<PAGE>
As filed with the Securities and Exchange Commission on December 29, 2000.
File No. 333-35000
811-08584
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. 2 [X]
---
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 26 [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 INSURANCE COMPANY
P.O. BOX 2999
HARTFORD, CT 06104-2999
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the registration statement.
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
__X__ on January 26, 2001 pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
_____ on _________, 2001 pursuant to paragraph (a)(1) of Rule 485
_____ this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
PURSUANT TO RULE 24F-2(a) UNDER THE INVESTMENT COMPANY ACT OF 1940, THE
REGISTRANT HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES.
<PAGE>
<TABLE>
<S> <C>
HARTFORD SELECT LEADERS
SEPARATE ACCOUNT THREE
HARTFORD LIFE INSURANCE COMPANY
P.O. BOX 5085
HARTFORD, CONNECTICUT 06102-5085
TELEPHONE: (800) 862-6668 (CONTRACT OWNERS)
(800) 862-4397 (ACCOUNT EXECUTIVE) [LOGO]
</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
This Prospectus describes information you should know before you purchase
Hartford Select Leaders. Please read it carefully.
Hartford Select Leaders 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 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 Class Y shares of Money Market
Portfolio of the Morgan Stanley Dean Witter Select Dimensions Investment
Series
- DIVERSIFIED INCOME SUB-ACCOUNT which purchases Class Y shares of Diversified
Income Portfolio of the Morgan Stanley Dean Witter Select Dimensions
Investment Series
- BALANCED GROWTH SUB-ACCOUNT which purchases Class Y shares of Balanced Growth
Portfolio of the Morgan Stanley Dean Witter Select Dimensions Investment
Series
- UTILITIES SUB-ACCOUNT which purchases Class Y shares of Utilities Portfolio of
the Morgan Stanley Dean Witter Select Dimensions Investment Series
- DIVIDEND GROWTH SUB-ACCOUNT which purchases Class Y shares of Dividend Growth
Portfolio of the Morgan Stanley Dean Witter Select Dimensions Investment
Series
- VALUE-ADDED MARKET SUB-ACCOUNT which purchases Class Y shares of Value-Added
Market Portfolio of the Morgan Stanley Dean Witter Select Dimensions
Investment Series
- GROWTH SUB-ACCOUNT which purchases Class Y shares of Growth Portfolio of the
Morgan Stanley Dean Witter Select Dimensions Investment Series
- AMERICAN OPPORTUNITIES SUB-ACCOUNT which purchases Class Y shares of American
Opportunities Portfolio (formerly known as American Value Portfolio) of the
Morgan Stanley Dean Witter Select Dimensions Investment Series
- MID-CAP EQUITY SUB-ACCOUNT which purchases Class Y shares of Mid-Cap Equity
Portfolio (formerly named Mid-Cap Growth Portfolio) of the Morgan Stanley Dean
Witter Select Dimensions Investment Series
- GLOBAL EQUITY SUB-ACCOUNT which purchases Class Y shares of Global Equity
Portfolio of the Morgan Stanley Dean Witter Select Dimensions Investment
Series
- DEVELOPING GROWTH SUB-ACCOUNT which purchases Class Y shares of Developing
Growth Portfolio of the Morgan Stanley Dean Witter Select Dimensions
Investment Series
- HIGH YIELD SUB-ACCOUNT which purchases shares of High Yield Portfolio of The
Universal Institutional Funds, Inc.
- MID CAP VALUE SUB-ACCOUNT which purchases shares of Mid Cap Value Portfolio of
The Universal Institutional Funds, Inc.
- EMERGING MARKETS DEBT SUB-ACCOUNT which purchases shares of Emerging Markets
Debt Portfolio of The Universal Institutional Funds, Inc.
- EMERGING MARKETS EQUITY SUB-ACCOUNT which purchases shares of Emerging Markets
Equity Portfolio of The Universal Institutional Funds, Inc.
- FIXED INCOME SUB-ACCOUNT which purchases shares of Fixed Income Portfolio of
The Universal Institutional Funds, Inc.
- ACTIVE INTERNATIONAL ALLOCATION SUB-ACCOUNT which purchases shares of Active
International Allocation Portfolio of The Universal Institutional Funds, Inc.
<PAGE>
- TECHNOLOGY SUB-ACCOUNT which purchases shares of Technology Portfolio of The
Universal Institutional Funds, Inc.
- STRATEGIC STOCK SUB-ACCOUNT which purchases Class II shares of Strategic Stock
Portfolio of the Van Kampen Life Investment Trust
- ENTERPRISE SUB-ACCOUNT which purchases Class II shares of Enterprise Portfolio
of the Van Kampen Life Investment Trust
- AMERICAN FUNDS GLOBAL GROWTH FUND SUB-ACCOUNT which purchases Class 2 shares
of the Global Growth Fund of American Funds Insurance Series ("American Funds
Global Growth Fund")
- AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION FUND SUB-ACCOUNT which purchases
Class 2 shares of the Global Small Capitalization Fund of American Funds
Insurance Series ("American Funds Global Small Capitalization Fund")
- AMERICAN FUNDS GROWTH FUND SUB-ACCOUNT which purchases Class 2 shares of the
Growth Fund of American Funds Insurance Series ("American Funds Growth Fund")
- AMERICAN FUNDS GROWTH-INCOME FUND SUB-ACCOUNT which purchases Class 2 shares
of the Growth-Income Fund of American Funds Insurance Series ("American Funds
Growth-Income Fund")
- AMERICAN FUNDS INTERNATIONAL FUND SUB-ACCOUNT which purchases Class 2 shares
of the International Fund of American Funds Insurance Series ("American Funds
International Fund")
- MFS CAPITAL OPPORTUNITIES SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- Capital Opportunities Series of the MFS-Registered
Trademark-Variable Insurance Trust-SM-
- MFS EMERGING GROWTH SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- Emerging Growth Series of the MFS-Registered
Trademark- Variable Insurance Trust-SM-
- MFS GROWTH SERIES SUB-ACCOUNT which purchases shares of the MFS-Registered
Trademark- Growth Series of the MFS-Registered Trademark- Variable Insurance
Trust-SM-
- MFS GROWTH WITH INCOME SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- Growth with Income Series of the MFS-Registered
Trademark-Variable Insurance Trust-SM-
- MFS TOTAL RETURN SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- Total Return Series of the MFS-Registered Trademark-
Variable Insurance Trust-SM-
- FRANKLIN SMALL CAP FUND SUB-ACCOUNT which purchases Class 2 shares of the
Small Cap Fund of the Franklin Templeton Variable Insurance Products Trust
("Franklin Small Cap Fund")
- FRANKLIN STRATEGIC INCOME SECURITIES FUND SUB-ACCOUNT (FORMERLY FRANKLIN
STRATEGIC INCOME INVESTMENTS FUND SUB-ACCOUNT) which purchases Class 1 shares
of the Franklin Strategic Income Securities Fund (formerly Franklin Strategic
Income Investments Fund) of the Franklin Templeton Variable Insurance Products
Trust
- MUTUAL SHARES SECURITIES FUND SUB-ACCOUNT which purchases Class 2 shares of
Mutual Shares Securities Fund of the Franklin Templeton Variable Insurance
Products Trust
- TEMPLETON DEVELOPING MARKETS SECURITIES FUND SUB-ACCOUNT (FORMERLY TEMPLETON
DEVELOPING MARKETS EQUITY FUND SUB-ACCOUNT) which purchases Class 1 shares of
the Templeton Developing Markets Securities Fund (formerly Templeton
Developing Markets Equity Fund) of the Franklin Templeton Variable Insurance
Products Trust
- TEMPLETON GROWTH SECURITIES FUND SUB-ACCOUNT (FORMERLY TEMPLETON GLOBAL GROWTH
FUND SUB-ACCOUNT) which purchases Class 2 shares of the Templeton Growth
Securities Fund (formerly Templeton Global Growth Fund) of the Franklin
Templeton Variable Insurance Products Trust
You may also allocate some or all of your Premium Payment to the "Fixed
Account", 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
Account 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: JANUARY 26, 2001
STATEMENT OF ADDITIONAL INFORMATION DATED: JANUARY 26, 2001
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 3
--------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
----------------------------------------------------------------------
DEFINITIONS 4
----------------------------------------------------------------------
FEE TABLE 6
----------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES 7
----------------------------------------------------------------------
HIGHLIGHTS 14
----------------------------------------------------------------------
GENERAL CONTRACT INFORMATION 16
----------------------------------------------------------------------
Hartford Life Insurance Company 16
----------------------------------------------------------------------
Separate Account 16
----------------------------------------------------------------------
THE PORTFOLIOS 16
----------------------------------------------------------------------
The Investment Advisers 18
----------------------------------------------------------------------
PERFORMANCE RELATED INFORMATION 20
----------------------------------------------------------------------
THE FIXED ACCOUNT 21
----------------------------------------------------------------------
THE CONTRACT 22
----------------------------------------------------------------------
Purchases and Contract Value 22
----------------------------------------------------------------------
Charges and Fees 24
----------------------------------------------------------------------
Death Benefit 26
----------------------------------------------------------------------
Surrenders 29
----------------------------------------------------------------------
ANNUITY PAYOUTS 31
----------------------------------------------------------------------
OTHER PROGRAMS AVAILABLE 33
----------------------------------------------------------------------
OTHER INFORMATION 34
----------------------------------------------------------------------
Legal Matters and Experts 34
----------------------------------------------------------------------
More Information 34
----------------------------------------------------------------------
FEDERAL TAX CONSIDERATIONS 34
----------------------------------------------------------------------
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION 39
----------------------------------------------------------------------
APPENDIX I -- INFORMATION REGARDING TAX-QUALIFIED RETIREMENT
PLANS 40
----------------------------------------------------------------------
APPENDIX II -- OPTIONAL DEATH BENEFITS -- EXAMPLES 43
----------------------------------------------------------------------
</TABLE>
<PAGE>
4 HARTFORD LIFE INSURANCE COMPANY
--------------------------------------------------------------------------------
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 Account.
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, Connecticut
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.
This amount is calculated using the Assumed Investment Return for variable
dollar amount Annuity Payouts or the underlying rate of return for fixed dollar
amount 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 ACCOUNT: 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 Account.
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.
MAXIMUM ANNIVERSARY VALUE: This is the highest Anniversary Value prior to the
deceased's 81st birthday or the date of death, if earlier.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 5
--------------------------------------------------------------------------------
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.
<PAGE>
6 HARTFORD LIFE INSURANCE COMPANY
--------------------------------------------------------------------------------
FEE TABLE
<TABLE>
<S> <C>
CONTRACT OWNER TRANSACTION EXPENSES
Sales Charge Imposed on Purchases (as a percentage of Premium
Payments) None
-------------------------------------------------------------------------
Contingent Deferred Sales Charge (as a percentage of Premium
Payments) (1)
First Year (2) 7%
-------------------------------------------------------------------------
Second Year 6%
-------------------------------------------------------------------------
Third Year 6%
-------------------------------------------------------------------------
Fourth Year 5%
-------------------------------------------------------------------------
Fifth Year 4%
-------------------------------------------------------------------------
Sixth Year 3%
-------------------------------------------------------------------------
Seventh Year 2%
-------------------------------------------------------------------------
Eighth Year 0%
-------------------------------------------------------------------------
ANNUAL MAINTENANCE FEE (3) $30
-------------------------------------------------------------------------
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average daily
Sub-Account Value)
Mortality and Expense Risk Charge 1.35%
-------------------------------------------------------------------------
Administrative Fees 0.15%
-------------------------------------------------------------------------
Total Separate Account Annual Expenses 1.50%
-------------------------------------------------------------------------
OPTIONAL CHARGES (as a percentage of average daily Sub-Account
Value)
Optional Death Benefit Charge 0.15%
-------------------------------------------------------------------------
Earnings Protection Benefit Charge 0.20%
-------------------------------------------------------------------------
Total Separate Account Annual Expenses with all optional
charges 1.85%
-------------------------------------------------------------------------
</TABLE>
(1) Each Premium Payment has its own Contingent Deferred Sales Charge schedule.
The Contingent Deferred Sales Charge is not assessed on partial Surrenders
which do not exceed the Annual Withdrawal Amount.
(2) Length of time from each Premium Payment.
(3) An annual $30 charge deducted on a Contract Anniversary or upon Surrender if
the Contract Value at either of those times is less than $50,000. It is
deducted proportionately from the Accounts in which you are invested at the
time of the charge.
The purpose of the Fee Table and Examples is to assist you in understanding
various costs and expenses that you will pay directly or indirectly. The Fee
Table and Examples reflect expenses of the Separate Account and underlying
Funds. We will deduct any Premium Taxes that apply. The Examples assume that any
fee waivers or expense reinbursements for the underlying Funds will continue for
the period shown in the Examples.
The Examples 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 Examples 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.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 7
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Annual Fund Operating Expenses
As of the Fund's Year End
(As a percentage of net assets)
<TABLE>
<CAPTION>
TOTAL FUND
OPERATING
OTHER EXPENSES
MANAGEMENT FEES 12B-1 DISTRIBUTION EXPENSES (INCLUDING ANY
(INCLUDING ANY AND/OR SERVICING FEES (INCLUDING ANY WAIVERS OR
WAIVERS) (INCLUDING WAIVERS) REIMBURSEMENTS) REIMBURSEMENTS)
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS
INVESTMENT SERIES:
Money Market Portfolio 0.50% 0.25% 0.04% 0.79%
----------------------------------------------------------------------------------------------------------------------------
Diversified Income Portfolio 0.40% 0.25% 0.08% 0.73%
----------------------------------------------------------------------------------------------------------------------------
Balanced Growth Portfolio 0.60% 0.25% 0.04% 0.89%
----------------------------------------------------------------------------------------------------------------------------
Utilities Portfolio 0.65% 0.25% 0.05% 0.95%
----------------------------------------------------------------------------------------------------------------------------
Dividend Growth Portfolio 0.58% 0.25% 0.02% 0.85%
----------------------------------------------------------------------------------------------------------------------------
Value-Added Market Portfolio 0.50% 0.25% 0.05% 0.80%
----------------------------------------------------------------------------------------------------------------------------
Growth Portfolio 0.80% 0.25% 0.10% 1.15%
----------------------------------------------------------------------------------------------------------------------------
American Opportunities Portfolio 0.62% 0.25% 0.04% 0.91%
----------------------------------------------------------------------------------------------------------------------------
Mid-Cap Equity Portfolio (formerly Mid-Cap
Growth) (1) 0.75% 0.25% 0.17% 1.17%
----------------------------------------------------------------------------------------------------------------------------
Global Equity Portfolio 1.00% 0.25% 0.08% 1.33%
----------------------------------------------------------------------------------------------------------------------------
Developing Growth Portfolio 0.50% 0.25% 0.08% 0.83%
----------------------------------------------------------------------------------------------------------------------------
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.:
High Yield Portfolio (2) 0.50% N/A 0.61% 1.11%
----------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Portfolio (2) 0.75% N/A 0.62% 1.37%
----------------------------------------------------------------------------------------------------------------------------
Emerging Markets Debt Portfolio (2) 0.80% N/A 0.98% 1.78%
----------------------------------------------------------------------------------------------------------------------------
Emerging Markets Securitiies Portfolio (2) 1.25% N/A 1.37% 2.62%
----------------------------------------------------------------------------------------------------------------------------
Fixed Income Portfolio (2) 0.40% N/A 0.56% 0.96%
----------------------------------------------------------------------------------------------------------------------------
Active International Allocation Portfolio (2) 0.80% N/A 1.83% 2.63%
----------------------------------------------------------------------------------------------------------------------------
Technology Portfolio (2) 0.80% N/A 11.77% 12.57%
----------------------------------------------------------------------------------------------------------------------------
VAN KAMPEN LIFE INVESTMENT TRUST:
Strategic Stock Portfolio (3) (12) 0.50% 0.25% 0.41% 1.16%
----------------------------------------------------------------------------------------------------------------------------
Enterprise Portfolio (3) (12) 0.50% 0.25% 0.12% 0.87%
----------------------------------------------------------------------------------------------------------------------------
AMERICAN FUNDS INSURANCE SERIES:
American Funds Global Growth Fund 0.68% 0.25% 0.03% 0.96%
----------------------------------------------------------------------------------------------------------------------------
American Funds Global Small Capitalization Fund 0.79% 0.25% 0.03% 1.07%
----------------------------------------------------------------------------------------------------------------------------
American Funds Growth Fund 0.38% 0.25% 0.01% 0.64%
----------------------------------------------------------------------------------------------------------------------------
American Funds Growth-Income Fund 0.34% 0.25% 0.01% 0.60%
----------------------------------------------------------------------------------------------------------------------------
American Funds International Fund 0.55% 0.25% 0.05% 0.85%
----------------------------------------------------------------------------------------------------------------------------
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE
TRUST:
MFS-Registered Trademark- Capital Opportunities
Series (7) (8) 0.75% N/A 0.16% 0.91%
----------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Emerging Growth
Series (7) 0.75% N/A 0.09% 0.84%
----------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth Series (7) (8) 0.75% N/A 0.16% 0.91%
----------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth with Income
Series (7) 0.75% N/A 0.13% 0.88%
----------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Total Return
Series (7) 0.75% N/A 0.15% 0.90%
----------------------------------------------------------------------------------------------------------------------------
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS
TRUST:
Franklin Small Cap Fund -- Class 2 (4) (5) 0.55% 0.25% 0.27% 1.07%
----------------------------------------------------------------------------------------------------------------------------
Franklin Strategic Income Securities Fund (6) 0.43% N/A 0.32% 0.75%
----------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2 (4) (9) 0.60% 0.25% 0.19% 1.04%
----------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund --
Class 1 (10) 1.25% N/A 0.31% 1.56%
----------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund -- Class 2
(4) (11) 0.83% 0.25% 0.05% 1.13%
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
8 HARTFORD LIFE INSURANCE COMPANY
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(1) With respect to the Mid-Cap Equity Portfolio, the expense information shown
in the table above has been restated to reflect the current fees. Prior to
December 31, 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, Emerging Markets Debt,
Emerging Markets Equity, Active International Allocation and Fixed Income
Portfolios, the investment advisers have voluntarily agreed to waive their
investment advisory fees and to reimburse certain expenses of the Portfolios
if such fees would cause their respective "Total Fund Operating Expenses" to
exceed certain limits. The expense ratios for the Active International
Allocation Portfolio and Technology Portfolio are annualized. Including
these 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
OTHER OPERATING
PORTFOLIO MANAGEMENT FEES EXPENSES EXPENSES
<S> <C> <C> <C>
-----------------------------------------------------------------------
High Yield 0.19% 0.61% 0.80%
-----------------------------------------------------------------------
Mid-Cap Value 0.43% 0.62% 1.05%
-----------------------------------------------------------------------
Emerging Markets Debt 0.45% 0.98% 1.43%
-----------------------------------------------------------------------
Emerging Markets Equity 0.42% 1.37% 1.79%
-----------------------------------------------------------------------
Fixed Income 0.14% 0.56% 0.70%
-----------------------------------------------------------------------
Active International Allocation 0.00% 1.15% 1.15%
-----------------------------------------------------------------------
Technology Portfolio 0.00% 1.15% 1.15%
-----------------------------------------------------------------------
</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. Including the aforementioned
reductions, it is estimated that "Management Fees", "Other Expenses" and
"Total Fund Operating Expenses" for the Portfolios would be:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
PORTFOLIO MANAGEMENT FEES EXPENSES EXPENSES
<S> <C> <C> <C>
-----------------------------------------------------------------------
Strategic Stock 0.24% 0.41% 0.65%
-----------------------------------------------------------------------
Enterprise 0.47% 0.13% 0.60%
-----------------------------------------------------------------------
</TABLE>
(4) The Fund's Class 2 distribution plan or "Rule 12b-1 Plan" is described in
the Fund's prospectus. While the maximum amount payable under the Fund's
Class 2 Rule 12b-1 Plan is 0.35% per year of the Fund's average daily net
assets, the Board of Trustees of Franklin Templeton Variable Insurance
Products Trust has set the current rate at 0.25% per year through at least
April 30, 2001.
(5) On February 8, 2000, a merger and reorganization was approved that combined
the assets of the Franklin Small Cap Fund with a similar fund of the
Templeton Variable Products Series Fund, effective May 1, 2000. On
February 8, 2000, fund shareholders approved new management fees, which
apply to the combined fund effective May 1, 2000. The table shows restated
total expenses based on the new fees and assets of the fund as of
December 31, 1999, and not the assets of the combined fund. However, if the
table reflected both the new fees and the combined assets, the fund's
expenses after May 1, 2000 would be estimated as: Management Fees 0.55%,
Distribution and Service Fees 0.25%, Other Expenses 0.27%, and Total Fund
Operating Expenses 1.07%.
(6) The management fees shown are based on the fund's maximum contractual
amount. Other expenses are estimated. The manager and administrator have
agreed in advance to waive or limit their respective fees and the manager to
assume as its own expense certain expenses otherwise payable by the fund so
that total annual fund operating expenses do not exceed 0.75% for the
current fiscal year. After December 31, 2001, the manager and administrator
may end this arrangement at any time. Without this reduction Total Fund
Operating Expenses were:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
MANAGEMENT FEES 12B-1 FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------
Franklin Strategic Income Securities Fund 0.43% N/A 0.52% 0.95%
------------------------------------------------------------------------------------------------
</TABLE>
(7) Each Series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with
its custodian and dividend disbursing agent. Each series may enter into
other such arrangements and directed brokerage arrangements, which would
also have the effect of reducing the series' expenses. After these
reductions, the Total Fund Operating Expenses would be:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
MANAGEMENT FEES 12B-1 FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Capital Opportunities
Series 0.75% N/A 0.15% 0.90%
------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Emerging Growth Series 0.75% N/A 0.08% 0.83%
------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth Series 0.75% N/A 0.15% 0.90%
------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth with Income
Series 0.75% N/A 0.12% 0.87%
------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Total Return Series 0.75% N/A 0.14% 0.89%
------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 9
--------------------------------------------------------------------------------
(8) MFS has contractually agreed, subject to reimbursement, to bear expenses for
these series such that each such series' "Other Expenses" (after taking into
account the expense offset arrangement described above), do not exceed 0.15%
of the average daily net assets of the series during the current fiscal
year. These contractual fee arrangements will continue until at least
May 1, 2001, unless changed with the consent of the board of trustees which
oversees the series. Without this waiver, "Total Fund Operating Expenses"
would have been:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
MANAGEMENT FEES 12B-1 FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Capital Opportunities
Series 0.75% N/A 0.27% 1.02%
------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth Series 0.75% N/A 0.71% 1.46%
------------------------------------------------------------------------------------------------
</TABLE>
(9) On February 8, 2000, a merger and reorganization was approved that combined
the Mutual Shares Securities Fund with a similar fund of Templeton Variable
Products Series Fund, effective May 1, 2000. The table shows total expenses
based on the fund's assets as of December 31, 1999, and not the assets of
the combined fund. However, if the table reflected combined assets, the
fund's expenses after May 1, 2000 would be estimated as: Management Fees
0.60%, Distribution and Service Fees 0.25%, Other Expenses 0.19%, and Total
Fund Operating Expenses 1.04%.
(10) On February 8, 2000, shareholders approved a merger and reorganization that
combined the Developing Markets Securities Fund with the Templeton
Developing Markets Equity Fund, effective May 1, 2000. The shareholders of
that fund had approved new management fees, which apply to the combined fund
effective May 1, 2000. The table shows restated total expenses based on the
new fees and the assets of the fund as of December 31, 1999, and not the
assets of the combined fund. However, if the table reflected both the new
fees and the combined assets, the fund's expenses after May 1, 2000 would be
estimated as: Management Fees 1.25%, Other Expenses 0.29%, and Total Fund
Operating Expenses 1.54%.
(11) On February 8, 2000, a merger and reorganization was approved that combined
the Templeton Growth Securities Fund with a similar fund of Templeton
Variable Products Series Fund, effective May 1, 2000. The table shows total
expenses based on the fund's assets as of December 31, 1999, and not the
assets of the combined fund. However, if the table reflected combined
assets, the fund's expenses after May 1, 2000 would be estimated as:
Management Fees 0.80%, Distribution and Service Fees 0.25%, Other Expenses
0.05%, and Total Fund Operating Expenses 1.10%.
(12) Under the Distribution Plan and Service Plan, the Portfolio may spend up to
a total of 0.35% per year of the Portfolio's average daily net assets with
respect to its Class II Shares. Notwithstanding the foregoing, the
Portfolio's Board of Trustees currently limits the aggregate amount payable
under the Distribution Plan and Service Plan to 0.25% per year of the
Portfolio's average daily net assets with respect to Class II Shares.
<PAGE>
10 HARTFORD LIFE INSURANCE COMPANY
--------------------------------------------------------------------------------
EXAMPLES
YOU WOULD PAY THE FOLLOWING EXPENSES ON A $1,000 INVESTMENT AT THE END OF THE
APPLICABLE TIME PERIOD ASSUMING A 5% ANNUAL RETURN ON ASSETS.
<TABLE>
<CAPTION>
If you Surrender your Contract: If you annuitize your Contract: If you do not Surrender your Contract:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------
MONEY MARKET
Without any
optional
benefits $ 85 $130 $166 $271 $23 $ 74 $126 $270 $24 $ 74 $127 $271
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 87 $134 $174 $286 $25 $ 78 $134 $286 $26 $ 79 $135 $286
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 87 $136 $176 $291 $26 $ 80 $136 $291 $26 $ 80 $137 $291
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 89 $140 $183 $306 $27 $ 84 $144 $306 $28 $ 85 $145 $306
-----------------------------------------------------------------------------------------------------------------------
DIVERSIFIED
INCOME
Without any
optional
benefits $ 84 $128 $163 $265 $23 $ 72 $123 $264 $23 $ 72 $124 $265
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 86 $132 $171 $280 $24 $ 76 $131 $279 $25 $ 77 $131 $280
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 86 $134 $173 $285 $25 $ 78 $133 $284 $26 $ 78 $134 $285
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 88 $138 $180 $300 $26 $ 82 $141 $300 $27 $ 83 $142 $300
-----------------------------------------------------------------------------------------------------------------------
BALANCED GROWTH
Without any
optional
benefits $ 86 $133 $171 $281 $24 $ 77 $131 $280 $25 $ 77 $132 $281
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 88 $137 $178 $296 $26 $ 81 $139 $296 $27 $ 82 $140 $296
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 88 $138 $181 $301 $27 $ 83 $141 $301 $27 $ 83 $142 $301
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 90 $143 $188 $316 $28 $ 87 $149 $315 $29 $ 88 $150 $316
-----------------------------------------------------------------------------------------------------------------------
UTILITIES
Without any
optional
benefits $ 87 $134 $174 $287 $25 $ 78 $134 $287 $26 $ 79 $135 $287
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 88 $139 $181 $302 $27 $ 83 $142 $302 $27 $ 84 $143 $302
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 89 $140 $184 $307 $27 $ 85 $145 $307 $28 $ 85 $145 $307
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 90 $145 $191 $322 $29 $ 89 $152 $321 $29 $ 90 $153 $322
-----------------------------------------------------------------------------------------------------------------------
DIVIDEND GROWTH
Without any
optional
benefits $ 86 $131 $169 $277 $24 $ 75 $129 $276 $25 $ 76 $130 $277
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 87 $136 $177 $292 $26 $ 80 $137 $292 $26 $ 81 $138 $292
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 88 $137 $179 $297 $26 $ 81 $139 $297 $27 $ 82 $140 $297
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 89 $142 $186 $312 $28 $ 86 $147 $311 $28 $ 87 $148 $312
-----------------------------------------------------------------------------------------------------------------------
VALUE-ADDED
MARKET
Without any
optional
benefits $ 85 $130 $167 $272 $24 $ 74 $127 $271 $24 $ 74 $127 $272
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 87 $134 $174 $287 $25 $ 78 $134 $287 $26 $ 79 $135 $287
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 87 $136 $177 $292 $26 $ 80 $137 $292 $26 $ 81 $138 $292
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 89 $140 $184 $307 $27 $ 85 $145 $307 $28 $ 85 $145 $307
-----------------------------------------------------------------------------------------------------------------------
GROWTH
Without any
optional
benefits $ 89 $140 $184 $307 $27 $ 85 $145 $307 $28 $ 85 $145 $307
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 90 $145 $191 $322 $29 $ 89 $152 $321 $29 $ 90 $153 $322
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 91 $146 $194 $327 $29 $ 91 $155 $326 $30 $ 91 $155 $327
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 92 $150 $201 $341 $31 $ 95 $162 $341 $31 $ 96 $163 $341
-----------------------------------------------------------------------------------------------------------------------
AMERICAN
OPPORTUNITIES
Without any
optional
benefits $ 86 $133 $172 $283 $25 $ 77 $132 $282 $25 $ 78 $133 $283
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 88 $138 $179 $298 $26 $ 82 $140 $298 $27 $ 82 $141 $298
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 88 $139 $182 $303 $27 $ 83 $143 $303 $27 $ 84 $143 $303
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 90 $143 $189 $318 $28 $ 88 $150 $317 $29 $ 89 $151 $318
-----------------------------------------------------------------------------------------------------------------------
MID-CAP EQUITY
Without any
optional
benefits $ 89 $141 $185 $309 $27 $ 85 $146 $308 $28 $ 86 $146 $309
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 90 $145 $192 $324 $29 $ 90 $153 $323 $30 $ 90 $154 $324
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 91 $147 $195 $329 $29 $ 91 $156 $328 $30 $ 92 $156 $329
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 92 $151 $202 $343 $31 $ 96 $163 $342 $32 $ 96 $164 $343
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 11
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
If you Surrender your Contract: If you annuitize your Contract: If you do not Surrender your Contract:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------
GLOBAL EQUITY
Without any
optional
benefits $ 91 $145 $193 $325 $29 $ 90 $154 $324 $30 $ 91 $154 $325
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 92 $150 $200 $339 $31 $ 95 $161 $339 $31 $ 95 $162 $339
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 93 $151 $202 $344 $31 $ 96 $164 $343 $32 $ 97 $164 $344
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 94 $156 $209 $358 $33 $101 $171 $358 $33 $101 $172 $358
-----------------------------------------------------------------------------------------------------------------------
DEVELOPING
GROWTH
Without any
optional
benefits $ 85 $131 $168 $275 $24 $ 75 $128 $274 $24 $ 75 $129 $275
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 87 $135 $176 $290 $25 $ 79 $136 $290 $26 $ 80 $137 $290
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 87 $137 $178 $295 $26 $ 81 $138 $295 $27 $ 82 $139 $295
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 89 $141 $185 $310 $27 $ 85 $146 $309 $28 $ 86 $147 $310
-----------------------------------------------------------------------------------------------------------------------
HIGH YIELD
Without any
optional
benefits $ 88 $139 $182 $303 $27 $ 83 $143 $303 $27 $ 84 $143 $303
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 90 $143 $189 $318 $28 $ 88 $150 $317 $29 $ 89 $151 $318
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 90 $145 $192 $323 $29 $ 89 $153 $322 $29 $ 90 $153 $323
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 92 $149 $199 $337 $30 $ 94 $160 $337 $31 $ 95 $161 $337
-----------------------------------------------------------------------------------------------------------------------
MID CAP VALUE
Without any
optional
benefits $ 91 $147 $195 $329 $29 $ 91 $156 $328 $30 $ 92 $156 $329
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 92 $151 $202 $343 $31 $ 96 $163 $342 $32 $ 96 $164 $343
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 93 $152 $204 $348 $31 $ 97 $166 $347 $32 $ 98 $166 $348
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 95 $157 $211 $362 $33 $102 $173 $361 $34 $103 $174 $362
-----------------------------------------------------------------------------------------------------------------------
EMERGING
MARKETS DEBT
Without any
optional
benefits $ 95 $159 $214 $368 $34 $104 $176 $367 $34 $104 $177 $368
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 97 $163 $221 $382 $35 $108 $183 $381 $36 $109 $184 $382
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 97 $164 $224 $386 $36 $110 $186 $385 $36 $110 $186 $386
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 99 $169 $231 $400 $37 $114 $193 $399 $38 $115 $194 $400
-----------------------------------------------------------------------------------------------------------------------
EMERGING
MARKETS
EQUITY
Without any
optional
benefits $104 $183 $253 $443 $42 $129 $217 $442 $43 $129 $217 $443
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $105 $187 $260 $455 $44 $133 $224 $455 $44 $134 $224 $455
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $106 $188 $262 $459 $44 $135 $226 $459 $45 $135 $227 $459
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $107 $192 $269 $472 $46 $139 $233 $471 $46 $140 $234 $472
-----------------------------------------------------------------------------------------------------------------------
FIXED INCOME
Without any
optional
benefits $ 87 $135 $175 $288 $25 $ 79 $135 $288 $26 $ 79 $136 $288
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 88 $139 $182 $303 $27 $ 83 $143 $303 $27 $ 84 $143 $303
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 89 $141 $184 $308 $27 $ 85 $145 $308 $28 $ 86 $146 $308
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 90 $145 $192 $323 $29 $ 89 $153 $322 $29 $ 90 $153 $323
-----------------------------------------------------------------------------------------------------------------------
ACTIVE
INTERNATIONAL
ALLOCATION
Without any
optional
benefits $104 $183 $254 $443 $42 $129 $217 $443 $43 $130 $218 $443
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $105 $187 $261 $456 $44 $134 $224 $455 $44 $134 $225 $456
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $106 $189 $263 $460 $44 $135 $227 $460 $45 $136 $227 $460
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $107 $193 $270 $473 $46 $139 $234 $472 $47 $140 $234 $473
-----------------------------------------------------------------------------------------------------------------------
TECHNOLOGY
Without any
optional
benefits $206 $435 N/A N/A $144 $394 N/A N/A $145 $395 N/A N/A
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $207 $439 N/A N/A $146 $398 N/A N/A $146 $398 N/A N/A
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $208 $440 N/A N/A $146 $399 N/A N/A $147 $399 N/A N/A
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $209 $443 N/A N/A $148 $402 N/A N/A $148 $403 N/A N/A
-----------------------------------------------------------------------------------------------------------------------
STRATEGIC STOCK
Without any
optional
benefits $ 89 $141 $184 $308 $27 $ 85 $145 $308 $28 $ 86 $146 $308
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 90 $145 $192 $323 $29 $ 89 $153 $322 $29 $ 90 $153 $323
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 91 $146 $194 $328 $29 $ 91 $155 $327 $30 $ 92 $156 $328
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 92 $151 $201 $342 $31 $ 96 $163 $342 $31 $ 96 $163 $342
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
12 HARTFORD LIFE INSURANCE COMPANY
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
If you Surrender your Contract: If you annuitize your Contract: If you do not Surrender your Contract:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------
ENTERPRISE
Without any
optional
benefits $ 86 $132 $170 $279 $24 $ 76 $130 $278 $25 $ 77 $131 $279
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 87 $136 $178 $294 $26 $ 81 $138 $294 $26 $ 81 $139 $294
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 88 $138 $180 $299 $26 $ 82 $140 $299 $27 $ 83 $141 $299
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 89 $142 $187 $314 $28 $ 87 $148 $313 $28 $ 87 $149 $314
-----------------------------------------------------------------------------------------------------------------------
AMERICAN FUNDS
GLOBAL GROWTH
FUND
Without any
optional
benefits $ 87 $135 $175 $288 $25 $ 79 $135 $288 $26 $ 79 $136 $288
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 88 $139 $182 $303 $27 $ 83 $143 $303 $27 $ 84 $143 $303
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 89 $141 $184 $308 $27 $ 85 $145 $308 $28 $ 86 $146 $308
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 90 $145 $192 $323 $29 $ 89 $153 $322 $29 $ 90 $153 $323
-----------------------------------------------------------------------------------------------------------------------
AMERICAN FUNDS
GLOBAL SMALL
CAPITALIZATION
FUND
Without any
optional
benefits $ 88 $138 $180 $299 $26 $ 82 $140 $299 $27 $ 83 $141 $299
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 89 $142 $187 $314 $28 $ 87 $148 $313 $28 $ 87 $149 $314
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 90 $144 $190 $319 $28 $ 88 $151 $318 $29 $ 89 $151 $319
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 91 $148 $197 $334 $30 $ 93 $158 $333 $31 $ 93 $159 $334
-----------------------------------------------------------------------------------------------------------------------
AMERICAN FUNDS
GROWTH FUND
Without any
optional
benefits $ 83 $125 $159 $255 $22 $ 69 $118 $255 $23 $ 70 $119 $255
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 85 $130 $166 $271 $23 $ 74 $126 $270 $24 $ 74 $127 $271
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 86 $131 $169 $276 $24 $ 75 $129 $275 $25 $ 76 $129 $276
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 87 $136 $176 $291 $26 $ 80 $136 $291 $26 $ 80 $137 $291
-----------------------------------------------------------------------------------------------------------------------
AMERICAN FUNDS
GROWTH-INCOME
FUND
Without any
optional
benefits $ 83 $124 $157 $251 $22 $ 68 $116 $251 $22 $ 68 $117 $251
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 85 $128 $164 $267 $23 $ 72 $124 $266 $24 $ 73 $125 $267
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 85 $130 $167 $272 $24 $ 74 $127 $271 $24 $ 74 $127 $272
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 87 $134 $174 $287 $25 $ 78 $134 $287 $26 $ 79 $135 $287
-----------------------------------------------------------------------------------------------------------------------
AMERICAN FUNDS
INTERNATIONAL
FUND
Without any
optional
benefits $ 86 $131 $169 $277 $24 $ 75 $129 $276 $25 $ 76 $130 $277
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 87 $136 $177 $292 $26 $ 80 $137 $292 $26 $ 81 $138 $292
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 88 $137 $179 $297 $26 $ 81 $139 $297 $27 $ 82 $140 $297
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 89 $142 $186 $312 $28 $ 86 $147 $311 $28 $ 87 $148 $312
-----------------------------------------------------------------------------------------------------------------------
MFS CAPTIAL
OPPORTUNITIES
SERIES
Without any
optional
benefits $ 86 $133 $172 $283 $25 $ 77 $132 $282 $25 $ 78 $133 $283
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 88 $138 $179 $298 $26 $ 82 $140 $298 $27 $ 82 $141 $298
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 88 $139 $182 $303 $27 $ 83 $143 $303 $27 $ 84 $143 $303
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 90 $143 $189 $318 $28 $ 88 $150 $317 $29 $ 89 $151 $318
-----------------------------------------------------------------------------------------------------------------------
MFS EMERGING
GROWTH SERIES
Without any
optional
benefits $ 86 $131 $169 $276 $24 $ 75 $129 $275 $25 $ 76 $129 $276
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 87 $136 $176 $291 $26 $ 80 $136 $291 $26 $ 80 $137 $291
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 88 $137 $178 $296 $26 $ 81 $139 $296 $27 $ 82 $140 $296
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 89 $141 $186 $311 $28 $ 86 $147 $310 $28 $ 86 $147 $311
-----------------------------------------------------------------------------------------------------------------------
MFS GROWTH
SERIES
Without any
optional
benefits $ 86 $133 $172 $283 $25 $ 77 $132 $282 $25 $ 78 $133 $283
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 88 $138 $179 $298 $26 $ 82 $140 $298 $27 $ 82 $141 $298
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 88 $139 $182 $303 $27 $ 83 $143 $303 $27 $ 84 $143 $303
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 90 $143 $189 $318 $28 $ 88 $150 $317 $29 $ 89 $151 $318
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 13
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
If you Surrender your Contract: If you annuitize your Contract: If you do not Surrender your Contract:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------
MFS GROWTH WITH
INCOME SERIES
Without any
optional
benefits $ 86 $132 $171 $280 $24 $ 76 $131 $279 $25 $ 77 $131 $280
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 87 $137 $178 $295 $26 $ 81 $138 $295 $27 $ 82 $139 $295
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 88 $138 $180 $300 $26 $ 82 $141 $300 $27 $ 83 $142 $300
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 89 $143 $188 $315 $28 $ 87 $149 $314 $29 $ 88 $149 $315
-----------------------------------------------------------------------------------------------------------------------
MFS TOTAL
RETURN SERIES
Without any
optional
benefits $ 86 $133 $172 $282 $25 $ 77 $132 $281 $25 $ 78 $132 $282
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 88 $137 $179 $297 $26 $ 81 $139 $297 $27 $ 82 $140 $297
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 88 $139 $181 $302 $27 $ 83 $142 $302 $27 $ 84 $143 $302
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 90 $143 $189 $317 $28 $ 88 $150 $316 $29 $ 88 $150 $317
-----------------------------------------------------------------------------------------------------------------------
FRANKLIN SMALL
CAP FUND
Without any
optional
benefits $ 88 $138 $180 $299 $26 $ 82 $140 $299 $27 $ 83 $141 $299
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 89 $142 $187 $314 $28 $ 87 $148 $313 $28 $ 87 $149 $314
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 90 $144 $190 $319 $28 $ 88 $151 $318 $29 $ 89 $151 $319
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 91 $148 $197 $334 $30 $ 93 $158 $333 $31 $ 93 $159 $334
-----------------------------------------------------------------------------------------------------------------------
FRANKLIN
STRATEGIC
INCOME
SECURITIES
FUND
Without any
optional
benefits $ 85 $128 $164 $267 $23 $ 72 $124 $266 $24 $ 73 $125 $267
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 86 $133 $172 $282 $25 $ 77 $132 $281 $25 $ 78 $132 $282
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 87 $134 $174 $287 $25 $ 78 $134 $287 $26 $ 79 $135 $287
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 88 $139 $181 $302 $27 $ 83 $142 $302 $27 $ 84 $143 $302
-----------------------------------------------------------------------------------------------------------------------
MUTUAL SHARES
SECURITIES
FUND
Without any
optional
benefits $ 88 $137 $178 $296 $26 $ 81 $139 $296 $27 $ 82 $140 $296
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 89 $141 $186 $311 $28 $ 86 $147 $310 $28 $ 86 $147 $311
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 90 $143 $188 $316 $28 $ 87 $149 $315 $29 $ 88 $150 $316
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 91 $147 $196 $331 $30 $ 92 $157 $330 $30 $ 93 $157 $331
-----------------------------------------------------------------------------------------------------------------------
TEMPLETON
DEVELOPING
MARKETS
SECURITIES
FUND
Without any
optional
benefits $ 93 $152 $204 $347 $31 $ 97 $165 $346 $32 $ 98 $166 $347
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 94 $157 $211 $361 $33 $102 $173 $360 $34 $102 $173 $361
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 95 $158 $213 $366 $33 $103 $175 $365 $34 $104 $176 $366
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 96 $162 $220 $380 $35 $108 $182 $379 $36 $108 $183 $380
-----------------------------------------------------------------------------------------------------------------------
TEMPLETON
GROWTH
SECURITIES
FUND
Without any
optional
benefits $ 88 $140 $183 $305 $27 $ 84 $144 $305 $28 $ 85 $144 $305
-----------------------------------------------------------------------------------------------------------------------
With Optional
Death
Benefit $ 90 $144 $190 $320 $28 $ 89 $151 $319 $29 $ 89 $152 $320
-----------------------------------------------------------------------------------------------------------------------
With Earnings
Protection
Benefit $ 91 $145 $193 $325 $29 $ 90 $154 $324 $30 $ 91 $154 $325
-----------------------------------------------------------------------------------------------------------------------
With both
optional
benefits $ 92 $150 $200 $339 $31 $ 95 $161 $339 $31 $ 95 $162 $339
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
14 HARTFORD LIFE INSURANCE COMPANY
--------------------------------------------------------------------------------
HIGHLIGHTS
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 amount you
choose to Surrender and the length of time the Premium Payment you made has been
in your Annuity. The percentage used to calculate the Contingent Deferred Sales
Charge is equal to:
<TABLE>
<CAPTION>
NUMBER OF YEARS FROM CONTINGENT DEFERRED
PREMIUM PAYMENT SALES CHARGE WILL BE:
<S> <C>
-------------------------------------------
1 7%
-------------------------------------------
2 6%
-------------------------------------------
3 6%
-------------------------------------------
4 5%
-------------------------------------------
5 4%
-------------------------------------------
6 3%
-------------------------------------------
7 2%
-------------------------------------------
8 or more 0%
-------------------------------------------
</TABLE>
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 three 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 1.35% of your Contract Value invested in the Portfolios.
The second type of charge is the fee you pay for the Separate Account. This
charge is:
An administrative fee of .15% per year of the Contract Values held in the
Separate Account.
The third type of charge is the fee you pay for the Portfolios. See the Annual
Fund Operating Expenses table for more complete information and the Portfolios'
prospectuses accompanying this prospectus.
If you elect the Optional Death Benefit, we will subtract an additional charge
on a daily basis which is equal to an annual charge of .15% of your Contract
Value invested in the Funds.
If you elect the Earnings Protection Benefit, we will subtract an additional
charge on a daily basis until we begin to make Annuity Payouts that is equal to
an annual charge of 0.20% of your Contract Value invested in the Funds.
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. Once Annuity Payouts begin, you may take
full or partial Surrenders under the Payments for a Period Certain, Life Annuity
with Payments for a Period Certain or the Joint and Last Survivor Annuity with
Payments for a Period Certain Annuity Options, but only if you selected the
variable dollar amount Annuity Payouts.
- 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?
Your Contract has a Death Benefit which is equal to the amount payable under the
standard Death Benefit or the Interest Accumulation Death Benefit ("Optional
Death Benefit"). We pay the Death Benefit if the Contract Owner, joint owner or
Annuitant, die before we begin to make annuity payments. The Death Benefit
amount will remain invested in the Sub-Accounts according to your last
instructions and will fluctuate with the performance of the underlying Funds.
If you do not elect the Optional Death Benefit, the Death Benefit will be the
greater of:
- the total Premium Payments you have made to us minus any amounts you have
Surrendered;
- The Contract Value of your annuity, or
- Your Maximum Anniversary Value, which is described below.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 15
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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.
If you elect the Optional Death Benefit at an additional charge, the Death
Benefit will be the greater of:
- the total Premium Payments you have made to us minus the dollar amount of any
partial Surrenders;
- the Contract Value of your annuity;
- your Maximum Anniversary Value or
- your Interest Accumulation Value.
Assuming you have not taken any Surrenders, your Interest Accumulation Value is
calculated by accumulating interest on your Premium Payments at a rate of 5% per
year up to the deceased's 81st birthday or date of death, whichever is earlier.
If you have taken any Surrenders, the 5% will be accumulated on your Premium
Payments, but we will make an adjustment for any of the Surrenders. This
adjustment will reduce the Death Benefit under the Optional Death Benefit
proportionally for the Surrenders. The Death Benefit under the Optional Death
Benefit is limited to a maximum of 200% of Premium Payments, less proportional
adjustments for any Surrenders. For examples on how the Optional Death Benefit
is calculated see "Appendix II". If you elect the Optional Death Benefit, we
will deduct an additional charge on a daily basis which is equal to an annual
charge of .15% of your Contract Value invested in the Portfolios.
The Optional Death Benefit may not be available if the Contract Owner or
Annuitant is age 76 or older. For Contracts issued in the states of Washington
or New York, the Optional Death Benefit is not available. Once you elect the
Optional Death Benefit, you cannot cancel it.
If you elect the Optional Death Benefit at any time after you purchase your
Annuity, the Optional Death Benefit calculation will be different.
You may also elect the Earnings Protection Benefit at an additional charge. The
Earnings Protection Benefit may not currently be available in your state and is
not available in Washington and New York. The Earnings Protection Benefit will
not be available if you or your Annuitant is age 76 or older on the date the
Earnings Protection Benefit is added to your Contract. Once you elect the
Earnings Protection Benefit, you cannot cancel it.
If you and your Annuitant are age 69 or under on the date the Earnings
Protection Benefit is added to your Contract, the death benefit calculation is
the greater of:
- The total Premium Payments you have made to us minus the dollar amount of any
partial Surrenders, or
- The Maximum Anniversary Value, or
- Your Contract Value on the date we receive a death certificate or other legal
document acceptable to us plus 40% of the Contract gain since the date the
Earnings Protection Benefit was added to your Contract.
If you or your Annuitant are age 70 through 75 on the date the Earnings
Protection Benefit is added to your Contract, the percentage of Contract gain
added to your Contract Value is reduced to 25%.
Your Contract gain is limited to or "capped" at a maximum of 200% of Contract
Value on the date the Earnings Protection Benefit was added to your Contract
plus Premium Payments not previously withdrawn made after the Earnings
Protection Benefit was added to your Contract, excluding any Premium Payments
made in the 12 months before the date of death. We subtract any adjustments for
partial Surrenders.
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: Life Annuity, Life Annuity with Cash Refund, Life
Annuity with Payments for a Period Certain, Joint and Last Survivor Life
Annuity, Joint and Last Survivor Life Annuity with Payments for a Period Certain
and Payments For a Period Certain. We may make other Annuity Payout Options
available at any time.
You must begin to take payments before the Annuitant's 90th birthday or the end
of the 10th Contract Year, whichever comes later, unless you elect a later date
to begin receiving payments subject to the laws and regulations then in effect
and our approval. If you purchased your Contract in New York, you must begin
Annuity Payouts by your Annuitant's 90th birthday. If you do not tell us what
Annuity Payout Option you want before that time, we will make Automatic Annuity
Payouts under the Life Annuity with Payments for a Period Certain Payout Option
with a ten-year period certain payment option. Automatic Annuity Payouts will be
fixed-dollar amount Annuity Payouts, variable-dollar amount Annuity Payouts, or
a combination of fixed or variable dollar amount Annuity Payouts, depending on
the investment allocation of your Account in effect on the Annuity Commencement
Date.
<PAGE>
16 HARTFORD LIFE INSURANCE COMPANY
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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 2999, Hartford, Connecticut 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 DATE
RATING AGENCY OF RATING RATING BASIS OF RATING
<S> <C> <C> <C>
--------------------------------------------------------------------------------
A.M. Best and
Company, Inc. 4/1/00 A+ Financial performance
--------------------------------------------------------------------------------
Standard & Poor's 8/1/00 AA Insurer financial strength
--------------------------------------------------------------------------------
Fitch 5/1/00 AA+ Financial strength
--------------------------------------------------------------------------------
</TABLE>
These ratings apply to Hartford's ability to meet its obligations under the
Contract. The ratings do not apply to the Separate Account or the underlying
Funds.
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 22, 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 Contracts are shares of the portfolios or
funds of Morgan Stanley Dean Witter Select Dimensions Investment Series, The
Universal Institutional Funds, Inc., Van Kampen Life Investment Trust, American
Funds Insurance Series, MFS-Registered Trademark- Variable Insurance Trust-SM-,
and Franklin Templeton Variable Insurance Products Trust, all open-ended
investment companies. The underlying portfolios or funds 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
or funds. 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 Funds' prospectuses and the Statement
of Additional Information. The Fund's 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.
Governemnt securities, obligatins of U.S. regulated banks and savings
institutions having total assets of more than $1 billion, or less than $1
billion is such are fully federally insured as to principal (the interest may
not be insured), repurchase agreements and high grade corporate debt obligations
maturing in thirteen months or less.
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.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 17
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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 25% 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 both capital appreciation and current
income.
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 OPPORTUNITIES 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 EQUITY PORTFOLIO -- Seeks long-term capital growth by investing
primarily in equity securities of medium sized companies (that is, companies
whose equity market capitalization falls within the range of companies
comprising the S & P 400 Index).
GLOBAL EQUITY PORTFOLIO -- Seeks to obtain 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.
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.:
HIGH YIELD PORTFOLIO -- Seeks above-average total return over a market cycle of
three to five years by investing primarily in high yield securities (commonly
referred to as "junk bonds"). The Portfolio also may invest in investment grade
fixed income securities, including U.S. Government securities, corporate bonds
and mortgage securities. The Portfolio may invest to a limited extent in foreign
fixed income securities, including emerging market securities. The Investment
Adviser may use futures, swaps and other types of derivatives in managing the
Portfolio.
MID-CAP VALUE PORTFOLIO -- Seeks above-average total return over a market cycle
of three to five years by investing in common stocks of companies with
capitalizations in the range of companies included in the S&P MidCap 400 Index
(currently $500 million to $6 billion). The Portfolio purchases stocks that
typically do not pay dividends. The Investment Adviser analyzes securities to
identify stocks that are undervalued, and measures the relative attractiveness
of the Portfolio's current holdings against potential purchases.
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. The Investment Adviser seeks high total return by investing in a
portfolio of emerging market debt that offers low correlation to many other
asset classes. Using macroeconomic and fundamental analysis, the Investment
Adviser seeks to identify developing countries that are undervalued and have
attractive or improving fundamentals. After the country allocation is
determined, the sector and security selection is made within each county.
EMERGING MARKETS EQUITY PORTFOLIO -- Seeks long-term capital appreciation by
investing primarily in equity securities of issuers in emerging market
countries. The Investment Adviser seeks to maximize returns by investing in
growth-oriented equity securities in emerging markets. The Investment Adviser's
investment approach combines top-down country allocation with bottom-up stock
selection. Investment selection criteria include attractive growth
characteristics, reasonable valuations and managements with a strong shareholder
value orientation.
FIXED INCOME PORTFOLIO -- Seeks above-average total return over a market cycle
of three to five years by investing primarily in a diversified mix of dollar
denominated investment grade fixed income securities, particularly U.S.
Government, corporate and mortgage securities. The Portfolio ordinarily will
maintain an average weighted maturity in excess of five years. The Portfolio may
invest opportunistically in non-dollar denominated securities and below
investment grade securities; and it may use futures, swaps and other types of
derivatives in managing the Portfolio.
ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO -- Seeks long-term capital
appreciation by investing primarily in accordance with country and sector
weightings determined by the investment adviser in equity securities of non-U.S.
issuers which, in the
<PAGE>
18 HARTFORD LIFE INSURANCE COMPANY
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aggregate, replicate broad-market indices. The Investment Adviser seeks to
maintain a diversified portfolio of international equity securities based on a
top-down approach that emphasizes country and sector selection and weighting
rather than individual stock selection. The Investment Adviser capitalizes on
the significance of country and sector selection in international equity
portfolio returns by over and underweighting countries based on three factors:
(i) valuation; (ii) fundamental change; and (iii) short-term market
momentum/technicals.
TECHNOLOGY PORTFOLIO -- Seeks long-term capital appreciation by investing
primarily in equity securities of companies that the Investment Adviser expects
will benefit from their involvement in technology and technology-related
industries. The Investment Adviser seeks to identify significant long-term
technology trends and invest primarily in companies the Investment Adviser
believes are positioned to benefit materially from these trends.
Under "The Portfolios" section, under sub-section entitled "The Investment
Advisers," the fifth paragraph is deleted and replaced with the following:
In addition to acting as the Sub-Adviser for the Growth Portfolio, MSDW
Investment Management, pursuant to an Investment Advisory Agreement with The
Universal Institutional Funds, Inc., is the investment adviser for the Emerging
Markets Debt Portfolio, Emerging Markets Equity Portfolio, Active International
Allocation Portfolio, and Technology Portfolio. As the investment adviser, MSDW
Investment Management provides investment advice and portfolio management
services for Emerging Markets Debt Portfolio, Emerging Markets Equity Portfolio,
Active International Allocation Portfolio, and Technology Portfolio subject to
the supervision of The Universal Institutional Funds, Inc.'s Board of Directors.
VAN KAMPEN LIFE INVESTMENT TRUST:
STRATEGIC STOCK PORTFOLIO -- Seeks an above average total return through a
combination of potential capital appreciation and dividend income, consistent
with the preservation of invested capital. Under normal market conditions, the
Portfolio's investment adviser seeks to achieve the investment objectives by
investing in a portfolio of high dividend yielding equity securities of
companies 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 Portfolio's investment adviser to have above average
potential for capital appreciation.
AMERICAN FUNDS INSURANCE SERIES:
AMERICAN FUNDS GLOBAL GROWTH FUND -- Seeks long-term growth of capital by
investing primarily in common stocks of issuers domiciled around the world.
AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION FUND -- Seeks long-term growth of
capital by investing primarily in equity securities of smaller companies located
around the world that typically have market capitalizations of $50 million to
$1.5 billion.
AMERICAN FUNDS GROWTH FUND -- Seeks long-term growth of capital by investing
primarily in common stocks which demonstrate the potential for appreciation.
AMERICAN FUNDS GROWTH-INCOME FUND -- Seeks growth of capital and income by
investing primarily in common stocks or other securities which demonstrate the
potential for appreciation and/or dividends.
AMERICAN FUNDS INTERNATIONAL FUND -- Seeks long-term growth of capital by
investing primarily in common stocks of issuers domiciled outside of the United
States.
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST:
MFS-REGISTERED TRADEMARK- CAPITAL OPPORTUNITIES SERIES -- Seeks capital
appreciation.
MFS-REGISTERED TRADEMARK- EMERGING GROWTH SERIES -- Seeks to provide long-term
growth of capital.
MFS-REGISTERED TRADEMARK- GROWTH SERIES -- Seeks to provide long-term growth of
capital and future income rather than current income.
MFS-REGISTERED TRADEMARK- GROWTH WITH INCOME SERIES -- Seeks to provide
reasonable current income and long-term growth of capital and income.
MFS-REGISTERED TRADEMARK- TOTAL RETURN SERIES -- Seeks primarily to provide
above-average income (compared to a portfolio invested in equity securities)
consistent with the prudent employment of capital, and secondarily to provide a
reasonable opportunity for growth of capital and income.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST:
FRANKLIN SMALL CAP FUND -- Seeks long-term capital growth.
FRANKLIN STRATEGIC INCOME SECURITIES FUND -- Seeks to earn a high level of
current income. Its secondary goal is long-term capital appreciation.
MUTUAL SHARES SECURITIES FUND -- Seeks capital appreciation. Its secondary goal
is income.
TEMPLETON DEVELOPING MARKETS SECURITIES FUND -- Seeks long-term capital
appreciation.
TEMPLETON GROWTH SECURITIES FUND -- Seeks long-term capital growth.
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 Equity Portfolio, the Global Equity Portfolio, the
Developing Growth Portfolio, and the Emerging Markets Portfolio of the
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HARTFORD LIFE INSURANCE COMPANY 19
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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").
Morgan Stanley Dean Witter Portfolios offer both Class X and Class Y shares.
Only Class Y shares are available in this Contract.
MSDW Advisors provides administrative services, manages the Morgan Stanley 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 Mid-Cap Equity Portfolio, TCW Investment Management Company
("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 Advisors, 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
Universal Institutional Funds, Inc., is the investment adviser for the Emerging
Markets Debt Portfolio, Emerging Markets Equity Portfolio and Active
International Allocation Portfolio. As the investment adviser, MSDW Investment
Management, provides investment advice and portfolio management services for the
Emerging Markets Debt, Emerging Markets Equity and Active International
Allocation Portfolios, subject to the supervision of The Universal Institutional
Fund's Board of Directors.
The investment adviser for the High Yield Portfolio, Fixed Income 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. is a
diversified asset management company with more than two million retail investor
accounts, extensive capabilities for managing institutional portfolios, and more
than $90 billion under management or supervision as of December 31, 1999. Van
Kampen Investments Inc.'s more than 50 open-end and 39 closed-end funds and more
than 2,700 unit investment trusts are professionally distributed by leading
authorized dealers nationwide. The Van Kampen Life Investment Trust offers
Class I and Class II shares. Only Class II shares are available in this
Contract.
The American Fund Global Growth Fund, American Funds Global Small Capitalization
Fund, American Funds Growth Fund, American Funds Growth-Income Fund and American
Funds International Fund are all part of American Funds Insurance Series.
American Funds Insurance Series is a fully managed, diversified, open-end
investment company organized as a Massachusetts business trust in 1983. American
Funds Insurance Series offers two classes of fund shares: Class 1 shares and
Class 2 shares. This Annuity invests only in Class 2 shares of American Funds
Insurance Series. The investment adviser for each of the funds of American Funds
Insurance Series is Capital Research and Management Company located at
333 South Hope Street, Los Angeles, California 90071. Capital Research and
Management Company is a wholly owned subsidiary of The Capital Group
Companies, Inc.
The MFS-Registered Trademark- Capital Opportunities Series, MFS-Registered
Trademark- Emerging Growth Series, MFS-Registered Trademark- Growth Series,
MFS-Registered Trademark- Growth with Income Series, MFS-Registered Trademark-
Total Return Series are series of the MFS-Registered Trademark- Variable
Insurance Trust-SM-. The MFS Variable Insurance Trust-SM- is a professionally
managed open-end management investment company. The MFS Variable Insurance
Trust-SM- is registered as a Massachusetts business trust. MFS Investment
Management-Registered Trademark- serves as the investment adviser to each of the
Series of the MFS-Registered Trademark- Variable Insurance Trust-SM-. MFS
Investment Management-Registered Trademark- is located at 500 Boylston Street,
Boston, Massachusetts 02116.
Franklin Small Cap Fund, Franklin Strategic Income Securities Fund, Mutual
Shares Securities Fund, Templeton Developing Markets Securities Fund, and
Templeton Growth Securities Fund are all part of the Franklin Templeton Variable
Insurance Products Trust. The Franklin Templeton Variable Insurance Products
Trust is an open-end managed investment company which was organized as a
Massachusetts business trust on April 26, 1988. Franklin Templeton Variable
Insurance Products Trust currently offers Class 1 and Class 2 shares. Class 2
shares of each Fund are available in this Annuity, except that Class 1 shares of
Franklin
* On December 1, 1998, Morgan Stanley Asset Management Inc. changed its name to
Morgan Stanley Dean Witter Investment Management Inc. but continues to do
business in certain instances using the name Morgan Stanley Asset Management.
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20 HARTFORD LIFE INSURANCE COMPANY
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Strategic Income Securities Fund and Templeton Developing Markets Securities
Fund are available. The investment manager of the Franklin Small Cap Fund and
the Franklin Strategic Income Securities Fund is Franklin Advisers, Inc. located
at 777 Mariners Island Blvd. P.O. Box 7777, San Mateo, California 94403-777. The
investment manager of Mutual Shares Securities Fund is Franklin Mutual Advisers,
LLC, located at 51 John F. Kennedy Parkway, Short Hills, New Jersey, 07078. The
investment manager of Templeton Growth Securities Fund is Templeton Global
Advisers Limited, located at Lyford Cay, Nassau, N.P. Bahamas. The investment
manager of Templeton Developing Markets Securities Fund is Templeton Asset
Management Ltd., located at 7 Temasek Blvd. #38-03, Suntec Tower One, Singapore,
038987.
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.
ADMINISTRATIVE SERVICES -- Hartford has entered into agreements with the
investment advisers or distributors of many of the Funds. Under the terms of
these agreements, Hartford provides administrative services and the Funds pay a
fee to Hartford that is usually based on an annual percentage of the average
daily net assets of the Funds. These agreements may be different for each Fund
or each Fund family.
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 since the inception of the Separate Account 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
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 21
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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.
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 Portfolio Sub-Account may advertise YIELD AND EFFECTIVE YIELD.
The yield of a Sub-Account is based upon the income earned by the Sub-Account
over a seven-day period and then annualized, i.e. the income earned in the
period is assumed to be earned every seven days over a 52-week period and stated
as a percentage of the investment. Effective yield is calculated similarly but
when annualized, the income earned by the investment is assumed to be reinvested
in Sub-Account units and thus compounded in the course of a 52-week period.
Yield and effective yield include the recurring charges at the Separate Account
level including the Annual Maintenance Fee.
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 ACCOUNT
--------------------------------------------------------------------------------
IMPORTANT INFORMATION YOU SHOULD KNOW: THIS PORTION OF THE PROSPECTUS RELATING
TO THE FIXED ACCOUNT IS NOT REGISTERED UNDER THE SECURITIES ACT OF 1933 ("1933
ACT") AND THE FIXED ACCOUNT IS NOT REGISTERED AS AN INVESTMENT COMPANY UNDER THE
1940 ACT. THE FIXED ACCOUNT 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 ACCOUNT. THE FOLLOWING DISCLOSURE ABOUT THE FIXED ACCOUNT MAY BE SUBJECT
TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS
REGARDING THE ACCURACY AND COMPLETENESS OF DISCLOSURE.
Premium Payments and Contract Values allocated to the Fixed Account become a
part of 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 Account.
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 Account 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 Account
on a "first-in first-out" basis. For Contracts issued in the state of New York,
the Fixed Account interest rates may vary from other states.
IMPORTANT: ANY INTEREST CREDITED TO AMOUNTS YOU ALLOCATE TO THE FIXED ACCOUNT IN
EXCESS OF 3% PER YEAR WILL BE DETERMINED AT OUR SOLE DISCRETION. YOU ASSUME THE
RISK THAT INTEREST CREDITED TO THE FIXED ACCOUNT 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. Currently, the 6-Month and 12-Month Transfer Programs
are credited the same interest rate as the Fixed Account. At some time in the
future, Hartford may offer interest rates specific to the transfer programs.
Under the 6-Month Transfer Program, the interest rate can accrue up to 6 months
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.
<PAGE>
22 HARTFORD LIFE INSURANCE COMPANY
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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 Account'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 Account.
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.
You may only have one DCA program in place at one time. There is no charge for
Dollar Cost Averaging.
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.
If you are purchasing the Contract for use in an IRA or other qualified
retirement plan, you should consider other features of the Contract besides tax
deferral, since any investment vehicle used within an IRA or other qualified
plan receives tax deferred treatment under the Code.
We have filed the Contract with the Earnings Protection Benefit with the
Internal Revenue Service for approval for use in an IRA. For more information,
please see Appendix I -- Information Regarding Tax-Qualified Retirement Plans,
Individual Retirement Annuities ("IRAs") Under Section 408. Please consult your
qualified tax adviser if you are considering adding the Earnings Protection
Benefit to your Contract if it is an IRA.
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. For Contracts issued in Oregon, Premium
Payments will only be accepted prior to the third Contract Anniversary. For
Contracts issued in Massachusetts, subsequent Premium Payments will only be
accepted until the Annuitant's 63rd birthday or the third Contract Anniversary,
whichever is later. We will send you a confirmation notice upon receipt and
acceptance of your Premium Payment.
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 invested on the next Valuation Day. If we receive your subsequent
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.
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
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 23
--------------------------------------------------------------------------------
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 you 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, including any Optional Death
Benefit 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.
FIXED ACCOUNT TRANSFERS -- During each Contract Year, you may make transfers out
of the Fixed Account 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 Account, 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.
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24 HARTFORD LIFE INSURANCE COMPANY
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FIXED ACCOUNT TRANSFER RESTRICTIONS -- We reserve the right to defer transfers
from the Fixed Account 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 Account.
TELEPHONE AND INTERNET TRANSFERS -- In most states, you can make transfers:
- By calling us at (800) 862-6668.
- Electronically, when available, by the internet through our website at
http://online.hartfordlife.com
Transfer instructions received by telephone on any Valuation Day before the
close of the New York Stock Exchange will be carried out that day. Otherwise,
the instructions will be carried out at the close of the New York Stock Exchange
on the next Valuation Day.
Transfer instructions you send electronically are considered to be received by
Hartford at the time and date on the electronic acknowledgement Hartford returns
to you. If the time and date indicated on the acknowledgment is before the close
of the New York Stock Exchange on a Valuation Day, the instructions will be
carried out that day. Otherwise, the instructions will be carried out at the
close of the New York Stock Exchange on the next Valuation Day. If you do not
receive an electronic acknowledgement, you should telephone us as soon as
possible.
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.
Telephone or internet transfer requests may currently only be cancelled by
calling us at (800)862-6668 before the close of the New York Stock Exchange.
Hartford, our agents or our affiliates are NOT responsible for losses resulting
from telephone or electronic requests that we believe are genuine. We will use
reasonable procedures to confirm that instructions received by telephone or
through our website are geniune, including a requirement that contract owners
provide certain indentification information, including a personal
indentification number. We record all telephone transfer instructions. We
reserve the right to suspend, modify, or terminate telephone or electronic
transfer privileges at any time.
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 6 charges and fees associated with the Contract; and the Optional
Death Benefit Charge:
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 may assess a Contingent Deferred Sales Charge when you request a full or
partial Surrender. The Contingent Deferred Sales Charge is based on the amount
you choose to Surrender and how long your Premium Payments have been in the
Contract. 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 amount
assessed a Contingent Deferred Sales Charge will not exceed your total Premium
Payments.
The percentage used to calculate the Contingent Deferred Sales Charge is equal
to:
<TABLE>
<CAPTION>
NUMBER OF YEARS
FROM PREMIUM CONTINGENT DEFERRED
PAYMENT SALES CHARGE
<S> <C>
----------------------------------------------
1 7%
----------------------------------------------
2 6%
----------------------------------------------
3 6%
----------------------------------------------
4 5%
----------------------------------------------
5 4%
----------------------------------------------
6 3%
----------------------------------------------
7 2%
----------------------------------------------
8 or more 0%
----------------------------------------------
</TABLE>
For example, you made an initial Premium Payment of $10,000 five years ago and
an additional Premium Payment of $20,000 one year ago. If you request a partial
withdrawal of $15,000 and
you have not taken your Annual Withdrawal Amount for the year, we will deduct a
CDSC as follows.
- Hartford will Surrender the Annual Withdrawal Amount which is equal to 15% of
your total Premium Payments or $4,500 without charging a CDSC.
- We will then Surrender the Premium Payments that have been in the Annuity the
longest.
- That means we would Surrender the entire $10,000 initial Premium Payment and
deduct a CDSC of 4% on that amount or $400.00.
- The remaining $500 will come from the additional Premium Payment made one year
ago and we will deduct a CDSC of 7% of the $500 or $35.00.
- Your CDSC is $435.00
If you have any questions about these charges, please contact your financial
adviser or Hartford.
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HARTFORD LIFE INSURANCE COMPANY 25
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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 15% of the
total Premium Payments. If you do not take 15% one year, you may not take more
than 15% the next year. These amounts are different for Contracts issued to a
Charitable Remainder Trust.
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 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.
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
- SURRENDER ORDER -- During the first seven Contract Years all Surrenders in
excess of the Annual Withdrawal Amount will be taken first from Premium
Payments, then from earnings. Surrenders from Premium Payments in excess of
the Annual Withdrawal Amount will be subject to a Contingent Deferred Sales
Charge.
- After the Seventh Contract Year, all Surrenders in excess of the Annual
Withdrawal Amount will be taken first from earnings, then from Premium
Payments held in your Contract for more than seven years and then from Premium
Payments invested for less than seven years. Only Premium Payments invested
for less than seven years are subject to a Contingent Deferred Sales Charge.
2. MORTALITY AND EXPENSE RISK CHARGE
For assuming mortality and expense risks under the Contract, we deduct a daily
charge at an annual rate of 1.35% of Sub-Account Value (estimated at .90% for
mortality and .45% 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.
<PAGE>
26 HARTFORD LIFE INSURANCE COMPANY
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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. ADMINISTRATIVE CHARGE
For administration, we apply a daily charge at the rate of .15% per year against
all Contract Values held in the Separate Account during both the accumulation
and annuity phases of the Contract. There is not necessarily a relationship
between the amount of administrative charge imposed on a given Contract and the
amount of expenses that may be attributable to that Contract; expenses may be
more or less than the charge.
You should refer to the Trust prospectus for a description of deductions and
expenses paid out of the assets of the Trust's portfolios.
5. 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.
6. CHARGES AGAINST THE PORTFOLIOS
The Separate Account purchases shares of the Portfolios at net asset value. The
net asset value of the Portfolio reflects investment advisory fees and
administrative expenses already deducted from the assets of the Portfolios.
These changes are described in the Portfolios' prospectuses accompanying this
prospectus.
OPTIONAL DEATH BENEFIT CHARGE -- If you elect the Optional Death Benefit, we
will subtract an additional charge on a daily basis which is equal to an annual
charge of .15% of your Contract Value invested in the Portfolios.
EARNINGS PROTECTION BENEFIT CHARGE -- If you elect the Earnings Protection
Benefit, we will subtract an additional charge on a daily basis until we begin
to make Annuity Payouts that is equal to an annual charge of 0.20% of your
Contract Value invested in the Portfolios.
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 Funds. 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.
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You may also elect the Optional Death Benefit for an additional fee. The
Optional Death Benefit adds the Interest Accumulation Value to the Death Benefit
calculation.
If you elect the Optional Death Benefit, the Death Benefit prior to the
deceased's date of death or the deceased's 81st birthday, whichever is earlier,
will be the greater of:
- the total Premium Payments you have made to us minus any amounts you have
Surrendered;
- The Contract Value of your annuity, or
- Your Maximum Anniversary Value
- The Interest Accumulation Value on the date the Optional Death Benefit is
added to your contract.
The Interest Accumulation Value prior to the deceased's date of death or 81st
birthday, whichever is earlier is equal to:
- Your Contract Value on the date the Optional Death Benefit is added;
- Plus any Premium Payments made after the date the Optional Death Benefit is
added;
- Minus any partial Surrenders taken after the Optional Death Benefit was added;
- Compounded daily at an annual rate of 5.0%.
If you have taken any partial Surrenders, the Interest Accumulation Value will
be adjusted to reduced the Optional Death Benefit proportionally for any partial
Surrenders.
On or after the deceased's 81st birthday or date of death, the Interest
Accumulation Value will not continue to compound, but will be adjusted to add
any Premium Payments or subtract any partial Surrenders.
The Optional Death Benefit is limited to a maximum of 200% of the Contract Value
on the date the Optional Death Benefit was added, plus 200% of any Premium
Payments made since the addition of the Optional Death Benefit less proportional
adjustments for any Surrenders from that date.
If you elect the Optional Death Benefit, we will subtract an additional charge
on a daily basis that is equal to an annual charge of .15% of your Contract
Value invested in the Portfolios. The Optional Death Benefit may not be
available if the Contract Owner or Annuitant is age 76 or older. The Optional
Death Benefit is not available in Washington or New York. Once you elect the
Optional Death Benefit, you cannot cancel it.
If you purchase your contract after September 30, 1999, you must elect the
Optional Death Benefit at the time you send us your initial Premium Payment.
You may also elect the Earnings Protection Benefit at an additional charge. The
Earnings Protection Benefit may not currently be available in your state and is
not available in Washington and New York. You cannot elect the Earnings
Protection Benefit if you or your Annuitant is age 76 or older. Once you elect
the Earnings Protection Benefit, you cannot cancel it.
If you and your Annuitant are age 69 or under on the date the Earnings
Protection Benefit is added to your Contract, the Earnings Protection Benefit is
the greater of:
- The total Premium Payments you have made to us minus the dollar amount of any
partial Surrenders; or
- The Maximum Anniversary Value; or
- Your Contract Value on the date we receive a death certificate or other legal
document acceptable to us, plus 40% of the Contract gain since the date the
Earnings Protection Benefit was added to your Contract.
We determine any Contract gain by comparing your Contract Value on the date you
added the Earnings Protection Benefit to your Contract to your Contract Value on
the date we calculate the Death Benefit. We deduct any Premium Payments and add
adjustments for any partial Surrenders made during that time.
We make an adjustment for partial Surrenders if the amount of a Surrender is
greater than the Contract gain in the Contract immediately prior to the
Surrender.
Your Contract gain is limited to or "capped" at a maximum of 200% of Contract
Value on the date the Earnings Protection Benefit was added to your Contract
plus Premium Payments not previously withdrawn made after the Earnings
Protection Benefit was added to your Contract, excluding any Premium Payments
made in the 12 months before the date of death. We subtract any adjustments for
partial Surrenders.
Hartford takes 40% of either the Contract gain or the capped amount and adds it
back to your Contract Value to complete the Death Benefit calculation. If you or
your Annuitant are age 70 through 75, we add 25% of the Contract gain or capped
amount back to Contract Value to complete the Death Benefit calculation. The
percentage used for the Death Benefit calculation is determined by the oldest
age of you and your Annuitant at the time the Earnings Protection Benefit is
added to your Contract.
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28 HARTFORD LIFE INSURANCE COMPANY
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________________________________________________________________________________
- FOR EXAMPLE: Assuming that:
- The Contract Value on the date we received proof of death plus 40% of the
Contract gain was the greatest of the three death benefit calculations,
- You elected the Earnings Protection Benefit when you purchased your Contract,
- You made a single Premium Payment of $100,000,
- You took no partial Surrenders.
- The Contract Value on the date we receive proof of death was $400,000.Hartford
would calculate the Contract gain as follows:
- Contract Value on the date we receive proof of death equals $400,000,
- minus the Contract Value on the date the Earnings Protection Benefit was added
to your Contract or $100,000 = $300,000.To determine if the cap applies:
- Hartford calculates the Contract Value on the date the Earnings Protection
Benefit was added to your Contract ($100,000),
- plus Premium Payments made since that date ($0),
- minus Premium Payments made in the 12 months prior to death ($0),
Which equals $100,000. The cap is 200% of $100,000 which is $200,000.
In this situation the cap applies, so Hartford takes 40% of $200,000 or $80,000
and adds that to the Contract Value on the date we receive proof of death and
the total Death Benefit with the Earnings Protection Benefit is $480,000.
________________________________________________________________________________
Before you purchase the Earnings Protection Benefit, you should also consider
the following.
- If your Contract has no gain when Hartford calculates the Death Benefit,
Hartford will not pay an Earnings Protection Benefit.
- Partial Surrenders can reduce or eliminate your Contract gain. So if you plan
to make partial Surrenders, there may be no Earnings Protection Benefit.
- If you transfer ownership of your Contract to someone other than your spouse
who would have been ineligible for the Earnings Protection Benefit when it was
added to your Contract, the Earnings Protection Benefit charge will continue
to be deducted even though no Earnings Protection Benefit will be payable.
For more information on how these optional benefits may affect your taxes,
please see the section entitled, "Federal Tax Considerations," under sub-section
entitled "Taxation of Annuities -- General Provisions Affecting Purchasers Other
Than Qualified Retirement Plans."
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.
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. If you elect the Optional Death Benefit for an additional charge
and the Contract continues with the Spouse as Contract Owner, we will adjust the
Contract Value to the amount that we would have paid
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HARTFORD LIFE INSURANCE COMPANY 29
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as the Death Benefit if the Spouse had elected to receive the Death Benefit.
This spousal continuation is available only once for each Contract.
If your spouse continues any portion of the Contract as Contract Owner and
elects the Earnings Protection Benefit, Hartford will use the date the Contract
is continued with your spouse as Contract Owner as the date the Earnings
Protection Benefit was added to the Contract. The percentage used for the
Earnings Protection Benefit will be determined by the oldest age of any
remaining joint owner or Annuitant at the time the Contract is continued.
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.
IF DEATH OCCURS BEFORE THE ANNUITY COMMENCEMENT DATE:
<TABLE>
<S> <C> <C> <C>
IF THE DECEASED IS THE . . . AND . . . AND . . . THEN THE . . .
Contract Owner There is a surviving joint The Annuitant is living or Joint Contract Owner
Contract Owner deceased receives the Death
Benefit.
Contract Owner There is no surviving The Annuitant is living or Designated Beneficiary
joint Contract Owner deceased receives the Death
Benefit.
Contract Owner There is no surviving The Annuitant is living or Contract Owner's estate
joint Contract Owner and deceased receives the Death
the Beneficiary Benefit.
predeceases the Contract
Owner
Annuitant The Contract Owner is There is no named The Contract Owner becomes
living Contingent Annuitant the Contingent Annuitant
and The Contract
continues.
Annuitant The Contract Owner is The Contingent Annuitant Contingent Annuitant
living is living becomes the Annuitant, and
the Contract continues.
</TABLE>
IF DEATH OCCURS ON OR AFTER THE ANNUITY COMMENCEMENT DATE:
<TABLE>
<S> <C> <C>
IF THE DECEASED IS THE . . . AND . . . THEN THE . . .
Contract Owner The Annuitant is living Designated Beneficiary becomes the
Contract Owner
Annuitant The Contract Owner is living Contract Owner receives the Death
Benefit.
Annuitant The Annuitant is also the Contract Owner Designated Beneficiary receives 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.
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
<PAGE>
30 HARTFORD LIFE INSURANCE COMPANY
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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
Payments 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 AFTER THE ANNUITY COMMENCEMENT DATE -- Partial Surrenders are
permitted after the Annuity Commencement Date if you select the Life Annuity
with Payments for a Period Certain, Joint and Last Survivor Life Annuity with
Payments for a Period Certain or the Payments for a Period Certain Annuity
Payout Option. You may take partial Surrenders of amounts equal to the Commuted
Value of the payments that we would have made during the "Period Certain" or the
number of years you select under the Annuity Payout Option that we guarantee to
make Annuity Payouts.
To qualify for partial Surrenders under these Annuity Payout Options you must
elect a variable dollar amount Annuity Payout and you must make the Surrender
request during the Period Certain.
Hartford will deduct any applicable Contingent Deferred Sales Charges.
If you elect to take the entire Commuted Value of the Annuity Payouts we would
have made during the Period Certain, Hartford will not make any Annuity Payouts
during the remaining Period Certain. If you elect to take only some of the
Commuted Value of the Annuity Payouts we would have made during the Period
Certain, Hartford will reduce the remaining Annuity Payouts during the remaining
Period Certain. Annuity Payouts that are to be made after the Period Certain is
over will not change.
Please check with your qualified tax adviser because there could be adverse tax
consequences for partial Surrenders after the Annuity Commencement Date.
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.
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 a 10% 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:
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 31
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(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 QUALIFIED TAX ADVISER BEFORE MAKING ANY
SURRENDERS. PLEASE SEE THE "FEDERAL TAX CONSIDERATIONS" SECTION FOR MORE
INFORMATION.
ANNUITY PAYOUTS
--------------------------------------------------------------------------------
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:
- When do you want Annuity Payouts to begin?
- Which Annuity Payout Option do you want to use?
- How often do you want the payee to receive Annuity Payouts?
- What is the Assumed Investment Return?
- Do you want fixed-dollar amount or variable-dollar amount Annuity Payouts?
Please check with your financial adviser 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 Annuitant's 90th
birthday or the end of the 10th Contract Year, whichever is later. You may elect
a later Annuity Commencement Date if we allow and subject to the laws and
regulations then in effect. 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.
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. Once we begin to
make Annuity Payouts, the Annuity Payout Option cannot be changed.
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.
LIFE ANNUITY WITH A CASH REFUND
We will make Annuity Payouts as long as the Annuitant is living. When the
Annuitant dies, if the Annuity Payouts already made are less than the Contract
Value minus any Premium Tax, the remaining value will be paid to the
Beneficiary. The remaining value is equal to the Contract Value minus any
Premium Tax minus the Annuity Payouts already made. This option is only
available for Annuity Payouts using the 5% Assumed Investment Return.
LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN
We will make Annuity Payouts as long as the Annuitant is living, but we at least
guarantee to make Annuity Payouts for a time period you select, between 5 years
and 100 years minus the Annuitant's age. If the Annuitant dies before the
guaranteed number of years have passed, then the Beneficiary may elect to
continue Annuity Payouts for the remainder of the guaranteed number of years or
receive the Commuted Value in one sum.
For Qualified Contracts, the guaranteed number of years must be less than the
life expectancy of the Annuitant at the time the Annuity Payouts begin. We
compute life expectancy using the IRS mortality tables.
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-dollar amount Annuity Payouts, these percentages represent Annuity
Units; for fixed-dollar amount Annuity Payouts, they represent actual dollar
amounts. The percentage will also impact the Annuity Payout amount we pay while
both
<PAGE>
32 HARTFORD LIFE INSURANCE COMPANY
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Annuitants are living. If you pick a lower percentage, your original Annuity
Payouts will be higher while both Annuitants are alive.
JOINT AND LAST SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN
We will make Annuity Payouts as long as either the Annuitant or Joint Annuitant
are living, but we at least guarantee to make Annuity Payouts for a time period
you select, between 5 years and 100 years minus the Annuitant's age. If the
Annuitant and the Joint Annuitant both die before the guaranteed number of years
have passed, then the Beneficiary has two options, (a) continue Annuity Payouts
for the remainder of the guaranteed number of years or (b) receive the Commuted
Value in one sum.
When choosing this option, you must decide what will happen to the Annuity
Payouts 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-dollar amount Annuity Payouts, these percentages represent Annuity
Units; for fixed-dollar amount Annuity Payouts, these percentages 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.
PAYMENTS FOR A PERIOD CERTAIN
We agree to make payments for a specified time. The minimum period that you can
select is 10 years during the first two Contract Years and 5 years after the
second Contract Anniversary. The maximum period that you can select is 100 years
minus your Annuitant's age.
- If you select this option under a variable-dollar amount payment, you may
Surrender your Annuity after annuity payments have started and we will give
you the present value of the remaining payments less any applicable
Contingent Deferred Sales Charge.
- If the Annuitant dies prior to the end of the period selected, we will pay
your Beneficiary the present value of the remaining payments, either in a
lump sum payment or we will continue payments until the end of the period
selected.
For Contracts issued in the State of Oregon, Payments for a Period Certain may
be selected as follows: For fixed payments, the minimum period that you can
select is 10 years at any time and 5 years on or after the 2nd Contract
Anniversary. For variable annuity payments, the minimum period that you can
select is 5 years on or after the 10th Contract Anniversary. Under an Annuity
payable with variable annuity payments, you may Surrender the Contract after
payments have begun by submitting a written request to us. The amount available
to you is the Commuted Value.
IMPORTANT INFORMATION:
- YOU CANNOT SURRENDER YOUR CONTRACT ONCE ANNUITY PAYOUTS BEGIN, UNLESS YOU HAVE
SELECTED LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN, JOINT AND LAST
SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN, AND PAYMENTS FOR A
PERIOD CERTAIN VARIABLE-DOLLAR AMOUNT ANNUITY PAYOUT OPTION. A CONTINGENT
DEFERRED SALES CHARGE MAY BE DEDUCTED.
- AUTOMATIC ANNUITY PAYOUTS FOR NON-QUALIFIED CONTRACTS -- If you do not elect
an Annuity Payout Option, Annuity Payouts will automatically begin on the
Annuity Commencement Date under the Life Annuity with Payments for a Period
Certain Annuity Payout Option with a ten-year period certain. Automatic
Annuity Payouts will be fixed-dollar amount Annuity Payouts, variable-dollar
amount Annuity Payouts, or a combination of fixed or variable dollar amount
Annuity Payouts, depending on the investment allocation of your Account in
effect on the Annuity Commencement Date.
- AUTOMATIC ANNUITY PAYOUTS FOR QUALIFIED CONTRACTS AND CONTRACTS ISSUED IN
TEXAS -- If you do not elect an Annuity Payout Option, Annuity Payouts will
automatically begin on the Annuity Commencement Date under the Life Annuity
Payout Option. Automatic Annuity Payouts will be fixed-dollar amount Annuity
Payouts, variable-dollar amount Annuity Payouts, or a combination of fixed or
variable dollar amount Annuity Payouts, depending on the investment allocation
of your Account in effect on the Annuity Commencement Date.
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 ("AIR") is the investment return you select before
we start to make Annuity Payouts. It is a critical assumption for calculating
variable dollar amount Annuity Payouts. The first Annuity Payout will be based
upon the AIR.
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HARTFORD LIFE INSURANCE COMPANY 33
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The remaining Annuity Payouts will fluctuate based on the performance of the
underlying Funds.
Subject to the approval of your State, you can select one of three AIRs: 3%, 5%
or 6%. The greater the AIR, the greater the initial Annuity Payout. A higher AIR
may result in smaller potential growth in the Annuity Payouts. On the other
hand, a lower AIR results in a lower initial Annuity Payout, but future Annuity
Payouts have the potential to be greater.
For example, if the Sub-Accounts earned exactly the same as the AIR, then the
second monthly Annuity Payout Option is the same as the first. If the
Sub-Accounts earned more than the AIR, then the second monthly Annuity Payout
Option is higher than the first. If the Sub-Accounts earned less than the AIR,
then the second monthly Annuity Payout Option is lower than the first.
Level variable-dollar amount Annuity Payouts would be produced if the investment
returns remained constant and equal to the AIR. In fact, Annuity Payouts will
vary up or down as the investment rate varies up or down from the AIR.
5. DO YOU WANT FIXED-DOLLAR AMOUNT OR VARIABLE-DOLLAR AMOUNT ANNUITY PAYOUTS?
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 Annuity Payment 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
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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 Rebalancer
Program,
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34 HARTFORD LIFE INSURANCE COMPANY
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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-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 7% 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.
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 Christine Hayer
Repasy, 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: Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085.
Telephone: (800) 862-6668 (Contract Owners)
(800) 862-4397 (Account Executive)
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.
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HARTFORD LIFE INSURANCE COMPANY 35
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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 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.
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36 HARTFORD LIFE INSURANCE COMPANY
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vi. In general, any amount actually received under the Contract as a Death
Benefit, including any Optional Death Benefit or Earnings Protection
Benefit, will be treated as an amount received for purposes of this
subparagraph a. and the next subparagraph b. As a result, Hartford believes
that for federal tax purposes the Optional Death Benefit and the Earnings
Protection Benefit should be treated as an integral part of the Contract's
benefits (e.g., as investment protection benefit) and that any charges
under the contract for the Optional Death Benefit or the Earnings
Protection Benefit should not be treated as an amount received by the
Contract Owner for purposes of this subparagraph a. However, it is possible
that the IRS could take a contrary position that some or all of these
charges for the Optional Death Benefit or the Earnings Protection Benefit
should be treated for federal tax purposes as an amount received under the
Contract (e.g., as an amount distributed from the Contract to pay for an
additional benefit that should be treated as a benefit that is being
provided by a separate contract for tax purposes, i.e., by a separate
contract that is not part of the annuity Contract for tax purposes). If the
IRS takes such a contrary position, however, then any Beneficiary of an
Optional Death Benefit or an Earnings Protection Benefit may be entitled to
claim that some part of such Death Benefit is excludable from gross income
for federal tax purposes (e.g., as a death benefit that should be treated
for tax purposes as if it were being provided by a separate contract that
qualifies as a life insurance contract for tax purposes).
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,
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HARTFORD LIFE INSURANCE COMPANY 37
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1982, then any amount received or deemed received prior to the Annuity
Commencement Date shall be deemed to come (1) first from the amount of the
investment in the contract prior to August 14, 1982 (pre-8/14/82 investment)
carried over from the prior Contract, (2) then from the portion of the income on
the contract (carried over to, as well as accumulating in, the successor
Contract) that is attributable to such pre-8/14/82 investment, (3) then from the
remaining income on the contract and (4) last from the remaining investment in
the contract. As a result, to the extent that such amount received or deemed
received does not exceed such pre-8/14/82 investment, such amount is not
includable in gross income., In addition, to the extent that such amount
received or deemed received does not exceed the sum of (a) such pre-8/14/82
investment and (b) the income on the contract attributable thereto, such amount
is not subject to the 10% penalty tax. In all other respects, amounts received
or deemed received from such post-exchange Contracts are generally subject to
the rules described in this subparagraph 3.
f. REQUIRED DISTRIBUTIONS
i. Death of Contract Owner or Primary Annuitant Subject to the alternative
election or spouse beneficiary provisions in ii or iii below:
1. If any Contract Owner dies on or after the Annuity Commencement Date and
before the entire interest in the Contract has been distributed, the
remaining portion of such interest shall be distributed at least as
rapidly as under the method of distribution being used as of the date of
such death;
2. If any Contract Owner dies before the Annuity Commencement Date, the
entire interest in the Contract will be distributed within 5 years after
such death; and
3. If the Contract Owner is not an individual, then for purposes of 1. or
2. above, the primary annuitant under the Contract shall be treated as
the Contract Owner, and any change in the primary annuitant shall be
treated as the death of the Contract Owner. The primary annuitant is the
individual, the events in the life of whom are of primary importance in
affecting the timing or amount of the payout under the Contract.
ii. Alternative Election to Satisfy Distribution Requirements
If any portion of the interest of a Contract Owner described in i. above is
payable to or for the benefit of a designated beneficiary, such beneficiary may
elect to have the portion distributed over a period that does not extend beyond
the life or life expectancy of the beneficiary. Distributions must begin within
a year of the Contract Owner's 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.
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38 HARTFORD LIFE INSURANCE COMPANY
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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.
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
Any portion of a distribution that is (or is deemed to be) current taxable
income to the Contract Owner will be subject to federal income tax withholding
and reporting under the Code. Generally, however, a Contract Owner may elect not
to have income taxes withheld or to have income taxes withheld at a different
rate by filing a completed election form with us. 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.
G. GENERATION-SKIPPING TRANSFERS
Under certain circumstances, the Internal Revenue Code may impose a
"generation-skipping transfer tax" when all or part of an annuity is transferred
to, or a death benefit is paid to, an individual two or more generations younger
than the owner. Federal tax law may require us to deduct the tax from your
contract, or from any applicable payment, and pay it directly to the Internal
Revenue Service.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 39
--------------------------------------------------------------------------------
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
SECTION
<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>
<PAGE>
40 HARTFORD LIFE INSURANCE COMPANY
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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 advisers
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 $10,500 (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 2000, $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 of a
governmental employer 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. 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,
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 41
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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.
IRAs generally may not invest in life insurance contracts. However, an annuity
that is used as an IRA may provide for a death benefit that equals the greater
of the premiums paid and the annuity's cash value. The Contract offers an
Optional Death Benefit and an Earnings Protection Benefit. The Optional Death
Benefit and the Earnings Protection Benefit may exceed the greater of the
Contract Value and total Premium Payments less prior surrenders. WE HAVE FILED
THE CONTRACT WITH THE OPTIONAL DEATH BENEFIT AND THE EARNINGS PROTECTION BENEFIT
WITH THE INTERNAL REVENUE SERVICE FOR APPROVAL FOR USE AS AN IRA. NO ASSURANCE
IS GIVEN THAT THESE BENEFITS MEET THE QUALIFICATION REQUIREMENTS FOR AN IRA.
Although we regard the Optional Death Benefit and the Earnings Protection
Benefit as investment protection features that should not have an adverse tax
effect, it is possible that the IRS could take a contrary position regarding
tax-qualification or resulting in certain deemed distributions and penalty
taxes. You should consult a qualified tax adviser if you are considering adding
the Optional Death Benefit or the Earnings Protection Benefit to your Contract
if it is an IRA.
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 distribution 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 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.
<PAGE>
42 HARTFORD LIFE INSURANCE COMPANY
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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.
(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.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 43
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APPENDIX II -- OPTIONAL DEATH BENEFITS -- EXAMPLES
OPTIONAL DEATH BENEFIT EXAMPLES
EXAMPLE 1
Assume that you make a Premium Payment of $100,000. On the first Contract
Anniversary assume your Contract Value is $108,000.00. The Interest Accumulation
Value is $105,000 or 5% accumulation on the $100,000 Premium Payment.
<TABLE>
<C> <S>
$100,000 Premium Payment
$ 5,000 Interest of 5%
--------
$105,000 Interest Accumulation Value
</TABLE>
If you request a partial Surrender of $10,000 the next day, your Interest
Accumulation Value will change. The adjustment for the partial Surrender is
determined by dividing the partial Surrender amount by the Contract Value prior
to the Surrender and multiplying that amount by the Interest Accumulation Value
prior to the Surrender. To determine the new Interest Accumulation Value, that
total is then subtracted from the Interest Accumulation Value prior to the
Surrender.
<TABLE>
<C> <S>
$ 10,000 partial Surrender divided by
$108,000 Contract Value prior to Surrender equals
.09259 multiplied by
$105,000 Interest Accumulation Value for a total of
$ 9,722 to be deducted from the Interest Accumulation Value equals
$ 95,278 the new Interest Accumulation Value
</TABLE>
EXAMPLE 2
Assume that you make a Premium Payment of $100,000. On the first Contract
Anniversary assume your Contract Value is $92,000.00. The Interest Accumulation
Value is $105,000 or 5% accumulation on the $100,000 Premium Payment.
<TABLE>
<C> <S>
$100,000 Premium Payment
$ 5,000 Interest of 5%
--------
$105,000 Interest Accumulation Value
</TABLE>
If you request a partial Surrender of $10,000 the next day, your Interest
Accumulation Value will change. The adjustment for the partial Surrender is
determined by dividing the partial Surrender amount by the Contract Value prior
to the Surrender and multiplying that amount by the Interest Accumulation Value
prior to the Surrender. To determine the new Interest Accumulation Value, that
total is then subtracted from the Interest Accumulation Value prior to the
Surrender.
<TABLE>
<C> <S>
$ 10,000 partial Surrender divided by
$ 92,000 Contract Value prior to Surrender equals
.10870 multiplied by
$105,000 Interest Accumulation Value for a total of
$ 11,413 to be deducted from the Interest Accumulation Value equals
$ 93,587 the New Interest Accumulation Value
</TABLE>
--------------------------------------------------------------------------------
<PAGE>
44 HARTFORD LIFE INSURANCE COMPANY
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EARNINGS PROTECTION BENEFIT EXAMPLES
EXAMPLE 1
Assume that:
- You elected the Earnings Protection Benefit when you purchased your Contract,
- You made a single Premium Payment of $100,000,
- On your fifth Contract anniversary, your Contract Value was $150,000,
- On the day after your fifth Contract Anniversary, you made a partial Surrender
of $40,000,
- On the day we calculate the Death Benefit, your Contract Value was $140,000,
- The Contract Value on the date we calculate the Death Benefit plus 40% of the
Contract gain was the greatest of the three death benefit calculations,
ADJUSTMENT FOR PARTIAL SURRENDERS
To calculate the Earnings Protection Benefit, we make an adjustment for partial
Surrenders if the amount of a Surrender is greater than the Contract gain in the
Contract immediately prior to the Surrender. To determine if the partial
Surrender is greater than the Contract gain:
- Add the amount of the partial Surrender ($40,000) to
- The Contract Value on the date the Earnings Protection Benefit is added to
your Contract ($100,000),
- Add Premium Payments made after the Earnings Protection Benefit is added to
your Contract before you make the partial Surrender ($0),
- Subtract the Contract Value on the Valuation Day immediately before you make
the partial Surrender ($150,000),
- Subtract the sum of any prior adjustments for all prior partial Surrenders
made after the Earnings Protection Benefit is added to your Contract ($0),
Which equals $-10,000 which is less than zero, so there is no adjustment for the
partial Surrender in this case.
CALCULATION OF CONTRACT GAIN
So Hartford would calculate the Contract gain as follows:
- Contract Value on the date we receive proof of death ($140,000),
- Subtract the Contract Value on the date the Earnings Protection Benefit was
added to your Contract ($100,000),
- Add any adjustments for partial Surrenders ($0).
So the Contract gain equals $40,000.
CALCULATION OF EARNINGS PROTECTION BENEFIT CAP
To determine if the cap applies:
- Hartford calculates the Contract Value on the date the Earnings Protection
Benefit was added to your Contract ($100,000),
- plus Premium Payments made since that date ($0),
- minus Premium Payments made in the 12 months prior to death ($0),
- minus any adjustments for partial Surrenders ($0),
Which equals $100,000. The cap is 200% of $100,000 which is $200,000.
DEATH BENEFIT WITH EARNINGS PROTECTION BENEFIT
In this situation the cap does not apply, so Hartford takes 40% of $40,000 or
$16,000 and adds that to the Contract Value on the date we receive proof of
death and the total Death Benefit with the Earnings Protection Benefit is
$156,000.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 45
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EXAMPLE 2
Assume that:
- You elected the Earnings Protection Benefit when you purchased your Contract,
- You made a single Premium Payment of $100,000,
- On your fifth Contract anniversary, your Contract Value was $150,000,
- On the day after your fifth Contract Anniversary, you made a partial Surrender
of $60,000,
- On the day we calculate the Death Benefit, your Contract Value was $120,000,
- The Contract Value on the date we calculate the Death Benefit plus 40% of the
Contract gain was the greatest of the three death benefit calculations,
ADJUSTMENT FOR PARTIAL SURRENDERS
To calculate the Earnings Protection Benefit, we make an adjustment for partial
Surrenders if the amount of a Surrender is greater than the Contract gain in the
Contract immediately prior to the Surrender. To determine if the partial
Surrender is greater than the Contract gain:
- Add the amount of the partial Surrender ($60,000) to
- The Contract Value on the date the Earnings Protection Benefit is added to
your Contract ($100,000)
- Add Premium Payments made after the Earnings Protection Benefit is added to
your Contract before you make the partial Surrender ($0),
- Subtract the Contract Value on the Valuation Day immediately before you make
the partial Surrender ($150,000),
- Subtract the sum of any prior adjustments for all prior partial Surrenders
made after the Earnings Protection Benefit is added to your Contract ($0),
Which equals $+10,000 which is greater than zero, so there is a $10,000
adjustment for the partial Surrender in this case.
CALCULATION OF CONTRACT GAIN
So Hartford would calculate the Contract gain as follows:
- Contract Value on the date we receive proof of death ($120,000),
- Subtract the Contract Value on the date the Earnings Protection Benefit was
added to your Contract ($100,000),
- Add any adjustments for partial Surrenders ($10,000),
So the Contract gain equal $30,000.
CALCULATION OF EARNINGS PROTECTION BENEFIT CAP
To determine if the cap applies:
- Hartford calculates the Contract Value on the date the Earnings Protection
Benefit was added to your Contract ($100,000),
- plus Premium Payments made since that date ($0),
- minus Premium Payments made in the 12 months prior to death ($0),
- minus any adjustments for partial Surrenders ($10,000)
Which equals $90,000. The cap is 200% of $90,000 which is $180,000.
DEATH BENEFIT WITH EARNINGS PROTECTION BENEFIT
In this situation the cap does not apply, so Hartford takes 40% of $30,000 or
$12,000 and adds that to the Contract Value on the date we receive proof of
death and the total Death Benefit with the Earnings Protection Benefit is
$132,000.
<PAGE>
46 HARTFORD LIFE INSURANCE COMPANY
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<PAGE>
This form must be completed for all tax-sheltered annuities.
SECTION 403(b)(11) ACKNOWLEDGMENT FORM
The 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:
- attained age 59 1/2,
- separated from service,
- died, or
- 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 your annuity. Please refer to your Plan.
Please complete the following and return to:
Hartford Life Insurance Company
Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Name of Contract Owner/Participant: ___________________________________________
Address: ______________________________________________________________________
City or Plan/School District: _________________________________________________
Date: _________________________________________________________________________
Contract No.: _________________________________________________________________
Signature: ____________________________________________________________________
<PAGE>
To obtain a Statement of Additional Information, please complete the form below
and mail to:
Hartford Life Insurance Company
Attn: Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Please send a Statement of Additional Information for Hartford Select Leaders to
me at the following address:
<TABLE>
<S> <C>
-----------------------------------------------------------------------------
Name
-----------------------------------------------------------------------------
Address
-----------------------------------------------------------------------------
City/State Zip Code
</TABLE>
<PAGE>
PART B
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT THREE
HARTFORD SELECT LEADERS
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: Investment Product Services, P.O. Box 5085, Hartford,
Connecticut 06102-5085.
Date of Prospectus: January 26, 2001
Date of Statement of Additional Information: January 26, 2001
333-35000
<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, Connecticut 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>
------------------------------------------------------------------------------------------------------------
Rating Agency Effective Rating Basis of Rating
Date of Rating
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A.M. Best and Company, Inc. 4/1/00 A+ Financial performance
------------------------------------------------------------------------------------------------------------
Standard & Poor's 8/1/00 AA Insurer financial strength
------------------------------------------------------------------------------------------------------------
Fitch 5/1/00 AA+ Financial strength
------------------------------------------------------------------------------------------------------------
</TABLE>
These ratings apply to Hartford's ability to meet its obligations under the
Contract, the ratings do not apply to the Separate Account or the underlying
Funds.
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 7% 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: 1999: $3,457,547;
1998: $1,627,728; and 1997: $3,556,222. HSD has retained none of these
commissions.
<PAGE>
-5-
CALCULATION OF YIELD AND RETURN
YIELD OF A MONEY MARKET SUB-ACCOUNT. As summarized in the prospectus under the
heading "Performance Related Information," the yield of a Money Market
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
A MONEY MARKET 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.
YIELD AND EFFECTIVE YIELD FOR THE SEVEN DAY PERIOD ENDING
DECEMBER 31, 1999.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
SUB-ACCOUNT YIELD EFFECTIVE YIELD
---------------------------------------------------------------------------
<S> <C> <C>
Money Market 3.92% 4.00%
---------------------------------------------------------------------------
</TABLE>
YIELDS OF SUB-ACCOUNTS. As summarized in the prospectus under the heading
"Performance Related Information," yields of 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.
YIELD QUOTATION BASED ON A 30 DAY PERIOD ENDED DECEMBER 31, 1999.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
SUB-ACCOUNT YIELD
------------------------------------------------------------------------------
<S> <C>
Diversified Income 7.70%
------------------------------------------------------------------------------
High Yield 8.13%
------------------------------------------------------------------------------
Fixed Income 5.00%
------------------------------------------------------------------------------
</TABLE>
At any time in the future, yields and total return may be higher or lower than
past yields and there can be no assurance that any historical results will
continue.
CALCULATION OF TOTAL RETURN. As summarized in the prospectus under the heading
"Performance Related Information", total return is a measure of the change in
value of an investment in a Sub-Account over the period covered. The formula for
total return used herein includes three steps: (1) calculating the value of the
hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of units owned at the end of the period by the unit
value per unit on the last trading day of the period; (2) assuming redemption at
the end of the period and deducting any applicable contingent deferred sales
charge and (3) dividing this account value for the hypothetical investor by the
initial $1,000 investment and annualizing the result for periods of less than
one year. Standardized total return will be calculated since the inception of
the Separate Account for one year, five years, and ten years or some other
relevant periods if a Sub-Account has not been in existence for at least ten
years.
The following are the standardized average annual total return quotations for
the Sub-Accounts. There is no information for the Technology Sub-Account
because as of December 31, 1999 the Sub-Account had not commenced operation.
<PAGE>
-7-
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN SINCE THE INCEPTION OF THE SEPARATE
ACCOUNT FOR YEAR ENDED DECEMBER 31, 1999 (1)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
SINCE INCEPTION
SUB-ACCOUNT 1 YEAR 5 YEAR 10 YEAR OF SEPARATE
ACCOUNT
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market (2) -7.04% -0.32% N/A -0.61%
--------------------------------------------------------------------------------------------------------
Diversified Income (2) -13.53% -0.09% N/A -0.39%
--------------------------------------------------------------------------------------------------------
Balanced Growth (2) -8.28% 9.38% N/A 8.84%
--------------------------------------------------------------------------------------------------------
Utilities (2) 31.22% 20.43% N/A 19.51%
--------------------------------------------------------------------------------------------------------
Dividend Growth (2) -11.22% 17.04% N/A 16.14%
--------------------------------------------------------------------------------------------------------
Value Added Market (2) 0.20% 14.17% N/A 13.14%
--------------------------------------------------------------------------------------------------------
Growth (2) 26.69% 17.16% N/A 16.37%
--------------------------------------------------------------------------------------------------------
American Opportunities (2) 43.11% 28.69% N/A 27.55%
--------------------------------------------------------------------------------------------------------
Midcap Equity (2) 78.78% N/A N/A 27.18%
--------------------------------------------------------------------------------------------------------
Global Equity (2) 21.81% 11.12% N/A 10.22%
--------------------------------------------------------------------------------------------------------
Developing Growth (2) 79.19% 27.79% N/A 26.91%
--------------------------------------------------------------------------------------------------------
High Yield -4.49% N/A N/A 2.09%
--------------------------------------------------------------------------------------------------------
Mid-Cap Value 8.32% N/A N/A 19.62%
--------------------------------------------------------------------------------------------------------
Emerging Markets Debt 17.46% N/A N/A -10.88%
--------------------------------------------------------------------------------------------------------
Emerging Markets Equity 82.77% N/A N/A 4.68%
--------------------------------------------------------------------------------------------------------
Fixed Income -13.09% N/A N/A -1.16%
--------------------------------------------------------------------------------------------------------
Active International Allocation N/A N/A N/A 7.15%
--------------------------------------------------------------------------------------------------------
Strategic Stock Fund (3) -12.19% N/A N/A -0.22%
--------------------------------------------------------------------------------------------------------
Enterprise Fund (3) 13.67% 24.04% N/A 20.30%
--------------------------------------------------------------------------------------------------------
American Funds Global Growth Fund 57.15% N/A N/A 31.66%
--------------------------------------------------------------------------------------------------------
American Funds Global Small
Capitalization Fund 78.52% N/A N/A 40.88%
--------------------------------------------------------------------------------------------------------
American Funds Growth Fund 44.93% 28.49% N/A 27.44%
--------------------------------------------------------------------------------------------------------
American Funds Growth - Income Fund -0.46% 16.63% N/A 16.09%
--------------------------------------------------------------------------------------------------------
American Funds International Fund 63.35% 20.14% N/A 18.95%
--------------------------------------------------------------------------------------------------------
MFS Capital Opportunities Series 35.24% N/A N/A 26.64%
--------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series 64.09% N/A N/A 31.54%
--------------------------------------------------------------------------------------------------------
MFS Growth Series N/A N/A N/A 28.62%
--------------------------------------------------------------------------------------------------------
MFS Growth and Income Series -4.90% N/A N/A 16.08%
--------------------------------------------------------------------------------------------------------
MFS Total Return Series -8.48% N/A N/A 10.92%
--------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund 83.43% N/A N/A 24.92%
--------------------------------------------------------------------------------------------------------
Franklin Strategic Income Securities
Fund N/A N/A N/A -8.17%
--------------------------------------------------------------------------------------------------------
Mutual Shares Securities 1.89% N/A N/A 4.25%
--------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities
Fund 42.34% 1.24% N/A -1.36%
--------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund 9.04% 10.65% N/A 9.51%
--------------------------------------------------------------------------------------------------------
</TABLE>
(1) Performance figures above do not reflect any deductions for any optional
death benefits charges. Performance would have been lower had any optional
death benefits been available and been chosen.
(2) The underlying Portfolio commenced offering Class Y shares on May 1, 2000.
The returns shown above are for Class X shares of the Portfolio (which are not
offered in this statement of additional information). Class X and Class Y
shares are invested in the same portfolio of securities. However, the returns
for Class Y shares would differ from those of Class X to the extent the Classes
have different expenses.
(3) The underlying Portfolios commenced offering Class II shares on April 28,
2000. The returns shown above are for Class I shares of the Portfolios (which
are not offered in this statement of additional information). The annual return
variability of the Portfolio's Class II shares would be substantially similar to
that shown for Class I shares because all of the Portfolio's shares are invested
in the same portfolio of securities. However, the actual annual returns of
Class II shares would be lower than the annual returns shown for the Portfolio's
Class I shares because of differences in the expenses borne by each class of
shares.
<PAGE>
-8-
In addition to the standardized total return, the Sub-Account may advertise a
non-standardized total return. This figure will usually be calculated since the
inception of the underlying fund 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.
Therefore, non-standardized total return for a Sub-Account is higher than
standardized total return for a Sub-Account.
The following are the non-standardized annualized total return quotations for
the Sub-Accounts. There is no information for the Technology Sub-Account
because as of December 31, 1999 the Sub-Account had not commenced operation.
NON-STANDARDIZED ANNUALIZED TOTAL RETURN THAT PRE-DATE THE INCEPTION DATE OF THE
SEPARATE ACCOUNT FOR YEAR ENDED DECEMBER 31, 1999 (1)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
FUND SINCE
SUB-ACCOUNT INCEPTION 1 YEAR 5 YEAR 10 YEAR INCEPTION OF
DATE FUND
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market (2) 11/08/1994 2.96% 3.44% N/A 3.44%
-----------------------------------------------------------------------------------------------------------------
Diversified Income (2) 11/08/1994 -3.53% 3.54% N/A 3.53%
-----------------------------------------------------------------------------------------------------------------
Balanced Growth (2) 11/08/1994 1.72% 12.28% N/A 11.98%
-----------------------------------------------------------------------------------------------------------------
Utilities (2) 11/08/1994 41.22% 23.10% N/A 22.46%
-----------------------------------------------------------------------------------------------------------------
Dividend Growth (2) 11/08/1994 -1.22% 19.40% N/A 18.72%
-----------------------------------------------------------------------------------------------------------------
Value Added Market (2) 11/08/1994 10.20% 16.84% N/A 16.09%
-----------------------------------------------------------------------------------------------------------------
Growth (2) 11/08/1994 36.69% 19.98% N/A 19.45%
-----------------------------------------------------------------------------------------------------------------
American Opportunities (2) 11/08/1994 53.11% 31.05% N/A 30.15%
-----------------------------------------------------------------------------------------------------------------
Midcap Equity (2) 01/21/1997 88.78% N/A N/A 31.40%
-----------------------------------------------------------------------------------------------------------------
Global Equity (2) 11/08/1994 31.81% 14.28% N/A 13.71%
-----------------------------------------------------------------------------------------------------------------
Developing Growth (2) 11/08/1994 89.19% 30.18% N/A 29.53%
-----------------------------------------------------------------------------------------------------------------
High Yield 01/02/1997 5.51% N/A N/A 6.82%
-----------------------------------------------------------------------------------------------------------------
Mid-Cap Value 01/02/1997 18.32% N/A N/A 23.38%
-----------------------------------------------------------------------------------------------------------------
Emerging Markets Debt 06/16/1997 27.46% N/A N/A -4.11%
-----------------------------------------------------------------------------------------------------------------
Emerging Markets Equity 10/01/1996 92.77% N/A N/A 10.57%
-----------------------------------------------------------------------------------------------------------------
Fixed Income 01/02/1997 -3.09% N/A N/A 3.72%
-----------------------------------------------------------------------------------------------------------------
Active International
Allocation 09/20/1999 N/A N/A N/A 17.15%
-----------------------------------------------------------------------------------------------------------------
Strategic Stock Fund (3) 11/03/1997 -2.19% N/A N/A 6.47%
-----------------------------------------------------------------------------------------------------------------
Enterprise Fund (3) 04/06/1986 23.67% 26.34% 15.55% 12.47%
-----------------------------------------------------------------------------------------------------------------
American Funds Global
Growth Fund 04/30/1997 67.15% N/A N/A 36.00%
-----------------------------------------------------------------------------------------------------------------
American Funds Global
Small Capitalization Fund 04/30/1998 88.52% N/A N/A 47.40%
-----------------------------------------------------------------------------------------------------------------
American Funds Growth Fund 02/08/1984 54.93% 30.94% 19.24% 17.83%
-----------------------------------------------------------------------------------------------------------------
American Funds Growth -
Income Fund 02/08/1984 9.54% 19.15% 12.62% 13.80%
-----------------------------------------------------------------------------------------------------------------
American Funds International
Fund 05/01/1990 73.35% 23.13% N/A 14.72%
-----------------------------------------------------------------------------------------------------------------
MFS Capital Opportunities
Series 08/14/1996 45.24% N/A N/A 30.27%
-----------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series 07/24/1995 74.09% N/A N/A 34.38%
-----------------------------------------------------------------------------------------------------------------
MFS Growth Series 05/03/1999 N/A N/A N/A 38.62%
-----------------------------------------------------------------------------------------------------------------
MFS Growth and Income Series 10/09/1995 5.10% N/A N/A 19.31%
-----------------------------------------------------------------------------------------------------------------
MFS Total Return Series 01/03/1995 1.52% 13.67% N/A 13.69%
-----------------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund 11/01/1995 93.43% N/A N/A 28.38%
-----------------------------------------------------------------------------------------------------------------
Franklin Strategic Income
Securities Fund 07/01/1999 N/A N/A N/A 1.83%
-----------------------------------------------------------------------------------------------------------------
Mutual Shares Securities 11/01/1996 11.89% N/A N/A 9.20%
-----------------------------------------------------------------------------------------------------------------
Templeton Developing Markets
Securities Fund 03/15/1994 52.34% 5.13% N/A 3.38%
-----------------------------------------------------------------------------------------------------------------
Templeton Growth Securities
Fund 03/15/1994 19.04% 13.66% N/A 12.04%
-----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Performance figures above do not reflect any deductions for any optional
charges. Performance would have been lower had any optional death benefits
been available and been chosen.
(2) The underlying Portfolio commenced offering Class Y shares on May 1, 2000.
The returns shown above are for Class X shares of the Portfolio (which are not
offered in this statement of additional information). Class X and Class Y
shares are invested in the same portfolio of securities. However, the returns
for Class Y shares would differ from those of Class X to the extent the Classes
have different expenses.
(3) The underlying Portfolios commenced offering Class II shares on April 28,
2000. The returns shown above are for Class I shares of the Portfolios (which
are not offered in this statement of additional information). The annual
return variability of the Portfolio's Class II shares would be substantially
similar to that shown for Class I shares because all of the Portfolio's shares
are invested in the same portfolio of securities. However, the actual annual
returns of Class II shares would be lower than the annual returns shown for the
Portfolio's Class I shares because of differences in the expenses borne by each
class of shares.
<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.
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.
<PAGE>
-10-
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>
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, North
American Government Securities, Balanced Growth, Utilities, Dividend Growth,
Value-Added Market, Growth, American Opportunities, Global Equity, Developing
Growth, Emerging Markets, Diversified Income, Mid-Cap Equity, Strategic Stock,
Enterprise, High Yield, Mid-Cap Value, Emerging Markets Debt, Emerging Markets
Equity, Active International Allocation, and Fixed Income sub-accounts),
(collectively, the Account) as of December 31, 1999, 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,
1999, and the results of its operations and the changes in its net assets for
the periods presented in conformity with generally accepted accounting
principles.
Hartford, Connecticut
February 17, 2000 ARTHUR ANDERSEN LLP
------------------------------------ SA-1 -------------------------------------
<PAGE>
SEPARATE ACCOUNT THREE
--------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
NORTH AMERICAN
MONEY GOVERNMENT
MARKET SECURITIES
SUB-ACCOUNT SUB-ACCOUNT
----------- --------------
<S> <C> <C>
ASSETS:
Investments in the Morgan Stanley Dean
Witter Select Dimensions Investment
Series:
Money Market Portfolio
Shares 10,834,994
Cost $10,834,994
Market Value...................... $10,834,994 --
North American Government Securities
Portfolio
Shares 86,378
Cost $872,727
Market Value...................... -- $866,373
Balanced Growth Portfolio
Shares 1,015,741
Cost $14,863,445
Market Value...................... -- --
Utilities Portfolio
Shares 462,270
Cost $7,714,454
Market Value...................... -- --
Dividend Growth Portfolio
Shares 3,918,333
Cost $71,722,742
Market Value...................... -- --
Value-Added Market Portfolio
Shares 1,381,279
Cost $21,243,860
Market Value...................... -- --
Growth Portfolio
Shares 699,117
Cost $12,317,177
Market Value...................... -- --
American Opportunities Portfolio
Shares 2,469,114
Cost $49,283,138
Market Value...................... -- --
Global Equity Portfolio
Shares 1,066,162
Cost $13,446,082
Market Value...................... -- --
Due from Hartford Life Insurance
Company.............................. 194,186 --
Receivable for fund shares sold....... -- 33
----------- --------
Total Assets.......................... 11,029,180 866,406
----------- --------
LIABILITIES:
Due to Hartford Life Insurance
Company.............................. -- 9,272
Payable for fund shares purchased..... -- --
----------- --------
Total Liabilities..................... -- 9,272
----------- --------
Net Assets (variable annuity contract
liabilities)......................... $11,029,180 $857,134
=========== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------ SA-2 -------------------------------------
<PAGE>
<TABLE>
<CAPTION>
BALANCED DIVIDEND VALUE-ADDED AMERICAN
GROWTH UTILITIES GROWTH MARKET GROWTH OPPORTUNITIES
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in the Morgan Stanley Dean
Witter Select Dimensions Investment
Series:
Money Market Portfolio
Shares 10,834,994
Cost $10,834,994
Market Value...................... -- -- -- -- -- --
North American Government Securities
Portfolio
Shares 86,378
Cost $872,727
Market Value...................... -- -- -- -- -- --
Balanced Growth Portfolio
Shares 1,015,741
Cost $14,863,445
Market Value...................... $14,860,285 -- -- -- -- --
Utilities Portfolio
Shares 462,270
Cost $7,714,454
Market Value...................... -- $12,134,575 -- -- -- --
Dividend Growth Portfolio
Shares 3,918,333
Cost $71,722,742
Market Value...................... -- -- $78,053,202 -- -- --
Value-Added Market Portfolio
Shares 1,381,279
Cost $21,243,860
Market Value...................... -- -- -- $28,371,479 -- --
Growth Portfolio
Shares 699,117
Cost $12,317,177
Market Value...................... -- -- -- -- $16,268,448 --
American Opportunities Portfolio
Shares 2,469,114
Cost $49,283,138
Market Value...................... -- -- -- -- -- $80,493,126
Global Equity Portfolio
Shares 1,066,162
Cost $13,446,082
Market Value...................... -- -- -- -- -- --
Due from Hartford Life Insurance
Company.............................. 1,289 34,817 215,046 34,589 35,476 79,433
Receivable for fund shares sold....... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total Assets.......................... 14,861,574 12,169,392 78,268,248 28,406,068 16,303,924 80,572,559
----------- ----------- ----------- ----------- ----------- -----------
LIABILITIES:
Due to Hartford Life Insurance
Company.............................. -- -- -- -- -- --
Payable for fund shares purchased..... 1,720 16,639 33,617 22,518 35,758 77,291
----------- ----------- ----------- ----------- ----------- -----------
Total Liabilities..................... 1,720 16,639 33,617 22,518 35,758 77,291
----------- ----------- ----------- ----------- ----------- -----------
Net Assets (variable annuity contract
liabilities)......................... $14,859,854 $12,152,753 $78,234,631 $28,383,550 $16,268,166 $80,495,268
=========== =========== =========== =========== =========== ===========
<CAPTION>
GLOBAL
EQUITY
SUB-ACCOUNT
-----------
<S> <C>
ASSETS:
Investments in the Morgan Stanley Dean
Witter Select Dimensions Investment
Series:
Money Market Portfolio
Shares 10,834,994
Cost $10,834,994
Market Value...................... --
North American Government Securities
Portfolio
Shares 86,378
Cost $872,727
Market Value...................... --
Balanced Growth Portfolio
Shares 1,015,741
Cost $14,863,445
Market Value...................... --
Utilities Portfolio
Shares 462,270
Cost $7,714,454
Market Value...................... --
Dividend Growth Portfolio
Shares 3,918,333
Cost $71,722,742
Market Value...................... --
Value-Added Market Portfolio
Shares 1,381,279
Cost $21,243,860
Market Value...................... --
Growth Portfolio
Shares 699,117
Cost $12,317,177
Market Value...................... --
American Opportunities Portfolio
Shares 2,469,114
Cost $49,283,138
Market Value...................... --
Global Equity Portfolio
Shares 1,066,162
Cost $13,446,082
Market Value...................... $20,928,768
Due from Hartford Life Insurance
Company.............................. 7,900
Receivable for fund shares sold....... --
-----------
Total Assets.......................... 20,936,668
-----------
LIABILITIES:
Due to Hartford Life Insurance
Company.............................. --
Payable for fund shares purchased..... 7,096
-----------
Total Liabilities..................... 7,096
-----------
Net Assets (variable annuity contract
liabilities)......................... $20,929,572
===========
</TABLE>
------------------------------------ SA-3 -------------------------------------
<PAGE>
SEPARATE ACCOUNT THREE
--------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
DEVELOPING EMERGING DIVERSIFIED MID-CAP
GROWTH MARKETS INCOME EQUITY
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments in the Morgan Stanley Dean
Witter Select Dimensions Investment
Series:
Developing Growth Portfolio
Shares 334,662
Cost $5,730,184
Market Value...................... $13,399,857 -- -- --
Emerging Markets Portfolio
Shares 125,354
Cost $1,330,305
Market Value...................... -- $1,816,378 -- --
Diversified Income Portfolio
Shares 884,227
Cost $8,985,666
Market Value...................... -- -- $7,922,677 --
Mid-Cap Equity Portfolio
Shares 652,739
Cost $9,835,592
Market Value...................... -- -- -- $14,791,067
Investments in Van Kampen Life
Investment Trust:
Strategic Stock Portfolio
Shares 104,284
Cost $1,227,614
Market Value...................... -- -- -- --
Enterprise Portfolio
Shares 81,999
Cost $1,835,396
Market Value...................... -- -- -- --
Investments in the Morgan Stanley Dean
Witter Universal Funds Inc.:
High Yield Portfolio
Shares 95,293
Cost $1,019,591
Market Value...................... -- -- -- --
Mid-Cap Value Portfolio
Shares 52,228
Cost $750,722
Market Value...................... -- -- -- --
Emerging Markets Debt Portfolio
Shares 10,771
Cost $76,489
Market Value...................... -- -- -- --
Emerging Markets Equity Portfolio
Shares 8,105
Cost $88,782
Market Value...................... -- -- -- --
Active International Allocation
Portfolio
Shares 1,199
Cost $12,998
Market Value...................... -- -- -- --
Fixed Income Portfolio
Shares 4,701
Cost $48,709
Market Value...................... -- -- -- --
Due from Hartford Life Insurance
Company.............................. 4,632 -- 19,088 51,285
Receivable for fund shares sold....... -- 70 -- --
----------- ---------- ---------- -----------
Total Assets.......................... 13,404,489 1,816,448 7,941,765 14,842,352
----------- ---------- ---------- -----------
LIABILITIES:
Due to Hartford Life Insurance
Company.............................. -- 552 -- --
Payable for fund shares purchased..... 4,202 -- 18,693 51,095
----------- ---------- ---------- -----------
Total Liabilities..................... 4,202 552 18,693 51,095
----------- ---------- ---------- -----------
Net Assets (variable annuity contract
liabilities)......................... $13,400,287 $1,815,896 $7,923,072 $14,791,257
=========== ========== ========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------ SA-4 -------------------------------------
<PAGE>
<TABLE>
<CAPTION>
EMERGING
MID-CAP EMERGING MARKETS
STRATEGIC STOCK ENTERPRISE HIGH YIELD VALUE MARKETS DEBT EQUITY
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in the Morgan Stanley Dean
Witter Select Dimensions Investment
Series:
Developing Growth Portfolio
Shares 334,662
Cost $5,730,184
Market Value...................... -- -- -- -- -- --
Emerging Markets Portfolio
Shares 125,354
Cost $1,330,305
Market Value...................... -- -- -- -- -- --
Diversified Income Portfolio
Shares 884,227
Cost $8,985,666
Market Value...................... -- -- -- -- -- --
Mid-Cap Equity Portfolio
Shares 652,739
Cost $9,835,592
Market Value...................... -- -- -- -- -- --
Investments in Van Kampen Life
Investment Trust:
Strategic Stock Portfolio
Shares 104,284
Cost $1,227,614
Market Value...................... $1,223,252 -- -- -- -- --
Enterprise Portfolio
Shares 81,999
Cost $1,835,396
Market Value...................... -- $2,141,007 -- -- -- --
Investments in the Morgan Stanley Dean
Witter Universal Funds Inc.:
High Yield Portfolio
Shares 95,293
Cost $1,019,591
Market Value...................... -- -- $975,803 -- -- --
Mid-Cap Value Portfolio
Shares 52,228
Cost $750,722
Market Value...................... -- -- -- $815,807 -- --
Emerging Markets Debt Portfolio
Shares 10,771
Cost $76,489
Market Value...................... -- -- -- -- $74,425 --
Emerging Markets Equity Portfolio
Shares 8,105
Cost $88,782
Market Value...................... -- -- -- -- -- $112,198
Active International Allocation
Portfolio
Shares 1,199
Cost $12,998
Market Value...................... -- -- -- -- -- --
Fixed Income Portfolio
Shares 4,701
Cost $48,709
Market Value...................... -- -- -- -- -- --
Due from Hartford Life Insurance
Company.............................. 2,302 16,865 -- 2,509 -- 4,989
Receivable for fund shares sold....... -- -- -- -- -- --
---------- ---------- -------- -------- ------- --------
Total Assets.......................... 1,225,554 2,157,872 975,803 818,316 74,425 117,187
---------- ---------- -------- -------- ------- --------
LIABILITIES:
Due to Hartford Life Insurance
Company.............................. -- -- 38 -- 12 --
Payable for fund shares purchased..... 2,300 16,864 -- 2,512 -- 4,994
---------- ---------- -------- -------- ------- --------
Total Liabilities..................... 2,300 16,864 38 2,512 12 4,994
---------- ---------- -------- -------- ------- --------
Net Assets (variable annuity contract
liabilities)......................... $1,223,254 $2,141,008 $975,765 $815,804 $74,413 $112,193
========== ========== ======== ======== ======= ========
<CAPTION>
ACTIVE
INTERNATIONAL FIXED
ALLOCATION INCOME
SUB-ACCOUNT SUB-ACCOUNT
------------- -----------
<S> <C> <C>
ASSETS:
Investments in the Morgan Stanley Dean
Witter Select Dimensions Investment
Series:
Developing Growth Portfolio
Shares 334,662
Cost $5,730,184
Market Value...................... -- --
Emerging Markets Portfolio
Shares 125,354
Cost $1,330,305
Market Value...................... -- --
Diversified Income Portfolio
Shares 884,227
Cost $8,985,666
Market Value...................... -- --
Mid-Cap Equity Portfolio
Shares 652,739
Cost $9,835,592
Market Value...................... -- --
Investments in Van Kampen Life
Investment Trust:
Strategic Stock Portfolio
Shares 104,284
Cost $1,227,614
Market Value...................... -- --
Enterprise Portfolio
Shares 81,999
Cost $1,835,396
Market Value...................... -- --
Investments in the Morgan Stanley Dean
Witter Universal Funds Inc.:
High Yield Portfolio
Shares 95,293
Cost $1,019,591
Market Value...................... -- --
Mid-Cap Value Portfolio
Shares 52,228
Cost $750,722
Market Value...................... -- --
Emerging Markets Debt Portfolio
Shares 10,771
Cost $76,489
Market Value...................... -- --
Emerging Markets Equity Portfolio
Shares 8,105
Cost $88,782
Market Value...................... -- --
Active International Allocation
Portfolio
Shares 1,199
Cost $12,998
Market Value...................... $14,062 --
Fixed Income Portfolio
Shares 4,701
Cost $48,709
Market Value...................... -- $47,245
Due from Hartford Life Insurance
Company.............................. -- 19,003
Receivable for fund shares sold....... -- --
------- -------
Total Assets.......................... 14,062 66,248
------- -------
LIABILITIES:
Due to Hartford Life Insurance
Company.............................. 2 --
Payable for fund shares purchased..... -- 19,003
------- -------
Total Liabilities..................... 2 19,003
------- -------
Net Assets (variable annuity contract
liabilities)......................... $14,060 $47,245
======= =======
</TABLE>
------------------------------------ SA-5 -------------------------------------
<PAGE>
SEPARATE ACCOUNT THREE
--------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ ---------- ------------
<S> <C> <C> <C>
DEFERRED ANNUITY CONTRACTS IN THE
ACCUMULATION PERIOD:
Money Market Portfolio 1.25%..... 898,360 $12.117281 $ 10,885,676
Money Market Portfolio 1.4%...... 844 12.105339 10,216
Money Market Portfolio 1.5%...... 12,768 10.439293 133,288
North American Government
Securities Portfolio 1.25%...... 71,360 11.870066 847,053
North American Government
Securities Portfolio 1.4%....... 850 11.858359 10,081
Balanced Growth Portfolio
1.25%........................... 813,545 18.230000 14,830,927
Balanced Growth Portfolio 1.4%... 512 18.211833 9,333
Balanced Growth Portfolio 1.5%... 1,781 10.999656 19,594
Utilities Portfolio 1.25%........ 420,088 28.898536 12,139,931
Utilities Portfolio 1.4%......... 444 28.869918 12,822
Dividend Growth Portfolio
1.25%........................... 3,173,799 24.630777 78,173,127
Dividend Growth Portfolio 1.5%... 5,721 10.750975 61,504
Value-Added Market Portfolio
1.25%........................... 1,282,502 21.944514 28,143,875
Value-Added Market Portfolio
1.5%............................ 442 11.871109 5,249
Growth Portfolio 1.25%........... 638,375 25.416166 16,225,039
Growth Portfolio 1.4%............ 492 25.390936 12,486
Growth Portfolio 1.5%............ 2,068 14.820183 30,641
American Opportunities Portfolio
1.25%........................... 2,034,217 39.531891 80,416,445
American Opportunities Portfolio
1.5%............................ 4,609 17.103552 78,823
Global Equity Portfolio 1.25%.... 1,056,399 19.732589 20,845,479
Global Equity Portfolio 1.4%..... 618 19.713070 12,185
Global Equity Portfolio 1.5%..... 5,203 13.820388 71,908
Developing Growth Portfolio
1.25%........................... 345,453 38.573629 13,325,390
Developing Growth Portfolio
1.4%............................ 454 38.535362 17,499
Developing Growth Portfolio
1.5%............................ 2,790 20.576241 57,398
Emerging Markets Portfolio
1.25%........................... 124,693 14.444234 1,801,096
Emerging Markets Portfolio
1.4%............................ 1,026 14.429938 14,800
Diversified Income Portfolio
1.25%........................... 645,224 12.174809 7,855,479
Diversified Income Portfolio
1.4%............................ 799 12.162658 9,721
Diversified Income Portfolio
1.5%............................ 6,006 9.6353060 57,872
Mid-Cap Equity Portfolio 1.25%... 654,210 22.567847 14,764,106
Mid-Cap Equity Portfolio 1.4%.... 747 22.545394 16,834
Mid-Cap Equity Portfolio 1.5%.... 520 19.825174 10,317
Strategic Stock Portfolio
1.25%........................... 120,348 10.093336 1,214,717
Strategic Stock Portfolio 1.4%... 847 10.083303 8,537
Enterprise Portfolio 1.25%....... 161,076 13.219240 2,129,303
Enterprise Portfolio 1.4%........ 886 13.206158 11,705
High Yield Portfolio 1.25%....... 89,967 10.554381 949,541
High Yield Portfolio 1.4%........ 951 10.543954 10,029
High Yield Portfolio 1.5%........ 1,538 10.531861 16,195
Mid-Cap Value Portfolio 1.25%.... 67,052 11.977275 803,096
Mid-Cap Value Portfolio 1.4%..... 935 11.965487 11,191
Mid-Cap Value Portfolio 1.5%..... 115 13.235353 1,517
Emerging Markets Debt Portfolio
1.25%........................... 7,335 8.615091 63,188
Emerging Markets Debt Portfolio
1.4%............................ 1,304 8.606516 11,225
Emerging Markets Equity Portfolio
1.25%........................... 7,681 14.353528 110,254
Emerging Markets Equity Portfolio
1.4%............................ 100 14.346777 1,435
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------ SA-6 -------------------------------------
<PAGE>
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ ---------- ------------
<S> <C> <C> <C>
Emerging Markets Equity Portfolio
1.5%............................ 35 $14.342270 $ 504
Active International Allocation
Portfolio 1.25%................. 1,100 11.718265 12,889
Active International Allocation
Portfolio 1.4%.................. 100 11.713372 1,171
Fixed Income Portfolio 1.25%..... 4,594 10.065310 46,239
Fixed Income Portfolio 1.4%...... 100 10.060554 1,006
------------
SUB-TOTAL........................ 306,309,936
------------
ANNUITY CONTRACTS IN THE ANNUITY
PERIOD:
Value Added Market Portfolio..... 10,683 21.944514 234,426
------------
SUB-TOTAL........................ 234,426
------------
GRAND TOTAL:....................... $306,544,362
============
</TABLE>
------------------------------------ SA-7 -------------------------------------
<PAGE>
SEPARATE ACCOUNT THREE
--------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
NORTH AMERICAN
GOVERNMENT
MONEY MARKET SECURITIES
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 453,480 $ 37,573
EXPENSES:
Mortality and expense
undertakings.......... (121,885) (10,397)
--------- --------
Net investment income
(loss).............. 331,595 27,176
--------- --------
CAPITAL GAINS INCOME..... -- --
--------- --------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... -- 10
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- (9,535)
--------- --------
Net gain (loss) on
investments......... -- (9,525)
--------- --------
Net increase
(decrease) in net
assets resulting
from operations..... $ 331,595 $ 17,651
========= ========
</TABLE>
* Formerly American Value Sub-Account; change effective May 1, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------ SA-8 -------------------------------------
<PAGE>
<TABLE>
<CAPTION>
BALANCED DIVIDEND VALUE-ADDED AMERICAN GLOBAL
GROWTH UTILITIES GROWTH MARKET GROWTH OPPORTUNITIES EQUITY
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.............. $ 422,153 $ 130,397 $ 1,535,011 $ 303,667 $ 409 $ 167,998 $ 61,943
EXPENSES:
Mortality and expense
undertakings.......... (173,579) (102,674) (1,046,636) (345,779) (115,581) (651,253) (210,399)
----------- ---------- ----------- ---------- ---------- ----------- ----------
Net investment income
(loss).............. 248,574 27,723 488,375 (42,112) (115,172) (483,255) (148,456)
----------- ---------- ----------- ---------- ---------- ----------- ----------
CAPITAL GAINS INCOME..... 1,553,466 56,259 7,395,476 977,166 672,780 4,737,700 --
----------- ---------- ----------- ---------- ---------- ----------- ----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (3,262) 5,342 (480,235) 147,338 14,773 50,287 56,665
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (1,541,041) 3,157,171 (8,423,738) 1,690,184 2,912,991 21,722,063 5,133,613
----------- ---------- ----------- ---------- ---------- ----------- ----------
Net gain (loss) on
investments......... (1,544,303) 3,162,513 (8,903,973) 1,837,522 2,927,764 21,772,350 5,190,278
----------- ---------- ----------- ---------- ---------- ----------- ----------
Net increase
(decrease) in net
assets resulting
from operations..... $ 257,737 $3,246,495 $(1,020,122) $2,772,576 $3,485,372 $26,026,795 $5,041,822
=========== ========== =========== ========== ========== =========== ==========
</TABLE>
* Formerly American Value Sub-Account; change effective May 1, 1999.
------------------------------------ SA-9 -------------------------------------
<PAGE>
SEPARATE ACCOUNT THREE
--------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
DEVELOPING EMERGING DIVERSIFIED MID-CAP
GROWTH MARKETS INCOME EQUITY
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT***
----------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 4,411 $ 2,473 $ 845,355 $ 18,309
EXPENSES:
Mortality and expense
undertakings.......... (100,942) (16,864) (123,142) (57,238)
---------- -------- ----------- ----------
Net investment (loss)
income.............. (96,531) (14,391) 722,213 (38,929)
---------- -------- ----------- ----------
CAPITAL GAINS INCOME..... -- -- -- --
---------- -------- ----------- ----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 62,233 (21,948) (307,806) 38,623
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 6,141,966 877,750 (731,936) 4,731,989
---------- -------- ----------- ----------
Net gain (loss) on
investments......... 6,204,199 855,802 (1,039,742) 4,770,612
---------- -------- ----------- ----------
Net increase
(decrease) in net
assets resulting
from operations..... $6,107,668 $841,411 $ (317,529) $4,731,683
========== ======== =========== ==========
</TABLE>
* From inception, September 7, 1999, to December 31, 1999.
** From inception, September 20, 1999, to December 31, 1999.
*** Formerly Mid-Cap Growth Sub-Account; change effective September 8, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------ SA-10 -------------------------------------
<PAGE>
<TABLE>
<CAPTION>
ACTIVE
MID-CAP EMERGING EMERGING MARKETS INTERNATIONAL
STRATEGIC STOCK ENTERPRISE HIGH YIELD VALUE MARKETS DEBT EQUITY ALLOCATION
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.............. $ 7,539 $ 1,033 $ 72,135 $ 1,154 $ 7,432 $-- $ 32
EXPENSES:
Mortality and expense
undertakings.......... (11,779) (10,732) (8,761) (7,134) (494) (197) (20)
-------- -------- -------- -------- ------- ------- ------
Net investment (loss)
income.............. (4,240) (9,699) 63,374 (5,980) 6,938 (197) 12
-------- -------- -------- -------- ------- ------- ------
CAPITAL GAINS INCOME..... 1,974 24,329 -- 90,470 -- -- --
-------- -------- -------- -------- ------- ------- ------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 4,505 1,734 514 1,429 710 1 --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (42,314) 296,782 (28,866) 34,523 2,962 23,416 1,064
-------- -------- -------- -------- ------- ------- ------
Net gain (loss) on
investments......... (37,809) 298,516 (28,352) 35,952 3,672 23,417 1,064
-------- -------- -------- -------- ------- ------- ------
Net increase
(decrease) in net
assets resulting
from operations..... $(40,075) $313,146 $ 35,022 $120,442 $10,610 $23,220 $1,076
======== ======== ======== ======== ======= ======= ======
<CAPTION>
FIXED INCOME
SUB-ACCOUNT*
------------
<S> <C>
INVESTMENT INCOME:
Dividends.............. $ 1,263
EXPENSES:
Mortality and expense
undertakings.......... (39)
-------
Net investment (loss)
income.............. 1,224
-------
CAPITAL GAINS INCOME..... --
-------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (1,464)
-------
Net gain (loss) on
investments......... (1,464)
-------
Net increase
(decrease) in net
assets resulting
from operations..... $ (240)
=======
</TABLE>
* From inception, September 7, 1999, to December 31, 1999.
** From inception, September 20, 1999, to December 31, 1999.
*** Formerly Mid-Cap Growth Sub-Account; change effective September 8, 1999.
------------------------------------ SA-11 -------------------------------------
<PAGE>
SEPARATE ACCOUNT THREE
--------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
NORTH AMERICAN
MONEY GOVERNMENT
MARKET SECURITIES
SUB-ACCOUNT SUB-ACCOUNT
----------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 331,595 $ 27,176
Capital gains income... -- --
Net realized gain
(loss) on security
transactions.......... -- 10
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- (9,535)
----------- --------
Net increase (decrease)
in net assets
resulting from
operations............ 331,595 17,651
----------- --------
UNIT TRANSACTIONS:
Purchases.............. 961,634 118,516
Net transfers.......... 2,133,467 (88,334)
Surrenders for benefit
payments and fees..... (2,078,551) (33,876)
Net annuity
transactions.......... -- --
----------- --------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,016,550 (3,694)
----------- --------
Total increase
(decrease) in net
assets................ 1,348,145 13,957
NET ASSETS:
Beginning of period.... 9,681,035 843,177
----------- --------
End of period.......... $11,029,180 $857,134
=========== ========
</TABLE>
* Formerly American Value Sub-Account; change effective May 1, 1999.
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
NORTH AMERICAN
MONEY GOVERNMENT
MARKET SECURITIES
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>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------ SA-12 -------------------------------------
<PAGE>
<TABLE>
<CAPTION>
BALANCED DIVIDEND VALUE-ADDED AMERICAN GLOBAL
GROWTH UTILITIES GROWTH MARKET GROWTH OPPORTUNITIES EQUITY
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)................ $ 248,574 $ 27,723 $ 488,375 $ (42,112) $ (115,172) $ (483,255) $ (148,456)
Capital gains income... 1,553,466 56,259 7,395,476 977,166 672,780 4,737,700 --
Net realized gain
(loss) on security
transactions.......... (3,262) 5,342 (480,235) 147,338 14,773 50,287 56,665
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (1,541,041) 3,157,171 (8,423,738) 1,690,184 2,912,991 21,722,063 5,133,613
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 257,737 3,246,495 (1,020,122) 2,772,576 3,485,372 26,026,795 5,041,822
----------- ----------- ----------- ----------- ----------- ----------- -----------
UNIT TRANSACTIONS:
Purchases.............. 1,091,899 952,747 6,247,531 1,214,225 1,471,933 6,686,946 906,595
Net transfers.......... 1,937,530 2,307,769 (843,289) (1,516,592) 6,172,061 12,687,722 125,377
Surrenders for benefit
payments and fees..... (1,044,321) (497,161) (4,356,589) (1,148,148) (432,263) (2,669,417) (929,440)
Net annuity
transactions.......... -- -- -- (85,175) -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,985,108 2,763,355 1,047,653 (1,535,690) 7,211,731 16,705,251 102,532
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total increase
(decrease) in net
assets................ 2,242,845 6,009,850 27,531 1,236,886 10,697,103 42,732,046 5,144,354
NET ASSETS:
Beginning of period.... 12,617,009 6,142,903 78,207,100 27,146,664 5,571,063 37,763,222 15,785,218
----------- ----------- ----------- ----------- ----------- ----------- -----------
End of period.......... $14,859,854 $12,152,753 $78,234,631 $28,383,550 $16,268,166 $80,495,268 $20,929,572
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
* Formerly American Value Sub-Account; change effective May 1, 1999.
<TABLE>
<CAPTION>
BALANCED DIVIDEND VALUE-ADDED AMERICAN GLOBAL
GROWTH UTILITIES GROWTH MARKET GROWTH OPPORTUNITIES EQUITY
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>
------------------------------------ SA-13 -------------------------------------
<PAGE>
SEPARATE ACCOUNT THREE
--------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
DEVELOPING EMERGING DIVERSIFIED MID-CAP
GROWTH MARKETS INCOME EQUITY
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT****
----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ (96,531) $ (14,391) $ 722,213 $ (38,929)
Capital gains income.................. -- -- -- --
Net realized gain (loss) on security
transactions......................... 62,233 (21,948) (307,806) 38,623
Net unrealized appreciation
(depreciation) of investments during
the period........................... 6,141,966 877,750 (731,936) 4,731,989
----------- ---------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations............ 6,107,668 841,411 (317,529) 4,731,683
----------- ---------- ----------- -----------
UNIT TRANSACTIONS:
Purchases............................. 429,979 60,700 474,843 631,223
Net transfers......................... 297,879 (124,138) (4,195,328) 6,606,745
Surrenders for benefit payments and
fees................................. (363,226) (127,471) (747,492) (307,651)
Net annuity transactions.............. -- -- -- --
----------- ---------- ----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions..... 364,632 (190,909) (4,467,977) 6,930,317
----------- ---------- ----------- -----------
Total increase (decrease) in net
assets............................... 6,472,300 650,502 (4,785,506) 11,662,000
NET ASSETS:
Beginning of period................... 6,927,987 1,165,394 12,708,578 3,129,257
----------- ---------- ----------- -----------
End of period......................... $13,400,287 $1,815,896 $ 7,923,072 $14,791,257
=========== ========== =========== ===========
</TABLE>
** From inception, September 7, 1999, to December 31, 1999.
*** From inception, September 20, 1999, to December 31, 1999.
**** Formerly Mid-Cap Growth Sub-Account; change effective September 8, 1999.
HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
DEVELOPING EMERGING DIVERSIFIED MID-CAP
GROWTH MARKETS INCOME EQUITY
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT****
------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ (78,216) $ (2,506) $ 598,968 $ (19,069)
Capital gains income.................. 9,991 3,882 13,039 22,379
Net realized gain (loss) on security
transactions......................... (50,218) (98,895) (542) (12,301)
Net unrealized appreciation
(depreciation) of investments during
the period........................... 565,818 (425,945) (374,577) 93,824
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations............ 447,375 (523,464) 236,888 84,833
----------- ----------- ----------- -----------
UNIT TRANSACTIONS:
Purchases............................. 465,093 108,809 1,329,914 627,674
Net transfers......................... (500,337) (289,983) 5,025,623 733,380
Surrenders for benefit payments and
fees................................. (302,821) (93,209) (573,911) (92,782)
Net annuity transactions.............. -- -- -- --
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions..... (338,065) (274,383) 5,781,626 1,268,272
----------- ----------- ----------- -----------
Total increase (decrease) in net
assets............................... 109,310 (797,847) 6,018,514 1,353,105
NET ASSETS:
Beginning of period................... 6,818,677 1,963,241 6,690,064 1,776,152
----------- ----------- ----------- -----------
End of period......................... $ 6,927,987 $ 1,165,394 $12,708,578 $ 3,129,257
=========== =========== =========== ===========
</TABLE>
* From inception, April 1, 1998, to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------ SA-14 -------------------------------------
<PAGE>
<TABLE>
<CAPTION>
MID-CAP EMERGING
STRATEGIC STOCK ENTERPRISE HIGH YIELD VALUE MARKETS DEBT
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ (4,240) $ (9,699) $ 63,374 $ (5,980) $ 6,938
Capital gains income.................. 1,974 24,329 -- 90,470 --
Net realized gain (loss) on security
transactions......................... 4,505 1,734 514 1,429 710
Net unrealized appreciation
(depreciation) of investments during
the period........................... (42,314) 296,782 (28,866) 34,523 2,962
---------- ----------- ----------- ----------- -------
Net increase (decrease) in net assets
resulting from operations............ (40,075) 313,146 35,022 120,442 10,610
---------- ----------- ----------- ----------- -------
UNIT TRANSACTIONS:
Purchases............................. 254,441 757,512 134,347 127,131 30,692
Net transfers......................... 438,182 1,024,173 414,668 201,334 23,041
Surrenders for benefit payments and
fees................................. (111,302) (30,878) (31,559) (41,098) (8,683)
Net annuity transactions.............. -- -- -- -- --
---------- ----------- ----------- ----------- -------
Net increase (decrease) in net assets
resulting from unit transactions..... 581,321 1,750,807 517,456 287,367 45,050
---------- ----------- ----------- ----------- -------
Total increase (decrease) in net
assets............................... 541,246 2,063,953 552,478 407,809 55,660
NET ASSETS:
Beginning of period................... 682,008 77,055 423,287 407,995 18,753
---------- ----------- ----------- ----------- -------
End of period......................... $1,223,254 $ 2,141,008 $ 975,765 $ 815,804 $74,413
========== =========== =========== =========== =======
<CAPTION>
EMERGING ACTIVE
MARKETS INTERNATIONAL FIXED
EQUITY ALLOCATION INCOME
SUB-ACCOUNT** SUB-ACCOUNT*** SUB-ACCOUNT**
------------- -------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ (197) $ 12 $ 1,224
Capital gains income.................. -- -- --
Net realized gain (loss) on security
transactions......................... 1 -- --
Net unrealized appreciation
(depreciation) of investments during
the period........................... 23,416 1,064 (1,464)
---------- ------- ---------
Net increase (decrease) in net assets
resulting from operations............ 23,220 1,076 (240)
---------- ------- ---------
UNIT TRANSACTIONS:
Purchases............................. 7,000 12,988 2,090
Net transfers......................... 83,321 -- 45,400
Surrenders for benefit payments and
fees................................. (1,348) (4) (5)
Net annuity transactions.............. -- -- --
---------- ------- ---------
Net increase (decrease) in net assets
resulting from unit transactions..... 88,973 12,984 47,485
---------- ------- ---------
Total increase (decrease) in net
assets............................... 112,193 14,060 47,245
NET ASSETS:
Beginning of period................... -- -- --
---------- ------- ---------
End of period......................... $ 112,193 $14,060 $ 47,245
========== ======= =========
</TABLE>
<TABLE>
<CAPTION>
MID-CAP EMERGING
STRATEGIC STOCK ENTERPRISE HIGH YIELD VALUE MARKETS DEBT
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT*
--------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ (2,753) $ (237) $ 15,995 $ (635) $ 1,977
Capital gains income.................. -- -- 3,182 8,170 --
Net realized gain (loss) on security
transactions......................... (321) 820 (924) (287) (11,790)
Net unrealized appreciation
(depreciation) of investments during
the period........................... 37,952 8,829 (14,922) 30,563 (5,026)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations............ 34,878 9,412 3,331 37,811 (14,839)
----------- ----------- ----------- ----------- -----------
UNIT TRANSACTIONS:
Purchases............................. 280,816 32,385 303,764 152,667 54,001
Net transfers......................... 367,384 36,080 117,154 219,693 (20,302)
Surrenders for benefit payments and
fees................................. (1,070) (822) (962) (2,176) (107)
Net annuity transactions.............. -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions..... 647,130 67,643 419,956 370,184 33,592
----------- ----------- ----------- ----------- -----------
Total increase (decrease) in net
assets............................... 682,008 77,055 423,287 407,995 18,753
NET ASSETS:
Beginning of period................... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
End of period......................... $ 682,008 $ 77,055 $ 423,287 $ 407,995 $ 18,753
=========== =========== =========== =========== ===========
</TABLE>
------------------------------------ SA-15 -------------------------------------
<PAGE>
SEPARATE ACCOUNT THREE
--------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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 contractowners of the Company in various mutual
funds (the Funds) as directed by the contractowners.
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). Realized gains and
losses on the sales of securities are computed on the basis of identified
cost of the fund shares sold. Dividend and capital gains income is
accrued as of the ex-dividend date. Capital gains income represents
dividends from the Funds which are characterized as capital gains under
tax regulations.
b) SECURITY VALUATION--The investments in shares of the Morgan Stanley Dean
Witter Select Dimensions Investment Series, the Van Kampen Life
Investment Trust, and the Morgan Stanley Dean Witter Universal Funds,
Inc., are valued at the closing net asset value per share as determined
by the appropriate Fund as of December 31, 1999.
c) UNIT TRANSACTIONS--Unit transactions are executed based on the unit
values calculated at the close of the business day.
d) 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.
e) USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported
amounts of income and expenses during the period. Operating results in
the future could vary from the amounts derived from management's
estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
a) MORTALITY AND EXPENSE UNDERTAKINGS--The Company, as issuer of variable
annuity contracts, provides the mortality and expense undertakings and,
with respect to the Account, receives a maximum annual fee of up to 1.25%
of the Account's average daily net assets. The Company also provides
administrative services and receives an annual fee of 0.15% of the
Account's average daily net assets.
b) DEDUCTION OF ANNUAL MAINTENANCE FEE--Annual maintenance fees are deducted
through termination of units of interest from applicable contract owners'
accounts, in accordance with the terms of the contracts. These charges
are reflected in surrenders for benefit payments and fees on the
accompanying statements of changes in net assets.
------------------------------------ SA-16 -------------------------------------
<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, 1999 and 1998, 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, 1999.
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 auditing standards generally accepted
in the United States. 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, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States.
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.
Hartford, Connecticut
January 31, 2000 ARTHUR ANDERSEN LLP
F-1
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(in millions)
REVENUES
Premiums and other considerations $2,045 $2,218 $1,637
Net investment income 1,359 1,759 1,368
Net realized capital gains (losses) (4) (2) 4
----------------------------------------------------------------------------------------------
TOTAL REVENUES 3,400 3,975 3,009
----------------------------------------------------------------------------------------------
BENEFITS, CLAIMS AND EXPENSES
Benefits, claims and claim adjustment expenses 1,574 1,911 1,379
Amortization of deferred policy acquisition costs 539 431 335
Dividends to policyholders 104 329 240
Other expenses 631 766 586
----------------------------------------------------------------------------------------------
TOTAL BENEFITS, CLAIMS AND EXPENSES 2,848 3,437 2,540
----------------------------------------------------------------------------------------------
Income before income tax expense 552 538 469
Income tax expense 191 188 167
----------------------------------------------------------------------------------------------
NET INCOME $ 361 $ 350 $ 302
----------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-2
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
<S> <C> <C>
------------------------------------------------------------------------------------------
1999 1998
------------------------------------------------------------------------------------------
(in millions, except
for share data)
ASSETS
Investments
Fixed maturities, available for sale, at fair value
(amortized cost of $13,923 and $14,505) $ 13,499 $ 14,818
Equity securities, at fair value 56 31
Policy loans, at outstanding balance 4,187 6,684
Other investments 342 264
------------------------------------------------------------------------------------------
TOTAL INVESTMENTS 18,084 21,797
------------------------------------------------------------------------------------------
Cash 55 17
Premiums receivable and agents' balances 29 17
Reinsurance recoverables 1,274 1,257
Deferred policy acquisition costs 4,013 3,754
Deferred income tax 459 464
Other assets 654 695
Separate account assets 110,397 90,262
------------------------------------------------------------------------------------------
TOTAL ASSETS $134,965 $118,263
------------------------------------------------------------------------------------------
LIABILITIES
Future policy benefits $ 4,332 $ 3,595
Other policyholder funds 16,004 19,615
Other liabilities 1,613 2,094
Separate account liabilities 110,397 90,262
------------------------------------------------------------------------------------------
TOTAL LIABILITIES 132,346 115,566
------------------------------------------------------------------------------------------
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 (loss)
Net unrealized capital gains (losses) on securities, net
of tax (255) 184
------------------------------------------------------------------------------------------
TOTAL ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (255) 184
------------------------------------------------------------------------------------------
Retained earnings 1,823 1,462
------------------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY 2,619 2,697
------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $134,965 $118,263
------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Accumulated Other
Comprehensive
Income (Loss)
-----------------
<S> <C> <C> <C> <C> <C>
Net Unrealized
Capital Gains
(Losses) on Total
Common Capital Securities, Retained Stockholder's
Stock Surplus Net of Tax Earnings Equity
-------------------------------------------------------------------------------------------------------------
(in millions)
1999
Balance, December 31, 1998 $6 $1,045 $ 184 $1,462 $2,697
Comprehensive income
Net income -- -- -- 361 361
Other comprehensive income (loss), net of
tax (1):
Changes in net unrealized capital gains
(losses) on securities (2) -- -- (439) -- (439)
Total other comprehensive income (loss) (439)
Total comprehensive income (loss) (78)
-------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999 $6 $1,045 $(255) $1,823 $2,619
-------------------------------------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Net unrealized capital gain (loss) on securities is reflected net of tax of
$(236), $3 and $80, for the years ended December 31, 1999, 1998 and 1997,
respectively.
(2) Net of reclassification adjustment for after-tax gains (losses) realized in
net income of $(2), $(1) and $2 for the years ended December 31, 1999, 1998
and 1997, respectively.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(in millions)
OPERATING ACTIVITIES
Net income $ 361 $ 350 $ 302
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization (18) (23) 8
Net realized capital losses (gains) 4 2 (4)
Loss due to commutation of reinsurance 16 -- --
(Increase) decrease in premiums receivable and agents'
balances (18) 1 119
(Decrease) increase in other liabilities (263) (79) 223
Change in receivables, payables, and accruals 125 83 107
(Decrease) increase in accrued taxes (163) 60 126
Decrease (increase) in deferred income tax 241 (118) 40
Increase in deferred policy acquisition costs (358) (439) (555)
Increase in future policy benefits 797 536 585
Increase in reinsurance recoverables (318) (101) (31)
Other, net (81) 99 52
--------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 325 371 972
--------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchases of investments (5,753) (6,061) (6,869)
Sales of investments 6,383 4,901 4,256
Maturity of investments 1,818 1,761 2,329
Purchases of affiliates and other (25) -- --
--------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES 2,423 601 (284)
--------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net disbursements for investment and universal life-type
contracts charged against policyholder accounts (2,710) (1,009) (677)
--------------------------------------------------------------------------------------------
Net cash used for financing activities (2,710) (1,009) (677)
--------------------------------------------------------------------------------------------
Net increase (decrease) in cash 38 (37) 11
Cash -- beginning of year 17 54 43
--------------------------------------------------------------------------------------------
Cash -- end of year $ 55 $ 17 $ 54
--------------------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information:
Net Cash Paid During the Year for:
Income taxes $ 111 $ 263 $ 9
Noncash Investing Activities:
In 1999, the Company's parent, Hartford Life and Accident Insurance Company, recaptured an
in force block of individual life insurance previously ceded to the Company. This
commutation resulted in a reduction in the Company's assets of $666, consisting of $556
of invested assets, $99 of deferred policy acquisition costs and $11 of other assets.
Liabilities decreased $650, consisting of $543 of other policyholder funds, $60 of future
policy benefits and $47 of other liabilities. As a result, the Company recognized an
after-tax loss relating to this transaction of $16.
In 1998, due to the recapture of an in force block of business previously ceded to MBL
Life Assurance Co. of New Jersey, reinsurance recoverables of $4,753 were exchanged for
the fair value of assets comprised of $4,310 in policy loans and $443 in other net
assets.
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
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 (HLAI) 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). In November 1998,
Hartford Life Insurance Company transferred in the form of a dividend, Hartford
Financial Services, LLC and its subsidiaries to HLA.
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 its
insurance subsidiaries 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.
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, mutual funds and
retirement plan services for savings and retirement needs; (b) life insurance
for income protection and estate planning; (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 are prepared on the basis of accounting
principles generally accepted in the United States, which differ materially from
the statutory accounting practices prescribed by various insurance regulatory
authorities. All material intercompany transactions and balances between
Hartford Life Insurance Company and its subsidiaries have been eliminated.
The preparation of financial statements, in conformity with accounting
principles generally accepted in the United States, 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) ADOPTION OF NEW ACCOUNTING STANDARDS
Effective January 1, 1999, Hartford Life Insurance Company adopted Statement of
Position (SOP) No. 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use". This 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. Adoption of this SOP did not have a
material impact on the Company's financial condition or results of operations.
Effective January 1, 1999, Hartford Life Insurance Company adopted SOP
No. 97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments". This SOP addresses accounting by insurance and other enterprises
for assessments related to insurance activities, including recognition,
measurement and disclosure of guaranty fund or other assessments. Adoption of
this SOP did not have a material impact 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) FUTURE ADOPTION OF NEW ACCOUNTING STANDARDS
In June 1999, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133". This statement amends SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", to defer its effective date for
one year, to fiscal years beginning after June 15, 2000. Initial
F-6
<PAGE>
application for Hartford Life Insurance Company will begin January 1, 2001. SFAS
No. 133 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.
The Company has reviewed its derivative holdings and is in the process of
quantifying the impact of SFAS No. 133. The Company is also assessing what
actions, if any, need to be taken to minimize potential volatility, while at the
same time maintaining the economic protection needed to support the goals of its
business.
In October 1998, the American Institute of Certified Public Accountants (AICPA)
issued SOP No. 98-7, "Accounting for Insurance and Reinsurance Contracts That Do
Not Transfer Insurance Risk". This SOP provides guidance on the method of
accounting for insurance and reinsurance contracts that do not transfer
insurance risk, defined in the SOP as the deposit method. This SOP is effective
for financial statements for fiscal years beginning after June 15, 1999 and is
not expected to have a material impact on the Company's financial condition or
results of operations.
(D) 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 and
disability policies are recognized as revenues ratably over the policy period.
(E) 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 of the life insurance subsidiaries of the Company. The participating
insurance in force accounted for 34%, 35% and 33% in 1999, 1998 and 1997,
respectively, of total insurance in force.
(F) INVESTMENTS
Hartford Life Insurance Company's investments in both fixed maturities, which
include bonds, redeemable preferred stock and commercial paper, and equity
securities, which include common and non-redeemable preferred stocks, are
classified as "available for sale" in accordance with SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". Accordingly, these
securities are carried at fair value with the after-tax difference from cost
reflected in stockholder's equity as a component of accumulated other
comprehensive income. Policy loans are carried at outstanding balance which
approximates fair value. Other invested assets consist primarily of partnership
investments, which are accounted for by the equity method, and mortgage loans,
whereby the carrying value approximates fair value. Realized capital gains and
losses on security transactions associated with the Company's immediate
participation guaranteed contracts are excluded from revenues and deferred over
the expected maturity of the securities, since under the terms of the contracts
the realized gains and losses will be credited to policyholders in future years
as they are entitled to receive them. 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.
(G) DERIVATIVE INSTRUMENTS
HEDGE ACCOUNTING -- 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. Hartford Life Insurance 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 No. 86-2, "Accounting for
Options" and various Emerging Issues Task Force 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 (c) Future Adoption of New Accounting Standards.
Derivative instruments must be designated at inception as a hedge and measured
for effectiveness both at inception
F-7
<PAGE>
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
or quarterly 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
they are 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.
FUTURES -- 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.
FORWARD COMMITMENTS -- 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 are recognized immediately in the Consolidated Statements of Income as
a component of net investment income.
OPTIONS -- 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 -- 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 earnings. Interest rate swaps purchased in
anticipation of an asset purchase (anticipatory transaction) are recognized
consistent with the underlying asset components such that the settlement
component is recognized in the Consolidated Statements of Income while the
change in market value is recognized as an unrealized capital gain or loss.
INTEREST RATE CAPS AND FLOORS -- Premiums paid on purchased cap or floor
agreements and the premium received on issued cap or floor agreements (used for
risk management) are adjusted into the basis of the applicable asset and
amortized over the asset life. Gains or losses on termination of such positions
are adjusted into the basis of the asset or liability and amortized over the
remaining asset life. Net payments are recognized as an adjustment to income or
basis adjusted and amortized depending on the specific hedge strategy.
FORWARD EXCHANGE AND CURRENCY SWAPS CONTRACTS -- 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 adjustment
component of stockholder's equity.
Cash flows from futures, options and swaps, accounted for as hedges, are
included with the cash flows of the item being hedged.
(H) SEPARATE ACCOUNTS
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 substantially all the investment risk and rewards, and guaranteed
separate accounts, wherein the Company contractually guarantees either a minimum
return or account value to the policyholder.
(I) DEFERRED POLICY ACQUISITION COSTS
Policy acquisition costs, which include commissions and certain other 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.
F-8
<PAGE>
Acquisition costs and their related deferral are included in the Company's other
expenses as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
------------------------------
Commissions $ 887 $1,069 $ 976
Deferred acquisition costs (898) (891) (862)
Other 642 588 472
------------------------------
TOTAL OTHER EXPENSES $ 631 $ 766 $ 586
------------------------------
</TABLE>
(J) FUTURE POLICY BENEFITS
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.
(K) OTHER POLICYHOLDER FUNDS
Other policyholder funds include reserves for investment contracts without life
contingencies, corporate owned life insurance and universal life insurance
contracts. These reserves are based on account values, which represent the
balance that accrues to the benefit of policyholders.
3. INVESTMENTS AND DERIVATIVE INSTRUMENTS
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
For the years ended
December 31,
--------------------------------
1999 1998 1997
<S> <C> <C> <C>
--------------------------------
Interest income from fixed maturities $ 934 $ 952 $ 932
Interest income from policy loans 391 789 425
Income from other investments 48 32 26
--------------------------------
Gross investment income 1,373 1,773 1,383
Less: Investment expenses 14 14 15
--------------------------------
NET INVESTMENT INCOME $1,359 $1,759 $1,368
--------------------------------
</TABLE>
(B) COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
<TABLE>
<CAPTION>
For the years ended
December 31,
--------------------------
1999 1998 1997
<S> <C> <C> <C>
--------------------------
Fixed maturities $(7) $(28) $(7)
Equity securities 2 21 12
Real estate and other 1 5 (1)
--------------------------
NET REALIZED CAPITAL GAINS (LOSSES) $(4) $(2) $ 4
--------------------------
</TABLE>
(C) NET UNREALIZED CAPITAL GAINS (LOSSES) ON EQUITY SECURITIES
<TABLE>
<CAPTION>
For the years ended
December 31,
--------------------------
1999 1998 1997
<S> <C> <C> <C>
--------------------------
Gross unrealized capital gains $ 9 $ 2 $14
Gross unrealized capital losses (2) (1) --
--------------------------
Net unrealized capital gains 7 1 14
Deferred income tax expense 2 -- 5
--------------------------
Net unrealized capital gains, net of tax 5 1 9
Balance -- beginning of year 1 9 8
--------------------------
NET CHANGE IN UNREALIZED CAPITAL GAINS (LOSSES) ON EQUITY
SECURITIES $ 4 $(8) $ 1
--------------------------
</TABLE>
F-9
<PAGE>
(D) NET UNREALIZED CAPITAL GAINS (LOSSES) ON FIXED MATURITIES
<TABLE>
<CAPTION>
For the years ended
December 31,
----------------------------
1999 1998 1997
<S> <C> <C> <C>
----------------------------
Gross unrealized capital gains $ 48 $ 421 $371
Gross unrealized capital losses (472) (108) (80)
Unrealized capital (gains) losses credited to policyholders 24 (32) (30)
----------------------------
Net unrealized capital gains (losses) (400) 281 261
Deferred income tax expense (benefit) (140) 98 91
----------------------------
Net unrealized capital gains (losses), net of tax (260) 183 170
Balance -- beginning of year 183 170 22
----------------------------
NET CHANGE IN UNREALIZED CAPITAL GAINS (LOSSES) ON FIXED
MATURITIES $(443) $ 13 $148
----------------------------
</TABLE>
(E) FIXED MATURITY INVESTMENTS
<TABLE>
<CAPTION>
As of December 31, 1999
---------------------------------------------
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) $ 180 $ 5 $ (3) $ 182
U.S. Government and Government agencies and authorities
(guaranteed and sponsored) -- asset backed 1,094 5 (35) 1,064
States, municipalities and political subdivisions 155 2 (1) 156
Foreign governments 289 6 (14) 281
Public utilities 865 7 (39) 833
All other corporate, including international 5,646 18 (244) 5,420
All other corporate -- asset backed 4,103 5 (123) 3,985
Short-term investments 1,156 -- -- 1,156
Certificates of deposit 434 -- (12) 422
Redeemable preferred stock 1 -- (1) --
---------------------------------------------
TOTAL FIXED MATURITIES $13,923 $48 $(472) $13,499
---------------------------------------------
</TABLE>
<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
Foreign 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>
The amortized cost and estimated fair value of fixed maturity investments as of
December 31, 1999 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
F-10
<PAGE>
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.
<TABLE>
<CAPTION>
Amortized
Cost Fair Value
<S> <C> <C>
----------------------------
MATURITY
One year or less $ 2,454 $ 2,440
Over one year through five years 4,874 4,787
Over five years through ten years 3,072 2,940
Over ten years 3,523 3,332
----------------------------
TOTAL $13,923 $13,499
----------------------------
</TABLE>
(F) SALES OF FIXED MATURITY AND EQUITY SECURITY INVESTMENTS
Sales of fixed maturities, excluding short-term fixed maturities, for the years
ended December 31, 1999, 1998 and 1997 resulted in proceeds of $3.4 billion,
$3.2 billion and $4.2 billion, gross realized capital gains of $153, $103 and
$169, gross realized capital losses (including writedowns) of $160, $131 and
$176, respectively. Sales of equity security investments for the years ended
December 31, 1999, 1998 and 1997 resulted in proceeds of $7, $35 and $132 and
gross realized capital gains of $2, $21 and $12, respectively, and no gross
realized capital losses for all periods.
(G) 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.
(H) 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.
The Company maintains a derivatives counterparty exposure policy which
establishes market based credit limits, favors long-term financial stability and
creditworthiness, and typically requires credit enhancement/credit risk reducing
agreements. Credit risk is measured as the amount owed to the Company based on
current market conditions and potential payment obligations between the Company
and its counterparties. Credit exposures are quantified weekly and netted, and
collateral is pledged to or held by the Company to the extent the current value
of derivatives exceed exposure policy thresholds.
The Company's derivative program is monitored by an internal compliance unit and
is reviewed by senior management. 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 $5.5
billion and $6.2 billion ($3.9 billion and $3.9 billion related to the Company's
investments, $1.6 billion and $2.3 billion on the Company's liabilities) as of
December 31, 1999 and 1998, respectively.
The tables below provide a summary of derivative instruments held by Hartford
Life Insurance Company as of December 31, 1999 and 1998, segregated by major
investment and liability category:
F-11
<PAGE>
<TABLE>
<CAPTION>
1999 -- Amount Hedged (Notional Amounts)
----------------------------------------------------------------------------------
Total Issued Purchased Interest Rate Foreign Total
Carrying Caps & Caps, Floors Swaps & Currency Notional
ASSETS HEDGED Value Floors & Options Futures (1) Forwards Swaps (2) Amount
<S> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------
Asset backed securities (excluding
anticipatory) $ 5,049 $ -- $ -- $ -- $ 911 $-- $ 911
Anticipatory (3) -- -- -- 5 112 -- 117
Other bonds and notes 7,294 494 611 -- 1,676 80 2,861
Short-term investments 1,156 -- -- -- -- -- --
----------------------------------------------------------------------------------
TOTAL FIXED MATURITIES 13,499 494 611 5 2,699 80 3,889
Equity securities, policy loans and
other investments 4,585 -- -- -- -- -- --
----------------------------------------------------------------------------------
TOTAL INVESTMENTS $18,084 494 611 5 2,699 80 3,889
----------------------------------------------------------------------------------
OTHER POLICYHOLDER FUNDS $16,004 -- 1,150 -- 430 -- 1,580
----------------------------------------------------------------------------------
TOTAL DERIVATIVE INSTRUMENTS --
NOTIONAL VALUE $ 494 $1,761 $ 5 $3,129 $80 $5,469
----------------------------------------------------------------------------------
TOTAL DERIVATIVE INSTRUMENTS --
FAIR VALUE $ (22) $ 8 $ -- $ (30) $ 2 $ (42)
----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1998 -- Amount Hedged (Notional Amounts)
-------------------------------------------------------------------------------
Total Issued Purchased Interest Rate Foreign Total
Carrying Caps & Caps & Swaps & Currency Notional
ASSETS HEDGED Value Floors Floors Futures (1) Forwards Swaps (2) Amount
<S> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------
Asset backed securities (excluding
anticipatory) $ 5,187 $ 44 $ 243 $ 3 $ 885 $-- $1,175
Anticipatory (3) -- -- -- -- 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 -- 1,150 -- 1,195 -- 2,345
-------------------------------------------------------------------------------
TOTAL DERIVATIVE INSTRUMENTS --
NOTIONAL VALUE $ 505 $1,990 $21 $3,615 $90 $6,221
-------------------------------------------------------------------------------
TOTAL DERIVATIVE INSTRUMENTS --
FAIR VALUE $ (6) $ 19 $-- $ 27 $(7) $ 33
-------------------------------------------------------------------------------
</TABLE>
(1) As of December 31, 1999 and 1998, approximately 100% and 5%,
respectively, of the notional futures contracts expire within one year.
(2) As of December 31, 1999 and 1998, approximately 28% and 11%,
respectively, of foreign currency swaps expire within one year.
(3) 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, 1999, the Company had $1.4 of net
deferred losses on interest rate swaps and futures. The Company expects to basis
adjust the entire loss in 2000. During 1999, $0.2 of new future activity was
basis adjusted. As of December 31, 1998, the Company had no deferred gains for
interest rate swaps.
F-12
<PAGE>
The following is a reconciliation of notional amounts by derivative type and
strategy as of December 31, 1999 and 1998:
<TABLE>
<CAPTION>
BY DERIVATIVE TYPE
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------
<CAPTION>
December 31, 1998 Maturities/ December 31, 1999
Notional Amount Additions Terminations (1) Notional Amount
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Caps $1,912 $ -- $ 148 $1,764
Floors 583 -- 178 405
Swaps/Forwards 3,705 991 1,487 3,209
Futures 21 292 308 5
Options -- 86 -- 86
-------------------------------------------------------------------------------------------------------------------------------
TOTAL $6,221 $1,369 $2,121 $5,469
-------------------------------------------------------------------------------------------------------------------------------
BY STRATEGY
-------------------------------------------------------------------------------------------------------------------------------
Liability $2,345 $ 17 $ 782 $1,580
Anticipatory 235 204 322 117
Asset 2,398 831 427 2,802
Portfolio 1,243 317 590 970
-------------------------------------------------------------------------------------------------------------------------------
TOTAL $6,221 $1,369 $2,121 $5,469
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) During 1999, 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 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.
Other invested assets consist primarily of partnership investments, which are
accounted for by the equity method, and mortgage loans, whereby the carrying
value approximates 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 similar to external valuation models.
The carrying amount and fair values of Hartford Life Insurance Company's
financial instruments as of December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
------------------------------------
ASSETS
Fixed maturities $13,499 $13,499 $14,818 $14,818
Equity securities 56 56 31 31
Policy loans 4,187 4,187 6,684 6,684
Other investments 342 348 264 309
LIABILITIES
Other policyholder funds (1) 11,734 11,168 11,709 11,726
------------------------------------
</TABLE>
(1) Excludes corporate owned life insurance and universal life insurance
contracts.
F-13
<PAGE>
5. SEPARATE ACCOUNTS
Hartford Life Insurance Company maintained separate account assets and
liabilities totaling $110.4 billion and $90.3 billion as of December 31, 1999
and 1998, 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 $101.7 billion and
$80.6 billion as of December 31, 1999 and 1998, respectively, wherein the
policyholder assumes substantially all the investment risk, and guaranteed
separate accounts totaling $8.7 and $9.7 billion as of December 31, 1999 and
1998, 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
$860 and $1.8 billion as of December 31, 1999 and 1998, 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 $1.1 billion, $908 and
$699 in 1999, 1998 and 1997, respectively. The guaranteed separate accounts
include fixed market value adjusted (MVA) individual annuities and modified
guaranteed life insurance. The average credited interest rate on these contracts
was 6.5% and 6.6% as of December 31, 1999 and 1998, respectively. The assets
that support these liabilities were comprised of $8.7 billion and $9.5 billion
in fixed maturities as of December 31, 1999 and 1998, respectively, and $0.2
billion of other invested assets as of December 31, 1998. 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 $(96) and $40 in carrying value and $2.0 billion and
$3.5 billion in notional amounts as of December 31, 1999 and 1998, respectively.
6. STATUTORY RESULTS
<TABLE>
<CAPTION>
For the years ended December 31,
------------------------------------
1999 1998 1997
<S> <C> <C> <C>
------------------------------------
Statutory net income $ 151 $ 211 $ 214
------------------------------------
Statutory capital and surplus $1,905 $1,676 $1,441
------------------------------------
</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
2000, without prior regulatory approval, is estimated to be $190.
Hartford Life Insurance Company and its domestic insurance subsidiaries prepare
their statutory financial statements in accordance with accounting practices
prescribed by the applicable state of domicile. Prescribed statutory accounting
practices include publications of the National Association of Insurance
Commissioners (NAIC), as well as state laws, regulations and general
administrative rules.
The NAIC adopted the Codification of Statutory Accounting Principles (SAP) in
March 1998. The proposed effective date for the statutory accounting guidance is
January 1, 2001. It is expected that Hartford Life Insurance Company's
domiciliary state will adopt the SAP and the Company will make the necessary
changes required for implementation. The Company has not yet determined the
impact that the SAP will have on the statutory financial statements of Hartford
Life Insurance Company and its insurance subsidiaries.
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, stock appreciation rights, performance shares or
restricted stock, or any combination of the foregoing. 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 and Class B Common Stock
and treasury stock as reported in the Annual Report on Hartford Life's Form 10-K
of the Company 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 awards. Performance shares
awards of common stock granted under the Plan become payable upon the attainment
of specific performance goals achieved over a three year period.
F-14
<PAGE>
All options granted have an exercise price equal to the market price of the
Company's stock on the date of grant and an option's maximum term is ten years.
Certain non-performance 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 non-performance based options
become exercisable over a three year period commencing with the date of grant.
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 120,694, 121,943 and 54,316
shares under the ESPP in 1999, 1998 and 1997, respectively. The weighted average
fair value of the discount under the ESPP was $7.48 per share in 1999, $13.74
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 both 1999 and
1998, and $5 in 1997.
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 1999, 1998 and 1997.
The assumed rate in the per capita cost of health care (the health care trend
rate) was 7.1% for 1999, decreasing ratably to 5.0% in the year 2003. Increasing
or decreasing 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 in both 1999 and 1998, and $2 in 1997.
9. REINSURANCE
Hartford Life Insurance Company cedes insurance to other insurers in order to
limit its maximum losses. Such transfer does not relieve Hartford Life Insurance
Company of its primary liability. Failure of reinsurers to honor their
obligations could result in losses to Hartford Life Insurance Company. Hartford
Life Insurance Company reduces this risk by evaluating the financial condition
of reinsurers, and monitoring for possible concentrations of credit risk.
Hartford Life Insurance Company has no significant reinsurance related
concentrations of credit risk.
The Company records a receivable for the portion of reinsured benefits paid and
insurance liabilities. Reinsurance recoveries on ceded reinsurance contracts
were $397, $300 and $418 for the years ended December 31, 1999, 1998 and 1997,
respectively. Hartford Life Insurance Company also assumes insurance from other
insurers.
The effect of reinsurance on premiums and other considerations is summarized as
follows:
<TABLE>
<CAPTION>
For the years ended December 31,
------------------------------------
1999 1998 1997
<S> <C> <C> <C>
------------------------------------
Direct premiums and other considerations $2,660 $2,722 $2,164
Reinsurance assumed 95 150 159
Reinsurance ceded (710) (654) (686)
------------------------------------
PREMIUMS AND OTHER CONSIDERATIONS $2,045 $2,218 $1,637
------------------------------------
</TABLE>
F-15
<PAGE>
Hartford Life Insurance Company maintains certain reinsurance agreements with
HLA, whereby the Company cedes both group life and group accident and health
risk. Under these treaties, the Company ceded group life premium of $119, $132
and $80 in 1999, 1998 and 1997, respectively, and accident and health premium of
$430, $379, and $335, respectively, to HLA.
Pursuant to a reinsurance agreement dating back to 1992, the Company assumed
100% of certain blocks of individual life insurance from HLA. Under this
reinsurance agreement Hartford Life Insurance Company assumed $9, $13 and $18 of
premium from HLA in 1999, 1998 and 1997, respectively. On December 1, 1999, HLA
recaptured this in force block of individual life insurance previously ceded to
the Company. This commutation resulted in a reduction in the Company's assets of
$666, consisting of $556 of invested assets, $99 of deferred policy acquisition
costs and $11 of other assets. Liabilities decreased $650, consisting of $543 of
other policyholder funds, $60 of future policy benefits and $47 of other
liabilities. As a result, the Company recognized an after-tax loss relating to
this transaction of $16.
In 1998, the Hartford Life recaptured an in force block of Corporate Owned Life
Insurance (COLI) business previously ceded to MBL Assurance Co. of New Jersey
(MBL Life). The transaction was consummated through an assignment of a
reinsurance arrangement between Hartford Life and MBL Life to a Hartford Life
subsidiary. Hartford Life originally assumed the life insurance block in 1992
from Mutual Benefit Life, which was placed in court-supervised rehabilitation in
1991, and reinsured a portion of those policies back to MBL Life. This recapture
was effective January 1, 1998 and resulted in a decrease in ceded premiums and
other considerations of $163 in 1998. Additionally, this transaction resulted in
a decrease in reinsurance recoverables of $4.8 billion, which was exchanged for
the fair value of assets comprised of $4.3 billion in policy loans and $443 in
other net assets.
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 for 1997 and 1998 and intend to file a
separate consolidated federal income tax return for 1999. The Company's
effective tax rate was 35%, 35% and 36% in 1999, 1998 and 1997, respectively.
Income tax expense (benefit) is as follows:
<TABLE>
<CAPTION>
For the years ended
December 31,
------------------------------
1999 1998 1997
<S> <C> <C> <C>
------------------------------
Current $(50) $307 $162
Deferred 241 (119) 5
------------------------------
INCOME TAX EXPENSE $191 $188 $167
------------------------------
</TABLE>
A reconciliation of the tax provision at the U.S. federal statutory rate to the
provision (benefit) for income taxes is as follows:
<TABLE>
<CAPTION>
For the years ended
December 31,
------------------------------
1999 1998 1997
<S> <C> <C> <C>
------------------------------
Tax provision at the U.S. federal statutory rate $193 $188 $164
Other (2) -- 3
------------------------------
TOTAL $191 $188 $167
------------------------------
</TABLE>
Deferred tax assets (liabilities) include the following as of December 31:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C> <C>
---------------------
Tax basis deferred policy acquisition costs $ 720 $ 751
Financial statement deferred policy acquisition costs and
reserves 11 103
Employee benefits (3) 4
Net unrealized capital losses (gains) on securities 138 (98)
Investments and other (407) (296)
---------------------
TOTAL $ 459 $ 464
---------------------
</TABLE>
F-16
<PAGE>
Hartford Life Insurance Company had a current tax receivable of $56 as of
December 31, 1999 and a current tax payable of $65 as of December 31, 1998.
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 the
balance in this account, which for tax return purposes was $104 as of December
31, 1999.
11. RELATED PARTY TRANSACTIONS
Transactions of the Company with 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 in both 1999 and 1998 and $39 in 1997.
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 alleged economic and
punitive damages have been asserted. Some of these cases have been filed as
purported class actions and some cases have been filed in certain jurisdictions
that permit punitive damage awards disproportionate to the actual damages
incurred. 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 estimated
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 $2, $9 and $15 in 1999, 1998 and 1997,
respectively, of which $1 in 1999 and $4 in both 1998 and 1997 were estimated to
be creditable against premium taxes.
(C) LEASES
The rent paid to Hartford Fire for space occupied by the Company was $9 in 1999
and $7 in both 1998 and 1997. Future minimum rental commitments are as follows:
<TABLE>
<S> <C>
2000 $ 14
2001 14
2002 13
2003 12
2004 12
Thereafter 62
--------
TOTAL $ 127
--------
</TABLE>
The principal executive offices of Hartford Life Insurance Company, together
with its parent, are located in Simsbury, Connecticut. Rental expense is
recognized on a level basis over the term of the primary sublease for the
facility located in Simsbury, Connecticut, which expires on December 31, 2009,
and amounted to approximately $9 in each of the years ended December 31, 1999,
1998 and 1997.
(D) TAX MATTERS
Hartford Life's federal income tax returns are routinely audited by the Internal
Revenue Service. Hartford Life's 1996-1997 federal income tax returns are
currently under audit by the Internal Revenue Service. Management believes that
sufficient provision has been made in the financial statements for issues that
may result from tax examinations and other tax related matters for all open tax
years.
F-17
<PAGE>
13. SEGMENT INFORMATION
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 fixed and variable
annuities, mutual funds, retirement plan services other investment products.
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.
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 tables outlines summarized financial
information concerning the Company's segments.
<TABLE>
<CAPTION>
Investment Individual
1999 Products Life COLI Other Total
<S> <C> <C> <C> <C> <C>
--------------------------------------------------
Total revenues $ 1,884 $ 574 $ 830 $ 112 $ 3,400
Net investment income 699 169 431 60 1,359
Amortization of deferred policy acquisition costs 411 128 -- -- 539
Income tax expense (benefit) 159 37 15 (20) 191
Net income (loss) 300 68 28 (35) 361
Assets 106,352 5,962 20,198 2,453 134,965
</TABLE>
<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>
14. QUARTERLY RESULTS FOR 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
<S> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, June 30, September 30, December 31,
------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
------------------------------------------------------------------------------
Revenues $838 $915 $853 $721 $846 $826 $863 $1,513
Benefits, claims and expenses 703 787 722 591 695 688 728 1,371
Net income 88 83 85 85 100 89 88 93
</TABLE>
F-18
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE I -- SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN AFFILIATES
AS OF DECEMBER 31, 1999
(IN MILLIONS)
<TABLE>
<CAPTION>
Amount at
Fair which shown
Type of Investment Cost Value on Balance Sheet
<S> <C> <C> <C>
------------------------------------
FIXED MATURITIES
Bonds and Notes
U.S. Government and Government agencies and authorities
(guaranteed and sponsored) $ 180 $ 182 $ 182
U.S. Government and Government agencies and authorities
(guaranteed and sponsored) -- asset backed 1,094 1,064 1,064
States, municipalities and political subdivisions 155 156 156
Foreign governments 289 281 281
Public utilities 865 833 833
All other corporate, including international 5,646 5,420 5,420
All other corporate -- asset backed 4,103 3,985 3,985
Short-term investments 1,156 1,156 1,156
Certificates of deposit 434 422 422
Redeemable preferred stock 1 -- --
------------------------------------
TOTAL FIXED MATURITIES 13,923 13,499 13,499
------------------------------------
EQUITY SECURITIES
Common Stocks
Industrial and miscellaneous 49 56 56
------------------------------------
TOTAL EQUITY SECURITIES 49 56 56
------------------------------------
TOTAL FIXED MATURITIES AND EQUITY SECURITIES 13,972 13,555 13,555
------------------------------------
Policy Loans 4,187 4,187 4,187
------------------------------------
OTHER INVESTMENTS
Mortgage loans on real estate 198 198 198
Other invested assets 127 150 144
------------------------------------
TOTAL OTHER INVESTMENTS 325 348 342
------------------------------------
TOTAL INVESTMENTS $18,484 $18,090 $18,084
------------------------------------
</TABLE>
S-1
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
Net Benefits,
Deferred Realized Claims and
Policy Future Other Premiums Net Capital Claim
Acquisition Policy Policyholder and Other Investment Gains Adjustment
Segment Costs Benefits Funds Considerations Income (Losses) Expenses
<S> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------
1999
Investment Products $3,099 $2,744 $ 8,859 $1,185 $ 699 $-- $ 660
Individual Life 914 270 1,880 405 169 -- 254
Corporate Owned Life Insurance -- 321 5,244 399 431 -- 621
Other -- 997 21 56 60 (4) 39
-------------------------------------------------------------------------------------------
CONSOLIDATED OPERATIONS $4,013 $4,332 $16,004 $2,045 $1,359 $(4) $1,574
-------------------------------------------------------------------------------------------
1998
-------------------------------------------------------------------------------------------
Investment Products $2,823 $2,407 $ 9,194 $1,043 $ 736 $-- $ 670
Individual Life 931 466 2,307 363 181 (1) 262
Corporate Owned Life Insurance -- 225 8,097 774 793 -- 924
Other -- 497 17 38 49 (1) 55
-------------------------------------------------------------------------------------------
CONSOLIDATED OPERATIONS $3,754 $3,595 $19,615 $2,218 $1,759 $(2) $1,911
-------------------------------------------------------------------------------------------
1997
-------------------------------------------------------------------------------------------
Investment Products $2,478 $2,070 $ 9,620 $ 771 $ 739 $-- $ 677
Individual Life 837 392 2,182 323 164 -- 242
Corporate Owned Life Insurance -- 56 9,259 551 429 -- 439
Other -- 541 (27) (8) 36 4 21
-------------------------------------------------------------------------------------------
CONSOLIDATED OPERATIONS $3,315 $3,059 $21,034 $1,637 $1,368 $ 4 $1,379
-------------------------------------------------------------------------------------------
<CAPTION>
Amortization
of Deferred
Policy
Acquisition Dividends to Other
Segment Costs Policyholders Expenses
<S> <C> <C> <C>
---------------------------------------
1999
Investment Products $411 $ -- $354
Individual Life 128 -- 87
Corporate Owned Life Insurance -- 104 62
Other -- -- 128
---------------------------------------
CONSOLIDATED OPERATIONS $539 $104 $631
---------------------------------------
1998
---------------------------------------
Investment Products $326 $ -- $368
Individual Life 105 -- 77
Corporate Owned Life Insurance -- 329 278
Other -- -- 43
---------------------------------------
CONSOLIDATED OPERATIONS $431 $329 $766
---------------------------------------
1997
---------------------------------------
Investment Products $250 $ -- $266
Individual Life 83 -- 77
Corporate Owned Life Insurance -- 240 259
Other 2 -- (16)
---------------------------------------
CONSOLIDATED OPERATIONS $335 $240 $586
---------------------------------------
</TABLE>
S-2
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE IV -- REINSURANCE
(IN MILLIONS)
<TABLE>
<CAPTION>
Percentage
Gross Ceded to Assumed From Net of Amount
Amount Other Companies Other Companies Amount Assumed to Net
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------
FOR THE YEAR ENDED
DECEMBER 31, 1999
Life insurance in force $307,970 $131,162 $11,785 $188,593 6.2%
PREMIUMS AND OTHER CONSIDERATIONS
Life insurance and annuities $ 2,212 $ 275 $ 84 $ 2,021 4.2%
Accident and health insurance 448 435 11 24 45.8%
------------------------------------------------------------------------
TOTAL PREMIUMS AND OTHER CONSIDERATIONS $ 2,660 $ 710 $ 95 $ 2,045 4.6%
------------------------------------------------------------------------
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%
------------------------------------------------------------------------
</TABLE>
S-3
<PAGE>
PART C
<PAGE>
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) All financial statements included in Part A and Part B.
(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) Not applicable.
(8) Form of Share Purchase Agreement by the registrant and Dean
Witter Select Dimensions Investment Series. (1)
(9) Opinion and Consent of Christine Hayer Repasy, Senior Vice
President, General Counsel and Corporate Secretary.
(10) Consent of Arthur Andersen LLP, Independent Public Accountants.
(11) No financial statements are omitted.
----------------------
(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>
(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
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
NAME POSITION WITH HARTFORD
----------------------------------------------------------------------------------------------------------------------
<S> <C>
David A. Carlson Vice President
----------------------------------------------------------------------------------------------------------------------
Peter W. Cummins Senior Vice President
----------------------------------------------------------------------------------------------------------------------
Bruce W. Ferris Vice President
----------------------------------------------------------------------------------------------------------------------
Timothy M. Fitch Vice President and Actuary
----------------------------------------------------------------------------------------------------------------------
Mary Jane B. Fortin Vice President & Chief Accounting Officer
----------------------------------------------------------------------------------------------------------------------
David T. Foy Senior Vice President, Chief Financial Officer and Treasurer, Director*
----------------------------------------------------------------------------------------------------------------------
Lois W. Grady Senior Vice President
----------------------------------------------------------------------------------------------------------------------
Stephen T. Joyce Senior Vice President
----------------------------------------------------------------------------------------------------------------------
Michael D. Keeler Vice President
----------------------------------------------------------------------------------------------------------------------
Robert A. Kerzner Senior Vice President
----------------------------------------------------------------------------------------------------------------------
Thomas M. Marra President, Director*
----------------------------------------------------------------------------------------------------------------------
Deanne Osgood Vice President
----------------------------------------------------------------------------------------------------------------------
Craig R. Raymond Senior Vice President and Chief Actuary
----------------------------------------------------------------------------------------------------------------------
Christine Hayer Repasy Senior Vice President, General Counsel and Corporate Secretary, Director*
----------------------------------------------------------------------------------------------------------------------
Lowndes A. Smith Chairman of the Board, Chief Executive Officer, Director*
----------------------------------------------------------------------------------------------------------------------
Joe M. Thomson Senior Vice President
----------------------------------------------------------------------------------------------------------------------
John C. Walters Executive Vice President, Director*
----------------------------------------------------------------------------------------------------------------------
David M. Znamierowski Senior Vice President and Chief Investment Officer, Director*
----------------------------------------------------------------------------------------------------------------------
</TABLE>
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 October 31, 2000, there were 4,762 Contract Owners.
Item 28. Indemnification
Sections 33-770 to 33-778, inclusive, of the Connecticut General
Statutes ("CGS") provide that a corporation may provide indemnification
of or advance expenses to a director, officer, employee or agent.
Reference is hereby made to Section 33-771(e) of CGS regarding
indemnification of directors and Section 33-776(d) of CGS regarding
indemnification of officers, employees and agents of Connecticut
corporations. These statutes provide, in general, that Connecticut
corporations incorporated prior to January 1, 1997 shall, except to the
extent that their certificate of incorporation expressly provides
otherwise, indemnify their directors, officers, employees and agents
against "liability" (defined as the obligation to pay a judgment,
settlement, penalty, fine, including an excise tax assessed with
respect to an employee benefit plan, or reasonable expenses incurred
with respect to a proceeding) when (1) a determination is made pursuant
to Section 33-775 that the party seeking indemnification has met the
standard of conduct set forth in Section 33-771 or (2) a court has
determined that indemnification is appropriate pursuant to Section
33-774. Under Section 33-775, the determination of and the
authorization for indemnification are made (a) by the disinterested
directors, as defined in Section 33-770(3); (b) by special counsel; (c)
by the shareholders; or (d) in the case of indemnification of an
officer, agent or employee of the corporation, by the general counsel
of the corporation or such other officer(s) as the board of directors
may specify. Also, Section 33-772 provides that a corporation shall
indemnify an individual who was wholly successful on the merits or
otherwise against reasonable expenses incurred by him in connection
with a proceeding to which he was a party because he was a director of
the corporation. In the case of a proceeding by or in the right of the
corporation or with respect to conduct for which the director, officer,
agent or employee was adjudged liable on the basis that he received a
financial benefit to which he was not entitled, indemnification is
limited to reasonable expenses incurred in connection with the
proceeding against the corporation to which the individual was named a
party.
Under the Depositor's bylaws, the Depositor must indemnify both
directors and officers of the Depositor for (1) any claims and
liabilities to which they become
<PAGE>
subject by reason of being or having been directors or officers of the
Depositor and (2) legal and other expenses incurred in defending
against such claims, in each case, to the extent such is consistent
with statutory provisions.
Section 33-777 of CGS specifically authorizes a corporation to procure
indemnification insurance on behalf of an individual who was a
director, officer, employer or agent of the corporation. Consistent
with the statute, the directors and officers of the Depositor 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.
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
Hartford Life and Annuity Insurance Company - Separate Account Seven
Hart Life Insurance Company - Separate Account One
Hart Life Insurance Company - Separate Account Two
American Maturity Life Insurance Company - Separate Account AMLVA
Servus Life Insurance Company - Separate Account One
Servus Life Insurance Company - Separate Account Two
(b) Directors and Officers of HSD
<TABLE>
<CAPTION>
Positions and Offices
Name With Underwriter
------ ----------------
<S> <C>
William A. Campagna Vice President
David A. Carlson Vice President
Peter W. Cummins Senior Vice President
Bruce W. Ferris Vice President
David T. Foy Treasurer
George R. Jay Controller
Ryan Johnson Vice President
Thomas M. Marra President, Director
Christine Hayer Repasy Senior Vice President, General Counsel and Corporate Secretary
Lowndes A. Smith Chairman of the Board and
Chief Executive Officer, Director
John C. Walters Executive Vice President, Director
</TABLE>
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 the requirements of Securities Act
Rule 485(b) for effectiveness of this Registration Statement and has caused this
Registration Statement to be signed on its behalf, in the Town of Simsbury, and
State of Connecticut on this 29th day of December, 2000.
HARTFORD LIFE INSURANCE COMPANY -
SEPARATE ACCOUNT THREE
(Registrant)
By: Thomas M. Marra *By: /s/ Marianne O'Doherty
------------------------------- ---------------------------
Thomas M. Marra, President* Marianne O'Doherty
Attorney-in-Fact
HARTFORD LIFE INSURANCE COMPANY
(Depositor)
By: Thomas M. Marra
-------------------------------
Thomas M. Marra, 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.
David T. Foy, Senior Vice President, Chief
Financial Officer and Treasurer, Director*
Thomas M. Marra, President, Director*
Christine Hayer Repasy, Senior Vice President,
General Counsel and Corporate Secretary,
Director* *By: /s/ Marianne O'Doherty
Lowndes A. Smith, Chairman of the Board, Chief ----------------------
Executive Officer, Director* Marianne O'Doherty
Raymond P. Welnicki, Senior Vice President, Attorney-in-Fact
Director*
John C. Walters, Executive Vice President, Date: December 29, 2000
Director*
Lizabeth H. Zlatkus, Executive Vice President,
Director*
David M. Znamierowski, Senior Vice President and
Chief Investment Officer, Director*
<PAGE>
EXHIBIT INDEX
(9) Opinion and Consent of Christine Hayer Repasy, Senior Vice President,
General Counsel and Corporate Secretary.
(10) Consent of Arthur Andersen LLP, Independent Public Accountants.
(15) Power of Attorney.
(16) Organizational Chart.
