<PAGE>
As filed with the Securities and Exchange Commission on April 14, 1998.
File No. 333-19605
811-4732
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
----
Post-Effective Amendment No. 1 [X]
----
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 84 [X]
----
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO
(Exact Name of Registrant)
HARTFORD LIFE INSURANCE COMPANY
(Name of Depositor)
P.O. BOX 2999
HARTFORD, CT 06104-2999
(Address of Depositor's Principal Offices)
(860) 843-6731
(Depositor's Telephone Number, Including Area Code)
LESLIE T. SOLER, ESQ.
HARTFORD LIFE
P.O. BOX 2999
HARTFORD, CT 06104-2999
(Name and Address of Agent for Service)
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
-----
60 days after filing pursuant to paragraph (a)(1) of Rule 485
-----
on May 1, 1998 pursuant to paragraph (a)(1) of Rule 485
-----
this post-effective amendment designates a new effective date for a
----- previously
filed post-effective amendment.
-----
PURSUANT TO RULE 24F-2(a)(1) UNDER THE INVESTMENT COMPANY ACT OF 1940, THE
REGISTRANT HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES.
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
N-4 ITEM NO. PROSPECTUS HEADING
-----------------------------------------------------
1. Cover Page Hartford Life Insurance Company,
Separate Account Two
2. Definitions Definitions
3. Condensed Financial Information None
4. Synopsis or Highlights Summary
5. General Description of Hartford, the Separate Account
Registrant and the Funds
6. Deductions Contract Fees and Charges
7. General Description of Annuity Description of the Contracts,
Contracts Contract Fees and Charges and
Additional Contract Information
8. Annuity Period Selecting an Annuity Payment
Option
9. Death Benefit Description of the Contracts
10. Purchases and Contract Value Description of the Contracts
11. Redemptions Surrenders
12. Taxes Federal Tax Considerations
13. Legal Proceedings Legal Proceedings
14. Table of Contents of the Statement Table of Contents to Statement
Additional Information of Additional Information
15. Cover Page Part B; Statement of Additional
Information
16. Table of Contents Table of Contents
17. General Information and History Description of Hartford Life
Insurance Company
<PAGE>
18. Services None
19. Purchase of Securities Distribution of the Contracts
being Offered
20. Underwriters Distribution of the Contracts
21. Calculation of Performance Data Calculation of Yield and Return
22. Annuity Payments Payments Under the Contract,
Selecting an Annuity Payment Option
23. Financial Statements Financial Statements
24. Financial Statements and Exhibits Financial Statements and Exhibits
25. Directors and Officers of the Directors and Officers of the
Depositor Depositor
26. Persons Controlled by or Under Persons Controlled by or Under
Common Control with the Common Control with the
Depositor or Registrant Depositor or Registrant
27. Number of Contract Owners Number of Contract Owners
28. Indemnification Indemnification
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Location of Accounts and
Records Records
31. Management Services Management Services
32. Undertakings Undertakings
<PAGE>
DIRECTOR IMMEDIATE VARIABLE ANNUITY CONTRACT
INDIVIDUAL SINGLE PREMIUM PAYMENT
HARTFORD LIFE INSURANCE COMPANY
200 HOPMEADOW STREET
SIMSBURY, CONNECTICUT 06070
TELEPHONE: 1-800-862-6668 (CONTRACT
OWNERS)
[LOGO] 1-800-862-7155 (INVESTMENT REPRESENTATIVES)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This prospectus ("Prospectus") describes the individual variable immediate
annuity contract (the "Contract") offered by Hartford Life Insurance Company
("Hartford"). The Contract may be sold to or issued in connection with
retirement plans, including plans that qualify for special federal income tax
treatment under the Internal Revenue Code.
Contract Owner(s) may allocate the Premium Payment and transfer Contract Value
to one or more Sub-Accounts of Hartford Life Insurance Company Separate Account
One (the "Separate Account"). The assets of each Sub-Account are invested solely
in a corresponding mutual fund (the "Funds"). The Funds are:
<TABLE>
<S> <C> <C>
Advisers Fund Sub-Account -- shares of Class IA of Hartford Advisers HLS Fund, Inc.
("Hartford Advisers Fund")
Bond Fund Sub-Account -- shares of Class IA of Hartford Bond HLS Fund, Inc.
("Hartford Bond Fund")
Capital Appreciation Fund Sub-Account -- shares of Class IA of Hartford Capital Appreciation HLS
Fund, Inc. ("Hartford Capital Appreciation Fund")
Dividend and Growth Fund Sub-Account -- shares of Class IA of Hartford Dividend and Growth HLS
Fund, Inc. ("Hartford Dividend and Growth Fund")
Index Fund Sub-Account -- shares of Class IA of Hartford Index HLS Fund, Inc.
("Hartford Index Fund")
International Advisers Fund Sub-Account -- shares of Class IA of Hartford International Advisers HLS
Fund, Inc. ("Hartford International Advisers Fund")
International Opportunities Fund Sub-Account -- shares of Class IA of Hartford International Opportunities
HLS Fund, Inc. ("Hartford International Opportunities
Fund")
MidCap Fund Sub-Account -- shares of Class IA of Hartford MidCap HLS Fund, Inc.
("Hartford MidCap Fund")
Money Market Fund Sub-Account -- shares of Class IA of Hartford Money Market HLS Fund, Inc.
("Hartford Money Market Fund")
Mortgage Securities Fund Sub-Account -- shares of Class IA of Hartford Mortgage Securities HLS
Fund, Inc. ("Hartford Mortgage Securities Fund")
Small Company Fund Sub-Account -- shares of Class IA of Hartford Small Company HLS Fund,
Inc. ("Hartford Small Company Fund")
Stock Fund Sub-Account -- shares of Class IA of Hartford Stock HLS Fund, Inc.
("Hartford Stock Fund")
</TABLE>
Under the Contract, Hartford makes periodic Annuity Payments to the Contract
Owner(s) (or other designated Payee). The dollar amount of each Annuity Payment
varies according to the investment performance of the Funds in which the
selected Sub-Accounts are invested. The Contract Owner(s) bear the investment
risk of amounts invested in the Separate Account.
This Prospectus sets forth the basic information regarding the Contract and the
Separate Account that a prospective investor should know before purchasing a
Contract. The prospectus for the Funds, which provides information regarding
investment objectives and policies of each Fund, should be read in conjunction
with this Prospectus. A Statement of Additional Information providing additional
information about the Contract and the Separate Account has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. The
table of contents for the Statement of Additional Information is on page 43 of
this Prospectus. Call 1-800-862-6668, or write the Administrative Office of
Hartford to obtain a free copy of the Statement of Additional Information.
- --------------------------------------------------------------------------------
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. THIS
PROSPECTUS MUST BE ACCOMPANIED BY THE CURRENT PROSPECTUS FOR EACH OF THE FUNDS.
- --------------------------------------------------------------------------------
AN INVESTMENT IN A CONTRACT IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, NOR IS THE CONTRACT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN A
CONTRACT INVOLVES CERTAIN RISKS, INCLUDING THE RISK OF LOSS OF THE PREMIUM
PAYMENT (PRINCIPAL).
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
PROSPECTUS DATED: MAY 1, 1998
STATEMENT OF ADDITIONAL INFORMATION DATED: MAY 1, 1998
<PAGE>
2 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS........................................................... 3
FEE AND EXPENSE TABLES................................................ 5
ACCUMULATION UNIT VALUE............................................... 7
SUMMARY............................................................... 8
HARTFORD, THE SEPARATE ACCOUNT AND THE FUNDS.......................... 9
Hartford Life Insurance Company..................................... 9
Separate Account.................................................... 9
The Funds........................................................... 9
PERFORMANCE RELATED INFORMATION....................................... 11
DESCRIPTION OF THE CONTRACTS.......................................... 11
Purchasing a Contract............................................... 11
Right to Examine the Contract....................................... 12
Crediting and Allocating the Premium Payment........................ 12
Contract Value Before Income Start Date............................. 12
The Net Investment Factor........................................... 12
Sub-Account Value Transfers Before and After Income Start Date...... 13
Surrenders.......................................................... 13
Death Before Income Start Date...................................... 13
Death On or After the Income Start Date............................. 14
Determination of the Death Benefit.................................. 14
Distribution Requirements: Prior to the Income Start Date........... 14
Payments Under the Contract......................................... 15
SELECTING AN ANNUITY PAYMENT OPTION................................... 15
Annuity Payment Options............................................. 15
Annuity Calculation Date and Income Start Date...................... 16
Income Payment Dates................................................ 16
Variable Annuity Payments........................................... 16
CONTRACT FEES AND CHARGES............................................. 18
Contingent Deferred Sales Charge.................................... 18
Premium Tax Charge.................................................. 18
Mortality and Expense Risk Charge................................... 18
Fund Expenses....................................................... 18
ADDITIONAL CONTRACT INFORMATION....................................... 18
Contract Ownership.................................................. 18
Changing the Contract Owner or Beneficiary.......................... 19
Misstatement of Age or Sex.......................................... 19
Change of Contract Terms............................................ 19
Reports to Contract Owners.......................................... 19
Miscellaneous....................................................... 19
Voting Privileges................................................... 19
FEDERAL TAX CONSIDERATIONS............................................ 20
General............................................................. 20
Taxation of Hartford and the Separate Account....................... 20
Taxation of Purchasers of Non-Qualified Contracts................... 20
Taxation of Purchasers of Qualified Contracts....................... 23
Federal Income Tax Withholding...................................... 24
Contract Owners That Are Nonresident Aliens or Foreign
Corporations....................................................... 24
Other Tax Consequences.............................................. 24
OTHER INFORMATION..................................................... 25
Distribution of the Contracts....................................... 25
Legal Proceedings................................................... 25
Experts............................................................. 25
ILLUSTRATIONS OF ANNUITY PAYMENTS ASSUMING HYPOTHETICAL RATES OF
RETURN.............................................................. 26
ILLUSTRATIONS OF ANNUITY PAYMENTS USING HISTORIC RATES OF RETURN...... 29
TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION............. 43
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 3
- --------------------------------------------------------------------------------
DEFINITIONS
ACCUMULATION UNIT: An accounting unit of measure used to calculate Sub-Account
Value prior to the Annuity Calculation Date.
ADMINISTRATIVE OFFICE OF HARTFORD: Currently located at 200 Hopmeadow Street,
Simsbury, CT. All correspondence concerning this Contract should be sent to P.O.
Box 5085, Hartford, CT 06102-5085, Attn.: Individual Annuity Services, except
overnight or express mail packages, which should be sent to: 200 Hopmeadow
Street, Simsbury, CT 06089.
ANNIVERSARY VALUE: The Commuted Value calculated as of a Contract Anniversary.
ANNUITANT: The person (or persons) whose life (or lives) determines the Annuity
Payments payable under the Contract and whose death determines the Death Benefit
after the Income Start Date. With regard to joint and last survivor Annuity
Payment Options, the maximum number of joint Annuitants is two and provisions
referring to the death of an Annuitant mean the death of the last surviving
Annuitant. Provisions relating to an action by the Annuitant mean, in case of
joint Annuitants, both Annuitants acting jointly. Unless otherwise specified,
the Contract Owner is the Annuitant.
ANNUITY CALCULATION DATE: The date as of which the first Annuity Payment will be
calculated. It will be no more than five days prior to the Income Start Date.
Values calculated prior to the Income Start Date but after the Annuity
Calculation Date will equal values as of the Annuity Calculation Date.
ANNUITY PAYMENT: One of several periodic payments made by Hartford to the Payee
under an Annuity Payment Option.
ANNUITY PAYMENT OPTION: The form of Annuity Payments selected by the Contract
Owner. The Annuity Payment Option is shown on the Contract specifications page
as the "Annuity Benefit."
ANNUITY UNIT: An accounting unit of measure used to calculate the amount of
Variable Annuity Payments.
ANNUITY UNIT FACTOR: The factor applied in computing Annuity Unit values to
neutralize the effect of the Assumed Investment Return.
ASSUMED INVESTMENT RETURN (AIR): The annual rate of return shown on the
specification page of the Contract. This rate is used to determine the degree of
fluctuation in the amount of Variable Annuity Payments in response to
fluctuations in the net investment return of selected Sub-Accounts by assuming
(among other things) that the assets in the Sub-Accounts supporting the Contract
will have a net annual return over the anticipated Annuity Payment period equal
to that rate of return. If the actual performance of the selected Sub-Accounts
is equal to the AIR, the Annuity Payment will be constant. If the actual
performance is greater than the AIR, the Annuity Payment will increase. If the
actual performance is less than the AIR, the Variable Annuity Payment amount
will be lower.
BENEFICIARY: The person(s) entitled to receive the Contract Value upon the death
of the Contract Owner or Annuitant prior to the Income Start Date or, the Death
Benefit upon the death of the Annuitant after the Income Start Date available
under some Annuity Payment Options.
CANCELLATION PERIOD: The "Right to Examine" period described on the cover page
of the Contract during which the Contract Owner may return the Contract.
CODE: The Internal Revenue Code of 1986, as amended.
COMMISSION: U.S. Securities and Exchange Commission.
COMMUTED VALUE: The present value of the remaining guaranteed Annuity Payments
under an Annuity Payment Option having Annuity Payments guaranteed for a
specified number of years, computed using the Assumed Investment Return for the
Contract and the Annuity Unit value(s) calculated as of the date that Hartford
receives a fully completed request for surrender, or Due Proof of Death of the
Annuitant.
CONTRACT ANNIVERSARY: The same date in each Contract Year as the Contract Issue
Date.
CONTRACT ISSUE DATE: The date on which Hartford issues the Contract and on which
the Contract becomes effective. The Contract Issue Date is shown on the
specifications page of the Contract and is used to determine Contract Years and
Contract Anniversaries.
CONTRACT OWNER(S): The person (or persons) who owns (or own) the Contract and
who is (are) entitled to exercise all rights and privileges provided in the
Contract. The maximum number of joint Contract Owners is two. Provisions
relating to action by the Contract Owner mean, in the case of joint Contract
Owners, both Contract Owners acting jointly.
CONTRACT VALUE: The sum of the Sub-Account Values under the Contract prior to
the Annuity Calculation Date.
CONTRACT YEAR: A 12-month period beginning on the Contract Issue Date or on a
Contract Anniversary.
DEATH BENEFIT: The amount payable by Hartford based upon the death of the
Contract Owner or Annuitant prior to the Income Start Date, or upon the death of
Annuitant on or after the Income Start Date. The Death Benefit is calculated as
of the date that Due Proof of Death is received at Hartford.
DUE PROOF OF DEATH: A certified copy of a death certificate, an order of a court
of competent jurisdiction, a statement
<PAGE>
4 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
from a physician who attended the deceased or any other proof acceptable to
Hartford.
FUND: Any open-end management investment company (or investment portfolio
thereof) or unit investment trust (or series thereof) in which a Sub-Account
invests.
HARTFORD: Hartford Life Insurance Company.
INCOME PAYMENT DATE: The date each month, quarter, semi-annual period, or year
as of which Hartford computes the Annuity Payments.
INCOME START DATE: The date as of which the Annuity Payments are to begin. It is
the first Income Payment Date and is shown on the specifications page of the
Contract.
IRA: An "individual retirement annuity" as described in Section 408 of the Code.
JOINT ANNUITANT: A person, other than the primary Annuitant, whose life
determines the Annuity Payments payable. The Contract will have a Joint
Annuitant only if a joint life Annuity Payment Option is elected.
MAXIMUM ANNIVERSARY VALUE: The greatest Anniversary Value under the Contract
while the Annuitant is alive prior to his or her 81st birthday reduced by the
dollar amount of Annuity Payments made since that anniversary.
NET ASSET VALUE: The value per share of any Fund on any Valuation Day. The
method of computing the Net Asset Value is described in the prospectus for each
Fund.
NET INVESTMENT FACTOR: The Net Investment Factor for each of the Sub-Accounts is
equal to the Net Asset Value of the corresponding Fund at the end of the
Valuation Period (plus the per share amount of any dividends or capital gains
distributed by that Fund if the ex-dividend date occurs in the Valuation Period
then ended) divided by the Net Asset Value of the corresponding Fund at the
beginning of the Valuation Period.
NON-QUALIFIED CONTRACT: A Contract that is not a Qualified Contract.
PAYEE: The person or party designated by the Contract Owner to receive Annuity
Payments. Unless otherwise specified the Annuitant is the Payee.
PAYMENT FACTOR: The factor used on the Annuity Calculation Date to calculate the
first Annuity Payment.
PREMIUM PAYMENT: The payment made to Hartford pursuant to the terms of the
Contract.
PREMIUM TAX: The amount of tax charged by a state or municipality on the Premium
Payment or Contract Value.
QUALIFIED CONTRACT: A Contract that is issued in connection with a retirement
plan that qualifies for special federal income tax treatment under Section 408
or Section 457 of the Code.
SEPARATE ACCOUNT: Hartford Life Insurance Company Separate Account Two.
SUB-ACCOUNT: A subdivision of the Separate Account, the assets of which are
invested in a corresponding Fund.
SUB-ACCOUNT VALUE: On or before the Annuity Calculation Date, the amount is
determined on any day by multiplying the number of Accumulation Units
attributable to the Contract in that Sub-Account by the Accumulation Unit value
for that Sub-Account.
SURRENDER VALUE: The Contract Value less any applicable Premium Tax prior to the
Annuity Calculation Date, or the Commuted Value less applicable contingent
deferred sales charges on or after the Annuity Calculation Date.
VALUATION DAY: Every day that the New York Stock Exchange is open for trading.
VALUATION PERIOD: The period that starts at the close of regular trading on the
New York Stock Exchange on any Valuation Day and ends at the close of regular
trading on the next succeeding Valuation Day.
VARIABLE ANNUITY PAYMENT: An Annuity Payment that may vary in amount from one
Income Payment Date to the next as a function of the investment performance of
one or more Sub-Accounts selected by the Contract Owner to support Annuity
Payments.
WRITTEN NOTICE: A notice or request submitted in writing in a form satisfactory
to Hartford that is manually signed by the Contract Owner(s) and received at the
Administrative Office of Hartford.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 5
- --------------------------------------------------------------------------------
FEE AND EXPENSE TABLES
Contract Owner Transaction Expenses
<TABLE>
<S> <C>
Sales Charge imposed on Premium Payment..................... None
Contingent Deferred Sales Charge (as a percentage of
Commuted Value)*
First Year.............................................. 6%
Second Year............................................. 6%
Third Year.............................................. 5%
Fourth Year............................................. 5%
Fifth Year.............................................. 4%
Sixth Year.............................................. 3%
Seventh Year............................................ 2%
Eighth Year............................................. 0%
Exchange Fee................................................ None
</TABLE>
- ---------
* Only applies to PAYMENTS GUARANTEED FOR A SPECIFIED NUMBER OF YEARS. Annuity
Payment Option, after the Income Start Date.
Annual Separate Account Expenses
(as a percentage of average annual net assets)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge........................... 1.25%
Other Charges............................................... None
Total Separate Account Expenses............................. 1.25%
</TABLE>
Annual Fund Operating Expenses
(as percentage of net assets)
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER OPERATING
FEES EXPENSES EXPENSES
---------- -------- ----------
<S> <C> <C> <C>
Hartford Advisers Fund.......................... 0.610% 0.020% 0.630%
Hartford Bond Fund.............................. 0.490% 0.020% 0.510%
Hartford Capital Appreciation Fund.............. 0.620% 0.020% 0.640%
Hartford Dividend and Growth Fund............... 0.660% 0.020% 0.680%
Hartford Index Fund............................. 0.375% 0.015% 0.390%
Hartford International Advisers Fund............ 0.750% 0.120% 0.870%
Hartford International Opportunities Fund....... 0.680% 0.090% 0.770%
Hartford Money Market Fund...................... 0.425% 0.015% 0.440%
Hartford MidCap Fund (1)........................ 0.750% 0.040% 0.790%
Hartford Mortgage Securities Fund............... 0.425% 0.025% 0.450%
Hartford Small Company Fund..................... 0.750% 0.020% 0.770%
Hartford Stock Fund............................. 0.430% 0.020% 0.450%
</TABLE>
- ---------
(1) Hartford MidCap Fund is a new Fund: Operating expenses are based on
annualized estimates of such expenses to be incurred in the current fiscal
year.
The above tables are intended to assist the Contract Owner in understanding
the costs and expenses that he or she will bear directly or indirectly. The
table reflects the current management fees, other expenses and total expenses
for each Fund. Premium Taxes, ranging from 0% to 4%, may also be applicable. For
a more complete description of the various costs and expenses, see "Charges and
Deductions," page - and the prospectus for the Funds which accompanies this
Prospectus.
<PAGE>
6 HARTFORD LIFE INSURANCE COMPANY
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EXAMPLES
A Contract Owner will pay the following expenses on a $1,000 investment,
assuming a 5% annual return on assets and an Annuitant age 65 with a 5% Assumed
Investment Return:
1. If the LIFE Annuity Payment Option is selected and you do not surrender
your Contract:
<TABLE>
<CAPTION>
1 3
SUB-ACCOUNT YEAR YEARS
----- ------
<S> <C> <C>
Advisers Fund................................ $19 $60
Bond Fund.................................... 18 56
Capital Appreciation Fund.................... 19 60
Dividend and Growth Fund..................... 20 61
Index Fund................................... 17 52
International Advisers Fund.................. 22 67
International Opportunities Fund............. 21 64
MidCap Fund.................................. 21 65
Money Market Fund............................ 17 54
Mortgage Securities Fund..................... 17 54
Small Company Fund........................... 21 64
Stock Fund................................... 17 54
</TABLE>
2. If the PAYMENTS GUARANTEED FOR 20 YEARS Annuity Payment Option is
selected and you do not surrender your Contract:
<TABLE>
<CAPTION>
1 3
SUB-ACCOUNT YEAR YEARS
----- ------
<S> <C> <C>
Advisers Fund................................ $19 $60
Bond Fund.................................... 18 56
Capital Appreciation Fund.................... 19 61
Dividend and Growth Fund..................... 20 52
Index Fund................................... 17 67
International Advisers Fund.................. 22 64
International Opportunities Fund............. 21 65
MidCap Fund.................................. 21 54
Money Market Fund............................ 17 54
Mortgage Securities Fund..................... 17 54
Small Company Fund........................... 21 64
Stock Fund................................... 17 54
</TABLE>
3. If the GUARANTEED PAYMENTS FOR 20 YEARS Annuity Payment Option is
selected and you surrender your Contract:
<TABLE>
<CAPTION>
1 3
SUB-ACCOUNT YEAR YEARS
----- ------
<S> <C> <C>
Advisers Fund................................ $79 $110
Bond Fund.................................... 78 106
Capital Appreciation Fund.................... 79 110
Dividend and Growth Fund..................... 80 111
Index Fund................................... 77 102
International Advisers Fund.................. 82 117
International Opportunities Fund............. 81 114
MidCap Fund.................................. 81 115
Money Market Fund............................ 77 104
Mortgage Securities Fund..................... 77 104
Small Company Fund........................... 81 114
Stock Fund................................... 77 104
</TABLE>
These examples should not be considered representations of past or future
performance or expenses. The actual expenses paid or performance achieved may be
greater or less than those shown.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 7
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ACCUMULATION UNIT VALUES
(FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE PERIOD)
The following information has been derived from the audited financial
statements of the Separate Account which have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and should be read in conjunction with those statements which are
included in the Statement of Additional Information, which is incorporated by
reference in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
----------------
<S> <C>
BOND FUND SUB-ACCOUNT
(INCEPTION DATE AUGUST 1, 1986)
Accumulation unit value at beginning of period......... $1.000
Accumulation unit value at end of period............... $2.114
Number accumulation units outstanding at end of period
(in thousands)........................................ 111,586
STOCK FUND SUB-ACCOUNT
(INCEPTION DATE AUGUST 1, 1986)
Accumulation unit value at beginning of period......... $1.000
Accumulation unit value at end of period............... $4.602
Number accumulation units outstanding at end of period
(in thousands)........................................ 372,754
MONEY MARKET FUND SUB-ACCOUNT
(INCEPTION DATE AUGUST 1, 1986)
Accumulation unit value at beginning of period......... $1.000
Accumulation unit value at end of period............... $1.650
Number accumulation units outstanding at end of period
(in thousands)........................................ 140,797
ADVISERS FUND SUB-ACCOUNT
(INCEPTION DATE AUGUST 1, 1986)
Accumulation unit value at beginning of period......... $1.000
Accumulation unit value at end of period............... $3.572
Number accumulation units outstanding at end of period
(in thousands)........................................ 1,012,472
CAPITAL APPRECIATION FUND SUB-ACCOUNT
(INCEPTION DATE AUGUST 1, 1986)
Accumulation unit value at beginning of period......... $1.000
Accumulation unit value at end of period............... $4.845
Number accumulation units outstanding at end of period
(in thousands)........................................ 351,189
MORTGAGE SECURITIES FUND SUB-ACCOUNT
(INCEPTION DATE AUGUST 1, 1986)
Accumulation unit value at beginning of period......... $1.000
Accumulation unit value at end of period............... $2.098
Number accumulation units outstanding at end of period
(in thousands)........................................ 81,143
INDEX FUND SUB-ACCOUNT
(INCEPTION DATE MAY 1, 1987)
Accumulation unit value at beginning of period......... $1.000
Accumulation unit value at end of period............... $3.726
Number accumulation units outstanding at end of (in
thousands)............................................ 109,837
INTERNATIONAL OPPORTUNITIES FUND SUB-ACCOUNT
(INCEPTION DATE JULY 2, 1990)
Accumulation unit value at end of period............... $1.000
Accumulation unit value at end of period............... $1.469
Number accumulation units outstanding at end of period
(in thousands)........................................ 264,642
DIVIDEND & GROWTH FUND SUB-ACCOUNT
(INCEPTION DATE MARCH 8, 1994)
Accumulation unit value at beginning of period......... $1.000
Accumulation unit value at end of period............... $2.149
Number accumulation units outstanding at end of period
(in thousands)........................................ 308,682
INTERNATIONAL ADVISERS FUND SUB-ACCOUNT
(INCEPTION DATE MARCH 1, 1995)
Accumulation unit value at beginning of period......... $1.000
Accumulation unit value at end of period............... $1.319
Number accumulation units outstanding at end of period
(in thousands)........................................ 43,217
HARTFORD SMALL COMPANY FUND SUB-ACCOUNT
(INCEPTION DATE AUGUST 9, 1996)
Accumulation unit value at beginning of period......... $1.000
Accumulation unit value at end of period............... $1.247
Number accumulation units outstanding at end of period
(in thousands)........................................ 56,706
HARTFORD MIDCAP FUND SUB-ACCOUNT
(INCEPTION DATE JULY 30, 1997)
Accumulation unit value at beginning of period......... $1.000
Accumulation unit value at end of period............... $1.097
Number of accumulation units outstanding at end of
period (in thousands)................................. 8,306
</TABLE>
<PAGE>
8 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SUMMARY
GENERAL DESCRIPTION
This Prospectus is designed to provide prospective Contract Owners with
information necessary to decide whether or not to purchase a Contract. This
summary provides a concise description of the more significant aspects of the
Contract. Further detail is provided in this Prospectus, the related Statement
of Additional Information, the Contract, and the prospectus for the Funds. For
further information, contact the Administrative Office of Hartford or your
registered representative.
PURCHASING A CONTRACT
A prospective Contract Owner may purchase a Contract by completing and
submitting an application or an order request along with a single Premium
Payment to the Administrative Office of Hartford. The minimum Premium Payment
for a Contract is $25,000 and the maximum Premium Payment generally is
$1,000,000 (See "Purchasing a Contract," page 11), unless approved by Hartford.
Subject to certain minimum allocation requirements that may be in effect
from time to time, the Premium Payment is allocated to each Sub-Account as
specified on the application or order request. All percentage allocations must
be in whole numbers. (See "Crediting an Allocating Premium Payment," page 12.)
RIGHT TO EXAMINE THE CONTRACT
Contract Owners may cancel the Contract during the Cancellation Period and
receive a refund equal to the Contract Value. The Cancellation Period is a
ten-day period of time beginning when the Contract is received by a Contract
Owner. Some states require a longer Cancellation Period and return of the
Premium Payment. (See "Right to Examine the Contract," page 12.)
TRANSFERS
Prior to the Annuity Calculation Date, a Contract Owner may transfer all or
part of any Sub-Account Value to another available Sub-Account(s), subject to
certain restrictions. (See "Sub-Account Value Transfers," page 13.) Similar
transfers may be made after the Income Start Date, subject to certain
restrictions. (See "Variable Annuity Payments," page 16.)
ANNUITY PAYMENT OPTIONS
The following Annuity Payment Options are available under the Contract: Life
Annuity; LIFE ANNUITY WITH CASH REFUND; LIFE ANNUITY WITH PAYMENTS GUARANTEED
FOR A SPECIFIED NUMBER OF YEARS; JOINT AND LAST SURVIVOR; JOINT AND LAST
SURVIVOR LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR A SPECIFIED NUMBER OF YEARS;
and PAYMENTS GUARANTEED FOR A SPECIFIED NUMBER OF YEARS.
DEATH BENEFITS
The Contract provides for a Death Benefit, under certain Annuity Payment
Options, in the event the Annuitant or Contract Owner(s) die(s) prior to the
Income Start Date and if the Annuitant dies after the Income Start Date. (See
"Payment Upon the Death of Any Contract Owner or the Annuitant," page - .)
Certain Annuity Payment Options do not provide a Death Benefit.
SURRENDERS
Upon Written Notice prior to the Annuity Calculation Date, a Contract Owner
may surrender the Contract and receive the Contract Value. On or after the
Income Start Date under a PAYMENTS GUARANTEED FOR A SPECIFIED NUMBER OF YEARS
Annuity Payment Option, a Contract Owner also may surrender the Contract for the
Surrender Value. (See "Surrenders," page 13.) Surrenders may have adverse
federal income tax consequences including the possibility of being subject to a
penalty tax. (See "Federal Tax Considerations," page 20.)
CHARGES AND FEES
The following charges and fees are assessed under the Contracts:
CONTINGENT DEFERRED SALES CHARGE
Hartford deducts a contingent deferred sales charge if the Contract is
surrendered after the Income Start Date under PAYMENTS GUARANTEED FOR A
SPECIFIED NUMBER OF YEARS Annuity Payment Option. The contingent deferred sales
charge is 6% of the Commuted Value (less any applicable Premium Tax charge) if
surrendered during the first two Contract Years; 5% of the Commuted Value (less
any applicable Premium Tax charge) if surrendered during the third or fourth
contract years; and decreases 1% each Contract Year up to and including the
seventh Contract Year. The contingent deferred sales charge is 0% if the
Contract is surrendered after the seventh Contract Year. No contingent deferred
sales charge is assessed upon the death of the Annuitant after the Income Start
Date.
MORTALITY AND EXPENSE RISK CHARGE
Hartford makes a daily charge of .003446% (approximately equivalent to an
effective annual rate of 1.25%) of the Separate Account's net assets to
compensate it for assuming certain mortality and expense risks. (See "Mortality
and Expense Risk Charge," page 18.)
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 9
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PREMIUM TAX CHARGE
Generally, taxes, if any, on the Premium Payment are incurred as of the
Annuity Calculation Date, and a Premium Tax Charge is deducted from the Contract
Value as of that date. These taxes currently range from 0% to 4.0% of the
Premium Payment. (See "Premium Tax Charge," page 18.)
EXPENSES OF THE FUNDS
The investment experience of each Sub-Account reflects that of the Fund
whose shares it holds. The investment experience of each Fund, in turn, reflects
its fees and other operating expenses. Please read the prospectus for each of
the Funds for details.
HARTFORD, THE SEPARATE ACCOUNT AND THE FUNDS
HARTFORD LIFE INSURANCE COMPANY
Hartford Life Insurance Company ("Hartford") is a stock life insurance
company engaged in the business of writing health and life insurance, both
individual and group, in all states of the United States and the District of
Columbia. Hartford was originally incorporated under the laws of Massachusetts
on June 5, 1902, and was subsequently redomiciled to Connecticut. Its offices
are located in Simsbury, Connecticut; however, its mailing address is P.O. Box
2999, Hartford, CT 06104-2999. Hartford is a subsidiary of Hartford Fire
Insurance Company, one of the largest multiple lines insurance carriers in the
United States. Hartford is ultimately controlled by The Hartford Financial
Services Group, Inc., a Delaware corporation.
HARTFORD RATINGS
<TABLE>
<CAPTION>
EFFECTIVE
DATE OF
RATING AGENCY RATING RATING BASIS OF RATING
- --------------------- --------- ----------- ----------------------
<S> <C> <C> <C>
9/9/97 A+ Financial soundness
A.M. Best and and operating
Company, Inc......... performance.
Standard & Poor's.... 1/23/98 AA Claims paying ability
Duff & Phelps........ 1/23/98 AA+ Claims paying ability
</TABLE>
SEPARATE ACCOUNT
The Separate Account is a separate investment account of Hartford
established under Connecticut law on June 2, 1986. Hartford owns the assets of
the Separate Account. These assets are held separate from Hartford's general
account and its other separate accounts. That portion of the Separate Account's
assets that is equal to the reserves and other Contract liabilities of the
Separate Account is not chargeable with liabilities arising out of any other
business Hartford may conduct.
The Separate Account is registered with the Commission under the Investment
Company Act of 1940 (the "1940 Act") as a unit investment trust and meets the
definition of a "separate account" under the federal securities laws. Such
registration does not involve any supervision by the Commission of the
management of the Separate Account or of Hartford. The Separate Account is also
governed by the laws of Connecticut, Hartford's state of domicile, and may also
be governed by laws of other states in which Hartford does business.
The investment in the Separate Account is allocated to one or more
Sub-Accounts as per the Contract Owner's specifications. Each Sub-Account is
invested exclusively in the assets of one underlying Fund. The Separate Account
has 12 Sub-Accounts, each of which invests in shares of a corresponding Fund.
Income, gains and losses, realized or unrealized, from assets allocated to a
Sub-Account are credited to or charged against that Sub-Account without regard
to other income, gains or losses of Hartford.
CHANGES TO THE SEPARATE ACCOUNT
Hartford may make the following changes to the Separate Account:
1. Any changes required by the 1940 Act or other applicable law or regulation;
2. combine separate accounts, including the Separate Account;
3. add new Sub-Accounts to or remove existing Sub-Accounts from the Separate
Account or combine Sub-Accounts;
4. make Sub-Accounts (including new Sub-Accounts) available to such classes of
Contracts as Hartford may determine;
5. add new Funds or remove existing Funds;
6. substitute new Funds for any existing Fund if shares of the Fund are no
longer available for investment or if Hartford determines that investment in
a Fund is no longer appropriate in light of the purposes of the Separate
Account;
7. de-register the Separate Account under the 1940 Act if such registration is
no longer required; and
8. operate the Separate Account as a management investment company under the
1940 Act or as any other form permitted by law.
No such changes will be made without any necessary approval of the
Commission and applicable state insurance departments. Contract Owners will be
notified of any changes.
THE FUNDS
Each Sub-Account invests in a corresponding Fund. Each of the Funds is an
open-end diversified management investment company managed by HL Investment
Advisors,
<PAGE>
10 HARTFORD LIFE INSURANCE COMPANY
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Inc. ("HL Advisors"), a registered investment adviser. HL Advisors has retained
Wellington Management Company, L.L.P. to act as investment sub-adviser to the
Funds indicated by an asterisk. In addition, HL Advisors has entered into an
investment services agreement with Hartford Investment Management Company
("HIMCO"), for the provision of investment services to the remaining Funds. The
Funds, as well as a brief description of their investment objectives, are
provided below:
HARTFORD ADVISERS FUND
Seeks to achieve maximum long-term total rate of return by investing in
common stocks and other equity securities, bonds and other debt securities, and
money market instruments.*
HARTFORD BOND FUND
Seeks to achieve maximum current income consistent with preservation of
capital by investing primarily in fixed-income securities.
HARTFORD CAPITAL APPRECIATION FUND
Seeks to achieve growth of capital by investing in equity securities
selected solely on the basis of potential for capital appreciation.*
HARTFORD DIVIDEND AND GROWTH FUND
Seeks a high level of current income consistent with growth of capital and
reasonable investment risk. The Fund invests primarily in equity securities and
securities convertible into equity securities.*
HARTFORD INDEX FUND
Seeks to provide investment results which approximate the price and yield
performance of publicly-traded common stocks in the aggregate, as represented by
the Standard & Poor's 500 Composite Stock Price Index.(1)
HARTFORD INTERNATIONAL ADVISERS FUND
Seeks to provide maximum long-term total return consistent with prudent
investment risk. The Fund assets will be diversified among at least five
countries and will be allocated among equity and debt securities and money
market instruments.*
HARTFORD INTERNATIONAL OPPORTUNITIES FUND
Seeks growth of capital by investing primarily in equity securities issued
by non-U.S. companies.*
HARTFORD MIDCAP FUND
Seeks to achieve long-term capital growth through capital appreciation by
investing primarily in equity securities.*
HARTFORD MORTGAGE SECURITIES FUND
Seeks to achieve maximum current income consistent with safety of principal
and maintenance of liquidity by investing primarily in mortgage-related
securities, including securities issued by the Government National Mortgage
Association.
HARTFORD SMALL COMPANY FUND
Seeks to achieve growth of capital by investing primarily in equity
securities selected on the basis of potential for capital appreciation.*
HARTFORD STOCK FUND
Seeks to achieve long-term growth of capital growth by investing primarily
in equity securities.*
HARTFORD MONEY MARKET FUND
Seeks to achieve maximum current income consistent with liquidity and
preservation of capital.
NO ONE CAN ASSURE THAT ANY FUND WILL ACHIEVE ITS STATED OBJECTIVES AND
POLICIES. SINCE EACH UNDERLYING FUND HAS DIFFERENT INVESTMENT OBJECTIVES, EACH
IS SUBJECT TO DIFFERENT RISKS. More detailed information concerning the
investment objectives, policies and restrictions of the Funds, the expenses of
the Funds, the risks attendant to investing in the Funds and other aspects of
their operations can be found in the current prospectus for each Fund which
accompanies this Prospectus and the current statement of additional information
for the Funds. THE FUNDS' PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAN
ALSO BE OBTAINED BY CALLING 1-800-862-6668. The Funds' prospectus should be read
carefully before any decision is made concerning the allocation of the Premium
Payment or transfers of Contract Value among the Sub-Accounts.
Hartford cannot guarantee that each Fund will always be available under the
Contracts, but in the unlikely event that a Fund is not available, Hartford will
take reasonable steps to secure the availability of a comparable fund. Shares of
each Fund are purchased and redeemed at Net Asset Value, without a sales charge.
Shares of the Funds are sold to separate accounts of Hartford and its
insurance company affiliates other than the Separate Account to serve as the
underlying investment for both variable annuity contracts and variable life
insurance contracts, a practice known as "mixed funding." As a result, there is
a possibility that a material conflict may arise between the interests of
Contract Owners, and of owners of other contracts whose contract values are
allocated to one or more of these other separate accounts investing in any
(1)"STANDARD & POOR'S-REGISTERED TRADEMARK-", "S&P-REGISTERED TRADEMARK-", "S&P
500-REGISTERED TRADEMARK-", "STANDARD & POOR'S 500", AND "500" ARE TRADEMARKS OF
THE MCGRAW-HILL COMPANIES, INC. AND HAVE BEEN LICENSED FOR USE BY HARTFORD LIFE
INSURANCE COMPANY. THE INDEX FUND IS NOT SPONSORED, ENDORSED, SOLD OR PROMOTED
BY STANDARD & POOR'S ("S&P") AND S&P MAKES NO REPRESENTATION REGARDING THE
ADVISABILITY OF INVESTING IN THE INDEX FUND.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 11
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one of the Funds. In the event of any such material conflicts, Hartford will
consider what action may be appropriate, including removing the Fund from the
Separate Account or replacing the Fund with another Fund. There are certain
risks associated with mixed funding, as disclosed in the Funds' prospectus.
ALL FUNDS MAY NOT BE AVAILABLE IN ALL STATES.
PERFORMANCE RELATED INFORMATION
The Separate Account may advertise certain performance related information
concerning its Sub-Accounts. Performance information about a Sub-Account is
based on the Sub-Account's past performance only and is no indication of future
performance.
The Advisers Fund, Bond Fund, Capital Appreciation Fund, Dividend and Growth
Fund,Index Fund, International Advisers Fund, International Opportunities Fund,
MidCap Fund, Mortgage Securities Fund, Small Company Fund, Stock Fund, and Money
Market Fund Sub-Accounts may include total return in advertisements or other
sales material.
When a Sub-Account advertises its standardized total return, it will usually
be calculated for one year, five years, and ten years or some other relevant
periods if the Sub-Account has not been in existence for at least ten years.
Total return is measured by comparing the value of an investment in the
Sub-Account at the beginning of the relevant period to the value of the
investment at the end of the period (assuming the deduction of any contingent
deferred sales charge which would be payable if the investment were redeemed at
the end of the period).
In addition to the standardized total return, the Sub-Account may advertise
a non-standardized total return. This figure will usually be calculated for one
year, five years, and ten years or other periods. Non-standardized total return
is measured in the same manner as the standardized total return described above,
except that the contingent deferred sales charge is not deducted. Therefore,
non-standardized total return for a Sub-Account is higher than standardized
total return for a Sub-Account.
The Bond Fund and Mortgage Securities Fund Sub-Accounts may advertise yield
in addition to total return. The yield will be computed in the following manner:
The net investment income per unit earned during a recent one month period,
divided by the unit value on the last day of the period. This figure reflects
the recurring charges at the Separate Account level.
The Money Market Fund Sub-Account may advertise yield and effective yield.
The yield of the Money Market Fund Sub-Account is based upon the income earned
by the Sub-Account over a seven-day period and then annualized, i.e. the income
earned in the period is assumed to be earned every seven days over a 52-week
period and stated as a percentage of the investment. Effective yield is
calculated similarly but when annualized, the income earned by the investment is
assumed to be reinvested in Sub-Account units and thus compounded in the course
of a 52-week period. Yield and effective yield reflect the recurring charges at
the Separate Account level.
The Separate Account may also disclose yield, standard total return, and
non-standard total return for periods prior to the date the Separate Account
commenced operations. For periods prior to the date the Separate Account
commenced operations, performance information for the Sub-Accounts will be
calculated based on the performance of the underlying Funds and the assumption
that the Sub-Accounts were in existence for the same periods as those of the
underlying Funds, with a level of charges equal to those currently assessed
against the Sub-Accounts.
Hartford may provide information on various topics to Contract Owners and
prospective Contract Owners in advertising, sales literature or other materials.
These topics may include the relationship between sectors of the economy and the
economy as a whole and its effect on various securities markets, investment
strategies and techniques (such as value investing, dollar cost averaging and
asset allocation), the advantages and disadvantages of investing in tax-
advantaged and taxable instruments, customer profiles and hypothetical purchase
scenarios, financial management and tax and retirement planning, and other
investment alternatives, including comparisons between the Contracts and the
characteristics of and market for such alternatives.
DESCRIPTION OF THE CONTRACTS
PURCHASING A CONTRACT
A prospective Contract Owner may purchase a Contract by completing and
submitting an application or an order request. The maximum age for Annuitants on
the Contract Issue Date is 90. A single Premium Payment must be delivered to the
Administrative Office of Hartford along with the Contract Owner's application or
an order request. The minimum Premium Payment is $25,000 unless Hartford
specifically consents to a lower Premium Payment. No additional Premium Payments
may be made under the Contracts. Unless Hartford gives its prior approval, it
will not accept a Premium Payment in excess of $1,000,000. Hartford will send
Contract Owners a confirmation notice upon receipt and acceptance of the
Contract Owner's Premium Payment.
<PAGE>
12 HARTFORD LIFE INSURANCE COMPANY
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RIGHT TO EXAMINE THE CONTRACT
Contract Owners may cancel the Contract during the Cancellation Period,
which is the 10-day period beginning on the day the Contract Owner receives the
Contract. Some states may require a longer Cancellation Period. To cancel the
Contract, the Contract Owner must mail or deliver within 10 days, a written
request for cancellation accompanied by the Contract to the Administrative
Office of Hartford.
Hartford will refund the Contract Value as of the date of receipt of the
request for cancellation. The Contract Owner bears the investment risk during
the period prior to Hartford's receipt of the request for cancellation. Hartford
will refund the Premium Payment where required by law.
CREDITING AND ALLOCATING
THE PREMIUM PAYMENT
If the application or an order request for a Contract is properly completed
and is accompanied by any additional information necessary to process it, the
Premium Payment will be allocated, as designated by the Contract Owner, to one
or more of the Sub-Accounts within two business days of receipt. If the
application, order request, or other required information is incomplete when
received, Hartford reserves the right to retain the Premium Payment for up to
five business days while it attempts to complete the information. If the
information cannot be made complete within five business days, the applicant
will be informed of the reasons for the delay and the Premium Payment will be
returned unless the applicant specifically consents to Hartford retaining the
Premium Payment until the information is made complete. The Premium Payment will
then be allocated within two business days after receipt of the complete
information.
Contract Owners may allocate the Premium Payment among any or all available
Sub-Accounts subject to minimum amounts then in effect. Currently, amounts
allocated to any one Sub-Account must equal at least 1% of the net Premium
Payment. All percentage allocations must be in whole numbers.
CONTRACT VALUE BEFORE INCOME START DATE
SUB-ACCOUNT VALUE
The Contract Value is the sum of all Sub-Account Values and therefore
reflects the investment performance of the Sub-Accounts to which it is
allocated. The Sub-Account Value for any Sub-Account as of the Contract Issue
Date is equal to the amount of the Premium Payment allocated to that
Sub-Account. The Sub-Account Value for a Contract is determined on any given day
by the multiplying the number of Accumulation Units attributable to the Contract
in that Sub-Account by the Accumulation Unit value for that Sub-Account.
Therefore, on any Valuation Day the Contract Owner's Sub-Account Value reflects
any variation of the interest income, dividends, net capital gains or losses,
realized or unrealized, and any amounts transferred into or out of that
Sub-Account.
ACCUMULATION UNITS
The portions of the Premium Payment allocated to a Sub-Account or amounts of
Contract Value transferred to a Sub-Account are converted into Accumulation
Units. For any Contract, the number of Accumulation Units credited to a
Sub-Account is determined by dividing the dollar amount directed to the
Sub-Account by the Accumulation Unit value for that Sub-Account for the
Valuation Day as of which the portion of the Premium Payment or transferred
Contract Value is invested in the Sub-Account. Transferred Contract Value is
invested in a Sub-Account as of the end of the Valuation Period during which the
transfer request was received. Therefore, a Premium Payment or portion thereof
allocated to or amounts transferred to a Sub-Account under a Contract increase
the number of Accumulation Units of that Sub-Account credited to the Contract.
Surrenders, transfers out of a Sub-Account, the death of any Contract Owner
or the Annuitant before the Income Start Date, and the application of Contract
Value less Premium Tax to an Annuity Payment Option on the Annuity Calculation
Date all result in a decrease in the number of Accumulation Units of one or more
Sub-Accounts. Accumulation Units are valued as of the end of the Valuation
Period.
The Accumulation Unit value for each Sub-Account was arbitrarily set
initially at $1 when the Sub-Account began operations. Thereafter, the
Accumulation Unit value at the end of every Valuation Day equals the
Accumulation Unit value at the end of the preceding Valuation Day multiplied by
the Net Investment Factor (described below).
THE NET INVESTMENT FACTOR
(BEFORE AND AFTER INCOME START DATE)
The Net Investment Factor is an index applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. For each
Sub-Account, the Net Investment Factor reflects the investment performance of
the Fund in which that Sub-Account invests and the charges assessed against that
Sub-Account for a Valuation Period. The Net Investment Factor is calculated by
dividing (1) by (2) and subtracting (3) from the result, where:
(1) is the result of:
a. the Net Asset Value of the Fund held in the Sub-Account, determined at
the end of the current Valuation Period; plus
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 13
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b. the per share amount of any dividend or capital gain distributions made
by the Fund held in the Sub-Account.
(2) is the Net Asset Value of the Fund held in the Sub-Account, determined at
the beginning of the Valuation Period.
(3) is a daily factor representing the mortality and expense risk charge
deducted from the Sub-Account, adjusted for the number of days in the
Valuation Period.
SUB-ACCOUNT VALUE TRANSFERS
BEFORE AND AFTER INCOME START DATE
The Contract Owner may transfer the values of the Sub-Accounts allocations
from one or more Sub-Accounts to another free of charges. However, Hartford
reserves the right to limit the number of transfers to twelve (12) per Contract
Year, with no two (2) transfers occurring on consecutive Valuation Days.
Transfers by telephone may be made by a Contract Owner or by the
attorney-in-fact pursuant to a power of attorney by calling (800) 862-6668 or by
the agent of record by calling (800) 862-7155. Telephone transfers may not be
permitted by some states for their residents who purchase variable annuities.
The policy of Hartford and its agents and affiliates is that they will not
be responsible for losses resulting from acting upon telephone requests
reasonably believed to be genuine. Hartford will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine; otherwise,
Hartford may be liable for any losses due to unauthorized or fraudulent
instructions. The procedures Hartford follows for transactions initiated by
telephone include requirements that the callers provide certain information for
identification purposes. All transfer instructions by telephone are tape
recorded.
Transfers between Sub-Accounts may be made both before and after the Income
Start Date provided that the minimum allocation to any Sub-Account may not be
less than $500. All percentage (%) allocations must be in whole numbers (e.g.,
1%).
It is the responsibility of the Contract Owner to verify the accuracy of all
confirmations of transfers and to promptly advise Hartford of any inaccuracies
within 30 days of receipt of the confirmation. Hartford will send the Contract
Owner a confirmation of the transfer within five days from the date of any
instructions.
Subject to exceptions set forth in the following paragraph, the right to
reallocate Contract Values is subject to modification if Hartford determines, in
its sole opinion, that the exercise of that right by one or more Contract Owners
is, or would be, to the disadvantage of other Contract Owners. Any modification
could be applied to transfers to or from some or all of the Sub-Accounts and
could include, but would not be limited to, the requirements of a minimum time
period between each transfer, not accepting transfer requests of an agent acting
under power of attorney on behalf of more than one Contract Owner, or limiting
the dollar amount that may be transferred between the Sub-Accounts by a Contract
Owner at any one time. Such restrictions may be applied in any manner reasonably
designed to prevent any use of the transfer right which is considered by
Hartford to be to the disadvantage of other Contract Owners. Some states may
have certain limitations.
Currently, and with respect to Contracts issued in all states, the only
restriction in effect is that Hartford will not accept instructions from agents
acting under a power of attorney of multiple Contract Owners whose accounts
aggregate more than $2 million, unless the agent has entered into a third party
transfer services agreement with Hartford.
SURRENDERS
ON OR BEFORE THE INCOME START DATE
A Contract Owner may surrender the Contract for its Surrender Value at any
time on or before the Income Start Date. A Contract's Surrender Value fluctuates
daily as a function of the investment performance of the Sub-Accounts in which a
Contract Owner is invested. Hartford does not guarantee any minimum Surrender
Value. The Surrender Value will be determined as of the date Hartford receives
the Written Notice for surrender at the Administrative Office of Hartford.
AFTER THE INCOME START DATE
A Contract Owner may surrender the Contract on or after the Income Start
Date only if the PAYMENTS GUARANTEED FOR A SPECIFIED NUMBER OF YEARS Annuity
Payment Option is in effect. Upon such a surrender Hartford pays the Contract
Owner the Commuted Value less any applicable contingent deferred sales charges.
This surrender charge is computed as of the date Hartford receives the Written
Notice for surrender at the Administrative Office of Hartford.
Contract Owners should consult their tax adviser regarding the tax
consequences of a surrender. result in adverse tax consequences, including the
imposition of a penalty tax of 10% of the taxable portion of the Surrender
Value. See "Federal Tax Considerations," page 20 for more details.
DEATH BEFORE INCOME START DATE
If the Contract Owner or the Annuitant dies before the Income Start Date,
Hartford will pay the Death Benefit.
The Death Benefit is an amount equal to the Contract Value. The Contract
Value may be taken in one sum or
<PAGE>
14 HARTFORD LIFE INSURANCE COMPANY
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under any of the settlement options then being offered by Hartford.
IF THE CONTRACT OWNER DIES before the Income Start Date, any surviving joint
Contract Owner becomes the Beneficiary. If there is no surviving joint Contract
Owner, the designated Beneficiary will be the Beneficiary. If the Contract
Owner's spouse is the sole Beneficiary and the Annuitant is living, the spouse
may elect, in lieu of receiving the Contract Value, to be treated as the
Contract Owner. If no Beneficiary designation is in effect or if the Beneficiary
has predeceased the Contract Owner, the Contract Owner's estate will be the
Beneficiary.
IF THE ANNUITANT DIES prior to the Income Start Date and the Contract Owner
is living, the Contract Owner shall be the Beneficiary. In that case, the rights
of any designated Beneficiary shall be voided.
DEATH ON OR AFTER THE INCOME START DATE
If the Annuitant dies on or after the Income Start Date, Hartford will pay
the Death Benefit under the Annuity Payment Option in effect as of the
Annuitant's death. Under some Annuity Payment Options, there is no Death
Benefit.
The Death Benefit on or after the Income Start Date, under the PAYMENTS
GUARANTEED FOR A SPECIFIED NUMBER OF YEARS Annuity Payment Option, is the
greatest of:
a) the Commuted Value;
b) 100% of the Premium Payment reduced by the aggregate dollar amount of all
Annuity Payments made since the Income Start Date; and
c) the Maximum Anniversary Value (the greatest Anniversary Value under the
Contract while the Annuitant is alive prior to his or her 81st birthday
reduced by the dollar amount of Annuity Payments made since that
anniversary).
IF THE ANNUITANT DIES on or after the Income Start Date, the Beneficiary
will have the option of having payments continue to the Beneficiary for the
remainder of the period or taking the Death Benefit in one sum.
IF A CONTRACT OWNER WHO IS NOT THE ANNUITANT, DIES on or after the Income
Start Date, any surviving joint Contract Owner becomes the sole Contract Owner.
If there is no surviving Contract Owner, the Payee becomes the new Contract
Owner. If any Contract Owner dies, the remaining Annuity Payments will be
distributed at least as rapidly as under the method of distribution being used
as of the date of such death.
DETERMINATION OF THE DEATH BENEFIT
The Death Benefit will be calculated as of the date Hartford receives
Written Notice of Due Proof of Death. Any Annuity Payments made on or after the
date of death, but before receipt of Written Notice of Due Proof of Death will
be recovered by Hartford from the Payee.
PRIOR TO THE INCOME START DATE, in the absence of complete instructions to
either pay the Death Benefit in one sum or under one of the settlement options
being offered, the Contract Value will be moved to the Hartford Money Market
Fund.
ON OR AFTER THE INCOME START DATE, in the absence of complete instructions
to either pay the Death Benefit in one sum or continue payments, the present
value of the guaranteed remaining payments will be moved to the Hartford Money
Market Fund.
Upon receipt of complete instructions, Hartford will proceed as follows: If
the instructions are to resume payments, Hartford will make any payments that
went unpaid since the date Hartford received Written Notice of Due Proof of
Death. Hartford will then reallocate the remaining balance in the Hartford Money
Market Fund according to the instructions and resume payments. If the
instructions are to pay the Death Benefit in one sum, Hartford will pay the
Death Benefit.
DISTRIBUTION REQUIREMENTS:
PRIOR TO THE INCOME START DATE
The Contract Value will be distributed based on the Contract Owner's or
Annuitant's date of death and the Beneficiary's election:
1) in a single lump sum within five years;
2) under an Annuity Payment Option provided that:
a) Annuity Payments begin within one year of the date of death, and
b) Annuity Payments are made in substantially equal installments over the
life of the Beneficiary, or
c) Annuity Payments are made in substantially equal installments over a
period not greater than the life expectancy of the Beneficiary;
3) if the sole Beneficiary is the spouse of the deceased Contract Owner, he or
she may by Written Notice within one year of the Contract Owner's death,
elect to continue the Contract as the new Contract Owner. If the spouse so
elects, all of his or her rights as Beneficiary cease and if the deceased
Contract Owner was also the sole Annuitant and appointed no contingent
Annuitant, he or she will become the Annuitant; or
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 15
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4) if the Contract Owner is not an individual, then the "primary Annuitant"
shall be treated as the Contract Owner under 1) and 2) above. For this
purpose, the "primary Annuitant" means the individual, the events in the
life of whom are of primary importance in affecting the timing or amount of
the payout under the Contract.
PAYMENTS UNDER THE CONTRACT
Hartford generally makes payments of surrenders, Death Benefits, or any
Annuity Payments within seven days of receipt of all applicable Written Notices
and/or Due Proofs of Death. However, Hartford may postpone such payments for any
of the following reasons:
1. when the New York Stock Exchange ("NYSE") is closed for trading other than
customary holiday or weekend closing, or trading on the NYSE is restricted,
as determined by the Commission; or
2. when the Commission by order permits a postponement for the protection of
Contract Owners; or
3. when the Commission determines that an emergency exists that would make the
disposal of securities held in the Separate Account or the determination of
their value not reasonably practicable.
If a recent check or draft has been submitted, Hartford has the right to
defer payment of surrenders, payments upon the death of the Contract Owner or
Annuitant before the Income Start Date, Death Benefits, or Annuity Payments
until the check or draft has been honored.
SELECTING AN ANNUITY
PAYMENT OPTION
The Annuity Payment Option specifies the type of annuity to be paid and
determines how long the annuity will be paid, the frequency of Annuity Payments,
and the amount of each Annuity Payment. The Contract Owner must select the
Annuity Payment Option when applying for the Contract. This election is
irrevocable once the Contract is issued. The Contract Owner must select the
Sub-Accounts to which Contract Value less applicable Premium Tax will be
applied. Unless otherwise directed, Sub-Account values, as they exist on the
Annuity Calculation Date, are used to calculate the first Annuity Payment.
ANNUITY PAYMENT OPTIONS
LIFE ANNUITY
Hartford makes Annuity Payments to the Payee for as long as the Annuitant
lives. UNDER THIS OPTION, A PAYEE WOULD RECEIVE ONLY ONE ANNUITY PAYMENT IF THE
ANNUITANT DIES AFTER THE FIRST ANNUITY PAYMENT, TWO ANNUITY PAYMENTS IF THE
ANNUITANT DIES AFTER THE SECOND ANNUITY PAYMENT, ETC.
LIFE ANNUITY WITH CASH REFUND
Hartford makes Annuity Payments to the Payee as long as the Annuitant lives.
If the Annuitant dies and the sum of all Annuity Payments made are less than the
Contract Value less Premium Tax used to purchase Annuity Units on the Annuity
Calculation Date, the Beneficiary is entitled to a Death Benefit. The Death
Benefit equals the Contract Value less Premium Tax used to purchase Annuity
Units on the Annuity Calculation Date minus the sum of all Annuity Payments
made. This Option is only available using the 5% A.I.R.
LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR A SPECIFIED NUMBER OF YEARS
Hartford makes Annuity Payments to the Payee for as long as the Annuitant
lives. At the time this Option is selected, the Contract Owner must select a
specific number of years (a minimum of five years and maximum of: a) 100 minus
the Annuitant's age or b) 40 years, whichever is less). If the Annuitant dies
before the specified number of years has passed, the Beneficiary will have the
option of either having the payments continue to the Beneficiary for the
remainder of the period or receiving the Commuted Value in one sum. Some
restrictions apply to Qualified Contracts with regards to the specified number
of years for which payments are guaranteed.
JOINT AND LAST SURVIVOR LIFE ANNUITY
Hartford makes Annuity Payments to the Payee while both Annuitants are
living. After the death of either Annuitant, Annuity Payments continue to the
Payee for as long as the other Annuitant lives. UNDER THIS OPTION, A PAYEE WOULD
RECEIVE ONLY ONE ANNUITY PAYMENT IF BOTH ANNUITANTS DIE AFTER THE FIRST ANNUITY
PAYMENT, ETC. ANNUITY PAYMENTS AFTER THE DEATH OF THE FIRST ANNUITANT MADE IN
AMOUNTS EQUAL TO 100%, 66.67% OR 50% OF THE AMOUNT THAT WOULD OTHERWISE BE PAID.
JOINT AND LAST SURVIVOR LIFE ANNUITY WITH PAYMENTS
GUARANTEED FOR A SPECIFIED NUMBER OF YEARS WHILE BOTH
ANNUITANTS ARE LIVING
Hartford makes Annuity Payments to the Payee while both Annuitants are
living. After the death of either Annuitant, Annuity Payments continue to the
Payee for as long as the other Annuitant lives. At the time of purchase, the
Contract Owner must elect to have Annuity Payments after the death of the first
Annuitant made in amounts equal to 100%, 66.67% or 50% of the amount that would
otherwise be paid. At the time this Option is selected, the Contract Owner must
select a specific number of years (a minimum of five years and maximum of 100
minus the younger Annuitant's age). If the Annuitants die before the specified
number of years has passed, the Beneficiary will have the
<PAGE>
16 HARTFORD LIFE INSURANCE COMPANY
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option of either having the payments continue to the Beneficiary for the
remainder of the period or receiving the Commuted Value in one sum. Some
restrictions apply to Qualified Contracts with regards to the specified number
of years for which payments are guaranteed.
PAYMENTS GUARANTEED FOR A SPECIFIED NUMBER OF YEARS
Hartford makes Annuity Payments to the Payee for the number of years (a
minimum of five years and maximum of 100 minus the Annuitant's age) selected by
the Contract Owner. If the Annuitant dies before the specified number of years
has passed, payments to the Beneficiary will continue until the specified number
of years has elapsed. After the death of the Annuitant, the Beneficiary will
have the option of either having the payments continue to the Beneficiary for
the remainder of the period or receiving the Commuted Value in one sum. Some
restrictions apply to Qualified Contracts with regards to the specified number
of years for which payments are guaranteed.
Prior to the death of the Annuitant, the Contract Owner may elect to receive
the Commuted Value. If the Contract Owner makes this election, Hartford will
deduct the contingent deferred sales charge from the Commuted Value before
paying it to the Contract Owner.
ANNUITY CALCULATION DATE
AND INCOME START DATE
The Contract Owner selects the Income Start Date in the application or order
request. The Annuity Calculation Date will be no more than five Valuation Days
before the Income Start Date. The Contract Value less any applicable Premium Tax
is applied to purchase Annuity Units of the Sub-Accounts selected by the
Contract Owner as of the Annuity Calculation Date. The first Annuity Payment is
computed using the value of such Annuity Units as of the Annuity Calculation
Date.
INCOME PAYMENT DATES
All Annuity Payments after the first Annuity Payment are computed and
payable as of the Income Payment Dates. These dates are the same day of the
month as the Income Start Date based on the Annuity Payment frequency selected
by the Contract Owner and shown on the specification page of the Contract.
Available Annuity Payment frequency includes monthly, quarterly, semi-annual and
annual. The Annuity Payment frequency may not be changed once selected by the
Contract Owner.
In the event that the Contract Owner does not select an Annuity Payment
frequency, Annuity Payments will be made monthly.
VARIABLE ANNUITY PAYMENTS
THE FIRST VARIABLE ANNUITY PAYMENT
Variable Annuity Payments are periodic payments from Hartford to the
designated Payee, the amount of which varies from one Income Payment Date to the
next as a function of the net investment performance of the Sub-Accounts
selected by the Contract Owner to support such Annuity Payments. The dollar
amount of the first Variable Annuity Payment depends on the Annuity Payment
Option chosen, the age of the Annuitant, the gender of the Annuitant (if
applicable), the amount of Contract Value applied to purchase the Annuity
Payments, and the applicable annuity purchase rates based on the 1983a
Individual Annuity Mortality table using projection scale G projected to the
year 2000 and an Assumed Investment Return of not less than 3.0%.
The dollar amount of the first Variable Annuity Payment attributable to each
Sub-Account is determined by dividing the dollar amount of the Contract Value
less applicable Premium Tax applied to that Sub-Account on the Annuity
Calculation Date by $1,000 and multiplying the result by the Payment Factor in
the Contract for the selected Annuity Payment Option. The dollar value of the
first Variable Annuity Payment is the sum of the first Variable Annuity Payments
attributable to each Sub-Account.
ANNUITY UNITS
The number of Annuity Units attributable to a Sub-Account is derived by
dividing the first Variable Annuity Payment attributable to that Sub-Account by
the Annuity Unit value for that Sub-Account for the Valuation Period ending on
the Annuity Calculation Date or during which the Annuity Calculation Date falls
if the Valuation Period does not end on such date. The number of Annuity Units
attributable to each Sub-Account under a Contract remains fixed unless there is
a transfer of Annuity Units between Sub-Accounts.
SUBSEQUENT VARIABLE ANNUITY PAYMENTS
The dollar amount of each subsequent Variable Annuity Payment attributable
to each Sub-Account is determined by multiplying the number of Annuity Units of
that Sub-Account credited under the Contract by the Annuity Unit value
(described below) for that Sub-Account for the Valuation Period ending on the
Income Payment Date, or during which the Annuity Payment Date falls if the
Valuation Period does not end on such date. The dollar value of each subsequent
Variable Annuity Payment is the sum of the subsequent Variable Annuity Payments
attributable to each Sub-Account. Notwithstanding the foregoing, when an Income
Payment Date would fall on a day that is not a Valuation Day, the Income Payment
is computed as of the Valuation Day immediately following what would have been
the Income Payment Date.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 17
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The Annuity Unit value of each Sub-Account for any Valuation Period is equal
to (a) multiplied by (b) divided by (c) where:
(a) is the Net Investment Factor for the Valuation Period for which the Annuity
Unit value is being calculated;
(b) is the Annuity Unit value for the preceding Valuation Period; and
(c) is a daily Assumed Investment Return factor (for the 3%, 5% or 6% Assumed
Investment Return) adjusted for the number of days in the Valuation Period.
The Annuity Unit Factor is equal to one plus the applicable Assumed
Investment Return percentage. Therefore, for 3%, it is 1.03, for 5% it is 1.05
and for 6% it is 1.06. The annual factors can be translated into daily factor of
1.00008098, 1.00013368, and 1.00015965, respectively.
THE ASSUMED INVESTMENT RETURN
The Annuity Unit value will increase or decrease from one Income Payment
Date to the next in direct proportion to the net investment return of the
Sub-Account or Sub-Accounts supporting the Variable Annuity Payments, less an
adjustment to neutralize the selected Assumed Investment Return. Dividing what
would otherwise be the Annuity Unit value by the Assumed Investment Return
factor is necessary in order to adjust the change in the Annuity Unit value
(resulting from the Net Investment Factor) so that the Annuity Unit value only
changes to the extent that the Net Investment Factor represents a rate of return
greater than or less than the Assumed Investment Return selected by the Contract
Owner. Without this adjustment, the Net Investment Factor would decrease the
Annuity Unit value to the extent that such value represented an annualized rate
of return of less than 0.0% and increase the Annuity Unit value to the extent
that such value represented an annualized rate of return of greater than 0.0%.
Subject to state approval, the Contract permits Contract Owners to select
one of three Assumed Investment Returns: 3%, 5% or 6%. A higher Assumed
Investment Return will result in a higher initial payment, a more slowly rising
series of subsequent payments when actual investment performance (minus any
deductions and expenses) exceeds the Assumed Investment Return, and a more rapid
drop in subsequent payments when actual investment performance (minus any
deductions and expenses) is less than the Assumed Investment Return. The
following examples may help clarify the impact of selecting one Assumed
Investment Return over another:
1. If a Contract Owner selects a 3% ASSUMED INVESTMENT Return and if the net
investment return of the Sub-Account for an Annuity Payment period is equal
to the pro-rated portion of the 3% Assumed Investment Return, the Variable
Annuity Payment attributable to that Sub-Account for that period will equal
the Annuity Payment for the prior period. To the extent that such net
investment return exceeds an annualized rate of return of 3% for a payment
period, the Annuity Payment for that period will be greater than the Annuity
Payment for the prior period. To the extent that such return for a period
falls short of an annualized rate of 3%, the Annuity Payment for that period
will be less than the Annuity Payment for the prior period.
2. If a Contract Owner selects a 5% ASSUMED INVESTMENT RETURN and if the net
investment return of the Sub-Account for an Annuity Payment period is equal
to the pro-rated portion of the 5% Assumed Investment Return, the Variable
Annuity Payment attributable to that Sub-Account for that period will equal
the Annuity Payment for the prior period. To the extent that such net
investment return exceeds an annualized rate of return of 5% for a payment
period, the Annuity Payment for that period will be greater than the Annuity
Payment for the prior period. To the extent that such return for a period
falls short of an annualized rate of 5%, the Annuity Payment for that period
will be less than the Annuity Payment for the prior period.
3. If a Contract Owner selects a 6% ASSUMED INVESTMENT RETURN and if the net
investment return of the Sub-Account for an Annuity Payment period is equal
to the pro-rated portion of the 6% Assumed Investment Return, the Variable
Annuity Payment attributable to that Sub-Account for that period will equal
the Annuity Payment for the prior period. To the extent that such net
investment return exceeds an annualized rate of return of 6% for a payment
period, the Annuity Payment for that period will be greater than the Annuity
Payment for the prior period. To the extent that such return for a period
falls short of an annualized rate of 6%, the Annuity Payment for that period
will be less than the Annuity Payment for the prior period.
Exchange ("Transfer") of Annuity Units. Calculation Date, the Contract Owner
may exchange (I.E., "transfer") the dollar value of a designated number of
Annuity Units of a particular Sub-Account for an equivalent dollar amount of
Annuity Units of another Sub-Account. On the date of the transfer, the dollar
amount of a Variable Annuity Payment generated from the Annuity Units of either
Sub-Account would be the same. Transfers are executed as of the day Hartford
receives Written Notice requesting transfer. For guidelines refer to
"Sub-Account Value Transfers" on page 13.
<PAGE>
18 HARTFORD LIFE INSURANCE COMPANY
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CONTRACT FEES AND CHARGES
CONTINGENT DEFERRED SALES CHARGE
No sales charge is deducted from the Premium Payment at the time that the
Payment is made. However, a contingent deferred sales charge is deducted when a
Contract Owner elects to receive the Commuted Value under the PAYMENTS
GUARANTEED FOR A SPECIFIED NUMBER OF YEARS ANNUITY PAYMENT OPTION.
In the event that surrender charges from the Contracts are not sufficient to
cover the expenses of selling the Contracts, Hartford will bear such expenses.
Conversely, if the revenue from such charges exceeds such expenses, the excess
of revenues from such charges over expenses will be retained by Hartford.
The surrender charge is equal to a percentage of the Commuted Value (not to
exceed the Premium Payment) and is deducted from those values prior to their
being paid.
<TABLE>
<CAPTION>
SURRENDER CHARGE AS A PERCENTAGE
CONTRACT YEAR OF COMMUTED VALUE
- ---------------- -----------------------------------
<S> <C>
1 6%
2 6%
3 5%
4 5%
5 4%
6 3%
7 2%
8 or more 0%
</TABLE>
PREMIUM TAX CHARGE
Certain states and municipalities impose a tax on Hartford in connection
with the Premium Payment or Contract Value. This tax can range from 0% to 4% of
either the Premium Payment or the Contract Value and is generally based on the
Contract Owner's state of residence. Taxes are generally incurred by Hartford as
of the Annuity Calculation Date. Hartford deducts the charge for taxes from the
Contract Value on the Annuity Calculation Date. Some jurisdictions impose a tax
on the Premium Payment at the time the Premium Payment is received. In those
jurisdictions, Hartford's current practice is to pay the tax on the Premium
Payment and then deduct the charge for these taxes from the Contract Value on a
surrender prior to Annuity Calculation Date, or on the Annuity Commencement
Date.
MORTALITY AND EXPENSE RISK CHARGE
Hartford deducts a daily charge from the assets of the Separate Account to
compensate Hartford for mortality and expense risks that Hartford assumes under
the Contracts. The daily charge is at the rate of 0.003446% (approximately
equivalent to an effective annual rate of 1.25%) of the net assets of the
Separate Account. Approximately .90% of this annual charge is for the assumption
of mortality risk and .35% is for the assumption of expense risk.
The mortality risk that Hartford assumes (for life contingency based Annuity
Payment Options) is the risk that Annuitants, as a group, will live for a longer
period of time than Hartford estimated when it established the annuity purchase
rates in the Contract. Because of these guarantees, each Contract Owner is
assured that the Annuitant's longevity will not have an adverse effect on the
Annuity Payments that the Payee receives under Annuity Payment Options based on
life contingencies. Hartford also assumes a mortality risk because the Contracts
guarantee a "death benefit" if the Contract Owner or Annuitant dies before the
Income Start Date.
FUND EXPENSES
The investment performance of each Fund reflects the management fee that the
Fund pays to its investment manager as well as other operating expenses that the
Fund incurs. Investment management fees are generally daily fees computed as a
percent of a Fund's average daily net assets at an annual rate. Please read the
prospectus for each Fund for complete details.
ADDITIONAL CONTRACT INFORMATION
CONTRACT OWNERSHIP
The Contract belongs to the Contract Owner. A Contract Owner may exercise
all of the rights and options described in the Contract. Only the Annuitant may
be the owner of an IRA Contract.
The Contract Owner's rights include the right to: (1) select or change the
Contract Owner, (2) select or change any Beneficiary or contingent Beneficiary,
(3) select or change the Payee while the Annuitant is still alive, (4) allocate
the Premium Payment among and between the Sub-Accounts, (5) transfer Contract
Value among and between the Sub-Accounts, and (6) exchange or transfer Annuity
Units between Sub-Accounts on which Variable Annuity Payments are based.
The rights of owners of Qualified Contracts may be restricted by the terms
of a related employee benefit plan. For example, such plans may require an owner
of a Qualified Contract to obtain the consent of his or her spouse before
exercising certain ownership rights or may restrict withdrawals. See "Federal
Tax Considerations," page 20 for more details.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 19
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Selection of an Annuitant or Payee who is not the Contract Owner may have
adverse tax consequences. See "Federal Tax Considerations," page 20 for more
details.
CHANGING THE CONTRACT OWNER OR BENEFICIARY
At any time after the Cancellation Period, a Contract Owner may transfer
ownership of the Contract subject to Hartford's policies and procedures at the
time of the change.
At any time prior to the death of the Annuitant, the Contract Owner may name
a new Beneficiary by Written Notice unless an irrevocable Beneficiary has
previously been named. When an irrevocable Beneficiary has been designated, the
Contract Owner must provide the irrevocable Beneficiary's written consent to
Hartford before a new Beneficiary is designated.
These changes take effect as of the day the Written Notice was signed and
dated. Hartford is not liable for any payments made under the Contract prior to
the effectiveness of any change. For possible tax consequences of these changes,
see "Federal Tax Considerations," page 20.
MISSTATEMENT OF AGE OR SEX
If an age or sex of the Annuitant given to Hartford (in the application or
otherwise) is misstated, Hartford will adjust the benefits it pays under the
Contract to the amount that would have been payable at the correct age or sex.
If Hartford made any underpayments because of any such misstatement, it shall
pay the amount of such underpayment to the Payee or Beneficiary in one sum. If
Hartford makes any overpayments because of a misstatement of age or sex, it
shall deduct from current or future payments due under the Contract, the amount
of such overpayment.
CHANGE OF CONTRACT TERMS
Upon notice to the Contract Owner, Hartford may modify the Contract to:
1. conform the Contract or the operations of Hartford or of the Separate
Account to the requirements of any law to which the Contract, Hartford or
the Separate Account is subject;
2. assure continued qualification of the Contract as an annuity contract or a
Qualified Contract under the Code;
3. reflect a change (as permitted in the Contract) in the operation of the
Separate Account.
In the event of any such modification, Hartford will make appropriate
endorsements to the Contract.
No modification of this Contract shall be made except over the signature of
the President, a Vice President, an Assistant Vice President or a Secretary of
Hartford. Any modification or waiver must be in writing. No agent may bind
Hartford by making any promise not contained in the Contract.
REPORTS TO CONTRACT OWNERS
Hartford sends each Contract Owner a report at least annually, or more often
as required by law, indicating: the number of Accumulation or Annuity Units and
the dollar value of such units; the Contract Value prior to the Annuity
Calculation Date; the Premium Payment; or surrenders made before the Annuity
Calculation Date; Annuity Payments on or after the Income Start Date; and any
other information required by law.
The reports, which are mailed to Contract Owners at their last known
address, include any information that may be required by the Commission or the
insurance supervisory official of the jurisdiction in which the Contract is
issued.
Hartford also sends any other reports, notices or documents required by law
to be furnished to Owners.
MISCELLANEOUS
NON-PARTICIPATING
The Contract does not participate in the surplus or profits of Hartford and
Hartford does not pay dividends on the Contract.
PROOF OF AGE AND SURVIVAL
Hartford reserves the right to require proof of the Annuitant's age and
gender prior to the Annuity Calculation Date. In addition, Hartford reserves the
right to require proof that the Annuitant is living before any Income Payment
Date.
CONTRACT APPLICATION OR ORDER REQUEST
Hartford issues the Contract in consideration of the Contract Owner's
application or order request and Premium Payment. The entire Contract is made up
of the Contract and any attached endorsements or riders. In the absence of
fraud, Hartford considers statements made in the application or order request to
be representations and not warranties. Hartford will not use any statement in
defense of a claim or to void the Contract unless it is contained in the
application or order request. Hartford will not contest the Contract.
VOTING PRIVILEGES
In accordance with current interpretations of applicable law, Hartford votes
Fund shares held in the Separate
<PAGE>
20 HARTFORD LIFE INSURANCE COMPANY
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Account at regular and special shareholder meetings of the Funds in accordance
with instructions received from persons having voting interests in the
corresponding Sub-Accounts.
The number of votes that a Contract Owner has the right to instruct are
calculated separately for each Sub-Account, and may include fractional votes.
Prior to the Annuity Calculation Date, the Contract Owner holds a voting
interest in each Sub-Account to which Variable Contract Value is allocated.
After the Annuity Calculation Date, the Contract Owner has a voting interest in
each Sub-Account from which Variable Annuity Payments are made.
For each Contract Owner prior to the Annuity Calculation Date, the number of
votes attributable to a Sub-Account will be determined by dividing the Contract
Owner's Sub-Account Value by the Net Asset Value of the Fund in which that
Sub-Account invests. For each Contract Owner after the Annuity Calculation Date,
the number of votes attributable to a Sub-Account is determined by dividing the
liability for future Variable Annuity Payments to be paid from that Sub-Account
by the Net Asset Value of the Fund in which that Sub-Account invests. This
liability for future payments is calculated on the basis of the mortality
assumptions, the selected Assumed Investment Return and the Annuity Unit value
of that Sub-Account. As Variable Annuity Payments are made to the Payee, the
liability for future payments decreases as does the number of votes.
The number of votes available to a Contract Owner are determined as of the
date coinciding with the date established by the Fund for determining
shareholders eligible to vote at the relevant meeting of the Fund's
shareholders. Voting instructions are solicited by written communication prior
to such meeting in accordance with procedures established for the Fund. Each
Contract Owner or Payee having a voting interest in a Sub-Account will receive
proxy materials and reports relating to any meeting of shareholders of the Funds
in which that Sub-Account invests.
Fund shares as to which no timely instructions are received and shares held
by Hartford in a Sub-Account as to which no Owner or Payee has a beneficial
interest are voted in proportion to the voting instructions that are received
with respect to all Contracts participating in that Sub-Account. Voting
instructions to abstain on any item to be voted upon are applied to reduce the
total number of votes eligible to be cast on a matter.
FEDERAL TAX CONSIDERATIONS
GENERAL
TAX LAW IS COMPLEX AND TAX CONSEQUENCES WILL VARY ACCORDING TO THE ACTUAL
STATUS OF THE CONTRACT OWNER AND, IF APPLICABLE, THE TYPE OF RETIREMENT PROGRAM
FOR WHICH THE CONTRACT IS PURCHASED. THEREFORE, A PERSON, TRUSTEE OR OTHER
ENTITY CONTEMPLATING THE PURCHASE OF A CONTRACT MAY NEED LEGAL AND TAX ADVICE.
This Prospectus does not provide a detailed description of the federal
income tax consequences of purchasing a Contract. Special tax rules may apply to
certain purchase situations not discussed herein. In addition, no attempt is
made here to consider any applicable state or other tax laws. For detailed
information, a prospective purchaser should always consult a qualified tax
adviser. This discussion is based on Hartford's understanding of current federal
income tax laws as they are currently interpreted.
TAXATION OF HARTFORD AND THE SEPARATE ACCOUNT
The Separate Account is taxed as part of Hartford which is taxed as a life
insurance company under Subchapter L of Chapter 1 of the Code. Accordingly, the
Separate Account is not separately taxed as a "regulated investment company"
under subchapter M. Investment income and any realized capital gains on the
assets of the Separate Account are reinvested and are taken into account in
determining the value of the Accumulation and Annuity Units. As a result, such
investment income and realized capital gains are automatically applied to
increase reserves under the Contract.
No taxes are due on interest, dividends and short-term or long-term capital
gains earned by the Separate Account with respect to Qualified or Non-Qualified
Contracts.
TAXATION OF PURCHASERS
OF NON-QUALIFIED CONTRACTS
CORPORATIONS, TRUSTS AND OTHER NON-NATURAL PERSONS
Section 72 of the Code governs the taxation of annuity contracts and
contains provisions relating to non-natural Contract Owners. Non-natural persons
include, among others, corporations, trusts, and partnerships. In general,
unless the non-natural person holds a Contract as agent for a natural person,
the annual net increase in the value of the Contract is includable in the
non-natural person's gross income for the tax period in which the net increase
occurs. There is, however, an exception to this general rule for certain annuity
contracts held by structured settlement companies, certain annuity contracts
held by an employer with respect to a terminated qualified retirement plan and
certain immediate annuity contracts. For this purpose, an immediate annuity
means an annuity that is purchased with a single premium payment, that has an
annuity start date commencing no later than one year from the date of purchase,
and that provides for a series of substantially equal periodic payments to be
made not less frequently than annually during the annuity period. A non-natural
person
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 21
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which is a tax-exempt entity for federal income tax purposes is not subject to
income tax as a result of Section 72 of the Code.
NATURAL PERSONS
Section 72 generally provides that a Contract Owner is not taxed on
increases in the value of the Contract until an amount distributed from the
Contract is received (or deemed received) by the Contract Owner, either in the
form of Annuity Payments, as contemplated by the Contract, or in some other form
(i.e., surrender or Death Benefit). However, this tax deferral generally applies
only if: (1) the investments in the Separate Account are "adequately
diversified" in accordance with Treasury Department regulations, (2) Hartford,
rather than the Contract Owner, is considered the owner of such assets for
federal income tax purposes, and (3) certain distribution requirements are met
in the event that the Contract Owner dies. These requirements are discussed
further under the caption "Tax Status of the Contract" below.
DISTRIBUTIONS PRIOR TO THE INCOME START DATE
The Contract does not permit partial withdrawals or partial surrenders or
loans. If, however, a Contract is surrendered prior to the Income Start Date,
amounts received by the Contract Owner are includable in his or her income to
the extent that such amounts exceed the "investment in the contract." For this
purpose, the investment in the contract at any time equals the Premium Payment
(to the extent that such Payment was neither deductible when made nor excludable
from income as, for example, in the case of certain contributions to Qualified
Contracts), less any amounts previously received from the Contract which were
not includable in income. Also, the Surrender Value may be subject to a penalty
tax, described below. In general, an assignment of the Contract (or other change
of ownership) without full and adequate consideration will be treated as a
distribution from the Contract and taxed in the same manner as a surrender
(except where the Contract is transferred between spouses or incident to a
divorce).
The Contract provides that upon the death of Contract Owner, Annuitant or
Joint Annuitant, the Beneficiary will receive the Contract Value. This
distribution is includable in the Beneficiary's income as follows: (1) if
distributed in a lump sum, it is taxed in the same manner as a surrender, (2) if
it is distributed in the form of Annuity Payments, it is taxed in the same
manner as Annuity Payments (see below).
DISTRIBUTIONS AFTER THE INCOME START DATE
The portion of each Annuity Payment taxable as ordinary income is equal to
the excess of the Annuity Payment over the "exclusion amount." The "exclusion
amount" is the investment in the Contract (described above), adjusted for any
guaranteed period, divided by the number of Annuity Payments expected to be made
(determined by Treasury Department regulations that take into account the
Annuitant's life expectancy and the Annuity Payment Option elected). After the
dollar amount of the investment in the Contract, adjusted for any guaranteed
period, is deemed to be recovered, the entire amount of each Annuity Payment is
fully includable in income. Nonetheless, should the Annuity Payments cease
before the adjusted investment in the Contract is fully recovered, a deduction
is allowed for the unrecovered amount of the adjusted investment in the
Contract. Where a guaranteed period of Annuity Payments is selected and the
Annuitant does not live to the end of that period, the Annuity Payments for the
remainder of the period are includable in income as follows: (1) if distributed
in a lump sum, they are included in income to the extent that they exceed the
unrecovered investment in the Contract at that time, or (2) if received as
Annuity Payments, they are fully excluded from income until the remaining
investment in the Contract is deemed to be recovered. All Annuity Payments
thereafter are fully includable in income.
PENALTY TAX ON CERTAIN DISTRIBUTIONS
Distributions received (or deemed received) from a Contract (before or after
the Income Start Date) may be subject to a penalty tax equal to 10% of the
amount treated as taxable income. In general, however, there is no penalty tax
on distributions:
1. made on or after a taxpayer reaches age 59 1/2;
2. made on or after the death of the Contract Owner;
3. attributable to a taxpayer's becoming disabled;
4. that are part of a series of substantially equal periodic payments (not less
frequently than annually) for the life (or the life expectancy) of the
taxpayer or the joint lives (or joint life expectancies) of the taxpayer and
his or her designated beneficiary;
5. made under certain annuities issued in connection with structured settlement
agreements; and
6. made under an annuity contract that is purchased with a single premium
payment when the annuity date is no later than a year from purchase and
substantially equal periodic payments are made, not less frequently than
annually, during the annuity payment period.
AGGREGATION OF TWO OR MORE CONTRACTS
All non-qualified deferred annuity contracts that are issued by Hartford (or
its affiliates) to the same owner during any calendar year are treated as one
annuity contract for purposes of determining the amount includable in gross
income under Section 72(e) of the Code. The effects of this rule are not yet
clear; however, it could affect the time when income is taxable and the amount
that might be subject to the 10% penalty tax described above. In addition, the
Treasury Department has specific authority to issue regulations that prevent the
avoidance of Section 72(e) of the Code through the serial purchase of annuity
contracts or otherwise. There may also be other situations in which the
<PAGE>
22 HARTFORD LIFE INSURANCE COMPANY
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Treasury Department may conclude that it would be appropriate to aggregate two
or more deferred or immediate annuity contracts purchased by the same owner.
Accordingly, a Contract Owner should consult a competent tax adviser before
purchasing more than one annuity contract in a calendar year.
POSSIBLE CHANGES IN TAXATION
In past years, legislation has been proposed that would have adversely
modified the federal taxation of certain annuity contracts. For example, one
such proposal would have changed the tax treatment of non-qualified annuities
that did not have "substantial life contingencies" by taxing income as it is
credited to the annuity contract. Although as of the date of this Prospectus
Congress is not considering any legislation regarding taxation of annuity
contracts, there is always the possibility that the tax treatment of annuities
could change by legislation or other means (such as IRS regulations, revenue
rulings, judicial decisions, etc.). Moreover, it is also possible that any
change could be retroactive (that is, effective prior to the date of the
change).
CONTRACTS OBTAINED THROUGH A TAX-FREE EXCHANGE OF OTHER ANNUITY OR LIFE
INSURANCE CONTRACTS
Section 1035 of the Code generally provides that no gain or loss shall be
recognized on the exchange of one annuity contract for another. If the
surrendered contract was issued prior to August 14, 1982, the tax rules formerly
provided that the surrender was taxable only to the extent the amount received
exceeds the owner's investment in the contract will and continue to apply to
amounts allocable to investments in that contract prior to August 14, 1982. In
contrast, contracts issued after January 19, 1985 in a Code Section 1035
exchange are treated as new contracts for purposes of the penalty and
distribution-at-death rules. Special rules and procedures apply to Section 1035
transactions. Prospective Contract Owners wishing to take advantage of Section
1035 should consult their tax adviser.
TAX STATUS OF THE CONTRACTS
The foregoing discussion assumes that the Contracts qualify as "annuity
contracts" for federal income tax purposes under the Code.
DIVERSIFICATION REQUIREMENTS
Section 817(h) of the Code provides that separate account investments
underlying a contract must be "adequately diversified" in accordance with
Treasury Department regulations in order for the contract to qualify as an
annuity contract under Section 72 of the Code. The Separate Account, through
each underlying Fund, intends to comply with the diversification requirements
prescribed in regulations under Section 817(h) of the Code, which affect how the
assets in the various Sub-Accounts may be invested. Although Hartford does not
have direct control over the Funds in which the Separate Account invests,
Hartford believes that each Fund will meet the diversification requirements, and
therefore, the Contract will be treated as an annuity contract under the Code.
The Treasury Department has issued diversification regulations which
generally require, in effect, among other things, that no more than 55% of the
value of the total assets of each Fund is represented by any one investment, no
more than 70% is represented by any two investments, no more than 80% is
represented by any three investments, and no more than 90% is represented by any
four investments. In determining whether the diversification standards are met,
all securities of the same issuer, all interests in the same real property
project, and all interests in the same commodity are each treated as a single
investment. In addition, in the case of government securities, each government
agency or instrumentality shall be treated as a separate issuer.
In certain circumstances, owners of variable annuity 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 the separate account assets would be includable in the variable
annuity contract owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the contract owner possesses 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
concerning investment 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., the
contract owner), rather than the insurance company, to be treated as the owner
of the assets in the account." This announcement also states that guidance would
be issued by way of regulations or rulings on the "extent to which policyholders
may direct their investments to particular Sub-Accounts 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 Contracts are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, the Contract Owner has the choice of several Sub-Accounts in which to
allocate the Premium Payment and Contract Value, and may be able to transfer
Contract Value among Sub-Accounts more frequently than in such rulings. In
addition, the Contract provides for more Sub-Accounts than did the variable
contracts that were the subject of the such rulings. These differences could
result in a Contract Owner being treated as the owner of the assets of the
Separate Account. In addition, Hartford 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. Hartford therefore reserves the right to modify the
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 23
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Contract as necessary to attempt to prevent the Contact Owner from being
considered the owner of the Separate Account's assets.
REQUIRED DISTRIBUTIONS
In order to be treated as an annuity contract for federal income tax
purposes, Section 72(s) of the Code requires any Non-Qualified Contract to
provide that: (a) if any Contract Owner dies on or after the Income Start Date
but prior to the time the entire interest in the Contract has been distributed,
the remaining portion of such interest will be distributed at least as rapidly
as under the method of distribution being used as of the date of that Contract
Owner's death; and (b) if any Contract Owner dies prior to the Income Start
Date, the entire interest in the Contract will be distributed within five years
after the date of the Contract Owner's death. These requirements will be
considered satisfied as to any portion of the Contract Owner's interest that is
payable to or for the benefit of a "designated beneficiary," and that is
distributed over the life of such Beneficiary or over a period not extending
beyond the life expectancy of that Beneficiary, provided that such distributions
begin within one year of that Contract Owner's death. The Contract Owner's
"designated beneficiary" is the person designated by such Contract Owner as a
Beneficiary and must be a natural person. However, if the Contract Owner's sole
designated beneficiary is the surviving spouse of the Contract Owner, the
Contract may be continued with the surviving spouse as the new Contract Owner.
The requirements further provide that if the Contract Owner is not an
individual, the primary Annuitant shall be treated as the Contract Owner for
purposes of making distributions that are required to be made upon the death of
the Contract Owner. If there is a change in the primary Annuitant, such change
shall be treated as the death of the Contract Owner. The Contract does not
permit a change of the Annuitants, however.
Non-Qualified Contracts contain provisions that are intended to comply with
the requirements of Section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. Hartford will review such
provisions and modify them if necessary to assure that they comply with the
requirements of Code Section 72(s) when clarified by regulation or otherwise.
TAXATION OF PURCHASERS OF QUALIFIED CONTRACTS
The Contracts are designed for use as IRAs or in connection with Deferred
Compensation Plans established and maintained by state or local governments or
tax-exempt organizations. Important differences exist between the tax rules
which are applicable to IRAs and Deferred Compensation Plans. These rules are
complex and may vary depending on individual circumstances. Adverse tax
consequences may result from distributions prior to age 59 1/2 (subject to
certain exceptions); distributions that do not conform to applicable
commencement and minimum distribution rules; aggregate distributions in excess
of a specified annual amount; and in other circumstances. Therefore, no attempt
is made to provide more than general information about the use of the Contracts
as IRAs or when owned by eligible employers in connection with Deferred
Compensation Plans. Contract Owners, Annuitants, and Beneficiaries are cautioned
that the rights of any person to any benefits under a Deferred Compensation Plan
may be subject to the terms and conditions of the plan itself, regardless of the
terms and conditions of the Contract, but that Hartford is not bound by the
terms and conditions of such plans to the extent such terms conflict with the
Contract, unless Hartford specifically consents to be bound. A brief description
of some of the federal income tax rules which apply to IRAs and Deferred
Compensation Plans is set forth below. Hartford may amend the Contract as
necessary to conform it to the requirements of applicable law.
INDIVIDUAL RETIREMENT ANNUITIES
The Contract is designed for use as an IRA purchased through a tax-deferred
rollover contribution from another IRA, a retirement plan qualified under
Section 401 or Section 403(a) of the Code or tax sheltered annuity contract
under Section 403(b) of the Code. Amounts held under a Deferred Compensation
Plan under Section 457 of the Code CANNOT be rolled over or transferred to an
IRA.
DISTRIBUTIONS FROM AN IRA
In general, payments from an IRA which are not rolled over must be included
in gross income as ordinary taxable income in the year in which they are
received. Required minimum distributions must begin by April 1 of the calendar
year following the calendar year in which the IRA owner attains the age of
70 1/2. Certain other mandatory distribution rules apply upon the death of the
IRA owner.
TEN PERCENT PENALTY TAX ON EARLY DISTRIBUTIONS
Distributions received (or deemed received) from an IRA may be subject to a
penalty tax equal to ten percent (10%) of the amount treated as taxable income.
In general, however, there is no such penalty tax on distributions:
1. made on or after the date on which the taxpayer reaches age 59 1/2,
2. made to a beneficiary (or to the estate of the taxpayer) on or after the
death of the taxpayer,
3. attributable to the taxpayer's becoming disabled, or
4. which are part of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or life expectancy) of the
taxpayer or the joint lives (or joint life expectancies) of the taxpayer and
his or her designated beneficiary.
<PAGE>
24 HARTFORD LIFE INSURANCE COMPANY
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In addition, effective for distributions from an IRA made after December 31,
1996, there is no such penalty tax on distributions:
5. made to the taxpayer to the extent such distributions do not exceed the
amount allowable as a deduction for federal income tax purposes allowed to
the taxpayer for amounts paid during the taxable year for medical care, or
6. if certain conditions are met, made to an unemployed taxpayer after
separation from employment, for health insurance premiums.
CODE SECTION 457 DEFERRED COMPENSATION PLANS. Contracts may be purchased by
a state or local government or tax-exempt organization that is an employer
sponsoring a Deferred Compensation Plan under Section 457 of the Code in order
to effect distribution of plan benefits to participants under the plan. In
general, distributions from a Deferred Compensation Plan are prohibited unless
made after the participant attains the age specified in the plan, separates from
service, dies, or suffers an unforeseeable financial emergency. Distributions
under plans that meet the requirements of Section 457 of the Code are taxable as
ordinary income in the year paid or made available to the participant or
beneficiary.
Generally, required minimum distributions must begin by April 1 of the
calendar year following the calendar year in which the participating employee
attains the age of 70 1/2. Certain other mandatory distribution rules apply upon
the death of the participating employee.
Amounts held under a Deferred Compensation Plan under Section 457 of the
Code CANNOT be rolled over or transferred to an IRA.
FEDERAL INCOME TAX WITHHOLDING
The portion of a distribution from a Contract that is taxable income to the
recipient is generally subject to withholding for the recipient's federal income
tax liability at rates that vary according to the type of distribution and the
recipient's tax status. Section 3405 of the Code governs withholding and is
summarized below:
NON-PERIODIC DISTRIBUTIONS
The portion of a non-periodic distribution which constitutes taxable income
will be subject to federal income tax withholding unless the recipient elects
not to have taxes withheld. If an election not to have taxes withheld is not
provided, 10% of the taxable distribution will be withheld as federal income
tax. Election forms will be provided at the time distributions are requested. If
the necessary election forms are not submitted to Hartford, Hartford will
automatically withhold 10% of the taxable distribution.
PERIODIC DISTRIBUTIONS (DISTRIBUTIONS PAYABLE OVER A PERIOD GREATER THAN ONE
YEAR)
The portion of a periodic distribution which constitutes taxable income will
be subject to federal income tax withholding as if the recipient were married
claiming three exemptions. A recipient may elect not to have income taxes
withheld or have income taxes withheld at a different rate by providing a
completed election form. Election forms will be provided at the time
distributions are requested.
DEFERRED COMPENSATION PLANS
Deferred compensation plans meeting the requirements of Section 457 of the
Code are generally subject to regular wage withholding rules.
Certain states also require withholding of state income tax whenever federal
income tax is withheld.
CONTRACT OWNERS THAT ARE NONRESIDENT
ALIENS OR FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal
income tax consequences to Contract Owners that are U.S. citizens or residents.
Purchasers that are not U.S. citizens or residents will generally be subject to
U.S. federal income tax and withholding on annuity distributions at a 30% rate,
unless a lower treaty rate applies and any required tax forms are submitted to
Hartford. In addition, purchasers may be subject to state premium tax, other
state and/or municipal taxes, and taxes that may be imposed by the purchaser's
country of citizenship or residence. Prospective purchasers are advised to
consult with a qualified tax adviser regarding U.S., state, and foreign taxation
with respect to the purchase of a Contract.
OTHER TAX CONSEQUENCES
As noted above, the foregoing comments about the federal tax consequences
under these Contracts are not exhaustive, and special rules may apply to other
tax situations not discussed in this Prospectus. Further, the federal income tax
consequences discussed herein reflect Hartford's understanding of current law
and the law may change. Federal estate and state and local estate, inheritance
and other tax consequences of ownership or receipt of distributions under a
Contract depend on the individual circumstances of each Contract Owner or
recipient of the distribution. In particular, gift and/or estate tax
consequences may result in situations where the Contract Owner is not also the
Annuitant, Payee, and Beneficiary. A competent tax adviser should be consulted
for further information.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 25
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OTHER INFORMATION
DISTRIBUTION OF THE CONTRACTS
Hartford Securities Distribution Company, Inc. ("HSD"), which is located at
200 Hopmeadow Street, Simsbury, CT 06070, is principal underwriter and
distributor of the Contracts. HSD is an affiliate of Hartford, is registered
with the Commission as a broker-dealer, and is a member of the National
Association of Securities Dealers, Inc. Hartford pays HSD for acting as
principal underwriter under a distribution agreement. The Contracts are offered
on a continuous basis and Hartford does not anticipate discontinuing the offer.
Applications for Contracts are solicited by agents who are licensed by
applicable state insurance authorities to sell Hartford's insurance contracts
and who are also registered representatives of a broker-dealer having a selling
agreement with HSD. Such broker-dealers will generally receive commissions based
on a percent of the Premium Payment made (up to a maximum of 6%). The writing
agent will receive a percentage of these commissions from the respective
broker-dealer, depending on the practice of that broker-dealer. Contract Owners
do not pay these commissions.
Broker-dealers or financial institutions are compensated according to a
schedule set forth by HSD and any applicable rules or regulations for variable
insurance compensation. Compensation is generally based on premium payments made
by policyholders or contract owners. This compensation is usually paid from the
sales charges described in this Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institutions of insurance
products. These payments, which may be different for different broker-dealers or
financial institutions, will be made by HSD, its affiliates or Hartford out of
their own assets and will not effect the amounts paid by the policyholders or
contract owners to purchase, hold or surrender variable insurance products.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or
to which the assets of the Separate Account are subject.
EXPERTS
The audited financial statements and financial statement schedules included
in this Prospectus and elsewhere in the registration statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving the reports. The principal business
address of Arthur Andersen LLP is One Financial Plaza, Hartford, Connecticut
06103.
<PAGE>
26 HARTFORD LIFE INSURANCE COMPANY
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ILLUSTRATIONS OF ANNUITY PAYMENTS
ASSUMING HYPOTHETICAL RATES OF RETURN
The following graph has been prepared to show how investment performance
could affect Variable Annuity Payments over time. The graph illustrates the
Variable Annuity Payments of a Non-Qualified Contact under three rate of return
scenarios. Of course, the illustrations merely represent what Variable Annuity
Payments might be paid under a HYPOTHETICAL Non-Qualified Contract.
WHAT THE GRAPHS ILLUSTRATE.
Each curve plotted on the graph illustrates the payments under a
hypothetical Non-Qualified Contract (described in more detail below) assuming a
different hypothetical rate of return for a single Sub-Account supporting the
Contract by plotting one point for each contract year. Each such annual point on
the graph represents the average of twelve monthly Variable Annuity Payments
made in that contract year under the hypothetical Contract (hereinafter, an
"Average Monthly Payment"). Each curve on the graph assumes that the initial
Variable Annuity Payment under the hypothetical Contract is $1,000 (discussed in
more detail below).
HYPOTHETICAL RATES OF RETURN.
The Variable Annuity Payments reflect three different assumptions for a
constant investment return before fees and expenses: 0%, 6% and 12%. Net of all
expenses, these constant returns are: 1.83%, 4.06% and 9.95%. Average Monthly
Payments reflect the assumed investment return net of all expenses of the
illustrated Sub-Account (and the Funds) over the periods shown in each graph.
Fund management fees and operating expenses are assumed to be at an annual rate
of 0.60% of their average daily net assets. This is the weighted average of Fund
expenses shown in the fee table on page 5. The mortality and expense risk charge
is assumed to be at an annual rate of 1.25% of the illustrated Sub-Account's
average daily net assets.
Nevertheless, THE AVERAGE MONTHLY PAYMENTS DEPICTED IN THE GRAPH ARE BASED
ON HYPOTHETICAL CONTRACTS AND HYPOTHETICAL INVESTMENT RESULTS AND ARE NOT
PROJECTIONS OR INDICATIONS OF FUTURE RESULTS. HARTFORD DOES NOT GUARANTEE OR
EVER SUGGEST THAT ANY SUB-ACCOUNT OR CONTRACT ISSUED BY IT WOULD GENERATE THESE
OR SIMILAR AVERAGE MONTHLY PAYMENTS FOR ANY PERIOD OF TIME. THE GRAPHS ARE FOR
ILLUSTRATION PURPOSES ONLY AND DO NOT REPRESENT FUTURE VARIABLE ANNUITY PAYMENTS
OR FUTURE INVESTMENT RETURNS. Variable Annuity Payments under a real Contract
may be more or less than those forming the basis for the Average Monthly
Payments shown in these illustrations if the actual returns of the Sub-Accounts
selected by a Contract Owner are different from the hypothetical returns.
Because it is very likely that a Sub-Account's investment return will fluctuate
over time, one can expect Variable Annuity Payments under a real Contract to
fluctuate. Moreover, under a real Contract, the total amount of Variable Annuity
Payments ultimately received by a Payee depends upon which Annuity Payment
Option the Contract Owner selects and, for life contingent annuity payment
options, how long the Annuitant lives. See "Selecting An Annuity Payment
Option," page 15.
ASSUMPTIONS ON WHICH THE HYPOTHETICAL CONTRACT IS BASED.
In order to illustrate a hypothetical Contract, Hartford had to make several
assumptions about the Contract. These assumptions are that: (1) the hypothetical
Contract is a Non-Qualified Contract, (2) the entire Contract Value of the
hypothetical Contract is allocated (on the Annuity Calculation Date) to a
Sub-Account having a constant investment return before fees and expenses of 0%,
6%, or 12%, (3) the Contract Owner selected an Assumed Investment Return of 5%,
(4) the Contract Owner elects to receive monthly Variable Annuity Payments, and
(5) the Contract Value (less any applicable Premium Tax) applied to the purchase
of Annuity Units on the Annuity Calculation Date under the Annuity Payment
Option selected results in an initial Variable Annuity Payment of $1,000.
For a discussion of how a Contract Owner may elect to receive monthly,
quarterly, semi-annual or annual Variable Annuity Payments, see "Income Payment
Dates," page 16.
ASSUMED INVESTMENT RETURN.
Among the most important factors that determine that amount of Variable
Annuity Payments is the Assumed Investment Return selected by the Contract
Owner. The hypothetical Contract has an Assumed Investment Return of 5%. Subject
to state approval, a Contract Owner may, however, select a 3%, 5% or 6% Assumed
Investment Return under a real Contract. Generally, Variable Annuity Payments
will increase in size from one Income Payment Date to the next if the annualized
net rate of return during that time is greater than the Assumed Investment
Return, and will decrease if the annualized net rate of return over this period
is less than the Assumed Investment Return. (The Assumed Investment Return is an
important component of the Payment Factor.) For a detailed discussion of Assumed
Investment Returns, see "Variable Annuity Payments," page 16.
THE $1,000 INITIAL ANNUITY PAYMENT.
The hypothetical Contract has an initial Variable Annuity Payment of $1,000.
The dollar amount of the first Variable Annuity Payment under a real Contract
generally depends upon the Annuity Payment Option selected by the Contract
Owner, the amount of Contract Value applied to purchase the Variable Annuity
Payments, the annuity purchase rates in the Contract at the time it is purchased
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 27
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(i.e., the Payment Factor), the age of the Annuitant, and, in most cases (e.g.,
Non-Qualified Contracts), the sex of the Annuitant. For each of the
illustrations, the entire Contract Value under the hypothetical Contract is
allocated to a Sub-Account having a constant investment return before fees and
expenses of 0%, 6%, or 12%. However, for a real Contract, Contract Value is
often allocated among several Sub-Accounts prior to the Annuity Calculation
Date. The dollar amount of the first Variable Annuity Payment attributable to
each Sub-Account is determined under a real Contract by dividing the dollar
amount of Contract Value (less applicable Premium Tax) applied to that
Sub-Account on the Annuity Calculation Date by $1,000, and multiplying the
result by the annuity Payment Factor in the Contract for the selected Annuity
Payment Option. The dollar value of the first Variable Annuity Payment is the
sum of the first Variable Annuity Payments attributable to each Sub-Account. For
a detailed discussion of how the first Variable Annuity Payment is determined,
see "Variable Annuity Payments," page 16.
<PAGE>
28 HARTFORD LIFE INSURANCE COMPANY
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HYPOTHETICAL ILLUSTRATIONS
<TABLE>
<CAPTION>
HYPOTHETICAL 0% GROSS HYPOTHETICAL 6% GROSS HYPOTHETICAL 12% GROSS
RATE RATE RATE
AVERAGE MONTHLY AVERAGE MONTHLY AVERAGE MONTHLY
PAYMENT PAYMENT PAYMENT
FOR EACH YEAR SHOWN FOR EACH YEAR SHOWN FOR EACH YEAR SHOWN
$1,000 INITIAL $1,000 INITIAL $1,000 INITIAL
PAYMENT; 5% AIR PAYMENT; 5% AIR PAYMENT; 5% AIR
- ---------------------- ---------------------- ----------------------
AVERAGE AVERAGE AVERAGE
CONTRACT MONTHLY CONTRACT MONTHLY CONTRACT MONTHLY
YEAR PAYMENT YEAR PAYMENT YEAR PAYMENT
- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1 970 1 996 1 1,021
2 907 2 987 2 1,070
3 848 3 978 3 1,120
4 793 4 969 4 1,173
5 741 5 961 5 1,228
6 693 6 952 6 1,286
7 648 7 943 7 1,346
8 606 8 935 8 1,410
9 566 9 927 9 1,476
10 529 10 918 10 1,546
11 495 11 910 11 1,619
12 463 12 902 12 1,695
13 433 13 894 13 1,775
14 404 14 886 14 1,858
15 378 15 878 15 1,946
16 353 16 870 16 2,038
17 330 17 862 17 2,134
18 309 18 854 18 2,234
19 289 19 847 19 2,340
20 270 20 839 20 2,450
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C> <C> <C>
Contract Year 0% Gross Rate 6% Gross Rate 12% Gross Rate
1 970 996 1,021
2 907 987 1,070
3 848 978 1,120
4 793 969 1,173
5 741 961 1,228
6 693 952 1,286
7 648 943 1,346
8 606 935 1,410
9 566 927 1,476
10 529 918 1,546
11 495 910 1,619
12 463 902 1,695
13 433 894 1,775
14 404 886 1,858
15 378 878 1,946
16 353 870 2,038
17 330 862 2,134
18 309 854 2,234
19 289 847 2,340
20 270 839 2,450
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 29
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ILLUSTRATIONS OF ANNUITY PAYMENTS
USING HISTORIC RATES OF RETURN
The following graphs have been prepared to show how investment performance
affects Variable Annuity Payments over time. These graphs illustrate the
"performance" of a Non-Qualified Contract under which Variable Annuity Payments
begin at the end of the month that the Contract was issued which is the same
month that each Sub-Account illustrated began operations. Of course, Hartford
did not sell Contracts prior to the date of this Prospectus (i.e., during any of
the time periods shown) and therefore the illustrations merely represent what
Variable Annuity Payments might have been under a hypothetical Non-Qualified
Contract had one existed during the years shown.
WHAT THE GRAPHS ILLUSTRATE
Each graph illustrates the "performance" of a particular Sub-Account based
on hypothetical Non-Qualified Contract (described in more detail below) by
plotting one point for each calendar year since the Sub-Account began
operations. Each such annual point on the graph represents the average of twelve
monthly Variable Annuity Payments made in that year under the hypothetical
Contract. Each graph assumes that the initial Variable Annuity Payment under the
hypothetical Contract is $1,000 (discussed in more detail below). All of the
graphs end on December 31, 1997. Where a Sub-Account began operations in
mid-year, the point for the first year represents the average of monthly
Variable Annuity Payments made (which is fewer than 12) under the hypothetical
Contract during that year. The points therefore represent, in each case, the
average monthly Variable Annuity Payment (hereinafter, an "Average Monthly
Payment").
Average Monthly Payments reflect the actual past investment return after all
expenses of the Sub-Accounts over the periods shown in each graph. Nevertheless,
THE AVERAGE MONTHLY PAYMENTS DEPICTED IN THE GRAPHS ARE BASED ON HYPOTHETICAL
CONTRACTS AND PAST INVESTMENT RESULTS AND ARE NOT PROJECTIONS OR INDICATIONS OF
FUTURE RESULTS. HARTFORD DOES NOT GUARANTEE OR EVEN SUGGEST THAT ANY CONTRACT
ISSUED BY IT WOULD GENERATE THESE OR SIMILAR VARIABLE ANNUITY PAYMENTS FOR ANY
PERIOD OF TIME. THE GRAPHS ARE FOR ILLUSTRATION PURPOSES ONLY AND DO NOT
REPRESENT FUTURE VARIABLE ANNUITY PAYMENTS OR FUTURE INVESTMENT RETURNS.
Variable Annuity Payments under a real Contract may be more or less than those
forming the basis for the Average Monthly Payments shown in these illustrations
if the actual returns of the Sub-Accounts selected by a Contract Owner are
different from the past returns of the Sub-Accounts. Because it is very likely
that a Sub-Account's investment return will fluctuate over time, one can expect
Variable Annuity Payments under a real Contract to fluctuate. Moreover, under a
real Contract, the total amount of Variable Annuity Payments ultimately received
by a Payee depends upon which Annuity Payment Option the Contract Owner selects
and, for life contingent annuity options, how long the Annuitant lives. (See
"Selecting An Annuity Payment Option," page 15.)
ASSUMPTIONS ON WHICH THE HYPOTHETICAL CONTRACT IS BASED
In order to illustrate a hypothetical Contract, Hartford had to make several
assumptions about the Contract. These assumptions are that: (1) the hypothetical
Contract is a Non-Qualified Contract, (2) the entire Contract Value of the
hypothetical Contract is allocated (on the Annuity Calculation Date) to the
Sub-Account being illustrated, (3) the Contract Owner selected an Assumed
Investment Return of 5%, (4) the Contract Owner elects to receive monthly
Variable Annuity Payments and elects an Income Start Date that is the last day
of the month in which the Contract was issued, (5) the Contract Value (less any
applicable premium tax) applied to the purchase of Annuity Units on the Annuity
Calculation Date under the Annuity Payment Option selected results in an initial
Variable Annuity Payment of $1,000, and (6) the Income Start Date is the last
day of the month that the Sub-Account illustrated began operations. TO THE
EXTENT THAT A REAL CONTRACT IS ISSUED BY HARTFORD ON A BASIS DIFFERENT FROM THE
FOREGOING ASSUMPTIONS, THAT REAL CONTRACT WOULD HAVE HAD AVERAGE MONTHLY
PAYMENTS DIFFERENT FROM THOSE ILLUSTRATED EVEN DURING THE PERIODS ILLUSTRATED.
For a discussion of how a Contract Owner may elect to receive monthly,
quarterly, semi-annual or annual Variable Annuity Payments, see "Income Payment
Dates," page 16.
ASSUMED INVESTMENT RETURN
Among the most important factors that determine that amount of Variable
Annuity Payments is the Assumed Investment Return selected by the Contract
Owner. The hypothetical Contract has an Assumed Investment Return of 5%. Subject
to state approval, a Contract Owner may, however, select a 3%, 5% or 6% Assumed
Investment Return under a real Contract. Generally, Variable Annuity Payments
will increase in size from one Income Payment Date to the next if the annualized
net rate of return during that time is greater than the Assumed Investment
Return, and will decrease if the annualized net rate of return over this period
is less than the Assumed Investment Return. (The Assumed Investment Return is an
important component of the Payment Factor.) For a detailed discussion of Assumed
Investment Returns, see "Variable Annuity Payments," page 16. Standardized and
non-standardized average annual total returns as well as the Sub-Account Annual
Percentage Change column reflect the performance of the Sub-Account being
illustrated without adjustment for an Assumed Investment Return.
<PAGE>
30 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
THE $1,000 INITIAL ANNUITY PAYMENT
The hypothetical Contract has an initial Variable Annuity Payment of $1,000.
The dollar amount of the first Variable Annuity Payment under a real Contract
generally depends upon the Annuity Payment Option selected by the Contract
Owner, the amount of Contract Value applied to purchase the Variable Annuity
Payments, the annuity purchase rates in the Contract at the time it is purchased
(i.e., the Payment Factor), the age of the Annuitant, and, in most cases (e.g.,
Non-Qualified Contracts), the sex of the Annuitant. For each of the
illustrations, the entire Contract Value under the hypothetical Contract is
allocated to the Sub-Account shown in the illustrations. However, for a real
Contract, Contract Value is often allocated among several Sub-Accounts prior to
the Annuity Calculation Date. The dollar amount of the first Variable Annuity
Payment attributable to each Sub-Account is determined under a real Contract by
dividing the dollar amount of Contract Value (less applicable Premium Tax)
applied to that Sub-Account on the Annuity Calculation Date by $1,000, and
multiplying the result by the annuity Payment Factor in the Contract for the
selected Annuity Payment Option. The dollar value of the first Variable Annuity
Payment is the sum of the first Variable Annuity Payments attributable to each
Sub-Account. For a detailed discussion of how the first Variable Annuity Payment
is determined, see "Variable Annuity Payments," page 16.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 31
- --------------------------------------------------------------------------------
ADVISERS FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
-------- -------- --------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983 * 990 1.26%
1984 948 6.05%
1985 1,078 25.26%
1986 1,253 11.27%
1987 1,337 4.66%
1988 1,322 12.71%
1989 1,479 20.24%
1990 1,459 0.01%
1991 1,584 18.88%
1992 1,630 6.96%
1993 1,731 10.86%
1994 1,688 -3.94%
1995 1,821 26.74%
1996 2,042 15.14%
1997 2,384 22.96%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 22.96%
5 Year 13.83%
10 Year 12.66%
Since Inception 11.84%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 16.96%
5 Year 13.35%
10 Year 12.66%
Since Inception 11.84%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C>
Advisers Fund
Calendar Year Sub-Account
1977
1978
1979
1980
1981
1982
1983* 990
1984 948
1985 1,078
1986 1,253
1987 1,337
1988 1,322
1989 1,479
1990 1,459
1991 1,584
1992 1,630
1993 1,731
1994 1,688
1995 1,821
1996 2,042
1997 2,384
</TABLE>
* Fund inception was 4/83. Therefore, the Average Monthly Payment represents
the average monthly payment from April 1983 to December 1983. The Annual
Sub-Account Return is based on the period from April 1983 to December 1983.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
Contingent Deferred Sales Charge where the latter do not.
<PAGE>
32 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
-------- -------- --------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984 * 1,038 9.16%
1985 1,237 34.37%
1986 1,485 7.65%
1987 1,496 -5.55%
1988 1,451 24.67%
1989 1,694 22.60%
1990 1,550 -12.02%
1991 1,852 52.16%
1992 2,100 15.55%
1993 2,492 19.30%
1994 2,562 1.26%
1995 2,897 28.63%
1996 3,328 19.20%
1997 3,881 20.83%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 20.83%
5 Year 17.48%
10 Year 18.13%
Since Inception 16.32%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 14.83%
5 Year 17.06%
10 Year 18.13%
Since Inception 16.32%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C>
Capital Appreciation Fund
Calendar Year Sub-Account
1977
1978
1979
1980
1981
1982
1983
1984* 1,038
1985 1,237
1986 1,485
1987 1,496
1988 1,451
1989 1,694
1990 1,550
1991 1,852
1992 2,100
1993 2,492
1994 2,562
1995 2,897
1996 3,328
1997 3,881
</TABLE>
* Fund inception was 4/84. Therefore, the Average Monthly Payment represents
the average monthly payment from April 1984 to December 1984. The Annual
Sub-Account Return is based on the period from April 1984 to December 1984.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
Contingent Deferred Sales Charge where the latter do not.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 33
- --------------------------------------------------------------------------------
INDEX FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
-------- -------- --------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987 * 978 -14.02%
1988 890 14.75%
1989 1,049 28.73%
1990 1,035 -5.24%
1991 1,145 27.93%
1992 1,205 5.49%
1993 1,256 7.76%
1994 1,228 -0.31%
1995 1,401 34.85%
1996 1,653 20.58%
1997 2,044 30.96%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 30.96%
5 Year 18.00%
10 Year 15.76%
Since Inception 13.12%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 24.96%
5 Year 17.58%
10 Year 15.76%
Since Inception 13.12%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C>
Index Fund
Calendar Year Sub-Account
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987* 978
1988 890
1989 1,049
1990 1,035
1991 1,145
1992 1,205
1993 1,256
1994 1,228
1995 1,401
1996 1,653
1997 2,044
</TABLE>
* Fund inception was 5/87. Therefore, the Average Monthly Payment represents
the average monthly payment from May 1987 to December 1987. The Annual
Sub-Account Return is based on the period from May 1987 to December 1987.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
Contingent Deferred Sales Charge where the latter do not.
<PAGE>
34 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
INTERNATIONAL OPPORTUNITIES FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
-------- -------- --------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990 * 900 -12.18%
1991 890 11.60%
1992 869 -5.62%
1993 911 32.07%
1994 999 -3.15%
1995 967 12.51%
1996 1,056 11.53%
1997 1,090 -0.91%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year -0.91%
5 Year 9.73%
10 Year --
Since Inception 5.26%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year -6.91%
5 Year 9.17%
10 Year --
Since Inception 5.26%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C>
International Fund
Calendar Year Sub-Account
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990* 900
1991 890
1992 869
1993 911
1994 999
1995 967
1996 1,056
1997 1,090
</TABLE>
* Fund inception was 7/90. Therefore, the Average Monthly Payment represents
the average monthly payment from July 1990 to December 1990. The Annual
Sub-Account Return is based on the period from July 1990 to December 1990.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
Contingent Deferred Sales Charge where the latter do not.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 35
- --------------------------------------------------------------------------------
MONEY MARKET FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
-------- -------- --------------------
<S> <C> <C>
1977
1978
1979
1980 * 1,009 5.09%
1981 1,074 14.29%
1982 1,162 12.39%
1983 1,212 8.01%
1984 1,254 9.35%
1985 1,296 7.19%
1986 1,313 5.45%
1987 1,311 5.17%
1988 1,319 6.06%
1989 1,347 7.77%
1990 1,375 6.76%
1991 1,386 4.72%
1992 1,364 2.35%
1993 1,324 1.66%
1994 1,286 2.67%
1995 1,272 4.45%
1996 1,261 3.86%
1997 1,248 4.02%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 4.02%
5 Year 3.33%
10 Year 4.42%
Since Inception 6.31%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS FOR THE
PERIODS ENDED 12/31/1997**
- --------------------------------------------------
<S> <C>
1 Year -1.98%
5 Year 2.62%
10 Year 4.42%
Since Inception 6.31%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C>
Money Market Fund
Calendar Year Sub-Account
1977
1978
1979
1980* 1,009
1981 1,074
1982 1,162
1983 1,212
1984 1,254
1985 1,296
1986 1,313
1987 1,311
1988 1,319
1989 1,347
1990 1,375
1991 1,386
1992 1,364
1993 1,324
1994 1,286
1995 1,272
1996 1,261
1997 1,248
</TABLE>
* Fund inception was 6/80. Therefore, the Average Monthly Payment represents
the average monthly payment from June 1980 to December 1980. The Annual
Sub-Account Return is based on the period from June 1980 to December 1980.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
Contingent Deferred Sales Charge where the latter do not.
<PAGE>
36 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SMALL COMPANY FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
-------- -------- --------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996 * 1,025 4.26%
1997 1,092 16.91%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 16.91%
5 Year --
10 Year --
Since Inception 16.84%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 10.91%
5 Year --
10 Year --
Since Inception 13.05%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C>
Small Company Fund
Calendar Year Sub-Account
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996* 1,025
1997 1,092
</TABLE>
* Fund inception was 8/96. Therefore, the Average Monthly Payment represents
the average monthly payment from August 1996 to December 1996. The Annual
Sub-Account Return is based on the period from August 1996 to December 1996.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
Contingent Deferred Sales Charge where the latter do not.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 37
- --------------------------------------------------------------------------------
BOND FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
-------- -------- --------------------
<S> <C> <C>
1977 * 998 1.00%
1978 979 1.34%
1979 959 1.63%
1980 929 4.91%
1981 932 9.12%
1982 1,045 26.16%
1983 1,132 1.48%
1984 1,121 11.78%
1985 1,262 19.11%
1986 1,396 10.78%
1987 1,360 -1.26%
1988 1,364 6.25%
1989 1,397 10.73%
1990 1,416 7.06%
1991 1,506 15.02%
1992 1,579 4.23%
1993 1,645 8.86%
1994 1,541 -5.14%
1995 1,585 17.01%
1996 1,596 2.24%
1997 1,637 9.97%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 9.97%
5 Year 6.32%
10 Year 7.45%
Since Inception 7.74%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 3.97%
5 Year 5.69%
10 Year 7.45%
Since Inception 7.74%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C>
Bond Fund
Calendar Year Sub-Account
1977* 998
1978 979
1979 959
1980 929
1981 932
1982 1,045
1983 1,132
1984 1,121
1985 1,262
1986 1,396
1987 1,360
1988 1,364
1989 1,397
1990 1,416
1991 1,506
1992 1,579
1993 1,645
1994 1,541
1995 1,585
1996 1,596
1997 1,637
</TABLE>
* Fund inception was 8/77. Therefore, the Average Monthly Payment represents
the average monthly payment from August 1977 to December 1977. The Annual
Sub-Account Return is based on the period from August 1977 to December 1977.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
Contingent Deferred Sales Charge where the latter do not.
<PAGE>
38 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
DIVIDEND AND GROWTH FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
-------- -------- --------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994 * 1,024 4.07%
1995 1,146 34.68%
1996 1,383 21.39%
1997 1,695 30.25%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 30.25%
5 Year --
10 Year --
Since Inception 22.09%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 24.25%
5 Year --
10 Year --
Since Inception 21.45%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C>
Dividend and Growth Fund
Calendar Year Sub-Account
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994* 1,024
1995 1,146
1996 1,383
1997 1,695
</TABLE>
* Fund inception was 3/94. Therefore, the Average Monthly Payment represents
the average monthly payment from March 1994 to December 1994. The Annual
Sub-Account Return is based on the period from March 1994 to December 1994.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
Contingent Deferred Sales Charge where the latter do not.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 39
- --------------------------------------------------------------------------------
INTERNATIONAL ADVISERS FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
-------- -------- --------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995 * 1,037 11.45%
1996 1,099 10.41%
1997 1,143 4.20%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 4.20%
5 Year --
10 Year --
Since Inception 10.26%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year -1.80%
5 Year --
10 Year --
Since Inception 8.75%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C>
International Advisers
Fund
Calendar Year Sub-Account
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995* 1,037
1996 1,099
1997 1,143
</TABLE>
* Fund inception was 3/95. Therefore, the Average Monthly Payment represents
the average monthly payment from March 1995 to December 1995. The Annual
Sub-Account Return is based on the period from March 1995 to December 1995.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
Contingent Deferred Sales Charge where the latter do not.
<PAGE>
40 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
MORTGAGE SECURITIES FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
-------- -------- --------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984 * 1,000
1985 1,064 19.13%
1986 1,162 9.75%
1987 1,151 1.36%
1988 1,170 7.03%
1989 1,205 11.74%
1990 1,239 8.35%
1991 1,324 13.31%
1992 1,365 3.35%
1993 1,372 4.99%
1994 1,297 -2.83%
1995 1,336 14.73%
1996 1,348 3.77%
1997 1,372 7.66%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 7.66%
5 Year 5.51%
10 Year 7.09%
Since Inception 7.72%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 1.66%
5 Year 4.86%
10 Year 7.09%
Since Inception 7.72%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C>
Mortgage Securities Fund
Calendar Year Sub-Account
1977
1978
1979
1980
1981
1982
1983
1984* 1,000
1985 1,064
1986 1,162
1987 1,151
1988 1,170
1989 1,205
1990 1,239
1991 1,324
1992 1,365
1993 1,372
1994 1,297
1995 1,336
1996 1,348
1997 1,372
</TABLE>
* Fund inception was 12/84. Therefore, the Average Monthly Payment represents
the monthly payment for December 1984.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
Contingent Deferred Sales Charge where the latter do not.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 41
- --------------------------------------------------------------------------------
STOCK FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
-------- -------- --------------------
<S> <C> <C>
1977 * 999 1.72%
1978 992 3.55%
1979 1,044 21.10%
1980 1,228 29.61%
1981 1,349 -0.64%
1982 1,311 19.81%
1983 1,652 12.50%
1984 1,500 -0.70%
1985 1,718 29.85%
1986 2,052 10.93%
1987 2,305 4.09%
1988 2,172 17.51%
1989 2,536 24.49%
1990 2,450 -5.07%
1991 2,701 23.07%
1992 2,758 8.68%
1993 2,982 12.92%
1994 2,980 -3.11%
1995 3,306 32.43%
1996 3,937 22.83%
1997 4,893 29.75%
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 29.75%
5 Year 18.22%
10 Year 15.67%
Since Inception 13.91%
</TABLE>
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/1997**
- ------------------------------------------------------------
<S> <C>
1 Year 23.75%
5 Year 17.81%
10 Year 15.67%
Since Inception 13.91%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C>
Stock Fund
Calendar Year Sub-Account
1977* 999
1978 992
1979 1,044
1980 1,228
1981 1,349
1982 1,311
1983 1,652
1984 1,500
1985 1,718
1986 2,052
1987 2,305
1988 2,172
1989 2,536
1990 2,450
1991 2,701
1992 2,758
1993 2,982
1994 2,980
1995 3,306
1996 3,937
1997 4,893
</TABLE>
* Fund inception was 8/77. Therefore, the Average Monthly Payment represents
the average monthly payment from August 1977 to December 1977. The Annual
Sub-Account Return is based on the period from August 1977 to December 1977.
** Standardized Average Annual Total Returns differ from Non-Standardized
Average Annual Total Returns in that the former reflect a deduction for the
Contingent Deferred Sales Charge where the latter do not.
<PAGE>
42 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
MID-CAP FUND SUB-ACCOUNT
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT FOR EACH YEAR OR PARTIAL YEAR SHOWN
$1,000 INITIAL PAYMENT: 5% AIR
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
CALENDAR MONTHLY SUB-ACCOUNT
YEAR PAYMENT RETURN
-------- -------- --------------------
<S> <C> <C>
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997 * 1,026 9.68%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS FOR THE PERIOD ENDED
7/31/97 - 12/31/1997**
- ------------------------------------------------------------
<S> <C>
9.68% (does not reflect contingent deferred sales charge)
<CAPTION>
3.68% (reflects contingent deferred sales charge)
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE MONTHLY PAYMENT
<S> <C>
Mid-Cap Fund
Calendar Year Sub-Account
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997* 1,026
</TABLE>
* Fund inception was 7/97. Therefore, the Average Monthly Payment represents
the average monthly payment from July 1997 to December 1997. The Annual
Sub-Account Return is based on the period from July 1997 to December 1997.
** These returns are not annualized.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 43
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
FOR
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY...........................
INDEPENDENT PUBLIC ACCOUNTANTS...........................................
CALCULATION OF YIELD AND RETURN..........................................
Yield of the Money Market Fund Sub-Account.............................
Yield of the Bond Fund and Mortgage Securities Fund Sub-Accounts.......
Calculation of Total Return............................................
PERFORMANCE COMPARISONS..................................................
Yield and Total Return.................................................
VARIABLE ANNUITY PAYMENTS................................................
Annuity Unit Value.....................................................
Illustration of Calculation of Annuity Unit Value......................
Illustration of Variable Annuity Payments..............................
OTHER INFORMATION........................................................
</TABLE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Individual Single Premium Payment Immediate Variable Annuity Contract
Issued by
Hartford Life Insurance Company
and
Hartford Life Insurance Company Separate Account Two
THIS STATEMENT OF ADDITIONAL INFORMATION, DATED MAY 1, 1998, IS NOT A
PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN
CONJUNCTION WITH THE PROSPECTUS DATED MAY 1, 1998 FOR HARTFORD LIFE INSURANCE
COMPANY ("HARTFORD") SINGLE PURCHASE PAYMENT IMMEDIATE VARIABLE ANNUITY CONTRACT
WHICH IS REFERRED TO HEREIN.
THE PROSPECTUS SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR SHOULD KNOW
BEFORE PURCHASING A CONTRACT. FOR A COPY OF THE PROSPECTUS, SEND A WRITTEN
REQUEST TO THE ADMINISTRATIVE OFFICE OF HARTFORD AT 200 HOPMEADOW STREET,
SIMSBURY, CONNECTICUT 06070, OR TELEPHONE 1-800-862-6668.
<PAGE>
TABLE OF CONTENTS
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY . . . . . . . . . . . . . .
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . .
CALCULATION OF YIELD AND RETURN. . . . . . . . . . . . . . . . . . . . . .
Yield of the Money Market Fund Sub-Account . . . . . . . . . . . . .
Yield of the Bond Fund and Mortgage
Securities Fund Sub-Accounts . . . . . . . . . . . . . . . . . .
Calculation of Total Return . . . . . . . . . . . . . . . . . . . . .
PERFORMANCE COMPARISONS. . . . . . . . . . . . . . . . . . . . . . . . . .
Yield and Total Return . . . . . . . . . . . . . . . . . . . . . . .
VARIABLE ANNUITY PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . .
Annuity Unit Value. . . . . . . . . . . . . . . . . . . . . . . . . .
Illustration of Calculation of Annuity Unit Value . . . . . . . . . .
Illustration of Variable Annuity Payments . . . . . . . . . . . . . .
OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY
Hartford Life Insurance Company ("Hartford") is a stock life insurance
company engaged in the business of writing life insurance, both individual
and group, in all states of the United States and the District of Columbia.
Hartford was originally incorporated under the laws of Massachusetts on June
5, 1902, and was subsequently redomiciled to Connecticut. Its offices are
located in Simsbury, Connecticut; however, its mailing address is P.O. Box
2999, Hartford, CT 06104-2999. Hartford is ultimately controlled by The
Hartford Financial Services Group, Inc., one of the largest financial service
providers in the United States.
HARTFORD RATINGS
- --------------------------------------------------------------------------------
RATING AGENCY EFFECTIVE RATING BASIS OF RATING
DATE OF RATING
- --------------------------------------------------------------------------------
A.M. Best and Company, Inc. 9/9/97 A+ Financial soundness
and operating
performance.
- --------------------------------------------------------------------------------
Standard & Poor's 1/23/98 AA Claims paying
ability
- --------------------------------------------------------------------------------
Duff & Phelps 1/23/98 AA+ Claims paying
ability
- --------------------------------------------------------------------------------
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for Hartford Life Insurance Company Separate
Two are Arthur Andersen LLP. Its principal business address at One Financial
Plaza, Hartford, CT 06103. Arthur Andersen LLP audits the financial statements
included in the Prospectus and elsewhere in the registration statement and
verifies that the statutory-basis financial statements are presented in
accordance with statutory accounting practices prescribed or permitted by the
National Association of Insurance Commissioners and the State of Connecticut
Insurance Department.
CALCULATION OF YIELD AND RETURN
Yield of the Money Market Fund Sub-Account
As summarized in the Prospectus under the heading "Performance Related
Information," the yield of the Money Market Fund Sub-Account for a seven day
period (the "base period") will be computed by determining the "net change in
value" (calculated as set forth below) of a hypothetical account having a
balance of one accumulation unit of the Sub-Account at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from Contract
Owner accounts, and dividing the difference by the value of the account at
the beginning of the base period to obtain the base period return, and then
multiplying the base period return by 365/7 with the resulting yield figure
carried to the nearest hundredth of one percent. Net changes in value of a
hypothetical account will include net investment income of the account
(accrued daily dividends as declared by the underlying funds, less daily
expense charges of the account) for the period, but will not include realized
gains or losses or unrealized appreciation or depreciation on the underlying
fund shares.
The effective yield is calculated by compounding the base period return by
adding 1, raising the sum to a power equal to 365/7 and subtracting 1 from the
result, according to the following formula:
365/7
Effective Yield = [(Base Period Return + 1) ] - 1
2
<PAGE>
The Money Market Fund Sub-Account's yield and effective yield will vary in
response to fluctuations in interest rates and in the expenses of the
Sub-Account.
THE CURRENT YIELD AND EFFECTIVE YIELD REFLECT RECURRING CHARGES ON THE SEPARATE
ACCOUNT LEVEL.
MONEY MARKET FUND SUB-ACCOUNT
The yield and effective yield for the seven day period ending December 31, 1997
for the Money Market Fund Sub-Account was as follows:
Yield 4.11%
Effective Yield 4.20%
YIELDS OF THE BOND FUND AND MORTGAGE SECURITIES FUND SUB-ACCOUNTS
As summarized in the Prospectus under the heading "Performance Related
Information," yields of these two Sub-Accounts will be computed by annualizing a
recent month's net investment income, divided by a Fund share's net asset value
on the last trading day of that month. The Bond Fund and Mortgage Securities
Fund Sub-Accounts' yields will vary from time to time depending upon market
conditions and, the composition of the underlying funds' portfolios. Yield
should also be considered relative to changes in the value of the Sub-Accounts'
shares and to the relative risks associated with the investment objectives and
policies of the Bond Fund and Mortgage Securities Fund.
THE YIELD REFLECTS RECURRING CHARGES ON THE SEPARATE ACCOUNT LEVEL.
BOND FUND AND
MORTGAGE SECURITIES FUND SUB-ACCOUNTS
Yield calculations of the Sub-Accounts used for illustration purposes reflect
the interest earned by the Sub-Accounts, less applicable asset charges assessed
against a Contract Owner's account over the base period. Yield quotations based
on a 30 day period ended December 31, 1997 were computed by dividing the
dividends and interests earned during the period by the maximum offering price
per unit on the last day of the period, according to the following formula:
Example:
6
Current Yield Formula for the Sub-Account 2[((A-B)/(CD) + 1) - 1]
Where A = Dividends and interest earned during the period.
B = Expenses accrued for the period (net of reimbursements).
C = The average daily number of units outstanding during the period
that were entitled to receive dividends.
D = The maximum offering price per unit on the last day of the period.
Bond Fund
Yield = 5.02%
3
<PAGE>
Mortgage Securities Fund
Yield = 5.34%
At any time in the future, yields and total return may be higher or lower than
past yields and there can be no assurance that any historical results will
continue.
CALCULATION OF TOTAL RETURN
As summarized in the Prospectus under the heading "Performance Related
Information," total return is a measure of the change in value of an investment
in a Sub-Account over the period covered. The formula for total return used
herein includes three steps: (1) calculating the value of the hypothetical
initial investment of $1,000 as of the end of the period by multiplying the
total number of units owned at the end of the period by the unit value per unit
on the last trading day of the period; (2) assuming redemption at the end of the
period and deducting any applicable contingent deferred sales charge (the
contingent deferred sales charged deducted under the ASince Inception@ column
below depends on the fund inception date; 6% is deducted for 1 Year, 4% for 5
Year, and 0% for 10 Year periods); and (3) dividing this account value for the
hypothetical investor by the initial $1,000 investment and annualizing the
result for periods of less than one year. Total return will be calculated for
one year, five years and ten years or some other relevant periods if a
Sub-Account has not been in existence for at least ten years.
The following are the standardized average annual total return quotations for
the Sub-Accounts for the period ended December 31, 1997.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Sub-Accounts Inception Since
Date Inception 1 Year 5 Year 10 Year
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Advisers Fund 3/31/83 11.84% 16.96% 13.35% 12.66%
Bond Fund 8/31/77 7.74% 3.97% 5.69% 7.45%
Capital Appreciation Fund 4/2/84 16.32% 14.83% 17.06% 18.13%
Dividend and Growth Fund 3/8/94 21.45% 24.25% N/A N/A
Index Fund 5/1/87 13.12% 24.96% 17.58% 15.76%
International Advisers Fund 3/1/95 8.75% -1.80% N/A N/A
MidCap Fund 7/30/97 3.68% N/A N/A N/A
Money Market Fund 6/30/80 6.31% -1.98% 2.62% 4.42%
Mortgage Securities Fund 1/1/85 7.72% 1.66% 4.86% 7.09%
Small Company Fund 8/9/96 13.05% 10.91% N/A N/A
International Opportunities Fund 7/2/90 5.26% -6.91% 9.17% N/A
Stock Fund 8/31/77 13.91% 23.75% 17.81% 15.67%
- -----------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
In addition to the standardized total return, the Sub-Account may advertise a
non-standardized total return. This figure will usually be calculated for one
year, five years, and ten years or other periods. Non-standardized total return
is measured in the same manner as the standardized total return described above,
except that the contingent deferred sales charge is not deducted. Therefore,
non-standardized total return for a Sub-Account is higher than standardized
total return for a Sub-Account.
The following are the non-standardized annualized total return quotations for
the Sub-Accounts for the period ended December 31, 1997.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Sub-Accounts Inception Since
Date Inception 1 Year 5 Year 10 Year
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Advisers Fund 3/31/83 11.84% 22.96% 13.83% 12.66%
Bond Fund 8/31/77 7.74% 9.97% 6.32% 7.45%
Capital Appreciation Fund 4/2/84 16.32% 20.83% 17.48% 18.13%
Dividend and Growth Fund 3/8/94 22.09% 30.25% N/A N/A
Index Fund 5/1/87 13.12% 30.96% 18.00% 15.76%
International Advisers Fund 3/1/95 10.26% 4.20% N/A N/A
MidCap Fund 7/30/97 9.68% N/A N/A N/A
Money Market Fund 6/30/80 6.31% 4.02% 3.33% 4.42%
Mortgage Securities Fund 1/1/85 7.72% 7.66% 5.51% 7.09%
Small Company Fund 8/9/96 16.84% 16.91% N/A N.A
International Opportunities Fund 7/2/90 5.26% -0.91% 9.73% N/A
Stock Fund 8/31/77 13.91% 29.75% 18.22% 15.67%
- -----------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
PERFORMANCE COMPARISONS
Yield and Total Return
Each Sub-Account may from time to time include its total return in
advertisements or in information furnished to present or prospective
shareholders. Each Sub-Account may from time to time include its yield and
total return in advertisements or information furnished to present or
prospective shareholders. Each Sub-Account may from time to time include in
advertisements its total return (and yield in the case of certain Sub-Accounts)
the ranking of those performance figures relative to such figures for groups of
other annuities analyzed by Lipper Analytical Services and Morningstar, Inc. as
having the same investment objectives.
The total return and yield may also be used to compare the performance of the
Sub-Accounts against certain widely acknowledged outside standards or indices
for stock and bond market performance. The Standard & Poor's Composite Index of
500 Stocks (the "S&P 500") is a market value-weighted and unmanaged index
showing the changes in the aggregate market value of 500 stocks relative to the
base period 1941-43. The S&P 500 is composed almost entirely of common stocks
of companies listed on the New York Stock Exchange, although the common stocks
of a few companies listed on the American Stock Exchange or traded
over-the-counter are included. The 500 companies represented include 400
industrial, 60 transportation and 40 financial services concerns. The S&P 500
represents about 80% of the market value of all issues traded on the New York
Stock Exchange.
The NASDAQ-OTC Composite Price Index (The "NASDAQ Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of approximately 3,500 stocks relative to the base measure of 100.00 on
February 5, 1971. The NASDAQ Index is composed entirely of common stocks of
companies traded over-the-counter and often through the National Association of
Securities Dealers Automated Quotations ("NASDAQ") system. Only those
over-the-counter stocks having only one market maker or traded on exchanges are
excluded.
The Morgan Stanley Capital International EAFE Index (the "EAFE Index") is an
unmanaged index, which includes over 1,000 companies representing the stock
markets of Europe, Australia, New Zealand, and the Far East. The EAFE Index is
weighted by market capitalization, and therefore, it has a heavy representation
in countries with large stock markets, such as Japan.
The Shearson Lehman Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted
issues are not included in the SL Government Index.
The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized rating
agency.
The Composite Index for Hartford Advisers Fund is comprised of the S&P 500
(55%), the Lehman Government/Corporate Bond Index (35%), both mentioned above,
and 90 Day U.S. Treasury Bills (10%).
6
<PAGE>
VARIABLE ANNUITY PAYMENTS
ANNUITY UNIT VALUE
The value of an Annuity Unit is calculated at the same time that the value of an
Accumulation Unit is calculated and is based on the same values for Fund shares
and other assets and liabilities. (See "Annuity Payments" in the Prospectus.)
The Annuity Unit Value for each Sub-Account's first Valuation Period was set at
$10. The Annuity Unit Value of each Sub-Account for any subsequent Valuation
Period is equal to (a) multiplied by (b) divided by (c) where:
(a) is the Net Investment Factor for the Valuation Period for which the
Annuity Unit Value is being calculated;
(b) is the Annuity Unit Value for the preceding Valuation Period; and
(c) is a daily Assumed Investment Return factor (for the 3%, 5% or 6%
Assumed Investment Return) adjusted for the number of days in the
Valuation Period.
The Assumed Investment Return factor is equal to one plus the applicable
percentage. Therefore, for 3%, it is 1.03, for 4% it is 1.04 and for 6% it is
1.06. The annual factors can be translated into daily factor of 1.000080986,
1.00010746, and 1.000159654, respectively.
If a Contract Owner selects a 5% Assumed Investment Return rate and if the net
investment return of the Sub-Account for an Annuity Payment period is equal to
the pro-rated portion of the 5% Assumed Investment Return, the Variable Annuity
Payment attributable to that Sub-Account for that period will equal the Payment
for the prior period. To the extent that such net investment return exceeds an
annualized rate of return of 5% for a Payment period, the Payment for that
period will be greater than the Payment for the prior period and to the extent
that such return for a period falls short of an annualized rate of 5%, the
Payment for that period will be less than the Payment for the prior period.
The following illustrations show, by use of hypothetical examples, the method of
determining the Annuity Unit Value and the amount of several Variable Annuity
Payments based on one Sub-Account.
ILLUSTRATION OF CALCULATION OF ANNUITY UNIT VALUE
<TABLE>
<CAPTION>
<S> <C>
1. Annuity Unit Value for immediately preceding
Valuation Period 10.00000000
2. Net Investment Factor 1.00036164
3. Daily factor to compensate for Assumed Investment
Return of 5% 1.00013368
4. Adjusted Net Investment Factor (2)/(3) 1.00028063
5. Annuity Unit Value for current Valuation Period (4)x(1) 10.00280630
<CAPTION>
ILLUSTRATION OF VARIABLE ANNUITY PAYMENTS
(assuming no premium tax is applicable)
<S> <C>
1. Number of Accumulation Units at Annuity Date 1,000.00
2. Accumulation Unit Value 12.55548000
3. Adjusted Contract Value (1)x(2) $12,555.48
4. First monthly Annuity Payment per $1,000 of
adjusted Contract Value $ 9.63
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
5. First monthly Annuity Payment (3)x(4)/1,000 $ 120.91
6. Annuity Unit Value 10.00280630
7. Number of Annuity Units (5)/(6) 12.08760785
8. Assume Annuity Unit value for second month equal to 10.04000000
9. Second Monthly Annuity Payment (7)X(8) $ 121.36
10. Assume Annuity Unit value for third month equal to 10.05000000
11. Third Monthly Annuity Payment (7)X(10) $ 121.48
</TABLE>
OTHER INFORMATION
A registration statement has been filed with the Securities and Exchange
Commission ("SEC") under the Securities Act of 1933, as amended, with respect to
the Contracts discussed in this Statement of Additional Information. Not all
the information set forth in the registration statement, amendments and exhibits
thereto has been included in this Statement of Additional Information.
Statements contained in this Statement of Additional Information concerning the
content of the Contracts and other legal instruments are summaries. For a
complete statement of the terms of these documents, reference should be made to
the instruments filed with the SEC.
8
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life Insurance Company
Separate Account Two and to the
Owners of Units of Interest Therein:
We have audited the accompanying statement of assets and liabilities of Hartford
Life Insurance Company Separate Account Two (the Account) as of December 31,
1997, and the related statement of operations for the year then ended and
statements of changes in net assets for each of the two years in the period then
ended. These financial statements are the responsibility of the Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hartford Life Insurance Company
Separate Account Two as of December 31, 1997, the results of its operations for
the year then ended and the changes in its net assets for each of the two years
in the period then ended in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 16, 1998
<PAGE>
This page intentionally left blank.
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ------------
<S> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund, Inc.
Shares 233,750,856
Cost $ 239,212,290
Market Value....................................... $245,380,897 -- --
Hartford Stock Fund, Inc.
Shares 342,491,362
Cost $1,100,714,577
Market Value....................................... -- $1,754,695,243 --
HVA Money Market Fund, Inc.
Shares 267,032,906
Cost $ 267,032,906
Market Value....................................... -- -- $267,032,906
Hartford Advisers Fund, Inc.
Shares 1,464,839,883
Cost $2,548,538,776
Market Value....................................... -- -- --
Hartford Capital Appreciation Fund, Inc.
Shares 393,201,702
Cost $1,191,518,665
Market Value....................................... -- -- --
Hartford Mortgage Securities Fund, Inc.
Shares 176,335,636
Cost $ 190,215,927
Market Value....................................... -- -- --
Hartford Index Fund, Inc.
Shares 142,876,568
Cost $ 270,370,922
Market Value....................................... -- -- --
Hartford International Opportunities Fund, Inc.
Shares 303,637,818
Cost $ 352,424,043
Market Value....................................... -- -- --
Hartford Dividend and Growth Fund, Inc.
Shares 342,782,937
Cost $ 502,839,651
Market Value....................................... -- -- --
Due from Hartford Life Insurance Company............. 509,273 3,595 34,153,395
Receivable from fund shares sold..................... 239 13,285,824 4
------------ -------------- ------------
Total Assets......................................... 245,890,409 1,767,984,662 301,186,305
------------ -------------- ------------
LIABILITIES:
Due to Hartford Life Insurance Company............... 240 13,285,750 74
Payable for fund shares purchased.................... 509,402 3,595 34,148,202
------------ -------------- ------------
Total Liabilities.................................... 509,642 13,289,345 34,148,276
------------ -------------- ------------
Net Assets (variable annuity contract liabilities)... $245,380,767 $1,754,695,317 $267,038,029
------------ -------------- ------------
------------ -------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL MORTGAGE
ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ----------------- --------------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund, Inc.
Shares 233,750,856
Cost $ 239,212,290
Market Value....................................... -- -- -- --
Hartford Stock Fund, Inc.
Shares 342,491,362
Cost $1,100,714,577
Market Value....................................... -- -- -- --
HVA Money Market Fund, Inc.
Shares 267,032,906
Cost $ 267,032,906
Market Value....................................... -- -- -- --
Hartford Advisers Fund, Inc.
Shares 1,464,839,883
Cost $2,548,538,776
Market Value....................................... $3,701,278,316 -- -- --
Hartford Capital Appreciation Fund, Inc.
Shares 393,201,702
Cost $1,191,518,665
Market Value....................................... -- $1,733,908,230 -- --
Hartford Mortgage Securities Fund, Inc.
Shares 176,335,636
Cost $ 190,215,927
Market Value....................................... -- -- $191,109,211 --
Hartford Index Fund, Inc.
Shares 142,876,568
Cost $ 270,370,922
Market Value....................................... -- -- -- $411,157,188
Hartford International Opportunities Fund, Inc.
Shares 303,637,818
Cost $ 352,424,043
Market Value....................................... -- -- -- --
Hartford Dividend and Growth Fund, Inc.
Shares 342,782,937
Cost $ 502,839,651
Market Value....................................... -- -- -- --
Due from Hartford Life Insurance Company............. 452,648 7,173 99,310 --
Receivable from fund shares sold..................... 549 13,688,014 142,887 6,849,126
-------------- ----------------- --------------- ------------
Total Assets......................................... 3,701,731,513 1,747,603,417 191,351,408 418,006,314
-------------- ----------------- --------------- ------------
LIABILITIES:
Due to Hartford Life Insurance Company............... 434 13,688,077 144,327 6,850,498
Payable for fund shares purchased.................... 459,485 7,172 93,430 --
-------------- ----------------- --------------- ------------
Total Liabilities.................................... 459,919 13,695,249 237,757 6,850,498
-------------- ----------------- --------------- ------------
Net Assets (variable annuity contract liabilities)... $3,701,271,594 $1,733,908,168 $191,113,651 $411,155,816
-------------- ----------------- --------------- ------------
-------------- ----------------- --------------- ------------
<CAPTION>
INTERNATIONAL DIVIDEND AND
OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------ -------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund, Inc.
Shares 233,750,856
Cost $ 239,212,290
Market Value....................................... -- --
Hartford Stock Fund, Inc.
Shares 342,491,362
Cost $1,100,714,577
Market Value....................................... -- --
HVA Money Market Fund, Inc.
Shares 267,032,906
Cost $ 267,032,906
Market Value....................................... -- --
Hartford Advisers Fund, Inc.
Shares 1,464,839,883
Cost $2,548,538,776
Market Value....................................... -- --
Hartford Capital Appreciation Fund, Inc.
Shares 393,201,702
Cost $1,191,518,665
Market Value....................................... -- --
Hartford Mortgage Securities Fund, Inc.
Shares 176,335,636
Cost $ 190,215,927
Market Value....................................... -- --
Hartford Index Fund, Inc.
Shares 142,876,568
Cost $ 270,370,922
Market Value....................................... -- --
Hartford International Opportunities Fund, Inc.
Shares 303,637,818
Cost $ 352,424,043
Market Value....................................... $393,046,097 --
Hartford Dividend and Growth Fund, Inc.
Shares 342,782,937
Cost $ 502,839,651
Market Value....................................... -- $ 669,224,723
Due from Hartford Life Insurance Company............. 3,770 1,032,701
Receivable from fund shares sold..................... 108,721 182
------------------ -------------
Total Assets......................................... 393,158,588 670,257,606
------------------ -------------
LIABILITIES:
Due to Hartford Life Insurance Company............... 109,361 147
Payable for fund shares purchased.................... 3,769 1,033,593
------------------ -------------
Total Liabilities.................................... 113,130 1,033,740
------------------ -------------
Net Assets (variable annuity contract liabilities)... $393,045,458 $ 669,223,866
------------------ -------------
------------------ -------------
</TABLE>
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
INTERNATIONAL SMALL
ADVISERS FUND COMPANY FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- ------------
<S> <C> <C>
ASSETS:
Investments:
Hartford International Advisers Fund, Inc.
Shares 48,879,214
Cost $56,417,985
Market Value....................................... $57,422,859 --
Hartford Small Company Fund, Inc.
Shares 59,385,385
Cost $69,986,701
Market Value....................................... -- $71,393,763
Hartford MidCap Fund, Inc.
Shares 8,067,718
Cost $ 8,836,979
Market Value....................................... -- --
Smith Barney Cash Portfolio
Shares 507,910
Cost $ 507,910
Market Value....................................... -- --
Smith Barney Appreciation Fund
Shares 12,256
Cost $ 87,371
Market Value....................................... -- --
Smith Barney Government Portfolio
Shares 37,076
Cost $ 37,076
Market Value....................................... -- --
BB&T Growth & Income Fund
Shares 545,238
Cost $ 6,067,937
Market Value....................................... -- --
AmSouth Equity Income Fund
Shares 233,814
Cost $ 2,359,717
Market Value....................................... -- --
Dividend Receivable.................................. -- --
Due from Hartford Life Insurance Company............. 25,458 175,566
Receivable from fund shares sold..................... 9 16
------------- ------------
Total Assets......................................... 57,448,326 71,569,345
------------- ------------
LIABILITIES:
Due to Hartford Life Insurance Company............... 8 19
Payable for fund shares purchased.................... 25,945 175,691
------------- ------------
Total Liabilities.................................... 25,953 175,710
------------- ------------
Net Assets (variable annuity contract liabilities)... $57,422,373 $71,393,635
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
SMITH BARNEY
SMITH BARNEY SMITH BARNEY GOVERNMENT
MIDCAP FUND CASH PORTFOLIO APPRECIATION FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------------- ----------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford International Advisers Fund, Inc.
Shares 48,879,214
Cost $56,417,985
Market Value....................................... -- -- -- --
Hartford Small Company Fund, Inc.
Shares 59,385,385
Cost $69,986,701
Market Value....................................... -- -- -- --
Hartford MidCap Fund, Inc.
Shares 8,067,718
Cost $ 8,836,979
Market Value....................................... $9,173,875 -- -- --
Smith Barney Cash Portfolio
Shares 507,910
Cost $ 507,910
Market Value....................................... -- $507,912 -- --
Smith Barney Appreciation Fund
Shares 12,256
Cost $ 87,371
Market Value....................................... -- -- $170,562 --
Smith Barney Government Portfolio
Shares 37,076
Cost $ 37,076
Market Value....................................... -- -- -- $37,076
BB&T Growth & Income Fund
Shares 545,238
Cost $ 6,067,937
Market Value....................................... -- -- -- --
AmSouth Equity Income Fund
Shares 233,814
Cost $ 2,359,717
Market Value....................................... -- -- -- --
Dividend Receivable.................................. -- 1,205 -- 96
Due from Hartford Life Insurance Company............. 48,940 26,690 -- --
Receivable from fund shares sold..................... 1 162 120 24
----------- -------- -------- -------
Total Assets......................................... 9,222,816 535,969 170,682 37,196
----------- -------- -------- -------
LIABILITIES:
Due to Hartford Life Insurance Company............... 1 200 109 32
Payable for fund shares purchased.................... 48,925 26,757 -- --
----------- -------- -------- -------
Total Liabilities.................................... 48,926 26,957 109 32
----------- -------- -------- -------
Net Assets (variable annuity contract liabilities)... $9,173,890 $509,012 $170,573 $37,164
----------- -------- -------- -------
----------- -------- -------- -------
<CAPTION>
BB&T AMSOUTH
GROWTH AND EQUITY
INCOME FUND INCOME FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- -------------
<S> <C> <C>
ASSETS:
Investments:
Hartford International Advisers Fund, Inc.
Shares 48,879,214
Cost $56,417,985
Market Value....................................... -- --
Hartford Small Company Fund, Inc.
Shares 59,385,385
Cost $69,986,701
Market Value....................................... -- --
Hartford MidCap Fund, Inc.
Shares 8,067,718
Cost $ 8,836,979
Market Value....................................... -- --
Smith Barney Cash Portfolio
Shares 507,910
Cost $ 507,910
Market Value....................................... -- --
Smith Barney Appreciation Fund
Shares 12,256
Cost $ 87,371
Market Value....................................... -- --
Smith Barney Government Portfolio
Shares 37,076
Cost $ 37,076
Market Value....................................... -- --
BB&T Growth & Income Fund
Shares 545,238
Cost $ 6,067,937
Market Value....................................... $6,477,421 --
AmSouth Equity Income Fund
Shares 233,814
Cost $ 2,359,717
Market Value....................................... -- $2,391,912
Dividend Receivable.................................. -- --
Due from Hartford Life Insurance Company............. 11,400 6,464
Receivable from fund shares sold..................... -- --
----------- -------------
Total Assets......................................... 6,488,821 2,398,376
----------- -------------
LIABILITIES:
Due to Hartford Life Insurance Company............... -- --
Payable for fund shares purchased.................... 11,401 6,460
----------- -------------
Total Liabilities.................................... 11,401 6,460
----------- -------------
Net Assets (variable annuity contract liabilities)... $6,477,420 $2,391,916
----------- -------------
----------- -------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------- --------- --------------
DEFERRED ANNUITY CONTRACTS IN THE ACCUMULATION
PERIOD:
<S> <C> <C> <C>
INDIVIDUAL SUB-ACCOUNTS:
Bond Fund Qualified 1.00%....................... 276,322 $ 4.084713 $ 1,128,696
Bond Fund Non-Qualified 1.00%................... 1,879,248 4.022607 7,559,476
Bond Fund 1.25%................................. 111,586,155 2.113753 235,865,570
Bond Fund .25%.................................. 57,428 1.421542 81,636
Stock Fund Qualified 1.00%...................... 848,097 8.882260 7,533,018
Stock Fund Non-Qualified 1.00%.................. 3,172,838 8.493415 26,948,230
Stock Fund 1.25%................................ 372,753,860 4.601624 1,715,273,108
Stock Fund .25%................................. 1,113,935 2.442242 2,720,499
Money Market Fund Qualified 1.00%............... 979,465 2.570693 2,517,904
Money Market Fund Non-Qualified 1.00%........... 12,009,970 2.571915 30,888,622
Money Market Fund 1.25%......................... 140,796,551 1.650311 232,358,097
Money Market Fund .25%.......................... 412,812 1.237665 510,923
Advisers Fund Qualified 1.00%................... 3,353,386 5.351192 17,944,612
Advisers Fund Non-Qualified 1.00%............... 11,223,033 5.351192 60,056,604
Advisers Fund 1.25%............................. 1,012,471,703 3.572368 3,616,921,513
Advisers Fund .25%.............................. 1,064,392 2.012508 2,142,097
Capital Appreciation Fund Qualified 1.00%....... 858,728 8.154392 7,002,405
Capital Appreciation Fund Non-Qualified 1.00%... 2,279,033 8.150600 18,575,486
Capital Appreciation Fund 1.25%................. 351,188,619 4.845288 1,701,610,001
Capital Appreciation Fund .25%.................. 2,365,382 2.354942 5,570,337
Mortgage Securities Fund Qualified 1.00%........ 694,613 2.692454 1,870,214
Mortgage Securities Fund Non-Qualified 1.00%.... 6,914,379 2.692454 18,616,647
Mortgage Securities Fund 1.25%.................. 81,142,537 2.097829 170,223,167
Mortgage Securities Fund .25%................... 15,250 1.370090 20,891
Index Fund 1.00%................................ 102,566 1.472201 150,998
Index Fund Non-Qualified 1.00%.................. 557,157 1.472201 820,247
Index Fund 1.25%................................ 109,836,846 3.726058 409,258,459
Index Fund .25%................................. 216,268 2.411839 521,604
International Opportunities Fund Qualified
1.00%.......................................... 314,039 1.496781 470,048
International Opportunities Fund Non-Qualified
1.00%.......................................... 1,518,024 1.496728 2,272,069
International Opportunities Fund 1.25%.......... 264,642,015 1.468965 388,749,858
International Opportunities Fund .25%........... 733,875 1.660294 1,218,449
Dividend and Growth Fund Qualified 1.00%........ 390,646 2.169750 847,604
Dividend and Growth Fund Non-Qualified 1.00%.... 1,710,116 2.169750 3,710,524
Dividend and Growth Fund 1.25%.................. 308,682,099 2.149172 663,410,924
Dividend and Growth Fund .25%................... 268,881 2.232593 600,302
International Advisers Fund Sub-Account 1.00%... 37,492 1.328248 49,796
International Advisers Fund Non-Qualified
1.00%.......................................... 223,145 1.328248 296,392
International Advisers Fund 1.25%............... 43,216,995 1.318862 56,997,252
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------- --------- --------------
INDIVIDUAL SUB-ACCOUNTS -- (CONTINUED)
<S> <C> <C> <C>
International Advisers Fund .25%................ 39,807 $ 1.356789 $ 54,010
Hartford Small Company 1.00%.................... 99,533 1.250966 124,512
Hartford Small Company Non-Qualified 1.00%...... 377,483 1.250966 472,218
Hartford Small Company 1.25%.................... 56,706,183 1.246631 70,691,687
Hartford Small Company .25%..................... 48,170 1.264068 60,890
MidCap Fund Sub-Account 1.00% Qualified......... 12,789 1.098000 14,042
MidCap Fund Sub-Account 1.00% Non-Qualified..... 34,465 1.098000 37,843
MidCap Fund Sub-Account 1.25%................... 8,305,640 1.096832 9,109,892
MidCap Fund Sub-Account 1.00% Qualified......... 10,996 1.101485 12,113
Smith Barney Shearson Daily Dividend, Inc.
Qualified 1.00%................................ 53,613 2.777393 148,906
Smith Barney Shearson Daily Dividend, Inc.
Non-Qualified 1.00%............................ 125,291 2.874151 360,106
Smith Barney Shearson Appreciation Fund, Inc.
Qualified 1.00%................................ 18,335 9.303319 170,573
Smith Barney Shearson Gov't and Agencies, Inc.
Qualified 1.00%................................ 14,846 2.503304 37,164
BB&T Growth and Income Fund Sub-Account......... 5,443,658 1.189902 6,477,420
Am South Fund Sub-Account 1.00% Qualified....... 2,337,620 1.023227 2,391,916
--------------
TOTAL ACCUMULATION PERIOD......................... 9,503,477,571
--------------
ANNUITY CONTRACTS IN THE ANNUITY PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Bond Fund Non-Qualified 1.00%................... 14,968 4.022607 60,210
Bond Fund 1.25%................................. 324,152 2.113753 685,179
Stock Fund Non-Qualified 1.00%.................. 11,832 8.493415 100,494
Stock Fund 1.25%................................ 460,700 4.601624 2,119,968
Money Market Fund Qualified 1.00%............... 11,497 2.570693 29,553
Money Market Fund Non-Qualified 1.00%........... 75,465 2.571915 194,090
Money Market Fund 1.25%......................... 326,508 1.650311 538,840
Advisers Fund Qualified 1.00%................... 3,304 5.351192 17,680
Advisers Fund Non-Qualified 1.00%............... 57,148 5.351192 305,810
Advisers Fund 1.25%............................. 1,087,032 3.572368 3,883,278
Capital Appreciation Fund Non-Qualified 1.00%... 2,576 8.150600 20,996
Capital Appreciation Fund 1.25%................. 232,998 4.845288 1,128,942
Mortgage Securities Fund Non-Qualified 1.00%.... 72,723 2.692454 195,803
Mortgage Securities Fund 1.25%.................. 89,106 2.097829 186,929
Index Fund 1.25%................................ 108,562 3.726058 404,508
International Opportunities Fund 1.25%.......... 228,075 1.468965 335,034
Dividend and Growth Fund 1.25%.................. 304,541 2.149172 654,512
International Advisers Fund 1.25%............... 18,897 1.318862 24,923
Hartford Small Company 1.25%.................... 35,558 1.246631 44,328
--------------
TOTAL ANNUITY PERIOD.............................. 10,931,077
--------------
GRAND TOTAL....................................... $9,514,408,648
--------------
--------------
</TABLE>
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------ -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................................ $12,961,364 $ 16,077,936 $13,797,570
EXPENSES:
Mortality and expense undertakings................... (2,612,230) (18,967,977) (3,238,151)
----------- ------------ -----------
Net investment income (loss)....................... 10,349,134 (2,890,041) 10,559,419
----------- ------------ -----------
CAPITAL GAINS INCOME................................... -- 64,909,605 --
----------- ------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on security transactions.... 17,262 1,176,996 --
Net unrealized appreciation (depreciation) of
investments during
the period.......................................... 10,119,718 315,737,284 --
----------- ------------ -----------
Net gain (loss) on investments..................... 10,136,980 316,914,280 --
----------- ------------ -----------
Net increase (decrease) in net assets resulting
from operations................................... $20,486,114 $378,933,844 $10,559,419
----------- ------------ -----------
----------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT CAPITAL MORTGAGE
ADVISERS FUND MONEY MARKET FUND APPRECIATION FUND SECURITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ----------------- ----------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................................ $ 77,714,905 $2,646 $ 8,543,668 $11,347,408
EXPENSES:
Mortality and expense undertakings................... (41,311,784) (627) (19,474,176) (2,333,945)
------------- ------ ----------------- ---------------
Net investment income (loss)....................... 36,403,121 2,019 (10,930,508) 9,013,463
------------- ------ ----------------- ---------------
CAPITAL GAINS INCOME................................... 129,600,221 -- 103,244,397 --
------------- ------ ----------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on security transactions.... 2,159,454 -- 413,746 28,917
Net unrealized appreciation (depreciation) of
investments during
the period.......................................... 501,068,905 -- 190,913,008 5,074,541
------------- ------ ----------------- ---------------
Net gain (loss) on investments..................... 503,228,359 -- 191,326,754 5,103,458
------------- ------ ----------------- ---------------
Net increase (decrease) in net assets resulting
from operations................................... $ 669,231,701 $2,019 $283,640,643 $14,116,921
------------- ------ ----------------- ---------------
------------- ------ ----------------- ---------------
<CAPTION>
INTERNATIONAL DIVIDEND AND
INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................................ $ 4,750,804 $ 3,651,850 $ 9,408,629
EXPENSES:
Mortality and expense undertakings................... (4,257,897) (5,181,012) (6,174,075)
----------- ------------------ ------------
Net investment income (loss)....................... 492,907 (1,529,162) 3,234,554
----------- ------------------ ------------
CAPITAL GAINS INCOME................................... 21,612,566 29,748,890 9,959,170
----------- ------------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on security transactions.... 243,148 29,653 (4,003)
Net unrealized appreciation (depreciation) of
investments during
the period.......................................... 65,120,869 (32,127,237) 111,067,791
----------- ------------------ ------------
Net gain (loss) on investments..................... 65,364,017 (32,097,584) 111,063,788
----------- ------------------ ------------
Net increase (decrease) in net assets resulting
from operations................................... $87,469,490 $ (3,877,856) $124,257,512
----------- ------------------ ------------
----------- ------------------ ------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS -- (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
INTERNATIONAL SMALL
ADVISERS FUND COMPANY FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................................ $1,605,717 $ 32,487
EXPENSES:
Mortality and expense undertakings................... (569,723) (489,607)
------------- ------------
Net investment income (loss)......................... 1,035,994 (457,120)
------------- ------------
CAPITAL GAINS INCOME................................... 110,732 3,307,195
------------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on security transactions.... 13,808 (36,223)
Net unrealized appreciation (depreciation) of
investments during the period....................... 118,913 1,332,603
------------- ------------
Net gain (loss) on investments..................... 132,721 1,296,380
------------- ------------
Net increase (decrease) in net assets resulting
from operations................................... $1,279,447 $4,146,455
------------- ------------
------------- ------------
</TABLE>
* From inception, July 15, 1997, to December 31, 1997.
** From inception, June 3, 1997, to December 31, 1997.
*** From inception, October 23, 1997, to December 31, 1997.
The accompanying notes are an integral part of these financial statements.
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMITH BARNEY
SMITH BARNEY SMITH BARNEY GOVERNMENT
MIDCAP FUND CASH PORTFOLIO FUND APPRECIATION FUND PORTFOLIO
SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------------- ----------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................................ $ 8,146 $26,755 $ 2,394 $1,998
EXPENSES:
Mortality and expense undertakings................... (20,807) (5,365) (1,707) (404)
------------ ------- ------- ------
Net investment income (loss)......................... (12,661) 21,390 687 1,594
------------ ------- ------- ------
CAPITAL GAINS INCOME................................... -- -- 22,341 --
------------ ------- ------- ------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on security transactions.... (2,185) -- 6,810 --
Net unrealized appreciation (depreciation) of
investments during the period....................... 336,895 -- 8,816 --
------------ ------- ------- ------
Net gain (loss) on investments..................... 334,710 -- 15,626 --
------------ ------- ------- ------
Net increase (decrease) in net assets resulting
from operations................................... $322,049 $21,390 $38,654 $1,594
------------ ------- ------- ------
------------ ------- ------- ------
<CAPTION>
BB&T AMSOUTH
GROWTH AND EQUITY INCOME
INCOME FUND FUND
SUB-ACCOUNT** SUB-ACCOUNT***
------------- ----------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................................ $ 43,938 $ 4,389
EXPENSES:
Mortality and expense undertakings................... (21,234) (2,657)
------------- -------
Net investment income (loss)......................... 22,704 1,732
------------- -------
CAPITAL GAINS INCOME................................... 662 --
------------- -------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on security transactions.... -- (1)
Net unrealized appreciation (depreciation) of
investments during the period....................... 409,485 32,196
------------- -------
Net gain (loss) on investments..................... 409,485 32,195
------------- -------
Net increase (decrease) in net assets resulting
from operations................................... $432,851 $33,927
------------- -------
------------- -------
</TABLE>
<PAGE>
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss)......................... $ 10,349,134 $ (2,890,041) $ 10,558,627
Capital gains income................................. -- 64,909,605 792
Net realized gain (loss) on security transactions.... 17,262 1,176,996 --
Net unrealized appreciation (depreciation) of
investments during the period....................... 10,119,718 315,737,284 --
------------ -------------- -------------
Net increase (decrease) in net assets resulting from
operations.......................................... 20,486,114 378,933,844 10,559,419
------------ -------------- -------------
UNIT TRANSACTIONS:
Purchases............................................ 28,788,526 208,829,884 56,766,167
Net transfers........................................ 19,102,654 45,780,800 (9,782,834)
Surrenders........................................... (18,300,042) (92,238,226) (68,418,264)
Net annuity transactions............................. 325,387 633,517 12,261
------------ -------------- -------------
Net increase (decrease) in net assets resulting from
unit transactions................................... 29,916,525 163,005,975 (21,422,670)
------------ -------------- -------------
Total increase (decrease) in net assets.............. 50,402,639 541,939,819 (10,863,251)
NET ASSETS:
Beginning of period.................................. 194,978,128 1,212,755,498 277,901,280
------------ -------------- -------------
End of period........................................ $245,380,767 $1,754,695,317 $ 267,038,029
------------ -------------- -------------
------------ -------------- -------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
MONEY
BOND FUND STOCK FUND MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- -------------
OPERATIONS:
Net investment income (loss)......................... $ 9,645,789 $ 3,458,346 $ 9,260,160
Capital gains income................................. -- 36,500,208 --
Net realized gain (loss) on security transactions.... (221,405) 1,221,317 --
Net unrealized (depreciation) appreciation of
investments during the period....................... (5,160,742) 171,537,514 --
------------ -------------- -------------
Net increase (decrease) in net assets resulting from
operations.......................................... 4,263,642 212,717,385 9,260,160
------------ -------------- -------------
UNIT TRANSACTIONS:
Purchases............................................ 25,740,584 167,200,796 69,939,055
Net transfers........................................ (16,696,613) 28,419,235 66,601,560
Surrenders........................................... (15,363,352) (50,578,919) (52,603,716)
Net annuity transactions............................. 63,477 (84,340) (175,109)
------------ -------------- -------------
Net (decrease) increase in net assets resulting from
unit transactions................................... (6,255,904) 144,956,772 83,761,790
------------ -------------- -------------
Total (decrease) increase in net assets.............. (1,992,262) 357,674,157 93,021,950
NET ASSETS:
Beginning of period.................................. 196,970,390 855,081,341 184,879,330
------------ -------------- -------------
End of period........................................ $194,978,128 $1,212,755,498 $ 277,901,280
------------ -------------- -------------
------------ -------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT CAPITAL MORTGAGE
ADVISERS FUND MONEY MARKET FUND APPRECIATION FUND SECURITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ----------------- ----------------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)......................... $ 36,403,121 $ 2,019 $ (10,930,508) $ 9,013,463
Capital gains income................................. 129,600,221 -- 103,244,397 --
Net realized gain (loss) on security transactions.... 2,159,454 -- 413,746 28,917
Net unrealized appreciation (depreciation) of
investments during the period....................... 501,068,905 -- 190,913,008 5,074,541
-------------- ----------------- ----------------- ---------------
Net increase (decrease) in net assets resulting from
operations.......................................... 669,231,701 2,019 283,640,643 14,116,921
-------------- ----------------- ----------------- ---------------
UNIT TRANSACTIONS:
Purchases............................................ 364,832,050 -- 194,562,087 7,925,304
Net transfers........................................ 27,406,992 (88,379) (11,521,643) (9,594,437)
Surrenders........................................... (206,501,208) (9,133) (87,759,430) (17,575,723)
Net annuity transactions............................. 725,608 (21,870) 361,130 (3,307)
-------------- ----------------- ----------------- ---------------
Net increase (decrease) in net assets resulting from
unit transactions................................... 186,463,442 (119,382) 95,642,144 (19,248,163)
-------------- ----------------- ----------------- ---------------
Total increase (decrease) in net assets.............. 855,695,143 (117,363) 379,282,787 (5,131,242)
NET ASSETS:
Beginning of period.................................. 2,845,576,451 117,363 1,354,625,381 196,244,893
-------------- ----------------- ----------------- ---------------
End of period........................................ $3,701,271,594 $-- $1,733,908,168 $191,113,651
-------------- ----------------- ----------------- ---------------
-------------- ----------------- ----------------- ---------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
U.S. GOVERNMENT CAPITAL MORTGAGE
ADVISERS FUND MONEY MARKET FUND APPRECIATION FUND SECURITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ----------------- ----------------- ---------------
OPERATIONS:
Net investment income (loss)......................... $ 42,565,178 $ 4,826 $ (6,448,058) $ 10,591,830
Capital gains income................................. 52,150,764 -- 66,515,678 --
Net realized gain (loss) on security transactions.... 1,838,982 -- 2,074,856 (435,321)
Net unrealized (depreciation) appreciation of
investments during the period....................... 271,199,538 -- 145,316,093 (2,802,442)
-------------- ----------------- ----------------- ---------------
Net increase (decrease) in net assets resulting from
operations.......................................... 367,754,462 4,826 207,458,569 7,354,067
-------------- ----------------- ----------------- ---------------
UNIT TRANSACTIONS:
Purchases............................................ 317,249,591 -- 189,467,703 8,471,412
Net transfers........................................ (5,375,317) (10,049) (3,020,837) (18,731,894)
Surrenders........................................... (148,652,281) (5,248) (57,537,694) (18,950,990)
Net annuity transactions............................. (7,328) (12,789) 159,816 (68,468)
-------------- ----------------- ----------------- ---------------
Net (decrease) increase in net assets resulting from
unit transactions................................... 163,214,665 (28,086) 129,068,988 (29,279,940)
-------------- ----------------- ----------------- ---------------
Total (decrease) increase in net assets.............. 530,969,127 (23,260) 336,527,557 (21,925,873)
NET ASSETS:
Beginning of period.................................. 2,314,607,324 140,623 1,018,097,824 218,170,766
-------------- ----------------- ----------------- ---------------
End of period........................................ $2,845,576,451 $ 117,363 $1,354,625,381 $196,244,893
-------------- ----------------- ----------------- ---------------
-------------- ----------------- ----------------- ---------------
<CAPTION>
INTERNATIONAL DIVIDEND AND
INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------------ -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss)......................... $ 492,907 $ (1,529,162) $ 3,234,554
Capital gains income................................. 21,612,566 29,748,890 9,959,170
Net realized gain (loss) on security transactions.... 243,148 29,653 (4,003)
Net unrealized appreciation (depreciation) of
investments during the period....................... 65,120,869 (32,127,237) 111,067,791
------------ ------------------ -------------
Net increase (decrease) in net assets resulting from
operations.......................................... 87,469,490 (3,877,856) 124,257,512
------------ ------------------ -------------
UNIT TRANSACTIONS:
Purchases............................................ 65,766,703 38,595,370 159,109,767
Net transfers........................................ 26,458,731 (16,075,692) 87,528,713
Surrenders........................................... (18,692,668) (26,504,799) (20,331,098)
Net annuity transactions............................. 190,331 66,746 349,515
------------ ------------------ -------------
Net increase (decrease) in net assets resulting from
unit transactions................................... 73,723,097 (3,918,375) 226,656,897
------------ ------------------ -------------
Total increase (decrease) in net assets.............. 161,192,587 (7,796,232) 350,914,409
NET ASSETS:
Beginning of period.................................. 249,963,229 400,841,689 318,309,457
------------ ------------------ -------------
End of period........................................ $411,155,816 $393,045,458 $ 669,223,866
------------ ------------------ -------------
------------ ------------------ -------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
INTERNATIONAL DIVIDEND AND
INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------------ -------------
OPERATIONS:
Net investment income (loss)......................... $ 1,647,249 $ 2,504,471 $ 2,622,394
Capital gains income................................. 3,111,887 9,391,222 2,783,157
Net realized gain (loss) on security transactions.... 136,100 91,388 (4,854)
Net unrealized (depreciation) appreciation of
investments during the period....................... 34,189,219 27,779,181 37,804,713
------------ ------------------ -------------
Net increase (decrease) in net assets resulting from
operations.......................................... 39,084,455 39,766,262 43,205,410
------------ ------------------ -------------
UNIT TRANSACTIONS:
Purchases............................................ 45,748,598 41,231,155 98,719,762
Net transfers........................................ 19,409,151 19,333,907 69,845,165
Surrenders........................................... (10,550,651) (21,132,233) (8,446,511)
Net annuity transactions............................. (31,502) 8,570 153,439
------------ ------------------ -------------
Net (decrease) increase in net assets resulting from
unit transactions................................... 54,575,596 39,441,399 160,271,855
------------ ------------------ -------------
Total (decrease) increase in net assets.............. 93,660,051 79,207,661 203,477,265
NET ASSETS:
Beginning of period.................................. 156,303,178 321,634,028 114,832,192
------------ ------------------ -------------
End of period........................................ $249,963,229 $400,841,689 $ 318,309,457
------------ ------------------ -------------
------------ ------------------ -------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INTERNATIONAL SMALL
ADVISERS FUND COMPANY FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)......................... $ 1,035,994 $ (457,120)
Capital gains income................................. 110,732 3,307,195
Net realized gain (loss) on security transactions.... 13,808 (36,223)
Net unrealized appreciation (depreciation) of
investments during the period....................... 118,913 1,332,603
------------- ------------
Net increase (decrease) in net assets resulting from
operations.......................................... 1,279,447 4,146,455
------------- ------------
UNIT TRANSACTIONS:
Purchases............................................ 18,887,741 24,742,079
Net transfers........................................ 9,531,179 30,544,670
Surrenders........................................... (2,110,213) (1,630,264)
Net annuity transactions............................. 25,045 44,603
------------- ------------
Net increase (decrease) in net assets resulting from
unit transactions................................... 26,333,752 53,701,088
------------- ------------
Total increase (decrease) in net assets.............. 27,613,199 57,847,543
NET ASSETS:
Beginning of period.................................. 29,809,174 13,546,092
------------- ------------
End of period........................................ $57,422,373 $71,393,635
------------- ------------
------------- ------------
* From inception, July 15, 1997 to December 31, 1997.
** From inception, June 3, 1997 to December 31, 1997.
*** From inception, October 23, 1997 to December 31, 1997.
STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
INTERNATIONAL SMALL
ADVISERS FUND COMPANY FUND
SUB-ACCOUNT SUB-ACCOUNT****
---------- ------------
OPERATIONS:
Net investment income (loss)......................... $ 644,546 $ (17,678)
Capital gains income................................. 595,787 --
Net realized gain on security transactions........... (3,562) 922
Net unrealized (depreciation) appreciation of
investments during the period....................... 708,119 74,459
---------- ----------
Net increase (decrease) in net assets resulting from
operations.......................................... 1,944,890 57,703
---------- ----------
UNIT TRANSACTIONS:
Purchases............................................ 10,618,419 4,333,960
Net transfers........................................ 10,257,798 9,203,248
Surrenders........................................... (609,471) (48,819)
Net annuity transactions............................. -- --
---------- ----------
Net increase (decrease) in net assets resulting from
unit transactions................................... 20,266,746 13,488,389
---------- ----------
Total increase (decrease) in net assets.............. 22,211,636 13,546,092
NET ASSETS:
Beginning of period.................................. 7,597,538 --
---------- ----------
End of period........................................ $29,809,174 $13,546,092
---------- ----------
---------- ----------
</TABLE>
**** From inception, August 9, 1996 to December 31, 1996.
The accompanying notes are an integral part of these financial statements.
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMITH BARNEY
SMITH BARNEY SMITH BARNEY GOVERNMENT
MIDCAP FUND CASH PORTFOLIO APPRECIATION FUND PORTFOLIO
SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------------- ----------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)......................... $ (12,661) $ 21,390 $ 687 $ 1,594
Capital gains income................................. -- -- 22,341 --
Net realized gain (loss) on security transactions.... (2,185) -- 6,810 --
Net unrealized appreciation (depreciation) of
investments during the period....................... 336,895 -- 8,816 --
------------ -------- -------- -------
Net increase (decrease) in net assets resulting from
operations.......................................... 322,049 21,390 38,654 1,594
------------ -------- -------- -------
UNIT TRANSACTIONS:
Purchases............................................ 2,088,623 -- -- --
Net transfers........................................ 6,774,154 -- -- --
Surrenders........................................... (10,936) (93,309) (40,942) (4,272)
Net annuity transactions............................. -- -- -- --
------------ -------- -------- -------
Net increase (decrease) in net assets resulting from
unit transactions................................... 8,851,841 (93,309) (40,942) (4,272)
------------ -------- -------- -------
Total increase (decrease) in net assets.............. 9,173,890 (71,919) (2,288) (2,678)
NET ASSETS:
Beginning of period.................................. -- 580,931 172,861 39,842
------------ -------- -------- -------
End of period........................................ $9,173,890 $509,012 $170,573 $37,164
------------ -------- -------- -------
------------ -------- -------- -------
* From inception, July 15, 1997 to December 31, 1997.
** From inception, June 3, 1997 to December 31, 1997.
*** From inception, October 23, 1997 to December 31, 1997.
STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
SMITH BARNEY SMITH BARNEY
CASH SMITH BARNEY GOVERNMENT
PORTFOLIO APPRECIATION FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------------ ----------------
OPERATIONS:
Net investment income (loss)......................... $ 22,053 $ 15,035 $ 1,646
Capital gains income................................. -- -- --
Net realized gain on security transactions........... -- 174 --
Net unrealized (depreciation) appreciation of
investments during the period....................... -- 11,776 --
--------- ------- -------
Net increase (decrease) in net assets resulting from
operations.......................................... 22,053 26,985 1,646
--------- ------- -------
UNIT TRANSACTIONS:
Purchases............................................ 25 -- --
Net transfers........................................ -- -- --
Surrenders........................................... (10,494) (2,558) (4,273)
Net annuity transactions............................. -- -- --
--------- ------- -------
Net increase (decrease) in net assets resulting from
unit transactions................................... (10,469) (2,558) (4,273)
--------- ------- -------
Total increase (decrease) in net assets.............. 11,584 24,427 (2,627)
NET ASSETS:
Beginning of period.................................. 569,347 148,434 42,469
--------- ------- -------
End of period........................................ $ 580,931 $172,861 $ 39,842
--------- ------- -------
--------- ------- -------
<CAPTION>
BB&T
GROWTH AND AMSOUTH EQUITY
INCOME FUND INCOME FUND
SUB-ACCOUNT** SUB-ACCOUNT***
------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)......................... $ 22,704 $ 1,732
Capital gains income................................. 662 --
Net realized gain (loss) on security transactions.... -- --
Net unrealized appreciation (depreciation) of
investments during the period....................... 409,485 32,195
------------- ---------------
Net increase (decrease) in net assets resulting from
operations.......................................... 432,851 33,927
------------- ---------------
UNIT TRANSACTIONS:
Purchases............................................ 5,104,417 2,100,608
Net transfers........................................ 1,006,220 259,438
Surrenders........................................... (66,068) (2,057)
Net annuity transactions............................. -- --
------------- ---------------
Net increase (decrease) in net assets resulting from
unit transactions................................... 6,044,569 2,357,989
------------- ---------------
Total increase (decrease) in net assets.............. 6,477,420 2,391,916
NET ASSETS:
Beginning of period.................................. -- --
------------- ---------------
End of period........................................ $6,477,420 $2,391,916
------------- ---------------
------------- ---------------
* From inception, July 15, 1997 to December 31, 1997.
** From inception, June 3, 1997 to December 31, 1997.
*** From inception, October 23, 1997 to December 31, 19
STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
------------ ------------------ ---------
OPERATIONS:
Net investment income (loss).........................
Capital gains income.................................
Net realized gain on security transactions...........
Net unrealized (depreciation) appreciation of
investments during the period.......................
Net increase (decrease) in net assets resulting from
operations..........................................
UNIT TRANSACTIONS:
Purchases............................................
Net transfers........................................
Surrenders...........................................
Net annuity transactions.............................
Net increase (decrease) in net assets resulting from
unit transactions...................................
Total increase (decrease) in net assets..............
NET ASSETS:
Beginning of period..................................
End of period........................................
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION:
Separate Account Two (the Account) is a separate investment account within
Hartford Life Insurance Company (the Company) and is registered with the
Securities and Exchange Commission (SEC) as a unit investment trust under the
Investment Company Act of 1940, as amended. Both the Company and the Account are
subject to supervision and regulation by the Department of Insurance of the
State of Connecticut and the SEC. The Account invests deposits by variable
annuity contractholders of the Company in various mutual funds (the Funds) as
directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting principles
in the investment company industry:
a) SECURITY TRANSACTIONS -- Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments sold is
determined on the basis of identified cost. Dividend and capital gains income
are accrued as of the ex-dividend date. Capital gains income represents
dividends from the Funds which are characterized as capital gains under tax
regulations.
b) SECURITY VALUATION -- The investment in shares of the Hartford, Smith
Barney, BB&T and AmSouth mutual funds are valued at the closing net asset value
per share as determined by the appropriate Fund as of December 31, 1997.
c) FEDERAL INCOME TAXES -- The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as an
insurance company under the Internal Revenue Code. Under current law, no federal
income taxes are payable with respect to the operations of the Account.
d) USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported amounts
of income and expenses during the period. Operating results in the future could
vary from the amounts derived from management's estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
a) MORTALITY AND EXPENSE UNDERTAKINGS -- The Company, as issuer of variable
annuity contracts, provides the mortality and expense undertakings and, with
respect to the Account, receives a maximum annual fee of up to 1.25% of the
Account's average daily net assets.
b) DEDUCTION OF ANNUAL MAINTENANCE FEE -- Annual maintenance fees are
deducted through termination of units of interest from applicable contract
owners' accounts, in accordance with the terms of the contracts.
4. HARTFORD U.S. GOVERNMENT MONEY
MARKET FUND:
On June 27, 1997, the Hartford U.S. Government Money Market Fund was merged
with the HVA Money Market Fund. Accordingly, all contractholder account values
held in the Hartford U.S. Government Money Market Fund were exchanged for
equivalent account values of HVA Money Market Fund on June 27, 1997.
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life Insurance Company:
We have audited the accompanying Consolidated Balance Sheets of Hartford Life
Insurance Company (the "Company") and subsidiaries as of December 31, 1997 and
1996, and the related Consolidated Statements of Income, Stockholder's Equity
and Cash Flows for each of the three years in the period ended December 31,
1997. These consolidated financial statements and the schedules referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Hartford Life
Insurance Company and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in Index to
Consolidated Financial Statements and Schedules are presented for the purpose of
complying with the Securities and Exchange Commission's rules and are not part
of the basic financial statements. These schedules have been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
January 27, 1998
<PAGE>
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1997 1996 1995
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Premiums and other considerations............... $1,637 $1,705 $1,487
Net investment income........................... 1,368 1,397 1,328
Net realized capital gains (losses)............. 4 (213) (11)
------ ------ ------
Total revenues................................ 3,009 2,889 2,804
------ ------ ------
Benefits, claims and expenses
Benefits, claims and claim adjustment
expenses....................................... 1,379 1,535 1,422
Amortization of deferred policy acquisition
costs.......................................... 335 234 199
Dividends to policyholders...................... 240 635 675
Other expenses.................................. 586 427 317
------ ------ ------
Total benefits, claims and expenses........... 2,540 2,831 2,613
------ ------ ------
Income before income tax expense................ 469 58 191
Income tax expense.............................. 167 20 62
------ ------ ------
Net income........................................ $ 302 $ 38 $ 129
------ ------ ------
------ ------ ------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER
31,
-----------------
1997 1996
------- -------
<S> <C> <C>
(IN MILLIONS,
EXCEPT FOR SHARE
DATA)
Assets
Investments
Fixed maturities, available for sale, at fair
value (amortized cost of $13,885 and
$13,579)....................................... $14,176 $13,624
Equity securities, at fair value................ 180 119
Policy loans, at outstanding balance............ 3,756 3,836
Other investments, at cost...................... 47 56
------- -------
Total investments............................. 18,159 17,635
Cash............................................ 54 43
Premiums receivable and agents' balances........ 18 137
Accrued investment income....................... 330 407
Reinsurance recoverables........................ 6,325 6,259
Deferred policy acquisition costs............... 3,315 2,760
Deferred income tax............................. 348 474
Other assets.................................... 352 357
Separate account assets......................... 69,055 49,690
------- -------
Total assets.................................. $97,956 $77,762
------- -------
------- -------
Liabilities
Future policy benefits.......................... $ 3,270 $ 2,474
Other policyholder funds........................ 21,034 22,134
Other liabilities............................... 2,254 1,572
Separate account liabilities.................... 69,055 49,690
------- -------
Total liabilities............................. 95,613 75,870
------- -------
Stockholder's Equity
Common stock -- 1,000 shares authorized, issued
and outstanding, par value $5,690.............. 6 6
Additional paid in capital...................... 1,045 1,045
Net unrealized capital gains on securities, net
of tax......................................... 179 30
Retained earnings............................... 1,113 811
------- -------
Total stockholder's equity.................... 2,343 1,892
------- -------
Total liabilities and stockholder's equity...... $97,956 $77,762
------- -------
------- -------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
NET UNREALIZED
CAPITAL GAINS
ADDITIONAL (LOSSES) ON TOTAL
COMMON PAID IN SECURITIES, RETAINED STOCKHOLDER'S
STOCK CAPITAL NET OF TAX EARNINGS EQUITY
------ -------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
Balance, December 31, 1994.............. $6 $ 826 $(654) $ 644 $ 822
Net income............................ -- -- -- 129 129
Capital contribution.................. -- 181 -- -- 181
Change in net unrealized capital gains
(losses) on securities, net of tax... -- -- 597 -- 597
--
------ ------ ----------- ------
Balance, December 31, 1995.............. 6 1,007 (57) 773 1,729
Net income............................ -- -- -- 38 38
Capital contribution.................. -- 38 -- -- 38
Change in net unrealized capital gains
(losses) on securities, net of tax... -- -- 87 -- 87
--
------ ------ ----------- ------
Balance, December 31, 1996.............. 6 1,045 30 811 1,892
Net income............................ -- -- -- 302 302
Change in net unrealized capital gains
(losses) on securities, net of tax... -- -- 149 -- 149
--
------ ------ ----------- ------
Balance, December 31, 1997.............. $6 $1,045 $179 $1,113 $2,343
--
--
------ ------ ----------- ------
------ ------ ----------- ------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
------------------------------
1997 1996 1995
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Operating Activities
Net income............................ $ 302 $ 38 $ 129
Adjustments to reconcile net income to
cash provided by operating activities
Depreciation and amortization......... 8 14 21
Net realized capital (gains) losses... (4) 213 11
Decrease (increase) in deferred income
taxes................................ 40 (102) (172)
Increase in deferred policy
acquisition costs.................... (555) (572) (379)
Decrease (increase) in premiums
receivable and agents' balances...... 119 10 (81)
Decrease (increase) in accrued
investment income.................... 77 (13) (16)
Decrease (increase) in other assets... 52 (132) (177)
(Increase) decrease in reinsurance
recoverables......................... (416) 179 (35)
Increase (decrease) in liabilities for
future policy benefits............... 796 (92) 483
Increase in other liabilities......... 379 477 281
-------- -------- --------
Cash provided by operating
activities......................... 798 20 65
-------- -------- --------
Investing Activities
Purchases of fixed maturity
investments.......................... (6,231) (5,747) (6,228)
Sales of fixed maturity investments... 4,232 3,459 4,845
Maturities and principal paydowns of
fixed maturity investments........... 2,329 2,693 1,741
Net sales (purchases) of other
investments.......................... 24 (107) (871)
Net (purchases) sales of short-term
investments.......................... (638) 84 (24)
-------- -------- --------
Cash (used for) provided by
investing activities............... (284) 382 (537)
-------- -------- --------
Financing Activities
Capital contribution.................. -- 38 --
Net (disbursements for) receipts from
investment and universal life-type
contracts (charged against) credited
to policyholder accounts............. (503) (443) 498
-------- -------- --------
Cash (used for) provided by
financing activities............... (503) (405) 498
-------- -------- --------
Increase (decrease) in cash........... 11 (3) 26
Cash -- beginning of year............. 43 46 20
-------- -------- --------
Cash -- end of year................... $ 54 $ 43 $ 46
-------- -------- --------
-------- -------- --------
Supplemental Disclosure of Cash Flow
Information:
Net Cash Paid During the Year for:
Income taxes.......................... $ 9 $ 189 $ 162
Noncash Financing Activities:
Capital contribution.................. $ -- $ -- $ 181
-------- -------- --------
-------- -------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN MILLIONS EXCEPT PER SHARE DATA UNLESS OTHERWISE STATED)
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
These consolidated financial statements include Hartford Life Insurance
Company and its wholly-owned subsidiaries (the "Company"), ITT Hartford Life and
Annuity Insurance Company ("ILA") and ITT Hartford International Life
Reassurance Corporation ("HLRe"), formerly American Skandia Life Reinsurance
Corporation. The Company is a wholly-owned subsidiary of Hartford Life and
Accident Insurance Company ("HLA"), a wholly-owned subsidiary of Hartford Life,
Inc. ("Hartford Life"). Hartford Life is a direct subsidiary of Hartford
Accident and Indemnity Company ("HA&I"), an indirect subsidiary of The Hartford
Financial Services Group, Inc. ("The Hartford"). On February 10, 1997, Hartford
Life filed a registration statement, as amended, with the Securities and
Exchange Commission relating to an Initial Public Offering ("IPO") of the
Hartford Life's Class A Common Stock. Pursuant to the IPO on May 22, 1997,
Hartford Life sold to the public 26 million shares at $28.25 per share and
received net proceeds of $687. Of the proceeds, $527 was used to retire debt
related to Hartford Life's outstanding promissory notes and line of credit with
the remaining $160 contributed by Hartford Life to HLA to support growth in its
core businesses.
On December 19, 1995, ITT Industries, Inc. (formerly ITT Corporation)
("ITT") distributed all the outstanding shares of capital stock of The Hartford
to ITT stockholders of record on such date. As a result, The Hartford became an
independent, publicly traded company.
Along with its parent, the Company is a leading insurance and financial
services company which provides (a) investment products such as individual
variable annuities and fixed market value adjusted annuities, deferred
compensation and retirement plan services and mutual funds for savings and
retirement needs; (b) life insurance for income protection and estate planning;
and (c) employee benefits products such as group life and group disability
insurance and corporate owned life insurance.
2. SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
These consolidated financial statements present the financial position,
results of operations and cash flows of the Company. All material intercompany
transactions and balances between the Company, its subsidiaries and affiliates
have been eliminated. The consolidated financial statements are prepared on the
basis of generally accepted accounting principles which differ materially from
the statutory accounting practices prescribed by various insurance regulatory
authorities.
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The most
significant estimates include those used in determining deferred policy
acquisition costs and the liability for future policy benefits and other
policyholder funds. Although some variability is inherent in these estimates,
management believes the amounts provided are adequate.
Certain reclassifications have been made to prior year financial information
to conform to the current year presentation.
(B) CHANGES IN ACCOUNTING PRINCIPLES
In December 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") No. 97-3 "Accounting by Insurance
and Other Enterprises for Insurance Related Assessments". This SOP provides
guidance on accounting by insurance and other enterprises for assessments
related to insurance activities. Specifically, the SOP provides guidance on when
a guaranty fund or other assessment should be recognized, how to measure the
liability, and what information should be disclosed. This SOP will be effective
for fiscal years beginning after December 15, 1998. Adoption of SOP 97-3 is not
expected to have a material impact on the Company's financial condition or
results of operations.
On November 14, 1996, the Emerging Issues Task Force ("EITF") reached a
consensus on Issue No. 96-12, "Recognition of Interest Income and Balance Sheet
Classification of Structured Notes". This EITF issue requires companies to
record income on certain structured securities on a retrospective interest
method. The Company adopted EITF No. 96-12 for structured securities acquired
after November 14, 1996. Adoption of EITF No. 96-12 did not have a material
effect on the Company's financial condition or results of operations.
In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities"
which is effective for transfers and servicing of financial
<PAGE>
- --------------------------------------------------------------------------------
assets and extinguishments of liabilities occurring after December 31, 1996.
This statement established criteria for determining whether transferred assets
should be accounted for as sales or secured borrowings. Subsequently, in
December 1996, the FASB issued SFAS No. 127, "Deferral of Effective Date of
Certain Provisions of FASB Statement No. 125", which defers the effective date
of certain provisions of SFAS No. 125 for one year. Adoption of SFAS No. 125 is
not expected to have a material effect on the Company's financial condition or
results of operations.
Effective January 1, 1996, the Company adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of". This statement establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. Adoption of SFAS No. 121 did not
have a material effect on the Company's financial condition or results of
operations.
The Company's cash flows were not impacted by these changes in accounting
principles.
(C) REVENUE RECOGNITION
Revenues for universal life-type policies and investment products consist of
policy charges for the cost of insurance, policy administration and surrender
charges assessed to policy account balances and are recognized in the period in
which services are provided. Premiums for traditional life insurance and
disability policies are recognized as revenues when they are due from
policyholders.
(D) FUTURE POLICY BENEFITS AND OTHER POLICYHOLDER FUNDS
Liabilities for future policy benefits are computed by the net level premium
method using interest rate assumptions varying from 3% to 11% and withdrawal and
mortality assumptions appropriate at the time the policies were issued. Health
reserves, which are the result of sales of group long-term and short-term
disability, stop loss, Medicare Supplement and individual disability products,
are stated at amounts determined by estimates on individual cases and estimates
of unreported claims based on past experience. Liabilities for universal
life-type and investment contracts are stated at policyholder account values
before surrender charges.
(E) POLICYHOLDER REALIZED CAPITAL GAINS AND LOSSES
Realized capital gains and losses on security transactions associated with
the Company's immediate participation guaranteed contracts are excluded from
revenues and deferred over the expected maturity of the securities, since under
the terms of the contracts the realized gains and losses will be credited to
policyholders in future years as they are entitled to receive them.
(F) INVESTMENTS
The Company's investments in fixed maturities include bonds and commercial
paper which are considered "available for sale" and accordingly are carried at
fair value with the after-tax difference from cost reflected as a component of
Stockholder's Equity designated "Net unrealized capital gains (losses) on
securities, net of tax". Equity securities, which include common and
non-redeemable preferred stocks, are carried at fair values with the after-tax
difference from cost reflected in Stockholder's Equity. Policy loans are carried
at outstanding balance which approximates fair value. Net realized capital gains
and losses, after deducting pension policyholders' share, are reported as a
component of revenue and are determined on a specific identification basis.
The Company's accounting policy for impairment requires recognition of an
other than temporary impairment charge on a security if it is determined that
the Company is unable to recover all amounts due under the contractual
obligations of the security. In addition, for securities expected to be sold, an
other than temporary impairment charge is recognized if the Company does not
expect the fair value of a security to recover to cost or amortized cost prior
to the expected date of sale. Once an impairment charge has been recorded, the
Company then continues to review the other than temporarily impaired securities
for appropriate valuation on an on-going basis.
During 1996, it was determined that certain individual securities within the
investment portfolio supporting the Company's block of guaranteed rate contract
business written prior to 1995 ("Closed Book GRC") could not recover to
amortized cost prior to sale. Therefore, an other than temporary impairment loss
of $88, after-tax, was recorded.
(G) DERIVATIVE INSTRUMENTS
The Company uses a variety of derivative instruments including swaps, caps,
floors, forwards and exchange traded financial futures and options as part of an
overall risk management strategy. These instruments are used as a means of
hedging exposure to price, foreign currency and/ or interest rate risk on
planned investment purchases or existing assets and liabilities. The Company
does not hold or issue derivative instruments for trading purposes. The
Company's accounting for derivative instruments used to manage risk is in
accordance with the concepts established in SFAS No. 80, "Accounting for Futures
Contracts", SFAS No. 52, "Foreign Currency Translation", AICPA SOP 86-2,
"Accounting for Options" and various EITF pronouncements. Written options are
used, in all cases in conjunction with other assets and derivatives, as part of
the Company's asset and liability management strategy. Derivative instruments
are carried at values consistent with the asset or liability being hedged.
Derivative instruments used to hedge fixed maturities or equity securities are
carried at fair value
<PAGE>
- --------------------------------------------------------------------------------
with the after-tax difference from cost reflected in Stockholder's Equity.
Derivative instruments used to hedge other invested assets or liabilities are
carried at cost.
Derivative instruments must be designated at inception as a hedge and
measured for effectiveness both at inception and on an on-going basis. The
Company's minimum correlation threshold for hedge designation is 80%. If
correlation, which is assessed monthly and measured based on a rolling three
month average, falls below 80%, hedge accounting will be terminated. Derivative
instruments used to create a synthetic asset must meet synthetic accounting
criteria including designation at inception and consistency of terms between the
synthetic and the instrument being replicated. Consistent with industry
practice, synthetic instruments are accounted for like the financial instrument
it is intended to replicate. Derivative instruments which fail to meet risk
management criteria, subsequent to acquisition, are marked to market with the
impact reflected in the Consolidated Statements of Income.
Gains or losses on financial futures contracts entered into in anticipation
of the investment of future receipt of product cash flows are deferred and, at
the time of the ultimate investment purchase, reflected as an adjustment to the
cost basis of the purchased asset. Gains or losses on futures used in invested
asset risk management are deferred and adjusted into the cost basis of the
hedged asset when the contract futures are closed, except for futures used in
duration hedging which are deferred and basis adjusted on a quarterly basis. The
basis adjustments are amortized into net investment income over the remaining
asset life.
Open forward commitment contracts are marked to market through Stockholder's
Equity. Such contracts are accounted for at settlement by recording the purchase
of the specified securities at the previously committed price. Gains or losses
resulting from the termination of forward commitment contracts before the
delivery of the securities are recognized immediately in the Consolidated
Statements of Income as a component of net investment income.
The cost of options entered into as part of a risk management strategy are
basis adjusted to the underlying asset or liability and amortized over the
remaining life of the option. Gains or losses on expiration or termination are
adjusted into the basis of the underlying asset or liability and amortized over
the remaining asset life.
Interest rate swaps involve the periodic exchange of payments without the
exchange of underlying principal or notional amounts. Net receipts or payments
are accrued and recognized over the life of the swap agreement as an adjustment
to investment income. Should the swap be terminated, the gain or loss is
adjusted into the basis of the asset or liability and amortized over the
remaining life. Should the hedged asset be sold or liability terminated without
terminating the swap position, any swap gains or losses are immediately
recognized in net investment income. Interest rate swaps purchased in
anticipation of an asset purchase ("anticipatory transaction") are recognized
consistent with the underlying asset components such that the settlement
component is recognized in the Consolidated Statements of Income while the
change in market value is recognized as an unrealized capital gain or loss.
Premiums paid on purchased floor or cap agreements and the premium received
on issued cap or floor agreements (used for risk management) are adjusted into
the basis of the applicable asset and amortized over the asset life. Gains or
losses on termination of such positions are adjusted into the basis of the asset
or liability and amortized over the remaining asset life. Net payments are
recognized as an adjustment to income or basis adjusted and amortized depending
on the specific hedge strategy.
Forward exchange contracts and foreign currency swaps are accounted for in
accordance with SFAS No. 52. Changes in the spot rate of instruments designated
as hedges of the net investment in a foreign subsidiary are reflected in the
cumulative translation adjustments component of Stockholder's Equity. Cash flows
from futures, options, and swaps, accounted for as hedges, are included with the
cash flows of the item being hedged.
(H) SEPARATE ACCOUNTS
The Company maintains separate account assets and liabilities which are
reported at fair value. Separate account assets are segregated from other
investments, and investment income and gains and losses accrue directly to the
policyholders. Separate accounts reflect two categories of risk assumption:
non-guaranteed separate accounts, wherein the policyholder assumes the
investment risk, and guaranteed separate account assets, wherein the Company
contractually guarantees either a minimum return or account value to the
policyholder.
(I) DEFERRED POLICY ACQUISITION COSTS
Policy acquisition costs, which include commissions and certain underwriting
expenses associated with acquiring business, are deferred and amortized over the
estimated lives of the contracts, generally 20 years. Generally, acquisition
costs are deferred and amortized using the retrospective deposit method. Under
the retrospective deposit method, acquisition costs are amortized in proportion
to the present value of expected gross profits from surrender charges,
investment, mortality and expense margins. Actual gross profits can vary from
management's estimates resulting in increases or decreases in the rate of
amortization. Management periodically updates these estimates, when appropriate,
and evaluates the recoverability of the deferred acquisition cost asset. When
appropriate, management revises its assumptions on the estimated gross profits
of these contracts and the cumulative amortization
<PAGE>
- --------------------------------------------------------------------------------
for the books of business are reestimated and adjusted by a cumulative charge or
credit to income.
The Company's other expenses include the following:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Commissions........................... $ 976 $ 848 $ 619
Deferred acquisition costs............ (862) (823) (618)
Other................................. 472 402 316
--------- --------- ---------
Total other expenses.............. $ 586 $ 427 $ 317
--------- --------- ---------
--------- --------- ---------
</TABLE>
(J) DIVIDENDS TO POLICYHOLDERS
Certain life insurance policies contain dividend payment provisions that
enable the policyholder to participate in the earnings of the life insurance
subsidiaries of the Company. The participating insurance in force accounted for
55%, 44%, and 41% in 1997, 1996, and 1995, respectively, of total insurance in
force.
3. INITIAL PUBLIC OFFERING
On February 10, 1997, Hartford Life filed a registration statement, as
amended, with the Securities and Exchange Commission, relating to the IPO of
Hartford Life's Class A Common Stock. Pursuant to the IPO on May 22, 1997,
Hartford Life sold to the public 26 million shares at $28.25 per share and
received proceeds, net of offering expenses, of $687. Of the proceeds, $527 was
used to retire debt related to Hartford Life's promissory notes outstanding and
line of credit. The remaining $160 was contributed by Hartford Life to HLA to
support growth in its core businesses. The 26 million shares sold in the
Offering represent approximately 18.6% of the equity ownership in Hartford Life
and approximately 4.4% of the combined voting power of Hartford Life's Class A
and Class B Common Stock. The Hartford owns all of the 114 million outstanding
shares of Class B Common Stock of Hartford Life, representing approximately
81.4% of the equity ownership in Hartford Life and approximately 95.6% of the
combined voting power of Hartford Life's Class A and Class B Common Stock.
Holders of Class A Common Stock generally have identical rights to the holders
of Class B Common Stock except that the holders of Class A Common Stock are
entitled to one vote per share while holders of Class B Common Stock are
entitled to five votes per share on all matters submitted to a vote of Hartford
Life's stockholders.
4. INVESTMENTS AND DERIVATIVE INSTRUMENTS
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Interest income from fixed
maturities......................... $ 932 $ 918 $ 996
Interest income from policy loans... 425 477 342
Income from other investments....... 26 15 1
--------- --------- ---------
Gross investment income............. 1,383 1,410 1,339
Less: Investment expenses........... 15 13 11
--------- --------- ---------
Net investment income............... $ 1,368 $ 1,397 $ 1,328
--------- --------- ---------
--------- --------- ---------
</TABLE>
(B) COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------------
1997 1996 1995
----- --------- ---------
<S> <C> <C> <C>
Fixed maturities......................... $ (7) $ (201) $ 23
Equity securities........................ 12 2 (6)
Real estate and other.................... (1) (4) (25)
Less: Increase in liability to
policyholders for realized capital
gains................................... -- (10) (3)
--- --------- ---------
Net realized capital gains (losses) $ 4 $ (213) $ (11)
--- --------- ---------
--- --------- ---------
</TABLE>
(C) NET UNREALIZED CAPITAL GAINS (LOSSES) ON EQUITY SECURITIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Gross unrealized capital gains.............. $ 14 $ 13 $ 4
Gross unrealized capital losses............. -- (1) (2)
--- --- ---
Net unrealized capital gains................ 14 12 2
Deferred income tax expense................. 5 4 1
--- --- ---
Net unrealized capital gains, net of tax.... 9 8 1
Balance -- beginning of year................ 8 1 (6)
--- --- ---
Net change in unrealized capital gains
(losses) on equity securities.............. $ 1 $ 7 $ 7
--- --- ---
--- --- ---
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
(D) NET UNREALIZED CAPITAL GAINS (LOSSES) ON FIXED MATURITIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Gross unrealized capital gains................................... $ 371 $ 386 $ 529
Gross unrealized capital losses.................................. (80) (341) (569)
Unrealized capital (gains) losses credited to policyholders...... (30) (11) (52)
----- ----- -----
Net unrealized capital gains (losses)............................ 261 34 (92)
Deferred income tax expense (benefit)............................ 91 12 (34)
----- ----- -----
Net unrealized capital gains (losses), net of tax................ 170 22 (58)
Balance -- beginning of year..................................... 22 (58) (648)
----- ----- -----
Net change in unrealized capital gains (losses) on fixed
maturities...................................................... $ 148 $ 80 $ 590
----- ----- -----
----- ----- -----
</TABLE>
(E) FIXED MATURITY INVESTMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U.S. gov't and gov't agencies and authorities
(guaranteed and sponsored)...................................... $ 217 $ 3 $ (1) $ 219
U.S. gov't and gov't agencies and authorities
(guaranteed and sponsored) -- asset backed...................... 1,175 64 (35) 1,204
States, municipalities and political subdivisions................ 211 7 (1) 217
International governments........................................ 376 20 (3) 393
Public utilities................................................. 871 26 (3) 894
All other corporate including international...................... 5,033 200 (25) 5,208
All other corporate -- asset backed.............................. 4,091 41 (8) 4,124
Short-term investments........................................... 1,318 -- -- 1,318
Certificates of deposit.......................................... 593 10 (4) 599
---------- ----- ----- ----------
Total fixed maturities....................................... $13,885 $371 $(80) $14,176
---------- ----- ----- ----------
---------- ----- ----- ----------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U.S. gov't and gov't agencies and authorities
(guaranteed and sponsored)...................................... $ 166 $ 12 $ (3) $ 175
U.S. gov't and gov't agencies and authorities
(guaranteed and sponsored) -- asset backed...................... 1,970 161 (128) 2,003
States, municipalities and political subdivisions................ 373 6 (11) 368
International governments........................................ 281 12 (4) 289
Public utilities................................................. 877 12 (8) 881
All other corporate including international...................... 4,656 120 (107) 4,669
All other corporate -- asset backed.............................. 3,601 49 (59) 3,591
Short-term investments........................................... 1,655 14 (21) 1,648
---------- ----- ----------- ----------
Total fixed maturities....................................... $13,579 $386 $(341) $13,624
---------- ----- ----------- ----------
---------- ----- ----------- ----------
</TABLE>
The amortized cost and estimated fair value of fixed maturity investments at
December 31, 1997 by estimated maturity year are shown below. Expected
maturities differ from contractual maturities due to call or prepayment
provisions. Asset backed securities, including MBS and CMO's, are distributed to
maturity year based on the Company's estimates of the rate of future prepayments
of principal over the remaining lives of the securities. These estimates are
developed using prepayment speeds provided in broker consensus data. Such
estimates are derived from prepayment speeds experienced at the interest rate
levels projected for the applicable underlying collateral and can be expected to
vary from actual experience.
MATURITY
<TABLE>
<CAPTION>
AMORTIZED
COST FAIR VALUE
----------- -----------
<S> <C> <C>
One year or less......................... $ 2,838 $ 2,867
Over one year through five years......... 5,528 5,595
Over five years through ten years........ 3,094 3,156
Over ten years........................... 2,425 2,558
----------- -----------
Total................................ $ 13,885 $ 14,176
----------- -----------
----------- -----------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Sales of fixed maturities, excluding short-term fixed maturities, for the
years ended December 31, 1997, 1996 and 1995 resulted in proceeds of $4.2
billion, $3.5 billion and $4.8 billion, gross realized capital gains of $169,
$87 and $91, gross realized capital losses (including writedowns) of $176, $298
and $72, respectively. Sales of equity security investments for the years ended
December 31, 1997, 1996 and 1995 resulted in proceeds of $132, $74 and $64,
gross realized capital gains of $12, $2 and $28 and gross realized capital
losses of $0, $0 and $59, respectively.
(F) CONCENTRATION OF CREDIT RISK
Excluding investments in U.S. government and agencies, the Company has not
invested in the securities of a single issuer in amounts greater than 10% of
stockholder's equity at December 31, 1997.
(G) DERIVATIVE INSTRUMENTS
The Company utilizes a variety of derivative instruments, including swaps,
caps, floors, forwards and exchange traded futures and options, in accordance
with Company policy and in order to achieve one of three Company approved
objectives: to hedge risk arising from interest rate, price or currency exchange
rate volatility; to manage liquidity; or, to control transactions costs. The
Company utilizes derivative instruments to manage market risk through four
principal risk management strategies: hedging anticipated transactions, hedging
liability instruments, hedging invested assets and hedging portfolios of assets
and/or liabilities. The Company does not trade in these instruments for the
express purpose of earning trading profits.
The Company maintains a derivatives counterparty exposure policy which
establishes market-based credit limits, favors long-term financial stability and
creditworthiness, and typically requires credit enhancement/credit risk reducing
agreements. Credit risk is measured as the amount owed to the Company based on
current market conditions and potential payment obligations between the Company
and its counterparties. Credit exposures are quantified weekly and netted, and
collateral is pledged to or held by the Company to the extent the current value
of derivatives exceed exposure policy thresholds.
The Company's derivative program is monitored by an internal compliance unit
and is reviewed by senior management and Hartford Life's Finance Committee.
Notional amounts, which represent the basis upon which pay or receive amounts
are calculated and are not reflective of credit risk, pertaining to derivative
financial instruments (excluding the Company's guaranteed separate account
derivative investments), totaled $6.5 billion and $9.9 billion ($4.6 billion and
$7.4 billion related to the Company's investments, $1.9 billion and $2.5 billion
on the Company's liabilities) at December 31, 1997 and 1996, respectively.
The table below provides a summary of derivative instruments held by the
Company at December 31, 1997 and 1996, segregated by major investment and
liability category:
<TABLE>
<CAPTION>
1997 -- AMOUNT HEDGED (NOTIONAL AMOUNTS)
----------------------------------------------------------------------------------
PURCHASED
CAPS, FOREIGN
TOTAL ISSUED FLOORS INTEREST CURRENCY TOTAL
CARRYING CAPS & AND FUTURES RATE SWAPS NOTIONAL
ASSETS HEDGED VALUE FLOORS OPTIONS (2) SWAPS (3) AMOUNT
- ----------------------------------- -------- -------- ---------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset backed securities (excluding
inverse floaters and
anticipatory)..................... $ 5,253 $ 500 $ 1,404 $ 28 $ 221 $-- $ 2,153
Inverse floaters (1)............... 75 47 80 -- 25 -- 152
Anticipatory (4)................... -- -- -- -- -- -- --
Other bonds and notes.............. 7,531 462 460 22 1,258 91 2,293
Short-term investments............. 1,317 -- -- -- -- -- --
-------- -------- ---------- --- ---------- --- ----------
Total fixed maturities......... 14,176 1,009 1,944 50 1,504 91 4,598
Equity securities, policy loans and
other investments................. 3,983 -- -- -- -- -- --
-------- -------- ---------- --- ---------- --- ----------
Total investments.............. $ 18,159 $ 1,009 $ 1,944 $ 50 $ 1,504 $91 $ 4,598
Long term debt................. -- -- -- -- -- -- --
Other policy claims............ -- 10 150 -- 1,747 -- 1,907
-------- -------- ---------- --- ---------- --- ----------
Total derivatives -- notional
value........................... $ 1,019 $ 2,094 $ 50 $ 3,251 $91 $ 6,505
-------- -------- ---------- --- ---------- --- ----------
Total derivatives -- fair value.... $ (8) $ 23 $ -- $ 19 $(6) $ 28
-------- -------- ---------- --- ---------- --- ----------
-------- -------- ---------- --- ---------- --- ----------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 --AMOUNT HEDGED (NOTIONAL AMOUNTS)
--------------------------------------------------------------------------
FOREIGN
TOTAL ISSUED PURCHASED INTEREST CURRENCY TOTAL
CARRYING CAPS & CAPS, FLOORS RATE SWAPS NOTIONAL
ASSETS HEDGED VALUE FLOORS AND OPTIONS FUTURES (2) SWAPS (3) AMOUNT
- ----------------------------------- -------- ------- ------------ ----------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset backed securities (excluding
inverse floaters and
anticipatory)..................... $ 5,242 $ 500 $ 2,454 $ -- $ 941 $ -- $3,895
Inverse floaters (1)............... 352 98 856 -- 346 -- 1,300
Anticipatory (4)................... -- -- -- 132 -- -- 132
Other bonds and notes.............. 7,369 425 440 5 1,079 125 2,074
Short-term investments............. 661 -- -- -- -- -- --
-------- ------- ------------ ----- --------- -------- -------
Total fixed maturities......... 13,624 1,023 3,750 137 2,366 125 7,401
Equity securities, policy loans and
other investments................. 4,011 -- -- -- 19 -- 19
-------- ------- ------------ ----- --------- -------- -------
Total investments.............. $ 17,635 $ 1,023 $ 3,750 $ 137 $ 2,385 $ 125 $7,420
Long term debt................. -- -- -- -- -- -- --
Other policy claims............ -- 10 150 -- 2,351 -- 2,511
-------- ------- ------------ ----- --------- -------- -------
Total derivatives -- notional
value......................... $ 1,033 $ 3,900 $ 137 $ 4,736 $ 125 $9,931
-------- ------- ------------ ----- --------- -------- -------
Total derivatives -- fair
value......................... $ (10) $ 38 $ -- $ 2 $ (9 ) $ 21
-------- ------- ------------ ----- --------- -------- -------
-------- ------- ------------ ----- --------- -------- -------
</TABLE>
- ---------
(1) Inverse floaters are variations of collateralized mortgage obligations
("CMO's") for which the coupon rates move inversely with an index rate such as
the London interbank offered rate ("LIBOR"). The risk to principal is considered
negligible as the underlying collateral for the securities is guaranteed or
sponsored by government agencies. To address the volatility risk created by the
coupon variability, the Company uses a variety of derivative instruments,
primarily interest rate swaps, caps and floors.
(2) As of December 31, 1997 and 1996, over 44% and 39% , respectively, of
the notional futures contracts expire within one year.
(3) As of December 31, 1997 and 1996, over 16% and 42%, respectively, of
foreign currency swaps expire within one year; the balance matures over the
succeeding 9 years.
(4) Deferred gains and losses on anticipatory transactions are included in
the carrying value of fixed maturities in the Consolidated Balance Sheets. At
the time of the ultimate purchase, they are reflected as a basis adjustment to
the purchased asset. At December 31, 1997, the Company had $0 deferred gains and
losses. At December 31, 1996, the Company had $0.9 in net deferred gains for
futures, interest rate swaps and purchased options of which $2.0 was basis
adjusted in 1997.
The following is a reconciliation of notional amounts by derivative type and
strategy as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 MATURITIES/ DECEMBER 31, 1997
NOTIONAL AMOUNT ADDITIONS TERMINATIONS (1) NOTIONAL AMOUNT
----------------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
BY DERIVATIVE TYPE
Caps......................................... $1,755 $ 14 $ 530 $1,239
Floors....................................... 3,168 28 1,332 1,864
Swaps/Forwards............................... 4,861 941 2,460 3,342
Futures...................................... 137 131 218 50
Options...................................... 10 -- -- 10
------- -------- ------- -------
Total.................................... $9,931 $1,114 $4,540 $6,505
------- -------- ------- -------
BY STRATEGY
Liability.................................... $2,511 $ 191 $ 795 $1,907
Anticipatory................................. 132 4 136 --
Asset........................................ 2,112 739 1,046 1,805
Portfolio.................................... 5,176 180 2,563 2,793
------- -------- ------- -------
Total.................................... $9,931 $1,114 $4,540 $6,505
------- -------- ------- -------
------- -------- ------- -------
</TABLE>
- ---------
(1) During 1997, the Company had no significant gains or losses on terminations
of hedge positions using derivative financial instruments.
<PAGE>
- --------------------------------------------------------------------------------
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 "Disclosure about Fair
Value of Financial Instruments" requires disclosure of fair value information of
financial instruments. For certain financial instruments where quoted market
prices are not available, other independent valuation techniques and assumptions
are used. Because considerable judgment is used, these estimates are not
necessarily indicative of amounts that could be realized in a current market
exchange. SFAS No. 107 excludes certain financial instruments from disclosure,
including insurance contracts.
For cash, short-term investments, accounts receivable, policy loans,
mortgage loans and other liabilities, carrying amounts on the Consolidated
Balance Sheets approximate fair value.
Fair value for fixed maturities and marketable equity securities are based
upon quoted market prices. Fair value for securities that are not publicly
traded are analytically determined. These amounts are disclosed in Note 4 of
Notes to Consolidated Financial Statements.
The fair value of derivative financial instruments, including swaps, caps,
floors, futures, options and forward commitments, is determined using a pricing
model which is validated through quarterly comparison to dealer quoted prices.
Amounts are disclosed in Note 4 of Notes to Consolidated Financial Statements.
Fair value for partnerships and trusts are based on external market
valuations from partnership and trust management.
Other policy claims and benefits payable fair value information is
determined by estimating future cash flows, discounted at the current market
rate.
The carrying amount and fair values of the Company's financial instruments
at December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------ ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- ------- --------- -------
<S> <C> <C> <C> <C>
ASSETS
Fixed maturities..................................... $ 14,176 $14,176 $ 13,624 $13,624
Equity securities.................................... 180 180 119 119
Policy loans......................................... 3,756 3,756 3,836 3,836
Mortgage loans....................................... -- -- 2 2
Investments in partnerships, trusts and other........ 47 91 54 104
LIABILITIES
Other policy benefits................................ $ 11,769 $11,755 $ 11,707 $11,469
</TABLE>
6. SEPARATE ACCOUNTS
The Company maintained separate account assets and liabilities totaling
$69.1 billion and $49.7 billion at December 31, 1997 and 1996, respectively,
which are reported at fair value. Separate account assets are segregated from
other investments and net investment income and net realized capital gains and
losses accrue directly to the policyholder. Separate accounts reflect two
categories of risk assumption: non-guaranteed separate accounts totaling $58.6
billion and $39.4 billion at December 31, 1997 and 1996, respectively, wherein
the policyholder assumes the investment risk, and guaranteed separate accounts
totaling $10.5 and $10.3 billion at December 31, 1997 and 1996, respectively,
wherein the Company contractually guarantees either a minimum return or account
value to the policyholder. Included in the non-guaranteed category were policy
loans totaling $1.9 billion and $2.0 billion at December 31, 1997 and 1996,
respectively. Net investment income (including net realized capital gains and
losses) and interest credited to policyholders on separate account assets are
not reflected in the Consolidated Statements of Income.
Separate account management fees were $699, $538 and $387 in 1997, 1996 and
1995, respectively. The guaranteed separate accounts include fixed market value
adjusted individual annuity and modified guaranteed life insurance. The average
credited interest rate on these contracts was 6.52% at December 31, 1997. The
assets that support these liabilities were comprised of $10.2 billion in fixed
maturities as of December 31, 1997. The portfolios are segregated from other
investments and are managed to minimize liquidity and interest rate risk. In
order to minimize the risk of disintermediation associated with early
withdrawals, fixed MVA annuity and modified guaranteed life insurance contracts
carry a graded surrender charge as well as a market value adjustment. Additional
investment risk is hedged using a variety of derivatives which totaled $119 in
carrying value and $3.0 billion in notional amounts as of December 31, 1997.
<PAGE>
- --------------------------------------------------------------------------------
7. INCOME TAX
Hartford Life and The Hartford have entered into a tax sharing agreement
under which each member in the consolidated U.S. Federal income tax return will
make payments between them such that, with respect to any period, the amount of
taxes to be paid by the Company, subject to certain adjustments, generally will
be determined as though the Company were filing separate Federal, state and
local income tax returns.
As long as The Hartford continues to beneficially own, directly or
indirectly, at least 80% of the combined voting power and 80% of the value of
the outstanding capital stock of Hartford Life, the Company will be included for
Federal income tax purposes in the affiliated group of which The Hartford is the
common parent. To the extent allowed by law, it is the intention of The Hartford
and its subsidiaries to continue to file a single consolidated Federal income
tax return. The Company will continue to remit (receive from) The Hartford a
current income tax provision (benefit) computed in accordance with such tax
sharing agreement. The Company's effective tax rate was 36%, 35% and 32% in
1997, 1996 and 1995, respectively.
Income tax expense is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------
1997 1996 1995
---- ------ ------
<S> <C> <C> <C>
Current...................................... $119 $ 122 $ 211
Deferred..................................... 48 (102) (149)
---- ------ ------
Income tax expense......................... $167 $ 20 $ 62
---- ------ ------
---- ------ ------
</TABLE>
A reconciliation of the tax provision at the U.S. Federal statutory rate to
the provision for income taxes is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1997 1996 1995
--------- ----- -----
<S> <C> <C> <C>
Tax provision at the U.S. Federal statutory
rate...................................... $ 164 $ 20 $ 67
Tax-exempt income.......................... -- -- (3)
Foreign tax credit......................... -- -- (4)
Other...................................... 3 -- 2
--------- --- ---
Total.................................... $ 167 $ 20 $ 62
--------- --- ---
--------- --- ---
</TABLE>
Deferred tax assets include the following at December 31:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Tax return deferred acquisition costs............ $ 639 $ 514
Financial statement deferred acquisition costs
and reserves.................................... (366) (242)
Employee benefits................................ 5 8
Net unrealized capital gains on securities....... (96) (16)
Investments and other............................ 166 210
--------- ---------
Total.......................................... $ 348 $ 474
--------- ---------
--------- ---------
</TABLE>
Income taxes paid were $9, $189 and $162 in 1997, 1996 and 1995,
respectively. The Company had a current tax payment of $27 due to The Hartford
at December 31, 1997 and a tax refund due from The Hartford of $72 at December
31, 1996.
Prior to the Tax Reform Act of 1984, the Life Insurance Company Income Tax
Act of 1959 permitted the deferral from taxation of a portion of statutory
income under certain circumstances. In these situations, the deferred income was
accumulated in a "Policyholders' Surplus Account" and will be taxable in the
future only under conditions which management considers to be remote; therefore,
no Federal income taxes have been provided on this deferred income. The balance
for tax return purposes of the Policyholders' Surplus Account as of December 31,
1997 was $37.
8. POSTRETIREMENT BENEFIT AND SAVINGS PLANS
(A) PENSION PLANS
The Company's employees are included in The Hartford's noncontributory
defined benefit pension plans. These plans provide pension benefits that are
based on years of service and the employee's compensation during the last ten
years of employment. The Company's funding policy is to contribute annually an
amount between the minimum funding requirements set forth in the Employee
Retirement Income Security Act of 1974, as amended, and the maximum amount that
can be deducted for U.S. Federal income tax purposes. Generally, pension costs
are funded through the purchase of the Company's group pension contracts. The
cost to the Company was approximately $5, $5 and $2 in 1997, 1996 and 1995,
respectively.
The Company also provides, through The Hartford, certain health care and
life insurance benefits for eligible retired employees. A substantial portion of
the Company's employees may become eligible for these benefits upon retirement.
The Company's contribution for health care benefits will depend on the retiree's
date of retirement and years of service. In addition, the plan has a defined
dollar cap which limits average Company contributions. The Company has prefunded
a portion of the health care and life insurance obligations through trust funds
where such prefunding can be accomplished on a tax effective basis.
Postretirement health care and life insurance benefits expense, allocated by The
Hartford, was immaterial to the results of operations for 1997, 1996 and 1995,
respectively.
The assumed rate in the per capita cost of health care (the health care
trend rate) was 8.5% for 1997, decreasing ratably to 6.0% in the year 2001.
Increasing the health care trend rates by one percent per year would have an
immaterial impact on the accumulated postretirement benefit obligation and the
annual expense. To the extent that the actual experience differs from the
inherent assumptions,
<PAGE>
- --------------------------------------------------------------------------------
the effect will be amortized over the average future service of covered
employees.
(B) INVESTMENT AND SAVINGS PLAN
Substantially all employees of the Company are eligible to participate in The
Hartford's Investment and Savings Plan. Under this plan, designated
contributions, which may be invested in Class A Common Stock of Hartford Life or
certain other investments, are matched, up to 3% of compensation, by the
Company. The cost to the Company for the above-mentioned plans was approximately
$2 in 1997.
9. STOCK COMPENSATION PLANS
During the second quarter of 1997, Hartford Life adopted the 1997 HLI
Incentive Stock Plan (the "Plan"). Under the Plan, options granted may be either
non-qualified options or incentive stock options qualifying under Section 422A
of the Internal Revenue Code. The aggregate number of shares of Class A Common
Stock which may be awarded in any one year shall be subject to an annual limit.
The maximum number of shares of Class A Common Stock which may be granted under
the Plan in each year shall be 1.5% of the total issued and outstanding shares
of Hartford Life Class A Common Stock and treasury stock as reported in the
Annual Report on Hartford Life's Form 10-K for the preceding year plus unused
portions of such limit from prior years. In addition, no more than 5,000,000
shares of Class A Common Stock shall be cumulatively available for awards of
incentive stock options under the Plan, and no more than 20% of the total number
of shares on a cumulative basis shall be available for restricted stock and
performance shares.
All options granted have an exercise price equal to the market price of
Hartford Life's stock on the date of grant and an option's maximum term is ten
years. Certain nonperformance based options become exercisable upon the
attainment of specified market price appreciation of Hartford Life's common
shares or at seven years after the date of grant, while the remaining
nonperformance based options become exercisable over a three year period
commencing with the date of grant.
Also included in the Plan are long term performance awards which become
payable upon the attainment of specific performance goals achieved over a three
year period.
During the second quarter of 1997, Hartford Life established the HLI
Employee Stock Purchase Plan ("ESPP"). Under this plan, eligible employees of
Hartford Life and the Company may purchase Class A Common Stock of Hartford Life
at a 15% discount from the lower of the market price at the beginning or end of
the quarterly offering period. Hartford Life may sell up to 2,700,000 shares of
stock to eligible employees. Hartford Life sold 54,316 shares under the ESPP in
1997.
10. REINSURANCE
The Company cedes insurance to other insurers, including its parent HLA, in
order to limit its maximum loss. Such transfer does not relieve the Company of
its primary liability. The Company also assumes insurance from other insurers.
Failure of reinsurers to honor their obligations could result in losses to the
Company. The Company evaluates the financial condition of its reinsurers and
monitors concentration of credit risk.
Net premiums and other considerations were comprised of the following:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Gross premiums............................... $ 2,164 $ 2,138 $ 1,545
Assumed...................................... 159 190 591
Ceded........................................ (686) (623) (649)
--------- --------- ---------
Net premiums and other considerations...... $ 1,637 $ 1,705 $ 1,487
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company ceded approximately $76, $100 and $101 of group life premium in
1997, 1996 and 1995, respectively, representing $33.6 billion, $33.3 billion and
$32.3 billion of insurance in force, respectively. The Company ceded $339, $318
and $320 of accident and health premium to HLA in 1997, 1996 and 1995,
respectively. The Company assumed $89, $101 and $103 of premium in 1997, 1996
and 1995, respectively, representing $8.2 billion, $8.5 billion and $8.5 billion
of individual life insurance in force, respectively, from HLA.
Life reinsurance recoveries, which reduce death and other benefits,
approximated $158, $140 and $220 for the years ended December 31, 1997, 1996 and
1995, respectively.
As of December 31, 1997, the Company had reinsurance recoverables of $5.0
billion from Mutual Benefit Life Assurance Corporation ("Mutual Benefit"),
supported by assets in a security trust of $5.0 billion (including policy loans
and accrued interest of $4.5 billion). The risk of Mutual Benefit becoming
insolvent is mitigated by the reinsurance agreement's requirement that the
assets be kept in a security trust with the Company as sole beneficiary. The
Company has no other significant reinsurance-related concentrations of credit
risk.
11. RELATED PARTY TRANSACTIONS
Transactions of the Company with HA&I and its affiliates relate principally
to tax settlements, reinsurance, insurance coverage, rental and service fees,
payment of dividends and capital contributions. In addition, certain affiliated
insurance companies purchased group annuity contracts from the Company to fund
pension costs and claim annuities to settle casualty claims. Substantially all
general insurance expenses related to the Company, including rent and employee
benefit plan expenses, are initially paid by The Hartford. Direct expenses are
allocated to the Company using specific identification, and indirect expenses
are allocated using other applicable methods. Indirect expenses include those
for corporate areas which,
<PAGE>
- --------------------------------------------------------------------------------
depending on type, are allocated based on either a percentage of direct expenses
or on utilization. Indirect expenses allocated to the Company by The Hartford
were $34, $40, and $45 in 1997, 1996 and 1995, respectively. Management believes
that the methods used are reasonable.
The rent paid to Hartford Fire for space occupied by the Company was $7 in
1997, and $3 in 1996 and 1995. The Company expects to pay annual rent of $7 in
1998 and 1999, respectively, $12 in 2000 and 2001, respectively, $13 in 2002 and
$87 thereafter, over the remaining term of the sublease, which expires on
December 31, 2009. Rental expense is recognized over a level basis over the term
of the sublease and amounted to approximately $9 in 1997 and $8 in 1996 and
1995.
12. STATUTORY RESULTS
The domestic insurance subsidiaries of Hartford Life prepare their statutory
financial statements in accordance with accounting practices prescribed by the
State of Connecticut Insurance Department. Prescribed statutory accounting
practices include publications of the National Association of Insurance
Commissioners ("NAIC"), as well as state laws, regulations, and general
administrative rules.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Statutory net income......................... $ 214 $ 144 $ 112
------ ------ ------
Statutory surplus............................ $1,441 $1,207 $1,125
------ ------ ------
------ ------ ------
</TABLE>
A significant percentage of the consolidated statutory surplus is
permanently reinvested or is subject to various state regulatory restrictions
which limit the payment of dividends without prior approval. The total amount of
statutory dividends which may be paid by the insurance subsidiaries of the
Company in 1998 is estimated to be $144.
13. COMMITMENTS AND CONTINGENT LIABILITIES
(A) LITIGATION
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for monetary and punitive damages have
been asserted. Although there can be no assurances, management, at the present
time, does not anticipate that the ultimate liability arising from such pending
or threatened litigation will have a material effect on the financial condition
or operating results of the Company.
(B) GUARANTY FUNDS
Under insurance guaranty fund laws in each state, the District of Columbia
and Puerto Rico, insurers licensed to do business can be assessed by state
insurance guaranty associations for certain obligations of insolvent insurance
companies to policyholders and claimants. Recent regulatory actions against
certain large life insurers encountering financial difficulty have prompted
various state insurance guaranty associations to begin assessing life insurance
companies for the deemed losses. Most of these laws do provide, however, that an
assessment may be excused or deferred if it would threaten an insurer's solvency
and further provide annual limits on such assessments. A large part of the
assessments paid by the Company's insurance subsidiaries pursuant to these laws
may be used as credits for a portion of the Company's insurance subsidiaries'
premium taxes. The Company paid guaranty fund assessments of approximately $15,
$11 and $10 in 1997, 1996 and 1995, respectively, of which $4, $5, and $6 were
estimated to be creditable against premium taxes.
14. BUSINESS SEGMENT INFORMATION
The Company, along with its parent, sells financial products such as fixed
and variable annuities, retirement plan services, and life and disability
insurance on both an individual and a group basis. The Company divides its core
businesses into three segments: Annuity, Individual Life Insurance, and Employee
Benefits. The Company also maintains a Guaranteed Investment Contracts segment,
which is primarily comprised of guaranteed rate contract business written prior
to 1995 and a Corporate Operation. The Annuity segment offers individual
variable annuities and fixed market value adjusted annuities, deferred
compensation and retirement plan services, mutual funds, investment management
services and other financial products. The Individual Life Insurance segment
sells a variety of individual life insurance products, including variable life,
universal life, interest-sensitive whole life, and term life policies. The
Employee Benefits segment sells group insurance products, including group life,
group short and long-term disability and corporate owned life insurance, and
engages in certain international operations. The Guaranteed Investment Contracts
segment sells a limited amount of guaranteed investment contracts and contains
Closed Book GRC. Through its Corporate Operation, the Company reports items that
are not directly allocable to any of its business segments. Included in the
Corporate Operation are unallocated income and expense and certain other items
not directly allocable to any segment. Net realized capital gains and losses are
recognized in the period of realization, but are allocated to the segments
utilizing durations of the segment portfolios.
<PAGE>
- --------------------------------------------------------------------------------
The following table outlines revenues, operating income and assets by
business segment:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Annuity.............................................. $ 1,269 $ 968 $ 759
Individual Life Insurance............................ 487 440 383
Employee Benefits.................................... 972 1,366 1,273
Guaranteed Investment Contracts...................... 241 34 337
Corporate Operation.................................. 40 81 52
-------- -------- --------
Total revenues..................................... $ 3,009 $ 2,889 $ 2,804
-------- -------- --------
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)
Annuity.............................................. $ 317 $ 226 $ 171
Individual Life Insurance............................ 85 68 56
Employee Benefits.................................... 53 44 37
Guaranteed Investment Contracts...................... -- (346) (103)
Corporate Operation.................................. 14 66 30
-------- -------- --------
Total income before income tax expense............. $ 469 $ 58 $ 191
-------- -------- --------
-------- -------- --------
ASSETS
Annuity $ 69,152 $ 52,877 $ 39,732
Individual Life Insurance............................ 4,918 3,753 3,173
Employee Benefits.................................... 18,196 14,708 13,494
Guaranteed Investment Contracts...................... 3,347 4,533 6,069
Corporate Operation.................................. 2,343 1,891 1,729
-------- -------- --------
Total assets....................................... $ 97,956 $ 77,762 $ 64,197
-------- -------- --------
-------- -------- --------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
SCHEDULE I -- SUMMARY OF INVESTMENTS OTHER THAN INVESTMENTS IN AFFILIATES
AS OF DECEMBER 31, 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
AMOUNT AT
WHICH
FAIR SHOWN ON
TYPE OF INVESTMENT COST VALUE BALANCE SHEET
- --------------------------------------------- ------- ------- --------------
<S> <C> <C> <C>
Fixed Maturities
Bonds and Notes
U. S. gov't and gov't agencies and
authorities (guaranteed and sponsored) $ 217 $ 219 $ 219
U. S. gov't and gov't agencies and
authorities (guaranteed and sponsored) --
asset-backed.............................. 1,175 1,204 1,204
States, municipalities and political
subdivisions.............................. 211 217 217
International governments.................. 376 393 393
Public utilities........................... 871 894 894
All other corporate including
international............................. 5,033 5,208 5,208
All other corporate -- asset-backed........ 4,091 4,124 4,124
Short-term investments..................... 1,318 1,318 1,318
Certificates of deposit...................... 593 599 599
------- ------- -------
Total fixed maturities....................... 13,885 14,176 14,176
------- ------- -------
Equity Securities
Common Stocks
Public utilities........................... -- -- --
Banks, trusts and insurance companies...... -- -- --
Industrial and miscellaneous............... 166 180 180
Nonredeemable preferred stocks............. -- -- --
------- ------- -------
Total equity securities...................... 166 180 180
------- ------- -------
Total fixed maturities and equity
securities.................................. 14,051 14,356 14,356
------- ------- -------
Real Estate.................................. -- -- --
Other Investments
Mortgage loans on real estate.............. -- -- --
Policy loans............................... 3,756 3,756 3,756
Investments in partnerships, trusts and
other..................................... 47 91 47
------- ------- -------
Total other investments...................... 3,803 3,847 3,803
------- ------- -------
Total investments............................ $17,854 $18,203 $18,159
------- ------- -------
------- ------- -------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
FUTURE
POLICY
BENEFITS,
UNPAID OTHER
DEFERRED CLAIMS POLICY
POLICY AND CLAIM CLAIMS AND PREMIUMS NET
ACQUISITION ADJUSTMENT BENEFITS AND OTHER INVESTMENT
SEGMENT COSTS EXPENSES PAYABLE CONSIDERATIONS INCOME
- --------------------------------------------- ----------- --------- ---------- --------------- ---------
<S> <C> <C> <C> <C> <C>
1997
Annuity...................................... $2,478 $2,070 $ 6,838 $ 769 $ 500
Individual Life Insurance.................... 837 392 2,182 323 164
Employee Benefits............................ -- 780 9,232 541 431
Guaranteed Investment Contracts.............. -- -- 2,782 2 239
Corporate Operation.......................... -- 28 -- 2 34
----------- --------- ---------- ------ ---------
Consolidated operations...................... $3,315 $3,270 $21,034 $1,637 $1,368
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
1996
Annuity...................................... $2,030 $1,526 $ 6,016 $ 535 $ 433
Individual Life Insurance.................... 730 346 2,160 287 153
Employee Benefits............................ -- 574 9,834 881 485
Guaranteed Investment Contracts.............. -- -- 4,124 2 251
Corporate Operation.......................... -- 28 -- -- 75
----------- --------- ---------- ------ ---------
Consolidated operations...................... $2,760 $2,474 $22,134 $1,705 $1,397
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
1995
Annuity...................................... $1,561 $1,314 $ 5,661 $ 319 $ 400
Individual Life Insurance.................... 615 706 1,932 246 137
Employee Benefits............................ 12 325 9,285 922 351
Guaranteed Investment Contracts.............. -- 28 5,720 -- 377
Corporate Operation.......................... -- -- -- -- 63
----------- --------- ---------- ------ ---------
Consolidated operations...................... $2,188 $2,373 $22,598 $1,487 $1,328
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
<CAPTION>
NET BENEFITS, AMORTIZATION
REALIZED CLAIMS AND OF DEFERRED
CAPITAL CLAIM POLICY
GAINS ADJUSTMENT ACQUISITION DIVIDENDS TO OTHER
SEGMENT (LOSSES) EXPENSES COSTS POLICYHOLDERS EXPENSES
- --------------------------------------------- ----------- ----------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
1997
Annuity...................................... $ -- $ 445 $250 $ -- $ 257
Individual Life Insurance.................... -- 242 83 -- 77
Employee Benefits............................ -- 425 2 240 252
Guaranteed Investment Contracts.............. -- 232 -- -- 9
Corporate Operation.......................... 4 35 -- -- (9)
----------- ----------- ----- ----- -----
Consolidated operations...................... $ 4 $1,379 $335 $240 $ 586
----------- ----------- ----- ----- -----
----------- ----------- ----- ----- -----
1996
Annuity...................................... $ -- $ 412 $174 $ -- $ 156
Individual Life Insurance.................... -- 245 59 -- 68
Employee Benefits............................ -- 546 -- 635 141
Guaranteed Investment Contracts.............. (219) 332 1 -- 47
Corporate Operation.......................... 6 -- -- -- 15
----------- ----------- ----- ----- -----
Consolidated operations...................... $(213) $1,535 $234 $635 $ 427
----------- ----------- ----- ----- -----
----------- ----------- ----- ----- -----
1995
Annuity...................................... $ -- $ 317 $117 $ -- $ 114
Individual Life Insurance.................... -- 203 70 -- 54
Employee Benefits............................ -- 424 -- 675 137
Guaranteed Investment Contracts.............. -- 453 12 -- 15
Corporate Operation.......................... (11) 25 -- -- (3)
----------- ----------- ----- ----- -----
Consolidated operations...................... $ (11) $1,422 $199 $675 $ 317
----------- ----------- ----- ----- -----
----------- ----------- ----- ----- -----
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
SCHEDULE IV -- REINSURANCE
(IN MILLIONS)
<TABLE>
<CAPTION>
CEDED TO ASSUMED FROM PERCENTAGE
GROSS OTHER OTHER NET OF AMOUNT
AMOUNT COMPANIES COMPANIES AMOUNT ASSUMED TO NET
-------- -------------- -------------- -------- ---------------
<S> <C> <C> <C> <C> <C>
For the year ended December 31, 1997
Life insurance in force........................... $245,487 $ 178,771 $ 33,156 $ 99,872 33.2%
Insurance revenues
Life insurance and annuities.................... 1,818 340 157 1,635 9.6%
Accident and health insurance................... 346 346 2 2 100.0%
-------- -------------- ------- --------
Total insurance revenues.......................... $ 2,164 $ 686 $ 159 $ 1,637 9.7%
-------- -------------- ------- --------
-------- -------------- ------- --------
For the year ended December 31, 1996
Life insurance in force......................... $177,094 $ 106,146 $ 31,957 $102,905 31.1%
Insurance revenues
Life insurance and annuities.................... 1,801 298 169 1,672 10.1%
Accident and health insurance................... 337 325 21 33 63.6%
-------- -------------- ------- --------
Total insurance revenues.......................... $ 2,138 $ 623 $ 190 $ 1,705 11.1%
-------- -------------- ------- --------
-------- -------------- ------- --------
For the year ended December 31, 1995
Life insurance in force......................... $182,716 $ 112,774 $ 26,996 $ 96,938 27.8%
Insurance revenues
Life insurance and annuities.................... 1,232 325 574 1,481 38.8%
Accident and health insurance................... 313 324 17 6 283.3%
-------- -------------- ------- --------
Total insurance revenues.......................... $ 1,545 $ 649 $ 591 $ 1,487 39.7%
-------- -------------- ------- --------
-------- -------------- ------- --------
</TABLE>
<PAGE>
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) All financial statements are included in Part A and Part B of the
Registration Statement.
(b) (1) Resolution of the Board of Directors of Hartford Life Insurance
Company ("Hartford") authorizing the establishment of the
Separate Account.(1)
(2) Not applicable.
(3) (a) Principal Underwriter Agreement.(2)
(3) (b) Form of Dealer Agreement.(1)
(4) Form of Individual Single Premium Immediate Variable Annuity
Contract.(3)
(5) Form of Application.(3)
(6) (a) Articles of Incorporation of Hartford.(3)
(6) (b) Bylaws of Hartford.(2)
(7) Not applicable.
(8) Not applicable.
(9) Opinion and Consent of Lynda Godkin, Senior Vice President,
General Counsel, and Corporate Secretary.
(10) Consent of Arthur Andersen LLP, Independent Public Accountants.
(11) No financial statements are omitted.
(12) Not applicable.
- ------------------------------
(1) Incorporated by reference to Post-Effective Amendment No. 2, to the
Registration Statement File No. 33-73570, dated May 1, 1995.
(2) Incorporated by reference to Post-Effective Amendment No. 3, to the
Registration Statement File No. 33-73570, dated April 29, 1996
(3) Incorporated by reference to Pre-Effective Amendment No. 1, to the
Registration Statement File No. 333-19605, filed May 9, 1997.
<PAGE>
(13) Not applicable.
(14) Not applicable.
(15) Copy of Power of Attorney.
(16) Organizational Chart.
Item 25. Directors and Officers of the Depositor
- --------------------------------------------------------------------------------
NAME POSITION WITH HARTFORD
- --------------------------------------------------------------------------------
Dong H. Ahn Vice President
Wendell J. Bossen Vice President
Gregory A. Boyko Senior Vice President, Chief Financial Officer,
and Treasurer, Director*
Peter W. Cummins Senior Vice President
Ann M. de Raismes Senior Vice President
Timothy M. Fitch Vice President and Actuary
David T. Foy Vice President
Bruce D. Gardner Vice President
J. Richard Garrett Vice President and Assistant Treasurer
John P. Ginnetti Executive Vice President & Director of Asset
Management Services, Director*
William A. Godfrey, III Senior Vice President
Lynda Godkin Senior Vice President, General Counsel and
Corporate Secretary, Director*
Lois W. Grady Senior Vice President
Christopher Graham Vice President
Mark E. Hunt Vice President
Stephen T. Joyce Vice President
Michael D. Keeler Vice President
Robert A. Kerzner Senior Vice President
<PAGE>
- --------------------------------------------------------------------------------
NAME POSITION WITH HARTFORD
- --------------------------------------------------------------------------------
David N. Levenson Vice President
Steven M. Maher Vice President and Actuary
William B. Malchodi, Jr. Vice President
Raymond J. Marra Vice President
Thomas M. Marra Executive Vice President and Director, Individual
Life and Annuity Division, Director*
Robert F. Nolan, Jr. Senior Vice President
Joseph J. Noto Vice President
Michael C. O'Halloran Vice President
Lawrence M. O'Rourke Vice President
Daniel E. O'Sullivan Vice President
Craig R. Raymond Senior Vice President and Chief Actuary
Mary P. Robinson Vice President
Donald A. Salama Vice President
Timothy P. Schiltz Vice President
Lowndes A. Smith President and Chief Executive Officer, Director*
Keith A. Stevenson Vice President
Edward A. Sweeney Vice President
Judith V. Tilbor Vice President
Raymond P. Welnicki Senior Vice President and Director, Employee
Benefit Division, Director*
Walter C. Welsh Senior Vice President
Lizabeth H. Zlatkus Senior Vice President, Director*
David M. Znamierowski Senior Vice President, Director*
- --------------------------------------------------------------------------------
Unless otherwise indicated, the principal business address of each the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
*Denotes Board of Directors.
<PAGE>
Item 26. Persons Controlled By or Under Common Control with the Depositor or
Registrant
Filed herewith as Exhibit 16.
Item 27. Number of Contract Owners
As of February 28, 1998, there were 154,444 Contract Owners.
Item 28. Indemnification
Under Section 33-772 of the Connecticut General Statutes, unless
limited by its certificate of incorporation, the Registrant must
indemnify a director who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party
because he is or was a director of the corporation against reasonable
expenses incurred by him in connection with the proceeding.
The Registrant may indemnify an individual made a party to a
proceeding because he is or was a director against liability incurred
in the proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of
the Registrant, and, with respect to any criminal proceeding, had no
reason to believe his conduct was unlawful. Conn. Gen. Stat. Section
33-771(a). Additionally, pursuant to Conn. Gen. Stat. Section 33-776,
the Registrant may indemnify officers and employees or agents for
liability incurred and for any expenses to which they becomes subject
by reason of being or having been an employees or officers of the
Registrant. Connecticut law does not prescribe standards for the
indemnification of officers, employees and agents and expressly states
that their indemnification may be broader than the right of
indemnification granted to directors.
The foregoing statements are specifically made subject to the detailed
provisions of Section 33-770 et seq.
Notwithstanding the fact that Connecticut law obligates the Registrant
to indemnify a only a director that was successful on the merits in a
suit, under Article VIII, Section 1 of the Registrant's bylaws, the
Registrant must indemnify both directors and officers of the
Registrant for (1) any claims and liabilities to which they become
subject by reason of being or having been a directors or officers of
the company and legal and (2) other expenses incurred in defending
against such claims, in each case, to the extent such is consistent
with statutory provisions.
Additionally, the directors and officers of Hartford and Hartford
Securities Distribution Company, Inc. ("HSD") are covered under a
directors and officers liability insurance policy issued to The
Hartford Financial Services Group, Inc. and its subsidiaries. Such
policy will reimburse the Registrant for any payments that it shall
make to directors and officers pursuant
<PAGE>
to law and will, subject to certain exclusions contained in the
policy, further pay any other costs, charges and expenses and
settlements and judgments arising from any proceeding involving any
director or officer of the Registrant in his past or present capacity
as such, and for which he may be liable, except as to any liabilities
arising from acts that are deemed to be uninsurable.
Insofar as indemnification for liabilities 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 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.
Item 29. Principal Underwriters
(a) HSD acts as principal underwriter for the following investment
companies:
Hartford Life Insurance Company - Separate Account One
Hartford Life Insurance Company - Separate Account Two
Hartford Life Insurance Company - Separate Account Two
(DC Variable Account I)
Hartford Life Insurance Company - Separate Account Two
(DC Variable Account II)
Hartford Life Insurance Company - Separate Account Two
(QP Variable Account)
Hartford Life Insurance Company - Separate Account Two
(Variable Account "A")
Hartford Life Insurance Company - Separate Account Two
(NQ Variable Account)
Hartford Life Insurance Company - Putnam Capital Manager Trust
Separate Account
Hartford Life Insurance Company - Separate Account Three
Hartford Life Insurance Company - Separate Account Five
Hartford Life and Annuity Insurance Company - Separate Account
One
Hartford Life and Annuity Insurance Company - Putnam Capital
Manager
Trust Separate Account Two
Hartford Life and Annuity Insurance Company - Separate Account
Three
Hartford Life and Annuity Insurance Company - Separate Account
Five
Hartford Life and Annuity Insurance Company - Separate Account
Six
American Maturity Life Insurance - Separate Account AMLVA
<PAGE>
(b) Directors and Officers of HSD
Name and Principal Positions and Offices
Business Address With Underwriter
----------------- -----------------
Lowndes A. Smith President and Chief Executive Officer,
Director
John P. Ginnetti Executive Vice President, Director
Thomas M. Marra Executive Vice President, Director
Peter W. Cummins Senior Vice President
Lynda Godkin Senior Vice President, General Counsel
and Corporate Secretary
Donald E. Waggaman, Jr. Treasurer
George R. Jay Controller
Paul E. Olson Supervising Registered Principal
James Cubanski Assistant Secretary
Stephen T. Joyce Assistant Secretary
Glen J. Kvadus Assistant Secretary
Edward M. Ryan, Jr. Assistant Secretary
Unless otherwise indicated, the principal business address of each the
above individuals is P.O. Box 2999, Hartford, CT 06104-2999.
Item 30. Location of Accounts and Records
All of the accounts, books, records or other documents required to be
kept by Section 31(a) of the Investment Company Act of 1940 and rules
thereunder, are maintained by Hartford at 200 Hopmeadow Street,
Simsbury, Connecticut 06089.
Item 31. Management Services
All management contracts are discussed in Part A and Part B of this
Registration Statement.
Item 32. Undertakings
(a) The Registrant hereby undertakes to file a post-effective
amendment to this Registration Statement as frequently as is
necessary to ensure that the audited financial statements in the
Registration Statement are never more than 16 months old so long
as payments under the variable annuity Contracts may be accepted.
(b) The Registrant hereby undertakes to include either (1) as part of
any application to purchase a Contract offered by the Prospectus,
a space that an applicant can check to request a Statement of
Additional Information, or (2) a post card or similar written
communication affixed to or included in the Prospectus that the
applicant can remove to send for a Statement of Additional
Information.
(c) The Registrant hereby undertakes to deliver any Statement of
Additional Information and any financial statements required to
be made available under this Form promptly upon written or oral
request.
(d) Hartford hereby represents that the aggregate fees and charges
under the Contract are reasonable in relation to the services
rendered, the expenses expected to be incurred,
and the risks assumed by Hartford.
The Registrant is relying on the no-action letter issued by the
Division of Investment Management to American Counsel of Life
Insurance, Ref. No. IP-6-88, November 28, 1988. The Registrant has
complied with conditions one through four of the no-action letter.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets all the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and duly caused this Registration Statement to be signed
on its behalf, in the City of Hartford, and State of Connecticut on this 10th
day of April, 1998.
HARTFORD LIFE INSURANCE COMPANY -
SEPARATE ACCOUNT TWO
(Registrant)
*By: /s/ Thomas M. Marra *By: /s/ Leslie T. Soler
-------------------------------------------- -----------------------
Thomas M. Marra, Executive Vice President Leslie T. Soler
and Director, Individual Life and Annuity Attorney-in-Fact
Division, Director
HARTFORD LIFE INSURANCE COMPANY
(Depositor)
*By: /s/ Thomas M. Marra
---------------------------------------------
Thomas M. Marra, Executive Vice President
and Director, Individual Life and Annuity
Division, Director
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons and in the
capacity and on the date indicated.
Gregory A. Boyko, Senior Vice President,
Chief Financial Officer, and Treasurer,
Director * *By: /s/ Leslie T. Soler
John P. Ginnetti, Executive Vice ---------------------
President and Director, Asset Management Leslie T. Soler
Services, Director * Attorney-in-Fact
Lynda Godkin, Senior Vice President, General
Counsel and Corporate Secretary, Director* Dated: April 10, 1998
Thomas M. Marra, Executive Vice
President and Director, Individual Life and
Annuity Division, Director *
Lowndes A. Smith, President and
Chief Executive Officer, Director*
Raymond P. Welnicki, Senior Vice
President and Director, Employee Benefit
Division, Director *
Lizabeth H. Zlatkus, Senior Vice President,
Director *
David M. Znamierowski, Senior Vice President,
Director
<PAGE>
EXHIBIT INDEX
(9) Opinion and Consent of Lynda Godkin, Senior Vice President, General Counsel
and Corporate Secretary.
(10) Consent of Arthur Andersen LLP, Independent Public Accountants.
(15) Copy of Power of Attorney.
(16) Organizational Chart.
<PAGE>
[LOGO]
HARTFORD LIFE
April 10, 1998 LYNDA GODKIN
Senior Vice President, General Counsel &
Corporate Secretary
Board of Directors
Hartford Life Insurance Company
200 Hopmeadow Street
Simsbury, CT 06089
RE: Hartford Life Insurance Company Separate Account Two
Immediate Variable Annuity
File No. 333-19605
Dear Sir/Madam:
I have acted as General Counsel to Hartford Life Insurance Company (the
"Company"), a Connecticut insurance company, and Hartford Life Insurance Company
Separate Account Two (the "Account") in Connecticut with the registration of an
indefinite amount of securities in the form of single premium variable annuity
insurance contracts (the "Contracts") with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. I have examined such
documents (including the Form N-4 registration statement) and reviewed such
questions of law as I considered necessary and appropriate, and on the basis of
such examination and review, it is my opinion that:
1. The Company is a corporation duly organized and validly existing as a stock
life insurance company under the laws of the State of Connecticut and is
duly authorized to by the Insurance Department of the State of Connecticut
to issue the Contacts.
2. The Account is a duly authorized and existing separate account established
pursuant to the provisions of Section 38a-433 of the Connecticut Statutes.
3. To the extent so provided under the Contracts, that portion of the assets
of the Account equal to the reserves and other contract liabilities with
respect to the Account will not be chargeable with liabilities arising out
of any other business that the Company may conduct.
4. The Contracts, when issued as contemplated by the Form N-4 registration
statement, will constitute legal, validly issued and binding obligations of
the Company.
<PAGE>
Board of Directors
April 10, 1998
Page 2
I hereby consent to the filing of this opinion as an exhibit to the Form N-4
registration statement for the Contracts and the Account.
Sincerely yours,
/s/ Lynda Godkin
Lynda Godkin
<PAGE>
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
Registration Statement File No. 333-19605 for Hartford Life Insurance Company
Separate Account Two on Form N-4.
/s/ Arthur Andersen LLP
Hartford, Connecticut
April 13, 1998
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
POWER OF ATTORNEY
-----------------
Gregory A. Boyko
John P. Ginnetti
Lynda Godkin
Thomas M. Marra
Lowndes A. Smith
Raymond P. Welnicki
Lizabeth H. Zlatkus
David M. Znamierowski
do hereby jointly and severally authorize Lynda Godkin, Marianne O'Doherty,
and Leslie T. Soler to sign as their agent, any Registration Statement,
pre-effective amendment, post-effective amendment and any application for
exemptive relief of the Hartford Life Insurance Company and Hartford Life and
Accident Insurance Company under the Securities Act of 1933 and/or the
Investment Company Act of 1940.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney for
the purpose herein set forth.
/s/ Gregory A. Boyko Dated as of March 16, 1998
- --------------------------------------- --------------------------
Gregory A. Boyko
/s/ John P. Ginnetti Dated as of March 16, 1998
- --------------------------------------- --------------------------
John P. Ginnetti
/s/ Lynda Godkin Dated as of March 16, 1998
- --------------------------------------- --------------------------
Lynda Godkin
/s/ Thomas M. Marra Dated as of March 16, 1998
- --------------------------------------- --------------------------
Thomas M. Marra
/s/ Lowndes A. Smith Dated as of March 16, 1998
- --------------------------------------- --------------------------
Lowndes A. Smith
/s/ Raymond P. Welnicki Dated as of March 16, 1998
- --------------------------------------- --------------------------
Raymond P. Welnicki
/s/ Lizabeth H. Zlatkus Dated as of March 16, 1998
- --------------------------------------- --------------------------
Lizabeth H. Zlatkus
/s/ David M. Znamierowski Dated as of March 16, 1998
- --------------------------------------- --------------------------
David M. Znamierowski
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
THE HARTFORD
The Hartford Financial Services Group, Inc.
(Delaware)
|
- -------------------------------------------------------------------------------------------------------------
Nutmeg Insurance Company The Hartford Investment
(Connecticut) Management Company
| (Delaware)
Hartford Fire Insurance Company |
(Connecticut) Hartford Investment
| Services, Inc.
Hartford Accident and Indemnity Company (Connecticut)
(Connecticut)
|
Hartford Life, Inc.
(Delaware)
|
Hartford Life and Accident Insurance Company
(Connecticut)
|
|
|
- -------------------------------------------------------------------------------------------------------------
Alpine Life Hartford Financial Hartford Life American Maturity ITT Hartford Canada
Insurance Services Life Insurance Company Life Insurance Holdings, Inc.
Company Insurance Co. (Connecticut) Company (Canada)
(New Jersey) (Connecticut) | (Connecticut) |
| | |
| AML Financial, Inc. |
| (Connecticut) Hartford Life
| Insurance Company
| of Canada
| (Canada)
|
|
- -------------------------------------------------------------------------------------------------------------
Hartford Life and Annuity ITT Hartford International Hartford Financial Services Royal Life
Insurance Company Life Reassurance Corporation Corporation Insurance
(Connecticut) (Connecticut) (Delaware) Company of
| | America
| | (Connecticut)
| |
ITT Hartford Life, Ltd. |
(Bermuda) |
|
|
- -------------------------------------------------------------------------------------------------------------
MS Fund HL Funding HL Investment Hartford Hartford Securities Hartford-Comp. Emp.
America Company, Inc. Advisors, Inc. Equity Sales Distribution Benefit Service
1993-K, Inc. (Connecticut) (Connecticut) Company, Inc. Company, Inc. Company
(Delaware) | (Connecticut) (Connecticut) (Connecticut)
|
Hartford Investment
Financial Services
Company
(Delaware)
</TABLE>
