Administrator's data
processing system on a schedule to be determined by Carrier and
Administrator. Up to three (3) days of training will be made
available by the Administrator each calendar year without charge
to Carrier.
3
<PAGE>
f. Additional Policy Forms
Administrator shall maintain the computer code to provide for
ongoing services with respect to additional policy forms as may be
developed from time to time by Carrier; and Administrator will
provide ongoing services with respect to such additional policy
forms upon terms and conditions as may be mutually agreeable.
g. Referral of Inquires
Administrator shall promptly refer all inquiries to Carrier with
respect to the purchase of a Policy, or other requests for
information as may be specified from time to time by Carrier.
Administrator shall respond to inquiries (e.g., policy values,
billing inquiries) as may be permitted by Carrier. For VUL,
responses shall be limited to those that a Transfer Agent is
authorized to answer.
h. Agency Matters
In performing the Ongoing Services described in this section 2,
Administrator shall take all steps reasonably necessary to assure
Carrier that Administrator has no connection or appearance of
connection with any insurance agency or insurance broker. In
furtherance of this obligation, and not by way of litigation,
Administrator agrees that it shall comply with the prohibited and
restricted arrangements described in Schedule G-1.
3. STANDARDS OF PERFORMANCE
All services provided by Administrator shall be performed with a high
degree of professional care. In furtherance thereto, Standards of
Performance for specific services shall be performed in accordance with
standards set forth in Schedule H, or as otherwise mutually agreed upon
in writing.
4. TERM OF AGREEMENT
This Agreement shall continue from the Effective Date until terminated
pursuant to the provisions of Section 10 or 11.
4
<PAGE>
5. WARRANTIES/INDEMNIFICATION
Administrator represents and warrants that the services performed and/or
materials produced will not violate any proprietary rights of any third
party, including, but without limitation, confidential relationships,
patent, trademark and copyright rights. Administrator hereby separately
agrees to indemnify and hold Carrier harmless from any loss, claim,
damage, cost or expense of any kind, including reasonable attorney's fees
to which Carrier may be subjected by virtue of the foregoing warranty.
Administrator represents and warrants that it has registered and shall
maintain its registration as a transfer agent under applicable law; that
it is empowered under applicable laws and by its charter and bylaws to
enter and perform this Agreement; and that it has and will continue to
have access to the necessary facilities, equipment and personnel to
perform its duties and obligations under this Agreement.
Administrator warrants and represents that: (a) during the first twelve
months from the Effective Date, it shall maintain an errors and omissions
policy in an amount of $1,000,000 to compensate Carrier in the event of
any loss arising from Andesa's actions in connection with the Policies;
and (b) during and after the twelve months from the Effective Date,
Andesa shall maintain, in accordance with reasonable commercial
standards, an errors and omissions policy in amounts sufficient to
compensate Carrier in the event of any loss arising from Andesa's actions
in connection with the Policies and sufficient criminal theft-assurance.
The Administrator shall, upon request from the Carrier, provide
satisfactory evidence of any such insurance coverage.
Andesa represents and warrants that all non-Andesa owned software and
hardware in use at Andesa's installation in furnishing the third party
administration services hereunder has been procured by Andesa under valid
licenses or purchases from the owners thereof, and that Andesa is not
now, nor will be during the term of this Agreement, in default under any
such license. Andesa will not utilize any software or hardware during the
term of this Agreement which may cause Carrier to be charged with
infringement upon or any violation of the rights of any owner thereof.
Andesa will indemnify and hold Carrier harmless from and against any
loss, cost, liability, or expense (including reasonable counsel fees)
which Carrier may incur by reason of any breach or claimed breach of the
foregoing representations and warranties.
Administrator warrants that it has the absolute right to grant Carrier a
license for use of data processing programs.
Administrator warrants that it shall perform its obligations hereunder in
accordance with the Standards of Performance described in Section 3. In
the event errors are attributable to Administrator, Carrier shall notify
Administrator of any errors within a reasonable amount of time after
Carrier learns of such errors and shall accompany notification with
sufficient
5
<PAGE>
documentation for Administrator to correct such errors. Administrator
will correct such errors within thirty (30) days.
Except as expressly set forth in this Agreement, neither party makes any
representations or warranties, express or implied, to each other
including without limitation the warranties or merchantability or fitness
for a particular purpose.
Neither party shall be liable for any indirect, incidental, special,
consequential or punitive damages, regardless of whether such party has
been advised of the possibility of such damages.
The provisions of this Section shall survive the termination of this
Agreement for any reason whatsoever.
6. CONFIDENTIALITY
Administrator will take all reasonable actions to maintain the
confidentiality of all Carrier and Employer data used in the performance
of this Agreement. Administrator will not disclose these data or the
contents of any record maintained pursuant to this Agreement to any party
other than Carrier, Employer or Servicing Agents, without the express
written consent of Carrier.
Neither Administrator nor Carrier shall copy, reproduce or disclose any
confidential information it receives from the other. For the purpose of
this Agreement, confidential information includes all information which
is considered proprietary to Administrator, Carrier, or any of Carrier's
affiliated companies, including but not limited to, information or
materials related to the business affairs or procedures of Administrator,
Carrier, or Carrier's affiliated companies, or the design, programs, flow
charts and documentation of Administrator's or Carrier's data processing
applications system and software.
Should Administrator and Carrier disclose confidential information to
each other, or should Administrator or Carrier learn of confidential
information, neither shall, at any time during or after the term of this
Agreement, disclose such information to any other individual, company or
other entity or agency, nor use such confidential information for any
purpose other than in performance of this Agreement.
The following information shall not be deemed confidential information.
Administrator and Carrier shall have no obligation with respect to any
such information which:
a. is or falls into the public domain through no wrongful act of
Administrator or Carrier; or
6
<PAGE>
b. is rightfully received from a third party without restriction
and without breach of this Agreement; or
c. is approved for release by written authorization of any officer
of Administrator and Carrier, or
d. is disclosed pursuant to the requirements of a governmental
agency or operation of law; or
e. is already in possession of the Administrator or Carrier as
evidenced by their records and is not the subject of a separate
non-disclosure or confidentiality agreement with either of them.
7. COMPENSATION TO ADMINISTRATOR FROM CARRIER
For the services of Administrator described in Section 1, Carrier shall
pay Administrator the service fee as provided for in Schedule I.
For the services of Administrator described in Section 2, Carrier shall
pay Administrator the administrative fee as provided for in Schedule J.
8. OWNERSHIP OF RECORDS
It is specifically agreed that all records developed and maintained
pursuant to Section 2 are the property of Carrier. Upon termination of
Administrator's services pursuant to this Agreement for any reason,
Administrator shall transfer such records to Carrier within ten (10)
business days following the date of termination. Administrator is hereby
granted the right to maintain copies of records as may be required under
applicable law for a period not to exceed the applicable statute(s) of
limitations to document the services performed prior to termination.
9. SUSPENSION OF ADMINISTRATOR'S SERVICES
Administrator's Services as described in Section 2 shall be suspended
with respect to all Employers upon failure of Carrier to make the
compensation payments to Administrator as specified in Section 7 within
thirty (30) days of notification by Administrator that the payment is
overdue by sixty (60) or more days. Suspension of services shall
continue until such payment is made.
7
<PAGE>
10. PARTIAL TERMINATION OF ADMINISTRATOR'S SERVICES
Administrator's Services as described in Section 2 shall terminate with
respect to a specific Employer and each Policy issued to such Employer
upon:
a. Cancellation of that Policy by Carrier or Employer, or
b. Administrator's failure to substantially perform its duties under
this Agreement, unless cured by Administrator within thirty (30)
days of receipt of a written notice by Carrier which specifies
that nature of the alleged failure to perform.
11. COMPLETE TERMINATION OF ADMINISTRATOR'S SERVICES
Administrator's Services as described in Section 2 shall terminate upon:
a. Election by Carrier.
b. Election by Carrier, following: (i) bankruptcy, receivership or
dissolution of Administrator; (ii) the assignment by Administrator
of more than twenty-five (25) percent of its assets for the
benefit of creditors; or (iii) Administrator's failure to follow
Standards of Performance as specified in Section 3 and the
uncorrected existence of any of these circumstances for more than
thirty (30) days; provided, however, that Carrier may elect
immediate termination at any time during the thirty day period
specified in section 16, or thereafter, in the event Administrator
fails to provide Ongoing Services in accordance with the Disaster
Recovery Requirements specified in the first paragraph of the
Disaster Recovery Requirements provision in Schedule M.
12. LICENSED SOFTWARE
The source computer code and associated documentation Administrator uses
to provide the services specified in Section 2 is herein referred to as
"Licensed Software."
13. USE OF ADMINISTRATOR'S LICENSED SOFTWARE
In the event of the termination of Administrator's services pursuant to
Section 10.b or 11.b, Carrier may elect to use Licensed Software to
provide the services specified in Section 2. In the event of such
election:
a. Grant of Perpetual License
Administrator grants Carrier a perpetual license for the use of
the Licensed software and authorizes Carrier's use of the license
only for the purpose of providing the services specified in
Section 2. Administrator retains the right to utilize any ideas,
8
<PAGE>
concepts, know-how, or techniques contained in the materials or
information furnished by Administrator pursuant to this Agreement.
Administrator retains any and all rights it may have under U.S.
Patent Laws, U.S. Statutory Copyright Laws, or other applicable
laws.
b. Confidentiality of Licensed Software
Carrier shall exercise due diligence, at least equal to that which
it exercises for similar property owned by the Carrier, to keep
the Licensed Software confidential. In the event Carrier contracts
to utilize a third party to provide the administrative services
specified in Section 2, Carrier shall inform such third party of
this obligation. Carrier shall be responsible to Administrator for
all damages resulting from Carrier's or such third party's failure
to comply with this provision.
c. Consulting Services
Administrator shall provide advice as to hardware and software
configuration, software installation, and all other matters
reasonably necessary to enable Carrier to perform the data
processing services described in Section 2. The minimum hardware
and software configurations currently required to perform the data
processing services are set forth in the attached Schedule K.
d. Training Services
Administrator shall provide training for personnel of Carrier in the
operation of Administrator's data processing system on a schedule and at
a location to be determined by Carrier. Carrier shall reimburse
Administrator for reasonable out-of-pocket expenses previously agreed to
by Carrier and incurred at Carrier's request, including personnel time at
Administrator's standard rates as identified in Schedule I, travel to and
from Carrier's site, lodging, meals, telephone, and shipping, as may be
necessary.
14. CONTINUED USE
Administrator warrants Carrier's right to continued, uninterrupted use of
the services provided hereunder, subject to the terms hereof, if there is
a successor in interest by merger, operation of law, assignment, purchase
or otherwise. Andesa warrants that the terms and conditions of this
Agreement shall remain intact unless Carrier and Administrator's
successor mutually agree to modify or amend.
9
<PAGE>
15. ESCROW OF PROGRAMS
Administrator agrees to keep on deposit a copy of the latest version of
the compiled and linked (executable) Licensed Software in accordance with
an escrow agreement in the form attached as Schedule L and shall cause
Carrier to be included within its terms and conditions as a Licensee.
Administrator shall place the source computer code (i) for the latest
version of each Program within thirty (30) days of Releases 1, 2 and 3
specified on Schedule B to implement policies on Administrator's
administrative systems; (H) for all subsequent versions of the source
computer code within thirty (30) days of release, (iii) instructions for
compiling, linking, loading, and creating an executable version from the
source code; (iv) a list of the software tools used to create an
executable version; and (v) documentation on how to run and operate the
executable, Licensed Software in a production environment; with an
appropriate escrow agent and will cause such agent to notify Carrier in
writing upon receipt of such source computer code.
Administrator shall choose the escrow agent and assume all costs,
including but not limited to any registration, set-up or deposit fees
associated with escrow charges.
The parties agree that Administrator's failure to place the source
computer code with the escrow agent as required herein shall constitute a
material breach of this Agreement, and in such event, Carrier shall have
the right to obtain the most recent source code deposit and all items
described above from the escrow agent without charge.
In the event of either (a) the termination of Administrator's services
pursuant to Sections 10.b or 11.b; or (b) the failure of Administrator to
achieve the disaster recovery service level specified in Schedule M,
Carrier shall, without charge, receive its copy of all items described
above from the escrow agent within fifteen (15) days.
16. DATA SECURITY, BACKUP AND RECOVERY
Administrator shall provide data security, backup and recovery in
accordance with Schedule M.
In the event Administrator fads to achieve the disaster recovery service
level, specified in Schedule M Administrator shall pay to Carrier as
liquidated damages, and not as a penalty, five thousand dollars
($5000.00) per day for each day the service level is not met during a
thirty day period beginning on the day immediately following the day a
disaster recovery service level specified in Schedule M is not met.
Liquidated damages, as specified above, shall continue to accrue during
the thirty day period specified until Administrator resumes one hundred
percent (100%) of its operational
10
<PAGE>
obligations at its usual place of business or any backup data center. In
the event Administrator is unable to resume one hundred percent (100%) of
its operational obligations during the thirty day period specified,
Carrier may elect to terminate the Agreement pursuant to section 11.b.
Administrator grants to Carrier a non-exclusive license to use the
Licensed Software during any period when Carrier utilizes in-house
operations as a result of Administrator's failure to achieve disaster
recovery service levels.
In the event Administrator fails to achieve the disaster recovery service
level described in Schedule M (without regard to the thirty day period
specified above), Carrier shall have the right to obtain a release of the
Licensed Software and all items deposited in escrow pursuant to section
15. If the most current version is not released to Carrier, Administrator
shall pay to Carrier as liquidated damages, and not as a penalty, $5,000
per day for each day that Carrier is not in receipt of the most current
version, and Administrator shall use best efforts, at its own expense, to
assist Carrier in updating the source code.
17. GENERAL PROVISIONS
a. This Agreement shall be governed by and construed in all respects
in accordance with laws of the State of Pennsylvania; provided,
however, that Administrator shall comply with all applicable
insurance administrator registration and licensing requirements
and shall be responsible for obtaining any necessary
administrator's license, certificate or registration.
b. All disputes between the parties shall be submitted to binding
arbitration in accordance with the commercial arbitration rules of
the American Arbitration Association to be conducted in
Wilmington, Delaware, or some other mutually agreed upon location.
In no event will Administrator attempt to resolve disputes via
failure to perform services. In no event will either party attempt
to resolve disputes via failure to pay amounts due the other;
provided, however, that either party is authorized at any time
either before or after termination of this Agreement to deduct
from any payment due the other party, the entire amount of any
funds owed by the other party.
c. All attached schedules are incorporated herein by reference.
d. Administrator, at all times, shall be an independent contractor
and the employees of Administrator shall in no event be considered
employees of Carrier. No agency relationship between the parties,
except as expressly provided herein, shall exist as a result of
the execution of this Agreement or the performance of duties by
the parties hereunder. Administrator shall have no authority to
accept, settle or compromise claims or accept service of process
on behalf of Carrier. All notices of claims, complaints,
regulatory inquiries or suits on any policy received by
Administrator shall be promptly transmitted to Carrier.
11
<PAGE>
e. Carrier, through its own representatives, from time to time after
the Effective Date, may make such investigation of Administrator
and such audit of its financial condition as it deems necessary or
advisable to familiarize itself with Administrator. In furtherance
thereto, Administrator agrees to provide Carrier with an annual
financial statement and independent auditor's report prepared by a
then Certified Public Accountant chosen by Administrator and shall
not unreasonably withhold information from Carrier concerning
Administrator's interim financial condition. Administrator agrees
to permit Carrier and its authorized representatives to have full
access to the premises and to all books and records of
Administrator pertaining to the business contemplated in this
Agreement during regular business hours and upon reasonable
advance notice to Administrator. Carrier shall have the right to
make copies of books and records and excerpts therefrom.
f. This Agreement and any waiver, amendment or modification of any
provision hereof shall be not binding upon either party until it
is signed by an authorized officer of said party.
g. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and lawful
assigns.
h. All rights, powers and privileges conferred shall be cumulative
and shall not restrict those given by law. No failure of either
party to exercise any power or right given to said parties
hereunder, and no customs or practices of the parties in variance
of the terms hereof shall constitute a waiver of either party's
right to demand exact compliance with the terms hereof.
i. Except as otherwise may be stipulated in this Agreement,
Administrator and Carrier each agree to hold harmless the other
against any and all claims, demands, causes of action, losses,
costs and expenses, including without limitation all costs,
expenses and reasonable attorney's fees (whether based upon tort,
breach of this Agreement, failure to pay employee taxes or
withholdings, failure to obtain workers' compensation insurance,
or otherwise), including reasonable attorney's fees incurred in
appealing an adverse judgment, for death or injury to person,
damage to any property, or any proven direct damages, by
whomsoever suffered, arising out of any act or omission or
negligence on the part of the indemnifying party, its assigns, or
their respective subcontractors, officers, directors, employees,
or servants.
j. The performance by Administrator and Carrier thereunder shall be
subject to delays caused by an Act of God, war, riot, fire,
explosion, accident, flood, sabotage, inability to obtain fuel or
power, governmental laws, regulations or order, acts or inaction
of the other party, or any other cause beyond the reasonable
control of a party, or labor trouble, strike, lockout or
injunction (whether or not such labor event is within the
reasonable control of either party). In the event of any such
delay, the times for
12
<PAGE>
performance as specified in Section 10.b and 11.b will be extended
for an additional sixty (60) days, except as otherwise specified
in Schedule M.
k. Neither party may assign its rights, duties and liabilities
pursuant to this Agreement to any third party (other than their
respective subsidiaries or successors) without prior written
consent of the other party, which consent shall not be
unreasonably withheld.
1. Neither party shall use the name, trade name, servicemarks,
trademarks, trade dress or logo of the other in publicity
releases, advertising or similar activities without the prior
written consent of the other.
m. If any word, phrase, clause or provision of this Agreement is
deemed by any Court to be invalid, illegal or unenforceable, then
notwithstanding such invalidity, illegality or unenforceability,
the remainder of this Agreement shall nevertheless remain in full
force and effect.
n. This Agreement, taken together with supporting documents
incorporated by reference herein, constitutes the entire Agreement
between the parties with respect to the subject matter contained
herein and may only be modified by an amendment executed in
writing by both parties hereto. All prior written or oral
communications, agreements, negotiations and understandings,
except those relating to services provided prior to the Effective
Date of this Agreement (per agreement dated 1/20/93), or
specifically referenced herein, are specifically superseded
hereby.
o. Both parties agree to execute and deliver promptly any and all
further documents which may be necessary or appropriate to fully
and completely carry out the terms and intent of this Agreement.
p. Notices provided for in this Agreement shall be in writing,
addressed to the appropriate party at the respective address set
forth below or to such other address as provided for by notice,
and if sent by mail shall be certified, return receipt requested.
Administrator: Carrier:
Andesa TPA, Inc. Aetna Life Insurance and
1605 N. Cedar Crest Boulevard Annuity Company
Suite 502 151 Farmington Avenue
Allentown, PA 18104 Hartford, CT 06156
Attention: Stanley E. Brallier,
YF9F
Assistant Vice President
q. Each of the undersigned persons represents that he has the
authority to execute this Agreement on behalf of the party for
which he signs.
13
<PAGE>
IN WITNESS WHEREOF the parties have hereto by their duly authorized
representatives executed this Agreement as of the Effective Date.
Andesa TPA, Inc. Aetna Life Insurance and Annuity Company
By: /s/David R. Bridges By: /s/Stanley E. Brallier
------------------------ ------------------------
Name: David R. Bridges Stanley E. Brallier
Title: Executive Vice President Assistant Vice President
Date: 2/3/95 Date: 2/14/95
------------------------ ------------------------
14
<PAGE>
SCHEDULE A - POLICY RIDER AND APPLICATION FORMS
Description Form No.
----------- --------
UL Form
- -------
Flexible Premium Adjustable Life Insurance Policy 70160-92 US Series
Flexible Premium Adjustable Life Insurance Policy 70162-92 US Series
VUL Forms
- ---------
Flexible Premium Variable Universal Life Insurance Policy 70180-93 US Series
Flexible Premium Variable Universal Life Insurance Policy 70182-93 US Series
Term Insurance Rider-UL 70161-92 US Series
Term Insurance Rider - VUL 70181-94 US Series
Simplified Application and 70158-93 US Series
Supplemental Application 70159-93 US Series
Enrollment Form To Be Determined
By Carrier
Form Number "Series" includes endorsement, amendments, and state by state
variations.
Date: 2/3/95
-----------------------
Administrator Carrier
By: /s/DRB By: /s/ SEB
----------------------- -------------------------
A-1 of 1
<PAGE>
SCHEDULE B - SCHEDULE OF DEVELOPMENT TASKS
The support level in all releases must include administrative support for each
variable funding option under VUL.
I. Release 1: Using Carrier's existing System Test environment and a
schedule mutually agreed upon by the Carrier and Administrator, test
events and processing specified by Carrier. As a minimum, Carrier will
provide all specifications required for implementation and the following
support will be tested against Licensed Software and Administrator's
procedures and available in a production environment *
1. Issue support, including Carrier's guaranteed standard issue,
underwritten, and combinations thereof for both cash value accumulation
test and guideline premium test VUL Policies, for:
a. base coverage (i.e., Policy form only),
b. term rider coverage,
c. Policies with table (substandard) ratings,
d. Policies with flat extras (aviation and avocation), and
e. Policies that are exchanged, converted, or replaced.
2. Accounting and commission support (including reversal processing) for:
a. month anniversary processing,
b. initial premium payments,
c. "dump-ins" of premium,
d. "rollovers" of premium,
e. payments up to and in excess of commissionable basic
premium ("CBP"),
f. premium load refund for use in cash value calculations,
g. VUL fund transfers, and
h. VUL fund allocation changes.
3. Integration with the Carrier's daily fund valuation process.
II. Release 2: Using Carrier's existing System Test environment and a
schedule mutually agreed upon by the Carrier and Administrator, test
events and processing specified by Carrier. As a minimum, Carrier will
provide all specifications required for implementation and the following
support will be tested against Licensed Software and Administrator's
procedures and available in a production environment *.
B-1 of 3
<PAGE>
1. Support to change:
a. Servicing Agent,
b. CBP, and
c. Data on groups, by Producer.
2. Support for:
a. increases and decreases in Specified Amounts,
b. policy loans,
c. surrenders (partial and full),
d. processing premium load refunds (VUL),
e. cancellations, including cancellation by exercise of "free look"
rights, and
f lapses.
III. Release 3: Using Carrier's existing System Test environment and a
schedule mutually agreed upon by the Carrier and Administrator, test
events and processing specified by Carrier. As a minimum, Carrier will
provide all specifications required for implementation and the following
support will be tested against Licensed Software and Administrator's
procedures and available in a production environment *.
Support for:
a. death claims,
b. death claims with policy loans,
c. commission recall,
d. premium load refund (VUL),
e. death benefit option changes,
f coverage beyond maturity,
g. preferred policy loans, and
h. reinstatements.
IV. Disaster Recovery Plan in Place.
[Basic requirements to be inserted subject to Carrier's approval.]
* Administrator shall immediately consult with Carrier in the event any
specification is deemed by Administrator to be inaccurate or incomplete.
Administrator and Carrier shall thereafter negotiate appropriate modifications
to the specifications and appropriate revisions to previously agreed upon
completion dates. Carrier shall have the right to elect any negotiated options.
B-2 of 3
<PAGE>
Should the re-implementation of any specification elected by Carrier due to a
revision of a specification, Administrator shall be compensated by Carrier for
the additional resources required.
If, in Carrier's sole discretion, the Policies or Interfaces do not pass
acceptance tests and Administrator is unable, within thirty (30) days of written
notice from Carrier of such failure, to correct any and all deficiencies,
Carrier shall thereupon have the right to terminate this Agreement and/or the
Schedule. Upon such termination, Carrier shall have no obligation to the
Administrator to pay for ongoing services defined in Section 2.
Should Carrier accept the tests of Policies and Interfaces by forwarding a
notice of acceptance (the "Acceptance Notice") to the Administrator, Carrier
will then be obligated to pay as provided in this Agreement.
Date: 2/3/95
-----------------------
Administrator Carrier
By: /s/DRB By: /s/ SEB
----------------------- ------------------------
B-3 of 3
<PAGE>
SCHEDULE C - POLICY VALUES (Monthly by Individual)
Group Number Smoking Status
Policy Number Premium Class
Plan Code/Sub Plan Policy Owner Name/Address
Company Code Rating Codes
State Code Beneficiary Information
Policy Status Division Affiliation
Issue Date
Date of Termination
Insured's Name
Social Security Number
Issue Age
Sex
Maturity Date
Coverage Information - Term Rider
Number of Increases Underwriting Class - Increases
Issue Dates Number of Decreases
Face Amount -Increases Decrease Dates
Face Amount - Decreases Premium Class - Increases
Substandard Rating - Increases
Cash Value Information
Cash Value (by component) Cost of Insurance (by component)
Surrender Charges Interest Credited (by component)
Paid Premiums (first/renewal) Partial Surrenders
Expense Charges (first/renewal)
Death Benefit Information
Death Benefit Option
Premium Accumulation Rate
Accumulated Premiums
Death Benefit
Premium Information
Flat Extra Gross Premium & Period
Planned Annual Gross Premium
Premium Mode
Target Premium
For VUL: include T80 and T100 Premium
Basic Monthly Premium
Excess of Target (first year/renewal)
C-1 of 2
<PAGE>
SCHEDULE C - POLICY VALUES (Monthly/Daily by Individual)
Coverage Information - Base (Monthly)
Number of Increases Premium Class - Increases
Number of Decreases Underwriting Class - Increases
Issue Dates Target Premium - Increases
Decrease Dates Target Premium - Decreases
Face Amount - Increases Substandard Rating - Increases
Face Amount - Decreases
Policy Loan Information (Monthly)
Loan Interest Rate
Loan Interest (Accrued)
Loan Value (by component)
Agent Information (Monthly)
Issue Agency
Agent Code
Agent's Share of Commission
Reinsurance Information (Monthly)
Type
Company Code
Reinsurer Code
Reinsurance Retention Percent
Percentage of COI Charges Reinsured
Percentage of Coverage Reinsured
VUL Fund Information (Daily)
Fund Unit Value (To be Provided by Carrier)
Units Bought, Sold, Transferred or Surrendered (By Funding Option)
Value
Date: 2/3/95
-----------------------
Administrator Carrier
By: /s/DRB By: /s/ SEB
----------------------- -------------------------
D-1 of 1
<PAGE>
SCHEDULE D - REPORTS/DATA TO CARRIER (Monthly/Daily)
<TABLE>
<CAPTION>
UL and VUL (1) File Frequency File Name
- ------------- ---- --------- ---------
<S> <C> <C> <C>
Accounting Interface Data Daily F766S6.LIA.CSM.ACCTEXT.Y
Accounting Interface Report Daily F766S6.LIA.CSM.ACCTRPTS.Y
Accounting Interface Report Monthly F766S6.LIA.CSM.MTHACCT.Y
Policy Data Base Interface Data Monthly F7VRS6.AND.POLICYDB
Policy Data Base Interface Report Monthly F7VRS6.AND.MISREPTS
Compensation Interface Data Daily F713S6.AND.J7VT603.AGTCOMP
Compensation Interface Report Daily F713S6.AND.J7VT604.AGTCOMP
INDEX Interface Data Daily F719S6.AND.INDEXCSM
Reinsurance Interface Data Monthly F7VRS6.AND.REINSCOI
Carrier Input Transfer File Data Variable F7VRS6.AND.CSM.INPUT
VUL Only (1)
- ------------
Unit Asset Value ("UV") Data Daily ANDUVINP.CSV
File
UV History File Update Report Daily
Report
Administration Reports Report Daily
Administration Report Data Daily ANDCONTR.CSV
File
</TABLE>
(1) The format for transmission of all data and reports shall be
substantially similar to that detailed in the Aetna/Andesa Interface
Specifications Manual furnished by Carrier to Administrator, unless
otherwise agreed by Carrier.
Date: 2/3/95
-----------------------
Administrator Carrier
By: /s/DRB By: /s/ SEB
----------------------- -------------------------
D-2 of 1
<PAGE>
SCHEDULE E - REPORTS TO SERVICING AGENT Monthly by Insured and in Total) All
Reports shall list the name of the Case (as defined in Schedule J), Case number,
and reporting period.
Death Benefit Report
Employee Name Initial Base Face Amount
Policy Number Current Face Amount
Issue Age Term Face Amount
Policy Year/Date Gross Face Amount
Year in Force Policy Debt
Net Death Benefit
Cash Value Report
Employee Name Current Accumulated Cash Value
Policy Number Policy Debt
Issue Age Surrender Charge
Policy Year/Date Net Surrender Value
Year in Force
Premium Report
Employee Name Planned Premium
Policy Number Premiums Paid From (Reporting
Issue Age Period Date)
Policy Year/Date Premiums Paid Since Issue
Year in Force
Loans and Withdrawals Report
Employee Name Policy Debt
Policy Number Total Available Loan
Issue Age Withdrawals From
Policy Year/Date Total Withdrawals
Year in Force Premiums Paid Since Issue
E-1 of 2
<PAGE>
Investment Allocation Report
Employee Name Assets by Fund
Policy Number Total assets by policy
Issue Age Total by fund
Policy Year/Date
Year in force
Cash Reconciliation Report (Policy Level)
Employee Name Pre-earnings Balance
Policy Number Interest Earnings
Prior Policy Month End Balance Ending Balance
Premium Surrender Penalty
Premium Expense Premium Load Credit
Policy Fee Cash Surrender Value
Cost of Insurance Column Totals
Withdrawals
Cash Flow Report (Case Level)
TO BE DETERMINED
Additional Communications
Premium and Lapse Notices
Policy Pages
Reinsurance Report
Confirmations
Annual Report - Policy Level, Case Level, Division Level
Insured Name Plan of Insurance
Policy Number Rider Information
Date of Issue Summary of Policy Values
Owner Summary of Transactions
Serviced by Interest Rates
[Other Reports To Be Defined]
Date: 2/3/95
-----------------------
Administrator Carrier
By: /s/DRB By: /s/ SEB
----------------------- -------------------------
E-2 of 2
<PAGE>
SCHEDULE F - REPORTS TO EMPLOYER (Monthly by Insured and in Total)
All Reports shall list the name of the Case (as defined in Schedule J), Case
number, and reporting period.
Death Benefit Report
Employee Name Initial Base Face Amount
Policy Number Current Face Amount
Issue Age Term Face Amount
Policy Year/Date Gross Face Amount
Year in Force Policy Debt
Net Death Benefit
Cash Value Report
Employee Name Current Accumulated Cash Value
Policy Number Policy Debt
Issue Age Surrender Charge
Policy Year/Date Net Surrender Value
Year in Force
Premium Report
Employee Name Planned Premium
Policy Number Premiums Paid From (Reporting
Issue Age Period Date)
Policy Year/Date Premiums Paid Since Issue
Year in Force
Loans and Withdrawals Report
Employee Name Policy Debt
Policy Number Total Available Loan
Issue Age Withdrawals From
Policy Year/Date Total Withdrawals
Year in Force Premiums Paid Since Issue
F-1 of 2
<PAGE>
Investment Allocation Report
Employee Name Assets by Fund
Policy Number Total assets by policy
Issue Age Total by fund
Policy Year/Date
Year in force
Cash Reconciliation Report (Policy Level)
Employee Name Pre-earnings Balance
Policy Number Interest Earnings
Prior Policy Month End Balance Ending Balance
Premium Surrender Penalty
Premium Expense Premium Load Credit
Policy Fee Cash Surrender Value
Cost of Insurance Column Totals
Withdrawals
Cash Flow Report (Case Level)
TO BE DETERMINED
Additional Communications
Premium and Lapse Notices
Policy Pages
Reinsurance Report
Confirmations
Annual Report - Policy Level, Case Level, Division Level
Insured Name Plan of Insurance
Policy Number Rider Information
Date of Issue Summary of Policy Values
Owner Summary of Transactions
Serviced by Interest Rates
Date: 2/3/95
-----------------------
Administrator Carrier
By: /s/DRB By: /s/ SEB
----------------------- -------------------------
F-2 of 2
<PAGE>
SCHEDULE G - DATA PROCESSING RECORDS MAINTAINED
The following data records will be maintained indefinitely in machine readable
format.
Data Pertaining to All Insureds (Monthly)
Earnings Rate(s)-Unborrowed Cash Value Earnings Rate - Borrowed Cash Value
Premium Expense Rate Per Capita Administrative Charge
Loan Interest Rate Target Premium Load Rates
Cost of Insurance Tables
Data Maintained Separately for Each Insured (At Issue and Upon Change in Data)
Birthdate Name
Sex Social Security Number
Issue Date Policy Number
Policy Owner Name/Address
Data Maintained Separately for Each Insured (Monthly)
State Residence Code Aetna Region Code
Division Affiliation Health Status
Cash Value Balance Cash Value Partial Surrenders
(new and old money) Cash Value Earnings - Unborrowed
Cash Value Earnings - Borrowed (new and old money)
Cash Value Withdrawal Deposits to Unborrowed Cash Value
Premium Allocation Loan Balance
Premiums Paid Loan Interest - Non-Deductible
Loan Interest - Deductible Monthly Fee
Loan Repayments Death Benefit (base and term)
Cost of Insurance Attained Age
Premium Expense Charge Smoking Status
Premium Allocation Policy Status
Premium Class Commissionable Premium Components
Billing Frequency
Rating Codes
Commission Agent/Agency Data
Date: 2/3/95
-----------------------
Administrator Carrier
By: /s/DRB By: /s/ SEB
----------------------- -------------------------
G-1 of 1
<PAGE>
SCHEDULE G-1 - PROHIBITED AND RESTRICTED ARRANGEMENTS
While the Agreement is in force, and unless Carrier expressly agrees otherwise
in writing, Administrator agrees to comply with the following restrictions on
its activities:
No common employees
Administrator shall have no common employees with an insurance agency or
insurance broker.
No control
Administrator shall not be subject to control in connection with any service
performed under this Agreement, whether by means of partnership, joint venture
or otherwise, by an insurance agency or insurance broker.
No common telephone lines
Administrator shall have its own telephone lines to perform its work and shall
have its telephones answered in its own name, and not in the name of any
insurance agency or insurance broker, nor by employees of any insurance agency
or insurance broker.
No joint promotion
Administrator shall not commingle its promotional material with that of any
insurance agency or insurance broker. "Promotional material" of Administrator
shall include, but not be limited to its letters, brochures and other documents
describing Administrator's services.
Signage
Administrator shall display signage on its premises, whether owned or leased,
including common areas such as a lobby or building directory, which shall not
disclose that Administrator is affiliated or associated with any insurance
agency or insurance broker. Administrator shall cause signage to be erected or
displayed on the entrance to its office and from all common areas and in all
building directories, naming Administrator. The provisions of this paragraph
shall not apply, however, to the extent that any leasor not affiliated with
Administrator reasonably imposes restrictions on signage pursuant to the terms
of a then current lease with Administrator.
Disclosure
The terms of this Schedule G-1 may be disclosed by Carrier to any of its
existing or prospective insurance producers, general agents or insurance
brokers.
Date: 2/3/95
-----------------------
Administrator Carrier
By: /s/DRB By: /s/ SEB
----------------------- -------------------------
G-1, 1 of 1
<PAGE>
SCHEDULE H - STANDARDS OF PERFORMANCE
1. Policy Issue. Administrator shall use best efforts to issue each Policy as
required by Section 2.a of the Agreement within two days following receipt by
the Administrator of issue instructions and accurate related data in machine
readable format from Carrier. Administrator shall promptly notify Carrier in the
event Administrator becomes aware of a delay for any reason.
2. Claim Notification. Administrator shall transmit to Carrier written notice of
all claims Administrator has received, whether in writing or orally, within one
business day of receipt of such notice by Administrator. Administrator shall
time stamp each written claim notification it has received, and shall maintain a
written record in a log or otherwise the time that each oral claim is received.
3. Variable Processing and Reporting.
a. Confirmations. Administrator shall prepare a written confirmation
of each transaction in compliance with applicable law in a form satisfactory to
Carrier. Administrator shall transmit confirmations within one business day
after each transaction to Policy Owner or his designee, to Servicing Agent if
so designated by Carrier, and if elected by Carrier, to Carrier.
b. Daily Valuation Processing. Each day, Administrator shall compute the
then current value for each funding option of a Policy affected by one or more
Policy transactions for that day. "Policy transactions" for these purposes shall
include, but not be limited to, premium payments, funding option transfers,
partial or full surrenders, or Policy loan disbursements which affect the total
number of units or the Unit Asset Value ("UV") of any variable funding option
under a Policy. Administrator shall make such computations and transmit same to
Carrier by Interface no later than midnight on each day the New York Stock
Exchange is open for business or as otherwise specified in the prospectus of
each VUL.
c. Processing Schedules.
i. Monthly Processing. Administrator shall transmit to Carrier all
monthly reports required by Schedule D, in computer readable form no later than
midnight on the last day of the month covered by the report, and maintain
capability to provide same in hard copy.
ii. Daily Processing. Administrator shall transmit to Carrier all
daily reports required by Schedule D, in computer readable form no later than
midnight of the day covered by the report, and maintain capability to provide
same in hard copy.
iii. Routine Processing. Administrator shall calculate and deduct the
cost of insurance ("COI") and all monthly policy fees on the first day of each
policy month for all policies.
H-1 of 3
<PAGE>
iv. Acceleration of Schedule. Administrator shall use best efforts
to accelerate monthly and daily processing at the request of Carrier.
d. Corrective Measures. Administrator shall provide Carrier with one or
more designated contacts who shall be available on a 24 hour basis to resolve
problems of an emergency nature involving the transmission of data to Carrier,
or the processing of reports. Such instances are expected to occur infrequently,
and Carrier and Administrator will take all reasonable actions to limit their
occurrence.
e. Correction of Unit Asset Value Errors. Administrator, at its own
expense, shall correct each UV and each VUL Policy value within one business day
of the time when it became aware of an error in the UV or the number of units of
any VUL Policy provided, however, that Carrier shall be responsible for the
expense of correction of any UV or VUL Policy value due to the transmission of
incorrect data by Carrier.
4. Communications with Carrier and with Policy Owners.
a. Material Issues. Administrator shall provide prompt notification to
Carrier in writing of all "material issues" affecting each Policy and VUL.
Prompt notification shall mean written notification within 48 hours of the time
Administrator became aware or received notice of any material issue. "Material
issues" shall mean any material fact or circumstance concerning a Policy Owner,
a Policy, the UV, any report or confirmation or the transmission of any report
or confirmation, including, but not limited to: policy surrenders, processing
problems, and vacation schedules of the Administrator's personnel.
b. Confirmations. Administrator shall promptly notify Carrier in writing
of all transactions placed by Producers with respect to any Policy.
c. Planned Premium Payment Notice. Administrator shall transmit to the
Policy owner or his designee a complete and correct planned premium notice
thirty-five days before the planned premium due date. In the event such
thirty-fifth day is not a business day, Administrator shall send such notice on
the immediately following business day.
d. Unpaid Bills. Administrator shall notify Carrier in writing of all
unpaid bills, including unpaid planned premiums due with respect to Policies,
within 15 days after the date on which such payment is due.
e. "Lapse Pending" Notice. Administrator shall send a "Lapse Pending"
Notice, in a form approved by Carrier in writing, to each Policy owner (with
copies to Producer and Carrier) no later than two business days following the
monthly deduction day of a Policy that coincides with the start of the 61-day
grace period with respect to each Policy that has entered such grace period.
H-2 of 3
<PAGE>
f. Lapse Notice. Administrator shall send a "Lapse Notice", in a form
approved by Carrier in writing to each Policy owner (with copies to Producer and
Carrier) on the twenty-sixth day of each grace period under such Policy, unless
otherwise instructed by Carrier. In the event the twenty-sixth day is not a
business day, Administrator shall send such notice on the immediately following
business day.
5. Standards of Performance Report. Administrator shall provide Carrier with a
report within five days following the end of each month that the Agreement is in
effect, in format acceptable to Carrier, that describes Administrator's
adherence to the standards set forth in this Schedule H during such month.
Date: 2/3/95
-----------------------
Administrator Carrier
By: /s/DRB By: /s/ SEB
------------------------ -------------------------
H-3 of 3
<PAGE>
SCHEDULE I - SERVICE FEES FOR DEVELOPMENT TASKS
Administrator will maintain a record of hours of services performed and provide
Carrier with a monthly invoice to describe hours of service during the
immediately preceding month. Such hours will be converted to service fees
according to the rate schedule outlined below. All invoices will be prepared to
describe the services provided, and by whom, during the period. Such fees are
due within thirty (30) calendar days of billing. Overdue bills shall be payable
in the amount billed plus 1.5% for each month or partial month overdue.
For the implementation of initial UL insurance products, Administrator will
advise Carrier if sum total service fees are expected to exceed $100,000 and
will not proceed without additional approval of tasks by Carrier. In no event
will the sum total fees for UL exceed $150,000.
For implementation of the VUL products, Administrator will advise Carrier if
total service fees are expected to exceed $50,000 and will not proceed without
additional approval of tasks by Carrier. In no event will the sum total service
fees for VUL exceed $75,000.
HOURLY PATE SCHEDULE:
Rate Class 1994 Rate 1995 Rate
Principal $215 $215
Kim Bohling
John Walker
David Bridges DRB SEB (no charge)
Sr. Professional $150 $150
William Smith
David March
James Caskie DRB SEB (no charge)
Dan Desfosses
Linda Ellison
David Harland
Professional $100 $100
Margaret May
Alex Linderman
Support All Other $60 $60
Service Fees are subject to change by Administrator on each January 1 while the
Agreement is in force; provided that: (a) sixty day advance notice is provided
to Carrier; and (b) any new Service Fees are no greater than those charged by
Administrator to its most favored customers.
Date: 2/3/95
-----------------------
Administrator Carrier
By: /s/DRB By: /s/ SEB
----------------------- -------------------------
I-1 of 1
<PAGE>
SCHEDULE J - ONGOING ADMINISTRATIVE FEES
On going administrative fees will be calculated and billed monthly by
Administrator. Fees are due within 30 calendar days of billing. Overdue bills
shall be payable in the amount billed plus 1.5% for each month or partial month
overdue.
All invoices will reference the Carrier's purchase order which Carrier shall
supply and be addressed as follows:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, CT 06156
Attention: Stanley E. Brallier, Assistant Vice President, YF9F
Definitions
For purposes of this Schedule J:
"Case" means all Policies owned by an Employer (or issued or transferred to
employees of an Employer) which share a common Policy form.
"CPI" means the U.S. Bureau of Labor Statistics consumer price index for all
urban consumers - all items.
"Participant" means each in-force policy required for an individual insured.
Election of Billing Options
On or before the date the first Policy is issued in a Case, Carrier shall elect
a Billing Option for that Case and notify Administrator accordingly. Carrier may
also change (no more often than once every 12 months) the Billing Option for any
Case upon thirty day prior notice to Administrator.
Billing Option I
While Billing Option I is in effect for a Case, Carrier shall be billed monthly
for that Case as follows:
(i) $375.00 per Option I Case for the first ten Option I Cases;
$250.00 per Option I Case for the next ten Option I Cases;
$125.00 for all remaining Option I Cases; plus
J-1 of 3
<PAGE>
(ii) $3.00 per Option I Case Participant multiplied by the ratio of the CPI
for October of the calendar year immediately preceding the start of the
billing period divided by the CPI for October, 1992. The October, 1992
CPI will be adjusted as necessary to correspond to the same base year as
the current billing year.
Option I Development Service Fee
If Billing Option I is in effect for a Case, Administrator shall waive any
development tasks service fees described on Schedule I with respect to
customized reports developed for that Case.
Billing Option II
If Billing Option II is in effect for a Case, direct communication between
Administrator and Broker or Employer shall be limited to that required to
perform standard transactions.
While Billing Option II is in effect for a Case, Carrier shall be billed monthly
for that Case as follows:
(i) $50.00 per Option II Case, plus
(ii) $25.00 per Option II Case Participant.
(iii) Cost of preparing any customized reports or performing any other
non-standard services.
Monthly Product Fee
Following acceptance by Carrier of the tests of Policies and Interfaces
described in Schedule B, Carrier shall be billed a monthly product fee ("Monthly
Product Fee") of $1,250.00 per product (e.g. UL; VUL)
Incidental Claim Service Fee
The Administrators actual cost of obtaining death certificates, if so requested
by Carrier, shall be billed monthly, but not in excess of Pension Benefits
Information's (or an equivalent service) published rate for this service.
Total Monthly Administrative Fee
While this Agreement is in effect, the total monthly administrative fee is the
sum of the applicable: (a) Billing Option I fees; (b) Billing Option II fees;
(c) Monthly Product Fee(s); and (d) Incidental Claim Service Fees. Case and Case
Participant administrative fees are billed monthly from the date the
Administrator issues the policy until the date coverage ceases.
J-2 of 3
<PAGE>
In the event of the termination of Administrator's services pursuant to Section
11.a. prior to the third anniversary of the execution of this Agreement, the
monthly fee will be calculated and paid for all Cases and Participants active as
of the termination date until the third anniversary of the execution of this
Agreement at the Billing Option in effect at the time of cancellation.
Date: 2/3/95
-----------------------
Administrator Carrier
By: /s/DRB By: /s/ SEB
----------------------- -------------------------
J-3 of 3
<PAGE>
SCHEDULE K - EQUIPMENT AND SOFTWARE REQUIREMENTS
TPA AGREEMENT
This schedule specifies the minimum software and hardware environment required
to execute, without modification, the Andesa TPA software utilizing the master
data files.
Personal computer with:
48 megabytes RAM
500 megabytes of hard disk storage
3.5 " and 5.25 " floppy drives
DC-6150 1/4" cartridge tape drive
Printer - HP Laser Jet III, IV or compatible
SCO Unix version 3.2 or later
All applications software is written in Pascal with the exception of several low
level C routines. The Unix C shell operating system environment is required.
Date: 2/3/95
-----------------------
Administrator Carrier
By: /s/DRB By: /s/ SEB
----------------------- -------------------------
K-1 of 1
<PAGE>
SCHEDULE L - TECHNOLOGY ESCROW AGREEMENT
[TO BE INSERTED]
Account Number 0114010-30004-0105002
---------------------
L-1 of 1
<PAGE>
TECHNOLOGY ESCROW AGREEMENT
Account Number 0114010-30004-0105002
---------------------
This Technology Escrow Agreement ("Agreement") is effective this 1st day of
March, 1994, by and between Data Securities international, Inc., its successors
and assigns ("Escrow Agent"), a Delaware corporation, Andesa TPA, Inc., its
successors and assigns ("Licensor"), a Pennsylvania corporation, and Aetna Life
Insurance and Annuity Company, its successors and assigns ("Licensee"), a
Connecticut corporation.
Notices to Licensor, Licensee and Escrow Agent should be sent to the parties as
identified in the attached Exhibit A.
WHEREAS, Licensor has or will enter into a contract with the Licensee for the
use of proprietary technology and other materials of Licensor;
WHEREAS, availability of or access to certain proprietary data related to the
proprietary technology and other materials is critical to Licensee in the
conduct of its business;
WHEREAS, Licensor has deposited or will deposit with Escrow Agent the related
proprietary data to provide for retention and controlled access for Licensee
under the conditions specified below;
NOW THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, and in consideration of the promises, mutual covenants and
conditions contained herein, the parties hereto agree as follows:
1. Licensor Deposit Account. Following the execution of this Agreement and
the payment of the set-up and deposit fees to Escrow Agent, Escrow Agent
shall open a Deposit Account for Licensor. The opening of the account
means (a) that Escrow Agent shall establish an account ledger in the name
of the Licensor and (b) that Licensor shall receive the notice of time
for renewal as provided in Section 7. Unless and until Licensor makes an
Initial Deposit with Escrow Agent, Escrow Agent shall have no obligation
to Licensor except as defined by this Section.
2. Initial Deposit. The Initial Deposit will consist of all material
initially supplied by Licensor to Escrow Agent as specified by an
accompanying document called a "Description of Deposit Materials"
hereinafter referred to as an Exhibit B. Escrow Agent shall issue to
Licensor and Licensee a copy of the Exhibit B within ten (10) days of
acceptance by Escrow Agent of the Initial Deposit.
1
<PAGE>
3. Deposit Changes. Unless otherwise provided by this Agreement Addenda or
Exhibits, the Licensor has the obligation to keep the Deposit updated
with supplemental or replacement materials.
a. Supplemental Deposit. This Supplemental Deposit will include
any materials added to the Deposit. Licensor will submit the
Supplemental Deposit accompanied by an Exhibit B. Within ten
(10) days of acceptance by Escrow Agent of such Supplemental
Deposit, Escrow Agent shall notify Licensor and Licensee by
issuing a copy of the Exhibit B.
b. Replacement Deposit. Replacement materials replace the
existing Deposit defined by an Exhibit B or all Exhibit B's.
Portions of an Exhibit B Deposit may not be replaced.
Licensor will submit the Replacement materials accompanied
by an Exhibit B. Within ten (10) days of acceptance by
Escrow Agent of such Replacement materials, Escrow Agent
shall notify Licensor and Licensee by issuing a copy of the
Exhibit B. Escrow Agent will destroy or return to Licensor
all materials that are replaced by the Replacement
Materials.
4. Deposit Inspection. Upon the receipt of the initial Deposit and any
Deposit Changes, Escrow Agent will visually match the listed items on the
Exhibit B to the labeling of such materials received. Escrow Agent shall
not be responsible for verifying the contents or validating the accuracy
of Licenser's labeling. Acceptance of the Deposit will occur only when
Escrow Agent concludes that the Deposit Inspection is complete.
5. Licensee Registration Account. Following the execution of this Agreement
and the payment of the registration fee to Escrow Agent, Escrow Agent
shall open a Registration Account for Licensee. The opening of the
Registration account means (a) that Escrow Agent shall establish an
account ledger in the name of the Licensee and (b) that Licensee shall
receive the notice of time for renewal as provided in Section 7. Unless
and until Licensor makes an Initial Deposit of Materials with Escrow
Agent, Escrow Agent shall have no obligation to Licensee except as
defined by this section.
6. Deposit Obligations of Confidentiality. Escrow Agent agrees to establish
a receptacle in which it shall place the Deposit and shall put the
receptacle under the control of one or more of its officers, selected by
Escrow Agent, whose identity shall be available to Licensor at all times.
Escrow Agent shall exercise a professional level of care in carrying out
the terms of this Agreement.
Escrow Agent acknowledges Licensor's assertion that the Deposit shall
contain proprietary data of Licensor and that Escrow Agent has an
obligation to preserve and protect that confidentiality.
2
<PAGE>
7. Term of Agreement. This Agreement will have an initial term of one year,
commencing on the effective date of this Agreement. This Agreement may be
renewed for additional one-year periods upon receipt by Escrow Agent of
the specified renewal fees. In the event that the renewal fees are not
received within thirty (30) days before the expiration date, Escrow Agent
shall so notify Licensor and Licensee of the thirty (30) day expiration
period. If the renewal fees are not received within the subsequent thirty
(30) days, this Agreement will expire without further notice and without
liability of Escrow Agent to the parties of this Agreement. Licensee has
the right to pay renewal fees and other related fees.
8. Expiry. Upon non-renewal or other termination of this Agreement, all
duties and obligations of Escrow Agent co Licensor and Licensee will
terminate. If Licensor requests the return of the Deposit, Escrow Agent
shall return the Deposit to Licensor only after all outstanding invoices
and the deposit return fees are paid. If the fee(s) are not received by
the anniversary date of this Agreement Escrow Agent shall, at it's
option, destroy or return the Deposit to Licensor.
9. Release of Deposit to Licensee. Upon Licensee's written instruction,
Escrow Agent will:
a. Release Deposit to Licensee; and
b. Notify by certified mail within five (5) working days of release that
release has been made.
10. Indemnification. Licensor and Licensee agree to defend and indemnify
Escrow Agent and hold Escrow Agent harmless from and against all claims,
actions and suits, whether in contract or in tort, and from and against
any and all liabilities, losses, damages, costs, charges, penalties,
counsel fees, and other expenses of any nature (including. without
limitation settlement costs) incurred by Escrow Agent as a result of
performance of this Agreement except in the event of a judgment which
specified that Escrow Agent acted with gross negligence or willful
misconduct.
11. Audit Rights. Escrow Agent agrees to keep records of the activities
undertaken and materials prepared pursuant to this Agreement. Licensor
and Licensee will be entitled at reasonable times, during normal business
hours and upon reasonable notice to Escrow Agent, during the term of this
Agreement to inspect the records of Escrow Agent with respect to this
Agreement.
Licensor or Licensee will be entitled, upon reasonable notice to Escrow
Agent and during normal business hours, at the facilities designated by
Escrow Agent, accompanied by a designated employee of Escrow Agent, to
inspect the pbysical status and condition of the Deposit. The Deposit may
not be changed by Licensor or Licensee during the audit.
3
<PAGE>
12. Designated Representative. Licensor and Licensm agree to desigriate one
individual each to receive notices from Escrow Agent and to act on behalf
of Licensor and Licensee respectively with respect to the performance of
their obligations as set forth in this Agreement and to notify Escrow
Agent immediately, as stipulated in Exhibit A, in the event of any change
from one Designated Representative to another.
13. General. Escrow Agent may act in reliance upon any written instruction,
instrument, or signature believed to be genuine and may assume that any
person giving any written notice, request, advice or instruction in
connection with or relating to this Agreement has been duly authorized to
do so. Escrow Agent is not responsible for failure to fulfill its
obligations under this Agreement due to causes beyond its control.
This Agreement is to be governed by, and construed in accordance with the
laws of the State of California.
This Agreement, including the Exhibits and Addenda hereto constitutes the
entire Agreement between the parties concerning the subject matter
hereof, and will supersede all previous communications, representations,
understandings, and agreements, either oral or written, between the
parties.
If any provision of this Agreement is held by any court to be invalid or
unenforceable, that provision will be severed from this Agreement and the
remaining provisions will continue in full force.
14. Fees. All service fees will be due in full at the time of the request for
service. Renewal fees will be due in full upon the receipt of invoice
unless otherwise specified by the invoice. For the purpose of annual
renewal fees the effective date of this Agreement will be the anniversary
date. Invoiced fees must be paid within sixty (60) days of receipt of
invoice or Escrow Agent may terminate this Agreement. If payment is not
timely received by Escrow Agent, Escrow Agent shall have the right to
accrue and collect interest at the rate of 1 and 1/2% per month (18% per
annum) from the date of invoice for all late payments.
4
<PAGE>
All service fees and annual renewal fees will be those specified in Escrow
Agent's Schedule of Fees in effect at the time of renewal, or request for
service, except as otherwise agreed. For any increase in Escrow Agent's standard
fees, Escrow Agent shall notify Licensor and Licensee at least ninety (90) days
prior to any renewal of this Agreement. For any service not listed on the
Schedule of Fees, Escrow Agent shall provide a quote prior to rendering such
service.
<TABLE>
<S> <C> <C>
Date: 3/1/94 Date: 2/17/94 Date: 3/3/94
------------------------ ----------------------- ------------------------
Andesa TPA, Inc. Aetna Life Insurance and Data Securities Int'l, Inc.
Annuity Co.
By: /s/Kimberly Bohling By: /s/Stanley E. Brallier By: /s/ Kirk Sanella
------------------------ ----------------------- ------------------------
Kimberly Bohling Stanley E. Brallier
Vice President Vice President
</TABLE>
5
<PAGE>
EXHIBIT A
Account Number 0114010-30004-0105002
---------------------
Designated Representatives and Locations
Notices to Licensor should be sent to:
Licensor: Andesa TPA, Inc.
1621 North Cedar Crest Boulevard
Suite 102
Allenstown, Pennsylvania 18104
Designated
Representative: William Smith
Manager, Systems
215-821-8980
Notices to Licensee should be sent to:
Licensee:
Address:
Designated
Representative:
Phone:
All notices to change the designated representative and or the name, address or
telephone number from Licensee or Licensor must be signed by an officer of
Licensee or Licensor as the case may be.
All contracts, deposit materials and notices to Escrow Agent should be sent to:
Data Securities International, Inc.
Attn: Contract Administration
6165 Greenwich Drive, Suite 220
San Diego, CA 92122
619-457-5199
Date:
6
<PAGE>
SCHEDULE M - DATA SECURITY, BACKUP AND RECOVERY
Administrator agrees to maintain software and data for the purpose of daily
backup and recovery as follows:
Software:
Backup copies of executables, source code and compilers will be stored in a heat
resistant safe on site.
Backup copies of executables and source code will be stored off-site in a bank
vault located at least one mile from Administrator's office.
Data:
Original census data will be stored permanently in a bank vault.
All current and historical processing data is maintained on magnetic
media, stored as follows.
Current month: On site in heat resistant safe
First previous month: Off site in bank vault
Second previous month: On site in heat-resistant safe
Third previous month: On site in heat-resistant safe
Editing input log for current month stored in bank vault
All Employer and Servicing Agent reports are maintained as follows:
Copy to Carrier
Copy on site in heat-resistant safe
Disaster Recovery Requirements:
In the event Administrator is unable to provide the Ongoing Services specified
in the Agreement for any reason, including but not limited to physical damage to
equipment or facilities at its regular place of business or any back-up data
center, or any other malfunction in equipment, telecommunications links and
devices or software, Administrator shall restore 100% capability to process VUL
UL values within twenty-four (24) hours of the point of failure; 75% of
capability for other services and reports on the formats specified herein with
seventy-two (72) hours of the point of failure; and to 100% capability for all
other services and reports in the formats specified herein, within five (5) days
of the point of failure.
M-1 of 2
<PAGE>
Administrator shall maintain the capability for full and complete test of its
disaster recovery plan, as may be requested by Carrier on an annual basis while
the Agreement is in effect. In the event of such request, Administrator shall
provide Carrier with written confirmation of its test results. Administrator's
failure to provide test results that, are satisfactory and in accordance with
reasonable commercial standards, shall constitute a failure to follow Standards
of Performance for purposes of section 11.b of the Agreement.
Date: 2/3/95
-----------------------
Administrator Carrier
By: /s/DRB By: /s/ SEB
----------------------- -------------------------
M-2 of 2
[Aetna Letterhead]
151 Farmington Avenue
Hartford, CT 06156
Kirk P. Wickman
General Counsel
Law Division, RW4A
Investments & Financial Services
July 29, 1997 (860) 273-6128
Fax: (860) 273-1548
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Attention: Filing Desk
Re: Aetna Life Insurance and Annuity Company and its Variable Life Account B
Post-Effective Amendment No. 5 to Registration Statement on Form S-6
Prospectus Title: Corporate Variable Universal Life
File Nos.: 33-75248 and 811-4536
Dear Sir or Madam:
The undersigned serves as counsel to Aetna Life Insurance and Annuity Company, a
Connecticut life insurance company (the "Company"). It is my understanding that
the Company, as depositor, has registered an indefinite amount of securities
(the "Securities") under the Securities Act of 1933 (the "Securities Act") as
provided in Rule 24f-2 under the Investment Company Act of 1940 (the "Investment
Company Act").
In connection with this opinion, I have reviewed the S-6 Registration Statement
as amended to the date hereof and this Post-Effective Amendment No. 5. I have
also examined originals or copies, certified or otherwise identified to my
satisfaction, of such documents, trust records and other instruments I have
deemed necessary or appropriate for the purpose of rendering this opinion. For
purposes of such examination, I have assumed the genuineness of all signatures
on original documents and the conformity to the original of all copies.
I am admitted to practice law in Connecticut, and do not purport to be an expert
on the laws of any other state. My opinion herein as to any other law is based
upon a limited inquiry thereof which I have deemed appropriate under the
circumstances.
<PAGE>
Based upon the foregoing, I am of the opinion that the Securities have been
legally authorized and, assuming that the Securities have been issued and sold
in accordance with the provisions of the prospectus being registered, will be
legally issued.
I consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
/s/ Kirk P. Wickman
Kirk P. Wickman
151 Farmington Avenue
Hartford, CT 06156
Mark S. Reilly, FSA, MAAA
Pricing Actuary
Life Products Group, TN41
(860) 273-4436
Fax: (860) 273-4438
June 26, 1997
Re: CVUL (File No. 33-75248)
Dear Sir or Madam:
In my capacity as Actuary of Aetna Life Insurance and Annuity Company (ALIAC), I
have provided actuarial advice concerning ALIAC's Corporate Variable Universal
Life Flexible Premium Variable Universal Life Insurance Policy (the "Policy"). I
also provided actuarial advice concerning the preparation of Post-Effective
Amendment No. 5 to Registration Statement on Form S-6, File No. 33-75248 (the
"Registration Statement") for filing with the Securities and Exchange Commission
under the Securities Act of 1933 in connection with the Policy.
In my opinion the illustrations of benefits under the Policy included in the
prospectus under the caption "Illustrations of Death Benefit, Total Account
Values and Surrender Values" are, based on the assumptions stated in the
illustrations, consistent with the provisions of the Policy. Also, in my opinion
the age selected in the illustrations is representative of the manner in which
the Policy operates.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ Mark S. Reilly
Mark S. Reilly
Pricing Actuary
The Board of Directors of Aetna Life Insurance and Annuity Company and
Policyholders of Aetna Variable Life Account B:
We consent to the incorporation by reference into Registration Statement
(No. 33-75248) on Form S-6 our reports dated February 4, 1997 and
February 14, 1997.
KPMG Peat Marwick LLP
Hartford, Connecticut
July 29, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000785986
<NAME> Aetna Variable Life Account B
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 235,848,312
<INVESTMENTS-AT-VALUE> 244,765,030
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 244,765,030
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 244,765,030
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 244,765,030
<DIVIDEND-INCOME> 2,905,983
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (335,872)
<NET-INVESTMENT-INCOME> 2,570,111
<REALIZED-GAINS-CURRENT> 1,018,701
<APPREC-INCREASE-CURRENT> (5,215,951)
<NET-CHANGE-FROM-OPS> (1,627,139)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000785986
<NAME> Aetna Variable Life Account B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 209,041,214
<INVESTMENTS-AT-VALUE> 223,173,883
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 223,173,883
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 223,173,883
<DIVIDEND-INCOME> 13,813,478
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,905,137
<NET-INVESTMENT-INCOME> 11,908,341
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</TABLE>
