<PAGE>
As filed with the Securities and Exchange Commission July 7, 1998
File No. 333-52711
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. __1___ [X]
Post-Effective Amendment No. ______ [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. _9_ [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) 843-6731
(Depositor's Telephone Number, Including Area Code)
LESLIE T. SOLER
HARTFORD LIFE
P.O. BOX 2999
HARTFORD, CT 06104-2999
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of the registration statement.
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b) of Rule 485
___ on May 1, 1998 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on _________1998 pursuant to paragraph (a)(1) of Rule 485
___ this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
PURSUANT TO RULE 24F-2(a) UNDER THE INVESTMENT COMPANY ACT OF 1940,
THE REGISTRANT HAS REGISTERED AN INDEFINITE AMOUNT OF
SECURITIES.
The registrant hereby amends this registrant statement on such date or dates
as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the registration shall become
effective on such date as the Commission, acting pursuant to Section 8(a),
may determine.
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
-----------------------
N-4 ITEM NO. PROSPECTUS HEADING
------------ ------------------
1. Cover Page Hartford, The Separate Account
and The Portfolios
2. Definitions Glossary of Special Terms
3. Synopsis or Highlights Summary
4. Condensed Financial Not Applicable
Information
5. General Description of Hartford, The Separate Account, and
Registrant The Portfolios
6. Deductions Contract Fees and Charges
7. General Description of Description of the Contracts, The Separate
Annuity Contracts Account, and Surrenders
8. Annuity Period Settlement Provisions
9. Death Benefit Death Before the Annuity Commencement
Date, Death On or After the Annuity
Commencement Date, and Distribution
Requirements: Prior to the Annuity
Commencement Date
10. Purchases Description of the Contracts
and Contract Value
11. Redemptions Surrenders
12. Taxes Federal Tax Considerations
13. Legal Proceedings Legal Matters, Experts
14. Table of Contents of the Table of Contents to Statement of
Statement of Addition Additional Information
Information
<PAGE>
15. Cover Page Part B; Statement of Additional
Information
16. Table of Contents Table of Contents
17. General Information and Description of Hartford Life Insurance
History Company
18. Services None
19. Purchase of Securities Distribution of the Contracts
being Offered
20. Underwriters Distribution of the Contracts
21. Calculation of Calculation of Yield and Return
Performance Data
22. Annuity Payments Settlement Provisions
23. Financial Statements Financial Statements
24. Financial Statements and Financial Statements and
Exhibits Exhibits
25. Directors and Officers Directors and Officers of the
of the Depositor Depositor
26. Persons Controlled by Persons Controlled by or Under
or Under Common Control Common Control with the
with the Depositor or Depositor or Registrant
Registrant
27. Number of Contract Owners Number of Contract Owners
28. Indemnification Indemnification
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Location of Accounts and Records
Records
31. Management Services Management Services
32. Undertakings Undertakings
<PAGE>
PART A
<PAGE>
SELECT DIMENSIONS ASSETMANAGER
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THREE
P.O. Box 5085
Hartford, Connecticut 06102-5085
Telephone: 1-800-862-6668 (Contract Owners)
1-800-862-4397 (Account Executive)
- --------------------------------------------------------------------------------
This Prospectus describes an individual and group tax-deferred variable annuity
contract designed for retirement planning purposes (each, a "Contract" and
collectively, the "Contracts").
The Contracts are issued by Hartford Life Insurance Company ("Hartford").
Payments for the Contracts will be held in Sub-Accounts of Hartford Life
Insurance Company Separate Account Three (the "Separate Account").
There are currently eighteen Sub-Accounts available under the Contract.
Underlying investment portfolios ("Portfolios") are available through the Dean
Witter Select Dimensions Investment Series, the Morgan Stanley Universal Funds,
Inc. and the Van Kampen American Capital Life Investment Trust (individually, a
"Fund", collectively, the "Funds"). The following Portfolios are available under
the Contract: the Money Market Portfolio, the North American Government
Securities Portfolio, the Diversified Income Portfolio, the Balanced Growth
Portfolio, the Utilities Portfolio, the Dividend Growth Portfolio, the
Value-Added Market Portfolio, the Growth Portfolio, the American Value
Portfolio, the Mid-Cap Growth Portfolio, the Global Equity Portfolio, the
Developing Growth Portfolio, and the Emerging Markets Portfolio of the Dean
Witter Select Dimensions Investment Series, the High Yield Portfolio, the
Mid-Cap Value Portfolio and the Emerging Markets Debt Portfolio of the Morgan
Stanley Universal Funds, Inc. and the Strategic Stock Portfolio and the
Enterprise Portfolio of the Van Kampen American Capital Life Investment Trust.
This Prospectus sets forth the basic information concerning the Contract and the
Separate Account that a prospective investor should know before purchasing a
Contract. You should keep this Prospectus for future reference. A Statement of
Additional Information providing additional information about the Contract and
the Separate Account has been filed with the Securities and Exchange Commission
and is available without charge upon request. To obtain the Statement of
Additional Information, call (800) 862-6668 or send a written request to
Hartford Life Insurance Company, Attn: Individual Annuity Services, P.O. Box
5085, Hartford, CT 06102-5085. The Table of Contents for the Statement of
Additional Information may be found on page 30 of this Prospectus. The Statement
of Additional Information is incorporated by reference into this Prospectus.
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.
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.
Prospectus Dated: July , 1998
Statement of Additional Information Dated: July , 1998
1 - PROSPECTUS
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
----------------------------------------------------------------------------
<S> <C>
Glossary of Special Terms 3
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Fee Table 5
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Summary 7
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Hartford, The Separate Account and The Portfolios 8
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Hartford Life Insurance Company 8
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The Separate Account 8
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The Portfolios 9
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Performance Related Information 12
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Description of the Contracts 13
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Contracts Offered 13
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Purchasing a Contract 13
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Right to Examine the Contract 13
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Crediting and Allocating the Premium Payment 13
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Contract Value -- Before the Annuity Commencement Date 13
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Sub-Account Value Transfers Before and After the Annuity
Commencement Date 14
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Surrenders 15
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Contract Fees and Charges 16
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Death Before the Annuity Commencement Date 17
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Death On or After the Annuity Commencement Date 18
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Distribution Requirements: Prior to the Annuity Commencement Date 18
----------------------------------------------------------------------------
Settlement Provisions 18
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Annuity Payment Options 19
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Annuity Proceeds Settlement Option 20
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<CAPTION>
PAGE
<S> <C>
----------------------------------------------------------------------------
Annuity Calculation Date and Annuity Commencement Date 20
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Income Payment Dates 20
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Variable Annuity Payments 20
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Additional Contract Information 22
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Assignment 22
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Misstatement of Age or Sex 22
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Contract Modification 22
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Federal Tax Considerations 22
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A. General 22
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B. Taxation of Hartford and the Separate Account 22
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C. Taxation of Annuities -- General Provisions Affecting
Purchasers Other Than Qualified Retirement Plans 23
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D. Federal Income Tax Withholding 25
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E. General Provisions Affecting Qualified Retirement Plans 26
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F. Annuity Purchases by Nonresident Aliens
and Foreign Corporations 26
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Other Information 26
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Distribution of the Contracts 26
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Legal Matters 26
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Experts 26
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Additional Information 26
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Appendix I -- Information Regarding
Tax-qualified Plans 27
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Table of Contents for Statement of Additional Information 30
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</TABLE>
2 - PROSPECTUS
<PAGE>
GLOSSARY OF SPECIAL TERMS
--------------------------------------------------------------------
ACCUMULATION UNIT: An accounting unit of measure used to calculate the value of
a Sub-Account before Annuity payments begin.
ADMINISTRATIVE OFFICE OF THE COMPANY: Currently located at 200 Hopmeadow Street,
Simsbury, Connecticut 06089. Except for correspondence sent overnight, all
correspondence concerning the Contract should be sent to Hartford Life Insurance
Company, Attn: Individual Annuity Services, P.O. Box 5085, Hartford, CT
06102-5085. Overnight correspondence should be sent to 200 Hopmeadow Street,
Simsbury, Connecticut 06089.
ANNUAL MAINTENANCE FEE: An annual $30 charge on a Contract having a Contract
Value of less than $100,000, as determined on the most recent Contract
Anniversary or upon full surrender of the Contract. The charge is deducted
proportionally from the investment options in use at the time of the deduction.
ANNUITANT: The person on whose life the Contract is issued. The Annuitant may
not be changed.
ANNUITY: A contract issued by an insurance company that provides, in exchange
for premium payments, a series of income payments. This Prospectus describes a
deferred Annuity contract in which premium payments accumulate tax-deferred
until a partial or full surrender is taken or until the Annuity Commencement
Date. Annuity payments under the Contract will begin as of the Annuity
Commencement Date in accordance with the Annuity payment option selected.
ANNUITY CALCULATION DATE: The date as of which the first Annuity payment is
calculated. It will be no more than five Valuation Days prior to the Annuity
Commencement Date.
ANNUITY COMMENCEMENT DATE: The date as of which Annuity payments will begin. The
Annuity Commencement Date will not be deferred beyond the Annuitant's age 90 or
the end of Contract Year 10, whichever is later. If the Contract is sold as part
of a Charitable Remainder Trust, the Annuity Commencement Date may be deferred
to the end of the Annuitant's age 100.
ANNUITY UNIT: An accounting unit of measure used to calculate the dollar amount
of Variable Annuity payments.
ANNUITY UNIT FACTOR: The factor applied in computing Annuity Unit values to
neutralize the effect of the Assumed Investment Return.
ASSUMED INVESTMENT RETURN (AIR): The annual rate of return shown on the
specification page of the Contract. This rate is used to determine the degree of
fluctuation in the amount of Variable Annuity payments in response to
fluctuations in the net investment return of selected Sub-Accounts. The AIR
assumes (among other things) that the assets in the Sub-Accounts supporting the
Contract will have a net annual return over the anticipated Annuity payment
period equal to the rate of return selected. If the actual performance in the
net investment return of the selected Sub-Accounts is equal to the AIR, the
payment will be constant. If the actual performance in the net investment return
of the selected Sub-Accounts is greater than the AIR, the Annuity payment will
increase. If the actual performance is less than the AIR, the Annuity payment
amount will be lower.
BENEFICIARY: The person(s) entitled to receive a Death Benefit upon the death of
the Contract Owner or Annuitant, as applicable.
CODE: The Internal Revenue Code of 1986, as amended.
COMMISSION: The U.S. Securities and Exchange Commission.
COMMUTED VALUE: The present value of remaining guaranteed Annuity payments under
the Payment for a Period Certain Annuity payment option.
CONTINGENT ANNUITANT: The person a Contract Owner may designate, who, if the
Annuitant dies prior to the Annuity Commencement Date, becomes the Annuitant.
CONTRACT: For an Annuity issued to an individual, the Contract is the individual
Annuity and any endorsements or riders. For a group Annuity, the Contract is a
certificate evidencing a participating interest in a group Annuity and any
endorsements or riders. Any reference in this Prospectus to a Contract includes
the certificate.
CONTRACT ANNIVERSARY: The anniversary of the Contract Issue Date.
CONTRACT ISSUE DATE: The date as of which an account is established for the
Contract Owner.
CONTRACT OWNER(S): The owner(s) of the Contract (or a certificate in certain
states), trustee or other entity, sometimes herein referred to as "you" or
"your."
CONTRACT VALUE: The aggregate value of the Sub-Accounts on any Valuation Day.
CONTRACT YEAR: A period of 12 months commencing with the Contract Issue Date or
any anniversary thereof.
DEATH BENEFIT: The amount payable upon the death of a Contract Owner(s) or
Annuitant before Annuity payments have commenced and, under Annuity payment
options Payment for a Period Certain and Life Annuity with a Cash Refund, after
annuity payments have commenced.
DUE PROOF OF DEATH: A certified copy of a death certificate, an order of a court
of competent jurisdiction, a statement from a physician who attended the
deceased or any other proof acceptable to Hartford.
FIXED ANNUITY: An Annuity with payments which remain fixed as to dollar amount
throughout the payment period.
FUNDS: Currently, the Dean Witter Select Dimensions Investment Series, the
Morgan Stanley Universal Funds, Inc. and the Van Kampen American Capital Life
Investment Trust.
3 - PROSPECTUS
<PAGE>
GENERAL ACCOUNT: The General Account of Hartford which consists of all assets of
Hartford other than those allocated to the separate accounts of Hartford.
HARTFORD: Hartford Life Insurance Company.
INCOME PAYMENT DATE: The date each month, quarter, semi-annual period, or year
as of which Hartford computes the Annuity payments.
JOINT ANNUITANT: Upon annuitization, a person, other than the Annuitant, on
whose continuation of life Annuity payments may be made. The contract will have
a Joint Annuitant only if the Annuity payment option selected provides for a
survivor. The Joint Annuitant may not be changed.
MAXIMUM ANNIVERSARY VALUE: Value used in determining the Death Benefit prior to
the Annuity Commencement Date. It is based on a series of calculations on
Contract Anniversaries of Contract Values, Premium Payments and partial
surrenders, as described on page 17 of this Prospectus.
NET ASSET VALUE: The value per share of any Portfolio on any Valuation Day. The
method of computing the Net Asset Value is described in the prospectus for each
Fund.
NET INVESTMENT FACTOR: The Net Investment Factor for each of the Sub-Accounts,
equal to the Net Asset Value of the corresponding Fund at the end of the
Valuation Period (plus the per share amount of any dividends or capital gains
distributed by that Fund if the ex-dividend date occurs in the Valuation Period
then ended) divided by the Net Asset Value of the corresponding Fund at the
beginning of the Valuation Period.
NON-QUALIFIED CONTRACT: A Contract which is not classified as a tax-qualified
retirement plan funded with pre-tax dollars under the Code.
PAYEE: The person or party designated by the Contract Owner to receive Annuity
payments.
PLAN: A voluntary plan of an employer which qualifies for special tax treatment
under a section of the Code.
PORTFOLIOS: Currently, the portfolios of Dean Witter Select Dimensions
Investment Series, the Morgan Stanley Universal Funds, Inc. and Van Kampen
American Capital Life Investment Trust described on page 9 of this Prospectus.
PREMIUM PAYMENT: A payment made to Hartford pursuant to the terms of the
Contract.
PREMIUM TAX: The amount of tax, if any, charged by a federal, state or other
governmental entity on Premium Payments or Contract Value.
QUALIFIED CONTRACT: A Contract which qualifies as a tax-qualified retirement
plan using pre-tax dollars under the Code, such as an employer-sponsored 401(k)
or an Individual Retirement Annuity (IRA).
SEPARATE ACCOUNT: An account that Hartford established to separate the assets
funding the variable benefits for the class of contracts to which the Contract
belongs from the other assets of Hartford. The Hartford separate account is
entitled "Hartford Life Insurance Company -- Separate Account Three."
SUB-ACCOUNT: A subdivision established within the Separate Account used to
allocate the Contract Owner's Contract Value to the corresponding Fund.
SUB-ACCOUNT VALUE: On or before the Annuity Calculation Date, the amount is
determined on any day by multiplying the number of Accumulation Units
attributable to the Contract in that Sub-Account by the Accumulation Unit value
for that Sub-Account.
SURRENDER VALUE: Prior to the Annuity Commencement Date, the Surrender Value is
the Contract Value, less any applicable Premium Taxes, and/or the Annual
Maintenance Fee. After the Annuity Commencement Date, the Surrender Value under
the PAYMENT FOR A PERIOD CERTAIN Annuity payment option is equal to the Commuted
Value.
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 (generally 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 - PROSPECTUS
<PAGE>
FEE TABLE
SUMMARY
--------------------------------------------------------------------
CONTRACT OWNER TRANSACTION EXPENSES (ALL SUB-ACCOUNTS)
<TABLE>
<CAPTION>
PRIOR TO AFTER
ANNUITIZATION ANNUITIZATION
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Sales Load Imposed on Purchases (as a percentage of premium payments) None None
- ---------------------------------------------------------------------------------------------------------------------------------
Exchange Fee $0 $0
- ---------------------------------------------------------------------------------------------------------------------------------
DEFERRED SALES LOAD (as a percentage of amounts withdrawn) None None
- ---------------------------------------------------------------------------------------------------------------------------------
Annual Maintenance Fee (1) $30 $30
- ---------------------------------------------------------------------------------------------------------------------------------
ANNUAL EXPENSES -- SEPARATE ACCOUNT (as percentage of average account value)
Mortality and Expense Risk 1.50% 1.25%
- ---------------------------------------------------------------------------------------------------------------------------------
Administration Fees 0.15% 0.15%
- ---------------------------------------------------------------------------------------------------------------------------------
Other Account Fees 0% 0%
- ---------------------------------------------------------------------------------------------------------------------------------
Total 1.65% 1.40%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Annual Maintenance Fee is an annual $30 charge on a Contract having a
Contract Value of less than $100,000, as determined on most recent Contract
Anniversary or upon full surrender of the Contract. The charge is deducted
proportionally from the investment options in use at the time of the
deduction.
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
<TABLE>
<CAPTION>
TOTAL FUND
OPERATING
MANAGEMENT OTHER EXPENSES (AFTER
FEES (AFTER EXPENSES (AFTER ANY FEE WAIVERS
ANY ANY EXPENSE AND EXPENSE
FEE WAIVERS) REIMBURSEMENT) REIMBURSEMENT)(1)
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES:
- -------------------------------------------------------------------------------------------------------------------------------
Money Market Portfolio 0.500% 0.050% 0.550%
- -------------------------------------------------------------------------------------------------------------------------------
North American Government Securities Portfolio 0.650% 0.610% 1.260%
- -------------------------------------------------------------------------------------------------------------------------------
Diversified Income Portfolio 0.400% 0.150% 0.550%
- -------------------------------------------------------------------------------------------------------------------------------
Balanced Growth Portfolio (1) 0.620% 0.110% 0.730%
- -------------------------------------------------------------------------------------------------------------------------------
Utilities Portfolio 0.650% 0.110% 0.760%
- -------------------------------------------------------------------------------------------------------------------------------
Dividend Growth Portfolio 0.625% 0.025% 0.650%
- -------------------------------------------------------------------------------------------------------------------------------
Value-Added Market Portfolio 0.500% 0.080% 0.580%
- -------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio (1) 0.810% 0.160% 0.970%
- -------------------------------------------------------------------------------------------------------------------------------
American Value Portfolio 0.625% 0.055% 0.680%
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Mid-Cap Growth Portfolio (2) 0.750% 0.370% 1.120%
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Global Equity Portfolio 1.000% 0.130% 1.130%
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Developing Growth Portfolio 0.500% 0.100% 0.600%
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Emerging Markets Portfolio 1.250% 0.460% 1.710%
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MORGAN STANLEY UNIVERSAL FUNDS, INC.:
- -------------------------------------------------------------------------------------------------------------------------------
High Yield Portfolio (3) 0.000% 0.800% 0.800%
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Mid-Cap Value Portfolio (3) 0.000% 1.050% 1.050%
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Emerging Markets Debt Portfolio (3) 0.090% 1.210% 1.300%
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VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST:
- -------------------------------------------------------------------------------------------------------------------------------
Strategic Stock Portfolio (4) 0.000% 0.650% 0.650%
- -------------------------------------------------------------------------------------------------------------------------------
Enterprise Portfolio (4) 0.430% 0.170% 0.600%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) On March 2, 1998, the Balanced Portfolio was renamed the Balanced Growth
Portfolio. As of that date, its Management Fee was lowered from 0.75% to 0.60%.
Also, on March 2, 1998, the Core Equity Portfolio was renamed the Growth
Portfolio. As of that date, its Management Fee was lowered from 0.85% to 0.80%.
(2) The investment manager has undertaken to assume all expenses of the Mid-Cap
Growth Portfolio and waive the compensation provided for that Portfolio in
its management agreement with the Portfolio until such time as the Portfolio
has $50 million of net assets or until July 31, 1998, whichever occurs
first.
(3) With respect to the High Yield, Mid-Cap Value and Emerging Markets Debt
Portfolios, the investment advisers have voluntarily agreed to waive their
investment advisory fees and to reimburse the Portfolios if such fees would
cause their respective "Total Fund Operating Expenses" to exceed those set
5 - PROSPECTUS
<PAGE>
forth in the table above. Absent such reductions, it is estimated that
"Management Fees," "Other Expenses" and "Total Fund Operating Expenses" for
the Portfolios would have been as follows:
<TABLE>
<CAPTION>
TOTAL FUND
PORTFOLIO MANAGEMENT FEE OTHER EXPENSES OPERATING EXPENSES
<S> <C> <C> <C>
High Yield 0.50% 1.18% 1.68%
Mid-Cap Value 0.75% 1.38% 2.13%
Emerging Markets Debt 0.80% 1.26% 2.06%
</TABLE>
(4) With respect to the Strategic Stock Portfolio and the Enterprise Portfolio,
the investment adviser, Van Kampen American Capital Asset Management, Inc.,
has voluntarily agreed to waive its investment advisory fees and to
reimburse the Portfolios if such fees would cause their respective "Total
Fund Operating Expenses" to exceed those set forth in the table above.
Absent such reductions, it is estimated that "Management Fees," "Other
Expenses" and "Total Fund Operating Expenses" for the Portfolios would have
been as follows:
<TABLE>
<CAPTION>
TOTAL FUND
PORTFOLIO MANAGEMENT FEE OTHER EXPENSES OPERATING EXPENSES
<S> <C> <C> <C>
Strategic Stock 0.50% 2.09% 2.59%
Enterprise 0.50% 0.17% 0.67%
</TABLE>
The purpose of these tables is to assist the Contract Owner in understanding the
various costs and expenses that a Contract Owner will bear directly or
indirectly. The table reflects expenses of the Separate Account and the current
management fees, other expenses and total expenses for each Fund. Premium Taxes,
ranging from 0% to 4%, may also be applicable. For a more complete description
of the various costs and expenses, see "Contract Fees and Charges," page 16 and
the prospectus for the Funds which accompanies this Prospectus.
EXAMPLE
<TABLE>
<CAPTION>
IF YOU SURRENDER YOUR CONTRACT IF YOU ANNUITIZE YOUR CONTRACT
AT THE END OF THE APPLICABLE AT THE END OF THE APPLICABLE
TIME PERIOD, YOU WOULD PAY THE TIME PERIOD, YOU WOULD PAY THE
FOLLOWING EXPENSES ON A $1,000 FOLLOWING EXPENSES ON A $1,000
INVESTMENT, ASSUMING A 5% INVESTMENT, ASSUMING A 5%
ANNUAL RETURN ON ASSETS: ANNUAL RETURN ON ASSETS:
- ---------------------------------------------------------------------------------------------------------------
3 5 10 3 5 10
SUB-ACCOUNT 1 YEAR YEARS YEARS YEARS 1 YEAR YEARS YEARS YEARS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market Portfolio $23 $71 $122 $262 $20 $63 $109 $235
- ---------------------------------------------------------------------------------------------------------------
North American Government Securities
Portfolio 30 93 158 333 27 85 145 308
- ---------------------------------------------------------------------------------------------------------------
Diversified Income Portfolio 23 71 122 262 20 63 109 235
- ---------------------------------------------------------------------------------------------------------------
Balanced Growth Portfolio 25 77 131 280 22 69 118 254
- ---------------------------------------------------------------------------------------------------------------
Utilities Portfolio 25 78 133 283 22 69 119 257
- ---------------------------------------------------------------------------------------------------------------
Dividend Growth Portfolio 24 74 127 272 21 66 114 245
- ---------------------------------------------------------------------------------------------------------------
Value-Added Market Portfolio 23 72 124 265 20 64 110 238
- ---------------------------------------------------------------------------------------------------------------
Growth Portfolio 27 84 144 304 24 76 130 278
- ---------------------------------------------------------------------------------------------------------------
American Value Portfolio 24 75 129 275 21 67 115 248
- ---------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Portfolio 29 89 151 319 26 81 138 294
- ---------------------------------------------------------------------------------------------------------------
Global Equity Portfolio 29 89 152 320 26 81 138 295
- ---------------------------------------------------------------------------------------------------------------
Developing Growth Portfolio 24 73 125 267 21 65 111 240
- ---------------------------------------------------------------------------------------------------------------
Emerging Markets Portfolio 35 107 181 375 32 99 168 351
- ---------------------------------------------------------------------------------------------------------------
High Yield Portfolio 26 79 135 287 23 71 122 261
- ---------------------------------------------------------------------------------------------------------------
Mid-Cap Value Portfolio 28 87 148 312 25 78 134 287
- ---------------------------------------------------------------------------------------------------------------
Emerging Markets Debt Portfolio 31 94 160 337 28 86 147 311
- ---------------------------------------------------------------------------------------------------------------
Strategic Stock Portfolio 24 74 127 272 21 66 114 245
- ---------------------------------------------------------------------------------------------------------------
Enterprise Portfolio 24 73 125 267 21 65 111 240
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Pursuant to requirements of the Investment Company Act of 1940, as amended
("1940 Act"), the Annual Maintenance Fee has been reflected in the EXAMPLE by a
method intended to show the "average" impact of the fee on an investment in the
Separate Account. The Annual Maintenance Fee is deducted only when the Contract
Value is less than $100,000. In the EXAMPLE, the Annual Maintenance Fee is
approximated as a 0.06% annual asset charge based on the experience of the
Contracts.
This EXAMPLE should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.
6 - PROSPECTUS
<PAGE>
SUMMARY
--------------------------------------------------------------------
WHAT IS THE CONTRACT?
The Contract is an individual and group tax-deferred variable annuity contract
designed for retirement planning purposes. This Prospectus is designed to
provide prospective Contract Owners with information necessary to decide whether
or not to purchase a Contract. This summary provides a concise description of
the more significant aspects of the Contract. Further detail is provided in this
Prospectus, the related Statement of Additional Information, the Contract, and
the prospectus for the Funds. For further information, contact Hartford at the
Administrative Office of the Company or your registered representative.
WHO MAY PURCHASE A CONTRACT?
The Contracts are available for purchase by individuals and groups on both a
non-qualified and qualified basis. The maximum issue age for the Contract is 85
years old. (See "Description of the Contracts," page 13.) A prospective Contract
Owner may purchase a Contract by completing and submitting an application or an
order request along with the initial Premium Payment to Hartford for its
approval. Generally, the minimum initial Premium Payment is $20,000. Thereafter,
the minimum Premium Payment is $500. Certain plans may be allowed to make
smaller periodic payments. There is no deduction for sales expenses from Premium
Payments when made. A deduction will be made for state Premium Taxes for
Contracts sold in certain states. (See "Contract Fees and Charges," page 16.)
Subject to certain minimum allocation requirements that may be in effect from
time to time, the initial Premium Payment, less any applicable Premium Taxes, is
allocated to each Sub-Account as specified on the application or order request.
All percentage allocations must be in whole numbers (e.g., 1%).
IS THERE A RIGHT TO EXAMINE THE CONTRACT?
Contract Owners may cancel the Contract during the cancellation period and
receive a refund equal to the Contract Value plus any applicable Premium Taxes.
The cancellation period is a ten-day period of time beginning when the Contract
is received by a Contract Owner. Some states require a longer cancellation
period or return of the Premium Payment. (See "Right to Examine the Contract,"
page 13.)
WHAT ARE THE INVESTMENT OPTIONS AVAILABLE UNDER THE CONTRACT?
The underlying investments for the Contract are shares of the Portfolios of the
Dean Witter Select Dimensions Investment Series, the Morgan Stanley Universal
Funds, Inc. and Van Kampen American Capital Life Investment Trust, open-end
management investment companies as follows: the Money Market Portfolio, the
North American Government Securities Portfolio, the Diversified Income
Portfolio, the Balanced Growth Portfolio, the Utilities Portfolio, the Dividend
Growth Portfolio, the Value-Added Market Portfolio, the Growth Portfolio, the
American Value Portfolio, the Mid-Cap Growth Portfolio, the Global Equity
Portfolio, the Developing Growth Portfolio, and the Emerging Markets Portfolio
of the Dean Witter Select Dimensions Investment Series, the High Yield
Portfolio, the Mid-Cap Value Portfolio and the Emerging Markets Debt Portfolio
of the Morgan Stanley Universal Funds, Inc. and the Strategic Stock Portfolio
and the Enterprise Portfolio of the Van Kampen American Capital Life Investment
Trust and such other Portfolios as shall be offered from time to time. (See "The
Portfolios," page 9.) With certain limitations, Contract Owners may allocate
their Premium Payments and Contract Values to one or a combination of
Sub-Accounts which invest in these investment options, and may transfer among
the corresponding Sub-Accounts. (See "Sub-Account Value Transfers Before and
After the Annuity Commencement Date," page 14.)
CAN I GET MY MONEY IF I NEED IT?
The Contracts may be surrendered, or portions of the value of the Contracts may
be surrendered, at any time prior to the Annuity Commencement Date without
charge. (See "Surrenders," page 15). The Contract may also be surrendered after
the Annuity Commencement Date under the Payment for a Period Certain Annuity
payment option. Surrenders may have adverse federal income tax consequences
including the possibility of being subject to a penalty tax. (See "Federal Tax
Considerations," page 22.)
DOES THE CONTRACT PAY ANY DEATH BENEFITS?
The Contract provides for a minimum Death Benefit in the event of the death of
the Annuitant or Contract Owner before the Annuity Commencement Date and, under
some Annuity payment options, after the Annuity Commencement Date. (See "Death
Before the Annuity Commencement Date" and "Death On or After the Annuity
Commencement Date," pages 17 and 18.)
WHAT ARE THE CONTRACT FEES AND CHARGES?
The following fees and charges are assessed under the Contracts:
ANNUAL MAINTENANCE FEE. An Annual Maintenance Fee in the amount of $30 is
deducted from Contract Values each Contract Year (not applicable to Contracts
with Contract Values of $100,000 or more, as determined on the most recent
Contract Anniversary). (See "Contract Fees and Charges," page 16.)
7 - PROSPECTUS
<PAGE>
ADMINISTRATION CHARGE. The Contract provides an administration of .15% per annum
against all Contract Values held in the Separate Account. (See "Administration
Charge," page 16.)
MORTALITY AND EXPENSE RISK CHARGE. Prior to annuitization, Hartford applies a
1.50% per annum mortality and expense risk charge against all Contract Values
held in the Separate Account. After annuitization, the mortality and expense
risk charge will decrease to 1.25% per annum of the Contract Values held in the
Separate Account. (See "Contract Fees and Charges," page 16.)
PREMIUM TAX CHARGE. On any Contract subject to a Premium Tax, Hartford may
deduct the tax on a pro-rata basis from the Sub-Accounts at the time Hartford
pays the tax to the applicable government authorities, at the time the Contract
is surrendered, at the time Death Benefits are paid or on the Annuity
Commencement Date. (See "Contract Fees and Charges," page 16.)
EXPENSES OF THE PORTFOLIOS. The investment experience of each Sub-Account
reflects the investment experience of the Portfolio whose shares it holds. The
investment experience of each Portfolio, in turn, reflects its fees and other
operating expenses. (See "Annual Fund Operating Expenses," page 5 of this
Prospectus and the prospectus for the Funds attached hereto).
WHAT ARE THE ANNUITY PAYMENT OPTIONS?
The following Annuity payment options are available under the Contract on either
a fixed or variable basis: Life Annuity; Life Annuity with a Cash Refund; Life
Annuity with Payments for a Period Certain; Joint and Last Survivor Life
Annuity; Joint and Last Survivor Life Annuity with Payments for a Period
Certain; and Payment for a Period Certain. In the absence of an Annuity payment
option election, and depending on state law, the Contract Value (less applicable
Premium Taxes) will be applied on the Annuity Commencement Date to provide a
Fixed Annuity with payments guaranteed for 10 years. (See "Settlement
Provisions," page 18.)
In addition, the Annuity Proceeds Settlement Option is offered to a Beneficiary
who opt to leave the Death Benefit invested in the Sub-Accounts.
HARTFORD, THE SEPARATE ACCOUNT AND THE PORTFOLIOS
--------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
Hartford Life Insurance Company ("Hartford") is a stock life insurance company
engaged in the business of writing life insurance, both individual and group, in
all states of the United States and the District of Columbia. Hartford was
originally incorporated under the laws of Massachusetts on June 5, 1902, and was
subsequently redomiciled to Connecticut. Its offices are located in Simsbury,
Connecticut; however, its mailing address is P.O. Box 2999, Hartford, CT
06104-2999. Hartford is ultimately controlled by The Hartford Financial Services
Group, Inc., one of the largest financial service providers in the United
States.
HARTFORD RATINGS
<TABLE>
<CAPTION>
EFFECTIVE
RATING DATE OF
AGENCY RATING RATING BASIS OF RATING
- ------------------- --------- ----------- --------------------------
<S> <C> <C> <C>
A.M. Best and A+ Financial soundness and
Company, Inc....... 9/9/97 operating performance
Standard & Poor's.. 1/23/98 AA Insurer financial strength
Duff & Phelps...... 1/23/98 AA+ Claims paying ability
</TABLE>
THE SEPARATE ACCOUNT
The Separate Account was established on June 13, 1994, in accordance with
authorization by the Board of Directors of Hartford. It is the Separate Account
in which Hartford 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, it is registered as a unit
investment trust under the 1940 Act. 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. The Separate Account
meets the definition of "separate account" under federal securities law.
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 may
conduct. So Contract Values allocated to the Sub-Accounts will not be affected
by the rate of return of Hartford's General Account, nor by the investment
performance of any of Hartford's other separate accounts. However, the
obligations arising under the Contracts are general obligations of Hartford.
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. Premium Payments, less any applicable
Premium Tax, and proceeds of transfers between Portfolios are applied to
purchase shares in the appropriate Portfolio 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,
8 - PROSPECTUS
<PAGE>
both your Annuity payments and reserve values will vary in accordance with these
factors.
Hartford 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 Funds prospectuses.
Hartford 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 already purchased or to be purchased in the future by the Separate
Account provided that the substitution has been approved by the Commission.
Current law requires notification to you of any such substitution. Hartford
reserves the right to add new Portfolios or close Portfolios.
The Separate Account may be subject to liabilities arising from the Separate
Account assets which are attributable to other variable annuity contracts
offered by the Separate Account which are not described in this Prospectus.
THE PORTFOLIOS
The underlying investment for the Contracts are shares of the Dean Witter Select
Dimensions Investment Series, the Morgan Stanley Universal Funds, Inc. and Van
Kampen American Capital Life Investment Trust, all open-end management
investment companies. The underlying Portfolios corresponding to each
Sub-Account and their investment objectives are described below. Hartford
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.
DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES:
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 Funds prospectuses.
BALANCED GROWTH PORTFOLIO
Seeks to provide capital growth with reasonable current income by investing,
under normal market conditions, at least 60% of its total assets in a
diversified portfolio of common stocks of companies which have a record of
paying dividends and, in the opinion of the Investment Manager, have the
potential for increasing dividends and in securities convertible into common
stock, and at least 20% of its total assets in investment grade fixed-income
(fixed-rate and adjustable-rate) securities such as corporate notes and bonds
and obligations issued or guaranteed by the U.S. Government, its agencies and
its instrumentalities.
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.
GROWTH 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 attractively valued given their
above average relative earnings growth potential at that time.
9 - PROSPECTUS
<PAGE>
MID-CAP GROWTH PORTFOLIO
Seeks long-term capital growth by investing primarily in equity securities of
"mid-cap" companies (that is, companies whose equity market capitalization falls
within the range of $250 million to $5 billion).
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, 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.
MORGAN STANLEY UNIVERSAL FUNDS, INC.:
HIGH YIELD PORTFOLIO
Seeks above-average total return over a market cycle of three to five years by
investing primarily in a diversified portfolio of high yield securities,
including corporate bonds and other fixed income securities and derivatives.
High yield securities are rated below investment grade and are commonly referred
to as "junk bonds". The Portfolio's average weighted maturity will ordinarily
exceed five years and will usually be between five and fifteen years. See the
special considerations for investments in high yield securities disclosed in the
Fund prospectus.
MID-CAP VALUE PORTFOLIO
Seeks above-average total return over a market cycle of three to five years by
investing in common stocks and other equity securities of issuers with equity
capitalizations in the range of the companies represented in the S&P MidCap 400
Index.
EMERGING MARKETS DEBT PORTFOLIO
Seeks high total return by investing primarily in fixed income securities of
government and government related issues located in emerging market countries
which securities provide a high level of current income while at the same time
holding the potential for capital appreciation if the perceived creditworthiness
of the issuer improves due to the improving economic, financial, political,
social or other conditions in the country in which the issuer is located.
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST:
STRATEGIC STOCK PORTFOLIO
Seeks to provide investors with an above average total return through a
combination of potential capital appreciation and dividend income, consistent
with the preservation of invested capital by investing primarily in a portfolio
of dividend paying equity securities included in the Dow Jones Industrial
Average or in the Morgan Stanley Capital International USA Index.
ENTERPRISE PORTFOLIO
Seeks capital appreciation through investments in securities believed by the
investment adviser to have above average potential for capital appreciation.
The Portfolios are available only to serve as the underlying investment for
variable annuity and variable life contracts. A full description of the
Portfolios, including their investment objectives, policies and restrictions,
risks, charges and expenses and other aspects of their operation, is contained
in the accompanying Funds prospectuses which should be read in conjunction with
this Prospectus before investing, and in the Funds' Statement of Additional
Information which may be ordered without charge from the Funds.
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 and the Funds do not
currently foresee any such disadvantages either to variable annuity contract
owners or to variable life insurance policyowners, the Funds' Boards 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 a 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.
THE INVESTMENT ADVISERS
Dean Witter InterCapital Inc. ("InterCapital"), a Delaware Corporation, whose
address is Two World Trade Center, New York,
10 - PROSPECTUS
<PAGE>
New York 10048, is the Investment Manager for the Money Market Portfolio, the
North American Government Securities Portfolio, the Diversified Income
Portfolio, the Balanced Growth Portfolio, the Utilities Portfolio, the Dividend
Growth Portfolio, the Value-Added Market Portfolio, the Growth Portfolio, the
American Value Portfolio, the Mid-Cap Growth Portfolio, the Global Equity
Portfolio, the Developing Growth Portfolio, and the Emerging Markets Portfolio
of the Dean Witter Select Dimensions Investment Series (the "Dean Witter
Portfolios"). InterCapital was incorporated in July, 1992 and is a wholly-owned
subsidiary of Morgan Stanley, Dean Witter, Discover, Co. ("MSDWD")
InterCapital provides administrative services, manages the Dean Witter
Portfolios' business affairs and manages the investment of the Dean Witter
Portfolios' assets, including the placing of orders for the purchase and sales
of portfolio securities. InterCapital has retained Dean Witter Services Company
Inc., its wholly-owned subsidiary, to perform the aforementioned administrative
services for the Dean Witter Portfolios. For its services, the Dean Witter
Portfolios pay InterCapital a monthly fee. See the accompanying Fund prospectus
for a more complete description of InterCapital and the respective fees of the
Dean Witter Portfolios.
With regard to the North American Government Securities Portfolio and the
Emerging Markets Portfolio, TCW Funds Management ("TCW"), under a sub-advisory
agreement with InterCapital, provides these Portfolios with investment advice
and portfolio management, in each case subject to the overall supervision of the
InterCapital. TCW's address is 865 South Figueroa Street, Suite 1800, Los
Angeles, California 90017.
With regard to the Growth Portfolio, Morgan Stanley Asset Management Inc.
("MSAM"), under a sub-advisory agreement with InterCapital, provides the Growth
Portfolio with investment advice and portfolio management, subject to the
overall supervision of InterCapital. MSAM, like InterCapital, is a wholly-owned
subsidiary of MSDWD. MSAM's address is 1221 Avenue of the Americas, New York,
New York 10020.
In addition to acting as the sub-advisor for the Growth Portfolio, MSAM,
pursuant to an investment advisory agreement with the Morgan Stanley Universal
Funds, Inc., is the investment advisor for the Emerging Markets Debt Portfolio.
As the investment advisor, MSAM, provides investment advice and portfolio
management services for the Emerging Markets Debt Portfolio, subject to the
supervision of the Morgan Stanley Universal Fund's Board of Directors.
The investment advisor for the High Yield Portfolio and the Mid Cap Value
Portfolio is Miller, Anderson & Sherrerd, LLP ("MAS"). MAS is a Pennsylvania
limited liability partnership founded in 1969 with its principal offices at One
Tower Bridge, West Conshohocken, Pennsylvania 19428. MAS provides investment
advisory services to employee benefit plans, endowment funds, foundations and
other institutional investors and has served as an investment advisor to several
open-end investment companies. MAS is a indirect wholly owned subsidiary of
MSDWD.
The investment advisor with respect to the Strategic Stock Portfolio and the
Enterprise Portfolio is Van Kampen American Capital Asset Management, Inc., a
wholly-owned subsidiary of Van Kampen American Capital, Inc. Van Kampen American
Capital, Inc. is an indirect wholly-owned subsidiary of MSDWD. Van Kampen
American Capital, Inc. is a diversified asset management company with more than
two million retail investor accounts, extensive capabilities for managing
institutional portfolios, and more than $60 billion under management or
supervision. Van Kampen American Capital Inc.'s more than 50 open-end and 38
closed end funds and more than 2,500 unit investment trusts are professionally
distributed by leading financial advisers nationwide.
VOTING RIGHTS. Hartford is the legal owner of all shares of the Funds held in
the Separate Account. As the owner, Hartford has the right to vote at the Funds'
shareholder meetings. However, to the extent required by federal securities laws
or regulations, Hartford will:
1. Vote all Fund shares attributable to a Contract according to instructions
received from the Contract Owner, and
2. Vote all Fund 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 to vote Fund shares in its own right, Hartford may
elect to do so.
Hartford will notify you of any Fund shareholders' meeting if the shares held
for your account may be voted at such meetings. Hartford will send proxy
materials and a form of instruction by means of which you can instruct Hartford
with respect to the voting of the Fund shares held for your account.
In connection with the voting of Fund shares held by it, Hartford will arrange
for the handling and tallying of proxies received from Contract Owners. Hartford
as such, shall have no right, except as described below, to vote any Fund shares
held by it under the Contract which may be registered in its name or the names
of its nominees. Hartford will, however, vote the Fund 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 to furnish a proxy or otherwise arrange for
the exercise of voting rights with respect to the Fund shares held for such
Contract Owner's account. Hartford will vote shares for which no instructions
have been given and shares which are not attributable to Contract Owners (i.e.
shares owned by Hartford) in the same proportion
11 - PROSPECTUS
<PAGE>
as it votes shares of that Fund for which it has received instructions. During
the Annuity period under a Contract, the number of votes will decrease as the
assets held to fund Annuity benefits decrease.
The Funds are available only to serve as the underlying investment vehicles for
variable annuity and variable life insurance contracts, including the Contracts
described in this Prospectus, issued by Hartford. 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 Funds simultaneously.
Although Hartford and the Funds do not currently foresee any such disadvantages
either to variable annuity contract owners or to variable life insurance policy
owners, the Funds' Board of Directors intends to monitor events in order to
identify any material conflicts between such contract owners and policy owners
and to determine what action, if any, should be taken in response thereto. If
the Board of Directors of the Funds were to conclude that separate funds should
be established for variable life and variable annuity separate accounts, the
variable annuity contract owners would not bear any expense related to the
establishment of such separate funds.
SUBSTITUTIONS, ADDITIONS, OR DELETIONS OF INVESTMENTS. Hartford retains the
right, subject to any applicable law, to make certain changes to the investment
options offered under the Contract. Hartford reserves the right to eliminate the
shares of any of the Funds and to substitute shares of another registered
investment company for the shares of any Fund already purchased or to be
purchased in the future by the Separate Account, if the shares of the Funds are
no longer available for investment, or, if in Hartford's judgment, investment in
any Fund would be inappropriate in view of the purposes of the Separate Account.
To the extent required by the 1940 Act, substitutions of shares attributable to
a Contract Owner's interest in a Fund will not be made until Commission approval
has been obtained and the Contract Owner has been notified of the change.
New Funds may be established at the discretion of Hartford. Any new Fund will be
made available to existing Contract Owners on a basis to be determined by
Hartford. Hartford may also close one or more Funds to additional Premium
Payments or transfers from existing Sub-Accounts.
In the event of any substitution or change, Hartford may, by appropriate
endorsement, make such changes in the Contract as may be necessary or
appropriate to reflect such substitution or change. Furthermore, if deemed to be
in the best interest of persons having voting rights in the Contracts, the
Separate Account may be operated as a management company under the 1940 Act or
any other form permitted by law, may be de-registered under the 1940 Act in the
event such registration is no longer required, or may be combined with one or
more other separate accounts.
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.
All of the Sub-Accounts may include total return in advertisements or other
sales material.
When a Sub-Account advertises its standardized total return, it will usually be
calculated to the date of effectiveness of the Separate Account. This figure
will usually be calculated for one year, 5 years, and 10 years or some other
relevant period if the Separate Account has not been in existence for one, five
or 10 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.
In addition to the standardized total return, the Sub-Account may advertise a
non-standardized total return. This figure will usually be calculated for one
year, 5 years, and 10 years or other periods, and may predate the inception of
the Separate Account. Non-standardized total return is measured in the same
manner as the standardized total return described above, except that the Annual
Maintenance Fee is not deducted. Therefore, non-standardized total return for a
Sub-Account is higher than standardized total return for a Sub-Account.
The North American Government Securities Portfolio, Balanced Growth Portfolio,
High Yield 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 Annual
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 reflects the recurring charges at the Separate Account level including the
Annual Maintenance Fee.
12 - PROSPECTUS
<PAGE>
The Separate Account may also disclose yield, standard total return, and
non-standard total return. For periods prior to the date the Separate Account
commenced operations, performance information for the Sub-Accounts will be
calculated based on the performance of the underlying Funds and the assumption
that the Sub-Accounts were in existence for the same periods as those of the
underlying Funds, with a level of charges equal to those currently assessed
against the Sub-Accounts.
Hartford 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.
DESCRIPTION OF THE CONTRACTS
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CONTRACTS OFFERED
The Contracts are individual or group tax-deferred Variable Annuity Contracts
designed for retirement planning purposes and may be purchased by any
individual, group or trust, including any 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 Code; Individual Retirement
Annuities adopted according to Section 408 of the 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 Code ("Qualified Contracts").
PURCHASING A CONTRACT
A prospective Contract Owner may purchase a Contract by completing and
submitting an application or an order request along with an initial Premium
Payment to the Administrative Office of the Company. The maximum age for
Annuitants on the Contract Issue Date is 85. Generally, the minimum Premium
Payment is $20,000. Thereafter, the minimum Premium Payment is $500. Certain
plans may be allowed to make smaller periodic payments. Unless Hartford gives
its prior approval, it will not accept a Premium Payment in excess of
$1,000,000. Each Premium Payment may be split among the various Sub-Accounts
subject to minimum amounts then in effect. Hartford will send Contract Owners a
confirmation notice upon receipt and acceptance of the Contract Owner's Premium
Payment.
RIGHT TO EXAMINE THE CONTRACT
If you are not satisfied with your purchase, you may cancel the Contract by
returning it within 10 days (or longer in some states) after you receive it. A
written request for cancellation must accompany the Contract. In such event,
Hartford will, without deduction for any charges normally assessed thereunder,
pay you an amount equal to the Contract Value plus any applicable Premium Tax on
the date of receipt of the request for cancellation. You bear the investment
risk during the period prior to Hartford's receipt of request for cancellation.
Hartford 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.
CREDITING AND ALLOCATING THE PREMIUM PAYMENT
The initial Premium Payment, less any applicable Premium Tax, will be credited
to your Contract within 2 business days of receipt of the initial Premium
Payment and a properly completed application or an order to purchase a Contract
by Hartford at the Administrative Office of the Company. It will be credited to
the Sub-Account(s) in accordance with your election. If the application, order
request, or other required information is incomplete when received, Hartford
reserves the right to retain the Premium Payment for up to five business days
while it attempts to complete the information. If the information cannot be made
complete within 5 business days, the applicant will be informed of the reasons
for the delay and the Premium Payment will be returned unless the applicant
specifically consents to Hartford retaining the Premium Payment until the
information is made complete. The Premium Payment will then be allocated within
two business days after receipt of the complete information.
Subsequent Premium Payments received by Hartford in the Administrative Office of
the Company, or other designated administrative offices are priced on the
Valuation Day prior to the close of the New York Stock Exchange (generally 4:00
p.m. E.T.). Unless otherwise specified, Hartford will allocate any subsequent
Premium Payment to Sub-Accounts in accordance with the most recent premium
allocation instructions received by Hartford.
CONTRACT VALUE -- BEFORE THE ANNUITY COMMENCEMENT DATE
SUB-ACCOUNT VALUE. The Contract Value is the sum of all Sub-Account Values and
therefore reflects the investment performance of the Sub-Accounts to which it is
allocated. The Sub-Account Value for any Sub-Account as of the Contract Issue
Date is equal to the amount of the Premium Payment allocated to that
Sub-Account. The Sub-Account Value for a Contract is determined on any given day
by the multiplying the number of Accumulation Units attributable to the Contract
in that Sub-
13 - PROSPECTUS
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Account by the Accumulation Unit value for that Sub-Account. Therefore, on any
Valuation Day the Contract Owner's Sub-Account Value reflects any variation of
the interest income, dividends, net capital gains or losses, realized or
unrealized, and any amounts transferred into or out of that Sub-Account.
ACCUMULATION UNITS. The portions of the Premium Payments allocated to a
Sub-Account or amounts of Contract Value transferred to a Sub-Account are
converted into Accumulation Units. For any Contract, the number of Accumulation
Units credited to a Sub-Account is determined by dividing the dollar amount
directed to the Sub-Account by the value of the Accumulation Unit for that
Sub-Account for the Valuation Day as of which the portion of the Premium Payment
or transferred Contract Value is invested in the Sub-Account. Transferred
Contract Value is invested in a Sub-Account as of the end of the Valuation
Period during which the transfer request was received. Therefore, a Premium
Payment or portion of a Premium Payment allocated to or amounts transferred to a
Sub-Account under a Contract increase the number of Accumulation Units of that
Sub-Account credited to the Contract.
Surrenders, transfers out of a Sub-Account, the death of any Contract Owner or
the Annuitant before the Annuity Commencement Date, and the application of
Contract Value less Premium Tax to an Annuity payment option on the Annuity
Calculation Date all result in a decrease in the number of Accumulation Units of
one or more Sub-Accounts. Accumulation Units are valued as of the end of the
Valuation Period.
The Accumulation Unit value for each Sub-Account was arbitrarily set initially
at $1 when the Sub-Account began operations. Thereafter, the Accumulation Unit
value for each Sub-Account will equal (a) the Accumulation Unit value at the end
of the preceding Valuation Day multiplied by (b) the Net Investment Factor for
the Valuation Day for which the Accumulation Unit value is being calculated.
(See "Net Investment Factor," below.)
The Sub-Account Value as of each Valuation Day is then determined by
multiplying: (a) the number of Accumulation Units in the Sub-Account by (b) the
Accumulation Unit value for that Sub-Account as of that Valuation Day.
You will be advised, at least semiannually, of the number of Accumulation Units
credited to each Sub-Account, the current Accumulation Unit values, and the
total value of your Contract.
THE NET INVESTMENT FACTOR (BEFORE AND AFTER THE ANNUITY COMMENCEMENT DATE). The
Net Investment Factor is an index applied to measure the investment performance
of a Sub-Account from one Valuation Period to the next. For each Sub-Account,
the Net Investment Factor reflects the investment performance of the Fund in
which that Sub-Account invests and the charges assessed against that Sub-Account
for a Valuation Period. The Net Investment Factor is calculated by dividing (a)
by (b) and subtracting (c) from the result, where:
(a) is the Net Asset Value of the Fund held in that Sub-Account, determined at
the end of the current Valuation Period (plus the per share amount of any
dividends or capital gains distributions made by that Fund);
(b) is the Net Asset Value of the Fund held in the Sub-Account, determined at
the beginning of the Valuation Period;
(c) is a daily factor representing the mortality and expense risk charge and any
applicable administration charge deducted from the Sub-Account, adjusted for
the number of days in the Valuation Period.
SUB-ACCOUNT VALUE TRANSFERS BEFORE AND AFTER THE ANNUITY COMMENCEMENT DATE
You may transfer the your Sub-Account Values from one or more Sub-Accounts to
another Sub-Account free of charge. However, Hartford reserves the right to
limit the number of transfers to 12 per Contract Year, with no 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 Hartford at (800) 862-6668 or by the agent of record by calling (800)
862-7155. Telephone transfers may not be permitted by some states.
The policy of Hartford 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 will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine. The procedures Hartford
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 may permit the Contract Owner to preauthorize transfers among
Sub-Accounts and between Sub-Accounts under certain circumstances. Transfers
between the Sub-Accounts may be made both before and after the Annuity
Commencement Date. Generally, the minimum allocation to any Sub-Account may not
be less than $500. All percentage (%) allocations must be in whole numbers
(e.g., 1%). No minimum balance is presently required in any Sub-Account.
It is the responsibility of the Contract Owner to verify the accuracy of all
confirmations of transfers and to promptly advise Hartford of any inaccuracies
within 30 days of receipt of the confirmation.
Subject to the exceptions set forth in the following paragraph, the right to
reallocate Contract Values is subject to modification if Hartford determines, in
its sole opinion, 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
14 - PROSPECTUS
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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 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 to be to the disadvantage of
other Contract Owners.
For Contracts issued in the State of New York, the reservation of rights set
forth in the preceding paragraph is limited to: (i) requiring up to a maximum of
10 Valuation Days between each transfer; (ii) limiting the amount to be
transferred on any one Valuation Day to no more than $2 million; and (iii) upon
30 days prior written notice, to only accepting transfer instructions from the
Contract Owner and not from the Contract Owner's representative, agent or person
acting under a power of attorney for the Contract Owner.
Currently, and with respect to Contracts issued in all states, the only
restriction in effect is that Hartford will not accept instructions from agents
acting under a power of attorney of multiple Contract Owners whose accounts
aggregate more than $2 million, unless the agent has entered into a third party
transfer services agreement with Hartford.
SURRENDERS
FULL SURRENDERS PRIOR TO THE ANNUITY COMMENCEMENT DATE. At any time prior to the
Annuity Commencement Date, the Contract Owner has the right to fully surrender
the Contract. In such event, the Surrender Value of the Contract may be taken in
the form of a lump sum cash settlement. With the exception of Annuity payment
options 6, no surrenders are permitted after the Annuity Commencement Date.
The Surrender Value of the Contract is equal to the Contract Value less any
Premium Taxes, and the Annual Maintenance Fee, if applicable. The Surrender
Value may be more or less than the amount of the Premium Payments made to a
Contract.
PARTIAL SURRENDERS PRIOR TO THE ANNUITY COMMENCEMENT DATE. 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
Hartford's minimum amount rules then in effect. Additionally, if the remaining
Contract Value following a surrender is less than $500, Hartford may terminate
the Contract and pay the Surrender Value. For Contracts issued in Texas, the
Contract will not be terminated when the remaining Contract Value after a
surrender is less than $500 unless there were no Premium Payments made during
the previous 2 Contract Years.
When requesting a partial surrender, you should specify the Sub-Account(s) from
which the partial surrender will be taken. Otherwise, the surrender will be
effected on a pro rata basis according to the value in each Sub-Account.
Hartford may permit the Contract Owner to preauthorize partial surrenders
subject to certain limitations then in effect.
SURRENDERS AFTER THE ANNUITY COMMENCEMENT DATE. A Contract Owner may fully
surrender the Contract on or after the Annuity Commencement Date if the Payment
for a Period Certain Annuity payment option is in effect. Under the Payments for
a Period Certain option, Hartford pays the Contract Owner the Commuted Value
upon surrender. This surrender charge is computed as of the date Hartford
receives the written request for surrender at the Administrative Office of the
Company. No partial surrenders are permitted after the Annuity Commencement
Date.
A Contract Owner may request in writing a partial and full surrender of the
Contract. Partial surrenders may be requested by telephone provided certain
requirements are met. (See "Telephone Surrender Privileges," below.)
CONTRACT OWNERS SHOULD CONSULT THEIR TAX ADVISER REGARDING THE TAX CONSEQUENCES
OF A SURRENDER. A surrender made before age 59 1/2 may result in adverse tax
consequences, including the imposition of a penalty tax of 10% of the taxable
portion of the Surrender Value. (See "Federal Tax Considerations," page 22.)
TELEPHONE SURRENDER PRIVILEGES. Hartford permits partial surrenders by telephone
subject to dollar amount limitations in effect at the time a Contract Owner
requests the surrender. To request partial surrenders by telephone, a Contract
Owner must have completed and returned to Hartford a Telephone Redemption
Program Enrollment Form authorizing telephone surrenders. If there are joint
Contract Owners, both must authorize Hartford to accept telephone instructions
and agree that Hartford may accept telephone instructions for partial surrenders
from either Contract Owner. Partial surrender requests will not be honored until
Hartford receives all required documents in proper form.
Telephone authorization will remain valid until (a) Hartford receives written
notice of revocation by a Contract Owner, or, in the case of joint Contract
Owners, written notice from either Contract Owner; (b) Hartford discontinues the
privilege; or (c) Hartford has reason to believe that a Contract Owner has
entered into a market timing agreement with an investment adviser and/or
broker/dealer.
Hartford may record any telephone calls to verify data concerning transactions
and may adopt other procedures to confirm that telephone instructions are
genuine. Hartford will not be liable for losses or expenses arising out of
telephone instructions reasonably believed to be genuine.
In order to obtain that day's unit values on surrender, Hartford must receive
telephone surrender instructions prior to the close of trading on the New York
Stock Exchange (generally 4:00 p.m.).
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Hartford may modify, suspend, or terminate telephone transaction privileges at
any time.
PAYMENT OF SURRENDER AMOUNTS. Payment of any request for a full or partial
surrender from the Sub-Accounts will be made as soon as possible and in any
event no later than seven days after the request is received by Hartford at the
Administrative Office of the Company.
There may be postponement in the payment of Surrender Amounts whenever (a) the
New York Stock Exchange is closed; (b) trading on the New York Stock Exchange is
restricted as determined by the Commission; (c) the Commission permits
postponement and so orders; or (d) the Commission determines that an emergency
exists making valuation of the amounts or disposal of securities not reasonably
practicable.
CERTAIN QUALIFIED CONTRACT SURRENDERS -- 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) SEPARATED FROM SERVICE, C) DIED, D) BECOME DISABLED
OR E) EXPERIENCED FINANCIAL HARDSHIP (CASH VALUE INCREASES MAY NOT BE
DISTRIBUTED FOR HARDSHIPS PRIOR TO AGE 59 1/2).
DISTRIBUTIONS PRIOR TO AGE 59 1/2 DUE TO FINANCIAL HARDSHIP OR SEPARATION FROM
SERVICE MAY STILL BE SUBJECT TO A PENALTY TAX OF 10%.
HARTFORD WILL NOT ASSUME ANY RESPONSIBILITY FOR 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 CONTRACT
VALUES.
ANY FULL OR PARTIAL SURRENDER DESCRIBED ABOVE MAY AFFECT THE CONTINUING
TAX-QUALIFIED STATUS OF SOME CONTRACTS OR PLANS AND MAY RESULT IN ADVERSE TAX
CONSEQUENCES TO THE CONTRACT OWNER. THE CONTRACT OWNER, THEREFORE, SHOULD
CONSULT WITH HIS OR HER TAX ADVISER BEFORE UNDERTAKING ANY SUCH SURRENDER. (SEE
"FEDERAL TAX CONSIDERATIONS," PAGE 22.)
CONTRACT FEES AND CHARGES
ANNUAL MAINTENANCE FEE. Each year, on each Contract Anniversary on or before the
Annuity Commencement Date, Hartford will deduct an Annual Maintenance Fee, if
applicable, from Contract Values to reimburse it for expenses relating to the
maintenance of the Contract and the Sub-Account(s) thereunder. The Annual
Maintenance Fee is $30 per Contract Year for Contracts with less than $100,000
Contract Value on the Contract Anniversary. If, during a Contract Year, the
Contract is surrendered for its full value, Hartford will deduct the Annual
Maintenance Fee, if applicable, at the time of such surrender. The fee is a flat
fee which will be due in the full amount regardless of the time of the Contract
Year that Contract Values are surrendered. The deduction will be made pro rata
according to the value in each Sub-Account under a Contract.
The types of expenses covered by the Annual Maintenance Fee 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.
Annual Maintenance Fees are waived for Contracts with Contract Value equal to or
greater than $100,000. Hartford reserves the right to waive the Annual
Maintenance Fee under certain conditions.
ADMINISTRATION CHARGE. For administration, Hartford 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.
MORTALITY AND EXPENSE RISK CHARGE. Although Variable Annuity payments made under
the Contracts will vary in accordance with the investment performance of the
underlying Fund shares held in the Sub-Account(s), the payments will not be
affected by (a) Hartford's actual mortality experience before or after the
Annuity Commencement Date or (b) Hartford's actual expenses, if greater than the
deductions provided for in the Contracts because of the expense and mortality
undertakings by Hartford.
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Prior to the Annuity Commencement Date, Hartford will, for assuming these risks
under the Contracts, make a daily charge at the rate of 1.50% per annum against
all Contract Values (estimated at 0.95% for mortality and 0.55% for expense).
After the Annuity Commencement Date, Hartford will make a daily charge of 1.25%
per annum (estimated at .90% for mortality and .35% for expense) against all
Sub-Account Values.
The mortality undertaking provided by Hartford 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 1983a Individual Annuity Mortality
Table projected to the year 2000 using Projection Scale G 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
also assumes the liability for payment of a minimum Death Benefit under the
Contract.
The mortality undertakings are based on Hartford's determination of expected
mortality rates among all Annuitants. If actual experience among Annuitants
during the Annuity payment period deviates from Hartford's actuarial
determination of expected mortality rates among Annuitants because, as a group,
their longevity is longer than anticipated, Hartford must provide amounts from
its general funds to fulfill its Contract obligations. Hartford will bear the
loss in such a situation. Also, in the event of the death of an Annuitant or
Contract Owner before the Annuity Commencement Date, whichever is earlier,
Hartford can, in periods of declining value, experience a loss resulting from
the assumption of the mortality risk relative to the guaranteed Death Benefit.
In providing an expense undertaking, Hartford assumes the risk that the Annual
Maintenance Fee and Administrative Charge for maintaining the Contracts prior to
the Annuity Commencement Date may be insufficient to cover the actual cost of
providing such items.
PREMIUM TAXES. A deduction is also made for Premium Tax, if applicable, imposed
by a federal, state or other governmental entity. Certain states impose a
Premium Tax, currently ranging up to 4%. Some states assess the tax at the time
Premium Payments are made; others assess the tax at the time of annuitization.
Hartford will pay Premium Taxes at the time imposed under applicable law. At its
sole discretion, Hartford may deduct Premium Taxes at the time Hartford pays
such taxes to the applicable government authorities, at the time the Contract is
surrendered, at the time the Death Benefit is paid, or on the Annuity
Commencement Date.
EXPENSES OF THE PORTFOLIOS. The investment experience of each Sub-Account
reflects the investment experience of the Portfolio who shares it holds. The
investment experience of each Portfolio, in turn, reflects its fees, and other
operating expenses. (See the Prospectus for the Portfolios, page 5 for more
detail.)
EXCEPTIONS. Hartford may offer, in its discretion, reduced fees and charges
including, but not limited to, the mortality and expense risk charge and the
Annual Maintenance Fee for certain sales (including employer sponsored savings
plans) 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.
DEATH BEFORE THE ANNUITY
COMMENCEMENT DATE
If the Contract Owner or the Annuitant dies before the Annuity Commencement
Date, Hartford will pay a Death Benefit.
If the deceased had not attained age 81, the Death Benefit is the greatest of:
(a) the Contract Value, 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 Contract Anniversary
value attained from the following: Hartford will calculate a Contract
Anniversary value for each Contract Anniversary prior to the deceased's attained
age 81. The Contract Anniversary value is equal to the Contract Value on a
Contract Anniversary, increased by the dollar amount of any Premium Payments
made since that anniversary and reduced by the dollar amount of any partial
surrenders since that anniversary.
If the deceased had attained age 81, then the Death Benefit is the greatest of:
(a) the Contract Value, or
(b) 100% of the total Premium Payments made to such Contract, reduced by any
prior surrenders, or
(c) the Maximum Anniversary Value at the deceased's attained age 80, reduced by
any prior surrenders and increased by premiums paid.
If the Contract Owner or Annuitant dies before the Annuity Commencement Date and
a Death Benefit is payable to the Beneficiary, the Death Benefit will be
calculated as of the date Hartford receives written notification of Due Proof of
Death. Any Annuity payments made or after the date of death, but before receipt
of written notification of Due Proof of Death will be recovered by Hartford from
the Payee.
The calculated Death Benefit will remain invested in accordance with the last
allocation instructions given by the Contract Owner until new complete
settlement instructions are received from the beneficiary(s). During the time
period between Hartford's receipt of written notification of Due Proof of Death
and
17 - PROSPECTUS
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Hartford's receipt of complete settlement instructions, the calculated Death
Benefit will be subject to market fluctuations.
IF THE CONTRACT OWNER DIES before the Annuity Commencement Date, any surviving
joint Contract Owner becomes the Beneficiary. If there is no surviving joint
Contract Owner, the designated Beneficiary will be the Beneficiary. If the
Contract Owner's spouse is the sole Beneficiary and the Annuitant is living, the
spouse may elect, in lieu of receiving the Contract Value, to be treated as the
Contract Owner. If no Beneficiary designation is in effect or if the Beneficiary
has predeceased the Contract Owner, the Contract Owner's estate will be the
Beneficiary.
IF THE ANNUITANT DIES before the Annuity Commencement Date, the Contingent
Annuitant will become the Annuitant. If either (a) there is no Contingent
Annuitant, (b) the Contingent Annuitant predeceases the Annuitant, or (c) if any
sole Contract Owner dies before the Annuity Commencement Date, the Beneficiary,
as determined under the Contract control provisions, will receive the Death
Benefit. However, if the Annuitant dies prior to the Annuity Commencement Date
and the Contract Owner is living, the Contract Owner shall be the Beneficiary.
In that case, the rights of any designated Beneficiary shall be void.
DEATH ON OR AFTER THE ANNUITY
COMMENCEMENT DATE
If the Annuitant dies on or after the Annuity Commencement Date, Hartford will
pay the Death Benefit under the following Annuity payment options: Life Annuity
with Cash Refund and Life Annuity with Payment for a Period Certain.
PAYMENT FOR A PERIOD CERTAIN. The Death Benefit on or after the Annuity
Commencement Date, under the Payment for a Period Certain Annuity payment option
is as follows:
IF THE ANNUITANT DIES on or after the Annuity Commencement Date, the Beneficiary
will have the option of having payments continue to the Beneficiary for the
remainder of the period or taking the Death Benefit in one sum. If the
Beneficiary opts to take the Death Benefit in one sum, the Death Benefit will
equal the Commuted Value.
IF A CONTRACT OWNER WHO IS NOT THE ANNUITANT DIES on or after the Annuity
Commencement Date, any surviving joint Contract Owner becomes the sole Contract
Owner. If there is no surviving Contract Owner, the Payee becomes the new
Contract Owner. If any Contract Owner dies, the remaining Annuity payments will
be distributed at least as rapidly as under the method of distribution being
used as of the date of such death.
LIFE ANNUITY WITH CASH REFUND. The Death Benefit on or after the Annuity
Commencement Date, under the Life Annuity with Cash Refund Annuity payment
option equals the Contract Value less Premium Tax used to purchase Annuity Units
on the Annuity Calculation Date minus the sum of all Annuity payments made.
DISTRIBUTION REQUIREMENTS:
PRIOR TO THE ANNUITY
COMMENCEMENT DATE
The Death Benefit will be distributed based on the Contract Owner's or
Annuitant's date of death and the Beneficiary's election:
(a) in a single lump sum, within 5 years from the death
(b) under an Annuity payment option provided that:
(1) Annuity payments begin within one year of the date of death, and
(2) Annuity payments are made in substantially equal installments over the
life of the Beneficiary, or
(3) Annuity payments are made in substantially equal installments over a
period not greater than the life expectancy of the Beneficiary;
(c) if the sole Beneficiary is the spouse of the deceased Contract Owner, he or
she may by written notice within one year of the Contract Owner's death,
elect to continue the Contract as the new Contract Owner. If the spouse so
elects, all of his or her rights as Beneficiary cease and if the deceased
Contract Owner was also the sole Annuitant and appointed no Contingent
Annuitant, he or she will become the Annuitant (For qualified plans, see
"Appendix I," page 27); or
(d) if the Contract Owner is not an individual, then the "primary Annuitant"
shall be treated as the Contract Owner under (a) and (b) above. For this
purpose, the "primary Annuitant" means 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.
The Death Benefit will only be paid after Hartford has received Due Proof of
Death.
There may be postponement in the payment of Death Benefits whenever (a) the New
York Stock Exchange is closed, including for holidays and 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 of the amounts or disposal
of securities not reasonably practicable.
SETTLEMENT PROVISIONS
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You select an Annuity Commencement Date and an Annuity payment option which may
be on a fixed or variable basis, or a combination thereof. The Annuity
Commencement Date will not be deferred beyond the end of Annuitant's age 90 or
the end of
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Contract Year 10, whichever is later. (If the Contract is sold as part of a
Charitable Remainder Trust, the Annuity Commencement Date may be deferred to the
end of the Annuitant's age 100.) The Annuity Commencement Date and/or the
Annuity payment 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 contains the 6 Annuity payment options described below and Option
7, the Annuity Proceeds Settlement Option. Annuity payment options 3, 5, 6 and
the Annuity Proceeds Settlement Option are each 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 Hartford. With respect to
Non-Qualified Contracts, if you do not elect otherwise, Fixed Annuity payments
will automatically begin on the Annuity Commencement Date under Annuity payment
option 3 with Annuity payments guaranteed for 10 years. For Qualified Contracts
and Contracts issued in Texas, if you do not elect otherwise, Fixed Annuity
payments will begin automatically on the Annuity Commencement Date, under option
1 to provide a life Annuity.
With the exception of Annuity payment option 6, no surrenders are permitted
after Annuity payments commence.
ANNUITY PAYMENT OPTIONS
OPTION 1: LIFE ANNUITY
Hartford makes Annuity payments for as long as the Annuitant lives. Under this
option, a Payee would receive only one Annuity payment if the Annuitant dies
after the first such payment, two Annuity payments if the Annuitant dies after
the second payment, etc.
OPTION 2: LIFE ANNUITY WITH A CASH REFUND
Hartford makes Variable Annuity payments as long as the Annuitant lives. If the
Annuitant dies and the sum of all Annuity payments made are less than the
Contract Value less Premium Tax on the Annuity Calculation Date, the Beneficiary
is entitled to a Death Benefit. The Death Benefit equals the Contract Value less
Premium Tax on the Annuity Calculation Date minus the sum of all Annuity
payments made. This option is only available when for Variable Annuity payment
using the 5% A.I.R.
OPTION 3: LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN
Hartford makes Annuity payments for as long as the Annuitant lives. At the time
this option is selected, the Contract Owner must select a specific number of
years (a minimum of 5 years and maximum of 100 minus the Annuitant's age). If
the Annuitant dies before the specified number of years has passed, the
Beneficiary will have the option of either having the payments continue to the
Beneficiary for the remainder of the period or receiving the present value of
the remaining payments in one sum. Some restrictions apply to Qualified
Contracts with regards to the specified number of years for which payments are
guaranteed. (See first paragraph under "Settlement Provisions," page 18.)
OPTION 4: JOINT AND LAST SURVIVOR LIFE ANNUITY
Hartford makes Annuity payments while the Annuitant and Joint Annuitant are
living. After the death of either Annuitant, payments continue for as long as
the other Annuitant lives. Under this option, a Payee would receive only one
Annuity payment if the Annuitant and Joint Annuitant die after the first such
payment, etc. At the time of purchase the Contract Owner must elect to have
Annuity payments after the death of the first Annuitant made in amounts equal to
100%, 66.67% or 50% of the amount that would otherwise be paid.
OPTION 5: JOINT AND LAST SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A PERIOD
CERTAIN
Hartford makes Annuity payments to the Payee while the Annuitant and Joint
Annuitant are living. After the death of either Annuitant, Annuity payments
continue to the Payee for as long as the Joint Annuitant lives. At the time of
purchase, the Contract Owner must elect to have Annuity payments after the death
of the first Annuitant made in amounts equal to 100%, 66.67% or 50% of the
amount that would otherwise be paid. At the time this Option is selected, the
Contract Owner must select a specific number of years (a minimum of five years
and maximum of 100 minus the younger Annuitant's age). If the Annuitant and
Joint Annuitant die before the specified number of years has passed, the
Beneficiary will have the option of either having the payments continue to the
Beneficiary for the remainder of the period or receiving the present value of
the remaining payments in one sum. Some restrictions apply to Qualified
Contracts with regards to the specified number of years for which payments are
guaranteed. (See first paragraph under "Settlement Options," page 18.)
OPTION 6: PAYMENTS FOR A PERIOD CERTAIN
Hartford makes Annuity payments for the number of years (a minimum of 5 years
and maximum of 100 minus the Annuitants age) selected by the Contract Owner. If
the Annuitant dies before the specified number of years have passed, Annuity
payments to the Beneficiary will continue until the specified number of years
have elapsed. After the death of the Annuitant, the Beneficiary will have the
option of either having the payments continue to the Beneficiary for the
remainder of the period or receiving the present value of the remaining payments
in one sum. Some restrictions apply to Qualified Contracts with regards to the
specified number of years for which payments are guaranteed. (See first
paragraph under "Settlement Provisions," page 18.)
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ANNUITY PROCEEDS SETTLEMENT OPTION
OPTION 7: ANNUITY PROCEEDS SETTLEMENT OPTION
Proceeds from the Death Benefit may be left with Hartford for a period not to
exceed 5 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 surrenders may be made at any time. In the
event of surrenders, the remaining value will equal the Contract Value of the
proceeds left with Hartford, minus any surrenders. This option may not be
available under certain Contracts issued in connection with Qualified Plans.
Hartford may offer other Annuity payment options from time to time.
VARIABLE AND FIXED ANNUITY PAYMENTS. When an Annuity is effected under a
Contract, unless otherwise specified, Contract Values (less applicable Premium
Taxes) held in the Sub-Accounts will be applied to provide a Variable Annuity
based on the pro rata amount in the various Sub-Accounts. YOU SHOULD CONSIDER
THE QUESTION OF ALLOCATION OF CONTRACT VALUES (LESS APPLICABLE PREMIUM TAXES)
AMONG SUB-ACCOUNTS OF THE SEPARATE ACCOUNT AND THE GENERAL ACCOUNT OF HARTFORD
TO MAKE CERTAIN THAT ANNUITY PAYMENTS ARE BASED ON THE INVESTMENT ALTERNATIVE
BEST SUITED TO YOUR NEEDS FOR RETIREMENT.
The minimum Annuity payment is $50. No election may be made which results in a
first payment of less than $50. If at any time Annuity payments are or become
less than $50, Hartford has the right to change the frequency of payment to
intervals that will result in payments of at least $50. For New York Contracts,
the minimum monthly Annuity payment is $20. If any amount due is less than the
minimum amount per year, Hartford may make such other settlement as may be
equitable to the Payee.
When Annuity payments are to commence, the value of the Contract is determined
as the sum of 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.
All Annuity payments under any option will occur the same day of the month as
the Annuity Commencement Date, based on the payment frequency selected by the
Contract Owner. Available payment frequencies include monthly, quarterly,
semi-annual and annual. The payment frequency may not be changed after payout
has begun.
ANNUITY CALCULATION DATE AND
ANNUITY COMMENCEMENT DATE
The Contract Owner selects the Annuity Commencement Date in the application or
order request. The Annuity Calculation Date will be no more than five Valuation
Days before the Annuity Commencement Date. The Contract Value less any
applicable Premium Tax is applied to purchase Annuity Units of the Sub-Accounts
selected by the Contract Owner as of the Annuity Calculation Date. The first
Annuity payment is computed using the value of such Annuity Units as of the
Annuity Calculation Date.
INCOME PAYMENT DATES
All Annuity payments after the first Annuity payment are computed and payable as
of the Income Payment Dates. These dates are the same day of the month as the
Annuity Commencement Date based on the Annuity payment frequency selected by the
Contract Owner and shown on the specification page of the Contract. Available
Annuity payment frequencies includes monthly, quarterly, semi-annual and annual.
The Annuity payment frequency may not be changed once selected by the Contract
Owner.
In the event that the Contract Owner does not select a payment frequency,
Annuity payments will be made monthly.
VARIABLE ANNUITY PAYMENTS
THE FIRST VARIABLE ANNUITY PAYMENT. Variable Annuity payments are periodic
payments from Hartford to the designated Payee, the amount of which varies from
one Income Payment Date to the next as a function of the net investment
performance of the Sub-Accounts selected by the Contract Owner to support such
Annuity payments. The dollar amount of the first Variable Annuity payment
depends on the Annuity payment option chosen, the age of the Annuitant, the
gender of the Annuitant (if applicable), the amount of Contract Value applied to
purchase the Annuity payments, and the applicable annuity purchase rates based
on the 1983a Individual Annuity Mortality table using projection scale G
projected to the year 2000 and an AIR of not less than 3.0%.
The dollar amount of the first Variable Annuity payment attributable to each
Sub-Account is determined by dividing the dollar amount of the Contract Value
less applicable Premium Tax applied to that Sub-Account on the Annuity
Calculation Date by $1,000 and multiplying the result by the payment factor in
the Contract for the selected Annuity payment option. The dollar value of the
first Variable Annuity payment is the sum of the first Variable Annuity payments
attributable to each Sub-Account.
ANNUITY UNITS. The number of Annuity Units attributable to a Sub-Account is
derived by dividing the first Variable Annuity payment attributable to that
Sub-Account by the Annuity Unit value for that Sub-Account for the Valuation
Period ending on the Annuity Calculation Date or during which the Annuity
Calculation Date falls if the Valuation Period does not end on such
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date. The number of Annuity Units attributable to each Sub-Account under a
Contract remains fixed unless there is a transfer of Annuity Units between
Sub-Accounts.
SUBSEQUENT VARIABLE ANNUITY PAYMENTS. The dollar amount of each subsequent
Variable Annuity payment attributable to each Sub-Account is calculated on the
Income Payment Date. It is determined by multiplying (a) by (b) and adding (c),
where:
(a) is the number of Annuity Units of each Sub-Account credited under the
Contract;
(b) is the Annuity Unit value (described below) for that Sub-Account; and
(c) is the results of each Sub-Account calculation.
The total subsequent Variable Annuity payments equal the sum of the amounts
attributable to each Sub-Account.
Notwithstanding the foregoing, when an Income Payment Date would fall on a day
that is not a Valuation Day, the Income Payment is computed as of the next
Valuation Day. If the date of the month elected does not occur in a given month,
i.e., the 29th, 30th, or 31st of a month, the payments will be computed as of
the last Valuation Day of the month.
The Annuity Unit value of each Sub-Account for any Valuation Period is equal to
(a) multiplied by (b) multiplied by (c) where:
(a) is the Net Investment Factor for the Valuation Period for which the Annuity
Unit value is being calculated;
(b) is the Annuity Unit value for the preceding Valuation Period; and
(c) is the Annuity Unit Factor
The Annuity Unit Factor neutralizes the AIR percentage (3%, 5%, or 6%). The
daily Annuity Unit Factor corresponding to the AIR percentages of 3%, 5%, and 6%
are 0.999919, 0.999866, and 0.999840, respectively.
THE ASSUMED INVESTMENT RETURN (AIR). The Annuity Unit value will increase or
decrease from one Income Payment Date to the next in direct proportion to the
net investment return of the Sub-Account or Sub-Accounts supporting the Variable
Annuity payments, less an adjustment to neutralize the selected AIR. Dividing
what would otherwise be the Annuity Unit value by the AIR factor is necessary in
order to adjust the change in the Annuity Unit value (resulting from the Net
Investment Factor) so that the Annuity Unit value only changes to the extent
that the Net Investment Factor represents a rate of return greater than or less
than the AIR selected by the Contract Owner. Without this adjustment, the Net
Investment Factor would decrease the Annuity Unit value to the extent that such
value represented an annualized rate of return of less than 0.0% and increase
the Annuity Unit value to the extent that such value represented an annualized
rate of return of greater than 0.0%.
Subject to state approval, the Contract permits Contract Owners to select one of
three AIRs: 3%, 5% or 6%. A higher AIR will result in a higher initial payment,
a more slowly rising series of subsequent payments when actual investment
performance (minus any deductions and expenses) exceeds the AIR, and a more
rapid drop in subsequent payments when actual investment performance (minus any
deductions and expenses) is less than the AIR. The following examples may help
clarify the impact of selecting one AIR over another:
1. If a Contract Owner selects a 3% AIR and if the net investment return of the
Sub-Account for an Annuity payment period is equal to the pro-rated portion
of the 3% AIR, the Variable Annuity payment attributable to that Sub-Account
for that period will equal the Annuity payment for the prior period. To the
extent that such net investment return exceeds an annualized rate of return
of 3% for a payment period, the Annuity payment for that period will be
greater than the Annuity payment for the prior period and to the extent that
such return for a period falls short of an annualized rate of 3%, the
Annuity payment for that period will be less than the Annuity payment for
the prior period.
2. If a Contract Owner selects a 5% AIR and if the net investment return of the
Sub-Account for an Annuity payment period is equal to the pro-rated portion
of the 5% AIR, the Variable Annuity payment attributable to that Sub-Account
for that period will equal the Annuity payment for the prior period. To the
extent that such net investment return exceeds an annualized rate of return
of 5% for a payment period, the Annuity payment for that period will be
greater than the Annuity payment for the prior period and to the extent that
such return for a period falls short of an annualized rate of 5%, the
Annuity payment for that period will be less than the Annuity payment for
the prior period.
3. If a Contract Owner selects a 6% AIR and if the net investment return of the
Sub-Account for an Annuity payment period is equal to the pro-rated portion
of the 6% AIR, the Variable Annuity payment attributable to that Sub-Account
for that period will equal the Annuity payment for the prior period. To the
extent that such net investment return exceeds an annualized rate of return
of 6% for a payment period, the Annuity payment for that period will be
greater than the Annuity Payment for the prior period and to the extent that
such return for a period falls short of an annualized rate of 6%, the
Annuity payment for that period will be less than the Annuity payment for
the prior period.
LEVEL VARIABLE ANNUITY PAYMENTS WOULD BE PRODUCED IF THE INVESTMENT RATE RETURNS
REMAINED CONSTANT AND EQUAL TO THE A.I.R. IN FACT, PAYMENTS WILL VARY UP OR DOWN
AS THE INVESTMENT RATE VARIES UP OR DOWN FROM THE A.I.R.
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EXCHANGE ("TRANSFER") OF ANNUITY UNITS. After the Annuity Calculation Date, the
Contract Owner may exchange (i.e., "transfer") the dollar value of a designated
number of Annuity Units of a particular Sub-Account for an equivalent dollar
amount of Annuity Units of another Sub-Account. On the date of the transfer, the
dollar amount of a Variable Annuity payment generated from the Annuity Units of
either Sub-Account would be the same. Transfers are executed as of the day
Hartford receives a written request for a transfer. For guidelines refer to
"Sub-Account Value Transfers Before and After the Annuity Commencement Date,"
page 14.
FIXED ANNUITY. Fixed Annuity payments are determined at annuitization by
multiplying the Contract Value (less applicable Premium Taxes) by a rate to be
determined by Hartford which is no less than the rate specified in the Fixed
Annuity option tables in the Contract. The Annuity payment will remain level for
the duration of the Annuity. Any Fixed Annuity allocation may not be changed.
ADDITIONAL CONTRACT INFORMATION
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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 be deemed a distribution which subjects the assignment
proceeds to income taxes and certain penalty taxes.
MISSTATEMENT OF AGE OR SEX
If the Annuitant's stated age and/or sex in the Contract are incorrect, Hartford
will change the benefits payable to those which the Premium Payments would have
purchased for the correct age and sex. Sex is not a factor when Annuity Benefits
are based on unisex annuity payment rate tables. If Annuity payments were made
based on incorrect age or sex, we will increase or reduce a later Annuity
payment or payments to adjust for the error. Any adjustment will include
interest, at a rate of 4% per year, from the date of wrong payment to the date
the adjustment is made.
CONTRACT MODIFICATION
Hartford reserves the right to modify the Contract, but only if such
modification: (a) is necessary to make the Contract or the Separate Account
comply with any law or regulation issued by a governmental agency to which
Hartford is subject; or (b) 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 (c) is necessary to reflect a
change in the operation of the Separate Account or the Sub-Account(s) or (d)
provides additional Separate Account options or (e) withdraws Separate Account
options. In the event of any such modification Hartford will provide notice to
the Contract Owner or to the payee(s) during the Annuity period. Hartford may
also make appropriate endorsement to the Contract to reflect such modification.
FEDERAL TAX CONSIDERATIONS
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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 27, is based on Hartford's understanding of
existing federal income tax laws as they are currently interpreted.
B. TAXATION OF HARTFORD AND
THE SEPARATE ACCOUNT
The Separate Account is taxed as part of Hartford which is taxed as a life
insurance company in accordance with the Internal Revenue Code of 1986, as
amended (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 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
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Units (See "Contract Value -- Before the Annuity Commencement Date" commencing
on page 13). 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 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
in tax-qualified retirement arrangements, certain annuities held by structured
settlement companies, certain annuities held by an employer with respect to a
terminated tax-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.
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 as a result of
divorce.
B. DISTRIBUTIONS AFTER THE 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
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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 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 premature distribution
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 Contract Owner 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 Contract Owner'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 Contract Owner (or
the joint lives or life expectancies of the Contract Owner and the Contract
Owner's Beneficiary).
5. Distributions of amounts which are allocable to the "investment in the
contract" prior to August 14, 1982 (see next subparagraph e.).
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 1. above is
payable to or for the benefit of a designated beneficiary,
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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 1. 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.
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 monitors the diversification of investments in the separate accounts
and tests for diversification as required by the Code. Hartford 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 for tax purposes. The
Internal Revenue Service ("IRS") has issued several rulings which discuss
investor control. The IRS has ruled that certain incidents of ownership by the
contract owner, such as the ability to select and control investments in a
separate account, could 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 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 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, Hartford 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 unless the recipient elects otherwise. A
recipient may elect not to have income taxes withheld or to 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.
25 - PROSPECTUS
<PAGE>
E. GENERAL PROVISIONS AFFECTING TAX-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 27 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.
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 adviser regarding U.S.,
state, and foreign taxation with respect to an annuity purchase.
OTHER INFORMATION
--------------------------------------------------------------------
DISTRIBUTION OF THE 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. The principal business address of HSD
is the same as that of Hartford.
The securities will be sold by salespersons of HSD who represent Hartford as
insurance and by variable annuity agents who are registered representatives of
Broker-Dealers who have entered into distribution agreements with HSD.
HSD is 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.
Commissions will be paid by Hartford and will not be more than 1% of Premium
Payments. Trail commissions of 1% annually will be paid on a quarterly basis
beginning after the first Contract Year. From time to time, Hartford may pay or
permit other promotional incentives, in cash or credit or other compensation.
Broker-dealers or financial institutions are compensated according to a schedule
set forth by HSD and any applicable rules or regulations for variable insurance
compensation. Compensation is generally based on premium payments made by
policyholders or contract owners. This compensation is usually paid from the
sales charges described in this Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not effect the amounts paid by the policyholders or contract
owners to purchase, hold or surrender variable insurance products.
The securities may also be sold directly to employees of Hartford and Hartford
Fire Insurance Company, an affiliate of Hartford, without compensation to HSD
salespersons. The securities will be credited with an additional 5% of the
employee's Premium Payment by Hartford. This additional percentage of Premium
Payment in no way affects present or future charges, rights, benefits or current
Contract Values of other Contract Owners.
LEGAL MATTERS
There are no material legal proceedings to which the Separate Account is a
party.
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,
General Counsel, Hartford Life, P.O. Box 2999, Hartford, Connecticut 06104-2999.
EXPERTS
The audited financial statements and financial statement schedules included in
this 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 giving said reports. 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, Connecticut 06102-5085
Telephone: (800) 521-0538 (Contract Owners)
26 - PROSPECTUS
<PAGE>
APPENDIX I
--------------------------------------------------------------------
INFORMATION REGARDING TAX-QUALIFIED RETIREMENT 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,
TO DISTRIBUTIONS WHICH DO NOT SATISFY CERTAIN REQUIREMENTS AND TO 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'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. TAX-QUALIFIED PENSION OR PROFIT-SHARING PLANS
Provisions of the Code permit eligible employers to establish tax-qualified
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. Employers
intending to use these contracts in connection with such plans should seek
competent tax and other legal 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 $10,000 (indexed) 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 (and, in the case of hardship, any income
attributable to such contributions may not be distributed).
Generally, the above restrictions do not apply to distributions attributable to
cash values or other amounts held under a section 403(b) contract as of December
31, 1988.
C. DEFERRED COMPENSATION PLANS
UNDER SECTION 457
Employees and independent contractors performing services for eligible employers
may have contributions made 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 Eligible Deferred Compensation Plans
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 (typically 25% of gross compensation) or $7,500
(indexed), whichever is less. Such a 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 an Eligible Deferred Compensation Plan
should understand that his or her rights and benefits are governed strictly by
the terms of the plan and that the employer is the legal owner of any contract
issued with respect to the plan. 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 or her plan for any charges in regard to participating therein
other than those disclosed in this Prospectus. Participants should also be aware
that effective August 20, 1996, the Small Business Job Protection Act of 1996
requires that all assets and income of an Eligible Deferred Compensation Plan
established by a governmental employer which is a State, a political subdivision
of a State, or any agency or instrumentality of a State or political subdivision
of a State, must be held in trust (or under certain specified annuity
27 - PROSPECTUS
<PAGE>
contracts or custodial accounts) for the exclusive benefit of participants and
their beneficiaries. Special transition rules apply to such governmental
Eligible Deferred Compensation Plans already in existence on August 20, 1996,
and provide that such plans need not establish a trust before January 1, 1999.
However, this requirement of a trust does not apply to amounts under an Eligible
Deferred Compensation Plan of a tax-exempt (non-governmental) organization and
such amounts will be subject to the claims of such tax-exempt employer's general
creditors.
In general, distributions from an Eligible Deferred Compensation Plan are
prohibited under Section 457 unless made after the participating employee
attains age 70 1/2, separates from service, dies, 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.
IRAs generally may not invest in life insurance contracts. However, an annuity
that is used as an IRA may provide a death benefit that equals the greater of
the premiums paid and the annuity's cash value. The Contract offers an enhanced
Death Benefit that may exceed the greater of the Contract Value and total
Premium Payments less prior surrenders. For Contracts issued in most states,
Hartford has obtained approval from the Internal Revenue Service to use the
Contract as an IRA. For Contracts issued in New York, Hartford has asked the
Internal Revenue Service to approve use of the Contract as an IRA, but there is
no assurance that approval will be granted.
Special rollover rules apply to SIMPLE IRAs. Amounts can be rolled over from one
SIMPLE IRA to another SIMPLE IRA. However, amounts can be rolled over from a
SIMPLE IRA to a regular IRA only after two years have expired since the
participant first commenced participation in the SIMPLE IRA. Amounts cannot be
rolled over to a SIMPLE IRA from a qualified plan or a regular IRA. Hartford is
a non designated financial institution.
Effective after December 31, 1997, the Contract can be offered as ROTH IRAs
under Section 408A of the Code. Contributions to a ROTH IRA are not deductible.
Subject to special limitations, a distribution from a regular IRA may be rolled
over to a ROTH IRA. However, a rollover to a ROTH IRA is not excludable from
gross income. If certain specified conditions are met, qualified distributions
from a ROTH IRA are tax-free.
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 an IRA or a qualified plan before an 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, for eligible medical
expenses and distributions in the form of a life annuity and, except in the case
of an IRA, certain distributions after separation from service after age 55. For
these purposes, a life annuity means 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).
In addition, effective for distributions made from an IRA after December 31,
1997, there is no such penalty tax on distributions that do not exceed the
amount of certain qualifying higher education expenses, as defined by Section
72(t)(7) of the Code, or which are qualified first-time home buyer distributions
meeting the requirements of Section 72(t)(8) of the Code.
If you are a participant in a SIMPLE IRA plan, you should be aware that the 10%
penalty tax described above is increased to 25% with respect to non-exempt
premature distributions made from your SIMPLE IRA during the first two years
following the date you first commenced participation in any SIMPLE IRA plan of
your employer.
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 tax-qualified retirement plan must generally be
distributed, or begin to be distributed, not later than April 1 of the calendar
year following the later of (i) the calendar year in which the individual
attains age 70 1/2 or (ii) the calendar year in which the individual retires
from service with the employer sponsoring the plan ("required beginning date").
However, the required beginning date for an individual who is a five (5) percent
owner (as defined in the Code), or who is the owner of an IRA, is April 1 of the
calendar year following the calendar year in which the individual attains age
70 1/2. 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
28 - PROSPECTUS
<PAGE>
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 individual's 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 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. WITHHOLDING
In general, distributions from IRAs and plans described in Section 457 of the
Code are subject to regular wage withholding rules.
Periodic distributions from other tax-qualified retirement plans that are made
for a specified period of 10 or more years or for the life or life expectancy of
the participant or the joint lives or life expectancies of the participant and
beneficiary are generally subject to federal income tax withholding as if the
recipient were married claiming three exemptions. 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.
Other distributions from such other tax-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; or
(c) direct transfer distributions.
Direct transfer distributions are direct payments to an IRA or to another
eligible retirement plan under Code Section 401(a)(31).
29 - PROSPECTUS
<PAGE>
TABLE OF CONTENTS TO
STATEMENT OF ADDITIONAL
INFORMATION
<TABLE>
<CAPTION>
SECTION PAGE
- -----------------------------------------------------------
<S> <C>
Description of Hartford Life Insurance
Company
- -----------------------------------------------------------
Safekeeping of Assets
- -----------------------------------------------------------
Independent Public Accountants
- -----------------------------------------------------------
Distribution of Contracts
- -----------------------------------------------------------
Calculation of Yield and Return
- -----------------------------------------------------------
Performance Comparisons
- -----------------------------------------------------------
Financial Statements
- -----------------------------------------------------------
</TABLE>
30 - PROSPECTUS
<PAGE>
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, 1988 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. separated from service,
c. died, or
d. become disabled.
Distributions of post December 31, 1988 contributions, excluding any income
thereon, may also be made if you have experienced a financial hardship.
Also, there may be a 10% penalty tax for distributions made prior to age 59 1/2
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: ___________________________________________________
Contract No: ____________________________________________
Signature: ______________________________________________
<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 the Select Dimensions
AssetManager to me at the following address:
- -------------------------------------------------------
Name
- -------------------------------------------------------
Address
- -------------------------------------------------------
City/State Zip Code
<PAGE>
PART B
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THREE
SELECT DIMENSIONS ASSETMANAGER
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: Individual Annuity Services, P.O. Box 5085, Hartford, CT
06102-5085.
Date of Prospectus: July ____, 1998
Date of Statement of Additional Information: July ____, 1998
<PAGE>
2
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY..........................
SAFEKEEPING OF ASSETS...................................................
INDEPENDENT PUBLIC ACCOUNTANTS..........................................
DISTRIBUTION OF CONTRACTS...............................................
CALCULATION OF YIELD AND RETURN.........................................
PERFORMANCE COMPARISONS.................................................
FINANCIAL STATEMENTS....................................................
<PAGE>
3
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY
Hartford Life Insurance Company 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. Hartford
was originally incorporated under the laws of Massachusetts on June 5, 1902,
and was subsequently redomiciled to Connecticut. Its offices are located in
Simsbury, Connecticut; however, its mailing address is P.O. Box 2999,
Hartford, CT 06104-2999. Hartford is a subsidiary of Hartford Fire Insurance
Company, one of the largest multiple lines insurance carriers in the United
States. Hartford is ultimately controlled by The Hartford Financial Services
Group, Inc., a Delaware corporation.
HARTFORD RATINGS
<TABLE>
<CAPTION>
EFFECTIVE
DATE OF
RATING AGENCY RATING RATING BASIS OF RATING
<S> <C> <C> <C>
A.M. Best and Company, Inc. 9/9/97 A+ Financial soundness
and operating performance.
Standard & Poor's 1/23/98 AA Insurer financial strength
Duff & Phelps 1/23/98 AA+ Claims paying ability
</TABLE>
SAFEKEEPING OF ASSETS
Title to the assets of the Separate Account is held by Hartford. The assets
are kept physically segregated and are held separate and apart from
Hartford's general corporate assets. Records are maintained of all purchases
and redemptions of Fund shares held in each of the Sub-Accounts.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited financial statements and financial statement schedules included
in this 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 giving said reports. The principal business address of Arthur
Andersen LLP is One Financial Plaza, Hartford, Connecticut 06103.
DISTRIBUTION OF CONTRACTS
Hartford Securities Distribution Company, Inc. ("HSD") serves as principal
underwriter for the securities issued with respect to the Separate Account and
will offer the Contracts on a continuous basis.
<PAGE>
4
HSD is a wholly-owned subsidiary of Hartford. The principal business address
of HSD is the same as that of Hartford.
The securities will be sold by salespersons of HSD, who represent Hartford as
insurance and Variable Annuity agents and who are registered representatives
of Broker-Dealers who have entered into distribution agreements with HSD.
HSD 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").
Hartford currently pays HSD underwriting commissions for its role as
Principal Underwriter of this variable annuity contract. For the past three
years, the aggregate dollar amount of underwriting commissions paid to and
retained by HSD in its role as Principal Underwriter for this contract has
been: 1997: $2,256,552.18; 1996: $2,328,296.26; and 1995: $996,727.81.
CALCULATION OF YIELD AND RETURN
YIELD OF THE MONEY MARKET FUND SUB-ACCOUNT. As summarized in the Prospectus
under the heading "Performance Related Information," the yield of the Money
Market Fund Sub-Account for a seven day period (the "base period") will be
computed by determining the "net change in value" (calculated as set forth
below) of a hypothetical account having a balance of one accumulation unit of
the Sub-Account at the beginning of the period, subtracting a hypothetical
charge reflecting deductions from Contract Owner accounts, and dividing the
difference by the value of the account at the beginning of the base period to
obtain the base period return, and then 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 daily dividends as declared by the
underlying funds, less daily expense 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 divided by 7 and
subtracting 1 from the result, according to the following formula:
(365/7)
Effective Yield = [(Base Period Return + 1) ] - 1
The yield and effective yield for the seven day period ending March 31, 1998
for the Money Market Portfolio Sub-Account is as follows:
($30 Annual Maintenance Fee)
Yield: 3.44%
Effective Yield: 3.50%
<PAGE>
5
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. THE CURRENT YIELD AND EFFECTIVE YIELD REFLECT RECURRING CHARGES
ON THE SEPARATE ACCOUNT LEVEL, INCLUDING THE MAXIMUM ANNUAL MAINTENANCE FEE.
YIELDS OF NORTH AMERICAN GOVERNMENT SECURITIES PORTFOLIO AND DIVERSIFIED
INCOME PORTFOLIO SUB-ACCOUNTS. As summarized in the Prospectus under the
heading "Performance Related Information," yields of the above Sub-Accounts
will be computed by annualizing a recent month's net investment income,
divided by a Portfolio share's net asset value on the last trading day of
that month. Net changes in the value of a hypothetical account will assume
the change in the underlying mutual fund's "net asset value per share" for
the same period in addition to the daily expense charge assessed, at the
sub-account level for the respective period. The Sub-Accounts' yields will
vary from time to time depending upon market conditions and, the composition
of the underlying funds' portfolios. Yield should also be considered relative
to changes in the value of the Sub-Accounts' shares and to the relative risks
associated with the investment objectives and policies of the underlying
Portfolio.
THE YIELD REFLECTS RECURRING CHARGES ON THE SEPARATE ACCOUNT LEVEL, INCLUDING
THE ANNUAL MAINTENANCE FEE.
Yield calculations of the North American Government Securities Portfolio and
Diversified Income Portfolio Sub-Accounts used for illustration purposes
reflect the interest earned by the Sub-Accounts, less applicable asset based
charges assessed under the Contract over the base period. Yield quotations
based on a 30 day period ended March 31, 1998 were computed by dividing
the dividends and interests earned during the period by the maximum offering
price per unit on the last day of the period, according to the following
formula:
Example:
(6)
Current Yield Formula for the Sub-Account 2[((A-B)/(CD) + 1) - 1]
Where A = Dividends and interest earned during the period.
B = Expenses accrued for the period (net of reimbursements).
C = The average daily number of units outstanding during the period
that were entitled to receive dividends.
D = The maximum offering price per unit on the last day of the period.
<TABLE>
<CAPTION>
SUB-ACCOUNTS YIELD
<S> <C>
North American Government Securities Portfolio* 2.93%
Diversified Income Portfolio* 5.35%
</TABLE>
* Yield based on a thirty day period ending March 31, 1998.
<PAGE>
6
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.
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.
The following are the standardized average annual total return quotations for
the Sub-Accounts for the 1, 5, and 10 year periods ended March 31, 1998.
(These returns assume a mortality and risk expense charge of 1.50% and an
Annual Maintenance Fee of $30.)
STANDARDIZED ANNUALIZED TOTAL RETURN
FOR YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
SINCE
SUB-ACCOUNTS INCEPTION DATE 1 YEAR INCEPTION
<S> <C> <C> <C>
North American Government
Securities Portfolio 11/8/94 1.54% .14%
Diversified Income Portfolio 11/8/94 5.27% 2.81%
Balanced Growth Portfolio 11/8/94 27.31% 13.86%
Utilities Portfolio 11/8/94 40.27% 17.13%
Dividend Growth Portfolio 11/8/94 34.30% 25.42%
Value Added Market Portfolio 11/8/94 34.21% 18.97%
Growth Portfolio 11/8/94 37.18% 16.08%
American Value Portfolio 11/8/94 47.21% 23.29%
Mid-Cap Growth Portfolio 1/21/97 30.29% 14.36%
Global Equity Portfolio 11/8/94 15.91% 8.32%
Developing Growth Portfolio 11/8/94 37.86% 21.35%
Emerging Markets Portfolio 11/8/94 -10.92% -.11%
Money Market Portfolio 11/8/94 .54% .21%
High Yield Portfolio 1/2/97 12.90% 7.41%
Mid-Cap Value Portfolio 1/2/97 50.69% 37.63%
Emerging Markets Debt Portfolio 6/6/97 na 1.44%
Strategic Stock Portfolio 11/3/97 na 10.65%
Enterprise Portfolio 4/7/86 44.78% %
</TABLE>
<PAGE>
7
In addition to the standardized total return, the Sub-Account may advertise a
non-standardized total return. This figure will usually be calculated for
one year, five years, and ten years or other periods. Non-standardized total
return is measured in the same manner as the standardized total return
described above, except that the Annual Maintenance Fee is not deducted.
Therefore, non-standardized total return for a Sub-Account is higher than
standardized total return for a Sub-Account.
The following are the non-standardized annualized total return quotations for
the Sub-Accounts for the 1, 5, and 10 year periods ended March 31, 1998.
(These returns assume a mortality and risk expense charge of 1.50% and an
Annual Maintenance Fee of $30.)
NON-STANDARDIZED ANNUALIZED TOTAL RETURN
FOR YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
INCEPTION SINCE
SUB-ACCOUNTS DATE 1 YEAR 5 YEAR 10 YEAR INCEPTION
- ------------ --------- ------ ------ ------- ---------
<S> <C> <C> <C> <C> <C>
North American Government
Securities Portfolio 11/8/94 4.54% na na 3.55%
Diversified Income Portfolio 11/8/94 8.27% na na 6.14%
Balanced Growth Portfolio 11/8/94 30.31% na na 16.82%
Utilities Portfolio 11/8/94 43.27% na na 20.11%
Dividend Growth Portfolio 11/8/94 37.30% na na 28.05%
Value Added Market Portfolio 11/8/94 37.21% na na 21.86%
Growth Portfolio 11/8/94 40.18% na na 19.09%
American Value Portfolio 11/8/94 50.21% na na 25.99%
Mid-Cap Growth Portfolio 1/21/97 33.29% na na 19.10%
Global Equity Portfolio 11/8/94 18.91% na na 11.55%
Developing Growth Portfolio 11/8/94 49.86% na na 23.86%
Emerging Markets Portfolio 11/8/94 -7.92% na na 3.40%
Money Market Portfolio 11/8/94 3.54% na na 3.62%
High Yield Portfolio 1/2/97 15.90% na na 12.17%
Mid-Cap Value Portfolio 1/2/97 53.69% na na 42.40%
Emerging Markets Debt
Portfolio 6/6/97 na na na 4.44%
Strategic Stock Portfolio 11/3/97 na na na 13.65%
Enterprise Portfolio 4/7/86 19.23% 19.23% 16.62% 11.89%
</TABLE>
<PAGE>
8
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. Each Sub-Account may from time to time include its
total return in advertisements or in information furnished to present or
prospective shareholders. Each Sub-Account may from time to time include its
yield and total return in advertisements or information furnished to present
or prospective shareholders. Each Sub-Account may from time to time include
in advertisements its total return (and yield in the case of certain
Sub-Accounts) the ranking of those performance figures relative to such
figures for groups of other annuities analyzed by Lipper Analytical Services
and Morningstar, Inc. as having the same investment objectives.
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. The Standard & Poor's Composite Index
of 500 Stocks (the "S&P 500") is a market value-weighted and unmanaged index
showing the changes in the aggregate market value
<PAGE>
9
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 about 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.
The NASDAQ-OTC Composite Price Index (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 excluded.
The Morgan Stanley Capital International EAFE Index (the "EAFE Index") is an
unmanaged index, which includes over 1,000 companies representing the stock
markets of Europe, Australia, New Zealand, and the Far East. The EAFE Index
is weighted by market capitalization, and therefore, it has a heavy
representation in countries with large stock markets, such as Japan.
The Shearson Lehman 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 Shearson Lehman 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 Composite Index for Hartford Advisers Fund is comprised of the S&P 500
(55%), the Lehman Government/Corporate Bond Index (35%), both mentioned
above, and 90 Day U.S. Treasury Bills (10%).
<PAGE>
DEAN WITTER SELECT DIMENSIONS SEPARATE ACCOUNT THREE
Hartford Life Insurance Company
Statement of Assets & Liabilities (unaudited)
March 31, 1998
<TABLE>
<CAPTION>
North
American Balanced
Government Growth Dividend Value Added Growth
Money Market Securities Portfolio Utilities and Growth Market Portfolio
Fund Fund Fund Fund Fund Fund Fund
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
----------- ---------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Investments:
DWS Money Market Fund
Shares 6,988,514
Cost 6,988,514
Market Value: 6,988,514
DWS North American Gov't Securities Fund
Shares 49,288
Cost 497,050
Market Value: 500,767
DWS Balanced Growth Fund
Shares 484,489
Cost 6,562,342
Market Value: 7,955,304
DWS Utilities Fund
Shares 179,175
Cost 2,356,687
Market Value: 3,189,321
DWS Dividend and Growth Fund
Shares 2,919,367
Cost 50,116,474
Market Value: 64,576,395
DWS Value-Added Market Fund
Shares 1,242,308
Cost 18,505,119
Market Value: 24,398,931
DWS Core Equity Fund
Shares 224,566
Cost 3,157,441
Market Value: 4,163,450
DWS American Value Fund
Shares 1,155,436
Cost 18,569,454
Market Value:
DWS Global Equity Fund
Shares 965,227
Cost 11,855,111
Market Value:
DWS Developing Growth Fund
Shares 347,006
Cost 5,692,673
Market Value:
DWS Emerging Markets Fund
Shares 156,379
Cost 1,722,312
Market Value:
DWS Diversified Income Fund
Shares 839,970
Cost 8,597,825
Market Value:
DWS Mid Cap Fund
Shares 191,335
Cost 2,053,267
Market Value:
Due From Hartford Life Insurance Company 4,817 60 41,031 25,794 1,207
Receivable from fund shares sold 276 19 477
----------- -------- ----------- ---------- ----------- ----------- -----------
Total Assets 6,988,790 500,786 7,960,121 3,189,858 64,617,426 24,424,725 4,164,657
----------- -------- ----------- ---------- ----------- ----------- -----------
Liabilities
Due to Hartford Life Insurance Company 267 20
Payable for fund shares purchased 4,810 39,958 25,843 1,242
----------- -------- ----------- ---------- ----------- ----------- -----------
Total Liabilities 267 20 4,810 39,958 25,843 1,242 7,822
----------- -------- ----------- ---------- ----------- ----------- -----------
Net Assets (variable annuity
contract liabilities) 6,988,523 500,766 7,955,311 3,189,858 64,577,468 24,398,882 4,163,415
----------- -------- ----------- ---------- ----------- ----------- -----------
<CAPTION>
Global
American Equity Developing Emerging Diversified
Value Value Growth Markets Income Midcap
Fund Fund Fund Fund Fund Fund
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
----------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Assets
Investments:
DWS Money Market Fund
Shares 6,988,514
Cost 6,988,514
Market Value:
DWS North American Gov't Securities Fund
Shares 49,288
Cost 497,050
Market Value:
DWS Balanced Fund
Shares 484,489
Cost 6,562,342
Market Value:
DWS Utilities Fund
Shares 179,175
Cost 2,356,687
Market Value:
DWS Dividend Growth Fund
Shares 2,919,367
Cost 50,116,474
Market Value:
DWS Value-Added Market Fund
Shares 1,242,308
Cost 18,505,119
Market Value:
DWS Core Equity Fund
Shares 224,566
Cost 3,157,441
Market Value:
DWS American Value Fund
Shares 1,155,436
Cost 18,569,454
Market Value: 25,731,562
DWS Global Equity Fund
Shares 965,227
Cost 11,855,111
Market Value: 14,082,662
DWS Developing Growth Fund
Shares 347,006
Cost 5,692,673
Market Value: 7,488,389
DWS Emerging Markets Fund
Shares 156,379
Cost 1,722,312
Market Value: 1,762,391
DWS Diversified Income Fund
Shares 839,970
Cost 8,597,825
Market Value: 8,626,495
DWS Mid Cap Fund
Shares 191,335
Cost 2,053,267
Market Value: 2,391,691
Due From Hartford Life Insurance Company 7,851 23,785 2,224 10,322 1,632
Receivable from fund shares sold 72
----------- ---------- ---------- --------- ---------- -----------
Total Assets 25,739,413 14,106,447 7,490,613 1,762,463 8,636,817 2,393,323
----------- ---------- ---------- --------- ---------- -----------
Liabilities
Due to Hartford Life Insurance Company 63
Payable for fund shares purchased 7,822 23,778 2,017 10,324 1,632
----------- ---------- ---------- --------- ---------- -----------
Total Liabilities 7,822 23,778 2,017 63 10,324 1,632
----------- ---------- ---------- --------- ---------- -----------
Net Assets (variable annuity
contract liabilities) 25,731,591 14,082,669 7,488,596 1,762,400 8,626,493 2,391,691
----------- ---------- ---------- --------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DEAN WITTER SELECT DIMENSIONS SEPARATE ACCOUNT THREE
Hartford Life Insurance Company
Statement of Operations (unaudited)
March 31, 1998
<TABLE>
<CAPTION>
North
American
Government Dividend Value Added
Money Market Securities Balanced Utilities and Growth Market Core Equity
Fund Fund Fund Fund Fund Fund Fund
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
----------- ---------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends 93,854 4,788 29,911 15,296 277,221 67,645
EXPENSES:
Mortality and expense undertakings (25,542) (1,639) (23,511) (9,386) (196,280) (76,379) (13,216)
----------- ---------- ----------- ----------- ----------- ----------- -----------
Net investment income (loss) 68,312 3,149 6,400 5,910 80,941 (8,734) (13,216)
CAPITAL GAINS INCOME - - - - - - -
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENT:
Net realized gain (loss) on
security transactions - (99) 5 352 1,064 1,734 215
Net unrealized appreciation (depreciation)
of investments during the period - (499) 612,278 334,241 7,172,554 2,536,726 433,725
----------- ---------- ----------- ----------- ----------- ----------- -----------
Net gain (losses) on investments 0 (598) 612,283 334,593 7,173,618 2,538,460 433,940
----------- ---------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations: 68,312 2,551 618,683 340,503 7,254,559 2,529,726 420,724
----------- ---------- ----------- ----------- ----------- ----------- -----------
----------- ---------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
Global
American Equity Developing Emerging Diversified
Value Value Growth Markets Income Midcap
Fund Fund Fund Fund Fund Fund
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
----------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends 31,184 15,244 4,657 962 140,706 5,262
EXPENSES:
Mortality and expense undertakings (77,348) (43,731) (23,826) (6,021) (26,739) (7,069)
------------ ----------- ------------ ----------- ----------- ------------
Net investment income (loss) (46,164) (28,487) (19,169) (5,059) 113,967 (1,807)
CAPITAL GAINS INCOME - - - - - -
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENT:
Net realized gain (loss) on
security transactions 552 1,327 5,610 (25,894) 1 192
Net unrealized appreciation (depreciation)
of investments during the period 2,865,949 1,506,324 833,828 5,810 (14,854) 208,762
------------ ----------- ------------ ----------- ----------- ------------
Net gain (losses) on investments 2,866,501 1,507,651 839,438 (20,084) (14,853) 208,954
------------ ----------- ------------ ----------- ----------- ------------
Net increase (decrease) in net assets
resulting from operations: 2,820,337 1,479,164 820,269 (25,143) 99,114 207,147
------------ ----------- ------------ ----------- ----------- ------------
------------ ----------- ------------ ----------- ----------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DEAN WITTER SELECT DIMENSIONS SEPARATE ACCOUNT THREE
Hartford Life Insurance Company
Statement of Changes in Net Assets (unaudited)
31-Mar-98
<TABLE>
<CAPTION>
North
American Balanced
Government Growth Dividend Value Added Growth
Money Market Securities Portfolio Utilities and Growth Market Portfolio
Fund Fund Fund Fund Fund Fund Fund
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
----------- ---------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) 68,312 3,149 6,400 5,910 80,941 (8,734) (13,216)
Capital gains income
Net realized gain (loss) on
security transactions (99) 5 352 1,064 1,734 215
Net unrealized appreciation (depreciation)
of investments during the period (499) 612,278 334,241 7,172,554 2,536,726 433,725
Net increase (decrease) in net assets
resulting from operations 68,312 2,551 618,683 340,503 7,254,559 2,529,726 420,724
----------- ----------- ----------- ---------- ----------- ----------- -----------
UNIT TRANSACTIONS:
Purchases 31,166 104,470 557,301 248,032 3,546,993 780,351 74,401
Net transfers (1,035,460) (16,372) 977,648 180,728 2,170,147 533,436 149,468
Surrenders (384,021) (934) (44,795) (51,174) (649,530) (153,369) (38,410)
Net annuity transactions (12,338)
Total increase (decrease) in net assets
resulting from unit transactions (1,388,315) 87,164 1,490,154 377,586 5,067,610 1,148,080 185,459
Total increase (decrease) in net assets (1,320,003) 89,715 2,108,837 718,089 12,322,169 3,677,806 606,183
----------- ----------- ----------- ---------- ----------- ----------- -----------
NET ASSETS:
Beginning of period 8,308,526 411,051 5,846,474 2,471,769 52,255,299 20,721,076 3,557,232
End of Period 6,988,523 500,766 7,955,311 3,189,858 64,577,468 24,398,882 4,163,415
----------- ----------- ----------- ---------- ----------- ----------- -----------
DEAN WITTER SELECT DIMENSIONS SEPARATE ACCOUNT THREE
Hartford Life Insurance Company
Statement of Changes in Net Assets (unaudited)
For the year ended December 31, 1997
<CAPTION>
North
American Balanced
Government Growth Dividend Value Added Growth
Money Market Securities Portfolio Utilities and Growth Market Portfolio
Fund Fund Fund Fund Fund Fund Fund
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
----------- ---------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) 311,465 12,978 27,082 25,725 207,230 1,105 (28,598)
Capital gains income 11,255 5,598 1,118,280 25,010 9,815
Net realized gain (loss)
on security transactions 134 1 (1,072) 1,187 (250) (35)
Net unrealized appreciation (depreciation)
of investments during the period 3,756 532,164 385,952 5,104,874 2,624,687 423,579
Net increase (decrease) in net assets
resulting from operations 311,465 16,868 570,502 416,203 6,431,571 2,650,552 404,761
----------- --------- ----------- ---------- ----------- ----------- ----------
UNIT TRANSACTIONS:
Purchases 10,986,034 80,522 2,480,987 787,146 25,298,127 8,641,262 1,171,714
Net transfers (7,694,766) (501) 773,542 (218,038) 5,093,960 1,738,699 745,942
Surrenders (752,612) (27,777) (584,850) (112,067) (2,369,968) (827,826) (124,197)
Net annuity transactions 341,474
Total increase (decrease) in net assets
resulting from unit transactions 2,538,656 52,244 2,669,679 457,041 28,022,119 9,893,609 1,793,459
Total increase (decrease) in net assets 2,850,121 69,112 3,240,181 873,244 34,453,690 12,544,161 2,198,220
----------- --------- ----------- ---------- ----------- ----------- ----------
NET ASSETS:
Beginning of period 5,458,405 341,940 2,606,292 1,598,525 17,801,609 8,176,915 1,359,011
End of Period 8,308,526 411,052 5,846,473 2,471,769 52,255,299 20,721,076 3,557,231
----------- --------- ----------- ---------- ----------- ----------- ----------
<CAPTION>
Global
American Equity Developing Emerging Diversified
Value Value Growth Markets Income Midcap
Fund Fund Fund Fund Fund Fund
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
----------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) (46,164) (28,487) (19,169) (5,059) 113,967 (1,807)
Capital gains income
Net realized gain (loss) on
security transactions 552 1,327 5,610 (25,894) 1 192
Net unrealized appreciation (depreciation)
of investments during the period 2,865,949 1,506,324 833,828 5,810 (14,854) 208,762
Net increase (decrease) in net assets
resulting from operations 2,820,337 1,479,164 820,269 (25,143) 99,114 207,147
------------ ---------- ------------ ------------ ------------ -----------
UNIT TRANSACTIONS:
Purchases 1,943,038 552,016 110,856 13,559 544,474 167,431
Net transfers 895,871 68,831 (136,157) (150,350) 1,382,231 260,286
Surrenders (317,684) (110,176) (125,049) (38,907) (89,390) (19,325)
Net annuity transactions
Total increase (decrease) in net assets
resulting from unit transactions 2,521,225 510,671 (150,350) (175,698) 1,837,315 408,392
Total increase (decrease) in net assets 5,341,562 1,989,835 669,919 (200,841) 1,936,429 615,539
------------ ---------- ------------ ------------ ------------ -----------
NET ASSETS:
Beginning of period 20,390,029 12,092,834 6,818,677 1,963,241 6,690,064 1,776,152
End of Period 25,731,591 14,082,669 7,488,596 1,762,400 8,626,493 2,391,691
------------ ---------- ------------ ------------ ------------ -----------
The accompanying notes are an integral part of these financial statements.
<CAPTION>
Global
American Equity Developing Emerging Diversified
Value Value Growth Markets Income Midcap
Fund Fund Fund Fund Fund Fund
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
----------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) (147,030) (51,246) (65,434) (17,516) 270,857 1,157
Capital gains income 253,252 13,138 7,785
Net realized gain (loss)
on security transactions 25,705 (626) (5,860) (14,073) 153 1,041
Net unrealized appreciation (depreciation)
of investments during the period 3,404,201 378,264 665,187 (42,909) 12,589 129,661
Net increase (decrease) in net assets
resulting from operations 3,536,128 339,530 593,893 (74,498) 291,384 131,859
------------ ---------- ----------- ----------- ----------- -----------
UNIT TRANSACTIONS:
Purchases 7,393,094 5,772,580 2,012,668 809,422 2,936,576 1,190,000
Net transfers 1,198,780 1,004,060 36,985 6,465 1,246,736 495,121
Surrenders (804,164) (784,786) (235,174) (120,404) (347,647) (40,829)
Net annuity transactions
Total increase (decrease) in net assets
resulting from unit transactions 7,787,710 5,991,854 1,814,479 695,483 3,835,665 1,644,292
Total increase (decrease) in net assets 11,323,838 6,331,384 2,408,372 620,985 4,127,049 1,776,151
------------ ---------- ----------- ----------- ----------- -----------
NET ASSETS:
Beginning of period 9,066,189 5,761,451 4,410,307 1,342,257 2,563,017
End of Period 20,390,027 12,092,835 6,818,679 1,963,242 6,690,066 1,776,151
------------ ---------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<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 assets and liabilities of
Hartford Life Insurance Company Separate Account Three (the Account) as of
December 31, 1997, and the related statement of operations for the year then
ended and statements of changes in net assets for each of the two years in the
period then ended. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hartford Life Insurance
Company Separate Account Three as of December 31, 1997, the results of its
operations for the year then ended and the changes in its net assets for each
of the two years in the period then ended, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 16, 1998
<PAGE>
Separate Account Three
Hartford Life Insurance Company
Statement of Assets & Liabilities
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
North American
Money Market Government
Portfolio Securities Portfolio
Sub-Account Sub-Account
-------------- ----------------------
<S> <C> <C>
Assets:
Investments in Dean Witter Select Dimensions Investments Series:
Money Market Portfolio
Shares 8,308,517
Cost $ 8,308,517
Market Value ................................................. $ 8,308,517 --
North American Government Securities Portfolio
Shares 40,418
Cost $ 406,836
Market Value ................................................. -- $ 411,052
Balanced Portfolio
Shares 388,986
Cost $ 5,065,773
Market Value ................................................. -- --
Utilities Portfolio
Shares 156,115
Cost $ 1,972,904
Market Value ................................................. -- --
Dividend and Growth Portfolio
Shares 2,670,124
Cost $44,966,952
Market Value ................................................. -- --
Value-Added Market Portfolio
Shares 1,180,018
Cost $17,364,030
Market Value ................................................. -- --
Core-Equity Portfolio
Shares 214,810
Cost $ 2,984,976
Market Value ................................................. -- --
American Value Portfolio
Shares 1,035,552
Cost $16,093,852
Market Value ................................................. -- --
Global Equity Value Portfolio
Shares 932,369
Cost $11,371,601
Market Value ................................................. -- --
Developing Growth Portfolio
Shares 355,870
Cost $ 5,856,576
Market Value ................................................. -- --
Emerging Market Portfolio
Shares 173,585
Cost $ 1,928,974
Market Value ................................................. -- --
Diversified Income Portfolio
Shares 650,152
Cost $ 6,646,543
Market Value ................................................. -- --
Mid-Cap Growth Portfolio
Shares 155,803
Cost $ 1,646,491
Market Value ................................................. -- --
Due from Hartford Life Insurance Company ....................... -- --
Receivable from fund shares sold ............................... 16,577 16
----------- -----------
Total Assets .................................................. 8,325,094 411,068
----------- -----------
Liabilities:
Due to Hartford Life Insurance Company ......................... 16,568 17
Payable for fund shares purchased .............................. -- --
----------- -----------
Total Liabilities .............................................. 16,568 17
----------- -----------
Net Assets (variable annuity contract liabilities) ............. $ 8,308,526 $ 411,051
=========== ===========
Variable annuity contracts in the accumulation period:
Individual Sub-Accounts:
Units Owned by Contractholders ................................ 734,664 36,306
Unit Values ................................................... $ 11.309282 $ 11.321926
Annuity Contracts in the annuity period:
Individual Sub-Accounts
Units Owned by Contractholders ................................ -- --
Unit Values ................................................... -- --
<CAPTION>
Dividend
Balanced Utilities and Growth
Portfolio Portfolio Portfolio
Sub-Account Sub-Account Sub-Account
--------------- --------------- ----------------
<S> <C> <C> <C>
Assets:
Investments in Dean Witter Select Dimensions Investments Series:
Money Market Portfolio
Shares 8,308,517
Cost $ 8,308,517
Market Value ................................................. -- -- --
North American Government Securities Portfolio
Shares 40,418
Cost $ 406,836
Market Value ................................................. -- -- --
Balanced Portfolio
Shares 388,986
Cost $ 5,065,773
Market Value ................................................. $ 5,846,457 -- --
Utilities Portfolio
Shares 156,115
Cost $ 1,972,904
Market Value ................................................. -- $ 2,471,297 --
Dividend and Growth Portfolio
Shares 2,670,124
Cost $44,966,952
Market Value ................................................. -- -- $ 52,254,318
Value-Added Market Portfolio
Shares 1,180,018
Cost $17,364,030
Market Value ................................................. -- -- --
Core-Equity Portfolio
Shares 214,810
Cost $ 2,984,976
Market Value ................................................. -- -- --
American Value Portfolio
Shares 1,035,552
Cost $16,093,852
Market Value ................................................. -- -- --
Global Equity Value Portfolio
Shares 932,369
Cost $11,371,601
Market Value ................................................. -- -- --
Developing Growth Portfolio
Shares 355,870
Cost $ 5,856,576
Market Value ................................................. -- -- --
Emerging Market Portfolio
Shares 173,585
Cost $ 1,928,974
Market Value ................................................. -- -- --
Diversified Income Portfolio
Shares 650,152
Cost $ 6,646,543
Market Value ................................................. -- -- --
Mid-Cap Growth Portfolio
Shares 155,803
Cost $ 1,646,491
Market Value ................................................. -- -- --
Due from Hartford Life Insurance Company ....................... -- -- 27,269
Receivable from fund shares sold ............................... 12,386 5,805 --
----------- ----------- ------------
Total Assets .................................................. 5,858,843 2,477,102 52,281,587
----------- ----------- ------------
Liabilities:
Due to Hartford Life Insurance Company ......................... 12,369 5,333 --
Payable for fund shares purchased .............................. -- -- 26,288
----------- ----------- ------------
Total Liabilities .............................................. 12,369 5,333 26,288
----------- ----------- ------------
Net Assets (variable annuity contract liabilities) ............. $ 5,846,474 $ 2,471,769 $ 52,255,299
=========== =========== ============
Variable annuity contracts in the accumulation period:
Individual Sub-Accounts:
Units Owned by Contractholders ................................ 369,353 146,104 2,483,000
Unit Values ................................................... $ 15.828958 $ 16.917905 $ 21.045231
Annuity Contracts in the annuity period:
Individual Sub-Accounts
Units Owned by Contractholders ................................ -- -- --
Unit Values ................................................... -- -- --
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value-Added Core-Equity American Global Equity
Market Portfolio Portfolio Value Portfolio Value Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account
- - ------------------ --------------- ----------------- -----------------
<S> <C> <C> <C>
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
$ 20,721,116 -- -- --
-- $ 3,557,261 -- --
-- -- $ 20,390,011 --
-- -- -- $ 12,092,829
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
14,524 -- 13,160 15,629
-- 136 -- --
------------ ----------- ------------ ------------
20,735,640 3,557,397 20,403,171 12,108,458
------------ ----------- ------------ ------------
-- 165 -- --
14,564 -- 13,142 15,624
------------ ----------- ------------ ------------
14,564 165 13,142 15,624
------------ ----------- ------------ ------------
$ 20,721,076 $ 3,557,232 $ 20,390,029 $ 12,092,834
============ =========== ============ ============
1,136,343 214,343 1,022,028 920,187
$ 17.936035 $ 16.595943 $ 19.950549 $ 13.141711
18,933 -- -- --
$ 17.936035 -- -- --
<CAPTION>
Developing Emerging Diversified Mid-Cap
Growth Portfolio Markets Portfolio Income Portfolio Growth Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account
- - ------------------ ------------------- ------------------ -----------------
<S> <C> <C> <C>
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
$ 6,818,465 -- -- --
-- $ 1,963,242 -- --
-- -- $ 6,690,066 --
-- -- -- $ 1,776,152
5,022 424 59,934 2,432
-- -- -- --
----------- ----------- ----------- -----------
6,823,487 1,963,666 6,750,000 1,778,584
----------- ----------- ----------- -----------
-- -- -- --
4,810 425 59,936 2,432
----------- ----------- ----------- -----------
4,810 425 59,936 2,432
----------- ----------- ----------- -----------
$ 6,818,677 $ 1,963,241 $ 6,690,064 $ 1,776,152
=========== =========== =========== ===========
360,845 172,144 546,677 155,357
$ 18.896418 $ 11.404653 $ 12.237687 $ 11.432686
-- -- -- --
-- -- -- --
</TABLE>
<PAGE>
Separate Account Three
Hartford Life Insurance Company
Statement of Operations
For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
North American
Money Market Government
Portfolio Securities Portfolio
Sub-Account Sub-Account
-------------- ----------------------
<S> <C> <C>
Investment income:
Dividends ............................................ $ 429,621 $ 18,324
Expenses:
Mortality and expense undertakings ................... (118,156) (5,346)
----------- --------
Net investment income (loss) ......................... 311,465 12,978
----------- --------
Capital gains income .................................. -- --
----------- --------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) on security transactions .... -- 134
Net unrealized appreciation (depreciation) of
investments during the period ....................... -- 3,756
----------- --------
Net realized and unrealized gain (loss)
on investments ..................................... -- 3,890
----------- --------
Net increase (decrease) in net assets resulting from
operations ......................................... $ 311,465 $ 16,868
=========== ========
<CAPTION>
Dividend
Balanced Utilities and Growth
Portfolio Portfolio Portfolio
Sub-Account Sub-Account Sub-Account
------------- ------------- --------------
<S> <C> <C> <C>
Investment income:
Dividends ............................................ $ 85,051 $ 50,582 $ 694,925
Expenses:
Mortality and expense undertakings ................... (57,969) (24,857) (487,695)
--------- --------- ----------
Net investment income (loss) ......................... 27,082 25,725 207,230
--------- --------- ----------
Capital gains income .................................. 11,255 5,598 1,118,280
--------- --------- ----------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) on security transactions .... 1 (1,072) 1,187
Net unrealized appreciation (depreciation) of
investments during the period ....................... 532,164 385,952 5,104,874
--------- --------- ----------
Net realized and unrealized gain (loss)
on investments ..................................... 532,165 384,880 5,106,061
--------- --------- ----------
Net increase (decrease) in net assets resulting from
operations ......................................... $ 570,502 $ 416,203 $6,431,571
========= ========= ==========
</TABLE>
*From inception, January 21, 1997 to December 31, 1997.
The accompanying notes are an integral part of these financial statements.
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value-Added Core-Equity American Global Equity
Market Portfolio Portfolio Value Portfolio Value Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account
- - ------------------ ------------- ----------------- -----------------
<S> <C> <C> <C>
$ 188,926 $ 4,297 $ 46,393 $ 76,975
(187,821) (32,895) (193,423) (128,221)
---------- --------- ---------- -----------
1,105 (28,598) (147,030) (51,246)
---------- --------- ---------- -----------
25,010 9,815 253,252 13,138
---------- --------- ---------- -----------
(250) (35) 25,705 (626)
2,624,687 423,579 3,404,201 378,264
---------- --------- ---------- -----------
2,624,437 423,544 3,429,906 377,638
---------- --------- ---------- -----------
$2,650,552 $ 404,761 $3,536,128 $ 339,530
========== ========= ========== ===========
<CAPTION>
Developing Emerging Diversified Mid-Cap
Growth Portfolio Markets Portfolio Income Portfolio Growth Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account*
- - ------------------ ------------------- ------------------ -----------------
<S> <C> <C> <C>
$ 10,754 $ 8,429 $ 331,153 $ 12,328
(76,188) (25,945) (60,296) (11,171)
--------- --------- --------- ---------
(65,434) (17,516) 270,857 1,157
--------- --------- --------- ---------
-- -- 7,785 --
--------- --------- --------- ---------
(5,860) (14,073) 153 1,041
665,187 (42,909) 12,589 129,661
--------- --------- --------- ---------
659,327 (56,982) 12,742 130,702
--------- --------- --------- ---------
$ 593,893 $ (74,498) $ 291,384 $ 131,859
========= ========= ========= =========
</TABLE>
<PAGE>
Separate Account Three
Hartford Life Insurance Company
Statement of Changes in Net Assets
For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
North American
Money Market Government
Portfolio Securities Portfolio
Sub-Account Sub-Account
--------------- ----------------------
<S> <C> <C>
Operations:
Net investment income (loss) ................................ $ 311,465 $ 12,978
Capital gains income ........................................ -- --
Net realized gain (loss) on security transactions ........... -- 134
Net unrealized appreciation (depreciation) of
investments during the period .............................. -- 3,756
------------- ---------
Net increase in net assets resulting from operations ........ 311,465 16,868
------------- ---------
Unit transactions:
Purchases ................................................... 10,986,034 80,522
Net transfers ............................................... (7,694,766) (501)
Surrenders .................................................. (752,612) (27,777)
Net annuity transactions .................................... -- --
------------- ---------
Net increase in net assets resulting from unit
transactions ............................................... 2,538,656 52,244
------------- ---------
Total increase in net assets ................................ 2,850,121 69,112
Net Assets:
Beginning of period ......................................... 5,458,405 341,939
------------- ---------
End of period ............................................... $ 8,308,526 $ 411,051
============= =========
<CAPTION>
Dividend
Balanced Utilities and Growth
Portfolio Portfolio Portfolio
Sub-Account Sub-Account Sub-Account
------------- ------------- ---------------
<S> <C> <C> <C>
Operations:
Net investment income (loss) ................................ $ 27,082 $ 25,725 $ 207,230
Capital gains income ........................................ 11,255 5,598 1,118,280
Net realized gain (loss) on security transactions ........... 1 (1,072) 1,187
Net unrealized appreciation (depreciation) of
investments during the period .............................. 532,164 385,952 5,104,874
---------- ---------- ------------
Net increase in net assets resulting from operations ........ 570,502 416,203 6,431,571
---------- ---------- ------------
Unit transactions:
Purchases ................................................... 2,480,988 787,145 25,298,127
Net transfers ............................................... 773,542 (218,038) 5,093,960
Surrenders .................................................. (584,850) (112,067) (2,369,968)
Net annuity transactions .................................... -- -- --
---------- ---------- ------------
Net increase in net assets resulting from unit
transactions ............................................... 2,669,680 457,040 28,022,119
---------- ---------- ------------
Total increase in net assets ................................ 3,240,182 873,243 34,453,690
Net Assets:
Beginning of period ......................................... 2,606,292 1,598,526 17,801,609
---------- ---------- ------------
End of period ............................................... $5,846,474 $2,471,769 $ 52,255,299
========== ========== ============
</TABLE>
*From inception, January 21, 1997 to December 31, 1997.
- --------------------------------------------------------------------------------
Hartford Life Insurance Company
Statement of Changes in Net Assets
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
North American
Money Market Government
Portfolio Securities Portfolio
Sub-Account Sub-Account
--------------- ----------------------
<S> <C> <C>
Operations:
Net investment income (loss) ................................ $ 99,617 $ 8,511
Capital gains income ........................................ -- --
Net realized gain (loss) on security transactions ........... -- 335
Net unrealized appreciation of investments during the
period ..................................................... -- 60
------------- ---------
Net increase in net assets resulting from operations ........ 99,617 8,906
------------- ---------
Unit transactions:
Purchases ................................................... 6,948,541 205,518
Net transfers ............................................... (2,722,056) 173,663
Surrenders .................................................. (186,897) (93,829)
------------- ---------
Net increase in net assets resulting from unit
transactions ............................................... 4,039,588 285,352
------------- ---------
Total increase in net assets ................................ 4,139,205 294,258
Net Assets:
Beginning of period ......................................... 1,319,200 47,681
------------- ---------
End of period ............................................... $ 5,458,405 $ 341,939
============= =========
<CAPTION>
Dividend
Balanced Utilities and Growth
Portfolio Portfolio Portfolio
Sub-Account Sub-Account Sub-Account
------------- ------------- --------------
<S> <C> <C> <C>
Operations:
Net investment income (loss) ................................ $ 20,892 $ 21,954 $ 82,889
Capital gains income ........................................ 8,328 894 10,163
Net realized gain (loss) on security transactions ........... 6,424 (1,428) (1,335)
Net unrealized appreciation of investments during the
period ..................................................... 165,616 59,442 1,770,825
---------- ---------- -----------
Net increase in net assets resulting from operations ........ 201,260 80,862 1,862,542
---------- ---------- -----------
Unit transactions:
Purchases ................................................... 1,550,548 896,723 11,219,771
Net transfers ............................................... (295,995) 128,215 1,189,188
Surrenders .................................................. (203,150) (137,390) (665,008)
---------- ---------- -----------
Net increase in net assets resulting from unit
transactions ............................................... 1,051,403 887,548 11,743,951
---------- ---------- -----------
Total increase in net assets ................................ 1,252,663 968,410 13,606,493
Net Assets:
Beginning of period ......................................... 1,353,629 630,116 4,195,116
---------- ---------- -----------
End of period ............................................... $2,606,292 $1,598,526 $17,801,609
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value-Added Core-Equity American Global Equity
Market Portfolio Portfolio Value Portfolio Value Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account
- - ------------------ ------------- ----------------- -----------------
<S> <C> <C> <C>
$ 1,105 $ (28,598) $ (147,030) $ (51,246)
25,010 9,815 253,252 13,138
(250) (35) 25,705 (626)
2,624,687 423,579 3,404,201 378,264
----------- ---------- ----------- -----------
2,650,552 404,761 3,536,128 339,530
----------- ---------- ----------- -----------
8,641,262 1,171,717 7,393,097 5,772,577
1,738,699 745,942 1,198,780 1,004,060
(827,826) (124,197) (804,164) (784,786)
341,474 -- -- --
----------- ---------- ----------- -----------
9,893,609 1,793,462 7,787,713 5,991,851
----------- ---------- ----------- -----------
12,544,161 2,198,223 11,323,841 6,331,381
8,176,915 1,359,009 9,066,188 5,761,453
----------- ---------- ----------- -----------
$20,721,076 $3,557,232 $20,390,029 $12,092,834
=========== ========== =========== ===========
<CAPTION>
Developing Emerging Diversified Mid-Cap
Growth Portfolio Markets Portfolio Income Portfolio Growth Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account*
- - ------------------ ------------------- ------------------ -----------------
<S> <C> <C> <C>
$ (65,434) $ (17,516) $ 270,857 $ 1,157
-- -- 7,785 --
(5,860) (14,073) 153 1,041
665,187 (42,909) 12,589 129,661
---------- ---------- ---------- ----------
593,893 (74,498) 291,384 131,859
---------- ---------- ---------- ----------
2,012,667 809,422 2,936,575 1,190,000
36,985 6,465 1,246,736 495,122
(235,174) (120,404) (347,647) (40,829)
-- -- -- --
---------- ---------- ---------- ----------
1,814,478 695,483 3,835,664 1,644,293
---------- ---------- ---------- ----------
2,408,371 620,985 4,127,048 1,776,152
4,410,306 1,342,256 2,563,016 --
---------- ---------- ---------- ----------
$6,818,677 $1,963,241 $6,690,064 $1,776,152
========== ========== ========== ==========
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value-Added Core-Equity American Global Equity Developing Emerging Diversified
Market Portfolio Portfolio Value Portfolio Value Portfolio Growth Portfolio Markets Portfolio Income Portfolio
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
- ------------------- ------------- ----------------- ----------------- ------------------ ------------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
$ 7,612 $ (5,790) $ (45,165) $ (5,756) $ (33,989) $ (1,247) $ 83,793
1,620 1,743 23,844 3,905 2,707 -- 1,078
3,162 519 179 932 3,963 (27) 101
638,574 144,463 660,479 304,832 196,773 77,164 21,655
---------- ---------- ---------- ---------- ---------- ---------- ----------
650,968 140,935 639,337 303,913 169,454 75,890 106,627
---------- ---------- ---------- ---------- ---------- ---------- ----------
5,771,510 819,995 5,876,271 3,658,651 3,157,803 932,707 1,616,132
118,782 109,486 669,473 948,105 274,161 206,356 235,033
(62,463) (12,084) (319,324) (211,305) (148,442) (38,428) (38,500)
---------- ---------- ---------- ---------- ---------- ---------- ----------
5,827,829 917,397 6,226,420 4,395,451 3,283,522 1,100,635 1,812,665
---------- ---------- ---------- ---------- ---------- ---------- ----------
6,478,797 1,058,332 6,865,757 4,699,364 3,452,976 1,176,525 1,919,292
1,698,118 300,677 2,200,431 1,062,089 957,330 165,731 643,724
---------- ---------- ---------- ---------- ---------- ---------- ----------
$8,176,915 $1,359,009 $9,066,188 $5,761,453 $4,410,306 $1,342,256 $2,563,016
========== ========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE>
Separate Account Three
Hartford Life Insurance Company
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
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.
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. Capital gains
income represents dividends from the Funds which are characterized as
capital gains under tax regulations.
b) Security Valuation--The investment in shares of the Dean Witter Select
Dimensions Investment Series Mutual Funds are valued at the closing net
asset value per share as determined by the appropriate Fund as of
December 31, 1997.
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 up to
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.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
(IN MILLIONS) 1998 1997
- --------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
REVENUES
Premiums and other considerations $ 563 $ 310
Net investment income 352 337
Net realized capital gains -- 4
- --------------------------------------------------------------------------------
TOTAL REVENUES 915 651
- --------------------------------------------------------------------------------
BENEFITS, CLAIMS AND EXPENSES
Benefits, claims and claim adjustment expenses 398 342
Amortization of deferred policy acquisition costs 94 81
Dividends to policyholders 107 54
Other insurance expenses 188 73
- --------------------------------------------------------------------------------
TOTAL BENEFITS, CLAIMS AND EXPENSES 787 550
- --------------------------------------------------------------------------------
INCOME BEFORE INCOME TAX EXPENSE 128 101
Income tax expense 45 38
- --------------------------------------------------------------------------------
NET INCOME $ 83 $ 63
- --------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
(IN MILLIONS, EXCEPT FOR SHARE DATA) 1998 1997
- --------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
INVESTMENTS
Fixed maturities, available for sale, at fair
value (amortized cost of $14,336 and $13,885) $ 14,609 $ 14,176
Equity securities, available for sale, at
fair value 188 180
Policy loans, at outstanding balance 3,760 3,756
Other investments, at cost 235 47
- --------------------------------------------------------------------------------
Total investments 18,792 18,159
Cash 52 54
Premiums and amounts receivable 23 18
Accrued investment income 353 330
Reinsurance recoverable 6,040 6,325
Deferred policy acquisition costs 3,430 3,315
Deferred income tax 454 348
Other assets 207 352
Separate account assets 77,457 69,055
- --------------------------------------------------------------------------------
TOTAL ASSETS $106,808 $ 97,956
- --------------------------------------------------------------------------------
LIABILITIES
Future policy benefits $ 3,325 $ 3,270
Other policyholder funds 20,980 21,034
Other liabilities 2,622 2,254
Separate account liabilities 77,457 69,055
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 104,384 95,613
- --------------------------------------------------------------------------------
STOCKHOLDER'S EQUITY
Common stock - authorized 1,000; issued and
outstanding, par value $5,690 6 6
Capital surplus 1,045 1,045
Accumulated other comprehensive income
Net unrealized capital gains on securities,
net of tax 177 179
Total accumulated other comprehensive income 177 179
Retained earnings 1,196 1,113
- --------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY 2,424 2,343
- --------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $106,808 $ 97,956
- --------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
THREE MONTHS ENDED MARCH 31, 1998 (unaudited)
<TABLE>
<CAPTION>
ACCUMULATED OTHER
COMPREHENSIVE
INCOME
----------------------
NET
UNREALIZED CAPITAL TOTAL
COMMON CAPITAL GAINS (LOSSES) ON RETAINED STOCKHOLDERS'
(IN MILLIONS) (UNAUDITED) STOCK SURPLUS SECURITIES, NET OF TAX EARNINGS EQUITY
- ----------------------------------------- -------- -------- ---------------------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 $ 6 $ 1,045 $ 179 $ 1,113 $ 2,343
COMPREHENSIVE INCOME
Net income -- -- -- 83 83
-----------
Other comprehensive income, net of tax:
Change in unrealized capital gains
(losses) on securities (1) (2) -- -- (2) -- (2)
-----------
Total other comprehensive income (2)
-----------
TOTAL COMPREHENSIVE INCOME 81
------- -------- -------------------- --------- -----------
BALANCE, MARCH 31, 1998 $ 6 $ 1,045 $ 177 $ 1,196 $ 2,424
------- -------- -------------------- --------- -----------
------- -------- -------------------- --------- -----------
</TABLE>
THREE MONTHS ENDED MARCH 31, 1997 (unaudited)
<TABLE>
<CAPTION>
ACCUMULATED OTHER
COMPREHENSIVE
INCOME
----------------------
NET
UNREALIZED CAPITAL TOTAL
COMMON CAPITAL GAINS (LOSSES) ON RETAINED STOCKHOLDERS'
(IN MILLIONS) (UNAUDITED) STOCK SURPLUS SECURITIES, NET OF TAX EARNINGS EQUITY
- ----------------------------------------- -------- -------- ---------------------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 $ 6 $ 1,045 $ 30 $ 811 $ 1,892
COMPREHENSIVE INCOME
Net income -- -- -- 63 63
-----------
Other comprehensive income, net of tax:
Change in unrealized capital gains
(losses) on securities (1) (2) -- -- (87) -- (87)
-----------
Total other comprehensive income (87)
-----------
TOTAL COMPREHENSIVE INCOME 24
------- -------- -------------------- --------- -----------
BALANCE, MARCH 31, 1997 $ 6 $ 1,045 $ (57) $ 874 $ 1,868
------- -------- -------------------- --------- -----------
------- -------- -------------------- --------- -----------
</TABLE>
(1) UNREALIZED GAIN (LOSS) ON SECURITIES IS NET OF TAX EXPENSE (BENEFIT) OF $95
AND $(34) FOR MARCH 31, 1998 AND 1997, RESPECTIVELY.
(2) NET OF RECLASSIFICATION ADJUSTMENT FOR GAINS REALIZED IN NET INCOME OF $0
AND $4 FOR MARCH 31, 1998 AND 1997, RESPECTIVELY.
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
(IN MILLIONS) 1998 1997
- --------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 83 $ 63
ADJUSTMENTS TO NET INCOME:
Depreciation and amortization (5) 5
Net realized capital gains -- (4)
(Increase) decrease in deferred income taxes (102) 21
Increase in deferred policy acquisition costs (115) (128)
(Increase) decrease in premiums receivable and agents'
balances (5) 32
(Increase) decrease in accrued investment income (23) 57
Decrease in other assets 104 25
Decrease (increase) in reinsurance recoverables 23 (112)
Increase in liabilities for future policy benefits 55 158
Increase in other liabilities 74 227
- --------------------------------------------------------------------------------------------
CASH PROVIDED BY OPERATING ACTIVITIES 89 344
- --------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchases of fixed maturity investments (2,014) (1,525)
Sales of fixed maturity investments 1,162 985
Maturities and principal paydowns of fixed maturity
investments 459 664
Net (purchases) sales of other investments (118) 111
Net sales (purchases) of short-term investments 211 (102)
- --------------------------------------------------------------------------------------------
CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES (300) 133
- --------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net receipts from (disbursements for) investment and universal
life-type contracts credited to (charged against) policyholder
accounts 209 (447)
- --------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 209 (447)
- --------------------------------------------------------------------------------------------
(Decrease) increase in cash (2) 30
Cash - beginning of period 54 43
- --------------------------------------------------------------------------------------------
CASH - END OF PERIOD $ 52 $ 73
- --------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
NET CASH PAID DURING THE PERIOD FOR:
Income taxes $ 56 $ 41
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN MILLIONS EXCEPT FOR SHARE DATA UNLESS OTHERWISE STATED)
(UNAUDITED)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Hartford Life Insurance Company (the "Company") have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures which are normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules and regulations, although
the Company believes that the disclosures made are adequate to make the
information presented not misleading. In the opinion of management, these
statements include all adjustments which were normal recurring adjustments
necessary to present fairly the financial position, results of operations and
cash flows for the periods presented.
For a description of accounting policies, see Note 2 of Notes to Consolidated
Financial Statements in the Company's 1997 Form 10-K Annual Report.
Certain reclassifications have been made to prior year financial information to
conform to the current year classification of transactions and accounts.
(b) CHANGES IN ACCOUNTING PRINCIPLES
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") No. 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use". The SOP provides guidance on
accounting for the costs of internal use software and in determining whether the
software is for internal use. The SOP defines internal use software as software
that is acquired, internally developed, or modified solely to meet internal
needs and identifies stages of software development and accounting for the
related costs incurred during the stages. This statement is effective for
fiscal years beginning after December 15, 1998 and is not expected to have a
material impact on the Company's financial condition or results of operations.
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income", which establishes
standards for reporting and display of comprehensive income and its components
in a full set of general purpose financial statements. The objective of this
statement is to report a measure of all changes in equity of an enterprise that
result from transactions and other economic events of the period other than
transactions with owners. Comprehensive income is the total of net income and
all other nonowner changes in equity. Accordingly, the Company has reported
comprehensive income in the Condensed Consolidated Statement of Changes in
Stockholder's Equity.
NOTE 2. INITIAL PUBLIC OFFERING ("IPO")
On February 10, 1997, the Company's indirect parent, Hartford Life, Inc.
("Hartford Life"), filed a registration statement, as amended, with the
Securities and Exchange Commission, relating to the IPO of Hartford Life's
Class A Common Stock. Pursuant to the IPO on May 22, 1997, Hartford Life sold
to the public 26 million shares at $28.25 per share and received proceeds, net
of offering expenses, of $687. Of the proceeds, $527 was used to retire debt
related to Hartford Life's promissory notes outstanding and line of credit. The
remaining $160 was contributed by Hartford Life to Hartford Life and Accident
Insurance Company, the Company's direct parent, to support growth in its core
businesses.
The 26 million shares sold in the IPO represent approximately 18.6% of the
equity ownership in Hartford Life and approximately 4.4% of the combined voting
power of Hartford Life's Class A and Class B Common Stock. The Hartford owns
all of the 114 million outstanding shares of Class B Common Stock of Hartford
Life, representing approximately 81.4% of the equity ownership in Hartford Life
and approximately 95.6% of the combined voting power of Hartford Life's Class A
and Class B Common Stock. Holders of Class A Common Stock generally have
identical rights to the holders of Class B Common Stock except that the holders
of Class A Common Stock are entitled to one vote per share while holders of
Class B Common Stock are entitled to five votes per share on all matters
submitted to a vote of Hartford Life's stockholders.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for monetary and punitive damages have
been asserted. Although there can be no assurances, management, at the present
time, does not anticipate that the ultimate liability arising from such pending
or threatened litigation will have a material effect on the financial condition
or operating results of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLAR AMOUNTS IN MILLIONS EXCEPT FOR PER SHARE DATA UNLESS OTHERWISE STATED)
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") addresses the financial condition of the Company as of March
31, 1998, compared with December 31, 1997, and its results of operations for the
three months ended March 31, 1998 compared with the equivalent 1997 period.
This discussion should be read in conjunction with the MD&A in the Company's
1997 Form 10-K Annual Report.
Certain statements contained in this discussion, other than statements of
historical fact, are forward-looking statements. These statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and include estimates and assumptions related to economic,
competitive and legislative developments. These forward-looking statements are
subject to change and uncertainty which are, in many instances, beyond the
Company's control and have been made based upon management's expectations and
beliefs concerning future developments and their potential effect on Hartford
Life Insurance Company and subsidiaries (the "Company"). There can be no
assurance that future developments will be in accordance with management's
expectations or that the effect of future developments on the Company will be
those anticipated by management. Actual results could differ materially from
those expected by the Company, depending on the outcome of certain factors,
including those described in the forward-looking statements.
Certain reclassifications have been made to prior year financial information to
conform to the current year presentation.
INDEX
Consolidated Results of Operations: Employee Benefits 10
Operating Summary 8 Guaranteed Investment Contracts 11
Annuity 9 Accounting Standards 11
Individual Life Insurance 10
CONSOLIDATED RESULTS OF OPERATIONS: OPERATING SUMMARY
OPERATING SUMMARY FIRST QUARTER ENDED
MARCH 31,
----------------------------
1998 1997
----------------------------
REVENUES $ 915 $ 651
EXPENSES 832 588
------ ------
NET INCOME $ 83 $ 63
------ ------
------ ------
The Company's insurance business operates in three principal segments: Annuity,
Individual Life Insurance, and Employee Benefits as well as a Guaranteed
Investments Contracts segment, which is primarily comprised of business written
prior to 1995. The Company also maintains a Corporate operation through which
it reports items that are not directly allocable to any of its business
segments.
The Annuity segment focuses on the savings and retirement needs of the growing
number of individuals who are preparing for retirement or have already retired.
This segment consists of two areas of operation: Individual Annuity and Group
Annuity. The variety of products sold within this segment reflects the diverse
nature of the market. These include, in the Individual Annuity area, individual
variable annuities, fixed market value adjusted ("MVA") annuities, and mutual
funds; and in the Group Annuity area, deferred compensation and retirement plan
services for municipal governments and corporations, structured settlement
contracts and other special purpose annuity contracts, and investment management
contracts. The Individual Life Insurance segment, which focuses on the high end
<PAGE>
estate and business planning markets, sells a variety of life insurance
products, including variable life and universal life insurance. The Employee
Benefits segment consists of two areas of operation: Group Insurance and
Specialty Insurance. Through Group Insurance, the Company offers products such
as group life insurance, group short- and long-term disability and accidental
death and dismemberment. Substantially all of the Group Insurance business
directly written by the Company is ceded to its direct parent, Hartford Life and
Accident Insurance Company. Specialty Insurance primarily consists of the
Company's corporate owned life insurance ("COLI") business. The Guaranteed
Investment Contracts segment consists of guaranteed rate contract ("GRC")
business that is supported by assets held in either the Company's general
account or a guaranteed separate account and includes a closed block of
guaranteed rate contracts ("Closed Book GRC"). The Company decided in 1995,
after a thorough review of its GRC business, that it would significantly de-
emphasize general account GRC, choosing to focus its distribution efforts on
other products sold through other divisions. Management expects no material
income or loss from the Guaranteed Investment Contracts segment in the future.
Revenues increased $264, or 41%, to $915 for the first quarter of 1998 from
$651 for the comparable period in 1997. This was partially due to COLI revenues
which increased $161 due to renewal premium on leveraged COLI and increased fees
associated with variable COLI sales. Excluding COLI, revenues increased $103, or
22%, over the first quarter of 1997. This increase was driven by the Annuity
segment whose revenues increased $101, or 36%, for the first quarter of 1998 as
compared to the first quarter of 1997. This increase was due to higher fee
income earned on growing annuity account values where the average account value
grew $18.9 billion, or 37%, to $70.6 billion at March 31, 1998 from $51.7
billion at March 31, 1997 due to market appreciation and new sales. Also,
Individual Life Insurance revenues increased $17, or 15%, for the first quarter
of 1998 as compared to the first quarter of 1997 due to increased cost of
insurance charges and other fee income on the Company's growing block of
variable life business. Partially offsetting the increases discussed above was
a $20 decline in revenues related to Closed Book GRC.
Expenses increased $244, or 41%, to $832 for the first quarter of 1998 from $588
for the comparable period in 1997. The increase was partially driven by COLI,
whose expenses increased $160 as a result of increased operating expenses
associated with significant renewal premium and variable COLI sales for the
quarter ended March 31, 1998. Excluding COLI, expenses increased $84, or 20%,
over the first quarter of 1997. Annuity expenses grew $81 primarily due to
higher amortization of deferred policy acquisition costs and operating expenses.
Individual Life Insurance expenses increased $15 primarily due to higher
benefits, claims, and claim adjustment expenses, which is consistent with the
growth in this blocks of business. Partially offsetting the increases discussed
above was a $20 decline in expenses related to Closed Book GRC.
Net income increased $20, or 32%, to $83 for the first quarter of 1998 from $63
for the first quarter of 1997 primarily due to growth in the Annuity and the
Individual Life Insurance segments. Annuity earnings increased $20, or 47%, due
to increasing account values resulting from significant stock market
appreciation and new sales, particularly in Individual Annuity. Individual
Life Insurance earnings increased $2, or 18%, as a result of strong sales and
growing account values. Guaranteed Investment Contracts had no net income in
the first quarter of 1998 or 1997, consistent with management's expectations.
SEGMENT RESULTS
The Company's reporting segments, which reflect the management structure of the
Company, consist of Annuity, Individual Life Insurance, Employee Benefits,
Guaranteed Investment Contracts and a Corporate Operation.
Below is a summary of net income by segment.
FIRST QUARTER ENDED
MARCH 31,
-------------------------
1998 1997
-------------------------
ANNUITY $ 63 $ 43
INDIVIDUAL LIFE INSURANCE 13 11
EMPLOYEE BENEFITS 6 6
GUARANTEED INVESTMENT CONTRACTS -- --
CORPORATE OPERATION 1 3
---------- ----------
NET INCOME $ 83 $ 63
---------- ----------
---------- ----------
The sections that follow analyze each segment's results.
<PAGE>
ANNUITY
FIRST QUARTER ENDED
MARCH 31,
-------------------------
1998 1997
-------------------------
REVENUES $ 381 $ 280
EXPENSES 318 237
------- -------
NET INCOME $ 63 $ 43
------- -------
------- -------
Revenues increased $101, or 36%, to $381 as of March 31, 1998 from $280 as of
March 31, 1997. Individual Annuity revenues increased $90, or 50%, over the
first quarter of 1997 primarily due to higher fee income earned on growth in
individual variable annuity account values. Average individual variable annuity
account values grew $16.9 billion, or 51%, to $50.2 billion as of March 31, 1998
from $33.3 billion as of March 31, 1997. This growth was the result of
significant market appreciation as well as strong sales of $2.4 billion in the
first quarter of 1998. Also, Group Annuity revenues increased $11, or 11%, as
of March 31, 1998 as compared to March 31, 1997 due to higher net investment
income resulting from growth in assets under management. Group Annuity average
account values grew $2.0 billion, or 22%, to $11.1 billion as March 31, 1998
from $9.1 billion as of March 31, 1997 due to market appreciation and new
deposits.
Expenses increased $81, or 34%, to $318 as of March 31, 1998 from $237 as of
March 31, 1997. Benefits, claims and claim adjustment expenses increased $14
primarily due to increased interest credited on Individual Annuity general
account values, which increased $1.3 billion, or 43%, to $4.2 billion at March
31, 1998 from $2.9 billion at March 31, 1997. Amortization of DPAC increased
$20 as prior and current year sales remained strong. Also, other business
expenses increased $37 as a result of the growth in this segment. However,
operating expenses as a percentage of average account value declined from 1997
levels.
Annuity net income increased $20, or 47%, to $63 as of March 31, 1998 from $43
as of March 31, 1997 as a result of growing average account values discussed
above and operating expense efficiencies.
INDIVIDUAL LIFE INSURANCE
FIRST QUARTER ENDED
MARCH 31,
------------------------
1998 1997
------------------------
REVENUES $ 128 $ 111
EXPENSES 115 100
------- -------
NET INCOME $ 13 $ 11
------- -------
------- -------
Revenues increased $17, or 15%, to $128 as of March 31, 1998 from $111 as of
March 31, 1997. This increase was primarily due to higher cost of insurance
charges and other fee income earned on the Company's growing block of variable
life insurance. Variable life average account values increased $540, or 84%, to
$1.2 billion as of March 31, 1998 from $640 as of March 31, 1997 due to market
appreciation and strong sales. Variable life product sales constituted 75%, or
$24, of total Individual Life Insurance new sales in the first quarter of 1998,
an increased of $9, or 60%, compared to the same period in 1997.
Expenses increased $15, or 15%, to $115 as of March 31, 1998 from $100 as of
March 31, 1997. This increase was primarily the result of higher benefits,
claims, and claim adjustment expenses of $20 due to the growth in this segment
as well as increased mortality experience in the first quarter of 1998. Net
income increased $2, or 18%, to $13 as of March 31, 1998 from $11 as of March
31, 1997.
EMPLOYEE BENEFITS
FIRST QUARTER ENDED
MARCH 31,
------------------------
1998 1997
------------------------
REVENUES $ 348 $ 179
EXPENSES 342 173
------- -------
NET INCOME $ 6 $ 6
------- -------
------- -------
Revenues increased $169, or 94%, to $348 as of March 31, 1998 from $179 as of
March 31, 1997. This was primarily due to COLI whose revenues increased $161,
or 90%, for the first quarter of 1998 as compared to the first quarter of 1997.
This increase was due to $80 of renewal premium on leveraged COLI as well as
increase in fee income of $78 related to new sales of variable COLI.
<PAGE>
Expenses increased $169, or 98%, to $342 as of March 31, 1998 from $173 as of
March 31, 1997. COLI expenses increased $160 primarily due to higher expenses
associated with the first quarter 1998 increased variable COLI sales and
leveraged COLI renewal premium. Net income was consistent with the prior year
results.
GUARANTEED INVESTMENT CONTRACTS
FIRST QUARTER ENDED
MARCH 31,
------------------------
1998 1997
------------------------
REVENUES $ 52 $ 72
EXPENSES 52 72
------- -------
NET INCOME $ -- $ --
------- -------
------- -------
This segment reported no net income for the first quarter of 1998 and 1997
consistent with management's expectations that net income (loss) from Closed
Book GRC in the years subsequent to 1996 will be immaterial based on the
Company's current projections for the performance of the assets and liabilities
associated with Closed Book GRC. However, no assurance can be given that, under
certain unanticipated economic circumstances which result in the Company's
assumptions being proven inaccurate, further losses in respect of Closed Book
GRC will not occur in the future.
ACCOUNTING STANDARDS
For a discussion of accounting standards, see Note 1 of Notes to Condensed
Consolidated Financial Statements
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for monetary and punitive damages have
been asserted. Although there can be no assurances, management, at the present
time, does not anticipate that the ultimate liability arising from such pending
or threatened litigation will have a material effect on the financial condition
or operating results of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - See Exhibits Index
(b) Reports on Form 8-K - None
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life Insurance Company:
We have audited the accompanying Consolidated Balance Sheets of Hartford Life
Insurance Company (the "Company") and subsidiaries as of December 31, 1997 and
1996, 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,
1997. These consolidated financial statements and the schedules referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Hartford Life
Insurance Company and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in Index to
Consolidated Financial Statements and Schedules are presented for the purpose of
complying with the Securities and Exchange Commission's rules and are not part
of the basic financial statements. These schedules have been subjected to the
auditing procedures applied in the audits of the basic 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 financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
January 27, 1998
<PAGE>
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1997 1996 1995
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Premiums and other considerations............... $1,637 $1,705 $1,487
Net investment income........................... 1,368 1,397 1,328
Net realized capital gains (losses)............. 4 (213) (11)
------ ------ ------
Total revenues................................ 3,009 2,889 2,804
------ ------ ------
Benefits, claims and expenses
Benefits, claims and claim adjustment
expenses....................................... 1,379 1,535 1,422
Amortization of deferred policy acquisition
costs.......................................... 335 234 199
Dividends to policyholders...................... 240 635 675
Other expenses.................................. 586 427 317
------ ------ ------
Total benefits, claims and expenses........... 2,540 2,831 2,613
------ ------ ------
Income before income tax expense................ 469 58 191
Income tax expense.............................. 167 20 62
------ ------ ------
Net income........................................ $ 302 $ 38 $ 129
------ ------ ------
------ ------ ------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER
31,
-----------------
1997 1996
------- -------
<S> <C> <C>
(IN MILLIONS,
EXCEPT FOR SHARE
DATA)
Assets
Investments
Fixed maturities, available for sale, at fair
value (amortized cost of $13,885 and
$13,579)....................................... $14,176 $13,624
Equity securities, at fair value................ 180 119
Policy loans, at outstanding balance............ 3,756 3,836
Other investments, at cost...................... 47 56
------- -------
Total investments............................. 18,159 17,635
Cash............................................ 54 43
Premiums receivable and agents' balances........ 18 137
Accrued investment income....................... 330 407
Reinsurance recoverables........................ 6,325 6,259
Deferred policy acquisition costs............... 3,315 2,760
Deferred income tax............................. 348 474
Other assets.................................... 352 357
Separate account assets......................... 69,055 49,690
------- -------
Total assets.................................. $97,956 $77,762
------- -------
------- -------
Liabilities
Future policy benefits.......................... $ 3,270 $ 2,474
Other policyholder funds........................ 21,034 22,134
Other liabilities............................... 2,254 1,572
Separate account liabilities.................... 69,055 49,690
------- -------
Total liabilities............................. 95,613 75,870
------- -------
Stockholder's Equity
Common stock -- 1,000 shares authorized, issued
and outstanding, par value $5,690.............. 6 6
Additional paid in capital...................... 1,045 1,045
Net unrealized capital gains on securities, net
of tax......................................... 179 30
Retained earnings............................... 1,113 811
------- -------
Total stockholder's equity.................... 2,343 1,892
------- -------
Total liabilities and stockholder's equity...... $97,956 $77,762
------- -------
------- -------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
NET UNREALIZED
CAPITAL GAINS
ADDITIONAL (LOSSES) ON TOTAL
COMMON PAID IN SECURITIES, RETAINED STOCKHOLDER'S
STOCK CAPITAL NET OF TAX EARNINGS EQUITY
------ -------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
Balance, December 31, 1994.............. $6 $ 826 $(654) $ 644 $ 822
Net income............................ -- -- -- 129 129
Capital contribution.................. -- 181 -- -- 181
Change in net unrealized capital gains
(losses) on securities, net of tax... -- -- 597 -- 597
--
------ ------ ----------- ------
Balance, December 31, 1995.............. 6 1,007 (57) 773 1,729
Net income............................ -- -- -- 38 38
Capital contribution.................. -- 38 -- -- 38
Change in net unrealized capital gains
(losses) on securities, net of tax... -- -- 87 -- 87
--
------ ------ ----------- ------
Balance, December 31, 1996.............. 6 1,045 30 811 1,892
Net income............................ -- -- -- 302 302
Change in net unrealized capital gains
(losses) on securities, net of tax... -- -- 149 -- 149
--
------ ------ ----------- ------
Balance, December 31, 1997.............. $6 $1,045 $179 $1,113 $2,343
--
--
------ ------ ----------- ------
------ ------ ----------- ------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
------------------------------
1997 1996 1995
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Operating Activities
Net income............................ $ 302 $ 38 $ 129
Adjustments to reconcile net income to
cash provided by operating activities
Depreciation and amortization......... 8 14 21
Net realized capital (gains) losses... (4) 213 11
Decrease (increase) in deferred income
taxes................................ 40 (102) (172)
Increase in deferred policy
acquisition costs.................... (555) (572) (379)
Decrease (increase) in premiums
receivable and agents' balances...... 119 10 (81)
Decrease (increase) in accrued
investment income.................... 77 (13) (16)
Decrease (increase) in other assets... 52 (132) (177)
(Increase) decrease in reinsurance
recoverables......................... (416) 179 (35)
Increase (decrease) in liabilities for
future policy benefits............... 796 (92) 483
Increase in other liabilities......... 379 477 281
-------- -------- --------
Cash provided by operating
activities......................... 798 20 65
-------- -------- --------
Investing Activities
Purchases of fixed maturity
investments.......................... (6,231) (5,747) (6,228)
Sales of fixed maturity investments... 4,232 3,459 4,845
Maturities and principal paydowns of
fixed maturity investments........... 2,329 2,693 1,741
Net sales (purchases) of other
investments.......................... 24 (107) (871)
Net (purchases) sales of short-term
investments.......................... (638) 84 (24)
-------- -------- --------
Cash (used for) provided by
investing activities............... (284) 382 (537)
-------- -------- --------
Financing Activities
Capital contribution.................. -- 38 --
Net (disbursements for) receipts from
investment and universal life-type
contracts (charged against) credited
to policyholder accounts............. (503) (443) 498
-------- -------- --------
Cash (used for) provided by
financing activities............... (503) (405) 498
-------- -------- --------
Increase (decrease) in cash........... 11 (3) 26
Cash -- beginning of year............. 43 46 20
-------- -------- --------
Cash -- end of year................... $ 54 $ 43 $ 46
-------- -------- --------
-------- -------- --------
Supplemental Disclosure of Cash Flow
Information:
Net Cash Paid During the Year for:
Income taxes.......................... $ 9 $ 189 $ 162
Noncash Financing Activities:
Capital contribution.................. $ -- $ -- $ 181
-------- -------- --------
-------- -------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN MILLIONS EXCEPT PER SHARE DATA UNLESS OTHERWISE STATED)
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
These consolidated financial statements include Hartford Life Insurance
Company and its wholly-owned subsidiaries (the "Company"), ITT Hartford Life and
Annuity Insurance Company ("ILA") and ITT Hartford International Life
Reassurance Corporation ("HLRe"), formerly American Skandia Life Reinsurance
Corporation. The Company is a wholly-owned subsidiary of Hartford Life and
Accident Insurance Company ("HLA"), a wholly-owned subsidiary of Hartford Life,
Inc. ("Hartford Life"). Hartford Life is a direct subsidiary of Hartford
Accident and Indemnity Company ("HA&I"), an indirect subsidiary of The Hartford
Financial Services Group, Inc. ("The Hartford"). On February 10, 1997, Hartford
Life filed a registration statement, as amended, with the Securities and
Exchange Commission relating to an Initial Public Offering ("IPO") of the
Hartford Life's Class A Common Stock. Pursuant to the IPO on May 22, 1997,
Hartford Life sold to the public 26 million shares at $28.25 per share and
received net proceeds of $687. Of the proceeds, $527 was used to retire debt
related to Hartford Life's outstanding promissory notes and line of credit with
the remaining $160 contributed by Hartford Life to HLA to support growth in its
core businesses.
On December 19, 1995, ITT Industries, Inc. (formerly ITT Corporation)
("ITT") distributed all the outstanding shares of capital stock of The Hartford
to ITT stockholders of record on such date. As a result, The Hartford became an
independent, publicly traded company.
Along with its parent, the Company is a leading insurance and financial
services company which provides (a) investment products such as individual
variable annuities and fixed market value adjusted annuities, deferred
compensation and retirement plan services and mutual funds for savings and
retirement needs; (b) life insurance for income protection and estate planning;
and (c) employee benefits products such as group life and group disability
insurance and corporate owned life insurance.
2. SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
These consolidated financial statements present the financial position,
results of operations and cash flows of the Company. All material intercompany
transactions and balances between the Company, its subsidiaries and affiliates
have been eliminated. The consolidated financial statements are prepared on the
basis of generally accepted accounting principles which differ materially from
the statutory accounting practices prescribed by various insurance regulatory
authorities.
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 most
significant estimates include those used in determining deferred policy
acquisition costs and the liability for future policy benefits and other
policyholder funds. Although some variability is inherent in these estimates,
management believes the amounts provided are adequate.
Certain reclassifications have been made to prior year financial information
to conform to the current year presentation.
(B) CHANGES IN ACCOUNTING PRINCIPLES
In December 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") No. 97-3 "Accounting by Insurance
and Other Enterprises for Insurance Related Assessments". This SOP provides
guidance on accounting by insurance and other enterprises for assessments
related to insurance activities. Specifically, the SOP provides guidance on when
a guaranty fund or other assessment should be recognized, how to measure the
liability, and what information should be disclosed. This SOP will be effective
for fiscal years beginning after December 15, 1998. Adoption of SOP 97-3 is not
expected to have a material impact on the Company's financial condition or
results of operations.
On November 14, 1996, the Emerging Issues Task Force ("EITF") reached a
consensus on Issue No. 96-12, "Recognition of Interest Income and Balance Sheet
Classification of Structured Notes". This EITF issue requires companies to
record income on certain structured securities on a retrospective interest
method. The Company adopted EITF No. 96-12 for structured securities acquired
after November 14, 1996. Adoption of EITF No. 96-12 did not have a material
effect on the Company's financial condition or results of operations.
In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities"
which is effective for transfers and servicing of financial
<PAGE>
- --------------------------------------------------------------------------------
assets and extinguishments of liabilities occurring after December 31, 1996.
This statement established criteria for determining whether transferred assets
should be accounted for as sales or secured borrowings. Subsequently, in
December 1996, the FASB issued SFAS No. 127, "Deferral of Effective Date of
Certain Provisions of FASB Statement No. 125", which defers the effective date
of certain provisions of SFAS No. 125 for one year. Adoption of SFAS No. 125 is
not expected to have a material effect on the Company's financial condition or
results of operations.
Effective January 1, 1996, the Company adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of". This statement establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. Adoption of SFAS No. 121 did not
have a material effect on the Company's financial condition or results of
operations.
The Company's cash flows were not impacted by these changes in accounting
principles.
(C) REVENUE RECOGNITION
Revenues for universal life-type policies and investment products consist of
policy charges for the cost of insurance, policy administration and surrender
charges assessed to policy account balances and are recognized in the period in
which services are provided. Premiums for traditional life insurance and
disability policies are recognized as revenues when they are due from
policyholders.
(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 and
mortality assumptions appropriate at the time the policies were issued. Health
reserves, which are the result of sales of group long-term and short-term
disability, stop loss, Medicare Supplement and individual disability products,
are stated at amounts determined by estimates on individual cases and estimates
of unreported claims based on past experience. Liabilities for universal
life-type and investment contracts are stated at policyholder account values
before surrender charges.
(E) POLICYHOLDER REALIZED CAPITAL GAINS AND LOSSES
Realized capital gains and losses on security transactions associated with
the Company's immediate participation guaranteed contracts are excluded from
revenues and deferred over the expected maturity of the securities, 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) INVESTMENTS
The Company's investments in fixed maturities include bonds and commercial
paper which are considered "available for sale" and accordingly are carried at
fair value with the after-tax difference from cost reflected as a component of
Stockholder's Equity designated "Net unrealized capital gains (losses) on
securities, net of tax". Equity securities, which include common and
non-redeemable preferred stocks, are carried at fair values with the after-tax
difference from cost reflected in Stockholder's Equity. Policy loans are carried
at outstanding balance which approximates fair value. Net realized capital gains
and losses, after deducting pension policyholders' share, are reported as a
component of revenue and are determined on a specific identification basis.
The Company's accounting policy for impairment requires recognition of an
other than temporary impairment charge on a security if it is determined that
the Company is unable to recover all amounts due under the contractual
obligations of the security. In addition, for securities expected to be sold, an
other than temporary impairment charge is recognized if the Company does not
expect the fair value of a security to recover to cost or amortized cost prior
to the expected date of sale. Once an impairment charge has been recorded, the
Company then continues to review the other than temporarily impaired securities
for appropriate valuation on an on-going basis.
During 1996, it was determined that certain individual securities within the
investment portfolio supporting the Company's block of guaranteed rate contract
business written prior to 1995 ("Closed Book GRC") could not recover to
amortized cost prior to sale. Therefore, an other than temporary impairment loss
of $88, after-tax, was recorded.
(G) DERIVATIVE INSTRUMENTS
The Company uses a variety of derivative instruments including swaps, caps,
floors, forwards and exchange traded financial futures and options 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. The Company
does not hold or issue derivative instruments for trading purposes. The
Company's accounting for derivative 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", AICPA SOP 86-2,
"Accounting for Options" and various EITF pronouncements. Written options are
used, in all cases in conjunction with other assets and derivatives, as part of
the Company's asset and liability management strategy. Derivative instruments
are carried at values consistent with the asset or liability being hedged.
Derivative instruments used to hedge fixed maturities or equity securities are
carried at fair value
<PAGE>
- --------------------------------------------------------------------------------
with the after-tax difference from cost reflected in Stockholder's Equity.
Derivative instruments used to hedge other invested assets or liabilities are
carried at cost.
Derivative instruments must be designated at inception as a hedge and
measured for effectiveness both at inception and on an on-going basis. The
Company'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. Derivative
instruments 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. Consistent with industry
practice, synthetic instruments are accounted for like the financial instrument
it is intended to replicate. Derivative instruments which fail to meet risk
management criteria, subsequent to acquisition, 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 investment of future receipt of product cash flows are deferred and, at
the time of the ultimate investment purchase, reflected as an adjustment to the
cost basis of the purchased asset. Gains or losses on futures used in invested
asset risk management are deferred and adjusted into the cost 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 net investment income over the remaining
asset life.
Open forward commitment contracts are marked to market through Stockholder's
Equity. Such contracts are accounted for at settlement by recording the purchase
of the specified securities at the previously committed price. Gains or losses
resulting from the termination of 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 option. 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 investment 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 net investment income. 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 capital gain or loss.
Premiums paid on purchased floor or cap agreements and the premium received
on issued cap or floor 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. Changes in the spot rate of instruments designated
as hedges of the net investment in a foreign subsidiary are reflected in the
cumulative translation adjustments component of Stockholder's Equity. Cash flows
from futures, options, and swaps, accounted for as hedges, are included with the
cash flows of the item being hedged.
(H) SEPARATE ACCOUNTS
The Company maintains separate account assets and liabilities 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
policyholders. Separate accounts reflect two categories of risk assumption:
non-guaranteed separate accounts, wherein the policyholder assumes the
investment risk, and guaranteed separate account assets, wherein the Company
contractually guarantees either a minimum return or account value to the
policyholder.
(I) DEFERRED POLICY ACQUISITION COSTS
Policy acquisition costs, which include commissions and certain underwriting
expenses associated with acquiring business, are deferred and amortized over the
estimated lives of the contracts, generally 20 years. Generally, acquisition
costs are deferred and amortized using the retrospective deposit method. Under
the retrospective deposit method, acquisition costs are amortized in proportion
to the present value of expected gross profits from surrender charges,
investment, mortality and expense margins. Actual gross profits can vary from
management's estimates resulting in increases or decreases in the rate of
amortization. Management periodically updates these estimates, when appropriate,
and evaluates the recoverability of the deferred acquisition cost asset. When
appropriate, management revises its assumptions on the estimated gross profits
of these contracts and the cumulative amortization
<PAGE>
- --------------------------------------------------------------------------------
for the books of business are reestimated and adjusted by a cumulative charge or
credit to income.
The Company's other expenses include the following:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Commissions........................... $ 976 $ 848 $ 619
Deferred acquisition costs............ (862) (823) (618)
Other................................. 472 402 316
--------- --------- ---------
Total other expenses.............. $ 586 $ 427 $ 317
--------- --------- ---------
--------- --------- ---------
</TABLE>
(J) DIVIDENDS TO POLICYHOLDERS
Certain life insurance policies contain dividend payment provisions that
enable the policyholder to participate in the earnings of the life insurance
subsidiaries of the Company. The participating insurance in force accounted for
55%, 44%, and 41% in 1997, 1996, and 1995, respectively, of total insurance in
force.
3. INITIAL PUBLIC OFFERING
On February 10, 1997, Hartford Life filed a registration statement, as
amended, with the Securities and Exchange Commission, relating to the IPO of
Hartford Life's Class A Common Stock. Pursuant to the IPO on May 22, 1997,
Hartford Life sold to the public 26 million shares at $28.25 per share and
received proceeds, net of offering expenses, of $687. Of the proceeds, $527 was
used to retire debt related to Hartford Life's promissory notes outstanding and
line of credit. The remaining $160 was contributed by Hartford Life to HLA to
support growth in its core businesses. The 26 million shares sold in the
Offering represent approximately 18.6% of the equity ownership in Hartford Life
and approximately 4.4% of the combined voting power of Hartford Life's Class A
and Class B Common Stock. The Hartford owns all of the 114 million outstanding
shares of Class B Common Stock of Hartford Life, representing approximately
81.4% of the equity ownership in Hartford Life and approximately 95.6% of the
combined voting power of Hartford Life's Class A and Class B Common Stock.
Holders of Class A Common Stock generally have identical rights to the holders
of Class B Common Stock except that the holders of Class A Common Stock are
entitled to one vote per share while holders of Class B Common Stock are
entitled to five votes per share on all matters submitted to a vote of Hartford
Life's stockholders.
4. INVESTMENTS AND DERIVATIVE INSTRUMENTS
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Interest income from fixed
maturities......................... $ 932 $ 918 $ 996
Interest income from policy loans... 425 477 342
Income from other investments....... 26 15 1
--------- --------- ---------
Gross investment income............. 1,383 1,410 1,339
Less: Investment expenses........... 15 13 11
--------- --------- ---------
Net investment income............... $ 1,368 $ 1,397 $ 1,328
--------- --------- ---------
--------- --------- ---------
</TABLE>
(B) COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------------
1997 1996 1995
----- --------- ---------
<S> <C> <C> <C>
Fixed maturities......................... $ (7) $ (201) $ 23
Equity securities........................ 12 2 (6)
Real estate and other.................... (1) (4) (25)
Less: Increase in liability to
policyholders for realized capital
gains................................... -- (10) (3)
--- --------- ---------
Net realized capital gains (losses)...... $ 4 $ (213) $ (11)
--- --------- ---------
--- --------- ---------
</TABLE>
(C) NET UNREALIZED CAPITAL GAINS (LOSSES) ON EQUITY SECURITIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Gross unrealized capital gains.............. $ 14 $ 13 $ 4
Gross unrealized capital losses............. -- (1) (2)
--- --- ---
Net unrealized capital gains................ 14 12 2
Deferred income tax expense................. 5 4 1
--- --- ---
Net unrealized capital gains, net of tax.... 9 8 1
Balance -- beginning of year................ 8 1 (6)
--- --- ---
Net change in unrealized capital gains
(losses) on equity securities.............. $ 1 $ 7 $ 7
--- --- ---
--- --- ---
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
(D) NET UNREALIZED CAPITAL GAINS (LOSSES) ON FIXED MATURITIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Gross unrealized capital gains................................... $ 371 $ 386 $ 529
Gross unrealized capital losses.................................. (80) (341) (569)
Unrealized capital (gains) losses credited to policyholders...... (30) (11) (52)
----- ----- -----
Net unrealized capital gains (losses)............................ 261 34 (92)
Deferred income tax expense (benefit)............................ 91 12 (34)
----- ----- -----
Net unrealized capital gains (losses), net of tax................ 170 22 (58)
Balance -- beginning of year..................................... 22 (58) (648)
----- ----- -----
Net change in unrealized capital gains (losses) on fixed
maturities...................................................... $ 148 $ 80 $ 590
----- ----- -----
----- ----- -----
</TABLE>
(E) FIXED MATURITY INVESTMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U.S. gov't and gov't agencies and authorities
(guaranteed and sponsored)...................................... $ 217 $ 3 $ (1) $ 219
U.S. gov't and gov't agencies and authorities
(guaranteed and sponsored) -- asset backed...................... 1,175 64 (35) 1,204
States, municipalities and political subdivisions................ 211 7 (1) 217
International governments........................................ 376 20 (3) 393
Public utilities................................................. 871 26 (3) 894
All other corporate including international...................... 5,033 200 (25) 5,208
All other corporate -- asset backed.............................. 4,091 41 (8) 4,124
Short-term investments........................................... 1,318 -- -- 1,318
Certificates of deposit.......................................... 593 10 (4) 599
---------- ----- ----- ----------
Total fixed maturities....................................... $13,885 $371 $(80) $14,176
---------- ----- ----- ----------
---------- ----- ----- ----------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U.S. gov't and gov't agencies and authorities
(guaranteed and sponsored)...................................... $ 166 $ 12 $ (3) $ 175
U.S. gov't and gov't agencies and authorities
(guaranteed and sponsored) -- asset backed...................... 1,970 161 (128) 2,003
States, municipalities and political subdivisions................ 373 6 (11) 368
International governments........................................ 281 12 (4) 289
Public utilities................................................. 877 12 (8) 881
All other corporate including international...................... 4,656 120 (107) 4,669
All other corporate -- asset backed.............................. 3,601 49 (59) 3,591
Short-term investments........................................... 1,655 14 (21) 1,648
---------- ----- ----------- ----------
Total fixed maturities....................................... $13,579 $386 $(341) $13,624
---------- ----- ----------- ----------
---------- ----- ----------- ----------
</TABLE>
The amortized cost and estimated fair value of fixed maturity investments at
December 31, 1997 by estimated maturity year are shown below. Expected
maturities differ from contractual maturities due to call or prepayment
provisions. Asset backed securities, including MBS and CMO's, are distributed to
maturity year based on the Company's estimates of the rate of future prepayments
of principal over the remaining lives of the securities. These estimates are
developed using prepayment speeds provided in broker consensus data. Such
estimates are derived from prepayment speeds experienced at the interest rate
levels projected for the applicable underlying collateral and can be expected to
vary from actual experience.
MATURITY
<TABLE>
<CAPTION>
AMORTIZED
COST FAIR VALUE
----------- -----------
<S> <C> <C>
One year or less......................... $ 2,838 $ 2,867
Over one year through five years......... 5,528 5,595
Over five years through ten years........ 3,094 3,156
Over ten years........................... 2,425 2,558
----------- -----------
Total................................ $ 13,885 $ 14,176
----------- -----------
----------- -----------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Sales of fixed maturities, excluding short-term fixed maturities, for the
years ended December 31, 1997, 1996 and 1995 resulted in proceeds of $4.2
billion, $3.5 billion and $4.8 billion, gross realized capital gains of $169,
$87 and $91, gross realized capital losses (including writedowns) of $176, $298
and $72, respectively. Sales of equity security investments for the years ended
December 31, 1997, 1996 and 1995 resulted in proceeds of $132, $74 and $64,
gross realized capital gains of $12, $2 and $28 and gross realized capital
losses of $0, $0 and $59, respectively.
(F) CONCENTRATION OF CREDIT RISK
Excluding investments in U.S. government and agencies, the Company has not
invested in the securities of a single issuer in amounts greater than 10% of
stockholder's equity at December 31, 1997.
(G) DERIVATIVE INSTRUMENTS
The Company utilizes a variety of derivative instruments, including swaps,
caps, floors, forwards and exchange traded futures and options, in accordance
with Company policy and in order to achieve one of three Company approved
objectives: to hedge risk arising from interest rate, price or currency exchange
rate volatility; to manage liquidity; or, to control transactions costs. The
Company utilizes derivative instruments to manage market risk through four
principal risk management strategies: hedging anticipated transactions, hedging
liability instruments, hedging invested assets and hedging portfolios of assets
and/or liabilities. The Company does not trade in these instruments for the
express purpose of earning trading profits.
The Company maintains a derivatives counterparty exposure policy which
establishes market-based credit limits, favors long-term financial stability and
creditworthiness, and typically requires credit enhancement/credit risk reducing
agreements. Credit risk is measured as the amount owed to the Company based on
current market conditions and potential payment obligations between the Company
and its counterparties. Credit exposures are quantified weekly and netted, and
collateral is pledged to or held by the Company to the extent the current value
of derivatives exceed exposure policy thresholds.
The Company's derivative program is monitored by an internal compliance unit
and is reviewed by senior management and Hartford Life's Finance Committee.
Notional amounts, which represent the basis upon which pay or receive amounts
are calculated and are not reflective of credit risk, pertaining to derivative
financial instruments (excluding the Company's guaranteed separate account
derivative investments), totaled $6.5 billion and $9.9 billion ($4.6 billion and
$7.4 billion related to the Company's investments, $1.9 billion and $2.5 billion
on the Company's liabilities) at December 31, 1997 and 1996, respectively.
The table below provides a summary of derivative instruments held by the
Company at December 31, 1997 and 1996, segregated by major investment and
liability category:
<TABLE>
<CAPTION>
1997 -- AMOUNT HEDGED (NOTIONAL AMOUNTS)
----------------------------------------------------------------------------------
PURCHASED
CAPS, FOREIGN
TOTAL ISSUED FLOORS INTEREST CURRENCY TOTAL
CARRYING CAPS & AND FUTURES RATE SWAPS NOTIONAL
ASSETS HEDGED VALUE FLOORS OPTIONS (2) SWAPS (3) AMOUNT
- ----------------------------------- -------- -------- ---------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset backed securities (excluding
inverse floaters and
anticipatory)..................... $ 5,253 $ 500 $ 1,404 $ 28 $ 221 $-- $ 2,153
Inverse floaters (1)............... 75 47 80 -- 25 -- 152
Anticipatory (4)................... -- -- -- -- -- -- --
Other bonds and notes.............. 7,531 462 460 22 1,258 91 2,293
Short-term investments............. 1,317 -- -- -- -- -- --
-------- -------- ---------- --- ---------- --- ----------
Total fixed maturities......... 14,176 1,009 1,944 50 1,504 91 4,598
Equity securities, policy loans and
other investments................. 3,983 -- -- -- -- -- --
-------- -------- ---------- --- ---------- --- ----------
Total investments.............. $ 18,159 $ 1,009 $ 1,944 $ 50 $ 1,504 $91 $ 4,598
Long term debt................. -- -- -- -- -- -- --
Other policy claims............ -- 10 150 -- 1,747 -- 1,907
-------- -------- ---------- --- ---------- --- ----------
Total derivatives -- notional
value........................... $ -- $ 1,019 $ 2,094 $ 50 $ 3,251 $91 $ 6,505
-------- -------- ---------- --- ---------- --- ----------
Total derivatives -- fair value.... $ -- $ (8) $ 23 $ -- $ 19 $(6) $ 28
-------- -------- ---------- --- ---------- --- ----------
-------- -------- ---------- --- ---------- --- ----------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 --AMOUNT HEDGED (NOTIONAL AMOUNTS)
--------------------------------------------------------------------------
FOREIGN
TOTAL ISSUED PURCHASED INTEREST CURRENCY TOTAL
CARRYING CAPS & CAPS, FLOORS RATE SWAPS NOTIONAL
ASSETS HEDGED VALUE FLOORS AND OPTIONS FUTURES (2) SWAPS (3) AMOUNT
- ----------------------------------- -------- ------- ------------ ----------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset backed securities (excluding
inverse floaters and
anticipatory)..................... $ 5,242 $ 500 $ 2,454 $ -- $ 941 $ -- $3,895
Inverse floaters (1)............... 352 98 856 -- 346 -- 1,300
Anticipatory (4)................... -- -- -- 132 -- -- 132
Other bonds and notes.............. 7,369 425 440 5 1,079 125 2,074
Short-term investments............. 661 -- -- -- -- -- --
-------- ------- ------------ ----- --------- -------- -------
Total fixed maturities......... 13,624 1,023 3,750 137 2,366 125 7,401
Equity securities, policy loans and
other investments................. 4,011 -- -- -- 19 -- 19
-------- ------- ------------ ----- --------- -------- -------
Total investments.............. $ 17,635 $ 1,023 $ 3,750 $ 137 $ 2,385 $ 125 $7,420
Long term debt................. -- -- -- -- -- -- --
Other policy claims............ -- 10 150 -- 2,351 -- 2,511
-------- ------- ------------ ----- --------- -------- -------
Total derivatives -- notional
value......................... $ -- $ 1,033 $ 3,900 $ 137 $ 4,736 $ 125 $9,931
-------- ------- ------------ ----- --------- -------- -------
Total derivatives -- fair
value......................... $ -- $ (10) $ 38 $ -- $ 2 $ (9 ) $ 21
-------- ------- ------------ ----- --------- -------- -------
-------- ------- ------------ ----- --------- -------- -------
</TABLE>
- ---------
(1) Inverse floaters are variations of collateralized mortgage obligations
("CMO's") for which the coupon rates move inversely with an index rate such as
the London interbank offered rate ("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, the Company uses a variety of derivative instruments,
primarily interest rate swaps, caps and floors.
(2) As of December 31, 1997 and 1996, over 44% and 39% , respectively, of
the notional futures contracts expire within one year.
(3) As of December 31, 1997 and 1996, over 16% and 42%, respectively, of
foreign currency swaps expire within one year; the balance matures over the
succeeding 9 years.
(4) Deferred gains and losses on anticipatory transactions are included in
the carrying value of fixed maturities 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, 1997, the Company had $0 deferred gains and
losses. At December 31, 1996, the Company had $0.9 in net deferred gains for
futures, interest rate swaps and purchased options of which $2.0 was basis
adjusted in 1997.
The following is a reconciliation of notional amounts by derivative type and
strategy as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 MATURITIES/ DECEMBER 31, 1997
NOTIONAL AMOUNT ADDITIONS TERMINATIONS (1) NOTIONAL AMOUNT
----------------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
BY DERIVATIVE TYPE
Caps......................................... $1,755 $ 14 $ 530 $1,239
Floors....................................... 3,168 28 1,332 1,864
Swaps/Forwards............................... 4,861 941 2,460 3,342
Futures...................................... 137 131 218 50
Options...................................... 10 -- -- 10
------- -------- ------- -------
Total.................................... $9,931 $1,114 $4,540 $6,505
------- -------- ------- -------
BY STRATEGY
Liability.................................... $2,511 $ 191 $ 795 $1,907
Anticipatory................................. 132 4 136 --
Asset........................................ 2,112 739 1,046 1,805
Portfolio.................................... 5,176 180 2,563 2,793
------- -------- ------- -------
Total.................................... $9,931 $1,114 $4,540 $6,505
------- -------- ------- -------
------- -------- ------- -------
</TABLE>
- ---------
(1) During 1997, the Company had no significant gains or losses on terminations
of hedge positions using derivative financial instruments.
<PAGE>
- --------------------------------------------------------------------------------
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 "Disclosure about Fair
Value of Financial Instruments" requires disclosure of fair value information of
financial instruments. For certain financial instruments where quoted market
prices are not available, other independent valuation techniques and assumptions
are used. Because considerable judgment is used, these estimates are not
necessarily indicative of amounts that could be realized in a current market
exchange. SFAS No. 107 excludes certain financial instruments from disclosure,
including insurance contracts.
For cash, short-term investments, accounts receivable, policy loans,
mortgage loans and other liabilities, carrying amounts on the Consolidated
Balance Sheets approximate fair value.
Fair value for fixed maturities and marketable equity securities are based
upon quoted market prices. Fair value for securities that are not publicly
traded are analytically determined. These amounts are disclosed in Note 4 of
Notes to Consolidated Financial Statements.
The fair value of derivative financial instruments, including swaps, caps,
floors, futures, options and forward commitments, is determined using a pricing
model which is validated through quarterly comparison to dealer quoted prices.
Amounts are disclosed in Note 4 of Notes to Consolidated Financial Statements.
Fair value for partnerships and trusts are based on external market
valuations from partnership and trust management.
Other policy claims and benefits payable fair value information is
determined by estimating future cash flows, discounted at the current market
rate.
The carrying amount and fair values of the Company's financial instruments
at December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------ ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- ------- --------- -------
<S> <C> <C> <C> <C>
ASSETS
Fixed maturities..................................... $ 14,176 $14,176 $ 13,624 $13,624
Equity securities.................................... 180 180 119 119
Policy loans......................................... 3,756 3,756 3,836 3,836
Mortgage loans....................................... -- -- 2 2
Investments in partnerships, trusts and other........ 47 91 54 104
LIABILITIES
Other policy benefits................................ $ 11,769 $11,755 $ 11,707 $11,469
</TABLE>
6. SEPARATE ACCOUNTS
The Company maintained separate account assets and liabilities totaling
$69.1 billion and $49.7 billion at December 31, 1997 and 1996, respectively,
which are reported at fair value. Separate account assets are segregated from
other investments and net investment income and net realized capital gains and
losses accrue directly to the policyholder. Separate accounts reflect two
categories of risk assumption: non-guaranteed separate accounts totaling $58.6
billion and $39.4 billion at December 31, 1997 and 1996, respectively, wherein
the policyholder assumes the investment risk, and guaranteed separate accounts
totaling $10.5 and $10.3 billion at December 31, 1997 and 1996, respectively,
wherein the Company contractually guarantees either a minimum return or account
value to the policyholder. Included in the non-guaranteed category were policy
loans totaling $1.9 billion and $2.0 billion at December 31, 1997 and 1996,
respectively. Net investment income (including net realized capital 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 were $699, $538 and $387 in 1997, 1996 and
1995, respectively. The guaranteed separate accounts include fixed market value
adjusted individual annuity and modified guaranteed life insurance. The average
credited interest rate on these contracts was 6.52% at December 31, 1997. The
assets that support these liabilities were comprised of $10.2 billion in fixed
maturities as of December 31, 1997. The portfolios are segregated from other
investments and are managed to minimize liquidity and interest rate risk. In
order to minimize the risk of disintermediation associated with early
withdrawals, fixed MVA 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 $119 in
carrying value and $3.0 billion in notional amounts as of December 31, 1997.
<PAGE>
- --------------------------------------------------------------------------------
7. INCOME TAX
Hartford Life and The Hartford have entered into a tax sharing agreement
under which each member in the consolidated U.S. Federal income tax return will
make payments between them such that, with respect to any period, the amount of
taxes to be paid by the Company, subject to certain adjustments, generally will
be determined as though the Company were filing separate Federal, state and
local income tax returns.
As long as The Hartford continues to beneficially own, directly or
indirectly, at least 80% of the combined voting power and 80% of the value of
the outstanding capital stock of Hartford Life, the Company will be included for
Federal income tax purposes in the affiliated group of which The Hartford is the
common parent. To the extent allowed by law, it is the intention of The Hartford
and its subsidiaries to continue to file a single consolidated Federal income
tax return. The Company will continue to remit (receive from) The Hartford a
current income tax provision (benefit) computed in accordance with such tax
sharing agreement. The Company's effective tax rate was 36%, 35% and 32% in
1997, 1996 and 1995, respectively.
Income tax expense is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------
1997 1996 1995
---- ------ ------
<S> <C> <C> <C>
Current...................................... $119 $ 122 $ 211
Deferred..................................... 48 (102) (149)
---- ------ ------
Income tax expense......................... $167 $ 20 $ 62
---- ------ ------
---- ------ ------
</TABLE>
A reconciliation of the tax provision at the U.S. Federal statutory rate to
the provision for income taxes is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1997 1996 1995
--------- ----- -----
<S> <C> <C> <C>
Tax provision at the U.S. Federal statutory
rate...................................... $ 164 $ 20 $ 67
Tax-exempt income.......................... -- -- (3)
Foreign tax credit......................... -- -- (4)
Other...................................... 3 -- 2
--------- --- ---
Total.................................... $ 167 $ 20 $ 62
--------- --- ---
--------- --- ---
</TABLE>
Deferred tax assets include the following at December 31:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Tax return deferred acquisition costs............ $ 639 $ 514
Financial statement deferred acquisition costs
and reserves.................................... (366) (242)
Employee benefits................................ 5 8
Net unrealized capital gains on securities....... (96) (16)
Investments and other............................ 166 210
--------- ---------
Total.......................................... $ 348 $ 474
--------- ---------
--------- ---------
</TABLE>
Income taxes paid were $9, $189 and $162 in 1997, 1996 and 1995,
respectively. The Company had a current tax payment of $27 due to The Hartford
at December 31, 1997 and a tax refund due from The Hartford of $72 at December
31, 1996.
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,
1997 was $37.
8. POSTRETIREMENT BENEFIT AND SAVINGS PLANS
(A) PENSION PLANS
The Company's employees are included in The Hartford'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. The Company'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, as amended, and the maximum amount that
can be deducted for U.S. Federal income tax purposes. Generally, pension costs
are funded through the purchase of the Company's group pension contracts. The
cost to the Company was approximately $5, $5 and $2 in 1997, 1996 and 1995,
respectively.
The Company also provides, through The Hartford, certain health care and
life insurance benefits for eligible retired employees. A substantial portion of
the Company's employees may become eligible for these benefits upon retirement.
The Company'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. The Company 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 The
Hartford, was immaterial to the results of operations for 1997, 1996 and 1995,
respectively.
The assumed rate in the per capita cost of health care (the health care
trend rate) was 8.5% for 1997, 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,
<PAGE>
- --------------------------------------------------------------------------------
the effect will be amortized over the average future service of covered
employees.
(B) INVESTMENT AND SAVINGS PLAN
Substantially all employees of the Company are eligible to participate in The
Hartford's Investment and Savings Plan. Under this plan, designated
contributions, which may be invested in Class A Common Stock of Hartford Life or
certain other investments, are matched, up to 3% of compensation, by the
Company. The cost to the Company for the above-mentioned plans was approximately
$2 in 1997.
9. STOCK COMPENSATION PLANS
During the second quarter of 1997, Hartford Life adopted the 1997 HLI
Incentive Stock Plan (the "Plan"). Under the Plan, options granted may be either
non-qualified options or incentive stock options qualifying under Section 422A
of the Internal Revenue Code. The aggregate number of shares of Class A Common
Stock which may be awarded in any one year shall be subject to an annual limit.
The maximum number of shares of Class A Common Stock which may be granted under
the Plan in each year shall be 1.5% of the total issued and outstanding shares
of Hartford Life Class A Common Stock and treasury stock as reported in the
Annual Report on Hartford Life's Form 10-K for the preceding year plus unused
portions of such limit from prior years. In addition, no more than 5,000,000
shares of Class A Common Stock shall be cumulatively available for awards of
incentive stock options under the Plan, and no more than 20% of the total number
of shares on a cumulative basis shall be available for restricted stock and
performance shares.
All options granted have an exercise price equal to the market price of
Hartford Life's stock on the date of grant and an option's maximum term is ten
years. Certain nonperformance based options become exercisable upon the
attainment of specified market price appreciation of Hartford Life's common
shares or at seven years after the date of grant, while the remaining
nonperformance based options become exercisable over a three year period
commencing with the date of grant.
Also included in the Plan are long term performance awards which become
payable upon the attainment of specific performance goals achieved over a three
year period.
During the second quarter of 1997, Hartford Life established the HLI
Employee Stock Purchase Plan ("ESPP"). Under this plan, eligible employees of
Hartford Life and the Company may purchase Class A Common Stock of Hartford Life
at a 15% discount from the lower of the market price at the beginning or end of
the quarterly offering period. Hartford Life may sell up to 2,700,000 shares of
stock to eligible employees. Hartford Life sold 54,316 shares under the ESPP in
1997.
10. REINSURANCE
The Company cedes insurance to other insurers, including its parent HLA, in
order to limit its maximum loss. Such transfer does not relieve the Company of
its primary liability. The Company also assumes insurance from other insurers.
Failure of reinsurers to honor their obligations could result in losses to the
Company. The Company evaluates the financial condition of its reinsurers and
monitors concentration of credit risk.
Net premiums and other considerations were comprised of the following:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Gross premiums............................... $ 2,164 $ 2,138 $ 1,545
Assumed...................................... 159 190 591
Ceded........................................ (686) (623) (649)
--------- --------- ---------
Net premiums and other considerations...... $ 1,637 $ 1,705 $ 1,487
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company ceded approximately $76, $100 and $101 of group life premium in
1997, 1996 and 1995, respectively, representing $33.6 billion, $33.3 billion and
$32.3 billion of insurance in force, respectively. The Company ceded $339, $318
and $320 of accident and health premium to HLA in 1997, 1996 and 1995,
respectively. The Company assumed $89, $101 and $103 of premium in 1997, 1996
and 1995, respectively, representing $8.2 billion, $8.5 billion and $8.5 billion
of individual life insurance in force, respectively, from HLA.
Life reinsurance recoveries, which reduce death and other benefits,
approximated $158, $140 and $220 for the years ended December 31, 1997, 1996 and
1995, respectively.
As of December 31, 1997, the Company had reinsurance recoverables of $5.0
billion from Mutual Benefit Life Assurance Corporation ("Mutual Benefit"),
supported by assets in a security trust of $5.0 billion (including policy loans
and accrued interest of $4.5 billion). 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 the Company as sole beneficiary. The
Company has no other significant reinsurance-related concentrations of credit
risk.
11. RELATED PARTY TRANSACTIONS
Transactions of the Company with HA&I and its affiliates relate principally
to tax settlements, reinsurance, insurance coverage, rental and service fees,
payment of dividends and capital contributions. In addition, certain affiliated
insurance companies purchased group annuity contracts from the Company to fund
pension costs and claim annuities to settle casualty claims. Substantially all
general insurance expenses related to the Company, including rent and employee
benefit plan expenses, are initially paid by The Hartford. Direct expenses are
allocated to the Company using specific identification, and indirect expenses
are allocated using other applicable methods. Indirect expenses include those
for corporate areas which,
<PAGE>
- --------------------------------------------------------------------------------
depending on type, are allocated based on either a percentage of direct expenses
or on utilization. Indirect expenses allocated to the Company by The Hartford
were $34, $40, and $45 in 1997, 1996 and 1995, respectively. Management believes
that the methods used are reasonable.
The rent paid to Hartford Fire for space occupied by the Company was $7 in
1997, and $3 in 1996 and 1995. The Company expects to pay annual rent of $7 in
1998 and 1999, respectively, $12 in 2000 and 2001, respectively, $13 in 2002 and
$87 thereafter, over the remaining term of the sublease, which expires on
December 31, 2009. Rental expense is recognized over a level basis over the term
of the sublease and amounted to approximately $9 in 1997 and $8 in 1996 and
1995.
12. STATUTORY RESULTS
The domestic insurance subsidiaries of Hartford Life prepare their statutory
financial statements in accordance with accounting practices prescribed by the
State of Connecticut Insurance Department. Prescribed statutory accounting
practices include publications of the National Association of Insurance
Commissioners ("NAIC"), as well as state laws, regulations, and general
administrative rules.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Statutory net income......................... $ 214 $ 144 $ 112
------ ------ ------
Statutory surplus............................ $1,441 $1,207 $1,125
------ ------ ------
------ ------ ------
</TABLE>
A significant percentage of the consolidated statutory surplus is
permanently reinvested or is subject to various state regulatory restrictions
which limit the payment of dividends without prior approval. The total amount of
statutory dividends which may be paid by the insurance subsidiaries of the
Company in 1998 is estimated to be $144.
13. COMMITMENTS AND CONTINGENT LIABILITIES
(A) LITIGATION
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for monetary and punitive damages have
been asserted. Although there can be no assurances, management, at the present
time, does not anticipate that the ultimate liability arising from such pending
or threatened litigation will have a material effect on the financial condition
or operating results of the Company.
(B) GUARANTY FUNDS
Under insurance guaranty fund laws in each state, the District of Columbia
and Puerto Rico, insurers licensed to do business can be assessed by state
insurance guaranty associations for certain obligations of insolvent insurance
companies to policyholders and claimants. Recent regulatory actions against
certain large life insurers encountering financial difficulty have prompted
various state insurance guaranty associations to begin assessing life insurance
companies for the deemed losses. Most of these laws do provide, however, that an
assessment may be excused or deferred if it would threaten an insurer's solvency
and further provide annual limits on such assessments. A large part of the
assessments paid by the Company's insurance subsidiaries pursuant to these laws
may be used as credits for a portion of the Company's insurance subsidiaries'
premium taxes. The Company paid guaranty fund assessments of approximately $15,
$11 and $10 in 1997, 1996 and 1995, respectively, of which $4, $5, and $6 were
estimated to be creditable against premium taxes.
14. BUSINESS SEGMENT INFORMATION
The Company, along with its parent, sells financial products such as fixed
and variable annuities, retirement plan services, and life and disability
insurance on both an individual and a group basis. The Company divides its core
businesses into three segments: Annuity, Individual Life Insurance, and Employee
Benefits. The Company also maintains a Guaranteed Investment Contracts segment,
which is primarily comprised of guaranteed rate contract business written prior
to 1995 and a Corporate Operation. The Annuity segment offers individual
variable annuities and fixed market value adjusted annuities, deferred
compensation and retirement plan services, mutual funds, investment management
services and other financial products. The Individual Life Insurance segment
sells a variety of individual life insurance products, including variable life,
universal life, interest-sensitive whole life, and term life policies. The
Employee Benefits segment sells group insurance products, including group life,
group short and long-term disability and corporate owned life insurance, and
engages in certain international operations. The Guaranteed Investment Contracts
segment sells a limited amount of guaranteed investment contracts and contains
Closed Book GRC. Through its Corporate Operation, the Company reports items that
are not directly allocable to any of its business segments. Included in the
Corporate Operation are unallocated income and expense and certain other items
not directly allocable to any segment. Net realized capital gains and losses are
recognized in the period of realization, but are allocated to the segments
utilizing durations of the segment portfolios.
<PAGE>
- --------------------------------------------------------------------------------
The following table outlines revenues, operating income and assets by
business segment:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Annuity.............................................. $ 1,269 $ 968 $ 759
Individual Life Insurance............................ 487 440 383
Employee Benefits.................................... 972 1,366 1,273
Guaranteed Investment Contracts...................... 241 34 337
Corporate Operation.................................. 40 81 52
-------- -------- --------
Total revenues..................................... $ 3,009 $ 2,889 $ 2,804
-------- -------- --------
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)
Annuity.............................................. $ 317 $ 226 $ 171
Individual Life Insurance............................ 85 68 56
Employee Benefits.................................... 53 44 37
Guaranteed Investment Contracts...................... -- (346) (103)
Corporate Operation.................................. 14 66 30
-------- -------- --------
Total income before income tax expense............. $ 469 $ 58 $ 191
-------- -------- --------
-------- -------- --------
ASSETS
Annuity $ 69,152 $ 52,877 $ 39,732
Individual Life Insurance............................ 4,918 3,753 3,173
Employee Benefits.................................... 18,196 14,708 13,494
Guaranteed Investment Contracts...................... 3,347 4,533 6,069
Corporate Operation.................................. 2,343 1,891 1,729
-------- -------- --------
Total assets....................................... $ 97,956 $ 77,762 $ 64,197
-------- -------- --------
-------- -------- --------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
SCHEDULE I -- SUMMARY OF INVESTMENTS OTHER THAN INVESTMENTS IN AFFILIATES
AS OF DECEMBER 31, 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
AMOUNT AT
WHICH
FAIR SHOWN ON
TYPE OF INVESTMENT COST VALUE BALANCE SHEET
- --------------------------------------------- ------- ------- --------------
<S> <C> <C> <C>
Fixed Maturities
Bonds and Notes
U. S. gov't and gov't agencies and
authorities (guaranteed and sponsored) $ 217 $ 219 $ 219
U. S. gov't and gov't agencies and
authorities (guaranteed and sponsored) --
asset-backed.............................. 1,175 1,204 1,204
States, municipalities and political
subdivisions.............................. 211 217 217
International governments.................. 376 393 393
Public utilities........................... 871 894 894
All other corporate including
international............................. 5,033 5,208 5,208
All other corporate -- asset-backed........ 4,091 4,124 4,124
Short-term investments..................... 1,318 1,318 1,318
Certificates of deposit...................... 593 599 599
------- ------- -------
Total fixed maturities....................... 13,885 14,176 14,176
------- ------- -------
Equity Securities
Common Stocks
Public utilities........................... -- -- --
Banks, trusts and insurance companies...... -- -- --
Industrial and miscellaneous............... 166 180 180
Nonredeemable preferred stocks............. -- -- --
------- ------- -------
Total equity securities...................... 166 180 180
------- ------- -------
Total fixed maturities and equity
securities.................................. 14,051 14,356 14,356
------- ------- -------
Real Estate.................................. -- -- --
Other Investments
Mortgage loans on real estate.............. -- -- --
Policy loans............................... 3,756 3,756 3,756
Investments in partnerships, trusts and
other..................................... 47 91 47
------- ------- -------
Total other investments...................... 3,803 3,847 3,803
------- ------- -------
Total investments............................ $17,854 $18,203 $18,159
------- ------- -------
------- ------- -------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
FUTURE
POLICY
BENEFITS,
UNPAID OTHER
DEFERRED CLAIMS POLICY
POLICY AND CLAIM CLAIMS AND PREMIUMS NET
ACQUISITION ADJUSTMENT BENEFITS AND OTHER INVESTMENT
SEGMENT COSTS EXPENSES PAYABLE CONSIDERATIONS INCOME
- --------------------------------------------- ----------- --------- ---------- --------------- ---------
<S> <C> <C> <C> <C> <C>
1997
Annuity...................................... $2,478 $2,070 $ 6,838 $ 769 $ 500
Individual Life Insurance.................... 837 392 2,182 323 164
Employee Benefits............................ -- 780 9,232 541 431
Guaranteed Investment Contracts.............. -- -- 2,782 2 239
Corporate Operation.......................... -- 28 -- 2 34
----------- --------- ---------- ------ ---------
Consolidated operations...................... $3,315 $3,270 $21,034 $1,637 $1,368
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
1996
Annuity...................................... $2,030 $1,526 $ 6,016 $ 535 $ 433
Individual Life Insurance.................... 730 346 2,160 287 153
Employee Benefits............................ -- 574 9,834 881 485
Guaranteed Investment Contracts.............. -- -- 4,124 2 251
Corporate Operation.......................... -- 28 -- -- 75
----------- --------- ---------- ------ ---------
Consolidated operations...................... $2,760 $2,474 $22,134 $1,705 $1,397
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
1995
Annuity...................................... $1,561 $1,314 $ 5,661 $ 319 $ 400
Individual Life Insurance.................... 615 706 1,932 246 137
Employee Benefits............................ 12 325 9,285 922 351
Guaranteed Investment Contracts.............. -- 28 5,720 -- 377
Corporate Operation.......................... -- -- -- -- 63
----------- --------- ---------- ------ ---------
Consolidated operations...................... $2,188 $2,373 $22,598 $1,487 $1,328
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
<CAPTION>
NET BENEFITS, AMORTIZATION
REALIZED CLAIMS AND OF DEFERRED
CAPITAL CLAIM POLICY
GAINS ADJUSTMENT ACQUISITION DIVIDENDS TO OTHER
SEGMENT (LOSSES) EXPENSES COSTS POLICYHOLDERS EXPENSES
- --------------------------------------------- ----------- ----------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
1997
Annuity...................................... $ -- $ 445 $250 $ -- $ 257
Individual Life Insurance.................... -- 242 83 -- 77
Employee Benefits............................ -- 425 2 240 252
Guaranteed Investment Contracts.............. -- 232 -- -- 9
Corporate Operation.......................... 4 35 -- -- (9)
----------- ----------- ----- ----- -----
Consolidated operations...................... $ 4 $1,379 $335 $240 $ 586
----------- ----------- ----- ----- -----
----------- ----------- ----- ----- -----
1996
Annuity...................................... $ -- $ 412 $174 $ -- $ 156
Individual Life Insurance.................... -- 245 59 -- 68
Employee Benefits............................ -- 546 -- 635 141
Guaranteed Investment Contracts.............. (219) 332 1 -- 47
Corporate Operation.......................... 6 -- -- -- 15
----------- ----------- ----- ----- -----
Consolidated operations...................... $(213) $1,535 $234 $635 $ 427
----------- ----------- ----- ----- -----
----------- ----------- ----- ----- -----
1995
Annuity...................................... $ -- $ 317 $117 $ -- $ 114
Individual Life Insurance.................... -- 203 70 -- 54
Employee Benefits............................ -- 424 -- 675 137
Guaranteed Investment Contracts.............. -- 453 12 -- 15
Corporate Operation.......................... (11) 25 -- -- (3)
----------- ----------- ----- ----- -----
Consolidated operations...................... $ (11) $1,422 $199 $675 $ 317
----------- ----------- ----- ----- -----
----------- ----------- ----- ----- -----
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
SCHEDULE IV -- REINSURANCE
(IN MILLIONS)
<TABLE>
<CAPTION>
CEDED TO ASSUMED FROM PERCENTAGE
GROSS OTHER OTHER NET OF AMOUNT
AMOUNT COMPANIES COMPANIES AMOUNT ASSUMED TO NET
-------- -------------- -------------- -------- ---------------
<S> <C> <C> <C> <C> <C>
For the year ended December 31, 1997
Life insurance in force........................... $245,487 $ 178,771 $ 33,156 $ 99,872 33.2%
Insurance revenues
Life insurance and annuities.................... 1,818 340 157 1,635 9.6%
Accident and health insurance................... 346 346 2 2 100.0%
-------- -------------- ------- --------
Total insurance revenues.......................... $ 2,164 $ 686 $ 159 $ 1,637 9.7%
-------- -------------- ------- --------
-------- -------------- ------- --------
For the year ended December 31, 1996
Life insurance in force......................... $177,094 $ 106,146 $ 31,957 $102,905 31.1%
Insurance revenues
Life insurance and annuities.................... 1,801 298 169 1,672 10.1%
Accident and health insurance................... 337 325 21 33 63.6%
-------- -------------- ------- --------
Total insurance revenues.......................... $ 2,138 $ 623 $ 190 $ 1,705 11.1%
-------- -------------- ------- --------
-------- -------------- ------- --------
For the year ended December 31, 1995
Life insurance in force......................... $182,716 $ 112,774 $ 26,996 $ 96,938 27.8%
Insurance revenues
Life insurance and annuities.................... 1,232 325 574 1,481 38.8%
Accident and health insurance................... 313 324 17 6 283.3%
-------- -------------- ------- --------
Total insurance revenues.......................... $ 1,545 $ 649 $ 591 $ 1,487 39.7%
-------- -------------- ------- --------
-------- -------------- ------- --------
</TABLE>
<PAGE>
PART C
<PAGE>
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) Resolution of the Board of Directors of Hartford
Life Insurance Company ("Hartford") authorizing the
establishment of the Separate Account.(1)
(2) Not applicable.
(3) (a) Principal Underwriter Agreement.(2)
(b) Form of Dealer Agreement.(2)
(4) Form of Individual Flexible Premium Variable
Annuity Contract.(1)
(5) Form of Application.(1)
(6) (a) Certificate of Incorporation of Hartford.(3)
(b) Bylaws of Hartford.(1)
(7) Not applicable.
(8) Not applicable.
(9) Opinion and Consent of Lynda Godkin, Senior Vice President,
General Counsel, and Corporate Secretary.
(10) Consent of Arthur Andersen LLP, Independent Public Accountants.
(11) No financial statements are omitted.
(12) Not applicable.
- ----------------------
(1) Incorporated by reference to Post-Effective Amendment No. 2, to
the Registration Statement File No. 33-73570, dated May 1, 1995.
(2) Incorporated by reference to Post-Effective Amendment No. 3, to
the Registration Statement File No. 33-73570, dated April 29,
1996.
(3) Incorporated by reference to Post-Effective Amendment No. 19, to
the Registration Statement File No. 33-73570, filed on April 14,
1997.
<PAGE>
(13) Not applicable.
(14) Not applicable.
(15) Copy of Power of Attorney.
(16) Organizational Chart.
Item 25. Directors and Officers of the Depositor
<TABLE>
<CAPTION>
NAME POSITION WITH HARTFORD
<S> <C>
Dong H. Ahn Vice President
Wendell J. Bossen Vice President
Gregory A. Boyko Senior Vice President, Chief Financial
Officer, and Treasurer, Director*
Peter W. Cummins Senior Vice President
Ann M. de Raismes Senior Vice President
Timothy M. Fitch Vice President and Actuary
David T. Foy Vice President
Bruce D. Gardner Vice President
J. Richard Garrett Vice President and Assistant Treasurer
John P. Ginnetti Executive Vice President & Director of
Asset Management Services, Director*
William A. Godfrey, III Senior Vice President
Lynda Godkin Senior Vice President, General Counsel
and Corporate Secretary, Director*
Lois W. Grady Senior Vice President
Christopher Graham Vice President
Mark E. Hunt Vice President
Stephen T. Joyce Vice President
Michael D. Keeler Vice President
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION WITH HARTFORD
<S> <C>
Robert A. Kerzner Senior Vice President
David N. Levenson Vice President
Steven M. Maher Vice President and Actuary
William B. Malchodi, Jr. Vice President
Raymond J. Marra Vice President
Thomas M. Marra Executive Vice President and Director,
Individual Life and Annuity Division,
Director*
Robert F. Nolan, Jr. Senior Vice President
Joseph J. Noto Vice President
Michael C. O'Halloran Vice President
Lawrence M. O'Rourke Vice President
Daniel E. O'Sullivan Vice President
Craig R. Raymond Senior Vice President and Chief Actuary
Marry P. Robinson Vice President
Donald A. Salama Vice President
Timothy P. Schiltz Vice President
Lowndes A. Smith President and Chief Executive Officer,
Director*
Keith A. Stevenson Vice President
Edward A. Sweeney Vice President
Judith V. Tilbor Vice President
Raymond P. Welnicki Senior Vice President and Director,
Employee Benefit Division, Director*
Walter C. Welsh Senior Vice President
Lizabeth H. Zlatkus Senior Vice President, Director*
David M. Znamierowski Senior Vice President, Director*
</TABLE>
Unless otherwise indicated, the principal business address of each the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
*Denotes Board of Directors.
<PAGE>
Item 26. Persons Controlled By or Under Common Control with the
Depositor or Registrant
Filed herewith as Exhibit 16.
Item 27. Number of Contract Owners
As of April 30, 1998, there were 3,085 Contract Owners.
Item 28. Indemnification
Under Section 33-772 of the Connecticut General Statutes,
unless limited by its certificate of incorporation, the
Registrant must indemnify a director who was wholly
successful, on the merits or otherwise, in the defense of
any proceeding to which he was a party because he is or
was a director of the corporation against reasonable
expenses incurred by him in connection with the
proceeding.
The Registrant may indemnify an individual made a party
to a proceeding because he is or was a director against
liability incurred in the proceeding if he acted in good
faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Registrant, and,
with respect to any criminal proceeding, had no reason to
believe his conduct was unlawful. Conn. Gen. Stat. 33-771(a).
Additionally, pursuant to Conn. Gen. Stat. 33-776, the
Registrant may indemnify officers and employees or agents
for liability incurred and for any expenses to which they
becomes subject by reason of being or having been an
employees or officers of the Registrant. Connecticut law
does not prescribe standards for the indemnification of
officers, employees and agents and expressly states that
their indemnification may be broader than the right of
indemnification granted to directors.
The foregoing statements are specifically made subject to
the detailed provisions of Section 33-770 et seq.
Notwithstanding the fact that Connecticut law obligates
the Registrant to indemnify a only a director that was
successful on the merits in a suit, under Article III,
Section 1 of the Registrant's bylaws, the Registrant must
indemnify both directors and officers of the Registrant
for (1) any claims and liabilities to which they become
subject by reason of being or having been a directors or
officers of the company and legal and (2) other expenses
incurred in defending against such claims, in each case,
to the extent such is consistent with statutory
provisions.
Additionally, the directors and officers of Hartford and
Hartford Securities Distribution Company, Inc. ("HSD")
are covered under a directors and officers liability
insurance policy issued to The Hartford Financial
Services Group, Inc. and its subsidiaries. Such policy
will reimburse the Registrant for any payments that it
<PAGE>
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, or otherwise, the
Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by
a director, officer or controlling person of the
Registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or
controlling person in connection with the securities
being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
Item 29. Principal Underwriters
(a) HSD acts as principal underwriter for the following investment
companies:
<TABLE>
<S> <C>
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
Hartford Life and Annuity Insurance Company - Separate Account One
Hartford Life and Annuity Insurance Company - Putnam Capital Manager
Trust Separate Account Two
Hartford Life and Annuity Insurance Company - Separate Account Three
Hartford Life and Annuity Insurance Company - Separate Account Five
Hartford Life and Annuity Insurance Company - Separate Account Six
American Maturity Life Insurance Company - Separate Account AMLVA
</TABLE>
<PAGE>
(b) Directors and Officers of HSD
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
------------------ ---------------------
<S> <C>
Lowndes A. Smith President and Chief Executive Officer, Director
John P. Ginnetti Executive Vice President, Director
Thomas M. Marra Executive Vice President, Director
Peter W. Cummins Senior Vice President
Lynda Godkin Senior Vice President, General Counsel and
Corporate Secretary
Donald E. Waggaman, Jr. Treasurer
George R. Jay Controller
Paul E. Olson Supervising Registered Principal
James Cubanski Assistant Secretary
Stephen T. Joyce Assistant Secretary
Glen J. Kvadus Assistant Secretary
Edward M. Ryan, Jr. Assistant Secretary
</TABLE>
Unless otherwise indicated, the principal business
address of each the above individuals is P.O. Box 2999,
Hartford, CT 06104-2999.
Item 30. Location of Accounts and Records
All of the accounts, books, records or other documents
required to be kept by Section 31(a) of the Investment
Company Act of 1940 and rules thereunder, are maintained by
Hartford at 200 Hopmeadow Street, Simsbury, Connecticut
06089.
Item 31. Management Services
All management contracts are discussed in Part A and Part B
of this Registration Statement.
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.
<PAGE>
(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.
(d) Hartford hereby represents that the aggregate fees
and charges under the Contract are reasonable in
relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by
Hartford.
The Registrant is relying on the no-action letter issued by
the Division of Investment Management to American Counsel of
Life Insurance, Ref. No. IP-6-88, November 28, 1988. The
Registrant has complied with conditions one through four of
the no-action letter.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant has caused this Registration Statement
to be signed on its behalf, in the City of Hartford, and State of
Connecticut on this 6th day of July, 1998.
HARTFORD LIFE INSURANCE COMPANY -
SEPARATE ACCOUNT THREE
(Registrant)
*By: /s/ Thomas M. Marra *By: /s/ Marianne O'Doherty
------------------------------------- ---------------------
Thomas M. Marra, Executive Vice President Marianne O'Doherty
and Director, Individual Life and Annuity Attorney-in-Fact
Division, Director
HARTFORD LIFE INSURANCE COMPANY
(Depositor)
*By: /s/ Thomas M. Marra
-------------------------------------
Thomas M. Marra, Executive Vice President
and Director, Individual Life and Annuity
Division, Director
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.
Gregory A. Boyko, Senior Vice President,
Chief Financial Officer, and Treasurer,
Director* *By: /s/ Marianne O'Doherty
John P. Ginnetti, Executive Vice ------------------------
President and Director, Asset Management Marianne O'Doherty
Services, Director* Attorney-in-Fact
Lynda Godkin, Senior Vice President, General Dated: July 6, 1998
Counsel and Corporate Secretary, Director*
Thomas M. Marra, Executive Vice
President and Director, Individual Life and
Annuity Division, Director*
Lowndes A. Smith, President and
Chief Executive Officer, Director*
Raymond P. Welnicki, Senior Vice President
and Director, Employee Benefit Division,
Director*
Lizabeth H. Zlatkus, Senior Vice President,
Director*
David M. Znamierowski, Senior Vice President,
Director*
<PAGE>
EXHIBIT INDEX
(9) Opinion and Consent of Lynda Godkin, Senior Vice
President, General Counsel and Corporate Secretary.
(10) Consent of Arthur Andersen LLP, Independent Public Accountants.
(15) Copy of Power of Attorney.
(16) Organizational Chart.
<PAGE>
EXHIBIT 9
[LOGO]
HARTFORD LIFE
July 6, 1998 LYNDA GODKIN
Senior Vice President, General
Counsel & Corporate Secretary
Board of Directors
Hartford Life Insurance Company
200 Hopmeadow Street
Simsbury, CT 06089
RE: SEPARATE ACCOUNT THREE
HARTFORD LIFE INSURANCE COMPANY
FILE NO. 333-52711
Dear Sir/Madam:
I have acted as General Counsel to Hartford Life Insurance Company (the
"Company"), a Connecticut insurance company, and Hartford Life Insurance
Company Separate Account Three (the "Account") in Connecticut with the
registration of an indefinite amount of securities in the form of variable
annuity contracts (the "Contracts") with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. I have examined
such documents (including the Form N-4 registration statement) and reviewed
such questions of law as I considered necessary and appropriate, and on the
basis of such examination and review, it is my opinion that:
1. The Company is a corporation duly organized and validly existing as a
stock life insurance company under the laws of the State of Connecticut
and is duly authorized by the Insurance Department of the State of
Connecticut to issue the Contracts.
2. The Account is a duly authorized and existing separate account
established pursuant to the provisions of Section 38a-433 of the
Connecticut Statutes.
3. To the extent so provided under the Contracts, that portion of the
assets of the Account equal to the reserves and other contract
liabilities with respect to the Account will not be chargeable with
liabilities arising out of any other business that the Company may
conduct.
4. The Contracts, when issued as contemplated by the Form N-4
Registration Statement, will constitute legal, validly issued and binding
obligations of the Company.
I hereby consent to the filing of this opinion as an exhibit to the Form N-4
registration statement for the Contracts and the Account.
Sincerely yours,
/s/ Lynda Godkin
Lynda Godkin
<PAGE>
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. 333-52711 for Hartford Life Insurance
Company Separate Account Three on Form N-4.
/s/ Arthur Andersen LLP
Hartford, Connecticut
July 7, 1998
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
POWER OF ATTORNEY
-----------------
Gregory A. Boyko
John P. Ginnetti
Lynda Godkin
Thomas M. Marra
Lowndes A. Smith
Raymond P. Welnicki
Lizabeth H. Zlatkus
David M. Znamierowski
do hereby jointly and severally authorize Lynda Godkin, Marianne O'Doherty,
and Leslie T. Soler 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 and Hartford Life and
Accident Insurance Company 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/ Gregory A. Boyko Dated as of March 16, 1998
- --------------------------------------- --------------------------
Gregory A. Boyko
/s/ John P. Ginnetti Dated as of March 16, 1998
- --------------------------------------- --------------------------
John P. Ginnetti
/s/ Lynda Godkin Dated as of March 16, 1998
- --------------------------------------- --------------------------
Lynda Godkin
/s/ Thomas M. Marra Dated as of March 16, 1998
- --------------------------------------- --------------------------
Thomas M. Marra
/s/ Lowndes A. Smith Dated as of March 16, 1998
- --------------------------------------- --------------------------
Lowndes A. Smith
/s/ Raymond P. Welnicki Dated as of March 16, 1998
- --------------------------------------- --------------------------
Raymond P. Welnicki
/s/ Lizabeth H. Zlatkus Dated as of March 16, 1998
- --------------------------------------- --------------------------
Lizabeth H. Zlatkus
/s/ David M. Znamierowski Dated as of March 16, 1998
- --------------------------------------- --------------------------
David M. Znamierowski
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
THE HARTFORD
The Hartford Financial Services Group, Inc.
(Delaware)
|
- -------------------------------------------------------------------------------------------------------------
Nutmeg Insurance Company The Hartford Investment
(Connecticut) Management Company
| (Delaware)
Hartford Fire Insurance Company |
(Connecticut) Hartford Investment
| Services, Inc.
Hartford Accident and Indemnity Company (Connecticut)
(Connecticut)
|
Hartford Life, Inc.
(Delaware)
|
Hartford Life and Accident Insurance Company
(Connecticut)
|
|
|
- -------------------------------------------------------------------------------------------------------------
Alpine Life Hartford Financial Hartford Life American Maturity ITT Hartford Canada
Insurance Services Life Insurance Company Life Insurance Holdings, Inc.
Company Insurance Co. (Connecticut) Company (Canada)
(New Jersey) (Connecticut) | (Connecticut) |
| | |
| AML Financial, Inc. |
| (Connecticut) Hartford Life
| Insurance Company
| of Canada
| (Canada)
|
|
- -------------------------------------------------------------------------------------------------------------
Hartford Life and Annuity ITT Hartford International Hartford Financial Services Royal Life
Insurance Company Life Reassurance Corporation Corporation Insurance
(Connecticut) (Connecticut) (Delaware) Company of
| | America
| | (Connecticut)
| |
ITT Hartford Life, Ltd. |
(Bermuda) |
|
|
- -------------------------------------------------------------------------------------------------------------
MS Fund HL Funding HL Investment Hartford Hartford Securities Hartford-Comp. Emp.
America Company, Inc. Advisors, Inc. Equity Sales Distribution Benefit Service
1993-K, Inc. (Connecticut) (Connecticut) Company, Inc. Company, Inc. Company
(Delaware) | (Connecticut) (Connecticut) (Connecticut)
|
Hartford Investment
Financial Services
Company
(Delaware)
</TABLE>
