As filed with the Securities and Exchange Registration No. 333-15817
Commission on April 16, 1998 Registration No. 811-4536
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-6
POST-EFFECTIVE AMENDMENT NO. 2 TO
REGISTRATION STATEMENT
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
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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
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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)
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It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
- --------
X on May 1, 1998 pursuant to paragraph (b) of Rule 485
- --------
this post-effective amendment designates a new effective date for
- --------
a previously filed post-effective amendment
<PAGE>
VARIABLE LIFE ACCOUNT B
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
Cross Reference Sheet
N-8B-2
Item No. Part I - Prospectus
1 Cover Page; The Separate Account; The Company and Management
2 Cover Page; The Separate Account; The Company and Management
3 Not Applicable
4 Distribution of the Certificates
5 The Separate Account; The Company and Management
6 The Separate Account; The Company and Management
7 Not Applicable
8 Not Applicable
9 Additional Information - Legal Matters
10 The Separate Account; Certificate Rights; Certificate Choices;
Additional Information; Miscellaneous Certificate Provisions;
Termination or Change in Coverage; Allocation of Premiums -
Fund Additions, Deletions or Substitutions
11 Allocation of Premiums - The Funds
12 Allocation of Premiums - The Funds
13 Charges & Fees
14 Certificate Choices
15 Allocation of Premiums; Certificate Choices; Certificate Values
16 The Separate Account; Allocation of Premiums - The Funds;
Certificate Values
17 Certificate Rights
18 The Separate Account
19 Additional Information - Reports to Owners
20 Not Applicable
21 Certificate Rights - Certificate Loans
22 Not Applicable
<PAGE>
N-8B-2
Item No. Part I - Prospectus
23 The Company and Management
24 Not Applicable
25 The Company and Management
26 Not Applicable
27 The Company and Management
28 The Company and Management
29 The Company and Management
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Additional Information - State Regulation
36 Not Applicable
37 Not Applicable
38 Additional Information - Distribution of the Certificates
39 The Company and Management
40 Not Applicable
41 The Company and Management
42 Not Applicable
43 Not Applicable
44 Charges & Fees; Certificate Values
45 Not Applicable
46 The Separate Account; Certificate Values
47 Not Applicable
48 Not Applicable
49 Not Applicable
50 The Separate Account
51 Cover Page; Certificate Choices
52 Allocation of Premiums - Fund Additions, Deletions or Substitutions;
Termination or Change in Coverage
<PAGE>
N-8B-2
Item No. Part I - Prospectus
53 Tax Matters
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Financial Statements of Separate Account; Financial Statements of
Insurance Company
<PAGE>
Variable Life Account B
Aetna Life Insurance and Annuity Company (the "Company")
151 Farmington Avenue
Hartford, Connecticut 06156
(800)-677-4636
Prospectus Dated May 1, 1998
Flexible Premium Group Variable Universal Life Insurance for New York State
United Teachers Benefit Trust
("NYSUT Trust")
This Prospectus describes Certificates issued by the Company under a group
Policy to provide life insurance coverage for certain Members of New York State
United Teachers "NYSUT" and their spouses and children. The Certificates allow
flexible premium payments, provided that sufficient premiums are paid to cover
charges or, during the first 5 years after issuance or after a coverage
increase, to qualify for the Certificate's No Lapse Coverage.
You may choose (and later change) whether the benefit payable upon the death of
the insured person will generally remain constant or will vary with the
Certificate's account value. You may borrow from the Certificate's account
value, surrender the Certificate for any unborrowed value, make a Partial
Surrender, request increases or decreases in coverage, and elect certain
optional supplemental benefits (in each case subject to limitations described
further in this Prospectus).
The account value is the amount of Net Premiums you have paid, increased (or
decreased) by the return (positive or negative) earned thereon, after we impose
the charges described in this Prospectus. You decide whether your account value
is invested in Variable Life Account B under one or more Variable Options,
and/or in the Fixed Account. The value in each Variable Option is not
guaranteed and will vary with the investment performance of an associated Fund.
The Variable Options are:
[bullet] Aetna Ascent VP (formerly Aetna Ascent Variable Portfolio)
[bullet] Aetna Balanced VP, Inc. (formerly Aetna Investment Advisers Fund, Inc.)
[bullet] Aetna Income Shares d/b/a Aetna Bond VP
[bullet] Aetna Crossroads VP (formerly Aetna Crossroads Variable Portfolio)
[bullet] Aetna Variable Fund d/b/a Aetna Growth and Income VP
[bullet] Aetna Index Plus Large Cap VP (formerly Aetna Variable Index Plus
Portfolio)
[bullet] Aetna Legacy VP (formerly Aetna Legacy Variable Portfolio)
[bullet] Aetna Variable Encore Fund d/b/a Aetna Money Market VP
[bullet] Fidelity VIP Equity-Income Portfolio
[bullet] Fidelity VIP II--Contrafund Portfolio
[bullet] Janus Aspen Aggressive Growth Portfolio
[bullet] Janus Aspen Balanced Portfolio
[bullet] Janus Aspen Growth Portfolio
[bullet] Janus Aspen Worldwide Growth Portfolio
[bullet] Oppenheimer Global Securities Fund
[bullet] Oppenheimer Strategic Bond Fund
[bullet] Portfolio Partners MFS Emerging Equities Portfolio
[bullet] Portfolio Partners MFS Research Growth Portfolio
[bullet] Portfolio Partners MFS Value Equity Portfolio
[bullet] Portfolio Partners Scudder International Growth Portfolio
[bullet] Portfolio Partners T. Rowe Price Growth Equity Portfolio
Net Premiums allocated to the Fixed Account will accumulate at rates of interest
we determine. Such rates will not be less than 4% a year. Unless specifically
mentioned, this Prospectus describes only the Variable Options. Not all Variable
Options may be available under all Policies or in all jurisdictions. The
Statement of Additional Information ("SAI") for any of the Funds may be obtained
by calling (800) 677-4636.
i
<PAGE>
Replacing existing insurance or supplementing an existing flexible premium
variable life insurance policy with a Certificate may not be to your advantage.
The Certificates have a "free look" period during which you may return the
Certificate. (See Right of Certificate Examination)
The Policy and outstanding Certificates (including your coverage) may be
terminated at any time, without your consent, by NYSUT Trust or in certain
other circumstances. (See Termination or Change in Coverage). Also, NYSUT
Trust, by agreement with the Company, may make changes in the Certificate (and
your coverage) without your consent; however, if such changes result in a
reduction in benefits or an increase in guaranteed charges, your consent is
required.
THIS PROSPECTUS AND OTHER INFORMATION ABOUT VARIABLE LIFE ACCOUNT B REQUIRED TO
BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION CAN BE FOUND IN THE SEC'S
WEB SITE AT http://www.sec.gov.
BOTH THIS PROSPECTUS AND THE ATTACHED PROSPECTUS FOR ANY APPLICABLE UNDERLYING
FUND SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. THESE SECURITIES HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, NOR
HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
ii
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Definitions ......................................................... v
The Separate Account ................................................ 1
Charges & Fees ...................................................... 1
Premium Load ...................................................... 1
Charges and Fees Assessed Against the Total Account Value......... 1
Monthly Deduction ................................................. 1
Cost of Insurance ................................................. 2
Certificate Fee ................................................... 2
Charges for Supplemental Benefits ................................. 2
Transfer and Partial Surrender Charges ............................ 2
Mortality and Expense Risk Charge ................................. 3
Charges Assessed Against the Underlying Funds ..................... 3
Allocation of Premiums .............................................. 5
The Funds ......................................................... 5
Mixed and Shared Funding; Conflicts of Interest ................... 7
Fund Additions, Deletions or Substitutions ........................ 7
Fixed Account ..................................................... 7
Certificate Choices ................................................. 9
Premium Payments .................................................. 9
Commencement of Coverage .......................................... 9
5-Year No Lapse Coverage Provision ................................ 10
Death Benefit Options ............................................. 10
Transfers ......................................................... 10
Telephone Transfers ............................................... 11
Automated Transfers (Dollar Cost Averaging) ....................... 11
Termination or Change in Coverage ................................... 12
Certificate Values .................................................. 14
Total Account Value ............................................... 14
Accumulation Unit Value ........................................... 14
Maturity Value .................................................... 14
Certificate Rights .................................................. 15
Full Surrenders ................................................... 15
Partial Surrenders ................................................ 15
Paid-Up Nonforfeiture Option ...................................... 15
Grace Period ...................................................... 16
Reinstatement of a Lapsed Certificate ............................. 16
Certificate Loans ................................................. 17
Certificate Changes ................................................. 18
Increase in Specified Amount ...................................... 18
Decrease in Specified Amount ...................................... 18
Change in Death Benefit Option .................................... 18
Right of Certificate Examination .................................. 19
Supplemental Benefits ............................................. 19
Certificate Settlement .............................................. 19
Settlement Options ................................................ 20
Calculation of Variable Payment Settlement Option Values .......... 21
The Company and Management .......................................... 21
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Additional Information ............................................ 24
Reports to Owners ............................................... 24
Right to Instruct Voting of Fund Shares ......................... 24
State Regulation ................................................ 24
Legal Matters ................................................... 24
The Registration Statement ...................................... 24
Distribution of the Certificates ................................ 25
Independent Auditors ............................................ 25
Year 2000 ....................................................... 25
Tax Matters ....................................................... 26
Federal Tax Status of the Company ............................... 26
Life Insurance Qualification .................................... 26
General Rules ................................................... 26
Modified Endowment Contracts .................................... 27
Diversification Standards ....................................... 28
Investor Control ................................................ 28
Withholding ..................................................... 28
Other Tax Considerations ........................................ 29
Miscellaneous Certificate Provisions .............................. 29
The Certificates ................................................ 29
Payment and Deferral of Benefits ................................ 29
Suicide and Incontestability .................................... 29
Protection of Proceeds .......................................... 29
Nonparticipation ................................................ 30
Changes in Owner and Beneficiary; Assignment .................... 30
Performance Reporting and Advertising ........................... 30
Illustrations of Death Benefit and Total Account Values.......... 30
Financial Statements of the Separate Account ......................S-1
Financial Statements of the Company ...............................F-1
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESMAN OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, OR OTHER
SALES MATERIAL AUTHORIZED BY THE COMPANY AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
THE PURPOSE OF THE CERTIFICATES IS TO PROVIDE INSURANCE PROTECTION. LIFE
INSURANCE IS A LONG-TERM INVESTMENT. OWNERS SHOULD CONSIDER THEIR NEED FOR
INSURANCE COVERAGE AND THE CERTIFICATES' LONG-TERM INVESTMENT POTENTIAL. NO
CLAIM IS MADE THAT THE CERTIFICATES ARE IN ANY WAY SIMILAR OR COMPARABLE TO AN
INVESTMENT IN A MUTUAL FUND.
iv
<PAGE>
Definitions
Accumulation Unit: A unit used to measure the value of the Owner's interest in
each applicable Variable Option. An Accumulation Unit is used to calculate the
value of the variable portion of a Certificate before the election of a
Settlement Option.
Attained Age: A person's age (as of his or her closest birthday) on the
Certificate Issue Date, plus the number of full Certificate Years elapsed.
Amount at Risk: The Death Benefit under a Certificate divided by 1.0032737,
minus the Certificate's Total Account Value.
Annuitant: A person whose life determines the amount of life contingent annuity
payments.
Annuity: A series of payments for life or for a definite period.
Basic Monthly Premium: The minimum amount of premium that must be paid to
maintain the 5- year No Lapse Coverage in effect, assuming there have been no
Certificate Loans or Partial Surrenders.
Certificate Loan: The amount received by borrowing from the Total Account
Value.
Certificate Year/Certificate Anniversary: The first Certificate Year is the 12
month period beginning on the Issue Date of the Certificate. Your Certificate
Anniversary is the Certificate Issue Date plus 1 Year, 2 Years, etc.
Company: Aetna Life Insurance and Annuity Company.
Cost of Insurance: A monthly charge related to the Company's expected mortality
cost for an Insured's basic insurance coverage under a Certificate, not
including any supplemental benefit provision that you may elect through a
Certificate rider. It is equal to the Amount at Risk for the Insured on the
Monthly Deduction Day, multiplied by that Insured's monthly Cost of Insurance
rate.
Death Benefit: The amount, described in the Death Benefit Options section,
which is payable following an Insured's death, subject to all provisions
contained in the Certificate.
Death Benefit Option: Either of the two methods that you may elect for
determining a Death Benefit.
Fixed Account: A non-variable funding option available under the Certificates
that guarantees a minimum interest rate of 4% per year.
Fixed Account Value: The non-loaned portion of a Certificate's Total Account
Value attributable to its non-variable portion. The Fixed Account Value is part
of the general assets of the Company.
Full Surrender: Your right to terminate a Certificate in exchange for payment
of its Surrender Value.
v
<PAGE>
Fund(s):One or more of the open-end management investment companies (mutual
fund), or a separate series thereof, whose shares are purchased by the Separate
Account to fund the benefits provided by the Certificates.
Grace Period: The 61-day period beginning on any Monthly Deduction Day on which
a Certificate's Surrender Value is insufficient to cover the current Monthly
Deduction. A similar Grace Period also applies if the amount of any loan and
any accrued loan interest exceeds the Total Account Value. The Certificate will
lapse without value at the end of the 61-day period unless a sufficient payment
is received by the Company or unless the 5-year No Lapse Coverage is in effect.
Home Office: The Company's principal executive offices at 151 Farmington
Avenue, Hartford, Connecticut 06156.
Insured: The person on whose life a Certificate is issued. In order to be
eligible for coverage initially, or to continue to be covered, an Insured must
be (a) a Member or (b) an Insured Member's spouse. However, no coverage is
available for persons described in clause (b) whose attained Age is 80 or older
at the Issue Date of their Certificate.
Issue Date: The Issue Date for a Certificate, or for a Specified Amount
increase, is stated in the Certificate Specifications or Supplemental
Certificate Specifications in your Certificate.
Loan Account Value: The sum of all unpaid Certificate Loans. The amount
necessary to repay Certificate Loans in full is the Loan Account Value plus any
accrued interest.
Loan Value: Is 90% of the Total Account Value of a Certificate.
Maturity Date: The Certificate Anniversary on which the Insured's Attained Age
is 100.
Member: An eligible member of NYSUT or a NYSUT agency fee payer.
Monthly Deduction: A monthly charge assessed against the Total Account Value,
which includes the Cost of Insurance, the Certificate fee and any charges for
supplemental benefit riders.
Monthly Deduction Day: The first Monthly Deduction Day is the Issue Date.
Monthly Deduction Days occur each month thereafter on the same day as the Issue
Date of the Certificate.
Net Premium: The Net Premium is equal to the amount of the premium paid less
the then-current Premium Load deduction.
Net Single Premium: The amount required to purchase a guaranteed benefit if
allocated to the Fixed Account, using the Insured's Age and premium class. The
Net Single Premium is determined using a guaranteed interest rate of 4% per
year and the Certificate's guaranteed maximum Cost of Insurance rates.
No Lapse Coverage: A provision in the Certificate providing that, if at least
the Basic Monthly Premiums are paid, a Certificate will remain in force for a
period of at least 5 years beginning on the Issue Date or the Issue Date of an
increase in Specified Amount, even if the Surrender Value is insufficient to
pay the current Monthly Deduction.
Owner:The person to whom a Certificate is issued; the Owner is entitled to
exercise all rights under the Certificate and is also referred to as "You".
vi
<PAGE>
Partial Surrender: The amount you can receive in cash by surrendering a part of
a Certificate.
Planned Premiums: Premiums we agree to bill.
Policy: The group life insurance contract owned by NYSUT Trust, pursuant to
which the Certificates are issued. The Certificates are subject to the terms of
the Policy.
Pro-Rata Basis: In the same proportion that each of the Variable Options and
the Fixed Account Value under a Certificate bear to the sum of Certificate's
Separate Account Value and Fixed Account Value.
SEC: Securities and Exchange Commission.
Separate Account: A separate account maintained by the Company for the purpose
of funding the Certificates; Variable Life Account B.
Separate Account Value: The portion of a Certificate's Total Account Value
attributable to the variable portion of the Certificate. For any Variable
Option, it is the Accumulation Unit Value for that Variable Option multiplied
by the number of Accumulation Units for that Variable Option credited to the
Certificate.
Settlement Option(s): The method(s) by which payment may be made from a Death
Benefit or upon the Maturity Date or the Full Surrender of a Certificate.
Specified Amount: The amount chosen by the Owner at enrollment and used in
determining the Death Benefit. It may be increased or decreased as described in
this Prospectus.
Surrender Value: The Total Account Value on the date of surrender, less the
Loan Account Value and less any accrued interest.
Total Account Value: The sum of the Fixed Account Value, the Separate Account
Value and the Loan Account Value.
Valuation Date: The date and time at which the Accumulation Unit Value of a
Variable Option is calculated. Currently, this calculation occurs after the
close of business of the New York Stock Exchange on any normal business day,
Monday through Friday, that the New York Stock Exchange is open.
Valuation Period: The period of time between successive Valuation Dates.
Variable Option: One or more of the variable funding options available under
the Certificate as described in this Prospectus.
We, our, us, Company: Aetna Life Insurance and Annuity Company.
Written Request: A request in writing, in a form satisfactory to us and
received by us at the Home Office.
You, your: The person entitled to purchase or exercise any rights or privileges
under a Certificate or a Settlement Option. This is generally the Owner (or,
during a Settlement Option, the payee).
vii
<PAGE>
The Separate Account
The Separate Account that supports the Variable Options is our Variable Life
Account B. Amounts allocated to the Separate Account are invested in the Funds.
Each of the Funds is an open-end management investment company (mutual fund),
or a separate series thereof, whose shares are purchased by the Separate
Account to fund the benefits provided by the Certificates. The Funds currently
available under the Separate Account, including their investment objectives and
their investment advisers, are described in this Prospectus. Complete
descriptions of the Funds' investment objectives and restrictions and other
material information relating to an investment in the Funds are contained in
the prospectuses for each of the Funds which are attached to this Prospectus.
Variable Life Account B was established pursuant to a June 18, 1986 resolution
of the Board of Directors of the Company. Under Connecticut Insurance Law, the
income, gains or losses of the Separate Account are credited to the Separate
Account without regard to the other income, gains or losses of the Company. The
Separate Account's assets are held for the Company's variable life insurance
policies. Any and all distributions made by the Funds with respect to Fund
shares held by the Separate Account will be reinvested in additional Fund
shares at net asset value. The assets maintained in the Separate Account that
are not in excess of the Separate Account's reserves and other liabilities
attributable to variable life insurance policies will not be charged with any
liabilities arising out of any other business conducted by the Company. The
Company is, however, responsible for meeting all obligations under the
Certificates to the Owners.
The Separate Account is registered with the SEC as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act") and meets the
definition of separate account under the federal securities laws. Such
registration does not involve any approval or disapproval by the SEC of the
Separate Account or the Company's management or investment practices or
policies. The Company does not guarantee the Separate Account's investment
performance.
Charges & Fees
Premium Load
Before a premium is allocated to the Certificate's Total Account Value, 8% of
the premium is deducted to cover certain expenses and taxes associated with the
sales, start-up and maintenance costs of the Certificates. We reserve the right
to increase this charge to not more than 10% under both new and
previously-issued Certificates.
Charges and Fees Assessed Against the Total Account Value
Charges and fees assessed against the Total Account Value will be deducted from
each of a Certificate's Variable Options and Fixed Account Value on a Pro Rata
Basis.
Monthly Deduction
The Monthly Deduction includes the Cost of Insurance, a Certificate fee, and
any charges for supplemental benefits. Monthly Deductions begin on the Issue
Date, even if the Issue Date is earlier than the date the application form for
a Certificate is signed, and occur on each Monthly Deduction Day thereafter. If
the Certificate's issuance is delayed due to underwriting requirements, the
charges will not be assessed until the underwriting is complete and the
application for the Certificate is approved.
As to when insurance coverage and investment performance commence under a
Certificate, see Enrollment and Commencement of Coverage.
1
<PAGE>
Cost of Insurance
The Cost of Insurance charge is related to the Company's expected mortality
cost for your base insurance coverage under a Certificate, not including any
supplemental benefits that you may elect through a Certificate rider. The Cost
of Insurance charge is equal to the Certificate's Amount at Risk on the Monthly
Deduction Day, multiplied by a monthly Cost of Insurance rate. Our Amount at
Risk at any time is approximately the difference between the Certificate's
then-applicable Death Benefit and its Total Account Value. An increase in the
Total Account Value or a decrease in the Death Benefit will result in a smaller
Cost of Insurance charge, while a decrease in the Total Account Value or an
increase in the Death Benefit will result in a larger Cost of Insurance charge.
The Cost of Insurance rate generally increases over the life of a Certificate
and is based on the Insured's Attained Age and the Insured's risk class. The
Cost of Insurance rates for standard risk Insureds will not exceed those based
on a 50% male/50% female blend under the 1980 Commissioners Standard Ordinary
Mortality Table, smoker or non-smoker (1980 Tables). Substandard risk Insureds
will have monthly deductions based on Cost of Insurance rates which may be
higher than those set forth in the 1980 Tables. A table of guaranteed maximum
Cost of Insurance rates per $1,000 of the Amount at Risk will be included in
each Certificate. Subject to the applicable guaranteed maximum rates, the
monthly Cost of Insurance rates may be adjusted by us from time to time.
Current cost of insurance rates are generally lowest for Certificates having
Specified Amounts of at least $250,000. We expect to review our current cost of
insurance rates on at least an annual basis in light of the actual mortality
experience of participants under the NYSUT Trust group Policy. In many cases,
we expect that these periodic reviews will result in upward or downward
revisions to the current Cost of Insurance rates that apply both to previously
and subsequently-issued Certificates. Cost of Insurance rates will be the same
for male and female insureds, and will generally be lower for non-smokers than
for smokers. We also offer preferred Cost of Insurance rates for both smokers
and non-smokers who meet more stringent requirements than do standard risk
smokers and non-smokers, respectively. If an Insured classified "smoker"
changes his smoking habits so as to fall within our non-smoker category, you
may make a Written Request for reclassification after the first Certificate
Year.
Cost of Insurance rates for an increase in Specified Amount for which evidence
of insurability has been provided will be based on the Insured's risk class at
the time of the increase.
Certificate Fee
The Monthly Deduction also includes a Certificate fee of $14 a month during the
first Certificate Year from the Issue Date of the Certificate or increases and
$6 a month thereafter. This charge is for administrative expenses, such as risk
underwriting and Certificate issuance, premium billing and collection,
Certificate value calculation, confirmation of Certificate transactions, and
periodic reports to Owners. We reserve the right to raise this charge, both for
new and previously issued Certificates, to not more than $19 a month during the
first Certificate Year from the Issue Date of the Certificate or increases and
$11 a month thereafter. The monthly Certificate fee is not expected to exceed
our actual administrative costs.
Charges for Supplemental Benefits
If you elect any supplemental benefits through adding riders to the
Certificate, a supplemental benefits charge may be included in the Monthly
Deduction amount. The amount of any charge will vary depending upon the actual
supplemental benefits selected and is described on each applicable Certificate
rider.
Transfer and Partial Surrender Charges
We reserve the right to charge an administrative fee of up to $25 for each
transfer between investment options in excess of 12 transfers per year. For
Partial Surrenders, we reserve the right to charge an administrative fee of $25
or, if less, 2% of the surrender amount.
2
<PAGE>
Mortality and Expense Risk Charge
A mortality and expense risk charge will be deducted from the Separate Account
Value to compensate the Company for the aggregate mortality and expense risk
assumed in connection with the Certificates. The mortality risk assumed by the
Company is that Insureds, as a group, may live for a shorter period of time
than estimated and that the Company will, therefore, pay Death Benefits before
it is able to collect sufficient amounts of Cost of Insurance charges. The
expense risk assumed is that expenses incurred in issuing and administering the
Certificates and operating the Separate Account will be greater than the
administrative charges that the Company can impose for such expenses. We expect
to earn a profit from this charge.
The mortality and expense risk charge will be deducted daily and currently
equals an annual rate of 0.85% of the average daily net assets of the Separate
Account during the first 10 Certificate years and 0% thereafter. Because the
Certificates were first offered for sale in 1997, the planned deduction after
the tenth year has not yet gone into effect for any outstanding Certificate.
The Company reserves the right to increase or decrease the mortality and
expense risk charge if it believes that circumstances have changed so that
current charges are no longer appropriate. However, in no event will the charge
exceed 1.25% of average daily net assets on an annual basis. Beginning in
Certificate year 11 the Annual rate is guaranteed not to exceed 0.40% of net
assets on an annual basis.
The Separate Account currently is not subject to any taxes. However, if taxes
are assessed against the Separate Account, we reserve the right to assess taxes
against the Separate Account Value.
Charges Assessed Against the Underlying Funds
The following table illustrates the investment advisory fees, other expenses
and total expenses paid by each of the Funds as a percentage of average net
assets based on figures for the year ended December 31, 1997 unless otherwise
indicated:
<TABLE>
<CAPTION>
Investment
Advisory Fees(1) Other Expenses Total Fund
(after expense (after expense Annual
reimbursement) reimbursement) Expenses
---------------- ---------------- -----------
<S> <C> <C> <C>
Aetna Ascent VP(2)(3) 0.57% 0.23% 0.80%
Aetna Balanced VP, Inc.(3) 0.50% 0.10% 0.60%
Aetna Bond VP(3) 0.40% 0.10% 0.50%
Aetna Crossroads VP(2)(3) 0.55% 0.25% 0.80%
Aetna Growth and Income VP(3) 0.50% 0.09% 0.59%
Aetna Index Plus Large Cap VP(2)(3) 0.32% 0.23% 0.55%
Aetna Legacy VP(2)(3) 0.49% 0.31% 0.80%
Aetna Money Market VP(3) 0.25% 0.10% 0.35%
Fidelity VIP Equity-Income Portfolio(4) 0.50% 0.08% 0.58%
Fidelity VIP II Contrafund Portfolio(4) 0.60% 0.11% 0.71%
Janus Aspen Aggressive Growth Portfolio(5) 0.73% 0.03% 0.76%
Janus Aspen Balanced Portfolio(5) 0.76% 0.07% 0.83%
Janus Aspen Growth Portfolio(5) 0.65% 0.05% 0.70%
Janus Aspen Worldwide Growth Portfolio(5) 0.66% 0.08% 0.74%
Oppenheimer Global Securities Fund 0.70% 0.06% 0.76%
Oppenheimer Strategic Bond Fund 0.75% 0.08% 0.83%
Portfolio Partners MFS Emerging Equities Portfolio(6)(7) 0.68% 0.13% 0.81%
Portfolio Partners MFS Research Growth Portfolio(6)(7) 0.70% 0.15% 0.85%
Portfolio Partners MFS Value Equity Portfolio(6) 0.65% 0.25% 0.90%
Portfolio Partners Scudder International Growth Portfolio(6) 0.80% 0.20% 1.00%
Portfolio Partners T. Rowe Price Growth Equity Portfolio(6) 0.60% 0.15% 0.75%
</TABLE>
3
<PAGE>
(1) Certain of the Fund advisers reimburse the Company for administrative costs
incurred in connection with administering the Funds as variable funding
options under the Contract. These reimbursements are paid out of the
investment advisory fees and are not charged to investors.
(2) Effective May 1, 1998, the Portfolios' adviser has agreed to waive a
portion of its fee or to reimburse certain expenses so that aggregate
expenses do not exceed the total expenses shown above. These fee
waiver/expense reimbursement arrangements will increase total return and
may be modified or terminated at any time.
Without these fee waiver/expense reimbursement arrangements Management Fees
and Total Expenses for the Portfolio would be higher. Management Fees and
Total Expenses would be as follows: 0.60% and 0.83% for Ascent VP; 0.60% and
0.85% for Crossroads VP; 0.35% and 0.58% for Index Plus Large Cap VP, and
0.60% and 0.91% for Legacy VP, respectively.
(3) Prior to May 1, 1998, the investment adviser provided administrative
services to the Fund and assumed the Fund's ordinary recurring direct
costs under an Administrative Services Agreement. Effective May 1, 1998,
the investment adviser will continue to provide administrative services to
the Fund but will no longer assume all of the Fund's ordinary recurring
direct costs under the Administrative Services Agreement. The
Administrative Fee is 0.075% on the first $5 billion in assets and 0.050%
on all assets over $5 billion. The "Other Expenses" shown are not based on
actual figures for the year ended December 31, 1997, but reflect the fee
payable under the new Administrative Services Agreement and estimates of
the Fund's ordinary recurring direct costs.
(4) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds have entered into
arrangements with their custodian whereby credits realized, as a result of
uninvested cash balances were used to reduce custodian expenses. Including
these reductions, the total operating expenses would have been 0.57% for
Equity-Income Portfolio and 0.68% for Contrafund Portfolio.
(5) Management fees for Aggressive Growth, Balanced, Growth and Worldwide
Growth Portfolios reflect a reduced fee schedule effective July 1, 1997.
The management fees shown above are based on the new rate applied to net
assets as of December 31, 1997. Other expenses are based on gross expenses
of the Shares before expense offset arrangements for the fiscal year ended
December 31, 1997. The information for each Portfolio is net of fee
waivers or reductions from Janus Capital. Fee reductions for the
Aggressive Growth, Balanced, Growth and Worldwide Growth Portfolios reduce
the management fee to the level of the corresponding Janus retail fund.
Other waivers, if applicable, are first applied against the management fee
and then against other expenses. Without such waivers or reductions, the
Management Fee, Other Expenses and Total Operating Expenses for the Shares
would have been 0.74%, 0.04%, and 0.78% for Aggressive Growth Portfolio;
0.77%, 0.06%, and 0.83% for Balanced Portfolio; 0.74%, 0.04%, and 0.78%
for Growth Portfolio; and 0.72%, 0.09%, and 0.81% for Worldwide Growth
Portfolio, respectively. Janus Capital may modify or terminate the waivers
or reductions at any time upon at least 90 days' notice to the Trustees.
(6) Each Portfolio's aggregate expenses are contractually limited to the
advisory and administrative fees disclosed above. The investment adviser
will not seek an increase in its advisory or administrative fee at any
time prior to May 1, 1999.
(7) The advisory fee is 0.70% of the first $500 million in assets and 0.65% on
the excess.
For further details on each Fund's expenses, please refer to that Fund's
prospectus.
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Allocation of Premiums
You may allocate all or a part of your Net Premiums to the Funds currently
available through the Separate Account in connection with a Certificate and/or
you may allocate all or a part of your Net Premiums to the Fixed Account.
The Funds
The investment results of the Funds, whose investment objectives are described
below, are likely to differ significantly. There is no assurance that any of
the Funds will achieve their respective investment objectives. Investment in
some of the Funds involves special risks, which are described in their
respective prospectuses. You should read the attached prospectuses for the
Funds and consider carefully, and on a continuing basis, which Fund or
combination of Funds is best suited to your long-term investment objectives.
Except where otherwise noted, all of the Funds are diversified, as defined in
the Investment Company Act of 1940. Aetna Variable Fund seeks to maximize total
return through investments in a diversified portfolio of common stocks and
securities convertible into common stocks.(1)
[bullet] Aetna Balanced VP, Inc. (formerly Aetna Investment Advisers Fund,
Inc.) seeks to maximize investment return, consistent with reasonable
safety of principal by investing in a diversified portfolio of one or
more of the following asset classes: stocks, bonds and cash
equivalents, based on the investment adviser's judgment of which of
those sectors or mix thereof offers the best investment prospects.(1)
[bullet] Aetna Income Shares d/b/a Aetna Bond VP seeks to maximize total
return, consistent with reasonable risk, through investments in a
diversified portfolio consisting primarily of debt securities.(1)
[bullet] Aetna Variable Fund d/b/a Aetna Growth and Income VP seeks to maximize
total return through investments in a diversified portfolio of common
stocks and securities convertible into common stock.(1)
[bullet] Aetna Variable Encore Fund d/b/a Aetna Money Market VP seeks to
provide high current return, consistent with preservation of capital
and liquidity, through investment in high-quality money market
instruments. An investment in the Fund is neither insured nor
guaranteed by the U.S. Government.(1)
[bullet] Aetna Generation Portfolios, Inc.--Aetna Ascent VP (formerly Aetna
Ascent Variable Portfolio) seeks to provide capital appreciation. The
Portfolio is designed for investors who have an investment horizon
exceeding 15 years and who have a high level of risk tolerance. (1)
[bullet] Aetna Generation Portfolios, Inc.--Aetna Crossroads VP (formerly Aetna
Crossroads Variable Portfolio) seeks to provide total return (i.e.,
income and capital appreciation, both realized and unrealized). The
Portfolio is designed for investors who have an investment horizon
exceeding 10 years and who have a moderate level of risk tolerance.(1)
[bullet] Aetna Generation Portfolios, Inc.--Aetna Legacy VP (formerly Aetna
Legacy Variable Portfolio) seeks to provide total return consistent
with preservation of capital. The Portfolio is designed for investors
who have an investment horizon exceeding five years and who have a low
level of risk tolerance.(1)
[bullet] Aetna Variable Portfolios, Inc.--Aetna Index Plus Large Cap VP
(formerly Aetna Variable Index Plus Portfolio) seeks to outperform the
total return performance of publicly traded common stocks represented
by the S&P 500 Composite Stock Price Index.(1)
[bullet] Fidelity Investments Variable Insurance Products Fund--Equity-Income
Portfolio seeks reasonable income by investing primarily in
income-producing equity securities. In selecting investments, the Fund
also considers the potential for capital appreciation.(2)
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[bullet] Fidelity Investments Variable Insurance Products Fund II--Contrafund
Portfolio seeks maximum total return over the long term by investing
mainly in securities of companies whose value the investment adviser
believes is not fully recognized by the public.(2)
[bullet] Janus Aspen Series--Aggressive Growth Portfolio is a nondiversified
portfolio that seeks long-term growth of capital. The Portfolio
pursues its investment objective by normally investing at least 50% of
its equity assets in securities issued by medium-sized companies.
Medium-sized companies are those whose market capitalizations fall
within the range of companies in the S&P MidCap 400 Index, which as of
December 31, 1997 included companies with capitalizations between
approximately $213 million and $13.7 billion, but which is expected to
change on a regular basis.(3)
[bullet] Janus Aspen Series--Balanced Portfolio seeks long-term capital growth,
consistent with preservation of capital and balanced by current
income. The Portfolio pursues its investment objective by, under
normal circumstances, investing 40%-60% of its assets in securities
selected primarily for their growth potential and 40%-60% of its
assets in securities selected primarily for their income potential.(3)
[bullet] Janus Aspen Series--Growth Portfolio seeks long-term growth of capital
in a manner consistent with the preservation of capital. The Portfolio
pursues its investment objective by investing primarily in common
stocks of issuers of any size. This Portfolio generally invests in
larger, more established issuers.(3)
[bullet] Janus Aspen Series--Worldwide Growth Portfolio seeks long-term growth
of capital in a manner consistent with the preservation of capital.
The Portfolio pursues its investment objective primarily through
investments in common stocks of foreign and domestic issuers.(3)
[bullet] Oppenheimer Global Securities Fund seeks long-term capital
appreciation by investing a substantial portion of its assets in
securities of foreign issuers, "growth-type" companies, cyclical
industries and special situations which are considered to have
appreciation possibiities but which may be considered to be
speculative.(4)
[bullet] Oppenheimer Strategic Bond Fund seeks a high level of current income
principally derived from interest on debt securities and seeks to
enhance such income by writing covered call options on debt
securities. The Fund intends to invest principally in: (i) foreign
government and corporate debt securities, (ii) securities of the U.S.
Government and its agencies and instrumentalities ("U.S. Government
securities"), and (iii) lower-rated high yield domestic debt
securities, commonly known as "junk bonds", which are subject to a
greater risk of loss of principal and nonpayment of interest than
higher-rated securities. These securities may be considered to be
speculative. Current income is not an objective.(4)
[bullet] Portfolio Partners, Inc. --MFS Emerging Equities Portfolio seeks to
provide long-term growth of capital. Dividend and interest income from
portfolio securities, if any, is incidental to the Portfolio's
investment objective.(5)(a)
[bullet] Portfolio Partners, Inc.--MFS Research Growth Portfolio seeks
long-term growth of capital and future income.(5)(a)
[bullet] Portfolio Partners, Inc.--MFS Value Equity Portfolio seeks capital
appreciation. Dividend income, if any, is a consideration incidental
to the Portfolio's objective of capital appreciation. (5)(a)
[bullet] Portfolio Partners, Inc.--Scudder International Growth Portfolio seeks
long-term growth of capital primarily through a diversified portfolio
of marketable foreign equity securities. (5)(b)
[bullet] Portfolio Partners, Inc.--T. Rowe Price Growth Equity Portfolio seeks
long-term growth of capital and, secondarily, to increase dividend
income by investing primarily in common stocks of well established
growth companies. (5)(c)
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Investment Advisers for each of the Funds:
(1)Aeltus Investment Management, Inc.
(2)Fidelity Management & Research Company
(3)Janus Capital Corporation
(4)OppenheimerFunds, Inc.
(5)Aetna Life Insurance and Annuity Company (Adviser);
(a)Massachusetts Financial Services Company ("MFS")(Subadviser)
(b)Scudder Kemper Investments, Inc. (Subadviser)
(c)T. Rowe Price Associates, Inc. (Subadviser)
Some of the above Funds may use instruments known as derivatives as part
of their investment strategies, as described in their respective prospectuses.
The use of certain derivatives such as inverse floaters and principal only debt
instruments may involve higher risk of volatility to a Fund. The use of
leverage in connection with derivatives can also increase risk of losses. See
the prospectus for each Fund for a discussion of the risks associated with an
investment in that Fund. You should also refer to the attached prospectuses of
the Funds for more complete information about their investment policies and
restrictions.
Mixed and Shared Funding; Conflicts of Interest
Shares of the Funds are available only to insurance company separate accounts
which fund variable annuity contracts and variable life insurance policies,
including the Certificates described in this Prospectus. Fund shares are
offered to separate accounts of the Company and its affiliates and of insurance
companies that are not affiliated with the Company. It is conceivable that, in
the future, it may not be advantageous for variable life insurance separate
accounts and variable annuity separate accounts to invest in a Fund
simultaneously, since the interests of the participants in such accounts may
differ. Although neither the Company nor the Funds currently foresees any such
disadvantages either to variable life insurance or to variable annuity
participants, each Fund's Board of Trustees/Directors has agreed to monitor
events in order to identify any material irreconcilable conflicts which may
possibly arise and to determine what action, if any, should be taken in
response thereto. If such a conflict were to occur, one of the separate
accounts might withdraw its investment in a Fund. This might force that Fund to
sell portfolio securities at disadvantageous prices.
Fund Additions, Deletions or Substitutions
The Company may add additional Funds as investment options under your
Certificate at any time. The Company may also stop accepting payments into a
Fund at any time although amounts you have deposited in those Funds could stay
in the Fund. Any dividends or capital gains earned on the Fund could be
reinvested in the Fund. The Company also has the right to replace shares of a
Fund with shares of another Fund if the Company believes that the Fund is no
longer appropriate as an investment option under the Certificate. To do any of
these actions, the Company must comply with the terms of the 1940 Act and with
any insurance laws or regulations that would apply at the time. The Company
would provide notice to you before it would replace a Fund or close a Fund to
new payments and will also provide notice about any new Fund that is added.
Fixed Account
Interests in the Fixed Account have not been registered with the SEC, in
reliance upon an exclusion under the Securities Act of 1933. However,
disclosures in this Prospectus regarding the Fixed Account may be subject to
certain generally applicable provisions of the federal securities laws relating
to the accuracy and completeness of the statements. Disclosure in this
Prospectus relating to the Fixed Account has not been reviewed by the SEC.
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The Fixed Account is a fixed funding option available under the Certificates
under which the Company credits interest at rates that it declares from time to
time. These rates are in the Company's sole discretion, except that the Company
guarantees a 4% minimum annual interest rate on amounts in the Fixed Account
(the Fixed Account Value), compounded monthly. Current interest rates may also
vary depending on when an amount was allocated to the Fixed Account.
The Fixed Account is supported by the general assets of the Company. The
general assets of the Company include all assets of the Company other than
those held in legally-segregated separate accounts sponsored by the Company or
its affiliates. The Company will invest the assets attributable to the Fixed
Account in those assets chosen by the Company, as allowed by applicable law for
investment of its general assets. Such assets, and any investment income
therefrom are solely the property of the Company.
8
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Certificate Choices
Premium Payments
The Certificates are flexible premium variable universal life insurance in
that, within limits, the Owner has the right to decide when to make premium
payments and in what amounts. Each Certificate specifies Planned Premiums and
Basic Monthly Premiums. However, payment of Planned or Basic Monthly Premiums
will not, except as noted below, guarantee that your Certificate will remain in
force. Conversely, failure to pay such premiums will cause your Certificate to
lapse. Not paying an amount at least equal to your Basic Monthly premiums will
cause the Certificate's 5-year No Lapse Coverage not to be applicable. (See No
Lapse Coverage)
Planned Premiums are those premiums you request and we agree to bill on an
annual, semiannual, quarterly or other periodic basis. Pre-authorized automatic
monthly check payments or salary or pension deduction arrangements through the
Member's employer may also be arranged. You may change your Planned Premium at
any time by submitting a Written Request to us. Premiums paid by payroll
deduction are generally forwarded by your employer to NYSUT Trust, which
forwards them to us. We are not responsible for errors and delays caused by or
other conduct of your employer or NYSUT Trust.
We may require evidence of insurability if payment of any premium would
increase the difference between the Death Benefit and the Total Account Value
(thus increasing our Amount at Risk). If satisfactory evidence of insurability
is requested and not provided, we will refund any refused premium without
interest and without participation of such amount in the Funds. We may also
refuse to accept any premium payment (other than one required to keep a
Certificate in force) if it would cause the Certificate to fail to be treated
as life insurance for federal income tax purposes. Finally, premiums paid in
excess of the Planned Premium or an increase in your Planned Premium may cause
the Certificate to be classified as a "Modified Endowment Contract" for federal
income tax purposes. (See Tax Matters) In that case, we will mail you a
notification and, if you wish to avoid Modified Endowment Contract status, we
will refund the excess premium, without interest and without participation in
the Funds.
Commencement of Coverage
The insurance coverage under a Certificate starts when we have approved the
insurance based on the application and any other information required to be
submitted by the Insured, we or our representative have received at least the
first Basic Monthly Premium and the Insured is eligible for coverage.
Therefore, coverage may not commence until some time after you submit an
application for a Certificate.
If, however, you submit at least the full first Basic Monthly Premium for the
billing frequency or a completed Payroll Deduction Authorization with your
application, and if certain other requirements are met, we may offer immediate
temporary fixed insurance coverage. For more information about the
availability, terms and conditions of this coverage, you should consult your
Aetna representative, who can also provide you with a copy of our conditional
receipt.
The Issue Date of a Certificate is generally the date that we approve a
Certificate. Under limited circumstances, however, we may backdate a
Certificate, upon request, by assigning an Issue Date that is up to six months
earlier than otherwise would apply. Backdating may be desirable, for example,
so that you can purchase coverage at lower Cost of Insurance rates based on a
younger insurance Age. For a backdated Certificate, you must pay the cost of
insurance and other charges from the Issue Date to the Issue Date that would
have applied without backdating, notwithstanding that insurance coverage was
not in effect and no interest or investment return is credited for that period.
9
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Your initial premium payment is credited to and begins to earn a return in the
Separate Account or the Fixed Account on the Issue Date of the Certificate or
the date that at least the first Basic Monthly Premium is received at our Home
Office, whichever is later. After the first premium payment, all premiums must
be sent to our Home Office. These and all other premiums will be deemed
received when actually received at the Home Office together with any
identifying information we require from the Member's employer or NYSUT Trust.
Your premium payments will be allocated as you have directed, effective at the
end of the Valuation Period in which each payment is received in the Home
Office.
You may reallocate your future premium payments at any time. Allocations must
be changed in whole percentages. The change will be effective with the next
premium payment after we receive your request. We will send you confirmation of
the change. (See Transfers)
5-Year No Lapse Coverage Provision
A Certificate will not enter a Grace Period--and therefore will not
terminate--within the 5-year period after its Issue Date or the Issue Date of
any Specified Amount increase that you have requested, if required premiums are
paid as follows: the Certificate will not enter a Grace Period on any Monthly
Deduction Day within such a 5-year period, if the sum of premiums paid within
that period equals or exceeds (a) the sum of the Basic Monthly Premiums for
each Certificate Month from the start of the period, including the current
month; plus (b) any Partial Surrenders since the start of the period; plus (c)
any increase in the Loan Account Value since the start of the period.
If these requirements are not met on any Monthly Deduction Day within the
5-year period, and the Surrender Value is less than the Monthly Deduction for
that day, the Certificate will enter the Grace Period. Additional premium
payments must then be paid to prevent the termination of the Certificate. (See
Grace Period)
We will accumulate any amounts of Monthly Deduction that, as a result of the No
Lapse Coverage, we have not collected, and we will collect such amounts from
any Surrender Value resulting from subsequent Net Premiums that you pay. Also,
once the No Lapse Coverage is no longer in effect as to your Certificate, your
Certificate may lapse unless you pay sufficient premiums to permit us to
collect the full amount of previously uncollected Monthly Deductions, if any.
(See Grace Period)
Death Benefit Options
At the time of enrollment, you must choose between the two available Death
Benefit Options.
Under Option 1, the Death Benefit will be the greater of: (a) the Specified
Amount or (b) the applicable percentage of the Total Account Value. The
percentage is 250% through age 40 and decreases yearly to 100% at age 95.
Option 1 generally provides a level Death Benefit.
Under Option 2, the Death Benefit will be the greater of: (a) the Specified
Amount plus the Total Account Value or (b) the applicable percentage (described
above) of the total Account Value. Option 2 provides a varying Death Benefit
which increases or decreases over time, depending upon the amount of premiums
paid and the investment performance of the Fund(s) you choose.
The Death Benefit payable under either Option will be calculated as of the date
of death and will be reduced by (a) the amount necessary to repay the Loan
Account Value in full with all accrued interest, (b) if the Certificate is
within the Grace Period, the amount required to keep the Certificate in force
through the date of death, and (c) the amount of any other Monthly Deductions
that we were unable to collect. (See 5-year No Lapse Coverage Provision)
Transfers
At any time prior to the Maturity Date, you may transfer all or part of your
Separate Account Value in any Variable Option to any other Variable Option or
to the Fixed Account. We reserve the right to charge an administrative fee of
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$25 for each transfer over 12 per year and to limit the total number of
Variable Options you may elect to 15 over the lifetime of the Certificate.
Within the 45 days following the Certificate Anniversary, you may request a
transfer of a portion of the Fixed Account Value to one or more of the Variable
Options. This type of transfer is allowed only once within this 45 day period,
and we must receive your request at the Home Office within the 45 day period.
The transfer will be effective at the end of the Valuation Period in which your
request is received by the Home Office. The amount of any such transfer cannot
exceed the greater of 25% of the Fixed Account Value or $500.
Telephone Transfers
You may request a transfer of account values either by Written Request (as set
forth above) or by telephone. All transfers must be in accordance with the
terms of the Certificate.
Transfer instructions are currently accepted on each Valuation Date. Once
instructions have been accepted, they may not be rescinded; however, new
telephone instructions may be given on the following day. If the transfer
instructions are not in good order, the Company will not execute the transfer
and you will be notified.
We will use reasonable procedures, such as requiring identifying information
from callers, recording telephone instructions, and providing written
confirmation of transactions, in order to confirm that telephone instructions
are genuine. Any telephone instructions which we reasonably believe to be
genuine will be your responsibility, including losses arising from any errors
in the communication of instructions. As a result of this procedure, the Owner
will bear the risk of loss. If the Company does not use reasonable procedures,
as described above, it may be liable for losses that result from any
unauthorized instructions.
Automated Transfers (Dollar Cost Averaging)
Dollar Cost Averaging describes a system of investing a uniform sum of money at
regular intervals over a period of one, two or three years, as you select.
Dollar Cost Averaging is based on the principle that acquiring Accumulation
Units with a constant sum of money at fixed intervals results in acquiring more
of the units when prices are low and fewer units when prices are high.
You may establish automated transfers of amounts on a monthly or quarterly
basis from the Aetna Money Market VP Fund Variable Option to any other Variable
Option through a Written Request or other method acceptable to the Company.
Dollar Cost Averaging is not permitted to or from the Fixed Account. You must
have a minimum of $5,000 allocated to the Aetna Money Market VP Variable Option
in order to enroll in the Dollar Cost Averaging program. The minimum automated
transfer amount is $50 per month. There is no additional charge for this
Program. You may start or stop participation in the Dollar Cost Averaging
program at any time, but you must give the Company at least 30 days' notice to
change any automated transfer instructions that are currently in place.
Automated transfers do not reduce the number of charge-free transfers that you
could otherwise make. The Company reserves the right to suspend or modify
automated transfer privileges at any time.
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Termination or Change in Coverage
Even if the 5-year No Lapse Coverage is still in effect under your Certificate,
and even if you have paid enough premiums to prevent your Certificate from
lapsing, your Certificate, and all coverage thereunder, may be terminated
without your consent. This may happen, for example, if NYSUT notifies the
Company that it wishes to terminate the group Policy. NYSUT Trust has agreed to
provide each of the Insured with advance notice of policy cancellation or
discontinuance. Such notice must be mailed or delivered to such Insured at the
last known address of record at least 15 days before the date plan cancellation
or discontinuance is to take effect. Prior to the termination date, you could
exercise your rights to make a Full Surrender or to convert your Certificate to
paid-up fixed life insurance. (See Paid-Up Nonforfeiture Option)
The group Policy, and your Certificate, may also terminate if NYSUT Trust
ceases to cause payroll deduction premiums to be remitted to us. This would
occur (following an opportunity to cure the problem in accordance with the
terms of the group Policy) regardless of whether premiums for your Certificate
were being paid by payroll deduction, or the amount of premium paid, or the
available Surrender Value under your Certificate.
A Certificate also will terminate immediately if and when the Insured ceases to
be within at least one of the categories of persons that are eligible for
coverage under a Certificate. Those eligibility requirements are set forth
above under Definitions--Insured. If an Insured who is eligible only as the
spouse of a Member who is Insured ceases to be eligible, the Insured may become
a Member within 31 days after eligibility ceases and may continue the
Certificate uninterrupted.
If you do not make such an election within the 31-day period, or the
Certificate terminates because we or NYSUT Trust terminates the group Policy as
described above, you would then have the option of electing to convert your
coverage to an individual policy as described in the immediately following
paragraph. Either of these elections must be received at the Home Office (and,
as the case may be, the insured has become a Member or we have received the
required first premium under the conversion policy at our Home Office) within
the 31-day period. Otherwise, we will pay you the Certificate's Surrender
Value, calculated at the end of the last Valuation Period during which it was
in force.
The conversion privilege is available only within the 31-day period following
termination of the group Policy by NYSUT Trust or us or termination of a
Certificate upon the Insured's ineligibility for continued coverage thereunder.
The amount of insurance which ceases may be converted to any substantially
comparable flexible premium general account life insurance policy except term
insurance that the Company makes available for such purpose and according to
the Certificate terms. We cannot provide assurance, however, that the terms of
the conversion policy will not involve additional charges or otherwise be as
attractive to you than the Certificates. We reserve the right to permit only
the initial premium for the conversion policy to be paid at the time of
conversion and to distribute to you the rest of the Surrender Value as of the
Certificate's termination date. The Company will send notice to the Owner of
the right to convert. No evidence of insurability will be required.
Income taxes may be payable with respect to such partial distribution or any
other distribution of Surrender Value following termination of a Certificate.
(See Tax Matters)
If a timely conversion request has been received, and the Insured dies during
the time allowed for conversion, the amount that could have been converted will
be payable as a death benefit to the Beneficiary designated by the
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Insured. In the event there is no designated beneficiary, we may pay from the
Death Benefit payable a sum not exceeding $500 to any person appearing to us to
be equitably entitled to same by reason of having incurred funeral expenses
incident to the death of the Insured. If a conversion request has not been
received, however, we will pay that benefit only if the insured dies within the
31-day conversion period.
Also NYSUT Trust, by agreement with us, may make changes in your Certificate
(and your coverage) without your consent; however, if such changes result in a
reduction in benefit or an increase in guaranteed charges, your consent is
required.
We reserve the right at any time to cease issuing new Certificates to any class
or classes of Members or their relations.
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Certificate Values
Total Account Value
Amounts allocated under a Certificate to a Variable Option of the Separate
Account are credited in the form of Accumulation Units of that Variable Option,
based on such units' then Accumulation Unit Value. The number of Accumulation
Units credited is determined by dividing the amount being allocated by the
appropriate Accumulation Unit Value. Since each Variable Option has a unique
Accumulation Unit Value, if you have elected a combination of Variable Options
you will have Accumulation Units credited to your Separate Account Value for
each Variable Option.
The Total Account Value of your Certificate is determined by: (a) multiplying
the total number of Accumulation Units credited to the Certificate for each
applicable Variable Option by its appropriate current Accumulation Unit Value;
(b) if you have elected a combination of Variable Options, totaling the
resulting values; and (c) adding any Fixed Account Value and any Loan Account
Value.
The number of Accumulation Units credited to a Certificate will not be changed
by any subsequent change in the value of an Accumulation Unit or the investment
performance of the related Fund. The number is increased by any subsequent
allocation of Net Premiums or other account value to the Variable Option.
Similarly, whenever any account value is removed from the Variable Option (such
as upon transfer, Full or Partial Surrender, Certificate Loan or Monthly
Deduction allocated to that option), a number of Accumulation Units in that
Variable Option will be canceled whose aggregate then-current Accumulation Unit
Values equal the amount being removed from the Variable Option.
The Fixed Account Value includes all amounts allocated to the Fixed Account
under a Certificate and any interest credited thereon. The Fixed Account Value
is reduced by amounts removed from the Fixed Account, such as upon a transfer,
Full or Partial Surrender, Certificate Loan or Monthly Deduction allocated to
the Fixed Account.
You will be advised at least annually as to the number of Accumulation Units
which remain credited to your Certificate, the current Accumulation Unit
Values, the Separate Account Value, the Fixed Account Value, and the Total
Account Value. (See Reports to Owners)
Accumulation Unit Value
The value of an Accumulation Unit for any Valuation Period is determined by
multiplying (a) the value of an Accumulation Unit for the immediately preceding
Valuation Period by (b) the sum of 1 plus the net investment rate for the
current period for the appropriate Variable Option.
The net investment rate equals (a) the value of the net assets of the Variable
Option held in the Separate Account at the end of a Valuation Period, before
any adjustment for amounts allocated to or removed from the Variable Option
during the period; minus (b) the value of the net assets of the Variable Option
held in the Separate Account at the beginning of that Valuation Period,
adjusted by any taxes or provisions for taxes attributable to the operation of
the Separate Account; divided by (c) the value of the Variable Option's
Accumulation Units held in the Separate Account at the beginning of the
Valuation Period; minus (d) the rate of any applicable daily charge for
mortality and expense risk.
Maturity Value
The Maturity Value of a Certificate is the Surrender Value on the Maturity
Date. All or part of the Surrender Value may be applied to one or more of the
Settlement Options. (See Certificate Settlement)
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<PAGE>
Certificate Rights
Full Surrenders
By Written Request, you may surrender a Certificate for its Surrender Value at
any time before the Maturity Date while the Insured is alive. All insurance
coverage under the Certificate will end on the date of the Full Surrender. The
Surrender Value will equal the Total Account Value on the date of surrender,
less the Loan Account Value and less any unpaid accrued interest. We may
require return of the Certificate for a Full Surrender.
The Surrender Value is computed as of the end of the Valuation Period in which
we receive your Written Request.
Partial Surrenders
By Written Request, you may, at any time after the first Certificate Year,
partially surrender your Certificate.
The minimum amount of any Partial Surrender is $500. We may also charge an
administrative fee of $25 or, if less, 2% of the amount surrendered. Any
Partial Surrender and any related administration charge will be deducted on a
Pro-Rata Basis from each investment option in use under the Certificate.
If the Death Benefit Option for a Certificate is Option 1, a Partial Surrender
will reduce the Total Account Value, Death Benefit, and Specified Amount. The
Specified Amount and Total Account Value each will be reduced by the amount of
the surrender. However, we will not allow a Partial Surrender if the Specified
Amount will be reduced below the minimum Specified Amount set forth in the
Certificate Specifications. Nevertheless, if the Death Benefit for the
Certificate immediately prior to the surrender is determined based on the
applicable percentage of the Total Account Value, the Partial Surrender may not
reduce the Specified Amount. A reduction in the Specified Amount will cause a
reduction in the required Basic Monthly Premiums for the 5-year No Lapse
Coverage and may cause an increase in your current Cost of Insurance rate if a
Specified Amount is reduced from $250,000 or more to an amount less than
$250,000 (see Monthly Deduction). The future premium required to maintain the
5-year No Lapse Coverage will be based on the new Specified Amount and will be
set forth in a supplemental Certificate Specifications page that will be
delivered to you.
If the Death Benefit Option for a Certificate is Option 2, a Partial Surrender
will reduce both the Total Account Value and the Death Benefit by the amount of
the surrender, but the Specified Amount will not be reduced.
Paid-Up Nonforfeiture Option
By Written Request, you may elect, at any time before the Maturity Date, to
continue your Certificate as fixed (non-variable) paid-up life insurance.
The Surrender Value will be applied as a Net Single Premium to determine the
Specified Amount of the paid-up insurance. The cost of the paid-up insurance
will be based on the guaranteed maximum Cost of Insurance rates in the
Certificate and an interest rate of 4% compounded annually. However, the
Specified Amount of the paid-up insurance cannot exceed the Death Benefit under
the Certificate as of the effective date of the paid-up insurance. Any excess
Surrender Value will be distributed to you and will be treated as a partial
distribution for federal income tax purposes. (See Tax Matters) The effective
date of the paid-up coverage will be the first Monthly Deduction Day that
occurs on or after our receipt of your Written Request.
Full Surrenders and Certificate Loans, as described in this Prospectus, will be
allowed if the Certificate is continued in force as paid-up insurance. However,
all supplemental rider benefits will terminate and will be unavailable with the
paid-up coverage. The surrender value will be the Net Single Premium for the
paid up insurance on the date of surrender, less any outstanding loan balance.
Partial Surrenders will not be available.
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<PAGE>
Proceeds payable under this option upon death of the Insured or maturity will
equal the Specified Amount less any Certificate Loans and accrued unpaid
interest under the paid up insurance. See "Tax Matters" for a discussion of
possible tax consequences resulting from your electing the paid-up
nonforfeiture option.
Grace Period
If You have paid sufficient premiums to meet the conditions of the No Lapse
Coverage period, but outstanding loans have caused the Surrender Value to be
insufficient to allow a Monthly Deduction on the Monthly Deduction Day, We will
allow You 61 days of grace for payment of an amount sufficient to allow the
Monthly Deduction. We may require payment of the amount equal to the lesser of
(1) or (2) where:
(1) is the amount necessary to meet the loan-related conditions of the No Lapse
Coverage provision; or
(2) is an amount sufficient to cover the Monthly Deduction(s) that would result
in the Surrender Value being greater than zero.
If You have not paid sufficient premiums to meet the conditions of the No Lapse
Coverage period and the Surrender Value is insufficient to allow a Monthly
Deduction on a Monthly Deduction Day, We will allow You 61 days of grace for
payment of an amount sufficient to allow the monthly Deduction. We may require
payment of the amount necessary to keep the coverage under this Certificate in
force for the current month plus two additional months.
If payment is not made within 61 days after the Monthly Deduction Day, the
Certificate will terminate without value at the end of the Grace Period. The
termination will be effective on the Monthly Deduction Day for the first unpaid
Monthly Deduction.
Written notice will be mailed to Your last known address, according to Our
records, not less than 31 days before termination of this Certificate. This
notice will also be mailed to the last known address of any assignee of record.
During the days of grace, this Certificate will stay in force. If the Insured's
Death occurs during the days of grace, We will deduct an amount required to
keep this Certificate in force from that Death Benefit.
Reinstatement of a Lapsed Certificate
If the Certificate terminates following its Grace Period, it may be reinstated.
If this Certificate is reinstated, the Certificate Year upon reinstatement will
be calculated as if there had never been a lapse in coverage. However, you must
apply for reinstatement within 5 years after the date of termination and before
the Maturity Date. Also, we must receive evidence of the Insured's current
insurability that is satisfactory to us, as well as a premium payment that at
least equals the amount that we specify. We must receive a payment at least
equal to the sum of (1) and (2) where: (1) is any portion of the Loan Account
Value plus accrued interest on the date of lapse exceeding the Total Account
Value on the date of lapse; and (2) a premium payment sufficient to keep the
Certificate in force for the current month plus two additional months. If this
Certificate is reinstated within a No Lapse Coverage period, all values
including the Loan Account Value would be reinstated as they were the date of
lapse.
If this Certificate is reinstated after a No Lapse Coverage period has expired,
the coverage would be reinstated on the Monthly Deduction Day following Our
approval. The payment received would first be applied to pay any positive
excess of the Loan Account Value plus accrued interest on the date of lapse
over the Total Account Value on the date of lapse with any remainder treated as
a premium. The Total Account Value at reinstatement would be the Net Premium
paid less the Monthly Deduction for that day. Any Loan Account Value would not
be reinstated.
Monthly Deductions and investment performance will recommence on the Monthly
Deduction Day on or first following our approval of the reinstatement.
Nevertheless, we will pay the reinstated Death Benefit if the Insured
16
<PAGE>
dies prior to that date but after we have received a reinstatement request and
all payments and information required for us to grant the request.
Supplemental benefit riders will be reinstated only with our consent. Any
Certificate Loan will be reinstated and any prior uncollected Monthly
Deductions will remain due only if the Certificate lapsed within a 5-year No
Lapse Coverage period that has not yet expired by the time of reinstatement.
(See 5-year No Lapse Coverage Provisions) Any portion of the No Lapse Coverage
period that still remains by the time of reinstatement will also be restored.
In that case, you may put the No Lapse Coverage into effect for any time during
such remaining period as of which you have paid at least the cumulative amount
of all Basic Monthly Premiums required to date for this purpose (including any
amount of unpaid Basic Monthly Premiums due for periods prior to the
reinstatement).
A reinstatement may result in restarting the test used for determining whether
the Certificate is a Modified Endowment Contract. (See Tax Matters)
Certificate Loans
We will grant loans at any time after the expiration of the Right of
Certificate Examination and before the Maturity Date. The amount of the loan
will not be more than the Loan Value. Unless otherwise required by state law,
the Loan Value is 90% of the Total Account Value. The amount of the loan will
be transferred out of the Fixed Account and any Variable Options on a Pro-Rata
Basis and be held instead as part of the Loan Account Value. Loans and loan
repayments will be effected as of the end of the Valuation Period in which we
receive the Written Request for the loan or the repayment, respectively.
The loan may be repaid in full or in part at any time prior to the Maturity
Date, as long as the Certificate is in force and the Insured is alive. The
amount necessary to repay all loans in full is the Loan Account Value plus any
accrued interest. Loan repayments will be allocated to the Fixed Account Value
and the Separate Account Value in the same proportion in which the loan was
taken. Unless you specifically instruct us otherwise, Additional Premiums
received will be considered loan repayments. The full Surrender Value under
this Certificate will equal the Total Account Value on the date of surrender
less the Loan Account Value plus any accrued interest. If a loan is not repaid
prior to the Maturity Date, the amount payable at the Maturity Date will equal
the Total Account Value on the Maturity Date, less the Loan Account Value on
the Maturity Date plus any accrued interest.
The amount of interest earned on the Loan Account Value and the amount of
interest charged to you on a loan depends on whether the loan is considered a
preferred loan, as defined in the Certificate at the time. Beginning in the
11th Certificate Year, the interest rate charged on preferred loans and the
interest rate credited to the related Loan Account Value is 4%. For all other
loans, the current loan interest rate charged is 8% and the related Loan
Account Value will earn interest at a guaranteed minimum rate of 6%; however,
we may credit interest in excess of this rate, in our sole discretion.
Accordingly, even if the loan is repaid, the amount of the Death Benefit and
the Certificate's Surrender Value may be permanently affected, since the Loan
Account Value is credited with interest rather than with the investment
experience of the Funds.
Interest is due and payable on each Certificate Anniversary, the date the
Certificate ends or upon full repayment of the Loan Account Value. Any interest
not paid when due will be added to the Loan Account Value on the Certificate
Anniversary and will itself bear interest on the same terms.
Federal income tax consequences of Certificate Loans are discussed under Tax
Matters.
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Certificate Changes
You may make certain changes to your Certificate, as described below, by
submitting a Written Request to our Home Office. Supplemental Certificate
Specifications will be sent to you once the change is completed. Any change
that decrease a $250,000 or larger Specified Amount to less than $250,000 (or
vice-versa) can cause an increase (or decrease) in your current Cost of
Insurance Rate. (See Monthly Deduction)
Increase in Specified Amount
Increases will be allowed at any time while a Certificate is in force if
satisfactory evidence of insurability for the Insured is provided. The
Surrender Value immediately after an increase must be at least three times the
sum of (a) the most recent Monthly Deduction from the Total Account Value and
(b) the Specified Amount of the increase multiplied by the applicable Cost of
Insurance rate divided by 1000. Specified Amount increases must be requested in
multiples of $1,000. Any maximum limit on the Specified Amount will be set
forth in the Certificate Specifications.
The Issue Date for any increase will be shown in the supplemental Certificate
Specifications. The 5-year period of the No Lapse Coverage provision applicable
to the increase will restart on the Issue Date of the increase. The Basic
Monthly Premium after the increase will be based on the Insured's Attained Age
and new Specified Amount.
For possible tax consequences of an increase in Specified Amount, see Tax
Matters.
Decrease in Specified Amount
You may decrease the Specified Amount of a Certificate after the first
Certificate Year. However, we will not allow a decrease in the Specified Amount
if the Specified Amount would be reduced below the minimum Specified Amount set
forth in the Certificate Specifications or if it would cause the Certificate to
be treated as other than life insurance for income tax purposes.
The Issue Date of the decrease will be the Monthly Deduction Day on or next
following the date on which your Written Request is received. The decrease will
reduce any past increases in the reverse order in which they occurred. (This
same order will also be followed for decreases in Specified Amount resulting
from changes in Death Benefit Option or a Partial Surrender.) If the 5-year No
Lapse Coverage provision is still applicable, the Basic Monthly Premium for
that purpose will be adjusted to be based on the reduced Specified Amount.
A Specified Amount decrease can cause a Certificate to be taxed as a Modified
Endowment. For a discussion of tax considerations in connection with Specified
Amount decreases, see Tax Matters.
Change in Death Benefit Option
Changes from Option 1 to Option 2 will be allowed at any time while the
Certificate is in force. The Specified Amount will be reduced to equal the
Specified Amount less the Total Account Value at the time of the change.
Changes from Option 2 to Option 1 also will be allowed at any time while the
Certificate is in force. The Specified Amount will be increased to equal the
Specified Amount plus the Total Account Value as of the date of the change. If
the Death Benefit at the time of the change is determined based on the
applicable percentage of the Total Account Value, the new Specified Amount may
be calculated differently from the foregoing description.
We will not allow a change in the Death Benefit Option if the Specified Amount
will be reduced below the minimum Specified Amount set forth in the Certificate
Specifications or if it would cause the Certificate to be treated as other than
life insurance for income tax purposes. Also, evidence of insurability may be
required. The change will take effect on the Monthly Deduction Day on or next
following the date on which your Written Request is received and, in cases
where evidence of insurability is required, we approve the increase.
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<PAGE>
Following any change in Death Benefit Option, the Basic Monthly Premium will be
adjusted so that it will be based on the new Specified Amount. A change in
Death Benefit Option may restart the test for determining whether a Certificate
is a Modified Endowment Contract for federal income tax purposes. (See Tax
Matters)
Right of Certificate Examination
The Certificate has a free look period during which you may examine your
Certificate. If for any reason you are dissatisfied, it may be returned to us
or to our representative within 10 days of receipt. Upon its return this
Certificate will be deemed void from its beginning. The amount refunded will be
(a) all payment made or (b) where permitted by state law, the premiums paid,
adjusted for any positive or negative investment performance in the Variable
Options you selected (but not deducting any charges made under the
Certificate).
Supplemental Benefits
The supplemental benefits currently available as riders to a Certificate are
listed below. The riders contain other terms and conditions, about which you
can obtain information from your Aetna representative.
[bullet] Disability Benefit Rider provides--for a credit of the benefit amount
described in the rider in the event of the total disability of the
covered Insured. The Specified Amount generally may not be increased
during the time while benefits are being provided under this rider.
[bullet] Accelerated Death Benefit Rider--provides for the advance payment to
the Owner of a portion of the Specified Amount if the Insured provides
requisite evidence of less than one year's life expectancy. There is
no charge for this rider.
[bullet] Accidental Death Benefit Rider--provides for the payment of up to
$200,000 to provide a double Death Benefit if the Insured dies as a
result of an accident as defined in the rider.
[bullet] Child Insurance Rider-provides for non-participating term life
insurance on the child(ren) of the Insured.
Other riders for supplemental benefits may become available under the
Certificate from time to time. The charges for such riders will be set forth in
your Certificate Specifications. Supplemental benefit riders may be added or
canceled by the Owner at any time, pursuant to our procedures then in effect.
Any change you make in supplemental benefits may cause us to revise the Basic
Monthly Premium, in which case the new amount will be set forth in a
supplemental Certificate Specifications page that we will provide to you. Any
change in supplemental benefit rider coverage may also have tax consequences.
(See Tax Matters)
Certificate Settlement
Proceeds are generally payable by the Company in a lump sum upon the death of
the Insured or upon Full Surrender or upon maturity. You may elect one or more
of the Settlement Options discussed below. We may agree to other Settlement
Options at our discretion.
You may make a Written Request to elect, change or revoke a Settlement Option
before payments begin under any Settlement Option. This request will take
effect upon its receipt at our Home Office. If no Settlement Option has been
elected by you when proceeds become payable, the payee may make the election.
If the Certificate has been assigned, We must consent to the election of any
Settlement Option. Any excess Death Benefit due will be paid as elected. The
payee is entitled to exercise any rights and privileges that are permitted
under a Settlement Option.
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No fixed or variable Settlement Option may be elected that would result in a
first payment of less than $50 or that would result in total yearly payments of
less than $250. If the proceeds payable are insufficient to elect an option for
these minimum amounts, a lump-sum payment must be elected. We may refuse to
permit a Settlement Option if the payee is not a natural person. Also, the
Annuitant's age (plus the number of years for which any payments under the
annuity option chosen) may not exceed 95 years.
The several Settlement Options may differ in their tax consequences.
Settlement Options
The Settlement Options listed below are available under the Certificates.
Options 1, 2 and 3 are available on either a fixed payment or a variable
payment basis. The amount of the first payment under Options 1, 2 and 3
(whether on a fixed or variable basis) is determined, based on the option
chosen, using the annuity rates specified in the Certificate. This rate is the
same regardless of whether an Annuitant is male or female.
For a fixed Settlement Option, the amount of the first and each subsequent
payment is the same. That amount will be based on an interest rate of at least
3%.
If our then current settlement option rate would provide higher payments on a
comparable fixed premium annuity at the time payments commence, we also will
use the higher rate for fixed Settlement Options under a Certificate.
For a variable Settlement Option, the first payment is determined using an
assumed interest rate of 3.5% or 5% whichever has been specified by the Owner
or payee, as the case may be. Subsequent payments will vary based on Fund
performance as discussed below under Calculation of Variable Payment Settlement
Option Values. The initial payment will be higher if 5% is elected as the
assumed interest rate; but subsequent payments will increase less with
favorable Fund performance (and decrease more with unfavorable Fund
performance) than if 3.5% is elected.
Except to the extent noted below for Option 1, no withdrawals from or changes
of a Settlement Option may be made under Options 1, 2 and 3 once payments
begin.
Option 1 -- Payments for a stated number of years, but no more than thirty. The
period must be for at least five years, but if variable payments are selected,
you may withdraw all or a portion of the remaining payments at any time.
Option 2 -- Payments for the lifetime of the Annuitant. If also chosen, we will
guarantee payments for a number of years from 5 to 30 or a "cash refund" upon
the Annuitant's death. The cash refund election is available only if all
amounts allocated to this Option 2 are on a fixed basis and are subject to that
election. The amount of the cash refund is the difference between the amount
applied to this annuity option at the time of settlement and the total amount
of payments received under the option prior to the Annuitant's death.
Option 3 -- Life Income Based Upon the Lives of Two Annuitants--payments during
the joint lifetimes of two Annuitants. Payments will continue until both
Annuitants have died. When this option is chosen, a choice must be made of (a)
100%, 66-2/3% or 50% of the payment to continue after the first death; (b)
payments for a minimum of 5 to 30 years, with 100% of the payment to continue
after the first death; (c) 100% of the payment to continue to the surviving
Annuitant if the survivor is the original payee, and 50% of the payment to
continue to the survivor if the surviving Annuitant is the second payee; or (d)
100% of the payment to continue after the first death, with a "cash refund"
feature comparable to that described for Option 2 above.
Option 4 --Payment of interest on the sum left with us at 3% or such higher
rate as we may, in our sole discretion, declare. After commencement of this
option, the payee may make a Written Request to receive all or a portion of the
amount held under this option as a lump sum or have it applied to one or more
of the other available Settlement Options. Upon the death of the Annuitant(s)
(or the payee under Option 4), the current value of the funds held under Option
4, and the present value of any remaining guaranteed payments under the other
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Options will be paid. Any remaining guaranteed payments will continue to be
received by the beneficiary unless the beneficiary elects to receive the
present value of any remaining guaranteed payments in a lump sum. If the
beneficiary subsequently dies, the present value of any remaining guaranteed
payments will be paid in one sum to the beneficiary's' estate.
Although the foregoing discussion of Settlement Options is in terms of monthly
payments, an election also may be made to receive quarterly, semi-annual or
annual payments instead.
Calculation of Variable Payment Settlement Option Values
Variable Settlement Options will be supported by the then available Funds of
the Company's Variable Annuity Account B (Account B), a separate account very
similar to the Separate Account, except that Account B supports variable
annuity benefits, rather than variable life insurance benefits. We reserve the
right to impose a maximum of four on the number of Funds that can be used at
any one time for a Settlement Option. We will provide an Account B prospectus
in connection with selection of a Settlement Option. That prospectus will
describe the available Funds, the costs and expenses of such Funds and the
charges imposed on Account B. Such Funds may be, and the charges imposed on
Account B are expected to be, different from those that relate to the Separate
Account prior to commencement of a Settlement Option. Accordingly, you should
review the Account B prospectus, as well as the prospectuses for Account B's
underlying Funds, prior to selecting any variable payment Settlement Option.
The amount of each variable annuity payment after the first is determined
pursuant to a formula described in the Certificates that is generally used by
actuaries for making such calculations. Speaking generally, if the total return
of the Fund for any month, less a deduction currently equivalent to an annual
rate of 1.25% for mortality and expense risk which we expect to result in a
profit to us, exceeds the Settlement Option's assumed interest rate (3.5% or
5%, as discussed above), the next variable payment will be larger than the
previous one. On the other hand, if the Fund's total return for any month, as
so adjusted, is less than the assumed interest rate, the next variable payment
will be smaller than the previous one. The amount of any such increases or
decreases in variable annuity payments does not bear a direct relationship to
the Fund's total returns.
You may make transfers among Funds under our administrative procedures in
effect at the time. Currently, we limit the number of transfers to four per
Calendar Year, but we can change this limit in the future.
The Company and Management
Aetna Life Insurance and Annuity Company is a stock life insurance company
organized under the insurance laws of the State of Connecticut in 1976. Through
a merger, it succeeded to the business of Aetna Variable Annuity Life Insurance
Company (formerly Participating Annuity Life Insurance Company organized in
1954). The Company is engaged in the business of issuing life insurance
policies and annuity contracts in all states of the United States. The Company
is an indirect wholly-owned subsidiary of Aetna, Inc., a publicly traded
healthcare and financial services company, whose principal offices are at the
same location as the Company's Home Office.
The Company serves as the principal underwriter for the securities offered
hereunder and also acts as the principal underwriter for Variable Annuity
Accounts B, C and G (separate accounts of the Company registered as unit
investment trusts), and Variable Annuity Account I (a separate account of Aetna
Insurance Company of America registered as a unit investment trust).
Additionally, the Company is registered as an investment adviser under the
Investment Advisers Act of 1940 and, as such, is the investment adviser for
Portfolio Partners, Inc. The Company is also the depositor of Variable Annuity
Accounts B, C and G.
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The following are the Directors and Executive Officers of Aetna Life Insurance
and Annuity Company. Unless otherwise indicated, the principal business address
for all individuals is the Company's Home Office.
<TABLE>
<CAPTION>
Name & Address Position with the Company Business Experience During the Past Five Years
- ---------------------- ------------------------------------ -----------------------------------------------------
<S> <C> <C>
Thomas J. McInerney Director, President and Chairman, President (since September 1997), Aetna Life
Executive Committee (Principal Insurance and Annuity Company; President (since
Executive Officer) September 1997), Aetna Insurance Company of
America; Director and President (since September
1997), Aetna Retirement Holdings, Inc.; President
(since August 1997), Aetna Retirement Services,
Inc.; Executive Vice President (since August 1997),
Aetna Inc., Aetna Services, Inc. and Aetna Life
Insurance Company; Vice President, Strategy
(March 1997 - August 1997) Aetna Inc., Aetna
Services, Inc. and Aetna Life Insurance Company,
Vice President, Sales (December 1996 - March
1997) and Vice President National Accounts (April
1996 - March 1997), Aetna US Healthcare Inc.;
Vice President, Strategy, Finance, & Administration
(July 1995 - April 1996), Aetna Inc.; Vice
President, Guaranteed Products (November 1992 -
July 1995), Aetna Life Insurance Company.
Shaun P. Mathews Director and Senior Vice President Senior Vice President, Product Management (since
September 1997), Vice President, Products Group
(February 1996 - September 1997), Senior Vice
President, Strategic Markets and Products
(February 1993 - February 1996) and Senior Vice
President, Mutual Funds.
Catherine Hale Smith Director, Chief Financial Officer Chief Financial Officer and Senior Vice President,
and Senior Vice President Strategy and Finance (Since February 1998), Aetna
Life Insurance and Annuity Company; Chief
Financial Officer (since February 1998), Aetna
Retirement Services, Inc.; Vice President, Strategy,
Finance and Administration, Financial Relations
(September 1996 - February 1998), Aetna Inc.;
Chief of Staff, Health/Group Life, Strategy and
Communication (April 1993 - September 1996).
Kirk P. Wickman Vice President, General Counsel Vice President, General Counsel and Corporate
and Corporate Secretary Secretary (since November 1996), Aetna Life
Insurance and Annuity Company; Vice President
and Counsel (June 1992 - November 1996), Aetna
Life Insurance Company.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Name & Address Position with the Company Business Experience During the Past Five Years
- ---------------------- ------------------------------- ---------------------------------------------------
<S> <C> <C>
Deborah Koltenuk Vice President and Treasurer, Vice President and Treasurer, Corporate Controller
Corporate Controller (since July 1996), Aetna Life Insurance and
Annuity Company; Vice President and Treasurer,
Corporate Controller (since July 1996), Aetna
Retirement Holdings, Inc.; Vice President,
Investment Financial Reporting and Securities
Operations (April 1996 - July 1996), Aetna Life
Insurance Company; Vice President, Investment
Planning and Financial Reporting (October 1994 -
April 1996), The Aetna Casualty and Surety
Company and The Standard Fire and Insurance
Company; Assistant Vice President, Finance and
Administration (June 1994 - October 1994), Aetna
Life Insurance Company; Controller (September
1993 - June 1994), Aetna Information Technology;
Assistant Vice President (December 1990 -
September 1993), Aetna Life and Casualty
Company.
Frederick D. Kelsven Vice President and Chief Vice President, Chief Compliance Officer (since
Compliance Officer February 1997), Aetna Life Assignment Company;
Vice President & Chief Compliance Officer (since
November 1996), Aetna Investment Services, Inc.;
Director of Compliance (January 1985 - September
1996), Nationwide Life Insurance Company.
</TABLE>
* The address of all Directors and Officers listed is 151 Farmington Avenue,
Hartford, Connecticut. These individuals may also be directors and/or officers
of other affiliates of the Company.
Directors, officers and employees of the Company are covered by a blanket
fidelity bond in the amount of $60 million issued by Aetna Casualty and Surety
Company.
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Additional Information
Reports to Owners
The Company will maintain all records relating to the Separate Account and the
Certificates. At least once in each Certificate Year, the Company will send you
a report containing Certificate Values (see Total Amount Value) as of the most
recent Certificate Anniversary. If any portion of your Total Account Value is
allocated to the Separate Account, you will receive such additional periodic
reports as may be required by the SEC. (See Right to Instruct Voting of Fund
Shares)
Right to Instruct Voting of Fund Shares
In accordance with our view of present applicable law, we will generally vote
the shares of each of the Funds held in the Separate Account in accordance with
instructions received from variable life owners having a voting interest in the
Funds. Owners having such an interest will receive periodic reports relating to
the Fund, proxy material and a form for giving voting instructions. The number
of shares which you have a right to vote with respect to a Fund will be
determined, as of a record date established by the Fund, by dividing the
portion of your Total Account Value attributable to that Fund by the net asset
value of one share in the Fund. Fund shares held by the Separate Account for
which no timely instructions are received and Fund shares which are not
otherwise attributable to variable life owners will be represented by us at the
meeting and voted in the same proportion as the voting instructions which are
received from such owners participating in each Fund through the Separate
Account.
Notwithstanding the foregoing, if the Investment Company Act of 1940 or any
regulations thereunder should be amended or if the present interpretation
thereof should change, and as a result we determine that we are permitted to
vote the shares of the Fund in our own right, we may elect to do so. Also,
under certain limited circumstances, current law permits us to disregard voting
instructions. In that event, a summary of and the reasons for such action will
be included in the next annual report to Owners.
State Regulation
The Certificates will be offered for sale in states selected by the Company, in
its sole discretion, where one or more eligible purchasers reside. The Company
is subject to regulation and supervision by the Insurance Department of the
State of Connecticut, which periodically examines its affairs. The Company is
also subject to the insurance laws and regulations of all other jurisdictions
where it is authorized to do business. We are required to submit annual
statements of our operations, including financial statements, to the insurance
departments of those jurisdictions, for the purposes of determining solvency
and compliance with local insurance laws and regulations.
Legal Matters
The Company knows of no material legal proceedings pending to which either the
Separate Account or the Company is a party or which would materially affect the
Separate Account. The legal validity of the securities described in this
Prospectus has been passed upon by Counsel to the Company.
The Registration Statement
A Registration Statement under the Securities Act of 1933 has been filed with
the SEC relating to the offering described in this Prospectus. This Prospectus
does not include all of the information set forth in the Registration
Statement, certain portions of which have been omitted pursuant to the rules
and regulations of the SEC. The omitted information may be obtained at the
SEC's principal office in Washington, DC, upon payment of the SEC's prescribed
fees.
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<PAGE>
Distribution of the Certificates
The Company will serve as principal underwriter of the securities offered
hereunder, as defined by the federal securities laws. The Certificates will be
distributed by Aetna Investment Services, Inc. ("Aetna Services"), which is an
affiliate of the Company. The Company and Aetna Services are registered as
broker-dealers with the SEC and are members of the National Association of
Securities Dealers, Inc. All persons offering or selling the Certificates will
be registered representatives of Aetna Services, and will also be licensed as
the Company's insurance agents to sell variable life insurance. The Company and
NYSUT Trust will enter into an agreement which calls for NYSUT Trust to
exclusively endorse the Policy to Members for supplemental group variable
universal life insurance and for NYSUT Trust to perform administrative
services, including making available NYSUT Trust payroll slots to facilitate
premium remittances to the Company. Under the proposed agreement, the Company
intends to pay NYSUT Trust $70,000 in 1998 and $100,000 in 1999. NYSUT Trust
has indicated to the Company that it intends to use these amounts to enhance
benefits to its members.
Salespersons will be compensated for sales of the Certificates on salaried
basis or on a commission. The maximum sales commission to be paid for
Certificate distribution is 25% of the first year premium up to 12 Basic
Monthly Premiums. In the event of an increase in Specified Amount, the maximum
sales commission will be 25% of 12 times the amount of Basic Monthly Premium
attributable to the increase. The maximum sales commission on all other
premiums is 2% through the 15th Certificate year, or the 15th year following a
Specified Amount increase. In addition, some sales personnel may receive
various types of non-cash compensation as special sales incentives, including
trips and educational and/or business seminars. Supervisory and other
management personnel of the Company may receive compensation that will vary
based on the relative profitability to the Company of the funding options you
select. Funding options that invest in Funds advised by the Company or its
affiliates are generally more profitable to the Company.
Independent Auditors
KPMG Peat Marwick LLP, CityPlace II, Hartford, Connecticut, are the independent
auditors for the Separate Account and for the Company. The services provided to
the Separate Account include primarily the examination of the Separate
Account's financial statements and review of filings made with the SEC.
Year 2000
As a healthcare and financial services enterprise, Aetna Inc. (referred to
collectively with its affiliates and subsidiaries as Aetna), is dependent on
computer systems and applications to conduct its business. Aetna has developed
and is currently executing a comprehensive risk-based plan designed to make its
computer systems, applications and facilities Year 2000 ready. The plan covers
four stages including (i) inventory, (ii) assessment, (iii) remediation and
(iv) testing and certification. At year end 1997, Aetna, including the Company,
had substantially completed the inventory and assessment stages. The
remediation process is currently underway and targeted for completion by
December 31, 1998. Testing and certification of these systems and applications
are targeted for completion by mid-1999. The costs of these efforts will not
affect the Separate Account.
The Company, its affiliates and the mutual funds that serve as investment
options for the Separate Account also have relationships with investment
advisers, broker dealers, transfer agents, custodians or other securities
industry participants or other service providers that are not affiliated with
Aetna. Aetna, including the Company, is initiating communication with its
critical external relationships to determine the extent to which Aetna may be
vulnerable to such parties' failure to resolve their own Year 2000 issues.
Where practicable Aetna and the Company will assess and attempt to mitigate
their risks with respect to the failure of these parties to be Year 2000
ready. There can be no assurance that failure of third parties to complete
adequate preparations in a timely manner, and any resulting systems
interruptions or other consequences, would not have an adverse effect, directly
or indirectly, on the Separate Account, including, without limitation, its
operation or the valuation of its assets and units.
25
<PAGE>
Tax Matters
The following is a discussion of certain federal income tax considerations
relating to the Certificates. This discussion is based on the Company's
understanding of federal income tax laws and regulations as they now exist.
These laws and regulations are complex, and tax results may vary among
individuals. A person contemplating the purchase of or the exercise of
elections under a Certificate described in this Prospectus should seek
competent tax advice. Premium payments paid by payroll deduction do not reduce
your taxable income.
Federal Tax Status of the Company
The Company is taxed as a life insurance company in accordance with the
Internal Revenue Code of 1986, as amended ("Code"). For federal income tax
purposes, the operations of the Separate Account form a part of the Company's
total operations and are not taxed separately, although operations of the
Separate Account are treated separately for accounting and financial statement
purposes.
Both investment income and realized capital gains of the Separate Account
(i.e., income, capital gains and dividends distributed to the Separate Account
by the Funds) that are credited to Policy reserves are reinvested without tax,
since the Code does not impose a tax on the Separate Account for these amounts.
The Company reserves the right, however, to make a deduction for such taxes
should they be imposed in the future.
Life Insurance Qualification
Section 7702 of the Code provides a definition of life insurance for tax
purposes. These rules place limits on the relationship between the death
benefit and the account value. However, under the Certificate, the death
benefit automatically increases to maintain compliance with Section 7702. These
rules also place limits on the amount of premiums payable under the contract.
In no event may the total of all premiums paid exceed the then-current maximum
premium limitations established by federal law for a Policy to qualify as life
insurance. If, at any time, a premium is paid which would result in total
premiums exceeding such maximum premium limitation, we will only accept that
portion of the premium which will make total premiums equal the maximum. Any
part of the premium in excess of that amount will be returned or applied as
otherwise agreed and no further premiums will be accepted until allowed by the
then-current maximum premium limitations prescribed by law. The Company
believes that the Certificates meet this statutory definition of life
insurance. As a result, and if the diversification standards of Section 817(h)
of the Code (discussed below) are also satisfied, then (a) Death Benefits paid
under a Certificate, as well as benefits under the Accelerated Death Benefit
and Accidental Death Benefit riders, should generally be excluded from the
gross income of the recipient for federal income tax purposes, and (b) an Owner
should not generally be taxed on any increase in the Total Account Value under
a Certificate, prior to actual receipt by the Owner of a distribution thereof.
The Company intends to comply with Sections 7702 and 817(h) of the Code and
therefore reserves the right to make such changes as it deems necessary to
ensure such compliance. Any such changes will apply uniformly to affected
Owners and will be made only after advance written notice. In some cases,
moreover, in order to assure that a Certificate continues to qualify and be
taxed as life insurance, the Company may need to distribute amounts that may be
includable in the Certificate Owner's taxable income.
General Rules
Upon the Full Surrender, maturity or cancellation of any Certificate, whether
or not it is a Modified Endowment Contract (discussed below), the Owner will be
taxed on the Surrender Value to the extent that it exceeds the total premiums
paid less prior untaxed distributions from the Certificate. The amount of any
unpaid Certificate Loan will,
26
<PAGE>
upon surrender, be added to the Surrender Value for tax purposes and will be
treated for this purpose as if it had been received as a distribution.
If the Certificate is not a Modified Endowment Contract, the proceeds of any
full or Partial Surrenders or other partial distributions made after the first
15 Certificate Years are generally not taxable, unless the total amount
received due to such surrenders or other distributions from the Certificate
exceeds total premiums paid less prior untaxed distributions from the
Certificate. However, Partial Surrenders and other partial distributions made
within the first 15 Certificate Years in connection with reductions of Death
Benefits may be taxable in limited circumstances, under a complicated formula,
if the Surrender Value plus any unpaid Certificate debt exceeds the total
premiums paid less the untaxed portion of any prior distributions from the
Certificate. This result may occur even if the total amount of distributions
from the Certificate to that date does not exceed total premiums paid to that
date.
Loans received under a Certificate will ordinarily be considered indebtedness
of the Owner, and, assuming the Certificate is not considered a Modified
Endowment Contract, Certificate Loans will not be treated as current partial
distributions subject to tax. Generally, amounts of loan interest paid by
Owners will be considered nondeductible "personal interest."
Modified Endowment Contracts
A Certificate will be considered a Modified Endowment Contract if it fails the
"7-pay test." A Certificate fails the 7-pay test if, at any time in the first
seven Certificate Years, the amount paid into the Certificate exceeds the
amount that would have been paid had the Certificate been designed to become
paid up after payment of seven equal annual premiums. A new 7-pay test begins
at any time a material change takes effect. A material change, for example, may
include an increase in the Specified Amount or the addition of a qualified
additional benefit (including a decrease resulting from a Partial Surrender),
the addition or cancellation of benefits under a Disability Benefit Rider or
Accidental Death Benefit Rider, or payment of premiums at a time when the Death
Benefit is computed based on the Net Single Premium.
In the event of a reduction in future benefits during the first seven
Certificate Years (or within the first seven Certificate Years after a material
change), the 7-pay test will be recalculated retroactively based on the reduced
level of benefits. (For example, a reduction in future benefits could result if
you request a decrease in Specified Amount, Partial Surrender or cancellation
of certain rider benefits.) If the premiums previously paid are greater than
the recalculated 7-pay test limit, the Certificate will be a Modified Endowment
Contract.
A Certificate received in exchange for a Modified Endowment Contract will also
be a Modified Endowment Contract.
If the Certificate is a Modified Endowment Contract, the proceeds of any full
or Partial Surrenders, Certificate Loans, assignments, pledges or other
distributions from the Certificate will be currently includable in the
Certificate Owner's income to the extent that the Certificate's Total Account
Value immediately before payment exceeds total premiums paid (increased by the
amount of distributions previously taxed and reduced by untaxed amounts
previously distributed from the Certificate). All Modified Endowment Contracts
purchased by you from the Company (and its affiliates) during the same calendar
year, will be aggregated for purposes of determining the taxable portion of
distributions from the Certificate.
Distributions during any Certificate year in which a Certificate becomes a
Modified Endowment Contract and any subsequent Certificate Year will be taxed
as described above. In addition, distributions from a Certificate within two
years before it becomes Modified Endowment Contract may also be subject to tax
in this manner. Thus, a distribution made from a Certificate that is not a
Modified Endowment Contract could later become taxable as a distribution from a
Modified Endowment Contract.
27
<PAGE>
If the Certificate is a Modified Endowment Contract, a penalty tax equal to 10%
of the amount, if any, includable in the Certificate Owner's income will also
apply to the proceeds of any Certificate surrender, loan or other complete or
partial distribution, unless the Owner has reached the age of 591/2. The
penalty tax does not, however, apply to any full or partial distributions that
are made while the Owner is disabled (within the meaning of the Code) or that
are part of a series of equal periodic payments made not less frequently than
annually for the life or life expectancy of such Owner or the joint lives (or
joint life expectancies) of such Owner and his or her beneficiary (i.e., an
annuity).
Diversification Standards
Section 817(h) of the Code provides that separate account investments (or the
investments of a mutual fund, the shares of which are owned by separate
accounts of insurance companies) underlying the Policy must be "adequately
diversified" in accordance with Treasury regulations in order for the Policy to
qualify as life insurance. The Treasury Department has issued regulations
prescribing the diversification requirements in connection with variable
contracts. The Separate Account, through the Funds, intends to comply with
these requirements.
Investor Control
In certain circumstances, owners of variable contracts may be considered the
owners for federal income tax purposes of the assets of the separate account
used to support their contracts. In those circumstances, income and gains from
separate account assets would be includable in the variable contractowner's
gross income. In several rulings published prior to the enactment of Section
817(h), the IRS stated that a variable contractowner will be considered the
owner of separate account assets if the contractowner possess incidents of
ownership in those assets, such as the ability to exercise investment control
over the assets. The Treasury department has also announced, in connection with
the issuance of regulations under Section 817 (h) concerning diversification,
that those regulations "do not provide guidance concerning the circumstances in
which investor control of the investments of a segregated asset account may
cause the investor(i.e. you), rather than the insurance company, to be treated
as the owner of the assets in the account." This announcement also stated that
guidance would be issued by way of regulations or rulings on the "extent to
which policyholders may direct their investments to particular Funds without
being treated as owners of the underlying assets." As of the date of this
Prospectus, no such guidance has been issued.
The ownership rights under the Policy are similar to, but different in certain
respects from those described by the IRS in pre-Section 817(h) rulings in which
it was determined that Policyowners were not owners of separate account assets.
For example, a Policyowner has additional flexibility in allocating premium
payments and account values. While the Company does not believe that these
differences would result in a Policyowner being treated as the owner of a pro
rata portion of the assets of the Separate Account, there is no regulation or
ruling of the IRS that confirms this conclusion. In addition, the Company does
not know what standards will be set forth, if any, in the regulations or
rulings which the Treasury Department has stated it expects to issue. The
Company therefore reserves the right to modify the Policy as necessary to
attempt to prevent a Policyowner from being considered the owner of a pro rata
share of the assets of the Separate Account.
Withholding
Generally, unless you provide us with a written election to the contrary before
we make the distribution, we are required to withhold income tax from any
portion of a distribution we make to you that is includable in your income. If
you do not wish us to withhold tax from the payment, or if enough is not
withheld, you may have to pay later. You may also have to pay penalties if your
withholding and estimated tax payments are insufficient.
28
<PAGE>
Other Tax Considerations
There may be state and local income tax, and also federal and state transfer,
estate, gift, inheritance and other tax consequences of Certificate ownership,
premium payments and receipt of Certificate proceeds depending on the
circumstances of each Owner or beneficiary. The foregoing summary does not
purport to be complete or to cover all situations. Counsel and other advisors
should be consulted for more complete information.
Misc. Certificate Provisions
The Certificates
The Certificate which you receive, the related group Policy owned by NYSUT
Trust pursuant to which the Certificates are issued, the application form you
complete when you purchase the Certificate, any applications for any changes
approved by us, and any riders constitute the whole contract. Copies of all
applications are attached to and made a part of the Certificate. Only the
President, Executive Vice President or the Corporate Secretary may agree with
you to a change in the Certificate or the Policy, and then only in writing.
Payment and Deferral of Benefits
All benefits are payable at our Home Office. We may require submission of the
Certificate before we grant Certificate Loans, make changes or pay benefits.
Payments of any Separate Account Value will ordinarily be made within 7 days
after our receipt of your Written Request. However, the Company reserves the
right to suspend or postpone the date of any payment of any benefit or values
for any Valuation Period (1) when the New York Stock Exchange is closed (except
holidays or weekends); (2) when trading on the Exchange is restricted; (3) when
an emergency exists as determined by the SEC so that disposal of the securities
held in the Funds is not reasonably practicable or it is not reasonably
practicable to determine the value of the Funds' net assets. For payment from
the Separate Account in such instances, we may defer payment of Full Surrender
and Partial Surrender Values, any Death Benefit in excess of the current
Specified Amount, any portion of the Loan Value.
Payment of any Fixed Account Value may be deferred for up to six months, except
when used to pay amounts due us. Payment of the Death Benefit also may be
delayed if the Certificate is being contested.
Suicide and Incontestability
In most states, if the Insured dies by suicide within 2 years from the Issue
Date of a Certificate, we will pay only a limited benefit. Generally, the
benefit will consist of a refund of premiums paid, subject to a positive or
negative adjustment to reflect investment performance in the Separate Account.
In most states, if the Insured dies by suicide within 2 years from the Issue
Date of any increase in coverage, we will pay as to that increase only the
amount of prior Monthly Deductions that were attributable to that increase.
In most states, with respect to statements made in the initial application form
or any subsequent application, we will not contest any coverage under a
Certificate after it has been in force for 2 years from its Issue Date.
Notwithstanding the foregoing, if the Age of the Insured is misstated,
regardless how long the coverage has been in effect, the amount of the Death
Benefit will be adjusted to reflect the coverage that would have been purchased
by the most recent pre-Maturity Date Monthly Deduction at the correct Age.
Protection of Proceeds
To the extent provided by law, the proceeds of the Certificate are subject
neither to claims by a beneficiary's creditors nor to any legal process against
any beneficiary.
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<PAGE>
Nonparticipation
The Certificate is not entitled to share in the divisible surplus of the
Company. No dividends are payable.
Changes in Owner and Beneficiary; Assignment
Unless otherwise stated in the Certificate, you may change the Owner and/or the
beneficiary or beneficiaries, or both, at any time while the Certificate is in
force. A request for such change must be made by Written Request. After we have
agreed, in writing, to the change, it will take effect as of the date on which
your Written Request was signed. Death Benefit proceeds payable on death of the
Insured will be paid to each named beneficiary as specified in your then
effective beneficiary designation. If no named beneficiary is living at the
date of the Insured's death, all proceeds will be payable to the Owner or the
Owner's estate. If required by state law, an amount may be paid from the Death
Benefit to any person appearing to the Company to be equitably entitled by
reason of having incurred funeral expenses.
A Certificate may also be assigned. No assignment of a Certificate will be
binding on us unless made in writing and sent to us at our Home Office. The
Company will use reasonable procedures to confirm that the assignment is
authentic, including verification of signature. If the Company fails to follow
its procedures, it would be liable for any losses to you directly resulting
from the failure. Otherwise, we are not responsible for the validity of any
assignment. The rights of the Owner and the interest of the beneficiary will be
subject to the rights of any assignee of record.
Assignment or change of Owner can have adverse tax consequences. (See Tax
Matters)
Performance Reporting and Advertising
From time to time, the Company may advertise different types of historical
performance for the Variable Options of the Separate Account available under
the Certificates. We may also distribute sales literature that compares the
percentage change in Accumulation Unit Values for any of the Variable Options
to established market indices such as the Standard & Poor's 500 Stock Index and
the Dow Jones Industrial Average or to the percentage change in values of other
mutual funds that have investment objectives similar to the Variable Option
being compared.
Illustrations of Death Benefit and Total Account Values
The following pages provide a hypothetical illustration of how the Option 1
Death Benefit and Total Account Values can change over time for a Certificate
issued to an Age 45 preferred risk non-smoker Insured if premiums are
accumulated at 5% interest per year or the investment return on the assets held
in each Fund were a uniform gross annual rate of 0%, 6%, and 12%, respectively,
based upon a number of assumptions. There are two pages of values. The first
page illustrates the assumption that the guaranteed maximum Cost of Insurance
rates and other charges at maximum rates are charged in all years. The second
page illustrates the assumption that the current scale of Cost of Insurance
rates for a $250,000 Specified Amount and other charges at current rates are
charged in all years. Current cost of insurance rates are generally lowest for
Certificates having Specified Amounts of at least $250,000. We expect to review
our current cost of insurance rates on at least an annual basis in light of the
actual mortality experience of participants under the NYSUT group Policy.
The values shown in these illustrations vary according to assumptions used for
charges and gross rates of investment return. The actual investment returns
experienced by the Certificates and the charges deducted may be higher or lower
than those illustrated. The charges reflected on the first page consist of the
maximum allowable charges under the Certificate, including 1.25% for years 1-10
and 0.40% for the eleventh year and after, for mortality and expense risk in
all Certificate Years and 0.72% for expenses of the Funds. The charges
reflected on the second page consist of the current charges imposed under the
Certificates, including 0.85% for mortality and expense risk in Certificate
Years 1 through 10 only and (as is currently planned) 0% thereafter, and 0.72%
for Fund expenses. The charge for Fund expenses reflected in the illustrations
assumes that Total Account Values have
30
<PAGE>
been allocated equally among all Funds and represent a fixed, unweighted
average of the investment advisory fees charged to each of the Funds as of
December 31, 1997 (after expense reimbursements) and other operating expenses
(after expense reimbursements) for the year then ended.
After deduction of these amounts, the illustrated gross annual investment rates
of return of 0%, 6% and 12% correspond to approximate net annual rates of
- -1.57%, 4.43% and 10.43%, respectively, during the first 10 Certificate Years,
and -0.72%, 5.28% and 11.28%, respectively, thereafter on a current basis. On a
guaranteed basis, the illustrated gross annual investment rates of return of
0%, 6% and 12% correspond to approximate net annual rates of -1.97%, 4.03% and
10.03% during the first 10 years and -1.12%, 4.88% and 10.88% during the
eleventh year and after, respectively.
The Death Benefit and Total Account Values would be different from those shown
if the gross annual investment rates of return averaged 0%, 6%, and 12% over a
period of years, but fluctuated above and below those averages for individual
Certificate Years. The illustrations also assume payment of premiums as
indicated, no Certificate Loans, no increases or decreases in Specified Amount,
no Death Benefit Option changes, no Partial Surrenders and no supplemental
rider benefits.
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
Benefit and Total Account Values shown.
Upon request, we will provide a comparable personalized illustration based upon
the Age and underwriting classification of the proposed Insured, including the
Specified Amount and premium requested, the proposed frequency of premium
payments and any available riders requested. A fee of $25 may be charged for
each such illustration. The hypothetical gross annual investment return assumed
in such an illustration will not exceed 12%.
31
<PAGE>
FLEXIBLE PREMIUM
VARIABLE UNIVERSAL LIFE INSURANCE CERTIFICATE
UNISEX AGE 45
$1,548.48 ANNUAL BASIC PREMIUM
PREFERRED NONSMOKER RISK
FACE AMOUNT $250,000
DEATH BENEFIT OPTION 1 (GUARANTEED VALUES)
<TABLE>
<CAPTION>
Premiums Death Benefit
Accumulated Gross Annual Investment Total Account Value Surrender Value
at Returns of Annual Investment Returns of Annual Investment Returns of
Policy 5% Interest --------------------------------- --------------------------------- --------------------------------
Year Per Year Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
- ----------- ------------ ---------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,626 250,000 250,000 250,000 364 415 467 364 415 467
2 3,333 250,000 250,000 250,000 761 888 1,023 761 888 1,023
3 5,126 250,000 250,000 250,000 1,087 1,316 1,569 1,087 1,316 1,569
4 7,008 250,000 250,000 250,000 1,342 1,695 2,102 1,342 1,695 2,102
5 8,984 250,000 250,000 250,000 1,520 2,014 2,612 1,520 2,014 2,612
6 11,059 250,000 250,000 250,000 1,614 2,265 3,091 1,614 2,265 3,091
7 13,238 250,000 250,000 250,000 1,616 2,434 3,524 1,616 2,434 3,524
8 15,526 250,000 250,000 250,000 1,510 2,499 3,889 1,510 2,499 3,889
9 17,928 250,000 250,000 250,000 1,285 2,444 4,167 1,285 2,444 4,167
10 20,450 250,000 250,000 250,000 934 2,253 4,337 934 2,253 4,337
15 35,085 0 0 250,000 0 0 2,891 0 0 2,891
20 53,762 0 0 0 0 0 0 0 0 0
25 77,600 0 0 0 0 0 0 0 0 0
30 108,023 0 0 0 0 0 0 0 0 0
20 Age 65 53,762 0 0 0 0 0 0 0 0 0
</TABLE>
Assumes no policy loan has been made and no supplemental rider benefits have
been elected. If premiums are paid more frequently than annually, the Death
Benefits, Total Account Values, and Cash Surrender Values would be less than
those illustrated. Zeros indicate that the Certificate lapses if additional
premiums are not paid.
The investment results are illustrative only and should not be considered a
representation of past or future investments 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
rate of return. The Total Account Value and Cash Value for a Policy would be
different from those shown in 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 years.
32
<PAGE>
FLEXIBLE PREMIUM
VARIABLE UNIVERSAL LIFE INSURANCE CERTIFICATE
UNISEX AGE 45
$1,548.48 ANNUAL BASIC PREMIUM
PREFERRED NONSMOKER RISK
FACE AMOUNT $250,000
DEATH BENEFIT OPTION 1 (CURRENT VALUES)
<TABLE>
<CAPTION>
Premiums Death Benefit
Accumulated Gross Annual Investment Total Account Value Surrender Value
at Returns of Annual Investment Returns of Annual Investment Returns of
Policy 5% Interest --------------------------------- --------------------------------- --------------------------------
Year Per Year Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12%
- ----------- ------------ ---------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,626 250,000 250,000 250,000 670 731 793 670 731 793
2 3,333 250,000 250,000 250,000 1,420 1,590 1,767 1,420 1,590 1,767
3 5,126 250,000 250,000 250,000 2,155 2,482 2,839 2,155 2,482 2,839
4 7,008 250,000 250,000 250,000 2,874 3,410 4,019 2,874 3,410 4,019
5 8,984 250,000 250,000 250,000 3,578 4,376 5,319 3,578 4,376 5,319
6 11,059 250,000 250,000 250,000 4,266 5,381 6,753 4,266 5,381 6,753
7 13,238 250,000 250,000 250,000 4,940 6,427 8,333 4,940 6,427 8,333
8 15,526 250,000 250,000 250,000 5,598 7,516 10,076 5,598 7,516 10,076
9 17,928 250,000 250,000 250,000 6,242 8,649 12,000 6,242 8,649 12,000
10 20,450 250,000 250,000 250,000 6,849 9,807 14,100 6,849 9,807 14,100
15 35,085 250,000 250,000 250,000 8,713 15,536 27,888 8,713 15,536 27,888
20 53,762 250,000 250,000 250,000 7,118 19,282 47,841 7,118 19,282 47,841
25 77,600 250,000 250,000 250,000 736 19,110 78,153 736 19,110 78,153
30 108,023 0 250,000 250,000 0 10,594 126,598 0 10,594 126,598
20 Age 65 53,762 250,000 250,000 250,000 7,118 19,282 47,841 7,118 19,282 47,841
</TABLE>
Assumes no policy loan has been made and no supplemental rider benefits have
been elected. If premiums are paid more frequently than annually, the Death
Benefits, Total Account Values, and Cash Surrender Values would be less than
those illustrated. Zeros indicate that the Certificate lapses if additional
premiums are not paid.
The investment results are illustrative only and should not be considered a
representation of past or future investments 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
rate of return. The Total Account Value and Cash Value for a Policy would be
different from those shown in 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 years.
33
<PAGE>
FINANCIAL STATEMENTS
VARIABLE LIFE ACCOUNT B
Index
Statement of Assets and Liabilities ......................... S-2
Statements of Operations and Changes in Net Assets .......... S-4
Condensed Financial Information ............................. S-5
Notes to Financial Statements ............................... S-9
Independent Auditors' Report ................................ S-20
S-1
<PAGE>
Variable Life Account B
Statement of Assets and Liabilities--December 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at net asset value: (Note 1)
Aetna Variable Fund; 3,935,729 shares (cost $126,171,024) ............................ $132,379,023
Aetna Income Shares; 1,642,350 shares (cost $21,116,917) ............................. 21,104,804
Aetna Variable Encore Fund; 1,520,490 shares (cost $20,249,343) ...................... 20,320,201
Aetna Investment Advisers Fund, Inc.; 1,517,909 shares (cost $22,364,815) ............ 24,336,071
Aetna Ascent Variable Portfolio; 127,672 shares (cost $1,774,627) .................... 1,802,553
Aetna Crossroads Variable Portfolio; 54,282 shares (cost $705,224) ................... 710,292
Aetna Legacy Variable Portfolio; 53,730 shares (cost $649,521) ....................... 650,139
Aetna Variable Index Plus Portfolio; 139,939 shares (cost $1,985,472) ................ 1,961,545
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio; 831,279 shares (cost $18,659,751) .......................... 20,183,450
Growth Portfolio; 191,918 shares (cost $6,740,034) .................................. 7,120,144
Overseas Portfolio; 93,214 shares (cost $1,797,983) ................................. 1,789,714
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio; 140,740 shares (cost $2,253,029) ........................... 2,534,727
Contrafund Portfolio; 1,014,044 shares (cost $18,714,668) ........................... 20,220,028
Janus Aspen Series:
Aggressive Growth Portfolio; 603,521 shares (cost $11,557,498) ...................... 12,402,365
Balanced Portfolio; 469,699 shares (cost $7,320,172) ................................ 8,205,641
Growth Portfolio; 648,268 shares (cost $10,619,569) ................................. 11,980,000
Worldwide Growth Portfolio; 1,039,046 shares (cost $22,485,938) ..................... 24,303,287
Portfolio Partners, Inc.:
PPI MFS Emerging Equities Portfolio; 444,333 shares (cost $19,019,357) .............. 19,061,872
PPI MFS Research Growth Portfolio; 736,167 shares (cost $7,234,426) ................. 7,148,181
PPI Scudder International Growth Portfolio; 1,014,972 shares (cost $14,118,551) ..... 14,311,110
------------
NET ASSETS (cost $335,537,919) ........................................................ $352,525,147
============
Net assets represented by:
Policyholders' account values: (Notes 1 and 5)
Aetna Variable Fund:
Policyholders' account values ........................................................ $132,379,023
Aetna Income Shares:
Policyholders' account values ........................................................ 21,104,804
Aetna Variable Encore Fund:
Policyholders' account values ........................................................ 20,320,201
Aetna Investment Advisers Fund, Inc.:
Policyholders' account values ........................................................ 24,336,071
Aetna Ascent Variable Portfolio:
Policyholders' account values ........................................................ 1,802,553
Aetna Crossroads Variable Portfolio:
Policyholders' account values ........................................................ 710,292
</TABLE>
S-2
<PAGE>
Variable Life Account B
Statement of Assets and Liabilities--December 31, 1997 (continued):
Aetna Legacy Variable Portfolio:
Policyholders' account values ....................... $ 650,139
Aetna Variable Index Plus Portfolio:
Policyholders' account values ....................... 1,961,545
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
Policyholders' account values ...................... 20,183,450
Growth Portfolio:
Policyholders' account values ...................... 7,120,144
Overseas Portfolio:
Policyholders' account values ...................... 1,789,714
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio:
Policyholders' account values ...................... 2,534,727
Contrafund Portfolio:
Policyholders' account values ....................... 20,220,028
Janus Aspen Series:
Aggressive Growth Portfolio:
Policyholders' account values ...................... 12,402,365
Balanced Portfolio:
Policyholders' account values ...................... 8,205,641
Growth Portfolio:
Policyholders' account values ...................... 11,980,000
Worldwide Growth Portfolio:
Policyholders' account values ...................... 24,303,287
Portfolio Partners, Inc.:
PPI MFS Emerging Equities Portfolio:
Policyholders' account values ...................... 19,061,872
PPI MFS Research Growth Portfolio:
Policyholders' account values ...................... 7,148,181
PPI Scudder International Growth Portfolio:
Policyholders' account values ...................... 14,311,110
------------
$352,525,147
============
See Notes to Financial Statements
S-3
<PAGE>
Variable Life Account B
Statements of Operations and Changes in Net Assets
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------
1997 1996
--------------- ----------------
<S> <C> <C>
INVESTMENT INCOME:
Income: (Notes 1, 3 and 5)
Dividends .......................................................... $ 35,222,623 $ 13,813,478
Expenses: (Notes 2 and 5)
Valuation Period Deductions ........................................ (2,713,203) (1,905,137)
------------- -------------
Net investment income ............................................... 32,509,420 11,908,341
------------- -------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on sales of investments: (Notes 1, 4 and 5)
Proceeds from sales ................................................ 260,329,704 29,656,908
Cost of investments sold ........................................... 245,858,726 26,434,292
------------- -------------
Net realized gain ................................................. 14,470,978 3,222,616
Net unrealized gain on investments: (Note 5)
Beginning of year .................................................. 14,132,669 4,391,574
End of year ........................................................ 16,987,228 14,132,669
------------- -------------
Net change in unrealized gain ..................................... 2,854,559 9,741,095
------------- -------------
Net realized and unrealized gain on investments ..................... 17,325,537 12,963,711
------------- -------------
Net increase in net assets resulting from operations ................ 49,834,957 24,872,052
------------- -------------
FROM UNIT TRANSACTIONS:
Variable life premium payments ...................................... 135,098,143 101,416,302
Sales and administrative charges deducted by the Company ............ (4,620,884) (3,032,151)
Premiums allocated to the fixed account ............................. (2,741,149) (3,127,437)
------------- -------------
Net premiums allocated to the variable account ..................... 127,736,110 95,256,714
Transfers to the Company for monthly deductions ..................... (21,545,914) (15,491,673)
Redemptions by contract holders ..................................... (24,062,185) (4,154,465)
Transfers on account of policy loans ................................ (2,875,077) (3,783,533)
Other ............................................................... 263,373 (40,991)
------------- -------------
Net increase in net assets from unit transactions (Note 5) ......... 79,516,307 71,786,052
------------- -------------
Change in net assets ................................................ 129,351,264 96,658,104
NET ASSETS:
Beginning of year ................................................... 223,173,883 126,515,779
------------- -------------
End of year ......................................................... $ 352,525,147 $ 223,173,883
============= =============
</TABLE>
See Notes to Financial Statements
S-4
<PAGE>
Variable Life Account B
Condensed Financial Information--Year Ended December 31, 1997
<TABLE>
<CAPTION>
Value
Per Unit Increase (Decrease) Units
------------------------ in Value of Outstanding Reserves
Beginning End of Accumulation at End at End
of Year Year Unit of Period of Year
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Variable Fund:
Aetna Vest .......................... $34.932 $44.936 28.64% 1,403,227.0 $63,055,847
Aetna Vest II ....................... 19.507 25.085 28.60% 805,944.5 20,216,852
Aetna Vest Plus ..................... 16.389 21.075 28.58% 1,783,619.4 37,590,494
Aetna Vest Estate Protector ......... 11.675 15.037 28.79% 70,938.6 1,066,670
Corporate Specialty Market .......... 14.805 19.039 28.60% 548,828.8 10,449,160
Aetna Income Shares:
Aetna Vest .......................... 21.850 23.428 7.22% 257,674.2 6,036,890
Aetna Vest II ....................... 14.691 15.752 7.22% 61,987.6 976,413
Aetna Vest Plus ..................... 11.764 12.613 7.22% 187,384.8 2,363,574
Aetna Vest Estate Protector ......... 10.452 11.224 7.38% 18,991.8 213,166
Corporate Specialty Market .......... 11.354 12.175 7.22% 945,807.8 11,514,761
Aetna Variable Encore Fund:
Aetna Vest .......................... 16.577 17.310 4.43% 151,657.5 2,625,230
Aetna Vest II ....................... 12.117 12.653 4.43% 13,650.7 172,723
Aetna Vest Plus ..................... 11.388 11.892 4.43% 566,497.4 6,736,612
Aetna Vest Estate Protector ......... 10.333 10.807 4.58% 36,266.4 391,929
Corporate Specialty Market .......... 10.895 11.377 4.43% 913,597.2 10,393,707
Aetna Investment Advisers Fund, Inc.:
Aetna Vest .......................... 17.547 21.286 21.31% 106,658.2 2,270,280
Aetna Vest II ....................... 17.742 21.515 21.27% 234,300.7 5,041,082
Aetna Vest Plus ..................... 14.880 18.044 21.27% 493,793.3 8,909,876
Aetna Vest Estate Protector ......... 11.340 13.554 19.53%(1) 11,121.3 150,741
Corporate Specialty Market .......... 12.954 15.708 21.27% 506,998.4 7,964,092
Aetna Ascent Variable Portfolio:
Aetna Vest .......................... 11.828 14.055 18.84% 16,408.7 230,615
Aetna Vest II ....................... 11.828 14.040 18.70% 10,217.2 143,453
Aetna Vest Plus ..................... 11.828 14.040 18.70% 96,649.5 1,356,995
Aetna Vest Estate Protector ......... 11.886 14.077 18.43%(1) 5,078.4 71,490
Aetna Crossroads Variable Portfolio:
Aetna Vest .......................... 11.474 13.369 16.52% 5,240.7 70,064
Aetna Vest II ....................... 11.544 13.356 15.69%(1) 5,740.1 76,663
Aetna Vest Plus ..................... 11.474 13.356 16.40% 40,129.7 535,965
Aetna Vest Estate Protector ......... 11.487 13.391 16.58% 2,061.1 27,600
Aetna Legacy Variable Portfolio:
Aetna Vest II ....................... 11.263 12.604 11.91%(2) 894.7 11,277
Aetna Vest Plus ..................... 11.118 12.604 13.37% 48,206.0 607,607
Aetna Vest Estate Protector ......... 11.344 12.638 11.40%(3) 2,473.2 31,255
</TABLE>
S-5
<PAGE>
Variable Life Account B
Condensed Financial Information--Year Ended December 31, 1997 (continued):
<TABLE>
<CAPTION>
Value
Per Unit Increase (Decrease) Units
----------------------- in Value of Outstanding Reserves
Beginning End of Accumulation at End at End
of Year Period Unit of Period of Period
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Variable Index Plus Portfolio:
Aetna Vest .......................... $12.017 $13.081 8.86%(4) 11,393.3 $ 149,038
Aetna Vest II ....................... 11.345 13.081 15.30%(4) 7,240.3 94,713
Aetna Vest Plus ..................... 11.172 13.081 17.09%(3) 86,063.0 1,125,815
Aetna Vest Estate Protector ......... 12.371 13.102 5.91%(5) 17,901.0 234,541
Corporate Specialty Market .......... 12.785 13.081 2.32%(6) 27,324.3 357,438
Fidelity Investments Variable
Insurance Products Fund:
Equity-Income Portfolio:
Aetna Vest .......................... 10.871 13.788 26.83% 16,476.3 227,168
Aetna Vest II ....................... 10.871 13.788 26.83% 5,186.7 71,513
Aetna Vest Plus ..................... 10.871 13.788 26.83% 545,391.4 7,519,612
Aetna Vest Estate Protector ......... 10.883 13.824 27.02% 62,365.5 862,136
Corporate Specialty Market .......... 12.512 15.869 26.83% 724,876.8 11,503,021
Fidelity Investments Variable
Insurance Products Fund:
Growth Portfolio:
Corporate Specialty Market .......... 11.255 13.759 22.25% 517,477.9 7,120,144
Overseas Portfolio:
Corporate Specialty Market .......... 11.241 12.415 10.45% 144,152.5 1,789,714
Fidelity Investments Variable
Insurance Products Fund II:
Asset Manager Portfolio:
Corporate Specialty Market .......... 12.022 14.361 19.46% 176,505.1 2,534,727
Contrafund Portfolio:
Aetna Vest .......................... 11.525 14.166 22.91% 34,241.1 485,043
Aetna Vest II ....................... 11.525 14.166 22.91% 7,039.4 99,717
Aetna Vest Plus ..................... 11.525 14.166 22.91% 319,136.2 4,520,728
Aetna Vest Estate Protector ......... 11.538 14.203 23.09% 44,043.2 625,540
Corporate Specialty Market .......... 12.396 15.236 22.91% 950,961.4 14,489,000
Janus Aspen Series:
Aggressive Growth Portfolio:
Aetna Vest .......................... 16.153 18.017 11.54% 62,426.4 1,124,758
Aetna Vest II ....................... 16.153 18.017 11.54% 29,971.2 540,002
Aetna Vest Plus ..................... 16.153 18.017 11.54% 340,401.2 6,133,150
Aetna Vest Estate Protector ......... 9.797 10.944 11.71% 65,486.4 716,682
Corporate Specialty Market .......... 12.120 13.519 11.54% 287,588.9 3,887,773
</TABLE>
S-6
<PAGE>
Variable Life Account B
Condensed Financial Information--Year Ended December 31, 1997 (continued):
<TABLE>
<CAPTION>
Value
Per Unit Increase (Decrease) Units
------------------------ in Value of Outstanding Reserves
Beginning End of Accumulation at End at End
of Year Period Unit of Period of Period
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balanced Portfolio:
Aetna Vest .......................... $13.966 $16.883 20.89% 7,765.1 $ 131,096
Aetna Vest II ....................... 14.075 17.015 20.89% 10,401.5 176,977
Aetna Vest Plus ..................... 13.960 16.875 20.89% 247,390.9 4,174,751
Aetna Vest Estate Protector ......... 11.101 13.440 21.07% 17,145.8 230,433
Corporate Specialty Market .......... 12.242 14.799 20.89% 235,992.1 3,492,384
Growth Portfolio:
Aetna Vest .......................... 14.898 18.105 21.53% 37,937.8 686,846
Aetna Vest II ....................... 14.884 18.088 21.53% 61,620.8 1,114,603
Aetna Vest Plus ..................... 14.863 18.063 21.53% 431,965.3 7,802,391
Aetna Vest Estate Protector ......... 10.857 13.214 21.71% 44,074.0 582,402
Corporate Specialty Market .......... 12.232 14.865 21.53% 120,672.6 1,793,758
Worldwide Growth Portfolio:
Aetna Vest .......................... 16.364 19.790 20.94% 108,747.3 2,152,075
Aetna Vest II ....................... 16.368 19.795 20.94% 55,876.7 1,106,085
Aetna Vest Plus ..................... 16.348 19.770 20.94% 557,760.6 11,027,190
Aetna Vest Estate Protector ......... 11.811 14.305 21.12% 58,328.9 834,389
Corporate Specialty Market .......... 13.459 16.277 20.94% 564,191.6 9,183,548
Portfolio Partners, Inc.:
PPI MFS Emerging Equities Portfolio:
Aetna Vest .......................... 17.571 17.357 (1.22%)(7) 70,564.4 1,224,807
Aetna Vest II ....................... 17.573 17.359 (1.22%)(7) 34,713.7 602,592
Aetna Vest Plus ..................... 17.563 17.349 (1.22%)(7) 477,392.0 8,282,500
Aetna Vest Estate Protector ......... 10.942 10.810 (1.21%)(7) 66,830.1 722,463
Corporate Specialty Market .......... 14.451 14.275 (1.22%)(7) 576,485.2 8,229,510
PPI MFS Research Growth Portfolio:
Aetna Vest .......................... 12.277 12.042 (1.91%)(7) 64,898.6 781,537
Aetna Vest II ....................... 12.332 12.096 (1.91%)(7) 23,240.4 281,124
Aetna Vest Plus ..................... 12.163 11.931 (1.91%)(7) 352,781.7 4,209,155
Aetna Vest Estate Protector ......... 9.329 9.152 (1.90%)(7) 10,326.6 94,508
Corporate Specialty Market .......... 11.124 10.912 (1.91%)(7) 163,291.1 1,781,857
</TABLE>
S-7
<PAGE>
Variable Life Account B
Condensed Financial Information--Year Ended December 31, 1997 (continued):
<TABLE>
<CAPTION>
Value
Per Unit Increase (Decrease) Units
-------------------------- in Value of Outstanding Reserves
Beginning End of Accumulation at End at End
of Year Period Unit of Period of Period
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PPI Scudder International Growth Portfolio:
Aetna Vest ............................... $15.495 $15.692 1.27%(7) 131,667.0 $2,066,166
Aetna Vest II ............................ 15.399 15.596 1.27%(7) 44,659.7 696,495
Aetna Vest Plus .......................... 15.314 15.509 1.27%(7) 449,154.4 6,965,802
Aetna Vest Estate Protector .............. 11.627 11.777 1.29%(7) 21,515.0 253,383
Corporate Specialty Market ............... 12.832 12.995 1.27%(7) 333,144.4 4,329,264
</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 March 1997.
(3)--Reflects less than a full year of performance activity. Funds were first
received in this option during May 1997.
(4)--Reflects less than a full year of performance activity. Funds were first
received in this option during June 1997.
(5)--Reflects less than a full year of performance activity. Funds were first
received in this option during July 1997.
(6)--Reflects less than a full year of performance activity. Funds were first
received in this option during August 1997.
(7)--Reflects less than a full year of performance activity. Funds were first
received in this option during November 1997.
See Notes to Financial Statements
S-8
<PAGE>
Variable Life Account B
Notes to Financial Statements--December 31, 1997
1. Summary of Significant Accounting Policies
Variable Life Account B (the"Account") is a separate account established by
Aetna Life Insurance and Annuity Company (the "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 December 31, 1997:
Aetna Variable Fund
Aetna Income Shares
Aetna Variable Encore Fund
Aetna Investment Advisers Fund, Inc.
Aetna Ascent Variable Portfolio
Aetna Crossroads Variable Portfolio
Aetna Legacy Variable Portfolio
Aetna Variable Index Plus Portfolio
Fidelity Investments Variable Insurance
Products Fund:
[bullet] Equity-Income Portfolio
[bullet] Growth Portfolio
[bullet] Overseas Portfolio
Fidelity Investments Variable Insurance
Products Fund II:
[bullet] Asset Manager Portfolio
[bullet] Contrafund Portfolio
Janus Aspen Series:
[bullet] Aggressive Growth Portfolio
[bullet] Balanced Portfolio
[bullet] Growth Portfolio
[bullet] Worldwide Growth Portfolio
Portfolio Partners, Inc.:
[bullet] PPI MFS Emerging Equities Portfolio
[bullet] PPI MFS Research Growth Portfolio
[bullet] PPI Scudder International Growth Portfolio
b. 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 the 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-9
<PAGE>
Variable Life Account B
Notes to Financial Statements--December 31, 1997 (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 years ended December 31, 1997 and 1996
aggregated $372,355,431 and $260,329,704 and $113,349,117 and $29,656,908,
respectively.
S-10
<PAGE>
[This page intentionally left blank]
<PAGE>
Variable Life Account B
Notes to Financial Statements--December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets--Year Ended December 31, 1997
<TABLE>
<CAPTION>
Valuation
Period
Dividends Deductions
------------ ------------
<S> <C> <C>
Aetna Variable Fund: $26,573,304 ($1,085,553)
PolicyHolders' account values
Aetna Income Shares: 1,087,150 (148,230)
PolicyHolders' account values
Aetna Variable Encore Fund: 372,968 (144,720)
PolicyHolders' account values
Aetna Investment Advisers Fund, Inc.: 2,876,287 (185,443)
PolicyHolders' account values
Aetna Ascent Variable Portfolio: 112,004 (11,360)
PolicyHolders' account values
Aetna Crossroads Variable Portfolio: 45,840 (3,290)
PolicyHolders' account values
Aetna Legacy Variable Portfolio: 38,169 (3,596)
PolicyHolders' account values
Aetna Variable Index Plus Portfolio: 77,848 (4,920)
PolicyHolders' account values
Alger American Small Capitalization
Portfolio:(1) 576,583 (128,523)
PolicyHolders' account values
American Century VP Capital Appreciation
Fund:(2) 132,455 (57,820)
PolicyHolders' account values
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: 1,485,715 (163,582)
PolicyHolders' account values
Growth Portfolio: 192,233 (54,856)
PolicyHolders' account values
Overseas Portfolio: 46,706 (8,253)
PolicyHolders' account values
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 175,953 (18,257)
PolicyHolders' account values
Contrafund Portfolio: 235,708 (110,146)
PolicyHolders' account values
Janus Aspen Series:
Aggressive Growth Portfolio: 0 (95,697)
PolicyHolders' account values
Balanced Portfolio: 192,757 (52,872)
PolicyHolders' account values
<CAPTION>
Proceeds Cost of Net
from Investments Realized
Sales Sold Gain (Loss)
-------------- ------------- --------------
<S> <C> <C> <C>
Aetna Variable Fund: $11,219,896 $ 7,857,508 $3,362,388
PolicyHolders' account values
Aetna Income Shares: 2,358,910 2,406,924 (48,014)
PolicyHolders' account values
Aetna Variable Encore Fund: 74,201,538 73,731,940 469,598
PolicyHolders' account values
Aetna Investment Advisers Fund, Inc.: 1,960,106 1,561,449 398,657
PolicyHolders' account values
Aetna Ascent Variable Portfolio: 1,279,898 1,184,906 94,992
PolicyHolders' account values
Aetna Crossroads Variable Portfolio: 198,099 193,283 4,816
PolicyHolders' account values
Aetna Legacy Variable Portfolio: 225,894 207,391 18,503
PolicyHolders' account values
Aetna Variable Index Plus Portfolio: 143,972 131,418 12,554
PolicyHolders' account values
Alger American Small Capitalization
Portfolio:(1) 53,957,227 53,285,312 671,915
PolicyHolders' account values
American Century VP Capital Appreciation
Fund:(2) 15,197,338 15,512,673 (315,335)
PolicyHolders' account values
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: 14,420,981 11,843,310 2,577,671
PolicyHolders' account values
Growth Portfolio: 6,814,876 5,870,796 944,080
PolicyHolders' account values
Overseas Portfolio: 359,668 322,274 37,394
PolicyHolders' account values
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 244,742 220,690 24,052
PolicyHolders' account values
Contrafund Portfolio: 4,519,164 3,602,586 916,578
PolicyHolders' account values
Janus Aspen Series:
Aggressive Growth Portfolio: 18,445,996 17,632,824 813,172
PolicyHolders' account values
Balanced Portfolio: 1,238,408 1,021,789 216,619
PolicyHolders' account values
</TABLE>
S-12
<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 Year of Year Gain (Loss) Transactions of Year of Year
- ------------- ------------- ---------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
$7,294,643 $6,207,999 ($1,086,644) $ 11,743,902
$92,871,626 $132,379,023
(190,180) (12,114) 178,066 6,856,045
13,179,787 21,104,804
106,394 70,857 (35,537) 10,565,707
9,092,185 20,320,201
1,383,931 1,971,257 587,326 4,867,703
15,791,541 24,336,071
15,645 27,927 12,282 1,049,257
545,378 1,802,553
(191) 5,069 5,260 533,974
123,692 710,292
20 618 598 582,502
13,963 650,139
0 (23,927) (23,927) 1,899,990
0 1,961,545
172,057 0 (172,057) (14,034,001)
13,086,083 0
(146,911) 0 146,911 (6,388,736)
6,482,525 0
1,096,283 1,523,698 427,415 2,546,018
13,310,213 20,183,450
294,867 380,110 85,243 900,915
5,052,529 7,120,144
37,941 (8,270) (46,211) 1,227,751
532,327 1,789,714
134,978 281,699 146,721 796,072
1,410,186 2,534,727
730,883 1,505,359 774,476 11,491,722
6,911,690 20,220,028
249,074 844,868 595,794 1,426,169
9,662,927 12,402,365
243,163 885,469 642,306 3,632,486
3,574,345 8,205,641
</TABLE>
S-13
<PAGE>
Variable Life Account B
Notes to Financial Statements--December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets--Year Ended December 31, 1997 (continued)
<TABLE>
<CAPTION>
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
-------------- ----------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Growth Portfolio: $ 309,334 ($ 90,076) $ 3,312,122 $ 2,585,617 $ 726,505
PolicyHolders' account values
Short-Term bond Portfolio: (3) 101,542 (32,381) 9,071,413 8,891,967 179,446
PolicyHolders' account values
Worldwide Growth Portfolio: 325,821 (167,065) 7,022,675 5,257,711 1,764,964
PolicyHolders' account values
Portfolio Partners Inc.:
PPI MFS Emerging Equities Portfolio: 0 (17,086) 9,834,242 9,998,952 (164,710)
PolicyHolders' account values
PPI MFS Research Growth Portfolio: 0 (6,128) 1,889,839 1,891,124 (1,285)
PolicyHolders' account values
PPI Scudder International Growth Portfolio: 0 (12,927) 1,858,258 1,827,173 31,085
PolicyHolders' account values
Scudder Variable Life Investment Fund --
International Portfolio: (4) 264,246 (110,422) 20,554,442 18,819,109 1,735,333
PolicyHolders' account values ----------- ---------- ------------ ------------ -----------
Total Variable Life Account B $35,222,623 ($2,713,203) $260,329,704 $245,858,726 $14,470,978
=========== ========== ============ ============ ===========
</TABLE>
(1) Effective November 28, 1997, assets from this fund were transferred into
the PPI MFS Emerging Equity Portfolio.
(2) Effective November 28, 1997, assets from this fund were transferred into
the PPI MFS Research Growth Portfolio.
(3) Effective November 28, 1997, assets from this fund were transferred into
the Aetna Variable Encore Fund.
(4) Effective November 28, 1997, assets from this fund were transferred into
the PPI Scudder
International Growth Portfolio.
S-14
<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 Year of Year Gain (Loss) Transactions of Year of Year
- -------------- --------------- --------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
$ 566,478 $ 1,360,430 $ 793,952 $ 3,065,638
$ 7,174,647 $ 11,980,000
26,773 0 (26,773) (4,049,682)
3,827,848 0
872,277 1,817,349 945,072 11,519,359
9,915,136 24,303,287
0 42,515 42,515 19,201,153
0 19,061,872
0 (86,245) (86,245) 7,241,839
0 7,148,181
0 192,560 192,560 14,100,392
0 14,311,110
1,244,544 0 (1,244,544) (11,259,868)
10,615,255 0
----------- ----------- ------------ ------------- ------------ ------------
$14,132,669 $16,987,228 $ 2,854,559 $ 79,516,307 $223,173,883 $352,525,147
=========== =========== ============ ============= ============ ============
</TABLE>
S-15
<PAGE>
Variable Life Account B
Notes to Financial Statements--December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets--Year Ended December 31, 1996 (continued)
<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: $9,712,578 ($ 991,737) $5,373,083 $4,466,494 $906,589
PolicyHolders' account values
Aetna Income Shares: 810,294 (121,325) 1,564,483 1,544,041 20,442
PolicyHolders' account values
Aetna Variable Encore Fund: 477,308 (71,555) 9,490,775 9,560,169 (69,394)
PolicyHolders' account values
Aetna Investment Advisers Fund, Inc.: 1,201,085 (127,990) 1,717,127 1,435,761 281,366
PolicyHolders' account values
Aetna Ascent Variable Portfolio: 18,222 (1,210) 127,981 124,671 3,310
PolicyHolders' account values
Aetna Crossroads Variable Portfolio: 2,462 (91) 1,317 1,263 54
PolicyHolders' account values
Aetna Legacy Variable Portfolio: 671 (36) 503 486 17
PolicyHolders' account values
Alger American Small Capitalization Portfolio: 33,925 (93,143) 2,003,029 1,400,608 602,421
PolicyHolders' account values
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: 19,619 (57,181) 625,427 574,716 50,711
PolicyHolders' account values
Growth Portfolio: 85,627 (30,149) 243,345 245,938 (2,593)
PolicyHolders' account values
Overseas Portfolio:
PolicyHolders' account values 14,172 (4,004) 478,644 450,003 28,641
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 62,788 (13,383) 981,022 966,124 14,898
PolicyHolders' account values
Contrafund Portfolio: 10,199 (36,829) 353,531 314,886 38,645
PolicyHolders' account values
Janus Aspen Series:
Aggressive Growth Portfolio: 79,809 (68,571) 1,171,119 858,482 312,637
PolicyHolders' account values
Balanced Portfolio: 70,301 (23,444) 452,062 367,517 84,545
PolicyHolders' account values
Growth Portfolio: 140,964 (46,593) 808,709 590,651 218,058
PolicyHolders' account values
Short-Term Bond Portfolio: 84,482 (17,596) 424,360 415,377 8,983
PolicyHolders' account values
</TABLE>
S-16
<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 Year of Year Gain (Loss) Transactions of Year of Year
- ------------- ------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
$ 65,391 $7,294,643 $7,229,252 $ 5,056,913
$70,958,031 $92,871,626
189,278 (190,180) (379,458) 2,798,667
10,051,167 13,179,787
138,935 106,394 (32,541) 3,268,179
5,520,188 9,092,185
1,031,584 1,383,931 352,347 4,815,033
9,269,700 15,791,541
0 15,645 15,645 509,411
0 545,378
0 (191) (191) 121,458
0 123,692
0 20 20 13,291
0 13,963
595,950 172,057 (423,893) 7,688,994
5,277,779 13,086,083
28,202 1,096,283 1,068,081 11,810,807
418,176 13,310,213
(36,211) 294,867 331,078 3,470,007
1,198,559 5,052,529
21,923 37,941 16,018 (102,302)
579,802 532,327
47,435 134,978 87,543 298,650
959,690 1,410,186
10,253 730,883 720,630 5,090,135
1,088,910 6,911,690
376,606 249,074 (127,532) 5,949,433
3,517,151 9,662,927
60,589 243,163 182,574 2,648,699
611,670 3,574,345
196,848 566,478 369,630 3,974,072
2,518,516 7,174,647
6,078 26,773 20,695 3,383,696
347,588 3,827,848
</TABLE>
S-17
<PAGE>
Variable Life Account B
Notes to Financial Statements--December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets--Year Ended December 31, 1996 (continued)
<TABLE>
<CAPTION>
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
-------------- ---------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Janus Aspen Series (continued):
Worldwide Growth Portfolio: $ 105,214 ($ 49,874) $ 1,127,422 $ 777,300 $ 350,122
PolicyHolders' account values
Scudder Variable Life Investment Fund --
International Portfolio: 173,534 (85,922) 1,752,475 1,537,715 214,760
PolicyHolders' account values
TCI Portfolios, Inc.--Growth Fund: 710,224 (64,504) 960,494 802,090 158,404
PolicyHolders' account values ----------- ------------ ------------ ----------- ----------
Total Variable Life Account B $13,813,478 ($1,905,137) $29,656,908 $26,434,292 $3,222,616
=========== ============ ============ =========== ==========
</TABLE>
S-18
<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 Year of Year Gain (Loss) Transactions of Year of Year
- ------------- --------------- --------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$ 227,523 $ 872,277 $ 644,754 $ 7,436,957
$ 1,427,963 $ 9,915,136
431,463 1,244,544 813,081 2,808,258
6,691,544 10,615,255
999,727 (146,911) (1,146,638) 745,694
6,079,345 6,482,525
---------- ----------- ------------ ----------- ------------ ------------
$4,391,574 $14,132,669 $ 9,741,095 $71,786,052 $126,515,779 $223,173,883
========== =========== ============ =========== ============ ============
</TABLE>
S-19
<PAGE>
Independent Auditors' Report
The Board of Directors of Aetna Life Insurance and Annuity Company and
Policyholders of Variable Life Account B:
We have audited the accompanying statement of assets and liabilities of Aetna
Life Insurance and Annuity Company Variable Life Account B (the "Account") as
of December 31, 1997, and the related statements of operations and changes in
net assets for each of the years in the two-year period then ended and
condensed financial information for the year ended December 31, 1997. These
financial statements and condensed financial information are the responsibility
of the Account's management. Our responsibility is to express an opinion on
these financial statements and condensed financial information based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and condensed
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and condensed financial information. Our procedures
included confirmation of securities owned as of December 31, 1997, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and condensed financial information
referred to above present fairly, in all material respects, the financial
position of Aetna Life Insurance and Annuity Company Variable Life Account B as
of December 31, 1997, the results of its operations and changes in its net
assets for each of the years in the two-year period then ended and condensed
financial information for the year ended December 31, 1997 in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
February 27, 1998
S-20
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
Index to Consolidated Financial Statements
------------------------------------------
Page
Independent Auditors' Report F-2
Consolidated Financial Statements:
Consolidated Statements of Income for the Years Ended
December 31, 1997, 1996 and 1995 F-3
Consolidated Balance Sheets as of December 31, 1997
and 1996 F-4
Consolidated Statements of Changes in Shareholder's Equity
for the Years Ended December 31, 1997, 1996 and 1995 F-5
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1997, 1996 and 1995 F-6
Notes to Consolidated Financial Statements F-7
F-1
<PAGE>
Independent Auditors' Report
The Shareholder and Board of Directors
Aetna Life Insurance and Annuity Company:
We have audited the accompanying consolidated balance sheets of Aetna Life
Insurance and Annuity Company and Subsidiary as of December 31, 1997 and 1996,
and the related consolidated statements of income, changes in shareholder's
equity and cash flows for each of the years in the three-year period ended
December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Aetna Life Insurance
and Annuity Company and Subsidiary at December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
February 3, 1998
F-2
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Income
(millions)
Years Ended December 31,
--------------------------------
1997 1996 1995
------- ------- -------
Revenue:
Premiums $267.1 $133.6 $212.7
Charges assessed against policyholders 475.0 396.5 318.9
Net investment income 1,080.5 1,045.6 1,004.3
Net realized capital gains 36.0 19.7 41.3
Other income 39.7 45.4 42.0
------- ------- -------
Total revenue 1,898.3 1,640.8 1,619.2
------- ------- -------
Benefits and expenses:
Current and future benefits 1,127.8 968.6 997.2
Operating expenses 347.4 342.2 310.8
Amortization of deferred policy
acquisition costs 128.4 69.8 48.0
Severance and facilities charges -- 61.3 --
------- ------- -------
Total benefits and expenses 1,603.6 1,441.9 1,356.0
------- ------- -------
Income before income taxes 294.7 198.9 263.2
Income taxes 89.4 57.8 87.3
------- ------- -------
Net income $205.3 $141.1 $175.9
======= ======= =======
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Balance Sheets
(millions, except share data)
<TABLE>
<CAPTION>
December 31, December 31,
Assets 1997 1996
- ------ ---- ----
<S> <C> <C>
Investments:
Debt securities available for sale, at fair value
(amortized cost: $12,912.2 and $12,539.1) $13,463.8 $12,905.5
Equity securities, available for sale:
Nonredeemable preferred stock (cost: $131.7 and $107.6) 147.6 119.0
Investment in affiliated mutual funds (cost: $78.1 and $77.3) 83.0 81.1
Common stock (cost: $0.2 and $0.0) .6 .3
Short-term investments 95.6 34.8
Mortgage loans 12.8 13.0
Policy loans 469.6 399.3
--------- --------
Total investments 14,273.0 13,553.0
Cash and cash equivalents 565.4 459.1
Accrued investment income 163.0 159.0
Premiums due and other receivables 63.7 26.6
Deferred policy acquisition costs 1,654.6 1,515.3
Reinsurance loan to affiliate 397.2 628.3
Other assets 46.8 33.7
Separate accounts assets 22,982.7 15,318.3
--------- --------
Total assets $40,146.4 $31,693.3
========= ========
Liabilities and Shareholder's Equity
Liabilities:
Future policy benefits $3,763.7 $3,617.0
Unpaid claims and claim expenses 38.0 28.9
Policyholders' funds left with the Company 11,143.5 10,663.7
--------- --------
Total insurance reserve liabilities 14,945.2 14,309.6
Other liabilities 312.8 354.7
Income taxes:
Current 12.4 20.7
Deferred 72.0 80.5
Separate accounts liabilities 22,970.0 15,318.3
--------- --------
Total liabilities 38,312.4 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
Accumulated other comprehensive income 92.9 60.5
Retained earnings 1,320.3 1,128.2
--------- --------
Total shareholder's equity 1,834.0 1,609.5
--------- --------
Total liabilities and shareholder's equity $40,146.4 $31,693.3
========= ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Changes in Shareholder's Equity
(millions)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Shareholder's equity, beginning of year $1,609.5 $1,583.0 $1,088.5
Comprehensive income
Net income 205.3 141.1 175.9
Other comprehensive income, net of tax
Unrealized gains (losses) on securities ($50.1
million, $(110.8) million and $494.6 million, 32.4 (72.0) 321.5
pretax, respectively)
-------- -------- --------
Total comprehensive income 237.7 69.1 497.4
-------- -------- --------
Capital contributions -- 10.4 0.0
Other changes 4.1 (49.5) 0.0
Common stock dividends (17.3) (3.5) (2.9)
-------- -------- --------
Shareholder's equity, end of year $1,834.0 $1,609.5 $1,583.0
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Cash Flows
(millions)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $205.3 $141.1 $175.9
Adjustments to reconcile net income to net cash provided by
(used for) operating activities:
(Increase) decrease in accrued investment income (4.0) 16.5 (33.3)
(Increase) decrease in premiums due and other receivables (33.3) 1.6 25.4
Increase in policy loans (70.3) (60.7) (89.9)
Increase in deferred policy acquisition costs (139.3) (174.0) (177.0)
Decrease in reinsurance loan to affiliate 231.1 27.2 34.8
Net increase in universal life account balances 286.4 243.2 393.4
(Decrease) increase in other insurance reserve liabilities (249.6) (211.5) 79.0
Net (decrease) increase in other liabilities and other assets (41.7) 3.1 13.0
Decrease in income taxes (31.4) (26.7) (4.5)
Net accretion of discount on investments (66.4) (68.0) (66.4)
Net realized capital gains (36.0) (19.7) (41.3)
Other, net -- 1.1 --
-------- -------- --------
Net cash provided by (used for) operating activities 50.8 (126.8) 309.1
-------- -------- --------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale 5,311.3 5,182.2 4,207.2
Equity securities 103.1 190.5 180.8
Mortgage loans 0.2 8.7 10.7
Limited partnership -- -- 26.6
Investment maturities and collections of:
Debt securities available for sale 1,212.7 885.2 583.9
Short-term investments 89.3 35.0 106.1
Cost of investment purchases in:
Debt securities available for sale (6,732.8) (6,534.3) (6,034.0)
Equity securities (113.3) (118.1) (170.9)
Short-term investments (149.9) (54.7) (24.7)
Mortgage loans -- -- (21.3)
Other, net -- (17.6) --
-------- -------- --------
Net cash used for investing activities (279.4) (423.1) (1,135.6)
-------- -------- --------
Cash Flows from Financing Activities:
Deposits and interest credited for investment contracts 1,621.2 1,579.5 1,884.5
Withdrawals of investment contracts (1,256.3) (1,146.2) (1,109.6)
Capital contribution to Separate Account (25.0) -- --
Return of capital from Separate Account 12.3 -- --
Capital contribution from HOLDCO -- 10.4 --
Dividends paid to shareholder (17.3) (3.5) (2.9)
-------- -------- --------
Net cash provided by financing activities 334.9 440.2 772.0
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 106.3 (109.7) (54.5)
Cash and cash equivalents, beginning of year 459.1 568.8 623.3
-------- -------- --------
Cash and cash equivalents, end of year $565.4 $459.1 $568.8
======== ======== ========
Supplemental cash flow information:
Income taxes paid, net $119.6 $85.5 $92.8
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Aetna Life Insurance and Annuity Company and its wholly owned subsidiary
(collectively, the "Company") are providers of financial services and life
insurance products in the United States. The Company has two business
segments: financial services and individual life insurance.
Financial services products include annuity contracts that offer a variety
of funding and payout options for individual and employer-sponsored
retirement plans qualified under Internal Revenue Code Sections 401, 403,
408 and 457, and non-qualified annuity contracts. These contracts may be
deferred or immediate ("payout annuities"). Financial services also include
investment advisory services and pension plan administrative services.
Individual life insurance products include universal life, variable
universal life, traditional whole life and term insurance.
Basis of Presentation
---------------------
The consolidated financial statements include Aetna Life Insurance and
Annuity Company and its wholly owned subsidiary, Aetna Insurance Company of
America. 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").
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles. Certain reclassifications have
been made to 1996 and 1995 financial information to conform to the 1997
presentation.
New Accounting Standard
-----------------------
As of December 31, 1997 the Company adopted Financial Accounting Standard
("FAS") No. 130, Reporting Comprehensive Income. This statement establishes
standards for the reporting and presentation of comprehensive income and
its components in a full set of financial statements. Comprehensive income
encompasses all changes in shareholder's equity (except those arising from
transactions with shareholders) and includes net income and net unrealized
capital gains or losses on available-for-sale securities. As this new
standard only requires additional information in a financial statement, it
does not affect the Company's financial position or results of operations.
Future Application of Accounting Standards
------------------------------------------
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities
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.
F-7
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Future Application of Accounting Standards (Continued)
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.
Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments
In December 1997, the American Institute of Certified Public Accountants
issued Statement of Position 97-3, Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments, which provides guidance for
determining when an insurance or other enterprise should recognize a
liability for guaranty-fund and other insurance related assessments and
guidance for measuring the liability. This statement is effective for 1999
financial statements with early adoption permitted. The Company does not
expect adoption of this statement to have a material effect on its
financial position or results of operations.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from reported results
using those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, money market instruments
and other debt issues with a maturity of 90 days or less when purchased.
Investments
Debt and equity securities are classified as available for sale and carried
at fair value. These securities are written down (as realized capital
losses) for other than temporary declines in value. Unrealized capital
gains and losses related to available for sale investments, other than
amounts allocable to experience rated contractholders, are reflected in
shareholder's equity, net of related taxes.
Fair values for debt and equity securities are based on quoted market
prices or dealer quotations. Where quoted market prices or dealer
quotations are not available, fair values are measured utilizing quoted
market prices for similar securities or by using discounted cash flow
methods. Cost for mortgage-backed securities is adjusted for unamortized
premiums and discounts, which are amortized using the interest method over
the estimated remaining term of the securities, adjusted for anticipated
prepayments.
F-8
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Investments (Continued)
The company engages in securities lending whereby certain securities from
its portfolio are loaned to other institutions for short periods of time.
Initial collateral, primarily cash, is required at a rate of 102% of the
market value of a loaned domestic security and 105% of the market value of
a loaned foreign security. The collateral is deposited by the borrower with
a lending agent, and retained and invested by the lending agent according
to the Company's guidelines to generate additional income. The market value
of the loaned securities is monitored on a daily basis with additional
collateral obtained or refunded as the market value of the loaned
securities fluctuates. At December 31, 1997 and 1996, the Company loaned
securities (which are reflected as invested assets) with a market value of
approximately $385.1 million and $444.7 million, respectively.
Purchases and sales of debt and equity securities are recorded on the trade
date.
The investment in affiliated mutual funds represents an investment in Aetna
managed mutual funds which have been seeded by the Company, and is carried
at fair value.
Mortgage loans and policy loans are carried at unpaid principal balances,
net of impairment reserves. Sales of mortgage loans are recorded on the
closing date.
Short-term investments, consisting primarily of money market instruments
and other debt issues purchased with a maturity of 91 days to one year, are
considered available for sale and are carried at fair value, which
approximates amortized cost.
The Company utilizes futures contracts, swap agreements and warrants for
other than trading purposes in order to manage investment returns and price
risk and to align maturities, interest rates, and funds availability with
its obligations. (Refer to Note 3.)
Futures contracts are carried at fair value and require daily cash
settlement. Changes in the fair value of futures contracts that qualify as
hedges are deferred and recognized as an adjustment to the hedged asset or
liability. Deferred gains or losses on such futures contracts are amortized
over the life of the acquired asset or liability as a yield adjustment or
through net realized capital gains or losses upon disposal of an asset.
Changes in the fair value of futures contracts that do not qualify as
hedges are recorded in net realized capital gains or losses. Hedge
designation requires specific asset or liability identification, a
probability at inception of high correlation with the position underlying
the hedge, and that high correlation be maintained throughout the hedge
period. If a hedging instrument ceases to be highly correlated with the
position underlying the hedge, hedge accounting ceases at that date and
excess gains and losses on the hedging instrument are reflected in net
realized capital gains or losses.
Interest rate swap agreements which are designated as interest rate risk
management instruments at inception are accounted for using the accrual
method. Accordingly, the difference between amounts
F-9
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Investments (Continued)
paid and received on such agreements is reported in net investment income.
There is no recognition in the Consolidated Balance Sheets for changes in
the fair value of the agreement.
Warrants represent the right to purchase specific securities and are
accounted for as hedges. Upon exercise, the cost of the warrants are added
to the basis of the securities purchased.
Deferred Policy Acquisition Costs
Certain costs of acquiring insurance business are deferred. These costs,
all of which vary with and are primarily related to the production of new
and renewal business, consist principally of commissions, certain expenses
of underwriting and issuing contracts, and certain agency expenses. For
fixed ordinary life contracts, such costs are amortized over expected
premium-paying periods (up to 20 years). For universal life and certain
annuity contracts, such costs are amortized in proportion to estimated
gross profits and adjusted to reflect actual gross profits over the life of
the contracts (up to 20 years). Deferred policy acquisition costs are
written off to the extent that it is determined that future policy premiums
and investment income or gross profits are not adequate to cover related
losses and expenses.
Insurance Reserve Liabilities
Future policy benefits include reserves for universal life, immediate
annuities with life contingent payouts and traditional life insurance
contracts. Reserves for universal life contracts are equal to cumulative
deposits less charges and withdrawals plus credited interest thereon.
Reserves for immediate annuities with life contingent payouts and
traditional life insurance contracts are computed on the basis of assumed
investment yield, mortality, and expenses, including a margin for adverse
deviations. Such assumptions generally vary by plan, year of issue and
policy duration. Reserve interest rates range from 2.25% to 12.00% for all
years presented. Investment yield is based on the Company's experience.
Mortality and withdrawal rate assumptions are based on relevant Aetna
experience and are periodically reviewed against both industry standards
and experience.
Policyholders' funds left with the Company include reserves for deferred
annuity investment contracts and immediate annuities without life
contingent payouts. Reserves on such contracts are equal to cumulative
deposits less charges and withdrawals plus credited interest thereon (rates
range from 3.50% to 9.50% for all years presented) net of adjustments for
investment experience that the Company is entitled to reflect in future
credited interest. Reserves on contracts subject to experience rating
reflect the rights of contractholders, plan participants and the Company.
Unpaid claims for all lines of insurance include benefits for reported
losses and estimates of benefits for losses incurred but not reported.
F-10
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Premiums, Charges Assessed Against Policyholders, Benefits and Expenses
For universal life and certain annuity contracts, charges assessed against
policyholders' funds for the cost of insurance, surrender charges,
actuarial margin and other fees are recorded as revenue in charges assessed
against policyholders. Other amounts received for these contracts are
reflected as deposits and are not recorded as revenue. Life insurance
premiums, other than premiums for universal life and certain annuity
contracts, are recorded as premium revenue when due. Related policy
benefits are recorded in relation to the associated premiums or gross
profit so that profits are recognized over the expected lives of the
contracts. When annuity payments with life contingencies begin under
contracts that were initially investment contracts, the accumulated balance
in the account is treated as a single premium for the purchase of an
annuity and reflected as an offsetting amount in both premiums and current
and future benefits in the Consolidated Statements of Income.
Separate Accounts
Assets held under variable universal life and variable annuity contracts
are segregated in Separate Accounts and are invested, as designated by the
contractholder or participant under a contract, in shares of mutual funds
which are managed by the Company, or other selected mutual funds not
managed by the Company.
Separate Accounts assets and liabilities are carried at fair value except
for those relating to a guaranteed interest option. Since the Company bears
the investment risk where the contract is held to maturity, the assets of
the Separate Account supporting the guaranteed interest option are carried
at an amortized cost of $658.6 million for 1997 (fair value $668.7 million)
and $515.6 million for 1996 (fair value $523.0 million). Reserves relating
to the guaranteed interest option are maintained at fund value and reflect
interest credited at rates ranging from 4.10% to 8.00% in both 1997 and in
1996.
Separate Accounts assets and liabilities are shown as separate captions in
the Consolidated Balance Sheets. Deposits, investment income and net
realized and unrealized capital gains and losses of the Separate Accounts
are not reflected in the Consolidated Statements of Income (with the
exception of realized capital gains and losses on the sale of assets
supporting the guaranteed interest option). The Consolidated Statements of
Cash Flows do not reflect investment activity of the Separate Accounts.
Income Taxes
The Company is included in the consolidated federal income tax return of
Aetna. The Company is taxed at regular corporate rates after adjusting
income reported for financial statement purposes for certain items.
Deferred income tax expenses/benefits result from changes during the year
in cumulative temporary differences between the tax basis and book basis of
assets and liabilities.
F-11
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments
Debt securities available for sale as of December 31, 1997 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ------
(millions)
<S> <C> <C> <C> <C>
U.S. government and government
agencies and authorities $1,219.7 $74.0 $0.1 $1,293.6
States, municipalities and political
subdivisions 0.3 -- -- 0.3
U.S. corporate securities:
Financial 2,370.7 84.6 1.3 2,454.0
Food & fiber 195.4 9.3 -- 204.7
Healthcare & consumer products 728.5 27.0 2.6 752.9
Media & broadcast 252.9 14.7 0.1 267.5
Natural resources 143.5 5.5 - 149.0
Transportation & capital goods 528.2 33.2 0.1 561.3
Utilities 521.3 23.5 0.9 543.9
Other corporate securities 96.9 3.2 - 100.1
---------- -------- -------- -----------
Total U.S. corporate securities 4,837.4 201.0 5.0 5,033.4
Foreign Securities:
Government 612.5 36.7 23.6 625.6
Utilities 177.5 28.7 -- 206.2
Other 857.9 27.7 42.8 842.8
---------- -------- -------- -----------
Total foreign securities 1,647.9 93.1 66.4 1,674.6
Residential mortgage-backed securities:
Pass-throughs 784.4 71.3 2.0 853.7
Collateralized mortgage obligations 2,280.5 137.4 2.0 2,415.9
---------- -------- -------- -----------
Total residential mortgage-
backed securities 3,064.9 208.7 4.0 3,269.6
Commercial/Multifamily mortgage-
backed securities 1,127.8 34.0 0.4 1,161.4
Other asset-backed securities 1,014.2 17.1 0.4 1,030.9
---------- -------- -------- -----------
Total Debt Securities $12,912.2 $627.9 $76.3 $13,463.8
========== ======== ======== ===========
</TABLE>
F-12
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
Debt securities available for sale as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ------
(millions)
<S> <C> <C> <C> <C>
U.S. government and government
agencies and authorities $1,072.4 $20.5 $4.5 $1,088.4
States, municipalities and political
subdivisions 6.0 1.2 -- 7.2
U.S. corporate securities:
Financial 2,143.4 43.1 9.7 2,176.8
Food & fiber 198.2 4.6 1.3 201.5
Healthcare & consumer products 735.9 20.2 6.3 749.8
Media & broadcast 274.9 7.0 2.8 279.1
Natural resources 187.7 4.5 0.4 191.8
Transportation & capital goods 521.9 22.0 1.8 542.1
Utilities 448.8 14.8 2.8 460.8
Other corporate securities 141.5 3.0 -- 144.5
--------- --------- -------- ---------
Total U.S. corporate securities 4,652.3 119.2 25.1 4,746.4
Foreign Securities:
Government 758.6 36.0 5.7 788.9
Utilities 187.8 16.1 -- 203.9
Other 945.5 30.9 6.3 970.1
--------- -------- --------- ---------
Total foreign securities 1,891.9 83.0 12.0 1,962.9
Residential mortgage-backed securities:
Pass-throughs 792.2 78.3 3.1 867.4
Collateralized mortgage obligations 2,227.8 94.9 13.7 2,309.0
--------- --------- -------- ---------
Total residential mortgage-
backed securities 3,020.0 173.2 16.8 3,176.4
Commercial/Multifamily mortgage-
backed securities 1,008.7 24.8 5.6 1,027.9
Other asset-backed securities 887.8 10.7 2.2 896.3
--------- -------- --------- --------
Total Debt Securities $12,539.1 $432.6 $66.2 $12,905.5
========= ======== ========= ========
</TABLE>
F-13
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
At December 31, 1997 and 1996, net unrealized appreciation of $551.6
million and $366.4 million, respectively, on available-for-sale debt
securities included $429.3 million and $288.5 million, respectively,
related to experience rated contracts, which were not reflected in
shareholder's equity but in future policy benefits and policyholders' funds
left with the Company.
The carrying and fair value of debt securities for the year ended December
31, 1997 are shown below by contractual maturity. Actual maturities may
differ from contractual maturities because securities may be restructured,
called, or prepaid.
Amortized Fair
Cost Value
--------- ------
(millions)
Due to mature:
One year or less $367.3 $367.6
After one year through five years 2,165.1 2,195.4
After five years through ten years 2,367.3 2,407.0
After ten years 2,805.6 3,031.9
Mortgage-backed securities 4,192.7 4,431.0
Other asset-backed securities 1,014.2 1,030.9
--------- ---------
Total $12,912.2 $13,463.8
========= =========
At December 31, 1997 and 1996, debt securities carried at $8.2 million and
$7.6 million, respectively, were on deposit as required by regulatory
authorities.
The Company did not have any investments in a single issuer, other than
obligations of the U.S. government, with a carrying value in excess of 10%
of the Company's shareholder's equity at December 31, 1997.
F-14
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
Included in the Company's debt securities were residential collateralized
mortgage obligations ("CMOs") supporting the following:
<TABLE>
<CAPTION>
1997 1996
--------------------- ------------------------
Fair Amortized Fair Amortized
Value Cost Value Cost
-------- -------- -------- --------
(millions)
<S> <C> <C> <C> <C>
Total residential CMOs(1) $2,415.9 $2,280.5 $2,309.0 $2,227.8
======== ======== ======== ========
Percentage of total:
Supporting experience rated products 81.6% 84.2%
Supporting remaining products 18.4% 15.8%
----- -----
100.0% 100.0%
===== =====
</TABLE>
(1) At December 31, 1997 and 1996, approximately 73% and 71%,
respectively, of the Company's residential CMO holdings were
backed by government agencies such as GNMA, FNMA, FHLMC.
There are various categories of CMOs which are subject to different degrees
of risk from changes in interest rates and, for nonagency-backed CMOs,
defaults. The principal risks inherent in holding CMOs are prepayment and
extension risks related to dramatic decreases and increases in interest
rates resulting in the repayment of principal from the underlying mortgages
either earlier or later than originally anticipated. At December 31, 1997
and 1996, approximately 4% and 3%, respectively, of the Company's CMO
holdings were invested in types of CMOs which are subject to more
prepayment and extension risk than traditional CMOs (such as interest- or
principal-only strips).
F-15
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
Investments in equity securities available for sale were as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
(millions)
1997
Equity Securities $210.0 $21.3 $0.1 $231.2
====== ===== ==== ======
1996
Equity Securities $184.9 $16.3 $0.8 $200.4
====== ===== ==== ======
3. Financial Instruments
Estimated Fair Value
--------------------
The carrying values and estimated fair values of certain of the Company's
financial instruments at December 31, 1997 and 1996 were as follows:
1997 1996
-------------------- -----------------
Carrying Fair Carrying Fair
Value Value Value Value
--------- ------ -------- -----
(millions)
Assets:
Mortgage loans $ 12.8 $ 12.4 $ 13.0 $ 13.2
Liabilities:
Investment contract
liabilities:
With a fixed maturity $ 1,030.3 $1,005.4 $1,014.1 $1,028.8
Without a fixed
maturity 10,113.2 9,587.5 9,649.6 9,427.6
Fair value estimates are made at a specific point in time, based on
available market information and judgments about the financial instrument,
such as estimates of timing and amount of future cash flows. Such estimates
do not reflect any premium or discount that could result from offering for
sale at one time the Company's entire holdings of a particular financial
instrument, nor do they consider the tax impact of the realization of
unrealized gains or losses. In many cases, the fair value estimates cannot
be substantiated by comparison to independent markets, nor can the
disclosed value be realized in immediate settlement of the instrument. In
evaluating the Company's management of interest rate, price and liquidity
risks, the fair values of all assets and liabilities should be taken into
consideration, not only those presented above.
F-16
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
3. Financial Instruments (Continued)
Estimated Fair Value (Continued)
The following valuation methods and assumptions were used by the Company in
estimating the fair value of the above financial instruments:
Mortgage loans: Fair values are estimated by discounting expected mortgage
loan cash flows at market rates which reflect the rates at which similar
loans would be made to similar borrowers. The rates reflect management's
assessment of the credit quality and the remaining duration of the loans.
Investment contract liabilities (included in policyholders' funds left with
the Company):
With a fixed maturity: Fair value is estimated by discounting cash flows at
interest rates currently being offered by, or available to, the Company for
similar contracts.
Without a fixed maturity: Fair value is estimated as the amount payable to
the contractholder upon demand. However, the Company has the right under
such contracts to delay payment of withdrawals which may ultimately result
in paying an amount different than that determined to be payable on demand.
Off-Balance-Sheet and Other Financial Instruments (including Derivative
Instruments)
The Company uses off-balance-sheet and other financial instruments
primarily to manage portfolio risks, including interest rate,
prepayment/call, credit, price, and liquidity risks. In 1997 and 1996,
Treasury futures contracts were used to manage interest rate risk in the
Company's bond portfolio; and, in 1996, stock index futures contracts were
used to manage price risk in the Company's equity portfolio. In 1996 and
1995, interest rate swaps and forward commitments to enter into interest
rate swaps, respectively, were also used to manage interest rate risk in
the Company's bond portfolio.
Futures Contracts:
Futures contracts represent commitments to either purchase or sell
securities at a specified future date and at a specified price or yield.
Futures contracts trade on organized exchanges and, therefore, have minimal
credit risk. Cash settlements are made daily based on changes in the prices
of the underlying assets. There were no futures contracts open as of
December 31, 1997 and 1996.
Interest Rate Swaps:
Under interest rate swaps, the Company agrees with other parties to
exchange interest amounts calculated by reference to an agreed notional
principal amount. Generally, no cash is exchanged at the outset of the
contract and no principal payments are made. A single net payment is
usually made by one counterparty at each due date or upon termination of
the contract. The Company would be
F-17
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
3. Financial Instruments (Continued)
Off-Balance-Sheet and Other Financial Instruments (Including Derivative
Instruments) (Continued)
exposed to credit-related losses in the event of nonperformance by
counterparties to financial instruments, however, the Company controls its
exposure to credit risk through credit approvals, credit limits and regular
monitoring procedures. The credit exposure of interest rate swaps is
represented by the fair value (market value) of contracts with a positive
fair value (market value) at the reporting date. There were no interest
rate swap agreements open as of December 31, 1997 and 1996.
During 1995, the Company received $0.4 million for writing call options on
underlying securities. The Company did not write any call options in 1997
and 1996.
Warrants:
Warrants are instruments giving the Company the right, but not the
obligation to buy a security at a given price during a specified period. As
of December 31, 1997 and 1996, the Company had open warrants to purchase
equity securities with a fair value of $0.6 million and $0.3 million,
respectively.
Debt Instruments with Derivative Characteristics:
The Company also had investments in certain debt instruments with
derivative characteristics, including those whose market value is at least
partially determined by, among other things, levels of or changes in
domestic and/or foreign interest rates (short or long term), exchange
rates, prepayment rates, equity markets or credit ratings/spreads. The
amortized cost and fair value of these securities, included in the debt
securities portfolio, as of December 31, 1997 was as follows:
Amortized Fair
Cost Value
--------- ----
(millions)
Residential collateralized mortgage
obligations $2,280.5 $2,415.9
Principal-only strips (included above) 59.0 67.0
Interest-only strips (included above) 12.8 24.3
Other structured securities with derivative
characteristics (1) 107.4 105.2
(1) Represents non-leveraged instruments whose fair values and credit
risk are based on underlying securities, including fixed income
securities and interest rate swap agreements.
F-18
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
4. Net Investment Income
Sources of net investment income were as follows:
1997 1996 1995
---- ---- ----
(millions)
Debt securities $962.8 $945.3 $891.5
Nonredeemable preferred stock 13.7 5.9 4.2
Investment in affiliated
mutual funds 4.9 14.3 14.9
Mortgage loans 1.3 2.2 1.4
Policy loans 19.9 18.4 13.7
Reinsurance loan to affiliate 37.5 44.1 46.5
Cash equivalents 44.2 29.4 38.9
Other 10.0 2.1 8.4
-------- -------- --------
Gross investment income 1,094.3 1,061.7 1,019.5
Less investment expenses (13.8) (16.1) (15.2)
-------- -------- --------
Net investment income $1,080.5 $1,045.6 $1,004.3
======== ======== ========
Net investment income includes amounts allocable to experience rated
contractholders of $823.1 million, $787.6 million and $744.2 million for
the years ended December 31, 1997, 1996 and 1995, respectively. Interest
credited to contractholders is included in current and future benefits.
5. Dividend Restrictions and Shareholder's Equity
The Company paid $17.3 million and $3.5 million in cash dividends to HOLDCO
in 1997 and 1996, respectively.
The amount of dividends that may be paid to the shareholder in 1998 without
prior approval by the Insurance Commissioner of the State of Connecticut is
$77.6 million.
The Insurance Department of the State of Connecticut (the "Department")
recognizes as net income and shareholder's capital and surplus those
amounts determined in conformity with statutory accounting practices
prescribed or permitted by the Department, which differ in certain respects
from generally accepted accounting principles. Statutory net income was
$80.5 million, $57.8 million and $70.0 million for the years ended December
31, 1997, 1996 and 1995, respectively. Statutory capital and surplus was
$778.7 million and $713.6 million as of December 31, 1997 and 1996,
respectively.
As of December 31, 1997 the Company does not utilize any statutory
accounting practices which are not prescribed by state regulatory
authorities that, individually or in the aggregate, materially affect
statutory capital and surplus.
F-19
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
6. Capital Gains and Losses on Investment Operations
Realized capital gains or losses are the difference between the carrying
value and sale proceeds of specific investments sold.
Net realized capital gains on investments were as follows:
1997 1996 1995
---- ---- ----
(millions)
Debt securities $22.5 $11.1 $32.8
Equity securities 9.9 8.6 8.3
Other 3.6 -- 0.2
------ -------- ------
Pretax realized capital gains $36.0 $19.7 $41.3
====== ======== ======
After tax realized capital gains $23.2 $13.0 $25.8
====== ======== ======
Net realized capital gains of $96.1 million, $53.1 million and $61.1
million for 1997, 1996 and 1995, respectively, allocable to experience
rated contracts, were deducted from net realized capital gains and an
offsetting amount was reflected in policyholders' funds left with the
Company. Net unamortized gains were $138.1 million and $53.3 million at
December 31, 1997 and 1996, respectively.
Proceeds from the sale of available-for-sale debt securities and the
related gross gains and losses were as follows:
1997 1996 1995
----- ----- ----
(millions)
Proceeds on Sales $5,311.3 $5,182.2 $4,207.2
Gross Gains 25.8 24.3 44.6
Gross Losses 3.3 13.2 11.8
F-20
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
6. Capital Gains and Losses on Investment Operations (Continued)
Changes in shareholder's equity related to changes in accumulated other
comprehensive income (unrealized capital gains and losses on securities)
(excluding those related to experience rated contractholders) were as
follows:
1997 1996 1995
---- ---- ----
(millions)
Debt securities $44.3 $(100.1) $255.9
Equity securities 5.6 (10.5) 27.3
Limited partnership -- -- 1.8
----- ------- ------
49.9 (110.6) 285.0
Increase (decrease) in deferred
income taxes (See Note 8) 17.5 (38.6) (36.5)
----- ------- ------
Net changes in accumulated other
comprehensive income $32.4 $(72.0) $321.5
===== ======= ======
Net unrealized capital gains allocable to experience rated contracts of
$356.7 million and $72.6 million at December 31, 1997 and $245.2 million
and $43.3 million at December 31, 1996 are reflected on the Consolidated
Balance Sheets in policyholders' funds left with the Company and future
policy benefits, respectively, and are not included in shareholder's
equity.
Shareholder's equity included the following accumulated other comprehensive
income, which are net of amounts allocable to experience rated
contractholders, at December 31:
1997 1996 1995
---- ---- ----
(millions)
Debt securities
Gross unrealized capital gains $140.6 $101.7 $179.3
Gross unrealized capital losses (18.4) (23.8) (1.3)
----- ----- -----
122.2 77.9 178.0
Equity securities
Gross unrealized capital gains 21.2 16.3 27.2
Gross unrealized capital losses (0.1) (0.8) (1.2)
---- ---- -----
21.1 15.5 26.0
Deferred income taxes (See Note 8) 50.4 32.9 71.5
---- ---- -----
Net accumulated other
comprehensive income $92.9 $60.5 $132.5
==== ==== =====
F-21
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
6. Capital Gains and Losses on Investment Operations (Continued)
Changes in accumulated other comprehensive income related to changes in
unrealized gains (losses) on securities (excluding those related to
experience rated contractholders) were as follows:
1997 1996 1995
---- ---- ----
(millions)
Unrealized holding gains (losses)
arising during the period (1) $98.8 $(14.8) $390.5
Less: reclassification adjustment
for gains and other items included
in net income (2) 66.4 57.2 69.0
----- ------ ------
Net unrealized gains (losses)
on securities $32.4 $(72.0) $321.5
===== ====== ======
(1) Pretax unrealized holding gains (losses) arising during the
period were $152.0 million, ($22.8) million and $600.8 million
for 1997, 1996 and 1995, respectively.
(2) Pretax reclassification adjustments for gains and other items
included in net income were $102.4 million, $87.7 million and
$107.5 million for 1997, 1996 and 1995, respectively.
7. Severance and Facilities Charges
Severance and facilities charges during 1996, as described below, included
the following (pretax):
<TABLE>
<CAPTION>
Vacated
Asset Leased Corporate
(Millions) Severance Write-off Property Other Allocation Total
-------------------------- --------- --------- --------- ----- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Financial Services $29.1 $1.0 $1.3 $1.7 $ -- $33.1
Individual Life Insurance 12.5 0.4 0.5 0.8 -- 14.2
Corporate Allocation -- -- -- -- 14.0 14.0
--------- --------- --------- ----- ---------- ---------
Total Company $41.6 $1.4 $1.8 $2.5 $14.0 $61.3
-------------------------- --------- --------- --------- ----- ---------- ---------
</TABLE>
In the third quarter of 1996, the Company recorded a $30.7 million after
tax ($47.3 million pretax) charge principally related to actions taken or
expected to be taken to improve its cost structure relative to its
competitors. The severance portion of the charge is based on a plan to
eliminate 702 positions (primarily customer service, sales and information
technology support staff). The facilities portion of the charge is based on
a plan to consolidate sales/service field offices.
F-22
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
7. Severance and Facilities Charges (Continued)
In addition to the above charge, Aetna recorded a facilities and severance
charge in the second quarter of 1996, primarily as a result of actions
taken or expected to be taken to reduce the level of corporate expenses and
other costs previously absorbed by Aetna's property-casualty operations,
which were sold in April 1996. The cost allocated to the Company associated
with this charge was $9.1 million after tax ($14.0 million pretax).
Activity for 1997 and 1996 within the severance and facilities reserve
(pretax, in millions) and the number of positions eliminated related to
such actions were as follows:
(Millions) Reserve Positions
----------------------------------- ---------- ---------
Balance at December 31, 1995 $ -- --
Severance and facilities charges 47.3 702
Corporate Allocation 14.0 --
Actions taken (1) (13.4) (178)
---------- ---------
Balance at December 31, 1996 47.9 524
Actions taken (1) (27.1) (163)
---------- ---------
Balance at December 31, 1997 $20.8 361
========== =========
(1) Includes $15.9 million and $8.0 million in 1997 and 1996,
respectively, of severance-related actions and $7.9 million and $4.1
million in 1997 and 1996, respectively, of corporate
allocation-related actions.
The Company's severance actions are expected to be substantially completed
by September 30, 1998. The corporate allocation actions were substantially
completed in 1997.
F-23
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
8. Income Taxes
The Company is included in the consolidated federal income tax return, the
Illinois Unitary return and the Connecticut and the New York combined state
income tax returns of Aetna. Aetna allocates to each member an amount
approximating the tax it would have incurred were it not a member of the
consolidated group, and credits the member for the use of its tax saving
attributes used in the consolidated federal income tax return.
Income taxes for the years ended December 31, consist of:
1997 1996 1995
---- ---- ----
(millions)
Current taxes:
Income Taxes:
Federal income tax $64.5 $50.9 $82.9
State income tax 3.7 3.7 3.2
Net realized capital gains 45.6 25.3 28.5
----- ---- ----
113.8 79.9 114.6
----- ---- -----
Deferred taxes (benefits):
Income taxes:
Federal 8.4 (3.5) (14.4)
Net realized capital gains (losses) (32.8) (18.6) (12.9)
----- ----- -----
(24.4) (22.1) (27.3)
----- ----- -----
Total $89.4 $57.8 $87.3
===== ===== =====
Income taxes were different from the amount computed by applying the
federal income tax rate to income before income taxes for the following
reasons:
1997 1996 1995
---- ---- ----
(millions)
Income before income taxes $294.7 $198.9 $263.2
Tax rate 35% 35% 35%
------- ------- -------
Application of the tax rate 103.1 69.6 92.1
------- ------- -------
Tax effect of:
State income tax, net of
federal benefit 2.4 2.4 2.1
Excludable dividends (15.9) (8.7) (9.3)
Other, net (0.2) (5.5) 2.4
------- ------- --------
Income taxes $89.4 $57.8 $87.3
======= ======= ========
F-24
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
8. Income Taxes (Continued)
The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities at December 31 are presented below:
1997 1996
---- ----
(millions)
Deferred tax assets:
Insurance reserves $415.8 $344.6
Unrealized gains allocable to
experience rated contracts 150.1 100.8
Investment losses 6.6 7.5
Postretirement benefits other
than pensions 26.3 27.0
Deferred compensation 31.2 25.0
Pension (3.6) 7.6
Restructuring charge 9.5 17.6
Depreciation 3.9 2.6
Other 8.8 9.1
--------- --------
Total gross assets 648.6 541.8
Deferred tax liabilities:
Deferred policy acquisition costs 515.6 482.1
Market discount 5.1 6.8
Net unrealized capital gains 200.5 133.7
Other (0.6) (0.3)
--------- ---------
Total gross liabilities 720.6 622.3
--------- ---------
Net deferred tax liability $72.0 $80.5
========= =========
Net unrealized capital gains and losses are presented in shareholder's
equity net of deferred taxes. As of December 31, 1997 and 1996, no
valuation allowances were required for unrealized capital gains and losses.
The "Policyholders' Surplus Account," which arose under prior tax law, is
generally that portion of a life insurance company's statutory income that
has not been subject to taxation. As of December 31, 1983, no further
additions could be made to the Policyholders' Surplus Account for tax
return purposes under the Deficit Reduction Act of 1984. The balance in
such account was approximately $17.2 million at December 31, 1997. This
amount would be taxed only under certain conditions. No income taxes have
been provided on this amount since management believes the conditions under
which such taxes would become payable are remote.
F-25
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
8. Income Taxes (Continued)
The Internal Revenue Service ("Service") has completed examinations of the
consolidated federal income tax returns of Aetna through 1990. Discussions
are being held with the Service with respect to proposed adjustments.
Management believes there are adequate defenses against, or sufficient
reserves to provide for, any such adjustments. The Service has commenced
its examinations for the years 1991 through 1994.
9. Benefit Plans
Employee Pension Plans - The Company, in conjunction with Aetna, has
noncontributory defined benefit pension plans covering substantially all
employees. The plans provide pension benefits based on years of service and
average annual compensation (measured over 60 consecutive months of highest
earnings in a 120-month period). Contributions are determined using the
Projected Unit Credit Method and, for qualified plans subject to ERISA
requirements, are limited to amounts that are tax-deductible. As of
December 31, 1997, Aetna's accrued pension cost has been allocated to its
subsidiaries, including the Company, under an allocation based on eligible
salaries. Data on a separate company basis regarding the proportionate
share of the projected benefit obligation and plan assets is not available.
The accumulated benefit obligation and plan assets are recorded by Aetna.
As of the measurement date (i.e., September 30), the accumulated plan
assets exceeded accumulated plan benefits. Allocated pretax charges to
operations for the pension plan (based on the Company's total salary cost
as a percentage of Aetna's total salary cost) were $2.7 million, $4.3
million and $6.1 million for the years ended December 31, 1997, 1996 and
1995, respectively.
Employee Postretirement Benefits - In addition to providing pension
benefits, Aetna currently provides certain health care and life insurance
benefits for retired employees. A comprehensive medical and dental plan is
offered to all full-time employees retiring at age 50 with 15 years of
service or at age 65 with 10 years of service. There is a cap on the
portion of the cost paid by the Company relating to medical and dental
benefits. Retirees are generally required to contribute to the plans based
on their years of service with Aetna. The costs to the Company associated
with the Aetna postretirement plans for 1997, 1996 and 1995 were $2.7
million, $1.8 million and $1.4 million, respectively.
As of December 31, 1996, Aetna transferred to the Company approximately
$77.7 million of accrued liabilities, primarily related to the pension and
postretirement benefit plans described above, that had been previously
recorded by Aetna. The after tax amount of this transfer (approximately
$50.5 million) is reported as a reduction in retained earnings. In 1997,
other changes in shareholder's equity includes an additional $0.8 million
reduction reflecting revisions to the allocation of these accrued
liabilities.
Agent Pension Plans - The Company, in conjunction with Aetna, has a
non-qualified pension plan covering certain agents. The plan provides
pension benefits based on annual commission earnings. As of the measurement
date (i.e., September 30), the accumulated plan assets exceeded accumulated
plan benefits.
F-26
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
9. Benefit Plans (Continued)
Agent Postretirement Benefits - The Company, in conjunction with Aetna,
also provides certain postretirement health care and life insurance
benefits for certain agents. The costs to the Company associated with the
agents' postretirement plans for 1997, 1996 and 1995 were $0.6 million,
$0.7 million and $0.8 million, respectively.
Incentive Savings Plan - Substantially all employees are eligible to
participate in a savings plan under which designated contributions, which
may be invested in common stock of Aetna or certain other investments, are
matched, up to 5% of compensation, by Aetna. Pretax charges to operations
for the incentive savings plan were $4.4 million, $5.4 million and $4.9
million in 1997, 1996 and 1995, respectively.
Stock Plans - Aetna has a stock incentive plan that provides for stock
options, deferred contingent common stock or equivalent cash awards or
restricted stock to certain key employees. Executive and middle management
employees may be granted options to purchase common stock of Aetna at or
above the market price on the date of grant. Options generally become 100%
vested three years after the grant is made, with one-third of the options
vesting each year. Aetna does not recognize compensation expense for stock
options granted at or above the market price on the date of grant under its
stock incentive plans. In addition, executives may be granted incentive
units which are rights to receive common stock or an equivalent value in
cash. The incentive units may vest within a range from 0% to 175% at the
end of a four year period based on the attainment of performance goals. The
costs to the Company associated with the Aetna stock plans for 1997, 1996
and 1995, were $2.9 million, $8.1 million and $6.3 million, respectively.
As of December 31, 1996, Aetna transferred to the Company approximately
$1.1 million of deferred tax benefits related to stock options. This amount
is reported as an increase in retained earnings. In 1997, other changes in
shareholder's equity include an additional increase of $2.3 million
reflecting revisions to the allocation of the deferred tax benefit.
10. Related Party Transactions
The Company is compensated by the Separate Accounts for bearing mortality
and expense risks pertaining to variable life and annuity contracts. Under
the insurance contracts, the Separate Accounts pay the Company a daily fee
which, on an annual basis, ranges, depending on the product, from 0.10% to
1.90% of their average daily net assets. The Company also receives fees
from Aetna managed mutual funds for serving as investment adviser. Under
the advisory agreements, these funds pay the Company a daily fee which, on
an annual basis, ranges, depending on the fund, from 0.25% to 0.85% of
their average daily net assets. The Company also receives fees (expressed
as a percentage of the average daily net assets) from some of its funds for
providing administration services, and from The Aetna Series Fund for
providing shareholder services and promoting sales. The amount of
compensation and fees received from the Separate Accounts and mutual funds,
included in charges assessed against policyholders, amounted to $271.2
million, $186.8 million and $128.1 million in 1997, 1996 and 1995,
respectively. The Company may waive advisory fees at its discretion.
F-27
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
10. Related Party Transactions (Continued)
The Company acts as an investment adviser for its affiliated mutual funds.
Since August 1996, Aeltus Investment Management, Inc. ("Aeltus"), a wholly
owned subsidiary of HOLDCO and an affiliate of the Company, has been acting
as Subadvisor for affiliated mutual funds and adviser for most of the
General Account assets. Fees paid by the Company to Aeltus, included in
both charges assessed against policyholders and net investment income, on
an annual basis, range from 0.06% to 0.55% of the average daily net assets
under management. For the years ended December 31, 1997 and 1996, the
Company paid $45.5 million and $16.0 million in such fees.
The Company may, from time to time, make reimbursements to an Aetna managed
mutual fund for some or all of its operating expenses. Reimbursement
arrangements may be terminated at any time without notice.
Since 1981, all domestic individual non-participating life insurance of
Aetna and its subsidiaries has been issued by the Company. 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. A $6.1 million and a $108.0
million commission, paid by the Company to Aetna Life in 1996 and 1988,
respectively, was capitalized as deferred policy acquisition costs. In
consideration for the assumption of this business, a loan was established
relating to the assets held by Aetna Life which support the insurance
reserves. 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. The
Company maintained insurance reserves of $574.5 million ($397.2 million
relating to the modified coinsurance agreement and $177.3 million relating
to the coinsurance agreement) and $628.3 million as of December 31, 1997
and 1996, respectively, relating to the business assumed. The fair value of
the loan relating to assets held by Aetna Life was $412.3 million and
$625.3 million as of December 31, 1997 and 1996, respectively, and is based
upon the fair value of the underlying assets. Premiums of $176.7 million,
$25.3 million and $28.0 million and current and future benefits of $183.9
million, $39.5 million and $43.0 million were assumed in 1997, 1996 and
1995, respectively.
Investment income of $37.5 million, $44.1 million and $46.5 million was
generated from the reinsurance loan to affiliate in 1997, 1996 and 1995,
respectively.
On December 16, 1988, the Company assumed $25.0 million of premium revenue
from Aetna Life for the purchase and administration of a life contingent
single premium variable payout annuity contract. In addition, the Company
also is responsible for administering fixed annuity payments that are made
to annuitants receiving variable payments. Reserves of $32.5 million and
$28.9 million were maintained for this contract as of December 31, 1997 and
1996, respectively.
Effective February 1, 1992, the Company increased its retention limit per
individual life to $2.0 million and entered into a reinsurance agreement
with Aetna Life to reinsure amounts in excess of this
F-28
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
10. Related Party Transactions (Continued)
limit, up to a maximum of $8.0 million on any new individual life business,
on a yearly renewable term basis. Premium amounts related to this agreement
were $5.9 million, $5.2 million and $3.2 million for 1997, 1996 and 1995,
respectively.
Effective October 1, 1997, the Company entered into a reinsurance agreement
with Aetna Life to assume amounts in excess of $0.2 million for certain of
its participating life insurance, on a yearly renewable term basis. Premium
amounts related to this agreement were $0.7 million in 1997.
The Company received a capital contribution of $10.4 million in cash from
HOLDCO in 1996. The Company received no capital contributions in 1997 or
1995.
The Company paid $17.3 million and $3.5 million in cash dividends to HOLDCO
in 1997 and 1996, respectively. In 1995, the Company dividended $2.9
million in the form of two of its subsidiaries, Systematized Benefits
Administrators, Inc. and Aetna Investment Services, Inc., to Aetna
Retirement Services, Inc. (the Company's former parent).
Premiums due and other receivables include $37.0 million and $2.8 million
due from affiliates in 1997 and 1996, respectively. Other liabilities
include $1.2 million and $10.7 million due to affiliates for 1997 and 1996,
respectively.
As of December 31, 1997, Aetna transferred to the Company $2.5 million
based on its decision not to settle state tax liabilities for the years
1996 and 1997. This amount has been reported as an other increase in
retained earnings.
Substantially all of the administrative and support functions of the
Company are provided by Aetna and its affiliates. The financial statements
reflect allocated charges for these services based upon measures
appropriate for the type and nature of service provided.
11. Reinsurance
The Company utilizes indemnity reinsurance agreements to reduce its
exposure to large losses in all aspects of its insurance business. Such
reinsurance permits recovery of a portion of losses from reinsurers,
although it does not discharge the primary liability of the Company as
direct insurer of the risks reinsured. The Company evaluates the financial
strength of potential reinsurers and continually monitors the financial
condition of reinsurers. Only those reinsurance recoverables deemed
probable of recovery are reflected as assets on the Company's Consolidated
Balance Sheets.
F-29
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
11. Reinsurance (Continued)
The following table includes premium amounts ceded/assumed to/from
affiliated companies as discussed in Note 10 above.
<TABLE>
<CAPTION>
Ceded to Assumed
Direct Other from Other Net
Amount Companies Companies Amount
(millions)
------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
1997
----
Premiums:
Life Insurance $ 35.7 $15.1 $177.4 $198.0
Accident and Health Insurance 5.6 5.6 -- --
Annuities 67.9 -- 1.2 69.1
------- ------------- ----------- ---------
Total earned premiums $109.2 $20.7 $178.6 $267.1
======= ============= =========== =========
1996
----
Premiums:
Life Insurance $ 34.6 $11.2 $25.3 $ 48.7
Accident and Health Insurance 6.3 6.3 -- --
Annuities 84.3 -- 0.6 84.9
------- ------------- ----------- ---------
Total earned premiums $125.2 $17.5 $25.9 $133.6
======= ============= =========== =========
1995
----
Premiums:
Life Insurance $ 28.8 $ 8.6 $28.0 $ 48.2
Accident and Health Insurance 7.5 7.5 -- --
Annuities 164.0 -- 0.5 164.5
------- ------------- ----------- ---------
Total earned premiums $200.3 $16.1 $28.5 $212.7
======= ============= =========== =========
</TABLE>
12. Commitments and Contingent Liabilities
Commitments
Through the normal course of investment operations, the Company commits to
either purchase or sell securities or money market instruments at a
specified future date and at a specified price or yield. The inability of
counterparties to honor these commitments may result in either higher or
lower replacement cost. Also, there is likely to be a change in the value
of the securities underlying the commitments. At December 31, 1997, the
Company had commitments to purchase investments of $38.7 million. The fair
value of the investments at December 31, 1997 approximated $39.0 million.
F-30
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
12. Commitments and Contingent Liabilities (Continued)
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.
13. Segment Information (1)
The Company's operations are reported through two major business segments:
Financial Services and Individual Life Insurance. Summarized financial
information for the Company's principal operations was as follows:
1997 1996 1995
--------- --------- ---------
(millions)
Revenue:
Financial Services $1,277.9 $1,195.1 $1,211.3
Individual Life Insurance 620.4 445.7 407.9
--------- --------- ---------
Total revenue $1,898.3 $1,640.8 $1,619.2
========= ========= =========
Income before income taxes: (2)
Financial Services $188.2 $129.9 $160.1
Individual Life Insurance 106.5 83.0 103.1
--------- --------- ---------
Total income before
income taxes $294.7 $212.9 $263.2
========= ========= =========
Net income: (2)
Financial Services $137.5 $94.3 $113.8
Individual Life Insurance 67.8 55.9 62.1
--------- --------- ---------
Net income $205.3 $150.2 $175.9
========= ========= =========
Assets under management: (3)
Financial Services (4) $37,609.3 $27,268.1 $22,534.4
Individual Life Insurance 3,096.1 2,830.5 2,590.9
--------- --------- ---------
Total assets under management 40,705.4 $30,098.6 $25,125.3
========= ========= =========
(1) The 1996 results include severance and facilities charges of
$30.7 million, after tax. Of this charge $21.5 million related to
the Financial Services segment and $9.2 million related to the
Individual Life Insurance segment.
(2) Excludes any effect of the corporate facilities and severance
charge recorded in 1996 which is not directly allocable to the
Financial Services and Individual Life Insurance segments. (Refer
to Note 7).
(3) Excludes net unrealized capital gains (losses) of $551.5 million,
$366.4 million and $797.1 million at December 31, 1997, 1996 and
1995, respectively.
(4) The December 31, 1997 balance includes the transfer of $4,078.5
million of assets under management that were previously reported
by an affiliate.
F-31
<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. 2 TO
THE REGISTRATION STATEMENT
This Post-Effective Amendment No. 2 to Registration Statement No. 333-15817 is
comprised of the following papers and documents:
[bullet] The facing sheet.
[bullet] One prospectus consisting of 91 pages for the Flexible Premium Group
Variable Universal Life Insurance Policy for New York State United
Teachers Benefit Trust
[bullet] The undertaking to file reports
<PAGE>
[bullet] The undertaking pursuant to Rule 484
[bullet] Representation 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)
The following Exhibits:
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) Master General Agent Agreement(1)
(3)(ii) Life Insurance General Agent Agreement(1)
(3)(iii) Broker Agreement(1)
(3)(iv) Life Insurance Broker-Dealer Agreement(1)
(3)(v) Restated and Amended Third Party Administration and Transfer
Agent Agreement(2)
(4) Not Applicable
(5)(i) Group Policy (70262-97)
(5)(ii) Certificate (70263-97) Under Group Policy
(5)(iii) Disability Benefit Rider (70264-97)
(5)(iv) Accelerated Death Benefit Rider (70265-97)
(5)(v) Accidental Death Benefit Rider (70266-97)
(5)(vi) Accelerated Death Benefit Disclosure Statement (DISC/NYSUT)
(5)(vii) Children Insurance Rider Term Insurance (70267-97)
(6)(i) Certificate of Incorporation of Aetna Life Insurance and
Annuity Company, Depositor(3)
(6)(ii) Amendment of Certificate of Incorporation of Aetna Life
Insurance and Annuity Company, Depositor(4)
(6)(iii) By-Laws as amended September 17, 1997 of Aetna Life Insurance
and Annuity Company(5)
(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) Fifth Amendment dated as of May 1, 1997 to the 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)
<PAGE>
(8)(iii) Sixth Amendment dated November 6, 1997 to the 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, March 1, 1996 and May 1, 1997(7)
(8)(iv) Form of Seventh Amendment dated as of May 1, 1998 to the 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, March 1, 1996, May 1, 1997 and November 6, 1997(8)
(8)(v) 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(4)
(8)(vi) Fifth Amendment dated as of May 1, 1997 to the 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)(vii) Sixth Amendment dated as of January 20, 1998 to the 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, March 1, 1996 and May 1, 1997(9)
(8)(viii) Form of Seventh Amendment dated as of May 1, 1998 to the 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, March 1, 1996, May 1, 1997 and January 20,
1998(8)
(8)(ix) Service Agreement between Aetna Life Insurance and Annuity
Company and Fidelity Investment Institutional Operations
Company dated as of November 1, 1995(10)
(8)(x) Amendment dated January 1,1997 to Service Agreement between
Aetna Life Insurance and Annuity Company and Fidelity
Investment Institutional Operations Company dated as of
November 1, 1995(6)
(8)(xi) Fund Participation Agreement among Janus Aspen Series and
Aetna Life Insurance and Annuity Company and Janus Capital
Corporation dated December 8, 1997(11)
(8)(xii) Service Agreement between Janus Capital Corporation and Aetna
Life Insurance and Annuity Company dated December 8, 1997(11)
<PAGE>
(8)(xiii) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Oppenheimer Variable Annuity Account Funds
and Oppenheimer Funds, Inc.(12)
(8)(xiv) Service Agreement between Oppenheimer Funds, Inc. and Aetna
Life Insurance and Annuity Company(12)
(9) Not Applicable
(10)(i) Application for Group Variable Universal Life Insurance
(Application for Group Policy) (70262-1997NYAPP)
(10)(ii) Life Insurance Pre-APP (70272-97)
(10)(iii) Group Life Insurance Application (70272-97(A)ZNY)
(10)(iv) Supplement (70268-97(5/98)) to Application for Variable Life
Insurance
(11) Issuance, Transfer and Redemption Procedures(13)
2. Opinion and Consent of Counsel
3. Not Applicable
4. Not Applicable
5. Not Applicable
6. Actuarial Opinion and Consent
7. Consent of Independent Auditors
8. Copy of Power of Attorney(8)
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 (Accession No. 0000912057-96-002773).
2. Incorporated by reference to Post-Effective Amendment No. 5 to Registration
Statement on Form S-6 (File No. 33-75248), as filed electronically on July
29, 1997 (Accession No. 0000950146-97-001104).
3. 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 (Accession No. 0000950146-96-000534).
4. 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 (Accession No. 0000950146-97-000159).
5. Incorporated by reference to Post-Effective Amendment No. 12 to Registration
Statement on Form N-4 (File No. 33-91846), as filed electronically on
October 30, 1997 (Accession No. 0000950146-97-001589).
6. Incorporated by Reference to Post-Effective Amendment No. 30 to Registration
Statement on Form N-4 (File No. 33-34370), as filed electronically on
September 29, 1997 (Accession No. 0000950146-97-001485).
7. Incorporated by Reference to Post-Effective Amendment No. 16 to Registration
Statement on Form N-4 (File No. 33-75964), as filed electronically on
February 9, 1998 (Accession No. 0000950146-98-000179).
<PAGE>
8. Incorporated by reference to Post-Effective Amendment No. 9 to Registration
Statement on Form N-4 (File No. 333-01107), as filed electronically on April
7, 1998 (Accession No. 0000950146-98-000564). 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 (Accession No.
0000912057-96-006383).
9. Incorporated by Reference to Post-Effective Amendment No. 7 to Registration
Statement on Form S-6 (File No. 33-75248), as filed electronically on
February 24, 1998 (Accession No. 0000950146-98-000267).
10. 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 (Accession No. 0000928389-96-00136).
11. Incorporated by reference to Post-Effective Amendment No. 10 to Registration
Statement on Form N-4 (File No. 33-75992), as filed electronically on
December 31, 1997 (Accession No. 0000950146-97-001982).
12. Incorporated by reference to Post-Effective Amendment No. 27 to Registration
Statement on Form N-4 (File No. 33-34370), as filed electronically on April
16, 1997 (Accession No. 0000950146-97-000617).
13. Incorporated by reference to Registration Statement on Form S-6 (File No.
333-27337), as filed electronically on May 16, 1997 (Accession No.
0001029869-97-000636).
<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, certifies
that it meets the requirements of Securities Act Rule 485(b) for effectiveness
of this Post-Effective Amendment to its Registration Statement on Form S-6 (File
No. 333-15817) and has duly caused this Post-Effective Amendment No. 2 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 this 16th
day of April, 1998.
VARIABLE LIFE ACCOUNT B OF
AETNA LIFE INSURANCE AND
ANNUITY COMPANY
(Registrant)
(SEAL)
ATTEST:/s/ Karen A. Peddle
--------------------------------
Karen A. Peddle
Assistant Corporate Secretary
By: AETNA LIFE INSURANCE AND
ANNUITY COMPANY
(Depositor)
By: Thomas J. McInerney*
---------------------------
Thomas J. McInerney
Principal Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 2 to the Registration Statement has been signed below by the
following persons in the capacities indicated and on the dates indicated.
Signature Title Date
- --------- ----- ----
Thomas J. McInerney* Director and President ) April
- -------------------- (Principal Executive Officer) ) 16, 1998
Thomas J. McInerney )
)
Catherine H. Smith* Director and Chief Financial )
- ------------------- Officer )
Catherine H. Smith )
<PAGE>
Signature Title Date
- --------- ----- ----
Shaun P. Mathews* Director )
- ----------------- )
Shaun P. Mathews )
)
Deborah Koltenuk* Vice President and Treasurer, )
- ----------------- Corporate Controller )
Deborah Koltenuk )
By: /s/ Julie E. Rockmore
-------------------------
Julie E. Rockmore
*Attorney-in-Fact
<PAGE>
VARIABLE LIFE ACCOUNT B
EXHIBIT INDEX
Exhibit No. Exhibit Page
- ----------- ------- ----
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) Master General Agent Agreement *
99-1.3(ii) Life Insurance General Agent Agreement *
99-1.3(iii) Broker-Dealer Agreement *
99-1.3(iv) Life Insurance Broker-Dealer Agreement *
99-1.3(v) Restated and Amended Third Party Administration and *
Transfer Agent Agreement
99-1.5(i) Group Policy (70262-97) ______
99-1.5(ii) Certificate (70263-97) Under Group Policy ______
99-1.5(iii) Disability Benefit Rider (70264-97) ______
99-1.5(iv) Accelerated Death Benefit Rider (70265-97) ______
99-1.5(v) Accidental Death Benefit Rider (70266-97) ______
99-1.5(vi) Accelerated Death Benefit Disclosure Statement ______
(DISC/NYSUT)
99-1.5(vii) Children Insurance Rider Term Insurance (70267-97) ______
99-1.6(i) Certification of Incorporation of Aetna Life Insurance *
and Annuity Company
99-1.6(ii) Amendment of Certificate of Incorporation of Aetna Life *
Insurance and Annuity Company Depositor
99-1.6(iii) By-Laws as amended September 17, 1997 of Aetna Life *
Insurance and Annuity Company
*Incorporated by Reference
<PAGE>
Exhibit No. Exhibit Page
- ----------- ------- ----
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) Fifth Amendment dated as of May 1, 1997 to the 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(iii) Sixth Amendment dated November 6, 1997 to the 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, March 1, 1996 and May 1, 1997
99-1.8(iv) Form of Seventh Amendment dated as of May 1, 1998 to the *
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, March 1, 1996, May 1, 1997 and
November 6, 1997
99-1.8(v) 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
*Incorporated by reference
<PAGE>
Exhibit No. Exhibit Page
- ----------- ------- ----
99-1.8(vi) Fifth Amendment dated as of May 1, 1997 to the 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
99-1.8(vii) Sixth Amendment dated as of January 20, 1998 to the 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, March 1, 1996 and May 1, 1997
99-1.8(viii) Form of Seventh Amendment dated as of May 1, 1998 to the *
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, March 1, 1996, May 1, 1997
and January 20, 1998
99-1.8(ix) Service Agreement between Aetna Life Insurance and *
Annuity Company and Fidelity Investment Institutional
Operations Company dated as of November 1, 1995
99-1.8(x) Amendment dated January 1, 1997 to Service Agreement *
between Aetna Life Insurance and Annuity Company and
Fidelity Investment Institutional Operations Company
dated as of November 1, 1995
99-1.8(xi) Fund Participation Agreement among Janus Aspen Series and *
Aetna Life Insurance and Annuity Company and Janus
Capital Corporation dated December 8, 1997
99-1.8(xii) Service Agreement between Janus Capital Corporation and *
Aetna Life Insurance and Annuity Company dated December
8, 1997
*Incorporated by reference
<PAGE>
Exhibit No. Exhibit Page
- ----------- ------- ----
99-1.8(xiii) Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company and Oppenheimer Variable Annuity
Account Funds and Oppenheimer Funds, Inc.
99-1.8(xiv) Service Agreement between Oppenheimer Funds, Inc. and *
Aetna Life Insurance and Annuity Company
99-1.10(i) Application for Group Variable Universal Life Insurance ______
(Application for Group Policy) (70262-1997NYAPP)
99-1.10(ii) Life Insurance Pre-APP (70272-97) ______
99-1.10(iii) Group Life Insurance Application (70272-97(A)ZNY) ______
99-1.10(iv) Supplement (70268-97(5/98)) to Application for Variable ______
Life Insurance
99-1.11 Issuance, Transfer and Redemption Procedures *
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 *
*Incorporated by reference
a contract between
Aetna Life Insurance and Annuity Company
(herein called Aetna)
and
New York State United Teachers Benefit Trust
(Policyholder)
Policy Number: [ ] Signed at Aetna's Home Office in
Hartford, Connecticut
Date of issue: [ ] on the date of issue.
To take effect: [ ]
Policy delivered in: New York
This policy will be construed in [
line with the law of the State of delivery. President]
Based on timely premium payments
Aetna agrees with the New York State United
Teachers Benefit Trust, to pay benefits [
accordance with the policy terms. Secretary]
The duties and the rights of the
policyholder will be based solely on
the terms of this policy. This [
policy is non-participating. Registrar]
RIGHT OF EXAMINATION
This policy may be returned to Aetna or its representative within 10 days after
its receipt. Return this policy to Aetna at 151 Farmington Avenue, Hartford,
Connecticut 06156. Upon its return, all insurance under this Certificate will
then be deemed void from its beginning.
70262-97
<PAGE>
INDEX
PART I
CONTRACT --
CERTIFICATES
PART II
ELIGIBILITY -- ELIGIBLE PERSONS
PART III
CANCELLATION OF POLICY --
CONVERSION OF CERTIFICATE
PART IV
PREMIUM PROVISIONS --
GRACE PERIOD PROVISIONS
PART V
POLICYHOLDER AND INSURANCE
COMPANY MATTERS
PART VI
MISCELLANEOUS PROVISIONS
COPY OF APPLICATION
2
<PAGE>
PART I
CONTRACT --
CERTIFICATES
CONTRACT
This policy, any attached endorsements, the Policyholder's application and the
Certificate constitute the entire contract. A copy of the Policyholder's
application is attached. All statements made by the New York State United
Teachers Benefit Trust or an Insured shall be deemed representations and not
warranties. Aetna will not use such statements to void this contract or defend
against a claim unless it is contained in the initial application or subsequent
applications.
CERTIFICATES
Aetna will prepare a Certificate setting forth a description of coverage for
each Insured under this policy. All such Certificates are hereby incorporated
into and made a part of this policy. Certificates will be issued for delivery to
each Owner.
Each Certificate incorporated into and made a part of this policy will be
identified by:
The form number 70263-1997;
The name of the Insured.
If Aetna receives a request from the New York State United Teachers Benefit
Trust to change any of the provisions of a Certificate, such change(s) that is
agreed to by Aetna will be made on future Certificates and, if applicable, on
existing Certificates by formal amendment and in accordance with any applicable
laws or regulations and any written instructions from the New York State United
Teachers Benefit Trust. The Certificate Owner's consent is needed if such
change(s) results in a reduction in benefits or an increase in guaranteed
charges.
PART II
ELIGIBILITY -- ELIGIBLE PERSONS
ELIGIBILITY
The New York State United Teachers Benefit Trust and the eligible class or
classes of Members will be those which are: (a) designated to Aetna in writing;
(b) accepted by Aetna; and (c) placed on file with Aetna. With Aetna's consent,
any class or classes of eligible Members may be changed by formal amendment of
this policy by written notice from the New York State United Teachers Benefit
Trust to Aetna.
Aetna will keep, in a file set up for the New York State United Teachers Benefit
Trust, a copy of the rates that apply to its eligible class or classes of
Members.
3
<PAGE>
The New York State United Teachers Benefit Trust may act on all policy matters.
Each such act, or agreement made between Aetna and the New York State United
Teachers Benefit Trust, or notice given by one to the other will be binding.
ELIGIBLE PERSONS
All Members of the New York State United Teachers Benefit Trust and their
Spouses are eligible to apply for coverage under this policy. An eligible person
may become insured under only one eligible class at a time, even if he/she is a
member of more than one class. An eligible person may only become covered for
that insurance which he/she elects and for which he/she pays the required
premium and provide evidence of insurability satisfactory to Aetna.
A Member is eligible on the latest of:
[bullet] the Issue Date of the policy; or
[bullet] the date he/she enters an eligible class of Members.
The Spouse of an eligible Member is eligible on the later of:
[bullet] the date the Member becomes insured under the Certificate; or
[bullet] the date he/she becomes the Spouse of an eligible Member;
but only if the Spouse is less than 80 years of age on that date.
PART III
CANCELLATION OF POLICY --
CONVERSION OF CERTIFICATE
CANCELLATION OF POLICY
The New York State United Teachers Benefit Trust may cancel this policy with
respect to all or any class or classes of Members by giving Aetna written notice
31 days before the cancellation date. Coverage under the Certificate will
terminate or, at the option of the Certificate Owner, may be converted.
The New York State United Teachers Benefit Trust will provide each of its
Members and their Spouses with advance notice of policy cancellation or
discontinuance. Such notice must be mailed or delivered to such Member at the
last known address of record at least 15 days before the date plan cancellation
or discontinuance is to take effect.
Subject to any applicable laws or regulations, Aetna has the right to cancel
this policy as to all or any class of Members at any time after the end of the
Grace Period if the policy premium has not been paid. Written notice of the
termination date must be given by Aetna to the New York State United Teachers
Benefit Trust.
Aetna reserves the right to discontinue accepting new applications under this
policy or as to any or all coverage of all or any class or classes of Members by
giving the New York State United Teachers Benefit Trust advance written notice
of when new applications will
4
<PAGE>
no longer be accepted. This date will not be earlier than 31 days after Aetna
has given written notice, unless another date is agreed to by the New York State
United Teachers Benefit Trust and Aetna.
CONVERSION OF CERTIFICATE
If a Certificate terminates because (a) an Insured ceases to be a member of the
New York State United Teachers Benefit Trust, or (b) the insured is no longer
eligible for coverage under the Certificate as a Spouse and declines membership
in the New York State United Teachers Benefit Trust, or (c) the New York State
United Teachers Benefit Trust discontinues the group policy, the amount of
insurance which ceases may be converted to any substantially comparable flexible
premium general account life insurance policy except term that We make available
for such purpose and according to the Certificate terms. Aetna will send notice
to the Certificate Owner at the last known address of record of this right to
convert within fifteen days before or after the date plan cancellation or
discontinuance is to take effect. If such notice is given more than fifteen
days, but less than ninety days after the date plan cancellation or
discontinuance is to take effect, the time allowed for conversion shall expire
at the end of such ninety days. No evidence of insurability will be required.
If the Insured dies during the time allowed for conversion, the amount that
could have converted will be payable as a death benefit to the Beneficiary
designated by the Insured. In the event there is no designated beneficiary, We
may pay from the Death Benefit payable at a sum not exceeding $500 to any person
appearing to Us to be equitably entitled to same by reason of having incurred
funeral expenses incident to the death of the Insured.
The new policy will be issued:
[bullet] based on the Insured's Attained Age and sex at Our current rates at the
time of conversion (Certificates issued to residents of the State of
New York and residents of the State of New York at the time of
conversion will be issued a sex-neutral policy based only on the
Insured's Attained Age at Our current rates at the time of conversion);
[bullet] with the same premium class as would have been assigned to the Insured
for the new policy had it been issued on this Certificate's Issue Date;
[bullet] effective the date coverage under the Certificate terminates;
[bullet] subject to any limitations of risk or assignments outstanding against
this Certificate.
PART IV
PREMIUM PROVISIONS --
GRACE PERIOD PROVISIONS
5
<PAGE>
PAYMENT OF PREMIUMS
The amount and frequency of each Certificate Owner's premium is shown on his/her
Certificate Specifications. The amount may be adjusted by Aetna from time to
time, as described therein.
GRACE PERIOD FOR CERTIFICATE
The 61-day Grace Period granted to a Certificate Owner for payment of his/her
premium is described in his or her Certificate.
PAYMENT OF PREMIUM BY NEW YORK STATE UNITED TEACHERS BENEFIT TRUST
The total policy premium payable by the New York State United Teachers Benefit
Trust will be the sum of all premiums remitted for persons insured under this
policy, excluding premiums that are not payable by payroll deduction. The
initial policy premium will be due on the Issue Date of this policy. After that,
the New York State United Teachers Benefit Trust will remit premium payments to
Aetna's Home Office on a weekly basis.
If any policy premium is not paid when due, this policy will be canceled as of
the premium due date; except as provided in the section called Policy Grace
Period.
POLICY GRACE PERIOD
A policy Grace Period of 61 days from the premium due date will be granted to
the New York State United Teachers Benefit Trust for the payment of premiums
required under this policy. The policy will be in force during such Grace
Period. If such premium is not paid in such Grace Period, this policy will
cancel at the end of that Grace Period. This policy will cancel before that date
if the New York State United Teachers Benefit Trust gives written notice of
cancellation in advance to Aetna. If this policy cancels, the New York State
United Teachers Benefit Trust will be jointly and severally liable to Aetna for
all unpaid premiums for insurance which was in force.
6
<PAGE>
PART V
POLICYHOLDER AND INSURANCE COMPANY MATTERS
DECLARATIONS
The first "policy month" starts on [ ]. Each subsequent policy month
starts on the [ ] of a calendar month. The first "policy year" starts on
[ ] and ends on [ ]. Each subsequent policy year starts on a [ ]
and ends on a [ ].
DATA REQUIRED
The New York State United Teachers Benefit Trust must give Aetna all data
required as to policy matters. All data which may have a bearing on insurance or
premiums will be open for Aetna to inspect while this policy is in force. Also,
such data must be open until the final rights and duties under this policy have
been resolved.
CLERICAL ERROR
Any clerical error by anyone in keeping records, or a delay in making an entry,
will not be the sole determination of the coverage's validity. A fair change in
premiums will be made when the error or delay is found.
MISSTATEMENTS
If the Insured's age is misstated, the amount of the Death Benefit will be
adjusted to reflect the coverage that would have been purchased by the most
recent Monthly Deduction at the correct age.
INCONTESTABILITY
The validity of this policy shall not be contested, except for non-payment of
premiums, after it has been in force for 2 years. All statements made by or for
the Insured are representations and not warranties. Aetna will not use any such
statement to void the insurance or defend against a claim unless the statement
is attached to and made a part of the policy or Certificate.
NON-DISCRIMINATION
In the management of this policy, the New York State United Teachers Benefit
Trust will act so as not to discriminate unfairly between persons in like
situations at the time of the action.
7
<PAGE>
POLICY CHANGES
This policy may be changed at any time by written agreement between Aetna and
the New York State United Teachers Benefit Trust provided all necessary
regulatory approvals have been received. The consent of any Certificate Owner is
needed if the change results in a reduction in benefits or an increase in
guaranteed charges. All agreements made by Aetna are signed by one of its
executive officers. No other person can change or waive any of the policy terms
or make any agreement binding Aetna. The New York State United Teachers Benefit
Trust will not have to give written approval of a change in the policy if:
the New York State United Teachers Benefit Trust asked for the change and
Aetna has agreed to it; and
the change is needed so that the policy will conform to any law, regulation
or ruling of:
a jurisdiction that affects a person covered under this policy; or
the federal government.
PART VI
MISCELLANEOUS PROVISIONS
COPY OF APPLICATION
DEATH BENEFIT
If the Insured dies while the Certificate is in force, Aetna will pay a death
benefit based upon the Death Benefit Option in effect on the date of death, less
the Loan Account Value plus any accrued interest less any outstanding payment
required keep the Certificate in force through the date of death. In the event
there is no designated beneficiary, We may pay from the Death Benefit payable at
a sum not exceeding $500 to any person appearing to Us to be equitably entitled
to same by reason of having incurred funeral expenses incident to the death of
the Insured.
The individual(s) or entity(ies) that will receive any Proceeds on the death of
the Insured is the Beneficiary named by the Certificate Owner. If no Beneficiary
has been named, or if no named Beneficiary is living at the time of the
Insured's death, all Proceeds will be paid to the Certificate Owner or the
Certificate Owner's executors, administrators or assigns.
NONFORFEITURE PROVISIONS
By Written Request the Certificate Owner may, at any time while the policy is in
force and according to the terms of the Certificate, elect to (a) surrender or
partially surrender his/her Certificate in exchange for payment of all or part
of its Surrender Value, (b) continue the coverage in effect as paid up or (c)
borrow up to 90% of the sum of the Certificate's Separate Account Value and
Fixed Account Value. Aetna reserves the right to defer payments as provided
under the Certificate's Right to Defer Payment provision.
8
<PAGE>
THE SEPARATE ACCOUNT
The Separate Account established for the purpose of providing Variable Options
to fund this insurance is Variable Life Account B. Variable Life Account B was
established pursuant to a June 18, 1986, resolution of the Board of Directors of
Aetna. The Separate Account is registered with the SEC as a unit investment
trust under the Investment Company Act of 1940 and meets the definition of
separate account under the federal securities laws. Such registration does not
involve any approval or disapproval by the Commission of the Separate Account or
Aetna's management or investment practices or policies. Aetna does not guarantee
the Separate Account's investment performance.
9
<PAGE>
GUARANTEED MAXIMUM COST OF INSURANCE RATES
TABLE OF
GUARANTEED MAXIMUM INSURANCE RATES
PER $1,000 OF THE AMOUNT AT RISK
<TABLE>
<CAPTION>
NonSmoker Smoker
Attained Preferred Substandard Substandard Attained Preferred Substandard Substandard
Age Standard Class 1 Class 2 Age Standard Class 1 Class 2
<S> <C> <C> <C> <C> <C> <C> <C>
21 0.1117 0.27925 0.363025 21 0.1467 0.36675 0.476775
22 0.1117 0.27925 0.363025 22 0.1467 0.36675 0.476775
23 0.1108 0.27700 0.360100 23 0.1459 0.36475 0.474175
24 0.1108 0.27700 0.360100 24 0.1450 0.36250 0.471250
25 0.1083 0.27075 0.351975 25 0.1434 0.35850 0.466050
26 0.1083 0.27075 0.351975 26 0.1425 0.35625 0.463125
27 0.1075 0.26875 0.349375 27 0.1434 0.35850 0.466050
28 0.1092 0.27300 0.354900 28 0.1442 0.36050 0.468650
29 0.1108 0.27700 0.360100 29 0.1475 0.36875 0.479375
30 0.1117 0.27925 0.363025 30 0.1517 0.37925 0.493025
31 0.1142 0.28550 0.371150 31 0.1575 0.39375 0.511875
32 0.1167 0.29175 0.379275 32 0.1634 0.40850 0.531050
33 0.1208 0.30200 0.392600 33 0.1709 0.42725 0.555425
34 0.1258 0.31450 0.408850 34 0.1809 0.45225 0.587925
35 0.1317 0.32925 0.428025 35 0.1909 0.47725 0.620425
36 0.1392 0.34800 0.452400 36 0.2042 0.51050 0.663650
37 0.1475 0.36875 0.479375 37 0.2225 0.55625 0.723125
38 0.1584 0.39600 0.514800 38 0.2417 0.60425 0.785525
39 0.1692 0.42300 0.549900 39 0.2634 0.65850 0.856050
40 0.1825 0.45625 0.593125 40 0.2893 0.72325 0.940225
41 0.1967 0.49175 0.639275 41 0.3193 0.79825 1.037725
42 0.2125 0.53125 0.690625 42 0.3501 0.87525 1.137825
43 0.2276 0.56900 0.739700 43 0.3826 0.95650 1.243450
44 0.2442 0.61050 0.793650 44 0.4160 1.04000 1.352000
45 0.2634 0.65850 0.856050 45 0.4535 1.13375 1.473875
46 0.2826 0.70650 0.918450 46 0.4911 1.22775 1.596075
47 0.3043 0.76075 0.988975 47 0.5311 1.32775 1.726075
48 0.3268 0.81700 1.062100 48 0.5737 1.43425 1.864525
49 0.3518 0.87950 1.143350 49 0.6196 1.54900 2.013700
50 0.3793 0.94825 1.232725 50 0.6704 1.67600 2.178800
51 0.4102 1.02550 1.333150 51 0.7264 1.81600 2.360800
52 0.4469 1.11725 1.452425 52 0.7890 1.97250 2.564250
53 0.4877 1.21925 1.585025 53 0.8599 2.14975 2.794675
54 0.5319 1.32975 1.728675 54 0.9384 2.34600 3.049800
55 0.5812 1.45300 1.888900 55 1.0202 2.55050 3.315650
56 0.6337 1.58425 2.059525 56 1.1062 2.76550 3.595150
57 0.6888 1.72200 2.238600 57 1.1931 2.98275 3.877575
</TABLE>
10
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
58 0.7464 1.86600 2.425800 58 1.2816 3.20400 4.165200
59 0.8090 2.02250 2.629250 59 1.3736 3.43400 4.464200
60 0.8799 2.19975 2.859675 60 1.4747 3.68675 4.792775
61 0.9618 2.40450 3.125850 61 1.5917 3.97925 5.173025
62 1.0561 2.64025 3.432325 62 1.7271 4.31775 5.613075
63 1.1689 2.92225 3.798925 63 1.8886 4.72150 6.137950
64 1.2984 3.24600 4.219800 64 2.0676 5.16900 6.719700
</TABLE>
TABLE OF
GUARANTEED MAXIMUM INSURANCE RATES
PER $1,000 OF THE AMOUNT AT RISK
<TABLE>
<CAPTION>
NonSmoker Smoker
Attained Preferred Substandard Substandard Attained Preferred Substandard Substandard
Age Standard Class 1 Class 2 Age Standard Class 1 Class 2
<S> <C> <C> <C> <C> <C> <C> <C>
58 0.7464 1.86600 2.425800 58 1.2816 3.20400 4.165200
59 0.8090 2.02250 2.629250 59 1.3736 3.43400 4.464200
60 0.8799 2.19975 2.859675 60 1.4747 3.68675 4.792775
61 0.9618 2.40450 3.125850 61 1.5917 3.97925 5.173025
62 1.0561 2.64025 3.432325 62 1.7271 4.31775 5.613075
63 1.1689 2.92225 3.798925 63 1.8886 4.72150 6.137950
64 1.2984 3.24600 4.219800 64 2.0676 5.16900 6.719700
65 1.4387 3.59675 4.675775 65 2.2626 5.65650 7.353450
66 1.5917 3.97925 5.173025 66 2.4610 6.15250 7.998250
67 1.7514 4.37850 5.692050 67 2.6663 6.66575 8.665475
68 1.9195 4.79875 6.238375 68 2.8649 7.16225 9.310925
69 2.1002 5.25050 6.825650 69 3.0811 7.70275 10.013575
70 2.3053 5.76325 7.492225 70 3.3109 8.27725 10.760425
71 2.5641 6.41025 8.333325 71 3.5836 8.95900 11.646700
72 2.8204 7.05100 9.166300 72 3.9027 9.75675 12.683775
73 3.1491 7.87275 10.234575 73 4.2732 10.68300 13.887900
74 3.5257 8.81425 11.458525 74 4.6902 11.72550 15.243150
75 3.9371 9.84275 12.795575 75 5.1506 12.87650 16.739450
76 4.3841 10.96025 14.248325 76 5.6332 14.08300 18.307900
77 4.8534 12.13350 15.773550 77 6.1290 15.32250 19.919250
78 5.3485 13.37125 17.382625 78 6.6295 16.57375 21.545875
79 5.8811 14.70275 19.113575 79 7.1558 17.88950 23.256350
80 6.4733 16.18325 21.038225 80 7.7293 19.32325 25.120225
81 7.1432 17.85800 23.215400 81 8.3729 20.93225 27.211925
82 7.9096 19.77400 25.706200 82 9.1021 22.75525 29.581825
83 8.7882 21.97050 28.561650 83 9.9301 24.82525 32.272825
84 9.7551 24.38775 31.704075 84 10.8745 27.18625 35.342125
85 10.8047 27.01175 35.115275 85 11.8300 29.57500 38.447500
86 11.9162 29.79050 38.727650 86 12.8830 32.20750 41.869750
87 13.0934 32.73350 42.553550 87 13.9031 34.75775 45.185075
88 14.3145 35.78625 46.522125 88 15.0644 37.66100 48.959300
89 15.6065 39.01625 50.721125 89 16.1827 40.45675 52.593775
90 16.9690 42.42250 55.149250 90 17.4484 43.62100 56.707300
91 18.4362 46.09050 59.917650 91 18.7977 46.99425 61.092525
92 20.0534 50.13350 65.173550 92 20.2876 50.71900 65.934700
</TABLE>
11
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
93 21.9228 54.80700 71.249100 93 22.0116 55.02900 71.537700
94 24.2237 60.55925 78.727025 94 24.2237 60.55925 78.727025
95 27.4624 68.65600 89.252800 95 27.4624 68.65600 89.252800
96 32.5183 81.29575 90.909100 96 32.5183 81.29575 90.909100
97 41.3602 90.90910 90.909100 97 41.3602 90.90910 90.909100
98 57.8690 90.90910 90.909100 98 57.8690 90.90910 90.909100
99 90.9091 90.90910 90.909100 99 90.9091 90.90910 90.909100
</TABLE>
The Guaranteed Maximum Cost of Insurance rates for Substandard Classes 1 and 2
reduce to the Preferred/Standard Cost of Insurance rates after 20 years, or at
attained age 65, whichever is later.
70262-97
12
A
AETNA LIFE INSURANCE AND ANNUITY COMPANY
151 Farmington Avenue
Hartford, Connecticut 06156
(A STOCK COMPANY)
By Group Policy
[GVUL - 000000]
Issued to Certain Members of the New York State United Teachers Benefit
Trust and their Spouses.
The insurance described in this Certificate is provided under and is subject, in
every respect, to all of the terms of the group policy. The group policy may be
changed or discontinued, in whole or in part, in accordance with its terms,
without the consent of any Insured.
The insurance described in this Certificate replaces and supersedes any
insurance previously in force under the group policy specified above.
RIGHT OF EXAMINATION
This Certificate may be returned to Aetna or its representative within 10 days
after this Certificate and this notice of right are delivered. Return this
Certificate to Aetna at 151 Farmington Avenue, Hartford, Connecticut 06156. Upon
its return this Certificate will be deemed void from its beginning and all
premiums paid will be refunded.
Signed for Aetna on its Issue Date.
/s/ Dan Kearney
---------------
President
FLEXIBLE PREMIUM GROUP VARIABLE UNIVERSAL LIFE INSURANCE CERTIFICATE
[bullet] FLEXIBLE PREMIUMS PAYABLE UNTIL MATURITY DATE OR DEATH
[bullet] PROCEEDS PAYABLE UPON THE FIRST EVENT TO OCCUR - SURRENDER, MATURITY OR
DEATH
[bullet] NON-PARTICIPATING - NO DIVIDENDS PAYABLE
The amount or duration of the death benefit may be fixed or variable and
may increase or decrease. The death benefit is payable as described in the
Death Benefit Options and Proceeds sections of this Certificate.
Values in each Fund held in a Separate Account may increase or decrease
daily. Such values are not guaranteed as to dollar amount. Refer to the
Certificate Values section of this Certificate for more information.
70263-97
<PAGE>
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TABLE OF CONTENTS
CERTIFICATE SPECIFICATIONS
PART I DEFINITIONS
PART II GENERAL PROVISIONS
PART III SUICIDE AND INCONTESTABILITY
PART IV PREMIUMS AND REINSTATEMENT
PART V DEATH BENEFIT
PART VI CERTIFICATE VALUES
PART VII NONFORFEITURE PROVISIONS
PART VIII LOANS
PART IX CHANGES IN INSURANCE COVERAGE
PART X SETTLEMENT OPTIONS
APPLICATION
70263-97
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PART I - DEFINITIONS
Annuitant
The person whose life determines the amount of life-contingent payments.
Attained Age
Issue age of the Insured as shown in the Certificate Specifications, increased
by the number of Certificate Years elapsed. Issue Age is the Insured's Age on
his/her birthday nearest this Certificate's Date of Issue.
Basic Monthly Premium
The amount of premium that must be paid to continue coverage in force under the
No Lapse Coverage provision.
Certificate Month
The Certificate Month begins each month on the same day of the month as the
Issue Date.
Certificate Year/Certificate Anniversary
The first Certificate Year is the 12-month period beginning on the Issue Date.
Each Certificate Anniversary is equal to the Issue Date plus 1 year, 2 years,
etc.
Fixed Account
A non-variable funding option available on this Certificate that guarantees a
minimum interest rate of 4% per year.
Fixed Account Value
The non-loaned portion of this Certificate's Total Account Value attributable to
the non-variable portion of this Certificate. The Fixed Account Value is part of
the general assets of the Company.
Fund(s)
One or more of the underlying variable funding options available under this
Certificate. Each of the funds is a separate investment portfolio of an open-end
management investment company (mutual fund) whose shares are purchased by the
Separate Account to fund the benefits provided by this Certificate.
Home Office
Our main office, located at 151 Farmington Avenue, Hartford, Connecticut 06156.
Insurability Requirement
A person satisfies the Insurability Requirement only if and when We accept that
person as insurable. To decide whether a person is insurable, We will require
proof of good health. The proof may include a health questionnaire, a physical
exam and other types of information and tests and will vary based on the amount
of coverage requested and Our standard practices at the time.
Insured
The person covered for life insurance under this Certificate. An Insured must be
an eligible Member or agency fee payer of the New York State United Teachers
Benefit Trust (a `Member') or a Member's Spouse.
Issue Date
The effective date of initial coverage. It is shown on the Certificate
Specifications or supplemental Certificate Specifications. Coverage is
contingent upon payment of the first premium and issue of this Certificate as
provided in the application.
3
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Loan Account Value
The sum of all unpaid loans. The amount necessary to repay all loans in full is
the Loan Account Value plus any accrued loan interest.
Maturity Date
The Certificate Anniversary on which the Insured's Attained Age is 100.
Member
A member or agency fee payer of the New York State United Teachers Benefit Trust
who is eligible for coverage under the group policy.
Minimum Specified Amount
The Specified Amount cannot be decreased below this amount. The Minimum
Specified Amount is shown in the Certificate Specifications.
Monthly Deduction
A charge assessed against the Total Account Value which includes the Cost of
Insurance, a monthly Certificate fee and any charges for supplemental benefit
riders. Monthly Deductions begin on the Issue Date and occur on each Monthly
Deduction Day thereafter.
Monthly Deduction Day
The first Monthly Deduction Day is the Issue Date. Monthly Deduction Days occur
each month thereafter on the same day of the month as the Issue Date.
Net Premium
Equal to the premium paid, less the deduction for the premium load.
Net Single Premium
The amount required to purchase a guaranteed benefit assuming the Certificate's
Surrender Value is allocated to the Fixed Account, using the Insured's Attained
Age and premium class. The Net Single Premium is determined using guaranteed
interest of 4.0% per year and guaranteed Cost of Insurance Rates.
Payee
The person who receives annuity payments.
Proceeds
The amount that We will pay upon the Death of the Insured, the Maturity Date or
upon surrender as described in the Proceeds provision.
Separate Account(s)
Variable Life Account B; or, when referring to a settlement option as described
in the Settlement Options provisions of this Certificate, Variable Annuity
Account B.
Separate Account Value
The portion of this Certificate's Total Account Value attributable to the
variable portion of this Certificate. This Certificate's Separate Account Value
is held in Variable Life Account B.
Specified Amount
The amount chosen by the Owner and used in determining the Death Benefit. It may
be decreased or increased as described in this Certificate. The Specified Amount
is shown in the Certificate Specifications or in the supplemental Certificate
Specifications, if later changed. The Specified Amount must be elected in
increments of $1,000 and cannot be decreased below the Minimum Specified Amount.
4
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Spouse
A Member's legally-married wife or husband.
Subsequent Application(s)
Any application after the initial application initiated by You or by Us.
Total Account Value
The sum of the Fixed Account Value, the Separate Account Value and the Loan
Account Value.
Valuation Date
Any day on which the New York Stock Exchange is open for trading and on which
any relevant Funds value their shares.
Valuation Period
The period of time commencing, usually at 4:15 p.m. Eastern Time on each
Valuation Date and ending 4:15 p.m. Eastern Time on the next Valuation Date.
Variable Annuity Account B
A Separate Account which segregates assets attributable to the variable portion
of annuity contracts and life insurance settlement options from other assets of
the Company. Its assets are invested in shares of the Funds. Variable Annuity
Account B holds all or a portion of the Certificate's Proceeds if a variable
settlement option is elected.
Variable Life Account B
A Separate Account which segregates assets attributable to the variable portion
of life insurance from other assets of the Company. Its assets are invested in
shares of the Funds.
Variable Option
One or more of the variable funding options available under this Certificate.
We, Our, Us, Company
Aetna Life Insurance and Annuity Company, its successors or assigns.
Written Request
A request in writing, in a form satisfactory to Us and received by Us at the
Home Office.
You/Your
The Owner of this Certificate.
PART II - GENERAL PROVISIONS
Owner
Unless otherwise specified in the Certificate or on the application form or as
later changed, this Certificate is owned by the Insured.
All rights granted by this Certificate or allowed by Us belong to the Owner.
Beneficiary
The individual(s) or entity(ies) that will receive any Proceeds on the death of
the Insured is the Beneficiary. The Beneficiary is as stated in the application
form, unless later changed.
If no Beneficiary has been named, or if no named Beneficiary is living at the
time of the Insured's death, all Proceeds will be paid to the Owner or the
Owner's executors, administrators, or assigns.
5
<PAGE>
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Changes in Owner and Beneficiary
Unless this Certificate states otherwise, the Owner and the Beneficiary, or
both, may be changed. This may be done as often as desired by the Owner while
this Certificate is in force.
To change the Owner or Beneficiary Your Written Request must be sent to Us. When
We give Our written acceptance, the change will take effect as of the date Your
Written Request was signed. The change will be subject to any action We take
before Our written acceptance of the change.
Assignment
A copy of an Assignment must be on file at the Home Office. Until We receive
such notice, We will not be required to take notice of, or be responsible for,
any transfer of any interest in this Certificate by Assignment, agreement, or
otherwise.
We are not responsible for the validity of any Assignment. The rights of the
Owner and the interest of the Beneficiary will be subject to the rights of any
assignee of record.
Non-Participating
No dividends will be paid.
Certificate Settlement
All amounts payable by Us will be paid by the Home Office. We will deduct from
the amount payable at settlement any Loan Account Value plus accrued interest
and any overdue amount necessary to keep the coverage in force to the date that
Proceeds are payable. We may require return of this Certificate.
Misstatement of Age
If the Insured's age is misstated, the amount of the Death Benefit will be
adjusted to reflect the coverage that would have been purchased by the most
recent Monthly Deduction for the correct age.
Change of Address
You must notify Us at the Home Office of a change in Your mailing address. All
notices will be sent to the last known address of record.
Annual Report
At least once after each Certificate Anniversary We will send You a report. The
report will show the Total Account Value, the Surrender Value and the Death
Benefit on the date of the report. It will also show, since the last report, at
least the following information:
[bullet] gross premiums paid;
[bullet] the Cost of Insurance and the cost of riders;
[bullet] interest and investment return credited to the Total Account Value;
[bullet] the amount of any surrenders or Partial Surrenders;
[bullet] a summary of loan activity;
[bullet] a projection of the Total Account Value, Loan Account Value and
Surrender Value as of the succeeding Certificate Anniversary; and
[bullet] any other information required by the State of New York or by any other
jurisdiction.
6
<PAGE>
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Illustration of Benefits
We will provide an illustration of future Death Benefits and Total Account
Values, based on stated assumptions, at any time upon Written Request. We
reserve the right to charge a fee for this service.
Proceeds
Proceeds on the Insured's death will equal:
[bullet] the Death Benefit; less
[bullet] the Loan Account Value plus any accrued interest; less
[bullet] any payment required to keep the Certificate in force through the date
of death.
Proceeds on death are computed as of the date of death and are payable after
receipt at the Home Office of due proof of the Insured's death and all other
information necessary for such payment to be made.
Proceeds on the Maturity Date will equal:
[bullet] the Total Account Value on the Maturity Date; less
[bullet] the Loan Account Value on the Maturity Date plus any accrued interest.
Proceeds on surrender are as described in the Surrender Value provision.
All Proceeds are subject to adjustment under the Misstatement of Age,
Incontestability, Suicide Exclusion and Grace Period provisions.
Right to Defer Payment
Payments of any Separate Account Value will be made within 7 days after Our
receipt of Your Written Request. However, the Company reserves the right to
suspend or postpone the date of any payment of any benefit or values for any
Valuation Period (1) when the New York Stock Exchange is closed (except holidays
or weekends); (2) when trading on the New York Stock Exchange is restricted; (3)
when an emergency exists as determined by the Securities and Exchange Commission
(SEC) so that disposal of the securities held in the Funds is not reasonably
practicable or it is not reasonably practicable to determine the value of the
Funds' net assets; or (4) during any other period when the SEC, by order, so
permits for the protection of security holders. For payment from the Separate
Account in such instances, We may defer payment of:
[bullet] Surrender or Partial Surrender Values;
[bullet] any Proceeds on death in excess of the current Specified Amount; or
[bullet] any portion of the loan value.
Payment of any Fixed Account Value may be deferred for up to six months, except
when used to pay premiums due Us.
7
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Termination of Coverage
Coverage under this Certificate will terminate on the earliest to occur of:
[bullet] the death of the Insured; or
[bullet] the date coverage terminates as provided under the Grace Period
provision; or
[bullet] the Maturity Date; or
[bullet] the date coverage is surrendered; or
[bullet] the date the Insured ceases to be a Member of the New York State United
Teachers Benefit Trust, or
[bullet] the date the Insured is no longer eligible for coverage under the
Certificate as a Spouse and declines membership in the New York State
United Teachers Benefit Trust; or
[bullet] the date the New York State United Teachers Benefit Trust discontinues
the group policy.
Conversion Privilege
If coverage under the Certificate terminates because (a) the Insured ceases to
be a Member of the New York State United Teachers Benefit Trust; or (b) the
Insured is no longer eligible for coverage under the Certificate as a Spouse and
declines membership in the New York State United Teachers Benefit Trust; or (c)
the New York State United Teachers Benefit Trust discontinues the group policy,
the amount of insurance which ceases may be converted to any plan of life
insurance except term that We make available for such purpose. Your Written
Request to convert must be received by Us and the first premium paid on the new
policy within 31 days from the date of termination of coverage.
If the Insured dies during that 31-day period, the amount that he/she could have
converted will be payable as a death benefit to the Beneficiary.
The new policy will be issued:
[bullet] based on the Insured's Attained Age and sex at Our current rates at the
time of conversion;
[bullet] with the same premium class as would have been assigned to the Insured
for the new policy had it been issued on this Certificate's Issue Date;
[bullet] subject to any limitations of risk or assignments outstanding against
this Certificate.
Extra benefit riders in force on this Certificate at the time of conversion can
be issued on the new policy without satisfying the Insurability Requirement only
with Our consent. Extra benefit riders must be currently available for sale with
the new policy.
After an individual policy becomes effective for any person, that policy will be
in exchange for all benefits and privileges under the group Policy and this
Certificate as regards the person involved and the amount that could have been
converted.
The new policy will not take effect if the Insured is not living on the issue
date of the new policy.
If the Conversion Privilege is not exercised, the Owner will receive the full
Surrender Value. The Surrender Value will be determined as of the end of the
Valuation Period in which coverage terminates.
8
<PAGE>
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PART III - Suicide and Incontestability
Suicide Exclusion
If the Insured dies by suicide within 2 years from the Issue Date, the insurance
will end and We will pay:
[bullet] the difference between payments made and amounts allocated to the
Separate Account; plus
[bullet] the Separate Account Value; plus
[bullet] any charges made under this Certificate's terms on the Separate Account
Value; less
[bullet] the sum of:
[bullet] the Loan Account Value transferred from the Fixed Account
Value; plus
[bullet] the interest due on the Loan Account Value; plus
[bullet] the value of any Partial Surrenders from the Fixed Account
Value; plus
[bullet] any interest earned on the Loan Account Value transferred to
the Separate Account Value.
If the Insured dies by suicide within 2 years from the Issue Date of any
increase in coverage, We will pay only the Monthly Deductions for the increase
in coverage.
If the Insured dies by suicide more than 2 years from the Issue Date but within
2 years from the Issue Date of any increase in coverage, We will pay:
[bullet] the Proceeds on death for any coverage in effect more than 2 years from
the Issue Date of coverage; plus
[bullet] the Monthly Deduction charges for the increase in coverage.
All amounts will be calculated as of the date of the suicide.
Incontestability
With respect to statements made by or on behalf of the Insured in the initial
application form(s) or in any subsequent Application Form(s) for the Insured: We
will not contest coverage under this Certificate after it has been in force
during the lifetime of the Insured for 2 years from the Issue Date.
With respect to statements made in any Subsequent Application Form(s) for the
Insured: We will not contest coverage relating to Subsequent Application Form(s)
after coverage has been in force during the lifetime of the Insured for 2 years
from the Issue Date of such coverage or from the Issue Date of any
reinstatement.
If coverage under this Certificate is contested, Your rights or the
Beneficiary's rights may be affected.
9
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PART IV - PREMIUMS AND REINSTATEMENT
General
Sufficient premiums must be paid to continue this Certificate in force. The
initial premium is due on the Issue Date. Premium due dates are measured from
the Issue Date.
We may apply limits for Planned premiums and Additional Premiums as necessary to
preserve the status of this Certificate as life insurance under federal tax law.
We may require that the Insured satisfy the Insurability Requirement if payment
of a new Planned Premium or an Additional Premium during the current Certificate
Year would increase the difference between the Death Benefit and the Total
Account Value.
Premium Load
Before a premium is allocated to the Total Account Value, a percentage of
premium, guaranteed not to exceed 10%, will be deducted to cover certain
expenses associated with sales, start-up and maintenance costs of this
Certificate.
Planned Premiums
A Planned Premium is the premium amount that the Member agrees to pay and We
agree to bill. The frequency of the Planned Premiums (for example, bi-weekly or
monthly) will be determined by the billing arrangement agreed to by Us and the
New York State United Teachers Benefit Trust. The amount and frequency of the
Planned Premium as of the Issue Date are shown in the Certificate
Specifications.
Additional Premiums
Additional Premiums are premium payments in excess of Planned Premiums.
Additional Premiums may be paid at any time while this Certificate is in force
and before the Maturity Date.
Allocation of Premium
Each Net Premium will be allocated to the Funds You select under Variable Life
Account B and/or the Fixed Account in the percentages indicated in the
Certificate Specifications. If these percentages are changed in accordance with
the Changes in Allocation Percentages provision of this Certificate, We will
send notification to You confirming the change.
Changes in Allocation Percentages
Allocation percentages may be changed at any time by Your Written Request to Us.
Allocations must be changed in whole percentages. The change will be effective
as of the date of the next premium payment after You notify Us.
No Lapse Coverage
This Certificate will not terminate within the 5-year period after the Issue
Date or the Issue Date of any increase if on each Monthly Deduction Day within
that period the sum of premiums paid within that period equals or exceeds:
[bullet] The sum of the Basic Monthly Premiums, for each Certificate Month from
the start of the period, including the current month; plus
[bullet] Any Partial Surrenders; plus
[bullet] Any increase in the Loan Account Value since the start of the period.
If on any Monthly Deduction Day within the 5-year period the sum of premiums
paid is less than the sum of the above and there is insufficient Surrender
Value, the Grace Period provision will apply.
10
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After the 5-year period expires, the Surrender Value may be insufficient to keep
this Certificate in force. Payment of an Additional Premium may be necessary.
The Basic Monthly Premium is shown in the Certificate Specifications or
Supplemental Certificate Specifications if later changed.
Grace Period
If this Certificate is within the No Lapse Coverage period and the Surrender
Value is insufficient to allow a Monthly Deduction on the Monthly Deduction Day,
We will allow You 61 days of grace for payment of an amount sufficient to allow
the Monthly Deduction. We may require payment of the amount equal to the lesser
of (1) or (2) where:
(1) is the amount necessary to meet the conditions of the No Lapse Coverage
provision; or
(2) is an amount sufficient to cover the Monthly Deduction(s) that would
result in the Surrender Value being greater than zero.
If this Certificate is no longer within the No Lapse Coverage period and the
Surrender Value is insufficient to allow a Monthly Deduction on a Monthly
Deduction Day, We will allow You 61 days of grace for payment of an amount
sufficient to allow the Monthly Deduction. We may require payment of the amount
necessary to keep the coverage under this Certificate in force for the current
month plus two additional months.
If payment is not made within 61 days after the Monthly Deduction Day, the
Certificate will terminate without value at the end of the Grace Period. The
termination will be effective on the Monthly Deduction Day for the first unpaid
Monthly Deduction.
Written notice will be mailed to Your last known address, according to Our
records, not less than 31 days before termination of this Certificate. This
notice will also be mailed to the last known address of any assignee of record.
During the days of grace, this Certificate will stay in force. If the Insured's
Death occurs during the days of grace, We will deduct an amount required to keep
this Certificate in force from that Death Benefit.
Reinstatement
If this Certificate terminates as provided in the Grace Period provision, it may
be reinstated. To reinstate, the following conditions must be met:
[bullet] You must apply for reinstatement within 5 years of the date of
termination and before the Certificate's Maturity Date.
[bullet] We must receive evidence that the Insured satisfies the Insurability
Requirement.
[bullet] We must receive a premium payment sufficient to keep this Certificate
in force for the current month plus two additional months.
If this Certificate is reinstated within a No Lapse Coverage period, all values
including the Loan Account Value would be reinstated as they were the date of
lapse.
If this Certificate is reinstated after a No Lapse Coverage period has expired,
the coverage would be reinstated on the Monthly Deduction Day following Our
approval. The Total Account Value at reinstatement would be the Net Premium paid
less the Monthly Deduction for that day. Any Loan Account Value would not be
reinstated.
If this Certificate has been surrendered in exchange for payment of its full
Surrender Value, it cannot be reinstated.
11
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Extra benefit riders will be reinstated only with Our consent.
PART V - DEATH BENEFIT
Death Benefit Options
General
The Proceeds payable upon the Insured's Death will be based upon one of the
following Death Benefit Options You choose. The Death Benefit Option as of the
Issue Date will be shown on the Certificate Specifications or, if changed, on
the Supplemental Certificate Specifications.
Option 1
The Specified Amount includes the Total Account Value. Under this option, the
Death Benefit will be the greater of the Specified Amount or a percentage of the
Total Account Value. This percentage is described in the table below.
Option 2
The Specified Amount is in addition to the Total Account Value. Under this
option, the Death Benefit will be the greater of the Specified Amount plus the
Total Account Value on the date of death or a percentage of the Total Account
Value. This percentage is described in the table below.
<TABLE>
<CAPTION>
- --------------- ------------- -------------- ------------- -------------- -------------- ------------- --------------
ACCOUNT ACCOUNT ACCOUNT ACCOUNT
ATTAINED VALUE ATTAINED VALUE ATTAINED VALUE ATTAINED VALUE
AGE % AGE % AGE % AGE %
- --------------- ------------- -------------- ------------- -------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
0-40 250%
41 243 51 178% 61 128% 71 113%
42 236 52 171 62 126 72 111
43 229 53 164 63 124 73 109
44 222 54 157 64 122 74 107
45 215 55 150 65 120 75-90 105
46 209 56 146 66 119 91 104
47 203 57 142 67 118 92 103
48 197 58 138 68 117 93 102
49 191 59 134 69 116 94 101
50 185 60 130 70 115 95+ 100
- --------------- ------------- -------------- ------------- -------------- -------------- ------------- --------------
</TABLE>
PART VI - CERTIFICATE VALUES
Basis of Calculation
The values of this Certificate equal or exceed those required by law in the
state where this Certificate is delivered. A detailed statement has been filed
with the State that shows how to compute those values.
Interest Credited
We will credit interest on the Fixed Account Value at the guaranteed rate of
4.0% per year. This guaranteed rate equals 0.32737%, per month, compounded
monthly. We may credit interest in excess of the guaranteed rate.
Beginning in Certificate Year 11 the interest earned by that portion of the Loan
Account Value equal to a hardship/education loan will be credited at a rate
equal to the guaranteed loan interest rate. Interest, at the rates specified,
will be earned by the Loan Account Value and credited to the Fixed Account Value
and the Separate Account Value in the same proportion in which the Loan Account
Value was originally deducted from these values.
Interest credited to the Loan Account Value will never be less than 4.0% per
year.
12
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Fixed Account Value
The Fixed Account Value will be:
[bullet] the value of the Net Premiums credited to the Fixed Account Value; less
[bullet] the portion of Monthly Deductions taken from the Fixed Account Value;
plus
[bullet] interest credited; less
[bullet] any transfers of value out of the Fixed Account Value; plus
[bullet] any transfers from the Fund(s) to the Fixed Account Value; plus
[bullet] interest earned on the Loan Account Value attributable to the Fixed
Account Value; plus
[bullet] any loan repayments credited to the Fixed Account Value.
Separate Account Value
The Separate Account Value will be the sum of the Fund Account Values.
A. Fund Account Value
The portion of each Net Premium, transfer, or loan repayment allocated to a
Fund plus any interest earned on the Loan Account Value which is
attributable to that Fund is credited to this Certificate in the form of
accumulation units. Accumulation units measure the value of Your interest
in each applicable Variable Option. The number of accumulation units
credited is equal to that Fund's portion of the amount being credited
divided by the Accumulation Unit Value for that Variable Option for the
Valuation Period in which the amount being credited. Similarly,
accumulation units are canceled as surrenders, Partial Surrenders, loans,
transfers and deductions are made from that variable option.
The Fund Account Value of each Variable Option will equal the Accumulation
Unit Value for a Variable Option multiplied by the number of accumulation
units for that Variable Option credited to this Certificate.
B. Accumulation Unit Value
The Accumulation Unit Value is determined by multiplying the value of the
Variable Option's accumulation unit for the immediately preceding Valuation
Period by the net investment factor for the current period.
The net investment factor equals the net investment rate plus 1.0. The net
investment rate is determined separately for each Variable Option held in
Variable Life Account B as follows:
[bullet] the value of the Variable Option's accumulation units held in
Variable Life Account B at the end of a Valuation Period; less
[bullet] the value of the Variable Option's accumulation units held in
Variable Life Account B at the beginning of that Valuation Period,
adjusted by any taxes or provisions for taxes attributable to the
operation of Variable Life Account B; divided by
13
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[bullet] the value of the Variable Option's accumulation units held in Variable
Life Account B at the beginning of the Valuation Period; less
[bullet] a daily charge at an annual rate not to exceed .90% of net assets of
the Fund for mortality and expense risks attributable to policies
funded through Variable Life Account B. Beginning in Certificate Year
11 this daily charge will be reduced to 0% at any time it is not being
charged at its maximum amount.
Charges to Certificate Values
Charges and deductions made according to this Certificate's provisions will be
deducted from the Separate Account Value and the Fixed Account Value in the same
proportion that these Values bear to the sum of the Fixed Account Value and the
Separate Account Value on the date of the deduction.
The portion of the deduction attributable to the Separate Account Value will
reduce each Fund Account Value proportionately. The value deducted from each
Fund is determined by dividing the amount of the deduction attributable to that
Fund by the Variable Option's Accumulation Unit Value for the Valuation Period
when the charge was made. The resulting number of Variable Option accumulation
units will be deducted from the total accumulation units for that Fund.
The portion of the deduction attributable to the Fixed Account Value will be
deducted from that Value as a dollar amount.
Transfers Within Accounts
At any time prior to the Maturity Date, You may transfer all or part of each
Fund Account Value to any other Fund or to the Fixed Account Value at any time.
Funds may be transferred between the Funds or from the Funds to the Fixed
Account. We reserve the right to charge an administrative fee for more than 12
transfers per year.
We reserve the right to limit the total number of Funds You may elect over the
Certificate's lifetime to 15.
Within the forty-five days following a Certificate Anniversary, You may request
a transfer of a portion of the Fixed Account Value to one or more of the Funds.
This type of transfer is allowed only once within these forty-five days and We
must receive Your request at the Home Office within the forty-five days. The
transfer will be effective on the Valuation Date that Your request is received
by the Home Office. The amount of such transfer cannot exceed the greater of 25%
of the Fixed Account Value or $500. If the Fixed Account Values is less than or
equal to $500, You may transfer all or a portion of the Fixed Account Value. We
may increase this limit from time to time.
Accumulation units for each Variable Option will be added to or subtracted from
Your Separate Account Value, based on each Variable Option's Accumulation Unit
Value at the end of the Valuation Period when request for such transfer is
received by Us. A dollar amount will be added to or subtracted from the Fixed
Account Value according to the terms of Your request for transfer.
Monthly Deductions
Monthly Deductions will be deducted as described in the Charges to Certificate
Values provision.
[bullet] the Cost of Insurance as calculated below; plus
[bullet] a monthly Certificate fee, shown in the Policy Specifications; plus
14
<PAGE>
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[bullet] any charge for rider benefits
Cost of Insurance
The Cost of Insurance on any Monthly Deduction Day will be (1) multiplied by the
result of (2) minus (3) where:
(1) equals the Cost of Insurance Rate on that date divided by 1,000;
(2) equals the Death Benefit on that date divided by 1.0032737;
(3) equals the Total Account Value on that date before computing the
Monthly Deductions for the Cost of Insurance for this Certificate.
Cost of Insurance Rate
The monthly Cost of Insurance rate is based on the Insured's issue age, number
of Certificate Years elapsed, Specified Amount and premium class. For an
increase in the Specified Amount, the premium class for that increase will be
used. If an Insured is assigned a premium class which designates "smoker" and
this classification changes, You may, by Written Request, reclassify the Insured
any time after the first Certificate Anniversary. Upon Our acceptance of the
change, supplemental Certificate Specifications will be sent to You.
The monthly Cost of Insurance Rates may be adjusted by Us from time to time.
Adjustments will be on a class basis and will be based on Our estimates for
future factors such as mortality, investment income, expenses, and the length of
time the Certificates stay in force. Any adjustments will be made on a
nondiscriminatory basis.
The rate during any Certificate Year will never exceed the rate shown for that
year in the Table of Guaranteed Maximum Insurance Rates in the Certificate
Specifications. Those rates are based on the 1980 Commissioners Standard
Ordinary Mortality Table D, unisex, 50% male, 50% female, Smoker or Nonsmoker.
Any change in the cost factors will be determined in accordance with procedures
and standards on file with the New York State Insurance Department.
PART VII - NONFORFEITURE PROVISIONS
Continuation of Coverage
Coverage under this Certificate will continue to the Maturity Date as long as
the Surrender Value is sufficient to cover each Monthly Deduction. If the
Surrender Value is insufficient to cover a Monthly Deduction, the Grace Period
provision will apply except as provided under the No Lapse Coverage provision.
Surrender Value
By Written Request You may, at any time while the Certificate is in force,
surrender the coverage in effect in exchange for payment of its full Surrender
Value. Partial Surrenders will also be allowed. We reserve the right to defer
payments as provided under the Right to Defer Payment provision.
The full Surrender Value under this Certificate will equal the Total Account
Value on the date of surrender less the Loan Account Value plus any accrued
interest.
15
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Partial Surrenders
Partial Surrenders may be made beginning in the 2nd Certificate Year by Written
Request. The minimum amount of any Partial Surrender is $500. We may also charge
an administrative fee of $25 for each Partial Surrender.
If the Death Benefit option in effect is Option 1, a Partial Surrender will
reduce the Total Account Value, Death Benefit, and Specified Amount. The
Specified Amount and Total Account Value will be reduced by equal amounts.
However, We will not allow a Partial Surrender if the Specified Amount will be
reduced below the Minimum Specified Amount.
If the Death Benefit option in effect is Option 2, a Partial Surrender will
reduce the Total Account Value and the Death Benefit. The Specified Amount will
not be reduced.
If the Death Benefit option in effect is determined as a percentage of the Total
Account Value, the Partial Surrender may not reduce the Specified Amount.
Paid-Up Nonforfeiture Option
By Written Request You may elect, at any time, to continue the coverage in
effect as paid-up life insurance.
The Surrender Value will be applied as a Net Single Premium to determine the
Specified Amount of the paid-up insurance. The cost of the paid-up insurance
will be based on the guaranteed maximum Cost of Insurance Rates in this
Certificate and an interest rate of 4.0% compounded annually. However, the
Specified Amount of the paid-up insurance cannot exceed the Death Benefit under
this Certificate as of the Issue Date of the paid-up insurance. Any excess
Surrender Value will be refunded to You.
The paid-up insurance may be surrendered at any time for its Surrender Value,
less any outstanding loan balance. The Surrender Value will be equal to the Net
Single Premium for the paid-up insurance on the date of surrender.
The Issue Date of the paid-up insurance will be the Monthly Deduction Day which
occurs on or immediately after the date Your request is received by Us.
As of the Issue date:
[bullet] no further premium payments, Monthly Deductions, excess interest
credits or changes in coverage may be made;
[bullet] Loans as described in this Certificate will be allowed; and
[bullet] all extra benefit riders will terminate.
PART VIII - LOANS
General
We will grant loans. The amount of all loans will not be more than the Loan
Value. The Loan Value is 90% of the sum of the Separate Account Value and the
Fixed Account Value.
The amount of the loan will be transferred out of the Fixed Account and Separate
Account Values as described in the Certificate Values provision. The loan amount
increases the Loan Account Value.
The Loan Account Value plus accrued interest will reduce any Proceeds. If the
Loan Account Value exceeds the sum of the Separate Account Value and the Fixed
Account Value, the Grace Period provision will apply.
16
<PAGE>
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Loans and loan repayments will be effected as of the end of the Valuation Period
in which We receive the Written Request for the loan or the repayment,
respectively.
Preferred Loans
Beginning in the 11th Certificate Year and on each Certificate Anniversary
thereafter, that portion of the Loan Value attributable to the Separate Account
Value will be treated as preferred. The interest rate charged on the Preferred
Loan will equal the interest rate credited to the portion of the Loan Account
Value equal to the Preferred Loan.
Loan Interest Rate Charged
Interest, at an annual effective rate, will be charged on the Loan Account
Value. The Loan Interest Rate is 8% per year on the Loan Account Value that is
not treated as a Preferred Loan The Loan Interest Rate charged on the Preferred
Loan is 4%. Interest is due and payable on the next Certificate Anniversary, the
date a Certificate ends or upon full repayment of the Loan Account Value. Any
interest not paid when due will be added to the Loan Account Value on the
Certificate Anniversary and will itself bear interest on the same terms.
Repayment
A loan may be repaid in full or in part at any time prior to the Maturity Date
as long as the coverage is in force and the Insured is alive. The amount
necessary to repay all loans in full is the Loan Account Value plus any accrued
interest. Any payment We receive will be deemed to be a premium payment unless
You specifically designate it as a loan repayment.
Loan repayments will be allocated to the Fixed Account Value and the Separate
Account Value in the same proportion in which the loan was taken. The Loan
Account Value will be reduced by the amount of any loan repayment.
Part IX - CHANGES IN INSURANCE COVERAGE
General
For any change in coverage We will require Your Written Request. Supplemental
Certificate Specifications and/or a notice confirming the change will be sent to
You once the change is completed.
Although We are under no obligation to identify transactions that may cause this
Certificate to become a Modified Endowment Contract, if We do so, We reserve the
right, but are not obligated to, refrain from implementing the transaction
pending advice from You.
Increase in Specified Amount
You may increase the Specified Amount at any time.
The Insured will be required to satisfy the Insurability Requirement.
The Issue Date for any increase will be shown in the Supplemental Certificate
Specifications.
The Surrender Value immediately after an increase must be at least three times
the sum of:
[bullet] the most recent Monthly Deduction from the Total Account Value; and
[bullet] the Specified Amount of the increase multiplied by the applicable Cost
of Insurance Rate divided by 1000.
17
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The 5-year period as described in the No Lapse Coverage provision will restart
for the increase on the Issue Date of the increase.
The Basic Monthly Premium after the increase will be based on the new Specified
Amount.
Decrease in Specified Amount
You may decrease the Specified Amount at any time after the 5th Certificate
Year. We will not allow a decrease in the Specified Amount if the Specified
Amount would be reduced below the Minimum Specified Amount.
For a decrease in the Specified Amount, the Issue Date will be the Monthly
Deduction Day on or next following the date on which Your Written Request is
received.
The decrease, including any decrease in connection with a Partial Surrender or a
change in Death Benefit Option, will reduce any past increases in the reverse
order in which they occurred.
The Basic Monthly Premium will after a decrease, including any decrease in
connection with a Partial Surrender, will be based on the new Specified Amount.
Change in Death Benefit Option
Any change in the Death Benefit option is subject to the following conditions:
[bullet] We will not allow a change in the Death Benefit option if the Specified
Amount will be reduced below the Minimum Specified Amount.
[bullet] The change will take effect on the Monthly Deduction Day on or next
following the date on which Your Written Request is received.
[bullet] Evidence of insurability may be required.
Change from Option 1 to 2
Changes from Option 1 to 2 will be allowed at any time. The Specified Amount
will be reduced to equal the Specified Amount less the Total Account Value at
the time of the change.
The Basic Monthly Premiums following the change will be based on the new
Specified Amount.
Change from Option 2 to 1
Changes from Option 2 to 1 will be allowed at any time. The new Specified Amount
will equal the Specified Amount plus the Total Account Value as of the date of
the change.
The Basic Monthly Premiums following the change will be based on the new
Specified Amount.
Change of Fund(s)
If shares of any Fund are no longer available for investment by the Separate
Account or, in Our judgment, further investment in such shares should become
inadvisable or inappropriate in view of the purpose of the Certificate, We may
cease to make such Fund shares available under the Certificate prospectively, or
we may substitute shares of other Fund(s) for shares already acquired. We may
also, from time to time, add additional Funds. Any elimination, substitution or
addition of Funds will be done in accordance with applicable state or federal
securities laws. We reserve the right to substitute shares of another Fund for
shares already acquired without a proxy vote.
The investment policy of a Separate Account may not be changed without the
approval of the Insurance Commissioner of the State of Connecticut and the
approval of the Superintendent of the State of New York. The approval process
has been filed with the Commissioner.
18
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We will notify You of any change.
Separate Account
Variable Life Account B is a Separate Account established by Us in accordance
with the laws of the State of Connecticut and the State of New York. Income,
realized and unrealized gains and losses from the assets of Variable Life
Account B will be credited to or charged against Variable Life Account B without
regard to Our other income, gains, or losses. Variable Life Account B's
liabilities arise from the variable life insurance policies that it supports.
The assets of Variable Life Account B are available to cover the liabilities of
the General Account only to the extent that Variable Life Account B's assets
exceed its liabilities.
The value of the assets of Variable Life Account B is determined whenever the
Certificate's benefits vary and at the end of every Valuation Period.
PART X - SETTLEMENT OPTIONS
Separate Account
Variable Life Account B is a Separate Account established by Us in accordance
with the laws of the State of Connecticut. Income, realized and unrealized gains
and losses from the assets of Variable Life Account B will be credited to or
charged against Variable Life Account B without regard to Our other income,
gains, or losses. Variable Life Account B's liabilities arise from the variable
life insurance policies that it supports. The assets of Variable Life Account B
are available to cover the liabilities of the General Account only to the extent
that Variable Life Account B's assets exceed its liabilities.
The value of the assets of Variable Life Account B is determined whenever the
policy benefits vary and at the end of every Valuation Period.
Conditions
All or part of the Proceeds of this Certificate may be applied under one or more
of the options described below. An election shall be made by Written Request
filed with the Home Office. The Payee of Proceeds may make this election if no
prior election has been made. Our consent to the election of an option is
required if:
[bullet] the Payee is not a natural person receiving payments in his or
her own right; or
[bullet] the Payee is an assignee of this Certificate.
When any option is chosen, the Payee must designate whether the annuity will be:
(a) a fixed annuity
(b) a variable annuity, or
(c) a combination of (a) and (b).
If a fixed annuity is chosen, the annuity purchase rate for the option chosen
will reflect at least the minimum guaranteed interest rate of 3.0%.
Where a variable annuity is chosen, the Payee must elect an assumed annual net
return rate of 3.5% or 5.0%. If not elected, We will use an assumed annual net
return rate of 3.5%. The assumed annual net return rate is the interest rate
used to determine the amount of the first annuity payment under a variable
annuity.
If a variable annuity is chosen, the Payee must allocate the amount among the
allowable Funds. We reserve the right to allow no more than four funds to be
selected at any one time.
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4. Fund Transfers During the Annuity Period:
At the request of the Payee, all or any portion of the amount allocated to a
Fund may be transferred from any Fund to any other allowable Fund. During the
annuity period, the maximum number of allowable transfers in a calendar year is
four. We reserve the right to change the number of allowable transfers.
Transfer requests must be expressed as a percentage of the allocation among the
Funds of the amount upon which the variable annuity will be based. We may
establish a minimum transfer amount. Transfers will be processed as of the
Valuation Date next following when a transfer request is received in good order
at Our Home Office.
5. Annuity Options:
Option 1 -- Payments for a Stated Period of Time -- An annuity will be paid for
5 to 30 years. If payments for this option are made under a variable annuity,
the present value of all or a portion of any remaining guaranteed payments may
be withdrawn at any time. If a withdrawal is requested within 5 years after the
start of payments, it will be treated as a surrender.
OPTION 1
Payments for a Stated Period of Time
Amount of Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Monthly Monthly
Years Payment Years Payment
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
5 17.91 18 5.96
6 15.14 19 5.73
7 13.16 20 5.51
8 11.68 21 5.32
9 10.53 22 5.15
10 9.61 23 4.99
11 8.86 24 4.84
12 8.24 25 4.71
13 7.71 26 4.59
14 7.26 27 4.47
15 6.87 28 4.37
16 6.53 29 4.27
17 6.23 30 4.18
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
20
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OPTION 1
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Monthly Monthly
Years Payment Years Payment
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
5 18.12 18 6.20
6 15.35 19 5.97
7 13.38 20 5.75
8 11.90 21 5.56
9 10.75 22 5.39
10 9.83 23 5.24
11 9.09 24 5.09
12 8.46 25 4.96
13 7.94 26 4.84
14 7.49 27 4.73
15 7.10 28 4.63
16 6.76 29 4.53
17 6.47 30 4.45
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Monthly Monthly
Years Payment Years Payment
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
5 18.74 18 6.94
6 15.99 19 6.71
7 14.02 20 6.51
8 12.56 21 6.33
9 11.42 22 6.17
10 10.51 23 6.02
11 9.77 24 5.88
12 9.16 25 5.76
13 8.64 26 5.65
14 8.20 27 5.54
15 7.82 28 5.45
16 7.49 29 5.36
17 7.20 30 5.28
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
Option 2 -- Life Income based on the life of the Payee-- Payments will be made
until the death of the Annuitant. When this option is chosen, a choice from the
following must be made:
(a) payments cease at the death of the Annuitant;
(b) payments may be guaranteed for 5-30 years; or
21
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(c) cash refund: If the Annuitant dies, the Beneficiary will receive a lump
sum payment equal to the amount applied to the annuity option (less any
premium tax) allocated to the fixed annuity option less the total
amount of fixed annuity payments paid prior to such death. This cash
refund feature is only available if the total amount applied to the
annuity option is allocated to this feature.
OPTION 2
Life Income
Amount of Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
Payments Guaranteed for a Stated Period of Years
<TABLE>
<CAPTION>
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
Adjusted
Age of None 5 10 15 20 Cash
Annuitant Refund
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
50 $4.05 $4.05 $4.03 $3.99 $3.93 $3.89
51 4.12 4.11 4.09 4.05 3.99 3.94
52 4.19 4.19 4.16 4.11 4.04 4.00
53 4.27 4.26 4.23 4.18 4.10 4.06
54 4.35 4.34 4.31 4.25 4.16 4.12
55 4.44 4.42 4.39 4.32 4.22 4.19
56 4.53 4.51 4.47 4.40 4.29 4.26
57 4.62 4.61 4.56 4.48 4.35 4.33
58 4.72 4.71 4.65 4.56 4.42 4.41
59 4.83 4.81 4.75 4.64 4.49 4.49
60 4.95 4.93 4.86 4.73 4.55 4.57
61 5.07 5.05 4.97 4.83 4.62 4.66
62 5.20 5.17 5.08 4.92 4.69 4.76
63 5.34 5.31 5.20 5.02 4.76 4.85
64 5.49 5.45 5.33 5.12 4.83 4.96
65 5.65 5.61 5.47 5.22 4.89 5.06
66 5.82 5.77 5.61 5.33 4.96 5.18
67 6.01 5.94 5.75 5.44 5.02 5.30
68 6.20 6.13 5.91 5.54 5.08 5.42
69 6.41 6.33 6.07 5.65 5.14 5.56
70 6.64 6.54 6.23 5.76 5.19 5.70
71 6.88 6.76 6.41 5.86 5.24 5.84
72 7.14 7.00 6.59 5.97 5.28 6.00
73 7.43 7.26 6.77 6.06 5.32 6.16
74 7.73 7.53 6.96 6.16 5.35 6.33
75 8.06 7.82 7.14 6.25 5.38 6.51
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
22
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OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
Payments Guaranteed for a Stated Period of Years
<TABLE>
<CAPTION>
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Adjusted
Age of None 5 10 15 20
Annuitant
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
<S> <C> <C> <C> <C> <C>
50 $4.34 $4.34 $4.31 $4.27 $4.22
51 4.41 4.40 4.38 4.33 4.27
52 4.48 4.47 4.45 4.40 4.32
53 4.56 4.55 4.52 4.46 4.38
54 4.64 4.63 4.59 4.53 4.44
55 4.72 4.71 4.67 4.60 4.50
56 4.81 4.80 4.75 4.67 4.56
57 4.91 4.89 4.84 4.75 4.62
58 5.01 4.99 4.93 4.83 4.69
59 5.12 5.10 5.03 4.92 4.75
60 5.23 5.21 5.13 5.00 4.82
61 5.36 5.33 5.24 5.09 4.88
62 5.49 5.45 5.35 5.19 4.95
63 5.63 5.59 5.47 5.28 5.02
64 5.78 5.73 5.60 5.38 5.08
65 5.94 5.89 5.73 5.48 5.15
66 6.11 6.05 5.87 5.58 5.21
67 6.29 6.22 6.02 5.69 5.27
68 6.49 6.41 6.17 5.79 5.33
69 6.70 6.60 6.33 5.90 5.38
70 6.92 6.81 6.49 6.00 5.43
71 7.17 7.04 6.66 6.10 5.48
72 7.43 7.27 6.84 6.20 5.52
73 7.71 7.53 7.02 6.30 5.55
74 8.02 7.80 7.20 6.39 5.59
75 8.35 8.08 7.38 6.48 5.62
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
23
<PAGE>
- --------------------------------------------------------------------------------
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
Payments Guaranteed for a Stated Period of Years
<TABLE>
<CAPTION>
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Adjusted
Age of None 5 10 15 20
Annuitant
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
<S> <C> <C> <C> <C> <C>
50 $5.26 $5.25 $5.22 $5.17 $5.11
51 5.33 5.32 5.28 5.23 5.15
52 5.40 5.38 5.34 5.29 5.20
53 5.47 5.45 5.41 5.35 5.26
54 5.54 5.53 5.48 5.41 5.31
55 5.63 5.61 5.56 5.47 5.36
56 5.71 5.69 5.63 5.54 5.42
57 5.80 5.78 5.72 5.61 5.47
58 5.90 5.88 5.81 5.69 5.53
59 6.01 5.98 5.90 5.77 5.59
60 6.12 6.09 6.00 5.85 5.65
61 6.24 6.21 6.10 5.93 5.71
62 6.37 6.33 6.21 6.02 5.77
63 6.51 6.46 6.33 6.11 5.83
64 6.66 6.60 6.45 6.20 5.89
65 6.82 6.75 6.57 6.30 5.95
66 6.99 6.91 6.71 6.39 6.01
67 7.17 7.08 6.85 6.49 6.06
68 7.36 7.27 6.99 6.59 6.12
69 7.57 7.46 7.15 6.69 6.17
70 7.80 7.67 7.30 6.78 6.21
71 8.05 7.89 7.47 6.88 6.25
72 8.31 8.13 7.64 6.97 6.29
73 8.59 8.38 7.81 7.06 6.33
74 8.90 8.64 7.99 7.15 6.36
75 9.23 8.93 8.16 7.23 6.38
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
24
<PAGE>
- --------------------------------------------------------------------------------
Option 3 -- Life Income based upon the lives of two Payees-- An annuity will be
paid during the lives of the Annuitant and a second Annuitant. Payments will
continue until both Annuitants have died. When this option is chosen, a choice
of the following must be made:
(a) 100% of the payment to continue after the first death;
(b) 66 2/3% of the payment to continue after the first death;
(c) 50% of the payment to continue after the first death;
(d) 100% of the payment to continue after the first death with a guarantee
of 5-30 years:
(e) 100% of the payment to continue at the death of the second annuitant
and 50% of the payment to continue at the death of the Annuitant; or
(f) 100% of the payment to continue after the first death with a cash
refund feature. If the Annuitant and joint Annuitant die, the
Beneficiary will receive a lump sum payment equal to the amount applied
to the annuity option (less any premium tax) less the total amount of
fixed annuity payments paid prior to such death. This cash refund
feature is only available if the total amount applied to the annuity
option is allocated to this feature.
OPTION 3
Life Income for Two Payees
Amount of Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- ----------------------------- -------------- -------------- ------------- ---------------- ------------- ------------
Adjusted Ages Option 3d
- ----------------------------- ----------------
Annuitant Second Option 3a Option 3b Option 3c 10 Years Option 3e Option 3f
Annuitant Guaranteed
- --------------- ------------- -------------- -------------- ------------- ---------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
55 50 $3.69 $4.05 $4.27 $3.69 $4.03 $3.69
55 55 3.88 4.25 4.47 3.87 4.14 3.87
55 60 3.99 4.44 4.71 3.98 4.20 3.98
60 55 3.99 4.44 4.71 3.98 4.42 3.98
60 60 4.24 4.71 4.99 4.23 4.57 4.23
60 65 4.38 4.97 5.32 4.38 4.65 4.38
65 60 4.38 4.97 5.32 4.38 4.93 4.38
65 65 4.72 5.33 5.70 4.71 5.14 4.72
65 70 4.93 5.68 6.15 4.91 5.27 4.91
70 65 4.93 5.68 6.15 4.91 5.66 4.91
70 70 5.40 6.21 6.70 5.36 5.96 5.38
70 75 5.69 6.68 7.32 5.62 6.13 5.66
75 70 5.69 6.68 7.32 5.62 6.67 5.66
75 75 6.37 7.45 8.15 6.23 7.12 6.33
75 80 6.78 8.11 8.99 6.54 7.36 6.71
- --------------- ------------- -------------- -------------- ------------- ---------------- ------------- ------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
25
<PAGE>
- --------------------------------------------------------------------------------
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- ---------------------------------- --------------- ---------------- ---------------- --------------- ----------------
Adjusted Ages Option 3d
- ---------------------------------- ---------------
Annuitant Second Option 3a Option 3b Option 3c 10 Years Option 3e
Annuitant Guaranteed
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $3.97 $4.35 $4.56 $3.97 $4.31
55 55 4.16 4.54 4.76 4.15 4.42
55 60 4.27 4.73 5.00 4.26 4.48
60 55 4.27 4.73 5.00 4.26 4.70
60 60 4.51 4.99 5.27 4.50 4.84
60 65 4.66 5.25 5.61 4.65 4.93
65 60 4.66 5.25 5.61 4.65 5.22
65 65 4.99 5.61 5.99 4.98 5.42
65 70 5.19 5.97 6.44 5.17 5.54
70 65 5.19 5.97 6.44 5.17 5.93
70 70 5.67 6.49 6.99 5.62 6.23
70 75 5.95 6.96 7.61 5.87 6.40
75 70 5.95 6.96 7.61 5.87 6.95
75 75 6.64 7.73 8.43 6.48 7.40
75 80 7.04 8.39 9.29 6.79 7.64
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
26
<PAGE>
- --------------------------------------------------------------------------------
OPTION 3
Life Income for Two Payees
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- ---------------------------------- --------------- ---------------- ---------------- --------------- ----------------
Adjusted Ages Option 3d
- ---------------------------------- ---------------
Annuitant Second Option 3a Option 3b Option 3c 10 Years Option 3e
Annuitant Guaranteed
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $4.88 $5.26 $5.48 $4.88 $5.23
55 55 5.04 5.44 5.66 5.04 5.32
55 60 5.15 5.63 5.91 5.14 5.38
60 55 5.15 5.63 5.91 5.14 5.59
60 60 5.37 5.87 6.16 5.37 5.72
60 65 5.52 6.14 6.51 5.51 5.80
65 60 5.52 6.14 6.51 5.51 6.10
65 65 5.83 6.49 6.87 5.82 6.29
65 70 6.04 6.84 7.34 6.00 6.41
70 65 6.04 6.84 7.34 6.00 6.81
70 70 6.49 7.35 7.87 6.44 7.08
70 75 6.77 7.84 8.51 6.68 7.25
75 70 6.77 7.84 8.51 6.68 7.81
75 75 7.45 8.60 9.33 7.27 8.25
75 80 7.86 9.28 10.20 7.57 8.49
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
Option 4 - Payment of interest on Proceeds left with Us. Proceeds held under
this option may be left with Us after the Death of the Payee only with Our
consent. By Written Request, the Payee may later elect to:
[bulllet] receive all or a portion of the amount held under this option; or
[bulllet] apply all or a portion of this amount to Options 1,2 or 3 as described
above.
Other Options -- We may make other options available as allowed by the laws of
the state in which this Certificate is delivered.
27
<PAGE>
- --------------------------------------------------------------------------------
6. Other Terms of Annuity Options:
(a) Generally, the first annuity payment must be made as required by
federal law.
(b) Payments will be made on a monthly basis unless the Payee requests
otherwise.
(c) No choice of any annuity option may be made if the first payment would
be less than $50 or if the total payments in a year would be less than
$250 (unless otherwise required by state law).
(d) For purposes of calculating the guaranteed first payment of a variable
annuity or the payments for a fixed annuity, the Annuitant's and second
Annuitant's adjusted age will be used.
The Payee's and second Payee's adjusted age is his or her age as
of the birthday closest to the annuity commencement date reduced
by one year for annuity commencement dates occurring during the
period of time from July 1, 1992 through December 31, 1999. The
Annuitant's and second Annuitant's age will be reduced by two
years for annuity commencement dates occurring during the period
of time from January 1, 2000 through December 31, 2009. The
Annuitant's and second Annuitant's age will be reduced by one
additional year for annuity commencement dates occurring in each
succeeding decade.
(e) If a fixed annuity under Option 1, 2 or 3 is elected, We will use the
applicable current settlement option rate if it will provide higher
fixed annuity payments.
(f) When annuity payments start, the age of the Annuitant plus the number
of years for which payments are guaranteed must not exceed 95.
7. Death Benefit:
Upon the death of the Annuitant(s), any remaining guaranteed payments will
continue to the Beneficiary unless the Beneficiary elects to receive the present
value of any remaining guaranteed payments in a lump sum. Such payments will be
paid at least as rapidly as under the method of distribution then in effect. If
the Beneficiary dies while receiving payments, the present value of any
remaining guaranteed payments will be paid in one sum to the beneficiary's
estate.
The interest rate used to determine the first annuity payment will be used to
calculate the present value. The present value will be determined as of the
Valuation Period in which proof of death acceptable to Us
28
<PAGE>
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM GROUP VARIABLE UNIVERSAL LIFE INSURANCE CERTIFICATE
[bulllet] FLEXIBLE PREMIUMS PAYABLE UNTIL MATURITY DATE OR DEATH
[bulllet] PROCEEDS PAYABLE UPON THE FIRST EVENT TO OCCUR - SURRENDER, MATURITY
OR DEATH
[bulllet] NON-PARTICIPATING - NO DIVIDENDS PAYABLE
The amount or duration of the death benefit may be fixed or variable and
may increase or decrease. The death benefit is payable as described in the
Death Benefit Options and Proceeds sections of this Certificate.
Values in each Fund held in a Separate Account may increase or decrease
daily. Such values are not guaranteed as to dollar amount. Refer to the
Certificate Values section of this Certificate for more information.
70263-97
29
A
This Extra Benefit Rider is attached to and made a part of this Certificate.
Unless defined herein, definitions of terms appearing in the Certificate will
also apply to the same terms appearing in this Rider.
TOTAL DISABILITY BEFORE AGE 60
Definitions
Occupation
For the first full 24 months of Total Disability, Occupation is the Insured's
occupation when Total Disability starts. After 24 months, Occupation means any
occupation for which the Insured Employee is reasonably suited by education
training or experience.
Total Disability/Disabled
Total Disability is the inability due to sickness or injury to perform the
substantial and material duties of an Occupation for remuneration or profit.
Benefit
Benefit Amount
While this Rider is in force, We will credit the Benefit Amount to the Account
Value of this Certificate on each Monthly Deduction Day during the Total
Disability of the Insured. Subject to the conditions of this Rider, the Benefit
Amount will apply retroactively on each Monthly Deduction Day since the start of
the Total Disability.
The Benefit Amount will be the greater of:
(1) the Basic Monthly Premium on that Monthly Deduction Day; or
(2) the Monthly Deduction for that date for the Insured's coverage and all
Extra Benefit Riders except this one.
Conditions
The following conditions apply:
1. the Total Disability of the Insured must start while this Rider is in force
and before the Insured is Attained Age 60 subject to this Rider's
Incontestability provision;
2. the Total Disability must be continuous for at least 180 days;
70264-97
<PAGE>
3. We must be given Notice and Proof as described in this Rider. See Notice
and Proof of Total Disability in this Rider;
4. If Notice and proof are not given within the time period required by this
Rider; the Benefit Amount will not be waived more than 12 months before
Notice is given to Us; and
5. The Specified Amount of this Certificate may not be increased during the
Insured's Total Disability.
Notice and Proof of Disability
We will require written Notice and Proof of the Total Disability. Notice must be
given to Us during the lifetime of the Insured and during the period of Total
Disability. Satisfactory Proof of the Total Disability of the Insured must be
given to Us within 12 months after We are given Notice.
Failure to provide Notice or Proof of Total disability will not reduce the claim
for this Riders' Benefit Amount if it is shown that Notice or Proof of Total
Disability was provided as soon as reasonably possible.
After a claim is approved and the Rider's benefit is exercised, We may require
further Proof at reasonable intervals. As part of the Proof, We may require that
doctors of Our choice examine the Insured at Our expense. If the required Proof
is not given benefits will cease. If the Insured recovers, benefits will cease.
Other Provisions
Excluded Disabilities
This Rider does not provide its Benefit for Total Disability which results from:
1. military (land, sea, or air) service by the Insured in time of war,
declared or undeclared;
2. injury that is intentionally self-inflicted.
Reinstatement
If the Insured is Totally Disabled on the date this Certificate lapses because
of insufficient value, We will reinstate the Certificate if:
1. the requirements of the Notice and Proof of Total Disability section of
this Rider are met;
2. the right to exercise this Rider's Benefit would otherwise have been
granted;
3. the application for reinstatement is received within 5 years of the date of
termination and before the Certificate's maturity date;
4. We receive evidence that the Insured satisfies the Insurability
Requirement; and
5. if We receive payment of any unpaid loan amount causing the Surrender Value
to be less than zero.
Monthly Rider Cost
2
<PAGE>
The Monthly Rider premium for the coverage provided by this Rider will be shown
in the Certificate Specifications or the supplement Certificate Specifications.
The Monthly Rider Cost on each Monthly Deduction Day will be (a) multiplied by
(b) where:
(a) is the Benefit Amount for that date, assuming it was payable; and
(b) is the monthly rate, as determined from the table below. The monthly rider
rate is based on the Insured's attained Age as of the Issue Date of this
Rider.
The Monthly Deduction will be increased by the cost for this Rider.
There is no cost for this Rider on any Monthly Deduction Day for which the
Benefit Amount is payable.
<TABLE>
<CAPTION>
Monthly Rider Rate
- ------------------------------------------------------------------------------------------------------------------
Age Rate Age Rate Age Rate
- ------------------- ------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Under 33 .02 48-49 .06 55-57 .10
- ------------------------------------------------------------------------------------------------------------------
33-39 .03 50-52 .07 58-59 .11
- ------------------------------------------------------------------------------------------------------------------
40-43 .04 53 .08
- ------------------------------------------------------------------------------------------------------------------
44-47 .05 54 .09
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Loans
This Rider's Benefit does not include the payment of loan interest due during
the period of Total Disability.
Incontestability
We cannot contest this Rider after it has been in force for 2 years from its
Issue Date with no Total Disability having occurred.
3
<PAGE>
Termination
This Rider will terminate on the first to occur:
[bullet] on the date the Insured terminates employment;
[bullet] the date that the Insured is Attained Age 60; unless the Benefit Amount
is currently being paid according to the terms of this Rider; or
[bullet] the date the Insured's coverage under the Certificate ends.
Termination of this Rider will not prejudice a claim for Total Disability which
exists at that time.
This Rider has no cash value.
The Issue Date of this Rider will be the Issue Date shown in the Certificate
Specifications. This Rider is signed for Aetna on its Issue Date.
Aetna Life Insurance and Annuity Company
/s/ Dan Kearney
---------------
President
70264-97
[Aetna Logo]
This Extra Benefit Rider is attached to and made a part of this Certificate.
Unless defined herein, definitions of terms appearing in this Certificate also
apply to the same terms appearing in this Rider. Coverage will be reduced upon
the receipt of an Accelerated Benefit.
ACCELERATED BENEFIT
If an Insured becomes Terminally Ill while life insurance coverage is in effect
for him/her under this Certificate, the Owner may request that We pay an
Accelerated Benefit. If We grant approval of any such request, We will pay to
the Owner, in one lump sum, the amount of Accelerated Benefit, subject to all of
the following terms.
Tax Consequences: While We cannot provide legal or tax advice to its Owners, an
Owner should carefully consider the tax consequences of requesting an
Accelerated Benefit. The amount of Accelerated Benefit received by the Owner may
be subject to income tax upon receipt. An Owner should consult his counsel or
tax advisor before requesting an Accelerated Benefit.
Terminally Ill Insured
An Insured is terminally ill if:
- he/she suffers from a progressive and medically recognized disease or
condition that is not expected to be cured or corrected; and
- he/she, to a reasonable medical probability and based on a generally
accepted prognostic protocol, will not survive more than 12 months
beyond the date of the request for an Accelerated Benefit.
Physician
An individual who is licensed to practice medicine and treat illness or injury
in the state in the United States in which treatment is received and who is
acting within the scope of that license.
Physician does not include:
- the Owner;
- the Terminally Ill Insured;
- a person who lives with either the Owner or the Terminally Ill
Insured; or
- a person who is part of the Owner's or Terminally Ill Insured's
immediate family (parent, spouse, sibling, or child).
70265-97
<PAGE>
Request for an Accelerated Benefit
The Owner may request an Accelerated Benefit at any time, prior to the death of
the Terminally Ill Insured, by completing a benefit request form and submitting
it to Us. The request must include a statement of a Physician that the Insured
is Terminally Ill. The Physician's statement must include: All medical test
results; laboratory reports; and any other information on which the statement is
based; including the generally accepted prognostic protocol used by the
Physician to determine the Terminally Ill Insured's expected remaining life
span.
Within five days of receipt of an application to accelerate benefits, We will
provide the Owner with the following:
[bullet] an illustration demonstrating the effect of the Accelerated Benefit on
the Certificate's cash values and loans;
[bullet] a numerical computation of the amount of the Death Benefit which would
be payable upon death;
[bullet] a numerical computation of the amount of the Death Benefit that would
be payable upon acceleration; and
[bullet] a notice that other means may be available to achieve the intended
goal, including a Loan.
The Accelerated Benefit will be paid within fourteen days from the date on which
this information is transmitted in writing to the Owner. The Owner shall have
the right to rescind the request for payment of an Accelerated Benefit.
Independent Medical Exam
In considering a request for an Accelerated Benefit, We may require the
Terminally Ill Insured, at Our expense, to submit to an independent medical exam
by a Physician We choose. We may suspend Our review of a request for an
Accelerated Benefit until the exam has been completed and the results submitted
to Us.
Amount of Accelerated Benefit
The amount of Accelerated Benefit that will be payable to the Owner will be an
amount chosen by the Owner. The Amount of Accelerated Benefit chosen must be at
least 25% of the Terminally Ill Insured's Specified Amount, as shown in the
Certificate Specifications, and shall not exceed the lesser of:
[bullet] 50% of the Specified Amount, as shown in the Certificate Specifications
minus any outstanding Loan Balance and Partial Surrenders; or
[bullet] $500,000.
2
<PAGE>
Administration Charge
Any amount of Accelerated Benefit payable will be subject to an administrative
charge not to exceed $300.
Claims of Creditors
To the extent allowed by law:
[bullet] any Accelerated Benefit paid to an Owner is exempt from any legal or
equitable process for the debts of such Owner; and
[bullet] an Owner will not be required to request an Accelerated Benefit in
order to satisfy claims of creditors.
Effect of Accelerated Benefit on Certificate
A lien will be created when the Accelerated Benefit is paid to the Owner. The
lien will equal the Accelerated Benefit payable plus the administration charge.
The lien will accrue interest. Proceeds payable under this Certificate upon the
death of the Terminally Ill Insured will be reduced by the amount of any lien
plus accrued interest.
Interest Charge On Lien
The interest on the lien will accrue daily at the lien interest rate. The lien
interest rate is an effective annual rate. Interest that accrues will be
deducted from the Proceeds payable upon the death of the Terminally Ill Insured.
The lien interest rate that applies at the time the lien is made will not change
during the life of the lien.
The lien interest rate at the time of the benefit acceleration shall be the
lesser of:
[bullet] the Certificate's loan interest rate and
[bullet] the current maximum adjustable policy loan interest rate based on
Moody's Corporate Bond Yield Averages -- Monthly Average Corporates --
published by Moody's Investors Service, Inc., or any successor thereto,
for the calendar month ending two months before the date of application
for an accelerate payment.
Aetna will notify the Owner at the time a lien is made of the lien interest rate
applicable to the lien.
Final Benefit Determination
Aetna will, after a review of all pertinent documentation (including, but not
limited to any Independent Medical Exam results), make the final determination
as to whether or not an Accelerated Benefit is payable.
3
<PAGE>
Effect on Other Provisions of the Certificate
The addition of this Accelerated Benefit Rider will not affect the terms of the
Certificate entitled "Premiums and Reinstatement". However, the following also
applies:
At any time that the Certificate is reinstated in accordance with the
terms of the Reinstatement provision, Aetna will also reinstate any lien,
if one existed, plus lien interest accrued from the date of the
Accelerated Benefit payment through the date that coverage is reinstated.
The addition of this Accelerated Benefit Rider will not affect the terms of the
Certificate entitled "Grace Period". However, the following also applies.
At any time that the lien amount (including accrued interest) in
connection with an Accelerated Benefit exceeds the Proceeds payable upon
death, as described in this Certificate, We will allow You 61 days to pay
the excess in order to prevent Certificate termination.
The provisions of this Certificate entitled "Cost of Insurance Rate" will remain
unchanged; however, the following also applies
After an Accelerated Benefit is paid to an Owner, the Monthly Deductions
will continue to be made on the same basis as prior to the payment of the
Accelerated Benefit.
The provisions of this Certificate entitled "Loans" will remain unchanged;
however, the following also applies:
When an Accelerated Benefit is paid to an Owner, any future requests for
loans for the Terminally Ill Insured will be limited to the excess of the
Surrender Value over the sum of the lien plus accrued lien interest.
The provisions of this Certificate entitled "Nonforfeiture Provisions" will
remain unchanged; however, the following also applies:
When an Accelerated Benefit is paid to an Owner, a future request for the
surrender value, Paid Up Insurance, or a Partial Surrender will be limited
to the excess of the surrender value over the sum of the lien plus accrued
lien interest.
The Beneficiary provision in the Certificate entitled "General Provisions" will
remain unchanged; however, the following also applies:
In the event that the Owner makes a request for an Accelerated Benefit,
such request will not be valid without the consent of an irrevocable
Beneficiary, if any.
The Assignment provision in the section of the Certificate entitled "General
Provisions" will remain unchanged; however, the following also applies.
In the event that a Terminally Ill Insured who is also the Owner of his/her
own insurance makes a request on his/her own behalf for an Accelerated
Benefit, such request shall not be a valid one without the consent of the
assignee, if any.
4
<PAGE>
The following item is hereby added to the Termination of Coverage provision of
this Certificate entitled "General Provisions".
[bullet] the date on which any lien amount (including accrued interest) in
connection with an Accelerated Benefit equals or exceeds the Proceeds
payable upon death, as described in this Certificate; or
Limitations
[bullet] The provisions of this Rider apply only to a Terminally Ill Insured.
The Rider does not affect coverage under any other rider that is in
effect under this Certificate.
[bullet] Not more than one Accelerated Benefit will be payable with respect to
each Terminally Ill Insured to which this Rider applies.
[bullet] We reserve the right to require consent to pay an Accelerated Benefit
from any individual who has a vested right to receive the Proceeds.
[bullet] We will not cancel this Rider. Unless the Owner requests, in writing,
the termination of this Rider, it will remain in effect as long as this
Certificate remains in effect.
The Rider has no value. The Issue Date of this Rider will be the Issue Date
shown in the Certificate Specifications.
This Rider is attached to and made a part of this Certificate. It is signed for
Aetna on its Issue Date.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
/s/ Dan Kearney
---------------
President
70265-97
5
[Aetna Logo]
This extra benefit rider is attached to and made a part of this Certificate.
Unless defined herein, definitions of terms appearing in the Certificate also
apply to the same terms appearing in this Rider.
Definitions
Insured
As stated in the Certificate Specifications, the Insured is the individual who
has coverage as provided by this Rider.
Benefit
Benefit Amount
We will pay to the Beneficiary the Benefit Amount which is equal to the current
Specified Amount as shown in the Certificate Specifications or supplemental
Certificate Specifications, for the Insured, but not to exceed $200,000 upon
receipt by Us at Our Home Office of due proof that:
(1) death of the Insured occurred while his or her Coverage under the
Certificate is in force;
(2) death was the direct result, independent of all other causes, of bodily
injury caused by an accident which occurred while this Rider was in
force; and
(3) death occurred within 90 days after such injury.
If the Specified Amount for an Insured is changed, the Benefit Amount for this
Rider will change at the same time and by the same amount, except that the
Benefit Amount for this Rider may not exceed $200,000.
Risks Not Covered
This Rider does not cover death which is the direct or indirect result of:
(a) suicide, attempted suicide or intentionally self-inflicted injury;
(b) bodily or mental infirmity, or any other kind of disease;
(c) disease or bacterial infections; except that this will not apply if death
is caused by a disease or infection which results directly from the
accidental injury;
(d) operating a motor vehicle while intoxicated; as used herein, the term
"intoxicated" means that the blood alcohol level of the Insured at the time
of the accident was determined to equal or exceed the legal presumption of
intoxication under the laws of the jurisdiction in which the accident took
place;
70266-97
<PAGE>
(e) voluntary use of any controlled substance as defined in Title II of the
Comprehensive Drug Abuse Prevention and Control Act of 1970, as now or
hereafter amended; unless prescribed by a physician for the Insured;
(f) medical or surgical treatment; however, this exclusion does not apply if
such treatment is needed to treat an injury which results from a covered
accident and is performed within 90 days of the date of the injury;
(g) war (declared or undeclared) or any event incident to war;
(h) operating, or riding in, or descending from, or with any kind of aircraft,
if:
(i) the Insured is a pilot, an officer or member of the crew of aircraft;
(ii) the Insured is giving or receiving any kind of training or
instruction, or has any duties on board the aircraft, or duties that
require descent therefrom; or
(iii) the aircraft is operated by or under the direction of any military
(land, sea or air) authority, or is being used for any test or
experiment; or
(iv) committing or attempting to commit an assault or felony.
Other Provisions
Autopsy
If not prohibited by law, We shall have the right to conduct an autopsy at Our
own expense.
Monthly Rider Cost
The Monthly Rider Cost for the coverage provided by this Rider will be shown in
the Certificate Specifications, or the supplemental Certificate Specifications.
The Monthly Rider cost will be the Benefit Amount multiplied by the monthly rate
as determined from the table below. The monthly rider rate is based on the
Insured's Attained Age as of the Issue Date of this Rider. The Monthly Deduction
will be increased by the cost of this Rider.
<TABLE>
<CAPTION>
Monthly Rider Rate
- ------------------------------------------------------------------------------------------------------------------
Age Rate Age Rate Age Rate
- ------------------- ------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Under 35 .00007 48-52 .00010 61-63 .00013
- ------------------------------------------------------------------------------------------------------------------
35-41 .00008 53-56 .00011 64-65 .00014
- ------------------------------------------------------------------------------------------------------------------
42-47 .00009 57-60 .00012
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Termination
An Insured's Coverage under this Rider will end on the first of the following:
(a) the date the Insured reaches Attained Age 70; or
(b) the date the Insured's Coverage under the Certificate ends; or
2
<PAGE>
(c) the Monthly Deduction Day following the Owner's Written Request to
terminate this Rider.
This Rider has no value. The Issue Date of this Rider will be the Issue Date
shown in the Certificate Specifications. However, if Coverage under this Rider
is elected after such Issue Date, the Issue Date of this Rider will be shown in
the supplemental Certificate Specifications.
This Rider is attached to and made a part of this Certificate. It is signed for
Aetna on its Issue Date.
Aetna Life Insurance and Annuity Company
/s/ Dan Kearney
---------------
President
70266-97
3
[Aetna Logo]
An Accelerated Benefit Rider paid by Aetna Life Insurance and Annuity Company is
in accordance with a request for payment under the terms of the Accelerated
Benefit Rider included in Your Certificate and will be subject to the following.
1. Upon payment of an Accelerated Benefit, a lien against the ultimate death
benefit will be created equal to the amount of the Accelerated Benefit. The
lien will accrue interest. The proceeds payable on the death of the Insured
will be reduced by the amount of any lien, including lien interest,
established by the operation of the Accelerated Benefit provision.
2. Payment of an Accelerated Benefit may affect eligibility for public
assistance programs and may be taxable..
3. There is no separate charge for the Accelerated Benefit coverage provided
under the Certificate. However, an administration charge, which will not
exceed $300, will apply upon payment of an Accelerated Benefit. Lien
interest will accrue from the date the Accelerated Benefit is paid through
the date that death benefit proceeds are payable.
4. Tax Consequences: While Aetna cannot provide legal or tax advice to its
Owners, an Owner should carefully consider the tax consequences of
requesting an Accelerated Benefit. The amount of an Accelerated Benefit
received by the Owner may be subject to income tax upon receipt. An Owner
should consult his counsel or tax advisor before requesting an Accelerated
Benefit.
5. Upon payment of an Accelerated Benefit any future requests for loans for
the Terminally Ill Insured will be limited to the excess of the surrender
value over the sum of the lien plus accrued interest.
6. Upon payment of an Accelerated Benefit any future request for the surrender
value or a Partial Surrender will be limited to the excess of the surrender
value over the sum of the lien plus accrued lien interest.
7. Application for the Accelerated Benefit is voluntary and without coercion
on the part of any third party.
8. Upon payment of an Accelerated Benefit, Aetna will provide the Owner
written notification of any reduced in-force specified amount or
Certificate values.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
/s/ Dan Kearney
---------------
President
DISC/NYSUT
[Aetna Logo]
This Extra Benefit Rider is attached to and made a part of this Certificate. It
provides non-participating term life insurance on the child(ren) of the Insured
named in the Certificate Specifications. Unless defined herein, definitions of
terms appearing in the Certificate also apply to the same terms appearing in
this Rider.
CHILDREN INSURANCE BENEFIT
Benefit Amount
We will pay the Benefit Amount for this Rider upon receipt by Us at the Home
Office of due proof that the death of an Insured Child occurred while this Rider
was in force with respect to such child. The Benefit Amount for this Rider is
$4,000.
Insured Child
Insured Child means the Insured's natural child, legally adopted child or
stepchild covered under this Rider who is at least 15 days old and less than
Attained Age 19 (or less than Attained Age 23, if the child is an unmarried
full-time student dependent upon the Insured for support).
Coverage for the Insured Child under this Rider becomes effective on the later
of:
[bullet] the date the child first becomes eligible for insurance and the Insured
has made Written Request for such insurance and has signed any required
applications forms; or
[bullet] the date the child meets Evidence of Insurability Requirements.
The Insured Child cannot be insured for any other coverage under this
Certificate while this Rider is in force.
BENEFICIARY
Each Benefit Amount will be paid to the Beneficiary as stated in the application
or Subsequent Applications. Unless a different Beneficiary is named, the
Beneficiary under this Rider will be the Owner, if living. If the Owner is not
living, the Benefit Amount will be paid to the Owner or the Owner's executors,
administrators or assigns.
70267-97
70267-ny
<PAGE>
CONVERSION
If coverage under this Rider ends, the term insurance it provides may be
converted, subject to these rules.
[bullet] Insurance on an Insured Child may be converted only on the Certificate
Anniversary nearest that child's 19th birthday or upon termination of
this Rider, whichever occurs first.
[bullet] This Rider may be converted to any policy we make available for such
purpose, without evidence of insurability, for up to 5 times the
Benefit Amount of this Rider.
[bullet] The premium rate for the new policy shall be based on the Insured
Child's Attained Age and sex at Our current rates at the time of
conversion (an Insured Child residing in the State of New York will be
issued a new policy based only on the Insured Child's Attained Age at
Our current rates at the time of conversion);
[bullet] The new policy may contain extra benefit riders, but only with Our
consent.
[bullet] Proper Written Request and payment of the first premium must be made
within 31 days of the Certificate Anniversary nearest the child's 19th
birthday (or the child's 23rd birthday if the Insured Child is an
unmarried full-time student dependent upon the Insured for support).
The Date of Issue of the new Certificate will be the Certificate
Anniversary nearest the child's 19th birthday (or the child's 23rd
birthday if the Insured Child is an unmarried full-time student
dependent upon the Insured for support) or upon termination of this
rider, whichever occurs first. The new Certificate will not take effect
if the Insured Child is not then living.
OTHER PROVISIONS
Reinstatement
If the Certificate is reinstated in accordance with its Reinstatement provision,
this Rider may also be reinstated. The Certificate's reinstatement requirements
will apply. A Benefit Amount will not be paid if an Insured Child's death occurs
after the Grace Period and before Reinstatement.
Monthly Rider Cost
The Monthly Rider Cost for the coverage provided by this Rider will be shown in
the Certificate Specifications, or the supplemental Certificate Specifications.
The Monthly Rider cost will be the Benefit Amount multiplied by .0005. The
Monthly Deduction will be increased by the cost of this Rider.
2
<PAGE>
Suicide
If an Insured Child dies by suicide within 2 years from the date the Insured
Child is covered under this Rider, we will refund the Monthly Rider Cost paid
with respect to such Insured Child. This Rider's Benefit Amount will not be
paid.
If an Insured Child dies by suicide within 2 years from the date the Insured
Child is covered under this Rider, but within 2 years from the Issue Date of any
increase in Coverage, We will pay:
[bullet] the Benefit Amount for any coverage in effect more than 2 years from
the date the Insured Child is covered under this Rider; plus
[bullet] the Monthly Rider Cost for the increase in his or her coverage.
All amounts will be calculated as of the date of the suicide.
Incontestability
We will not contest this Rider after it has been in force on the life of an
Insured Child for 2 years. With respect to statements made in any Reinstatement
Applications for an Insured Child: We will not contest coverage after coverage
has been in force on the life of an Insured Child for 2 years from the effective
date of any Reinstatement.
Termination
The insurance on each Insured Child will end on the first to occur:
[bullet] the Certificate Anniversary nearest that child's 19th birthday (or the
child's 23rd birthday, if the Insured Child is an unmarried, full-time
student dependent upon the Insured for support);
[bullet] the date the Certificate terminates; or
[bullet] the death of the Insured named in the Certificate Specifications; or
[bullet] the Monthly Deduction Date after We receive Your Written request to
terminate this rider; or
This Rider has no cash value. The Issue Date of this Rider will be the Issue
Date shown in the Certificate Specifications. However, if coverage under this
Rider is elected after such Issue Date, the issue Date of this Rider will be the
shown in the supplemental Certificate Specifications.
3
<PAGE>
This Rider is attached to and made a part of this Certificate. It is signed for
Aetna on its Date of Issue.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
/s/ Dan Kearney
---------------
President
Application is hereby made to AETNA LIFE INSURANCE AND ANNUITY COMPANY, of
Hartford, Connecticut for a policy of Group Variable Universal Life Insurance to
be issued to the undersigned applicant.
Applicant: New York State United Teachers Benefit Trust
Address: Albany, NY 12257
- --------------------------------------------------------------------------------
Only the Members of the New York State United Teachers Benefit Trust and their
Spouses are eligible for coverage under this policy. No insurance shall become
effective as to any person except as provided in the group policy.
- --------------------------------------------------------------------------------
Signed at ____________________ New York State United Teachers Benefit Trust
City, State
on ______________ By ______________________________________
Date Name and Title
____________________
Witness Title
- --------------------------------------------------------------------------------
70262-1997NY APP
<TABLE>
<CAPTION>
<S> <C> <C>
LIFE Aetna Life Insurance and Annuity [AETNA EXPRESS]
[Aetna Logo] INSURANCE Co.
PRE-APP 151 Farmington Avenue
Hartford, CT 06156-1961
- -------------------------------------------------------------------------------------------------------------------------
File No. State of Delivery TIA Form if required Cash with App Amount
|_| Yes |_| No |_| Yes |_| No $
- -------------------------------------------------------------------------------------------------------------------------
1. Proposed Insured
- -------------------------------------------------------------------------------------------------------------------------
Print Full Legal Name (First, Middle, Last) Sex: Date of Birth: SSN:
|_| M |_| F
- -------------------------------------------------------------------------------------------------------------------------
Residence Address, City, State and Zip Code Place of Birth:
- -------------------------------------------------------------------------------------------------------------------------
2. Occupation Information
- -------------------------------------------------------------------------------------------------------------------------
Employer Name: Occupation: Annual Income:
$
- -------------------------------------------------------------------------------------------------------------------------
3. Replacement Information
- -------------------------------------------------------------------------------------------------------------------------
Will life insurance or annuity in any Company be replaced or changed if insurance applied for is issued: |_| Yes |_|
No
If Yes, |_| Internal |_| External |_| Internal 1035 |_| External 1035
- -------------------------------------------------------------------------------------------------------------------------
4. Plan Information
- -------------------------------------------------------------------------------------------------------------------------
Basic Plan Face Amount $
------------------------------------------------------ --------------------------------------
Death Benefit Option (if Modal $ Planned $
-------------- -------------------- ------------
List Supplemental Benefits/Riders & Amounts (e.g. WP, ADB)
- -------------------------------------------------------------------------------------------------------------------------
5. Billing Information
- -------------------------------------------------------------------------------------------------------------------------
|_| Direct Bill - Annual |_| ACP District Number:
--------------------------------------------------
|_| Direct Bill - Semi Annual |_| Salary Deduction District Name:
---------------------------------------------------------------------------------
|_| Direct Bill - Quarterly NYSUT member or agency fee payor:
---------------------------------------------------------------------------------
Social Security Number:
- -------------------------------------------------------------------------------------------------------------------------
6. Beneficiary Information
- -------------------------------------------------------------------------------------------------------------------------
Primary - Name: SSN: Relationship: Share/Proceed Amount
$
- -------------------------------------------------------------------------------------------------------------------------
Secondary (if any): SSN: Relationship: Share/Proceed Amount
- -------------------------------------------------------------------------------------------------------------------------
Final Designation:
|_| Estate of the Insured |_| Executors or Administrators of the Survivor of the Beneficiary (ies).
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
70272-97
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
7. Owner Information (If other than the Proposed Insured)
- -------------------------------------------------------------------------------------------------------------------------
Primary - Name/DOB: SSN: Relationship: Share/Proceed Amount
- -------------------------------------------------------------------------------------------------------------------------
Secondary (if any): SSN: Relationship: Share/Proceed Amount
- -------------------------------------------------------------------------------------------------------------------------
Final Designation:
|_| Insured |_| Insured at legal age in delivery state |_| Executors or Administrators of the Survivor of the Owner(s).
- -------------------------------------------------------------------------------------------------------------------------
8. Payor Information
|_| Same as Owner (Provide address information) |_| Other (if other complete)
- -------------------------------------------------------------------------------------------------------------------------
Name: Relationship SSN/TIN:
- -------------------------------------------------------------------------------------------------------------------------
Residence Address, City, State and Zip Code
- -------------------------------------------------------------------------------------------------------------------------
9. Tobacco & Health Information
- -------------------------------------------------------------------------------------------------------------------------
In the past twelve (12) months have you used tobacco in any form? |_| Y |_| N
Have you in the last ten (10) years had or been treated for diabetes, cancer, heart disease,
alcoholism, drug abuse or high blood pressure? |_| Y |_| N
- -------------------------------------------------------------------------------------------------------------------------
10. Contact Information
- -------------------------------------------------------------------------------------------------------------------------
Contact me at: Home Phone: Business Phone:
|_| Home |_| Work |_| Both ( ) ( )
- -------------------------------------------------------------------------------------------------------------------------
Best Time to Call: From/AM-PM To/AM-PM From/AM-PM To/AM-PM
- -------------------------------------------------------------------------------------------------------------------------
11. Agent Information
Is the proposed insurance for business purposes? |_| Y |_| N
If Yes, are other principals commensurately insured? |_| Y |_| N
Is application in Lieu of Group? |_| Y |_| N
If Proposed insured is under age 15, are parents/guardians and all siblings insured? |_| Y |_| N
If Yes, please provide amounts: $
-----------------------------------------------------------------------------
Besides yourself will any other third party be compensated to influence the applicant's decision to
purchase this contract?
|_| Yes |_| No. If yes, provide the name of that third party
----------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Agency Code Agent Life Code Agent Name (print) Agent Split Information
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Agent Address: Phone Number:
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
The answers above are true and complete to the best of my knowledge and belief. I agree that coverage can take effect
only if the proposed insured is alive, all answers in the Life Application material to the risk are still true and
complete to the best of my knowledge and belief when the contract is delivered and the entire first premium is paid.
I agree to advise the Company or producer in writing of any known or suspected changes in the health of the proposed
insured or of any changes to any answers on this Pre-App or the Life Application prior to delivery of the contract.
No Insurance contract or coverage is created by completion of this pre-app.
- -------------------------------------------------------------------------------------------------------------------------
Signature of (Proposed) Insured Date
- -------------------------------------------------------------------------------------------------------------------------
Signature of Applicant/Owner, if other than proposed insured Date
- -------------------------------------------------------------------------------------------------------------------------
Signature of Agent Agent License # Date
- -------------------------------------------------------------------------------------------------------------------------
Signed at (City, State)
- -------------------------------------------------------------------------------------------------------------------------
Authorization To Obtain and Disclose Information
On behalf of myself or any minor children proposed for insurance in this application, I hereby authorize: any licensed
physician, medical practitioner, hospital, clinic or medically related facility, insurance company, consumer reporting
agency, and MIB, Inc. to release to Aetna Life Insurance and Annuity Company for purposes of determining eligibility
for life insurance coverage or claim for benefits:
Any information or records concerning the mental and physical history, condition and treatment, general character,
habits, reputation, mode of living, occupation, income, financial status, aviation activities, and hazardous hobbies
of any proposed insured. I understand that the information released under this authorization will be used for purposes
of determining eligibility for life coverage or claims for benefits and I authorize Aetna to redisclose the information
for those purposes to MIB, Inc, to any reinsurer and to other life insurance companies with whom I have or may apply
for coverage or to whom a claim for benefits may be submitted. This authorization is valid until 2 years after the
effective date of any contract issued in connection with this authorization, or for use in an investigation of a
claim for benefits that is submitted on this contract within this two year period. A photocopy of this authorization
is as valid as the original.
I have received Aetna's Underwriting Notice, which includes the MIB, Inc., and Fair Credit Reporting Act Notices.
I understand that information pertaining to me will not be disclosed without my authorization except as described under
"Disclosure of Information to Others" in the accompanying Underwriting Notice, or as otherwise permitted or required
by law.
- -------------------------------------------------------------------------------------------------------------------------
Signature of (Proposed) Insured Date
</TABLE>
70272-97
3
Application for GROUP
LIFE INSURANCE
ISSUED TO ELIGIBLE MEMBERS OF THE
NEW YORK STATE UNITED TEACHERS
BENEFIT TRUST AND THEIR SPOUSES
A
Aetna Life Insurance and Annuity Company
70272-97(A)ZNY
<PAGE>
When completing the application Please:
[bullet] Print legibly. (If possible, use black
ink.) This will ensure that
application information is accurate
and easy to photocopy.
[bullet] If blood or urine is required, please
sign the consent form. (State of
residence determines appropriate
consent form to be used.)
[bullet] Include any special supplements that
may be required (e.g. aviation and/or
avocation, child rider, Variable Life
supplement).
[bullet] Ensure that automatic requirements
(blood, exam, etc.) are completed.
[bullet] Complete enclosed Transmittal letter
for applications of $1,000,000 to
$5,000,000, or if there is special
information that would assist the
underwriter in underwriting the case.
Cases over $5,000,000 please submit
supporting documentation such as
audited financial statements, income
tax returns, etc.
[bullet] Limits. The maximum amount of
insurance on a Spouse a shall not
exceed the amount of insurance
proposed or existing on an Insured
Member of the New York State United
Teacher's Benefit Trust.
[bullet] Ask all questions of the proposed
insured. Do not assume anything.
[bullet] If you must change application
information prior to submission, draw
a line through it, enter the correct
information and have the proposed
insured initial the change.
[bullet] Signatures required on: application,
ACP form if requested, MIB
authorization, Owner/Taxpayer form and
Conditional Receipt. Agent must also
sign the application and transmittal
letter.
[bullet] Agent signature must include the agent
license number and not the agent code
number.
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
A GROUP LIFE INSURANCE APPLICATION
ISSUED TO ELIGIBLE MEMBERS OF THE NEW YORK STATE UNITED
TEACHERS BENEFIT TRUST AND THEIR SPOUSES
Aetna Life Insurance and Annuity Co.
151 Farmington Avenue
Hartford, CT
06156-1961
- -------------------------------------------------------------------------------------------------------------------------
General ANSWER ALL QUESTIONS IF:
Information |_| New Insurance |_| Increase Amount $ |_| Certificate No.
------------------------ --------------------
|_| Other Certificate Change ANSWER APPLICABLE QUESTIONS
-----------------------------------
|_| Certificate Number to be changed
- -------------------------------------------------------------------------------------------------------------------------
ST OF DEL |_| STATE OF DELIVERY
------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
(Proposed) 1. Print Full Legal Name (First, Middle, Last)
Insured
----------------------------------------------------------------------------------------------------------
Information Residence Address (Number, Street) P. O. Box
----------------------------------------------------------------------------------------------------------
City, State and Zip Code
----------------------------------------------------------------------------------------------------------
Sex Date of Birth (mm/dd/yy) Place of Birth MVR License # and License State
----------------------------------------------------------------------------------------------------------
2a. Occupation (Title & Give Exact Duties)
----------------------------------------------------------------------------------------------------------
2b. Employer's Name and Address 2c. Annual Income
----------------------------------------------------------------------------------------------------------
2d. Amount of life insurance presently in force:
Aetna $ ADB $ Other Companies $ ADB $
--------------- ------------------ ------------------- ------------------
Are there current negotiations with other companies? |_| Yes |_| No
If Yes, advise Company and results.
-----------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
3. Will life insurance or annuity in any Company be replaced or changed if insurance applied for is
issued? |_| Yes |_| No
Explain
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Insurance 4. Basic Plan Face Amount $
-------------------------------------------------- ----------------------------
Information Death Benefit Option (if applicable)
----------------------------------------------------------------------
Billing Frequency: |_| Salary Deduction |_| Direct Bill - Annual
|_| Direct Bill - Semi-Annual |_| Direct Bill - Quarterly |_| ACP
NYSUT member or agency fee
payor:
---------------------------------------------------------------------------------------------------
Social Security
Number:
---------------------------------------------------------------------------------------------------
District District
Number: Name
--------------------------------------------- -------------------------------------------
List Supplemental Benefits/Riders & Amounts (e.g. WP, ABR, ADB, CIR*)
------------------------------------------- ----------------------------------- --------------------------
------------------------------------------- ----------------------------------- --------------------------
------------------------------------------- ----------------------------------- --------------------------
- -------------------------------------------------------------------------------------------------------------------------
(Proposed) NON MEDICAL QUESTIONS
Insured 5. HAVE YOU WITHIN 2 YEARS: (IF YES, EXPLAIN)
Information a. Flown as a pilot or crew member or intend to do so? (If Yes, furnish
Aviation supplement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |_| Yes |_| No
b. Engaged in motor vehicle or boat racing, rock or mountain climbing,
hang gliding or sky, skin or scuba diving or intend such activities?
(If Yes, furnish Avocation supplement) . . . . . . . . . . . . . . . . . . . . . |_| Yes |_| No
c. Had your license suspended or revoked, had 3 or more moving violations,
or been convicted of driving under the influence of alcohol or drugs? |_| Yes |_| No
d. Frequently traveled outside of the United States or intend to do so? . . . . . . |_| Yes |_| No
6. HAVE YOU EVER:
a. Had insurance refused, or offered only with an extra premium? . . . . . . . . . . |_| Yes |_| No
b. Been convicted of a felony offense? . . . . . . . . . . . . . . . . . . . . . . . |_| Yes |_| No
7. HAVE YOU IN THE LAST 5 YEARS: (IF YES, EXPLAIN)
a. Used hallucinogenic or narcotic drugs not prescribed by a doctor? . . . . . . . . |_| Yes |_| No
b. Used alcoholic beverages? (Note type, quantity and frequency) . . . . . . . . . . |_| Yes |_| No
c. Had or been advised to have medical treatment or counseling from a
commonly recognized practitioner or organization for alcohol or drug use? . . . . |_| Yes |_| No
- ---------------
Smoking 8. a. Have you smoked cigarettes within the past 12 months? . . . . . . . . . . . . . . |_| Yes |_| No
Information If Yes, how much? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ---------------
b. If No, have you used any other tobacco products within the past 12 months
(e.g. cigar, pipe, smokeless tobacco)? . . . . . . . . . . . . . . . . . . . . . |_| Yes |_| No
If Yes, have you smoked cigarettes within the past 10 years? . . . . . . . . . . . |_| Yes |_| No
c. Have you used any nicotine substitutes within the past 12 months
(e.g. patch, gum)? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |_| Yes |_| No
- ---------------
Height & 9. a. What is your current height? . . . . . . . . . . . . . . . . . . . . . . . . . . . ---------------
Weight b. What is your current weight? . . . . . . . . . . . . . . . . . . . . . . . . . . . ---------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
History 10. Have you had a history of heart, lung or liver disorder, stroke, diabetes or
cancer? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |_| Yes |_| No
- -------------------------------------------------------------------------------------------------------------------------
Attending 11. Name, address and phone number of personal physician, date, reason last seen and results.
Physician
----------------------------------------------------------------------------------------------------------
Information
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
ADDITIONAL INFORMATION (Give details of YES answers, dates and results)
For additional space please use Addendum Sheet.
----------------------------------------------------------------------------------------------------------
QUES. #
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
IF AN EXAM IS REQUIRED AND QUESTION 10 IS ANSWERED "YES" AN MD EXAM IS REQUIRED
70272-97(A)ZNY
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
(Proposed) PART II - QUESTIONS 12 - 19 REQUIRED EVEN FOR EXAMINED BUSINESS
Insured 12. HAVE YOU EVER IN THE LAST 10 YEARS HAD OR BEEN TREATED
Information FOR: (IF YES, EXPLAIN)
a. Mental or nervous disorder? . . . . . . . . . . . . . . . . . . . . . . . . . . . |_| Yes |_| No
b. Disease of the nervous system or brain? . . . . . . . . . . . . . . . . . . . . . |_| Yes |_| No
c. Fainting, seizures, paralysis or stroke? . . . . . . . . . . . . . . . . . . . . |_| Yes |_| No
d. Shortness of breath, persistent cough? . . . . . . . . . . . . . . . . . . . . . |_| Yes |_| No
e. Emphysema or other lung disease? . . . . . . . . . . . . . . . . . . . . . . . . |_| Yes |_| No
f. Chest pain, high blood pressure, heart attack, heart murmur, disease of the
heart or blood vessels? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |_| Yes |_| No
g. Hepatitis, cirrhosis, or other disease of the liver or pancreas? . . . . . . . . |_| Yes |_| No
h. Ulcer, colitis, chronic diarrhea, or other disorder of the stomach or intestines? |_| Yes |_| No
i. Sugar, albumin, blood or pus in urine? . . . . . . . . . . . . . . . . . . . . . |_| Yes |_| No
j. Disease of the kidneys, reproductive organs or sexually transmitted disease
(other than AIDS)? |_| Yes |_| No
k. Diabetes, thyroid or glandular disease? . . . . . . . . . . . . . . . . . . . . . |_| Yes |_| No
l. Arthritis, disease or injury of the muscles, bones or joints? . . . . . . . . . . |_| Yes |_| No
m. Cancer, tumor, cyst, disease of skin or lymph glands? . . . . . . . . . . . . . . |_| Yes |_| No
13. HAVE YOU IN THE LAST 10 YEARS (IF YES, EXPLAIN):
a. Been diagnosed or treated for immune deficiency (other than AIDS), anemia
or other blood disorder by a member of the medical profession? . . . . . . . . . |_| Yes |_| No
b. Had recurrent fever, fatigue or unexplained weight loss? . . . . . . . . . . . . |_| Yes |_| No
14. Have you in the last 10 years been diagnosed or treated for AIDS/ARC by
a member of the medical profession? . . . . . . . . . . . . . . . . . . . . . . . . . |_| Yes |_| No
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
15. OTHER THAN ABOVE, HAVE YOU WITHIN THE PAST 5 YEARS:
(IF YES, EXPLAIN)
a. Had a checkup, consultation, illness, injury, surgery or diagnostic test (other
than for HIV)? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |_| Yes |_| No
b. Been advised to have any diagnostic test, hospitalization or surgery which
was not completed (other than for HIV)? . . . . . . . . . . . . . . . . . . . . . |_| Yes |_| No
16. a. Are you now under observation or treatment? . . . . . . . . . . . . . . . . . . . . |_| Yes |_| No
b. Do you need assistance, supervision or use of medical appliances of any
kind? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |_| Yes |_| No
17. Have you within 90 days had or been advised to have surgery or to be admitted
to a medical facility or within 2 years been treated or diagnosed by a physician
for heart disease, stroke, immune disorder (other than AIDS) or cancer? . . . . . . . |_| Yes |_| No
- ---------------
Family 18. a. Do you have a family history of diabetes, heart disease or hereditary
History disease? (If Yes, explain) . . . . . . . . . . . . . . . . . . . . . . . . . . . |_| Yes |_| No
b. Father, age: health status: if deceased, cause:
------------- --------------- ----------------------
c. Mother, age: health status: if deceased, cause:
------------- --------------- ----------------------
- ---------------
Explanations 19. EXPLANATIONS: Include, nature and severity of condition, frequency of attacks, treatments received,
medication, dates, name, address and phone number of medical attendants and hospitals.
For additional space please use Addendum Sheet.
- -------------------------------------------------------------------------------------------------------------------------
QUESTION #
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
70272-97(A)ZNY
BENEFICIARY/OWNER INFORMATION
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
Beneficiary 20 A. PRIMARY (provide full name and relationship)
Information
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
Soc. Sec. #
----------------------------------------------------------------------------------------------------------
B. SECONDARY (If any, provide full name and relationship)
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
Unless otherwise requested, if more than one beneficiary is named, payment will be made in equal shares.
If no beneficiary survives the insured, payment will be made to the executors or administrators of the
insured.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
C. OTHER |_| (e.g. Mode Settlement, Trustee under the Will, Individual Creditor. If Creditor -
who will receive any balance.
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
Soc. Sec. #
----------------------------------------------------------------------------------------------------------
D. FINAL (check one) |_| Estate of the Insured
|_| Executors or Administrators of the Survivor of the Beneficiary(ies)
- -------------------------------------------------------------------------------------------------------------------------
OWNER OWNER: THE (PROPOSED) INSURED IS OWNER UNLESS OTHERWISE REQUESTED
21. A. PRIMARY (Provide full name, address, relationship and Date of Birth, mm/dd/yy)
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
B. SECONDARY (If any, provide full name, address, relationship and Date of Birth, mm/dd/yy)
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
C. OTHER |_|
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
D. FINAL: (check one) |_| Insured
|_| Insured at legal age in delivery state
|_| Executors or Administrators of the Survivor of the Owner(s)
</TABLE>
70272-97(A)ZNY
7
<PAGE>
22. Any payment is subject to the terms and conditions of the Conditional
Receipt. If payment is made, the Conditional Receipt must be provided and
explained.
23. If automatic payment from checking account is selected:
I (we) authorize Aetna Life Insurance and Annuity Company (ALIAC) to debit
my (our) checking account electronically, by paper means or by any other
commercially accepted method, to cover premiums and other payments for my
certificate(s). I (we) also authorize my financial institution named on the
voided check attached to charge my account for such payments. If my/our
account number or financial institution change, I (we) authorize ALIAC to
accept verbal instructions from me regarding such changes, and to change
this authorization accordingly. This authorization is to remain in full
force and effect until ALIAC has received written notification from me (or
either of us) of its termination within a reasonable time to take action.
|_| Attach "VOID" Check Date of draw (8th, 20th or 28th)
-----------------------
Signature of Payor
--------------------------------------------------------------
24. The answers above are true and complete to the best of my knowledge and
belief.
I agree that no producer may alter the terms of the application, the Conditional
Receipt or the certificate, nor can the producer waive any of Aetna's rights or
requirements.
I agree that coverage can take effect only if the proposed insured is alive, and
all answers in this application material to the risk are still true and complete
to the best of my knowledge and belief when the certificate is delivered and the
entire first premium is paid.
I agree to advise the Company or producer in writing of any known or suspected
changes in the health of the proposed insured, or of any changes to any answers
on this application, prior to delivery of this certificate.
- --------------------------------------------------------------------------------
Signature of (Proposed) Insured Date
- --------------------------------------------------------------------------------
Signature of Applicant/Owner, if other than proposed insured Date
- --------------------------------------------------------------------------------
Signature of Assignee, if applicable Date
- --------------------------------------------------------------------------------
City State Zip
- --------------------------------------------------------------------------------
Signature of Agent Agent License # Date
70272-97(A)ZNY
8
<PAGE>
AGENT'S REPORT
<TABLE>
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C>
PHI Please complete and explain the PHI process to the (proposed) insured.
Information Please provide both numbers and the best place to call:
|_| Home Phone No. |_| AM |_| PM
|_| Business Phone No. |_| AM |_| PM
- ------------------------------------------------------------------------------------------------------------------
1. Underwriting Requirements |_| Nonmed |_| Paramedical |_| Medical
Blood Profile/Urine Test required. |_| Yes |_| No
If Yes, are other principals commensurately insured? |_| Yes |_| No. (If No, explain)
2. Have you seen the proposed insured? |_| Yes |_| No
3. If application is for $1,000,000 or more, have you secured financial data?
|_| Yes |_| No
- ------------------------------------------------------------------------------------------------------------------
Premium 1. Billing Information 2. Premium Information
Information |_| Annual |_| Full Modal Premium $___________________
|_| Semi-Annual |_| Planned Modal Prem. $___________________
|_| Quarterly |_| Additional Premium $___________________
|_| List Bill - Add to Existing ______________
|_| Monthly Check Plan
|_| Monthly List Bill
Add to existing Account ________________
3. Premium Payor name and address (if other than proposed insured) (Include Street,
City, State, Zip)
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Additional
Information ---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
- -------------------------------------------------------------- --------------------------------------------------
Agent 1. Replacement? If yes:
------------------------------
Information |_| Yes |_| Internal |_| Internal 1035
|_| No |_| External |_| External 1035
2. If the law requires, has the Cost Disclosure Statement been given and will the Cost Disclosure
Summary be delivered? |_| Yes |_| No
3. Has the required Underwriting Notice been given? |_| Yes |_| No
- ------------------------------------------------------------------------------------------------------------------
Agent's Name
---------------------------------------------------------------------------------------------------
Address
---------------------------------------------------------------------------------------------------
Phone No. ( )
---------------------------------------------------------------------------------------------------
LIFE CODE MARKET AGENCY CODE
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
</TABLE>
70272-97(A)ZNY
9
<PAGE>
A ADDENDUM SHEET
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------
Application ADDITIONAL INFORMATION
- -------------------------------------------------------------------------------------------------------------------
Question#
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
----------- -------------------------------------------------------------------
Date Signature of (Proposed Insured)
70272-97(A)ZNY
</TABLE>
10
<TABLE>
<CAPTION>
<S> <C> <C>
AETNA Supplement to Application Aetna Life Insurance and Annuity Company
for Variable Life Insurance 151 Farmington Avenue
Hartford, CT 06156-1961
----------------------------------------------------------------------------------------------------------------------------------
Proposed 1a. Name of Insured (First, Middle, Last)
Insured(s)
--------------------------------------------------------------------------------------------------------------------
1b. Name of Insured (First, Middle, Last)
----------------------------------------------------------------------------------------------------------------------------------
Premium 2. (Indicate whole percentages. Percentages must equal 100%.)
Payment
Allocation Global/International Growth Growth & Income (Stocks & Bonds)
______ % Janus Aspen Worldwide Growth Portfolio ______ % Aetna Balanced VP, Inc.
______ % Oppenheimer Global Securities Fund ______ % Janus Aspen Balanced Portfolio
______ % PPI Scudder International Growth Portfolio
Asset Allocation
Aggressive Growth ______ % Aetna Ascent VP
______ % Janus Aspen Aggressive Growth Portfolio ______ % Aetna Crossroads VP
______ % PPI MFS Emerging Equities Portfolio ______ % Aetna Legacy VP
Growth Income
______ % Fidelity VIP II Contrafund Portfolio ______ % Aetna Bond VP
______ % Janus Aspen Growth Portfolio ______ % Oppenheimer Strategic Bond Fund
______ % PPI MFS Research Growth Portfolio
______ % PPI MFS Value Equity Portfolio Stability of Principal
______ % PPI T. Rowe Price Growth Equity Portfolio ______ % Aetna Fixed Account
______ % Aetna Money Market VP
Growth & Income (Stocks)
______ % Aetna Growth and Income VP
______ % Aetna Index Plus Large Cap VP
______ % Fidelity VIP Equity Income Portfolio
----------------------------------------------------------------------------------------------------------------------------------
Owner's The rules of the National Association of Securities Dealers, Inc. require that the Sales Representative have
Suitability reasonable grounds to believe that the sale is suitable for the Owner, based on information provided by the Owner
as shown on this form and on information known by the Sales Representative.
--------------------------------------------------------------------------------------------------------------------
3. Owner's Taxpayer Identification Number
[ ] Individual ___ ___ ___ / ___ ___ / ___ ___ ___ ___
[ ] Partnership [ ] Corporation [ ] Trustee [ ] Other ___ ___ / ___ ___ ___ ___ ___ ___ ___
--------------------------------------------------------------------------------------------------------------------
4. Age
--------------------------------------------------------------------------------------------------------------------
5. Citizenship
--------------------------------------------------------------------------------------------------------------------
6. Marital Status
--------------------------------------------------------------------------------------------------------------------
7. Number of Dependents
--------------------------------------------------------------------------------------------------------------------
8. Occupation
--------------------------------------------------------------------------------------------------------------------
9. Employer's Name & Address
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
10. Investment Objectives (Check all applicable objectives.)
[ ] Capital Preservation [ ] Growth
[ ] Tax Advantage/Deferral [ ] Aggressive Growth
[ ] Current Income [ ] Other (please specify) _______________________
[ ] Growth and Income
70268-97 (5/98)
Page 1 of 2 - Incomplete without all pages
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
----------------------------------------------------------------------------------------------------------------------------------
Owner's 11. Insurance Objectives (Check all applicable objectives.)
Suitability
(Cont'd.) [ ] Estate Creation
[ ] Estate Conservation
[ ] Other (please specify) _____________________________________________________________________________________
--------------------------------------------------------------------------------------------------------------------
12. Investment Knowledge
[ ] Limited [ ] Good [ ] Extensive
--------------------------------------------------------------------------------------------------------------------
13. Risk Tolerance
[ ] None [ ] Low [ ] Medium [ ] High
--------------------------------------------------------------------------------------------------------------------
14. Is the coverage in accord with the Owner's insurance objectives and anticipated financial needs?
[ ] Yes [ ] No
--------------------------------------------------------------------------------------------------------------------
15. Total Income of Owner's Immediate Family
[ ] $250,000 + [ ] $100,000 - $249,999 [ ] $50,000 - $99,999 [ ] $25,000 - $49,999
[ ] Under $25,000
--------------------------------------------------------------------------------------------------------------------
16. Estimated Net Worth of Owner's Immediate Family
[ ] $1,000,000 + [ ] $500,000 - $1,000,000 [ ] $250,000 - $500,000 [ ] $100,000 - $250,000
[ ] Under $100,000
--------------------------------------------------------------------------------------------------------------------
17. Federal Tax Bracket
[ ] 15% [ ] 28% [ ] Other (please specify) _______________________________________________________________
--------------------------------------------------------------------------------------------------------------------
18. Is the Owner associated with a National Association of Securities Dealers, Inc. firm?
[ ] Yes [ ] No
----------------------------------------------------------------------------------------------------------------------------------
Signatures 19. If jointly, or business owned, please provide the name(s) and signature(s) of the person(s) authorized
to exercise ownership rights:
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
I understand that:
THE AMOUNT AND DURATION OF THE DEATH BENEFIT MAY VARY UNDER SPECIFIED CONDITIONS.
VALUES NOT IN THE FIXED ACCOUNT MAY INCREASE OR DECREASE IN ACCORDANCE WITH THE EXPERIENCE OF THE SEPARATE
ACCOUNT.
THE AMOUNT OF THE MATURITY BENEFIT IS NOT GUARANTEED BUT IS DEPENDENT UPON THE THEN SURRENDER VALUE.
ILLUSTRATIONS OF BENEFITS, INCLUDING DEATH BENEFITS, ACCOUNT VALUES, AND SURRENDER VALUES ARE AVAILABLE
UPON REQUEST.
--------------------------------------------------------------------------------------------------------------------
I hereby acknowledge receipt of the Prospectus dated
prospectuses dated currently for all applicable
prospectus(es) pertaining to the Separate Account and all
of the variable options.
--------------------------------------------------------------------------------------------------------------------
Signed at (City, State) On (mm/dd/yy)
--------------------------------------------------------------------------------------------------------------------
By (Signature of Owner) By (Signature of Owner)
--------------------------------------------------------------------------------------------------------------------
Based on information obtained from the Owner, I believe the investment is suitable for the Owner's
objectives.
--------------------------------------------------------------------------------------------------------------------
Signature of Registered Representative On (mm/dd/yy)
70268-97 (5/98)
Page 2 of 2 - Incomplete without all pages
</TABLE>
Opinion and Consent of Counsel
[Aetna Letterhead] 151 Farmington Avenue
[Aetna Logo] Hartford, CT 06156
Julie E. Rockmore
Counsel
Law Division, RE4A
Investments & Financial Services
(860) 273-4686
Fax: (860) 273-8340
April 16, 1998
Securities and Exchange Commission
450 Fifth Street
Washington, D.C. 20549
Re: Aetna Life Insurance and Annuity Company and its
Variable Life Account B
Post Effective Amendment No. 2 to the Registration Statement on Form S-6
Prospectus Title: Flexible Premium Group Variable Universal Life
Insurance for New York United Teachers Benefit Trust ("NYSUT Trust")
SEC File Nos. 333-15817 and 811-4536
Gentlemen:
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")
pursuant to 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. 2 (the
"Registration Statement"). 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 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 are 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/ Julie E. Rockmore
Julie E. Rockmore
[Aetna Logo]
Retirement Services
151 Farmington Avenue
Hartford, CT 06156
Mark S. Reilly, FSA, MAAA
Pricing Actuary
Product & Brand Management
Retail Markets, TN41
Office: (860)273-8129
Fax: (860)273-4438
March 29, 1998
Re: Flexible Premium Group Variable Universal Life Insurance of New York State
United Teachers Benefit Trust (File No.333-15817 )
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 Flexible Premium Group
Variable Universal Life Insurance of New York State United Teachers Benefit
Trust (the "Policy"). I also provided actuarial advice concerning the
preparation of Post-Effective Amendment No. 2 to Registration Statement on Form
S-6, File No. 333-15817 (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 and Total Account
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
Consent of Independent Auditors
The Board of Directors of Aetna Life Insurance and Annuity Company and
Policyholders of Aetna Variable Life Account B:
We consent to the use of our reports dated February 3, 1998 and February 27,
1998 included in this Post-Effective Amendment No. 2 to Registration Statement
(No. 333-15817) on Form S-6 and to the reference to our firm under the heading
"Independent Auditors" in the prospectus.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
April 16, 1998
