<PAGE>
<TABLE>
<S> <C>
HARTFORD LEADERS
SEPARATE ACCOUNT SEVEN
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>
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This Prospectus describes information you should know before you purchase
Hartford Leaders variable annuity. Please read it carefully.
Hartford Leaders variable annuity is a Contract between you and Hartford Life
Insurance Company where you agree to make at least one payment to us and we
agree to make a series of annuity payments to you 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 payments to you.
x Variable, because the value of your annuity will fluctuate with the
performance of the underlying funds.
- --------------------------------------------------------------------------------
At purchase, you allocate your premium payment, which is any purchase payment
less any Premium Taxes, 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:
- - AMERICAN FUNDS ASSET ALLOCATION FUND SUB-ACCOUNT which purchases Class 2
shares of the Asset Allocation Fund of American Funds Insurance Series (also
known as American Variable Insurance Series) ("American Funds Asset Allocation
Fund")
- - AMERICAN FUNDS BOND FUND SUB-ACCOUNT which purchases Class 2 shares of the
Bond Fund of American Funds Insurance Series ("American Funds Bond Fund")
- - AMERICAN FUNDS GLOBAL GROWTH FUND SUB-ACCOUNT which purchases Class 2 shares
of the Global Growth Fund of American Funds Insurance Series ("American Funds
Global Growth Fund")
- - AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION FUND SUB-ACCOUNT which purchases
Class 2 shares of the Global Small Capitalization Fund of American Funds
Insurance Series ("American Funds Global Small Capitalization Fund")
- - AMERICAN FUNDS GROWTH FUND SUB-ACCOUNT which purchases Class 2 shares of the
Growth Fund of American Funds Insurance Series ("American Funds Growth Fund")
- - AMERICAN FUNDS GROWTH-INCOME FUND SUB-ACCOUNT which purchases Class 2 shares
of the Growth-Income Fund of American Funds Insurance Series ("American Funds
Growth-Income Fund")
- - AMERICAN FUNDS INTERNATIONAL FUND SUB-ACCOUNT which purchases Class 2 shares
of the International Fund of American Funds Insurance Series ("American Funds
International Fund")
- - AMERICAN FUNDS NEW WORLD FUND SUB-ACCOUNT which purchases Class 2 shares of
the New World Fund of American Funds Insurance Series ("American Funds New
World Fund")
- - FRANKLIN REAL ESTATE FUND SUB-ACCOUNT which purchases Class 2 shares of the
Franklin Real Estate Fund of the Franklin Templeton Variable Insurance
Products Trust ("Franklin Real Estate Fund")
- - FRANKLIN SMALL CAP FUND SUB-ACCOUNT which purchases Class 2 shares of the
Small Cap Fund of the Franklin Templeton Variable Insurance Products Trust
("Franklin Small Cap Fund")
- - FRANKLIN STRATEGIC INCOME SECURITIES FUND SUB-ACCOUNT (FORMERLY FRANKLIN
STRATEGIC INCOME INVESTMENTS FUND SUB-ACCOUNT) which purchases Class 1 shares
of the Franklin Strategic Income Securities Fund (formerly Franklin Strategic
Income Investments Fund) of the Franklin Templeton Variable Insurance Products
Trust
- - HARTFORD MONEY MARKET HLS FUND SUB-ACCOUNT which purchases Class IA shares of
the Hartford Money Market HLS Fund
- - MFS CAPITAL OPPORTUNITIES SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- Capital Opportunities Series of the
MFS-Registered Trademark- Variable Insurance Trust-SM-
<PAGE>
- - MFS EMERGING GROWTH SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- Emerging Growth Series of the
MFS-Registered Trademark- Variable Insurance Trust-SM-
- - MFS GLOBAL EQUITY SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- Global Equity Series of the
MFS-Registered Trademark- Variable Insurance Trust-SM-
- - MFS GROWTH SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- Growth Series of the MFS-Registered Trademark-
Variable Insurance Trust-SM-
- - MFS GROWTH WITH INCOME SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- Growth with Income Series of the
MFS-Registered Trademark- Variable Insurance Trust-SM-
- - MFS HIGH INCOME SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- High Income Series of the MFS-Registered Trademark-
Variable Insurance Trust-SM-
- - MFS NEW DISCOVERY SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- New Discovery Series of the
MFS-Registered Trademark- Variable Insurance Trust-SM-
- - MFS TOTAL RETURN SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- Total Return Series of the MFS-Registered Trademark-
Variable Insurance Trust-SM-
- - MUTUAL SHARES SECURITIES FUND SUB-ACCOUNT which purchases Class 2 shares of
Mutual Shares Securities Fund of the Franklin Templeton Variable Insurance
Products Trust
- - TEMPLETON ASSET STRATEGY FUND SUB-ACCOUNT (FORMERLY TEMPLETON ASSET ALLOCATION
FUND SUB-ACCOUNT) which purchases Class 2 shares of the Templeton Asset
Strategy Fund (formerly Templeton Asset Allocation Fund) of the Franklin
Templeton Variable Insurance Products Trust
- - TEMPLETON DEVELOPING MARKETS SECURITIES FUND SUB-ACCOUNT (FORMERLY TEMPLETON
DEVELOPING MARKETS EQUITY FUND SUB-ACCOUNT) which purchases Class 1 shares of
the Templeton Developing Markets Securities Fund (formerly Templeton
Developing Markets Equity Fund) of the Franklin Templeton Variable Insurance
Products Trust
- - TEMPLETON GROWTH SECURITIES FUND SUB-ACCOUNT (FORMERLY TEMPLETON GLOBAL GROWTH
FUND SUB-ACCOUNT) which purchases Class 2 shares of the Templeton Growth
Securities Fund (formerly Templeton Global Growth Fund) of the Franklin
Templeton Variable Insurance Products Trust
- - TEMPLETON INTERNATIONAL SECURITIES FUND SUB-ACCOUNT (FORMERLY TEMPLETON
INTERNATIONAL FUND SUB-ACCOUNT) which purchases Class 2 shares of the
Templeton International Securities Fund (formerly Templeton International
Fund) of the Franklin Templeton Variable Insurance Products Trust
You may also allocate some or all of your premium payment to one of the "Fixed
Accumulation Features", which pays an interest rate guaranteed for a certain
time period from the time the payment is made. Premium payments put in a 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. 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 Securities and Exchange Commission, the Commission doesn't approve or
disapprove these securities or determine if the information is truthful or
complete. Anyone who represents that the Securities and Exchange Commission does
these things may be guilty of a criminal offense.
This Prospectus and the Statement of Additional Information can also be obtained
from the Securities and Exchange Commission'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.
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PROSPECTUS DATED: MAY 1, 2000
STATEMENT OF ADDITIONAL INFORMATION DATED: MAY 1, 2000
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 3
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
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GLOSSARY OF SPECIAL TERMS 4
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FEE TABLE 5
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ACCUMULATION UNIT VALUES 11
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SUMMARY 14
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HARTFORD LIFE INSURANCE COMPANY 16
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THE SEPARATE ACCOUNT 16
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THE FUNDS 16
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PERFORMANCE RELATED INFORMATION 19
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THE FIXED ACCUMULATION FEATURES 19
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THE CONTRACT 20
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Contract Value -- Before the Annuity Commencement Date 21
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Contract Value Transfers Before and After the Annuity
Commencement Date 21
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Surrenders 22
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Contract Charges 23
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Death Benefits 25
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SETTLEMENT PROVISIONS 27
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Annuity Payments 28
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Other Information 30
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FEDERAL TAX CONSIDERATIONS 30
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A. General 30
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B. Taxation of Hartford and the Separate Account 30
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C. Taxation of Annuities -- General Provisions Affecting
Purchasers Other Than Qualified Retirement Plans 30
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D. Federal Income Tax Withholding 33
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E. General Provisions Affecting Qualified Retirement Plans 33
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F. Annuity Purchases By Nonresident Aliens and Foreign
Corporations 33
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G. Generation-Skipping Transfers 33
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MISCELLANEOUS 33
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How Contracts Are Sold 33
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Legal Matters 34
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Experts 34
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More Information 34
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TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION 35
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APPENDIX I -- INFORMATION REGARDING TAX-QUALIFIED RETIREMENT
PLANS 36
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APPENDIX II -- OPTIONAL DEATH BENEFIT -- EXAMPLES 39
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</TABLE>
<PAGE>
4 HARTFORD LIFE INSURANCE COMPANY
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GLOSSARY OF SPECIAL TERMS
ACCOUNT: Any of the Sub-Accounts or Fixed Accumulation Features.
ACCUMULATION UNIT: A unit of measure we use to calculate values before we begin
to make annuity payments to you.
ADMINISTRATIVE OFFICE: Located at 200 Hopmeadow Street, Simsbury, Connecticut
06089. The 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 since
that anniversary and reduced by the dollar amount of any partial Surrenders
since that anniversary.
ANNUAL MAINTENANCE FEE: An annual $30 charge for annuities having a value of
less than $50,000 on the most recent Contract Anniversary or when the annuity is
Surrendered in full. The charge is deducted proportionately from the funds in
use at the time.
ANNUITANT: The person on whose life the Contract is based. The Annuitant may not
be changed.
ANNUITY: A Contract issued by us that provides, in exchange for premium
payments, a series of annuity payments.
ANNUITY CALCULATION DATE: The date we calculate your first annuity payment.
ANNUITY COMMENCEMENT DATE: The date we start to make annuity payments to you.
ANNUITY UNIT: A unit of measure we use to calculate the value of the annuity
payments we make to you.
ASSUMED INVESTMENT RETURN ("AIR"): The investment return, either 3%, 5% or 6%,
which we base your variable dollar amount payments on. You select the AIR before
we start to make annuity payments.
BENEFICIARY: The person or persons you designate to receive payment of the death
benefit upon the death of the Contract Owner.
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 we begin making annuity payments.
CONTRACT: The contract is the individual Annuity contract and any endorsements
or riders. If you have a group annuity, you will receive a certificate rather
than a contract.
CONTRACT ANNIVERSARY: The annual anniversary of the date we issued your annuity.
If your contract anniversary falls on a day that is not a Valuation Day, then
the next Valuation Day will be your Contract Anniversary for that year.
CONTRACT OWNER(S) OR YOU: The owner(s) or holder(s) of this Annuity.
CONTRACT VALUE: The total value of your Annuity that we get by adding up the
value of each of your Sub-Accounts and Fixed Accumulation Features on any
Valuation Day.
CONTRACT YEAR: The 12 months following the date you purchased your annuity and
from any Contract Anniversary.
DOLLAR COST AVERAGING ("DCA"): Systematic transfers from one Account to another.
DCA PROGRAM FIXED ACCUMULATION FEATURES: Fixed Accumulation Features we
establish to use for dollar cost averaging programs. These are part of our
General Account.
DEATH BENEFIT: The amount we pay when the Contract Owner or the Annuitant dies.
DUE PROOF OF DEATH: A certified copy of a death certificate, an order of a court
of competent jurisdiction, or any other proof acceptable to us.
FIXED ACCUMULATION FEATURE: This is an account that is part of our General
Account. You may allocate all or a portion of your premium payments or transfer
of Contract Value to this account. In your contract this is defined as "The
Fixed Account."
GENERAL ACCOUNT: Our General Account that includes our company assets and your
annuity assets allocated to any of the Fixed Accumulation Features or DCA
Program Fixed Accumulation Features.
HARTFORD OR WE: Hartford Life Insurance Company.
MAXIMUM ANNIVERSARY VALUE: This is the highest Anniversary Value prior the
deceased's 81st birthday or the date of death, if earlier.
PAYEE: The person or party designated by you to receive annuity payments.
PREMIUM TAX: A tax charged by a state or municipality on premium payments.
SEPARATE ACCOUNT: An account that we establish to separate the assets for your
annuity Sub-Accounts from our company assets.
SURRENDER: A complete or partial withdrawal or distribution from your annuity.
SURRENDER VALUE: What we pay you if you terminate your annuity before we begin
to make annuity payments.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. The
value of the Separate Account is determined as of the close of the New York
Stock Exchange (generally 4:00 p.m. Eastern Time).
VALUATION PERIOD: The period between the close of business on successive
Valuation Days.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 5
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FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C>
SALES CHARGE IMPOSED ON PURCHASES (as a percentage of
Premium Payments) None
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CONTINGENT DEFERRED SALES CHARGE (as a percentage of Premium
Payments) (1)
First Year (2) 7%
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Second Year 6%
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Third Year 6%
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Fourth Year 5%
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Fifth Year 4%
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Sixth Year 3%
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Seventh Year 2%
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Eighth Year 0%
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ANNUAL MAINTENANCE FEE (3) $30
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SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average
daily Sub-Account Value)
Mortality and Expense Risk Charge 1.25%
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Administrative Fees 0.15%
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Total Separate Account Annual Expenses 1.40%
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OPTIONAL CHARGES (as a percentage of average daily
Sub-Account Value)
Optional Death Benefit Charge 0.15%
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Total Separate Account Annual Expenses with the Optional
Death Benefit Charge 1.55%
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</TABLE>
(1) Each Premium Payment has its own Contingent Deferred Sales Charge schedule.
See "Charges and Fees -- The Contingent Deferred Sales Charge." The
Contingent Deferred Sales Charge is not assessed on partial Surrenders which
do not exceed the Annual Withdrawal Amount.
(2) Length of time from each Premium Payment.
(3) An annual $30 charge deducted on a Contract Anniversary or upon Surrender if
the Contract Value at either of those times is less than $50,000. It is
deducted proportionately from the Accounts in which you are invested at the
time of the charge.
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>
6 HARTFORD LIFE INSURANCE COMPANY
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Annual Fund Operating Expenses
As of the Fund's Year End
(As a percentage of net assets)
<TABLE>
<CAPTION>
TOTAL FUND
OPERATING
EXPENSES
12B-1 DISTRIBUTION (INCLUDING
MANAGEMENT FEES AND/OR SERVICING OTHER EXPENSES ANY WAIVERS
(INCLUDING FEES (INCLUDING (INCLUDING ANY AND ANY
ANY WAIVERS) WAIVERS) REIMBURSEMENTS) REIMBURSEMENTS)
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
American Funds Asset Allocation Fund 0.43% 0.25% 0.01% 0.69%
- --------------------------------------------------------------------------------------------------------------------------
American Funds Bond Fund 0.51% 0.25% 0.02% 0.78%
- --------------------------------------------------------------------------------------------------------------------------
American Funds Global Growth Fund 0.68% 0.25% 0.03% 0.96%
- --------------------------------------------------------------------------------------------------------------------------
American Funds Global Small Capitalization Fund 0.79% 0.25% 0.03% 1.07%
- --------------------------------------------------------------------------------------------------------------------------
American Funds Growth Fund 0.38% 0.25% 0.01% 0.64%
- --------------------------------------------------------------------------------------------------------------------------
American Funds Growth-Income Fund 0.34% 0.25% 0.01% 0.60%
- --------------------------------------------------------------------------------------------------------------------------
American Funds International Fund 0.55% 0.25% 0.05% 0.85%
- --------------------------------------------------------------------------------------------------------------------------
American Funds New World Fund (1) 0.89% 0.25% 0.06% 1.20%
- --------------------------------------------------------------------------------------------------------------------------
Franklin Real Estate Fund -- Class 2 (2) (3) 0.56% 0.25% 0.02% 0.83%
- --------------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund -- Class 2 (2) (4) 0.55% 0.25% 0.27% 1.07%
- --------------------------------------------------------------------------------------------------------------------------
Franklin Strategic Income Securities Fund
(formerly Franklin Strategic Income
Investments Fund) (5) 0.43% N/A 0.32% 0.75%
- --------------------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS Fund 0.45% N/A 0.02% 0.47%
- --------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Capital Opportunities
Series (6) (7) 0.75% N/A 0.16% 0.91%
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MFS-Registered Trademark- Emerging Growth
Series (6) 0.75% N/A 0.09% 0.84%
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MFS-Registered Trademark- Global Equity
Series (6) (7) 1.00% N/A 0.21% 1.21%
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MFS-Registered Trademark- Growth Series (6) (7) 0.75% N/A 0.16% 0.91%
- --------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth with Income
Series (6) 0.75% N/A 0.13% 0.88%
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MFS-Registered Trademark- High Income
Series (6) (7) 0.75% N/A 0.16% 0.91%
- --------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- New Discovery
Series (6) (7) 0.90% N/A 0.17% 1.07%
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MFS-Registered Trademark- Total Return
Series (6) 0.75% N/A 0.15% 0.90%
- --------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2 (2) (8) 0.60% 0.25% 0.19% 1.04%
- --------------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund (formerly
Templeton Asset Allocation Fund) -- Class 2
(2) (9) 0.60% 0.25% 0.18% 1.03%
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Templeton Developing Markets Securities Fund
(formerly Templeton Developing Markets Equity
Fund) -- Class 1 (10) 1.25% N/A 0.31% 1.56%
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Templeton Growth Securities Fund (formerly
Templeton Global Growth Fund) -- Class 2
(2) (11) 0.83% 0.25% 0.05% 1.13%
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Templeton International Securities Fund
(formerly Templeton International Fund) --
Class 2 (2) (12) 0.69% 0.25% 0.19% 1.13%
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</TABLE>
(1) These expenses are annualized. The Fund began operations on June 17, 1999.
(2) The Fund's Class 2 distribution plan or "Rule 12b-1 Plan" is described in
the Fund's prospectus. While the maximum amount payable under the Fund's
Class 2 Rule 12b-1 Plan is 0.35% per year of the Fund's average daily net
assets, the Board of Trustees of Franklin Templeton Variable Insurance
Products Trust has set the current rate at 0.25% per year through at least
April 30, 2001.
(3) The fund administration fee is paid indirectly through the management fees.
(4) On 2/8/00, a merger and reorganization was approved that combined the assets
of the Franklin Small Cap Fund with a similar fund of the Templeton Variable
Products Series Fund, effective 5/1/00. On 2/8/00, fund shareholders
approved new management fees,
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 7
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which apply to the combined fund effective 5/1/00. The table shows restated
total expenses based on the new fees and assets of the fund as of 12/31/99,
and not the assets of the combined fund. However, if the table reflected
both the new fees and the combined assets, the fund's expenses after 5/1/00
would be estimated as: Management Fees 0.55%, Distribution and Service Fees
0.25%, Other Expenses 0.27%, and Total Fund Operating Expenses 1.07%.
(5) The management fees shown are based on the fund's maximum contractual
amount. Other expenses are estimated. The manager and administrator have
agreed in advance to waive or limit their respective fees and the manager to
assume as its own expense certain expenses otherwise payable by the fund so
that total annual fund operating expenses do not exceed 0.75% for the
current fiscal year. After December 31, 2001, the manager and administrator
may end this arrangement at any time. Without this reduction Total Fund
Operating Expenses were:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
MANAGEMENT FEES 12B-1 FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Franklin Strategic Income Securities Fund 0.43% N/A 0.52% 0.95%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(6) Each Series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with
its custodian and dividend disbursing agent. Each series may enter into
other such arrangements and directed brokerage arrangements, which would
also have the effect of reducing the series' expenses. After these
reductions, the Total Fund Operating Expenses would be:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
MANAGEMENT FEES 12B-1 FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Capital Opportunities Series 0.75% N/A 0.15% 0.90%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Emerging Growth Series 0.75% N/A 0.08% 0.83%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Global Equity Series 1.00% N/A 0.15% 1.15%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth Series 0.75% N/A 0.15% 0.90%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth with Income Series 0.75% N/A 0.12% 0.87%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- High Income Series 0.75% N/A 0.15% 0.90%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- New Discovery Series 0.90% N/A 0.15% 1.05%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Total Return Series 0.75% N/A 0.14% 0.89%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(7) MFS has contractually agreed, subject to reimbursement, to bear expenses for
these series such that each such series' "Other Expenses" (after taking into
account the expense offset arrangement described above), do not exceed 0.15%
of the average daily net assets of the series during the current fiscal
year. These contractual fee arrangements will continue until at least
May 1, 2001, unless changed with the consent of the board of trustees which
oversees the series. Without this waiver, "Total Fund Operating Expenses"
would have been:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
MANAGEMENT FEES 12B-1 FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Capital Opportunities Series 0.75% N/A 0.27% 1.02%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Global Equity Series 1.00% N/A 3.39% 4.39%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth Series 0.75% N/A 0.71% 1.46%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- High Income Series 0.75% N/A 0.22% 0.97%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- New Discovery Series 0.90% N/A 1.59% 2.49%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(8) On 2/8/00, a merger and reorganization was approved that combined the Mutual
Shares Securities Fund with a similar fund of Templeton Variable Products
Series Fund, effective 5/1/00. The table shows total expenses based on the
fund's assets as of 12/31/99, and not the assets of the combined fund.
However, if the table reflected combined assets, the fund's expenses after
5/1/00 would be estimated as: Management Fees 0.60%, Distribution and
Service Fees 0.25%, Other Expenses 0.19%, and Total Fund Operating Expenses
1.04%.
(9) On 2/8/00, shareholders approved a merger and reorganization that combined
the Templeton Asset Strategy Fund with the Templeton Global Asset Allocation
Fund, effective 5/1/00. The shareholders of that fund had approved new
management fees, which apply to the combined fund effective 5/1/00. The
table shows restated total expenses based on the new fees and the assets of
the fund as of 12/31/99, and not the assets of the combined fund. However,
if the table reflected both the new fees and the
<PAGE>
8 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
combined assets, the fund's expenses after 5/1/00 would be estimated as:
Management Fees 0.60%, Distribution and Service Fees 0.25%, Other Expenses
0.14%, and Total Fund Operating Expenses 0.99%.
(10) On 2/8/00, shareholders approved a merger and reorganization that combined
the Developing Markets Securities Fund with the Templeton Developing Markets
Equity Fund, effective 5/1/00. The shareholders of that fund had approved
new management fees, which apply to the combined fund effective 5/1/00. The
table shows restated total expenses based on the new fees and the assets of
the fund as of 12/31/99, and not the assets of the combined fund. However,
if the table reflected both the new fees and the combined assets, the fund's
expenses after 5/1/00 would be estimated as: Management Fees 1.25%, Other
Expenses 0.29%, and Total Fund Operating Expenses 1.54%.
(11) On 2/8/00, a merger and reorganization was approved that combined the
Templeton Growth Securities Fund with a similar fund of Templeton Variable
Products Series Fund, effective 5/1/00. The table shows total expenses based
on the fund's assets as of 12/31/99, and not the assets of the combined
fund. However, if the table reflected combined assets, the fund's expenses
after 5/1/00 would be estimated as: Management Fees 0.80%, Distribution and
Service Fees 0.25%, Other Expenses 0.05%, and Total Fund Operating Expenses
1.10%.
(12) On 2/8/00, shareholders approved a merger and reorganization that combined
the Templeton International Securities Fund with the Templeton International
Equity Fund, effective 5/1/00. The shareholders of that fund had approved
new management fees, which apply to the combined fund effective 5/1/00. The
table shows restated total expenses based on the new fees and the assets of
the fund as of 12/31/99, and not the assets of the combined fund. However,
if the table reflected both the new fees and the combined assets, the fund's
expenses after 5/1/00 would be estimated as: Management Fees 0.65%,
Distribution and Service Fees 0.25%, Other Expenses 0.20%, and Total Fund
Operating Expenses 1.10%.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 9
- --------------------------------------------------------------------------------
EXAMPLE
THE FOLLOWING EXAMPLE ASSUMES THE OPTIONAL DEATH BENEFIT IS NOT SELECTED:
<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>
- --------------------------------------------------------------------------------------------------------------------
American Funds Asset
Allocation Fund $83 $124 $156 $250 $21 $67 $116 $249
- --------------------------------------------------------------------------------------------------------------------
American Funds Bond Fund $84 $126 $161 $260 $22 $70 $120 $259
- --------------------------------------------------------------------------------------------------------------------
American Funds Global Growth
Fund $86 $132 $170 $278 $24 $76 $130 $277
- --------------------------------------------------------------------------------------------------------------------
American Funds Global Small
Capitalization Fund $87 $135 $175 $289 $25 $79 $135 $289
- --------------------------------------------------------------------------------------------------------------------
American Funds Growth Fund $82 $122 $154 $245 $21 $66 $113 $244
- --------------------------------------------------------------------------------------------------------------------
American Funds Growth-Income
Fund $82 $121 $152 $241 $21 $65 $111 $240
- --------------------------------------------------------------------------------------------------------------------
American Funds International
Fund $85 $128 $164 $267 $23 $72 $124 $266
- --------------------------------------------------------------------------------------------------------------------
American Funds New World Fund $88 $139 $181 $302 $27 $83 $142 $302
- --------------------------------------------------------------------------------------------------------------------
Franklin Real Estate Fund --
Class 2 $84 $128 $163 $265 $23 $72 $123 $264
- --------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund --
Class 2 $87 $135 $175 $289 $25 $79 $135 $289
- --------------------------------------------------------------------------------------------------------------------
Franklin Strategic Income
Securities Fund $84 $126 $159 $257 $22 $69 $119 $256
- --------------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS
Fund $81 $117 $145 $227 $19 $61 $104 $226
- --------------------------------------------------------------------------------------------------------------------
MFS Capital Opportunities
Series $85 $130 $167 $273 $24 $74 $127 $272
- --------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series $84 $128 $164 $266 $23 $72 $124 $265
- --------------------------------------------------------------------------------------------------------------------
MFS Global Equity Series $88 $139 $182 $303 $27 $83 $143 $303
- --------------------------------------------------------------------------------------------------------------------
MFS Growth Series $85 $130 $167 $273 $24 $74 $127 $272
- --------------------------------------------------------------------------------------------------------------------
MFS Growth with Income Series $85 $129 $166 $270 $23 $73 $126 $269
- --------------------------------------------------------------------------------------------------------------------
MFS High Income Series $85 $130 $167 $273 $24 $74 $127 $272
- --------------------------------------------------------------------------------------------------------------------
MFS New Discovery Series $87 $135 $175 $289 $25 $79 $135 $289
- --------------------------------------------------------------------------------------------------------------------
MFS Total Return Series $85 $130 $167 $272 $24 $74 $127 $271
- --------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund
-- Class 2 $87 $134 $174 $286 $25 $78 $134 $285
- --------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund
-- Class 2 $86 $134 $173 $285 $25 $78 $133 $284
- --------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets
Securities Fund -- Class 1 $92 $149 $199 $337 $30 $94 $160 $337
- --------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities
Fund -- Class 2 $87 $137 $178 $295 $26 $81 $138 $295
- --------------------------------------------------------------------------------------------------------------------
Templeton International
Securities Fund -- Class 2 $87 $137 $178 $295 $26 $81 $138 $295
- --------------------------------------------------------------------------------------------------------------------
<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>
- -----------------------------
American Funds Asset
Allocation Fund $22 $68 $117 $250
- -----------------------------
American Funds Bond Fund $23 $71 $121 $260
- -----------------------------
American Funds Global Growth
Fund $25 $76 $130 $278
- -----------------------------
American Funds Global Small
Capitalization Fund $26 $80 $136 $289
- -----------------------------
American Funds Growth Fund $22 $66 $114 $245
- -----------------------------
American Funds Growth-Income
Fund $21 $65 $112 $241
- -----------------------------
American Funds International
Fund $24 $73 $125 $267
- -----------------------------
American Funds New World Fund $27 $84 $143 $302
- -----------------------------
Franklin Real Estate Fund --
Class 2 $23 $72 $124 $265
- -----------------------------
Franklin Small Cap Fund --
Class 2 $26 $80 $136 $289
- -----------------------------
Franklin Strategic Income
Securities Fund $23 $70 $120 $257
- -----------------------------
Hartford Money Market HLS
Fund $20 $61 $105 $227
- -----------------------------
MFS Capital Opportunities
Series $24 $75 $128 $273
- -----------------------------
MFS Emerging Growth Series $24 $73 $124 $266
- -----------------------------
MFS Global Equity Series $27 $84 $143 $303
- -----------------------------
MFS Growth Series $24 $75 $128 $273
- -----------------------------
MFS Growth with Income Series $24 $74 $126 $270
- -----------------------------
MFS High Income Series $24 $75 $128 $273
- -----------------------------
MFS New Discovery Series $26 $80 $136 $289
- -----------------------------
MFS Total Return Series $24 $74 $127 $272
- -----------------------------
Mutual Shares Securities Fund
-- Class 2 $26 $79 $135 $286
- -----------------------------
Templeton Asset Strategy Fund
-- Class 2 $26 $78 $134 $285
- -----------------------------
Templeton Developing Markets
Securities Fund -- Class 1 $31 $95 $161 $337
- -----------------------------
Templeton Growth Securities
Fund -- Class 2 $27 $82 $139 $295
- -----------------------------
Templeton International
Securities Fund -- Class 2 $27 $82 $139 $295
- ---------------------------------------------------------------------------------
</TABLE>
<PAGE>
10 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
THE FOLLOWING EXAMPLE ASSUMES THE OPTIONAL DEATH BENEFIT IS SELECTED:
<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>
- --------------------------------------------------------------------------------------------------------------------
American Funds Asset
Allocation Fund $84 $128 $164 $266 $23 $72 $124 $265
- --------------------------------------------------------------------------------------------------------------------
American Funds Bond Fund $85 $131 $168 $275 $24 $75 $128 $274
- --------------------------------------------------------------------------------------------------------------------
American Funds Global Growth
Fund $87 $136 $177 $293 $26 $80 $137 $293
- --------------------------------------------------------------------------------------------------------------------
American Funds Global Small
Capitalization Fund $88 $139 $182 $304 $27 $84 $143 $304
- --------------------------------------------------------------------------------------------------------------------
American Funds Growth Fund $84 $127 $161 $261 $22 $70 $121 $260
- --------------------------------------------------------------------------------------------------------------------
American Funds Growth-Income
Fund $84 $126 $159 $257 $22 $69 $119 $256
- --------------------------------------------------------------------------------------------------------------------
American Funds International
Fund $86 $133 $172 $282 $25 $77 $132 $281
- --------------------------------------------------------------------------------------------------------------------
American Funds New World Fund $90 $143 $189 $317 $28 $88 $150 $316
- --------------------------------------------------------------------------------------------------------------------
Franklin Real Estate Fund --
Class 2 $86 $132 $171 $280 $24 $76 $131 $279
- --------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund --
Class 2 $88 $139 $182 $304 $27 $84 $143 $304
- --------------------------------------------------------------------------------------------------------------------
Franklin Strategic Income
Securities Fund $85 $130 $167 $272 $24 $74 $127 $271
- --------------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS
Fund $82 $122 $153 $243 $21 $65 $112 $242
- --------------------------------------------------------------------------------------------------------------------
MFS Capital Opportunities
Series $87 $135 $175 $288 $25 $79 $135 $288
- --------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series $86 $133 $171 $281 $24 $77 $131 $280
- --------------------------------------------------------------------------------------------------------------------
MFS Global Equity Series $90 $143 $189 $318 $28 $88 $150 $317
- --------------------------------------------------------------------------------------------------------------------
MFS Growth Series $87 $135 $175 $288 $25 $79 $135 $288
- --------------------------------------------------------------------------------------------------------------------
MFS Growth with Income Series $86 $134 $173 $285 $25 $78 $133 $284
- --------------------------------------------------------------------------------------------------------------------
MFS High Income Series $87 $135 $175 $288 $25 $79 $135 $288
- --------------------------------------------------------------------------------------------------------------------
MFS New Discovery Series $88 $139 $182 $304 $27 $84 $143 $304
- --------------------------------------------------------------------------------------------------------------------
MFS Total Return Series $87 $134 $174 $287 $25 $78 $134 $287
- --------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund
-- Class 2 $88 $138 $181 $301 $27 $83 $141 $300
- --------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund
-- Class 2 $88 $138 $180 $300 $26 $82 $141 $300
- --------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets
Securities Fund -- Class 1 $93 $154 $206 $352 $32 $99 $168 $351
- --------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities
Fund -- Class 2 $89 $141 $185 $310 $27 $85 $146 $309
- --------------------------------------------------------------------------------------------------------------------
Templeton International
Securities Fund -- Class 2 $89 $141 $185 $310 $27 $85 $146 $309
- --------------------------------------------------------------------------------------------------------------------
<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>
- -----------------------------
American Funds Asset
Allocation Fund $24 $73 $124 $266
- -----------------------------
American Funds Bond Fund $24 $75 $129 $275
- -----------------------------
American Funds Global Growth
Fund $26 $81 $138 $293
- -----------------------------
American Funds Global Small
Capitalization Fund $27 $84 $144 $304
- -----------------------------
American Funds Growth Fund $23 $71 $122 $261
- -----------------------------
American Funds Growth-Income
Fund $23 $70 $120 $257
- -----------------------------
American Funds International
Fund $25 $78 $132 $282
- -----------------------------
American Funds New World Fund $29 $88 $150 $317
- -----------------------------
Franklin Real Estate Fund --
Class 2 $25 $77 $131 $280
- -----------------------------
Franklin Small Cap Fund --
Class 2 $27 $84 $144 $304
- -----------------------------
Franklin Strategic Income
Securities Fund $24 $74 $127 $272
- -----------------------------
Hartford Money Market HLS
Fund $21 $66 $113 $243
- -----------------------------
MFS Capital Opportunities
Series $26 $79 $136 $288
- -----------------------------
MFS Emerging Growth Series $25 $77 $132 $281
- -----------------------------
MFS Global Equity Series $29 $89 $151 $318
- -----------------------------
MFS Growth Series $26 $79 $136 $288
- -----------------------------
MFS Growth with Income Series $26 $78 $134 $285
- -----------------------------
MFS High Income Series $26 $79 $136 $288
- -----------------------------
MFS New Discovery Series $27 $84 $144 $304
- -----------------------------
MFS Total Return Series $26 $79 $135 $287
- -----------------------------
Mutual Shares Securities Fund
-- Class 2 $27 $83 $142 $301
- -----------------------------
Templeton Asset Strategy Fund
-- Class 2 $27 $83 $142 $300
- -----------------------------
Templeton Developing Markets
Securities Fund -- Class 1 $32 $99 $168 $352
- -----------------------------
Templeton Growth Securities
Fund -- Class 2 $28 $86 $147 $310
- -----------------------------
Templeton International
Securities Fund -- Class 2 $28 $86 $147 $310
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 11
- --------------------------------------------------------------------------------
ACCUMULATION UNIT VALUES
(For an Accumulation Unit outstanding throughout the period)
The following information has been derived from the audited financial statements
of the Separate Account, which have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and should be read in conjunction with those statements which are
included in the Statement of Additional Information, which is incorporated by
reference in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
<S> <C>
- --------------------------------------------------------------------------------
AMERICAN FUNDS ASSET ALLOCATION FUND SUB-ACCOUNT (INCEPTION
DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 9.776
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 116
- --------------------------------------------------------------------------------
AMERICAN FUNDS BOND FUND SUB-ACCOUNT (INCEPTION DATE JULY 1,
1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.106
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 110
- --------------------------------------------------------------------------------
AMERICAN FUNDS GLOBAL FUND GROWTH SUB-ACCOUNT (INCEPTION
DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $13.980
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 189
- --------------------------------------------------------------------------------
AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION FUND SUB-ACCOUNT
(INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $13.784
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 50
- --------------------------------------------------------------------------------
AMERICAN FUNDS GROWTH FUND SUB-ACCOUNT (INCEPTION DATE JULY
1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $12.518
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 787
- --------------------------------------------------------------------------------
AMERICAN FUNDS GROWTH-INCOME FUND SUB-ACCOUNT (INCEPTION
DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 9.591
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 954
- --------------------------------------------------------------------------------
AMERICAN FUNDS INTERNATIONAL FUND SUB-ACCOUNT (INCEPTION
DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $14.663
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 161
- --------------------------------------------------------------------------------
AMERICAN FUNDS NEW WORLD FUND SUB-ACCOUNT (INCEPTION DATE
JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $11.659
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 71
- --------------------------------------------------------------------------------
FRANKLIN REAL ESTATE FUND SUB-ACCOUNT (INCEPTION DATE JULY
1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 8.842
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 2
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
12 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
<S> <C>
- --------------------------------------------------------------------------------
FRANKLIN SMALL CAP FUND SUB-ACCOUNT (INCEPTION DATE JULY 1,
1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $16.658
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 76
- --------------------------------------------------------------------------------
FRANKLIN STRATEGIC INCOME SECURITIES FUND SUB-ACCOUNT
(INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.189
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 15
- --------------------------------------------------------------------------------
HARTFORD MONEY MARKET HLS FUND SUB-ACCOUNT (INCEPTION DATE
JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 1.018
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 1,444
- --------------------------------------------------------------------------------
MUTUAL SHARES SECURITIES FUND SUB-ACCOUNT (INCEPTION DATE
JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 9.800
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 57
- --------------------------------------------------------------------------------
MFS CAPITAL OPPORTUNITIES SUB-ACCOUNT (INCEPTION DATE JULY
1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $12.219
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 178
- --------------------------------------------------------------------------------
MFS EMERGING GROWTH SUB-ACCOUNT (INCEPTION DATE JULY 1,
1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $15.422
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 227
- --------------------------------------------------------------------------------
MFS GLOBAL EQUITY SUB-ACCOUNT (INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $11.600
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 5
- --------------------------------------------------------------------------------
MFS GROWTH SUB-ACCOUNT (INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $12.016
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 197
- --------------------------------------------------------------------------------
MFS GROWTH WITH INCOME SUB-ACCOUNT (INCEPTION DATE JULY 1,
1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 9.963
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 274
- --------------------------------------------------------------------------------
MFS HIGH INCOME SUB-ACCOUNT (INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.053
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 71
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 13
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
<S> <C>
- --------------------------------------------------------------------------------
MFS NEW DISCOVERY SUB-ACCOUNT (INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $14.336
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 55
- --------------------------------------------------------------------------------
MFS TOTAL RETURN SUB-ACCOUNT (INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 9.700
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 53
- --------------------------------------------------------------------------------
TEMPLETON ASSET STRATEGY FUND SUB-ACCOUNT (INCEPTION DATE
JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.869
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 10
- --------------------------------------------------------------------------------
TEMPLETON DEVELOPING MARKETS SECURITIES FUND SUB-ACCOUNT
(INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $11.123
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 21
- --------------------------------------------------------------------------------
TEMPLETON GROWTH SECURITIES FUND SUB-ACCOUNT (INCEPTION DATE
JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.619
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 76
- --------------------------------------------------------------------------------
TEMPLETON INTERNATIONAL SECURITIES FUND SUB-ACCOUNT
(INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.960
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 48
- --------------------------------------------------------------------------------
</TABLE>
Accumulation Unit Values do not include the Optional Death Benefit Charge. If
you elect the Optional Death Benefit, Accumulation Unit Values would be lower.
<PAGE>
14 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SUMMARY
HOW DO I PURCHASE THIS ANNUITY?
You must complete our application or order request and submit it to us for
approval with your first premium payment. Your first premium payment must be at
least $1,000 and subsequent premium payments must be at least $500. The minimum
premium payment requirements may differ if you are participating in our
automatic investing ("InvestEase-Registered Trademark-") program.
- For a limited time, usually within ten days after you receive your annuity,
you may cancel your annuity without paying a Contingent Deferred Sales
Charge. You bear the investment risk for your premium payment prior to our
receipt of your request for cancellation.
WHAT TYPE OF SALES CHARGE WILL I PAY?
CONTINGENT DEFERRED SALES CHARGE ("CDSC")
You don't pay a sales charge when you purchase your Annuity. We may charge you a
CDSC when you partially or fully Surrender your Annuity. The CDSC will depend on
the amount you choose to Surrender and the length of time the Premium Payments
you made have been in your Annuity. The percentage used to calculate the CDSC is
equal to:
<TABLE>
<CAPTION>
NUMBER OF YEARS FROM CONTINGENT DEFERRED
PREMIUM PAYMENT SALES CHARGE
<S> <C>
- -----------------------------------------
One Year 7%
- -----------------------------------------
Two Years 6%
- -----------------------------------------
Three Years 6%
- -----------------------------------------
Four Years 5%
- -----------------------------------------
Five Years 4%
- -----------------------------------------
Six Years 3%
- -----------------------------------------
Seven Years 2%
- -----------------------------------------
Eight Years 0%
- -----------------------------------------
</TABLE>
IS THERE AN ANNUAL MAINTENANCE FEE?
Yes. We deduct this $30 fee each year on your Contract Anniversary or when you
completely 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 three different types of
charges each year. The first type of charge is the fee you pay for insurance.
This charge is:
A mortality and expense risk charge that is subtracted daily and is equal to an
annual charge of 1.25% of your Contract Value invested in the Funds.
The second type of charge is the fee you pay for the Separate Account. This
charge is:
An administrative fee of .15% per year of the Contract Value held in the
Separate Account.
The third type of charge is the fee you pay for the Funds. See the Annual
Operation Expense Table for more complete information and the funds'
prospectuses attached to this Prospectus.
If you elect the Optional Death Benefit, we will deduct an additional charge
daily from your Contract Value which is equal to 0.15% per year of your Contract
Value invested in the Funds.
CAN I TAKE OUT ANY OF MY MONEY?
You can partially or fully Surrender your Contract subject to a Contingent
Deferred Sales Charge (CDSC). You can partially Surrender your Contract without
any CDSC applied to the Surrender under the following conditions:
- - Surrenders which don't exceed 15% of premium payments per Contract Year
(Annual Withdrawal Amount);
- - Surrenders made from premium payments invested more than seven years; 100%
Surrender of earnings after the seventh Contract Year;
- - Surrenders under the nursing home waiver (described as Eligible Confinement in
the Contract); or
- - Surrenders eligible for disability waiver under a group qualified plan.
WILL HARTFORD PAY A DEATH BENEFIT?
Your Contract has a Death Benefit and we offer an Optional Interest Accumulation
Death Benefit ("Optional Death Benefit") that you can elect for an additional
fee. There is a Death Benefit if the Contract Owner, joint owner or Annuitant,
die before we begin to make annuity payments. The Death Benefit will remain
invested in the Sub-Accounts according to your last instructions (unless
otherwise mutually specified by your Beneficiaries) and will be subject to
market fluctuations.
IF YOU DO NOT ELECT THE OPTIONAL DEATH BENEFIT, the Death Benefit, which we will
calculate as of the date we receive Due Proof of Death, will be the greater of:
- - 100% of the total premium payments you have made to us reduced by any
subsequent Surrenders;
- - The Contract Value of your annuity, or
- - Your Maximum Anniversary Value, which is described below.
The Maximum Anniversary Value is based on a series of calculations on Contract
Anniversaries, of Contract Values, premium payments and partial Surrenders. We
will calculate an Anniversary Value for each Contract Anniversary prior to the
deceased's 81st birthday or date of death. The Anniversary Value is equal to the
Contract Value as of a Contract Anniversary, increased by the dollar amount of
any premium payments made since that anniversary and reduced by the dollar
amount of any partial Surrenders since that anniversary. The Maximum Anniversary
Value is equal to the greatest Anniversary Value attained from this series of
calculations.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 15
- --------------------------------------------------------------------------------
IF YOU ELECT THE OPTIONAL DEATH BENEFIT, the Death Benefit, which we will
calculate as of the date we receive Due Proof of Death, will be the greater of:
- - 100% of the total premium payments you have made to us reduced by any
subsequent Surrenders;
- - The Contract Value of your annuity;
- - Your Maximum Anniversary Value, which is the highest Anniversary Value before
the deceased's 81st birthday or date of death; or
- - Your Interest Accumulation Value.
The INTEREST ACCUMULATION VALUE is calculated by accumulating interest on your
premium payments at a rate of 5% per year up to the deceased's 81st birthday or
date of death, assuming you have not taken any Surrenders. If you have taken any
Surrenders, the 5% will be accumulated on your premium payments, but there will
be an adjustment for any of the Surrenders. This adjustment will reduce the
Optional Death Benefit proportionally for the Surrenders. The Optional Death
Benefit is limited to a maximum of 200% of premium payments, less proportional
adjustments for any Surrenders. For examples on how the Optional Death Benefit
is calculated see "Appendix II". If you elect the Optional Death Benefit, we
will deduct an additional charge daily from your Contract Value equal to .15% of
the Sub-Account value. The Optional Death Benefit may not be available if the
Contract Owner or Annuitant is age 75 or older. For Contracts issued in the
states of Washington or New York, the Optional Death Benefit is not available.
If you elect the Optional Death Benefit at any time after you purchase your
annuity, the Optional Death Benefit calculation will be different.
WHAT ANNUITY PAYMENT OPTIONS ARE AVAILABLE?
When you purchase your annuity, you may choose one of the following annuity
payment options, or receive a lump sum payment:
LIFE ANNUITY where we make scheduled payments for the Annuitant's life.
- Payments under this option stop upon the death of the Annuitant, even if the
Annuitant dies after one payment.
LIFE ANNUITY WITH CASH REFUND where we make payments during the life of the
Annuitant and when the Annuitant dies, we pay the remaining value to the
Beneficiary. The remaining value is calculated at the time we receive Due Proof
of Death by subtracting the annuity payments already made from the Contract
Value, less any applicable Premium Taxes, applied to this annuity payment
option.
- This option is only available if you select a variable dollar amount payment
with the 5% AIR or fixed dollar amount annuity payments.
LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN where we make payments for the
life of the Annuitant but you are at least guaranteed payments for a time period
you select which is a minimum of 5 years and a maximum of 100 years minus your
annuitant's age.
- If the Annuitant dies prior to the end of the period selected, we will pay
the value of the remaining payments to your Beneficiary, either in a lump
sum or we will continue payments until the end of the period selected.
JOINT AND LAST SURVIVOR ANNUITY where we make payments during the lifetimes of
the Annuitant and another designated individual called the Joint Annuitant. At
the time of electing this annuity payment option, the Contract Owner may elect
reduced payments over the remaining lifetime of the survivor.
- Payments under this option stop upon the death of the Annuitant and Joint
Annuitant, even if the Annuitant and Joint Annuitant die after one payment.
JOINT AND LAST SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN where we
make payments during the lifetime of the Annuitant and a Joint Annuitant, and we
guarantee those payments for a time period you select which is a minimum of 5
years and a maximum 100 years minus the younger Annuitant's age. At the time of
electing this Annuity Option, the Contract Owner may elect reduced payments over
the remaining lifetime of the survivor.
- If the Annuitant and the Joint Annuitant die prior to the end of the period
selected, we will pay the value of the remaining payments to your
Beneficiary, either in a lump sum or we will continue payments until the end
of the period selected.
PAYMENTS FOR A PERIOD CERTAIN where we agree to make payments for a specified
time. The minimum period that you can select is 10 years during the first two
Contract Years and 5 years after the second Contract Anniversary. The maximum
period that you can select is 100 years minus your Annuitant's age.
- If you select this option under a variable dollar amount payment, you may
Surrender your Annuity after annuity payments have started and we will give
you the present value of the remaining payments less any applicable
Contingent Deferred Sales Charge.
- If the Annuitant dies prior to the end of the period selected, we will pay
the value of the remaining payments to your Beneficiary, either in a lump
sum or we will continue payments until the end of the period selected.
You must begin to take payments before the Annuitant's 90th birthday or the end
of the 10th Contract Year, which ever comes later, unless you elect a later date
to begin receiving payments subject to the laws and regulations then in effect
and our approval. If you do not tell us what annuity payment option you want
before that time, we will pay you under the Life Annuity with a 10 year period
certain. In New York, the Annuity Commencement Date may not be deferred beyond
the Annuitant's 90th birthday. Please consult your Registered Representative or
call us.
<PAGE>
16 HARTFORD LIFE INSURANCE COMPANY
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HARTFORD LIFE INSURANCE COMPANY
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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 2999, Hartford, CT 06104-2999. We are
ultimately controlled by The Hartford Financial Services Group, Inc., one of the
largest financial service providers in the United States.
HARTFORD'S RATINGS
<TABLE>
<CAPTION>
EFFECTIVE 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
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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 December 8, 1986 and is registered as a unit investment trust under the
Investment Company Act of 1940. This registration does not involve supervision
by the Commission 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 the benefit of you and other Contract Owners, and the persons
entitled to the payments described in the Contract.
- - Is not subject to the liabilities arising out of any other business Hartford
may conduct.
- - Is not affected by the rate of return of Hartford's General Account or by the
investment performance of any of Hartford's other Separate Accounts.
- - May be subject to liabilities from a Sub-Account of the Separate Account which
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
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The American Funds Asset Allocation Fund, American Funds Bond Fund, American
Fund Global Growth Fund, American Funds Global Small Capitalization Fund,
American Funds Growth Fund, American Funds Growth-Income Fund, American Funds
International Fund and American Funds New World Fund are all part of American
Funds Insurance Series. American Funds Insurance Series is a fully managed,
diversified, open-end investment company organized as a Massachusetts business
trust in 1983. American Funds Insurance Series offers two classes of fund
shares: Class 1 shares and Class 2 shares. This Annuity invests only in Class 2
shares of American Funds Insurance Series. The investment adviser for each of
the funds of American Funds Insurance Series is Capital Research and Management
Company located at 333 South Hope Street, Los Angeles, California 90071. Capital
Research and Management Company is a wholly owned subsidiary of The Capital
Group Companies, Inc.
Hartford Money Market HLS Fund is sponsored and administered by Hartford Life
Insurance Company. HL Investment Advisers, LLC located at 200 Hopmeadow Street,
Simsbury, Connecticut, serves as the investment adviser to the Fund. Hartford
Investment Management Company serves as sub-investment adviser and provides day
to day investment services. The Fund is a separate Maryland corporation
registered with the Securities and Exchange Commission as an open-end management
investment company. Shares of the Fund have been divided into Class IA and Class
IB. Only Class IA shares are available in this Annuity.
The MFS-Registered Trademark- Capital Opportunities Series,
MFS-Registered Trademark- Emerging Growth Series, MFS-Registered Trademark-
Global Equity Series, MFS-Registered Trademark- Growth Series,
MFS-Registered Trademark- Growth with Income Series, MFS-Registered Trademark-
High Income Series, MFS-Registered Trademark- New Discovery Series, and
MFS-Registered Trademark- Total Return Series are series of the
MFS-Registered Trademark- Variable Insurance Trust-SM-. The MFS Variable
Insurance Trust-SM- is a professionally managed open-end management investment
company. The MFS Variable Insurance Trust-SM- is registered as a Massachusetts
business trust. MFS Investment Management-Registered Trademark- serves as the
investment adviser to each of the Series of the MFS-Registered Trademark-
Variable Insurance Trust-SM-. MFS Investment Management-Registered Trademark- is
located at 500 Boylston Street, Boston, Massachusetts 02116.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 17
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Franklin Real Estate Fund, Franklin Small Cap Fund, Franklin Strategic Income
Securities Fund, Templeton Asset Strategy Fund, Templeton International
Securities Fund, Mutual Shares Securities Fund, Templeton Developing Markets
Securities Fund, and Templeton Growth Securities Fund are all part of the
Franklin Templeton Variable Insurance Products Trust. The Franklin Templeton
Variable Insurance Products Trust is an open-end managed investment company
which was organized as a Massachusetts business trust on April 26, 1988.
Franklin Templeton Variable Insurance Products Trust currently offers Class 1
and Class 2 shares. Class 2 shares of each Fund are available in this Annuity,
except that Class 1 shares of Franklin Strategic Income Securities Fund and
Templeton Developing Markets Securities Fund are available. The investment
manager of the Franklin Real Estate Fund, Franklin Small Cap Fund, and the
Franklin Strategic Income Securities Fund is Franklin Advisers, Inc. located at
777 Mariners Island Blvd., P.O. Box 7777, San Mateo, California 94403-777. The
investment manager of Mutual Shares Securities Fund is Franklin Mutual Advisers,
LLC, located at 51 John F. Kennedy Parkway, Short Hills, New Jersey 07078. The
investment manager of Templeton Growth Securities Fund is Templeton Global
Advisers Limited, located at Lyford Cay, Nassau, N.P. Bahamas. The investment
manager of Templeton Developing Markets Securities Fund is Templeton Asset
Management Ltd., located at 7 Temasek Blvd. #38-03, Suntec Tower One, Singapore,
038987.
The investment manager of Templeton Asset Strategy Fund and Templeton
International Securities Fund is Templeton Investment Counsel, Inc. located at
500 East Broward Boulevard, Fort Lauderdale, Florida 33394-3091. Templeton
Investment Counsel, Inc., Franklin Advisers, Inc., Franklin Mutual Advisers,
LLC, Templeton Global Advisers Limited, and Templeton Asset Management, Ltd. are
wholly owned by Franklin Resources, Inc., a publicly owned company engaged in
the financial services industry through its subsidiaries.
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 are more fully described in
the accompanying Funds' prospectus and Statement of Additional Information,
which may be ordered from us. The Funds' prospectus should be read in
conjunction with this Prospectus before investing.
The Funds may not be available in all states contact your registered
representative for current information about availability.
The investment goals of each of the Funds are as follows:
AMERICAN FUNDS ASSET ALLOCATION FUND -- Seeks high total return, including
income and capital gains, consistent with the preservation of capital over the
long term through a diversified portfolio that can include common stocks and
other equity-type securities, bonds and other intermediate and long-term fixed
income securities and money market instruments in any combination.
AMERICAN FUNDS BOND FUND -- Seeks to provide as high a level of current income
as is consistent with the preservation of capital by investing primarily in
fixed-income securities.
AMERICAN FUNDS GLOBAL GROWTH FUND -- Seeks long-term growth of capital by
investing primarily in common stocks of issuers domiciled around the world.
AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION FUND -- Seeks long-term growth of
capital by investing primarily in equity securities of smaller companies located
around the world that typically have market capitalizations of $50 million to
$1.5 billion.
AMERICAN FUNDS GROWTH FUND -- Seeks long-term growth of capital by investing
primarily in common stocks which demonstrate the potential for appreciation.
AMERICAN FUNDS GROWTH-INCOME FUND -- Seeks growth of capital and income by
investing primarily in common stocks or other securities which demonstrate the
potential for appreciation and/or dividends.
AMERICAN FUNDS INTERNATIONAL FUND -- Seeks long-term growth of capital by
investing primarily in common stocks of issuers domiciled outside of the United
States.
AMERICAN FUNDS NEW WORLD FUND -- Seeks long-term growth of capital by investing
primarily in common stocks of issuers with significant exposure to countries
with developing economies and/or markets. The Fund may also invest in debt
securities, including high-yield, high risk bonds.
FRANKLIN REAL ESTATE FUND -- Seeks capital appreciation. Its secondary goal is
to earn current income.
FRANKLIN SMALL CAP FUND -- Seeks long-term capital growth.
FRANKLIN STRATEGIC INCOME SECURITIES FUND (FORMERLY FRANKLIN STRATEGIC INCOME
INVESTMENTS FUND) -- Seeks to earn a high level of current income. Its secondary
goal is long-term capital appreciation.
HARTFORD MONEY MARKET HLS FUND -- Seeks maximum current income consistent with
liquidity and preservation of capital.
MFS-REGISTERED TRADEMARK- CAPITAL OPPORTUNITIES SERIES -- Seeks capital
appreciation.
MFS-REGISTERED TRADEMARK- EMERGING GROWTH SERIES -- Seeks to provide long-term
growth of capital.
MFS-REGISTERED TRADEMARK- GLOBAL EQUITY SERIES -- Seeks capital appreciation.
MFS-REGISTERED TRADEMARK- GROWTH SERIES -- Seeks to provide long-term growth of
capital and future income rather than current income.
MFS-REGISTERED TRADEMARK- GROWTH WITH INCOME SERIES -- Seeks to provide
reasonable current income and long-term growth of capital and income.
MFS-REGISTERED TRADEMARK- HIGH INCOME SERIES -- Seeks high current income by
investing primarily in a professionally managed diversified portfolio of fixed
income securities, some of which may involve equity features.
MFS-REGISTERED TRADEMARK- NEW DISCOVERY SERIES -- Seeks capital appreciation.
<PAGE>
18 HARTFORD LIFE INSURANCE COMPANY
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MFS-REGISTERED TRADEMARK- TOTAL RETURN SERIES -- Seeks primarily to provide
above-average income (compared to a portfolio invested in equity securities)
consistent with the prudent employment of capital, and secondarily to provide a
reasonable opportunity for growth of capital and income.
MUTUAL SHARES SECURITIES FUND -- Seeks capital appreciation. Its secondary goal
is income.
TEMPLETON ASSET STRATEGY FUND (FORMERLY TEMPLETON ASSET ALLOCATION
FUND) -- Seeks high total return.
TEMPLETON DEVELOPING MARKETS SECURITIES FUND (FORMERLY TEMPLETON DEVELOPING
MARKETS EQUITY FUND) -- Seeks long-term capital appreciation.
TEMPLETON GROWTH SECURITIES FUND (FORMERLY TEMPLETON GLOBAL GROWTH
FUND) -- Seeks long-term capital growth.
TEMPLETON INTERNATIONAL SECURITIES FUND (FORMERLY TEMPLETON INTERNATIONAL
FUND) -- Seeks long-term capital growth.
MIXED AND SHARED FUNDING -- Shares of the Funds are 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 contracts, 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
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 Payments to you, the number of votes you
have will decrease.
SUBSTITUTIONS, ADDITIONS, OR DELETIONS OF FUNDS -- We reserve the right, subject
to any applicable law, to make certain changes to the Funds offered under your
Contract. We may, in our sole discretion, establish new Funds. New Funds will be
made available to existing Contract Owners as we determine appropriate. We may
also close one or more Funds to additional payments or transfers from existing
Sub-Accounts.
We reserve the right to eliminate the shares of any of the Funds for any reason
and to substitute shares of another registered investment company for the shares
of any Fund already purchased or to be purchased in the future by the Separate
Account. To the extent required by the 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 such changes in the Contract as may be necessary or appropriate to reflect
such 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.
ADMINISTRATIVE SERVICES -- Hartford has entered into agreements with the
investment advisers or distributors of many of the Funds. Under the terms of
these agreements, Hartford provides administrative services and the Funds pay a
fee to Hartford that is usually based on an annual percentage of the average
daily net assets of the Funds. These agreements may be different for each Fund
or each Fund family.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 19
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PERFORMANCE RELATED INFORMATION
The Separate Account may advertise certain performance-related information
concerning the Sub-Accounts. Performance information about a Sub-Account is
based on the Sub-Account's past performance only and is no indication of future
performance.
When a Sub-Account advertises its standardized total return, it will usually be
calculated for one year, five years, and ten years or some other relevant
periods if the Sub-Account has not been in existence for at least ten years.
Total return is measured by comparing the value of an investment in the
Sub-Account at the beginning of the relevant period to the value of the
investment at the end of the period and assumes that the Optional Death Benefit
has not been elected.
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, divided by the unit value on
the last day of the period. This figure reflects the recurring charges at the
Separate Account level including the Annual Maintenance Fee.
The Hartford Money Market HLS Fund Sub-Account may advertise yield and effective
yield. The yield of a Sub-Account is based upon the income earned by the
Sub-Account over a seven-day period and then annualized, i.e. the income earned
in the period is assumed to be earned every seven days over a 52-week period and
stated as a percentage of the investment. Effective yield is calculated
similarly but when annualized, the income earned by the investment is assumed to
be reinvested in Sub-Account units and thus compounded in the course of a
52-week period. Yield and effective yield reflect the recurring charges at the
Separate Account level including the Annual Maintenance Fee.
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 value 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 Contracts and the
characteristics of and market for such alternatives.
THE FIXED ACCUMULATION FEATURES
- --------------------------------------------------------------------------------
IMPORTANT INFORMATION YOU SHOULD KNOW: THIS PORTION OF THE CONTRACT RELATING TO
THE FIXED ACCUMULATION FEATURES IS NOT REGISTERED UNDER THE SECURITIES ACT OF
1933 ("1933 ACT") AND THE FIXED ACCUMULATION FEATURES ARE NOT REGISTERED AS
INVESTMENT COMPANIES UNDER THE INVESTMENT COMPANY ACT OF 1940 ("1940 ACT"). NONE
OF THE FIXED ACCUMULATION FEATURES OR ANY OF THEIR INTERESTS ARE 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 FEATURES. THE FOLLOWING DISCLOSURE ABOUT THE FIXED
ACCUMULATION FEATURES MAY BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS
OF THE FEDERAL SECURITIES LAWS REGARDING THE ACCURACY AND COMPLETENESS OF
DISCLOSURE.
Payments and Contract Values allocated to a Fixed Accumulation Feature become a
part of our general assets. We invest the assets of the General Account in
accordance with applicable law governing the investments of insurance company
General Accounts. We have more than one Fixed Accumulation Feature. The standard
Fixed Accumulation Feature (the "Fixed Accumulation Feature") and then a number
of DCA Program Fixed Accumulation Features, which we collectively refer to as
the "Fixed Accumulation Features".
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, in our sole discretion, to credit
interest at a rate in excess of 3% per year. You assume the risk that interest
credited to the Fixed Accumulation Feature may not exceed the minimum guarantee
of 3% for any given year.
We will periodically publish the Fixed Accumulation Feature interest rates
currently in effect. There is no specific formula for the determination of
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, Fixed
Accumulation Feature interest rates may vary from other states.
From time to time, we may credit increased interest rates to Contract Owners
under certain programs established at our sole discretion.
DOLLAR COST AVERAGING PLUS ("DCA PLUS") PROGRAMS -- These programs will use
designated DCA Program Fixed Accumulation Features. Currently, Contract Owners
may enroll in
<PAGE>
20 HARTFORD LIFE INSURANCE COMPANY
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a special pre-authorized transfer program known as our Dollar Cost Averaging
Plus Program (the "Program"). Under this Program, Contract Owners who enroll may
allocate a minimum of $5,000 of their payment into the appropriate DCA Program
Fixed Accumulation Feature (we may allow a lower minimum premium payment for
qualified plan transfers or rollovers, including IRAs) and pre-authorize
transfers to any of the Sub-Accounts under either the 6-Month Transfer Program
or 12-Month Transfer Program. The 6-Month Transfer Program and the 12-Month
Transfer Program will generally have different credited interest rates. Under
the 6-Month Transfer Program, the interest rate can accrue up to 6 months and
all payments and accrued interest must be transferred from the DCA Program Fixed
Accumulation Feature in use 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 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, which will generally be less than the prior monthly transfer
amounts. Contract Owners who purchase their Contracts in New York have a
different DCA Plus Program, which includes different credited interest rates.
Currently, only one DCA Plus Program transfer period is available in New York,
but that period allows transfers to selected Sub-Accounts in 3 to 12 months.
The pre-authorized transfers will begin within 15 days after we receive the
initial Program payment and 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, we will transfer any remaining amounts to the Fixed
Accumulation Feature and 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, unless otherwise directed by You.
You may only have one dollar cost averaging program in place at one time, this
means one standard dollar cost averaging plan or one Dollar Cost Averaging Plus
Program.
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 of
enrollment in the Program, you will no longer receive the increased interest
rate and unless we receive instructions to the contrary, the amounts remaining
in the DCA Program Fixed Accumulation Feature may be transferred to the Fixed
Accumulation Feature and accrue the interest rate currently in effect.
Transfers made under a Dollar Cost Averaging Program do not count towards the
twelve transfers each Contract Year that we allow without charge and are not
subject to our rule that prohibits any two transfers from occurring on
Consecutive Valuation Days.
We reserve the right to discontinue, modify or amend the Program or any other
interest rate program established by Hartford. Any change to the Program will
not affect Contract Owners currently enrolled in the Program.
THE CONTRACT
- --------------------------------------------------------------------------------
THE CONTRACT OFFERED -- The Contracts are individual or group tax-deferred
variable annuity contracts. They are designed for retirement planning purposes
and may be purchased by any individual, group or trust, including; (a) any
trustee or custodian for a retirement plan qualified under Sections 401(a), or
403(a) of the Internal Revenue Code (which includes Section 401(k));
(b) annuity purchase plans adopted by public school systems and certain
tax-exempt organizations according to Section 403(b) of the Code;
(c) Individual Retirement Annuities adopted according to Section 408 of the
Code; (d) employee pension plans established for employees by a state, a
political subdivision of a state, or an agency or instrumentality of either a
state or a political subdivision of a state, and (e) certain eligible deferred
compensation plans as defined in Section 457 of the Code ("Qualified
Contracts"). If you are purchasing the Contract for use in an IRA or other
qualified retirement plan, you should consider other features of the Contract
besides tax deferral, since any investment vehicle used within an IRA or other
qualified plan receives tax deferred treatment under the Code.
PURCHASING A CONTRACT -- A prospective Contract Owner may purchase a Contract by
completing and submitting an application or an order request along with an
initial premium payment to the Administrative Office of the Company. The maximum
age for Annuitant, Owner and Joint Owner on the Contract Issue Date is 85.
Generally, the minimum premium payment is $1,000. The minimum subsequent premium
payment is $500. Certain plans may be allowed to make smaller periodic premium
payments. Unless we give our prior approval, we will not accept a premium
payment in excess of $1,000,000. Each premium payment, which is your premium
payment after the deduction of any applicable Premium Taxes, may be split among
the various Accounts subject to minimum amounts then in effect. For Contracts
issued in Oregon, subsequent premium payments will only be accepted before the
third Contract Anniversary. For Contracts issued in Massachusetts, subsequent
premium payments will only be accepted until the Annuitant's 63rd birthday or
the third Contract Anniversary, whichever is later. We will send you a
confirmation notice upon receipt and acceptance of your premium payment.
RIGHT TO EXAMINE THE CONTRACT -- If you are not satisfied with your purchase,
you may cancel the Contract by returning it within 10 days (or longer in some
states) after you receive it. You must send a written request for cancellation
along with the Contract. We will, without deduction for any CDSC normally
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 21
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assessed, pay you an amount equal to the Contract Value. YOU BEAR THE INVESTMENT
RISK DURING THE PERIOD PRIOR TO OUR RECEIPT OF YOUR REQUEST FOR CANCELLATION. We
will refund the premium paid only for Individual Retirement Annuities, if
returned within seven days of receipt, and in those states where required by
law.
CREDITING AND VALUATION -- Your premium payment, which is the balance remaining
after the deduction of any Premium Tax, is credited to your Contract within two
business days of receipt by us at our Administrative Office of a properly
completed application or an order to purchase a Contract and the premium
payment. The payment will be credited to the Accounts according to the
instructions we receive from you.
If your application or other information is incomplete when received, your
payment will be credited to the Accounts within five business days of receipt of
complete information. If the payment is not credited within five business days,
it will be immediately returned to you unless you have been informed of the
delay and tell us not to return it.
Subsequent premium payments are priced on the Valuation Day we receive the
payment in our Administrative Office, provided it is received before the New
York Stock Exchange closes. Unless otherwise specified, We will allocate any
subsequent payments to Accounts according to your most recent instructions.
CONTRACT VALUE -- BEFORE THE ANNUITY COMMENCEMENT DATE
Your Contract Value reflects the interest rate credited any amounts allocated to
the Fixed Accumulation Features and the investment performance of the
Sub-Accounts where you have payments allocated.
SUB-ACCOUNT VALUES -- Your Sub-Account Value on the date we issue your Contract
is the amount of your premium payment allocated to any Sub-Account. After that,
we determine your Sub-Account value by determining the Accumulation Unit value
for each Sub-Account, and then multiplying that value by the number of those
units. Sub-Account Value reflects any variation of the interest income,
dividends, net capital gains or losses, realized or unrealized, and any amounts
transferred into or out of that Sub-Account.
ACCUMULATION UNITS -- When Premium Payments are credited to your Sub-Accounts,
they are converted into Accumulation Units by dividing the amount of your
Premium Payments, minus any Premium Taxes, by the Accumulation Unit Value for
that day. The more Premium Payments you put into your Contract, the more
Accumulation Units you will own. You decrease the number of Accumulation Units
you have by requesting Surrenders, transferring money out of an Account,
settling a Death Benefit claim or by annuitizing your Contract.
ACCUMULATION UNIT VALUE -- The Accumulation Unit value for each Sub-Account was
arbitrarily set initially at $1 when the Sub-Account began operations. After
that, the Accumulation Unit value for each Sub-Account will equal (a) the
Accumulation Unit value at the end of the preceding Valuation Day multiplied by
(b) the Net Investment Factor (see the definition below) for the Valuation Day
for which the Accumulation Unit value is being calculated.
You will be advised, at least semiannually, of the number of Accumulation Units
credited to each Sub-Account, the current Accumulation Unit values, and the
total value of your Contract.
THE NET INVESTMENT FACTOR (BEFORE AND AFTER THE ANNUITY COMMENCEMENT
DATE) -- The Net Investment Factor is an index applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. For each
Sub-Account, the Net Investment Factor reflects the investment performance of
the Fund in which that Sub-Account invests and the charges assessed against that
Sub-Account for a Valuation Period. The Net Investment Factor is calculated by
dividing (a) by (b) and subtracting (c) from the result, where:
(a) Is the Net Asset Value of the Fund held in that Sub-Account, determined at
the end of the current Valuation Period (plus the per share amount of any
dividends or capital gains distributions made by that Fund);
(b) Is the Net Asset Value of the Fund held in the Sub-Account, determined at
the beginning of the Valuation Period;
(c) Is a daily factor representing the mortality and expense risk charge and any
optional charges deducted from the Sub-Account, adjusted for the number of
days in the Valuation Period.
CONTRACT VALUE TRANSFERS BEFORE AND AFTER THE ANNUITY COMMENCEMENT DATE
You may transfer your Contract Values from one or more Accounts to another
Account free of charge. WE RESERVE THE RIGHT TO LIMIT THE NUMBER OF TRANSFERS TO
12 PER CONTRACT YEAR, WITH NO 2 TRANSFERS OCCURRING ON CONSECUTIVE VALUATION
DAYS. There may be limitations on transfers to and from the Fixed Accumulation
Features that are described in your Contract. Some states may allow us to limit
the dollar amount transferred.
TELEPHONE AND INTERNET TRANSFERS -- In most states, you, or your
attorney-in-fact acting pursuant to a power of attorney, can make transfers:
- - By calling us at (800) 862-6668
- - Electronically, when available, by the Internet through our website at
http://online.hartfordlife.com
Transfer instructions received by telephone on any Valuation Day before the
close of the New York Stock Exchange will be carried out that day. Otherwise,
the instructions will be carried out at the close of the New York Stock Exchange
on the next Valuation Day.
Transfer instructions you send electronically are considered to be received by
Hartford at the time and date stated on the electronic acknowledgement Hartford
returns to you. If the time and date indicated on the acknowledgement is before
the close of
<PAGE>
22 HARTFORD LIFE INSURANCE COMPANY
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the New York Stock Exchange on a Valuation Day, the instructions will be carried
out that day. Otherwise, the instructions will be carried out at the close of
the New York Stock Exchange the next Valuation Day. If you do not receive an
electronic acknowledgement, you should telephone us as soon as possible.
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.
Telephone or Internet transfer requests may currently only be cancelled by
calling us at (800) 862-6668 before the close of the New York Stock Exchange.
Hartford, our agents or our affiliates are NOT responsible for losses resulting
from telephone or electronic requests that we believe are genuine. We will use
reasonable procedures to confirm that instructions received by telephone or
through our website are genuine, including a requirement that contract owners
provide certain identification information, including a personal identification
number. We record all telephone transfer instructions. We reserve the right to
suspend, modify, or terminate telephone or electronic transfer privileges at any
time.
We may permit you to pre-authorize transfers under certain circumstances.
Transfers between the Accounts may be made both before and after the Annuity
Commencement Date. Generally, the minimum allocation to any Sub-Account may not
be less than $500. All percentage (%) allocations must be in whole numbers
(e.g., 1%). No minimum balance is presently required in any Account.
The right to reallocate Contract Values is subject to modification if we
determine, in our sole opinion, that the exercise of that right by one or more
Contract Owners is, or would be, to the disadvantage of other Contract Owners.
Any modification could be applied to transfers to or from some or all of the
Accounts and could include, but not be limited to, the requirement of a minimum
time period between each transfer, not accepting transfer requests of an agent
acting under a power of attorney on behalf of more than one Contract Owner, or
limiting the dollar amount that may be transferred between the Sub-Accounts by
you at any one time. SUCH RESTRICTIONS MAY BE APPLIED IN ANY MANNER REASONABLY
DESIGNED TO PREVENT ANY USE OF THE TRANSFER RIGHT WHICH WE CONSIDER TO BE TO THE
DISADVANTAGE OF OTHER CONTRACT OWNERS.
For Contracts issued in THE STATES OF NEW YORK, FLORIDA, MARYLAND OR OREGON, the
reservation of rights set forth in the preceding paragraph is limited to:
(i) requiring up to a maximum of 10 Valuation Days between each transfer;
(ii) limiting the amount to be transferred on any one Valuation Day to no more
than $2 million; and (iii) upon 30 days prior written notice, to only accepting
transfer instructions from you and not from your representative, agent or person
acting under a power of attorney for you.
Currently, we will not accept instructions from agents acting under a power of
attorney of multiple Contract Owners whose Accounts aggregate more than $2
million, unless the agent has entered into a third party transfer services
agreement with us.
Transfers made under a Dollar Cost Averaging Program do not count towards the
twelve transfers each Contract Year that we allow without charge and are not
subject to our rule that prohibits any two transfers from occurring on
Consecutive Valuation Days.
SURRENDERS
Contract Owners should consult their qualified tax adviser regarding the tax
consequences of a Surrender.
- A Surrender made before age 59 1/2 may result in adverse tax consequences,
including a penalty tax of 10% of the taxable portion of the Surrender
Value. (See "Federal Tax Considerations").
PAYMENT OF SURRENDER AMOUNTS -- Payment of any request for a full or partial
Surrender from the Accounts will be made as soon as possible and in any event no
later than seven days after we receive the request at our Administrative Office.
There may be postponement in the payment of Surrender Amounts whenever (a) the
New York Stock Exchange is closed; (b) trading on the New York Stock Exchange is
restricted as determined by the Commission; (c) the Commission permits
postponement and so orders; or (d) the Commission determines that an emergency
exists making valuation of the amounts or disposal of securities not reasonably
practicable.
FULL SURRENDERS PRIOR TO THE ANNUITY COMMENCEMENT DATE -- At any time prior to
the Annuity Commencement Date, you have the right to fully Surrender the
Contract. In such event, the Surrender Value of the Contract may be taken in the
form of a lump sum cash payment.
The Surrender Value of the Contract is equal to the Contract Value less any
Premium Taxes, the Annual Maintenance Fee and any Contingent Deferred Sales
Charge, if applicable. The Surrender Value may be more or less than the amount
of the payments made to your Contract.
PARTIAL SURRENDERS PRIOR TO THE ANNUITY COMMENCEMENT DATE -- You may make a
partial Surrender of your Contract Value at any time prior to the Annuity
Commencement Date so long as the amount Surrendered is at least equal to our
minimum amount rules then in effect. Additionally, if the remaining Contract
Value following a Surrender is less than $500, we may terminate the Contract and
pay the Surrender Value. For Contracts issued in Texas, the Contract will not be
terminated when the remaining Contract Value after a Surrender is less than $500
unless there were no payments made during the previous 2 Contract Years.
WHEN REQUESTING A PARTIAL SURRENDER, YOU SHOULD SPECIFY THE ACCOUNT(S) FROM
WHICH THE PARTIAL SURRENDER WILL BE TAKEN; OTHERWISE, THE SURRENDER WILL BE
TAKEN ON A PRO RATA BASIS ACCORDING TO THE VALUE IN EACH ACTIVE ACCOUNT.
We may permit you to pre-authorize partial Surrenders subject to certain
limitations then in effect. We permit partial Surrenders
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 23
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by telephone subject to dollar amount limitations in effect at the time you
request the Surrender. To request partial Surrenders by telephone, you must have
completed and returned to us a Telephone Redemption Program Enrollment Form
authorizing telephone Surrenders. If there are joint Contract Owners, both must
authorize us to accept telephone instructions and agree that We may accept
telephone instructions for partial Surrenders from either Contract Owner.
Partial Surrender requests will not be honored until we receive all required
documents in proper form.
Telephone authorization will remain valid until (a) we receive written notice of
revocation by you, or, in the case of joint Contract Owners, written notice from
either Contract Owner; (b) we discontinue the privilege; or (c) we have reason
to believe that you have entered into a market timing agreement with an
investment adviser and/or broker/dealer.
We may record any telephone calls to verify data concerning transactions and may
adopt other procedures to confirm that telephone instructions are genuine. We
will not be liable for losses or expenses arising out of telephone instructions
reasonably believed to be genuine.
In order to obtain that day's unit values on Surrender, We must receive
telephone Surrender instructions prior to the close of trading on the New York
Stock Exchange (generally 4:00 p.m.).
We may modify, suspend, or terminate telephone transaction privileges at any
time.
SURRENDERS AFTER THE ANNUITY COMMENCEMENT DATE -- You may fully Surrender your
Contract on or after the Annuity Commencement Date if you elect the Payment For
a Period Certain Settlement Option. We pay you the commuted value that is equal
to the present value of the remaining payments we are scheduled to make less any
applicable Contingent Deferred Sales Charge. The commuted value is determined as
of the date we receive your written request for Surrender at our Administrative
Office.
Partial Surrenders are permitted after the Annuity Commencement Date if you
elect a variable dollar amount payment under the Payments for a Period Certain
Settlement Option, but check with your qualified tax adviser because there may
be adverse tax consequences.
IMPORTANT TAX INFORMATION -- There are certain restrictions on section 403(b)
tax-sheltered annuities. As of December 31, 1988, all section 403(b) annuities
have limits on full and partial Surrenders. Contributions to the Contract made
after December 31, 1988 and any increases in cash value after December 31, 1988
may not be distributed unless the Contract Owner/employee has a) attained age
59 1/2, b) separated from service, c) died, d) become disabled or
e) experienced 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 or separation from service may still be subject to a penalty
tax of 10%. We will not assume any responsibility for determining whether a
surrender is permissible, with or without tax penalty, in any particular
situation; or in monitoring Surrender requests regarding pre or post January 1,
1989 Contract Values. Any full or partial Surrender described above may affect
the continuing tax-qualified status of some Contracts or plans and may result in
adverse tax consequences to the Contract Owner. The Contract Owner, therefore,
should consult with a tax adviser before undertaking any such Surrender. (See
"Federal Tax Considerations").
CONTRACT CHARGES
CONTINGENT DEFERRED SALES CHARGE ("CDSC")
The CDSC 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 may assess a CDSC when you request a full or partial Surrender. The CDSC is
based on the amount you choose to Surrender and how long your Premium Payments
have been in the Contract. Each Premium Payment has its own CDSC 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 CDSC will
be when you Surrender. The amount assessed a CDSC will not exceed your total
Premium Payments.
The percentage used to calculate the CDSC is equal to:
<TABLE>
<CAPTION>
NUMBER OF YEARS FROM CONTINGENT DEFERRED
PREMIUM PAYMENT SALES CHARGE
<S> <C>
- -----------------------------------------
1 7%
- -----------------------------------------
2 6%
- -----------------------------------------
3 6%
- -----------------------------------------
4 5%
- -----------------------------------------
5 4%
- -----------------------------------------
6 3%
- -----------------------------------------
7 2%
- -----------------------------------------
8 or more 0%
- -----------------------------------------
</TABLE>
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 year, we will deduct a CDSC as follows.
- - Hartford will Surrender the Annual Withdrawal Amount which is equal to 15% of
your total Premium Payments or $4,500 without charging a CDSC.
- - 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 CDSC of 4% on that amount or $400.00.
- - The remaining $500 will come from the additional Premium Payment made one year
ago and we will deduct a CDSC of 7% of the $500 or $35.00.
<PAGE>
24 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- - Your CDSC is $435.00
If you have any questions about these charges, please contact your financial
adviser or Hartford.
PAYMENTS NOT SUBJECT TO CDSC
ANNUAL WITHDRAWAL AMOUNT -- During the first seven Contract years, you may make
a partial Surrender of Contract Values of up to 15% of the premium payments each
Contract Year on a non-cumulative basis, as determined on the date of the
requested Surrender, without the application of the CDSC. After the seventh
Contract Year, you may make a partial Surrender each Contract Year of 15% of
premium payments made during the seven years prior to the Surrender and 100% of
the Contract Value less the premium payments made during the seven years prior
to the Surrender. These amounts are different for Contracts issued to a
Charitable Remainder Trust.
EXTENDED SURRENDER PRIVILEGE -- This privilege allows Annuitants who attain age
70 1/2 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 stated Contract without incurring any CDSC.
WAIVERS OF CDSC
CONFINEMENT IN A NURSING HOME, HOSPITAL OR LONG TERM CARE FACILITY (DESCRIBED AS
ELIGIBLE CONFINEMENT IN THE CONTRACT) -- We will waive any CDSC applicable to a
partial or full Surrender if the Annuitant, Contract Owner or joint owner is
confined, at the recommendation of a physician for medically necessary reasons,
for at least 180 calendar days to: a hospital recognized as a general hospital
by the proper authority of the state in which it is located; or a hospital
recognized as a general hospital by the Joint Commission on the Accreditation of
Hospitals; or a facility certified as a hospital or long-term care facility; or
a nursing home licensed by the state in which it is located and offers the
services of a registered nurse 24 hours a day.
The Annuitant, Contract Owner or joint owner cannot be confined at the time the
Contract is purchased in order to receive this waiver and the Contract Owner(s)
must have been the Contract Owner(s) continuously since the Contract issue date.
You must provide written proof of confinement satisfactory to Hartford and you
must request the partial or full 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 contact Hartford to determine availability.
DEATH OF THE ANNUITANT OR CONTRACT OWNER OR PAYMENTS UNDER AN ANNUITY
OPTION -- No CDSC otherwise applicable will be assessed in the event of death of
the Annuitant, death of the Contract Owner or if payments are made under an
Annuity option (other than a Surrender of variable payments for a Period Certain
Annuity option) provided for under the Contract.
OTHER PLANS OR PROGRAMS -- Certain plans or programs established by us from time
to time may have different Surrender privileges.
MORTALITY AND EXPENSE RISK CHARGE -- For assuming risks under the Contract, We
deduct a daily charge at the rate of 1.25% per year against all Contract Values
held in the Accounts during the life of the Contract. Although variable annuity
payments made under the Contracts will vary in accordance with the investment
performance of the underlying Fund shares held in the Sub-Account(s), the
payments will not be affected by (a) our actual mortality experience among
Annuitants before or after the Annuity Commencement Date or (b) our actual
expenses, if greater than the deductions provided for in the Contracts because
of the expense and mortality undertakings by us.
There are two types of mortality risks: those made during the accumulation or
deferral phase and those made during the annuity payout phase. The mortality
risk we take in the accumulation phase is that we may experience a loss
resulting from the assumption of the mortality risk relative to the death
benefit in event of the death of an Annuitant or Contract Owner before
commencement of Annuity payments, in periods of declining value. The mortality
risk we take during the annuity payout phase is to make monthly Annuity payments
(determined in accordance with the 1983a Individual Annuity Mortality Table and
other provisions contained in the Contract) to Annuitants regardless of how long
an Annuitant may live, and regardless of how long all Annuitants as a group may
live. These mortality undertakings are based on our determination of expected
mortality rates among all Annuitants. If actual experience among Annuitants
during the Annuity payment period deviates from our actuarial determination of
expected mortality rates among Annuitants because, as a group, their longevity
is longer than anticipated, we must provide amounts from our general funds to
fulfill our contractual obligations. We will bear the loss in such a situation.
During the accumulation phase, we also provide an expense undertaking. We assume
the risk that the Annual Maintenance Fee for maintaining the Contracts prior to
the Annuity Commencement Date may be insufficient to cover the actual cost of
providing such items.
ANNUAL MAINTENANCE FEE -- Each year, on each Contract Anniversary on or before
the Annuity Commencement Date, we will deduct an Annual Maintenance Fee, if
applicable, from Contract Values to reimburse us for expenses relating to the
maintenance of the Contract and Accounts. If during a Contract Year the Contract
is Surrendered for its full value, we will deduct the Annual Maintenance Fee at
the time of such Surrender. The fee is a flat fee that will be due in the full
amount regardless of the time of the Contract Year that Contract Values are
Surrendered. The Annual Maintenance Fee is $30 per Contract Year for Contracts
with less than $50,000 Contract Value on the Contract Anniversary. Fees will be
deducted on a pro rata basis according to the value in each Account under a
Contract.
WAIVERS OF THE ANNUAL MAINTENANCE FEE -- Annual Maintenance Fees are waived for
Contracts with Contract Value equal to or greater than $50,000. In addition, we
will waive one Annual Maintenance Fee for Contract Owners who own one or more
Contracts with a combined Contract Value of $50,000 up to
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 25
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$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 Annual Maintenance Fee
waivers to a total of six Contracts. We reserve the right to waive the Annual
Maintenance Fee under other conditions.
ADMINISTRATIVE CHARGE -- For administration, we apply a daily charge at the rate
of .15% per year against all Contract Values held in the Separate Account during
both the accumulation and annuity phases of the Contract. There is not
necessarily a relationship between the amount of administrative charge imposed
on a given Contract and the amount of expenses that may be attributable to that
Contract; expenses may be more or less than the charge.
You should refer to the Funds' Prospectuses for a description of deductions and
expenses paid out of the assets of the Trust's portfolios.
PREMIUM TAXES -- Charges are also deducted for Premium Tax, if applicable,
imposed by state or other governmental entity. Certain states impose a Premium
Tax, currently ranging up to 3.5%. Some states assess the tax at the time
purchase payments are made; others assess the tax at the time of annuitization.
We will pay Premium Taxes at the time imposed under applicable law. At our sole
discretion, we may deduct Premium Taxes at the time we pay such taxes to the
applicable taxing authorities, at the time the Contract is Surrendered, at the
time a death benefit is paid, or at the time the Contract annuitizes.
OPTIONAL DEATH BENEFIT FEE -- If you elect the Optional Death Benefit, we will
deduct daily from your Contract Value an additional charge which equals .15% per
year of the Sub-Account value.
EXCEPTIONS TO CHARGES UNDER THE CONTRACT -- We may offer, at our discretion,
reduced fees and charges including, but not limited to, CDSC, the mortality and
expense risk charge, administration charges, optional charges and the Annual
Maintenance Fee for certain sales (including employer sponsored savings plans)
under circumstances which may result in savings of certain costs and expenses.
Reductions in these fees and charges will not be unfairly discriminatory against
any Contract Owner.
DEATH BENEFITS
DEATH BEFORE THE ANNUITY COMMENCEMENT DATE
DETERMINATION OF THE BENEFICIARY -- If the Contract Owner or the Annuitant dies
before the Annuity Commencement Date, we will pay a Death Benefit to the
Beneficiary.
- IF THE CONTRACT OWNER DIES before the Annuity Commencement Date, any
surviving joint Contract Owner becomes the Beneficiary. If there is no
surviving joint Contract Owner, the designated Beneficiary will be the
Beneficiary. If the Contract Owner's spouse is a Beneficiary, the spouse may
elect, in lieu of receiving the Death Benefit, to be treated as the Contract
Owner. If the Annuitant is not living and there is no Contingent Annuitant,
the spouse will be presumed to be the Contingent Annuitant. If no
Beneficiary designation is in effect or if the Beneficiary has predeceased
the Contract Owner, the Contract Owner's estate will be the Beneficiary.
- IF THE ANNUITANT DIES before the Annuity Commencement Date, the Contingent
Annuitant will become the Annuitant. If either (a) there is no Contingent
Annuitant, (b) the Contingent Annuitant predeceases the Annuitant, or
(c) if any sole Contract Owner dies before the Annuity Commencement Date,
the Beneficiary, as determined under the Contract control provisions, will
receive the Death Benefit. However, if the Annuitant dies prior to the
Annuity Commencement Date and the Contract Owner is living, the Contract
Owner shall be the Beneficiary. In that case, the rights of any designated
Beneficiary shall be void.
DETERMINATION OF THE DEATH BENEFIT
IF YOU DID NOT ELECT THE OPTIONAL DEATH BENEFIT, Your Death Benefit, which we
will calculate as of the date we receive Due Proof of Death, will be calculated
as follows:
If the deceased HAD NOT REACHED THEIR 81ST BIRTHDAY, the Death Benefit is the
greater of:
- - 100% of the total premium payments made to the Contract, reduced by any
subsequent Surrenders, or
- - The Contract Value of your annuity, or
- - Your Maximum Anniversary Value, which is described below.
The Maximum Anniversary Value is based on a series of calculations on Contract
Anniversaries of Contract Values, premium payments and partial Surrenders. We
will calculate an Anniversary Value for each Contract Anniversary prior to the
deceased's 81st birthday or date of death. The Anniversary Value is equal to the
Contract Value as of a Contract Anniversary, increased by the dollar amount of
any premium payments made since that anniversary and reduced by the dollar
amount of any partial Surrenders since that anniversary. The Maximum Anniversary
Value is equal to the greatest Anniversary Value attained from this series of
calculations.
IF THE DECEASED REACHED THEIR 81ST BIRTHDAY, then the Death Benefit is the
greater of:
- - 100% of the total premium payments made to us, reduced by any subsequent
Surrenders, or
- - The Contract Value of your annuity, or
- - The Maximum Anniversary Value.
If you did elect the Optional Death Benefit, the Death Benefit, which we will
calculate as of the date we receive Due Proof of Death, will be the greater of:
- - 100% of the total premium payments made to us, reduced by any subsequent
Surrenders;
- - The Contract Value of your annuity;
<PAGE>
26 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- - The Maximum Anniversary Value; or
- - The Interest Accumulation Value, which is described below.
The Interest Accumulation Value is calculated by accumulating interest on your
premium payments at a rate of 5% per year up to the deceased's 81st birthday or
date of death, assuming you have not taken any Surrenders. If you have taken any
Surrenders, the 5% will be accumulated on your premium payments, but there will
be an adjustment for any of the Surrenders. This adjustment will reduce the
Optional Death Benefit proportionally for the Surrenders. We stop compounding
interest on the deceased's 81st birthday or date of death. After that date, the
Interest Accumulation Value will be adjusted by adding any subsequent payments
and subtracting proportional adjustments for any partial Surrenders. The
Optional Death Benefit is limited to a maximum of 200% of premium payments, less
proportional adjustments for any Surrenders. For examples on how the Optional
Death Benefit is calculated see "Appendix II". The Optional Death Benefit may
not be available if the Contract Owner or Annuitant is age 75 or older. For
Contracts issued in the states of Washington or New York, the Optional Death
Benefit is not available.
If you elect to add the Optional Death Benefit after you purchase your annuity,
the Interest Accumulation Value calculation will be:
- - Your Contract Value on the date we add the Optional Death Benefit to your
annuity;
- - Plus any Premium Payments made after the Optional Death Benefit is added;
- - Minus any partial Surrenders after the Optional Death Benefit is added;
- - Compounded daily at an annual interest rate of 5%.
SPOUSAL CONTRACT CONTINUATION -- If a Beneficiary is the Contract Owner's
spouse, that portion of the Contract for which the spouse is considered the
Beneficiary will continue with the spouse as Contract Owner, unless the spouse
elects to receive the Death Benefit as a lump sum payment or as an annuity
payment option. If the Contract continues with the spouse as Contract Owner, we
will adjust the Contract Value to the amount that we would have paid as the
Death Benefit payment, had the spouse elected to receive the Death Benefit.
Spousal Contract Continuation will only apply one time for each Contract.
CALCULATION OF THE DEATH BENEFIT -- If the Contract Owner or Annuitant dies
before the Annuity Commencement Date and a Death Benefit is payable to the
Beneficiary, the Death Benefit will be calculated as of the date we receive
written notification of Due Proof of Death. THE DEATH BENEFIT REMAINS INVESTED
IN THE SEPARATE ACCOUNT ACCORDING TO YOUR LAST INSTRUCTIONS UNTIL THE PROCEEDS
ARE PAID OR WE RECEIVE NEW SETTLEMENT INSTRUCTIONS FROM THE BENEFICIARY. DURING
THE TIME PERIOD BETWEEN OUR RECEIPT OF WRITTEN NOTIFICATION OF DUE PROOF OF
DEATH AND OUR RECEIPT OF THE COMPLETE SETTLEMENT INSTRUCTIONS, THE CALCULATED
DEATH BENEFIT WILL BE SUBJECT TO MARKET FLUCTUATIONS. UPON RECEIPT OF COMPLETE
SETTLEMENT INSTRUCTIONS, WE WILL CALCULATE THE PAYABLE AMOUNT.
Any Annuity payments made on or after the date of death, but before receipt of
written notification of Due Proof of Death will be recovered by us from the
Payee.
DEATH ON OR AFTER THE ANNUITY COMMENCEMENT DATE
If, on or after the Annuity Commencement Date, the Contract Owner dies and the
Annuitant is living, the Beneficiary becomes the Contract Owner. If the
Annuitant dies and the Contract Owner is living, the Contract Owner becomes the
Beneficiary.
If the Annuitant dies on or after the Annuity Commencement Date, a Death Benefit
may be paid or payments may continue under the following annuity payment
options:
- - Life Annuity with Cash Refund
- - Life Annuity with payments for a Period Certain
- - Joint and Last Survivor Life Annuity with payments for a Period Certain and
- - Payments for a Period Certain.
Proceeds from the Death Benefit may be left with us for no more than 5 years
from the date of the Contract Owner's death if the death occurs prior to the
Annuity Commencement Date. These proceeds will remain in the Account(s) to which
they were allocated at the time of death unless the Beneficiary elects to
reallocate them. Full or partial Surrenders may be made at any time. In the
event of a complete Surrender, the remaining value will equal the Contract Value
of the proceeds left with us, minus any partial Surrenders. This option may not
be available under certain Contracts issued in connection with Qualified Plans.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 27
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SETTLEMENT PROVISIONS
You select an Annuity Commencement Date which will not be deferred beyond the
Valuation Day immediately following the later of the Annuitant's 90th birthday
or the end of the tenth Contract Year. You may elect a later Annuity
Commencement Date if we allow and subject to the laws and regulations then in
effect. If the Contract is sold as part of a Charitable Remainder Trust, the
Annuity Commencement Date may be deferred to the Annuitant's 100th birthday. The
Annuity Commencement Date may be changed from time to time, but ANY CHANGE MUST
BE WITHIN 30 DAYS PRIOR TO THE DATE ON WHICH ANNUITY PAYMENTS ARE SCHEDULED TO
BEGIN. In New York, the Annuity Commencement Date cannot be deferred beyond the
Annuitant's 90th birthday.
You also elect in writing an annuity payment option, which may be any of the
options described below or any annuity payment option then being offered by us.
The annuity payment option may not be changed on or after the Annuity
Commencement Date. The Contract contains the six annuity payment options
described below and the Annuity Proceeds Settlement Option.
For Qualified Contracts, the following annuity payment options are only
available if the guaranteed payment period is less than the life expectancy of
the Annuitant at the time the option becomes effective. The Annuity Proceeds
Settlement option is available for Qualified Contracts only if the guaranteed
payment period is less than the life expectancy of the Beneficiary at the time
the option becomes effective. Such life expectancies are computed on the basis
of the mortality table prescribed by the IRS, or if none is prescribed, the
mortality table in use by us. If you do not elect otherwise, fixed dollar amount
annuity payments will begin automatically on the Annuity Commencement Date,
under the Life Annuity Payment Option.
For Non-Qualified Contracts, if you do not elect otherwise, fixed dollar amount
annuity payments will automatically begin on the Annuity Commencement Date under
the annuity payment option Life Annuity with payments for a Period Certain of 10
years. For Qualified Contracts and Contracts issued in Texas, if you do not
elect otherwise, fixed dollar amount annuity payments will begin automatically
on the Annuity Commencement Date, under the Life Annuity Payment Option.
No Surrenders are permitted after annuity payments begin unless you select the
Payments for a Period Certain Annuity Payment Option and the variable dollar
amount payment.
ANNUITY PAYMENT OPTIONS
LIFE ANNUITY
where we make Annuity payments for as long as the Annuitant lives.
- Payments under this option stop upon the death of the annuitant, even if the
Annuitant dies after one payment.
LIFE ANNUITY WITH CASH REFUND
where we make payments during the life of the Annuitant and when the Annuitant
dies, we pay the remaining value to the Beneficiary. The remaining value is
calculated at the time we receive Due Proof of Death by subtracting the annuity
payments already made from the Contract Value less any applicable Premium Taxes
applied to this annuity payment option.
- This option is only available if you select payments using a variable dollar
amount payment option with the 5% AIR or fixed dollar amount annuity
payments.
LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN
where we make payments to you for the life of the Annuitant but you are at least
guaranteed payments for a time period you select which is a minimum of 5 years
and a maximum of 100 years minus your Annuitant's age.
- If the Annuitant dies prior to the end of the period selected, we will pay
your Beneficiary the present value of the remaining payments, either in a
lump sum payment or we will continue payments until the end of the period
selected.
JOINT AND LAST SURVIVOR ANNUITY
where we make payments during the lifetimes of the Annuitant and another
designated individual called the Joint Annuitant. At the time of electing this
Annuity Option, the Contract Owner may elect reduced payments over the remaining
lifetime of the survivor.
- Payments under this option stop upon the death of the Annuitant and Joint
Annuitant, even if the Annuitant and Joint Annuitant die after one payment.
JOINT AND LAST SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN
where we make payments during the lifetime of the Annuitant and a Joint
Annuitant, and we guarantee those payments for a time period you select which is
not less than 5 years and no more than 100 years minus the younger Annuitant's
age. At the time of electing this Annuity Option, the Contract Owner may elect
reduced payments over the remaining lifetime of the survivor.
- If the Annuitant and Joint Annuitant die prior to the end of the period
selected, we will pay your Beneficiary the present value of the remaining
payments, either in a lump sum payment or We will continue payments until
the end of the period selected.
PAYMENTS FOR A PERIOD CERTAIN
where we agree to make payments for a specified time. The minimum period that
you can select is 10 years during the first two Contract years and 5 years after
the second Contract Anniversary. The maximum period that you can select is 100
years minus your Annuitant's age.
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28 HARTFORD LIFE INSURANCE COMPANY
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- If you select this option under a variable dollar amount payment, YOU MAY
SURRENDER YOUR ANNUITY after annuity payments have started and we will give
you the present value of the remaining payments less any applicable
Contingent Deferred Sales Charge.
- If the Annuitant dies prior to the end of the period selected, we will pay
your Beneficiary the present value of the remaining payments, either in a
lump sum payment or we will continue payments until the end of the period
selected.
- For Contracts issued in the state of Oregon, Payments for a Period Certain
may be selected as follows: For fixed annuity payments, the minimum period
that you can select is 10 years at any time and 5 years on or after the 2nd
Contract Anniversary. For variable annuity payments, the minimum period that
you can select is 5 years on or after the 10th Contract Anniversary. Under
an Annuity payable with variable annuity payments, you may surrender the
Contract after payments have begun by submitting a written request to us.
The amount available to you is the Commuted Value.
WE MAY OFFER OTHER ANNUITY PAYMENT OPTIONS FROM TIME TO TIME.
ANNUITY PAYMENTS
When you decide to begin to take payments, we calculate your Contract Value
minus any Premium Tax which we must pay and, unless you instruct us otherwise,
we apply that amount to a variable annuity with the same Sub-Account values. You
may however, choose to have your Contract Value applied to a fixed annuity
instead.
IMPORTANT: YOU SHOULD CONSIDER THE QUESTION OF ALLOCATION OF CONTRACT VALUES
(LESS APPLICABLE PREMIUM TAXES) AMONG ACCOUNTS TO MAKE CERTAIN THAT ANNUITY
PAYMENTS ARE BASED ON THE INVESTMENT ALTERNATIVE BEST SUITED TO YOUR NEEDS FOR
RETIREMENT.
ANNUITY PAYMENTS -- The minimum Annuity payment is $50. No election may be made
which results in a first payment of less than $50. If at any time Annuity
payments are or become less than $50, we have the right to change the frequency
of payment to intervals so that payments will at least be $50. For Contracts
issued in the State of New York, the minimum monthly Annuity payment is $20. If
any amount due is less than the minimum amount per year, we make such other
settlement as may be equitable to the Payee.
All Annuity payments under any option will occur the same day of the month as
the Annuity Commencement Date, based on the payment frequency selected by you.
Available payment frequencies include monthly, quarterly, semi-annual and
annual. The payment frequency may be changed within 30 days prior to the
anniversary of your Annuity Commencement Date.
ANNUITY COMMENCEMENT DATE -- You select the Annuity Commencement Date in your
application or order request. The Annuity Calculation Date will be no more than
five Valuation Days before the Annuity Commencement Date.
ANNUITY CALCULATION DATE -- On the Annuity Calculation Date, your Contract Value
less any applicable Premium Tax is applied to purchase Annuity Units of the
Sub-Accounts selected by you. The first Annuity payment is computed using the
value of these Annuity Units as of the Annuity Calculation Date.
INCOME PAYMENT DATES -- All Annuity payments after the first Annuity payment are
computed and payable as of the Income Payment Dates. These dates are the same
day of the month as the Annuity Commencement Date, based on the Annuity payment
frequency selected by you. They are also shown on the specification page of your
Contract. You may choose from monthly, quarterly, semi-annual and annual
payments. The Annuity payment frequency may not be changed once selected by you.
IN THE EVENT THAT YOU DO NOT SELECT A PAYMENT FREQUENCY, ANNUITY PAYMENTS WILL
BE MADE MONTHLY.
VARIABLE ANNUITY PAYMENTS
THE FIRST VARIABLE ANNUITY PAYMENT -- Variable Annuity payments are periodic
payments we pay to your designated Payee, the amount of which varies from one
Income Payment Date to the next as a function of the net investment performance
of the Sub-Accounts selected by you. The dollar amount of the first Variable
Annuity payment depends on the annuity payment option chosen, the age of the
Annuitant, the gender of the Annuitant (if applicable), the amount of Contract
Value less applicable Premium Tax applied to purchase the Annuity payments, and
the applicable annuity purchase rates based on the 1983a Individual Annuity
Mortality table using projection scale G projected to the year 2000 and an AIR
of not less than 3.0%.
The dollar amount of the first Variable Annuity payment attributable to each
Sub-Account is determined by dividing the dollar amount of the Contract Value
less applicable Premium Tax applied to that Sub-Account on the Annuity
Calculation Date by $1,000 and multiplying the result by the payment factor in
the Contract for the selected annuity payment option. The dollar value of the
first Variable Annuity payment is the sum of the first Variable Annuity payments
attributable to each Sub-Account.
ANNUITY UNITS -- The number of Annuity Units attributable to a Sub-Account is
derived by dividing the first Variable Annuity payment attributable to that
Sub-Account by the Annuity Unit value for that Sub-Account for the Valuation
Period ending on the Annuity Calculation Date or during which the Annuity
Calculation Date falls if the Valuation Period does not end on such date. The
number of Annuity Units attributable to each Sub-Account under a Contract
remains fixed unless there is a transfer of Annuity Units between Sub-Accounts.
SUBSEQUENT VARIABLE ANNUITY PAYMENTS -- The dollar amount of each subsequent
Variable Annuity payment attributable to each Sub-Account is calculated on the
Income Payment Date. It is determined by multiplying (a) by (b), where:
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HARTFORD LIFE INSURANCE COMPANY 29
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(a) is the number of Annuity Units of each Sub-Account credited under the
Contract and
(b) is the Annuity Unit value (described below) for that Sub-Account.
The total subsequent Variable Annuity payments equal the sum of the amounts
attributable to each Sub-Account.
When an Income Payment Date falls on a day that is not a Valuation Day, the
Income Payment is computed as of the prior Valuation Day. If the date of the
month elected does not occur in a given month, i.e., the 29th, 30th, or 31st of
a month, the payment will be computed as of the last Valuation Day of the month.
When an Income Payment Date falls on a day that is not a Valuation Day, the
Income Payment is computed as of the prior Valuation Day. If the date of the
month elected does not occur in a given month, i.e., the 29th, 30th, or 31st of
a month, the payment will be computed as of the last Valuation Day of the month.
The Annuity Unit value of each Sub-Account for any Valuation Period is equal to
(a) multiplied by (b) multiplied by (c) where:
(a) is the Net Investment Factor for the Valuation Period for which the Annuity
Unit value is being calculated;
(b) is the Annuity Unit value for the preceding Valuation Period; and
(c) is the Annuity Unit Factor
The Annuity Unit Factor neutralizes the AIR percentage (3%, 5%, or 6%). The
daily Annuity Unit Factor corresponding to the AIR percentages of 3%, 5%, and 6%
are 0.999919, 0.999866, and 0.999840, respectively.
THE ASSUMED INVESTMENT RETURN (AIR) -- The Annuity Unit value will increase or
decrease from one Income Payment Date to the next in direct proportion to the
net investment return of the Sub-Account(s) supporting the Variable Annuity
payments, less an adjustment to neutralize the selected AIR. Dividing what would
otherwise be the Annuity Unit value by the AIR factor is necessary in order to
adjust the change in the Annuity Unit value (resulting from the Net Investment
Factor) so that the Annuity Unit value only changes to the extent that the Net
Investment Factor represents a rate of return greater than or less than the AIR
selected by you. Without this adjustment, the Net Investment Factor would
decrease the Annuity Unit value to the extent that such value represented an
annualized rate of return of less than 0.0% and increase the Annuity Unit value
to the extent that such value represented an annualized rate of return of
greater than 0.0%.
The Contract permits Contract Owners to select one of three AIRs: 3%, 5% or 6%.
A higher AIR will result in a higher initial payment, a more slowly rising
series of subsequent payments when actual investment performance (minus any
deductions and expenses) exceeds the AIR, and a more rapid drop in subsequent
payments when actual investment performance (minus any deductions and expenses)
is less than the AIR. The 6% AIR is not available in the states of Oklahoma,
Oregon, New Jersey, New York or Texas. The following examples may help clarify
the impact of selecting one AIR over another:
- - If you select a 3% AIR and if the net investment return of the Sub-Account for
an Annuity payment period is equal to the pro-rated portion of the 3% AIR, the
Variable Annuity payment attributable to that Sub-Account for that period will
equal the Annuity payment for the prior period. To the extent that such net
investment return EXCEEDS an annualized rate of return of 3% for a payment
period, the Annuity payment for that period will be greater than the Annuity
payment for the prior period and to the extent that such return for a period
falls short of an annualized rate of 3%, the Annuity payment for that period
will be less than the Annuity payment for the prior period.
- - If you select a 5% AIR and if the net investment return of the Sub-Account for
an Annuity payment period is equal to the pro-rated portion of the 5% AIR, the
Variable Annuity payment attributable to that Sub-Account for that period will
equal the Annuity payment for the prior period. To the extent that such net
investment return exceeds an annualized rate of return of 5% for a payment
period, the Annuity payment for that period will be greater than the Annuity
payment for the prior period and to the extent that such return for a period
falls short of an annualized rate of 5%, the Annuity payment for that period
will be less than the Annuity payment for the prior period.
- - If you select a 6% AIR and if the net investment return of the Sub-Account for
an Annuity payment period is equal to the pro-rated portion of the 6% AIR, the
Variable Annuity payment attributable to that Sub-Account for that period will
equal the Annuity payment for the prior period. To the extent that such net
investment return exceeds an annualized rate of return of 6% for a payment
period, the Annuity payment for that period will be greater than the Annuity
payment for the prior period and to the extent that such return for a period
falls short of an annualized rate of 6%, the Annuity payment for that period
will be less than the Annuity payment for the prior period.
LEVEL VARIABLE ANNUITY PAYMENTS WOULD BE PRODUCED IF THE INVESTMENT RATE RETURNS
REMAINED CONSTANT AND EQUAL TO THE AIR. IN FACT, PAYMENTS WILL VARY UP OR DOWN
AS THE INVESTMENT RATE VARIES UP OR DOWN FROM THE AIR.
EXCHANGE (TRANSFER) OF ANNUITY UNITS -- After the Annuity Calculation Date, you
may exchange (i.e., transfer) the dollar value of a designated number of Annuity
Units of a particular Sub-Account for an equivalent dollar amount of Annuity
Units of another Sub-Account. On the date of the transfer, the dollar amount of
a Variable Annuity payment generated from the Annuity Units of either
Sub-Account would be the same. Transfers are executed as of the day Hartford
receives a written request for a
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30 HARTFORD LIFE INSURANCE COMPANY
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transfer. For guidelines refer to Sub-Account Value Transfers Before and After
the Annuity Commencement Date.
FIXED DOLLAR ANNUITY -- Fixed Annuity payments are determined at annuitization
by multiplying the Contract Value (less applicable Premium Taxes) by a rate to
be determined by Hartford which is no less than the rate specified in the Fixed
Annuity option tables in the Contract. The Annuity payment will remain level for
the duration of the Annuity. Any Fixed Annuity allocation may not be changed.
OTHER INFORMATION
ASSIGNMENT -- Ownership of this Contract is generally assignable. However, if
the Contracts are issued pursuant to some form of Qualified Plan, it is possible
that the ownership of the Contracts may not be transferred or assigned depending
on the type of tax-qualified retirement plan involved. An assignment of a
Non-Qualified Contract may subject the Contract Values or assignment proceeds to
income taxes and certain penalty taxes.
CONTRACT MODIFICATION -- The Annuitant may not be changed; however, 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.
FEDERAL TAX CONSIDERATIONS
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What are some of the federal tax consequences which affect these Contracts?
A. GENERAL
Since federal tax law is complex, the tax consequences of purchasing this
contract will vary depending on your situation. You may need tax or legal advice
to help you determine whether purchasing this contract is right for you.
Our general discussion of the tax treatment of this contract is based on our
understanding of federal income tax laws as they are currently interpreted. A
detailed description of all federal income tax consequences regarding the
purchase of this contract cannot be made in the prospectus. We also do not
discuss state, municipal or other tax laws that may apply to this contract. For
detailed information, you should consult with a qualified tax adviser familiar
with your situation.
B. TAXATION OF HARTFORD AND THE SEPARATE ACCOUNT
The Separate Account is taxed as part of Hartford which is taxed as a life
insurance company in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, the Separate Account will not be taxed as a
"regulated investment company" under subchapter M of Chapter 1 of the Code.
Investment income and any realized capital gains on the assets of the Separate
Account are reinvested and are taken into account in determining the value of
the Accumulation and Annuity Units (See "Value of Accumulation Units"). As a
result, such investment income and realized capital gains are automatically
applied to increase reserves under the Contract.
No taxes are due on interest, dividends and short-term or long-term capital
gains earned by the Separate Account with respect to Qualified or Non-Qualified
Contracts.
C. TAXATION OF ANNUITIES -- GENERAL PROVISIONS AFFECTING PURCHASERS OTHER THAN
QUALIFIED RETIREMENT PLANS
Section 72 of the Code governs the taxation of annuities in general.
1. NON-NATURAL PERSONS, CORPORATIONS, ETC.
Code Section 72 contains provisions for contract owners which are not natural
persons. Non-natural persons include corporations, trusts, limited liability
companies, partnerships and other types of legal entities. The tax rules for
contracts owned by non-natural persons are different from the rules for
contracts owned by individuals. For example, the annual net increase in the
value of the contract is currently includible in the gross income of a
non-natural person, unless the non-natural person holds the contract as an agent
for a natural person. There are additional exceptions from current inclusion
for:
- - certain annuities held by structured settlement companies,
- - certain annuities held by an employer with respect to a terminated qualified
retirement plan and
- - certain immediate annuities.
A non-natural person which is a tax-exempt entity for federal tax purposes will
not be subject to income tax as a result of this provision.
If the contract owner is a non-natural person, the primary annuitant is treated
as the contract owner in applying mandatory distribution rules. These rules
require that certain distributions be made upon the death of the contract owner.
A change in the primary annuitant is also treated as the death of the contract
owner.
2. OTHER CONTRACT OWNERS (NATURAL PERSONS).
A Contract Owner is not taxed on increases in the value of the Contract until an
amount is received or deemed received, e.g., in the form of a lump sum payment
(full or partial value of a Contract) or as Annuity payments under the
settlement option elected.
The provisions of Section 72 of the Code concerning distributions are summarized
briefly below. Also summarized are special rules affecting distributions from
Contracts obtained in a tax-free exchange for other annuity contracts or life
insurance contracts which were purchased prior to August 14, 1982.
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HARTFORD LIFE INSURANCE COMPANY 31
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a. DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
i. Total premium payments less amounts received which were not includable in
gross income equal the "investment in the contract" under Section 72 of the
Code.
ii. To the extent that the value of the Contract (ignoring any surrender
charges except on a full surrender) exceeds the "investment in the
contract," such excess constitutes the "income on the contract."
iii. Any amount received or deemed received prior to the Annuity Commencement
Date (e.g., upon a partial surrender) is deemed to come first from any
such "income on the contract" and then from "investment in the contract,"
and for these purposes such "income on the contract" shall be computed by
reference to any aggregation rule in subparagraph 2.c. below. As a result,
any such amount received or deemed received (1) shall be includable in
gross income to the extent that such amount does not exceed any such
"income on the contract," and (2) shall not be includable in gross income
to the extent that such amount does exceed any such "income on the
contract." If at the time that any amount is received or deemed received
there is no "income on the contract" (e.g., because the gross value of the
Contract does not exceed the "investment in the contract" and no
aggregation rule applies), then such amount received or deemed received
will not be includable in gross income, and will simply reduce the
"investment in the contract."
iv. The receipt of any amount as a loan under the Contract or the assignment or
pledge of any portion of the value of the Contract shall be treated as an
amount received for purposes of this subparagraph a. and the next
subparagraph b.
v. In general, the transfer of the Contract, without full and adequate
consideration, will be treated as an amount received for purposes of this
subparagraph a. and the next subparagraph b. This transfer rule does not
apply, however, to certain transfers of property between spouses or incident
to divorce.
b. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE.
Annuity payments made periodically after the Annuity Commencement Date are
includable in gross income to the extent the payments exceed the amount
determined by the application of the ratio of the "investment in the contract"
to the total amount of the payments to be made after the Annuity Commencement
Date (the "exclusion ratio").
i. When the total of amounts excluded from income by application of the
exclusion ratio is equal to the investment in the contract as of the
Annuity Commencement Date, any additional payments (including surrenders)
will be entirely includable in gross income.
ii. If the annuity payments cease by reason of the death of the Annuitant and,
as of the date of death, the amount of annuity payments excluded from gross
income by the exclusion ratio does not exceed the investment in the
contract as of the Annuity Commencement Date, then the remaining portion of
unrecovered investment shall be allowed as a deduction for the last taxable
year of the Annuitant.
iii. Generally, nonperiodic amounts received or deemed received after the
Annuity Commencement Date are not entitled to any exclusion ratio and
shall be fully includable in gross income. However, upon a full surrender
after such date, only the excess of the amount received (after any
surrender charge) over the remaining "investment in the contract" shall be
includable in gross income (except to the extent that the aggregation
rule referred to in the next subparagraph c. may apply).
c. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS.
Contracts issued after October 21, 1988 by the same insurer (or affiliated
insurer) to the same Contract Owner within the same calendar year (other than
certain contracts held in connection with a tax-qualified retirement
arrangement) will be treated as one annuity Contract for the purpose of
determining the taxation of distributions prior to the Annuity Commencement
Date. An annuity contract received in a tax-free exchange for another annuity
contract or life insurance contract may be treated as a new Contract for this
purpose. Hartford believes that for any annuity subject to such aggregation, the
values under the Contracts and the investment in the contracts will be added
together to determine the taxation under subparagraph 2.a., above, of amounts
received or deemed received prior to the Annuity Commencement Date. Withdrawals
will first be treated as withdrawals of income until all of the income from all
such Contracts is withdrawn. As of the date of this Prospectus, there are no
regulations interpreting this provision.
d. 10% PENALTY TAX -- APPLICABLE TO CERTAIN WITHDRAWALS AND ANNUITY
PAYMENTS.
i. If any amount is received or deemed received on the Contract (before or
after the Annuity Commencement Date), the Code applies a penalty tax equal
to ten percent of the portion of the amount includable in gross income,
unless an exception applies.
ii. The 10% penalty tax will not apply to the following distributions
(exceptions vary based upon the precise plan involved):
1. Distributions made on or after the date the recipient has attained the
age of 59 1/2.
2. Distributions made on or after the death of the holder or where the
holder is not an individual, the death of the primary annuitant.
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
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32 HARTFORD LIFE INSURANCE COMPANY
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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.
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
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HARTFORD LIFE INSURANCE COMPANY 33
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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 requested.
E. GENERAL PROVISIONS AFFECTING QUALIFIED RETIREMENT PLANS
The Contract may be used for a number of qualified retirement plans. If the
Contract is being purchased with respect to some form of qualified retirement
plan, please refer to Appendix I for information relative to the types of plans
for which it may be used and the general explanation of the tax features of such
plans.
F. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal income
tax consequences to annuity purchasers that are U.S. citizens or residents.
Purchasers that are not U.S. citizens or residents will generally be subject to
U.S. federal income tax and withholding on annuity distributions at a 30% rate,
unless a lower treaty rate applies. In addition, purchasers may be subject to
state premium tax, other state and/or municipal taxes, and taxes that may be
imposed by the purchaser's country of citizenship or residence. Prospective
purchasers are advised to consult with a qualified tax adviser regarding U.S.,
state, and foreign taxation with respect to an annuity purchase.
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.
MISCELLANEOUS
- --------------------------------------------------------------------------------
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 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.
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
<PAGE>
34 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
or contract owners. This compensation is usually paid from the sales charges
described in this Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not effect the amounts paid by the policyholders or contract
owners to purchase, hold or Surrender variable insurance products.
The Contract may be sold directly to certain individuals under certain
circumstances that do not involve payment of any sales compensation to a
registered representative. In such case, Hartford will credit the Contract with
an additional 5.0% of the Premium Payment. This additional percentage of Premium
Payment in no way affects present or future charges, rights, benefits or current
values of other Contract Owners. The following class of individuals are eligible
for this feature: (1) current or retired officers, directors, trustees and
employees (and their families) of the ultimate parent and affiliates of
Hartford; and (2) employees and registered representatives (and their families)
of registered broker-dealers (or their financial institutions) that have a sales
agreement with Hartford and its principal underwriter to sell the Contracts.
LEGAL MATTERS
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.
EXPERTS
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: 1-800-862-6668 (Contract Owners)
1-800-862-7155 (Registered Representatives)
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 35
- --------------------------------------------------------------------------------
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
SECTION
<S> <C>
------------------------------------------------------------------------------
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY
------------------------------------------------------------------------------
SAFEKEEPING OF ASSETS
------------------------------------------------------------------------------
INDEPENDENT PUBLIC ACCOUNTANTS
------------------------------------------------------------------------------
DISTRIBUTION OF CONTRACTS
------------------------------------------------------------------------------
CALCULATION OF YIELD AND RETURN
------------------------------------------------------------------------------
PERFORMANCE COMPARISONS
------------------------------------------------------------------------------
FINANCIAL STATEMENTS
------------------------------------------------------------------------------
</TABLE>
<PAGE>
36 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
APPENDIX I -- INFORMATION REGARDING TAX-QUALIFIED RETIREMENT PLANS
This summary does not attempt to provide more than general information about the
federal income tax rules associated with use of a Contract by a tax-qualified
retirement plan. Because of the complexity of the federal tax rules, owners,
participants and beneficiaries are encouraged to consult their own tax advisors
as to specific tax consequences.
The federal tax rules applicable to owners of Contracts under tax-qualified
retirement plans vary according to the type of plan as well as the terms and
conditions of the plan itself. Contract owners, plan participants and
beneficiaries are cautioned that the rights and benefits of any person may be
controlled by the terms and conditions of the tax-qualified retirement plan
itself, regardless of the terms and conditions of a Contract. We are not bound
by the terms and conditions of such plans to the extent such terms conflict with
a Contract, unless we specifically consent to be bound.
Some tax-qualified retirement plans are subject to distribution and other
requirements that are not incorporated into our administrative procedures.
Contract owners, participants and beneficiaries are responsible for determining
that contributions, distributions and other transactions comply with applicable
law. Tax penalties may apply to transactions with respect to tax-qualified
retirement plans if applicable federal income tax rules and restrictions are not
carefully observed.
We do not currently offer the Contracts in connection with all of the types of
tax-qualified retirement plans discussed below and may not offer the Contracts
for all types of tax-qualified retirement plans in the future.
1. TAX-QUALIFIED PENSION OR PROFIT-SHARING PLANS -- Eligible employers can
establish certain tax-qualified pension and profit-sharing plans under section
401 of the Code. Rules under section 401(k) of the Code govern certain "cash or
deferred arrangements" under such plans. Rules under section 408(k) govern
"simplified employee pensions". Tax-qualified pension and profit-sharing plans
are subject to limitations on the amount that may be contributed, the persons
who may be eligible to participate and the time when distributions must
commence. Employers intending to use the Contracts in connection with
tax-qualified pension or profit-sharing plans should seek competent tax and
other legal advice.
2. TAX SHELTERED ANNUITIES UNDER SECTION 403(b) -- Public schools and certain
types of charitable, educational and scientific organizations, as specified in
section 501(c)(3) of the Code, can purchase tax-sheltered annuity contracts for
their employees. Tax-deferred contributions can be made to tax-sheltered annuity
contracts under section 403(b) of the Code, subject to certain limitations.
Generally, such contributions may not exceed the lesser of $10,500 (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 2000, $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 of a
governmental employer 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. The requirement of a trust does
not apply to amounts under a Deferred Compensation Plan of a tax-exempt
(non-governmental) employer. In addition, the requirement of a trust does not
apply to amounts under a Deferred Compensation Plan of a governmental employer
if the Deferred Compensation Plan is not an eligible plan within the meaning of
section 457(b) of the Code. In the absence of such a trust,
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 37
- --------------------------------------------------------------------------------
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 distribution 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 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 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.
<PAGE>
38 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
The Required Beginning Date for an individual who is a five (5) percent owner
(as defined in the Code), or who is the owner of an IRA, is April 1 of the
calendar year following the calendar year in which the individual attains age
70 1/2.
The entire interest of the Participant must be distributed beginning no later
than the Required Beginning Date over:
- - the life of the Participant or the lives of the Participant and the
Participant's designated beneficiary, or
- - over a period not extending beyond the life expectancy of the Participant or
the joint life expectancy of the Participant and the Participant's designated
beneficiary.
Each annual distribution must equal or exceed a "minimum distribution amount"
which is determined by dividing the account balance by the applicable life
expectancy. This account balance is generally based upon the account value as of
the close of business on the last day of the previous calendar year. In
addition, minimum distribution incidental benefit rules may require a larger
annual distribution.
If an individual dies before reaching his or her Required Beginning Date, the
individual's entire interest must generally be distributed within five years of
the individual's death. However, this rule will be deemed satisfied, if
distributions begin before the close of the calendar year following the
individual's death to a designated beneficiary and distribution is over the life
of such designated beneficiary (or over a period not extending beyond the life
expectancy of the beneficiary). If the beneficiary is the individual's surviving
spouse, distributions may be delayed until the individual would have attained
age 70 1/2.
If an individual dies after reaching his or her Required Beginning Date or after
distributions have commenced, the individual's interest must generally be
distributed at least as rapidly as under the method of distribution in effect at
the time of the individual's death.
(c) WITHHOLDING In general, regular wage withholding rules apply to
distributions from IRAs and plans described in section 457 of the Code.
Periodic distributions from other tax-qualified retirement plans that are
made for a specified period of 10 or more years or for the life or life
expectancy of the participant (or the joint lives or life expectancies of
the participant and beneficiary) are generally subject to federal income tax
withholding as if the recipient were married claiming three exemptions. The
recipient of periodic distributions may generally elect not to have
withholding apply or to have income taxes withheld at a different rate by
providing a completed election form.
Mandatory federal income tax withholding at a flat rate of 20% will generally
apply to other distributions from such other tax-qualified retirement plans
unless such distributions are:
- - the non-taxable portion of the distribution;
- - required minimum distributions; or
- - direct transfer distributions.
Direct transfer distributions are direct payments to an IRA or to another
eligible retirement plan under Code section 401(a)(31).
Certain states require withholding of state taxes when federal income tax is
withheld.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 39
- --------------------------------------------------------------------------------
APPENDIX II -- OPTIONAL DEATH BENEFIT -- EXAMPLES
EXAMPLE 1
Assume that you make a Premium Payment of $100,000. On the first Contract
Anniversary assume your Contract Value is $108,000.00. The Interest Accumulation
Value is $105,000 or 5% accumulation on the $100,000 Premium Payment.
<TABLE>
<C> <S>
$100,000 Premium Payment
$ 5,000 Interest of 5%
- --------
$105,000 Interest Accumulation Value
</TABLE>
If you request a partial Surrender of $10,000 the next day, your Interest
Accumulation Value will change. The adjustment for the partial Surrender is
determined by dividing the partial Surrender amount by the Contract Value prior
to the Surrender and multiplying that amount by the Interest Accumulation Value
prior to the Surrender. To determine the new Interest Accumulation Value, that
total is then subtracted from the Interest Accumulation Value prior to the
Surrender.
<TABLE>
<C> <S>
$ 10,000 partial Surrender divided by
$108,000 Contract Value prior to Surrender equals
.09259 multiplied by
$105,000 Interest Accumulation Value for a total of
$ 9,722 to be deducted from the Interest Accumulation Value equals
$ 95,278 the new Interest Accumulation Value
</TABLE>
EXAMPLE 2
Assume that you make a Premium Payment of $100,000. On the first Contract
Anniversary assume your Contract Value is $92,000.00. The Interest Accumulation
Value is $105,000 or 5% accumulation on the $100,000 Premium Payment.
<TABLE>
<C> <S>
$100,000 Premium Payment
$ 5,000 Interest of 5%
- --------
$105,000 Interest Accumulation Value
</TABLE>
If you request a partial Surrender of $10,000 the next day, your Interest
Accumulation Value will change. The adjustment for the partial Surrender is
determined by dividing the partial Surrender amount by the Contract Value prior
to the Surrender and multiplying that amount by the Interest Accumulation Value
prior to the Surrender. To determine the new Interest Accumulation Value, that
total is then subtracted from the Interest Accumulation Value prior to the
Surrender.
<TABLE>
<C> <S>
$ 10,000 partial Surrender divided by
$ 92,000 Contract Value prior to Surrender equals
.10870 multiplied by
$105,000 Interest Accumulation Value for a total of
$ 11,413 to be deducted from the Interest Accumulation Value equals
$ 93,587 the New Interest Accumulation Value
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
This form must be completed for all tax sheltered annuities.
SECTION 403(b)(11) ACKNOWLEDGMENT FORM
The variable annuity Contract which 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:
- - attained age 59 1/2,
- - separated from service,
- - died, or
- - 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, Connecticut 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, Connecticut 06102-5085
Please send a Statement of Additional Information for Hartford Leaders variable
annuity 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 SEVEN
HARTFORD LEADERS
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,
Connecticut 06102-5085.
Date of Prospectus: May 1, 2000.
Date of Statement of Additional Information: May 1, 2000.
333-69475
<PAGE>
-2-
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 COMPARISONS............................................... 10
FINANCIAL STATEMENTS .................................................
<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
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 an affiliate of Hartford.
<PAGE>
-4-
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.
The securities will be sold by salespersons 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 and retained by HSD in its role as Principal Underwriter has been: 1999:
$4,008,039.48; 1998: $0 and 1997: $0. HSD has retained none of these
commissions.
CALCULATION OF YIELD AND RETURN
YIELD OF A MONEY MARKET SUB-ACCOUNT. As summarized in the prospectus under the
heading "Performance Related Information," 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,
<PAGE>
-5-
subtracting a hypothetical charge reflecting deductions from Contract Owner
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
multiplying the base period return by 365/7 with the resulting yield figure
carried to the nearest hundredth of one percent. Net changes in value of a
hypothetical account will include net investment income of the account (accrued
daily dividends as declared by the underlying funds, less daily expense charges
of the account) for the period, but will not include realized gains or losses or
unrealized appreciation or depreciation on the underlying fund shares.
The effective yield is calculated by compounding the base period return by
adding 1, raising the sum to a power equal to 365/7 and subtracting 1 from the
result, according to the following formula:
365/7
Effective Yield = [(Base Period Return + 1) ] - 1
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
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SUB-ACCOUNT YIELD EFFECTIVE YIELD
- -------------------------------------------------------------------------------
<S> <C> <C>
Hartford Money Market HLS 3.94% 4.02%
Fund
- -------------------------------------------------------------------------------
</TABLE>
YIELD OF SUB-ACCOUNTS. As summarized in the prospectus under the heading
"Performance Related Information," 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.
<PAGE>
-6-
Yield calculations of the Sub-Accounts used for illustration purposes reflect
the interest earned by the Sub-Accounts, less applicable asset charges assessed
against a Contract Owner's account over the base period. Yield quotations based
on a 30 day period 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
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SUB-ACCOUNT YIELD
- -------------------------------------------------------------------------------
<S> <C>
American Funds Bond Fund N/A
- -------------------------------------------------------------------------------
MFS High Income Series N/A
- -------------------------------------------------------------------------------
</TABLE>
At any time in the future, yields and total return may be higher or lower than
past yields and there can be no assurance that any historical results will
continue.
The method of calculating yields described above for these Sub-Accounts differs
from the method used by the Sub-Accounts prior to May 1, 1988. 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. As summarized in the prospectus under the heading
"Performance Related Information," total return is a measure of the change in
value of an investment in a Sub-Account over the period covered and assumes that
the Optional Death Benefit has not been 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
<PAGE>
-7-
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.
The following are the standardized average annual total return quotations for
the Sub-Accounts.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR YEAR ENDED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
SEPARATE SINCE INCEPTION OF
SUB-ACCOUNT ACCOUNT 1 YEAR 5 YEAR 10 YEAR SEPARATE ACCOUNT
INCEPTION DATE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
American Funds Asset 08/01/1989 -4.57% 12.38% 7.94% N/A
Allocation Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds Bond 01/02/1996 -8.87% N/A N/A -0.10%
Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds Global 04/30/1997 57.31% N/A N/A 31.80%
Growth Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds Global 04/30/1998 78.71% N/A N/A 41.03%
Small Capitalization Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds Growth 12/08/1986 45.09% 28.63% 17.15% N/A
Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds Growth- 12/08/1986 -0.35% 16.76% 10.43% N/A
Income Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds 05/01/1990 63.53% 20.27% N/A 12.24%
International Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds New 06/17/1999 N/A N/A N/A 7.46%
World Fund
- -------------------------------------------------------------------------------------------------------------------
Franklin Real Estate Fund 01/24/1989 -17.66% 3.46% 5.18% N/A
- -------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund 11/01/1995 83.63% N/A N/A 25.05%
- -------------------------------------------------------------------------------------------------------------------
Franklin Strategic Income 07/01/1999 N/A N/A N/A -8.11%
Securities Fund (FORMERLY
FRANKLIN STRATEGIC INCOME
FUND)
- -------------------------------------------------------------------------------------------------------------------
Hartford Money Market 12/08/1986 -6.56% 0.09% 0.76% N/A
HLS Fund
- -------------------------------------------------------------------------------------------------------------------
MFS Capital Opportunities 08/14/1996 35.39% N/A N/A 26.78%
Series
- -------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth 07/24/1995 64.26% N/A N/A 31.68%
Series
- -------------------------------------------------------------------------------------------------------------------
MFS Global Equity Series 05/03/1999 N/A N/A N/A 12.69%
- -------------------------------------------------------------------------------------------------------------------
<PAGE>
-8-
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
SEPARATE SINCE INCEPTION OF
SUB-ACCOUNT ACCOUNT 1 YEAR 5 YEAR 10 YEAR SEPARATE ACCOUNT
INCEPTION DATE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MFS Growth Series 05/03/1999 N/A N/A N/A 28.71%
- -------------------------------------------------------------------------------------------------------------------
MFS Growth with Income 10/09/1995 -4.80% N/A N/A 16.68%
Series
- -------------------------------------------------------------------------------------------------------------------
MFS High Income Series 07/26/1995 -5.04% N/A N/A 2.92%
- -------------------------------------------------------------------------------------------------------------------
MFS New Discovery 05/01/1998 61.00% N/A N/A 32.14%
Series
- -------------------------------------------------------------------------------------------------------------------
MFS Total Return Series 01/03/1995 -8.38% N/A N/A 11.04%
- -------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities 11/01/1996 2.01% N/A N/A 5.25%
Fund
- -------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy 08/24/1988 11.93% 12.68% 9.19% N/A
Fund (FORMERLY TEMPLETON
ASSET ALLOCATION FUND)
- -------------------------------------------------------------------------------------------------------------------
Templeton Developing 03/15/1994 42.49% 1.35% N/A -0.36%
Markets Securities Fund
(FORMERLY TEMPLETON
DEVELOPING MARKETS EQUITY
FUND)
- -------------------------------------------------------------------------------------------------------------------
Templeton Growth 03/15/1994 9.16% 10.77% N/A 9.17%
Securities Fund (FORMERLY
TEMPLETON GLOBAL GROWTH
FUND)
- -------------------------------------------------------------------------------------------------------------------
Templeton International 05/01/1992 11.52% 12.52% N/A 11.33%
Securities Fund (FORMERLY
TEMPLETON INTERNATIONAL
FUND)
- -------------------------------------------------------------------------------------------------------------------
</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.
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.
<PAGE>
-9-
NON-STANDARDIZED ANNUALIZED TOTAL RETURN THAT PRE-DATE THE
INCEPTION DATE OF THE SEPARATE ACCOUNT FOR YEAR ENDED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FUND INCEPTION SINCE INCEPTION OF
SUB-ACCOUNT DATE 1 YEAR 5 YEAR 10 YEAR FUND
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
American Funds Asset 08/01/1989 5.43% 15.08% 10.31% N/A
Allocation Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds Bond 01/02/1996 1.13% N/A N/A 4.03%
Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds Global 04/30/1997 67.31% N/A N/A 36.14%
Growth Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds Global 04/30/1998 88.71% N/A N/A 47.54%
Small Capitalization Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds Growth 02/08/1984 55.09% 31.07% 19.36% N/A
Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds Growth- 02/08/1984 9.65% 19.27% 12.74% N/A
Income Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds 05/01/1990 73.53% 23.25% N/A 14.84%
International Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds New 06/17/1999 N/A N/A N/A 17.46%
World Fund
- -------------------------------------------------------------------------------------------------------------------
Franklin Real Estate Fund 01/24/1989 -7.66% 6.47% 7.48% N/A
- -------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund 11/01/1995 93.63% N/A N/A 28.51%
- -------------------------------------------------------------------------------------------------------------------
Franklin Strategic Income 07/01/1999 N/A N/A N/A 1.89%
Securities Fund (FORMERLY
FRANKLIN STRATEGIC INCOME
FUND)
- -------------------------------------------------------------------------------------------------------------------
Hartford Money Market 06/30/1980 3.44% 3.82% 3.64% N/A
HLS Fund
- -------------------------------------------------------------------------------------------------------------------
MFS Capital Opportunities 08/14/1996 45.39% N/A N/A 30.40%
Series
- -------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth 07/24/1995 74.26% N/A N/A 34.51%
Series
- -------------------------------------------------------------------------------------------------------------------
MFS Global Equity Series 05/03/1999 N/A N/A N/A 22.69%
- -------------------------------------------------------------------------------------------------------------------
MFS Growth Series 05/03/1999 N/A N/A N/A 38.71%
- -------------------------------------------------------------------------------------------------------------------
MFS Growth with Income 10/09/1995 5.20% N/A N/A 19.43%
Series
- -------------------------------------------------------------------------------------------------------------------
MFS High Income Series 07/26/1995 4.96% N/A N/A 6.73%
- -------------------------------------------------------------------------------------------------------------------
MFS New Discovery 05/01/1998 71.00% N/A N/A 38.94%
Series
- -------------------------------------------------------------------------------------------------------------------
MFS Total Return Series 01/03/1995 1.62% N/A N/A 13.80%
- -------------------------------------------------------------------------------------------------------------------
<PAGE>
-10-
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FUND INCEPTION SINCE INCEPTION OF
SUB-ACCOUNT DATE 1 YEAR 5 YEAR 10 YEAR FUND
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mutual Shares 11/01/1996 12.01% N/A N/A 9.31%
Securities Fund
- -------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy 08/24/1988 21.93% 15.50% 11.53% N/A
Fund (FORMERLY TEMPLETON
ASSET ALLOCATION FUND)
- -------------------------------------------------------------------------------------------------------------------
Templeton Developing 03/15/1994 52.49% 5.23% N/A 3.49%
Markets Securities Fund
(FORMERLY TEMPLETON
DEVELOPING MARKETS EQUITY
FUND)
- -------------------------------------------------------------------------------------------------------------------
Templeton Growth 03/15/1994 19.16% 13.77% N/A 12.15%
Securities Fund (FORMERLY
TEMPLETON GLOBAL GROWTH
FUND)
- -------------------------------------------------------------------------------------------------------------------
Templeton International 05/01/1992 21.52% 15.40% N/A 13.64%
Securities Fund (FORMERLY
TEMPLETON INTERNATIONAL
FUND)
- -------------------------------------------------------------------------------------------------------------------
</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.
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
<PAGE>
-11-
companies listed on the American Stock Exchange or traded over-the-counter
are included. The 500 companies represented include 400 industrial, 60
transportation and 40 financial services concerns. The S&P 500 represents about
80% of the market value of all issues traded on the New York Stock Exchange.
The NASDAQ-OTC Composite Price Index (The "NASDAQ Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of approximately 3,500 stocks relative to the base measure of 100.00 on
February 5, 1971. The NASDAQ Index is composed entirely of common stocks of
companies traded over-the-counter and often through the National Association of
Securities Dealers Automated Quotations ("NASDAQ") system. Only those
over-the-counter stocks having only one market maker or traded on exchanges are
excluded.
The Morgan Stanley Capital International EAFE Index (the "EAFE Index") is an
unmanaged index, which includes over 1,000 companies representing the stock
markets of Europe, Australia, New Zealand, and the Far East. The EAFE Index is
weighted by market capitalization, and therefore, it has a heavy representation
in countries with large stock markets, such as Japan.
The Shearson Lehman Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted issues
are not included in the SL Government Index.
The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized rating
agency.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT SEVEN 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 Seven (Hartford Money Market
HLS, American Funds Asset Allocation, American Funds Bond, American Funds Global
Growth, American Funds Global Small Capitalization, American Funds Growth,
American Funds Growth-Income, American Funds International, American Funds New
World, Franklin Real Estate Securities, Franklin Small Cap, Mutual Shares
Securities, Franklin Strategic Income Investments, MFS Capital Opportunities,
MFS Emerging Growth, MFS Global Equity, MFS Growth, MFS Growth with Income, MFS
High Income, MFS New Discovery, MFS Total Return, Templeton Asset Allocation,
Templeton International, Templeton Developing Markets Equity, and Templeton
Global Growth sub-accounts), (collectively, the Account) as of December 31,
1999, and the related statements of operations and the statements of changes in
net assets for the period 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,
1999, and the results of its operations and the changes in its net assets for
the period presented in conformity with generally accepted accounting
principles.
Hartford, Connecticut
February 17, 2000 ARTHUR ANDERSEN LLP
_____________________________________ SA-1 _____________________________________
<PAGE>
SEPARATE ACCOUNT SEVEN
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
HARTFORD AMERICAN FUNDS
MONEY MARKET ASSET AMERICAN FUNDS AMERICAN FUNDS
HLS ALLOCATION BOND GLOBAL GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in the Hartford
Money Market HLS Fund:
Hartford Money Market HLS
Fund, Inc. - Class IA
Shares 3,927,653
Cost $3,927,653
Market Value.............. $3,927,653 -- -- --
Investments in American Funds
Insurance Series:
Asset Allocation Fund
Shares 149,944
Cost $2,359,658
Market Value.............. -- $2,258,152 -- --
Bond Fund
Shares 272,500
Cost $2,674,701
Market Value.............. -- -- $2,654,149 --
Global Growth Fund
Shares 194,533
Cost $3,435,833
Market Value.............. -- -- -- $4,164,947
Global Small Capitalization
Fund
Shares 70,595
Cost $1,144,251
Market Value.............. -- -- -- --
Growth Fund
Shares 227,132
Cost $15,291,922
Market Value.............. -- -- -- --
Growth-Income Fund
Shares 409,587
Cost $15,099,051
Market Value.............. -- -- -- --
International Fund
Shares 164,674
Cost $3,867,188
Market Value.............. -- -- -- --
New World Fund
Shares 99,427
Cost $1,028,049
Market Value.............. -- -- -- --
Investments in the Franklin
Templeton Variable Insurance
Products Trust:
Real Estate Securities Fund
Shares 7,119
Cost $103,928
Market Value.............. -- -- -- --
Small Cap Fund
Shares 64,378
Cost $1,275,742
Market Value.............. -- -- -- --
Mutual Shares Securities
Fund
Shares 64,165
Cost $821,533
Market Value.............. -- -- -- --
Investments in the Templeton
Variable Products Series
Fund:
Franklin Strategic Income
Investments Fund
Shares 76,779
Cost $764,210
Market Value.............. -- -- -- --
Due from Hartford Life
Insurance Company............ 30,045 8,978 5,309 29,739
Receivable for fund shares
sold......................... -- -- -- --
---------- ---------- ---------- ----------
Total Assets.................. 3,957,698 2,267,130 2,659,458 4,194,686
---------- ---------- ---------- ----------
LIABILITIES:
Due to Hartford Life Insurance
Company...................... -- -- -- --
Payable for fund shares
purchased.................... 29,963 8,978 5,310 29,739
---------- ---------- ---------- ----------
Total Liabilities............. 29,963 8,978 5,310 29,739
---------- ---------- ---------- ----------
Net Assets (variable annuity
contract liabilities)........ $3,927,735 $2,258,152 $2,654,148 $4,164,947
========== ========== ========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------------------- SA-2
-------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FUNDS FRANKLIN
GLOBAL SMALL AMERICAN FUNDS AMERICAN FUNDS AMERICAN FUNDS AMERICAN FUNDS REAL ESTATE
CAPITALIZATION GROWTH GROWTH-INCOME INTERNATIONAL NEW WORLD SECURITIES
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- -------------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in the Hartford
Money Market HLS Fund:
Hartford Money Market HLS
Fund, Inc. - Class IA
Shares 3,927,653
Cost $3,927,653
Market Value.............. -- -- -- -- -- --
Investments in American Funds
Insurance Series:
Asset Allocation Fund
Shares 149,944
Cost $2,359,658
Market Value.............. -- -- -- -- -- --
Bond Fund
Shares 272,500
Cost $2,674,701
Market Value.............. -- -- -- -- -- --
Global Growth Fund
Shares 194,533
Cost $3,435,833
Market Value.............. -- -- -- -- -- --
Global Small Capitalization
Fund
Shares 70,595
Cost $1,144,251
Market Value.............. $1,225,521 -- -- -- -- --
Growth Fund
Shares 227,132
Cost $15,291,922
Market Value.............. -- $16,028,736 -- -- -- --
Growth-Income Fund
Shares 409,587
Cost $15,099,051
Market Value.............. -- -- $13,545,054 -- -- --
International Fund
Shares 164,674
Cost $3,867,188
Market Value.............. -- -- -- $4,401,730 -- --
New World Fund
Shares 99,427
Cost $1,028,049
Market Value.............. -- -- -- -- $1,170,252 --
Investments in the Franklin
Templeton Variable Insurance
Products Trust:
Real Estate Securities Fund
Shares 7,119
Cost $103,928
Market Value.............. -- -- -- -- -- $105,928
Small Cap Fund
Shares 64,378
Cost $1,275,742
Market Value.............. -- -- -- -- -- --
Mutual Shares Securities
Fund
Shares 64,165
Cost $821,533
Market Value.............. -- -- -- -- -- --
Investments in the Templeton
Variable Products Series
Fund:
Franklin Strategic Income
Investments Fund
Shares 76,779
Cost $764,210
Market Value.............. -- -- -- -- -- --
Due from Hartford Life
Insurance Company............ 20,453 261,870 248,815 60,113 25,954 --
Receivable for fund shares
sold......................... -- -- -- -- -- --
---------- ----------- ----------- ---------- ---------- --------
Total Assets.................. 1,245,974 16,290,606 13,793,869 4,461,843 1,196,206 105,928
---------- ----------- ----------- ---------- ---------- --------
LIABILITIES:
Due to Hartford Life Insurance
Company...................... -- -- -- -- -- 18
Payable for fund shares
purchased.................... 20,454 261,869 248,813 60,114 25,954 --
---------- ----------- ----------- ---------- ---------- --------
Total Liabilities............. 20,454 261,869 248,813 60,114 25,954 18
---------- ----------- ----------- ---------- ---------- --------
Net Assets (variable annuity
contract liabilities)........ $1,225,520 $16,028,737 $13,545,056 $4,401,729 $1,170,252 $105,910
========== =========== =========== ========== ========== ========
<CAPTION>
FRANKLIN
FRANKLIN MUTUAL SHARES STRATEGIC
SMALL CAP SECURITIES INCOME INVESTMENTS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------- ------------------
<S> <C> <C> <C>
ASSETS:
Investments in the Hartford
Money Market HLS Fund:
Hartford Money Market HLS
Fund, Inc. - Class IA
Shares 3,927,653
Cost $3,927,653
Market Value.............. -- -- --
Investments in American Funds
Insurance Series:
Asset Allocation Fund
Shares 149,944
Cost $2,359,658
Market Value.............. -- -- --
Bond Fund
Shares 272,500
Cost $2,674,701
Market Value.............. -- -- --
Global Growth Fund
Shares 194,533
Cost $3,435,833
Market Value.............. -- -- --
Global Small Capitalization
Fund
Shares 70,595
Cost $1,144,251
Market Value.............. -- -- --
Growth Fund
Shares 227,132
Cost $15,291,922
Market Value.............. -- -- --
Growth-Income Fund
Shares 409,587
Cost $15,099,051
Market Value.............. -- -- --
International Fund
Shares 164,674
Cost $3,867,188
Market Value.............. -- -- --
New World Fund
Shares 99,427
Cost $1,028,049
Market Value.............. -- -- --
Investments in the Franklin
Templeton Variable Insurance
Products Trust:
Real Estate Securities Fund
Shares 7,119
Cost $103,928
Market Value.............. -- -- --
Small Cap Fund
Shares 64,378
Cost $1,275,742
Market Value.............. $1,724,699 -- --
Mutual Shares Securities
Fund
Shares 64,165
Cost $821,533
Market Value.............. -- $850,186 --
Investments in the Templeton
Variable Products Series
Fund:
Franklin Strategic Income
Investments Fund
Shares 76,779
Cost $764,210
Market Value.............. -- -- $764,718
Due from Hartford Life
Insurance Company............ -- 1,976 112,773
Receivable for fund shares
sold......................... -- -- --
---------- -------- --------
Total Assets.................. 1,724,699 852,162 877,491
---------- -------- --------
LIABILITIES:
Due to Hartford Life Insurance
Company...................... -- -- --
Payable for fund shares
purchased.................... 72 1,974 112,775
---------- -------- --------
Total Liabilities............. 72 1,974 112,775
---------- -------- --------
Net Assets (variable annuity
contract liabilities)........ $1,724,627 $850,188 $764,716
========== ======== ========
</TABLE>
------------------------------------------------- SA-3
-------------------------------------------------
<PAGE>
SEPARATE ACCOUNT SEVEN
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
MFS
CAPITAL MFS MFS MFS
OPPORTUNITIES EMERGING GROWTH GLOBAL EQUITY GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- --------------- ------------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments in the MFS
Variable Insurance Trust:
Capital Opportunities Series
Shares 157,794
Cost $2,946,692
Market Value.............. $3,428,872 -- -- --
Emerging Growth Series
Shares 162,329
Cost $4,454,467
Market Value.............. -- $6,158,752 -- --
Global Equity Series
Shares 10,915
Cost $126,858
Market Value.............. -- -- $131,521 --
Growth
Shares 256,414
Cost $3,081,188
Market Value.............. -- -- -- $3,576,971
Growth with Income Series
Shares 156,109
Cost $3,163,664
Market Value.............. -- -- -- --
High Income Series
Shares 102,765
Cost $1,160,901
Market Value.............. -- -- -- --
New Discovery Series
Shares 52,426
Cost $680,146
Market Value.............. -- -- -- --
Total Return Series
Shares 71,028
Cost $1,250,916
Market Value.............. -- -- -- --
Investments in the Templeton
Variable Products Series
Fund:
Templeton Asset Allocation
Fund
Shares 14,154
Cost $309,850
Market Value.............. -- -- -- --
Templeton International Fund
Shares 65,746
Cost $1,314,319
Market Value.............. -- -- -- --
Investments in the Franklin
Templeton Variable Insurance
Products Trust:
Templeton Developing Markets
Equity Fund
Shares 28,573
Cost $249,395
Market Value.............. -- -- -- --
Templeton Global Growth Fund
Shares 60,187
Cost $881,906
Market Value.............. -- -- -- --
Due from Hartford Life
Insurance Company............ 76,191 45,813 49,425 88,259
Receivable for fund shares
sold......................... -- -- -- --
---------- ---------- -------- ----------
Total Assets.................. 3,505,063 6,204,565 180,946 3,665,230
---------- ---------- -------- ----------
LIABILITIES:
Due to Hartford Life Insurance
Company...................... -- -- -- --
Payable for fund shares
purchased.................... 76,192 45,812 49,427 88,260
---------- ---------- -------- ----------
Total Liabilities............. 76,192 45,812 49,427 88,260
---------- ---------- -------- ----------
Net Assets (variable annuity
contract liabilities)........ $3,428,871 $6,158,753 $131,519 $3,576,970
========== ========== ======== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------------------- SA-4
-------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
MFS MFS TEMPLETON
GROWTH MFS NEW MFS ASSET TEMPLETON
WITH INCOME HIGH INCOME DISCOVERY TOTAL RETURN ALLOCATION INTERNATIONAL
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in the MFS
Variable Insurance Trust:
Capital Opportunities Series
Shares 157,794
Cost $2,946,692
Market Value.............. -- -- -- -- -- --
Emerging Growth Series
Shares 162,329
Cost $4,454,467
Market Value.............. -- -- -- -- -- --
Global Equity Series
Shares 10,915
Cost $126,858
Market Value.............. -- -- -- -- -- --
Growth
Shares 256,414
Cost $3,081,188
Market Value.............. -- -- -- -- -- --
Growth with Income Series
Shares 156,109
Cost $3,163,664
Market Value.............. $3,326,691 -- -- -- -- --
High Income Series
Shares 102,765
Cost $1,160,901
Market Value.............. -- $1,180,775 -- -- -- --
New Discovery Series
Shares 52,426
Cost $680,146
Market Value.............. -- -- $905,389 -- -- --
Total Return Series
Shares 71,028
Cost $1,250,916
Market Value.............. -- -- -- $1,260,746 -- --
Investments in the Templeton
Variable Products Series
Fund:
Templeton Asset Allocation
Fund
Shares 14,154
Cost $309,850
Market Value.............. -- -- -- -- $329,372 --
Templeton International Fund
Shares 65,746
Cost $1,314,319
Market Value.............. -- -- -- -- -- $1,454,965
Investments in the Franklin
Templeton Variable Insurance
Products Trust:
Templeton Developing Markets
Equity Fund
Shares 28,573
Cost $249,395
Market Value.............. -- -- -- -- -- --
Templeton Global Growth Fund
Shares 60,187
Cost $881,906
Market Value.............. -- -- -- -- -- --
Due from Hartford Life
Insurance Company............ 26,350 22,541 6,973 25,947 9,263 14,900
Receivable for fund shares
sold......................... -- -- -- -- -- --
---------- ---------- -------- ---------- -------- ----------
Total Assets.................. 3,353,041 1,203,316 912,362 1,286,693 338,635 1,469,865
---------- ---------- -------- ---------- -------- ----------
LIABILITIES:
Due to Hartford Life Insurance
Company...................... -- -- -- -- -- --
Payable for fund shares
purchased.................... 26,353 22,541 6,974 25,948 9,265 14,902
---------- ---------- -------- ---------- -------- ----------
Total Liabilities............. 26,353 22,541 6,974 25,948 9,265 14,902
---------- ---------- -------- ---------- -------- ----------
Net Assets (variable annuity
contract liabilities)........ $3,326,688 $1,180,775 $905,388 $1,260,745 $329,370 $1,454,963
========== ========== ======== ========== ======== ==========
<CAPTION>
TEMPLETON
DEVELOPING TEMPLETON
MARKETS EQUITY GLOBAL GROWTH
SUB-ACCOUNT SUB-ACCOUNT
-------------- -------------
<S> <C> <C>
ASSETS:
Investments in the MFS
Variable Insurance Trust:
Capital Opportunities Series
Shares 157,794
Cost $2,946,692
Market Value.............. -- --
Emerging Growth Series
Shares 162,329
Cost $4,454,467
Market Value.............. -- --
Global Equity Series
Shares 10,915
Cost $126,858
Market Value.............. -- --
Growth
Shares 256,414
Cost $3,081,188
Market Value.............. -- --
Growth with Income Series
Shares 156,109
Cost $3,163,664
Market Value.............. -- --
High Income Series
Shares 102,765
Cost $1,160,901
Market Value.............. -- --
New Discovery Series
Shares 52,426
Cost $680,146
Market Value.............. -- --
Total Return Series
Shares 71,028
Cost $1,250,916
Market Value.............. -- --
Investments in the Templeton
Variable Products Series
Fund:
Templeton Asset Allocation
Fund
Shares 14,154
Cost $309,850
Market Value.............. -- --
Templeton International Fund
Shares 65,746
Cost $1,314,319
Market Value.............. -- --
Investments in the Franklin
Templeton Variable Insurance
Products Trust:
Templeton Developing Markets
Equity Fund
Shares 28,573
Cost $249,395
Market Value.............. $299,735 --
Templeton Global Growth Fund
Shares 60,187
Cost $881,906
Market Value.............. -- $938,910
Due from Hartford Life
Insurance Company............ 1,074 3,942
Receivable for fund shares
sold......................... -- --
-------- --------
Total Assets.................. 300,809 942,852
-------- --------
LIABILITIES:
Due to Hartford Life Insurance
Company...................... -- --
Payable for fund shares
purchased.................... 1,073 3,941
-------- --------
Total Liabilities............. 1,073 3,941
-------- --------
Net Assets (variable annuity
contract liabilities)........ $299,736 $938,911
======== ========
</TABLE>
------------------------------------------------- SA-5
-------------------------------------------------
<PAGE>
SEPARATE ACCOUNT SEVEN
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ ---------- -----------
<S> <C> <C> <C>
DEFERRED ANNUITY CONTRACTS IN THE
ACCUMULATION PERIOD:
Hartford Money Market HLS Fund
1.5%............................ 1,931,127 $ 1.016961 $ 1,963,881
Hartford Money Market HLS Fund
1.4%............................ 485,270 1.017478 493,752
Hartford Money Market HLS Fund
1.25%........................... 1,443,769 1.018239 1,470,102
Asset Allocation Fund 1.5%....... 95,715 9.763857 934,547
Asset Allocation Fund 1.25%...... 116,323 9.776112 1,137,189
Asset Allocation Fund 1.4%....... 19,083 9.768759 186,416
Bond Fund 1.5%................... 130,825 10.093283 1,320,450
Bond Fund 1.65%.................. 1,015 10.089521 10,243
Bond Fund 1.25%.................. 110,301 10.105950 1,114,694
Bond Fund 1.4%................... 20,673 10.098350 208,761
Global Growth Fund 1.5%.......... 83,301 13.962993 1,163,127
Global Growth Fund 1.65%......... 590 13.957799 8,237
Global Growth Fund 1.4%.......... 25,408 13.969976 354,951
Global Growth Fund 1.25%......... 188,737 13.980455 2,638,632
Global Small Capitalization Fund
1.5%............................ 32,795 13.767193 451,501
Global Small Capitalization Fund
1.4%............................ 6,579 13.774075 90,619
Global Small Capitalization Fund
1.5%............................ 49,578 13.784415 683,400
Growth Fund 1.5%................. 377,385 12.502121 4,718,115
Growth Fund 1.65%................ 795 12.497460 9,933
Growth Fund 1.25%................ 786,889 12.517781 9,850,100
Growth Fund .80%................. 36 12.865591 466
Growth Fund 1.4%................. 115,932 12.508384 1,450,123
Growth-Income Fund 1.5%.......... 342,021 9.579464 3,276,375
Growth-Income Fund 1.65%......... 2,725 9.575882 26,097
Growth-Income Fund 1.25%......... 954,356 9.591485 9,153,688
Growth-Income Fund 1.4%.......... 113,613 9.584268 1,088,896
International Fund 1.5%.......... 129,165 14.644814 1,891,603
International Fund 1.25%......... 160,614 14.663115 2,355,098
International Fund 1.4%.......... 10,548 14.652129 154,551
International Fund .80%.......... 35 13.799473 477
New World Fund 1.5%.............. 12,627 11.644005 147,031
New World Fund 1.25%............. 70,565 11.658593 822,685
New World Fund 1.4%.............. 17,214 11.649838 200,536
Real Estate Securities Fund
1.5%............................ 3,571 8.830523 31,538
Real Estate Securities Fund
1.4%............................ 6,166 8.834957 54,478
Real Estate Securities Fund
1.25%........................... 2,250 8.841604 19,894
Small Cap Fund 1.5%.............. 13,274 16.636909 220,836
Small Cap Fund 1.65%............. 216 16.630728 3,590
Small Cap Fund 1.4%.............. 13,640 16.645221 227,037
Small Cap Fund 1.25%............. 76,431 16.657685 1,273,164
Mutual Shares Securities Fund
1.5%............................ 18,240 9.783931 178,459
Mutual Shares Securities Fund
1.65%........................... 314 9.780274 3,069
Mutual Shares Securities Fund
1.4%............................ 11,575 9.788843 113,303
Mutual Shares Securities Fund
1.25%........................... 56,691 9.796213 555,357
Franklin Strategic Income
Investments Fund 1.5%........... 2,250 10.176193 22,901
Franklin Strategic Income
Investments Fund 1.4%........... 57,494 10.181293 585,359
Franklin Strategic Income
Investments Fund 1.25%.......... 15,355 10.188959 156,456
Capital Opportunities Series
1.5%............................ 79,197 12.203397 966,469
Capital Opportunities Series
1.65%........................... 352 12.198850 4,288
Capital Opportunities Series
1.4%............................ 22,816 12.209515 278,576
Capital Opportunities Series
1.25%........................... 178,377 12.218688 2,179,538
Emerging Growth Series 1.5%...... 143,014 15.402545 2,202,777
Emerging Growth Series 1.65%..... 577 15.396821 8,882
Emerging Growth Series 1.4%...... 28,898 15.410232 445,330
Emerging Growth Series 1.25%..... 227,066 15.421795 3,501,764
Global Equity Series 1.5%........ 342 11.585770 3,967
Global Equity Series 1.4%........ 6,004 11.591574 69,594
Global Equity Series 1.25%....... 4,996 11.600282 57,958
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------------------- SA-6
-------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ ---------- -----------
<S> <C> <C> <C>
Growth Series 1.5%............... 52,128 $12.001263 $ 625,599
Growth Series 1.4%............... 48,508 12.007270 582,453
Growth Series 1.25%.............. 197,142 12.016294 2,368,918
Growth with Income Series 1.5%... 34,885 9.950259 347,119
Growth with Income Series
1.65%........................... 2,379 9.946537 23,667
Growth with Income Series 1.4%... 22,935 9.955242 228,328
Growth with Income Series
1.25%........................... 273,777 9.962740 2,727,574
High Income Series 1.5%.......... 27,923 10.039968 280,342
High Income Series 1.4%.......... 18,374 10.044992 184,566
High Income Series 1.25%......... 71,212 10.052557 715,867
New Discovery Series 1.5%........ 6,421 14.318332 91,945
New Discovery Series 1.4%........ 1,691 14.325485 24,229
New Discovery Series 1.25%....... 55,050 14.336247 789,214
Total Return Series 1.5%......... 61,956 9.688322 600,252
Total Return Series 1.65%........ 2,066 9.684701 20,004
Total Return Series 1.4%......... 12,872 9.693183 124,773
Total Return Series 1.25%........ 53,164 9.700481 515,716
Templeton Asset Allocation Fund
1.5%............................ 7,913 10.855332 85,898
Templeton Asset Allocation Fund
1.4%............................ 12,377 10.860766 134,421
Templeton Asset Allocation Fund
1.25%........................... 10,033 10.868937 109,051
Templeton International Fund
1.5%............................ 64,725 10.946563 708,512
Templeton International Fund
1.4%............................ 20,130 10.952050 220,463
Templeton International Fund
1.25%........................... 47,990 10.960275 525,988
Templeton Developing Markets
Equity Fund 1.5%................ 100 11.108629 1,112
Templeton Developing Markets
Equity Fund 1.4%................ 6,254 11.114200 69,507
Templeton Developing Markets
Equity Fund 1.25%............... 20,599 11.122555 229,117
Templeton Global Growth Fund
1.5%............................ 9,400 10.605862 99,693
Templeton Global Growth Fund
1.4%............................ 2,901 10.611118 30,778
Templeton Global Growth Fund
1.25%........................... 76,130 10.619149 808,440
-----------
GRAND TOTAL........................ $75,814,406
===========
</TABLE>
------------------------------------------------- SA-7
-------------------------------------------------
<PAGE>
SEPARATE ACCOUNT SEVEN
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM INCEPTION, JULY 1, 1999, TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
HARTFORD AMERICAN FUNDS
MONEY MARKET ASSET AMERICAN FUNDS AMERICAN FUNDS
HLS ALLOCATION BOND GLOBAL GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends..................... $ 45,304 $ 21,760 $ 59,157 $ 17,852
EXPENSES:
Mortality and expense
undertakings................. (11,924) (5,478) (8,200) (9,403)
--------- --------- --------- ---------
Net investment income
(loss)..................... 33,380 16,282 50,957 8,449
--------- --------- --------- ---------
CAPITAL GAINS INCOME............ 2 126,885 -- 155,656
--------- --------- --------- ---------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on
security transactions........ -- 31 359 1,389
Net unrealized (depreciation)
appreciation of investments
during the period............ -- (101,506) (20,553) 729,114
--------- --------- --------- ---------
Net (loss) gain on
investments................ -- (101,475) (20,194) 730,503
--------- --------- --------- ---------
Net increase in net assets
resulting from
operations................. $ 33,382 $ 41,692 $ 30,763 $ 894,608
========= ========= ========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------------------- SA-8
-------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FUNDS FRANKLIN
GLOBAL SMALL AMERICAN FUNDS AMERICAN FUNDS AMERICAN FUNDS AMERICAN FUNDS REAL ESTATE
CAPITALIZATION GROWTH GROWTH-INCOME INTERNATIONAL NEW WORLD SECURITIES
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- -------------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends..................... $ -- $ -- $ 62,951 $ 14,573 $ 3,676 $ 247
EXPENSES:
Mortality and expense
undertakings................. (2,120) (36,369) (31,452) (7,626) (2,616) (209)
--------- ---------- ----------- --------- --------- -------
Net investment income
(loss)..................... (2,120) (36,369) 31,499 6,947 1,060 38
--------- ---------- ----------- --------- --------- -------
CAPITAL GAINS INCOME............ 98,577 1,922,000 1,917,941 389,714 435 343
--------- ---------- ----------- --------- --------- -------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on
security transactions........ (1,737) (599) 526 (25,899) 999 (25)
Net unrealized (depreciation)
appreciation of investments
during the period............ 81,270 736,813 (1,553,997) 534,543 142,203 2,000
--------- ---------- ----------- --------- --------- -------
Net (loss) gain on
investments................ 79,533 736,214 (1,553,471) 508,644 143,202 1,975
--------- ---------- ----------- --------- --------- -------
Net increase in net assets
resulting from
operations................. $ 175,990 $2,621,845 $ 395,969 $ 905,305 $ 144,697 $ 2,356
========= ========== =========== ========= ========= =======
<CAPTION>
FRANKLIN
FRANKLIN MUTUAL SHARES STRATEGIC
SMALL CAP SECURITIES INCOME INVESTMENTS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------- ------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends..................... $ 184 $ 929 $18,285
EXPENSES:
Mortality and expense
undertakings................. (3,102) (1,919) (1,780)
--------- ------- -------
Net investment income
(loss)..................... (2,918) (990) 16,505
--------- ------- -------
CAPITAL GAINS INCOME............ 26 -- --
--------- ------- -------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on
security transactions........ 1,167 191 27
Net unrealized (depreciation)
appreciation of investments
during the period............ 448,957 28,653 508
--------- ------- -------
Net (loss) gain on
investments................ 450,124 28,844 535
--------- ------- -------
Net increase in net assets
resulting from
operations................. $ 447,232 $27,854 $17,040
========= ======= =======
</TABLE>
------------------------------------------------- SA-9
-------------------------------------------------
<PAGE>
SEPARATE ACCOUNT SEVEN
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE PERIOD FROM INCEPTION, JULY 1, 1999, TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
MFS
CAPITAL MFS MFS MFS
OPPORTUNITIES EMERGING GROWTH GLOBAL EQUITY GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- --------------- ------------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends..................... $ -- $ -- $ 101 $ 5,430
EXPENSES:
Mortality and expense
undertakings................. (6,375) (12,765) (116) (8,158)
--------- ---------- --------- ---------
Net investment (loss)....... (6,375) (12,765) (15) (2,728)
--------- ---------- --------- ---------
CAPITAL GAINS INCOME............ -- -- 1,971 7,094
--------- ---------- --------- ---------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on
security transactions........ 442 1,060 2 202
Net unrealized appreciation of
investments during the
period....................... 482,180 1,704,285 4,664 495,783
--------- ---------- --------- ---------
Net gain on investments..... 482,622 1,705,345 4,666 495,985
--------- ---------- --------- ---------
Net increase in net assets
resulting from
operations................. $ 476,247 $1,692,580 $ 6,622 $ 500,351
========= ========== ========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------------------- SA-10
-------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
MFS MFS TEMPLETON
GROWTH MFS NEW MFS ASSET TEMPLETON
WITH INCOME HIGH INCOME DISCOVERY TOTAL RETURN ALLOCATION INTERNATIONAL
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends..................... $ -- $ -- $ -- $ -- $ -- $--
EXPENSES:
Mortality and expense
undertakings................. (8,327) (3,554) (1,803) (2,288) (511) (3,984)
--------- ---------- ---------- --------- --------- --------
Net investment (loss)....... (8,327) (3,554) (1,803) (2,288) (511) (3,984)
--------- ---------- ---------- --------- --------- --------
CAPITAL GAINS INCOME............ -- -- 15,390 -- -- --
--------- ---------- ---------- --------- --------- --------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on
security transactions........ (34) 12 153 (7) 5 569
Net unrealized appreciation of
investments during the
period....................... 163,027 19,874 225,243 9,829 19,522 140,647
--------- ---------- ---------- --------- --------- --------
Net gain on investments..... 162,993 19,886 225,396 9,822 19,527 141,216
--------- ---------- ---------- --------- --------- --------
Net increase in net assets
resulting from
operations................. $ 154,666 $ 16,332 $ 238,983 $ 7,534 $ 19,016 $137,232
========= ========== ========== ========= ========= ========
<CAPTION>
TEMPLETON
DEVELOPING TEMPLETON
MARKETS EQUITY GLOBAL GROWTH
SUB-ACCOUNT SUB-ACCOUNT
-------------- -------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends..................... $ 54 $ 242
EXPENSES:
Mortality and expense
undertakings................. (720) (1,502)
------- ---------
Net investment (loss)....... (666) (1,260)
------- ---------
CAPITAL GAINS INCOME............ -- 1,172
------- ---------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on
security transactions........ 67 32
Net unrealized appreciation of
investments during the
period....................... 50,339 57,004
------- ---------
Net gain on investments..... 50,406 57,036
------- ---------
Net increase in net assets
resulting from
operations................. $49,740 $ 56,948
======= =========
</TABLE>
------------------------------------------------- SA-11
-------------------------------------------------
<PAGE>
SEPARATE ACCOUNT SEVEN
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM INCEPTION, JULY 1, 1999, TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
HARTFORD AMERICAN FUNDS
MONEY MARKET ASSET AMERICAN FUNDS AMERICAN FUNDS
HLS ALLOCATION BOND GLOBAL GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)....................... $ 33,380 $ 16,282 $ 50,957 $ 8,449
Capital gains income.......... 2 126,885 -- 155,656
Net realized gain (loss) on
security transactions........ -- 31 359 1,389
Net unrealized (depreciation)
appreciation of investments
during the period............ -- (101,506) (20,553) 729,114
---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations.... 33,382 41,692 30,763 894,608
---------- ---------- ---------- ----------
UNIT TRANSACTIONS:
Purchases..................... 4,862,876 1,425,884 2,036,552 2,511,217
Net transfers................. (951,728) 811,493 598,489 776,934
Surrenders for benefit
payments and fees............ (16,795) (20,917) (11,656) (17,812)
Net annuity transactions...... -- -- -- --
---------- ---------- ---------- ----------
Net increase in net assets
resulting from unit
transactions................. 3,894,353 2,216,460 2,623,385 3,270,339
---------- ---------- ---------- ----------
Net increase in net assets.... 3,927,735 2,258,152 2,654,148 4,164,947
NET ASSETS:
Beginning of period........... -- -- -- --
---------- ---------- ---------- ----------
End of period................. $3,927,735 $2,258,152 $2,654,148 $4,164,947
========== ========== ========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------------------- SA-12
-------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FUNDS FRANKLIN
GLOBAL SMALL AMERICAN FUNDS AMERICAN FUNDS AMERICAN FUNDS AMERICAN FUNDS REAL ESTATE
CAPITALIZATION GROWTH GROWTH-INCOME INTERNATIONAL NEW WORLD SECURITIES
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- -------------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)....................... $ (2,120) $ (36,369) $ 31,499 $ 6,947 $ 1,060 $ 38
Capital gains income.......... 98,577 1,922,000 1,917,941 389,714 435 343
Net realized gain (loss) on
security transactions........ (1,737) (599) 526 (25,899) 999 (25)
Net unrealized (depreciation)
appreciation of investments
during the period............ 81,270 736,813 (1,553,997) 534,543 142,203 2,000
---------- ----------- ----------- ---------- ---------- --------
Net increase in net assets
resulting from operations.... 175,990 2,621,845 395,969 905,305 144,697 2,356
---------- ----------- ----------- ---------- ---------- --------
UNIT TRANSACTIONS:
Purchases..................... 824,033 10,722,699 9,961,708 2,406,935 531,587 89,856
Net transfers................. 230,437 2,742,725 3,242,751 1,099,087 499,704 14,541
Surrenders for benefit
payments and fees............ (4,940) (58,532) (55,372) (9,598) (5,736) (843)
Net annuity transactions...... -- -- -- -- -- --
---------- ----------- ----------- ---------- ---------- --------
Net increase in net assets
resulting from unit
transactions................. 1,049,530 13,406,892 13,149,087 3,496,424 1,025,555 103,554
---------- ----------- ----------- ---------- ---------- --------
Net increase in net assets.... 1,225,520 16,028,737 13,545,056 4,401,729 1,170,252 105,910
NET ASSETS:
Beginning of period........... -- -- -- -- -- --
---------- ----------- ----------- ---------- ---------- --------
End of period................. $1,225,520 $16,028,737 $13,545,056 $4,401,729 $1,170,252 $105,910
========== =========== =========== ========== ========== ========
<CAPTION>
FRANKLIN
FRANKLIN MUTUAL SHARES STRATEGIC
SMALL CAP SECURITIES INCOME INVESTMENTS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------- ------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)....................... $ (2,918) $ (990) $ 16,505
Capital gains income.......... 26 -- --
Net realized gain (loss) on
security transactions........ 1,167 191 27
Net unrealized (depreciation)
appreciation of investments
during the period............ 448,957 28,653 508
---------- -------- --------
Net increase in net assets
resulting from operations.... 447,232 27,854 17,040
---------- -------- --------
UNIT TRANSACTIONS:
Purchases..................... 630,903 649,702 97,027
Net transfers................. 654,035 175,147 660,466
Surrenders for benefit
payments and fees............ (7,543) (2,515) (9,817)
Net annuity transactions...... -- -- --
---------- -------- --------
Net increase in net assets
resulting from unit
transactions................. 1,277,395 822,334 747,676
---------- -------- --------
Net increase in net assets.... 1,724,627 850,188 764,716
NET ASSETS:
Beginning of period........... -- -- --
---------- -------- --------
End of period................. $1,724,627 $850,188 $764,716
========== ======== ========
</TABLE>
------------------------------------------------- SA-13
-------------------------------------------------
<PAGE>
SEPARATE ACCOUNT SEVEN
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE PERIOD FROM INCEPTION, JULY 1, 1999, TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
MFS
CAPITAL MFS MFS MFS
OPPORTUNITIES EMERGING GROWTH GLOBAL EQUITY GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- --------------- ------------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment (loss)
income....................... $ (6,375) $ (12,765) $ (15) $ (2,728)
Capital gains income.......... -- -- 1,971 7,094
Net realized gain (loss) on
security transactions........ 442 1,060 2 202
Net unrealized appreciation of
investments during the
period....................... 482,180 1,704,285 4,664 495,783
---------- ---------- -------- ----------
Net increase in net assets
resulting from operations.... 476,247 1,692,580 6,622 500,351
---------- ---------- -------- ----------
UNIT TRANSACTIONS:
Purchases..................... 2,513,108 3,239,426 96,068 1,951,955
Net transfers................. 445,144 1,236,084 28,845 1,134,814
Surrenders for benefit and
payments and fees............ (5,628) (9,337) (16) (10,150)
Net annuity transactions...... -- -- -- --
---------- ---------- -------- ----------
Net increase in net assets
resulting from unit
transactions................. 2,952,624 4,466,173 124,897 3,076,619
---------- ---------- -------- ----------
Net increase in net assets.... 3,428,871 6,158,753 131,519 3,576,970
NET ASSETS:
Beginning of period........... -- -- -- --
---------- ---------- -------- ----------
End of period................. $3,428,871 $6,158,753 $131,519 $3,576,970
========== ========== ======== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------------------- SA-14
-------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
MFS MFS TEMPLETON
GROWTH MFS NEW MFS ASSET TEMPLETON
WITH INCOME HIGH INCOME DISCOVERY TOTAL RETURN ALLOCATION INTERNATIONAL
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment (loss)
income....................... $ (8,327) $ (3,554) $ (1,803) $ (2,288) $ (511) $ (3,984)
Capital gains income.......... -- -- 15,390 -- -- --
Net realized gain (loss) on
security transactions........ (34) 12 153 (7) 5 569
Net unrealized appreciation of
investments during the
period....................... 163,027 19,874 225,243 9,829 19,522 140,647
---------- ---------- -------- ---------- -------- ----------
Net increase in net assets
resulting from operations.... 154,666 16,332 238,983 7,534 19,016 137,232
---------- ---------- -------- ---------- -------- ----------
UNIT TRANSACTIONS:
Purchases..................... 2,159,882 977,701 393,804 968,780 236,918 997,440
Net transfers................. 1,020,966 191,978 276,347 290,507 76,346 324,351
Surrenders for benefit and
payments and fees............ (8,826) (5,236) (3,746) (6,076) (2,910) (4,060)
Net annuity transactions...... -- -- -- -- -- --
---------- ---------- -------- ---------- -------- ----------
Net increase in net assets
resulting from unit
transactions................. 3,172,022 1,164,443 666,405 1,253,211 310,354 1,317,731
---------- ---------- -------- ---------- -------- ----------
Net increase in net assets.... 3,326,688 1,180,775 905,388 1,260,745 329,370 1,454,963
NET ASSETS:
Beginning of period........... -- -- -- -- -- --
---------- ---------- -------- ---------- -------- ----------
End of period................. $3,326,688 $1,180,775 $905,388 $1,260,745 $329,370 $1,454,963
========== ========== ======== ========== ======== ==========
<CAPTION>
TEMPLETON
DEVELOPING TEMPLETON
MARKETS EQUITY GLOBAL GROWTH
SUB-ACCOUNT SUB-ACCOUNT
-------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment (loss)
income....................... $ (666) $ (1,260)
Capital gains income.......... -- 1,172
Net realized gain (loss) on
security transactions........ 67 32
Net unrealized appreciation of
investments during the
period....................... 50,339 57,004
-------- --------
Net increase in net assets
resulting from operations.... 49,740 56,948
-------- --------
UNIT TRANSACTIONS:
Purchases..................... 195,729 615,160
Net transfers................. 56,350 270,275
Surrenders for benefit and
payments and fees............ (2,083) (3,472)
Net annuity transactions...... -- --
-------- --------
Net increase in net assets
resulting from unit
transactions................. 249,996 881,963
-------- --------
Net increase in net assets.... 299,736 938,911
NET ASSETS:
Beginning of period........... -- --
-------- --------
End of period................. $299,736 $938,911
======== ========
</TABLE>
------------------------------------------------- SA-15
-------------------------------------------------
<PAGE>
SEPARATE ACCOUNT SEVEN
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. ORGANIZATION:
Separate Account Seven (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 contractowners of the Company in various mutual
funds (the Funds) as directed by the contractowners.
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 is
accrued as of the ex-dividend date. Capital gains income represents
dividends from the Funds which are characterized as capital gains under
tax regulations.
b) SECURITY VALUATION--The investments in shares of the 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 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:
Deductions 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 1.25% 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 3.5% 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 included in surrenders for benefit payments and fees
on the accompanying statements of changes in net assets.
c) ADMINISTRATIVE CHARGE--The Company will make deductions to cover
administrative expenses at a maximum annual rate of 0.15% of the
contract's value. These expenses are included in surrenders for benefit
payments and fees on the accompanying statements of changes in net
assets.
d) 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 on the accompanying
statements of changes in net assets.
_____________________________________ SA-16 ____________________________________
<PAGE>
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, 1999 and 1998, 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, 1999.
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 auditing standards generally accepted
in the United States. 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, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States.
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.
Hartford, Connecticut
January 31, 2000 ARTHUR ANDERSEN LLP
F-1
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(in millions)
REVENUES
Premiums and other considerations $2,045 $2,218 $1,637
Net investment income 1,359 1,759 1,368
Net realized capital gains (losses) (4) (2) 4
- ----------------------------------------------------------------------------------------------
TOTAL REVENUES 3,400 3,975 3,009
- ----------------------------------------------------------------------------------------------
BENEFITS, CLAIMS AND EXPENSES
Benefits, claims and claim adjustment expenses 1,574 1,911 1,379
Amortization of deferred policy acquisition costs 539 431 335
Dividends to policyholders 104 329 240
Other expenses 631 766 586
- ----------------------------------------------------------------------------------------------
TOTAL BENEFITS, CLAIMS AND EXPENSES 2,848 3,437 2,540
- ----------------------------------------------------------------------------------------------
Income before income tax expense 552 538 469
Income tax expense 191 188 167
- ----------------------------------------------------------------------------------------------
NET INCOME $ 361 $ 350 $ 302
- ----------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-2
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
<S> <C> <C>
- ------------------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------
(in millions, except
for share data)
ASSETS
Investments
Fixed maturities, available for sale, at fair value
(amortized cost of $13,923 and $14,505) $ 13,499 $ 14,818
Equity securities, at fair value 56 31
Policy loans, at outstanding balance 4,187 6,684
Other investments 342 264
- ------------------------------------------------------------------------------------------
TOTAL INVESTMENTS 18,084 21,797
- ------------------------------------------------------------------------------------------
Cash 55 17
Premiums receivable and agents' balances 29 17
Reinsurance recoverables 1,274 1,257
Deferred policy acquisition costs 4,013 3,754
Deferred income tax 459 464
Other assets 654 695
Separate account assets 110,397 90,262
- ------------------------------------------------------------------------------------------
TOTAL ASSETS $134,965 $118,263
- ------------------------------------------------------------------------------------------
LIABILITIES
Future policy benefits $ 4,332 $ 3,595
Other policyholder funds 16,004 19,615
Other liabilities 1,613 2,094
Separate account liabilities 110,397 90,262
- ------------------------------------------------------------------------------------------
TOTAL LIABILITIES 132,346 115,566
- ------------------------------------------------------------------------------------------
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 gains (losses) on securities, net
of tax (255) 184
- ------------------------------------------------------------------------------------------
TOTAL ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (255) 184
- ------------------------------------------------------------------------------------------
Retained earnings 1,823 1,462
- ------------------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY 2,619 2,697
- ------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $134,965 $118,263
- ------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Accumulated Other
Comprehensive
Income (Loss)
-----------------
<S> <C> <C> <C> <C> <C>
Net Unrealized
Capital Gains
(Losses) on Total
Common Capital Securities, Retained Stockholder's
Stock Surplus Net of Tax Earnings Equity
- -------------------------------------------------------------------------------------------------------------
(in millions)
1999
Balance, December 31, 1998 $6 $1,045 $ 184 $1,462 $2,697
Comprehensive income
Net income -- -- -- 361 361
Other comprehensive income (loss), net of
tax (1):
Changes in net unrealized capital gains
(losses) on securities (2) -- -- (439) -- (439)
Total other comprehensive income (loss) (439)
Total comprehensive income (loss) (78)
- -------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999 $6 $1,045 $(255) $1,823 $2,619
- -------------------------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Net unrealized capital gain (loss) on securities is reflected net of tax of
$(236), $3 and $80, for the years ended December 31, 1999, 1998 and 1997,
respectively.
(2) Net of reclassification adjustment for after-tax gains (losses) realized in
net income of $(2), $(1) and $2 for the years ended December 31, 1999, 1998
and 1997, respectively.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(in millions)
OPERATING ACTIVITIES
Net income $ 361 $ 350 $ 302
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization (18) (23) 8
Net realized capital losses (gains) 4 2 (4)
Loss due to commutation of reinsurance 16 -- --
(Increase) decrease in premiums receivable and agents'
balances (18) 1 119
(Decrease) increase in other liabilities (263) (79) 223
Change in receivables, payables, and accruals 125 83 107
(Decrease) increase in accrued taxes (163) 60 126
Decrease (increase) in deferred income tax 241 (118) 40
Increase in deferred policy acquisition costs (358) (439) (555)
Increase in future policy benefits 797 536 585
Increase in reinsurance recoverables (318) (101) (31)
Other, net (81) 99 52
- --------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 325 371 972
- --------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchases of investments (5,753) (6,061) (6,869)
Sales of investments 6,383 4,901 4,256
Maturity of investments 1,818 1,761 2,329
Purchases of affiliates and other (25) -- --
- --------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES 2,423 601 (284)
- --------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net disbursements for investment and universal life-type
contracts charged against policyholder accounts (2,710) (1,009) (677)
- --------------------------------------------------------------------------------------------
Net cash used for financing activities (2,710) (1,009) (677)
- --------------------------------------------------------------------------------------------
Net increase (decrease) in cash 38 (37) 11
Cash -- beginning of year 17 54 43
- --------------------------------------------------------------------------------------------
Cash -- end of year $ 55 $ 17 $ 54
- --------------------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information:
Net Cash Paid During the Year for:
Income taxes $ 111 $ 263 $ 9
Noncash Investing Activities:
In 1999, the Company's parent, Hartford Life and Accident Insurance Company, recaptured an
in force block of individual life insurance previously ceded to the Company. This
commutation resulted in a reduction in the Company's assets of $666, consisting of $556
of invested assets, $99 of deferred policy acquisition costs and $11 of other assets.
Liabilities decreased $650, consisting of $543 of other policyholder funds, $60 of future
policy benefits and $47 of other liabilities. As a result, the Company recognized an
after-tax loss relating to this transaction of $16.
In 1998, due to the recapture of an in force block of business previously ceded to MBL
Life Assurance Co. of New Jersey, reinsurance recoverables of $4,753 were exchanged for
the fair value of assets comprised of $4,310 in policy loans and $443 in other net
assets.
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
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 (HLAI) 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). In November 1998,
Hartford Life Insurance Company transferred in the form of a dividend, Hartford
Financial Services, LLC and its subsidiaries to HLA.
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 its
insurance subsidiaries 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.
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, mutual funds and
retirement plan services for savings and retirement needs; (b) life insurance
for income protection and estate planning; (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 are prepared on the basis of accounting
principles generally accepted in the United States, which differ materially from
the statutory accounting practices prescribed by various insurance regulatory
authorities. All material intercompany transactions and balances between
Hartford Life Insurance Company and its subsidiaries have been eliminated.
The preparation of financial statements, in conformity with accounting
principles generally accepted in the United States, 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) ADOPTION OF NEW ACCOUNTING STANDARDS
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 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. 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.
The Company's cash flows were not impacted by these changes in accounting
principles.
(C) FUTURE ADOPTION OF NEW ACCOUNTING STANDARDS
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, "Accounting for
Derivative Instruments and Hedging Activities", to defer its effective date for
one year, to fiscal years beginning after June 15, 2000. Initial
F-6
<PAGE>
application for Hartford Life Insurance Company will begin January 1, 2001. SFAS
No. 133 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 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.
The Company has reviewed its derivative holdings and is in the process of
quantifying the impact of SFAS No. 133. The Company is also assessing what
actions, if any, need to be taken to minimize potential volatility, while at the
same time maintaining the economic protection needed to support the goals of its
business.
In October 1998, the American Institute of Certified Public Accountants (AICPA)
issued SOP No. 98-7, "Accounting for Insurance and Reinsurance Contracts That Do
Not Transfer Insurance Risk". This SOP provides guidance on the method of
accounting for insurance and reinsurance contracts that do not transfer
insurance risk, defined in the SOP as the deposit method. This SOP is effective
for financial statements for fiscal years beginning after June 15, 1999 and is
not expected to have a material impact on the Company's financial condition or
results of operations.
(D) 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 and
disability policies are recognized as revenues ratably over the policy period.
(E) 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 of the life insurance subsidiaries of the Company. The participating
insurance in force accounted for 34%, 35% and 33% in 1999, 1998 and 1997,
respectively, of total insurance in force.
(F) INVESTMENTS
Hartford Life Insurance Company's investments in both fixed maturities, which
include bonds, redeemable preferred stock and commercial paper, and equity
securities, which include common and non-redeemable preferred stocks, are
classified as "available for sale" in accordance with SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". Accordingly, these
securities are carried at fair value with the after-tax difference from cost
reflected in stockholder's equity as a component of accumulated other
comprehensive income. Policy loans are carried at outstanding balance which
approximates fair value. Other invested assets consist primarily of partnership
investments, which are accounted for by the equity method, and mortgage loans,
whereby the carrying value 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.
(G) DERIVATIVE INSTRUMENTS
HEDGE ACCOUNTING -- 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. Hartford Life Insurance 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 No. 86-2, "Accounting for
Options" and various Emerging Issues Task Force 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 (c) Future Adoption of New Accounting Standards.
Derivative instruments must be designated at inception as a hedge and measured
for effectiveness both at inception
F-7
<PAGE>
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
or quarterly 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
they are 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.
FUTURES -- 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.
FORWARD COMMITMENTS -- 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 are recognized immediately in the Consolidated Statements of Income as
a component of net investment income.
OPTIONS -- The cost of options entered into as part of a risk management
strategy are basis adjusted to the underlying asset or liability and amortized
over the remaining life of the option. Gains or losses on expiration or
termination are adjusted into the basis of the underlying asset or liability and
amortized over the remaining asset life.
INTEREST RATE SWAPS -- 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 earnings. 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.
INTEREST RATE CAPS AND FLOORS -- Premiums paid on purchased cap or floor
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 AND CURRENCY SWAPS CONTRACTS -- 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 adjustment
component of stockholder's equity.
Cash flows from futures, options and swaps, accounted for as hedges, are
included with the cash flows of the item being hedged.
(H) SEPARATE ACCOUNTS
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 substantially all the investment risk and rewards, and guaranteed
separate accounts, wherein the Company contractually guarantees either a minimum
return or account value to the policyholder.
(I) DEFERRED POLICY ACQUISITION COSTS
Policy acquisition costs, which include commissions and certain other 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.
F-8
<PAGE>
Acquisition costs and their related deferral are included in the Company's other
expenses as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
------------------------------
Commissions $ 887 $1,069 $ 976
Deferred acquisition costs (898) (891) (862)
Other 642 588 472
------------------------------
TOTAL OTHER EXPENSES $ 631 $ 766 $ 586
------------------------------
</TABLE>
(J) FUTURE POLICY BENEFITS
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.
(K) OTHER POLICYHOLDER FUNDS
Other policyholder funds include reserves for investment contracts without life
contingencies, corporate owned life insurance and universal life insurance
contracts. These reserves are based on account values, which represent the
balance that accrues to the benefit of policyholders.
3. INVESTMENTS AND DERIVATIVE INSTRUMENTS
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
For the years ended
December 31,
--------------------------------
1999 1998 1997
<S> <C> <C> <C>
--------------------------------
Interest income from fixed maturities $ 934 $ 952 $ 932
Interest income from policy loans 391 789 425
Income from other investments 48 32 26
--------------------------------
Gross investment income 1,373 1,773 1,383
Less: Investment expenses 14 14 15
--------------------------------
NET INVESTMENT INCOME $1,359 $1,759 $1,368
--------------------------------
</TABLE>
(B) COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
<TABLE>
<CAPTION>
For the years ended
December 31,
--------------------------
1999 1998 1997
<S> <C> <C> <C>
--------------------------
Fixed maturities $(7) $(28) $(7)
Equity securities 2 21 12
Real estate and other 1 5 (1)
--------------------------
NET REALIZED CAPITAL GAINS (LOSSES) $(4) $(2) $ 4
--------------------------
</TABLE>
(C) NET UNREALIZED CAPITAL GAINS (LOSSES) ON EQUITY SECURITIES
<TABLE>
<CAPTION>
For the years ended
December 31,
--------------------------
1999 1998 1997
<S> <C> <C> <C>
--------------------------
Gross unrealized capital gains $ 9 $ 2 $14
Gross unrealized capital losses (2) (1) --
--------------------------
Net unrealized capital gains 7 1 14
Deferred income tax expense 2 -- 5
--------------------------
Net unrealized capital gains, net of tax 5 1 9
Balance -- beginning of year 1 9 8
--------------------------
NET CHANGE IN UNREALIZED CAPITAL GAINS (LOSSES) ON EQUITY
SECURITIES $ 4 $(8) $ 1
--------------------------
</TABLE>
F-9
<PAGE>
(D) NET UNREALIZED CAPITAL GAINS (LOSSES) ON FIXED MATURITIES
<TABLE>
<CAPTION>
For the years ended
December 31,
----------------------------
1999 1998 1997
<S> <C> <C> <C>
----------------------------
Gross unrealized capital gains $ 48 $ 421 $371
Gross unrealized capital losses (472) (108) (80)
Unrealized capital (gains) losses credited to policyholders 24 (32) (30)
----------------------------
Net unrealized capital gains (losses) (400) 281 261
Deferred income tax expense (benefit) (140) 98 91
----------------------------
Net unrealized capital gains (losses), net of tax (260) 183 170
Balance -- beginning of year 183 170 22
----------------------------
NET CHANGE IN UNREALIZED CAPITAL GAINS (LOSSES) ON FIXED
MATURITIES $(443) $ 13 $148
----------------------------
</TABLE>
(E) FIXED MATURITY INVESTMENTS
<TABLE>
<CAPTION>
As of December 31, 1999
---------------------------------------------
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) $ 180 $ 5 $ (3) $ 182
U.S. Government and Government agencies and authorities
(guaranteed and sponsored) -- asset backed 1,094 5 (35) 1,064
States, municipalities and political subdivisions 155 2 (1) 156
Foreign governments 289 6 (14) 281
Public utilities 865 7 (39) 833
All other corporate, including international 5,646 18 (244) 5,420
All other corporate -- asset backed 4,103 5 (123) 3,985
Short-term investments 1,156 -- -- 1,156
Certificates of deposit 434 -- (12) 422
Redeemable preferred stock 1 -- (1) --
---------------------------------------------
TOTAL FIXED MATURITIES $13,923 $48 $(472) $13,499
---------------------------------------------
</TABLE>
<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
Foreign 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>
The amortized cost and estimated fair value of fixed maturity investments as of
December 31, 1999 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
F-10
<PAGE>
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.
<TABLE>
<CAPTION>
Amortized
Cost Fair Value
<S> <C> <C>
----------------------------
MATURITY
One year or less $ 2,454 $ 2,440
Over one year through five years 4,874 4,787
Over five years through ten years 3,072 2,940
Over ten years 3,523 3,332
----------------------------
TOTAL $13,923 $13,499
----------------------------
</TABLE>
(F) SALES OF FIXED MATURITY AND EQUITY SECURITY INVESTMENTS
Sales of fixed maturities, excluding short-term fixed maturities, for the years
ended December 31, 1999, 1998 and 1997 resulted in proceeds of $3.4 billion,
$3.2 billion and $4.2 billion, gross realized capital gains of $153, $103 and
$169, gross realized capital losses (including writedowns) of $160, $131 and
$176, respectively. Sales of equity security investments for the years ended
December 31, 1999, 1998 and 1997 resulted in proceeds of $7, $35 and $132 and
gross realized capital gains of $2, $21 and $12, respectively, and no gross
realized capital losses for all periods.
(G) 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.
(H) 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.
The Company maintains a derivatives counterparty exposure policy which
establishes market based credit limits, favors long-term financial stability and
creditworthiness, and typically requires credit enhancement/credit risk reducing
agreements. Credit risk is measured as the amount owed to the Company based on
current market conditions and potential payment obligations between the Company
and its counterparties. Credit exposures are quantified weekly and netted, and
collateral is pledged to or held by the Company to the extent the current value
of derivatives exceed exposure policy thresholds.
The Company's derivative program is monitored by an internal compliance unit and
is reviewed by senior management. Notional amounts, which represent the basis
upon which pay or receive amounts are calculated and are not reflective of
credit risk, pertaining to derivative financial instruments (excluding the
Company's guaranteed separate account derivative investments), totaled $5.5
billion and $6.2 billion ($3.9 billion and $3.9 billion related to the Company's
investments, $1.6 billion and $2.3 billion on the Company's liabilities) as of
December 31, 1999 and 1998, respectively.
The tables below provide a summary of derivative instruments held by Hartford
Life Insurance Company as of December 31, 1999 and 1998, segregated by major
investment and liability category:
F-11
<PAGE>
<TABLE>
<CAPTION>
1999 -- Amount Hedged (Notional Amounts)
----------------------------------------------------------------------------------
Total Issued Purchased Interest Rate Foreign Total
Carrying Caps & Caps, Floors Swaps & Currency Notional
ASSETS HEDGED Value Floors & Options Futures (1) Forwards Swaps (2) Amount
<S> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------
Asset backed securities (excluding
anticipatory) $ 5,049 $ -- $ -- $ -- $ 911 $-- $ 911
Anticipatory (3) -- -- -- 5 112 -- 117
Other bonds and notes 7,294 494 611 -- 1,676 80 2,861
Short-term investments 1,156 -- -- -- -- -- --
----------------------------------------------------------------------------------
TOTAL FIXED MATURITIES 13,499 494 611 5 2,699 80 3,889
Equity securities, policy loans and
other investments 4,585 -- -- -- -- -- --
----------------------------------------------------------------------------------
TOTAL INVESTMENTS $18,084 494 611 5 2,699 80 3,889
----------------------------------------------------------------------------------
OTHER POLICYHOLDER FUNDS $16,004 -- 1,150 -- 430 -- 1,580
----------------------------------------------------------------------------------
TOTAL DERIVATIVE INSTRUMENTS --
NOTIONAL VALUE $ 494 $1,761 $ 5 $3,129 $80 $5,469
----------------------------------------------------------------------------------
TOTAL DERIVATIVE INSTRUMENTS --
FAIR VALUE $ (22) $ 8 $ -- $ (30) $ 2 $ (42)
----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1998 -- Amount Hedged (Notional Amounts)
-------------------------------------------------------------------------------
Total Issued Purchased Interest Rate Foreign Total
Carrying Caps & Caps & Swaps & Currency Notional
ASSETS HEDGED Value Floors Floors Futures (1) Forwards Swaps (2) Amount
<S> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------
Asset backed securities (excluding
anticipatory) $ 5,187 $ 44 $ 243 $ 3 $ 885 $-- $1,175
Anticipatory (3) -- -- -- -- 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 -- 1,150 -- 1,195 -- 2,345
-------------------------------------------------------------------------------
TOTAL DERIVATIVE INSTRUMENTS --
NOTIONAL VALUE $ 505 $1,990 $21 $3,615 $90 $6,221
-------------------------------------------------------------------------------
TOTAL DERIVATIVE INSTRUMENTS --
FAIR VALUE $ (6) $ 19 $-- $ 27 $(7) $ 33
-------------------------------------------------------------------------------
</TABLE>
(1) As of December 31, 1999 and 1998, approximately 100% and 5%,
respectively, of the notional futures contracts expire within one year.
(2) As of December 31, 1999 and 1998, approximately 28% and 11%,
respectively, of foreign currency swaps expire within one year.
(3) 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, 1999, the Company had $1.4 of net
deferred losses on interest rate swaps and futures. The Company expects to basis
adjust the entire loss in 2000. During 1999, $0.2 of new future activity was
basis adjusted. As of December 31, 1998, the Company had no deferred gains for
interest rate swaps.
F-12
<PAGE>
The following is a reconciliation of notional amounts by derivative type and
strategy as of December 31, 1999 and 1998:
<TABLE>
<CAPTION>
BY DERIVATIVE TYPE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
December 31, 1998 Maturities/ December 31, 1999
Notional Amount Additions Terminations (1) Notional Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Caps $1,912 $ -- $ 148 $1,764
Floors 583 -- 178 405
Swaps/Forwards 3,705 991 1,487 3,209
Futures 21 292 308 5
Options -- 86 -- 86
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL $6,221 $1,369 $2,121 $5,469
- -------------------------------------------------------------------------------------------------------------------------------
BY STRATEGY
- -------------------------------------------------------------------------------------------------------------------------------
Liability $2,345 $ 17 $ 782 $1,580
Anticipatory 235 204 322 117
Asset 2,398 831 427 2,802
Portfolio 1,243 317 590 970
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL $6,221 $1,369 $2,121 $5,469
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) During 1999, 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.
Other invested assets consist primarily of partnership investments, which are
accounted for by the equity method, and mortgage loans, whereby the carrying
value approximates 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 similar to external valuation models.
The carrying amount and fair values of Hartford Life Insurance Company's
financial instruments as of December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
------------------------------------
ASSETS
Fixed maturities $13,499 $13,499 $14,818 $14,818
Equity securities 56 56 31 31
Policy loans 4,187 4,187 6,684 6,684
Other investments 342 348 264 309
LIABILITIES
Other policyholder funds (1) 11,734 11,168 11,709 11,726
------------------------------------
</TABLE>
(1) Excludes corporate owned life insurance and universal life insurance
contracts.
F-13
<PAGE>
5. SEPARATE ACCOUNTS
Hartford Life Insurance Company maintained separate account assets and
liabilities totaling $110.4 billion and $90.3 billion as of December 31, 1999
and 1998, 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 $101.7 billion and
$80.6 billion as of December 31, 1999 and 1998, respectively, wherein the
policyholder assumes substantially all the investment risk, and guaranteed
separate accounts totaling $8.7 and $9.7 billion as of December 31, 1999 and
1998, 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
$860 and $1.8 billion as of December 31, 1999 and 1998, 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 $1.1 billion, $908 and
$699 in 1999, 1998 and 1997, respectively. The guaranteed separate accounts
include fixed market value adjusted (MVA) individual annuities and modified
guaranteed life insurance. The average credited interest rate on these contracts
was 6.5% and 6.6% as of December 31, 1999 and 1998, respectively. The assets
that support these liabilities were comprised of $8.7 billion and $9.5 billion
in fixed maturities as of December 31, 1999 and 1998, respectively, and $0.2
billion of other invested assets as of December 31, 1998. 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 $(96) and $40 in carrying value and $2.0 billion and
$3.5 billion in notional amounts as of December 31, 1999 and 1998, respectively.
6. STATUTORY RESULTS
<TABLE>
<CAPTION>
For the years ended December 31,
------------------------------------
1999 1998 1997
<S> <C> <C> <C>
------------------------------------
Statutory net income $ 151 $ 211 $ 214
------------------------------------
Statutory capital and surplus $1,905 $1,676 $1,441
------------------------------------
</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
2000, without prior regulatory approval, is estimated to be $190.
Hartford Life Insurance Company and its domestic insurance subsidiaries prepare
their statutory financial statements in accordance with accounting practices
prescribed by the applicable state of domicile. Prescribed statutory accounting
practices include publications of the National Association of Insurance
Commissioners (NAIC), as well as state laws, regulations and general
administrative rules.
The NAIC adopted the Codification of Statutory Accounting Principles (SAP) in
March 1998. The proposed effective date for the statutory accounting guidance is
January 1, 2001. It is expected that Hartford Life Insurance Company's
domiciliary state will adopt the SAP and the Company will make the necessary
changes required for implementation. The Company has not yet determined the
impact that the SAP will have on the statutory financial statements of Hartford
Life Insurance Company and its insurance subsidiaries.
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, stock appreciation rights, performance shares or
restricted stock, or any combination of the foregoing. 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 and Class B Common Stock
and treasury stock as reported in the Annual Report on Hartford Life's Form 10-K
of the Company 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 awards. Performance shares
awards of common stock granted under the Plan become payable upon the attainment
of specific performance goals achieved over a three year period.
F-14
<PAGE>
All options granted have an exercise price equal to the market price of the
Company's stock on the date of grant and an option's maximum term is ten years.
Certain non-performance 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 non-performance based options
become exercisable over a three year period commencing with the date of grant.
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 120,694, 121,943 and 54,316
shares under the ESPP in 1999, 1998 and 1997, respectively. The weighted average
fair value of the discount under the ESPP was $7.48 per share in 1999, $13.74
per share in 1998 and $9.63 per share in 1997.
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 both 1999 and
1998, and $5 in 1997.
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 1999, 1998 and 1997.
The assumed rate in the per capita cost of health care (the health care trend
rate) was 7.1% for 1999, decreasing ratably to 5.0% in the year 2003. Increasing
or decreasing 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 in both 1999 and 1998, and $2 in 1997.
9. REINSURANCE
Hartford Life Insurance Company cedes insurance to other insurers in order to
limit its maximum losses. Such transfer does not relieve Hartford Life Insurance
Company of its primary liability. Failure of reinsurers to honor their
obligations could result in losses to Hartford Life Insurance Company. Hartford
Life Insurance Company reduces this risk by evaluating the financial condition
of reinsurers, and monitoring for possible concentrations of credit risk.
Hartford Life Insurance Company has no significant reinsurance related
concentrations of credit risk.
The Company records a receivable for the portion of reinsured benefits paid and
insurance liabilities. Reinsurance recoveries on ceded reinsurance contracts
were $397, $300 and $418 for the years ended December 31, 1999, 1998 and 1997,
respectively. Hartford Life Insurance Company also assumes insurance from other
insurers.
The effect of reinsurance on premiums and other considerations is summarized as
follows:
<TABLE>
<CAPTION>
For the years ended December 31,
------------------------------------
1999 1998 1997
<S> <C> <C> <C>
------------------------------------
Direct premiums and other considerations $2,660 $2,722 $2,164
Reinsurance assumed 95 150 159
Reinsurance ceded (710) (654) (686)
------------------------------------
PREMIUMS AND OTHER CONSIDERATIONS $2,045 $2,218 $1,637
------------------------------------
</TABLE>
F-15
<PAGE>
Hartford Life Insurance Company maintains certain reinsurance agreements with
HLA, whereby the Company cedes both group life and group accident and health
risk. Under these treaties, the Company ceded group life premium of $119, $132
and $80 in 1999, 1998 and 1997, respectively, and accident and health premium of
$430, $379, and $335, respectively, to HLA.
Pursuant to a reinsurance agreement dating back to 1992, the Company assumed
100% of certain blocks of individual life insurance from HLA. Under this
reinsurance agreement Hartford Life Insurance Company assumed $9, $13 and $18 of
premium from HLA in 1999, 1998 and 1997, respectively. On December 1, 1999, HLA
recaptured this in force block of individual life insurance previously ceded to
the Company. This commutation resulted in a reduction in the Company's assets of
$666, consisting of $556 of invested assets, $99 of deferred policy acquisition
costs and $11 of other assets. Liabilities decreased $650, consisting of $543 of
other policyholder funds, $60 of future policy benefits and $47 of other
liabilities. As a result, the Company recognized an after-tax loss relating to
this transaction of $16.
In 1998, the Hartford Life recaptured an in force block of Corporate Owned Life
Insurance (COLI) business previously ceded to MBL Assurance Co. of New Jersey
(MBL Life). The transaction was consummated through an assignment of a
reinsurance arrangement between Hartford Life and MBL Life to a Hartford Life
subsidiary. Hartford Life originally assumed the life insurance block in 1992
from Mutual Benefit Life, which was placed in court-supervised rehabilitation in
1991, and reinsured a portion of those policies back to MBL Life. This recapture
was effective January 1, 1998 and resulted in a decrease in ceded premiums and
other considerations of $163 in 1998. Additionally, this transaction resulted in
a decrease in reinsurance recoverables of $4.8 billion, which was exchanged for
the fair value of assets comprised of $4.3 billion in policy loans and $443 in
other net assets.
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 for 1997 and 1998 and intend to file a
separate consolidated federal income tax return for 1999. The Company's
effective tax rate was 35%, 35% and 36% in 1999, 1998 and 1997, respectively.
Income tax expense (benefit) is as follows:
<TABLE>
<CAPTION>
For the years ended
December 31,
------------------------------
1999 1998 1997
<S> <C> <C> <C>
------------------------------
Current $(50) $307 $162
Deferred 241 (119) 5
------------------------------
INCOME TAX EXPENSE $191 $188 $167
------------------------------
</TABLE>
A reconciliation of the tax provision at the U.S. federal statutory rate to the
provision (benefit) for income taxes is as follows:
<TABLE>
<CAPTION>
For the years ended
December 31,
------------------------------
1999 1998 1997
<S> <C> <C> <C>
------------------------------
Tax provision at the U.S. federal statutory rate $193 $188 $164
Other (2) -- 3
------------------------------
TOTAL $191 $188 $167
------------------------------
</TABLE>
Deferred tax assets (liabilities) include the following as of December 31:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C> <C>
---------------------
Tax basis deferred policy acquisition costs $ 720 $ 751
Financial statement deferred policy acquisition costs and
reserves 11 103
Employee benefits (3) 4
Net unrealized capital losses (gains) on securities 138 (98)
Investments and other (407) (296)
---------------------
TOTAL $ 459 $ 464
---------------------
</TABLE>
F-16
<PAGE>
Hartford Life Insurance Company had a current tax receivable of $56 as of
December 31, 1999 and a current tax payable of $65 as of December 31, 1998.
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 the
balance in this account, which for tax return purposes was $104 as of December
31, 1999.
11. RELATED PARTY TRANSACTIONS
Transactions of the Company with 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 in both 1999 and 1998 and $39 in 1997.
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 alleged economic and
punitive damages have been asserted. Some of these cases have been filed as
purported class actions and some cases have been filed in certain jurisdictions
that permit punitive damage awards disproportionate to the actual damages
incurred. 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 estimated
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 $2, $9 and $15 in 1999, 1998 and 1997,
respectively, of which $1 in 1999 and $4 in both 1998 and 1997 were estimated to
be creditable against premium taxes.
(C) LEASES
The rent paid to Hartford Fire for space occupied by the Company was $9 in 1999
and $7 in both 1998 and 1997. Future minimum rental commitments are as follows:
<TABLE>
<S> <C>
2000 $ 14
2001 14
2002 13
2003 12
2004 12
Thereafter 62
--------
TOTAL $ 127
--------
</TABLE>
The principal executive offices of Hartford Life Insurance Company, together
with its parent, are located in Simsbury, Connecticut. Rental expense is
recognized on a level basis over the term of the primary sublease for the
facility located in Simsbury, Connecticut, which expires on December 31, 2009,
and amounted to approximately $9 in each of the years ended December 31, 1999,
1998 and 1997.
(D) TAX MATTERS
Hartford Life's federal income tax returns are routinely audited by the Internal
Revenue Service. Hartford Life's 1996-1997 federal income tax returns are
currently under audit by the Internal Revenue Service. Management believes that
sufficient provision has been made in the financial statements for issues that
may result from tax examinations and other tax related matters for all open tax
years.
F-17
<PAGE>
13. SEGMENT INFORMATION
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 fixed and variable
annuities, mutual funds, retirement plan services other investment products.
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 tables outlines summarized financial
information concerning the Company's segments.
<TABLE>
<CAPTION>
Investment Individual
1999 Products Life COLI Other Total
<S> <C> <C> <C> <C> <C>
--------------------------------------------------
Total revenues $ 1,884 $ 574 $ 830 $ 112 $ 3,400
Net investment income 699 169 431 60 1,359
Amortization of deferred policy acquisition costs 411 128 -- -- 539
Income tax expense (benefit) 159 37 15 (20) 191
Net income (loss) 300 68 28 (35) 361
Assets 106,352 5,962 20,198 2,453 134,965
</TABLE>
<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>
<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>
14. QUARTERLY RESULTS FOR 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
<S> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, June 30, September 30, December 31,
------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
------------------------------------------------------------------------------
Revenues $838 $915 $853 $721 $846 $826 $863 $1,513
Benefits, claims and expenses 703 787 722 591 695 688 728 1,371
Net income 88 83 85 85 100 89 88 93
</TABLE>
F-18
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE I -- SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN AFFILIATES
AS OF DECEMBER 31, 1999
(IN MILLIONS)
<TABLE>
<CAPTION>
Amount at
Fair which shown
Type of Investment Cost Value on Balance Sheet
<S> <C> <C> <C>
------------------------------------
FIXED MATURITIES
Bonds and Notes
U.S. Government and Government agencies and authorities
(guaranteed and sponsored) $ 180 $ 182 $ 182
U.S. Government and Government agencies and authorities
(guaranteed and sponsored) -- asset backed 1,094 1,064 1,064
States, municipalities and political subdivisions 155 156 156
Foreign governments 289 281 281
Public utilities 865 833 833
All other corporate, including international 5,646 5,420 5,420
All other corporate -- asset backed 4,103 3,985 3,985
Short-term investments 1,156 1,156 1,156
Certificates of deposit 434 422 422
Redeemable preferred stock 1 -- --
------------------------------------
TOTAL FIXED MATURITIES 13,923 13,499 13,499
------------------------------------
EQUITY SECURITIES
Common Stocks
Industrial and miscellaneous 49 56 56
------------------------------------
TOTAL EQUITY SECURITIES 49 56 56
------------------------------------
TOTAL FIXED MATURITIES AND EQUITY SECURITIES 13,972 13,555 13,555
------------------------------------
Policy Loans 4,187 4,187 4,187
------------------------------------
OTHER INVESTMENTS
Mortgage loans on real estate 198 198 198
Other invested assets 127 150 144
------------------------------------
TOTAL OTHER INVESTMENTS 325 348 342
------------------------------------
TOTAL INVESTMENTS $18,484 $18,090 $18,084
------------------------------------
</TABLE>
S-1
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
Net Benefits,
Deferred Realized Claims and
Policy Future Other Premiums Net Capital Claim
Acquisition Policy Policyholder and Other Investment Gains Adjustment
Segment Costs Benefits Funds Considerations Income (Losses) Expenses
<S> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------
1999
Investment Products $3,099 $2,744 $ 8,859 $1,185 $ 699 $-- $ 660
Individual Life 914 270 1,880 405 169 -- 254
Corporate Owned Life Insurance -- 321 5,244 399 431 -- 621
Other -- 997 21 56 60 (4) 39
-------------------------------------------------------------------------------------------
CONSOLIDATED OPERATIONS $4,013 $4,332 $16,004 $2,045 $1,359 $(4) $1,574
-------------------------------------------------------------------------------------------
1998
-------------------------------------------------------------------------------------------
Investment Products $2,823 $2,407 $ 9,194 $1,043 $ 736 $-- $ 670
Individual Life 931 466 2,307 363 181 (1) 262
Corporate Owned Life Insurance -- 225 8,097 774 793 -- 924
Other -- 497 17 38 49 (1) 55
-------------------------------------------------------------------------------------------
CONSOLIDATED OPERATIONS $3,754 $3,595 $19,615 $2,218 $1,759 $(2) $1,911
-------------------------------------------------------------------------------------------
1997
-------------------------------------------------------------------------------------------
Investment Products $2,478 $2,070 $ 9,620 $ 771 $ 739 $-- $ 677
Individual Life 837 392 2,182 323 164 -- 242
Corporate Owned Life Insurance -- 56 9,259 551 429 -- 439
Other -- 541 (27) (8) 36 4 21
-------------------------------------------------------------------------------------------
CONSOLIDATED OPERATIONS $3,315 $3,059 $21,034 $1,637 $1,368 $ 4 $1,379
-------------------------------------------------------------------------------------------
<CAPTION>
Amortization
of Deferred
Policy
Acquisition Dividends to Other
Segment Costs Policyholders Expenses
<S> <C> <C> <C>
---------------------------------------
1999
Investment Products $411 $ -- $354
Individual Life 128 -- 87
Corporate Owned Life Insurance -- 104 62
Other -- -- 128
---------------------------------------
CONSOLIDATED OPERATIONS $539 $104 $631
---------------------------------------
1998
---------------------------------------
Investment Products $326 $ -- $368
Individual Life 105 -- 77
Corporate Owned Life Insurance -- 329 278
Other -- -- 43
---------------------------------------
CONSOLIDATED OPERATIONS $431 $329 $766
---------------------------------------
1997
---------------------------------------
Investment Products $250 $ -- $266
Individual Life 83 -- 77
Corporate Owned Life Insurance -- 240 259
Other 2 -- (16)
---------------------------------------
CONSOLIDATED OPERATIONS $335 $240 $586
---------------------------------------
</TABLE>
S-2
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE IV -- REINSURANCE
(IN MILLIONS)
<TABLE>
<CAPTION>
Percentage
Gross Ceded to Assumed From Net of Amount
Amount Other Companies Other Companies Amount Assumed to Net
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------
FOR THE YEAR ENDED
DECEMBER 31, 1999
Life insurance in force $307,970 $131,162 $11,785 $188,593 6.2%
PREMIUMS AND OTHER CONSIDERATIONS
Life insurance and annuities $ 2,212 $ 275 $ 84 $ 2,021 4.2%
Accident and health insurance 448 435 11 24 45.8%
------------------------------------------------------------------------
TOTAL PREMIUMS AND OTHER CONSIDERATIONS $ 2,660 $ 710 $ 95 $ 2,045 4.6%
------------------------------------------------------------------------
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%
------------------------------------------------------------------------
</TABLE>
S-3
