As filed with the Securities and Exchange Registration No. ______________
Commission on April 7, 1998
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Aetna Insurance Company of America
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Connecticut
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06-1286272
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151 Farmington Avenue, Hartford, Connecticut 06156, (860) 273-4686
Julie E. Rockmore, Counsel
Aetna Insurance Company of America
151 Farmington Avenue, RE4A, Hartford, Connecticut 06156
(860) 273-4686
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(Name, Address, including Zip Code, and Telephone Number,
including Area Code, of Agent for Service)
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The annuities covered by this registration statement are to be issued from time
to time after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [XX]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legal facsimile thereof, pursuant to Item 11(a)(1) of
this Form, 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, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _______________
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, 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. [ ]
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Calculation of Registration Fee
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<CAPTION>
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Title of Each Class Amount to be Proposed Maximum Proposed Maximum Amount of
of Securities to be Registered Offering Price Per Aggregate Offering Registration Fee
Registered Unit Price
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<S> <C> <C> <C> <C>
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* * $8,267,000 $2,850.69
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</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. 333-22723 ( which includes securities formerly
registered under Registration Statement No. 33-63611) are being carried forward
to this Registration Statement. As of February 28, 1998, the amount of such
unsold securities was $163,153,000. The registration fees paid in connection
with the registration of such securities was $75,757.58.
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AICA GUARANTEED ACCOUNT
A CREDITED 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)
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Form S-2
Item No. Information Required in Prospectus Location
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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 Registered................... Description of the AICA Guaranteed
Account
10 Interests of Named Experts and Counsel....................... Not Applicable
11 Information with Respect to the Registrant................... Not Applicable
12 Incorporation of Certain Information by Incorporation of Certain Documents by
Reference.................................................... Reference; Experts
13 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: May 1, 1998
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.")
THIS PROSPECTUS SHOULD BE READ IN CONJUNCTION WITH 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.
THIS PROSPECTUS AND OTHER INFORMATION ABOUT THE COMPANY REQUIRED TO BE FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION CAN BE FOUND IN THE SEC'S WEB SITE
AT http://www.sec.gov.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION 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.
THESE CONTRACTS ARE NOT OFFERED FOR SALE IN THE STATE OF NEW YORK.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 ("Exchange Act"), and, in accordance therewith, files
periodic reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports and other information concerning the
Company may be inspected and copied at the public reference facilities of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511, and at 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of such material also can be
obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
This Prospectus is accompanied by a copy of the Company's annual report on Form
10-K for the year ended December 31, 1997. Reference is made to Form 10-K for a
description of the Company and its business, including financial statements.
The Company intends to deliver to holders of outstanding Contracts account
statements at least annually and such other periodic reports as may be required
by law, but it is not anticipated that any such reports will include periodic
financial statements or information concerning the Company.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's latest Annual Report on Form 10-K, filed with the Commission
pursuant to Section 15(d) of the Exchange Act, is incorporated by reference
into this Prospectus and must accompany this Prospectus. The Form 10-K contains
additional information about the Company, including certified financial
statements for the Company's latest fiscal year. No other reports have been
filed by the Company pursuant to Section 13(a) or 15(d) of the Exchange Act
since the end of the fiscal year covered by that Form 10-K.
The Company will provide without charge to each person to whom this Prospectus
is delivered, on the written or oral request of any such person, a copy of any
or all of the documents incorporated by reference in the Registration Statement
of which this Prospectus forms a part other than exhibits to such documents
unless such exhibits are specifically incorporated by reference into such
documents. Requests should be directed to Aetna Insurance Company of America,
151 Farmington Avenue, Hartford, Connecticut 06156, telephone (800) 531-4547.
<PAGE>
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION ................................................ 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ...................... 1
GLOSSARY ............................................................. 3
SUMMARY .............................................................. 4
DESCRIPTION OF THE AICA GUARANTEED ACCOUNT ........................... 5
General ........................................................... 5
Contributions to the Guaranteed Account ........................... 6
Guaranteed Rates .................................................. 6
Maturity of a Guaranteed Term ..................................... 7
Maturity Value Transfer Provision ................................. 7
TRANSFERS AND WITHDRAWALS ............................................ 8
Transfers ......................................................... 8
Withdrawals ....................................................... 8
Calculation of Transfer or Withdrawal Amounts ..................... 8
MARKET VALUE ADJUSTMENT .............................................. 9
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 ................................................... 12
Taxation of the Guaranteed Account ................................ 12
YEAR 2000 ............................................................ 12
EXPERTS .............................................................. 12
LEGAL MATTERS ........................................................ 12
FURTHER INFORMATION .................................................. 12
INQUIRIES ............................................................ 13
APPENDIX I--Examples of Market Value Adjustment Calculations ......... 14
APPENDIX II--Examples of Market Value Adjustment Yields .............. 16
2
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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 a
specific Guaranteed Rate or Rates are offered on amounts invested during a
specific Deposit Period. Guaranteed Terms are made available by the Company
subject to the Company's terms and conditions, including, but not limited to,
the Company's right to restrict allocations to new purchase payments or
deposits (such as by prohibiting transfers into a particular Guaranteed Term
from any other Guaranteed Term or from any other funding option or by
prohibiting the reinvestment of Matured Term Value into a particular Guaranteed
Term). The Company may offer more than one Guaranteed Term of the same duration
and credit one with a different rate subject to certain restrictions such as
requiring the use of the Dollar Cost Averaging Program.
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.
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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 distributed under one of the Systematic Distribution Options described
in the Contract Prospectus; and (4) amounts transferred from the Guaranteed
Term in connection with the Dollar Cost Averaging Program described in the
Contract Prospectus. However, if the Certificate Holder discontinues the Dollar
Cost Averaging Program and the amounts in it are transferred in accordance with
the Company's terms and conditions governing Guaranteed Terms, to another
Guaranteed Term, a market value adjustment will apply.
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
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Contract; or (c) withdraw the Matured Term Value. In none of these
circumstances would a Market Value Adjustment be 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 or if no
shorter Guaranteed Term is available, to the next longer 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. 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
(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").
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 an insulated, 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").
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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. The Company may also limit the number of
Guaranteed Terms an individual may select. At this time, if the Certificate
Holder has the Dollar Cost Averaging Program in effect in a Guaranteed Term and
wishes to add an additional deposit to be dollar cost averaged, all amounts to
be dollar cost averaged will have to be combined and the dollar cost averaging
amounts will be recalculated. This will affect the duration of amounts in the
Guaranteed Term.
The Company reserves the right to limit the number of investment options
selected during the Accumulation Period. At this time there is no limit on the
number of investment options selected during the Accumulation Period, but the
number of investment options that may be selected at any one time by a
Certificate Holder is limited to 18. Each Guaranteed Term is counted as one
investment option. There is no minimum amount required if investments come from
Purchase Payments; however, you must meet the minimum purchase 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 cessation by the
Certificate Holder of the Dollar Cost Averaging Program in certain
circumstances, or the selection of a Systematic Distribution Option available
under the Contract for periodic 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. The Company may offer different Guaranteed Rates on Guaranteed
Terms of the same duration and may have certain restrictions apply to the use
of any Guaranteed Terms such as, but not limited to, the requirement of the use
of the Dollar Cost Averaging Program. The Company may also limit the number of
Guaranteed Terms an individual may select. 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
Guaranteed Term may also have several different Guaranteed Rates for subsequent
specific periods of time. For
6
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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. If no shorter Guaranteed Term is available, the next longer Guaranteed
Term will be used. 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, but a 1-year Guaranteed
Term is available for maturities, the Matured Term Value will be reinvested in
the 1-year Guaranteed Term, 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. 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. A deferred
sales charge may be assessed on amounts withdrawn from the Contract. Please see
"Contract Charges" and the Contract Prospectus for more information.
7
<PAGE>
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 Company reserves the
right to limit the number of investment options selected during the
Accumulation Period. At this time there is no limit on the number of investment
options selected during the Accumulation Period, but the number of investment
options that may be selected at any one time by a Certificate Holder is limited
to 18. Each Guaranteed Term is counted as one investment option. The minimum
amount that may be transferred from other investment 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
restriction does not apply to the selection of Systematic Distribution Options
available under the Contract or to transfers relating to the Dollar Cost
Averaging Program. However, if the Certificate Holder discontinues the Dollar
Cost Averaging Program, the Company may require that all amounts in that
Guaranteed Term be transferred into another Guaranteed Term in accordance with
the Company's terms and conditions governing Guaranteed Terms. A market value
adjustment will apply.
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 1/1/95-1/14/95
Deposit Period B = Five-Year Guaranteed Term 1/1/96-1/14/96
Deposit Period C = Five-Year Guaranteed Term 1/1/97-1/14/97
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.
8
<PAGE>
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 in
connection with the Dollar Cost Averaging Program (unless the transfer is made
as a result of the discontinuance by the Certificate Holder of the Dollar Cost
Averaging Program--see "Transfers"), and amounts withdrawn under one of the
Systematic Distribution Options.
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.
9
<PAGE>
For example, assume the withdrawal will be processed on May 15, 1998. List the
yield-to-maturity percentage figures as of May 8, 1998 for the same Treasury
Notes that determined the deposit period yield. Average these yields to
determine the current yield.
MVA Formula
The mathematical formula used to determine the MVA is:
x
---
365
(1 + i)
{-------}
(1 + j)
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 of a maximum of 7% of Purchase Payments
withdrawn grading down to 0% as of the seventh year from receipt of the
Purchase Payment may be deducted from those amounts withdrawn. Please see the
Contract Prospectus for further details.
Mortality and expense risk charges and the administrative charges that are
deducted from variable funding options are not deducted from the Guaranteed
Account. An annual maintenance fee of a maximum of $30.00 may be deducted from
each Account and upon full surrender of Account Value. The fee is deducted on a
pro rata basis from each investment option in which you have an interest. Also,
transfer fees of up to $10 per transfer may be deducted from amounts held in or
transferred from the Guaranteed Account, and premium taxes of up to 4% may be
applied to amounts held in 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 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.
Certificate Holders allocating amounts to the nonunitized separate account do
not receive a unit value of ownership of assets accounted for in the 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
10
<PAGE>
is borne by the Company. All benefits available to Certificate Holders
allocating amounts to the nonunitized separate account are Contract guarantees
made by the Company and are accounted for in the separate account. All of the
general assets of the Company are available to meet the guarantees under the
Contracts. However, if and to the extent provided in the applicable Contracts,
assets of the nonunitized separate account are not chargeable with liabilities
arising out of any other business conducted by the Company, and income, gains or
losses of the separate account are credited to or charged against the assets of
the separate account without regard to other income, gains or losses of the
Company. The Company intends to amend all Contracts covered by this Prospectus
in order to provide that the assets of the separate account to the extent of
Contract liabilities are "insulated" from other Company liabilities as described
above.
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.
From time to time, the Company may offer customers of certain broker-dealers
special guaranteed rates in connection with the Guaranteed Account offered
through the Contracts, and may negotiate different commissions for these
broker-dealers. For additional information regarding distribution, see the
Contract Prospectus.
11
<PAGE>
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 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.
YEAR 2000
The Company shares the same systems as ALIAC and management has decided not to
allocate Year 2000 costs to the Company. ALIAC has developed and is currently
executing a comprehensive risk-based plan designed to make its computer systems,
applications and facilities Year 2000 ready. The plan covers four stages
including (i) inventory, (ii) assessment, (iii) remediation and (iv) testing
and certification. At year end 1997, ALIAC had substantially completed the
inventory and assessment stages. The remediation process is currently underway
and targeted for completion by December 31, 1998. Testing and certification of
these systems and applications are targeted for completion by mid 1999.
The Company deals with affiliated and unaffiliated third parties in connection
with the investments made by the Company with the amounts allocated to the
Guaranteed Account. Aetna, Inc. and ALIAC, are initiating communication with
their critical external relationships to determine the extent to which the Aetna
organization may be vulnerable to such parties' failure to resolve their own
Year 2000 issues. Where practicable the Aetna organization, including the
Company, will assess and attempt to mitigate its risks with respect to the
failure of these parties to be Year 2000 ready. The failure of third parties to
complete adequate preparations in a timely manner could have an adverse effect
on the operation of the Guaranteed Account, or the establishment of future
Guaranteed Rates.
EXPERTS
The financial statements and schedule of the Company as of December 31, 1997 and
1996 and for each of the years in the three-year period ended December 31, 1997,
which are included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, have been incorporated by reference herein and into the
Registration Statement on Form S-2 in reliance upon the reports of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing. The reports of KPMG Peat Marwick LLP, covering the December 31, 1997
financial statements and schedule of the Company refer to a change in method for
accounting for guaranty-fund and other insurance related assessments.
LEGAL MATTERS
The validity of the securities offered by this Prospectus has been passed upon
by Counsel of the Company.
FURTHER INFORMATION
This Prospectus does not contain all of the information contained in the
registration statement of which the Prospectus is a part, and certain portions
of the registration statement have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The information so
omitted may be obtained from the offices of the Commission, as set forth under
"Available Information," upon payment of the prescribed fee.
12
<PAGE>
INQUIRIES
You may direct inquiries by writing directly to us at the address shown on the
cover page of this Prospectus or by calling 1-800-531-4547.
13
<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.
x
---
365
(1 + i)
MVA = {-------}
(1 + j)
927
---
365
1.08
= {----}
1.10
= .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.
x
---
365
(1 + i)
MVA = {-------}
(1 + j)
927
---
365
1.05
= {----}
1.04
= .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.
14
<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.
x
---
365
(1 + i)
MVA = {-------}
(1 + j)
927
---
365
1.10
= {----}
1.08
= 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 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.
x
---
365
(1 + i)
MVA = {-------}
(1 + j)
927
---
365
1.05
= {----}
1.04
= 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.
15
<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>
16
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Not Applicable
Item 15. 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.
<PAGE>
Item 16. Exhibits
Exhibits
(4.1) Variable Annuity Contract G2-CDA-94 (IR)(1)
(4.2) Variable Annuity Contract G2-CDA-94 (NQ)(1)
(4.3) Variable Annuity Contract G-MP2 (5/96)(2)
(4.4) Certificate of Group Annuity Coverage MP2CERT (5/96)(2)
(4.5) Endorsements (MP2END (5/97)) and (I-MP2END (5/97)) to
Contracts G-MP2 (5/96) and MP2CERT (5/96)(2)
(4.6) Variable Annuity Contract G-CDA-GP2(3)
(4.7) Variable Annuity Contract I-CDA-GP2(3)
(4.8) Group Variable, Fixed, or Combination Annuity Contract
(Nonparticipating) G-GP2 (5/96)(4)
(4.9) Individual Variable, Fixed or Combination Annuity Contract
(Nonparticipating) I-GP2 (5/96)(4)
(4.10) Certificate of Group Annuity Coverage GP2CERT (5/97)(4)
(4.11) Variable Annuity Contract G-MP2 (5/97)(5)
(4.12) Variable Annuity Certificate MP2CERT (5/97)(5)
(4.13) Variable Annuity Contract IMP2 (5/97)(5)
(4.14) Endorsement (MP2END 9/97) to Contract G-MP2 (5/96) and
Certificate MP2CERT (5/96)(5)
(4.15) Endorsement (IMP2END 9/97)) to Contract G-MP2 (5/96) and
Certificate MP2CERT (5/96)(5)
(4.16) Endorsement GP2END (5/97) to Contract G-GP2 (5/96)(4)
(4.17) Endorsement I-GP2END (5/97) to Contract I-GP2 (5/96)(4)
(4.18) Endorsement I-GP2END (5/97) to Contract I-GP2 (5/96)(4)
(4.19) Endorsement GP2QEND (4/94) to Contract G-CDA-GP2(3)
(4.20) Endorsement GP2NHEND (4/94) to Contract G-CDA-GP2(3)
(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,
1997 (File No. 33-81010), as filed electronically with the
Commission on March 27, 1998 (Accession Number
0000950146-98-000492). Each of the exhibits so listed is
incorporated by reference as indicated in the Form 10-K.
(23) (a) Consent of Independent Auditors
(b) Consent of Legal Counsel (Included in Item (5) above)
(24) (a) Powers of Attorney (Included on signature page)
(b) Certificate of Resolution Authorizing Signature by Power of
Attorney(1)
(27) Financial Data Schedule
Exhibits other than those listed are omitted because they are not required or
are not applicable.
<PAGE>
1. Incorporated by reference to Registration Statement on Form N-4 (File No.
33-59749), as filed electronically on June 1, 1995 (Accession No.
0000950109-95-002138).
2. Incorporated by reference to Post-Effective Amendment No. 4 to Registration
Statement on Form N-4 (File No. 33-59749), as filed electronically on April
16, 1997 (Accession No. 0000950146-97-000620).
3. Incorporated by reference to Registration Statement on Form N-4 (File No.
33-80750), as filed on June 23, 1994.
4. Incorporated by reference to Post-Effective Amendment No. 8 to Registration
Statement on Form N-4 (File No. 33-80750), as filed electronically on April
23, 1997 (Accession No. 0000950146-97-000634).
5. Incorporated by reference to Post-Effective Amendment No. 6 to Registration
Statement on Form N-4 (File No. 33-59749), as filed electronically on
November 26, 1997 (Accession No. 0000950146-97-001810).
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.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the
<PAGE>
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.
Item 18. Financial Statements and Schedules
Not Applicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of its
requirements for filing on Form S-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Hartford, State of Connecticut, on this 7th day of
April, 1998.
AETNA INSURANCE COMPANY OF AMERICA
(Registrant)
By: /s/ Thomas J. McInerney
------------------------
Thomas J. McInerney
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-2 has been signed by the following persons in
the capacities and on the dates indicated. Each person whose signature appears
below constitutes Mary Katherine Johnson, Kirk P. Wickman, and Julie E. Rockmore
and each of them individually, such person's true and lawful attorneys, and
agents with full power of substitution and resubstitution, for him or her and in
his or her name, place and stead, in any and all capacities, 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.
Signature Title Date
- --------- ----- ----
/s/ Thomas J. McInerney Director and President )
- -------------------------- (principal executive officer) )
Thomas J. McInerney )
)
/s/ Catherine H. Smith Director ) April
- -------------------------- )
Catherine H. Smith ) 7, 1998
)
/s/ Shaun P. Mathews Director )
- -------------------------- )
Shaun P. Mathews )
)
/s/ Deborah Koltenuk Vice President and Treasurer, )
- -------------------------- Corporate Controller )
Deborah Koltenuk (principal financial officer) )
By: /s/ Mary Katherine Johnson
--------------------------
Mary Katherine Johnson
*Attorney-in-fact
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
- ----------- ------- ----
<S> <C> <C>
16(4.1) Variable Annuity Contract G2-CDA-94 (IR) *
16(4.2) Variable Annuity Contract G2-CDA-94 (NQ) *
16(4.3) Variable Annuity Contract G-MP2 (5/96) *
16(4.4) Certificate of Group Annuity Coverage MP2CERT (5/96) *
16(4.5) Endorsements (MP2END (5/97)) and (I-MP2END (5/97)) to Contracts G-MP2 (5/96) and *
MP2CERT (5/96)
16(4.6) Variable Annuity Contract G-CDA-GP2 *
16(4.7) Variable Annuity Contract I-CDA-GP2 *
16(4.8) Group Variable, Fixed, or Combination Annuity Contract *
(Nonparticipating) G-GP2 (5/96)
16(4.9) Individual Variable, Fixed or Combination Annuity Contract (Nonparticipating) I-GP2 *
(5/96)
16(4.10) Certificate of Group Annuity Coverage GP2CERT (5/97) *
16(4.11) Variable Annuity Contract G-MP2 (5/97) *
16(4.12) Variable Annuity Certificate MP2CERT (5/97) *
16(4.13) Variable Annuity Contract IMP2 (5/97) *
16(4.14) Endorsement (MP2END 9/97) to Contract G-MP2 (5/96) and Certificate MP2CERT (5/96) *
16(4.15) Endorsement (IMP2END 9/97)) to Contract G-MP2 (5/96) and Certificate MP2CERT (5/96) *
16(4.16) Endorsement GP2END (5/97) to Contract G-GP2 (5/96) *
</TABLE>
*Incorporated by reference
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
- ----------- ------- ----
<S> <C> <C>
16(4.17) Endorsement I-GP2END (5/97) to Contract I-GP2 (5/96) *
16(4.18) Endorsement I-GP2END (5/97) to Contract I-GP2 (5/96) *
16(4.19) Endorsement GP2QEND (4/94) to Contract G-CDA-GP2 *
16(4.20) Endorsement GP2NHEND (4/94) to Contract G-CDA-GP2 *
16(5) Opinion re Legality
------------
16(10) Material Contracts *
16(23)(a) Consent of Independent Auditors
------------
16(23)(b) Consent of Legal Counsel (Included in Item 16(5) above) ------------
16(24)(a) Powers of Attorney *
16(24)(b) Certificate of Resolution Authorizing Signature by Power of Attorney *
16(27) Financial Data Schedule
------------
</TABLE>
* Incorporated by reference
[Aetna logo]
[Aetna letterhead]
151 Farmington Avenue
Hartford, CT 06156
Julie E. Rockmore
April 7, 1998 Counsel
Law Division, RE4A
Investments & Financial Services
(860) 273-4686
Fax: (860) 273-8340
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, DC 20549
Re: Aetna Insurance Company of America
Registration Statement on Form S-2
Prospectus Title: AICA Guaranteed Account
File No. 333-_____________________
Dear Sir:
As Counsel of Aetna Insurance Company of America (the "Company"), I have
represented the Company in connection with the AICA Guaranteed Account (the
"Guaranteed Account"), a credited interest option available under certain
variable annuity contracts, and the Form S-2 Registration Statement relating to
such account.
In connection with such representation, I have reviewed the Registration
Statement on Form S-2 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, when sold, will have been
legally issued, and will constitute a legal and binding obligation of the
Company.
I further consent to the use of this opinion as an exhibit to the Registration
Statement.
Sincerely,
/s/ Julie E. Rockmore
Julie E. Rockmore
Counsel
Aetna Insurance Company of America
Consent of Independent Auditors
The Shareholder and Board of Directors of
Aetna Insurance Company of America:
We consent to the incorporation by reference in the registration statement on
Form S-2 of Aetna Insurance Company of America (the "Company") of our reports
dated March 25, 1998 with respect to the balance sheets of the Company as of
December 31, 1997 and 1996, and the related statements of income, changes in
shareholder's equity, and cash flows and the related schedule for each of the
years in the three-year period ended December 31, 1997, which reports appear in
the Company's 1997 Annual Report on Form 10-K and to the reference to our firm
under the heading "Experts" in the Prospectus. Our reports refer to a change in
method for accounting for guaranty-fund and other insurance related assessments
in 1997.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
April 6, 1998
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from
1997 Annual Report for Aetna Insurance Company of America on Form 10-K
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000925988
<NAME> Aetna Insurance Company of America
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<DEBT-HELD-FOR-SALE> 137,918
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 137,918
<CASH> 12,494
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 45,364
<TOTAL-ASSETS> 880,542
<POLICY-LOSSES> 0
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 145,626
<NOTES-PAYABLE> 0
0
0
<COMMON> 2,550
<OTHER-SE> 49,700
<TOTAL-LIABILITY-AND-EQUITY> 880,542
0
<INVESTMENT-INCOME> 7,083
<INVESTMENT-GAINS> 102
<OTHER-INCOME> 243
<BENEFITS> 6,535
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 2,482
<INCOME-TAX> 769
<INCOME-CONTINUING> 1,713
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 520
<NET-INCOME> 1,193
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
