<PAGE>
As filed with the Securities and Exchange Commission on April 12, 1999
File No. 33-80738
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
-----
Post-Effective Amendment No. 6 [X]
------
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 12 [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) 843-6733
(Depositor's Telephone Number, Including Area Code)
MARIANNE O'DOHERTY
HARTFORD LIFE
P.O. BOX 2999
HARTFORD, CT 06104-2999
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
--------
X on May 3, 1999 pursuant to paragraph (b) of Rule 485
--------
60 days after filing pursuant to paragraph (a)(1) of Rule 485
--------
on _____, 1999 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)(1) UNDER THE INVESTMENT COMPANY ACT OF 1940, THE
REGISTRANT HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES.
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
N-4 Item No. Prospectus Heading
- ------------------------------------ ---------------------------------
1. Cover Page Cover Page
2. Definitions Glossary of Special Terms
3. Synopsis or Highlights Summary
4. Condensed Financial Information Statement of Additional Information
5. General Description of Registrant, The Contract; The Separate
Depositor, and Portfolio Companies Account; The Fixed Account;
Hartford Life Insurance
Company; The Portfolios;
General Matters
6. Deductions Charges Under the Contract
7. General Description of Operation of the Contract
Annuity Contracts Accumulation Period; Death
Benefit; The Contract; The
Separate Account; General
Matters
8. Annuity Period Annuity Benefits
9. Death Benefit Death Benefit
10. Purchases and Contract Value Operation of the Contract/
Accumulation Period
11. Redemptions Operation of the Contract/
Accumulation Period
12. Taxes Federal Tax Considerations
13. Legal Proceedings General Matters - Legal
Proceedings
<PAGE>
14. Table of Contents of the Statement Table of Contents to Statement
of Additional Information of Additional Information
15. Cover Page Part B; Statement of
Additional Information
16. Table of Contents Tables of Contents
17. General Information and None
History
18. Services None
19. Purchase of Securities Distribution of Contracts
being Offered
20. Underwriters Distribution of Contracts
21. Calculation of Performance Calculation of Yield and
Data Return
22. Annuity Payments None
23. Financial Statements Financial Statements
24. Financial Statements and Financial Statements and
Exhibits Exhibits
25. Directors and Officers of the Directors and Officers of the
Depositor Depositor
26. Persons Controlled by or Under Persons Controlled by or Under
Common Control with the Depositor Common Control with the
of Registrant Depositor or Registrant
27. Number of Contract Owners Number of Contract Owners
28. Indemnification Indemnification
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Records Location of Accounts and Records
31. Management Services Management Services
32. Undertakings Undertakings
<PAGE>
Part A
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
DEAN WITTER SELECT DIMENSIONS VARIABLE ANNUITY
SEPARATE ACCOUNT THREE
P.O. Box 5085
Hartford, Connecticut 06102-5085
Telephone: (800) 862-6668 (Contract Owners)
(800) 862-4397 (Account Executive)
- --------------------------------------------------------------------------------
This Prospectus describes information you should know before you purchase Series
I of the Dean Witter Select Dimensions variable annuity. Please read it
carefully.
Dean Witter Select Dimensions variable annuity is a contract between you and
Hartford Life Insurance Company where you agree to make at least one Premium
Payment to us and we agree to make a series of Annuity Payouts at a later date.
This Annuity is a flexible premium, tax-deferred, variable annuity offered to
both individuals and groups. It is:
x Flexible, because you may add Premium Payments at any time.
x Tax-deferred, which means you don't pay taxes until you take money out or
until we start to make Annuity Payouts.
x Variable, because the value of your Annuity will fluctuate with the
performance of the underlying portfolios.
At the time you purchase your Annuity, you allocate your Premium Payment to
"Sub-Accounts". These are subdivisions of our Separate Account, an account that
keeps your Annuity assets separate from our company assets. The Sub-Accounts
then purchase shares of mutual funds set up exclusively for variable annuity or
variable life insurance products. These portfolios are not the same mutual funds
that you buy through your stockbroker or through a retail mutual fund. They may
have similar investment strategies and the same portfolio managers as retail
mutual funds. This Annuity offers you Portfolios with investment strategies
ranging from conservative to aggressive and you may pick those Portfolios that
meet your investment goals and risk tolerance. The Sub-Accounts and the
Portfolios are listed below:
- - Money Market Sub-Account which purchases shares of Money Market Portfolio of
the Morgan Stanley Dean Witter Select Dimensions Investment Series;
- - North American Government Securities Sub-Account which purchases shares of
North American Government Securities Portfolio of the Morgan Stanley Dean
Witter Select Dimensions Investment Series;
- - Diversified Income Sub-Account which purchases shares of Diversified Income
Portfolio of the Morgan Stanley Dean Witter Select Dimensions Investment
Series;
- - Balanced Growth Sub-Account which purchases shares of Balanced Growth
Portfolio of the Morgan Stanley Dean Witter Select Dimensions Investment
Series;
- - Utilities Sub-Account which purchases shares of Utilities Portfolio of the
Morgan Stanley Dean Witter Select Dimensions Investment Series;
- - Dividend Growth Portfolio which purchases shares of Dividend Growth Portfolio
of the Morgan Stanley Dean Witter Select Dimensions Investment Series;
- - Value-Added Market Sub-Account which purchases shares of Value-Added Market
Portfolio of the Morgan Stanley Dean Witter Select Dimensions Investment
Series;
- - Growth Sub-Account which purchases shares of Growth Portfolio of the Morgan
Stanley Dean Witter Select Dimensions Investment Series;
- - American Value Portfolio which purchases shares of American Value Portfolio of
the Morgan Stanley Dean Witter Select Dimensions Investment Series;
- - Mid-Cap Growth Sub-Account which purchases shares of Mid-Cap Growth Portfolio
of the Morgan Stanley Dean Witter Select Dimensions Investment Series;
- - Global Equity Sub-Account which purchases shares of Global Equity Portfolio of
the Morgan Stanley Dean Witter Select Dimensions Investment Series;
1 - PROSPECTUS
<PAGE>
- - Developing Growth Sub-Account which purchases shares of Developing Growth
Portfolio of the Morgan Stanley Dean Witter Select Dimensions Investment
Series;
- - Emerging Markets Sub-Account which purchases shares of Emerging Markets
Portfolio of the Morgan Stanley Dean Witter Select Dimensions Investment
Series;
- - High Yield Sub-Account which purchases shares of High Yield Portfolio of the
Morgan Stanley Dean Witter Universal Funds, Inc.;
- - Mid-Cap Value Sub-Account which purchases shares of Mid-Cap Value Portfolio of
the Morgan Stanley Dean Witter Universal Funds, Inc.;
- - Emerging Markets Debt Sub-Account which purchases shares of Emerging Markets
Debt Portfolio of the Morgan Stanley Dean Witter Universal Funds, Inc.;
- - Strategic Stock Sub-Account which purchases shares of Strategic Stock
Portfolio of the Van Kampen Life Investment Trust;
- - Enterprise Sub-Account which purchases shares of Enterprise Portfolio of the
Van Kampen Life Investment Trust.
You may also allocate some or all of your Premium Payment to the "Fixed
Accumulation Feature", which pays an interest rate guaranteed for a certain time
period from the time the Premium Payment is made. Premium Payments allocated to
the Fixed Accumulation Feature are not segregated from our company assets like
the assets of the Separate Account.
If you decide to buy this Annuity, you should keep this prospectus for your
records. You can also call us at 1-800-862-6668 to get a Statement of Additional
Information, free of charge. The Statement of Additional Information contains
more information about this Annuity and, like this prospectus, is filed with the
Securities and Exchange Commission ("SEC"). We have included the Table of
Contents for the Statement of Additional Information at the end of this
prospectus.
Although we file the prospectus and the Statement of Additional information with
the SEC, the SEC doesn't approve or disapprove these securities or determine if
the information is truthful or complete. Anyone who represents that the SEC does
these things may be guilty of a criminal offense. This Prospectus and the
Statement of Additional Information can also be obtained from the SEC's website
(HTTP://WWW.SEC.GOV).
This Annuity IS NOT:
- - A bank deposit or obligation
- - Federally insured
- - Endorsed by any bank or governmental agency
This Annuity may not be available for sale in all states.
Prospectus Dated: May 3, 1999
Statement of Additional Information Dated: May 3, 1999
2 - PROSPECTUS
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
----------------------------------------------------------------------------
<S> <C>
Definitions 4
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Fee Table 6
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Accumulation Unit Values 9
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Highlights 11
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General Contract Information 12
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Hartford Life Insurance Company 12
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Separate Account 12
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The Portfolios 12
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The Investment Advisers 14
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Performance Related Information 15
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The Fixed Accumulation Feature 16
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<CAPTION>
PAGE
<S> <C>
----------------------------------------------------------------------------
The Contract 17
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Purchases and Contract Value 17
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Charges and Fees 19
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Death Benefit 21
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Surrenders 22
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Annuity Payouts 23
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Other Programs Available 25
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Other Information 25
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Legal Matters and Experts 27
----------------------------------------------------------------------------
More Information 27
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Federal Tax Considerations 28
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Appendix I - Information Regarding Tax-Qualified Retirement Plans 32
----------------------------------------------------------------------------
</TABLE>
3 - PROSPECTUS
<PAGE>
DEFINITIONS
--------------------------------------------------------------------
These terms are capitalized when used throughout this prospectus. Please refer
to these defined terms if you have any questions as you read your prospectus.
ACCOUNT: Any of the Sub-Accounts or Fixed Accumulation Feature.
ACCUMULATION UNITS: If you allocate your Premium Payment to any of the
Sub-Accounts, we will convert those payments into Accumulation Units in the
selected Sub-Accounts. Accumulation Units are valued at the end of each
Valuation Day and are used to calculate the value of your Contract prior to
Annuitization.
ACCUMULATION UNIT VALUE: The daily price of Accumulation Units on any Valuation
Day.
ADMINISTRATIVE OFFICE OF THE COMPANY: Our location and overnight mailing address
is: 200 Hopmeadow Street, Simsbury, Connecticut 06089. Our standard mailing
address is: Investment Product Services, P.O. Box 5085, Hartford, CT 06102-5085.
ANNIVERSARY VALUE: The value equal to the Contract Value as of 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.
ANNUAL MAINTENANCE FEE: An annual $30 charge deducted on a Contract Anniversary
or upon full Surrender if the Contract Value at either of those times is less
than $50,000. The charge is deducted proportionately from each Account in which
you are invested.
ANNUAL WITHDRAWAL AMOUNT: This is the amount you can Surrender per Contract Year
without paying a Contingent Deferred Sales Charge. This amount is
non-cumulative, meaning that it cannot be carried over from one year to the
next.
ANNUITANT: The person on whose life the Contract is based. The Annuitant may not
be changed after your Contract is issued.
ANNUITY CALCULATION DATE: The date we calculate the first Annuity Payout.
ANNUITY PAYOUT: The money we pay out after the Annuity Commencement Date for the
duration and frequency you select.
ANNUITY PAYOUT OPTION: Any of the options available for payout after the Annuity
Commencement Date or death of the Contract Owner or Annuitant.
ANNUITY UNIT: The unit of measure we use to calculate the value of your Annuity
Payouts under a variable dollar amount Annuity Payout Option.
ANNUITY UNIT VALUE: The daily price of Annuity Units on any Valuation Day.
BENEFICIARY: The person(s) entitled to receive a Death Benefit upon the death of
the Contract Owner or Annuitant.
CHARITABLE REMAINDER TRUST: An irrevocable trust, where an individual donor
makes a gift to the trust, and in return receives an income tax deduction. In
addition, the individual donor has the right to receive a percentage of the
trust earnings for a specified period of time.
CODE: The Internal Revenue Code of 1986, as amended.
COMMUTED VALUE: The present value of any remaining guaranteed Annuity Payouts.
CONTINGENT ANNUITANT: The person you may designate to become the Annuitant if
the original Annuitant dies before the Annuity Commencement Date. You must name
a Contingent Annuitant before the original Annuitant's death.
CONTINGENT DEFERRED SALES CHARGE: The deferred sales charge that may apply when
you make a full or partial Surrender.
CONTRACT: The individual Annuity Contract and any endorsements or riders. Group
participants and some individuals will receive a certificate rather than a
Contract.
CONTRACT ANNIVERSARY: The anniversary of the date we issued your Contract. If
the Contract Anniversary falls on a Non-Valuation Day, then the Contract
Anniversary will be the next Valuation Day.
CONTRACT VALUE: The total value of the Accounts on any Valuation Day.
CONTRACT YEAR: Any 12 month period between Contract Anniversaries, beginning
with the date the Contract was issued.
DEATH BENEFIT: The amount payable after the Contract Owner or the Annuitant
dies.
DOLLAR COST AVERAGING: A program that allows you to systematically make
transfers between Accounts available in your Contract.
FIXED ACCUMULATION FEATURE: Part of our General Account, where you may allocate
all or a portion of your Contract Value. In your Contract, this is defined as
the "Fixed Account".
GENERAL ACCOUNT: The General Account includes our company assets and any money
you have invested in the Fixed Accumulation Feature.
HARTFORD, WE OR OUR: Hartford Life Insurance Company. Only Hartford is a
capitalized term in the prospectus.
JOINT ANNUITANT: The person on whose life Annuity Payouts are based if the
Annuitant dies after Annuitization. You may name a Joint Annuitant only if your
Annuity Payout Option provides for a survivor. The Joint Annuitant may not be
changed.
4 - PROSPECTUS
<PAGE>
MAXIMUM ANNIVERSARY VALUE: This is the highest Anniversary Value prior to the
deceased's 81st birthday or the date of death, if earlier.
NET INVESTMENT FACTOR: This is used to measure the investment performance of a
Sub-Account from one Valuation Day to the next, and is also used to calculate
your Annuity Payout amount.
NON-VALUATION DAY: Any day the New York Stock Exchange is not open for trading.
PAYEE: The person or party you designate to receive Annuity Payouts.
PREMIUM PAYMENT: Money sent to us to be invested in your Annuity.
PREMIUM TAX: A tax charged by a state or municipality on Premium Payments.
REQUIRED MINIMUM DISTRIBUTION: A federal requirement that individuals age 70 1/2
and older must take a distribution from their tax-qualified retirement account
by December 31, each year. For employer sponsored Qualified Contracts, the
individual must begin taking distributions at the age of 70 1/2 or upon
retirement, whichever comes later.
SUB-ACCOUNT VALUE: The value on or before the Annuity Calculation Date, which is
determined on any day by multiplying the number of Accumulation Units by the
Accumulation Unit Value for that Sub-Account.
SURRENDER: A complete or partial withdrawal from your Contract.
SURRENDER VALUE: The amount we pay you if you terminate your Contract before the
Annuity Commencement Date. The Surrender Value is equal to the Contract Value
minus any applicable charges.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. Values
of the Separate Account are determined as of the close of the New York Stock
Exchange, generally 4:00 p.m. Eastern Time.
VALUATION PERIOD: The time span between the close of trading on the New York
Stock Exchange from one Valuation Day to the next.
5 - PROSPECTUS
<PAGE>
FEE TABLE
--------------------------------------------------------------------
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Load Imposed on Purchases
(as a percentage of Premium Payments) None
- ---------------------------------------------------------------------------------------------------------------------------------
DEFERRED SALES CHARGE (as a percentage of amounts Surrendered)
First Year (1) 6%
- ---------------------------------------------------------------------------------------------------------------------------------
Second Year 6%
- ---------------------------------------------------------------------------------------------------------------------------------
Third Year 5%
- ---------------------------------------------------------------------------------------------------------------------------------
Fourth Year 5%
- ---------------------------------------------------------------------------------------------------------------------------------
Fifth Year 4%
- ---------------------------------------------------------------------------------------------------------------------------------
Sixth Year 3%
- ---------------------------------------------------------------------------------------------------------------------------------
Seventh Year 2%
- ---------------------------------------------------------------------------------------------------------------------------------
Eighth Year 0%
- ---------------------------------------------------------------------------------------------------------------------------------
Annual Maintenance Fee (2) $30
- ---------------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average Sub-Account Value)
- ---------------------------------------------------------------------------------------------------------------------------------
Mortality and Expense Risk Charge 1.25%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Length of time from Premium Payment.
(2) An annual $30 charge deducted on a Contract Anniversary or upon full
Surrender if the Contract Value at either of those times is less than
$50,000. The charge is deducted proportionately from each Account in which
you are invested.
The purpose of this table is to assist you in understanding various fees and
charges you will pay directly or indirectly. The table reflects expenses of the
Separate Account and underlying Portfolios. Premium Taxes, if any, have been
taken into account.
This EXAMPLE should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown. The Annual
Maintenance Fee has been reflected in the Example by a method intended to show
the "average" impact of the Annual Maintenance Fee on an investment in the
Separate Account. We do this by approximating an "average" 0.06% annual charge.
6 - PROSPECTUS
<PAGE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OPERATING
FEES EXPENSES
INCLUDING OTHER INCLUDING
WAIVERS EXPENSES WAIVERS
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES:
Money Market Portfolio 0.500% 0.050% 0.550%
- ------------------------------------------------------------------------------------------------------------------------------
North American Government Securities Portfolio 0.650% 0.500% 1.150%
- ------------------------------------------------------------------------------------------------------------------------------
Diversified Income Portfolio 0.400% 0.090% 0.490%
- ------------------------------------------------------------------------------------------------------------------------------
Balanced Growth Portfolio 0.620% 0.090% 0.710%
- ------------------------------------------------------------------------------------------------------------------------------
Utilities Portfolio 0.650% 0.060% 0.710%
- ------------------------------------------------------------------------------------------------------------------------------
Dividend Growth Portfolio 0.600% 0.030% 0.630%
- ------------------------------------------------------------------------------------------------------------------------------
Value-Added Market Portfolio 0.500% 0.050% 0.550%
- ------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio 0.810% 0.250% 1.060%
- ------------------------------------------------------------------------------------------------------------------------------
American Value Portfolio 0.620% 0.040% 0.660%
- ------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Portfolio (1) 0.750% 0.230% 0.980%
- ------------------------------------------------------------------------------------------------------------------------------
Global Equity Portfolio 1.000% 0.100% 1.100%
- ------------------------------------------------------------------------------------------------------------------------------
Developing Growth Portfolio 0.500% 0.090% 0.590%
- ------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Portfolio 1.250% 0.480% 1.730%
- ------------------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.:
High Yield Portfolio (2) 0.150% 0.650% 0.800%
- ------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Portfolio (2) 0.230% 0.820% 1.050%
- ------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Debt Portfolio (2) 0.270% 1.250% 1.520%
- ------------------------------------------------------------------------------------------------------------------------------
VAN KAMPEN LIFE INVESTMENT TRUST:
Strategic Stock Portfolio (3) 0.000% 0.650% 0.650%
- ------------------------------------------------------------------------------------------------------------------------------
Enterprise Portfolio (3) 0.460% 0.140% 0.600%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) With respect to the Mid-Cap Growth Portfolio, the expense information shown
in the table above has been restated to reflect the current fees. Prior to
April 30, 1999, the investment adviser, Morgan Stanley Dean Witter Advisors
Inc., assumed all expenses of the Portfolio and waived the compensation
provided for the Portfolio in its management agreement with the Fund.
(2) 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 for certain other
expenses. 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
MANAGEMENT OTHER OPERATING
PORTFOLIO FEES EXPENSES EXPENSES
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
High Yield .500% 0.650% 1.150%
- ------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value .750% 0.820% 1.570%
- ------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Debt .800% 1.250% 2.050%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(3) With respect to the Strategic Stock Portfolio and the Enterprise Portfolio,
the investment adviser, Van Kampen 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
MANAGEMENT OTHER OPERATING
PORTFOLIO FEES EXPENSES EXPENSES
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Strategic Stock .500% 2.090% 2.590%
- ------------------------------------------------------------------------------------------------------------------------------
Enterprise .500% .170% .670%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7 - PROSPECTUS
<PAGE>
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 $73 $104 $137 $220 $18 $58 $101 $219
- ---------------------------------------------------------------------------------------------------------------
North American Government Securities 79 123 168 282 25 77 132 281
- ---------------------------------------------------------------------------------------------------------------
Diversified Income 72 102 134 213 18 56 98 212
- ---------------------------------------------------------------------------------------------------------------
Balanced Growth 75 109 146 237 20 63 109 236
- ---------------------------------------------------------------------------------------------------------------
Utilities 75 109 146 237 20 63 109 236
- ---------------------------------------------------------------------------------------------------------------
Dividend Growth 74 106 142 228 19 61 105 227
- ---------------------------------------------------------------------------------------------------------------
Value-Added Market 73 104 137 220 18 58 101 219
- ---------------------------------------------------------------------------------------------------------------
Growth 78 120 164 273 24 74 127 272
- ---------------------------------------------------------------------------------------------------------------
American Value 74 107 143 231 20 62 106 230
- ---------------------------------------------------------------------------------------------------------------
Mid-Cap Growth 67 87 108 159 13 41 72 158
- ---------------------------------------------------------------------------------------------------------------
Global Equity 79 121 166 277 24 75 129 276
- ---------------------------------------------------------------------------------------------------------------
Developing Growth 73 105 140 224 19 60 103 223
- ---------------------------------------------------------------------------------------------------------------
Emerging Markets 85 140 198 339 31 95 161 339
- ---------------------------------------------------------------------------------------------------------------
High Yield 76 112 150 246 21 66 114 245
- ---------------------------------------------------------------------------------------------------------------
Mid-Cap Value 78 119 163 272 24 74 127 271
- ---------------------------------------------------------------------------------------------------------------
Emerging Markets Debt 83 134 187 319 28 88 151 318
- ---------------------------------------------------------------------------------------------------------------
Strategic Stock 74 107 143 230 19 61 106 229
- ---------------------------------------------------------------------------------------------------------------
Enterprise 74 106 140 225 19 60 103 224
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
IF YOU DO NOT SURRENDER YOUR
CONTRACT, YOU WOULD PAY THE
FOLLOWING EXPENSES ON A $1,000
INVESTMENT, ASSUMING A 5%
ANNUAL RETURN ON ASSETS:
- ---------------------------------------------
3 5 10
SUB-ACCOUNT 1 YEAR YEARS YEARS YEARS
- ---------------------------------------------
<S> <C> <C> <C> <C>
Money Market $19 $59 $101 $220
- ---------------------------------------------
North American Government Securities 25 78 132 282
- ---------------------------------------------
Diversified Income 18 57 98 213
- ---------------------------------------------
Balanced Growth 21 64 110 237
- ---------------------------------------------
Utilities 21 64 110 237
- ---------------------------------------------
Dividend Growth 20 61 106 228
- ---------------------------------------------
Value-Added Market 19 59 101 220
- ---------------------------------------------
Growth 24 75 128 273
- ---------------------------------------------
American Value 20 62 107 231
- ---------------------------------------------
Mid-Cap Growth 13 42 72 159
- ---------------------------------------------
Global Equity 25 76 130 277
- ---------------------------------------------
Developing Growth 19 60 104 224
- ---------------------------------------------
Emerging Markets 31 95 162 339
- ---------------------------------------------
High Yield 22 67 114 246
- ---------------------------------------------
Mid-Cap Value 24 74 127 272
- ---------------------------------------------
Emerging Markets Debt 29 89 151 319
- ---------------------------------------------
Strategic Stock 20 62 107 230
- ---------------------------------------------
Enterprise 20 61 104 225
- ---------------------------------------------
</TABLE>
8 - PROSPECTUS
<PAGE>
ACCUMULATION UNIT VALUES
--------------------------------------------------------------------
(For an Accumulation Unit outstanding throughout the period)
The following information has been derived from the audited financial statements
of the Separate Account, which have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and should be read in conjunction with those statements which are
included in the Statement of Additional Information, which is incorporated by
reference in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1998 1997 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
MONEY MARKET SUB-ACCOUNT (Inception date September 14, 1994)
Accumulation Unit Value at beginning of period..................................... $ 11.309 $ 10.901 $ 10.521 $ 10.000
Accumulation Unit Value at end of period........................................... $ 11.728 $ 11.309 $ 10.901 $ 10.521
Number Accumulation Units outstanding at end of period (in thousands).............. 825 735 501 125
NORTH AMERICAN GOVERNMENT SECURITIES SUB-ACCOUNT (Inception date September 14,
1994)
Accumulation Unit Value at beginning of period..................................... $ 11.322 $ 10.841 $ 10.536 $ 10.000
Accumulation Unit Value at end of period........................................... $ 11.642 $ 11.322 $ 10.841 $ 10.536
Number Accumulation Units outstanding at end of period (in thousands).............. 72 36 32 5
BALANCED SUB-ACCOUNT (Inception date September 14, 1994)
Accumulation Unit Value at beginning of period..................................... $ 15.829 $ 13.618 $ 12.164 $ 10.000
Accumulation Unit Value at end of period........................................... $ 17.859 $ 15.829 $ 13.618 $ 12.164
Number Accumulation Units outstanding at end of period (in thousands).............. 706 369 191 11
UTILITIES SUB-ACCOUNT (Inception date September 14, 1994)
Accumulation Unit Value at beginning of period..................................... $ 16.918 $ 13.568 $ 12.684 $ 10.000
Accumulation Unit Value at end of period........................................... $ 20.391 $ 16.918 $ 13.568 $ 12.684
Number Accumulation Units outstanding at end of period (in thousands).............. 301 146 118 50
DIVIDEND GROWTH SUB-ACCOUNT (Inception date September 14, 1994)
Accumulation Unit Value at beginning of period..................................... $ 21.045 $ 16.921 $ 13.787 $ 10.000
Accumulation Unit Value at end of period........................................... $ 24.847 $ 21.045 $ 16.921 $ 13.787
Number Accumulation Units outstanding at end of period (in thousands).............. 3,148 2,483 1,052 304
VALUE-ADDED SUB-ACCOUNT (Inception date September 14, 1994)
Accumulation Unit Value at beginning of period..................................... $ 17.936 $ 14.422 $ 12.418 $ 10.000
Accumulation Unit Value at end of period........................................... $ 19.843 $ 17.936 $ 14.422 $ 12.418
Number Accumulation Units outstanding at end of period (in thousands).............. 1,353 1,136 567 137
CORE EQUITY SUB-ACCOUNT (Inception date September 14, 1994)
Accumulation Unit Value at beginning of period..................................... $ 16.596 $ 13.675 $ 11.224 $ 10.000
Accumulation Unit Value at end of period........................................... $ 18.530 $ 16.596 $ 13.675 $ 11.224
Number Accumulation Units outstanding at end of (in thousands)..................... 301 214 99 27
AMERICAN VALUE SUB-ACCOUNT (Inception date September 14, 1994)
Accumulation Unit Value at end of period........................................... $ 19.951 $ 15.335 $ 13.770 $ 10.000
Accumulation Unit Value at end of period........................................... $ 25.729 $ 19.951 $ 15.335 $ 13.770
Number Accumulation Units outstanding at end of period (in thousands).............. 1,468 1,022 591 160
GLOBAL EQUITY SUB-ACCOUNT (Inception date September 14, 1994)
Accumulation Unit Value at beginning of period..................................... $ 13.142 $ 12.265 $ 11.162 $ 10.000
Accumulation Unit Value at end of period........................................... $ 14.918 $ 13.142 $ 12.265 $ 11.162
Number Accumulation Units outstanding at end of period (in thousands).............. 1,058 920 470 95
DEVELOPING GROWTH SUB-ACCOUNT (Inception date September 14, 1994)
Accumulation Unit Value at beginning of period..................................... $ 18.896 $ 16.843 $ 15.123 $ 10.000
Accumulation Unit Value at end of period........................................... $ 20.318 $ 18.896 $ 16.843 $ 15.123
Number Accumulation Units outstanding at end of period (in thousands).............. 341 361 262 63
</TABLE>
9 - PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1998 1997 1996 1995
--------- --------- --------- ---------
EMERGING MARKETS SUB-ACCOUNT (Inception date September 14, 1994)
<S> <C> <C> <C> <C>
Accumulation Unit Value at beginning of period..................................... $ 11.405 $ 11.420 $ 9.841 $ 10.000
Accumulation Unit Value at end of period........................................... $ 7.981 $ 11.405 $ 11.420 $ 9.841
Number Accumulation Units outstanding at end of period (in thousands).............. 146 172 118 17
DIVERSIFIED INCOME SUB-ACCOUNT (Inception date September 14, 1994)
Accumulation Unit Value at beginning of period..................................... $ 12.238 $ 11.457 $ 10.607 $ 10.000
Accumulation Unit Value at end of period........................................... $ 12.577 $ 12.238 $ 11.457 $ 10.607
Number Accumulation Units outstanding at end of period (in thousands).............. 1,010 547 224 61
MIDCAP GROWTH SUB-ACCOUNT (Inception date January 21, 1997)
Accumulation Unit Value at beginning of period..................................... $ 11.433 -- -- --
Accumulation Unit Value at end of period........................................... $ 11.913 $ 11.433 -- --
Number Accumulation Units outstanding at end of period (in thousands).............. 263 155 -- --
MORGAN STANLEY HIGH YIELD SUB-ACCOUNT (Inception date April 1, 1998)
Accumulation Unit Value at beginning of period..................................... $ 10.000 -- -- --
Accumulation Unit Value at end of period........................................... $ 9.993 -- -- --
Number Accumulation Units outstanding at end of period (in thousands).............. 42 -- -- --
MORGAN STANLEY MID-CAP SUB-ACCOUNT (Inception date April 1, 1998)
Accumulation Unit Value at beginning of period..................................... $ 10.000 -- -- --
Accumulation Unit Value at end of period........................................... $ 10.072 -- -- --
Number Accumulation Units outstanding at end of period (in thousands).............. 41 -- -- --
MORGAN STANLEY EMERGING MARKETS SUB-ACCOUNT (Inception date April 1, 1998)
Accumulation Unit Value at beginning of period..................................... $ 10.000 -- -- --
Accumulation Unit Value at end of period........................................... $ 6.752 -- -- --
Number Accumulation Units outstanding at end of period (in thousands).............. 3 -- -- --
VAN KAMPEN STRATEGIC STOCK SUB-ACCOUNT (Inception date April 1, 1998)
Accumulation Unit Value at beginning of period..................................... $ 10.000 -- -- --
Accumulation Unit Value at end of period........................................... $ 10.284 -- -- --
Number Accumulation Units outstanding at end of period (in thousands).............. 66 -- -- --
VAN KAMPEN ENTERPRISE SUB-ACCOUNT (Inception date April 1, 1998)
Accumulation Unit Value at beginning of period..................................... $ 10.000 -- -- --
Accumulation Unit Value at end of period........................................... $ 10.652 -- -- --
Number Accumulation Units outstanding at end of period (in thousands).............. 7 -- -- --
</TABLE>
10 - PROSPECTUS
<PAGE>
HIGHLIGHTS
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HOW DO I PURCHASE THIS ANNUITY?
You must complete our application or order request and submit it to us for
approval with your first Premium Payment. Your first Premium Payment must be at
least $1,000 and subsequent Premium Payments must be at least $500, unless you
take advantage of our Automatic Additions Program or are part of certain
retirement plans.
- - For a limited time, usually within ten days after you receive your Contract,
you may cancel your Annuity without paying a Contingent Deferred Sales Charge.
You may bear the investment risk for your Premium Payment prior to our receipt
of your request for cancellation.
WHAT TYPE OF SALES CHARGE WILL I PAY?
You don't pay a sales charge when you purchase your Annuity. We may charge you a
Contingent Deferred Sales Charge when you partially or fully Surrender your
Annuity. The Contingent Deferred Sales Charge will depend on the length of time
the Premium Payment you made has been in your Annuity. If the amount you paid
has been in your Annuity:
x For less than two years, the charge is 6%.
x For more than two years and less than four years, the charge is 5%.
x For more than four years and less than five years, the charge is 4%.
x For more than five years and less than six years, the charge is 3%
x For more than six years and less than seven years, the charge is 2%.
You won't be charged a Contingent Deferred Sales Charge on:
x The Annual Withdrawal Amount
x Premium Payments or earnings that have been in your Annuity for more than
seven years.
x Distributions made due to death
x Most payments we make to you as part of your Annuity Payout
IS THERE AN ANNUAL MAINTENANCE FEE?
We deduct this $30.00 fee each year on your Contract Anniversary or when you
fully Surrender your Annuity, if, on either of those dates, the value of your
Annuity is less than $50,000.
WHAT CHARGES WILL I PAY ON AN ANNUAL BASIS?
In addition to the Annual Maintenance Fee, you pay two other types of charges
each year. The first type of charge is the fee you pay for insurance. This
charge is:
A mortality and expense risk charge that is subtracted daily and is equal to an
annual charge of 1.25% of your Contract Value invested in the Portfolios.
The second type of charge is the fee you pay for the Portfolios.
Currently, Fund charges range from 0.490% to 1.730% annually of the average
daily value of the amount you have invested in the Portfolios. See the Annual
Fund Operating Expenses table for more complete information and the Portfolios'
prospectuses accompanying this prospectus.
CAN I TAKE OUT ANY OF MY MONEY?
- - You may Surrender all or part of the amounts you have invested at any time
before we start making Annuity Payouts, or after Annuity Payouts begin under
the Payment for a Designated Period Annuity Payout Option.
- - You may have to pay income tax on the money you take out and, if you Surrender
before you are age 59 1/2, you may have to pay an income tax penalty. You may
have to pay a Contingent Deferred Sales Charge on the money you Surrender.
WILL HARTFORD PAY A DEATH BENEFIT?
There is a Death Benefit if the Contract Owner, joint owner or the Annuitant die
before we begin to make Annuity Payouts. The Death Benefit will be calculated as
of the date we receive a certified death certificate or other legal document
acceptable to us and will be the greater of:
- - The total Premium Payments you have made to us minus any amounts you have
Surrendered, or
- - The Contract Value of your Annuity, or
- - Your Maximum Anniversary Value, which is described below.
The Maximum Anniversary Value is based on a series of calculations on Contract
Anniversaries of Contract Values, Premium Payments and partial Surrenders. We
will calculate an Anniversary Value for each Contract Anniversary prior to the
deceased's 81st birthday or date of death, whichever is earlier. The Anniversary
Value is equal to the Contract Value as of 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.
The Maximum Anniversary Value is equal to the greatest Anniversary Value
attained from this series of calculations.
11 - PROSPECTUS
<PAGE>
This Death Benefit amount will remain invested in the Sub-Accounts according to
your last instructions and will fluctuate with the performance of the underlying
Portfolios.
WHAT ANNUITY PAYOUT OPTIONS ARE AVAILABLE?
When it comes time for us to make payouts, you may choose one of the following
Annuity Payout Options: Option 1 -- Life Annuity, Option 2 -- Life Annuity with
120, 180 or 240 Monthly Payments Certain, Option 3 -- Joint and Last Survivor
Life Annuity and Option 4: Payments For a Designated Period. We may make other
Annuity Payout Options available at any time.
You must begin to take payouts by the Annuitant's 90th birthday. If you do not
tell us what Annuity Payout Option you want before that time, we will make
payments under Option 2 -- Life Annuity with 120 monthly payments certain.
GENERAL CONTRACT INFORMATION
--------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
Hartford Life Insurance Company 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 as well as the District of Columbia. We were originally
incorporated under the laws of Massachusetts on June 5, 1902, and subsequently
redomiciled to Connecticut. Our offices are located in Simsbury, Connecticut;
however, our mailing address is P.O. Box 5085, Hartford, CT 06104-5085. We are
ultimately controlled by The Hartford Financial Services Group, Inc., one of the
largest financial service providers in the United States.
HARTFORD'S RATINGS
<TABLE>
<CAPTION>
EFFECTIVE DATE
RATING AGENCY OF RATING RATING BASIS OF RATING
- -------------------- -------------- --------- ---------------------
<S> <C> <C> <C>
A.M. Best and
Company, Inc....... 1/1/99 A+ Financial performance
Insurer financial
Standard & Poor's... 6/1/98 AA strength
Duff & Phelps....... 12/21/98 AA+ Claims paying ability
</TABLE>
SEPARATE ACCOUNT
The Separate Account is where we set aside and invest the assets of some of our
annuity contracts, including this Contract. The Separate Account was established
on June 13, 1994 and is registered as a unit investment trust under the
Investment Company Act of 1940. This registration does not involve supervision
by the SEC of the management or the investment practices of the Separate Account
or Hartford. The Separate Account meets the definition of "Separate Account"
under federal securities law. This Separate Account holds only assets for
variable annuity contracts. The Separate Account:
- - Holds assets for your benefit and the benefit of other Contract Owners, and
the persons entitled to the payouts described in the Contract.
- - Is not subject to the liabilities arising out of any other business Hartford
may conduct.
- - Is not affected by the rate of return of Hartford's General Account or by the
investment performance of any of Hartford's other Separate Accounts.
- - May be subject to liabilities from a Sub-Account of the Separate Account that
holds assets of other variable annuity contracts offered by the Separate
Account, which are not described in this Prospectus.
- - Is credited with income and gains, and takes losses, whether or not realized,
from the assets it holds.
We do not guarantee the investment results of the Separate Account. There is no
assurance that the value of your Annuity will equal the total of the payments
you make to us.
THE PORTFOLIOS
--------------------------------------------------------------------
The underlying investment for the Policies are shares of the Portfolios of
Morgan Stanley Dean Witter Select Dimensions Investment Series, Morgan Stanley
Dean Witter Universal Portfolios, Inc., and Van Kampen Life Investment Trust,
all open-ended 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.
We do not guarantee the investment results of any of the underlying Portfolios.
Since each underlying Portfolio has different investment objectives, each is
subject to different risks. These risks and the Portfolio's expenses are more
fully described in the accompanying Portfolios' prospectuses and the Statements
of Additional Information. The Portfolios' prospectuses should be read in
conjunction with this Prospectus before investing.
MORGAN STANLEY 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
12 - PROSPECTUS
<PAGE>
savings institutions having total assets of more than $1 billion, or less than
$1 billion if such are fully federally insured as to principal (the interest may
not be insured) and high grade corporate debt obligations maturing in thirteen
months or less.
NORTH AMERICAN GOVERNMENT SECURITIES PORTFOLIO
Seeks to earn a high level of current income while maintaining relatively low
volatility of principal, by investing primarily in investment grade fixed-income
securities issued or guaranteed by the U.S., Canadian or Mexican governments.
DIVERSIFIED INCOME PORTFOLIO
Seeks, as a primary objective, to earn a high level of current income and, as a
secondary objective, to maximize total return, but only to the extent consistent
with its primary objective, by equally allocating its assets among three
separate groupings of fixed-income securities. Up to one-third of the securities
in which the Diversified Income Portfolio may invest will include securities
rated Baa/BBB or lower. See the Special Considerations for investments for high
yield securities disclosed in the Fund's prospectus.
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.
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's prospectus.
MORGAN STANLEY DEAN WITTER 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
13 - PROSPECTUS
<PAGE>
bonds". The Portfolio's average weighted maturity will ordinarily exceed five
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 issuers and, to a lesser extent, of corporate
issuers located in emerging market countries.
VAN KAMPEN 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 advisor to have above average potential for capital appreciation.
THE INVESTMENT ADVISERS
Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors"), a Delaware
Corporation, whose address is Two World Trade Center, New York, 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 Morgan
Stanley Dean Witter Select Dimensions Investment Series (the "Morgan Stanley
Dean Witter Portfolios"). MSDW Advisors was incorporated in July, 1992 and is a
wholly-owned subsidiary of Morgan Stanley Dean Witter & Co. ("MSDW")
MSDW Advisors provides administrative services, manages the Dean Witter
Portfolios' business affairs and manages the investment of the Morgan Stanley
Dean Witter Portfolios' assets, including the placing of orders for the purchase
and sales of portfolio securities. MSDW Advisors has retained Morgan Stanley
Dean Witter Services Company Inc., its wholly-owned subsidiary, to perform the
aforementioned administrative services for the Morgan Stanley Dean Witter
Portfolios. For its services, the Morgan Stanley Dean Witter Portfolios pay MSDW
Advisors a monthly fee. See the accompanying Fund prospectus for a more complete
description of MSDW Advisors and the respective fees of the Morgan Stanley 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 MSDW Advisors, provides these Portfolios with investment advice
and portfolio management, in each case subject to the overall supervision of the
MSDW Advisors. TCW's address is 865 South Figueroa Street, Suite 1800, Los
Angeles, California 90017.
With regard to the Growth Portfolio, Morgan Stanley Dean Witter Investment
Management Inc. ("MSDW Investment Management"), under a Sub-Advisory Agreement
with MSDW Advisers, provides the Growth Portfolio with investment advice and
portfolio management, subject to the overall supervision of MSDW Advisors. MSDW
Investment Management, like MSDW Advisors, is a wholly-owned subsidiary of MSDW.
MSDW Investment Management's address is 1221 Avenue of the Americas, New York,
New York 10020.
In addition to acting as the Sub-Adviser for the Growth Portfolio, MSDW
Investment Management, pursuant to an Investment Advisory Agreement with the
Morgan Stanley Dean Witter Universal Funds, Inc., is the investment adviser for
the Emerging Markets Debt Portfolio. As the investment adviser, MSDW Investment
Managment, provides investment advice and portfolio management services for the
Emerging Markets Debt Portfolio, subject to the supervision of the Morgan
Stanley Dean Witter Universal Fund's Board of Directors.
The Investment Adviser 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 portfolios, foundations
and other institutional investors and has served as an investment adviser to
several open-end investment companies. MAS is an indirect wholly-owned
subsidiary of MSDW.
The Investment Adviser with respect to the Strategic Stock Portfolio and the
Enterprise Portfolio is Van Kampen Asset Management Inc., a wholly-owned
subsidiary of Van Kampen Investments Inc. Van Kampen Investments Inc. is an
indirect wholly-owned subsidiary of MSDW. Van Kampen Investments Inc.'s address
is 1 Parkview Place, Oakbrook Terrace, Illinois 60181. Van Kampen Investments
Inc. is a diversified asset management company with more than two million retail
investor
14 - PROSPECTUS
<PAGE>
accounts, extensive capabilities for managing institutional portfolios, and more
than $75 billion under management or supervision. Van Kampen Investments Inc.'s
more than 50 open-end and 39 closed end portfolios and more than 2,500 unit
investment trusts are professionally distributed by leading financial advisers
nationwide.
* "STANDARD & POOR'S," "S&P-REGISTERED TRADEMARK-," "S&P
500-REGISTERED TRADEMARK-," "STANDARD & POOR'S 500," AND "500" ARE TRADEMARKS
OF THE MCGRAW-HILL COMPANIES, INC. AND HAVE BEEN LICENSED FOR USE BY HARTFORD.
THE INDEX FUND IS NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY STANDARD &
POOR'S AND STANDARD & POOR'S MAKES NO REPRESENTATION REGARDING THE
ADVISABILITY OF INVESTING IN THE INDEX FUND.
MIXED AND SHARED FUNDING -- Shares of the Portfolios may be sold to our other
separate accounts and our insurance company affiliates or other unaffiliated
insurance companies to serve as the underlying investment for both variable
annuity contracts and variable life insurance policies, a practice known as
"mixed and shared funding." As a result, there is a possibility that a material
conflict may arise between the interests of Contract Owners, and of owners of
other contracts whose contract values are allocated to one or more of these
other separate accounts investing in any one of the Portfolios. In the event of
any such material conflicts, we will consider what action may be appropriate,
including removing the Fund from the Separate Account or replacing the Fund with
another underlying fund. There are certain risks associated with mixed and
shared funding, as disclosed in the Portfolios' prospectus.
VOTING RIGHTS -- We are the legal owners of all Fund shares held in the Separate
Account and we have the right to vote at the Fund's shareholder meetings. To the
extent required by federal securities laws or regulations, we will:
- - Notify you of any Fund shareholders' meeting if the shares held for your
Contract may be voted.
- - Send proxy materials and a form of instructions that you can use to tell us
how to vote the Fund shares held for your Contract.
- - Arrange for the handling and tallying of proxies received from Contract
Owners.
- - Vote all Fund shares attributable to your Contract according to instructions
received from you, and
- - Vote all Fund shares for which no voting instructions are received in the same
proportion as shares for which instructions have been received.
If any federal securities laws or regulations, or their present interpretation,
change to permit us to vote Fund shares on our own, we may decide to do so. You
may attend any Shareholder Meeting at which shares held for your Contract may be
voted. After we begin to make Annuity Payouts to you, the number of votes you
have will decrease.
SUBSTITUTIONS, ADDITIONS, OR DELETIONS OF PORTFOLIOS -- We reserve the right,
subject to any applicable law, to make certain changes to the Portfolios offered
under Your Contract. We may, in our sole discretion, establish new Portfolios.
New Portfolios will be made available to existing Contract Owners as we
determine appropriate. We may also close one or more Portfolios to additional
Payments or transfers from existing Sub-Accounts.
We reserve the right to eliminate the shares of any of the Portfolios for any
reason 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. To the extent required by the Investment Company Act of 1940
(the "1940 Act"), substitutions of shares attributable to your interest in a
Fund will not be made until we have the approval of the Commission and we have
notified you of the change.
In the event of any substitution or change, we may, by appropriate endorsement,
make any changes in the Contract necessary or appropriate to reflect the
substitution or change. If we decide that it is in the best interest of Contract
Owners, 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 the 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.
When a Sub-Account advertises its STANDARDIZED TOTAL RETURN, it will usually be
calculated for one year, five years, and ten years or some other relevant
periods if the Sub-Account has not been in existence for at least ten years.
Total return is measured by comparing the value of an investment in the
Sub-Account at the beginning of the relevant period to the value of the
investment at the end of the period.
The Separate Account may also advertise NON-STANDARD TOTAL RETURNS THAT PRE-DATE
THE INCEPTION DATE OF THE SEPARATE ACCOUNT. These non-standardized total returns
are calculated by assuming that the Sub-Accounts have been in existence for the
same periods as the underlying Portfolios and by taking deductions for charges
equal to those currently assessed against the Sub-Accounts. These
non-standardized returns must be accompanied by standardized total returns.
15 - PROSPECTUS
<PAGE>
If applicable, the Sub-Accounts 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 includes the recurring charges at the
Separate Account level including the Annual Maintenance Fee.
The Money Market Fund 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
and effective yield include the recurring charges at the Separate Account level
including the Annual Maintenance Fee.
The Separate Account may also disclose YIELD for periods prior to the date the
Separate Account commenced operations. For these periods, performance
information for the Sub-Accounts will be calculated based on the performance of
the underlying Portfolios and the assumption that the Sub-Accounts were in
existence for the same periods as those of the underlying Portfolios, with a
level of charges equal to those currently assessed against the Sub-Accounts. No
yield disclosure for periods prior to the date of the Separate Account will be
used without the yield disclosure for periods as of the date of the inception of
the Separate Account.
We 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 systematic investing, Dollar Cost Averaging
and asset allocation), the advantages and disadvantages of investing in
tax-deferred and taxable instruments, customer profiles and hypothetical
purchase scenarios, financial management and tax and retirement planning, and
other investment alternatives, including comparisons between the Contract and
the characteristics of and market for such alternatives.
THE FIXED ACCUMULATION FEATURE
--------------------------------------------------------------------
IMPORTANT INFORMATION YOU SHOULD KNOW: THIS PORTION OF THE PROSPECTUS RELATING
TO THE FIXED ACCUMULATION FEATURE IS NOT REGISTERED UNDER THE SECURITIES ACT OF
1933 ("1933 ACT") AND THE FIXED ACCUMULATION FEATURE IS NOT REGISTERED AS AN
INVESTMENT COMPANY UNDER THE 1940 ACT. THE FIXED ACCUMULATION FEATURE OR ANY OF
ITS INTERESTS ARE NOT SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT
OR THE 1940 ACT, AND THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
REVIEWED THE DISCLOSURE REGARDING THE FIXED ACCUMULATION FEATURE. THE FOLLOWING
DISCLOSURE ABOUT THE FIXED ACCUMULATION FEATURE MAY BE SUBJECT TO CERTAIN
GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS REGARDING THE
ACCURACY AND COMPLETENESS OF DISCLOSURE.
Premium Payments and Contract Values allocated to the Fixed Accumulation Feature
become a part of our General Account assets. We invest the assets of the General
Account according to the laws governing the investments of insurance company
General Accounts.
Currently, we guarantee that we will credit interest at a rate of not less than
3% per year, compounded annually, to amounts you allocate to the Fixed
Accumulation Feature. We reserve the right to change the rate subject only to
applicable state insurance law. We may credit interest at a rate in excess of 3%
per year. We will periodically publish the Fixed Accumulation Feature interest
rates currently in effect. There is no specific formula for determining interest
rates. Some of the factors that we may consider in determining whether to credit
excess interest are; general economic trends, rates of return currently
available and anticipated on our investments, regulatory and tax requirements
and competitive factors. We will account for any deductions, Surrenders or
transfers from the Fixed Accumulation Feature on a "first-in first-out" basis.
For Contracts issued in the state of New York, the Fixed Accumulation Feature
interest rates may vary from other states.
IMPORTANT: ANY INTEREST CREDITED TO AMOUNTS YOU ALLOCATE TO THE FIXED
ACCUMULATION FEATURE IN EXCESS OF 3% PER YEAR WILL BE DETERMINED AT OUR SOLE
DISCRETION. YOU ASSUME THE RISK THAT INTEREST CREDITED TO THE FIXED ACCUMULATION
FEATURE MAY NOT EXCEED THE MINIMUM GUARANTEE OF 3% FOR ANY GIVEN YEAR.
From time to time, we may credit increased interest rates under certain programs
established in our sole discretion.
DOLLAR COST AVERAGING PLUS ("DCA") PROGRAMS -- Currently, you may enroll in a
special pre-authorized transfer program known as our DCA Plus Program (the
"Program"). Under this Program, Contract Owners who enroll may allocate a
minimum of $5,000 of their Premium Payment into the Program (we may allow a
lower minimum Premium Payment for qualified plan transfers or rollovers,
including IRAs) and pre-authorize transfers to any of the Sub-Accounts under
either the 6 Month Transfer Program or 12 Month Transfer Program. The 6-Month
Transfer Program and the 12-Month Transfer Program will generally have different
credited interest rates. Under the 6-Month Transfer Program, the interest rate
can accrue up to 6 months
16 - PROSPECTUS
<PAGE>
and all Premium Payments and accrued interest must be transferred from the
Program to the selected Sub-Accounts in 3 to 6 months. Under the 12-Month
Transfer Program, the interest rate can accrue up to 12 months and all Premium
Payments and accrued interest must be transferred to the selected Sub-Accounts
in 7 to 12 months. This will be accomplished by monthly transfers for the period
selected and a final transfer of the entire amount remaining in the Program.
Contract owners who purchase their Contracts in New York have a different DCA
Plus Program. Currently, only one DCA Plus Program transfer period is available
in New York, but that period allows transfers to selected Sub-Accounts in 3 to
12 months.
The pre-authorized transfers will begin within 15 days of receipt of the Program
payment provided we receive complete enrollment instructions. If we do not
receive complete Program enrollment instructions within 15 days of receipt of
the initial Program payment, the Program will be voided and the entire balance
in the Program will be transferred to the Accounts designated by you. If you do
not designate an Account, you will receive the Fixed Accumulation Feature's
current effective interest rate. Any subsequent payments we receive within the
Program period selected will be allocated to the Sub-Accounts over the remainder
of that Program transfer period.
You may elect to terminate the pre-authorized transfers by calling or writing us
of your intent to cancel enrollment in the Program. Upon cancellation, you will
no longer receive the Program interest rate and unless we receive instructions
to the contrary, the amounts remaining in the Program may accrue the interest
rate currently in effect for the Fixed Accumulation Feature.
We reserve the right to discontinue, modify or amend the Program or any other
interest rate program we establish. Any change to the Program will not affect
Contract Owners currently enrolled in the Program. This Program may not be
available in all states; please contact us to determine if it is available in
your state.
You may only have one DCA program in place at one time. The Fixed Accumulation
Feature and Dollar Cost Averaging Plus Program are not available in Oregon.
THE CONTRACT
--------------------------------------------------------------------
PURCHASES AND CONTRACT VALUE
WHAT TYPES OF CONTRACTS ARE AVAILABLE?
The Contract is an individual or group tax-deferred variable annuity contract.
It is 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 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 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.
The examples above represent Qualified Contracts, as defined by the Code. In
addition, individuals and trusts can also purchase Contracts that are not part
of a tax qualified retirement plan. These are known as Non-Qualified Contracts.
HOW DO I PURCHASE A CONTRACT?
You may purchase a Contract by completing and submitting an application or an
order request along with an initial Premium Payment. For most Contracts, the
minimum Premium Payment is $1,000. For additional Premium Payments, the minimum
Premium Payment is $500. Under certain situations, we may allow smaller Premium
Payments, for example, if you enroll in our Automatic Additions Program or are
part of certain tax qualified retirement plans. Prior approval is required for
Premium Payments of $1,000,000 or more.
You and your Annuitant must not be older than age 85 on the date that your
Contract is issued. You must be of legal age in the state where the Contract is
being purchased or a guardian must act on your behalf.
HOW ARE PREMIUM PAYMENTS APPLIED TO MY CONTRACT?
Your initial Premium Payment will be invested within two Valuation Days of our
receipt of a properly completed application or an order request and the Premium
Payment. If we receive your subsequent Premium Payment before the close of the
New York Stock Exchange, it will be priced on the same Valuation Day. If we
receive your Premium Payment after the close of the New York Stock Exchange, it
will be processed on the next Valuation Day. If we receive your Premium Payment
on a Non-Valuation Day, the amount will be invested on the next Valuation Day.
Unless we receive new instructions, we will invest the Premium Payment based on
your last allocation instructions. We will send you a confirmation when we
invest your Premium Payment.
17 - PROSPECTUS
<PAGE>
If the request or other information accompanying the Premium Payment is
incomplete when received, we will hold the money in a non-interest bearing
account for up to five Valuation Days while we try to obtain complete
information. If we cannot obtain the information within five Valuation Days, we
will either return the Premium Payment and explain why the Premium Payment could
not be processed or keep the Premium Payment if you authorize us to keep it
until your provide the necessary information.
CAN I CANCEL MY CONTRACT AFTER I PURCHASE IT?
We want you to be satisfied with the Contract you have purchased. We urge you to
closely examine its provisions. If for any reason you are not satisfied with
your Contract, simply return it within ten days after you receive it with a
written request for cancellation that indicates your tax-withholding
instructions. In some states, you may be allowed more time to cancel your
Contract. We will not deduct any Contingent Deferred Sales Charges during this
time. We may require additional information, including a signature guarantee,
before we can cancel your Contract.
You bear the investment risk from the time the Contract is issued until we
receive your complete cancellation request.
The amount we pay you upon cancellation depends on the requirements of the state
where you purchased your Contract, the method of purchase, the type of Contract
you purchased and your age.
HOW IS THE VALUE OF MY CONTRACT CALCULATED BEFORE THE ANNUITY COMMENCEMENT DATE?
The Contract Value is the sum of all Accounts. There are two things that affect
your Sub-Account value: (1) the number of Accumulation Units and (2) the
Accumulation Unit Value. The Sub-Account value is determined by multiplying the
number of Accumulation Units by the Accumulation Unit Value. Therefore, on any
Valuation Day your Contract Value reflects the investment performance of the
Sub-Accounts and will fluctuate with the performance of the underlying
Portfolios.
When Premium Payments are credited to your Sub-Accounts, they are converted into
Accumulation Units by dividing the amount of your Premium Payments, minus any
Premium Taxes, by the Accumulation Unit Value for that day. The more Premium
Payments you put into your Contract, the more Accumulation Units you will own.
You decrease the number of Accumulation Units you have by requesting Surrenders,
transferring money out of an Account, settling a Death Benefit claim or by
annuitizing your Contract.
To determine the current Accumulation Unit Value, we take the prior Valuation
Day's Accumulation Unit Value and multiply it by the Net Investment Factor for
the current Valuation Day.
The Net Investment Factor is used to measure the investment performance of a
Sub-Account from one Valuation Day to the next. The Net Investment Factor for
each Sub-Account equals:
- - The net asset value per share of each Fund held in the Sub-Account at the end
of the current Valuation Day divided by
- - The net asset value per share of each Fund held in the Sub-Account at the end
of the prior Valuation Day; minus
- - The daily mortality and expense risk charge adjusted for the number of days in
the period, and any other applicable charge.
We will send you a statement in each calendar quarter, which tells you how many
Accumulation Units you have, their value and your total Contract Value.
CAN I TRANSFER FROM ONE SUB-ACCOUNT TO ANOTHER?
TRANSFERS BETWEEN SUB-ACCOUNTS -- You may transfer from one Sub-Account to
another before and after the Annuity Commencement Date at no extra charge. Your
transfer request will be processed on the day that it is received as long as it
is received on a Valuation Day before the close of the New York Stock Exchange.
Otherwise, your request will be processed on the following Valuation Day. We
will send you a confirmation when we process your transfer. You are responsible
for verifying transfer confirmations and promptly advising us of any errors
within 30 days of receiving the confirmation.
SUB-ACCOUNT TRANSFER RESTRICTIONS -- We reserve the right to limit the number of
transfers to 12 per Contract Year, with no transfers occurring on consecutive
Valuation Days. We also have the right to restrict transfers if we believe that
the transfers could have an adverse effect on other Contract Owners. In all
states except New York, Florida, Maryland and Oregon, we may:
- - Require a minimum time period between each transfer,
- - Limit the dollar amount that may be transferred on any one Valuation Day, and
- - Not accept transfer requests from an agent acting under a power of attorney
for more than one Contract Owner.
We also have a restriction in place that involves individuals who act under a
power of attorney for multiple Contract Owners. If the value of the Contract
Owners' Accounts add up to more than $2 million, we will not accept transfer
instructions from the power of attorney unless the power of attorney has entered
into a Third Party Transfer Services Agreement with us.
Some states may have different restrictions.
18 - PROSPECTUS
<PAGE>
FIXED ACCUMULATION FEATURE TRANSFERS -- During each Contract Year, you may make
transfers out of the Fixed Accumulation Feature to Sub-Accounts. All transfer
allocations must be in whole numbers (e.g., 1%). You may transfer either:
- - 30% of your total amount in the Fixed Accumulation Feature, or
- - An amount equal to the largest previous transfer.
These transfer limits do not include transfers done through Dollar Cost
Averaging or the DCA Plus Program.
If your interest rate renews at a rate at least 1% lower than your prior
interest rate, you may transfer an amount equal to up to 100% of the amount to
be invested at the renewal rate. You must make this transfer request within 60
days of being notified of the renewal rate.
FIXED ACCUMULATION FEATURE TRANSFER RESTRICTIONS -- We reserve the right to
defer transfers from the Fixed Accumulation Feature for up to 6 months from the
date of your request. After any transfer, you must wait six months before moving
Sub-Account Values back to the Fixed Accumulation Feature.
TELEPHONE TRANSFERS -- In most states, you can make transfers by calling us at
(800) 862-6668. Hartford, our agents or our affiliates are not responsible for
losses resulting from telephone requests that we believe are genuine. We will
use reasonable procedures to confirm that telephone instructions are genuine,
including requiring that callers provide certain identification information and
recording all telephone transfer instructions.
POWER OF ATTORNEY -- You may authorize another person to make transfers on your
behalf by submitting a completed Power of Attorney form. Once we have the
completed form on file, we will accept transfer instructions, subject to our
transfer restrictions, from your designated third party until we receive new
instructions in writing from you. You will not be able to make transfers or
other changes to your Contract if you have authorized someone else to act under
a Power of Attorney.
CHARGES AND FEES
There are 5 charges and fees associated with the Contract:
1. THE CONTINGENT DEFERRED SALES CHARGE
The Contingent Deferred Sales Charge covers some of the expenses relating to the
sale and distribution of the Contract, including commissions paid to registered
representatives and the cost of preparing sales literature and other promotional
activities.
We assess a Contingent Deferred Sales Charge when you request a full or partial
Surrender. The percentage of the Contingent Deferred Sales Charge is based on
how long your Premium Payments have been in the Contract. The Contingent
Deferred Sales Charge will not exceed the total amount of the Premium Payments
made. Each Premium Payment has its own Contingent Deferred Sales Charge
schedule. Premium Payments are Surrendered in the order in which they were
received. The longer you leave your Premium Payments in the Contract, the lower
the Contingent Deferred Sales Charge will be when you Surrender.
The Contingent Deferred Sales Charge is a percentage of the amount Surrendered
and is equal to:
<TABLE>
<CAPTION>
NUMBER OF YEARS
FROM PREMIUM CONTINGENT DEFERRED
PAYMENT SALES CHARGE
- ----------------- -------------------
<S> <C>
1 6%
2 6%
3 5%
4 5%
5 4%
6 3%
7 2%
8 or more 0%
</TABLE>
THE FOLLOWING SURRENDERS ARE NOT SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE:
- - ANNUAL WITHDRAWAL AMOUNT -- During the first seven years from each Premium
Payment, you may, each Contract Year, take partial Surrenders up to 10% of the
total Premium Payments. If you do not take 10% one year, you may not take more
than 10% the next year. These amounts are different for group unallocated
Contracts and Contracts issued to a Charitable Remainder Trust.
- - SURRENDERS MADE FROM PREMIUM PAYMENTS INVESTED FOR MORE THAN SEVEN YEARS --
After the seventh Contract Year, you may take the total of: (a) all of your
earnings, and (b) all Premium Payments held in your Contract for more than
seven years, and (c) 10% of Premium Payments made during the last seven years.
UNDER THE FOLLOWING SITUATIONS, THE CONTINGENT DEFERRED SALES CHARGE IS WAIVED:
- - Upon eligible confinement as described in the Waiver of Sales Charge Rider.
For Contracts purchased on or after September 29, 1997, we will waive any
Contingent Deferred Sales Charge applicable to a partial or full Surrender if
you, the joint owner or the Annuitant, is confined for at least 180 calendar
days to a: (a) facility recognized as a general hospital by the proper
authority of the state in which it is located; or (b) facility recognized as a
general hospital by the Joint Commission on the Accreditation of Hospitals; or
(c) facility certified as a hospital or long-term care facility; or (d)
nursing home licensed by the state in which it is located and offers the
services of a registered nurse 24 hours a day. If you, the joint owner or the
Annuitant is confined when you purchase the Contract, this waiver is not
available. For it to apply, you must: (a) have owned the Contract continuously
since it was issued, (b) provide written proof of confinement satisfactory to
us, and (c) request the Surrender within 90 calendar days of the last day of
confinement. This waiver may not be available in
19 - PROSPECTUS
<PAGE>
all states. Please contact your Registered Representative or us to determine
if it is available for you.
- - For Required Minimum Distributions. This allows Annuitants who are age 70 1/2
or older, with a Contract held under an Individual Retirement Account or
403(b) plan, to Surrender an amount equal to the Required Minimum Distribution
for the Contract without a Contingent Deferred Sales Charge. All requests for
Required Minimum Distributions must be in writing.
- - On or after the Annuitant's 90th birthday.
- - For disabled participants enrolled in a group unallocated, tax qualified
retirement plan. With our approval and under certain conditions, participants
who become disabled can receive Surrenders free of Contingent Deferred Sales
Charge.
THE FOLLOWING SITUATIONS ARE NOT SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE:
- - Upon death of the Annuitant or Contract Owner. No Contingent Deferred Sales
Charge will be deducted if the Annuitant or Contract Owner dies, unless the
Contract Owner is not a natural person (e.g. a trust).
- - Upon Annuitization. The Contingent Deferred Sales Charge is not deducted when
you annuitize the Contract. We will charge a Contingent Deferred Sales Charge
if the Contract is fully Surrendered during the Contingent Deferred Sales
Charge period under an Annuity Payout Option which allows Surrenders.
- - Upon cancellation during the Right to Cancel Period
2. MORTALITY AND EXPENSE RISK CHARGE
For assuming mortality and expense risks under the Contract, we deduct a daily
charge at the rate of 1.25% per year of Sub-Account Value (estimated at .90% for
mortality and .35% for expenses). The mortality and expense risk charge is
broken into charges for mortality risks and for an expense risk:
- - MORTALITY RISK -- There are two types of mortality risks that we assume, those
made while your Premium Payments are accumulating and those made once Annuity
Payouts have begun
During the period your Premium Payments are accumulating, we are required to
cover any difference between the Death Benefit paid and the Surrender Value.
These differences may occur during periods of declining value or in periods
where the Contingent Deferred Sales Charges would have been applicable. The risk
that we bear during this period is that actual mortality rates, in aggregate,
may exceed expected mortality rates.
Once Annuity Payouts have begun, we may be required to make Annuity Payouts as
long as the Annuitant is living, regardless of how long the Annuitant lives. We
would be required to make these payments if the Payout Option chosen is the Life
Annuity, Life Annuity With Payments for a Period Certain or Joint and Last
Survivor Life Annuity Payout Option. The risk that we bear during this period is
that the actual mortality rates, in aggregate, may be lower than the expected
mortality rates.
- - EXPENSE RISK -- We also bear an expense risk that the Contingent Deferred
Sales Charges and the Annual Maintenance Fee collected before the Annuity
Commencement Date may not be enough to cover the actual cost of selling,
distributing and administering the Contract.
Although variable Annuity Payouts will fluctuate with the performance of the
underlying Fund selected, your Annuity Payouts will not be affected by (a) the
actual mortality experience of our Annuitants, or (b) our actual expenses if
they are greater than the deductions stated in the Contract. Because we cannot
be certain how long our Annuitants will live, we charge this percentage fee
based on the mortality tables currently in use. The mortality and expense risk
charge enables us to keep our commitments and to pay you as planned.
3. ANNUAL MAINTENANCE FEE
The Annual Maintenance Fee is a flat fee that is deducted from your Contract
Value to reimburse us for expenses relating to the administrative maintenance of
the Contract and the Accounts. The annual $30 charge is deducted on a Contract
Anniversary or when the Contract is fully Surrendered if the Contract Value at
either of those times is less than $50,000. The charge is deducted
proportionately from each Account in which you are invested.
WHEN IS THE ANNUAL MAINTENANCE FEE WAIVED?
We will waive the Annual Maintenance Fee if your Contract Value is $50,000 or
more on your Contract Anniversary or when you fully Surrender your Contract. In
addition, we will waive one Annual Maintenance Fee for Contract Owners who own
more than one Contract with a combined Contract Value between $50,000 and
$100,000. If you have multiple Contracts with a combined Contract Value of
$100,000 or greater, we will waive the Annual Maintenance Fee on all Contracts.
However, we reserve the right to limit the number of waivers to a total of six
Contracts. We also reserve the right to waive the Annual Maintenance Fee under
certain other conditions.
4. PREMIUM TAXES
We deduct Premium Taxes, if required, by a state or other government agency.
Some states collect the taxes when Premium Payments are made; others collect at
Annuitization. Since we pay Premium Taxes when they are required by applicable
law, we may deduct them from your Contract when we pay the taxes, upon
Surrender, or on the Annuity Commencement Date. The Premium Tax rate varies by
state or municipality. Currently, the maximum rate charged by any state is 3.5%
and 4% in Puerto Rico.
20 - PROSPECTUS
<PAGE>
5. CHARGES AGAINST THE FUNDS
The Separate Account purchases shares of the Funds at net asset value. The net
asset value of the Fund reflects investment advisory fees and administrative
expenses already deducted from the assets of the Funds. These changes are
described in the Funds' prospectuses accompanying this prospectus.
WE MAY OFFER, IN OUR DISCRETION, REDUCED FEES AND CHARGES INCLUDING, BUT NOT
LIMITED TO CONTINGENT DEFERRED SALES CHARGES, THE MORTALITY AND EXPENSE RISK
CHARGE, AND THE ANNUAL MAINTENANCE FEE, FOR CERTAIN CONTRACTS (INCLUDING
EMPLOYER SPONSORED SAVINGS PLANS) WHICH MAY RESULT IN DECREASED COSTS AND
EXPENSES. REDUCTIONS IN THESE FEES AND CHARGES WILL NOT BE UNFAIRLY
DISCRIMINATORY AGAINST ANY CONTRACT OWNER.
DEATH BENEFIT
WHAT IS THE DEATH BENEFIT AND HOW IS IT CALCULATED?
The Death Benefit is the amount we will pay upon the death of the Contract Owner
or the Annuitant. The Death Benefit is calculated when we receive a certified
death certificate or other legal document acceptable to us.
The calculated Death Benefit will remain invested in the same Accounts,
according to the Contract Owner's last instructions until we receive complete
written settlement instructions from the Beneficiary. Therefore, the Death
Benefit amount will fluctuate with the performance of the underlying Portfolios.
When there is more than one Beneficiary, we will calculate the Accumulation
Units for each Sub-account and the dollar amount for the Fixed Accumulation
Feature for each Beneficiary's portion of the proceeds.
If death occurs before the Annuity Commencement Date, the Death Benefit is the
greatest of:
- - The Contract Value on the date the death certificate or other legal document
acceptable to us is received; or
- - 100% of all Premium Payments paid into the Contract minus any partial
Surrenders; or
- - The Maximum Anniversary Value, which is described below.
The Maximum Anniversary Value is based on a series of calculations on Contract
Anniversaries of Contract Values, Premium Payments and partial Surrenders. We
will calculate an Anniversary Value for each Contract Anniversary prior to the
deceased's 81st birthday or date of death, whichever is earlier. The Anniversary
Value is equal to the Contract Value as of 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.
The Maximum Anniversary Value is equal to the greatest Anniversary Value
attained from this series of calculations.
The Maximum Anniversary Value is only calculated until the earlier of the
Contract Owner or Annuitant's 81st birthday or death.
HOW IS THE DEATH BENEFIT PAID?
The Death Benefit may be taken in one lump sum or under any of the Annuity
Payout Options then being offered by us. On the date we receive complete
instructions from the Beneficiary, we will compute the Death Benefit amount to
be paid out or applied to a selected Annuity Payout Option. When there is more
than one Beneficiary, we will calculate the Death Benefit amount for each
Beneficiary's portion of the proceeds and then pay it out or apply it to a
selected Annuity Payout Option according to each Beneficiary's instructions. If
we receive the complete instructions on a Non-Valuation Day, computations will
take place on the next Valuation Day.
The Beneficiary may elect under the Annuity Payout Option "Death Benefit
Remaining with the Company" to leave proceeds from the Death Benefit with us for
up to five years from the date of the Contract Owner's death if the Contract
Owner died before the Annuity Commencement Date. Once we receive a certified
death certificate or other legal documents acceptable to us, the Beneficiary
can: (a) make Sub-Account transfers and (b) take Surrenders without paying
Contingent Deferred Sales Charges.
REQUIRED DISTRIBUTIONS -- If the Contract Owner dies before the Annuity
Commencement Date, the Death Benefit must be distributed within five years after
death. The Beneficiary can choose any Annuity Payout Option that results in
complete Annuity Payout within five years.
If the Contract Owner dies on or after the Annuity Commencement Date under an
Annuity Payout Option with a Death Benefit, any remaining value must be
distributed at least as rapidly as under the payment method being used as of the
Contract Owner's death.
If the Contract Owner is not an individual (e.g. a trust), then the original
Annuitant will be treated as the Contract Owner in the situations described
above and any change in the original Annuitant will be treated as the death of
the Contract Owner.
WHO WILL RECEIVE THE DEATH BENEFIT?
The distribution of the Death Benefit is based on whether death is before, on or
after the Annuity Commencement Date.
21 - PROSPECTUS
<PAGE>
IF DEATH OCCURS BEFORE
<TABLE>
<CAPTION>
THE ANNUITY COMMENCEMENT DATE:
- -----------------------------------------------------------------
<S> <C> <C> <C>
IF THE
DECEASED IS
THE... AND... AND... THEN THE...
Contract Owner There is a The Annuitant Joint Contract
surviving is living or Owner receives
joint Contract deceased the Death
Owner Benefit.
Contract Owner There is no The Annuitant Designated
surviving is living or Beneficiary
joint Contract deceased receives the
Owner Death Benefit.
Contract Owner There is no The Annuitant Contract Owner's
surviving is living or estate receives
joint Contract deceased the Death
Owner and the Benefit.
Beneficiary
predeceases
the Contract
Owner
Annuitant The Contract There is no Death Benefit is
Owner is named paid to the
living Contingent Contract Owner
Annuitant and not the
designated
Beneficiary.
Annuitant The Contract The Contingent Contingent
Owner is Annuitant is Annuitant becomes
living living the Annuitant,
and the Contract
continues.
- -----------------------------------------------------------------
</TABLE>
IF DEATH OCCURS ON OR AFTER
<TABLE>
<CAPTION>
THE ANNUITY COMMENCEMENT DATE:
- ----------------------------------------------------
<S> <C> <C>
IF THE
DECEASED IS
THE... AND... THEN THE...
Contract The Annuitant is Designated
Owner living Beneficiary becomes
the Contract Owner
Annuitant The Contract Contract Owner
Owner is living receives the Death
Benefit.
Annuitant The Annuitant is Designated
also the Beneficiary receives
Contract Owner the Death Benefit.
- ----------------------------------------------------
</TABLE>
THESE ARE THE MOST COMMON DEATH BENEFIT SCENARIOS, HOWEVER, THERE ARE OTHERS.
SOME OF THE ANNUITY PAYOUT OPTIONS MAY NOT RESULT IN A DEATH BENEFIT PAYOUT. IF
YOU HAVE QUESTIONS ABOUT THESE AND ANY OTHER SCENARIOS, PLEASE CONTACT YOUR
REGISTERED REPRESENTATIVE OR US.
WHAT SHOULD THE BENEFICIARY CONSIDER?
ALTERNATIVES TO THE REQUIRED DISTRIBUTIONS -- The selection of an Annuity Payout
Option and the timing of the selection will have an impact on the tax treatment
of the Death Benefit. To receive favorable tax treatment, the Annuity Payout
Option selected: (a) cannot extend beyond the Beneficiary's life or life
expectancy, and (b) must begin within one year of the date of death.
If these conditions are NOT met, the Death Benefit will be treated as a lump sum
payment for tax purposes. This sum will be taxable in the year in which it is
considered received.
SPOUSAL CONTRACT CONTINUATION -- If the Beneficiary is the Contract Owner's
spouse, the Beneficiary may elect to continue the Contract as the contract
owner, receive the death benefit in one lump sum payment or elect an Annuity
Payout Option. This spousal continuation is available only once for each
Contract.
SURRENDERS
WHAT KINDS OF SURRENDERS ARE AVAILABLE?
FULL SURRENDERS BEFORE THE ANNUITY COMMENCEMENT DATE -- When you Surrender your
Contract before the Annuity Commencement Date, the Surrender Value of the
Contract will be made in a lump sum payment. The Surrender Value is the Contract
Value minus any applicable Premium Taxes, Contingent Deferred Sales Charges and
the Annual Maintenance Fee. The Surrender Value may be more or less than the
amount of the Premium Payments made to a Contract.
PARTIAL SURRENDERS BEFORE THE ANNUITY COMMENCEMENT DATE -- You may request a
partial Surrender of Contract Values at any time before the Annuity Commencement
Date. There are two restrictions:
- - The partial Surrender amount must be at least equal to $100, our current
minimum for partial Surrenders, and
- - The Contract must have a minimum Contract Value of $500 after the Surrender.
The minimum Contract Value in New York must be $1000 after the Surrender. We
reserve the right to close your Contract and pay the full Surrender Value if
the Contract Value is under the minimum after the Surrender. If your Contract
was issued in Texas, a remaining value of $500 is not required to continue the
Contract if Premium Payments were made in the last two Contract Years.
FULL SURRENDERS AFTER THE ANNUITY COMMENCEMENT DATE -- You may Surrender your
Contract on or after the Annuity Commencement Date only if you selected the
Payment For a Period Certain Annuity Payout Option. Under this option, we pay
you the Commuted Value of your Contract minus any applicable Contingent Deferred
Sales Charges. The Commuted Value is determined on the day we receive your
written request for Surrender.
PARTIAL SURRENDERS ARE ALLOWED AFTER THE ANNUITY COMMENCEMENT DATE. IF YOU ELECT
THE PAYMENTS FOR A DESIGNATED PERIOD ANNUITY PAYOUT OPTION, BUT CHECK WITH YOUR
TAX ADVISOR BECAUSE THERE COULD BE ADVERSE TAX CONSEQUENCES.
HOW DO I REQUEST A SURRENDER?
Requests for full Surrenders must be in writing. Requests for partial Surrenders
can be made in writing or by telephone. We will send your money within seven
days of receiving complete instructions. However, we may postpone payment of
Surrenders whenever: (a) the New York Stock Exchange is closed, (b) trading on
the New York Stock Exchange is restricted by the SEC, (b) the SEC permits and
orders postponement or (c) the SEC determines that an emergency exists to
restrict valuation.
22 - PROSPECTUS
<PAGE>
WRITTEN REQUESTS -- To request a full or partial Surrender, complete a Surrender
Form or send us a letter, signed by you, stating:
- - the dollar amount that you want to receive, either before or after we withhold
taxes and deduct for any applicable charges,
- - your tax withholding amount or percentage, if any, and
- - your mailing address.
If there are joint Contract Owners, both must authorize all Surrenders. For a
partial Surrender, specify the Accounts that you want your Surrender to come
from, otherwise, the Surrender will be taken in proportion to the value in each
Account.
TELEPHONE REQUESTS -- To request a partial Surrender by telephone, we must have
received your completed Telephone Redemption Program Enrollment Form. If there
are joint Contract Owners, both must sign this form. By signing the form, you
authorize us to accept telephone instructions for partial Surrenders from either
Contract Owner. Telephone authorization will remain in effect until we receive a
written cancellation notice from you or your joint Contract Owner, we
discontinue the program; or you are no longer the owner of the Contract. There
are some restrictions on telephone surrenders, please call us with any
questions.
We may record telephone calls and use other procedures to verify information and
confirm that instructions are genuine. We will not be liable for losses or
expenses arising from telephone instructions reasonably believed to be genuine.
WE MAY MODIFY THE REQUIREMENTS FOR TELEPHONE REDEMPTIONS AT ANY TIME.
Telephone Surrender instructions received before the close of the New York Stock
Exchange will be processed on that Valuation Day. Otherwise, your request will
be processed on the next Valuation Day.
COMPLETING A POWER OF ATTORNEY FORM FOR ANOTHER PERSON TO ACT ON YOUR BEHALF MAY
PREVENT YOU FROM MAKING SURRENDERS VIA TELEPHONE.
WHAT SHOULD BE CONSIDERED ABOUT TAXES?
There are certain tax consequences associated with Surrenders:
PRIOR TO AGE 59 1/2 -- If you make a Surrender prior to age 59 1/2, there may be
adverse tax consequences including a10% federal income tax penalty on the
taxable portion of the Surrender payment. Surrendering before age 59 1/2 may
also affect the continuing tax-qualified status of some Contracts.
WE DO NOT MONITOR SURRENDER REQUESTS. TO DETERMINE WHETHER A SURRENDER IS
PERMISSIBLE, WITH OR WITHOUT FEDERAL INCOME TAX PENALTY, PLEASE CONSULT YOUR
PERSONAL TAX ADVISER.
MORE THAN ONE CONTRACT ISSUED IN THE SAME CALENDAR YEAR -- If you own more than
one contract issued by us or our affiliates in the same calendar year, then
these contracts may be treated as one contract for the purpose of determining
the taxation of distributions prior to the Annuity Commencement Date. Please
consult your tax adviser for additional information.
INTERNAL REVENUE CODE SECTION 403(b) ANNUITIES -- As of December 31, 1988, all
section 403(b) annuities have limits on full and partial Surrenders.
Contributions to your Contract made after December 31, 1988 and any increases in
cash value after December 31, 1988 may not be distributed unless you are: (a)
age 59 1/2, (b) no longer employed, (c) deceased, (d) disabled, or (e)
experiencing a 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; unemployment or retirement may still be subject to a penalty
tax of 10%.
WE ENCOURAGE YOU TO CONSULT WITH YOUR TAX ADVISER BEFORE MAKING ANY SURRENDERS.
PLEASE SEE THE "FEDERAL TAX CONSIDERATIONS" SECTION FOR MORE INFORMATION.
ANNUITY PAYOUTS
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THIS SECTION DESCRIBES WHAT HAPPENS WHEN WE BEGIN TO MAKE REGULAR ANNUITY
PAYOUTS FROM YOUR CONTRACT. YOU, AS THE CONTRACT OWNER, SHOULD ANSWER FIVE
QUESTIONS:
1. When do you want Annuity Payouts to begin?
2. What Annuity Payout Option do you want to use?
3. How often do you want to receive Annuity Payouts?
4. What is the Assumed Investment Return?
5. Do you want fixed dollar amount or variable dollar amount Annuity Payouts?
Please check with your financial advisor to select the Annuity Payout Option
that best meets your income needs.
1. WHEN DO YOU WANT ANNUITY PAYOUTS TO BEGIN?
You select an Annuity Commencement Date when you purchase your Contract or at
any time before you begin receiving Annuity Payouts. You may change the Annuity
Commencement Date by notifying us within thirty days prior to the date. The
Annuity Commencement Date cannot be deferred beyond the 15th day of the month of
the Annuitant's 90th birthday. If this Contract is issued to the trustee of a
Charitable Remainder Trust, the Annuity Commencement Date may be deferred to the
Annuitant's 100th birthday.
23 - PROSPECTUS
<PAGE>
The Annuity Calculation Date is when the amount of your Annuity Payout is
determined. This occurs within five Valuation Days before your selected Annuity
Commencement Date.
All Annuity Payouts, regardless of frequency, will occur on the same day of the
month as the Annuity Commencement Date. After the initial payout, if an Annuity
Payout date falls on a Non-Valuation Day, the Annuity Payout is computed on the
prior Valuation Day. If the Annuity Payout date does not occur in a given month
due to a leap year or months with only 28 days (i.e. the 31st), the Annuity
Payout will be computed on the last Valuation Day of the month.
2. WHICH ANNUITY PAYOUT OPTION DO YOU WANT TO USE?
Your Contract contains the Annuity Payout Options described below. The Annuity
Proceeds Settlement Option is an option that can be elected by the Beneficiary
after the death of the Contract Owner and is described in the "Death Benefit"
section. We may at times offer other Annuity Payout Options.
OPTION 1: LIFE ANNUITY
We make Annuity Payouts as long as the Annuitant is living. When the Annuitant
dies, we stop making Annuity Payouts. A Payee would receive only one Annuity
Payout if the Annuitant dies after the first payout, two Annuity Payouts if the
Annuitant dies after the second payout, and so forth.
OPTION 2: LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS CERTAIN
We make monthly Annuity Payouts during the lifetime of the Annuitant but Annuity
Payouts are at least guaranteed for a minimum of 120, 180 or 240 months, as you
elect. If, at the death of the Annuitant, Annuity Payouts have been made for
less than the minimum elected number of months, then the Commuted Value as of
the date of the Annuitant's death will be paid in one sum to the Beneficiary.
OPTION 3: JOINT AND LAST SURVIVOR LIFE ANNUITY
We will make Annuity Payouts as long as the Annuitant and Joint Annuitant are
living. When one Annuitant dies, we continue to make Annuity Payouts to the
other Annuitant until that second Annuitant dies. When choosing this option, you
must decide what will happen to the Annuity Payouts; either fixed or variable,
after the first Annuitant dies. You must select Annuity Payouts that:
- - Remain the same at 100%, or
- - Decrease to 66.67%,
- - or Decrease to 50%.
For variable Annuity Payouts, these percentages represent Annuity Units; for
fixed Annuity Payouts, they represent actual dollar amounts. The percentage will
also impact the Annuity Payout amount we pay while both Annuitants are living.
If you pick a lower percentage, your original Annuity Payouts will be higher
while both Annuitants are alive.
OPTION 4: PAYMENTS FOR A DESIGNATED PERIOD
We will make Annuity Payouts for the number of years that you select. You can
select between 5 years and 30 years.
IMPORTANT INFORMATION:
- - YOU CANNOT SURRENDER YOUR CONTRACT ONCE ANNUITY PAYOUTS BEGIN, UNLESS YOU HAVE
SELECTED THE PAYMENTS FOR A DESIGNATED PERIOD ANNUITY PAYOUT OPTION. A
CONTINGENT DEFERRED SALES CHARGE MAY BE DEDUCTED.
- - For Non-Qualified Contracts, if you do not elect an Annuity Payout Option,
fixed Annuity Payouts will automatically begin on the Annuity Commencement
Date under the Life Annuity with 120,180 or 240 Monthly Payments Certain
Annuity Payout Option with payouts for 120 months.
- - For Qualified Contracts and Contracts issued in Texas, if you do not elect an
Annuity Payout Option, fixed Annuity Payouts will begin automatically on the
Annuity Commencement Date, under the Annuity Payout Option 1 -- Life Annuity.
3. HOW OFTEN DO YOU WANT THE PAYEE TO RECEIVE ANNUITY PAYOUTS?
In addition to selecting an Annuity Commencement Date and an Annuity Payout
Option, you must also decide how often you want the Payee to receive Annuity
Payouts. You may choose to receive Annuity Payouts:
- - monthly,
- - quarterly,
- - semi-annually, or
- - annually.
Once you select a frequency, it cannot be changed. If you do not make a
selection, the Payee will receive monthly Annuity Payouts. You must select a
frequency that results in an Annuity Payout of at least $50. If the amount falls
below $50, we have the right to change the frequency to bring the Annuity Payout
up to at least $50. For Contracts issued in New York, the minimum monthly
Annuity Payout is $20.
4. WHAT IS THE ASSUMED INVESTMENT RETURN?
The Assumed Investment Return is the investment return used to calculate
variable Annuity Payouts. The Assumed Investment Return for your Annuity is 5%.
The first Annuity Payout will be based upon a 5% Assumed Investment Return. The
remaining Annuity Payouts will fluctuate based on the actual investment results
of the Sub-Accounts.
24 - PROSPECTUS
<PAGE>
5. DO YOU WANT ANNUITY PAYOUTS TO BE FIXED-DOLLAR AMOUNT OR VARIABLE-DOLLAR
AMOUNT?
You may choose an Annuity Payout Option with fixed-dollar amounts or
variable-dollar amounts, depending on your income needs.
FIXED-DOLLAR AMOUNT ANNUITY PAYOUTS -- Once a fixed-dollar amount Annuity Payout
begins, you cannot change your selection to receive variable-dollar amount
Annuity Payout. You will receive equal fixed-dollar amount Annuity Payouts
throughout the Annuity Payout period. Fixed-dollar amount Annuity Payout amounts
are determined by multiplying the Contract Value, minus any applicable Premium
Taxes, by an Annuity rate. The annuity rate is set by us and is not less than
the rate specified in the fixed-dollar amount Annuity Payout Option tables in
your Contract.
VARIABLE-DOLLAR AMOUNT ANNUITY PAYOUTS -- A variable-dollar amount Annuity
Payout is based on the investment performance of the Sub-Accounts. The
variable-dollar amount Annuity Payouts may fluctuate with the performance of the
underlying Portfolios. To begin making variable-dollar amount Annuity Payouts,
we convert the first Annuity Payout amount to a set number of Annuity Units and
then price those units to determine the Annuity Payout amount. The number of
Annuity Units that determines the Annuity Payout amount remains fixed unless you
transfer units between Sub-Accounts.
The dollar amount of the first variable Annuity Payout depends on:
- - the Annuity Payout Option chosen,
- - the Annuitant's attained age and gender (if applicable), and,
- - the applicable annuity purchase rates based on the 1983a Individual Annuity
Mortality table
- - the Assumed Investment Return
The total amount of the first variable-dollar amount Annuity Payout is
determined by dividing the Contract Value minus any applicable Premium Taxes, by
$1,000 and multiplying the result by the payment factor defined in the Contract
for the selected Annuity Payout Option.
The dollar amount of each subsequent variable-dollar amount Annuity Payout is
equal to the total of:
Annuity Units for each Sub-Account multiplied by Annuity Unit Value of each
Sub-Account.
The Annuity Unit Value of each Sub-Account for any Valuation Period is equal to
the Accumulation Unit Value Net Investment Factor for the current Valuation
Period multiplied by the Annuity Unit factor, multiplied by the Annuity Unit
Value for the preceding Valuation Period.
TRANSFER OF ANNUITY UNITS -- After the Annuity Calculation Date, you may
transfer dollar amounts of Annuity Units from one Sub-Account to another. On the
day you make a transfer, the dollar amounts are equal for both Sub-Accounts and
the number of Annuity Units will be different. We will transfer the dollar
amount of your Annuity Units the day we receive your written request if received
before the close of the New York Stock Exchange. Otherwise, the transfer will be
made on the next Valuation Day.
OTHER PROGRAMS AVAILABLE
--------------------------------------------------------------------
AUTOMATIC ADDITIONS PROGRAM -- Automatic Additions is an electronic transfer
program that allows you to have money automatically transferred from your
checking or savings account, and invested in your Contract. It is available for
Premium Payments made after your initial Premium Payment. The minimum amount for
each transfer is $50. You can elect to have transfers occur either monthly or
quarterly, and they can be made into any Account available in your Contract.
AUTOMATIC INCOME PROGRAM -- The Automatic Income Program allows you to Surrender
up to 10% of your total Premium Payments each Contract Year. We can Surrender
from the Accounts you select systematically on a monthly, quarterly, semiannual,
or annual basis. The Automatic Income Program may change based on your
instructions after your seventh Contract Year.
ASSET REBALANCER PROGRAM -- Asset Allocation is a program that allows you to
choose an allocation for your Sub-Accounts to help you reach your investment
goals. Some Contracts offer model allocations with pre-selected Sub-Accounts and
percentages that have been established for each type of investor -- ranging from
conservative to aggressive. Over time, Sub-Account performance may cause your
Contract's allocation percentages to change, but under the Asset Allocation
Program, your Sub-Account allocations are rebalanced to the percentages in the
current model you have chosen. You can transfer freely between allocation models
up to twelve times per year. You can also allocate a portion of your investment
to Sub-Accounts that may not be part of the model. You can only participate in
one asset allocation model at a time.
OTHER INFORMATION
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ASSIGNMENT -- Ownership of this Contract is generally assignable. However, if
the Contract is issued to a tax qualified retirement plan, it is possible that
the ownership of the Contract may not be transferred or assigned. An assignment
of a Non-
25 - PROSPECTUS
<PAGE>
Qualified Contract may subject the Contract Values or Surrender Value to income
taxes and certain penalty taxes.
CONTRACT MODIFICATION -- The Annuitant may not be changed. However, if the
Annuitant is still living, the Contingent Annuitant may be changed at any time
prior to the Annuity Commencement Date by sending us written notice. We may
modify the Contract, but no modification will effect the amount or term of any
Contract unless a modification is required to conform the Contract to applicable
Federal or State law. No modification will effect the method by which Contract
Values are determined.
HOW CONTRACTS ARE SOLD -- Hartford Securities Distribution Company, Inc. ("HSD")
serves as Principal Underwriter for the securities issued with respect to the
Separate Account. 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. HSD is an affiliate of
ours. Both HSD and Hartford are ultimately controlled by The Hartford Financial
Services Group, Inc. The principal business address of HSD is the same as ours.
The securities will be sold by individuals who represent us as insurance agents
and who are registered representatives of Broker-Dealers that have entered into
distribution agreements with HSD.
Commissions will be paid by Hartford and will not be more than 6% of Premium
Payments. 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 Contract may be sold directly to certain individuals under certain
circumstances that do not involve payment of any sales compensation to a
registered representative. In such case, Hartford will credit the Contract with
an additional 5.0% of the Premium Payment. This additional percentage of Premium
Payment in no way affects present or future charges, rights, benefits or current
values of other Contract Owners. The following class of individuals are eligible
for this feature: (1) current or retired officers, directors, trustees and
employees (and their families) of the ultimate parent and affiliates of
Hartford; and (2) employees and registered representatives (and their families)
of registered broker-dealers (or their financial institutions) that have a sales
agreement with Hartford and its principal underwriter to sell the Contracts.
YEAR 2000
IN GENERAL -- The Year 2000 issue relates to the ability or inability of
computer hardware, software and other information technology (IT) systems, as
well as non-IT systems, such as equipment and machinery with imbedded chips and
microprocessors, to properly process information and data containing or related
to dates beginning with the year 2000 and beyond. The Year 2000 issue exists
because, historically, many IT and non-IT systems that are in use today were
developed years ago when a year was identified using a two-digit date field
rather than a four-digit date field. As information and data containing or
related to the century date are introduced to date sensitive systems, these
systems may recognize the year 2000 as "1900", or not at all, which may result
in systems processing information incorrectly. This, in turn, may significantly
and adversely affect the integrity and reliability of information databases of
IT systems, may cause the malfunctioning of certain non-IT systems, and may
result in a wide variety of adverse consequences to a company. In addition, Year
2000 problems that occur with third parties with which a company does business,
such as suppliers, computer vendors, distributors and others, may also adversely
affect any given company.
The integrity and reliability of Hartford's IT systems, as well as the
reliability of its non-IT systems, are integral aspects of Hartford's business.
Hartford issues insurance policies, annuities, mutual funds and other financial
products to individual and business customers, nearly all of which contain date
sensitive data, such as policy expiration dates, birth dates and premium payment
dates. In addition, various IT systems support communications and other systems
that integrate Hartford's various business segments and field offices. Hartford
also has business relationships with numerous third parties that affect
virtually all aspects of Hartford's business, including, without limitation,
suppliers, computer hardware and software vendors, insurance agents and brokers,
securities broker-dealers and other distributors of financial products, many of
which provide date sensitive data to Hartford, and whose operations are
important to Hartford's business.
INTERNAL YEAR 2000 EFFORTS AND TIMETABLE -- Beginning in 1990, Hartford began
working on making its IT systems Year 2000 ready, either through installing new
programs or replacing systems. Since January 1998, Hartford's Year 2000 efforts
have focused on the remaining Year 2000 issues related to IT and non-IT systems
in all of Hartford's business segments. These Year 2000 efforts include the
following five main initiatives: (1) identifying and assessing Year 2000 issues;
(2) taking actions to remediate IT and non-IT systems so that they are Year
26 - PROSPECTUS
<PAGE>
2000 ready; (3) testing IT and non-IT systems for Year 2000 readiness; (4)
deploying such remediated and tested systems back into their respective
production environments; and (5) conducting internal and external integrated
testing of such systems. As of December 31, 1998, Hartford substantially
completed initiatives (1) through (4) of its internal Year 2000 efforts.
Hartford has begun initiative (5) and management currently anticipates that such
activity will continue into the fourth quarter of 1999.
THIRD PARTY YEAR 2000 EFFORTS AND TIMETABLE -- Hartford's Year 2000 efforts
include assessing the potential impact on Hartford of third parties' Year 2000
readiness. Hartford's third party Year 2000 efforts include the following three
main initiatives: (1) identifying third parties which have significant business
relationships with Hartford, including, without limitation, insurance agents,
brokers, third party administrators, banks and other distributors and servicers
of financial products, and inquiring of such third parties regarding their Year
2000 readiness; (2) evaluating such third parties' responses to Hartford's
inquiries; and (3) based on the evaluation of third party responses (or a third
party's failure to respond) and the significance of the business relationship,
conducting additional activities with respect to third parties as determined to
be necessary in each case. These activities may include conducting additional
inquiries, more in-depth evaluations of Year 2000 readiness and plans, and
integrated IT systems testing. Hartford has completed the first third party
initiative and, as of early 1999, had substantially completed evaluating third
party responses received. Hartford has begun conducting the additional
activities described in initiative (3) and management currently anticipates that
it will continue to do so through the end of 1999. However, notwithstanding
these third party Year 2000 efforts, Hartford does not have control over these
third parties and, as a result, Hartford cannot currently determine to what
extent future operating results may be adversely affected by the failure of
these third parties to adequately address their Year 2000 issues.
YEAR 2000 COSTS -- The costs of Hartford's Year 2000 program that were incurred
through the year ended December 31, 1997 were not material to Hartford's
financial condition or results of operations. The after-tax costs of Hartford's
Year 2000 efforts for the year ended December 31, 1998 were approximately $3
million. Management currently estimates that after-tax costs related to the Year
2000 program to be incurred in 1999 will be less than $10 million. These costs
are being expensed as incurred.
RISKS AND CONTINGENCY PLANS -- If significant Year 2000 problems arise,
including problems arising with third parties, failures of IT and non-IT systems
could occur, which in turn could result in substantial interruptions in
Hartford's business. In addition, Hartford's investing activities are an
important aspect of its business and Hartford may be exposed to the risk that
issuers of investments held by it will be adversely impacted by Year 2000
issues. Given the uncertain nature of Year 2000 problems that may arise,
especially those related to the readiness of third parties discussed above,
management cannot determine at this time whether the consequences of Year 2000
related problems that could arise will have a material impact on Hartford's
financial condition or results of operations.
Hartford is in the process of developing certain contingency plans so that if,
despite its Year 2000 efforts, Year 2000 problems ultimately arise, the impact
of such problems may be avoided or minimized. These contingency plans are being
developed based on, among other things, known or reasonably anticipated
circumstances and potential vulnerabilities. The contingency planning also
includes assessing the dependency of Hartford's business on third parties and
their Year 2000 readiness. Hartford currently anticipates that internal and
external contingency plans will be substantially complete by the end of the
second quarter of 1999. However, in many contexts, Year 2000 issues are dynamic,
and ongoing assessments of business functions, vulnerabilities and risks must be
made. As such, new contingency plans may be needed in the future and/or existing
plans may need to be modified as circumstances warrant.
LEGAL MATTERS AND EXPERTS
There are no material legal proceedings pending 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,
Senior Vice President, General Counsel and Corporate Secretary, Hartford Life
Insurance Company, P.O. Box 2999, Hartford, Connecticut 06104-2999.
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.
MORE INFORMATION
You may call your Representative if you have any questions or write or call us
at the address below:
Hartford Life Insurance Company
Attn: Individual Annuity Services
P.O. Box 5085
Hartford, Connecticut 06102-5085.
Telephone:(800) 862-6668 (Contract Owners)
(800) 862-4397 (Account Executive)
27 - PROSPECTUS
<PAGE>
FEDERAL TAX CONSIDERATIONS
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WHAT ARE SOME OF THE FEDERAL TAX CONSEQUENCES WHICH AFFECT THESE CONTRACTS?
A. GENERAL
Since federal tax law is complex, the tax consequences of purchasing this
contract will vary depending on your situation. You may need tax or legal advice
to help you determine whether purchasing this contract is right for you.
Our general discussion of the tax treatment of this contract is based on our
understanding of federal income tax laws as they are currently interpreted. A
detailed description of all federal income tax consequences regarding the
purchase of this contract cannot be made in the prospectus. We also do not
discuss state, municipal or other tax laws that may apply to this contract. For
detailed information, you should consult with a qualified tax adviser familiar
with your situation.
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 Units (See "Value of Accumulation Units"). 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. Code Section 72 contains provisions
for contract owners which are not natural persons. Non-natural persons include
corporations, trusts, limited liability companies, partnerships and other types
of legal entities. The tax rules for contracts owned by non-natural persons are
different from the rules for contracts owned by individuals. For example, the
annual net increase in the value of the contract is currently includible 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 are additional exceptions from
current inclusion for:
- - certain annuities held by structured settlement companies,
- - certain annuities held by an employer with respect to a terminated qualified
retirement plan and
- - certain immediate annuities.
A non-natural person which is a tax-exempt entity for federal tax purposes will
not be subject to income tax as a result of this provision.
If the contract owner is a non-natural person, the primary annuitant is treated
as the contract owner in applying mandatory distribution rules. These rules
require that certain distributions be made upon the death of the contract owner.
A change in the primary annuitant is also 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
28 - PROSPECTUS
<PAGE>
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 incident to
divorce.
B. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE.
Annuity payments made periodically after the Annuity Commencement Date are
includable in gross income to the extent the payments exceed the amount
determined by the application of the ratio of the "investment in the contract"
to the total amount of the payments to be made after the Annuity Commencement
Date (the "exclusion ratio").
I. When the total of amounts excluded from income by application of the
exclusion ratio is equal to the investment in the contract as of the Annuity
Commencement Date, any additional payments (including surrenders) will be
entirely includable in gross income.
II. If the annuity payments cease by reason of the death of the Annuitant and,
as of the date of death, the amount of annuity payments excluded from gross
income by the exclusion ratio does not exceed the investment in the contract as
of the Annuity Commencement Date, then the remaining portion of unrecovered
investment shall be allowed as a deduction for the last taxable year of the
Annuitant.
III. Generally, nonperiodic amounts received or deemed received after the
Annuity Commencement Date are not entitled to any exclusion ratio and shall be
fully includable in gross income. However, upon a full surrender after such
date, only the excess of the amount received (after any surrender charge) over
the remaining investment in the contract shall be includable in gross income
(except to the extent that the aggregation rule referred to in the next
subparagraph c. may apply).
C. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS.
Contracts issued after October 21, 1988 by the same insurer (or affiliated
insurer) to the same Contract Owner within the same calendar year (other than
certain contracts held in connection with a tax-qualified retirement
arrangement) will be treated as one annuity Contract for the purpose of
determining the taxation of distributions prior to the Annuity Commencement
Date. An annuity contract received in a tax-free exchange for another annuity
contract or life insurance contract may be treated as a new Contract for this
purpose. Hartford believes that for any annuity subject to such aggregation, the
values under the Contracts and the investment in the contracts will be added
together to determine the taxation under subparagraph 2.a., above, of amounts
received or deemed received prior to the Annuity Commencement Date. Withdrawals
will first be treated as withdrawals of income until all of the income from all
such Contracts is withdrawn. As of the date of this Prospectus, there are no
regulations interpreting this provision.
D. 10% PENALTY TAX -- APPLICABLE TO CERTAIN
WITHDRAWALS AND ANNUITY PAYMENTS.
I. If any amount is received or deemed received on the Contract (before or after
the Annuity Commencement Date), the Code applies a penalty tax equal to ten
percent of the portion of the amount includable in gross income, unless an
exception applies.
II. The 10% penalty tax will not apply to the following distributions
(exceptions vary based upon the precise plan involved):
1. Distributions made on or after the date the recipient has attained the age of
59 1/2.
2. Distributions made on or after the death of the holder or where the holder is
not an individual, the death of the primary annuitant.
3. Distributions attributable to a recipient's becoming disabled.
4. A distribution that is part of a scheduled series of substantially equal
periodic payments (not less frequently than annually) for the life (or life
expectancy) of the recipient (or the joint lives or life expectancies of the
recipient and the recipient's designated 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
29 - PROSPECTUS
<PAGE>
income on the contract attributable thereto, such amount is not subject to the
10% penalty tax. In all other respects, amounts received or deemed received from
such post-exchange Contracts are generally subject to the rules described in
this subparagraph 3.
F. REQUIRED DISTRIBUTIONS
I. DEATH OF CONTRACT OWNER OR PRIMARY ANNUITANT
Subject to the alternative election or spouse beneficiary provisions in ii or
iii below:
1. If any Contract Owner dies on or after the Annuity Commencement Date and
before the entire interest in the Contract has been distributed, the remaining
portion of such interest shall be distributed at least as rapidly as under the
method of distribution being used as of the date of such death;
2. If any Contract Owner dies before the Annuity Commencement Date, the entire
interest in the Contract will be distributed within 5 years after such death;
and
3. If the Contract Owner is not an individual, then for purposes of 1. or 2.
above, the primary annuitant under the Contract shall be treated as the Contract
Owner, and any change in the primary annuitant shall be treated as the death of
the Contract Owner. The primary annuitant is the individual, the events in the
life of whom are of primary importance in affecting the timing or amount of the
payout under the Contract.
II. ALTERNATIVE ELECTION TO SATISFY DISTRIBUTION REQUIREMENTS
If any portion of the interest of a Contract Owner described in i. above is
payable to or for the benefit of a designated beneficiary, such beneficiary may
elect to have the portion distributed over a period that does not extend beyond
the life or life expectancy of the beneficiary. The election must be made and
payments must begin within a year of the death.
III. SPOUSE BENEFICIARY
If any portion of the interest of a Contract Owner is payable to or for the
benefit of his or her spouse, and the Annuitant or Contingent Annuitant is
living, such spouse shall be treated as the Contract Owner of such portion for
purposes of section i. above. This spousal continuation shall apply only once
for this contract.
3. DIVERSIFICATION REQUIREMENTS. The Code requires that investments supporting
your contract be adequately diversified. Code Section 817 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. If a contract is not treated as an annuity
contract, the contract owner will be subject to income tax on annual increases
in cash value.
The Treasury Department's diversification regulations 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 the
case of government securities, each government agency or instrumentality is
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 still 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.
We monitor the diversification of investments in the separate accounts and test
for diversification as required by the Code. We intend 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 separate accounts
supporting the contract must be considered to be owned by the insurance company
and not by the contract owner. It is unclear under what circumstances an
investor is considered to have enough control over the assets in the separate
account to be considered the owner of the assets for tax purposes.
The IRS has issued several rulings discussing investor control. These rulings
say that certain incidents of ownership by the contract owner, such as the
ability to select and control investments in a separate account, will cause the
contract owner to be treated as the owner of the assets for tax purposes.
In its explanation of the diversification regulations, the Treasury Department
recognized 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.
30 - PROSPECTUS
<PAGE>
The final regulations issued under Section 817 did not provide guidance
regarding investor control, and as of the date of this prospectus, guidance has
yet to be issued. We do not know if additional guidance will be issued. If
guidance is issued, we do not know if it will have a retroactive effect.
Due to the lack of specific guidance on investor control, there is some
uncertainty about when a contract owner is considered the owner of the assets
for tax purposes. We reserve the right to modify the contract, as necessary, to
prevent you from being considered the owner of assets in the separate account.
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 there is no election to waive withholding, 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. A recipient may elect not to have income taxes
withheld or have income taxes withheld at a different rate by providing a
completed election form. Election forms will be provided at the time
distributions are requested.
E. GENERAL PROVISIONS AFFECTING QUALIFIED RETIREMENT PLANS
The Contract may be used for a number of qualified retirement plans. If the
Contract is being purchased with respect to some form of qualified retirement
plan, please refer to Appendix I 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.
31 - PROSPECTUS
<PAGE>
APPENDIX I - INFORMATION REGARDING TAX-QUALIFIED RETIREMENT PLANS
--------------------------------------------------------------------
This summary does not attempt to provide more than general information about the
federal income tax rules associated with use of a Contract by a tax-qualified
retirement plan. Because of the complexity of the federal tax rules, owners,
participants and beneficiaries are encouraged to consult their own tax advisors
as to specific tax consequences.
The federal tax rules applicable to owners of Contracts under tax-qualified
retirement plans vary according to the type of plan as well as the terms and
conditions of the plan itself. Contract owners, plan participants and
beneficiaries are cautioned that the rights and benefits of any person may be
controlled by the terms and conditions of the tax-qualified retirement plan
itself, regardless of the terms and conditions of a Contract. We are not bound
by the terms and conditions of such plans to the extent such terms conflict with
a Contract, unless we specifically consent to be bound.
Some tax-qualified retirement plans are subject to distribution and other
requirements that are not incorporated into our administrative procedures.
Contract owners, participants and beneficiaries are responsible for determining
that contributions, distributions and other transactions comply with applicable
law. Tax penalties may apply to transactions with respect to tax-qualified
retirement plans if applicable federal income tax rules and restrictions are not
carefully observed.
We do not currently offer the Contracts in connection with all of the types of
tax-qualified retirement plans discussed below and may not offer the Contracts
for all types of tax-qualified retirement plans in the future.
1. Tax-Qualified Pension or Profit-Sharing Plans Eligible employers can
establish certain tax-qualified pension and profit-sharing plans under section
401 of the Code. Rules under section 401(k) of the Code govern certain "cash or
deferred arrangements" under such plans. Rules under section 408(k) govern
"simplified employee pensions". Tax-qualified pension and profit-sharing plans
are subject to limitations on the amount that may be contributed, the persons
who may be eligible to participate and the time when distributions must
commence. Employers intending to use the Contracts in connection with tax-
qualified pension or profit-sharing plans should seek competent tax and other
legal advice.
2. Tax Sheltered Annuities Under Section 403(b) Public schools and certain
types of charitable, educational and scientific organizations, as specified in
section 501(c)(3) of the Code, can purchase tax-sheltered annuity contracts for
their employees. Tax-deferred contributions can be made to tax-sheltered annuity
contracts under section 403(b) of the Code, subject to certain limitations.
Generally, such contributions may not exceed the lesser of $10,000 (indexed) or
20% of the employee's "includable compensation" for such employee's most recent
full year of employment, subject to other adjustments. Special provisions under
the Code 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:
- - after the participating employee attains age 59 1/2;
- - upon separation from service;
- - upon death or disability; or
- - 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.
3. Deferred Compensation Plans Under Section 457 A governmental employer
or a tax-exempt employer other than a governmental unit can establish a Deferred
Compensation Plan under section 457 of the Code. For these purposes, a
"governmental employer" is a State, a political subdivision of a State, or an
agency or an instrumentality of a State or political subdivision of a State.
Employees and independent contractors performing services for a governmental or
tax-exempt employer can elect to have contributions made to a Deferred
Compensation Plan of their employer in accordance with the employer's plan and
section 457 of the Code.
Deferred Compensation Plans that meet the requirements of section 457(b) of the
Code are called "eligible" Deferred Compensation Plans. Section 457(b) limits
the amount of contributions that can be made to an eligible Deferred
Compensation Plan on behalf of a participant. Generally, the limitation on
contributions is 33 1/3% of a participant's includable compensation (typically
25% of gross compensation) or, for 1999, $8,000 (indexed), whichever is less.
The plan may provide for additional catch-up contributions during the three
taxable years ending before the year in which the participant attains normal
retirement age.
All of the assets and income of an eligible Deferred Compensation Plan
established by a governmental employer after August 20, 1996, must be held in
trust for the exclusive benefit of participants and their beneficiaries. For
this purpose, custodial accounts and certain annuity contracts are treated as
trusts. Eligible Deferred Compensation Plans that were in existence on
32 - PROSPECTUS
<PAGE>
August 20, 1996 may be amended to satisfy the trust and exclusive benefit
requirements any time prior to January 1, 1999, and must be amended not later
than that date to continue to receive favorable tax treatment. The requirement
of a trust does not apply to amounts under a Deferred Compensation Plan of a
tax-exempt (non-governmental) employer. In addition, the requirement of a trust
does not apply to amounts under a Deferred Compensation Plan of a governmental
employer if the Deferred Compensation Plan is not an eligible plan within the
meaning of section 457(b) of the Code. In the absence of such a trust, amounts
under the plan will be subject to the claims of the employer's general
creditors.
In general, distributions from an eligible Deferred Compensation Plan are
prohibited under section 457 of the Code unless made after the participating
employee:
- - attains age 70 1/2,
- - separates from service,
- - dies, or
- - suffers an unforeseeable financial emergency as defined in the Code.
Under present federal tax law, amounts accumulated in a Deferred Compensation
Plan under section 457 of the Code cannot be transferred or rolled over on a
tax-deferred basis except for certain transfers to other Deferred Compensation
Plans under section 457 in limited cases.
4. Individual Retirement Annuities ("IRAs") Under Section 408
Traditional IRAs. Eligible individuals can establish individual retirement
programs under section 408 of the Code through the purchase of an IRA. Section
408 imposes limits with respect to IRAs, including limits on the amount that may
be contributed to an IRA, the amount of such contributions that may be deducted
from taxable income, the persons who may be eligible to contribute to an IRA,
and the time when distributions commence from an IRA. Distributions from certain
tax-qualified retirement plans may be "rolled-over" to an IRA on a tax-deferred
basis.
SIMPLE IRAs. Eligible employees may establish SIMPLE IRAs in connection with a
SIMPLE IRA plan of an employer under section 408(p) of the Code. 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 Traditional IRA only after two years have expired since the employee first
commenced participation in the employer's SIMPLE IRA plan. Amounts cannot be
rolled over to a SIMPLE IRA from a qualified plan or a Traditional IRA. Hartford
is a non-designated financial institution for purposes of the SIMPLE IRA rules.
Roth IRAs. Eligible individuals may establish Roth IRAs under section 408A of
the Code. Contributions to a Roth IRA are not deductible. Subject to special
limitations, a Traditional IRA may be converted into a Roth IRA or a
distribution from a Traditional IRA may be rolled over to a Roth IRA. However, a
conversion or a rollover from a Traditional IRA to a Roth IRA is not excludable
from gross income. If certain conditions are met, qualified distributions from a
Roth IRA are tax-free.
5. Federal Tax Penalties and Withholding Distributions from tax-qualified
retirement plans are generally taxed as ordinary income 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 that bears the
same ratio as the after-tax contributions bear to the expected return.
(a) Penalty Tax on Early Distributions Section 72(t) of the Code imposes an
additional penalty tax equal to 10% of the taxable portion of a distribution
from certain tax-qualified retirement plans. However, the 10% penalty tax
does not apply to a distributions that is:
- - Made on or after the date on which the employee reaches age 59 1/2;
- - Made to a beneficiary (or to the estate of the employee) on or after the death
of the employee;
- - Attributable to the employee's becoming disabled (as defined in the Code);
- - Part of a series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the employee or the
joint lives (or joint life expectancies) of the employee and his or her
designated beneficiary;
- - Except in the case of an IRA, made to an employee after separation from
service after reaching age 55; or
- - Not greater than the amount allowable as a deduction to the employee for
eligible medical expenses during the taxable year.
In addition, the 10% penalty tax does not apply to a distribution from an IRA
that is:
- - Made after separation from employment to an unemployed IRA owner for health
insurance premiums, if certain conditions are met;
- - Not in excess of the amount of certain qualifying higher education expenses,
as defined by section 72(t)(7) of the Code; or
- - A qualified first-time homebuyer distribution meeting the requirements
specified at 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 is increased to 25% with respect to non-exempt early 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.
33 - PROSPECTUS
<PAGE>
(b) Minimum Distribution Penalty Tax If the amount distributed is less than the
minimum required distribution for the year, the Participant is subject to a
50% penalty tax on the amount that was not properly distributed.
An individual's interest in a tax-qualified retirement plan generally must be
distributed, or begin to be distributed, not later than the Required Beginning
Date. Generally, the Required Beginning Date is April 1 of the calendar year
following the later of:
- - the calendar year in which the individual attains age 70 1/2; or
- - the calendar year in which the individual retires from service with the
employer sponsoring the plan.
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 the Required Beginning Date over:
- - the life of the Participant or the lives of the Participant and the
Participant's designated beneficiary, or
- - over a period not extending beyond the life expectancy of the Participant or
the joint life expectancy of the Participant and the Participant's designated
beneficiary.
Each annual distribution must equal or exceed a "minimum distribution amount"
which is determined by dividing the account balance by the applicable life
expectancy. This account balance is generally based upon the account value as of
the close of business on the last day of the previous calendar year. In
addition, minimum distribution incidental benefit rules may require a larger
annual distribution.
If an individual dies before reaching his or her Required Beginning Date, the
individual's entire interest must generally be distributed within five years of
the 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 and distribution is over the life
of such 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.
(c) Withholding In general, regular wage withholding rules apply to
distributions from IRAs and plans described in section 457 of the Code.
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.
Mandatory federal income tax withholding at a flat rate of 20% will generally
apply to other distributions from such other tax-qualified retirement plans
unless such distributions are:
- - the non-taxable portion of the distribution;
- - required minimum distributions; or
- - direct transfer distributions.
Direct transfer distributions are direct payments to an IRA or to another
eligible retirement plan under Code section 401(a)(31).
Certain states require withholding of state taxes when federal income tax is
withheld.
34 - 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>
35 - PROSPECTUS
<PAGE>
This form must be completed for all tax-sheltered annuities.
SECTION 403(b)(11) ACKNOWLEDGMENT FORM
- ---------------------------------------------------------------
The Hartford Variable Annuity Contract that 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 Dean Witter Select Dimensions 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: ______________________________________________
- --------------------------------------------------------------------------------
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 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
DEAN WITTER SELECT DIMENSIONS VARIABLE ANNUITY
This Statement of Additional Information is not a Prospectus. The
information contained herein should be read in conjunction with the
Prospectus.
To obtain a prospectus, send a written request to Hartford Life Insurance
Company, Attn: Annuity Marketing Services, P.O. Box 5085, Hartford, CT
06102-5085.
Date of Prospectus: May 3, 1999
Date of Statement of Additional Information: May 3, 1999
33-80738
<PAGE>
-2-
TABLE OF CONTENTS
SECTION PAGE
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY . . . . . . . . . . . . . . 3
SAFEKEEPING OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . 3
DISTRIBUTION OF CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . 3
CALCULATION OF YIELD AND RETURN. . . . . . . . . . . . . . . . . . . . . . 5
PERFORMANCE COMPARISONS. . . . . . . . . . . . . . . . . . . . . . . . . . 9
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 life insurance, both individual and group, in all
states of the United States and the District of Columbia. We were originally
incorporated under the laws of Massachusetts on June 5, 1902, and
subsequently redomiciled to Connecticut. Our offices are located in
Simsbury, Connecticut; however, our mailing address is P.O. Box 2999,
Hartford, CT 06104-2999. We are ultimately controlled by The Hartford
Financial Services Group, Inc., one of the largest financial service
providers in the United States.
HARTFORD'S RATINGS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Effective
Rating Agency Date of Rating Rating Basis of Rating
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
A.M. Best and Company, Inc. 1/1/99 A+ Financial performance
- ---------------------------------------------------------------------------------------
Standard & Poor's 6/1/98 AA Insurer financial strength
- ---------------------------------------------------------------------------------------
Duff & Phelps 12/21/98 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.
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. HSD is an affiliate of ours.
Both HSD and Hartford are ultimately controlled by The Hartford Financial
Services Group, Inc. The principal business address of HSD is the same as
ours. The securities will be sold by individuals who represent us as
insurance agents and who are registered representatives of Broker-Dealers
that have entered into distribution agreements with HSD.
<PAGE>
-4-
Commissions will be paid by Hartford and will not be more than 6% of Premium
Payments. 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 the 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 Contract may be sold directly to certain individuals under certain
circumstances that do not involve payment of any sales compensation to a
registered representative. In such case, Hartford will credit the Contract
with an additional 5.0% of the Premium Payment. This additional percentage of
Premium Payment in no way affects present or future charges, rights, benefits
or current values of other Contract Owners. The following class of
individuals are eligible for this feature: (1) current or retired officers,
directors, trustees and employees (and their families) of the ultimate parent
and affiliates of Hartford; and (2) employees and registered representatives
(and their families) of registered broker-dealers (or their financial
institutions) that have a sales agreement with Hartford and its principal
underwriter to sell the Contracts.
Hartford currently pays HSD underwriting commissions for its role as
Principal Underwriter of all variable annuities associated with this Separate
Account. For the past three years, the aggregate dollar amount of
underwriting commissions paid to HSD in its role as Principal
Underwriter has been: 1998: $1,627,728, 1997: $3,556,222 and 1996:
$2,517,574. HDS has retained none of these commissions.
<PAGE>
-5-
CALCULATION OF YIELD AND RETURN
YIELD OF THE MONEY MARKET PORTFOLIO SUB-ACCOUNT. As summarized in the
Prospectus under the heading "Performance Related Information," the yield of
the Sub-Account for a seven day period (the "base period") will be computed
by determining the "net change in value" of a hypothetical account having a
balance of one unit at the beginning of the period, dividing the net change
in account value by the value of the account at the beginning of the base
period to obtain the base period return, and multiplying the base period
return by 365/7 with the resulting yield figure carried to the nearest
hundredth of one percent. Net changes in value of a hypothetical account
will include net investment income of the account (accrued dividends as
declared by the underlying funds, less expense and Contract charges of the
account) for the period, but will not include realized gains or losses or
unrealized appreciation or depreciation on the underlying fund shares.
The effective yield is calculated by compounding the base period return by
adding 1, raising the sum to a power equal to 365/7 and subtracting 1 from
the result, according to the following formula:
365/7
Effective Yield = [(Base Period Return + 1) ] - 1
THE MONEY MARKET PORTFOLIO SUB-ACCOUNT'S YIELD AND EFFECTIVE YIELD WILL VARY
IN RESPONSE TO FLUCTUATIONS IN INTEREST RATES AND IN THE EXPENSES OF THE
SUB-ACCOUNT. THE CURRENT YIELD AND EFFECTIVE YIELD REFLECT RECURRING CHARGES
ON THE SEPARATE ACCOUNT LEVEL, INCLUDING THE MAXIMUM ANNUAL MAINTENANCE FEE.
- ---------------------------------------------------------------------------
SUB-ACCOUNT YIELD EFFECTIVE YIELD
- ---------------------------------------------------------------------------
The Money Market Portfolio* 3.30% 3.36%
- ---------------------------------------------------------------------------
* Yield and effective yield for the seven day period ending December 31, 1998.
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 Fund 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 Fund.
THE YIELD REFLECTS RECURRING CHARGES ON THE SEPARATE ACCOUNT LEVEL, INCLUDING
THE ANNUAL MAINTENANCE FEE.
<PAGE>
-6-
Yield calculations of the Sub-Accounts used for illustration purposes reflect
the interest earned by the Sub-Accounts, less applicable asset charges
assessed against a Contract Owner's account over the base period. Yield
quotations based on a 30 day period were computed by dividing the dividends
and interest 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.
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.
- ---------------------------------------------------------------------------
SUB-ACCOUNT YIELD
- ---------------------------------------------------------------------------
The North American Government Securities Portfolio** 3.49%
- ---------------------------------------------------------------------------
The Diversified Income Portfolio** 6.77%
- ---------------------------------------------------------------------------
High Yield Portfolio** 8.26%
- ---------------------------------------------------------------------------
** Yield quotation based on a 30 day period ended December 31, 1998.
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.
<PAGE>
-7-
For the fiscal year ended December 31, 1998, standardized average annual
total return quotations for the Sub-Accounts listed were as follows.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR YEAR ENDED DECEMBER 31, 1998
S/A
INCEPTION SINCE
SUB-ACCOUNT DATE 1 YEAR 5 YEAR 10 YEAR INCEPTION
- ------------------------------------------------------------------------------
American Value 11/8/94 19.96% N/A N/A 22.44%
- ------------------------------------------------------------------------------
Balanced Growth 11/8/94 3.82% N/A N/A 11.38%
- ------------------------------------------------------------------------------
Developing Growth 11/8/94 -1.48% N/A N/A 15.46%
- ------------------------------------------------------------------------------
Dividend Growth 11/8/94 9.06% N/A N/A 21.50%
- ------------------------------------------------------------------------------
Diversified Income 11/8/94 -6.23% N/A N/A 1.34%
- ------------------------------------------------------------------------------
Emerging Markets 11/8/94 -37.22% N/A N/A -10.14%
- ------------------------------------------------------------------------------
Global Equity 11/8/94 4.52% N/A N/A 6.03%
- ------------------------------------------------------------------------------
Growth 11/8/94 2.65% N/A N/A 12.36%
- ------------------------------------------------------------------------------
Midcap Growth 1/2/97 -4.80% N/A N/A 3.50%
- ------------------------------------------------------------------------------
Money Market 11/8/94 -5.30% N/A N/A -0.60%
- ------------------------------------------------------------------------------
North American 11/8/94 -6.17% N/A N/A -0.80%
- ------------------------------------------------------------------------------
Government
Utilities 11/8/94 11.53% N/A N/A 15.20%
- ------------------------------------------------------------------------------
Value-Added Market 11/8/94 1.63% N/A N/A 14.50%
- ------------------------------------------------------------------------------
VK Enterprise 4/1/98 N/A N/A N/A -2.48%
- ------------------------------------------------------------------------------
VK Strategic Stock 4/1/98 N/A N/A N/A -6.16%
- ------------------------------------------------------------------------------
MS Emerging Markets
Debt 4/1/98 N/A N/A N/A -39.53%
- ------------------------------------------------------------------------------
MS High Yield 4/1/98 N/A N/A N/A -9.06%
- ------------------------------------------------------------------------------
MS Midcap Value 4/1/98 N/A N/A N/A -7.88%
- ------------------------------------------------------------------------------
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 contingent deferred sales charge and the
Annual Maintenance Fee are not deducted and the time periods used to
calculate return are based on the inception date of the underlying Funds.
Therefore, non-standardized total return for a Sub-Account is higher than
standardized total return for a Sub-Account.
<PAGE>
-8-
The following are the non-standardized annualized total return quotations for
the Sub-Accounts for the fiscal year ended December 31, 1998.
NON-STANDARDIZED ANNUALIZED TOTAL RETURN THAT PRE-DATE THE INCEPTION DATE OF THE
SEPARATE ACCOUNT FOR YEAR ENDED DECEMBER 31, 1998
FUND
INCEPTION SINCE
SUB-ACCOUNT DATE 1 YEAR 5 YEAR 10 YEAR INCEPTION
- -------------------------------------------------------------------------------
American Value 11/8/94 28.96% N/A N/A 25.59%
- -------------------------------------------------------------------------------
Balanced Growth 11/8/94 12.82% N/A N/A 15.01%
- -------------------------------------------------------------------------------
Developing Growth 11/8/94 7.52% N/A N/A 18.64%
- -------------------------------------------------------------------------------
Dividend Growth 11/8/94 18.06% N/A N/A 24.54%
- -------------------------------------------------------------------------------
Diversified Income 11/8/94 2.77% N/A N/A 5.68%
- -------------------------------------------------------------------------------
Emerging Markets 11/8/94 -30.02% N/A N/A -5.29%
- -------------------------------------------------------------------------------
Global Equity 11/8/94 13.52% N/A N/A 10.12%
- -------------------------------------------------------------------------------
Growth 11/8/94 11.65% N/A N/A 16.03%
- -------------------------------------------------------------------------------
Midcap Growth 1/2/97 4.20% N/A N/A 9.43%
- -------------------------------------------------------------------------------
Money Market 11/8/94 3.70% N/A N/A 3.92%
- -------------------------------------------------------------------------------
North American 11/8/94 2.83% N/A N/A 3.73%
- -------------------------------------------------------------------------------
Government
Utilities 11/8/94 20.53% N/A N/A 18.74%
- -------------------------------------------------------------------------------
Value-Added Market 11/8/94 10.63% N/A N/A 17.96%
- -------------------------------------------------------------------------------
VK Enterprise 4/1/98 N/A N/A N/A 6.52%
- -------------------------------------------------------------------------------
VK Strategic Stock 4/1/98 N/A N/A N/A 2.84%
- -------------------------------------------------------------------------------
MS Emerging Markets
Debt 4/1/98 N/A N/A N/A -32.48%
- -------------------------------------------------------------------------------
MS High Yield 4/1/98 N/A N/A N/A -0.07%
- -------------------------------------------------------------------------------
MS Midcap Value 4/1/98 N/A N/A N/A 1.12%
- -------------------------------------------------------------------------------
<PAGE>
-9-
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. The total return and yield may also be used to
compare the performance of the Sub-Accounts against certain widely
acknowledged outside standards or indices for stock and bond market
performance. Index performance is not representative of the performance of
the Sub-Account to which it is compared and is not adjusted for commissions
and other costs. Portfolio holdings of the Sub-Account will differ from
those of the index to which it is compared. Performance comparison indices
include the following:
The Consumer Price Index, prepared by the U.S. Bureau of Labor Statistics, is
a commonly used measure of the rate of inflation. The index shows the
average change in the cost of selected consumer goods and services and does
not represent a return on an investment vehicle.
The Dow Jones Industrial Average is an unmanaged list of 30 common stocks
frequently used as a general measure of stock market performance. Its
performance figures reflect changes of market prices and reinvestment of all
distributions.
Lehman Brothers Corporate Bond Index is an unmanaged list of publicly issued,
fixed-rate, non-convertible investment-grade domestic corporate debt
securities frequently used as a general measure of the performance of
fixed-income securities. The average quality of bonds included in the index
may be higher than the average quality of those bonds in which a Fund may
customarily invest. The index does not include bonds in certain of the lower
rating classifications in which a Fund may invest. The performance figures
of the index reflect changes in market prices and reinvestment of all
interest payments.
The Lehman Brothers Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury;
all publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted
issues are not included in the SL Government Index.
<PAGE>
-10-
The Lehman Brothers Government/Corporate Bond Index (the "SL Government/
Corporate Index") is a measure of the market value of approximately 5,300
bonds with a face value currently in excess of $1.3 trillion. To be included
in the SL Government/Corporate Index, an issue must have amounts outstanding
in excess of $1 million, have at least one year to maturity and be rated
"Baa" or higher ("investment grade") by a nationally recognized rating
agency. The index does not include bonds in certain of the lower-rating
classifications in which a Fund may invest. Its performance figures reflect
changes in market prices and reinvestment of all interest payments.
Morgan Stanley Capital International World Index is an unmanaged list of
approximately 1,450 equity securities listed on the stock exchanges of the
United States, Europe, Canada, Australia, New Zealand and the Far East, with
all values expressed in U.S. dollars. Performance figures reflect changes in
market prices and reinvestment of distributions net of withholding taxes.
The securities in the index change over time to maintain representativeness.
The NASDAQ-OTC Industrial Average (The "NASDAQ Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate
market value of approximately 3,500 stocks relative to the base measure of
100.00 on February 5, 1971. The NASDAQ Index is composed entirely of common
stocks of companies traded over-the-counter and often through the National
Association of Securities Dealers Automated Quotations ("NASDAQ") system.
Only those over-the-counter stocks having only one market maker or traded on
exchanges are excluded. Its performance figures reflect changes of market
prices but do not reflect reinvestment of cash dividends.
Salomon Brothers Long-Term High-Grade Corporate Bond Index is an unmanaged
list of publicly traded corporate bonds having a rating of at least AA by
Standard & Poor's or Aa by Moody's and is frequently used as general measure
of the performance of fixed-income securities. The average quality of bonds
included in the index may be higher than the average quality of those bonds
in which a Fund may customarily invest. The index does not include bonds in
certain of the lower rating classifications in which the Fund may invest.
Performance figures for the index reflect changes of market prices and
reinvestment of all distributions.
The Salomon Brothers 7-10 Year Government Bond Index is an unmanaged list of
U.S. Government and government agency securities with maturities of 7 to 10
years. Performance figures for the index reflect changes of market prices
and reinvestment of all interest payments.
The Standard & Poor's Composite Index of 500 stocks (the "S&P 500") a market
value-weighted and unmanaged index showing changes in the aggregate market
value of 500 stocks relative to the base period 1941-43. The S&P 500 is
composed almost entirely of common stocks of companies listed on the New York
Stock Exchange, although the common stocks of a few companies listed on the
American Stock Exchange or traded over-the-counter are included. The 500
companies represented include 400 industrial, 60 transportation and 40
financial services concerns. The S&P 500 represents about 80% of the market
value of all issues traded on the New York Stock Exchange. Its performance
figures reflect changes of market prices and reinvestment of all regular cash
dividends.
The Standard & Poor's 40 Utilities Index is unmanaged list of 40 utility
stocks. The Index assumes reinvestment of all distributions and reflects
changes in market prices but does not take into account brokerage commissions
or other fees.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-1
- --------------------------------------------------------------------------------
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 statements of assets and liabilities of
Hartford Life Insurance Company Separate Account Three (Money Market Portfolio,
North American Government Securities Portfolio, Balanced Portfolio, Utilities
Portfolio, Dividend Growth Portfolio, Value-Added Market Portfolio, Growth
Portfolio, American Value Portfolio, Global Equity Portfolio, Developing Growth
Portfolio, Emerging Markets Portfolio, Diversified Income Portfolio, Mid-Cap
Growth Portfolio, High Yield Portfolio, Mid-Cap Portfolio, Emerging Markets Debt
Portfolio, Strategic Stock Portfolio, and Enterprise Portfolio), (collectively,
the Account) as of December 31, 1998, and the related statements of operations
and the statements of changes in net assets for the periods presented. 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 the Account as of December 31,
1998, and the results of their operations and the changes in their net assets
for the periods presented in conformity with generally accepted accounting
principles.
Hartford, Connecticut
February 15, 1999 ARTHUR ANDERSEN LLP
<PAGE>
SA-2 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT THREE
STATEMENTS OF ASSETS & LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
NORTH AMERICAN
GOVERNMENT
MONEY SECURITIES
MARKET PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
----------------- ---------------
<S> <C> <C>
ASSETS:
Investments in Dean
Witter Select
Dimensions Funds:
Money Market
Portfolio
Shares 9,681,027
Cost $9,681,027
Market Value....... $9,681,027 --
North American
Government
Securities Portfolio
Shares 83,072
Cost $839,998
Market Value....... -- $ 843,179
Balanced Growth
Portfolio
Shares 770,270
Cost $11,079,141
Market Value....... -- --
Utilities Portfolio
Shares 328,294
Cost $4,879,422
Market Value....... -- --
Dividend and Growth
Portfolio
Shares 3,546,756
Cost $63,451,773
Market Value....... -- --
Value-Added Market
Portfolio
Shares 1,414,630
Cost $21,709,319
Market Value....... -- --
Growth Portfolio
Shares 305,601
Cost $34,532,827
Market Value....... -- --
American Value
Portfolio
Shares 1,620,036
Cost $28,275,121
Market Value....... -- --
Global Equity
Portfolio
Shares 1,074,553
Cost $13,436,117
Market Value....... -- --
Due from Hartford Life
Insurance Company..... -- --
Receivable from fund
shares sold........... 11,776 32
----------------- ---------------
Total Assets........... 9,692,803 843,211
----------------- ---------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 11,768 34
Payable for fund shares
purchased............. -- --
----------------- ---------------
Total Liabilities...... 11,768 34
----------------- ---------------
Net Assets (variable
annuity contract
liabilities).......... $9,681,035 $ 843,177
----------------- ---------------
----------------- ---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-3
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVIDEND VALUE-ADDED AMERICAN GLOBAL
BALANCED UTILITIES GROWTH MARKET GROWTH VALUE EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in Dean
Witter Select
Dimensions Funds:
Money Market
Portfolio
Shares 9,681,027
Cost $9,681,027
Market Value....... -- -- -- -- -- -- --
North American
Government
Securities Portfolio
Shares 83,072
Cost $839,998
Market Value....... -- -- -- -- -- -- --
Balanced Growth
Portfolio
Shares 770,270
Cost $11,079,141
Market Value....... $12,617,022 -- -- -- -- -- --
Utilities Portfolio
Shares 328,294
Cost $4,879,422
Market Value....... -- $6,142,373 -- -- -- -- --
Dividend and Growth
Portfolio
Shares 3,546,756
Cost $63,451,773
Market Value....... -- -- $78,205,970 -- -- -- --
Value-Added Market
Portfolio
Shares 1,414,630
Cost $21,709,319
Market Value....... -- -- -- $27,146,755 -- -- --
Growth Portfolio
Shares 305,601
Cost $34,532,827
Market Value....... -- -- -- -- $5,571,107 -- --
American Value
Portfolio
Shares 1,620,036
Cost $28,275,121
Market Value....... -- -- -- -- -- $37,763,046 --
Global Equity
Portfolio
Shares 1,074,553
Cost $13,436,117
Market Value....... -- -- -- -- -- -- $15,785,190
Due from Hartford Life
Insurance Company..... 5,233 124 5,081 65 1,159 80,137 1,949
Receivable from fund
shares sold........... -- 406 -- -- -- -- --
------------- ------------ ------------ ------------ ------------ ------------ ------------
Total Assets........... 12,622,255 6,142,903 78,211,051 27,146,820 5,572,266 37,843,183 15,787,139
------------- ------------ ------------ ------------ ------------ ------------ ------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- -- -- -- -- -- --
Payable for fund shares
purchased............. 5,246 -- 3,951 156 1,203 79,961 1,921
------------- ------------ ------------ ------------ ------------ ------------ ------------
Total Liabilities...... 5,246 -- 3,951 156 1,203 79,961 1,921
------------- ------------ ------------ ------------ ------------ ------------ ------------
Net Assets (variable
annuity contract
liabilities).......... $12,617,009 $6,142,903 $78,207,100 $27,146,664 $5,571,063 $37,763,222 $15,785,218
------------- ------------ ------------ ------------ ------------ ------------ ------------
------------- ------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
<PAGE>
SA-4 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT THREE
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
DEVELOPING EMERGING
GROWTH MARKETS
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
ASSETS:
Investments in Dean
Witter Select
Dimensions Funds:
Developing Growth
Portfolio
Shares 332,915
Cost $5,400,245
Market Value....... $6,927,952 --
Emerging Markets
Portfolio
Shares 147,336
Cost $1,557,101
Market Value....... -- $1,165,424
Diversified Income
Portfolio
Shares 1,279,817
Cost $13,039,634
Market Value....... -- --
Mid-Cap Growth
Portfolio
Shares 263,850
Cost $2,905,773
Market Value....... -- --
Investments in Morgan
Stanley Universal
Funds:
High Yield Portfolio
Shares 40,897
Cost $438,209
Market Value....... -- --
Mid-Cap Portfolio
Shares 27,437
Cost $377,432
Market Value....... -- --
Emerging Markets Debt
Portfolio
Shares 3,074
Cost $23,779
Market Value....... -- --
Investments in Van
Kampen Funds:
Strategic Stock
Portfolio
Shares 57,168
Cost $644,056
Market Value....... -- --
Enterprise Portfolio
Shares 3,441
Cost $68,226
Market Value....... -- --
Due from Hartford Life
Insurance Company..... 182 --
Receivable from fund
shares sold........... -- 45
------------ ------------
Total Assets........... 6,928,134 1,165,469
------------ ------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- 75
Payable for fund shares
purchased............. 147 --
------------ ------------
Total Liabilities...... 147 75
------------ ------------
Net Assets (variable
annuity contract
liabilities).......... $6,927,987 $1,165,394
------------ ------------
------------ ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-5
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVERSIFIED MID-CAP EMERGING
INCOME GROWTH HIGH YIELD MID-CAP MARKETS DEBT STRATEGIC STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ------------ ------------ ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in Dean
Witter Select
Dimensions Funds:
Developing Growth
Portfolio
Shares 332,915
Cost $5,400,245
Market Value....... -- -- -- -- -- --
Emerging Markets
Portfolio
Shares 147,336
Cost $1,557,101
Market Value....... -- -- -- -- -- --
Diversified Income
Portfolio
Shares 1,279,817
Cost $13,039,634
Market Value....... $12,708,581 -- -- -- -- --
Mid-Cap Growth
Portfolio
Shares 263,850
Cost $2,905,773
Market Value....... -- $3,129,258 -- -- -- --
Investments in Morgan
Stanley Universal
Funds:
High Yield Portfolio
Shares 40,897
Cost $438,209
Market Value....... -- -- $ 423,287 -- -- --
Mid-Cap Portfolio
Shares 27,437
Cost $377,432
Market Value....... -- -- -- $ 407,995 -- --
Emerging Markets Debt
Portfolio
Shares 3,074
Cost $23,779
Market Value....... -- -- -- -- $ 18,753 --
Investments in Van
Kampen Funds:
Strategic Stock
Portfolio
Shares 57,168
Cost $644,056
Market Value....... -- -- -- -- -- $ 682,008
Enterprise Portfolio
Shares 3,441
Cost $68,226
Market Value....... -- -- -- -- -- --
Due from Hartford Life
Insurance Company..... -- 1,627 2,284 -- -- --
Receivable from fund
shares sold........... 11,004 -- -- 15 1 26
------------ ------------ ------------ ------------ ------------- ----------------
Total Assets........... 12,719,585 3,130,885 425,571 408,010 18,754 682,034
------------ ------------ ------------ ------------ ------------- ----------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 11,007 -- -- 15 1 26
Payable for fund shares
purchased............. -- 1,628 2,284 -- -- --
------------ ------------ ------------ ------------ ------------- ----------------
Total Liabilities...... 11,007 1,628 2,284 15 1 26
------------ ------------ ------------ ------------ ------------- ----------------
Net Assets (variable
annuity contract
liabilities).......... $12,708,578 $3,129,257 $ 423,287 $ 407,995 $ 18,753 $ 682,008
------------ ------------ ------------ ------------ ------------- ----------------
------------ ------------ ------------ ------------ ------------- ----------------
<CAPTION>
ENTERPRISE
PORTFOLIO
SUB-ACCOUNT
------------
<S> <C>
ASSETS:
Investments in Dean
Witter Select
Dimensions Funds:
Developing Growth
Portfolio
Shares 332,915
Cost $5,400,245
Market Value....... --
Emerging Markets
Portfolio
Shares 147,336
Cost $1,557,101
Market Value....... --
Diversified Income
Portfolio
Shares 1,279,817
Cost $13,039,634
Market Value....... --
Mid-Cap Growth
Portfolio
Shares 263,850
Cost $2,905,773
Market Value....... --
Investments in Morgan
Stanley Universal
Funds:
High Yield Portfolio
Shares 40,897
Cost $438,209
Market Value....... --
Mid-Cap Portfolio
Shares 27,437
Cost $377,432
Market Value....... --
Emerging Markets Debt
Portfolio
Shares 3,074
Cost $23,779
Market Value....... --
Investments in Van
Kampen Funds:
Strategic Stock
Portfolio
Shares 57,168
Cost $644,056
Market Value....... --
Enterprise Portfolio
Shares 3,441
Cost $68,226
Market Value....... $ 77,055
Due from Hartford Life
Insurance Company..... --
Receivable from fund
shares sold........... 3
------------
Total Assets........... 77,058
------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... 3
Payable for fund shares
purchased............. --
------------
Total Liabilities...... 3
------------
Net Assets (variable
annuity contract
liabilities).......... $ 77,055
------------
------------
</TABLE>
<PAGE>
SA-6 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT THREE
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ ----------- -------------
<S> <C> <C> <C>
INDIVIDUAL DEFERRED ANNUITY
CONTRACTS IN THE ACCUMULATION
PERIOD:
Money Market Portfolio........... 825,471 $ 11.727893 $ 9,681,035
North American Government
Securities Portfolio............ 72,425 11.642026 843,177
Balanced Portfolio............... 706,490 17.858730 12,617,009
Utilities Portfolio.............. 301,248 20.391484 6,142,903
Dividend Growth Portfolio........ 3,147,567 24.846842 78,207,100
Value-Added Market Portfolio..... 1,353,336 19.843369 26,854,745
Growth Portfolio................. 300,655 18.529740 5,571,063
American Value Portfolio......... 1,467,720 25.729172 37,763,222
Global Equity Portfolio.......... 1,058,141 14.917879 15,785,218
Developing Growth Portfolio...... 340,981 20.317799 6,927,987
Emerging Markets Portfolio....... 146,026 7.980718 1,165,394
Diversified Income Portfolio..... 1,010,489 12.576658 12,708,578
Mid-Cap Growth Portfolio......... 262,675 11.913063 3,129,257
High Yield Portfolio............. 42,358 9.993200 423,287
Mid-Cap Portfolio................ 40,509 10.071717 407,995
Emerging Markets Debt
Portfolio....................... 2,777 6.752049 18,753
Strategic Stock Portfolio........ 66,321 10.283526 682,008
Enterprise Portfolio............. 7,234 10.652197 77,055
-------------
SUB-TOTAL........................ 219,005,785
-------------
INDIVIDUAL ANNUITY CONTRACTS IN THE
ANNUITY PERIOD:
Value-Added Market Portfolio..... 14,711 19.843369 291,919
-------------
SUB-TOTAL........................ 291,919
-------------
GRAND TOTAL:....................... $ 219,297,704
-------------
-------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
SA-8 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT THREE
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
NORTH AMERICAN
GOVERNMENT
MONEY MARKET SECURITIES
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
------------- ---------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 394,845 $24,239
EXPENSES:
Mortality and expense
undertakings.......... (110,113) (7,890)
------------- -------
Net investment income
(loss).............. 284,732 16,349
------------- -------
CAPITAL GAINS INCOME..... -- --
------------- -------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- (53)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- (1,035)
------------- -------
Net gain (loss) on
investments......... -- (1,088)
------------- -------
Net increase
(decrease) in net
assets resulting
from operations..... $ 284,732 $15,261
------------- -------
------------- -------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-9
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVIDEND VALUE-ADDED AMERICAN GLOBAL
BALANCED UTILITIES GROWTH MARKET GROWTH VALUE EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
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.............. $ 251,285 $ 81,279 $ 1,225,787 $ 287,008 $ -- $ 190,852 $ 184,065
EXPENSES:
Mortality and expense
undertakings.......... (128,769) (53,918) (923,593) (337,462) (61,332) (388,539) (197,569)
------------ ------------ ------------- ------------ ------------ ------------ ------------
Net investment income
(loss).............. 122,516 27,361 302,194 (50,454) (61,332) (197,687) (13,504)
------------ ------------ ------------- ------------ ------------ ------------ ------------
CAPITAL GAINS INCOME..... 182,182 40,060 2,757,300 348,777 117,693 2,346,274 51,144
------------ ------------ ------------- ------------ ------------ ------------ ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (246) 2,661 (39,000) 1,753 (176) (25,094) (35,419)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 757,197 764,558 7,466,831 2,080,349 465,996 5,191,767 1,627,845
------------ ------------ ------------- ------------ ------------ ------------ ------------
Net gain (loss) on
investments......... 756,951 767,219 7,427,831 2,082,102 465,820 5,166,673 1,592,426
------------ ------------ ------------- ------------ ------------ ------------ ------------
Net increase
(decrease) in net
assets resulting
from operations..... $ 1,061,649 $834,640 $ 10,487,325 $ 2,380,425 $522,181 $ 7,315,260 $ 1,630,066
------------ ------------ ------------- ------------ ------------ ------------ ------------
------------ ------------ ------------- ------------ ------------ ------------ ------------
</TABLE>
<PAGE>
SA-10 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT THREE
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
DEVELOPING EMERGING
GROWTH MARKETS
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 14,955 $ 17,282
EXPENSES:
Mortality and expense
undertakings.......... (93,171) (19,788)
------------ ------------
Net investment income
(loss).............. (78,216) (2,506)
------------ ------------
CAPITAL GAINS INCOME..... 9,991 3,882
------------ ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (50,218) (98,895)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 565,818 (425,945)
------------ ------------
Net gain (loss) on
investments......... 515,600 (524,840)
------------ ------------
Net increase
(decrease) in net
assets resulting
from operations..... $447,375 $(523,464)
------------ ------------
------------ ------------
</TABLE>
* From inception, April 1, 1998, to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-11
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVERSIFIED MID-CAP EMERGING
INCOME GROWTH HIGH YIELD MID-CAP MARKETS DEBT STRATEGIC STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT*
------------ ------------ ------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 740,327 $ 15,261 $ 17,840 $ 908 $ 2,236 $--
EXPENSES:
Mortality and expense
undertakings.......... (141,359) (34,330) (1,845) (1,543) (259) (2,753)
------------ ------------ ------------- ------------- ------------- -------
Net investment income
(loss).............. 598,968 (19,069) 15,995 (635) 1,977 (2,753)
------------ ------------ ------------- ------------- ------------- -------
CAPITAL GAINS INCOME..... 13,039 22,379 3,182 8,170 -- --
------------ ------------ ------------- ------------- ------------- -------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (542) (12,301) (924) (287) (11,790) (321)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (374,577) 93,824 (14,922) 30,563 (5,026) 37,952
------------ ------------ ------------- ------------- ------------- -------
Net gain (loss) on
investments......... (375,119) 81,523 (15,846) 30,276 (16,816) 37,631
------------ ------------ ------------- ------------- ------------- -------
Net increase
(decrease) in net
assets resulting
from operations..... $ 236,888 $ 84,833 $ 3,331 $37,811 $(14,839) $34,878
------------ ------------ ------------- ------------- ------------- -------
------------ ------------ ------------- ------------- ------------- -------
<CAPTION>
ENTERPRISE
PORTFOLIO
SUB-ACCOUNT*
-------------
<S> <C>
INVESTMENT INCOME:
Dividends.............. $--
EXPENSES:
Mortality and expense
undertakings.......... (237)
------
Net investment income
(loss).............. (237)
------
CAPITAL GAINS INCOME..... --
------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 820
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 8,829
------
Net gain (loss) on
investments......... 9,649
------
Net increase
(decrease) in net
assets resulting
from operations..... $9,412
------
------
</TABLE>
* From inception, April 1, 1998, to December 31, 1998.
<PAGE>
SA-12 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT THREE
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
NORTH AMERICAN
GOVERNMENT
MONEY SECURITIES
MARKET PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
----------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 284,732 $ 16,349
Capital gains income... -- --
Net realized gain
(loss) on security
transactions.......... -- (53)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- (1,035)
----------------- ---------------
Net increase (decrease)
in net assets
resulting from
operations............ 284,732 15,261
----------------- ---------------
UNIT TRANSACTIONS:
Purchases.............. 2,269,367 193,291
Net transfers.......... (103,876) 228,171
Surrenders for benefit
payments and fees..... (1,077,714) (4,597)
Net annuity
transactions.......... -- --
----------------- ---------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,087,777 416,865
----------------- ---------------
Total increase
(decrease) in net
assets................ 1,372,509 432,126
NET ASSETS:
Beginning of period.... 8,308,526 411,051
----------------- ---------------
End of period.......... $9,681,035 $843,177
----------------- ---------------
----------------- ---------------
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
NORTH AMERICAN
GOVERNMENT
MONEY SECURITIES
MARKET PORTFOLIO 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................ -- 378,264
----------------- ---------------
Net increase (decrease)
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 for benefit
payments and fees..... (752,612) (27,777)
Net annuity
transactions.......... -- --
----------------- ---------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 2,538,656 52,244
----------------- ---------------
Total increase
(decrease) 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
----------------- ---------------
----------------- ---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-13
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVIDEND VALUE-ADDED AMERICAN GLOBAL
BALANCED UTILITIES GROWTH MARKET GROWTH VALUE EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
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)................ $ 122,516 $ 27,361 $ 302,194 $ (50,454) $ (61,332) $ (197,687) $ (13,504)
Capital gains income... 182,182 40,060 2,757,300 348,777 117,693 2,346,274 51,144
Net realized gain
(loss) on security
transactions.......... (246) 2,661 (39,000) 1,753 (176) (25,094) (35,419)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 757,197 764,558 7,466,831 2,080,349 465,996 5,191,767 1,627,845
-------------- ------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 1,061,649 834,640 10,487,325 2,380,425 522,181 7,315,260 1,630,066
-------------- ------------ ------------ ------------ ------------ ------------ ------------
UNIT TRANSACTIONS:
Purchases.............. 2,390,416 1,685,047 9,969,087 3,221,008 853,950 6,155,199 1,794,138
Net transfers.......... 3,698,381 1,330,554 8,540,385 1,399,020 760,745 4,983,345 764,415
Surrenders for benefit
payments and fees..... (379,911) (179,107) (3,044,996) (495,307) (123,045) (1,080,611) (496,235)
Net annuity
transactions.......... -- -- -- (79,558) -- -- --
-------------- ------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 5,708,886 2,836,494 15,464,476 4,045,163 1,491,650 10,057,933 2,062,318
-------------- ------------ ------------ ------------ ------------ ------------ ------------
Total increase
(decrease) in net
assets................ 6,770,535 3,671,134 25,951,801 6,425,588 2,013,831 17,373,193 3,692,384
NET ASSETS:
Beginning of period.... 5,846,474 2,471,769 52,255,299 20,721,076 3,557,232 20,390,029 12,092,834
-------------- ------------ ------------ ------------ ------------ ------------ ------------
End of period.......... $ 12,617,009 $ 6,142,903 $ 78,207,100 $ 27,146,664 $ 5,571,063 $ 37,763,222 $ 15,785,218
-------------- ------------ ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
DIVIDEND VALUE-ADDED AMERICAN GLOBAL
BALANCED UTILITIES GROWTH MARKET GROWTH VALUE EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
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)................ $ 27,082 $ 25,725 $ 207,230 $ 1,105 $ (28,598) $ (147,030) $ (51,246)
Capital gains income... 11,255 5,598 1,118,280 25,010 9,815 253,252 13,138
Net realized gain
(loss) on security
transactions.......... 1 (1,072) 1,187 (250) (35) 25,705 (626)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 3,756 532,164 385,952 5,104,874 2,624,687 423,579 3,404,201
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 570,502 416,203 6,431,571 2,650,552 404,761 3,536,128 339,530
------------ ------------ ------------ ------------ ------------ ------------ ------------
UNIT TRANSACTIONS:
Purchases.............. 2,480,988 787,145 25,298,127 8,641,262 1,171,717 7,393,097 5,772,577
Net transfers.......... 773,542 (218,038) 5,093,960 1,738,699 745,942 1,198,780 1,004,060
Surrenders for benefit
payments and fees..... (584,850) (112,067) (2,369,968) (827,826) (124,197) (804,164) (784,786)
Net annuity
transactions.......... -- -- -- 341,474 -- -- --
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 2,669,680 457,040 28,022,119 9,893,609 1,793,462 7,787,713 5,991,851
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total increase
(decrease) in net
assets................ 3,240,182 873,243 34,453,690 12,544,161 2,198,223 11,323,841 6,331,381
NET ASSETS:
Beginning of period.... 2,606,292 1,598,526 17,801,609 8,176,915 1,359,009 9,066,188 5,761,453
------------ ------------ ------------ ------------ ------------ ------------ ------------
End of period.......... $ 5,846,474 $ 2,471,769 $ 52,255,299 $ 20,721,076 $ 3,557,232 $ 20,390,029 $ 12,092,834
------------ ------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
<PAGE>
SA-14 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT THREE
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
DEVELOPING EMERGING
GROWTH MARKETS
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ (78,216) $ (2,506)
Capital gains income... 9,991 3,882
Net realized gain
(loss) on security
transactions.......... (50,218) (98,895)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 565,818 (425,945)
------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 447,375 (523,464)
------------ ------------
UNIT TRANSACTIONS:
Purchases.............. 465,093 108,809
Net transfers.......... (500,337) (289,983)
Surrenders for benefit
payments and fees..... (302,821) (93,209)
Net annuity
transactions.......... -- --
------------ ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (338,065) (274,383)
------------ ------------
Total increase
(decrease) in net
assets................ 109,310 (797,847)
NET ASSETS:
Beginning of period.... 6,818,677 1,963,241
------------ ------------
End of period.......... $6,927,987 $1,165,394
------------ ------------
------------ ------------
</TABLE>
* From inception, April 1, 1998, to December 31, 1998.
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
DEVELOPING EMERGING
GROWTH MARKETS
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)..................... $ (65,434) $ (17,516)
Capital gains income........ -- --
Net realized gain (loss) on
security transactions...... (5,860) (14,073)
Net unrealized appreciation
(depreciation) of
investments during the
period..................... 665,187 (42,909)
------------ ------------
Net increase (decrease) in
net assets resulting from
operations................. 593,893 (74,498)
------------ ------------
UNIT TRANSACTIONS:
Purchases................... 2,012,667 809,422
Net transfers............... 36,985 6,465
Surrenders for benefit
payments and fees.......... (235,174) (120,404)
Net annuity transactions.... -- --
------------ ------------
Net increase (decrease) in
net assets resulting from
unit transactions.......... 1,814,478 695,483
------------ ------------
Total increase (decrease) in
net assets................. 2,408,371 620,985
NET ASSETS:
Beginning of period......... 4,410,306 1,342,256
------------ ------------
End of period............... $6,818,677 $1,963,241
------------ ------------
------------ ------------
</TABLE>
** From inception, January 21, 1997 to December 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY SA-15
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVERSIFIED MID-CAP EMERGING
INCOME GROWTH HIGH YIELD MID-CAP MARKETS DEBT STRATEGIC STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT*
------------ ------------ ------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 598,968 $ (19,069) $ 15,995 $ (635) $ 1,977 $ (2,753)
Capital gains income... 13,039 22,379 3,182 8,170 -- --
Net realized gain
(loss) on security
transactions.......... (542) (12,301) (924) (287) (11,790) (321)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (374,577) 93,824 (14,922) 30,563 (5,026) 37,952
------------ ------------ ------------- ------------- ------------- --------
Net increase (decrease)
in net assets
resulting from
operations............ 236,888 84,833 3,331 37,811 (14,839) 34,878
------------ ------------ ------------- ------------- ------------- --------
UNIT TRANSACTIONS:
Purchases.............. 1,329,914 627,674 303,764 152,667 54,001 280,816
Net transfers.......... 5,025,623 733,380 117,154 219,693 (20,302) 367,384
Surrenders for benefit
payments and fees..... (573,911) (92,782) (962) (2,176) (107) (1,070)
Net annuity
transactions.......... -- -- -- -- -- --
------------ ------------ ------------- ------------- ------------- --------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 5,781,626 1,268,272 419,956 370,184 33,592 647,130
------------ ------------ ------------- ------------- ------------- --------
Total increase
(decrease) in net
assets................ 6,018,514 1,353,105 423,287 407,995 18,753 682,008
NET ASSETS:
Beginning of period.... 6,690,064 1,776,152 -- -- -- --
------------ ------------ ------------- ------------- ------------- --------
End of period.......... $ 12,708,578 $3,129,257 $423,287 $407,995 $18,753 $682,008
------------ ------------ ------------- ------------- ------------- --------
------------ ------------ ------------- ------------- ------------- --------
<CAPTION>
ENTERPRISE
PORTFOLIO
SUB-ACCOUNT*
-------------
<S> <C>
OPERATIONS:
Net investment income
(loss)................ $ (237)
Capital gains income... --
Net realized gain
(loss) on security
transactions.......... 820
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 8,829
-------------
Net increase (decrease)
in net assets
resulting from
operations............ 9,412
-------------
UNIT TRANSACTIONS:
Purchases.............. 32,385
Net transfers.......... 36,080
Surrenders for benefit
payments and fees..... (822)
Net annuity
transactions.......... --
-------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 67,643
-------------
Total increase
(decrease) in net
assets................ 77,055
NET ASSETS:
Beginning of period.... --
-------------
End of period.......... $77,055
-------------
-------------
</TABLE>
<TABLE>
<CAPTION>
DIVERSIFIED MID-CAP
INCOME GROWTH
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT**
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)..................... $ 270,857 $ 1,157
Capital gains income........ 7,785 --
Net realized gain (loss) on
security transactions...... 153 1,041
Net unrealized appreciation
(depreciation) of
investments during the
period..................... 12,589 129,661
------------ --------------
Net increase (decrease) in
net assets resulting from
operations................. 291,384 131,859
------------ --------------
UNIT TRANSACTIONS:
Purchases................... 2,936,575 1,190,000
Net transfers............... 1,246,736 495,122
Surrenders for benefit
payments and fees.......... (347,647) (40,829)
Net annuity transactions.... -- --
------------ --------------
Net increase (decrease) in
net assets resulting from
unit transactions.......... 3,835,664 1,644,293
------------ --------------
Total increase (decrease) in
net assets................. 4,127,048 1,776,152
NET ASSETS:
Beginning of period......... 2,563,016 --
------------ --------------
End of period............... $ 6,690,064 $1,776,152
------------ --------------
------------ --------------
</TABLE>
<PAGE>
SA-16 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT THREE
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
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 is accrued as of the ex-dividend date. Capital gains income
represents those dividends from the Funds which are characterized as
capital gains under tax regulations.
b) SECURITY VALUATION--The investments in shares of the Morgan Stanley Dean
Witter Select Dimensions Investment Series, the Morgan Stanley Universal
Funds, Inc. and the Van Kampen American Capital Life Investment Trust
Mutual Funds is valued at the closing net asset value per share as
determined by the appropriate Fund as of December 31, 1998.
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 1.50%
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. These expenses
are reflected in Surrenders for benefit payments and fees on the
accompanying statements of changes in net assets.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To Hartford Life Insurance Company:
We have audited the accompanying Consolidated Balance Sheets of Hartford Life
Insurance Company and subsidiaries as of December 31, 1998 and 1997, and the
related Consolidated Statements of Income, Changes in Stockholder's Equity and
Cash Flows for each of the three years in the period ended December 31, 1998.
These Consolidated Financial Statements and the schedules referred to below are
the responsibility of Hartford Life Insurance Company's management. Our
responsibility is to express an opinion on these 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, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998 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 the 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 26, 1999
F-1 PROSPECTUS
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1998 1997 1996
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Premiums and other considerations............... $2,218 $1,637 $1,705
Net investment income........................... 1,759 1,368 1,397
Net realized capital (losses) gains............. (2) 4 (213)
------ ------ ------
Total revenues................................ 3,975 3,009 2,889
------ ------ ------
Benefits, claims and expenses
Benefits, claims and claim adjustment
expenses....................................... 1,911 1,379 1,535
Amortization of deferred policy acquisition
costs.......................................... 431 335 234
Dividends to policyholders...................... 329 240 635
Other expenses.................................. 766 586 427
------ ------ ------
Total benefits, claims and expenses........... 3,437 2,540 2,831
------ ------ ------
Income before income tax expense................ 538 469 58
Income tax expense.............................. 188 167 20
------ ------ ------
Net income........................................ $ 350 $ 302 $ 38
------ ------ ------
------ ------ ------
</TABLE>
See Notes to Consolidated Financial Statements.
F-2 PROSPECTUS
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS OF DECEMBER
31,
-----------------
1998 1997
------- -------
<S> <C> <C>
(IN MILLIONS,
EXCEPT FOR SHARE
DATA)
Assets
Investments
Fixed maturities, available for sale, at fair
value (amortized cost of $14,505 and
$13,885)....................................... $14,818 $14,176
Equity securities, at fair value................ 31 180
Policy loans, at outstanding balance............ 6,684 3,756
Other investments, at cost...................... 264 47
------- -------
Total investments............................. 21,797 18,159
Cash............................................ 17 54
Premiums receivable and agents' balances........ 17 18
Reinsurance recoverables........................ 1,257 6,114
Deferred policy acquisition costs............... 3,754 3,315
Deferred income tax............................. 464 348
Other assets.................................... 695 682
Separate account assets......................... 90,262 69,055
------- -------
Total assets.................................. $118,263 $97,745
------- -------
------- -------
Liabilities
Future policy benefits.......................... $ 3,595 $ 3,059
Other policyholder funds........................ 19,615 21,034
Other liabilities............................... 2,094 2,254
Separate account liabilities.................... 90,262 69,055
------- -------
Total liabilities............................. 115,566 95,402
------- -------
Stockholder's Equity
Common stock -- 1,000 shares authorized, 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................................... 184 179
------- -------
Total accumulated other comprehensive
income....................................... 184 179
------- -------
Retained earnings............................... 1,462 1,113
------- -------
Total stockholder's equity.................... 2,697 2,343
------- -------
Total liabilities and stockholder's equity...... $118,263 $97,745
------- -------
------- -------
</TABLE>
See Notes to Consolidated Financial Statements.
F-3 PROSPECTUS
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME
---------------
NET UNREALIZED
CAPITAL GAINS
(LOSSES) ON TOTAL
COMMON CAPITAL SECURITIES, RETAINED STOCKHOLDER'S
STOCK SURPLUS NET OF TAX EARNINGS EQUITY
------ ------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
1998
Balance, December 31, 1997.............. $6 $ 1,045 $179 $1,113 $2,343
Comprehensive income
Net income............................ -- -- -- 350 350
-------------
Other comprehensive income, net of tax
(1):
Changes in net unrealized capital
gains on securities (2).............. -- -- 5 -- 5
-------------
Total other comprehensive income........ 5
-------------
Total comprehensive income 355
-------------
Dividends............................... -- -- -- (1) (1)
--
------- ------ ----------- -------------
Balance, December 31, 1998.......... $6 $ 1,045 $184 $1,462 $2,697
--
------- ------ ----------- -------------
1997
Balance, December 31, 1996.............. $6 $ 1,045 $ 30 $ 811 $1,892
Comprehensive income
Net income............................ -- -- -- 302 302
-------------
Other comprehensive income, net of tax
(1):
Changes in net unrealized capital
gains on securities (2).............. -- -- 149 -- 149
-------------
Total other comprehensive income........ 149
-------------
Total comprehensive income 451
--
------- ------ ----------- -------------
Balance, December 31, 1997.......... $6 $ 1,045 $179 $1,113 $2,343
--
------- ------ ----------- -------------
1996
Balance, December 31, 1995.............. $6 $ 1,007 $(57) $ 773 $1,729
Comprehensive income
Net income............................ -- -- -- 38 38
-------------
Other comprehensive income, net of tax
(1):
Changes in net unrealized capital
gains on securities (2).............. -- -- 87 -- 87
-------------
Total other comprehensive income........ 87
-------------
Total comprehensive income............ 125
-------------
Capital contribution.................... -- 38 -- -- 38
--
------- ------ ----------- -------------
Balance, December 31, 1996.......... $6 $ 1,045 $ 30 $ 811 $1,892
--
--
------- ------ ----------- -------------
------- ------ ----------- -------------
</TABLE>
- ------------------------------
(1) Net unrealized capital gain on securities is reflected net of tax of $3,
$80 and $47, as of December 31, 1998, 1997 and 1996, respectively.
(2) There was no reclassification adjustment for after-tax gains (losses)
realized in net income for the years ended December 31, 1998 and 1997. December
31, 1996 is net of a $142 reclassification adjustment for after-tax losses
realized in net income.
See Notes to Consolidated Financial Statements.
F-4 PROSPECTUS
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
------------------------------
1998 1997 1996
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Operating Activities
Net income............................ $ 350 $ 302 $ 38
Adjustments to reconcile net income to
net cash provided by operating
activities
Depreciation and amortization......... (23) 8 14
Net realized capital losses (gains)... 2 (4) 213
Decrease in premiums receivable and
agents' balances..................... 1 119 10
(Decrease) increase in other
liabilities.......................... (79) 223 577
Change in receivables, payables, and
accruals............................. 83 107 (22)
Increase (decrease) in accrued
taxes................................ 60 126 (91)
(Increase) decrease in deferred income
taxes................................ (118) 40 (102)
Increase in deferred policy
acquisition costs.................... (439) (555) (572)
Increase in future policy benefits.... 536 585 101
(Increase) decrease in reinsurance
recoverables and other related
assets............................... (2) 21 (146)
-------- -------- --------
Net cash provided by operating
activities......................... 371 972 20
-------- -------- --------
Investing Activities
Purchases of investments.............. (6,061) (6,869) (5,854)
Sales of investments.................. 4,901 4,256 3,543
Maturity of investments............... 1,761 2,329 2,693
-------- -------- --------
Net cash provided by (used for)
investing activities............... 601 (284) 382
-------- -------- --------
Financing Activities
Capital contribution.................. -- -- 38
Net disbursements for investment and
universal life-type contracts charged
against policyholder accounts........ (1,009) (677) (443)
-------- -------- --------
Net cash used for financing
activities......................... (1,009) (677) (405)
-------- -------- --------
Net (decrease) increase in cash....... (37) 11 (3)
Cash -- beginning of year............. 54 43 46
-------- -------- --------
Cash -- end of year................... $ 17 $ 54 $ 43
-------- -------- --------
-------- -------- --------
Supplemental Disclosure of Cash Flow
Information:
Net Cash Paid During the Year for:
Income taxes.......................... $ 263 $ 9 $ 189
Noncash Investing Activities:
Due to the recapture of an in force block of business previously ceded
to MBL Life Assurance Co. of New Jersey, reinsurance recoverables of
$4,546 were exchanged for the fair value of assets comprised of
$4,354 in policy loans and $192 in other assets.
</TABLE>
See Notes to Consolidated Financial Statements.
F-5 PROSPECTUS
<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 ("Hartford Life Insurance Company" or the
"Company"), Hartford Life and Annuity Insurance Company (ILA) and 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). Pursuant to an initial
public offering (the "IPO") on May 22, 1997, Hartford Life sold 26 million
shares of Class A Common Stock 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 outstanding promissory notes and line of credit with
the remaining $160 contributed by Hartford Life to HLA to support growth in its
core businesses. Hartford Life became a publicly traded company upon the sale of
26 million shares representing approximately 18.6% of the equity ownership in
Hartford Life. 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, HLA, the Company is a leading financial services and
insurance 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 disability insurance
that is directly written by the Company and is substantially ceded to its
parent, HLA, and (d) corporate owned life insurance.
2. SUMMARY OF 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 November 1998, the Emerging Issues Task Force (EITF) reached consensus on
Issue No. 98-15, "Structured Notes Acquired for a Specific Investment Strategy".
This EITF issue requires companies to account for structured notes acquired for
a specific investment strategy, as a unit. Affected companies that entered into
these notes prior to September 25, 1998 are required to either restate prior
period financial statements to conform with the prescribed unit accounting model
or disclose the related impact on earnings for all periods presented and
cumulatively over the life of the instruments had the registrant accounted for
the structure as a unit. Based upon recently prescribed current generally
accepted accounting principles for such types of transactions entered into after
September 24, 1998, there was no additional earnings impact to the Company
related to combined structured note transactions. As of December 31, 1998, the
Company does not hold any combined structured notes.
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The new standard establishes accounting and
reporting guidance for derivative instruments, including certain derivative
instruments embedded in other contracts. The standard requires, among other
things, that all derivatives be carried on the balance sheet at fair value. The
standard also specifies hedge accounting criteria under which a derivative can
qualify for special accounting. In order to receive special accounting, the
derivative instrument must qualify as either a hedge of the fair value or the
variability of the cash flow of a qualified asset or liability. Special
accounting for qualifying hedges provides for matching the timing of gain or
loss recognition on the hedging instrument with the recognition of the
corresponding changes in value of the hedged item. SFAS No. 133 will be
effective for fiscal years beginning after June 15, 1999. Initial application
for Hartford Life Insurance Company will begin for the first quarter of the year
2000. While Hartford Life Insurance Company is currently in the process of
quantifying the impact of SFAS No. 133, the Company is reviewing its derivative
holdings in order to take actions needed to minimize potential
F-6 PROSPECTUS
<PAGE>
volatility, while at the same time maintaining the economic protection needed to
support the goals of its business.
In March 1998, the American Institute of Certified Public Accountants (AICPA)
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 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 Consolidated
Statements of Changes in Stockholder's Equity.
In December 1997, the AICPA issued 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.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information". The new standard requires public business
enterprises to disclose certain financial and descriptive information about
reportable operating segments in annual financial statements and in condensed
financial statements of interim periods. Operating segments are components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and assessing performance. SFAS No. 131 also establishes
standards for related disclosures about products and services, geographic areas
and major customers. The Company adopted SFAS No. 131 in 1998. For additional
information, see Note 13.
On November 14, 1996, the 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 FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities" which is
effective for transfers and servicing of financial 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. Adoption of SFAS No. 125 did not have a material
effect on the Company's financial condition or results of operations.
Effective January 1, 1996, Hartford Life Insurance 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. 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 investment products and universal life-type policies consist of
policy charges for policy administration, cost of insurance and surrender
charges assessed to policy account balances and are recognized in the period in
which services are provided. Premiums for traditional life insurance 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.
Liabilities for universal life-type and investment contracts are stated at
policyholder account values before surrender charges.
(E) INVESTMENTS
Hartford Life Insurance 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 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. Realized capital gains and
losses
F-7 PROSPECTUS
<PAGE>
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. Net realized capital gains and losses, excluding those
related to immediate participation guaranteed contracts, 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
additional impairment, if necessary.
(F) DERIVATIVE INSTRUMENTS
Hartford Life Insurance 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. Hartford Life Insurance 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 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. For a discussion
of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"
issued in June 1998, see (b) Changes in Accounting Principles.
Derivative instruments must be designated at inception as a hedge and measured
for effectiveness both at inception and on an ongoing basis. Hartford Life
Insurance Company's correlation threshold for hedge designation is 80% to 120%.
If correlation, which is assessed monthly and measured based on a rolling three
month average, falls outside the 80% to 120% range, 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.
F-8 PROSPECTUS
<PAGE>
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.
(G) SEPARATE ACCOUNTS
Hartford Life Insurance Company maintains separate account assets and
liabilities which are reported at fair value. Separate account assets are
segregated from other investments. Separate accounts reflect two categories of
risk assumption: non-guaranteed separate accounts, wherein the policyholder
assumes the investment risk and rewards, and guaranteed separate account assets,
wherein the Company contractually guarantees either a minimum return or account
value to the policyholder.
(H) 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, usually 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
charges, 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 for the books of business are
re-estimated and adjusted by a cumulative charge or credit to income.
Acquisition costs and their related deferral are included in the Company's other
expenses as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- ----- -----
<S> <C> <C> <C>
Commissions........................... $ 1,069 $ 976 $ 848
Deferred acquisition costs............ (891) (862) (823)
Other................................. 588 472 402
--------- ----- -----
Total other expenses.............. $ 766 $ 586 $ 427
--------- ----- -----
--------- ----- -----
</TABLE>
(I) DIVIDENDS TO POLICYHOLDERS
Certain life insurance policies contain dividend payment provisions that enable
the policyholder to participate in the earnings on that participating block of
business. The participating insurance in force accounted for 71%, 55% and 44% in
1998, 1997 and 1996, respectively, of total insurance in force.
3. INVESTMENTS AND DERIVATIVE INSTRUMENTS
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Interest income from fixed
maturities......................... $ 952 $ 932 $ 918
Interest income from policy loans... 789 425 477
Income from other investments....... 32 26 15
--------- --------- ---------
Gross investment income............. 1,773 1,383 1,410
Less: Investment expenses........... 14 15 13
--------- --------- ---------
Net investment income............... $ 1,759 $ 1,368 $ 1,397
--------- --------- ---------
--------- --------- ---------
</TABLE>
(B) COMPONENTS OF NET REALIZED CAPITAL (LOSSES) GAINS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Fixed maturities....................... $ (28) $ (7) $ (201)
Equity securities...................... 21 12 2
Real estate and other.................. 5 (1) (4)
Less: Decrease in liability to
policyholders for realized capital
gains................................. -- -- (10)
--- --- -----
Net realized capital (losses) gains.... $ (2) $ 4 $ (213)
--- --- -----
--- --- -----
</TABLE>
(C) NET UNREALIZED CAPITAL (LOSSES) GAINS ON EQUITY SECURITIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Gross unrealized capital gains......... $ 2 $ 14 $ 13
Gross unrealized capital losses........ (1) -- (1)
--
--- ---
Net unrealized capital gains........... 1 14 12
Deferred income tax expense............ -- 5 4
--
--- ---
Net unrealized capital gains, net of
tax................................... 1 9 8
Balance -- beginning of year........... 9 8 1
--
--- ---
Net change in unrealized capital gains
on equity securities.................. $ (8) $ 1 $ 7
--
--
--- ---
--- ---
</TABLE>
(D) NET UNREALIZED CAPITAL GAINS (LOSSES) ON FIXED MATURITIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Gross unrealized capital gains......... $ 421 $ 371 $ 386
Gross unrealized capital losses........ (108) (80) (341)
Unrealized capital gains credited to
policyholders......................... (32) (30) (11)
----- ----- -----
Net unrealized capital gains........... 281 261 34
Deferred income tax expense............ 98 91 12
----- ----- -----
Net unrealized capital gains, net of
tax................................... 183 170 22
Balance -- beginning of year........... 170 22 (58)
----- ----- -----
Net change in unrealized capital gains
(losses) on fixed maturities.......... $ 13 $ 148 $ 80
----- ----- -----
----- ----- -----
</TABLE>
F-9 PROSPECTUS
<PAGE>
(E) FIXED MATURITY INVESTMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U. S. Government and Government agencies and authorities
(guaranteed and sponsored)...................................... $ 121 $ 2 $ -- $ 123
U. S. Government and Government agencies and authorities
(guaranteed and sponsored) -- asset backed...................... 1,001 23 (8) 1,016
States, municipalities and political subdivisions................ 165 8 -- 173
International governments........................................ 393 26 (7) 412
Public utilities................................................. 844 33 (3) 874
All other corporate including international...................... 5,469 260 (42) 5,687
All other corporate -- asset backed.............................. 4,155 58 (42) 4,171
Short-term investments........................................... 1,847 -- -- 1,847
Certificates of deposit.......................................... 510 11 (6) 515
---------- ----- ----- ----------
Total fixed maturities....................................... $14,505 $421 $(108) $14,818
---------- ----- ----- ----------
---------- ----- ----- ----------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U. S. Government and Government agencies and authorities
(guaranteed and sponsored)...................................... $ 217 $ 3 $ (1) $ 219
U. S. Government and Government 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>
The amortized cost and estimated fair value of fixed maturity investments as of
December 31, 1998 by estimated maturity year are shown below. Expected
maturities differ from contractual maturities due to call or prepayment
provisions. Asset backed securities, including mortgage backed securities and
collateralized mortgage obligations, 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...................... $ 3,047 $ 3,116
Over one year through five years...... 4,796 4,843
Over five years through ten years..... 3,242 3,318
Over ten years........................ 3,420 3,541
----------- -----------
Total............................. $ 14,505 $ 14,818
----------- -----------
----------- -----------
</TABLE>
Sales of fixed maturities, excluding short-term fixed maturities, for the years
ended December 31, 1998, 1997 and 1996 resulted in proceeds of $3.2 billion,
$4.2 billion and $3.5 billion, gross realized capital gains of $103, $169 and
$87, gross realized capital losses (including writedowns) of $131, $176 and
$298, respectively. In 1996, gross realized capital losses includes an other
than temporary impairment of $137 related to the Company's block of guaranteed
investment contract business written prior to 1995 which could not recover to
amortized cost prior to sale. Sales of equity security investments for the years
ended December 31, 1998, 1997 and 1996 resulted in proceeds of $35, $132 and $74
and gross realized capital gains of $21, $12 and $2, respectively, and no gross
realized capital losses for all periods.
(F) CONCENTRATION OF CREDIT RISK
The Company is not exposed to any significant concentration of credit risk in
fixed maturities of a single issuer greater than 10% of stockholder's equity.
F-10 PROSPECTUS
<PAGE>
(G) DERIVATIVE INSTRUMENTS
Hartford Life Insurance 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.
Hartford Life Insurance 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.
Hartford Life Insurance Company's derivative program is monitored by an internal
compliance unit and is reviewed by senior management and Hartford Life's Finance
Committee of the Board of Directors. 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 $6.2
billion and $6.5 billion ($3.9 billion and $4.6 billion related to the Company's
investments, $2.3 billion and $1.9 billion on the Company's liabilities) as of
December 31, 1998 and 1997, respectively.
The tables below provide a summary of derivative instruments held by Hartford
Life Insurance Company as of December 31, 1998 and 1997, segregated by major
investment and liability category:
<TABLE>
<CAPTION>
1998 -- AMOUNT HEDGED (NOTIONAL AMOUNTS)
----------------------------------------------------------------------------------
FOREIGN
TOTAL ISSUED PURCHASED INTEREST CURRENCY TOTAL
CARRYING CAPS & CAPS & FUTURES RATE SWAPS NOTIONAL
ASSETS HEDGED VALUE FLOORS FLOORS (2) SWAPS (3) AMOUNT
- ----------------------------------- -------- -------- ---------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset backed securities (excluding
inverse floaters and
anticipatory)..................... $ 5,163 $ -- $ 188 $ 3 $ 885 $-- $ 1,076
Inverse floaters (1)............... 24 44 55 -- -- -- 99
Anticipatory (4)................... -- -- -- -- 235 -- 235
Other bonds and notes.............. 7,683 461 597 18 1,300 90 2,466
Short-term investments............. 1,948 -- -- -- -- -- --
-------- -------- ---------- --- ---------- --- ----------
Total fixed maturities......... 14,818 505 840 21 2,420 90 3,876
Equity securities, policy loans and
other investments................. 6,979 -- -- -- -- -- --
-------- -------- ---------- --- ---------- --- ----------
Total investments.............. $21,797 505 840 21 2,420 90 3,876
Other policyholder funds....... $19,615 1,100 50 -- 1,195 -- 2,345
-------- -------- ---------- --- ---------- --- ----------
Total derivative instruments --
notional value................ $ 1,605 $ 890 $ 21 $ 3,615 $90 $ 6,221
-------- -------- ---------- --- ---------- --- ----------
Total derivative instruments --
fair value.................... $ (6) $ 19 $ -- $ 27 $(7) $ 33
-------- -------- ---------- --- ---------- --- ----------
-------- -------- ---------- --- ---------- --- ----------
</TABLE>
F-11 PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
1997 -- AMOUNT HEDGED (NOTIONAL AMOUNTS)
--------------------------------------------------------------------------
FOREIGN
TOTAL ISSUED PURCHASED INTEREST CURRENCY TOTAL
CARRYING CAPS & CAPS & RATE SWAPS NOTIONAL
ASSETS HEDGED VALUE FLOORS FLOORS FUTURES (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
Other policyholder funds....... $21,034 10 150 -- 1,747 -- 1,907
-------- ------- ------ --- --------- --- -------
Total derivative instruments --
notional value................ $1,019 $ 2,094 $ 50 $ 3,251 $ 91 $6,505
-------- ------- ------ --- --------- --- -------
Total derivative instruments --
fair value.................... $ (8 ) $ 23 $ -- $ 19 $ (6 ) $ 28
-------- ------- ------ --- --------- --- -------
-------- ------- ------ --- --------- --- -------
</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, 1998 and 1997, approximately 5% and 44% , respectively,
of the notional futures contracts expire within one year.
(3) As of December 31, 1998 and 1997, approximately 11% and 16%, respectively,
of foreign currency swaps expire within one year.
(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. As of December 31, 1998 and 1997, the Company had no
deferred gains for interest rate swaps. During 1998, $1.5 in deferred gains
were basis adjusted.
The following is a reconciliation of notional amounts by derivative type and
strategy as of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 MATURITIES/ DECEMBER 31, 1998
NOTIONAL AMOUNT ADDITIONS TERMINATIONS (1) NOTIONAL AMOUNT
----------------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
BY DERIVATIVE TYPE
Caps......................................... $1,239 $1,000 $ 327 $1,912
Floors....................................... 1,864 -- 1,281 583
Swaps/Forwards............................... 3,342 1,838 1,475 3,705
Futures...................................... 50 8 37 21
Options...................................... 10 -- 10 --
------ -------- ------ ------
Total.................................... $6,505 $2,846 $3,130 $6,221
------ -------- ------ ------
By Strategy
Liability.................................... $1,907 $1,099 $ 661 $2,345
Anticipatory................................. -- 242 7 235
Asset........................................ 1,805 1,260 667 2,398
Portfolio.................................... 2,793 245 1,795 1,243
------ -------- ------ ------
Total.................................... $6,505 $2,846 $3,130 $6,221
------ -------- ------ ------
------ -------- ------ ------
</TABLE>
- ------------------------
(1) During 1998, the Company had no significant gains or losses on
terminations of hedge positions using derivative financial instruments.
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS 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. Hartford
Life Insurance
F-12 PROSPECTUS
<PAGE>
Company uses the following methods and assumptions in estimating the fair value
of each class of financial instrument.
Fair value for fixed maturities and marketable equity securities approximates
those quotations published by applicable stock exchanges or received from other
reliable sources.
For policy loans, carrying amounts approximate fair value.
Fair value for other invested assets primarily consist of partnerships and
trusts that are based on external market valuations from partnership and trust
management as well as mortgage loans where carrying amounts approximate fair
value.
Other policyholder funds fair value information is determined by estimating
future cash flows, discounted at the current market rate.
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 periodic comparison to dealer quoted prices.
The carrying amount and fair values of Hartford Life Insurance Company's
financial instruments as of December 31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
------------------ ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Assets
Fixed maturities..................................... $14,818 $14,818 $14,176 $14,176
Equity securities.................................... 31 31 180 180
Policy loans......................................... 6,684 6,684 3,756 3,756
Other investments.................................... 264 309 47 91
Liabilities
Other policyholder funds (1)......................... $11,709 $11,726 $11,769 $11,755
</TABLE>
- ------------------------------
(1) Excludes corporate owned life insurance and universal life insurance
contracts.
5. SEPARATE ACCOUNTS
Hartford Life Insurance Company maintained separate account assets and
liabilities totaling $90.3 billion and $69.1 billion as of December 31, 1998 and
1997, respectively, which are reported at fair value. Separate account assets,
which are segregated from other investments, reflect two categories of risk
assumption: non-guaranteed separate accounts totaling $80.6 billion and $58.6
billion as of December 31, 1998 and 1997, respectively, wherein the policyholder
assumes the investment risk, and guaranteed separate accounts totaling $9.7 and
$10.5 billion as of December 31, 1998 and 1997, respectively, wherein Hartford
Life Insurance Company contractually guarantees either a minimum return or
account value to the policyholder. Included in non-guaranteed separate account
assets were policy loans totaling $1.8 billion and $1.9 billion as of December
31, 1998 and 1997, 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 and other revenues were $908, $699 and $538 in
1998, 1997 and 1996, respectively. The guaranteed separate accounts include
fixed market value adjusted (MVA) individual annuity and modified guaranteed
life insurance. The average credited interest rate on these contracts was 6.6%
and 6.5% as of December 31, 1998 and 1997, respectively. The assets that support
these liabilities were comprised of $9.5 billion and $10.2 billion in fixed
maturities as of December 31, 1998 and 1997, respectively. 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 $40 and $119 in carrying value and $3.5 billion and
$3.0 billion in notional amounts as of December 31, 1998 and 1997, respectively.
6. STATUTORY RESULTS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Statutory net income................ $ 211 $ 214 $ 144
--------- --------- ---------
Statutory surplus................... $ 1,676 $ 1,441 $ 1,207
--------- --------- ---------
--------- --------- ---------
</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 1999
is estimated to be $168.
Hartford Life Insurance Company and its domestic insurance subsidiaries prepare
their statutory financial statements in accordance with accounting practices
prescribed by the State of Connecticut. Prescribed statutory accounting
practices include
F-13 PROSPECTUS
<PAGE>
publications of the National Association of Insurance Commissioners, as well as
state laws, regulations, and general administrative rules.
7. STOCK COMPENSATION PLANS
Hartford Life Insurance Company's employees are included in the 1997 Hartford
Life, Inc. Incentive Stock Plan (the "Plan"), which was adopted during the
second quarter of 1997. 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 million
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 Hartford Life,
Inc. 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 121,943 and 54,316 shares under
the ESPP in 1998 and 1997, respectively. The weighted average fair value of the
discount under the ESPP was $13.80 per share in 1998 and $9.63 per share in
1997.
8. POSTRETIREMENT BENEFIT AND SAVINGS PLANS
(A) PENSION PLANS
Hartford Life Insurance 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 $6 in 1998 and $5
in both 1997 and 1996.
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 1998, 1997 and 1996.
The assumed rate in the per capita cost of health care (the health care trend
rate) was 7.8% for 1998, decreasing ratably to 5.0% in the year 2003. Increasing
the health care trend rates by one percent per year would have an immaterial
impact on the accumulated postretirement benefit obligation and the annual
expense. To the extent that the actual experience differs from the inherent
assumptions, the effect will be amortized over the average future service of
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 Hartford Life Insurance Company for the above-mentioned
plan was approximately $4 and $2 in 1998 and 1997, respectively.
9. REINSURANCE
Hartford Life Insurance 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.
F-14 PROSPECTUS
<PAGE>
Net premiums and other considerations were comprised of the following:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Gross premiums...................... $ 2,722 $ 2,164 $ 2,138
Assumed............................. 150 159 190
Ceded............................... (654) (686) (623)
--------- --------- ---------
Net premiums and other
considerations................... $ 2,218 $ 1,637 $ 1,705
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company ceded approximately $128, $76 and $100 of group life premium to HLA
in 1998, 1997 and 1996, respectively, representing $38.4 billion, $33.6 billion
and $33.3 billion of insurance in force, respectively. The Company ceded $383,
$339 and $318 of accident and health premium to HLA in 1998, 1997 and 1996,
respectively. The Company assumed $82, $89 and $101 of premium in 1998, 1997 and
1996, respectively, representing $7.4 billion, $8.2 billion and $8.5 billion of
individual life insurance in force, respectively, from HLA.
Life reinsurance recoveries, which reduce death and other benefits, approximated
$97, $158 and $140 for the years ended December 31, 1998, 1997 and 1996,
respectively.
Hartford Life Insurance Company has no significant reinsurance-related
concentrations of credit risk.
10. 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 own 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. It is the intention of The
Hartford and its non-life subsidiaries to file a single consolidated Federal
income tax return. The life insurance companies will file a separate
consolidated federal income tax return. The Company's effective tax rate was
35%, 36% and 35% in 1998, 1997 and 1996, respectively.
Income tax expense is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Current................................ $ 307 $ 162 $ 118
Deferred............................... (119) 5 (98)
----- ----- -----
Income tax expense................... $ 188 $ 167 $ 20
----- ----- -----
----- ----- -----
</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,
-------------------------------------
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Tax provision at the U.S. Federal
statutory rate........................ $ 188 $ 164 $ 20
Other.................................. -- 3 --
----- ----- ---
Total................................ $ 188 $ 167 $ 20
----- ----- ---
----- ----- ---
</TABLE>
Deferred tax assets (liabilities) include the following as of December 31:
<TABLE>
<CAPTION>
1998 1997
----- -----
<S> <C> <C>
Tax basis deferred policy acquisition costs... $ 751 $ 639
Financial statement deferred policy
acquisition costs and reserves............... 103 69
Employee benefits............................. 4 8
Net unrealized capital gains on securities.... (98) (96)
Investments and other......................... (296) (272)
----- -----
Total....................................... $ 464 $ 348
----- -----
----- -----
</TABLE>
Hartford Life Insurance Company had a current tax payable of $65 and $64 as of
December 31, 1998 and 1997, respectively.
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, based on current tax law,
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, 1998 was $104.
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, 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 $47, $34 and $40 in 1998, 1997 and 1996,
respectively. Management believes that the methods used are reasonable.
F-15 PROSPECTUS
<PAGE>
12. COMMITMENTS AND CONTINGENT LIABILITIES
(A) LITIGATION
Hartford Life Insurance 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, at the present
time the Company does not anticipate that the ultimate liability arising from
such pending or threatened litigation, after consideration of provisions made
for potential losses and costs of defense, will have a material adverse 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. Part of the assessments paid
by the Company and its subsidiaries pursuant to these laws may be used as
credits for a portion of the associated premium taxes. The Company paid guaranty
fund assessments of approximately $9, $15 and $11 in 1998, 1997 and 1996,
respectively, of which $4, $4 and $5, respectively, were estimated to be
creditable against premium taxes.
(C) LEASES
The rent paid to Hartford Fire for space occupied by the Company was $7 in both
1998 and 1997 and $3 in 1996. Future minimum rental commitments are as follows:
<TABLE>
<S> <C>
1999............... $ 7
2000............... 12
2001............... 12
2002............... 13
2003............... 13
Thereafter......... 74
---------
Total............ $ 131
---------
---------
</TABLE>
Rental expense is recognized on a level basis over the term of the primary
sublease, which expires on December 31, 2009, and amounted to approximately $9
in both 1998 and 1997 and $8 in 1996.
(D) TAX MATTERS
Hartford Life's federal income tax returns are routinely audited by the Internal
Revenue Service. Hartford Life is currently under audit for the years 1993
through 1995, with the audit for the years 1996 through 1997 expected to begin
during early 1999. Management believes that adequate provision has been made in
the financial statements for items that may result from tax examinations and
other tax related matters.
(E) INVESTMENTS
As of December 31, 1998, Hartford Life Insurance Company held $71 of asset
backed securities securitized and serviced by Commercial Financial Services,
Inc. (CFS) of which $50 were included in the Company's general account and $21
in the Company's guaranteed separate account. In October 1998, the Company
became aware of allegations of improper activities at CFS. On December 11, 1998,
CFS filed for protection under Chapter 11 of the Bankruptcy Code. As of December
31, 1998, CFS continues to service the asset backed securities, which remain
current on payments of principal and interest, however, the Company does not
expect to recover all of its principal investment. Based upon information
available in the fourth quarter 1998, the Company recognized a $25, after-tax,
writedown related to its holdings in CFS of which $18 was related to the
Company's general account assets. The ultimate realizable amount depends on the
outcome of the bankruptcy of CFS and these estimates are therefore subject to
material change as new information becomes available. The Company is presently
unable to determine the amount of further potential loss, if any, related to the
securities.
13. SEGMENT INFORMATION
Hartford Life Insurance Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information", during the fourth quarter of
1998. This statement replaces SFAS No. 14, "Financial Reporting for Segments of
a Business Enterprise", and establishes new standards for reporting information
about operating segments in annual financial statements and in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
This statement requires that the reportable operating segments be based on the
Company's internal operations. On this basis, Hartford Life Insurance Company's
segments represent strategic operations which offer different products and
services as well as serve different markets.
Hartford Life Insurance Company is organized into three reportable operating
segments which include Investment Products, Individual Life and Corporate Owned
Life Insurance (COLI). Investment Products offers individual variable annuities,
fixed market value adjusted (MVA) annuities and fixed and variable immediate
annuities, mutual funds, deferred compensation and retirement plan services,
structured settlement contracts and other special purpose annuity contracts.
Individual Life sells a variety of life insurance products, including variable
life, universal life, interest-sensitive whole life and term life insurance.
COLI primarily offers variable products used by employers to fund non-qualified
benefits or other post-employment benefit obligations as well as leveraged COLI.
The Company includes in "Other" corporate items not directly allocable to any of
its reportable operating segments as well as certain employee benefit products
including group life and disability insurance that is directly written by the
Company and is substantially ceded to its parent, HLA.
F-16 PROSPECTUS
<PAGE>
The accounting policies of the reportable operating segments are the same as
those described in the summary of significant accounting policies in Note 2.
Hartford Life Insurance Company evaluates performance of its segments based on
revenues, net income and the segment's return on allocated capital. The Company
charges direct operating expenses to the appropriate segment and allocates the
majority of indirect expenses to the segments based on an intercompany expense
arrangement. Intersegment revenues are not significant and primarily occur
between corporate and the operating segments. These amounts include interest
income on allocated surplus and the amortization of net realized capital gains
and losses through net investment income utilizing the duration of the segment's
investment portfolios. The Company's revenues are primarily derived from
customers within the United States. The Company's long-lived assets primarily
consist of deferred policy acquisition costs and deferred tax assets from within
the United States. The following table outlines summarized financial information
concerning the Company's segments. The information for 1997 and 1996 has been
restated to conform to the 1998 presentation.
<TABLE>
<CAPTION>
INVESTMENT INDIVIDUAL
1998 PRODUCTS LIFE COLI OTHER TOTAL
- ------------------------------------------------------- --------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Total revenues......................................... $ 1,779 $ 543 $ 1,567 $ 86 $ 3,975
Net investment income.................................. 736 181 793 49 1,759
Amortization of deferred policy acquisition costs...... 326 105 -- -- 431
Income tax expense (benefit)........................... 145 35 12 (4) 188
Net income (loss)...................................... 270 64 24 (8) 350
Assets................................................. 87,207 5,228 22,631 3,197 118,263
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT INDIVIDUAL
1997 PRODUCTS LIFE COLI OTHER TOTAL
- ------------------------------------------------------- --------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Total revenues......................................... $ 1,510 $ 487 $ 980 $ 32 $ 3,009
Net investment income.................................. 739 164 429 36 1,368
Amortization of deferred policy acquisition costs...... 250 83 -- 2 335
Income tax expense..................................... 111 30 15 11 167
Net income............................................. 206 55 27 14 302
Assets................................................. 72,288 4,914 17,800 2,743 97,745
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT INDIVIDUAL
1996 PRODUCTS LIFE COLI OTHER TOTAL
- ------------------------------------------------------- --------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Total revenues......................................... $ 1,002 $ 440 $ 1,360 $ 87 $ 2,889
Net investment income.................................. 684 153 480 80 1,397
Amortization of deferred policy acquisition costs...... 174 60 -- -- 234
Income tax expense (benefit)........................... (42 ) 24 11 27 20
Net income (loss)...................................... (77 ) 44 26 45 38
Assets................................................. 57,410 3,753 14,222 2,377 77,762
</TABLE>
14. QUARTERLY RESULTS FOR 1998 AND 1997 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
-------------------- -------------------- -------------------- --------------------
1998 1997 1998 1997 1998 1997 1998 1997
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues........................... $ 915 $ 651 $ 721 $ 645 $ 826 $ 679 $ 1,513 $ 1,034
Benefits, claims and expenses...... 787 550 591 536 688 550 1,371 904
Net income......................... 83 63 85 74 89 81 93 84
</TABLE>
F-17 PROSPECTUS
<PAGE>
SCHEDULE I -- SUMMARY OF INVESTMENTS --
OTHER THAN INVESTMENTS IN AFFILIATES
AS OF DECEMBER 31, 1998
(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. Government and Government agencies
and authorities (guaranteed and
sponsored)................................ $ 121 $ 123 $ 123
U. S. Government and Government agencies
and authorities (guaranteed and sponsored)
-- asset backed........................... 1,001 1,016 1,016
States, municipalities and political
subdivisions.............................. 165 173 173
Foreign governments........................ 393 412 412
Public utilities........................... 844 874 874
All other corporate including
international............................. 5,469 5,687 5,687
All other corporate -- asset backed........ 4,155 4,171 4,171
Short-term investments..................... 1,847 1,847 1,847
Certificates of deposit...................... 510 515 515
------- ------- -------
Total fixed maturities....................... 14,505 14,818 14,818
------- ------- -------
Equity Securities
Common Stocks
Industrial and miscellaneous............... 30 31 31
------- ------- -------
Total equity securities...................... 30 31 31
------- ------- -------
Total fixed maturities and equity
securities.................................. 14,535 14,849 14,849
------- ------- -------
Policy Loans................................. 6,684 6,684 6,684
------- ------- -------
Other Investments
Mortgage loans on real estate.............. 206 207 206
Other invested assets...................... 58 102 58
------- ------- -------
Total other investments...................... 264 309 264
------- ------- -------
Total investments............................ $21,483 $21,842 $21,797
------- ------- -------
------- ------- -------
</TABLE>
F-18 PROSPECTUS
<PAGE>
SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN MILLIONS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DEFERRED
POLICY FUTURE OTHER PREMIUMS NET
ACQUISITION POLICY POLICYHOLDER AND OTHER INVESTMENT
SEGMENT COSTS BENEFITS FUNDS CONSIDERATIONS INCOME
- --------------------------------------------- ----------- --------- ---------- --------------- ---------
<S> <C> <C> <C> <C> <C>
1998
Investment Products.......................... $2,823 $2,407 $ 9,194 $1,043 $ 736
Individual Life.............................. 931 466 2,307 363 181
Corporate Owned Life Insurance............... -- 225 8,097 774 793
Other........................................ -- 497 17 38 49
----------- --------- ---------- ------ ---------
Consolidated operations...................... $3,754 $3,595 $19,615 $2,218 $1,759
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
1997
Investment Products.......................... $2,478 $2,070 $ 9,620 $ 771 $ 739
Individual Life.............................. 837 392 2,182 323 164
Corporate Owned Life Insurance............... -- 56 9,259 551 429
Other........................................ -- 541 (27) (8) 36
----------- --------- ---------- ------ ---------
Consolidated operations...................... $3,315 $3,059 $21,034 $1,637 $1,368
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
1996
Investment Products.......................... $2,030 $1,526 $10,140 $ 537 $ 684
Individual Life.............................. 730 346 2,160 287 153
Corporate Owned Life Insurance............... -- -- 9,823 880 480
Other........................................ -- 602 11 1 80
----------- --------- ---------- ------ ---------
Consolidated operations...................... $2,760 $2,474 $22,134 $1,705 $1,397
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
<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>
1998
Investment Products.......................... $ -- $ 670 $326 $ -- $ 368
Individual Life.............................. (1) 262 105 -- 77
Corporate Owned Life Insurance............... -- 924 -- 329 278
Other........................................ (1) 55 -- -- 43
----- ----------- ----- ----- -----
Consolidated operations...................... $ (2) $1,911 $431 $329 $ 766
----- ----------- ----- ----- -----
----- ----------- ----- ----- -----
1997
Investment Products.......................... $ -- $ 677 $250 $ -- $ 266
Individual Life.............................. -- 242 83 -- 77
Corporate Owned Life Insurance............... -- 439 -- 240 259
Other........................................ 4 21 2 -- (16)
----- ----------- ----- ----- -----
Consolidated operations...................... $ 4 $1,379 $335 $240 $ 586
----- ----------- ----- ----- -----
----- ----------- ----- ----- -----
1996
Investment Products.......................... $(219) $ 744 $175 $ -- $ 203
Individual Life.............................. -- 245 59 -- 68
Corporate Owned Life Insurance............... -- 545 -- 634 144
Other........................................ 6 1 -- 1 12
----- ----------- ----- ----- -----
Consolidated operations...................... $(213) $1,535 $234 $635 $ 427
----- ----------- ----- ----- -----
----- ----------- ----- ----- -----
</TABLE>
F-19 PROSPECTUS
<PAGE>
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, 1998
Life insurance in force........................... $326,400 $200,782 $18,289 $143,907 12.7%
Premiums and other considerations
Life insurance and annuities.................... $ 2,329 $ 271 $ 142 $ 2,200 6.5%
Accident and health insurance................... 393 383 8 18 44.4%
-------- -------------- ------- --------
Total premiums and other considerations........... $ 2,722 $ 654 $ 150 $ 2,218 6.8%
-------- -------------- ------- --------
-------- -------------- ------- --------
For the year ended December 31, 1997
Life insurance in force......................... $245,487 $178,771 $33,156 $ 99,872 33.2%
Premiums and other considerations
Life insurance and annuities.................... $ 1,818 $ 340 $ 157 $ 1,635 9.6%
Accident and health insurance................... 346 346 2 2 100.0%
-------- -------------- ------- --------
Total premiums and other considerations........... $ 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%
Premiums and other considerations
Life insurance and annuities.................... $ 1,801 $ 298 $ 169 $ 1,672 10.1%
Accident and health insurance................... 337 325 21 33 63.6%
-------- -------------- ------- --------
Total premiums and other considerations........... $ 2,138 $ 623 $ 190 $ 1,705 11.1%
-------- -------------- ------- --------
-------- -------------- ------- --------
</TABLE>
F-20 PROSPECTUS
<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)
(3) (b) Form of the Sales Agreement.(2)
(4) Individual Flexible Premium Variable Annuity Contract.(1)
(5) Form of Application.(1)
(6) (a) Articles of Incorporation of Hartford.(3)
(b) Bylaws of Hartford.(1)
(7) Form of Reinsurance Agreement.
(8) Form of Share Purchase Agreement by the registrant and Dean
Witter Select Dimensions Investment Series.(1)
(9) Opinion and Consent of Lynda Godkin, Senior Vice President,
General Counsel and Corporate Secretary.
(10) Consent of Arthur Andersen LLP, Independent Public Accountants.
- -----------------
(1) Incorporated by reference to Post-Effective Amendment No. 2, to the
Registration Statement File No. 33-80738, dated May 1, 1995.
(2) Incorporated by reference to Post Effective Amendment No. 3, to the
Registration Statement File No. 33-80738, dated May 1, 1996.
(3) Incorporated by reference to Post Effective Amendment No. 4, to the
Registration Statement File No. 33-80738, filed on April 14, 1997.
<PAGE>
(11) No financial statements are omitted.
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) Copy of Power of Attorney.
(16) Organizational Chart.
Item 25. Directors and Officers of the Depositor
- ------------------------------------------------------------------------------
NAME POSITION WITH HARTFORD
- ------------------------------------------------------------------------------
Wendell J. Bossen Vice President
- ------------------------------------------------------------------------------
Gregory A. Boyko Senior Vice President, Director*
- ------------------------------------------------------------------------------
Peter W. Cummins Senior Vice President
- ------------------------------------------------------------------------------
Timothy M. Fitch Vice President
- ------------------------------------------------------------------------------
Mary Jane B. Fortin Vice President & Chief Accounting Officer
- ------------------------------------------------------------------------------
David T. Foy Senior Vice President & Treasurer
- ------------------------------------------------------------------------------
Lynda Godkin Senior Vice President, General Counsel and
Corporate Secretary, Director*
- ------------------------------------------------------------------------------
Lois W. Grady Senior Vice President
- ------------------------------------------------------------------------------
Stephen T. Joyce Vice President
- ------------------------------------------------------------------------------
Michael D. Keeler Vice President
- ------------------------------------------------------------------------------
Robert A. Kerzner Senior Vice President
- ------------------------------------------------------------------------------
Thomas M. Marra Executive Vice President, Director*
- ------------------------------------------------------------------------------
Joseph J. Noto Vice President
- ------------------------------------------------------------------------------
Craig R. Raymond Senior Vice President and Chief Actuary
- ------------------------------------------------------------------------------
Donald A. Salama Vice President
- ------------------------------------------------------------------------------
Lowndes A. Smith President and Chief Executive Officer, Director*
- ------------------------------------------------------------------------------
David M. Znamierowski Senior Vice President, Director*
- ------------------------------------------------------------------------------
Unless otherwise indicated, the principal business address of each of 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 March 31, 1999, there were 3,694 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. Section
33-771(a). Additionally, pursuant to Conn. Gen. Stat. Section 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 VIII, 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.
<PAGE>
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 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:
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)
<PAGE>
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 Insurance Company - Separate Account Seven
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
Alpine Life Insurance Company - Separate Account One
Alpine Life Insurance Company - Separate Account Two
American Maturity Life Insurance Company - Separate Account AMLVA
Royal Life Insurance Company - Separate Account One
Royal Life Insurance Company - Separate Account Two
(b) Directors and Officers of HSD
Name and Principal Positions and Offices
Business Address With Underwriter
---------------------- --------------------------------------
Lowndes A. Smith President and Chief Executive Officer,
Director
Thomas M. Marra Executive Vice President & Director
Peter W. Cummins Senior Vice President
Lynda Godkin Senior Vice President, General Counsel
and Corporate Secretary
David T. Foy Treasurer
George R. Jay Controller
Unless otherwise indicated, the principal business address of each
of 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.
<PAGE>
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.
(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 Council 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 certifies that it meets all the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and duly caused this Registration Statement to be signed
on its behalf, in the Town of Simsbury, and State of Connecticut on this 9th day
of April, 1999.
HARTFORD LIFE INSURANCE COMPANY - SEPARATE ACCOUNT THREE
(Registrant)
*By: Thomas M. Marra *By: /s/ Marianne O'Doherty
----------------------------------------- -----------------------
Thomas M. Marra, Executive Vice President Marianne O'Doherty
Attorney-in-Fact
HARTFORD LIFE INSURANCE COMPANY
(Depositor)
*By: Thomas M. Marra
--------------------------------------------
Thomas M. Marra, Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons and in
the capacity and on the date indicated.
Gregory A. Boyko, Senior Vice President,
Director *
Lynda Godkin, Senior Vice President,
General Counsel & Corporate Secretary, Director*
Thomas M. Marra, Executive Vice *By: /s/ Marianne O'Doherty
----------------------
President, Director * Marianne O'Doherty
Lowndes A. Smith, President & Attorney-In-Fact
Chief Executive Officer, Director *
David M. Znamierowski, Senior Vice President, Dated: April 9, 1999
Director*
<PAGE>
EXHIBIT INDEX
(7) Form of Reinsurance Agreement
(9) Opinion and Consent of Lynda Godkin, Senior Vice President, General
CounselAnd Corporate Secretary
(10) Consent of Arthur Andersen LLP, Independent Public Accountants
(15) Copy of Power of Attorney
(16) Organizational Chart
<PAGE>
REINSURANCE AGREEMENT
between
[CEDING COMPANY]
and
[REINSURER]
<PAGE>
INDEX
<TABLE>
<CAPTION>
ARTICLE PAGE
------- ----
<S> <C> <C>
Access to Records XII 7
Amounts at Risk II 1
Arbitration XVII 8
Automatic Excess Reinsurance III 2
Claims VII 5
Currency XIV 7
DAC Tax Regulation Election XVIII 9
Delays, Errors, or Omissions XIII 7
Effective Date; Term and Termination XIX 10
Extra Contractual Obligations IX 6
Hold Harmless XV 8
Insolvency XVI 8
Liability of Reinsurer IV 3
Litigation X 6
Notices XX 13
Offset XI 7
Parties to the Agreement I 1
Premium Accounting VI 4
Reinsurance Premiums V 3
Reserves VIII 5
</TABLE>
SCHEDULES
A Maximum Limits of Reinsurance in Reinsurer
B Policy Forms and Funds Subject to this Reinsurance Agreement
C Definition of Guaranteed Minimum Death Benefit
D Reinsurance Premium Rates
E Reporting Format Description
2
<PAGE>
REINSURANCE AGREEMENT
(hereinafter called Agreement)
between
[CEDING COMPANY]
(hereinafter called Ceding Company)
and
[REINSURER]
(hereinafter called Reinsurer)
It is agreed by the two companies as follows:
ARTICLE I PARTIES TO THE AGREEMENT
This Agreement shall be binding upon and shall inure solely to the benefit of
Ceding Company and Reinsurer. This Agreement shall not and is not intended to
create any right or interest in any third party and shall not and is not
intended to create any legal relationship between either party and any third
party, including, without limitation, annuitants, insureds, certificate
holders, employees, dependents, beneficiaries, policy owners, applicants or
assignees under any policy or contract issued by Ceding Company.
ARTICLE II AMOUNTS AT RISK
A. The reinsurance death benefit is the excess of the guaranteed minimum death
benefit over the contract surrender value. At issue, the guaranteed minimum
death benefit is equal to the initial premium. Once every year thereafter,
on the contract anniversary, prior to certificate or contract owner
attained age 81, the guaranteed minimum death benefit is reset to the then
current contract value, if this value exceeds the current guaranteed
minimum death benefit.
B. The Contract Value represents the owner's invested assets in the funds in
Schedule B as it appears in the records of Ceding Company before
application of any contingent deferred sales charge on any given date. The
Surrender Value is defined as the Contract Value less any contingent
deferred sales charge. The charge is a percentage of the amount surrendered
(not to exceed the aggregate amount of the premium payments made) and
equals:
3
<PAGE>
<TABLE>
<CAPTION>
Length of Time
from Premium Payment
Charge (Number of Years)
------ -----------------
<S> <C>
6% 1
6% 2
5% 3
5% 4
4% 5
3% 6
2% 7
0% 8 or more
</TABLE>
C. The Net Amount At Risk, is equal to the guaranteed minimum death benefit
less the Surrender Value at the end of each calendar month. The Net Amount
At Risk cannot fall below zero.
ARTICLE III AUTOMATIC EXCESS REINSURANCE
A. On and after the Effective Date of this Agreement, subject to the terms,
conditions and limitations set forth in this Agreement and the Schedules
attached to and made a part hereof, Ceding Company shall cede and the
Reinsurer shall accept Ceding Company's guaranteed death benefit liability
under the Variable Annuity Contracts, as described in Article II A.
B. This Agreement covers only Ceding Company's liability for claims paid under
Variable Annuity Contracts written on forms and investment in funds which
were reviewed by the Reinsurer prior to their issuance. Forms, as
supplemented by additional materials, and funds available as of the date of
this Agreement are listed on Schedule B, attached hereto and made a part
hereof. If Ceding Company intends to cede to Reinsurer liability with
respect to a new form or fund, or a revised version of an approved form or
fund, the following applies:
a) new or revised forms that do not materially impact the guaranteed
minimum death benefit risk, shall be submitted to Reinsurer by
Ceding Company as a revised Schedule B to be included in this
Agreement. A form that contains no change in the guaranteed
minimum death benefit calculation and surrender charges no greater
than those shown in Article II paragraph B will be deemed to have
no material impact on the guaranteed minimum death benefit risk;
b) new or revised forms or funds that materially impact the
guaranteed minimum death benefit risk shall be subject to the
approval of Reinsurer. Reinsurer shall have no change in liability
until written notice is provided to Ceding Company that such new
or revised forms or funds are acceptable. If Reinsurer fails to
provide written notice of acceptance within thirty (30) days, such
changes shall be considered to have been approved.
4
<PAGE>
ARTICLE IV LIABILITY OF REINSURER
Reinsurer's liability for reinsurance under this Agreement shall follow that of
Ceding Company in every case, and be subject in all respects to the general
stipulations, terms, clauses, conditions, waivers and modifications of the
Variable Annuity Contracts.
In no event shall Reinsurer have any reinsurance liability unless the Variable
Annuity Contract issued by Ceding Company is in force and the underwriting and
issuance of coverage by Ceding Company constitutes the doing of business in a
state of the United States of America or in territories of the United States of
America in which Ceding Company is properly licensed and authorized to do
business.
ARTICLE V REINSURANCE PREMIUMS
The monthly premiums for reinsurance subject to the terms and conditions of this
Agreement shall be calculated as the average of the reinsurance premiums using
the Net Amount at Risk as of the end of the prior month and the reinsurance
premium using the Net Amount at Risk as of the end of the current month by
applying the YRT rates set forth in Schedule D, subject to the following:
A. The reinsurance premiums shall be based on the older of contract owner and
annuitant at the time the Net Amount at Risk is calculated. Ceding Company
shall determine the age at the time it prepares the monthly exposure data
submission for the variable annuity guaranteed death benefit, as set forth
in Schedule E, attached hereto.
B. The premium for each calendar month will be at least equivalent to the
Monthly Average Contract Value times the minimum premium rate as shown in
paragraphs D and E below. The Monthly Average Contract Value is the average
of the contract values at the end of the current calendar month and the end
of the prior calendar month. The Monthly Contract Value times the minimum
premium rate will be remitted to Reinsurer in advance for the current
month, at the time of settlement for the prior month.
C. The premium for each calendar month will be no more than the monthly
Average Contract Value times the maximum premium rate as shown in
paragraphs D and E below. Basis points (bps) shown below are monthly.
D. [Premium rate schedules]
ARTICLE VI PREMIUM ACCOUNTING
Ceding Company shall forward to Reinsurer within 30 days of the end of the
reporting period a monthly statement substantially similar to that set forth in
Schedule E. Reinsurance premiums submitted by Ceding Company shall be net of
claims incurred. If a balance is due Reinsurer, Ceding Company shall remit any
balance due for the prior
5
<PAGE>
month along with an advance premium for the current month, in accordance with
Article V.
ARTICLE VII CLAIMS
A. Ceding Company is solely responsible for payment of its claims under the
Variable Annuity Contracts, policies, master contracts or certificates
identified on Schedule B. Ceding Company shall provide Reinsurer with proof
of claim, proof of claim payment and any other claim documentation
requested by Reinsurer. Reinsurance premiums submitted by Ceding Company
shall be net of claims incurred. If a balance is due Ceding Company,
Reinsurer shall remit payment within thirty (30) calendar days following
receipt of the monthly reinsurance statement, as set forth in Schedule E.
B. Ceding Company shall notify Reinsurer of its intentions to contest,
compromise, or litigate a claim involving reinsurance.
ARTICLE VIII RESERVES
The reserve held by Reinsurer for reinsurance of the variable annuity death
benefit will be determined as follows:
Contracts issued on or after [Date]
The minimum of the amount calculated by Ceding Company or the recognized
statutory required reserve. Not to exceed the following:
1. Create artificial one (1) year exposures based on a 1/3 drop in all funds
(excluding fixed and money market funds), with no recovery for twelve (12)
months.
2. Apply annual mortality rates from the 1980 CSO mortality table.
3. Ignore the benefit of reinsurance premium.
Contracts issued on or before [Date]
The minimum of the amount calculated by Ceding Company or the recognized
statutory required reserve. Not to exceed the following:
[Date] Year End -- [ %] of the reserve and [Date] Year End -- [ %] of the
reserve calculated using the following method:
1. Create artificial one (1) year exposures based on the following fund
performance:
(a) [ %] drop in equity funds, with no recovery for twelve (12) months
(b) [ %] drop in debt funds, with no recovery for twelve (12) months
6
<PAGE>
2. Apply the annual mortality rates from the [Date] Group Annuity Mortality
Table, loaded [ %].
3. Ignore the benefit of reinsurance premium.
[Date] Year End and beyond -- [ %] of the reserve calculated using the same
method as contracts issued on or after [Date].
ARTICLE IX EXTRA CONTRACTUAL OBLIGATIONS
A. In no event shall Reinsurer be liable for extra contractual damages
(whether they constitute Compensatory damages, Statutory penalties,
Exemplary or Punitive damages) which are awarded against Ceding Company as
a result of an act, omission or course of conduct by Ceding Company in
connection with policies subject to this Agreement, unless the Reinsurer
shall have received notice of an concurred with the actions taken or not
taken by Ceding Company which led to its liability, in which case the
Reinsurer shall pay its share of such liability. For this purpose, the
Reinsurer's share shall be proportionate with its risk under the business
reinsured hereunder.
B. The following definitions shall apply:
(1) Punitive damages and Exemplary damages are those damages awarded as a
penalty, the amount of which is not governed nor fixed by statute.
(2) Statutory penalties are those amounts which are awarded as a penalty,
but fixed in amount by statute.
(3) Compensatory damages are those amounts awarded to compensate for the
actual damages sustained and are not awarded as a penalty nor fixed
in amount by statute.
ARTICLE X LITIGATION
A. In the event of any action brought against Ceding Company related to the
guaranteed minimum death benefit risk under any Underlying Annuity Contract
that is subject to the terms and conditions of this Agreement, Ceding
Company shall provide a copy of such action and written notice of such
action within two (2) business days to Reinsurer. If Reinsurer is a party
to action brought against Ceding Company, Ceding Company shall seek
agreement by Reinsurer on the selection and appointment of local counsel to
represent Ceding Company in such action.
B. Ceding Company and Reinsurer agree that all litigation costs, excluding the
salaries of employees of Ceding Company and Reinsurer, shall be borne by
Ceding Company. However, if Ceding Company and Reinsurer agree to jointly
defend any litigation, litigation costs will be borne in proportion to the
net liability borne by each party.
7
<PAGE>
ARTICLE XI OFFSET
Either party shall have, and may exercise at any time, and from time-to-time,
the right to offset any balance or amounts whether on account of premiums or on
account of losses or otherwise, due from one party to the other under the terms
of this Agreement. However, in the event of insolvency of Ceding Company subject
to the provisions of Article XVI, offset shall only be allowed in accordance
with the statutes and/or regulations of the state having jurisdiction over the
insolvency.
ARTICLE XII ACCESS TO RECORDS
Reinsurer, or its duly authorized representative, shall have access (at any
reasonable time) to all records of Ceding Company (including the right to
photocopy documents) which pertain in any way to this reinsurance. The right of
access shall continue for twelve (12) months following the termination of this
Agreement.
ARTICLE XIII DELAYS, ERRORS OR OMISSIONS
No accidental delay, errors or omissions on the part of Ceding Company shall
relieve Reinsurer of liability provided such delay, errors or omissions are
rectified as soon as possible after discovery. However, Reinsurer shall not be
liable with respect to any reinsurance which may have been inadvertently
included in the premium computation, but which ought not to have been included
by reason of the terms and conditions of this Agreement. It is expressly
understood and agreed that if failure to comply with any terms of this Agreement
is hereby shown to be unintentional or the result of misunderstanding or
oversight on the part of either party, both parties shall be restored to the
position they would have occupied had no such error or oversight occurred,
subject always to the correction of the error or oversight.
ARTICLE XIV CURRENCY
All retentions and limits hereunder are expressed in United States dollars and
all premium and loss payments shall be made in United States currency. For the
purposes of this Agreement, amounts paid or received by Reinsurer in any other
currency shall be converted into United States dollars at the rates of exchange
on the date such transactions are entered on the books of Reinsurer.
ARTICLE XV HOLD HARMLESS
A. Reinsurer shall indemnify and hold Ceding Company harmless from any and all
liability, loss, damage, fines, punitive damages, penalties and costs,
including expenses and attorney's fees, which results from any negligence
or willful misconduct of Reinsurer in fulfilling its duties and obligations
under this Agreement or which results from any action which exceeds its
authority under this Agreement.
8
<PAGE>
B. Ceding Company shall indemnify and hold Reinsurer harmless from any and all
liability, loss, damage, fines, punitive damages, penalties and costs,
including expenses and attorney's fees, which results from any negligence
or willful misconduct of Ceding Company in fulfilling its duties and
obligations under this Agreement or which results from any action which
exceeds its authority under this Agreement.
ARTICLE XVI INSOLVENCY
In the event of insolvency of Ceding Company, the reinsurance under this
Agreement shall be payable directly by Reinsurer to Ceding Company or to its
liquidator, receiver, conservator or statutory successor on the basis of
Reinsurer's liability to Ceding Company without diminution because of the
insolvency of Ceding Company or because the liquidator, receiver, conservator or
statutory successor of Ceding Company has failed to pay all or a portion of any
claim. It is agreed, however, that the liquidator, receiver, conservator or
statutory successor of Ceding Company shall give prompt written notice to
Reinsurer of the pendency of a claim against Ceding Company within a reasonable
time after such claim is filed in the receivership, conservation, insolvency or
liquidation proceeding and that during the pendency of such claim, Reinsurer may
investigate such claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses that it may deem
available to Ceding Company or its liquidator, receiver, conservator or
statutory successor. The expense thus incurred by Reinsurer shall be chargeable,
subject to the approval of the Court, against Ceding Company as part of the
expense of conservation or liquidation to the extend of a pro-rata share of the
benefit which may accrue to Ceding Company solely as a result of the defense
undertaken by Reinsurer.
Where two or more reinsurers are involved in the same claim and a majority in
interest elect to interpose to such claim, the expense shall be apportioned in
accordance with the terms of this Agreement as though such expense had been
incurred by Ceding Company.
ARTICLE XVII ARBITRATION
A. As a condition precedent to any right of action hereunder, any dispute
between the parties with respect to the interpretation of this Agreement
or any right, obligation or liability of either party, whether such dispute
arises before or after termination of this Agreement, shall be submitted to
arbitration upon the written request of either party. Each party shall
select an arbitrator within thirty (30) days of the written request for
arbitration. If either party refuses or neglects to appoint an arbitrator
within thirty (30) days of the written request for arbitration, the other
party may appoint the second arbitrator. The two arbitrators shall select
an umpire within thirty (30) days of the appointment of the second
arbitrator. If the two arbitrators fail to agree on the selection of the
umpire within thirty (30) days of the appointment of the second arbitrator,
each arbitrator shall submit to the other a list of three umpire
candidates, each arbitrator shall select one name from the list submitted
by the other and the
9
<PAGE>
umpire shall be selected from the two names chosen by a lot drawing
procedure to be agreed upon by the arbitrators.
B. The arbitrators and the umpire all shall be active or retired,
disinterested executive officers of insurance or reinsurance companies.
C. The arbitration panel shall interpret this Agreement as an honorable
engagement rather than merely as a legal obligation and shall make its
decision considering the custom and practice of the applicable insurance
and reinsurance business. The arbitration panel is released from judicial
formalities and shall not be bound by strict rules of procedure and
evidence.
D. The decision of the arbitration panel shall be final and binding on both
parties. The arbitration panel may, at its discretion, award costs and
expenses as it deems appropriate, including, but not limited to, attorneys'
fees and interest. Judgment may be entered upon the final decision of the
arbitration panel in any court of competent jurisdiction.
E. All meetings and hearings before the arbitration panel shall take place in
Hartford, Connecticut unless some other place is mutually agreed upon the
parties.
F. Each party shall bear the expense of its own arbitrator and shall jointly
and equally bear with the other party the expenses of the umpire and of the
arbitration.
ARTICLE XVIII DAC TAX REGULATION ELECTION
Reinsurer and Ceding Company hereby agree to make an election pursuant to
Internal Revenue Code Regulations Section 1.848-2(g)(8). This election shall be
effective for all taxable years for which the Reinsurance Agreement remains in
effect.
The terms used in this article are defined by reference to Regulation Section
1.848.2 promulgated on December 28, 1992.
Reinsurer and Ceding Company agree that the entity with net positive
consideration for the reinsurance agreement for each taxable year will
capitalize specified policy acquisition expenses with respect to the reinsurance
agreement without regard to the general deductions limitation of Section
848(c)(1) of the Internal Revenue Code of 1986, as amended.
Reinsurer and Ceding Company agree to exchange information pertaining to the
amount of net consideration under the reinsurance agreement each year to ensure
consistency. To achieve this, Ceding Company shall provide Reinsurer with a
schedule of its calculation of the net consideration for all reinsurance
agreements in force between them for a taxable year by no later than [Date] of
the succeeding year. Reinsurer shall advise Ceding Company if it disagrees with
the amounts provided by no later than [Date],
10
<PAGE>
otherwise the amounts will be presumed correct and shall be reported by both
parties in their respective tax returns for such tax year. If Reinsurer
contests Ceding Company's calculation of the net consideration, the Parties
agree to act in good faith to resolve any differences within thirty (30) days
of the date Reinsurer submits its alternative calculation and report the
amounts agreed upon in their respective tax returns for such tax year.
Reinsurer represents and warrants that it is subject to U. S. taxation under
either Subchapter L or Subpart F of Part III of Subchapter N of the Internal
Revenue Code of 1986, as amended.
ARTICLE XIX EFFECTIVE DATE; TERM AND TERMINATION
A. The effective date of this Agreement is [Date]. This Agreement remains
effective for all annuity contracts subject to this Agreement written by
Ceding Company for three (3) years from the effective date, unless
terminated pursuant to the paragraphs listed below:
B. Either Reinsurer or Ceding Company shall have the option of terminating
this agreement with ninety (90) calendar days written notice to the other
party for new business anytime on or after the end of the three (3) year
period.
C. Once each calendar year, Ceding Company shall have the option to recapture
existing contracts beginning with the twentieth (20) anniversary of their
reinsurance hereunder. Recapture must be made on an issue year basis, and
no contracts can be recaptured unless all contracts with earlier years are
recaptured.
D. Reinsurer shall have the option of terminating this Agreement upon delivery
of thirty (30) calendar days written notice to Ceding Company, within
thirty (30) days of the happening of any of the following events:
FOR NEW AND EXISTING BUSINESS:
(1) Ceding Company's A. M. BEST rating is reduced to a "C" or lower.
(2) Ceding Company is placed upon a "watch list" by its domiciliary
state's insurance regulators;
(3) An order appointing a receiver, conservator or trustee for
management of Ceding Company is entered or a proceeding is commenced
for rehabilitation, liquidation, supervision or conservation of
Ceding Company;
(4) The Securities and Exchange Commission revokes the authority of
Ceding Company to conduct business;
11
<PAGE>
(5) Failure by Ceding Company to pay premium in accordance with Article
V. If, during the thirty (30) days notice period, Reinsurer
receives all premiums in arrears and all premiums which may become
due within the thirty (30) days notice period, the notice of
termination shall be deemed withdrawn. In the event of termination
under this paragraph, this Agreement may be reinstated upon the
written consent of Reinsurer if, at any time within sixty (60) days
of termination, Ceding Company pays and Reinsurer receives all
premiums due with interest thereon and payable up to the date of
reinstatement. (Please refer to paragraph J below for the interest
calculation description).
E. Ceding Company shall have the option of terminating this Agreement upon
delivery of thirty (30) calendar days written notice to Reinsurer, within
thirty (30) days of the happening of any of the following events:
FOR NEW AND EXISTING BUSINESS:
(1) Reinsurer's A. M. BEST rating is reduced to a "B++" or lower;
(2) Reinsurer is placed upon a "watch list" by its domiciliary state's
insurance regulators;
(3) An order appointing a receiver, conservator or trustee for management
of Reinsurer is entered or a proceeding is commenced for
rehabilitation, liquidation, supervision or conservation of Reinsurer;
F. If this Agreement is terminated for new and existing business, Reinsurer
shall be relieved of all liability to Ceding Company for claims incurred
following the termination date of this Agreement under such Underlying
Annuity Contracts issued by Ceding Company, and
G. If this Agreement is terminated for new business only, Reinsurer will
remain liable, after termination, in accordance with the terms and
conditions of this Agreement, with respect to all reinsurance effective
prior to termination of the Agreement for new business.
H. Both parties shall continue to be entitled to all offset credits provided
by Article XI up to the effective date of termination.
I. Ceding Company shall not have the right to assign or transfer any portion
of the rights, duties and obligations of Ceding Company under the terms and
conditions of this Agreement without the written approval of Reinsurer.
J. In the event of reinstatement as described in paragraph D above, there will
be an interest charge at the three (3) month LIBOR Rate (as published in
the Wall Street Journal), plus 1%, determined on the first business day
following the end of the 30-
12
<PAGE>
day notice period. The settlement is considered overdue at the end of the
30-day notice period and interest shall commence from the overdue date.
ARTICLE XX NOTICES
All notices required to be given hereunder shall be in writing and shall be
deemed delivered if personally delivered, sent via facsimile, or dispatched by
certified or registered mail, return receipt requested, postage prepaid,
addressed to the parties as follows:
[Name and Address of Ceding Company]
[Name and Address of Reinsurer]
Notice shall be deemed given on the date it is received in the mail or sent via
facsimile in accordance with the foregoing. Any party may change the address to
which to send notices by notifying the other party of such change of address in
writing in accordance with the foregoing.
This Agreement constitutes the entire contract between the parties and shall be
deemed to have been made under and governed by the laws of the State of
Connecticut. Any amendment or modification hereto shall be in writing, endorsed
upon or attached hereto and signed by both Ceding Company and Reinsurer.
In witness thereof, the parties hereto have caused this Agreement to be signed
in duplicate on the dates indicated to be effective as of the date specified
above.
CEDING COMPANY
Date: By:
--------------------- -----------------------------
REINSURER
Date: By:
--------------------- -----------------------------
13
<PAGE>
SCHEDULE A
Maximum Limits of Reinsurance in Reinsurer
The maximum purchase amount issued on the life of each insured*:
[$ ]
The total purchase amount is the sum of all premium contributions for each
contract in which the insured is the owner or annuitant. For purchase amounts in
excess of the maximum, Reinsurer's death benefit liability will be reduced by
the ratio of purchase amounts in excess of the maximum to the total purchase
amounts.
*The insured is defined as the first to die of the owner and the annuitant.
14
<PAGE>
SCHEDULE B
Contracts and Funds Subject to this Reinsurance Agreement
Form Number Policy Description Date
- ----------- ------------------ ----
FUNDS:
a) Fixed Accounts on the above forms
b) Variable Accounts as listed below:
Fund Description
- ----------------
15
<PAGE>
SCHEDULE C
GUARANTEED MINIMUM DEATH BENEFIT
A. Ceding Company will determine the Guaranteed Minimum Death Benefit for
each deceased within seven (7) working days of written notice of death.
The guaranteed minimum death benefit will have the meaning described in the
attached policy form [ ].
16
<PAGE>
SCHEDULE D
Monthly Reinsurance Premium Rates
For Inforce Business as of [Date]
Exposure Based
Per [$ ] Exposed
<TABLE>
<CAPTION>
AGES MALE FEMALE
- ------------------------------------- ----------------------------------- -----------------------------------
<S> <C> <C>
< 35
- ------------------------------------- ----------------------------------- -----------------------------------
35-39
- ------------------------------------- ----------------------------------- -----------------------------------
40-44
- ------------------------------------- ----------------------------------- -----------------------------------
45-49
- ------------------------------------- ----------------------------------- -----------------------------------
50-54
- ------------------------------------- ----------------------------------- -----------------------------------
55-59
- ------------------------------------- ----------------------------------- -----------------------------------
60-64
- ------------------------------------- ----------------------------------- -----------------------------------
65-69
- ------------------------------------- ----------------------------------- -----------------------------------
70-74
- ------------------------------------- ----------------------------------- -----------------------------------
75-79
- ------------------------------------- ----------------------------------- -----------------------------------
80-84
- ------------------------------------- ----------------------------------- -----------------------------------
85-89
- ------------------------------------- ----------------------------------- -----------------------------------
</TABLE>
17
<PAGE>
EXHIBIT 9
[LOGO]
[HARTFORD LIFE]
April 9, 1999 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. 33-80738
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 connection 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 validly 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.
<PAGE>
Board of Directors
April 9, 1999
Page 2
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,
/s/ Lynda Godkin
Lynda Godkin
<PAGE>
EXHIBIT 10
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of
this Registration Statement File No. 33-80738 for Hartford Life Insurance
Company Separate Account Three on Form N-4.
Arthur Andersen LLP
Hartford, Connecticut
April 12, 1999
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
POWER OF ATTORNEY
-----------------
Gregory A. Boyko
David T. Foy
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, Christine Repasy,
Marianne O'Doherty, Thomas S. Clark and Brian Lord 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 under the Securities Act of 1933 and/or the Investment Company Act of
1940, and do hereby ratify any such signatures heretofore made by such
persons.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney for
the purpose herein set forth.
/s/ Gregory A. Boyko Dated as of January 15, 1999
- ------------------------------
Gregory A. Boyko
/s/ David T. Foy Dated as of January 15, 1999
- ------------------------------
David T. Foy
/s/ Lynda Godkin Dated as of January 15, 1999
- ------------------------------
Lynda Godkin
/s/ Thomas M. Marra Dated as of January 15, 1999
- ------------------------------
Thomas M. Marra
/s/ Lowndes A. Smith Dated as of January 15, 1999
- ------------------------------
Lowndes A. Smith
/s/ Raymond P. Welnicki Dated as of January 15, 1999
- ------------------------------
Raymond P. Welnicki
/s/ Lizabeth H. Zlatkus Dated as of January 15, 1999
- ------------------------------
Lizabeth H. Zlatkus
/s/ David M. Znamierowski Dated as of January 15, 1999
- ------------------------------
David M. Znamierowski
<PAGE>
ORGANIZATIONAL CHART
<TABLE>
<CAPTION>
<S> <C>
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(DELAWARE)
|
---------------------------------------------
NUTMEG INSURANCE COMPANY |
(CONNECTICUT) THE HARTFORD INVESTMENT
| MANAGEMENT COMPANY
HARTFORD FIRE INSURANCE COMPANY (DELAWARE)
(CONNECTICUT) |
| |
HARTFORD ACCIDENT AND INDEMNITY COMPANY HARTFORD INVESTMENT
(CONNECTICUT) SERVICES, INC.
| (CONNECTICUT)
HARTFORD LIFE, INC.
(DELAWARE)
|
HARTFORD LIFE & ACCIDENT INSURANCE COMPANY
(CONNECTICUT)
|
|
|
-------------------------------------------------------------------------------------------------------------------------
| | | | | | | | |
ITT HARTFORD LIFE | | | | | | HLIC PLANCO
INTERNATIONAL LTD. | | | | | | CANADA FINANCIAL
(CONNECTICUT) | | | | | | HOLDINGS, INC. SERVICES,
| | | | | | | (CANADA) INCORPORATED
| | | | | | | | (PENNSYLVANIA)
| | | | | | | | |
| | ALPINE LIFE HARTFORD FINANCIAL HARTFORD LIFE HARTFORD AMERICAN | |
| | INSURANCE SERVICES LIFE INSURANCE COMPANY FINANCIAL MATURITY LIFE | |
| | COMPANY INSURANCE CO. (CONNECTICUT) SERVICES, LLC INSURANCE COMPANY | |
| | (CONNECTICUT) (CONNECTICUT) | (DELAWARE) (CONNECTICUT) | PLANCO, INC.
| | | | | | (PENNSYLVANIA)
| | ------------------------------------- | AML FINANCIAL, INC. |
HARTFORD CALMA | | | | | (CONNECTICUT) |
COMPANY | ROYAL LIFE HARTFORD HARTFORD | HARTFORD
(FLORIDA) | INSURANCE INTERNATIONAL LIFE AND | LIFE INSURANCE
| COMPANY LIFE REASSURANCE ANNUITY INSURANCE | COMPANY
| OF AMERICA CORP. COMPANY | OF CANADA
|(CONNECTICUT) (CONNECTICUT) (CONNECTICUT) | (CANADA)
| | |
| | |
| ITT HARTFORD |
| LIFE, LTD. |
| (BERMUDA) |
| |
| |
----------| ---------------------------------------------------------------------------------------------
| | | | | |
INTERNATIONAL MS FUND HL INVESTMENT HARTFORD HARTFORD SECURITIES HARTFORD COMP. EMP.
CORPORATE AMERICA 1993-K ADVISORS, LLC EQUITY SALES DISTRIBUTION BENEFITS SERVICE
MARKETING GROUP, INC. SPE, INC. (CONNECTICUT) COMPANY, INC. COMPANY, INC. COMPANY
(CONNECTICUT) (DELAWARE) | (CONNECTICUT) (CONNECTICUT) (CONNECTICUT)
| |
| |
THE EVERGREEN HARTFORD INVESTMENT
GROUP, INC. FINANCIAL SERVICES
(NEW YORK) COMPANY
(DELAWARE)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(DELAWARE)
|
NUTMEG INSURANCE COMPANY
(CONNECTICUT)
|
HARTFORD FIRE INSURANCE COMPANY
(CONNECTICUT)
|
----------------------------------------------------------------------------------------------------------------------------
| | |
| | ITT HARTFORD LIFE
| | -------INTERNATIONAL LTD.
| | | (CONNECTICUT)
| | | |
| | | ITT HARTFORD
| | | ----SUDAMERICANA
| | | | HOLDING S.A.
| | | | (ARGENTINA)
| | | |------------------------------------------------------
| | | | | |
| | | | HARTFORD GALICIA INSTITUTO DE
| | | | SEGUROS VIDA COMPANIA SALTA COMPANIA DE
| | | |--------DE VIDA DE SEGUROS S.A. SEGUROS DE VIDA S.A.
| | | | (URUGUAY) (ARGENTINA) (ARGENTINA)
| | | |
| | ICATU | | ITT HARTFORD
| | HARTFORD | |-----SEGUROS DE VIDA
| | SEGUROS S.A.----------| | (ARGENTINA)
| | (BRAZIL) | |
| | | | |
| | | | | ITT HARTFORD
| | -- ----------| | |------SEGUROS DE
| | | | | | RETIRO S.A.
| | | | | | (ARGENTINA)
|-----------|----------------|---------------|---|--------------------------------------------------------------------------
| | | | | |
| | | ICATU HARTFORD | | CONSULTORA DE CAPITALES
| | | FUNDO DE PENSAO | | S.A. SOCIEDAD GERENTE
| | | (BRAZIL) | |----DE FONDOS COMUNES
| | | | | | DE ENVERSION
| | | | | | (ARGENTINA)
| | | ICATU HARTFORD | |
| | | CAPITALIZACAO S.A. | | CLARIDAD
| | | (BRAZIL) | | ADMINISTRADORA DE
| | | | | |---FONDOS DE JUBILACIONES
| | | BRAZILCAP | | Y PENSIONES S.A.
| | | CAPITALIZACAO S.A. | | (ARGENTINA)
| | | (BRAZIL) | |
| | | | |
| | -------------------------- | |
| |--------------- | | |
| | | | |
HARTFORD FIRE HARTFORD FIRE | | |------- SEGPOOL S.A.
INTERNATIONAL------------INTERNATIONAL, LTD. | | | (ARGENTINA)
(GERMANY) GMBH (CONNECTICUT) | | |
(WEST GERMANY) | | |
| | |
ICATU HARTFORD | | | THESIS S.A.
ADMINISTRACAO | | |-------- (ARGENTINA)
DE BENEFICIOS LTDA-- | | |
(BRAZIL) | |
| |
----------------- |
| |
CAB |--------- U.O.R., S.A.
CORPORATION (ARGENTINA)
(BRITISH VIRGIN ISLANDS)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(DELAWARE)
|
NUTMEG INSURANCE COMPANY
(CONNECTICUT)
|
HARTFORD FIRE INSURANCE COMPANY
(CONNECTICUT)
|
- --------------------------------------------------------------------------------------------------------------------------------|
| |
THE HARTFORD INTERNATIONAL |
|-----------------------------------------------------------------------FINANCIAL SERVICES GROUP, INC. |
| | | (DELAWARE) |
| | | ----------------------|----------------- |
| | | | | | | |
ZWOLSCHE | | ITT HARTFORD LONDON AND | HARTFORD |
ALGEMEENE N.V. | | INTERNATIONAL, LTD. EDINBURGH | EUROPE, INC. |
(NETHERLANDS) | | (U.K.) INSURANCE GROUP, LTD.| (DELAWARE) |
| | | (U.K.) | |
| | | | | |
| | | ------------- | |
| | | | | |
| ITT ASSURANCES HARTFORD INTERNATIONAL | LONDON AND --ITT ERCOS |
| S.A. INSURANCE CO., N.V. |--- EDINBURGH DE SEGUROS Y |
| ZWOLSCHE ALGEMEENE (FRANCE) (BELGIUM) | INSURANCE CO., LTD. REASEGUROS S.A.|
|----SCHADEVERZEKERING | | (U.K.) (SPAIN) |
--------| N.V.----------------------------------- | | | |
| | (NETHERLANDS) | | | | |
Z.A. | | | | EXCESS INSURANCE |
- --VERZEKERINGEN | | | | COMPANY LTD. |
| N.V. | ZWOLSCHE ALGEMEENE | | | (U.K.) |
| (BELGIUM) |------HERVERZEKERING B.V. | | | |
| | -----| (NETHERLANDS) | | | LONDON AND |
| | | | | | |--- EDINBURGH LIFE |
| Z.A. LUX S.A. | | | | ASSURANCE CO., LTD. |
| (LUXEMBURG) | ZWOLSCHE ALGEMEENE | | | (U.K.) |
| |--LEVENS-VERZEKERING N.V.------------ | | | |
| | (NETHERLANDS) | | | | |
- ----------------|------------------------------------|------------|------|--------------|---------------------------------------|
| | | | | | |
| -------- | | | | |
| | | | | | | |
| ZWOLSCHE | ZWOLSCHE ALGEMEENE ZWOLSCHE ALGEMEENE | | | |
| ALGEMEENE |-----HYPOTHEKEN N.V. BELEGGINGEN III B.V. | | | |
| EUROPA B.V. | (NETHERLANDS) (NETHERLANDS) | | | |
| (NETHERLANDS) | ---------- | | |
- --------| | | | | |
| EXPLOITATIEMAAT- BELEGGINGSMAAT- | | |
|----- SCHAPPIJ SCHAPPIJ | | |
| BUIZERDLAAN B.V. BUIZERDLAAN B.V. | | |
| (NETHERLANDS) (NETHERLANDS) | | |
| | | |
| | | -----
| HOLLAND | |-------------------------- |
|---- BELEGGINGSGROEP B.V. | | | |
(NETHERLANDS) | |----------------- | |
| -------| | | |
| | | | | |
| | | | | |
F.A. KNIGHT | MACALISTER & LONDON AND | HARTFORD FIRE
& SON N.V. | DUNDAS, LTD. EDINBURGH | INTERNATIONAL
(BELGIUM) | (SCOTLAND) TRUSTEES, LTD. | SERVICIOS
| (U.K.) | (SPAIN)
------------------------- -----------
| | |
FENCOURT QUOTEL LONDON AND
PRINTERS, LTD. INSURANCE EDINBURGH
(U.K.) SYSTEMS, LTD. SERVICES, LTD.
(U.K.) (U.K.)
|
EUROSURE
INSURANCE
MARKETING, LTD.
(U.K.)
</TABLE>
