As filed with the Securities and Exchange Registration No. 333-49581
Commission on April 4, 2000
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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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Florida
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06-1286272
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5100 West Lemon Street, Suite 213, Tampa, Florida 33609
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Julie E. Rockmore, Counsel
Aetna Insurance Company of America
151 Farmington Avenue, TS31, 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. |_| _____________________
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. |_| _________________
<PAGE>
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)
Location - Prospectus
Form S-2 Information Required in Dated
Item No. Prospectus May 1, 2000
- -------- ----------------------- ---------------------------
1 Forepart of the Registration
Statement and Outside Front Cover
Page of Prospectus ............ Outside Front Cover
2 Inside Front and Outside Back
Cover Pages of Prospectus...... Table of Contents
(inside front cover)
3 Summary Information, Risk Factors
and Ratio of Earnings to Fixed
Charges........................ Summary
4 Use of Proceeds................ Not Applicable
5 Determination of Offering Price Not Applicable
6 Dilution....................... Not Applicable
7 Selling Security Holders....... Not Applicable
8 Plan of Distribution........... Other Topics -
Distribution of Contracts
9 Description of Securities to be
Registered..................... Description of the Guaranteed
Account--Guaranteed Terms and
Guaranteed Interest Rates
10 Interests of Named Experts and
Counsel........................ Other Topics--Experts
11 Information with Respect to the
Registrant..................... Not Applicable
12 Incorporation of Certain
Information by Reference....... Other Topics--Incorporation
of Certain Documents by
Reference
13 Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities................ Not Applicable
<PAGE>
AICA Guaranteed Account - May 1, 2000
- --------------------------------------------------------------------------------
Introduction
The AICA Guaranteed Account (the Guaranteed Account) is a fixed interest option
available during the accumulation phase of certain variable annuity contracts
issued by Aetna Insurance Company of America (the Company, we, us). Read this
prospectus carefully before investing in the Guaranteed Account and save it for
future reference.
General Description
The Guaranteed Account offers investors an opportunity to earn specified
guaranteed rates of interest for specified periods of time, called guaranteed
terms. We generally offer several guaranteed terms at any one time for those
considering investing in the Guaranteed Account. Each guaranteed term offers a
guaranteed interest rate for investments that remain in the Guaranteed Account
for the duration of the specific guaranteed term. The guaranteed term
establishes both the length of time for which we agree to credit a guaranteed
interest rate and how long your investment must remain in the Guaranteed
Account in order to receive the guaranteed interest rate.
We guarantee both principal and interest if, and only if, your investment
remains invested for the full guaranteed term. Charges related to the contract,
such as a maintenance fee or early withdrawal charge, may still apply even if
you do not withdraw until the end of a guaranteed term. Investments taken out
of the Guaranteed Account prior to the end of a guaranteed term may be subject
to a market value adjustment which may result in an investment gain or loss.
See "Market Value Adjustment," page 11.
This prospectus will explain:
> Guaranteed interest rates and guaranteed terms;
> Contributions to the Guaranteed Account;
> Types of investments available;
> How rates are offered;
> How there can be an investment risk, and how we calculate gain or loss;
> Contract charges that can affect your account value in the Guaranteed
Account;
> Taking investments out of the Guaranteed Account; and
> How to reinvest or withdraw at maturity.
Additional Disclosure Information
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed on the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense. We do not intend for this prospectus to be an offer to sell
or a solicitation of an offer to buy these securities in any state or
jurisdiction that does not permit their sale. We have not authorized anyone to
provide you with information that is different than that contained in this
prospectus. These contracts are not offered for sale in the State of New York.
Our Home Office: Our Service Center:
Aetna Insurance Company of America Aetna Insurance Company of America
5100 West Lemon Street 151 Farmington Avenue
Suite 213 Hartford, Connecticut 06156
Tampa, Florida 3360 (800) 531-4547
813-261-9582
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page
Summary ....................................................................... 3
Description of the Guaranteed Account ......................................... 6
General, Contributions to the Guaranteed Account, Deposit Period,
Guaranteed Terms, Guaranteed Interest Rates,
Maturity Value Transfer Provision
Transfers ..................................................................... 9
Withdrawals ................................................................... 10
Deferral of Payments, Reinvestment Privilege
Market Value Adjustment (MVA) ................................................. 11
Calculation of the MVA, Deposit Period Yield, Current Yield, MVA Formula
Contract Charges .............................................................. 13
Other Topics .................................................................. 13
Income Phase -- Investments -- Distribution of Contracts -- Taxation --
Experts -- Legal Matters -- Further Information -- Incorporation of Certain
Documents by Reference -- Inquiries
Appendix I -- Examples of Market Value Adjustment Calculations ................ 17
Appendix II -- Examples of Market Value Adjustment Yields ..................... 19
</TABLE>
<PAGE>
[Begin Callout]
Questions: Contacting the
Company. To answer your
questions, contact your sales
representative or write or
call our Service Center at:
Aetna Financial Services
Annuity Services
151 Farmington Avenue
Hartford, CT 06156-1258
1-800-531-4547
[End Callout]
Summary
- --------------------------------------------------------------------------------
The Guaranteed Account is a fixed interest option that may be available during
the accumulation phase of your variable annuity contract. The following is a
summary of certain facts about the Guaranteed Account.
In General. Amounts that you invest in the Guaranteed Account will earn a
guaranteed interest rate if left in the Guaranteed Account for a specified
period of time (the guaranteed term). You must invest amounts in the Guaranteed
Account for the full guaranteed term in order to receive the quoted guaranteed
interest rate. If you withdraw or transfer those amounts before the end of the
guaranteed term, we may apply a "market value adjustment," which may be
positive or negative.
Deposit Periods. A deposit period is the time during which we offer a specific
guaranteed interest rate if you deposit dollars for a specific guaranteed term.
For a particular guaranteed interest rate and guaranteed term to apply to your
account dollars, you must invest them during the deposit period in which that
rate and term are offered.
Guaranteed Terms. A guaranteed term is the period of time account dollars must
be left in the Guaranteed Account in order to earn the guaranteed interest rate
specified for that guaranteed term. We offer different guaranteed terms at
different times. We may also offer more than one guaranteed term of the same
duration with different guaranteed interest rates. Check with your sales
representative or the Company to learn the details about the guaranteed term(s)
currently offered. We reserve the right to limit the number of guaranteed terms
or the availability of certain guaranteed terms.
Guaranteed Interest Rates. We guarantee different interest rates, depending
upon when account dollars are invested in the Guaranteed Account. For
guaranteed terms one year or longer, we may offer different rates for specified
time periods within a guaranteed term. The interest rate we guarantee is an
annual effective yield; that means that the rate reflects a full year's
interest. We credit interest at a rate that will provide the guaranteed annual
effective yield over one year. The guaranteed interest rate(s) are guaranteed
for that deposit period and for the length of the guaranteed term.
The guaranteed interest rates we offer will always meet or exceed the minimum
interest rates agreed to in the contract. Apart from meeting the contractual
minimum interest rates, we cannot guarantee any aspect of future offerings.
Fees and Other Deductions. We do not make deductions from amounts in the
Guaranteed Account to cover mortality and expense risks. We consider these
risks when determining the credited rate. The following other types of charges
may be deducted from amounts held in, withdrawn or transferred from the
Guaranteed Account:
> Market Value Adjustment (MVA). An MVA may be applied to amounts transferred
or withdrawn prior to the end of a guaranteed term, which reflects changes
in interest rates since the deposit period. The MVA may be positive or
negative, and therefore may increase or decrease the amount withdrawn to
satisfy a transfer or withdrawal request. See "Market Value Adjustment
(MVA)."
> Tax Penalties and/or Tax Withholding. Amounts withdrawn may be subject to
withholding for federal income taxes, as well as a 10% penalty tax for
3
<PAGE>
[Begin Callout]
Contract holder (You/Your)--
The contract holder of an
individually owned contract or
the certificate holder of a
group contract.
[End Callout]
amounts withdrawn prior to you having attained age 59-1/2. See "Taxation"; see
also the "Taxation" section of the contract prospectus.
> Early Withdrawal Charge. An early withdrawal charge, which is a deferred
sales charge, may apply to amounts withdrawn from the contract, in order to
reimburse us for some of the sales and administrative expenses associated
with the contract. See "Contract Charges"; see also the "Fees" section of
the contract prospectus.
> Maintenance Fee. A maintenance fee of up to $30 may be deducted, on an
annual basis, pro rata from all funding options including the Guaranteed
Account. See "Contract Charges"; see also the "Fees" section of the
contract prospectus.
> Transfer Fees. During the accumulation phase, transfer fees of up to $10
per transfer may be deducted from amounts held in or transferred from the
Guaranteed Account. See "Contract Charges"; see also the "Fees" section of
the contract prospectus.
> Premium Taxes. We may deduct premium taxes of up to 4% from amounts in the
Guaranteed Account. See "Contract Charges"; see also the "Fees" section of
the contract prospectus.
Market Value Adjustment (MVA). If you withdraw or transfer your account value
from the Guaranteed Account before a guaranteed term is complete, an MVA may
apply. The MVA reflects the change in the value of the investment due to
changes in interest rates since the date of deposit. The MVA may be positive or
negative depending upon interest rate activity at the time of withdrawal or
transfer.
An MVA will not apply to:
> Amounts transferred or withdrawn at the end of a guaranteed term;
> Transactions made under the maturity value transfer provision;
> Transfers due to participation in the dollar cost averaging program (see
"Market Value Adjustment" for certain restrictions);
> Amounts distributed under a systematic distribution option (see "Systematic
Distribution Options" in the contract prospectus);
> Withdrawals for minimum distributions required by the Internal Revenue Code
of 1986, as amended (Tax Code), and for which the early withdrawal charge
is waived; and
> Withdrawals due to your exercise of the right to cancel your contract. See
the "Right to Cancel" section of the contract prospectus.
MVAs applied to withdrawals or transfers from the Guaranteed Account will be
calculated as an "aggregate MVA," which is the sum of all MVAs applicable due
to the withdrawal (see sidebar on page 11 for an example of the calculation of
the aggregate MVA). The following withdrawals will be subject to an aggregate
MVA only if it is positive:
> Withdrawals due to the election of a lifetime income option; and
> Unless otherwise noted, payment of a guaranteed death benefit (if paid
within the first six months following death).
All other withdrawals will be subject to an aggregate MVA, regardless of
whether it is positive or negative, including:
> Withdrawals due to the election of a nonlifetime income option;
4
<PAGE>
> Payment of a guaranteed death benefit (due to the death of a spousal
beneficiary or a joint contract holder who continued the account in his or
her name after the death of the other joint contract holder);
> Payment of a guaranteed death benefit more than six months after the date
of death; and
> Full or partial withdrawals during the accumulation phase (however, an MVA
may not apply in certain situations, as noted above).
See "Description of the Guaranteed Account" and "Market Value Adjustment
(MVA)."
Maturity of a Guaranteed Term. On or before the end of a guaranteed term, you
may instruct us to:
> Transfer the matured amount to one or more new guaranteed terms available
under the current deposit period;
> Transfer the matured amount to other available investment options; or
> Withdraw the matured amount.
Amounts withdrawn may be subject to an early withdrawal charge, a maintenance
fee, tax withholding and, if you are under age 59-1/2, tax penalties. See
"Contract Charges"; see also the "Fees" and "Taxation" sections of the contract
prospectus.
When a guaranteed term ends, if we have not received instructions from you, we
will automatically reinvest the maturing investment into a new guaranteed term
of similar length (see "Maturity of a Guaranteed Term" and "Maturity Value
Transfer Provision"). If the same guaranteed term is no longer available, the
next shortest guaranteed term available in the current deposit period will be
used. If no shorter guaranteed term is available, the next longest guaranteed
term will be used.
If you do not provide instructions concerning the maturing amount on or before
the end of a guaranteed term, and this amount is automatically reinvested as
noted above, the maturity value transfer provision will apply.
Maturity Value Transfer Provision. This provision allows transfers or
withdrawals of amounts automatically reinvested at the end of a guaranteed term
without an MVA, if the transfer or withdrawal occurs during the calendar month
immediately following a guaranteed term maturity date. As described in "Fees
and Other Deductions" above, other fees, including an early withdrawal charge
and a maintenance fee, may be assessed on amounts withdrawn. See "Maturity
Value Transfer Provision."
Transfer of Account Dollars. Generally, account dollars invested in the
Guaranteed Account may be transferred among guaranteed terms offered through
the Guaranteed Account, and/or to other investment options offered through the
contract. However:
> Transfers may not be made during the deposit period in which your account
dollars are invested in the Guaranteed Account or for 90 days after the
close of that deposit period; and
> We may apply an MVA to transfers made before the end of a guaranteed term.
Investments. Guaranteed interest rates credited during any guaranteed term do
not necessarily relate to investment performance. Deposits received into the
Guaranteed Account will generally be invested in federal, state and municipal
5
<PAGE>
obligations, corporate bonds, preferred stocks, real estate mortgages, real
estate, certain other fixed income investments, and cash or cash equivalents.
All of our general assets are available to meet guarantees under the Guaranteed
Account.
Amounts allocated to the Guaranteed Account are held in a nonunitized separate
account established by the Company under Florida law. Prior to January 5, 2000,
these amounts were held in a nonunitized separate account established by the
Company under Connecticut law. To the extent provided for in the contract,
assets of the separate account are not chargeable with liabilities arising out
of any other business that we conduct. See "Investments."
Notification of Maturity. We will notify you at least 18 calendar days prior to
the maturity of a guaranteed term. We will include information relating to the
current deposit period's guaranteed interest rates and the available guaranteed
terms. You may obtain information concerning available deposit periods,
guaranteed interest rates, and guaranteed terms by telephone (1-800-531-4547).
See "Description of the AICA Guaranteed Account--General" and "Maturity of a
Guaranteed Term."
Description of the Guaranteed Account
- --------------------------------------------------------------------------------
General
The Guaranteed Account offers guaranteed interest rates for specific guaranteed
terms. For a particular guaranteed interest rate and guaranteed term to apply
to your account dollars, you must invest them during the deposit period in
which that rate and term are offered. For guaranteed terms of one year or
longer, we may offer different interest rates for specified time periods within
a guaranteed term. We may also offer more than one guaranteed term of the same
duration with different guaranteed interest rates.
An MVA may be applied to any values withdrawn or transferred from a guaranteed
term prior to the end of that guaranteed term, except for amounts transferred
under the maturity value transfer provision, amounts transferred under the
dollar cost averaging program, amounts withdrawn under a systematic
distribution option, amounts withdrawn for minimum distributions required by
the Tax Code, and withdrawals due to your exercise of the right to cancel your
contract.
MVAs applied to withdrawals or transfers from the Guaranteed Account will be
calculated as an "aggregate MVA," which is the sum of all MVAs applicable due
to the withdrawal (see sidebar on page 11 for an example of the calculation of
the aggregate MVA). The following withdrawals will be subject to an aggregate
MVA only if it is positive:
> Withdrawals due to the election of a lifetime income option; and
> Unless otherwise noted, payment of a guaranteed death benefit (if paid
within the first six months following death).
All other withdrawals will be subject to an aggregate MVA, regardless of
whether it is positive or negative, including:
6
<PAGE>
> Withdrawals due to the election of a nonlifetime income option;
> Payment of a guaranteed death benefit (due to the death of a spousal
beneficiary or a joint contract holder who continued the account in his or
her name after the death of the other joint contract holder);
> Payment of a guaranteed death benefit more than six months after the date
of death; and
> Full or partial withdrawals during the accumulation phase (however, an MVA
may not apply in certain situations, see "Market Value Adjustment (MVA)").
We maintain a toll-free telephone number for those wishing to obtain
information concerning available deposit periods, guaranteed interest rates,
and guaranteed terms. The telephone number is 1-800-531-4547. At least 18
calendar days before a guaranteed term matures we will notify you of the
upcoming deposit period dates and information on the current guaranteed
interest rates, guaranteed terms and projected matured guaranteed term values.
Contributions to the Guaranteed Account
You may invest in the guaranteed terms available in the current deposit period
by allocating new payments to the Guaranteed Account or by transferring a sum
from other funding options available under the contract or from other
guaranteed terms of the Guaranteed Account, subject to the transfer limitations
described in the contract. We may limit the number of guaranteed terms you may
select. Currently, if the dollar cost averaging program is in effect in a
guaranteed term and you wish to add an additional deposit to be dollar cost
averaged, all amounts to be dollar cost averaged will be combined and the
dollar cost averaging amount will be recalculated. This will affect the
duration of amounts in the guaranteed term.
Although there is currently no limit, we reserve the right to limit the total
number of investment options you may select at any one time during the life of
the contract. For purposes of determining any limit, each guaranteed term
counts as one investment option. Although we may require a minimum payment(s)
to a contract, we do not require a minimum investment for a guaranteed term.
Refer to the contract prospectus. There is a $500 minimum for transfers from
other funding options.
Investments may not be transferred from a guaranteed term during the deposit
period in which the investment is applied or during the first 90 days after the
close of the deposit period. This restriction does not apply to amounts
transferred or withdrawn under the maturity value transfer provision, to
amounts transferred under the dollar cost averaging program or, in some
situations, withdrawn because you discontinued the dollar cost averaging
program, or to amounts distributed under a systematic distribution option. See
"Maturity Value Transfer Provision" and "Transfers."
Deposit Period
The deposit period is the period of time during which you may direct
investments to a particular guaranteed term(s) and receive a stipulated
guaranteed interest rate(s). Each deposit period may be a month, a calendar
quarter, or any other period of time we specify.
7
<PAGE>
[Begin Callout]
Business Day--Any day on
which the New York Stock
Exchange is open.
[End Callout]
Guaranteed Terms
A guaranteed term is the time we specify during which we credit the guaranteed
interest rate. We offer guaranteed terms at our discretion for various periods
ranging up to and including ten years. We may limit the number of guaranteed
terms you may select and may require enrollment in the dollar cost averaging
program.
Guaranteed Interest Rates
Guaranteed interest rates are the rates that we guarantee will be credited on
amounts applied during a deposit period for a specific guaranteed term. We may
offer different guaranteed interest rates on guaranteed terms of the same
duration. Guaranteed interest rates are annual effective yields, reflecting a
full year's interest. We credit interest at a rate that will provide the
guaranteed annual effective yield over one year. Guaranteed interest rates are
credited according to the length of the guaranteed term as follows:
> Guaranteed Terms of One Year or Less. The guaranteed interest rate is
credited from the date of deposit to the last day of the guaranteed term.
> Guaranteed Terms of Greater than One Year. Several different guaranteed
interest rates may be applicable during a guaranteed term of more than one
year. The initial guaranteed interest rate is credited from the date of
deposit to the end of a specified period within the guaranteed term. We may
credit several different guaranteed interest rates for subsequent specific
periods of time within the guaranteed term. For example, for a five-year
guaranteed term we may guarantee 7% for the first year, 6.75% for the next
two years, and 6.5% for the remaining two years. We reserve the right,
however, to apply one guaranteed interest rate for an entire guaranteed
term.
We will not guarantee or credit a guaranteed interest rate below the minimum
rate specified in the contract, nor will we credit interest at a rate above the
guaranteed interest rate we announce prior to the start of a deposit period.
Our guaranteed interest rates are influenced by, but do not necessarily
correspond to, interest rates available on fixed income investments we may buy
using deposits directed to the Guaranteed Account (see "Investments"). We
consider other factors when determining guaranteed interest rates including
regulatory and tax requirements, sales commissions and administrative expenses
borne by the Company, general economic trends, and competitive factors. We make
the final determination regarding guaranteed interest rates. We cannot predict
the level of future guaranteed interest rates.
Maturity of a Guaranteed Term. At least 18 calendar days prior to the maturity
of a guaranteed term we will notify you of the upcoming deposit period, the
projected value of the amount maturing at the end of the guaranteed term, and
the guaranteed interest rate(s) and guaranteed term(s) available for the
current deposit period.
When a guaranteed term matures, the amounts in any maturing guaranteed term may
be:
> Transferred to a new guaranteed term(s), if available under the contract;
> Transferred to any of the allowable investment options available under the
contract; or
> Withdrawn from the contract.
8
<PAGE>
We do not apply an MVA to amounts transferred or withdrawn from a guaranteed
term on the date the guaranteed term matures. Amounts withdrawn, however, may
be subject to an early withdrawal charge, a maintenance fee, taxation and, if
the contract holder is under age 59-1/2, tax penalties.
If we have not received direction from you by the maturity date of a guaranteed
term, we will automatically transfer the matured term value to a new guaranteed
term of similar length. If the same guaranteed term is no longer available, the
next shortest guaranteed term available in the current deposit period will be
used. If no shorter guaranteed term is available, the next longest guaranteed
term will be used.
Under the Guaranteed Account, each guaranteed term is counted as one funding
option. If a guaranteed term matures, and is renewed for the same term, it will
not count as an additional investment option for purposes of any limitation on
the number of investment options.
You will receive a confirmation statement, plus information on the new
guaranteed rate(s) and guaranteed term.
Maturity Value Transfer Provision
If we automatically reinvest the proceeds from a matured guaranteed term, you
may transfer or withdraw from the Guaranteed Account the amount that was
reinvested without an MVA. An early withdrawal charge and maintenance fee may
apply to withdrawals. If the full amount reinvested is transferred or
withdrawn, we will include interest credited to the date of the transfer or
withdrawal. This provision is only available until the last business day of the
month following the maturity date of the prior guaranteed term. This provision
only applies to the first transfer or withdrawal request received from the
contract holder with respect to a particular matured guaranteed term value,
regardless of the amount involved in the transaction.
Transfers
- --------------------------------------------------------------------------------
We allow you to transfer all or a portion of your account value to the
Guaranteed Account or to other investment options under the contract. We do not
allow transfers from any guaranteed term to any other guaranteed term or
investment option during the deposit period for that guaranteed term or for 90
days following the close of that deposit period. The 90-day wait does not apply
to:
> Amounts transferred on the maturity date or under the maturity value
transfer provision;
> Amounts transferred from the Guaranteed Account before the maturity date
due to the election of an income phase payment option;
> Amounts distributed under a systematic distribution option; or
> Amounts transferred from an available guaranteed term in connection with
the dollar cost averaging program.
Transfers after the 90-day period are permitted from guaranteed term(s) to
other guaranteed term(s) available during a deposit period or to other
9
<PAGE>
[Begin Callout]
Guaranteed Term Group--
A grouping of deposits or
investments having the same
guaranteed term.
[End Callout]
available investment options. We will apply an MVA to transfers made before the
end of a guaranteed term. Transfers within one calendar month of a term's
maturity date are not counted as one of the 12 free transfers of accumulated
values in the account.
When the contract holder requests the transfer of a specific dollar amount, we
account for any applicable MVA in determining the amount to be withdrawn from a
guaranteed term(s) to fulfill the request. Therefore, the amount we actually
withdraw from the guaranteed term(s) may be more or less than the requested
dollar amount (see "Appendix I" for an example). For more information on
transfers, see the contract prospectus.
Withdrawals
- --------------------------------------------------------------------------------
The contract allows for full or partial withdrawals from the Guaranteed
Account at any time during the accumulation phase. To make a full or partial
withdrawal, a request form (available from us) must be properly completed and
submitted to our Service Center.
Partial withdrawals are made pro rata from a guaranteed term group. From each
guaranteed term group, we will first withdraw funds from the oldest deposit
period, then from the next oldest, and so on.
We may apply an MVA to withdrawals made prior to the end of a guaranteed term,
except for withdrawals made under the maturity value transfer provision (see
"Market Value Adjustment"). We may deduct an early withdrawal charge and
maintenance fee. The early withdrawal charge is a deferred sales charge which
may be deducted upon withdrawal to reimburse us for some of the sales and
administrative expenses associated with the contract. A maintenance fee, up to
$30, may be deducted pro rata from each of the funding options, including the
Guaranteed Account. Refer to the contract prospectus for a description of these
charges. When a request for a partial withdrawal of a specific dollar amount is
made, we will include the MVA in determining the amount to be withdrawn from
the guaranteed term(s) to fulfill the request. Therefore, the amount we
actually take from the guaranteed term(s) may be more or less than the dollar
amount requested. See "Appendix I" for an example.
Deferral of Payments
Under certain emergency conditions, we may defer payment of a Guaranteed
Account withdrawal for up to six months. Refer to the contract prospectus for
more details.
Reinvestment Privilege
You may elect to reinvest all or a portion of a full withdrawal during the 30
days following such a withdrawal. We must receive amounts for reinvestment
within 60 days of the withdrawal.
We will apply reinvested amounts to the current deposit period. This means that
the guaranteed annual interest rate and guaranteed terms available on the date
of reinvestment will apply. Amounts are reinvested in the same proportion as
prior to the full withdrawal. Any negative MVA we applied to a withdrawal will
not be refunded. Refer to the contract prospectus for further details.
10
<PAGE>
[Begin Callout]
Aggregate MVA--The total of
all MVAs applied due to a
transfer or withdrawal.
Calculation of the Aggregate
MVA -- In order to satisfy a
transfer or withdrawal,
amounts may be withdrawn
from more than one
guaranteed term, with more
than one guaranteed interest
rate. In order to determine
the MVA applicable to such a
transfer or withdrawal, the
MVAs applicable to each
guaranteed term will be added
together, in order to
determine the "aggregate
MVA."
Example:
$1,000 withdrawal,
two guaranteed terms,
MVA1 = $10, MVA2 = $-30
$10 + $-30 = $-20.
Aggregate MVA = $-20.
Example:
$1,000 withdrawal,
two guaranteed terms,
MVA1 = $30, MVA2 = $-10
$30 + $-10 = $20.
Aggregate MVA = $20.
[End Callout]
Market Value Adjustment (MVA)
- --------------------------------------------------------------------------------
We apply an MVA to amounts transferred or withdrawn from the Guaranteed Account
prior to the end of a guaranteed term. To accommodate early withdrawals or
transfers, we may need to liquidate certain assets or use cash that could
otherwise be invested at current interest rates. When we sell assets
prematurely we could realize a profit or loss depending upon market conditions.
The MVA reflects changes in interest rates since the deposit period. When
interest rates increase after the deposit period, the value of the investment
decreases and the MVA amount may be negative. Conversely, when interest rates
decrease after the deposit period, the value of the investment increases and
the MVA amount may be positive. Therefore, the application of an MVA may
increase or decrease the amount withdrawn from a guaranteed term to satisfy a
withdrawal or transfer request.
An MVA will not apply to:
> Amounts transferred or withdrawn at the end of a guaranteed term;
> Transactions made under the maturity value transfer provision;
> Transfers due to participation in the dollar cost averaging program*;
> Amounts distributed under a systematic distribution option--see "Systematic
Distribution Options" in the contract prospectus;
> Withdrawals for minimum distributions required by the Tax Code and for
which the early withdrawal charge is waived; and
> Withdrawals due to your exercise of the right to cancel your contract. See
the "Right to Cancel" section of the contract prospectus.
* If you discontinue the dollar cost averaging program and transfer the
amounts in it, subject to the Company's terms and conditions governing
guaranteed terms, to another guaranteed term, an MVA will apply.
MVAs applied to withdrawals or transfers from the Guaranteed Account will be
calculated as an "aggregate MVA," which is the sum of all MVAs applicable due
to the withdrawal (see sidebar on this page for an example of the calculation
of the aggregate MVA). The following withdrawals will be subject to an
aggregate MVA only if it is positive:
> Withdrawals due to the election of a lifetime income option; and
> Unless otherwise noted, payment of a guaranteed death benefit (if paid
within the first six months following death).
All other withdrawals will be subject to an aggregate MVA, regardless of
whether it is positive or negative, including:
> Withdrawals due to the election of a nonlifetime income option;
> Payment of a guaranteed death benefit (due to the death of a spousal
beneficiary or a joint contract holder who continued the account in his or
her name after the death of the other joint contract holder);
> Payment of a guaranteed death benefit more than six months after the date
of death; and
> Full or partial withdrawals during the accumulation phase (however, an MVA
may not apply in certain situations, as noted above).
11
<PAGE>
Calculation of the MVA
The amount of the MVA depends upon the relationship between:
> The deposit period yield of U.S. Treasury Notes that will mature in the
last quarter of the guaranteed term; and
> The current yield of such U. S. Treasury Notes at the time of withdrawal.
If the current yield is less than the deposit period yield, the MVA will
decrease the amount withdrawn from a guaranteed term to satisfy a transfer or
withdrawal request (the MVA will be positive). If the current yield is greater
than the deposit period yield, the MVA will increase the amount withdrawn from
a guaranteed term (the MVA will be negative or detrimental to the investor).
Deposit Period Yield
We determine the deposit period yield used in the MVA calculation by
considering interest rates prevailing during the deposit period of the
guaranteed term from which the transfer or withdrawal will be made. First, we
identify the Treasury Notes that mature in the last three months of the
guaranteed term. Then, we determine their yield-to-maturity percentages for the
last business day of each week in the deposit period. We then average the
resulting percentages to determine the deposit period yield.
Treasury Note information may be found each business day in publications such
as the Wall Street Journal, which publishes the yield-to-maturity percentages
for all Treasury Notes as of the preceding business day.
Current Yield
We use the same Treasury Notes identified for the deposit period yield to
determine the current yield--Treasury Notes that mature in the last three
months of the guaranteed term. However, we use the yield-to-maturity
percentages for the last business day of the week preceding the withdrawal and
average those percentages to get the current yield.
MVA Formula
The mathematical formula used to determine the MVA is:
x
{ (1+i) } ----
{ (1+j) } 365
where i is the deposit period yield; j is the current yield; and x is the
number of days remaining (computed from Wednesday of the week of withdrawal) in
the guaranteed term. (For examples of how we calculate MVA, refer to Appendix
I.)
We make an adjustment in the formula of the MVA to reflect the period of time
remaining in the guaranteed term from the Wednesday of the week of a
withdrawal.
12
<PAGE>
Contract Charges
- --------------------------------------------------------------------------------
Certain charges may be deducted directly or indirectly from the funding options
available under the contract, including the Guaranteed Account.
The contract may have a maintenance fee of up to $30 that we will deduct, on an
annual basis, pro rata from all funding options including the Guaranteed
Account. We may also deduct a maintenance fee upon full withdrawal of a
contract.
The contract may have an early withdrawal charge that we will deduct, if
applicable, upon a full or partial withdrawal from the contract. If the
withdrawal occurs prior to the maturity of a guaranteed term, both the early
withdrawal charge and an MVA may be assessed.
We do not deduct mortality and expense risk charges and other asset-based
charges that may apply to variable funding options from the Guaranteed Account.
These charges are only applicable to the variable funding options.
We may deduct premium taxes of up to 4% from amounts in the Guaranteed Account.
During the accumulation phase, transfer fees of up to $10 per transfer may be
deducted from amounts held in or transferred from the Guaranteed Account.
Refer to the contract prospectus for details on contract deductions.
Other Topics
- --------------------------------------------------------------------------------
Income Phase
The Guaranteed Account may not be used as a funding option during the income
phase. Amounts invested in guaranteed terms must be transferred to one or more
of the options available to fund income payments before income payments can
begin.
An aggregate MVA, as previously described, may be applied to amounts
transferred to fund income payments before the end of a guaranteed term.
Amounts used to fund lifetime income payments will receive either a positive
aggregate MVA or none at all; however, amounts transferred to fund a
nonlifetime income payment option may receive either a positive or negative
aggregate MVA.
Refer to the contract prospectus for a discussion of the income phase.
Investments
Amounts applied to the Guaranteed Account will be deposited to a nonunitized
separate account established under Florida law. (Prior to January 5, 2000,
these amounts were held in an a nonunitized separate account established under
Connecticut law.) A nonunitized separate account is a separate account in which
the contract holder does not participate in the performance of the assets
through unit values or any other interest. Contract holders allocating funds to
the nonunitized separate account do not receive a unit value of ownership of
assets accounted for in this separate account. The
13
<PAGE>
risk of investment gain or loss is borne entirely by the Company. All Company
obligations due to allocations to the nonunitized separate account are
contractual guarantees of the Company and are accounted for in the separate
account. All of the general assets of the Company are available to meet our
contractual guarantees. To the extent provided for in the applicable contract,
the assets of the nonunitized separate account are not chargeable with
liabilities resulting from any other business of the Company. Income, gains and
losses of the separate account are credited to or charged against the separate
account without regard to other income, gains or losses of the Company.
Types of Investments. We intend to invest primarily in investment-grade fixed
income securities including:
> Securities issued by the United States Government;
> Issues of United States Government agencies or instrumentalities (these
issues may or may not be guaranteed by the United States Government);
> Debt securities which have an investment grade, at the time of purchase,
within the four highest grades assigned by Moody's Investors Services, Inc.
(Aaa, Aa, A or Baa), Standard & Poor's Corporation (AAA, AA, A or BBB) or
any other nationally-recognized rating service;
> Other debt instruments, including those issued or guaranteed by banks or
bank holding companies, and of corporations, which although not rated by
Moody's, Standard & Poor's, or other nationally recognized rating services,
are deemed by the Company's management to have an investment quality
comparable to securities which may be purchased as stated above; and
> 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.
We may invest in futures and options. We purchase financial futures, related
options and options on securities solely for non-speculative hedging purposes.
Should securities prices be expected to decline, we may sell a futures contract
or purchase a put option on futures or securities to protect the value of
securities held in or to be sold for the nonunitized separate account.
Similarly, if securities prices are expected to rise, we may purchase a futures
contract or a call option against anticipated positive cash flow or may
purchase options on securities.
We are not obligated to invest the assets attributable to the contract
according to any particular strategy, except as required by Florida and other
state insurance laws. The guaranteed interest rates established by the Company
may not necessarily relate to the performance of the nonunitized separate
account.
Distribution of Contracts
Aetna Life Insurance and Annuity Company (ALIAC) serves as principal
underwriter for the securities sold through this prospectus. ALIAC is
registered as a broker-dealer with the SEC and is a member of the National
Association of Securities Dealers, Inc.
Certain broker-dealers may be offered special guaranteed rates in connection
with the Guaranteed Account offered through the contracts, and ALIAC may
negotiate different commissions for these broker-dealers. For additional
information, see the contract prospectus.
14
<PAGE>
Taxation
You should seek advice from your tax adviser as to the application of federal
(and where applicable, state and local) tax laws to amounts paid to or
distributed under the contract. Refer to the contract prospectus for a
discussion of tax considerations.
Taxation of the Company. We are taxed as a life insurance company under Part I
of Subchapter L of the Internal Revenue Code of 1986, as amended. We own all
assets supporting the contract obligations of the Guaranteed Account. Any
income earned on such assets is considered income to the Company. We do not
intend to make any provision or impose a charge under the contract with respect
to any tax liability of the Company.
Taxation of Payments and Distributions. For information concerning the tax
treatment of payments to and distributions from the contract, please refer to
the contract prospectus.
Experts
We have incorporated by reference into Post Effective Amendment No. 4 to the
Registration Statement of which this prospectus is a part and/or into this
prospectus:
> The balance sheets of the Company as of December 31, 1999 and 1998 and the
related statements of income, changes in shareholder's equity and cash
flows and related schedule for each of the years in the three-year period
ended December 31, 1999; and
> The reports of KPMG LLP.
These statements are included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1999. We have relied upon the reports of KPMG LLP,
independent certified public accountants, and upon their authority as experts
in accounting and auditing.
Legal Matters
The validity of the securities offered by this prospectus has been passed upon
by counsel to the Company.
Further Information
This prospectus does not contain all of the information contained in the
registration statement of which this prospectus is a part. Portions of the
registration statement have been omitted from this prospectus as allowed by the
Securities and Exchange Commission (SEC). You may obtain the omitted
information from the offices of the SEC, as described below.
We are required by the Securities Exchange Act of 1934 to file periodic reports
and other information with the SEC. You may inspect or copy information
concerning the Company at the Public Reference Room of the SEC at:
Securities and Exchange Commission
450 Fifth Street NW
Washington, DC 20549
You may also obtain copies of these materials at prescribed rates from the
Public Reference Room of the above office. You may obtain information on the
15
<PAGE>
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
You may also find more information about the Company at www.aetna.com.
A copy of the Company's annual report on Form 10-K for the year ended December
31, 1999 accompanies this prospectus. We refer to Form 10-K for a description
of the Company and its business, including financial statements. We intend to
send contract holders annual account statements and other such legally-required
reports. We do not anticipate such reports will include periodic financial
statements or information concerning the Company.
You can find this prospectus and other information the Company files
electronically with the SEC on the SEC's web site at www.sec.gov.
Incorporation of Certain Documents by Reference
The registration statement for this prospectus incorporates some documents by
reference. We will provide a free copy of any such documents upon the written
or oral request of anyone who has received this prospectus. We will not include
exhibits to those documents unless they are specifically incorporated by
reference into the document. Direct requests to:
Aetna Insurance Company of America
151 Farmington Avenue
Hartford, CT 06156
1-800-531-4547
Inquiries
You may contact us directly by writing or calling us at the address or phone
number shown above.
16
<PAGE>
Appendix I
Examples of Market Value Adjustment Calculations
- --------------------------------------------------------------------------------
The following are examples of market value adjustment (MVA) calculations using
several hypothetical deposit period yields and current yields. These examples
do not include the effect of any early withdrawal charge or other fees or
deductions that may be assessed under the contract upon withdrawal.
EXAMPLE I
Assumptions:
i, the deposit period yield, is 8%
j, the current yield, is 10%
x, the number of days remaining (computed from Wednesday of the week of
withdrawal) in the guaranteed term, is 927.
x
MVA = { (1+i) } ---
{ (1+j) } 365
927
= { (1.08) } ---
{ (1.10) } 365
= .9545
In this example, the deposit period yield of 8% is less than the current yield
of 10%; therefore, the MVA is less than one. The amount withdrawn from the
guaranteed term is multiplied by this MVA.
If a withdrawal or transfer of a specific dollar amount is requested, the
amount withdrawn from a guaranteed term will be increased to compensate for the
negative MVA amount. For example, a withdrawal request to receive a check for
$2,000 would result in a $2,095.34 withdrawal from the guaranteed term.
Assumptions:
i, the deposit period yield, is 5%
j, the current yield, is 6%
x, the number of days remaining (computed from Wednesday of the week of
withdrawal) in the guaranteed term, is 927
x
MVA = { (1+i) } ---
{ (1+j) } 365
927
= { (1.05) } ---
{ (1.06) } 365
= .9762
In this example, the deposit period yield of 5% is less than the current yield
of 6%; therefore, the MVA is less than one. The amount withdrawn from the
guaranteed term is multiplied by this MVA.
If a withdrawal or transfer of a specific dollar amount is requested, the
amount withdrawn from a guaranteed term will be increased to compensate for the
negative MVA amount. For example, a withdrawal request to receive a check for
$2,000 would result in a $2,048.76 withdrawal from the guaranteed term.
17
<PAGE>
EXAMPLE II
Assumptions:
i, the deposit period yield, is 10%
j, the current yield, is 8%
x, the number of days remaining (computed from Wednesday of the week of
withdrawal) in the guaranteed term, is 927.
x
MVA = { (1+i) } ---
{ (1+j) } 365
927
= { (1.08) } ---
{ (1.10) } 365
= 1.0477
In this example, the deposit period yield of 10% is greater than the current
yield of 8%; therefore, the MVA is greater than one. The amount withdrawn from
the guaranteed term is multiplied by this MVA.
If a withdrawal or transfer of a specific dollar amount is requested, the
amount withdrawn from a guaranteed term will be decreased to compensate for the
positive MVA amount. For example, a withdrawal request to receive a check for
$2,000 would result in a $1,908.94 withdrawal from the guaranteed term.
Assumptions:
i, the deposit period yield, is 5%
j, the current yield, is 4%
x, the number of days remaining (computed from Wednesday of the week of
withdrawal) in the guaranteed term, is 927.
x
MVA = { (1+i) } ---
{ (1+j) } 365
927
= { (1.08) } ---
{ (1.10) } 365
= 1.0246
In this example, the deposit period yield of 5% is greater than the current
yield of 4%; therefore, the MVA is greater than one. The amount withdrawn from
the guaranteed term is multiplied by this MVA.
If a withdrawal or transfer of a specific dollar amount is requested, the
amount withdrawn from a guaranteed term will be decreased to compensate for the
positive MVA amount. For example, a withdrawal request to receive a check for
$2,000 would result in a $1,951.98 withdrawal from the guaranteed term.
18
<PAGE>
Appendix II
Examples of Market Value Adjustment Yields
- --------------------------------------------------------------------------------
The following hypothetical examples show the MVA based upon a given current
yield at various times remaining in the guaranteed term. Table A illustrates
the application of the MVA based upon a deposit period yield of 10%; Table B
illustrates the application of the MVA based upon a deposit period yield of 5%.
The MVA will have either a positive or negative influence on the amount
withdrawn from or remaining in a guaranteed term. Also, the amount of the MVA
generally decreases as the end of the guaranteed term approaches.
TABLE A: Deposit Period Yield of 10%
<TABLE>
<CAPTION>
Change in
Yield
Current Period Time Remaining to
Yield Yield Maturity of Guaranteed Term
- --------- ---------- ----------------------------------------------------------------------------
8 Years 6 Years 4 Years 2 Years 1 Year 3 Months
----------- ----------- ----------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
15% +5% -29.9% -23.4% -16.3% -8.5% -4.3% -1.1%
13% +3% -19.4 -14.9 -10.2 -5.2 -2.7 -0.7
12% +2% -13.4 -10.2 -7.0 -3.5 -1.8 -0.4
11% +1% -7.0 -5.3 -3.6 -1.8 -0.9 -0.2
9% -1% 7.6 5.6 3.7 1.8 0.9 0.2
8% -2% 15.8 11.6 7.6 3.7 1.9 0.5
7% -3% 24.8 18.0 11.7 5.7 2.8 0.7
5% -5% 45.1 32.2 20.5 9.8 4.8 1.2
</TABLE>
TABLE B: Deposit Period Yield of 5%
<TABLE>
<CAPTION>
Change in
Deposit
Current Period Time Remaining to
Yield Yield Maturity of Guaranteed Term
- --------- ---------- ----------------------------------------------------------------------------
8 Years 6 Years 4 Years 2 Years 1 Year 3 Months
----------- ----------- ----------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
9% +4% -25.9% -20.1% -13.9% -7.2% -3.7% -0.9%
8% +3% -20.2 -15.6 -10.7 -5.5 -2.8 -0.7
7% +2% -14.0 -10.7 -7.3 -3.7 -1.9 -0.5
6% +1% -7.3 -5.5 -3.7 -1.9 -0.9 -0.2
4% -1% 8.0 5.9 3.9 1.9 1.0 0.2
3% -2% 16.6 12.2 8.0 3.9 1.9 0.5
2% -3% 26.1 19.0 12.3 6.0 2.9 0.7
1% -4% 36.4 26.2 16.8 8.1 4.0 1.0
</TABLE>
19
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Not Applicable
Item 15. Indemnification of Directors and Officers
Florida Statutes chapter 607.0859 governs the indemnification of officers,
directors, employees and agents of a Florida corporation. Section
607.0859(1) provides that a corporation may indemnify a person who is or was
a party to a proceeding by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation (or in certain other
defined circumstances) against liability (defined as obligations to pay a
judgment, settlement, penalty, fine, including an excise tax assessed with
respect to any employee benefit plan, and expenses actually and reasonably
incurred with respect to the proceeding). Section 607.0859(2) provides that
a corporation may indemnify a person who was or is a party to any proceeding
by or in the right of the corporation to procure a judgment in its favor by
reason that the person is or was connected to the corporation as noted in
subsection (1) against expenses and amounts paid in settlement not
exceeding, in the judgment of the board of directors, the estimated expense
of litigating the proceeding to conclusion, actually and reasonably incurred
in connection with the defense or settlement of such proceeding, including
any appeal. Indemnification under both subsection (1) and (2) is subject to
a determination that the person seeking indemnification has met the standard
of conduct set forth in the applicable subsection. However, pursuant to
section 607.0859(3), to the extent that the person seeking indemnification
has been successful in defense of any proceeding, claim or issue referred to
in subsection (1) or (2), that person shall be indemnified against expenses
that he or she actually and reasonably incurred. Expenses incurred by an
officer or director in defending any such proceeding may be paid in advance
of the final disposition of the proceeding, provided that such person
undertakes to repay any such amount if he or she is ultimately found not to
be entitled to indemnification pursuant to section 607.0850. Expenses
incurred by other employees or agents may be advanced upon such terms and
conditions deemed appropriate by the board of directors.
Section 607.0850(4) provides that any indemnification under subsection (1)
or (2), unless made pursuant to a determination by a court, shall be made
only as authorized in the specific case upon a determination that that
indemnification is proper in the circumstances because the party has met the
applicable standard of conduct set forth in subsection (1) or (2). Such
determination may be made (a) by the disinterested directors, pursuant to
section 607.0850(4)(a); (b) by a committee duly designated by the board of
directors, pursuant to section 607.0850(4)(b); (c) by independent legal
counsel, pursuant to section 607.0850(4)(c); or (d) by the shareholders,
pursuant to section 607.0850(4)(d). The reasonableness of expenses and
authorization of indemnification shall be made in the same manner, except as
otherwise required by section 607.0850(5).
<PAGE>
The indemnification and advancement of expenses provisions of section
607.0850 are not exclusive, and a corporation may make other or further
provisions for the indemnification or advancement of expenses of parties
identified in section 607.0850(1), except as otherwise prohibited by section
607.0850(7). Indemnification and advancement of expenses may also be
ordered by a court of competent jurisdiction, pursuant to section
607.0850(9). Section 607.0850(12) specifically authorizes a corporation to
procure indemnification insurance on behalf of an individual who was a
director, officer, employer or agent of the corporation. Consistent with
this 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 subsidiary, including the Depositor.
Item 16. Exhibits
Exhibits
(4.1) Variable Annuity Contract (G2-CDA-94(IR))(1)
(4.2) Variable Annuity Contract (G2-CDA-94(NQ))(1)
(4.3) Variable Annuity Contract (G-MP2(5/96))(2)
(4.4) Certificate of Group Annuity Coverage (MP2CERT(5/96))(2)
(4.5) Variable Annuity Contract (G-CDA-GP2(4/94))(3)
(4.6) Variable Annuity Contract (I-CDA-GP2(4/94))(3)
(4.7) Certificate of Group Annuity Coverage (GP2CERT(4/94))(3)
(4.8) Group Variable, Fixed, or Combination Annuity Contract
(Nonparticipating) (G-GP2(5/96))(4)
(4.9) Individual Variable, Fixed or Combination Annuity Contract
(Nonparticipating) (I-GP2(5/96))(4)
(4.10) Variable Annuity Contract (G-GP2(5/97))(3)
(4.11) Variable Annuity Contract (G-MP2(5/97))(5)
(4.12) Variable Annuity Certificate (MP2CERT(5/97))(5)
(4.13) Variable Annuity Contract (IMP2(5/97))(5)
(4.14) Certificate of Group Annuity Coverage (GP2CERT(5/97))(4)
(5) Opinion re Legality
(10) Material Contracts are listed under exhibit 10 in the Company's
Form 10-K for the fiscal year ended December 31, 1999 (File No.
33-81010), as filed with the Commission on March 23, 2000. Each of
the exhibits so listed is incorporated by reference as indicated in
the Form 10-K.
(13) Aetna Insurance Company of America Form 10-K for the fiscal year
ended December 31, 1999
(23) (a) Consent of Independent Auditors
(b) Consent of Legal Counsel (Included in Exhibit (5) above)
(24) (a) Powers of Attorney
(b) Certificate of Resolution Authorizing Signature by Power of
Attorney(1)
(27) Financial Data Schedule
<PAGE>
Exhibits other than those listed are omitted because they are not required or
are not applicable.
1. Incorporated by reference to Registration Statement on Form N-4 (File No.
33-59749), as filed on June 1, 1995.
2. Incorporated by reference to Post-Effective Amendment No. 4 to
Registration Statement on Form N-4 (File No. 33-59749), as filed on April
16, 1997.
3. Incorporated by reference to Post-Effective Amendment No. 9 to
Registration Statement on Form N-4 (File No. 33-80750), as filed on April
17, 1998.
4. Incorporated by reference to Post-Effective Amendment No. 8 to
Registration Statement on Form N-4 (File No. 33-80750), as filed on April
23, 1997.
5. Incorporated by reference to Post-Effective Amendment No. 6 to
Registration Statement on Form N-4 (File No. 33-59749), as filed on
November 26, 1997.
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.
<PAGE>
(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.
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. 333-49581) to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Hartford, State of Connecticut, on
this 4th day of April, 2000.
AETNA INSURANCE COMPANY OF AMERICA
(REGISTRANT)
By: 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.
Signature Title Date
- --------- ----- ----
Thomas J. McInerney* Director and President )
- -------------------- (principal executive officer) )
Thomas J. McInerney )
)
Deborah Koltenuk* Vice President, Corporate Controller, )
- -------------------- and Assistant Treasurer (principal ) April
Deborah Koltenuk accounting and financial officer) ) 4th, 2000
)
Catherine H. Smith* Director )
- -------------------- )
Catherine H. Smith )
)
Shaun P. Mathews* Director )
- -------------------- )
Shaun P. Mathews )
By: /s/ Michael A. Pignatella
------------------------------------
Michael A. Pignatella
*Attorney-in-Fact
<PAGE>
Exhibit Index
Exhibit No. Exhibit
- ----------- -------
16(5) Opinion re Legality --------
16(13) Aetna Insurance Company of America Form 10-K for
the fiscal year ended December 31, 1999 --------
16(23)(a) Consent of Independent Auditors --------
16(23)(b) Consent of Legal Counsel *
16(24)(a) Powers of Attorney --------
16(27) Financial Data Schedule
--------
*Included in Exhibit 16(5) above
[Aetna logo] Aetna Inc.
[Aetna letterhead] 151 Farmington Avenue
Financial Services Hartford, CT 06156-8975
Michael A. Pignatella
Counsel
AFS Law, TS31
April 4th, 2000 (860) 273-0261
Fax: (860) 273-9407
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
Prospectus Title: AICA Guaranteed Account
File No. 333-49581
Dear Sir or Madam:
The undersigned serves as Counsel to Aetna Insurance Company of America, a
Connecticut life insurance company (the "Company"), I have represented the
Company in connection with the Guaranteed Account (the "Account") available
under certain variable annuity contracts and the S-2 Registration Statement
relating to such Account.
In connection with this opinion, I have reviewed Post-Effective Amendment No. 4
to the Registration Statement on Form S-2 relating to such Account, 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 Post-Effective
Amendment No. 4 to the Registration Statement.
Sincerely,
/s/ Michael A. Pignatella
- -------------------------
Michael A. Pignatella
Counsel
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999 Commission file number 33-81010
----------------- --------
Aetna Insurance Company of America
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Florida 06-1286272
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5100 West Lemon Street, Suite 213, Tampa,Florida 33609
- --------------------------------------------------------------------------------
(Address of principal executive offices) (ZIP Code)
</TABLE>
(Registrant's telephone number, including area code) (860) 273-0123
--------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K [X].
As of March 22, 2000 there were 1,275 shares of common stock outstanding, par
value $100 per share, all of which shares were held by Aetna Life Insurance and
Annuity Company.
Reduced Disclosure Format
- -------------------------
The registrant meets the conditions set forth in General Instruction I(1)(a)
and (b) of Form 10-K and is therefore filing this Form with the reduced
disclosure format.
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Annual Report on Form 10-K
For the Year Ended December 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I
Item 1. Business ** ........................................................ 3
Item 2. Properties ** ...................................................... 7
Item 3. Legal Proceedings .................................................. 7
Item 4. Submission of Matters to a Vote of Security Holders * .............. 7
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters ............................................... 7
Item 6. Selected Financial Data * .......................................... 8
Item 7. Management's Analysis of the Results of Operations ** .............. 8
Item 7A. Quantitative and Qualitative Disclosure About Market Risk .......... 15
Item 8. Financial Statements and Supplementary Data ........................ 16
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure .......................................... 36
PART III
Item 10. Directors and Executive Officers of the Registrant * ............... 36
Item 11. Executive Compensation * ........................................... 36
Item 12. Security Ownership of Certain Beneficial Owners and
Management * ...................................................... 36
Item 13. Certain Relationships and Related Transactions * ................... 36
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K ............................................................... 36
Index to Financial Statement Schedule ..................................... 39
Signatures ................................................................ 42
</TABLE>
* Item omitted pursuant to General Instruction I(2) of Form 10-K.
** Item prepared in accordance with General Instruction I(2) of Form 10-K.
2
<PAGE>
PART I
Item 1. Business.
Aetna Insurance Company of America (the "Company") is a stock life insurance
company organized in 1990 under the insurance laws of Connecticut. Effective
January 5, 2000, the Company's state of domicile changed from Connecticut to
Florida. The Company is a wholly owned subsidiary of Aetna Life Insurance and
Annuity Company ("ALIAC"). ALIAC is a wholly owned subsidiary of Aetna
Retirement Holdings, Inc. ("HOLDCO"). HOLDCO is a wholly owned subsidiary of
Aetna Retirement Services, Inc., whose ultimate parent is Aetna Inc. (together
with its subsidiaries, "Aetna"). The Company has one operating segment and all
revenue reported by the Company comes from external customers. The Company's
principal executive office is located at 5100 West Lemon Street, Suite 213,
Tampa, Florida 33609 and its principal office for operations is located at 151
Farmington Avenue, Hartford, Connecticut 06156.
Products and Services
The Company principally offers annuity contracts to individuals on a qualified
and nonqualified basis and to employer-sponsored retirement plans qualified
under Internal Revenue Code Sections 401, 403 and 408. These contracts may be
deferred or immediate ("payout annuities").
Investment Options
The Company's products provide customers with variable and/or fixed investment
options. Variable ("non-guaranteed") options provide for full assumption by the
customer of investment risks. Assets supporting non-guaranteed variable options
are held in separate accounts that invest in ALIAC mutual funds and/or
unaffiliated mutual funds. ALIAC mutual funds include funds managed by Aeltus
Investment Management, Inc. ("Aeltus"), an affiliate of the Company, and,
beginning in November 1997, funds managed by ALIAC and subadvised by outside
investment advisors. Variable separate account investment income and realized
capital gains and losses are not reflected in the Company's statements of
income.
Fixed options can be either "fully guaranteed" or "experience rated". Fully
guaranteed options provide guarantees on investment return, maturity values,
and if applicable, benefit payments. Experience rated options require the
customer to assume investment (including realized capital gains and losses) and
other risks subject, among other things, to certain minimum guarantees. The
effect of investment performance (as long as minimum guarantees are not
triggered) does not impact the Company's results.
Fees and Investment Margins
Insurance charges or other fees earned by the Company vary by product and
depend, among other factors, on the funding option selected by the customer
under the product. For annuity products where assets are allocated to variable
funding options, the Company may charge the separate account an asset-based
insurance and expense charge. When a customer selects an ALIAC mutual fund as a
variable funding option, the Company receives a participation fee from either
Aeltus or ALIAC. In addition, when a customer selects an unaffiliated mutual
fund as a variable funding option, the Company receives distribution fees
and/or expense reimbursements. For fixed funding
3
<PAGE>
Item 1. Business. (continued)
Fees and Investment Margins (continued)
options, the Company earns an investment margin, which is based on the
difference between income earned on the investments supporting the liability
and interest credited to customers. The Company may also receive other fees or
charges depending on the nature of the products.
Assets Under Management
The substantial portion of fees or other charges and investment margins is
based on assets under management. Assets under management are principally
affected by net deposits (i.e. deposits, including new contracts, less
surrenders), investment growth (e.g., interest credited to customer accounts
for fixed options or market performance for variable options) and customer
retention. Assets under management, excluding net unrealized capital gains and
losses related to market value adjustments required under Financial Accounting
Standard ("FAS") No. 115, were $1.3 billion, $1.1 billion and $0.8 billion at
December 31, 1999, 1998 and 1997, respectively. Assets under management are
available for contractholder withdrawal and are subject to fair value
adjustments and/or deferred surrender charges.
To encourage customer retention and recover acquisition expenses, contracts
typically impose a surrender charge on policyholder balances withdrawn within a
period of time after the contract's inception. The period of time and level of
the charge vary by product. This charge may be waived from time to time at the
Company's discretion. Existing tax penalties on annuity distributions prior to
age 591/2 provide further disincentive to customers for premature surrenders of
account balances, but generally do not impede transfers of those balances to
products of competitors.
Principal Markets and Method of Distribution
The Company's products are offered primarily to individuals and
employer-sponsored groups in the education market. The Company's products
generally are sold through a managed network of banks and broker/dealers and
dedicated career agents.
Competition
Competition arises from other insurance companies, as well as an array of
financial services companies including banks, mutual funds and other investment
managers. Principal competitive factors are reputation for investment
performance, product features, service, cost and the perceived financial
strength of the investment manager or sponsor.
Competition may affect, among other matters, both business growth and the
pricing of the Company's products and services.
Reserves
Reserves for investment contracts (deferred annuities and immediate annuities
without life contingent payouts) are equal to cumulative deposits plus credited
interest less withdrawals and charges thereon. Of those investment contracts
which are experience-rated, the reserves also reflect
4
<PAGE>
Item 1. Business. (continued)
Reserves (continued)
net realized capital gains/losses (which the Company reflects through credited
rates on an amortized basis) and net unrealized capital gains/losses related to
FAS No. 115.
Reserves, as described above, are computed amounts that, with additions from
deposits to be received and with interest on such reserves compounded annually
at assumed rates, are expected to be sufficient to meet the Company's policy
obligations at their maturities or to pay expected death or retirement benefits
or other withdrawal requests.
General Account Investments
Consistent with the nature of the contract obligations involved in the
Company's operations, the majority of the general account assets are invested
in long-term debt securities such as: U.S. corporate debt securities, U.S.
government securities, foreign government and corporate debt securities,
residential mortgage-backed securities, commercial and multifamily
mortgage-backed securities and other asset-backed securities. It is
management's objective that the portfolios be of high quality while achieving
competitive investment yields and returns. Investment portfolios generally
match the duration of the insurance liabilities they support. The general
account of the Company has been segmented to improve the asset/liability
matching process. The duration of investments is monitored and security
purchases and sales are executed with the objective of having adequate funds
available to satisfy the Company's maturing liabilities. Aeltus is the advisor
of the Company's general account assets.
See Management's Analysis of the Results of Operations--General Account
Investments for a further discussion of investments.
Other Matters
a. Regulation
The Company's operations are subject to comprehensive regulation throughout the
United States. The laws of the various jurisdictions establish supervisory
agencies, including the state insurance departments, with broad authority to
grant licenses to transact business and regulate many aspects of the products
and services offered by the Company, as well as solvency and reserve adequacy.
Many agencies also regulate investment activities on the basis of quality,
diversification, and other quantitative criteria. The Company's operations and
accounts are subject to examination at regular intervals by certain of these
regulators.
Operations conducted by the Company are subject to regulation by various
insurance agencies where the Company conducts business, in particular the
Insurance Department of Connecticut, prior to January 5, 2000, and the
Insurance Department of Florida, subsequent to January 5, 2000. Among other
matters, these agencies may regulate premium rates, trade practices, agent
licensing, policy forms, and underwriting and claims practices.
The Securities and Exchange Commission ("SEC") and, to a lesser extent, the
states regulate the sales and investment management activities and operations
of the Company. Regulations of the
5
<PAGE>
Item 1. Business. (continued)
Other Matters (continued)
SEC, Department of Labor and Internal Revenue Service also impact certain of
the Company's annuity and other investment and retirement products. These
products involve Separate Accounts and mutual funds registered under the
Investment Company Act of 1940.
Insurance Holding Company Laws
A number of states, including Florida and Connecticut, regulate affiliated
groups of insurers, such as the group to which the Company belongs, under
holding company statutes. These laws, among other things, place certain
restrictions on transactions between affiliates such as dividends and other
distributions that may be paid to the Company's parent corporation. For
information regarding payments of dividends by the Company, see "Liquidity &
Capital Resources" in Management's Analysis of the Results of Operations and
Note 5 of Notes to Financial Statements.
Insurance Company Guaranty Fund Assessments
Under insurance guaranty fund laws existing in all states, insurers doing
business in those states can be assessed (up to prescribed limits) for certain
obligations of insolvent insurance companies to policyholders and claimants.
The after-tax charges to earnings for guaranty fund obligations for the years
ended December 31, 1999 and 1997 were $0.1 million and $0.5 million. There was
no after-tax charge to earnings for guaranty fund obligations for the year
ended December 31, 1998. The full amount of the charge reported for guaranty
fund obligations in 1997 was an after-tax cumulative effect charge to net
income related to the company's adoption of Statement of Position 97-3,
Accounting by Insurance and Other Enterprises for Insurance related Assessments
("SOP 97-3"), in 1997.
For information regarding certain other potential regulatory changes relating
to the Company's businesses, see "Forward-Looking Information/Risk Factors" in
Management's Analysis of the Results of Operations.
b. Ratings
The Company's financial strength ratings at October 27, 1999 and March 22, 2000
were as follows:
<TABLE>
<CAPTION>
Rating Agencies
--------------------------------------------------
Moody's
Duff & Investors Standard &
A.M. Best Phelps Service Poor's
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
October 27, 1999 A AA Aa3 AA-
March 22, 2000 (1) A AA Aa3 AA-
- -------------------------------------------------------------------------
</TABLE>
(1) A.M. Best has placed the Company's rating under review with developing
implications. Duff & Phelps has placed the Company's rating on "Rating
Watch - Uncertain". Moody's Investors Service has the Company's rating on
review, direction uncertain. Standard & Poor's has the Company's rating on
Credit Watch with "developing" implications.
6
<PAGE>
Item 1. Business. (continued)
Other Matters (continued)
c. Miscellaneous
The Company utilizes the employees of Aetna and its affiliates (primarily
ALIAC) and receives an expense allocation, at cost, based on the utilization of
these employees.
The Company uses ALIAC's computer facilities. The Company's management believes
that ALIAC's computer facilities, systems and related procedures are adequate
to meet its business needs. ALIAC's data processing systems and backup and
security policies, practices and procedures are regularly evaluated by ALIAC's
management and internal auditors and are modified as considered necessary. See
Management's Analysis of the Results of Operations for information regarding
the Company's Year 2000 status.
The Company is not dependent upon any single customer and no single customer
accounted for 10% or more of revenue in 1999. In addition, the loss of business
from any one, or a few, independent brokers or agents would not have a material
adverse effect on the earnings of the Company.
Item 2. Properties
The Company's principal executive office is located at 5100 West Lemon Street,
Suite 213, Tampa, Florida 33609 and its principal office for operations is
located at 151 Farmington Avenue, Hartford, Connecticut 06156. The Company
occupies office space that is owned or leased by Aetna Life Insurance Company
or other affiliates. Expenses associated with these offices are allocated on a
direct and indirect basis to the Company and the other subsidiaries of Aetna.
Item 3. Legal Proceedings
The Company is not currently involved in any material litigation.
Item 4. Submission of Matters to a Vote of Security Holders
Omitted pursuant to General Instruction I(2)(c) of Form 10-K.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
All of the Company's outstanding shares are owned by its parent company, ALIAC.
For the years ended 1999, 1998 and 1997, the Company did not pay dividends to
ALIAC. Effective January 5, 2000, the Company changed its state of domicile
from Connecticut to Florida. All dividends paid to ALIAC in 2000 must have
prior approval by the Insurance Commissioner of the State of Florida.
The Company has entered into support agreements with ALIAC under which ALIAC
has agreed to cause the Company to have sufficient capital to meet a certain
capital and surplus level. The Company did not receive any capital
contributions relating to these agreements in 1999 and received contributions
relating to these agreements of $15 million and $20 million from ALIAC in 1998
and 1997, respectively.
7
<PAGE>
Item 6. Selected Financial Data
Omitted pursuant to General Instruction I(2)(a) of Form 10-K.
Item 7. Management's Analysis of the Results of Operations
Management's analysis of the results of operations is presented in lieu of
Management's Discussion and Analysis of Financial Condition and Results of
Operations, pursuant to General Instruction I(2)(a) of Form 10-K.
Recent Developments
On February 25, 2000, William H. Donaldson became Chairman, President and Chief
Executive Officer of Aetna Inc. He replaced Richard L. Huber, who resigned. On
March 12, 2000, Aetna Inc. announced that, among other things, it plans to
separate its global health and global financial services businesses into two
independent publicly traded companies as soon as an orderly separation can be
achieved.
Results of Operations
<TABLE>
<CAPTION>
(Millions) 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Charges assessed against policyholders $ 15.5 $ 11.5 $ 6.1
Net investment income 10.9 10.4 7.1
Other income 1.5 0.6 0.2
Net realized capital (losses) gains (0.3) (0.2) 0.1
- -----------------------------------------------------------------------------------------------------------
Total revenue 27.6 22.3 13.5
- -----------------------------------------------------------------------------------------------------------
Current and future benefits 8.0 9.0 6.5
Operating expenses 6.9 6.2 3.7
Amortization of deferred policy acquisition costs 4.6 3.9 0.8
- -----------------------------------------------------------------------------------------------------------
Total benefits and expenses 19.5 19.1 11.0
- -----------------------------------------------------------------------------------------------------------
Income before income taxes and cumulative-effect adjustment 8.1 3.2 2.5
Income taxes 2.7 0.6 0.8
- -----------------------------------------------------------------------------------------------------------
Income before cumulative-effect adjustment 5.4 2.6 1.7
- -----------------------------------------------------------------------------------------------------------
Cumulative-effect adjustment, net of tax -- -- 0.5
- -----------------------------------------------------------------------------------------------------------
Net income $ 5.4 $ 2.6 $ 1.2
===========================================================================================================
Net realized capital (losses) gains, net of tax (included above) $ (0.2) $ (0.1) $ 0.1
===========================================================================================================
Deposits not included above:
Annuities--fixed options $ 9.0 $ 73.8 $ 161.7
Annuities--variable options 20.1 168.4 231.0
- -----------------------------------------------------------------------------------------------------------
Total $ 29.1 $ 242.2 $ 392.7
===========================================================================================================
Assets under management: (1)
Annuities--fixed options (2) $ 223.0 $ 251.3 $ 257.8
Annuities--variable options (3) 1,108.4 891.4 560.7
- -----------------------------------------------------------------------------------------------------------
Total (4) $ 1,331.4 $ 1,142.7 $ 818.5
===========================================================================================================
</TABLE>
(1) Excludes net unrealized capital losses of $4.5 million at December 31, 1999
and net unrealized capital gains of $4.1 million and $2.1 million at
December 31, 1998 and 1997, respectively.
(2) Includes $78.7 million, $101.9 million and $114.2 million related to the
assets supporting a guaranteed interest option at December 31, 1999, 1998
and 1997, respectively.
(3) Includes $870.3 million, $689.1 million and $448.5 million at December 31,
1999, 1998 and 1997, respectively, of assets held and managed by
unaffiliated mutual funds.
(4) Includes $340.8 million, $359.6 million and $257.8 million of assets
managed by Aeltus at December 31, 1999, 1998 and 1997, respectively, and
includes $120.2 million, $94.0 million and $112.2 million of assets
managed by its parent, ALIAC, at December 31, 1999, 1998 and 1997,
respectively.
8
<PAGE>
Item 7. Management's Analysis of the Results of Operations (continued)
Results of Operations (continued)
The Company's net income increased $2.8 million and $1.4 million in 1999 and
1998, respectively. Net income in 1997 included a charge for a
cumulative-effect adjustment, net of tax, of $0.5 million related to a change
in the accounting for guaranty fund and other insurance related assessments.
Excluding net realized capital gains or losses and the 1997 cumulative-effect
adjustment, earnings increased $2.9 million and $1.1 million in 1999 and 1998,
respectively. The increases in 1999 and 1998 earnings were due to increased fee
income from higher levels of assets under management partially offset by
increased operating expenses.
Assets under management increased by $188.7 million in 1999 and $324.2 million
in 1998. The increases in 1999 and 1998 were primarily due to appreciation in
the stock market.
Net deposits (deposits, including new contracts, less surrenders) decreased in
1999 and 1998 primarily due to decreases in deposits from new contracts. The
decrease in deposits from new contracts occurred because the Company did not
actively market its group and individual annuity products in 1999 and during
the last part of 1998 (see "Outlook" below).
Outlook
The Company's strategy is to increase assets under management and improve
profitability by focusing on new distribution opportunities, primarily in
Florida. As part of this strategy, effective January 5, 2000, the Company
changed its state of domicile from Connecticut to Florida. The Company has
begun to focus its marketing efforts principally on expanding its group annuity
sales with the offering, through dedicated agents, of contracts to public, tax
exempt and private employers sponsoring retirement plans. The Company also
plans to explore alternative methods of distribution, such as direct marketing.
Although the Company has offered group and individual annuities, principally
non-qualified annuities and qualified individual retirement annuities, it is
not actively marketing these products. The Company plans, however, to continue
to make them available through dedicated agents, although some sales, in
particular the non-qualified and IRA sales, may be made through brokering
agents and certain banks that have selling agreements with the Company.
Refer to "Forward-Looking Information/Risk Factors" regarding other important
factors that may materially affect the Company.
General Account Investments
The Company's investment strategies and portfolios are intended to match the
duration of the related liabilities and provide sufficient cash flow to meet
obligations while maintaining a competitive rate of return. The duration of
these investments is monitored, and investment purchases and sales are executed
with the objective of having adequate funds available to satisfy the Company's
maturing liabilities. The risks associated with investments supporting
experience-rated products are assumed by those customers subject to, among
other things, certain minimum guarantees.
9
<PAGE>
Item 7. Management's Analysis of the Results of Operations (continued)
General Account Investments (continued)
The Company's invested assets were comprised of the following:
<TABLE>
<CAPTION>
(Millions) December 31, 1999 December 31, 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Debt securities, available for sale, at fair value $ 128.3 $ 142.3
Nonredeemable preferred stock 0.9 3.0
- ------------------------------------------------------------------------------------------------
Total investments $ 129.2 $ 145.3
================================================================================================
</TABLE>
Total investments decreased for 1999 primarily due to the decrease in debt
securities. Compared to 1998, debt securities decreased as a result of fixed
annuity withdrawals and a decline in the securities' fair value. The decline in
fair value was attributable to higher interest rates at the end of 1999.
Debt Securities
At December 31, 1999 and 1998, $126.1 million (or 98% of the total carrying
value of debt securities) and $133.4 million (or 94% of the total carrying
value of debt securities), respectively, supported experience-rated products.
It is management's objective that the portfolio of debt securities be of high
quality and be well-diversified by market sector. The debt securities in the
Company's portfolio are generally rated by external rating agencies, and, if
not externally rated, are rated by the Company on a basis believed to be
similar to that used by the rating agencies. The average quality rating of the
Company's debt security portfolio at December 31, 1999 and 1998 was AA and AA-,
respectively.
The percent of total debt securities investments by quality ratings is as
follows:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
- -----------------------------------------------------
<S> <C> <C>
AAA 39.0% 38.4%
AA 8.8 8.5
A 35.3 33.5
BBB 16.9 19.6
- -----------------------------------------------------
Total 100.0% 100.0%
=====================================================
</TABLE>
The percent of total debt securities investments by market sector is as
follows:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Corporate Securities 55.8% 56.7%
U.S. Treasuries/Agencies 16.5 16.4
Commercial/Multifamily Mortgage-Backed Securities 6.8 7.4
Residential Mortgage-Backed Securities 7.9 6.9
Foreign Securities--U.S. Dollar Denominated 8.1 6.3
Asset-Backed Securities 4.9 6.3
- -----------------------------------------------------------------------------------------------
Total 100.0% 100.0%
===============================================================================================
</TABLE>
10
<PAGE>
Item 7. Management's Analysis of the Results of Operations (continued)
General Account Investments (continued)
Risk Management and Market-Sensitive Instruments
The Company regularly evaluates the appropriateness of investments relative to
its management approved investment guidelines and the business objective of the
portfolios. The Company manages interest rate risk by seeking to maintain a
tight duration band, while credit risk is managed by maintaining high average
quality ratings and diversified sector exposure within the debt securities
portfolio. In connection with its investment and risk management objectives,
the Company also uses financial instruments whose fair value is at least
partially determined by, among other things, levels of or changes in domestic
interest rates (short-term or long-term), duration, prepayment rates, or credit
ratings/spreads.
The risks associated with investments supporting experience-rated annuity
products are assumed by those contractholders and not by the Company (subject
to, among other things, certain minimum guarantees). Risks associated with the
investments and liabilities related to experience-rated annuity products are
not included in the sensitivity analysis presented below.
The following discussion about the Company's risk management activities
includes forward-looking statements that involve risk and uncertainties. Set
forth below are management's projections of hypothetical net losses in fair
value of shareholder's equity of the Company's market-sensitive instruments if
certain assumed changes in market rates were to occur (sensitivity analysis).
These instruments are not leveraged and are held for purposes other than
trading. While the Company believes that the assumed market rate changes are
reasonably possible in the near term, actual results may differ, particularly
as a result of any management actions that would be taken to mitigate such
hypothetical losses in fair value of shareholder's equity. Based on the
Company's overall exposure to interest rate risk, the Company believes that
these changes in market rates would not materially affect the near-term
financial position, results of operations or cash flows of the Company.
Interest Rate Risk
Assuming an immediate increase of 100 basis points in interest rates the net
hypothetical loss in fair value of shareholder's equity related to financial
instruments is estimated to be $ 0.1 million (after-tax), (0.1% of total
shareholder's equity) at December 31, 1999 and 1998. The Company believes that
an interest rate shift of this magnitude represents a moderately adverse
scenario, and is approximately equal to the historical annual volatility of
interest rate movements for the Company's intermediate-term available-for-sale
debt securities. The Company has included corresponding changes in certain
insurance liabilities in this sensitivity analysis.
The effect of interest rate risk on potential near term net income, cash flow
and fair value was determined based on commonly used models. The models project
the impact of interest rate changes on a wide range of factors, including
duration, prepayment, put options and call options. Fair value was estimated
based on the net present value of cash flows or duration estimates, using a
representative set of likely future interest rates scenarios.
11
<PAGE>
Item 7. Management's Analysis of the Results of Operations (continued)
Liquidity and Capital Resources
Generally, the Company meets its operating requirements by maintaining
appropriate levels of liquidity in its investment portfolio and using overall
cash flows from deposits, income received on investments and capital
contributions. Cash provided from these sources was used primarily for
operating expenses and to fund contract withdrawals.
Debt securities have durations that were selected to approximate the durations
of the liabilities they support. The general account of the Company has been
segmented to improve the asset/liability matching process. The duration of
these investments is monitored, and investment purchases and sales are executed
with the objective of having adequate funds available to satisfy the Company's
maturing liabilities.
As the Company's investment strategy focuses on matching asset and liability
durations, and not specific cash flows, and since these duration assessments
are dependent on numerous cash flow assumptions, asset sales may, from time to
time, be required to satisfy liability obligations and/or rebalance asset
portfolios. The investment portfolios are closely monitored to assess asset and
liability matching in order to rebalance the portfolios as conditions warrant.
The Company has significant short-term liquidity supporting its business. At
December 31, 1999, cash and cash equivalents were $22.9 million.
Given the quality ratings of the Company's debt securities portfolio (see
"General Account Investments"), management expects the vast majority of the
Company's investments in debt securities to be repaid in accordance with
contractual terms. In addition, most of the debt securities in the portfolio
are highly marketable and can be sold to enhance cash flow before maturity.
For the years ended 1999, 1998 and 1997, the Company did not pay dividends to
ALIAC. Effective January 5, 2000, the Company changed its state of domicile
from Connecticut to Florida. All dividends paid to ALIAC in 2000 must have
prior approval by the Insurance Commissioner of the State of Florida.
The Company has entered into support agreements with ALIAC under which ALIAC
has agreed to cause the Company to have sufficient capital to meet a certain
capital and surplus level. The Company did not receive any capital
contributions relating to these agreements in 1999 and received contributions
relating to these agreements of $15 million and $20 million from ALIAC in 1998
and 1997, respectively.
See "Statements of Cash Flows" for additional information.
Year 2000
The Company relies heavily on information technology ("IT") systems and other
systems and facilities, such as telephones, building access control systems and
heating and ventilation equipment ("embedded systems") to conduct its business.
It shares the same IT systems as its parent, ALIAC. The Company
12
<PAGE>
Item 7. Management's Analysis of the Results of Operations (continued)
Year 2000 (continued)
also has business relationships with financial institutions, financial
intermediaries, public utilities and other critical vendors, as well as
regulators and customers who are themselves reliant on IT and embedded systems
to conduct their businesses.
Current Status
After the Year 2000 rollover, ALIAC and Aetna conducted a series of quality
control checks on the Company's mission-critical IT systems and embedded
systems. These systems operated as planned, in all material respects, and there
were no significant interruptions in the Company's operations. Data within the
Company's IT systems was up-to-date and customers were able to access
information electronically. As of March 22, 2000 the Company has not
experienced any material difficulties with its mission-critical IT systems,
embedded systems, suppliers, or customers due to Year 2000 issues. ALIAC and
Aetna are in the process of reassigning their Year 2000 personnel and
transferring Year 2000 related responsibilities to their businesses. The
Company remains Year 2000 vigilant, and any potential future Year 2000 issues
will be addressed by IT personnel.
Future Risks and Contingency/Recovery Planning
The Company currently does not expect any future material Year 2000 issues.
However, the Company cannot guarantee that it will not have any future material
Year 2000 issues due to the cyclical nature of certain of the Company's
business processes and those of its critical suppliers or customers. The
Company has contingency/recovery plans aimed at sustaining the continuity of
critical business functions in the event of future Year 2000 issues. As part of
its contingency planning process, contingency plans have been developed for
those failure scenarios it believes could have a significant impact on the
Company's operations. Those plans remain in effect. The scenarios that have
been planned for include, but are not limited to, limitations on providers',
suppliers' and customers' ability to interact electronically with the Company,
Year 2000 related failures at key external relationships, limitations on the
Company's suppliers' or customers' ability to move funds electronically,
failures in pricing securities and increased call volumes. The Company's
planned responses to these scenarios include, but are not limited to,
reallocation of existing resources, use of alternative processes and
procedures, use of outside providers to supplement internal capabilities and
use of alternative suppliers.
Year 2000 Costs
Year 2000 project costs are not allocated to the Company.
Refer to "Foward-Looking Information/Risk Factors" for factors that could cause
actual Year 2000 results to differ from the Company's expectation.
Forward-Looking Information/Risk Factors
The Private Securities Litigation Reform Act of 1995 (the "1995 Act") provides
a "safe harbor" for forward-looking statements, so long as (1) those statements
are identified as forward-looking, and (2) the statements are accompanied by
meaningful cautionary statements that identify important
13
<PAGE>
Item 7. Management's Analysis of the Results of Operations (continued)
Forward-Looking Information/Risk Factors (continued)
factors that could cause actual results to differ materially from those
discussed in the statement. We want to take advantage of these safe harbor
provisions.
Certain information contained in this Management's Analysis of the Results of
Operations is forward-looking within the meaning of the 1995 Act or Securities
and Exchange Commission rules. This information includes, but is not limited to
the information that appears under the headings: (1) "Results of Operations --
Outlook", (2) "General Account Investments- Risk Management and Market
Sensitive Instruments/Interest Rate Risk" and (3) "Year 2000." In writing this
Management's Analysis of the Results of Operations, we also used the following
words, or variations of these words and similar expressions, where we intended
to identify forward-looking statements:
<TABLE>
<S> <C>
o Expects o Plans
o Projects o Believes
o Anticipates o Seeks
o Intends o Estimates
</TABLE>
These forward-looking statements rely on a number of assumptions concerning
future events, and are subject to a number of significant uncertainties and
other factors, many of which are outside our control, that could cause actual
results to differ materially from these statements. You should not put undue
reliance on these forward-looking statements. We disclaim any intention or
obligation to update or revise forward-looking statements, whether as a result
of new information, future events or otherwise.
Set forth below are certain important risk factors that, in addition to general
economic conditions and other factors (some of which are discussed elsewhere in
this report), may affect these forward-looking statements and our businesses
generally.
Certain Factors Particular to Financial Services Operations
Significant changes in financial markets could affect earnings. Significant
changes in financial markets could impact the level of assets under management
and administration in our businesses, and, in turn, our level of asset-based
fees in those businesses. For example, significant increases in interest rates
or decreases in equity markets would directly affect the level of assets under
management and administration and, in addition, may increase the level of
withdrawals and decrease the level of deposits by customers. Customers under
those circumstances may seek to diversify among asset managers or seek
investment alternatives that we do not offer. Significant declines in the value
of investments also may affect our ability to pass through investment losses to
certain experience rated customers, whether due to triggering minimum
guarantees or other business reasons.
Decreases in ratings could affect assets under management. Decreases in the
claims-paying ratings of the Company could have the effect of decreasing new
sales and deposits and increasing withdrawals and surrenders in our businesses.
Such changes in sales and deposits, withdrawals and surrenders would adversely
affect the level of asset-based fees of our businesses. Claims-paying ratings
of the Company are periodically reviewed and subject to changes, in certain
cases, based on factors beyond our control.
14
<PAGE>
Item 7. Management's Analysis of the Results of Operations (continued)
Forward-Looking Information/Risk Factors (continued)
Early withdrawal of assets could affect earnings. We incur up-front costs, such
as commissions, when we sell our annuity and other financial services products.
We generally defer these costs and recognize them over time. As a result, the
retention of assets under these products is an important component of
profitability. We generally seek to structure our products and sales to
encourage retention of assets under management and administration or recover
costs, through surrender charges, higher credited rates to customers if we
retain their assets for longer periods, paying renewal commissions, paying
service fees or other terms. However, if customers withdraw assets earlier than
we anticipated when we priced the products, it would adversely affect
profitability. We could also experience competitive pressure to lower margins.
Litigation can adversely affect us. Litigation also could adversely affect us,
both through costs of defense and adverse results or settlements. Refer to Note
10 of Notes to Financial Statements for information regarding litigation.
Year 2000 related issues could affect operations and results of operations. As
of March 22, 2000, we have not experienced any material Year 2000 related
difficulties. However, our operations and results of operations could be
materially and adversely affected if we or any of our mission-critical
suppliers were to experience significant Year 2000 related difficulties.
Adverse changes in regulation could affect the operations of each of our
businesses. Each of our businesses is subject to comprehensive regulation.
These businesses could be adversely affected by:
o Increases in minimum capital and other financial viability requirements for
insurance operations;
o Changes in the taxation of insurance companies; and
o Changes in the tax treatment of annuity products as well as changes in
capital gains tax rates. Certain of these changes, should they occur, could
affect the attractiveness to customers of our products.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
See "General Account Investments" in Management's Analysis of the Results of
Operations.
15
<PAGE>
Item 8. Financial Statements and Supplementary Data.
Index to Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report ................................... 17
Financial Statements:
Statements of Income for the Years Ended December 31, 1999,
1998 and 1997 ................................................ 18
Balance Sheets as of December 31, 1999 and 1998 ............... 19
Statements of Changes in Shareholder's Equity for the Years
Ended December 31, 1999, 1998 and 1997 ....................... 20
Statements of Cash Flows for the Years Ended December 31, 1999,
1998 and 1997 ................................................ 21
Notes to Financial Statements ................................. 22
</TABLE>
16
<PAGE>
Independent Auditors' Report
The Shareholder and Board of Directors
Aetna Insurance Company of America:
We have audited the accompanying balance sheets of Aetna Insurance Company of
America as of December 31, 1999 and 1998, and the related statements of income,
changes in shareholder's equity and cash flows for each of the years in the
three-year period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Aetna Insurance Company of
America at December 31, 1999 and 1998, and the results of its operations and
its cash flows for each of the years in the three-year period ended December
31, 1999, in conformity with generally accepted accounting principles.
/s/ KPMG LLP
Hartford, Connecticut
March 22, 2000
17
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Statements of Income
(millions)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------
1999 1998 1997
------- ------- -----
<S> <C> <C> <C>
Revenues:
Charges assessed against policyholders $ 15.5 $ 11.5 $ 6.1
Net investment income 10.9 10.4 7.1
Net realized capital (losses) gains (0.3) (0.2) 0.1
Other income 1.5 0.6 0.2
------- ------- -----
Total revenue 27.6 22.3 13.5
------- ------- -----
Benefits and expenses:
Current and future benefits 8.0 9.0 6.5
Operating expenses:
Salaries and related benefits 2.4 2.5 1.6
Other 4.5 3.7 2.1
Amortization of deferred policy acquisition costs 4.6 3.9 0.8
------- ------- -----
Total benefits and expenses 19.5 19.1 11.0
------- ------- -----
Income before income taxes and cumulative
effect adjustment 8.1 3.2 2.5
Income taxes 2.7 0.6 0.8
------- ------- -----
Income before cumulative effect adjustments 5.4 2.6 1.7
Cumulative-effect adjustment, net of tax -- -- 0.5
------- ------- -----
Net income $ 5.4 $ 2.6 $ 1.2
======= ======= =====
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Balance Sheets
(Millions, except share data)
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
-------------- --------------
<S> <C> <C>
Assets
Investments:
Debt securities, available-for-sale, at fair value:
(amortized cost: $132.8 and $138.2) $ 128.3 $ 142.3
Equity securities, available-for-sale, at fair value:
Nonredeemable preferred stock (amortized cost: $1.0 and $3.1) 0.9 3.0
Cash and cash equivalents 22.9 16.5
Deferred policy acquisition costs 58.8 59.9
Accrued investment income 2.0 2.1
Premiums due and other receivables 9.0 13.3
Other assets 0.6 0.4
Separate Accounts assets 1,194.6 1,006.5
-------------- --------------
Total assets $ 1,417.1 $ 1,244.0
============== ==============
Liabilities and Shareholder's Equity
Liabilities:
Policyholders' funds left with the Company 138.8 153.2
Other liabilities 6.5 11.8
Due to parent and affiliates 0.5 0.9
Income taxes
Current 0.7 0.1
Deferred 2.6 0.7
Separate Accounts liabilities 1,194.6 1,006.5
-------------- --------------
Total liabilities 1,343.7 1,173.2
-------------- --------------
Shareholder's equity:
Common capital stock, par value $2,000 (1,275 shares authorized,
issued and outstanding) 2.5 2.5
Paid-in capital 62.5 62.5
Accumulated other comprehensive (loss) income (1.6) 1.2
Retained earnings 10.0 4.6
-------------- --------------
Total shareholder's equity 73.4 70.8
-------------- --------------
Total liabilities and shareholder's equity $ 1,417.1 $ 1,244.0
============== ==============
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Statements of Changes in Shareholder's Equity
(Millions)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Shareholder's equity, beginning of year $ 70.8 $ 52.2 $ 31.3
Comprehensive income
Net income 5.4 2.6 1.2
Other comprehensive income, net of tax
Unrealized (losses) gains on securities
(($4.3) million, $1.5 million and $0.0
million, pretax) (2.8) 1.0 --
----------- ----------- -----------
Total comprehensive income 2.6 3.6 1.2
----------- ----------- -----------
Capital contributions -- 15.0 20.0
Other changes -- -- (0.3)
----------- ----------- -----------
Shareholder's equity, end of year $ 73.4 $ 70.8 $ 52.2
=========== =========== ===========
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Statements of Cash Flows
(Millions)
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------
1999 1998 1997
------- ------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 5.4 $ 2.6 $ 1.2
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Net amortization of discount on debt securities (0.1) (0.1) (0.4)
------- ------- --------
Cash flows provided by operating activities and
net realized capital gains before changes in
assets and liabilities 5.3 2.5 0.8
Net realized capital losses (gains) 0.3 0.2 (0.1)
------- ------- --------
Cash flows provided by operating activities
before changes in assets and liabilities 5.6 2.7 0.7
Changes in assets and liabilities:
Decrease (increase) in accrued investment income 0.1 (0.1) (1.7)
Decrease (increase) in deferred policy acquisition costs 1.1 (14.5) (24.3)
Net change in amounts due to/from parent and affiliates (0.4) 0.9 0.5
Net (decrease) increase in other assets and liabilities (10.1) 9.2 3.4
Net change in income taxes 4.0 2.4 (1.4)
------- ------- --------
Net cash provided by (used for) operating activities 0.3 0.6 (22.8)
------- ------- --------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available-for-sale 34.2 27.8 16.6
Equity securities 2.1 -- --
Investment maturities and repayments of:
Debt securites available-for-sale 17.9 3.4 3.2
Short-term investments -- -- 1.0
Cost of investment purchases in:
Debt securities available-for-sale (47.6) (36.8) (132.8)
Short-term investments -- -- (1.0)
------- ------- --------
Net cash provided by (used for) investing activities 6.6 (5.6) (113.0)
------- ------- --------
Cash Flows from Financing Activities:
Deposits and interest credited for investment contracts 12.8 19.7 84.7
Withdrawal of investment contracts (19.0) (14.3) (5.7)
Capital contribution -- 15.0 20.0
Other, net 5.7 (11.4) (2.5)
------- ------- --------
Net cash (used for) provided by financing activities (0.5) 9.0 96.5
------- ------- --------
Net increase (decrease) in cash and cash equivalents 6.4 4.0 (39.3)
Cash and cash equivalents, beginning of year 16.5 12.5 51.8
------- ------- --------
Cash and cash equivalents, end of year $ 22.9 $ 16.5 $ 12.5
======= ======= ========
Supplemental cash flow information:
Income taxes (received) paid, net $ (1.3) $ (3.3) $ 1.5
======= ======= ========
</TABLE>
See Notes to Financial Statements.
21
<PAGE>
Notes to Financial Statements
1. Summary of Significant Accounting Policies
Aetna Insurance Company of America (the "Company") is a provider of financial
services in the United States. The Company is a wholly owned subsidiary of
Aetna Life Insurance and Annuity Company ("ALIAC"). ALIAC is a wholly owned
subsidiary of Aetna Retirement Holdings, Inc. ("HOLDCO"). HOLDCO is a wholly
owned subsidiary of Aetna Retirement Services, Inc., whose ultimate parent is
Aetna Inc. ("Aetna").
The Company has one operating segment and all revenue reported by the Company
comes from external customers.
Basis of Presentation
These financial statements have been prepared in conformity with generally
accepted accounting principles. Certain reclassifications have been made to
1998 and 1997 financial information to conform to the 1999 presentation.
Future Application of Accounting Standards
Deposit Accounting: Accounting for Insurance and Reinsurance Contracts That Do
Not Transfer Insurance Risk
In October 1998, the American Institute of Certified Public Accountants issued
SOP 98-7, Deposit Accounting: Accounting for Insurance and Reinsurance
Contracts That Do Not Transfer Insurance Risk, which provides guidance on how
to account for all insurance and reinsurance contracts that do not transfer
insurance risk, except for long-duration life and health insurance contracts.
This statement is effective for the Company's financial statements beginning
January 1, 2000. The Company does not expect the adoption of this standard to
have a material effect on its financial position and results of operations.
Accounting for Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standard ("FAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities. This standard requires companies to record
all derivatives on the balance sheet as either assets or liabilities and
measure those instruments at fair value. The manner in which companies are to
record gains or losses resulting from changes in the values of those
derivatives depends on the use of the derivative and whether it qualifies for
hedge accounting. As amended by FAS No. 137, Accounting for Derivative
Instruments and Hedging Activities -- Deferral of the Effective Date of FASB
Statement No. 133, this standard is effective for the Company's financial
statements beginning January 1, 2001, with early adoption permitted. The impact
of FAS No. 133 on the Company's financial statements will vary based on certain
factors including future interpretative guidance from the FASB, the extent of
the Company's hedging activities, the types of hedging instruments used and the
effectiveness of such instruments. The Company is evaluating the impact of
adoption of this standard and currently does not believe that it will have a
material effect on its financial position and results of operations.
22
<PAGE>
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from reported results using those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, money market instruments and
other debt issues with a maturity of 90 days or less when purchased.
Investments
Debt and equity securities are classified as available for sale and carried at
fair value. Securities are written down (as realized capital losses) for other
than temporary declines in value. Included in available-for-sale securities are
investments that support experience-rated products.
Experience-rated products are products where the customer, not the Company,
assumes investment (including realized capital gains and losses) and other
risks, subject to, among other things, minimum guarantees. As long as minimum
guarantees are not triggered, the effect of experience- rated products'
investment performance does not impact the Company's results of operations.
Realized and unrealized capital gains and losses on investments supporting
these products are reflected in policyholder's funds left with the Company.
Realized capital gains and losses on all other investments are reflected in the
Company's results of operations. Unrealized capital gains and losses on all
other investments are reflected in shareholder's equity, net of related income
taxes. Purchases and sales of debt and equity securities are recorded on the
trade date.
Fair values for debt and equity securities are based on quoted market prices or
dealer quotations. Where quoted market prices or dealer quotations are not
available, fair values are measured utilizing quoted market prices for similar
securities or by using discounted cash flow methods. Cost for mortgage-backed
securities is adjusted for unamortized premiums and discounts, which are
amortized using the interest method over the estimated remaining term of the
securities, adjusted for anticipated prepayments. The Company does not accrue
interest on problem debt securities when management believes the collection of
interest is unlikely.
The Company engages in securities lending whereby certain securities from its
portfolio are loaned to other institutions for short periods of time. Initial
collateral, primarily cash, is required at a rate of 102% of the market value
of a loaned domestic security and 105% of the market value of a loaned foreign
security. The collateral is deposited by the borrower with a lending agent, and
retained and invested by the lending agent according to the Company's
guidelines to generate additional income. The market value of the loaned
securities is monitored on a daily basis with
23
<PAGE>
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
additional collateral obtained or refunded as the market value of the loaned
securities fluctuates. At December 31, 1999 and 1998, the Company had no
securities on loan.
Short-term investments, consisting primarily of money market instruments and
other debt issues purchased with an original maturity of 91 days to one year,
are considered available-for-sale and are carried at fair value, which
approximates amortized cost.
Deferred Policy Acquisition Costs
Certain costs of acquiring certain insurance business are deferred. These
costs, all of which vary with and are primarily related to the production of
new and renewal business, consist principally of commissions, certain expenses
of underwriting and issuing contracts, and certain agency expenses. For certain
annuity contracts, such costs are amortized in proportion to estimated gross
profits and adjusted to reflect actual gross profits over the life of the
contracts (up to 20 years for annuity and pension contracts.)
Periodically, modifications may be made to deferred annuity contract features,
such as shortening the surrender charge period or waiving the surrender charge,
changing the mortality and expense fees, etc. Unamortized deferred policy
acquisition costs associated with these modified contracts are not written off,
but rather, continue to be associated with the original block of business to
which these costs were previously recorded. Such costs are amortized based on
revised estimates of expected gross profits based upon the contract after the
modification. Unamortized deferred policy acquisition costs related to deferred
annuity products were approximately $58.8 million and $59.9 million as of
December 31, 1999 and 1998, respectively.
Deferred policy acquisition costs are written off to the extent that it is
determined that future policy premiums and investment income or gross profits
are not adequate to cover related expenses.
Reserves
Policyholders' funds left with the Company include reserves for deferred
annuity investment contracts and immediate annuities without life contingent
payouts. Reserves on such contracts are equal to cumulative deposits less
charges and withdrawals plus credited interest thereon (rates range from 5.40%
to 7.50% for all years presented), net of adjustments for investment experience
that the Company is entitled to reflect in future credited interest. These
reserves also include unrealized gains/losses related to FAS No. 115. Reserves
on contracts subject to experience rating reflect the rights of
contractholders, plan participants and the Company.
Revenue Recognition
For certain annuity contracts, charges assessed against policyholders' funds
for the cost of insurance, surrender charges, actuarial margin and other fees
are recorded as revenue in charges assessed against policyholders. Other
amounts received for these contracts are reflected as deposits and are not
recorded as revenue. Related policy benefits are recorded in relation to the
associated premiums or gross profit so that profits are recognized over the
expected lives of the contracts.
24
<PAGE>
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Separate Accounts
Separate Accounts assets and liabilities generally represent funds maintained
to meet specific investment objectives of contractholders who bear the
investment risk, subject, in some cases, to minimum guaranteed rates.
Investment income and investment gains and losses generally accrue directly to
such contractholders. The assets of each account are legally segregated and are
not subject to claims that arise out of any other business of the Company.
Separate Account assets supporting variable options under annuity contracts are
invested, as designated by the contractholder or participant under a contract
(who bears the investment risk subject, in limited cases, to minimum guaranteed
rates) in shares of mutual funds which are managed by an affiliate of the
Company, or other selected mutual funds not managed by the Company or an
affiliate.
Separate Accounts assets are carried at fair value. At December 31, 1999 and
1998, unrealized losses of $(0.8) million and unrealized gains of $1.0 million,
respectively, after taxes, on assets supporting a guaranteed interest option
are reflected in shareholder's equity. Separate Accounts liabilities are
carried at fair value, except for those relating to the guaranteed interest
option. Reserves relating to the guaranteed interest option are maintained at
fund value and reflect interest credited at rates ranging from 3.70% to 12.00%
in 1999 and 3.00% to 8.10% in 1998.
Separate Accounts assets and liabilities are shown as separate captions in the
Balance Sheets. Deposits, investment income and net realized and unrealized
capital gains and losses of the Separate Accounts are not reflected in the
Financial Statements (with the exception of realized and unrealized capital
gains and losses on the assets supporting the guaranteed interest option). The
Statements of Cash Flows do not reflect investment activity of the Separate
Accounts.
Income Taxes
The Company is included in the consolidated federal income tax return of Aetna.
The Company is taxed at regular corporate rates after adjusting income reported
for financial statement purposes for certain items. Deferred income tax
expenses/benefits result from changes during the year in cumulative temporary
differences between the tax basis and book basis of assets and liabilities.
25
<PAGE>
Notes to Financial Statements (continued)
2. Investments
Debt securities available-for-sale at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
(Millions) Cost Gains Losses Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. government and government
agencies and authorities $ 21.5 $ -- $ 0.3 $ 21.2
- --------------------------------------------------------------------------------------------------------
U.S. corporate securities:
Utilities 5.7 -- 0.2 5.5
Financial 33.3 -- 0.6 32.7
Transportation/capital goods 1.6 -- -- 1.6
Health care/consumer products 12.6 -- 0.9 11.7
Natural resources 14.5 -- 0.7 13.8
Other corporate securities 6.7 -- 0.4 6.3
- --------------------------------------------------------------------------------------------------------
Total U.S. corporate securities 74.4 -- 2.8 71.6
- --------------------------------------------------------------------------------------------------------
Foreign securities:
Government 1.0 -- -- 1.0
Other 9.9 0.1 0.5 9.5
- --------------------------------------------------------------------------------------------------------
Total foreign securities 10.9 0.1 0.5 10.5
- --------------------------------------------------------------------------------------------------------
Residential mortgage-backed securities:
Pass-throughs -- -- -- --
Collateralized mortgage obligations 10.6 -- 0.5 10.1
- --------------------------------------------------------------------------------------------------------
Total residential mortgage-backed securities 10.6 -- 0.5 10.1
- --------------------------------------------------------------------------------------------------------
Commercial/multifamily mortgage-
backed securities 9.0 -- 0.3 8.7
- --------------------------------------------------------------------------------------------------------
Other asset-backed securities 6.4 -- 0.2 6.2
- --------------------------------------------------------------------------------------------------------
Total debt securities $ 132.8 $ 0.1 $ 4.6 $ 128.3
========================================================================================================
</TABLE>
26
<PAGE>
Notes to Financial Statements (continued)
2. Investments (continued)
Debt securities available-for-sale at December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
(Millions) Cost Gain Losses Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. government and government
agencies and authorities $ 22.6 $ 0.7 $ -- $ 23.3
- --------------------------------------------------------------------------------------------------------
U.S. corporate securities:
Utilities 7.0 0.1 -- 7.1
Financial 37.9 1.2 0.1 39.0
Transportation & capital goods 8.6 0.3 -- 8.9
Healthcare & consumer products 15.3 0.6 -- 15.9
Natural resources 8.6 0.3 -- 8.9
Other corporate securities 0.7 0.2 -- 0.9
- --------------------------------------------------------------------------------------------------------
Total U.S. corporate securities 78.1 2.7 0.1 80.7
- --------------------------------------------------------------------------------------------------------
Foreign securities:
Government 1.1 -- -- 1.1
Other 8.0 0.2 0.3 7.9
- --------------------------------------------------------------------------------------------------------
Total foreign securities 9.1 0.2 0.3 9.0
- --------------------------------------------------------------------------------------------------------
Residential mortgage-backed securities:
Pass-throughs 0.7 -- -- 0.7
Collateralized mortgage obligations 8.7 0.4 -- 9.1
- --------------------------------------------------------------------------------------------------------
Total residential mortgage-backed securities 9.4 0.4 -- 9.8
- --------------------------------------------------------------------------------------------------------
Commercial/multifamily mortgage-
backed securities 10.3 0.3 -- 10.6
- --------------------------------------------------------------------------------------------------------
Other asset-backed securities 8.7 0.2 -- 8.9
- --------------------------------------------------------------------------------------------------------
Total Debt Securities $ 138.2 $ 4.5 $ 0.4 $ 142.3
========================================================================================================
</TABLE>
27
<PAGE>
Notes to Financial Statements (continued)
2. Investments (continued)
At December 31, 1999 and 1998 net unrealized (depreciation) appreciation of
$(4.5) million and $4.1 million respectively, on available-for-sale debt
securities included unrealized (losses) gains of $(4.5) million and $3.8
million, respectively, related to experience-rated contracts, which were not
reflected in shareholder's equity but in policyholders' funds left with the
Company.
The amortized cost and fair value of debt securities for the year ended
December 31, 1999 are shown below by contractual maturity. Actual maturities
may differ from contractual maturities because securities may be restructured,
called or prepaid.
<TABLE>
<CAPTION>
Amortized Fair
(Millions) Cost Value
- ---------------------------------------------------------------
<S> <C> <C>
Due to mature:
One year or less $ 9.3 $ 9.3
After one year through five years 49.8 49.0
After five years through ten years 18.2 17.6
After ten years 29.5 27.3
Mortgage-backed securities 19.6 18.9
Other asset-backed securities 6.4 6.2
- ---------------------------------------------------------------
Total $ 132.8 $ 128.3
===============================================================
</TABLE>
At December 31, 1999 and 1998, debt securities carried at $5.6 million and $5.4
million, respectively, were on deposit as required by various state regulatory
agencies.
Investments in equity securities available for sale as of December 31, were as
follows:
<TABLE>
<CAPTION>
(Millions) 1999 1998
- --------------------------------------------------
<S> <C> <C>
Cost $ 1.0 $ 3.1
Gross unrealized gains -- --
Gross unrealized losses (0.1) (0.1)
- --------------------------------------------------
Fair value $ 0.9 $ 3.0
==================================================
</TABLE>
The Company does not have any investments in a single issuer, other than
obligations of the U.S. government, with a carrying value in excess of 10% of
the Company's shareholder's equity at December 31, 1999.
28
<PAGE>
Notes to Financial Statements (continued)
3. Financial Instruments
Estimated Fair Value
The carrying values and estimated fair values of certain of the Company's
financial instruments at December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------ ------------------------
Carrying Fair Carrying Fair
(Millions) Value Value Value Value
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Liabilities:
Investment contract liabilities:
With a fixed maturity $ 1.2 $ 1.3 $ 0.6 $ 0.5
Without a fixed maturity $ 137.6 $ 131.6 $ 152.6 $ 143.8
- ----------------------------------------------------------------------------------------
</TABLE>
Fair value estimates are made at a specific point in time, based on available
market information and judgments about the financial instrument, such as
estimates of timing and amount of future cash flows. Such estimates do not
reflect any premium or discount that could result from offering for sale at one
time the Company's entire holdings of a particular financial instrument, nor do
they consider the tax impact of the realization of unrealized gains or losses.
In many cases, the fair value estimates cannot be substantiated by comparison
to independent markets, nor can the disclosed value be realized in immediate
settlement of the instrument. In evaluating the Company's management of
interest rate, price and liquidity risks, the fair values of all assets and
liabilities should be taken into consideration, not only those presented above.
The following valuation methods and assumptions were used by the Company in
estimating the fair value of the above financial instruments:
Investment contract liabilities (included in policyholders' funds left with the
Company):
With a fixed maturity: Fair value is estimated by discounting cash flows at
interest rates currently being offered by, or available to, the Company for
similar contracts.
Without a fixed maturity: Fair value is estimated as the amount payable to the
contractholder upon demand. However, the Company has the right under such
contracts to delay payment of withdrawals which may ultimately result in paying
an amount different than that determined to be payable.
Off-Balance-Sheet and Other Financial Instruments
The Company did not have transactions in off-balance-sheet instruments in 1999
or 1998.
29
<PAGE>
Notes to Financial Statements (continued)
4. Net Investment Income
Sources of net investment income were as follows:
<TABLE>
<CAPTION>
(Millions) 1999 1998 1997
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Debt securities $ 9.4 $ 9.0 $ 6.0
Nonredeemable preferred stock 0.1 0.3 --
Cash equivalents 0.7 0.7 1.2
Other 0.8 0.6 --
- ------------------------------------------------------------------------
Gross investment income 11.0 10.6 7.2
Less: investment expenses 0.1 0.2 0.1
- ------------------------------------------------------------------------
Net investment income $ 10.9 $ 10.4 $ 7.1
========================================================================
</TABLE>
Net investment income includes amounts allocable to experience-rated
contractholders of $8.6 million, $8.9 million and $7.0 million for the years
ended December 31, 1999, 1998 and 1997, respectively. Interest credited to
contractholders is included in current and future benefits.
5. Dividend Restrictions and Shareholder's Equity
Effective January 5, 2000 the Company changed its state of domicile from
Connecticut to Florida. All dividends paid to shareholders in 2000 must have
prior approval by the Insurance Commissioner of the State of Florida.
The Insurance Department of the State of Connecticut (the "Department")
recognizes as net income and shareholder's capital and surplus, those amounts
determined in conformity with statutory accounting practices prescribed or
permitted by the Department, which differ in certain respects from generally
accepted accounting principles ("GAAP"). Statutory net income (loss) was $(0.1)
million, $(5.2) million and $0.4 million for the years ended December 31, 1999,
1998 and 1997, respectively. Statutory capital and surplus was $52.5 million
and $53.4 million as of December 31, 1999 and 1998, respectively. The Company
has entered into support agreements with ALIAC under which ALIAC has agreed to
cause the Company to have sufficient capital to meet a certain capital and
surplus level. The Company received no capital contributions relating to these
agreements in 1999. The Company received $15.0 million and $20.0 million from
ALIAC in 1998 and 1997, respectfully.
As of December 31, 1999, the Company does not utilize any statutory accounting
practices which are not prescribed by state regulatory authorities that,
individually or in the aggregate, materially affect statutory capital and
surplus.
6. Capital Gains and Losses on Investment Operations
Realized capital gains or losses are the difference between the carrying value
and sale proceeds of specific investments sold.
Net realized capital gains (losses) on debt securities, as reflected in the
Statements of Income for the years ended December 31, 1999, 1998 and 1997 were
$(0.3) million, $(0.2) million and $0.1 million, respectively.
30
<PAGE>
Notes to Financial Statements (continued)
6. Capital Gains and Losses on Investment Operations (continued)
Net realized capital (losses) gains of $(1.1) million, $(0.2) million and $0.2
million allocable to experience-rated contracts, were deducted from net
realized capital gains and an offsetting amount was reflected in policyholders'
funds left with the Company in 1999, 1998 and 1997, respectively. Net
unamortized (losses) gains were $(1.0) million and $0.2 million at December 31,
1999 and 1997, respectively. The amounts in 1998 were immaterial.
Proceeds from the sale of available-for-sale debt securities and the related
gross gains and losses (excluding those related to experience rated
contractholders in 1999, 1998 and 1997) were as follows:
<TABLE>
<CAPTION>
(Millions) 1999 1998 1997
- ---------------------------------------------------------
<S> <C> <C> <C>
Proceeds on sales $ 34.2 $ 27.8 $ 16.6
Gross gains 0.2 0.6 0.1
Gross losses 0.5 0.8 --
- ---------------------------------------------------------
</TABLE>
Changes in shareholder's equity related to changes in accumulated other
comprehensive income (unrealized capital gains and losses on securities,
excluding those related to experience-rated contractholders), were as follows:
<TABLE>
<CAPTION>
(Millions) 1999 1998 1997
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Debt securities $ (0.3) $ 0.1 --
Equity securities -- (0.1) --
Other (4.1) 1.6
- ----------------------------------------------------------------------------------
Subtotal (4.4) 1.6 --
Increase in deferred income taxes (See Note 7) (1.6) 0.6 --
- ----------------------------------------------------------------------------------
Net change in accumulated other
comprehensive income $ (2.8) $ 1.0 --
==================================================================================
</TABLE>
Net unrealized capital gains (losses) allocable to experience-rated contracts
of $(4.5) million and $3.8 million at December 31, 1999 and 1998, respectively,
are reflected on the Balance Sheets in policyholders' funds left with the
Company and are not included in shareholder's equity.
31
<PAGE>
Notes to Financial Statements (continued)
6. Capital Gains and Losses on Investment Operations (continued)
Shareholder's equity included the following accumulated other comprehensive
income, which is net of amounts allocable to experience rated contractholders,
at December 31:
<TABLE>
<CAPTION>
(Millions) 1999 1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Debt securities:
Gross unrealized gains $ 0.1 $ 0.3 $ 0.2
Gross unrealized losses (0.1) -- --
- ------------------------------------------------------------------------------------
-- 0.3 0.2
- ------------------------------------------------------------------------------------
Equity securities:
Gross unrealized gains -- -- --
Gross unrealized losses (0.1) (0.1) --
- ------------------------------------------------------------------------------------
(0.1) (0.1) --
- ------------------------------------------------------------------------------------
Other:
Gross unrealized gains -- 1.9 --
Gross unrealized losses (2.4) (0.3) --
- ------------------------------------------------------------------------------------
(2.4) 1.6 --
- ------------------------------------------------------------------------------------
Less: deferred federal income (benefits) taxes
(see Note 7) (0.9) 0.6 --
- ------------------------------------------------------------------------------------
Net unrealized capital (losses) gains $ (1.6) $ 1.2 $ 0.2
====================================================================================
</TABLE>
Changes in accumulated other comprehensive income related to changes in
unrealized gains (losses) on securities (excluding those related to
experience-rated contractholders) were as follows:
<TABLE>
<CAPTION>
(Millions) 1999 1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized holding gains (losses) arising
during the period (1) $ (2.9) $ 0.9 $ 0.3
Less: reclassification adjustment for gains and
other items included in net income (2) (0.1) (0.1) 0.3
- ------------------------------------------------------------------------------------
Net unrealized (losses) gains on securities $ (2.8) $ 1.0 $ --
====================================================================================
</TABLE>
(1) Pretax unrealized holding gains (losses) arising during the period were
$(4.5) million, $1.3 million and $0.4 million for 1999, 1998 and 1997,
respectively.
(2) Pretax reclassification adjustments for gains and other items included in
net income were $(0.2) million, $(0.2) million and $0.4 million for 1999,
1998 and 1997, respectively.
32
<PAGE>
Notes to Financial Statements (continued)
7. Income Taxes
The Company is included in the consolidated federal income tax return of Aetna
and combined Connecticut state income tax return of Aetna. Aetna allocates to
each member an amount approximating the tax it would have incurred were it not
a member of the consolidated group, and credits the member for the use of its
tax saving attributes used in the consolidated returns.
Income taxes for the years ended December 31, consist of:
<TABLE>
<CAPTION>
(Millions) 1999 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Current taxes (benefits):
Federal $ (0.3) $ (1.7) $ 1.2
State -- 0.1 --
Net realized capital gains (losses) (0.4) (0.1) 0.1
- ------------------------------------------------------------------------------
(0.7) (1.7) 1.3
- ------------------------------------------------------------------------------
Deferred taxes (benefits):
Federal 3.1 2.3 (0.4)
Net realized capital gains (losses) 0.3 -- (0.1)
- ------------------------------------------------------------------------------
3.4 2.3 (0.5)
- ------------------------------------------------------------------------------
Total $ 2.7 $ 0.6 $ 0.8
==============================================================================
</TABLE>
Income taxes were different from the amount computed by applying the federal
income tax rate to income before income taxes for the following reasons:
<TABLE>
<CAPTION>
(Millions) 1999 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Income before income taxes and cumulative
effect adjustment $ 8.1 $ 3.2 $ 2.5
Tax rate 35% 35% 35%
- ------------------------------------------------------------------------------
Application of the tax rate 2.8 1.1 0.9
Tax effect of:
Excludable dividends (0.1) (0.5) (0.1)
- ------------------------------------------------------------------------------
Income taxes $ 2.7 $ 0.6 $ 0.8
==============================================================================
</TABLE>
33
<PAGE>
Notes to Financial Statements (continued)
7. Income Taxes (continued)
The tax effects of temporary differences that give rise to deferred tax assets
and deferred tax liabilities at December 31 are presented below:
<TABLE>
<CAPTION>
(Millions) 1999 1998
- -------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Policyholders' funds left with the Company $ 12.4 $ 16.6
Unrealized gains allocable to experience-rated
contracts -- 1.3
Net unrealized capital losses 2.5 --
Investment losses 0.4 --
Guaranty fund assessments 0.1 0.1
Other 0.5 0.1
- -------------------------------------------------------------------------
Total gross assets 15.9 18.1
- -------------------------------------------------------------------------
Deferred tax liabilities:
Deferred policy acquisition costs 16.9 16.9
Unrealized losses allocable to experience-rated
contracts 1.6 --
Net unrealized capital gains -- 1.9
- -------------------------------------------------------------------------
Total gross liabilities 18.5 18.8
- -------------------------------------------------------------------------
Net deferred tax liability $ 2.6 $ 0.7
=========================================================================
</TABLE>
Net unrealized capital gains and losses are presented in shareholder's equity
net of deferred taxes.
Management believes that it is more likely than not that the Company will
realize the benefit of the deferred tax assets. The Company expects sufficient
taxable income in the future to realize the deferred tax assets because of the
Company's long-term history of having taxable income, which is projected to
continue.
The Internal Revenue Service (the "Service") has completed examinations of the
consolidated federal income tax returns of Aetna through 1994. Discussions are
being held with the Service with respect to proposed adjustments. Management
believes there are adequate defenses against, or sufficient reserves to provide
for, any such adjustments. The Service has commenced its examinations for the
years 1995 through 1997.
8. Benefit Plans
The Company utilizes the employees of Aetna and its affiliates (primarily
ALIAC). The benefit plan charges allocated to the Company were $0.4 million and
$0.2 million at December 31, 1999 and 1998, respectively. In 1997 the charges
were immaterial.
34
<PAGE>
Notes to Financial Statements (continued)
9. Related Party Transactions
Substantially all of the administrative and support functions of the Company
are provided by Aetna and its affiliates. The financial statements reflect
allocated charges, at cost, for these services based upon measures appropriate
for the type and nature of service provided. Total charges allocated to the
Company, including rent, salaries and other administrative expenses, were $6.0
million and $10.5 million for the years ended December 31, 1999 and 1998,
respectively, (of which $2.0 million and $5.5 million, respectively, were
capitalized as deferred policy acquisition costs).
The Company is compensated by the Separate Accounts for bearing mortality and
expense risks pertaining to variable annuity contracts. Under the insurance
contracts, the Separate Accounts pay the Company a daily fee which, on an
annual basis, was 1.25% and 1.40% for 1999 and 1998 and 1.40% in 1997, of their
average daily net assets. The amount of compensation and fees received from the
Separate Accounts, included in charges assessed against policyholders, amounted
to $13.5 million, $10.3 million and $5.6 million for the years ended December
31, 1999, 1998 and 1997, respectively.
The Company received no capital contributions in 1999. The Company received
capital contributions of $15.0 million in cash from ALIAC in 1998 and $20.0
million in 1997.
Aeltus, an affiliate of the Company, acts as adviser for the general account
assets. The Company pays Aeltus a fee which, on an annual basis, is .06% of the
average daily net assets under management. The amount of such fees for the
years ended December 31, 1999, 1998 and 1997 amounted to $0.1 million, $0.2
million and $0.1 million, respectively.
10. Commitments and Contingent Liabilities
Commitments
At December 31, 1999 and 1998 the Company had no commitments or contingent
liabilities.
Litigation
The Company is not currently involved in any material litigation.
35
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None
PART III
Item 10. Directors and Executive Officers of the Registrant.
Omitted pursuant to General Instruction I(2) of Form 10-K.
Item 11. Executive Compensation.
Omitted pursuant to General Instruction I(2) of Form 10-K .
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Omitted pursuant to General Instruction I(2) of Form 10-K .
Item 13. Certain Relationships and Related Transactions.
Omitted pursuant to General Instruction I(2) of Form 10-K .
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
1. Financial statements. See Item 8 on Page 16
2. Financial statement schedules. See Index to Financial Statement
Schedules on Page 39.
3. Exhibits:
3(i) Certificate of Incorporation
Incorporated herein by reference to Pre-Effective Amendment No. 1 to
Registration Statement on Form N-4, File No. 333-87131, as filed
with the Securities and Exchange Commission on December 15, 1999.
3(ii) By-Laws
Incorporated herein by reference to Pre-Effective Amendment No. 1 to
Registration Statement on Form N-4, File No. 333-87131, as filed on
December 15, 1999.
4 Instruments Defining the Rights of Security Holders, Including
Indentures (Annuity Contracts)
Incorporated herein by reference to Registration Statement on Form
N-4, File No. 33-80750, as amended and filed most recently on April
23, 1997.
36
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(Continued)
Incorporated herein by reference to Registration Statement on Form
N-4, File No. 33-59749, as filed on June 1, 1995.
Incorporated herein by reference to Post-Effective Amendment No. 4
to Registration Statement on Form N-4, File No. 33-59749, as filed
on April 16, 1997.
Incorporated herein by reference to Post-Effective Amendment No. 6
to Registration Statement on Form N-4, File No. 33-59749, as filed
on November 26, 1997.
Incorporated herein by reference to Post-Effective Amendment No. 8
to Registration Statement on Form N-4, File No. 33-59749, as filed
on April 17, 1998.
Incorporated herein by reference to Registration Statement on Form
S-2, File No. 33-63657, as filed on October 25, 1995.
Incorporated herein by reference to Pre-Effective Amendment No. 3
to the Registration Statement on Form S-2, File No. 33-63657, as
filed on January 17, 1996.
Incorporated herein by reference to Post-Effective Amendment No. 3
to Registration Statement on Form S-2, File No. 33-63657, as filed
on November 24, 1997.
Incorporated herein by reference to Pre-Effective Amendment No. 1
to Registration Statement on Form N-4, File No. 333-01107 as filed
on December 15, 1999.
10 Material Contracts (Management contracts / compensatory plans or
arrangements)
The Aetna Inc. Annual Incentive Plan, incorporated herein by
reference to Exhibit 10.6 to Aetna Inc.'s Registration Statement on
Form S-4 (Registration No. 333-5791) filed on June 12, 1996.*
The Aetna Services, Inc. Supplemental Incentive Savings Plan Amended
and Restated as of January 1, 1999, incorporated herein by reference
to Exhibit 10.2 to Aetna Inc's Form 10-Q filed on July 29, 1999.*
The Aetna Services, Inc. Supplemental Pension Benefit Plan Amended
and Restated as of January 1, 1999, incorporated herein by reference
to Exhibit 10.1 to Aetna Inc's Form 10-Q filed on July 29, 1999.*
The Aetna Inc. 1998 Stock Incentive Plan, incorporated herein by
reference to Exhibit 4.4 to Aetna Inc.'s Registration Statement on
Form S-8 (Registration Statement No. 333-68881) filed on December
14, 1998.*
37
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(Continued)
The Aetna Inc. 1996 Stock Incentive Plan, incorporated herein by
reference to Exhibit 10.5 to Aetna Inc.'s Registration Statement on
Form S-4 (Registration Statement No. 333-5791) filed on June 12,
1996.*
Employment Agreement, dated as of December 19, 1995 between Aetna
Services, Inc. and Daniel P. Kearney, incorporated herein by
reference to Aetna Services, Inc.'s 1995 Form 10-K*
Amendment dated as of July 22, 1996 to Employment Agreement dated as
of December 19, 1995 between Aetna Services, Inc., and Daniel P.
Kearney, incorporated herein by reference to Aetna Inc.'s Form 10-Q
filed on May 6, 1997*
Amendment dated as of September 8, 1997 to Employment Agreement
dated as of December 19, 1995 between Aetna Services, Inc. and
Daniel P. Kearney--Incorporated herein by reference to Aetna Inc.'s
Form 10-Q filed on November 4, 1997*
Letter Agreement, dated as of April 6, 1999, between Aetna Inc. and
Thomas McInerney, incorporated herein by reference to Exhibit 10.4
to Aetna Inc.'s Form 10-Q filed on July 29, 1999.*
Description of certain arrangements not embodied in formal
documents, as described under the heading "Executive Compensation",
are incorporated herein by reference to Aetna Inc.'s 2000 Proxy
Statement.
* Management contract or compensatory plan or arrangement.
24 Power of Attorney
Filed with this Report immediately after Signature page.
27 Financial Data Schedule
Exhibits other than these listed are omitted because they are not
required or not applicable.
(b) Reports on Form 8-K.
None.
38
<PAGE>
Index to Financial Statement Schedule
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report ................................. 40
III. Supplementary Insurance Information as of and for the years
ended December 31, 1999, 1998 and 1997 .................. 41
</TABLE>
Schedules other than those listed above are omitted because they are not
required or are not applicable.
39
<PAGE>
Independent Auditors' Report
The Shareholder and Board of Directors
Aetna Insurance Company of America:
Under date of March 22, 2000, we reported on the balance sheets of Aetna
Insurance Company of America as of December 31, 1999 and 1998, and the related
statements of income, changes in shareholder's equity and cash flows for each
of the years in the three-year period ended December 31, 1999, as included
herein. In connection with our audits of the aforementioned financial
statements, we also audited the related financial statement schedule as listed
in the accompanying index. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
/s/ KPMG LLP
Hartford, Connecticut
March 22, 2000
40
<PAGE>
Schedule III
Supplementary Insurance Information
As of and for the years ended December 31, 1999, 1998 and 1997
(in millions)
<TABLE>
<CAPTION>
Amortization
Deferred Policyholders' of Deferred
Policy Funds Left Net Other Current Policy Other
Acquisition with the Investment Income and Future Acquisition Operating
Costs Company Income (1) (2) Benefits Costs Expenses
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 $ 58.8 $ 138.8 $ 10.9 $ 16.7 $ 8.0 $ 4.6 $ 6.9
- -----------------------------------------------------------------------------------------------------------------
1998 $ 59.9 $ 153.2 $ 10.4 $ 11.9 $ 9.0 $ 3.9 $ 6.2
- -----------------------------------------------------------------------------------------------------------------
1997 $ 45.4 $ 145.6 $ 7.1 $ 6.4 $ 6.5 $ 0.8 $ 3.7
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The allocation of net investment income is based upon the investment year
method or specific identification of certain portfolios within specific
segments.
(2) Amounts include realized capital gains and losses and charges assessed
against policyholders.
41
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AETNA INSURANCE COMPANY OF AMERICA
(Registrant)
Date March 23, 2000 By /s/ Deborah Koltenuk
---------------------------- -----------------------------------------
Deborah Koltenuk
Vice President, Corporate Controller and
Assistant Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 23, 2000.
<TABLE>
<CAPTION>
Signature Title
<S> <C>
*
- ---------------------------------
Thomas J. McInerney President and Director
(Principal Executive Officer)
*
- ---------------------------------
Shaun P. Mathews Senior Vice President and Director
*
- ---------------------------------
Catherine H. Smith Director
*
- ---------------------------------
David W. O'Leary Director
*
- ---------------------------------
Steven A. Haxton Director
/s/ Deborah Koltenuk
- ---------------------------------
Deborah Koltenuk Vice President, Corporate Controller
and Assistant Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
</TABLE>
*By: /s/ Mary Ellen Thibodeau
-------------------------------
Mary Ellen Thibodeau,
Corporate Secretary and Counsel
42
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of Aetna Insurance Company of
America, hereby severally constitute and appoint Mary Ellen Thibodeau and
Deborah Koltenuk and each of them individually, our true and lawful attorneys,
with full power to them and each of them to sign for us, and in our names and
in the capacities indicated below, the 1999 Form 10-K and any and all
amendments thereto to be filed with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, hereby ratifying and confirming our
signatures as they may be signed by our said attorney to the Form 10-K and any
and all amendments thereto.
WITNESS our hands and common seal on this 23rd day of March, 2000.
<TABLE>
<CAPTION>
Signature Title
<S> <C>
/s/ Thomas J. McInerney
- -----------------------------------
Thomas J. McInerney President and Director
(Principal Executive Officer)
/s/ Shaun P. Mathews
- -----------------------------------
Shaun P. Mathews Senior Vice President and Director
/s/ Catherine H. Smith
- -----------------------------------
Catherine H. Smith Director
/s/ David W. O'Leary
- -----------------------------------
David W. O'Leary Director
/s/ Steven A. Haxton
- -----------------------------------
Steven A. Haxton Director
/s/ Deborah Koltenuk
- -----------------------------------
Deborah Koltenuk Vice President, Corporate Controller
and Assistant Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
</TABLE>
43
<PAGE>
ASSISTANT CORPORATE SECRETARY'S CERTIFICATE
AETNA INSURANCE COMPANY OF AMERICA
I, Lena A. Kalynowski, the duly appointed Assistant Corporate Secretary of
Aetna Insurance Company of America (the "Company"), hereby certify that the
attached resolutions adopted by the Board of Directors on April 18, 1996, are
currently in full force and effect, and have not been amended, restated, or
superseded.
IN WITNESS WHEREOF, I have affixed my name as Assistant Corporate
Secretary and have caused the corporate seal of said Company to be hereunto
affixed this 23rd day of March, 2000.
/s/ Lena A. Kalynowski
-------------------------------------------
(corporate seal) Lena A. Kalynowski
Assistant Corporate Secretary
Aetna Insurance Company of America
44
<PAGE>
AETNA INSURANCE COMPANY OF AMERICA
COMPANY NAME, AUTHORITY TO
SIGN (DUPLICATE CORPORATE SEALS)
April 18, 1996
- --------------
RESOLVED: That the following officers:
President
Senior Vice President
Vice President
General Counsel
Corporate Secretary
Treasurer
Assistant Corporate Secretary
(1) are hereby severally authorized to sign in the Company's name:
(a) insurance contracts of every type and description which the
Company is authorized to write;
(b) agreements relating to the purchase, sale, or exchange of
securities including any consents and modifications given
or made under such agreements;
(c) conveyances and leases of real estate or any interest
therein including any modifications thereof;
(d) assignments and releases of mortgages and other liens,
claims or demands;
(e) any other written instrument which they are authorized to
approve in the normal course of Company business; and
(f) any other written instrument when specifically authorized
by the Board of Directors or the President;
and are further severally authorized (i) to delegate all or any
part of the foregoing authority to one or more officers, employees
or agents of this Company, provided that each such delegation is in
writing and a copy thereof is filed in the Office of the Corporate
Secretary, or (ii) to designate any attorney at law representing
this Company on a matter under their direction, to so sign this
Company's name;
(2) are hereby severally authorized to possess the Company's
duplicate seals and to affix the same to items (a) through (f)
above;
and are further severally authorized to designate any Company
officer under their direction to possess and to so affix the
Company's duplicate seals; and
that the Senior Vice President, Investments is hereby
authorized to designate any officer, employee or agent of this
Company under his direction to sign the Company's name and to
affix the Company's seal to any and all documents required in
connection with any investment transaction in which the Company
has an interest.
45
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.
333-49581 on Post Effective Amendment No. 4 on Form S-2 of Aetna Insurance
Company of America (the "Company") of our reports dated March 22, 2000 with
respect to the balance sheets of the Company as of December 31, 1999 and 1998,
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, 1999, which reports appear in the December 31, 1999 annual
report on Form 10-K of the Company and to the reference to our firm under the
heading "Experts" in the prospectus.
/s/ KPMG LLP
Hartford, Connecticut
April 4, 2000
Exhibit 16(24)(a)
POWER OF ATTORNEY
I, the undersigned Director and President of Aetna Insurance Company of America,
hereby constitute and appoint Megan Dunphy, J. Neil McMurdie, Michael A.
Pignatella, Julie E. Rockmore and Kirk P. Wickman, 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
333-49581
333-87131
Registration Statements filed under the Investment Company Act of 1940:
811-8582
hereby ratifying and confirming on this 11th day of February, 2000, 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
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Aetna Insurance Company of America, hereby
constitute and appoint Megan Dunphy, J. Neil McMurdie, Michael A. Pignatella,
Julie E. Rockmore and Kirk P. Wickman, 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
333-49581
333-87131
Registration Statements filed under the Investment Company Act of 1940:
811-8582
hereby ratifying and confirming on this 11th day of February, 2000, 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
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Aetna Insurance Company of America, hereby
constitute and appoint Megan Dunphy, J. Neil McMurdie, Michael A. Pignatella,
Julie E. Rockmore and Kirk P. Wickman, 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
333-49581
333-87131
Registration Statements filed under the Investment Company Act of 1940:
811-8582
hereby ratifying and confirming on this 11th day of February, 2000, 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
<PAGE>
POWER OF ATTORNEY
I, the undersigned Vice President, Corporate Controller and Assistant Treasurer
of Aetna Insurance Company of America, hereby constitute and appoint Megan
Dunphy, J. Neil McMurdie, Michael A. Pignatella, Julie E. Rockmore and Kirk P.
Wickman, 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
333-49581
333-87131
Registration Statements filed under the Investment Company Act of 1940:
811-8582
hereby ratifying and confirming on this 11th day of February, 2000, 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
Vice President,
Corporate Controller and
Assistant Treasurer
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Aetna Insurance Company of America, hereby
constitute and appoint Megan Dunphy, J. Neil McMurdie, Michael A. Pignatella,
Julie E. Rockmore and Kirk P. Wickman, 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
333-49581
333-87131
Registration Statements filed under the Investment Company Act of 1940:
811-8582
hereby ratifying and confirming on this 11th day of February, 2000, 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/ David W. O'Leary
- --------------------------------------------------------
David W. O'Leary
Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Aetna Insurance Company of America, hereby
constitute and appoint Megan Dunphy, J. Neil McMurdie, Michael A. Pignatella,
Julie E. Rockmore and Kirk P. Wickman, 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
333-49581
333-87131
Registration Statements filed under the Investment Company Act of 1940:
811-8582
hereby ratifying and confirming on this 11th day of February, 2000, 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/ Steven A. Haxton
- --------------------------------------------------------
Steven A. Haxton
Director
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from
the financial statements contained in the Form 10-K for the year
ended December 31, 1999 for the Aetna Insurance Company of America
and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000925988
<NAME> Aetna Insurance Company of America
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 128
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 1
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 129
<CASH> 23
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 59
<TOTAL-ASSETS> 1,417
<POLICY-LOSSES> 0
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 139
<NOTES-PAYABLE> 0
0
0
<COMMON> 3
<OTHER-SE> 70
<TOTAL-LIABILITY-AND-EQUITY> 1,417
0
<INVESTMENT-INCOME> 11
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 2
<BENEFITS> 8
<UNDERWRITING-AMORTIZATION> 5
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 8
<INCOME-TAX> 3
<INCOME-CONTINUING> 5
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5
<EPS-BASIC> 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>
