As filed with the Securities and Exchange Registration No. 33-61897
Commission on April 11, 1997 Registration No. 811-05906
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
- --------------------------------------------------------------------------------
POST-EFFECTIVE AMENDMENT NO. 2 TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
and Amendment to
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
- --------------------------------------------------------------------------------
Variable Annuity Account G of Aetna Life Insurance and Annuity Company
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RE4A, Hartford, Connecticut 06156
Depositor's Telephone Number, including Area Code: (860) 273-7834
Susan E. Bryant, Counsel
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RE4A, Hartford, Connecticut 06156
(Name and Address of Agent for Service)
- --------------------------------------------------------------------------------
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
--------
X on May 1, 1997 pursuant to paragraph (b) of Rule 485
--------
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
registered an indefinite number of securities under the Securities Act of 1933.
Registrant filed a Rule 24f-2 Notice for the fiscal year ended December 31, 1996
on February 28, 1997.
<PAGE>
VARIABLE ANNUITY ACCOUNT G
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-4 ITEM NO. PART A (PROSPECTUS) LOCATION
<S> <C> <C>
1 Cover Page........................................... Cover Page
2 Definitions.......................................... Definitions
3 Synopsis............................................. Summary; Fee Table
4 Condensed Financial Information...................... Condensed Financial Information
5 General Description of Registrant, Depositor, and Facts about Aetna, the Separate
Portfolio Companies.................................. Account and the Oppenheimer
Variable Account Funds
6 Deductions........................................... Charges and Deductions
7 General Description of Variable Annuity Contracts.... The Contract
8 Annuity Period....................................... The Contract; Annuity Benefit
9 Death Benefit........................................ Distributions Under the Contract
10 Purchases and Contract Values........................ The Contract -- Purchase
Payments and Allocating Your
Purchase Payments; -- Value of
the Accumulation Account and
Unit Value
11 Redemptions.......................................... Distributions Under the Contract
12 Taxes................................................ Federal Tax Matters
13 Legal Proceedings.................................... Miscellaneous - Legal Proceedings
<PAGE>
14 Table of Contents of the Statement of Additional Table of Contents of the Statement of
Information.......................................... Additional Information
<PAGE>
FORM N-4 ITEM NO. PART B (STATEMENT OF ADDITIONAL INFORMATION) LOCATION
<S> <C> <C>
15 Cover Page........................................... Cover page
16 Table of Contents.................................... Table of Contents
17 General Information and History...................... General Information and History;
Variable Annuity Account G
18 Services............................................. General Information and History;
Independent Auditors
19 Purchase of Securities Being Offered................. Offering and Purchase
20 Underwriters......................................... Offering and Purchase
21 Calculation of Performance Data...................... Not Applicable
22 Annuity Payments..................................... Not Applicable
23 Financial Statements................................. Financial Statements
</TABLE>
<PAGE>
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, Hartford, Connecticut 06156
1-800-531-4547
VARIABLE ANNUITY ACCOUNT G
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
Prospectus Dated May 1, 1997
MULTI VEST[RegTM] PLAN -- An Individual Deferred Variable Annuity
This Prospectus describes the individual deferred variable annuity contract
("Contract") originally issued by Confederation Life Insurance and Annuity
Company ("Confederation"). The Contract allows tax-deferred capital accumulation
and provides future fixed income for retirement or other long-term purposes by
allowing Purchase Payments to be allocated on a variable basis, a fixed basis or
a combination of both.
On August 12, 1994 Confederation was placed in rehabilitation by the Fulton
County, Georgia Superior Court and ceased sales of new Contracts and acceptance
of additional Purchase Payments. On October 2, 1995, Aetna Life Insurance and
Annuity Company ("Aetna", "the Company", "we", "our", or "us") assumed the
existing in-force Contracts in accordance with an Assumption Reinsurance
Agreement which was approved by the Fulton County, Georgia Superior Court in
connection with the rehabilitation of Confederation. Contract owners will look
to Aetna instead of Confederation to fulfill the terms of their Contracts.
Aetna does not intend to resume sales of new Contracts; additional Purchase
Payments may continue to be made under existing Contracts subject to certain
limitations. See "The Contract -- Purchase Payments and Allocating Your Purchase
Payments."
This Prospectus is intended to describe the Contract provisions relating to the
variable funding options and the fees and expenses that may be charged in
connection with Purchase Payments allocated to Variable Annuity Account G of
Aetna Life Insurance and Annuity Company (the "Separate Account"). Information
with respect to the fixed funding option is included in the Appendix to this
Prospectus.
There are currently eight Subaccounts in the Separate Account. Each Subaccount
invests in a corresponding portfolio of the Oppenheimer Variable Account Funds:
the Oppenheimer Money Fund; the Oppenheimer High Income Fund; the Oppenheimer
Bond Fund; the Oppenheimer Capital Appreciation Fund; the Oppenheimer Growth
Fund; the Oppenheimer Multiple Strategies Fund; the Oppenheimer Global
Securities Fund; and the Oppenheimer Strategic Bond Fund. Each Fund has distinct
investment objectives and policies which are described in the accompanying
prospectus for the Oppenheimer Variable Account Funds. See "Facts About Aetna,
The Separate Account and The Oppenheimer Variable Account Funds."
This Prospectus sets forth the basic information about the Separate Account that
a prospective investor should know before investing. Additional information
about the Separate Account is contained in a Statement of Additional Information
("SAI") dated May 1, 1997, which has been filed with the Securities and Exchange
Commission ("SEC"). The Table of Contents of the SAI is found in this
Prospectus. An SAI is available at no charge by indicating your request on the
prospectus receipt or by calling 1-800-531-4547. An SAI for any of the
Oppenheimer Variable Account Funds may also be obtained by calling that phone
number.
THIS PROSPECTUS, THE STATEMENT OF ADDITIONAL INFORMATION AND OTHER INFORMATION
ABOUT THE SEPARATE ACOUNT REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION (SEC) CAN BE FOUND IN THE SEC'S WEB SITE AT http://www.sec.gov.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
DEFINITIONS .................................................. 1
SUMMARY ........................................................ 3
FEE TABLE ..................................................... 4
CONDENSED FINANCIAL INFORMATION ................................ 6
FINANCIAL STATEMENTS ......................................... 8
FACTS ABOUT AETNA, THE SEPARATE ACCOUNT, AND THE OPPENHEIMER
VARIABLE ACCOUNT FUNDS ......................................... 8
The Company .................................................. 8
Variable Annuity Account G ................................... 8
The Oppenheimer Variable Account Funds and Investment Adviser 8
THE CONTRACT .................................................. 9
Parties to the Contract ...................................... 9
Purchase Payments and Allocating Your Purchase Payments ..... 10
Value of the Accumulation Account and Unit Value .............. 10
Allocation Changes ............................................ 11
Transfers ..................................................... 11
Dollar Cost Averaging ......................................... 11
Questions ..................................................... 12
CHARGES AND DEDUCTIONS ......................................... 12
Surrender Charges ............................................ 12
Mortality and Expense Risk Charge ............................. 13
Administration Fee ............................................ 13
Annual Contract Fee ......................................... 13
State Taxes .................................................. 13
Other Taxes .................................................. 13
Fund Expenses ............................................... 13
DISTRIBUTIONS UNDER THE CONTRACT ............................. 13
Withdrawals .................................................. 13
Systematic Withdrawal ......................................... 14
Surrender ..................................................... 14
Death Proceeds ............................................... 14
Payment ..................................................... 15
ANNUITY BENEFIT ............................................... 15
Annuitization ............................................... 15
Partial Annuity Benefit ...................................... 15
Annuity Date .................................................. 15
Annuity Options ............................................... 16
Income Payments ............................................... 16
FEDERAL TAX MATTERS ............................................ 16
Introduction .................................................. 16
Aetna's Tax Status ............................................ 16
Taxation of Annuity Contracts in General .................... 17
Qualified Contracts ......................................... 17
Other Tax Considerations ...................................... 18
DISTRIBUTION OF THE CONTRACT ................................... 18
MISCELLANEOUS .................................................. 19
Voting Rights ............................................... 19
Changes in the Contract ...................................... 19
Incontestability ............................................ 19
Nonparticipating ............................................ 19
Assignment .................................................. 19
Annual Contract Report ...................................... 19
Misstatement of Age or Sex ................................... 19
Telephone Transfers ......................................... 20
Legal Proceedings ............................................ 20
Legal Matters ............................................... 20
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION ........... 20
APPENDIX A -- THE FIXED ACCOUNT ................................ Appendix-1
</TABLE>
i
<PAGE>
DEFINITIONS
Accumulation Account and Value of the Accumulation Account: The Accumulation
Account is the account to which Net Purchase Payments are credited. The Value of
the Accumulation Account refers to the combined value of your Contract in all of
the Subaccounts of the Separate Account and the Fixed Account.
Aetna: We, our, us, Aetna Life Insurance and Annuity Company.
Annuitant: The person on whose life the Income Payments are based and the person
you designate to receive Income Payments.
Annuity Date: The date on which the Annuity Option becomes effective.
Annuity Value: The Value of the Accumulation Account on the Annuity Date less
the Annual Contract Fee for the then current Contract Year and any applicable
State Taxes.
Beneficiary: The person designated by you to receive benefits in the event of
your death prior to the Annuity Date or to receive any remaining guaranteed
payments under an Income Option in the event of the death of the Annuitant after
the Annuity Date.
Code: The Internal Revenue Code of 1986, as amended.
Confederation: Confederation Life Insurance and Annuity Company.
Contract: The individual deferred variable annuity described in this Prospectus.
Contract Date: The date the Contract becomes effective.
Contract Year: Each 12-month period starting the same day and month as the
Contract Date.
Fixed Account: A part of our General Account consisting of assets, from
Contracts such as the one described in this Prospectus, which are not allocated
to the Separate Account. See Appendix A.
Fund: A portfolio of Oppenheimer Variable Account Funds in which assets of a
corresponding Subaccount are invested.
General Account: Our corporate assets other than those segregated in any
separate account established by us.
Home Office: Our principal executive offices located at 151 Farmington Avenue,
Hartford, Connecticut 06156.
Income Payment: The amount we pay to an Annuitant at regular intervals under an
Annuity Option.
Non-Qualified Contracts: Contracts other than Qualified Contracts.
Oppenheimer Variable Account Funds: The Oppenheimer Variable Account Funds, a
diversified, open-end management investment company (mutual fund) in which the
Separate Account invests.
Purchase Payment and Net Purchase Payment: A Purchase Payment is a premium paid
to us as consideration for the benefits provided by this Contract. A Net
Purchase Payment is that portion of each Purchase Payment which is credited to
the Accumulation Account after the deduction for State Taxes, if any.
Qualified Contracts: Contracts purchased by plans that qualify for special
federal income tax treatment or plans which are intended to qualify for special
federal income tax treatment under Code sections 401(a) and 403(b) or Contracts
purchased by individuals for their individual retirement accounts under Code
section 408.
SEC: The Securities and Exchange Commission.
Separate Account: Variable Annuity Account G of Aetna Life Insurance and Annuity
Company, established and maintained for the investment of the portion of Net
Purchase Payments from contracts such as the one described in this Prospectus,
which are not allocated to the Fixed Account.
State Taxes: Premium taxes imposed by certain jurisdictions on Purchase Payments
when received, or on values withdrawn, surrendered or annuitized.
Subaccount: A division of the Separate Account to which Net Purchase Payments
may be allocated. Each Subaccount invests in shares of a Fund.
Surrender: A request for the Surrender Value which terminates the Contract.
Surrender Charge: A contingent deferred sales load which may be charged in the
event of a Withdrawal or Surrender.
Surrender Value: The Value of the Accumulation Account less any applicable
Surrender Charges and State Taxes, and the Annual Contract Fee for the current
Contract Year.
1
<PAGE>
Transfer: The reallocation of all or a portion of the value in one Subaccount or
the Fixed Account to another Subaccount or the Fixed Account.
Unit and Unit Value: A standard of measurement used to determine your value in
each Subaccount prior to the Annuity Date. Each Subaccount has a distinct Unit
Value which may vary from one Valuation Period to the next.
Valuation Date: The date and time at which the Accumulation Unit Value and
Annuity Unit Value of a Subaccount is calculated. Currently, this calculation
occurs after the close of business of the New York Stock Exchange on any normal
business day, Monday through Friday, that the New York Stock Exchange is open.
Valuation Period: The period of time between two consecutive Valuation Dates.
We, Our, Us: Aetna Life Insurance and Annuity Company or Aetna.
Withdrawal: The surrender of a portion of the Value of the Accumulation Account.
You and Your: The purchaser and Owner of the Contract.
1940 Act: The Investment Company Act of 1940, as amended.
2
<PAGE>
SUMMARY
The following is a brief summary of some of the important features of the
Contract described in this Prospectus. Reference should be made to the body of
this Prospectus for more detailed information. Appendix A describes the fixed
funding option available under your Contract.
The Contract
The Contract allows tax-deferred capital accumulation and provides future fixed
income payments beginning on a date you choose. The amount of your future fixed
income will be based on the investment experience of the assets underlying the
Contract during the accumulation period. See "The Contract."
Purchase Payments
Additional Purchase Payments of at least $100 may be made at any time prior to
the Annuity Date. However, you are under no obligation to make additional
Purchase Payments. See "The Contract -- Purchase Payments and Allocating Your
Purchase Payments."
Withdrawals and Surrenders
Prior to the Annuity Date, you may make unlimited Withdrawals or Surrender your
Contract for the Surrender Value. See "Distributions Under the Contract" and
"Appendix A -- The Fixed Account." You may be subject to a penalty tax for an
early withdrawal. See "Federal Tax Matters -- Other Tax Considerations --
Penalty Tax on Certain Distributions."
Surrender Charges
A Surrender Charge may apply on the amounts withdrawn or surrendered. See
"Charges and Deductions -- Surrender Charges."
Taxes and Withholding
Purchase Payment and investment results of your Accumulation Account are
generally not taxable until distributed. Withholding for income tax may be
imposed on certain withdrawals. See "Federal Tax Matters."
Charges and Deductions
Certain charges and deductions are associated with the Contracts, for example,
State Taxes, annual contract fee, mortality and expense risk charge and
administrative fee. The Funds are also subject to certain fees and expenses. See
"Fee Table;" "Charges and Deductions."
Annuity Payments
The Contract is an annuity which provides for a series of fixed Income Payments.
You may choose the date Income Payments begin, subject to some limitations. The
amount of and the length of Income Payments will be based, in part, on the
Annuity Option selected. See "Annuity Benefit."
Death Benefits
Death proceeds are paid to your Beneficiary in the event of your death and you
have not annuitized all your Accumulation Account. See "Annuity Benefit." If
death occurs prior to age 85, the death proceeds will never be less than the sum
of Purchase Payments received less: prior Withdrawals, applicable Surrender
Charges on prior Withdrawals and values applied to the Partial Annuity Benefit.
Every five years, we will adjust the death proceeds to reflect increases in your
Accumulation Account Value. If death occurs on or after age 85 the death
proceeds will equal the value of the Accumulation Account. See "Distributions
Under the Contract -- Death Proceeds."
3
<PAGE>
FEE TABLE
The Fee Table is provided to assist you in understanding the various charges and
deductions that you will bear directly or indirectly. The Fee Table reflects
expenses under the Contract and of both the Separate Account and the Oppenheimer
Variable Account Funds. The Fee Table does not include possible State Taxes. See
"Charges and Deductions" in this Prospectus and "How the Funds are Managed" in
the prospectus for the Oppenheimer Variable Account Funds.
Contract Holder Transaction Expenses
<TABLE>
<CAPTION>
Percentage of
Purchase Payment
----------------
<S> <C> <C>
Sales Load at Time of Purchase 0%
Deferred sales load when Purchase Payment withdrawn or surrendered
Number of Years(1)
--------------------
1 6%
2 6%
3 5%
4 4%
5 3%
Thereafter 0%
Charge for Transfer None
</TABLE>
(1) Surrender Charges are based upon the number of years between the date
Purchase Payments are deemed to have been received and the date they are
withdrawn or surrendered. Purchase Payments received prior to October 2,
1995, are deemed to have been received on the date of your initial Purchase
Payment. Additional Purchase Payments received after October 2, 1995 will be
deemed to be received on the date we actually receive them.
<TABLE>
<S> <C>
ANNUAL CONTRACT FEE $30
SEPARATE ACCOUNT ANNUAL EXPENSES (Daily deductions, equal to
the percentage shown on an annual basis, made from amounts allocated
to the variable options under each Contract).
Percentage of Average
Accumulation Account
Value Allocated to
Separate Account
-----------------------
Mortality and Expense Risk Charge ................................. 1.25%
Administration Fee ................................................ 0.10%
---------------------
Total Separate Account Annual Expenses ........................... 1.35%
=====================
</TABLE>
FUND ANNUAL CHARGES AND EXPENSES
(as percentage of the average account value)
<TABLE>
<CAPTION>
Total Fund
Management Other Annual
Fees Expenses Expenses(1)
------------- ----------- -------------
<S> <C> <C> <C>
Oppenheimer Money Fund 0.45% 0.04% 0.49%
Oppenheimer High Income Fund 0.75% 0.06% 0.81%
Oppenheimer Bond Fund 0.74% 0.04% 0.78%
Oppenheimer Capital Appreciation Fund 0.72% 0.03% 0.75%
Oppenheimer Growth Fund(2) 0.75% 0.04% 0.79%
Oppenheimer Multiple Strategies Fund 0.73% 0.04% 0.77%
Oppenheimer Global Securities Fund 0.73% 0.08% 0.81%
Oppenheimer Strategic Bond Fund 0.75% 0.10% 0.85%
</TABLE>
(1) Does not reflect expenses related to the Contract or Separate Account.
(2) There was a non-recurring reimbursement made to Oppenheimer Growth Fund by
the Fund's Manager due to the acquisition of a Fund in the fiscal year ended
December 31, 1996. Absent this reimbursement, the Other Expenses would have
been 0.06% and Total Expenses would have been 0.81%.
4
<PAGE>
HYPOTHETICAL EXAMPLES
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
A. If you surrender your Contract at the end of the applicable period, you would
pay the following expenses on a $1,000 investment, assuming 5% annual return
on assets:
<TABLE>
<CAPTION>
Subaccount 1 Year 3 Years 5 Years 10 Years
- ---------------------------------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Oppenheimer Money Fund $81 $104 $129 $222
Oppenheimer High Income Fund 84 114 145 255
Oppenheimer Bond Fund 84 113 144 252
Oppenheimer Capital Appreciation Fund 84 112 142 249
Oppenheimer Growth Fund 84 113 144 253
Oppenheimer Multiple Strategies Fund 84 113 143 251
Oppenheimer Global Securities Fund 84 114 145 255
Oppenheimer Strategic Bond Fund 85 115 147 259
</TABLE>
B. If you do not surrender your Contract or if you annuitize, you would pay the
following expenses on a $1,000 investment, assuming 5% annual return on
assets:
<TABLE>
<CAPTION>
Subaccount 1 Year 3 Years 5 Years 10 Years
- ---------------------------------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Oppenheimer Money Fund $19 $60 $102 $222
Oppenheimer High Income Fund 22 69 119 255
Oppenheimer Bond Fund 22 68 117 252
Oppenheimer Capital Appreciation Fund 22 67 116 249
Oppenheimer Growth Fund 22 69 118 253
Oppenheimer Multiple Strategies Fund 22 68 117 251
Oppenheimer Global Securities Fund 22 69 119 255
Oppenheimer Strategic Bond Fund 23 70 121 259
</TABLE>
For the purpose of calculating the expenses in the above examples, we have
converted the $30 Annual Contract Fee to a 0.055% annual asset charge based on
the average size of Contracts. Converted in this way, the Annual Contract Fee
(on a percentage basis) would be higher for smaller Contracts and lower for
larger Contracts.
5
<PAGE>
CONDENSED FINANCIAL INFORMATION
Accumulation Unit Values
The condensed financial information presented below for the periods ended
September 30, 1995, December 31, 1995 and year ended December 31, 1996 was
derived from the financial statements of the Separate Account which were audited
by KPMG Peat Marwick LLP, independent auditors. The condensed financial
information presented below for the years ended December 31, 1994 and prior were
derived from the financial statements of the Separate Account, which financial
statements were audited by other auditors. The financial statements of
Confederation Separate Account A and Variable Annuity Account G and the
Independent Auditors' reports thereon are included in the Statement of
Additional Information.
<TABLE>
<CAPTION>
1990(1)* 1991(2)* 1992* 1993(3)*
----------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Oppenheimer Money
Fund
Accumulation Unit Value at
beginning of period ...... $ 10.00 $ 10.23 $ 10.72 $ 10.99
at end of period ......... $ 10.23 $ 10.72 $ 10.99 $ 11.19
Increase (decrease) in
Accumulation Unit
Value(4) ..................
Accumulation Units
outstanding ............... 11,496.99 278,364.11 823,485.65 1,304,423.04
Oppenheimer High
Income Fund
Accumulation Unit Value at
beginning of period ...... $ 10.00 $ 10.00 $ 11.80 $ 13.73
at end of period ......... $ 10.00 $ 11.80 $ 13.73 $ 17.11
Increase (decrease) in
Accumulation Unit
Value(4) ..................
Accumulation Units
outstanding ............... -- 133,655.43 546,212.32 2,010,341.54
Oppenheimer Bond
Fund
Accumulation Unit Value at
beginning of period ...... $ 10.00 $ 10.00 $ 11.07 $ 11.63
at end of period ......... $ 10.00 $ 11.07 $ 11.63 $ 12.97
Increase (decrease) in
Accumulation Unit
Value(4) ..................
Accumulation Units
outstanding ............... -- 132,312.74 610,765.61 1,414,173.21
Oppenheimer Capital
Appreciation Fund
Accumulation Unit Value at
beginning of period ...... $ 10.00 $ 10.07 $ 15.37 $ 17.50
at end of period ......... $ 10.07 $ 15.37 $ 17.50 $ 21.98
Increase (decrease) in
Accumulation Unit
Value(4) ..................
Accumulation Units
outstanding ............... 3,511.36 163,873.92 718,400.83 1,662,361.45
Oppenheimer Growth
Fund
Accumulation Unit Value at
beginning of period ...... $ 10.00 $ 10.13 $ 12.54 $ 14.17
at end of period ......... $ 10.13 $ 12.54 $ 14.17 $ 15.00
Increase (decrease) in
Accumulation Unit
Value(4) ..................
Accumulation Units
outstanding ............... 6,615.78 119,618.09 563,151.08 1,700,812.71
<CAPTION>
1/1/95 10/1/95
through through
1994* 9/30/95* 12/31/95 1996
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Oppenheimer Money
Fund
Accumulation Unit Value at
beginning of period ...... $ 11.19 $ 11.51 $ 11.87 $ 12.00
at end of period ......... $ 11.51 $ 11.87 $ 12.00 $ 12.45
Increase (decrease) in
Accumulation Unit
Value(4) .................. 3.71%
Accumulation Units
outstanding ............... 2,665,713 1,526,060 1,445,120 992,336
Oppenheimer High
Income Fund
Accumulation Unit Value at
beginning of period ...... $ 17.11 $ 16.35 $ 18.66 $ 19.42
at end of period ......... $ 16.35 $ 18.66 $ 19.42 $ 22.08
Increase (decrease) in
Accumulation Unit
Value(4) .................. 13.70%
Accumulation Units
outstanding ............... 1,978,010 2,018,023 1,996,764 1,734,939
Oppenheimer Bond
Fund
Accumulation Unit Value at
beginning of period ...... $ 12.97 $ 12.55 $ 13.96 $ 14.49
at end of period ......... $ 12.55 $ 13.96 $ 14.49 $ 14.98
Increase (decrease) in
Accumulation Unit
Value(4) .................. 3.38%
Accumulation Units
outstanding ............... 1,445,364 1,313,477 1,289,495 1,099,466
Oppenheimer Capital
Appreciation Fund
Accumulation Unit Value at
beginning of period ...... $ 21.98 $ 20.04 $ 25.16 $ 26.21
at end of period ......... $ 20.04 $ 25.16 $ 26.21 $ 31.08
Increase (decrease) in
Accumulation Unit
Value(4) .................. 18.60%
Accumulation Units
outstanding ............... 2,402,122 2,183,166 2,192,369 1,991,499
Oppenheimer Growth
Fund
Accumulation Unit Value at
beginning of period ...... $ 15.00 $ 14.94 $ 19.40 $ 20.14
at end of period ......... $ 14.94 $ 19.40 $ 20.14 $ 24.88
Increase (decrease) in
Accumulation Unit
Value(4) .................. 23.52%
Accumulation Units
outstanding ............... 2,083,816 2,299,776 2,313,184 2,117,163
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
1990(1)* 1991(2)* 1992*
---------- ------------ ------------
<S> <C> <C> <C>
Oppenheimer Multiple
Strategies Fund
Accumulation Unit Value at
beginning of period ...... $10.00 $ 10.11 $ 11.72
at end of period ......... $10.11 $ 11.72 $ 12.60
Increase (decrease) in
Accumulation Unit
Value(4) ..................
Accumulation Units
outstanding ............... 59.11 184,581.48 832,976.24
Oppenheimer Global
Securities Fund
Accumulation Unit Value at
beginning of period ...... -- $ 10.00 $ 10.55
at end of period ......... -- $ 10.55 $ 9.67
Increase (decrease) in
Accumulation Unit
Value(4) ..................
Accumulation Units
outstanding ............... -- 202,907.57 657,073.46
Oppenheimer Strategic
Bond Fund
Accumulation Unit Value at
beginning of period ...... -- -- --
at end of period ......... -- -- --
Increase (decrease) in
Accumulation Unit
Value(4) ..................
Accumulation Units
outstanding ............... -- -- --
<CAPTION>
1/1/95 10/1/95
through through
1993(3)* 1994* 9/30/95* 12/31/95 1996
-------------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Oppenheimer Multiple
Strategies Fund
Accumulation Unit Value at
beginning of period ...... $ 12.60 $ 14.42 $ 13.95 $ 16.42 $ 16.70
at end of period ......... $ 14.42 $ 13.95 $ 16.42 $ 16.70 $ 19.03
Increase (decrease) in
Accumulation Unit
Value(4) .................. 13.94%
Accumulation Units
outstanding ............... 2,947,594.19 3,598,828 3,320,340 3,267,185 2,961,280
Oppenheimer Global
Securities Fund
Accumulation Unit Value at
beginning of period ...... $ 9.67 $ 16.25 $ 15.11 $ 15.89 $ 15.24
at end of period ......... $ 16.25 $ 15.11 $ 15.89 $ 15.24 $ 17.68
Increase (decrease) in
Accumulation Unit
Value(4) .................. 15.95%
Accumulation Units
outstanding ............... 2,260,855.75 3,590,803 3,267,722 3,088,121 2,654,158
Oppenheimer Strategic
Bond Fund
Accumulation Unit Value at
beginning of period ...... $ 10.00 $ 10.33 $ 9.81 $ 10.75 $ 11.16
at end of period ......... $ 10.33 $ 9.81 $ 10.75 $ 11.16 $ 12.34
Increase (decrease) in
Accumulation Unit
Value(4) .................. 10.56%
Accumulation Units
outstanding ............... 956,346.22 1,556,820 1,387,889 1,410,417 1,561,723
</TABLE>
(1) Period from April 1, 1990 to December 31, 1990.
(2) For Oppenheimer Global Securities Fund only, period from March 1, 1991
(inception) to December 31, 1991.
(3) For Oppenheimer Strategic Bond Fund only, period from May 1, 1993
(inception) to December 31, 1993.
(4) The above figures are calculated by subtracting the beginning Accumulation
Unit Value from the ending Accumulation Unit Value during a calendar year,
and dividing the result by the beginning Accumulation Unit Value. These
figures do not reflect the deferred sales charge or the annual contract fee.
Inclusion of these charges would reduce the investment results shown.
* The condensed financial information was prepared by Confederation.
Confederation issued and administered the Contracts funded by the Separate
Account prior to the assumption reinsurance of the Contracts and the
transfer of the Separate Account to Aetna on October 2, 1995. See "Facts
About Aetna, The Separate Account and The Oppenheimer Variable Account
Funds."
7
<PAGE>
FINANCIAL STATEMENTS
The Financial Statements for Aetna and the Separate Account are in the Statement
of Additional Information.
FACTS ABOUT AETNA, THE SEPARATE ACCOUNT AND
THE OPPENHEIMER VARIABLE ACCOUNT FUNDS
The Company
Aetna Life Insurance and Annuity Company (the "Company") is the issuer of the
Contract, and as such, it is responsible for providing the insurance and annuity
benefits under the Contract. The Company is a stock life insurance company
organized under the insurance laws of the State of Connecticut in 1976. Through
a merger, it succeeded to the business of Aetna Variable Annuity Life Insurance
Company (formerly Participating Annuity Life Insurance Company, an Arkansas life
insurance company organized in 1954). The Company is engaged in the business of
issuing life insurance policies and variable annuity contracts in all states of
the United States. The Company's principal executive offices are located at 151
Farmington Avenue, Hartford, Connecticut 06156.
The Company is a wholly owned subsidiary of Aetna Retirement Holdings, Inc.,
which is in turn a wholly owned subsidiary of Aetna Retirement Services, Inc.
and an indirect wholly owned subsidiary of Aetna Inc.
Variable Annuity Account G
The Separate Account was originally established by Confederation pursuant to the
laws of the State of Georgia on December 15, 1988. On August 12, 1994
Confederation was placed in rehabilitation by the Fulton County, Georgia
Superior Court and ceased sales of new Contracts and acceptance of additional
Purchase Payments under existing in-force Contracts. The rehabilitator of
Confederation (the "Rehabilitator") sought proposals for the acquisition of
Confederation's stock, assets or liabilities which would provide superior
benefits to Confederation's estate, including Confederation's policyholders. On
May 3, 1995 the Rehabilitator and Aetna entered into an Assumption Reinsurance
Agreement pursuant to which Confederation would transfer to Aetna and Aetna
would assume and accept from Confederation the liabilities arising under the
Contracts and the assets funding the Contracts, including the Separate Account.
Pursuant to the Assumption Reinsurance Agreement, the Separate Account was
transferred intact to Aetna on October 2, 1995 and re-established by us as
Variable Annuity Account G of Aetna Life Insurance and Annuity Company pursuant
to the laws of the State of Connecticut. The Separate Account is a unit
investment trust registered with the SEC under the 1940 Act and it meets the
definition of a "separate account" under Federal securities laws. This does not
involve any supervision by the SEC of the management or investment policies or
practices of the Separate Account.
Although Aetna holds title to the assets of the Separate Account, such assets
are not chargeable with liabilities arising out of any other business we may
conduct. Income, gains or losses of the Separate Account are credited to or
charged against the assets of the Separate Account without regard to other
income, gains or losses of the Company. As a result, the investment performance
of the Separate Account is entirely independent of the investment performance of
the General Account or any other separate account maintained by us. All
obligations of Aetna arising under the Contracts are its general corporate
obligations.
The Separate Account currently has eight Subaccounts: the Money Fund; the High
Income Fund; the Bond Fund; the Capital Appreciation Fund; the Growth Fund; the
Multiple Strategies Fund; the Global Securities Fund; and the Strategic Bond
Fund.
The Oppenheimer Variable Account Funds and Investment Adviser
Currently, each Subaccount of the Separate Account invests exclusively in
corresponding portfolios of the Oppenheimer Variable Account Funds (each
portfolio a "Fund"). The Oppenheimer Variable Account Funds was first organized
as a Massachusetts business trust in 1984. The Oppenheimer Variable Account
Funds was registered with the SEC as a diversified, open-end management
investment company under the 1940 Act. OppenheimerFunds, Inc. is the Investment
Adviser ("Adviser") of the Oppenheimer Variable Account Funds. The Adviser is
owned by Oppenheimer Acquisition Corp., a holding company owned in part by
senior management of the Adviser and ultimately controlled by Massachusetts
Mutual Life Insurance Company. Additional information on each Fund can be found
in the Oppenheimer Variable Account Funds prospectus.
The investment objectives and policies of the eight Funds of the Oppenheimer
Variable Account Funds are summarized below.
Oppenheimer Money Fund -- seeks the maximum current income from investments in
"money market" securities consistent with low capital risk and the maintenance
of liquidity. An investment in this Fund is neither insured nor guaranteed by
the U.S. Government, and there is no assurance that this Fund will be able to
maintain a stable net asset value of $1.00 per share.
Oppenheimer High Income Fund -- seeks a high level of current income from
investment in high yield fixed-income securities, including unrated securities
or high risk securities in the lower rating categories, commonly known as "junk
bonds," which are subject to a greater risk of loss of principal and nonpayment
of interest than higher-rated securities. These securities may be considered to
be speculative.
8
<PAGE>
Oppenheimer Bond Fund -- primarily seeks a high level of current income from
investment in high yield fixed-income securities rated "Baa" or better by
Moody's or "BBB" or better by Standard & Poor's. Secondarily, this Fund seeks
capital growth when consistent with its primary objective.
Oppenheimer Capital Appreciation Fund -- seeks to achieve capital appreciation
by investing in "growth-type" companies.
Oppenheimer Growth Fund -- seeks to achieve capital appreciation by investing in
securities of well-known established companies.
Oppenheimer Multiple Strategies Fund -- seeks a total investment return (which
includes current income and capital appreciation in the value of its shares)
from investments in common stocks and other equity securities, bonds and other
debt securities, and "money market" securities.
Oppenheimer Global Securities Fund -- seeks long-term capital appreciation by
investing a substantial portion of its assets in securities of foreign issuers,
"growth-type" companies, cyclical industries and special situations which are
considered to have appreciation possibilities. Current income is not an
objective. These securities may be considered to be speculative.
Oppenheimer Strategic Bond Fund -- seeks a high level of current income
principally derived from interest on debt securities and seeks to enhance such
income by writing covered call options on debt securities. The Fund intends to
invest principally in (i) foreign government and corporate debt securities, (ii)
U.S. Government securities, and (iii) lower-rated high yield domestic debt
securities, commonly known as "junk bonds," which are subject to a greater risk
of loss of principal and nonpayment of interest than higher-rated securities.
These securities may be considered to be speculative.
There is no assurance that a Fund will achieve its investment objectives. You
bear the full investment risk of an investment in a Fund. Additional information
concerning each Fund, its potential risks and its fees and expenses can be found
in the accompanying current prospectus for the Oppenheimer Variable Account
Funds. Additional copies of the Oppenheimer Variable Account Funds Prospectus
may be obtained from the Company's Home Office at the address and telephone
number listed on the cover of this Prospectus. You should read the Oppenheimer
Variable Account Funds Prospectus and consider carefully, and on a continuing
basis, which Fund or combination of Funds is best suited to your long-term
investment objectives.
Resolving Material Conflicts
Because the Oppenheimer Variable Account Funds offers shares to the
separate accounts of other insurance companies and may offer shares to our other
separate accounts, a material conflict may arise between the interests of the
Separate Account and one or more other separate accounts investing in the
Oppenheimer Variable Account Funds. The Board of Trustees of the Oppenheimer
Variable Account Funds has agreed to monitor events in order to identify any
material conflicts and to determine what action, if any, should be taken in
response. We will take all steps we believe are necessary to protect the
Separate Account.
Changes and Substitutions of Funds
We reserve the right to add or eliminate a Fund and substitute shares held
by a Subaccount for another portfolio of the Oppenheimer Variable Account Funds
or for another registered open-end management investment company as permitted by
the 1940 Act. To the extent required by the 1940 Act, substitutions of shares
attributable to your interest in a Subaccount will not be made until you have
been notified of the change.
If deemed to be in the best interests of persons having voting rights under the
Contracts and subject to any approvals that may be required under applicable
law, the Separate Account may be: (1) operated as a management company under the
1940 Act, or any other form permitted by law; (2) deregistered under the 1940
Act in the event such registration is no longer required; (3) combined with one
or more other separate accounts; or (4) changed in other respects.
THE CONTRACT
The Contract described in this Prospectus is an individual deferred variable
annuity which was established with an initial Purchase Payment and allows for
additional Purchase Payments if you so choose.
Parties to the Contract
Owner
As the purchaser of the Contract, you may exercise all rights and
privileges provided in the Contract, subject to any rights that you, as Owner,
may convey to an irrevocable beneficiary. Joint ownership is not allowed.
Annuitant
The Annuitant is the person you designate to receive Income Payments and on
whose life these payments are based. At the time you elect an Annuity Option,
you may elect to name a joint Annuitant. See "Annuity Benefit -- Annuity
Options."
9
<PAGE>
Beneficiary
The Beneficiary is the person you designate to receive the death proceeds.
See "Distributions Under the Contract -- Death Proceeds." If no Beneficiary is
living at that time, the death proceeds are payable to your estate. If the
Annuitant dies after the Annuity Date, the Beneficiary is the person who will
receive any remaining guaranteed payments under an Annuity Option. If no
Beneficiary is living at that time, the remaining guaranteed payments are
payable to the estate of the Annuitant.
Change of Annuitant or Beneficiary
Prior to the Annuity Date, you may change the Annuitant or Beneficiary by
submitting a written request to our Home Office. After the Annuity Date only a
change of Beneficiary may be made. Any change will become effective on the date
you sign the request. However, any change will be subject to any payment or
other action taken by us before we record the change. If the Owner is not a
natural person, under current Federal tax law, the Surrender Value must be
distributed upon any change of the Annuitant or the death of the Annuitant. See
"Federal Tax Matters."
Purchase Payments and Allocating Your Purchase Payments
No new Contracts are being issued. You may make additional Purchase Payments
under the Contract prior to the date all your Accumulation Account has been
annuitized. Additional Purchase Payments must be at least $100. There is no
limit on the number of additional Purchase Payments you may make. Each
additional Purchase Payment will be subject to our requirements at that time. We
reserve the right to modify the requirements.
If imposed by the state or municipality in which you reside, State Taxes will be
deducted from each Purchase Payment and the remaining amount is known as the Net
Purchase Payment. See "Charges and Deductions -- State Taxes." Allocations to
the funding options of additional Net Purchase Payments will be made based upon
your allocation instructions in your application unless we receive a written
notice with new instructions. See "The Contract -- Allocation Changes."
Additional Net Purchase Payments will be credited to the Accumulation Account on
the Valuation Date the Purchase Payment is received at our Home Office.
Under our bank draft investing program, additional Purchase Payments may also be
made by monthly drafts against your financial institution checking account. To
authorize these drafts, you must complete and return to us a special bank draft
authorization form which may be obtained from our Home Office.
All Purchase Payments on Qualified Contracts must comply with applicable
provisions of the Code and your retirement plan, if any. Additional Purchase
Payments commingled in an individual retirement annuity with a rollover
contribution from other retirement plans may result in unfavorable tax
consequences. You should consult your tax advisor.
Value of the Accumulation Account and Unit Value
The total value of your Contract, known as the Value of the Accumulation
Account, equals your value in all the Subaccounts plus your value in the Fixed
Account. Generally, if the net asset value of a Fund increases or decreases, so
does the value in the corresponding Subaccount. The Accumulation Account
reflects the total of all increases and decreases in the Subaccounts in which
you have an interest. Your value in any given Subaccount is determined by
multiplying the Unit Value for the Subaccount by the number of Units you own.
If you allocate amounts to a Subaccount, Aetna will purchase shares of the
corresponding Fund on behalf of the Subaccount and hold those shares in the
Subaccount. We will credit your Accumulation Account with Units of the
Subaccount. The number of Units will be determined by dividing the amount
allocated to the Subaccount by the Unit Value of the Subaccount for the
Valuation Period during which the amount was allocated.
The Unit Value in each Subaccount was initially set at $10. Thereafter, the Unit
Value for each Subaccount at the end of any Valuation Period is calculated by
multiplying the Unit Value at the end of the prior Valuation Period by the net
investment factor of the Subaccount for the then current Valuation Period.
The net investment factor for each Subaccount for any Valuation Period is equal
to (A / B) -- C,
where
A is the net result of:
(1) the net asset value per share of the Fund shares held in the Subaccount,
determined at the end of the current Valuation Period; plus
(2) the per share amount of any dividend and capital gains distributions made
by the Fund if the "ex-dividend" date occurs during the current
Valuation Period; plus or minus
(3) a charge or credit, if any, for taxes.
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<PAGE>
B is the net result of:
(1) the net asset value per share of the Fund shares held in the Subaccount
determined as of the end of the immediately preceding Valuation Period;
plus or minus
(2) a charge or credit, if any, for taxes.
C represents a daily deduction of .0037% for the Mortality and Expense Risk
Charge and the Administration Fee. The Mortality and Expense Risk Charge and the
Administration Fee are equal to an annual rate of 1.35% of the daily asset value
of the Subaccount. This percentage represents a 1.25% charge for the mortality
and expense risk assumed, and a .10% charge for the Administration Fee. The
daily deduction can result in a decrease of the Unit Value even if the Fund's
net asset value per share increases. See "Charges and Deductions."
The net investment factor may be greater or less than one. Therefore, the Unit
Value for a Subaccount may increase or decrease from one Valuation Period to the
next Valuation Period.
Allocation Changes
You may change the allocation of additional Net Purchase Payments among the
Subaccounts and the Fixed Account. There is no limit to the number of changes
you may make to your allocations. Allocations must be in whole percentages of
not less than 10%. The sum of the amounts which may be allocated to the Fixed
Account over the life of the Contract is limited to $250,000. See "Appendix A --
The Fixed Account."
Transfers
Prior to the Annuity Date, you may make unlimited Transfers among the
Subaccounts and into and out of the Fixed Account subject to certain rules. See
"Appendix A -- The Fixed Account." There are presently no fees for Transfers nor
are any taxes due. However, we reserve the right to charge a fee for Transfers
in excess of 12 per Contract Year or to limit the number of Transfers to 12 per
Contract Year.
Transfers may be made by written request. Transfers may also be made by
telephone, providing telephone transfers have been specifically authorized. To
make telephone Transfers, call 1-800-531-4547. Telephone Transfers into or out
of the Fixed Account are not permitted. Transfer requests must be received at
our Home Office prior to 4:00 pm Eastern Time in order to be processed on the
same Valuation Date. We reserve the right to reject telephone or written
requests submitted in bulk on behalf of ten or more Contracts and to otherwise
limit, deny or terminate telephone transfers. See "Miscellaneous -- Telephone
Transfers."
The minimum amount which may be transferred at any one time is the lesser of
$500 or your interest in the Fixed Account or the Subaccount from which the
Transfer is made. Under our Dollar Cost Averaging program, however, the minimum
amount for Transfers is $50 per Subaccount. See "The Contract -- Dollar Cost
Averaging." The sum of the amount which can be allocated to the Fixed Account
over the life of the Contract is limited to $250,000. See "Appendix A -- The
Fixed Account."
Dollar Cost Averaging
Our Dollar Cost Averaging program allows you to regularly transfer amounts from
the Money Fund Subaccount to one or more other Subaccounts. This results in the
purchase of more Units when the Unit Value is low and fewer Units when the Unit
Value is high. Therefore, the purchase of Units under Dollar Cost Averaging in a
rising or falling market will result in your average cost per Unit being less
than the average price per Unit.
For example, assume that you request $60 per month be transferred from the Money
Fund Subaccount to the Growth Fund Subaccount. The following table illustrates
the effect of Dollar Cost Averaging over a four-month period.
<TABLE>
<CAPTION>
Transfer Unit Value Units
Month Amount ("Price") Purchased
- -------- ----------- ------------- -----------
<S> <C> <C> <C>
1 $60 $2 30
2 60 3 20
3 60 4 15
4 60 5 12
</TABLE>
The average price per Unit for these purchases is the sum of the prices divided
by the number of monthly Transfers ($14 [divided by] 4), which equals $3.50. The
average cost per Unit that you would pay for these purchases is the total amount
transferred divided by the total number of Units purchased ($240 [divided by]
77), which equals $3.12. The table is illustrative only and not representative
of past or future results.
Under our Dollar Cost Averaging program we will automatically transfer an amount
you specify from your value of the Money Fund Subaccount into other Subaccounts
on a monthly basis. Each Transfer to a Subaccount must be at least $50.00. At
the time you elect to participate in the Dollar Cost Averaging program, the
value of your Money Fund Subaccount must be equal to at least 12 monthly
Transfers. Transfers to the Fixed Account are not permitted under the Dollar
Cost Averaging program.
11
<PAGE>
After we process your request we will Transfer the amount from your value of the
Money Fund Subaccount to the Subaccount or Subaccounts you select on the
fifteenth day of each calendar month or if the fifteenth is not a Valuation
Date, the next Valuation Date. There is no charge for this program. You may
discontinue the monthly Transfers by sending a written request to us.
There is no guarantee that the Dollar Cost Averaging program will result in
Contract values that equal or exceed any Payments made or any other advantage or
benefit.
Questions
Owner inquiries about the Contract or any procedures should be addressed as
follows:
Write to: Aetna Life Insurance and Annuity Company
Customer Service
151 Farmington Avenue
Hartford, Connecticut 06156
Call Customer Service: 1-800-531-4547 (for automated transfers or changes in the
allocation of Account Values,
call 1-800-262-3862)
All communications must include the Contract number and the names of the Owner
and the Annuitant.
CHARGES AND DEDUCTIONS
Surrender Charges
We do not deduct sales charges from Purchase Payments at the time of investment.
However, a Surrender Charge, as described below, may be assessed against
Withdrawals or a Surrender. The Surrender Charge covers certain expenses
incurred relating to the sale of the Contract including commissions to
registered representatives and promotional expenses.
Surrender Charges are based upon the number of years between the date Purchase
Payments are deemed received and the date they are Withdrawn or Surrendered:
(a) Purchase Payments made prior to October 2, 1995 (the day Aetna assumed the
Contract) are deemed to have been received on the date of receipt of
your initial Purchase Payment.
(b) Purchase Payments received by us after October 2, 1995 are deemed received
on the date we actually receive the Purchase Payment.
The Surrender Charge is a percentage of the amount of each Purchase Payment
withdrawn or surrendered and equals:
<TABLE>
<CAPTION>
Years Since Purchase
Payment Deemed Received Charge
- ------------------------- --------
<S> <C>
1 6%
2 6%
3 5%
4 4%
5 3%
Thereafter 0%
</TABLE>
No Surrender Charge is imposed against:
(a) That portion of a Surrender which does not exceed 10% of current Value of
the Accumulation Account, providing that there has been no prior
Withdrawal in the same Contract Year.
(b) That portion of your first Withdrawal in a Contract Year which does not
exceed 10% of the current Value of the Accumulation Account.
(c) Any portion of the Accumulation Account which is applied under the Partial
Annuity Benefit. See "Annuity Benefit -- Partial Annuity Benefit."
(d) Withdrawals made under our Systematic Withdrawal Program. See
"Distributions Under the Contract -- Systematic Withdrawal."
(e) The Value of the Accumulation Account upon Annuitization.
(f) Any amounts withdrawn or surrendered in excess of Purchase Payments.
(g) Any distribution made as the result of the death of the Owner.
Purchase Payments will be deemed to be withdrawn or surrendered in the order in
which they were deemed received. All Withdrawals and Surrenders will be deducted
first from Purchase Payments and then from amounts in excess of Purchase
Payments.
12
<PAGE>
In the case of a Withdrawal, the Surrender Charge is deducted from the
Accumulation Account as an additional withdrawal. In the event that your request
for a Withdrawal specifies the Subaccounts and/or the Fixed Account from which
the Withdrawal is to be made, the Surrender Charge will be deducted equally from
such Subaccounts and/or the Fixed Account. Otherwise, the Surrender Charge will
be deducted proportionally based on your value in each Subaccount. If you
Surrender your Contract, the Surrender Charge is deducted from the total amount
to be paid to you.
Mortality and Expense Risk Charge
Aetna deducts a Mortality and Expense Risk Charge from your value in each
Subaccount equal to, on an annual basis, 1.25% of the daily asset value of which
approximately .95% is attributable to mortality risks and approximately .30% is
attributable to expense risk. The mortality risks assumed by the Company arise
from its contractual obligations (i) to make annuity payments after the Annuity
Date for the life of the Annuitant(s), and (ii) to provide the death benefit
that may be higher than the value of the Accumulation Account. The expense risk
assumed by the Company is that the costs of administering the Contracts and the
Separate Account will exceed the amount recovered from the Administrative Fee.
The Mortality and Expense Risk Charge may be used to cover distribution expenses
of the Contracts because we do not believe the Surrender Charge will be
sufficient. See "Charges and Deductions -- Surrender Charges." This charge is
guaranteed by the Company and cannot be increased.
Administration Fee
A daily charge is deducted from your value in each Subaccount equal to, on an
annual basis, .10% of the daily asset value. This fee is intended only to
reimburse us for administrative expenses. We do not expect to recover an amount
in excess of our accumulated expenses through the deduction of the
Administration Fee. We reserve the right to change this fee in the future.
Annual Contract Fee
On each Contract anniversary on or before the Annuity Date we will deduct a
$30.00 Annual Contract Fee for the previous Contract Year from your Accumulation
Account. The fee is intended to partially reimburse us for costs of maintaining
the Contracts, the Separate Account and the Fixed Account. If the Contract is
surrendered or annuitized, we will deduct the Annual Contract Fee at the time of
Surrender or Annuitization for the current Contract Year. The deduction will be
made pro rata from your value in each Subaccount and the Fixed Account. The
Annual Contract Fee is not expected to result in a profit to Aetna. We guarantee
that this charge will not be increased.
State Taxes
State Taxes are taxes imposed by certain jurisdictions: (i) at the time Purchase
Payments are received; (ii) from values applied to an Annuity Option; or (iii)
from Withdrawals or Surrenders. We will deduct State Taxes when we determine the
tax is due.
These taxes currently range from 0 to 3.5%. The amount of any such tax will
depend on, among other things, your state of residence, and the status of Aetna
and the insurance laws of that state. These taxes are subject to change and your
tax advisor should be consulted for current information.
Other Taxes
We do not expect to incur any Federal or state income tax liability attributable
to investment income or capital gains retained as part of the reserves under the
Contracts. Based upon these expectations, no charge is being made currently to
the Separate Account for Federal or state income taxes which may be attributable
to the Separate Account.
We will periodically review the need for a charge to the Separate Account for
Federal or state income taxes. Such a charge may be made in future years for any
Federal or state income taxes incurred by us with respect to the Separate
Account or for the economic effect of any such taxes. In the event that we
should incur Federal or state income taxes attributable to investment income or
capital gains retained as part of the reserves under the Contract, the
Accumulation Account of the Contract would be correspondingly adjusted for any
provision or charge for such taxes.
Under present laws, we incur state and local taxes (in addition to the State
Taxes described above), in several states. At present, we do not charge for
these. Charges for such taxes may be made in the future.
Fund Expenses
The value of the assets in the Separate Account will reflect the value of the
Funds as well as the fees and expenses of each Fund. A complete description of
the expenses and deductions for each Fund is found in the accompanying
Oppenheimer Variable Account Funds prospectus.
DISTRIBUTIONS UNDER THE CONTRACT
Withdrawals
Prior to the Annuity Date, you may request a Withdrawal from any portion or all
of your Accumulation Account subject to any Surrender Charges or any required
tax withholding or penalty. You may be subject to a penalty tax for an early
withdrawal. See "Charges and Deductions -- Surrender Charges;" "Federal Tax
Matters -- Other Tax Considerations -- Penalty Tax on Certain Distributions."
13
<PAGE>
Withdrawals must be made by written request. Your Withdrawal request may specify
the amount of the withdrawal or surrender to be deducted from each Subaccount or
from the Fixed Account; otherwise we will withdraw the amount requested pro rata
from your value in each Subaccount and the Fixed Account. The minimum amount
which can be withdrawn is the lesser of $500 or your value in the Subaccounts
specified or the Fixed Account. The maximum amount which may be withdrawn from
the Fixed Account is limited. See "Appendix A -- The Fixed Account."
Except for New York residents, we reserve the right to consider any Withdrawal
that would reduce the Value of the Accumulation Account to less than $2,000 to
be a request for Surrender. In this event, the Surrender Value will be paid to
you and the Contract will terminate. See "Distributions Under the Contract --
Surrender Value."
Systematic Withdrawal
To the extent permitted by your plan and the Code, under the Systematic
Withdrawal program, you may make regularly scheduled Withdrawals from your
Accumulation Account. See "Federal Tax Matters." To elect a Systematic
Withdrawal, your value of your Accumulation Account must have been at least
$12,000. You may not elect this program if you have taken a prior Withdrawal
during the same Contract Year. The program allows you to prearrange the
Withdrawal of a specified dollar amount of at least $100 per Withdrawal, on a
monthly, quarterly or semi-annual payment basis. The maximum amount that may be
withdrawn each Contract Year is 10% of the Value of the Accumulation Account as
of the previous year end. Surrender Charges are not imposed on Withdrawals under
this program. See "Charges and Deductions -- Surrender Charges." While you are
receiving Systematic Withdrawals, you may not elect to make additional Purchase
Payments under our bank draft investing program or to allocated amounts to the
Subaccounts under our Dollar Cost Averaging program. See "The Contract --
Purchase Payments and Allocating Your Purchase Payments; -- Dollar Cost
Averaging."
Systematic Withdrawals will begin on the first scheduled Withdrawal date
selected by you following the date we process your request. You should receive
Withdrawal payments by the fifteenth (15th) of the applicable month. Withdrawals
will be deducted pro rata from your value in each Subaccount and the Fixed
Account.
You may modify or discontinue your Systematic Withdrawal program at any time by
sending a written request to us. We reserve the right to discontinue or modify
the Systematic Withdrawal program by providing you with 30 days' prior written
notice. Such discontinuation would not affect any Systematic Withdrawal program
you currently have in effect. We also reserve the right to assess a processing
fee for the program although we do not currently do so.
All parties to the Contract are cautioned that the rights of any person to
implement the Systematic Withdrawal program under Qualified Contracts may be
subject to the terms and conditions of the applicable provisions of the Code and
of the retirement plan, if any, regardless of the terms and conditions of the
Qualified Contract.
Surrender
Prior to the Annuity Date, you may Surrender the Contract for the Surrender
Value subject to any Surrender Charges or required tax withholding or penalty.
See "Charges and Deductions -- Surrender Charges" and "Federal Tax Matters --
Other Tax Considerations." You must submit a written request for Surrender and
return the Contract to us. The Surrender Value will be based on the Unit Values
at the end of the Valuation Period during which the Surrender request is
received.
You may receive the Surrender Value as a lump sum payment or apply it under one
of the Annuity Options. See "Annuity Benefit -- Annuity Options." No Surrender
Charge will be imposed on any amount being surrendered which is applied under an
Annuity Option. See "Charges and Deductions -- Surrender Charges."
Surrender Value
The Surrender Value of your Contract varies each day depending on the
investment results of the Subaccounts you have selected. We cannot guarantee any
minimum amount of Surrender Value except for any amount you have allocated to
the Fixed Account.
The Surrender Value is equal to the value of your Accumulation Account minus
Surrender Charges and State Taxes, if any, and the Annual Contract Fee for the
current Contract Year. See "Charges and Deductions."
Death Proceeds
Death proceeds are paid to your Beneficiary in the event any amounts remain in
your Accumulation Account at the time of your death because you have not applied
all your Accumulation Account to one or more Annuity Options.
If you die prior to age 85, the death proceeds are equal to the greatest of: (i)
the sum of your Purchase Payments less prior Withdrawals, applicable Surrender
Charges on prior Withdrawals, and values applied to the Partial Annuity Benefit;
(ii) the Value of the Accumulation Account; or (iii) the last established
adjusted death benefit described below, plus Purchase Payments, and less
Withdrawals, applicable Surrender Charges on Withdrawals and values applied to
the Partial Annuity Benefit occurring since the last adjusted death benefit was
established. The adjusted death benefit will be established every five years
starting with the fifth Contract anniversary and will equal the Value of the
Accumulation Account on that Contract anniversary.
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If you die on or after age 85, the death proceeds are equal to the Value of the
Accumulation Account.
If you commit suicide within two years from the date of issue and prior to the
Annuity Date, the death proceeds are equal to the Value of the Accumulation
Account.
The death proceeds are calculated on the earlier of: (i) the date we receive
proof of death and the Beneficiary makes an election as to an Annuity Option or
a lump sum payment; or (ii) 60 days after our receipt of proof of death. See
"Distributions Under the Contract -- Payment."
The Beneficiary may elect to receive the death proceeds under any Annuity Option
or as a lump sum payment. See "Annuity Benefit -- Annuity Options." If the
Beneficiary does not elect an Annuity Option or a lump sum payment within 60
days after we have received proof of death, proceeds will be paid in a series of
Income Payments, for as long as the Beneficiary is living, with payments
guaranteed for ten years. However, if the life expectancy of the Beneficiary as
of the date of your death is less than ten years, the death proceeds will be
paid in a series of Income Payments for as long as the Beneficiary is living,
with payments guaranteed for five years.
If the Contract is a Non-Qualified Contract and your spouse is the Beneficiary,
your spouse can elect to receive either the death proceeds or assume Contract
ownership and continue the Contract as if you had not died. See "Federal Tax
Matters."
Payment
Payment of any Withdrawal, Surrender, or lump sum death proceeds from the
Separate Account will usually occur within seven days from the date we receive a
request in good order. We may be permitted to defer such payment if: (i) the New
York Stock Exchange is closed for other than usual weekends or holidays, or
trading on the Exchange is otherwise restricted; (ii) an emergency exists as
defined by the SEC or the SEC requires that trading be restricted; or (iii) the
SEC permits a delay for protection of Owners.
We may defer payment of any Withdrawal or Surrender from the Fixed Account for
up to six months from the date we receive your written request.
Because you assume the investment risk with respect to amounts allocated to the
Separate Account and because certain Surrenders are subject to the Surrender
Charge, the total amount paid upon Surrender of the Contract may be more or less
than the total Purchase Payments made.
ANNUITY BENEFIT
Annuitization
Annuitization allows you to apply some or all of your Accumulation Account to an
Annuity Option that will provide a series of fixed Income Payments. The date an
Annuity Option becomes effective is the Annuity Date for that option. If you
elect a partial annuity you will have more than one Annuity Date.
Partial Annuity Benefit
After the first Contract Year you may withdraw a portion of your Accumulation
Account, free of Surrender Charge, to purchase a single premium immediate
annuity issued by us or one of our affiliates. The value is withdrawn as of the
Annuity Date. The remaining portion of your Accumulation Account continues to
accumulate in the Fixed Account and the Subaccounts you have selected. The
Partial Annuity Benefit cannot be elected by residents of New York.
The Partial Annuity Benefit must be elected in writing and the minimum amount
which may be annuitized is $10,000. You may not elect the Partial Annuity
Benefit if it will reduce the value of your Accumulation Account to less than
$2,000, or if the annual Income Payment would be less than $100. Unless you
specify otherwise, we will withdraw the annuitized amount pro rata from your
Accumulation Account Value in each Subaccount and the Fixed Account. The maximum
amount that may be withdrawn from the Fixed Account each calendar year to apply
to a Partial Annuity Benefit is limited. See "Appendix A -- The Fixed Account."
Annuity Date
Unless elected otherwise, the Annuity Date for any amounts not previously
annuitized will be the later of the 10th Contract anniversary or the Contract
anniversary nearest the 65th birthday of the Annuitant. All amounts must be
annuitized by the Contract anniversary nearest the 85th birthday of the
Annuitant.
You may change the Annuity Date by written request at least 30 days before both
the previously selected Annuity Date and the new Annuity Date. Without our
approval, the new Annuity Date cannot be earlier than the tenth Contract
anniversary if the Annuitant's age is 75 years or less on the Contract Date or
later than the Contract anniversary nearest the Annuitant's 85th birthday. In
addition, for Qualified Contracts, certain provisions of your retirement plan
and/or the Code may further restrict your choice of an Annuity Date. See
"Federal Tax Matters."
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Annuity Options
The Annuity Value will be paid in the form of a fixed annuity according to the
Annuity Option you choose. Federal income tax laws may restrict the availability
of certain Annuity Options for certain Qualified Contracts. See "Federal Tax
Matters." Upon commencement of Income Payments you are not permitted to change
your Annuity Option.
In the event that you have not chosen an Annuity Option, we will make Income
Payments to the Annuitant during the lifetime of the Annuitant with payments
guaranteed for ten years.
Option 1. Annuity Certain -- We will make equal payments to the Annuitant for a
guaranteed term which cannot be less than five years nor more than 30 years. If
the Annuitant dies before the end of the guaranteed term, payments will continue
to be made to the Beneficiary for the duration of the guaranteed term.
Option 2. Life Only or Life with Term Certain -- We will make equal payments to
the Annuitant during the lifetime of the Annuitant. An election may be made to
guarantee payments for a term of 10 or 20 years. If the Annuitant dies before
the end of any guaranteed term, payments will continue to the Beneficiary for
the duration of that term. If no guaranteed term is selected, payments will be
made only while the Annuitant is living. Therefore, it is possible that only one
payment will be made if the Annuitant dies before the second payment.
Option 3. Joint and Survivor Annuity -- We will make payments to the Annuitant
or joint Annuitant while either of them is living. A joint Annuitant must be
named at the time this option is chosen. The age and sex of both the Annuitant
and joint Annuitant will be used to determine payments. If one Annuitant dies,
payments will continue to the surviving Annuitant. Payments will cease upon the
death of the Annuitant last to die. Therefore, it is possible that only one
payment will be made if both Annuitants die before the second payment.
In addition to these options, you may choose any other Annuity Option agreed
upon by us.
Income Payments
Income Payments will be based upon the Annuity Option selected, the age and sex
of an Annuitant when payments begin, the frequency of payments and any scheduled
changes in the amount of Income Payments.
At the time an Annuity Option becomes effective, we will require proof of the
age and sex of the Annuitant and any joint Annuitant. The age used to calculate
payments under an Annuity Option will be the Annuitant's age as of the
Annuitant's nearest birthday on the Annuity Date. From time to time, we may
require proof that the Annuitant or Beneficiary is living when payment is
contingent upon the survival of such person.
At the time the Annuity Option commences, payments will be calculated on a fixed
basis using the greater of: (i) the rates guaranteed in the Contract; or (ii)
more favorable rates which we then offer to this class of Contracts.
You may elect payments to be made to the Annuitant on an annual, semi- annual,
quarterly or monthly basis, provided each payment is at least $100. If the value
of your Accumulation Account is less than $2,000 or your payment on an annual
basis is less than $100, we will pay the Annuity Value as a single sum. Such
payment will be in full settlement and will terminate this Contract.
FEDERAL TAX MATTERS
Introduction
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. This
summary does not address all of the tax consequences of ownership of a Contract
or of distributions under a Contract. You should consult your tax advisor in
order to understand the tax consequences of any transaction. This summary is
based upon our understanding of the existing federal income tax laws as they are
currently interpreted by the Internal Revenue Service. No representation is made
as to the likelihood of the continuation of the existing federal income tax laws
or of their current interpretation by the Internal Revenue Service.
Additionally, no attempt has been made to consider any applicable state or other
laws.
This summary assumes that Qualified Contracts are used to provide benefits to
individual participants under certain retirement plans which qualify for special
federal income tax treatment under sections 219, 401, 403 or 408 of the Code.
The ultimate effects of federal income taxes on the Value of the Accumulation
Account, on Income Payments, and on the economic benefits provided to you, the
Annuitant, or the Beneficiary under the Contract depend on the type of
retirement plan under which a Contract is purchased, on the tax and employment
status of the individual concerned, and on our tax status.
Aetna's Tax Status
Aetna is taxed as a life insurance company under Part 1 of Subchapter L of the
Code. Because the Separate Account is not a separate entity, and its operations
form a part of Aetna's business, the Separate Account will not be taxed
separately.
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Investment income and net capital gains realized on the sale or exchange of the
assets of the Separate Account will be reinvested and taken into account in
determining the Unit Value. Under existing federal income tax laws, the
investment income and net capital gains of the Separate Account will not be
taxed to the extent that these items are retained as part of the reserves under
the Contract. However, if Aetna incurs any federal income taxes attributable to
the Separate Account, we reserve the right to make a charge to the Separate
Account for the payment of such taxes.
Taxation of Annuity Contracts in General
Increases in the Accumulation Account
Section 72 of the Code governs the taxation of annuity contracts. An Owner
who is a natural person generally is not taxed on increases in the Accumulation
Account until some form of distribution occurs. The assignment, pledge, or
agreement to assign or pledge any portion of the Accumulation Account, or the
application of a portion of your Accumulation Account to the Partial Annuity
Benefit, generally will be treated as a distribution to you. The taxable portion
of such a distribution is taxed as ordinary income.
If an Owner is not a natural person, then the Owner generally must include in
gross income any increase in the excess of the value of the Contract over the
Owner's "investment in the Contract" during the taxable year. Certain exceptions
to this rule may apply and should be discussed with your tax advisor.
Distributions Received Prior to the Annuity Date
Amounts received before the Annuity Date pursuant to a Withdrawal or
Surrender under a Non-Qualified Contract generally are treated as taxable income
to the extent that the value of the Contract immediately before the Withdrawal
exceeds the "investment in the Contract" at that time. Any additional amount
withdrawn is not taxable. In the case of a Withdrawal or Surrender under a
Qualified Contract a portion of the amount received is taxable based on the
ratio of the "investment in the Contract" to the individual's balance in the
retirement plan, which is generally the value of the Contract.
The "investment in the Contract" generally equals the total amount of any
Purchase Payments made by or on behalf of an individual under a Contract that
were not excluded from the gross income of the individual. For Qualified
Contracts, the "investment in the Contract" will often be zero.
Income Payments
In general, there is no tax on that portion of each Income Payment which
represents the same ratio that the "investment in the Contract" bears to the
total expected value of the Income Payments for the term of the payments. After
the "investment in the Contract" is recovered, the full amount of additional
Income Payments, if any, is taxable.
Death Proceeds
Death proceeds which are distributed in a lump sum are taxed in the same
manner as the proceeds of a Surrender of the Contract. Death proceeds
distributed under an annuity option are taxed in the same manner as Income
Payments.
In order for a Non-Qualified Contract to be treated as an annuity contract for
federal income tax purposes, section 72(s) of the Code generally requires the
Contract to provide that (a) if the Owner dies on or after the Annuity Date but
prior to the time the entire interest in the Contract has been distributed, the
remaining interest must be distributed at least as rapidly as under the method
of distribution being used as of the date of the death of the Owner; and (b) if
the Owner dies prior to the Annuity Date, the death proceeds must be distributed
within five years after the date of the death of the Owner. These rules do not
apply, however, where the surviving spouse of the Owner is the designated
beneficiary under the Contract, and thus is treated under section 72(s) of the
Code as a successor Owner of the Contract. The Non-Qualified Contracts are
intended to comply with the requirements of section 72(s), and will be modified
if necessary to ensure compliance with any future interpretations of section
72(s).
Qualified Contracts
The Qualified Contract is designed for use with several types of retirement
plans. Special favorable tax treatment is available for Qualified Contracts,
although the tax rules applicable to such Contracts vary according to the type
of plan and the terms and conditions of the plan. Adverse tax consequences may
result from: (i) contributions to Qualified Contracts in excess of specified
limits; (ii) distributions from Qualified Contracts prior to age 59 1/2 (subject
to certain exceptions); (iii) failure to make distributions from Qualified
Contracts that conform to specified minimum distribution rules; (iv) the receipt
of aggregate distributions from Qualified Contracts in excess of a specified
annual amount; and (v) other circumstances.
Aetna makes no attempt to provide more than general information about plans
which qualify for special federal income tax treatment under the Code. Owners
and participants under retirement plans, as well as Annuitants and
Beneficiaries, are cautioned that the rights of any person to any benefits under
Qualified Contracts may be subject to the terms and conditions of the retirement
plans themselves, regardless of the terms and conditions of the Qualified
Contract issued in connection with such plans. Purchasers of Qualified Contracts
for use with any retirement plan should consult their legal counsel and tax
advisor regarding the suitability of a Qualified Contract for their retirement
plan.
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(a) Section 403(b) Plans. Under section 403(b) of the Code, payments made by
public school systems and certain tax- exempt organizations to purchase
annuity contracts for their employees are excludable from the gross income of
the employee, subject to certain limitations. However, these payments may be
subject to FICA (Social Security) taxes.
(b) Individual Retirement Annuities. Sections 219 and 408 of the Code permit
individuals or their employers to contribute to an individual retirement
program known as an Individual Retirement Annuity or "IRA". Individual
Retirement Annuities are subject to complex limitations on the amounts which
may be contributed and deducted and on the times when distributions may
commence. In addition, distributions from certain other types of retirement
plans may be rolled over into an Individual Retirement Annuity on a
tax-deferred basis.
(c) Corporate Pension and Profit-Sharing Plans and H.R 10 Plans. Sections
401(a) and 403(a) of the Code permit employers to establish various types of
retirement plans for employees, and permit self-employed individuals to
establish retirement plans for themselves and their employees which qualify for
special federal income tax treatment. These retirement plans may permit the
purchase of the Qualified Contracts to provide benefits under the plans.
Other Tax Considerations
Penalty Tax on Certain Distributions
In the case of any taxable distribution from a Non-Qualified Contract,
there may be a penalty tax equal to 10% of the taxable amount of the
distribution. In general, however, this penalty tax does not apply to
distributions: (1) made on or after the date on which the Owner attains age
59 1/2; (2) made as a result of death or disability of the Owner; or (3)
received in substantially equal periodic payments as a life annuity. Other tax
penalties may apply to certain distributions under a Qualified Contract.
Transfers of Ownership or Benefits
A transfer of ownership of a Contract, or the designation of an Annuitant
or other Beneficiary who is not also the Owner may result in tax consequences to
the Owner, Annuitant, or Beneficiary that are not discussed herein. Owners
contemplating such a transfer or assignment should contact their tax advisors
with respect to the potential tax effects of such transactions.
Multiple Contracts
Non-Qualified Contracts that are issued by Aetna (or one of our affiliates)
to the same Owner during any calendar year may be treated as one annuity
contract for purposes of determining the amount includible in gross income. Any
person considering the purchase of more than one annuity contract should consult
their tax advisor.
Section 1035
Section 1035 of the Code provides that no gain or loss shall be recognized
on the exchange of an annuity contract for another. Special rules and procedures
apply to exchanges subject to section 1035. You should consult your tax advisor
as to how to proceed if you intend to take advantage of the tax benefits
provided for exchanges under section 1035.
Investor Control
It is possible that regulations or other administrative guidance will be
issued concerning the extent to which owners may direct their investments to
particular divisions of a separate account without being treated for tax
purposes as the owners of the assets in such divisions. Aetna reserves the right
to modify the Contracts, as necessary, to prevent the Owner from being treated
as owning the assets in the Subaccounts.
Income Tax Withholding
Distributions are generally subject to withholding for the federal income
tax liability of the recipient at rates which vary according to the type of
distribution and the tax status of the recipient. However, for distributions
which are not "eligible rollover distributions" under Qualified Contracts, the
recipient may elect not to have withholding apply. "Eligible rollover
distributions" under Qualified Contracts are subject to withholding unless they
are transferred directly to an eligible individual retirement account, qualified
retirement plan, or section 403(b) plan.
DISTRIBUTION OF THE CONTRACT
Aetna Life Insurance and Annuity Company is the principal underwriter of the
Contracts. Third party broker-dealers may also serve as distributors. Aetna is
registered as a broker-dealer with the SEC and is a member of the National
Association of Securities Dealers, Inc. Although Aetna does not intend to offer
or sell any new Contracts, additional Purchase Payments will continue to be
accepted under existing in-force Contracts. Aetna may enter into contracts with
various broker/dealers to assist in accepting additional Purchase Payments. The
compensation paid by Aetna for this service is not anticipated to be greater
than 6.5% of Purchase Payments made.
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MISCELLANEOUS
Voting Rights
As previously stated, all of the assets of the Separate Account are shares of a
corresponding portfolio of the Oppenheimer Variable Account Funds held in the
Subaccounts of the Separate Account. Based on our view of present applicable
law, we will vote the Fund shares held in the Separate Account at meetings of
shareholders in accordance with instructions received from Owners having an
interest in the Subaccount. However, if the 1940 Act or any related regulations
should be amended, or if present interpretations change, and we determine that
we are permitted to vote the Fund shares in our own right, we may elect to do
so.
You hold a voting interest in each Fund in which you have value in the
corresponding Subaccount. The number of Fund shares which are attributable to
you is determined by dividing your value in a particular Subaccount by the net
asset value of one Fund share. The number of votes which you have a right to
cast will be determined as of the record date established by each Fund.
We will solicit voting instructions by mail prior to the shareholder meetings.
Each person having a voting interest in a Subaccount will be sent proxy
material, reports and other materials relating to the appropriate Funds. If we
do not receive your instructions prior to the meeting, your shares as well as
any shares not attributable to Owners will be voted in the same proportion as
the instructions received from all Owners providing timely instructions.
Changes in the Contract
Generally, we may not change or amend the Contract without the consent of the
Owner, except as expressly provided in the Contract. However, we may change or
amend the Contract to ensure that the Contract complies with any state law,
federal law or the Code.
Incontestability
The Contract is incontestable.
Nonparticipating
The Contract is nonparticipating. No dividends are payable and the Contract will
not share in the profits or surplus earnings of Aetna.
Assignment
During the lifetime of the Annuitant, the Owner of any Non-Qualified Contract
may assign the Contract. An assignment is a transfer of all or some of the
Contract rights and privileges to another person. A change of Owner is an
absolute assignment.
Generally, a Qualified Contract may not be sold, assigned, transferred,
discounted or pledged as collateral for a loan or as security for the
performance of an obligation unless permitted by your qualified retirement plan
or by laws relevant to your Qualified Contract.
No assignment of a Contract will be binding on us unless made in writing and
sent to us at our Home Office. The Company will use reasonable procedures to
confirm that the assignment is authentic, including verification of signature.
If the Company fails to follow its procedures, it would be liable for any losses
to you directly resulting from the failure. Otherwise, we are not responsible
for the validity of any assignment. The rights of the Owner and the interest of
the Annuitant and any Beneficiary will be subject to the rights of any assignee
of record.
Annual Contract Report
Prior to the Annuity Date we will mail you quarterly reports showing:
(1) the Value of any amounts held in,
(a) the Fixed Account; and
(b) the Subaccounts under the Separate Account;
(2) the number of any Subaccount Units; and
(3) the Subaccounts Unit Value.
Misstatement of Age or Sex
If the age or sex of the Annuitant has been misstated, the benefits payable
under the Contract will be adjusted to those that the Accumulation Value would
have purchased based on the correct age and sex. Any overpayments or
underpayments we make as a result of such misstatement will be respectively
charged against or credited to the Income Payments to be made so as to adjust
for any overpayment or underpayment. Sex is not a factor when annuity payments
are based on unisex annuity payment rate tables.
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Telephone Transfers
You automatically have the right to make transfers among the Subaccounts and the
Fixed Account by telephone. Aetna has enacted reasonable procedures to prevent
abuses of transactions by telephone. The procedures include requiring the use of
a personal identification number (PIN) in order to execute transactions and to
ensure authenticity, the Company records all calls on the 800 line. You are
responsible for safeguarding your PIN, and for keeping your Accumulation Account
information confidential. If Aetna fails to follow these procedures it would be
liable for any losses to you resulting from the failure.
Legal Proceedings
We and our Board of Directors know of no material legal proceedings pending to
which the Separate Account is a party or which would materially affect the
Separate Account.
Legal Matters
The validity of the securities offered by this Prospectus has been passed upon
by Counsel to the Company.
CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available which contains more details
concerning the subjects discussed in this Prospectus. The following is the Table
of Contents for that statement.
General Information and History
Variable Annuity Account G
Offering and Purchase
Independent Auditors
Financial Statements of CLIAC Separate Account A
Financial Statements of Variable Annuity Account G
Financial Statements of Aetna Life Insurance and Annuity Company
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APPENDIX A
THE FIXED ACCOUNT
Net Purchase Payments and Transfers allocated to the Fixed Account become part
of our General Account. As a result of exemptive and exclusionary provisions of
the Federal securities laws, interests in the Fixed Account have not been
registered under the Securities Act of 1933 ("1933 Act") nor is the Fixed
Account an Investment Company under the 1940 Act. Accordingly, neither the Fixed
Account nor any interest in the Fixed Account will generally be subject to
either the 1933 Act or the 1940 Act. Disclosure regarding the General Account
and the Fixed Account Option, however, may be subject to generally applicable
provisions of the federal securities laws regarding the accuracy and
completeness of the statements. The SEC has not reviewed the disclosures in this
Prospectus which relate to the Fixed Account.
The Fixed Account option guarantees an interest rate for one year from the date
amounts are allocated or transferred to the Fixed Account. At the end of each
year, the current rate will be guaranteed for the next one year period. The
guaranteed rate will never be less than 4.5% annually.
The guaranteed one year rate will be based upon Aetna's investment income earned
on invested assets and the amortization of any capital gains and/or losses
realized on the sale of invested assets. We assume the risk of investment gains
or losses by guaranteeing the one year rate, while you bear the risk that the
guaranteed one year rate may not exceed 4.5%.
Some states require that any balance you maintain in the Fixed Account be at
least $2,000.
Transfers, Withdrawals or Surrenders
You may make Withdrawals or Surrenders from the Fixed Account subject to
Surrender Charges or any required tax withholding or penalty. See "Charges and
Deductions -- Surrender Charges;" "Federal Tax Matters." You may also make
transfers into or out of the Fixed Account.
The minimum amount which you may Withdraw or Transfer from the Fixed Account is
the lesser of $500 or your value in the Fixed Account. The maximum amount which
you may Withdraw, Transfer or apply to the Partial Annuity Benefit each calendar
year is limited to 25% of your value of the Fixed Account. If any request for a
Withdrawal, Transfer, or exercise of the Partial Annuity Benefit would reduce
your value in the Fixed Account to less than $2,000, you have the right to
increase your request to include the balance. We may defer payment of any
Withdrawal or Surrender from the Fixed Account for up to six months from the
date we receive your written request.
There is no limit on the number of Transfers into the Fixed Account. However,
the sum of the amounts which can be allocated to and transferred into the Fixed
Account over the life of the Contract is limited to $250,000. We reserve the
right to change this limit.
Appendix-1
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VARIABLE ANNUITY ACCOUNT G
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
Statement of Additional Information dated May 1, 1997
Individual Variable Annuity Contracts originally issued by
Confederation Life Insurance and Annuity Company
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the current prospectus for Variable Annuity Account G (the
"Separate Account") dated May 1, 1997.
A free prospectus is available upon request from the local Aetna Life Insurance
and Annuity Company office or by writing to or calling:
Aetna Life Insurance and Annuity Company
Customer Service
151 Farmington Avenue
Hartford, Connecticut 06156
1-800-531-4547
Read the prospectus before you invest. Terms used in this Statement of
Additional Information shall have the same meaning as in the prospectus.
TABLE OF CONTENTS
Page
General Information and History ........................................ 1
Variable Annuity Account G ............................................. 1
Offering and Purchase .................................................. 2
Independent Auditors ................................................... 2
Financial Statements of CLIAC Separate Account A ....................... A-1
Financial Statements of Variable Annuity Account G ..................... S-1
Financial Statements of Aetna Life Insurance and Annuity Company ....... F-1
<PAGE>
GENERAL INFORMATION AND HISTORY
Aetna Life Insurance and Annuity Company (the "Company") is a stock life
insurance company which was organized under the insurance laws of the State of
Connecticut in 1976. Through a merger, it succeeded to the business of Aetna
Variable Annuity Life Insurance Company (formerly Participating Annuity Life
Insurance Company organized in 1954). As of December 31, 1996, the Company had
$30.1 billion invested through its products, including $15.0 billion in its
separate accounts (of which the Company oversees the management of $10.5
billion) and $1.1 billion in its mutual funds offered outside of its separate
accounts. As of December 31, 1995, it ranked among the top 2% of all U.S. life
insurance companies based on assets. The Company is a wholly owned subsidiary
of Aetna Retirement Holdings, Inc., which is in turn a wholly owned subsidiary
of Aetna Retirement Services, Inc., and an indirect wholly owned subsidiary of
Aetna Inc. The Company is engaged in the business of issuing life insurance
policies and annuity contracts in all states of the United States. The Company's
Home Office is located at 151 Farmington Avenue, Hartford, Connecticut 06156.
In addition to serving as the principal underwriter and the depositor for the
Separate Account, the Company is also a registered investment adviser under the
Investment Advisers Act of 1940, and a registered broker-dealer under the
Securities Exchange Act of 1934.
Other than the mortality and expense risk charges and the administration fee
described in the prospectus, all expenses incurred in the operation of the
Separate Account are borne by the Company. See "Charges and Deductions" in the
prospectus.
The assets of the Separate Account are held by the Company. The Separate Account
has no custodian. However, the Funds in whose shares the assets of the Separate
Account are invested have a custodian, as discussed in their prospectus.
VARIABLE ANNUITY ACCOUNT G
Variable Annuity Account G (the "Separate Account") is a separate account
originally established by Confederation Life Insurance and Annuity Company as
CLIAC Separate Account A under the laws of the state of Georgia and was
re-established by the Company pursuant to the laws of the state of Connecticut
in connection with the intact transfer of CLIAC Separate Account A. The
Separate Account funds the Contract. The Separate Account is registered with
the Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940, as amended. The assets of the Separate Account
will be invested in shares of the Funds described in the prospectus. Purchase
Payments made under the Contract may be allocated to one or more of the variable
investment options listed below. The Company may make additions to, deletions
from or substitutions of available investment options as permitted by law and
subject to the conditions of the Contract. The availability of the Funds is
subject to applicable regulatory authorization.
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The Funds currently available under the Contract are as follows:
Oppenheimer Bond Fund Oppenheimer High Income Fund
Oppenheimer Capital Appreciation Fund Oppenheimer Money Fund
Oppenheimer Global Securities Fund Oppenheimer Multiple Strategies Fund
Oppenheimer Growth Fund Oppenheimer Strategic Bond Fund
Complete descriptions of each of the Funds, including their investment
objectives, policies, risks and fees and expenses, are contained in the
prospectus and statement of additional information for the Funds.
OFFERING AND PURCHASE
The Company is both the Depositor and the principal underwriter for the
securities sold by the prospectus. Although the Company no longer offers the
individual deferred variable annuity contracts, existing holders of in-force
contracts may make additional deposits.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, CityPlace II, Hartford, Connecticut 06103-4103, are the
independent auditors for the Company, Separate Account G and Separate Account A.
The services provided to the Separate Account include primarily the examination
of the Separate Accounts' financial statements and the review of filings made
with the SEC.
<PAGE>
CLIAC SEPARATE ACCOUNT A
Table of Contents
September 30, 1995
Page
Independent Auditors' Report A-2
Audited Financial Statements:
Statement of Assets and Liabilities A-3
Statement of Operations for the period from
January 1, 1995 to September 30, 1995 A-5
Statement of Changes in Net Assets for the
period from January 1, 1995 to
September 30, 1995 A-6
Notes to Financial Statements A-7
A-1
<PAGE>
Independent Auditors' Report
The Board of Directors
Aetna Life Insurance and Annuity Company:
We have audited the accompanying statement of assets and liabilities of CLIAC
Separate Account A as of September 30, 1995, and the related statements of
operations and changes in net assets for the period from January 1, 1995 to
September 30, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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. Our procedures included
confirmation of securities owned as of September 30, 1995, by correspondence
with the custodian. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
As discussed in note 1 to the financial statements, the Company's ultimate
parent was put into rehabilitation on August 12, 1994. As discussed in note 8 to
the financial statements, the Company entered into an Assumption Reinsurance
Agreement on May 3, 1995 and this agreement was closed on October 2, 1995.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CLIAC Separate Account A at
September 30, 1995, the results of its operations and the changes in its net
assets for the period from January 1, 1995 to September 30, 1995 in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Hartford, Connecticut
April 26, 1996
A-2
<PAGE>
CLIAC SEPARATE ACCOUNT A
Statement of Assets and Liabilities
September 30, 1995
<TABLE>
<CAPTION>
Capital Global
Money Appreciation Securities
Fund Bond Fund Fund Fund
Combined Subaccount Subaccount Subaccount Subaccount
-------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Investments at net asset value:
Oppenheimer Money Fund -
18,082,764 shares at $1 per share
(cost $18,082,764) $18,082,764 18,082,764 - - -
Oppenheimer Bond Fund -
1,585,939 shares at $11.56 per
share (cost $17,985,508) 18,333,451 - 18,333,451 - -
Oppenheimer Capital Appreciation
Fund - 1,678,069 shares at $32.74
per share (cost $44,443,415) 54,939,919 - - 54,939,919 -
Oppenheimer Global Securities
Fund - 3,332,017 shares at $15.58
per share (cost $53,123,666) 51,912,880 - - - 51,912,880
Oppenheimer Growth Fund -
1,973,706 shares at $22.60 per
share (cost $36,596,218) 44,605,745 - - - -
Oppenheimer High Income Fund -
3,596,865 shares at $10.47 per share
(cost $37,310,886) 37,659,189 - - - -
Oppenheimer Multiple Strategies
Fund - 3,785,174 shares at $14.40
per share (cost $51,797,075) 54,506,479 - - - -
Oppenheimer Strategic Bond Fund -
3,108,154 shares at $4.80 per
share (cost $14,875,490) 14,919,140 - - - -
------------- ------------ ------------ ----------- ------------
Total investments
(cost $274,215,022) $294,959,567 18,082,764 18,333,451 54,939,919 51,912,880
------------- ------------ ------------ ----------- ------------
</TABLE>
(Continued)
See Notes to Financial Statements.
<TABLE>
<CAPTION>
High Multiple
Growth Income Strategies Strategic
Fund Fund Fund Bond Fund
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Investments at net asset value:
Oppenheimer Money Fund -
18,082,764 shares at $1 per share
(cost $18,082,764) - - - -
Oppenheimer Bond Fund -
1,585,939 shares at $11.56 per
share (cost $17,985,508) - - - -
Oppenheimer Capital Appreciation
Fund - 1,678,069 shares at $32.74
per share (cost $44,443,415) - - - -
Oppenheimer Global Securities
Fund - 3,332,017 shares at $15.58
per share (cost $53,123,666) - - - -
Oppenheimer Growth Fund -
1,973,706 shares at $22.60 per
share (cost $36,596,218) 44,605,745 - - -
Oppenheimer High Income Fund -
3,596,865 shares at $10.47 per share
(cost $37,310,886) - 37,659,189 - -
Oppenheimer Multiple Strategies
Fund - 3,785,174 shares at $14.40
per share (cost $51,797,075) - - 54,506,479 -
Oppenheimer Strategic Bond Fund -
3,108,154 shares at $4.80 per
share (cost $14,875,490) - - - 14,919,140
------------ ------------ ------------ -----------
Total investments
(cost $274,215,022) 44,605,745 37,659,189 54,506,479 14,919,140
------------ ------------ ------------ -----------
</TABLE>
A-3
<PAGE>
CLIAC SEPARATE ACCOUNT A
Statement of Assets and Liabilities, Continued
September 30, 1995
<TABLE>
<CAPTION>
Capital Global
Money Appreciation Securities
Fund Bond Fund Fund Fund
Combined Subaccount Subaccount Subaccount Subaccount
-------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total investments (carried
forward)
(cost $274,215,022) $294,959,567 18,082,764 18,333,451 54,939,919 51,912,880
Other assets:
Dividends receivable 37,711 37,711 - - -
Contract holders' funds receivable
from Oppenheimer 325,632 14,971 8,006 41,420 53,124
------------- ------------ ------------ ------------ ------------
Total assets $295,322,910 18,135,446 18,341,457 54,981,339 51,966,004
============= ============ ============ ============ ============
Liabilities:
Distributions payable to sponsor
(note 7) 325,632 14,971 2,037 47,388 53,719
------------- ------------ ------------ ------------ ------------
Total liabilities 325,632 14,971 2,037 47,388 53,719
------------- ------------ ------------ ------------ ------------
Net assets (note 4) $294,997,278 18,120,475 18,339,420 54,933,951 51,912,285
============= ============ ============ ============ ============
Total units 1,526,060 1,313,477 2,183,166 3,267,722
Unit value 11.87 13.96 25.16 15.89
Net assets held for the benefit
of contract holders $294,997,278 18,120,475 18,339,420 54,933,951 51,912,285
============= ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
High Multiple
Growth Income Strategies Strategic
Fund Fund Fund Bond Fund
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Total investments (carried
forward)
(cost $274,215,022) 44,605,745 37,659,189 54,506,479 14,919,140
Other assets:
Dividends receivable - - - -
Contract holders' funds receivable
from Oppenheimer 44,887 125,868 36,076 1,280
------------ ------------ ------------ -----------
Total assets 44,650,632 37,785,057 54,542,555 14,920,420
============ ============ ============ ===========
Liabilities:
Distributions payable to sponsor
(note 7) 44,887 125,868 36,076 686
------------ ------------ ------------ -----------
Total liabilities 44,887 125,868 36,076 686
------------ ------------ ------------ -----------
Net assets (note 4) 44,605,745 37,659,189 54,506,479 14,919,734
============ ============ ============ ===========
Total units 2,299,776 2,018,023 3,320,340 1,387,889
Unit value 19.40 18.66 16.42 10.75
Net assets held for the benefit
of contract holders 44,605,745 37,659,189 54,506,479 14,919,734
============ ============ ============ ===========
</TABLE>
See Notes to Financial Statements.
A-4
<PAGE>
CLIAC SEPARATE ACCOUNT A
Statement of Operations
Period from January 1, 1995 to September 30, 1995
<TABLE>
<CAPTION>
Capital Global
Money Appreciation Securities
Fund Bond Fund Fund Fund
Combined Subaccount Subaccount Subaccount Subaccount
-------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net investment income:
Dividends $11,356,476 1,024,766 882,634 249,563 1,319,558
Mortality, expense and administrative
charges to Sponsor (note 2) 2,895,609 248,354 191,620 482,272 519,381
------------- ---------- ------------ ------------ ------------
Net investment income (loss) 8,460,867 776,412 691,014 (232,709) 800,177
------------ ----------- ---------- ----------- -----------
Net realized and unrealized gain (loss)
on investments:
Net realized gain (loss) on
investments (3,476,826) - (379,456) (1,735,749) (1,998,600)
Net unrealized appreciation
on investments 36,076,753 - 1,692,417 13,015,588 3,603,421
------------- ---------- ------------ ------------ ------------
Net realized and unrealized
gain on investments 32,599,927 - 1,312,961 11,279,839 1,604,821
------------- ---------- ------------ ------------ ------------
Net increase in net assets resulting
from operations $41,060,794 776,412 2,003,975 11,047,130 2,404,998
============= ========== ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
High Multiple
Growth Income Strategies Strategic
Fund Fund Fund Bond Fund
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net investment income:
Dividends 891,081 2,756,733 3,352,181 879,960
Mortality, expense and administrative
charges to Sponsor (note 2) 387,117 373,459 540,125 153,281
------------ ------------ ------------ -----------
Net investment income (loss) 503,964 2,383,274 2,812,056 726,679
------------ ------------ ------------ -----------
Net realized and unrealized gain (loss)
on investments:
Net realized gain (loss) on
investments 1,805,422 (1,098,097) 486,030 (556,376)
Net unrealized appreciation
on investments 7,620,209 3,598,154 5,347,259 1,199,705
------------ ------------ ------------ -----------
Net realized and unrealized
gain on investments 9,425,631 2,500,057 5,833,289 643,329
------------ ------------ ------------ -----------
Net increase in net assets resulting
from operations 9,929,595 4,883,331 8,645,345 1,370,008
============ ============ ============ ===========
</TABLE>
A-5
See Notes to Financial Statements.
<PAGE>
CLIAC SEPARATE ACCOUNT A
Statement of Changes in Net Assets
Period from January 1, 1995 to September 30, 1995
<TABLE>
<CAPTION>
Capital Global
Money Appreciation Securities
Fund Bond Fund Fund Fund
Combined Subaccount Subaccount Subaccount Subaccount
-------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net assets at December 31, 1994 $280,165,974 30,682,355 18,139,319 48,138,532 54,257,039
Changes from operations:
Net investment income (loss) 8,460,867 776,412 691,014 (232,709) 800,177
Net realized gain (loss) on invest-
ments (3,476,826) - (379,456) (1,735,749) (1,998,600)
Net unrealized appreciation
on investments 36,076,753 - 1,692,417 13,015,588 3,603,421
------------- ------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations 41,060,794 776,412 2,003,975 11,047,130 2,404,998
Net increase (decrease) from unit
transactions (note 5) (26,229,490) (13,338,292) (1,803,874) (4,251,711) (4,749,752)
------------- ------------ ------------ ------------ ------------
Total increase (decrease) in
net assets 14,831,304 (12,561,880) 200,101 6,795,419 (2,344,754)
------------- ------------ ------------ ------------ ------------
Net assets at September 30, 1995 $294,997,278 18,120,475 18,339,420 54,933,951 51,912,285
============= ============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
High Multiple
Growth Income Strategies Strategic
Fund Fund Fund Bond Fund
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net assets at December 31, 1994 31,132,209 32,340,464 50,203,648 15,272,408
Changes from operations:
Net investment income (loss) 503,964 2,383,274 2,812,056 726,679
Net realized gain (loss) on invest-
ments 1,805,422 (1,098,097) 486,030 (556,376)
Net unrealized appreciation
on investments 7,620,209 3,598,154 5,347,259 1,199,705
------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations 9,929,595 4,883,331 8,645,345 1,370,008
Net increase (decrease) from unit
transactions (note 5) 3,543,941 435,394 (4,342,514) (1,722,682)
------------ ------------ ------------ ------------
Total increase (decrease) in
net assets 13,473,536 5,318,725 4,302,831 (352,674)
------------ ------------ ------------ ------------
Net assets at September 30, 1995 44,605,745 37,659,189 54,506,479 14,919,734
============ ============ ============ ============
</TABLE>
A-6
<PAGE>
CLIAC SEPARATE ACCOUNT A
Notes to Financial Statements
September 30, 1995
(1) Organization and Significant Accounting Policies
CLIAC Separate Account A (the "Separate Account" or "Separate Account A")
is a separate account of Confederation Life Insurance and Annuity
Company (a stock life insurance company) (the "Sponsor"), a wholly
owned subsidiary of Confederation Financial Holdings, Inc. ("CFH").
CFH is a wholly owned subsidiary of Confederation Life Insurance
Company (U.S.) in Rehabilitation ("CLIC U.S."), an estate formed from
the U.S. division of Confederation Life Insurance Company of Canada
("CLIC Canada") which is a mutual company incorporated under the laws
of Canada. The Separate Account was established for the purpose of
funding variable annuity contracts issued by the Sponsor. The
Separate Account became registered as a unit investment trust under
the Investment Company Act of 1940, as amended, during 1990, and
recorded its first policy sale on August 23, 1990.
Currently, the Separate Account has eight Subaccounts, each of which
invests exclusively in shares of the corresponding Portfolios of the
Oppenheimer Variable Account Funds (the "Oppenheimer Funds"): the
Oppenheimer Money Fund, the Oppenheimer Bond Fund, the Oppenheimer
Capital Appreciation Fund, the Oppenheimer Global Securities Fund,
the Oppenheimer Growth Fund, the Oppenheimer High Income Fund, the
Oppenheimer Multiple Strategies Fund and the Oppenheimer Strategic
Bond Fund. The contractholder may allocate all or part of the initial
premium and additional premiums, if any, to one or more Subaccounts
of the Separate Account or to the Sponsor's General Account. The
Sponsor's General Account consists of all assets owned by the Sponsor
other than those in the Separate Account.
CLIC Canada was placed in liquidation on August 11, 1994 by the Office of
the Superintendent of Financial Institutions, the federal regulator
of insurance companies in Canada. CLIC U.S. was placed under
rehabilitation pursuant to the laws of the State of Michigan on
August 12, 1994 by the Circuit Court for the County of Ingham, State
of Michigan. The Sponsor was placed under rehabilitation pursuant to
the laws of the State of Georgia on September 12, 1994 by the
Superior Court for the County of Fulton, State of Georgia.
While net assets of the Separate Account do not inure to the benefit of
creditors of the Sponsor, the Sponsor, however, remains responsible
to pay certain policy benefits that may exist in excess of available
Separate Account net assets. The Sponsor's liabilities in this
regard, however, have been transferred to another insurance company
as a result of the reinsurance agreement discussed in note 8.
Basis of Presentation
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that
effect amounts reported therein. Although actual results could differ
from these estimates, any such differences are expected to be
immaterial to the net assets of the Separate Account.
(Continued)
A-7
<PAGE>
CLIAC SEPARATE ACCOUNT A
Notes to Financial Statements
Investments
The investments in the Oppenheimer Funds are stated at the closing market
values per share on September 30, 1995. Investment transactions are
recorded on the trade date. The difference between the cost and
current market value of investments owned is recorded as an
unrealized gain or loss on investments. Realized gains and losses are
calculated on a "first-in, first-out" basis.
Dividends
Dividends are recorded on the ex-dividend date and reflect the daily
dividends declared by the Oppenheimer Funds from their accumulated
net investment income. Dividends paid to the Separate Account are
automatically reinvested in shares of the Oppenheimer Funds.
Federal Income Taxes
Operations of the Separate Account form a part of, and are taxed with,
operations of the Sponsor, which is taxed as a "life insurance
company" under the Internal Revenue Code. Under current law, no
federal income taxes are payable with respect to the Separate
Account's net investment income and the net realized gain on
investments.
(2) Mortality, Expense and Administrative (M, E and A) Charges to Sponsor
Mortality and Expense Risk Charge
A daily charge, equal to, on an annual basis, 1.25% of the daily net
asset value is deducted from each Subaccount to compensate the
Sponsor for certain mortality and expense risks assumed. The
mortality risk arises from the Sponsor's obligation to make income
payments regardless of how long all annuitants may live. The expense
risk assumed by the Sponsor is the risk that actual administrative
costs will exceed the amount recovered through the administrative
charges.
Administrative Expense Charge
A daily charge, equal to, on an annual basis, .10% of the daily net
asset value is deducted from each Subaccount to reimburse the Sponsor
for administrative expenses.
(3) Surrender Charges and Annual Contract Fee
Surrender Charges
There are no sales expenses deducted from premiums at the time premiums
are paid. If a contract has not been in force for six years, upon
surrender or for certain withdrawals, a surrender charge is deducted
from the proceeds. Surrender charges may be decreased or waived on
contracts meeting certain restrictions as determined by the Sponsor.
Annual Contract Fee
An annual contract fee of $30 is deducted on each contract anniversary
date, and on any day the contract is surrendered, if such surrender
occurs on any day other than the contract anniversary date. Annual
contract fees of $174,510 were assessed for the period from January
1, 1995 to September 30, 1995.
(Continued)
A-8
<PAGE>
CLIAC SEPARATE ACCOUNT A
Notes to Financial Statements
(4) Net Assets
Net assets at September 30, 1995 consisted of the following:
<TABLE>
<CAPTION>
Unrealized Accumulated
Appreciation Realized Net
Accumulated Accumulated (Depreciation) Gain (Loss) Assets at
Unit M, E and A Investment on on September 30,
Transactions Charges Income Investments Investments 1995
------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Money Fund $ 16,009,626 (951,517) 3,062,366 - - 18,120,475
Bond Fund 15,601,002 (658,266) 3,180,818 347,943 (132,077) 18,339,420
Capital Appreciation Fund 40,191,383 (1,428,019) 5,820,372 10,496,504 (146,289) 54,933,951
Global Securities Fund 45,378,958 (1,538,669) 2,220,935 (1,210,786) 7,061,847 51,912,285
Growth Fund 32,820,644 (1,060,726) 1,565,874 8,009,527 3,270,426 44,605,745
High Income Fund 30,156,094 (1,191,910) 8,884,554 348,303 (537,852) 37,659,189
Multiple Strategies Fund 43,739,930 (1,640,883) 7,559,595 2,709,404 2,138,433 54,506,479
Strategic Bond Fund 14,078,717 (391,908) 2,114,009 43,650 (924,734) 14,919,734
------------- ----------- ------------ ------------ ----------- -------------
$237,976,354 (8,861,898) 34,408,523 20,744,545 10,729,754 294,997,278
============= =========== ============ ============ =========== =============
</TABLE>
(5) Summary of Changes from Unit Transactions
The following table represents a summary of changes from unit
transactions for the period from January 1, 1995 to September 30,
1995:
<TABLE>
<CAPTION>
Units Amount
<S> <C> <C>
Money Fund Subaccount:
Contract purchases - $ -
Net transfers in (out) (688,516) (8,056,294)
Terminated contracts, partial withdrawals, transfers
to annuity reserves, surrender charges and annual
contract fees (451,137) (5,281,998)
------------- ---------------
(1,139,653) (13,338,292)
------------- ---------------
Bond Fund Subaccount:
Contract purchases - -
Net transfers in (out) 9,640 78,721
Terminated contracts, partial withdrawals, transfers to
annuity reserves, surrender charges and annual
contract fees (141,527) (1,882,595)
------------- ---------------
(131,887) (1,803,874)
------------- ---------------
Capital Appreciation Fund Subaccount:
Contract purchases - -
Net transfers in (out) (83,978) (1,285,303)
Terminated contracts, partial withdrawals, transfers to
annuity reserves, surrender charges and annual
contract fees (134,978) (2,966,408)
------------- ---------------
(218,956) (4,251,711)
------------- ---------------
</TABLE>
(Continued)
A-9
<PAGE>
CLIAC SEPARATE ACCOUNT A
Notes to Financial Statements
<TABLE>
<CAPTION>
Units Amount
<S> <C> <C>
Global Securities Fund Subaccount:
Contract purchases 1,282 $ 18,996
Net transfers in (out) (113,392) (1,565,934)
Terminated contracts, partial withdrawals, transfers to
annuity reserves, surrender charges and annual
contract fees (210,971) (3,202,814)
------------- ---------------
(323,081) (4,749,752)
------------- ---------------
Growth Fund Subaccount:
Contract purchases - -
Net transfers in (out) 390,495 6,587,820
Terminated contracts, partial withdrawals, transfers to
annuity reserves, surrender charges and annual
contract fees (174,535) (3,043,879)
------------- ---------------
215,960 3,543,941
------------- ---------------
High Income Fund Subaccount:
Contract purchases 1,318 23,150
Net transfers in (out) 214,578 3,509,955
Terminated contracts, partial withdrawals, transfers to
annuity reserves, surrender charges and annual
contract fees (175,883) (3,097,711)
------------- ---------------
40,013 435,394
------------- ---------------
Multiple Strategies Fund Subaccount:
Contract purchases 180 2,724
Net transfers in (out) 75,057 1,037,490
Terminated contracts, partial withdrawals, transfers to
annuity reserves, surrender charges and annual
contract fees (353,725) (5,382,728)
------------- ---------------
(278,488) (4,342,514)
------------- ---------------
Strategic Bond Fund Subaccount:
Contract purchases - -
Net transfers in (out) (29,323) (315,280)
Terminated contracts, partial withdrawals, transfers to
annuity reserves, surrender charges and annual
contract fees (139,608) (1,407,402)
------------- ---------------
(168,931) (1,722,682)
------------- ---------------
Net decrease from unit transactions (26,229,490)
===============
</TABLE>
(Continued)
A-10
<PAGE>
CLIAC SEPARATE ACCOUNT A
Notes to Financial Statements
(6) Purchases and Sales of Investments
The aggregate cost of investments purchased and the aggregate proceeds
from investments sold for the period from January 1, 1995 to
September 30, 1995 were as follows:
<TABLE>
<CAPTION>
Aggregate Aggregate
Cost of Proceeds
Purchases from Sales
<S> <C> <C>
Money Fund Subaccount $ 34,306,368 $ 47,677,567
Bond Fund Subaccount 6,061,712 7,864,951
Capital Appreciation Fund Subaccount 18,785,915 22,997,481
Global Securities Fund Subaccount 11,797,255 16,534,938
Growth Fund Subaccount 13,147,749 9,601,687
High Income Fund Subaccount 14,768,826 14,219,875
Multiple Strategies Fund Subaccount 5,735,960 10,078,170
Strategic Bond Fund Subaccount 4,739,544 6,462,226
---------------- ---------------
$109,343,329 $135,436,895
================ ===============
</TABLE>
(Continued)
A-11
<PAGE>
CLIAC SEPARATE ACCOUNT A
Notes to Financial Statements
(7) Related Party Transactions
As of September 30, 1995, Separate Account A has recorded distributions
Payable to Sponsor in the accompanying statement of assets and
liabilities for funds requested from Oppenheimer for redemptions
which have not been transferred to the Sponsor for distribution.
(8) Assumption Reinsurance Agreement
On May 3, 1995, the Sponsor entered into an Assumption Reinsurance
Agreement with Aetna Life Insurance and Annuity Company ("ALIAC")
under which ALIAC would assume liability through reinsurance for all
of the Sponsor's separate account policies as well as those
individual life and GIC policyholders who elected to be reinsured
(subject to the approval of the various states) and subject to the
fulfillment of certain other closing conditions. This assumption
reinsurance transaction was closed on October 2, 1995, effective
October 1, 1995. Thereafter the Separate Account A became Variable
Annuity Account G of ALIAC.
A-12
<PAGE>
FINANCIAL STATEMENTS
VARIABLE ANNUITY ACCOUNT G
Index
Statement of Assets and Liabilities ....................................... S-2
Statement of Operations and Changes in Net Assets ......................... S-3
Notes to Financial Statements ............................................. S-4
Independent Auditors' Report .............................................. S-8
S-1
<PAGE>
Variable Annuity Account G
Statement of Assets and Liabilities - December 31, 1996
<TABLE>
<CAPTION>
ASSETS:
Investments, at net asset value: (Note 1)
<S> <C>
Oppenheimer Funds:
Bond Fund; 1,416,187 shares (cost $16,366,936) .................................................... $16,470,259
Capital Appreciation Fund; 1,599,099 shares (cost $55,935,418) .................................... 61,901,121
Global Securities Fund; 2,660,872 shares (cost $41,811,291) ....................................... 46,911,181
Growth Fund; 1,933,783 shares (cost $44,651,471) .................................................. 52,676,250
High Income Fund; 3,441,325 shares (cost $36,547,903) ............................................. 38,301,952
Money Fund; 12,331,339 shares (cost $12,339,602) .................................................. 12,331,339
Multiple Strategies Fund; 3,605,624 shares (cost $52,111,012) ..................................... 56,355,896
Strategic Bond Fund; 3,786,294 shares (cost $18,487,737) .......................................... 19,272,238
Dividends Receivable .................................................................................. 20,175
------------
NET ASSETS (cost $278,251,370) ........................................................................ $304,240,411
============
Net assets represented by:
Reserves for annuity contracts in accumulation period: (Notes 1 and 5)
Oppenheimer Funds:
Bond Fund:
Annuity contracts in accumulation ................................................................. $16,470,259
Capital Appreciation Fund:
Annuity contracts in accumulation ................................................................. 61,901,121
Global Securities Fund:
Annuity contracts in accumulation ................................................................. 46,911,181
Growth Fund:
Annuity contracts in accumulation ................................................................. 52,676,250
High Income Fund:
Annuity contracts in accumulation ................................................................. 38,301,952
Money Fund:
Annuity contracts in accumulation ................................................................. 12,351,514
Multiple Strategies Fund:
Annuity contracts in accumulation ................................................................. 56,355,896
Strategic Bond Fund:
Annuity contracts in accumulation ................................................................. 19,272,238
------------
$304,240,411
============
</TABLE>
See Notes to Financial Statements
S-2
<PAGE>
Variable Annuity Account G
Statements of Operations and Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended December 31,
1996 * 1995
------------- -------------
<S> <C> <C>
INVESTMENT INCOME:
Income: (Notes 1, 3 and 5)
Dividends ........................................................................... $17,968,354 $2,527,579
Expenses: (Notes 2 and 5)
Valuation Period Deductions ......................................................... (4,100,918) (1,006,867)
------------- -------------
Net investment income .................................................................. 13,867,436 1,520,712
------------- -------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on sales of investments: (Notes 1, 4 and 5)
Proceeds from sales .................................................................. 123,718,459 27,617,465
Cost of investments sold ............................................................. 117,214,579 27,564,734
------------- -------------
Net realized gain .................................................................. 6,503,880 52,731
Net unrealized gain on investments: (Note 5)
Beginning of period .................................................................. 6,664,287 0
End of period ........................................................................ 25,989,041 6,664,287
------------- -------------
Net change in unrealized gain ...................................................... 19,324,754 6,664,287
------------- -------------
Net realized and unrealized gain on investments ........................................ 25,828,634 6,717,018
------------- -------------
Net increase in net assets resulting from operations ................................... 39,696,070 8,237,730
------------- -------------
FROM UNIT TRANSACTIONS:
Variable annuity contract purchase payments ............................................ 1,347,812 295,637,163
Sales and administrative charges deducted by the Company ............................... 0 (98,694)
------------- -------------
Net variable annuity contract purchase payments .................................... 1,347,812 295,538,469
Transfers to the Company's fixed account options ....................................... (1,158,167) (265,956)
Redemptions by contract holders ........................................................ (34,319,022) (4,878,071)
Other .................................................................................. 2,437,592 (2,396,046)
------------- -------------
Net increase(decrease) in net assets from unit transactions (Note 5) ............... (31,691,785) 287,998,396
------------- -------------
Change in net assets ................................................................... 8,004,285 296,236,126
NET ASSETS:
Beginning of period .................................................................... 296,236,126 0
------------- -------------
End of period .......................................................................... $304,240,411 $296,236,126
============= =============
</TABLE>
* Statement of Operations and Changes in Net Assets for the Period from
October 1, 1995 through December 31, 1995.
See Notes to Financial Statements
S-3
<PAGE>
Variable Annuity Account G
Notes to Financial Statements - December 31, 1996
1. Summary of Significant Accounting Policies
Variable Annuity Account G ("Account") is a separate account established by
Aetna Life Insurance and Annuity Company and is registered under the
Investment Company Act of 1940 as a unit investment trust. The Account is
sold exclusively for use with the individual deferred variable annuity
contracts originally issued by Confederation Life Insurance and Annuity
Company. The Contract allows tax-deferred capital accumulation under
specific sections of the Internal Revenue Code of 1986, as amended. The
account commenced operations on October 2, 1995.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported therein. Although actual results
could differ from these estimates, any such differences are expected to be
immaterial to the net assets of the Account.
a. Valuation of Investments
Investments in the following Funds are stated at the closing net asset
value per share as determined by each Fund on December 31, 1996:
Oppenheimer Funds
[bullet]Bond Fund
[bullet]Capital Appreciation Fund
[bullet]Global Securities Fund
[bullet]Growth Fund
[bullet]High Income Fund
[bullet]Money Fund
[bullet]Multiple Strategies Fund
[bullet]Strategic Bond Fund
b. Other
Investment transactions are accounted for on a trade date basis and
dividend income is recorded on the ex-dividend date. The cost of
investments sold is determined by specific identification.
c. Federal Income Taxes
The operations of the Account form a part of, and are taxed with, the total
operations of Aetna Life Insurance and Annuity Company ("Company") which is
taxed as a life insurance company under the Internal Revenue Code of 1986,
as amended.
d. Annuity Reserves
Annuity reserves held in the Separate Accounts are computed for currently
payable contracts according to the Progressive Annuity, a49, 1971
Individual Annuity Mortality, 1971 Group Annuity Mortality, 83a, and 1983
Group Annuity Mortality tables using various assumed interest rates not to
exceed seven percent. Mortality experience is monitored by the Company.
Charges to annuity reserves for mortality experience are reimbursed to the
Company if the reserves required are less than originally estimated. If
additional reserves are required, the Company reimburses the Account.
2. Valuation Period Deductions
Deductions by the Account for mortality and expense risk charges are made
in accordance with the terms of the contracts and are paid to the Company.
S-4
<PAGE>
Variable Annuity Account G
Notes to Financial Statements - December 31, 1996 (continued):
3. Dividend Income
On an annual basis, the Funds distribute substantially all of their taxable
income and realized capital gains to their shareholders. Distributions to
the Account are automatically reinvested in shares of the Funds. The
Account's proportionate share of each Fund's undistributed net investment
income (distributions in excess of net investment income) and accumulated
net realized gain (loss) on investments is included in net unrealized gain
(loss) in the Statements of Operations and Changes in Net Assets.
4. Purchases and Sales of Investments
The cost of purchases and proceeds from sales of investments other than
short-term investments for the year ended December 31, 1996 and the period
ended December 31, 1995 aggregated $105,939,733 and $123,718,459;
$317,090,950 and $27,617,465, respectively.
S-5
<PAGE>
Variable Annuity Account G
Notes to Financial Statements - December 31, 1996 (continued):
<TABLE>
<CAPTION>
5. Supplemental information to Statements of Operations and Changes in Net Assets - Year Ended December 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Oppenheimer Funds:
Bond Fund: $1,104,498 ($235,724) $4,826,495 $4,828,642 ($2,147)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
Capital Appreciation Fund: 3,495,018 (828,310) 26,760,766 23,113,025 3,647,741
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
Global Securities Fund: 0 (644,717) 15,620,037 15,191,263 428,774
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
Growth Fund: 3,625,748 (665,320) 12,139,115 10,964,531 1,174,584
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
High Income Fund: 3,607,200 (515,281) 16,152,336 15,476,296 676,040
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
Money Fund: 807,981 (230,448) 35,552,603 35,524,618 27,985
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
Multiple Strategies Fund: 3,968,794 (746,766) 7,332,774 7,002,443 330,331
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
Strategic Bond Fund: 1,359,115 (234,352) 5,334,333 5,113,761 220,572
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------
Total Variable Annuity Account G $17,968,354 ($4,100,918) $123,718,459 $117,214,579 $6,503,880
=============================================================================================================================
S-6
<PAGE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase(Decrease) Net Assets
---------- Change in In Net Assets ----------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$386,616 $ 103,324 ($283,292) ($2,797,881) 18,684,805 16,470,259
- -------------------------------------------------------------------------------------------------------
3,759,740 5,965,703 2,205,963 (4,075,202) 57,455,911 61,901,121
- -------------------------------------------------------------------------------------------------------
(1,380,765) 5,099,890 6,480,655 (6,427,068) 47,073,537 46,911,181
- -------------------------------------------------------------------------------------------------------
2,222,313 8,024,778 5,802,465 (3,857,056) 46,595,829 52,676,250
- -------------------------------------------------------------------------------------------------------
529,137 1,754,049 1,224,912 (5,460,806) 38,769,887 38,301,952
- -------------------------------------------------------------------------------------------------------
0 11,912 11,912 (5,609,002) 17,343,086 12,351,514
- -------------------------------------------------------------------------------------------------------
821,545 4,244,884 3,423,339 (5,190,564) 54,570,762 56,355,896
- -------------------------------------------------------------------------------------------------------
325,701 784,501 458,800 1,725,794 15,742,309 19,272,238
- -------------------------------------------------------------------------------------------------------
$6,664,287 $25,989,041 $19,324,754 ($31,691,785) $296,236,126 $304,240,411
=======================================================================================================
</TABLE>
S-7
<PAGE>
Independent Auditors' Report
The Board of Directors of Aetna Life Insurance and Annuity Company and
Contract Owners of Variable Annuity Account G:
We have audited the accompanying statement of assets and liabilities of Aetna
Life Insurance and Annuity Company Variable Annuity Account G (the "Account") as
of December 31, 1996, the related statements of operations and changes in net
assets for the year then ended and the three-month period ended December 31,
1995 and condensed financial information for the year ended December 31, 1996.
These financial statements and condensed financial information are the
responsibility of the Account's management. Our responsibility is to express an
opinion on these financial statements and condensed financial information based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and condensed
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1996, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and condensed financial information
referred to above present fairly, in all material respects, the financial
position of Aetna Life Insurance and Annuity Company Variable Annuity Account G
as of December 31, 1996, the results of its operations and the changes in its
net assets for the year then ended and for the three-month period ended December
31, 1995 and the condensed financial information for the year ended December 31,
1996 in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Hartford, Connecticut
February 14, 1997
S-8
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBIDIARIES
Index to Consolidated Financial Statements
Page
Independent Auditors' Report F-2
Consolidated Financial Statements:
Consolidated Statements of Income for the Years Ended
December 31, 1996, 1995 and 1994 F-3
Consolidated Balance Sheets as of December 31, 1996
and 1995 F-4
Consolidated Statements of Changes in Shareholder's Equity
for the Years Ended December 31, 1996, 1995 and 1994 F-5
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1996, 1995 and 1994 F-6
Notes to Consolidated Financial Statements F-7
F-1
<PAGE>
Independent Auditors' Report
The Shareholder and Board of Directors
Aetna Life Insurance and Annuity Company:
We have audited the accompanying consolidated balance sheets of Aetna Life
Insurance and Annuity Company and Subsidiaries as of December 31, 1996 and 1995,
and the related consolidated statements of income, changes in shareholder's
equity and cash flows for each of the years in the three-year period ended
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial 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 Aetna Life Insurance
and Annuity Company and Subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
February 4, 1997
F-2
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Income
(millions)
Years Ended December 31,
--------------------------------
1996 1995 1994
---- ---- ----
Revenue:
Premiums $133.6 $212.7 $191.6
Charges assessed against policyholders 396.5 318.9 279.0
Net investment income 1,045.6 1,004.3 917.2
Net realized capital gains 19.7 41.3 1.5
Other income 45.4 42.0 10.3
------- ------- -------
Total revenue 1,640.8 1,619.2 1,399.6
------- ------- -------
Benefits and expenses:
Current and future benefits 968.6 997.2 921.5
Operating expenses 342.2 310.8 225.7
Amortization of deferred policy
acquisition costs 69.8 48.0 31.5
Severance and facilities charges 61.3 -- --
------- ------- -------
Total benefits and expenses 1,441.9 1,356.0 1,178.7
------- ------- -------
Income before income taxes 198.9 263.2 220.9
Income taxes 57.8 87.3 75.6
------- ------- -------
Net income $141.1 $175.9 $145.3
======= ======= =======
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Balance Sheets
(millions, except share data)
December 31,
-------------------------
1996 1995
---- ----
Assets
- ------
Investments:
Debt securities, available for sale:
(amortized cost: $12,539.1 and $11,923.7) $12,905.5 $12,720.8
Equity securities, available for sale:
Non-redeemable preferred stock
(cost: $107.6 and $51.3) 119.0 57.6
Investment in affiliated mutual funds
(cost: $77.3 and $173.4) 81.1 191.8
Common stock (cost: $0.0 and $6.9) 0.3 8.2
Short-term investments 34.8 15.1
Mortgage loans 13.0 21.2
Policy loans 399.3 338.6
--------- ---------
Total investments 13,553.0 13,353.3
Cash and cash equivalents 459.1 568.8
Accrued investment income 159.0 175.5
Premiums due and other receivables 26.6 37.3
Deferred policy acquisition costs 1,515.3 1,341.3
Reinsurance loan to affiliate 628.3 655.5
Other assets 33.7 26.2
Separate Account assets 15,318.3 10,987.0
--------- ---------
Total assets $31,693.3 $27,144.9
========= =========
Liabilities and Shareholder's Equity
- -------------------------------------
Liabilities:
Future policy benefits $3,617.0 $3,594.6
Unpaid claims and claim expenses 28.9 27.2
Policyholders' funds left with the Company 10,663.7 10,500.1
--------- ---------
Total insurance reserve liabilities 14,309.6 14,121.9
Other liabilities 354.7 257.2
Income taxes:
Current 20.7 26.2
Deferred 80.5 169.6
Separate Account liabilities 15,318.3 10,987.0
--------- ---------
Total liabilities 30,083.8 25,561.9
--------- ---------
Shareholder's equity:
Common stock, par value $50 (100,000 shares
authorized; 55,000 shares issued and
outstanding) 2.8 2.8
Paid-in capital 418.0 407.6
Net unrealized capital gains 60.5 132.5
Retained earnings 1,128.2 1,040.1
--------- ---------
Total shareholder's equity 1,609.5 1,583.0
--------- ---------
Total liabilities and shareholder's equity $31,693.3 $27,144.9
========= =========
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Changes in Shareholder's Equity
(millions)
Years Ended December 31,
-----------------------------------
1996 1995 1994
---- ---- ----
Shareholder's equity, beginning of year $1,583.0 $1,088.5 $1,246.7
Capital contributions 10.4 -- --
Net change in unrealized capital gains (losses) (72.0) 321.5 (303.5)
Net income 141.1 175.9 145.3
Other changes (49.5) -- --
Common stock dividends declared (3.5) (2.9) --
-------- -------- --------
Shareholder's equity, end of year $1,609.5 $1,583.0 $1,088.5
======== ======== ========
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Cash Flows
(millions)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $141.1 $175.9 $145.3
Adjustments to reconcile net income to net
cash (used for) provided by operating activities:
Decrease (increase) in accrued investment income 16.5 (33.3) (17.5)
Decrease in premiums due and other receivables 1.6 25.4 1.3
Increase in policy loans (60.7) (89.9) (46.0)
Increase in deferred policy acquisition costs (174.0) (177.0) (105.9)
Decrease in reinsurance loan to affiliate 27.2 34.8 27.8
Net increase in universal life account balances 243.2 393.4 164.7
(Decrease) increase in other insurance
reserve liabilities (211.5) 79.0 75.1
Net increase in other liabilities and other assets 3.1 13.0 52.5
Decrease in income taxes (26.7) (4.5) (10.3)
Net accretion of discount on investments (68.0) (66.4) (77.9)
Net realized capital gains (19.7) (41.3) (1.5)
Other, net 1.1 -- (1.0)
-------- -------- --------
Net cash (used for) provided by operating activities (126.8) 309.1 206.6
-------- -------- --------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale 5,182.2 4,207.2 3,593.8
Equity securities 190.5 180.8 93.1
Mortgage loans 8.7 10.7 --
Limited partnership -- 26.6 --
Investment maturities and collections of:
Debt securities available for sale 885.2 583.9 1,289.2
Short-term investments 35.0 106.1 30.4
Cost of investment purchases in:
Debt securities available for sale (6,534.3) (6,034.0) (5,621.4)
Equity securities (118.1) (170.9) (162.5)
Short-term investments (54.7) (24.7) (106.1)
Mortgage loans -- (21.3) --
Limited partnership -- -- (25.0)
Other, net (17.6) -- --
-------- -------- --------
Net cash used for investing activities (423.1) (1,135.6) (908.5)
-------- -------- --------
Cash Flows from Financing Activities:
Deposits and interest credited for investment contracts 1,579.5 1,884.5 1,737.8
Withdrawals of investment contracts (1,146.2) (1,109.6) (948.7)
Additional capital contributions 10.4 -- --
Dividends paid to shareholder (3.5) (2.9) --
-------- -------- --------
Net cash provided by financing activities 440.2 772.0 789.1
-------- -------- --------
Net (decrease) increase in cash and cash equivalents (109.7) (54.5) 87.2
Cash and cash equivalents, beginning of year 568.8 623.3 536.1
-------- -------- --------
Cash and cash equivalents, end of year $459.1 $568.8 $623.3
======== ======== ========
Supplemental cash flow information:
Income taxes paid, net $85.5 $92.8 $85.9
======== ======== ========
See Notes to Consolidated Financial Statements.
</TABLE>
F-6
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Aetna Life Insurance and Annuity Company and its wholly owned subsidiaries
(collectively, the "Company") is a provider of financial services and life
insurance products in the United States. The Company has two business
segments: financial services and individual life insurance.
Financial services products include annuity contracts that offer a variety
of funding and payout options for individual and employer-sponsored
retirement plans qualified under Internal Revenue Code Sections 401, 403,
408 and 457, and non-qualified annuity contracts. These contracts may be
deferred or immediate ("payout annuities"). Financial services also include
investment advisory services, financial planning and pension plan
administrative services.
Individual life insurance products include universal life, variable
universal life, traditional whole life and term insurance.
Basis of Presentation
The consolidated financial statements include Aetna Life Insurance and
Annuity Company and its wholly owned subsidiaries, Aetna Insurance Company
of America and Aetna Private Capital, Inc. Aetna Life Insurance and Annuity
Company is a wholly owned subsidiary of Aetna Retirement Holdings, Inc.
("HOLDCO"). HOLDCO is a wholly owned subsidiary of Aetna Retirement
Services, Inc., whose ultimate parent is Aetna Inc. ("Aetna").
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles. Certain reclassifications have
been made to 1995 and 1994 financial information to conform to the 1996
presentation.
Future Application of Accounting Standards
Financial Accounting Standard ("FAS") No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, was
issued in June 1996. This statement provides accounting and reporting
standards for transfers of financial assets and extinguishments of
liabilities. Transactions covered by this statement would include
securitizations, sales of partial interests in assets, repurchase
agreements and securities lending. This statement requires that after a
transfer of financial assets, an entity would recognize any assets it
controls and liabilities it has incurred. An entity would not recognize
assets when control has been surrendered or liabilities have been
satisfied. Portions of this statement are effective for each of 1997 and
1998 financial statements and early adoption is not permitted. The Company
does not expect adoption of this statement to have a material effect on its
financial position or results of operations.
F-7
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from reported results
using those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, money market instruments
and other debt issues with a maturity of 90 days or less when purchased.
Investments
All of the Company's debt and equity securities are classified as available
for sale and carried at fair value. These securities are written down (as
realized capital losses) for other than temporary declines in value.
Unrealized capital gains and losses related to available for sale other
than amounts allocable to experience rated contractholders, are reflected
in shareholder's equity, net of related taxes.
Fair values for debt and equity securities are based on quoted market
prices or dealer quotations. Where quoted market prices or dealer
quotations are not available, fair values are measured utilizing quoted
market prices for similar securities or by using discounted cash flow
methods. Cost for mortgage-backed securities is adjusted for unamortized
premiums and discounts, which are amortized using the interest method over
the estimated remaining term of the securities, adjusted for anticipated
prepayments.
Purchases and sales of debt and equity securities are recorded on the trade
date.
The investment in affiliated mutual funds primarily represents an
investment in the Aetna Series Fund, Inc., a retail mutual fund which has
been seeded by the Company, and is carried at fair value.
Mortgage loans and policy loans are carried at unpaid principal balances,
net of impairment reserves. Sales of mortgage loans are recorded on the
closing date.
Short-term investments, consisting primarily of money market instruments
and other debt issues purchased with a maturity of 91 days to one year, are
considered available for sale and are carried at fair value, which
approximates amortized cost.
F-8
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Futures contracts are carried at fair value and require daily cash
settlement. Changes in the fair value of futures contracts that qualify as
hedges are deferred and recognized as an adjustment to the hedged asset or
liability. Deferred gains or losses on such futures contracts are amortized
over the life of the acquired asset or liability as a yield adjustment or
through net realized capital gains or losses upon disposal of an asset.
Changes in the fair value of futures contracts that do not qualify as
hedges are recorded in net realized capital gains or losses. Hedge
designation requires specific asset or liability identification, a
probability at inception of high correlation with the position underlying
the hedge, and that high correlation be maintained throughout the hedge
period. If a hedging instrument ceases to be highly correlated with the
position underlying the hedge, hedge accounting ceases at that date and
excess gains and losses on the hedging instrument are reflected in net
realized capital gains or losses.
Swap agreements which are designated as interest rate risk management
instruments at inception are accounted for using the accrual method.
Accordingly, the difference between amounts paid and received on such
agreements is reported in net investment income. There is no recognition in
the Consolidated Balance Sheets for changes in the fair value of the
agreement.
Deferred Policy Acquisition Costs
Certain costs of acquiring insurance business are deferred. These costs,
all of which vary with and are primarily related to the production of new
and renewal business, consist principally of commissions, certain expenses
of underwriting and issuing contracts, and certain agency expenses. For
fixed ordinary life contracts, such costs are amortized over expected
premium-paying periods (up to 20 years). For universal life and certain
annuity contracts, such costs are amortized in proportion to estimated
gross profits and adjusted to reflect actual gross profits over the life of
the contracts (up to 20 years).
Deferred policy acquisition costs are written off to the extent that it is
determined that future policy premiums and investment income or gross
profits are not adequate to cover related losses and expenses.
Insurance Reserve Liabilities
Future Policy Benefits include reserves for universal life, immediate
annuities with life contingent payouts and traditional life insurance
contracts. Reserves for universal life contracts are equal to cumulative
deposits less charges and withdrawals plus credited interest thereon.
Reserves for immediate annuities with life contingent payouts and
traditional life insurance contracts are computed on the basis of assumed
investment yield, mortality, and expenses, including a margin for adverse
deviations. Such assumptions generally vary by plan, year of issue and
policy duration. Reserve interest rates range from 2.25% to 12.00%.
Investment yield is based on the Company's experience. Mortality and
withdrawal rate assumptions are based on relevant Aetna experience and are
periodically reviewed against both industry standards and experience.
F-9
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Policyholders' Funds Left With the Company include reserves for deferred
annuity investment contracts and immediate annuities without life
contingent payouts. Reserves on such contracts are equal to cumulative
deposits less charges and withdrawals plus credited interest thereon (rates
range from 4.00% to 7.00%), net of adjustments for investment experience
that the Company is entitled to reflect in future credited interest.
Reserves on contracts subject to experience rating reflect the rights of
contractholders, plan participants and the Company.
Unpaid claims for all lines of insurance include benefits for reported
losses and estimates of benefits for losses incurred but not reported.
Premiums, Charges Assessed Against Policyholders, Benefits and Expenses
For universal life and certain annuity contracts, charges assessed against
policyholders' funds for the cost of insurance, surrender charges,
actuarial margin and other fees are recorded as revenue in charges assessed
against policyholders. Other amounts received for these contracts are
reflected as deposits and are not recorded as revenue. Life insurance
premiums, other than premiums for universal life and certain annuity
contracts, are recorded as premium revenue when due. Related policy
benefits are recorded in relation to the associated premiums or gross
profit so that profits are recognized over the expected lives of the
contracts. When annuity payments begin under contracts with life contingent
payouts that were initially investment contracts, the accumulated balance
in the account is treated as a single premium for the purchase of an
annuity, reflected as an offsetting amount in both premiums and current and
future benefits in the Consolidated Statements of Income.
Separate Accounts
Assets held under variable universal life and variable annuity contracts
are segregated in Separate Accounts and are invested, as designated by the
contractholder or participant under a contract, in shares of Aetna Variable
Fund, Aetna Income Shares, Aetna Variable Encore Fund, Aetna Investment
Advisers Fund, Inc., Aetna GET Fund, the Aetna Series Fund Inc., or the
Aetna Generation Funds (collectively, "Funds"), which are managed by the
Company, or other selected mutual funds not managed by the Company.
Separate Accounts assets and liabilities are carried at fair value except
for those relating to a guaranteed interest option. Since the Company bears
the investment risk where the contract is held to maturity, the assets of
the Separate Account supporting the guaranteed interest option are carried
at an amortized cost of $515.6 million for 1996 (fair value $523.0 million)
and $322.2 million for 1995 (fair value $343.9 million). Reserves relating
to the guaranteed interest option are maintained at fund value and reflect
interest credited at rates ranging from 4.10% to 8.00% in 1996 and 4.50% to
8.38% in 1995.
F-10
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Separate Accounts assets and liabilities are shown as separate captions in
the Consolidated Balance Sheets. Deposits, investment income and net
realized and unrealized capital gains and losses of the Separate Accounts
are not reflected in the Consolidated Statements of Income (with the
exception of realized capital gains and losses on the sale of assets
supporting the guaranteed interest option). The Consolidated Statements of
Cash Flows do not reflect investment activity of the Separate Accounts.
Income Taxes
The Company is included in the consolidated federal income tax return of
Aetna. The Company is taxed at regular corporate rates after adjusting
income reported for financial statement purposes for certain items.
Deferred income tax expenses/benefits result from changes during the year
in cumulative temporary differences between the tax basis and book basis of
assets and liabilities.
F-11
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments
Debt securities available for sale as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
(millions)
<S> <C> <C> <C> <C>
U.S. government and government
agencies and authorities $ 1,072.4 $ 20.5 $ 4.5 $ 1,088.4
States, municipalities and political
subdivisions 6.0 1.2 -- 7.2
U.S. corporate securities:
Financial 2,143.4 43.1 9.7 2,176.8
Food & fiber 198.2 4.6 1.3 201.5
Healthcare & consumer products 735.9 20.2 6.3 749.8
Media & broadcast 274.9 7.0 2.8 279.1
Natural resources 187.7 4.5 0.4 191.8
Transportation & capital goods 521.9 22.0 1.8 542.1
Utilities 448.8 14.8 2.8 460.8
Other 141.5 3.0 -- 144.5
--------- --------- --------- ---------
Total U.S. corporate securities 4,652.3 119.2 25.1 4,746.4
Foreign Securities:
Government 758.6 36.0 5.7 788.9
Utilities 187.8 16.1 -- 203.9
Other 945.5 30.9 6.3 970.1
--------- --------- --------- ---------
Total foreign securities 1,891.9 83.0 12.0 1,962.9
Residential mortgage-backed securities:
Pass-throughs 792.2 78.3 3.1 867.4
Collateralized mortgage obligations 2,227.8 94.9 13.7 2,309.0
--------- --------- --------- ---------
Total residential mortgage-
backed securities 3,020.0 173.2 16.8 3,176.4
Commercial/Multifamily mortgage-
backed securities 1,008.7 24.8 5.6 1,027.9
Other asset-backed securities 887.8 10.7 2.2 896.3
--------- --------- --------- ---------
Total Debt Securities $12,539.1 $ 432.6 $ 66.2 $12,905.5
========= ========= ========= =========
</TABLE>
F-12
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
Debt securities available for sale as of December 31, 1995 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
(millions)
<S> <C> <C> <C> <C>
U.S. government and government
agencies and authorities $ 539.5 $ 47.5 $ -- $ 587.0
States, municipalities and political
subdivisions 41.4 12.4 -- 53.8
U.S. Corporate securities:
Financial 2,764.4 110.3 2.1 2,872.6
Food & fiber 310.8 20.8 0.6 331.0
Healthcare & consumer products 766.0 59.2 0.2 825.0
Media & broadcast 191.7 10.0 -- 201.7
Natural resources 186.9 12.6 0.2 199.3
Transportation & capital goods 602.4 46.7 0.2 648.9
Utilities 454.4 27.8 1.0 481.2
Other 119.9 10.2 -- 130.1
--------- --------- --------- ---------
Total U.S. corporate securities 5,396.5 297.6 4.3 5,689.8
Foreign securities:
Government 316.4 26.1 2.0 340.5
Utilities 236.3 32.9 269.2
Other 749.9 60.5 3.5 806.9
--------- --------- --------- ---------
Total foreign securities 1,302.6 119.5 5.5 1,416.6
Residential mortgage-backed securities:
Pass-throughs 556.7 99.2 1.8 654.1
Collateralized mortgage obligations 2,383.9 167.6 2.2 2,549.3
--------- --------- --------- ---------
Total residential mortgage-
backed securities 2,940.6 266.8 4.0 3,203.4
Commercial/multifamily mortgage-
backed securities 741.9 32.3 0.2 774.0
Other asset-backed securities 961.2 35.5 0.5 996.2
--------- --------- --------- ---------
Total Debt Securities $11,923.7 $ 811.6 $ 14.5 $12,720.8
========= ========= ========= =========
</TABLE>
F-13
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
At December 31, 1996 and 1995, net unrealized appreciation of $366.4
million and $797.1 million, respectively, on available for sale debt
securities included $288.5 million and $619.1 million, respectively,
related to experience rated contracts, which were not reflected in
shareholder's equity but in Future Policy Benefits and Policyholders' Funds
Left With the Company.
The amortized cost and fair value of debt securities for the year ended
December 31, 1996 are shown below by contractual maturity. Actual
maturities may differ from contractual maturities because securities may be
restructured, called, or prepaid.
Amortized Fair
Cost Value
--------- -----
(millions)
Due to mature:
One year or less $ 424.4 $ 425.7
After one year through five years 2,162.4 2,194.2
After five years through ten years 2,467.4 2,509.6
After ten years 2,568.4 2,675.4
Mortgage-backed securities 4,028.7 4,204.3
Other asset-backed securities 887.8 896.3
--------- ---------
Total $12,539.1 $12,905.5
========= =========
The Company engages in securities lending whereby certain securities from
its portfolio are loaned to other institutions for short periods of time.
Collateral, primarily cash, which is in excess of the market value of the
loaned securities, is deposited by the borrower with a lending agent, and
retained and invested by the lending agent to generate additional income
for the Company. The market value of the loaned securities is monitored on
a daily basis with additional collateral obtained or refunded as the market
value fluctuates. At December 31, 1996 and 1995, the Company had loaned
securities (which are reflected as invested assets) with a market value of
approximately $444.7 million and $264.5 million, respectively.
At December 31, 1996 and 1995, debt securities carried at $7.6 million and
$7.4 million, respectively, were on deposit as required by regulatory
authorities.
The carrying value of non-income producing investments was $0.9 million and
$0.1 million at December 31, 1996 and 1995, respectively.
The Company did not have any investments in a single issuer, other than
obligations of the U.S. government, with a carrying value in excess of 10%
of the Company's shareholder's equity at December 31, 1996.
F-14
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
Included in the Company's total debt securities were residential
collateralized mortgage obligations ("CMOs") supporting the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
Fair Amortized Fair Amortized
Value Cost Value Cost
----- ---- ----- ----
(millions)
<S> <C> <C> <C> <C>
Total residential CMOs (1) $2,309.0 $2,227.8 $2,549.4 $2,383.9
======== ======== ======== ========
Percentage of total:
Supporting experience rated products 84.2% 85.3%
Supporting remaining products 15.8% 14.7%
-------- --------
100.0% 100.0%
======== ========
</TABLE>
(1) At December 31, 1996 and 1995, approximately 71% and 81%,
respectively, of the Company's residential CMO holdings were backed by
government agencies such as GNMA, FNMA, FHLMC.
There are various categories of CMOs which are subject to different degrees
of risk from changes in interest rates and, for nonagency-backed CMOs,
defaults. The principal risks inherent in holding CMOs are prepayment and
extension risks related to dramatic decreases and increases in interest
rates resulting in the repayment of principal from the underlying mortgages
either earlier or later than originally anticipated.
At December 31, 1996 and 1995, approximately 68% and 79%, respectively, of
the Company's CMO holdings were in planned amortization class ("PAC") and
sequential structure tranches, which are subject to less prepayment and
extension risk than other types of CMO instruments. At December 31, 1996
and 1995, approximately 3% of the Company's CMO holdings were in the
interest-only ("IOs") and principal-only ("POs") tranches, which are
subject to more prepayment and extension risks than other types of CMO
instruments. Remaining CMO holdings are in other tranches that have
prepayment and extension risks which fall between the degree of risk
associated with PACs and sequentials, and IOs and POs.
F-15
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
Investments in available for sale equity securities were as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ---------- ---------- -----
(millions)
1996
Equity Securities $ 184.9 $ 16.3 $ 0.8 $ 200.4
======= ======= ======= =======
1995
Equity Securities $ 231.6 $ 27.2 $ 1.2 $ 257.6
======= ======= ======= =======
3. Financial Instruments
Estimated Fair Value
The carrying values and estimated fair values of certain of the Company's
financial instruments at December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
------------------ -----------------
Carrying Fair Carrying Fair
Value Value Value Value
----- ----- ----- -----
(millions)
<S> <C> <C> <C> <C>
Assets:
Mortgage loans $ 13.0 $ 13.2 $ 21.2 $ 21.9
Liabilities:
Investment contract liabilities:
With a fixed maturity $ 1,014.1 $ 1,028.8 $ 989.1 $ 1,001.2
Without a fixed maturity 9,649.6 9,427.6 9,511.0 9,298.4
</TABLE>
Fair value estimates are made at a specific point in time, based on
available market information and judgments about the financial instrument,
such as estimates of timing and amount of future cash flows. Such estimates
do not reflect any premium or discount that could result from offering for
sale at one time the Company's entire holdings of a particular financial
instrument, nor do they consider the tax impact of the realization of
unrealized gains or losses. In many cases, the fair value estimates cannot
be substantiated by comparison to independent markets, nor can the
disclosed value be realized in immediate settlement of the instrument. In
evaluating the Company's management of interest rate, price and liquidity
risks, the fair values of all assets and liabilities should be taken into
consideration, not only those presented above.
F-16
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
3. Financial Instruments (Continued)
The following valuation methods and assumptions were used by the Company in
estimating the fair value of the above financial instruments:
Mortgage loans: Fair values are estimated by discounting expected mortgage
loan cash flows at market rates which reflect the rates at which similar
loans would be made to similar borrowers. The rates reflect management's
assessment of the credit quality and the remaining duration of the loans.
Investment contract liabilities (included in Policyholders' Funds Left With
the Company):
With a fixed maturity: Fair value is estimated by discounting cash flows at
interest rates currently being offered by, or available to, the Company for
similar contracts.
Without a fixed maturity: Fair value is estimated as the amount payable to
the contractholder upon demand. However, the Company has the right under
such contracts to delay payment of withdrawals which may ultimately result
in paying an amount different than that determined to be payable on demand.
Off-Balance-Sheet and Other Financial Instruments (including Derivative
Financial Instruments)
The Company uses off-balance-sheet and other financial instruments
primarily to manage portfolio risks, including interest rate,
prepayment/call, credit, price, and liquidity risks. In 1996, Treasury
futures contracts were used to manage interest rate risk in the Company's
bond portfolio and stock index futures contracts were used to manage price
risk in the Company's equity portfolio. In 1996 and 1995, interest rate
swaps and forward commitments to enter into interest rate swaps,
respectively, were also used to manage interest rate risk in the Company's
bond portfolio.
Futures Contracts:
Futures contracts represent commitments to either purchase or sell
underlying assets at a specified future date. Futures contracts trade on
organized exchanges and, therefore, have minimal credit risk. Cash
settlements are made daily based on changes in the prices of the underlying
assets. There were no futures contracts open as of December 31, 1996 and
1995.
F-17
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
3. Financial Instruments (Continued)
Interest Rate Swaps:
Under interest rate swaps, the Company agrees with other parties to
exchange interest amounts calculated by reference to an agreed notional
principal amount. Generally, no cash is exchanged at the outset of the
contract and no principal payments are made. A single net payment is
usually made by one counterparty at each due date or upon termination of
the contract. The Company would be exposed to credit-related losses in the
event of nonperformance by counterparties to financial instruments,
however, the Company controls its exposure to credit risk through credit
approvals, credit limits and regular monitoring procedures. The credit
exposure of interest rate swaps is represented by the fair value (market
value) of contracts with a positive fair value (market value) at the
reporting date. There were no interest rate swap agreements open as of
December 31, 1996. At December 31, 1995, the Company had an open forward
swap agreement with a notional amount of $100.0 million and a fair value of
$0.1 million.
During 1995, the Company received $0.4 million for writing call options on
underlying securities. The Company did not write any call options in 1996.
As of December 31, 1996 and 1995, there were no option contracts
outstanding.
The Company also had investments in certain debt instruments with
derivative characteristics, including those whose market value is at least
partially determined by, among other things, levels of or changes in
domestic and/or foreign interest rates (short or long term), exchange
rates, prepayment rates, equity markets or credit ratings/spreads. The
amortized cost and fair value of these securities, included in the debt
securities portfolio, as of December 31, 1996 was as follows:
Amortized Fair
Cost Value
---- -----
(millions)
Residential collateralized mortgage obligations $ 2,227.8 $ 2,309.0
Principal-only strips (included above) 44.5 53.3
Interest-only strips (included above) 10.3 22.8
Other structured securities with derivative
characteristics (1) 126.3 129.2
(1) Represents non-leveraged instruments whose fair values and credit risk
are based on underlying securities, including fixed income securities
and interest rate swap agreements.
F-18
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
4. Net Investment Income
Sources of net investment income were as follows:
1996 1995 1994
---- ---- ----
(millions)
Debt securities $ 945.3 $ 891.5 $ 823.9
Preferred stock 5.9 4.2 3.9
Investment in affiliated mutual funds 14.3 14.9 5.2
Mortgage loans 2.2 1.4 1.4
Policy loans 18.4 13.7 11.5
Reinsurance loan to affiliate 44.1 46.5 51.5
Cash equivalents 29.4 38.9 29.5
Other 2.1 8.4 6.7
-------- -------- --------
Gross investment income 1,061.7 1,019.5 933.6
Less investment expenses (16.1) (15.2) (16.4)
-------- -------- --------
Net investment income $1,045.6 $1,004.3 $ 917.2
======== ======== ========
Net investment income includes amounts allocable to experience rated
contractholders of $787.6 million, $744.2 million and $677.1 million for
the years ended December 31, 1996, 1995 and 1994, respectively. Interest
credited to contractholders is included in Current and Future Benefits.
5. Dividend Restrictions and Shareholder's Equity
The Company paid $3.5 million in cash dividends to HOLDCO in 1996. In 1995,
the Company dividended $2.9 million in the form of two of its subsidiaries,
Systematized Benefits Administrators, Inc. and Aetna Investment Services,
Inc., to Aetna Retirement Services, Inc. (the Company's former parent).
The amount of dividends that may be paid to the shareholder in 1997 without
prior approval by the Insurance Commissioner of the State of Connecticut is
$71.1 million.
The Insurance Department of the State of Connecticut (the "Department")
recognizes as net income and shareholder's capital and surplus those
amounts determined in conformity with statutory accounting practices
prescribed or permitted by the Department, which differ in certain respects
from generally accepted accounting principles. Statutory net income was
$57.8 million, $70.0 million and $64.9 million for the years ended December
31, 1996, 1995 and 1994, respectively. Statutory capital and surplus was
$713.6 million and $670.7 million as of December 31, 1996 and 1995,
respectively.
As of December 31, 1996 the Company does not utilize any statutory
accounting practices which are not prescribed by state regulatory
authorities that, individually or in the aggregate, materially affect
statutory capital and surplus.
F-19
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
6. Capital Gains and Losses on Investment Operations
Realized capital gains or losses are the difference between the carrying
value and sale proceeds of specific investments sold.
Net realized capital gains on investments were as follows:
1996 1995 1994
---- ---- ----
(millions)
Debt securities $ 11.1 $ 32.8 $ 1.0
Equity securities 8.6 8.3 0.2
Mortgage loans -- 0.2 0.3
-------- -------- -------
Pretax realized capital gains $ 19.7 $ 41.3 $ 1.5
======== ======= =======
After tax realized capital gains $ 13.0 $ 25.8 $ 1.0
======== ======= =======
Net realized capital gains of $53.1 million and $61.1 million for 1996 and
1995, respectively, and net realized capital losses of $29.1 million for
1994, allocable to experience rated contracts, were deducted from net
realized capital gains (losses) and an offsetting amount was reflected in
policyholder funds' left with the Company. Net unamortized gains were $53.3
million and $7.3 million at December 31, 1996 and 1995, respectively.
Changes to the mortgage loan valuation reserve and writedowns on debt
securities for other than temporary declines in value are included in net
realized capital gains (losses) and amounted to $(3.3) million, $3.1
million and $1.1 million, of which $(3.2) million, $2.2 million and $0.8
million were allocable to experience rated contractholders, for the years
ended December 31, 1996, 1995 and 1994, respectively. There was no
valuation reserve for mortgage loans at December 31, 1996 or at December
31, 1995.
Proceeds from the sale of available for sale debt securities and the
related gross gains and losses were as follows:
1996 1995 1994
---- ---- ----
(millions)
Proceeds on Sales $5,182.2 $4,207.2 $3,593.8
Gross gains 24.3 44.6 26.6
Gross losses 13.2 11.8 25.6
F-20
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
6. Capital Gains and Losses on Investment Operations (Continued)
Changes in shareholder's equity related to changes in unrealized capital
gains (losses), (excluding those related to experience rated
contractholders), were as follows:
1996 1995 1994
---- ---- ----
(millions)
Debt securities $ (100.1) $ 255.9 $ (242.1)
Equity securities (10.5) 27.3 (13.3)
Limited partnership -- 1.8 (1.8)
-------- -------- --------
(110.6) 285.0 (257.2)
Deferred income taxes (See Note 8) (38.6) (36.5) 46.3
-------- -------- --------
Net change in unrealized
capital gains (losses) $ (72.0) $ 321.5 $ (303.5)
======== ======== ========
Net unrealized capital gains allocable to experience rated contracts of
$245.2 million and $43.3 million at December 31, 1996 and $515.0 million
and $104.1 million at December 31, 1995 are reflected on the Consolidated
Balance Sheets in Policyholders' Funds Left With the Company and Future
Policy Benefits, respectively, and are not included in shareholder's
equity.
Shareholder's equity included the following unrealized capital gains
(losses), which are net of amounts allocable to experience rated
contractholders, at December 31:
1996 1995 1994
---- ---- ----
(millions)
Debt securities
Gross unrealized capital gains $101.7 $179.3 $ 27.4
Gross unrealized capital losses (23.8) (1.3) (105.2)
------ ------ --------
77.9 178.0 (77.8)
Equity securities
Gross unrealized capital gains 16.3 27.2 6.5
Gross unrealized capital losses (0.8) (1.2) (7.9)
------ ------ --------
15.5 26.0 (1.4)
Limited Partnership -- -- --
Gross unrealized capital gains -- -- --
Gross unrealized capital losses -- -- (1.8)
------ ------ --------
-- -- (1.8)
Deferred income taxes (See Note 8) 32.9 71.5 108.0
------ ------ --------
Net unrealized capital gains (losses) $ 60.5 $132.5 $(189.0)
====== ====== ========
F-21
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
7. Severance and Facilities Charges
Severance and facilities charges during 1996, as described below, included
the following (pretax):
<TABLE>
<CAPTION>
Vacated
Asset Leased Corporate
(Millions) Severance Write-Off Property Other Allocation Total
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Financial Services $ 29.1 $ 1.0 $ 1.3 $ 1.7 $ -- $ 33.1
Individual Life Insurance 12.5 0.4 0.5 0.8 -- 14.2
Corporate Allocation -- -- -- -- 14.0 14.0
---------------------------------------------------------------
Total Company $ 41.6 $ 1.4 $ 1.8 $ 2.5 $ 14.0 $ 61.3
- --------------------------------------------------------------------------------------------
</TABLE>
In the third quarter of 1996, the Company recorded a $30.7 million after
tax ($47.3 million pretax) charge principally related to actions taken or
expected to be taken to improve its cost structure relative to its
competitors. The severance portion of the charge is based on a plan to
eliminate 702 positions (primarily customer service, sales and information
technology support staff). The facilities portion of the charge is based on
a plan to consolidate sales/service field offices.
In addition to the above charge, Aetna recorded a facilities and severance
charge in the second quarter of 1996, primarily as a result of actions
taken or expected to be taken to reduce the level of corporate expenses and
other costs previously absorbed by Aetna's property-casualty operations.
The cost allocated to the Company associated with this charge was $9.1
million after tax ($14.0 million pretax).
The activity during 1996 within the severance and facilities reserve
(pretax, in millions) and the number of positions eliminated related to
such actions were as follows:
Reserve Positions
---------------------------------------------------------------------------
Beginning of year $ -- --
Severance and facilities charges 47.3 702
Corporate Allocation 14.0 --
Actions taken (1) (13.4) (178)
-------------------------------
End of year $ 47.9 524
---------------------------------------------------------------------------
(1) Includes $8.0 million of severance-related actions and $4.1 million of
corporate allocation-related actions.
The Company's severance actions are expected to be substantially completed
by March 31, 1998. The corporate allocation actions and the vacating of the
leased office space are expected to be substantially completed in 1997.
F-22
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
8. Income Taxes
The Company is included in the consolidated federal income tax return and
combined Connecticut and New York state income tax returns of Aetna. Aetna
allocates to each member an amount approximating the tax it would have
incurred were it not a member of the consolidated group, and credits the
member for the use of its tax saving attributes used in the consolidated
returns.
Income taxes for the years ended December 31, consist of:
1996 1995 1994
---- ---- ----
(millions)
Current taxes (benefits):
Income Taxes:
Federal $ 50.9 $ 82.9 $ 78.7
State 3.7 3.2 4.4
Net realized capital gains (losses) 25.3 28.5 (33.2)
------ ------ ------
79.9 114.6 49.9
------ ------ ------
Deferred taxes (benefits):
Income Taxes:
Federal (3.5) (14.4) (8.0)
Net realized capital gains (losses) (18.6) (12.9) 33.7
------ ------ ------
(22.1) (27.3) 25.7
------ ------ ------
Total $ 57.8 $ 87.3 $ 75.6
====== ====== ======
Income taxes were different from the amount computed by applying the
federal income tax rate to income before income taxes for the following
reasons:
1996 1995 1994
---- ---- ----
(millions)
Income before income taxes $198.9 $263.2 $220.9
Tax rate 35% 35% 35%
------ ------ ------
Application of the tax rate 69.6 92.1 77.3
------ ------ ------
Tax effect of:
State income tax, net of federal benefit 2.4 2.1 2.9
Excludable dividends (8.7) (9.3) (8.6)
Other, net (5.5) 2.4 4.0
------ ------ ------
Income taxes $ 57.8 $ 87.3 $ 75.6
====== ====== ======
F-23
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
8. Income Taxes (Continued)
The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities at December 31 are presented below:
1996 1995
---- ----
(millions)
Deferred tax assets:
Insurance reserves $ 344.6 $ 290.4
Unrealized gains allocable to
experience rated contracts 100.8 216.7
Investment losses 7.5 7.3
Postretirement benefits other
than pensions 27.0 7.7
Deferred compensation 25.0 18.9
Pension 7.6 5.7
Other 29.3 9.2
------- -------
Total gross assets 541.8 555.9
Deferred tax liabilities:
Deferred policy acquisition costs 482.1 433.0
Market discount 6.8 4.4
Net unrealized capital gains 133.7 288.2
Other (0.3) (0.1)
------- -------
Total gross liabilities 622.3 725.5
------- -------
Net deferred tax liability $ 80.5 $ 169.6
======= =======
Net unrealized capital gains and losses are presented in shareholder's
equity net of deferred taxes. Valuation allowances are provided when it is
not considered more likely than not that deferred tax assets will be
realized. As of December 31, 1996 and 1995, no valuation allowances were
required for unrealized capital gains and losses.
The "Policyholders' Surplus Account," which arose under prior tax law, is
generally that portion of a life insurance company's statutory income that
has not been subject to taxation. As of December 31, 1983, no further
additions could be made to the Policyholders' Surplus Account for tax
return purposes under the Deficit Reduction Act of 1984. The balance in
such account was approximately $17.2 million at December 31, 1996. This
amount would be taxed only under certain conditions. No income taxes have
been provided on this amount since management believes the conditions under
which such taxes would become payable are remote.
F-24
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
8. Income Taxes (Continued)
The Internal Revenue Service ("Service") has completed examinations of the
consolidated federal income tax returns of Aetna through 1990. Discussions
are being held with the Service with respect to proposed adjustments.
Management believes there are adequate defenses against, or sufficient
reserves to provide for, any such adjustments. The Service has commenced
its examinations for the years 1991 through 1994.
9. Benefit Plans
Employee Pension Plans - The Company, in conjunction with Aetna, has
noncontributory defined benefit pension plans covering substantially all
employees. The plans provide pension benefits based on years of service and
average annual compensation (measured over 60 consecutive months of highest
earnings in a 120-month period). Contributions are determined using the
Projected Unit Credit Method and, for qualified plans subject to ERISA
requirements, are limited to the amounts that are tax-deductible. As of
December 31, 1996, Aetna's accrued pension cost has been allocated to its
subsidiaries, including the Company, under an allocation based on eligible
salaries. Data on a separate company basis regarding the proportionate
share of the projected benefit obligation and plan assets is not available.
The accumulated benefit obligation and plan assets are recorded by Aetna.
As of the measurement date (i.e., September 30), the accumulated plan
assets exceeded accumulated plan benefits. Allocated pretax charges to
operations for the pension plan (based on the Company's total salary cost
as a percentage of Aetna's total salary cost) were $4.3 million, $6.1
million and $5.5 million for the years ended December 31, 1996, 1995 and
1994, respectively.
Employee Postretirement Benefits - In addition to providing pension
benefits, Aetna currently provides health care and life insurance benefits,
subject to certain caps, for retired employees. A comprehensive medical and
dental plan is offered to all full-time employees retiring at age 50 with
15 years of service or at age 65 with 10 years of service. Retirees are
generally required to contribute to the plans based on their years of
service with Aetna. The costs to the Company associated with the Aetna
postretirement plans for 1996, 1995 and 1994 were $1.8 million, $1.4
million and $1.0 million, respectively.
As of December 31, 1996, Aetna transferred to the Company approximately
$77.7 million of accrued liabilities, primarily related to the pension and
postretirement benefit plans described above, that had been previously
recorded by Aetna. The after tax amount of this transfer (approximately
$50.5 million) is reported as a reduction in retained earnings.
Agent Pension Plans - The Company, in conjunction with Aetna, has a
non-qualified pension plan covering certain agents. The plan provides
pension benefits based on annual commission earnings. As of the measurement
date (i.e., September 30), the accumulated plan assets exceeded accumulated
plan benefits.
F-25
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
9. Benefit Plans (Continued)
Agent Postretirement Benefits - The Company, in conjunction with Aetna,
also provides certain postretirement health care and life insurance
benefits for certain agents. The costs to the Company associated with the
agents' postretirement plans for 1996, 1995 and 1994 were $0.7 million,
$0.8 million and $0.7 million, respectively.
Incentive Savings Plan - Substantially all employees are eligible to
participate in a savings plan under which designated contributions, which
may be invested in common stock of Aetna or certain other investments, are
matched, up to 5% of compensation, by Aetna. Pretax charges to operations
for the incentive savings plan were $5.4 million, $4.9 million and $3.3
million in 1996, 1995 and 1994, respectively.
Stock Plans - Aetna has a stock incentive plan that provides for stock
options, deferred contingent common stock or equivalent cash awards or
restricted stock to certain key employees. Executive and middle management
employees may be granted options to purchase common stock of Aetna at or
above the market price on the date of grant. Options generally become 100%
vested three years after the grant is made, with one-third of the options
vesting each year. Aetna does not recognize compensation expense for stock
options granted at or above the market price on the date of grant under its
stock incentive plans. In addition, executives may be granted incentive
units which are rights to receive common stock or an equivalent value in
cash. The incentive units may vest within a range from 0% to 175% at the
end of a four year period based on the attainment of performance goals. The
costs to the Company associated with the Aetna stock plans for 1996, 1995
and 1994, were $8.1 million, $6.3 million and $1.7 million, respectively.
As of December 31, 1996, Aetna transferred to the Company approximately
$1.1 million of deferred tax benefits related to stock options. This amount
is reported as an increase in retained earnings.
10. Related Party Transactions
The Company is compensated by the Separate Accounts for bearing mortality
and expense risks pertaining to variable life and annuity contracts. Under
the insurance contracts, the Separate Accounts pay the Company a daily fee
which, on an annual basis, ranges, depending on the product, from .10% to
1.90% of their average daily net assets. The Company also receives fees
from the variable life and annuity mutual funds and The Aetna Series Fund
for serving as investment adviser. Under the advisory agreements, the Funds
pay the Company a daily fee which, on an annual basis, ranges, depending on
the fund, from .25% to .85% of their average daily net assets. The Company
also receives fees (expressed as a percentage of the average daily net
assets) from the variable life and annuity mutual funds and The Aetna
Series Fund for providing administration services, and from The Aetna
Series Fund for providing shareholder services and promoting sales. The
amount of compensation and fees received from the Separate Accounts and
Funds, included in Charges Assessed Against Policyholders, amounted to
$185.4 million, $128.1 million and $104.6 million in 1996, 1995 and 1994,
respectively. The Company may waive advisory fees at its discretion.
F-26
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
10. Related Party Transactions (Continued)
The Company acts as an investment adviser for its affiliated mutual funds.
Since August 1996, Aeltus Investment Management, Inc. ("Aeltus"), a wholly
owned subsidiary of HOLDCO and an affiliate of the Company, has been acting
as Subadvisor of all affiliated mutual funds and of most of the General
Account assets. Fees paid by the Company to Aeltus, included in both
Charges Assessed Against Policyholders and Net Investment Income, on an
annual basis, range from .06% to .55% of the average daily net assets under
management. For the year ended December 31, 1996, the Company paid $16.0
million in such fees.
The Company may, from time to time, make reimbursements to a Fund for some
or all of its operating expenses. Reimbursement arrangements may be
terminated at any time without notice.
Since 1981, all domestic individual non-participating life insurance of
Aetna and its subsidiaries has been issued by the Company. Effective
December 31, 1988, the Company entered into a reinsurance agreement with
Aetna Life Insurance Company ("Aetna Life") in which substantially all of
the non-participating individual life and annuity business written by Aetna
Life prior to 1981 was assumed by the Company. A $108.0 million commission,
paid by the Company to Aetna Life in 1988, was capitalized as deferred
policy acquisition costs. An additional $6.1 million commission, paid by
the Company to Aetna Life in 1996, was capitalized as deferred policy
acquisition costs. The Company maintained insurance reserves of $628.3
million and $655.5 million as of December 31, 1996 and 1995, respectively,
relating to the business assumed. In consideration for the assumption of
this business, a loan was established relating to the assets held by Aetna
Life which support the insurance reserves. The loan is being reduced in
accordance with the decrease in the reserves. The fair value of this loan
was $625.3 million and $663.5 million as of December 31, 1996 and 1995,
respectively, and is based upon the fair value of the underlying assets.
Premiums of $25.3 million, $28.0 million and $32.8 million and current and
future benefits of $39.5 million, $43.0 million and $43.8 million were
assumed in 1996, 1995 and 1994, respectively.
Investment income of $44.1 million, $46.5 million and $51.5 million was
generated from the reinsurance loan to affiliate in 1996, 1995 and 1994,
respectively. Net income of approximately $8.1 million, $18.4 million and
$25.1 million resulted from this agreement in 1996, 1995 and 1994,
respectively.
On December 16, 1988, the Company assumed $25.0 million of premium revenue
from Aetna Life for the purchase and administration of a life contingent
single premium variable payout annuity contract. In addition, the Company
also is responsible for administering fixed annuity payments that are made
to annuitants receiving variable payments. Reserves of $28.9 million and
$28.0 million were maintained for this contract as of December 31, 1996 and
1995, respectively.
Effective February 1, 1992, the Company increased its retention limit per
individual life to $2.0 million and entered into a reinsurance agreement
with Aetna Life to reinsure amounts in excess of this limit, up to a
maximum of $8.0 million on any new individual life business, on a yearly
renewable term basis. Premium amounts related to this agreement were $5.2
million, $3.2 million and $1.3 million for 1996, 1995 and 1994,
respectively.
F-27
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
10. Related Party Transactions (Continued)
The Company received a capital contribution of $10.4 million in cash from
HOLDCO in 1996. The Company received no capital contributions in 1995 or
1994.
The Company paid $3.5 million in cash dividends to HOLDCO in 1996. In 1995,
the Company dividended $2.9 million in the form of two of its subsidiaries,
Systematized Benefits Administrators, Inc. and Aetna Investment Services,
Inc., to Aetna Retirement Services, Inc. (the Company's former parent).
Premiums due and other receivables include $2.8 million and $5.7 million
due from affiliates in 1996 and 1995, respectively. Other liabilities
include $10.7 million and $12.4 million due to affiliates for 1996 and
1995, respectively.
Substantially all of the administrative and support functions of the
Company are provided by Aetna and its affiliates. The financial statements
reflect allocated charges for these services based upon measures
appropriate for the type and nature of service provided.
11. Reinsurance
The Company utilizes indemnity reinsurance agreements to reduce its
exposure to large losses in all aspects of its insurance business. Such
reinsurance permits recovery of a portion of losses from reinsurers,
although it does not discharge the primary liability of the Company as
direct insurer of the risks reinsured. The Company evaluates the financial
strength of potential reinsurers and continually monitors the financial
condition of reinsurers. Only those reinsurance recoverables deemed
probable of recovery are reflected as assets on the Company's Consolidated
Balance Sheets.
F-28
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
11. Reinsurance (Continued)
The following table includes premium amounts ceded/assumed to/from
affiliated companies as discussed in Note 10 above.
Ceded to Assumed
Direct Other from Other Net
Amount Companies Companies Amount
------ --------- --------- ------
(millions)
1996
Premiums:
Life Insurance $ 34.6 $ 11.2 $ 25.3 $ 48.7
Accident and Health Insurance 6.3 6.3 -- --
Annuities 84.3 -- 0.6 84.9
======= ======= ======= =======
Total earned premiums $ 125.2 $ 17.5 $ 25.9 $ 133.6
======= ======= ======= =======
1995
Premiums:
Life Insurance $ 28.8 $ 8.6 $ 28.0 $ 48.2
Accident and Health Insurance 7.5 7.5 -- --
Annuities 164.0 -- 0.5 164.5
======= ======= ======= =======
Total earned premiums $ 200.3 $ 16.1 $ 28.5 $ 212.7
======= ======= ======= =======
1994
Premiums:
Life Insurance $ 27.3 $ 6.0 $ 32.8 $ 54.1
Accident and Health Insurance 9.3 9.3 -- --
Annuities 137.3 -- 0.2 137.5
======= ======= ======= =======
Total earned premiums $ 173.9 $ 15.3 $ 33.0 $ 191.6
======= ======= ======= =======
12. Commitments and Contingent Liabilities
Commitments
Through the normal course of investment operations, the Company commits to
either purchase or sell securities or money market instruments at a
specified future date and at a specified price or yield. The inability of
counterparties to honor these commitments may result in either higher or
lower replacement cost. Also, there is likely to be a change in the value
of the securities underlying the commitments. At December 31, 1996, the
Company had commitments to purchase investments of $17.9 million. The fair
value of the investments at December 31, 1996 approximated $18.3 million.
F-29
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
12. Commitments and Contingent Liabilities (Continued)
Litigation
The Company is involved in numerous lawsuits arising, for the most part, in
the ordinary course of its business operations. While the ultimate outcome
of litigation against the Company cannot be determined at this time, after
consideration of the defenses available to the Company and any related
reserves established, it is not expected to result in liability for amounts
material to the financial condition of the Company, although it may
adversely affect results of operations in future periods.
F-30
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
13. Segment Information (1)
The Company's operations are reported through two major business segments:
Financial Services and Individual Life Insurance.
Summarized financial information for the Company's principal operations was
as follows:
(Millions) 1996 1995 1994
- --------------------------------------------------------------------------------
Revenue:
Financial Services $ 1,195.1 $ 1,211.3 $ 1,013.5
Individual Life Insurance 445.7 407.9 386.1
---------------------------------
Total revenue $ 1,640.8 $ 1,619.2 $ 1,399.6
- --------------------------------------------------------------------------------
Income before income taxes: (2)
Financial Services $ 129.9 $ 160.1 $ 122.5
Individual Life Insurance 83.0 103.1 98.4
---------------------------------
Total income before income taxes $ 212.9 $ 263.2 $ 220.9
- --------------------------------------------------------------------------------
Net income: (2)
Financial Services $ 94.3 $ 113.8 $ 85.5
Individual Life Insurance 55.9 62.1 59.8
---------------------------------
Net income $ 150.2 $ 175.9 $ 145.3
- --------------------------------------------------------------------------------
Assets under management: (3)
Financial Services $27,268.1 $22,534.4 $18,122.9
Individual Life Insurance 2,830.5 2,590.9 2,220.5
- --------------------------------------------------------------------------------
Total assets under management $30,098.6 $25,125.3 $20,343.4
- --------------------------------------------------------------------------------
(1) The 1996 results include severance and facilities charges of $30.7 million,
after tax. Of this charge $21.5 million related to the Financial Services
segment and $9.2 million related to the Individual Life Insurance segment.
(2) Excludes any effect of the corporate facilities and severance charge
recorded in 1996 which is not directly allocable to the Financial Services
and Individual Life Insurance segments. (Refer to Note 7).
(3) Excludes net unrealized capital gains (losses) of $366.4 million, $797.1
million and $(386.4) million at December 31, 1996, 1995 and 1994,
respectively.
F-31
<PAGE>
Form No. 61897(S)-2 ALIAC Ed. May 1997
<PAGE>
VARIABLE ANNUITY ACCOUNT G
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Included in Part A:
Condensed Financial Information
(2) Included in Part B:
Financial Statements of CLIAC Separate Account A:
- Independent Auditors' Report
- Statement of Assets and Liabilities as of September 30,
1995
- Statements of Operations for the period from January 1,
1995 to September 30, 1995
- Statement of Changes in Net Assets for the period from
January 1, 1995 to September 30, 1995
- Notes to Financial Statements
Financial Statements of Variable Annuity Account G:
- Statement of Assets and Liabilities as of December 31,
1996
- Statements of Operations and Changes in Net Assets for
the year ended December 31, 1996 and for the period from
October 1, 1995 to December 31, 1995
- Notes to Financial Statements
- Independent Auditors' Report
Financial Statements of the Depositor:
- Independent Auditors' Report
- Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994
- Consolidated Balance Sheets as of December 31, 1996 and
1995
- Consolidated Statements of Changes in Shareholder's Equity
for the years ended December 31, 1996, 1995 and 1994
- Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994
- Notes to Consolidated Financial Statements
(b) Exhibits
(1) Resolution of the Board of Directors of Aetna Life Insurance
and Annuity Company establishing Variable Annuity Account G(1)
(2) Not applicable
(3) Form of Selling Agreement (Oppenheimer)(2)
(4.1) Form of Variable Annuity Contract(1)
(4.2) Form of Non-qualified Annuity Contract Endorsement(1)
(4.3) Form of Restriction on Transferability Endorsement(1)
(4.4) Form of Amendment to Contract for Systematic Withdrawal
Program(1)
(4.5) Form of Amendment to 408(b) Contract(1)
(4.6) Form of Amendment to 403(b) Contract(1)
(4.7) Form of Rehabilitation Endorsement(1)
(4.8) Form of Assumption Certificate(1)
(5) Not applicable
(6.1) Certification of Incorporation and By-Laws of Aetna Life
Insurance and Annuity Company(3)
<PAGE>
(6.2) Amendment of Certificate of Incorporation of Aetna Life
Insurance and Annuity Company(4)
(7) Not applicable
(8) Fund Participation Agreement(2)
(9) Opinion of Counsel(5)
(10.1) Consent of Independent Auditors
(10.2) Consent of Counsel
(11) Not applicable
(12) Not applicable
(13) Not applicable
(14) Not applicable
(15.1) Power of Attorney(6)
(15.2) Authorization for Signatures(7)
(27) Financial Data Schedule
1. Incorporated by reference to Registration Statement on Form N-4 (File No.
33-61897), as filed electronically on August 17, 1995.
2. Incorporated by reference to Pre-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 33-61897), as filed electronically on
September 28, 1995.
3. Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form S-1 (file No. 33-60477), as filed electronically on April
15, 1996.
4. Incorporated by reference to Post-Effective Amendment No. 12 to
Registration Statement on Form N-4 (File No. 75964), as filed
electronically on February 11, 1997.
5. Incorporated by reference to Registrant's 24f-2 Notice for the fiscal year
ended December 31, 1996, as filed electronically with the Securities and
Exchange Commission on February 28, 1997.
6. Incorporated by reference to Registration Statement on Form S-2 (File No.
33-60477), as filed electronically on April 4, 1997.
7. Incorporated by reference to Post-Effective Amendment No. 5 to Registration
Statement on Form N-4 (File No. 33-75986), as filed electronically on April
12, 1996.
<PAGE>
Item 25. Directors and Officers of the Depositor
Name and Principal
Business Address* Positions and Offices with Depositor
Daniel P. Kearney Director and President
Timothy A. Holt Director, Senior Vice President and Chief
Financial Officer
Christopher J. Burns Director and Senior Vice President
Laura R. Estes Director and Senior Vice President
J. Scott Fox Director and Senior Vice President
Gail P. Johnson Director and Vice President
John Y. Kim Director and Senior Vice President
Shaun P. Mathews Director and Vice President
Glen Salow Director and Vice President
Creed R. Terry Director and Vice President
Deborah Koltenuk Vice President and Treasurer, Corporate
Controller
Frederick D. Kelsven Vice President and Chief Compliance Officer
Kirk P. Wickman Vice President, General Counsel and
Secretary
* The principal business address of all directors and officers listed is 151
Farmington Avenue, Hartford, Connecticut 06156.
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant
Attached hereto is a listing of all persons directly under common control
with the Registrant. The listing indicates (1) the state or other sovereign
power under the laws of which the entity is organized, (2) the percentage of
voting securities owned or other basis of control by the person, if any,
immediately controlling it (percentages are rounded to the nearest whole
percentage and are based on ownership of voting rights), and (3) its principal
business.
<PAGE>
March 31, 1997 COMPANY ORGANIZATION LIST
<TABLE>
<CAPTION>
- -------------------------------- ----------------- ---------------------- ------------- ------------------------------------------
COMPANY STATE IMMEDIATE OWNER OWNERSHIP PRINCIPAL BUSINESS
PERCENTAGE+
- -------------------------------- ----------------- ---------------------- ------------- ------------------------------------------
<S> <C> <C> <C> <C>
Aetna Inc. CT (1) Publicly Held Holding Company
- -------------------------------- ----------------- ---------------------- ------------- ------------------------------------------
Aetna Services, Inc. CT (1) (*) Aetna Inc. 100% Holding Company
- -------------------------------- ----------------- ---------------------- ------------- ------------------------------------------
Aetna U.S. Healthcare Inc. PA (1) (*) Aetna Inc. 100% Holding Company
- -------------------------------- ----------------- ---------------------- ------------- ------------------------------------------
Aetna Risk Indemnity Company Bermuda (1) (*) Aetna Inc. 100% Insurance
Limited
- -------------------------------- ----------------- ---------------------- ------------- ------------------------------------------
Aetna Life Insurance Company CT (1) (*) Aetna Services, Inc. 100% Life and Health Insurance and Related
Services
- -------------------------------- ----------------- ---------------------- ------------- ------------------------------------------
Aetna Retirement Services, Inc. CT (1) (*) Aetna Services, Inc. 100% Holding Company
- -------------------------------- ----------------- ---------------------- ------------- ------------------------------------------
Aetna International, Inc. CT (1) (*) Aetna Services, Inc. 100% Holding Company for International
Subsidiaries
- -------------------------------- ----------------- ---------------------- ------------- ------------------------------------------
Aetna Health and Life Insurance CT (1) (*) Aetna Services, Inc. 100% Life and Health Insurance
Company
- -------------------------------- ----------------- ---------------------- ------------- ------------------------------------------
Structured Benefits, Inc. CT (1) (*) Aetna Services, Inc. 100% Broker of Life and Annuity Products and
Administrative Services
- -------------------------------- ----------------- ---------------------- ------------- ------------------------------------------
</TABLE>
(1) Corporation (*) Fully Consolidated
(2) Partnership (**) One Line Consolidation
(3) Joint Venture (***) Not Consolidated
(4) Trust
(5) Limited Liability Company
+ Percentages are rounded to the nearest whole percent and are based on
ownership of voting rights.
1
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------- -------------- ----------------------------- ------------ --------------------------------------
COMPANY STATE IMMEDIATE OWNER OWNERSHIP PRINCIPAL BUSINESS
PERCENTAGE+
- ----------------------------------- -------------- ----------------------------- ------------ --------------------------------------
<S> <C> <C> <C> <C>
Aetna Foundation, Inc. CT (1) (*) Aetna Services, Inc. 100%(a) Supports charitable scientific,
literary and educational activities
- ----------------------------------- -------------- ----------------------------- ------------ --------------------------------------
Imperial Fire & Marine U.K. (1) (***) Aetna Services, Inc. 10% Reinsurance
Re-Insurance Company Limited
- ----------------------------------- -------------- ----------------------------- ------------ --------------------------------------
Aetna Business Resources, Inc. CT (1) (*) Aetna Services, Inc. 100% Provides business services to
external clients
- ----------------------------------- -------------- ----------------------------- ------------ --------------------------------------
AE Fifteen, Incorporated CT (1) (*) Aetna Services, Inc. 100% Shell Corp. for interest in
cogeneration
- ----------------------------------- -------------- ----------------------------- ------------ --------------------------------------
Luettgens Limited CT (1) (*) Aetna Services, Inc. 100% Retail Specialty Store
- ----------------------------------- -------------- ----------------------------- ------------ --------------------------------------
AE Housing Corp. CT (1) (*) Aetna Services, Inc. 100% Real Estate
- ----------------------------------- -------------- ----------------------------- ------------ --------------------------------------
Aetna Capital L.L.C. DE (5) (*) Aetna Services, Inc. 95%(b) Finance - limited liability company
- ----------------------------------- -------------- ----------------------------- ------------ --------------------------------------
Aetna Realty Investments I, Inc. CT (1) (*) Aetna Services, Inc. 100% Real Estate Investment
- ----------------------------------- -------------- ----------------------------- ------------ --------------------------------------
Structured Benefits of Florida, FL (1) (**) Structured Benefits, Inc. 100% Brokering of Life and Annuity
products and Administrative Services
- ----------------------------------- -------------- ----------------------------- ------------ --------------------------------------
Aetna Properties I Limited CT (2) (***) Aetna Realty Investments I, 84%(c) Real Estate Investment
Partnership Inc.
- ----------------------------------- -------------- ----------------------------- ------------ --------------------------------------
CMBS Holdings, Inc. TX (1) (*) Aetna Life Insurance Company 100% Real Estate Investment and Management
- ----------------------------------- -------------- ----------------------------- ------------ --------------------------------------
Aetna Real Estate Properties, Inc. CT (1) (*) Aetna Life Insurance Company 100% Acquire, develop and lease real estate
- ----------------------------------- -------------- ----------------------------- ------------ --------------------------------------
ALIC Energy, Co. TX (1) (*) Aetna Life Insurance Company 100% Acquisition and Management of
non-traditional investments
- ----------------------------------- -------------- ----------------------------- ------------ --------------------------------------
Aetna Insurance Company of CT (1) (*) Aetna Life Insurance Company 100% Insurance
Connecticut
- ----------------------------------- -------------- ----------------------------- ------------ --------------------------------------
CDI Equity, Inc. DE (1) (*) Aetna Life Insurance Company 100% General Business Corporation
- ----------------------------------- -------------- ----------------------------- ------------ --------------------------------------
- --------
(a) Nonstock Corporation
(b) Aetna Capital Holdings, Inc. owns 5% of this Limited Liability Company.
(c) Aetna Realty Investments I, Inc. is a 1% general partner and an 83% limited partner.
2
<PAGE>
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
CDI Equity L.L.C. DE (5) (*) Aetna Life Insurance Company 99%(d) General Business Corporation
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
AE Fourteen, Inc. CT (1) (*) Aetna Life Insurance Company 100% Cogeneration
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
Aetna Life Assignment Company CT (1) (*) Aetna Life Insurance Company 100% Assignment Company for structured
settlements
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
Bayshore Heights Associates FL (2) (**) Aetna Life Insurance Company 70% Real Estate
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
Aetna/Area Corporation CT (1) (*) Aetna Life Insurance Company 100% Real Estate Investment and Management
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
Aetna Institutional Investors I CT (2) (**) Aetna Life Insurance Company 13%(e) Real Estate Investment
Limited Partnership)
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
ShadowRidge At Oak Park CA (2) (**) Aetna Life Insurance Company 80% Real Estate
Condominium Associates
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
BPC Equity, Inc. DE (1) (*) Aetna Life Insurance Company 100% General Business Corporation
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
BPC Equity, L.L.C. DE (5) (*) Aetna Life Insurance Company 99%(f) General Business Corporation
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
AHP Holdings, Inc. CT (1) (*) Aetna Life Insurance Company 100% Holding Company
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
Bay Area Mall, L.L.C. DE (5) (*) Aetna Life Insurance Company 99%(g) Real Estate
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
Bay Area Mall, Inc. DE (1) (*) Aetna Life Insurance Company 100% Real Estate
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
455 Market Street CA (2) (**) Aetna Life Insurance Company 90%(h) Real Estate
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
- --------
(d) CDI Equity, Inc. owns 1% of this Limited Liability Company.
(e) Aetna Real Estate Properties, Inc. is a 1% general partner.
(f) BPC Equity, Inc. owns 1% of this Limited Liability Company.
(g) Bay Area Mall, Inc. owns 1% of this Limited Liability Company.
(h) 89% general partner and 1% limited partner.
3
<PAGE>
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
Koll Center Newport A CA (2) (**) Aetna Life Insurance Company 50%(i) Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
Koll Center Newport Number 8 CA (2) (**) Aetna Life Insurance Company 50%(j) Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
Koll Center Newport Number 9 CA (2) (**) Aetna Life Insurance Company 50%(k) Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
Koll Center Newport Number 10 CA (2) (**) Aetna Life Insurance Company 50%(l) Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
Koll Center Newport Number 11 CA (2) (**) Aetna Life Insurance Company 50%(m) Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
Koll Center Newport Number 14 CA (3) (**) Aetna Life Insurance Company 60% Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
Aetna Hamilton Partnership IL (2) (**) Aetna Life Insurance Company 62% Real Estate
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
Waterloo Associates Limited NC (2) (**) Aetna Life Insurance Company 99%(n) Real Estate Investment
Partnership
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
Hayward Industrial Park CT (2) (**) Aetna Life Insurance Company 99% Real Estate Investment
Associates
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
Gables At Farmington Associates CT (2) (**) Aetna Life Insurance Company 60% Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
Gables at Brighton Associates NY (2) (**) Aetna Life Insurance Company 50% Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
Country Club Heights at Woburn MA (2) (**) Aetna Life Insurance Company 60% Real Estate Investment
Associates
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
Britcher Aetna-Laguna Hills CA (2) (**) Aetna Life Insurance Company 68% Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
Harbor Business Park CA (2) (**) Aetna Life Insurance Company 99% Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ------------ --------------------------------------
- --------
(i) Aetna Life Insurance Company is a 49% general partner and a 1% limited partner.
(j) Aetna Life Insurance Company is a 49% general partner and a 1% limited partner.
(k) Aetna Life Insurance Company is a 49% general partner and a 1% limited partner.
(l) Aetna Life Insurance Company is a 49% general partner and a 1% limited partner.
(m) Aetna Life Insurance Company is a 49% general partner and a 1% limited partner.
(n) Aetna Life Insurance Company is a 99% general partner and Trumbull Three, Inc. is a 1% limited partner.
4
<PAGE>
- ----------------------------------- ------------ ------------------------------- ------------ --------------------------------------
Ensenada De Las Colinas I TX (2) (**) Aetna Life Insurance Company 99%(o) Real Estate Investment
Associates
- ----------------------------------- ------------ ------------------------------- ------------ --------------------------------------
Trevose Hospitality, Inc. CT (1) (**) Aetna Life Insurance Company 100% Real Estate Investment
- ----------------------------------- ------------ ------------------------------- ------------ --------------------------------------
Oaks at Valley Ranch I TX (2) (**) Aetna Life Insurance Company 99%(p) Real Estate Investment
- ----------------------------------- ------------ ------------------------------- ------------ --------------------------------------
Oaks at Valley Ranch II TX (2) (**) Aetna Life Insurance Company 99%(q) Real Estate Investment
- ----------------------------------- ------------ ------------------------------- ------------ --------------------------------------
KBC-RED Hill Limited Partnership CA (2) (**) Aetna Life Insurance Company 80% Real Estate Investment
- ----------------------------------- ------------ ------------------------------- ------------ --------------------------------------
KBC-Eastside Limited Partnership AZ (2) (**) Aetna Life Insurance Company 80% Real Estate Investment
- ----------------------------------- ------------ ------------------------------- ------------ --------------------------------------
C.R.I. Hotel Associates, L.P. IA (2) (**) Aetna Life Insurance Company 75% Real Estate Investment
- ----------------------------------- ------------ ------------------------------- ------------ --------------------------------------
Trumbull One, Inc. CT (1) (*) Aetna Life Insurance Company 100% Real Estate Investment
- ----------------------------------- ------------ ------------------------------- ------------ --------------------------------------
Trumbull Two, Inc. CT (1) (*) Aetna Life Insurance Company 100% Real Estate Investment
- ----------------------------------- ------------ ------------------------------- ------------ --------------------------------------
Trumbull Three, Inc. CT (1) (*) Aetna Life Insurance Company 100% Real Estate Investment
- ----------------------------------- ------------ ------------------------------- ------------ --------------------------------------
Trumbull Four, Inc. CT (1) (*) Aetna Life Insurance Company 100% Real Estate Investment
- ----------------------------------- ------------ ------------------------------- ------------ --------------------------------------
Century City North L.L.C. DE (5) (**) Aetna Life Insurance Company 84%(r) Real Estate Investment
- ----------------------------------- ------------ ------------------------------- ------------ --------------------------------------
Southfield Partners MD (2) (**) Aetna Life Insurance Company 99%(s) Real Estate Investment
- ----------------------------------- ------------ ------------------------------- ------------ --------------------------------------
Lincoln Rancho Cucamonga CA (2) (**) Aetna Life Insurance Company 60% Real Estate Investment
Associates
- ----------------------------------- ------------ ------------------------------- ------------ --------------------------------------
- --------
(o) Aetna Life Insurance Company is a 99% general partner and Trumbull One, Inc. is a 1% limited partner.
(p) Aetna Life Insurance Company is a 99% general partner and Trumbull One, Inc. is a 1% limited partner.
(q) Aetna Life Insurance Company is a 99% general partner and Trumbull One, Inc. is a 1% limited partner.
(r) Aetna Health and Life Insurance Company owns 16% of this Limited Liability Company.
(s) Aetna Life Insurance Company is a 99% general partner and Trumbull Four, Inc. is a 1% limited partner.
5
<PAGE>
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Village Green of Madison Heights MI (2) (**) Aetna Life Insurance Company 99%(t) Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Centrum Associates CA (2) (**) Aetna Life Insurance Company 65% Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Tri-City Mall Associates AZ (2) (**) Aetna Life Insurance Company 50% Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Southwest Financial Associates AZ (2) (**) Aetna Life Insurance Company 60% Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
B&H Ventures IV Limited CT (2) (**) Aetna Life Insurance Company 75% Real Estate Investment
Partnership
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Champions Richland Northcourte TX (2) (*) Aetna Life Insurance Company 99%(u) Real Estate Investment
Partnership
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Chris-Town Village Associates AZ (2) (**) Aetna Life Insurance Company 50% Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Arshaw Partners I TX (2) (*) Aetna Life Insurance Company 50% Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Assembly Square Mall LLC DE (5) (**) Aetna Life Insurance Company 99%(#) Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Woodside Terrace Partners CA (2) (**) Aetna Life Insurance Company 60% Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Spectrum Fashion Center AZ (2) (**) Aetna Life Insurance Company 50% Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Chambridgeside Galleria MA (2) (**) Aetna Life Insurance Company 50% Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
ADBI Partnership FL (2) (**) Aetna Life Insurance Company 30% Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Marriott Inner Harbor Hotel MD (2) (*) Aetna Life Insurance Company 99% Real Estate Investment
- ---------------------------------- -------------------------------------------------------------------------------------------------
TCR Ventanga Limited TX (2) (**) Aetna Life Insurance Company 99%(v) Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
- --------
(t) Aetna Life Insurance Company is a 99% general partner and Trumbull Three, Inc. is a 1% limited partner.
(u) Aetna Life Insurance Company is a 99% general partner and Trumbull One, Inc. is a 1% limited partner.
(#) Aetna Life Insurance Company is a 99% general partner and Bay Area Mall, Inc., is a 1% general partner
(v) Aetna Life Insurance Company is a 99% general partner and Trumbull Two, Inc. is a 1% limited partner.
6
<PAGE>
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
1501 Fourth Ave. Limited WA (2) (**) Aetna Life Insurance Company 85%(w) Real Estate Investment
Partnership
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Thace Associates MI (2) (**) Aetna Life Insurance Company 25% Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Lincoln Los Padres CA (2) (**) Aetna Life Insurance Company 99%(x) Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Eastmeadow Distribution Center GA (2) (**) Aetna Life Insurance Company 99%(y) Real Estate Investment
Limited Partnership
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Eastmeadow Distribution Center GA (2) (**) Aetna Life Insurance Company 99%(z) Real Estate Investment
Phase II Limited Partnership
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Azalea Mall, L.L.C. DE (5) (**) Aetna Life Insurance Company 99%(aa) Real Estate Holding Company
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Southeast Second Avenue, Inc. DE (1) (*) Aetna Life Insurance Company 100% Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Menlo One, L.L.C. DE (5) (**) Aetna Life Insurance Company 99%(bb) Real Estate Holding Company
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Central Trust Center Associates OH (2) (**) Aetna Life Insurance Company 15% Real Estate Investment
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Capitol District Energy Center CT (2) (**) AE Fourteen, Inc. 50% Cogeneration of electrical power
Cogeneration Associates
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Aetna Health Plans of Ohio, Inc. OH (1) (*) AHP Holdings, Inc. 100% HMO
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Aetna Dental Care of California, CA (1) (*) AHP Holdings, Inc. 100% Provide pre-paid dental services
Inc.
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Aetna Health Plans of Florida, FL (1) (*) AHP Holdings, Inc. 100% HMO
Inc.
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
- --------
(w) Aetna Life Insurance Company is a 84% general partner and a 1% limited partner.
(x) Aetna Life Insurance company is a 99% general partner and Trumbull Two, Inc. is a 1% limited partner.
(y) Aetna Life Insurance Company is a 98% general partner and a 1% limited partner.
(z) Aetna Life Insurance Company is a 98% general partner and a 1% limited partner.
(aa) Southeast Second Avenue, Inc. owns 1% of these limited liability companies.
(bb Southeast Second Avenue, Inc. owns 1% of these limited liability companies.
7
<PAGE>
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Informed Health, Inc. DE (1) (*) AHP Holdings, Inc. 100% Sponsors health Information service
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Aetna Health Plans of Tennessee, TN (1) (*) AHP Holdings, Inc. 100% HMO
Inc.
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Aetna Health Plans of Georgia, GA (1) (*) AHP Holdings, Inc. 100% HMO
Inc.
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Aetna Health Management, Inc. DE (1) (*) AHP Holdings, Inc. 100% HMO management company
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Aetna Dental Care of New Jersey, NJ (1) (*) AHP Holdings, Inc. 100% Dental Care
Inc.
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
AUSHC Holdings, Inc. DE (1) (*) AHP Holdings, Inc. 100% Holding Company
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Aetna Health Plans of the VA (1) (*) AHP Holdings, Inc. 100% HMO
Mid-Atlantic, Inc.
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Aetna Health Plans of the NC (1) (*) AHP Holdings, Inc. 100% HMO
Carolinas, Inc.
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
PHPSNE Parent Corporation DE (1) (*) AHP Holdings, Inc. 55% Holding company
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Aetna Health Plans of Arizona, AZ (1) (*) AHP Holdings, Inc. 100% HMO
Inc.
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Aetna Dental Care of Texas, Inc. TX (1)(*) AHP Holdings, Inc. 100% HMO offering single health service
plan - dental
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Human Affairs International, UT (1) (*) AHP Holdings, Inc. 100% Provide employee assistance services
Incorporated and managed mental health programs
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Aetna Health Plans of Illinois, IL (1) (*) AHP Holdings, Inc. 100% HMO
Inc.
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Aetna Dental Care of Kentucky, KY (1) (*) AHP Holdings, Inc. 100% Dental Plan Organization
Inc.
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Aetna Health Plans of Central and PA (1) (*) AHP Holdings, Inc. 100% HMO
Eastern Pennsylvania, Inc.
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Aetna Health Plans of Texas, Inc. TX (1) (*) AHP Holdings, Inc. 100% HMO
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Aetna Health Plans of Louisiana, LA (1) (*) AHP Holdings, Inc. 100% HMO
Inc.
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
8
<PAGE>
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Aetna Professional Management CT (1) (*) AHP Holdings, Inc. 100% Physician Practice Management
Corporation
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
MED Southwest, Inc. TX (1) (*) AHP Holdings, Inc. 55% Holding Company
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Aetna Health Plans of Southern CT (1) (*) PHPSNE Parent Corporation 100% HMO
New England, Inc.
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Freedom Choice, Inc. PA (1)(*) Aetna Health Plans of Central 100% Third party administrator
and Eastern Pennsylvania, Inc.
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
ADS Health Management, Inc. CA (1) (*) Aetna Professional Management 100% Physician practice management services
Corporation
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Healthways, Inc. IL (1) (*) Aetna Professional Management 100% General Business Corporation
Corporation
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Aetna Government Health Plans, CA (1) (*) Aetna Health Management, Inc. 100% Sponsors Champus business
Inc.
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Aetna Health Plans of California, CA (1) (*) Aetna Health Management, Inc. 100% HMO
Inc.
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Aetna Health Plans of New York, NY (1) (*) Healthways Systems, Inc. 100% HMO
Inc.
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Aetna Health Plans of New Jersey, NJ (1) (*) Healthways Systems, Inc. 100% HMO
Inc.
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Southwest Physicians Life TX (1) (*) MED Southwest, Inc. 100% Life and Health Insurer
Insurance Company
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Aetna Health Plans of North TX (1) (*) MED Southwest, Inc. 100% HMO
Texas, Inc.
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Human Affairs of Alaska, Inc. AK (1) (*) Human Affairs International, 100% Provides mental health services/managed
Incorporated mental health services
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Human Affairs International of CA (1) (*) Human Affairs International, 100% Provides mental health services/managed
California Incorporated mental health services
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
Human Affairs International of TX (1) (*) Human Affairs International, 100% Provides mental health services/managed
Texas, Inc. Incorporated mental health services
- ----------------------------------- ------------- ------------------------------ ----------- ---------------------------------------
9
<PAGE>
- ----------------------------------- ------------ -------------------------------- -------- -----------------------------------------
Behavioral Healthcare Solutions, DE (1) (*) Human Affairs International, 100% Mental health services
Inc. Incorporated
- ----------------------------------- ------------ -------------------------------- -------- -----------------------------------------
Human Affairs International IPA, NY (1) (*) Human Affairs International, 100% Independent practice association
Inc. Incorporated
- ----------------------------------- ------------ -------------------------------- -------- -----------------------------------------
Aetna Retirement Holdings, Inc. CT (1) (*) Aetna Retirement Services, Inc. 100% Holding Company
- ----------------------------------- ------------ -------------------------------- -------- -----------------------------------------
Aetna Life Insurance and Annuity CT (1) (*) Aetna Retirement Holdings, Inc. 100% Life insurance, pensions and annuities
Company
- ----------------------------------- ------------ -------------------------------- -------- -----------------------------------------
Systematized Benefits CT (1) (*) Aetna Retirement Holdings, Inc. 100% Third Party Administrator
Administrators, Inc.
- ----------------------------------- ------------ -------------------------------- -------- -----------------------------------------
Aetna Financial Services, Inc. CT (1) (*) Aetna Retirement Holdings, Inc. 100% Broker-dealer and investment advisor
- ----------------------------------- ------------ -------------------------------- -------- -----------------------------------------
Aeltus Investment Management, Inc. CT (1) (*) Aetna Retirement Holdings, Inc. 100% Investment Advisor
- ----------------------------------- ------------ -------------------------------- -------- -----------------------------------------
Aetna Investment Services, Inc. CT (1) (*) Aetna Retirement Holdings, Inc. 100% Distribute securities products - ALIAC
and outside funds
- ----------------------------------- ------------ -------------------------------- -------- -----------------------------------------
Aetna Insurance Agency Holdings CT (1) (*) Aetna Retirement Holdings, Inc. 100% Holding Company
Company, Inc.
- ----------------------------------- ------------ -------------------------------- -------- -----------------------------------------
Aetna Insurance Company of America CT (1) (*) Aetna Life Insurance and 100% Write/reinsure life and annuity business
Annuity Company
- ----------------------------------- ------------ -------------------------------- -------- -----------------------------------------
Aetna Private Capital Inc. CT (1) (*) Aetna Life Insurance and 100% General Business Corporation
Annuity Company
- ----------------------------------- ------------ -------------------------------- -------- -----------------------------------------
Aetna New Series Fund, Inc. MD (1) (**) Aetna Life Insurance and 100% Regulated Investment Company (Mutual
Annuity Company Fund)
- ----------------------------------- ------------ -------------------------------- -------- -----------------------------------------
Aetna Income Shares MA (4) (**) Aetna Life Insurance and 99% Regulated Investment Company (Mutual
Annuity Company Fund)
- ----------------------------------- ------------ -------------------------------- -------- -----------------------------------------
Aetna Variable Encore Fund MA (4) (**) Aetna Life Insurance and 100% Regulated Investment Company (Mutual
Annuity Company Fund)
- ----------------------------------- ------------ -------------------------------- -------- -----------------------------------------
Aetna GET Fund MA (4) (**) Aetna Life Insurance and 100% Regulated Investment Company (Mutual
Annuity Company Fund)
- ----------------------------------- ------------ -------------------------------- -------- -----------------------------------------
Aetna Variable Portfolios, Inc. MD (1) (**) Aetna Life Insurance and 100% Regulated Investment Company (Mutual
Annuity Company Fund)
- ----------------------------------- ------------ -------------------------------- -------- -----------------------------------------
10
<PAGE>
- --------------------------------- ------------------ ----------------------------- --------- ---------------------------------------
Aetna Variable Fund MA (4) (**) Aetna Life Insurance and 98% Regulated Investment Company (Mutual
Annuity Company Fund)
- --------------------------------- ------------------ ----------------------------- --------- ---------------------------------------
Aetna Generation Portfolios, Inc. MD (1) (**) Aetna Life Insurance and 100% Regulated Investment Company (Mutual
Annuity Company Fund)
- --------------------------------- ------------------ ----------------------------- --------- ---------------------------------------
Aetna Investment Advisers Fund, MD (1) (**) Aetna Life Insurance and 100% Regulated Investment Company (Mutual
Inc. Annuity Company Fund)
- --------------------------------- ------------------ ----------------------------- --------- ---------------------------------------
Aetna Series Fund, Inc. MD (1) (**) Aetna Life Insurance and 13%(aaa) Regulated Investment Company (Mutual
Annuity Company Fund)
- --------------------------------- ------------------ ----------------------------- --------- ---------------------------------------
Aetna Investment Management Bermuda (1) (*) Aeltus Investment Management, 100% Holding Company
(Bermuda) Holdings Limited Inc.
- --------------------------------- ------------------ ----------------------------- --------- ---------------------------------------
Aeltus Capital, Inc. CT (1) (*) Aeltus Investment Management, 100% Broker-dealer related functions
Inc.
- --------------------------------- ------------------ ----------------------------- --------- ---------------------------------------
Aeltus Trust Company CT (1) (*) Aeltus Investment Management, 100% Fiduciary Powers Granted to State Bank
Inc. and Trust Companies
- --------------------------------- ------------------ ----------------------------- --------- ---------------------------------------
Aetna Investment Management Singapore (1) (*) Aetna Investment Management 100% Limited private investment management
(S'pore) PTE Ltd. (Bermuda) Holdings Limited
- --------------------------------- ------------------ ----------------------------- --------- ---------------------------------------
China Dynamic Investment Hong Kong (1) (**) Aetna Investment Management 50% Establish and manage collective
Management (Hong Kong) Limited (Bermuda) Holdings Limited investment scheme
- --------------------------------- ------------------ ----------------------------- --------- ---------------------------------------
Aetna Insurance Agency, Inc. CT (1) (*) Aetna Insurance Agency 100% Insurance Company
Holdings Company, Inc.
- --------------------------------- ------------------ ----------------------------- --------- ---------------------------------------
Aetna Insurance Agency of MA (1) (*) Aetna Insurance Agency 100% Insurance Company
Massachusetts, Inc. Holdings Company, Inc.
- --------------------------------- ------------------ ----------------------------- --------- ---------------------------------------
Aetna International Holdings Hong Kong (1) (*) Aetna International, Inc. 100% Holding Company for insurance and
(Hong Kong) I Limited financial services
- --------------------------------- ------------------ ----------------------------- --------- ---------------------------------------
East Asia Aetna Insurance Company Bermuda (1) (**) Aetna International, Inc. 50% Life Disability and Employee Benefits
(Bermuda) Ltd. Ins. in H.K.
- --------------------------------- ------------------ ----------------------------- --------- ---------------------------------------
Aetna International Fund CT (1) (*) Aetna International, Inc. 100% Investment Management Services
Management Inc.
- --------------------------------- ------------------ ----------------------------- --------- ---------------------------------------
AE Insurance (Cayman) Ltd. Cayman (1) (**) Aetna International, Inc. 100% Insurance Company
- --------------------------------- ------------------ ----------------------------- --------- ---------------------------------------
- --------
(aaa) Aetna Life Insurance Company owns 1% of this fund.
11
<PAGE>
- -------------------------------- ---------------------------- ------------------------- -------- -----------------------------------
ALICA Holdings, Inc. CT (1) (*) Aetna International, Inc. 80% Dedicated Holding Company
- -------------------------------- ---------------------------- ------------------------- -------- -----------------------------------
Aetna Life Insurance Company of CT (1) (*) Aetna International, Inc. 100% Life Insurance
America
- -------------------------------- ---------------------------- ------------------------- -------- -----------------------------------
Aetna International Holdings Hong Kong (1) (*) Aetna International, Inc. 100% Holding Company
(Hong Kong) II Limited
- -------------------------------- ---------------------------- ------------------------- -------- -----------------------------------
Aetna Internacional Compania, S. Mexico (1) (**) Aetna International, Inc. 68%(cc) Holding Company
en N.C. de C.V.
- -------------------------------- ---------------------------- ------------------------- -------- -----------------------------------
Aetna Internacional De Mexico Mexico (1) (**) Aetna International, Inc. 100% Mexican Holding Company
S.A. De C.V.
- -------------------------------- ---------------------------- ------------------------- -------- -----------------------------------
Aetna S.A. Chile (1) (*) Aetna International, Inc. 100% Holding Co.
- -------------------------------- ---------------------------- ------------------------- -------- -----------------------------------
Arcella Limited Hong Kong (1) (*) Aetna International, Inc. 100% Investment & holding Co. for
Aetna's Asia Pacific operations
- -------------------------------- ---------------------------- ------------------------- -------- -----------------------------------
Aetna Life & Casualty Bermuda Bermuda (1) (*) Aetna International, Inc. 100% Insurance, Guaranteed and Indemnity
Limited Business
- -------------------------------- ---------------------------- ------------------------- -------- -----------------------------------
Aetna International Global Luxembourg (1) (*) Aetna International, Inc. 100% Investment Services
Investment Services
- -------------------------------- ---------------------------- ------------------------- -------- -----------------------------------
Aetna Heart Company Limited Taiwan (1) (*) Aetna International, Inc. 80% Trading Company - Marketing of
gifts and souvenirs
- -------------------------------- ---------------------------- ------------------------- -------- -----------------------------------
Aetna Life Insurance Inc. Philippines (1) (*) Aetna International, Inc. 100% Life Insurance
- -------------------------------- ---------------------------- ------------------------- -------- -----------------------------------
Aetna Life and Casualty Netherlands Antilles (1) (*) Aetna International, Inc. 100% Finance Investment Company
International Finance N.V.
- -------------------------------- ---------------------------- ------------------------- -------- -----------------------------------
Aetna Investment Management Australia (1) (*) Aetna International, Inc. 100% Stockbroking
(Australia) Limited
- -------------------------------- ---------------------------- ------------------------- -------- -----------------------------------
Aetna Capital Holdings, Inc. CT (1) (*) Aetna International, Inc. 100% Holding Company
- -------------------------------- ---------------------------- ------------------------- -------- -----------------------------------
Aetna Securities Investment Taiwan (1) (*) Aetna International, Inc. 100% Securities investment advisor
Management (Taiwan) Ltd.
- -------------------------------- ---------------------------- ------------------------- -------- -----------------------------------
Aetna Capital Management U.K. (1) (*) Aetna International, Inc. 100% Promoter of offshore mutual funds
International Ltd. 0r other open-ended investment
vehicles
- -------------------------------- ---------------------------- ------------------------- -------- -----------------------------------
- --------
(cc) Aetna International de Mexico, S.A. de C.V. owns 16% of Aetna Internacional Compania, S. en N. C. de C.V.
12
<PAGE>
- ----------------------------------- -------------------- ------------------------------ --------- ----------------------------------
AE Five Incorporated CT (1) (*) Aetna International, Inc. 100% Holding Company
- ----------------------------------- -------------------- ------------------------------ --------- ----------------------------------
Aetna Canada Holdings Limited Canada (1) (*) Aetna International, Inc. 100% Investment Holding Company
- ----------------------------------- -------------------- ------------------------------ --------- ----------------------------------
Aetna Investment Management Taiwan (1) (*) Aetna International, Inc. 80% Provide non-security business and
(Taiwan) Limited investment advice
- ----------------------------------- -------------------- ------------------------------ --------- ----------------------------------
Aetna International (N.Z.) Limited New Zealand (1) (*) Aetna International, Inc. 100% Holding Company
- ----------------------------------- -------------------- ------------------------------ --------- ----------------------------------
Aetna Investment Management Hong Kong (1) (*) Aetna International, Inc. 100% Investment Holding Company
(F.E.) Holdings Limited
- ----------------------------------- -------------------- ------------------------------ --------- ----------------------------------
Blue Cross (Asia Pacific) Hong Kong (1) (**) Aetna International Holdings 35%(dd) Underwriter Casualty and
Insurance Ltd. (Hong Kong) I Limited General Insurance in Hong Kong and
Macau
- ----------------------------------- -------------------- ------------------------------ --------- ----------------------------------
East Asia Aetna Services Company Hong Kong (1) (**) East Asia Aetna Insurance 100% Management services to associate
Limited Company (Bermuda) Ltd. companies
- ----------------------------------- -------------------- ------------------------------ --------- ----------------------------------
The Aetna International Umbrella Luxembourg (1) (***) Aetna Life Insurance Company 10%(ee) An undertaking for the collective
Fund of America investment in transferable
securities
- ----------------------------------- -------------------- ------------------------------ --------- ----------------------------------
PT Danamon-Aetna Life Insurance Indonesia (1) (**) Aetna Life Insurance Company 50% Limited liability life insurance
Company of America company
- ----------------------------------- -------------------- ------------------------------ --------- ----------------------------------
Daya Aetna (Malaysia) SDN. BHD. Malaysia (1) (*) Aetna International Holdings 82% Holding Company
(Hong Kong) II Limited
- ----------------------------------- -------------------- ------------------------------ --------- ----------------------------------
Aetna Universal Insurance SDN. Malaysia (1) (*) Daya Aetna (Malaysia) SDN. BHD 100% Individual Life, Home service,
BHD. group and general insurance
- ----------------------------------- -------------------- ------------------------------ --------- ----------------------------------
Aetna Healthcare, Inc. Philippines (1) (*) Aetna Life Insurance Inc. 100% Insurance
- ----------------------------------- -------------------- ------------------------------ --------- ----------------------------------
- --------
(dd) East Asia Aetna Insurance Company (Bermuda) Ltd. owns 30% of Blue Cross (Asia Pacific) Insurance Ltd.
(ee) Percentage controlled by Aetna Services, Inc. includes ownership by the following: Aetna Services, Inc. 1%, Aetna Life &
Casualty Bermuda Limited 5%, Aetna
Investment Management (F.E.) Limited 2% and Aetna Life Insurance Company of Canada 1%.
13
<PAGE>
- ----------------------------------- ------------------- -------------------------------- --------- ---------------------------------
Seguros Monterrey Aetna, S.A. Mexico (1) (**) AE Five Incorporated 14%(bbb) Insurance and Reinsurance
- ----------------------------------- ------------------- -------------------------------- --------- ---------------------------------
Fianzas Monterrey Aetna, S.A. Mexico (1) (**) AE Five Incorporated 14%(ccc) Issuance of Bonds
- ----------------------------------- ------------------- -------------------------------- --------- ---------------------------------
Aetna (Netherlands) Holdings B.V. Netherlands (1) (*) Aetna Life and Casualty 100% Finance Company
International Finance N.V.
- ----------------------------------- ------------------- -------------------------------- --------- ---------------------------------
Travelguard Limited Hong Kong (1) (*) Blue Cross (Asia Pacific) 100% Insurance Agent
Insurance Ltd.
- ----------------------------------- ------------------- -------------------------------- --------- ---------------------------------
Toursafe Limited Hong Kong (1) (*) Blue Cross (Asia Pacific) 100% Insurance Agent
Insurance Ltd.
- ----------------------------------- ------------------- -------------------------------- --------- ---------------------------------
Travelsafe Limited Hong Kong (1) (*) Blue Cross (Asia Pacific) 100% Insurance agent for its ultimate
Insurance Ltd. holding company
- ----------------------------------- ------------------- -------------------------------- --------- ---------------------------------
Multiasistencia, S.A. de C.V. Mexico (1) (**) Aetna Internacional Compania S 49% Administrative services in
en N.C. de C.V. connection with insurance claims
- ----------------------------------- ------------------- -------------------------------- --------- ---------------------------------
Meximed, S.A. de C.V. Mexico (1) (**) Aetna Internacional Compania S 49% Services for insureds for
en N.C. de C.V. hospitals admissions and claims
processing
- ----------------------------------- ------------------- -------------------------------- --------- ---------------------------------
Seguros Bancomer, S.A. de C.V. Mexico (1) (**) Aetna Internacional Compania S 49% Insurance and Reinsurance company
en N.C. de C.V.
- ----------------------------------- ------------------- -------------------------------- --------- ---------------------------------
Administradora de Fondos Para el Mexico (1) (**) Aetna Internacional Compania S 49% Retirement funds management
Retiro Bancomer, S.A. de C.V. en N.C. de C.V. company
- ----------------------------------- ------------------- -------------------------------- --------- ---------------------------------
Grupo Vamsa, S.A. de C.V. Mexico (1) (**) Aetna Internacional Compania S 49% Legal Administration and
en N.C. de C.V. Financial Services
- ----------------------------------- ------------------- -------------------------------- --------- ---------------------------------
Asesores en Promocion Segunomina Mexico (1) (**) Aetna Internacional Compania S 49% Marketing of Seguros products/
S.A. de C.V. en N.C. de C.V. payroll discounts
- ----------------------------------- ------------------- -------------------------------- --------- ---------------------------------
Aetna Chile Seguros Generales S.A. Chile (1) (*) Aetna S.A. 98% Casualty insurance company
- ----------------------------------- ------------------- -------------------------------- --------- ---------------------------------
- --------
(bbb) Aetna Internacional de Mexico, S.A. de C.V. owns 13% of this company and Aetna Internacional Compania, S en NC de C.V.
owns 8% of this company..
(ccc) Aetna Internacional de Mexico, S.A. de C.V. owns 13% of this company and Aetna Internacional Compania, S en NC de C.V.
owns 8% of this company.
14
<PAGE>
- ----------------------------------- ------------------ -------------------------------- -------- -----------------------------------
Aetna Administradora de Fondos de Chile (1) (*) Aetna S.A. 100% Real Estate Investment Trust
Inversion S.A. Management Co.
- ----------------------------------- ------------------ -------------------------------- -------- -----------------------------------
Aetna Chile Seguros de Vida S.A. Chile (1) (*) Aetna S.A. 100% Life Insurance Company
- ----------------------------------- ------------------ -------------------------------- -------- -----------------------------------
Aetna Pensiones S.A. Chile (1) (*) Aetna S.A. 100% Holding Company
- ----------------------------------- ------------------ -------------------------------- -------- -----------------------------------
Aetna Credito Hipotecario S.A. Chile (1) (*) Aetna S.A. 100% Mortgage Company
- ----------------------------------- ------------------ -------------------------------- -------- -----------------------------------
Aetna Vida S.A. Argentina (1) (*) Aetna S.A. 60% Health and Life Insurance
- ----------------------------------- ------------------ -------------------------------- -------- -----------------------------------
Aetna International Peru S.A. Peru (1) (*) Aetna S.A. 86%(ff) Holding Company
- ----------------------------------- ------------------ -------------------------------- -------- -----------------------------------
Aetna Salud S.A. Chile (1) (*) Aetna S.A. 90% Health Indemnity - Chile
- ----------------------------------- ------------------ -------------------------------- -------- -----------------------------------
Administradora de Fondos de Chile (1) (*) Aetna Pensiones S.A. 52% Pension Funds Management Company
Pensiones Santa Maria S.A.
- ----------------------------------- ------------------ -------------------------------- -------- -----------------------------------
Santa Maria Internacional S.A. Chile (1) (*) Administradora de Fondos de 100% Pension Administration
Pensiones Santa Maria S.A.
- ----------------------------------- ------------------ -------------------------------- -------- -----------------------------------
Aetna Pensiones Peru S.A. Peru (1) (**) Santa Maria Internacional S.A. 71%(gg) Investment
- ----------------------------------- ------------------ -------------------------------- -------- -----------------------------------
Administradora de Fondos de Peru (1) (**) Aetna Pensiones Peru S.A. 30%(hh) Pension Funds Management Company
Pensiones Integra S.A.
- ----------------------------------- ------------------ -------------------------------- -------- -----------------------------------
Wiese Aetna Compania de Seguros Peru (1) (*) Aetna International Peru S.A. 34% Insurance and Reinsurance
S.A.
- ----------------------------------- ------------------ -------------------------------- -------- -----------------------------------
Immobilaria Padre Marinano S.A. Chile (1) (*) Aetna Credito Hipotecario S.A. 99%(ii) Real Estate Development
- ----------------------------------- ------------------ -------------------------------- -------- -----------------------------------
Aetna Life Insurance Company of Canada (1) (*) Aetna Canada Holdings Limited 100% Life, accident and sickness
Canada insurance
- ----------------------------------- ------------------ -------------------------------- -------- -----------------------------------
Equinox Financial Group Inc. Canada (1) (*) Aetna Canada Holdings Limited 92%(jj) Distributor of life insurance,
financial and related products
- ----------------------------------- ------------------ -------------------------------- -------- -----------------------------------
- --------
(ff) Aetna Chile Seguros De Vida S.A. and Aetna Chile Seguros Generales S. A. have combined ownership of 14%.
(gg) Aetna S.A. owns 29% of this company.
(hh) Aetna Pensiones Peru S.A. owns 30% of this company.
(ii) Aetna S.A. owns 1% of this company.
(jj) Aetna Life Insurance Company of Canada owns 8% of this corporation.
15
<PAGE>
- ---------------------------------- ------------------------ -------------------------------- -------- ------------------------------
2733854 Canada Ltd. Canada (1) (*) Aetna Canada Holdings Limited 70%(kk) Marketing of life ins. and
related products
- ---------------------------------- ------------------------ -------------------------------- -------- ------------------------------
AlphaQuest Capital Management Ontario (1) (***) Aetna Canada Holdings Limited 15% Investment Counselor Portfolio
Limited Manager
- ---------------------------------- ------------------------ -------------------------------- -------- ------------------------------
Aetna Acceptance Corporation Ontario (1) (*) Aetna Canada Holdings Limited 100% Provision of Financial
Limited Assistance to Agents to Assist
in growth of business
- ---------------------------------- ------------------------ -------------------------------- -------- ------------------------------
Eclipse Claims Services, Inc. Ontario (1) (**) Aetna Life Insurance Company 25% Electronic Claims adjustment
of Canada services
- ---------------------------------- ------------------------ -------------------------------- -------- ------------------------------
Aetna Benefits Management, Inc. Canada (1) (*) Aetna Life Insurance Company 100% Claims Administration and
of Canada Actuarial Services
- ---------------------------------- ------------------------ -------------------------------- -------- ------------------------------
Aetna Health Management Canada, Ontario (1) (*) Aetna Life Insurance Company 100% Managed Healthcare
Inc. of Canada
- ---------------------------------- ------------------------ -------------------------------- -------- ------------------------------
Landex Properties Ltd. British Columbia (1) (*) Aetna Life Insurance Company 100% Real Estate acquisitions
of Canada
- ---------------------------------- ------------------------ -------------------------------- -------- ------------------------------
Mount-Batten Properties Limited Ontario (1) (*) Aetna Life Insurance Company 100% Acquisition, development and
of Canada management of Real Estate
- ---------------------------------- ------------------------ -------------------------------- -------- ------------------------------
3158047 Canada Limited Canada (1) (*) Aetna Life Insurance Company 100% Acquisition, development and
of Canada management of Real Estate
- ---------------------------------- ------------------------ -------------------------------- -------- ------------------------------
3273806 Canada Limited Canada (1) (*) Aetna Life Insurance Company 100% Real Estate Holding Company
of Canada
- ---------------------------------- ------------------------ -------------------------------- -------- ------------------------------
PVS Preferred Vision Services Inc. Canada (1) (**) Aetna Benefits Management, 20% Provider of Ophthalmic,
Inc. Service for four major
shareholders
- ---------------------------------- ------------------------ -------------------------------- -------- ------------------------------
Associative Rehabilitation Inc. Ontario (1) (*) Aetna Life Insurance Company 100% Health Management Company
of Canada
- ---------------------------------- ------------------------ -------------------------------- -------- ------------------------------
Churchill Office Park Limited Canada (1) (**) Mount-Batten Properties Limited 45% Real Estate Development of
Ottawa site
- ---------------------------------- ------------------------ -------------------------------- -------- ------------------------------
Aetna Health (N.Z.) Limited New Zealand (1) (**) Aetna International (N.Z) 50% Health Insurance Underwriting
Limited
- ---------------------------------- ------------------------ -------------------------------- -------- ------------------------------
Aetna Life Insurance (N.Z.) New Zealand (1) (*) Aetna Health (N.Z.) Limited 100% Group benefits/pension
Limited management
- ---------------------------------- ------------------------ -------------------------------- -------- ------------------------------
- --------
(kk) Equinox Financial Group, Inc. owns 30% of this corporation.
16
<PAGE>
- ----------------------------------- ------------------- ---------------------------- ------- ---------------------------------------
First Medical Corporation Limited New Zealand (1) (*) Aetna Health (N.Z.) Limited 100% Indemnity Health Insurance
- ----------------------------------- ------------------- ---------------------------- ------- ---------------------------------------
Medic Aid Computers Limited New Zealand (1) (*) First Medical Corporation 100% Dormant--No Business
Limited
- ----------------------------------- ------------------- ---------------------------- ------- ---------------------------------------
Medical Aids Hire (1974) Limited New Zealand (1) (*) First Medical Corporation 100% Dormant--No Business
Limited
- ----------------------------------- ------------------- ---------------------------- ------- ---------------------------------------
Managed Care (New Zealand) Limited New Zealand (1) (*) Aetna Health (N.Z.) Limited 100% Super annuitization/long term care
- ----------------------------------- ------------------- ---------------------------- ------- ---------------------------------------
Prime Health Limited New Zealand (1) (*) Managed Care (New Zealand) 50% Buying and managing risk for publicly
Limited funded health services and providing
management services and infrastructure
to its network of doctors
- ----------------------------------- ------------------- ---------------------------- ------- ---------------------------------------
PLJ Holdings Limited Hong Kong (1) (*) Aetna Investment Management 100% Investment Management & Securities
(F.E.) Holdings Limited Trading
- ----------------------------------- ------------------- ---------------------------- ------- ---------------------------------------
Aetna Investment Management Hong Kong (1) (*) Aetna Investment Management 100% Investment Management. & Advisory
(F.E.) Limited (F.E.) Holdings Limited Services for Individual Clients and
Investment Funds
- ----------------------------------- ------------------- ---------------------------- ------- ---------------------------------------
Aetna International Fund Managers Hong Kong (1) (*) Aetna Investment Management 100% Investment & Unit Trust Management
Limited (F.E.) Holdings Limited
- ----------------------------------- ------------------- ---------------------------- ------- ---------------------------------------
Aetna Investment Management Hong Kong (1) (*) Aetna Investment Management 100% Nominee Services Holding Assets of AIM
(F.E.) Nominees Limited (F.E.) Holdings Limited F.E.'s Customers in street name
- ----------------------------------- ------------------- ---------------------------- ------- ---------------------------------------
Kwang HUA Securities Investment & Taiwan (1) (***) Aetna Investment Management 14% Securities Investment & Trust
Trust Co. Ltd. (F.E.) Holdings Limited
- ----------------------------------- ------------------- ---------------------------- ------- ---------------------------------------
Kwang HUA Securities Investment Taiwan (1) (***) PLJ Holdings Limited 14% Investment Consulting Company
Consultant Co. Ltd.
- ----------------------------------- ------------------- ---------------------------- ------- ---------------------------------------
U.S. Healthcare Financial DE (1) (*) Aetna U.S. Healthcare Inc. 100% Holding company
Services, Inc.
- ----------------------------------- ------------------- ---------------------------- ------- ---------------------------------------
Primary Holdings, Inc. DE (1) (*) Aetna U.S. Healthcare Inc. 100% Holding company
- ----------------------------------- ------------------- ---------------------------- ------- ---------------------------------------
17
<PAGE>
- ----------------------------------- ---------- -------------------------- ------ ------------------------------------------
U.S. Healthcare Dental Plan, Inc. PA (1) (*) Aetna U.S. Healthcare Inc. 100% Dental
- ----------------------------------- ---------- -------------------------- ------ ------------------------------------------
U.S. Healthcare Dental Plan, Inc. NJ (1) (*) Aetna U.S. Healthcare Inc. 100% Dental
- ----------------------------------- ---------- -------------------------- ------ ------------------------------------------
U.S. Healthcare Dental Plan, Inc. DE (1) (*) Aetna U.S. Healthcare Inc. 100% Dental
- ----------------------------------- ---------- -------------------------- ------ ------------------------------------------
U.S. Health Insurance Company NY (1) (*) Aetna U.S. Healthcare Inc. 100% Accident and health insurance company
- ----------------------------------- ---------- -------------------------- ------ ------------------------------------------
Corporate Health Insurance MN (1) (*) Aetna U.S. Healthcare Inc. 100% Accident and health insurance company
Company
- ----------------------------------- ---------- -------------------------- ------ ------------------------------------------
U.S. Managed Care, Inc. MD (1) (*) Aetna U.S. Healthcare Inc. 100% Utilization review
- ----------------------------------- ---------- -------------------------- ------ ------------------------------------------
Health Maintenance Organization NJ (1) (*) Aetna U.S. Healthcare Inc. 100% HMO
of New Jersey, Inc.
- ----------------------------------- ---------- -------------------------- ------ ------------------------------------------
U.S. Healthcare, Inc. NY (1) (*) Aetna U.S. Healthcare Inc. 100% HMO
- ----------------------------------- ---------- -------------------------- ------ ------------------------------------------
U.S. Healthcare, Inc. CT (1) (*) Aetna U.S. Healthcare Inc. 100% HMO
- ---------------------------------- ---------------------------------------------------------------------------------------
U.S. Healthcare, Inc. MA (1) (*) Aetna U.S. Healthcare Inc. 100% HMO
- ----------------------------------- ---------- -------------------------- ------ ------------------------------------------
U.S. Healthcare, Inc. DE (1) (*) Aetna U.S. Healthcare Inc. 100% HMO
- ----------------------------------- ---------- -------------------------- ------ ------------------------------------------
U.S. Healthcare of New Hampshire, NH (1) (*) Aetna U.S. Healthcare Inc. 100% HMO
Inc.
- ----------------------------------- ---------- -------------------------- ------ ------------------------------------------
Advent Investments, Inc. DE (1) (*) U.S. Healthcare Financial 100% DE Holding company
Services, Inc.
- ----------------------------------- ---------- -------------------------- ------ ------------------------------------------
Independent Investments, Inc. DE (1) (*) U.S. Healthcare Financial 100% DE Holding company
Services, Inc.
- ----------------------------------- ---------- -------------------------- ------ ------------------------------------------
United States Physicians Care PA (1) (*) U.S. Healthcare Financial 100% Financial Services to Physicians
Systems, Inc. Services, Inc.
- ----------------------------------- ---------- -------------------------- ------ ------------------------------------------
United States Home Health Care PA (1) (*) U.S. Healthcare Financial 100% Inactive - other medical services
Systems, Inc. Services, Inc.
- ----------------------------------- ---------- -------------------------- ------ ------------------------------------------
U.S. Health Aviation Corp. PA (1) (*) U.S. Healthcare Financial 100% Ownership and operation of airplanes
Services, Inc.
- ----------------------------------- ---------- -------------------------- ------ ------------------------------------------
18
<PAGE>
- ----------------------------------- ----------- -------------------------------- ---- ------------------------------------------
U.S. Healthcare Properties, Inc. PA (1) (*) U.S. Healthcare Financial 100% Holding company for real estate
Services, Inc.
- ----------------------------------- ----------- -------------------------------- ---- ------------------------------------------
Criterion Communications Inc. DE (1) (*) U.S. Healthcare Financial 51% Corporation communications
Services, Inc.
- ----------------------------------- ----------- -------------------------------- ---- ------------------------------------------
Inteli-Health, Inc. DE (1) (*) U.S. Healthcare Financial 98% Software development
Services, Inc.
- ----------------------------------- ----------- -------------------------------- ---- ------------------------------------------
USHC Management Services DE (1) (*) U.S. Healthcare Financial 100% Management and financial services to
Corporation Services, Inc. network providers
- ----------------------------------- ----------- -------------------------------- ---- ------------------------------------------
U.S. Healthcare Advantage, Inc. DE (1) (*) Advent Investments, Inc. 100% Holding company
- ----------------------------------- ----------- -------------------------------- ---- ------------------------------------------
Healthcare Data Interchange DE (1) (*) Advent Investments, Inc. 100% Software development
Corporation
- ----------------------------------- ----------- -------------------------------- ---- ------------------------------------------
Wissahickon Payment DE (1) (*) Advent Investments, Inc. 100% Third party administrator
Administrators, Inc.
- ----------------------------------- ----------- -------------------------------- ---- ------------------------------------------
Advent Financial Services, Inc. DE (1) (*) U.S. Healthcare Advantage, Inc. 100% Holding company
- ----------------------------------- ----------- -------------------------------- ---- ------------------------------------------
Corporate Health Administrators, PA (1) (*) Advent Financial Services, Inc. 100% Third party administrator for
Inc. self-insured plans
- ----------------------------------- ----------- -------------------------------- ---- ------------------------------------------
Managed Care Coordinators, Inc. DE (1) (*) Advent Financial Services, Inc. 100% evaluation and administration of
multiple health plans
- ----------------------------------- ----------- -------------------------------- ---- ------------------------------------------
U.S. Phoenix Corporation PA (1) (*) Advent Financial Services, Inc. 100% Shell
- ----------------------------------- ----------- -------------------------------- ---- ------------------------------------------
U.S. Quality Algorithms, Inc. PA (1) (*) Advent Financial Services, Inc. 100% Services to analyze the quality and
effectiveness of medical care
- ----------------------------------- ----------- -------------------------------- ---- ------------------------------------------
Workers Comp Advantage, Inc. PA (1) (*) Advent Financial Services, Inc. 100% Case management and other medical
management services for employers on
costs related to workers' compensation
claims
- ----------------------------------- ----------- -------------------------------- ---- ------------------------------------------
Primary Investments, Inc. DE (1) (*) Primary Holdings, Inc. 100% Holding company
- ----------------------------------- ----------- -------------------------------- ---- ------------------------------------------
United States Health Care Systems PA (1) (*) Primary Investments, Inc. 100% HMO
of Pennsylvania, Inc.
- ----------------------------------- ----------- -------------------------------- ---- ------------------------------------------
U.S. Healthcare, Inc. VA (1) (*) Primary Investments, Inc. 100% HMO
- ----------------------------------- ----------- -------------------------------- ---- ------------------------------------------
U.S. Healthcare, Inc. OH (1) (*) Primary Investments, Inc. 100% HMO
- ----------------------------------- ----------- -------------------------------- ---- ------------------------------------------
19
<PAGE>
- ----------------------------------- ----------- ------------------------- ------ ------------------------------------------
U.S. Healthcare of the Carolinas, NC (1) (*) Primary Investments, Inc. 100% HMO
Inc.
- ----------------------------------- ----------- ------------------------- ------ ------------------------------------------
U.S. Healthcare of Georgia, Inc. GA (1) (*) Primary Investments, Inc. 100% HMO
- ----------------------------------- ----------- ------------------------- ------ ------------------------------------------
Advent HMO Corporation ND (1) (*) Primary Investments, Inc. 100% Inactive
- ----------------------------------- ----------- ------------------------- ------ ------------------------------------------
U.S. Health Insurance Company CT (1) (*) Primary Investments, Inc. 100% Accident and health insurance company
- ----------------------------------- ----------- ------------------------- ------ ------------------------------------------
Aetna U.S. Healthcare, Inc. MI (1) (*) Primary Investments, Inc. 100% HMO
- ----------------------------------- ----------- ------------------------- ------ ------------------------------------------
Aetna U.S. Healthcare, Inc. OK (1) (*) Primary Investments, Inc. 100% HMO
- ----------------------------------- ----------- ------------------------- ------ ------------------------------------------
U.S. Healthcare, Inc. MO (1) (*) Primary Investments, Inc. 100% HMO
- ----------------------------------- ----------- ------------------------- ------ ------------------------------------------
</TABLE>
20
<PAGE>
Item 27. Number of Contract Owners
As of February 28, 1997, there were 5,585 individuals holding interests in
variable annuity contracts funded through Variable Annuity Account G.
Item 28. Indemnification
Reference is hereby made to Section 33-771(f) of the Connecticut General
Statutes ("C.G.S.") regarding indemnification of directors and Section 33-776(4)
regarding indemnification of officers, employees and agents of Connecticut
corporations. These statutes provide in general that Connecticut corporations
incorporated prior to January 1, 1997 shall indemnify their officers, directors,
employees and agents against "liability" (defined as the obligation to pay a
judgment, settlement, penalty, fine, excise tax in the case of an employee
benefit plan or reasonable expenses incurred with respect to a proceeding). In
the case of a proceeding by or in the right of the corporation, indemnification
is limited to reasonable expenses incurred in connection with the proceeding
against the corporation to which the individual was named a party. The
corporation's obligation to provide such indemnification does not apply unless
(1) the individual has met the standard of conduct set forth in Section 33-771;
and (2) a determination is made (by majority vote of a quorum of the board of
directors who were not parties to the proceeding, or if a quorum cannot be
obtained, by a committee of the board selected as described in Section
33-775(b)(2); by special legal counsel selected by the board of directors or
members thereof as described in Section 33-775(b)(3); by shareholders) that the
individual met the standard set forth in Section 33-771; or (3) the court, upon
application by the individual, determines in view of all the circumstances that
such person is reasonably entitled to be indemnified. Also, unless limited by
its Certificate of Incorporation, a corporation must indemnify an individual who
was wholly successful on the merits or otherwise against reasonable expenses
incurred by him in connection with a proceeding to which he was a party because
of his relationship as director, officer, employee or agent of the corporation.
The statute does specifically authorize a corporation to procure indemnification
insurance on behalf of an individual who is or was a director, officer, employer
or agent of the corporation. Consistent with the statute, Aetna Inc. has
procured insurance from Lloyd's of London and several major United States excess
insurers for its directors and officers and the directors and officers of its
subsidiaries, including the Depositor.
Item 29. Principal Underwriter
(a) In addition to serving as the principal underwriter and depositor for
the Registrant, Aetna Life Insurance and Annuity Company (Aetna) also
acts as the principal underwriter and investment adviser for Aetna
Variable Encore Fund, Aetna Variable Fund, Aetna Series Fund, Inc.,
Aetna Generation Portfolios, Inc., Aetna Income Shares, Aetna
Investment Advisers Fund, Inc., Aetna GET Fund, and Aetna Variable
Portfolios, Inc. (all management investment companies registered under
the Investment Company Act of 1940 (1940 Act)). Additionally, Aetna
acts as the principal underwriter and depositor for Variable Life
Account B of Aetna, Variable Annuity Account B of Aetna and Variable
<PAGE>
Annuity Account C of Aetna (separate accounts of Aetna registered as
unit investment trusts under the 1940 Act). Aetna is also the principal
underwriter for Variable Annuity Account I of Aetna Insurance Company
of America (AICA) (a separate account of AICA registered as a unit
investment trust under the 1940 Act).
(b) See Item 25 regarding the Depositor.
(c) Compensation as of December 31, 1996:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Name of Net Underwriting Compensation on
Principal Discounts and Redemption or Brokerage
Underwriter Commissions Annuitization Commissions Compensation*
- ----------- ---------------- --------------- ----------- -------------
<S> <C> <C>
Aetna Life $134,053 $4,295,099
Insurance and
Annuity
Company
</TABLE>
* Compensation shown in column 5 includes deductions for mortality and
expense risk guarantees and contract charges assessed to cover costs
incurred in the sales and administration of the contracts issued under
Variable Annuity Account G.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules under it relating to the securities
described in and issued under this Registration Statement are located at the
home office of the Depositor as follows:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156
Item 31. Management Services
Not applicable
Item 32. Undertakings
Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement on
Form N-4 as frequently as is necessary to ensure that the audited
financial statements in the
<PAGE>
registration statement are never more than sixteen months old for as
long as payments under the variable annuity contracts may be accepted;
(b) to include as part of any application to purchase a contract offered by
a prospectus which is part of this registration statement on Form N-4,
a space that an applicant can check to request a Statement of
Additional Information; and
(c) to deliver any Statement of Additional Information and any financial
statements required to be made available under this Form N-4 promptly
upon written or oral request.
(d) The Company hereby represents that it is relying upon and complies with
the provisions of Paragraphs (1) through (4) of the SEC Staff's
No-Action Letter dated November 22, 1988 with respect to language
concerning withdrawal restrictions applicable to plans established
pursuant to Section 403(b) of the Internal Revenue Code. See American
Counsel of Life Insurance; SEC No-Action Letter, [1989 Transfer Binder]
Fed. SEC. L. Rep. (CCH) [paragraph] 78,904 at 78,523 (November 22,
1988).
(e) Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
(f) Aetna Life Insurance and Annuity Company represents that the fees and
charges deducted under the contracts covered by this registration
statement, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed
by the insurance company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, Variable Annuity Account G of Aetna Life Insurance and
Annuity Company, certifies that it meets the requirements of Securities Act Rule
485(b) for effectiveness of this Post-Effective Amendment No. 2 to its
Registration Statement on Form N-4 (File No. 33-61897) and has duly caused this
Post-Effective Amendment No. 2 to its Registration Statement on Form N-4 (File
No. 33-61897) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Hartford, State of Connecticut, on the 11th day of
April, 1997.
VARIABLE ANNUITY ACCOUNT G OF AETNA
LIFE INSURANCE AND ANNUITY COMPANY
(Registrant)
By: AETNA LIFE INSURANCE AND ANNUITY COMPANY
(Depositor)
By: /S/ Daniel P. Kearney*
------------------------------------------
Daniel P. Kearney
President
As required by the Securities Act of 1933, this Post-Effective Amendment
No. 2 to the Registration Statement on Form N-4 (File No. 33-61897) has been
signed by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
Daniel P. Kearney* Director and President )
- ------------------------------------ )
Daniel P. Kearney (principal executive officer) )
)
Timothy A. Holt* Director, Senior Vice President and Chief Financial )
- ----------------------------------- )
Timothy A. Holt Officer )
)
Christopher J. Burns* Director ) April
- ------------------------------------ )
Christopher J. Burns ) 11, 1997
)
Laura R. Estes* Director )
- ------------------------------------ )
Laura R. Estes )
)
J. Scott Fox* Director )
- ------------------------------------ )
J. Scott Fox )
)
Gail P. Johnson* Director )
- ------------------------------------ )
Gail P. Johnson )
<PAGE>
)
John Y. Kim* Director )
- ------------------------------------ )
John Y. Kim )
)
Shaun P. Mathews* Director )
- ------------------------------------ )
Shaun P. Mathews )
)
Glen Salow* Director )
- ------------------------------------ )
Glen Salow )
)
Creed R. Terry* Director )
- ------------------------------------ )
Creed R. Terry )
)
Deborah Koltenuk* Vice President and Treasurer, Corporate Controller )
- ------------------------------------ )
Deborah Koltenuk )
By: /s/Julie E. Rockmore
------------------------------------------------------------
Julie E. Rockmore
*Attorney-in-Fact
</TABLE>
<PAGE>
VARIABLE ANNUITY ACCOUNT G
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
<S> <C> <C>
99-B.1 Resolution of the Board of Directors of Aetna Life Insurance and Annuity *
Company establishing Variable Annuity Account G
99-B.3 Form of Selling Agreement *
99-B.4.1 Form of Variable Annuity Contract *
99-B.4.2 Form of Non-qualified Annuity Contract Endorsement *
99-B.4.3 Form of Restriction on Transferability Endorsement *
99-B.4.4 Form of Amendment to Contract for Systematic Withdrawal Program *
99-B.4.5 Form of Amendment to 408(b) Contract *
99-B.4.6 Form of Amendment to 403(b) Contract *
99-B.4.7 Form of Rehabilitation Endorsement *
99-B.4.8 Form of Assumption Certificate *
99-B.6.1 Certificate of Incorporation and By-Laws of Depositor *
99-B.6.2 Amendment of Certificate of Incorporation of Depositor *
99-B.8 Fund Participation Agreement *
99-B.9 Opinion of Counsel *
99-B.10.1 Consent of Independent Auditors -----------------
99-B.10.2 Consent of Counsel -----------------
99-B.15.1 Power of Attorney *
99-B.15.2 Authorization for Signatures *
27 Financial Data Schedule -----------------
*Incorporated by reference
</TABLE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors of Aetna Life Insurance and Annuity Company
and Contract Owners of Aetna Variable Annuity Account G:
We consent to the use of our reports included herein and to the references to
our Firm under the captions "Condensed Financial Information" in the Prospectus
and "Independent Auditors" in the Statement of Additional Information.
/s/KPMG Peat Marwick LLP
Hartford, Connecticut
April 11, 1997
151 Farmington Avenue
Hartford, CT 06156
Susan E. Bryant
Counsel
Law Division, RE4A
Investments & Financial Services
April 10, 1997 (860) 273-7834
Fax: (860) 273-0356
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Dear Sir or Madam:
As Counsel of Aetna Life Insurance and Annuity Company (the "Company"), I hereby
consent to the use of my opinion dated February 28, 1997 (incorporated herein by
reference to the 24f-2 Notice for the fiscal year ended December 31, 1996 filed
on behalf of Variable Annuity Account G of Aetna Life Insurance and Annuity
Company on February 28, 1997) as an exhibit to this Post-Effective Amendment No.
2 to Registration Statement on Form N-4 (File No. 33-61897).
Sincerely,
/s/Susan E. Bryant
Susan E. Bryant
Counsel
Aetna Life Insurance and Annuity Company
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000855882
<NAME> VAG Financials
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 278,251,370
<INVESTMENTS-AT-VALUE> 304,240,411
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 304,240,411
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 304,240,411
<DIVIDEND-INCOME> 17,968,354
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 4,100,918
<NET-INVESTMENT-INCOME> 13,867,436
<REALIZED-GAINS-CURRENT> 6,503,880
<APPREC-INCREASE-CURRENT> 19,324,754
<NET-CHANGE-FROM-OPS> 39,696,070
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
