<PAGE>
<TABLE>
<S> <C>
THE DIRECTOR SELECT PLUS
SEPARATE ACCOUNT TWO
HARTFORD LIFE INSURANCE COMPANY
P.O. BOX 5085
HARTFORD, CONNECTICUT 06102-5085
TELEPHONE: 1-800-862-6668 (CONTRACT OWNERS)
1-800-862-7155 (REGISTERED REPRESENTATIVES) [LOGO]
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This prospectus describes information you should know before you purchase The
Director Select Plus variable annuity. Please read it carefully.
We call this annuity Director Select Plus because each time you make a Premium
Payment, Hartford will credit your Contract Value with a Payment Enhancement.
The expenses for this Annuity may be higher than the expenses for an annuity
without the Payment Enhancements. The Payment Enhancements may, over time, be
more than offset by the higher expenses.
The Director Select Plus 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 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:
- - EVERGREEN CAPITAL GROWTH SUB-ACCOUNT which purchases shares of Evergreen VA
Capital Growth Fund of the Evergreen Variable Annuity Trust.
- - EVERGREEN FOUNDATION SUB-ACCOUNT which purchases shares of Evergreen VA
Foundation Fund of the Evergreen Variable Annuity Trust.
- - EVERGREEN GROWTH SUB-ACCOUNT which purchases shares of Evergreen VA Growth
Fund of the Evergreen Variable Annuity Trust.
- - EVERGREEN OMEGA SUB-ACCOUNT which purchases shares of Evergreen VA Omega Fund
of the Evergreen Variable Annuity Trust.
- - EVERGREEN PERPETUAL INTERNATIONAL SUB-ACCOUNT which purchases shares of
Evergreen VA Perpetual International Fund of the Evergreen Variable Annuity
Trust.
- - EVERGREEN SPECIAL EQUITY SUB-ACCOUNT which purchases shares of Evergreen VA
Special Equity Fund of the Evergreen Variable Annuity Trust.
- - HARTFORD ADVISERS HLS FUND SUB-ACCOUNT which purchases shares of Class IB of
Hartford Advisers HLS Fund, Inc.
- - HARTFORD BOND HLS FUND SUB-ACCOUNT which purchases shares of Class IB of
Hartford Bond HLS Fund, Inc.
- - HARTFORD CAPITAL APPRECIATION HLS FUND SUB-ACCOUNT which purchases shares of
Class IB of Hartford Capital Appreciation HLS Fund, Inc.
- - HARTFORD DIVIDEND AND GROWTH HLS FUND SUB-ACCOUNT which purchases shares of
Class IB of Hartford Dividend and Growth HLS Fund, Inc.
- - HARTFORD GLOBAL LEADERS HLS FUND SUB-ACCOUNT which purchases shares of
Class IB of Hartford Global Leaders HLS Fund.
- - HARTFORD GROWTH AND INCOME HLS FUND SUB-ACCOUNT which purchases shares of
Class IB of Hartford Growth and Income HLS Fund.
- - HARTFORD HIGH YIELD HLS FUND SUB-ACCOUNT which purchases shares of Class IB of
Hartford High Yield HLS Fund.
- - HARTFORD INDEX HLS FUND SUB-ACCOUNT which purchases shares of Class IB of
Hartford Index HLS Fund, Inc.
<PAGE>
- - HARTFORD INTERNATIONAL ADVISERS HLS FUND SUB-ACCOUNT which purchases shares of
Class IB of Hartford International Advisers HLS Fund, Inc.
- - HARTFORD INTERNATIONAL OPPORTUNITIES HLS FUND SUB-ACCOUNT which purchases
shares of Class IB of Hartford International Opportunities HLS Fund, Inc.
- - HARTFORD MIDCAP HLS FUND SUB-ACCOUNT which purchases shares of Class IB of
Hartford MidCap HLS Fund, Inc.
- - HARTFORD MONEY MARKET HLS FUND SUB-ACCOUNT which purchases shares of Class IB
of Hartford Money Market HLS Fund, Inc.
- - HARTFORD MORTGAGE SECURITIES HLS FUND SUB-ACCOUNT that purchases shares of
Class IB of Hartford Mortgage Securities HLS Fund, Inc.
- - HARTFORD SMALL COMPANY HLS FUND SUB-ACCOUNT which purchases shares of
Class IB of Hartford Small Company HLS Fund, Inc.
- - HARTFORD STOCK HLS 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
- --------------------------------------------------------------------------------
THE DATE OF THIS PROSPECTUS IS MARCH 7, 2000
THE DATE OF THE STATEMENT OF ADDITIONAL INFORMATION IS MARCH 7, 2000.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 3
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
- ----------------------------------------------------------------------
DEFINITIONS 4
- ----------------------------------------------------------------------
FEE TABLE 6
- ----------------------------------------------------------------------
HIGHLIGHTS 10
- ----------------------------------------------------------------------
GENERAL CONTRACT INFORMATION 11
- ----------------------------------------------------------------------
Hartford Life Insurance Company 11
- ----------------------------------------------------------------------
The Separate Account 11
- ----------------------------------------------------------------------
The Funds 12
- ----------------------------------------------------------------------
THE FIXED ACCUMULATION FEATURE 14
- ----------------------------------------------------------------------
THE CONTRACT 15
- ----------------------------------------------------------------------
Purchases and Contract Value 15
- ----------------------------------------------------------------------
Charges and Fees 17
- ----------------------------------------------------------------------
Death Benefit 19
- ----------------------------------------------------------------------
Surrenders 21
- ----------------------------------------------------------------------
ANNUITY PAYOUTS 23
- ----------------------------------------------------------------------
OTHER PROGRAMS AVAILABLE 25
- ----------------------------------------------------------------------
OTHER INFORMATION 25
- ----------------------------------------------------------------------
Legal Matters and Experts 26
- ----------------------------------------------------------------------
More Information 26
- ----------------------------------------------------------------------
FEDERAL TAX CONSIDERATIONS 26
- ----------------------------------------------------------------------
A. General 26
- ----------------------------------------------------------------------
B. Taxation of Hartford and the Separate Account 26
- ----------------------------------------------------------------------
C. Taxation of Annuities -- General Provisions Affecting
Purchases Other Than Qualified Retirement Plans 27
- ----------------------------------------------------------------------
D. Federal Income Tax Withholding 29
- ----------------------------------------------------------------------
E. General Provisions Affecting Qualified Retirement Plans 29
- ----------------------------------------------------------------------
F. Annuity Purchases By Nonresident Aliens and Foreign
Corporations 29
- ----------------------------------------------------------------------
G. Generation -- Skipping Transfers 29
- ----------------------------------------------------------------------
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION 30
- ----------------------------------------------------------------------
APPENDIX 1 -- INFORMATION REGARDING TAX-QUALIFIED RETIREMENT
PLANS 31
- ----------------------------------------------------------------------
</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 the
Annuity Calculation Date.
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, Connecticut
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 and any
Payment Enhancements credited 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 COMMENCEMENT DATE: The date we start to make Annuity Payouts.
ANNUITY PAYOUT: The money we pay out after the Annuity Commencement Date for the
duration and frequency you select.
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.
This amount is calculated using the Assumed Investment Return for variable
dollar amount Annuity Payouts or the underlying rate of return for fixed dollar
amount 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.
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 the Annuity Calculation Date. You may name a Joint
Annuitant only if your Annuity Payout
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 5
- --------------------------------------------------------------------------------
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.
PAYMENT ENHANCEMENT: An amount that Hartford credits your Contract Value at the
time a premium payment is made. The amount of a Payment Enhancement is based on
the cumulative premium payments you make to your Annuity.
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 CHARGE IMPOSED ON PURCHASES (as a percentage of
premium payments) None
- ---------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGE (as a percentage of amounts
Surrendered) (1)
First Year (2) 8%
- ---------------------------------------------------------------------
Second Year 8%
- ---------------------------------------------------------------------
Third Year 8%
- ---------------------------------------------------------------------
Fourth Year 8%
- ---------------------------------------------------------------------
Fifth Year 7%
- ---------------------------------------------------------------------
Sixth Year 6%
- ---------------------------------------------------------------------
Seventh Year 5%
- ---------------------------------------------------------------------
Eighth Year 0%
- ---------------------------------------------------------------------
ANNUAL MAINTENANCE FEE (3) $30
- ---------------------------------------------------------------------
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average
daily Sub-Account Value)
MORTALITY AND EXPENSE RISK CHARGE 1.45%
- ---------------------------------------------------------------------
Total Separate Account Annual Expenses 1.45%
- ---------------------------------------------------------------------
OPTIONAL CHARGES (as a percentage of average daily
Sub-Account Value)
OPTIONAL DEATH BENEFIT CHARGE 0.15%
- ---------------------------------------------------------------------
Total Separate Account Annual Expenses with the Optional
Death Benefit Charge 1.60%
- ---------------------------------------------------------------------
</TABLE>
(1) Each Premium Payment has its own Contingent Deferred Sales Charge Schedule.
(2) Length of time from premium payment.
(3) 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 the Fee Table and Examples is to assist you in understanding
various costs and expenses that you will pay directly or indirectly. The Fee
Table and Examples reflect expenses of the Separate Account and underlying
Funds. We will deduct any Premium Taxes that apply.
The Examples 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 Examples 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.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 7
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses as of the Fund's Year End
(as a percentage of average net assets)
<TABLE>
<CAPTION>
12b-1
DISTRIBUTION
AND/OR SERVICING TOTAL FUND
FEE (INCLUDING OTHER OPERATING
MANAGEMENT FEES ANY WAIVERS)(1) EXPENSES EXPENSES
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Evergreen VA Capital Growth Fund 0.80% N/A 0.38% 1.18%
- ------------------------------------------------------------------------------------------------------------------------
Evergreen VA Foundation Fund 0.83% N/A 0.12% 0.95%
- ------------------------------------------------------------------------------------------------------------------------
Evergreen VA Growth Fund 0.70% N/A 0.63% 1.33%
- ------------------------------------------------------------------------------------------------------------------------
Evergreen VA Omega Fund 0.60% N/A 0.36% 0.96%
- ------------------------------------------------------------------------------------------------------------------------
Evergreen VA Perpetual International Fund 1.00% N/A 0.96% 1.96%
- ------------------------------------------------------------------------------------------------------------------------
Evergreen VA Special Equity Fund (2) 1.36% N/A 2.35% 3.71%
- ------------------------------------------------------------------------------------------------------------------------
Hartford Advisers HLS Fund 0.63% 0.18% 0.02% 0.83%
- ------------------------------------------------------------------------------------------------------------------------
Hartford Bond HLS Fund 0.49% 0.18% 0.03% 0.70%
- ------------------------------------------------------------------------------------------------------------------------
Hartford Capital Appreciation HLS Fund 0.64% 0.18% 0.02% 0.84%
- ------------------------------------------------------------------------------------------------------------------------
Hartford Dividend and Growth HLS Fund 0.65% 0.18% 0.03% 0.86%
- ------------------------------------------------------------------------------------------------------------------------
Hartford Global Leaders HLS Fund 0.74% 0.18% 0.12% 1.04%
- ------------------------------------------------------------------------------------------------------------------------
Hartford Growth and Income HLS Fund 0.78% 0.18% 0.04% 1.00%
- ------------------------------------------------------------------------------------------------------------------------
Hartford High Yield HLS Fund 0.66% 0.18% 0.06% 0.90%
- ------------------------------------------------------------------------------------------------------------------------
Hartford Index HLS Fund 0.40% 0.18% 0.03% 0.61%
- ------------------------------------------------------------------------------------------------------------------------
Hartford International Advisers HLS Fund 0.76% 0.18% 0.09% 1.03%
- ------------------------------------------------------------------------------------------------------------------------
Hartford International Opportunities HLS Fund 0.69% 0.18% 0.09% 0.96%
- ------------------------------------------------------------------------------------------------------------------------
Hartford MidCap HLS Fund 0.76% 0.18% 0.03% 0.97%
- ------------------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS Fund 0.45% 0.18% 0.02% 0.65%
- ------------------------------------------------------------------------------------------------------------------------
Hartford Mortgage Securities HLS Fund 0.45% 0.18% 0.03% 0.66%
- ------------------------------------------------------------------------------------------------------------------------
Hartford Small Company HLS Fund 0.75% 0.18% 0.03% 0.96%
- ------------------------------------------------------------------------------------------------------------------------
Hartford Stock HLS Fund 0.46% 0.18% 0.02% 0.66%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) 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 0.25%
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 agreed to waive
0.07% of this fee through at least April 30, 2001. Absent such waiver, the
12b-1 Distribution and/or Servicing Fees would be 0.25% and the Total Fund
Operating Expenses would be as follows: Hartford Advisers HLS Fund--0.90%;
Hartford Bond HLS Fund--0.77%; Hartford Capital Appreciation HLS
Fund--0.91%; Hartford Dividend and Growth HLS Fund--0.93%; Hartford Global
Leaders HLS Fund--1.11%; Hartford Growth and Income HLS Fund--1.07%;
Hartford High Yield HLS Fund--0.97%; Hartford Index HLS Fund--0.68%;
Hartford International Advisers HLS Fund--1.10%; Hartford International
Opportunities HLS Fund--1.03%; Hartford MidCap HLS Fund--1.04%; Hartford
Money Market HLS Fund--0.72%; Hartford Mortgage Securities HLS Fund--0.73%;
Hartford Small Company HLS Fund--1.03%; Hartford Stock HLS Fund--0.73%.
(2) The Evergreen VA Special Equity Portfolio inception date is 9/30/99.
Expenses have been estimated based upon current fund contracts. Currently
the Advisor waives its management fee and reimburses the Fund for certain
expenses. With these waivers and reimbursements, the Management Fee and
Total Operating Expenses would be:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
MANAGEMENT FEES EXPENSES EXPENSES
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------
Evergreen VA Special Equity Fund 0.00% 1.03% 1.03%
-----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
8 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
EXAMPLE
THE FOLLOWING EXAMPLE ILLUSTRATES SITUATIONS WHERE THE OPTIONAL DEATH BENEFIT IS
SELECTED AND TAKES INTO ACCOUNT THE PAYMENT ENHANCEMENT CREDITED ON A $1,000
INVESTMENT.
<TABLE>
<CAPTION>
If you Surrender your Contract at the If you annuitize your Contract at the
end of the applicable time period you end of the applicable time period you
would pay the following expenses on would pay the following expenses on
a $1,000 investment, assuming a 5% a $1,000 investment, assuming a 5%
annual return on assets: annual return on assets:
SUB-ACCOUNT 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>
- --------------------------------------------------------------------------------------------------------------------
Evergreen VA Capital Growth
Fund $106 $172 $226 $330 $59 $ 91 $156 $329
- --------------------------------------------------------------------------------------------------------------------
Evergreen VA Foundation Fund $104 $165 $214 $306 $57 $ 84 $144 $305
- --------------------------------------------------------------------------------------------------------------------
Evergreen VA Growth Fund $108 $176 $234 $345 $61 $ 96 $163 $344
- --------------------------------------------------------------------------------------------------------------------
Evergreen VA Omega Fund $104 $165 $215 $307 $57 $ 84 $144 $306
- --------------------------------------------------------------------------------------------------------------------
Evergreen VA Perpetual
International Fund $114 $195 $266 $405 $68 $115 $195 $404
- --------------------------------------------------------------------------------------------------------------------
Evergreen VA Special Equity
Fund $133 $244 $346 $554 $86 $169 $280 $554
- --------------------------------------------------------------------------------------------------------------------
Hartford Advisers HLS Fund $102 $161 $208 $294 $56 $ 80 $137 $293
- --------------------------------------------------------------------------------------------------------------------
Hartford Bond HLS Fund $101 $157 $201 $280 $54 $ 76 $130 $279
- --------------------------------------------------------------------------------------------------------------------
Hartford Capital Appreciation
HLS Fund $103 $161 $209 $295 $56 $ 80 $138 $294
- --------------------------------------------------------------------------------------------------------------------
Hartford Dividend and Growth
HLS Fund $103 $162 $210 $297 $56 $ 81 $139 $296
- --------------------------------------------------------------------------------------------------------------------
Hartford Global Leaders HLS
Fund $105 $167 $219 $315 $58 $ 87 $148 $315
- --------------------------------------------------------------------------------------------------------------------
Hartford Growth and Income
HLS Fund $104 $166 $217 $311 $57 $ 86 $146 $311
- --------------------------------------------------------------------------------------------------------------------
Hartford High Yield HLS Fund $103 $163 $212 $301 $56 $ 82 $141 $300
- --------------------------------------------------------------------------------------------------------------------
Hartford Index HLS Fund $100 $154 $196 $271 $53 $ 73 $126 $270
- --------------------------------------------------------------------------------------------------------------------
Hartford International
Advisers HLS Fund $105 $167 $219 $314 $58 $ 86 $148 $314
- --------------------------------------------------------------------------------------------------------------------
Hartford International
Opportunities HLS Fund $104 $165 $215 $307 $57 $ 84 $144 $306
- --------------------------------------------------------------------------------------------------------------------
Hartford MidCap HLS Fund $104 $165 $215 $308 $57 $ 85 $145 $308
- --------------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS
Fund $101 $155 $199 $275 $54 $ 74 $128 $274
- --------------------------------------------------------------------------------------------------------------------
Hartford Mortgage Securities
HLS Fund $101 $155 $199 $276 $54 $ 75 $128 $275
- --------------------------------------------------------------------------------------------------------------------
Hartford Small Company HLS
Fund $104 $165 $215 $307 $57 $ 84 $144 $306
- --------------------------------------------------------------------------------------------------------------------
Hartford Stock HLS Fund $101 $155 $199 $276 $54 $ 75 $128 $275
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
If you do not Surrender your
Contract, you would pay the
following expenses on a $1,000
investment, assuming a 5% annual
return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- -----------------------------
Evergreen VA Capital Growth
Fund $30 $ 92 $156 $330
- -----------------------------
Evergreen VA Foundation Fund $28 $ 85 $144 $306
- -----------------------------
Evergreen VA Growth Fund $32 $ 97 $164 $345
- -----------------------------
Evergreen VA Omega Fund $28 $ 85 $145 $307
- -----------------------------
Evergreen VA Perpetual
International Fund $38 $116 $196 $405
- -----------------------------
Evergreen VA Special Equity
Fund $57 $169 $281 $554
- -----------------------------
Hartford Advisers HLS Fund $26 $ 81 $138 $294
- -----------------------------
Hartford Bond HLS Fund $25 $ 77 $131 $280
- -----------------------------
Hartford Capital Appreciation
HLS Fund $26 $ 81 $139 $295
- -----------------------------
Hartford Dividend and Growth
HLS Fund $27 $ 82 $140 $297
- -----------------------------
Hartford Global Leaders HLS
Fund $29 $ 87 $149 $315
- -----------------------------
Hartford Growth and Income
HLS Fund $28 $ 86 $147 $311
- -----------------------------
Hartford High Yield HLS Fund $27 $ 83 $142 $301
- -----------------------------
Hartford Index HLS Fund $24 $ 74 $126 $271
- -----------------------------
Hartford International
Advisers HLS Fund $28 $ 87 $149 $314
- -----------------------------
Hartford International
Opportunities HLS Fund $28 $ 85 $145 $307
- -----------------------------
Hartford MidCap HLS Fund $28 $ 85 $145 $308
- -----------------------------
Hartford Money Market HLS
Fund $24 $ 75 $129 $275
- -----------------------------
Hartford Mortgage Securities
HLS Fund $24 $ 75 $129 $276
- -----------------------------
Hartford Small Company HLS
Fund $28 $ 85 $145 $307
- -----------------------------
Hartford Stock HLS Fund $24 $ 75 $129 $276
- ---------------------------------------------------------------------------------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 9
- --------------------------------------------------------------------------------
EXAMPLE
THE FOLLOWING EXAMPLE ILLUSTRATES SITUATIONS WHERE THE OPTIONAL DEATH BENEFIT
RIDER IS NOT SELECTED AND TAKES INTO ACCOUNT THE PAYMENT ENHANCEMENT CREDITED ON
A $1,000 INVESTMENT.
<TABLE>
<CAPTION>
If you Surrender your Contract at the If you annuitize your Contract at the
end of the applicable time period you end of the applicable time period you
would pay the following expenses on would pay the following expenses on
a $1,000 investment, assuming a 5% a $1,000 investment, assuming a 5%
annual return on assets: annual return on assets:
SUB-ACCOUNT 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>
- --------------------------------------------------------------------------------------------------------------------
Evergreen VA Capital Growth
Fund $105 $167 $219 $314 $58 $ 86 $148 $314
- --------------------------------------------------------------------------------------------------------------------
Evergreen VA Foundation Fund $102 $160 $206 $291 $55 $ 79 $136 $290
- --------------------------------------------------------------------------------------------------------------------
Evergreen VA Growth Fund $106 $172 $226 $330 $59 $ 91 $156 $329
- --------------------------------------------------------------------------------------------------------------------
Evergreen VA Omega Fund $102 $160 $207 $292 $55 $ 80 $136 $291
- --------------------------------------------------------------------------------------------------------------------
Evergreen VA Perpetual
International Fund $113 $190 $259 $391 $66 $111 $188 $390
- --------------------------------------------------------------------------------------------------------------------
Evergreen VA Special Equity
Fund $131 $240 $339 $542 $84 $164 $273 $542
- --------------------------------------------------------------------------------------------------------------------
Hartford Advisers HLS Fund $101 $156 $200 $278 $54 $ 75 $129 $277
- --------------------------------------------------------------------------------------------------------------------
Hartford Bond HLS Fund $ 99 $152 $193 $264 $53 $ 71 $123 $263
- --------------------------------------------------------------------------------------------------------------------
Hartford Capital Appreciation
HLS Fund $101 $156 $201 $279 $54 $ 76 $130 $278
- --------------------------------------------------------------------------------------------------------------------
Hartford Dividend and Growth
HLS Fund $101 $157 $202 $281 $54 $ 76 $131 $280
- --------------------------------------------------------------------------------------------------------------------
Hartford Global Leaders HLS
Fund $103 $163 $211 $300 $56 $ 82 $140 $299
- --------------------------------------------------------------------------------------------------------------------
Hartford Growth and Income
HLS Fund $103 $161 $209 $296 $56 $ 81 $138 $295
- --------------------------------------------------------------------------------------------------------------------
Hartford High Yield HLS Fund $102 $158 $204 $285 $55 $ 78 $133 $285
- --------------------------------------------------------------------------------------------------------------------
Hartford Index HLS Fund $ 99 $149 $188 $255 $52 $ 68 $118 $254
- --------------------------------------------------------------------------------------------------------------------
Hartford International
Advisers HLS Fund $103 $162 $211 $299 $56 $ 82 $140 $298
- --------------------------------------------------------------------------------------------------------------------
Hartford International
Opportunities HLS Fund $102 $160 $207 $292 $55 $ 80 $136 $291
- --------------------------------------------------------------------------------------------------------------------
Hartford MidCap HLS Fund $102 $160 $208 $293 $56 $ 80 $137 $292
- --------------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS
Fund $ 99 $150 $191 $259 $52 $ 70 $120 $258
- --------------------------------------------------------------------------------------------------------------------
Hartford Mortgage Securities
HLS Fund $ 99 $151 $191 $260 $52 $ 70 $120 $259
- --------------------------------------------------------------------------------------------------------------------
Hartford Small Company HLS
Fund $102 $160 $207 $292 $55 $ 80 $136 $291
- --------------------------------------------------------------------------------------------------------------------
Hartford Stock HLS Fund $ 99 $151 $191 $260 $52 $ 70 $120 $259
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
If you do not Surrender your
Contract, you would pay the
following expenses on a $1,000
investment, assuming a 5% annual
return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- -----------------------------
Evergreen VA Capital Growth
Fund $28 $ 87 $149 $314
- -----------------------------
Evergreen VA Foundation Fund $26 $ 80 $136 $291
- -----------------------------
Evergreen VA Growth Fund $30 $ 92 $156 $330
- -----------------------------
Evergreen VA Omega Fund $26 $ 80 $137 $292
- -----------------------------
Evergreen VA Perpetual
International Fund $37 $111 $189 $391
- -----------------------------
Evergreen VA Special Equity
Fund $55 $165 $274 $542
- -----------------------------
Hartford Advisers HLS Fund $25 $ 76 $130 $278
- -----------------------------
Hartford Bond HLS Fund $23 $ 72 $123 $264
- -----------------------------
Hartford Capital Appreciation
HLS Fund $25 $ 76 $131 $279
- -----------------------------
Hartford Dividend and Growth
HLS Fund $25 $ 77 $132 $281
- -----------------------------
Hartford Global Leaders HLS
Fund $27 $ 83 $141 $300
- -----------------------------
Hartford Growth and Income
HLS Fund $26 $ 81 $139 $296
- -----------------------------
Hartford High Yield HLS Fund $25 $ 78 $134 $285
- -----------------------------
Hartford Index HLS Fund $22 $ 69 $118 $255
- -----------------------------
Hartford International
Advisers HLS Fund $27 $ 82 $141 $299
- -----------------------------
Hartford International
Opportunities HLS Fund $26 $ 80 $137 $292
- -----------------------------
Hartford MidCap HLS Fund $26 $ 80 $138 $293
- -----------------------------
Hartford Money Market HLS
Fund $23 $ 70 $121 $259
- -----------------------------
Hartford Mortgage Securities
HLS Fund $23 $ 71 $121 $260
- -----------------------------
Hartford Small Company HLS
Fund $26 $ 80 $137 $292
- -----------------------------
Hartford Stock HLS Fund $23 $ 71 $121 $260
- -------------------------------------------------------------------------------------------
</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 $10,000 and subsequent Premium Payments must be at least $500, unless you
take advantage of our InvestEase-Registered Trademark- Program 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 ARE PAYMENT ENHANCEMENTS?
Each time you make a Premium Payment, Hartford will credit your Contract Value
with a Payment Enhancement. The amount of the Payment Enhancement is based on
your cumulative Premium Payments.
Hartford has developed a variety of variable annuities to help you meet your
goals. We issue variable annuities that do not have Payment Enhancements, but
that do have lower mortality and expense risk charges and shorter contingent
deferred sales charge periods than this Annuity. When you talk to your financial
adviser, you should make sure that an annuity with a Payment Enhancement is a
suitable investment for you.
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. Each Premium Payment has
its own Contingent Deferred Sales Charge period. The Contingent Deferred Sales
Charge is a percentage of the amount surrendered and is equal to:
<TABLE>
<CAPTION>
NUMBER OF YEARS FROM CONTINGENT DEFERRED
PREMIUM PAYMENT SALES CHARGE
<S> <C>
- -----------------------------------------
One Year 8%
- -----------------------------------------
Two Years 8%
- -----------------------------------------
Three Years 8%
- -----------------------------------------
Four Years 8%
- -----------------------------------------
Five Years 7%
- -----------------------------------------
Six Years 6%
- -----------------------------------------
Seven Years 5%
- -----------------------------------------
Eight Years 0%
- -----------------------------------------
</TABLE>
You won't be charged a Contingent Deferred Sales Charge on:
x The Annual Withdrawal Amount
x Premium Payments that have been in your Annuity for more than seven years.
x Payment Enhancements or earnings
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 1.45% of your Contract Value invested in the Funds.
The second type of charge is the fee you pay for the Funds. Please see the
Annual Fund Operating Expenses table for more complete information and the
Funds' prospectuses accompanying this prospectus.
If you elect the Optional Death Benefit, we will subtract an additional charge
on a daily basis until we begin to make Annuity Payouts that is equal to an
annual charge of .15% of your Contract Value invested in the Funds.
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. Once Annuity Payouts begin, you may take
full or partial Surrenders under the Payments for a Period Certain, Life Annuity
with Payments for a Period Certain or the Joint and Last Survivor Annuity with
Payments for a Period Certain Annuity Option, but only if you selected the
variable dollar amount Annuity Payouts.
- - 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. The 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.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 11
- --------------------------------------------------------------------------------
The Death Benefit is the greater of:
- - The total Premium Payments you have made to us minus the dollar amount of any
partial Surrenders, or
- - The Contract Value of your Annuity minus any Payment Enhancements credited in
the 12 months prior to the date we calculate the Death Benefit, or,
- - Your Maximum Anniversary Value, which is described below, minus any Payment
Enhancements credited in the 12 months prior to the date we calculate the
Death Benefit.
The Maximum Anniversary Value is based on a series of calculations on Contract
Anniversaries of Contract Values, Premium Payments, Payment Enhancements 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 and Payment
Enhancements 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.
If you elect the Optional Death Benefit at an additional charge, the Death
Benefit will be the greater of:
- - The total Premium Payments you have made to us minus the dollar amount of any
partial Surrenders;
- - The Contract Value of your Annuity minus any Payment Enhancements credited in
the 12 months prior to the date we calculate the Death Benefit;
- - Your Maximum Anniversary Value, minus any Payment Enhancements credited in the
12 months prior to the date we calculate the Death Benefit;
- - Your Interest Accumulation Value.
The Optional Death Benefit Rider may not be available if the Contract Owner or
Annuitant is age 75 or older. The Optional Death Benefit is not available in the
states of Washington or New York.
The Optional Death Benefit calculation will be different if you elect to add the
Optional Death Benefit after you purchase your Annuity.
WHAT ANNUITY PAYOUT OPTIONS ARE AVAILABLE?
When it comes time for us to make Annuity Payouts, you may choose one of the
following Annuity Payout Options: Life Annuity, Life Annuity with Cash Refund,
Life Annuity with Payments for a Period Certain, Joint and Last Survivor Life,
Joint and Last Survivor Life with Payments for a Period Certain and Payment For
a Period Certain. We may make other Annuity Payout Options available at any
time.
You must begin to take Annuity Payouts by the Annuitant's 90th birthday or the
end of the 10th Contract Year, whichever is later, unless you elect a later date
to begin receiving payments subject to the laws and regulations then in effect
and our approval. In Maryland, Massachusetts, Oregon or Alabama, you must begin
to take Annuity Payouts by the Annuitant's 90th birthday or the end of the 12th
Contract Year. If you do not tell us what Annuity Payout Option you want before
those dates, we will make payments under Life Annuity with a 10 year Period
Certain Annuity Option.
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 8/1/99 AA Insurer financial strength
- --------------------------------------------------------------------------------
Duff & Phelps 7/1/99 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.
<PAGE>
12 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- - 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
The Evergreen VA Capital Growth Fund, Evergreen VA Foundation Fund,
Evergreen VA Growth Fund, Evergreen VA Omega Fund, Evergreen VA Perpetual
International Fund, and Evergreen VA Special Equity Fund are series of Evergreen
Variable Annuity Trust, a Delaware business trust. Mentor Investment Advisors
LLC is the investment advisor to the Evergreen VA Capital Growth Fund and to the
Evergreen VA Growth Fund. Evergreen Asset Management Corp. is the investment
advisor to the Evergreen VA Foundation Fund. Evergreen Investment Management
Company is the investment advisor to the Evergreen VA Omega Fund. Mentor
Perpetual Advisors LLC is the investment advisor to the Evergreen VA Perpetual
International Fund. Meridian Investment Company is the investment advisor to the
Evergreen VA Special Equity Fund. All the investment advisors for the Evergreen
Funds are subsidiaries of First Union Corporation, the sixth largest bank
holding company in the United States, with over $250 billion in consolidated
assets as of December 31, 1999.
All of the Hartford Funds are sponsored and administered by Hartford Life
Insurance Company. HL Investment Advisors, LLC ("HL Advisors") serves as the
investment adviser to each of the Hartford 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, except for the Hartford Global Leaders HLS Fund, the
Hartford Growth and Income HLS Fund and the Hartford High Yield HLS Fund, is a
separate Maryland corporation registered with the Securities and Exchange
Commission as an open-end management investment company. The Hartford Global
Leaders HLS Fund, the Hartford Growth and Income HLS Fund and the Hartford High
Yield HLS Fund are diversified series of Hartford Series Fund, Inc., a Maryland
corporation, also 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.
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' prospectuses
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:
EVERGREEN VA CAPITAL GROWTH FUND -- Seeks to provide long-term appreciation of
capital by investing primarily in common stocks which the investment advisor
believes offer the potential for capital appreciation over both the immediate
and long term.
EVERGREEN VA FOUNDATION FUND -- Seeks, in order of priority, reasonable income,
conservation of capital and capital appreciation.
EVERGREEN VA GROWTH FUND -- Seeks to provide long-term capital growth through
investment in common stock. Although the Fund may invest in companies of any
size, the Fund invests principally in common stocks of small to mid-sized
companies.
EVERGREEN VA OMEGA FUND -- Seeks maximum capital growth through investment in
common stocks and convertible securities of companies of all sizes.
EVERGREEN VA PERPETUAL INTERNATIONAL FUND -- Seeks to provide long-term capital
appreciation by investing in a diversified portfolio of equity securities of
issuers of all sizes located outside the United States. The Fund may also invest
in debt securities.
EVERGREEN VA SPECIAL EQUITY FUND -- Seeks capital growth through a diversified
portfolio of common stocks of domestic companies of varying market
capitalizations.
HARTFORD ADVISERS HLS 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 HLS 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 HLS Fund,
Inc." Sub-advised by HIMCO.
HARTFORD CAPITAL APPRECIATION HLS FUND -- Seeks growth of capital by investing
in equity securities selected solely on the basis of potential for capital
appreciation. Sub-advised by Wellington Management.
HARTFORD DIVIDEND AND GROWTH HLS FUND -- Seeks a high level of current income
consistent with growth of capital by
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 13
- --------------------------------------------------------------------------------
investing primarily in dividend paying securities. Sub-advised by Wellington
Management.
HARTFORD GLOBAL LEADERS HLS FUND -- Seeks growth of capital by investing
primarily in equity securities issued by U.S. company and non-U.S. high quality
growth companies worldwide that, in the opinion of Wellington Management, are
leaders within their respective industries as indicated by an established market
presence and strong competitive position on a global, regional or country basis.
Sub-advised by Wellington Management.
HARTFORD GROWTH AND INCOME HLS FUND -- Seeks growth of capital and current
income by investing primarily in equity securities with earnings growth
potential and steady rising dividends. Sub-advised by Wellington Management.
HARTFORD HIGH YIELD HLS FUND -- Seeks high current income by investing in
non-grade fixed-income securities. Growth of capital is a secondary objective.
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 High Yield HLS
Fund." Sub-advised by HIMCO.
HARTFORD INDEX HLS FUND -- Seeks to provide investment results that approximate
the price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock Price
Index.* Sub-advised by HIMCO.
HARTFORD INTERNATIONAL ADVISERS HLS FUND -- Seeks maximum long-term total return
by investing in a portfolio of equity, debt and money market securities.
Securities in which the Fund invests primarily will be denominated in non-U.S.
currencies and will be traded in non-U.S. markets. Sub-advised by Wellington
Management.
HARTFORD INTERNATIONAL OPPORTUNITIES HLS FUND -- Seeks growth of capital by
investing primarily in equity securities issued by non-U.S. companies.
Sub-advised by Wellington Management.
HARTFORD MIDCAP HLS FUND -- Seeks to achieve long-term capital growth through
capital appreciation by investing primarily in equity securities of companies
with market capitalizations within the range represented by the Standard and
Poor's Mid-Cap 400 Index. Sub-advised by Wellington Management.
HARTFORD MORTGAGE SECURITIES HLS FUND -- Seeks maximum current income consistent
with safety of principal and maintenance of liquidity by investing primarily in
mortgage-related securities, including securities issued by the Government
National Mortgage Association. Sub-advised by HIMCO.
HARTFORD SMALL COMPANY HLS FUND -- Seeks growth of capital by investing
primarily in equity securities within the range represented by the Russell 200
Index selected on the basis of potential for capital appreciation. Sub-advised
by Wellington Management.
HARTFORD STOCK HLS FUND -- Seeks long-term growth by investing primarily in
equity securities. Sub-advised by Wellington Management.
HARTFORD MONEY MARKET HLS FUND -- Seeks maximum current income consistent with
liquidity and preservation of capital. Sub-advised by HIMCO.
* "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.
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.
<PAGE>
14 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
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.
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, Payment Enhancements 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 PLUS") 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 may have different credited
interest rates. Currently, the 6-Month and 12-Month Transfer Programs are
credited the same interest rate as the Fixed Accumulation Feature. At some time
in the future, Hartford may offer interest rates specific to the transfer
programs.
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.
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.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 15
- --------------------------------------------------------------------------------
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 at 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. There is no charge for
Dollar Cost Averaging.
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 $10,000. 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-Registered Trademark-
Program or are part of certain tax qualified retirement plans. Prior approval is
required for Premium Payments of $1,000,000 or more. In Maryland, Massachusetts,
Oregon and Alabama, Premium Payments may only be made during the first Contract
Year.
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 invested 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 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 you provide the necessary information.
WHAT ARE PAYMENT ENHANCEMENTS?
Each time you make a Premium Payment to your Contract, Hartford will credit your
Contract Value with a Payment Enhancement. The Payment Enhancement is based on
your cumulative Premium Payments and is equal to:
x 3% of the Premium Payment if your cumulative Premium Payments are less than
$50,000.
x 4% of the Premium Payment if your cumulative Premium Payments are $50,000 or
more.
If you make a subsequent Premium Payment that increases your cumulative Premium
Payments to $50,000 or more, Hartford will credit an additional Payment
Enhancement to your Contract Value equal to 1% of your prior Premium Payments.
The Payment Enhancements will be allocated to the same Accounts and in the same
proportion as your Premium Payment.
DO I ALWAYS GET TO KEEP MY PAYMENT ENHANCEMENTS?
You won't always get to keep the Payment Enhancements credited to your Contract
Value. Hartford will take back or
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16 HARTFORD LIFE INSURANCE COMPANY
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"recapture" some or all of the Payment Enhancements under certain circumstances:
- - Hartford will take back the Payment Enhancements we credit to your Contract
Value if you cancel your Contract during the "Right to Examine" period
described in your Contract.
- - Hartford will deduct any Payment Enhancements credited to your Contract Value
in the 24 months prior to the Annuity Calculation Date when we determine the
amount available for Annuity Payouts.
- - Hartford will also exclude any Payment Enhancements credited to your Contract
Value in the 12 months prior to the date we calculate the Death Benefit when
determining the Death Benefit payable.
- - Hartford will deduct all Payment Enhancements credited during a period of
eligible confinement to a hospital, nursing home or other qualified long-term
care facility under the Waiver of Sales Charge Rider if you request a full or
partial Surrender.
DO PAYMENT ENHANCEMENTS ALWAYS BENEFIT ME?
Not all of the time. Hartford issues a variety of variable annuities designed to
meet different retirement planning goals. Some of our variable annuities have no
Payment Enhancement, some have lower mortality and expense risk charges and
still others have no contingent deferred sales charge. You and your financial
adviser should decide if you may be better off in certain circumstances with one
of our other variable annuities. You and your financial adviser should consider
some of the following factors when determining which annuity is appropriate for
you:
- - The length of time that you plan to continue to own your Contract.
- - The frequency, amount and timing of any partial Surrenders.
- - The amount of your Premium Payments.
- - When you plan to annuitize your Contract.
- - Whether you might experience an event that results in the loss of some or all
of the Payment Enhancements.
We recapture the Payment Enhancements credited in the 24 months prior to the
Annuity Calculation Date, in the 12 months prior to the date we receive notice
of death, and under certain circumstances, if you are confined to a nursing
home. It might not be beneficial to purchase this Annuity if you know that you
will experience an event that will require Hartford to take back these Payment
Enhancements. In addition, although this Annuity's fees and charges are lower
than many annuities that add a "bonus" or Payment Enhancement, the expenses are
higher than some variable annuities without a Payment Enhancement. Over the life
of the Annuity, the Payment Enhancements you receive may be more than offset by
the higher expenses.
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. Hartford will take back the Payment Enhancements
credited to your Contract Value if you elect to cancel your Contract.
HOW IS THE VALUE OF MY CONTRACT CALCULATED BEFORE THE ANNUITY CALCULATION 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 and Payment Enhancements are credited to your
Sub-Accounts, they are converted into Accumulation Units by dividing the sum of
your Premium Payments and Payment Enhancements, 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 a Sub-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 and any other applicable charges,
including any administrative charges or the Optional Death Benefit Charge,
adjusted for the number of days in the period.
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.
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HARTFORD LIFE INSURANCE COMPANY 17
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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 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. We reserve the right to suspend,
modify, or terminate telephone transfer privileges at any time.
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 and the Optional Death
Benefit Charge:
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. 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 FROM CONTINGENT DEFERRED
PREMIUM PAYMENT SALES CHARGE
<S> <C>
- -----------------------------------------
1 8%
- -----------------------------------------
2 8%
- -----------------------------------------
3 8%
- -----------------------------------------
4 8%
- -----------------------------------------
5 7%
- -----------------------------------------
6 6%
- -----------------------------------------
7 5%
- -----------------------------------------
8 or more 0%
- -----------------------------------------
</TABLE>
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18 HARTFORD LIFE INSURANCE COMPANY
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________________________________________________________________________________
For example, you made an initial Premium Payment of $10,000 five years ago and
an additional Premium Payment of $20,000 one year ago. If you request a partial
withdrawal of $15,000 and you have not taken your Annual Withdrawal Amount for
the Contract Year, we will deduct a Contingent Deferred Sales Charge as follows:
- - Hartford will Surrender the Annual Withdrawal Amount which is equal to 10% of
your total Premium Payments, or $3,000 without charging a Contingent Deferred
Sales Charge.
- - We will then Surrender the Premium Payments that have been in the Annuity the
longest.
- - That means we would Surrender the entire $10,000 initial Premium Payment and
deduct a Contingent Deferred Sales Charge of 7% on that amount or $700.00.
- - The remaining $2,000 will come from the additional Premium Payment made one
year ago and we will deduct a Contingent Deferred Sales Charge of 8% of the
$2,000 or $160.00.
- - Your total Contingent Deferred Sales Charge is $860.00.
If you have any questions about these charges, please contact your financial
advisor or Hartford.
________________________________________________________________________________
THE FOLLOWING SURRENDERS ARE NOT SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE:
- - ANNUAL WITHDRAWAL AMOUNT: During the first seven Contract Years, 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 Contracts issued to a Charitable
Remainder Trust.
- - SURRENDERS MADE FROM PREMIUM PAYMENTS AFTER THE SEVENTH CONTRACT YEAR: After
the seventh Contract Year, you may take the total of: (a) all of your
earnings, (b) all Premium Payments held in your Contract for more than seven
years, (c) Payment Enhancements credited for more than seven years, and
(d) 10% of your 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. 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 consecutive 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 by Medicare 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 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 91 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. ONCE YOU ELECT THIS WAIVER, HARTFORD
WILL NOT ACCEPT ANY SUBSEQUENT PREMIUM PAYMENTS. IN ADDITION, IF YOU REQUEST A
FULL OR PARTIAL SURRENDER DURING CONFINEMENT, WE WILL DEDUCT FROM YOUR
CONTRACT VALUE ANY PAYMENT ENHANCEMENTS CREDITED DURING THE TIME YOU WERE
CONFINED.
- - 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.
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 the commencement of Annuity Payouts. The Contingent Deferred Sales Charge
is not deducted when we begin to make Annuity Payouts. We will charge a
Contingent Deferred Sales Charge if the Contract is fully or partially
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 an annual rate of 1.45% of Sub-Account Value (estimated at 0.95% for
mortality and 0.50% 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.
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HARTFORD LIFE INSURANCE COMPANY 19
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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.
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
when Annuity Payouts begin. 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 Calculation 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.
OPTIONAL DEATH BENEFIT CHARGE -- If you elect the Optional Death Benefit, we
will subtract an additional charge on a daily basis until we begin to make
Annuity Payouts that is equal to an annual charge of .15% of your Contract Value
invested in the Funds.
PAYMENT ENHANCEMENTS -- No specific charges are assessed to cover the expenses
of the Payment Enhancement. Rather, the combination of charges and fees within
the Annuity, including the Mortality and Expense Risk Charge and the Contingent
Deferred Sales Charge, are set at a level sufficient to cover the cost of
offering the enhancements. As with all of its investment products, Hartford
expects to make a profit on the sale of these Annuities, however, there are no
additional profits inherent with the structure of this Annuity when compared
with any other product we offer.
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, ANY APPLICABLE ADMINISTRATIVE CHARGES, THE OPTIONAL DEATH BENEFIT 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 total Premium Payments you have made to us minus the dollar amount of any
partial Surrenders; or
- - The Contract Value of your Annuity minus any Payment Enhancements credited in
the 12 months prior to the date we calculate the Death Benefit; or
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20 HARTFORD LIFE INSURANCE COMPANY
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- - The Maximum Anniversary Value, which is described below, minus any Payment
Enhancements credited in the 12 months prior to the date we calculate the
Death Benefit.
The Maximum Anniversary Value is based on a series of calculations on Contract
Anniversaries of Contract Values, Premium Payments, Payment Enhancements 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 and
Payment Enhancements credited 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.
You may also elect the Optional Death Benefit for an additional fee. The
Optional Death Benefit adds the Interest Accumulation Value to the Death Benefit
calculation.
If you elect the Optional Death Benefit, the Death Benefit prior to the
deceased's date of death or the deceased's 81st birthday, whichever is earlier,
will be the greater of:
- - The total Premium Payments you have made to us minus the dollar amount of any
partial Surrenders; or
- - The Contract Value of your Annuity minus any Payment Enhancements credited in
the 12 months prior to the date we calculate the Death Benefit; or
- - The Maximum Anniversary Value, minus any Payment Enhancements credited in the
12 months prior to the date we calculate the Death Benefit; or
- - The Interest Accumulation Value described below.
The Interest Accumulation Value prior to the deceased's date of death or 81st
birthday, whichever is earlier is equal to:
- - Your Contract Value of your Annuity minus any Payment Enhancements credited in
the 12 months prior to the date we calculate the Death Benefit;
- - Plus any Premium Payments made, but not including any Payment Enhancements
credited;
- - Minus any partial Surrenders;
- - Compounded daily at an annual rate of 5%.
If you have taken any partial Surrenders, the Interest Accumulation Value will
be adjusted to reduce the Optional Death Benefit proportionally for any partial
Surrenders.
On or after the deceased's 81st birthday or date of death, the Interest
Accumulation Value will not continue to compound, but will be adjusted to add
any Premium Payments and Payment Enhancements or subtract any partial
Surrenders.
The Optional Death Benefit is limited to a maximum of 200% of any Premium
Payments made less proportional adjustments for any Surrenders.
If you elect the Optional Death Benefit, we will subtract an additional charge
on a daily basis until we begin to make Annuity Payouts that is equal to an
annual charge of .15% of your Contract Value invested in the Funds. The Optional
Death Benefit may not be available if the Contract Owner or Annuitant is age 75
or older. The Optional Death Benefit is not available in the states of
Washington or New York.
If you elect the Optional Death Benefit after you purchase your Annuity, your
Interest Accumulation Value calculation will be:
- - Your Contract Value on the date we add the Optional Death Benefit to your
Annuity;
- - Minus any Payment Enhancements credited on or before we add the Optional Death
Benefit;
- - Plus any Premium Payments made after the Optional Death Benefit is added, but
not including any Payment Enhancements credited;
- - Minus any partial surrenders after the Optional Death Benefit is added;
- - Compounded daily at an annual interest rate of 5%.
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 death if the death occurred
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
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HARTFORD LIFE INSURANCE COMPANY 21
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situations described above and any change in the original Annuitant will be
treated as the death of the Contract Owner.
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. If the beneficiary elects to continue the Contract, we will adjust the
Contract Value to equal the amount that we would have paid as the Death Benefit.
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 surviving joint The Annuitant is living or Joint Contract Owner
Contract Owner deceased receives the Death
Benefit.
Contract Owner There is no surviving The Annuitant is living or Designated Beneficiary
joint Contract Owner deceased receives the Death
Benefit.
Contract Owner There is no surviving The Annuitant is living or Contract Owner's estate
joint Contract Owner and deceased receives the Death
the Beneficiary Benefit.
predeceases the Contract
Owner
Annuitant The Contract Owner is There is no named Death Benefit is paid to
living Contingent Annuitant the Contract Owner and not
the designated
Beneficiary.
Annuitant The Contract Owner is The Contingent Annuitant Contingent Annuitant
living is 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 living Designated Beneficiary becomes the
Contract Owner
Annuitant The Contract Owner is living Contract Owner receives the Death
Benefit.
Annuitant The Annuitant is also the Contract Owner Designated Beneficiary receives 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.
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 paid in a lump sum. 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. A
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22 HARTFORD LIFE INSURANCE COMPANY
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Contingent Deferred Sales Charge may be deducted. 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 AFTER THE ANNUITY COMMENCEMENT DATE -- Partial Surrenders are
permitted after the Annuity Commencement Date if you select the Life Annuity
with Payments for a Period Certain, Joint and Last Survivor Life Annuity with
Payments for a Period Certain or the Payment for a Period Certain Annuity Payout
Option. You may take partial Surrenders of amounts equal to the Commuted Value
of the payments that we would have made during the "Period Certain" or the
number of years you select under the Annuity Payout Option that we guarantee to
make Annuity Payouts.
To qualify for partial Surrenders under these Annuity Payout Options you must
elect a variable dollar amount Annuity Payout and you must make the Surrender
request during the Period Certain.
Hartford will deduct any applicable Contingent Deferred Sales Charges.
If you elect to take the entire Commuted Value of the Annuity Payouts we would
have made during the Period Certain, Hartford will not make any Annuity Payouts
during the remaining Period Certain. If you elect to take only some of the
Commuted Value of the Annuity Payouts we would have made during the Period
Certain, Hartford will reduce the remaining Annuity Payouts during the remaining
Period Certain. Annuity Payouts that are to be made after the Period Certain is
over will not change.
Please check with your tax adviser because there could be adverse tax
consequences for partial Surrenders after the Annuity Commencement Date.
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, (c) the SEC permits and
orders postponement or (d) 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 a10% 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.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 23
- --------------------------------------------------------------------------------
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 federal income tax penalty 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:
- - When do you want Annuity Payouts to begin?
- - What Annuity Payout Option do you want to use?
- - How often do you want to receive Annuity Payouts?
- - What is the Assumed Investment Return?
- - 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.
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 Annuitant's 90th
birthday or the end of the 10th Contract Year, whichever is later. You may elect
a later Annuity Commencement Date if we allow and subject to the laws and
regulations then in effect. In Maryland, Massachusetts, Oregon and Alabama, the
Annuity Commencement Date cannot be deferred beyond the Annuitant's 90th
birthday or the end of the 12th Contract Year. 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. We will deduct any Payment Enhancements credited in the 24
months before the Annuity Calculation Date from your Contract Value when we
determine the amount available for Annuity Payouts.
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 more than 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 "Death Benefit Remaining with the Company" 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.
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.
LIFE ANNUITY WITH A CASH REFUND -- We will make Annuity Payouts as long as the
Annuitant is living. When the Annuitant dies the remaining value will be paid to
the Beneficiary. The remaining value is equal to the Contract Value on the
Annuity Calculation Date minus any Premium Tax and the Annuity Payouts already
made. This option is only available for Variable Dollar Amount Annuity Payouts
using the 5% Assumed Investment Return.
LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN -- We make Annuity Payouts
during the lifetime of the Annuitant but Annuity Payouts are at least guaranteed
for the number of years you select with a minimum of 10 years. If, at the death
of the Annuitant, Annuity Payouts have been made for less than the minimum
elected number of months, then the Beneficiary may elect to continue the
remaining Annuity Payouts or recieve the present value of the amount of the
remaining Annuity Payouts
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
<PAGE>
24 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- - 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.
JOINT AND LAST SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN -- We
will make Annuity Payouts as long as either the Annuitant or Joint Annuitant are
living, but we at least guarantee to make Annuity Payouts for a time period you
select, between 10 years and 100 years minus the Annuitant's age. If the
Annuitant and the Joint Annuitant both die before the guaranteed number of years
have passed, then the Beneficiary has two options, (a) continue Annuity Payouts
for the remainder of the guaranteed number of years or (b) receive the Commuted
Value in one sum.
When choosing this option, you must decide what will happen to the Annuity
Payouts 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 dollar amount Annuity Payouts, these percentages represent Annuity
Units. For fixed-dollar amount Annuity Payouts, these percentages 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.
PAYMENT FOR A PERIOD CERTAIN -- We will make Annuity Payouts for the number of
years that you select. You can select any number of years between 10 years and
100 years minus the Annuitant's age. If, at the death of the Annuitant, Annuity
Payouts have been made for less than the time period selected, then the
Beneficiary may elect to continue the remaining Annuity Payouts or receive the
commuted value in one sum.
IMPORTANT INFORMATION:
- - YOU CANNOT SURRENDER YOUR CONTRACT ONCE ANNUITY PAYOUTS BEGIN, UNLESS YOU HAVE
SELECTED THE LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN, JOINT AND LAST
SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN OR PAYMENT FOR A
PERIOD CERTAIN ANNUITY PAYOUT OPTIONS. 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 Payments for a 10 Year Period Certain.
- - 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 Life Annuity Payout Option.
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.
4. WHAT IS THE ASSUMED INVESTMENT RETURN?
The Assumed Investment Return ("AIR") is the investment return you select before
we start to make Annuity Payouts. It is a critical assumption for calculating
variable dollar amount Annuity Payouts. The first Annuity Payout will be based
upon the AIR. The remaining Annuity Payouts will fluctuate based on the
performance of the underlying Funds.
Subject to the approval of your State, you can select one of three AIRs: 3%, 5%
or 6%. The greater the AIR, the greater the initial Annuity Payout. A higher AIR
may result in smaller potential growth in the Annuity Payouts. On the other
hand, a lower AIR results in a lower initial Annuity Payout, but future Annuity
Payouts have the potential to be greater.
For example, if the second monthly Annuity Payout is the same as the first, the
sub-accounts earned exactly the same return as the AIR. If the second monthly
Annuity Payout is more than the first, the sub-accounts earned more than the
AIR. If the second Annuity Payout is less than the first, the sub-account earned
less than the AIR.
Level variable dollar amount Annuity Payouts would be produced if the investment
returns remained constant and equal to the AIR. In fact, Annuity Payouts will
vary up or down as the investment rate varies up or down from the AIR.
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
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 25
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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-
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.
<PAGE>
26 HARTFORD LIFE INSURANCE COMPANY
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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 7% 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.
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.
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: Investment Product 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.
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HARTFORD LIFE INSURANCE COMPANY 27
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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.
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
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28 HARTFORD LIFE INSURANCE COMPANY
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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.
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. Distributions must
begin within a year of the Contract Owner's death.
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HARTFORD LIFE INSURANCE COMPANY 29
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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.
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
Any portion of a distribution that is (or is deemed to be) current taxable
income to the Contract Owner will be subject to federal income tax withholding
and reporting under the Code. Generally, however, a Contract Owner may elect not
to have income taxes withheld or to have income taxes withheld at a different
rate by filing a completed election form with us. Election forms will be
provided at the time distributions are required.
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
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30 HARTFORD LIFE INSURANCE COMPANY
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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.
G. GENERATION -- SKIPPING TRANSFERS
Under certain circumstances, the Internal Revenue Code may impose a "generation
skipping transfer tax" when all or part of an annuity is transferred to, or a
death benefit is paid to, an individual two or more generations younger than the
owner. Federal tax law may require us to deduct the tax from your contract, or
from any applicable payment, and pay it directly to the Internal Revenue
Service.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 31
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TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
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DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY
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SAFEKEEPING OF ASSETS
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INDEPENDENT PUBLIC ACCOUNTANTS
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DISTRIBUTION OF CONTRACTS
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CALCULATION OF YIELD AND RETURN
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PERFORMANCE COMPARISONS
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FINANCIAL STATEMENTS
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</TABLE>
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32 HARTFORD LIFE INSURANCE COMPANY
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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.
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-
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 33
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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 -- Distributions 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
- - 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
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34 HARTFORD LIFE INSURANCE COMPANY
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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>
This form must be completed for all tax-sheltered annuities.
SECTION 403(b)(11) ACKNOWLEDGMENT FORM
The Director Select Plus 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 your Annuity. Please refer to your Plan.
Please complete the following and return to:
Hartford Life Insurance Company
Investment Product 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: Investment Product 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
DIRECTOR SELECT PLUS 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: Investment Product Services, P.O. Box 5085, Hartford, CT
06102-5085.
Date of Prospectus: March 7, 2000
Date of Statement of Additional Information: March 7, 2000
333-91925
<PAGE>
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TABLE OF CONTENTS
SECTION PAGE
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY............................. 3
SAFEKEEPING OF ASSETS...................................................... 3
INDEPENDENT PUBLIC ACCOUNTANTS............................................. 3
DISTRIBUTION OF CONTRACTS.................................................. 3
CALCULATION OF YIELD AND RETURN............................................ 4
PERFORMANCE RELATED INFORMATION............................................ 6
PERFORMANCE COMPARISONS.................................................... 9
FINANCIAL STATEMENTS....................................................... 11
<PAGE>
-3-
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>
- -----------------------------------------------------------------------------------------------------
Rating Agency Effective Rating Basis of Rating
Date of Rating
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A.M. Best and Company, Inc. 1/1/99 A+ Financial performance
- -----------------------------------------------------------------------------------------------------
Standard & Poor's 8/1/99 AA Insurer financial strength
- -----------------------------------------------------------------------------------------------------
Duff & Phelps 7/1/99 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.
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 an affiliate of Hartford. Both HSD and Hartford are ultimately
controlled by The Hartford Financial Services Group, Inc. The principal
business address of HSD is the same as that of Hartford.
<PAGE>
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The securities will be sold by salesperson of HSD who represent Hartford as
insurance and variable annuity agents and who are registered representatives
of Broker-Dealers who have entered into distribution agreements with HSD.
HSD is registered with the Commission under the Securities Exchange Act of
1934 as a Broker-Dealer and is a member of the National Association of
Securities Dealers, Inc.
Commissions will be paid by Hartford and will not be more than 7% 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 the 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.
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: 1999: $159,553,734.37; 1998: $61,629,500; and 1997: $64,851,026. HSD
has retained none of these commissions.
CALCULATION OF YIELD AND RETURN
YIELD OF A MONEY MARKET SUB-ACCOUNT. The yield of a Money Market 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
<PAGE>
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net investment income of the account (accrued daily dividends as declared by
the underlying funds, less daily expense charges of the account) for the
period, but will not include realized gains or losses or unrealized
appreciation or depreciation on the underlying fund shares.
The effective yield is calculated by compounding the base period return by
adding 1, raising the sum to a power equal to 365/7 and subtracting 1 from
the result, according to the following formula:
365/7
Effective Yield = [(Base Period Return + 1) ] - 1
A MONEY MARKET SUB-ACCOUNT'S YIELD AND EFFECTIVE YIELD WILL VARY IN
RESPONSE TO FLUCTUATIONS IN INTEREST RATES AND IN THE EXPENSES OF THE
SUB-ACCOUNT. THE CURRENT YIELD AND EFFECTIVE YIELD REFLECT RECURRING CHARGES
ON THE SEPARATE ACCOUNT LEVEL, INCLUDING THE MAXIMUM ANNUAL MAINTENANCE FEE.
Yield and effective yield for the seven-day period ending December 31, 1999.
- ----------------------------------------------------------------------------
SUB-ACCOUNT YIELD EFFECTIVE YIELD
- ----------------------------------------------------------------------------
Hartford Money Market HLS Fund 3.70% 3.76%
- ----------------------------------------------------------------------------
YIELD OF SUB-ACCOUNTS. Yields of Sub-Accounts will be computed by annualizing
a recent month's net investment income, divided by a Fund share's net asset
value on the last trading day of that month. Net changes in the value of a
hypothetical account will assume the change in the underlying mutual 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 Sub-Accounts' yields will vary from time-to-time depending upon market
conditions and, the composition of the underlying funds' portfolios. Yield
should also be considered relative to changes in the value of the
Sub-Accounts' shares and to the relative risks associated with the investment
objectives and policies of the underlying Fund.
THE YIELD REFLECTS RECURRING CHARGES ON THE SEPARATE ACCOUNT LEVEL, INCLUDING
THE ANNUAL MAINTENANCE FEE.
Yield calculations of the Sub-Accounts used for illustration purposes reflect
the interest earned by the Sub-Accounts, less applicable asset charges
assessed against a Contract Owner's account over the base period. Yield
quotations based on a 30-day
<PAGE>
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period were 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.
Yield quotation based on a 30-day period ended December 31, 1999.
- ------------------------------------------------------------------------------
SUB-ACCOUNTS YIELD
- ------------------------------------------------------------------------------
Hartford Bond HLS Fund 5.30%
- ------------------------------------------------------------------------------
Hartford High Yield HLS Fund 7.89%
- ------------------------------------------------------------------------------
Hartford Mortgage Securities HLS Fund 5.12%
- ------------------------------------------------------------------------------
The method of calculating yields described above for these Sub-Accounts
differs from the method used by the Sub-Accounts prior to May 1, 1989. The
denominator of the fraction used to calculate yield was previously the
average unit value for the period calculated. That denominator will
hereafter be the unit value of the Sub-Accounts on the last trading day of
the period calculated.
CALCULATION OF TOTAL RETURN. Total return is a measure of the change in
value of an investment in a Sub-Account over the period covered and assumes
that the Optional Death Benefit has not be elected. 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. Standardized total return will be
calculated since the inception of the Separate Account 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.
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 since the inception of the Separate Account 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 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 Hartford Money Market HLS 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 following are the standardized average annual total return quotations for
the Sub-Accounts:
<PAGE>
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STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR YEAR ENDED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
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SEPARATE ACCOUNT SINCE
SUB-ACCOUNT INCEPTION 1 YEAR 5 YEAR 10 YEAR INCEPTION OF
DATE SEPARATE ACCOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Evergreen VA Capital
Growth Fund 3/2/98 (4.83%) N/A N/A 0.48%
- ------------------------------------------------------------------------------------------------------
Evergreen VA
Foundation Fund 3/1/96 (0.74%) N/A N/A 11.67%
- ------------------------------------------------------------------------------------------------------
Evergreen VA Growth
Fund 3/2/98 9.71% N/A N/A (2.49%)
- ------------------------------------------------------------------------------------------------------
Evergreen VA Omega
Fund 3/1/97 35.42% N/A N/A 21.61%
- ------------------------------------------------------------------------------------------------------
Evergreen VA Perpetual
International Fund 3/2/98 28.25% N/A N/A 20.21%
- ------------------------------------------------------------------------------------------------------
Evergreen VA Special
Equity Fund 9/29/99 N/A N/A N/A 8.49%
- ------------------------------------------------------------------------------------------------------
Hartford Advisers HLS Fund 6/2/86 (2.20%) 15.88% 9.81% N/A
- ------------------------------------------------------------------------------------------------------
Hartford Bond HLS Fund 6/2/86 (14.60%) 2.04% 3.17% N/A
- ------------------------------------------------------------------------------------------------------
Hartford Capital Appreciation
HLS Fund 6/2/86 24.24% 20.17% 15.86% N/A
- ------------------------------------------------------------------------------------------------------
Hartford Dividend and Growth
HLS Fund 3/8/94 (7.39%) 17.39% N/A 14.42%
- ------------------------------------------------------------------------------------------------------
Hartford Global Leaders HLS
Fund 10/1/98 36.94% N/A N/A 59.62%
- ------------------------------------------------------------------------------------------------------
Hartford Growth and Income
HLS Fund 5/29/98 8.86% N/A N/A 16.14%
- ------------------------------------------------------------------------------------------------------
Hartford High Yield HLS
Fund 10/1/98 (7.99%) N/A N/A (5.76%)
- ------------------------------------------------------------------------------------------------------
Hartford Index HLS Fund 5/1/87 7.54% 23.18% 13.25% N/A
- ------------------------------------------------------------------------------------------------------
Hartford International
Advisers HLS Fund 3/1/95 10.17% N/A N/A 8.75%
- ------------------------------------------------------------------------------------------------------
Hartford International
Opportunities HLS Fund 7/2/90 26.60% 9.85% N/A 5.56%
- ------------------------------------------------------------------------------------------------------
Hartford MidCap HLS Fund 7/30/97 38.36% N/A N/A 28.65%
- ------------------------------------------------------------------------------------------------------
Hartford Money Market HLS
Fund 6/2/86 (7.80%) (0.78%) 0.49% N/A
- ------------------------------------------------------------------------------------------------------
Hartford Mortgage Securities
HLS Fund 6/2/86 (11.12%) 1.90% 2.82% N/A
- ------------------------------------------------------------------------------------------------------
Hartford Small Company
HLS Fund 8/9/96 52.15% N/A N/A 22.01%
- ------------------------------------------------------------------------------------------------------
Hartford Stock HLS Fund 6/2/86 6.85% 23.85% 13.69% N/A
- ------------------------------------------------------------------------------------------------------
</TABLE>
Performance figures above do not reflect any deductions for Optional Death
Benefit charges. Performance would have been lower had the Optional Death
Benefit been available and been chosen.
<PAGE>
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In addition to the standardized total return, the Sub-Account may advertise a
non-standardized total return. This figure will usually be calculated since
the inception of the underlying fund 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. Therefore, non-standardized total return for a Sub-Account is
higher than standardized total return for a Sub-Account. The following are
the non-standardized annualized total return quotations for the Sub-Accounts:
NON-STANDARDIZED ANNUALIZED TOTAL RETURN THAT PRE-DATE THE
INCEPTION DATE OF THE SEPARATE ACCOUNT FOR YEAR ENDED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
FUND SINCE
SUB-ACCOUNT INCEPTION 1 YEAR 5 YEAR 10 YEAR INCEPTION
DATE OF FUND
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Evergreen Va Capital
Growth Fund 3/2/98 5.17% N/A N/A 6.94%
- ------------------------------------------------------------------------------------------------------
Evergreen VA
Foundation Fund 3/1/96 9.26% N/A N/A 15.17%
- ------------------------------------------------------------------------------------------------------
Evergreen VA Growth
Fund 3/2/98 19.71% N/A N/A 4.61%
- ------------------------------------------------------------------------------------------------------
Evergreen VA Omega
Fund 3/1/97 45.42% N/A N/A 26.06%
- ------------------------------------------------------------------------------------------------------
Evergreen VA Perpetual
International Fund 3/2/98 38.25% N/A N/A 26.27%
- ------------------------------------------------------------------------------------------------------
Evergreen VA Special
Equity Fund 9/29/99 N/A N/A N/A 18.49%
- ------------------------------------------------------------------------------------------------------
Hartford Advisers HLS Fund 3/31/83 8.80% 18.81% 12.14% N/A
- ------------------------------------------------------------------------------------------------------
Hartford Bond HLS Fund 8/31/77 (3.60%) 5.93% 5.66% N/A
- ------------------------------------------------------------------------------------------------------
Hartford Capital Appreciation
HLS Fund 4/2/84 35.24% 22.99% 17.83% N/A
- ------------------------------------------------------------------------------------------------------
Hartford Dividend and Growth
HLS Fund 3/8/94 3.61% 20.10% N/A 17.16%
- ------------------------------------------------------------------------------------------------------
Hartford Global Leaders HLS
Fund 10/1/98 47.94% N/A N/A 70.19%
- ------------------------------------------------------------------------------------------------------
Hartford Growth and Income
HLS Fund 5/29/98 19.86% N/A N/A 24.27%
- ------------------------------------------------------------------------------------------------------
Hartford High Yield HLS
Fund 10/1/98 3.01% N/A N/A 5.49%
- ------------------------------------------------------------------------------------------------------
Hartford Index HLS Fund 5/1/87 18.54% 25.75% 15.54% N/A
- ------------------------------------------------------------------------------------------------------
Hartford International
Advisers HLS Fund 3/1/95 21.17% N/A N/A 12.43%
- ------------------------------------------------------------------------------------------------------
Hartford International
Opportunities HLS Fund 7/2/90 37.60% 13.49% N/A 8.58%
- ------------------------------------------------------------------------------------------------------
Hartford MidCap HLS Fund 7/30/97 49.36% N/A N/A 34.14%
- ------------------------------------------------------------------------------------------------------
Hartford Money Market HLS
Fund 6/30/80 3.20% 3.58% 3.40% N/A
- ------------------------------------------------------------------------------------------------------
Hartford Mortgage Securities
HLS Fund 1/1/85 (0.12%) 5.85% 5.37% N/A
- ------------------------------------------------------------------------------------------------------
Hartford Small Company
HLS Fund 8/9/96 63.15% N/A N/A 26.51%
- ------------------------------------------------------------------------------------------------------
Hartford Stock HLS Fund 8/31/77 17.85% 26.42% 15.97% N/A
- ------------------------------------------------------------------------------------------------------
</TABLE>
Performance figures above do not reflect any deductions for Optional Death
Benefit charges. Performance would have been lower had the Optional Death
Benefit been available and been chosen.
<PAGE>
-9-
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. Each Sub-Account may from time-to-time include its
total return in advertisements or in information furnished to present or
prospective shareholders. Each Sub-Account may from time-to-time include its
yield and total return in advertisements or information furnished to present
or prospective shareholders. Each Sub-Account may from time-to-time include
in advertisements its total return (and yield in the case of certain
Sub-Accounts) the ranking of those performance figures relative to such
figures for groups of other annuities analyzed by Lipper Analytical Services
and Morningstar, Inc. as having the same investment objectives.
The total return and yield may also be used to compare the performance of the
Sub-Accounts against certain widely acknowledged outside standards or indices
for stock and bond market performance. The Standard & Poor's Composite Index
of 500 Stocks (the "S&P 500") is a market value-weighted and unmanaged index
showing the changes in the aggregate market value of 500 stocks relative to
the base period 1941-43. The S&P 500 is composed almost entirely of common
stocks of companies listed on the New York Stock Exchange, although the
common stocks of a few companies listed on the American Stock Exchange or
traded over-the-counter are included. The 500 companies represented include
400 industrial, 60 transportation and 40 financial services concerns. The
S&P 500 represents about 80% of the market value of all issues traded on the
New York Stock Exchange.
The NASDAQ-OTC Composite Price Index (The "NASDAQ Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate
market value of approximately 3,500 stocks relative to the base measure of
100.00 on February 5, 1971. The NASDAQ Index is composed entirely of common
stocks of companies
<PAGE>
-10-
traded over-the-counter and often through the National Association of
Securities Dealers Automated Quotations ("NASDAQ") system. Only those
over-the-counter stocks having only one market maker or traded on exchanges
are excluded.
The Morgan Stanley Capital International EAFE Index (the "EAFE Index") is an
unmanaged index, which includes over 1,000 companies representing the stock
markets of Europe, Australia, New Zealand, and the Far East. The EAFE Index
is weighted by market capitalization, and therefore, it has a heavy
representation in countries with large stock markets, such as Japan.
The Shearson Lehman Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury;
all publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted
issues are not included in the SL Government Index.
The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of
approximately 5,300 bonds with a face value currently in excess of $1.3
trillion. To be included in the SL Government/Corporate Index, an issue must
have amounts outstanding in excess of $1 million, have at least one year to
maturity and be rated "Baa" or higher ("investment grade") by a nationally
recognized rating agency.
The Composite Index for Hartford Advisers Fund is comprised of the S&P 500
(55%), the Lehman Government/Corporate Bond Index (35%), both mentioned
above, and 90 Day U.S. Treasury Bills (10%).
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
UNAUDITED
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ------------
<S> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS Fund, Inc. -
Class IA
Shares 381,925,372
Cost $398,919,676
Market Value...................... $379,581,114 -- --
Hartford Stock HLS Fund, Inc. -
Class IA
Shares 446,551,430
Cost $1,739,620,114
Market Value...................... -- $3,191,676,331 --
Hartford Money Market HLS
Fund, Inc. - Class IA
Shares 416,009,296
Cost $416,009,296
Market Value...................... -- -- $416,009,296
Hartford Advisers HLS Fund, Inc. -
Class IA
Shares 1,924,549,471
Cost $3,837,456,863
Market Value...................... -- -- --
Hartford Capital Appreciation HLS
Fund, Inc. - Class IA
Shares 437,319,084
Cost $1,404,391,777
Market Value...................... -- -- --
Hartford Mortgage Securities HLS
Fund, Inc. - Class IA
Shares 163,664,753
Cost $176,379,736
Market Value...................... -- -- --
Hartford Index HLS Fund, Inc. -
Class IA
Shares 208,576,729
Cost $500,271,928
Market Value...................... -- -- --
Hartford International Opportunities
HLS Fund, Inc. - Class IA
Shares 270,848,565
Cost $312,238,682
Market Value...................... -- -- --
Hartford Dividend and Growth HLS
Fund, Inc. - Class IA
Shares 462,406,230
Cost $749,888,851
Market Value...................... -- -- --
Due from Hartford Life Insurance
Company.............................. -- -- --
Receivable from fund shares sold...... 160,437 77,855 38,653,596
------------ -------------- ------------
Total Assets.......................... 379,741,551 3,191,754,186 454,662,892
------------ -------------- ------------
LIABILITIES:
Due to Hartford Life Insurance
Company.............................. 160,617 79,461 38,625,437
Payable for fund shares purchased..... -- -- --
------------ -------------- ------------
Total Liabilities..................... 160,617 79,461 38,625,437
------------ -------------- ------------
Net Assets (variable annuity contract
liabilities)......................... $379,580,934 $3,191,674,725 $416,037,455
============ ============== ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 11
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ----------------- --------------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS Fund, Inc. -
Class IA
Shares 381,925,372
Cost $398,919,676
Market Value...................... -- -- -- -- --
Hartford Stock HLS Fund, Inc. -
Class IA
Shares 446,551,430
Cost $1,739,620,114
Market Value...................... -- -- -- -- --
Hartford Money Market HLS
Fund, Inc. - Class IA
Shares 416,009,296
Cost $416,009,296
Market Value...................... -- -- -- -- --
Hartford Advisers HLS Fund, Inc. -
Class IA
Shares 1,924,549,471
Cost $3,837,456,863
Market Value...................... $5,705,854,235 -- -- -- --
Hartford Capital Appreciation HLS
Fund, Inc. - Class IA
Shares 437,319,084
Cost $1,404,391,777
Market Value...................... -- $2,665,629,499 -- -- --
Hartford Mortgage Securities HLS
Fund, Inc. - Class IA
Shares 163,664,753
Cost $176,379,736
Market Value...................... -- -- $170,128,202 -- --
Hartford Index HLS Fund, Inc. -
Class IA
Shares 208,576,729
Cost $500,271,928
Market Value...................... -- -- -- $ 873,682,031 --
Hartford International Opportunities
HLS Fund, Inc. - Class IA
Shares 270,848,565
Cost $312,238,682
Market Value...................... -- -- -- -- $508,094,303
Hartford Dividend and Growth HLS
Fund, Inc. - Class IA
Shares 462,406,230
Cost $749,888,851
Market Value...................... -- -- -- -- --
Due from Hartford Life Insurance
Company.............................. -- 14,808,231 85,563 205,321 1,011,121
Receivable from fund shares sold...... 2,195,184 -- -- -- --
-------------- -------------- ------------ ------------- ------------
Total Assets.......................... 5,708,049,419 2,680,437,730 170,213,765 873,887,352 509,105,424
-------------- -------------- ------------ ------------- ------------
LIABILITIES:
Due to Hartford Life Insurance
Company.............................. 2,196,979 -- -- -- --
Payable for fund shares purchased..... -- 14,808,295 81,591 206,074 1,012,471
-------------- -------------- ------------ ------------- ------------
Total Liabilities..................... 2,196,979 14,808,295 81,591 206,074 1,012,471
-------------- -------------- ------------ ------------- ------------
Net Assets (variable annuity contract
liabilities)......................... $5,705,852,440 $2,665,629,435 $170,132,174 $ 873,681,278 $508,092,953
============== ============== ============ ============= ============
<CAPTION>
DIVIDEND AND
GROWTH FUND
SUB-ACCOUNT
--------------
<S> <C>
ASSETS:
Investments:
Hartford Bond HLS Fund, Inc. -
Class IA
Shares 381,925,372
Cost $398,919,676
Market Value...................... --
Hartford Stock HLS Fund, Inc. -
Class IA
Shares 446,551,430
Cost $1,739,620,114
Market Value...................... --
Hartford Money Market HLS
Fund, Inc. - Class IA
Shares 416,009,296
Cost $416,009,296
Market Value...................... --
Hartford Advisers HLS Fund, Inc. -
Class IA
Shares 1,924,549,471
Cost $3,837,456,863
Market Value...................... --
Hartford Capital Appreciation HLS
Fund, Inc. - Class IA
Shares 437,319,084
Cost $1,404,391,777
Market Value...................... --
Hartford Mortgage Securities HLS
Fund, Inc. - Class IA
Shares 163,664,753
Cost $176,379,736
Market Value...................... --
Hartford Index HLS Fund, Inc. -
Class IA
Shares 208,576,729
Cost $500,271,928
Market Value...................... --
Hartford International Opportunities
HLS Fund, Inc. - Class IA
Shares 270,848,565
Cost $312,238,682
Market Value...................... --
Hartford Dividend and Growth HLS
Fund, Inc. - Class IA
Shares 462,406,230
Cost $749,888,851
Market Value...................... $ 993,631,453
Due from Hartford Life Insurance
Company.............................. --
Receivable from fund shares sold...... 398,320
-------------
Total Assets.......................... 994,029,773
-------------
LIABILITIES:
Due to Hartford Life Insurance
Company.............................. 397,708
Payable for fund shares purchased..... --
-------------
Total Liabilities..................... 397,708
-------------
Net Assets (variable annuity contract
liabilities)......................... $ 993,632,065
=============
</TABLE>
---------------------------------------------------- 12
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1999
UNAUDITED
<TABLE>
<CAPTION>
INTERNATIONAL SMALL
ADVISERS COMPANY MIDCAP
FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------ ------------
<S> <C> <C> <C>
ASSETS:
Investments:
International Advisers HLS Fund, Inc
- Class IA
Shares 78,142,562
Cost $91,062,085
Market Value...................... $109,141,013 -- --
Small Company HLS Fund, Inc. -
Class IA
Shares 116,111,010
Cost $161,087,349
Market Value...................... -- $254,024,997 --
MidCap HLS Fund, Inc. - Class IA
Shares 126,461,413
Cost $205,816,508
Market Value...................... -- -- $259,688,385
Hartford Growth and Income HLS Fund
- Class IA
Shares 44,914,208
Cost $57,056,947
Market Value...................... -- -- --
Hartford High Yield HLS Fund -
Class IA
Shares 17,416,534
Cost $18,153,355
Market Value...................... -- -- --
Hartford Global Leaders HLS Fund -
Class IA
Shares 27,623,494
Cost $42,769,890
Market Value...................... -- -- --
Smith Barney Cash Portfolio
Shares 471,343
Cost $471,343
Market Value...................... -- -- --
Smith Barney Appreciation Fund
Shares 14,215
Cost $117,589
Market Value...................... -- -- --
Smith Barney Government Portfolio
Shares 31,310
Cost $31,310
Market Value...................... -- -- --
BB&T Growth & Income Fund
Shares 2,248,623
Cost $27,485,794
Market Value...................... -- -- --
AmSouth Equity Income Fund
Shares 2,572,237
Cost $28,494,557
Market Value...................... -- -- --
Due from Hartford Life Insurance
Company.............................. 119,851 5,463,600 16,063,484
Receivable from fund shares sold...... -- -- --
------------ ------------ ------------
Total Assets.......................... 109,260,864 259,488,597 275,751,869
------------ ------------ ------------
LIABILITIES:
Due to Hartford Life Insurance
Company.............................. -- -- --
Payable for fund shares purchased..... 120,096 5,463,705 16,063,809
------------ ------------ ------------
Total Liabilities..................... 120,096 5,463,705 16,063,809
------------ ------------ ------------
Net Assets (variable annuity contract
liabilities)......................... $109,140,768 $254,024,892 $259,688,060
============ ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 13
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
GROWTH AND GLOBAL SMITH BARNEY SMITH BARNEY SMITH BARNEY
INCOME HIGH YIELD LEADERS CASH APPRECIATION GOVERNMENT
FUND FUND FUND PORTFOLIO FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
International Advisers HLS Fund, Inc
- Class IA
Shares 78,142,562
Cost $91,062,085
Market Value...................... -- -- -- -- -- --
Small Company HLS Fund, Inc. -
Class IA
Shares 116,111,010
Cost $161,087,349
Market Value...................... -- -- -- -- -- --
MidCap HLS Fund, Inc. - Class IA
Shares 126,461,413
Cost $205,816,508
Market Value...................... -- -- -- -- -- --
Hartford Growth and Income HLS Fund
- Class IA
Shares 44,914,208
Cost $57,056,947
Market Value...................... $64,301,022 -- -- -- -- --
Hartford High Yield HLS Fund -
Class IA
Shares 17,416,534
Cost $18,153,355
Market Value...................... -- $17,501,387 -- -- -- --
Hartford Global Leaders HLS Fund -
Class IA
Shares 27,623,494
Cost $42,769,890
Market Value...................... -- -- $52,840,981 -- -- --
Smith Barney Cash Portfolio
Shares 471,343
Cost $471,343
Market Value...................... -- -- -- $ 471,343 -- --
Smith Barney Appreciation Fund
Shares 14,215
Cost $117,589
Market Value...................... -- -- -- -- $223,601 --
Smith Barney Government Portfolio
Shares 31,310
Cost $31,310
Market Value...................... -- -- -- -- -- $31,310
BB&T Growth & Income Fund
Shares 2,248,623
Cost $27,485,794
Market Value...................... -- -- -- -- -- --
AmSouth Equity Income Fund
Shares 2,572,237
Cost $28,494,557
Market Value...................... -- -- -- -- -- --
Due from Hartford Life Insurance
Company.............................. 119,444 -- 279,383 26,631 -- --
Receivable from fund shares sold...... -- 16,018 -- -- 14 11
----------- ----------- ----------- --------- -------- -------
Total Assets.......................... 64,420,466 17,517,405 53,120,364 497,974 223,615 31,321
----------- ----------- ----------- --------- -------- -------
LIABILITIES:
Due to Hartford Life Insurance
Company.............................. -- 15,974 -- -- 77 19
Payable for fund shares purchased..... 119,350 -- 279,292 27,259 -- --
----------- ----------- ----------- --------- -------- -------
Total Liabilities..................... 119,350 15,974 279,292 27,259 77 19
----------- ----------- ----------- --------- -------- -------
Net Assets (variable annuity contract
liabilities)......................... $64,301,116 $17,501,431 $52,841,072 $ 470,715 $223,538 $31,302
=========== =========== =========== ========= ======== =======
<CAPTION>
BB&T AMSOUTH
GROWTH & EQUITY INCOME
INCOME FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- -------------
<S> <C> <C>
ASSETS:
Investments:
International Advisers HLS Fund, Inc
- Class IA
Shares 78,142,562
Cost $91,062,085
Market Value...................... -- --
Small Company HLS Fund, Inc. -
Class IA
Shares 116,111,010
Cost $161,087,349
Market Value...................... -- --
MidCap HLS Fund, Inc. - Class IA
Shares 126,461,413
Cost $205,816,508
Market Value...................... -- --
Hartford Growth and Income HLS Fund
- Class IA
Shares 44,914,208
Cost $57,056,947
Market Value...................... -- --
Hartford High Yield HLS Fund -
Class IA
Shares 17,416,534
Cost $18,153,355
Market Value...................... -- --
Hartford Global Leaders HLS Fund -
Class IA
Shares 27,623,494
Cost $42,769,890
Market Value...................... -- --
Smith Barney Cash Portfolio
Shares 471,343
Cost $471,343
Market Value...................... -- --
Smith Barney Appreciation Fund
Shares 14,215
Cost $117,589
Market Value...................... -- --
Smith Barney Government Portfolio
Shares 31,310
Cost $31,310
Market Value...................... -- --
BB&T Growth & Income Fund
Shares 2,248,623
Cost $27,485,794
Market Value...................... $28,017,845 --
AmSouth Equity Income Fund
Shares 2,572,237
Cost $28,494,557
Market Value...................... -- $35,728,377
Due from Hartford Life Insurance
Company.............................. 2,564 170,059
Receivable from fund shares sold...... -- --
----------- -----------
Total Assets.......................... 28,020,409 35,898,436
----------- -----------
LIABILITIES:
Due to Hartford Life Insurance
Company.............................. -- --
Payable for fund shares purchased..... 2,585 170,055
----------- -----------
Total Liabilities..................... 2,585 170,055
----------- -----------
Net Assets (variable annuity contract
liabilities)......................... $28,017,824 $35,728,381
=========== ===========
</TABLE>
---------------------------------------------------- 14
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1999
UNAUDITED
<TABLE>
<CAPTION>
MENTOR VIP MENTOR VIP
CAPITAL GROWTH PERPETUAL INTERNATIONAL
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
-------------- -----------------------
<S> <C> <C>
ASSETS:
Investments:
Mentor VIP Capital Growth Fund
Shares 1,714,877
Cost $21,738,831
Market Value..................................... $24,728,524 --
Mentor VIP Perpetual International Fund
Shares 1,160,994
Cost $16,298,880
Market Value..................................... -- $22,755,484
Mentor VIP Growth Fund
Shares 1,040,522
Cost $11,202,467
Market Value..................................... -- --
Mitchell Hutchins Growth & Income Portfolio -
Class 1
Shares 245,997
Cost $3,654,815
Market Value..................................... -- --
Mitchell Hutchins Strategic Income Portfolio -
Class 1
Shares 98,344
Cost $1,219,298
Market Value..................................... -- --
Mitchell Hutchins Tactical Allocation Portfolio -
Class 1
Shares 1,320,950
Cost $21,338,736
Market Value..................................... -- --
Huntington VA Income Equity Fund
Shares 23,178
Cost $228,633
Market Value..................................... -- --
Due from Hartford Life Insurance Company............. -- 17,786
Receivable from fund shares sold..................... 7,221 --
----------- -----------
Total Assets......................................... 24,735,745 22,773,270
----------- -----------
LIABILITIES:
Due to Hartford Life Insurance Company............... 7,301 --
Payable for fund shares purchased.................... -- 17,847
----------- -----------
Total Liabilities.................................... 7,301 17,847
----------- -----------
Net Assets (variable annuity contract liabilities)... 24,728,444 $22,755,423
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 15
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
MENTOR VIP MITCHELL HUTCHINS MITCHELL HUTCHINS MITCHELL HUTCHINS
GROWTH GROWTH AND INCOME STRATEGIC INCOME TACTICAL ALLOCATION
FUND PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------------- ----------------- -------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Mentor VIP Capital Growth Fund
Shares 1,714,877
Cost $21,738,831
Market Value..................................... -- -- -- --
Mentor VIP Perpetual International Fund
Shares 1,160,994
Cost $16,298,880
Market Value..................................... -- -- -- --
Mentor VIP Growth Fund
Shares 1,040,522
Cost $11,202,467
Market Value..................................... $14,432,037 -- -- --
Mitchell Hutchins Growth & Income Portfolio -
Class 1
Shares 245,997
Cost $3,654,815
Market Value..................................... -- $4,022,057 -- --
Mitchell Hutchins Strategic Income Portfolio -
Class 1
Shares 98,344
Cost $1,219,298
Market Value..................................... -- -- $1,153,572 --
Mitchell Hutchins Tactical Allocation Portfolio -
Class 1
Shares 1,320,950
Cost $21,338,736
Market Value..................................... -- -- -- $21,769,264
Huntington VA Income Equity Fund
Shares 23,178
Cost $228,633
Market Value..................................... -- -- -- --
Due from Hartford Life Insurance Company............. 9,714 -- -- 1,537
Receivable from fund shares sold..................... -- 137 -- --
----------- ---------- ---------- -----------
Total Assets......................................... 14,441,751 4,022,194 1,153,572 21,770,801
----------- ---------- ---------- -----------
LIABILITIES:
Due to Hartford Life Insurance Company............... -- 134 38 --
Payable for fund shares purchased.................... 9,738 -- -- 1,531
----------- ---------- ---------- -----------
Total Liabilities.................................... 9,738 134 38 1,531
----------- ---------- ---------- -----------
Net Assets (variable annuity contract liabilities)... $14,432,013 $4,022,060 $1,153,534 $21,769,270
=========== ========== ========== ===========
<CAPTION>
HUNTINGTON VA
INCOME EQUITY
FUND
SUB-ACCOUNT
-------------
<S> <C>
ASSETS:
Investments:
Mentor VIP Capital Growth Fund
Shares 1,714,877
Cost $21,738,831
Market Value..................................... --
Mentor VIP Perpetual International Fund
Shares 1,160,994
Cost $16,298,880
Market Value..................................... --
Mentor VIP Growth Fund
Shares 1,040,522
Cost $11,202,467
Market Value..................................... --
Mitchell Hutchins Growth & Income Portfolio -
Class 1
Shares 245,997
Cost $3,654,815
Market Value..................................... --
Mitchell Hutchins Strategic Income Portfolio -
Class 1
Shares 98,344
Cost $1,219,298
Market Value..................................... --
Mitchell Hutchins Tactical Allocation Portfolio -
Class 1
Shares 1,320,950
Cost $21,338,736
Market Value..................................... --
Huntington VA Income Equity Fund
Shares 23,178
Cost $228,633
Market Value..................................... $228,763
Due from Hartford Life Insurance Company............. --
Receivable from fund shares sold..................... --
--------
Total Assets......................................... 228,763
--------
LIABILITIES:
Due to Hartford Life Insurance Company............... 8
Payable for fund shares purchased.................... --
--------
Total Liabilities.................................... 8
--------
Net Assets (variable annuity contract liabilities)... $228,755
========
</TABLE>
---------------------------------------------------- 16
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1999
UNAUDITED
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------- ---------- ---------------
<S> <C> <C> <C>
DEFERRED ANNUITY CONTRACTS IN THE
ACCUMULATION PERIOD:
Bond Fund Qualified 1.00%........ 213,341 $ 4.242785 $ 905,161
Bond Fund Non-Qualified 1.00%.... 1,528,336 4.178271 6,385,802
Bond Fund 1.25%.................. 167,706,691 2.184598 366,371,702
Bond Fund .25%................... 52,746 1.498860 79,060
Bond Fund 1.4%................... 755,787 2.182434 1,649,454
Bond Fund 1.5%................... 2,733,792 0.994947 2,719,978
Stock Fund Qualified 1.00%....... 2,764,533 13.310539 36,797,424
Stock Fund Qualified 1.00%....... 679,578 13.920026 9,459,745
Stock Fund 1.25%................. 432,423,789 7.175612 3,102,905,327
Stock Fund .25%.................. 1,068,046 3.885218 4,149,591
Stock Fund 1.4%.................. 2,104,901 7.168535 15,089,057
Stock Fund 1.5%.................. 11,808,607 1.223394 14,446,580
Stock Fund 1.65%................. 69,390 1.222948 84,860
Money Market Fund Qualified
1.00%........................... 459,952 2.782454 1,279,796
Money Market Fund Non-Qualified
1.00%........................... 6,995,552 2.783765 19,473,975
Money Market Fund 1.25%.......... 213,832,400 1.777341 380,053,091
Money Market Fund .25%........... 423,001 1.359855 575,220
Money Market Fund 1.65%.......... 95,824 1.049997 100,615
Money Market Fund 1.4%........... 1,061,435 1.775591 1,884,675
Money Market Fund 1.5%........... 11,251,805 1.050377 11,818,639
Advisers Fund Qualified 1.00%.... 2,884,286 7.230781 20,855,637
Advisers Fund Non-Qualified
1.00%........................... 8,513,289 7.230781 61,557,730
Advisers Fund 1.25%.............. 1,156,230,489 4.803097 5,553,487,191
Advisers Fund .25%............... 1,122,511 2.760456 3,098,643
Advisers Fund 1.65%.............. 90,120 1.127468 101,608
Advisers Fund 1.4%............... 4,952,412 4.798347 23,763,390
Advisers Fund 1.5%............... 24,758,627 1.127880 27,924,760
Capital Appreciation Fund
Qualified 1.00%................. 693,728 12.687752 8,801,850
Capital Appreciation Fund
Non-Qualified 1.00%............. 1,995,203 12.682513 25,304,182
Capital Appreciation Fund
1.25%........................... 347,433,441 7.501418 2,606,243,470
Capital Appreciation Fund .25%... 1,770,832 3.719454 6,586,527
Capital Appreciation Fund
1.65%........................... 56,270 1.334003 75,064
Capital Appreciation Fund 1.4%... 1,112,300 7.494011 8,335,584
Capital Appreciation Fund 1.5%... 5,291,692 1.334491 7,061,715
Mortgage Securities Fund
Qualified 1.00%................. 455,136 2.859263 1,301,354
Mortgage Securities Fund
Non-Qualified 1.00%............. 4,637,303 2.859263 13,259,270
Mortgage Securities Fund 1.25%... 69,554,953 2.216665 154,180,031
Mortgage Securities Fund .25%.... 14,431 1.476954 21,314
Mortgage Securities Fund 1.4%.... 120,468 2.214471 266,772
Mortgage Securities Fund 1.5%.... 435,786 1.022434 445,563
Index Fund Qualified 1.00%....... 180,991 2.226696 403,011
Index Fund Non-Qualified 1.00%... 705,606 2.226696 1,571,169
Index Fund 1.25%................. 152,272,495 5.607574 853,879,286
Index Fund .25%.................. 225,894 3.702905 836,463
Index Fund 1.65%................. 7,659 1.239923 9,497
Index Fund 1.4%.................. 1,106,937 5.602011 6,201,075
Index Fund 1.5%.................. 5,947,828 1.240377 7,377,549
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 17
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------- ---------- ---------------
<S> <C> <C> <C>
International Opportunities Fund
Qualified 1.00%................. 164,957 $ 2.321965 $ 383,024
International Opportunities Fund
Non-Qualified 1.00%............. 1,040,352 2.320729 2,414,376
International Opportunities Fund
1.25%........................... 218,271,540 2.266827 494,783,822
International Opportunities Fund
.25%............................ 693,181 2.614527 1,812,341
International Opportunities Fund
1.4%............................ 449,187 2.264582 1,017,221
International Opportunities Fund
1.5%............................ 5,242,257 1.273461 6,675,810
Dividend and Growth Fund
Qualified 1.00%................. 302,679 2.607548 789,249
Dividend and Growth Fund
Non-Qualified 1.00%............. 1,206,465 2.607548 3,145,915
Dividend and Growth Fund 1.25%... 381,269,170 2.569946 979,841,178
Dividend and Growth Fund .25%.... 208,016 2.723583 566,550
Dividend and Growth Fund 1.65%... 17,587 1.045671 18,390
Dividend and Growth Fund 1.4%.... 1,030,411 2.567396 2,645,474
Dividend and Growth Fund 1.5%.... 4,376,833 1.046052 4,578,395
International Advisers Fund
Qualified 1.00%................. 12,397 1.817544 22,533
International Advisers Fund
Non-Qualified 1.00%............. 153,873 1.817544 279,670
International Advisers Fund
1.25%........................... 57,796,510 1.795704 103,785,423
International Advisers Fund
.25%............................ 38,176 1.884645 71,947
International Advisers Fund
1.65%........................... 8,093 1.178048 9,534
International Advisers Fund
1.4%............................ 390,910 1.793926 701,264
International Advisers Fund
1.5%............................ 3,383,042 1.178481 3,986,850
Small Company Fund Qualified
1.00%........................... 227,604 2.269744 516,604
Small Company Fund Non-Qualified
1.00%........................... 2,533,564 2.269744 5,750,541
Small Company Fund 1.25%......... 107,808,156 2.250630 242,636,270
Small Company Fund .25%.......... 237,848 2.328130 553,741
Small Company Fund 1.65%......... 23,341 1.592576 37,173
Small Company Fund 1.4%.......... 725,945 2.248401 1,632,216
Small Company Fund 1.5%.......... 1,659,166 1.593152 2,643,303
MidCap Fund Sub-Account 1.00%
Qualified....................... 276,421 2.068062 571,655
MidCap Fund Sub-Account 1.00%
Non-Qualified................... 4,561,273 2.068062 9,432,996
MidCap Fund Sub-Account .25%..... 100,099 2.105927 210,800
MidCap Fund 1.65%................ 12,943 1.520083 19,674
MidCap Fund 1.4%................. 1,455,391 2.053534 2,988,695
MidCap Fund 1.5%................. 2,064,651 1.520630 3,139,571
MidCap Fund 1.25%................ 118,305,628 2.055574 243,185,973
Growth and Income Fund 1.65%..... 16,881 1.308008 22,081
Growth and Income Fund 1.4%...... 1,551,524 1.420460 2,203,878
Growth and Income Fund Non
Qualified 1.00%................. 94,246 1.427512 134,538
Growth and Income Fund Qualified
1.00%........................... 297,288 1.427512 424,382
Growth and Income Fund .25%...... 18,437 1.444538 26,633
Growth and Income Fund 1.25%..... 41,231,825 1.421882 58,626,791
Growth and Income Fund 1.5%...... 2,107,446 1.308485 2,757,561
High Yield Fund 1.4%............. 707,437 1.069043 756,281
High Yield Fund 1.5%............. 754,351 1.066776 804,723
High Yield Fund .25%............. 10,000 1.083588 10,836
High Yield Fund 1.25%............ 14,681,047 1.070110 15,710,335
High Yield Fund Qualified
1.00%........................... 9,996 1.073454 10,730
High Yield Fund Non Qualified
1.00%........................... 28,832 1.073454 30,950
Global Leaders Fund 1.4%......... 601,937 1.950512 1,174,085
</TABLE>
---------------------------------------------------- 18
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1999
UNAUDITED
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------- ---------- ---------------
<S> <C> <C> <C>
Global Leaders Fund .25%......... 34,138 $ 1.976824 $ 67,485
Global Leaders Fund 1.25%........ 25,342,886 1.952453 49,480,795
Global Leaders Fund Non Qualified
1.00%........................... 132,669 1.958438 259,824
Global Leaders Fund 1.00%........ 30,778 1.958438 60,278
Global Leaders Fund 1.5%......... 912,978 1.946293 1,776,922
Smith Barney Cash Portfolio
Qualified 1.00%................. 40,848 2.996122 122,387
Smith Barney Cash Portfolio
Non-Qualified 1.00%............. 112,352 3.100326 348,328
Smith Barney Appreciation Fund
1.00%........................... 17,669 12.651528 223,538
Smith Barney Government Portfolio
1.00%........................... 11,614 2.695221 31,302
BB&T Growth and Income Fund
1.4%............................ 164,327 1.263735 207,666
BB&T Growth and Income Fund
1.25%........................... 21,984,471 1.264991 27,810,158
AmSouth Equity Income Fund
1.4%............................ 868,023 1.400354 1,215,540
AmSouth Equity Income Fund
1.25%........................... 24,604,396 1.401746 34,489,115
Mentor Capital Growth Portfolio
1.4%............................ 100,477 1.129778 113,517
Mentor Capital Growth Portfolio
1.25%........................... 21,765,940 1.130892 24,614,927
Mentor Perpetual International
Fund 1.4%....................... 117,617 1.531949 180,183
Mentor Perpetual International
Fund 1.25%...................... 14,721,728 1.533464 22,575,240
Mentor Growth Fund 1.4%.......... 39,023 1.085030 42,341
Mentor Growth Fund 1.25%......... 13,248,938 1.086100 14,389,672
Mitchell Hutchins Growth and
Income Portfolio 1.5%........... 28,159 1.082851 30,491
Mitchell Hutchins Growth and
Income Portfolio 1.4%........... 24,198 1.168150 28,267
Mitchell Hutchins Growth and
Income Portfolio 1.25%.......... 3,389,460 1.169302 3,963,302
Mitchell Hutchins Strategic
Income Portfolio 1.5%........... 39,574 0.975253 38,595
Mitchell Hutchins Strategic
Income Portfolio 1.4%........... 48,568 1.002380 48,683
Mitchell Hutchins Strategic
Income Portfolio 1.25%.......... 1,062,673 1.003372 1,066,256
Mitchell Hutchins Tactical
Allocation Portfolio 1.5%....... 1,771,459 1.065485 1,887,463
Mitchell Hutchins Tactical
Allocation Portfolio 1.4%....... 260,842 1.235332 322,226
Mitchell Hutchins Tactical
Allocation Portfolio 1.25%...... 15,817,865 1.236550 19,559,581
Huntington VA Income Equity Fund
1.4%............................ 6,274 0.992986 6,230
Huntington VA Income Equity Fund
1.25%........................... 224,042 0.993229 222,525
---------------
SUB-TOTAL:....................... 15,777,904,275
---------------
ANNUITY CONTRACTS IN THE ANNUITY
PERIOD:
Bond Fund Non-Qualified 1.00%.... 13,487 4.178271 56,352
Bond Fund 1.25%.................. 646,995 2.184598 1,413,425
Stock Fund Non-Qualified 1.00%... 21,934 13.310539 291,952
Stock Fund 1.25%................. 1,177,626 7.175612 8,450,189
Money Market Fund Qualified
1.00%........................... 317 2.782454 883
Money Market Fund Non-Qualified
1.00%........................... 70,673 2.783765 196,736
Money Market Fund 1.25%.......... 367,868 1.777341 653,827
Advisers Fund Qualified 1.00%.... 1,924 7.230781 13,909
Advisers Fund Non-Qualified
1.00%........................... 107,185 7.230781 775,030
Advisers Fund 1.25%.............. 2,971,945 4.803097 14,274,540
Capital Appreciation Fund
Non-Qualified 1.00%............. 15,299 12.682513 194,028
Capital Appreciation Fund
1.25%........................... 403,526 7.501418 3,027,015
Mortgage Securities Fund
Non-Qualified 1.00%............. 57,599 2.859263 164,690
Mortgage Securities Fund 1.25%... 222,487 2.216665 493,180
Index Fund 1.25%................. 603,079 5.607574 3,381,807
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 19
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------- ---------- ---------------
<S> <C> <C> <C>
Index Fund Non Qualified1.00%.... 9,620 $ 2.226696 $ 21,421
International Opportunities Fund
Non-Qualified 1.00%............. 4,586 2.320729 10,643
International Opportunities Fund
1.25%........................... 439,255 2.266827 995,716
Dividend and Growth Fund 1.25%... 796,481 2.569946 2,046,914
International Advisers Fund
1.25%........................... 157,903 1.795704 283,547
Small Company Fund 1.25%......... 113,321 2.250630 255,044
MidCap Fund 1.25%................ 67,473 2.055574 138,696
Growth and Income Fund 1.25%..... 74,023 1.421882 105,252
High Yield Fund 1.25%............ 165,941 1.070110 177,576
Global Leaders Fund 1.25%........ 11,105 1.952453 21,683
AMSouth Equity Income Fund....... 16,927 1.401746 23,727
---------------
SUB-TOTAL........................ 37,467,782
---------------
GRAND TOTAL:....................... $15,815,372,057
===============
</TABLE>
---------------------------------------------------- 20
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
UNAUDITED
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ 20,856,394 $ 21,835,245
EXPENSES:
Mortality and expense undertakings.... (4,786,965) (35,154,364)
------------ ------------
Net investment income (loss)........ 16,069,429 (13,319,119)
------------ ------------
CAPITAL GAINS INCOME.................... 2,623,245 216,819,144
------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized (loss) gain on security
transactions......................... (203,417) 318,938
Net unrealized (depreciation)
appreciation of investments during
the period........................... (31,230,646) 275,463,487
------------ ------------
Net (loss) gain on investments...... (31,434,063) 275,782,425
------------ ------------
Net (decrease) increase in net
assets resulting from operations... $(12,741,389) $479,282,450
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 21
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX OPPORTUNITIES
FUND FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ------------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................. $19,516,607 $119,254,083 $ 8,050,639 $ 9,514,435 $ 8,124,740 $ 4,967,210
EXPENSES:
Mortality and expense undertakings.... (5,024,718) (66,290,644) (27,044,767) (2,222,251) (9,248,662) (5,283,728)
----------- ------------ ------------ ----------- ------------ ------------
Net investment income (loss)........ 14,491,889 52,963,439 (18,994,128) 7,292,184 (1,123,922) (316,518)
----------- ------------ ------------ ----------- ------------ ------------
CAPITAL GAINS INCOME.................... 9,037 410,469,104 127,112,714 -- 10,953,439 --
----------- ------------ ------------ ----------- ------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized (loss) gain on security
transactions......................... -- 2,721,491 8,239,831 106,051 3,676 12,898,810
Net unrealized (depreciation)
appreciation of investments during
the period........................... -- 6,294,211 578,461,865 (6,915,906) 121,670,024 137,769,735
----------- ------------ ------------ ----------- ------------ ------------
Net (loss) gain on investments...... -- 9,015,702 586,701,696 (6,809,855) 121,673,700 150,668,545
----------- ------------ ------------ ----------- ------------ ------------
Net (decrease) increase in net
assets resulting from operations... $14,500,926 $472,448,245 $694,820,282 $ 482,329 $131,503,217 $150,352,027
=========== ============ ============ =========== ============ ============
<CAPTION>
DIVIDEND
AND GROWTH
FUND
SUB-ACCOUNT
------------
<S> <C>
INVESTMENT INCOME:
Dividends............................. $ 16,011,869
EXPENSES:
Mortality and expense undertakings.... (12,526,370)
------------
Net investment income (loss)........ 3,485,499
------------
CAPITAL GAINS INCOME.................... 38,610,231
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized (loss) gain on security
transactions......................... 2,185,191
Net unrealized (depreciation)
appreciation of investments during
the period........................... (5,417,975)
------------
Net (loss) gain on investments...... (3,232,784)
------------
Net (decrease) increase in net
assets resulting from operations... $ 38,862,946
============
</TABLE>
---------------------------------------------------- 22
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
UNAUDITED
<TABLE>
<CAPTION>
INTERNATIONAL SMALL
ADVISERS COMPANY
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ 1,927,226 $ --
EXPENSES:
Mortality and expense undertakings.... (1,089,997) (1,741,126)
----------- -----------
Net investment income (loss)........ 837,229 (1,741,126)
----------- -----------
CAPITAL GAINS INCOME.................... -- 315,082
----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... 295,153 4,251,712
Net unrealized appreciation
(depreciation) of investments during
the period........................... 17,296,426 81,907,566
----------- -----------
Net gain (loss) on investments...... 17,591,579 86,159,278
----------- -----------
Net increase (decrease) in net
assets resulting from operations... $18,428,808 $84,733,234
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 23
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
GROWTH AND GLOBAL SMITH BARNEY SMITH BARNEY
MIDCAP INCOME HIGH YIELD LEADERS CASH APPRECIATION
FUND FUND FUND FUND PORTFOLIO FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ -- $ 172,552 $ 967,224 $ 67,709 $22,683 $ 1,997
EXPENSES:
Mortality and expense undertakings.... (1,335,119) (353,581) (122,260) (182,154) (4,908) (2,133)
----------- ---------- --------- ----------- ------- -------
Net investment income (loss)........ (1,335,119) (181,029) 844,964 (114,445) 17,775 (136)
----------- ---------- --------- ----------- ------- -------
CAPITAL GAINS INCOME.................... 10,415,254 397,311 1,135 238,680 -- 22,203
----------- ---------- --------- ----------- ------- -------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... (224,429) 46,869 (15,929) (9,270) -- 123
Net unrealized appreciation
(depreciation) of investments during
the period........................... 46,937,316 6,503,899 (642,094) 10,060,655 -- 5,735
----------- ---------- --------- ----------- ------- -------
Net gain (loss) on investments...... 46,712,887 6,550,768 (658,023) 10,051,385 -- 5,858
----------- ---------- --------- ----------- ------- -------
Net increase (decrease) in net
assets resulting from operations... $55,793,022 $6,767,050 $ 188,076 $10,175,620 $17,775 $27,925
=========== ========== ========= =========== ======= =======
<CAPTION>
SMITH BARNEY BB&T GROWTH AMSOUTH
GOVERNMENT & INCOME EQUITY INCOME
PORTFOLIO FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................. $1,568 $ 300,770 $ 354,120
EXPENSES:
Mortality and expense undertakings.... (347) (320,977) (336,848)
------ ----------- ----------
Net investment income (loss)........ 1,221 (20,207) 17,272
------ ----------- ----------
CAPITAL GAINS INCOME.................... -- 393,152 --
------ ----------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... -- 3,527 (4,172)
Net unrealized appreciation
(depreciation) of investments during
the period........................... -- (1,805,236) 6,229,908
------ ----------- ----------
Net gain (loss) on investments...... -- (1,801,709) 6,225,736
------ ----------- ----------
Net increase (decrease) in net
assets resulting from operations... $1,221 $(1,428,764) $6,243,008
====== =========== ==========
</TABLE>
---------------------------------------------------- 24
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
UNAUDITED
<TABLE>
<CAPTION>
MENTOR VIP MENTOR VIP
CAPITAL GROWTH PERPETUAL INTERNATIONAL
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
-------------- -----------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ 32,268 $--
EXPENSES:
Mortality and expense undertakings.... (282,453) (195,980)
---------- ----------
Net investment income (loss)........ (250,185) (195,980)
---------- ----------
CAPITAL GAINS INCOME.................... 37,363 10,315
---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... 496 9,042
Net unrealized appreciation
(depreciation) of investments during
the period........................... 1,293,466 5,855,275
---------- ----------
Net gain (loss) on investments...... 1,293,962 5,864,317
---------- ----------
Net increase (decrease) in net
assets resulting from operations... $1,081,140 $5,678,652
========== ==========
</TABLE>
* From inception, November 1, 1999 to December 31, 1999
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 25
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
MENTOR VIP MITCHELL HUTCHINS MITCHELL HUTCHINS MITCHELL HUTCHINS HUNTINGTON VA
GROWTH GROWTH AND INCOME STRATEGIC INCOME TACTICAL ALLOCATION INCOME
FUND PORTFOLIO PORTFOLIO PORTFOLIO EQUITY FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
----------- ----------------- ----------------- ------------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................. $ 16,104 $ 41 $ 63,920 $ 71,190 $1,302
EXPENSES:
Mortality and expense undertakings.... (131,586) (27,575) (7,295) (111,510) (175)
---------- -------- -------- ---------- ------
Net investment income (loss)........ (115,482) (27,534) 56,625 (40,320) 1,127
---------- -------- -------- ---------- ------
CAPITAL GAINS INCOME.................... -- -- 0 1,339,390 --
---------- -------- -------- ---------- ------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions......................... 21,602 3,219 165 31,237 --
Net unrealized appreciation
(depreciation) of investments during
the period........................... 2,619,527 367,262 (65,581) 430,021 131
---------- -------- -------- ---------- ------
Net gain (loss) on investments...... 2,641,129 370,481 (65,416) 461,258 131
---------- -------- -------- ---------- ------
Net increase (decrease) in net
assets resulting from operations... $2,525,647 $342,947 $ (8,791) $1,760,328 $1,258
========== ======== ======== ========== ======
</TABLE>
* From inception, November 1, 1999 to December 31, 1999
---------------------------------------------------- 26
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999
UNAUDITED
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 16,069,429 $ (13,319,119)
Capital gains income.................. 2,623,245 216,819,144
Net realized (loss) gain on security
transactions......................... (203,417) 318,938
Net unrealized (depreciation)
appreciation of investments during
the period........................... (31,230,646) 275,463,487
------------ --------------
Net (decrease) increase in net assets
resulting from operations............ (12,741,389) 479,282,450
------------ --------------
UNIT TRANSACTIONS:
Purchases............................. 27,921,938 243,534,289
Net transfers......................... 28,910,921 204,580,762
Surrenders for benefit payments and
fees................................. (42,745,328) (238,079,087)
Net annuity transactions.............. 414,745 4,064,471
------------ --------------
Net increase (decrease) in net assets
resulting from unit transactions..... 14,502,276 214,100,435
------------ --------------
Total increase (decrease) in net
assets............................... 1,760,887 693,382,885
NET ASSETS:
Beginning of period................... 377,820,047 2,498,291,840
------------ --------------
End of period......................... $379,580,934 $3,191,674,725
============ ==============
</TABLE>
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND STOCK
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 14,116,691 $ (7,282,872)
Capital gains income.................. -- 63,980,079
Net realized (loss) gain on security
transactions......................... (17,730) (1,720,391)
Net unrealized appreciation
(depreciation) of investments during
the period........................... 5,723,478 522,612,064
------------ --------------
Net increase in net assets resulting
from operations...................... 19,822,439 577,588,880
------------ --------------
UNIT TRANSACTIONS:
Purchases............................. 41,906,997 201,628,213
Net transfers......................... 95,280,889 107,789,657
Surrenders for benefit payments and
fees................................. (24,892,187) (143,970,482)
Net annuity transactions.............. 321,142 560,255
------------ --------------
Net increase (decrease) in net assets
resulting from unit transactions..... 112,616,841 166,007,643
------------ --------------
Total increase (decrease) in net
assets............................... 132,439,280 743,596,523
NET ASSETS:
Beginning of period................... 245,380,767 1,754,695,317
------------ --------------
End of period......................... $377,820,047 $2,498,291,840
============ ==============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 27
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX
FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- -------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 14,491,889 $ 52,963,439 $ (18,994,128) $ 7,292,184 $ (1,123,922)
Capital gains income.................. 9,037 410,469,104 127,112,714 -- 10,953,439
Net realized (loss) gain on security
transactions......................... -- 2,721,491 8,239,831 106,051 3,676
Net unrealized (depreciation)
appreciation of investments during
the period........................... -- 6,294,211 578,461,865 (6,915,906) 121,670,024
------------- -------------- -------------- ------------ ------------
Net (decrease) increase in net assets
resulting from operations............ 14,500,926 472,448,245 694,820,282 482,329 131,503,217
------------- -------------- -------------- ------------ ------------
UNIT TRANSACTIONS:
Purchases............................. 52,032,809 400,762,799 114,346,316 5,634,859 86,228,724
Net transfers......................... 179,073,766 425,533,878 47,043,624 2,063,743 94,024,710
Surrenders for benefit payments and
fees................................. (172,457,509) (514,511,813) (177,116,018) (28,509,889) (63,335,518)
Net annuity transactions.............. 66,069 4,945,760 853,857 213,909 2,159,559
------------- -------------- -------------- ------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions..... 58,715,135 316,730,624 (14,872,221) (20,597,378) 119,077,475
------------- -------------- -------------- ------------ ------------
Total increase (decrease) in net
assets............................... 73,216,061 789,178,869 679,948,061 (20,115,049) 250,580,692
NET ASSETS:
Beginning of period................... 342,821,394 4,916,673,571 1,985,681,374 190,247,223 623,100,586
------------- -------------- -------------- ------------ ------------
End of period......................... $ 416,037,455 $5,705,852,440 $2,665,629,435 $170,132,174 $873,681,278
============= ============== ============== ============ ============
<CAPTION>
INTERNATIONAL DIVIDEND
OPPORTUNITIES AND GROWTH
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ (316,518) $ 3,485,499
Capital gains income.................. -- 38,610,231
Net realized (loss) gain on security
transactions......................... 12,898,810 2,185,191
Net unrealized (depreciation)
appreciation of investments during
the period........................... 137,769,735 (5,417,975)
------------ ------------
Net (decrease) increase in net assets
resulting from operations............ 150,352,027 38,862,946
------------ ------------
UNIT TRANSACTIONS:
Purchases............................. 13,080,473 65,414,965
Net transfers......................... (10,281,590) (15,678,141)
Surrenders for benefit payments and
fees................................. (43,785,344) (69,729,336)
Net annuity transactions.............. 123,273 320,965
------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions..... (40,863,188) (19,671,547)
------------ ------------
Total increase (decrease) in net
assets............................... 109,488,839 19,191,399
NET ASSETS:
Beginning of period................... 398,604,114 974,440,666
------------ ------------
End of period......................... $508,092,953 $993,632,065
============ ============
</TABLE>
<TABLE>
<CAPTION>
CAPITAL MORTGAGE
MONEY MARKET ADVISERS APPRECIATION SECURITIES INDEX
FUND FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $11,836,148 $ 44,020,326 $ (12,238,662) $ 9,644,833 $ (1,323,774)
Capital gains income.................. -- 130,914,844 114,733,928 -- 10,662,058
Net realized (loss) gain on security
transactions......................... -- 1,826,471 (4,786,085) 473,273 (704,518)
Net unrealized appreciation
(depreciation) of investments during
the period........................... -- 709,363,622 140,386,292 (228,914) 110,953,813
------------ -------------- -------------- ------------ ------------
Net increase in net assets resulting
from operations...................... 11,836,148 886,125,263 238,095,473 9,889,192 119,587,579
------------ -------------- -------------- ------------ ------------
UNIT TRANSACTIONS:
Purchases............................. 34,983,693 374,759,005 143,597,572 9,146,977 67,409,255
Net transfers......................... 123,126,442 280,406,929 (12,597,119) 8,722,639 58,996,655
Surrenders for benefit payments and
fees................................. (94,130,526) (329,416,389) (117,626,736) (28,665,195) (34,320,175)
Net annuity transactions.............. (32,392) 3,527,169 304,016 39,959 271,456
------------ -------------- -------------- ------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions..... 63,947,217 329,276,714 13,677,733 (10,755,620) 92,357,191
------------ -------------- -------------- ------------ ------------
Total increase (decrease) in net
assets............................... 75,783,365 1,215,401,977 251,773,206 (866,428) 211,944,770
NET ASSETS:
Beginning of period................... 267,038,029 3,701,271,594 1,733,908,168 191,113,651 411,155,816
------------ -------------- -------------- ------------ ------------
End of period......................... $342,821,394 $4,916,673,571 $1,985,681,374 $190,247,223 $623,100,586
============ ============== ============== ============ ============
<CAPTION>
INTERNATIONAL DIVIDEND
OPPORTUNITIES AND GROWTH
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 189,021 $ 4,915,811
Capital gains income.................. 25,347,181 25,624,259
Net realized (loss) gain on security
transactions......................... 1,455,876 (465,941)
Net unrealized appreciation
(depreciation) of investments during
the period........................... 17,463,831 82,775,505
------------ ------------
Net increase in net assets resulting
from operations...................... 44,455,909 112,849,634
------------ ------------
UNIT TRANSACTIONS:
Purchases............................. 16,804,591 141,279,121
Net transfers......................... (27,399,853) 99,305,048
Surrenders for benefit payments and
fees................................. (28,546,428) (49,052,200)
Net annuity transactions.............. 244,437 835,197
------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions..... (38,897,253) 192,367,166
------------ ------------
Total increase (decrease) in net
assets............................... 5,558,656 305,216,800
NET ASSETS:
Beginning of period................... 393,045,458 669,223,866
------------ ------------
End of period......................... $398,604,114 $974,440,666
============ ============
</TABLE>
---------------------------------------------------- 28
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
UNAUDITED
<TABLE>
<CAPTION>
INTERNATIONAL SMALL
ADVISERS COMPANY
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 837,229 $ (1,741,126)
Capital gains income.................. -- 315,082
Net realized gain (loss) on security
transactions......................... 295,153 4,251,712
Net unrealized appreciation
(depreciation) of investments during
the period........................... 17,296,426 81,907,566
------------ ------------
Net increase (decrease) in net assets
resulting from operations............ 18,428,808 84,733,234
------------ ------------
UNIT TRANSACTIONS:
Purchases............................. 10,659,922 13,837,871
Net transfers......................... 10,728,100 42,134,966
Surrenders for benefit payments and
fees................................. (6,643,729) (9,812,254)
Net annuity transactions.............. 129,729 (1,998)
------------ ------------
Net increase (decrease) in net assets
resulting from unit transactions..... 14,874,022 46,158,585
------------ ------------
Total increase (decrease) in net
assets............................... 33,302,830 130,891,819
NET ASSETS:
Beginning of period................... 75,837,938 123,133,073
------------ ------------
End of period......................... $109,140,768 $254,024,892
============ ============
</TABLE>
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
INTERNATIONAL SMALL
ADVISERS COMPANY
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 5,711,299 $ (1,090,110)
Capital gains income.................. 1,559,601 1,255,431
Net realized (loss) gain on security
transactions......................... (62,176) 1,445,433
Net unrealized (depreciation)
appreciation of investments during
the period........................... (222,372) 9,623,019
----------- ------------
Net increase in net assets resulting
from operations...................... 6,986,352 11,233,773
----------- ------------
UNIT TRANSACTIONS:
Purchases............................. 9,244,144 17,606,410
Net transfers......................... 5,996,311 27,369,558
Surrenders for benefit payments and
fees................................. (3,894,672) (4,568,343)
Net annuity transactions.............. 83,430 98,040
----------- ------------
Net increase (decrease) in net assets
resulting from unit transactions..... 11,429,213 40,505,665
----------- ------------
Total increase (decrease) in net
assets............................... 18,415,565 51,739,438
NET ASSETS:
Beginning of period................... 57,422,373 71,393,635
----------- ------------
End of period......................... $75,837,938 $123,133,073
=========== ============
</TABLE>
** From inception, June 1, 1998 to December 31, 1998
*** From inception, September 30, 1998 to December 31, 1998
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 29
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
GROWTH AND GLOBAL SMITH BARNEY SMITH BARNEY
MIDCAP INCOME HIGH YIELD LEADERS CASH APPRECIATION
FUND FUND FUND FUND PORTFOLIO FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ (1,335,119) $ (181,029) $ 844,964 $ (114,445) $ 17,775 $ (136)
Capital gains income.................. 10,415,254 397,311 1,135 238,680 -- 22,203
Net realized gain (loss) on security
transactions......................... (224,429) 46,869 (15,929) (9,270) -- 123
Net unrealized appreciation
(depreciation) of investments during
the period........................... 46,937,316 6,503,899 (642,094) 10,060,655 -- 5,735
------------ ----------- ----------- ----------- -------- --------
Net increase (decrease) in net assets
resulting from operations............ 55,793,022 6,767,050 188,076 10,175,620 17,775 27,925
------------ ----------- ----------- ----------- -------- --------
UNIT TRANSACTIONS:
Purchases............................. 28,146,551 15,704,459 4,494,431 8,251,247 -- --
Net transfers......................... 131,121,514 36,678,430 11,579,453 34,966,058 -- --
Surrenders for benefit payments and
fees................................. (1,798,300) (1,186,192) (881,151) (1,167,939) (33,763) (4,174)
Net annuity transactions.............. 122,890 88,032 177,075 16,976 -- --
------------ ----------- ----------- ----------- -------- --------
Net increase (decrease) in net assets
resulting from unit transactions..... 157,592,655 51,284,729 15,369,808 42,066,342 (33,763) (4,174)
------------ ----------- ----------- ----------- -------- --------
Total increase (decrease) in net
assets............................... 213,385,677 58,051,779 15,557,884 52,241,962 (15,988) 23,751
NET ASSETS:
Beginning of period................... 46,302,383 6,249,337 1,943,547 599,110 486,703 199,787
------------ ----------- ----------- ----------- -------- --------
End of period......................... $259,688,060 $64,301,116 $17,501,431 $52,841,072 $470,715 $223,538
============ =========== =========== =========== ======== ========
<CAPTION>
SMITH BARNEY BB&T GROWTH AMSOUTH
GOVERNMENT & INCOME EQUITY INCOME
PORTFOLIO FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 1,221 $ (20,207) $ 17,272
Capital gains income.................. -- 393,152 --
Net realized gain (loss) on security
transactions......................... -- 3,527 (4,172)
Net unrealized appreciation
(depreciation) of investments during
the period........................... -- (1,805,236) 6,229,908
------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations............ 1,221 (1,428,764) 6,243,008
------- ----------- -----------
UNIT TRANSACTIONS:
Purchases............................. -- 2,806,902 8,947,643
Net transfers......................... -- 4,398,250 60,144
Surrenders for benefit payments and
fees................................. (4,276) (1,469,630) (2,025,318)
Net annuity transactions.............. -- -- (8,117)
------- ----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions..... (4,276) 5,735,522 6,974,352
------- ----------- -----------
Total increase (decrease) in net
assets............................... (3,055) 4,306,758 13,217,360
NET ASSETS:
Beginning of period................... 34,357 23,711,066 22,511,021
------- ----------- -----------
End of period......................... $31,302 $28,017,824 $35,728,381
======= =========== ===========
</TABLE>
<TABLE>
<CAPTION>
GROWTH AND GLOBAL SMITH BARNEY
MIDCAP INCOME HIGH YIELD LEADERS CASH
FUND FUND FUND FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT** SUB-ACCOUNT*** SUB-ACCOUNT*** SUB-ACCOUNT
----------- ------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ (320,020) $ 5,967 $ 32,022 $ 472 $ 19,946
Capital gains income.................. -- -- -- 16,340 --
Net realized (loss) gain on security
transactions......................... (3,698) (2,267) (287) 1,084 --
Net unrealized (depreciation)
appreciation of investments during
the period........................... 6,597,665 740,175 (9,874) 10,436 --
----------- ---------- ---------- -------- --------
Net increase in net assets resulting
from operations...................... 6,273,947 743,875 21,861 28,332 19,946
----------- ---------- ---------- -------- --------
UNIT TRANSACTIONS:
Purchases............................. 13,468,482 1,325,581 226,463 114,768 --
Net transfers......................... 18,368,378 4,236,085 1,697,571 456,296 --
Surrenders for benefit payments and
fees................................. (982,314) (56,204) (2,348) (286) (42,255)
Net annuity transactions.............. -- -- -- -- --
----------- ---------- ---------- -------- --------
Net increase (decrease) in net assets
resulting from unit transactions..... 30,854,546 5,505,462 1,921,686 570,778 (42,255)
----------- ---------- ---------- -------- --------
Total increase (decrease) in net
assets............................... 37,128,493 6,249,337 1,943,547 599,110 (22,309)
NET ASSETS:
Beginning of period................... 9,173,890 -- -- -- 509,012
----------- ---------- ---------- -------- --------
End of period......................... $46,302,383 $6,249,337 $1,943,547 $599,110 $486,703
=========== ========== ========== ======== ========
<CAPTION>
SMITH BARNEY SMITH BARNEY BB&T GROWTH AMSOUTH
APPRECIATION GOVERNMENT & INCOME EQUITY INCOME
FUND PORTFOLIO FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ----------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 526 $ 1,465 $ 28,796 $ 134,592
Capital gains income.................. 15,116 -- -- --
Net realized (loss) gain on security
transactions......................... 51 -- 1,013 4,124
Net unrealized (depreciation)
appreciation of investments during
the period........................... 17,076 -- 1,927,801 971,715
-------- ------- ----------- -----------
Net increase in net assets resulting
from operations...................... 32,769 1,465 1,957,610 1,110,431
-------- ------- ----------- -----------
UNIT TRANSACTIONS:
Purchases............................. -- -- 9,760,778 14,622,450
Net transfers......................... -- -- 6,090,057 5,094,816
Surrenders for benefit payments and
fees................................. (3,555) (4,272) (574,799) (733,985)
Net annuity transactions.............. -- -- -- 25,393
-------- ------- ----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions..... (3,555) (4,272) 15,276,036 19,008,674
-------- ------- ----------- -----------
Total increase (decrease) in net
assets............................... 29,214 (2,807) 17,233,646 20,119,105
NET ASSETS:
Beginning of period................... 170,573 37,164 6,477,420 2,391,916
-------- ------- ----------- -----------
End of period......................... $199,787 $34,357 $23,711,066 $22,511,021
======== ======= =========== ===========
</TABLE>
** From inception, June 1, 1998 to December 31, 1998
*** From inception, September 30, 1998 to December 31, 1998
---------------------------------------------------- 30
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
UNAUDITED
<TABLE>
<CAPTION>
MENTOR VIP MENTOR VIP
CAPITAL GROWTH PERPETUAL INTERNATIONAL
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
-------------- -----------------------
<S> <C> <C>
OPERATIONS:
Net investment (loss) income.......... $ (250,185) $ (195,980)
Capital gains income.................. 37,363 10,315
Net realized gain (loss) on security
transactions......................... 496 9,042
Net unrealized
appreciation(depreciation) of
investments during the period........ 1,293,466 5,855,275
----------- -----------
Net increase (decrease) in net assets
resulting from operations............ 1,081,140 5,678,652
----------- -----------
UNIT TRANSACTIONS:
Purchases............................. 2,920,379 1,966,282
Net transfers......................... 2,776,202 4,932,157
Surrenders for benefit payments and
fees................................. (727,009) (634,023)
Net annuity transactions.............. -- --
----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions..... 4,969,572 6,264,416
----------- -----------
Total increase (decrease) in net
assets............................... 6,050,712 11,943,068
NET ASSETS:
Beginning of period................... 18,677,732 10,812,355
----------- -----------
End of period......................... $24,728,444 $22,755,423
=========== ===========
</TABLE>
* From inception, November 1, 1999 to December 31, 1999
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
MENTOR VIP MENTOR VIP
CAPITAL GROWTH PERPETUAL INTERNATIONAL
FUND FUND
SUB-ACCOUNT* SUB-ACCOUNT*
-------------- -----------------------
<S> <C> <C>
OPERATIONS:
Net investment (loss) income.......... $ (85,499) $ (51,799)
Capital gains income.................. -- --
Net realized gain(loss) on security
transactions......................... (4,500) 1,684
Net unrealized
appreciation(depreciation) of
investments during the period........ 1,696,228 601,328
----------- -----------
Net increase (decrease) in net assets
resulting from operations............ 1,606,229 551,213
----------- -----------
UNIT TRANSACTIONS:
Purchases............................. 11,672,774 6,236,230
Net transfers......................... 5,647,677 4,185,922
Surrenders for benefit payments and
fees................................. (248,948) (161,010)
Net annuity transactions.............. -- --
----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions..... 17,071,503 10,261,142
----------- -----------
Total increase (decrease) in net
assets............................... 18,677,732 10,812,355
NET ASSETS:
Beginning of period................... -- --
----------- -----------
End of period......................... $18,677,732 $10,812,355
=========== ===========
</TABLE>
* From inception, March 2, 1998 to December 31, 1998
**** From inception, December 16, 1998 to December 31, 1998
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
---------------------------------------------------- 31
----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
MENTOR VIP MITCHELL HUTCHINS MITCHELL HUTCHINS MITCHELL HUTCHINS HUNTINGTON VA
GROWTH GROWTH AND STRATEGIC INCOME TACTICAL ALLOCATION INCOME
FUND INCOME PORTFOLIO PORTFOLIO PORTFOLIO EQUITY FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
----------- ----------------- ----------------- ------------------- -------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment (loss) income.......... $ (115,482) $ (27,534) $ 56,625 $ (40,320) $ 1,127
Capital gains income.................. -- -- -- 1,339,390 --
Net realized gain (loss) on security
transactions......................... 21,602 3,219 165 31,237 --
Net unrealized
appreciation(depreciation) of
investments during the period........ 2,619,527 367,262 (65,581) 430,021 131
----------- ---------- ---------- ----------- --------
Net increase (decrease) in net assets
resulting from operations............ 2,525,647 342,947 (8,791) 1,760,328 1,258
----------- ---------- ---------- ----------- --------
UNIT TRANSACTIONS:
Purchases............................. 1,591,255 3,251,474 741,317 12,031,575 171,554
Net transfers......................... 186,787 512,571 475,556 8,174,292 55,943
Surrenders for benefit payments and
fees................................. (341,906) (95,651) (64,519) (207,496) --
Net annuity transactions.............. -- -- -- -- --
----------- ---------- ---------- ----------- --------
Net increase (decrease) in net assets
resulting from unit transactions..... 1,436,136 3,668,394 1,152,354 19,998,371 227,497
----------- ---------- ---------- ----------- --------
Total increase (decrease) in net
assets............................... 3,961,783 4,011,341 1,143,563 21,758,699 228,755
NET ASSETS:
Beginning of period................... 10,470,230 10,719 9,971 10,571 --
----------- ---------- ---------- ----------- --------
End of period......................... $14,432,013 $4,022,060 $1,153,534 $21,769,270 $228,755
=========== ========== ========== =========== ========
</TABLE>
* From inception, November 1, 1999 to December 31, 1999
<TABLE>
<CAPTION>
MENTOR VIP MITCHELL HUTCHINS MITCHELL HUTCHINS MITCHELL HUTCHINS
GROWTH GROWTH AND INCOME STRATEGIC INCOME TACTICAL ALLOCATION
FUND PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT* SUB-ACCOUNT**** SUB-ACCOUNT**** SUB-ACCOUNT****
------------ ----------------- ----------------- -------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment (loss) income.......... $ (44,785) $ 38 $ 111 $ 7
Capital gains income.................. -- 702 6 56
Net realized gain(loss) on security
transactions......................... (1,365) -- -- --
Net unrealized
appreciation(depreciation) of
investments during the period........ 610,042 (20) (145) 507
----------- ------- ------ -------
Net increase (decrease) in net assets
resulting from operations............ 563,892 720 (28) 570
----------- ------- ------ -------
UNIT TRANSACTIONS:
Purchases............................. 6,771,031 10,000 10,000 10,000
Net transfers......................... 3,215,967 -- -- --
Surrenders for benefit payments and
fees................................. (80,660) (1) (1) 1
Net annuity transactions.............. -- -- -- --
----------- ------- ------ -------
Net increase (decrease) in net assets
resulting from unit transactions..... 9,906,338 9,999 9,999 10,001
----------- ------- ------ -------
Total increase (decrease) in net
assets............................... 10,470,230 10,719 9,971 10,571
NET ASSETS:
Beginning of period................... -- -- -- --
----------- ------- ------ -------
End of period......................... $10,470,230 $10,719 $9,971 $10,571
=========== ======= ====== =======
</TABLE>
* From inception, March 2, 1998 to December 31, 1998
**** From inception, December 16, 1998 to December 31, 1998
---------------------------------------------------- 32
----------------------------------------------------
<PAGE>
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
UNAUDITED
1. ORGANIZATION:
Separate Account Two (the Account) is a separate investment account within
Hartford Life Insurance Company (the Company) and is registered with in 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). Realized gains and
losses on the sales of securities are computed on the basis of identified
cost of the fund shares sold. Dividend and capital gains income are
accrued as of the ex-dividend date. Capital gains income represents
those dividends from the Funds which are characterized as capital
gains under tax regulations.
b) SECURITY VALUATION--The investments in shares of the Funds are valued at
the closing net asset value per share as determined by the appropriate
Fund as of December 31, 1999.
c) UNIT TRANSACTIONS--Unit transactions are executed based on the unit
values calculated at the close of the business day.
d) 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.
e) 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 expense 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:
Certain amounts are deducted from the Contracts, as described below:
a) MORTALITY AND EXPENSE RISK CHARGE--The Company, will make deductions at a
maximum annual rate of 1.50% of the Contract's value for the mortality
and expenses risks which the Company undertakes.
b) TAX EXPENSE CHARGE--If applicable, the Company will make deductions at a
maximum rate of 4.0% of the Contract's value to meet premium tax
requirements. An additional tax charge based on a percentage of the
Contract's value may be assessed to partial withrawals or surrenders.
These expenses are included in surrenders for benefit payments and fees
in the accompanying statements of changes in net assets.
c) ANNUAL MAINTENANCE FEE--An annual maintenance fee in the amount of $30
may be deducted from the Contract's value each contract year. However,
this fee is not applicable to contracts with values of $50,000 or more,
as determined on the most recent contract anniversary. These expenses are
included in surrenders for benefit payments and fees in the accompaying
statements of changes in net assets.
______________________________________ 33 ______________________________________
<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 (Bond Fund, Stock Fund,
Money Market Fund, Advisers Fund, Capital Appreciation Fund, Mortgage Securities
Fund, Index Fund, International Opportunities Fund, Dividend and Growth Fund,
International Advisers Fund, Small Company Fund, MidCap Fund, Smith Barney Cash
Portfolio, Smith Barney Appreciation Fund, Smith Barney Government Portfolio,
BB&T Growth & Income Fund, AmSouth Equity Income Fund, Mentor VIP Capital Growth
Fund, Mentor VIP Perpetual International Fund, and Mentor VIP Growth 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 AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS
Fund, Inc. - Class
IA
Shares 349,618,159
Cost $365,928,024
Market Value....... $377,820,108 --
Hartford Stock HLS
Fund, Inc. - Class
IA
Shares 380,740,509
Cost $1,321,699,321
Market Value....... -- $2,498,292,052
Hartford Money Market
HLS Fund, Inc. -
Class IA
Shares 342,816,331
Cost $342,816,331
Market Value....... -- --
Hartford Advisers HLS
Fund, Inc. - Class
IA
Shares
1,646,987,741
Cost $3,054,571,935
Market Value....... -- --
Hartford Capital
Appreciation HLS
Fund, Inc. - Class
IA
Shares 417,240,558
Cost $1,302,905,756
Market Value....... -- --
Hartford Mortgage
Securities HLS Fund,
Inc. - Class IA
Shares 175,411,395
Cost $189,578,583
Market Value....... -- --
Hartford Index HLS
Fund, Inc. - Class
IA
Shares 174,516,110
Cost $371,361,315
Market Value....... -- --
Hartford
International
Opportunities HLS
Fund, Inc. - Class
IA
Shares 294,203,798
Cost $340,518,189
Market Value....... -- --
Hartford Dividend and
Growth HLS Fund,
Inc. - Class IA
Shares 451,028,566
Cost $725,280,325
Market Value....... -- --
Due from Hartford Life
Insurance Company..... 204,248 389,733
Receivable from fund
shares sold........... -- --
------------ --------------
Total Assets........... 378,024,356 2,498,681,785
------------ --------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- --
Payable for fund shares
purchased............. 204,309 389,945
------------ --------------
Total Liabilities...... 204,309 389,945
------------ --------------
Net Assets (variable
annuity contract
liabilities).......... $377,820,047 $2,498,291,840
------------ --------------
------------ --------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-3
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY CAPITAL MORTGAGE
MARKET FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ------------------ ---------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS
Fund, Inc. - Class
IA
Shares 349,618,159
Cost $365,928,024
Market Value....... -- -- -- -- --
Hartford Stock HLS
Fund, Inc. - Class
IA
Shares 380,740,509
Cost $1,321,699,321
Market Value....... -- -- -- -- --
Hartford Money Market
HLS Fund, Inc. -
Class IA
Shares 342,816,331
Cost $342,816,331
Market Value....... $342,816,331 -- -- -- --
Hartford Advisers HLS
Fund, Inc. - Class
IA
Shares
1,646,987,741
Cost $3,054,571,935
Market Value....... -- $4,916,675,095 -- -- --
Hartford Capital
Appreciation HLS
Fund, Inc. - Class
IA
Shares 417,240,558
Cost $1,302,905,756
Market Value....... -- -- $1,985,681,614 -- --
Hartford Mortgage
Securities HLS Fund,
Inc. - Class IA
Shares 175,411,395
Cost $189,578,583
Market Value....... -- -- -- $190,242,955 --
Hartford Index HLS
Fund, Inc. - Class
IA
Shares 174,516,110
Cost $371,361,315
Market Value....... -- -- -- -- $ 623,101,394
Hartford
International
Opportunities HLS
Fund, Inc. - Class
IA
Shares 294,203,798
Cost $340,518,189
Market Value....... -- -- -- -- --
Hartford Dividend and
Growth HLS Fund,
Inc. - Class IA
Shares 451,028,566
Cost $725,280,325
Market Value....... -- -- -- -- --
Due from Hartford Life
Insurance Company..... -- 662,986 10,643,121 -- 267,176
Receivable from fund
shares sold........... 19,488,693 -- -- 412,430 --
------------ -------------- ------------------ ---------------- --------------
Total Assets........... 362,305,024 4,917,338,081 1,996,324,735 190,655,385 623,368,570
------------ -------------- ------------------ ---------------- --------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 19,483,630 -- -- 408,162 --
Payable for fund shares
purchased............. -- 664,510 10,643,361 -- 267,984
------------ -------------- ------------------ ---------------- --------------
Total Liabilities...... 19,483,630 664,510 10,643,361 408,162 267,984
------------ -------------- ------------------ ---------------- --------------
Net Assets (variable
annuity contract
liabilities).......... $342,821,394 $4,916,673,571 $1,985,681,374 $190,247,223 $ 623,100,586
------------ -------------- ------------------ ---------------- --------------
------------ -------------- ------------------ ---------------- --------------
<CAPTION>
INTERNATIONAL DIVIDEND AND
OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------- ---------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS
Fund, Inc. - Class
IA
Shares 349,618,159
Cost $365,928,024
Market Value....... -- --
Hartford Stock HLS
Fund, Inc. - Class
IA
Shares 380,740,509
Cost $1,321,699,321
Market Value....... -- --
Hartford Money Market
HLS Fund, Inc. -
Class IA
Shares 342,816,331
Cost $342,816,331
Market Value....... -- --
Hartford Advisers HLS
Fund, Inc. - Class
IA
Shares
1,646,987,741
Cost $3,054,571,935
Market Value....... -- --
Hartford Capital
Appreciation HLS
Fund, Inc. - Class
IA
Shares 417,240,558
Cost $1,302,905,756
Market Value....... -- --
Hartford Mortgage
Securities HLS Fund,
Inc. - Class IA
Shares 175,411,395
Cost $189,578,583
Market Value....... -- --
Hartford Index HLS
Fund, Inc. - Class
IA
Shares 174,516,110
Cost $371,361,315
Market Value....... -- --
Hartford
International
Opportunities HLS
Fund, Inc. - Class
IA
Shares 294,203,798
Cost $340,518,189
Market Value....... $398,604,075 --
Hartford Dividend and
Growth HLS Fund,
Inc. - Class IA
Shares 451,028,566
Cost $725,280,325
Market Value....... -- $974,440,901
Due from Hartford Life
Insurance Company..... -- 122,495
Receivable from fund
shares sold........... 364,279 --
------------------- ---------------
Total Assets........... 398,968,354 974,563,396
------------------- ---------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 364,240 --
Payable for fund shares
purchased............. -- 122,730
------------------- ---------------
Total Liabilities...... 364,240 122,730
------------------- ---------------
Net Assets (variable
annuity contract
liabilities).......... $398,604,114 $974,440,666
------------------- ---------------
------------------- ---------------
</TABLE>
<PAGE>
SA-4 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
INTERNATIONAL SMALL MIDCAP SMITH BARNEY
ADVISERS FUND COMPANY FUND FUND CASH PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
International
Advisers HLS Fund,
Inc. - Class IA
Shares 65,678,237
Cost $75,055,437
Market Value....... $75,837,939 -- -- --
Small Company HLS
Fund, Inc. - Class
IA
Shares 93,203,695
Cost $112,102,718
Market Value....... -- $123,132,800 -- --
MidCap HLS Fund, Inc.
- Class IA
Shares 32,171,652
Cost $39,368,682
Market Value....... -- -- $46,303,243 --
Smith Barney Cash
Portfolio
Shares 486,806
Cost $486,806
Market Value....... -- -- -- $486,808
Smith Barney
Appreciation Fund
Shares 13,052
Cost $99,509
Market Value....... -- -- -- --
Smith Barney
Government Portfolio
Shares 34,357
Cost $34,357
Market Value....... -- -- -- --
BB&T Growth & Income
Fund
Shares 1,782,787
Cost $21,373,783
Market Value....... -- -- -- --
AmSouth Equity Income
Fund
Shares 1,999,203
Cost $21,507,113
Market Value....... -- -- -- --
Mentor VIP Capital
Growth Portfolio
Shares 1,375,385
Cost $16,981,499
Market Value....... -- -- -- --
Mentor VIP Perpetual
International
Portfolio
Shares 771,760
Cost $10,211,028
Market Value....... -- -- -- --
Mentor VIP Growth
Portfolio
Shares 913,633
Cost $9,860,193
Market Value....... -- -- -- --
Due from Hartford Life
Insurance Company..... 37,942 8,326,029 197,604 26,345
Receivable from fund
shares sold........... -- -- -- --
-------------- ------------- ------------ ---------------
Total Assets........... 75,875,881 131,458,829 46,500,847 513,153
-------------- ------------- ------------ ---------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- -- -- --
Payable for fund shares
purchased............. 37,943 8,325,756 198,464 26,450
-------------- ------------- ------------ ---------------
Total Liabilities...... 37,943 8,325,756 198,464 26,450
-------------- ------------- ------------ ---------------
Net Assets (variable
annuity contract
liabilities).......... $75,837,938 $123,133,073 $46,302,383 $486,703
-------------- ------------- ------------ ---------------
-------------- ------------- ------------ ---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-5
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMITH BARNEY SMITH BARNEY BB&T GROWTH & AMSOUTH EQUITY MENTOR
APPRECIATION FUND GOVERNMENT PORTFOLIO INCOME FUND INCOME FUND CAPITAL GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ --------------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
International
Advisers HLS Fund,
Inc. - Class IA
Shares 65,678,237
Cost $75,055,437
Market Value....... -- -- -- -- --
Small Company HLS
Fund, Inc. - Class
IA
Shares 93,203,695
Cost $112,102,718
Market Value....... -- -- -- -- --
MidCap HLS Fund, Inc.
- Class IA
Shares 32,171,652
Cost $39,368,682
Market Value....... -- -- -- -- --
Smith Barney Cash
Portfolio
Shares 486,806
Cost $486,806
Market Value....... -- -- -- -- --
Smith Barney
Appreciation Fund
Shares 13,052
Cost $99,509
Market Value....... $199,776 -- -- -- --
Smith Barney
Government Portfolio
Shares 34,357
Cost $34,357
Market Value....... -- $34,356 -- -- --
BB&T Growth & Income
Fund
Shares 1,782,787
Cost $21,373,783
Market Value....... -- -- $23,711,070 -- --
AmSouth Equity Income
Fund
Shares 1,999,203
Cost $21,507,113
Market Value....... -- -- -- $22,511,025 --
Mentor VIP Capital
Growth Portfolio
Shares 1,375,385
Cost $16,981,499
Market Value....... -- -- -- -- $18,677,728
Mentor VIP Perpetual
International
Portfolio
Shares 771,760
Cost $10,211,028
Market Value....... -- -- -- -- --
Mentor VIP Growth
Portfolio
Shares 913,633
Cost $9,860,193
Market Value....... -- -- -- -- --
Due from Hartford Life
Insurance Company..... -- -- 29,049 -- 11,902
Receivable from fund
shares sold........... 117 31 -- 30,849 --
-------- ------- ----------------- --------------- ---------------
Total Assets........... 199,893 34,387 23,740,119 22,541,874 18,689,630
-------- ------- ----------------- --------------- ---------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 106 30 -- 30,853 --
Payable for fund shares
purchased............. -- -- 29,053 -- 11,898
-------- ------- ----------------- --------------- ---------------
Total Liabilities...... 106 30 29,053 30,853 11,898
-------- ------- ----------------- --------------- ---------------
Net Assets (variable
annuity contract
liabilities).......... $199,787 $34,357 $23,711,066 $22,511,021 $18,677,732
-------- ------- ----------------- --------------- ---------------
-------- ------- ----------------- --------------- ---------------
<CAPTION>
MENTOR PERPETUAL MENTOR
INTERNATIONAL GROWTH
SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------
<S> <C> <C>
ASSETS:
Investments:
International
Advisers HLS Fund,
Inc. - Class IA
Shares 65,678,237
Cost $75,055,437
Market Value....... -- --
Small Company HLS
Fund, Inc. - Class
IA
Shares 93,203,695
Cost $112,102,718
Market Value....... -- --
MidCap HLS Fund, Inc.
- Class IA
Shares 32,171,652
Cost $39,368,682
Market Value....... -- --
Smith Barney Cash
Portfolio
Shares 486,806
Cost $486,806
Market Value....... -- --
Smith Barney
Appreciation Fund
Shares 13,052
Cost $99,509
Market Value....... -- --
Smith Barney
Government Portfolio
Shares 34,357
Cost $34,357
Market Value....... -- --
BB&T Growth & Income
Fund
Shares 1,782,787
Cost $21,373,783
Market Value....... -- --
AmSouth Equity Income
Fund
Shares 1,999,203
Cost $21,507,113
Market Value....... -- --
Mentor VIP Capital
Growth Portfolio
Shares 1,375,385
Cost $16,981,499
Market Value....... -- --
Mentor VIP Perpetual
International
Portfolio
Shares 771,760
Cost $10,211,028
Market Value....... $10,812,357 --
Mentor VIP Growth
Portfolio
Shares 913,633
Cost $9,860,193
Market Value....... -- $10,470,235
Due from Hartford Life
Insurance Company..... 15,306 67,722
Receivable from fund
shares sold........... -- --
----------------- --------------
Total Assets........... 10,827,663 10,537,957
----------------- --------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- --
Payable for fund shares
purchased............. 15,308 67,727
----------------- --------------
Total Liabilities...... 15,308 67,727
----------------- --------------
Net Assets (variable
annuity contract
liabilities).......... $10,812,355 $10,470,230
----------------- --------------
----------------- --------------
</TABLE>
<PAGE>
SA-6 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GROWTH AND
INCOME FUND
SUB-ACCOUNT
------------
<S> <C>
ASSETS:
Investments:
Hartford Growth and
Income HLS Fund -
Class IA
Shares 5,269,425
Cost $5,509,163
Market Value....... $6,249,337
Hartford High Yield
HLS Fund - Class IA
Shares 1,911,536
Cost $1,953,422
Market Value....... --
Hartford Global
Leaders HLS Fund -
Class IA
Shares 466,167
Cost $588,674
Market Value....... --
Mitchell Hutchins
Growth & Income
Portfolio
Shares 673
Cost $9,994
Market Value....... --
Mitchell Hutchins
Strategic Income
Portfolio
Shares 808
Cost $9,994
Market Value....... --
Mitchell Hutchins
Tactical Allocation
Portfolio
Shares 705
Cost $9,995
Market Value....... --
Investment Income
Receivable............ --
Due from Hartford Life
Insurance Company..... --
Receivable from fund
shares sold........... 67,470
------------
Total Assets........... 6,316,807
------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 67,470
Payable for fund shares
purchased............. --
------------
Total Liabilities...... 67,470
------------
Net Assets (variable
annuity contract
liabilities).......... $6,249,337
------------
------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-7
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH GLOBAL MITCHELL HUTCHINS GROWTH MITCHELL HUTCHINS STRATEGIC
YIELD FUND LEADERS FUND AND INCOME PORTFOLIO INCOME PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Growth and
Income HLS Fund -
Class IA
Shares 5,269,425
Cost $5,509,163
Market Value....... -- -- -- --
Hartford High Yield
HLS Fund - Class IA
Shares 1,911,536
Cost $1,953,422
Market Value....... $1,943,548 -- -- --
Hartford Global
Leaders HLS Fund -
Class IA
Shares 466,167
Cost $588,674
Market Value....... -- $599,110 -- --
Mitchell Hutchins
Growth & Income
Portfolio
Shares 673
Cost $9,994
Market Value....... -- -- $ 9,973 --
Mitchell Hutchins
Strategic Income
Portfolio
Shares 808
Cost $9,994
Market Value....... -- -- -- $9,849
Mitchell Hutchins
Tactical Allocation
Portfolio
Shares 705
Cost $9,995
Market Value....... -- -- -- --
Investment Income
Receivable............ -- -- 746 122
Due from Hartford Life
Insurance Company..... 47,113 -- -- --
Receivable from fund
shares sold........... -- 73,610 6 5
------------ ------------- ------- ------
Total Assets........... 1,990,661 672,720 10,725 9,976
------------ ------------- ------- ------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- 73,610 6 5
Payable for fund shares
purchased............. 47,114 -- -- --
------------ ------------- ------- ------
Total Liabilities...... 47,114 73,610 6 5
------------ ------------- ------- ------
Net Assets (variable
annuity contract
liabilities).......... $1,943,547 $599,110 $10,719 $9,971
------------ ------------- ------- ------
------------ ------------- ------- ------
<CAPTION>
MITCHELL HUTCHINS TACTICAL
ALLOCATION PORTFOLIO
SUB-ACCOUNT
---------------------------
<S> <C>
ASSETS:
Investments:
Hartford Growth and
Income HLS Fund -
Class IA
Shares 5,269,425
Cost $5,509,163
Market Value....... --
Hartford High Yield
HLS Fund - Class IA
Shares 1,911,536
Cost $1,953,422
Market Value....... --
Hartford Global
Leaders HLS Fund -
Class IA
Shares 466,167
Cost $588,674
Market Value....... --
Mitchell Hutchins
Growth & Income
Portfolio
Shares 673
Cost $9,994
Market Value....... --
Mitchell Hutchins
Strategic Income
Portfolio
Shares 808
Cost $9,994
Market Value....... --
Mitchell Hutchins
Tactical Allocation
Portfolio
Shares 705
Cost $9,995
Market Value....... $10,502
Investment Income
Receivable............ 69
Due from Hartford Life
Insurance Company..... --
Receivable from fund
shares sold........... 6
-------
Total Assets........... 10,577
-------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 6
Payable for fund shares
purchased............. --
-------
Total Liabilities...... 6
-------
Net Assets (variable
annuity contract
liabilities).......... $10,571
-------
-------
</TABLE>
<PAGE>
SA-8 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------- ---------- ---------------
<S> <C> <C> <C>
DEFERRED ANNUITY CONTRACTS IN THE
ACCUMULATION PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Bond Fund Qualified 1.00%........ 232,939 $ 4.373600 $ 1,018,782
Bond Fund Non-Qualified 1.00%.... 1,961,849 4.307093 8,449,866
Bond Fund 1.25%.................. 162,500,684 2.257591 366,860,082
Bond Fund .25%................... 55,518 1.533539 85,139
Bond Fund........................ 306,878 1.030758 316,317
Stock Fund Qualified 1.00%....... 802,936 11.737647 9,424,579
Stock Fund Non-Qualified 1.00%... 2,912,842 11.223740 32,692,982
Stock Fund 1.25%................. 403,629,126 6.065754 2,448,314,988
Stock Fund .25%.................. 1,056,753 3.251658 3,436,199
Stock Fund....................... 849,480 1.036706 880,661
Money Market Fund Qualified
1.00%........................... 612,050 2.679268 1,639,846
Money Market Fund Non-Qualified
1.00%........................... 9,019,394 2.680536 24,176,811
Money Market Fund 1.25%.......... 183,614,324 1.715714 315,029,666
Money Market Fund .25%........... 373,199 1.299644 485,026
Money Market Fund................ 725,403 1.016497 737,370
Advisers Fund Qualified 1.00%.... 3,191,360 6.604239 21,076,505
Advisers Fund Non-Qualified
1.00%........................... 9,942,207 6.604240 65,660,718
Advisers Fund 1.25%.............. 1,095,048,448 4.397886 4,815,898,238
Advisers Fund .25%............... 1,220,271 2.502440 3,053,655
Advisers Fund.................... 1,915,141 1.035292 1,982,730
Capital Appreciation Fund
Qualified 1.00%................. 774,553 9.322862 7,221,051
Capital Appreciation Fund
Non-Qualified 1.00%............. 2,433,361 9.318523 22,675,331
Capital Appreciation Fund
1.25%........................... 352,482,012 5.525767 1,947,733,468
Capital Appreciation Fund .25%... 2,264,988 2.712640 6,144,097
Capital Appreciation Fund........ 271,922 0.984021 267,577
Mortgage Securities Fund
Qualified 1.00%................. 484,096 2.844764 1,377,139
Mortgage Securities Fund
Non-Qualified 1.00%............. 5,584,466 2.844767 15,886,504
Mortgage Securities Fund 1.25%... 78,025,873 2.210954 172,511,615
Mortgage Securities Fund .25%.... 14,431 1.458457 21,047
Mortgage Securities Fund......... 10,000 1.022300 10,223
Index Fund 1.00%................. 146,209 1.866581 272,911
Index Fund Non-Qualified 1.00%... 569,781 1.866580 1,063,542
Index Fund 1.25%................. 131,578,849 4.712432 620,056,376
Index Fund .25%.................. 212,284 3.080896 654,025
Index Fund....................... 249,634 1.044934 260,851
International Opportunities Fund
Qualified 1.00%................. 197,097 1.676915 330,515
International Opportunities Fund
Non-Qualified 1.00%............. 1,314,169 1.676023 2,202,578
International Opportunities Fund
1.25%........................... 240,089,691 1.641190 394,032,800
International Opportunities Fund
.25%............................ 681,620 1.874113 1,277,433
International Opportunities
Fund............................ 140,095 0.924280 129,487
Dividend and Growth Fund
Qualified 1.00%................. 417,549 2.500875 1,044,238
Dividend and Growth Fund
Non-Qualified 1.00%............. 1,616,066 2.500878 4,041,584
Dividend and Growth Fund 1.25%... 391,151,359 2.470981 966,527,576
Dividend and Growth Fund .25%.... 250,697 2.592664 649,973
Dividend and Growth Fund......... 523,054 1.008273 527,381
International Advisers Fund
Sub-Account 1.00%............... 23,172 1.490549 34,539
International Advisers Fund
Non-Qualified 1.00%............. 201,485 1.490538 300,321
International Advisers Fund
1.25%........................... 50,971,459 1.476317 75,250,031
International Advisers Fund
.25%............................ 39,807 1.534052 61,066
International Advisers Fund...... 80,466 0.971292 78,156
Small Company Fund 1.00%......... 227,701 1.382431 314,781
Small Company Fund Non-Qualified
1.00%........................... 3,669,917 1.382433 5,073,414
Small Company Fund 1.25%......... 85,431,351 1.374218 117,401,300
Small Company Fund .25%.......... 61,838 1.407436 87,033
Small Company Fund............... 100,223 0.975195 97,737
MidCap Fund Sub-Account 1.00%
Qualified....................... 89,724 1.375964 123,457
MidCap Fund Sub-Account 1.00%
Non-Qualified................... 242,882 1.375969 334,198
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-9
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------- ---------- ---------------
<S> <C> <C> <C>
INDIVIDUAL SUB-ACCOUNTS --
(CONTINUED)
MidCap Fund 1.25%................ 33,348,056 $ 1.371074 $ 45,722,653
MidCap Fund 1.00% Qualified...... 29,907 1.390711 41,592
MidCap Fund...................... 79,150 1.016841 80,483
Smith Barney Cash Portfolio
Qualified 1.00%................. 52,115 2.889398 150,581
Smith Barney Cash Portfolio
Non-Qualified 1.00%............. 112,418 2.989930 336,122
Smith Barney Appreciation
Qualified 1.00%................. 18,002 11.098045 199,787
Smith Barney Government Portfolio
Qualified 1.00%................. 13,202 2.602409 34,357
BB&T Growth and Income Fund...... 17,799,083 1.332151 23,711,066
AMSouth Equity Income Fund 1.00%
Qualified....................... 19,801,638 1.135502 22,484,800
Mentor Capital Growth Fund....... 17,370,611 1.075249 18,677,732
Mentor Perpetual International
Fund............................ 9,747,833 1.109206 10,812,355
Mentor Growth Fund............... 11,540,088 0.907292 10,470,230
Growth and Income Fund........... 181,057 1.183528 214,286
Growth and Income Fund........... 10,000 1.183500 11,835
Growth and Income Fund........... 4,982,306 1.181798 5,888,079
Growth and Income Fund........... 16,550 1.188761 19,674
Growth and Income Fund........... 105,902 1.090282 115,463
High Yield Fund.................. 15,798 1.035511 16,359
High Yield Fund.................. 10,000 1.035500 10,355
High Yield Fund.................. 1,832,207 1.034881 1,896,116
High Yield Fund.................. 10,000 1.037462 10,375
High Yield Fund.................. 10,000 1.034245 10,342
Global Leaders Fund.............. 10,000 1.315500 13,155
Global Leaders Fund.............. 10,000 1.315500 13,155
Global Leaders Fund.............. 415,660 1.314733 546,482
Global Leaders Fund.............. 10,000 1.317944 13,179
Global Leaders Fund.............. 10,000 1.313892 13,139
Mitchell Hutchins Growth and
Income Portfolio................ 10,000 1.071942 10,719
Mitchell Hutchins Strategic
Income Portfolio................ 10,000 0.997127 9,971
Mitchell Hutchins Tactical
Allocation Portfolio............ 10,000 1.057099 10,571
---------------
SUB-TOTAL INDIVIDUAL
SUB-ACCOUNTS.................... 12,628,840,528
---------------
ANNUITY CONTRACTS IN THE ANNUITY
PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Bond Fund Non-Qualified 1.00%.... 19,762 4.307092 85,115
Bond Fund 1.25%.................. 445,052 2.257591 1,004,746
Stock Fund Non-Qualified 1.00%... 25,544 11.223888 286,703
Stock Fund 1.25%................. 536,739 6.065754 3,255,728
Money Market Fund Qualified
1.00%........................... 648 2.679268 1,736
Money Market Fund Non-Qualified
1.00%........................... 85,788 2.680536 229,959
Money Market Fund 1.25%.......... 303,652 1.715714 520,980
Advisers Fund Qualified 1.00%.... 2,600 6.604240 17,172
Advisers Fund Non-Qualified
1.00%........................... 74,716 6.604240 493,441
Advisers Fund 1.25%.............. 1,930,726 4.397886 8,491,112
Capital Appreciation Fund
Non-Qualified 1.00%............. 18,217 9.318439 169,754
Capital Appreciation Fund
1.25%........................... 266,044 5.525767 1,470,096
Mortgage Securities Fund
Non-Qualified 1.00%............. 58,753 2.844767 167,139
Mortgage Securities Fund 1.25%... 123,728 2.210954 273,556
Index Fund 1.25%................. 168,253 4.712432 792,881
International Opportunities Fund
Non-Qualified 1.00%............. 6,240 1.676024 10,459
International Opportunities Fund
1.25%........................... 378,288 1.641190 620,842
Dividend and Growth Fund 1.25%... 667,716 2.470981 1,649,914
International Advisers Fund
1.25%........................... 77,101 1.476317 113,825
Small Company Fund 1.25%......... 115,562 1.374218 158,808
AMSouth Equity Income Fund....... 23,092 1.135502 26,221
---------------
SUB-TOTAL INDIVIDUAL
SUB-ACCOUNTS.................... 19,840,187
---------------
GRAND TOTAL........................ $12,648,680,715
---------------
---------------
</TABLE>
<PAGE>
SA-10 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
----------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $17,912,357 $ 18,915,114
EXPENSES:
Mortality and expense
undertakings.......... (3,795,666) (26,197,986)
----------- ------------
Net investment income
(loss).............. 14,116,691 (7,282,872)
----------- ------------
CAPITAL GAINS INCOME..... -- 63,980,079
----------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (17,730) (1,720,391)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 5,723,478 522,612,064
----------- ------------
Net gain (loss) on
investments......... 5,705,748 520,891,673
----------- ------------
Net increase
(decrease) in net
assets resulting
from operations..... $19,822,439 $577,588,880
----------- ------------
----------- ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-11
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY CAPITAL MORTGAGE
MARKET FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- -------------- ------------------ ---------------- --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $15,550,709 $ 97,214,065 $ 10,528,844 $11,949,822 $ 5,084,024
EXPENSES:
Mortality and expense
undertakings.......... (3,714,561) (53,193,739) (22,767,506) (2,304,989) (6,407,798)
----------- -------------- ------------------ ---------------- --------------
Net investment income
(loss).............. 11,836,148 44,020,326 (12,238,662) 9,644,833 (1,323,774)
----------- -------------- ------------------ ---------------- --------------
CAPITAL GAINS INCOME..... -- 130,914,844 114,733,928 -- 10,662,058
----------- -------------- ------------------ ---------------- --------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- 1,826,471 (4,786,085) 473,273 (704,518)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 709,363,622 140,386,292 (228,914) 110,953,813
----------- -------------- ------------------ ---------------- --------------
Net gain (loss) on
investments......... -- 711,190,093 135,600,207 244,359 110,249,295
----------- -------------- ------------------ ---------------- --------------
Net increase
(decrease) in net
assets resulting
from operations..... $11,836,148 $ 886,125,263 $238,095,473 $ 9,889,192 $ 119,587,579
----------- -------------- ------------------ ---------------- --------------
----------- -------------- ------------------ ---------------- --------------
<CAPTION>
INTERNATIONAL DIVIDEND AND
OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------- ----------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 5,223,310 $ 15,429,535
EXPENSES:
Mortality and expense
undertakings.......... (5,034,289) (10,513,724)
------------------- ----------------
Net investment income
(loss).............. 189,021 4,915,811
------------------- ----------------
CAPITAL GAINS INCOME..... 25,347,181 25,624,259
------------------- ----------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 1,455,876 (465,941)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 17,463,831 82,775,505
------------------- ----------------
Net gain (loss) on
investments......... 18,919,707 82,309,564
------------------- ----------------
Net increase
(decrease) in net
assets resulting
from operations..... $44,455,909 $ 112,849,634
------------------- ----------------
------------------- ----------------
</TABLE>
<PAGE>
SA-12 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
INTERNATIONAL SMALL MIDCAP SMITH BARNEY
ADVISERS FUND COMPANY FUND FUND CASH PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $6,551,901 $ -- $ 330 $24,990
EXPENSES:
Mortality and expense
undertakings.......... (840,602) (1,090,110) (320,350) (5,044)
-------------- ------------- ------------ -------
Net investment income
(loss).............. 5,711,299 (1,090,110) (320,020) 19,946
-------------- ------------- ------------ -------
CAPITAL GAINS INCOME..... 1,559,601 1,255,431 -- --
-------------- ------------- ------------ -------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (62,176) 1,445,433 (3,698) --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (222,372) 9,623,019 6,597,665 --
-------------- ------------- ------------ -------
Net gain (loss) on
investments......... (284,548) 11,068,452 6,593,967 --
-------------- ------------- ------------ -------
Net increase
(decrease) in net
assets resulting
from operations..... $6,986,352 $11,233,773 $ 6,273,947 $19,946
-------------- ------------- ------------ -------
-------------- ------------- ------------ -------
</TABLE>
* From inception, March 2, 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>
SMITH BARNEY SMITH BARNEY BB&T GROWTH & AMSOUTH EQUITY MENTOR
APPRECIATION FUND GOVERNMENT PORTFOLIO INCOME FUND INCOME FUND CAPITAL GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
------------------ --------------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 2,368 $1,842 $ 218,179 $ 313,398 $ --
EXPENSES:
Mortality and expense
undertakings.......... (1,842) (377) (189,383) (178,806) (85,499)
------- ------ ----------------- --------------- ---------------
Net investment income
(loss).............. 526 1,465 28,796 134,592 (85,499)
------- ------ ----------------- --------------- ---------------
CAPITAL GAINS INCOME..... 15,116 -- -- -- --
------- ------ ----------------- --------------- ---------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 51 -- 1,013 4,124 (4,500)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 17,076 -- 1,927,801 971,715 1,696,228
------- ------ ----------------- --------------- ---------------
Net gain (loss) on
investments......... 17,127 -- 1,928,814 975,839 1,691,728
------- ------ ----------------- --------------- ---------------
Net increase
(decrease) in net
assets resulting
from operations..... $32,769 $1,465 $1,957,610 $1,110,431 $1,606,229
------- ------ ----------------- --------------- ---------------
------- ------ ----------------- --------------- ---------------
<CAPTION>
MENTOR PERPETUAL MENTOR
INTERNATIONAL GROWTH
SUB-ACCOUNT* SUB-ACCOUNT*
----------------- -------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $-- $--
EXPENSES:
Mortality and expense
undertakings.......... (51,799) (44,785)
-------- -------------
Net investment income
(loss).............. (51,799) (44,785)
-------- -------------
CAPITAL GAINS INCOME..... -- --
-------- -------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 1,684 (1,365)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 601,328 610,042
-------- -------------
Net gain (loss) on
investments......... 603,012 608,677
-------- -------------
Net increase
(decrease) in net
assets resulting
from operations..... $551,213 $563,892
-------- -------------
-------- -------------
</TABLE>
* From inception, March 2, 1998 to December 31, 1998.
<PAGE>
SA-14 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
GROWTH AND
INCOME FUND
SUB-ACCOUNT**
--------------
<S> <C>
INVESTMENT INCOME:
Dividends.............. $ 23,830
EXPENSES:
Mortality and expense
undertakings.......... (17,863)
--------------
Net investment income
(loss).............. 5,967
--------------
CAPITAL GAINS INCOME..... --
--------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (2,267)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 740,175
--------------
Net gain (loss) on
investments......... 737,908
--------------
Net increase
(decrease) in net
assets resulting
from operations..... $743,875
--------------
--------------
</TABLE>
** From inception, June 1, 1998 to December 31, 1998.
*** From inception, September 30, 1998 to December 31, 1998.
**** From inception, December 16, 1998 to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-15
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH GLOBAL MITCHELL HUTCHINS GROWTH MITCHELL HUTCHINS STRATEGIC
YIELD FUND LEADERS FUND AND INCOME PORTFOLIO INCOME PORTFOLIO
SUB-ACCOUNT*** SUB-ACCOUNT*** SUB-ACCOUNT**** SUB-ACCOUNT****
--------------- --------------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 34,816 $ 789 $ 44 $ 116
EXPENSES:
Mortality and expense
undertakings.......... (2,794) (317) (6) (5)
--------------- ------- ----- -----
Net investment income
(loss).............. 32,022 472 38 111
--------------- ------- ----- -----
CAPITAL GAINS INCOME..... -- 16,340 702 6
--------------- ------- ----- -----
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (287) 1,084 -- --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (9,874) 10,436 (20) (145)
--------------- ------- ----- -----
Net gain (loss) on
investments......... (10,161) 11,520 (20) (145)
--------------- ------- ----- -----
Net increase
(decrease) in net
assets resulting
from operations..... $ 21,861 $28,332 $720 $ (28)
--------------- ------- ----- -----
--------------- ------- ----- -----
<CAPTION>
MITCHELL HUTCHINS TACTICAL
ALLOCATION PORTFOLIO
SUB-ACCOUNT****
---------------------------
<S> <C>
INVESTMENT INCOME:
Dividends.............. $ 13
EXPENSES:
Mortality and expense
undertakings.......... (6)
-----
Net investment income
(loss).............. 7
-----
CAPITAL GAINS INCOME..... 56
-----
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 507
-----
Net gain (loss) on
investments......... 507
-----
Net increase
(decrease) in net
assets resulting
from operations..... $570
-----
-----
</TABLE>
** From inception, June 1, 1998 to December 31, 1998.
*** From inception, September 30, 1998 to December 31, 1998.
**** From inception, December 16, 1998 to December 31, 1998.
<PAGE>
SA-16 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 14,116,691 $ (7,282,872)
Capital gains income... -- 63,980,079
Net realized gain
(loss) on security
transactions.......... (17,730) (1,720,391)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 5,723,478 522,612,064
------------ --------------
Net increase (decrease)
in net assets
resulting from
operations............ 19,822,439 577,588,880
------------ --------------
UNIT TRANSACTIONS:
Purchases.............. 41,906,997 201,628,213
Net transfers.......... 95,280,889 107,789,657
Surrenders for benefit
payments and fees..... (24,892,187) (143,970,482)
Net annuity
transactions.......... 321,142 560,255
------------ --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 112,616,841 166,007,643
------------ --------------
Net increase (decrease)
in net assets......... 132,439,280 743,596,523
NET ASSETS:
Beginning of period.... 245,380,767 1,754,695,317
------------ --------------
End of period.......... $377,820,047 $2,498,291,840
------------ --------------
------------ --------------
</TABLE>
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
BOND FUND STOCK FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 10,349,134 $ (2,890,041)
Capital gains income... -- 64,909,605
Net realized gain
(loss) on security
transactions.......... 17,262 1,176,996
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 10,119,718 315,737,284
------------ --------------
Net increase (decrease)
in net assets
resulting from
operations............ 20,486,114 378,933,844
------------ --------------
UNIT TRANSACTIONS:
Purchases.............. 28,788,526 208,829,884
Net transfers.......... 19,102,654 45,780,800
Surrenders for benefit
payments and fees..... (18,300,042) (92,238,226)
Net annuity
transactions.......... 325,387 633,517
------------ --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 29,916,525 163,005,975
------------ --------------
Net increase (decrease)
in net assets......... 50,402,639 541,939,819
NET ASSETS:
Beginning of period.... 194,978,128 1,212,755,498
------------ --------------
End of period.......... $245,380,767 $1,754,695,317
------------ --------------
------------ --------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-17
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY CAPITAL MORTGAGE
MARKET FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ------------------ ---------------- --------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 11,836,148 $ 44,020,326 $ (12,238,662) $ 9,644,833 $ (1,323,774)
Capital gains income... -- 130,914,844 114,733,928 -- 10,662,058
Net realized gain
(loss) on security
transactions.......... -- 1,826,471 (4,786,085) 473,273 (704,518)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 709,363,622 140,386,292 (228,914) 110,953,813
------------ -------------- ------------------ ---------------- --------------
Net increase (decrease)
in net assets
resulting from
operations............ 11,836,148 886,125,263 238,095,473 9,889,192 119,587,579
------------ -------------- ------------------ ---------------- --------------
UNIT TRANSACTIONS:
Purchases.............. 34,983,693 374,759,005 143,597,572 9,146,977 67,409,255
Net transfers.......... 123,126,442 280,406,929 (12,597,119) 8,722,639 58,996,655
Surrenders for benefit
payments and fees..... (94,130,526) (329,416,389) (117,626,736) (28,665,195) (34,320,175)
Net annuity
transactions.......... (32,392) 3,527,169 304,016 39,959 271,456
------------ -------------- ------------------ ---------------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 63,947,217 329,276,714 13,677,733 (10,755,620) 92,357,191
------------ -------------- ------------------ ---------------- --------------
Net increase (decrease)
in net assets......... 75,783,365 1,215,401,977 251,773,206 (866,428) 211,944,770
NET ASSETS:
Beginning of period.... 267,038,029 3,701,271,594 1,733,908,168 191,113,651 411,155,816
------------ -------------- ------------------ ---------------- --------------
End of period.......... $342,821,394 $4,916,673,571 $1,985,681,374 $190,247,223 $ 623,100,586
------------ -------------- ------------------ ---------------- --------------
------------ -------------- ------------------ ---------------- --------------
<CAPTION>
INTERNATIONAL DIVIDEND AND
OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 189,021 $ 4,915,811
Capital gains income... 25,347,181 25,624,259
Net realized gain
(loss) on security
transactions.......... 1,455,876 (465,941)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 17,463,831 82,775,505
------------------- ---------------
Net increase (decrease)
in net assets
resulting from
operations............ 44,455,909 112,849,634
------------------- ---------------
UNIT TRANSACTIONS:
Purchases.............. 16,804,591 141,279,121
Net transfers.......... (27,399,853) 99,305,048
Surrenders for benefit
payments and fees..... (28,546,428) (49,052,200)
Net annuity
transactions.......... 244,437 835,197
------------------- ---------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (38,897,253) 192,367,166
------------------- ---------------
Net increase (decrease)
in net assets......... 5,558,656 305,216,800
NET ASSETS:
Beginning of period.... 393,045,458 669,223,866
------------------- ---------------
End of period.......... $398,604,114 $ 974,440,666
------------------- ---------------
------------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
MONEY CAPITAL MORTGAGE
MARKET FUND ADVISERS FUND APPRECIATION FUND SECURITIES FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ------------------ ---------------- --------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 10,558,627 $ 36,403,121 $ (10,930,508) $ 9,013,463 $ 492,907
Capital gains income... 792 129,600,221 103,244,397 -- 21,612,566
Net realized gain
(loss) on security
transactions.......... -- 2,159,454 413,746 28,917 243,148
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 501,068,905 190,913,008 5,074,541 65,120,869
------------ -------------- ------------------ ---------------- --------------
Net increase (decrease)
in net assets
resulting from
operations............ 10,559,419 669,231,701 283,640,643 14,116,921 87,469,490
------------ -------------- ------------------ ---------------- --------------
UNIT TRANSACTIONS:
Purchases.............. 56,766,167 364,832,050 194,562,087 7,925,304 65,766,703
Net transfers.......... (9,782,834) 27,406,992 (11,521,643) (9,594,437) 26,458,731
Surrenders for benefit
payments and fees..... (68,418,264) (206,501,208) (87,759,430) (17,575,723) (18,692,668)
Net annuity
transactions.......... 12,261 725,608 361,130 (3,307) 190,331
------------ -------------- ------------------ ---------------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (21,422,670) 186,463,442 95,642,144 (19,248,163) 73,723,097
------------ -------------- ------------------ ---------------- --------------
Net increase (decrease)
in net assets......... (10,863,251) 855,695,143 379,282,787 (5,131,242) 161,192,587
NET ASSETS:
Beginning of period.... 277,901,280 2,845,576,451 1,354,625,381 196,244,893 249,963,229
------------ -------------- ------------------ ---------------- --------------
End of period.......... $267,038,029 $3,701,271,594 $1,733,908,168 $191,113,651 $ 411,155,816
------------ -------------- ------------------ ---------------- --------------
------------ -------------- ------------------ ---------------- --------------
<CAPTION>
INTERNATIONAL DIVIDEND AND
OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ (1,529,162) $ 3,234,554
Capital gains income... 29,748,890 9,959,170
Net realized gain
(loss) on security
transactions.......... 29,653 (4,003)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (32,127,237) 111,067,791
------------------- ---------------
Net increase (decrease)
in net assets
resulting from
operations............ (3,877,856) 124,257,512
------------------- ---------------
UNIT TRANSACTIONS:
Purchases.............. 38,595,370 159,109,767
Net transfers.......... (16,075,692) 87,528,713
Surrenders for benefit
payments and fees..... (26,504,799) (20,331,098)
Net annuity
transactions.......... 66,746 349,515
------------------- ---------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (3,918,375) 226,656,897
------------------- ---------------
Net increase (decrease)
in net assets......... (7,796,231) 350,914,409
NET ASSETS:
Beginning of period.... 400,841,689 318,309,457
------------------- ---------------
End of period.......... $393,045,458 $ 669,223,866
------------------- ---------------
------------------- ---------------
</TABLE>
<PAGE>
SA-18 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
INTERNATIONAL SMALL MIDCAP SMITH BARNEY
ADVISERS FUND COMPANY FUND FUND CASH PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 5,711,299 $ (1,090,110) $ (320,020) $ 19,946
Capital gains income... 1,559,601 1,255,431 -- --
Net realized gain
(loss) on security
transactions.......... (62,176) 1,445,433 (3,698) --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (222,372) 9,623,019 6,597,665 --
-------------- ------------- ------------ ---------------
Net increase (decrease)
in net assets
resulting from
operations............ 6,986,352 11,233,773 6,273,947 19,946
-------------- ------------- ------------ ---------------
UNIT TRANSACTIONS:
Purchases.............. 9,244,144 17,606,410 13,468,482 --
Net transfers.......... 5,996,311 27,369,558 18,368,378 --
Surrenders for benefit
payments and fees..... (3,894,672) (4,568,343) (982,314) (42,255)
Net annuity
transactions.......... 83,430 98,040 -- --
-------------- ------------- ------------ ---------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 11,429,213 40,505,665 30,854,546 (42,255)
-------------- ------------- ------------ ---------------
Net increase (decrease)
in net assets......... 18,415,565 51,739,438 37,128,493 (22,309)
NET ASSETS:
Beginning of period.... 57,422,373 71,393,635 9,173,890 509,012
-------------- ------------- ------------ ---------------
End of period.......... $75,837,938 $123,133,073 $ 46,302,383 $486,703
-------------- ------------- ------------ ---------------
-------------- ------------- ------------ ---------------
</TABLE>
* From inception, March 2, 1998 to December 31, 1998.
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INTERNATIONAL SMALL MIDCAP SMITH BARNEY
ADVISERS FUND COMPANY FUND FUND CASH PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT
-------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 1,035,994 $ (457,120) $ (12,661) $ 21,390
Capital gains income... 110,732 3,307,195 -- --
Net realized gain
(loss) on security
transactions.......... 13,808 (36,223) (2,185) --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 118,913 1,332,603 336,895 --
-------------- ------------- ------------- ---------------
Net increase (decrease)
in net assets
resulting from
operations............ 1,279,447 4,146,455 322,049 21,390
-------------- ------------- ------------- ---------------
UNIT TRANSACTIONS:
Purchases.............. 18,887,741 24,742,079 2,088,623 --
Net transfers.......... 9,531,179 30,544,670 6,774,154 --
Surrenders for benefit
payments and fees..... (2,110,213) (1,630,264) (10,936) (93,309)
Net annuity
transactions.......... 25,045 44,603 -- --
-------------- ------------- ------------- ---------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 26,333,752 53,701,088 8,851,841 (93,309)
-------------- ------------- ------------- ---------------
Net increase (decrease)
in net assets......... 27,613,199 57,847,543 9,173,890 (71,919)
NET ASSETS:
Beginning of period.... 29,809,174 13,546,092 -- 580,931
-------------- ------------- ------------- ---------------
End of period.......... $57,422,373 $71,393,635 $ 9,173,890 $509,012
-------------- ------------- ------------- ---------------
-------------- ------------- ------------- ---------------
</TABLE>
* From inception, July 15, 1997 to December 31, 1997.
** From inception, June 3, 1997 to December 31, 1997.
*** From inception, October 23, 1997 to December 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-19
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMITH BARNEY SMITH BARNEY BB&T GROWTH & AMSOUTH EQUITY MENTOR
APPRECIATION FUND GOVERNMENT PORTFOLIO INCOME FUND INCOME FUND CAPITAL GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
------------------ --------------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 526 $ 1,465 $ 28,796 $ 134,592 $ (85,499)
Capital gains income... 15,116 -- -- -- --
Net realized gain
(loss) on security
transactions.......... 51 -- 1,013 4,124 (4,500)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 17,076 -- 1,927,801 971,715 1,696,228
-------- ------- ----------------- --------------- ---------------
Net increase (decrease)
in net assets
resulting from
operations............ 32,769 1,465 1,957,610 1,110,431 1,606,229
-------- ------- ----------------- --------------- ---------------
UNIT TRANSACTIONS:
Purchases.............. -- -- 9,760,778 14,622,450 11,672,774
Net transfers.......... -- -- 6,090,057 5,094,816 5,647,677
Surrenders for benefit
payments and fees..... (3,555) (4,272) (574,799) (733,985) (248,948)
Net annuity
transactions.......... -- -- -- 25,393 --
-------- ------- ----------------- --------------- ---------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (3,555) (4,272) 15,276,036 19,008,674 17,071,503
-------- ------- ----------------- --------------- ---------------
Net increase (decrease)
in net assets......... 29,214 (2,807) 17,233,646 20,119,105 18,677,732
NET ASSETS:
Beginning of period.... 170,573 37,164 6,477,420 2,391,916 --
-------- ------- ----------------- --------------- ---------------
End of period.......... $199,787 $34,357 $23,711,066 $22,511,021 $18,677,732
-------- ------- ----------------- --------------- ---------------
-------- ------- ----------------- --------------- ---------------
<CAPTION>
MENTOR PERPETUAL MENTOR
INTERNATIONAL GROWTH
SUB-ACCOUNT* SUB-ACCOUNT*
----------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ (51,799) $ (44,785)
Capital gains income... -- --
Net realized gain
(loss) on security
transactions.......... 1,684 (1,365)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 601,328 610,042
----------------- -------------
Net increase (decrease)
in net assets
resulting from
operations............ 551,213 563,892
----------------- -------------
UNIT TRANSACTIONS:
Purchases.............. 6,236,230 6,771,031
Net transfers.......... 4,185,922 3,215,967
Surrenders for benefit
payments and fees..... (161,010) (80,660)
Net annuity
transactions.......... -- --
----------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 10,261,142 9,906,338
----------------- -------------
Net increase (decrease)
in net assets......... 10,812,355 10,470,230
NET ASSETS:
Beginning of period.... -- --
----------------- -------------
End of period.......... $10,812,355 $10,470,230
----------------- -------------
----------------- -------------
</TABLE>
<TABLE>
<CAPTION>
SMITH BARNEY SMITH BARNEY BB&T GROWTH & AMSOUTH EQUITY U.S. GOVERNMENT
APPRECIATION FUND GOVERNMENT PORTFOLIO INCOME FUND INCOME FUND MONEY MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT** SUB-ACCOUNT*** SUB-ACCOUNT
------------------ --------------------- ----------------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 687 $ 1,594 $ 22,704 $ 1,732 $ 2,019
Capital gains income... 22,341 -- 662 -- --
Net realized gain
(loss) on security
transactions.......... 6,810 -- -- -- --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 8,816 -- 409,485 32,195 --
-------- ------- ----------------- --------------- ----------
Net increase (decrease)
in net assets
resulting from
operations............ 38,654 1,594 432,851 33,927 2,019
-------- ------- ----------------- --------------- ----------
UNIT TRANSACTIONS:
Purchases.............. -- -- 5,104,417 2,100,608 --
Net transfers.......... -- -- 1,006,220 259,438 (88,379)
Surrenders for benefit
payments and fees..... (40,942) (4,272) (66,068) (2,057) (9,133)
Net annuity
transactions.......... -- -- -- -- (21,870)
-------- ------- ----------------- --------------- ----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (40,942) (4,272) 6,044,569 2,357,989 (119,382)
-------- ------- ----------------- --------------- ----------
Net increase (decrease)
in net assets......... (2,288) (2,678) 6,477,420 2,391,916 (117,363)
NET ASSETS:
Beginning of period.... 172,861 39,842 -- -- 117,363
-------- ------- ----------------- --------------- ----------
End of period.......... $170,573 $37,164 $ 6,477,420 $ 2,391,916 $--
-------- ------- ----------------- --------------- ----------
-------- ------- ----------------- --------------- ----------
</TABLE>
* From inception, July 15, 1997 to December 31, 1997.
** From inception, June 3, 1997 to December 31, 1997.
*** From inception, October 23, 1997 to December 31, 1997.
<PAGE>
SA-20 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT TWO
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
GROWTH AND
INCOME FUND
SUB-ACCOUNT**
--------------
<S> <C>
OPERATIONS:
Net investment income
(loss)................ $ 5,967
Capital gains income... --
Net realized gain
(loss) on security
transactions.......... (2,267)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 740,175
--------------
Net increase (decrease)
in net assets
resulting from
operations............ 743,875
--------------
UNIT TRANSACTIONS:
Purchases.............. 1,325,581
Net transfers.......... 4,236,085
Surrenders for benefit
payments and fees..... (56,204)
Net annuity
transactions.......... --
--------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 5,505,462
--------------
Net increase (decrease)
in net assets......... 6,249,337
NET ASSETS:
Beginning of period.... --
--------------
End of period.......... $6,249,337
--------------
--------------
</TABLE>
** From inception, June 1, 1998 to December 31, 1998.
*** From inception, September 30, 1998 to December 31, 1998.
**** From inception, December 16, 1998 to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-21
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH GLOBAL MITCHELL HUTCHINS GROWTH MITCHELL HUTCHINS STRATEGIC
YIELD FUND LEADERS FUND AND INCOME PORTFOLIO INCOME PORTFOLIO
SUB-ACCOUNT*** SUB-ACCOUNT*** SUB-ACCOUNT**** SUB-ACCOUNT****
--------------- --------------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 32,022 $ 472 $ 38 $ 111
Capital gains income... -- 16,340 702 6
Net realized gain
(loss) on security
transactions.......... (287) 1,084 -- --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (9,874) 10,436 (20) (145)
--------------- --------------- ------- ------
Net increase (decrease)
in net assets
resulting from
operations............ 21,861 28,332 720 (28)
--------------- --------------- ------- ------
UNIT TRANSACTIONS:
Purchases.............. 226,463 114,768 10,000 10,000
Net transfers.......... 1,697,571 456,296 -- --
Surrenders for benefit
payments and fees..... (2,348) (286) (1) (1)
Net annuity
transactions.......... -- -- -- --
--------------- --------------- ------- ------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,921,686 570,778 9,999 9,999
--------------- --------------- ------- ------
Net increase (decrease)
in net assets......... 1,943,547 599,110 10,719 9,971
NET ASSETS:
Beginning of period.... -- -- -- --
--------------- --------------- ------- ------
End of period.......... $1,943,547 $599,110 $10,719 $9,971
--------------- --------------- ------- ------
--------------- --------------- ------- ------
<CAPTION>
MITCHELL HUTCHINS TACTICAL
ALLOCATION PORTFOLIO
SUB-ACCOUNT****
---------------------------
<S> <C>
OPERATIONS:
Net investment income
(loss)................ $ 7
Capital gains income... 56
Net realized gain
(loss) on security
transactions.......... --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 507
-------
Net increase (decrease)
in net assets
resulting from
operations............ 570
-------
UNIT TRANSACTIONS:
Purchases.............. 10,000
Net transfers.......... --
Surrenders for benefit
payments and fees..... 1
Net annuity
transactions.......... --
-------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 10,001
-------
Net increase (decrease)
in net assets......... 10,571
NET ASSETS:
Beginning of period.... --
-------
End of period.......... $10,571
-------
-------
</TABLE>
** From inception, June 1, 1998 to December 31, 1998.
*** From inception, September 30, 1998 to December 31, 1998.
**** From inception, December 16, 1998 to December 31, 1998.
<PAGE>
SA-22 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 are accrued as of the ex-dividend date. Capital gains income
represents those dividends from the Funds which are characterized as
capital gains under tax regulations.
b) SECURITY VALUATION--The investments in shares of the 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:
Deduction and Charges -- Certain amounts are deducted from the Contracts, as
described below:
a) MORTALITY AND EXPENSE RISK CHARGES--The Company will make deductions at a
maximum annual rate of 1.50% of the Contract's value for the mortality
and expense risks which the Company undertakes.
b) TAX EXPENSE CHARGE--If applicable, the Company will make deductions at a
maximum rate of 4.0% of the Contract's value to meet premium tax
requirements. An additional tax charge based on a percentage of the
Contract's value may be assessed to partial withdrawals or surrenders.
These expenses are reflected in surrenders for benefit payments and fees
on the accompanying statements of changes in net assets.
c) ANNUAL MAINTENANCE FEE--An annual maintenance fee in the amount of $30
may be deducted from the Contract's value each contract year. However,
this fee is not applicable to contracts with values of $50,000 or more,
as determined on the most recent contract anniversary. These expenses are
reflected in surrenders for benefit payments and fees on the accompanying
statements of changes in net assets.
4. HARTFORD U.S. GOVERNMENT MONEY MARKET FUND:
On June 27, 1997, the Hartford U.S. Government Money Market Fund was merged
with the HVA Money Market Fund. Accordingly, all contractholder account
values held in the Hartford U.S. Government Money Market Fund were exchanged
for equivalent account values of HVA Money Market Fund on June 27, 1997.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
THIRD QUARTER NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------------------
(IN MILLIONS) (UNAUDITED) 1999 1998 1999 1998
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Premiums and other considerations $ 513 $ 484 $ 1,517 $ 1,430
Net investment income 333 339 1,019 1,035
Net realized capital gains (losses) - 3 1 (3)
-----------------------------------------------------------------------------------------------------------------
TOTAL REVENUES 846 826 2,537 2,462
----------------------------------------------------------------------------------------------------------
BENEFITS, CLAIMS AND EXPENSES
Benefits, claims and claim adjustment expenses 379 353 1,195 1,100
Amortization of deferred policy acquisition costs 141 119 396 328
Dividends to policyholders 70 61 97 177
Other expenses 105 155 432 461
-----------------------------------------------------------------------------------------------------------------
TOTAL BENEFITS, CLAIMS AND EXPENSES 695 688 2,120 2,066
----------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAX EXPENSE 151 138 417 396
Income tax expense 51 49 144 139
-----------------------------------------------------------------------------------------------------------------
NET INCOME $ 100 $ 89 $ 273 $ 257
-----------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-1
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
SEPTEMBER 30, DECEMBER 31,
(IN MILLIONS, EXCEPT FOR SHARE DATA) 1999 1998
- -----------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
INVESTMENTS
Fixed maturities, available for sale, at fair value (amortized cost of
$14,175 and $14,505) $ 13,902 $ 14,818
Equity securities, at fair value 50 31
Policy loans, at outstanding balance 4,283 6,684
Other investments 352 264
- ----------------------------------------------------------------------------------------------------------------------
Total investments 18,587 21,797
Cash 35 17
Premiums receivable and agents' balances 32 17
Reinsurance recoverables 1,096 1,257
Deferred policy acquisition costs 4,012 3,754
Deferred income tax 490 464
Other assets 704 695
Separate account assets 97,030 90,262
- ----------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 121,986 $ 118,263
--------------------------------------------------------------------------------------------------------------
LIABILITIES
Future policy benefits $ 4,033 $ 3,595
Other policyholder funds 16,453 19,615
Other liabilities 1,853 2,094
Separate account liabilities 97,030 90,262
- ----------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 119,369 115,566
--------------------------------------------------------------------------------------------------------------
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 (loss)
Net unrealized capital (losses) gains on securities, net of tax (169) 184
--------------------------
Total accumulated other comprehensive income (loss) (169) 184
--------------------------
Retained earnings 1,735 1,462
- ----------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY 2,617 2,697
--------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 121,986 $ 118,263
---------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-2
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
ACCUMULATED OTHER
COMPREHENSIVE
INCOME (LOSS)
----------------------
NET
UNREALIZED CAPITAL
GAINS (LOSSES) ON TOTAL
COMMON CAPITAL SECURITIES, NET OF RETAINED STOCKHOLDER'S
(IN MILLIONS) (UNAUDITED) STOCK SURPLUS TAX EARNINGS EQUITY
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1998 $ 6 $ 1,045 $ 184 $ 1,462 $ 2,697
COMPREHENSIVE INCOME
Net income 273 273
------------
Other comprehensive income (loss), net of tax (1)
Net unrealized capital losses on securities (2) (353) (353)
------------
Total other comprehensive income (loss) (353)
------------
TOTAL COMPREHENSIVE INCOME (80)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1999 $ 6 $ 1,045 $ (169) $ 1,735 $ 2,617
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1998
ACCUMULATED OTHER
COMPREHENSIVE INCOME
----------------------
NET
UNREALIZED CAPITAL TOTAL
COMMON CAPITAL GAINS ON SECURITIES, RETAINED STOCKHOLDER'S
(IN MILLIONS) (UNAUDITED) STOCK SURPLUS NET OF TAX EARNINGS EQUITY
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 $ 6 $ 1,045 $ 179 $ 1,113 $ 2,343
COMPREHENSIVE INCOME
Net income 257 257
------------
Other comprehensive income, net of tax (1)
Net unrealized capital gains on securities (2) 112 112
------------
Total other comprehensive income 112
------------
TOTAL COMPREHENSIVE INCOME 369
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1998 $ 6 $ 1,045 $ 291 $ 1,370 $ 2,712
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) NET UNREALIZED CAPITAL GAINS (LOSSES) ON SECURITIES IS REFLECTED NET OF
TAX (BENEFIT) PROVISION OF $(190) AND $60 FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998, RESPECTIVELY.
(2) THERE WERE RECLASSIFICATION ADJUSTMENTS FOR AFTER-TAX GAINS (LOSSES)
REALIZED IN NET INCOME OF $1 AND $(2) FOR THE NINE MONTHS ENDED SEPTEMBER
30, 1999 AND 1998, RESPECTIVELY.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
(IN MILLIONS) (UNAUDITED) 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 273 $ 257
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation and amortization (8) (15)
Net realized capital (gains) losses (1) 3
Increase in premiums receivable and agents' balances (15) (4)
(Decrease) increase in other liabilities (81) 8
Change in receivables, payables and accruals 126 (8)
Decrease in accrued tax (200) (55)
Decrease (increase) in deferred income tax 164 (90)
Increase in deferred policy acquisition costs (258) (359)
Increase in future policy benefits 438 282
(Increase) decrease in reinsurance recoverables and other assets (262) 104
- ------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 176 123
- ------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchases of investments (5,132) (4,619)
Sales of investments 6,434 3,340
Maturities and principal paydowns of fixed maturity investments 1,338 1,387
- ------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 2,640 108
- ------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net disbursements for investment and universal life-type
contracts charged against policyholder accounts (2,798) (199)
- ------------------------------------------------------------------------------------------------------------------------------
NET CASH USED FOR FINANCING ACTIVITIES (2,798) (199)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in cash 18 32
Cash - beginning of period 17 54
- ------------------------------------------------------------------------------------------------------------------------------
CASH - END OF PERIOD $ 35 $ 86
- ------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
NET CASH PAID DURING THE PERIOD FOR
Income taxes $ 111 $ 241
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN MILLIONS EXCEPT FOR SHARE DATA UNLESS OTHERWISE STATED)
(UNAUDITED)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Hartford Life
Insurance Company and subsidiaries ("Hartford Life Insurance Company" or the
"Company") have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and note disclosures
which are normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to those rules and regulations, although the Company believes that the
disclosures made are adequate to make the information presented not misleading.
In the opinion of management, these statements include all adjustments which
were normal recurring adjustments necessary to present fairly the financial
position, results of operations and cash flows for the periods presented. For a
description of significant accounting policies, see Note 2 of Notes to
Consolidated Financial Statements in Hartford Life Insurance Company's 1998 Form
10-K Annual Report.
Certain reclassifications have been made to prior year financial information to
conform to the current year classification of transactions and accounts.
(B) CHANGES IN ACCOUNTING PRINCIPLES
In June 1999, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133". This statement amends SFAS No. 133 to defer its effective
date for one year, to fiscal years beginning after June 15, 2000. Initial
application for Hartford Life Insurance Company will begin for the first quarter
2001.
Effective January 1, 1999, Hartford Life Insurance Company adopted Statement of
Position (SOP) No. 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use". This SOP provides guidance on
accounting for costs of internal use software and in determining whether
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. Adoption of this SOP did not have a
material impact on the Company's financial condition or results of operations.
Effective January 1, 1999, Hartford Life Insurance Company adopted SOP No. 97-3,
"Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments". This SOP addresses accounting by insurance and other enterprises
for assessments related to insurance activities, including recognition,
measurement and disclosure of guaranty fund or other assessments. Adoption of
this SOP did not have a material impact on the Company's financial condition or
results of operations.
2. 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: 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, 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, Hartford Life and Accident
Insurance Company.
F-5
<PAGE>
The accounting policies of the reportable operating segments are the same as
those described in the summary of significant accounting policies in Note 2 of
Notes to Consolidated Financial Statements in Hartford Life Insurance Company's
1998 Form 10-K Annual Report. 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
allocation of net realized capital gains and losses through net investment
income utilizing the duration of the segment's investment portfolios. The
following tables present summarized financial information concerning the
Company's segments.
<TABLE>
Investment Individual
SEPTEMBER 30, 1999 Products Life COLI Other Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THIRD QUARTER ENDED
Total revenues $ 468 $ 148 $ 220 $ 10 $ 846
Net income 69 19 7 5 100
- ------------------------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED
Total revenues $ 1,403 $ 421 $ 659 $ 54 $ 2,537
Net income (loss) 228 51 20 (26) 273
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
Investment Individual
SEPTEMBER 30, 1998 Products Life COLI Other Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THIRD QUARTER ENDED
Total revenues $ 445 $ 137 $ 219 $ 25 $ 826
Net income 67 16 6 - 89
- ------------------------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED
Total revenues $ 1,333 $ 401 $ 691 $ 37 $ 2,462
Net income (loss) 197 44 18 (2) 257
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3. COMMITMENTS AND CONTINGENT LIABILITIES
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) INVESTMENTS
In October 1998, the Company became aware of allegations of improper activities
at Commercial Financial Services Inc. ("CFS"), a securitizer and servicer of
asset backed securities, and on December 11, 1998, CFS filed for protection
under Chapter 11 of the Bankruptcy Code. As a result, the Company recognized
$25, after-tax, writedown related to the asset backed securities during the
fourth quarter of 1998. In June 1999, CFS ceased operations at which time the
Company recognized an additional $28, after-tax, writedown. In August 1999, the
Company sold all of its CFS holdings at a nominal gain, recovering its June 30,
1999 amortized cost of $23.
(c) TAX MATTERS
Hartford Life Insurance Company's federal income tax returns are routinely
audited by the Internal Revenue Service. 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.
F-6
<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
------ -------------- --------------- ----------- -------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
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>
<PAGE>
F-10 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
(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>
(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>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES F-11
- --------------------------------------------------------------------------------
<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 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
<PAGE>
F-12 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
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:
<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 & 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)..................... $ 5,253 $ 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>
