As filed with the Securities and Exchange Registration No. 33-63657
Commission on April 7, 1998
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 4
TO
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
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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 legible 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, please 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 number of the earlier effective registration statement for the same
offering. [ ] _____________________
<PAGE>
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. [ ]
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Regulation S-K
Item 501(b)
<TABLE>
<CAPTION>
Form S-2
Item No. Information Required in Prospectus Location
- -------- ---------------------------------- --------
<S> <C> <C>
1 Forepart of the Registration Statement and Outside Front Cover Page
Cover Page of Prospectus ............................
2 Inside Front and Outside Back Cover Cover Page
Pages of Prospectus..................................
3 Summary Information, Risk Factors and Ratio of Earnings Summary Information; Description of
to Fixed Charges..................................... Contracts; Financial Statements
4 Use of Proceeds...................................... Investments
5 Determination of Offering Price...................... Not Applicable
6 Dilution............................................. Not Applicable
7 Selling Security Holders............................. Not Applicable
8 Plan of Distribution................................. Distribution of the Contracts
9 Description of Securities to be Registered .......... Description of the Contracts
10 Interests of Named Experts and Counsel .............. Not Applicable
11 Information with Respect to the Not applicable
Registrant...........................................
12 Incorporation of Certain Information by Reference.... Incorporation of Certain Documents by
Reference; Experts
13 Disclosure of Commission Position on Indemnification
Indemnification for Securities Act Liabilities ......
</TABLE>
<PAGE>
AETNA MULTI-RATE ANNUITY
Aetna Insurance Company of America
151 Farmington Avenue
Hartford, Connecticut 06156
This Prospectus describes certain single purchase payment modified
guaranteed deferred annuity contracts offered by Aetna Insurance Company of
America ("Company"). The contracts are issued as individual or group contracts
and allow you to earn interest and accumulate amounts on a tax deferred basis.
The amounts you accumulate can be used to provide annuity payments or other
benefits.
Individual contracts may be purchased as a nonqualified contract or as a
rollover traditional or Roth Individual Retirement Annuity. Group contracts may
be purchased for both qualified and non-qualified plans. Interests under a
group contract will be evidenced by the issuance to you of a separate
certificate. Individual contracts and certificates under group contracts are
both referred to herein as the "Contract." This Prospectus should be read
thoroughly before you purchase a Contract.
A minimum single purchase payment of at least $10,000 must accompany the
application for a Contract. Under the Contracts, the Company sets various rates
of interest ("Guaranteed Rates") that are paid for varying periods ("Guaranteed
Periods"). You choose the Guaranteed Period for which you would like to invest.
At the end of that Guaranteed Period, you may reinvest your accumulated funds
in another Guaranteed Period. Information concerning available Guaranteed
Periods and Guaranteed Rates may be obtained by calling 1-800-531-4547.
You may withdraw all or part of your accumulated funds at any time.
Withdrawals prior to the end of a Guaranteed Period may be subject to a Market
Value Adjustment and a surrender fee. Upon a full withdrawal, you could,
therefore, receive less than your purchase payment.
--------------
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 BE
LAWFULLY MADE.
--------------
THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED BY ANY BANK, NOR
ARE THEY INSURED BY THE FDIC; THEY ARE SUBJECT TO INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE CONTRACTS ARE NOT OFFERED FOR SALE IN THE STATE OF NEW YORK.
--------------
The date of this Prospectus is May 1, 1998.
<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.
2
<PAGE>
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION .................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE .......................... 2
SPECIAL TERMS ............................................................ 4
SUMMARY INFORMATION ...................................................... 5
DESCRIPTION OF CONTRACTS ................................................. 7
The Application Process ................................................. 7
Free Look ............................................................... 7
THE ACCUMULATION PERIOD .................................................. 7
Guaranteed Periods and Guaranteed Rates ................................. 7
Your Choices at the End of a Guaranteed Period .......................... 8
WITHDRAWALS AND SURRENDERS ............................................... 9
General ................................................................. 9
The Market Value Adjustment ............................................. 9
Fees Applicable to Withdrawals .......................................... 9
Special Withdrawals ..................................................... 10
The Systematic Withdrawal Option ........................................ 10
The Estate Conservation Option .......................................... 10
The Nursing Home Waiver ................................................. 11
Payment Upon Withdrawal or Surrender .................................... 11
CHARGES AND DEDUCTIONS ................................................... 11
Premium Taxes ........................................................... 11
Maintenance Fees ........................................................ 11
DEATH BENEFIT ............................................................ 11
Death Benefit Options Available to Your Beneficiary ..................... 12
ANNUITY PERIOD ........................................................... 12
Selecting an Annuity Date ............................................... 12
Annuity Payments ........................................................ 12
Annuity Options ......................................................... 13
Payment Upon Death After Annuity Payments Begin ......................... 13
INVESTMENTS .............................................................. 13
PARTICIPANT AND BENEFICIARY RIGHTS AND PRIVILEGES ........................ 14
AMENDMENT OF THE CONTRACTS ............................................... 14
DISTRIBUTION OF THE CONTRACTS ............................................ 14
FEDERAL INCOME TAXES ..................................................... 15
The Company ............................................................. 15
Taxes You or Others Pay--Non-Qualified Contracts ........................ 15
Accumulation Period .................................................... 15
Annuity Payments ....................................................... 15
Non-Natural Holders of a Non-Qualified Contract ........................ 15
Withdrawals Before the Annuity Date .................................... 16
Penalty For Premature Withdrawals and Payments ......................... 16
Partial Annuitization .................................................. 16
Distribution-At-Death Rules ............................................ 16
Certain Tax-Free Exchanges ............................................. 16
Taxes You or Others Pay--Qualified Contracts ............................ 17
Contracts Purchased As A Rollover Individual Retirement Annuity ........ 17
Qualified Pension, Profit-Sharing Plans, or Annuity Plans .............. 17
Tax Sheltered Annuities ................................................ 17
Withholding of Taxes ................................................... 17
See Your Own Tax Adviser ............................................... 18
YEAR 2000 ................................................................ 18
LEGAL MATTERS ............................................................ 18
EXPERTS .................................................................. 18
FURTHER INFORMATION ...................................................... 18
INQUIRIES ................................................................ 18
APPENDIX A: Calculating A Market Value Adjustment ........................ A-1
3
<PAGE>
SPECIAL TERMS
As used in this Prospectus, the following terms have the indicated
meanings:
Annuitant: The person whose life is measured for purposes of the duration of
annuity payments or the payment of the death benefit. This individual is
designated by you in your application. If the Contract is issued as a
nonqualified Contract, prior to the Annuity Date you may request In Writing to
change the designated Annuitant, but any such change is only effective if
approved by the Company.
Annuity Date: The date your annuity payments start under an annuity option you
elect. This date may be any time after the first year of your Contract, and
will be the later of the Annuitant's 85th birthday, or the tenth anniversary of
your purchase payment, unless you elect otherwise.
Annuity Option: The method you select for your annuity payments to be made.
Beneficiary: The person(s) entitled to receive any payment from the Contract
upon your death, the death of the Annuitant if not you, or the death of a joint
holder, as applicable. If a joint holder dies, the surviving joint holder will
be deemed the designated Beneficiary, and any other Beneficiary on record will
be treated as the Beneficiary at the death of the surviving joint holder.
Current Value: As of any given date, your purchase payment plus interest
credited, less any amount withdrawn or used to provide annuity payments. The
Current Value will also reflect any deduction for premium taxes, in the event
such taxes are deducted from your purchase payment, and any deduction for
maintenance fees, if such fees are applicable.
Guaranteed Period: The period for which Guaranteed Rates are credited.
Guaranteed Rate: The interest rate that we guarantee to pay during Guaranteed
Periods.
In Writing: A written form satisfactory to the Company and received at its
offices addressed to: Aetna Insurance Company of America, 151 Farmington
Avenue, Hartford, Connecticut 06156.
Market Value Adjustment: An adjustment that may be made to the amount withdrawn
from the Contract before the end of the Guaranteed Period. 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. The adjustment is expressed as a percentage of each dollar being
withdrawn.
You: The person who owns and holds the Contract. You may have a joint holder,
but only if such joint holder is your spouse. With respect to a group contract,
"you" refers to the person or persons who has or have been issued a certificate
under the group contract. Where there are joint holders of the Contract, each
must join in making any request or election or to take any action pursuant to
the Contract.
4
<PAGE>
SUMMARY INFORMATION
The Contract is an annuity contract issued to you by the Company that
allows you to invest and accumulate funds while deferring taxes on the interest
you earn.
You make a single purchase payment for a Contract. The minimum purchase
payment is $10,000. You may make larger payments, or you may buy more than one
Contract. Purchase payments over $1,000,000 require the Company's prior
approval. The interest rates that we guarantee are called Guaranteed Rates, and
the fixed periods during which these rates are guaranteed are called Guaranteed
Periods.
When you purchase a Contract, you select the Guaranteed Period you want
from among those the Company then offers. Except as described below, your
purchase payment will earn interest at the Guaranteed Rate for the duration of
the Guaranteed Period you select. Guaranteed Periods always start on the first
business day of the month. During the period of time between the date your
purchase payment is credited and the start of the Guaranteed Period you select,
your purchase payment earns interest at the Guaranteed Rate applicable to the
Guaranteed Period you selected. The Guaranteed Rates offered will never be less
than the minimum guaranteed interest rate stated in the Contract. Guaranteed
Periods are offered at the Company's discretion for various lengths of time
ranging up to and including twenty years. You may divide your single purchase
payment among any of the various Guaranteed Periods that we offer, but you must
invest at least $1,000 in any single Guaranteed Period selected.
For Guaranteed Periods of greater than one year, more than one Guaranteed
Rate may be applicable during a Guaranteed Period. For example, a Guaranteed
Period of five years may apply one Guaranteed Rate for the first year, a
different Guaranteed Rate for the next two years, and a third Guaranteed Rate
for the last two years.
Prior to the end of any Guaranteed Period, you can elect to reinvest the
Current Value of your Contract in another Guaranteed Period then available,
withdraw all or part of your Current Value, or choose to start your annuity
payments, subject to certain restrictions. The Company will notify you at least
18 calendar days before the end of any Guaranteed Period in which you have
Current Value. If you make no election, the Current Value of your Contract
automatically will be reinvested for a Guaranteed Period equal to the one just
completed, or if not available, the next shortest Guaranteed Period then
available. If no such shorter Guaranteed Period is available, the next longest
Guaranteed Period will be used.
THE COMPANY'S MANAGEMENT WILL MAKE THE FINAL DETERMINATION AS TO
GUARANTEED RATES TO BE DECLARED. THE COMPANY CANNOT PREDICT NOR CAN THE COMPANY
GUARANTEE WHAT THE GUARANTEED RATES WILL BE FOR FUTURE GUARANTEED PERIODS UNTIL
SUCH RATES ARE DECLARED. (See "Guaranteed Periods and Guaranteed Rates.")
You may withdraw all or part of your Contract's Current Value at anytime.
However, such withdrawals may be subject to a Market Value Adjustment,
surrender fee, a deduction for premium taxes and maintenance fees, and/or
federal income taxes and tax penalties.
A Market Value Adjustment is an adjustment applied to any amounts you
withdraw prior to the end of your Guaranteed Period. The Market Value
Adjustment may increase or decrease the amount of your withdrawal. The Market
Value Adjustment reflects the change in value of your investment in a
Guaranteed Period due to changes in interest rates since the start of that
Guaranteed Period. Generally, when interest rates decrease, the Market Value
Adjustment amount is positive. Conversely, when interest rates increase, the
Market Value Adjustment amount is negative. If interest rates increase, the
amount you receive upon the withdrawal of the Current Value of your Contract
before the end of the Guaranteed Period could be less than the amount you
invested at the start of the Guaranteed Period. The amount of the Market Value
Adjustment is determined by using the formula described in Appendix A. The
Market Value Adjustment does not apply to withdrawals under the Systematic
Withdrawal Option or the Estate Conservation Option, but it is applicable to
Special Withdrawals and withdrawals under the Nursing Home Waiver. The Market
Value Adjustment also does not apply to amounts withdrawn at the end of your
Guaranteed Period, provided that five days prior to the end of that Guaranteed
Period we receive notice of the withdrawal In Writing. (See "Market Value
Adjustment," "The Systematic Withdrawal Option," "The Estate Conservation
Option" and "Special Withdrawals.")
Except as described below, a surrender fee is imposed on any amount of
your purchase payment withdrawn during the first seven years of your Contract.
For purposes of this fee it is assumed that you are withdrawing all or a
portion of your purchase payment first, not your earnings. The amount of the
surrender fee is initially 7%, and declines periodically thereafter to 0% after
the seventh year. The surrender fee is not applicable to any amounts withdrawn
at the end of a Guaranteed Period if appropriate notice has been given. The
surrender fee is also not applicable to any amounts used to provide annuity
payments.
5
<PAGE>
After you own your Contract for one year, you are entitled to one Special
Withdrawal per year, up to a maximum amount equal to 10% of the Current Value
of your Contract at the time of your withdrawal. Also, if the Current Value of
your Contract meets the minimum dollar amounts established by the Company, you
can elect the Systematic Withdrawal Option. The Systematic Withdrawal Option
allows you to withdraw specified amounts or percentages of your Contract's
Current Value or to withdraw amounts over specified time periods that you
determine. Similarly, for Contracts purchased as traditional Individual
Retirement Annuities ("traditional IRA"), if you are at least age 70-1/2 and the
Current Value of your Contract meets the minimum dollar amounts established by
the Company, you can arrange a program of annual withdrawals through the Estate
Conservation Option. This option is designed to provide annual payments in an
amount equal to the minimum distribution that is required to be withdrawn each
year under the federal tax laws. Surrender fees do not apply to Special
Withdrawals, withdrawals under the Estate Conservation Option, Systematic
Withdrawal Option or the Nursing Home Waiver, but such withdrawals may be
subject to taxes, penalties and withholding taxes. (See "Federal Income
Taxes.")
Under certain emergency conditions, the Company may defer payment of any
withdrawal, including surrenders, for a period not exceeding six months from
the date of receipt of a surrender request.
You choose when you want your annuity payments to start. Your annuity
payments can start any time after the first year of your Contract, upon your
selection of an annuity option. You may use all or part of the Current Value of
your Contract to provide annuity payments. If your annuity payments start
before the end of your Guaranteed Period, a Market Value Adjustment may be
applied to any amounts used to start annuity payments. The annuity option you
select also determines the number, amount and frequency of your annuity
payments. Your annuity payments can be for a fixed period of time, for your
life, for the life of another person you select, or for the joint lives of you
and another person.
The Contract also provides a death benefit, which is paid if you or the
annuitant die before your annuity payments start. The amount of the death
benefit equals the Current Value of your Contract, provided that the death
benefit is paid within six months of the death of the annuitant. If paid after
six months of the date of death of the annuitant, or if paid upon your death
and you are not the annuitant, the death benefit equals the Current Value of
your Contract as adjusted by any applicable Market Value Adjustment.
Additionally, if you die and you are not the annuitant, the death benefit
payable will be subject to a surrender fee, if applicable. In certain
circumstances, your beneficiary or joint holder may have the option to continue
the Contract rather than receiving the death benefit.
The Company currently pays all state and local premium taxes on your
Contract when due. The Company recovers applicable taxes paid on your behalf by
deducting an appropriate amount from the Current Value of your Contract when
annuity payments start, or earlier upon surrender of your Contract. Currently,
such taxes range up to 4% of the amount of Current Value of the Contract used
for annuity payments. The Company reserves the right to deduct premium taxes at
any time from your purchase payment or from the Current Value of your Contract
based upon the Company's determination of when such tax is due.
6
<PAGE>
DESCRIPTION OF CONTRACTS
THE APPLICATION PROCESS
To begin the application process, you must submit a completed application
and your purchase payment to the Company for approval. The minimum purchase
payment is $10,000. The Company retains the right to limit the amount of the
maximum purchase payment, and all purchase payments over $1,000,000 require the
Company's approval. You may not make any additional purchase payments under an
existing Contract. However, additional Contracts may be purchased by eligible
persons at the then prevailing Guaranteed Rates and terms.
The Company will accept or reject an application within two business days
of its receipt. If the application is incomplete, the Company may hold it and
any accompanying purchase payment for five days. A purchase payment may be held
for longer periods only with your consent, pending acceptance of the
application. If the application is accepted, a Contract will be issued to you.
If the application is rejected, the application and any purchase payment will
be returned to you.
If your application is properly completed and accepted by the Company,
your purchase payment becomes part of the Company's general assets and is
credited to an account established for you. The Company will confirm the
crediting of your purchase payment within five business days of receipt of your
properly completed application. You start earning interest on your purchase
payment beginning on the effective date of your Contract, which is the date
your purchase payment is credited.
A Contract may be purchased as a rollover traditional IRA by transferring
amounts previously accumulated (rollover amounts) under another traditional IRA
or Individual Retirement Account under Section 408(a) or 408(b) of the Internal
Revenue Code of 1986 ("Tax Code"), or a retirement plan qualified under Section
401 or 403 of the Tax Code. A Contract may also be purchased as a rollover Roth
Individual Retirement Annuity ("Roth IRA") under Section 408A of the Tax Code,
by transferring amounts previously accumulated under another Roth IRA or from a
traditional IRA or Individual Retirement Account, provided certain conditions
are met. (See "Federal Income Taxes.")
The Company reserves the right to reject an application and, in such case,
any purchase payment will be returned to you without interest. The Company will
deliver your Contract within a reasonable time after receipt and acceptance of
your properly completed application and purchase payment.
FREE LOOK
You may cancel your Contract within ten days of receiving it (or as
otherwise provided by state law) by giving Aetna written notice and returning
your Contract. Upon cancellation, the Company will return your purchase payment
to you within seven days after it receives your notice of cancellation.
THE ACCUMULATION PERIOD
GUARANTEED PERIODS AND GUARANTEED RATES
In your application you select the Guaranteed Period you want from among
those Guaranteed Periods the Company then offers. Your purchase payment earns
interest at the Guaranteed Rate applicable to that Guaranteed Period.
Guaranteed Periods always start on the first business day of the month. During
the period of time between the date your purchase payment is credited and the
start of the Guaranteed Period you selected, your purchase payment earns
interest at the Guaranteed Rate applicable to the Guaranteed Period you
selected. Guaranteed Periods are offered at the Company's discretion for
various lengths of time ranging up to and including twenty years. You may
divide your single purchase payment among any of the various Guaranteed Periods
that we offer, but you must invest at least $1,000 in any single Guaranteed
Period selected, and not less than $10,000 in all Guaranteed Periods selected.
For Guaranteed Periods of greater than one year more than one Guaranteed Rate
may be applicable during one Guaranteed Period. For example, a Guaranteed
Period of five years may apply one Guaranteed Rate for the first year, a
different Guaranteed Rate for the next two years, and a third Guaranteed Rate
for the last two years.
All Guaranteed Rates are stated in terms of effective annual rate of
return; that is, a Guaranteed Rate reflects a full year's interest. Interest
you earn is credited daily at a rate that will provide the guaranteed effective
rate of return over the period of one year assuming no surrenders. Guaranteed
Rates will never be less than the minimum guaranteed interest rate stated in
the Contract. The Company reserves the right to offer, from time to time,
Guaranteed Rates to prospective investors that are higher than those offered to
current Contract owners with respect to Guaranteed Periods of the same
duration.
The example below shows how interest will be credited to you during each
Guaranteed Period. The hypothetical interest rate used in this example is
illustrative only and is not intended to predict future Guaranteed Rates to be
offered
7
<PAGE>
under the Contract. Actual Guaranteed Rates offered may be more or less than
those shown. The example assumes no withdrawals of any amount during the entire
seven year Guaranteed Period illustrated. Accordingly, the example does not
give effect to any Market Value Adjustment, surrender fee, deduction for
premium taxes and maintenance fees, or federal income taxes or possible tax
penalties. (See "Withdrawals and Surrenders," "The Market Value Adjustment,"
and "Premium Taxes," below, and "Federal Income Taxes.")
Example of Interest Crediting at the Guaranteed Rate
Purchase Payment: $20,000
Guaranteed Period: 7 years
Guaranteed Rate: 6.00% per annum
The Guaranteed Rate is applied in this example by using the following
formula: 1 + the Guaranteed Rate = 1.06.
Current Value at end of Contract Year 1 = $21,200.00 ($20,000.00 x 1.06)
Current Value at end of Contract Year 2 = $22,472.00 ($21,200.00 x 1.06)
Current Value at end of Contract Year 3 = $23,820.32 ($22,472.00 x 1.06)
Current Value at end of Contract Year 4 = $25,249.54 ($23,820.32 x 1.06)
Current Value at end of Contract Year 5 = $26,764.51 ($25,249.54 x 1.06)
Current Value at end of Contract Year 6 = $28,370.38 ($26,764.51 x 1.06)
Current Value at end of Guaranteed Period = $30,072.61 ($28,370.38 x 1.06)
Total Interest Credited in Guaranteed Period = $10,072.61 ($30,072.61 -
$20,000)
The Company will determine the Guaranteed Rates it offers periodically at
its sole discretion. The Company has no specific formula for determining the
rate of interest that it will declare as future Guaranteed Rates. The
determination of Guaranteed Rates will reflect interest rates available on the
types of debt instruments in which the Company intends to invest the proceeds
attributable to the Contracts. (See "Investments.") The Company's management
will also consider various other factors in determining Guaranteed Rates for a
given Guaranteed Period, such as regulatory and tax requirements, sales
commissions and administrative expenses, general economic trends, and
competitive factors. The Company's management will make the final determination
as to Guaranteed Rates to be offered. The Company cannot predict nor guarantee
future levels of guaranteed interest rates above a contractually guaranteed
minimum rate nor guarantee what rates will be offered in the future.
YOUR CHOICES AT THE END OF A GUARANTEED PERIOD
At least 18 calendar days prior to the end of a Guaranteed Period under
your Contract, the Company will send you a notice that your Guaranteed Period
is about to end. At the end of your Guaranteed Period, you can do three things
with the amount you have accumulated for that Guaranteed Period: (1) reinvest
all or part of it in another Guaranteed Period; (2) withdraw all or part of it;
or (3) use all or part of it to start your annuity payments. These choices also
can be used in combination. For example, you could withdraw part of the amount
you have accumulated, and reinvest the balance; or reinvest part, and use the
balance to start annuity payments. Each of these choices has certain
consequences, which you should consider carefully. (See "Withdrawals and
Surrenders," below, and "Annuity Period" and "Federal Income Taxes.")
Once you decide what you want to do with the Current Value for that
Guaranteed Period, you must advise the Company of your decision In Writing by
completing an election form. To be effective, your completed election form must
be received by the Company In Writing at least five days prior to the end of
the Guaranteed Period to which it applies. If you decide you want to reinvest
the Current Value of your Contract for a Guaranteed Period of the same duration
as the one just ending, you need not take any action.
IF THE COMPANY DOES NOT RECEIVE YOUR PROPERLY COMPLETED ELECTION FORM IN
TIME, YOUR CURRENT VALUE AT THE END OF THE GUARANTEED PERIOD WILL BE
AUTOMATICALLY REINVESTED FOR A GUARANTEED PERIOD EQUAL TO THE GUARANTEED PERIOD
JUST ENDED. If no such Guaranteed Period is then being offered, the Guaranteed
Period with the next shortest duration will be used. If no such shorter
Guaranteed Period is available, the next longest Guaranteed Period will be
used. Your Current Value will then earn interest at the Guaranteed Rate
applicable to the Guaranteed Period automatically selected for you. The Company
will mail a confirmation statement to you the next business day after the
completion of your just ended Guaranteed Period advising you of the new
Guaranteed Period and Guaranteed Rate.
8
<PAGE>
WITHDRAWALS AND SURRENDERS
GENERAL
At any time prior to the time your annuity payments start, you may
surrender all or part of the Current Value of your Contract. If, after any
partial withdrawal, the Current Value of your contract is less than $2,500, the
Company may terminate your Contract upon 90 days notice and refund the
remaining balance to you. If you withdraw all of your Current Value, you must
surrender your Contract. To make a partial or full withdrawal, you must
properly complete a withdrawal request or surrender form provided by the
Company, and submit it to the Company In Writing. All withdrawals may be
subject to a Market Value Adjustment, a surrender fee, a deduction for premium
taxes and maintenance fees, and federal income taxes and tax penalties. All
applicable fees and deductions are deducted from the amount of your withdrawal
in accordance with the terms of your Contract. Any Market Value Adjustment
applicable to your withdrawal may either increase or decrease the amount paid
to you. (See "Market Value Adjustment," below.) Accordingly, if you request
that you receive a specific dollar amount upon withdrawal, the amount actually
withdrawn from your Contract may be more or less than the requested dollar
amount. The Company will, upon request, inform you in advance of the amount
payable upon a withdrawal. Amounts are withdrawn on a pro rata basis from each
of the Guaranteed Periods under the Contract.
THE MARKET VALUE ADJUSTMENT
The amount payable upon a withdrawal before the end of a Guaranteed Period
may be increased or decreased by the application of the Market Value
Adjustment. When applicable, the Market Value Adjustment is applied to the
amount withdrawn. If your annuity payments start before the end of your
Guaranteed Period, a Market Value Adjustment may be applied to any amounts used
to start annuity payments. The Market Value Adjustment will not be applied to
withdrawals under the Estate Conservation Option or Systematic Withdrawal
Option or to a death benefit payable on death of Annuitant if paid within six
months of the Annuitant's death. The Market Value Adjustment also does not
apply to amounts withdrawn at the end of your Guaranteed Period, provided that
five days prior to the end of that Guaranteed Period we receive notice of the
withdrawal In Writing.
The Market Value Adjustment reflects the change in the value of your
investment due to changes in interest rates since the start of the Guaranteed
Period under your Contract. When interest rates increase, the Market Value
Adjustment amount is negative. Conversely, when interest rates decrease, the
Market Value Adjustment amount is positive. Because a Market Value Adjustment
can be positive or negative, it may increase or decrease the amount of your
withdrawal before the end of a Guaranteed Period.
The Company imposes a Market Value Adjustment for several reasons. Upon
withdrawal of money from your Contract, the Company may need to liquidate
certain assets or use existing cash flow that would otherwise be available to
invest at current interest rates. The assets that are liquidated may be sold at
a profit or a loss, depending upon market conditions. This profit or loss could
affect the determination of Guaranteed Rates. (See "Guaranteed Periods and
Guaranteed Rates," above.) To lessen this impact, certain withdrawals are
subject to a Market Value Adjustment.
For an explanation of how the Market Value Adjustment is calculated, see
Appendix A.
FEES APPLICABLE TO WITHDRAWALS
Upon any withdrawal, a surrender fee of up to 7% may be deducted from the
amount withdrawn, depending on the length of time that has passed since your
initial purchase payment was credited. The surrender fee only applies to the
amount of your purchase payment withdrawn, but for purposes of this fee it is
assumed that you are withdrawing all or a portion of your purchase payment
first, not your earnings. This assumption, however, does not apply for tax
purposes. (See "Federal Income Taxes.") The chart below indicates the
percentage fee applied to amounts you withdraw.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Surrender Fee
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Years since initial
payment credited: 0 1 2 3 4 5 6 7
Fee as a percentage
of payment withdrawn: 7% 7% 6% 6% 5% 4% 2% 0%
- --------------------------------------------------------------------------------
</TABLE>
The surrender fee and Market Value Adjustment are waived and not
applicable to any amounts withdrawn at the end of a Guaranteed Period, provided
that five days prior to the end of that Guaranteed Period we receive notice of
the withdrawal
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In Writing. The surrender fee and Market Value Adjustment, however, remain
applicable to any amount you reinvest for another Guaranteed Period. For
purposes of applying the surrender fee, all time periods are measured from the
date your initial purchase payment is credited, even if you reinvest all or
part of your Current Value in another Guaranteed Period. Once the surrender fee
declines to 0%, it is no longer applicable, regardless of how long you own your
Contract.
For example, assume that the first Guaranteed Period you select is for 5
years. Further assume that at the end of this 5 year Guaranteed Period, you
decide to reinvest the Current Value of your Contract for another Guaranteed
Period of 4 years. Assume you then make a withdrawal (but not a Special
Withdrawal, as described below) during the second year of the new Guaranteed
Period. Because six years have passed since your purchase payment was credited,
you would pay a 2% surrender fee, even though you could have withdrawn all or
part of the Current Value of your Contract at the end of the first 5 year
Guaranteed Period without paying a surrender fee. However, if you make a
withdrawal during the third year of the new Guaranteed Period, or anytime
thereafter, you would pay no surrender fee, because seven years would have
passed since your purchase payment was credited.
If you surrender your Contract and the Current Value is less than $2,500,
the surrender fee will be waived, provided you have not withdrawn any amounts
within the prior 12 months. The surrender fee is also waived if the Company
terminates your Contract because its Current Value is less than $2,500. In both
cases, a Market Value Adjustment will be applied, and a deduction will be made
for any premium taxes and maintenance fees, if applicable.
SPECIAL WITHDRAWALS
After you own your Contract for one year, you have the opportunity to make
one Special Withdrawal per year without paying a surrender fee unless you have
elected "SWO" or "ECO" described below. The maximum amount of the Special
Withdrawal equals 10% of the Current Value of your Contract at the time the
Company receives your withdrawal request In Writing. This opportunity is only
available for the first withdrawal of each year, and all subsequent withdrawals
during that year will be subject to the surrender fee, even if you did not
withdraw the full 10% with your first withdrawal. If your first withdrawal for
the year is in excess of 10% of the Current Value of your Contract, only the
excess amount is subject to a surrender fee. A Market Value Adjustment is
applicable to any amounts that you withdraw, and you also may be required to
pay taxes and tax penalties. (See "Federal Income Taxes.")
THE SYSTEMATIC WITHDRAWAL OPTION
If the Current Value of your Contract meets the minimum dollar amounts
established by the Company, you can elect a program of automated partial
withdrawals through the Systematic Withdrawal Option ("SWO"). SWO allows you to
withdraw either a specified amount or a percentage of your Contract's value, or
to withdraw amounts over a specified time period that you determine, within
certain limits described in your Contract. SWO payments can be made on a
monthly or quarterly basis, and the amount of each payment is determined by
dividing the designated annual amount by the number of payments due each
calendar year. SWO payments are withdrawn pro rata from each of the Guaranteed
Periods under your Contract.
SWO is available under three payment methods: the specified percentage
method, the specified payment method, and the specified period method. The
terms and conditions applicable to each of these payment methods are described
in your Contract.
Under a Contract purchased as a rollover traditional IRA, if the SWO
payment for any year is less than the minimum required distribution under the
Tax Code, the SWO payment will be increased to an amount equal to the minimum
distribution amount.
If you participate in SWO, you may not utilize a Special Withdrawal to
make additional withdrawals from your Contract. Once elected, SWO may be
canceled at anytime by submitting a request In Writing to the Company. However,
once canceled, SWO may not be elected again by you or your spousal Beneficiary.
The Company reserves the right to change the terms of SWO for future elections
and to discontinue the availability of this option upon notice. The Company
also reserves the right to establish the date when you may first elect SWO.
The Market Value Adjustment and surrender fees do not apply to withdrawals
received under SWO, but you may be required to pay taxes and tax penalties on
any amounts that you withdraw. (See "Federal Income Taxes.")
THE ESTATE CONSERVATION OPTION
If your Contract was purchased as a rollover traditional IRA, you are at
least age 70-1/2 and the Current Value meets the minimum dollar amounts
established by the Company, you can arrange a program of annual partial
withdrawals through the Estate Conservation Option ("ECO"). ECO is designed to
provide annual payments in an amount equal to the minimum
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distribution that is required to be withdrawn each year under the Tax Code. ECO
payments are withdrawn pro rata from each of the Guaranteed Periods under your
Contract. The Company will, upon request, inform you in advance of the amount
payable under ECO. ECO is not available under a Roth IRA Contract.
The Market Value Adjustment does not apply to withdrawals received under
ECO, and surrender fees also are not applicable. You will be required to pay
taxes on any amounts that you withdraw. (See "Federal Income Taxes.")
If you participate in ECO, you may not utilize a Special Withdrawal to
make additional withdrawals from your Contract. Once elected, ECO may be
canceled at anytime by submitting a request In Writing to the Company. However,
once canceled, ECO may not be elected again until 36 months have elapsed. The
Company reserves the right to change the terms of ECO for future elections and
to discontinue the availability of this option upon notice.
THE NURSING HOME WAIVER
The Nursing Home Waiver provides that if you have owned your Contract for
over one year, and the Annuitant has spent at least 45 consecutive days in a
licensed nursing care facility, then the surrender fee will be waived if you
withdraw any portion of the Current Value of your Contract within three years
of the Annuitant's admission to such licensed nursing care facility. The Market
Value Adjustment applies to withdrawals under the Nursing Home Waiver, and you
also may be required to pay taxes and tax penalties on any amounts that you
withdraw. (See "Federal Income Taxes.") The Nursing Home Waiver may not be
available in all states and does not apply if the Annuitant was in a licensed
nursing care facility when you purchased your Contract.
PAYMENT UPON WITHDRAWAL OR SURRENDER
Under certain emergency conditions, the Company may defer payment of any
withdrawal for a period not exceeding six months from date of receipt of a
withdrawal request.
CHARGES AND DEDUCTIONS
PREMIUM TAXES
Several states and local governments impose a premium or similar tax on
annuities. Currently, such taxes range up to 4% of either your purchase payment
or the amount accumulated in your Contract that you use for annuity payments.
The Company initially will pay all state-imposed premium or similar taxes
applicable to your Contract. These taxes will be deducted from the amounts that
you use for annuity payments immediately prior to the time your annuity
payments begin. If you surrender your Contract, or at your death your
Beneficiary elects to receive a lump sum distribution, a charge will be
deducted for any premium taxes paid on your behalf for which the Company has
not been reimbursed. The Company reserves the right to deduct premium taxes at
any time from your purchase payment or from the Current Value of your Contract
based upon the Company's determination of when such tax is due. In the event
that premium taxes are deducted from your purchase payment, the amount invested
in a Guaranteed Period will be equal to the amount of your purchase payment
reduced by any applicable premium tax.
MAINTENANCE FEES
Prior to the time your annuity payments start, an annual maintenance fee
may be deducted from the Current Value of your Contract on each anniversary of
your Contract's effective date and upon the surrender of your Contract. The
terms and conditions under which the maintenance fee may be deducted are stated
in your Contract. The Company currently does not charge a maintenance fee.
DEATH BENEFIT
In your application to purchase a Contract, you will select a Beneficiary.
If you or the Annuitant die before annuity payments begin, a death benefit will
be paid to your Beneficiary in accordance with the terms of your Contract. If a
joint holder dies, the surviving joint holder will be deemed the designated
Beneficiary, and any other Beneficiary on record will be treated as the
Beneficiary at the death of the surviving joint holder. If the Contract holder
is not a natural person, the death benefit will be payable at the death of the
Annuitant or upon any change of the Annuitant.
The amount of the death benefit equals the Current Value of your Contract,
provided that the death benefit is paid within six months of the death of the
Annuitant. If the death benefit is paid after six months of the date of death
of the
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Annuitant, or if paid upon your death and you are not the Annuitant, it equals
the Current Value of your Contract as adjusted by any applicable Market Value
Adjustment. Additionally, if you die and you are not the Annuitant, the death
benefit payable will be subject to a surrender fee, if applicable. The death
benefit is calculated as of the date of receipt of notification In Writing of
due proof of death and the Beneficiary's claim. In certain circumstances, your
Beneficiary or joint holder may have the option to continue the Contract rather
than receiving the death benefit.
You may change the Beneficiary you previously designated at any time by
submitting notice In Writing to the Company. The change will not be effective
until received and recorded by the Company.
DEATH BENEFIT OPTIONS AVAILABLE TO YOUR BENEFICIARY
If you die before annuity payments begin, or, if the Contract holder is
not a natural person and the Annuitant dies before annuity payments begin, any
Beneficiary under the Contract who is an individual has several options for
receiving payment of the death benefit. The death benefit may be paid in one
lump sum payment, or all or part of such amounts may be used to start annuity
payments using the Annuity Options available under the Contract. Unless the
designated Beneficiary is your spouse, all death benefits paid as a lump sum
must be distributed within five years of the date of death and any annuity
payment must begin within one year of the date of death. If the Beneficiary
elects to receive a lump sum payment, a charge will be deducted for any premium
taxes paid on your behalf for which the Company has not been reimbursed. A
spousal Beneficiary also may elect to exercise all rights under the Contract.
If you are an individual who is not the Annuitant, and the Annuitant dies,
your Beneficiary may elect either to apply all of the death benefit amount to
any Annuity Option available under the Contract within 60 days of the date of
death, or to receive such amount as a lump sum payment.
ANNUITY PERIOD
SELECTING AN ANNUITY DATE
You select the Annuity Date for your Contract, which is the date you want
your annuity payments to start under an Annuity Option that you select. This
date may be any time after the first year of your Contract, and will be the
later of the Annuitant's 85th birthday or the tenth anniversary of your
purchase payment, unless you elect otherwise.
You can change your Annuity Date by notifying the Company In Writing at
least 30 days before your annuity payments are to begin.
Regardless of your Annuity Date, your annuity payments will not begin
until you have selected an Annuity Option. Failure to select an Annuity Option
on your Annuity Date, or postponement of the Annuity Date past the later of the
Annuitant's 85th birthday or the tenth anniversary of your purchase payment,
may have adverse tax consequences. You should consult with a qualified tax
adviser if you are considering either of these courses of action.
ANNUITY PAYMENTS
You may apply all or a portion of the Current Value of your Contract to
provide annuity payments. Annuity payments are made to you or you can request
that the payments be deposited directly to your bank account. After your death,
we will send any annuity payments still due to the Beneficiary you have
selected. You may be required to pay taxes on all or a portion of the annuity
payments you receive. (See "Federal Income Taxes.")
Annuity payments are made monthly unless you request that annuity payments
be made quarterly, semi-annually or annually. You may change your request In
Writing at any time. The amount of each annuity payment depends on how much of
your Current Value, less applicable premium taxes, you use to start your
annuity payments, and the Annuity Option that you elect. No election may be
made that would result in a first annuity payment of less than $50 or total
yearly annuity payments of less than $250. If the amount you have accumulated
in your Contract as of the Annuity Date is insufficient to elect an Annuity
Option for the minimum amount specified, you will receive a lump sum payment.
After any two full consecutive years, measured from the anniversary of the
effective date of your Contract, and upon 90 days notice to you, the Company
may terminate a rollover traditional IRA Contract if the paid-up benefit at
maturity would be less than $20 per month. Instead of electing annuity
payments, you may request that the Company make a lump sum payment. No
surrender fee will be applied to any amounts used to start annuity payments,
although a Market Value Adjustment may be applicable.
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ANNUITY OPTIONS
You can elect to have your annuity payments made:
(1) for the life of the Annuitant;
(2) for the life of the Annuitant but guaranteed for a minimum of 5, 10, 15
or 20 years;
(3) for the life of two Annuitants; or
(4) for a stated period of time (10 to 30 years).
You must notify the Company In Writing of the Annuity Option elected at
least 30 days prior to the Annuity Date. You may change your election up to 30
days before your annuity payments start. If your annuity payments start before
the end of your Guaranteed Period, a Market Value Adjustment will be applied to
any amounts used to start annuity payments. If the Annuity Option selected is
one of the first three listed above (i.e., a lifetime annuity), only a positive
Market Value Adjustment will be applied. Once you elect for annuity payments to
begin, you may not elect to instead receive a lump sum payment.
If you choose an annuity for life but guaranteed for a minimum number of
years, when the annuity payments start, the age of the Annuitant plus the
number of years for which payments are guaranteed must not exceed 95.
Additionally, federal income tax requirements currently applicable to
traditional IRAs provide that the period of years guaranteed may not be any
greater than the joint life expectancies of the payee and his or her designated
Beneficiary.
Further, if you choose an annuity for the life of two Annuitants, annuity
payments will continue until both Annuitants have died. When this Annuity
Option is chosen, you must choose one of the following:
(1) 100% of the payment to continue after the first death;
(2) 66-2/3% of the payment to continue after the first death;
(3) 50% of the payment to continue after the first death;
(4) Payments for a minimum of 120 months, with 100% of the payment to
continue after the first death; or
(5) 100% of the payment to continue at the death of the second Annuitant
and 50% of the payment to continue at the death of the Annuitant.
PAYMENT UPON DEATH AFTER ANNUITY PAYMENTS BEGIN
Upon the death of either the Annuitant or the surviving joint Annuitant
after annuity payments start, the amount payable, if any, to your Beneficiary
depends on the Annuity Option currently in force. Any amounts payable must be
paid at least as rapidly as under the method of distribution in effect at the
Annuitant's death.
If you die after annuity payments start and you are not the Annuitant, any
remaining payments will continue to be made to your Beneficiary at least as
rapidly as under the method of distribution in effect at your death.
INVESTMENTS
Purchase Payments received under the Contracts and allocated to Guaranteed
Periods will be 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 a Contract Holder does not
participate in the performance of the assets through unit values or any other
interest.
Persons 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. You do not
participate in the investment gain or loss from assets accounted for in the
separate account. Such gain or loss is borne by the Company. All benefits
available to persons 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.
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The assets of the Company will be invested in accordance with the
requirements established by applicable state laws regarding the nature and
quality of investments that may be made by life insurance companies and the
percentage of their assets that may be committed to any particular type of
investment. In general, these laws permit investments, within specified limits
and subject to certain qualifications, in federal, state, and municipal
obligations, corporate bonds, preferred and common stocks, real estate
mortgages, and certain other investments.
The Company has no specific formula for establishing the Guaranteed Rates
for the Guaranteed Periods. The Company expects the rates to be influenced by,
but not necessarily correspond to, the yields on the fixed income securities to
be acquired with amounts that are allocated to the Guaranteed Periods at the
time that the Guaranteed Rates are established.
The Company intends to invest in assets which, in the aggregate, have
characteristics, especially cash flow patterns, reasonably related to the
characteristics of the liabilities. Various immunization techniques will be
used to achieve the objective of close aggregate matching of assets and
liabilities. The Company will primarily invest in investment-grade fixed income
securities including:
[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
organizations.
[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
organizations, 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 it
holds. Similarly, if securities prices are expected to rise, the Company may
purchase a futures contract or a call option thereon against anticipated
positive cash flow or may purchase options on securities.
WHILE THE FOREGOING GENERALLY DESCRIBES THE COMPANY'S INVESTMENT STRATEGY, THE
COMPANY IS NOT OBLIGATED TO INVEST THE ASSETS ATTRIBUTABLE TO THE CONTRACTS
ACCORDING TO ANY PARTICULAR STRATEGY, EXCEPT AS MAY BE REQUIRED BY CONNECTICUT
AND OTHER STATE INSURANCE LAWS, NOR WILL THE GUARANTEED RATES THE COMPANY
ESTABLISHES NECESSARILY RELATE TO THE INVESTMENT PERFORMANCE THE COMPANY
EXPERIENCES.
PARTICIPANT AND BENEFICIARY RIGHTS AND PRIVILEGES
You have the sole and absolute power to exercise all rights and privileges
under the Contract, except as otherwise provided by the Contract. Your rights
under a nonqualified Contract may be assigned or transferred. The Company will
not be bound by an assignment unless and until notice of such assignment is
submitted In Writing and such assignment is accepted by the Company. The
Company assumes no responsibility for the validity or effect of any assignment.
The Company reserves the right not to accept any assignment or transfer to a
nonnatural person. In some cases, an assignment may have adverse tax
consequences. You should consult a tax adviser regarding the consequences of an
assignment.
AMENDMENT OF THE CONTRACTS
Only an authorized officer of the Company may change the terms of the
Contract. The Company will notify you in writing of any such change. The
Company reserves the right to modify the Contract to meet the requirements of
applicable state or federal laws or regulations.
DISTRIBUTION OF THE CONTRACTS
Aetna Life Insurance and Annuity Company ("ALIAC"), an affiliate of the
Company, will serve as the underwriter of the securities being sold by this
Prospectus. ALIAC is registered as a broker-dealer with the Securities and
Exchange Commission and is a member of the National Association of Securities
Dealers, Inc. ("NASD"). As underwriter, ALIAC will
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contract with one or more other registered broker-dealers who are NASD members
("Distributors") to offer and sell the Contracts. Sales compensation paid to
Distributors will not exceed 6-1/2 percent of the purchase payment made for a
Contract. Alternatively, ALIAC may pay asset-based sales compensation annually
to Distributors that will not exceed 1-1/4% percent of the assets held under a
Contract. At its discretion, ALIAC may also pay sales compensation to Dealers
based on both a percentage of the purchase payment and the assets held annually
under a Contract. From time to time, customers of certain Broker-Dealers and
other entities may be offered special initial Guaranteed Rates and negotiated
commissions. ALIAC and one or more affiliates may also sell the Contracts
directly. All registered representatives of the Distributors must also be
licensed as insurance agents to sell the Contracts.
ALIAC may also contract with independent third party broker-dealers who
will act as wholesalers by assisting ALIAC in finding broker-dealers interested
in acting as Distributors of the Contracts. These wholesalers may also provide
training, marketing and other sales related functions for ALIAC and the
Distributors and may provide certain administrative services to ALIAC in
connection with the Contracts. ALIAC may pay such wholesalers compensation
based on purchase payments for the Contracts purchased through Distributors
selected by the wholesaler. ALIAC may also designate third parties to provide
services in connection with the Contracts such as reviewing applications for
completeness and compliance with insurance requirements and providing the
Distributors with approved marketing material, prospectuses or other supplies.
These parties will also receive payments based on purchase payments for their
services, to the extent such payments are allowed by applicable securities laws
and NASD rules. All costs and expenses related to these services will be paid
by ALIAC.
FEDERAL INCOME TAXES
THE COMPANY
The Company is taxed as a life insurance company under the Tax Code. The
assets underlying the Contracts will be owned by the Company. The income earned
on such assets will be the Company's income.
The Company assumes no responsibility for determining whether a particular
individual retirement annuity plan satisfies the applicable requirements of the
Tax Code or whether a particular person is eligible for such a plan.
TAXES YOU OR OTHERS PAY--NON-QUALIFIED CONTRACTS
Non-qualified Contracts are those used other than in connection with a
rollover Individual Retirement Annuity or tax-favored retirement program such
as an employee benefit plan.
Accumulation Period
The Contracts are considered annuity contracts under Section 72 of the Tax
Code. Currently, no Federal income tax is payable on increases in the value of
the Contract (such as interest credited to you) until payments are made to you
or another payee under such Contract. However, a Contract owned other than by a
natural person is not generally an annuity for tax purposes and any increase in
value thereunder is currently taxable as ordinary income.
Annuity Payments
Annuity payments are in part taxable to you or another payee as ordinary
income, and in part nontaxable. The nontaxable portion of each annuity payment
is that portion of your purchase payment returned to you. This nontaxable
portion is determined by dividing the "investment in the contract" (generally,
your purchase payment with certain adjustments) by the amount of "expected
return" during the time that periodic payments are to be made, and then
multiplying by the amount of the payment. The balance of the annuity payment is
taxable.
Non-Natural Holders of a Non-Qualified Contract
If you are not a natural person, a non-qualified Contract is not treated
as an annuity for income tax purposes and the "income on the contract" for the
taxable year is currently taxable as ordinary income. "Income on the contract"
is any increase over the year in the amount payable upon the withdrawal of all
or any portion of the Current Value, adjusted for amounts previously
distributed and amounts previously included in income. There are some
exceptions to the rule, and a non-natural person should consult with its tax
adviser prior to purchasing this Contract. A non-natural person exempt from
federal income taxes should consult with its tax adviser regarding treatment of
"income on the contract" for purposes of the unrelated business income tax.
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Withdrawals Before the Annuity Date
Partial withdrawals prior to the Annuity Date, other than those used to
provide annuity payments, and total surrenders at any time, will be taxable to
you as ordinary income to the extent that the Contract's Current Value exceeds
your "investment in the contract" at that time. For tax purposes, it is assumed
that you are withdrawing all or a portion of your earnings first, not your
purchase payment.
If you assign or pledge any part of your Current Value, the value so
pledged or assigned generally is treated like a withdrawal for tax purposes.
Transfer of ownership without full and adequate consideration is treated for
income tax purposes as a taxable surrender of the Contract. Transfers between
spouses or incident to divorce generally are not subject to this rule.
The tax treatment of withdrawals from each Contract may be affected if you
own other annuity contracts issued by us (or our affiliates) that were
purchased after October 21, 1988.
Penalty For Premature Withdrawals and Payments
In addition to being included in ordinary income, the taxable portion of
any withdrawal or payment made before you reach age 59-1/2 may be subject to a
10 percent federal penalty tax. The penalty tax does not apply to, among other
things, payments made on account of your death or becoming disabled, or to
payments made in substantially equal periodic payments, not less than annually,
over the life (or life expectancy) of the payee or over the joint lives (or
life expectancies) of the payee and a designated Beneficiary.
Partial Annuitization
Prior to the Annuity Date, you may withdraw a portion of your Account
Value and use it to provide annuity payments, while leaving the remaining
portion of your Account Value invested in one or more Guaranteed Periods. The
Tax Code and the regulations thereunder do not specifically address the tax
treatment applicable to payments provided pursuant to the exercise of this type
of option. The Company takes the position that payments provided pursuant to
this option are taxable as annuity payments, and not as a withdrawal. However,
because the tax treatment of such payments is currently unclear, you should
consult with a qualified tax adviser if you are considering a partial
annuitization of your Contract.
Distribution-At-Death Rules
In order to be treated for tax purposes as a non-qualified annuity
Contract, a non-qualified Contract must provide the following two distribution
rules: (a) if you die on or after the Annuity Date, and before the entire
interest in the Contract has been distributed, the remainder of your interest
will be distributed at least as quickly as the method in effect on your death;
and (b) if you die before the Annuity Date, your entire interest must generally
be distributed within five years after the date of death, or if the interest is
payable to a designated Beneficiary, such interest may be annuitized over the
life of that Beneficiary or a period not extending beyond the life expectancy
of that Beneficiary, provided payments begin within one year after the date of
death. A "designated Beneficiary" is any individual designated as a Beneficiary
by you. If the designated Beneficiary is your spouse, the Contract (together
with the deferral of tax on the accrued and future income thereunder) may be
continued in the name of the spouse.
Where the holder of the Contract is not an individual, the primary
Annuitant is considered the owner, solely for the purpose of the
distribution-at-death rules. The primary Annuitant is the individual the events
in whose life are of primary importance in affecting the timing and payment
under a Contract. In addition, when the holder of the Contract is not an
individual, a change in the primary Annuitant is treated as the death of the
holder of the Contract.
If you are a natural person but not the Annuitant and the Annuitant dies,
and if the Beneficiary does not elect an Annuity Option within 60 days of the
date of death, the gain if any, will be includable in the Beneficiary's income
in the year the Annuitant dies.
Certain Tax-Free Exchanges
Section 1035 of the Tax Code provides generally that no gain or loss will
be recognized under the exchange of a life insurance, endowment or annuity
contract for an annuity contract. Thus, a properly completed exchange from one
of these types of products into a Contract pursuant to the special annuity
contract exchange form the Company provides for this purpose is not generally a
taxable event under the Tax Code, and the investment in the Contract will be
the same as in the exchanged product.
Because of the complexity of these and other tax aspects in connection
with an exchange, a tax adviser should be consulted before any exchange is
made.
16
<PAGE>
TAXES YOU OR OTHERS PAY--QUALIFIED CONTRACTS
Contracts may also be used with several types of tax-favored retirement
programs, such as a rollover traditional or Roth IRA or an employee benefit
plan. The tax rules applicable to participants in such programs vary according
to the type of program and the terms and conditions of the program itself.
Contracts Purchased As A Rollover Individual Retirement Annuity
The Contract may be purchased as a rollover traditional IRA, by
transferring amounts previously accumulated (rollover amounts) under another
traditional IRA, or a retirement plan qualified under Sections 401 or 403 of
the Tax Code.
For Contracts purchased as a rollover traditional IRA, the Tax Code
requires that minimum distributions must begin no later than April 1 of the
year following the year in which you attain age 70-1/2 with respect to when
annuity payments are made to you and your Beneficiary. When payments under a
traditional IRA Contract are made in the form of an annuity, or in a single sum
such as on surrender of the Contract or by withdrawal, the entire payment is
generally taxed as ordinary income. As in the case of non-qualified Contracts,
certain distributions, such as those made prior to your reaching age 59-1/2, may
be subject to a 10% federal penalty tax.
For Roth IRAs, the minimum distribution rules do not apply prior to your
death. You are not required to begin taking minimum annual distributions by
April 1 of the calendar year following the calendar year you attain age 70-1/2.
The general rule that Annuity payments may not extend beyond your life/life
expectancy or beyond the joint lives/joint life expectancies of you and your
Beneficiary does not apply to a Roth IRA. Minimum distribution rules apply to
the Beneficiary at your death.
Section 408A of the Tax Code permits eligible individuals to contribute to
a Roth IRA on an after-tax (nondeductible) basis.
Distributions from other types of qualified plans are not permitted to be
transferred or rolled over to a Roth IRA. A Roth IRA can accept
transfers/rollovers only from an IRA, subject to ordinary income tax, or from
another Roth IRA.
Any "qualified" distribution from a Roth IRA is not includible in gross
income. A "qualified" distribution is any distribution made after you have
attained age 59-1/2, or on account of your death or disability, or for a
qualified first-time home purchase. A distribution will not be treated as
"qualified" if it is made within the 5-taxable year period beginning with the
first taxable year for which a contribution was made. If a distribution is not
"qualified", the accumulated earnings are includible in income.
The 10% premature distribution penalty will apply to the taxable portion
of the distribution unless one of the exceptions under the Tax Code applies. A
partial distribution will first be treated as a return of cost basis (i.e.
aggregate amount of contributions).
Qualified Pension, Profit-Sharing Plans, or Annuity Plans
Sections 401(a) and 403(a) of the Tax Code permit corporate employers and
self-employed individuals to establish various types of retirement plans for
employees. Such retirement plans may permit the purchase of Contracts to
provide benefits thereunder. The plan trustee or employer must be the Contract
holder and Beneficiary of Contracts used in such plans. The Tax Code sets forth
restrictions governing such items as transferability, distributions, and
withdrawals. The Tax Code contains requirements with respect to commencement of
minimum distributions and premature withdrawals similar to those applicable to
rollover traditional IRAs.
Tax Sheltered Annuities
Tax Code Section 403(b) permits the purchase of Contracts by employees of
public schools and certain charitable, educational and scientific organizations
described in Tax Code Section 501(c)(3). These qualifying employers may make
contributions to the Contracts for the benefit of their employees. Such
contributions are not includible in the gross income of the employee until the
employee receives distributions from the Contract. The amount of contributions
to the Contract used in connection with Tax Code Section 403(b) is limited to
certain maximums imposed by the Tax Code. Furthermore, the Tax Code sets forth
additional restrictions governing such items as transferability, distributions,
and withdrawals. The Tax Code contains requirements with respect to
commencement of minimum distributions and premature withdrawals similar to
those applicable to rollover traditional IRAs.
Withholding of Taxes
Pension and annuity distributions generally are subject to withholding for
the recipient's federal income tax liability at dates that vary according to the
type of distribution and tax status. Recipients may be provided the opportunity
to elect not to have tax withheld from distributions; however, certain
distributions from Tax Code Section 401(a) plans and Tax Code
17
<PAGE>
Section 403(b) tax deferred annuities are subject to mandatory 20% federal
income tax withholding. If the recipient is a non-resident alien any
withholding will be governed by Tax Code Section 1441 based on the individual's
citizenship, the country of domicile and treaty status.
See Your Own Tax Adviser
The above description of Federal income tax consequences of owning a
Contract and of the qualified retirement plans which may be funded by the
Contracts is only a brief summary and is not intended as tax advice. The tax
rules applicable to the Contracts and to tax qualified plans are extremely
complex and often difficult to understand. Anything less than full compliance
with the applicable rules, all of which are subject to change from time to
time, can have adverse tax consequences. The taxation of an Annuitant or other
payee has become so complex and confusing that great care must be taken to
avoid adverse tax consequences. For further information you should consult a
qualified tax adviser.
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 Multi-Rate Annuity ("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 Account, or the establishment of future
Guaranteed Rates.
LEGAL MATTERS
The validity of the interests under the Contracts offered hereby has been
passed upon by Counsel for the Company.
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 Post-Effective Amendment No. 4 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.
FURTHER INFORMATION
This Prospectus does not contain all of the information contained in the
registration statement of which the Prospectus is a part, and certain portions
of the registration statement have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The information so
omitted may be obtained from the offices of the Commission, as set forth under
"Available Information," upon payment of the prescribed fee.
INQUIRIES
You may direct inquiries by writing directly to us at the address shown on
the cover page of this Prospectus or by calling 1-800-531-4547.
18
<PAGE>
APPENDIX A
CALCULATING A MARKET VALUE ADJUSTMENT
The Market Value Adjustment Formula
The mathematical formula used to determine the Market Value Adjustment 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 Period.
EXPLANATION OF THE MARKET VALUE ADJUSTMENT FORMULA
The Market Value Adjustment essentially involves a comparison of two
yields: the yield available at the start of the current Guaranteed Period of
your Contract (the "Deposit Period Yield") and the yield currently available
(the "Current Yield"). An adjustment is needed to reflect the period of time
remaining in the Guaranteed Period of your contract.
The Market Value Adjustment depends on the relationship of the Deposit
Period Yield of U.S. Treasury Notes that mature in the last quarter of the
Guaranteed Period, to the Current Yield of such U.S. Treasury Notes at the time
of withdrawal. In general, if the Current Yield is the lesser of the two, the
Market Value Adjustment will decrease the amount withdrawn from the Contract to
satisfy the withdrawal request; if the Current Yield is the higher of the two,
the Market Value Adjustment will increase the amount withdrawn from the
Contract to satisfy the withdrawal request. As a result of the Market Value
Adjustment imposed, the amount withdrawn from the Contract prior to the
Maturity Date may be less than the amount paid into the Contract.
To determine the Deposit Period Yield and the Current Yield, certain
information must be obtained about the prices of outstanding U.S. Treasury
issues. This information may be found each business day in publications such as
The Wall Street Journal. This newspaper publishes the yield-to-maturity
percentages for all Treasury Notes as of the preceding business day. These
percentages are used in determining the Deposit Period Yield and the Current
Yield for the Market Value Adjustment calculation.
DEPOSIT PERIOD YIELD
Determining the Deposit Period Yield in the Market Value Adjustment
calculation involves consideration of interest rates prevailing at the start of
the Guaranteed Period from which the withdrawal will be made. First, the
Treasury Notes that mature in the last three months of the Guaranteed Period
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. The Deposit Period is the period of time during which the
purchase payment or any reinvestment may be made to available Guaranteed
Periods. A Deposit Period may be a month, a calendar quarter, or any other
period of time specified by the Company.
CURRENT YIELD
To determine the Current Yield, use the same Treasury Notes identified for
the Deposit Period Yield: Treasury Notes that mature in the last three months
of the Guaranteed Period. However, the yield-to-maturity percentages used are
those for the last business day of the week preceding the withdrawal. Average
these percentages to determine the Current Yield.
The following are examples of Market Value Adjustment ("MVA") calculations
using several hypothetical Deposit Period Yields and Current Yields. These
examples do not include the effect of any surrender fee that may be assessed
under the Contract upon withdrawal.
A-1
<PAGE>
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 Period, is 927.
x
---
365
MVA = (1+i)
{-----}
(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 Market Value Adjustment is less than 1. The amount
withdrawn from the Guaranteed Period is multiplied by this Market Value
Adjustment.
If a withdrawal of a stated percentage is requested, the value withdrawn
from a Guaranteed Period will reflect the deduction of the negative Market
Value Adjustment amount. However, if a withdrawal request of a specific dollar
amount is requested, the amount withdrawn from a Guaranteed Period will be
increased to compensate for the negative Market Value Adjustment amount. For
example, a withdrawal request to receive a check for $2,000 would result in a
$2,095.34 withdrawal from the Guaranteed Period.
Assumptions:
i, the Deposit Period Yield, is 5%
j, the Current Yield, is 6%
x, the number of days remaining (computed from Wednesday of the week of
withdrawal) in the Guaranteed Period, is 927.
x
---
365
MVA = (1+i)
{-----}
(1+j)
927
---
365
= 1.05
{-----}
1.06
= .9762
In this example the Deposit Period Yield of 5% is less than the Current
Yield of 6%, therefore, the Market Value Adjustment is less than 1. The amount
withdrawn from the Guaranteed Period is multiplied by this Market Value
Adjustment.
If a withdrawal of a stated percentage is requested, the value withdrawn
from a Guaranteed Period will reflect the deduction of the negative Market
Value Adjustment amount. However, if a withdrawal request of a specific dollar
amount is requested, the amount withdrawn from a Guaranteed Period will be
increased to compensate for the negative Market Value Adjustment amount. For
example, a withdrawal request to receive a check for $2,000 would result in a
$2,048.76 withdrawal from the Guaranteed Period.
A-2
<PAGE>
EXAMPLE II
- ----------
Assumptions:
i, the Deposit Period Yield, is 10%
j, the Current Yield, is 8%
x, the number of days remaining (computed from Wednesday of the week of
withdrawal) in the Guaranteed Period, is 927.
x
---
365
MVA = (1+i)
{-----}
(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 Market Value Adjustment is greater than 1.
The amount withdrawn from the Guaranteed Period is multiplied by this Market
Value Adjustment.
If a withdrawal of a stated percentage is requested, the value withdrawn
from a Guaranteed Period will reflect the addition of the positive Market Value
Adjustment amount. However, if a withdrawal request of a specific dollar amount
is requested, the amount withdrawn from a Guaranteed Period will be decreased
to reflect the positive Market Value Adjustment amount. For example, a
withdrawal request to receive a check for $2,000 would result in a $1,908.94
withdrawal from the Guaranteed Period.
Assumptions:
i, the Deposit Period Yield, is 5%
j, the Current Yield, is 4%
x, the number of days remaining (computed from Wednesday of the week of
withdrawal) in the Guaranteed Period, is 927.
x
---
365
MVA = (1+i)
{-----}
(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 Market Value Adjustment is greater than 1. The
amount withdrawn from the Guaranteed Period is multiplied by this Market Value
Adjustment.
If a withdrawal of a stated percentage is requested, the value withdrawn
from a Guaranteed Period will reflect the addition of the positive Market Value
Adjustment amount. However, if a withdrawal of a specific dollar amount is
requested, the amount withdrawn from a Guaranteed Period will be decreased to
reflect the positive Market Value Adjustment amount. For example, a withdrawal
request to receive a check for $2,000 would result in a $1,951.98 withdrawal
from the Guaranteed Period.
A-3
<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, including the Depositor.
Item 16. Exhibits
Exhibit No.
(1) Principal Underwriting Agreement between Aetna Insurance Company
of America and Aetna Life Insurance and Annuity Company(1)
<PAGE>
(1)(b) First Amendment to Principal Underwriting Agreement between Aetna
Insurance Company of America and Aetna Life Insurance and Annuity
Company(1)
(4) Instruments Defining the Rights of Security Holders
(a) Group Annuity Contract (Form No. G2-MGA-95)(2)
(b) Individual Annuity Contract (Form No. I2-MGA-95)(3)
(c) Certificate (G2CC-MGA-95) to Group Annuity Contract Form No.
G-MGA-95(4)
(d) Endorsement (E2-MGAIRA-95-2) to Group Annuity Contract Form No.
G2-MGA-95 and Certificate No. G2CC-MGA-95(4)
(e) Endorsement (E2-MGAROTH-97) to Group Annuity Contract Form No.
G2-MGA-95 and Certificate No. G2CC-MGA-95(4)
(5) Opinion as to 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 No. 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 Counsel (see Exhibit 5)
(24)(a) Powers of Attorney
(b) Certificate of Resolution Authorizing Signature by Power of
Attorney(5)
(27) Financial Data Schedule
Exhibits other than these listed are omitted because they are not required or
are not applicable.
1. Incorporated by reference to Registration Statement on Form S-1 (File No.
333-22723), as filed electronically on March 4, 1997 (Accession No.
0000950146-97-000292).
2. Incorporated by reference to Registration Statement on Form S-2 (File No.
33-63657), as filed electronically on October 25, 1995 (Accession No.
0000908634-95-000104).
3. Incorporated by reference to Pre-Effective Amendment No. 3 to Registration
Statement on Form S-2 (File No. 33-63657), as filed electronically on
January 17, 1996 (Accession No. 0000908634-96-000004).
4. Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form S-2 (File No. 33-63657), as filed electronically on
November 24, 1997 (Accession No. 0000950146-97-001786).
5. 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).
<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>
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 the
requirements for filing on Form S-2 and has duly caused this Post-Effective
Amendment No. 4 to the Registration Statement on Form S-2 (File No. 33-63657) 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
Principal Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 4 to Registration Statement on Form S-2 has been
signed by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C> <C>
/s/ Thomas J. McInerney* Director and President )
- ------------------------------------ (principal executive officer) )
Thomas J. McInerney )
)
/s/ Deborah Koltenuk* Director, Treasurer and Corporate Controller ) April
- ----------------------------------- (principal accounting and financial officer) ) 7, 1998
Deborah Koltenuk )
)
/s/ Catherine H. Smith* Director )
- ------------------------------------ )
Catherine H. Smith )
)
/s/ Shaun P. Mathews* Director )
- ------------------------------------ )
Shaun P. Mathews )
</TABLE>
By: /s/ Mary Katherine Johnson
------------------------------------------------------------
Mary Katherine Johnson
*Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
- ----------- ------- ----
<S> <C> <C>
16 (1)(a) Principal Underwriting Agreement between the Company and Aetna Life *
Insurance and Annuity Company
16 (1)(b) First Amendment to Principal Underwriting Agreement between the Company and *
Aetna Life Insurance and Annuity Company
16 (4)(a) Group Annuity Contract (Form No. G2-MGA-95) *
16 (4)(b) Individual Annuity Contract (Form No. I2-MGA-95) *
16 (4)(c) Certificate (G2CC-MGA-95) to Group Annuity Contract Form *
No. G-MGA-95
16 (4)(d) Endorsement (E2-MGAIRA-95-2) to Group Annuity Contract Form No. G2-MGA-95 *
and Certificate No. G2CC-MGA-95
16 (4)(e) Endorsement (E2-MGAROTH-97) to Group Annuity Contract Form No. G2-MGA-95 and *
Certificate No. G2CC-MGA-95
16 (5) Opinion as to Legality ------------
16 (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 No.
0000950146-98-000492). Each of the exhibits so listed is incorporated by
reference as indicated in the Form 10-K
16 (23)(a) Consent of Independent Auditors ------------
16 (23)(b) Consent of Counsel (see Exhibit 16(5) ------------
16 (24)(a) Powers of Attorney ------------
</TABLE>
*Incorporated by reference
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
- ----------- ------- ----
<S> <C> <C>
16 (24)(b) Certificate of Resolution Authorizing Signature by Power of Attorney *
16 (27) Financial Data Schedule ------------
</TABLE>
*Incorporated by reference
[Aetna letterhead]
151 Farmington Avenue
Hartford, CT 06156
Julie E. Rockmore
Counsel
Law Division, RE4A
Investments & Financial Services
April 7, 1998 (860) 273-4686
Fax: (860) 273-4686
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Aetna Insurance Company of America
Post-Effective Amendment No.4 to Registration Statement on Form S-2
File No. 33-63657
Prospectus Title: Aetna Multi-Rate Annuity
Dear Sirs:
As Counsel of Aetna Insurance Company of America (the "Company"), I have
represented the Company in connection with the Aetna Multi-Rate Annuity (the
"Annuity") available under certain variable annuity contracts and the S-2
Registration Statement relating to such Annuity.
In connection with such representation, I have reviewed Post-Effective Amendment
No. 4 to the Registration Statement on Form S-2 relating to such Annuity,
including the prospectus, and relevant proceedings of the Board of Directors.
Based upon this review, and assuming the securities represented by the Company
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
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 No.
33-63657 on Post Effective Amendment No. 4 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
POWER OF ATTORNEY
I, the undersigned Director and Officer of Aetna Insurance Company of America,
hereby constitute and appoint Julie E. Rockmore, Kirk P. Wickman and Mary
Katherine Johnson and each of them individually, my true and lawful attorneys,
with full power to them and each of them to sign for me, and in my name and in
the capacities indicated below, any and all amendments, to the Registration
Statements listed below filed with the Securities and Exchange Commission under
the Securities Act of 1933 and the Investment Company Act of 1940:
Registration Statements filed under the Securities Act of 1933:
33-59749
33-62481
33-63611
33-63657
33-80750
333-22723
Registration Statements filed under the Investment Company Act of 1940:
811-08582
hereby ratifying and confirming on this 20th day of January, 1998, my signature
as it may be signed by my said attorneys to any such Registration Statements and
any and all amendments thereto.
Signature/Title
---------------
/s/ Thomas J. McInerney
- -------------------------------------------------------
Thomas J. McInerney
Director and President
(Principal Executive Officer)
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Aetna Insurance Company of America, hereby
constitute and appoint Julie E. Rockmore, Kirk P. Wickman and Mary Katherine
Johnson and each of them individually, my true and lawful attorneys, with full
power to them and each of them to sign for me, and in my name and in the
capacity indicated below, any and all amendments, to the Registration Statements
listed below filed with the Securities and Exchange Commission under the
Securities Act of 1933 and the Investment Company Act of 1940:
Registration Statements filed under the Securities Act of 1933:
33-59749
33-62481
33-63611
33-63657
33-80750
333-22723
Registration Statements filed under the Investment Company Act of 1940:
811-08582
hereby ratifying and confirming on this 24th day of March, 1998, my signature as
it may be signed by my said attorneys to any such Registration Statements and
any and all amendments thereto.
Signature/Title
---------------
/s/ Catherine H. Smith
- -------------------------------------------------------
Catherine H. Smith
Director
2
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Aetna Insurance Company of America, hereby
constitute and appoint Julie E. Rockmore, Kirk P. Wickman and Mary Katherine
Johnson and each of them individually, my true and lawful attorneys, with full
power to them and each of them to sign for me, and in my name and in the
capacity indicated below, any and all amendments, to the Registration Statements
listed below filed with the Securities and Exchange Commission under the
Securities Act of 1933 and the Investment Company Act of 1940:
Registration Statements filed under the Securities Act of 1933:
33-59749
33-62481
33-63611
33-63657
33-80750
333-22723
Registration Statements filed under the Investment Company Act of 1940:
811-08582
hereby ratifying and confirming on this 20th day of January, 1998, my signature
as it may be signed by my said attorneys to any such Registration Statements and
any and all amendments thereto.
Signature/Title
---------------
/s/ Shaun P. Mathews
------------------------------------------------------
Shaun P. Mathews
Director
3
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director and Officer of Aetna Insurance Company of America,
hereby constitute and appoint Julie E. Rockmore, Kirk P. Wickman and Mary
Katherine Johnson and each of them individually, my true and lawful attorneys,
with full power to them and each of them to sign for me, and in my name and in
the capacities indicated below, any and all amendments, to the Registration
Statements listed below filed with the Securities and Exchange Commission under
the Securities Act of 1933 and the Investment Company Act of 1940:
Registration Statements filed under the Securities Act of 1933:
33-59749
33-62481
33-63611
33-63657
33-80750
333-22723
Registration Statements filed under the Investment Company Act of 1940:
811-08582
hereby ratifying and confirming on this 20th day of January, 1998, my signature
as it may be signed by my said attorneys to any such Registration Statements and
any and all amendments thereto.
Signature/Title
---------------
/s/ Deborah Koltenuk
- -------------------------------------------------------
Deborah Koltenuk
Director and Vice President
and Treasurer, Corporate Controller
(Chief Financial Officer)
4
<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>
