<PAGE>
File No. 33-80738
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 3 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 3 [X]
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THREE
(Exact Name of Registrant)
HARTFORD LIFE INSURANCE COMPANY
(Name of Depositor)
P.O. BOX 2999
HARTFORD, CT 06104-2999
(Address of Depositor's Principal Offices)
(860) 843-7563
(Depositor's Telephone Number, Including Area Code)
SCOTT K. RICHARDSON, ESQ.
ITT HARTFORD LIFE INSURANCE COMPANIES
P.O. BOX 2999
HARTFORD, CT 06104-2999
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
--------
X on May 1, 1996 pursuant to paragraph (b) of Rule 485
--------
60 days after filing pursuant to paragraph (a)(1) of Rule 485
--------
on May 1, 1996 pursuant to paragraph (a)(1) of Rule 485
--------
this post-effective amendment designates a new effective date for
--------- a previously filed post-effective amendment.
<PAGE>
PURSUANT TO RULE 24F-2(a)(1) UNDER THE INVESTMENT COMPANY ACT OF 1940, THE
REGISTRANT HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES. THE RULE 24F-2
NOTICE FOR THE REGISTRANT'S MOST RECENT FISCAL YEAR WAS FILED ON OR ABOUT
FEBRUARY 29, 1996.
<PAGE>
3
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
N-4 Item No. Prospectus Heading
------------ ------------------
1. Cover Page Cover Page
2. Definitions Glossary of Special Terms
3. Synopsis or Highlights Summary
4. Condensed Financial Information Statement of Additional Information
5. General Description of Registrant, The Contract;
Depositor, and Portfolio Companies The Separate Account;
The Fixed Account;
The Company;
The Portfolios; General Matters
6. Deductions Charges Under the Contract
7. General Description of Operation of the Contract
Annuity Contracts Accumulation Period;
Death Benefit;
The Contract;
The Separate Account;
General Matters
8. Annuity Period Annuity/Payout Period
9. Death Benefit Death Benefit
10. Purchases and Contract Value Operation of the Contract/Accumulation
Period
11. Redemptions Operation of the Contract/Accumulation
Period
12. Taxes Federal Tax Considerations
13. Legal Proceedings General Matters - Legal Proceedings
<PAGE>
14. Table of Contents of the Statement Table of Contents to Statement
of Additional Information of Additional Information
15. Cover Page Part B; Statement of Additional
Information
16. Table of Contents Tables of Contents
17. General Information and History Introduction
18. Services None
19. Purchase of Securities Distribution of Contracts
being Offered
20. Underwriters Distribution of Contracts
21. Calculation of Performance Data Calculation of Yield and Return
22. Annuity Payments Annuity Benefits
23. Financial Statements Financial Statements
24. Financial Statements and Financial Statements and
Exhibits Exhibits
25. Directors and Officers of the Directors and Officers of the
Depositor Depositor
26. Persons Controlled by or Under Persons Controlled by or Under
Common Control with the Depositor Common Control with the Depositor
or Registrant or Registrant
27. Number of Contract Owners Number of Contract Owners
28. Indemnification Indemnification
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Records Location of Accounts and Records
31. Management Services Management Services
32. Undertakings Undertakings
<PAGE>
HARTFORD
LIFE INSURANCE COMPANY
P.O. Box 5085
Hartford, CT 06102-5085
Telephone: 1-800-862-6668 (Contact Owner)
1-800-862-4397 (Investment Representative)
SEPARATE ACCOUNT THREE
[LOGO]
This Prospectus describes the Dean Witter Select Dimensions Plan, a tax
deferred variable annuity issued by Hartford Life Insurance Company ("Hartford
Life"). Payments for the Contract will be held in the Fixed Account and/or a
series of Hartford Life Insurance Company -- Separate Account Three (the
"Separate Account"). Allocations to and transfers to and from the Fixed
Account are not permitted in certain states.
There are currently twelve Sub-Accounts available under the Contract. The
underlying investment portfolios ("Portfolios") of the Dean Witter Select
Dimensions Investment Series for the Sub-Accounts are the Money Market
Portfolio, the North American Government Securities Portfolio, the Diversified
Income Portfolio, the Balanced Portfolio, the Utilities Portfolio, the
Dividend Growth Portfolio, the Value-Added Market Portfolio, the Core Equity
Portfolio, the American Value Portfolio, the Global Equity Portfolio, the
Developing Growth Portfolio, and the Emerging Markets Portfolio.
This Prospectus sets forth the information concerning the Separate Account
and the Fixed Account that investors should know before investing. This
Prospectus should be kept for future reference. Additional information about
the Separate Account and the Fixed Account has been filed with the Securities
and Exchange Commission and is available without charge upon request. To
obtain the Statement of Additional Information send a written request to
Hartford Life Insurance Company, Attn: Annuity Marketing Services, P.O. Box
5085, Hartford, CT 06102-5085. The Table of Contents for the Statement of
Additional Information may be found on page 32 of this Prospectus. The
Statement of Additional Information is incorporated by reference into this
Prospectus.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
------------------------------------------------------------------------------
------------------------------------------------------------------------------
VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED
BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY; THEY ARE SUBJECT
TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
------------------------------------------------------------------------------
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THIS PROSPECTUS IS ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE DEAN WITTER
SELECT DIMENSIONS INVESTMENT SERIES ("FUND") AND IS VALID ONLY WHEN
ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE FUND.
------------------------------------------------------------------------------
Prospectus Dated: May 1,1996
Statement of Additional Information Dated: May 1, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GLOSSARY OF SPECIAL TERMS............................................... 3
FEE TABLES.............................................................. 5
SUMMARY................................................................. 7
PERFORMANCE RELATED INFORMATION......................................... 9
INTRODUCTION............................................................ 9
THE CONTRACT............................................................ 9
Right to Cancel Period................................................ 10
THE SEPARATE ACCOUNT.................................................... 10
THE FIXED ACCOUNT....................................................... 11
THE COMPANY............................................................. 12
THE PORTFOLIOS.......................................................... 12
OPERATION OF THE CONTRACT/ACCUMULATION PERIOD........................... 14
Premium Payments...................................................... 14
Value of Accumulation Units........................................... 15
Value of the Fixed Account............................................ 15
Value of the Contract................................................. 15
Transfers Among Sub-Accounts.......................................... 15
Transfers Between the Fixed Account and the Sub-Accounts.............. 16
Redemption/Surrender of a Contract.................................... 16
DEATH BENEFIT........................................................... 17
CHARGES UNDER THE CONTRACT.............................................. 18
Contingent Deferred Sales Charges..................................... 18
During the First Seven Contract Years................................. 18
After the Seventh Contract Year....................................... 18
Mortality and Expense Risk Charge..................................... 19
Administration and Maintenance Fees................................... 20
Premium Taxes......................................................... 20
ANNUITY BENEFITS........................................................ 20
Annuity Options....................................................... 20
The Annuity Unit and Valuation........................................ 21
Determination of Payment Amount....................................... 21
FEDERAL TAX CONSIDERATIONS.............................................. 22
A. General............................................................ 22
B. Taxation of Hartford Life and the Separate Account................. 22
C. Taxation of Annuities -- General Provisions Affecting Purchasers
Other Than Qualified Retirement Plans.............................. 23
D. Federal Income Tax Withholding..................................... 26
E. General Provisions Affecting Qualified Retirement Plans............ 26
F. Annuity Purchases by Nonresident Aliens and Foreign Corporations... 27
GENERAL MATTERS......................................................... 27
Assignment............................................................ 27
Modification.......................................................... 27
Delay of Payments..................................................... 27
Voting Rights......................................................... 27
Distribution of the Contracts......................................... 28
Other Contracts Offered............................................... 28
Custodian of Separate Account Assets.................................. 28
Legal Proceedings..................................................... 28
Legal Counsel......................................................... 28
Experts............................................................... 28
Additional Information................................................ 28
APPENDIX I.............................................................. 29
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION................ 32
</TABLE>
2
<PAGE>
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT: An accounting unit of measure used to calculate values before
Annuity payments begin.
ANNUAL WITHDRAWAL AMOUNT: The amount which can be withdrawn in any Contract year
without surrender charges.
ANNUITANT: The person or participant upon whose life the Contract is issued.
ANNUITY: A series of payments for life, or for life with a minimum number of
payments or a determinable sum guaranteed, or for a joint lifetime and
thereafter during the lifetime of the survivor, or for a designated period.
ANNUITY COMMENCEMENT DATE: The date on which Annuity payments are to commence.
Under a group unallocated Contract, the date for each participant is determined
by the Contract Owner in accordance with the terms of the Plan.
ANNUITY UNIT: An accounting unit of measure used to calculate the value of
Annuity payments.
BENEFICIARY: The person(s) who receive Contract Values in the event of the
Annuitant's or Contract Owner's death under certain conditions. Under a group
unallocated Contract, the person named within the Plan documents/enrollment
forms by each Participant entitled to receive benefits as per the terms of the
Contract in case of the death of the Participant.
CODE: The Internal Revenue Code of 1986, as amended.
COMMISSION: Securities and Exchange Commission.
CONTINGENT ANNUITANT: The person so designated by the Contract Owner, who upon
the Annuitant's death, prior to the Annuity Commencement Date, becomes the
Annuitant.
CONTRACT ANNIVERSARY: The anniversary of the Contract Date.
CONTRACT OWNER(S): The owner(s) of the Contract, trustee or other entity,
sometimes herein referred to as "you".
CONTRACT VALUE: The aggregate value of any Sub-Account Accumulation Units held
under the Contract plus the value of the Fixed Account.
CONTRACT YEAR: A period of 12 months commencing with the Contract Date or any
anniversary thereof.
DEATH BENEFIT: The amount payable upon the death of a Contract Owner or
Annuitant (or Participant in the case of a group unallocated Contract) before
annuity payments have started.
FIXED ACCOUNT: Part of the General Account of Hartford Life to which a Contract
Owner may allocate all or a portion of his Premium Payment or Contract Value.
FIXED ANNUITY: An Annuity providing for guaranteed payments which remain fixed
in amount throughout the payment period and which do not vary with the
investment experience of a separate account.
FUND: Dean Witter Select Dimensions Investment Series.
GENERAL ACCOUNT: The General Account of Hartford Life which consists of all
assets of the Hartford Life Insurance Company other than those allocated to the
separate accounts of the Hartford Life Insurance Company.
HARTFORD LIFE: Hartford Life Insurance Company.
HOME OFFICE OF THE COMPANY: Currently located at 200 Hopmeadow Street, Simsbury,
Connecticut. All correspondence concerning the Contract should be sent to P.O.
Box 5085, Hartford, CT 06102-5085, Attn: Individual Annuity Services.
MAXIMUM ANNIVERSARY VALUE: A value used in determining the death benefit. It is
based on a series of calculations of Contract Values on Contract Anniversaries,
premium payments and partial surrenders, as described on page 17.
NON-QUALIFIED CONTRACT: A Contract which is not classified as a tax-qualified
retirement plan using pre-tax dollars under the Internal Revenue Code.
PARTICIPANT: (For Group Unallocated Contracts Only). Any eligible employee of an
employer/ Contract Owner participating in the Plan.
PLAN: A voluntary Plan of an Employer which qualifies for special tax treatment
under a section of the Internal Revenue Code.
PORTFOLIOS: Currently, the portfolios of Dean Witter Select Dimensions
Investment Series described on page 12 of this Prospectus.
PREMIUM PAYMENT: A payment made to Hartford Life pursuant to the terms of the
Contract.
3
<PAGE>
PREMIUM TAX: A tax charged by a state or municipality on Premium Payments or
Contract Values.
QUALIFIED CONTRACT: A Contract which qualifies as a tax-qualified retirement
plan using pre-tax dollars under the Internal Revenue Code, such as an
employer-sponsored 401(k) plan or an Individual Retirement Annuity (IRA).
SEPARATE ACCOUNT: The Hartford Life separate account entitled "Hartford Life
Insurance Company -- Separate Account Three".
SUB-ACCOUNT: Accounts established within the Separate Account with respect to a
Fund.
TERMINATION VALUE: The Contract Value upon termination of the Contract prior to
the Annuity Commencement Date, less any applicable Premium Taxes, the Annual
Maintenance Fee and any applicable contingent deferred sales charges.
UNALLOCATED CONTRACTS: Contracts issued to employers or such other entities as
Contract Owners with no allocation to a specific Participant, as defined herein.
The Plans will be responsible for the individual allocations.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. The
value of the Separate Account is determined at the close of the New York Stock
Exchange (currently 4:00 p.m. Eastern Time) on such days.
VALUATION PERIOD: The period between the close of business on successive
Valuation Days.
VARIABLE ANNUITY: An Annuity providing for payments varying in amount in
accordance with the investment experience of the assets of the Separate Account.
4
<PAGE>
FEE TABLE
SUMMARY
Contract Owner Transaction Expenses
(All Sub-Accounts)
<TABLE>
<S> <C>
Sales Load Imposed on Purchases (as a percentage of premium
payments)....................................................... None
Exchange Fee...................................................... $ 0
Deferred Sales Load (as a percentage of amounts withdrawn)
First Year (1)................................................ 6%
Second Year................................................... 6%
Third Year.................................................... 5%
Fourth Year................................................... 5%
Fifth Year.................................................... 4%
Sixth Year.................................................... 3%
Seventh Year.................................................. 2%
Eighth Year................................................... 0%
Annual Contract Fee (2)........................................... $ 30
Annual Expenses-Separate Account
(as percentage of average account value)
Mortality and Expense Risk.................................... 1.250%
Administration Fees........................................... 0.150%
Total......................................................... 1.400%
</TABLE>
Annual Fund Operating Expenses (3)
(as percentage of net assets)
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER OPERATING
FEES EXPENSES EXPENSES
---------- -------- ----------
<S> <C> <C> <C>
The Money Market Portfolio...................... 0.500% 0.310% 0.810%
The North American Government Securities
Portfolio..................................... 0.650% 1.850% 2.500%
The Diversified Income Portfolio................ 0.400% 0.930% 1.330%
The Balanced Portfolio.......................... 0.400% 0.930% 1.330%
The Utilities Portfolio......................... 0.650% 0.780% 1.430%
The Dividend Growth Portfolio................... 0.630% 0.200% 0.830%
The Value-Added Market Portfolio................ 0.500% 0.960% 1.460%
The Core Equity Portfolio....................... 0.850% 1.650% 2.500%
The American Value Portfolio.................... 0.630% 0.330% 0.960%
The Global Equity Portfolio..................... 0.100% 1.590% 1.690%
The Developing Growth Portfolio................. 0.500% 0.740% 1.240%
The Emerging Markets Portfolio.................. 1.250% 1.250% 2.500%
</TABLE>
- ------------------------------
(1) Length of time from premium payment.
(2) The Annual Contract Fee is a single $30 charge on a Contract. It is deducted
proportionally from the investment options in use at the time of the charge.
Pursuant to requirements of the 1940 Act, the Annual Contract Fee has been
reflected in the Examples by a method intended to show the "average" impact
of the Annual Contract Fee on an investment in the Separate Account. The
Annual Contract Fee is deducted only when the accumulated value is $50,000
or less. In the Example, the Annual Contract Fee is approximated as a 0.08%
annual asset charge based on the experience of the Contracts.
(3) The Investment Manager has agreed to waive the management fee and to
reimburse the Fund for all other expenses, except for any brokerage fees and
a portion of organizational expenses. The above fees represent the
management fees and operating expenses that would have been charged by the
Fund had the agreement not been made. For the period January 1, 1996 through
December 31, 1996, the Investment Manager will continue to waive the
management fee and to reimburse the operating expenses to the extent they
exceed 0.50% of daily net assets of the Portfolio or until such time as the
respective Portfolio has $50 million of net assets, whichever comes first.
EXAMPLE
<TABLE>
<CAPTION>
If you surrender your contract If you annuitize at the end of If you do not surrender your
at the end of the applicable the applicable time period: You contract: You would pay the
time period: You would pay the would pay the following following expenses on a $1,000
following expenses on a $1,000 expenses on a $1,000 investment, assuming a 5%
investment, assuming a 5% investment, assuming a 5% annual return on assets:
annual return on assets: annual return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- -------- ------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Money Market Portfolio... $ 82 $ 118 $ 156 $ 249 $ 21 $ 67 $ 115 $ 248 $ 22 $ 68 $ 116 $ 249
The North American Government
Securities Portfolio....... 99 169 241 412 38 118 200 411 39 119 201 412
The Diversified Income
Portfolio.................. 87 134 183 302 26 83 142 301 27 84 143 302
The Balanced Portfolio....... 87 134 183 302 26 83 142 301 27 84 143 302
The Utilities Portfolio...... 88 137 188 312 27 86 147 311 28 87 148 312
The Dividend Growth
Portfolio.................. 82 118 157 251 21 67 116 250 22 68 117 251
The Value-Added Market
Portfolio.................. 89 138 189 315 28 87 148 314 29 88 149 315
The Core Equity Portfolio.... 99 169 241 412 38 118 200 411 39 119 201 412
The American Value
Portfolio.................. 83 122 164 265 23 71 123 264 23 72 124 265
The Global Equity
Portfolio.................. 91 145 201 337 30 94 160 337 31 95 161 337
The Developing Growth
Portfolio . 86 131 178 293 26 80 137 292 26 81 138 293
The Emerging Markets
Portfolio.................. 99 169 241 412 38 118 200 411 39 119 201 412
</TABLE>
The purpose of this table is to assist the Contract Owner in understanding
various costs and expenses that a Contract Owner will bear directly or
indirectly. The table reflects expenses of the Separate Account and Funds.
Premium taxes may also be applicable.
This EXAMPLE should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.
5
<PAGE>
ACCUMULATION UNIT VALUES
(FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE PERIOD)
The following information, insofar as it relates to the period ended
December 31, 1995, has been examined by Arthur Andersen LLP, independent public
accountants, whose report thereon is included in the Statement of Additional
information, which is incorporated by reference to this Prospectus.
<TABLE>
<CAPTION>
1995
---------
<S> <C>
MONEY MARKET FUND SUB-ACCOUNT
Accumulation unit value at beginning of period.... $10.000(a)
Accumulation unit value at end of period.......... $10.521
Number accumulation units outstanding at end of
period (in thousands)........................... 125,381
NORTH AMERICAN GOVERNMENT SECURITIES FUND
SUB-ACCOUNT
Accumulation unit value at beginning of period.... $10.000(a)
Accumulation unit value at end of period.......... $10.536
Number accumulation units outstanding at end of
period (in thousands)........................... 4,526
BALANCED FUND SUB-ACCOUNT
Accumulation unit value at beginning of period.... $10.000(a)
Accumulation unit value at end of period.......... $12.164
Number accumulation units outstanding at end of
period (in thousands)........................... 11,284
UTILITIES FUND SUB-ACCOUNT
Accumulation unit value at beginning of period.... $10.000(a)
Accumulation unit value at end of period.......... $12.684
Number accumulation units outstanding at end of
period (in thousands)........................... 49,676
DIVIDEND GROWTH FUND SUB-ACCOUNT
Accumulation unit value at beginning of period.... $10.000(a)
Accumulation unit value at end of period.......... $13.787
Number accumulation units outstanding at end of
period (in thousands)........................... 304,353
VALUE-ADDED MARKET FUND SUB-ACCOUNT
Accumulation unit value at beginning of period.... $10.000(a)
Accumulation unit value at end of period.......... $12.418
Number accumulation units outstanding at end of
period (in thousands)........................... 136,750
CORE EQUITY FUND SUB-ACCOUNT
Accumulation unit value at beginning of period.... $10.000(a)
Accumulation unit value at end of period.......... $11.224
Number accumulation units outstanding at end of
period (in thousands)........................... 26,788
AMERICAN VALUE FUND SUB-ACCOUNT
Accumulation unit value at beginning of period.... $10.000(a)
Accumulation unit value at end of period.......... $13.770
Number accumulation units outstanding at end of
period (in thousands)........................... 159,880
GLOBAL EQUITY FUND SUB-ACCOUNT
Accumulation unit value at beginning of period.... $10.000(a)
Accumulation unit value at end of period.......... $11.162
Number accumulation units outstanding at end of
(in thousands).................................. 95,149
DEVELOPING GROWTH FUND SUB-ACCOUNT
Accumulation unit value at beginning of period.... $10.000(a)
Accumulation unit value at end of period.......... $15.123
Number accumulation units outstanding at end of
period (in thousands)........................... 63,304
EMERGING MARKET FUND SUB-ACCOUNT
Accumulation unit value at beginning of period.... $10.000(a)
Accumulation unit value at end of period.......... $9.841
Number accumulation units outstanding at end of
period (in thousands)........................... 16,840
DIVERSIFIED INCOME FUND SUB-ACCOUNT
Accumulation unit value at beginning of period.... $10.000(a)
Accumulation unit value at end of period.......... $10.607
Number accumulation units outstanding at end of
period (in thousands)........................... 60,690
</TABLE>
- ------------------------
(a) Inception Date February 15, 1995
6
<PAGE>
SUMMARY
WHAT IS THE CONTRACT AND HOW MAY I PURCHASE ONE?
The Contract offered is a tax deferred Variable Annuity Contract (see
"Taxation of Annuities in General," page 23). Generally, the Contract is
purchased by completing an application or an order to purchase a Contract and
submitting it, along with the initial Premium Payments, to Hartford Life for its
approval. The minimum initial Premium Payment is $1,000 with a minimum
allocation to any Fund of $500. Certain plans may make smaller initial and
subsequent periodic premium payments. Subsequent Premium Payments, if made, must
be a minimum of $500. Generally, a Contract Owner may exercise his right to
cancel the Contract within 10 days of delivery of the Contract by returning the
Contract to Hartford Life at its Home Office. If the Contract Owner exercises
his right to cancel, Hartford Life will return either the Contract Value or the
original Premium Payments to the Contract Owner. The duration of the right to
cancel period and Hartford Life's obligation to either return the Contract Value
or the original Premium will depend on state law (see "Right to Cancel Period").
WHO MAY PURCHASE THE CONTRACT?
Any individual, group or trust may purchase the Contracts, including any
trustee or custodian for a retirement plan which qualifies for special Federal
tax treatment under the Internal Revenue Code ("Qualified Contracts"). These
Contracts are also available for IRA's. (See "Federal Tax Considerations"
commencing on page 22 and Appendix I commencing on page 29.)
WHAT TYPES OF INVESTMENTS ARE AVAILABLE UNDER THE CONTRACT?
The underlying investments for the Contract are shares of the Dean Witter
Select Dimensions Investment Series, an open-end diversified series investment
company with multiple portfolios ("Portfolio") as follows: the Money Market
Portfolio, the North American Government Securities Portfolio, the Diversified
Income Portfolio, the Balanced Portfolio, the Utilities Portfolio, the Dividend
Growth Portfolio, the Value-Added Market Portfolio, the Core Equity Portfolio,
the American Value Portfolio, the Global Equity Portfolio, the Developing Growth
Portfolio, and the Emerging Markets Portfolio and such other Portfolios as shall
be offered from time to time, and the Fixed Account, or a combination of the
Portfolios and the Fixed Account. (See "The Portfolios" commencing on page 12
and "The Fixed Account" commencing on page 11.)
WHAT ARE THE CHARGES UNDER THE CONTRACTS?
SALES EXPENSES
There is no deduction for sales expenses from Premium Payments when made.
However, a contingent deferred sales charge may be assessed against Contract
Values when they are surrendered. (See "Contingent Deferred Sales Charges"
commencing on page 18.)
The length of time from receipt of a Premium Payment to the time of
surrender determines the contingent deferred sales charge. For this purpose,
Premium Payments will be deemed to be surrendered in the order in which they are
received and all surrenders will be first from Premium Payments and then from
other Contract values. The charge is a percentage of the amount withdrawn (not
to exceed the aggregate amount of the Premium Payments made). The charge is as
follows:
<TABLE>
<CAPTION>
LENGTH OF TIME
CHARGE FROM PREMIUM PAYMENT
------ --------------------
(NUMBER OF YEARS)
<S> <C>
6% 1
6% 2
5% 3
5% 4
4% 5
3% 6
2% 7
0% 8 or more
</TABLE>
No contingent deferred sales charge will be assessed in the event of death
of the Annuitant or Contract Owner, or upon the exercise of the withdrawal
privilege or if Contract Values are applied to an Annuity option
7
<PAGE>
provided for under the Contract (except that a surrender out of Annuity Option
Four will be subject to a contingent deferred sales charge where applicable).
(See "Contingent Deferred Sales Charges" commencing on page 18.)
FREE WITHDRAWAL PRIVILEGE. Withdrawals of up to 10% per Contract Year, on a
noncumulative basis, of the Premium Payments made to a Contract may be made
without the imposition of the contingent deferred sales charge during the first
seven Contract years. (See "Contingent Deferred Sales Charges" commencing on
page 18.) Certain plans or programs may have different withdrawal privileges.
MORTALITY AND EXPENSE RISKS
For assuming the mortality and expense risks under the Contract, Hartford
Life will impose a 1.25% per annum charge against all Contract Values held in
the Sub-Accounts (see "Mortality and Expense Risk Charge," page 19).
ANNUAL ADMINISTRATION AND MAINTENANCE FEE
The Contract provides for administration and Contract maintenance charges.
For administration, the charge is .15% per annum against all Contract Values
held in the Separate Account. For Contract maintenance, the charge is $30
annually. (See "Administration and Maintenance Fees," page 20.) Contracts with a
Contract value of $50,000 or more at time of Contract Anniversary will not be
assessed this charge.
PREMIUM TAXES
A deduction will be made for Premium Taxes for Contracts sold in certain
states. (See "Premium Taxes," page 20.)
CHARGES BY THE PORTFOLIOS
The Portfolios are subject to certain fees, charges and expenses. (See the
Prospectus for the Fund accompanying this Prospectus.)
CAN I GET MY MONEY IF I NEED IT?
Subject to any applicable charges, the Contract may be surrendered, or
portions of the value of such Contract may be withdrawn, at any time prior to
the Annuity Commencement Date. However, if less than $500 remains in a Contract
as a result of a withdrawal, Hartford Life may terminate the Contract in its
entirety. (See "Redemption/Surrender of a Contract," page 16; see also "Federal
Tax Considerations," page 22, for a discussion of federal tax consequences,
including a 10% penalty tax that may apply upon surrender or withdrawal.)
DOES THE CONTRACT PAY ANY DEATH BENEFITS?
A Death Benefit is provided in the event of death of the Annuitant or
Contract Owner or Joint Contract Owner before Annuity payments have commenced.
(See "Death Benefit," page 17.)
WHAT ARE THE AVAILABLE ANNUITY OPTIONS UNDER THE CONTRACT?
There are five available Annuity options under the Contract which are
described on page 20. The Annuity Commencement Date may not be deferred beyond
the Annuitant's 90th birthday except in certain states where the Annuity
Commencement Date may not be deferred beyond the Annuitant's 85th birthday. If a
Contract Owner does not elect otherwise, the Contract Value less applicable
premium taxes will be applied on the Annuity Commencement Date under the second
option to provide a life annuity with 120 monthly payments certain.
DOES THE CONTRACT OWNER HAVE ANY VOTING RIGHTS UNDER THE CONTRACT?
Contract Owners will have the right to vote on matters affecting an
underlying Portfolio to the extent that proxies are solicited by such Portfolio.
If a Contract Owner does not vote, Hartford Life shall vote such interests in
the same proportion as shares of the Portfolio for which instructions have been
received by Hartford Life. (See "Voting Rights," page 27.)
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PERFORMANCE RELATED INFORMATION
The Separate Account may advertise certain performance related information
concerning its Sub-Accounts. Performance information about a Sub-Account is
based on the Sub-Account's past performance only and is no indication of future
performance.
Each Portfolio may include total return in advertisements or other sales
material.
When a Sub-Account advertises its total return, it will usually be
calculated for one year, five years, and ten years or some other relevant
periods if the Sub-Account has not been in existence for at least ten years.
Total return is measured by comparing the value of an investment in the
Sub-Account at the beginning of the relevant period to the value of the
investment at the end of the period (assuming the deduction of any contingent
deferred sales charge which would be payable if the investment were redeemed at
the end of the period).
The North American Government Securities Portfolio and Diversified Income
Portfolio may advertise yield in addition to total return. The yield will be
computed in the following manner: The net investment income per unit earned
during a recent one month period is divided by the unit value on the last day of
the period. This figure reflects the recurring charges at the Separate Account
level including the Contract Maintenance Fee.
The Money Market Portfolio Sub-Account may advertise yield and effective
yield. The yield of a Sub-Account is based upon the income earned by the
Sub-Account over a seven-day period and then annualized, i.e. the income earned
in the period is assumed to be earned every seven days over a 52-week period and
stated as a percentage of the investment. Effective yield is calculated
similarly but when annualized, the income earned by the investment is assumed to
be reinvested in Sub-Account units and thus compounded in the course of a
52-week period. Yield reflect the recurring charges at the Separate Account
level including the Contract Maintenance Fee.
Total return at the Separate Account level includes all Contract charges:
sales charges, mortality and expense risk charges, and the Contract maintenance
fee, and is therefore lower than total return at the Fund level, with no
comparable charges. Likewise, yield at the Separate Account level includes all
recurring charges (except sales charges), and is therefore lower than yield at
the Portfolio level, with no comparable charges.
Hartford Life may provide information on various topics to Contract Owners
and prospective Contract Owners in advertising, sales literature or other
materials. These topics may include the relationship between sectors of the
economy and the economy as a whole and its effect on various securities markets,
investment strategies and techniques (such as value investing, dollar cost
averaging and asset allocation), the advantages and disadvantages of investing
in tax-advantaged and taxable instruments, customer profiles and hypothetical
purchase scenarios, financial management and tax and retirement planning, and
other investment alternatives, including comparisons between the Contracts and
the characteristics of and market for such alternatives.
INTRODUCTION
This Prospectus has been designed to provide you with the necessary
information to make a decision on purchasing a tax deferred Variable Annuity
Contract offered by Hartford Life and funded by the Fixed Account and/or a
series of the Separate Account. Please read the Glossary of Special Terms on
pages 3 and 4 prior to reading this Prospectus to familiarize yourself with the
terms being used.
THE CONTRACT
The Dean Witter Select Dimensions Plan is a tax deferred Variable Annuity
Contract. Payments for the Contract will be held in the Fixed Account and/or a
series of the Separate Account. Initially there are no deductions from your
Premium Payments (except for Premium Taxes, if applicable) so your entire
Premium Payment is put to work in the investment Sub-Account(s) of your choice
or the Fixed Account. Each Sub-Account invests in a different underlying
Portfolio with its own distinct investment objectives. You pick the Sub-
Account(s) with the investment objectives that meet your needs. You may select
one or more Sub-Accounts and/or the Fixed Account and determine the percentage
of your Premium Payment that is put into a Sub-
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Account or the Fixed Account. You may also transfer assets among the
Sub-Accounts and the Fixed Account so that your investment program meets your
specific needs over time. There are minimum requirements for investing in each
Sub-Account and the Fixed Account which are described later in this Prospectus.
In addition, there are certain other limitations on withdrawals and transfers of
amounts in the Sub-Accounts and the Fixed Account as described in this
Prospectus. See "Charges Under the Contract" for a description of the charges
for redeeming a Contract and other charges made under the Contract.
Generally, the Contract contains the five optional forms of Annuity
described later in this Prospectus. Options 2, 4 and 5 are available with
respect to Qualified Contracts only if the guaranteed payment period is less
than the life expectancy of the Annuitant at the time the option becomes
effective. Such life expectancy shall be computed on the basis of the mortality
table prescribed by the IRS, or if none is prescribed, the mortality table then
in use by Hartford Life.
The Contract Owner may select an Annuity Commencement Date and an Annuity
option which may be on a fixed or variable basis, or a combination thereof. The
Annuity Commencement Date may not be deferred beyond the Annuitant's 90th
birthday except in certain states where the Annuity Commencement Date may not be
deferred beyond the Annuitant's 85th birthday.
The Annuity Commencement Date and/or the Annuity option may be changed from
time to time, but any such change must be made at least 30 days prior to the
date on which payments are scheduled to begin. If you do not elect otherwise,
payments will begin at the Annuitant's age 90 under Option 2 with 120 monthly
payments certain (Option 1 for contracts issued in Texas).
When an Annuity is effected under a Contract, unless otherwise specified,
Contract Values held in the Sub-Accounts will be applied to provide a Variable
Annuity based on the pro rata amount in the various Sub-Accounts. Fixed Account
Contract Values will be applied to provide a Fixed Annuity. Variable Annuity
payments will vary in accordance with the investment performance of the
Sub-Accounts you have selected. The Contract allows the Contract Owner to change
the Sub-Accounts on which variable payments are based after payments have
commenced once every three (3) months. Any Fixed Annuity allocation may not be
changed.
The Contract offered under this Prospectus may be purchased by any
individual ("Non-Qualified Contract") or by an individual, trustee or custodian
for a retirement plan qualified under Sections 401(a) or 403(a) of the Internal
Revenue Code; annuity purchase plans adopted by public school systems and
certain tax-exempt organizations according to Section 403(b) of the Internal
Revenue Code; Individual Retirement Annuities adopted according to Section 408
of the Internal Revenue Code; employee pension plans established for employees
by a state, a political subdivision of a state, or an agency or instrumentality
of either a state or a political subdivision of a state, and certain eligible
deferred compensation plans as defined in Section 457 of the Internal Revenue
Code ("Qualified Contracts").
RIGHT TO CANCEL PERIOD
If you are not satisfied with your purchase you may surrender the Contract
by returning it within ten days (or longer in some states) after you receive it.
A written request for cancellation must accompany the Contract. In such event,
Hartford Life will, without deduction for any charges normally assessed
thereunder, pay you an amount equal to the Contract Value on the date of receipt
of the request for cancellation. You bear the investment risk during the period
prior to the Company's receipt of request for cancellation. Hartford Life will
refund the premium paid only for individual retirement annuities (if returned
within seven days of receipt) and in those states where required by law.
THE SEPARATE ACCOUNT
The Separate Account was established on June 13, 1994, in accordance with
authorization by the Board of Directors of Hartford Life. It is the Separate
Account in which Hartford Life sets aside and invests the assets attributable to
variable annuity contracts, including the contracts sold under this Prospectus.
Although the Separate Account is an integral part of Hartford Life, it is
registered as a unit investment trust under the Investment Company Act of 1940.
This registration does not, however, involve supervision by the Commission of
the management or the investment practices or policies of the Separate Account
or Hartford Life. The Separate Account meets the definition of "separate
account" under federal securities law.
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Under Connecticut law, the assets of the Separate Account attributable to
the Contracts offered under this Prospectus are held for the benefit of the
owners of, and the persons entitled to payments under, those Contracts. Income,
gains, and losses, whether or not realized, from assets allocated to the
Separate Account, are, in accordance with the Contracts, credited to or charged
against the Separate Account. Also, the assets in the Separate Account are not
chargeable with liabilities arising out of any other business Hartford Life may
conduct. So Contract Values allocated to the Sub-Accounts will not be affected
by the rate of return of Hartford Life's General Account, nor by the investment
performance of any of Hartford Life's other separate accounts. However, the
obligations arising under the Contracts are general obligations of Hartford
Life.
Your investment in the Separate Account is allocated to one or more
Sub-Accounts as per your specifications. Each Sub-Account is invested
exclusively in the shares of one underlying Portfolio. Net Premium Payments and
proceeds of transfers between Portfolios are applied to purchase shares in the
appropriate Fund at net asset value determined as of the end of the Valuation
Period during which the payments were received or the transfer made. All
distributions from the Portfolios are reinvested at net asset value. The value
of your investment will therefore vary in accordance with the net income and the
market value of the Portfolios of the underlying Portfolio. During the Variable
Annuity payout period, both your Annuity payments and reserve values will vary
in accordance with these factors.
Hartford Life does not guarantee the investment results of the Portfolios or
any of the underlying investments. There is no assurance that the value of a
Contract during the years prior to retirement or the aggregate amount of the
Variable Annuity payments will equal the total of Premium Payments made under
the Contract. Since each underlying Portfolio has different investment
objectives and policies, each is subject to different risks. These risks are
more fully described in the accompanying Fund Prospectus.
Hartford Life reserves the right, subject to compliance with the law, to
substitute the shares of any other registered investment company for the shares
of any Portfolio held by the Separate Account. Substitution may occur only if
shares of the Portfolio(s) become unavailable or if there are changes in
applicable law or interpretations of law. Current law requires notification to
you of any such substitution and approval of the Commission.
The Separate Account may be subject to liabilities arising from a Series of
the Separate Account whose assets are attributable to other variable annuity
contracts or variable life insurance policies offered by the Separate Account
which are not described in this Prospectus.
THE FIXED ACCOUNT
THAT PORTION OF THE CONTRACT RELATING TO THE FIXED ACCOUNT IS NOT REGISTERED
UNDER THE SECURITIES ACT OF 1933 ("1933 ACT") AND THE FIXED ACCOUNT IS NOT
REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940
("1940 ACT"). ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTERESTS THEREIN
ARE SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT,
AND THE DISCLOSURE REGARDING THE FIXED ACCOUNT HAS NOT BEEN REVIEWED BY THE
STAFF OF THE SECURITIES AND EXCHANGE COMMISSION. THE FOLLOWING DISCLOSURE ABOUT
THE FIXED ACCOUNT MAY BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF
THE FEDERAL SECURITIES LAWS REGARDING THE ACCURACY AND COMPLETENESS OF
DISCLOSURE.
Premium Payments and Contract Values allocated to the Fixed Account become a
part of the general assets of Hartford Life. Hartford Life invests the assets of
the General Account in accordance with applicable laws governing investments of
Insurance Company General Accounts.
Currently, Hartford Life guarantees that it will credit interest at a rate
of not less than 3% per year, compounded annually, to amounts allocated to the
Fixed Account under the Contracts. However, Hartford Life reserves the right to
change the rate according to state insurance law. Hartford Life may credit
interest at a rate in excess of 3% per year; however, Hartford Life is not
obligated to credit any interest in excess of 3% per year. There is no specific
formula for the determination of excess interest credits. Some of the factors
that the Company may consider in determining whether to credit excess interest
to amounts allocated to the Fixed Account and the amount thereof, are general
economic trends, rates of return currently available and anticipated on the
Company's investments, regulatory and tax requirements and competitive factors.
ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN EXCESS OF 3%
PER
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YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF THE COMPANY. THE OWNER ASSUMES
THE RISK THAT INTEREST CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE
MINIMUM GUARANTEE OF 3% FOR ANY GIVEN YEAR.
THE COMPANY
Hartford Life Insurance Company ("Hartford Life") was originally
incorporated under the laws of Massachusetts on June 5, 1902. It was
subsequently redomiciled to Connecticut. It is a stock life insurance company
engaged in the business of writing health and life insurance, both individual
and group, in all states of the United States and the District of Columbia. The
offices of Hartford Life are located in Simsbury, Connecticut; however, its
mailing address is P.O. Box 5085, Hartford, CT 06102-5085.
Hartford Life is ultimately 100% owned by Hartford Fire Insurance Company,
one of the largest multiple lines insurance carriers in the United States. On
December 20, 1995, Hartford Fire Insurance Company became an independent,
publicly traded corporation.
Hartford Life is rated A+ (superior) by A.M. Best and Company, Inc., on the
basis of its financial soundness and operating performance. Hartford Life is
rated AA+ by both Standard & Poor's and Duff and Phelps on the basis of its
claims paying ability.
These ratings do not apply to the performance of the Separate Account.
However, the contractual obligations under this variable annuity are the general
corporate obligations of Hartford Life. These ratings do apply to Hartford
Life's ability to meet its insurance obligations under the Contract.
THE PORTFOLIOS
The underlying investment for the Contracts are shares of the Dean Witter
Select Dimensions Investment Series ("Fund"), an open-end diversified series
investment company with multiple portfolios. The underlying Portfolio
corresponding to each Sub-Account and their investment objectives are described
below. Hartford Life reserves the right, subject to compliance with the law, to
offer additional portfolios with differing investment objectives. The Portfolios
may not be available in all states.
MONEY MARKET PORTFOLIO
Seeks high current income, preservation of capital and liquidity by
investing in the following money market instruments: U.S. Government securities,
obligations of U.S. regulated banks and savings institutions having total assets
of more than $1 billion, or less than $1 billion if such are fully federally
insured as to principal (the interest may not be insured) and high grade
corporate debt obligations maturing in thirteen months or less.
NORTH AMERICAN GOVERNMENT SECURITIES PORTFOLIO
Seeks to earn a high level of current income while maintaining relatively
low volatility of principal, by investing primarily in investment grade
fixed-income securities issued or guaranteed by the U.S., Canadian or Mexican
governments.
DIVERSIFIED INCOME PORTFOLIO
Seeks, as a primary objective, to earn a high level of current income and,
as a secondary objective, to maximize total return, but only to the extent
consistent with its primary objective, by equally allocating its assets among
three separate groupings of fixed-income securities. Up to one-third of the
securities in which the Diversified Income Portfolio may invest will include
securities rated Baa/BBB or lower. See the Special Considerations for
Investments for High Yield Securities disclosed in the Fund prospectus.
BALANCED PORTFOLIO
Seeks to achieve high total return through a combination of income and
capital appreciation, by investing in a diversified portfolio of common stocks
and investment grade fixed-income securities.
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UTILITIES PORTFOLIO
Seeks to provide current income and long-term growth of income and capital
by investing in equity and fixed-income securities of companies in the public
utilities industry.
DIVIDEND GROWTH PORTFOLIO
Seeks to provide reasonable current income and long-term growth of income
and capital by investing primarily in common stock of companies with a record of
paying dividends and the potential for increasing dividends.
VALUE-ADDED MARKET PORTFOLIO
Seeks to achieve a high level of total return on its assets through a
combination of capital appreciation and current income, by investing, on an
equally-weighted basis, in a diversified portfolio of common stocks of the
companies which are represented in the Standard & Poor's 500 Composite Stock
Price Index.
CORE EQUITY PORTFOLIO
Seeks long-term growth of capital by investing primarily in common stocks
and securities convertible into common stocks issued by domestic and foreign
companies.
AMERICAN VALUE PORTFOLIO
Seeks long-term capital growth consistent with an effort to reduce
volatility, by investing principally in common stock of companies in industries
which, at the time of the investment, are believed to be undervalued in the
marketplace.
GLOBAL EQUITY PORTFOLIO
Seeks a high level of total return on its assets primarily through long-term
capital growth and, to a lesser extent, from income, through investments in all
types of common stocks and equivalents (such as convertible securities and
warrants), preferred stocks and bonds and other debt obligations of domestic and
foreign companies and governments and international organizations.
DEVELOPING GROWTH PORTFOLIO
Seeks long-term capital growth by investing primarily in common stocks of
smaller and medium-sized companies that, in the opinion of the Investment
Manager, have the potential for growing more rapidly than the economy and which
may benefit from new products or services, technological developments or changes
in management.
EMERGING MARKETS PORTFOLIO
Seeks long-term capital appreciation by investing primarily in equity
securities of companies in emerging market countries. The Emerging Markets
Portfolio may invest up to 35% of its total assets in high risk fixed-income
securities that are rated below investment grade or are unrated (commonly
referred to as "junk bonds"). See the special considerations for investments in
high yield securities disclosed in the Fund prospectus.
The Portfolios are managed in styles similar to other investment companies
whose shares are generally offered to the public which are managed by Dean
Witter InterCapital Inc., the Investment Manager, or by TCW Funds Management,
Inc., the Sub-Adviser to certain of the Portfolios. The portfolios of these
other investment companies may, however, employ different investment practices
and may invest in securities different from those in which their counterpart
Portfolios invest, and consequently will not have identical portfolios or
experience identical investment results.
The Portfolios are available only to serve as the underlying investment for
variable annuity and variable life contracts. A full description of the
Portfolios, their investment objectives, policies and restrictions, risks,
charges and expenses and other aspects of their operation is contained in the
accompanying Fund Prospectus which should be read in conjunction with this
Prospectus before investing, and in the Fund Statement of Additional Information
which may be ordered without charge from Dean Witter Select Dimensions
Investment Series.
It is conceivable that in the future it may be disadvantageous for variable
annuity separate accounts and variable life insurance separate accounts to
invest in the Portfolios simultaneously. Although Hartford Life and the Fund do
not currently foresee any such disadvantages either to variable annuity contract
owners or to
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variable life insurance policyowners, the Fund's Board of Trustees would monitor
events in order to identify any material conflicts between such Contract Owners
and policyowners and to determine what action, if any, should be taken in
response thereto. If the Board of Trustees of the Fund were to conclude that
separate Portfolios should be established for variable life and variable annuity
separate accounts, the variable annuity Contract holders would not bear any
expenses attendant upon establishment of such separate funds.
Dean Witter InterCapital Inc. ("InterCapital" or the "Investment Manager"),
a Delaware Corporation, whose address is Two World Trade Center, New York, New
York 10048, is the Fund's Investment Manager. The Investment Manager, which was
incorporated in July, 1992, is a wholly-owned subsidiary of Dean Witter,
Discover & Co., ("DWDC"), a balanced financial services organization providing a
broad range of nationally marketed credit and investment products.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sales of portfolio
securities. Inter-Capital has retained its wholly-owned subsidiary, Dean Witter
Services Company Inc., to perform the aforementioned administrative services for
the Fund. For its services, the Portfolios pay the Investment Manager a monthly
fee. See the accompanying Fund Prospectus for a more complete description of the
Investment Manager and the respective fees of the Portfolios.
With regard to the North American Government Securities Portfolio, the
Balanced Portfolio, the Core Equity Portfolio and the Emerging Markets
Portfolio, under a Sub-Advisory Agreement between TCW Funds Management, Inc.
(the "Sub-Adviser") and the Investment Manager, the Sub-Adviser provides these
Portfolios with investment advice and portfolio management, in each case subject
to the overall supervision of the Investment Manager. The Sub-Adviser's address
is 865 South Figueroa Street, Suite 1800, Los Angeles, California 90017.
The Fund's Board of Trustees reviews the various services provided by or
under the direction of the Investment Manager (or by the Sub-Adviser) to ensure
that the Fund's general investment policies and programs are being properly
carried out and that administrative services are being provided to the Fund in a
satisfactory manner.
OPERATION OF THE
CONTRACT/ACCUMULATION PERIOD
PREMIUM PAYMENTS
The balance of each initial Premium Payment remaining after the deduction of
any applicable Premium Tax is credited to your Contract within two business days
of receipt of a properly completed application or an order to purchase a
Contract and the initial Premium Payment by Hartford Life at its Home Office,
P.O. Box 5085, Hartford, CT 06102-5085. It will be credited to the
Sub-Account(s) and/or the Fixed Account in accordance with your election. If the
application or other information is incomplete when received, the balance of
each initial Premium Payment, after deduction of any applicable Premium Tax,
will be credited to the Sub-Account(s) or the Fixed Account within five business
days of receipt or the entire Premium Payment will be immediately returned
unless you have been informed of the delay and request that the Premium Payment
not be returned.
Subsequent Premium Payments are priced on the Valuation Day received by
Hartford Life in its Home Office or other designated administrative office.
The number of Accumulation Units in each Sub-Account to be credited to a
Contract will be determined by dividing the portion of the Premium Payment being
credited to each Sub-Account by the value of an Accumulation Unit in that
Sub-Account on that date.
The minimum initial Premium Payment is $1,000. Subsequent Premium Payments,
if made, must be a minimum of $500. Certain plans may make smaller initial and
subsequent periodic payments. Each Premium Payment may be split among the
various Sub-Accounts and the Fixed Account subject to minimum amounts then in
effect.
Hartford Securities Distribution Company, Inc. ("HSD") serves as principal
underwriter for the securities issued with respect to the Separate Account. HSD
is a wholly-owned subsidiary of Hartford Life. HSD is
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registered with the Commission under the Securities Exchange Act of 1934 as a
Broker-Dealer and is a member of the National Association of Securities Dealers,
Inc. The principal business address of HSD is the same as Hartford Life
VALUE OF ACCUMULATION UNITS
The Accumulation Unit value for each Sub-Account will vary to reflect the
investment experience of the applicable Portfolio and will be determined on each
Valuation Day by multiplying the Accumulation Unit value of the particular
Sub-Account on the preceding Valuation Day by a "Net Investment Factor" for that
Sub-Account for the Valuation Period then ended. The "Net Investment Factor" for
each of the Sub-Accounts is equal to the net asset value per share of the
corresponding Portfolio at the end of the Valuation Period (plus the per share
amount of any dividends or capital gains distributed by that Portfolio if the
ex-dividend date occurs in the Valuation Period then ended) divided by the net
asset value per share of the corresponding Portfolio at the beginning of the
Valuation Period and subtracting from that amount the amount of any mortality
and expense risk and administration charges assessed during the Valuation Period
then ending. You should refer to the Fund Prospectus which accompanies this
Prospectus for a description of how the assets of each Portfolio are valued
since each determination has a direct bearing on the Accumulation Unit value of
the Sub-Account and therefore the value of a Contract. The Accumulation Unit
value is affected by the performance of the underlying Portfolio(s), expenses
and deduction of the charges described in this Prospectus.
The shares of the Portfolio are valued at net asset value on each Valuation
Day. A description of the valuation methods used in valuing Portfolio shares may
be found in the accompanying Prospectus of the Fund.
VALUE OF THE FIXED ACCOUNT
Hartford Life will determine the value of the Fixed Account by crediting
interest to amounts allocated to the Fixed Account. The minimum Fixed Account
interest rate is 3%, compounded annually. Hartford Life may credit a lower
minimum interest rate according to state law. Hartford Life also may credit
interest at rates greater than the minimum Fixed Account interest rate.
VALUE OF THE CONTRACT
The value of the Sub-Account investments under your Contract at any time
prior to the commencement of Annuity payments can be determined by multiplying
the total number of Accumulation Units credited to your Contract in each
Sub-Account by the then current Accumulation Unit values for the applicable
Sub-Account. The value of the Fixed Account under your Contract will be the
amount allocated to the Fixed Account plus interest credited. You will be
advised at least semi-annually of the number of Accumulation Units credited to
each Sub-Account, the current Accumulation Unit values, the Fixed Account Value,
and the total value of your Contract.
TRANSFERS AMONG SUB-ACCOUNTS
You may transfer the values of your Sub-Account allocations from one or more
Sub-Accounts to another free of charge. However, Hartford Life reserves the
right to limit the number of transfers to twelve (12) per Contract Year, with no
two (2) transfers occurring on consecutive Valuation Days. Transfers by
telephone may be made by a Contract Owner or by the attorney-in-fact pursuant to
a power of attorney by calling (800) 862-6668 or by the agent of record by
calling (800) 862-7155. Telephone transfers may not be permitted by some states
for their residents who purchase variable annuities.
The policy of Hartford Life and its agents and affiliates is that they will
not be responsible for losses resulting from acting upon telephone requests
reasonably believed to be genuine. Hartford Life will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine;
otherwise, Hartford Life may be liable for any losses due to unauthorized or
fraudulent instructions. The procedures Hartford Life follows for transactions
initiated by telephone include requirements that callers provide certain
information for identification purposes. All transfer instructions by telephone
are tape recorded.
Hartford Life may permit the Contract Owner to preauthorize transfers
between the Sub-Accounts and the Fixed Account under certain circumstances.
Transfers between the Sub-Accounts may be made both before and after Annuity
payments commence (limited to once a quarter) provided that the minimum
allocation to any Sub-Account may not be less than $500. No minimum balance is
presently required in any Sub-Account.
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The right to reallocate Contract Values between the Sub-Accounts is subject
to modification if Hartford Life determines, in its sole discretion, that the
exercise of that right by one or more Contract Owners is, or would be, to the
disadvantage of other Contract Owners. Any modification could be applied to
transfers to or from some or all of the Sub-Accounts and could include, but not
be limited to, the requirement of a minimum time period between each transfer,
not accepting transfer requests of an agent acting under a power of attorney on
behalf of more than one Contract Owner, or limiting the dollar amount that may
be transferred between the Sub-Accounts and the Fixed Account by a Contract
Owner at any one time. Such restrictions may be applied in any manner reasonably
designed to prevent any use of the transfer right which is considered by
Hartford Life to be to the disadvantage of other Contract Owners.
TRANSFERS BETWEEN THE FIXED ACCOUNT AND THE SUB-ACCOUNTS
Subject to the restrictions set forth above, transfers from the Fixed
Account into a Sub-Account may be made at any time during the Contract Year. The
maximum amount which may be transferred from the Fixed Account during any
Contract Year is the greater of 30% of the Fixed Account balance as of the last
Contract Anniversary or the greatest amount of any prior transfer from the Fixed
Account. If Hartford Life permits preauthorized transfers from the Fixed Account
to the Sub-Accounts, this restriction is inapplicable. However, if any interest
rate is renewed at a rate at least one percentage point less than the previous
rate, the Contract Owner may elect to transfer up to 100% of the Portfolios
receiving the reduced rate within sixty days of notification of the interest
rate decrease. Generally, transfers may not be made from any Sub-Account into
the Fixed Account for the six-month period following any transfer from the Fixed
Account into one or more of the Sub-Accounts. Hartford Life reserves the right
to defer transfers from the Fixed Account for up to six months from the date of
request.
REDEMPTION/SURRENDER OF A CONTRACT
At any time prior to the Annuity Commencement Date, you have the right,
subject to any IRS provisions applicable thereto, to surrender the value of the
Contract in whole or in part. Surrenders are not permitted after Annuity
payments commence except that a full surrender is allowed when payments for a
designated period (Option 4 or 5) are selected as the Annuity option.
FULL SURRENDERS. At any time prior to the Annuity Commencement Date (and
after the Annuity Commencement Date with respect to values applied to Option 4),
the Contract Owner has the right to terminate the Contract. In such event, the
Termination Value of the Contract may be taken in the form of a lump sum cash
settlement. The Termination Value of the Contract is equal to the Contract Value
less any applicable Premium Taxes, the Contract Maintenance Fee, if applicable,
and any applicable contingent deferred sales charges. The Termination Value may
be more or less than the amount of the Premium Payments made to a Contract.
PARTIAL SURRENDERS. The Contract Owner may make a partial surrender of
Contract Values at any time prior to the Annuity Commencement Date so long as
the amount surrendered is at least equal to the minimum amount rules then in
effect. Currently, there is no minimum amount rule in effect. However, Hartford
Life may institute minimum amount rules at some future time. Additionally, if
the remaining Contract Value following a surrender is less than $500 (and, for
Texas contracts, there were no Premium Payments made during the preceding two
contract years), Hartford Life may terminate the Contract and pay the
Termination Value.
Certain plans or programs may have different withdrawal privileges. Hartford
Life may permit the Contract Owner to preauthorize partial surrenders subject to
certain limitations then in effect.
THERE ARE CERTAIN RESTRICTIONS ON SECTION 403(B) TAX SHELTERED ANNUITIES. AS
OF DECEMBER 31, 1988, ALL SECTION 403(B) ANNUITIES HAVE LIMITS ON FULL AND
PARTIAL SURRENDERS. CONTRIBUTIONS TO THE CONTRACT MADE AFTER DECEMBER 31, 1988
AND ANY INCREASES IN CASH VALUE AFTER DECEMBER 31, 1988 MAY NOT BE DISTRIBUTED
UNLESS THE CONTRACT OWNER/EMPLOYEE HAS A) ATTAINED AGE 59 1/2, B) TERMINATED
EMPLOYMENT, C) DIED, D) BECOME DISABLED OR E) EXPERIENCED FINANCIAL HARDSHIP.
DISTRIBUTIONS DUE TO FINANCIAL HARDSHIP OR SEPARATION FROM SERVICE MAY STILL
BE SUBJECT TO A PENALTY TAX OF 10%.
HARTFORD LIFE WILL NOT ASSUME ANY RESPONSIBILITY IN DETERMINING WHETHER A
WITHDRAWAL IS PERMISSIBLE, WITH OR WITHOUT TAX PENALTY, IN ANY PARTICULAR
SITUATION; OR IN MONITORING WITHDRAWAL REQUESTS REGARDING PRE OR POST JANUARY 1,
1989 ACCOUNT VALUES.
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ANY SUCH FULL OR PARTIAL SURRENDER DESCRIBED ABOVE MAY RESULT IN ADVERSE TAX
CONSEQUENCES TO THE CONTRACT OWNER. THE CONTRACT OWNER, THEREFORE, SHOULD
CONSULT WITH HIS TAX ADVISER BEFORE UNDERTAKING ANY SUCH SURRENDER. (SEE
"FEDERAL TAX CONSIDERATIONS" COMMENCING ON PAGE 22.)
Payment on any request for a full or partial surrender from the Sub-Accounts
and/or the Fixed Account will be made as soon as possible and in any event no
later than seven days after the written request is received by Hartford Life at
its Home Office, Attn: Individual Annuity Services, P.O. Box 5085, Hartford, CT
06102-5085. Hartford Life may defer payment of any amounts from the Fixed
Account for up to six months from the date of the request for surrender. If
Hartford Life defers payment for more than 30 days, Hartford Life will pay
interest of at least 3% per annum on the amount deferred. In requesting a
partial withdrawal you should specify the Fixed Account and/or the
Sub-Account(s) from which the partial withdrawal is to be taken. Otherwise, such
withdrawal and any applicable contingent deferred sales charges will be effected
on a pro rata basis according to the value in the Fixed Account and each
Sub-Account under a Contract. Within this context, the contingent deferred sales
charges are taken from the Premium Payments in the order in which they were
received: from the earliest Premium Payments to the latest Premium Payments.
(See "Contingent Deferred Sales Charges," page 18.)
DEATH BENEFIT
The Contracts provide that in the event the Annuitant dies before the
Annuity Commencement Date, the Contingent Annuitant will become the Annuitant.
If the Annuitant dies before the Annuity Commencement Date and either (a) there
is no designated Contingent Annuitant, (b) the Contingent Annuitant predeceases
the Annuitant, or (c) if any Contract Owner dies before the Annuity Commencement
Date, the Beneficiary as determined under the Contract Control Provisions, will
receive the Death Benefit as determined on the date of receipt of due proof of
death by Hartford Life in its Home Office. With regard to Joint Contract Owners,
after the death of a joint Contract Owner prior to the Annuity Commencement
Date, the Beneficiary will be the surviving Contract Owner notwithstanding that
the beneficiary designation may be different.
GUARANTEED DEATH BENEFIT -- If, upon death prior to the Annuity Commencement
Date, the Annuitant or Contract Owner, as applicable, had not attained his 90th
birthday, the Beneficiary will receive the greatest of (a) the Contract Value
determined as of the day written proof of death of such person is received by
Hartford Life, or (b) 100% of the total Premium Payments made to such contract,
reduced by any prior surrenders, or (c) the Maximum Anniversary Value
immediately preceding the date of death. The Maximum Anniversary Value is equal
to the greatest Anniversary Value attained from the following:
As of the date of receipt of due proof of death, the Company will calculate
an Anniversary Value for each Contract Anniversary prior to the deceased's
attained age 81. The Anniversary Value is equal to the Contract Value on a
Contract Anniversary, increased by the dollar amount of any premium payment made
since that anniversary and reduced by the dollar amount of any partial
surrenders since that anniversary.
If the deceased, the Annuitant or the Contract Owner, as applicable, had
attained age 90, then the Death Benefit will equal the Contract Value.
PAYMENT OF DEATH BENEFIT -- Death Benefit proceeds will remain invested in
the Separate Account in accordance with the allocation instructions given by the
Contract Owner until the proceeds are paid or Hartford Life receives new
instructions from the Beneficiary. The Death Benefit may be taken in one sum,
payable within 7 days after the date Due Proof of Death is received, or under
any of the settlement options then being offered by the Company provided,
however, that: (a) in the event of the death of any Contract Owner prior to the
Annuity Commencement Date, the entire interest in the Contract will be
distributed within 5 years after the death of the Contract Owner and (b) in the
event of the death of any Contract Owner or Annuitant which occurs on or after
the Annuity Commencement Date, any remaining interest in the Contract will be
paid at least as rapidly as under the method of distribution in effect at the
time of death, or, if the benefit is payable over a period not extending beyond
the life expectancy of the Beneficiary or over the life of the Beneficiary, such
distribution must commence within one year of the date of death. The proceeds
due on the death may be applied to provide variable payments, fixed payments, or
a combination of variable and fixed payments. However, in the event of the
Contract Owner's death where the sole Beneficiary is the spouse of the Contract
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Owner and the Annuitant or Contingent Annuitant is living, such spouse may
elect, in lieu of receiving the death benefit, to be treated as the Contract
Owner. The Contract Value and the Maximum Anniversary Value of the Contract will
be unaffected by treating the spouse as the Contract Owner.
If the Contract is owned by a corporation or other non-individual, the Death
Benefit payable upon the death of the Annuitant prior to the Annuity
Commencement Date will be payable only as one sum or under the same settlement
options and in the same manner as if an individual Contract Owner died on the
date of the Annuitant's death.
There may be postponement in the payment of Death Benefits whenever (a) the
New York Stock Exchange is closed, except for holidays or weekends, or trading
on the New York Stock Exchange is restricted as determined by the Securities and
Exchange Commission; (b) the Securities and Exchange Commission permits
postponement and so orders; or (c) the Securities and Exchange Commission
determines that an emergency exists making valuation of the amounts or disposal
of securities not reasonably practicable.
GROUP UNALLOCATED CONTRACTS -- For Group Unallocated Contracts, Hartford
Life requires that detailed accounting of cumulative purchase payments,
cumulative gross surrenders, and current Contract Value attached to each Plan
Participant be submitted on an annual basis by the Contract Owner. Failure to
submit accurate data satisfactory to Hartford Life will give Hartford Life the
right to terminate this extension of benefits
CHARGES UNDER THE CONTRACT
CONTINGENT DEFERRED SALES CHARGES
There is no deduction for sales expenses from Premium Payments when made.
However, a contingent deferred sales charge may be assessed against Contract
Values when they are surrendered.
The length of time from receipt of a Premium Payment to the time of
surrender determines the contingent deferred sales charge. Premium payments will
be deemed to be surrendered in the order in which they were received.
DURING THE FIRST SEVEN CONTRACT YEARS
During the first seven contract years, all surrenders will be first from
Premium Payments and then from other Contract Values. If an amount equal to all
premium payments has been surrendered, a contingent deferred sales charge will
not be assessed against the surrender of the remaining Contract Value.
AFTER THE SEVENTH CONTRACT YEAR
After the seventh contract year, all surrenders will first be from earnings
and then from premium payments. A contingent deferred sales charge will not be
assessed against the surrender of earnings. If an amount equal to all earnings
has been surrendered, a contingent deferred sales charge will not be assessed
against premium payments received more than seven years prior to surrender, but
will be assessed against premium payments received less than seven years prior
to surrender.
The charge is a percentage of the amount withdrawn (not to exceed the
aggregate amount of the Premium Payments made) and equals:
<TABLE>
<CAPTION>
LENGTH OF TIME
CHARGE FROM PREMIUM PAYMENT
------ --------------------
(NUMBER OF YEARS)
<S> <C>
6% 1
6% 2
5% 3
5% 4
4% 5
3% 6
2% 7
0% 8 or more
</TABLE>
The contingent deferred sales charges are used to cover expenses relating to
the sale and distribution of the Contracts, including commissions paid to any
distribution organization and its sales personnel, the cost of
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preparing sales literature and other promotional activities. To the extent that
these charges do not cover such distribution expenses, the expenses will be
borne by Hartford Life from its general assets, including surplus. The surplus
might include profits resulting from unused mortality and expense risk charges.
During the first seven Contract Years, on a non-cumulative basis, a Contract
Owner may make a partial surrender of Contract Values of up to 10% of the
aggregate Premium Payments made to the contract (as determined on the date of
the requested withdrawal) without the application of the contingent deferred
sales charge. After the seventh Contract year, the Contract Owner may make a
partial surrender of 10% of premium payments made during the seven years prior
to the surrender and 100% of the Contract Value less the premium payments made
during the seven years prior to the surrender. The amounts not subject to sales
charges are known as the Annual Withdrawal Amount. The Annual Withdrawal Amount
is the amount which can be withdrawn in any Contract Year prior to incurring
surrender charges. An Extended Withdrawal Privilege rider allows an Annuitant
who attains age 70 1/2 under a Qualified Plan to withdraw an amount in excess of
the Annual Withdrawal Amount to comply with IRS minimum distribution rules.
The contingent deferred sales charges which cover expenses relating to the
sale and distribution of the Contracts may be reduced for certain sales of the
Contracts under circumstances which may result in savings of such sales and
distribution expenses. Therefore, the contingent deferred sales charges may be
reduced if the Contracts are sold to certain employee and professional groups.
In addition, there may be other circumstances of which Hartford Life is not
presently aware which could result in reduced sales or distribution expenses.
Reductions in these charges will not be unfairly discriminatory against any
Contract Owner.
Hartford Life may offer certain employer sponsored savings plans, in its
discretion reduced fees and charges including, but not limited to, the
contingent deferred sales charges, the mortality and expense risk charge and the
maintenance fee for certain sales under circumstances which may result in
savings of certain costs and expenses. Reductions in these fees and charges will
not be unfairly discriminatory against any Contract Owner.
MORTALITY AND EXPENSE RISK CHARGE
Although Variable Annuity payments made under the Contracts will vary in
accordance with the investment performance of the underlying Portfolio shares
held in the Sub-Account(s), the payments will not be affected by (a) Hartford
Life's actual mortality experience among Annuitants before or after the Annuity
Commencement Date or (b) Hartford Life's actual expenses, if greater than the
deductions provided for in the Contracts because of the expense and mortality
undertakings by Hartford Life.
For assuming these risks under the Contracts, Hartford Life will make a
daily charge at the rate of 1.25% per annum against all Contract Values held in
the Sub-Accounts during the life of the Contract, including the payout period,
(estimated at .90% for mortality and .35% for expense).
The mortality undertaking provided by Hartford Life under the Contracts,
assuming the selection of one of the forms of life Annuities, is to make monthly
Annuity payments (determined in accordance with the 1983(a) Individual Annuity
Mortality Table and other provisions contained in the Contract) to Annuitants
regardless of how long an Annuitant may live, and regardless of how long all
Annuitants as a group may live. Hartford Life also assumes the liability for
payment of a minimum Death Benefit under the Contract.
The mortality undertakings are based on Hartford Life's determination of
expected mortality rates among all Annuitants. If actual experience among
Annuitants during the Annuity payment period deviates from Hartford Life
actuarial determination of expected mortality rates among Annuitants because, as
a group, their longevity is longer than anticipated, Hartford Life must provide
amounts from its general Portfolios to fulfill its Contract obligations.
Hartford Life will bear the loss in such a situation. Also, in the event of the
death of an Annuitant or Contract Owner before the commencement of Annuity
payments, whichever is earlier, Hartford Life can, in periods of declining
value, experience a loss resulting from the assumption of the mortality risk
relative to the minimum Death Benefit.
In providing an expense undertaking, Hartford Life assumes the risk that the
contingent deferred sales charges and the Administration and Maintenance Fees
for maintaining the Contracts prior to the Annuity Commencement Date may be
insufficient to cover the actual cost of providing such items.
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<PAGE>
ADMINISTRATION AND MAINTENANCE FEES
Hartford Life will deduct certain fees from Contract Values to reimburse it
for expenses relating to the administration and maintenance of the Contract and
the Fixed Account. For Contract maintenance, Hartford Life will deduct an annual
fee of $30 on each Contract Anniversary on or before the Annuity Commencement
Date. The deduction will be made pro rata according to the value in each
Sub-Account and the Fixed Account under a Contract. If during a Contract Year
the Contract is surrendered for its full value, Hartford Life will deduct the
Contract Maintenance Fee at the time of such surrender. For administration,
Hartford Life makes a daily charge at the rate of .15% per annum against all
Contract Values held in the Separate Account during both the accumulation and
annuity phases of the Contract. There is not necessarily a relationship between
the amount of administrative charge imposed on a given Contract and the amount
of expenses that may be attributable to that Contract; expenses may be more or
less than the charge.
The types of expenses incurred by the Separate Account include, but are not
limited to, expenses of issuing the Contract and expenses for confirmations,
Contract quarterly statements, processing of transfers and surrenders,
responding to Contract Owner inquiries, reconciling and depositing cash
receipts, calculation and monitoring daily Sub-Account unit values, Separate
Account reporting, including semiannual and annual reports and mailing and
tabulation of shareholder proxy solicitations.
You should refer to the Fund Prospectus for a description of deductions and
expenses paid out of the assets of the Portfolios.
PREMIUM TAXES
A deduction is also made for Premium Tax, if applicable, imposed by a state
or other governmental entity. Certain states impose a Premium Tax, currently
ranging up to 3.5%. Some states assess the tax at the time purchase payments are
made; others assess the tax at the time of annuitization. Hartford Life will pay
Premium Taxes at the time imposed under applicable law. At its sole discretion,
Hartford Life may deduct Premium Taxes at the time Hartford Life pays such taxes
to the applicable taxing authorities, at the time the Contract is surrendered,
or at the time the Contract annuitizes.
ANNUITY BENEFITS
You select an Annuity Commencement Date and an Annuity option which may be
on a fixed or variable basis, or a combination thereof. The Annuity Commencement
Date will not be deferred beyond the Annuitant's 90th birthday except for
certain states where deferral past age 85 is not permitted. The Annuity
Commencement Date and/or the Annuity option may be changed from time to time,
but any change must be at least 30 days prior to the date on which Annuity
payments are scheduled to begin. The contract allows the Contract Owner to
change the Sub-Accounts on which variable payments are based after payments have
commenced once every three (3) months. Any Fixed Annuity allocation may not be
changed.
ANNUITY OPTIONS
The Contract contains the five optional Annuity forms described below.
Options 2, 4 and 5 are available to Qualified Contracts only if the guaranteed
payment period is less than the life expectancy of the Annuitant at the time the
option becomes effective. Such life expectancy shall be computed on the basis of
the mortality table prescribed by the IRS, or if none is prescribed, the
mortality table then in use by the Hartford Life. With respect to Non-Qualified
Contracts, if you do not elect otherwise, payments in most states will
automatically begin at the Annuitant's age 90 (with the exception of states that
do not allow deferral past age 85) under Option 2 with 120 monthly payments
certain. For Qualified Contracts and contracts issued in Texas, if you do not
elect otherwise, payments will begin automatically at the Annuitant's age 90
under Option 1 to provide a life Annuity.
Under any of the Annuity options excluding Options 4 and 5, no surrenders
are permitted after Annuity payments commence. Only full surrenders are allowed
out of Option 4 and any such surrender will be subject to contingent deferred
sales charges, if applicable. Full or partial withdrawals may be made from
Option 5 at any time and contingent deferred sales charges will not be applied.
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OPTION 1: LIFE ANNUITY
A life Annuity is an Annuity payable during the lifetime of the Annuitant
and terminating with the last payment preceding the death of the Annuitant. This
option offers the largest payment amount of any of the life Annuity options
since there is no guarantee of a minimum number of payments nor a provision for
a death benefit payable to a Beneficiary.
It would be possible under this option for an Annuitant to receive only one
Annuity payment if he died prior to the due date of the second Annuity payment,
two if he died before the date of the third Annuity payment, etc.
OPTION 2: LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS CERTAIN
This Annuity option is an Annuity payable monthly during the lifetime of an
Annuitant with the provision that payments will be made for a minimum of 120,
180 or 240 months, as elected. If, at the death of the Annuitant, payments have
been made for less than the minimum elected number of months, then the present
value as of the date of the Annuitant's death, of any remaining guaranteed
payments will be paid in one sum to the Beneficiary or Beneficiaries designated
unless other provisions have been made and approved by the company.
OPTION 3: JOINT AND LAST SURVIVOR ANNUITY
An Annuity payable monthly during the joint lifetime of the Annuitant and a
designated second person, and thereafter during the remaining lifetime of the
survivor, ceasing with the last payment prior to the death of the survivor.
Based on the options currently offered by Hartford Life, the Annuitant may elect
that the payment to the survivor be less than the payment made during the joint
lifetime of the Annuitant and a designated second person.
It would be possible under this option for an Annuitant and designated
second person to receive only one payment in the event of the common or
simultaneous death of the parties prior to the due date for the second payment
and so on.
OPTION 4: PAYMENTS FOR A DESIGNATED PERIOD
An amount payable monthly for the number of years selected which may be from
5 to 30 years. Under this option, you may, at any time, surrender the contract
and receive, within seven days, the Termination Value of the Contract as
determined by Hartford Life.
In the event of the Annuitant's death prior to the end of the designated
period, the present value as of the date of the Annuitant's death, of any
remaining guaranteed payments will be paid in one sum to the Beneficiary or
Beneficiaries designated unless other provisions have been made and approved by
the Company.
Option 4 is an option that does not involve life contingencies and thus no
mortality guarantee. Charges made for the mortality undertaking under the
contracts thus provide no real benefit to a Contract Owner.
OPTION 5: DEATH BENEFIT REMAINING WITH HARTFORD LIFE
Proceeds from the Death Benefit may be left with Hartford Life for a period
not to exceed five years from the date of the Contract Owner's death prior to
the Annuity Commencement Date. These proceeds will remain in the Sub-Account(s)
to which they were allocated at the time of death unless the Beneficiary elects
to reallocate them. Full or partial withdrawals may be made at any time. In the
event of withdrawals, the remaining value will equal the Contract Value of the
proceeds left with Hartford Life, minus any withdrawals.
Hartford Life may offer other annuity options from time to time.
THE ANNUITY UNIT AND VALUATION
The value of the Annuity Unit for each Sub-Account in the Separate Account
for any day is determined by multiplying the value for the preceding day by the
product of (1) the net investment factor (see "Valuation of Accumulation Units,"
commencing on page 15) for the day for which the Annuity Unit value is being
calculated and (2) a factor to neutralize the assumed investment rate of 5.00%
per annum discussed below.
DETERMINATION OF PAYMENT AMOUNT
When Annuity payments are to commence, the value of the Contract is
determined as the sum of the value of the Fixed Account no earlier than the
close of business on the fifth Valuation Day preceding the date
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<PAGE>
the first Annuity payment is due plus the product of the value of the
Accumulation Unit of each Sub-Account on that same day, and the number of
Accumulation Units credited to each Sub-Account as of the date the Annuity is to
commence.
The Contract contains tables indicating the minimum dollar amount of the
first monthly payment under the optional forms of Annuity for each $1,000 of
value of a Sub-Account under a Contract. The first monthly payment varies
according to the form and type of Annuity selected. The Contract contains
Annuity tables derived from the 1983a Individual Annuity Mortality Table with
ages set back one year and with an assumed investment rate ("A.I.R.") of 3% per
annum for the Fixed Annuity and 5% per annum for the Variable Annuity.
The total first monthly Variable Annuity payment is determined by
multiplying the value (expressed in thousands of dollars) of a Sub-Account (less
any applicable Premium Taxes) by the amount of the first monthly payment per
$1,000 of value obtained from the tables in the Contracts.
Fixed Annuity payments are determined at annuitization by multiplying the
values allocated to the Fixed Account (less applicable Premium Taxes) by a rate
to be determined by Hartford Life which is no less than the rate specified in
the Annuity tables in the Contract. The Annuity payment will remain level for
the duration of the Annuity.
The amount of the first monthly Variable Annuity payment, determined as
described above, is divided by the value of an Annuity Unit for the appropriate
Sub-Account no earlier than the close of business on the fifth Valuation Day
preceding the day on which the payment is due in order to determine the number
of Annuity Units represented by the first payment. This number of Annuity Units
remains fixed during the Annuity payment period, and in each subsequent month
the dollar amount of the Variable Annuity payment is determined by multiplying
this fixed number of Annuity Units by the then current Annuity Unit value.
THE A.I.R. ASSUMED IN THE MORTALITY TABLES WOULD PRODUCE LEVEL VARIABLE
ANNUITY PAYMENTS IF THE INVESTMENT RATE REMAINED CONSTANT. IN FACT, PAYMENTS
WILL VARY UP OR DOWN AS THE INVESTMENT RATE VARIES UP OR DOWN FROM THE A.I.R.
The Annuity Unit value used in calculating the amount of the Variable
Annuity payments will be based on an Annuity Unit value determined as of the
close of business on a day no earlier than the fifth Valuation Day preceding the
date of the Annuity payment.
FEDERAL TAX CONSIDERATIONS
WHAT ARE SOME OF THE FEDERAL TAX CONSEQUENCES WHICH AFFECT THESE CONTRACTS?
A. GENERAL
SINCE THE TAX LAW IS COMPLEX AND SINCE TAX CONSEQUENCES WILL VARY ACCORDING
TO THE ACTUAL STATUS OF THE CONTRACT OWNER INVOLVED AND THE TYPE OF PLAN UNDER
WHICH THE CONTRACT IS PURCHASED, LEGAL AND TAX ADVICE MAY BE NEEDED BY A PERSON,
TRUSTEE OR OTHER ENTITY CONTEMPLATING THE PURCHASE OF A CONTRACT DESCRIBED
HEREIN.
It should be understood that any detailed description of the Federal income
tax consequences regarding the purchase of these Contracts cannot be made in
this Prospectus and that special tax rules may be applicable with respect to
certain purchase situations not discussed herein. In addition, no attempt is
made here to consider any applicable state or other tax laws. For detailed
information, a qualified tax adviser should always be consulted. The discussion
here and in Appendix I, commencing on page 29, is based on Hartford Life's
understanding of current Federal income tax laws as they are currently
interpreted.
B. TAXATION OF HARTFORD LIFE AND THE SEPARATE ACCOUNT
The Separate Account is taxed as part of Hartford Life which is taxed as a
life insurance company in accordance with the Internal Revenue Code (the
"Code"). Accordingly, the Separate Account will not be taxed as a "regulated
investment company" under subchapter M of Chapter 1 of the Code. Investment
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income and any realized capital gains on the assets of the Separate Account are
reinvested and are taken into account in determining the value of the
Accumulation and Annuity Units (see "Value of Accumulation Units" commencing on
page 15). As a result, such investment income and realized capital gains are
automatically applied to increase reserves under the Contract.
No taxes are due on interest, dividends and short-term or long-term capital
gains earned by the Separate Account with respect to Qualified or Non-Qualified
Contracts.
C. TAXATION OF ANNUITIES -- GENERAL PROVISIONS AFFECTING PURCHASERS OTHER THAN
QUALIFIED RETIREMENT PLANS
Section 72 of the Internal Revenue Code governs the taxation of annuities in
general.
1. NON-NATURAL PERSONS, CORPORATIONS, ETC. Section 72 contains provisions
for Contract Owners which are non-natural persons. Non-natural persons
include corporations, trusts, and partnerships. The annual net increase
in the value of the Contract is currently includable in the gross income
of a non-natural person unless the non-natural person holds the Contract
as an agent for a natural person. There is an exception from current
inclusion for certain annuities held by structured settlement companies,
certain annuities held by an employer with respect to a terminated
qualified retirement plan and certain immediate annuities. A non-natural
person which is a tax-exempt entity for Federal tax purposes will not be
subject to income tax as a result of this provision.
If the Contract Owner is not an individual, the primary Annuitant shall
be treated as the Contract Owner for purposes of making distributions
which are required to be made upon the death of the Contract Owner. If
there is a change in the primary Annuitant, such change shall be treated
as the death of the Contract Owner.
2. OTHER CONTRACT OWNERS (NATURAL PERSONS). A Contract Owner is not taxed
on increases in the value of the Contract until an amount is received or
deemed received, e.g., in the form of a lump sum payment (full or
partial value of a Contract) or as Annuity payments under the settlement
option elected.
The provisions of Section 72 of the Code concerning distributions are
summarized briefly below. Also summarized are special rules affecting
distributions from Contracts obtained in a tax-free exchange for other
annuity contracts or life insurance contracts which were purchased prior
to August 14, 1982.
a. DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
i. Total premium payments less amounts received which were not
includable in gross income equal the "investment in the contract"
under Section 72 of the Code.
ii. To the extent that the value of the Contract (ignoring any
surrender charges except on a full surrender) exceeds the
"investment in the contract," such excess constitutes the
"income on the contract."
iii. Any amount received or deemed received prior to the Annuity
Commencement Date (e.g., upon a partial surrender) is deemed to
come first from any such "income on the contract" and then from
"investment in the contract," and for these purposes such
"income on the contract" shall be computed by reference to any
aggregation rule in subparagraph 2.c. below. As a result, any
such amount received or deemed received (1) shall be includable
in gross income to the extent that such amount does not exceed
any such "income on the contract," and (2) shall not be
includable in gross income to the extent that such amount does
exceed any such "income on the contract." If at the time that
any amount is received or deemed received there is no "income on
the contract" (e.g., because the gross value of the Contract
does not exceed the "investment in the contract" and no
aggregation rule applies), then such amount received or deemed
received will not be includable in gross income, and will simply
reduce the "investment in the contract."
iv. The receipt of any amount as a loan under the Contract or the
assignment or pledge of any portion of the value of the Contract
shall be treated as an amount received for purposes of this
subparagraph a. and the next subparagraph b.
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v. In general, the transfer of the Contract, without full and
adequate consideration, will be treated as an amount received for
purposes of this subparagraph a. and the next subparagraph b.
This transfer rule does not apply, however, to certain transfers
of property between spouses or incident to divorce.
b. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE. Annuity payments made
periodically after the Annuity Commencement Date are includable in
gross income to the extent the payments exceed the amount determined
by the application of the ratio of the "investment in the contract"
to the total amount of the payments to be made after the Annuity
Commencement Date (the "exclusion ratio").
i. When the total of amounts excluded from income by application of
the exclusion ratio is equal to the investment in the contract as
of the Annuity Commencement Date, any additional payments
(including surrenders) will be entirely includable in gross
income.
ii. If the annuity payments cease by reason of the death of the
Annuitant and, as of the date of death, the amount of annuity
payments excluded from gross income by the exclusion ratio does
not exceed the investment in the contract as of the Annuity
Commencement Date, then the remaining portion of unrecovered
investment shall be allowed as a deduction for the last taxable
year of the Annuitant.
iii. Generally, nonperiodic amounts received or deemed received after
the Annuity Commencement Date are not entitled to any exclusion
ratio and shall be fully includable in gross income. However,
upon a full surrender after such date, only the excess of the
amount received (after any surrender charge) over the remaining
"investment in the contract" shall be includable in gross income
(except to the extent that the aggregation rule referred to in
the next subparagraph c. may apply).
c. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS. Contracts issued after
October 21, 1988 by the same insurer (or affiliated insurer) to the
same Contract Owner within the same calendar year (other than certain
contracts held in connection with a tax-qualified retirement
arrangement) will be treated as one annuity Contract for the purpose
of determining the taxation of distributions prior to the Annuity
Commencement Date. An annuity contract received in a tax-free
exchange for another annuity contract or life insurance contract may
be treated as a new Contract for this purpose. Hartford Life believes
that for any annuity subject to such aggregation, the values under
the Contracts and the investment in the contracts will be added
together to determine the taxation under subparagraph 2.a., above, of
amounts received or deemed received prior to the Annuity Commencement
Date. Withdrawals will first be treated as withdrawals of income
until all of the income from all such Contracts is withdrawn. As of
the date of this Prospectus, there are no regulations interpreting
this provision.
d. 10% PENALTY TAX -- APPLICABLE TO CERTAIN WITHDRAWALS AND ANNUITY
PAYMENTS.
i. If any amount is received or deemed received on the Contract
(before or after the Annuity Commencement Date), the Code applies
a penalty tax equal to ten percent of the portion of the amount
includable in gross income, unless an exception applies.
ii. The 10% penalty tax will not apply to the following
distributions (exceptions vary based upon the precise plan
involved):
1. Distributions made on or after the date the recipient has
attained the age of 59 1/2.
2. Distributions made on or after the death of the holder or
where the holder is not an individual, the death of the
primary annuitant.
3. Distributions attributable to a recipient's becoming disabled.
4. A distribution that is part of a scheduled series of
substantially equal periodic payments for the life (or life
expectancy) of the recipient (or the joint lives or life
expectancies of the recipient and the recipient's
Beneficiary).
5. Distributions of amounts which are allocable to the
"investment in the contract" prior to August 14, 1982 (see
next subparagraph e.).
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e. SPECIAL PROVISIONS AFFECTING CONTRACTS OBTAINED THROUGH A TAX-FREE
EXCHANGE OF OTHER ANNUITY OR LIFE INSURANCE CONTRACTS PURCHASED PRIOR
TO AUGUST 14, 1982. If the Contract was obtained by a tax-free
exchange of a life insurance or annuity Contract purchased prior to
August 14, 1982, then any amount received or deemed received prior to
the Annuity Commencement Date shall be deemed to come (1) first from
the amount of the "investment in the contract" prior to August 14,
1982 ("pre-8/14/82 investment") carried over from the prior Contract,
(2) then from the portion of the "income on the contract" (carried
over to, as well as accumulating in, the successor Contract) that is
attributable to such pre-8/14/82 investment, (3) then from the
remaining "income on the contract" and (4) last from the remaining
"investment in the contract." As a result, to the extent that such
amount received or deemed received does not exceed such pre-8/14/82
investment, such amount is not includable in gross income., In
addition, to the extent that such amount received or deemed received
does not exceed the sum of (a) such pre-8/14/82 investment and (b)
the "income on the contract" attributable thereto, such amount is not
subject to the 10% penalty tax. In all other respects, amounts
received or deemed received from such post-exchange Contracts are
generally subject to the rules described in this subparagraph 3.
f. REQUIRED DISTRIBUTIONS
i. Death of Contract Owner or Primary Annuitant
Subject to the alternative election or spouse beneficiary
provisions in ii or iii below:
1. If any Contract Owner dies on or after the Annuity
Commencement Date and before the entire interest in the
Contract has been distributed, the remaining portion of such
interest shall be distributed at least as rapidly as under the
method of distribution being used as of the date of such
death;
2. If any Contract Owner dies before the Annuity Commencement
Date, the entire interest in the Contract will be distributed
within 5 years after such death; and
3. If the Contract Owner is not an individual, then for purposes
of 1. or 2. above, the primary annuitant under the Contract
shall be treated as the Contract Owner, and any change in the
primary annuitant shall be treated as the death of the
Contract Owner. The primary annuitant is the individual, the
events in the life of whom are of primary importance in
affecting the timing or amount of the payout under the
Contract.
ii. Alternative Election to Satisfy Distribution Requirements
If any portion of the interest of a Contract Owner described in
i. above is payable to or for the benefit of a designated
beneficiary, such beneficiary may elect to have the portion
distributed over a period that does not extend beyond the life
or life expectancy of the beneficiary. The election and payments
must begin within a year of the death.
iii. Spouse Beneficiary
If any portion of the interest of a Contract Owner is payable to
or for the benefit of his or her spouse, and the Annuitant or
Contingent Annuitant is living, such spouse shall be treated as
the Contract Owner of such portion for purposes of section i.
above.
3. DIVERSIFICATION REQUIREMENTS. Section 817 of the Code provides that a
variable annuity contract will not be treated as an annuity contract for
any period during which the investments made by the separate account or
underlying fund are not adequately diversified in accordance with
regulations prescribed by the Treasury Department. If a Contract is not
treated as an annuity contract, the Contract Owner will be subject to
income tax on the annual increases in cash value.
The Treasury Department has issued diversification regulations which
generally require, among other things, that no more than 55% of the
value of the total assets of the segregated asset account underlying a
variable contract is represented by any one investment, no more than 70%
is represented by any two investments, no more than 80% is represented
by any three investments, and no more than 90% is represented by any
four investments. In determining whether the diversification standards
are met, all securities of the same issuer, all interests in the same
real property project, and all interests in the same commodity are each
treated as a single investment. In addition, in the case of government
securities, each government agency or instrumentality shall be treated
as a separate issuer.
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A separate account must be in compliance with the diversification
standards on the last day of each calendar quarter or within 30 days
after the quarter ends. If an insurance company inadvertently fails to
meet the diversification requirements, the company may comply within a
reasonable period and avoid the taxation of contract income on an
ongoing basis. However, either the company or the Contract Owner must
agree to pay the tax due for the period during which the diversification
requirements were not met.
Hartford Life monitors the diversification of investments in the
separate accounts and tests for diversification as required by the Code.
Hartford Life intends to administer all contracts subject to the
diversification requirements in a manner that will maintain adequate
diversification.
4. OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT. In order for a variable
annuity contract to qualify for tax deferral, assets in the segregated
asset accounts supporting the variable contract must be considered to be
owned by the insurance company and not by the variable contract owner.
The Internal Revenue Service ("IRS") has issued several rulings which
discuss investor control. The IRS has ruled that incidents of ownership
by the contract owner, such as the ability to select and control
investments in a separate account, will cause the contract owner to be
treated as the owner of the assets for tax purposes.
Further, in the explanation to the temporary Section 817 diversification
regulations, the Treasury Department noted that the temporary
regulations "do not provide guidance concerning the circumstances in
which investor control of the investments of a segregated asset account
may cause the investor, rather than the insurance company, to be treated
as the owner of the assets in the account." The explanation further
indicates that "the temporary regulations provide that in appropriate
cases a segregated asset account may include multiple sub-accounts, but
do not specify the extent to which policyholders may direct their
investments to particular sub-accounts without being treated as the
owners of the underlying assets. Guidance on this and other issues will
be provided in regulations or revenue rulings under Section 817(d),
relating to the definition of variable contract." The final regulations
issued under Section 817 did not provide guidance regarding investor
control, and as of the date of this prospectus, no other such guidance
has been issued. Further, Hartford Life does not know if or in what form
such guidance will be issued. In addition, although regulations are
generally issued with prospective effect, it is possible that
regulations may be issued with retroactive effect. Due to the lack of
specific guidance regarding the issue of investor control, there is
necessarily some uncertainty regarding whether a Contract Owner could be
considered the owner of the assets for tax purposes. Hartford Life
reserves the right to modify the contracts, as necessary, to prevent
Contract Owners from being considered the owners of the assets in the
separate accounts.
D. FEDERAL INCOME TAX WITHHOLDING
The portion of a distribution which is taxable income to the recipient will
be subject to Federal income tax withholding, pursuant to Section 3405 of the
Code. The application of this provision is summarized below:
1. NON-PERIODIC DISTRIBUTIONS. The portion of a non-periodic distribution
which constitutes taxable income will be subject to Federal income tax
withholding unless the recipient elects not to have taxes withheld. If
an election not to have taxes withheld is not provided, 10% of the
taxable distribution will be withheld as Federal income tax. Election
forms will be provided at the time distributions are requested. If the
necessary election forms are not submitted to Hartford Life, Hartford
Life will automatically withhold 10% of the taxable distribution.
2. PERIODIC DISTRIBUTIONS (DISTRIBUTIONS PAYABLE OVER A PERIOD GREATER THAN
ONE YEAR). The portion of a periodic distribution which constitutes
taxable income will be subject to Federal income tax withholding as if
the recipient were married claiming three exemptions. A recipient may
elect not to have income taxes withheld or have income taxes withheld at
a different rate by providing a completed election form. Election forms
will be provided at the time distributions are requested.
E. GENERAL PROVISIONS AFFECTING QUALIFIED RETIREMENT PLANS
The Contract may be used for a number of qualified retirement plans. If the
Contract is being purchased with respect to some form of qualified retirement
plan, please refer to Appendix I commencing on page for information relative
to the types of plans for which it may be used and the general explanation of
the tax features of such plans.
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F. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal
income tax consequences to annuity purchasers that are U.S. citizens or
residents. Purchasers that are not U.S. citizens or residents will generally be
subject to U.S. federal income tax and withholding on annuity distributions at a
30% rate, unless a lower treaty rate applies. In addition, purchasers may be
subject to state premium tax, other state and/or municipal taxes, and taxes that
may be imposed by the purchaser's country of citizenship or residence.
Prospective purchasers are advised to consult with a qualified tax advisor
regarding U.S., state, and foreign taxation with respect to an annuity purchase.
GENERAL MATTERS
ASSIGNMENT
Ownership of a Contract described herein is generally assignable. However,
if the Contracts are issued pursuant to some form of Qualified Plan, it is
possible that the ownership of the Contracts may not be transferred or assigned
depending on the type of qualified retirement plan involved. An assignment of a
Non-Qualified Contract may subject the assignment proceeds to income taxes and
certain penalty taxes. (See "Taxation of Annuities in General -- Non-Tax
Qualified Purchasers," page 23.)
MODIFICATION
Hartford Life reserves the right to modify the Contract, but only if such
modification: (i) is necessary to make the Contract or the Separate Account
comply with any law or regulation issued by a governmental agency to which
Hartford Life is subject; or (ii) is necessary to assure continued qualification
of the Contract under the Code or other federal or state laws relating to
retirement annuities or annuity Contracts; or (iii) is necessary to reflect a
change in the operation of the Separate Account or the Sub-Account(s) or (iv)
provides additional Separate Account options or (v) withdraws Separate Account
options. In the event of any such modification Hartford Life will provide notice
to the Contract Owner or to the payee(s) during the Annuity period. Hartford
Life may also make appropriate endorsement in the Contract to reflect such
modification.
DELAY OF PAYMENTS
There may be postponement of a surrender payment or death benefit whenever
(a) the New York Stock Exchange is closed, except for holidays or weekends, or
trading on the New York Stock Exchange is restricted as determined by the
Commission; (b) the Commission permits postponement and so orders; or (c) the
Commission determines that an emergency exists making valuation or disposal of
securities not reasonably practicable.
VOTING RIGHTS
Hartford Life is the legal owner of all Fund shares held in the Separate
Account. As the owner, Hartford Life has the right to vote at the Funds'
shareholder meetings. However, to the extent required by federal securities laws
or regulations, Hartford Life will:
1. Vote all Fund shares attributable to a Contract according to
instructions received from the Contract Owner, and
2. Vote shares attributable to a Contract for which no voting
instructions are received in the same proportion as shares for which
instructions are received.
If any federal securities laws or regulations, or their present
interpretation change to permit Hartford Life to vote Fund shares in its own
right, Hartford Life may elect to do so.
Hartford Life will notify you of any Portfolio shareholders' meeting if the
shares held for your account may be voted at such meetings. Hartford Life will
also send proxy materials and a form of instruction by means of which you can
instruct Hartford Life with respect to the voting of the Portfolio shares held
for your account.
In connection with the voting of Portfolio shares held by it, Hartford Life
will arrange for the handling and tallying of voting instructions received from
Contract Owners. Hartford Life as such, shall have no right, except as
hereinafter provided, to vote any Fund shares held by it hereunder which may be
registered in its name or
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the names of its nominees. Hartford Life will, however, vote the Portfolio
shares held by it in accordance with the instructions received from the Contract
Owners for whose accounts the Fund shares are held. If a Contract Owner desires
to attend any meeting at which shares held for the Contract Owner's benefit may
be voted, the Contract Owner may request Hartford Life to furnish a proxy or
otherwise arrange for the exercise of voting rights with respect to the
Portfolio shares held for such Contract Owner's account. In the event that the
Contract Owner gives no instructions or leaves the manner of voting
discretionary, Hartford Life will vote such shares of the appropriate Portfolio
in the same proportion as shares of that Portfolio for which instructions have
been received. During the Annuity period under a Contract the number of votes
will decrease as the assets held to Portfolio Annuity benefits decrease.
DISTRIBUTION OF THE CONTRACTS
The securities will be sold by insurance and variable annuity agents of
Hartford Life who are registered representatives of Dean Witter Reynold Inc.
("Dean Witter"). Dean Witter is registered with the Commission under the
Securities Exchange Act of 1934 as a Broker-Dealer and is a members of the
National Association of Securities Dealers, Inc.
Commissions will be paid by Hartford Life and will not be more than 6% of
Premium Payments.
From time to time, Hartford Life may pay or permit other promotional
incentives, in cash or credit or other compensation.
OTHER CONTRACTS OFFERED
In addition to the Contracts described in this Prospectus, it is
contemplated that other forms of group or individual Variable Annuities may be
sold providing benefits which vary in accordance with the investment experience
of the Separate Account.
CUSTODIAN OF SEPARATE ACCOUNT ASSETS
The assets of the Separate Account are held by Hartford Life under a
safekeeping arrangement.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or
to which the assets of the Separate Account are subject. Hartford Life and Dean
Witter Select Dimensions are engaged in various matters of routine litigation
which in their judgments are not of material importance in relation to their
respective total assets.
LEGAL COUNSEL
Counsel with respect to Federal laws and regulations applicable to the issue
and sale of the Contracts and with respect to Connecticut law is Lynda Godkin,
Esquire, Associate General Counsel and Secretary, ITT Hartford Life Insurance
Companies, P.O. Box 2999, Hartford, Connecticut 06104-2999.
EXPERTS
The financial statements and schedules incorporated by reference in this
Prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports. Reference is made to said report of Hartford Life Insurance Company
(the depositor), which includes an explanatory paragraph with respect to the
adoption of new accounting standards changing the methods of accounting for debt
and equity securities. The principal business address of Arthur Andersen LLP is
One Financial Plaza, Hartford, Connecticut 06103.
ADDITIONAL INFORMATION
Inquiries will be answered by calling your representative or by writing:
Hartford Life Insurance Company
Attn: Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
Telephone: (800) 862-6668
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APPENDIX I
INFORMATION REGARDING TAX-QUALIFIED PLANS
The tax rules applicable to tax qualified contract owners, including
restrictions on contributions and distributions, taxation of distributions and
tax penalties, vary according to the type of plan as well as the terms and
conditions of the plan itself. Various tax penalties may apply to contributions
in excess of specified limits, to distributions in excess of specified limits,
distributions which do not satisfy certain requirements and certain other
transactions with respect to qualified plans. Accordingly, this summary provides
only general information about the tax rules associated with use of the Contract
by a qualified plan. Contract owners, plan participants and beneficiaries are
cautioned that the rights and benefits of any person to benefits are controlled
by the terms and conditions of the plan regardless of the terms and conditions
of the Contract. Some qualified plans are subject to distribution and other
requirements which are not incorporated into Hartford Life's administrative
procedures. Owners, participants and beneficiaries are responsible for
determining that contributions, distributions and other transactions comply with
applicable law. Because of the complexity of these rules, owners, participants
and beneficiaries are encouraged to consult their own tax advisors as to
specific tax consequences.
A. QUALIFIED PENSION PLANS
Provisions of the Code permit eligible employers to establish pension or
profit sharing plans (described in Section 401(a) and 401(k), if applicable, and
exempt from taxation under Section 501(a) of the Code), and Simplified Employee
Pension Plans (described in Section 408(k)). Such plans are subject to
limitations on the amount that may be contributed, the persons who may be
eligible and the time when distributions must commence. Corporate employers
intending to use these contracts in connection with such plans should seek
competent advice.
B. TAX SHELTERED ANNUITIES UNDER SECTION 403(B)
Section 403(b) of the Code permits public school employees and employees of
certain types of charitable, educational and scientific organizations specified
in Section 501(c)(3) of the Code to purchase annuity contracts, and, subject to
certain limitations, exclude such contributions from gross income. Generally,
such contributions may not exceed the lesser of $9,500 or 20% of the employees
"includable compensation" for his most recent full year of employment, subject
to other adjustments. Special provisions may allow some employees to elect a
different overall limitation.
Tax-sheltered annuity programs under Section 403(b) are subject to a
PROHIBITION AGAINST DISTRIBUTIONS FROM THE CONTRACT ATTRIBUTABLE TO
CONTRIBUTIONS MADE PURSUANT TO A SALARY REDUCTION AGREEMENT unless such
distribution is made:
(1) after the participating employee attains age 59 1/2;
(2) upon separation from service;
(3) upon death or disability, or
(4) in the case of hardship.
The above restrictions apply to distributions of employee contributions made
after December 31, 1988, earnings on those contributions, and earnings on
amounts attributable to employee contributions held as of December 31, 1988.
They do not apply to distributions of any employer or other after-tax
contributions, employee contributions made on or before December 31, 1988, and
earnings credited to employee contributions before December 31, 1988.
C. DEFERRED COMPENSATION PLANS UNDER SECTION 457
Employees and independent contractors performing services for such employers
may contribute on a before tax basis to the Deferred Compensation Plan of their
employer in accordance with the employer's plan and Section 457 of the Code.
Section 457 places limitations on contributions to Deferred Compensation Plans
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maintained by a State ("State" means a State, a political sub-division of a
State, and an agency or instrumentality of a State or political sub-division of
a State) or other tax-exempt organization. Generally, the limitation is 33 1/3%
of includable compensation (25% of gross compensation) or $7,500, whichever is
less. The plan may also provide for additional "catch-up" deferrals during the
three taxable years ending before a Participant attains normal retirement age.
An employee electing to participate in a plan should understand that his
rights and benefits are governed strictly by the terms of the plan, that the
employer is legal owner of any contract issued with respect to the plan and that
deferred amounts will be subject to the claims of the employer's creditors. The
employer as owner of the contract(s) retains all voting and redemption rights
which may accrue to the contract(s) issued with respect to the plan. The
participating employee should look to the terms of his plan for any charges in
regard to participating therein other than those disclosed in this Prospectus.
Distributions from a Section 457 Deferred Compensation Plan are prohibited
unless made after the participating employee attains the age specified in the
plan, separates from service, dies, becomes permanently and totally disabled or
suffers an unforeseeable financial emergency. Present federal tax law does not
allow tax-free transfers or rollovers for amounts accumulated in a Section 457
plan except for transfers to other Section 457 plans in limited cases.
D. INDIVIDUAL RETIREMENT ANNUITIES UNDER SECTION 408
Section 408 of the Code permits eligible individuals to establish individual
retirement programs through the purchase of Individual Retirement Annuities
("IRAs"). IRAs are subject to limitations on the amount that may be contributed,
the contributions that may be deducted from taxable income, the persons who may
be eligible and the time when distributions may commence. Also, distributions
from certain qualified plans may be "rolled-over" on a tax-deferred basis into
an IRA.
E. TAX PENALTIES
Distributions from retirement plans are generally taxed under Section 72 of
the Code. Under these rules, a portion of each distribution may be excludable
from income. The excludable amount is the portion of the distribution which
bears the same ratio as the after-tax contributions bear to the expected return.
1. PREMATURE DISTRIBUTION
Distributions from a qualified plan before the Participant attains age
59 1/2 are generally subject to an additional tax equal to 10% of the taxable
portion of the distribution. The 10% penalty does not apply to distributions
made after the employee's death, on account of disability and distributions in
the form of a life annuity and, except in the case of an IRA, certain
distributions after separation from service at or after age 55 and certain
distributions for eligible medical expenses. A life annuity is defined as a
scheduled series of substantially equal periodic payments for the life or life
expectancy of the Participant (or the joint lives or life expectancies of the
Participant and Beneficiary).
2. MINIMUM DISTRIBUTION TAX
If the amount distributed is less than the minimum required distribution for
the year, the Participant is subject to a 50% tax on the amount that was not
properly distributed.
An individual's interest in a retirement plan must generally be distributed
or begin to be distributed not later than April 1 of the calendar year in
which the individual attains age 70 1/2 ("required beginning date"). The
required beginning date with respect to certain government plans may be
further deferred. The entire interest of the Participant must be distributed
beginning no later than this required beginning date over a period which may
not extend beyond a maximum of the life expectancy of the Participant and a
designated Beneficiary. Each annual distribution must equal or exceed a
"minimum distribution amount" which is determined by dividing the account
balance by the applicable life expectancy. This account balance is generally
based upon the account value as of the close of business on the last day of
the previous calendar year. In addition, minimum distribution incidental
benefit rules may require a larger annual distribution.
If an individual dies before reaching his or her required beginning date,
the individual's entire interest must generally be distributed within five
years of the individuals' death. However, this rule will be deemed satisfied,
if distributions begin before the close of the calendar year following the
individual's death to a
30
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designated Beneficiary (or over a period not extending beyond the life
expectancy of the beneficiary). If the Beneficiary is the individual's
surviving spouse, distributions may be delayed until the individual would have
attained age 70 1/2.
If an individual dies after reaching his or her required beginning date or
after distributions have commenced, the individual's interest must generally
be distributed at least as rapidly as under the method of distribution in
effect at the time of the individual's death.
3. EXCESS DISTRIBUTION TAX
If the aggregate distributions from all IRAs and certain other qualified
plans in a calendar year exceed the greater of (i) $150,000, or (ii) $112,500
as indexed for inflation ($155,000 as of January 1, 1996), a penalty tax of
15% is generally imposed on the excess portion of the distribution.
4. WITHHOLDING
Periodic distributions from a qualified plan lasting for a period of 10 or
more years are generally subject to voluntary income tax withholding. The
recipient of periodic distributions may generally elect not to have
withholding apply or to have income taxes withheld at a different rate by
providing a completed election form. Otherwise, the amount withheld on such
distributions is determined at the rate applicable to wages as if the
recipient were married claiming three exemptions.
Nonperiodic distributions from an IRA are subject to income tax withholding
at a flat 10% rate. The recipient may elect not to have withholding apply.
Nonperiodic distributions from other qualified plans are generally subject
to mandatory income tax withholding at the flat rate of 20% unless such
distributions are:
(a) the non-taxable portion of the distribution;
(b) required minimum distributions;
(c) eligible rollover distributions.
Eligible rollover distributions are direct payments to an IRA or to another
qualified employer plan.
Any distribution from plans described in Section 457 of the Code is subject
to regular wage withholding rules.
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TABLE OF CONTENTS
TO
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
SECTION PAGE NO.
- ----------------------------------------------------------------------------------------------------------------- -----
<S> <C>
INTRODUCTION.....................................................................................................
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY...................................................................
SAFEKEEPING OF ASSETS............................................................................................
INDEPENDENT PUBLIC ACCOUNTANTS...................................................................................
DISTRIBUTION OF CONTRACTS........................................................................................
ANNUITY/PAYOUT PERIOD............................................................................................
Annuity Payments...............................................................................................
The Annuity Unit and Valuation.................................................................................
Determination of Payment Amount................................................................................
CALCULATION OF YIELD AND RETURN..................................................................................
PERFORMANCE COMPARISONS..........................................................................................
FINANCIAL STATEMENTS.............................................................................................
</TABLE>
32
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This form must be completed for all tax sheltered annuities.
SECTION 403(B)(11) ACKNOWLEDGMENT FORM
The Hartford Variable Annuity Contract which you have recently purchased is
subject to certain restrictions imposed by the Tax Reform Act of 1986.
Contributions to the Contract after December 31, 1989 and any increases in cash
value after December 31, 1988 may not be distributed to you unless you have:
a. attained age 59 1/2
b. terminated employment
c. died, or
d. become disabled.
Distributions of post December 31, 1988 contributions may also be made if you
have experienced a financial hardship.
Also, there may be a 10% penalty tax for distributions made because of financial
hardship or separation from service.
Also, please be aware that your 403(b) Plan may also offer other financial
alternatives other than the Hartford Variable Annuity. Please refer to your
Plan.
Please complete the following and return to:
Hartford Life Insurance Company
Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
Name of Contract Owner/Participant: ____________________________________________
Address: _______________________________________________________________________
City or Plan/School District: __________________________________________________
Date: __________________________________________________________________________
<PAGE>
To Obtain a Statement of Additional
Information, please complete the form below and
mail to:
Hartford Life Insurance Company
Attn: Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
Please send a Statement of Additional
Information for Separate Account Three to me at
the following address:
_________________________________________
Name
_________________________________________
Address
_________________________________________
City/State Zip Code
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THREE
This Statement of Additional Information is not a Prospectus. The information
contained herein should be read in conjunction with the Prospectus.
To obtain a Prospectus, send a written request to Hartford Life Insurance
Company, Attn: Annuity Marketing Services, P.O. Box 5085, Hartford,
CT 06102-5085.
Date of Prospectus: May 1, 1996
Date of Statement of Additional Information: May 1, 1996
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
INTRODUCTION....................................................
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY..................
SAFEKEEPING OF ASSETS...........................................
INDEPENDENT PUBLIC ACCOUNTANTS..................................
DISTRIBUTION OF CONTRACTS.......................................
ANNUITY/PAYOUT PERIOD...........................................
Annuity Payments...........................................
The Annuity Unit and Valuation.............................
Determination of Payment Amount............................
CALCULATION OF YIELD AND RETURN.................................
PERFORMANCE COMPARISONS.........................................
FINANCIAL STATEMENTS............................................
<PAGE>
INTRODUCTION
The tax deferred Variable Annuity Contracts described in the prospectus are
designed to provide Annuity benefits to individuals who have established or
wish to establish retirement programs which may or may not qualify for
special Federal income tax treatment. The Annuitant under these Contracts may
receive Annuity benefits in accordance with the Annuity option selected and
the retirement program, if any, under which the Contracts have been
purchased. Annuity payments under a Contract will begin on a particular
future date which may be selected at any time under the Contract or
automatically when the Annuitant reaches age 90, except in certain states
where deferral past age 85 is not permitted. There are several alternative
annuity payment options available under the Contract (see "Annuity Options,"
page of the Prospectus).
The Premium Payments under a Contract, less any applicable Premium Taxes,
will be applied to the Separate Account and/or the Fixed Account. Accordingly,
the net Premium Payment under the Contract will be applied to purchase
interests in one or more of the following twelve portfolios of the Dean
Witter Select Dimensions Investment Series, an open-end diversified series
investment company: the Money Market Portfolio, the North American Government
Securities Portfolio, the Diversified Income Portfolio, the Balanced
Portfolio, the Utilities Portfolio, the Dividend Growth Portfolio, the
Value-Added Market Portfolio, the Core Equity Portfolio, the American Value
Portfolio, the Global Equity Portfolio, the Developing Growth Portfolio, and
the Emerging Markets Portfolio.
Shares of the Portfolios are purchased by the Separate Account without the
imposition of any additional sales charge. The value of a Contract depends on
the value of the shares of the Portfolio held by the Separate Account
pursuant to that Contract. As a result, the Contract Owner bears the
investment risk since market value of the shares may increase or decrease.
The Contracts provide that in the event the Annuitant dies before the
selected Annuity Commencement Date, the Contingent Annuitant will become the
Annuitant. If the Annuitant dies before the Annuity Commencement Date and
there is no designated Contingent Annuitant, or the Contingent Annuitant
predeceases the Annuitant, or if the Contract Owner dies before the Annuity
Commencement Date, the Beneficiary will receive the Contract Value determined
on the date of receipt of due proof of death by Hartford Life Insurance
Company ("Hartford Life") in its Home Office. If, upon death prior to the
Annuity Commencement Date, the Annuitant or Contract Owner, as applicable,
had not attained his 90th birthday, the Beneficiary will receive the greater
of (a) the Contract Value determined as of the day written proof of death of
such person is received by Hartford Life, or (b) 100% of the total Premium
Payments made to such Contract, reduced by any prior surrenders, or (c) the
Contract Value on the Specified Contract Anniversary immediately preceding
the date of death, increased by the dollar amount of any Premium Payments
made and reduced by the dollar amount of any partial surrenders since the
immediately preceding Specified Contract Anniversary.
<PAGE>
-2-
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY
Hartford Life Insurance Company ("Hartford Life"), was originally
incorporated under the laws of Massachusetts on June 5, 1902. It was
subsequently redomiciled to Connecticut. It is a stock life insurance company
engaged in the business of writing health and life insurance, both individual
and group, in all states of the United States and the District of Columbia.
The offices of Hartford Life are located in Simsbury, Connecticut; however,
its mailing address is P.O. Box 5085, Hartford, CT 06102-5085.
Hartford Life is ultimately 100% owned by Hartford Fire Insurance Company,
one of the largest multiple lines insurance carriers in the United States. On
December 20, 1995, Hartford Fire Insurance Company became an independent,
publicly traded corporation.
Hartford Life is rated A+ (superior) by A.M. Best and Company, Inc., on the
basis of its financial soundness and operating performance. Hartford Life is
rated AA+ by both Standard & Poor's and Duff and Phelps on the basis of its
claims paying ability.
These ratings do not apply to the performance of the Separate Account.
However, the contractual obligation under this variable annuity are the
general corporate obligations of Hartford Life. These ratings do apply to
Hartford Life's ability to meet its insurance obligations under the Contract.
SAFEKEEPING OF ASSETS
The assets of the Separate Account are held by Hartford Life under a
safekeeping arrangement.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, One Financial Plaza, Hartford, Connecticut 06103,
independent public accountants, will perform an annual audit of the Separate
Account. The financial statements and schedules included in this Statement of
Additional Information and elsewhere in the Registration Statement have been
audited by Arthur Andersen LLP, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm
as experts in accounting and auditing in giving said report. Reference is
made to said report of Hartford Life Insurance Company (the depositor), which
includes an explanatory paragraph with respect to the adoption of new
accounting standards changing the methods of accounting for debt and equity
securities.
DISTRIBUTION OF CONTRACTS
Hartford Securities Distribution Company, Inc. ("HSD") serves as principal
underwriter for the securities issued with respect to the Separate Account.
HSD is a wholly-owned subsidiary of Hartford Life. The principal business
address of HSD is the same as Hartford Life.
The securities will be sold by insurance and Variable Annuity agents of
Hartford Life who are
<PAGE>
-3-
registered representatives of Dean Witter Reynold Inc. ("Dean Witter"). Dean
Witter is registered with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 as a Broker-Dealer and is a member of the
National Association of Securities Dealers, Inc. ("NASD").
Prior to June 26, 1995, the Principal Underwriter for the Separate Account
was Hartford Equity Sales Company, Inc., an NASD member Broker-Dealer.
The offering of the Separate Account Contracts is continuous.
ANNUITY/PAYOUT PERIOD
ANNUITY PAYMENTS
Variable Annuity payments are determined on the basis of (1) a mortality
table set forth in the Contracts and the type of Annuity payment option
selected, and (2) the investment performance of the investment medium
selected. Fixed Annuity payments are based on the Annuity tables contained
in the Contracts, and will remain level for the duration of the Annuity.
The amount of the Annuity payments will not be affected by adverse mortality
experience or by an increase in expenses in excess of the expense deduction
for which provision has been made (see "Mortality and Expense Risk Charge,"
page of the prospectus).
For a Variable Annuity, the Annuitant will be paid the value of a fixed
number of Annuity Units each month. The value of such units and the amounts
of the monthly Variable Annuity payments will, however, reflect investment
income occurring after retirement, and thus the Variable Annuity payments will
vary with the investment experience of the Portfolio shares selected.
THE ANNUITY UNIT AND VALUATION
The value of the Annuity Unit for each Sub-Account in the Separate Account
for any day is determined by multiplying the value for the preceding day by
the product of (1) the net investment factor (see "Valuation of Accumulation
Units," page of the prospectus) for the day for which the Annuity Unit
value is being calculated, and (2) a factor to neutralize the assumed
investment rate discussed below.
ILLUSTRATION OF CALCULATION OF ANNUITY UNIT VALUE
1. Net Investment Factor for period................................. 1.011225
2. Adjustment for 4% Assumed Investment Rate........................ .999892
3. 2x1.............................................................. 1.011116
4. Annuity Unit value, beginning of period.......................... .995995
5. Annuity Unit value, end of period (3x4).......................... 1.007066
<PAGE>
-4-
DETERMINATION OF PAYMENT AMOUNT
When Annuity payments are to commence, the value of the Contract is
determined as the sum of the value of the Fixed Account no earlier than the
close of business on the fifth Valuation Day preceding the date the first
Annuity payment is due plus the product of the value of the Accumulation Unit
of each Sub-Account on that same day, and the number of Accumulation Units
credited to each Sub-Account as of the date the Annuity is to commence.
The Contract contains tables indicating the minimum dollar amount of the
first monthly payment under the optional forms of Annuity for each $1,000 of
value of a Sub-Account under a Contract. The first monthly payment varies
according to the form and type of Annuity selected. The Contracts contain
Annuity tables derived from the 1983a Individual Annuity Mortality Table with
ages set back one year with an assumed investment rate ("A.I.R.") of 3.00%
per annum for a Fixed Annuity and 5.00% per annum for a Variable Annuity. The
total first monthly Variable Annuity payment is determined by multiplying the
value (expressed in thousands of dollars) of a Sub-Account (less any
applicable Premium Taxes) by the amount of the first monthly payment per
$1,000 of value obtained from the tables in the Contracts.
Fixed Annuity payments are determined at annuitization by multiplying the
value allocated to the Fixed Account by a rate to be determined by Hartford
Life which is no less than the rate specified in the Annuity tables in the
Contract. The Annuity payment will remain level for the duration of the
Annuity.
The amount of the first monthly Variable Annuity payment, determined as
described above, is divided by the value of an Annuity Unit for the
appropriate Sub-Account no earlier than the close of business on the fifth
Valuation Day preceding the day on which the payment is due in order to
determine the number of Annuity Units represented by the first payment. This
number of Annuity Units remains fixed during the Annuity Period, and in each
subsequent month the dollar amount of the Variable Annuity payment is
determined by multiplying this fixed number of Annuity Units by the then
current Annuity Unit value.
The A.I.R. assumed in the mortality tables would produce level Variable
Annuity payments if the investment rate remained constant. In fact, payments
will vary up or down as the investment rate varies up or down from the A.I.R.
The Annuity payments will be made on the fifteenth day of each month
following selection. The Annuity Unit value used in calculating the amount of
the Variable Annuity payments will be based on an Annuity Unit value
determined as of the close of business on a day no earlier than the fifth
Valuation Day preceding the date of the Annuity payment.
<PAGE>
-5-
CALCULATION OF YIELD AND RETURN
YIELD OF THE MONEY MARKET PORTFOLIO SUB-ACCOUNT. As summarized in the
Prospectus under the heading "Performance Related Information," the yield of
the Sub-Account for a seven day period (the "base period") will be computed
by determining the "net change in value" of a hypothetical account having a
balance of one unit at the beginning of the base period, dividing the net
change in account value by the value of the account at the beginning of the
base period to obtain the base period return, and multiplying the base period
return by 365/7 with the resulting yield figure carried to the nearest
hundredth of one percent. Net changes in value of a hypothetical account will
include net investment income of the account (accrued dividends as declared
by the underlying funds, less expense and Contract charges of the account)
for the period, but will not include realized gains or losses or unrealized
appreciation or depreciation on the underlying fund shares.
The effective yield is calculated by compounding the base period return by
adding 1, raising the sum to a power equal to 365/7 and subtracting 1 from
the result, according to the following formula:
(365/7)
Effective Yield = [(Base Period Return + 1) ]-1
The Money Market Portfolio Sub-Account's yield and effective yield will vary
in response to fluctuations in interest rates and in the expenses of the
Sub-Account.
CALCULATION OF TOTAL RETURN. As summarized in the Prospectus under the
heading "Performance Related Information", total return is a measure of the
change in value of an investment in a Sub-Account over the period covered.
The formula for total return used herein includes three steps: (1)
calculating the value of the hypothetical initial investment of $1,000 as of
the end of the period by multiplying the total number of units owned at the
end of the period by the unit value per unit on the last trading day of the
period; (2) assuming redemption at the end of the period and deducting any
applicable contingent deferred sales charge and (3) dividing this account
value for the hypothetical investor by the initial $1,000 investment and
annualizing the result for periods of less than one year. Total return will
be calculated for one year, five years, and ten years or some other relevant
periods if a Sub-Account has not been in existence for at least ten years.
At any time in the future, yields and total return may be higher or lower
than past yields and there can be no assurance that any historical results
will continue.
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. The total return and yield may also be used to
compare the performance of the Sub-Accounts against certain widely
acknowledged outside standards or indices for stock and bond market
performance. Index performance is not representative of the performance of the
<PAGE>
-6-
Sub-Account to which it is compared and is not adjusted for commissions and
other costs. Portfolio holdings of the Sub-Account will differ from those of
the index to which it is compared. Performance comparison indices include the
following:
The Consumer Price Index, prepared by the U.S. Bureau of Labor Statistics, is
a commonly used measure of the rate of inflation. The index shows the average
change in the cost of selected consumer goods and services and does not
represent a return on an investment vehicle.
The Dow Jones Industrial Average is an unmanaged list of 30 common stocks
frequently used as a general measure of stock market performance. Its
performance figures reflect changes of market prices and reinvestment of all
distributions.
Lehman Brothers Corporate Bond Index is an unmanaged list of publicly issued,
fixed-rate, non-convertible investment-grade domestic corporate debt
securities frequently used as a general measure of the performance of
fixed-income securities. The average quality of bonds included in the index
may be higher than the average quality of those bonds in which High Yield
Fund customarily invests. The index does not include bonds in certain of the
lower rating classifications in which the Fund may invest. The performance
figures of the index reflect changes in market prices and reinvestment of all
interest payments.
The Lehman Brothers Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury;
all publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted
issues are not included in the SL Government Index.
The Lehman Brothers Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of
approximately 5,300 bonds with a face value currently in excess of $1.3
trillion. To be included in the SL Government/Corporate Index, an issue must
have amounts outstanding in excess of $1 million, have at least one year to
maturity and be rated "Baa" or higher ("investment grade") by a nationally
recognized rating agency. The index does not include bonds in certain of the
lower-rating classifications in which High Yield Fund invests. Its
performance figures reflect changes in market prices and reinvestment of all
interest payments.
Morgan Stanley Capital International World Index is an unmanaged list of
approximately 1,450 equity securities listed on the stock exchanges of the
United States, Europe, Canada, Australia, New Zealand and the Far East, with
all values expressed in U.S. dollars. Performance figures reflect changes in
market prices and reinvestment of distributions net of withholding taxes. The
securities in the index change over time to maintain representativeness.
The NASDAQ-OTC Industrial Average (The "NASDAQ Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate
market value of approximately 3,500 stocks relative to the base measure of
100.00 on February 5, 1971. The NASDAQ Index is composed entirely of common
stocks of companies traded over-the-counter and often through the National
Association of Securities Dealers Automated Quotations ("NASDAQ") system.
Only those over-the-counter stocks having only one market maker or traded on
exchanges are
<PAGE>
-7-
excluded. Its performance figures reflect changes of market prices but do not
reflect reinvestment of cash dividends.
Salomon Brothers Long-Term High-Grade Corporate Bond Index is an unmanaged
list of publicly traded corporate bonds having a rating of at least AA by
Standard & Poor's or Aa by Moody's and is frequently used as general measure
of the performance of fixed-income securities. The average quality of bonds
included in the index may be higher than the average quality of those bonds
in which PCM High Yield customarily invests. The index does not include bonds
in certain of the lower rating classifications in which the Fund may invest.
Performance figures for the index reflect changes of market prices and
reinvestment of all distributions.
The Salomon Brothers 7-10 Year Government Bond Index is an unmanaged list of
U.S. Government and government agency securities with maturities of 7 to 10
years. Performance figures for the index reflect changes of market prices and
reinvestment of all interest payments.
The Standard & Poor's Composite Index of 500 stocks (the "S&P 500") is a
market value-weighted and unmanaged index showing changes in the aggregate
market value of 500 stocks relative to the base period 1941-43. The S&P 500
is composed almost entirely of common stocks of companies listed on the New
York Stock Exchange, although the common stocks of a few companies listed on
the American Stock Exchange or traded over-the-counter are included. The 500
companies represented include 400 industrial, 60 transportation and 40
financial services concerns. The S&P 500 represents about 80% of the market
value of all issues traded on the New York Stock Exchange. Its performance
figures reflect changes in market prices and reinvestment of all regular cash
dividends.
The Standard & Poor's 40 Utilities Index is an unmanaged list of 40 utility
stocks. The Index assumes reinvestment of all distributions and reflects
changes in market prices but does not take into account brokerage commissions
or other fees.
The manner in which total return and yield will be calculated for public use
is described above.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THREE AND TO THE
OWNERS OF UNITS OF INTEREST THEREIN:
We have audited the accompanying statement of net assets & liabilities of
Hartford Life Insurance Company Separate Account Three (the Account) as of
December 31, 1995, and the related statement of operations and statement of
changes in net assets for the period from inception, February 15, 1995, to
December 31, 1995. These financial statements are the responsibility of the
Account's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides 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 Hartford Life Insurance
Company Separate Account Three as of December 31, 1995, and the results of its
operations and changes in its net assets for the period from inception,
February 15, 1995, to December 31, 1995, in conformity with generally accepted
accounting principles.
Hartford, Connecticut
February 7, 1996 Arthur Andersen LLP
<PAGE>
Separate Account Three
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS & LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NORTH
AMERICAN
GOVERNMENT
MONEY SECURITIES BALANCED UTILITIES
MARKET FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in Dean
Witter Select
Dimensions Investment
Series:
Money Market Fund
Shares 1,319,202
Cost $1,319,202
Market Value......... $ 1,319,202 -- -- --
North American
Government Securities
Fund
Shares 4,688
Cost $ 47,282
Market Value......... -- $ 47,682 -- --
Balanced Fund
Shares 113,847
Cost $1,270,741
Market Value......... -- -- $1,353,645 --
Utilities Fund
Shares 50,991
Cost $ 576,742
Market Value......... -- -- -- $ 629,741
Dividend Growth Fund
Shares 309,832
Cost $3,783,456
Market Value......... -- -- -- --
Value Added Market Fund
Shares 138,736
Cost $1,604,300
Market Value......... -- -- -- --
Core Equity Fund
Shares 27,162
Cost $ 296,439
Market Value......... -- -- -- --
American Value Fund
Shares 160,497
Cost $1,968,939
Market Value......... -- -- -- --
Global Equity Fund
Shares 96,642
Cost $1,023,961
Market Value......... -- -- -- --
Developing Growth Fund
Shares 63,822
Cost $ 857,404
Market Value......... -- -- -- --
Emerging Markets Fund
Shares 17,121
Cost $ 165,716
Market Value......... -- -- -- --
Diversified Income Fund
Shares 62,987
Cost $ 634,446
Market Value......... -- -- -- --
Due from Hartford Life
Insurance Co.......... -- -- -- 1,221
Receivable from fund
shares sold........... 101 31 52 --
--------------- ------------ ----------- -------------
Total Assets........... 1,319,303 47,713 1,353,697 630,962
--------------- ------------ ----------- -------------
LIABILITIES:
Due to Hartford Life
Insurance Co.......... 103 32 68 --
Payable for fund shares
purchased............. -- -- -- 846
--------------- ------------ ----------- -------------
Total Liabilities...... 103 32 68 846
--------------- ------------ ----------- -------------
Net Assets (variable
annuity contract
liabilities).......... $ 1,319,200 $ 47,681 $1,353,629 $ 630,116
--------------- ------------ ----------- -------------
--------------- ------------ ----------- -------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
INDIVIDUAL
SUB-ACCOUNTS:
Units Owned by
Participants.......... 125,381 4,526 111,284 49,676
Unit Price............. $ 10.521492 $10.535876 $12.163732 $ 12.684605
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
1
<PAGE>
<TABLE>
<CAPTION>
DIVIDEND VALUE ADDED CORE EQUITY AMERICAN DEVELOPING
GROWTH FUND MARKET FUND FUND VALUE FUND GLOBAL EQUITY FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------ ------------- ----------- ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in Dean
Witter Select
Dimensions Investment
Series:
Money Market Fund
Shares 1,319,202
Cost $1,319,202
Market Value......... -- -- -- -- -- --
North American
Government Securities
Fund
Shares 4,688
Cost $ 47,282
Market Value......... -- -- -- -- -- --
Balanced Fund
Shares 113,847
Cost $1,270,741
Market Value......... -- -- -- -- -- --
Utilities Fund
Shares 50,991
Cost $ 576,742
Market Value......... -- -- -- -- -- --
Dividend Growth Fund
Shares 309,832
Cost $3,783,456
Market Value......... $4,195,123 -- -- -- -- --
Value Added Market Fund
Shares 138,736
Cost $1,604,300
Market Value......... -- $ 1,698,125 -- -- -- --
Core Equity Fund
Shares 27,162
Cost $ 296,439
Market Value......... -- -- $ 300,681 -- -- --
American Value Fund
Shares 160,497
Cost $1,968,939
Market Value......... -- -- -- $2,200,417 -- --
Global Equity Fund
Shares 96,642
Cost $1,023,961
Market Value......... -- -- -- -- $ 1,062,093 --
Developing Growth Fund
Shares 63,822
Cost $ 857,404
Market Value......... -- -- -- -- -- $ 957,333
Emerging Markets Fund
Shares 17,121
Cost $ 165,716
Market Value......... -- -- -- -- -- --
Diversified Income Fund
Shares 62,987
Cost $ 634,446
Market Value......... -- -- -- -- -- --
Due from Hartford Life
Insurance Co.......... 1,858 1,088 -- 2,015 1,755 462
Receivable from fund
shares sold........... -- -- 28 -- -- --
--------------- ------------ ------------- ----------- ------------------ ---------------
Total Assets........... 4,196,981 1,699,213 300,709 2,202,432 1,063,848 957,795
--------------- ------------ ------------- ----------- ------------------ ---------------
LIABILITIES:
Due to Hartford Life
Insurance Co.......... -- -- 32 -- -- --
Payable for fund shares
purchased............. 1,865 1,095 -- 2,001 1,759 465
--------------- ------------ ------------- ----------- ------------------ ---------------
Total Liabilities...... 1,865 1,095 32 2,001 1,759 465
--------------- ------------ ------------- ----------- ------------------ ---------------
Net Assets (variable
annuity contract
liabilities).......... $4,195,116 $ 1,698,118 $ 300,677 $2,200,431 $ 1,062,089 $ 957,330
--------------- ------------ ------------- ----------- ------------------ ---------------
--------------- ------------ ------------- ----------- ------------------ ---------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
INDIVIDUAL
SUB-ACCOUNTS:
Units Owned by
Participants.......... 304,353 136,750 26,788 159,800 95,149 63,304
Unit Price............. $13.787374 $ 12.417722 $ 11.224309 $13.769935 $ 11.162419 $ 15.122619
<CAPTION>
EMERGING MARKETS DIVERSIFIED INCOME
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------------
<S> <C> <C>
ASSETS:
Investments in Dean
Witter Select
Dimensions Investment
Series:
Money Market Fund
Shares
Cost
Market Value......... -- --
North American
Government Securities
Fund
Shares
Cost
Market Value......... -- --
Balanced Fund
Shares
Cost
Market Value......... -- --
Utilities Fund
Shares
Cost
Market Value......... -- --
Dividend Growth Fund
Shares
Cost
Market Value......... -- --
Value Added Market Fund
Shares
Cost
Market Value......... -- --
Core Equity Fund
Shares
Cost
Market Value......... -- --
American Value Fund
Shares
Cost
Market Value......... -- --
Global Equity Fund
Shares
Cost
Market Value......... -- --
Developing Growth Fund
Shares
Cost
Market Value......... -- --
Emerging Markets Fund
Shares
Cost
Market Value......... $ 165,729 --
Diversified Income Fund
Shares
Cost
Market Value......... -- $ 643,725
Due from Hartford Life
Insurance Co.......... 389 2,174
Receivable from fund
shares sold........... -- --
---------- ------------------
Total Assets........... 166,118 645,899
---------- ------------------
LIABILITIES:
Due to Hartford Life
Insurance Co.......... -- --
Payable for fund shares
purchased............. 387 2,175
---------- ------------------
Total Liabilities...... 387 2,175
---------- ------------------
Net Assets (variable
annuity contract
liabilities).......... $ 165,731 $ 643,724
---------- ------------------
---------- ------------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
INDIVIDUAL
SUB-ACCOUNTS:
Units Owned by
Participants.......... 16,840 60,690
Unit Price............. $ 9.841336 $ 10.606720
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2
<PAGE>
SEPARATE ACCOUNT THREE
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FROM INCEPTION FEBRUARY 15, 1995 TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
NORTH
AMERICAN
GOVERNMENT
MONEY SECURITIES BALANCED UTILITIES
MARKET FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 34,896 $ 1,534 $ 17,632 $ 6,819
EXPENSES:
Mortality and expense
undertakings.......... (8,342) (444 ) (7,867 ) (2,836 )
------- ------ ----------- -------------
Net investment income
(loss).............. 26,554 1,090 9,765 3,983
------- ------ ----------- -------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- 93 784 6
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 400 82,904 52,999
------- ------ ----------- -------------
Net gains (losses) on
investments......... -- 493 83,688 53,005
------- ------ ----------- -------------
Net increase
(decrease) in net
assets resulting
from operations..... $ 26,554 $ 1,583 $ 93,453 $ 56,988
------- ------ ----------- -------------
------- ------ ----------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
<PAGE>
<TABLE>
<CAPTION>
DIVIDEND VALUE ADDED CORE EQUITY AMERICAN DEVELOPING
GROWTH FUND MARKET FUND FUND VALUE FUND GLOBAL EQUITY FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------ ------------- ----------- ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 39,009 $ 13,523 $ 1,106 $ 10,842 $ 7,286 $ 4,826
EXPENSES:
Mortality and expense
undertakings.......... (20,420) (7,454 ) (1,053) (10,399 ) (4,552) (4,043)
--------------- ------------ ------ ----------- ------- ---------------
Net investment income
(loss).............. 18,589 6,069 53 443 2,734 783
--------------- ------------ ------ ----------- ------- ---------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (488) 51 (1) 309 181 107
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 411,667 93,825 4,242 231,478 38,132 99,929
--------------- ------------ ------ ----------- ------- ---------------
Net gains (losses) on
investments......... 411,179 93,876 4,241 231,787 38,313 100,036
--------------- ------------ ------ ----------- ------- ---------------
Net increase
(decrease) in net
assets resulting
from operations..... $ 429,768 $ 99,945 $ 4,294 $ 232,230 $ 41,047 $ 100,819
--------------- ------------ ------ ----------- ------- ---------------
--------------- ------------ ------ ----------- ------- ---------------
<CAPTION>
EMERGING MARKETS DIVERSIFIED INCOME
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 758 $ 8,733
EXPENSES:
Mortality and expense
undertakings.......... (538) (2,475)
----- -------
Net investment income
(loss).............. 220 6,258
----- -------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (63) 35
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 13 9,279
----- -------
Net gains (losses) on
investments......... (50) 9,314
----- -------
Net increase
(decrease) in net
assets resulting
from operations..... $ 170 $ 15,572
----- -------
----- -------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
<PAGE>
Separate Account Three
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FROM INCEPTION FEBRUARY 15, 1995 TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
NORTH
AMERICAN
GOVERNMENT
MONEY SECURITIES BALANCED UTILITIES
MARKET FUND FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment
income................ $ 26,554 $ 1,090 $ 9,765 $ 3,983
Net realized gain
(loss) on security
transactions.......... -- 93 784 6
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 400 82,904 52,999
--------------- ------------ ----------- -------------
Net increase (decrease)
in net assets
resulting from
operations............ 26,554 1,583 93,453 56,988
--------------- ------------ ----------- -------------
UNIT TRANSACTIONS:
Purchases.............. 2,795,148 81,336 1,183,650 466,844
Net transfers.......... (1,478,107) (35,237 ) 169,596 118,572
Surrenders............. (24,395) (1 ) (93,070) (12,288 )
--------------- ------------ ----------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,292,646 46,098 1,260,176 573,128
--------------- ------------ ----------- -------------
Total increase
(decrease) in net
assets................ 1,319,200 47,681 1,353,629 630,116
NET ASSETS:
Beginning of period.... -- -- -- --
--------------- ------------ ----------- -------------
End of period.......... $ 1,319,200 $ 47,681 $ 1,353,629 $ 630,116
--------------- ------------ ----------- -------------
--------------- ------------ ----------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
5
<PAGE>
<TABLE>
<CAPTION>
DIVIDEND VALUE ADDED CORE EQUITY AMERICAN DEVELOPING
GROWTH FUND MARKET FUND FUND VALUE FUND GLOBAL EQUITY FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------ ------------- ----------- ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income................ $ 18,589 $ 6,069 $ 53 $ 443 $ 2,734 $ 783
Net realized gain
(loss) on security
transactions.......... (488) 51 (1) 309 181 107
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 411,667 93,825 4,242 231,478 38,132 99,929
--------------- ------------ ------------- ----------- ------------------ ---------------
Net increase (decrease)
in net assets
resulting from
operations............ 429,768 99,945 4,294 232,230 41,047 100,819
--------------- ------------ ------------- ----------- ------------------ ---------------
UNIT TRANSACTIONS:
Purchases.............. 3,514,160 1,375,238 272,740 1,678,882 802,365 786,803
Net transfers.......... 352,632 235,521 23,596 358,598 230,961 113,811
Surrenders............. (101,444) (12,586 ) 47 (69,279) (12,284) (44,103)
--------------- ------------ ------------- ----------- ------------------ ---------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 3,765,348 1,598,173 296,383 1,968,201 1,021,042 856,511
--------------- ------------ ------------- ----------- ------------------ ---------------
Total increase
(decrease) in net
assets................ 4,195,116 1,698,118 300,677 2,200,431 1,062,089 957,330
NET ASSETS:
Beginning of period.... -- -- -- -- -- --
--------------- ------------ ------------- ----------- ------------------ ---------------
End of period.......... $4,195,116 $ 1,698,118 $ 300,677 $ 2,200,431 $ 1,062,089 $ 957,330
--------------- ------------ ------------- ----------- ------------------ ---------------
--------------- ------------ ------------- ----------- ------------------ ---------------
<CAPTION>
EMERGING MARKETS DIVERSIFIED INCOME
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------------ ------------------
<S> <C> <C>
OPERATIONS:
Net investment
income................ $ 220 $ 6,258
Net realized gain
(loss) on security
transactions.......... (63) 35
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 13 9,279
-------- --------
Net increase (decrease)
in net assets
resulting from
operations............ 170 15,572
-------- --------
UNIT TRANSACTIONS:
Purchases.............. 123,549 587,649
Net transfers.......... 41,980 42,607
Surrenders............. 32 (2,104)
-------- --------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 165,561 628,152
-------- --------
Total increase
(decrease) in net
assets................ 165,731 643,724
NET ASSETS:
Beginning of period.... -- --
-------- --------
End of period.......... $ 165,731 $ 643,724
-------- --------
-------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
6
<PAGE>
SEPARATE ACCOUNT THREE
HARTFORD LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ORGANIZATION:
Separate Account Three (the Account) is a separate investment account within
Hartford Life Insurance Company (the Company) and is registered with the
Securities and Exchange Commission (SEC) as a unit investment trust under
the Investment Company Act of 1940, as amended. Both the Company and the
Account are subject to supervision and regulation by the Department of
Insurance of the State of Connecticut and the SEC. The Account invests
deposits by variable annuity contractholders of the Company in various
mutual funds (the Funds) as directed by the contractholders. The Account
commenced operations on February 15, 1995.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting
principles in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividend and capital
gains income are accrued as of the ex-dividend date.
b) SECURITY VALUATION--The investment in shares of the Dean Witter Select
Dimensions Investment Series Mutual Funds is valued at the closing net
asset value per share as determined by the appropriate Fund as of
December 31, 1995.
c) FEDERAL INCOME TAXES--The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as
an insurance company under the Internal Revenue Code. Under current law,
no federal income taxes are payable with respect to the operations of
the Account.
d) 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 reported amounts of
assets and liabilities as of the date of the financial statements and
the reported amounts of income and expenses during the period. Operating
results in the future could vary from the amounts derived from
management's estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
a) MORTALITY AND EXPENSE UNDERTAKINGS--The Company, as issuer of variable
annuity contracts, provides the mortality and expense undertakings and,
with respect to the Account, receives a maximum annual fee of 1.25% of
the Account's average daily net assets. The Company also provides
administrative services and receives an annual fee of 0.15% of the
Account's average daily net assets.
b) DEDUCTION OF ANNUAL MAINTENANCE FEE--Annual maintenance fees are
deducted through termination of units of interest from applicable
contract owners' accounts, in accordance with the terms of the
contracts.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
7
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life Insurance Company and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Hartford Life
Insurance Company (a Connecticut corporation and wholly-owned subsidiary of
Hartford Life and Accident Insurance Company) and subsidiaries as of December
31, 1995 and 1994, and the related consolidated statements of income,
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1995. These consolidated financial statements and the
schedules referred to below are the responsibility of Hartford Life Insurance
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and schedules 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 consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
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
audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Hartford Life Insurance Company and subsidiaries as of December 31, 1995 and
1994, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
As discussed in Note 1 in Notes to Consolidated Financial Statements, Hartford
Life Insurance Company adopted new accounting standards promulgated by the
Financial Accounting Standards Board, changing its methods of accounting, as of
January 1, 1994, for debt and equity securities.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedules listed in
the Index to Consolidated Financial Statements and Schedules are presented for
purposes of complying with the Securities and Exchange Commission's rules and
are not a required part of the basic consolidated financial statements. These
schedules have been subjected to the auditing procedures applied in the audits
of the basic consolidated financial statements and, in our opinion, fairly
state in all material respects the financial data required to be set forth
therein in relation to the basic consolidated financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
January 24, 1996
F-1
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
------- ------- ------
<S> <C> <C> <C>
REVENUES
Premiums and other considerations $1,487 $1,100 $747
Net investment income 1,328 1,292 1,051
Net realized (losses) gains (11) 7 16
------ ------ -----
TOTAL REVENUES 2,804 2,399 1,814
------ ------ -----
BENEFITS, CLAIMS AND EXPENSES
Benefits, claims and claim
adjustment expenses 1,422 1,405 1,046
Dividends to policyholders 675 419 227
Amortization of deferred policy
acquisition costs 199 145 113
Other insurance expense 317 227 210
------ ------ -----
TOTAL BENEFITS, CLAIMS AND EXPENSES 2,613 2,196 1,596
------ ------ -----
INCOME BEFORE INCOME TAX EXPENSE 191 203 218
Income tax expense 62 65 75
------ ------ -----
NET INCOME $129 $138 $143
------ ------ -----
------ ------ -----
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
F-2
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
AS OF DECEMBER 31,
------------------
1995 1994
------- --------
ASSETS
<S> <C> <C>
Investments
Fixed maturities
available for sale, at market value
(amortized cost of $14,440 and $14,464) $14,400 $13,429
Equity securities, at market value
(cost of $61 and $76) 63 68
Mortgage loans, at outstanding balance 265 316
Policy loans, at outstanding balance 3,381 2,614
Other investments, at cost 156 107
------- -------
TOTAL INVESTMENTS 18,265 16,534
Cash 46 20
Premiums and amounts receivable 165 160
Reinsurance recoverable 6,221 5,466
Accrued investment income 394 378
Deferred policy acquisition costs 2,188 1,809
Deferred income tax 420 590
Other assets 234 83
Separate account assets 36,264 22,809
------- -------
TOTAL ASSETS $64,197 $47,849
------- -------
------- -------
LIABILITIES
Future policy benefits $2,373 $1,890
Other policyholder funds 22,598 21,328
Other liabilities 1,233 1,000
Separate account liabilities 36,264 22,809
------- -------
TOTAL LIABILITIES 62,468 47,027
------- -------
Commitments and contingencies (Note 9)
STOCKHOLDER'S EQUITY
Common stock
Authorized 1,000 shares, $5,690 par value
Issued and outstanding 1,000 shares 6 6
Additional paid-in capital 1,007 826
Retained earnings 773 644
Unrealized loss on investments, net of tax (57) (654)
------- -------
TOTAL STOCKHOLDER'S EQUITY 1,729 822
------- -------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $64,197 $47,849
------- -------
------- -------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
F-3
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN MILLIONS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
UNREALIZED LOSS TOTAL
COMMON ADDITIONAL RETAINED ON INVESTMENTS, STOCKHOLDER'S
STOCK PAID-IN-CAPITAL EARNINGS NET OF TAX EQUITY
------ --------------- -------- --------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 $6 $498 $373 $0 $877
Net income - - 143 - 143
Capital contribution - 180 - - 180
Excess of assets over liabilities
on reinsurance assumed from affiliate - (2) - - (2)
Change in unrealized loss on investments, net of tax - - - (5) (5)
------ --------------- -------- --------------- -------------
BALANCE, DECEMBER 31, 1993 6 676 516 (5) 1,193
------ --------------- -------- --------------- -------------
Net income - - 138 - 138
Capital contribution - 150 - - 150
Dividend paid - - (10) - (10)
Change in unrealized loss on investments, net of tax* - - - (649) (649)
------ --------------- -------- --------------- -------------
BALANCE, DECEMBER 31, 1994 6 826 644 (654) 822
------ --------------- -------- --------------- -------------
Net income - - 129 - 129
Capital contribution - 181 - - 181
Change in unrealized loss on investments, net of tax - - - 597 597
------ --------------- -------- --------------- -------------
BALANCE, DECEMBER 31, 1995 $6 $1,007 $773 ($57) $1,729
------ --------------- -------- --------------- -------------
------ --------------- -------- --------------- -------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(*) The 1994 change in unrealized loss on investments, net of tax, included an
unrealized gain of $91 due to adoption of SFAS No. 115 as discussed in Note 1(b)
of Notes to Consolidated Financial Statements.
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
F-4
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------
1995 1994 1993
------------- -------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $129 $138 $143
Adjustments to net income:
Net realized (losses) gains 11 (7) (16)
(Decrease) increase in liability to policyholders for realized gains (3) 5 (15)
Net amortization of premium on fixed maturities 21 41 2
Provision for deferred income taxes (172) (128) (121)
Increase in deferred policy acquisition costs (379) (441) (292)
(Increase) decrease in premiums and amounts receivable (81) 10 (28)
Increase in accrued investment income (16) (106) (4)
(Increase) decrease in other assets (177) 101 (36)
(Increase) decrease in reinsurance recoverable (35) 75 (121)
Increase in liability for future policy benefits 483 224 360
Increase in other liabilities 281 191 176
------------- -------------- -------------
CASH PROVIDED BY OPERATING ACTIVITIES 62 103 48
------------- -------------- -------------
INVESTING ACTIVITIES
Purchases of fixed maturities investments (6,228) (9,127) (12,406)
Proceeds from sales of fixed maturities investments 4,848 5,708 8,813
Maturities and principal paydowns of fixed maturities investments 1,741 1,931 2,596
Net purchases of other investments (871) (1,338) (206)
Net (purchases)/sales of short-term investments (24) 135 (564)
------------- -------------- -------------
CASH USED FOR INVESTING ACTIVITIES (534) (2,691) (1,767)
------------- -------------- -------------
FINANCING ACTIVITIES
Net receipts from investment and UL-type contracts credited to
policyholder account balances 498 2,467 1,513
Capital contribution 0 150 180
Dividends paid 0 (10) 0
------------- -------------- -------------
CASH PROVIDED BY FINANCING ACTIVITIES 498 2,607 1,693
------------- -------------- -------------
NET INCREASE (DECREASE) IN CASH 26 19 (26)
Cash at beginning of year 20 1 27
------------- -------------- -------------
CASH AT END OF YEAR $46 $20 $1
------------- -------------- -------------
------------- -------------- -------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
F-5
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN MILLIONS)
1. SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
These consolidated financial statements include Hartford Life Insurance Company
and its wholly-owned subsidiaries ("Hartford Life" or the "Company"), ITT
Hartford Life and Annuity Insurance Company ("ILA") and ITT Hartford
International Life Reassurance Corporation ("HLRe"), formerly American Skandia
Life Reinsurance Corporation. Hartford Life is a wholly-owned subsidiary of
Hartford Life and Accident Insurance Company ("HLA"). Hartford Life is
ultimately owned by Hartford Fire Insurance Company ("Hartford Fire"), which is
ultimately owned by ITT Hartford Group, Inc. ("ITT Hartford"), formerly a
subsidiary of ITT Corporation ("ITT"). On December 19, 1995, ITT Corporation
distributed all of the outstanding shares of ITT Hartford Group to ITT
Corporation Shareholders of record in an action known herein as the
"Distribution". As a result of the Distribution, ITT Hartford became an
independent publicly traded company.
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The
Company offers life, annuity, pension, and disability insurance products.
These products are distributed and marketed by multiple distribution channels
which include broker-dealers, agents and banks, as well as a captive sales
force. Hartford Life conducts business primarily in the United States and is
licensed to write business in all 50 states. The Company is headquartered in
Simsbury, Connecticut and has 3,045 direct employees.
The consolidated financial statements are prepared in conformity with generally
accepted accounting principles which differ in certain material respects from
the accounting practices prescribed or permitted by various insurance
regulatory authorities.
(B) CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1994, Hartford Life adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". The new standard requires, among other things,
that securities be classified as "held-to-maturity", "available-for-sale" or
"trading" based on Hartford Life's intentions with respect to the ultimate
disposition of the security and its ability to effect those intentions. The
classification determines the appropriate accounting carrying value (cost basis
or fair value) and, in the case of fair value, whether the adjustment impacts
Stockholder's Equity directly or is reflected in the Consolidated Statements of
Income. Investments in equity securities had previously been and continue to
be recorded at fair value with the corresponding impact included in
Stockholder's Equity. Under SFAS No. 115, Hartford Life's fixed maturities
are classified as "available-for-sale" and accordingly, these investments are
reflected at fair value with the corresponding impact included as a component
of Stockholder's Equity designated as "Unrealized loss on investments, net of
tax." As with the underlying investment security, unrealized gains and losses
on derivative financial instruments are considered in determining the fair
value of the portfolios. The impact of adoption was an increase to
Stockholder's Equity of $91. Hartford Life's cash flows were not impacted by
this change in accounting principle.
(C) REVENUE RECOGNITION
Revenues for universal life policies and investment products consist of policy
charges for the cost of insurance, policy administration and surrender charges
assessed to policy account balances. Premiums for traditional life insurance
policies are recognized as revenues when they are due from policyholders.
Deferred acquisition costs are amortized using the retrospective deposit method
for universal life and other types of contracts where the payment pattern is
irregular or surrender charges are a significant source of profit and the
prospective deposit method is used where investment margins are the primary
source of profit.
F-6
<PAGE>
(D) FUTURE POLICY BENEFITS AND OTHER POLICYHOLDER FUNDS
Liabilities for future policy benefits are computed by the net level premium
method using interest rate assumptions varying from 3% to 11% and withdrawal,
mortality and morbidity assumptions which vary by plan, year of issue and
policy durations and include a provision for adverse deviation. Other
policyholder funds which represent liabilities for universal life insurance and
investment products reflect policy account balances before applicable surrender
charges.
(E) POLICYHOLDER REALIZED GAINS AND LOSSES
Realized gains and losses on security transactions associated with Hartford
Life's immediate participation guaranteed contracts are excluded from
revenues, since under the terms of the contracts the realized gains and losses
will be credited to policyholders in future years as they are entitled to
receive them.
(F) DEFERRED POLICY ACQUISITION COSTS
Policy acquisition costs, including commissions and certain underwriting
expenses associated with acquiring traditional life insurance products, are
deferred and amortized over the lesser of the estimated or actual contract
life. For universal life insurance and investment products, acquisition costs
are being amortized generally in proportion to the present value of expected
gross profits from surrender charges, investment, mortality and expense
margins.
(G) INVESTMENTS
Hartford Life's investments in fixed maturities include bonds, redeemable
preferred stock and commercial paper which are classified as "available-for-
sale" and accordingly are carried at market value with the after-tax difference
from cost reflected as a component of Stockholder's Equity designated
"Unrealized loss on investments, net of tax". Equity securities, which include
common and non-redeemable preferred stocks, are carried at market value with
the after-tax difference from cost reflected in Stockholder's Equity. Realized
investment gains and losses, after deducting life and pension policyholders'
share, are reported as a component of revenue and are determined on a specific
identification basis.
(H) DERIVATIVE FINANCIAL INSTRUMENTS
Hartford Life uses a variety of derivative financial instruments including,
swaps, caps, floors, options, forwards and exchange traded financial futures as
part of an overall risk management strategy. These instruments, are used as a
means of hedging exposure to price, foreign currency and/or interest rate risk
on planned investment purchases or existing assets and liabilities. Hartford
Life does not hold or issue derivative financial instruments for trading
purposes. Hartford Life's accounting for derivative financial instruments used
to manage risk is in accordance with the concepts established in SFAS No. 80,
"Accounting for Futures Contracts," SFAS No. 52 , "Foreign Currency
Translation", American Institute of Certified Public Accountants Statement of
Position 86-2, "Accounting for Options" and various Emerging Issues Task Force
pronouncements. Written options are in all cases used in conjunction with other
assets and derivatives as part of an overall risk management strategy.
Derivative instruments are carried at values consistent with the asset or
liability being hedged. Derivatives used to hedge fixed maturities or equities
are carried at fair value with the after-tax difference from cost reflected in
Stockholder's Equity. Derivatives used to hedge other invested assets or
liabilities are carried at cost.
Derivatives, used as part of a risk management strategy, must be designated at
inception as a hedge and measured for effectiveness both at inception and on an
ongoing basis. Hartford Life's minimum correlation threshold for hedge
designation is 80%. If correlation, which is assessed monthly and measured
based on a rolling three month average, falls below 80%, hedge accounting will
be terminated. Derivatives used to create a synthetic asset must meet synthetic
accounting criteria including designation at inception and consistency of terms
between the synthetic and the instrument being replicated. Synthetic
instrument accounting, consistent with industry practice, provides that the
synthetic asset is accounted for like the financial instrument it is intended
to replicate. Derivatives which fail to meet risk management criteria are
marked to market with the impact reflected in the Consolidated Statements
of Income.
Gains or losses on financial futures contracts entered into in anticipation
of the future receipt of product cash flows are deferred and, at the time of
the ultimate purchase, reflected as a basis adjustment to the purchased
asset. Gains or losses on futures used in invested asset risk management are
deferred and adjusted into the basis of the hedged asset when the contract
futures are closed, except for futures used in duration hedging which are
deferred and basis adjusted on a quarterly basis. The basis adjustments are
amortized into investment income over the remaining asset life.
F-7
<PAGE>
Open forward commitment contracts are marked to market through Stockholder's
Equity. Such contracts are recorded at settlement by recording the purchase of
the specified securities at the previously committed price. Gains or losses
resulting from the termination of the forward commitment contracts before the
delivery of the securities are recognized immediately in the Consolidated
Statements of Income as a component of net investment income.
The cost of options entered into as part of a risk management strategy are
basis adjusted to the underlying asset or liability and amortized over the
remaining life of the hedge. Gains or losses on expiration or termination are
adjusted into the basis of the underlying asset or liability and amortized over
the remaining asset life.
Interest rate swaps involve the periodic exchange of payments without the
exchange of underlying principal or notional amounts. Net receipts or payments
are accrued and recognized over the life of the swap agreement as an
adjustment to income. Should the swap be terminated, the gain or loss is
adjusted into the basis of the asset or liability and amortized over the
remaining life. Should the hedged asset be sold or liability terminated without
terminating the swap position, any swap gains or losses are immediately
recognized in earnings. Interest rate swaps purchased in anticipation of an
asset purchase ("anticipatory transaction") are recognized consistent with the
underlying asset components such that the settlement component is recognized in
the Consolidated Statements of Income while the change in market value is
recognized as an unrealized gain or loss.
Premiums paid on purchased floor or cap agreements and the premium received on
issued floor or cap agreements (used for risk management), are adjusted into
the basis of the applicable asset and amortized over the asset life. Gains or
losses on termination of such positions are adjusted into the basis of the
asset or liability and amortized over the remaining asset life. Net payments
are recognized as an adjustment to income or basis adjusted and amortized
depending on the specific hedge strategy.
Forward exchange contracts and foreign currency swaps are accounted for in
accordance with SFAS No. 52.
(I) RELATED PARTY TRANSACTIONS
Transactions of Hartford Life with its parent and affiliates relate principally
to tax settlements, insurance coverage, rental and service fees and payment of
dividends and capital contributions. In addition, certain affiliated insurance
companies purchased group annuity contracts from Hartford Life to fund pension
costs and claim annuities to settle casualty claims.
On June 30, 1995, the assets of Lyndon Insurance Company ("Lyndon") were
contributed to ILA. As a result, ILA received approximately $365 in fixed
maturities, equity securities and cash, $26 in receivables, $187 of current
tax liability, $20 in deferred tax liability, and $3 of other liabilities.
The excess of assets over liabilities of $181 were recorded as an increase to
paid-in capital.
Substantially all general insurance expenses related to Hartford Life,
including rent expenses, are initially paid by Hartford Fire. Direct expenses
are allocated to Hartford Life using specific identification and indirect
expenses are allocated using other applicable methods.
The rent paid to Hartford Fire for the space occupied by Hartford Life was $3
in 1995, 1994, and 1993 respectively. Hartford Life expects to pay rent of $3
in 1996, 1997, 1998, 1999, and 2000, respectively and $57 thereafter, over the
contract life of the lease.
(J) DIVIDEND TO POLICYHOLDERS
Dividends to policyholders primarily represent those amounts paid to corporate
owned life insurance ("COLI") policyholders. These dividend liabilities, which
appear as other policyholder funds on the Consolidated Balance Sheets, are
recorded when approved by the board of directors.
See Note (4) for the related party coinsurance agreements.
F-8
<PAGE>
2. INVESTMENTS
(a) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
<S> <C> <C> <C>
1995 1994 1993
------ ------ ------
Interest income $1,338 $1,247 $1,007
Income from other investments 1 54 53
------ ------ ------
GROSS INVESTMENT INCOME 1,339 1,301 1,060
Less: Investment expenses 11 9 9
------ ------ ------
NET INVESTMENT INCOME $1,328 $1,292 $1,051
------ ------ ------
------ ------ ------
(b) UNREALIZED GAINS/(LOSSES) ON EQUITY SECURITIES
As of December 31,
--------------------------
1995 1994 1993
------ ------ ------
Gross unrealized gains $4 $2 $3
Gross unrealized losses (2) (11) (11)
Deferred income tax expenses/(benefit) 1 (3) (3)
------ ------ ------
NET UNREALIZED GAINS (LOSSES) AFTER TAX 1 (6) (5)
Balance at the beginning of the year (6) (5) (0)
------ ------ ------
CHANGE IN NET UNREALIZED GAINS (LOSSES) ON EQUITY SECURITIES $7 ($1) ($5)
------ ------ ------
------ ------ ------
(c) UNREALIZED GAINS/(LOSSES) IN FIXED SECURITIES
As of December 31,
--------------------------
1995 1994 1993
------ ------ ------
Gross unrealized gains $529 $150 $538
Gross unrealized losses (569) (1,185) (290)
Unrealized (losses)/gains credited to policyholder (52) 37 0
Deferred income tax (benefit)/expense (34) (350) 87
------ ------ ------
NET UNREALIZED (LOSSES) GAINS AFTER TAX (58) (648) 161
Balance at the beginning of the year (648) 161 144
------ ------ ------
CHANGE IN NET UNREALIZED GAINS(LOSES)
ON FIXED MATURITIES $590 ($809) $17
------ ------ ------
------ ------ ------
(d) COMPONENTS OF NET REALIZED GAINS/(LOSSES)
Year ended December 31,
--------------------------
1995 1994 1993
------ ------ ------
Fixed maturities $23 ($34) ($12)
Equity securities (6) (11) 0
Real estate and other (25) 47 43
Less: (decrease)/increase in liability to policyholders
for realized gains (3) 5 (15)
------ ------ ------
NET REALIZED (LOSSES) GAINS ($11) $7 $16
------ ------ ------
------ ------ ------
</TABLE>
F-9
<PAGE>
(e) DERIVATIVE INVESTMENTS
A summary of investments, segregated by major category along with the types of
derivatives and their respective notional amounts, are as follows as of
December 31, 1995 :
<TABLE>
<CAPTION>
SUMMARY OF INVESTMENTS
AS OF DECEMBER 31, 1995
(CARRYING AMOUNT)
Caps, Floors & Options Foreign
Carrying ----------------------- Currency
Value Non-Derivative Issued(b) Purchased(c) Futures(d) Swaps(f) Swaps
-------- ----------- -------- ----------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset-backed securities $5,764 $5,752 ($1) $30 $0 ($17) $0
Inverse floaters(a) 711 794 (30) 16 0 (69) 0
Anticipatory(e) 0 0 0 0 0 0 0
-------- ----------- -------- ----------- --------- -------- -------
TOTAL ASSET-BACKED SECURITIES 6,475 6,546 (31) 46 0 (86) 0
Other bonds and notes 7,118 7,165 (1) 0 0 (22) (24)
Short-term investments 807 807 0 0 0 0 0
-------- ----------- -------- ----------- --------- -------- -------
TOTAL FIXED MATURITIES 14,400 14,518 (32) 46 0 (108) (24)
Other investments 3,865 3,865 0 0 0 0 0
-------- ----------- -------- ----------- --------- -------- -------
TOTAL INVESTMENTS $18,265 $18,383 ($32) $46 $0 ($108) ($24)
-------- ----------- -------- ----------- --------- -------- -------
-------- ----------- -------- ----------- --------- -------- -------
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF INVESTMENTS
AS OF DECEMBER 31, 1995
(NOTIONAL AMOUNT)
(EXCLUDING LIABILITY HEDGES)
Caps, Floors & Options Foreign
Notional ---------------------- Currency
Amount Issued(b) Purchased(c) Futures(d) Swaps(f) Swaps
-------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Asset-backed securities $3,863 $118 $3,133 $322 $290 $0
Inverse floaters(a) 1,601 560 354 6 681 0
Anticipatory(e) 238 0 0 213 25 0
-------- --------- --------- ---------- --------- ---------
TOTAL ASSET-BACKED SECURITIES 5,702 678 3,487 541 996 0
Other bonds and notes 1,365 33 66 322 757 187
Short-term investments 0 0 0 0 0 0
-------- --------- --------- ---------- --------- ---------
TOTAL FIXED MATURITIES 7,067 711 3,553 863 1,753 187
Other investments 18 0 0 0 18 0
-------- --------- --------- ---------- --------- ---------
TOTAL INVESTMENTS $7,085 $711 $3,553 $863 $1,771 $187
-------- --------- --------- ---------- --------- ---------
-------- --------- --------- ---------- --------- ---------
</TABLE>
(a) Inverse floaters are variations of CMO's for which the coupon rates
move inversely with an index rate (e.g. LIBOR). The risk to principal is
considered negligible as the underlying collateral for the securities is
guaranteed or sponsored by government agencies. To address the volatility
risk created by the coupon variability, Hartford Life uses a variety of
derivative instruments, primarily interest rate swaps and issued floors.
(b) Includes issued caps $475 with a weighted average strike rate of 8.5%
(ranging from 7.0% to 10.4%) and over 85% mature in 2000 through 2004. Issued
floors totaled $236, have a weighted average strike rate of 8.1% (ranging
from 5.3% to 10.9%) and mature through 2007 with 76% maturing by 2004.
(c) Comprised of purchased floors of $1.8 billion and purchased caps of $1.7
billion. The floors have a weighted average strike price of 5.8% (ranging from
3.7% to 6.8%) and over 85% mature in 1997 through 1999. The caps have a
weighted average strike price of 7.5% (ranging from 4.5% and 10.1%) and over
82% mature in 1997 through 1999.
(d) Over 95% of futures contracts expire before December 31, 1996.
(e) Deferred gains and losses on anticipatory transactions are included in the
carrying value of bond investments in the consolidated balance sheets. At the
time of the ultimate purchase, they are reflected as a basis adjustment to the
purchased asset. At December 31, 1995, there were $5.3 in net deferred losses
for futures, interest rate swaps and purchased options.
(f) The following table summarizes the maturities by notional value of interest
rate swaps outstanding at December 31, 1995 and the related weighted average
interest pay rate or receive rate assuming current market conditions:
F-10
<PAGE>
<TABLE>
<CAPTION>
MATURITY OF SWAPS ON INVESTMENTS
AS OF DECEMBER 31, 1995
LAST
1996 1997 1998 1999 2000 THEREAFTER TOTAL MATURITY
---- ---- ---- ---- ---- ---------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST RATE SWAPS
PAY FIXED/RECEIVE VARIABLE
Notional Value $15 $50 $0 $453 $31 $229 $778 2004
Weighted Average Pay Rate 5.0% 7.2% 0.0% 8.1% 7.1% 7.8% 7.8%
Weighted Average Receive Rate 5.8% 5.9% 0.0% 5.8% 5.7% 5.9% 5.9%
PAY VARIABLE/RECEIVE FIXED
Notional Value $100 $68 $25 $25 $35 $190 $443 2007
Weighted Average Pay Rate 5.9% 8.6% 5.9% 0.0% 5.9% 5.4% 5.4%
Weighted Average Receive Rate 2.4% 7.9% 4.0% 0.0% 6.5% 6.9% 6.9%
PAY VARIABLE/RECEIVE DIFFERENT VARIABLE
Notional Value $50 $18 $36 $12 $200 $234 $550 2004
Weighted Average Pay Rate 5.8% 0.0% 3.7% 3.5% 4.5% 16.3% 5.7%
Weighted Average Receive Rate 5.4% 0.0% 5.6% 5.2% 6.8% 5.9% 6.4%
TOTAL INTEREST RATE SWAPS $165 $136 $61 $490 $266 $653 $1,771 2007
WEIGHTED AVERAGE PAY RATE 5.8% 7.8% 4.6% 7.6% 5.0% 7.3% 6.9%
WEIGHTED AVERAGE RECEIVE RATE 3.6% 7.2% 4.9% 5.4% 6.6% 6.3% 5.8%
</TABLE>
(g) The following table reconciles the derivative notional amounts by derivative
type and by strategy:
<TABLE>
<CAPTION>
BY DERIVATIVE TYPE
----------------------------------------------------------------------
12/31/94 MATURITIES/ 12/31/95
NOTIONAL AMOUNT ADDITIONS TERMINATIONS NOTIONAL AMOUNT
--------------- --------- ------------ ---------------
<S> <C> <C> <C> <C>
Caps $1,861 $2,666 $2,343 $2,184
Floors 2,131 237 188 2,180
Swaps/Collars/Forwards/Options 4,374 1,355 2,163 3,566
Futures 253 6,125 5,515 863
--------------- --------- ------------ ---------------
TOTAL $8,619 $10,383 $10,209 $8,793
--------------- --------- ------------ ---------------
--------------- --------- ------------ ---------------
BY STRATEGY
----------------------------------------------------------------------
12/31/94 MATURITIES/ 12/31/95
NOTIONAL AMOUNT ADDITIONS TERMINATIONS NOTIONAL AMOUNT
--------------- ---------- ------------ ---------------
Liability $1,725 $729 $746 $1,708
Anticipatory 626 1,564 1,952 238
Asset 3,048 3,153 3,217 2,984
Portfolio 3,220 4,937 4,294 3,863
--------------- ---------- ------------ --------------
TOTAL $8,619 $10,383 $10,209 $8,793
--------------- ---------- ------------ --------------
--------------- ---------- ------------ --------------
</TABLE>
In addition to risk management through derivative financial instruments
pertaining to the investment portfolio, interest rate sensitivity related to
certain Company liabilities was altered primarily through interest rate swap
agreements. The notional
F-11
<PAGE>
amount of the liability agreements in which Hartford Life generally pays one
variable rate in exchange for another, was $1.7 billion at December 31, 1995 and
1994 respectively. The weighted average pay rate is 5.9%; the weighted average
receive rate is 6.0% , and these agreements mature at various times through
2001.
(F) CONCENTRATION OF CREDIT RISK
Hartford Life has a reinsurance recoverable of $5.6 billion from Mutual Benefit
Life Assurance Corporation (Mutual Benefit). The risk of Mutual Benefit
becoming insolvent is mitigated by the reinsurance agreement's requirement that
the assets be kept in a security trust with Hartford Life as sole beneficiary.
Excluding investments in U.S. government and agencies, Hartford Life has no
other significant concentrations of credit risk.
Included in fixed maturity investments at December 31, 1995 were $39 of
Orange County, California Pension Obligation Bonds, $17 of which were carried
in the general account and $22 which were included in Hartford Life's
guaranteed separate accounts. During 1995 all interest payments due were
received. While Orange County is currently operating under Protection of
Chapter 9 of the Federal Bankruptcy Laws, Hartford Life believes the bonds
are not impaired other than on a temporary basis.
(G) FIXED MATURITIES
The schedule below details the amortized cost and fair values of Hartford Life's
fixed maturities by component, along with the gross unrealized gains and losses:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,1995
--------------------------------------------------
GROSS UNREALIZED
AMORTIZED --------------------- MARKET
COST GAINS LOSSES VALUE
---------- ------- ------ -----
<S> <C> <C> <C> <C>
U.S. Government and government agencies and
authorities;
Guaranteed and sponsored $502 $4 ($9) $497
Guaranteed and sponsored-asset backed 3,568 210 (387) 3,391
State, municipalities and political subdivisions 201 4 (3) 202
International governments 291 19 (4) 306
Public utilities 949 29 (2) 976
All other corporate-asset backed 3,065 76 (55) 3,086
All other corporate 5,056 187 (109) 5,134
Short-term investments 808 0 0 808
---------- ------- ----- -----
TOTAL INVESTMENTS $14,440 $529 ($569) $14,440
---------- ------- ----- -----
---------- ------- ----- -----
AS OF DECEMBER 31,1994
--------------------------------------------------
GROSS UNREALIZED
AMORTIZED --------------------- MARKET
COST GAINS LOSSES VALUE
---------- ------- ------ -----
U.S. Government and government agencies
and authorities;
Guaranteed and sponsored $1,516 $1 ($87) $1,430
Guaranteed and sponsored-asset backed 4,256 78 (571) 3,763
State, municipalities and political subdivisions 148 1 (12) 137
International governments 189 1 (14) 176
Public utilities 531 1 (32) 500
All other corporate-asset backed 2,442 30 (121) 2,351
All other corporate 3,717 38 (297) 3,458
Short-term investments 1,665 0 (51) 1,614
--------- ------- -------- -------
TOTAL INVESTMENTS $14,464 $150 ($1,185) $13,429
--------- ------- -------- -------
--------- ------- -------- -------
</TABLE>
F-12
<PAGE>
The amortized cost and estimated fair value of fixed maturities at December 31,
1995, by maturity, are shown below. Asset backed securities are distributed to
maturity year based on estimates of the rate of future prepayments of principal
over the remaining life of the securities. Expected maturities differ from
contractual maturities reflecting the borrowers' rights to call or prepay their
obligations.
<TABLE>
<CAPTION>
AMORTIZED MARKET
COST VALUE
---------- ---------
<S> <C> <C>
Due in one year or less $3,146 $3,133
Due after one year through five years 6,373 6,316
Due after five years through ten years 3,609 3,644
Due after ten years 1,312 1,307
---------- ---------
TOTAL $14,440 $14,400
---------- ---------
---------- ---------
</TABLE>
Sales of fixed maturities excluding short-term fixed maturities for the years
ended December 31, 1995, 1994, and 1993 resulted in proceeds of $4,848, $5,708,
and $8,813, respectively, resulting in gross realized gains of $91, $71, and
$192, respectively, and gross realized losses of $72, $100, and $219,
respectively, not including policyholder gains and losses. Sales of equity
securities and other investments for the years ended December 31, 1995, 1994,
and 1993 resulted in proceeds of $64, $159, and $127, respectively, resulting in
gross realized gains of $28, $3, and $0, respectively, and gross realized losses
of $59, $14, $0, respectively, not including policyholder gains and losses.
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995 AS OF DECEMBER 31, 1994
----------------------- -----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
ASSETS
Fixed maturities $14,400 $14,400 $13,429 $13,429
Equity securities 63 63 68 68
Policy loans 3,381 3,381 2,614 2,614
Mortgage loans 265 265 316 316
Investments in partnerships and trusts 94 97 36 42
Miscellaneous 62 62 67 67
LIABILITIES
Other policy claims and benefits $12,727 $12,767 $13,001 $12,374
</TABLE>
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument: fair value for fixed maturities and equity
securities approximate those quotations published by applicable stock exchanges
or are received from other reliable sources; policy and mortgage loan carrying
amounts approximate fair value; investments in partnerships and trusts are based
on external market valuations from partnership and trust management; and other
policy claims and benefits payable are determined by estimating future cash
flows discounted at the current market rate.
3. INCOME TAX
Hartford Life is included in ITT Hartford Group's consolidated U.S. Federal
income tax return and remits to (receives from) ITT Hartford Group, Inc. a
current income tax provision (benefit) computed in accordance with the tax
sharing arrangements between its insurance subsidiaries. The effective tax
rate was 32% in 1995 and 1994, and approximates the U.S. statutory tax rate
of 35% in 1993.
F-13
<PAGE>
The provision for income taxes was as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
INCOME TAX EXPENSES
Current $211 $185 $190
Deferred (149) (120) (115)
------- ------- -------
TOTAL $62 $65 $75
------- ------- -------
------- ------- -------
INCOME TAX PROVISION
Tax provision at U.S. statutory rate $67 $71 $76
Tax-exempt income (3) (3) 0
Foreign tax credit (4) (1) 0
Other 2 (2) (1)
------- ------- -------
PROVISION FOR INCOME TAX $62 $65 $75
------- ------- -------
------- ------- -------
</TABLE>
Income taxes paid were $162, $244, and $301 in 1995, 1994, and 1993
respectively. The current taxes due from Hartford Fire were $8 and $46 in 1995
and 1994, respectively.
Deferred tax assets(liabilities) include the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Tax deferred acquisition costs $410 $284
Book deferred acquisition costs and reserves 138 (134)
Employee benefits 8 7
Unrealized net loss on investments 32 353
Investments and other (168) 80
--------- ---------
TOTAL DEFERRED TAX ASSET $420 $590
--------- ---------
--------- ---------
</TABLE>
Prior to the Tax Reform Act of 1984, the Life Insurance Company Income Tax Act
of 1959 permitted the deferral from taxation of a portion of statutory income
under certain circumstances. In these situations, the deferred income was
accumulated in a "Policyholders' Surplus Account" and will be taxable in the
future only under conditions which management considers to be remote; therefore,
no Federal income taxes have been provided on this deferred income. The balance
for tax return purposes of the Policyholders' Surplus Account as of December 31,
1995 was $37.
4. REINSURANCE
Hartford Life cedes insurance to non-affiliated insurers in order to limit its
maximum loss. Such transfer does not relieve Hartford Life of its primary
liability. Hartford Life also assumes insurance from other insurers. Group
life and accident and health insurance business is substantially reinsured to
affiliated companies.
Life insurance net retained premiums were comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Gross premiums $1,545 $1,316 $1,135
Insurance assumed 591 299 93
Insurance ceded 649 515 481
------- ------- -------
NET RETAINED PREMIUMS $1,487 $1,100 $747
------- ------- -------
------- ------- -------
</TABLE>
F-14
<PAGE>
Life reinsurance recoveries, which reduced death and other benefits, for the
years ended December 31, 1995, 1994 and 1993 approximated $220, $164, and $149,
respectively.
In December 1994, Hartford Life assumed from a third party approximately $500
of corporate owned life insurance reserves on a coinsurance basis. In
December 1995, this block of business was reinsured to HLRe utilizing
modified coinsurance, with the assets and policy liabilities placed in a
separate account. In October 1994, HLRe recaptured approximately $500 of
corporate owned life insurance from a third party reinsurer. Subsequent to
this transaction, Hartford Life and HLRe restructured their coinsurance
agreement from coinsurance to modified coinsurance, with the assets and
policy liabilities placed in the separate account. These transactions did not
have a material impact on consolidated net income.
Also in December 1994, ILA ceded to a third party $1.0 billion in individual
fixed and variable annuities on a modified coinsurance basis. In December 1995,
Hartford Life ceded approximately $1.2 billion in individual variable annuities
on a modified coinsurance basis to a third party. These transactions did not
have a material impact on consolidated net income.
In May 1994, Hartford Life assumed the life insurance policies and the
individual annuities of Pacific Standard with reserves and account values of
approximately $400. Hartford Life received cash and investment grade assets
to support the life insurance and individual annuity contract obligations
assumed.
In November 1993, ILA acquired, through an assumption reinsurance
transaction, substantially all of the individual fixed and variable annuity
business of HLA. As a result of this transaction, the assets and liabilities
of Hartford Life increased approximately $1 billion. The excess of
liabilities assumed over assets received, of $2, was recorded as a decrease
to capital surplus. The remaining $41 in assets and liabilities were
transferred in October 1995. The impact on consolidated net income was not
significant.
In August 1993, Hartford Life received assets of $300 for assuming the group
COLI contract obligations of Mutual Benefit Life Insurance Company, through
an assumption reinsurance transaction. Under the terms of the agreement,
Hartford Life coinsured back 75% of the liabilities to Mutual Benefit Life
Insurance Company. All assets supporting Mutual Benefit's reinsurance
liability to Hartford Life are placed in a "security trust", with Hartford
Life as the sole beneficiary. The impact on 1993 consolidated net income was
not significant.
5. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
Hartford Life's employees are included in Hartford Fire's noncontributory
defined benefit pension plans. These plans provide pension benefits that are
based on years of service and the employee's compensation during the last ten
years of employment. Hartford Life's funding policy is to contribute annually
an amount between the minimum funding requirements set forth in the Employee
Retirement Income Security Act of 1974 and the maximum amount that can be
deducted for Federal income tax purposes. Generally, pension costs are funded
through the purchase of Hartford Life's group pension contracts. The cost to
Hartford Life was approximately $2, $2, and $3 in 1995, 1994 and 1993,
respectively.
Hartford Life provides certain health care and life insurance benefits for
eligible retired employees. A substantial portion of Hartford Life's employees
may become eligible for these benefits upon retirement. Hartford Life's
contribution for health care benefits will depend on the retiree's date of
retirement and years of service. In addition, the plan has a defined dollar cap
which limits average company contributions. Hartford Life has prefunded a
portion of the health care and life insurance obligations through trust funds
where such prefunding can be accomplished on a tax effective basis.
Postretirement health care and life insurance benefits expense, allocated by
Hartford Fire were immaterial for 1995, 1994, and 1993 respectively.
The assumed rate of future increases in the per capita cost of health care (the
health care trend rate) was 10.1% for 1995, decreasing ratably to 6.0% in the
year 2001. Increasing the health care trend rates by one percent per year would
have an immaterial impact on the accumulated postretirement benefit obligation
and the annual expense. To the extent that the actual experience differs from
the inherent assumptions, the effect will be amortized over the average future
service of the covered employees.
F-15
<PAGE>
6. BUSINESS SEGMENT INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
REVENUES
Individual Life and Annuity $797 $691 $595
Asset Management Services 734 789 794
Specialty Insurance Operations 1,273 919 425
------ ------ ------
TOTAL REVENUES $2,804 $2,399 $1,814
------ ------- ------
------ ------- ------
- ---------------------------------------------------------------
- ---------------------------------------------------------------
YEAR ENDED DECEMBER 31
------------------------
1995 1994 1993
------ ------- -----
INCOME BEFORE INCOME TAX EXPENSE
Individual Life and Annuity $236 $139 $129
Asset Management Services (79) 38 71
Specialty Insurance Operations 34 26 18
------ ------ ------
TOTAL INCOME BEFORE INCOME
TAX EXPENSE $191 $203 $218
------ ------ ------
------ ------ ------
- ---------------------------------------------------------------
- ---------------------------------------------------------------
YEAR ENDED DECEMBER 31
---------------------------
1995 1994 1993
------- ------- -------
IDENTIFIABLE ASSETS
Individual Life and Annuity $36,741 $26,668 $19,147
Asset Management Services 13,962 13,334 12,416
Specialty Insurance Operations 13,494 7,847 6,723
------- ------- -------
TOTAL IDENTIFIABLE ASSETS $64,197 $47,849 $38,286
------- ------- -------
------- ------- -------
</TABLE>
7. STATUTORY NET INCOME AND SURPLUS
Substantially all of the statutory surplus is permanently reinvested or is
subject to dividend restrictions relating to various state regulations which
limit the payment of dividends without prior approval. Statutory net income
and surplus as of December 31 were:
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
Statutory net income $112 $58 $63
Statutory surplus $1,125 $941 $812
</TABLE>
8. SEPARATE ACCOUNTS
Hartford Life maintains separate account assets and liabilities totaling $36.3
billion and $22.8 billion at December 31, 1995 and 1994, respectively which
are reported at fair value. Separate account assets are segregated from other
investments and investment income and gains and losses accrue directly to the
policyholder. Separate accounts reflect two categories of risk assumption:
non-guaranteed separate accounts totaling $25.9 billion and $14.8 billion at
December 31, 1995 and 1994, respectively, wherein the policyholder assumes the
investment risk, and guaranteed separate account assets totaling $10.4 billion
and $8.0 billion at December 31, 1995 and 1994, respectively, wherein Hartford
Life contractually guarantees either a minimum return or account value to the
policyholder. Included in the non-guaranteed category are policy loans
totaling $1.7 billion and $0.5 billion at December 31, 1995 and 1994,
respectively. Investment income (including investment gains and losses) and
interest credited to policyholders on separate account assets are not
reflected in the Consolidated Statements of Income. Separate account
management fees, net of minimum guarantees, were $387, $256, and $189, in
1995, 1994, and 1993, respectively.
F-16
<PAGE>
The guaranteed separate accounts include modified guaranteed individual
annuity, and modified guaranteed life insurance. The average credit interest
rate on these contracts is 6.62%. The assets that support these liabilities
were comprised of $10.4 billion in bonds at December 31, 1995. The portfolios
are segregated from other investments and are managed so as to minimize
liquidity and interest rate risk. In order to minimize the risk of
disintermediation associated with early withdrawals, individual annuity and
modified guaranteed life insurance contracts carry a graded surrender charge
as well as a market value adjustment. Additional investment risk is hedged
using a variety of derivatives which totaled $133 million in carrying value
and $2.7 billion in notional amounts at December 31, 1995.
9. COMMITMENTS AND CONTINGENCIES
In August 1994, Hartford Life renewed a two year note purchase facility
agreement which in certain instances obligates Hartford Life to purchase up to
$100 million in collateralized notes from a third party. Hartford Life is
receiving fees for this commitment. At December 31, 1995, Hartford Life had
not purchased any notes under this agreement.
Under insurance guaranty fund laws in most states, insurers doing business
therein can be assessed up to prescribed limits for policyholder losses
incurred by insolvent companies. The amount of any future assessments on
Hartford Life under these laws cannot be reasonably estimated. Most of these
laws do provide, however, that an assessment may be excused or deferred if it
would threaten an insurer's own financial strength. Additionally, guaranty
fund assessments are used to reduce state premium taxes paid by the Company in
certain states. Hartford Life paid guaranty fund assessments of approximately
$10, $8 and $6 in 1995, 1994, and 1993, respectively.
Hartford Life is involved in various legal actions, some of which involve
claims for substantial amounts. In the opinion of management the ultimate
liability with respect to such lawsuits, as well as other contingencies, is
not considered material in relation to the consolidated financial position of
Hartford Life.
F-17
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE I - SUMMARY OF INVESTMENTS (OTHER THAN INVESTMENTS IN AFFILIATES)
AS OF DECEMBER 31, 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
FAIR REPORTED ON
COST VALUE BALANCE SHEET
-------------- ------------- -----------------
<S> <C> <C> <C>
FIXED MATURITIES
Bonds
U.S. Government and government agencies and authorities
Guaranteed and sponsored $502 $497 $497
Guaranteed and sponsored - asset backed 3,568 3,391 $3,391
States, municipalities and political subdivisions 201 202 $202
International governments 291 306 $306
Public utilities 949 976 $976
All other corporate 5,056 5,134 $5,134
All other corporate - asset backed 3,065 3,086 $3,086
Short-term investments 808 808 $808
---------- --------- ---------
TOTAL FIXED MATURITIES $14,440 $14,400 $14,400
EQUITY SECURITIES
Common stocks - industrial, miscellaneous and all other 61 63 63
TOTAL FIXED MATURITIES AND EQUITY SECURITIES $14,501 $14,463 $14,463
POLICY LOANS 3,381 3,381 3,381
MORTGAGE LOANS 265 265 265
OTHER INVESTMENTS 156 159 156
--------- -------- -------
TOTAL INVESTMENTS $18,303 $18,268 $18,265
--------- -------- -------
--------- -------- -------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Fair value for stocks and bonds approximate those quotations published by
applicable stock exchanges or are received from other reliable sources. The
fair value for short-term investments approximates cost.
Policy and mortgage loans carrying amounts approximate fair value.
S-1
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE III - SUPPLEMENTAL INSURANCE INFORMATION
(in millions)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Amort. of
Deferred Future Other Premiums and Net Benefits, Claims Deferred Other
Policy Policy Policyholder Other Investment and Claim Adj. Policy Insurance
Acq. Costs Benefits Funds Considerations Income Expenses Acq. Costs Expenses
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
As of December 31, 1995 Year ended December 31, 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Individual Life and Annuity $2,088 $706 $4,371 $514 $283 $277 $176 $108
Asset Management Services 87 1,169 8,942 51 683 722 23 68
Specialty Insurance
Operations 13 498 9,285 922 351 423 0 816
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
TOTAL $2,188 $2,373 $22,598 $1,487 $1,317 $1,422 $199 $992
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
As of December 31, 1994 Year ended December 31, 1994
Individual Life and
Annuity $1,708 $582 $4,257 $492 $199 $334 $137 $80
Asset Management Services 101 845 10,160 39 750 695 8 48
Specialty Insurance
Operations 0 463 6,911 569 350 376 0 518
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
TOTAL $1,809 $1,890 $21,328 $1,100 $1,299 $1,405 $145 $646
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
As of December 31, 1993 Year ended December 31, 1993
Individual life and Annuity $1,237 $428 $3,535 $423 $172 $249 $97 $120
Asset Management Services 97 703 9,026 35 759 662 16 45
Specialty Insurance
Operations 0 528 5,673 289 136 135 0 272
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
TOTAL $1,334 $1,659 $18,234 $747 $1,067 $1,046 $113 $437
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
---------- -------- ------------ -------------- ---------- ---------------- ---------- ---------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Investment income is allocated to the reportable division based on each
division's share of investable funds or on a direct basis, where applicable,
including realized capital gains and losses.
Benefits, claims and claims adjustment expenses include the increase in
liability for future policy benefits and death, disability and other contract
benefits payments.
Other insurance expenses are allocated to the division based upon specific
identification, where possible.
S-2
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE IV - REINSURANCE
(in millions)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Percentage of
Gross Ceded to Assumed from Net Amount Assumed
Amount Other Companies Other Companies Amount to Net Amount
-------- ----------------- ----------------- -------- ----------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
LIFE INSURANCE IN FORCE $182,716 $112,774 $26,996 $96,938 27.8%
PREMIUMS AND OTHER CONSIDERATIONS
Individual Life and Annuity $549 $163 $122 $508 24.0%
Asset Management Services 51 0 0 51 0.0%
Specialty Insurance Operations 632 162 452 922 49.0%
313 324 17 6 283.3%
-------- ----------------- ----------------- --------
TOTAL $1,545 $649 $591 $1,487 39.7%
-------- ----------------- ----------------- --------
-------- ----------------- ----------------- --------
YEAR ENDED DECEMBER 31, 1994
LIFE INSURANCE IN FORCE $136,929 $87,553 $35,016 $84,392 41.5%
PREMIUMS AND OTHER CONSIDERATIONS
Individual Life and Annuity $448 $71 $106 $483 21.9%
Asset Management Services 39 0 0 39 0.0%
Specialty Insurance Operations 521 140 188 569 33.0%
Accident and Health 308 304 5 9 55.6%
-------- ----------------- ----------------- --------
TOTAL $1,316 $515 $299 $1,100 27.2%
-------- ----------------- ----------------- --------
-------- ----------------- ----------------- --------
YEAR ENDED DECEMBER 31, 1993
LIFE INSURANCE IN FORCE $93,099 $71,415 $27,067 $48,751 55.5%
PREMIUMS AND OTHER CONSIDERATIONS
Individual Life and Annuity $417 $85 $91 $423 21.5%
Asset Management Services 25 0 0 25 0.0%
Specialty Insurance Operations 386 97 0 289 0.0%
Accident and Health 307 299 2 10 20.0%
-------- ----------------- ----------------- --------
TOTAL $1,135 $481 $93 $747 12.4%
-------- ----------------- ----------------- --------
-------- ----------------- ----------------- --------
</TABLE>
S-3
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) All financial statements are included in Part A and Part B of the
Registration Statement.
(b) (1) The resolution authorizing the Separate Account is incorporated
by reference to Post-Effective Amendment No. 2, to the
Registration Statement File No. 33-80738, dated May 1, 1995.
(2) Not applicable. Hartford Life maintains custody of all assets.
(3) (a) Principal Underwriter Agreement is incorporated herein.
(3) (b) Form of the Sales Agreement is incorporated herein.
(4) The Individual Flexible Premium Variable Annuity Contract is
incorporated by reference as stated above.
(5) The form of Application is incorporated by reference as stated
above.
(6) (a) Certificate of Incorporation of Hartford Life Insurance
Company is incorporated herein.
(b) Bylaws of Hartford Life Insurance Company are incorporated
by reference as stated above.
(7) Not applicable.
(8) The form of Share Purchase Agreement by the registrant and Dean
Witter Select Dimensions Investment Series is incorporated by
reference as stated above.
(9) Legal opinion is incorporated herein.
(10) Consent of Arthur Andersen LLP is incorporated herein.
(11) No financial statements are omitted.
(12) Not applicable.
(13) Not applicable.
(14) A financial data schedule is incorporated herein.
<PAGE>
-2-
Item 25. Directors and Officers of the Depositor
Louis J. Abdou Vice President
Wendell J. Bossen Vice President
Gregory A. Boyko Vice President
Peter W. Cummins Vice President
Ann M. deRaismes Vice President
Timothy M. Fitch Vice President
Donald R. Frahm Chairman & CEO, Director
Bruce D. Gardner Vice President, Director
Joseph H. Gareau Executive Vice President & Chief
Investment Officer, Director
J. Richard Garrett Vice President & Treasurer
John P. Ginnetti Executive Vice President
Lynda Godkin Associate General Counsel &
Corporate Secretary
Lois W. Grady Vice President
David A. Hall Senior Vice President & Actuary
Joseph Kanarek Vice President
Robert A. Kerzner Vice President
Kevin J. Kirk Vice President
Andrew W. Kohnke Vice President
Stephen M. Maher Vice President & Actuary
<PAGE>
-3-
William B. Malchodi, Jr. Vice President & Director of Taxes
Thomas M. Marra Executive Vice President, Director
Robert F. Nolan Vice President
Joseph J. Noto Vice President
Leonard E. Odell, Jr. Senior Vice President, Director
Michael C. O'Halloran Vice President & Associate General
Counsel
Craig R. Raymond Vice President & Chief Actuary
Lowndes A. Smith President & Chief Operating Officer,
Director
Edward J. Sweeney Vice President
James E. Trimble Vice President & Actuary
Raymond P. Welnicki Senior Vice President, Director
Walter C. Welsh Vice President
James T. Westervelt Senior Vice President & Group
Comptroller
Lizabeth H. Zlatkus Vice President
Unless otherwise indicated, the principal business address of each the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
Item 26. Persons Controlled By or Under Common Control with the Depositor or
Registrant
Exhibit 26 is incorporated herein.
Item 27. Number of Contract Owners
As of December 31, 1995 , there were contract owners.
<PAGE>
-4-
Item 28. Indemnification
Under Section 33-320a of the Connecticut General Statutes, the Registrant must
indemnify a director or officer against judgments, fines, penalties, amounts
paid in settlement and reasonable expenses, including attorneys' fees, for
actions brought or threatened to be brought against him in his capacity as a
director or officer when it is determined by certain disinterested parties that
he acted in good faith and in a manner he reasonably believed to be in the best
interests of the Registrant. In any criminal action or proceeding, it also must
be determined that the director or officer had no reason to believe his conduct
was unlawful. The director or officer must also be indemnified when he is
successful on the merits in the defense of a proceeding or in circumstances
where a court determines that he is fairly and reasonably entitled to be
indemnified, and the court approves the amount. In shareholder derivative
suits, the director or officer must be finally adjudged not to have breached his
duty to the Registrant or a court must determine that he is fairly and
reasonably entitled to be indemnified and must approve the amount. In a claim
based upon the director's or officer's purchase or sale of the Registrant's
securities, the director or officer may obtain indemnification only if a court
determines that, in view of all the circumstances, he is fairly and reasonably
entitled to be indemnified, and then for such amount as the court shall
determine.
The foregoing statements are specifically made subject to the detailed
provisions of Section 33-320a.
The directors and officers of Hartford Life and Hartford Securities Distribution
Company, Inc. ("HSD") are covered under a directors and officers liability
insurance policy issued to ITT Hartford Group, Inc. and its subsidiaries. Such
policy will reimburse the Registrant for any payments that it shall make to
directors and officers pursuant to law and will, subject to certain exclusions
contained in the policy, further pay any other costs, charges and expenses and
settlements and judgments arising from any proceeding involving any director or
officer of the Registrant in his past or present capacity as such, and for which
he may be liable, except as to any liabilities arising from acts that are deemed
to be uninsurable.
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, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
-5-
Item 29. Principal Underwriters
(a) HSD acts as principal underwriter for the following investment
companies:
Hartford Life Insurance Company - Separate Account One
Hartford Life Insurance Company - Separate Account Two
Hartford Life Insurance Company - Separate Account Two (DC Variable
Account I)
Hartford Life Insurance Company - Separate Account Two (DC Variable
Account II)
Hartford Life Insurance Company - Separate Account Two (QP Variable
Account)
Hartford Life Insurance Company - Separate Account Two (Variable
Account "A")
Hartford Life Insurance Company - Separate Account Two (NQ Variable
Account)
Hartford Life Insurance Company - Putnam Capital Manager Trust
Separate Account
Hartford Life Insurance Company - Separate Account Three
Hartford Life Insurance Company - Separate Account Five
ITT Hartford Life and Annuity Insurance Company - Separate Account One
ITT Hartford Life and Annuity Insurance Company - Putnam Capital
Manager Trust Separate Account Two
ITT Hartford Life and Annuity Insurance Company - Separate Account
Three
ITT Hartford Life and Annuity Insurance Company - Separate Account
Five
ITT Hartford Life and Annuity Insurance Company - Separate Account Six
(b) Directors and Officers of HSD
Name and Principal Positions and Offices
Business Address With Underwriter
------------------ ---------------------
Donald E. Waggaman, Jr Treasurer
<PAGE>
-6-
Bruce D. Gardner Secretary
George R. Jay Controller
Lowndes A. Smith President
Item 30. Location of Accounts and Records
Accounts and records are maintained by Hartford Life.
Item 31. Management Services
None
Item 32. Undertakings
(a) The Registrant hereby undertakes to file a post-effective amendment to
this registration statement as frequently as is necessary to ensure
that the audited financial statements in the registration statement
are never more than 16 months old so long as payments under the
Variable Annuity Contracts may be accepted.
(b) The Registrant hereby undertakes to include either (1) as part of any
application to purchase a Contract offered by the Prospectus, a space
that an applicant can check to request a Statement of Additional
Information, or (2) a post card or similar written communication
affixed to or included in the Prospectus that the applicant can remove
to send for a Statement of Additional Information.
(c) The Registrant hereby undertakes to deliver any Statement of
Additional Information and any financial statements required to be
made available under this Form promptly upon written or oral request.
The Registrant is relying on the no-action letter issued by the Division of
Investment Management to American Council of Life Insurance, Ref. No. IP-6-88,
November 28, 1988. The Registrant has complied with the four provisions of the
no-action letter.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY, INC.
AND
HARTFORD LIFE AND ACCIDENT INSURANCE COMPANY, INC.
POWER OF ATTORNEY
Donald R. Frahm
Bruce D. Gardner
Joseph H. Gareau
John P. Ginnetti
Thomas M. Marra
Leonard E. Odell, Jr.
Lowndes A. Smith
Raymond P. Welnicki
Lizabeth H. Zlatkus
do hereby jointly and severally authorize Lynda Godkin and/or Scott K.
Richardson to sign as their agent, any Registration Statement, pre-effective
amendment, post-effective amendment and any application for exemptive relief of
the Hartford Life Insurance Company, Inc. and Hartford Life and Accident
Insurance Company, Inc. under the Securities Act of 1933 and/or the Investment
Company Act of 1940.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney for the
purpose herein set forth.
/s/ Donald R. Frahm Dated: 10/19/95
- ----------------------------------- ---------------------
Donald R. Frahm
/s/ Bruce D. Gardner Dated: 10/19/95
- ----------------------------------- ---------------------
Bruce D. Gardner
/s/ Joseph H. Gareau Dated: 10/19/95
- ----------------------------------- ---------------------
Joseph H. Gareau
/s/ John P. Ginnetti Dated: 10/26/95
- ----------------------------------- ---------------------
John P. Ginnetti
/s/ Thomas M. Marra Dated: 10/19/95
- ----------------------------------- ---------------------
Thomas M. Marra
/s/ Leonard E. Odell, Jr. Dated: 10/20/95
- ----------------------------------- ---------------------
Leonard E. Odell, Jr.
/s/ Lowndes A. Smith Dated: 10/19/95
- ----------------------------------- ---------------------
Lowndes A. Smith
<PAGE>
/s/ Raymond P. Welnicki Dated: 10/24/95
- ----------------------------------- ---------------------
Raymond P. Welnicki
/s/ Lizabeth H. Zlatkus Dated: 10/20/95
- ----------------------------------- ---------------------
Lizabeth H. Zlatkus
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets all the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and duly caused this Registration Statement to be signed
on its behalf, in the City of Hartford, and State of Connecticut on this 15
day of April , 1996.
HARTFORD LIFE INSURANCE COMPANY -
SEPARATE ACCOUNT THREE
(Registrant)
*By: /s/ Thomas M. Marra *By: /s/ Lynda Godkin
------------------------------------- --------------------------------
Thomas M. Marra, Executive Vice President Lynda Godkin
Attorney-in-Fact
HARTFORD LIFE INSURANCE COMPANY
(Depositor)
*By: /s/ Thomas M. Marra
-------------------------------------
Thomas M. Marra, Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons and in the
capacity and on the date indicated.
Donald R. Frahm, Chairman and
Chief Executive Officer, Director *
Bruce D. Gardner, Vice President,
Director *
Joseph H. Gareau, Executive Vice
President and Chief Investment
Officer, Director *
John P. Ginnetti, Executive Vice
President, Director *
Thomas M. Marra, Executive Vice *By: /s/ Lynda Godkin
----------------------------
President, Director * Lynda Godkin
Leonard E. Odell, Jr., Senior Attorney-In-Fact
Vice President, Director *
Lowndes A. Smith, President,
Chief Operating Officer, Director * Dated: April 15, 1996
-----------------------
Raymond P. Welnicki, Senior Vice
President, Director *
Lizabeth H. Zlatkus, Vice President
Director *
<PAGE>
[Exhibit 3a]
PRINCIPAL UNDERWRITER AGREEMENT
THIS AGREEMENT, dated as of the June 26, 1995, made by and between HARTFORD LIFE
INSURANCE COMPANY ("HLIC" or the "Sponsor"), a corporation organized and
existing under the laws of the State of Connecticut, and HARTFORD SECURITIES
DISTRIBUTION COMPANY, INC. ("HSD"), a corporation organized and existing under
the laws of the State of Connecticut,
WITNESSETH:
WHEREAS, the Board of Directors of HLIC has made provision for the establishment
of a separate account within HLIC in accordance with the laws of the State of
Connecticut, which separate account was organized and is established and
registered as a unit investment trust type investment company with the
Securities and Exchange Commission under the Investment Company Act of 1940
("1940 Act"), as amended, and which is designated Hartford Life Insurance
Company Separate Account Three (referred to as the "UIT"); and
WHEREAS, HSD offers to the public a certain Flexible Premium Variable Annuity
Insurance Contract (the "Contract) issued by HLIC with respect to the UIT units
of interest thereunder which are registered under the Securities Act of 1933
("1933 Act"), as amended; and
WHEREAS, HSD has previously agreed to act as distributor in connection with
offers and sales of the Contract under the terms and conditions set forth in
this Principal Underwriter Agreement.
NOW THEREFORE, in consideration of the mutual agreements made herein, HLIC and
HSD agree as follows:
I.
HSD'S DUTIES
1. HSD, as successor principal underwriter to Hartford Equity Sales
Company, Inc. for the Contract, will use its best efforts to effect
offers and sales of the Contract through broker-dealers that are
members of the National Association of Securities Dealers, Inc. and
whose registered representatives are duly licensed as insurance agents
of HLIC. HSD is responsible for compliance with all applicable
requirements of the 1933 Act, as amended, the Securities Exchange Act
of 1934 ("1934 Act"), as amended, and the 1940 Act, as amended, and
the rules and regulations relating to the sales and distribution of
the Contract, the need for which arises out of its duties as principal
underwriter of said Contract and relating to the creation of the UIT.
<PAGE>
2. HSD agrees that it will not use any prospectus, sales literature, or
any other printed matter or material or offer for sale or sell the
Contract if any of the foregoing in any way represent the duties,
obligations, or liabilities of HLIC as being greater than, or
different from, such duties, obligations and liabilities as are set
forth in this Agreement, as it may be amended from time to time.
3. HSD agrees that it will utilize the then currently effective
prospectus relating to the UIT's Policies in connection with its
selling efforts.
As to the other types of sales materials, HSD agrees that it will use
only sales materials which conform to the requirements of federal and
state insurance laws and regulations and which have been filed, where
necessary, with the appropriate regulatory authorities.
4. HSD agrees that it or its duly designated agent shall maintain records
of the name and address of, and the securities issued by the UIT and
held by, every holder of any security issued pursuant to this
Agreement, as required by the Section 26(a)(4) of the 1940 Act, as
amended.
5. HSD's services pursuant to this Agreement shall not be deemed to be
exclusive, and it may render similar services and act as an
underwriter, distributor, or dealer for other investment companies in
the offering of their shares.
6. In the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of its obligations and duties hereunder on the part
of HSD, HSD shall not be subject to liability under a Contract for any
act or omission in the course, or connected with, rendering services
hereunder.
II.
1. The UIT reserves the right at any time to suspend or limit the public
offering of the Policies upon 30 days' written notice to HSD, except
where the notice period may be shortened because of legal action taken
by any regulatory agency.
2. The UIT agrees to advice HSD immediately:
(a) Of any request by the Securities and Exchange Commission for
amendment of its 1933 Act registration statement or for
additional information;
(b) Of the issuance by the Securities and Exchange Commission of any
stop order suspending the effectiveness of the 1933 Act
registration statement relating to units of interest issued with
respect to the UIT or of the initiation of any proceedings for
that purpose;
(c) Of the happening of any material event, if known, which makes
untrue any statement in said 1933 Act registration statement or
which requires a change therein in order to make any statement
therein not misleading.
<PAGE>
HLIC will furnish to HSD such information with respect to the UIT and the
Policies in such form and signed by such of its officers and directors and
HSD may reasonably request and will warrant that the statements therein
contained when so signed will be true and correct. HLIC will also furnish,
from time to time, such additional information regarding the UIT's
financial condition as HSD may reasonably request.
III.
COMPENSATION
In accordance with an Expense Reimbursement Agreement between HLIC and HSD, HSD
is obligated to reimburse HSD for all operating expenses associated with the
services provided on behalf of the UIT under this Principal Underwriter
Agreement. No additional compensation is payable in excess of that required
under the Expense Reimbursement Agreement.
IV.
RESIGNATION AND REMOVAL OF PRINCIPAL UNDERWRITER
HSD may resign as a Principal Underwriter hereunder, upon 120 days' prior
written notice to HLIC. However, such resignation shall not become effective
until either the UIT has been completely liquidated and the proceeds of the
liquidation distributed through HLIC to the Contract owners or a successor
Principal Underwriter has been designated and has accepted its duties.
V.
MISCELLANEOUS
1. This Agreement may not be assigned by any of the parties hereto
without the written consent of the other party.
2. All notices and other communications provided for hereunder shall be
in writing and shall be delivered by hand or mailed first class,
postage prepaid, addressed as follows:
(a) If to HLIC - Hartford Life Insurance Company, P.O. Box 2999,
Hartford, Connecticut 06104.
<PAGE>
(b) If to HSD - Hartford Securities Distribution Company, Inc., P.O.
Box 2999, Hartford, Connecticut 06104.
or to such other address as HSD or HLIC shall designate by written notice
to the other.
3. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which shall be deemed one
instrument, and an executed copy of this Agreement and all amendments
hereto shall be kept on file by the Sponsor and shall be open to
inspection any time during the business hours of the Sponsor.
4. This Agreement shall inure to the benefit of and be binding upon the
successor of the parties hereto.
5. This Agreement shall be construed and governed by and according to the
laws of the State of Connecticut.
6. This Agreement may be amended from time to time by the mutual
agreement and consent of the parties hereto.
7. (a) This Agreement shall become effective June 26, 1995 and shall
continue in effect for a period of two years from that date and,
unless sooner terminated in accordance with 7(b) below, shall
continue in effect from year to year thereafter provided that its
continuance is specifically approved at least annually by a
majority of the members of the Board of Directors of HLIC.
(b) This Agreement (1) may be terminated at any time, without the
payment of any penalty, either by a vote of a majority of the
members of the Board of Directors of HLIC on 60 days' prior
written notice to HSD; (2) shall immediately terminate in the
event of its assignment and (3) may be terminated by HSD on 60
days' prior written notice to HLIC, but such termination will not
be effective until HLIC shall have an agreement with one or more
persons to act as successor principal underwriter of the
Contracts. HSD hereby agrees that it will continue to act as
successor principal underwriter until its successor or successors
assume such undertaking.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
(Seal) HARTFORD LIFE INSURANCE COMPANY
BY: /s/ Thomas M. Marra
------------------------------------
Thomas M. Marra
Senior Vice President
Attest: HARTFORD SECURITIES DISTRIBUTION
COMPANY, INC.
/s/ Lynda Godkin BY: /s/ George Jay
- ------------------------- ------------------------------------
Lynda Godkin George Jay
Secretary Controller
<PAGE>
BROKER-DEALER SALES AND
SUPERVISION AGREEMENT
This Broker-Dealer Sales and Supervision Agreement ("Agreement")
dated ____________________ is made by and between Hartford Life Insurance
Company and ITT Hartford Life and Annuity Insurance Company (referred to
collectively as "Companies"), Hartford Securities Distribution Company, Inc.
("Distributor"), a broker-dealer registered with the Securities and Exchange
Commission ("SEC") under the Securities and Exchange Act of 1934 ("1934 Act")
and a member of the National Association of Securities Dealers, Inc. ("NASD")
and __________________________________, who is also a broker-dealer registered
with the SEC under the 1934 Act and a member of the NASD ("Broker-Dealer"), and
any and all undersigned insurance agency affiliates ("Affiliates") of Broker-
Dealer.
WHEREAS, Companies offer certain variable life insurance policies and variable
and modified guaranteed annuity contracts which are deemed to be securities
under the Securities Act of 1933 (the "Registered Products"); and
WHEREAS, Companies wish to appoint the Broker-Dealer and Affiliates as agents of
the Companies for the solicitation and procurement of applications for
Registered Products; and
WHEREAS, Distributor is the principal underwriter of the Registered Products;
and
WHEREAS, Distributor anticipates having registered representatives who are
associated with Broker-Dealer ("Registered Representatives"), who are NASD
registered and are duly licensed under applicable state insurance law and
appointed as life insurance agents of Companies solicit and sell the Registered
Products; and
WHEREAS, Distributor acknowledges that the Broker-Dealer will provide certain
supervisory and administrative services to Registered Representatives who are
associated with the Broker-Dealer in connection with the solicitation, service
and sale of the Registered Products; and
WHEREAS, Broker-Dealer agrees to provide the aforementioned supervisory services
to its Registered Representatives who have been appointed by the Companies to
sell the Registered Products.
NOW THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the parties agree to the following:
I. APPOINTMENT OF THE BROKER-DEALER
The Companies hereby appoint Broker-Dealer as an agent of the Companies for
the solicitation and procurement of applications for the Registered
Products offered by the Companies, as outlined in Exhibit A attached
herein, in all states in which the Companies are authorized to do business
and in which Broker-Dealer or any Affiliates are properly licensed.
Distributor hereby authorizes Broker-Dealer under the securities laws to
supervise Registered Representatives in connection with the solicitation,
service and sale of the Registered Products.
II. AUTHORITY OF THE BROKER-DEALER
<PAGE>
Broker-Dealer has the authority to represent Distributor and Companies only
to the extent expressly granted in this Agreement. Broker-Dealer and any
Registered Representatives shall not hold themselves out to be employees of
Companies or Distributor in any dealings with the public. Broker-Dealer
and any Registered Representatives shall be independent contractors as to
Distributor or Companies. Nothing contained herein is intended to create a
relationship of employer and employee between Broker-Dealer and Distributor
or Companies or between Registered Representatives and Distributor or
Companies.
III. BROKER-DEALER REPRESENTATION
Broker-Dealer represents that it is a registered broker-dealer under the
1934 Act, a member in good standing of the NASD, and is registered as a
broker-dealer under state law to the extent necessary to perform the duties
described in this Agreement. Broker-Dealer represents that its Registered
Representatives, who will be soliciting applications for the Registered
Products, will be duly registered representatives associated with Broker-
Dealer and that they will be representatives in good standing with
accreditation as required by the NASD to sell the Registered Products.
Broker-Dealer agrees to abide by all rules and regulations of the NASD,
including its Rules of Fair Practice, and to comply with all applicable
state and federal laws and the rules and regulations of authorized
regulatory agencies affecting the sale of the Registered Products.
IV. BROKER-DEALER OBLIGATIONS
(a) TRAINING AND SUPERVISION
Broker-Dealer has full responsibility for the training and
supervision of all Registered Representatives associated with
Broker-Dealer and any other persons who are engaged directly or
indirectly in the offer or sale of the Registered Products. Broker-
Dealer shall, during the term of this Agreement, establish and
implement reasonable procedures for periodic inspection and
supervision of sales practices of its Registered Representatives.
If a Registered Representative ceases to be a Registered
Representative of Broker-Dealer, is disqualified for continued
registration or has their registration suspended by the NASD or
otherwise fails to meet the rules and standards imposed by Broker-
Dealer, Broker-Dealer shall immediately notify such Registered
Representative that he or she is no longer authorized to solicit
applications, on behalf of the Companies, for the sale of Registered
Products. Broker-Dealer shall immediately notify Distributor of
such termination or suspension.
(b) SOLICITATION
Broker-Dealer agrees to supervise its Registered Representatives so
that they will only solicit applications in states where the
Registered Products are approved for sale in accordance with
applicable state and federal laws. Broker-Dealer shall be notified
by Companies or Distributor of the availability of the Registered
Products in each state.
(c) NO CHURNING
Broker-Dealer and any Registered Representatives shall not make any
misrepresentation or incomplete comparison of products for the
purpose of inducing a policyholder to lapse, forfeit or surrender
its insurance in favor of purchasing a Registered Product.
(d) PROSPECTUS DELIVERY AND SUITABILITY REQUIREMENTS
Broker-Dealer shall ensure that its Registered Representatives
comply with the prospectus delivery requirements under the
Securities Act of 1933. In addition, Broker-Dealer shall ensure
that its Registered Representatives shall not make recommendations
to an applicant to purchase a Registered Product in the absence of
reasonable grounds to believe that the
2
<PAGE>
purchase is suitable for such applicant, as outlined in the
suitability requirements of the 1934 Act and the NASD Rules of Fair
Practice. Broker-Dealer shall ensure that each application
obtained by its Registered Representatives shall bear evidence of
approval by one of its principals indicating that the application
has been reviewed for suitability.
(e) PROMOTIONAL MATERIAL
Broker-Dealer and its Registered Representatives are not authorized
to provide any information or make any representation in connection
with this Agreement or the solicitation of the Registered Products
other than those contained in the prospectus or other promotional
material produced or authorized by Companies or Distributor.
Broker-Dealer agrees that if it develops any promotional material
for sales, training, explanatory or other purposes in connection
with the solicitation of applications for Registered Products,
including generic advertising and/or training materials which may be
used in connection with the sale of Registered Products, it will
obtain the prior written consent of Distributor, and where
appropriate, approval of Companies, such approval not to be
unreasonably withheld.
(f) RECORD KEEPING
Broker-Dealer is responsible for maintaining the records of its
Registered Representatives. Broker-Dealer shall maintain such other
records as are required of it by applicable laws and regulations.
The books, accounts and records maintained by Broker-Dealer that
relate to the sale of the Registered Products, or dealings with the
Companies, Distributor and/or Broker-Dealer shall be maintained so
as to clearly and accurately disclose the nature and details of each
transaction.
Broker-Dealer acknowledges that all the records maintained by
Broker-Dealer relating to the solicitation, service or sale of the
Registered Products subject to this Agreement, including but not
limited to applications, authorization cards, complaint files and
suitability reviews, shall be available to Companies and Distributor
upon request during normal business hours. Companies and
Distributor may retain copies of any such records which Companies
and Distributor, in their discretion, deems necessary or desirable
to keep.
(g) REFUND OF COMPENSATION
Broker-Dealer agrees to repay Companies the total amount of any
compensation which may have been paid to it within thirty (30)
business days of notice of the request for such refund should
Companies for any reason return any premium on a Registered Product
which was solicited by a Registered Representative of Broker-Dealer.
(h) PREMIUM COLLECTION
Broker-Dealer only has the authority to collect initial premiums
unless specifically set forth in the applicable commission schedule.
Unless previously authorized by Distributor, neither Broker-Dealer
nor any of its Registered Representatives shall have any right to
withhold or deduct any part of any premium it shall receive for
purposes of payment of commission or otherwise.
V. COMPANIES AND/OR DISTRIBUTOR OBLIGATIONS
(a) PROSPECTUS/PROMOTIONAL MATERIAL
Companies and/or Distributor will provide Broker-Dealer with
reasonable quantities of the currently effective prospectus for the
Registered Products and appropriate sales promotional
3
<PAGE>
material which has been filed with the NASD, and applicable state
insurance departments.
(b) COMPENSATION
Distributor will pay Broker-Dealer as full compensation for all
services rendered by Broker-Dealer under this Agreement, commissions
and/or service fees in the amounts, in the manner and for the period
of time as set forth in the Commission Schedules attached to this
Agreement or subsequently made a part hereof, and which are in
effect at the time such Registered Products are sold. The manner of
commission payments (I.E. fronted or trail) is not subject to change
after the effective date of a contract for which the compensation is
payable.
Distributor or Companies may change the Commission Schedules
attached to this Agreement at any time. Such change shall become
effective only when Distributor or Companies provide the Broker-
Dealer with written notice of the change. No such change shall
affect any contracts issued upon applications received by Companies
at Companies' Home Office prior to the effective date of such
change.
Distributor agrees to identify to Broker-Dealer for each such
payment, the name of the Registered Representative of Broker-Dealer
who solicited each contract covered by the payment. Distributor
will not compensate Broker-Dealer for any Registered Product which
is tendered for redemption after acceptance of the application. Any
chargebacks will be assessed against the Broker-Dealer of record at
the time of the redemption.
Distributor will only compensate Broker-Dealer or Affiliates, as
outlined below, for those applications accepted by Companies, and
only after receipt by Companies at Companies' Home Office or at such
other location as Companies may designate from time to time for its
various lines of business, of the required premium and compliance by
Broker-Dealer with any outstanding contract and prospectus delivery
requirements.
In the event that this Agreement terminates for fraudulent
activities or due to a material breach by the Broker-Dealer,
Distributor will only pay to Broker-Dealer or Affiliate commissions
or other compensation earned prior to discovery of events requiring
termination. No further commissions or other compensation shall
thereafter be payable.
(c) COMPENSATION PAYABLE TO AFFILIATES
If Broker-Dealer is unable to comply with state licensing
requirements because of a legal impediment which prohibits a non-
domiciliary corporation from becoming a licensed insurance agency or
prohibits non-resident ownership of a licensed insurance agency,
Distributor agrees to pay compensation to Broker-Dealer's
contractually affiliated insurance agency, a wholly-owned life
agency affiliate of Broker-Dealer, or a Registered Representative or
principal of Broker-Dealer who is properly state licensed. As
appropriate, any reference in this Agreement to Broker-Dealer shall
apply equally to such Affiliate. Distributor agrees to pay
compensation to an Affiliate subject to Affiliates agreement to
comply with the requirements of Exhibit B, attached hereto.
VI. TERMINATION
(a) This Agreement may be terminated by any party by giving thirty (30)
days' notice in writing to the other party.
(b) Such notice of termination shall be mailed to the last known address
of Broker-Dealer appearing on Companies' records, or in the event of
termination by Broker-Dealer, to the Home Office of Companies at
P.O. Box 2999, Hartford, Connecticut 06104-2999.
4
<PAGE>
(c) Such notice shall be an effective notice of termination of this
Agreement as of the time the notice is deposited in the United
States mail or the time of actual receipt of such notice if
delivered by means other than mail.
(d) This Agreement shall automatically terminate without notice upon the
occurrence of any of the events set forth below:
(1) Upon the bankruptcy or dissolution of Broker-Dealer.
(2) When and if Broker-Dealer commits fraud or gross negligence in the
performance of any duties imposed upon Broker-Dealer by this
Agreement or wrongfully withholds or misappropriates, for Broker-
Dealer's own use, funds of Companies, its policyholders or
applicants.
(3) When and if Broker-Dealer materially breaches this Agreement or
materially violates state insurance or Federal securities laws and
administrative regulations of a state in which Broker-Dealer
transacts business.
(4) When and if Broker-Dealer fails to obtain renewal of a necessary
license in any jurisdiction, but only as to that jurisdiction.
(e) The parties agree that on termination of this Agreement, any
outstanding indebtedness to Companies shall become immediately due
and payable.
VII. GENERAL PROVISIONS
(a) COMPLAINTS AND INVESTIGATIONS
Broker-Dealer shall cooperate with Distributor and Companies in the
investigation and settlement of all complaints or claims against
Broker-Dealer and/or Distributor or Companies relating to the
solicitation or sale of the Registered Products under this
Agreement. Broker-Dealer, Distributor and Companies each shall
promptly forward to the other any complaint, notice of claim or
other relevant information which may come into either one's
possession. Broker-Dealer, Distributor and Companies agree to
cooperate fully in any investigation or proceeding in order to
ascertain whether Broker-Dealer's, Distributor's or Companies'
procedures with respect to solicitation or servicing is consistent
with any applicable law or regulation.
In the event any legal process or notice is served on Broker-Dealer
in a suit or proceeding against Distributor or Companies, Broker-
Dealer shall forward forthwith such process or notice to Companies
at its Home Office in Hartford, Connecticut, by certified mail.
(b) WAIVER
The failure of Distributor or Companies to enforce any provisions of
this Agreement shall not constitute a waiver of any such provision.
The past waiver of a provision by Distributor or Companies shall not
constitute a course of conduct or a waiver in the future of that
same provision.
(c) INDEMNIFICATION
Broker-Dealer shall indemnify and hold Distributor and Companies
harmless from any liability, loss or expense sustained by Companies
or the Distributor (including reasonable attorney fees) on account
of any acts or omissions by Broker-Dealer or persons employed or
appointed by Broker-Dealer, except to the extent Companies' or
Distributor's acts or omissions caused such
5
<PAGE>
liability Indemnification by Broker-Dealer is subject to the
conditions that Distributor or Companies promptly notify Broker-
Dealer of any claim or suit made against Distributor or Companies,
and that Distributor or Companies allow Broker-Dealer to make such
investigation, settlement, or defense thereof as Broker-Dealer deems
prudent. Broker-Dealer expressly authorizes Companies to charge
against all compensation due or to become due to Broker-Dealer under
this Agreement any monies paid or liabilities incurred by Companies
under this Indemnification provision.
Distributor and Companies shall indemnify and hold Broker-Dealer
harmless from any liability, loss or expense sustained by the
Broker-Dealer (including reasonable attorney fees) on account of any
acts or omissions by Distributor or Companies, except to the extent
Broker-Dealer's acts or omissions caused such liability.
Indemnification by Distributor or Companies is subject to the
condition that Broker-Dealer promptly notify Distributor or
Companies of any claim or suit made against Broker-Dealer, and that
Broker-Dealer allow Distributor or Companies to make such
investigation, settlement, or defense thereof as Distributor or
Companies deems prudent.
(d) ASSIGNMENT
No assignment of this Agreement, or commissions payable hereunder,
shall be valid unless authorized in writing by Distributor. Every
assignment shall be subject to any indebtedness and obligation of
Broker-Dealer that may be due or become due to Companies and any
applicable state insurance regulations pertaining to such
assignments.
(e) OFFSET
Companies may at any time deduct, from any monies due under this
Agreement, every indebtedness or obligation of Broker-Dealer to
Companies or to any of its affiliates.
(f) CONFIDENTIALITY
Companies, Distributor and Broker-Dealer agree that all facts or
information received by any party related to a contract owner shall
remain confidential, unless such facts or information is required to
be disclosed by any regulatory authority or court of competent
jurisdiction.
(g) PRIOR AGREEMENTS
This Agreement terminates all previous agreements, if any, between
Companies, Distributor and Broker-Dealer. However, the execution of
this Agreement shall not affect any obligations which have already
accrued under any prior agreement.
(h) CHOICE OF LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of Connecticut.
By executing this Broker-Dealer Sales and Supervision Agreement Specifications
Page, Broker-Dealer acknowledges that it has read this Agreement in its entirety
and is in agreement with the terms and conditions outlining the rights of
Distributor, Companies and Broker-Dealer and Affiliates under this Agreement.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement to be
effective as set forth above, upon the later of the execution date below or
approval of Distributor's registration by all appropriate state securities
commissions.
6
<PAGE>
BROKER-DEALER HARTFORD SECURITIES DISTRIBUTION
COMPANY INC.
By: By:
Title: Title:
Date: Date:
AFFILIATE (IF APPLICABLE) HARTFORD LIFE INSURANCE COMPANY
By: By:
Title: Title:
Date: Date:
ITT HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY
By:
Title:
Date:
7
<PAGE>
EXHIBIT B
In accordance with Section V.(c) of the Broker-Dealer-Dealer Sales and
Supervision Agreement, no compensation is payable unless Broker-Dealer and
Registered Representative have first complied with all applicable state
insurance laws, rules and regulations. Distributor must ensure that any Broker-
Dealer with whom Distributor intends to enter into an Agreement and any
Registered Representatives meet the licensing and registration requirements of
the state(s) Broker-Dealer operates in and the NASD.
Companies are required by the Insurance Department in all 50 states to pay
compensation only to individuals and entities that are properly insurance
licensed and appointed. For registered products, Distributor must also comply
with NASD regulations that require Distributor to pay compensation to an NASD
registered Broker-Dealer. Distributor must comply with both state and NASD
requirements.
Distributor requires confirmation that Broker-Dealer holds current state
insurance licenses or markets insurance products through a contractual affiliate
or wholly owned life agency, which is properly insurance licensed. If Broker-
Dealer is properly state licensed then compensation may be paid to Broker-Dealer
in compliance with both state and NASD requirements.
If Broker-Dealer is not state insurance licensed and relies on the licensing of
a contractual affiliate or wholly owned life agency, the SEC has issued a number
of letters indicating that, under specific limited circumstances, it will take
"no action" against insurers (Distributor) paying compensation on registered
products to Broker-Dealer's contractual affiliate or wholly owned life agency.
At the request of Broker-Dealer, Distributor will provide copies of several of
these letters as well as a summary of their requirements.
If Broker-Dealer intends to rely on one of these "no-action" letters, legal
counsel for Broker-Dealer must confirm to Distributor in writing that all of the
circumstances of any one of the SEC no-action letters are applicable. Broker-
Dealer's counsel must summarize each point upon which the no-action relief was
granted and represent that Broker-Dealer's method of operation is identical or
meets the same criteria. Broker-Dealer's counsel must also confirm that, to the
best of counsel's knowledge, the SEC has not rescinded or modified its no-action
position since the letter was released.
The Broker-Dealer Sales and Supervision Agreement will not be finalized and no
new applications for registered products will be accepted or no new compensation
will be payable unless the appropriate proof of state licensing or no-action
relief is confirmed. In addition to a letter from Broker-Dealer's counsel,
copies of the following documentation is required:
-- life insurance licenses for all states in which Broker-Dealer holds
these licenses and intends to operate and/or;
-- life insurance licenses for any contractual affiliate or wholly owned
life agency; and
-- the SEC No-Action Letter that will be relied upon.
If you have any questions regarding these matters, please contact your Life
Licensing and Contracting representative.
8
<PAGE>
78
Exhibit 6(a)
CERTIFICATE PENDING OR RESTATING CERTIFICATE OF INCORPORATION BY ACTION OF
/ / INCORPORATORS
(Stock Corporation)
/ / BOARD OF /X/ BOARD OF DIRECTORS / / BOARD OF DIRECTORS
DIRECTORS AND SHAREHOLDERS AND MEMBERS
(Nonstock Corporation)
For office use only
_________________________
STATE OF CONNECTICUT ACCOUNT NO.
SECRETARY OF THE STATE
_________________________
INITIALS
_________________________
- --------------------------------------------------------------------------------
1. NAME OF CORPORATION DATE
Hartford Life Insurance Company February 10, 1982
- --------------------------------------------------------------------------------
2. The Certificate of incorporation is / / B. AMENDED
/ / A. AMENDED ONLY
/X/ AND RESTATED
/ / C. RESTATED ONLY by the
following resolution
See attached Restated Certificate of Incorporation.
- --------------------------------------------------------------------------------
3. (Omit if 2.A is checked.)
(a) The above resolution merely restates and does not change the provisions
of the original Certificate of Incorporation as supplemented and amended
to date, except as follows:
(Indicate amendments made, if any, if none, so indicate)
1. Section 1 is amended to read as Restated.
2. Section 4 is deleted.
3. Section 5 is deleted.
(b) Other than as indicated in Par. 3(a), there is no discrepancy between the
provisions of the original Certificate of Incorporation as supplemented
to date, and the provisions of this Certificate Restating the Certificate
of Incorporation.
- --------------------------------------------------------------------------------
BY ACTION OF INCORPORATORS
/ / 4. The above resolution was adopted by vote of at least two-thirds of the
incorporators before the organization meeting of the corporation, and
approved in writing by all subscribers (if any) for shares of the
corporation, (or if nonstock corporation, by all applicants for
membership entitled to vote, if any.)
We (at least two-thirds of the incorporators) hereby declare, under the
penalties of false statement that the statements made in the foregoing
certificate are true.
- --------------------------------------------------------------------------------
SIGNED SIGNED SIGNED
- --------------------------------------------------------------------------------
APPROVED
(All subscribers, or, if nonstock corporation, all applicants for membership
entitled to vote, if none, so indicate)
- --------------------------------------------------------------------------------
SIGNED SIGNED SIGNED
- --------------------------------------------------------------------------------
<PAGE>
79
(Continued)
- --------------------------------------------------------------------------------
4. (Omit if 2C is checked.) The above resolution was adopted by the
board of directors acting alone,
/ / there being no shareholders or subscribers.
/ / the board of directors being so authorized pursuant to Section 33-341,
Conn. G.S. as amended
/ / the corporation being a nonstock corporation and having no members and no
applicants for membership entitled to vote on such resolution.
- --------------------------------------------------------------------------------
5. The number of affirmative votes 6. The number of directors' votes
required to adopt such resolution is: in favor of the resolution was:
- --------------------------------------------------------------------------------
We hereby declare, under the penalties of false statement that the statements
made in the foregoing certificate are true.
- --------------------------------------------------------------------------------
NAME OF PRESIDENT OR VICE PRESIDENT (Print or Type)
NAME OF SECRETARY OR ASSISTANT SECRETARY (Print or Type)
- --------------------------------------------------------------------------------
SIGNED (President or Vice President) SIGNED (Secretary or Assistant Secretary)
- --------------------------------------------------------------------------------
/X/ 4. The above resolution was adopted by the board of directors and by
shareholders.
- --------------------------------------------------------------------------------
5. Vote of shareholders:
(a) (Use if no shares are required to be voted as a class.)
- --------------------------------------------------------------------------------
NUMBER OF SHARES ENTITLED TO VOTE 400
TOTAL VOTING POWER 400
VOTE REQUIRED FOR ADOPTION 267
VOTE FAVORING ADOPTION 400
- --------------------------------------------------------------------------------
(b) (If the shares of any class are entitled to vote as a class, indicate the
designation and number of outstanding shares of each such class, the
voting power thereof, and the vote of each such class for the amendment
resolution.)
We hereby declare, under the penalties of false statement that the statements
made in the foregoing certificate are true.
- --------------------------------------------------------------------------------
NAME OF PRESIDENT OR VICE PRESIDENT (Print or Type)
Robert B. Goode, Jr.,
Executive Vice Pres. & Chief
Oper. Officer
NAME OF SECRETARY OR ASSISTANT SECRETARY (Print or Type)
William A. McMahon,
Gen.Counsel & Secretary
- --------------------------------------------------------------------------------
SIGNED (President or Vice President) SIGNED (Secretary or Assistant Secretary)
/s/ Robert B. Goode, Jr. /s/ William A. McMahon
- --------------------------------------------------------------------------------
/ / 4. The above resolution was adopted by the board of directors and by
members.
5. Vote of members:
(a) (Use if no members are required to vote as a class.)
- --------------------------------------------------------------------------------
NUMBER OF MEMBERS VOTING
TOTAL VOTING POWER
VOTE REQUIRED FOR ADOPTION
VOTE FAVORING ADOPTION
- --------------------------------------------------------------------------------
(b) (If the members of any class are entitled to vote as a class indicate the
designation and number of members of each such class, the voting power
thereof, and the vote of each such class for the amendment resolution.)
We hereby declare, under the penalties of false statement that the statements
made in the foregoing certificate are true.
- --------------------------------------------------------------------------------
NAME OF PRESIDENT OR VICE PRESIDENT (Print or Type)
NAME OF SECRETARY OR ASSISTANT SECRETARY (Print or Type)
- --------------------------------------------------------------------------------
SIGNED (President or Vice President) SIGNED (Secretary or Assistant Secretary)
- --------------------------------------------------------------------------------
FILING FEE CERTIFICATION FEE TOTAL FEES
$30- $9.50 $39.50
- --------------------------------------------------------------------------------
FILED SIGNED (For Secretary of the State)
STATE OF CONNECTICUT Rec. & ICC To Ann Zacchio
- --------------------------------------------------------------------------------
APR - 2 1982 CERTIFIED COPY SENT ON (Date) INITIALS
Law Dept. Hartford Ins. Group
- --------------------------------------------------------------------------------
SECRETARY OF THE STATE TO
HTFD. Plaza HTFD. CT 06115
A.M.
- --------------------------------------------------------------------------------
By Time 2:30P.M. CARD LIST PROOF
------ --------
<PAGE>
80
Form 61-58
STATE OF CONNECTICUT )
OFFICE OF SECRETARY OF THE STATE )SS HARTFORD
I hereby certify that the foregoing is a true copy of record in this office
IN TESTIMONY WHEREOF I have hereunto set my
hand and affixed the Seal of said State, at
Hartford this 2nd day of April AD 1982
/s/ ??????? L. ??lley
SECRETARY OF THE STATE
<PAGE>
81
RESTATED CERTIFICATE OF INCORPORATION
HARTFORD LIFE INSURANCE COMPANY
This Restated Certificate of Incorporation gives effect to
the amendment of the Certificate of Incorporation of the corporation
and otherwise purports merely to restate all those provisions
already in effect. This Restated Certificate of Incorporation has
been adopted by the Board of Directors and by the sole shareholder.
Section 1. The name of the corporation is Hartford Life
Insurance Company and it shall have all the powers granted
by the general statutes, as now enacted or hereinafter
amended to corporations formed under the Stock Corporation
Act.
Section 2. The corporation shall have the purposes and
powers to write any and all forms of insurance which any
other corporation now or hereafter chartered by Connecticut
and empowered to do an insurance business may now or
hereafter may lawfully do; to accept and to issue cede
reinsurance; to issue policies and contracts for any kind
or combination of kinds of insurance; to policies or
contracts either with or without participation in profits;
to acquire and hold any or all of the shares or other
securities of any insurance corporation; and to engage in
any lawful act or activity for which corporations may be
formed under the Stock Corporation Act. The corporation is
authorized to exercise the powers herein granted in any
state, territory or jurisdiction of the United States or in
any foreign country.
Section 3. The capital with which the corporation shall
commence business shall be an amount not less than one
thousand dollars. The authorized capital shall be two
million five hundred thousand dollars divided into one
thousand shares of common capital stock with a par value of
twenty-five hundred dollars each.
We hereby declare, under the penalties of false statement
that the statements made in the foregoing Certificate are true.
Dated: February 10, 1982 HARTFORD LIFE INSURANCE COMPANY
By /s/ ROBERT B. GOODE, JR.
----------------------------
Attest:
/s/ WM. A. MCMAHON
- ----------------------
7342D
<PAGE>
Exhibit (6)(b)
By-Laws
of the
HARTFORD LIFE INSURANCE COMPANY
As passed and effective
February 13, 1978
and amended on
July 13, 1978
January 5, 1979
and
February 19, 1984
<PAGE>
ARTICLE I
Name - Home Office
Section 1. This corporation shall be named HARTFORD LIFE INSURANCE
COMPANY.
Section 2. The principal place of business and Home Office shall be
in the City of Hartford, Connecticut.
ARTICLE II
Stockholders' Meetings - Notice - Quorum - Right to Vote
Section 1. All meetings of the Stockholders shall be held at the
principal business office of the Company unless the Directors shall otherwise
provide and direct.
Section 2. The annual meeting of the Stockholders shall be held on
such day and at such hour as the Board of Directors may decide. For cause the
Board of Directors may postpone or adjourn such annual meeting to any other time
during the year.
Section 3. Special meetings of the Stockholders may be called by the
Board of Directors, the Executive Committee, the Chairman of the Board, the
President or any Vice President.
Section 4. Notice of Stockholders' meetings shall be mailed to each
Stockholder, at his address as it appears on the records of the Company, at
least seven days prior to the meeting. The notice shall state the place, date
and time of the meeting and shall specify all matters proposed to be acted upon
at the meeting.
Section 5. At each annual meeting the Stockholders choose Directors
as hereinafter provided.
Section 6. Each Stockholder shall be entitled to one vote for each
share of stock held by him at all meetings of the Company. Proxies may be
authorized by written power of attorney.
Section 7. Holders of one-half of the whole amount of the stock
issued and outstanding shall constitute a quorum.
<PAGE>
- 2 -
Section 8. Each Stockholder shall be entitled to a certificate of
stock which shall be signed by the President or a Vice President, and either the
Treasurer or an Assistant Treasurer of the Company, and shall bear the seal of
the Company, but such signatures and seal may be facsimile if permitted by the
laws of the State of Connecticut.
ARTICLE III
Directors - Meetings - Quorum
Section 1. The property, business and affairs of the Company shall be
managed by a board of not less than three nor more than twenty Directors, who
shall be chosen by ballot at each annual meeting. Vacancies occurring between
annual meetings may be filled by the Board of Directors by election. Each
Director shall hold office until the next annual meeting of Stockholders and
until his successor is chosen and qualified.
Section 2. Meetings of the Board of Directors may be called by the
direction of the Chairman of the Board, the President, or any three Directors.
Section 3. Three days' notice of meetings of the Board of Directors
shall be given to each Director, either personally or by mail or telegraph, at
his residence or usual place of business, but notice may be waived, at any time,
in writing.
Section 4. One third of the number of existing directorships, but not
less than two Directors, shall constitute a quorum.
ARTICLE IV
Election of Officers - Duties of Board of
Directors and Executive Committee
Section 1. The President shall be elected by the Board of Directors.
The Board of Directors may also elect one of its members to serve as Chairman of
the Board of Directors. The Chairman of the Board, or an individual appointed
by him, shall have authority to appoint all other officers, except as stated
herein, including one or more Vice Presidents and Assistant Vice Presidents, the
Treasurer
<PAGE>
and one or more Associate or Assistant Treasurers, one or more Secretaries and
Assistant Secretaries and such other Officers as the Chairman of the Board may
from time to time designate. All Officers of the Company shall hold office
during the pleasure of the Board of Directors. The Directors may require any
Officer of the Company to give security for the faithful performance of his
duties.
Section 2. The Directors may fill any vacancy among the officers by
election for the unexpired term.
Section 3. The Board of Directors may appoint from its own number an
Executive Committee of not less than five Directors. The Executive Committee
may exercise all powers vested in and conferred upon the Board of Directors at
any time when the Board is not in session. A majority of the members of said
Committee shall constitute a quorum.
Section 4. Meetings of the Executive Committee shall be called
whenever the Chairman of the Board, the President or a majority of its members
shall request. Forty-eight hours' notice shall be given of meetings but notice
may be waived, at any time, in writing.
Section 5. The Board of Directors shall annually appoint from its own
number a Finance Committee of not less than three Directors, whose duties shall
be as hereinafter provided.
Section 6. The Board of Directors may, at any time, appoint such
other Committees, not necessarily from its own number, as it may deem necessary
for the proper conduct of the business of the Company, which Committees shall
have only such powers and duties as are specifically assigned to them by the
Board of Directors or the Executive Committee.
Section 7. The Board of Directors may make contributions, in such
amounts as it determines to be reasonable, for public welfare or for charitable,
scientific or educational purposes, subject to the limits and restrictions
imposed by law and to such rules and regulations consistent with law as it
makes.
ARTICLE V
Officers
Chairman of the Board
Section 1. The Chairman of the Board shall preside at the meetings of
the Board of Directors and the Executive Committee and, in the absence of the
Chairman of the Finance Committee, at the meetings of the Finance Committee. In
the absence or inability of the Chairman of the Board to so preside, the
President shall preside in his place.
<PAGE>
President
Section 2. The President, under the supervision and control of the
Chairman of the Board, shall have general charge and oversight of the business
and affairs of the Company. The President shall preside at the meetings of the
Stockholders. He shall be a member of and shall preside at all meetings of all
Committees not referred to in Section 1 of this ARTICLE except that he may
designate a Chairman for each such other Committee.
Section 3. In the absence or inability of the President to perform
his duties, the Chairman of the Board may designate a Vice President to exercise
the powers and perform the duties of the President during such absence or
inability.
Secretary
Section 4. The Secretary of the Corporation shall keep a record of
all the meetings of the Company, of the Board of Directors and of the Executive
Committee, and he shall discharge all other duties specifically required of the
Secretary by law. The other Secretaries and Assistant Secretaries shall perform
such duties as may be assigned to them by the Board of Directors or by their
senior officers and any Secretary or Assistant Secretary may affix the seal of
the Company and attest it and the signature of any officer to any and all
instruments.
Treasurer
Section 5. The Treasurer shall keep, or cause to be kept, full and
accurate accounts of the Company. He shall see that the funds of the Company
are disbursed as may be ordered by the Board of Directors or the Finance
Committee. He shall have charge of all moneys paid to the Company and on
deposit to the credit of the Company or in any other properly authorized name,
in such banks or depositories as may be designated in a manner provided by these
by-laws. He shall also discharge all other duties that may be required of him
by law.
Other Officers
Section 6. The other officers shall perform such duties as may be
assigned to them by the President or the Board of Directors.
<PAGE>
- 5 -
ARTICLE VI
Finance Committee
Section 1. If a Finance Committee is established it shall be the duty
of that committee to supervise the investment of the funds of the Company in
securities in which insurance companies are permitted by law to invest, and all
other matters connected with the management of investments. If no Finance
Committee is established this duty shall be performed by the Board of Directors.
Section 2. All loans or purchases for the investment and reinvestment
of the funds of the Company shall be submitted for approval to the Finance
Committee, if not specifically approved by the Board of Directors.
Section 3. Sale or transfer of any stocks or bonds shall be made upon
authorization of the Finance Committee unless specifically authorized by the
Board of Directors.
Section 4. Transfers of stock and registered bonds, deeds, leases,
releases, sales, mortgages chattle or real, assignments or partial releases of
mortgages chattel or real, and in general all instruments of defeasance of
property and all agreements or contracts affecting the same, except discharges
of mortgages and entries to foreclose the same as hereinafter provided, shall be
authorized by the Finance Committee or the Board of Directors, and be executed
jointly for the Company by two persons, to wit: The Chairman of the Board, the
President or a Vice President, and a Secretary, the Treasurer or an Assistant
Treasurer, but may be acknowledged and delivered by either one of those
executing the instrument; provided, however, that either a Secretary, the
Treasurer, or an Assistant Treasurer alone, when authorized as aforesaid, or any
person specially authorized by the Finance Committee as attorney for the
Company, may make entry to foreclose any mortgage, and a Secretary, the
Treasurer or an Assistant Treasurer alone is authorized, without the necessity
of further authority, to discharge by deed or otherwise any mortgage on payment
to the Company of the principal, interest and all charges due.
Section 5. The Finance Committee may fix times and places for regular
meetings. No notice of regular meetings shall be necessary. Reasonable notice
shall be given of special meetings but the action of a majority of the Finance
Committee at any meeting shall be valid notwithstanding any defect in the notice
of such meeting.
<PAGE>
- 6 -
Section 6. In the absence of specific authorization from the Board of
Directors or the Finance Committee, the Chairman of the Board, the President, a
Vice President or the Treasurer shall have the power to vote or execute proxies
for voting any shares held by the Company.
ARTICLE VII
Funds
Section 1. All monies belonging to the Company shall be deposited to
the credit of the Company, or in such other name as the Finance Committee, the
Chairman of the Finance Committee or such executive officers as are designated
by the Board of Directors shall direct, in such bank or banks as may be
designated from time to time by the Finance Committee, the Chairman of the
Finance Committee, or by such executive officers as are designated by the Board
of Directors. Such monies shall be drawn only on checks or drafts signed by any
two executive officers of the Company, provided that the Board of Directors may
authorize the withdrawal of such monies by check or draft signed with the
facsimile signature of any one or more executive officers, and provided further,
that the Finance Committee may authorize such alternative methods of withdrawals
as it deems proper.
The Board of Directors, the President, the Chairman of the Finance
Committee, a Vice President, or such executive officers as are designated by the
Board of Directors may authorize withdrawal of funds by checks or drafts drawn
at offices of the Company to be signed by Managers, General Agents or employees
of the Company, provided that all such checks or drafts shall be signed by two
such authorized persons, except checks or drafts used for the payment of
claims or losses which need be signed by only one such authorized person, and
provided further that the Board of Directors of the Company or executive
officers designated by the Board of Directors may impose such limitations or
restrictions upon the withdrawal of such funds as it deems proper.
<PAGE>
- 7 -
ARTICLE VIII
Indemnity of Directors and Officers
Section 1. The Company shall indemnify and hold harmless each
Director and officer now or hereafter serving the Company, whether or not then
in office, from and against any and all claims and liabilities to which he may
be or become subject by reason of his being or having been a Director or officer
of the Company, or of any other company which he serves as a Director or officer
at the request of the Company, to the extent such is consistent with the
statutory provisions pertaining to indemnification, and shall provide such
further indemnification for legal and/or all other expenses reasonably incurred
in connection with defending against such claims and liabilities as is
consistent with statutory requirements.
ARTICLE IX
Amendment of ByLaws
Section 1. The Directors shall have power to adopt, amend and repeal
such bylaws as may be deemed necessary or appropriate for the management of the
property and affairs of the Company.
Section 2. The Stockholders at any annual or special meeting may
amend or repeal these bylaws or adopt new ones if the notice of such meeting
contains a statement of the proposed alteration, amendment, repeal or adoption,
or the substance thereof.
<PAGE>
[Exhibit 9]
March 15, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: SEPARATE ACCOUNT THREE ("SEPARATE ACCOUNT")
HARTFORD LIFE INSURANCE COMPANY ("COMPANY")
FILE NO. 33-80738
Dear Sir/Madam:
In my capacity as Associate General Counsel of the Company, I have supervised
the establishment of the Separate Account by the Board of Directors of the
Company as a separate account for assets applicable to Contracts offered by the
Company pursuant to Connecticut law. I have participated in the preparation of
the registration statement for the Separate Account on Form N-4 under the
Securities Act of 1933 and the Investment Company Act of 1940 with respect to
the Contracts.
I am of the following opinion:
1. The Separate Account is a separate account of the Company validly existing
pursuant to Connecticut law and the regulations issued thereunder.
2. The assets held in the Separate Account are not chargeable with liabilities
arising out of any other business the Company may conduct.
3. The Contracts are legally issued and represent binding obligations of the
Company.
In arriving at the foregoing opinion, I have made such examination of the law
and examined such records and other documents as in my opinion as are necessary
or appropriate.
I hereby consent to the filing of this opinion as an exhibit to the registration
statement under the Securities Act of 1933.
Sincerely,
/s/ Lynda Godkin
Lynda Godkin
Associate General Counsel & Secretary
<PAGE>
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of
this Registration Statement File No. 33-80738 for Hartford Life Insurance
Company Separate Account Three on Form N-4.
/s/ Arthur Andersen LLP
Hartford, Connecticut
April 24, 1996
<PAGE>
EXHIBIT 26
PERSONS CONTROLLED BY OR UNDER COMMON
CONTROL WITH THE DEPOSITOR OR REGISTRANT
ITT Hartford Group, Inc..
(Delaware)
|
Hartford Fire Insurance Company
(Connecticut)
|
Hartford Accident and Indemnity Company
(Connecticut)
|
Hartford Life and Accident Insurance Company
(Connecticut)
|
|
|
|
|
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alpine Life Hartford Financial Hartford Life American Maturity
Insurance Company Services Life Insurance Company Life Insurance
(New Jersey) Insurance Co. (Connecticut) Company
(Connecticut) | (Connecticut)
|
|
|
|
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
ITT Hartford ITT Hartford The Hartford Hartford Hartford Securities
Life and Annuity International Life Investment Equity Sales Distribution
Insurance Company Reassurance Corp Management Co. Company, Inc. Company, Inc.
(Connecticut) (Connecticut) (Connecticut) (Connecticut) (Connecticut)
</TABLE>
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