As Filed with the Securities and Exchange Commission on November 16, 1995
Registration No. 33-63657
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AETNA INSURANCE COMPANY OF AMERICA
(Exact name of registrant as specified in its charter)
Connecticut 06-1286272
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization Identification No.)
151 Farmington Avenue
Hartford, Connecticut 06156
(203) 273-7834
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Susan E. Bryant, Esquire
Aetna Insurance Company of America
151 Farmington Avenue
Hartford, Connecticut 06156
(203) 273-7834
(Name, address including zip code, and telephone number,
including area code, of agent for service)
Approximate Date of Commencement of Proposed Sale to Public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box: [X]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this form, check the following box: [ ]
CALCULATION OF REGISTRATION FEE
=============================================================================
Title of Proposed Proposed
each class Amount maximum maximum Amount of
of securities to be offering price aggregate registration
to be registered Registered per unit offering price fee
-----------------------------------------------------------------------------
Interests under $200,000,000 $200,000,000 $40,000
modified 290,000 290,000 100#
guaranteed deferred
annuity contracts ------------ ------------ ---------
Total...............$200,290,000 * $200,290,000 $40,100
=============================================================================
* The securities being registered are not issued in predetermined amounts or
units.
# Registration fee of $100 paid on October 25, 1995.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
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AETNA INSURANCE COMPANY OF AMERICA
Cross Reference Sheet pursuant to
Regulation S-K, Item 501(b)
Form S-2 Item Number Caption In Prospectus
1. Forepart of the Registration Statement and Cover Page
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages Cover Page
of Prospectus
3. Summary Information, Risk Factors and Summary Information;
Ratio of Earnings to Fixed Charges Description of Contracts;
Financial Statements
4. Use of Proceeds Investments
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution Distribution of Contracts
9. Description of Securities to be Registered Description of Contracts
10. Interests and Named Experts and Counsel Experts
11. Information with Respect to the Registrant Appendix D and E
12. Incorporation of Certain Information by Incorporation of Certain
Reference Documents by Reference
13. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act
Liabilities
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P R O S P E C T U S
AETNA INSURANCE COMPANY OF AMERICA
AETNA MULTI-RATE ANNUITY
151 Farmington Avenue
Hartford, Connecticut 06156
This Prospectus describes certain modified guaranteed deferred annuity
contracts offered by Aetna Insurance Company of America ("Company"). The
contracts are issued as individual or group contracts and allow you to earn
interest and accumulate amounts on a tax deferred basis. The funds you
accumulate can be used to provide annuity payments or other benefits.
Individual contracts may be purchased directly or as a rollover
Individual Retirement Annuity. Group contracts may be purchased for both
qualified and non-qualified plans. (See Appendix A.) Interests under a group
contract will be evidenced by the issuance to you of a separate certificate.
Individual contracts and certificates under group contracts are both referred
to herein as the "Contract." This Prospectus should be read thoroughly before
you purchase a Contract.
A minimum single purchase payment of at least $10,000 must accompany the
application for a Contract. Under the Contracts, the Company sets various
rates of interest ("Guaranteed Rate") that are paid for varying periods
("Guaranteed Period"). You choose the Guaranteed Period for which you would
like to invest, and at the end of that Guaranteed Period you may reinvest your
accumulated funds in another Guaranteed Period. Information concerning
available Guaranteed Periods and Guaranteed Rates may be obtained by calling
1-800-531-4547.
You may withdraw all or part of your accumulated funds at any time.
Withdrawals prior to the end of a Guaranteed Period may be subject to a Market
Value Adjustment and a surrender fee. Upon a full withdrawal, you could
therefore receive less than your purchase payment.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
----------------------
THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED BY ANY BANK,
NOR ARE THEY INSURED BY THE FDIC; THEY ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE CONTRACTS ARE NOT OFFERED FOR SALE IN THE STATE OF NEW YORK.
----------------------
The date of this Prospectus is ______________, 1995.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 ("Exchange Act"), and, in accordance
therewith, files periodic reports and other information with the Securities
and Exchange Commission (the "Commission"). Reports and other information
concerning the Company may be inspected and copied at the public reference
facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
and at the Commission's regional offices located at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and at 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material also can
be obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
This Prospectus includes as Appendix D and E, respectively, a copy of the
Company's annual report on Form 10-K for the year ended December 31, 1994, and
a copy of the Company's latest quarterly report on Form 10-Q. Reference is
made to those reports for a description of the Company and its business,
including financial statements.
The Company intends to deliver to holders of outstanding Contracts
account statements at least annually and such other periodic reports as may be
required by law, but it is not anticipated that any such reports will include
periodic financial statements or information concerning the Company.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's annual report on Form 10-K for the year ended December 31,
1994, and all reports filed by the Company pursuant to Sections 13(a) or 15(d)
of the Exchange Act since December 31, 1994, including all quarterly reports
on Form 10-Q, are incorporated by reference.
The Company's annual report on Form 10-K includes independently audited
financial statements as of December 31, 1994. Interim financial statements of
the Company are contained in the Company's Form 10-Q quarterly reports.
Where any document or part thereof is incorporated by reference in this
Prospectus and not delivered herewith, the Company will undertake to provide
without charge to each person, including any beneficial owner to whom a
Prospectus is delivered, upon written or oral request, a copy of any and all
of the information that has been incorporated by reference in this Prospectus.
Any request for such information should be addressed to Aetna Insurance
Company of America, 151 Farmington Ave., Hartford, Connecticut 06156.
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TABLE OF CONTENTS
Page
AVAILABLE INFORMATION.................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.......................... 2
SUMMARY INFORMATION...................................................... 5
SPECIAL TERMS............................................................ 7
Current Value.......................................................... 7
Annuitant.............................................................. 8
Annuity Date........................................................... 8
Annuity Option......................................................... 8
Beneficiary............................................................ 8
Guaranteed Period...................................................... 8
Guaranteed Rate........................................................ 8
In Writing............................................................. 8
You.................................................................... 9
DESCRIPTION OF CONTRACTS................................................. 9
The Application Process................................................ 9
Free Look.............................................................. 10
The Accumulation Period................................................ 10
Guaranteed Periods and Guaranteed Rates.............................. 10
Your Choices at the end of a Guaranteed Period....................... 12
Withdrawals and Surrenders........................................... 13
The Market Value Adjustment.......................................... 16
Premium Taxes........................................................ 17
Maintenance Fees..................................................... 17
Death Benefit........................................................ 18
Death Benefit Options Available to Your Beneficiary.................. 18
Annuity Period......................................................... 19
Selecting an Annuity Date............................................ 19
Annuity Payments..................................................... 19
Annuity Options...................................................... 19
Payment Upon Death After Annuity Payments Begin...................... 20
INVESTMENTS.............................................................. 21
PARTICIPANT AND BENEFICIARY RIGHTS AND PRIVILEGES........................ 22
AMENDMENT OF THE CONTRACTS............................................... 23
DISTRIBUTION OF THE CONTRACTS............................................ 23
FEDERAL INCOME TAXES..................................................... 24
The Company............................................................ 24
Taxes You or Others Pay - Non-Qualified Contracts...................... 24
Accumulation Period.................................................. 24
Annuity Payments..................................................... 24
Withdrawals Before the Annuity Date.................................. 25
Penalty For Premature Withdrawals.................................... 25
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Distribution-At-Death Rules......................................... 25
Certain Tax-Free Exchanges.......................................... 26
Taxes You or Other Pay - Qualified Contracts.......................... 26
Contracts Purchased As A Rollover Individual Retirement Annuity..... 26
Withholding on Eligible Rollover Distributions...................... 26
Qualified Pension, Profit-Sharing Plans, or Annuity Plans........... 27
Tax Sheltered Annuities............................................. 27
Withholding of Taxes................................................ 27
See Your Own Tax Adviser............................................ 27
LEGAL MATTERS........................................................... 28
EXPERTS................................................................. 28
FURTHER INFORMATION..................................................... 28
INQUIRIES............................................................... 28
APPENDIX A: Contracts For Qualified Plans
APPENDIX B: Market Value Adjustment
APPENDIX C: Special Free Look Provisions
APPENDIX D: Form 10-K For Fiscal Year Ended December 31, 1994
APPENDIX E: Form 10-Q For Quarter Ended June 30, 1995
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SUMMARY INFORMATION
The Contract is an annuity contract issued to you by the Company that
allows you to invest and accumulate funds while deferring taxes on the
interest you earn.
You make a single purchase payment for a Contract. The minimum purchase
payment is $10,000. You may make larger payments, or you may buy more than one
Contract. Purchase payments over $1,000,000 require the Company's prior
approval. Your purchase payment earns interest at fixed rates that the Company
guarantees will not change during certain fixed periods. The interest rates
that we guarantee are called Guaranteed Rates, and the fixed periods during
which these rates are guaranteed are called Guaranteed Periods.
When you purchase a Contract, you select the Guaranteed Period you want
from among those the Company then offers. Except as described below, your
purchase payment will earn interest at the Guaranteed Rate for the duration of
the Guaranteed Period you select. Guaranteed Periods always start on the first
business day of the month. During the period of time between the date your
purchase payment is credited and the start of the Guaranteed Period you
select, your purchase payment earns interest at the Guaranteed Rate applicable
to the Guaranteed Period you selected. The Guaranteed Rates offered will never
be less than the minimum guaranteed interest rate stated in the Contract. The
Company offers Guaranteed Periods of one to 20 years. You may divide your
single purchase payment among any of the various Guaranteed Periods that we
offer, but you must invest at least $1,000 in any single Guaranteed Period
selected.
For Guaranteed Periods of greater than one year more than one Guaranteed
Rate may be applicable during a Guaranteed Period. For example, a Guaranteed
Period of five years may apply one Guaranteed Rate for the first year, a
different Guaranteed Rate for the next two years, and a third Guaranteed Rate
for the last two years.
At the end of any Guaranteed Period, you can elect to reinvest the
current value of your Contract in another Guaranteed Period then available,
withdraw all or part of your current value, or choose to start your annuity
payments, subject to certain restrictions. The Company will notify you at
least 18 days before the end of any Guaranteed Period in which you have
current value. If you make no election, the current value of your Contract
automatically will be reinvested for a Guaranteed Period equal to the one just
completed, or if not available, the next shortest Guaranteed Period then
available. If no such shorter Guaranteed Period is available, the next longest
Guaranteed Period will be used.
THE COMPANY'S MANAGEMENT WILL MAKE THE FINAL DETERMINATION AS TO
GUARANTEED RATES TO BE DECLARED. THE COMPANY CANNOT PREDICT NOR CAN THE
COMPANY GUARANTEE WHAT THE GUARANTEED RATES WILL BE FOR FUTURE GUARANTEED
PERIODS UNTIL SUCH RATES ARE DECLARED. (See "Guaranteed Periods and Guaranteed
Rates.")
You may withdraw all or part of your Contract's current value at anytime.
However, such withdrawals may be subject to a surrender fee, a Market Value
Adjustment, a
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deduction for premium taxes and maintenance fees, and/or federal income taxes
and tax penalties. Except as described below, a surrender fee is imposed on
any amount of your purchase payment withdrawn during the first seven years of
your Contract. For purposes of this fee it is assumed that you are withdrawing
all or a portion of your purchase payment first, not your earnings. The amount
of the surrender fee is initially 7%, and declines periodically thereafter to
0% after the seventh year. The surrender fee is not applicable to any amounts
withdrawn at the end of a Guaranteed Period if appropriate notice has been
given. The surrender fee is also not applicable to any amounts used to provide
annuity payments.
After you own your Contract for one year, you are entitled to one Special
Withdrawal per year, up to a maximum amount equal to 10% of the current value
of your Contract at the time of your withdrawal. Also, if the current value of
your Contract exceeds $25,000, you can arrange a program of Systematic
Withdrawals, which allows you to withdraw specified amounts or percentages of
your Contract's current value or to withdraw amounts over specified time
periods that you determine. Similarly, for Contracts purchased as Individual
Retirement Annuities, if you are at least age 70 1/2 and the current value of
your Contract exceeds $25,000, you can arrange a program of annual withdrawals
through the Estate Conservation Option, which is designed to provide annual
payments in an amount equal to the minimum distribution that is required to be
withdrawn each year under the federal tax laws. Surrender fees do not apply to
Special Withdrawals, Systematic Withdrawals or withdrawals under the Estate
Conservation Option or the Nursing Home Waiver, but such withdrawals may be
subject to taxes, penalties and withholding taxes. (See "Federal Income
Taxes.")
A Market Value Adjustment is an adjustment applied to any amounts you
withdraw prior to the end of your Guaranteed Period. The Market Value
Adjustment may increase or decrease the amount of your withdrawal. The Market
Value Adjustment reflects the change in value of your investment in a
Guaranteed Period due to changes in interest rates since the start of that
Guaranteed Period. Generally, when interest rates decrease, the value of your
investment increases, and the Market Value Adjustment amount is positive.
Conversely, when interest rates increase, the value of your investment
decreases, and the Market Value Adjustment amount is negative. If interest
rates increase significantly, upon the withdrawal of the current value of your
Contract before the end of the Guaranteed Period, the amount you receive could
be less than the amount you invested at the start of the Guaranteed Period.
The amount of the Market Value Adjustment is determined by using the formula
described in Appendix B. The Market Value Adjustment does not apply to
Systematic Withdrawals or withdrawals under the Estate Conservation Option,
but it is applicable to Special Withdrawals and withdrawals under the Nursing
Home Waiver. The Market Value Adjustment also does not apply to amounts
withdrawn at the end of your Guaranteed Period, if appropriate notice has been
given.
Under certain emergency conditions, the Company may defer payment of any
withdrawal, including surrenders, for a period not exceeding six months from
the date of receipt of a withdrawal or surrender request.
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You choose when you want your annuity payments to start. Your annuity
payments can start anytime after the first year of your Contract, upon your
selection of an annuity option. You may use all or part of the current value
of your Contract to provide annuity payments. If your annuity payments start
before the end of your Guaranteed Period, a Market Value Adjustment may be
applied to any amounts used to start annuity payments. The annuity option you
select also determines the number, amount and frequency of your annuity
payments. Your annuity payments can be for a fixed period of time, for your
life, for the life of another person you select, or for the joint lives of you
and another person.
The Contract also provides a death benefit, which is paid if you or
the annuitant die before your annuity payments start. The amount of the death
benefit equals the current value of your Contract, provided that the death
benefit is paid within six months of the death of the annuitant. If paid after
six months of the date of death of the annuitant, or if paid upon your death
and you are not the annuitant, the death benefit equals the current value of
your Contract as adjusted by any applicable Market Value Adjustment.
Additionally, if you die and you are not the annuitant, the death benefit
payable will be subject to a surrender fee, if applicable. In certain
circumstances, your beneficiary or joint holder may have the option to
continue the Contract rather than receiving the death benefit.
The Company currently pays all state and local premium taxes on your
Contract when due. The Company recovers applicable taxes paid on your behalf
by deducting an appropriate amount from the current value of your Contract
when annuity payments start, or earlier upon surrender of your Contract.
Currently, such taxes range up to 3.5% of the amount of current value of the
Contract used for annuity payments. The Company reserves the right to deduct
premium taxes at any time from your purchase payment or from the current value
of your Contract based upon the Company's determination of when such tax is
due.
SPECIAL TERMS
As used in this Prospectus, the following terms have the indicated
meanings:
Current Value
As of any given date, your purchase payment plus interest credited, less
any amount withdrawn or used to provide annuity payments. The Current Value
will also reflect any deduction for premium taxes, in the event such taxes are
deducted from your purchase payment, and any deduction for maintenance fees,
if such fees are applicable.
Annuitant
The person whose life is measured for purposes of the duration of annuity
payments or the payment of the death benefit. This individual is designated by
you in your application. Prior to the Annuity Date you may request In Writing
to change the designated Annuitant, but any such change is only effective if
approved by the Company.
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Annuity Date
The date your annuity payments start under an annuity option you elect.
This date may be any time after the first year of your Contract, and will be
the later of the Annuitant's 85th birthday, or the tenth anniversary of your
purchase payment, unless you elect otherwise.
Annuity Option
The method you select for your annuity payments to be made.
Beneficiary
The person(s) entitled to receive any payment from the Contract upon your
death, the death of the Annuitant if not you, or the death of a joint holder,
as applicable. This person is designated by you in your application. If a
joint holder dies, the surviving joint holder will be deemed the designated
Beneficiary, and any other Beneficiary on record will be treated as the
contingent Beneficiary.
Guaranteed Period
The period for which Guaranteed Rates are credited.
Guaranteed Rate
The interest rate that we guarantee to pay during Guaranteed Periods.
In Writing
A written form satisfactory to the Company and received at its offices
addressed to: Aetna Insurance Company of America, 151 Farmington Avenue,
Hartford, Connecticut 06156.
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You
The person who owns and holds the Contract. You may have a joint holder,
but only if such joint holder is your spouse. With respect to a group
contract, "you" refers to the person or persons who has or have been issued a
certificate under the group contract. Where there are joint holders of the
Contract, each must join in making any request or election or to take any
action pursuant to the Contract.
DESCRIPTION OF CONTRACTS
The Application Process
To begin the application process, you must submit a completed application
and your purchase payment to the Company for approval. The minimum purchase
payment is $10,000. The Company retains the right to limit the amount of the
maximum purchase payment, and all purchase payments over $1,000,000 require
the Company's approval. You may not make any additional purchase payments
under an existing Contract. However, additional Contracts may be purchased by
eligible persons at the then prevailing Guaranteed Rates and terms.
The Company will accept or reject an application within two business days
of its receipt. If the application is incomplete, the Company may hold it and
any accompanying purchase payment for five days. A purchase payment may be
held for longer periods only with your consent, pending acceptance of the
application. If the application is accepted, a Contract will be issued to you.
If the application is rejected, the application and any purchase payment will
be returned to you.
If your application is properly completed and accepted by the Company,
your purchase payment becomes part of the Company's general assets and is
credited to an account established for you. The Company will confirm the
crediting of your purchase payment In Writing within five business days of
receipt of your properly completed application. You start earning interest on
your purchase payment beginning on the effective date of your Contract, which
is the date your purchase payment is credited.
A Contract may be purchased as a rollover Individual Retirement Annuity
by transferring amounts previously accumulated (rollover amounts) under
another Individual Retirement Annuity or an Individual Retirement Account
under Section 408 of the Internal Revenue Code of 1986 ("Tax Code"), or a
retirement plan qualified under Section 401 or 403 of the Tax Code. Certain
qualified and non-qualified plans may also purchase a Contract. (See Appendix
A.)
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The Company reserves the right to reject an application and, in such
case, any purchase payment will be returned to you without interest. The
Company will deliver your Contract within a reasonable time after receipt and
acceptance of your properly completed application and purchase payment.
Free Look
You may cancel your Contract within ten days of receiving it (or as
otherwise provided by state law) by giving Aetna written notice and returning
your Contract. Upon cancellation, the Company will return your purchase
payment to you within seven days after it receives your notice of
cancellation. In certain states, special restrictions apply to cancellations
pursuant to this provision. (See Appendix C.)
The Accumulation Period
Guaranteed Periods and Guaranteed Rates
In your application you select the Guaranteed Period you want from among
those Guaranteed Periods the Company then offers. Your purchase payment earns
interest at the Guaranteed Rate applicable to that Guaranteed Period.
Guaranteed Periods always start on the first business day of the month. During
the period of time between the date your purchase payment is credited and the
start of the Guaranteed Period you selected, your purchase payment earns
interest at the Guaranteed Rate applicable to the Guaranteed Period you
selected. The Company offers Guaranteed Periods ranging in duration from one
to 20 years. You may divide your single purchase payment among any of the
various Guaranteed Periods that we offer, but you must invest at least $1,000
in any single Guaranteed Period selected, and not less than $10,000 in all
Guaranteed Periods selected. For Guaranteed Periods of greater than one year
more than one Guaranteed Rate may be applicable during one Guaranteed Period.
For example, a Guaranteed Period of five years may apply one Guaranteed Rate
for the first year, a different Guaranteed Rate for the next two years, and a
third Guaranteed Rate for the last two years.
All Guaranteed Rates are stated in terms of effective annual rate of
return; that is, a Guaranteed Rate reflects a full year's interest. Interest
you earn is credited daily at a rate that will provide the guaranteed
effective rate of return over the period of one year assuming reinvestment of
all interest earned. Guaranteed Rates will never be less than the minimum
guaranteed interest rate stated in the Contract. The Company reserves the
right to offer, from time to time, Guaranteed Rates to prospective investors
that are higher than those offered to current Contract owners with respect to
Guaranteed Periods of the same duration.
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The example below shows how interest will be credited to you during each
Guaranteed Period. The hypothetical interest rate used in this example is
illustrative only and is not intended to predict future Guaranteed Rates to be
offered under the Contract. Actual Guaranteed Rates offered may be more or
less than those shown. The example assumes no withdrawals of any amount during
the entire seven year Guaranteed Period illustrated. Accordingly, the example
does not give effect to any surrender fee, Market Value Adjustment, deduction
for premium taxes and maintenance fees, or federal income taxes or possible
tax penalties. (See "Withdrawals and Surrenders," "The Market Value
Adjustment," and "Premium Taxes," below, and "Federal Income Taxes.")
Example of Interest Crediting at the Guaranteed Rate
Purchase Payment: $20,000
Guaranteed Period: 7 years
Guaranteed Rate: 6.00% per annum
The Guaranteed Rate is applied in this example by using the following
formula: 1 + the Guaranteed Rate = 1.06.
Current Value at end of Contract Year 1 = $21,200.00 ($20,000.00 x 1.06)
Current Value at end of Contract Year 2 = $22,472.00 ($21,200.00 x 1.06)
Current Value at end of Contract Year 3 = $23,820.32 ($22,472.00 x 1.06)
Current Value at end of Contract Year 4 = $25,249.54 ($23,820.32 x 1.06)
Current Value at end of Contract Year 5 = $26,764.51 ($25,249.54 x 1.06)
Current Value at end of Contract Year 6 = $28,370.38 ($26,764.51 x 1.06)
Current Value at end of Guaranteed Period = $30,072.61 ($28,370.38 x 1.06)
Total Interest Credited in Guaranteed Period = $10,072.61 ($30,072.61 - $20,000)
Current Value at end of Guaranteed Period = $30,072.61 ($20,000.00 + $10,072.61)
The Company will determine the Guaranteed Rates it offers periodically at
its sole discretion. The Company has no specific formula for determining the
rate of interest that it will declare as future Guaranteed Rates. The
determination of Guaranteed Rates will reflect interest rates available on the
types of debt instruments in which the Company intends to invest the proceeds
attributable to the Contracts. (See "Investments.") The Company's management
will also consider various other factors in determining Guaranteed
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Rates for a given Guaranteed Period, such as regulatory and tax requirements,
sales commissions and administrative expenses, general economic trends, and
competitive factors. The Company's management will make the final
determination as to Guaranteed Rates to be offered. The Company cannot predict
nor guarantee future levels of guaranteed interest rates above a contractually
guaranteed minimum rate nor guarantee what rates will be offered in the
future.
Your Choices at the end of a Guaranteed Period
At least 18 days prior to the end of a Guaranteed Period under your
Contract, the Company will send you a notice that your Guaranteed Period is
about to end. At the end of your Guaranteed Period, you can do three things
with the amount you have accumulated for that Guaranteed Period: (1) reinvest
all or part of it in another Guaranteed Period; (2) withdraw all or part of
it; or (3) use all or part of it to start your annuity payments. These choices
also can be used in combination. For example, you could withdraw part of the
amount you have accumulated, and reinvest the balance; or reinvest part, and
use the balance to start annuity payments. Each of these choices has certain
consequences, which you should consider carefully. (See "Withdrawals and
Surrenders," below, and "Annuity Period" and "Federal Income Taxes.")
Once you decide what you want to do with the Current Value for that
Guaranteed Period, you must advise the Company of your decision In Writing by
completing an election form. To be effective, your completed election form
must be received by the Company In Writing at least five days prior to the end
of the Guaranteed Period to which it applies. If you decide you want to
reinvest the Current Value of your Contract for a Guaranteed Period of the
same duration as the one just ending, you need not take any action.
IF THE COMPANY DOES NOT RECEIVE YOUR PROPERLY COMPLETED ELECTION FORM IN
TIME, OR IF NO FORM IS RECEIVED, YOUR CURRENT VALUE WILL BE AUTOMATICALLY
REINVESTED FOR A GUARANTEED PERIOD EQUAL TO THE GUARANTEED PERIOD JUST ENDED.
If no such Guaranteed Period is then being offered, the Guaranteed Period with
the next shortest duration will be used. If no such shorter Guaranteed Period
is available, the next longest Guaranteed Period will be used. Your Current
Value will then earn interest at the Guaranteed Rate applicable to the
Guaranteed Period automatically selected for you. The Company will mail a
confirmation statement to you the next business day after the completion of
your just ended Guaranteed Period advising you of the new Guaranteed Period
and Guaranteed Rate.
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Withdrawals and Surrenders
General
At any time prior to the time your annuity payments start, you may
surrender all or part of the Current Value of your Contract. Partial
surrenders are referred to in this Prospectus as "withdrawals." If, after any
withdrawal, the Current Value of your contract is less than $2,500, the
Company may terminate your Contract upon 90 days notice and refund the
remaining balance to you. If you withdraw all your Current Value, you must
surrender your Contract. To make a partial withdrawal or to surrender your
Contract, you must properly complete a withdrawal request or surrender form
provided by the Company, and submit it to the Company In Writing. All
withdrawals and any surrender may be subject to a surrender fee, a Market
Value Adjustment, a deduction for premium taxes and maintenance fees, and
federal income taxes and tax penalties. All applicable fees and deductions are
deducted from the amount of your withdrawal in accordance with the terms of
your Contract. Any Market Value Adjustment applicable to your withdrawal or
surrender may either increase or decrease the amount paid to you. (See "Market
Value Adjustment," below.) Accordingly, if you request that you receive a
specific dollar amount upon withdrawal, the amount actually withdrawn from
your Contract may be more or less than the requested dollar amount. The
Company will, upon request, inform you in advance of the amount payable upon a
withdrawal or surrender. Amounts withdrawn are withdrawn on a pro rata basis
from each of the Guaranteed Periods under the Contract.
Fees Applicable to Withdrawals and Surrenders
Upon any withdrawal or surrender, a surrender fee of up to 7% may be
deducted from the amount withdrawn, depending on the length of time that has
passed since your initial purchase payment was credited. The surrender fee
only applies to the amount of your purchase payment withdrawn, but for
purposes of this fee it is assumed that you are withdrawing all or a portion
of your purchase payment first, not your earnings. This assumption, however,
does not apply for tax purposes. (See "Federal Income Taxes.") The chart below
indicates the percentage fee applied to amounts you withdraw.
------------------------------------------------------------------------------
Surrender Fee
Years since initial
payment credited: 0 1 2 3 4 5 6 7
Fee as a percentage
of payment withdrawn: 7% 7% 6% 6% 5% 4% 2% 0%
------------------------------------------------------------------------------
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The surrender fee and Market Value Adjustment are waived and not
applicable to any amounts withdrawn at the end of a Guaranteed Period,
provided that five days prior to the end of that Guaranteed Period we receive
notice of the withdrawal In Writing. The surrender fee and Market Value
Adjustment, however, remain applicable to any amount you reinvest for another
Guaranteed Period. For purposes of applying the surrender fee, all time
periods are measured from the date your initial purchase payment is credited,
even if you reinvest all or part of your Current Value in another Guaranteed
Period. Once the surrender fee declines to 0%, it is no longer applicable,
regardless of how long you own your Contract.
For example, assume that the first Guaranteed Period you select is for 5
years. Further assume that at the end of this 5 year Guaranteed Period, you
decide to reinvest the Current Value of your Contract for another Guaranteed
Period of 4 years. Assume you then make a withdrawal (but not a Special
Withdrawal, as described below) during the second year of the new Guaranteed
Period. Because six years have passed since your purchase payment was
credited, you would pay a 2% surrender fee, even though you could have
withdrawn all or part of the Current Value of your Contract at the end of the
first 5 year Guaranteed Period without paying a surrender fee. However, if you
make a withdrawal during the third year of the new Guaranteed Period, or
anytime thereafter, you would pay no surrender fee, because seven years would
have passed since your purchase payment was credited.
If you surrender your Contract and the Current Value is less than $2,500,
the surrender fee will be waived, provided you have not withdrawn any amounts
within the prior 12 months. The surrender fee is also waived if the Company
terminates your Contract because its Current Value is less than $2,500. In
both cases, a Market Value Adjustment will be applied, and a deduction will be
made for any premium taxes and maintenance fees, if applicable.
Special Withdrawals
After you own your Contract for one year, you have the opportunity to
make one Special Withdrawal per year without paying a surrender fee. The
maximum amount of the Special Withdrawal equals 10% of the Current Value of
your Contract at the time the Company receives your withdrawal request In
Writing. This opportunity is only available for the first withdrawal of each
year, and all subsequent withdrawals during that year will be subject to the
surrender fee, even if you did not withdraw the full 10% with your first
withdrawal. If your first withdrawal for the year is in excess of 10% of the
Current Value of your Contract, only the excess amount is subject to a
surrender fee. A Market Value Adjustment is applicable to any amounts that you
withdraw, and you also may be required to pay taxes and tax penalties. (See
"Federal Income Taxes.")
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The Systematic Withdrawal Option
If the Current Value of your Contract exceeds $25,000, you can elect a
program of automated partial withdrawals through the Systematic Withdrawal
Option ("SWO"). SWO allows you to withdraw either a specified amount or a
percentage of your Contract's value, or to withdraw amounts over a specified
time period that you determine, within certain limits described in your
Contract. SWO payments can be made on a monthly or quarterly basis, and the
amount of each payment is determined by dividing the designated annual amount
by the number of payments due each calendar year. SWO payments are withdrawn
pro rata from each of the Guaranteed Periods under your Contract.
SWO is available under three payment methods: the specified percentage
method, the specified payment method, and the specified period method. The
terms and conditions applicable to each of these payment methods are described
in your Contract.
If you elect SWO under a Contract purchased as a rollover Individual
Retirement Annuity, and under the Tax Code you are required each year to
withdraw a minimum distribution amount, if the SWO payment for any year is
less than the minimum required distribution, the SWO payment will be increased
to an amount equal to the minimum distribution amount.
If you participate in SWO, you may not utilize a Special Withdrawal to
make additional withdrawals from your Contract. Once elected, SWO may be
cancelled at anytime by submitting a request In Writing to the Company. Once
cancelled, SWO may not be elected again by you or your spousal Beneficiary.
The Company reserves the right to change the terms of SWO for future elections
and to discontinue the availability of this option upon notice. The Company
also reserves the right to establish the date when you may first elect SWO.
Surrender fees and the Market Value Adjustment do not apply to
withdrawals received under SWO, but you may be required to pay taxes and tax
penalties on any amounts that you withdraw. (See "Federal Income Taxes.")
The Estate Conservation Option
If you are at least age 70 1/2 and the Current Value of your Contract
exceeds $25,000, you can arrange a program of annual partial withdrawals
through the Estate Conservation Option ("ECO"). ECO is available only for
Contracts purchased as a rollover Individual Retirement Annuity, and is
designed to provide annual payments in an amount equal to the minimum
distribution that is required to be withdrawn each year under the Tax Code.
ECO payments are withdrawn pro rata from each of the Guaranteed Periods under
your Contract. The Company will, upon request, inform you in advance of the
amount payable under ECO.
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Surrender fees do not apply to withdrawals received under ECO, and the
Market Value Adjustment also is not applicable. You will be required to pay
taxes on any amounts that you withdraw. (See "Federal Income Taxes.")
If you participate in ECO, you may not utilize a Special Withdrawal to
make additional withdrawals from your Contract. Once elected, ECO may be
cancelled at anytime by submitting a request In Writing to the Company. Once
cancelled, ECO may not be elected again until 36 months have elapsed. The
Company reserves the right to change the terms of ECO for future elections and
to discontinue the availability of this option upon notice.
The Nursing Home Waiver
The Nursing Home Waiver provides that if you have owned your Contract for
over one year, and the Annuitant has spent at least 45 consecutive days in a
licensed nursing care facility, then the surrender fee will be waived if you
withdraw or surrender any portion of the Current Value of your Contract within
three years of the Annuitant's admission to such licensed nursing care
facility. The Market Value Adjustment applies to withdraws and surrenders
under the Nursing Home Waiver, and you also may be required to pay taxes and
tax penalties on any amounts that you withdraw. (See "Federal Income Taxes.")
The Nursing Home Waiver may not be available in all states and does not apply
if the Annuitant was in a licensed nursing care facility when you purchased
your Contract.
Payment Upon Withdrawal or Surrender
Under certain emergency conditions, the Company may defer payment of any
withdrawal or surrender for a period not exceeding six months from date of
receipt of a withdrawal or surrender request.
The Market Value Adjustment
The amount payable upon a withdrawal or surrender before the end of a
Guaranteed Period may be increased or decreased by the application of the
Market Value Adjustment. When applicable, the Market Value Adjustment is
applied to the amount withdrawn or surrendered. If your annuity payments start
before the end of your Guaranteed Period, a Market Value Adjustment may be
applied to any amounts used to start annuity payments. The Market Value
Adjustment will not be applied to Systematic Withdrawals or to withdrawals
under the Estate Conservation Option. The Market Value Adjustment also does
not apply to amounts withdrawn at the end of your Guaranteed Period, if
appropriate notice has been given.
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The Market Value Adjustment reflects the change in the value of your
investment due to changes in interest rates since the start of the Guaranteed
Period under your Contract. When interest rates increase, the value of your
investment decreases and the Market Value Adjustment amount is negative.
Conversely, when interest rates decrease, the value of your investment
increases, and the Market Value Adjustment amount is positive. Because a
Market Value Adjustment can be positive or negative, it may increase or
decrease the amount of your withdrawal before the end of a Guaranteed Period.
The Company imposes a Market Value Adjustment for several reasons. Upon
withdrawal of money from your Contract, the Company may need to liquidate
certain assets or use existing cash flow that would otherwise be available to
invest at current interest rates. The assets that are liquidated may be sold
at a profit or a loss, depending upon market conditions. This profit or loss
could affect the determination of Guaranteed Rates. (See "Guaranteed Periods
and Guaranteed Rates," above.) To lessen this impact, certain withdrawals are
subject to a Market Value Adjustment.
For an explanation of how the Market Value Adjustment is calculated, see
Appendix B.
Premium Taxes
Several states and local governments impose a premium or similar tax on
annuities. Currently, such taxes range up to 3.5% of either your purchase
payment or the amount accumulated in your Contract that you use for annuity
payments. The Company initially will pay all state-imposed premium or similar
taxes applicable to your Contract. These taxes will be deducted from the
amounts that you use for annuity payments immediately prior to the time your
annuity payments begin. If you surrender your Contract, or at your death your
Beneficiary elects to receive a lump sum distribution, a charge will be
deducted for any premium taxes paid on your behalf for which the Company has
not been reimbursed. The Company reserves the right to deduct premium taxes at
any time from your purchase payment or from the Current Value of your Contract
based upon the Company's determination of when such tax is due. In the event
that premium taxes are deducted from your purchase payment, the amount
invested in a Guaranteed Period will be equal to the amount of your purchase
payment reduced by any applicable premium tax.
Maintenance Fees
Prior to the time your annuity payments start, an annual maintenance fee
may be deducted from the Current Value of your Contract on each anniversary of
your Contract's effective date and upon the surrender of your Contract. The
terms and conditions under which the maintenance fee may be deducted are
stated in your Contract.
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Death Benefit
In your application to purchase a Contract, you will select a
Beneficiary. If you or the Annuitant die before annuity payments begin, a
death benefit will be paid to your Beneficiary in accordance with the terms of
your Contract. If a joint holder dies, the surviving joint holder will be
deemed the designated Beneficiary, and any other Beneficiary on record will be
treated as the contingent Beneficiary. If the Contract holder is not a natural
person, the death benefit will be payable at the death of the Annuitant or
upon any change of the Annuitant.
The amount of the death benefit equals the Current Value of your
Contract, provided that the death benefit is paid within six months of the
death of the Annuitant. If the death benefit is paid after six months of the
date of death of the Annuitant, or if paid upon your death and you are not the
Annuitant, it equals the Current Value of your contract as adjusted by any
applicable Market Value Adjustment. Additionally, if you die and you are not
the Annuitant, the death benefit payable will be subject to a surrender fee,
if applicable. The death benefit is calculated as of the date of receipt of
notification In Writing of due proof of death and the Beneficiary's claim. In
certain circumstances, your Beneficiary or joint holder may have the option to
continue the Contract rather than receiving the death benefit.
You may change the Beneficiary you previously designated at any time by
submitting notice In Writing to the Company. The change will not be effective
until received and recorded by the Company.
Death Benefit Options Available to Your Beneficiary
If you die before annuity payments begin, or, if the Contract holder is
not a natural person and the Annuitant dies before annuity payments begin, any
Beneficiary under the Contract who is an individual has several options for
receiving payment of the death benefit. The death benefit may be paid in one
lump sum payment, or all or part of such amounts may be used to start annuity
payments using the Annuity Options available under the Contract. Unless the
designated Beneficiary is your spouse, all death benefits paid as a lump sum
must be distributed within five years of the date of death. If the Beneficiary
elects to receive a lump sum payment, a charge will be deducted for any
premium taxes paid on your behalf for which the Company has not been
reimbursed. A spousal Beneficiary also may elect to exercise all rights under
the Contract.
If you are an individual who is not the Annuitant, and the Annuitant
dies, your Beneficiary may elect either to apply all of the death benefit
amount to any Annuity Option available under the Contract within 60 days of
the date of death, or to receive such amount as a lump sum payment.
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Annuity Period
Selecting an Annuity Date
You select the Annuity Date for your Contract, which is the date you want
your annuity payments to start under an Annuity Option that you select. This
date may be any time after the first year of your Contract, and will be the
later of the Annuitant's 85th birthday or the tenth anniversary of your
purchase payment, unless you elect otherwise.
You can change your Annuity Date by notifying the Company In Writing at
least 30 days before your annuity payments are to begin.
Annuity Payments
You may apply all or a portion of the Current Value of your Contract to
provide annuity payments. Annuity payments are made to you unless you request
otherwise. You can request that we send annuity payments to any person you
name, or have the payments deposited directly in any bank account. After your
death, we will send any annuity payments still due to the Beneficiary you have
selected. You may be required to pay taxes on portions of the annuity payments
you receive. (See "Federal Income Taxes.")
Annuity payments are made monthly unless you request that annuity
payments be made quarterly, semi-annually or annually. You may change your
request In Writing at any time. The amount of each annuity payment depends on
how much of your Current Value, less applicable premium taxes, you use to
start your annuity payments, and the Annuity Option that you elect. No
election may be made that would result in a first annuity payment of less than
$50 or total yearly annuity payments of less than $250. If the amount you have
accumulated in your Contract as of the Annuity Date is insufficient to elect
an Annuity Option for the minimum amount specified, you will receive a lump
sum payment. After any two full consecutive years, measured from the
anniversary of the effective date of your Contract, and upon 90 days notice to
you, the Company may terminate a rollover Individual Retirement Annuity
Contract if the paid-up benefit at maturity would be less than $20 per month.
Instead of electing annuity payments, you may request that the Company make a
lump sum payment. No surrender fee will be applied to any amounts used to
start annuity payments, although a Market Value Adjustment may be applicable.
Annuity Options
You can elect to have your annuity payments made:
(1) for the life of your designated Annuitant or joint Annuitant;
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(2) for the life of the Annuitant but guaranteed for a minimum of
5, 10, 15 or 20 years;
(3) for the life of two Annuitants; or
(4) for a stated period of time (10 to 30 years).
You must notify the Company In Writing of the Annuity Option elected at
least 30 days prior to the Annuity Date. You may change your election at any
time up to 30 days before your annuity payments start. If your annuity
payments start before the end of your Guaranteed Period, a Market Value
Adjustment will be applied to any amounts used to start annuity payments. If
the Annuity Option selected is one of the first three listed above (i.e., a
lifetime annuity), only a positive Market Value Adjustment will be applied.
Once you elect for annuity payments to begin, you may not elect to instead
receive a lump sum payment.
If you choose an annuity for life but guaranteed for a minimum number of
years, when the annuity payments start, the age of the Annuitant plus the
number of years for which payments are guaranteed must not exceed 95.
Additionally, federal income tax requirements currently applicable to
Individual Retirement Annuities provide that the period of years guaranteed
may not be any greater than the joint life expectancies of the payee and his
or her designated Beneficiary.
Further, if you choose an annuity for the life of two Annuitants, annuity
payments will continue until both Annuitants have died. When this Annuity
Option is chosen, you must choose one of the following:
(1) 100% of the payment to continue after the first death;
(2) 66 2/3% of the payment to continue after the first death;
(3) 50% of the payment to continue after the first death;
(4) Payments for a minimum of 120 months, with 100% of the payment
to continue after the first death; or
(5) 100% of the payment to continue at the death of the second
Annuitant and 50% of the payment to continue at the death of
the Annuitant.
Payment Upon Death After Annuity Payments Begin
Upon the death of either the Annuitant or the surviving joint Annuitant
after annuity payments start, the amount payable, if any, to your Beneficiary
depends on the Annuity
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Option currently in force. Any amounts payable must be paid at least as
rapidly as under the method of distribution in effect at the Annuitant's
death.
If you die after annuity payments start and you are not the Annuitant,
any remaining payments will continue to be made to your Beneficiary at least
as rapidly as under the method of distribution in effect at your death.
INVESTMENTS
Purchase payments received under the Contracts and allocated to
Guaranteed Periods will be invested by the Company under the laws of the State
of Connecticut. You have no priority claims on, or participation in the
performance of, such assets. All such assets are the property of the Company
and available to meet the guarantees under the Contracts and the general
obligations of the Company.
The assets of the Company will be invested in accordance with the
requirements established by applicable state laws regarding the nature and
quality of investments that may be made by life insurance companies and the
percentage of their assets that may be committed to any particular type of
investment. In general, these laws permit investments, within specified limits
and subject to certain qualifications, in federal, state, and municipal
obligations, corporate bonds, preferred and common stocks, real estate
mortgages, and certain other investments.
The Company has no specific formula for establishing the Guaranteed Rates
for the Guaranteed Periods. The Company expects the rates to be influenced by,
but not necessarily correspond to, the yields on the fixed income securities
to be acquired with amounts that are allocated to the Guaranteed Periods at
the time that the Guaranteed Rates are established.
The Company intends to invest in assets which, in the aggregate, have
characteristics, especially cash flow patterns, reasonably related to the
characteristics of the liabilities. Various immunization techniques will be
used to achieve the objective of close aggregate matching of assets and
liabilities. The Company will primarily invest in investment-grade fixed
income securities including:
o Securities issued by the United States Government or its
agencies or instrumentalities, which issues may or may not be
guaranteed by the United States Government.
o Debt securities that are rated, at the time of purchase, within
the four highest grades assigned by Moody's Investors Services,
Inc. (Aaa, Aa, A or Baa) or Standard & Poor's Corporation (AAA,
AA, A or BBB) or any other nationally recognized rating
service.
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o Other debt instruments, including, but not limited to, issues
of or guaranteed by banks or bank holding companies and of
corporations, which obligations, although not rated by Moody's,
Standard & Poor's, or other nationally recognized rating firms,
are deemed by the Company's management to have an investment
quality comparable to securities which may be purchased as
stated above.
o Commercial paper, cash or cash equivalents, and other
short-term investments having a maturity of less than one year
which are considered by the Company's management to have
investment quality comparable to securities which may be
purchased as stated above.
In addition, the Company may invest in futures and options. Financial
futures and related options thereon and options on securities are purchased
solely for nonspeculative hedging purposes. In the event the securities prices
are anticipated to decline, the Company may sell a futures contract or
purchase a put option on futures or securities to protect the value of
securities it holds. Similarly, if securities prices are expected to rise, the
Company may purchase a futures contract or a call option thereon against
anticipated positive cash flow or may purchase options on securities.
WHILE THE FOREGOING GENERALLY DESCRIBES THE COMPANY'S INVESTMENT STRATEGY, THE
COMPANY IS NOT OBLIGATED TO INVEST THE ASSETS ATTRIBUTABLE TO THE CONTRACTS
ACCORDING TO ANY PARTICULAR STRATEGY, EXCEPT AS MAY BE REQUIRED BY CONNECTICUT
AND OTHER STATE INSURANCE LAWS, NOR WILL THE GUARANTEED RATES THE COMPANY
ESTABLISHES NECESSARILY RELATE TO THE INVESTMENT PERFORMANCE THE COMPANY
EXPERIENCES.
PARTICIPANT AND BENEFICIARY RIGHTS AND PRIVILEGES
You have the sole and absolute power to exercise all rights and
privileges under the Contract, except as otherwise provided by the Contract.
Your rights under the Contract may be assigned or transferred. The Company
will not be bound by an assignment unless and until notice of such assignment
is submitted In Writing and such assignment is accepted by the Company. The
Company assumes no responsibility for the validity or effect of any
assignment. The Company reserves the right not to accept any assignment or
transfer to a nonnatural person. In some cases, an assignment may have adverse
tax consequences. You should consult a tax adviser regarding the consequences
of an assignment.
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AMENDMENT OF THE CONTRACTS
Only an authorized officer of the Company may change the terms of the
Contract. The Company will notify you In Writing of any such change. The
Company reserves the right to modify the Contract to meet the requirements of
applicable state or federal laws or regulations.
DISTRIBUTION OF THE CONTRACTS
The Company will serve as the underwriter of the Contracts being offered
by this Prospectus. The Company is registered as a broker-dealer with the
Securities and Exchange Commission and is a member of the National Association
of Securities Dealers, Inc. ("NASD"). As underwriter, the Company will
contract with one or more other registered broker-dealers who are NASD members
("Distributors") to offer and sell the Contracts. Sales compensation paid to
Distributors will not exceed 6 1/2 percent of the purchase payment made for a
Contract. Alternatively, the Company may pay asset-based sales compensation
annually to Distributors that will not exceed 1 1/4 percent of the assets held
under a Contract. At its discretion, the Company may also pay sales
compensation to Dealers based on both a percentage of the purchase payment and
the assets held annually under a Contract. The Company and one or more
affiliates may also sell the Contracts directly. All registered
representatives of the Distributors must also be licensed as insurance agents
to sell the Contracts.
The Company may also contract with independent third party broker-dealers
who will act as wholesalers by assisting the Company in finding broker-dealers
interested in acting as Distributors for the Company. These wholesalers may
also provide training, marketing and other sales related functions for the
Company and the Distributors and may provide certain administrative services
to the Company in connection with the Contracts. The Company may pay such
wholesalers compensation based on purchase payments for the Contracts
purchased through Distributors selected by the wholesaler.
The Company may also designate third parties to provide services in
connection with the Contracts such as reviewing applications for completeness
and compliance with insurance requirements and providing the Distributors with
approved marketing material, prospectuses or other supplies. These parties
will also receive payments based on purchase payments for their services, to
the extent such payments are allowed by applicable securities laws and NASD
rules. All costs and expenses related to these services will be paid by the
Company.
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FEDERAL INCOME TAXES
The Company
The Company is taxed as a life insurance company under the Tax Code. The
assets underlying the Contracts will be owned by the Company. The income
earned on such assets will be the Company's income.
The Company assumes no responsibility for determining whether a
particular individual retirement annuity plan satisfies the applicable
requirements of the Tax Code or whether a particular person is eligible for
such a plan.
Taxes You or Others Pay - Non-Qualified Contracts
Non-qualified Contracts are those used other than in connection with a
rollover Individual Retirement Annuity or tax-favored retirement program such
as an employee benefit plan.
Accumulation Period
The Contracts are considered annuity contracts under Section 72 of the
Tax Code. Currently, no Federal income tax is payable on increases in the
value of the Contract (such as interest credited to you) until payments are
made to you or another payee under such Contract. However, a Contract owned
other than by a natural person is not generally an annuity for tax purposes
and any increase in value thereunder is currently taxable as ordinary income.
Annuity Payments
Annuity payments are in part taxable to you or another payee as ordinary
income, and in part nontaxable. The nontaxable portion of each annuity payment
is that portion of your purchase payment returned to you. This nontaxable
portion is determined by dividing the "investment in the contract" (generally,
your purchase payment with certain adjustments) by the amount of "expected
return" during the time that periodic payments are to be made, and then
multiplying by the amount of the payment. The balance of the annuity payment
is taxable.
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Withdrawals Before the Annuity Date
Partial withdrawals prior to the Annuity Date, other than those used to
provide annuity payments, and total surrenders at any time, will be taxable to
you as ordinary income to the extent that the Contract's Current Value exceeds
your "investment in the contract" at that time. For tax purposes, it is
assumed that you are withdrawing all or a portion of your earnings first, not
your purchase payment.
If you assign or pledge any part of your Current Value, the value so
pledged or assigned is treated like a withdrawal for tax purposes. Transfer of
ownership without full and adequate consideration is treated for income tax
purposes as a taxable surrender of the Contract. Transfers between spouses or
incident to divorce are not subject to this rule.
Penalty For Premature Withdrawals
In addition to being included in ordinary income, the taxable portion of
any withdrawal made before you reach age 59 1/2 may be subject to a 10 percent
penalty tax. The penalty tax does not apply to, among other things, payments
made on account of your death or becoming disabled, or to payments made in
substantially equal periodic payments, not less than annually, over the life
(or life expectancy) of the payee or over the joint lives (or life
expectancies) of the payee and a designated Beneficiary.
Distribution-At-Death Rules
In order to be treated for tax purposes as a non-qualified annuity
Contract, a non-qualified Contract must provide the following two distribution
rules: (a) if you die on or after the Annuity Date, and before the entire
interest in the Contract has been distributed, the remainder of your interest
will be distributed at least as quickly as the method in effect on your death;
and (b) if you die before the Annuity Date, your entire interest must
generally be distributed within five years after the date of death, or if the
interest is payable to a designated Beneficiary, such interest must be
annuitized over the life of that Beneficiary or a period not extending beyond
the life expectancy of that Beneficiary, beginning within one year after the
date of death. A "designated Beneficiary" is any individual designated as a
Beneficiary by you. If the designated Beneficiary is your spouse, the Contract
(together with the deferral of tax on the accrued and future income
thereunder) may be continued in the name of the spouse.
Where the holder of the Contract is not an individual, the primary
Annuitant is considered the owner, solely for the purpose of the
distribution-at-death rules. The primary Annuitant is the individual the
events in whose life are of primary importance in affecting the timing and
payment under a Contract. In addition, when the holder of the Contract is not
an individual, a change in the primary Annuitant is treated as the death of
the holder of the Contract.
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Certain Tax-Free Exchanges
Section 1035 of the Tax Code provides generally that no gain or loss will
be recognized under the exchange of a life insurance, endowment or annuity
contract for an annuity contract. Thus, a properly completed exchange from one
of these types of products into a Contract pursuant to the special annuity
contract exchange form the Company provides for this purpose is not generally
a taxable event under the Tax Code, and the investment in the Contract will be
the same as in the exchanged product.
Because of the complexity of these and other tax aspects in connection
with an exchange, a tax adviser should be consulted before any exchange is
made.
Taxes You or Others Pay - Qualified Contracts
Contracts may also be used with several types of tax-favored retirement
programs, such as a rollover Individual Retirement Annuity or an employee
benefit plan. The tax rules applicable to participants in such programs vary
according to the type of program and the terms and conditions of the program
itself.
Contracts Purchased As A Rollover Individual Retirement Annuity
The Contract may be purchased as a rollover Individual Retirement
Annuity, by transferring amounts previously accumulated (rollover amounts)
under another Individual Retirement Annuity, an Individual Retirement Account
(as defined by the Tax Code), or a retirement plan qualified under Sections
401 or 403 of the Tax Code.
For Contracts purchased as a rollover Individual Retirement Annuity, the
Tax Code requires that minimum distributions must begin no later than April 1
of the year following the year in which you attain age 70 1/2. When payments
under an Individual Retirement Annuity Contract are made in the form of an
annuity, or in a single sum such as on surrender of the Contract or by
withdrawal, the entire payment is generally taxed as ordinary income. As in
the case of non-qualified Contracts, certain distributions, such as those made
prior to your reaching 59 1/2, may be subject to a 10% penalty.
Withholding on Eligible Rollover Distributions
If you wish to rollover your entire Current Value to or from a rollover
Individual Retirement Annuity, you should have it paid directly to the
successor plan. Otherwise, your distribution will be subject to 20%
withholding. Consult a qualified tax adviser before taking such a
distribution.
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Qualified Pension, Profit-Sharing Plans, or Annuity Plans
Sections 401(a) and 403(a) of the Tax Code permit corporate employers and
self-employed individuals to establish various types of retirement plans for
employees. Such retirement plans may permit the purchase of Contracts to
provide benefits thereunder. The plan trustee must be the Contract holder and
Beneficiary of Contracts used in such plans. The Tax Code contains
requirements with respect to commencement of minimum distributions and
premature withdrawals similar to those applicable to rollover Individual
Retirement Annuities.
Tax Sheltered Annuities
Tax Code Section 403(b) permits the purchase of Contracts by employees of
public schools and certain charitable, educational and scientific
organizations described in Tax Code Section 501(c)(3). These qualifying
employers may make contributions to the Contracts for the benefit of their
employees. Such contributions are not includible in the gross income of the
employee until the employee receives distributions from the Contract. The
amount of contributions to the Contract used in connection with Tax Code
Section 403(b) is limited to certain maximums imposed by the Tax Code.
Furthermore, the Tax Code sets forth additional restrictions governing such
items as transferability, distributions, non-discrimination and withdrawals.
The Tax Code contains requirements with respect to commencement of minimum
distributions and premature withdrawals similar to those applicable to
rollover Individual Retirement Annuities.
Withholding of Taxes
The Company is obligated to withhold taxes from certain payments unless
the recipient elects otherwise. The withholding rate varies depending upon the
nature and the amount of the distribution. The Company will notify you or
another payee in advance of the first payment of his or her right to elect out
of withholding and furnish a form on which the election may be made. Any
election must be received by the Company In Writing in advance of the payment
in order to avoid withholding.
See Your Own Tax Adviser
The above description of Federal income tax consequences of owning a
Contract and of the qualified retirement plans which may be funded by the
Contracts is only a brief summary and is not intended as tax advice. The tax
rules applicable to the Contracts and to tax qualified plans are extremely
complex and often difficult to understand. Anything less than full compliance
with the applicable rules, all of which are subject to change from time to
27
<PAGE>
time, can have adverse tax consequences. The taxation of an Annuitant or other
payee has become so complex and confusing that great care must be taken to
avoid adverse tax consequences. For further information you should consult a
qualified tax adviser.
LEGAL MATTERS
The validity of the interests under the Contracts offered hereby has been
passed upon for the Company by Susan E. Bryant, Esq.
EXPERTS
The financial statements and schedules of the Company as of December 31,
1994 and 1993, and for each of the years in the three-year period ended
December 31, 1994, have been incorporated by reference in the Registration
Statement in reliance upon the reports of KPMG Peat Marwick LLP, independent
auditors, incorporated by reference and upon the authority of said firm as
experts in accounting and auditing.
The reports of KPMG Peat Marwick LLP on the above-mentioned financial
statements and financial statement schedules refer to a change in 1993 in the
Company's methods of accounting for certain investments in debt and equity
securities.
FURTHER INFORMATION
This Prospectus does not contain all of the information contained in the
registration statement of which the Prospectus is a part, and certain portions
of the registration statement have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The information so
omitted may be obtained from the offices of the Commission, as set forth under
"Available Information," upon payment of the prescribed fee.
INQUIRIES
You may direct inquiries by writing directly to us at the address shown
on the cover page of this Prospectus or by calling 1-800-531-4547.
28
<PAGE>
APPENDIX A
AETNA MULTI-RATE ANNUITY CONTRACT FOR QUALIFIED PLANS
The Contracts can be purchased on a group basis by pension and
profit-sharing plans qualified under Section 401(a) of the Tax Code, Keogh
Plans and eligible state deferred compensation plans under Section 457 of the
Code ("Qualified Plans").
To apply for a Contract, the trustee or other applicant need only
complete an application and make the initial Purchase Payments, subject to the
same $10,000 minimum applicable to other purchasers of the Contracts. The
$10,000 minimum is applicable to each Participant in the plan. A Contract will
then be issued to the applicant ("Contract Holder"). While no Certificates are
issued to Participants, each Purchase Payment is confirmed to the Contract
Holder. The initial Purchase Payments operate to establish interests under the
Contract in the same manner as non-qualified purchases. Each Contract will
have its own Guarantee Periods and Guaranteed Rates. Withdrawals or surrenders
under the Contract may be made at the election of the Contract Holder, on
behalf of one or more of the Participants. Withdrawals and surrenders of
individual interests under a Contract are subject to the same limitations,
Market Value Adjustments and fees as any other withdrawals and surrenders made
under the Contracts. Amounts received may be taken in cash or applied to
purchase annuities for Participants.
Contracts issued in connection with Qualified Plans do not provide for
death benefits. Annuities purchased for Participants may provide for a payment
upon the death of the Annuitant depending on the Annuity Option chosen.
<PAGE>
APPENDIX B
CALCULATING A MARKET VALUE ADJUSTMENT
The Market Value Adjustment Formula
The mathematical formula used to determine the Market Value Adjustment
is:
(1 + i) x
------- ---
(1 + j) 365
Where:
i is the Deposit Period Yield;
j is the Current Yield; and
x is the number of days remaining (computed from Wednesday of the
week of withdrawal) in the Guaranteed Period.
Explanation of the Market Value Adjustment Formula
The Market Value Adjustment essentially involves a comparison of two
yields: the yield available at the start of the current Guaranteed Period of
your Contract (the "Deposit Period Yield") and the yield currently available
(the "Current Yield"). An adjustment is needed to reflect the period of time
remaining in the Guaranteed Period of your contract.
The Market Value Adjustment Amount depends on the relationship of the
Deposit Period Yield of U.S. Treasury Notes that mature in the last quarter of
the Guaranteed Period, to the Current Yield of such U.S. Treasury Notes at the
time of withdrawal. In general, if the Current Yield is the lesser of the two,
the Market Value Adjustment will decrease the amount withdrawn from the
Contract to satisfy the withdrawal request; if the Current Yield is the higher
of the two, the Market Value Adjustment will increase the amount withdrawn
from the Contract to satisfy the withdrawal request. As a result of the Market
Value Adjustment imposed, the amount withdrawn or transferred from the
Contract prior to the Maturity Date may be less than the amount paid into the
Contract.
To determine the Deposit Period Yield and the Current Yield, certain
information must be obtained about the prices of outstanding U.S. Treasury
issues. This information may be found each business day in publications such
as The Wall Street Journal. This newspaper publishes the yield-to-maturity
percentages for all Treasury Notes as of the preceding business day. These
percentages are used in determining the Deposit Period Yield and the Current
Yield for the Market Value Adjustment calculation.
1
<PAGE>
Deposit Period Yield
Determining the Deposit Period Yield in the Market Value Adjustment
calculation involves consideration of interest rates prevailing at the start
of the Guaranteed Period from which the withdrawal will be made. First,
identify the Treasury Notes that mature in the last three months of the
Guaranteed Period. Then, list the yield-to-maturity percentages of these
Treasury Notes for the last business day of each week in the Deposit Period.
Average these percentages to determine the Deposit Period Yield.
For example, if the Guaranteed Period matures in May 1998, use the
Treasury Notes that mature in March, April, and May 1998. Then, if the start
of the Guaranteed Period from which the withdrawal will be made is May 1995,
the yield-to-maturity percentages of the above Treasury Notes on May 5, 1995,
May 12, 1995, May 19, 1995, and May 26, 1995 are averaged. This averaged
figure (shown as a percentage) is the Deposit Period Yield.
Current Yield
To determine the Current Yield, use the same Treasury Notes identified
for the Deposit Period Yield: Treasury Notes that mature in the last three
months of the Guaranteed Period. However, the yield-to-maturity percentages
used are those for the last business day of the week preceding the withdrawal.
Average these percentages to determine the Current Yield.
The following are examples of Market Value Adjustment ("MVA")
calculations using several hypothetical Deposit Period Yields and Current
Yields. These examples do not include the effect of any surrender fee that may
be assessed under the Contract upon withdrawal.
EXAMPLE 1
Assumptions:
i, the Deposit Period Yield, is 8%
j, the Current Yield, is 10%
x, the number of days remaining (computed from Wednesday of the week
of withdrawal) in the Guaranteed Period, is 927.
MVA = (1+i) x
----- ---
(1+j) 365
= 1.08 927
----- ---
1.10 365
= .9545
2
<PAGE>
In this example the Deposit Period Yield of 8% is less than the Current
Yield of 10%, therefore, the Market Value Adjustment is less than 1. The
amount withdrawn from the Guaranteed Period is multiplied by this Market Value
Adjustment.
If a withdrawal or transfer of a stated percentage is requested, the
value withdrawn from a Guaranteed Period will reflect the deduction of the
negative Market Value Adjustment Amount. However, if a withdrawal or transfer
request of a specific dollar amount is requested, the amount withdrawn from a
Guaranteed Period will be increased to compensate for the negative Market
Value Annuity Amount. For example, a withdrawal request to receive a check for
$2,000 would result in a $2,095.34 withdrawal from the Guaranteed Period.
Assumptions:
i, the Deposit Period Yield, is 5%
j, the Current Yield, is 6%
x, the number of days remaining (computed from Wednesday of the week
of withdrawal) in the Guaranteed Period, is 927.
MVA = (1+i) x
----- ---
(1+j) 365
= 1.05 927
----- ---
1.06 365
= .9762
In this example the Deposit Period Yield of 5% is less than the Current
Yield of 6%, therefore, the Market Value Adjustment is less than 1. The amount
withdrawn from the Guaranteed Period is multiplied by this Market Value
Adjustment.
If a withdrawal or transfer of a stated percentage is requested, the
value withdrawn from a Guaranteed Period will reflect the deduction of the
negative Market Value Adjustment Amount. However, if a withdrawal or transfer
request of a specific dollar amount is requested, the amount withdrawn from a
Guaranteed Period will be increased to compensate for the negative Market
Value Adjustment Amount. For example, a withdrawal request to receive a check
for $2,000 would result in a $2,048.76 withdrawal from the Guaranteed Period.
3
<PAGE>
EXAMPLE II
Assumptions:
i, the Deposit Period Yield, is 10%
j, the Current Yield, is 8%
x, the number of days remaining (computed from Wednesday of the week
of withdrawal) in the Guaranteed Period, is 927.
MVA = (1+i) x
----- ---
(1+j) 365
= (1.10) 927
----- ---
(1.08) 365
= 1.0477
In this example the Deposit Period Yield of 10% is greater than the
Current Yield of 8%, therefore, the Market Value Adjustment is greater than 1.
The amount withdrawn from the Guaranteed Period is multiplied by this Market
Value Adjustment.
If a withdrawal or transfer of a stated percentage is requested, the
value withdrawn from a Guaranteed Period will reflect the addition of the
positive Market Value Adjustment Amount. However, if a withdrawal or transfer
request of a specific dollar amount is requested, the amount withdrawn from a
Guaranteed Period will be decreased to reflect the positive Market Value
Adjustment Amount. For example, a withdrawal request to receive a check for
$2,000 would result in a $1,908.94 withdrawal from the Guaranteed Period.
Assumptions:
i, the Deposit Period Yield, is 5%
j, the Current Yield, is 4%
x, the number of days remaining (computed from Wednesday of the week
of withdrawal) in the Guaranteed Period, is 927.
MVA = (1+i) x
----- ---
(1+j) 365
= (1.05) 927
----- ---
(1.04) 365
= 1.0246
4
<PAGE>
In this example the Deposit Period Yield of 5% is greater than the
Current Yield of 4%, therefore, the Market Value Adjustment is greater than 1.
The amount withdrawn from the Guaranteed Period is multiplied by this Market
Value Adjustment.
If a withdrawal or transfer of a stated percentage is requested, the
value withdrawn from a Guaranteed Period will reflect the addition of the
positive Market Value Adjustment Amount. However, if a withdrawal or transfer
request of a specific dollar amount is requested, the amount withdrawn from a
Guaranteed Period will be decreased to reflect the positive Market Value
Adjustment Amount. For example, a withdrawal request to receive a check for
$2,000 would result in a $1,951.98 withdrawal from the Guaranteed Period.
5
<PAGE>
APPENDIX C
SPECIAL PROVISIONS FOR INDIVIDUAL CONTRACTS ISSUED IN THE STATE
OF CALIFORNIA, MISSOURI, OREGON, TEXAS, VIRGINIA AND WISCONSIN
The following provision, among others, applies only to individual
Contracts issued in the State of California, Missouri, Oregon, Texas, Virginia
and Wisconsin:
The Contract Holder has the right to request, In Writing, a surrender of
the Contract within ten days after it was purchased. In such event, in
California, Missouri, Oregon, Texas, Virginia and Wisconsin, the Company will
pay the Contract Holder an amount equal to the sum of (a) the Current Value on
the date the written request for surrender was received, as adjusted by any
applicable Market Value Adjustment and (b) any charges deducted from the
purchase payment.
<PAGE>
APPENDIX D
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
The registrant meets the conditions set forth in General Instruction J(1)(a)
and (b) of Form 10-K and is therefore filing this Form with the reduced
disclosure format.
For the fiscal year ended December 31, 1994 Commission file number 33-81010
----------------- --------
Aetna Insurance Company of America
-----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Connecticut 06-1286272
-----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
151 Farmington Avenue, Hartford, Connecticut 06156
-----------------------------------------------------------------------------
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code (203) 273-0978
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes ___X___ No _______
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10- K or any amendment to
this Form 10-K.
[X]
As of February 28, 1995 there were 1,275 shares of common stock outstanding,
par value $2,000 per share, all of which shares were held by Aetna Life
Insurance and Annuity Company.
Documents Incorporated by Reference
Certain portions of the registrant's S-1 Registration Statement filed on
October 24, 1994 as well as Aetna Life and Casualty's 1994 Proxy Statement
filed on March 18, 1994 are incorporated by reference into Part IV of this
report.
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Annual Report For 1994 on Form 10-K
TABLE OF CONTENTS
PART I PAGE
Item 1. Business**...................................................... 3
Item 2. Properties**.................................................... 5
Item 3. Legal Proceedings............................................... 5
Item 4. Submission of Matters to a Vote of Security Holders*
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters............................................ 5
Item 6. Selected Financial Data*
Item 7. Management's Analysis of the Results of Operations**............ 5
Item 8. Financial Statements............................................ 7
Item 9. Disagreements on Accounting and Financial Disclosure............ 19
PART III
Item 10. Directors and Executive Officers of the Registrant*
Item 11. Executive Compensation*
Item 12. Security Ownership of Certain Beneficial Owners and Management*
Item 13. Certain Relationships and Related Transactions*
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K........................................ 19
Index to Financial Statement Schedules..................................... 21
Signatures................................................................. 24
Power of Attorney.......................................................... 25
** Item prepared in accordance with General Instruction J(2) of Form 10-K.
* Omitted pursuant to General Instruction J(2) of Form 10-K.
2
<PAGE>
PART I
Item 1. Business
Aetna Insurance Company of America (the "Company") is a stock life insurance
company organized in 1990 under the insurance laws of Connecticut and is a
wholly owned subsidiary of Aetna Life Insurance and Annuity Company ("ALIAC").
ALIAC is a wholly owned subsidiary of Aetna Life and Casualty Company
("Aetna") which, with Aetna's subsidiaries, constitutes one of the largest
insurance/financial services organizations in the United States based on its
assets at December 31, 1993. The Company's Home Office is located at 151
Farmington Avenue, Hartford, Connecticut 06156. Between 1990 and December 31,
1994, no business was written and all income and expense was related to
investment activity only.
The Company will market and service individual and group annuity contracts
that will offer a variety of funding and distribution options for personal and
employer-sponsored retirement plans. These contracts may be immediate or
deferred. The Company is expected to begin marketing services in 1995. The
Company is licensed to sell life insurance in some states.
Other Matters
Regulation
The insurance business of the Company is subject to comprehensive and detailed
regulation and supervision throughout the United States. The laws of the
various jurisdictions establish supervisory agencies with broad authority to
regulate, among other things, the granting of licenses to transact business,
trade practices, agent licensing, policy forms, underwriting and claims
practices, reserve adequacy, insurer solvency, the maximum interest rates that
can be charged on life insurance policy loans and the minimum rates that must
be provided for accumulation of surrender values, the form and content of
required financial statements and the type and amounts of investments
permitted. The Company is required to file detailed reports with supervisory
agencies in each of the jurisdictions in which it does business, and its
operations and accounts are subject to examination by such agencies at regular
intervals.
Although the federal government does not directly regulate the business of
insurance, many federal laws do affect the business. Existing or recently
proposed federal laws that may significantly affect or would affect, if
passed, the insurance business cover such matters as employee benefits,
removal of barriers preventing banks from engaging in the insurance and mutual
fund businesses, the taxation of insurance companies, and the tax treatment of
insurance products. Additionally, certain separate accounts of the Company and
the mutual funds that will be used as funding vehicles for those accounts are
investment companies regulated by the Securities and Exchange Commission.
Several states, including Connecticut, regulate affiliated groups of insurers
such as the Company and its affiliates under insurance holding company
statutes. Under such laws,
3
<PAGE>
intercorporate transfers of assets and dividend payments from insurance
subsidiaries may be subject to prior notice or approval, depending on the size
of such transfers and payments in relation to the financial position of the
company making the transfer. Changes in control also are regulated under these
laws. As a Connecticut-domiciled insurance company, the Company is subject to
comprehensive regulation under the Connecticut insurance laws and by the
Connecticut Insurance Department.
In recent years, state insurance regulators have introduced and continue to
work on changes in statutory accounting practices and other initiatives to
strengthen solvency regulation. The National Association of Insurance
Commissioners (NAIC ) has adopted risk-based capital ("RBC") standards for
life insurers. The RBC formula is a regulatory tool designed to identify
weakly capitalized companies by comparing the adjusted surplus to the required
surplus, which reflects the risk profile of the company (RBC ratio). Within
certain ratio changes, regulators have increasing authority to take action as
the RBC ratio decreases. There are four levels of regulatory action ranging
from requiring insurers to submit a comprehensive plan to the state insurance
commissioner to when the state insurance commissioner places the insurer under
regulatory control.
The NAIC also is considering several other solvency related regulations
including the development of a model investment law and amendments to the
model insurance holding company law which would limit types and amounts of
investments by insurance companies. In addition, in recent years there has
been growing interest among certain members of Congress concerning possible
federal roles in the regulation of the insurance industry. Because these other
initiatives are in a preliminary stage, management cannot assess the potential
impact of their adoption on the company.
Under insurance guaranty fund laws existing in all states, insurers doing
business in those states can be assessed (up to prescribed limits) for
policyholder or claimant losses under policies issued by companies which
become insolvent. In the three years ended December 31, 1994, the Company has
been assessed nominal guaranty fund assessment fees attributable to
administrative assessments issued to all companies licensed to do business in
a state. Since the Company had written no business prior to December 31, 1994,
no assessments should be received relating to insolvencies which occurred
prior to December 31, 1994.
Miscellaneous
Upon business commencement, the Company will be engaged in a business that is
highly competitive due to the large number of stock and mutual life insurance
companies and other entities marketing insurance and investment products.
As of December 31, 1994, the Company had no employees. The Company utilizes
the employees of Aetna and its affiliates (primarily ALIAC).
The Company uses ALIAC's computer facilities. Management believes that ALIAC's
computer facilities, systems and related procedures are adequate to meet its
business needs. ALIAC's data processing systems and backup and security
policies, practices and procedures are regularly evaluated by ALIAC's
management and internal auditors and are modified as considered necessary.
4
<PAGE>
Item 2. Properties
The Company occupies office space that is owned or leased by Aetna Life
Insurance Company or other affiliates. Expenses associated with these offices
are allocated on a direct and indirect basis to the Company and the other
subsidiaries of Aetna.
Item 3. Legal Proceedings
The Company and its Board of Directors know of no material legal proceedings
pending to which the Company is a party or which would materially affect the
Company.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
All of the Company's outstanding shares are owned by its parent company,
ALIAC. For the years ended 1994, 1993 and 1992, the Company did not pay
dividends to ALIAC.
The amount of dividends which may be paid by the Company to ALIAC without
prior approval by the Insurance Commissioner of the State of Connecticut is
subject to various restrictions. Based upon these restrictions, the Company is
permitted a maximum of $922.8 thousand in dividend distributions in 1995.
Item 7. Management's Analysis of the Results of Operations
Results of Operations
Years Ended December 31,
(Thousands) 1994 1993 1992
---- ---- ----
Net investment income $ 619.3 $ 560.0 $ 645.0
Operating expenses 83.0 79.5 135.6
-------- -------- --------
Income before federal income 536.3 480.5 509.4
taxes
Federal income taxes 187.7 168.2 173.2
-------- -------- --------
Net income $ 348.6 $ 312.3 $ 336.2
-------- -------- --------
The Company's net income increased 12% in 1994 following a 7% decrease in
1993. The improvement in 1994 net income reflected an increase in net
investment income primarily due to increasing yields on cash equivalents. Net
income in 1993 reflected a 13% decrease in net investment income reflecting
the downward trend in investment
5
<PAGE>
yields on newly invested assets, offset in part by a 41% decrease in operating
expenses related to a decrease in operating expenses allocated from Aetna to
the Company.
Investments
As of December 31, 1994 and 1993, all of the Company's debt securities were
issued by the U. S. Treasury.
(Thousands) 1994 1993
- ----------------------------------------------------------------------------
Debt securities $ 6,906.5 $ 7,316.7
---------- ----------
Total Investments 6,906.5 7,316.7
Cash and cash equivalents 4,732.7 4,512.9
---------- ----------
Total Investments, cash and
cash equivalents $11,639.2 $11,829.6
========== ==========
Outlook
In 1995, once the Company starts selling its new products and services, it
will establish investment strategies and portfolios which will match the
duration of the related liabilities and provide sufficient cash flow to meet
obligations while maintaining a competitive after-tax rate of return.
6
<PAGE>
Item 8. Financial Statements and Supplementary Data
Financial Statements
Index
Page
Independent Auditors' Report 8
Financial Statements:
Statements of Income for the Years Ended
December 31, 1994, 1993 and 1992 9
Balance Sheets as of December 31, 1994
and 1993 10
Statements of Shareholder's Equity for
the Years Ended December 31, 1994, 1993 and 1992 11
Statements of Cash Flows for the Years
Ended December 31, 1994, 1993 and 1992 12
Notes to Financial Statements 13
December 31, 1994, 1993 and 1992
7
<PAGE>
Independent Auditors' Report
The Shareholder and Board of Directors
Aetna Insurance Company of America
We have audited the accompanying balance sheets of Aetna Insurance Company of
America as of December 31, 1994 and 1993, and the related statements of
income, changes in shareholder's equity, and cash flows for each of the years
in the three-year period ended December 31, 1994. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Aetna Insurance Company of
America at December 31, 1994 and 1993, and the results of its operations and
cash flows for each of the years in the three-year period ended December 31,
1994, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, in 1993 the Company
changed its methods of accounting for certain investments in debt and equity
securities.
KPMG Peat Marwick LLP
Hartford, Connecticut
March 17, 1995
8
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Statements of Income
(thousands)
Years Ended December 31,
------------------------
1994 1993 1992
---- ---- ----
Revenue:
Net investment income $ 619.3 $ 560.0 $ 645.0
-------- -------- --------
Total revenue 619.3 560.0 645.0
-------- -------- --------
Expenses:
Operating expenses 83.0 79.5 135.6
-------- -------- --------
Total expenses 83.0 79.5 135.6
-------- -------- --------
Income before federal income taxes 536.3 480.5 509.4
Federal income taxes 187.7 168.2 173.2
-------- -------- --------
Net income $ 348.6 $ 312.3 $ 336.2
======== ======== ========
See Notes to Financial Statements.
9
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
<TABLE>
<CAPTION>
Balance Sheets
(thousands)
December 31,
------------
Assets 1994 1993
- ------ ---- ----
<S> <C> <C>
Investments:
Debt securities, available for sale:
(amortized cost $7,043.9 and $7,132.0) $ 6,906.5 $ 7,316.7
---------- ----------
Total investments 6,906.5 7,316.7
Cash and cash equivalents 4,732.7 4,512.9
Accrued investment income 91.5 91.5
Deferred tax asset 0.4 --
Other assets 5.1 0.2
---------- ----------
Total assets $11,736.2 $11,921.3
========== ==========
Liabilities and Shareholder's Equity
Liabilities:
Due to parent and affiliates 10.5 89.7
Other liabilities 21.0 14.9
Federal income taxes payable
Current 29.4 167.9
Deferred -- 64.6
---------- ----------
Total liabilities 60.9 337.1
---------- ----------
Shareholder's equity:
Common capital stock, par value $2,000 (1,275 shares
authorized, issued and outstanding) 2,550.0 2,550.0
Paid-in capital 7,550.0 7,550.0
Net unrealized capital gains (losses) (137.4) 120.1
Retained earnings 1,712.7 1,364.1
---------- ----------
Total shareholder's equity 11,675.3 11,584.2
---------- ----------
Total liabilities and shareholder's equity $11,736.2 $11,921.3
========== ==========
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
<TABLE>
<CAPTION>
Statements of Changes in Shareholder's Equity
(thousands)
Years Ended December 31,
------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Shareholder's equity, beginning of year $11,584.2 $11,151.8 $10,815.6
Net change in unrealized capital gains (losses) (257.5) 120.1 0.0
Net income 348.6 312.3 336.2
---------- ---------- ----------
Shareholder's equity, end of year $11,675.3 $11,584.2 $11,151.8
========== ========== ==========
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
<TABLE>
<CAPTION>
Statements of Cash Flows
(thousands)
Years Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 348.6 $ 312.3 $ 336.2
Decrease in accrued investment income -- 46.3 51.4
Increase (decrease) in amounts due to/from parent and affiliates (79.2) 184.9 (44.9)
Decrease (increase) in other assets and liabilities 1.2 (76.0) 71.1
Increase (decrease) in federal income taxes payable (138.9) 50.2 (2.8)
Net amortization of premium on debt securities 88.1 78.4 38.3
--------- --------- ---------
Net cash provided by operating activities 219.8 596.1 449.3
--------- --------- ---------
Cash Flows from Investing Activities:
Proceeds from maturities and repayments of
debt securities -- 2,290.0 1,485.0
Cost of investments purchased -- (2,452.8) (1,532.4)
--------- --------- ---------
Net cash used for investing activities -- (162.8) (47.4)
--------- --------- ---------
Net increase in cash and cash equivalents 219.8 433.3 401.9
Cash and cash equivalents, beginning of year 4,512.9 4,079.6 3,677.7
--------- --------- ---------
Cash and cash equivalents, end of year $4,732.7 $4,512.9 $4,079.6
========= ========= =========
Supplemental cash flow information:
Income taxes paid, net $ 326.6 $ 118.0 $ 176.0
========= ========= =========
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements
December 31, 1994, 1993 and 1992
1. Summary of Significant Accounting Policies
Basis of Presentation
Aetna Insurance Company of America (the "Company") is a stock life insurance
company organized in 1990 under the insurance laws of Connecticut. The Company
is a wholly owned subsidiary of Aetna Life Insurance and Annuity Company
("ALIAC"). ALIAC is a wholly owned subsidiary of Aetna Life and Casualty
Company ("Aetna"). The Company is expected to begin marketing and servicing
individual and group annuity contracts in 1995. These financial statements
have been prepared in conformity with generally accepted accounting
principles.
Accounting changes
Accounting for Certain Investments in Debt and Equity Securities
On December 31, 1993, the Company adopted Financial Accounting Standard
("FAS") No. 115, Accounting for Certain Investments in Debt and Equity
Securities, which requires the classification of debt securities into three
categories: "held to maturity", which are carried at amortized cost;
"available for sale", which are carried at fair value with changes in fair
value recognized as a component of shareholder's equity; and "trading", which
are carried at fair value with immediate recognition in income of changes in
fair value.
Initial adoption of this standard in 1993 resulted in a net increase of $120.1
thousand, net of taxes of $64.6 thousand, to net unrealized gains in
shareholder's equity.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, money market instruments and
other debt issues with a maturity of ninety days or less when purchased.
Investments
At December 31, 1993 and 1994, all of the Company's debt securities are
classified as available for sale and carried at fair value. These securities
are written down (as realized losses) for other than temporary decline in
value. Unrealized gains and losses are reflected in shareholder's equity. Fair
values for debt securities are based on quoted market prices or dealer
quotations. Purchases and sales of debt securities are recorded on the trade
date.
13
<PAGE>
Federal 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 benefits result from changes during the year in cumulative temporary
differences between the tax basis and book basis of assets and liabilities.
2. Investments
Investments in debt securities available for sale were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
(Thousands) Cost Gains Losses Value
----------- ---------- --------- ------------
<S> <C> <C> <C> <C>
1994
U.S. Treasury securities $7,043.9 4.2 141.6 $6,906.5
=========== ========== ========= ============
1993
U.S. Treasury securities $7,132.0 184.7 -- $7,316.7
=========== ========== ========= ============
</TABLE>
The amortized cost and fair value of debt securities for the year ended
December 31, 1994 are shown below by contractual maturity. Actual maturities
may differ from contractual maturities because securities may be restructured,
called or prepaid.
Amortized Fair
(Thousands) Cost Value
Due to mature:
One year or less $3,016.0 $3,019.7
After one year through five years 4,027.9 3,886.8
--------- ---------
Total $7,043.9 $6,906.5
========= =========
At December 31, 1994 and 1993, debt securities with an amortized cost of $3.9
million were on deposit as required by various state regulatory agencies.
3. Capital Gains and Losses on Investments
Realized capital gains or losses are the difference between proceeds received
from investments sold or prepaid and amortized cost. For the three years ended
December 31, 1994, there were no realized capital gains or losses.
14
<PAGE>
Unrealized gains and losses on investments carried at fair value, net of
related taxes, reflected in shareholder's equity, were as follows for December
31,
(Thousands) 1994 1993
---- ----
Debt securities
Gross unrealized gains $ 4.2 $ 184.7
Gross unrealized losses (141.6) --
-------- --------
(137.4) 184.7
Deferred federal income taxes (See Note 6) -- 64.6
-------- --------
Net unrealized capital gains (losses) $(137.4) $ 120.1
======== ========
4. Net Investment Income
Sources of net investment income were as follows:
(Thousands) 1994 1993 1992
---- ---- ----
Debt securities $414.1 $425.7 $492.7
Cash equivalents 205.2 135.3 152.3
------- ------- -------
Gross investment income 619.3 561.0 645.0
Less investment expenses -- 1.0 --
------- ------- -------
Net investment income $619.3 $560.0 $645.0
======= ======= =======
5. Dividend Restrictions and Shareholder's Equity
The amount of dividends that may be paid to the shareholder in 1995 without
prior approval by the Insurance Commissioner of the State of Connecticut is
$922.8 thousand.
The Insurance Department of the State of Connecticut (the "Department")
recognizes as net income and shareholder's equity 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
("GAAP"). Statutory net income was $348.1 thousand, $312.3 thousand and $336.2
thousand for the years ended December 31, 1994, 1993 and 1992, respectively.
Statutory shareholder's equity was $11.8 million and $11.4 million as of
December 31, 1994 and 1993, respectively.
As of December 31, 1994, the Company does not utilize any statutory accounting
practices which are not prescribed by insurance regulators that, individually
or in the aggregate, materially affect statutory shareholder's equity.
6. Federal Income Taxes
The Company is included in the consolidated federal income tax return 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 in the consolidated return.
15
<PAGE>
In August 1993, the Omnibus Budget Reconciliation Act of 1993 (OBRA) was
enacted which resulted in an increase in the federal corporate tax rate from
34% to 35% retroactive to January 1, 1993. The enactment of OBRA resulted in
an increase in current taxes of $4.8 thousand which is included in the 1993
current tax expense.
Components of income tax expense (benefits) were as follows:
1994 1993 1992
---- ---- ----
(thousands)
Current tax expense:
Income from operations $188.1 $168.2 $173.2
Deferred tax benefit:
Income from operations (.4) -- --
------- ------- -------
Total $187.7 $168.2 $173.2
======= ======= =======
Income tax expense was equal to the federal income tax rate applied to income
before federal income taxes as shown below:
1994 1993 1992
---- ---- ----
(thousands)
Income before federal income taxes $536.3 $480.5 $509.4
Tax rate 35 % 35 % 34 %
------- ------- -------
Income tax expense $187.7 $168.2 $173.2
======= ======= =======
The tax effects of temporary differences that give rise to deferred tax assets
and deferred tax liabilities under FAS No. 109 at December 31, 1994 and 1993
are presented below:
1994 1993
---- ----
(thousands)
Deferred tax assets:
Net unrealized capital losses $ 48.1 $ --
Other, net .4 --
------- -------
Total gross assets 48.5 --
Less valuation allowance 48.1 --
------- -------
Assets net of valuation .4 --
------- -------
Deferred tax liabilities:
Net unrealized capital gains -- 64.6
------- -------
Total gross liabilities -- 64.6
------- -------
Net deferred tax liability (asset) $ (.4) $ 64.6
======= =======
Net unrealized capital gains and losses are presented in shareholder's equity
net of deferred taxes. At December 31, 1994, $137.4 thousand of net unrealized
capital losses were reflected in shareholder's equity without deferred tax
benefits. For federal income tax purposes, capital losses are deductible only
against capital gains in the year of sale or
16
<PAGE>
during the carryback and carryforward periods (three and five years,
respectively). Due to the expected full utilization of capital gains in the
carryback period and the uncertainty of future capital gains, a valuation
allowance of $48.1 thousand related to the net unrealized capital losses has
been reflected in shareholder's equity. Any reversals of the valuation
allowance are contingent upon the recognition of future capital gains in
Aetna's federal income tax return or a change in circumstances which causes
the recognition of the benefits to become more likely than not.
Non-recognition of the deferred tax benefits on net unrealized losses
described above had no impact on net income for 1994, but has the potential to
adversely affect future results if such losses are realized.
The Internal Revenue Service ("Service") has completed examinations of the
consolidated federal income tax returns of Aetna through 1986. Discussions are
being held with the Service with respect to proposed adjustments. However,
management believes there are adequate defenses against, or sufficient
reserves to provide for, such adjustments. The Service has commenced its
examinations for the years 1987 through 1990.
7. Benefit Plans
The Company has no employees, when it does, the employees of the Company will
be eligible for the same benefit plans as the employees of ALIAC. The
following is a discussion of benefit plans as they apply to ALIAC. Charges
were allocated to the Company based on appropriate measures. There were no
charges to operations during 1994 and 1993 for the benefit plans described
below. Charges to operations during 1992 were $2.8 thousand.
Employee Pension Plans - ALIAC, in conjunction with Aetna, has
non-contributory defined benefit pension plans covering substantially all
employees. The plans provide pension benefits based on years of service and
average annual compensation (measured over sixty consecutive months of highest
earnings in a 120 month period). Contributions are determined using the Entry
Age Normal Cost Method and, for qualified plans subject to ERISA requirements,
are limited to the amounts that are currently deductible for tax reporting
purposes. The accumulated plan assets exceed accumulated plan benefits.
Agent Pension Plans - ALIAC, in conjunction with Aetna, has a non-qualified
pension plan covering certain agents. The plan provides pension benefits based
on annual commission earnings. The accumulated plan assets exceed accumulated
plan benefits. There has been no funding to the plan for the years 1992
through 1994.
Employee Postretirement Benefits - In addition to providing pension benefits,
Aetna also provides certain postretirement health care and life insurance
benefits, subject to certain caps, for retired employees. Medical and dental
benefits are offered to all full-time employees retiring at age 50 with at
least 15 years of service or at age 65 with at least 10 years of service.
Retirees are required to contribute to the plans based on their years of
service with Aetna.
Aetna implemented FAS No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions on the immediate recognition basis in 1992. The
cumulative effect charge for all Aetna employees was reflected in Aetna's 1992
Statement of Income. Prior to the adoption of FAS No. 106, cost of
postretirement benefits was charged to operations as payments were made.
17
<PAGE>
Agent Postretirement Benefits - ALIAC, in conjunction with Aetna, also
provides certain postemployment health care and life insurance benefits for
certain agents.
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.
Stock Plans - Aetna has a stock incentive plan that provides for stock options
and deferred contingent common stock or cash awards to certain key employees.
Aetna also has a stock option plan under which executive and middle management
employees of Aetna may be granted options to purchase common stock of Aetna at
the market price on the date of grant or, in connection with certain business
combinations, may be granted options to purchase common stock on different
terms.
8. Related Party Transactions
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. Total charges allocated to the Company,
including rent, salaries and other administrative expenses, were $1.0 thousand
in 1993. There were no charges allocated to the Company for these services in
1994 and 1992.
9. Estimated Fair Value
The carrying values and estimated fair values of the Company's financial
instruments at December 31, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1994 1993
---------------------------- ----------------------------
Carrying Fair Carrying Fair
Value Value Value Value
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
(Thousands)
Assets:
Cash and cash equivalents $4,732.7 $4,732.7 $4,512.9 $4,512.9
Debt securities 6,906.5 6,906.5 7,316.7 7,316.7
</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 expected 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 evaluating the Company's management of interest
rate and liquidity risk, the fair values of all assets and liabilities should
be taken into consideration, not only those above.
18
<PAGE>
The following valuation methods and assumptions were used by the company in
estimating the fair value of the above financial instruments:
Debt securities: Fair values are based on quoted market prices or dealer
quotations.
Item 9. Disagreements on Accounting and Financial Disclosure
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report:
1. Financial statements. See Item 8 on Page 7.
2. Financial statement schedules. See Index to Financial Statement Schedules
on Page 21.
3. Exhibits:
3(a) Certificate of Incorporation
Incorporated herein by reference to Registration Statement on Form N-4, File
No. 33-80750, as filed with the Securities and Exchange Commission on June 23,
1994.
3(b) By-Laws
Incorporated herein by reference to Registration Statement on Form N-4, File
No. 33-80750, as filed with the Securities and Exchange Commission on June 23,
1994.
4. Annuity Contracts
Incorporated herein by reference to Registration Statement on Form N-4, File
No. 33-80750, as filed with the Securities and Exchange Commission on June 23,
1994.
Incorporated herein by reference to Registration Statement on Form S-1, File
No. 33-81010, as filed with the Securities and Exchange Commission on October
24, 1994.
19
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(Continued)
10. Material Contracts (Management contracts / compensatory plans or
arrangements)
The 1984 Stock Option Plan of Aetna Life and Casualty Company and the
amendments thereto; incorporated by reference to Aetna Life and Casualty
Company's 1992 Form 10-K, filed on March 17, 1993. Commission File Number
1-5704
Aetna Life and Casualty Company's Supplemental Incentive Savings Plan;
incorporated by reference to Aetna Life and Casualty Company's 1992 Form 10-K,
filed on March 17, 1993. Commission File Number 1-5704
Aetna Life and Casualty Company's Supplemental Pension Benefit Plan;
incorporated by reference to Aetna Life and Casualty Company's 1992 Form 10-K,
filed on March 17, 1993. Commission File Number 1-5704
Aetna Life and Casualty Company's 1986 Management Incentive Plan; incorporated
by reference to Aetna Life and Casualty Company's 1992 Form 10-K, as amended
effective February 25, 1994. Commission File Number 1-5704.
Aetna Life and Casualty Company's 1994 Stock Incentive Plan; incorporated by
reference to 1994 Proxy Statement of Aetna Life and Casualty Company filed on
March 18, 1994.
Form of Fund Participation Agreement by and among Insurance Management Series,
Federated Advisors and Aetna Insurance Company of America, incorporated by
reference to Pre-Effective Amendment No. 1 on Form N-4 (33-80750), as filed
with the Securities and Exchange Commission on December 23, 1994.
25. Power of Attorney
Filed with this Report immediately after Signature page.
Exhibits other than these listed are omitted because they are not required or
not applicable.
(b) Reports on Form 8-K.
None.
20
<PAGE>
Index to Financial Statement Schedules
Page
Independent Auditors' Report................................. 22
I. Summary of Investments - Other than Investments in
Affiliates as of December 31, 1994....................... 23
Schedules other than those listed above are omitted because they are not
required or are not applicable.
21
<PAGE>
Independent Auditors' Report
The Shareholder and Board of Directors
Aetna Insurance Company of America
Under date of March 17, 1995, we reported on the balance sheets of Aetna
Insurance Company of America as of December 31, 1994 and 1993, and the related
statements of income, changes in shareholder's equity, and cash flows for each
of the years in the three-year period ended December 31, 1994, as included
herein. In connection with our audits of the aforementioned financial
statements, we also have audited the related financial statement schedule as
listed in the accompanying index. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
As discussed in Note 1 to the financial statements, in 1993 the Company
changed its methods of accounting for certain investments in debt and equity
securities.
KPMG Peat Marwick LLP
Hartford, Connecticut
March 17, 1995
22
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
SCHEDULE I
Summary of Investments - Other than Investments in Affiliates
December 31, 1994
(thousands)
Amount at
Which Shown
Amortized in the
Type of Investment Cost Value Balance Sheet
------------------ --------- ----- -------------
Debt Securities:
U.S. Treasury securities $7,043.9 $6,906.5 $6,906.5
--------- --------- ---------
Total Investments - other than
investments in affiliates $7,043.9 $6,906.5 $6,906.5
========= ========= =========
* See Notes 1 and 2 to Financial Statements.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AETNA INSURANCE COMPANY OF AMERICA
(Registrant)
Date 3/28/95 By /s/James C. Hamilton
---------------------
James C. Hamilton
Vice President, Treasurer, and
Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 28, 1995.
Signature Title
*_______________________ President and Director
Daniel P. Kearney (Principal Executive Officer)
*_______________________ Vice President, Treasurer, and Director
James C. Hamilton
*_______________________ Vice President and Director
Richard C. Murphy
*_______________________ Senior Vice President and Director
Scott A. Striegel
*_______________________ Principal Accounting Officer
Eugene M. Trovato
* By: /s/Maria McKeon
---------------------------------------------
Maria McKeon, Corporate Secretary and Counsel
24
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of Aetna Insurance Company of
America, hereby severally constitute and appoint Maria F. McKeon and James C.
Hamilton and each of them individually, our true and lawful attorneys, with
full power to them and each of them to sign for us, and in our names and in
the capacities indicated below, the 1994 Form 10-K and any and all amendments
thereto to be filed with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, hereby ratifying and confirming our
signatures as they may be signed by our said attorney to the Form 10-K and any
and all amendments thereto.
WITNESS our hands and common seal on this 28th day of March, 1995.
Signature Title
/s/Daniel P. Kearney President and Director
--------------------
Daniel P. Kearney (Principal Executive Officer)
/s/James C. Hamilton Vice President, Treasurer, and Director
--------------------
James C. Hamilton
/s/Richard C. Murphy Vice President and Director
--------------------
Richard C. Murphy
/s/Scott A. Striegel Senior Vice President and Director
--------------------
Scott A. Striegel
/s/Eugene M. Trovato Principal Accounting Officer
--------------------
Eugene M. Trovato
25
<PAGE>
APPENDIX E
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1995 Commission file number 33-81010
------------- --------
Aetna Insurance Company of America
-----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Connecticut 06-1286272
-----------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
151 Farmington Avenue, Hartford, Connecticut 06156
-----------------------------------------------------------------------------
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code (203) 273-0978
--------------------------
None
-----------------------------------------------------------------------------
Former name, former address and former fiscal year if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
---------- ----------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares Outstanding
Title of Class at July 31, 1995
- -------------- ------------------
Common Capital Stock,
par value $2,000 1,275
The registrant meets the conditions set forth in General Instruction H(1)(a)
and (b) of Form 10-Q and is therefore filing this Form with the reduced
disclosure format.
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life insurance and Annuity Company)
Quarterly Report For Period Ended June 30, 1995 on Form 10-Q
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements PAGE
Statements of Income............................................ 3
Balance Sheets.................................................. 4
Statements of Changes in Shareholder's Equity................... 5
Statements of Cash
Flows........................................................... 6
Condensed Notes to Financial Statements......................... 7
Independent Auditors' Review Report............................. 8
Item 2. Management's Analysis of the Results of Operations........... 9
PART II. OTHER INFORMATION............................................ 10
Signatures............................................................... 11
2
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Statements of Income
(thousands)
<TABLE>
<CAPTION>
3 Months Ended June 30, 6 Months Ended June 30,
(Thousands) 1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Net investment income $ 179.0 $ 150.3 $ 353.0 $ 291.5
----------- ----------- ----------- -----------
Total revenue 179.0 150.3 353.0 291.5
Expenses:
Operating expenses 64.5 12.9 119.0 39.1
----------- ----------- ----------- -----------
Total expenses 64.5 12.9 119.0 39.1
Income before federal income taxes 114.5 137.4 234.0 252.4
Federal income taxes 39.9 48.0 81.7 88.3
----------- ----------- ----------- -----------
Net Income $ 74.6 $ 89.4 $ 152.3 $ 164.1
=========== =========== =========== ===========
</TABLE>
See Condensed Notes to Financial Statements.
3
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Balance Sheets
(thousands)
June 30, December 31,
Assets 1995 1994
- ------ ------------ ------------
Investments:
Debt securities available for sale:
(amortized cost $7,957.3 and $7,043.9) $ 8,066.6 $ 6,906.5
Cash and cash equivalents 4,120.2 4,732.7
Accrued investment income 121.8 91.5
Due from parent and affiliates 194.2 --
Deferred tax asset -- 0.4
Other assets 1.4 5.1
Separate Account assets 109.0 --
------------ ------------
Total assets $ 12,613.2 $ 11,736.2
============ ============
Liabilities and Shareholder's Equity
- ------------------------------------
Liabilities:
Due to parent and affiliates $ -- $ 10.5
Other liabilities 349.3 21.0
Federal income taxes
Current 83.3 29.4
Deferred 35.6 --
Separate Account liabilities 109.0 --
------------ ------------
Total liabilities 577.2 60.9
------------ ------------
Shareholder's equity:
Common capital stock, par value $2000
(1,275 shares authorized, issued and
outstanding) 2,550.0 2,550.0
Paid-in capital 7,550.0 7,550.0
Net unrealized capital gains (losses) 71.0 (137.4)
Retained earnings 1,865.0 1,712.7
------------ ------------
Total shareholder's equity 12,036.0 11,675.3
------------ ------------
Total liabilities and shareholder's
equity $ 12,613.2 $ 11,736.2
============ ============
See Condensed Notes to Financial Statements.
4
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Statements of Changes in Shareholder's Equity
(thousands)
6 Months Ended June 30,
----------------------------
1995 1994
------------ ------------
Shareholder's equity, beginning of period $ 11,675.3 $ 11,584.2
Net change in unrealized capital gains (losses) 208.4 (164.0)
Net income 152.3 164.1
------------ ------------
Shareholder's equity, end of period $ 12,036.0 $ 11,584.3
============ ============
See Condensed Notes to Financial Statements.
5
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Statements of Cash Flows
(thousands)
<TABLE>
<CAPTION>
6 Months Ended June 30,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 152.3 $ 164.1
(Increase) decrease in accrued investment income (30.3) 1.5
Net change in amounts due to/from parent and affiliates (204.7) 0.4
Net increase (decrease) in other assets and liabilities 332.4 (11.6)
Increase (decrease) in federal income taxes 51.3 (143.8)
Net amortization of a premium on debt securities 17.8 43.5
---------- ----------
Net cash provided by operating activities 318.8 54.1
---------- ----------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities 3,000.0 --
Short-term investments 500.0 --
Cost of investment purchases in:
Debt securities (3,939.2) --
Short-term investments (492.1) --
---------- ----------
Net cash used for investing activities (931.3) --
---------- ----------
Net (decrease) increase in cash and cash equivalents (612.5) 54.1
Cash and cash equivalents, beginning of period 4,732.7 4,512.9
---------- ----------
Cash and cash equivalents, end of period $ 4,120.2 $ 4,567.0
========== ==========
Supplemental cash flow information:
Income taxes paid, net $ 30.0 $ 232.1
========== ==========
</TABLE>
See Condensed Notes to Financial Statements.
6
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Condensed Notes to Financial Statements
1. Basis of Presentation
Aetna Insurance Company of America (the "Company") is a stock life
insurance company organized in 1990 under the insurance laws of
Connecticut. The Company is a wholly owned subsidiary of Aetna Life
Insurance and Annuity Company ("ALIAC"). ALIAC is a wholly owned
subsidiary of Aetna Life and Casualty Company ("Aetna"). The Company
began marketing and servicing variable individual and group annuity
contracts during the second quarter of 1995 through the Company's
Separate Accounts.
These financial statements have been prepared in conformity with
generally accepted accounting principles. These interim statements
necessarily rely heavily on estimates including assumptions as to
annualized tax rates. In the opinion of management, all adjustments
necessary for a fair statement of results for the interim periods have
been made. All such adjustments are of a normal recurring nature.
2. Federal Income Tax
Net unrealized capital gains and losses are presented in shareholder's
equity net of deferred taxes. During the six months ended June 30, 1995,
the Company moved from a net unrealized capital loss position of $140.3
thousand at December 31, 1994, to a net unrealized capital gain position
of $71.0 thousand at June 30, 1995, primarily due to decreases in
interest rates. As a result, all valuation allowances previously
established related to deferred tax assets on these capital losses were
reversed, which had no impact on net income for the three and six months
ended June 30, 1995.
7
<PAGE>
Independent Auditors' Review Report
The Board of Directors
Aetna Insurance Company of America:
We have reviewed the accompanying condensed balance sheet of Aetna Insurance
Company of America as of June 30, 1995, and the related condensed statements
of income for the three-month and six-month periods ended June 30, 1995 and
1994, and the related condensed statements of changes in shareholder's equity
and cash flows for the six-month periods then ended. These condensed financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying condensed financial statements for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of Aetna Insurance Company of America as of
December 31, 1994, and the related statements of income, changes in
shareholder's equity, and cash flows for the year then ended (not presented
herein); and in our report dated March 17, 1995, we expressed an unqualified
opinion on those financial statements. In our opinion, the information set
forth in the accompanying condensed balance sheet as of December 31, 1994, is
fairly presented, in all material respects, in relation to the balance sheet
from which it has been derived.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
July 27, 1995
8
<PAGE>
Item 2. Management's Analysis of the Results of Operations
<TABLE>
Results of Operations
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
(Thousands) 1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net investment income $ 179.0 $ 150.3 $ 353.0 $ 291.5
Operating expenses 64.5 12.9 119.0 39.1
----------- ----------- ----------- -----------
Income before federal income taxes 114.5 137.4 234.0 252.4
Federal income taxes 39.9 48.0 81.7 88.3
----------- ----------- ----------- -----------
Net income $ 74.6 $ 89.4 $ 152.3 $ 164.1
=========== =========== =========== ===========
</TABLE>
The Company's net income decreased 17% and 7% for the three and six
months ended June 30, 1995, respectively, when compared with the same
periods a year ago. The decrease in 1995 net income reflects higher
operating expenses attributed to the commencement of the Company's
business operations offset in part by higher net investment income
reflecting growth in assets and higher yields on cash and cash
equivalents.
Investments
As of June 30, 1995 and December 31, 1994, all of the Company's debt
securities were issued by the U. S. Treasury.
<TABLE>
<CAPTION>
June 30, December 31,
(Thousands) 1995 1994
------------------------------------------------------------------------------------
<S> <C> <C>
Debt securities $ 8,066.6 $ 6,906.5
Cash and cash equivalents 4,120.2 4,732.7
---------- ----------
Total debt securities, cash and
cash equivalents $ 12,186.4 $ 11,639.2
========== ==========
</TABLE>
9
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company and its Board of Directors know of no material legal
proceedings pending to which the Company is a party or which would
materially affect the Company.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(27) Financial Data Schedule.
(b) Reports on Form 8-K
None.
10
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AETNA INSURANCE COMPANY OF AMERICA
(Registrant)
August 11 , 1995 By /s/James C. Hamilton
--------------------------- --------------------------
(Date) James C. Hamilton
Vice President, Treasurer, and
Director
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses payable by the Company in connection with the offering is
set forth in the table below.
SEC registration fee $ 40,100
---------
Printing $ *
---------
Legal fees and expenses $ *
---------
Accounting fees and expenses $ *
---------
Miscellaneous $ *
---------
Total $ *
---------
*To be completed by Amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Reference is hereby made to the Connecticut General Statues ("C.G.S."),
Section 33-320a, regarding indemnification of directors and officers of
Connecticut corporations. The statute provides in general that Connecticut
corporations shall indemnify their officers, directors, employees, agents, and
certain other defined individuals against judgments, fines, penalties, amounts
paid in settlement and reasonable expenses actually incurred in connection
with proceedings against the corporation. The corporation's obligation to
provide such indemnification does not apply unless (1) the individual is
successful on the merits in the defense of any such proceeding; or (2) a
determination is made (by a majority of the board of directors not a party to
the proceeding by written consent; by independent legal counsel selected by a
majority of the directors not involved in the proceeding; or by a majority of
the shareholders not involved in the proceeding) that the individual acted in
good faith and in the best interests of the corporation; 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.
C.G.S. 33-320a provides an exclusive remedy; a Connecticut corporation
cannot indemnify a director or officer to an extent either greater or less
than that authorized by the statute, e.g., pursuant to its certificate of
incorporation, bylaws, or any separate contractual arrangement. However, the
statute does specifically authorize a corporation to procure indemnification
insurance to provide greater indemnification rights. The premiums for such
insurance may be shared by the corporation with the insured individuals on an
agreed basis.
II-1
<PAGE>
Consistent with the statute, Aetna Life and Casualty has procured
insurance from Lloyd's of London and several major United States excess
insurers for the directors and officers of itself and its subsidiaries which
supplements the indemnification rights provided by C.G.S. 33-320a to the
extent such coverage does not violate public policy.
ITEM 16. EXHIBITS
Exhibit
Number Description of Exhibits
(4) Form of Annuity Contract+
(5) Opinion as to legality of Contracts*
(10) Material contracts are listed under Exhibit 10 in the
Company's Form 10-K for the fiscal year ended December 31,
1994, which is included in the Prospectus as Appendix D.
Each of the Exhibits so listed is incorporated by reference
as indicated in the Form 10-K.+
(15) Letter dated October 20, 1995 from KPMG Peat Marwick LLP
regarding use of its reports dated April 27 and July 27,
1995, included in the Form 10-Q quarterly reports of the
Company for the quarters ended March 31, 1995 and June 30,
1995.+
(23)(a) Consent of Independent Auditors+
(23)(b) Consent of Counsel (see Exhibit 5)
(24) Powers of Attorney (included on signature page)+
Exhibits other than these listed are omitted because they
are not required or are not applicable.
+ Previously filed with this Registration Statement File No. 33-63657 on
October 25, 1995.
* To be filed by amendment
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material changes to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-2 and has duly caused this
Pre-Effective Amendment No. 1 to Registration Statement on Form S-2 (File No.
33-63657) to sign on its behalf by the undersigned, thereunto duly authorized,
in the City of Hartford, State of Connecticut, on November 16, 1995.
AETNA INSURANCE COMPANY OF AMERICA
By Daniel P. Kearney*
----------------------
Daniel P. Kearney
President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement or amendment thereto has been signed by the
following persons in the capacities and on the dates indicated.
Signature Title Date
Daniel P. Kearney* Director and President November 16, 1995
--------------------- Principal Executive Officer
Daniel P. Kearney
James C. Hamilton* Director, Vice President November 16, 1995
--------------------- and Treasurer
James C. Hamilton (Principal Accounting and
Financial Officer)
Shaun P. Mathews* Director November 16, 1995
---------------------
Shaun P. Mathews
Scott A. Striegel* Director November 16, 1995
---------------------
Scott A. Striegel
Susan E. Bryant
-------------------
Susan E. Bryant
* Attorney-in-Fact
II-4
[/R]
