Supplement to Prospectus Dated May 1, 1997
AetnaVest and AetnaVest II
Aetna Life Insurance and Annuity Company
Variable Life Account B
The prospectus dated May 1, 1997 and supplemented on July 14, 1997 (with
respect to AetnaVest only) is amended with respect to AetnaVest and AetnaVest
II 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>
The Date of this Supplement is August 21, 1997
Form No. X76004-97
1
<PAGE>
Prospectus - Page 7
In the Section Premium Allocation, 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 became 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 11
The Section in the prospectus entitled Automated Transfers (Dollar Cost
Averaging) is amended by adding the following:
Amounts being transferred into a Replaced Fund will automatically be
transferred into the Substitute Fund after the close of business of the New
York Stock Exchange on November 26, 1997, unless you have been dollar cost
averaging from the Aetna Variable Encore Fund into the Janus Aspen Short-Term
Bond Portfolio. In that event, your Dollar Cost Averaging will automatically
terminate after November 26, 1997. To continue with Dollar Cost Averaging after
that date, you must select Funds from the then-current list of available Funds.
Prospectus - Page 13
The table under 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.
2
<PAGE>
Prospectus - Page 24--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, Gail P. Johnson and Creed R.
Terry from the list.
Prospectus - Appendix A--Illustrations of Death Benefit, Total Account Values
and Cash Surrender Values for AetnaVest Policies
The tables have been revised as follows to reflect the applicable fund
expenses of the Substitute Funds instead of the Replaced Funds.
APPENDIX A
AETNAVEST POLICIES
Illustrations of Death Benefit, Total Account Values and Cash Surrender Values
for AetnaVest Policies
The following tables illustrate how the Total Account Values, Cash Surrender
Values, and Death Benefits of a Policy change with the investment experience of
the Funds. The tables show how the Total Account Values, Cash Surrender Values,
and Death Benefits of a Policy issued to an insured of a given age and a given
premium would vary over time if the investment return on the assets held in
each Fund were a uniform, gross, annual rate of 0%, 6%, and 12%, respectively.
Tables I through IV illustrate Policies issued to males, ages 25 and 40, in the
nonsmoker rate class. The Total Account Values, Cash Surrender Values, and
Death Benefits 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 the stated interest rate of 5%. The third through fifth columns
illustrated the Death Benefit of a Policy over the designated period. The sixth
through eighth columns illustrate the Total Account Values, while the ninth
through eleventh columns illustrate the Cash Surrender Values of each Policy
over the designated period. Tables II and IV assume that the maximum Cost of
Insurance Rates allowable under the Policy are 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 is assessed in each Policy Year. Tables I
and III assume that the current scale of Cost of Insurance Rates applies during
all Policy Years. These tables also assume that the current level of mortality
and expense risk charges, which ranges from 0.55% to 0.70% on an annual basis,
is assessed. A weighted average has been used for the illustrations assuming
that the Policyowner has invested in the Funds as follows: 56% in Aetna
Variable Fund; 6% in Aetna Income Shares; 4% in Aetna Variable Encore Fund; 7%
in Aetna Investment Advisers Fund; 0% in Aetna Ascent Variable Portfolio; 0% in
Aetna Crossroads Variable Portfolio; 0% in Aetna Legacy Variable Portfolios; 5%
in Portfolio Partners MFS Emerging Equities Portfolio; 4% in Portfolio Partners
MFS Research Growth Portfolio; 1% in Fidelity's Variable Insurance Products
Fund II--Contrafund Portfolio; 1% in Fidelity's Variable Insurance Products
Fund--Equity-Income Portfolio; 3% in Janus Aspen Growth Fund; 3% in Janus Aspen
Aggressive Growth Fund; 4% in Janus Aspen Worldwide Growth Fund; 1% in Janus
Aspen Balanced Fund; and 5% in Portfolio Partners Scudder International Growth
Portfolio.
The amounts shown for the Death Benefits, Cash Surrender Values, and Total
Account Values reflect the fact that the net investment return is lower than
the gross return on the assets held in each Fund as a result of expenses paid
by the Fund and other charges levied by the Separate Account.
3
<PAGE>
The hypothetical values shown in the tables do not reflect any Separate Account
charges for federal income taxes, since we are not currently making 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
Benefits, Total Account Values, and Cash 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 are allocated to Variable Life Account B and if no Policy
loans have been made. The tables are also based on the assumptions that the
Policy Owner has not requested an increase or decrease in the Specified Amount
of the Policy, that no partial surrenders have been made, and that no transfer
charges have been incurred.
Upon request, we will provide an illustration based upon the proposed insured's
age, sex, and underwriting classification, the specified amount or premium
requested, the proposed frequency of premium payments and any available riders
requested. A fee of $25 is charged for each such illustration.
The hypothetical gross annual investment return assumed in such an illustration
will not exceed 12%.
4
<PAGE>
AetnaVest Policy
TABLE I
FLEXIBLE PREMIUM VARIABLE INSURANCE POLICY(1)
MALE ISSUE AGE 25
$408.00 ANNUAL BASIC PREMIUM
NONSMOKER RISK
FACE AMOUNT $100,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit Cash Surrender Value
Accumulated Gross Annual Investment Total Account Value Annual Investment
at Return of Annual Investment Return of Return of
Policy 5% Interest Gross Gross Gross Gross Gross Gross Gross Gross Gross
Year Per Year 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 428 100,000 100,000 100,000 182 199 216 0 0 0
2 878 100,000 100,000 100,000 366 412 460 18 64 112
3 1,351 100,000 100,000 100,000 549 636 732 201 288 384
4 1,846 100,000 100,000 100,000 731 873 1,034 383 525 686
5 2,367 100,000 100,000 100,000 911 1,120 1,368 563 772 1,020
6 2,914 100,000 100,000 100,000 1,100 1,391 1,750 816 1,107 1,466
7 3,488 100,000 100,000 100,000 1,283 1,671 2,170 1,068 1,456 1,955
8 4,091 100,000 100,000 100,000 1,460 1,961 2,630 1,315 1,816 2,485
9 4,724 100,000 100,000 100,000 1,631 2,259 3,135 1,556 2,184 3,060
10 5,388 100,000 100,000 100,000 1,793 2,565 3,686 1,787 2,559 3,680
15 9,244 100,000 100,000 100,000 2,454 4,192 7,318 2,454 4,192 7,318
20 14,165 100,000 100,000 100,000 2,775 5,902 12,980 2,775 5,902 12,980
25 20,446 100,000 100,000 100,000 2,556 7,479 21,806 2,556 7,479 21,806
30 28,462 100,000 100,000 100,000 1,512 8,574 35,774 1,512 8,574 35,774
40 (Age 65) 51,751 0 100,000 116,534 0 5,088 95,520 0 5,088 95,520
</TABLE>
(1) 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.
If premiums are paid more frequently than annually, the Death Benefits,
Total Account Values, and Cash Surrender Values would be less than those
illustrated.
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 Policy Owner's allocations, and the Fund's
rates of return. The Total Account Value and Cash 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>
AetnaVest Policy
TABLE II
FLEXIBLE PREMIUM VARIABLE INSURANCE POLICY(1)
MALE ISSUE AGE 25
$408.00 ANNUAL PREMIUM
NONSMOKER RISK
FACE AMOUNT $100,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit Cash Surrender Value
Accumulated Gross Annual Investment Total Account Value Annual Investment
at Return of Annual Investment Return of Return of
Policy 5% Interest Gross Gross Gross Gross Gross Gross Gross Gross Gross
Year Per Year 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 428 100,000 100,000 100,000 182 199 216 0 0 0
2 878 100,000 100,000 100,000 364 410 458 16 62 110
3 1,351 100,000 100,000 100,000 546 633 728 198 285 380
4 1,846 100,000 100,000 100,000 726 867 1,027 378 519 679
5 2,367 100,000 100,000 100,000 903 1,111 1,358 555 763 1,010
6 2,914 100,000 100,000 100,000 1,090 1,378 1,735 806 1,094 1,451
7 3,488 100,000 100,000 100,000 1,270 1,654 2,148 1,055 1,439 1,933
8 4,091 100,000 100,000 100,000 1,444 1,939 2,601 1,299 1,794 2,456
9 4,724 100,000 100,000 100,000 1,610 2,231 3,096 1,535 2,156 3,021
10 5,388 100,000 100,000 100,000 1,768 2,530 3,635 1,762 2,524 3,629
15 9,244 100,000 100,000 100,000 2,384 4,082 7,137 2,384 4,082 7,137
20 14,165 100,000 100,000 100,000 2,649 5,669 12,513 2,649 5,669 12,513
25 20,446 100,000 100,000 100,000 2,316 7,003 20,703 2,316 7,003 20,703
30 28,462 100,000 100,000 100,000 1,107 7,704 33,400 1,107 7,704 33,400
40 (Age 65) 51,751 0 100,000 104,991 0 2,379 86,058 0 2,379 86,058
</TABLE>
(1) 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.
If premiums are paid more frequently than annually, the Death Benefits,
Total Account Values, and Cash Surrender Values would be less than those
illustrated.
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 Policy Owner's allocations, and the Fund's
rates of return. The Total Account Value and Cash 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>
AetnaVest Policy
TABLE III
FLEXIBLE PREMIUM VARIABLE INSURANCE POLICY(1)
MALE ISSUE AGE 40
$744.00 ANNUAL BASIC PREMIUM
NONSMOKER RISK
FACE AMOUNT $100,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit Cash Surrender Value
Accumulated Gross Annual Investment Total Account Value Annual Investment
at Return of Annual Investment Return of Return of
Policy 5% Interest Gross Gross Gross Gross Gross Gross Gross Gross Gross
Year Per Year 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 781 100,000 100,000 100,000 455 490 526 0 0 0
2 1,601 100,000 100,000 100,000 889 987 1,091 216 314 418
3 2,463 100,000 100,000 100,000 1,300 1,491 1,699 627 818 1,026
4 3,367 100,000 100,000 100,000 1,689 2,000 2,354 1,016 1,327 1,681
5 4,317 100,000 100,000 100,000 2,054 2,515 3,060 1,381 1,842 2,387
6 5,314 100,000 100,000 100,000 2,397 3,035 3,823 1,848 2,486 3,274
7 6,361 100,000 100,000 100,000 2,710 3,555 4,642 2,295 3,140 4,227
8 7,460 100,000 100,000 100,000 2,991 4,071 5,520 2,711 3,791 5,240
9 8,614 100,000 100,000 100,000 3,242 4,583 6,465 3,096 4,437 6,319
10 9,826 100,000 100,000 100,000 3,459 5,089 7,481 3,448 5,078 7,470
15 16,857 100,000 100,000 100,000 3,958 7,427 13,869 3,958 7,427 13,869
20 25,831 100,000 100,000 100,000 2,789 8,613 22,809 2,789 8,613 22,809
25 37,284 0 100,000 100,000 0 7,622 35,887 0 7,622 35,887
30 51,902 0 100,000 100,000 0 2,557 56,437 0 2,557 56,437
25 (Age 65) 37,284 0 100,000 100,000 0 7,622 35,887 0 7,622 35,887
</TABLE>
(1) 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.
If premiums are paid more frequently than annually, the Death Benefits,
Total Account Values, and Cash Surrender Values would be less than those
illustrated.
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 Policy Owner's allocations, and the Fund's
rates of return. The Total Account Value and Cash 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>
AetnaVest Policy
TABLE IV
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
MALE ISSUE AGE 40
$744.00 ANNUAL PREMIUM
NONSMOKER RISK
FACE AMOUNT $100,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit Cash Surrender Value
Accumulated Gross Annual Investment Total Account Value Annual Investment
at Return of Annual Investment Return of Return of
Policy 5% Interest Gross Gross Gross Gross Gross Gross Gross Gross Gross
Year Per Year 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 781 100,000 100,000 100,000 452 487 522 0 0 0
2 1,601 100,000 100,000 100,000 879 977 1,080 206 304 407
3 2,463 100,000 100,000 100,000 1,282 1,471 1,678 609 798 1,005
4 3,367 100,000 100,000 100,000 1,658 1,966 2,316 985 1,293 1,643
5 4,317 100,000 100,000 100,000 2,008 2,463 3,001 1,335 1,790 2,328
6 5,314 100,000 100,000 100,000 2,329 2,957 3,732 1,780 2,408 3,183
7 6,361 100,000 100,000 100,000 2,619 3,447 4,513 2,204 3,032 4,098
8 7,460 100,000 100,000 100,000 2,877 3,930 5,347 2,597 3,650 5,067
9 8,614 100,000 100,000 100,000 3,102 4,406 6,240 2,956 4,260 6,094
10 9,826 100,000 100,000 100,000 3,290 4,870 7,193 3,279 4,859 7,182
15 16,857 100,000 100,000 100,000 3,602 6,899 13,059 3,602 6,899 13,059
20 25,831 100,000 100,000 100,000 2,192 7,593 20,937 2,192 7,593 20,937
25 37,284 0 100,000 100,000 0 5,495 31,648 0 5,495 31,648
30 51,902 0 0 100,000 0 0 46,130 0 0 46,130
25 (Age 65) 37,284 0 100,000 100,000 0 5,495 31,648 0 5,495 31,648
</TABLE>
(1) 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.
If premiums are paid more frequently than annually, the Death Benefits,
Total Account Values, and Cash Surrender Values would be less than those
illustrated.
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 Policy Owner's allocations, and the Fund's
rates of return. The Total Account Value and Cash 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>
Prospectus - Appendix B--Illustrations of Death Benefit, Total Account Values
and Cash Surrender Values for AetnaVest II Policies
The tables have been revised as follows to reflect the applicable fund
expenses of the Substitute Funds instead of the Replaced Funds.
APPENDIX B
AETNAVEST II POLICIES
Illustrations of Death Benefit, Total Account Values and Cash Surrender Values
for AetnaVest II Policies
The following tables illustrate how the Total Account Values, Cash Surrender
Values, and Death Benefits of a Policy change with the investment experience of
the Funds. The tables show how the Total Account Values, Cash Surrender Values,
and Death Benefits of a Policy issued to an insured of a given age and a given
premium would vary over time if the investment return on the assets held in
each Fund were a uniform, gross, annual rate of 0%, 6%, and 12%, respectively.
Tables V through VIII illustrate Policies issued to males, ages 35 and 55, in
the nonsmoker rate class. Tables IX through XII illustrate Policies issued on a
unisex basis, ages 35 and 55, in the nonsmoker rate class. These tables are
provided for use in those states where unisex rates are required. The Total
Account Values, Cash Surrender Values, and Death Benefits 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 the stated interest rate of 5%. The third through fifth columns
illustrated the Death Benefit of a Policy over the designated period. The sixth
through eighth columns illustrate the Total Account Values, while the ninth
through eleventh columns illustrate the Cash Surrender Values of each Policy
over the designated period. Tables VI, VIII, X and XII assume that the maximum
Cost of Insurance Rates allowable under the Policy are charged in all Policy
Years. These tables also assume that the maximum allowable mortality and
expense risk charge of .90% on an annual basis, the maximum allowable
administrative charge of .50% and the maximum allowable premium load of 6% are
assessed in each Policy Year. Tables V, VII, IX and XI assume that the current
scale of Cost of Insurance Rates applies during all Policy Years. These tables
also assume that the current mortality and expense risk charge of .70% on an
annual basis, and the current premium load of 3.5% are assessed. A weighted
average has been used for the illustrations assuming that the Policyowner has
invested in the Funds as follows: 56% in Aetna Variable Fund; 6% in Aetna
Income Shares, 4% in Aetna Variable Encore Fund; 7% in Aetna Investment
Advisers Fund; 0% in Aetna Ascent Variable Portfolio; 0% in Aetna Crossroads
Variable Portfolio; 0% in Aetna Legacy Variable Portfolio; 5% in Portfolio
Partners MFS Emerging Equities Portfolio; 4% in Portfolio Partners MFS Research
Growth Portfolio; 1% in Fidelity's Variable Insurance Products Fund
II--Contrafund Portfolio; 1% in Fidelity's Variable Insurance Products
Fund-Equity Income Portfolio; 3% in Janus Aspen Growth Fund; 3% in Janus Aspen
Aggressive Growth Fund; 4% in Janus Aspen Worldwide Growth Fund; 1% in Janus
Aspen Balanced Fund; and 5% in Portfolio Partners Scudder International Growth
Portfolio.
The amounts shown for the Death Benefits, Cash Surrender Values, and total
Account Values reflect the fact that the net investment return is lower than
the gross return on the assets held in each Fund as a result of expenses paid
by each Fund and other charges levied by the Separate Account.
9
<PAGE>
The hypothetical values shown in the tables do not reflect any Separate Account
charges for federal income taxes, since we are not currently making 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
Benefits, Total Account Values, and Cash 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 are allocated to Variable Life Account B and if no Policy
loans have been made. The tables are also based on the assumptions that the
Policy Owner has not requested an increase or decrease in the Specified Amount
of the Policy, that no partial surrenders have been made, and that no transfer
charges have been incurred.
Upon request, we will provide an illustration based upon the proposed insured's
age, sex (if necessary), and underwriting classification, the specified amount
or premium requested, the proposed frequency of premium payments and any
available riders requested. A fee of $25 is charged for each such illustration.
The hypothetical gross annual investment return assumed in such an illustration
will not exceed 12%.
10
<PAGE>
AetnaVest II Policy
TABLE V
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
MALE ISSUE AGE 35
$1,410.00 ANNUAL BASIC PREMIUM
NONSMOKER RISK
FACE AMOUNT $250,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums Death Benefit
Accumulated Gross Annual Investment Total Account Value Cash Surrender Value
at Return of Annual Investment Return of Annual Investment Return of
Policy 5% Interest Gross Gross Gross Gross Gross Gross Gross Gross
Year Per Year 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,480 250,000 250,000 250,000 685 746 806 0 0 0
2 3,035 250,000 250,000 250,000 1,519 1,689 1,867 169 339 517
3 4,667 250,000 250,000 250,000 2,315 2,648 3,011 965 1,298 1,661
4 6,381 250,000 250,000 250,000 3,069 3,621 4,246 1,719 2,271 2,896
5 8,181 250,000 250,000 250,000 3,779 4,603 5,575 2,429 3,253 4,225
6 10,070 250,000 250,000 250,000 4,443 5,594 7,007 3,217 4,368 5,781
7 12,054 250,000 250,000 250,000 5,063 6,595 8,556 3,972 5,504 7,465
8 14,137 250,000 250,000 250,000 5,634 7,600 10,227 4,678 6,644 9,271
9 16,325 250,000 250,000 250,000 6,156 8,611 12,033 5,335 7,790 11,212
10 18,622 250,000 250,000 250,000 6,625 9,622 13,985 5,939 8,936 13,299
15 31,947 250,000 250,000 250,000 7,997 14,472 26,336 7,986 14,461 26,325
20 48,954 250,000 250,000 250,000 7,254 18,327 44,530 7,254 18,327 44,530
25 70,660 250,000 250,000 250,000 3,764 20,199 72,231 3,764 20,199 72,231
30 98,363 0 250,000 250,000 0 18,428 116,121 0 18,428 116,121
30 (Age 65) 98,363 0 250,000 250,000 0 18,428 116,121 0 18,428 116,121
</TABLE>
(1) 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.
If premiums are paid more frequently than annually, the Death Benefits,
Total Account Values, and Cash Surrender Values would be less than those
illustrated.
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 Policy Owner's allocations, and the Fund's
rates of return. The Total Account Value and Cash 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>
AetnaVest II Policy
TABLE VI
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
MALE ISSUE AGE 35
$1,410.00 ANNUAL BASIC PREMIUM
NONSMOKER RISK
FACE AMOUNT $250,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums
Accumulated Death Benefit Total Account Value Cash Surrender Value
at Gross Annual Investment Return of Annual Investment Return of Annual Investment Return of
Policy 5% Interest Gross Gross Gross Gross Gross Gross Gross Gross Gross
Year Per Year 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,480 250,000 250,000 250,000 646 705 763 0 0 0
2 3,035 250,000 250,000 250,000 1,440 1,602 1,773 90 252 423
3 4,667 250,000 250,000 250,000 2,191 2,510 2,857 841 1,160 1,507
4 6,381 250,000 250,000 250,000 2,900 3,425 4,021 1,550 2,075 2,671
5 8,181 250,000 250,000 250,000 3,561 4,344 5,267 2,211 2,994 3,917
6 10,070 250,000 250,000 250,000 4,175 5,263 6,602 2,949 4,037 5,376
7 12,054 250,000 250,000 250,000 4,734 6,177 8,027 3,643 5,086 6,936
8 14,137 250,000 250,000 250,000 5,239 7,085 9,554 4,283 6,129 8,598
9 16,325 250,000 250,000 250,000 5,685 7,980 11,185 4,864 7,159 10,364
10 18,622 250,000 250,000 250,000 6,073 8,862 12,931 5,387 8,176 12,245
15 31,947 250,000 250,000 250,000 6,938 12,805 23,614 6,927 12,794 23,603
20 48,954 250,000 250,000 250,000 5,373 15,068 38,342 5,373 15,068 38,342
25 70,660 0 250,000 250,000 0 13,157 58,068 0 13,157 58,068
30 98,363 0 250,000 250,000 0 2,548 84,391 0 2,548 84,391
30 (Age 65) 98,363 0 250,000 250,000 0 2,548 84,391 0 2,548 84,391
</TABLE>
(1) 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.
If premiums are paid more frequently than annually, the Death Benefits,
Total Account Values, and Cash Surrender Values would be less than those
illustrated.
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 Policy Owner's allocations, and the Fund's
rates of return. The Total Account Value and Cash 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>
AetnaVest II Policy
TABLE VII
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
MALE ISSUE AGE 55
$4,380.00 ANNUAL BASIC PREMIUM
NONSMOKER RISK
FACE AMOUNT $250,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums
Accumulated Death Benefit Total Account Value Cash Surrender Value
at Gross Annual Investment Return of Annual Investment Return of Annual Investment Return of
Policy 5% Interest Gross Gross Gross Gross Gross Gross Gross Gross Gross
Year Per Year 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,599 250,000 250,000 250,000 2,272 2,465 2,659 0 0 0
2 9,428 250,000 250,000 250,000 4,580 5,115 5,675 1,124 1,659 2,219
3 14,498 250,000 250,000 250,000 6,743 7,773 8,898 3,287 4,317 5,442
4 19,822 250,000 250,000 250,000 8,760 10,439 12,348 5,304 6,983 8,892
5 25,412 250,000 250,000 250,000 10,624 13,103 16,044 7,168 9,647 12,588
6 31,282 250,000 250,000 250,000 12,327 15,760 20,009 9,188 12,621 16,870
7 37,445 250,000 250,000 250,000 13,861 18,400 24,267 11,067 15,606 21,473
8 43,916 250,000 250,000 250,000 15,216 21,012 28,842 12,768 18,564 26,394
9 50,711 250,000 250,000 250,000 16,374 23,579 33,761 14,272 21,477 31,659
10 57,846 250,000 250,000 250,000 17,295 26,058 39,026 15,538 24,301 37,269
15 99,240 250,000 250,000 250,000 17,228 35,871 71,406 17,199 35,842 71,377
20 152,070 250,000 250,000 250,000 6,858 38,579 120,314 6,858 38,579 120,314
25 219,497 0 250,000 250,000 0 23,639 202,110 0 23,639 202,110
30 305,552 0 0 370,391 0 0 352,754 0 0 352,754
10 (Age 65) 57,846 250,000 250,000 250,000 17,295 26,058 39,026 15,538 24,301 37,269
</TABLE>
(1) 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.
If premiums are paid more frequently than annually, the Death Benefits,
Total Account Values, and Cash Surrender Values would be less than those
illustrated.
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 Policy Owner's allocations, and the Fund's
rates of return. The Total Account Value and Cash 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.
13
<PAGE>
AetnaVest II Policy
TABLE VIII
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
MALE ISSUE AGE 55
$4,380.00 ANNUAL PREMIUM
NONSMOKER RISK
FACE AMOUNT $250,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums
Accumulated Death Benefit Total Account Value Cash Surrender Value
at Gross Annual Investment Return of Annual Investment Return of Annual Investment Return of
Policy 5% Interest Gross Gross Gross Gross Gross Gross Gross Gross Gross
Year Per Year 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,599 250,000 250,000 250,000 1,893 2,070 2,249 0 0 0
2 9,428 250,000 250,000 250,000 3,744 4,222 4,724 288 766 1,268
3 14,498 250,000 250,000 250,000 5,366 6,265 7,250 1,910 2,809 3,794
4 19,822 250,000 250,000 250,000 6,748 8,181 9,820 3,292 4,725 6,364
5 25,412 250,000 250,000 250,000 7,866 9,937 12,413 4,410 6,481 8,957
6 31,282 250,000 250,000 250,000 8,695 11,500 15,008 5,556 8,361 11,869
7 37,445 250,000 250,000 250,000 9,210 12,831 17,581 6,416 10,037 14,787
8 43,916 250,000 250,000 250,000 9,371 13,879 20,091 6,923 11,431 17,643
9 50,711 250,000 250,000 250,000 9,130 14,579 22,488 7,028 12,477 20,386
10 57,846 250,000 250,000 250,000 8,435 14,863 24,717 6,678 13,106 22,960
15 99,240 0 250,000 250,000 0 7,319 31,087 0 7,290 31,058
20 152,070 0 0 250,000 0 0 17,083 0 0 17,083
25 219,497 0 0 0 0 0 0 0 0 0
30 305,552 0 0 0 0 0 0 0 0 0
10 (Age 65) 57,846 250,000 250,000 250,000 8,435 14,863 24,717 6,678 13,106 22,960
</TABLE>
(1) 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.
If premiums are paid more frequently than annually, the Death Benefits,
Total Account Values, and Cash Surrender Values would be less than those
illustrated.
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 Policy Owner's allocations, and the Fund's
rates of return. The Total Account Value and Cash 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.
14
<PAGE>
AetnaVest II Policy
TABLE IX
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
UNISEX ISSUE AGE 35
$1,350.00 ANNUAL PREMIUM
NONSMOKER RISK
FACE AMOUNT $250,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums
Accumulated Death Benefit Total Account Value Cash Surrender Value
at Gross Annual Investment Return of Annual Investment Return of Annual Investment Return of
Policy 5% Interest Gross Gross Gross Gross Gross Gross Gross Gross Gross
Year Per Year 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,417 250,000 250,000 250,000 640 698 755 0 0 0
2 2,906 250,000 250,000 250,000 1,428 1,589 1,758 138 299 468
3 4,469 250,000 250,000 250,000 2,180 2,496 2,839 890 1,206 1,549
4 6,110 250,000 250,000 250,000 2,890 3,411 4,002 1,600 2,121 2,712
5 7,833 250,000 250,000 250,000 3,555 4,334 5,253 2,265 3,044 3,963
6 9,642 250,000 250,000 250,000 4,175 5,262 6,597 3,003 4,090 5,425
7 11,541 250,000 250,000 250,000 4,750 6,195 8,047 3,707 5,152 7,004
8 13,536 250,000 250,000 250,000 5,276 7,130 9,607 4,362 6,216 8,693
9 15,630 250,000 250,000 250,000 5,753 8,065 11,291 4,968 7,280 10,506
10 17,829 250,000 250,000 250,000 6,179 8,998 13,108 5,523 8,342 12,452
15 30,588 250,000 250,000 250,000 7,465 13,535 24,672 7,454 13,524 24,661
20 46,871 250,000 250,000 250,000 6,955 17,335 41,898 6,955 17,335 41,898
25 67,653 250,000 250,000 250,000 3,999 19,465 68,211 3,999 19,465 68,211
30 94,177 0 250,000 250,000 0 18,214 109,645 0 18,214 109,645
30 (Age 65) 94,177 0 250,000 250,000 0 18,214 109,645 0 18,214 109,645
</TABLE>
(1) 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.
If premiums are paid more frequently than annually, the Death Benefits,
Total Account Values, and Cash Surrender Values would be less than those
illustrated.
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 Policy Owner's allocations, and the Fund's
rates of return. The Total Account Value and Cash 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.
15
<PAGE>
AetnaVest II Policy
TABLE X
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
UNISEX ISSUE AGE 35
$1,350.00 ANNUAL BASIC PREMIUM
NONSMOKER RISK
FACE AMOUNT $250,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums
Accumulated Death Benefit Total Account Value Cash Surrender Value
at Gross Annual Investment Return of Annual Investment Return of Annual Investment Return of
Policy 5% Interest Gross Gross Gross Gross Gross Gross Gross Gross Gross
Year Per Year 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,417 250,000 250,000 250,000 603 659 714 0 0 0
2 2,906 250,000 250,000 250,000 1,352 1,506 1,667 62 216 377
3 4,469 250,000 250,000 250,000 2,062 2,363 2,692 772 1,073 1,402
4 6,110 250,000 250,000 250,000 2,727 3,224 3,786 1,437 1,934 2,496
5 7,833 250,000 250,000 250,000 3,346 4,085 4,957 2,056 2,795 3,667
6 9,642 250,000 250,000 250,000 3,918 4,945 6,208 2,746 3,773 5,036
7 11,541 250,000 250,000 250,000 4,436 5,797 7,542 3,393 4,754 6,499
8 13,536 250,000 250,000 250,000 4,903 6,643 8,969 3,989 5,729 8,055
9 15,630 250,000 250,000 250,000 5,312 7,472 10,490 4,527 6,687 9,705
10 17,829 250,000 250,000 250,000 5,665 8,288 12,117 5,009 7,632 11,461
15 30,588 250,000 250,000 250,000 6,404 11,896 22,033 6,393 11,885 22,022
20 46,871 250,000 250,000 250,000 4,853 13,879 35,627 4,853 13,879 35,627
25 67,653 0 250,000 250,000 0 11,984 53,756 0 11,984 53,756
30 94,177 0 250,000 250,000 0 2,208 77,834 0 2,208 77,834
30 (Age 65) 94,177 0 250,000 250,000 0 2,208 77,834 0 2,208 77,834
</TABLE>
(1) 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.
If premiums are paid more frequently than annually, the Death Benefits,
Total Account Values, and Cash Surrender Values would be less than those
illustrated.
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 Policy Owner's allocations, and the Fund's
rates of return. The Total Account Value and Cash 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.
16
<PAGE>
AetnaVest II Policy
TABLE XI
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
UNISEX ISSUE AGE 55
$4,200.00 ANNUAL BASIC PREMIUM
NONSMOKER RISK
FACE AMOUNT $250,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums
Accumulated Death Benefit Total Account Value Cash Surrender Value
at Gross Annual Investment Return of Annual Investment Return of Annual Investment Return of
Policy 5% Interest Gross Gross Gross Gross Gross Gross Gross Gross Gross
Year Per Year 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,410 250,000 250,000 250,000 2,254 2,441 2,629 0 0 0
2 9,041 250,000 250,000 250,000 4,541 5,063 5,610 1,229 1,751 2,298
3 13,903 250,000 250,000 250,000 6,699 7,708 8,808 3,387 4,396 5,496
4 19,008 250,000 250,000 250,000 8,713 10,360 12,232 5,401 7,048 8,920
5 24,368 250,000 250,000 250,000 10,575 13,013 15,901 7,263 9,701 12,589
6 29,996 250,000 250,000 250,000 12,281 15,660 19,837 9,273 12,652 16,829
7 35,906 250,000 250,000 250,000 13,825 18,297 24,068 11,148 15,620 21,391
8 42,112 250,000 250,000 250,000 15,195 20,909 28,616 12,849 18,563 26,270
9 48,627 250,000 250,000 250,000 16,381 23,488 33,513 14,366 21,473 31,498
10 55,469 250,000 250,000 250,000 17,346 25,995 38,769 15,662 24,311 37,085
15 95,161 250,000 250,000 250,000 17,846 36,322 71,356 17,818 36,294 71,328
20 145,821 250,000 250,000 250,000 8,550 40,134 120,630 8,550 40,134 120,630
25 210,477 0 250,000 250,000 0 28,474 203,171 0 28,474 203,171
30 292,995 0 0 371,547 0 0 353,854 0 0 353,854
10 (Age 65) 55,469 250,000 250,000 250,000 17,346 25,995 38,769 15,662 24,311 37,085
</TABLE>
(1) 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.
If premiums are paid more frequently than annually, the Death Benefits,
Total Account Values, and Cash Surrender Values would be less than those
illustrated.
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 Policy Owner's allocations, and the Fund's
rates of return. The Total Account Value and Cash 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.
17
<PAGE>
AetnaVest II Policy
TABLE XII
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
UNISEX ISSUE AGE 55
$4,200.00 ANNUAL BASIC PREMIUM
NONSMOKER RISK
FACE AMOUNT $250,000
DEATH BENEFIT OPTION 1
<TABLE>
<CAPTION>
Premiums
Accumulated Death Benefit Total Account Value Cash Surrender Value
at Gross Annual Investment Return of Annual Investment Return of Annual Investment Return of
Policy 5% Interest Gross Gross Gross Gross Gross Gross Gross Gross Gross
Year Per Year 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,410 250,000 250,000 250,000 1,809 1,979 2,150 0 0 0
2 9,041 250,000 250,000 250,000 3,596 4,054 4,535 284 742 1,223
3 13,903 250,000 250,000 250,000 5,171 6,033 6,978 1,859 2,721 3,666
4 19,008 250,000 250,000 250,000 6,526 7,902 9,476 3,214 4,590 6,164
5 24,368 250,000 250,000 250,000 7,650 9,643 12,023 4,338 6,331 8,711
6 29,996 250,000 250,000 250,000 8,514 11,216 14,594 5,506 8,208 11,586
7 35,906 250,000 250,000 250,000 9,094 12,591 17,170 6,417 9,914 14,493
8 42,112 250,000 250,000 250,000 9,353 13,716 19,715 7,007 11,370 17,369
9 48,627 250,000 250,000 250,000 9,240 14,529 22,180 7,225 12,514 20,165
10 55,469 250,000 250,000 250,000 8,710 14,966 24,515 7,026 13,282 22,831
15 95,161 0 250,000 250,000 0 9,211 32,464 0 9,183 32,436
20 145,821 0 0 250,000 0 0 24,237 0 0 24,237
25 210,477 0 0 0 0 0 0 0 0 0
30 292,995 0 0 0 0 0 0 0 0 0
10 (Age 65) 55,469 250,000 250,000 250,000 8,710 14,966 24,515 7,026 13,282 22,831
</TABLE>
(1) 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.
If premiums are paid more frequently than annually, the Death Benefits,
Total Account Values, and Cash Surrender Values would be less than those
illustrated.
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 Policy Owner's allocations, and the Fund's
rates of return. The Total Account Value and Cash 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.
18
<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.
FORM No. X76004-97
F-8
