<PAGE>
As filed with the Securities and Exchange Commission on April 13, 1999.
File No. 333-41213
File No. 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. 3 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 108 [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)
MARIANNE O'DOHERTY
HARTFORD LIFE
P. O. BOX 2999
HARTFORD, CT 06104-2999
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of the registration statement.
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b) of Rule 485
_X_ on May 3, 1999 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on _________, 1999 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) 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 Glossary of Special Terms
3. Synopsis or Highlights Introduction
4. Condensed Financial Yield Information
Information
5. General Description of Hartford, The Separate Account,
Registrant The Funds and The Fixed Accumulation Feature
6. Deductions Charges Under the Contract
7. General Description of The Contracts, Separate Account, The Fixed
Annuity Contracts Accumulation Feature, and Surrender Benefits
8. Annuity Period Annuity Benefits
9. Death Benefit Death Benefits
10. Purchases and Contract The Contract, Contracts Offered, Premium Payments
Value and Initial Allocations and Contract Value
11. Redemptions Surrender Benefits
12. Taxes Federal Tax Considerations
13. Legal Proceedings Legal Matters & Experts
14. Table of Contents of Table of Contents to Statement of Additional
the Statement of Information Hartford
Additional Information
15. Cover Page Part B; Statement of Additional Information
<PAGE>
16. Table of Contents Table of Contents
17. General Information Introduction
and History
18. Services None
19. Purchase of Securities Distribution of Contracts
being Offered
20. Underwriters Distribution of Contracts
21. Calculation of Calculation of Yield and Return
Performance Data
22. Annuity Payments Annuity Benefits
23. Financial Statements Financial Statements
24. Financial Statements Financial Statements and Exhibits
and Exhibits
25. Directors and Officers Directors and Officers of the Depositor
of the Depositor
26. Persons Controlled by Persons Controlled by or Under Common Control
or Under Common Control with the Depositor or Registrant
with the Depositor or
Registrant
27. Number of Contract Number of Contract Owners
Owners
28. Indemnification Indemnification
29. Principal Underwriters Principal Underwriters
30. Location of Accounts Location of Accounts and Records
and Records
31. Management Services Management Services
32. Undertakings Undertaking
<PAGE>
PART A
<PAGE>
NATIONS VARIABLE ANNUITY
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO
P.O. BOX 5085
HARTFORD, CONNECTICUT 06102-5085
Telephone: 1-800-862-6668 (Contract
Owners)
[LOGO] 1-800-862-7155 (Registered Representatives)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Prospectus describes information you should know before you purchase Series
I of Nations Variable Annuity. Please read it carefully.
Nations Variable Annuity is a contract between you and Hartford Life Insurance
Company where you agree to make at least one Premium Payment to us and we agree
to make a series of Annuity Payouts at a later date. This Annuity is a flexible
premium, tax-deferred, variable annuity offered to both individuals and groups.
It is:
X Flexible, because you may add Premium Payments at any time.
X Tax-deferred, which means you don't pay taxes until you take money out or
until we start to make Annuity Payouts.
X Variable, because the value of your Annuity will fluctuate with the
performance of the underlying funds.
At the time you purchase your Annuity, you allocate your Premium Payment to
"Sub-Accounts". These are subdivisions of our Separate Account, an account that
keeps your Annuity assets separate from our company assets. The Sub-Accounts
then purchase shares of mutual funds set up exclusively for variable annuity or
variable life insurance products. These funds are not the same mutual funds that
you buy through your stockbroker or through a retail mutual fund. They may have
similar investment strategies and the same portfolio managers as retail mutual
funds. This Annuity offers you Funds with investment strategies ranging from
conservative to aggressive and you may pick those Funds that meet your
investment goals and risk tolerance. The Sub-Accounts and the Funds are listed
below:
- - Nations Balanced Assets Portfolio Sub-Account which purchases shares of the
Nations Balanced Assets Portfolio of Nations Annuity Trust
- - Nations Disciplined Equity Portfolio Sub-Account which purchases shares of the
Nations Disciplined Equity Portfolio of Nations Annuity Trust
- - Nations International Growth Portfolio Sub-Account which purchases shares of
the Nations International Growth Portfolio of Nations Annuity Trust
- - Nations Managed Index Portfolio Sub-Account which purchases shares of the
Nations Managed Index Portfolio of Nations Annuity Trust
- - Nations Managed SmallCap Index Portfolio Sub-Account which purchases shares of
the Nations Managed SmallCap Index Portfolio of Nations Annuity Trust
- - Nations Value Portfolio Sub-Account which purchases shares of the Nations
Value Portfolio of Nations Annuity Trust
- - Nations Marsico Growth & Income Portfolio Sub-Account which purchases shares
of the Nations Marsico Growth & Income Portfolio of Nations Annuity Trust
- - Nations Marsico Focused Equities Portfolio Sub-Account which purchases shares
of the Nations Marsico Focused Equities Portfolio of Nations Annuity Trust
- - AIM V.I. Capital Appreciation Fund Sub-Account which purchases shares of the
AIM V.I. Capital Appreciation Fund of the AIM Variable Insurance Funds, Inc.
- - AIM V.I. High Yield Fund Sub-Account which purchases shares of the AIM V.I.
High Yield Fund of the AIM Variable
Insurance Funds, Inc.
- - AIM V.I. Value Fund Sub-Account which purchases shares of the AIM V.I. Value
Fund of the AIM Variable Insurance Funds, Inc.
- - Advisers Fund Sub-Account which purchases shares of Class IB of Hartford
Advisers HLS Fund, Inc.
- - Bond Fund Sub-Account which purchases shares of Class IB of Hartford Bond HLS
Fund, Inc.
<PAGE>
- - Capital Appreciation Fund Sub-Account which purchases shares of Class IB of
Hartford Capital Appreciation HLS Fund, Inc.
- - Dividend and Growth Fund Sub-Account which purchases shares of Class IB of
Hartford Dividend and Growth HLS Fund, Inc.
- - Money Market Fund Sub-Account which purchases shares of Class IB of Hartford
Money Market HLS Fund, Inc.
- - International Opportunities Fund Sub-Account which purchases shares of Class
IB Hartford International Opportunities HLS Fund, Inc.
- - Small Company Fund Sub-Account which purchases shares of Class IB of Hartford
Small Company HLS Fund, Inc.
- - Stock Fund Sub-Account which purchases shares of Class IB of Hartford Stock
HLS Fund, Inc.
You may also allocate some or all of your Premium Payment to the "Fixed
Accumulation Feature", which pays an interest rate guaranteed for a certain time
period from the time the Premium Payment is made. Premium Payments allocated to
the Fixed Accumulation Feature are not segregated from our company assets like
the assets of the Separate Account.
If you decide to buy this Annuity, you should keep this prospectus for your
records. You can also call us at 1-800-862-6668 to get a Statement of Additional
Information, free of charge. The Statement of Additional Information contains
more information about this Annuity and, like this prospectus, is filed with the
Securities and Exchange Commission ("SEC"). We have included the Table of
Contents for the Statement of Additional Information at the end of this
prospectus.
Although we file the prospectus and the Statement of Additional information with
the SEC, the SEC doesn't approve or disapprove these securities or determine if
the information is truthful or complete. Anyone who represents that the SEC does
these things may be guilty of a criminal offense. This Prospectus and the
Statement of Additional Information can also be obtained from the SEC's website
(HTTP://WWW.SEC.GOV).
This Annuity IS NOT:
- A bank deposit or obligation
- Federally insured
- Endorsed by any bank or governmental agency
This Annuity may not be available for sale in all states.
- --------------------------------------------------------------------------------
PROSPECTUS DATED: MAY 3, 1999
STATEMENT OF ADDITIONAL INFORMATION DATED: MAY 3, 1999
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 3
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS........................................................... 4
FEE TABLE............................................................. 6
ANNUAL FUND OPERATING EXPENSES........................................ 6
ACCUMULATION UNIT VALUES.............................................. 8
HIGHLIGHTS............................................................ 10
GENERAL CONTRACT INFORMATION.......................................... 11
Hartford Life Insurance Company..................................... 11
The Separate Account................................................ 11
The Funds........................................................... 11
PERFORMANCE RELATED INFORMATION....................................... 13
THE FIXED ACCUMULATION FEATURE........................................ 14
THE CONTRACT.......................................................... 15
Purchases and Contract Value........................................ 15
Charges and Fees.................................................... 17
Death Benefit....................................................... 19
Surrenders.......................................................... 20
ANNUITY PAYOUTS....................................................... 21
OTHER PROGRAMS AVAILABLE.............................................. 23
OTHER INFORMATION..................................................... 24
Year 2000........................................................... 24
Legal Matters and Experts........................................... 25
More Information.................................................... 26
FEDERAL TAX CONSIDERATIONS............................................ 26
APPENDIX I -- INFORMATION REGARDING TAX-QUALIFIED RETIREMENT PLANS.... 30
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION.............. 33
</TABLE>
<PAGE>
4 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
DEFINITIONS
These terms are capitalized when used throughout this prospectus. Please
refer to these defined terms if you have any questions as you read your
prospectus.
ACCOUNT: Any of the Sub-Accounts or Fixed Accumulation Feature.
ACCUMULATION UNITS: If you allocate your Premium Payment to any of the
Sub-Accounts, we will convert those payments into Accumulation Units in the
selected Sub-Accounts. Accumulation Units are valued at the end of each
Valuation Day and are used to calculate the value of your Contract prior to
Annuitization.
ACCUMULATION UNIT VALUE: The daily price of Accumulation Units on any Valuation
Day.
ADMINISTRATIVE OFFICE OF THE COMPANY: Our location and overnight mailing address
is: 200 Hopmeadow Street, Simsbury, Connecticut 06089. Our standard mailing
address is: Investment Product Services, P.O. Box 5085, Hartford, CT 06102-5085.
ANNIVERSARY VALUE: The value equal to the Contract Value as of a Contract
Anniversary, increased by the dollar amount of any Premium Payments made since
that anniversary and reduced by the dollar amount of any partial Surrenders
since that anniversary.
ANNUAL MAINTENANCE FEE: An annual $30 charge deducted on a Contract Anniversary
or upon full Surrender if the Contract Value at either of those times is less
than $50,000. The charge is deducted proportionately from each Account in which
you are invested.
ANNUAL WITHDRAWAL AMOUNT: This is the amount you can Surrender per Contract Year
without paying a Contingent Deferred Sales Charge. This amount is
non-cumulative, meaning that it cannot be carried over from one year to the
next.
ANNUITANT: The person on whose life the Contract is based. The Annuitant may not
be changed after your Contract is issued.
ANNUITY CALCULATION DATE: The date we calculate the first Annuity Payout.
ANNUITY PAYOUT OPTION: Any of the options available for payout after the Annuity
Commencement Date or death of the Contract Owner or Annuitant.
ANNUITY UNIT: The unit of measure we use to calculate the value of your Annuity
Payouts under a variable dollar amount Annuity Payout Option.
ANNUITY UNIT VALUE: The daily price of Annuity Units on any Valuation Day.
BENEFICIARY: The person(s) entitled to receive a Death Benefit upon the death of
the Contract Owner or Annuitant.
CHARITABLE REMAINDER TRUST: An irrevocable trust, where an individual donor
makes a gift to the trust, and in return receives an income tax deduction. In
addition, the individual donor has the right to receive a percentage of the
trust earnings for a specified period of time.
CODE: The Internal Revenue Code of 1986, as amended.
COMMUTED VALUE: The present value of any remaining guaranteed Annuity Payouts.
CONTINGENT ANNUITANT: The person you may designate to become the Annuitant if
the original Annuitant dies before the Annuity Commencement Date. You must name
a Contingent Annuitant before the original Annuitant's death.
CONTINGENT DEFERRED SALES CHARGE: The deferred sales charge that may apply when
you make a full or partial Surrender.
CONTRACT: The individual Annuity Contract and any endorsements or riders. Group
participants and some individuals will receive a certificate rather than a
Contract.
CONTRACT ANNIVERSARY: The anniversary of the date we issued your Contract. If
the Contract Anniversary falls on a Non-Valuation Day, then the Contract
Anniversary will be the next Valuation Day.
CONTRACT VALUE: The total value of the Accounts on any Valuation Day.
CONTRACT YEAR: Any 12 month period between Contract Anniversaries, beginning
with the date the Contract was issued.
DEATH BENEFIT: The amount payable after the Contract Owner or the Annuitant
dies.
DOLLAR COST AVERAGING: A program that allows you to systematically make
transfers between Accounts available in your Contract.
FIXED ACCUMULATION FEATURE: Part of our General Account, where you may allocate
all or a portion of your Contract Value. In your Contract, this is defined as
the "Fixed Account".
GENERAL ACCOUNT: The General Account includes our company assets and any money
you have invested in the Fixed Accumulation Feature.
HARTFORD, WE OR OUR: Hartford Life Insurance Company. Only Hartford is a
capitalized term in the prospectus.
JOINT ANNUITANT: The person on whose life Annuity Payouts are based if the
Annuitant dies after Annuitization. You may
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 5
- --------------------------------------------------------------------------------
name a Joint Annuitant only if your Annuity Payout Option provides for a
survivor. The Joint Annuitant may not be changed.
MAXIMUM ANNIVERSARY VALUE: This is the highest Anniversary Value prior to the
deceased's 81st birthday or the date of death, if earlier.
NET INVESTMENT FACTOR: This is used to measure the investment performance of a
Sub-Account from one Valuation Day to the next, and is also used to calculate
your Annuity Payout amount.
NON-VALUATION DAY: Any day the New York Stock Exchange is not open for trading.
PAYEE: The person or party you designate to receive Annuity Payouts.
PREMIUM PAYMENT: Money sent to us to be invested in your Annuity.
PREMIUM TAX: A tax charged by a state or municipality on Premium Payments.
REQUIRED MINIMUM DISTRIBUTION: A federal requirement that individuals age 70 1/2
and older must take a distribution from their tax-qualified retirement account
by December 31, each year. For employer sponsored Qualified Contracts, the
individual must begin taking distributions at the age of 70 1/2 or upon
retirement, whichever comes later.
SUB-ACCOUNT VALUE: The value on or before the Annuity Calculation Date, which is
determined on any day by multiplying the number of Accumulation Units by the
Accumulation Unit Value for that Sub-Account.
SURRENDER: A complete or partial withdrawal from your Contract.
SURRENDER VALUE: The amount we pay you if you terminate your Contract before the
Annuity Commencement Date. The Surrender Value is equal to the Contract Value
minus any applicable charges.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. Values
of the Separate Account are determined as of the close of the New York Stock
Exchange, generally 4:00 p.m. Eastern Time.
VALUATION PERIOD: The time span between the close of trading on the New York
Stock Exchange from one Valuation Day to the next.
<PAGE>
6 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
FEE TABLE
Contract Owner Transaction Expenses
<TABLE>
<S> <C>
Sales Load Imposed on Purchases (as a percentage of Premium
Payments)....................................................... None
Deferred Sales Charge (as a percentage of amounts Surrendered)
First Year (1)................................................ 6%
Second Year................................................... 6%
Third Year.................................................... 5%
Fourth Year................................................... 5%
Fifth Year.................................................... 4%
Sixth Year.................................................... 3%
Seventh Year.................................................. 2%
Eighth Year................................................... 0%
Annual Maintenance Fee (2)........................................ $30
Separate Account Annual Expenses (as a percentage of average
Sub-Account Value)
Mortality and Expense Risk Charge............................. 1.25%
</TABLE>
- ---------
(1) Length of time from Premium Payment.
(2) An annual $30 charge deducted on a Contract Anniversary or upon full
Surrender if the Contract Value at either of those times is less than
$50,000. The charge is deducted proportionately from each Account in which
you are invested.
The purpose of this table is to assist you in understanding various fees and
charges you will pay directly or indirectly. The table reflects expenses of the
Separate Account and underlying Funds. Premium Taxes, if any, have been taken
into account.
This EXAMPLE should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown. The Annual
Maintenance Fee has been reflected in the Example by a method intended to show
the "average" impact of the Annual Maintenance Fee on an investment in the
Separate Account. We do this by approximating an "average" 0.06% annual charge.
Annual Fund Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
12B-1
DISTRIBUTION
AND/OR
MANAGEMENT FEES SERVICING FEES
INCLUDING INCLUDING OTHER
WAIVERS WAIVERS EXPENSES
---------------- ---------------- -------------
<S> <C> <C> <C>
Nations Balanced Assets Portfolio............................... 0.650% 0.000%(1) 0.350%(2)
Nations Disciplined Equity Portfolio............................ 0.650% 0.000%(1) 0.350%(2)
Nations International Growth Portfolio.......................... 0.800% 0.000%(1) 0.450%(2)
Nations Managed Index Portfolio................................. 0.200%(3) 0.250% 0.300%(2)
Nations Managed SmallCap Index Portfolio........................ 0.200%(3) 0.250% 0.300%(2)
Nations Value Portfolio......................................... 0.650% 0.000%(1) 0.350%(2)
Nations Marsico Growth & Income Portfolio....................... 0.750% 0.000%(1) 0.350%(2)
Nations Marsico Focused Equities Portfolio...................... 0.750% 0.000%(1) 0.350%(2)
AIM V.I. Capital Appreciation Fund.............................. 0.620% 0.000% 0.050%
AIM V.I. High Yield Fund (4).................................... 0.000% 0.000% 1.130%
AIM V.I. Value Fund............................................. 0.610% 0.000% 0.050%
Hartford Advisers HLS Fund...................................... 0.616% 0.180%(5) 0.018%
Hartford Bond HLS Fund.......................................... 0.482% 0.180%(5) 0.021%
Hartford Capital Appreciation HLS Fund.......................... 0.623% 0.180%(5) 0.019%
Hartford Dividend & Growth HLS Fund............................. 0.641% 0.180%(5) 0.018%
Hartford International Opportunities HLS Fund................... 0.681% 0.180%(5) 0.090%
Hartford Money Market HLS Fund.................................. 0.433% 0.180%(5) 0.015%
Hartford Small Company HLS Fund................................. 0.753% 0.180%(5) 0.019%
Hartford Stock HLS Fund......................................... 0.439% 0.180%(5) 0.018%
<CAPTION>
TOTAL FUND
OPERATING
EXPENSES
INCLUDING
WAIVERS
----------------
<S> <C>
Nations Balanced Assets Portfolio............................... 1.000%
Nations Disciplined Equity Portfolio............................ 1.000%
Nations International Growth Portfolio.......................... 1.250%
Nations Managed Index Portfolio................................. 0.750%
Nations Managed SmallCap Index Portfolio........................ 0.750%
Nations Value Portfolio......................................... 1.000%
Nations Marsico Growth & Income Portfolio....................... 1.100%
Nations Marsico Focused Equities Portfolio...................... 1.100%
AIM V.I. Capital Appreciation Fund.............................. 0.670%
AIM V.I. High Yield Fund (4).................................... 1.130%
AIM V.I. Value Fund............................................. 0.660%
Hartford Advisers HLS Fund...................................... 0.814%
Hartford Bond HLS Fund.......................................... 0.683%
Hartford Capital Appreciation HLS Fund.......................... 0.822%
Hartford Dividend & Growth HLS Fund............................. 0.839%
Hartford International Opportunities HLS Fund................... 0.951%
Hartford Money Market HLS Fund.................................. 0.628%
Hartford Small Company HLS Fund................................. 0.952%
Hartford Stock HLS Fund......................................... 0.637%
</TABLE>
- ---------
(1) Nations Balanced Assets Portfolio, Nations Disciplined Equity Portfolio,
Nations International Growth Portfolio, Nations Managed Index Portfolio,
Nations Managed SmallCap Index Portfolio, Nations Value Portfolio, Nations
Marsico Growth & Income Portfolio and Nations Marsico Focused Equities
Portfolio distributed by Stephens Inc., are subject to fees of up to 0.250%
pursuant to a shareholder servicing and distribution plan. The shareholder
servicing and distribution plan provides that the Portfolios may pay banks,
brokers/dealer, insurance companies or other financial institutions that
have entered into sales support agreements with Stephens Inc. or a
shareholder servicing agreement with the Portfolios for certain expenses
that are incurred in connection with sales and shareholder support services.
These fees are
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 7
- --------------------------------------------------------------------------------
currently being voluntarily waived for the Nations Balanced Assets
Portfolio, Nations Disciplined Equity Portfolio, Nations International
Growth Portfolio, Nations Value Portfolio, Nations Marsico Growth & Income
Portfolio and Nations Marsico Focused Equities Portfolio. Absent such
waivers, the 12b-1 Distribution and/or Servicing Fees would have been
0.250%. There is no assurance that these waivers will continue.
(2) The investment adviser for these Portfolios has agreed to temporarily waive
a portion of its management fee and/or reimburse other expenses. Absent fee
waivers as indicated at (1) and (3) and expense reimbursements, other
expenses and total fund operating expenses, respectively, of the indicated
Portfolio would have been as follows: Nations Balanced Assets Portfolio:
1.84% and 2.74%; Nations Disciplined Equity Portfolio: 1.54% and 2.44%;
Nations International Growth Portfolio: 3.07% and 4.12%; Nations Managed
Index Portfolio: 1.00% and 1.65%; Nations Managed SmallCap Index: 1.08% and
1.73%; Nations Value Portfolio: 1.45% and 2.35%; Nations Marsico Growth &
Income Portfolio: 1.02% and 2.02%; Nations Marsico Focused Equity Portfolio:
0.97% and 1.97%. There is no assurance that these waivers and/or
reimbursements will continue. The total operating expense ratios above have
been restated from the Portfolios' most recent year to reflect changes to
the management fees and administration fees effective May 1999. To the
extent Other Expenses are less than those shown, waivers and/or
reimbursements of management fees, if any, may decrease. You will be
notified of any decrease that materially increases total operating expenses.
If fee waivers and/or reimbursements are decreased or discontinued, the
amounts contained in the examples above may increase.
(3) The investment adviser for these Portfolios also has agreed to temporarily
waive a portion of its management fee. Absent such waivers, management fees
for each of Nations Managed Index Portfolio and Nations Managed SmallCap
Index Portfolio would have been 0.400%.
(4) Had there been no fee waivers or expense reimbursement, expenses for AIM
V.I. High Yield Fund would have been: Management Fees -- 0.630%; Other
Expenses -- 1.870%; and Total Expenses -- 2.500%.
(5) The Class IB shares of the Funds sponsored by Hartford are subject to fees
imposed under a distribution plan (herein, the "Distribution Plan") adopted
by the Funds pursuant to Rule 12b-1 of the 1940 Act. The Distribution Plan
provides that the Funds sponsored by Hartford may pay annually up to 0.250%
of the average daily net assets of a Fund attributable to its Class IB
shares to certain distributors with respect to activities primarily intended
to result in the sale of the Class IB shares. Hartford has voluntarily and
temporarily waived 0.070% of the average daily net assets of the Funds.
Absent such waiver, the 12b-1 Distribution and/or Servicing Fees would be
0.250% and the Total Fund Operating Expenses would be as follows: Hartford
Advisers Fund -- 0.884%; Hartford Bond Fund -- 0.753%; Hartford Capital
Appreciation Fund -- 0.892%; Hartford Dividend and Growth Fund -- 0.909%;
Hartford International Opportunities Fund -- 1.021%; Hartford Money Market
Fund -- 0.698%; Hartford Small Company Fund -- 1.022%; and Hartford Stock
Fund -- 0.707%. Hartford reserves the right to discontinue the waiver at any
time upon notice to shareholders.
<PAGE>
8 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
If you Surrender your Contract If you annuitize your Contract If you do not Surrender your
at the end of the applicable at the end of the applicable Contract, you would pay the
time period you would pay the time period you would pay the following expenses on a $1,000
following expenses on a $1,000 following expenses on a $1,000 investment, assuming a 5%
investment, assuming a 5% investment, assuming a 5% annual return on assets:
annual return on assets: annual return on assets:
<CAPTION>
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- -------- ------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Nations Balanced Assets
Portfolio.................. $ 78 $ 118 $ 161 $ 267 $ 23 $ 72 $ 124 $ 266 $ 24 $ 73 $ 125 $ 267
Nations Disciplined Equity
Portfolio.................. 78 118 161 267 23 72 124 266 24 73 125 267
Nations International Growth
Portfolio.................. 80 126 174 292 26 80 137 292 26 81 138 292
Nations Managed Index
Portfolio.................. 75 110 148 241 21 65 111 240 21 65 112 241
Nations Managed SmallCap
Index Portfolio............ 75 110 148 241 21 65 111 240 21 65 112 241
Nations Value Portfolio...... 78 118 161 267 23 72 124 266 24 73 125 267
Nations Marsico Growth &
Income Portfolio........... 79 121 166 277 24 75 129 276 25 76 130 277
Nations Marsico Focused
Equities Portfolio......... 79 121 166 277 24 75 129 276 25 76 130 277
Bond......................... 73 103 135 214 18 57 98 214 19 58 99 214
Stock........................ 72 101 133 209 17 55 96 209 18 56 97 209
Money Market................. 72 101 132 208 17 55 95 208 18 56 96 208
Advisers..................... 74 107 142 229 19 61 105 228 20 62 106 229
Capital Appreciation......... 74 107 142 229 19 61 106 229 20 62 106 229
Mortgage Securities.......... 72 101 133 210 18 56 96 209 18 56 97 210
International
Opportunities.............. 75 111 149 243 21 65 112 242 21 66 113 243
Dividend & Growth............ 74 107 143 231 20 62 106 230 20 62 107 231
AIM V.I. Capital
Appreciation............... 74 108 144 232 20 62 107 232 20 63 108 232
AIM V.I. High Yield.......... 79 122 167 280 24 76 131 279 25 77 131 280
AIM V.I. Value............... 74 107 143 231 20 62 106 230 20 62 107 231
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 9
- --------------------------------------------------------------------------------
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,
--------------
1998 1997
------- ----
NATIONS BALANCED ASSET PORTFOLIO SUB-ACCOUNT
<S> <C> <C>
Accumulation Unit Value at beginning of
period...................................... $1.000 --
Accumulation Unit Value at end of period..... $0.970 --
Number Accumulation Units outstanding at end
of period (in thousands).................... 2,926 --
NATIONS DISCIPLINED EQUITY PORTFOLIO
SUB-ACCOUNT
Accumulation Unit Value at beginning of
period...................................... $1.000 --
Accumulation Unit Value at end of period..... $1.060 --
Number Accumulation Units outstanding at end
of period (in thousands).................... 3,510 --
NATIONS INTERNATIONAL GROWTH PORTFOLIO
SUB-ACCOUNT
Accumulation Unit Value at beginning of
period...................................... $1.000 --
Accumulation Unit Value at end of period..... $1.031 --
Number Accumulation Units outstanding at end
of period (in thousands).................... 1,231 --
NATIONS MANAGED INDEX PORTFOLIO SUB-ACCOUNT
Accumulation Unit Value at beginning of
period...................................... $1.000 --
Accumulation Unit Value at end of period..... $1.097 --
Number Accumulation Units outstanding at end
of period (in thousands).................... 3,967 --
NATIONS MANAGED SMALL CAP INDEX PORTFOLIO
SUB-ACCOUNT
Accumulation Unit Value at beginning of
period...................................... $1.000 --
Accumulation Unit Value at end of period..... $0.886 --
Number Accumulation Units outstanding at end
of period (in thousands).................... 1,749 --
NATIONS VALUE PORTFOLIO SUB-ACCOUNT
Accumulation Unit Value at beginning of
period...................................... $1.000 --
Accumulation Unit Value at end of period..... $1.034 --
Number Accumulation Units outstanding at end
of period (in thousands).................... 4,444 --
NATIONS MARSICO GROWTH & INCOME PORTFOLIO
SUB-ACCOUNT
Accumulation Unit Value at beginning of
period...................................... $1.000 --
Accumulation Unit Value at end of period..... $1.193 --
Number Accumulation Units outstanding at end
of period (in thousands).................... 9,977 --
NATIONS MARSICO FOCUSED EQUITIES PORTFOLIO
SUB-ACCOUNT
Accumulation Unit Value at beginning of
period...................................... $1.000 --
Accumulation Unit Value at end of period..... $1.193 --
Number Accumulation Units outstanding at end
of period (in thousands).................... 9,977 --
HARTFORD BOND CLASS B FUND SUB-ACCOUNT
(Inception date August 1, 1986)
Accumulation Unit Value at beginning of
period...................................... $1.000 --
Accumulation Unit Value at end of period..... $1.049 --
Number Accumulation Units outstanding at end
of period (in thousands).................... 5,038 --
HARTFORD STOCK CLASS B FUND SUB-ACCOUNT
(Inception date August 1, 1986)
Accumulation Unit Value at beginning of
period...................................... $1.000 --
Accumulation Unit Value at end of period..... $1.138 --
Number Accumulation Units outstanding at end
of period (in thousands).................... 8,931 --
HARTFORD MONEY MARKET CLASS B FUND
SUB-ACCOUNT
(Inception date August 1, 1986)
Accumulation Unit Value at beginning of
period...................................... $1.000 --
Accumulation Unit Value at end of period..... $1.028 --
Number Accumulation Units outstanding at end
of period (in thousands).................... 2,120 --
HARTFORD ADVISERS CLASS B FUND SUB-ACCOUNT
(Inception date August 1, 1986)
Accumulation Unit Value at beginning of
period...................................... $1.000 --
Accumulation Unit Value at end of period..... $1.109 --
Number Accumulation Units outstanding at end
of period (in thousands).................... 31,298 --
</TABLE>
<PAGE>
10 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------
1998 1997
------- ----
<S> <C> <C>
HARTFORD CAPITAL APPRECIATION CLASS B FUND
SUB-ACCOUNT
(Inception date August 1, 1986)
Accumulation Unit Value at beginning of
period...................................... $1.000 --
Accumulation Unit Value at end of period..... $1.007 --
Number Accumulation Units outstanding at end
of period (in thousands).................... 5,901 --
HARTFORD INTERNATIONAL OPPORTUNITIES CLASS B
FUND SUB-ACCOUNT
(Inception date July 2, 1990)
Accumulation Unit Value at end of period..... $1.000 --
Accumulation Unit Value at end of period..... $0.979 --
Number Accumulation Units outstanding at end
of period (in thousands).................... 677 --
HARTFORD DIVIDEND & GROWTH CLASS B FUND
SUB-ACCOUNT
(Inception date March 8, 1994)
Accumulation Unit Value at beginning of
period...................................... $1.000 --
Accumulation Unit Value at end of period..... $1.027 --
Number Accumulation Units outstanding at end
of period (in thousands).................... 8,374 --
HARTFORD SMALL COMPANY CLASS B FUND
SUB-ACCOUNT
(Inception date August 9, 1996)
Accumulation Unit Value at beginning of
period...................................... $1.000 --
Accumulation Unit Value at end of period..... $0.978 --
Number Accumulation Units outstanding at end
of period (in thousands).................... 712 --
AIM V.I. HIGH YIELD FUND SUB-ACCOUNT
Accumulation Unit Value at beginning of
period...................................... $1.000 --
Accumulation Unit Value at end of period..... $0.905 --
Number Accumulation Units outstanding at end
of period (in thousands).................... 1,809 --
AIM V.I. VALUE FUND SUB-ACCOUNT
Accumulation Unit Value at beginning of
period...................................... $1.000 --
Accumulation Unit Value at end of period..... $1.045 --
Number Accumulation Units outstanding at end
of period (in thousands).................... 2,087 --
AIM V.I. CAPITAL APPRECIATION FUND
SUB-ACCOUNT
Accumulation Unit Value at beginning of
period...................................... $1.000 --
Accumulation Unit Value at end of period..... $1.012 --
Number Accumulation Units outstanding at end
of period (in thousands).................... 987 --
</TABLE>
<PAGE>
10 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
HIGHLIGHTS
HOW DO I PURCHASE THIS ANNUITY?
You must complete our application or order request and submit it to us for
approval with your first Premium Payment. Your first Premium Payment must be at
least $1,000 and subsequent Premium Payments must be at least $500, unless you
take advantage of our InvestEase Program-Registered Trademark- or are part of
certain retirement plans.
- For a limited time, usually within ten days after you receive your Contract,
you may cancel your Annuity without paying a Contingent Deferred Sales
Charge. You may bear the investment risk for your Premium Payment prior to
our receipt of your request for cancellation.
WHAT TYPE OF SALES CHARGE WILL I PAY?
You don't pay a sales charge when you purchase your Annuity. We may charge you a
Contingent Deferred Sales Charge when you partially or fully Surrender your
Annuity. The Contingent Deferred Sales Charge will depend on the length of time
the Premium Payment you made has been in your Annuity. If the amount you paid
has been in your Annuity:
x For less than two years, the charge is 6%.
x For more than two years and less than four years, the charge is 5%.
x For more than four years and less than five years, the charge is 4%.
x For more than five years and less than six years, the charge is 3%.
x For more than six years and less than seven years, the charge is 2%.
You won't be charged a Contingent Deferred Sales Charge on:
x The Annual Withdrawal Amount.
x Premium Payments or earnings that have been in your Annuity for more than
seven years.
x Distributions made due to death.
x Most payments we make to you as part of your Annuity Payout.
IS THERE AN ANNUAL MAINTENANCE FEE?
We deduct this $30.00 fee each year on your Contract Anniversary or when you
fully Surrender your Annuity, if, on either of those dates, the value of your
Annuity is less than $50,000.
WHAT CHARGES WILL I PAY ON AN ANNUAL BASIS?
In addition to the Annual Maintenance Fee, you pay two other types of charges
each year. The first type of charge is the fee you pay for insurance. This
charge is:
A mortality and expense risk charge that is subtracted daily and is equal to
an annual charge of 1.25% of your Contract Value invested in the Funds.
The second type of charge is the fee you pay for the Funds.
Currently, Fund charges range from 0.628% to 1.250% annually of the average
daily value of the amount you have invested in the Funds. See the Annual Fund
Operating Expenses table for more complete information and the Funds'
prospectuses accompanying this prospectus.
CAN I TAKE OUT ANY OF MY MONEY?
You may Surrender all or part of the amounts you have invested at any time
before we start making Annuity Payouts, or after Annuity Payouts begin under the
Payment for a Designated Period Annuity Payout Option.
- You may have to pay income tax on the money you take out and, if you
Surrender before you are age 59 1/2, you may have to pay an income tax
penalty.
- You may have to pay a Contingent Deferred Sales Charge on the money you
Surrender.
WILL HARTFORD PAY A DEATH BENEFIT?
There is a Death Benefit if the Contract Owner, joint owner or the Annuitant die
before we begin to make Annuity Payouts. The Death Benefit will be calculated as
of the date we receive a certified death certificate or other legal document
acceptable to us and will be the greater of:
- - The total Premium Payments you have made to us minus any amounts you have
Surrendered, or
- - The Contract Value of your Annuity, or
- - Your Maximum Anniversary Value, which is described below.
The Maximum Anniversary Value is based on a series of calculations on
Contract Anniversaries of Contract Values, Premium Payments and partial
Surrenders. We will calculate an Anniversary Value for each Contract Anniversary
prior to the deceased's 81st birthday or date of death, whichever is earlier.
The Anniversary Value is equal to the Contract Value as of a Contract
Anniversary, increased by the dollar amount of any Premium Payments made since
that anniversary and reduced by the dollar amount of any partial Surrenders
since that anniversary. The Maximum Anniversary Value is equal to the greatest
Anniversary Value attained from this series of calculations.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 11
- --------------------------------------------------------------------------------
This Death Benefit amount will remain invested in the Sub-Accounts according
to your last instructions and will fluctuate with the performance of the
underlying Funds.
WHAT ANNUITY PAYOUT OPTIONS ARE AVAILABLE?
When it comes time for us to make payouts, you may choose one of the following
Annuity Payout Options: Option 1 -- Life Annuity, Option 2 -- Life Annuity with
120, 180 or 240 Monthly Payments Certain, Option 3 -- Joint and Last Survivor
Life Annuity and Option 4 -- Payments For a Designated Period. We may make other
Annuity Payout Options available at any time.
You must begin to take payouts by the Annuitant's 90th birthday. If you do
not tell us what Annuity Payout Option you want before that time, we will make
payments under Option 2 -- Life Annuity with 120 monthly payments certain.
GENERAL CONTRACT INFORMATION
HARTFORD LIFE INSURANCE COMPANY
Hartford Life Insurance Company 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 as well as the District of Columbia. We were originally
incorporated under the laws of Massachusetts on June 5, 1902, and subsequently
redomiciled to Connecticut. Our offices are located in Simsbury, Connecticut;
however, our mailing address is P.O. Box 5085, Hartford, CT 06104-5085. We are
ultimately controlled by The Hartford Financial Services Group, Inc., one of the
largest financial service providers in the United States.
HARTFORD'S RATINGS
<TABLE>
<CAPTION>
EFFECTIVE DATE
RATING AGENCY OF RATING RATING BASIS OF RATING
- ----------------------------------- -------------- ------ -----------------------------------
<S> <C> <C> <C>
A.M. Best and Company, Inc......... 1/1/99 A+ Financial performance
Standard & Poor's.................. 6/1/98 AA Insurer financial strength
Duff & Phelps...................... 12/21/98 AA+ Claims paying ability
</TABLE>
THE SEPARATE ACCOUNT
The Separate Account is where we set aside and invest the assets of some of
our annuity contracts, including this Contract. The Separate Account was
established on June 2, 1986 and is registered as a unit investment trust under
the Investment Company Act of 1940. This registration does not involve
supervision by the SEC of the management or the investment practices of the
Separate Account or Hartford. The Separate Account meets the definition of
"Separate Account" under federal securities law. This Separate Account holds
only assets for variable annuity contracts. The Separate Account:
- - Holds assets for your benefit and the benefit of other Contract Owners, and
the persons entitled to the payouts described in the Contract.
- - Is not subject to the liabilities arising out of any other business Hartford
may conduct.
- - Is not affected by the rate of return of Hartford's General Account or by the
investment performance of any of Hartford's other Separate Accounts.
- - May be subject to liabilities from a Sub-Account of the Separate Account that
holds assets of other variable annuity contracts offered by the Separate
Account, which are not described in this Prospectus.
- - Is credited with income and gains, and takes losses, whether or not realized,
from the assets it holds.
We do not guarantee the investment results of the Separate Account. There is
no assurance that the value of your Annuity will equal the total of the payments
you make to us.
THE FUNDS
All Hartford Funds are sponsored and administered by Hartford Life Insurance
Company. HL Investment Advisors, Inc. ("HL Advisors") serves as the investment
adviser to each of the Funds. Wellington Management Company, LLP ("Wellington
Management") and The Hartford Investment Management Company ("HIMCO") serve as
sub-investment advisers and provide day to day investment services.
Each Hartford Fund is a separate Maryland corporation registered with the
Securities and Exchange Commission as an open-end management investment company.
The shares of each Fund have been divided into Class IA and Class IB. Only Class
IB shares are available in this Annuity.
The Nations Balanced Assets Portfolio, Nations Disciplined Equity Portfolio,
Nations International Growth Portfolio, Nations Managed Index Portfolio, Nations
Managed SmallCap Index Portfolio, Nations Value Portfolio, Nations Marsico
Growth & Income Portfolio and Nations Marsico Focused Equities Portfolio are
sponsored by Stephens Inc. and are investment portfolios of Nations Annuity
Trust, a Delaware business trust which is a registered open-end management
investment company. NationsBanc Advisors, Inc. serves as the investment adviser
to these Funds.
TradeStreet Investment Associates, Inc. serves as the investment sub-adviser
to the Nations Balanced Assets Portfolio, Nations Disciplined Equity Portfolio,
Nations Managed Index Portfolio, Nations Managed SmallCap Index Portfolio, and
Nations Value Portfolio. Gartmore
<PAGE>
12 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Global Partners is investment sub-adviser to Nations International Growth
Portfolio. The Nations Marsico Growth & Income Portfolio and Nations Marsico
Focused Equities Portfolio are sub-advised by Marsico Capital Management, LLC.
The AIM V.I. Capital Appreciation Fund, AIM V.I. High Yield Fund, and AIM
V.I. Value Fund are investment company portfolios of AIM Variable Insurance
Funds, Inc., a Maryland corporation which is a registered open-end, series,
management investment company. A I M Advisors, Inc. serves as the investment
advisor to these Funds.
We do not guarantee the investment results of any of the underlying Funds.
Since each underlying Fund has different investment objectives, each is subject
to different risks. These risks and the Funds' expenses, policies and procedures
are more fully described in the accompanying Funds' prospectus and Statement of
Additional Information, which you may order from us. The Funds' prospectus
should be read in conjunction with this prospectus before investing.
The Funds may not be available in all states.
The investment goals of each of the Funds are as follows:
NATIONS BALANCED ASSETS PORTFOLIO -- Seeks total return by investing in
equity and fixed income securities.
NATIONS DISCIPLINED EQUITY PORTFOLIO -- Seeks growth of capital by investing
in companies that are expected to produce significant increases in earnings per
share.
NATIONS INTERNATIONAL GROWTH PORTFOLIO -- Seeks long-term capital growth by
investing primarily in equity securities of companies domiciled in countries
outside of the United States and listed on major stock exchanges primarily in
Europe and the Pacific Basin.
NATIONS MANAGED INDEX PORTFOLIO -- Seeks, over the long-term, to provide a
total return which (gross of fees and expenses) exceeds the total return of the
Standard & Poor's 500 Composite Stock Price Index.(1)
NATIONS MANAGED SMALLCAP INDEX PORTFOLIO -- Seeks, over the long-term, to
provide a total return which (gross of fees and expenses) exceeds the total
return of the Standard & Poor's SmallCap 600 Index.(2)
NATIONS VALUE PORTFOLIO -- Seeks growth of capital by investing in companies
that are believed to be undervalued.
NATIONS MARSICO GROWTH & INCOME PORTFOLIO -- Seeks long-term growth of
capital with a limited emphasis on income.
NATIONS MARSICO FOCUSED EQUITIES PORTFOLIO -- Seeks long-term growth of
capital.
AIM V.I. CAPITAL APPRECIATION FUND -- Seeks growth of capital through
investment in common stocks, with emphasis on medium- and small-sized growth
companies.
AIM V.I. HIGH YIELD FUND -- Achieve a high level of current income. The
fund's investment objective may be changed by the fund's Board of Directors
without shareholder approval.
AIM V.I. VALUE FUND -- Achieve long-term growth of capital by investing
primarily in equity securities judged by the fund's investment advisor to be
undervalued relative to the investment advisor's appraisal of that current or
projected earnings of the companies issuing the securities, or relative to
current market values of assets owned by the companies issuing the securities or
relative to the equity market generally. Income is a secondary objective.
HARTFORD ADVISERS FUND -- Seeks maximum long-term total rate of return by
investing in common stocks and other equity securities, bonds and other debt
securities, and money market instruments. Sub-advised by Wellington Management.
HARTFORD BOND FUND -- Seeks maximum current income consistent with
preservation of capital by investing primarily in investment grade fixed-income
securities. Up to 20% of the total assets of this Fund may be invested in debt
securities rated in the highest category below investment grade ("Ba" by Moody's
Investor Services, Inc. or "BB" by Standard & Poor's) or, if unrated, are
determined to be of comparable quality by the Fund's investment adviser.
Securities rated below investment grade are commonly referred to as "high
yield-high risk securities" or "junk bonds." For more information concerning the
risks associated with investing in such securities, please refer to the section
in the accompanying prospectus for the Funds entitled "Hartford Bond Fund, Inc."
Sub-advised by HIMCO.
HARTFORD CAPITAL APPRECIATION FUND -- Seeks growth of capital by investing
in securities selected solely on the basis of potential for capital
appreciation. Sub-advised by Wellington Management.
HARTFORD DIVIDEND AND GROWTH FUND -- Seeks a high level of current income
consistent with growth of capital by investing primarily in dividend paying
equity securities. Sub-advised by Wellington Management.
* "STANDARD & POOR'S," "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.
THE INDEX FUND IS NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY STANDARD &
POOR'S AND STANDARD & POOR'S MAKES NO REPRESENTATION REGARDING THE
ADVISABILITY OF INVESTING IN THE INDEX FUND.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 13
- --------------------------------------------------------------------------------
HARTFORD INTERNATIONAL OPPORTUNITIES FUND -- Seeks growth of capital by
investing primarily in equity securities issued by non-U.S. companies.
Sub-advised by Wellington Management.
HARTFORD MONEY MARKET FUND -- Seeks maximum current income consistent with
liquidity and preservation of capital. Sub-advised by HIMCO.
HARTFORD SMALL COMPANY FUND -- Seeks growth of capital by investing
primarily in equity securities within the range represented by the Russell 2000
Index selected on the basis of potential for capital appreciation. Sub-advised
by Wellington Management.
HARTFORD STOCK FUND -- Seeks long-term growth by investing primarily in
equity securities. Sub-advised by Wellington Management.
MIXED AND SHARED FUNDING -- Shares of the Funds may be sold to our other
separate accounts and our insurance company affiliates or other unaffiliated
insurance companies to serve as the underlying investment for both variable
annuity contracts and variable life insurance policies, a practice known as
"mixed and shared funding." As a result, there is a possibility that a material
conflict may arise between the interests of 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 one of the Funds. In the event of any
such material conflicts, we will consider what action may be appropriate,
including removing the Fund from the Separate Account or replacing the Fund with
another underlying fund. There are certain risks associated with mixed and
shared funding, as disclosed in the Funds' prospectus.
VOTING RIGHTS -- We are the legal owners of all Fund shares held in the
Separate Account and we have the right to vote at the Fund's shareholder
meetings. To the extent required by federal securities laws or regulations, we
will:
- - Notify you of any Fund shareholders' meeting if the shares held for your
Contract may be voted.
- - Send proxy materials and a form of instructions that you can use to tell us
how to vote the Fund shares held for your Contract.
- - Arrange for the handling and tallying of proxies received from Contract
Owners.
- - Vote all Fund shares attributable to your Contract according to instructions
received from you, and
- - Vote all Fund shares for which no voting instructions are received in the same
proportion as shares for which instructions have been received.
If any federal securities laws or regulations, or their present
interpretation, change to permit us to vote Fund shares on our own, we may
decide to do so. You may attend any Shareholder Meeting at which shares held for
your Contract may be voted. After we begin to make Annuity Payouts to you, the
number of votes you have will decrease.
SUBSTITUTIONS, ADDITIONS, OR DELETIONS OF FUNDS -- We reserve the right,
subject to any applicable law, to make certain changes to the Funds offered
under Your Contract. We may, in our sole discretion, establish new Funds. New
Funds will be made available to existing Contract Owners as we determine
appropriate. We may also close one or more Funds to additional Payments or
transfers from existing Sub-Accounts.
We reserve the right to eliminate the shares of any of the Funds for any
reason and to substitute shares of another registered investment company for the
shares of any Fund already purchased or to be purchased in the future by the
Separate Account. To the extent required by the Investment Company Act of 1940
(the "1940 Act"), substitutions of shares attributable to your interest in a
Fund will not be made until we have the approval of the Commission and we have
notified you of the change.
In the event of any substitution or change, we may, by appropriate
endorsement, make any changes in the Contract necessary or appropriate to
reflect the substitution or change. If we decide that it is in the best interest
of the Contract Owners, the Separate Account may be operated as a management
company under the 1940 Act or any other form permitted by law, may be
de-registered under the 1940 Act in the event such registration is no longer
required, or may be combined with one or more other Separate Accounts.
PERFORMANCE RELATED INFORMATION
The Separate Account may advertise certain performance-related information
concerning the 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.
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.
The Separate Account may also advertise NON-STANDARD TOTAL RETURNS THAT
PRE-DATE THE INCEPTION DATE OF THE SEPARATE ACCOUNT. These non-standardized
total returns are calculated by assuming that the Sub-Accounts have been in
existence for the same periods as the underlying Funds and
<PAGE>
14 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
by taking deductions for charges equal to those currently assessed against the
Sub-Accounts. These non-standardized returns must be accompanied by standardized
total returns.
If applicable, the 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 is divided by the unit
value on the last day of the period. This figure includes the recurring charges
at the Separate Account level including the Annual Maintenance Fee.
The Money Market Fund Sub-Account may advertise YIELD AND EFFECTIVE YIELD.
The yield of a 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 include the recurring charges at the Separate Account
level including the Annual Maintenance Fee.
The Separate Account may also disclose YIELD for periods prior to the date
the Separate Account commenced operations. For these periods, 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. No yield disclosure
for periods prior to the date of the Separate Account will be used without the
yield disclosure for periods as of the date of the inception of the Separate
Account.
We 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 systematic investing, Dollar Cost Averaging
and asset allocation), the advantages and disadvantages of investing in tax-
deferred and taxable instruments, customer profiles and hypothetical purchase
scenarios, financial management and tax and retirement planning, and other
investment alternatives, including comparisons between the Contract and the
characteristics of and market for such alternatives.
THE FIXED ACCUMULATION FEATURE
IMPORTANT INFORMATION YOU SHOULD KNOW: THIS PORTION OF THE PROSPECTUS
RELATING TO THE FIXED ACCUMULATION FEATURE IS NOT REGISTERED UNDER THE
SECURITIES ACT OF 1933 ("1933 ACT") AND THE FIXED ACCUMULATION FEATURE IS NOT
REGISTERED AS AN INVESTMENT COMPANY UNDER THE 1940 ACT. THE FIXED ACCUMULATION
FEATURE OR ANY OF ITS INTERESTS ARE NOT SUBJECT TO THE PROVISIONS OR
RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT, AND THE STAFF OF THE SECURITIES
AND EXCHANGE COMMISSION HAS NOT REVIEWED THE DISCLOSURE REGARDING THE FIXED
ACCUMULATION FEATURE. THE FOLLOWING DISCLOSURE ABOUT THE FIXED ACCUMULATION
FEATURE MAY BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL
SECURITIES LAWS REGARDING THE ACCURACY AND COMPLETENESS OF DISCLOSURE.
Premium Payments and Contract Values allocated to the Fixed Accumulation
Feature become a part of our General Account assets. We invest the assets of the
General Account according to the laws governing the investments of insurance
company General Accounts.
Currently, we guarantee that we will credit interest at a rate of not less
than 3% per year, compounded annually, to amounts you allocate to the Fixed
Accumulation Feature. We reserve the right to change the rate subject only to
applicable state insurance law. We may credit interest at a rate in excess of 3%
per year. We will periodically publish the Fixed Accumulation Feature interest
rates currently in effect. There is no specific formula for determining interest
rates. Some of the factors that we may consider in determining whether to credit
excess interest are; general economic trends, rates of return currently
available and anticipated on our investments, regulatory and tax requirements
and competitive factors. We will account for any deductions, Surrenders or
transfers from the Fixed Accumulation Feature on a "first-in first-out" basis.
For Contracts issued in the state of New York, the Fixed Accumulation Feature
interest rates may vary from other states.
IMPORTANT: ANY INTEREST CREDITED TO AMOUNTS YOU ALLOCATE TO THE FIXED
ACCUMULATION FEATURE IN EXCESS OF 3% PER YEAR WILL BE DETERMINED AT OUR SOLE
DISCRETION. YOU ASSUME THE RISK THAT INTEREST CREDITED TO THE FIXED ACCUMULATION
FEATURE MAY NOT EXCEED THE MINIMUM GUARANTEE OF 3% FOR ANY GIVEN YEAR.
From time to time, we may credit increased interest rates under certain
programs established in our sole discretion.
DOLLAR COST AVERAGING PLUS ("DCA") PROGRAMS -- Currently, you may enroll in
a special pre-authorized transfer program known as our DCA Plus Program (the
"Program"). Under this Program, Contract Owners who enroll may allocate a
minimum of $5,000 of their Premium Payment into the Program (we may allow a
lower minimum Premium Payment for qualified plan transfers or rollovers,
including IRAs) and pre-authorize transfers to any of the Sub-Accounts under
either the 6 Month Transfer Program or 12 Month Transfer Program. The 6-Month
Transfer Program and the 12-Month Transfer Program will generally
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 15
- --------------------------------------------------------------------------------
have different credited interest rates. Under the 6-Month Transfer Program, the
interest rate can accrue up to 6 months and all Premium Payments and accrued
interest must be transferred from the Program to the selected Sub-Accounts in 3
to 6 months. Under the 12-Month Transfer Program, the interest rate can accrue
up to 12 months and all Premium Payments and accrued interest must be
transferred to the selected Sub-Accounts in 7 to 12 months. This will be
accomplished by monthly transfers for the period selected and a final transfer
of the entire amount remaining in the Program. Contract owners who purchase
their Contracts in New York have a different DCA Plus Program. Currently, only
one DCA Plus Program transfer period is available in New York, but that period
allows transfers to selected Sub-Accounts in 3 to 12 months.
The pre-authorized transfers will begin within 15 days of receipt of the
Program payment provided we receive complete enrollment instructions. If we do
not receive complete Program enrollment instructions within 15 days of receipt
of the initial Program payment, the Program will be voided and the entire
balance in the Program will be transferred to the Accounts designated by you. If
you do not designate an Account, you will receive the Fixed Accumulation
Feature's current effective interest rate. Any subsequent payments we receive
within the Program period selected will be allocated to the Sub-Accounts over
the remainder of that Program transfer period.
You may elect to terminate the pre-authorized transfers by calling or
writing us of your intent to cancel enrollment in the Program. Upon
cancellation, you will no longer receive the Program interest rate and unless we
receive instructions to the contrary, the amounts remaining in the Program may
accrue the interest rate currently in effect for the Fixed Accumulation Feature.
We reserve the right to discontinue, modify or amend the Program or any
other interest rate program we establish. Any change to the Program will not
affect Contract Owners currently enrolled in the Program. This Program may not
be available in all states; please contact us to determine if it is available in
your state.
You may only have one DCA program in place at one time. The Fixed
Accumulation Feature and Dollar Cost Averaging Plus Program are not available in
Oregon.
THE CONTRACT
PURCHASES AND CONTRACT VALUE
WHAT TYPES OF CONTRACTS ARE AVAILABLE?
The Contract is an individual or group tax-deferred variable annuity contract.
It is designed for retirement planning purposes and may be purchased by any
individual, group or trust, including:
- - Any trustee or custodian for a retirement plan qualified under Sections 401(a)
or 403(a) of the Code;
- - Annuity purchase plans adopted by public school systems and certain tax-exempt
organizations according to Section 403(b) of the Code;
- - Individual Retirement Annuities adopted according to Section 408 of the Code;
- - Employee pension plans established for employees by a state, a political
subdivision of a state, or an agency of either a state or a political
subdivision of a state, and
- - Certain eligible deferred compensation plans as defined in Section 457 of the
Code.
The examples above represent Qualified Contracts, as defined by the Code. In
addition, individuals and trusts can also purchase Contracts that are not part
of a tax qualified retirement plan. These are known as Non-Qualified Contracts.
HOW DO I PURCHASE A CONTRACT?
You may purchase a Contract by completing and submitting an application or an
order request along with an initial Premium Payment. For most Contracts, the
minimum Premium Payment is $1,000. For additional Premium Payments, the minimum
Premium Payment is $500. Under certain situations, we may allow smaller Premium
Payments, for example, if you enroll in our InvestEase Program or are part of
certain tax qualified retirement plans. Prior approval is required for Premium
Payments of $1,000,000 or more.
You and your Annuitant must not be older than age 85 on the date that your
Contract is issued. You must be of legal age in the state where the Contract is
being purchased or a guardian must act on your behalf.
HOW ARE PREMIUM PAYMENTS APPLIED TO MY CONTRACT?
Your initial Premium Payment will be invested within two Valuation Days of our
receipt of a properly completed application or an order request and the Premium
Payment. If we receive your subsequent Premium Payment before the close of the
New York Stock Exchange, it will be priced on the same Valuation Day. If we
receive your Premium Payment after the close of the New York Stock Exchange, it
will be processed on the next Valuation Day. If we receive your Premium Payment
on a Non-Valuation Day, the amount will be invested on the next Valuation Day.
Unless we receive new instructions, we will invest the Premium Payment based on
your last allocation instructions. We will send you a confirmation when we
invest your Premium Payment.
If the request or other information accompanying the Premium Payment is
incomplete when received, we will hold the money in a non-interest bearing
account for up to
<PAGE>
16 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
five Valuation Days while we try to obtain complete information. If we cannot
obtain the information within five Valuation Days, we will either return the
Premium Payment and explain why the Premium Payment could not be processed or
keep the Premium Payment if you authorize us to keep it until your provide the
necessary information.
CAN I CANCEL MY CONTRACT AFTER I PURCHASE IT?
We want you to be satisfied with the Contract you have purchased. We urge you to
closely examine its provisions. If for any reason you are not satisfied with
your Contract, simply return it within ten days after you receive it with a
written request for cancellation that indicates your tax-withholding
instructions. In some states, you may be allowed more time to cancel your
Contract. We will not deduct any Contingent Deferred Sales Charges during this
time. We may require additional information, including a signature guarantee,
before we can cancel your Contract.
You bear the investment risk from the time the Contract is issued until we
receive your complete cancellation request.
The amount we pay you upon cancellation depends on the requirements of the
state where you purchased your Contract, the method of purchase, the type of
Contract you purchased and your age.
HOW IS THE VALUE OF MY CONTRACT CALCULATED BEFORE THE ANNUITY COMMENCEMENT DATE?
The Contract Value is the sum of all Accounts. There are two things that affect
your Sub-Account value: (1) the number of Accumulation Units and (2) the
Accumulation Unit Value. The Sub-Account value is determined by multiplying the
number of Accumulation Units by the Accumulation Unit Value. Therefore, on any
Valuation Day your Contract Value reflects the investment performance of the
Sub-Accounts and will fluctuate with the performance of the underlying Funds.
When Premium Payments are credited to your Sub-Accounts, they are converted
into Accumulation Units by dividing the amount of your Premium Payments, minus
any Premium Taxes, by the Accumulation Unit Value for that day. The more Premium
Payments you put into your Contract, the more Accumulation Units you will own.
You decrease the number of Accumulation Units you have by requesting Surrenders,
transferring money out of an Account, settling a Death Benefit claim or by
annuitizing your Contract.
To determine the current Accumulation Unit Value, we take the prior
Valuation Day's Accumulation Unit Value and multiply it by the Net Investment
Factor for the current Valuation Day.
The Net Investment Factor is used to measure the investment performance of a
Sub-Account from one Valuation Day to the next. The Net Investment Factor for
each Sub-Account equals:
- - The net asset value per share of each Fund held in the Sub-Account at the end
of the current Valuation Day divided by
- - The net asset value per share of each Fund held in the Sub-Account at the end
of the prior Valuation Day; minus
- - The daily mortality and expense risk charge adjusted for the number of days in
the period, and any other applicable charge.
We will send you a statement in each calendar quarter, which tells you how
many Accumulation Units you have, their value and your total Contract Value.
CAN I TRANSFER FROM ONE SUB-ACCOUNT TO ANOTHER?
TRANSFERS BETWEEN SUB-ACCOUNTS -- You may transfer from one Sub-Account to
another before and after the Annuity Commencement Date at no extra charge. Your
transfer request will be processed on the day that it is received as long as it
is received on a Valuation Day before the close of the New York Stock Exchange.
Otherwise, your request will be processed on the following Valuation Day. We
will send you a confirmation when we process your transfer. You are responsible
for verifying transfer confirmations and promptly advising us of any errors
within 30 days of receiving the confirmation.
SUB-ACCOUNT TRANSFER RESTRICTIONS -- We reserve the right to limit the
number of transfers to 12 per Contract Year, with no transfers occurring on
consecutive Valuation Days. We also have the right to restrict transfers if we
believe that the transfers could have an adverse effect on other Contract
Owners. In all states except New York, Florida, Maryland and Oregon, we may:
- - Require a minimum time period between each transfer,
- - Limit the dollar amount that may be transferred on any one Valuation Day, and
- - Not accept transfer requests from an agent acting under a power of attorney
for more than one Contract Owner.
We also have a restriction in place that involves individuals who act under
a power of attorney for multiple Contract Owners. If the value of the Contract
Owners' Accounts add up to more than $2 million, we will not accept transfer
instructions from the power of attorney unless the power of attorney has entered
into a Third Party Transfer Services Agreement with us.
Some states may have different restrictions.
FIXED ACCUMULATION FEATURE TRANSFERS -- During each Contract Year, you may
make transfers out of the Fixed
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 17
- --------------------------------------------------------------------------------
Accumulation Feature to Sub-Accounts. All transfer allocations must be in whole
numbers (e.g., 1%). You may transfer either:
- - 30% of your total amount in the Fixed Accumulation Feature, or
- - An amount equal to the largest previous transfer.
These transfer limits do not include transfers done through Dollar Cost
Averaging or the DCA Plus Program.
If your interest rate renews at a rate at least 1% lower than your prior
interest rate, you may transfer an amount equal to up to 100% of the amount to
be invested at the renewal rate. You must make this transfer request within 60
days of being notified of the renewal rate.
FIXED ACCUMULATION FEATURE TRANSFER RESTRICTIONS -- We reserve the right to
defer transfers from the Fixed Accumulation Feature for up to 6 months from the
date of your request. After any transfer, you must wait six months before moving
Sub-Account Values back to the Fixed Accumulation Feature.
TELEPHONE TRANSFERS -- In most states, you can make transfers by calling us
at (800) 862-6668. Hartford, our agents or our affiliates are NOT responsible
for losses resulting from telephone requests that we believe are genuine. We
will use reasonable procedures to confirm that telephone instructions are
genuine, including requiring that callers provide certain identification
information and recording all telephone transfer instructions.
POWER OF ATTORNEY -- You may authorize another person to make transfers on
your behalf by submitting a completed Power of Attorney form. Once we have the
completed form on file, we will accept transfer instructions, subject to our
transfer restrictions, from your designated third party until we receive new
instructions in writing from you. You will not be able to make transfers or
other changes to your Contract if you have authorized someone else to act under
a Power of Attorney.
CHARGES AND FEES
There are 5 charges and fees associated with the Contract:
1. THE CONTINGENT DEFERRED SALES CHARGE
The Contingent Deferred Sales Charge covers some of the expenses relating to
the sale and distribution of the Contract, including commissions paid to
registered representatives and the cost of preparing sales literature and other
promotional activities.
We assess a Contingent Deferred Sales Charge when you request a full or
partial Surrender. The percentage of the Contingent Deferred Sales Charge is
based on how long your Premium Payments have been in the Contract. The
Contingent Deferred Sales Charge will not exceed the total amount of the Premium
Payments made. Each Premium Payment has its own Contingent Deferred Sales Charge
schedule. Premium Payments are Surrendered in the order in which they were
received. The longer you leave your Premium Payments in the Contract, the lower
the Contingent Deferred Sales Charge will be when you Surrender.
The Contingent Deferred Sales Charge is a percentage of the amount
Surrendered and is equal to:
<TABLE>
<CAPTION>
NUMBER OF
YEARS CONTINGENT
FROM DEFERRED
PREMIUM SALES
PAYMENT CHARGE
--------- ---
<S> <C>
1 6%
2 6%
3 5%
4 5%
5 4%
6 3%
7 2%
8 or more 0%
</TABLE>
THE FOLLOWING SURRENDERS ARE NOT SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE:
- - ANNUAL WITHDRAWAL AMOUNT -- During the first seven years from each Premium
Payment, you may, each Contract Year, take partial Surrenders up to 10% of the
total Premium Payments. If you do not take 10% one year, you may not take more
than 10% the next year. These amounts are different for group unallocated
Contracts and Contracts issued to a Charitable Remainder Trust.
- - SURRENDERS MADE FROM PREMIUM PAYMENTS INVESTED FOR MORE THAN SEVEN
YEARS -- After the seventh Contract Year, you may take the total of: (a) all
of your earnings, and (b) all Premium Payments held in your Contract for more
than seven years, and (c) 10% of Premium Payments made during the last seven
years.
UNDER THE FOLLOWING SITUATIONS, THE CONTINGENT DEFERRED SALES CHARGE IS WAIVED:
- - Upon eligible confinement as described in the Waiver of Sales Charge Rider.
For Contracts purchased on or after September 29, 1997, we will waive any
Contingent Deferred Sales Charge applicable to a partial or full Surrender if
you, the joint owner or the Annuitant, is confined for at least 180 calendar
days to a: (a) facility recognized as a general hospital by the proper
authority of the state in which it is located; or (b) facility recognized as a
general hospital by the Joint Commission on the Accreditation of Hospitals; or
(c) facility certified as a hospital or long-term care facility; or (d)
nursing home licensed by the state in which it is located and offers the
services of a registered nurse 24 hours a day. If you, the joint owner or the
Annuitant is confined when you purchase the Contract, this waiver is not
available. For it
<PAGE>
18 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
to apply, you must: (a) have owned the Contract continuously since it was
issued, (b) provide written proof of confinement satisfactory to us, and (c)
request the Surrender within 90 calendar days of the last day of confinement.
This waiver may not be available in all states. Please contact your Registered
Representative or us to determine if it is available for you.
- - For Required Minimum Distributions. This allows Annuitants who are age 70 1/2
or older, with a Contract held under an Individual Retirement Account or
403(b) plan, to Surrender an amount equal to the Required Minimum Distribution
for the Contract without a Contingent Deferred Sales Charge. All requests for
Required Minimum Distributions must be in writing.
- - On or after the Annuitant's 90th birthday.
- - For disabled participants enrolled in a group unallocated, tax qualified
retirement plan. With our approval and under certain conditions, participants
who become disabled can receive Surrenders free of Contingent Deferred Sales
Charge.
THE FOLLOWING SITUATIONS ARE NOT SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE:
- - Upon death of the Annuitant or Contract Owner. No Contingent Deferred Sales
Charge will be deducted if the Annuitant or Contract Owner dies, unless the
Contract Owner is not a natural person (e.g. a trust).
- - Upon Annuitization. The Contingent Deferred Sales Charge is not deducted when
you annuitize the Contract. We will charge a Contingent Deferred Sales Charge
if the Contract is fully Surrendered during the Contingent Deferred Sales
Charge period under an Annuity Payout Option which allows Surrenders.
- - Upon cancellation during the Right to Cancel Period
2. MORTALITY AND EXPENSE RISK CHARGE
For assuming mortality and expense risks under the Contract, we deduct a
daily charge at the rate of 1.25% per year of Sub-Account Value (estimated at
.90% for mortality and .35% for expenses). The mortality and expense risk charge
is broken into charges for mortality risks and for an expense risk:
- - MORTALITY RISK -- There are two types of mortality risks that we assume, those
made while your Premium Payments are accumulating and those made once Annuity
Payouts have begun.
During the period your Premium Payments are accumulating, we are required to
cover any difference between the Death Benefit paid and the Surrender Value.
These differences may occur during periods of declining value or in periods
where the Contingent Deferred Sales Charges would have been applicable. The risk
that we bear during this period is that actual mortality rates, in aggregate,
may exceed expected mortality rates.
Once Annuity Payouts have begun, we may be required to make Annuity Payouts
as long as the Annuitant is living, regardless of how long the Annuitant lives.
We would be required to make these payments if the Payout Option chosen is the
Life Annuity, Life Annuity With Payments for a Period Certain or Joint and Last
Survivor Life Annuity Payout Option. The risk that we bear during this period is
that the actual mortality rates, in aggregate, may be lower than the expected
mortality rates.
- - EXPENSE RISK -- We also bear an expense risk that the Contingent Deferred
Sales Charges and the Annual Maintenance Fee collected before the Annuity
Commencement Date may not be enough to cover the actual cost of selling,
distributing and administering the Contract.
Although variable Annuity Payouts will fluctuate with the performance of the
underlying Fund selected, your Annuity Payouts will NOT be affected by (a) the
actual mortality experience of our Annuitants, or (b) our actual expenses if
they are greater than the deductions stated in the Contract. Because we cannot
be certain how long our Annuitants will live, we charge this percentage fee
based on the mortality tables currently in use. The mortality and expense risk
charge enables us to keep our commitments and to pay you as planned.
3. ANNUAL MAINTENANCE FEE
The Annual Maintenance Fee is a flat fee that is deducted from your Contract
Value to reimburse us for expenses relating to the administrative maintenance of
the Contract and the Accounts. The annual $30 charge is deducted on a Contract
Anniversary or when the Contract is fully Surrendered if the Contract Value at
either of those times is less than $50,000. The charge is deducted
proportionately from each Account in which you are invested.
WHEN IS THE ANNUAL MAINTENANCE FEE WAIVED?
We will waive the Annual Maintenance Fee if your Contract Value is $50,000 or
more on your Contract Anniversary or when you fully Surrender your Contract. In
addition, we will waive one Annual Maintenance Fee for Contract Owners who own
more than one Contract with a combined Contract Value between $50,000 and
$100,000. If you have multiple Contracts with a combined Contract Value of
$100,000 or greater, we will waive the Annual Maintenance Fee on all Contracts.
However, we reserve the right to limit the number of waivers to a total of six
Contracts. We also reserve the right to waive the Annual Maintenance Fee under
certain other conditions.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 19
- --------------------------------------------------------------------------------
4. PREMIUM TAXES
We deduct Premium Taxes, if required, by a state or other government agency.
Some states collect the taxes when Premium Payments are made; others collect at
Annuitization. Since we pay Premium Taxes when they are required by applicable
law, we may deduct them from your Contract when we pay the taxes, upon
Surrender, or on the Annuity Commencement Date. The Premium Tax rate varies by
state or municipality. Currently, the maximum rate charged by any state is 3.5%
and 4% in Puerto Rico.
5. CHARGES AGAINST THE FUNDS
The Separate Account purchases shares of the Funds at net asset value. The net
asset value of the Fund reflects investment advisory fees and administrative
expenses already deducted from the assets of the Funds. These charges are
described in the Funds' prospectuses accompanying this prospectus.
WE MAY OFFER, IN OUR DISCRETION, REDUCED FEES AND CHARGES INCLUDING, BUT NOT
LIMITED TO CONTINGENT DEFERRED SALES CHARGES, THE MORTALITY AND EXPENSE RISK
CHARGE, AND THE ANNUAL MAINTENANCE FEE, FOR CERTAIN CONTRACTS (INCLUDING
EMPLOYER SPONSORED SAVINGS PLANS) WHICH MAY RESULT IN DECREASED COSTS AND
EXPENSES. REDUCTIONS IN THESE FEES AND CHARGES WILL NOT BE UNFAIRLY
DISCRIMINATORY AGAINST ANY CONTRACT OWNER.
DEATH BENEFIT
WHAT IS THE DEATH BENEFIT AND HOW IS IT CALCULATED?
The Death Benefit is the amount we will pay upon the death of the Contract Owner
or the Annuitant. The Death Benefit is calculated when we receive a certified
death certificate or other legal document acceptable to us.
The calculated Death Benefit will remain invested in the same Accounts,
according to the Contract Owner's last instructions until we receive complete
written settlement instructions from the Beneficiary. Therefore, the Death
Benefit amount will fluctuate with the performance of the underlying Funds. When
there is more than one Beneficiary, we will calculate the Accumulation Units for
each Sub-account and the dollar amount for the Fixed Accumulation Feature for
each Beneficiary's portion of the proceeds.
If death occurs before the Annuity Commencement Date, the Death Benefit is
the greatest of:
- - The Contract Value on the date the death certificate or other legal document
acceptable to us is received; or
- - 100% of all Premium Payments paid into the Contract minus any partial
Surrenders; or
- - The Maximum Anniversary Value, which is described below.
The Maximum Anniversary Value is based on a series of calculations on
Contract Anniversaries of Contract Values, Premium Payments and partial
Surrenders. We will calculate an Anniversary Value for each Contract Anniversary
prior to the deceased's 81st birthday or date of death, whichever is earlier.
The Anniversary Value is equal to the Contract Value as of a Contract
Anniversary, increased by the dollar amount of any Premium Payments made since
that anniversary and reduced by the dollar amount of any partial Surrenders
since that anniversary. The Maximum Anniversary Value is equal to the greatest
Anniversary Value attained from this series of calculations.
The Maximum Anniversary Value is only calculated until the earlier of the
Contract Owner or Annuitant's 81st birthday or death.
HOW IS THE DEATH BENEFIT PAID?
The Death Benefit may be taken in one lump sum or under any of the Annuity
Payout Options then being offered by us. On the date we receive complete
instructions from the Beneficiary, we will compute the Death Benefit amount to
be paid out or applied to a selected Annuity Payout Option. When there is more
than one Beneficiary, we will calculate the Death Benefit amount for each
Beneficiary's portion of the proceeds and then pay it out or apply it to a
selected Annuity Payout Option according to each Beneficiary's instructions. If
we receive the complete instructions on a Non-Valuation Day, computations will
take place on the next Valuation Day.
The Beneficiary may elect under the Annuity Proceeds Settlement Option
"Death Benefit Remaining with the Company" to leave proceeds from the Death
Benefit with us for up to five years from the date of the Contract Owner's death
if the Contract Owner died before the Annuity Commencement Date. Once we receive
a certified death certificate or other legal documents acceptable to us, the
Beneficiary can: (a) make Sub-Account transfers and (b) take Surrenders without
paying Contingent Deferred Sales Charges.
REQUIRED DISTRIBUTIONS -- If the Contract Owner dies before the Annuity
Commencement Date, the Death Benefit must be distributed within five years after
death. The Beneficiary can choose any Annuity Payout Option that results in
complete Annuity Payout within five years.
If the Contract Owner dies on or after the Annuity Commencement Date under
an Annuity Payout Option with a Death Benefit, any remaining value must be
distributed at least as rapidly as under the payment method being used as of the
Contract Owner's death.
If the Contract Owner is not an individual (e.g. a trust), then the original
Annuitant will be treated as the Contract Owner in the situations described
above and any change in
<PAGE>
20 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
the original Annuitant will be treated as the death of the Contract Owner.
WHO WILL RECEIVE THE DEATH BENEFIT?
The distribution of the Death Benefit is based on whether death is before, on or
after the Annuity Commencement Date.
IF DEATH OCCURS BEFORE THE ANNUITY COMMENCEMENT DATE:
<TABLE>
<CAPTION>
IF THE DECEASED
IS
THE... AND... AND... THEN THE...
- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
Contract Owner There is a The Annuitant is Joint Contract
surviving joint living or Owner receives
Contract Owner deceased the Death
Benefit.
Contract Owner There is no The Annuitant is Designated
surviving joint living or Beneficiary
Contract Owner deceased receives the
Death Benefit.
Contract Owner There is no The Annuitant is Contract Owner's
surviving joint living or estate receives
Contract Owner deceased the Death
and the Benefit.
Beneficiary
predeceases the
Contract Owner
Annuitant The Contract There is no Death Benefit is
Owner is living named Contingent paid to the
Annuitant Contract Owner
and not the
designated
Beneficiary.
Annuitant The Contract The Contingent Contingent
Owner is living Annuitant is Annuitant
living becomes the
Annuitant, and
the Contract
continues.
</TABLE>
IF DEATH OCCURS ON OR AFTER THE ANNUITY COMMENCEMENT DATE:
<TABLE>
<CAPTION>
IF THE DECEASED
IS
THE... AND... THEN THE...
- ---------------- -------------------- --------------------
<S> <C> <C>
Contract Owner The Annuitant is Designated
living Beneficiary becomes
the Contract Owner
Annuitant The Contract Owner Contract Owner
is living receives the Death
Benefit.
Annuitant The Annuitant is Designated
also the Contract Beneficiary receives
Owner the Death Benefit.
</TABLE>
THESE ARE THE MOST COMMON DEATH BENEFIT SCENARIOS, HOWEVER, THERE ARE
OTHERS. SOME OF THE ANNUITY PAYOUT OPTIONS MAY NOT RESULT IN A DEATH BENEFIT
PAYOUT. IF YOU HAVE QUESTIONS ABOUT THESE AND ANY OTHER SCENARIOS, PLEASE
CONTACT YOUR REGISTERED REPRESENTATIVE OR US.
WHAT SHOULD THE BENEFICIARY CONSIDER?
ALTERNATIVES TO THE REQUIRED DISTRIBUTIONS -- The selection of an Annuity
Payout Option and the timing of the selection will have an impact on the tax
treatment of the Death Benefit. To receive favorable tax treatment, the Annuity
Payout Option selected: (a) cannot extend beyond the Beneficiary's life or life
expectancy, and (b) must begin within one year of the date of death.
If these conditions are NOT met, the Death Benefit will be treated as a lump
sum payment for tax purposes. This sum will be taxable in the year in which it
is considered received.
SPOUSAL CONTRACT CONTINUATION -- If the Beneficiary is the Contract Owner's
spouse, the Beneficiary may elect to continue the Contract as the contract
owner, receive the death benefit in one lump sum payment or elect an Annuity
Payout Option. This spousal continuation is available only once for each
Contract.
SURRENDERS
WHAT KINDS OF SURRENDERS ARE AVAILABLE?
FULL SURRENDERS BEFORE THE ANNUITY COMMENCEMENT DATE -- When you Surrender
your Contract before the Annuity Commencement Date, the Surrender Value of the
Contract will be made in a lump sum payment. The Surrender Value is the Contract
Value minus any applicable Premium Taxes, Contingent Deferred Sales Charges and
the Annual Maintenance Fee. The Surrender Value may be more or less than the
amount of the Premium Payments made to a Contract.
PARTIAL SURRENDERS BEFORE THE ANNUITY COMMENCEMENT DATE -- You may request a
partial Surrender of Contract Values at any time before the Annuity Commencement
Date. There are two restrictions:
- - The partial Surrender amount must be at least equal to $100, our current
minimum for partial Surrenders, and
- - The Contract must have a minimum Contract Value of $500 after the Surrender.
The minimum Contract Value in New York must be $1000 after the Surrender. We
reserve the right to close your Contract and pay the full Surrender Value if
the Contract Value is under the minimum after the Surrender. If your Contract
was issued in Texas, a remaining value of $500 is not required to continue the
Contract if Premium Payments were made in the last two Contract Years.
FULL SURRENDERS AFTER THE ANNUITY COMMENCEMENT DATE -- You may Surrender
your Contract on or after the Annuity Commencement Date only if you selected the
Payment For a Period Certain Annuity Payout Option. Under this option, we pay
you the Commuted Value of your Contract minus any applicable Contingent Deferred
Sales Charges. The Commuted Value is determined on the day we receive your
written request for Surrender.
PARTIAL SURRENDERS ARE ALLOWED AFTER THE ANNUITY COMMENCEMENT DATE IF YOU
ELECT THE PAYMENTS FOR A DESIGNATED PERIOD ANNUITY PAYOUT OPTION, BUT CHECK WITH
YOUR
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 21
- --------------------------------------------------------------------------------
TAX ADVISOR BECAUSE THERE COULD BE ADVERSE TAX CONSEQUENCES.
HOW DO I REQUEST A SURRENDER?
Requests for full Surrenders must be in writing. Requests for partial Surrenders
can be made in writing or by telephone. We will send your money within seven
days of receiving complete instructions. However, we may postpone payment of
Surrenders whenever: (a) the New York Stock Exchange is closed, (b) trading on
the New York Stock Exchange is restricted by the SEC, (b) the SEC permits and
orders postponement or (c) the SEC determines that an emergency exists to
restrict valuation.
WRITTEN REQUESTS -- To request a full or partial Surrender, complete a
Surrender Form or send us a letter, signed by you, stating:
- - the dollar amount that you want to receive, either before or after we withhold
taxes and deduct for any applicable charges,
- - your tax withholding amount or percentage, if any, and
- - your mailing address.
If there are joint Contract Owners, both must authorize all Surrenders. For
a partial Surrender, specify the Accounts that you want your Surrender to come
from, otherwise, the Surrender will be taken in proportion to the value in each
Account.
TELEPHONE REQUESTS -- To request a partial Surrender by telephone, we must
have received your completed Telephone Redemption Program Enrollment Form. If
there are joint Contract Owners, both must sign this form. By signing the form,
you authorize us to accept telephone instructions for partial Surrenders from
either Contract Owner. Telephone authorization will remain in effect until we
receive a written cancellation notice from you or your joint Contract Owner, we
discontinue the program; or you are no longer the owner of the Contract. There
are some restrictions on telephone surrenders, please call us with any
questions.
We may record telephone calls and use other procedures to verify information
and confirm that instructions are genuine. We will not be liable for losses or
expenses arising from telephone instructions reasonably believed to be genuine.
WE MAY MODIFY THE REQUIREMENTS FOR TELEPHONE REDEMPTIONS AT ANY TIME.
Telephone Surrender instructions received before the close of the New York
Stock Exchange will be processed on that Valuation Day. Otherwise, your request
will be processed on the next Valuation Day.
COMPLETING A POWER OF ATTORNEY FORM FOR ANOTHER PERSON TO ACT ON YOUR BEHALF
MAY PREVENT YOU FROM MAKING SURRENDERS VIA TELEPHONE.
WHAT SHOULD BE CONSIDERED ABOUT TAXES?
There are certain tax consequences associated with Surrenders:
PRIOR TO AGE 59 1/2 -- If you make a Surrender prior to age 59 1/2, there
may be adverse tax consequences including a 10% federal income tax penalty on
the taxable portion of the Surrender payment. Surrendering before age 59 1/2 may
also affect the continuing tax-qualified status of some Contracts.
WE DO NOT MONITOR SURRENDER REQUESTS. TO DETERMINE WHETHER A SURRENDER IS
PERMISSIBLE, WITH OR WITHOUT FEDERAL INCOME TAX PENALTY, PLEASE CONSULT YOUR
PERSONAL TAX ADVISER.
MORE THAN ONE CONTRACT ISSUED IN THE SAME CALENDAR YEAR:
If you own more than one contract issued by us or our affiliates in the same
calendar year, then these contracts may be treated as one contract for the
purpose of determining the taxation of distributions prior to the Annuity
Commencement Date. Please consult your tax adviser for additional information.
INTERNAL REVENUE CODE SECTION 403(B) ANNUITIES -- As of December 31, 1988,
all section 403(b) annuities have limits on full and partial Surrenders.
Contributions to your Contract made after December 31, 1988 and any increases in
cash value after December 31, 1988 may not be distributed unless you are: (a)
age 59 1/2, (b) no longer employed, (c) deceased, (d) disabled, or (e)
experiencing a financial hardship (cash value increases may not be distributed
for hardships prior to age 59 1/2). Distributions prior to age 59 1/2 due to
financial hardship; unemployment or retirement may still be subject to a penalty
tax of 10%.
WE ENCOURAGE YOU TO CONSULT WITH YOUR TAX ADVISER BEFORE MAKING ANY
SURRENDERS. PLEASE SEE THE "FEDERAL TAX CONSIDERATIONS" SECTION FOR MORE
INFORMATION.
ANNUITY PAYOUTS
THIS SECTION DESCRIBES WHAT HAPPENS WHEN WE BEGIN TO MAKE REGULAR ANNUITY
PAYOUTS FROM YOUR CONTRACT. YOU, AS THE CONTRACT OWNER, SHOULD ANSWER FIVE
QUESTIONS:
1. When do you want Annuity Payouts to begin?
2. What Annuity Payout Option do you want to use?
3. How often do you want to receive Annuity Payouts?
4. What is the Assumed Investment Return?
5. Do you want fixed dollar amount or variable dollar amount Annuity Payouts?
Please check with your financial advisor to select the Annuity Payout Option
that best meets your income needs.
<PAGE>
22 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
1. WHEN DO YOU WANT ANNUITY PAYOUTS TO BEGIN?
You select an Annuity Commencement Date when you purchase your Contract or
at any time before you begin receiving Annuity Payouts. You may change the
Annuity Commencement Date by notifying us within thirty days prior to the date.
The Annuity Commencement Date cannot be deferred beyond the 15th day of the
month of the Annuitant's 90th birthday. If this Contract is issued to the
trustee of a Charitable Remainder Trust, the Annuity Commencement Date may be
deferred to the Annuitant's 100th birthday.
The Annuity Calculation Date is when the amount of your Annuity Payout is
determined. This occurs within five Valuation Days before your selected Annuity
Commencement Date.
All Annuity Payouts, regardless of frequency, will occur on the same day of
the month as the Annuity Commencement Date. After the initial payout, if an
Annuity Payout date falls on a Non-Valuation Day, the Annuity Payout is computed
on the prior Valuation Day. If the Annuity Payout date does not occur in a given
month due to a leap year or months with only 28 days (i.e. the 31st), the
Annuity Payout will be computed on the last Valuation Day of the month.
2. WHICH ANNUITY PAYOUT OPTION DO YOU WANT TO USE?
Your Contract contains the Annuity Payout Options described below. The
Annuity Proceeds Settlement Option is an option that can be elected by the
Beneficiary after the death of the Contract Owner and is described in the "Death
Benefit" section. We may at times offer other Annuity Payout Options.
OPTION 1 -- LIFE ANNUITY -- We make Annuity Payouts as long as the Annuitant
is living. When the Annuitant dies, we stop making Annuity Payouts. A Payee
would receive only one Annuity Payout if the Annuitant dies after the first
payout, two Annuity Payouts if the Annuitant dies after the second payout, and
so forth.
OPTION 2 -- LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS CERTAIN -- We
make monthly Annuity Payouts during the lifetime of the Annuitant but Annuity
Payouts are at least guaranteed for a minimum of 120, 180 or 240 months, as you
elect. If, at the death of the Annuitant, Annuity Payouts have been made for
less than the minimum elected number of months, then the Commuted Value as of
the date of the Annuitant's death will be paid in one sum to the Beneficiary.
OPTION 3 -- JOINT AND LAST SURVIVOR LIFE ANNUITY -- We will make Annuity
Payouts as long as the Annuitant and Joint Annuitant are living. When one
Annuitant dies, we continue to make Annuity Payouts to the other Annuitant until
that second Annuitant dies. When choosing this option, you must decide what will
happen to the Annuity Payouts; either fixed or variable, after the first
Annuitant dies. You must select Annuity Payouts that:
- - Remain the same at 100%, or
- - Decrease to 66.67%, or
- - Decrease to 50%.
For variable Annuity Payouts, these percentages represent Annuity Units; for
fixed Annuity Payouts, they represent actual dollar amounts. The percentage will
also impact the Annuity Payout amount we pay while both Annuitants are living.
If you pick a lower percentage, your original Annuity Payouts will be higher
while both Annuitants are alive.
OPTION 4 -- PAYMENTS FOR A DESIGNATED PERIOD -- We will make Annuity Payouts
for the number of years that you select. You can select between 5 years and 30
years.
IMPORTANT INFORMATION:
- - YOU CANNOT SURRENDER YOUR CONTRACT ONCE ANNUITY PAYOUTS BEGIN, UNLESS YOU HAVE
SELECTED THE PAYMENTS FOR A DESIGNATED PERIOD ANNUITY PAYOUT OPTION. A
CONTINGENT DEFERRED SALES CHARGE MAY BE DEDUCTED.
- - For Non-Qualified Contracts, if you do not elect an Annuity Payout Option,
fixed Annuity Payouts will automatically begin on the Annuity Commencement
Date under the Life Annuity with 120, 180 or 240 Monthly Payments Certain
Annuity Payout Option with payouts for 120 months.
- - For Qualified Contracts and Contracts issued in Texas, if you do not elect an
Annuity Payout Option, fixed Annuity Payouts will begin automatically on the
Annuity Commencement Date, under the Annuity Payout Option 1 -- Life Annuity.
3. HOW OFTEN DO YOU WANT THE PAYEE TO RECEIVE ANNUITY PAYOUTS?
In addition to selecting an Annuity Commencement Date and an Annuity Payout
Option, you must also decide how often you want the Payee to receive Annuity
Payouts. You may choose to receive Annuity Payouts:
- - monthly,
- - quarterly,
- - semi-annually, or
- - annually.
Once you select a frequency, it cannot be changed. If you do not make a
selection, the Payee will receive monthly Annuity Payouts. You must select a
frequency that results in an Annuity Payout of at least $50. If the amount falls
below $50, we have the right to change the frequency to bring the Annuity Payout
up to at least $50. For Contracts issued in New York, the minimum monthly
Annuity Payout is $20.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 23
- --------------------------------------------------------------------------------
4. WHAT IS THE ASSUMED INVESTMENT RETURN?
The Assumed Investment Return is the investment return used to calculate
variable Annuity Payouts. The Assumed Investment Return for your Annuity is 5%.
The first Annuity Payout will be based upon a 5% Assumed Investment Return. The
remaining Annuity Payouts will fluctuate based on the actual investment results
of the Sub-Accounts.
5. DO YOU WANT ANNUITY PAYOUTS TO BE FIXED-DOLLAR AMOUNT OR VARIABLE-DOLLAR
AMOUNT?
You may choose an Annuity Payout Option with fixed-dollar amounts or
variable-dollar amounts, depending on your income needs.
FIXED-DOLLAR AMOUNT ANNUITY PAYOUTS -- Once a fixed-dollar amount Annuity
Payout begins, you cannot change your selection to receive variable-dollar
amount Annuity Payout. You will receive equal fixed-dollar amount Annuity
Payouts throughout the Annuity Payout period. Fixed-dollar amount Annuity Payout
amounts are determined by multiplying the Contract Value, minus any applicable
Premium Taxes, by an Annuity rate. The annuity rate is set by us and is not less
than the rate specified in the fixed-dollar amount Annuity Payout Option tables
in your Contract.
VARIABLE-DOLLAR AMOUNT ANNUITY PAYOUTS -- A variable-dollar amount Annuity
Payout is based on the investment performance of the Sub-Accounts. The
variable-dollar amount Annuity Payouts may fluctuate with the performance of the
underlying Funds. To begin making variable-dollar amount Annuity Payouts, we
convert the first Annuity Payout amount to a set number of Annuity Units and
then price those units to determine the Annuity Payout amount. The number of
Annuity Units that determines the Annuity Payout amount remains fixed unless you
transfer units between Sub-Accounts.
The dollar amount of the first variable Annuity Payout depends on:
- - the Annuity Payout Option chosen,
- - the Annuitant's attained age and gender (if applicable), and,
- - the applicable annuity purchase rates based on the 1983a Individual Annuity
Mortality table
- - the Assumed Investment Return
The total amount of the first variable-dollar amount Annuity Payout is
determined by dividing the Contract Value minus any applicable Premium Taxes, by
$1,000 and multiplying the result by the payment factor defined in the Contract
for the selected Annuity Payout Option.
The dollar amount of each subsequent variable-dollar amount Annuity Payout
is equal to the total of:
Annuity Units for each Sub-Account multiplied by Annuity Unit Value of each
Sub-Account.
The Annuity Unit Value of each Sub-Account for any Valuation Period is equal
to the Accumulation Unit Value Net Investment Factor for the current Valuation
Period multiplied by the Annuity Unit factor, multiplied by the Annuity Unit
Value for the preceding Valuation Period.
TRANSFER OF ANNUITY UNITS -- After the Annuity Calculation Date, you may
transfer dollar amounts of Annuity Units from one Sub-Account to another. On the
day you make a transfer, the dollar amounts are equal for both Sub-Accounts and
the number of Annuity Units will be different. We will transfer the dollar
amount of your Annuity Units the day we receive your written request if received
before the close of the New York Stock Exchange. Otherwise, the transfer will be
made on the next Valuation Day.
OTHER PROGRAMS AVAILABLE
INVESTEASE-REGISTERED TRADEMARK- PROGRAM -- InvestEase is an electronic
transfer program that allows you to have money automatically transferred from
your checking or savings account, and invested in your Contract. It is available
for Premium Payments made after your initial Premium Payment. The minimum amount
for each transfer is $50. You can elect to have transfers occur either monthly
or quarterly, and they can be made into any Account available in your Contract.
AUTOMATIC INCOME PROGRAM -- The Automatic Income Program allows you to
Surrender up to 10% of your total Premium Payments each Contract Year. We can
Surrender from the Accounts you select systematically on a monthly, quarterly,
semiannual, or annual basis. The Automatic Income Program may change based on
your instructions after your seventh Contract Year.
ASSET ALLOCATION PROGRAM -- Asset Allocation is a program that allows you to
choose an allocation for your Sub-Accounts to help you reach your investment
goals. Some Contracts offer model allocations with pre-selected Sub-Accounts and
percentages that have been established for each type of investor -- ranging from
conservative to aggressive. Over time, Sub-Account performance may cause your
Contract's allocation percentages to change, but under the Asset Allocation
Program, your Sub-Account allocations are rebalanced to the percentages in the
current model you have chosen. You can transfer freely between allocation models
up to twelve times per year. You can also allocate a portion of your investment
to Sub-Accounts that may not be part of the model. You can only participate in
one asset allocation model at a time.
ASSET REBALANCING -- Asset Rebalancing is another type of asset allocation
program in which you customize your Sub-Accounts to meet your investment needs.
You select the Sub-Accounts and the percentages you want allocated to each Sub-
<PAGE>
24 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Account. Based on the frequency you select, your model will automatically
rebalance to the original percentages chosen. You can transfer freely between
models up to twelve times per year. You can also allocate a portion of your
investment to Sub-Accounts that are not part of the model. You can only
participate in one asset rebalancing model at a time.
OTHER INFORMATION
ASSIGNMENT -- Ownership of this Contract is generally assignable. However,
if the Contract is issued to a tax qualified retirement plan, it is possible
that the ownership of the Contract may not be transferred or assigned. An
assignment of a Non-Qualified Contract may subject the Contract Values or
Surrender Value to income taxes and certain penalty taxes.
CONTRACT MODIFICATION -- The Annuitant may not be changed. However, if the
Annuitant is still living, the Contingent Annuitant may be changed at any time
prior to the Annuity Commencement Date by sending us written notice. We may
modify the Contract, but no modification will effect the amount or term of any
Contract unless a modification is required to conform the Contract to applicable
Federal or State law. No modification will effect the method by which Contract
Values are determined.
HOW CONTRACTS ARE SOLD -- Hartford Securities Distribution Company, Inc.
("HSD") serves as Principal Underwriter for the securities issued with respect
to the Separate Account. HSD is registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 as a Broker-Dealer and is a
member of the National Association of Securities Dealers, Inc. HSD is an
affiliate of ours. Both HSD and Hartford are ultimately controlled by The
Hartford Financial Services Group, Inc. The principal business address of HSD is
the same as ours. The securities will be sold by individuals who represent us as
insurance agents and who are registered representatives of Broker-Dealers that
have entered into distribution agreements with HSD.
Commissions will be paid by Hartford and will not be more than 6% of Premium
Payments. From time to time, Hartford may pay or permit other promotional
incentives, in cash or credit or other compensation.
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 institution 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.
The Contract may be sold directly to certain individuals under certain
circumstances that do not involve payment of any sales compensation to a
registered representative. In such case, Hartford will credit the Contract with
an additional 5.0% of the Premium Payment. This additional percentage of Premium
Payment in no way affects present or future charges, rights, benefits or current
values of other Contract Owners. The following class of individuals are eligible
for this feature: (1) current or retired officers, directors, trustees and
employees (and their families) of the ultimate parent and affiliates of
Hartford; and (2) employees and registered representatives (and their families)
of registered broker-dealers (or their financial institutions) that have a sales
agreement with Hartford and its principal underwriter to sell the Contracts.
YEAR 2000
IN GENERAL -- The Year 2000 issue relates to the ability or inability of
computer hardware, software and other information technology (IT) systems, as
well as non-IT systems, such as equipment and machinery with imbedded chips and
microprocessors, to properly process information and data containing or related
to dates beginning with the year 2000 and beyond. The Year 2000 issue exists
because, historically, many IT and non-IT systems that are in use today were
developed years ago when a year was identified using a two-digit date field
rather than a four-digit date field. As information and data containing or
related to the century date are introduced to date sensitive systems, these
systems may recognize the year 2000 as "1900", or not at all, which may result
in systems processing information incorrectly. This, in turn, may significantly
and adversely affect the integrity and reliability of information databases of
IT systems, may cause the malfunctioning of certain non-IT systems, and may
result in a wide variety of adverse consequences to a company. In addition, Year
2000 problems that occur with third parties with which a company does business,
such as suppliers, computer vendors, distributors and others, may also adversely
affect any given company.
The integrity and reliability of Hartford's IT systems, as well as the
reliability of its non-IT systems, are integral aspects of Hartford's business.
Hartford issues insurance policies, annuities, mutual funds and other financial
products to individual and business customers, nearly all of which contain date
sensitive data, such as policy expiration dates, birth dates and premium payment
dates. In addition, various IT systems support communications and other
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 25
- --------------------------------------------------------------------------------
systems that integrate Hartford's various business segments and field offices.
Hartford also has business relationships with numerous third parties that affect
virtually all aspects of Hartford's business, including, without limitation,
suppliers, computer hardware and software vendors, insurance agents and brokers,
securities broker-dealers and other distributors of financial products, many of
which provide date sensitive data to Hartford, and whose operations are
important to Hartford's business.
INTERNAL YEAR 2000 EFFORTS AND TIMETABLE -- Beginning in 1990, Hartford
began working on making its IT systems Year 2000 ready, either through
installing new programs or replacing systems. Since January 1998, Hartford's
Year 2000 efforts have focused on the remaining Year 2000 issues related to IT
and non-IT systems in all of Hartford's business segments. These Year 2000
efforts include the following five main initiatives: (1) identifying and
assessing Year 2000 issues; (2) taking actions to remediate IT and non-IT
systems so that they are Year 2000 ready; (3) testing IT and non-IT systems for
Year 2000 readiness; (4) deploying such remediated and tested systems back into
their respective production environments; and (5) conducting internal and
external integrated testing of such systems. As of December 31, 1998, Hartford
substantially completed initiatives (1) through (4) of its internal Year 2000
efforts. Hartford has begun initiative (5) and management currently anticipates
that such activity will continue into the fourth quarter of 1999.
THIRD PARTY YEAR 2000 EFFORTS AND TIMETABLE -- Hartford's Year 2000 efforts
include assessing the potential impact on Hartford of third parties' Year 2000
readiness. Hartford's third party Year 2000 efforts include the following three
main initiatives: (1) identifying third parties which have significant business
relationships with Hartford, including, without limitation, insurance agents,
brokers, third party administrators, banks and other distributors and servicers
of financial products, and inquiring of such third parties regarding their Year
2000 readiness; (2) evaluating such third parties' responses to Hartford's
inquiries; and (3) based on the evaluation of third party responses (or a third
party's failure to respond) and the significance of the business relationship,
conducting additional activities with respect to third parties as determined to
be necessary in each case. These activities may include conducting additional
inquiries, more in-depth evaluations of Year 2000 readiness and plans, and
integrated IT systems testing. Hartford has completed the first third party
initiative and, as of early 1999, had substantially completed evaluating third
party responses received. Hartford has begun conducting the additional
activities described in initiative (3) and management currently anticipates that
it will continue to do so through the end of 1999. However, notwithstanding
these third party Year 2000 efforts, Hartford does not have control over these
third parties and, as a result, Hartford cannot currently determine to what
extent future operating results may be adversely affected by the failure of
these third parties to adequately address their Year 2000 issues.
YEAR 2000 COSTS -- The costs of Hartford's Year 2000 program that were
incurred through the year ended December 31, 1997 were not material to
Hartford's financial condition or results of operations. The after-tax costs of
Hartford's Year 2000 efforts for the year ended December 31, 1998 were
approximately $3 million. Management currently estimates that after-tax costs
related to the Year 2000 program to be incurred in 1999 will be less than $10
million. These costs are being expensed as incurred.
RISKS AND CONTINGENCY PLANS -- If significant Year 2000 problems arise,
including problems arising with third parties, failures of IT and non-IT systems
could occur, which in turn could result in substantial interruptions in
Hartford's business. In addition, Hartford's investing activities are an
important aspect of its business and Hartford may be exposed to the risk that
issuers of investments held by it will be adversely impacted by Year 2000
issues. Given the uncertain nature of Year 2000 problems that may arise,
especially those related to the readiness of third parties discussed above,
management cannot determine at this time whether the consequences of Year 2000
related problems that could arise will have a material impact on Hartford's
financial condition or results of operations.
Hartford is in the process of developing certain contingency plans so that
if, despite its Year 2000 efforts, Year 2000 problems ultimately arise, the
impact of such problems may be avoided or minimized. These contingency plans are
being developed based on, among other things, known or reasonably anticipated
circumstances and potential vulnerabilities. The contingency planning also
includes assessing the dependency of Hartford's business on third parties and
their Year 2000 readiness. Hartford currently anticipates that internal and
external contingency plans will be substantially complete by the end of the
second quarter of 1999. However, in many contexts, Year 2000 issues are dynamic,
and ongoing assessments of business functions, vulnerabilities and risks must be
made. As such, new contingency plans may be needed in the future and/or existing
plans may need to be modified as circumstances warrant.
LEGAL MATTERS AND EXPERTS
There are no material legal proceedings pending to which the Separate
Account is a party.
Counsel with respect to federal laws and regulations applicable to the issue
and sale of the Contracts and with respect to Connecticut law is Lynda Godkin,
Senior Vice President, General Counsel and Corporate Secretary, Hartford Life
Insurance Company, P.O. Box 2999, Hartford, Connecticut 06104-2999.
<PAGE>
26 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
The audited financial statements and financial statement schedules included
in this registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports. The principal business address of Arthur
Andersen LLP is One Financial Plaza, Hartford, Connecticut 06103.
MORE INFORMATION
You may call your Representative if you have any questions or write or call
us at the address below:
Hartford Life Insurance Company
Attn: Individual Annuity Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Telephone: (800) 862-6668 (Contract Owners)
(800) 862-7155 (Registered Representatives)
FEDERAL TAX CONSIDERATIONS
What are some of the federal tax consequences which affect these Contracts?
A. GENERAL
Since federal tax law is complex, the tax consequences of purchasing this
contract will vary depending on your situation. You may need tax or legal advice
to help you determine whether purchasing this contract is right for you.
Our general discussion of the tax treatment of this contract is based on our
understanding of federal income tax laws as they are currently interpreted. A
detailed description of all federal income tax consequences regarding the
purchase of this contract cannot be made in the prospectus. We also do not
discuss state, municipal or other tax laws that may apply to this contract. For
detailed information, you should consult with a qualified tax adviser familiar
with your situation.
B. TAXATION OF HARTFORD AND
THE SEPARATE ACCOUNT
The Separate Account is taxed as part of Hartford which is taxed as a life
insurance company in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, the Separate Account will not be taxed as a
"regulated investment company" under subchapter M of Chapter 1 of the Code.
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 (See "Value of Accumulation 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.
C. TAXATION OF ANNUITIES -- GENERAL
PROVISIONS AFFECTING PURCHASERS OTHER
THAN QUALIFIED RETIREMENT PLANS
Section 72 of the Code governs the taxation of annuities in general.
1. NON-NATURAL PERSONS, CORPORATIONS, ETC.
Code Section 72 contains provisions for contract owners which are not
natural persons. Non-natural persons include corporations, trusts, limited
liability companies, partnerships and other types of legal entities. The tax
rules for contracts owned by non-natural persons are different from the rules
for contracts owned by individuals. For example, the annual net increase in the
value of the contract is currently includible in the gross income of a non-
natural person, unless the non-natural person holds the contract as an agent for
a natural person. There are additional exceptions from current inclusion for:
- - certain annuities held by structured settlement companies,
- - certain annuities held by an employer with respect to a terminated qualified
retirement plan and
- - certain immediate annuities.
A non-natural person which is a tax-exempt entity for federal tax purposes
will not be subject to income tax as a result of this provision.
If the contract owner is a non-natural person, the primary annuitant is
treated as the contract owner in applying mandatory distribution rules. These
rules require that certain distributions be made upon the death of the contract
owner. A change in the primary annuitant is also treated as the death of the
contract owner.
2. OTHER CONTRACT OWNERS (NATURAL PERSONS).
A Contract Owner is not taxed on increases in the value of the Contract
until an amount is received or deemed received, e.g., in the form of a lump sum
payment (full or partial value of a Contract) or as Annuity payments under the
settlement option elected.
The provisions of Section 72 of the Code concerning distributions are
summarized briefly below. Also summarized are special rules affecting
distributions from Contracts obtained in a tax-free exchange for other annuity
contracts or life insurance contracts which were purchased prior to August 14,
1982.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 27
- --------------------------------------------------------------------------------
A. DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
i. Total premium payments less amounts received which were not includable in
gross income equal the "investment in the contract" under Section 72 of the
Code.
ii. To the extent that the value of the Contract (ignoring any surrender
charges except on a full surrender) exceeds the "investment in the
contract," such excess constitutes the "income on the contract."
iii. Any amount received or deemed received prior to the Annuity Commencement
Date (e.g., upon a partial surrender) is deemed to come first from any
such "income on the contract" and then from "investment in the contract,"
and for these purposes such "income on the contract" shall be computed by
reference to any aggregation rule in subparagraph 2.c. below. As a result,
any such amount received or deemed received (1) shall be includable in
gross income to the extent that such amount does not exceed any such
"income on the contract," and (2) shall not be includable in gross income
to the extent that such amount does exceed any such "income on the
contract." If at the time that any amount is received or deemed received
there is no "income on the contract" (e.g., because the gross value of the
Contract does not exceed the "investment in the contract" and no
aggregation rule applies), then such amount received or deemed received
will not be includable in gross income, and will simply reduce the
"investment in the contract."
iv. The receipt of any amount as a loan under the Contract or the assignment or
pledge of any portion of the value of the Contract shall be treated as an
amount received for purposes of this subparagraph a. and the next
subparagraph b.
v. In general, the transfer of the Contract, without full and adequate
consideration, will be treated as an amount received for purposes of this
subparagraph a. and the next subparagraph b. This transfer rule does not
apply, however, to certain transfers of property between spouses or incident
to divorce.
B. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE.
Annuity payments made periodically after the Annuity Commencement Date are
includable in gross income to the extent the payments exceed the amount
determined by the application of the ratio of the "investment in the contract"
to the total amount of the payments to be made after the Annuity Commencement
Date (the "exclusion ratio").
i. When the total of amounts excluded from income by application of the
exclusion ratio is equal to the investment in the contract as of the Annuity
Commencement Date, any additional payments (including surrenders) will be
entirely includable in gross income.
ii. If the annuity payments cease by reason of the death of the Annuitant and,
as of the date of death, the amount of annuity payments excluded from gross
income by the exclusion ratio does not exceed the investment in the
contract as of the Annuity Commencement Date, then the remaining portion of
unrecovered investment shall be allowed as a deduction for the last taxable
year of the Annuitant.
iii. Generally, nonperiodic amounts received or deemed received after the
Annuity Commencement Date are not entitled to any exclusion ratio and
shall be fully includable in gross income. However, upon a full surrender
after such date, only the excess of the amount received (after any
surrender charge) over the remaining "investment in the contract" shall be
includable in gross income (except to the extent that the aggregation rule
referred to in the next subparagraph c. may apply).
C. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS.
Contracts issued after October 21, 1988 by the same insurer (or affiliated
insurer) to the same Contract Owner within the same calendar year (other than
certain contracts held in connection with a tax-qualified retirement
arrangement) will be treated as one annuity Contract for the purpose of
determining the taxation of distributions prior to the Annuity Commencement
Date. An annuity contract received in a tax-free exchange for another annuity
contract or life insurance contract may be treated as a new Contract for this
purpose. Hartford believes that for any annuity subject to such aggregation, the
values under the Contracts and the investment in the contracts will be added
together to determine the taxation under subparagraph 2.a., above, of amounts
received or deemed received prior to the Annuity Commencement Date. Withdrawals
will first be treated as withdrawals of income until all of the income from all
such Contracts is withdrawn. As of the date of this Prospectus, there are no
regulations interpreting this provision.
D. 10% PENALTY TAX -- APPLICABLE TO CERTAIN WITHDRAWALS AND ANNUITY
PAYMENTS.
i. If any amount is received or deemed received on the Contract (before or
after the Annuity Commencement Date), the Code applies a penalty tax equal
to ten percent of the portion of the amount includable in gross income,
unless an exception applies.
ii. The 10% penalty tax will not apply to the following distributions
(exceptions vary based upon the precise plan involved):
1. Distributions made on or after the date the recipient has attained the
age of 59 1/2.
2. Distributions made on or after the death of the holder or where the
holder is not an individual, the death of the primary annuitant.
<PAGE>
28 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
3. Distributions attributable to a recipient's becoming disabled.
4. A distribution that is part of a scheduled series of substantially equal
periodic payments (not less frequently than annually) for the life (or
life expectancy) of the recipient (or the joint lives or life
expectancies of the recipient and the recipient's designated
Beneficiary).
5. Distributions of amounts which are allocable to the "investment in the
contract" prior to August 14, 1982 (see next subparagraph e.).
E. SPECIAL PROVISIONS AFFECTING CONTRACTS OBTAINED THROUGH A TAX-FREE
EXCHANGE OF OTHER ANNUITY OR LIFE INSURANCE CONTRACTS PURCHASED PRIOR TO
AUGUST 14, 1982.
If the Contract was obtained by a tax-free exchange of a life insurance or
annuity Contract purchased prior to August 14, 1982, then any amount received or
deemed received prior to the Annuity Commencement Date shall be deemed to come
(1) first from the amount of the "investment in the contract" prior to August
14, 1982 ("pre-8/14/82 investment") carried over from the prior Contract, (2)
then from the portion of the "income on the contract" (carried over to, as well
as accumulating in, the successor Contract) that is attributable to such
pre-8/14/82 investment, (3) then from the remaining "income on the contract" and
(4) last from the remaining "investment in the contract." As a result, to the
extent that such amount received or deemed received does not exceed such
pre-8/14/82 investment, such amount is not includable in gross income. In
addition, to the extent that such amount received or deemed received does not
exceed the sum of (a) such pre-8/14/82 investment and (b) the "income on the
contract" attributable thereto, such amount is not subject to the 10% penalty
tax. In all other respects, amounts received or deemed received from such post-
exchange Contracts are generally subject to the rules described in this
subparagraph 3.
F. REQUIRED DISTRIBUTIONS.
i. Death of Contract Owner or Primary Annuitant
Subject to the alternative election or spouse beneficiary provisions in ii
or iii below:
1. If any Contract Owner dies on or after the Annuity Commencement Date and
before the entire interest in the Contract has been distributed, the
remaining portion of such interest shall be distributed at least as
rapidly as under the method of distribution being used as of the date of
such death;
2. If any Contract Owner dies before the Annuity Commencement Date, the
entire interest in the Contract will be distributed within 5 years after
such death; and
3. If the Contract Owner is not an individual, then for purposes of 1. or
2. above, the primary annuitant under the Contract shall be treated as
the Contract Owner, and any change in the primary annuitant shall be
treated as the death of the Contract Owner. The primary annuitant is 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.
ii. Alternative Election to Satisfy Distribution Requirements
If any portion of the interest of a Contract Owner described in i. above is
payable to or for the benefit of a designated beneficiary, such beneficiary
may elect to have the portion distributed over a period that does not
extend beyond the life or life expectancy of the beneficiary. The election
must be made and payments must begin within a year of the death.
iii. Spouse Beneficiary
If any portion of the interest of a Contract Owner is payable to or for
the benefit of his or her spouse, and the Annuitant or Contingent
Annuitant is living, such spouse shall be treated as the Contract Owner of
such portion for purposes of section i. above. This spousal continuation
shall apply only once for this contract.
3. DIVERSIFICATION REQUIREMENTS.
The Code requires that investments supporting your contract be adequately
diversified. Code Section 817 provides that a variable annuity contract will not
be treated as an annuity contract for any period during which the investments
made by the separate account or underlying fund are not adequately diversified.
If a contract is not treated as an annuity contract, the contract owner will be
subject to income tax on annual increases in cash value.
The Treasury Department's diversification regulations require, among other
things, that:
- - no more than 55% of the value of the total assets of the segregated asset
account underlying a variable contract is represented by any one investment,
- - no more than 70% is represented by any two investments,
- - no more than 80% is represented by any three investments and
- - no more than 90% is represented by any four investments.
In determining whether the diversification standards are met, all securities
of the same issuer, all interests in the same real property project, and all
interests in the same commodity are each treated as a single investment. In the
case of government securities, each government agency or instrumentality is
treated as a separate issuer.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 29
- --------------------------------------------------------------------------------
A separate account must be in compliance with the diversification standards
on the last day of each calendar quarter or within 30 days after the quarter
ends. If an insurance company inadvertently fails to meet the diversification
requirements, the company may still comply within a reasonable period and avoid
the taxation of contract income on an ongoing basis. However, either the company
or the contract owner must agree to pay the tax due for the period during which
the diversification requirements were not met.
We monitor the diversification of investments in the separate accounts and
test for diversification as required by the Code. We intend to administer all
contracts subject to the diversification requirements in a manner that will
maintain adequate diversification.
4. OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT.
In order for a variable annuity contract to qualify for tax deferral, assets
in the separate accounts supporting the contract must be considered to be owned
by the insurance company and not by the contract owner. It is unclear under what
circumstances an investor is considered to have enough control over the assets
in the separate account to be considered the owner of the assets for tax
purposes.
The IRS has issued several rulings discussing investor control. These
rulings say that certain incidents of ownership by the contract owner, such as
the ability to select and control investments in a separate account, will cause
the contract owner to be treated as the owner of the assets for tax purposes.
In its explanation of the diversification regulations, the Treasury
Department recognized that the temporary regulations "do not provide guidance
concerning the circumstances in which investor control of the investments of a
segregated asset account may cause the investor, rather than the insurance
company, to be treated as the owner of the assets in the account." The
explanation further indicates that "the temporary regulations provide that in
appropriate cases a segregated asset account may include multiple sub-accounts,
but do not specify the extent to which policyholders may direct their
investments to particular sub-accounts without being treated as the owners of
the underlying assets. Guidance on this and other issues will be provided in
regulations or revenue rulings under Section 817(d), relating to the definition
of variable contract."
The final regulations issued under Section 817 did not provide guidance
regarding investor control, and as of the date of this prospectus, guidance has
yet to be issued. We do not know if additional guidance will be issued. If
guidance is issued, we do not know if it will have a retroactive effect.
Due to the lack of specific guidance on investor control, there is some
uncertainty about when a contract owner is considered the owner of the assets
for tax purposes. We reserve the right to modify the contract, as necessary, to
prevent you from being considered the owner of assets in the separate account.
D. FEDERAL INCOME TAX WITHHOLDING
The portion of a distribution which is taxable income to the recipient will
be subject to federal income tax withholding, pursuant to Section 3405 of the
Code. The application of this provision is summarized below:
1. 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 there is no election to waive withholding, 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.
2. 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.
E. GENERAL PROVISIONS AFFECTING
QUALIFIED RETIREMENT PLANS
The Contract may be used for a number of qualified retirement plans. If the
Contract is being purchased with respect to some form of qualified retirement
plan, please refer to Appendix I for information relative to the types of plans
for which it may be used and the general explanation of the tax features of such
plans.
F. ANNUITY PURCHASES BY NONRESIDENT
ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal
income tax consequences to annuity purchasers that are U.S. citizens or
residents. Purchasers that are not U.S. citizens or residents will generally be
subject to U.S. federal income tax and withholding on annuity distributions at a
30% rate, unless a lower treaty rate applies. 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 an annuity purchase.
<PAGE>
30 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
APPENDIX I
INFORMATION REGARDING TAX-QUALIFIED RETIREMENT PLANS
This summary does not attempt to provide more than general information about
the federal income tax rules associated with use of a Contract by a
tax-qualified retirement plan. Because of the complexity of the federal tax
rules, owners, participants and beneficiaries are encouraged to consult their
own tax advisors as to specific tax consequences.
The federal tax rules applicable to owners of Contracts under tax-qualified
retirement plans vary according to the type of plan as well as the terms and
conditions of the plan itself. Contract owners, plan participants and
beneficiaries are cautioned that the rights and benefits of any person may be
controlled by the terms and conditions of the tax-qualified retirement plan
itself, regardless of the terms and conditions of a Contract. We are not bound
by the terms and conditions of such plans to the extent such terms conflict with
a Contract, unless we specifically consent to be bound.
Some tax-qualified retirement plans are subject to distribution and other
requirements that are not incorporated into our administrative procedures.
Contract owners, participants and beneficiaries are responsible for determining
that contributions, distributions and other transactions comply with applicable
law. Tax penalties may apply to transactions with respect to tax-qualified
retirement plans if applicable federal income tax rules and restrictions are not
carefully observed.
We do not currently offer the Contracts in connection with all of the types
of tax-qualified retirement plans discussed below and may not offer the
Contracts for all types of tax-qualified retirement plans in the future.
1. TAX-QUALIFIED PENSION OR PROFIT-SHARING PLANS -- Eligible employers can
establish certain tax-qualified pension and profit-sharing plans under section
401 of the Code. Rules under section 401(k) of the Code govern certain "cash or
deferred arrangements" under such plans. Rules under section 408(k) govern
"simplified employee pensions". Tax-qualified pension and profit-sharing plans
are subject to limitations on the amount that may be contributed, the persons
who may be eligible to participate and the time when distributions must
commence. Employers intending to use the Contracts in connection with
tax-qualified pension or profit-sharing plans should seek competent tax and
other legal advice.
2. TAX SHELTERED ANNUITIES UNDER SECTION 403(B) -- Public schools and
certain types of charitable, educational and scientific organizations, as
specified in section 501(c)(3) of the Code, can purchase tax-sheltered annuity
contracts for their employees. Tax-deferred contributions can be made to
tax-sheltered annuity contracts under section 403(b) of the Code, subject to
certain limitations. Generally, such contributions may not exceed the lesser of
$10,000 (indexed) or 20% of the employee's "includable compensation" for such
employee's most recent full year of employment, subject to other adjustments.
Special provisions under the Code may allow some employees to elect a different
overall limitation.
Tax-sheltered annuity programs under section 403(b) are subject to a
PROHIBITION AGAINST DISTRIBUTIONS FROM THE CONTRACT ATTRIBUTABLE TO
CONTRIBUTIONS MADE PURSUANT TO A SALARY REDUCTION AGREEMENT, unless such
distribution is made:
- - after the participating employee attains age 59 1/2;
- - upon separation from service;
- - upon death or disability; or
- - in the case of hardship (and in the case of hardship, any income attributable
to such contributions may not be distributed).
Generally, the above restrictions do not apply to distributions attributable
to cash values or other amounts held under a section 403(b) contract as of
December 31, 1988.
3. DEFERRED COMPENSATION PLANS UNDER SECTION 457 -- A governmental employer
or a tax-exempt employer other than a governmental unit can establish a Deferred
Compensation Plan under section 457 of the Code. For these purposes, a
"governmental employer" is a State, a political subdivision of a State, or an
agency or an instrumentality of a State or political subdivision of a State.
Employees and independent contractors performing services for a governmental or
tax-exempt employer can elect to have contributions made to a Deferred
Compensation Plan of their employer in accordance with the employer's plan and
section 457 of the Code.
Deferred Compensation Plans that meet the requirements of section 457(b) of
the Code are called "eligible" Deferred Compensation Plans. Section 457(b)
limits the amount of contributions that can be made to an eligible Deferred
Compensation Plan on behalf of a participant. Generally, the limitation on
contributions is 33 1/3% of a participant's includable compensation (typically
25% of gross compensation) or, for 1999, $8,000 (indexed), whichever is less.
The plan may provide for additional "catch-up" contributions during the three
taxable years ending before the year in which the participant attains normal
retirement age.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 31
- --------------------------------------------------------------------------------
All of the assets and income of an eligible Deferred Compensation Plan
established by a governmental employer after August 20, 1996, must be held in
trust for the exclusive benefit of participants and their beneficiaries. For
this purpose, custodial accounts and certain annuity contracts are treated as
trusts. Eligible Deferred Compensation Plans that were in existence on August
20, 1996 may be amended to satisfy the trust and exclusive benefit requirements
any time prior to January 1, 1999, and must be amended not later than that date
to continue to receive favorable tax treatment. The requirement of a trust does
not apply to amounts under a Deferred Compensation Plan of a tax-exempt
(non-governmental) employer. In addition, the requirement of a trust does not
apply to amounts under a Deferred Compensation Plan of a governmental employer
if the Deferred Compensation Plan is not an eligible plan within the meaning of
section 457(b) of the Code. In the absence of such a trust, amounts under the
plan will be subject to the claims of the employer's general creditors.
In general, distributions from an eligible Deferred Compensation Plan are
prohibited under section 457 of the Code unless made after the participating
employee:
- - attains age 70 1/2,
- - separates from service,
- - dies, or
- - suffers an unforeseeable financial emergency as defined in the Code.
Under present federal tax law, amounts accumulated in a Deferred
Compensation Plan under section 457 of the Code cannot be transferred or rolled
over on a tax-deferred basis except for certain transfers to other Deferred
Compensation Plans under section 457 in limited cases.
4. INDIVIDUAL RETIREMENT ANNUITIES ("IRAS") UNDER SECTION 408
TRADITIONAL IRAS -- Eligible individuals can establish individual retirement
programs under section 408 of the Code through the purchase of an IRA. Section
408 imposes limits with respect to IRAs, including limits on the amount that may
be contributed to an IRA, the amount of such contributions that may be deducted
from taxable income, the persons who may be eligible to contribute to an IRA,
and the time when distributions commence from an IRA. Distributions from certain
tax-qualified retirement plans may be "rolled-over" to an IRA on a tax-deferred
basis.
SIMPLE IRAS -- Eligible employees may establish SIMPLE IRAs in connection
with a SIMPLE IRA plan of an employer under section 408(p) of the Code. Special
rollover rules apply to SIMPLE IRAs. Amounts can be rolled over from one SIMPLE
IRA to another SIMPLE IRA. However, amounts can be rolled over from a SIMPLE IRA
to a Traditional IRA only after two years have expired since the employee first
commenced participation in the employer's SIMPLE IRA plan. Amounts cannot be
rolled over to a SIMPLE IRA from a qualified plan or a Traditional IRA. Hartford
is a non-designated financial institution for purposes of the SIMPLE IRA rules.
ROTH IRAS -- Eligible individuals may establish Roth IRAs under section 408A
of the Code. Contributions to a Roth IRA are not deductible. Subject to special
limitations, a Traditional IRA may be converted into a Roth IRA or a
distribution from a Traditional IRA may be rolled over to a Roth IRA. However, a
conversion or a rollover from a Traditional IRA to a Roth IRA is not excludable
from gross income. If certain conditions are met, qualified distributions from a
Roth IRA are tax-free.
5. FEDERAL TAX PENALTIES AND WITHHOLDING -- Distribu-
tions from tax-qualified retirement plans are generally taxed as ordinary income
under section 72 of the Code. Under these rules, a portion of each distribution
may be excludable from income. The excludable amount is the portion of the
distribution that bears the same ratio as the after-tax contributions bear to
the expected return.
(a) PENALTY TAX ON EARLY DISTRIBUTIONS Section 72(t) of the Code imposes an
additional penalty tax equal to 10% of the taxable portion of a distribution
from certain tax-qualified retirement plans. However, the 10% penalty tax
does not apply to a distributions that is:
- Made on or after the date on which the employee reaches age 59 1/2;
- Made to a beneficiary (or to the estate of the employee) on or after the
death of the employee;
- Attributable to the employee's becoming disabled (as defined in the Code);
- Part of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of the
employee or the joint lives (or joint life expectancies) of the employee
and his or her designated beneficiary;
- Except in the case of an IRA, made to an employee after separation from
service after reaching age 55; or
- Not greater than the amount allowable as a deduction to the employee for
eligible medical expenses during the taxable year.
In addition, the 10% penalty tax does not apply to a distribution from an
IRA that is:
- Made after separation from employment to an unemployed IRA owner for
health insurance premiums, if certain conditions are met;
- Not in excess of the amount of certain qualifying higher education
expenses, as defined by section 72(t)(7) of the Code; or
<PAGE>
32 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- A qualified first-time homebuyer distribution meeting the requirements
specified at section 72(t)(8) of the Code.
If you are a participant in a SIMPLE IRA plan, you should be aware that the
10% penalty tax is increased to 25% with respect to non-exempt early
distributions made from your SIMPLE IRA during the first two years following the
date you first commenced participation in any SIMPLE IRA plan of your employer.
(b) MINIMUM DISTRIBUTION PENALTY TAX If the amount distributed is less than the
minimum required distribution for the year, the Participant is subject to a
50% penalty tax on the amount that was not properly distributed.
An individual's interest in a tax-qualified retirement plan generally must
be distributed, or begin to be distributed, not later than the Required
Beginning Date. Generally, the Required Beginning Date is April 1 of the
calendar year following the later of:
- - the calendar year in which the individual attains age 70 1/2; or
- - the calendar year in which the individual retires from service with the
employer sponsoring the plan.
The Required Beginning Date for an individual who is a five (5) percent
owner (as defined in the Code), or who is the owner of an IRA, is April 1 of the
calendar year following the calendar year in which the individual attains age
70 1/2.
The entire interest of the Participant must be distributed beginning no
later than the Required Beginning Date over:
- - the life of the Participant or the lives of the Participant and the
Participant's designated beneficiary, or
- - over a period not extending beyond the life expectancy of the Participant or
the joint life expectancy of the Participant and the Participant's designated
beneficiary.
Each annual distribution must equal or exceed a "minimum distribution
amount" which is determined by dividing the account balance by the applicable
life expectancy. This account balance is generally based upon the account value
as of the close of business on the last day of the previous calendar year. In
addition, minimum distribution incidental benefit rules may require a larger
annual distribution.
If an individual dies before reaching his or her Required Beginning Date,
the individual's entire interest must generally be distributed within five years
of the individual's death. However, this rule will be deemed satisfied, if
distributions begin before the close of the calendar year following the
individual's death to a designated beneficiary and distribution is over the life
of such designated beneficiary (or over a period not extending beyond the life
expectancy of the beneficiary). If the beneficiary is the individual's surviving
spouse, distributions may be delayed until the individual would have attained
age 70 1/2.
If an individual dies after reaching his or her Required Beginning Date or
after distributions have commenced, the individual's interest must generally be
distributed at least as rapidly as under the method of distribution in effect at
the time of the individual's death.
(c) WITHHOLDING In general, regular wage withholding rules apply to
distributions from IRAs and plans described in section 457 of the Code.
Periodic distributions from other tax-qualified retirement plans that are
made for a specified period of 10 or more years or for the life or life
expectancy of the participant (or the joint lives or life expectancies of
the participant and beneficiary) are generally subject to federal income tax
withholding as if the recipient were married claiming three exemptions. The
recipient of periodic distributions may generally elect not to have
withholding apply or to have income taxes withheld at a different rate by
providing a completed election form.
Mandatory federal income tax withholding at a flat rate of 20% will
generally apply to other distributions from such other tax-qualified retirement
plans unless such distributions are:
- - the non-taxable portion of the distribution;
- - required minimum distributions; or
- - direct transfer distributions.
Direct transfer distributions are direct payments to an IRA or to another
eligible retirement plan under Code section 401(a)(31).
Certain states require withholding of state taxes when federal income tax is
withheld.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 33
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
TO
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
SECTION PAGE
------------------------------------------------------------------------ ----
<S> <C>
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY..........................
SAFEKEEPING OF ASSETS...................................................
INDEPENDENT PUBLIC ACCOUNTANTS..........................................
DISTRIBUTION OF CONTRACTS...............................................
CALCULATION OF YIELD AND RETURN.........................................
PERFORMANCE COMPARISONS.................................................
FINANCIAL STATEMENTS....................................................
</TABLE>
<PAGE>
This form must be completed for all tax-sheltered annuities.
SECTION 403(b)(11) ACKNOWLEDGMENT FORM
The Hartford Variable Annuity Contract that you have recently purchased is
subject to certain restrictions imposed by the Tax Reform Act of 1986.
Contributions to the Contract after December 31, 1988 and any increases in cash
value after December 31, 1988 may not be distributed to you unless you have:
a. Attained age 59 1/2,
b. Separated from service,
c. Died, or
d. Become disabled.
Distributions of post December 31, 1988 contributions (excluding any income
thereon) may also be made if you have experienced a financial hardship.
Also, there may be a 10% penalty tax for distributions made prior to age 59 1/2
because of financial hardship or separation from service.
Also, please be aware that your 403(b) Plan may also offer other financial
alternatives other than the Nations Variable Annuity. Please refer to your Plan.
Please complete the following and return to:
Hartford Life Insurance Company
Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
Name of Contract Owner/Participant
- -------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City or Plan/School District
- --------------------------------------------------------------------------------
Date:
- --------------------------------------------------------------------------------
Contract No:
- --------------------------------------------------------------------------------
Signature:
- --------------------------------------------------------------------------------
<PAGE>
To obtain a Statement of Additional Information, please complete the form
below and mail to:
Hartford Life Insurance Company
Attn: Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
Please send a Statement of Additional Information to me at the following
address:
- ----------------------------------------------------
Name
- ------------------------------------------------------------
Address
- ------------------------------------------------------------
City/State Zip
Code
<PAGE>
PART B
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWO
NATIONS VARIABLE ANNUITY
This Statement of Additional Information is not a prospectus. The information
contained herein should be read in conjunction with the Prospectus.
To obtain a Prospectus, send a written request to Hartford Life Insurance
Company Attn: Individual Annuity Services, P.O. Box 5085, Hartford, CT
06102-5085.
Date of Prospectus: May 3, 1999
Date of Statement of Additional Information: May 3, 1999
333-41213
<PAGE>
-2-
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY . . . . . . . . . . . . . . 4
SAFEKEEPING OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 4
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . 4
DISTRIBUTION OF CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . 5
CALCULATION OF YIELD AND RETURN . . . . . . . . . . . . . . . . . . . . . 6
PERFORMANCE COMPARISONS . . . . . . . . . . . . . . . . . . . . . . . . . 10
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
-3-
INTRODUCTION
The individual and group tax-deferred variable annuity Contracts described in
the Prospectus are designed to provide Annuity benefits to individuals who
have established or wish to establish retirement programs which may or may
not qualify for special federal income tax treatment. The Annuitant under
these Contracts may receive Annuity benefits in accordance with the Annuity
option selected and the retirement program, if any, under which the Contracts
have been purchased. Annuity payments under a Contract will begin on a
particular future date which may be selected at any time under the Contract
or automatically when the Annuitant reaches age 90. There are several
alternative annuity payment options available under the Contract (see
"Annuity Payouts" in the Prospectus).
The Premium Payments under a Contract, less any applicable Premium Taxes,
will be applied to the Separate Account and/or the Fixed Accumulation Feature.
Accordingly, the net Premium Payment under the Contract will be applied to
purchase interests in one or more of the Nations Balanced Assets Portfolio,
Nations Disciplined Equity Portfolio, Nations International Growth Portfolio,
Nations Managed Index Portfolio, Nations Managed SmallCap Index Portfolio,
Nations Value Portfolio, Nations Marsico Growth & Income Portfolio, Nations
Marsico Focused Equities Portfolio, AIM V.I. Capital Appreciation Fund, AIM
V.I. High Yield Fund, AIM V.I. Value Fund, Advisers Fund, Bond Fund, Capital
Appreciation Fund, Dividend and Growth Fund, Money Market Fund,
International Opportunities Fund, Small Company Fund, and Stock Fund.
Shares of the Funds are purchased by the Separate Account without the
imposition of a sales charge. The value of a Contract depends on the value
of the shares of the Fund held by the Separate Account pursuant to that
Contract. As a result, the Contract Owner bears the investment risk since
market value of the shares may increase or decrease.
The Contracts provide that in the event the Annuitant dies before the
selected Annuity Commencement Date, the Contingent Annuitant will become the
Annuitant. If the Annuitant dies before the Annuity Commencement Date and
there is no designated Contingent Annuitant, or the Contingent Annuitant
predeceases the Annuitant, or if the Contract Owner dies before the Annuity
Commencement Date the Beneficiary will receive the Contract Value determined
on the date of receipt of due proof of death by Hartford Life Insurance
Company ("Hartford") at the Home Office. If, upon death prior to the Annuity
Commencement Date, the Annuitant or Contract Owner, as applicable, had not
attained his 90th birthday, the Beneficiary will receive the greater of (a)
the Contract Value determined as of the day Hartford receives written due
proof of death of such person, or (b) 100% of the total Premium Payments made
to such Contract, reduced by any prior surrenders, or (c) the Maximum
Anniversary Value immediately preceding the date of death established up to
age 80, adjusted for additions and surrenders. (See "Death Benefits" of the
Prospectus).
<PAGE>
-4-
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY
Hartford Life Insurance Company 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. We were originally
incorporated under the laws of Massachusetts on June 5, 1902, and
subsequently redomiciled to Connecticut. Our offices are located in
Simsbury, Connecticut; however, our mailing address is P.O. Box 2999,
Hartford, CT 06104-2999. We are ultimately controlled by The Hartford
Financial Services Group, Inc., one of the largest financial service
providers in the United States.
HARTFORD'S RATINGS
<TABLE>
<CAPTION>
Effective
Rating Agency Date of Rating Rating Basis of Rating
------------- -------------- ------ ---------------
<S> <C> <C> <C>
A.M. Best and Company, Inc. 1/1/99 A+ Financial performance
Standard & Poor's 6/1/98 AA Insurer financial strength
Duff & Phelps 12/21/98 AA+ Claims paying ability
</TABLE>
SAFEKEEPING OF ASSETS
Title to the assets of the Separate Account is held by Hartford. The assets
are kept physically segregated and are held separate and apart from
Hartford's general corporate assets. Records are maintained of all purchases
and redemptions of Fund shares held in each of the Sub-Accounts.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited financial statements and financial statement schedules included
in this registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm
as experts in giving said reports. The principal business address of Arthur
Andersen LLP is One Financial Plaza, Hartford, Connecticut 06103.
<PAGE>
-5-
DISTRIBUTION OF CONTRACTS
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account.
HSD is registered with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 as a Broker-Dealer and is a member of the
National Association of Securities Dealers, Inc. HSD is an affiliate of ours.
Both HSD and Hartford are ultimately controlled by The Hartford Financial
Services Group, Inc. The principal business address of HSD is the same as
ours. The securities will be sold by individuals who represent us as
insurance agents and who are registered representatives of Broker-Dealers
that have entered into distribution agreements with HSD.
Commissions will be paid by Hartford and will not be more than 6% of Premium
Payments. From time to time, Hartford may pay or permit other promotional
incentives, in cash or credit or other compensation.
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 institution 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.
The Contract may be sold directly to certain individuals under certain
circumstances that do not involve payment of any sales compensation to a
registered representative. In such case, Hartford will credit the Contract
with an additional 5.0% of the Premium Payment. This additional percentage of
Premium Payment in no way affects present or future charges, rights, benefits
or current values of other Contract Owners. The following class of
individuals are eligible for this feature: (1) current or retired officers,
directors, trustees and employees (and their families) of the ultimate parent
and affiliates of Hartford; and (2) employees and registered representatives
(and their families) of registered broker-dealers (or their financial
institutions) that have a sales agreement with Hartford and its principal
underwriter to sell the Contracts.
Hartford currently pays HSD underwriting commissions for its role as
Principal Underwriter of all variable annuities associated with this Separate
Account. For the past three years, the aggregate dollar amount of
underwriting commissions paid to HSD in its role as Principal Underwriter has
been: 1998: $61,629,500, 1997: $64,851,026 and 1996: $59,896,541. HSD has
retained none of these commissions.
<PAGE>
-6-
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
Hartford 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 divided by 7 and
subtracting 1 from the result, according to the following formula:
365/7
Effective Yield = [(Base Period Return + 1) ] - 1
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.
<TABLE>
<CAPTION>
SUB-ACCOUNT YIELD EFFECTIVE YIELD
----------- ----- ---------------
<S> <C> <C>
Money Market* 3.34% 3.40%
</TABLE>
* Yield and effective yield for the seven day period ending December 31, 1998.
YIELD OF BOND FUND SUB-ACCOUNT. As summarized in the Prospectus under the
heading "Performance Related Information," yields of the Bond Fund
Sub-Account 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. Net changes in the value of a hypothetical account will assume
the change in the underlying Fund's "net asset value per share" for the same
period in addition to the daily expense charge assessed, at the sub-account
level for the respective period. The Bond Fund Sub-Account's yield 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-Account's shares and to the
relative risks associated with the investment objectives and policy of the
Bond Fund Sub-Account.
<PAGE>
-7-
Yield calculations of the Bond Fund Sub-Account used for illustration
purposes reflect dividends and interest earned by the Sub-Account, less
applicable asset based charges assessed under the Contract over the base
period. Yield quotations based on a 30 day period are computed by dividing
the dividends and interest 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.
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.
<TABLE>
<CAPTION>
SUB-ACCOUNT YIELD
----------- -----
<S> <C>
Bond** 4.43%
AIM V.I. High Yield** N/A
</TABLE>
** Yield quotation based on a 30 day period ended December 31, 1998.
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 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.
<PAGE>
-8-
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
INCEPTION SINCE
SUB-ACCOUNT DATE 1 YEAR 5 YEAR 10 YEAR INCEPTION
----------- --------- ------ ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Nations Balanced
Assets Portfolio 4/1/98 N/A N/A N/A -11.86%
Nations Disciplined
Equity Portfolio 4/1/98 N/A N/A N/A -3.02%
Nations International
Growth Portfolio 4/1/98 N/A N/A N/A -5.92%
Nations Managed
Index Portfolio 4/1/98 N/A N/A N/A 0.58%
Nations Managed
Small-Cap Index
Portfolio 4/1/98 N/A N/A N/A -19.75%
Nations Value
Portfolio 4/1/98 N/A N/A N/A -5.69%
Nations Marsico
Growth & Income
Portfolio 4/1/98 N/A N/A N/A 10.35%
Nations Marsico
Focused Equities
Portfolio 4/1/98 N/A N/A N/A 17.91%
AIM Capital
Appreciation 5/5/93 8.82% 12.82% N/A 14.70%
AIM Value 5/5/93 21.70% 17.27% N/A 17.75%
AIM High Yield 5/1/98 N/A N/A N/A -16.87%
Advisers 3/31/83 13.87% 12.88% 11.31% N/A
Bond 6/2/86 -2.39% 2.04% 4.92% N/A
Capital Appreciation 6/2/86 4.83% 13.25% 15.04% N/A
Dividend & Growth 3/8/94 5.76% N/A N/A 17.60%
Money Market 6/2/86 -5.22% -0.17% 1.24% N/A
International
Opportunities 7/2/90 2.56% 2.28% N/A 2.75%
Small Company 8/9/96 1.05% N/A N/A 8.77%
Stock 6/2/86 22.57% 18.79% 14.74% N/A
</TABLE>
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 and the
Annual Maintenance Fee are not deducted and the time periods used to
calculate return as based on the inception date of the underlying Funds.
Therefore, non-standardized total return for a Sub-Account is higher than
standardized total return for a Sub-Account.
<PAGE>
-9-
NON-STANDARDIZED ANNUALIZED TOTAL RETURN THAT PRE-DATE THE INCEPTION DATE OF
THE SEPARATE ACCOUNT FOR YEAR ENDED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
INCEPTION SINCE
SUB-ACCOUNT DATE 1 YEAR 5 YEAR 10 YEAR INCEPTION
----------- --------- ------ ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Nations Balanced
Assets Portfolio 4/1/98 N/A N/A N/A -3.04%
Nations Disciplined
Equity Portfolio 4/1/98 N/A N/A N/A 5.98%
Nations International
Growth Portfolio 4/1/98 N/A N/A N/A 3.08%
Nations Managed
Index Portfolio 4/1/98 N/A N/A N/A 9.58%
Nations Managed
Small-Cap Index
Portfolio 4/1/98 N/A N/A N/A -11.44%
Nations Value
Portfolio 4/1/98 N/A N/A N/A 3.31%
Nations Marsico
Growth & Income
Portfolio 4/1/98 N/A N/A N/A 19.35%
Nations Marsico
Focused Equities
Portfolio 4/1/98 N/A N/A N/A 26.91%
AIM Capital
Appreciation 5/5/93 17.82% 15.78% N/A 17.28%
AIM Value 5/5/93 30.70% 20.14% N/A 20.37%
AIM High Yield 5/1/98 N/A N/A N/A -8.38%
Advisers 3/31/83 22.87% 16.03% 13.45% N/A
Bond 8/31/77 6.61% 5.73% 7.31% N/A
Capital Appreciation 4/2/84 13.83% 16.22% 16.87% N/A
Dividend & Growth 3/8/94 14.76% N/A N/A 20.44%
Money Market 6/30/80 3.78% 3.60% 4.02% N/A
International
Opportunities 7/2/90 11.56% 5.93% N/A 5.81%
Small Company 8/9/96 10.05% N/A N/A 13.99%
Stock 8/31/77 31.57% 21.71% 16.80% N/A
</TABLE>
<PAGE>
-10-
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 in 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
about 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.
<PAGE>
-11-
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%).
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-1
- --------------------------------------------------------------------------------
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 statements of assets and liabilities of
Hartford Life Insurance Company Separate Account Two (Nations Balanced Assets
Portfolio, Nations Disciplined Equity Portfolio, Nations International Growth
Portfolio, Nations Managed Index Portfolio, Nations Managed SmallCap Index
Portfolio, Nations Value Portfolio, Nations Marisco Growth & Income Portfolio,
Nations Marisco Focused Equities Portfolio, Hartford Bond Fund, Hartford Stock
Fund, Hartford Money Market Fund, Hartford Advisers Fund, Hartford Capital
Appreciation Fund, Hartford International Opportunities Fund, Hartford Dividend
and Growth Fund, Hartford Small Company Fund, AIM V.I. High Yield Fund, AIM V.I.
Value Fund, and AIM V.I. Capital Appreciation Fund) (collectively, the Account)
as of December 31, 1998, and the related statements of operations and the
statements of changes in net assets for the periods presented. These financial
statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Account as of December 31,
1998, and the results of their operations and the changes in their net assets
for the periods presented in conformity with generally accepted accounting
principles.
Hartford, Connecticut
February 16, 1999 ARTHUR ANDERSEN LLP
<PAGE>
SA-2 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
STATEMENTS OF ASSETS & LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS
BALANCED DISCIPLINED INTERNATIONAL
ASSETS PORTFOLIO EQUITY PORTFOLIO GROWTH PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- ----------------- -----------------
<S> <C> <C> <C>
ASSETS:
Investments:
Nations Balanced
Assets Portfolio
Shares 293,074
Cost $2,761,408
Market Value....... $2,836,956 -- --
Nations Disciplined
Equity Portfolio
Shares 350,309
Cost $3,407,882
Market Value....... -- $3,720,287 --
Nations International
Growth Portfolio
Shares 123,462
Cost $1,194,039
Market Value....... -- -- $1,269,194
Nations Managed Index
Portfolio
Shares 392,709
Cost $3,970,473
Market Value....... -- -- --
Nations Managed
SmallCap Index
Portfolio
Shares 171,539
Cost $1,590,096
Market Value....... -- -- --
Nations Value
Portfolio
Shares 440,971
Cost $4,273,735
Market Value....... -- -- --
Nations Marisco
Growth & Income
Portfolio
Shares 979,232
Cost $10,518,513
Market Value....... -- -- --
Nations Marisco
Focused Equities
Portfolio
Shares 1,585,151
Cost $17,746,309
Market Value....... -- -- --
Hartford Bond HLS
Fund, Inc. -- Class
IB
Shares 5,244,322
Cost $5,412,811
Market Value....... -- -- --
Hartford Stock HLS
Fund, Inc. -- Class
IB
Shares 9,232,900
Cost $9,616,893
Market Value....... -- -- --
Due from Hartford Life
Insurance Company..... 9,290 -- 79
Receivable from fund
shares sold........... -- 126 --
----------------- ----------------- -----------------
Total Assets........... 2,846,246 3,720,413 1,269,273
----------------- ----------------- -----------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- 127 --
Payable for fund shares
purchased............. 9,291 -- 79
----------------- ----------------- -----------------
Total Liabilities...... 9,291 127 79
----------------- ----------------- -----------------
Net Assets (variable
annuity contract
liabilities).......... $2,836,955 $3,720,286 $1,269,194
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Units Owned by
Participants.......... 2,926,023 3,510,472 1,231,312
Unit Price............. $ 0.969560 $ 1.059768 $ 1.030766
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-3
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONS
NATIONS MANAGED NATIONS MARISCO NATIONS MARISCO
MANAGED SMALLCAP NATIONS GROWTH & FOCUSED
INDEX PORTFOLIO INDEX PORTFOLIO VALUE PORTFOLIO INCOME PORTFOLIO EQUITIES PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------- ---------------- ---------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Nations Balanced
Assets Portfolio
Shares 293,074
Cost $2,761,408
Market Value....... -- -- -- -- --
Nations Disciplined
Equity Portfolio
Shares 350,309
Cost $3,407,882
Market Value....... -- -- -- -- --
Nations International
Growth Portfolio
Shares 123,462
Cost $1,194,039
Market Value....... -- -- -- -- --
Nations Managed Index
Portfolio
Shares 392,709
Cost $3,970,473
Market Value....... $4,351,220 -- -- -- --
Nations Managed
SmallCap Index
Portfolio
Shares 171,539
Cost $1,590,096
Market Value....... -- $1,549,000 -- -- --
Nations Value
Portfolio
Shares 440,971
Cost $4,273,735
Market Value....... -- -- $4,594,915 -- --
Nations Marisco
Growth & Income
Portfolio
Shares 979,232
Cost $10,518,513
Market Value....... -- -- -- $11,907,466 --
Nations Marisco
Focused Equities
Portfolio
Shares 1,585,151
Cost $17,746,309
Market Value....... -- -- -- -- $20,606,969
Hartford Bond HLS
Fund, Inc. -- Class
IB
Shares 5,244,322
Cost $5,412,811
Market Value....... -- -- -- -- --
Hartford Stock HLS
Fund, Inc. -- Class
IB
Shares 9,232,900
Cost $9,616,893
Market Value....... -- -- -- -- --
Due from Hartford Life
Insurance Company..... 4,221 473 3,010 10,286 47,971
Receivable from fund
shares sold........... -- -- -- -- --
---------------- ---------------- ---------------- ----------------- -------------------
Total Assets........... 4,355,441 1,549,473 4,597,925 11,917,752 20,654,940
---------------- ---------------- ---------------- ----------------- -------------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- -- -- -- --
Payable for fund shares
purchased............. 4,481 472 3,009 10,285 47,244
---------------- ---------------- ---------------- ----------------- -------------------
Total Liabilities...... 4,481 472 3,009 10,285 47,244
---------------- ---------------- ---------------- ----------------- -------------------
Net Assets (variable
annuity contract
liabilities).......... $4,350,960 $1,549,001 $4,594,916 $11,907,467 $20,607,696
---------------- ---------------- ---------------- ----------------- -------------------
---------------- ---------------- ---------------- ----------------- -------------------
Units Owned by
Participants.......... 3,966,976 1,749,036 4,443,598 9,977,215 16,214,714
Unit Price............. $ 1.096795 $ 0.885631 $ 1.034053 $ 1.193466 $ 1.270926
<CAPTION>
HARTFORD BOND HARTFORD STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
-------------- ---------------
<S> <C> <C>
ASSETS:
Investments:
Nations Balanced
Assets Portfolio
Shares 293,074
Cost $2,761,408
Market Value....... -- --
Nations Disciplined
Equity Portfolio
Shares 350,309
Cost $3,407,882
Market Value....... -- --
Nations International
Growth Portfolio
Shares 123,462
Cost $1,194,039
Market Value....... -- --
Nations Managed Index
Portfolio
Shares 392,709
Cost $3,970,473
Market Value....... -- --
Nations Managed
SmallCap Index
Portfolio
Shares 171,539
Cost $1,590,096
Market Value....... -- --
Nations Value
Portfolio
Shares 440,971
Cost $4,273,735
Market Value....... -- --
Nations Marisco
Growth & Income
Portfolio
Shares 979,232
Cost $10,518,513
Market Value....... -- --
Nations Marisco
Focused Equities
Portfolio
Shares 1,585,151
Cost $17,746,309
Market Value....... -- --
Hartford Bond HLS
Fund, Inc. -- Class
IB
Shares 5,244,322
Cost $5,412,811
Market Value....... $5,284,982 --
Hartford Stock HLS
Fund, Inc. -- Class
IB
Shares 9,232,900
Cost $9,616,893
Market Value....... -- $10,166,993
Due from Hartford Life
Insurance Company..... -- 8,409
Receivable from fund
shares sold........... 9,710 --
-------------- ---------------
Total Assets........... 5,294,692 10,175,402
-------------- ---------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 9,710 --
Payable for fund shares
purchased............. -- 8,410
-------------- ---------------
Total Liabilities...... 9,710 8,410
-------------- ---------------
Net Assets (variable
annuity contract
liabilities).......... $5,284,982 $10,166,992
-------------- ---------------
-------------- ---------------
Units Owned by
Participants.......... 5,038,023 8,931,341
Unit Price............. $ 1.049019 $ 1.138350
</TABLE>
<PAGE>
SA-4 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
STATEMENTS OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
HARTFORD HARTFORD
MONEY MARKET ADVISERS
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- ------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Money Market
HLS Fund, Inc. --
Class IB
Shares 2,179,042
Cost $2,179,042
Market Value....... $2,179,042 --
Hartford Advisers HLS
Fund, Inc. -- Class
IB
Shares 32,709,264
Cost $33,958,550
Market Value....... -- $34,713,950
Hartford Capital
Appreciation HLS
Fund, Inc. -- Class
IB
Shares 5,987,114
Cost $5,618,153
Market Value....... -- --
Hartford
International
Opportunities HLS
Fund, Inc. -- Class
IB
Shares 681,728
Cost $663,609
Market Value....... -- --
Hartford Dividend and
Growth HLS Fund,
Inc. -- Class IB
Shares 8,550,871
Cost $8,367,897
Market Value....... -- --
Hartford Small
Company HLS Fund,
Inc. -- Class IB
Shares 705,166
Cost $644,887
Market Value....... -- --
Nations AIM V.I. High
Yield Fund
Shares 185,157
Cost $1,710,372
Market Value....... -- --
Nations AIM V.I.
Value Fund
Shares 83,121
Cost $1,948,249
Market Value....... -- --
Nations AIM V.I.
Capital Appreciation
Fund
Shares 39,627
Cost $861,667
Market Value....... -- --
Due from Hartford Life
Insurance Company..... -- 51,966
Receivable from fund
shares sold........... 75 --
------------- ------------
Total Assets........... 2,179,117 34,765,916
------------- ------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 75 --
Payable for fund shares
purchased............. -- 51,882
------------- ------------
Total Liabilities...... 75 51,882
------------- ------------
Net Assets (variable
annuity contract
liabilities).......... $2,179,042 $34,714,034
------------- ------------
------------- ------------
Units Owned by
Participants.......... 2,119,787 31,298,238
Unit Price............. $ 1.027953 $ 1.109137
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-5
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HARTFORD
HARTFORD INTERNATIONAL HARTFORD HARTFORD
CAPITAL APPRECIATION OPPORTUNITIES DIVIDEND AND GROWTH SMALL COMPANY AIM V.I.
FUND FUND FUND FUND HIGH YIELD FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------------- -------------- -------------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Money Market
HLS Fund, Inc. --
Class IB
Shares 2,179,042
Cost $2,179,042
Market Value....... -- -- -- -- --
Hartford Advisers HLS
Fund, Inc. -- Class
IB
Shares 32,709,264
Cost $33,958,550
Market Value....... -- -- -- -- --
Hartford Capital
Appreciation HLS
Fund, Inc. -- Class
IB
Shares 5,987,114
Cost $5,618,153
Market Value....... $5,941,894 -- -- -- --
Hartford
International
Opportunities HLS
Fund, Inc. -- Class
IB
Shares 681,728
Cost $663,609
Market Value....... -- $ 662,779 -- -- --
Hartford Dividend and
Growth HLS Fund,
Inc. -- Class IB
Shares 8,550,871
Cost $8,367,897
Market Value....... -- -- $8,600,492 -- --
Hartford Small
Company HLS Fund,
Inc. -- Class IB
Shares 705,166
Cost $644,887
Market Value....... -- -- -- $ 695,969 --
Nations AIM V.I. High
Yield Fund
Shares 185,157
Cost $1,710,372
Market Value....... -- -- -- -- $1,636,790
Nations AIM V.I.
Value Fund
Shares 83,121
Cost $1,948,249
Market Value....... -- -- -- -- --
Nations AIM V.I.
Capital Appreciation
Fund
Shares 39,627
Cost $861,667
Market Value....... -- -- -- -- --
Due from Hartford Life
Insurance Company..... 4,078 -- 6,258 -- --
Receivable from fund
shares sold........... -- 256 -- 23 56
----------- -------------- ----------- -------------- ----------------
Total Assets........... 5,945,972 663,035 8,606,750 695,992 1,636,846
----------- -------------- ----------- -------------- ----------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- 256 -- 23 56
Payable for fund shares
purchased............. 4,076 -- 6,259 -- --
----------- -------------- ----------- -------------- ----------------
Total Liabilities...... 4,076 256 6,259 23 56
----------- -------------- ----------- -------------- ----------------
Net Assets (variable
annuity contract
liabilities).......... $5,941,896 $ 662,779 $8,600,491 $ 695,969 $1,636,790
----------- -------------- ----------- -------------- ----------------
----------- -------------- ----------- -------------- ----------------
Units Owned by
Participants.......... 5,901,008 676,676 8,374,016 711,812 1,808,512
Unit Price............. $ 1.006929 $0.979463 $ 1.027045 $0.977743 $ 0.905048
<CAPTION>
AIM V.I. AIM V.I. CAPITAL
VALUE FUND APPRECIATION FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Money Market
HLS Fund, Inc. --
Class IB
Shares 2,179,042
Cost $2,179,042
Market Value....... -- --
Hartford Advisers HLS
Fund, Inc. -- Class
IB
Shares 32,709,264
Cost $33,958,550
Market Value....... -- --
Hartford Capital
Appreciation HLS
Fund, Inc. -- Class
IB
Shares 5,987,114
Cost $5,618,153
Market Value....... -- --
Hartford
International
Opportunities HLS
Fund, Inc. -- Class
IB
Shares 681,728
Cost $663,609
Market Value....... -- --
Hartford Dividend and
Growth HLS Fund,
Inc. -- Class IB
Shares 8,550,871
Cost $8,367,897
Market Value....... -- --
Hartford Small
Company HLS Fund,
Inc. -- Class IB
Shares 705,166
Cost $644,887
Market Value....... -- --
Nations AIM V.I. High
Yield Fund
Shares 185,157
Cost $1,710,372
Market Value....... -- --
Nations AIM V.I.
Value Fund
Shares 83,121
Cost $1,948,249
Market Value....... $2,181,915 --
Nations AIM V.I.
Capital Appreciation
Fund
Shares 39,627
Cost $861,667
Market Value....... -- $ 998,592
Due from Hartford Life
Insurance Company..... -- --
Receivable from fund
shares sold........... 9,075 34
------------ ----------
Total Assets........... 2,190,990 998,626
------------ ----------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 9,878 33
Payable for fund shares
purchased............. -- --
------------ ----------
Total Liabilities...... 9,878 33
------------ ----------
Net Assets (variable
annuity contract
liabilities).......... $2,181,112 $ 998,593
------------ ----------
------------ ----------
Units Owned by
Participants.......... 2,087,270 987,003
Unit Price............. $ 1.044959 $1.011743
</TABLE>
<PAGE>
SA-6 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM INCEPTION, MARCH 27, 1998, TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS
BALANCED DISCIPLINED INTERNATIONAL
ASSETS PORTFOLIO EQUITY PORTFOLIO GROWTH PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- ----------------- -----------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 28,039 $ 8,374 $ 3,813
EXPENSES:
Mortality and expense
undertakings.......... (10,445) (17,210) (5,604)
-------- -------- -------
Net investment income
(loss).............. 17,594 (8,836) (1,791)
-------- -------- -------
CAPITAL GAINS INCOME..... -- -- --
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 1,248 333 130
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 75,548 312,405 75,154
-------- -------- -------
Net gain (loss) on
investments......... 76,796 312,738 75,284
-------- -------- -------
Net increase
(decrease) in net
assets resulting
from operations..... $ 94,390 $303,902 $73,493
-------- -------- -------
-------- -------- -------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-7
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONS
NATIONS MANAGED NATIONS MARISCO NATIONS MARISCO
MANAGED SMALLCAP NATIONS GROWTH & FOCUSED
INDEX PORTFOLIO INDEX PORTFOLIO VALUE PORTFOLIO INCOME PORTFOLIO EQUITIES PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------- ---------------- ---------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 26,887 $ 5,808 $ 16,682 $ 19,508 $ 25,214
EXPENSES:
Mortality and expense
undertakings.......... (19,884) (8,138) (20,586) (46,165) (76,812)
-------- -------- -------- ----------------- -------------------
Net investment income
(loss).............. 7,003 (2,330) (3,904) (26,657) (51,598)
-------- -------- -------- ----------------- -------------------
CAPITAL GAINS INCOME..... -- -- -- -- --
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 130 (5) (734) (3,632) (647)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 380,746 (41,096) 321,180 1,388,952 2,860,660
-------- -------- -------- ----------------- -------------------
Net gain (loss) on
investments......... 380,876 (41,101) 320,446 1,385,320 2,860,013
-------- -------- -------- ----------------- -------------------
Net increase
(decrease) in net
assets resulting
from operations..... $387,879 $(43,431) $316,542 $1,358,663 $2,808,415
-------- -------- -------- ----------------- -------------------
-------- -------- -------- ----------------- -------------------
<CAPTION>
HARTFORD BOND HARTFORD STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
-------------- ---------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 255,767 $423,490
EXPENSES:
Mortality and expense
undertakings.......... (22,175) (36,866)
-------------- ---------------
Net investment income
(loss).............. 233,592 386,624
-------------- ---------------
CAPITAL GAINS INCOME..... -- --
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 447 (396)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (127,829) 550,100
-------------- ---------------
Net gain (loss) on
investments......... (127,382) 549,704
-------------- ---------------
Net increase
(decrease) in net
assets resulting
from operations..... $ 106,210 $936,328
-------------- ---------------
-------------- ---------------
</TABLE>
<PAGE>
SA-8 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE PERIOD FROM INCEPTION, MARCH 27, 1998, TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
HARTFORD HARTFORD
MONEY MARKET ADVISERS
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $30,221 $ 1,804,946
EXPENSES:
Mortality and expense
undertakings.......... (7,864) (127,949)
------------- ------------
Net investment income
(loss).............. 22,357 1,676,997
------------- ------------
CAPITAL GAINS INCOME..... -- --
------------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- 1,191
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 755,399
------------- ------------
Net gain (loss) on
investments......... -- 756,590
------------- ------------
Net increase
(decrease) in net
assets resulting
from operations..... $22,357 $ 2,433,587
------------- ------------
------------- ------------
</TABLE>
* From inception, July 16, 1998, to December 31, 1998.
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-9
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HARTFORD
HARTFORD INTERNATIONAL HARTFORD HARTFORD
CAPITAL APPRECIATION OPPORTUNITIES DIVIDEND AND GROWTH SMALL COMPANY AIM V.I.
FUND FUND FUND FUND HIGH YIELD FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
--------------------- -------------- -------------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $140,339 $11,063 $256,481 $-- $ 62,908
EXPENSES:
Mortality and expense
undertakings.......... (25,003) (3,201) (40,326) (2,997) (3,821)
-------- ------- -------- ------- --------
Net investment income
(loss).............. 115,336 7,862 216,155 (2,997) 59,087
-------- ------- -------- ------- --------
CAPITAL GAINS INCOME..... -- -- -- -- --
-------- ------- -------- ------- --------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (119) 26 (15) 20 (39)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 323,740 (830) 232,595 51,082 (73,582)
-------- ------- -------- ------- --------
Net gain (loss) on
investments......... 323,621 (804) 232,580 51,102 (73,621)
-------- ------- -------- ------- --------
Net increase
(decrease) in net
assets resulting
from operations..... $438,957 $ 7,058 $448,735 $48,105 $(14,534)
-------- ------- -------- ------- --------
-------- ------- -------- ------- --------
<CAPTION>
AIM V.I. AIM V.I. CAPITAL
VALUE FUND APPRECIATION FUND
SUB-ACCOUNT* SUB-ACCOUNT*
------------- ------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 9,680 $ 1,395
EXPENSES:
Mortality and expense
undertakings.......... (4,776) (2,447)
------------- --------
Net investment income
(loss).............. 4,904 (1,052)
------------- --------
CAPITAL GAINS INCOME..... 85,619 24,715
------------- --------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (4,733) 2,118
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 233,667 136,927
------------- --------
Net gain (loss) on
investments......... 228,934 139,045
------------- --------
Net increase
(decrease) in net
assets resulting
from operations..... $319,457 $162,708
------------- --------
------------- --------
</TABLE>
* From inception, July 16, 1998, to December 31, 1998.
<PAGE>
SA-10 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM INCEPTION, MARCH 27, 1998, TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS
BALANCED DISCIPLINED INTERNATIONAL
ASSETS PORTFOLIO EQUITY PORTFOLIO GROWTH PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- ----------------- -----------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 17,594 $ (8,836) $ (1,791)
Capital gains income... -- -- --
Net realized gain
(loss) on security
transactions.......... 1,248 333 130
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 75,548 312,405 75,154
----------------- ----------------- -----------------
Net increase (decrease)
in net assets
resulting from
operations............ 94,390 303,902 73,493
----------------- ----------------- -----------------
UNIT TRANSACTIONS:
Purchases.............. 1,191,400 2,135,069 694,879
Net transfers.......... 1,574,738 1,308,683 509,945
Surrenders for benefit
payments and fees..... (23,573) (27,368) (9,123)
Net annuity
transactions.......... -- -- --
----------------- ----------------- -----------------
Total increase
(decrease) in net
assets resulting from
unit transactions..... 2,742,565 3,416,384 1,195,701
----------------- ----------------- -----------------
Total increase
(decrease) in net
assets................ 2,836,955 3,720,286 1,269,194
NET ASSETS:
Beginning of period.... -- -- --
----------------- ----------------- -----------------
End of period.......... $2,836,955 $3,720,286 $1,269,194
----------------- ----------------- -----------------
----------------- ----------------- -----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-11
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONS
NATIONS MANAGED NATIONS MARISCO NATIONS MARISCO
MANAGED SMALLCAP NATIONS GROWTH & FOCUSED
INDEX PORTFOLIO INDEX PORTFOLIO VALUE PORTFOLIO INCOME PORTFOLIO EQUITIES PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------- ---------------- ---------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 7,003 $ (2,330) $ (3,904) $ (26,657) $ (51,598)
Capital gains income... -- -- -- -- --
Net realized gain
(loss) on security
transactions.......... 130 (5) (734) (3,632) (647)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 380,746 (41,096) 321,180 1,388,952 2,860,660
---------------- ---------------- ---------------- ----------------- -------------------
Net increase (decrease)
in net assets
resulting from
operations............ 387,879 (43,431) 316,542 1,358,663 2,808,415
---------------- ---------------- ---------------- ----------------- -------------------
UNIT TRANSACTIONS:
Purchases.............. 2,891,993 1,174,665 2,902,677 7,617,543 13,184,406
Net transfers.......... 1,104,396 427,843 1,396,785 3,001,237 4,754,462
Surrenders for benefit
payments and fees..... (33,308) (10,076) (21,088) (69,976) (169,082)
Net annuity
transactions.......... -- -- -- -- 29,495
---------------- ---------------- ---------------- ----------------- -------------------
Total increase
(decrease) in net
assets resulting from
unit transactions..... 3,963,081 1,592,432 4,278,374 10,548,804 17,799,281
---------------- ---------------- ---------------- ----------------- -------------------
Total increase
(decrease) in net
assets................ 4,350,960 1,549,001 4,594,916 11,907,467 20,607,696
NET ASSETS:
Beginning of period.... -- -- -- -- --
---------------- ---------------- ---------------- ----------------- -------------------
End of period.......... $4,350,960 $1,549,001 $4,594,916 $11,907,467 $20,607,696
---------------- ---------------- ---------------- ----------------- -------------------
---------------- ---------------- ---------------- ----------------- -------------------
<CAPTION>
HARTFORD BOND HARTFORD STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
-------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 233,592 $ 386,624
Capital gains income... -- --
Net realized gain
(loss) on security
transactions.......... 447 (396)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (127,829) 550,100
-------------- ---------------
Net increase (decrease)
in net assets
resulting from
operations............ 106,210 936,328
-------------- ---------------
UNIT TRANSACTIONS:
Purchases.............. 1,973,020 6,565,916
Net transfers.......... 3,257,205 2,780,547
Surrenders for benefit
payments and fees..... (51,453) (115,799)
Net annuity
transactions.......... -- --
-------------- ---------------
Total increase
(decrease) in net
assets resulting from
unit transactions..... 5,178,772 9,230,664
-------------- ---------------
Total increase
(decrease) in net
assets................ 5,284,982 10,166,992
NET ASSETS:
Beginning of period.... -- --
-------------- ---------------
End of period.......... $5,284,982 $10,166,992
-------------- ---------------
-------------- ---------------
</TABLE>
<PAGE>
SA-12 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE PERIOD FROM INCEPTION, MARCH 27, 1998, TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
HARTFORD HARTFORD
MONEY MARKET ADVISERS
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 22,357 $ 1,676,997
Capital gains income... -- --
Net realized gain
(loss) on security
transactions.......... -- 1,191
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 755,399
------------- ------------
Net increase (decrease)
in net assets
resulting from
operations............ 22,357 2,433,587
------------- ------------
UNIT TRANSACTIONS:
Purchases.............. 1,205,792 21,876,614
Net transfers.......... 1,152,764 10,755,426
Surrenders for benefit
payments and fees..... (201,871) (351,593)
Net annuity
transactions.......... -- --
------------- ------------
Total increase
(decrease) in net
assets resulting from
unit transactions..... 2,156,685 32,280,447
------------- ------------
Total increase
(decrease) in net
assets................ 2,179,042 34,714,034
NET ASSETS:
Beginning of period.... -- --
------------- ------------
End of period.......... $2,179,042 $ 34,714,034
------------- ------------
------------- ------------
</TABLE>
* From inception, July 16, 1998, to December 31, 1998
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-13
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HARTFORD
HARTFORD INTERNATIONAL HARTFORD HARTFORD
CAPITAL APPRECIATION OPPORTUNITIES DIVIDEND AND GROWTH SMALL COMPANY AIM V.I.
FUND FUND FUND FUND HIGH YIELD FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
--------------------- -------------- -------------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 115,336 $ 7,862 $ 216,155 $ (2,997) $ 59,087
Capital gains income... -- -- -- -- --
Net realized gain
(loss) on security
transactions.......... (119) 26 (15) 20 (39)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 323,740 (830) 232,595 51,082 (73,582)
----------- -------------- ----------- -------------- ----------------
Net increase (decrease)
in net assets
resulting from
operations............ 438,957 7,058 448,735 48,105 (14,534)
----------- -------------- ----------- -------------- ----------------
UNIT TRANSACTIONS:
Purchases.............. 3,510,954 424,234 6,465,047 485,471 1,011,408
Net transfers.......... 2,022,841 232,918 1,794,442 166,509 646,458
Surrenders for benefit
payments and fees..... (30,856) (1,431) (107,733) (4,116) (6,542)
Net annuity
transactions.......... -- -- -- -- --
----------- -------------- ----------- -------------- ----------------
Total increase
(decrease) in net
assets resulting from
unit transactions..... 5,502,939 655,721 8,151,756 647,864 1,651,324
----------- -------------- ----------- -------------- ----------------
Total increase
(decrease) in net
assets................ 5,941,896 662,779 8,600,491 695,969 1,636,790
NET ASSETS:
Beginning of period.... -- -- -- -- --
----------- -------------- ----------- -------------- ----------------
End of period.......... $5,941,896 $662,779 $8,600,491 $695,969 $1,636,790
----------- -------------- ----------- -------------- ----------------
----------- -------------- ----------- -------------- ----------------
<CAPTION>
AIM V.I. AIM V.I. CAPITAL
VALUE FUND APPRECIATION FUND
SUB-ACCOUNT* SUB-ACCOUNT*
------------- ------------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 4,904 $ (1,052)
Capital gains income... 85,619 24,715
Net realized gain
(loss) on security
transactions.......... (4,733) 2,118
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 233,667 136,927
------------- --------
Net increase (decrease)
in net assets
resulting from
operations............ 319,457 162,708
------------- --------
UNIT TRANSACTIONS:
Purchases.............. 1,133,771 717,967
Net transfers.......... 733,569 120,333
Surrenders for benefit
payments and fees..... (5,685) (2,415)
Net annuity
transactions.......... -- --
------------- --------
Total increase
(decrease) in net
assets resulting from
unit transactions..... 1,861,655 835,885
------------- --------
Total increase
(decrease) in net
assets................ 2,181,112 998,593
NET ASSETS:
Beginning of period.... -- --
------------- --------
End of period.......... $2,181,112 $998,593
------------- --------
------------- --------
</TABLE>
* From inception, July 16, 1998, to December 31, 1998
<PAGE>
SA-14 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
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 is accrued as of the ex-dividend date. Capital gains income
represents dividends from the Funds which are characterized as capital
gains under tax regulations.
b) SECURITY VALUATION--The investments in shares of the Hartford, Nations,
and AIM V.I. mutual funds are valued at the closing net asset value per
share as determined by the appropriate Fund as of December 31, 1998.
c) FEDERAL INCOME TAXES--The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as an
insurance company under the Internal Revenue Code. Under current law, no
federal income taxes are payable with respect to the operations of the
Account.
d) USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported
amounts of income and expenses during the period. Operating results in
the future could vary from the amounts derived from management's
estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
a) 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. These expenses
are reflected in surrenders for benefit payments and fees on the
accompanying statements of changes in net assets.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES F-1
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life Insurance Company:
We have audited the accompanying Consolidated Balance Sheets of Hartford Life
Insurance Company and subsidiaries as of December 31, 1998 and 1997, and the
related Consolidated Statements of Income, Changes in Stockholder's Equity and
Cash Flows for each of the three years in the period ended December 31, 1998.
These Consolidated Financial Statements and the schedules referred to below are
the responsibility of Hartford Life Insurance 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, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998 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 the 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 26, 1999
<PAGE>
F-2 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1998 1997 1996
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Premiums and other considerations............... $2,218 $1,637 $1,705
Net investment income........................... 1,759 1,368 1,397
Net realized capital (losses) gains............. (2) 4 (213)
------ ------ ------
Total revenues................................ 3,975 3,009 2,889
------ ------ ------
Benefits, claims and expenses
Benefits, claims and claim adjustment
expenses....................................... 1,911 1,379 1,535
Amortization of deferred policy acquisition
costs.......................................... 431 335 234
Dividends to policyholders...................... 329 240 635
Other expenses.................................. 766 586 427
------ ------ ------
Total benefits, claims and expenses........... 3,437 2,540 2,831
------ ------ ------
Income before income tax expense................ 538 469 58
Income tax expense.............................. 188 167 20
------ ------ ------
Net income........................................ $ 350 $ 302 $ 38
------ ------ ------
------ ------ ------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES F-3
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER
31,
-----------------
1998 1997
------- -------
<S> <C> <C>
(IN MILLIONS,
EXCEPT FOR SHARE
DATA)
Assets
Investments
Fixed maturities, available for sale, at fair
value (amortized cost of $14,505 and
$13,885)....................................... $14,818 $14,176
Equity securities, at fair value................ 31 180
Policy loans, at outstanding balance............ 6,684 3,756
Other investments, at cost...................... 264 47
------- -------
Total investments............................. 21,797 18,159
Cash............................................ 17 54
Premiums receivable and agents' balances........ 17 18
Reinsurance recoverables........................ 1,257 6,114
Deferred policy acquisition costs............... 3,754 3,315
Deferred income tax............................. 464 348
Other assets.................................... 695 682
Separate account assets......................... 90,262 69,055
------- -------
Total assets.................................. $118,263 $97,745
------- -------
------- -------
Liabilities
Future policy benefits.......................... $ 3,595 $ 3,059
Other policyholder funds........................ 19,615 21,034
Other liabilities............................... 2,094 2,254
Separate account liabilities.................... 90,262 69,055
------- -------
Total liabilities............................. 115,566 95,402
------- -------
Stockholder's Equity
Common stock -- 1,000 shares authorized, issued
and outstanding, par value $5,690.............. 6 6
Capital surplus................................. 1,045 1,045
Accumulated other comprehensive income
Net unrealized capital gains on securities,
net of tax................................... 184 179
------- -------
Total accumulated other comprehensive
income....................................... 184 179
------- -------
Retained earnings............................... 1,462 1,113
------- -------
Total stockholder's equity.................... 2,697 2,343
------- -------
Total liabilities and stockholder's equity...... $118,263 $97,745
------- -------
------- -------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
F-4 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME
---------------
NET UNREALIZED
CAPITAL GAINS
(LOSSES) ON TOTAL
COMMON CAPITAL SECURITIES, RETAINED STOCKHOLDER'S
STOCK SURPLUS NET OF TAX EARNINGS EQUITY
------ -------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
1998
Balance, December 31, 1997.............. $6 $ 1,045 $179 $1,113 $2,343
Comprehensive income
Net income............................ -- -- -- 350 350
------
Other comprehensive income, net of tax
(1):
Changes in net unrealized capital
gains on securities (2).............. -- -- 5 -- 5
------
Total other comprehensive income........ 5
------
Total comprehensive income 355
------
Dividends............................... -- -- -- (1) (1)
--
------ ----- ----------- ------
Balance, December 31, 1998.......... $6 $ 1,045 $184 $1,462 $2,697
--
------ ----- ----------- ------
1997
Balance, December 31, 1996.............. $6 $ 1,045 $ 30 $ 811 $1,892
Comprehensive income
Net income............................ -- -- -- 302 302
------
Other comprehensive income, net of tax
(1):
Changes in net unrealized capital
gains on securities (2).............. -- -- 149 -- 149
------
Total other comprehensive income........ 149
------
Total comprehensive income 451
--
------ ----- ----------- ------
Balance, December 31, 1997.......... $6 $ 1,045 $179 $1,113 $2,343
--
------ ----- ----------- ------
1996
Balance, December 31, 1995.............. $6 $ 1,007 $(57) $ 773 $1,729
Comprehensive income
Net income............................ -- -- -- 38 38
------
Other comprehensive income, net of tax
(1):
Changes in net unrealized capital
gains on securities (2).............. -- -- 87 -- 87
------
Total other comprehensive income........ 87
------
Total comprehensive income............ 125
------
Capital contribution.................... -- 38 -- -- 38
--
------ ----- ----------- ------
Balance, December 31, 1996.......... $6 $ 1,045 $ 30 $ 811 $1,892
--
--
------ ----- ----------- ------
------ ----- ----------- ------
</TABLE>
- ---------
(1) Net unrealized capital gain on securities is reflected net of tax of $3,
$80 and $47, as of December 31, 1998, 1997 and 1996, respectively.
(2) There was no reclassification adjustment for after-tax gains (losses)
realized in net income for the years ended December 31, 1998 and 1997. December
31, 1996 is net of a $142 reclassification adjustment for after-tax losses
realized in net income.
See Notes to Consolidated Financial Statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES F-5
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
------------------------------
1998 1997 1996
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Operating Activities
Net income............................ $ 350 $ 302 $ 38
Adjustments to reconcile net income to
net cash provided by operating
activities
Depreciation and amortization......... (23) 8 14
Net realized capital losses (gains)... 2 (4) 213
Decrease in premiums receivable and
agents' balances..................... 1 119 10
(Decrease) increase in other
liabilities.......................... (79) 223 577
Change in receivables, payables, and
accruals............................. 83 107 (22)
Increase (decrease) in accrued
taxes................................ 60 126 (91)
(Increase) decrease in deferred income
taxes................................ (118) 40 (102)
Increase in deferred policy
acquisition costs.................... (439) (555) (572)
Increase in future policy benefits.... 536 585 101
(Increase) decrease in reinsurance
recoverables and other related
assets............................... (2) 21 (146)
-------- -------- --------
Net cash provided by operating
activities......................... 371 972 20
-------- -------- --------
Investing Activities
Purchases of investments.............. (6,061) (6,869) (5,854)
Sales of investments.................. 4,901 4,256 3,543
Maturity of investments............... 1,761 2,329 2,693
-------- -------- --------
Net cash provided by (used for)
investing activities............... 601 (284) 382
-------- -------- --------
Financing Activities
Capital contribution.................. -- -- 38
Net disbursements for investment and
universal life-type contracts charged
against policyholder accounts........ (1,009) (677) (443)
-------- -------- --------
Net cash used for financing
activities......................... (1,009) (677) (405)
-------- -------- --------
Net (decrease) increase in cash....... (37) 11 (3)
Cash -- beginning of year............. 54 43 46
-------- -------- --------
Cash -- end of year................... $ 17 $ 54 $ 43
-------- -------- --------
-------- -------- --------
Supplemental Disclosure of Cash Flow
Information:
Net Cash Paid During the Year for:
Income taxes.......................... $ 263 $ 9 $ 189
Noncash Investing Activities:
Due to the recapture of an in force block of business previously ceded
to MBL Life Assurance Co. of New Jersey, reinsurance recoverables of
$4,546 were exchanged for the fair value of assets comprised of
$4,354 in policy loans and $192 in other assets.
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
F-6 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
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 ("Hartford Life Insurance Company" or
the "Company"), Hartford Life and Annuity Insurance Company (ILA) and 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). Pursuant to an initial
public offering (the "IPO") on May 22, 1997, Hartford Life sold 26 million
shares of Class A Common Stock 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 outstanding promissory notes and line of credit with
the remaining $160 contributed by Hartford Life to HLA to support growth in its
core businesses. Hartford Life became a publicly traded company upon the sale of
26 million shares representing approximately 18.6% of the equity ownership in
Hartford Life. 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, HLA, the Company is a leading financial services and
insurance 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 disability insurance
that is directly written by the Company and is substantially ceded to its
parent, HLA, and (d) corporate owned life insurance.
2. SUMMARY OF 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 November 1998, the Emerging Issues Task Force (EITF) reached consensus on
Issue No. 98-15, "Structured Notes Acquired for a Specific Investment Strategy".
This EITF issue requires companies to account for structured notes acquired for
a specific investment strategy, as a unit. Affected companies that entered into
these notes prior to September 25, 1998 are required to either restate prior
period financial statements to conform with the prescribed unit accounting model
or disclose the related impact on earnings for all periods presented and
cumulatively over the life of the instruments had the registrant accounted for
the structure as a unit. Based upon recently prescribed current generally
accepted accounting principles for such types of transactions entered into after
September 24, 1998, there was no additional earnings impact to the Company
related to combined structured note transactions. As of December 31, 1998, the
Company does not hold any combined structured notes.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities". The new standard establishes
accounting and reporting guidance for derivative instruments, including certain
derivative instruments embedded in other contracts. The standard requires, among
other things, that all derivatives be carried on the balance sheet at fair
value. The standard also specifies hedge accounting criteria under which a
derivative can qualify for special accounting. In order to receive special
accounting, the derivative instrument must qualify as either
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES F-7
- --------------------------------------------------------------------------------
a hedge of the fair value or the variability of the cash flow of a qualified
asset or liability. Special accounting for qualifying hedges provides for
matching the timing of gain or loss recognition on the hedging instrument with
the recognition of the corresponding changes in value of the hedged item. SFAS
No. 133 will be effective for fiscal years beginning after June 15, 1999.
Initial application for Hartford Life Insurance Company will begin for the first
quarter of the year 2000. While Hartford Life Insurance Company is currently in
the process of quantifying the impact of SFAS No. 133, the Company is reviewing
its derivative holdings in order to take actions needed to minimize potential
volatility, while at the same time maintaining the economic protection needed to
support the goals of its business.
In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) No. 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use". The SOP provides
guidance on accounting for the costs of internal use software and in determining
whether the software is for internal use. The SOP defines internal use software
as software that is acquired, internally developed, or modified solely to meet
internal needs and identifies stages of software development and accounting for
the related costs incurred during the stages. This statement is effective for
fiscal years beginning after December 15, 1998 and is not expected to have a
material impact on the Company's financial condition or results of operations.
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income", which establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. The objective of this statement is to report a measure of
all changes in equity of an enterprise that result from transactions and other
economic events of the period other than transactions with owners. Comprehensive
income is the total of net income and all other nonowner changes in equity.
Accordingly, the Company has reported comprehensive income in the Consolidated
Statements of Changes in Stockholder's Equity.
In December 1997, the AICPA issued 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.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information". The new standard requires public
business enterprises to disclose certain financial and descriptive information
about reportable operating segments in annual financial statements and in
condensed financial statements of interim periods. Operating segments are
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and assessing performance. SFAS No. 131 also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The Company adopted SFAS No. 131 in 1998.
For additional information, see Note 13.
On November 14, 1996, the 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 FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities" which is
effective for transfers and servicing of financial 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. Adoption of SFAS No. 125 did not have a material
effect on the Company's financial condition or results of operations.
Effective January 1, 1996, Hartford Life Insurance 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. 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 investment products and universal life-type policies consist of
policy charges for policy administration, cost of insurance and surrender
charges assessed to policy account balances and are recognized in the period in
which services are provided. Premiums for traditional life insurance policies
are recognized as revenues when they are due from policyholders.
<PAGE>
F-8 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
(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.
Liabilities for universal life-type and investment contracts are stated at
policyholder account values before surrender charges.
(E) INVESTMENTS
Hartford Life Insurance 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 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. 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. Net realized capital gains
and losses, excluding those related to immediate participation guaranteed
contracts, 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 additional impairment, if necessary.
(F) DERIVATIVE INSTRUMENTS
Hartford Life Insurance 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. Hartford Life Insurance 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 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. For a discussion
of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"
issued in June 1998, see (b) Changes in Accounting Principles.
Derivative instruments must be designated at inception as a hedge and
measured for effectiveness both at inception and on an ongoing basis. Hartford
Life Insurance Company's correlation threshold for hedge designation is 80% to
120%. If correlation, which is assessed monthly and measured based on a rolling
three month average, falls outside the 80% to 120% range, hedge accounting will
be terminated. 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
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES F-9
- --------------------------------------------------------------------------------
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.
(G) SEPARATE ACCOUNTS
Hartford Life Insurance Company maintains separate account assets and
liabilities which are reported at fair value. Separate account assets are
segregated from other investments. Separate accounts reflect two categories of
risk assumption: non-guaranteed separate accounts, wherein the policyholder
assumes the investment risk and rewards, and guaranteed separate account assets,
wherein the Company contractually guarantees either a minimum return or account
value to the policyholder.
(H) 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, usually 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
charges, 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 for the books of business are
re-estimated and adjusted by a cumulative charge or credit to income.
Acquisition costs and their related deferral are included in the Company's
other expenses as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Commissions.......................... $ 1,069 $ 976 $ 848
Deferred acquisition costs........... (891) (862) (823)
Other................................ 588 472 402
--------- --------- ---------
Total other expenses............. $ 766 $ 586 $ 427
--------- --------- ---------
--------- --------- ---------
</TABLE>
(I) DIVIDENDS TO POLICYHOLDERS
Certain life insurance policies contain dividend payment provisions that
enable the policyholder to participate in the earnings on that participating
block of business. The participating insurance in force accounted for 71%, 55%
and 44% in 1998, 1997 and 1996, respectively, of total insurance in force.
3. INVESTMENTS AND DERIVATIVE INSTRUMENTS
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Interest income from fixed
maturities......................... $ 952 $ 932 $ 918
Interest income from policy loans... 789 425 477
Income from other investments....... 32 26 15
--------- --------- ---------
Gross investment income............. 1,773 1,383 1,410
Less: Investment expenses........... 14 15 13
--------- --------- ---------
Net investment income............... $ 1,759 $ 1,368 $ 1,397
--------- --------- ---------
--------- --------- ---------
</TABLE>
(B) COMPONENTS OF NET REALIZED CAPITAL (LOSSES) GAINS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1998 1997 1996
--------- ----- ---------
<S> <C> <C> <C>
Fixed maturities......................... $ (28) $ (7) $ (201)
Equity securities........................ 21 12 2
Real estate and other.................... 5 (1) (4)
Less: Decrease in liability to
policyholders for realized capital
gains................................... -- -- (10)
--------- --- ---------
Net realized capital (losses) gains...... $ (2) $ 4 $ (213)
--------- --- ---------
--------- --- ---------
</TABLE>
<PAGE>
F-10 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
(C) NET UNREALIZED CAPITAL (LOSSES) GAINS ON EQUITY SECURITIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Gross unrealized capital gains.............. $ 2 $ 14 $ 13
Gross unrealized capital losses............. (1) -- (1)
--- --- ---
Net unrealized capital gains................ 1 14 12
Deferred income tax expense................. -- 5 4
--- --- ---
Net unrealized capital gains, net of tax.... 1 9 8
Balance -- beginning of year................ 9 8 1
--- --- ---
Net change in unrealized capital gains on
equity securities.......................... $ (8) $ 1 $ 7
--- --- ---
--- --- ---
</TABLE>
(D) NET UNREALIZED CAPITAL GAINS (LOSSES) ON FIXED MATURITIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Gross unrealized capital gains.......... $ 421 $ 371 $ 386
Gross unrealized capital losses......... (108) (80) (341)
Unrealized capital gains credited to
policyholders.......................... (32) (30) (11)
--------- --------- ---------
Net unrealized capital gains............ 281 261 34
Deferred income tax expense............. 98 91 12
--------- --------- ---------
Net unrealized capital gains, net of
tax.................................... 183 170 22
Balance -- beginning of year............ 170 22 (58)
--------- --------- ---------
Net change in unrealized capital gains
(losses) on fixed maturities........... $ 13 $ 148 $ 80
--------- --------- ---------
--------- --------- ---------
</TABLE>
(E) FIXED MATURITY INVESTMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U. S. Government and Government agencies and authorities
(guaranteed and sponsored)...................................... $ 121 $ 2 $ -- $ 123
U. S. Government and Government agencies and authorities
(guaranteed and sponsored) -- asset backed...................... 1,001 23 (8) 1,016
States, municipalities and political subdivisions................ 165 8 -- 173
International governments........................................ 393 26 (7) 412
Public utilities................................................. 844 33 (3) 874
All other corporate including international...................... 5,469 260 (42) 5,687
All other corporate -- asset backed.............................. 4,155 58 (42) 4,171
Short-term investments........................................... 1,847 -- -- 1,847
Certificates of deposit.......................................... 510 11 (6) 515
---------- ----- ----------- ----------
Total fixed maturities....................................... $14,505 $421 $(108) $14,818
---------- ----- ----------- ----------
---------- ----- ----------- ----------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U. S. Government and Government agencies and authorities
(guaranteed and sponsored)...................................... $ 217 $ 3 $ (1) $ 219
U. S. Government and Government 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>
The amortized cost and estimated fair value of fixed maturity investments as
of December 31, 1998 by estimated maturity year are shown below. Expected
maturities differ from contractual maturities due to call or prepayment
provisions. Asset backed securities, including mortgage backed securities and
collateralized mortgage obligations, 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
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES F-11
- --------------------------------------------------------------------------------
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......................... $ 3,047 $ 3,116
Over one year through five years......... 4,796 4,843
Over five years through ten years........ 3,242 3,318
Over ten years........................... 3,420 3,541
----------- -----------
Total................................ $ 14,505 $ 14,818
----------- -----------
----------- -----------
</TABLE>
Sales of fixed maturities, excluding short-term fixed maturities, for the
years ended December 31, 1998, 1997 and 1996 resulted in proceeds of $3.2
billion, $4.2 billion and $3.5 billion, gross realized capital gains of $103,
$169 and $87, gross realized capital losses (including writedowns) of $131, $176
and $298, respectively. In 1996, gross realized capital losses includes an other
than temporary impairment of $137 related to the Company's block of guaranteed
investment contract business written prior to 1995 which could not recover to
amortized cost prior to sale. Sales of equity security investments for the years
ended December 31, 1998, 1997 and 1996 resulted in proceeds of $35, $132 and $74
and gross realized capital gains of $21, $12 and $2, respectively, and no gross
realized capital losses for all periods.
(F) CONCENTRATION OF CREDIT RISK
The Company is not exposed to any significant concentration of credit risk
in fixed maturities of a single issuer greater than 10% of stockholder's equity.
(G) DERIVATIVE INSTRUMENTS
Hartford Life Insurance 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.
Hartford Life Insurance 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.
Hartford Life Insurance Company's derivative program is monitored by an
internal compliance unit and is reviewed by senior management and Hartford
Life's Finance Committee of the Board of Directors. 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 $6.2 billion and $6.5 billion ($3.9 billion and $4.6 billion related to
the Company's investments, $2.3 billion and $1.9 billion on the Company's
liabilities) as of December 31, 1998 and 1997, respectively.
The tables below provide a summary of derivative instruments held by
Hartford Life Insurance Company as of December 31, 1998 and 1997, segregated by
major investment and liability category:
<PAGE>
F-12 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 -- AMOUNT HEDGED (NOTIONAL AMOUNTS)
----------------------------------------------------------------------------------
FOREIGN
TOTAL ISSUED PURCHASED INTEREST CURRENCY TOTAL
CARRYING CAPS & CAPS & FUTURES RATE SWAPS NOTIONAL
ASSETS HEDGED VALUE FLOORS FLOORS (2) SWAPS (3) AMOUNT
- ----------------------------------- -------- -------- ---------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset backed securities (excluding
inverse floaters and
anticipatory)..................... $ 5,163 $ -- $ 188 $ 3 $ 885 $-- $ 1,076
Inverse floaters (1)............... 24 44 55 -- -- -- 99
Anticipatory (4)................... -- -- -- -- 235 -- 235
Other bonds and notes.............. 7,683 461 597 18 1,300 90 2,466
Short-term investments............. 1,948 -- -- -- -- -- --
-------- -------- ---------- --- ---------- --- ----------
Total fixed maturities......... 14,818 505 840 21 2,420 90 3,876
Equity securities, policy loans and
other investments................. 6,979 -- -- -- -- -- --
-------- -------- ---------- --- ---------- --- ----------
Total investments.............. $ 21,797 505 840 21 2,420 90 3,876
Other policyholder funds....... $ 19,615 1,100 50 -- 1,195 -- 2,345
-------- -------- ---------- --- ---------- --- ----------
Total derivative instruments --
notional value................ $ 1,605 $ 890 $ 21 $ 3,615 $90 $ 6,221
-------- -------- ---------- --- ---------- --- ----------
Total derivative instruments --
fair value.................... $ (6) $ 19 $ -- $ 27 $(7) $ 33
-------- -------- ---------- --- ---------- --- ----------
-------- -------- ---------- --- ---------- --- ----------
</TABLE>
<TABLE>
<CAPTION>
1997 -- AMOUNT HEDGED (NOTIONAL AMOUNTS)
--------------------------------------------------------------------------
FOREIGN
TOTAL ISSUED PURCHASED INTEREST CURRENCY TOTAL
CARRYING CAPS & CAPS & RATE SWAPS NOTIONAL
ASSETS HEDGED VALUE FLOORS FLOORS FUTURES (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
Other policyholder funds....... $ 21,034 10 150 -- 1,747 -- 1,907
-------- ------- ------------ --- --------- --- -------
Total derivative instruments --
notional value................ $ 1,019 $ 2,094 $ 50 $ 3,251 $ 91 $6,505
-------- ------- ------------ --- --------- --- -------
Total derivative instruments --
fair value.................... $ (8) $ 23 $ -- $ 19 $ (6 ) $ 28
-------- ------- ------------ --- --------- --- -------
-------- ------- ------------ --- --------- --- -------
</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, 1998 and 1997, approximately 5% and 44% ,
respectively, of the notional futures contracts expire within one year.
(3) As of December 31, 1998 and 1997, approximately 11% and 16%,
respectively, of foreign currency swaps expire within one year.
(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. As of December 31, 1998 and 1997, the Company had no
deferred gains for interest rate swaps. During 1998, $1.5 in deferred gains were
basis adjusted.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES F-13
- --------------------------------------------------------------------------------
The following is a reconciliation of notional amounts by derivative type and
strategy as of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 MATURITIES/ DECEMBER 31, 1998
NOTIONAL AMOUNT ADDITIONS TERMINATIONS (1) NOTIONAL AMOUNT
----------------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
BY DERIVATIVE TYPE
Caps......................................... $1,239 $1,000 $ 327 $1,912
Floors....................................... 1,864 -- 1,281 583
Swaps/Forwards............................... 3,342 1,838 1,475 3,705
Futures...................................... 50 8 37 21
Options...................................... 10 -- 10 --
------- -------- ------- -------
Total.................................... $6,505 $2,846 $3,130 $6,221
------- -------- ------- -------
BY STRATEGY
Liability.................................... $1,907 $1,099 $ 661 $2,345
Anticipatory................................. -- 242 7 235
Asset........................................ 1,805 1,260 667 2,398
Portfolio.................................... 2,793 245 1,795 1,243
------- -------- ------- -------
Total.................................... $6,505 $2,846 $3,130 $6,221
------- -------- ------- -------
------- -------- ------- -------
</TABLE>
- ---------
(1) During 1998, the Company had no significant gains or losses on
terminations of hedge positions using derivative financial instruments.
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS 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. Hartford
Life Insurance Company uses the following methods and assumptions in estimating
the fair value of each class of financial instrument.
Fair value for fixed maturities and marketable equity securities
approximates those quotations published by applicable stock exchanges or
received from other reliable sources.
For policy loans, carrying amounts approximate fair value.
Fair value for other invested assets primarily consist of partnerships and
trusts that are based on external market valuations from partnership and trust
management as well as mortgage loans where carrying amounts approximate fair
value.
Other policyholder funds fair value information is determined by estimating
future cash flows, discounted at the current market rate.
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 periodic comparison to dealer quoted prices.
The carrying amount and fair values of Hartford Life Insurance Company's
financial instruments as of December 31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
------------------ ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- ------- --------- -------
<S> <C> <C> <C> <C>
ASSETS
Fixed maturities..................................... $ 14,818 $14,818 $ 14,176 $14,176
Equity securities.................................... 31 31 180 180
Policy loans......................................... 6,684 6,684 3,756 3,756
Other investments.................................... 264 309 47 91
LIABILITIES
Other policyholder funds (1)......................... $ 11,709 $11,726 $ 11,769 $11,755
</TABLE>
- ---------
(1) Excludes corporate owned life insurance and universal life insurance
contracts.
<PAGE>
F-14 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
5. SEPARATE ACCOUNTS
Hartford Life Insurance Company maintained separate account assets and
liabilities totaling $90.3 billion and $69.1 billion as of December 31, 1998 and
1997, respectively, which are reported at fair value. Separate account assets,
which are segregated from other investments, reflect two categories of risk
assumption: non-guaranteed separate accounts totaling $80.6 billion and $58.6
billion as of December 31, 1998 and 1997, respectively, wherein the policyholder
assumes the investment risk, and guaranteed separate accounts totaling $9.7 and
$10.5 billion as of December 31, 1998 and 1997, respectively, wherein Hartford
Life Insurance Company contractually guarantees either a minimum return or
account value to the policyholder. Included in non-guaranteed separate account
assets were policy loans totaling $1.8 billion and $1.9 billion as of December
31, 1998 and 1997, 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 and other revenues were $908, $699 and $538
in 1998, 1997 and 1996, respectively. The guaranteed separate accounts include
fixed market value adjusted (MVA) individual annuity and modified guaranteed
life insurance. The average credited interest rate on these contracts was 6.6%
and 6.5% as of December 31, 1998 and 1997, respectively. The assets that support
these liabilities were comprised of $9.5 billion and $10.2 billion in fixed
maturities as of December 31, 1998 and 1997, respectively. 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 $40 and $119 in carrying value and $3.5 billion and
$3.0 billion in notional amounts as of December 31, 1998 and 1997, respectively.
6. STATUTORY RESULTS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Statutory net income................ $ 211 $ 214 $ 144
--------- --------- ---------
Statutory surplus................... $ 1,676 $ 1,441 $ 1,207
--------- --------- ---------
--------- --------- ---------
</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 1999 is estimated to be $168.
Hartford Life Insurance Company and its domestic insurance subsidiaries
prepare their statutory financial statements in accordance with accounting
practices prescribed by the State of Connecticut. Prescribed statutory
accounting practices include publications of the National Association of
Insurance Commissioners, as well as state laws, regulations, and general
administrative rules.
7. STOCK COMPENSATION PLANS
Hartford Life Insurance Company's employees are included in the 1997
Hartford Life, Inc. Incentive Stock Plan (the "Plan"), which was adopted during
the second quarter of 1997. 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 million
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 Hartford
Life, Inc. 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 121,943 and
54,316 shares under the ESPP in 1998 and 1997, respectively. The weighted
average fair value of the discount under the ESPP was $13.80 per share in 1998
and $9.63 per share in 1997.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES F-15
- --------------------------------------------------------------------------------
8. POSTRETIREMENT BENEFIT AND SAVINGS PLANS
(A) PENSION PLANS
Hartford Life Insurance 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 $6 in 1998 and $5
in both 1997 and 1996.
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 1998, 1997 and 1996.
The assumed rate in the per capita cost of health care (the health care
trend rate) was 7.8% for 1998, decreasing ratably to 5.0% in the year 2003.
Increasing the health care trend rates by one percent per year would have an
immaterial impact on the accumulated postretirement benefit obligation and the
annual expense. To the extent that the actual experience differs from the
inherent assumptions, the effect will be amortized over the average future
service of covered employees.
(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 Hartford Life Insurance Company for the above-mentioned
plan was approximately $4 and $2 in 1998 and 1997, respectively.
9. REINSURANCE
Hartford Life Insurance 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,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Gross premiums...................... $ 2,722 $ 2,164 $ 2,138
Assumed............................. 150 159 190
Ceded............................... (654) (686) (623)
--------- --------- ---------
Net premiums and other
considerations................... $ 2,218 $ 1,637 $ 1,705
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company ceded approximately $128, $76 and $100 of group life premium to
HLA in 1998, 1997 and 1996, respectively, representing $38.4 billion, $33.6
billion and $33.3 billion of insurance in force, respectively. The Company ceded
$383, $339 and $318 of accident and health premium to HLA in 1998, 1997 and
1996, respectively. The Company assumed $82, $89 and $101 of premium in 1998,
1997 and 1996, respectively, representing $7.4 billion, $8.2 billion and $8.5
billion of individual life insurance in force, respectively, from HLA.
Life reinsurance recoveries, which reduce death and other benefits,
approximated $97, $158 and $140 for the years ended December 31, 1998, 1997 and
1996, respectively.
Hartford Life Insurance Company has no significant reinsurance-related
concentrations of credit risk.
10. 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 own 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. It is the intention of The
Hartford and its non-life subsidiaries to file a single consolidated Federal
income tax return. The life insurance companies will file a separate
consolidated federal income tax return. The Company's effective tax rate was
35%, 36% and 35% in 1998, 1997 and 1996, respectively.
<PAGE>
F-16 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Income tax expense is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Current.................................. $ 307 $ 162 $ 118
Deferred................................. (119) 5 (98)
--------- --------- ---------
Income tax expense..................... $ 188 $ 167 $ 20
--------- --------- ---------
--------- --------- ---------
</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,
---------------------------------
1998 1997 1996
--------- --------- -----
<S> <C> <C> <C>
Tax provision at the U.S. Federal
statutory rate........................... $ 188 $ 164 $ 20
Other..................................... -- 3 --
--------- --------- ---
Total................................... $ 188 $ 167 $ 20
--------- --------- ---
--------- --------- ---
</TABLE>
Deferred tax assets (liabilities) include the following as of December 31:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Tax basis deferred policy acquisition costs.... $ 751 $ 639
Financial statement deferred policy acquisition
costs and reserves............................ 103 69
Employee benefits.............................. 4 8
Net unrealized capital gains on securities..... (98) (96)
Investments and other.......................... (296) (272)
--------- ---------
Total........................................ $ 464 $ 348
--------- ---------
--------- ---------
</TABLE>
Hartford Life Insurance Company had a current tax payable of $65 and $64 as
of December 31, 1998 and 1997, respectively.
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, based on current tax law,
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, 1998 was $104.
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, 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 $47, $34 and $40 in 1998, 1997 and 1996,
respectively. Management believes that the methods used are reasonable.
12. COMMITMENTS AND CONTINGENT LIABILITIES
(A) LITIGATION
Hartford Life Insurance Company is involved in pending and threatened
litigation in the normal course of its business in which claims for monetary and
punitive damages have been asserted. Although there can be no assurances, at the
present time the Company does not anticipate that the ultimate liability arising
from such pending or threatened litigation, after consideration of provisions
made for potential losses and costs of defense, will have a material adverse
effect on the 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. Part of the assessments
paid by the Company and its subsidiaries pursuant to these laws may be used as
credits for a portion of the associated premium taxes. The Company paid guaranty
fund assessments of approximately $9, $15 and $11 in 1998, 1997 and 1996,
respectively, of which $4, $4 and $5, respectively, were estimated to be
creditable against premium taxes.
(C) LEASES
The rent paid to Hartford Fire for space occupied by the Company was $7 in
both 1998 and 1997 and $3 in 1996. Future minimum rental commitments are as
follows:
<TABLE>
<S> <C>
1999............. $ 7
2000............. 12
2001............. 12
2002............. 13
2003............. 13
Thereafter....... 74
---------
Total.......... $ 131
---------
---------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES F-17
- --------------------------------------------------------------------------------
Rental expense is recognized on a level basis over the term of the primary
sublease, which expires on December 31, 2009, and amounted to approximately $9
in both 1998 and 1997 and $8 in 1996.
(D) TAX MATTERS
Hartford Life's federal income tax returns are routinely audited by the
Internal Revenue Service. Hartford Life is currently under audit for the years
1993 through 1995, with the audit for the years 1996 through 1997 expected to
begin during early 1999. Management believes that adequate provision has been
made in the financial statements for items that may result from tax examinations
and other tax related matters.
(E) INVESTMENTS
As of December 31, 1998, Hartford Life Insurance Company held $71 of asset
backed securities securitized and serviced by Commercial Financial Services,
Inc. (CFS) of which $50 were included in the Company's general account and $21
in the Company's guaranteed separate account. In October 1998, the Company
became aware of allegations of improper activities at CFS. On December 11, 1998,
CFS filed for protection under Chapter 11 of the Bankruptcy Code. As of December
31, 1998, CFS continues to service the asset backed securities, which remain
current on payments of principal and interest, however, the Company does not
expect to recover all of its principal investment. Based upon information
available in the fourth quarter 1998, the Company recognized a $25, after-tax,
writedown related to its holdings in CFS of which $18 was related to the
Company's general account assets. The ultimate realizable amount depends on the
outcome of the bankruptcy of CFS and these estimates are therefore subject to
material change as new information becomes available. The Company is presently
unable to determine the amount of further potential loss, if any, related to the
securities.
13. SEGMENT INFORMATION
Hartford Life Insurance Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information", during the fourth quarter of
1998. This statement replaces SFAS No. 14, "Financial Reporting for Segments of
a Business Enterprise", and establishes new standards for reporting information
about operating segments in annual financial statements and in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
This statement requires that the reportable operating segments be based on the
Company's internal operations. On this basis, Hartford Life Insurance Company's
segments represent strategic operations which offer different products and
services as well as serve different markets.
Hartford Life Insurance Company is organized into three reportable operating
segments which include Investment Products, Individual Life and Corporate Owned
Life Insurance (COLI). Investment Products offers individual variable annuities,
fixed market value adjusted (MVA) annuities and fixed and variable immediate
annuities, mutual funds, deferred compensation and retirement plan services,
structured settlement contracts and other special purpose annuity contracts.
Individual Life sells a variety of life insurance products, including variable
life, universal life, interest-sensitive whole life and term life insurance.
COLI primarily offers variable products used by employers to fund non-qualified
benefits or other post-employment benefit obligations as well as leveraged COLI.
The Company includes in "Other" corporate items not directly allocable to any of
its reportable operating segments as well as certain employee benefit products
including group life and disability insurance that is directly written by the
Company and is substantially ceded to its parent, HLA.
The accounting policies of the reportable operating segments are the same as
those described in the summary of significant accounting policies in Note 2.
Hartford Life Insurance Company evaluates performance of its segments based on
revenues, net income and the segment's return on allocated capital. The Company
charges direct operating expenses to the appropriate segment and allocates the
majority of indirect expenses to the segments based on an intercompany expense
arrangement. Intersegment revenues are not significant and primarily occur
between corporate and the operating segments. These amounts include interest
income on allocated surplus and the amortization of net realized capital gains
and losses through net investment income utilizing the duration of the segment's
investment portfolios. The Company's revenues are primarily derived from
customers within the United States. The Company's long-lived assets primarily
consist of deferred policy acquisition costs and deferred tax assets from within
the United States. The following table outlines summarized financial information
concerning the Company's segments. The information for 1997 and 1996 has been
restated to conform to the 1998 presentation.
<TABLE>
<CAPTION>
INVESTMENT INDIVIDUAL
1998 PRODUCTS LIFE COLI OTHER TOTAL
- ------------------------------------------------------- --------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Total revenues......................................... $ 1,779 $ 543 $ 1,567 $ 86 $ 3,975
Net investment income.................................. 736 181 793 49 1,759
Amortization of deferred policy acquisition costs...... 326 105 -- -- 431
Income tax expense (benefit)........................... 145 35 12 (4) 188
Net income (loss)...................................... 270 64 24 (8) 350
Assets................................................. 87,207 5,228 22,631 3,197 118,263
</TABLE>
<PAGE>
F-18 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INDIVIDUAL
1997 PRODUCTS LIFE COLI OTHER TOTAL
- ------------------------------------------------------- --------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Total revenues......................................... $ 1,510 $ 487 $ 980 $ 32 $ 3,009
Net investment income.................................. 739 164 429 36 1,368
Amortization of deferred policy acquisition costs...... 250 83 -- 2 335
Income tax expense..................................... 111 30 15 11 167
Net income............................................. 206 55 27 14 302
Assets................................................. 72,288 4,914 17,800 2,743 97,745
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT INDIVIDUAL
1996 PRODUCTS LIFE COLI OTHER TOTAL
- ------------------------------------------------------- --------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Total revenues......................................... $ 1,002 $ 440 $ 1,360 $ 87 $ 2,889
Net investment income.................................. 684 153 480 80 1,397
Amortization of deferred policy acquisition costs...... 174 60 -- -- 234
Income tax expense (benefit)........................... (42 ) 24 11 27 20
Net income (loss)...................................... (77 ) 44 26 45 38
Assets................................................. 57,410 3,753 14,222 2,377 77,762
</TABLE>
14. QUARTERLY RESULTS FOR 1998 AND 1997 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
-------------------- -------------------- -------------------- --------------------
1998 1997 1998 1997 1998 1997 1998 1997
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues........................... $ 915 $ 651 $ 721 $ 645 $ 826 $ 679 $ 1,513 $ 1,034
Benefits, claims and expenses...... 787 550 591 536 688 550 1,371 904
Net income......................... 83 63 85 74 89 81 93 84
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES F-19
- --------------------------------------------------------------------------------
SCHEDULE I -- SUMMARY OF INVESTMENTS -- OTHER THAN INVESTMENTS IN AFFILIATES
AS OF DECEMBER 31, 1998
(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. Government and Government agencies
and authorities (guaranteed and
sponsored)................................ $ 121 $ 123 $ 123
U. S. Government and Government agencies
and authorities (guaranteed and sponsored)
-- asset backed........................... 1,001 1,016 1,016
States, municipalities and political
subdivisions.............................. 165 173 173
Foreign governments........................ 393 412 412
Public utilities........................... 844 874 874
All other corporate including
international............................. 5,469 5,687 5,687
All other corporate -- asset backed........ 4,155 4,171 4,171
Short-term investments..................... 1,847 1,847 1,847
Certificates of deposit...................... 510 515 515
------- ------- -------
Total fixed maturities....................... 14,505 14,818 14,818
------- ------- -------
Equity Securities
Common Stocks
Industrial and miscellaneous............... 30 31 31
------- ------- -------
Total equity securities...................... 30 31 31
------- ------- -------
Total fixed maturities and equity
securities.................................. 14,535 14,849 14,849
------- ------- -------
Policy Loans................................. 6,684 6,684 6,684
------- ------- -------
Other Investments
Mortgage loans on real estate.............. 206 207 206
Other invested assets...................... 58 102 58
------- ------- -------
Total other investments...................... 264 309 264
------- ------- -------
Total investments............................ $21,483 $21,842 $21,797
------- ------- -------
------- ------- -------
</TABLE>
<PAGE>
F-20 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
DEFERRED
POLICY FUTURE OTHER PREMIUMS NET
ACQUISITION POLICY POLICYHOLDER AND OTHER INVESTMENT
SEGMENT COSTS BENEFITS FUNDS CONSIDERATIONS INCOME
- --------------------------------------------- ----------- --------- ---------- --------------- ---------
<S> <C> <C> <C> <C> <C>
1998
Investment Products.......................... $2,823 $2,407 $ 9,194 $1,043 $ 736
Individual Life.............................. 931 466 2,307 363 181
Corporate Owned Life Insurance............... -- 225 8,097 774 793
Other........................................ -- 497 17 38 49
----------- --------- ---------- ------ ---------
Consolidated operations...................... $3,754 $3,595 $19,615 $2,218 $1,759
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
1997
Investment Products.......................... $2,478 $2,070 $ 9,620 $ 771 $ 739
Individual Life.............................. 837 392 2,182 323 164
Corporate Owned Life Insurance............... -- 56 9,259 551 429
Other........................................ -- 541 (27) (8) 36
----------- --------- ---------- ------ ---------
Consolidated operations...................... $3,315 $3,059 $21,034 $1,637 $1,368
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
1996
Investment Products.......................... $2,030 $1,526 $10,140 $ 537 $ 684
Individual Life.............................. 730 346 2,160 287 153
Corporate Owned Life Insurance............... -- -- 9,823 880 480
Other........................................ -- 602 11 1 80
----------- --------- ---------- ------ ---------
Consolidated operations...................... $2,760 $2,474 $22,134 $1,705 $1,397
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
<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>
1998
Investment Products.......................... $ -- $ 670 $326 $ -- $ 368
Individual Life.............................. (1) 262 105 -- 77
Corporate Owned Life Insurance............... -- 924 -- 329 278
Other........................................ (1) 55 -- -- 43
----------- ----------- ----- ----- -----
Consolidated operations...................... $ (2) $1,911 $431 $329 $ 766
----------- ----------- ----- ----- -----
----------- ----------- ----- ----- -----
1997
Investment Products.......................... $ -- $ 677 $250 $ -- $ 266
Individual Life.............................. -- 242 83 -- 77
Corporate Owned Life Insurance............... -- 439 -- 240 259
Other........................................ 4 21 2 -- (16)
----------- ----------- ----- ----- -----
Consolidated operations...................... $ 4 $1,379 $335 $240 $ 586
----------- ----------- ----- ----- -----
----------- ----------- ----- ----- -----
1996
Investment Products.......................... $(219) $ 744 $175 $ -- $ 203
Individual Life.............................. -- 245 59 -- 68
Corporate Owned Life Insurance............... -- 545 -- 634 144
Other........................................ 6 1 -- 1 12
----------- ----------- ----- ----- -----
Consolidated operations...................... $(213) $1,535 $234 $635 $ 427
----------- ----------- ----- ----- -----
----------- ----------- ----- ----- -----
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES F-21
- --------------------------------------------------------------------------------
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, 1998
Life insurance in force........................... $326,400 $ 200,782 $ 18,289 $143,907 12.7%
Premiums and other considerations
Life insurance and annuities.................... $ 2,329 $ 271 $ 142 $ 2,200 6.5%
Accident and health insurance................... 393 383 8 18 44.4%
-------- -------------- ------- --------
Total premiums and other considerations........... $ 2,722 $ 654 $ 150 $ 2,218 6.8%
-------- -------------- ------- --------
-------- -------------- ------- --------
For the year ended December 31, 1997
Life insurance in force......................... $245,487 $ 178,771 $ 33,156 $ 99,872 33.2%
Premiums and other considerations
Life insurance and annuities.................... $ 1,818 $ 340 $ 157 $ 1,635 9.6%
Accident and health insurance................... 346 346 2 2 100.0%
-------- -------------- ------- --------
Total premiums and other considerations........... $ 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%
Premiums and other considerations
Life insurance and annuities.................... $ 1,801 $ 298 $ 169 $ 1,672 10.1%
Accident and health insurance................... 337 325 21 33 63.6%
-------- -------------- ------- --------
Total premiums and other considerations........... $ 2,138 $ 623 $ 190 $ 1,705 11.1%
-------- -------------- ------- --------
-------- -------------- ------- --------
</TABLE>
<PAGE>
PART C
<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.(2)
(4) Form of Variable Annuity Contract.(1)
(5) Form of Application.(1)
(6) (a) Certificate of Incorporation of Hartford.(3)
(6) (b) Bylaws of Hartford.(1)
(7) Form of Reinsurance Agreement.
(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.
- ------------------------------
(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 Post Effective Amendment No. 19, to
the Registration Statement File No. 33-73570, filed on April 14, 1997.
<PAGE>
-2-
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) Power of Attorney.
(16) Organizational Chart.
Item 25. Directors and Officers of the Depositor
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
NAME POSITION WITH HARTFORD
- ------------------------------------------------------------------------------
<S> <C>
Wendell J. Bossen Vice President
- ------------------------------------------------------------------------------
Gregory A. Boyko Senior Vice President, Director*
- ------------------------------------------------------------------------------
Peter W. Cummins Senior Vice President
- ------------------------------------------------------------------------------
Timothy M. Fitch Vice President
- ------------------------------------------------------------------------------
Mary Jane B. Fortin Vice President & Chief Accounting Officer
- ------------------------------------------------------------------------------
David T. Foy Senior Vice President & Treasurer
- ------------------------------------------------------------------------------
Lynda Godkin Senior Vice President, General Counsel and Corporate
Secretary, Director*
- ------------------------------------------------------------------------------
Lois W. Grady Senior Vice President
- ------------------------------------------------------------------------------
Stephen T. Joyce Vice President
- ------------------------------------------------------------------------------
Michael D. Keeler Vice President
- ------------------------------------------------------------------------------
Robert A. Kerzner Senior Vice President
- ------------------------------------------------------------------------------
Thomas M. Marra Executive Vice President, Director*
- ------------------------------------------------------------------------------
Joseph J. Noto Vice President
- ------------------------------------------------------------------------------
Craig R. Raymond Senior Vice President and Chief Actuary
- ------------------------------------------------------------------------------
Donald A. Salama Vice President
- ------------------------------------------------------------------------------
Lowndes A. Smith President and Chief Executive Officer, Director*
- ------------------------------------------------------------------------------
David M. Znamierowski Senior Vice President, Director*
- ------------------------------------------------------------------------------
</TABLE>
Unless otherwise indicated, the principal business address of each of the
above individuals is P.O. Box 2999, Hartford, CT 06104-2999.
*Denotes Board of Directors.
<PAGE>
-3-
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 March 31, 1999, there are 220,051 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.
<PAGE>
-4-
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 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)
<PAGE>
-5-
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 Insurance Company - Separate Account Seven
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
Alpine Life Insurance Company - Separate Account One
Alpine Life Insurance Company - Separate Account Two
American Maturity Life Insurance Company - Separate Account
AMLVA
Royal Life Insurance Company - Separate Account One
Royal Life Insurance Company - Separate Account Two
(b) Directors and Officers of HSD
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address With Underwriter
------------------ ---------------------
<S> <C>
Lowndes A. Smith President and Chief Executive Officer,
Director
Thomas M. Marra Executive Vice President, Director
Peter W. Cummins Senior Vice President
Lynda Godkin Senior Vice President, General Counsel
and Corporate Secretary
David T. Foy Treasurer
George R. Jay Controller
</TABLE>
Unless otherwise indicated, the principal business address of
each of 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.
<PAGE>
-6-
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 Town of Simsbury, and State of Connecticut on
this 9th day of April, 1999.
HARTFORD LIFE INSURANCE COMPANY -
SEPARATE ACCOUNT TWO
(Registrant)
*By: Thomas M. Marra *By: /s/ Marianne O'Doherty
----------------------------------------- ----------------------
Thomas M. Marra, Executive Vice President Marianne O'Doherty
Attorney-in-Fact
HARTFORD LIFE INSURANCE COMPANY
(Depositor)
*By: Thomas M. Marra
-----------------------------------------
Thomas M. Marra, Executive Vice President
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,
Director* *By: /s/ Marianne O'Doherty
Lynda Godkin, Senior Vice President, General ----------------------
Counsel and Corporate Secretary, Director* Marianne O'Doherty
Thomas M. Marra, Executive Vice Attorney-in-Fact
President, Director*
Lowndes A. Smith, President and Date: April 9, 1999
Chief Executive Officer, Director*
David M. Znamierowski, Senior Vice President,
Director*
<PAGE>
EXHIBIT INDEX
(7) Form of Reinsurance Agreement.
(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) Power of Attorney.
(16) Organizational Chart.
<PAGE>
REINSURANCE AGREEMENT
between
[CEDING COMPANY]
and
[REINSURER]
<PAGE>
INDEX
<TABLE>
<CAPTION>
ARTICLE PAGE
------- ----
<S> <C> <C>
Access to Records XII 7
Amounts at Risk II 1
Arbitration XVII 8
Automatic Excess Reinsurance III 2
Claims VII 5
Currency XIV 7
DAC Tax Regulation Election XVIII 9
Delays, Errors, or Omissions XIII 7
Effective Date; Term and Termination XIX 10
Extra Contractual Obligations IX 6
Hold Harmless XV 8
Insolvency XVI 8
Liability of Reinsurer IV 3
Litigation X 6
Notices XX 13
Offset XI 7
Parties to the Agreement I 1
Premium Accounting VI 4
Reinsurance Premiums V 3
Reserves VIII 5
</TABLE>
SCHEDULES
A Maximum Limits of Reinsurance in Reinsurer
B Policy Forms and Funds Subject to this Reinsurance Agreement
C Definition of Guaranteed Minimum Death Benefit
D Reinsurance Premium Rates
E Reporting Format Description
2
<PAGE>
REINSURANCE AGREEMENT
(hereinafter called Agreement)
between
[CEDING COMPANY]
(hereinafter called Ceding Company)
and
[REINSURER]
(hereinafter called Reinsurer)
It is agreed by the two companies as follows:
ARTICLE I PARTIES TO THE AGREEMENT
This Agreement shall be binding upon and shall inure solely to the benefit of
Ceding Company and Reinsurer. This Agreement shall not and is not intended to
create any right or interest in any third party and shall not and is not
intended to create any legal relationship between either party and any third
party, including, without limitation, annuitants, insureds, certificate
holders, employees, dependents, beneficiaries, policy owners, applicants or
assignees under any policy or contract issued by Ceding Company.
ARTICLE II AMOUNTS AT RISK
A. The reinsurance death benefit is the excess of the guaranteed minimum death
benefit over the contract surrender value. At issue, the guaranteed minimum
death benefit is equal to the initial premium. Once every year thereafter,
on the contract anniversary, prior to certificate or contract owner
attained age 81, the guaranteed minimum death benefit is reset to the then
current contract value, if this value exceeds the current guaranteed
minimum death benefit.
B. The Contract Value represents the owner's invested assets in the funds in
Schedule B as it appears in the records of Ceding Company before
application of any contingent deferred sales charge on any given date. The
Surrender Value is defined as the Contract Value less any contingent
deferred sales charge. The charge is a percentage of the amount surrendered
(not to exceed the aggregate amount of the premium payments made) and
equals:
3
<PAGE>
<TABLE>
<CAPTION>
Length of Time
from Premium Payment
Charge (Number of Years)
------ -----------------
<S> <C>
6% 1
6% 2
5% 3
5% 4
4% 5
3% 6
2% 7
0% 8 or more
</TABLE>
C. The Net Amount At Risk, is equal to the guaranteed minimum death benefit
less the Surrender Value at the end of each calendar month. The Net Amount
At Risk cannot fall below zero.
ARTICLE III AUTOMATIC EXCESS REINSURANCE
A. On and after the Effective Date of this Agreement, subject to the terms,
conditions and limitations set forth in this Agreement and the Schedules
attached to and made a part hereof, Ceding Company shall cede and the
Reinsurer shall accept Ceding Company's guaranteed death benefit liability
under the Variable Annuity Contracts, as described in Article II A.
B. This Agreement covers only Ceding Company's liability for claims paid under
Variable Annuity Contracts written on forms and investment in funds which
were reviewed by the Reinsurer prior to their issuance. Forms, as
supplemented by additional materials, and funds available as of the date of
this Agreement are listed on Schedule B, attached hereto and made a part
hereof. If Ceding Company intends to cede to Reinsurer liability with
respect to a new form or fund, or a revised version of an approved form or
fund, the following applies:
a) new or revised forms that do not materially impact the guaranteed
minimum death benefit risk, shall be submitted to Reinsurer by
Ceding Company as a revised Schedule B to be included in this
Agreement. A form that contains no change in the guaranteed
minimum death benefit calculation and surrender charges no greater
than those shown in Article II paragraph B will be deemed to have
no material impact on the guaranteed minimum death benefit risk;
b) new or revised forms or funds that materially impact the
guaranteed minimum death benefit risk shall be subject to the
approval of Reinsurer. Reinsurer shall have no change in liability
until written notice is provided to Ceding Company that such new
or revised forms or funds are acceptable. If Reinsurer fails to
provide written notice of acceptance within thirty (30) days, such
changes shall be considered to have been approved.
4
<PAGE>
ARTICLE IV LIABILITY OF REINSURER
Reinsurer's liability for reinsurance under this Agreement shall follow that of
Ceding Company in every case, and be subject in all respects to the general
stipulations, terms, clauses, conditions, waivers and modifications of the
Variable Annuity Contracts.
In no event shall Reinsurer have any reinsurance liability unless the Variable
Annuity Contract issued by Ceding Company is in force and the underwriting and
issuance of coverage by Ceding Company constitutes the doing of business in a
state of the United States of America or in territories of the United States of
America in which Ceding Company is properly licensed and authorized to do
business.
ARTICLE V REINSURANCE PREMIUMS
The monthly premiums for reinsurance subject to the terms and conditions of this
Agreement shall be calculated as the average of the reinsurance premiums using
the Net Amount at Risk as of the end of the prior month and the reinsurance
premium using the Net Amount at Risk as of the end of the current month by
applying the YRT rates set forth in Schedule D, subject to the following:
A. The reinsurance premiums shall be based on the older of contract owner and
annuitant at the time the Net Amount at Risk is calculated. Ceding Company
shall determine the age at the time it prepares the monthly exposure data
submission for the variable annuity guaranteed death benefit, as set forth
in Schedule E, attached hereto.
B. The premium for each calendar month will be at least equivalent to the
Monthly Average Contract Value times the minimum premium rate as shown in
paragraphs D and E below. The Monthly Average Contract Value is the average
of the contract values at the end of the current calendar month and the end
of the prior calendar month. The Monthly Contract Value times the minimum
premium rate will be remitted to Reinsurer in advance for the current
month, at the time of settlement for the prior month.
C. The premium for each calendar month will be no more than the monthly
Average Contract Value times the maximum premium rate as shown in
paragraphs D and E below. Basis points (bps) shown below are monthly.
D. [Premium rate schedules]
ARTICLE VI PREMIUM ACCOUNTING
Ceding Company shall forward to Reinsurer within 30 days of the end of the
reporting period a monthly statement substantially similar to that set forth in
Schedule E. Reinsurance premiums submitted by Ceding Company shall be net of
claims incurred. If a balance is due Reinsurer, Ceding Company shall remit any
balance due for the prior
5
<PAGE>
month along with an advance premium for the current month, in accordance with
Article V.
ARTICLE VII CLAIMS
A. Ceding Company is solely responsible for payment of its claims under the
Variable Annuity Contracts, policies, master contracts or certificates
identified on Schedule B. Ceding Company shall provide Reinsurer with proof
of claim, proof of claim payment and any other claim documentation
requested by Reinsurer. Reinsurance premiums submitted by Ceding Company
shall be net of claims incurred. If a balance is due Ceding Company,
Reinsurer shall remit payment within thirty (30) calendar days following
receipt of the monthly reinsurance statement, as set forth in Schedule E.
B. Ceding Company shall notify Reinsurer of its intentions to contest,
compromise, or litigate a claim involving reinsurance.
ARTICLE VIII RESERVES
The reserve held by Reinsurer for reinsurance of the variable annuity death
benefit will be determined as follows:
Contracts issued on or after [Date]
The minimum of the amount calculated by Ceding Company or the recognized
statutory required reserve. Not to exceed the following:
1. Create artificial one (1) year exposures based on a 1/3 drop in all funds
(excluding fixed and money market funds), with no recovery for twelve (12)
months.
2. Apply annual mortality rates from the 1980 CSO mortality table.
3. Ignore the benefit of reinsurance premium.
Contracts issued on or before [Date]
The minimum of the amount calculated by Ceding Company or the recognized
statutory required reserve. Not to exceed the following:
[Date] Year End -- [ %] of the reserve and [Date] Year End -- [ %] of the
reserve calculated using the following method:
1. Create artificial one (1) year exposures based on the following fund
performance:
(a) [ %] drop in equity funds, with no recovery for twelve (12) months
(b) [ %] drop in debt funds, with no recovery for twelve (12) months
6
<PAGE>
2. Apply the annual mortality rates from the [Date] Group Annuity Mortality
Table, loaded [ %].
3. Ignore the benefit of reinsurance premium.
[Date] Year End and beyond -- [ %] of the reserve calculated using the same
method as contracts issued on or after [Date].
ARTICLE IX EXTRA CONTRACTUAL OBLIGATIONS
A. In no event shall Reinsurer be liable for extra contractual damages
(whether they constitute Compensatory damages, Statutory penalties,
Exemplary or Punitive damages) which are awarded against Ceding Company as
a result of an act, omission or course of conduct by Ceding Company in
connection with policies subject to this Agreement, unless the Reinsurer
shall have received notice of an concurred with the actions taken or not
taken by Ceding Company which led to its liability, in which case the
Reinsurer shall pay its share of such liability. For this purpose, the
Reinsurer's share shall be proportionate with its risk under the business
reinsured hereunder.
B. The following definitions shall apply:
(1) Punitive damages and Exemplary damages are those damages awarded as a
penalty, the amount of which is not governed nor fixed by statute.
(2) Statutory penalties are those amounts which are awarded as a penalty,
but fixed in amount by statute.
(3) Compensatory damages are those amounts awarded to compensate for the
actual damages sustained and are not awarded as a penalty nor fixed
in amount by statute.
ARTICLE X LITIGATION
A. In the event of any action brought against Ceding Company related to the
guaranteed minimum death benefit risk under any Underlying Annuity Contract
that is subject to the terms and conditions of this Agreement, Ceding
Company shall provide a copy of such action and written notice of such
action within two (2) business days to Reinsurer. If Reinsurer is a party
to action brought against Ceding Company, Ceding Company shall seek
agreement by Reinsurer on the selection and appointment of local counsel to
represent Ceding Company in such action.
B. Ceding Company and Reinsurer agree that all litigation costs, excluding the
salaries of employees of Ceding Company and Reinsurer, shall be borne by
Ceding Company. However, if Ceding Company and Reinsurer agree to jointly
defend any litigation, litigation costs will be borne in proportion to the
net liability borne by each party.
7
<PAGE>
ARTICLE XI OFFSET
Either party shall have, and may exercise at any time, and from time-to-time,
the right to offset any balance or amounts whether on account of premiums or on
account of losses or otherwise, due from one party to the other under the terms
of this Agreement. However, in the event of insolvency of Ceding Company subject
to the provisions of Article XVI, offset shall only be allowed in accordance
with the statutes and/or regulations of the state having jurisdiction over the
insolvency.
ARTICLE XII ACCESS TO RECORDS
Reinsurer, or its duly authorized representative, shall have access (at any
reasonable time) to all records of Ceding Company (including the right to
photocopy documents) which pertain in any way to this reinsurance. The right of
access shall continue for twelve (12) months following the termination of this
Agreement.
ARTICLE XIII DELAYS, ERRORS OR OMISSIONS
No accidental delay, errors or omissions on the part of Ceding Company shall
relieve Reinsurer of liability provided such delay, errors or omissions are
rectified as soon as possible after discovery. However, Reinsurer shall not be
liable with respect to any reinsurance which may have been inadvertently
included in the premium computation, but which ought not to have been included
by reason of the terms and conditions of this Agreement. It is expressly
understood and agreed that if failure to comply with any terms of this Agreement
is hereby shown to be unintentional or the result of misunderstanding or
oversight on the part of either party, both parties shall be restored to the
position they would have occupied had no such error or oversight occurred,
subject always to the correction of the error or oversight.
ARTICLE XIV CURRENCY
All retentions and limits hereunder are expressed in United States dollars and
all premium and loss payments shall be made in United States currency. For the
purposes of this Agreement, amounts paid or received by Reinsurer in any other
currency shall be converted into United States dollars at the rates of exchange
on the date such transactions are entered on the books of Reinsurer.
ARTICLE XV HOLD HARMLESS
A. Reinsurer shall indemnify and hold Ceding Company harmless from any and all
liability, loss, damage, fines, punitive damages, penalties and costs,
including expenses and attorney's fees, which results from any negligence
or willful misconduct of Reinsurer in fulfilling its duties and obligations
under this Agreement or which results from any action which exceeds its
authority under this Agreement.
8
<PAGE>
B. Ceding Company shall indemnify and hold Reinsurer harmless from any and all
liability, loss, damage, fines, punitive damages, penalties and costs,
including expenses and attorney's fees, which results from any negligence
or willful misconduct of Ceding Company in fulfilling its duties and
obligations under this Agreement or which results from any action which
exceeds its authority under this Agreement.
ARTICLE XVI INSOLVENCY
In the event of insolvency of Ceding Company, the reinsurance under this
Agreement shall be payable directly by Reinsurer to Ceding Company or to its
liquidator, receiver, conservator or statutory successor on the basis of
Reinsurer's liability to Ceding Company without diminution because of the
insolvency of Ceding Company or because the liquidator, receiver, conservator or
statutory successor of Ceding Company has failed to pay all or a portion of any
claim. It is agreed, however, that the liquidator, receiver, conservator or
statutory successor of Ceding Company shall give prompt written notice to
Reinsurer of the pendency of a claim against Ceding Company within a reasonable
time after such claim is filed in the receivership, conservation, insolvency or
liquidation proceeding and that during the pendency of such claim, Reinsurer may
investigate such claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses that it may deem
available to Ceding Company or its liquidator, receiver, conservator or
statutory successor. The expense thus incurred by Reinsurer shall be chargeable,
subject to the approval of the Court, against Ceding Company as part of the
expense of conservation or liquidation to the extend of a pro-rata share of the
benefit which may accrue to Ceding Company solely as a result of the defense
undertaken by Reinsurer.
Where two or more reinsurers are involved in the same claim and a majority in
interest elect to interpose to such claim, the expense shall be apportioned in
accordance with the terms of this Agreement as though such expense had been
incurred by Ceding Company.
ARTICLE XVII ARBITRATION
A. As a condition precedent to any right of action hereunder, any dispute
between the parties with respect to the interpretation of this Agreement
or any right, obligation or liability of either party, whether such dispute
arises before or after termination of this Agreement, shall be submitted to
arbitration upon the written request of either party. Each party shall
select an arbitrator within thirty (30) days of the written request for
arbitration. If either party refuses or neglects to appoint an arbitrator
within thirty (30) days of the written request for arbitration, the other
party may appoint the second arbitrator. The two arbitrators shall select
an umpire within thirty (30) days of the appointment of the second
arbitrator. If the two arbitrators fail to agree on the selection of the
umpire within thirty (30) days of the appointment of the second arbitrator,
each arbitrator shall submit to the other a list of three umpire
candidates, each arbitrator shall select one name from the list submitted
by the other and the
9
<PAGE>
umpire shall be selected from the two names chosen by a lot drawing
procedure to be agreed upon by the arbitrators.
B. The arbitrators and the umpire all shall be active or retired,
disinterested executive officers of insurance or reinsurance companies.
C. The arbitration panel shall interpret this Agreement as an honorable
engagement rather than merely as a legal obligation and shall make its
decision considering the custom and practice of the applicable insurance
and reinsurance business. The arbitration panel is released from judicial
formalities and shall not be bound by strict rules of procedure and
evidence.
D. The decision of the arbitration panel shall be final and binding on both
parties. The arbitration panel may, at its discretion, award costs and
expenses as it deems appropriate, including, but not limited to, attorneys'
fees and interest. Judgment may be entered upon the final decision of the
arbitration panel in any court of competent jurisdiction.
E. All meetings and hearings before the arbitration panel shall take place in
Hartford, Connecticut unless some other place is mutually agreed upon the
parties.
F. Each party shall bear the expense of its own arbitrator and shall jointly
and equally bear with the other party the expenses of the umpire and of the
arbitration.
ARTICLE XVIII DAC TAX REGULATION ELECTION
Reinsurer and Ceding Company hereby agree to make an election pursuant to
Internal Revenue Code Regulations Section 1.848-2(g)(8). This election shall be
effective for all taxable years for which the Reinsurance Agreement remains in
effect.
The terms used in this article are defined by reference to Regulation Section
1.848.2 promulgated on December 28, 1992.
Reinsurer and Ceding Company agree that the entity with net positive
consideration for the reinsurance agreement for each taxable year will
capitalize specified policy acquisition expenses with respect to the reinsurance
agreement without regard to the general deductions limitation of Section
848(c)(1) of the Internal Revenue Code of 1986, as amended.
Reinsurer and Ceding Company agree to exchange information pertaining to the
amount of net consideration under the reinsurance agreement each year to ensure
consistency. To achieve this, Ceding Company shall provide Reinsurer with a
schedule of its calculation of the net consideration for all reinsurance
agreements in force between them for a taxable year by no later than [Date] of
the succeeding year. Reinsurer shall advise Ceding Company if it disagrees with
the amounts provided by no later than [Date],
10
<PAGE>
otherwise the amounts will be presumed correct and shall be reported by both
parties in their respective tax returns for such tax year. If Reinsurer
contests Ceding Company's calculation of the net consideration, the Parties
agree to act in good faith to resolve any differences within thirty (30) days
of the date Reinsurer submits its alternative calculation and report the
amounts agreed upon in their respective tax returns for such tax year.
Reinsurer represents and warrants that it is subject to U. S. taxation under
either Subchapter L or Subpart F of Part III of Subchapter N of the Internal
Revenue Code of 1986, as amended.
ARTICLE XIX EFFECTIVE DATE; TERM AND TERMINATION
A. The effective date of this Agreement is [Date]. This Agreement remains
effective for all annuity contracts subject to this Agreement written by
Ceding Company for three (3) years from the effective date, unless
terminated pursuant to the paragraphs listed below:
B. Either Reinsurer or Ceding Company shall have the option of terminating
this agreement with ninety (90) calendar days written notice to the other
party for new business anytime on or after the end of the three (3) year
period.
C. Once each calendar year, Ceding Company shall have the option to recapture
existing contracts beginning with the twentieth (20) anniversary of their
reinsurance hereunder. Recapture must be made on an issue year basis, and
no contracts can be recaptured unless all contracts with earlier years are
recaptured.
D. Reinsurer shall have the option of terminating this Agreement upon delivery
of thirty (30) calendar days written notice to Ceding Company, within
thirty (30) days of the happening of any of the following events:
FOR NEW AND EXISTING BUSINESS:
(1) Ceding Company's A. M. BEST rating is reduced to a "C" or lower.
(2) Ceding Company is placed upon a "watch list" by its domiciliary
state's insurance regulators;
(3) An order appointing a receiver, conservator or trustee for
management of Ceding Company is entered or a proceeding is commenced
for rehabilitation, liquidation, supervision or conservation of
Ceding Company;
(4) The Securities and Exchange Commission revokes the authority of
Ceding Company to conduct business;
11
<PAGE>
(5) Failure by Ceding Company to pay premium in accordance with Article
V. If, during the thirty (30) days notice period, Reinsurer
receives all premiums in arrears and all premiums which may become
due within the thirty (30) days notice period, the notice of
termination shall be deemed withdrawn. In the event of termination
under this paragraph, this Agreement may be reinstated upon the
written consent of Reinsurer if, at any time within sixty (60) days
of termination, Ceding Company pays and Reinsurer receives all
premiums due with interest thereon and payable up to the date of
reinstatement. (Please refer to paragraph J below for the interest
calculation description).
E. Ceding Company shall have the option of terminating this Agreement upon
delivery of thirty (30) calendar days written notice to Reinsurer, within
thirty (30) days of the happening of any of the following events:
FOR NEW AND EXISTING BUSINESS:
(1) Reinsurer's A. M. BEST rating is reduced to a "B++" or lower;
(2) Reinsurer is placed upon a "watch list" by its domiciliary state's
insurance regulators;
(3) An order appointing a receiver, conservator or trustee for management
of Reinsurer is entered or a proceeding is commenced for
rehabilitation, liquidation, supervision or conservation of Reinsurer;
F. If this Agreement is terminated for new and existing business, Reinsurer
shall be relieved of all liability to Ceding Company for claims incurred
following the termination date of this Agreement under such Underlying
Annuity Contracts issued by Ceding Company, and
G. If this Agreement is terminated for new business only, Reinsurer will
remain liable, after termination, in accordance with the terms and
conditions of this Agreement, with respect to all reinsurance effective
prior to termination of the Agreement for new business.
H. Both parties shall continue to be entitled to all offset credits provided
by Article XI up to the effective date of termination.
I. Ceding Company shall not have the right to assign or transfer any portion
of the rights, duties and obligations of Ceding Company under the terms and
conditions of this Agreement without the written approval of Reinsurer.
J. In the event of reinstatement as described in paragraph D above, there will
be an interest charge at the three (3) month LIBOR Rate (as published in
the Wall Street Journal), plus 1%, determined on the first business day
following the end of the 30-
12
<PAGE>
day notice period. The settlement is considered overdue at the end of the
30-day notice period and interest shall commence from the overdue date.
ARTICLE XX NOTICES
All notices required to be given hereunder shall be in writing and shall be
deemed delivered if personally delivered, sent via facsimile, or dispatched by
certified or registered mail, return receipt requested, postage prepaid,
addressed to the parties as follows:
[Name and Address of Ceding Company]
[Name and Address of Reinsurer]
Notice shall be deemed given on the date it is received in the mail or sent via
facsimile in accordance with the foregoing. Any party may change the address to
which to send notices by notifying the other party of such change of address in
writing in accordance with the foregoing.
This Agreement constitutes the entire contract between the parties and shall be
deemed to have been made under and governed by the laws of the State of
Connecticut. Any amendment or modification hereto shall be in writing, endorsed
upon or attached hereto and signed by both Ceding Company and Reinsurer.
In witness thereof, the parties hereto have caused this Agreement to be signed
in duplicate on the dates indicated to be effective as of the date specified
above.
CEDING COMPANY
Date: By:
--------------------- -----------------------------
REINSURER
Date: By:
--------------------- -----------------------------
13
<PAGE>
SCHEDULE A
Maximum Limits of Reinsurance in Reinsurer
The maximum purchase amount issued on the life of each insured*:
[$ ]
The total purchase amount is the sum of all premium contributions for each
contract in which the insured is the owner or annuitant. For purchase amounts in
excess of the maximum, Reinsurer's death benefit liability will be reduced by
the ratio of purchase amounts in excess of the maximum to the total purchase
amounts.
*The insured is defined as the first to die of the owner and the annuitant.
14
<PAGE>
SCHEDULE B
Contracts and Funds Subject to this Reinsurance Agreement
Form Number Policy Description Date
- ----------- ------------------ ----
FUNDS:
a) Fixed Accounts on the above forms
b) Variable Accounts as listed below:
Fund Description
- ----------------
15
<PAGE>
SCHEDULE C
GUARANTEED MINIMUM DEATH BENEFIT
A. Ceding Company will determine the Guaranteed Minimum Death Benefit for
each deceased within seven (7) working days of written notice of death.
The guaranteed minimum death benefit will have the meaning described in the
attached policy form [ ].
16
<PAGE>
SCHEDULE D
Monthly Reinsurance Premium Rates
For Inforce Business as of [Date]
Exposure Based
Per [$ ] Exposed
<TABLE>
<CAPTION>
AGES MALE FEMALE
- ------------------------------------- ----------------------------------- -----------------------------------
<S> <C> <C>
< 35
- ------------------------------------- ----------------------------------- -----------------------------------
35-39
- ------------------------------------- ----------------------------------- -----------------------------------
40-44
- ------------------------------------- ----------------------------------- -----------------------------------
45-49
- ------------------------------------- ----------------------------------- -----------------------------------
50-54
- ------------------------------------- ----------------------------------- -----------------------------------
55-59
- ------------------------------------- ----------------------------------- -----------------------------------
60-64
- ------------------------------------- ----------------------------------- -----------------------------------
65-69
- ------------------------------------- ----------------------------------- -----------------------------------
70-74
- ------------------------------------- ----------------------------------- -----------------------------------
75-79
- ------------------------------------- ----------------------------------- -----------------------------------
80-84
- ------------------------------------- ----------------------------------- -----------------------------------
85-89
- ------------------------------------- ----------------------------------- -----------------------------------
</TABLE>
17
<PAGE>
EXHIBIT 9
[LOGO]
[HARTFORD LIFE]
April 9, 1999 LYNDA GODKIN
Senior Vice President, General Counsel &
Corporate Secretary
Board of Directors
Hartford Life Insurance Company
200 Hopmeadow Street
Simsbury, CT 06089
RE: SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
FILE NO. 333-41213
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 variable
annuity 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 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.
<PAGE>
Board of Directors
April 9, 1999
Page 2
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.
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>
EXHIBIT 10
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of
this Registration Statement File No. 333-41213 for Hartford Life Insurance
Company Separate Account Two on Form N-4.
/s/ Arthur Andersen LLP
Hartford, Connecticut
April 12, 1999
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
POWER OF ATTORNEY
-----------------
Gregory A. Boyko
David T. Foy
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, Christine Repasy,
Marianne O'Doherty, Thomas S. Clark and Brian Lord 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 under the Securities Act of 1933 and/or the Investment Company Act of
1940, and do hereby ratify any such signatures heretofore made by such
persons.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney for
the purpose herein set forth.
/s/ Gregory A. Boyko Dated as of January 15, 1999
- ------------------------------
Gregory A. Boyko
/s/ David T. Foy Dated as of January 15, 1999
- ------------------------------
David T. Foy
/s/ Lynda Godkin Dated as of January 15, 1999
- ------------------------------
Lynda Godkin
/s/ Thomas M. Marra Dated as of January 15, 1999
- ------------------------------
Thomas M. Marra
/s/ Lowndes A. Smith Dated as of January 15, 1999
- ------------------------------
Lowndes A. Smith
/s/ Raymond P. Welnicki Dated as of January 15, 1999
- ------------------------------
Raymond P. Welnicki
/s/ Lizabeth H. Zlatkus Dated as of January 15, 1999
- ------------------------------
Lizabeth H. Zlatkus
/s/ David M. Znamierowski Dated as of January 15, 1999
- ------------------------------
David M. Znamierowski
<PAGE>
ORGANIZATIONAL CHART
<TABLE>
<CAPTION>
<S> <C>
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(DELAWARE)
|
---------------------------------------------
NUTMEG INSURANCE COMPANY |
(CONNECTICUT) THE HARTFORD INVESTMENT
| MANAGEMENT COMPANY
HARTFORD FIRE INSURANCE COMPANY (DELAWARE)
(CONNECTICUT) |
| |
HARTFORD ACCIDENT AND INDEMNITY COMPANY HARTFORD INVESTMENT
(CONNECTICUT) SERVICES, INC.
| (CONNECTICUT)
HARTFORD LIFE, INC.
(DELAWARE)
|
HARTFORD LIFE & ACCIDENT INSURANCE COMPANY
(CONNECTICUT)
|
|
|
-------------------------------------------------------------------------------------------------------------------------
| | | | | | | | |
ITT HARTFORD LIFE | | | | | | HLIC PLANCO
INTERNATIONAL LTD. | | | | | | CANADA FINANCIAL
(CONNECTICUT) | | | | | | HOLDINGS, INC. SERVICES,
| | | | | | | (CANADA) INCORPORATED
| | | | | | | | (PENNSYLVANIA)
| | | | | | | | |
| | ALPINE LIFE HARTFORD FINANCIAL HARTFORD LIFE HARTFORD AMERICAN | |
| | INSURANCE SERVICES LIFE INSURANCE COMPANY FINANCIAL MATURITY LIFE | |
| | COMPANY INSURANCE CO. (CONNECTICUT) SERVICES, LLC INSURANCE COMPANY | |
| | (CONNECTICUT) (CONNECTICUT) | (DELAWARE) (CONNECTICUT) | PLANCO, INC.
| | | | | | (PENNSYLVANIA)
| | ------------------------------------- | AML FINANCIAL, INC. |
HARTFORD CALMA | | | | | (CONNECTICUT) |
COMPANY | ROYAL LIFE HARTFORD HARTFORD | HARTFORD
(FLORIDA) | INSURANCE INTERNATIONAL LIFE AND | LIFE INSURANCE
| COMPANY LIFE REASSURANCE ANNUITY INSURANCE | COMPANY
| OF AMERICA CORP. COMPANY | OF CANADA
|(CONNECTICUT) (CONNECTICUT) (CONNECTICUT) | (CANADA)
| | |
| | |
| ITT HARTFORD |
| LIFE, LTD. |
| (BERMUDA) |
| |
| |
----------| ---------------------------------------------------------------------------------------------
| | | | | |
INTERNATIONAL MS FUND HL INVESTMENT HARTFORD HARTFORD SECURITIES HARTFORD COMP. EMP.
CORPORATE AMERICA 1993-K ADVISORS, LLC EQUITY SALES DISTRIBUTION BENEFITS SERVICE
MARKETING GROUP, INC. SPE, INC. (CONNECTICUT) COMPANY, INC. COMPANY, INC. COMPANY
(CONNECTICUT) (DELAWARE) | (CONNECTICUT) (CONNECTICUT) (CONNECTICUT)
| |
| |
THE EVERGREEN HARTFORD INVESTMENT
GROUP, INC. FINANCIAL SERVICES
(NEW YORK) COMPANY
(DELAWARE)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(DELAWARE)
|
NUTMEG INSURANCE COMPANY
(CONNECTICUT)
|
HARTFORD FIRE INSURANCE COMPANY
(CONNECTICUT)
|
----------------------------------------------------------------------------------------------------------------------------
| | |
| | ITT HARTFORD LIFE
| | -------INTERNATIONAL LTD.
| | | (CONNECTICUT)
| | | |
| | | ITT HARTFORD
| | | ----SUDAMERICANA
| | | | HOLDING S.A.
| | | | (ARGENTINA)
| | | |------------------------------------------------------
| | | | | |
| | | | HARTFORD GALICIA INSTITUTO DE
| | | | SEGUROS VIDA COMPANIA SALTA COMPANIA DE
| | | |--------DE VIDA DE SEGUROS S.A. SEGUROS DE VIDA S.A.
| | | | (URUGUAY) (ARGENTINA) (ARGENTINA)
| | | |
| | ICATU | | ITT HARTFORD
| | HARTFORD | |-----SEGUROS DE VIDA
| | SEGUROS S.A.----------| | (ARGENTINA)
| | (BRAZIL) | |
| | | | |
| | | | | ITT HARTFORD
| | -- ----------| | |------SEGUROS DE
| | | | | | RETIRO S.A.
| | | | | | (ARGENTINA)
|-----------|----------------|---------------|---|--------------------------------------------------------------------------
| | | | | |
| | | ICATU HARTFORD | | CONSULTORA DE CAPITALES
| | | FUNDO DE PENSAO | | S.A. SOCIEDAD GERENTE
| | | (BRAZIL) | |----DE FONDOS COMUNES
| | | | | | DE ENVERSION
| | | | | | (ARGENTINA)
| | | ICATU HARTFORD | |
| | | CAPITALIZACAO S.A. | | CLARIDAD
| | | (BRAZIL) | | ADMINISTRADORA DE
| | | | | |---FONDOS DE JUBILACIONES
| | | BRAZILCAP | | Y PENSIONES S.A.
| | | CAPITALIZACAO S.A. | | (ARGENTINA)
| | | (BRAZIL) | |
| | | | |
| | -------------------------- | |
| |--------------- | | |
| | | | |
HARTFORD FIRE HARTFORD FIRE | | |------- SEGPOOL S.A.
INTERNATIONAL------------INTERNATIONAL, LTD. | | | (ARGENTINA)
(GERMANY) GMBH (CONNECTICUT) | | |
(WEST GERMANY) | | |
| | |
ICATU HARTFORD | | | THESIS S.A.
ADMINISTRACAO | | |-------- (ARGENTINA)
DE BENEFICIOS LTDA-- | | |
(BRAZIL) | |
| |
----------------- |
| |
CAB |--------- U.O.R., S.A.
CORPORATION (ARGENTINA)
(BRITISH VIRGIN ISLANDS)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(DELAWARE)
|
NUTMEG INSURANCE COMPANY
(CONNECTICUT)
|
HARTFORD FIRE INSURANCE COMPANY
(CONNECTICUT)
|
- --------------------------------------------------------------------------------------------------------------------------------|
| |
THE HARTFORD INTERNATIONAL |
|-----------------------------------------------------------------------FINANCIAL SERVICES GROUP, INC. |
| | | (DELAWARE) |
| | | ----------------------|----------------- |
| | | | | | | |
ZWOLSCHE | | ITT HARTFORD LONDON AND | HARTFORD |
ALGEMEENE N.V. | | INTERNATIONAL, LTD. EDINBURGH | EUROPE, INC. |
(NETHERLANDS) | | (U.K.) INSURANCE GROUP, LTD.| (DELAWARE) |
| | | (U.K.) | |
| | | | | |
| | | ------------- | |
| | | | | |
| ITT ASSURANCES HARTFORD INTERNATIONAL | LONDON AND --ITT ERCOS |
| S.A. INSURANCE CO., N.V. |--- EDINBURGH DE SEGUROS Y |
| ZWOLSCHE ALGEMEENE (FRANCE) (BELGIUM) | INSURANCE CO., LTD. REASEGUROS S.A.|
|----SCHADEVERZEKERING | | (U.K.) (SPAIN) |
--------| N.V.----------------------------------- | | | |
| | (NETHERLANDS) | | | | |
Z.A. | | | | EXCESS INSURANCE |
- --VERZEKERINGEN | | | | COMPANY LTD. |
| N.V. | ZWOLSCHE ALGEMEENE | | | (U.K.) |
| (BELGIUM) |------HERVERZEKERING B.V. | | | |
| | -----| (NETHERLANDS) | | | LONDON AND |
| | | | | | |--- EDINBURGH LIFE |
| Z.A. LUX S.A. | | | | ASSURANCE CO., LTD. |
| (LUXEMBURG) | ZWOLSCHE ALGEMEENE | | | (U.K.) |
| |--LEVENS-VERZEKERING N.V.------------ | | | |
| | (NETHERLANDS) | | | | |
- ----------------|------------------------------------|------------|------|--------------|---------------------------------------|
| | | | | | |
| -------- | | | | |
| | | | | | | |
| ZWOLSCHE | ZWOLSCHE ALGEMEENE ZWOLSCHE ALGEMEENE | | | |
| ALGEMEENE |-----HYPOTHEKEN N.V. BELEGGINGEN III B.V. | | | |
| EUROPA B.V. | (NETHERLANDS) (NETHERLANDS) | | | |
| (NETHERLANDS) | ---------- | | |
- --------| | | | | |
| EXPLOITATIEMAAT- BELEGGINGSMAAT- | | |
|----- SCHAPPIJ SCHAPPIJ | | |
| BUIZERDLAAN B.V. BUIZERDLAAN B.V. | | |
| (NETHERLANDS) (NETHERLANDS) | | |
| | | |
| | | -----
| HOLLAND | |-------------------------- |
|---- BELEGGINGSGROEP B.V. | | | |
(NETHERLANDS) | |----------------- | |
| -------| | | |
| | | | | |
| | | | | |
F.A. KNIGHT | MACALISTER & LONDON AND | HARTFORD FIRE
& SON N.V. | DUNDAS, LTD. EDINBURGH | INTERNATIONAL
(BELGIUM) | (SCOTLAND) TRUSTEES, LTD. | SERVICIOS
| (U.K.) | (SPAIN)
------------------------- -----------
| | |
FENCOURT QUOTEL LONDON AND
PRINTERS, LTD. INSURANCE EDINBURGH
(U.K.) SYSTEMS, LTD. SERVICES, LTD.
(U.K.) (U.K.)
|
EUROSURE
INSURANCE
MARKETING, LTD.
(U.K.)
</TABLE>
