As filed with the Securities and Exchange
Commission on March 4, 1997 Registration No. ____________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Aetna Insurance Company of America
Connecticut
63
06-1286272
151 Farmington Avenue, Hartford, Connecticut 06156, (860) 273-7834
Susan E. Bryant, Counsel
Aetna Insurance Company of America
151 Farmington Avenue, RC4A, Hartford, Connecticut 06156
(860) 273-7834
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(Agent for Service)
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effectiveness 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. [XX]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If the delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
Calculation of Registration Fee
<TABLE>
<CAPTION>
Proposed Proposed
Title of each class Amount Maximum maximum Amount of
of securities to be to be offering price aggregate Registration
Registered Registered per unit offering price Fee
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<S> <C> <C> <C> <C>
N/A * * $250,000,000* $75,757.58
</TABLE>
* The proposed maximum aggregate offering price is estimated solely for the
purpose of determining the registration fee. The amount to be registered and
the proposed maximum offering price per unit are not applicable since these
securities are not issued in predetermined amounts or units.
Pursuant to Rule 429(b) of the 1933 Act, unsold securities previously
registered under Registration Statement No. 33-63611 are being carried forward
to this Registration Statement. As of February 14, 1997, the amount of such
unsold securities was $4,921,706.50. The registration fee paid in connection
with the most recent registration of securities under Registration Statement
No. 33-63611 was $34,482.76.
<PAGE>
A GUARANTEED INTEREST OPTION AVAILABLE UNDER
VARIABLE ANNUITY CONTRACTS
ISSUED BY AETNA INSURANCE COMPANY OF AMERICA
CROSS REFERENCE SHEET
Pursuant to Regulation S-K
Item 501(b)
<TABLE>
<CAPTION>
Form S-1
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Item No. Information Required in Prospectus Location in Prospectus
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<S> <C> <C>
1 Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus ............ Outside Front Cover
2 Inside Front and Outside Back Cover
Pages of Prospectus................................ Table of Contents (inside front cover)
3 Summary Information, Risk Factors.................... Summary
Ratio of Earnings to Fixed Charges................... Not Applicable
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................................. Description of the AICA Guaranteed
Account
9 Description of Securities to be Description of the AICA Guaranteed
Registered........................................ Account
10 Interests of Named Experts and Counsel............... Not Applicable
<PAGE>
Form S-1
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Item No. Information Required in Prospectus Location in Prospectus
- --------- ---------------------------------- ----------------------
11 Information with Respect to the
Registrant......................................... The Company; Directors and Executive
Officers; Executive Compensation; Legal
Proceedings; Financial Statements
12 Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities...................................... Indemnification
</TABLE>
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
151 FARMINGTON AVENUE, HARTFORD, CONNECTICUT 06156 TELEPHONE: 1-800-531-4547
AICA Guaranteed Account
Credited Interest Option
Prospectus Dated: March , 1997
This Prospectus describes the AICA Guaranteed Account (the "Guaranteed
Account"), a credited interest funding option available to fund certain
variable annuity contracts ("Contracts") issued by Aetna Insurance Company of
America ("Company"). This Prospectus and the prospectus describing the
Contracts ("Contract Prospectus") should both be read thoroughly before
investing.
The Contract Prospectus describes the terms and conditions related to an
investment in the Contract, including the charges and expenses that will be
deducted directly or indirectly from the available funding options, including
the Guaranteed Account (see "Contract Charges"). This Prospectus describes
the pertinent information required to evaluate the terms of the Guaranteed
Account (see "Description of the AICA Guaranteed Account").
Under the terms of the Guaranteed Account, the Company sets various rates of
interest ("Guaranteed Rates") for varying lengths of time ("Guaranteed
Terms") and designates the period of time during which investments can be
made ("Deposit Period") at those rates and for those terms. A Certificate
Holder electing the Guaranteed Account can designate amounts to be invested
in any Guaranteed Term during the Deposit Period and will receive the
Guaranteed Rate for that term. Amounts invested in the Guaranteed Account can
come from the Certificate Holder's Purchase Payments for the Contract or by
transferring amounts accumulated by the Certificate Holder under other
funding options under the Contract. There is no minimum amount required if
investments come from Purchase Payments; however, with respect to transfers,
the Certificate Holder must meet minimum amounts that are set forth in your
Contract. The interest rate declared for a Guaranteed Term is an annual
effective yield; that is, it reflects a full year's interest. Interest is
credited daily at a rate that will provide the guaranteed annual effective
yield over the period of one year assuming reinvestment of all interest (see
"Guaranteed Rates"). THE COMPANY CANNOT PREDICT FUTURE LEVELS OF GUARANTEED
INTEREST RATES NOR GUARANTEE WHAT SUCH RATES WILL BE UNTIL THEY ARE DECLARED
FOR EACH GUARANTEED TERM.
WITHDRAWALS OR TRANSFERS FROM A GUARANTEED TERM PRIOR TO THE END OF THAT
GUARANTEED TERM MAY BE SUBJECT TO A MARKET VALUE ADJUSTMENT. SURRENDER OF ALL
OR PART OF THE CONTRACT MAY ALSO BE SUBJECT TO A DEFERRED SALES CHARGE (SEE
"MARKET VALUE ADJUSTMENT" AND "CONTRACT CHARGES"). UNDER CERTAIN CONDITIONS,
THESE ADJUSTMENTS AND CHARGES COULD RESULT IN THE CERTIFICATE HOLDER
RECEIVING AN AMOUNT LESS THAN THE AMOUNT PAID INTO THE GUARANTEED ACCOUNT.
The Company intends generally to invest funds received for the Guaranteed
Account primarily in investment-grade fixed income securities. (See
"Investments.") All of the general assets of the Company, including amounts
deposited to the Guaranteed Account, are available to meet the guarantees
under the Guaranteed Account. These assets are chargeable with liabilities
arising out of other business of the Company.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT CONTRACT
PROSPECTUS AND THE CURRENT FUND PROSPECTUSES. ALL PROSPECTUSES SHOULD BE READ
AND RETAINED FOR FUTURE REFERENCE.
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 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.
NO PERSON IS AUTHORIZED BY THE COMPANY TO GIVE INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFERS CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
<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.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
GLOSSARY 3
SUMMARY 4
DESCRIPTION OF THE AICA GUARANTEED ACCOUNT
General 6
Contributions to the Guaranteed Account 6
Guaranteed Rates 6
Maturity of a Guaranteed Term 7
Maturity Value Transfer Provision 7
TRANSFERS AND WITHDRAWALS
Transfers 8
Withdrawals 8
Calculation of Transfer or Withdrawal Amounts 8
MARKET VALUE ADJUSTMENT 8
Deposit Period Yield 9
Current Yield 9
MVA Formula 10
MISCELLANEOUS 10
Contract Charges 10
Withdrawals 10
Annuity Period 10
INVESTMENTS 10
DISTRIBUTION 11
TAX CONSIDERATIONS 11
Taxation of the Company 11
Taxation of the Guaranteed Account 12
THE COMPANY 12
Business 12
Employees 12
Regulation 12
Forward-Looking Information 13
Miscellaneous 14
Properties 14
Market for Registrant's Common Equity and Related Stockholder Matters 14
DIRECTORS AND EXECUTIVE OFFICERS 14
EXECUTIVE COMPENSATION 15
SECURITY OWNERSHIP OF MANAGEMENT 15
INDEMNIFICATION 15
EXPERTS 15
LEGAL PROCEEDINGS 16
LEGAL MATTERS 16
APPENDIX I--Examples of Market Value Adjustment Calculations 17
APPENDIX II--Examples of Market Value Adjustment Yields 19
SEPTEMBER 30, 1996 (UNAUDITED) FINANCIAL STATEMENTS 20
SELECTED FINANCIAL DATA 28
MANAGEMENT'S ANALYSIS OF THE RESULTS OF OPERATIONS 28
FINANCIAL STATEMENTS OF THE COMPANY F-1
</TABLE>
2
<PAGE>
GLOSSARY
In this Prospectus, the following terms have the meanings shown:
Account: A record established for each Certificate Holder in a group Contract
to identify Purchase Payments and amounts accumulated that are attributable
to the Certificate Holder under the Contract during the Accumulation Period.
Aggregate Market Value Adjustment Amount: The sum of all market value
adjustments calculated due to withdrawals or transfers from the Guaranteed
Account prior to the Maturity Date(s). This total may be a positive or
negative figure.
Annuity: A series of payments made for life, a definite period or a
combination of the two.
Annuity Period: The period of time during which annuity payments are made.
Certificate: The document issued to a Certificate Holder to evidence a
Certificate Holder's Account established under a group Contract.
Certificate Holder: A person who has established an Account under a group
Contract or the individual Contract Holder of an individual Contract.
Contract: A group or individual variable annuity contract issued by the
Company which offers the Guaranteed Account as a funding option.
Contract Holder: A person who purchases a Contract.
Contract Prospectus: The prospectus for the Separate Account and the
Contracts.
Deposit Period: The period of time during which Purchase Payments, transfers
and reinvestments are accepted for accumulation under the Guaranteed Account
for one or more Guaranteed Terms.
Guaranteed Rate: The interest rate(s) applicable to a specific Guaranteed
Term.
Guaranteed Term: The period of time specified by the Company for which
Guaranteed Rates are guaranteed on amounts invested during a specific Deposit
Period.
Home Office: The Company's principal executive offices located at 151
Farmington Avenue, Hartford, Connecticut 06156.
Market Value Adjustment (MVA): An adjustment that may be made to the amount
withdrawn or transferred from the Guaranteed Account before the Maturity
Date. The adjustment reflects the change in the value of the investment due
to changes in interest rates since the date of deposit and is computed using
the formula given in the Contract and Certificate. The adjustment is
expressed as a percentage of each dollar being withdrawn or transferred.
Market Value Adjustment Amount (MVA Amount): The amount by which the funds
being withdrawn or transferred from a Guaranteed Term is increased or
decreased due to the MVA.
Matured Term Value: The value of each Guaranteed Term on its Maturity Date.
Maturity Date: The last day of a Guaranteed Term.
Maturity Value Transfer Provision: A provision that is available at maturity
when the Company automatically reinvests the total maturing Guaranteed Term
value into the open Deposit Period. This provision allows Certificate Holders
to transfer or surrender the automatically reinvested value, without an MVA,
to a new Guaranteed Term or to other available investment options until the
last business day of the month following the maturity of a Guaranteed Term.
The last business day of the month is defined as the last business day of the
month when the New York Stock Exchange is open.
Purchase Payment: The gross payment made to an Account or to an individual
Contract.
3
<PAGE>
SUMMARY
Description of the Guaranteed Account
The AICA Guaranteed Account is a guaranteed interest option available as a
funding option under certain variable annuity contracts issued by the
Company. Amounts invested in the Guaranteed Account are credited with
interest rates guaranteed by the Company for stated periods of time. Amounts
must remain in the Guaranteed Account for the full Guaranteed Term to receive
the quoted interest rates. Withdrawals or transfers from a Guaranteed Term
before the end of the Guaranteed Term may be subject to a Market Value
Adjustment.
During a Deposit Period, Certificate Holders may direct some or all of their
Purchase Payment(s) to the Guaranteed Account. There is no minimum amount of
payment if the investment comes from a Purchase Payment. Transfers of
accumulated amounts from other funding options to the Guaranteed Account are
also allowed. If a transfer is made to the Guaranteed Account from other
Contract funding options, the transferred value may not be less than $500
(see "Contributions to the Guaranteed Account").
Guaranteed Rates and Guaranteed Terms
Interest is credited daily at a rate that will provide the guaranteed annual
effective yield over the period of one year. The Company will declare the
Guaranteed Rate(s) for all available Guaranteed Terms at the start of the
Deposit Period for those Guaranteed Terms. These Guaranteed Rate(s) are
guaranteed for that Deposit Period and for the length of the Guaranteed Term.
Guaranteed Rates will never be less than the annual effective rate stated in
the Contract (see "Guaranteed Rates").
Transfers and Withdrawals
Full or partial surrenders and transfers to other funding options under the
Contract are permitted from the Guaranteed Account; however, amounts invested
for a Guaranteed Term during a Deposit Period may not be transferred during
that Deposit Period or for 90 days after the close of that Deposit Period.
This restriction may not apply in all circumstances (see "Transfers and
Withdrawals").
Market Value Adjustment
Amounts withdrawn or transferred from the Guaranteed Account prior to the
Maturity Date may be subject to a Market Value Adjustment. The Market Value
Adjustment reflects the change in the value of the investment at the time of
withdrawal due to changes in interest rates since the date of deposit, and
may be positive or negative.
This provision does not apply to (1) amounts transferred on the Maturity
Date; (2) amounts transferred under the Maturity Value Transfer Provision;
(3) amounts transferred from the one-year Guaranteed Term in connection with
the Dollar Cost Averaging Program described in the Contract Prospectus; and
(4) amounts distributed under one of the Additional Withdrawal Options
described in the Contract Prospectus.
If amounts are withdrawn from the Guaranteed Account due to annuitization
under one of the lifetime Annuity options described in the Contract
Prospectus, only the positive Aggregate Market Value Adjustment, if any, is
applied. When a guaranteed death benefit is payable under the terms of the
Contract, only a positive Aggregate Market Value Adjustment amount, if any,
is applied to amounts withdrawn from the Guaranteed Account if withdrawn
within the first six months after the date of death (see "Market Value
Adjustment").
Maturity of a Guaranteed Term
On or before the Maturity Date, a Certificate Holder may instruct the
Company, on the Maturity Date, to (a) reinvest the Matured Term Value in the
Guaranteed Account for a new Guaranteed Rate and Term available under the
then current Deposit Period; (b) transfer the Matured Term Value to one or
more of the variable funding options available under the Contract; or (c)
withdraw the Matured Term Value. In none of these circumstances would a
Market Value Adjustment be
4
<PAGE>
applicable to the Matured Term Value; however, a deferred sales charge may be
assessed on amounts withdrawn from the Contract (see "Contract Charges" and
the Contract Prospectus).
If the Company does not receive direction from the Certificate Holder by the
Maturity Date, the Matured Term Value will be reinvested in the Guaranteed
Account for a new Guaranteed Rate and Term under the then current Deposit
Period. The new Guaranteed Term will have the same length to maturity as the
Guaranteed Term that is maturing. If such a Guaranteed Term is not available,
the transfer will be to the next shortest available Guaranteed Term (see
"Maturity of a Guaranteed Term").
Maturity Value Transfer Provision
The Maturity Value Transfer Provision is available at maturity when the
Company automatically reinvests the total Guaranteed Term value into the open
Deposit Period. This provision allows Certificate Holders to transfer to
other funding options or withdraw, without a Market Value Adjustment, all or
a portion of the Matured Term Value that was transferred to a new Guaranteed
Term by default. A deferred sales charge may still be applied to any amounts
withdrawn from the Contract (see "Maturity Value Transfer Provision").
Contract Charges
Certain charges such as the mortality and expense risk charge and
administrative charge are assessed under the Contract to compensate the
Company for costs associated with administering the Contract. These charges
are not deducted from the Guaranteed Account. Other charges, such as deferred
sales charges, maintenance fees, premium taxes and transfer fees, as well as
any federal income taxes and tax penalties, may be deducted from amounts held
in or transferred from the Guaranteed Account. For a description of all fees
and charges deducted under the Contract, see "Contract Charges" and the
Contract Prospectus.
Investments
The interest rate(s) credited during any Guaranteed Term does not necessarily
relate to investment performance. As in the case of all of the Company's
general account assets, deposits received under the Guaranteed Account will
generally be invested in federal, state and municipal obligations, corporate
bonds, other fixed income investments, and cash or cash equivalents. All of
the general assets of the Company are available to meet the guarantees under
the general account (see "Investments").
Guaranteed Account Notifications
At least 18 calendar days prior to the Maturity Date, the Company will notify
you of a Guaranteed Term's maturity. The notice will also include information
relating to the current Deposit Period's Guaranteed Rates and the available
Guaranteed Terms. At any time, you may obtain information concerning
available Deposit Periods, Guaranteed Rates, and Guaranteed Terms through the
use of a toll-free telephone number (1-800-531-4547) (see "Description of the
AICA Guaranteed Account--General" and "Maturity of a Guaranteed Term").
5
<PAGE>
DESCRIPTION OF THE AICA GUARANTEED ACCOUNT
General
This Prospectus describes the material provisions of the AICA Guaranteed
Account (the "Guaranteed Account"), a credited interest option available to
fund certain variable annuity contracts issued by Aetna Insurance Company of
America (the "Company"). Amounts allocated to the Guaranteed Account are held
in a noninsulated, nonunitized separate account (see "Investments").
Under the terms of the Guaranteed Account, the Company sets various rates of
interest ("Guaranteed Rates") for varying lengths of time ("Guaranteed
Terms") and designates the period of time during which investments can be
made ("Deposit Period"). Amounts must remain in the Guaranteed Account for
the full Guaranteed Term to receive the quoted interest rates. Withdrawals or
transfers from a Guaranteed Term before the end of the Guaranteed Term may be
subject to a market value adjustment ("MVA") (see "Market Value Adjustment").
Guaranteed Rates are annual effective yields, reflecting a full year's
interest. The interest is credited daily at a rate that will produce the
guaranteed annual effective yield over the period of one year. Guaranteed
Terms are offered at the Company's discretion for varying lengths of time
ranging up to and including ten years. The Deposit Period may be a week, a
month, a calendar quarter or any other period of time specified by the
Company. A Deposit Period may also be extended at the Company's discretion.
The Company maintains a toll-free telephone number (1-800-531-4547) that
allows Certificate Holders to obtain information concerning available Deposit
Periods, Guaranteed Rates and Guaranteed Terms. In addition, if you have
amounts allocated to a maturing Guaranteed Term, at least 18 calendar days
prior to the Maturity Date, the Company will send you information relating to
the upcoming Deposit Period dates as well as the current Guaranteed Rates,
Guaranteed Terms and projected Matured Term Values.
Contributions to the Guaranteed Account
Amounts may be invested in the Guaranteed Account for the Guaranteed Terms
and at the Guaranteed Rates available during the then current Deposit Period
by allocating all or a portion of your Purchase Payment(s) to the Guaranteed
Account. You may also elect to transfer accumulated values from other funding
options available under the Contract or from other Guaranteed Terms of the
Guaranteed Account to the Guaranteed Account, subject to the transfer
limitations described in the Contract. There is no minimum amount required if
investments come from Purchase Payments; however, you must meet the minimum
amounts that are set forth in your Contract. There is a $500 minimum for
transfers from other funding options.
Amounts invested in the Guaranteed Account during a Deposit Period may not be
transferred during that Deposit Period or for 90 days after the close of that
Deposit Period, except in connection with the Maturity Value Transfer
Provision, the Dollar Cost Averaging Program, or the selection of an
Additional Withdrawal Option available under the Contract for early or
systematic distributions (see "Transfers").
Guaranteed Rates
Guaranteed Rates are the interest rates that are guaranteed by the Company to
be credited on amounts invested during a Deposit Period for a specific
Guaranteed Term. Guaranteed Rates are annual effective yields, reflecting a
full year's interest. The interest is credited daily at a rate that will
produce the guaranteed annual effective yield over the period of one year.
Guaranteed Rates are credited according to the length of the Guaranteed Term.
For Guaranteed Terms of one year or less, a Guaranteed Rate is credited from
the date of deposit to the last day of the Guaranteed Term. For Guaranteed
Terms of greater than one year, several different Guaranteed Rates may be
applicable. The initial Guaranteed Rate is credited from the date of deposit
to the end of a specified period within the Guaranteed Term. The remainder of
the
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Guaranteed Term may also have several different Guaranteed Rates for
subsequent specific periods of time. For example, a 5-year Guaranteed Term
may guarantee 7% for the first year, 6.75% for the next two years, and 6.5%
for the remaining two years. At the Company's option, there may be one
Guaranteed Rate for the entire Guaranteed Term.
In no event will the Company guarantee or credit a Guaranteed Rate that is
less than an annual effective rate specified in the Contract. In addition,
the Contract does not allow for the crediting of interest above the
Guaranteed Rates which are announced by the Company at the start of a Deposit
Period.
The Company's determination of Guaranteed Rates is influenced by, but does
not necessarily correspond to, interest rates available on fixed-income
investments in which the Company may invest using amounts deposited into the
Guaranteed Account (see "Investments"). In addition, the Company will
consider other factors in determining Guaranteed Rates including regulatory
and tax requirements, sales commissions and administrative expenses borne by
the Company, general economic trends, and competitive factors.
THE COMPANY MAKES THE FINAL DETERMINATION REGARDING GUARANTEED RATES. THE
COMPANY CANNOT PREDICT THE LEVEL OF FUTURE GUARANTEED RATES.
Maturity of a Guaranteed Term
At least 18 calendar days before the Maturity Date, the Company will send
notification to the Certificate Holder of the upcoming Deposit Period, the
projected Matured Term Value for the amount maturing in the Guaranteed
Account and the Guaranteed Rate and Guaranteed Term for the current Deposit
Period. Certificate Holders may transfer amounts from any maturing Guaranteed
Term to new Guaranteed Terms. The amount in any maturing Guaranteed Term may
also be transferred into any other allowable option(s) available under the
Contract. There is no Market Value Adjustment applied to amounts transferred
or surrendered from a Guaranteed Term on the Maturity Date; however, a
surrender charge may be imposed for amounts surrendered under the Contract.
If no direction from the Certificate Holder is received by the Company at its
Home Office by the Maturity Date, the Company will automatically reinvest the
Matured Term Value in the Guaranteed Account during the new Deposit Period.
The Matured Term Value will be invested for a Guaranteed Term having the same
length to maturity as the Guaranteed Term that is maturing. If such a term is
not available, the transfer will be to the next shortest available Guaranteed
Term. The new Guaranteed Term may have a different length of time to maturity
than the maturing Guaranteed Term. For example, if a 3-year Guaranteed Term
matures and no direction is received, and a 3-year Guaranteed Term is not
available in the current Deposit Period, the Matured Term Value will be
reinvested in a new Guaranteed Term of less than 3 years, which is the next
shortest Guaranteed Term then available.
Once the Matured Term Value has been reinvested, the Certificate Holder will
receive a statement confirming the transfer, along with information on the
new Guaranteed Rate(s) and Guaranteed Term.
Maturity Value Transfer Provision
For those Certificate Holders who allow the Company to automatically transfer
the total Matured Term Value on the Maturity Date into the open Deposit
Period, the Maturity Value Transfer Provision is available. This provision
allows Certificate Holders to transfer or withdraw, without a Market Value
Adjustment, the Matured Term Value that was automatically transferred by the
Company to a new Guaranteed Term. A deferred sales charge may be assessed on
amounts withdrawn from the Contract. Please see "Contract Charges" and the
Contract Prospectus for more information. If all of the Matured Term Value is
transferred or withdrawn under the Maturity Value Transfer Provision, any
interest accrued under the new Guaranteed Term will be credited through the
date of transfer or withdrawal. The right to make a transfer or withdrawal
under the Maturity Value Transfer Provision is available until the last
business day (when the New York Stock Exchange is open) of the month
following the Maturity Date. The Maturity Value Transfer Provision only
applies to the first request received from the Certificate Holder, with
respect to a particular Matured Term Value.
7
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TRANSFERS AND WITHDRAWALS
Transfers
As described in the Contract Prospectus, all or any portion of accumulated
values under the Contract may be transferred to the Guaranteed Account or to
other funding options available under the Contract. The minimum amount that
may be transferred from other funding options to the Guaranteed Account is
$500.
Amounts applied to a Guaranteed Term during a Deposit Period may not be
transferred to any other funding option or to another Guaranteed Term during
that Deposit Period or for 90 days after the close of that Deposit Period.
This 90-day restriction does not apply to transfers relating to Dollar Cost
Averaging from the one-year Guaranteed Term or to the selection of an
Additional Withdrawal Option available under the Contract.
When a request is made to transfer a specific dollar amount, any applicable
Market Value Adjustment will be included in the determination of any amount
withdrawn from the Guaranteed Account to fulfill this request. Therefore, the
amount actually withdrawn from the Guaranteed Account may be more or less
than the requested dollar amount. A Market Value Adjustment may not be
applied under certain circumstances (see "Market Value Adjustment").
Withdrawals
The Contract allows for full or partial withdrawals of amounts accumulated
under the Contract. To make a full or partial withdrawal, you must complete a
withdrawal request form (available from the Company) and submit it to the
Company's Home Office. Withdrawals under the Contract are generally subject
to a Deferred Sales Charge.
Withdrawals from the Guaranteed Account may also be subject to a Market Value
Adjustment. When a request for a partial withdrawal of a specific dollar
amount is made, any applicable Market Value Adjustment will be included in
the determination of any amount to be withdrawn from the Guaranteed Term to
fulfill this request. Therefore, the amount actually withdrawn from the
Guaranteed Term(s) may be more or less than the dollar amount requested (see
"Market Value Adjustment," "Contract Charges" and the Contract Prospectus).
Calculation of Transfer or Withdrawal Amounts
When you request a transfer or withdrawal from the Guaranteed Account,
amounts invested for Guaranteed Terms having the same lengths will be grouped
together and then withdrawn pro rata from the Guaranteed Term groups. From
each Guaranteed Term group, amounts will be withdrawn starting with the
oldest Deposit Period.
For example:
Deposit Period A = Five-Year Guaranteed Term 1/1/94 - 1/14/94
Deposit Period B = Five-Year Guaranteed Term 1/1/95 - 1/14/95
Deposit Period C = Five-Year Guaranteed Term 1/1/96 - 1/14/96
Within this five year Guaranteed Term group, amounts would be taken first
from amounts allocated to Deposit Period A (the oldest Guaranteed Term
group), then from Deposit Period B, and then from Deposit Period C.
MARKET VALUE ADJUSTMENT
A Market Value Adjustment ("MVA") is applied to amounts transferred or
withdrawn from the Guaranteed Account before the Maturity Date, including
transfers made in order to elect a nonlifetime Annuity Option, but excluding
transactions under the Maturity Value Transfer Provision, transfers made from
the one-year Guaranteed Term in connection with the Dollar Cost Averaging
Program, and amounts withdrawn under one of the Additional Withdrawal Options
for systematic or periodic distributions under the Contract.
8
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If amounts are withdrawn from the Guaranteed Account due to annuitization
under one of the lifetime Annuity options described in the Contract
Prospectus, only the positive Aggregate Market Value Adjustment Amount, if
any, is applied (see "Annuity Period" in this Prospectus). Additionally, when
a guaranteed death benefit is payable under the terms of the Contract, only a
positive Aggregate Market Value Adjustment Amount, if any, is applied to
amounts withdrawn from the Guaranteed Account if withdrawn within the first
six months after the date of death. This provision does not apply at the
death of a spousal beneficiary or joint Certificate Holder who continued the
Account in his or her own name after the first death. If amounts are
withdrawn after the six-month period, a positive or negative Aggregate Market
Value Adjustment Amount, as applicable, will be applied.
In order to accommodate these withdrawals or transfers, the Company may need
to liquidate certain assets or use existing cash flows which would otherwise
be available to invest at current interest rates. The assets 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 Rates").
Market Value Adjustments can be positive or negative and therefore the
imposition of an MVA may increase or decrease the amount withdrawn from a
Guaranteed Term to satisfy the withdrawal or transfer request. The MVA Amount
depends on the relationship of the deposit period yield of U.S. Treasury
Notes that mature in the last quarter of the Guaranteed Term, 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 MVA will decrease the amount
withdrawn from the Guaranteed Account to satisfy the withdrawal or transfer
request; if the current yield is the higher of the two, the MVA will increase
the amount withdrawn from the Guaranteed Account to satisfy the withdrawal or
transfer request.
The MVA involves a deposit period yield and a current yield. An adjustment is
made in the formula of the MVA to reflect the period of time remaining in the
Guaranteed Term from the Wednesday of the week of withdrawal. 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 MVA calculation.
Deposit Period Yield
Determining the deposit period yield in the MVA calculation involves
consideration of interest rates prevailing during the Deposit Period for the
Guaranteed Term from which the withdrawal will be made. First, the Treasury
Notes that mature in the last three months of the Guaranteed Term are
identified, and then, the yield-to-maturity percentages of these Treasury
Notes for the last business day of each week in the Deposit Period are
determined. The resulting percentages are then averaged to determine 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 Term. 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.
For example, assume the withdrawal will be processed on May 15, 1997. List
the yield-to-maturity percentage figures as of May 9, 1997 for the same
Treasury Notes that determined the deposit period yield. Average these yields
to determine the current yield.
9
<PAGE>
MVA Formula
The mathematical formula used to determine the MVA 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 Term. (For examples of how to calculate MVAs,
please see Appendix I.)
MISCELLANEOUS
Contract Charges
Certain charges are deducted directly or indirectly from the funding options
available under the Contract. If amounts used for a full or partial surrender
are withdrawn from a Guaranteed Account, in addition to the Market Value
Adjustment, a deferred sales charge may be deducted from those amounts
withdrawn. Please see the Contract Prospectus.
Mortality and expense risk charges and the administrative charges that are
deducted from variable funding options are not deducted from the Guaranteed
Account. There may be other Contract charges such as maintenance fees or
transfer fees deducted from the Guaranteed Account. See the Contract
Prospectus.
Withdrawals
Under certain emergency conditions, the Company may defer payment of a
Guaranteed Account withdrawal request for a period of up to six months.
Please refer to the Contract Prospectus for further details.
Annuity Period
The Guaranteed Account cannot be used as an option during the Annuity Period.
At annuitization, amounts in the Guaranteed Account must be transferred to
one or more of the funding options which allow for Annuity payments. The
Aggregate Market Value Adjustment Amount (positive or negative) will be
applied to any amount transferred from the Guaranteed Account before the
Maturity Date to one of the nonlifetime Annuity options available under the
Contract. Only a positive Aggregate Market Value Adjustment, if any, is
applied due to annuitization under a lifetime Annuity option. Please refer to
the Contract Prospectus for a discussion of the Annuity Period.
INVESTMENTS
Amounts applied to the Guaranteed Account will be deposited to, and accounted
for in, a noninsulated nonunitized separate account established by the
Company under Connecticut law. A nonunitized separate account is a separate
account in which the Certificate Holder does not participate in the
performance of the assets through unit values or any other interest. The
assets of the noninsulated, nonunitized separate account may be charged with
liabilities arising out of any other business of the Company.
Certificate Holders allocating amounts to the Guaranteed Account do not
receive a unit ownership of assets accounted for in this separate account.
The assets accrue solely to the benefit of the Company. Certificate Holders
do not participate in the investment gain or loss from assets accounted for
in the separate account. Such gain or loss is borne entirely by the Company.
Certificate Holders will not participate in any manner in the investment
performance of the nonunitized separate account. All benefits available to
Certificate Holders are Contract guarantees made by the Company and are
accounted for in the separate account.
10
<PAGE>
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 investment 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:
(bullet) 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.
(bullet) 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.
(bullet) 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 services,
are deemed by the Company's management to have an investment
quality comparable to securities which may be purchased as stated
above.
(bullet) 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 held
in or to be sold for the general account or the nonunitized separate account.
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 INVESTMENT STRATEGY OF THE
GUARANTEED ACCOUNT, 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
PERFORMANCE OF THE NONUNITIZED SEPARATE ACCOUNT.
DISTRIBUTION
Aetna Life Insurance and Annuity Company ("ALIAC"), an affiliate of the
Company, is the principal underwriter of the Contract. ALIAC is registered
with the Securities and Exchange Commission under the Securities Exchange Act
of 1934 as a broker-dealer, and is a member of the National Association of
Securities Dealers, Inc. For additional information regarding distribution,
see the Contract Prospectus.
TAX CONSIDERATIONS
Certificate Holders should seek advice from their tax advisers concerning the
application of federal (and where applicable, state and local) tax laws to
amounts invested in the Guaranteed Account under the Contracts by them and by
their beneficiaries and payments from such investments. See also the Contract
Prospectus for other tax considerations.
Taxation of the Company
The Company is taxed as an insurance company under the Internal Revenue Code
of 1986 as amended. All assets supporting the Annuity obligations of the
Guaranteed Account are owned by the Company. Any income earned on such assets
is considered income to the Company.
11
<PAGE>
Taxation of the Guaranteed Account
Generally, any income earned on the Guaranteed Account deposits is not
taxable to Certificate Holders until withdrawn or distributed to the
Certificate Holder under the Contract. For additional information concerning
the tax treatment of Purchase Payments and distributions from the Contract,
please refer to the Contract Prospectus.
THE COMPANY
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 Retirement Holdings, Inc. Aetna
Retirement Holdings, Inc. is a wholly owned subsidiary of Aetna Retirement
Services, Inc. which is a wholly owned subsidiary of Aetna Services,
Inc. ("Aetna") (formerly Aetna Life and Casualty Company). Aetna Services, Inc.
is wholly owned by Aetna Inc. The Company's Home Office is located at 151
Farmington Avenue, Hartford, Connecticut 06156.
During the second quarter of 1995, the Company began marketing and servicing
variable and market value adjusted annuities through the Company's Separate
Accounts to individuals in the qualified and non-qualified markets.
The Company's variable annuity products utilize Separate Accounts to provide
contractholders with a vehicle for investments under which the
contractholders assume the investment risks as well as the benefit of
favorable performance. Assets held under these products are invested, as
designated by the contractholder or participant under a contract, in Separate
Accounts, which in turn invest in shares of mutual funds that are managed by
ALIAC or other selected mutual funds which are not managed by ALIAC. The
Company is compensated by the Separate Accounts for bearing mortality and
expense risks pertaining to variable annuity contracts (actuarial margin).
(See Note 8 of the Notes to Financial Statements).
Product retention is a key driver of profitability for annuity products. To
encourage product retention, annuity contracts typically impose a surrender
charge on policyholder balances withdrawn for a period of time after the
contract's inception. The period of time and level of the charge vary by
product. Existing tax penalties on annuity distributions prior to 59-1/2
provide an additional disincentive to premature surrenders of annuity
balances, but do not impede transfers of those balances to products of other
competitors.
Competition arises from other insurance companies, banks, mutual funds and
investment managers. Principal competitive factors are cost, service, product
features, investment options and level of investment performance and the
perceived financial strength of the investment manager or sponsor.
Competition may affect, among other matters, both business growth and the
pricing of the Company's products and services.
Products are distributed through a managed network of banks and
broker/dealers, as well as the distribution force of other affiliates of Aetna
Retirement Services, Inc.
Employees
As of the date of this Prospectus, the Company had no employees. The Company
utilizes the employees of Aetna and its affiliates (primarily ALIAC).
Regulation
The insurance business of the Company is subject to comprehensive, detailed
regulation 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, the minimum rates that
must be provided for accumulation of surrender values, the form and content
of required
12
<PAGE>
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 pensions and other
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.
Material changes in applicable federal and state laws regulations could
adversely affect the Company's business operations, although the Company is
unable to predict whether any such changes will be implemented.
Several states, including Connecticut, regulate affiliated groups of insurers
such as the Company and its affiliates under insurance holding company
statutes. Under such laws, intercorporate asset transfers and dividend
payments from insurance subsidiaries may require prior notice to or approval
of the insurance regulators, depending on the size of such transfers and
payments relative 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 been considering 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 company's 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 Company's RBC ratio at December 31, 1995 was
significantly above the levels which would require regulatory action.
The Company's variable products involve investments through Separate
Accounts, some of which are registered as investment companies with the SEC,
as are the variable mutual funds offered by the Company.
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
certain obligations of insolvent insurance companies to policyholders and
claimants. In each of the years in the three year period ended December 31,
1995, 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.
Forward-Looking Information
The Private Securities Litigation Reform Act of 1995 ("the Act") provides a
"safe harbor" for forward-looking statements to encourage companies to
provide prospective information about their companies, so long as those
statements are identified as forward-looking and are accompanied by
meaningful cautionary statements identifying important factors that could
cause actual results to differ materially from those discussed in the
statement. The Company desires to take
13
<PAGE>
advantage of the "safe harbor" provisions of the Act. Certain information
contained herein, particularly the information appearing under the heading
"Outlook" contained in Management's Analysis of the Results of Operations, is
forward- looking. Information regarding certain important factors that could
cause actual results of operations or outcomes of other events to differ
materially from any such forward-looking statement appear together with such
statement, and/or elsewhere herein.
Miscellaneous
The Company utilizes the employees of Aetna and its affiliates (primarily
ALIAC), and receives an expense allocation, at cost, based on the utilization
of these employees.
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.
The Company is not dependent upon any single customer and no single customer
accounted for more than 10% of revenue in 1995.
Properties
The Company occupies office space that is owned or leased by Aetna Life
Insurance Company or other affiliates of Aetna. Expenses associated with
these offices are allocated on a direct and indirect basis to the Company and
the other subsidiaries of Aetna.
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 1995, 1994 and 1993, 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 $958.0 thousand in dividend distributions in 1996.
DIRECTORS AND EXECUTIVE OFFICERS
The following are the Directors and Executive Officers of the Company. The
terms of office for all Directors and Executive Officers will run until the
Company's next annual meeting and until their successors are duly elected and
qualified.
<TABLE>
<CAPTION>
Current Position Principal Occupation and Employment During
Name, Age with the Company Past Five Years; Other Directorships of Directors
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Daniel P. Kearney, 56 Director, President President (since December 1993), Aetna Life Insurance and
and Chief Executive Officer Annuity Company; Executive Vice President (since December
1993), and Group Executive, Financial Division (February
1991- December 1993), Aetna Life and Casualty Company.
Director: Aetna Investment Services, Inc. (since November
1994); Aetna Insurance Company of America (since May 1994);
MBIA, Inc. (since 1992).
Laura R. Estes, 47 Director and Senior Senior Vice President, Manage/Design Products
Vice President and Services (since February 1996), and Senior
Vice President, Pensions (March 1991-February
1996), Aetna Life Insurance and Annuity
Company.
14
<PAGE>
Current Position Principal Occupation and Employment During
Name, Age with the Company Past Five Years; Other Directorships of Directors
- -------------------------------------------------------------------------------------------------------------------------------
Deborah Koltenuk, 40 Director, Vice President Vice President and Treasurer, Corporate
and Corporate Controller Controller, (October 1996-Present), Aetna Life
Insurance and Annuity Company, Aetna
Insurance Company of America, Aetna Retirement
Holdings, Inc.; Vice President,
Investment Planning and Financial Reporting
(April 1996-July 1996), Aetna Life Insurance
Company; Vice President, Investment Planning
and Financial Reporting, (October 1994-April
1996), Aetna Life Insurance Company, The
Aetna Casualty and Surety Company, The
Standard Fire Insurance Company; Assistant
Vice President, Finance and Administration,
(June 1994-October 1994), Aetna Information
Technology, Aetna Life Insurance Company,
The Aetna Casualty and Surety Company, The
Standard Fire Insurance Company; Controller,
Aetna Information Technology, (September
1993-June 1994), Aetna Life Insurance
Company, The Aetna Casualty and Surety
Company, The Standard Fire Insurance
Company; Assistant Vice President,
(December 1990-September 1993), Aetna Life Insurance
Company, The Aetna Casualty and Surety Company, The Standard
Fire Insurance Company.
James J. Mallozzi, 41 Director and Vice Vice President, Head of Retail Products, (July 1996-
President Present), Aetna Retirement Services, Inc.;
Vice President, Head of 401(k) Pension Sales &
Marketing, (December 1995-July 1996), Aetna
Retirement Services, Inc.; Chief of Staff, (July
1993-December 1995), Aetna International, Inc.; Managing
Director & Chief Operating Officer, (February 1990-
July 1993), Aetna Investment Management, Ltd.
(London, England).
Maria McKeon, 40 Corporate Secretary and Counsel Counsel (since 1991), Aetna Life and Casualty Company.
</TABLE>
EXECUTIVE COMPENSATION
As of the date of this Prospectus, the Company had no employees. The Company
utilizes the employees of Aetna and its affiliates (primarily Aetna Life
Insurance and Annuity Company). There were no charges allocated to the
Company for rent, salaries or other administrative expenses during 1995.
SECURITY OWNERSHIP OF MANAGEMENT
The Company's directors and officers do not beneficially own any outstanding
shares of stock of the Company. All of the outstanding shares of stock of the
Company are beneficially owned by its parent, Aetna Life Insurance and
Annuity Company. The percentage of shares of Aetna Life Insurance and Annuity
Company beneficially owned by any director of the Company, and by all
directors and officers of the Company as a group, does not exceed one percent
(1%) of the class outstanding.
INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed 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.
EXPERTS
The financial statements and schedules of the Company as of December 31, 1995
and 1994, and for each of the years in the three-year period ended December
31, 1995, have been included herein and in the Registration Statement in
reliance upon the reports of KPMG Peat Marwick LLP, independent certified
public accountants, appearing herein and elsewhere in the Registration
Statement and upon the authority of such firm as experts in accounting and
auditing.
The reports of KPMG Peat Marwick LLP on the above-mentioned financial statements
and schedules refer to a change in 1993 in the Company's methods of accounting
for certain investment in debt and equity securities.
With respect to the unaudited interim financial information of the Company for
the three and nine month periods ended September 30, 1996 and 1995 included
herein, the independent certified public accountants have reported that they
applied limited procedures in accordance with professional standards for a
review of such information. However, their separate report included in the
Company's Quarterly Report on Form 10-Q for the three and nine month periods
ended September 30, 1996 and 1995, and included herein, states that they did not
audit, and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their report on such information should
be restricted in light of the limited nature of the review procedures applied.
The accountants are not subject to the liability provisions of Section 11 of the
1933 Act for their report on the unaudited interim financial information
because that report is not a "report" or a "part" of the registration statement
prepared or certified by the accountants within the meaning of Sections 7 and 11
of the Act.
15
<PAGE>
LEGAL PROCEEDINGS
The Company and its Board of Directors know of no material legal proceedings
pending to which the Company is a party of which would materially affect the
Company.
LEGAL MATTERS
The validity of the securities offered by this Prospectus has been passed
upon by Susan E. Bryant, Esq., Counsel of the Company.
16
<PAGE>
APPENDIX I
EXAMPLES OF MARKET VALUE ADJUSTMENT CALCULATIONS
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 deferred sales charge that may be
assessed under the Contract upon withdrawal.
EXAMPLE I
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 Term, is 927.
MVA = {(1+i)} x
------- ---
(1+j) 365
= { 1.08 } 927
-------- ---
1.10 365
= .9545
In this example the Deposit Period yield of 8% is less than the current yield
of 10%, therefore, the MVA is less than 1. The amount withdrawn from the
Guaranteed Term is multiplied by this MVA.
If a withdrawal or transfer of a stated percentage is requested, the value
withdrawn from a Guaranteed Term will reflect the deduction of the negative
MVA Amount. However, if a withdrawal or transfer request of a specific dollar
amount is requested, the amount withdrawn from a Guaranteed Term will be
increased to compensate for the negative MVA Amount. For example, a
withdrawal request to receive a check for $2,000 would result in a $2,095.34
withdrawal from the Guaranteed Term.
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 Term, 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 MVA is less than 1. The amount withdrawn from the
Guaranteed Term is multiplied by this MVA.
If a withdrawal or transfer of a stated percentage is requested, the value
withdrawn from a Guaranteed Term will reflect the deduction of the negative
MVA Amount. However, if a withdrawal or transfer request of a specific dollar
amount is requested, the amount withdrawn from a Guaranteed Term will be
increased to compensate for the negative MVA Amount. For example, a
withdrawal request to receive a check for $2,000 would result in a $2,048.76
withdrawal from the Guaranteed Term.
17
<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 Term, 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 MVA is greater than 1. The amount withdrawn from
the Guaranteed Term is multiplied by this MVA.
If a withdrawal or transfer of a stated percentage is requested, the value
withdrawn from a Guaranteed Term will reflect the addition of the positive
MVA Amount. However, if a withdrawal or transfer request of a specific dollar
amount is requested, the amount withdrawn from a Guaranteed Term will be
decreased to reflect the positive MVA Amount. For example, a withdrawal
request to receive a check for $2,000 would result in a $1,908.94 withdrawal
from the Guaranteed Term.
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 Term, is 927.
MVA = {(1+i)} x
------- ---
(1+j) 365
= { 1.05 } 927
-------- ---
1.04 365
= 1.0246
In this example the Deposit Period yield of 5% is greater than the current
yield of 4%, therefore, the MVA is greater than 1. The amount withdrawn from
the Guaranteed Term is multiplied by this MVA.
If a withdrawal or transfer of a stated percentage is requested, the value
withdrawn from a Guaranteed Term will reflect the addition of the positive
MVA Amount. However, if a withdrawal or transfer request of a specific dollar
amount is requested, the amount withdrawn from a Guaranteed Term will be
decreased to reflect the positive MVA Amount. For example, a withdrawal
request to receive a check for $2,000 would result in a $1,951.98 withdrawal
from the Guaranteed Term.
18
<PAGE>
APPENDIX II
EXAMPLES OF MARKET VALUE ADJUSTMENT YIELDS
The following hypothetical examples show the Market Value Adjustment based on
a given current yield at various times remaining in the Guaranteed Term.
Table A illustrates figures based on a deposit period yield of 10%; Table B
illustrates figures based on a deposit period yield of 5%. The Market Value
Adjustment will have either a positive or negative influence on the amount
withdrawn from or remaining in a Guaranteed Term. Also, the amount of the
Market Value Adjustment generally decreases as the end of the Guaranteed Term
approaches.
TABLE A: Deposit Period Yield of 10%
<TABLE>
<CAPTION>
Change in
Deposit Time Remaining to Maturity of Guaranteed Term
Current Period ---------------------------------------------------------------
Yield Yield 8 Years 6 Years 4 Years 2 Years 1 Year 3 Months
- --------- ----------- --------- --------- --------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
15% +5% -29.9% -23.4% -16.3% -8.5% -4.3% -1.1%
13% +3% -19.4 -14.9 -10.2 -5.2 -2.7 -0.7
12% +2% -13.4 -10.2 -7.0 -3.5 -1.8 -0.4
11% +1% -7.0 -5.3 -3.6 -1.8 -0.9 -0.2
9% -1% 7.6 5.6 3.7 1.8 0.9 0.2
8% -2% 15.8 11.6 7.6 3.7 1.9 0.5
7% -3% 24.8 18.0 11.7 5.7 2.8 0.7
5% -5% 45.1 32.2 20.5 9.8 4.8 1.2
</TABLE>
TABLE B: Deposit Period Yield of 5%
<TABLE>
<CAPTION>
Change in
Deposit Time Remaining to Maturity of Guaranteed Term
Current Period ---------------------------------------------------------------
Yield Yield 8 Years 6 Years 4 Years 2 Years 1 Year 3 Months
- --------- ----------- --------- --------- --------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
9% +4% -25.9% -20.1% -13.9% -7.2% -3.7% -0.9%
8% +3% -20.2 -15.6 -10.7 -5.5 -2.8 -0.7
7% +2% -14.0 -10.7 -7.3 -3.7 -1.9 -0.5
6% +1% -7.3 -5.5 -3.7 -1.9 -0.9 -0.2
4% -1% 8.0 5.9 3.9 1.9 1.0 0.2
3% -2% 16.6 12.2 8.0 3.9 1.9 0.5
2% -3% 26.1 19.0 12.3 6.0 2.9 0.7
1% -4% 36.4 26.2 16.8 8.1 4.0 1.0
</TABLE>
19
<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 9 Months Ended
September 30, September 30,
---------------------------------------
1996 1995 1996 1995
--------- ------- ------------ --------
<S> <C> <C> <C> <C>
Revenue:
Charges assessed against policyholders $ 373.2 $ 35.2 $ 757.6 $ 35.2
Net investment income 341.0 183.7 673.5 536.7
Net realized capital losses -- -- (17.1) --
--------- ------- ------------ --------
Total revenue 714.2 218.9 1,414.0 571.9
Benefits and expenses:
Current and future benefits 533.6 -- 714.8 --
Operating expenses 343.7 78.3 2,165.3 197.3
--------- ------- ------------ --------
Total benefits and expenses 877.3 78.3 2,880.1 197.3
Income (loss) before income taxes (benefits) (163.1) 140.6 (1,466.1) 374.6
Income taxes (benefits) (78.6) 49.6 (625.4) 131.3
--------- ------- ------------ --------
Net income (loss) $ (84.5) $ 91.0 $ (840.7) $243.3
========= ======= ============ ========
</TABLE>
See Condensed Notes to Financial Statements.
20
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly-owned subsidiary of Aetna Life Insurance and Annuity Company)
Balance Sheets
(thousands)
<TABLE>
<CAPTION>
September 30, December 31,
Assets 1996 1995
-------------- --------------
<S> <C> <C>
Investments:
Debt securities, available for sale:
(amortized cost: $8,063.1 and $7,953.0) $ 8,140.3 $ 8,187.4
Cash and cash equivalents 35,716.6 4,044.2
Accrued investment income 182.3 112.6
Premiums due and other receivables 13.3 --
Deferred policy acquisition costs 15,724.0 2,066.4
Deferred tax asset 2,065.7 467.6
Income taxes receivable 713.0 --
Other assets 13.0 0.8
Separate Accounts assets 231,798.8 43,810.0
-------------- --------------
Total assets $294,367.0 $ 58,689.0
============== ==============
Liabilities and Shareholder's Equity
Liabilities:
Policyholders' funds left with the company $ 43,734.9 $ --
Due to parent and affiliates -- 174.6
Other liabilities 7,530.7 1,932.6
Income taxes payable 112.5 638.8
Separate Accounts liabilities 231,798.8 43,810.0
-------------- --------------
Total liabilities 283,176.9 46,556.0
-------------- --------------
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 50.2 152.4
Retained earnings 1,039.9 1,880.6
-------------- --------------
Total shareholder's equity 11,190.1 12,133.0
-------------- --------------
Total liabilities and shareholder's equity $294,367.0 $58,689.0
============== ==============
</TABLE>
See Condensed Notes to Financial Statements.
21
<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)
<TABLE>
<CAPTION>
9 Months Ended September 30,
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
Shareholder's equity, beginning of period $12,133.0 $11,675.3
Net change in unrealized capital gains and losses (102.2) 138.8
Net income (loss) (840.7) 243.3
------------ ------------
Shareholder's equity, end of period $11,190.1 $12,057.4
============ ============
</TABLE>
See Condensed Notes to Financial Statements.
22
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly-owned subsidiary of Aetna Life Insurance and Annuity Company)
Statements of Cash Flows
(thousands)
<TABLE>
<CAPTION>
9 Months Ended September 30,
----------------------------
1996 1995
------------- ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ (840.7) $ 243.3
Adjustments to reconcile net income (loss) to net cash
(used for) provided by operating activities:
Increase in accrued investment income (69.7) (33.8)
Increase in premiums due and other receivables (13.3) --
Increase in deferred policy acquisition costs (13,657.6) (1,537.2)
Net change in amounts due to/from parent and affiliates (174.6) 117.7
Net increase in other assets and liabilities 5,568.8 1,327.7
Net (decrease) increase in income taxes (2,782.4) 101.2
Net amortization of (discount) premium on debt securities (61.3) 19.7
Net realized capital losses 17.1 --
------------- ------------
Net cash (used for) provided by operating activities (12,013.7) 238.6
------------- ------------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale 2,410.0 3,000.0
Short-term investments -- 500.0
Cost of investment purchases in:
Debt securities available for sale (2,458.8) (3,939.2)
Short-term investments -- (492.1)
------------- ------------
Net cash used for investing activities (48.8) (931.3)
------------- ------------
Cash Flows from Financing Activities:
Deposits and interest credited for investment contracts 43,734.9 --
------------- ------------
Net cash provided by financing activities 43,734.9 --
------------- ------------
Net increase (decrease) in cash and cash equivalents 31,672.4 (692.7)
Cash and cash equivalents, beginning of period 4,044.2 4,732.7
------------- ------------
Cash and cash equivalents, end of period $ 35,716.6 $ 4,040.0
============= ============
Supplemental cash flow information:
Income taxes paid, net $ 2,232.0 $ 30.0
============= ============
</TABLE>
See Condensed Notes to Financial Statements.
23
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly-owned subsidiary of Aetna Life Insurance and Annuity Company)
Condensed Notes to Financial Statements (unaudited)
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 and is a
wholly-owned subsidiary of Aetna Life Insurance and Annuity Company
("ALIAC"). ALIAC is a wholly-owned subsidiary of Aetna Retirement Holdings,
Inc. ("HOLDCO"). HOLDCO is a wholly- owned subsidiary of Aetna Retirement
Services, Inc., which is a wholly-owned subsidiary of Aetna Services, Inc.
("Aetna") (formerly Aetna Life and Casualty Company). Aetna is a wholly-owned
subsidiary of Aetna Inc.
The financial statements have been prepared in accordance with generally
accepted accounting principles and are unaudited. 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. The accompanying condensed
financial statements should be read in conjunction with the financial
statements and related notes as presented in the Company's 1995 Annual Report
on Form 10-K as filed with the Securities and Exchange Commission on March
29, 1996. Certain financial information that is normally included in annual
financial statements prepared in accordance with generally accepted
accounting principles, but that is not required for interim reporting
purposes, has been condensed or omitted.
2. Accounting Changes
Financial Accounting Standard ("FAS") No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, was issued
in June 1996. This statement provides accounting and reporting standards for
transfers of financial assets and extinguishments of liabilities.
Transactions covered by this statement would include securitizations, sales
of partial interests in assets, repurchase agreements and securities lending.
This statement requires that after a transfer of financial assets, an entity
would recognize on the balance sheet any assets it controls and liabilities
it has incurred. Similarly, an entity would remove assets or liabilities from
its balance sheet when control of the assets has been surrendered or the
liabilities satisfied.
This statement is effective for 1997 financial statements and early adoption
or retroactive application of this statement is not permitted. The Company
does not expect the adoption of this statement will have a material effect on
its financial position or results of operations.
3. Related Party Transactions
Aeltus Investment Management, Inc. ("Aeltus"), a wholly owned subsidiary of
HOLDCO, was named the subadviser of all of ALIAC's affiliated mutual funds
and general account investments effective August 1, 1996 when ALIAC merged
its investment management operations into those of Aeltus.
The Company pays Aeltus a fee which, on an annual basis, is .06% of the
average daily net assets under management. The amount of such fees for the
three and nine months ended September 30, 1996 amounted to $10.2 thousand for
both periods.
4. Litigation
The Company may be involved in lawsuits arising, for the most part, in the
ordinary course of its business operations. While the ultimate outcome of
litigation against the Company cannot be determined at this time, after
consideration of the defenses available to the Company and any related
reserves established, it is not expected to result in liability for amounts
material to the financial condition of the Company, although it may adversely
affect results of operations in future periods.
5. Subsequent Event
On October 23, 1996, the Company received a capital contribution of $20.0
million from ALIAC.
24
<PAGE>
Item 2. Management's Analysis of the Results of Operations
Results of Operations
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended
September 30, September 30,
(Thousands) 1996 1995 1996 1995
- ---------------------------------------------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Charges assessed against policyholders $ 373.2 $ 35.2 $ 757.6 $ 35.2
Net investment income 341.0 183.7 673.5 536.7
Net realized capital losses -- -- (17.1) --
- ---------------------------------------------------- ------------ ------------ ------------- ------------
Total revenue 714.2 218.9 1,414.0 571.9
- ---------------------------------------------------- ------------ ------------ ------------- ------------
Current and future benefits 533.6 -- 714.8 --
Operating expenses 343.7 78.3 2,165.3 197.3
- ---------------------------------------------------- ------------ ------------ ------------- ------------
Total benefits and expenses 877.3 78.3 2,880.1 197.3
- ---------------------------------------------------- ------------ ------------ ------------- ------------
Income (loss) before income taxes (benefits) (163.1) 140.6 (1,466.1) 374.6
Income taxes (benefits) (78.6) 49.6 (625.4) 131.3
- ---------------------------------------------------- ------------ ------------ ------------- ------------
Net income (loss) $ (84.5) $ 91.0 $ (840.7) $ 243.3
==================================================== ============ ============ ============= ============
Net realized capital losses, net of tax
(included above) $ -- $ -- $ (11.1) $ --
==================================================== ============ ============ ============= ============
- ---------------------------------------------------- ------------ ------------ ------------- ------------
Deposits not included in premiums above:
Fully guaranteed $22,668.9 $ 9,200.0 $ 82,310.4 $ 9,300.0
Experience-rated 29,885.9 -- 43,167.3 --
Non-guaranteed 46,487.8 18,980.0 98,843.5 19,000.0
------------ ------------ ------------- ------------
Total $99,042.6 $28,180.0 $224,321.2 $28,300.0
==================================================== ============ ============ ============= ============
Assets under management: (1)(2)
Fully guaranteed $ 81,811.9 $ 8,510.3
Experience-rated 43,720.2 --
Non-guaranteed 149,891.7 20,204.6
------------- ------------
Total $275,423.8 $28,714.9
==================================================== ============ ============ ============= ============
</TABLE>
(1) Excludes net unrealized capital gains of $77.2 thousand and $2.2 thousand
at September 30, 1996 and 1995, respectively.
(2) Includes $141,611.3 thousand and $20,204.6 thousand at September 30, 1996
and 1995, respectively, of assets held and managed by unaffiliated mutual
funds.
The Company has reported net losses of $(84.5) thousand for the three months
ended September 30, 1996, compared to net gains of $91.0 thousand for the
same period a year ago. The Company has reported net losses of $(840.7)
thousand for the nine months ended September 30, 1996, compared to net gains
of $243.3 thousand for the same period a year ago. 1996 results reflect the
revenues and expenses associated with commencement of the Company's business
operations which have produced losses due to start up costs, particularly in
the first six months of the year. 1995 results reflect investment income on
the Company's capital partially offset by only minimal start up expenses.
Current and future benefits are primarily amounts credited on investment
contracts. For the three and nine months ended September 30, 1996, current
and future benefits exceed net investment income. The lower level of
investment income is primarily due to lower levels of invested assets caused
by the payment of start up costs and lower returns on such
25
<PAGE>
investments due to the short term nature of the portfolio. The Company
intends to reposition the portfolio into long-term higher yielding securities
during the remainder of 1996. On October 23, 1996, the Company received a
capital contribution of $20.0 million from ALIAC (see Note 5 of the Condensed
Notes to Financial Statements).
During the nine months ended September 30, 1996, the Company's net deferred
tax asset increased by $1,598.1 thousand from December 31, 1995, the benefit
of which reduced the Company's loss for the same period. This was primarily
due to losses from commencement of operations discussed above. Management
believes it is more likely than not that the Company will realize the benefit
of its net deferred tax asset.
General Account Investments
The Company's invested assets were comprised of the following:
September 30, December 31,
(Thousands) 1996 1995
----------------------------- --------------
Debt securities $8,140.3 $8,187.4
============================= ==============
At September 30, 1996 and December 31, 1995, all of the Company's debt
securities were issued by the U.S. Treasury. The average quality rating of
the Company's debt securities portfolio was AAA at both September 30, 1996
and December 31, 1995.
26
<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 September 30, 1996, and the related condensed
statements of income for the three-month and nine-month periods ended September
30, 1996 and 1995, and the related condensed statements of changes in
shareholder's equity and cash flows for the nine-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, 1995, 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 20, 1996, 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, 1995, 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
October 23, 1996
27
<PAGE>
SELECTED FINANCIAL DATA
1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ -----------
(Thousands)
Total Revenue $ 862.0 $ 619.3 $ 560.0 $ 645.0 $ 729.6
============ ============ ============ ============ ===========
Net Income $ 167.9 $ 348.6 $ 312.3 $ 336.2 $ 457.6
============ ============ ============ ============ ===========
Total Assets $58,689.0 $11,736.2 $11,921.3 $10,955.6 $10,955.6
============ ============ ============ ============ ===========
MANAGEMENT'S ANALYSIS OF THE RESULTS OF OPERATIONS
Results of Operations
Years Ended December 31,
-------------------------------
1995 1994 1993
------------ -------- ---------
(Thousands)
Net investment income $ 721.0 $619.3 $560.0
Realized capital gains 8.3 -- --
Charges assessed against policyholders 132.7 -- --
------------ -------- ---------
Total revenue 862.0 619.3 560.0
Operating expenses 605.2 83.0 79.5
------------ -------- ---------
Total expenses 605.2 83.0 79.5
------------ -------- ---------
Income before federal income taxes 256.8 536.3 480.5
Federal income taxes 88.9 187.7 168.2
------------ -------- ---------
Net income $ 167.9 $348.6 $312.3
============ ======== =========
1995 1994 1993
------------ -------- ---------
Deposits:
Fully guaranteed $12,953.8 $ -- $ --
Non-guaranteed 29,887.6 -- --
------------ -------- ---------
Total $42,841.4 $ -- $ --
============ ======== =========
Assets under management:
Fully guaranteed $10,052.4 $ -- $ --
Non-guaranteed 33,757.6 -- --
------------ -------- ---------
Total $43,810.0 $ -- $ --
============ ======== =========
Overview
The Company's adjusted earnings (after-tax) follow (in thousands):
1995 1994 1993
------------ -------- ---------
Net income $167.9 $348.6 $312.3
Less:
Net realized capital gains 5.4 -- --
------------ -------- ---------
Adjusted earnings $162.5 $348.6 $312.3
============ ======== =========
The Company's adjusted earnings decreased 53% in 1995 following a 12%
increase in 1994. The decrease in 1995 adjusted earnings reflects higher
operating expenses offset in part by charges assessed against policyholders
attributable to the commencement of the Company's business operations.
Results in 1995 also reflect higher net investment income
28
<PAGE>
reflecting a slight change in asset mix (larger percentage of debt securities
versus cash and cash equivalents) and higher yields on cash equivalents. The
improvement in 1994 adjusted earnings when compared to 1993 reflected an
increase in net investment income primarily due to increasing yields on cash
equivalents.
Investments
As of December 31, 1995 and 1994, all of the Company's debt securities were
issued by the U. S. Treasury.
<TABLE>
<CAPTION>
1995 1994
------------ -----------
(Thousands)
<S> <C> <C>
Debt securities $ 8,187.4 $ 6,906.5
------------ -----------
Total Investments 8,187.4 6,906.5
Cash and cash equivalents 4,044.2 4,732.7
------------ -----------
Total Investments, cash and cash equivalents $12,231.6 $11,639.2
============ ===========
</TABLE>
Outlook
Sales of non-qualified products are expected to significantly exceed 1995
levels as relationships formed with broker/ dealers and banks in 1995 build
sales momentum. The Company also intends to expand its retirement planning
capabilities.
Liquidity and Capital Resources
<TABLE>
<CAPTION>
1995 1994 1993
------------------------ -----------
(Thousands)
<S> <C> <C> <C>
Assets $58,689.0 $11,736.2 $11,921.3
======================== ===========
Shareholder's Equity $12,133.0 $11,675.3 $11,584.2
======================== ===========
Net Cash provided by Operating Activities $ 242.8 $ 219.8 $ 596.1
======================== ===========
Net Cash used for Investing Activities $ 931.3 $ 0.0 $ 162.8
======================== ===========
Cash and Cash Equivalents $ 4,044.2 $ 4,732.7 $ 4,512.9
======================== ===========
</TABLE>
The assets and shareholder's equity amounts for the years ended December 31,
1995, 1994 and 1993 reflect the implementation of FAS 115. See Notes 1 and 3
of Notes to Financial Statements.
Shareholder's equity increased by $457.7 thousand, which reflects net income
and the net change in unrealized capital gains (losses).
The Company's cash flow requirements for 1995 and 1994 were met by cash
provided by operating activities and from the maturity and sale of
investments.
The Company has no debt. There were no capital contributions in 1995, 1994 or
1993.
The amount of dividends that may be paid to the shareholder 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 $958.0 thousand in dividend distributions in 1996.
29
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
Financial Statements
Index
-----
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Independent Auditors' Report F-2
Statements of Income for the Years Ended
December 31, 1995, 1994 and 1993 F-3
Balance Sheets as of December 31, 1995 and 1994 F-4
Statements of Changes in Shareholder's Equity for
the Years Ended December 31, 1995, 1994 and 1993 F-5
Statements of Cash Flows for the Years
Ended December 31, 1995, 1994 and 1993 F-6
Notes to Financial Statements F-7
</TABLE>
F-1
<PAGE>
Independent Auditors' Report
The Shareholder and Board of Directors of
Aetna Insurance Company of America:
We have audited the accompanying balance sheets of Aetna Insurance Company of
America as of December 31, 1995 and 1994, 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, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
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, 1995 and 1994, and the results of its operations and
its cash flows for each of the years in the three-year period ended December
31, 1995, 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.
/S/KPMG Peat Marwick LLP
Hartford, Connecticut
March 20, 1996
F-2
<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,
----------------------------
1995 1994 1993
-------- -------- ---------
Revenue:
Net investment income $721.0 $619.3 $560.0
Realized capital gains 8.3 -- --
Charges assessed against policyholders 132.7 -- --
-------- -------- ---------
Total revenue 862.0 619.3 560.0
Expenses:
Operating expenses 605.2 83.0 79.5
-------- -------- ---------
Total expenses 605.2 83.0 79.5
Income before federal income taxes 256.8 536.3 480.5
Federal income taxes 88.9 187.7 168.2
-------- -------- ---------
Net income $167.9 $348.6 $312.3
======== ======== =========
See Notes to Financial Statements.
F-3
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Balance Sheets
(thousands)
<TABLE>
<CAPTION>
December 31,
-------------------------
1995 1994
------------ ------------
<S> <C> <C>
Assets
--------------------------------------------------------
Investments:
Debt securities available for sale:
(amortized cost $7,953.0 and $7,043.9) $ 8,187.4 $ 6,906.5
Cash and cash equivalents 4,044.2 4,732.7
Accrued investment income 112.6 91.5
Deferred policy acquisition costs 2,066.4 --
Deferred tax asset 467.6 0.4
Other assets 0.8 5.1
Separate Accounts assets 43,810.0 --
------------ ------------
Total assets $58,689.0 $11,736.2
============ ============
Liabilities and Shareholder's Equity
--------------------------------------------------------
Liabilities:
Due to parent and affiliates $ 174.6 $ 10.5
Other liabilities 1,932.6 21.0
Federal income taxes--Current 638.8 29.4
Separate Accounts liabilities 43,810.0 --
------------ ------------
Total liabilities 46,556.0 60.9
------------ ------------
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) 152.4 (137.4)
Retained earnings 1,880.6 1,712.7
------------ ------------
Total shareholder's equity 12,133.0 11,675.3
------------ ------------
Total liabilities and shareholder's equity $58,689.0 $11,736.2
============ ============
</TABLE>
See Notes to Financial Statements.
F-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)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Shareholder's equity, beginning of period $11,675.3 $11,584.2 $11,151.8
Net change in unrealized capital gains (losses) 289.8 (257.5) 120.1
Net income 167.9 348.6 312.3
------------ ------------ ------------
Shareholder's equity, end of period $12,133.0 $11,675.3 $11,584.2
============ ============ ============
</TABLE>
See Notes to Financial Statements.
F-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>
Years Ended December 31,
-------------------------------------
1995 1994 1993
------------ ----------- ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 167.9 $ 348.6 $ 312.3
Adjustments to reconcile net income to net cash provided by
operating activities:
Decrease (increase) in accrued investment income (21.1) -- 46.3
Increase in deferred policy acquisition costs (2,066.4) -- --
Net change in amounts due to/from parent and affiliates 164.1 (79.2) 184.9
Net increase (decrease) in other assets and liabilities 1,915.9 1.2 (76.0)
Increase (decrease) in federal income taxes 60.2 (138.9) 50.2
Net amortization of premium on debt securities 22.2 88.1 78.4
------------ ----------- ------------
Net cash provided by operating activities 242.8 219.8 596.1
------------ ----------- ------------
Cash Flows from Investing Activities:
Investment maturities and collection of:
Debt securities available for sale 3,000.0 -- 2,290.0
Short-term investments 500.0 -- --
Cost of investment purchases in:
Debt securities available for sale (3,939.2) -- (2,452.8)
Short-term investments (492.1) -- --
------------ ----------- ------------
Net cash used for investing activities (931.3) -- (162.8)
------------ ----------- ------------
Net (decrease) increase in cash and cash equivalents (688.5) 219.8 433.3
Cash and cash equivalents, beginning of period 4,732.7 4,512.9 4,079.6
------------ ----------- ------------
Cash and cash equivalents, end of period $ 4,044.2 $4,732.7 $ 4,512.9
------------ ----------- ------------
Supplemental cash flow information:
Income taxes paid, net $ 28.7 $ 326.6 $ 118.0
============ =========== ============
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements
December 31, 1995, 1994 and 1993
1. Summary of Significant Accounting Policies
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 Retirement
Services, Inc. ("ARSI"). ARSI is a wholly owned subsidiary of Aetna Life and
Casualty Company ("Aetna"). During the second quarter of 1995, the Company
began marketing and servicing variable and market value adjusted annuities
through the Company's Separate Accounts to individuals in the qualified and
non-qualified markets.
Basis of Presentation
These financial statements have been prepared in conformity with generally
accepted accounting principles. Certain reclassifications have been made to
1994 and 1993 financial information to conform to 1995 presentation.
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 resulted in a net increase of $120.1
thousand, net of taxes of $64.6 thousand, to net unrealized gains in
shareholder's equity.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from reported results using those
estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, money market instruments and
other debt issues with a maturity of ninety days or less when purchased.
Investments
At December 31, 1995 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 related to these securities, after
deducting related taxes, 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.
F-7
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements (continued)
December 31, 1995, 1994 and 1993
1. Summary of Significant Accounting Policies (Continued)
Deferred Policy Acquisition Costs
Certain costs of acquiring insurance business have been deferred. These
costs, all of which vary with and are primarily related to the production of
new business, consist principally of commissions, certain expenses of
underwriting and issuing contracts and certain agency expenses. Such costs
are amortized in proportion to estimated gross profits and adjusted to
reflect actual gross profits and are amortized over twenty years. Deferred
policy acquisition costs are written off to the extent that it is determined
that future policy premiums and investment income or gross profits would not
be adequate to cover related losses and expenses.
Charges Assessed Against Policyholders
Charges assessed against policyholders' funds for surrender charges,
actuarial margin and other fees are recorded as revenue when earned.
Separate Accounts
Assets held under variable annuity contracts are segregated in Separate
Accounts and are invested, as designated by the contractholder, in shares of
mutual funds that are managed by ALIAC or other selected mutual funds not
managed by ALIAC. Separate Accounts assets and liabilities are carried at
fair value except for those relating to a guaranteed interest option which is
offered through a Separate Account. The assets of the Separate Account
supporting the guaranteed interest option are carried at an amortized cost of
$10.1 million for 1995 (fair value of $9.3 million), since the Company bears
the investment risk where the contract is held to maturity. Reserves relating
to the guaranteed interest option are maintained at fund value and reflect
interest credited at rates ranging from 4.65% to 6.0% in 1995. Separate
Accounts assets and liabilities are shown as separate captions in the Balance
Sheets. Deposits, investment income and net realized and unrealized capital
gains (losses) of the Separate Accounts are not reflected in the Statements
of Income (with the exception of realized capital gains (losses) on the sale
of assets supporting the guaranteed interest option). The Statements of Cash
Flows do not reflect investment activity of the Separate Accounts.
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:
Gross Gross
Amortized Unrealized Unrealized
(Thousands) Cost Gains Losses Fair Value
----------- ------------ ------------ -------------
1995
U.S. Treasury securities $7,953.0 $237.4 $ 3.0 $8,187.4
=========== ============ ============ =============
1994
U.S. Treasury securities $7,043.9 $ 4.2 $141.6 $6,906.5
=========== ============ ============ =============
F-8
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements (continued)
December 31, 1995, 1994 and 1993
2. Investments (Continued)
The amortized cost and fair value of debt securities for the year ended
December 31, 1995 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 $2,526.1 $2,526.0
After one year through five years 5,426.9 5,661.4
----------- ----------
Total $7,953.0 $8,187.4
=========== ==========
The Company engages in securities lending whereby certain securities from its
portfolio are loaned to other institutions for short periods of time. Cash
collateral, which is in excess of the market value of the loaned securities,
is deposited by the borrower with a lending agent, and retained and invested
by the lending agent to generate additional income for the Company. The
market value of the loaned securities is monitored on a daily basis with
additional collateral obtained or refunded as the market value fluctuates. At
December 31, 1995, the Company had no securities out on loan.
At December 31, 1995 and 1994, debt securities carried at $4.4 million and
$3.9 million, respectively, 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. Net realized capital
gain on debt securities, as reflected in the Statements of Income for the
year ended December 31, 1995, were $8.3 thousand. For the years ended
December 31, 1994 and 1993 there were no realized capital gains or losses.
Unrealized capital gains (losses) on investments carried at fair value, net
of related taxes, reflected in shareholder's equity, were as follows for
December 31:
(Thousands) 1995 1994
------------------
Debt securities
Gross unrealized gains $237.4 $ 4.2
Gross unrealized losses (3.0) (141.6)
------------------
234.4 (137.4)
Deferred federal income taxes (See Note 6) 82.0 --
------------------
Net unrealized capital gains (losses) $152.4 $(137.4)
==================
F-9
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements (continued)
December 31, 1995, 1994 and 1993
4. Net Investment Income
Sources of net investment income were as follows:
(Thousands) 1995 1994 1993
--------- -------- ---------
Debt securities $457.5 $414.1 $425.7
Cash equivalents 261.1 205.2 135.3
Other 2.4 -- --
Gross investment income 721.0 619.3 561.0
Less investment expenses -- -- 1.0
--------- -------- ---------
Net investment income $721.0 $619.3 $560.0
========= ======== =========
5. Dividend Restrictions and Shareholder's Equity
The amount of dividends that may be paid to the shareholder in 1996 without
prior approval by the Insurance Commissioner of the State of Connecticut is
$958.0 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 $378.9 thousand,
$348.1 thousand and $312.3 thousand for the years ended December 31, 1995,
1994 and 1993, respectively. Statutory shareholder's equity was $12.1 million
and $11.8 million as of December 31, 1995 and 1994, respectively.
As of December 31, 1995 and 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.
Components of income tax expense (benefits) were as follows:
1995 1994 1993
--------- -------- ---------
(thousands)
Current tax expense:
Income from operations $ 635.2 $188.1 $168.2
Net realized capital gains 2.9 -- --
--------- -------- ---------
638.1 188.1 168.2
--------- -------- ---------
Deferred tax benefit:
Income from operations (549.2) (.4) --
--------- -------- ---------
Total $ 88.9 $187.7 $168.2
========= ======== =========
F-10
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements (continued)
December 31, 1995, 1994 and 1993
6. Federal Income Taxes (Continued)
Income tax expense was different from the amount computed by applying the
federal income tax rate to income before federal income taxes for the
following reasons:
1995 1994 1993
-------- -----------------
(thousands)
Income before federal income taxes $256.8 $536.3 $480.5
Tax rate 35 % 35 % 35 %
-------- -----------------
Application of the tax rate $ 89.9 $187.7 $168.2
Other, net (1.0) -- --
-------- -----------------
Income tax expense $ 88.9 $187.7 $168.2
======== =================
The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities at December 31, 1995 and 1994 are
presented below:
1995 1994
---------- -------
(thousands)
Deferred tax assets:
Net unrealized capital losses $ -- $48.1
Insurance reserves 1,054.6 --
Other, net -- .4
---------- -------
Total gross assets 1,054.6 48.5
Less valuation allowance -- 48.1
---------- -------
Deferred tax assets, net of valuation 1,054.6 .4
Deferred tax liabilities:
Deferred policy acquisition costs 496.4 --
Net unrealized capital gains 82.0 --
Other 8.6 --
---------- -------
Total gross liabilities 587.0 --
---------- -------
Net deferred tax asset $ 467.6 $ .4
========== =======
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. As of December 31, 1995, no valuation allowance was
required for unrealized capital gains and losses. The reversal of the
valuation allowance had no impact on net income in 1995. Management believes
that it is more likely than not that the Company will realize the benefit of
the net deferred tax asset.
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 challenges. The Service has
commenced its examinations for the years 1987 through 1990.
F-11
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements (continued)
December 31, 1995, 1994 and 1993
7. Benefit Plans
The Company utilizes the employees of Aetna and its affiliates (primarily
ALIAC). The following is a discussion of benefit plans as they apply to
ALIAC. The charges to operations of the Company for the utilization of these
employee's during 1995 were immaterial. There were no charges to operations
of the Company during 1994 and 1993 for the benefit plans described below.
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 Projected Unit Credit Method and, for qualified plans subject to ERISA
requirements, are limited to the amounts that are currently deductible for
tax reporting purposes. The accumulated benefit obligation and plan assets
are recorded by Aetna. 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.
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.
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, at cost, 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 $350.0 thousand and $1.0 thousand for the years ended December
31, 1995 and 1993, respectively. There were no charges in 1994.
The Company is compensated by the Separate Accounts for bearing mortality and
expense risks pertaining to variable annuity contracts. Under the insurance
contracts, the Separate Accounts pay the Company a daily fee which, on an
annual
F-12
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Notes to Financial Statements (continued)
December 31, 1995, 1994 and 1993
8. Related Party Transactions (Continued)
basis, is 1.40% of their average daily net assets. The amount of compensation
and fees received from the Separate Accounts, charges assessed against
policyholders, amounted to $132.7 thousand for the year ended December 31,
1995. There were no charges assessed against policyholders for the years
ended December 31, 1994 and 1993.
9. Estimated Fair Value
The carrying values and estimated fair values of the Company's financial
instruments at December 31, 1995 and 1994 were as follows:
1995 1994
---------------------- -----------------------
Carrying Fair Carrying Fair
(Thousands) Value Value Value Value
----------- ----------- ----------- -----------
Assets:
Cash and cash equivalents $4,044.2 $4,044.2 $4,732.7 $4,732.7
Debt securities 8,187.4 8,187.4 6,906.5 6,906.5
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.
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.
Off-Balance-Sheet Financial Instruments (including Derivative Financial
Instruments)
The Company did not have transactions in derivative instruments in 1995 or
1994.
10. Commitments and Contingent Liabilities
Commitments
At December 31, 1995 and 1994 the Company had no commitments or contingent
liabilities.
Litigation
There were no material legal proceedings pending against the Company as of
December 31, 1995 or 1994 which were beyond the ordinary course of business.
F-13
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
- ---------------------------------------------------------
Not Applicable
Item 14. Indemnification of Directors and Officers
- -------------------------------------------------------
Reference is hereby made to Section 33-771(f) of the Connecticut General
Statutes ("C.G.S.") regarding indemnification of directors and Section 33-776(4)
regarding indemnification of officers, employees and agents of Connecticut
corporations. These statutes provide in general that Connecticut corporations
incorporated prior to January 1, 1997 shall indemnify their officers, directors,
employees and agents against "liability" (defined as the obligation to pay a
judgment, settlement, penalty, fine, excise tax in the case of an employee
benefit plan or reasonable expenses incurred with respect to a proceeding). In
the case of a proceeding by or in the right of the corporation, indemnification
is limited to reasonable expenses incurred in connection with the proceeding
against the corporation to which the individual was named a party. The
corporation's obligation to provide such indemnification does not apply unless
(1) the individual has met the standard of conduct set forth in Section 33-771;
and (2) a determination is made (by majority vote of a quorum of the board of
directors who were not parties to the proceeding, or if a quorum cannot be
obtained, by a committee of the board selected as described in Section
33-775(b)(2); by special legal counsel selected by the board of directors or
members thereof as described in Section 33-775(b)(3); by shareholders) that the
individual met the standard set forth in Section 33-771; or (3) the court, upon
application by the individual, determines in view of all the circumstances that
such person is reasonably entitled to be indemnified. Also, unless limited by
its Certificate of Incorporation, a corporation must indemnify an individual who
was wholly successful on the merits or otherwise against reasonable expenses
incurred by him in connection with a proceeding to which he was a party because
of his relationship as director, officer, employee or agent of the corporation.
The statute does specifically authorize a corporation to procure indemnification
insurance on behalf of an individual who is or was a director, officer, employer
or agent of the corporation. Consistent with the statute, Aetna Inc. has
procured insurance from Lloyd's of London and several major United States excess
insurers for its directors and officers and the directors and officers of its
subsidiaries, including the Depositor.
Item 15. Recent Sales of Unregistered Securities
- -----------------------------------------------------
Not Applicable
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
- ---------------------------------------------------
(a) Exhibits
(1.1) Principal Underwriting Agreement
(1.2 First Amendment to Principal Underwriting Agreement
(3.1) Articles of Incorporation of Registrant(1)
(3.2) By-Laws(1)
(4) Instruments Defining the Rights of Security Holders:
(a) Form of Variable Annuity Contract (Group Variable)
(G-CDA-GP2(4/94));
Form of Aetna Growth Plus Group IRA Endorsement (CGP2QEND
(4/94));
Form of Variable Annuity Contract (Individual Variable)
(I-CDA-GP2(4/94));
and Form of Aetna Growth Plus Individual IRA Endorsement
(GP2QEND(4/94)), (GP2NHEND)(2)
(b) Form of Variable Annuity Contracts (G2-CDA-94(IR)) and
(G2-CDA-94(NQ))(1)
(5) Opinion re Legality
(10) Material Contracts are listed under exhibit 10 in the
Company's Form 10-K for the fiscal year ended December 31,
1995 (File No. 33-81010), as filed electronically with the
Commission on March 29, 1996. Each of the exhibits so
listed is incorporated by reference as indicated in the
Form 10-K.
(15) Letter re unaudited interim financial information
(23) (a) Consent of Independent Auditors
(b) Consent of Legal Counsel (Included in Item (5) above)
(24) (a) Powers of Attorney(3)
(b) Certificate of Resolution Authorizing Signature by Power
of Attorney(1)
(b) Consolidated Financial Statement Schedules
(i) Independent Auditors' Report
(ii) Schedule I - Summary of Investments - Other than Investments
in Affiliates as of December 31, 1995
(iii) Schedule III - Supplementary Insurance Information as of and
for the years ended December 31, 1995, 1994 and 1993
Exhibits and Schedules other than those listed are omitted because they are not
required or are not applicable.
1. Incorporated by reference to Registration Statement on Form N-4 (File No.
33-59749), as filed electronically on June 1, 1995.
2. Incorporated by reference to Registration Statement on Form N-4 (File No.
33-80750), as filed electronically on June 23, 1994.
3. Included on the signature page of this Registration Statement.
<PAGE>
Item 17. Undertakings
- --------------------------
The undersigned registrant hereby undertakes as follows, pursuant to Item
512 of Regulation S-K:
(a) Rule 415 offerings:
(1) To file, during any period in which offers or sales of the
registered securities 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; and
(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.
(h) Request for Acceleration of Effective Date:
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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 the Registrant
has duly caused this Registration Statement on Form S-1 to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Hartford,
State of Connecticut, on this 4th day of March, 1997.
By: AETNA INSURANCE COMPANY OF AMERICA
By: /s/Daniel P. Kearney
----------------------------------
Daniel P. Kearney
Principal Executive Officer
As required by the Securities Act of 1933 this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated. Each person whose signature appears below hereby constitutes Susan E.
Bryant, Kirk P. Wickman, and Julie E. Rockmore and each of them individually,
such person's true and lawful attorneys, with full power to them and each of
them to sign for such person and in such person's name and capacity indicated
below, any and all amendments to this Registration Statement, hereby ratifying
and confirming such person's signature as it may be signed by said attorneys to
any and all amendments.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/Daniel P. Kearney Director and President )
- ------------------------------------ (principal executive officer) )
Daniel P. Kearney
)
/s/Deborah Koltenuk Director, Vice President and Treasurer, Corporate )
- ------------------------------------ Controller ) March
Deborah Koltenuk ) 4, 1997
/s/Laura R. Estes Director )
- ------------------------------------
Laura R. Estes )
)
/s/James J. Mallozzi Director )
- ------------------------------------
James J. Mallozzi )
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
- ----------- ------- ----
<S> <C> <C>
16(1.1) Principal Underwriting Agreement
------------
16(1.2) First Amendment to Principal Underwriting Agreement
------------
16(a)(3.1) Articles of Incorporation of Registrant *
16(a)(3.2) By-Laws *
16(a)(4) Instruments Defining the Rights of Security Holders:
(a) Form of Variable Annuity Contract (Group Variable) *
(G-CDA-GP2(4/94)); Form of Aetna Growth Plus Group
IRA Endorsement (CGP2QEND(4/94)); Form of Variable
Annuity Contract (Individual Variable)
(I-CDA-GP2(4/94)); and Form of Aetna Growth Plus
Individual IRA Endorsement (GP2QEND(4/94)),
(GP2HEND)
(b) Form of Variable Annuity Contracts (G2-CDA-94(IR)) and
(G2-CDA-94(NQ))
16(a)(5) Opinion re Legality
------------
16(a)(10) Material Contracts *
16(a)(15) Letter re unaudited interim financial information ------------
16(a)(23)(a) Consent of Independent Auditors
------------
16(a)(23)(b) Consent of Legal Counsel (included in item 16(a)(5)) *
16(a)(24)(a) Powers of Attorney (included on signature page of this Registration Statement) *
16(a)(24)(b) Certificate of Resolution Authorizing Signature by Power of Attorney *
16(b)(i) Independent Auditors' Report
------------
16(b)(ii) Schedule I - Summary of Investments - Other than Investments in Affiliates as of
December 31, 1995
------------
16(b)(iii) Schedule III - Supplementary Insurance Information as of and for the years ended
December 31, 1995, 1994 and 1993
------------
</TABLE>
* Incorporated by reference
PRINCIPAL UNDERWRITING AGREEMENT
THIS UNDERWRITING AGREEMENT ("Agreement") is effective as of the 22nd day
of September, 1995, by and between Aetna Insurance Company of America ("AICA"),
on its own behalf and on behalf of Variable Annuity Account I and Variable
Annuity Account II (the "Accounts"), separate accounts of AICA, and Aetna Life
Insurance and Annuity Company, (the "Underwriter").
WHEREAS, the Accounts were established pursuant to authority granted by a
resolution of AICA's Board of Directors dated May 31, 1994;
WHEREAS, the Accounts will maintain the net proceeds of and reserves for
certain variable annuity contracts issued by AICA (the "Contracts");
WHEREAS, AICA has registered the Accounts as unit investment trusts under
the Investment Company Act of 1940 and has registered or will register the
Contracts for sale under the Securities Act of 1933; and
WHEREAS, AICA and the Accounts desire to have the Contracts sold through
the Underwriter, and the Underwriter is willing to provide for the sale of the
Contracts under the terms stated herein;
<PAGE>
NOW THEREFORE, in consideration of their mutual promises the parties hereto
agree as follows:
1. Principal Underwriter
---------------------
AICA appoints the Underwriter as, and the Underwriter agrees to serve as,
principal underwriter of the Contracts during the term of this Agreement. The
Underwriter agrees to use its best efforts to provide for the solicitation of
applications for the Contracts, and to undertake at its own expense to provide
all sales services relative to the Contracts and to perform otherwise all duties
and functions that are necessary and proper for the distribution of the
Contracts.
2. Sales Agreements
----------------
The Underwriter is hereby authorized to enter into written sales agreements
with other broker-dealers for the sale of the Contracts on terms and conditions
not inconsistent with and subject to this Agreement.
3. Registration and Responsibility of Underwriter
----------------------------------------------
The Underwriter represents that it is registered as a broker-dealer with
the SEC under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. ("NASD") and shall be
registered if necessary or otherwise appropriately qualified under the
securities laws of any state or other jurisdiction. The Underwriter shall be
responsible for carrying out its sales and underwriting obligations hereunder in
compliance with the NASD Rules of Fair Practice and federal and state securities
laws and regulations. In this connection, the Underwriter agrees that it shall
be responsible for ensuring that any organization with which
2
<PAGE>
it enters into a sales agreement for the sale of the Contracts, and such
organization's agents or representatives, are duly and appropriately licensed,
registered, appointed and otherwise qualified to offer and sell the Contracts
under the federal securities laws and any applicable securities and insurance
laws of each state or other jurisdiction in which the Contracts may be lawfully
sold and in which AICA is licensed to sell the Contracts;
4. Control and Responsibility
--------------------------
AICA shall have ultimate control and responsibility of the functions that
it has delegated. AICA shall own and have custody of its general corporate
accounts and records.
5. Administrative Services, Books, Records and Reports
---------------------------------------------------
The Underwriter shall cause to be maintained and preserved for the periods
prescribed such accounts, books and other documents as are required of it by the
Investment Company Act of 1940 and any other applicable laws and regulations.
The books, accounts and records of AICA, the Accounts and the Underwriter as to
all transactions effected in accordance with this Agreement shall be maintained
so as to clearly and accurately disclose the nature and details of such
transactions, including the sale of Contracts and payment of commissions and
service fees by AICA. The Underwriter shall furnish AICA with such reports as it
may reasonably request for the purpose of meeting its reporting and record
keeping requirements in accordance with applicable laws and regulations.
6. Fiduciary Capacity
------------------
Underwriter agrees that any purchase payments it receives for the Contracts
will be held in a fiduciary capacity and agrees to transfer any such amount to
AICA within three business days.
3
<PAGE>
7. Compensation to Underwriter
---------------------------
AICA will pay the Underwriter for services rendered hereunder as billed by
the Underwriter and agreed to by AICA. Underwriter agrees that reimbursement
shall be limited to actual expenses.
8. Non Exclusivity
---------------
The services of the Underwriter to the Accounts hereunder are not to be
deemed exclusive and the Underwriter shall be free to render similar services to
others as long as its services provided hereunder are not impaired or interfered
with thereby.
9. Non Assignability
-----------------
This Agreement shall be nonassignable by the parties hereto.
10. Amendment
---------
This Agreement shall be amended only by written agreement of the parties
hereto.
11. Termination
-----------
(a) This Agreement may be terminated by either party hereto for any
reason upon 60 days' written notice to the other party.
(b) This Agreement may be terminated upon written notice of one party
to the other party hereto in the event of bankruptcy or insolvency of such party
to which notice is given.
(c) This Agreement may be terminated at any time upon the mutual
written consent of the parties hereto.
4
<PAGE>
(d) This Agreement shall automatically terminate three years after
the date of execution and may be renewed for subsequent three-year periods.
(e) Upon termination of this Agreement, all authorizations, rights and
obligations shall cease except the obligations to settle accounts hereunder,
including payment of contributions subsequently received for Contracts in effect
at the time of termination or issued pursuant to applications received by AICA
prior to termination.
12. Applicable Law
--------------
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Connecticut.
13. Severability
------------
If any provision of this Agreement shall be held or made invalid by a
court, statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby.
5
<PAGE>
IN WITNESS THEREOF, the parties hereto have caused this Agreement to be
signed by their respective officials thereunder duly authorized and seals to be
affixed as of the day and year first above written.
AETNA INSURANCE COMPANY OF AMERICA
By /s/ James C. Hamilton
----------------------
Its Vice President & Treasurer
AETNA INSURANCE COMPANY OF AMERICA,
ON BEHALF OF ITS VARIABLE ANNUITY
ACCOUNTS I AND II
By /s/ James C. Hamilton
----------------------
Its Vice President & Treasurer
AETNA LIFE INSURANCE AND
ANNUITY COMPANY
By /s/ Mary Lou Marek
------------------
Its Vice President
6
FIRST AMENDMENT TO PRINCIPAL UNDERWRITING AGREEMENT
This First Amendment to the Principal Underwriting Agreement is made and entered
into as of the 11th day of January, 1996 by and between Aetna Insurance Company
of America ("AICA"), on its own behalf, on behalf of its general account, and on
behalf of Variable Annuity Account I and Variable Annuity Account II (the
"Accounts"), separate accounts of AICA, and Aetna Life Insurance and Annuity
Company (the "Underwriter").
WITNESSETH
WHEREAS, AICA and the Underwriter are parties to a Principal Underwriting
Agreement dated September 22, 1995 (the "Original Agreement"),
WHEREAS, AICA and the Underwriter now desire to modify the Original Agreement to
provide for the distribution by the Underwriter of certain modified guaranteed
annuity contracts issued by AICA;
NOW THEREFORE, in consideration of the premises and the mutual covenants and
promises expressed herein, the parties agree as follows:
The Principal Underwriting Agreement is now made among AICA, on its own
behalf, on behalf of its general account and on behalf of Variable
Annuity Account I and Variable Annuity Account II, and Aetna Life
Insurance and Annuity Company.
The second "Whereas" is deleted in its entirety and the following is
substituted therefor:
WHEREAS, the Accounts will maintain the net proceeds of and
reserves for certain variable annuity contracts issued by AICA, and
AICA's general account will receive the purchase payments under certain
modified guaranteed annuity contracts issued by AICA (the "Contracts");
The Fourth "Whereas" clause is deleted in its entirety and the
following is substituted therefor:
WHEREAS, AICA, the Accounts, and the general account
desire to have the Contracts sold through the Underwriter, and the
Underwriter is willing to provide for the sale of the Contracts under
the terms stated herein.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this First Amendment as of the
date written above.
AETNA INSURANCE COMPANY OF AMERICA
By /s/ Shaun P. Mathews
--------------------
Its Senior Vice President
AETNA INSURANCE COMPANY OF AMERICA,
ON BEHALF OF ITS GENERAL ACCOUNT AND VARIABLE ANNUITY ACCOUNTS I AND II
By /s/ Shaun P. Mathews
--------------------
Its Senior Vice President
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By /s/ Laura Estes
----------------
Its Senior vice President
151 Farmington Avenue
Hartford, CT 06156
Susan E. Bryant
Counsel
Law Division, RC4A
March 4, 1997 Investments & Financial Services
(860) 273-7834
Fax: (860) 273-0356
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C.
Re: Aetna Insurance Company of America
Registration Statement on Form S-1
AICA Guaranteed Account
Dear Sirs:
As Counsel of Aetna Insurance Company of America (the "Company"), I have
represented the Company in connection with the registration on Form S-1 of
investments in the AICA Guaranteed Account (the "Guaranteed Account") under the
Securities Act of 1933.
In connection with such representation, I have reviewed the Registration
Statement on Form S-1 for the Guaranteed Account including the prospectus and
relevant proceedings of the Board of Directors.
Based upon this review, and assuming the securities represented by the
Guaranteed Account are issued in accordance with the provisions of the
prospectus, I am of the opinion that the securities will, when sold, be legally
issued, fully paid and non-assessable.
I further consent to the use of this opinion as an exhibit to the Registration
Statement.
Sincerely,
/s/Susan E. Bryant
Susan E. Bryant
Counsel
Letter Re: Unaudited Interim Financial Information
Aetna Insurance Company of America
Hartford, Connecticut
Ladies and Gentlemen:
With respect to the Registration Statement on Form S-1, we acknowledge our
awareness of the use therein of our report dated October 23, 1996 related to our
review of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered a part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of sections 7 and 11 of the Act.
/s/KPMG PEAT MARWICK LLP
Hartford, Connecticut
February 27, 1997
Consent of Independent Auditors
The Shareholders and Board of Directors of
Aetna Insurance Company of America:
We consent to the use of our audit reports dated March 20, 1996, with respect to
the balance sheets of Aetna Insurance Company of America (the "Company") as of
December 31, 1995 and 1994 and the related statements of income, changes in
shareholder's equity, and cash flows and related schedules for each of the years
in the three-year period ended December 31, 1995, which reports are included
herein and to the reference to our firm under the heading "Experts" in the
prospectus.
Our reports refer to changes in 1993 in the Company's accounting for certain
investments in debt and equity securities.
/s/KPMG PEAT MARWICK LLP
Hartford, Connecticut
February 27, 1997
INDEPENDENT AUDITORS' REPORT
The Shareholder and Board of Directors
Aetna Insurance Company of America:
Under date of March 20, 1996, we reported on the balance sheets of Aetna
Insurance Company of America as of December 31, 1995 and 1994, 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, 1995, as included
herein. In connection with our audits of the aforementioned financial
statements, we also have audited the related financial statement schedules as
listed in the accompanying index. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
As discussed in Note 1 to the financial statement's, in 1993 the Company changed
its method of accounting for certain investments in debt and equity securities.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
March 20, 1996
EXHIBIT 16(b)(ii)
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, 1995
(thousands)
Amount at
Which Shown
in the
Type of Investment Cost Value* Balance Sheet
------------------ ---- ------ -------------
Debt Securities:
U.S. Treasury securities $7,953.0 $8,187.4 $8,187.4
-------- -------- --------
Toal Investments - other than
investments in affiliates $7,593.0 $8,187.4 $8,187.4
-------- -------- --------
* See Notes 1, 2 and 9 to Financial Statements.
EXHIBIT 16(b)(iii)
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
SCHEDULE III
Supplementary Insurance Information
As of and for the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
(Thousands)
Policy-
Deferred Unpaid holders' Other income
policy Future claims and funds left Net (including
acquisition policy Unearned claim with the Premium investment realized capital
costs benefits permiums expenses company revenue income(1) gains and losses)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $ 2066.4 $ - $ - $ - $ - $ - $ 721.0 $ 141.0
- ----
--------------------------------------------------------------------------------------------------------------------
1994 $ - $ - $ - $ - $ - $ - $ 619.3 $ -
- ----
--------------------------------------------------------------------------------------------------------------------
1993 $ - $ - $ - $ - $ - $ - $ 560.0 $ -
- ----
--------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
(Thousands)
Amortization
of deferred Current
policy Other & Future
acquisition operating benefits
costs expenses expenses
- ------------------------------------------------------
<S> <C> <C> <C>
1995 $ - $ 605.2 $ -
----------------------------------------------
1994 $ - $ 83.0 $ -
----------------------------------------------
1993 $ - $ 79.5 $ -
----------------------------------------------
</TABLE>
(1) The allocation of net investment income is based upon the interest year
method or specific identification of certain portfolios within specific
segments.
