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DIRECTOR LIFE
MODIFIED SINGLE PREMIUM
VARIABLE LIFE INSURANCE CONTRACTS
ITT HARTFORD LIFE AND ANNUITY INSURANCE
COMPANY
P.O. BOX 2999
HARTFORD, CONNECTICUT 06104-2999
[LOGO] TELEPHONE 1-800-231-5453
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This Prospectus describes Director Life, a modified single premium variable life
insurance contract ("Contract" or "Contracts") offered to applicants age 90 and
under by ITT Hartford Life and Annuity Insurance Company ("Hartford"). (On
January 1, 1998, Hartford's name will change to Hartford Life and Annuity
Insurance Company). The Contract lets the Contract Owner pay a single premium
and, subject to restrictions, additional premiums.
The Contract is a modified endowment contract for federal income tax purposes,
except in certain cases described under "Federal Tax Considerations," page 21. A
LOAN, DISTRIBUTION OR OTHER AMOUNT RECEIVED FROM A MODIFIED ENDOWMENT CONTRACT
DURING THE LIFE OF THE INSURED WILL BE TAXED TO THE EXTENT OF ANY ACCUMULATED
INCOME IN THE CONTRACT. ANY AMOUNTS THAT ARE TAXABLE WITHDRAWALS WILL BE SUBJECT
TO A 10% ADDITIONAL TAX, WITH CERTAIN EXCEPTIONS.
Generally, the minimum initial premium Hartford will accept is $10,000. The
initial premium will be allocated to HVA Money Market Fund, Inc. After the Right
to Cancel Period has expired, the amount so allocated will be transferred to the
Funds specified in the Contract Owner's application. The Funds presently are
Hartford Advisers Fund, Inc., Hartford Bond Fund, Inc., Hartford Capital
Appreciation Fund, Inc., Hartford Dividend and Growth Fund, Inc., Hartford Index
Fund, Inc., Hartford International Advisers Fund, Inc., Hartford International
Opportunities Fund, Inc., Hartford Mortgage Securities Fund, Inc., Hartford
Small Company Fund, Inc., Hartford Stock Fund, Inc. and HVA Money Market Fund,
Inc.
There is no guaranteed minimum Account Value for a Contract. The Account Value
of a Contract will vary up or down to reflect the investment experience of the
Funds to which premiums have been allocated. The Contract Owner bears the
investment risk for all amounts so allocated. The Contract continues in effect
while the Cash Surrender Value is sufficient to pay the monthly charges under
the Contract ("Deduction Amount"). The Contract may terminate if the Cash
Surrender Value is insufficient to cover a Deduction Amount and, after
expiration of a specified period, no additional premium payments are made.
The Contracts provide for a Face Amount, which is the minimum death benefit
under the Contract. The death benefit ("Death Benefit") may be greater than the
Face Amount. The Account Value will, and under certain circumstances the Death
Benefit of the Contract may, increase or decrease based on the investment
experience of the Funds to which premiums have been allocated. However, while
the Contract is in force, the Death Benefit will never be less than the Face
Amount. At the death of the Insured, Hartford will pay the death proceeds
("Death Proceeds") to the beneficiary. The Death Proceeds equal the Death
Benefit less any Indebtedness under the Contract.
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IT MAY NOT BE ADVANTAGEOUS TO PURCHASE VARIABLE LIFE INSURANCE AS A REPLACEMENT
FOR YOUR CURRENT LIFE INSURANCE OR IF YOU ALREADY OWN A VARIABLE LIFE INSURANCE
CONTRACT.
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THIS PROSPECTUS IS VALID ONLY IF ACCOMPANIED BY THE CURRENT PROSPECTUSES OF THE
APPLICABLE ELIGIBLE FUNDS WHICH CONTAIN A FULL DESCRIPTION OF THOSE FUNDS. ALL
PROSPECTUSES SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
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THE PRODUCTS DESCRIBED HEREIN ARE NOT DEPOSITS OF, OR GUARANTEED BY ANY BANK,
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS MAY 1, 1997.
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2 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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TABLE OF CONTENTS
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SPECIAL TERMS......................................................... 4
SUMMARY............................................................... 5
THE COMPANY........................................................... 7
THE SEPARATE ACCOUNT.................................................. 7
General............................................................. 7
Funds............................................................... 7
Investment Adviser.................................................. 9
THE CONTRACT.......................................................... 9
Application for a Contract.......................................... 9
Premiums............................................................ 9
Allocation of Premiums.............................................. 10
Accumulation Unit Values............................................ 10
DEDUCTIONS AND CHARGES................................................ 10
Monthly Deductions.................................................. 10
Annual Maintenance Fee.............................................. 11
Taxes Charged Against the Separate Account.......................... 12
Charges Against the Funds........................................... 12
Contingent Deferred Sales Charge.................................... 12
Premium Tax Charge.................................................. 12
CONTRACT BENEFITS AND RIGHTS.......................................... 12
Death Benefit....................................................... 12
Account Value....................................................... 13
Transfer of Account Value........................................... 13
Contract Loans...................................................... 13
Amount Payable on Surrender of the Contract......................... 14
Partial Withdrawals................................................. 14
Benefits at Maturity................................................ 14
Lapse and Reinstatement............................................. 14
Cancellation and Exchange Rights.................................... 15
Suspension of Valuation, Payments and Transfers..................... 15
LAST SURVIVOR CONTRACTS............................................... 15
OTHER MATTERS......................................................... 15
Voting Rights....................................................... 15
Statements to Contract Owners....................................... 16
Limit on Right to Contest........................................... 16
Misstatement as to Age and Sex...................................... 16
Payment Options..................................................... 16
Beneficiary......................................................... 17
Assignment.......................................................... 18
Dividends........................................................... 18
EXECUTIVE OFFICERS AND DIRECTORS...................................... 19
DISTRIBUTION OF THE CONTRACTS......................................... 20
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS.......................... 20
FEDERAL TAX CONSIDERATIONS............................................ 21
General............................................................. 21
Taxation of Hartford and the Separate Account....................... 21
Income Taxation of Contract Benefits................................ 21
Last Survivor Contracts............................................. 21
Modified Endowment Contracts........................................ 21
Estate and Generation Skipping Taxes................................ 22
Diversification Requirements........................................ 22
Ownership of the Assets in the Separate Account..................... 22
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ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 3
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Life Insurance Purchased for Use in Split Dollar Arrangements....... 23
Federal Income Tax Withholding...................................... 23
Non-Individual Ownership of Contracts............................... 23
Other............................................................... 23
Life Insurance Purchases by Nonresident Aliens and Foreign
Corporations....................................................... 23
LEGAL PROCEEDINGS..................................................... 23
LEGAL MATTERS......................................................... 23
EXPERTS............................................................... 24
REGISTRATION STATEMENT................................................ 24
APPENDIX A ILLUSTRATIONS OF BENEFITS.................................. 25
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THE CONTRACTS MAY NOT BE AVAILABLE IN ALL STATES.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER OR OTHER PERSON IS AUTHORIZED
TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED ON.
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4 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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SPECIAL TERMS
As used in this Prospectus, the following terms have the indicated meanings:
ACCOUNT VALUE: The current value of Accumulation Units plus the value of the
Loan Account under the Contract.
ACCUMULATION UNIT: An accounting unit of measure used to calculate the value of
a Sub-Account.
ANNUAL WITHDRAWAL AMOUNT: The amount of a surrender or partial withdrawal that
is not subject to the contingent deferred sales charge. This amount in any
Contract Year is the greater of 10% of premiums or 100% of cumulative earnings
(Account Value less premiums paid).
CASH SURRENDER VALUE: The Account Value less any contingent deferred sales
charge and additional premium tax charge and all Indebtedness.
CODE: The Internal Revenue Code of 1986, as amended.
CONTRACT ANNIVERSARY: The yearly anniversary of the Contract Date.
CONTRACT DATE: A date not later than three business days after receipt of the
initial premium at Hartford's Home Office.
CONTRACT OWNER: The person having rights to benefits under the Contract during
the lifetime of the Insured; the Contract Owner may or may not be the Insured.
CONTRACT YEARS: Annual periods computed from the Contract Date.
COVERAGE AMOUNT: The Death Benefit less the Account Value.
DEATH BENEFIT: The greater of (1) the Face Amount specified in the Contract or
(2) the Account Value on the date of death multiplied by a stated percentage as
specified in the Contract.
DEATH PROCEEDS: The amount that Hartford will pay on the death of the Insured.
This equals the Death Benefit less any Indebtedness.
DEDUCTION AMOUNT: A deduction on the Contract Date and on each Monthly Activity
Date for the cost of insurance, a tax expense charge, an administrative charge
and a mortality and expense risk charge.
FACE AMOUNT: On the Contract Date, the initial Face Amount is the amount shown
on the Contract's Specifications page. Thereafter, the Face Amount is reduced by
any partial withdrawals.
FUNDS: The registered investment management companies in which assets of the
Separate Account may be invested.
GUIDELINE SINGLE PREMIUM: The "Guideline Single Premium" as defined in Section
7702 of the Code.
HOME OFFICE: Currently located at 200 Hopmeadow Street, Simsbury, Connecticut;
however, the mailing address is P.O. Box 2999, Hartford, Connecticut 06104-2999.
INDEBTEDNESS: All monies owed to Hartford by the Contract Owner. These monies
include all outstanding loans on the Contract, including any interest due or
accrued Deduction Amount or annual maintenance fee.
INSURED: The person on whose life the Contract is issued.
LOAN ACCOUNT: An account in Hartford's General Account, established for any
amounts transferred from the Sub-Accounts for requested loans. The Loan Account
credits a fixed rate of interest of 4% per annum that is not based on the
investment experience of the Separate Account.
MONTHLY ACTIVITY DATE: The day of each month on which the Deduction Amount is
deducted from the Account Value of the Contract. Monthly Activity Dates occur on
the same day of the month as the Contract Date.
SEPARATE ACCOUNT: Separate Account Five, an account established by Hartford to
separate the assets funding the Contracts from other assets of Hartford.
SUB-ACCOUNT: The subdivisions of the Separate Account used to allocate a
Contract Owner's Account Value, less Indebtedness, among the Funds.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. The
value of the Separate Account is determined at the close of the New York Stock
Exchange (currently 4:00 p.m. Eastern Time) on such days.
VALUATION PERIOD: The period between the close of business on successive
Valuation Days.
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ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 5
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SUMMARY
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The Contracts are life insurance contracts with death benefits, cash values
and other traditional life insurance features. The Contracts are "variable."
Unlike the fixed benefits of ordinary whole life insurance, the Account Value
will, and the Death Benefit may, increase or decrease based on the investment
experience of the Funds to which premiums have been allocated. The Contracts are
credited with units ("Accumulation Units") to calculate cash values. The
Contract Owner may transfer the cash values among the Funds.
The Contracts can be issued on either a single life or "last survivor"
basis. For a discussion of how last survivor Contracts operate differently from
single life Contracts, see "Last Survivor Contracts," page 15.
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THE SEPARATE ACCOUNT AND THE FUNDS
Separate Account Five ("Separate Account") funds the variable life insurance
Contracts offered by this Prospectus. Hartford established the Separate Account
pursuant to Connecticut insurance law and organized as a unit investment trust
registered under the Investment Company Act of 1940. The Contracts currently
offer 11 sub-accounts ("Sub-Accounts"), each investing exclusively in a Fund. If
an initial premium is submitted with an application for a Contract, it will be
allocated, within three business days of receipt at Hartford's Home Office, to
HVA Money Market Fund, Inc. After the expiration of the Right to Cancel Period,
the values in HVA Money Market Fund, Inc. will be allocated to one or more of
the Funds as specified in the Contract Owner's application. See "The Contract --
Allocation of Premiums," page 10.
Currently, the Funds are Hartford Advisers Fund, Inc., Hartford Bond Fund,
Inc., Hartford Capital Appreciation Fund, Inc., Hartford Dividend and Growth
Fund, Inc., Hartford Index Fund, Inc., Hartford International Advisers Fund,
Inc., Hartford International Opportunities Fund, Inc., Hartford Mortgage
Securities Fund, Inc., Hartford Small Company Fund, Inc., Hartford Stock Fund,
Inc. and HVA Money Market Fund, Inc. Applicants should read the Funds prospectus
accompanying this Prospectus in connection with the purchase of a Contract. The
investment objectives of the Funds are as set forth in "The Separate Account,"
page 7.
The following table shows annual Fund operating expenses for 1996:
ANNUAL FUND OPERATING EXPENSES
(as percentage of net assets)
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TOTAL FUND
MANAGEMENT OTHER OPERATING
FEES EXPENSES EXPENSES
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Hartford Bond Fund.............................. 0.490% 0.030% 0.520%
Hartford Stock Fund............................. 0.441% 0.016% 0.457%
HVA Money Market Fund........................... 0.423% 0.021% 0.444%
Hartford Advisers Fund.......................... 0.615% 0.017% 0.632%
Hartford Capital Appreciation Fund.............. 0.629% 0.017% 0.646%
Hartford Mortgage Securities Fund............... 0.424% 0.029% 0.453%
Hartford Index Fund............................. 0.374% 0.019% 0.393%
Hartford International Opportunities Fund....... 0.691% 0.095% 0.786%
Hartford Dividend & Growth Fund................. 0.709% 0.017% 0.726%
Hartford International Advisers Fund............ 0.746% 0.214% 0.960%
Hartford Small Company Fund (1)................. 0.577% 0.150% 0.727%
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(1) In 1996 management fees were waived for the Hartford Small Company Fund. In
the absence of this waiver, the 1996 total expense ratio would have been
.880% (annualized).
The investment adviser for all the Funds is HL Investment Advisors, Inc., an
affiliate of Hartford. HL Investment Advisors, Inc. retains a sub-investment
adviser with respect to some of the Funds, and has entered into an investment
services agreement with respect to some of the Funds. See "The Separate
Account," page 7.
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PREMIUMS
The Contract permits the Contract Owner to pay a large single premium and,
subject to restrictions, additional premiums. The Contract Owner may choose a
minimum initial premium of 80%, 90% or 100% of the Guideline Single Premium
(based on the Face Amount). Under current underwriting rules, which are subject
to change, applicants between the ages of 45 and 80 who pay an initial premium
of 100% of the Guideline Single Premium are eligible for simplified underwriting
without a medical examination if they meet simplified underwriting standards as
evidenced in their responses in the application. For Contract Owners who pay an
initial premium of 80% or 90% of the Guideline Single Premium or who are below
age 45 or above age 80, standard underwriting applies, except that substandard
underwriting applies only in those cases that represent substandard risks
according to customary underwriting guidelines. Additional premiums are allowed
if they do not cause the Contract to fail to meet the definition of a
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6 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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life insurance contract under Section 7702 of the Code. Hartford may require
evidence of insurability for any additional premiums which increase the Coverage
Amount. Generally, the minimum initial premium Hartford will accept is $10,000.
Hartford may accept less than $10,000 under certain circumstances. No premium
will be accepted which does not meet the tax qualification guidelines for life
insurance under the Code.
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DEDUCTIONS AND CHARGES
On the Contract Date and on each Monthly Activity Date, Hartford will deduct
a Deduction Amount from the Account Value. The Deduction Amount will be made pro
rata respecting each Sub-Account attributable to the Contract. The Deduction
Amount includes a cost of insurance charge, tax expense charge, administrative
charge and a mortality and expense risk charge. The monthly cost of insurance
charge is to cover Hartford's anticipated mortality costs. In addition, Hartford
will deduct monthly from the Account Value a tax expense charge equal to an
annual rate of 0.40% for the first ten Contract Years. This charge compensates
Hartford for premium taxes imposed by various states and local jurisdictions and
for federal taxes imposed under Section 848 of the Code. The tax expense charge
includes a premium tax deduction of 0.25% and a federal tax deduction of 0.15%.
The premium tax deduction represents an average premium tax of 2.5% of premiums
over ten years. Hartford will deduct from the Account Value attributable to the
Separate Account a monthly administrative charge equal to an annual rate of
0.25%. This charge compensates Hartford for administrative expenses incurred in
the administration of the Separate Account and the Contracts. Hartford will also
deduct from the Account Value attributable to the Separate Account a monthly
charge equal to an annual rate of 0.90% for the mortality risks and expense
risks Hartford assumes in relation to the variable portion of the Contracts. If
the Cash Surrender Value is not sufficient to cover a Deduction Amount due on
any Monthly Activity Date the Contract may lapse. See "Deductions and Charges --
Monthly Deductions," page 10, and "Contract Benefits and Rights -- Lapse and
Reinstatement," page 14.
If the Account Value on a Contract Anniversary is less than $50,000,
Hartford will deduct on such date an annual maintenance fee of $30. This fee
will help reimburse Hartford for administrative and maintenance costs of the
Contracts. See "Deductions and Charges -- Annual Maintenance Fee," page 11.
Hartford may set up a provision for income taxes against the assets of the
Separate Account. See "Deductions and Charges -- Taxes Charged Against the
Separate Account," page 12, and "Federal Tax Considerations," page 21.
Applicants should review the Funds prospectus accompanying this Prospectus
for a description of the charges assessed against the assets of the Funds.
Upon surrender of the Contract and partial withdrawals in excess of the
Annual Withdrawal Amount, a contingent deferred sales charge may be assessed. In
Contract Years 1 through 3, this charge is 7.5% of surrendered Account Value
attributable to premiums paid. In Contract Years 4 through 5, this charge is 6%.
In Contract Years 6 through 7, this charge is 4%. In Contract Years 8 through 9,
this charge is 2%. After the ninth Contract Year, there is no charge. The
contingent deferred sales charge is imposed to cover a portion of the sales
expense incurred by Hartford in distributing the Contracts. This expense
includes agents commissions, advertising and the printing of prospectuses. See
"Deductions and Charges -- Contingent Deferred Sales Charge," page 12.
During the first nine Contract Years, an additional premium tax charge will
be imposed on surrender or partial withdrawals. See "Deductions and Charges --
Premium Tax Charge," page 12.
For a discussion of the tax consequences of surrender of the Contract or a
partial withdrawal, see "Federal Tax Considerations," page 21.
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DEATH BENEFIT
The Contracts provide for a Face Amount which is the minimum Death Benefit
under the Contract. The Death Benefit may be greater than the Face Amount. At
the death of the Insured, Hartford will pay the Death Proceeds to the
beneficiary. The Death Proceeds equal the Death Benefit less any Indebtedness
under the Contract. See "Contract Benefits and Rights -- Death Benefit," page
12.
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ACCOUNT VALUE
The Account Value will increase or decrease to reflect the investment
experience of the Funds applicable to the Contract and deductions for the
monthly Deduction Amount. There is no minimum guaranteed Account Value and the
Contract Owner bears the risk of the investment in the Funds. See "Contract
Benefits and Rights -- Account Value," page 13.
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CONTRACT LOANS
A Contract Owner may obtain one or both of two types of cash loans from
Hartford. Both types of loans are secured by the Contract. At the time a loan is
requested, the aggregate amount of all loans (including the currently applied
for loan) may not exceed 90% of the difference of the Account Value less any
contingent deferred sales charge and due and
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ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 7
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unpaid Deduction Amount. See "Contract Benefits and Rights -- Contract Loans,"
page 13.
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LAPSE
Under certain circumstances a Contract may terminate if the Cash Surrender
Value on any Monthly Activity Date is less than the required Monthly Deduction
Amount. Hartford will give written notice to the Contract Owner and a 61-day
grace period during which additional amounts may be paid to continue the
Contract. See "Contract Benefits and Rights -- Contract Loans," page 13, and
"Lapse and Reinstatement," page 14.
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CANCELLATION AND EXCHANGE RIGHTS
An applicant has a limited right to return his or her Contract for
cancellation. If the applicant returns the Contract, by mail or hand delivery,
to Hartford or to the agent who sold the Contract, to be cancelled within ten
days after delivery of the Contract to the applicant (in certain cases, this
free-look period is longer), Hartford will return to the applicant, within seven
days thereafter, the greater of the premiums paid for the Contract or the sum of
(1) the Account Value on the date the returned Contract is received by Hartford
or its agent and (2) any deductions under the Contract or by the Funds for
taxes, charges or fees.
In addition, once the Contract is in effect, it may be exchanged during the
first 24 months after its issuance for a permanent life insurance contract on
the life of the Insured without submitting proof of insurability. See "Contract
Benefits and Rights -- Cancellation and Exchange Rights," page 15.
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TAX CONSEQUENCES
The current federal tax law generally excludes all death benefit payments
from the gross income of the Contract beneficiary. The Contracts generally will
be treated as modified endowment contracts. This status does not affect the
Contracts' classification as life insurance, nor does it affect the exclusion of
death benefit payments from gross income. However, loans, distributions or other
amounts received under a modified endowment contract are taxed to the extent of
accumulated income in the Contract (generally, the excess of Account Value over
premiums paid) and may be subject to a 10% penalty tax. See "Federal Tax
Considerations," page 21.
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THE COMPANY
ITT Hartford Life and Annuity Insurance Company ("Hartford") is a stock life
insurance company engaged in the business of writing life insurance and
annuities, both individual and group, in all states of the United States, except
New York, and the District of Columbia. On January 1, 1998, Hartford' s name
will change to Hartford Life and Annuity Insurance Company. Hartford was
originally incorporated under the laws of Wisconsin on January 9, 1956, and was
subsequently redomiciled to Connecticut. Its offices are located in Simsbury,
Connecticut; however, its mailing address is P.O. Box 2999, Hartford, CT
06104-2999. Hartford is a subsidiary of Hartford Fire Insurance Company, one of
the largest multiple lines insurance carriers in the United States. Hartford is
ultimately owned by ITT Hartford Group, Inc., a Delaware corporation. Subject to
shareholder approval on May 2, 1997, the name of ITT Hartford Group, Inc. will
change to The Hartford Financial Services Group, Inc.
Hartford is rated A+ (superior) by A.M. Best and Company, Inc., on the basis
of its financial soundness and operating performance. Hartford is rated AA by
Standard & Poor's and AA+ by Duff and Phelps, on the basis of its claims paying
ability. These ratings do not apply to the investment performance of the
Sub-Accounts. The ratings apply to Hartford's ability to meet its insurance
obligations, including those described in this Prospectus.
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THE SEPARATE ACCOUNT
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Separate Account Five ("Separate Account") is a separate account of Hartford
established on August 17, 1994 pursuant to the insurance laws of the State of
Connecticut and organized as a unit investment trust registered with the
Securities and Exchange Commission under the Investment Company Act of 1940. The
Separate Account meets the definition of "separate account" under federal
securities law. Under Connecticut law, the assets of the Separate Account are
held exclusively for the benefit of Contract Owners and persons entitled to
payments under the Contracts. The assets of the Separate Account are not
chargeable with liabilities arising out of any other business which Hartford may
conduct.
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FUNDS
The assets of each Sub-Account are invested exclusively in one of the Funds.
A Contract Owner may allocate premiums among the Funds. Contract Owners should
review the following brief descriptions of the investment objectives of the
Funds in connection with that allocation. There is no assurance that any of the
Funds will achieve its stated objectives. Contract Owners are also advised to
read the Funds prospectus accompanying this Prospectus for more detailed
information.
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8 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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HARTFORD ADVISERS FUND, INC.
Seeks maximum long-term total rate of return consistent with prudent
investment risk by investing in common stocks and other equity securities, bonds
and other debt securities and money market instruments.
HARTFORD BOND FUND, INC.
Seeks maximum current income consistent with preservation of capital by
investing primarily in fixed-income securities. Up to 20% of the total assets of
this Fund may be invested in debt securities rated in the highest category below
investment grade ("Ba" by Moody's Investor Services, Inc. or "BB" by Standard &
Poor's) or, if unrated, are determined to be of comparable quality by the Fund's
investment adviser. Securities rated below investment grade are commonly
referred to as "high yield-high risk securities" or "junk bonds." For more
information concerning the risks associated with investing in such securities,
please refer to the section in the accompanying prospectus for the Hartford
Funds entitled "Hartford Bond Fund, Inc. -- Investment Policies."
HARTFORD CAPITAL APPRECIATION FUND, INC.
Seeks growth of capital by investing in securities selected solely on the
basis of potential for capital appreciation; income, if any, is an incidental
consideration.
HARTFORD DIVIDEND AND GROWTH FUND, INC.
Seeks a high level of current income consistent with growth of capital and
reasonable investment risk.
HARTFORD INDEX FUND, INC.
Seeks to provide investment results which approximate the price and yield
performance of publicly traded common stocks in the aggregate, as represented by
the Standard & Poor's 500 Composite Stock Price Index. *
HARTFORD INTERNATIONAL ADVISERS FUND, INC.
Seeks maximum long-term total rate of return consistent with prudent
investment risk by investing in a portfolio of equity, debt and money market
securities. Securities in which the Fund invests primarily will be denominated
in non-U.S. currencies and will be traded in non-U.S. markets.
HARTFORD INTERNATIONAL OPPORTUNITIES FUND, INC.
Seeks long-term total rate of return consistent with prudent investment risk
through investment primarily in equity securities issued by non-U.S. companies.
HARTFORD MORTGAGE SECURITIES FUND, INC.
Seeks maximum current income consistent with safety of principal and
maintenance of liquidity by invest-
ing primarily in mortgage-related securities,
including securities issued by the Government National Mortgage Association.
HARTFORD SMALL COMPANY FUND, INC.
Seeks growth of capital by investing primarily in equity securities selected
on the basis of potential for capital appreciation. Under normal market and
economic conditions, at least 65% of the Fund's total assets are invested in
equity securities of companies which have less than $2 billion in market
capitalization.
HARTFORD STOCK FUND, INC.
Seeks long-term capital growth primarily through capital appreciation, with
income as a secondary consideration, by investing primarily in equity
securities.
HVA MONEY MARKET FUND, INC.
Seeks maximum current income consistent with liquidity and preservation of
capital.
All of the Funds are organized as corporations under the laws of the State
of Maryland and are registered as diversified open-end management companies
under the Investment Company Act of 1940. Each Fund continually issues an
unlimited number of full and fractional shares of beneficial interest in the
Fund. Such shares are offered to separate accounts, including the Separate
Account, established by Hartford or one of its affiliated companies specifically
to fund the Contracts and other contracts issued by Hartford or its affiliates,
as permitted by the Investment Company Act of 1940.
It is conceivable that in the future it may be disadvantageous for variable
life insurance separate accounts and variable annuity separate accounts to
invest in the Funds simultaneously. Although neither Hartford nor the Funds
currently foresee any such disadvantages either to variable life insurance or
variable annuity contract owners, the Funds' Board of Directors intends to
monitor events in order to identify any material conflicts between variable life
and variable annuity contract owners and to determine what action, if any,
should be taken in response thereto. If the Board of Directors were to conclude
that separate funds should be established for variable life and variable annuity
separate accounts, Hartford will bear the attendant expenses.
All investment income of, and other distributions to, each Sub-Account
arising from the applicable Fund are reinvested in shares of that Fund at net
asset value. The income and both realized gains or losses on the assets of each
Sub-Account are therefore separate and are credited to or charged against the
Sub-Account without regard to income, gains or losses from any other Sub-Account
or from
* "STANDARD & POOR'S-REGISTERED TRADEMARK-", "S&P-REGISTERED TRADEMARK-", "S&P
500-REGISTERED TRADEMARK-", "STANDARD & POOR'S 500", AND "500" ARE TRADEMARKS
OF THE MCGRAW-HILL COMPANIES, INC. AND HAVE BEEN LICENSED FOR USE BY HARTFORD
LIFE INSURANCE COMPANY. THE HARTFORD INDEX FUND, INC. ("INDEX FUND") IS NOT
SPONSORED, ENDORSED, SOLD OR PROMOTED BY STANDARD & POOR'S ("S&P") AND S&P
MAKES NO REPRESENTATION REGARDING THE ADVISABILITY OF INVESTING IN THE INDEX
FUND.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 9
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any other business of Hartford. Hartford will purchase shares in the Funds in
connection with premiums allocated to the applicable Sub-Account in accordance
with Contract Owners' directions and will redeem shares in the Funds to meet
Contract obligations or make adjustments in reserves, if any. The Funds are
required to redeem Fund shares at net asset value and to make payment within
seven days.
Hartford reserves the right, subject to compliance with the law as then in
effect, to make additions to, deletions from or substitutions for the Separate
Account and its Sub-Accounts which fund the Contracts. If shares of any of the
Funds should no longer be available for investment, or if, in the judgment of
Hartford's management, further investment in shares of any Fund should become
inappropriate in view of the purposes of the Contracts, Hartford may substitute
shares of another Fund for shares already purchased, or to be purchased in the
future, under the Contracts. No substitution of securities will take place
without notice to and consent of Contract Owners and without prior approval of
the Securities and Exchange Commission to the extent required by the Investment
Company Act of 1940. Subject to Contract Owner approval, Hartford also reserves
the right to end the registration under the Investment Company Act of 1940 of
the Separate Account or any other separate accounts of which it is the depositor
and which may fund the Contracts.
Each Fund is subject to investment restrictions which may not be changed
without the approval of a majority of the shareholders of the Fund. See the
Funds prospectus accompanying this Prospectus.
- ---------------------------------------------------
INVESTMENT ADVISER
All of the Funds are sponsored by Hartford and are incorporated under the
laws of the State of Maryland. HL Investment Advisors, Inc. ("HL Advisors")
serves as the investment adviser to each of the Hartford Funds.
Wellington Management Company, L.L.P. ("Wellington Management") serves as
sub-investment adviser for Hartford Advisers Fund, Hartford Capital Appreciation
Fund, Hartford Dividend and Growth Fund, Hartford International Advisers Fund,
Hartford International Opportunities Fund, Hartford Small Company Fund and
Hartford Stock Fund.
In addition, HL Advisors has entered an investment services agreement with
Hartford Investment Management Company, Inc. ("HIMCO"), pursuant to which HIMCO
will provide certain investment services to Hartford Bond Fund, Hartford Index
Fund, Hartford Mortgage Securities Fund and HVA Money Market Fund.
A full description of the Funds, their investment policies and restrictions,
risks, charges and expenses and all other aspects of their operation is
contained in the accompanying Funds' prospectus which should be read in
conjunction with this Prospectus before investing and in the Funds' Statement of
Additional Information which may be ordered from Hartford. The Funds may not be
available in all states.
- ---------------------------------------------------
THE CONTRACT
- --------------------------------
APPLICATION FOR A CONTRACT
Individuals wishing to purchase a Contract must submit an application to
Hartford. A Contract will be issued only on the lives of insureds age 90 and
under who supply evidence of insurability satisfactory to Hartford. Acceptance
is subject to Hartford's underwriting rules and Hartford reserves the right to
reject an application for any reason. IF AN APPLICATION FOR A CONTRACT IS
REJECTED, THEN YOUR INITIAL PREMIUM WILL BE RETURNED ALONG WITH AN ADDITIONAL
AMOUNT FOR INTEREST, BASED ON THE CURRENT RATE BEING CREDITED BY HARTFORD. No
change in the terms or conditions of a Contract will be made without the consent
of the Contract Owner.
The Contract will be effective on the Contract Date only after Hartford has
received all outstanding delivery requirements and received the initial premium.
The Contract Date is the date used to determine all future cyclical transactions
on the Contract, e.g., Monthly Activity Date, Contract Months and Contract
Years. The Contract Date may be prior to, or the same as, the date the Contract
is issued ("Issue Date").
If the Coverage Amount is over the current limits established by Hartford,
the initial payment will not be accepted with the application. In other cases
where Hartford receives the initial payment with the application, Hartford will
provide fixed conditional insurance during underwriting according to the terms
of a conditional receipt. The fixed conditional insurance will be the insurance
applied for, up to a maximum that varies by age. If no fixed conditional
insurance was in effect, on Contract delivery Hartford will require a sufficient
payment to place the insurance in force.
- ---------------------------------------------------
PREMIUMS
The Contract permits the Contract Owner to pay a large single premium and,
subject to restrictions, additional premiums. The Contract Owner may choose a
minimum initial premium of 80%, 90% or 100% of the Guideline Single Premium
(based on the Face Amount). Under current underwriting rules (which are subject
to change), applicants between ages 45 and 80 who pay an initial premium of 100%
of the Guideline Single Premium (subject to then current premium limits) are
eligible for
<PAGE>
10 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
simplified underwriting without a medical examination if they meet simplified
underwriting standards as evidenced in their responses in the application. For
Contract Owners who pay an initial premium of 80% or 90% of the Guideline Single
Premium or who are below age 45 or above age 80, standard underwriting applies,
except that substandard underwriting applies only in those cases that represent
substandard risks according to customary underwriting guidelines. Additional
premiums are allowed if they do not cause the Contract to fail to meet the
definition of a life insurance contract under Section 7702 of the Code. Hartford
may require evidence of insurability for any additional premiums which increase
the Coverage Amount. Generally, the minimum initial premium Hartford will accept
is $10,000. Hartford may accept less than $10,000 under certain circumstances.
No premium will be accepted which does not meet the tax qualification guidelines
for life insurance under the Code.
- ---------------------------------------------------
ALLOCATION OF PREMIUMS
Within three business days of receipt of a completed application and the
initial premium at Hartford's Home Office, Hartford will allocate the entire
premium to HVA Money Market Fund, Inc. After the expiration of the Right To
Cancel Period the Account Value in HVA Money Market Fund, Inc. will be allocated
among the Funds in whole percentages to purchase Accumulation Units in the
applicable Sub-Accounts as the Contract Owner directs in the application.
Premiums received on or after the expiration of the Right to Cancel Period will
be allocated among the Sub-Accounts to purchase Accumulation Units in such Sub-
Accounts as directed by the Contract Owner or, in the absence of directions, as
specified in the original application. The number of Accumulation Units in each
Sub-Account to be credited to a Contract (including the initial allocation to
HVA Money Market Fund, Inc.) will be determined first by multiplying the premium
by the percentage to be allocated to each Fund to determine the portion to be
invested in the Sub-Account. Each portion to be invested in each Sub-Account is
then divided by the Accumulation Unit Value of that particular Sub-Account next
computed after receipt of the payment.
- ---------------------------------------------------
ACCUMULATION UNIT VALUES
The Accumulation Unit Value for each Sub-Account will vary to reflect the
investment experience of the applicable Fund and will be determined on each
Valuation Day by multiplying the Accumulation Unit Value of the particular
Sub-Account on the preceding Valuation Day by a "Net Investment Factor" for that
Sub-Account for the Valuation Period then ended. The Net Investment Factor for
each Sub-Account is the net asset value per share of the corresponding Fund at
the end of the Valuation Period (plus the per share dividends or capital gains
by that Fund if the ex-dividend date occurs in the Valuation Period then ended)
divided by the net asset value per share of the corresponding Fund at the
beginning of the Valuation Period. Applicants should refer to the Funds
prospectus accompanying this Prospectus for a description of how the assets of
each Fund are valued since such determination has a direct bearing on the
Accumulation Unit Value of the Sub-Account and therefore the Account Value of a
Contract. See also, "Contract Benefits and Rights -- Account Value," page 13.
All valuations in connection with a Contract, e.g., with respect to
determining Account Value and Cash Surrender Value and in connection with
Contract Loans, or calculation of Death Benefits, or with respect to determining
the number of Accumulation Units to be credited to a Contract with each premium,
other than the initial premium, will be made on the date the request or payment
is received by Hartford at its Home Office if such date is a Valuation Day;
otherwise such determination will be made on the next succeeding date which is a
Valuation Day.
- ---------------------------------------------------
DEDUCTIONS AND CHARGES
- --------------------------------
MONTHLY DEDUCTIONS
On the Contract Date, and on each Monthly Activity Date after the Contract
Date, Hartford will deduct an amount ("Deduction Amount") to cover charges and
expenses incurred in connection with a Contract. Each monthly Deduction Amount
will be deducted pro rata from each Sub-Account attributable to the Contract
such that the proportion of Account Value of the Contract attributable to each
Sub-Account remains the same before and after the deduction. The Deduction
Amount will vary from month to month. If the Cash Surrender Value is not
sufficient to cover a Deduction Amount due on any Monthly Activity Date, the
Contract may lapse. See "Contract Benefits and Rights -- Lapse and
Reinstatement," page 14. The following is a summary of the monthly deductions
and charges which constitute the Deduction Amount:
COST OF INSURANCE CHARGE: The cost of insurance charge covers Hartford's
anticipated mortality costs for standard and substandard risks. Current cost of
insurance rates are lower after the tenth Contract Year and are based on whether
100%, 90% or 80% of the Guideline Single Premium has been paid. The current cost
of insurance charge will not exceed the guaranteed cost of insurance charge.
This charge is a guaranteed maximum monthly rate multiplied by the Coverage
Amount on the Contract Date or any Monthly Activity Date. For standard risks,
the guaranteed cost of insurance rate is based on the 1980 Commissioners
Standard Ordinary Mortality Table, age last birthday). (Unisex rates may be
required in some states.) A table of guaranteed cost of insurance rates per
$1,000 will be included in each Contract; however, Hartford reserves the
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 11
- --------------------------------------------------------------------------------
right to use rates less than those shown in the table. Substandard risks will be
charged at a higher cost of insurance rate that will not exceed rates based on a
multiple of the 1980 Commissioners Standard Ordinary Mortality Table, age last
birthday. The multiple will be based on the insured's substandard rating.
The Coverage Amount is first set on the Contract Date and then on each
Monthly Activity Date. On such days, it is the Face Amount less the Account
Value subject to a Minimum Coverage Amount. The Coverage Amount remains level
between the Monthly Activity Dates.
The Coverage Amount may be adjusted to continue to qualify the Contracts as
life insurance contracts under the current federal tax law. Under that law, the
Minimum Coverage Amount is a stated percentage of the Account Value of the
Contract determined on each Monthly Activity Date. The percentages vary
according to the attained age of the Insured.
EXAMPLE:
Face Amount = $100,000
Account Value on the Monthly Activity Date = $30,000
Insured's attained age = 40
Minimum Coverage Amount percentage for age 40 = 150%
On the Monthly Activity Date, the Coverage Amount is $70,000. This is
calculated by subtracting the Account Value on the Monthly Activity Date
($30,000) from the Face Amount ($100,000), subject to a possible Minimum
Coverage Amount adjustment. This Minimum Coverage Amount is determined by taking
a percentage of the Account Value on the Monthly Activity Date. In this case,
the Minimum Coverage Amount is $45,000 (150% of $30,000). Since $45,000 is less
than the Face Amount less the Account Value ($70,000), no adjustment is
necessary. Therefore, the Coverage Amount will be $70,000.
Assume that the Account Value in the above example was $50,000. The Minimum
Coverage Amount would be $75,000 (150% of $50,000). Since this is greater than
the Face Amount less the Account Value ($50,000), the Coverage Amount for the
Contract Month is $75,000. (For an explanation of the Death Benefit, see
"Contract Benefits and Rights -- Death Benefit," page 12.)
Because the Account Value and, as a result, the Coverage Amount under a
Contract may vary from month to month, the cost of insurance charge may also
vary on each Monthly Activity Date.
TAX EXPENSE CHARGE: Hartford will deduct monthly from the Account Value a
tax expense charge equal to an annual rate of 0.40% for the first ten Contract
Years. This charge compensates Hartford for premium taxes imposed by various
states and local jurisdictions and for federal taxes imposed under Section 848
of the Code. The charge includes a premium tax deduction of 0.25% and a federal
tax deduction of 0.15%. The 0.25% premium tax deduction over ten Contract Years
approximates Hartford's average expenses for state and local premium taxes
(2.5%). Premium taxes vary, ranging from zero to more than 4.0%. The premium tax
deduction is made whether or not any premium tax applies. The deduction may be
higher or lower than the premium tax imposed. However, Hartford does not expect
to make a profit from this deduction. The 0.15% federal tax deduction helps
reimburse Hartford for approximate expenses incurred from federal taxes under
Section 848 of the Code. The federal tax deduction is a factor Hartford must use
when computing the maximum sales load chargeable under Securities and Exchange
Commission rules.
ADMINISTRATIVE CHARGE: Hartford will deduct monthly from the Account Value
attributable to the Separate Account an administrative charge equal to an annual
rate of 0.25%. This charge compensates Hartford for administrative expenses
incurred in the administration of the Separate Account and the Contracts.
MORTALITY AND EXPENSE RISK CHARGE: Hartford will deduct monthly from the
Account Value attributable to the Separate Account a charge equal to an annual
rate of 0.90% for the mortality risks and expense risks Hartford assumes in
relation to the variable portion of the Contracts. The mortality risk assumed is
that the cost of insurance charges specified in the Contract will be
insufficient to meet claims. Hartford also assumes a risk that the Face Amount
(the minimum Death Benefit) will exceed the Coverage Amount on the date of death
plus the Account Value on the date Hartford receives written notice of death.
The expense risk assumed is that expenses incurred in issuing and administering
the Contracts will exceed the administrative charges set in the Contract.
Hartford may profit from the mortality and expense risk charge and may use any
profits for any proper purpose, including any difference between the cost it
incurs in distributing the Contracts and the proceeds of the contingent deferred
sales charge. The mortality and expense risk charge is deducted while the
Contract is in force, including the duration of a payment option.
- ---------------------------------------------------
ANNUAL MAINTENANCE FEE
If the Account Value on a Contract Anniversary is less than $50,000,
Hartford will deduct on such date an annual maintenance fee of $30. This fee
will help reimburse Hartford for administrative and maintenance costs of the
Contracts. The sum of the monthly administrative charges and the annual
maintenance fee will not exceed the cost Hartford incurs in providing
administrative services under the Contracts.
<PAGE>
12 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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- ---------------------------------------------------
TAXES CHARGED AGAINST THE SEPARATE ACCOUNT
Currently, no charge is made to the Separate Account for federal income
taxes that may be attributable to the Separate Account. Hartford may, however,
make such a charge in the future. Charges for other taxes, if any, attributable
to the Separate Account may also be made.
- ---------------------------------------------------
CHARGES AGAINST THE FUNDS
The Separate Account purchases shares of the Funds at net asset value. The
net asset value of the Fund shares reflects investment advisory fees and
administrative expenses already deducted from the assets of the Funds. These
charges are described in the Funds prospectus accompanying this Prospectus.
- ---------------------------------------------------
CONTINGENT DEFERRED SALES CHARGE
Upon surrender of the Contract and partial withdrawals in excess of the
Annual Withdrawal Amount, a contingent deferred sales charge may be assessed. In
Contract Years 1 through 3, this charge is 7.5% of surrendered Account Value
attributable to premiums paid. In Contract Years 4 through 5, this charge is 6%.
In Contract Years 6 through 7, this charge is 4%. In Contract Years 8 through 9,
this charge is 2%. After the ninth Contract Year, there is no charge.
In determining the contingent deferred sales charge and the additional
premium tax charge discussed below, any surrender or partial withdrawal during
the first ten Contract Years will be deemed first from premiums paid and then
from earnings. If an amount equal to all premiums paid has been withdrawn, no
charge will be assessed on a withdrawal of the remaining Account Value.
The contingent deferred sales charge is imposed to cover a portion of the
sales expense incurred by Hartford in distributing the Contracts. This expense
includes agents' commissions, advertising and the printing of prospectuses.
See "Contract Benefits and Rights -- Amount Payable on Surrender of the
Contract," page 14.
- ---------------------------------------------------
PREMIUM TAX CHARGE
During the first nine Contract Years, an additional premium tax charge will
be imposed on surrender or partial withdrawals. The additional premium tax
charge is shown below, as a percentage of Account Value, at the end of each
Contract Year:
<TABLE>
<CAPTION>
CONTRACT
YEAR RATE
- ----------- ---------
<S> <C>
1 2.25%
2 2.00%
3 1.75%
4 1.50%
5 1.25%
6 1.00%
7 0.75%
8 0.50%
9 0.25%
10+ 0.00%
</TABLE>
After the ninth Contract Year, no additional premium tax charge will be
imposed.
- ---------------------------------------------------
CONTRACT BENEFITS AND RIGHTS
- -------------------------------- DEATH BENEFIT
While in force, the Contract provides for the payment of the Death Proceeds
to the named beneficiary when the Insured under the Contract dies. The Death
Proceeds payable to the beneficiary equal the Death Benefit less any loans
outstanding. The Death Benefit equals the greater of (1) the Face Amount or (2)
the Account Value multiplied by a specified percentage. The percentages vary
according to the attained age of the Insured and are specified in the Contract.
Therefore, an increase in Account Value may increase the Death Benefit. However,
because the Death Benefit will never be less than the Face Amount, a decrease in
Account Value may decrease the Death Benefit but never below the Face Amount.
EXAMPLES:
<TABLE>
<CAPTION>
A B
---------- ----------
<S> <C> <C>
Face Amount............................... $ 100,000 $ 100,000
Insured's Age............................. 40 40
Account Value on Date of Death............ 46,500 34,000
Specified Percentage...................... 250% 250%
</TABLE>
In Example A, the Death Benefit equals $116,250, i.e., the greater of
$100,000 (the Face Amount) or $116,250 (the Account Value at the Date of Death
of $46,500, multiplied by the specified percentage of 250%). This amount less
any outstanding loans constitutes the Death Proceeds which Hartford would pay to
the beneficiary.
In Example B, the death benefit is $100,000, i.e., the greater of $100,000
(the Face Amount) or $85,000 (the Account Value of $34,000, multiplied by the
specified percentage of 250%).
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 13
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All or part of the Death Proceeds may be paid in cash or applied under a
"Payment Option." See "Other Matters -- Payment Options," page 16.
- ---------------------------------------------------
ACCOUNT VALUE
The Account Value of a Contract will be computed on each Valuation Day. The
Account Value will vary to reflect the investment experience of the Funds, the
value of the Loan Account and the monthly Deduction Amounts. There is no minimum
guaranteed Account Value.
The Account Value of a particular Contract is related to the net asset value
of the Funds to which premiums on the Contract have been allocated. The Account
Value on any Valuation Day is calculated by multiplying the number of
Accumulation Units credited to the Contract in each Sub-Account as of the
Valuation Day by the Accumulation Unit Value of that Sub-Account, and then
summing the result for all the Sub-Accounts credited to the Contract and the
value of the Loan Account. See "The Contract -- Accumulation Unit Values," page
10.
- ---------------------------------------------------
TRANSFER OF ACCOUNT VALUE
While the Contract remains in effect, and subject to Hartford's transfer
rules then in effect, the Contract Owner may request that part or all of the
Account Value of a particular Sub-Account be transferred to other Sub-Accounts.
Hartford reserves the right to restrict the number of such transfers to no more
than 12 per Contract Year, with no two transfers being made on consecutive
Valuation Days. However, there are no restrictions on the number of transfers at
the present time. Transfers may be made by written request or by calling toll
free 1-800-231-5453. Transfers by telephone may be made by the agent of record
or by the attorney-in-fact pursuant to a power of attorney. Telephone transfers
may not be permitted in some states. The policy of Hartford and its agents and
affiliates is that they will not be responsible for losses resulting from acting
upon telephone requests reasonably believed to be genuine. Hartford will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine; otherwise, Hartford may be liable for any losses due to unauthorized or
fraudulent instructions. The procedures Hartford follows for transactions
initiated by telephone include requirements that callers provide certain
information for identification purposes. All transfer instructions by telephone
are tape recorded.
It is the responsibility of the Contract Owner to verify the accuracy of all
confirmations of transfers and to promptly advise Hartford of any inaccuracies
within one business day of receipt of the confirmation. Hartford will send the
Contract Owner confirmation of the transfer within five (5) days from the date
of any instruction.
Hartford may modify the right to reallocate Account Value among the
Sub-Accounts if Hartford determines, in its sole discretion, that the exercise
of that right by one or more Contract Owners is, or would be, to the
disadvantage of other Contract Owners. Any modification could be applied to
transfers to or from some or all of the Sub-Accounts and could include, but not
be limited to, the requirement of a minimum period between each transfer, not
accepting transfer requests of an agent acting under the power of attorney on
behalf of more than one Contract Owner, or limiting the dollar amount that may
be transferred among the Sub-Accounts at one time. These restrictions may be
applied in any manner reasonably designed to prevent any use of the transfer
right that Hartford considers to be disadvantageous to other Contract Owners.
As a result of a transfer, the number of Accumulation Units credited to the
Sub-Account from which the transfer is made will be reduced by the number
obtained by dividing the amount transferred by the Accumulation Unit Value of
that Sub-Account on the Valuation Day Hartford receives the transfer request.
The number of Accumulation Units credited to the Sub-Account to which the
transfer is made will be increased by the number obtained by dividing the amount
transferred by the Accumulation Unit Value of that Sub-Account on the Valuation
Day Hartford receives the transfer request.
- ---------------------------------------------------
CONTRACT LOANS
While the Contract is in effect, a Contract Owner may obtain, without the
consent of the beneficiary (provided the designation of beneficiary is not
irrevocable), one or both of two types of cash loans from Hartford. Both types
of loans are secured by the Contract. The aggregate loans (including the
currently applied for loan) may not exceed, at the time a loan is requested, 90%
of the Account Value less any contingent deferred sales charge and due and
unpaid Deduction Amount.
The loan amount will be transferred pro rata from each Sub-Account
attributable to the Contract (unless the Contract Owner specifies otherwise) to
the Loan Account. The amounts allocated to the Loan Account will bear interest
at a rate of 4% per annum (6% for "Preferred Loans"). The amount of the Loan
Account that equals the difference between the Account Value and the total of
all premiums paid under the Contract is considered a "Preferred Loan." The loan
interest rate that Hartford will charge on all loans is 6% per annum. The
difference between the value of the Loan Account and the Indebtedness will be
transferred on a pro rata basis from the Sub-Accounts to the Loan Account on
each Monthly Activity Date. The proceeds of a loan will be delivered to the
Contract Owner within seven business days of Hartford's receipt of the loan
request.
<PAGE>
14 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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If the aggregate outstanding loan(s) secured by the Contract exceeds the
Account Value of the Contract less any contingent deferred sales charges and due
and unpaid Deduction Amount, Hartford will give written notice to the Contract
Owner that, unless Hartford receives an additional payment within 61 days to
reduce the aggregate outstanding loan(s) secured by the Contract, the Contract
may lapse.
All or any part of any loan secured by a Contract may be repaid while the
Contract is still in effect. When loan repayments or interest payments are made,
they will be allocated among the Sub-Account(s) in the same percentage as
premiums are allocated (unless the Contract Owner requests a different
allocation) and an amount equal to the payment will be deducted from the Loan
Account. Any outstanding loan at the end of a Grace Period must be repaid before
the Contract will be reinstated. See "Contract Benefits and Rights -- Lapse and
Reinstatement," page 14.
A loan, whether or not repaid, will have a permanent effect on the Account
Value because the investment results of each Sub-Account will apply only to the
amount remaining in such Sub-Accounts. The longer a loan is outstanding, the
greater the effect is likely to be. The effect could be favorable or
unfavorable. If the Sub-Accounts earn more than 4% per annum (the annual
interest rate for amounts held in the Loan Account), a Contract Owner's Account
Value will not increase as rapidly as it would have had no loan been made. If
the Sub-Accounts earn less than 4% per annum, the Contract Owner's Account Value
will be greater than it would have been had no loan been made. Also, if not
repaid, the aggregate outstanding loan(s) will reduce the Death Proceeds and
Cash Surrender Value otherwise payable.
- ---------------------------------------------------
AMOUNT PAYABLE ON SURRENDER OF THE CONTRACT
While the Contract is in effect, a Contract Owner may elect, without the
consent of the beneficiary (provided the designation of beneficiary is not
irrevocable), to fully surrender the Contract. Upon surrender, the Contract
Owner will receive the Cash Surrender Value determined as of the day Hartford
receives the Contract Owner's written request or the date requested by the
Contract Owner whichever is later. The Cash Surrender Value equals the Account
Value less any contingent deferred sales charges and additional premium tax
charge and all Indebtedness. Hartford will pay the Cash Surrender Value of the
Contract within seven days of receipt by Hartford of the written request or on
the effective surrender date requested by the Contract Owner, whichever is
later. The Contract will terminate on the date of receipt of the written
request, or the date the Contract Owner requests the surrender to be effective,
whichever is later. For a discussion of the tax consequences of surrendering the
Contract, see "Federal Tax Considerations," page 21.
If the Contract Owner chooses to apply the surrender proceeds to a payment
option (see "Other Matters -- Payment Options," page 16), the contingent
deferred sales charge will not be imposed to the surrender proceeds applied to
the option. In other words, the surrender proceeds will equal the Cash Surrender
Value without reduction for the contingent deferred sales charge. However, the
additional premium tax charge, if applicable, will be deducted from the
surrender proceeds to be applied, and amounts withdrawn from Option 1, Option 5
or Option 6 will be subject to the contingent deferred sales charge, if
applicable.
- ---------------------------------------------------
PARTIAL WITHDRAWALS
While the Contract is in effect, a Contract Owner may elect, by written
request, to make partial withdrawals from the Cash Surrender Value. The Cash
Surrender Value, after partial withdrawal, must at least equal Hartford's
minimum amount rules then in effect; otherwise, the request will be treated as a
request for full surrender. The partial withdrawal will be deducted pro rata
from each Sub-Account, unless the Contract Owner instructs otherwise. The Face
Amount will be reduced proportionate to the reduction in the Account Value due
to the partial withdrawal. Partial withdrawals in excess of the Annual
Withdrawal Amount will be subject to the contingent deferred sales charge and
any additional premium tax charges. See "Deductions and Charges -- Contingent
Deferred Sales Charge," page 12,, and "Deductions and Charges -- Premium Tax
Charge," page 12. For a discussion of the tax consequences of partial
withdrawals, see "Federal Tax Considerations," page 21.
- ---------------------------------------------------
BENEFITS AT MATURITY
If the Insured is living on the "Maturity Date" (the anniversary of the
Contract Date on which the Insured is age 100), on surrender of the Contract to
Hartford, Hartford will pay to the Contract Owner the Cash Surrender Value. In
such case, the Contract will terminate and Hartford will have no further
obligations under the Contract. (The Maturity Date may be extended by rider
where approved, but see "Federal Tax Considerations -- Income Taxation of
Contract Benefits," page 21.)
- ---------------------------------------------------
LAPSE AND REINSTATEMENT
The Contract will remain in effect until the Cash Surrender Value is
insufficient to cover a Deduction Amount due on a Monthly Activity Date.
Hartford will notify the Contract Owner of the deficiency in writing and will
provide a 61-day period ("Grace Period") to pay an amount sufficient to cover
the Deduction Amount(s) due. The notice will indicate the amount that must be
paid.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 15
- --------------------------------------------------------------------------------
The Contract will continue through the Grace Period, but if no additional
premium payment is made, it will terminate at the end of the Grace Period. If
the person insured under the Contract dies during the Grace Period, the Death
Proceeds payable under the Contract will be reduced by the Deduction Amount(s)
due and unpaid. See "Contract Benefits and Rights -- Death Benefit," page 12.
If the Contract lapses, the Contract Owner may apply for reinstatement of
the Contract by payment of the reinstatement premium (and any applicable
charges) shown in the Contract. A request for reinstatement may be made within
five years of lapse. If a loan was outstanding at the time of lapse, Hartford
will require repayment of the loan before permitting reinstatement. In addition,
Hartford reserves the right to require evidence of insurability satisfactory to
Hartford.
- ---------------------------------------------------
CANCELLATION AND EXCHANGE RIGHTS
An applicant has a limited right to return a Contract for cancellation. If
the Contract is returned, by mail or personal delivery to Hartford or to the
agent who sold the Contract, to be cancelled within ten days after delivery of
the Contract to the Contract Owner (a longer free-look period is provided in
certain cases), Hartford will return to the applicant, within seven days, the
greater of premiums paid for the Contract or the sum of (1) the Account Value on
the date the returned Contract is received by Hartford or its agent and (2) any
deductions under Contract or by the Funds for taxes, charges or fees.
Once the Contract is in effect, it may be exchanged, during the first 24
months after its issuance, for a non-variable flexible premium adjustable life
insurance contract offered by Hartford (or an affiliated company) on the life of
the Insured. No evidence of insurability will be required. The new contract will
have, at the election of the Contract Owner, either the same Coverage Amount as
under the exchanged Contract on the date of exchange or the same Death Benefit.
The effective date, issue date and issue age will be the same as existed under
the exchanged Contract. If a Contract loan was outstanding, the entire loan must
be repaid. There may be a cash adjustment required on the exchange.
- ---------------------------------------------------
SUSPENSION OF VALUATION, PAYMENTS
AND TRANSFERS
Hartford will suspend all procedures requiring valuation (including
transfers, surrenders and loans) on any day a national stock exchange is closed
or trading is restricted due to an existing emergency, as defined by the
Securities and Exchange Commission, or on any day the Securities and Exchange
Commission has ordered that the right of surrender of the Contracts be suspended
for the protection of Contract Owners, until such condition has ended.
- ---------------------------------------------------
LAST SURVIVOR CONTRACTS
The Contracts are offered on both a single life and a "last survivor" basis.
Contracts sold on a last survivor basis operate in a manner almost identical to
the single life version. The most important difference is that the last survivor
version involves two Insureds and the Death Proceeds are paid on the death of
the last surviving Insured. The other significant differences between the last
survivor and single life versions are listed below.
1. The cost of insurance charges under the last survivor Contracts are
determined in a manner that reflects the anticipated mortality of the two
Insureds and the fact that the Death Benefit is not payable until the
death of the second Insured. See the last survivor illustrations in
"Appendix A," page 25.
2. To qualify for simplified underwriting under a last survivor Contract,
both Insureds must meet the simplified underwriting standards.
3. For a last survivor Contract to be reinstated, both Insureds must be
alive on the date of reinstatement.
4. The Contract provisions regarding misstatement of age or sex, suicide and
incontestability apply to either Insured.
5. Additional tax disclosures applicable to last survivor Contracts are
provided in "Federal Tax Considerations," page 21.
- ---------------------------------------------------
OTHER MATTERS
- -------------------------------- VOTING RIGHTS
In accordance with its interpretation of presently applicable law, Hartford
will vote the shares of the Funds at regular and special meetings of the
shareholders of the Funds in accordance with instructions from Contract Owners
(or the assignee of the Contract, as the case may be) having a voting interest
in the Separate Account. The number of shares held in the Separate Account which
are attributable to each Contract Owner is determined by dividing the Contract
Owner's interest in each Sub-Account by the net asset value of the applicable
shares of the Funds. Hartford will vote shares for which no instructions have
been given and shares which are not attributable to Contract Owners (i.e.,
shares owned by Hartford) in the same proportion as it votes shares for which it
has received instructions. However, if the Investment Company Act of 1940 or any
rule promulgated thereunder should be amended, or if Hartford's present
interpretation should change and, as a result, Hartford determines it is
permitted
<PAGE>
16 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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to vote the shares of the Funds in its own right, it may elect to do so.
The voting interests of the Contract Owner (or the assignee) in the Funds
will be determined as follows: Contract Owners may cast one vote for each full
or fractional Accumulation Unit owned under the Contract and allocated to a
Sub-Account, the assets of which are invested in the particular Fund on the
record date for the shareholder meeting for that Fund. If, however, a Contract
Owner has taken a loan secured by the Contract, amounts transferred from the
Sub-Account(s) to the Loan Account in connection with the loan (see "Contract
Benefits and Rights -- Contract Loans," page 13) will not be considered in
determining the voting interests of the Contract Owner. Contract Owners should
review the Funds prospectus accompanying this Prospectus to determine matters on
which shareholders may vote.
Hartford may, when required by state insurance regulatory authorities,
disregard Contract Owners' voting instructions if such instructions require that
the shares be voted so as to cause a change in the sub-classification or
investment objective of one or more of the Funds or to approve or disapprove an
investment advisory contract for the Funds.
In addition, Hartford itself may disregard Contract Owners' voting
instructions in favor of changes initiated by a Contract Owner in the investment
policy or the investment adviser of the Funds if Hartford reasonably disapproves
of such changes. A change would be disapproved only if the proposed change is
contrary to state law or prohibited by state regulatory authorities. If Hartford
does disregard voting instructions, a summary of that action and the reasons for
such action will be included in the next periodic report to Contract Owners.
- ---------------------------------------------------
STATEMENTS TO CONTRACT OWNERS
Hartford will maintain all records relating to the Separate Account and the
Sub-Accounts. At least once each Contract Year, Hartford will send to Contract
Owners a statement showing the Coverage Amount and the Account Value of the
Contract (indicating the number of Accumulation Units credited to the Contract
in each Sub-Account and the corresponding Accumulation Unit Value) and any
outstanding loan secured by the Contract as of the date of the statement. The
statement will also show premium paid, and Deduction Amounts under the Contract
since the last statement, and any other information required by any applicable
law or regulation.
- ---------------------------------------------------
LIMIT ON RIGHT TO CONTEST
Hartford may not contest the validity of the Contract after it has been in
effect during the Insured's lifetime for two years from the Issue Date. If the
Contract is reinstated, the two-year period is measured from the date of
reinstatement. Any increase in the Coverage Amount as a result of a premium is
contestable for two years from its effective date. In addition, if the Insured
commits suicide in the two year period, or such period as specified in state
law, the benefit payable will be limited to the Account Value less any
Indebtedness.
- ---------------------------------------------------
MISSTATEMENT AS TO AGE AND SEX
If the age or sex of the Insured is incorrectly stated, the Death Benefit
will be appropriately adjusted as specified in the Contract.
- ---------------------------------------------------
PAYMENT OPTIONS
The surrender proceeds or Death Proceeds under the Contracts may be paid in
a lump sum or may be applied to one of Hartford's payment options. The minimum
amount that may be applied under a payment option is $5,000, unless Hartford
consents to a lesser amount. Under Options 2, 3 and 4, no surrender or partial
withdrawals are permitted after payments commence. Full surrender or partial
withdrawals may be made from Option 1 or Option 6, but they are subject to the
contingent deferred sales charge, if applicable. Only a full surrender is
allowed from Option 5. A surrender from Option 5 will also be subject to the
contingent deferred sales charge, if applicable.
Hartford will pay interest of at least 3 1/2% per year on the Death Proceeds
from the date of the Insured's death to the date payment is made or a payment
option is elected. At such times, the proceeds are not subject to the investment
experience of the Separate Account.
The following options are available under the Contracts (Hartford may offer
other payment options):
OPTION 1: Interest Income
This option offers payments of interest, at the rate Hartford declares, on
the amount applied under this option. The interest rate will never be less than
3 1/2% per year.
OPTION 2: Life Annuity
A life annuity is an annuity payable during the lifetime of the payee and
terminating with the last payment preceding the death of the payee. This option
offers the largest payment amount of any of the life annuity options, since
there is no guarantee of a minimum number of payments nor a provision for a
death benefit payable to a beneficiary.
It would be possible under this option for a payee to receive only one
annuity payment if he died prior to the due date of the second annuity payment,
two annuity payments if he died before the date of the third annuity payment,
etc.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 17
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OPTION 3: Life Annuity with 120, 180 or 240 Monthly Payments Certain
This annuity option is an annuity payable monthly during the lifetime of the
payee with the provision that payments will be made for a minimum of 120, 180 or
240 months, as elected. If, at the death of the payee, payments have been made
for less than the minimum elected number of months, then the present value (as
of the date of the payee's death) of any remaining guaranteed payments will be
paid in one sum to the beneficiary or beneficiaries designated, unless other
provisions have been made and approved by Hartford.
OPTION 4: Joint and Last Survivor Annuity
An annuity payable monthly during the joint lifetime of the payee and a
designated second person, and thereafter during the remaining lifetime of the
survivor, ceasing with the last payment prior to the death of the survivor.
Based on the options currently offered by Hartford, the payee may elect that the
payment to the survivor be less than the payment made during the joint lifetime
of the payee and a designated second person.
It would be possible under this option for a payee and designated second
person to receive only one payment in the event of the common or simultaneous
death of the parties prior to the due date for the second payment and so on.
OPTION 5: Payments for a Designated Period
An amount payable monthly for the number of years, selected which may be
from five to 30 years. Under this option, you may, at any time, request a full
surrender and receive, within seven days, the termination value of the Contract
as determined by Hartford.
In the event of the payee's death prior to the end of the designated period,
the present value (as of the date of the payee's death) of any remaining
guaranteed payments will be paid in one sum to the beneficiary or beneficiaries
designated unless other provisions have been made and approved by Hartford.
Option 5 is an option that does not involve life contingencies.
OPTION 6: Death Proceeds Remaining with Hartford
Proceeds from the Death Benefit left with Hartford. These proceeds will
remain in the Sub-Accounts to which they were allocated at the time of death,
unless the beneficiary elects to reallocate them. Full or partial withdrawals
may be made at any time.
VARIABLE AND FIXED ANNUITY PAYMENTS: When an annuity is effected, unless
otherwise specified, the surrender proceeds or Death Proceeds held in the Sub-
Accounts will be applied to provide a variable annuity based on the pro rata
amount in the various Sub-Accounts. Fixed annuities options are also available.
YOU SHOULD CONSIDER WHETHER THE ALLOCATION OF PROCEEDS AMONG SUB-ACCOUNTS OF THE
SEPARATE ACCOUNT FOR YOUR ANNUITY PAYMENTS ARE BASED ON THE INVESTMENT
ALTERNATIVE BEST SUITED TO YOUR RETIREMENT NEEDS.
VARIABLE ANNUITY: The Contract contains tables indicating the minimum dollar
amount of the first monthly payment under the optional variable forms of annuity
for each $1,000 of value of a Sub-Account. The first monthly payment varies
according to the form and type of variable payment annuity selected. The
Contract contains variable payment annuity tables derived from the 1983a
Individual Annuity Mortality Table, with ages set back one year and with an
assumed investment rate ("A.I.R.") of 5% per annum. The total first monthly
variable annuity payment is determined by multiplying the proceeds value
(expressed in thousands of dollars) of a Sub-Account by the amount of the first
monthly payment per $1,000 of value obtained from the tables in the Contract.
The amount of the first monthly variable annuity payment is divided by the
value of an annuity unit (an accounting unit of measure used to calculate the
value of annuity payments) for the appropriate Sub-Account no earlier than the
close of business on the fifth Valuation Day preceding the day on which the
payment is due in order to determine the number of annuity units represented by
the first payment. This number of annuity units remains fixed during the annuity
payment period and in each subsequent month the dollar amount of the variable
annuity payment is determined by multiplying this fixed number of annuity units
by the current annuity unit value.
LEVEL VARIABLE ANNUITY PAYMENTS WOULD BE PRODUCED IF THE INVESTMENT RATE
REMAINED CONSTANT AND EQUAL TO THE A.I.R. IN FACT, PAYMENTS WILL VARY UP OR DOWN
AS THE INVESTMENT RATE VARIES UP OR DOWN RELATIVE TO THE A.I.R.
FIXED ANNUITY: Fixed annuity payments are determined by multiplying the
amount applied to the annuity by a rate (to be determined by Hartford) which is
no less than the rate specified in the fixed payment annuity tables in the
Contract. The annuity payment will remain level for the duration of the annuity.
Hartford will make any other arrangements for income payments as may be
agreed on.
- ---------------------------------------------------
BENEFICIARY
The applicant names the beneficiary in the application for the Contract. The
Contract Owner may change the
<PAGE>
18 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
beneficiary (unless irrevocably named) during the Insured's lifetime by written
request to Hartford. If no beneficiary is living when the Insured dies, the
Death Proceeds will be paid to the Contract Owner if living; otherwise to the
Contract Owner's estate.
- ---------------------------------------------------
ASSIGNMENT
The Contract may be assigned as collateral for a loan or other obligation.
Hartford is not responsible for any payment made or action taken before receipt
of written notice of such assignment. Proof of interest must be filed with any
claim under a collateral assignment.
- ---------------------------------------------------
DIVIDENDS
No dividends will be paid under the Contracts.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 19
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
POSITION WITH HARTFORD, OTHER BUSINESS PROFESSION, VOCATION OR EMPLOYMENT
NAME, AGE YEAR OF ELECTION FOR PAST 5 YEARS; OTHER DIRECTORSHIPS
- -------------------------------- ------------------------------------- ----------------------------------------------------------
<S> <C> <C>
Wendell J. Bossen, 63 Vice President, 1995** Vice President (1992-Present), Hartford Life Insurance
Company; Executive Vice President (1984) Mutual Benefit.
Gregory A. Boyko, 45 Vice President, 1995 Vice President & Controller (1995-Present), Hartford Life
Insurance Company; Chief Financial Officer (1994-1995),
IMG American Life; Senior Vice President (1992-1994),
Connecticut Mutual Life Insurance Company.
Peter W. Cummins, 60 Vice President, 1993 Vice President, Individual Annuity Operations
(1989-Present), Hartford.
Ann M. deRaismes, 46 Vice President, 1994 Vice President (1994-Present); Assistant Vice President
(1992-1994); Director of Human Resources (1991-1997),
Hartford Life Insurance Company.
James R. Dooley, 60 Vice President, 1973 Vice President, Director Information Services
(1973-Present), Hartford.
Timothy M. Fitch, 44 Vice President, 1995 Vice President, (1995-Present); Assistant Vice President
(1993-1995); Director (1991-1993), Hartford Life
Insurance Company.
Bruce D. Gardner, 46 Director, 1991* Vice President (1996-Present); General Counsel and
Corporate Secretary (1991-1995), Hartford Life Insurance
Company.
Joseph H. Gareau, 50 Executive Vice President & Senior Vice President & Chief Investment Officer
Chief Investment Officer, 1993 (1992-1993), Hartford; Senior Vice President & Chief
Director, 1993* Investment Officer (1992), Hartford Insurance Group.
Donald J. Gillette, 51 Vice President, 1993 Vice President, Director of Marketing (1991-Present),
Hartford.
Lynda Godkin, 43 General Counsel, 1996 Corporate Associate General Counsel and Corporate Secretary
Secretary, 1995 (1995-1996); Assistant General Counsel and Secretary
(1994-1995); Counsel (1990-1994), Hartford Life
Insurance Company.
Lois W. Grady, 52 Vice President, 1993 Assistant Vice President (1988-1993), Hartford Life
Insurance Company.
David A. Hall, 43 Senior Vice President & Senior Vice President & Actuary (1993-Present), Hartford.
Actuary, 1993
Robert A. Kerzner, 45 Vice President, 1994 Vice President (1994-Present); Regional Vice President
(1991-1994), Hartford.
William B. Malchodi, Jr., 46 Vice President, 1994 Vice President (1994-Present); Director of Taxes
Director of Taxes, 1992 (1992-Present), Hartford Insurance Group.
Thomas M. Marra, 38 Executive Vice President & Senior Vice President & Director, Individual Life and
Director, Individual Life and Annuity Division (1993-1996); Director of Individual
Annuity Division, 1996 Annuities (1991-1993), Hartford.
Director, 1994*
Steven L. Mattieson, 52 Vice President, 1984 Vice President, Director of New Business (1984-Present)
Hartford.
</TABLE>
<PAGE>
20 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITION WITH HARTFORD, OTHER BUSINESS PROFESSION, VOCATION OR EMPLOYMENT
NAME, AGE YEAR OF ELECTION FOR PAST 5 YEARS; OTHER DIRECTORSHIPS
- -------------------------------- ------------------------------------- ----------------------------------------------------------
<S> <C> <C>
Joseph J. Noto, 45 Vice President, 1989 President and Director (1994-Present), American Maturity
Life Insurance Company; Vice President (1989-Present),
Hartford Life Insurance Company.
Craig D. Raymond, 36 Vice President, 1993 Assistant Vice President (1992-1993); Actuary (1989-1994),
Chief Actuary, 1994 Hartford Life Insurance Company.
David T. Schrandt, 49 Vice President, 1987 Vice President, Treasurer and Controller (1987-Present),
Treasurer, 1987 Hartford.
Lowndes A. Smith, 57 President, 1989 President & Chief Operating Officer (1989-Present),
Chief Executive Officer, 1993 Hartford Life Insurance Company.
Director, 1985*
Lizabeth H. Zlatkus, 37 Vice President, 1994 Director, 1994* Vice President, Director Business Operaitons
(1994-Present), Assistant Vice President, Director
Executive Operations (1992-1994), Hartford Life
Insurance Company.
</TABLE>
- ------------------------
* Denotes date of election to Board of Directors.
** ITT Hartford Affiliated Company.
Unless otherwise indicated, the principal business address of each the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
- ---------------------------------------------------
DISTRIBUTION OF THE CONTRACTS
Hartford intends to sell the Contracts in all jurisdictions where it is
licensed to do business. The Contracts will be sold by life insurance sales
representatives who represent Hartford and who are registered representatives of
Hartford Equity Sales Company, Inc. ("HESCO") or certain other independent,
registered broker-dealers. Any sales representative or employee will have been
qualified to sell variable life insurance contracts under applicable federal and
state laws. Each broker-dealer is registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 and all are members of the
National Association of Securities Dealers, Inc.
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account. Both
HESCO and HSD are wholly-owned subsidiaries of Hartford Life Insurance Company.
The principal business address of HESCO and HSD is the same as that of Hartford.
The maximum sales commission payable to Hartford agents, independent
registered insurance brokers, and other registered broker-dealers is 6.0% of
initial and subsequent premiums. Additional annual compensation of no more than
0.75% of Account Value may be paid. From time to time, Hartford may pay or
permit other promotional incentives, in cash or credit or other compensation.
Hartford may provide information on various topics to Contract Owners and
prospective Contract Owners in advertising, sales literature or other materials.
These topics may include the relationship between sectors of the economy and the
economy as a whole and its effect on various securities markets, investment
strategies and techniques (such as value investing, dollar cost averaging and
asset allocation), the advantages and disadvantages of investing in tax-
advantaged and taxable instruments, customer profiles and hypothetical purchase
scenarios, financial management and tax and retirement planning, and variable
annuities and other investment alternatives, including comparisons between the
Contracts and the characteristics of, and market for, such alternatives.
- ---------------------------------------------------
SAFEKEEPING OF THE SEPARATE
ACCOUNT'S ASSETS
The assets of the Separate Account are held by Hartford. The assets of the
Separate Account are kept physically segregated and held separate and apart from
the General Account of Hartford. Hartford maintains records of all purchases and
redemptions of shares of the Fund. Additional protection for the assets of the
Separate Account is afforded by Hartford's blanket fidelity bond, issued by
Aetna Casualty and Surety Company, in the aggregate of $50 million, covering all
of the officers and employees of Hartford.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 21
- --------------------------------------------------------------------------------
- ---------------------------------------------------
FEDERAL TAX CONSIDERATIONS
- -------------------------------- GENERAL
SINCE THE TAX LAW IS COMPLEX AND SINCE TAX CONSEQUENCES WILL VARY ACCORDING
TO THE ACTUAL STATUS OF THE CONTRACT OWNER INVOLVED, LEGAL AND TAX ADVICE MAY BE
NEEDED BY A PERSON, EMPLOYER, OR OTHER ENTITY CONTEMPLATING THE PURCHASE OF A
CONTRACT DESCRIBED HEREIN.
It should be understood that any detailed description of the federal income
tax consequences regarding the purchase of the Contracts cannot be made in this
Prospectus and that special tax rules may be applicable with respect to certain
purchase situations not discussed herein. In addition, no attempt is made here
to consider any applicable state or other tax laws. For detailed information, a
qualified tax adviser should always be consulted. This discussion of federal tax
considerations is based upon Hartford's understanding of existing federal income
tax laws as they are currently interpreted.
- ---------------------------------------------------
TAXATION OF HARTFORD AND
THE SEPARATE ACCOUNT
The Separate Account is taxed as a part of Hartford which is taxed as a life
insurance company under Subchapter L of 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 the Code. Investment income
and realized capital gains on the assets of the Separate Account (the underlying
Funds) are reinvested and are taken into account in determining the value of the
Accumulation Units (see "Contract Benefits and Right -- Account Value," page
13). As a result, such investment income and realized capital gains are
automatically applied to increase reserves under the Contract.
Hartford does not expect to incur any federal income tax on the earnings or
realized capital gains attributable to the Separate Account. Based upon this
expectation, no charge is currently being made to the Separate Account for
federal income taxes. If Hartford incurs income taxes attributable to the
Separate Account or determines that such taxes will be incurred, it may assess a
charge for such taxes against the Separate Account.
- ---------------------------------------------------
INCOME TAXATION OF CONTRACT BENEFITS
For federal income tax purposes, the Contracts should be treated as life
insurance contracts under Section 7702 of the Code. The death benefit under a
life insurance contract is generally excluded from the gross income of the
beneficiary. Also, a life insurance contract owner is generally not taxed on
increments in the contract value until the contract is partially or completely
surrendered. Section 7702 limits the amount of premiums that may be invested in
a contract that is treated as life insurance. Hartford intends to monitor
premium levels to assure compliance with the Section 7702 requirements.
During the first 15 Contract Years, an "income first" rule generally applies
to distributions of cash required to be made under Code Section 7702 because of
a reduction in benefits under the Contract.
The Maturity Date Extension Rider allows a Contract Owner to extend the
Maturity Date to the date of the Insured's death. If the Maturity Date of the
Contract is extended by rider, Hartford believes that the Contract will continue
to be treated as a life insurance contract for federal income tax purposes after
the scheduled Maturity Date. However, due to the lack of specific guidance on
this issue, the result is not certain. If the Contract is not treated as a life
insurance contract for federal income tax purposes after the scheduled Maturity
Date, among other things, the Death Proceeds may be taxable to the recipient.
The Contract Owner should consult a qualified tax adviser regarding the possible
adverse tax consequences resulting from an extension of the scheduled Maturity
Date.
- ---------------------------------------------------
LAST SURVIVOR CONTRACTS
Although Hartford believes that the last survivor Contracts are in
compliance with Section 7702 of the Code, the manner in which Section 7702
should be applied to certain features of a joint survivorship life insurance
contract is not directly addressed by Section 7702. In the absence of final
regulations or other guidance issued under Section 7702, there is necessarily
some uncertainty whether a last survivor Contract will meet the Section 7702
definition of a life insurance contract.
- ---------------------------------------------------
MODIFIED ENDOWMENT CONTRACTS
A life insurance contract is treated as a "modified endowment contract"
under Section 7702A of the Code if it meets the definition of life insurance in
Section 7702 but fails the "seven-pay" test of Section 7702A. The seven-pay test
provides that premiums cannot be paid at a rate more rapidly than that allowed
by the payment of seven annual premiums using specified computational rules
provided in Section 7702A(c). The large single premium permitted under the
Contract does not meet the specified computational rules for the "seven-pay
test" under Section 7702A(c). Therefore, the Contract will generally be treated
as a modified endowment contract for federal income tax purposes. However, an
exchange under Section 1035 of the Code of a life insurance contract issued
before June 21, 1988 will not
<PAGE>
22 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
cause the new contract to be treated as a modified endowment contract if no
additional premiums are paid and there is no change in the death benefit as the
result of the exchange.
A Contract that is classified as modified endowment contract is generally
eligible for the beneficial tax treatment accorded to life insurance. That is,
the death benefit is excluded from income and increments in value are not
subject to current taxation. However, loans, distributions or other amounts
received from a modified endowment contract during the life of the Insured will
be taxed to the extent of any accumulated income in the contract (generally, the
excess of account value over premiums paid). Amounts that are taxable
withdrawals will be subject to a 10% additional tax, with certain exceptions.
All modified endowment contracts that are issued within any calendar year to
the same contract owner by one company or its affiliates shall be treated as one
modified endowment contract in determining the taxable portion of any loan or
distributions.
- ---------------------------------------------------
ESTATE AND GENERATION SKIPPING TAXES
When the Insured dies, the Death Proceeds will generally be includible in
the Contract Owner's estate for purposes of federal estate tax if the last
surviving Insured owned the Contract. If the Contract Owner was not the last
surviving Insured, the fair market value of the Contract would be included in
the Contract Owner's estate upon the Contract Owner's death. Nothing would be
includible in the last surviving Insured's estate if he or she neither retained
incidents of ownership at death nor had given up ownership within three years
before death.
Federal estate tax is integrated with federal gift tax under a unified rate
schedule. In general, estates less than $600,000 will not incur a federal estate
tax liability. In addition, an unlimited marital deduction may be available for
federal estate and gift tax purposes. The unlimited marital deduction permits
the deferral of taxes until the death of the surviving spouse (when the Death
Proceeds would be available to pay taxes due and other expenses incurred).
If the Contract Owner (whether or not he or she is an Insured) transfers
ownership of the Contract to someone two or more generations younger, the
transfer may be subject to the generation-skipping transfer tax, the taxable
amount being the value of the Contract. The generation-skipping transfer tax
provisions generally apply to transfers which would be subject to the gift and
estate tax rules. Individuals are generally allowed an aggregate generation
skipping transfer exemption of $1 million. Because these rules are complex, the
Contract Owner should consult with a qualified tax adviser for specific
information if ownership is passing to younger generations.
- ---------------------------------------------------
DIVERSIFICATION REQUIREMENTS
Section 817 of the Code provides that a variable life insurance contract
(other than a pension plan policy) will not be treated as a life insurance
contract for any period during which the investments made by the separate
account or underlying fund are not adequately diversified in accordance with
regulations prescribed by the Treasury Department. If a Contract is not treated
as a life insurance contract, the Contract Owner will be subject to income tax
on the annual increases in cash value.
The Treasury Department has issued diversification regulations which
generally require, among other things, that no more than 55% of the value of the
total assets of the segregated asset account underlying a variable contract is
represented by any one investment, no more than 70% is represented by any two
investments, no more than 80% is represented by any three investments, and no
more than 90% is represented by any four investments. In determining whether the
diversification standards are met, all securities of the same issuer, all
interests in the same real property project, and all interests in the same
commodity are each treated as a single investment. In addition, in the case of
government securities, each government agency or instrumentality shall be
treated as a separate issuer.
A separate account must be in compliance with the diversification standards
on the last day of each calendar quarter or within 30 days after the quarter
ends. If an insurance company inadvertently fails to meet the diversification
requirements, the company may comply within a reasonable period and avoid the
taxation of policy income on an ongoing basis. However, either the company or
the Contract Owner must agree to pay the tax due for the period during which the
diversification requirements were not met.
Hartford monitors the diversification of investments in the separate
accounts and tests for diversification as required by the Code. Hartford intends
to administer all Contracts subject to the diversification requirements in a
manner that will maintain adequate diversification.
- ---------------------------------------------------
OWNERSHIP OF THE ASSETS IN
THE SEPARATE ACCOUNT
In order for a variable life insurance contract to qualify for tax deferral,
assets in the segregated asset accounts supporting the variable contract must be
considered to be owned by the insurance company and not by the variable contract
owner. The Internal Revenue Service ("IRS") has issued several rulings which
discuss investor control. The IRS has ruled that incidents of ownership by the
contract owner, such as the ability to select and control investments in a
separate account, will cause the contract owner to be treated as the owner of
the assets for tax purposes.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 23
- --------------------------------------------------------------------------------
Further, in the explanation to the temporary Section 817 diversification
regulations, the Treasury Department noted that the temporary regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor, rather
than the insurance company, to be treated as the owner of the assets in the
account." The explanation further indicates that "the temporary regulations
provide that in appropriate cases a segregated asset account may include
multiple sub-accounts, but do not specify the extent to which policyholders may
direct their investments to particular sub-accounts without being treated as the
owners of the underlying assets. Guidance on this and other issues will be
provided in regulations or revenue rulings under section 817(d), relating to the
definition of "variable contract." The final regulations issued under Section
817 do not provide guidance regarding investor control, and as of the date of
this Prospectus, no other such guidance has been issued. Further, Hartford does
not know if or in what form such guidance will be issued. In addition, although
regulations are generally issued with prospective effect, it is possible that
regulations may be issued with retroactive effect. Due to the lack of specific
guidance regarding the issue of investor control, there is necessarily some
uncertainty regarding whether a Contract Owner could be considered the owner of
the assets for tax purposes. Hartford reserves the right to modify the
Contracts, as necessary, to prevent Contract Owners from being considered the
owners of the assets in the Separate Account.
- ---------------------------------------------------
LIFE INSURANCE PURCHASED FOR USE IN
SPLIT DOLLAR ARRANGEMENTS
On January 26, 1996, the IRS released a technical advice memorandum ("TAM")
on the taxability of life insurance policies used in certain split dollar
arrangements. A TAM, issued by the National Office of the IRS, provides advice
as to the internal revenue laws, regulations, and related statutes with respect
to a specific set of facts and a specific taxpayer. In the TAM, among other
things, the IRS concluded that an employee was subject to current taxation on
the excess of the cash surrender value of the policy over the premiums to be
returned to the employer. Purchasers of life insurance policies to be used in
split dollar arrangements are strongly advised to consult with a qualified tax
adviser to determine the tax treatment resulting from such an arrangement.
- ---------------------------------------------------
FEDERAL INCOME TAX WITHHOLDING
If any amounts are deemed to be current taxable income to the Contract
Owner, such amounts will be subject to federal income tax withholding and
reporting, pursuant to the Code.
- ---------------------------------------------------
NON-INDIVIDUAL OWNERSHIP OF CONTRACTS
Legislation has recently been proposed which would limit certain of the tax
advantages now afforded non-individual owners of life insurance contracts.
Prospective Contract Owners which are not individuals should consult a tax
adviser to determine the status of this proposed legislation and its potential
impact on the purchaser.
- ---------------------------------------------------
OTHER
Federal estate tax, state and local estate, inheritance and other tax
consequences of ownership or receipt of Contract proceeds depend on the
circumstances of each Contract Owner or beneficiary. A tax adviser should be
consulted to determine the impact of these taxes.
- ---------------------------------------------------
LIFE INSURANCE PURCHASES BY NONRESIDENT
ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal
income tax consequences to life insurance 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 taxable distributions from
life insurance policies at a 30% rate, unless a lower treaty rate applies. In
addition, purchasers may be subject to 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 a life insurance
policy purchase.
- ---------------------------------------------------
LEGAL PROCEEDINGS
There are no material legal proceedings pending to which the Separate
Account is a party.
- ---------------------------------------------------
LEGAL MATTERS
Legal matters in connection with the issue and sale of flexible premium
variable life insurance Contracts described in this Prospectus and the
organization of Hartford, its authority to issue the Contracts under Connecticut
law and the validity of the forms of the Contracts under Connecticut law and
legal matters relating to the federal securities and income tax laws have been
passed on by Lynda Godkin, General Counsel of Hartford Life Insurance Companies.
<PAGE>
24 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- ---------------------------------------------------
EXPERTS
The audited financial statements included in this prospectus and elsewhere
in the registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports. Reference is made to said report on the
statutory-basis financial statements of ITT Hartford Life and Annuity Insurance
Company which states the statutory-basis financial statements are presented in
accordance with statutory accounting practices prescribed or permitted by the
National Association of Insurance Commissioners and the State of Connecticut
Insurance Department, not presented in accordance with generally accepted
accounting principles. Reference is made to said report on the statutory-basis
financial statements of ITT Hartford Life and Annuity Insurance Company (the
Depositor), which includes an explanatory paragraph with respect to the change
in valuation method in determining aggregate reserves for future benefits in
1994, as discussed in Note 1 of Notes to Statutory Financial Statements. The
principal business address of Arthur Andersen LLP is One Financial Plaza,
Hartford, CT 06103.
The hypothetical Contract illustrations included in this Prospectus and the
registration statement with respect to the Separate Account have been approved
by Michael Winterfield, FSA, MAAA, Director, Individual Annuity Inforce
Management, for Hartford, and are included in reliance upon his opinion as to
their reasonableness.
- ---------------------------------------------------
REGISTRATION STATEMENT
A registration statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933 as amended. This Prospectus does not
contain all information set forth in the registration statement, its amendments
and exhibits, to all of which reference is made for further information
concerning the Separate Account, the Funds, Hartford, and the Contracts.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 25
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX A
ILLUSTRATIONS OF BENEFITS
The tables in Appendix A illustrate the way in which a Contract operates.
They show how the death benefit and surrender value could vary over an extended
period of time assuming hypothetical gross rates of return equal to constant
after tax annual rates of 0%, 6% and 12%. The tables are based on an initial
premium of $10,000. A male age 45, a female age 55 and a male age 65 with Face
Amounts of $40,161, $33,334 and $19,380, respectively, are illustrated for the
single life Contract. The illustrations for the last survivor Contract assume
male and female of equal ages, including age 55 and 65 for Face Amounts of
$44,053 and $27,778.
The death benefit and surrender value for a Contract would be different from
those shown if the rates of return averaged 0%, 6% and 12% over a period of
years, but also fluctuated above or below those averages for individual Contract
Years. They would also differ if any Contract loan were made during the period
of time illustrated.
The tables reflect the deductions of current Contract charges and guaranteed
Contract charges for a single gross interest rate. The death benefits and
surrender values would change if the current cost of insurance charges change.
The amounts shown for the death benefit and surrender value as of the end of
each Contract Year take into account an average daily charge equal to an annual
charge of 0.60% of the average daily net assets of the Funds for investment
advisory and administrative services fees. The gross annual investment return
rates of 0%, 6% and 12% on the Fund's assets are equal to net annual investment
return rates (net of the 0.60% average daily charge) of -0.60%, 5.40% and
11.40%, respectively.
In addition, the death benefit and surrender value as of the end of each
Contract Year take into account the (1) tax expense charge equal to an annual
rate of 0.40% of Account Value for the first ten Contract Years; (2)
administrative charge equal to an annual rate of 0.25% of Account Value
attributable to the Separate Account; (3) mortality and expense risk charge
equal to an annual rate of 0.90% of Account Value attributable to the Separate
Account; and (4) any Contingent Deferred Sales Charge and premium tax charge
which may be applicable in the first nine Contract Years.
The hypothetical returns shown in the tables are without any tax charges
that may be attributable to the Separate Account in the future. In order to
produce after tax returns of 0%, 6%, and 12%, the Separate Account would have to
earn a sufficient amount in excess of 0% or 6% or 12% to cover any tax charges
(see "Deductions and Charges -- Taxes Charged Against the Separate Account,"
page 12).
The "Premium Paid Plus Interest" column of each table shows the amount which
would accumulate if the initial premium was invested to earn interest, after
taxes of 5% per year, compounded annually.
Hartford will furnish upon request, a comparable illustration reflecting the
proposed insureds age, risk classification, Face Amount or initial premium
requested, and reflecting guaranteed cost of insurance rates. Hartford will also
furnish an additional similar illustration reflecting current cost of insurance
rates which may be less than, but never greater than, the guaranteed cost of
insurance rates.
<PAGE>
26 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE: 45 MALE
INITIAL FACE AMOUNT: $40,161
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.40% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ------------------------------------- -----------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- -------------- ------------ ---------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,865 9,870 40,161 10,787 9,794 40,161
2 11,025 11,807 10,821 40,161 11,642 10,660 40,161
3 11,576 12,834 11,859 40,161 12,573 11,603 40,161
4 12,155 13,952 13,143 40,161 13,587 12,784 40,161
5 12,763 15,172 14,382 40,161 14,693 13,909 40,161
6 13,401 16,501 15,936 40,161 15,899 15,340 40,161
7 14,071 17,948 17,414 40,161 17,216 16,687 40,161
8 14,775 19,526 19,229 40,161 18,655 18,361 40,161
9 15,513 21,246 20,993 40,161 20,228 19,978 40,161
10 16,289 23,120 23,120 40,161 21,952 21,952 40,161
11 17,103 25,288 25,288 40,161 23,941 23,941 40,161
12 17,959 27,663 27,663 40,388 26,140 26,140 40,161
13 18,856 30,264 30,264 42,975 28,575 28,575 40,577
14 19,799 33,116 33,116 45,701 31,264 31,264 43,145
15 20,789 36,246 36,246 48,570 34,217 34,217 45,851
16 21,829 39,682 39,682 51,587 37,459 37,459 48,697
17 22,920 43,443 43,443 55,607 41,007 41,007 52,490
18 24,066 47,559 47,559 59,924 44,891 44,891 56,563
19 25,270 52,064 52,064 64,560 49,141 49,141 60,936
20 26,533 57,030 57,030 69,577 53,796 53,796 65,631
25 33,864 89,881 89,881 104,262 84,682 84,682 98,231
35 55,160 223,447 223,447 236,855 210,220 210,220 222,834
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 12%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 27
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE: 45 MALE
INITIAL FACE AMOUNT: $40,161
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.40% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ---------------------------------- --------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- -------------- ----------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,279 9,298 40,161 10,201 9,222 40,161
2 11,025 10,568 9,606 40,161 10,399 9,441 40,161
3 11,576 10,865 9,925 40,161 10,593 9,658 40,161
4 12,155 11,171 10,403 40,161 10,782 10,021 40,161
5 12,763 11,487 10,743 40,161 10,965 10,228 40,161
6 13,401 11,812 11,294 40,161 11,140 10,628 40,161
7 14,071 12,148 11,657 40,161 11,304 10,819 40,161
8 14,775 12,494 12,232 40,161 11,454 11,197 40,161
9 15,513 12,851 12,619 40,161 11,589 11,360 40,161
10 16,289 13,219 13,219 40,161 11,703 11,703 40,161
11 17,103 13,667 13,667 40,161 11,844 11,844 40,161
12 17,959 14,131 14,131 40,161 11,963 11,963 40,161
13 18,856 14,611 14,611 40,161 12,058 12,058 40,161
14 19,799 15,109 15,109 40,161 12,125 12,125 40,161
15 20,789 15,625 15,625 40,161 12,159 12,159 40,161
16 21,829 16,160 16,160 40,161 12,156 12,156 40,161
17 22,920 16,715 16,715 40,161 12,108 12,108 40,161
18 24,066 17,289 17,289 40,161 12,005 12,005 40,161
19 25,270 17,884 17,884 40,161 11,839 11,839 40,161
20 26,533 18,501 18,501 40,161 11,598 11,598 40,161
25 33,864 21,395 21,395 40,161 8,813 8,813 40,161
35 55,160 30,942 30,942 40,161 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 6%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
28 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE: 45 MALE
INITIAL FACE AMOUNT: $40,161
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.60% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------- ------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- -------------- ---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,694 8,726 40,161 9,616 8,649 40,161
2 11,025 9,397 8,459 40,161 9,226 8,291 40,161
3 11,576 9,108 8,199 40,161 8,829 7,925 40,161
4 12,155 8,827 9,095 40,161 8,426 7,699 40,161
5 12,763 8,554 7,847 40,161 8,013 7,312 40,161
6 13,401 8,288 7,805 40,161 7,588 7,113 40,161
7 14,071 8,030 7,569 40,161 7,150 6,696 40,161
8 14,775 7,778 7,540 40,161 6,694 6,461 40,161
9 15,513 7,534 7,315 40,161 6,218 6,002 40,161
10 16,289 7,297 7,297 40,161 5,717 5,717 40,161
11 17,103 7,101 7,101 40,161 5,211 5,211 40,161
12 17,959 6,910 6,910 40,161 4,673 4,673 40,161
13 18,856 6,723 6,723 40,161 4,100 4,100 40,161
14 19,799 6,541 6,541 40,161 3,488 3,488 40,161
15 20,789 6,363 6,363 40,161 2,833 2,833 40,161
16 21,829 6,188 6,188 40,161 2,127 2,127 40,161
17 22,920 6,018 6,018 40,161 1,361 1,361 40,161
18 24,066 5,852 5,852 40,161 526 526 40,161
19 25,270 5,689 5,689 40,161 -- -- --
20 26,533 5,530 5,530 40,161 -- -- --
25 33,864 4,789 4,789 40,161 -- -- --
35 55,160 3,538 3,538 40,161 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 0%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 29
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE: 55 FEMALE
INITIAL FACE AMOUNT: $33,334
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.40% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ---------------------------------- --------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- -------------- ----------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,865 9,870 33,334 10,758 9,766 33,334
2 11,025 11,807 10,821 33,334 10,758 9,766 33,334
3 11,576 12,834 11,859 33,334 12,488 11,519 33,334
4 12,155 13,952 13,143 33,334 13,477 12,675 33,334
5 12,763 15,172 14,382 33,334 14,562 13,780 33,334
6 13,401 16,501 15,936 33,334 15,751 15,193 33,334
7 14,071 17,948 17,414 33,334 17,055 16,527 33,334
8 14,775 19,526 19,229 33,334 18,484 18,192 33,334
9 15,513 21,246 20,993 33,334 20,053 19,803 33,334
10 16,289 23,120 23,120 33,334 21,778 21,778 33,334
11 17,103 25,291 25,291 33,334 23,778 23,778 33,334
12 17,959 27,695 27,695 33,334 26,001 26,001 33,334
13 18,856 30,365 30,365 35,831 28,481 28,481 33,608
14 19,799 33,295 33,295 38,956 31,228 31,228 36,537
15 20,789 36,509 36,509 42,351 34,240 34,240 39,719
16 21,829 40,033 40,033 46,039 37,543 37,543 43,175
17 22,920 43,908 43,908 49,616 41,175 41,175 46,528
18 24,066 48,169 48,169 55,468 45,169 45,169 50,138
19 25,270 52,861 52,861 57,619 49,566 49,566 54,028
20 26,533 58,025 58,025 63,247 54,375 54,375 59,270
25 33,864 92,388 92,388 97,932 86,577 86,577 91,773
35 55,160 230,636 230,636 242,168 213,920 213,920 224,617
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 12%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
30 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE: 55 FEMALE
INITIAL FACE AMOUNT: $33,334
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.40% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ---------------------------------- --------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- -------------- ----------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,279 9,928 33,334 10,172 9,193 33,334
2 11,025 10,568 9,606 33,334 10,341 9,385 33,334
3 11,576 10,865 9,925 33,334 10,508 9,574 33,334
4 12,155 11,171 10,403 33,334 10,671 9,911 33,334
5 12,763 11,487 10,743 33,334 10,831 10,095 33,334
6 13,401 11,812 11,294 33,334 10,984 10,474 33,334
7 14,071 12,148 11,657 33,334 11,127 10,644 33,334
8 14,775 12,494 12,232 33,334 11,256 11,000 33,334
9 15,513 12,851 12,619 33,334 11,366 11,138 33,334
10 16,289 13,219 13,219 33,334 11,452 11,452 33,334
11 17,103 13,667 13,667 33,334 11,559 11,559 33,334
12 17,959 14,131 14,131 33,334 11,641 11,641 33,334
13 18,856 14,611 14,611 33,334 11,696 11,696 33,334
14 19,799 15,109 15,109 33,334 11,721 11,721 33,334
15 20,789 15,625 15,625 33,334 11,711 11,711 33,334
16 21,829 16,160 16,160 33,334 11,658 11,658 33,334
17 22,920 16,517 16,517 33,334 11,547 11,547 33,334
18 24,066 17,289 17,289 33,334 11,362 11,362 33,334
19 25,270 17,884 17,884 33,334 11,084 11,084 33,334
20 26,533 18,501 18,501 33,334 10,689 10,689 33,334
25 33,864 21,935 21,935 33,334 6,012 6,012 33,334
35 55,160 30,942 30,942 33,334 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 6%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 31
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE: 55 FEMALE
INITIAL FACE AMOUNT: $33,334
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.60% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------- ------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- -------------- ---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,694 8,726 33,334 9,587 8,621 33,334
2 11,025 9,397 8,459 33,334 9,168 8,235 33,334
3 11,576 9,108 8,199 33,334 8,745 7,842 33,334
4 12,155 8,827 8,095 33,334 8,315 7,591 33,334
5 12,763 8,554 7,847 33,334 7,879 7,181 33,334
6 13,401 8,288 7,805 33,334 7,433 6,959 33,334
7 14,071 8,030 7,569 33,334 6,973 6,520 33,334
8 14,775 7,778 7,540 33,334 6,492 6,260 33,334
9 15,513 7,534 7,315 33,334 5,986 5,771 33,334
10 16,289 7,297 7,297 33,334 5,449 5,449 33,334
11 17,103 7,101 7,101 33,334 4,898 4,898 33,334
12 17,959 6,910 6,910 33,334 4,307 4,307 33,334
13 18,856 6,723 6,723 33,334 3,676 3,676 33,334
14 19,799 6,541 6,541 33,334 3,000 3,000 33,334
15 20,789 6,363 6,363 33,334 2,273 2,273 33,334
16 21,829 6,188 6,188 33,334 1,482 1,482 33,334
17 22,920 6,018 6,018 33,334 610 610 33,334
18 24,066 5,852 5,852 33,334 -- -- --
19 25,270 5,689 5,689 33,334 -- -- --
20 26,533 5,530 5,530 33,334 -- -- --
25 33,864 4,789 4,789 33,334 -- -- --
35 55,160 3,538 3,538 33,334 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 0%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
32 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE: 65 MALE
INITIAL FACE AMOUNT: $19,380
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.40% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ------------------------------------- -----------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- -------------- ------------ ---------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,865 9,870 19,380 10,681 9,690 19,380
2 11,025 11,807 10,821 19,380 11,245 10,446 19,380
3 11,576 12,834 11,859 19,380 12,244 11,280 19,380
4 12,155 13,952 13,143 19,380 13,150 12,353 19,380
5 12,763 15,172 14,382 19,380 14,160 13,383 19,380
6 13,401 16,501 15,936 19,380 15,292 14,740 19,380
7 14,071 17,954 17,420 20,289 16,571 16,047 19,380
8 14,775 19,552 19,254 21,703 18,024 17,734 20,007
9 15,513 21,306 21,053 23,224 19,638 19,389 21,406
10 16,289 23,209 23,309 25,298 21,389 21,389 23,315
11 17,103 25,389 25,389 27,420 23,395 23,395 25,268
12 17,959 27,782 27,782 29,728 25,599 25,599 27,391
13 18,856 30,395 30,395 32,523 27,999 27,999 29,960
14 19,799 33,264 33,264 35,261 30,640 30,640 32,479
15 20,789 36,398 36,398 38,583 33,518 33,518 35,530
16 21,829 39,845 39,845 41,838 36,690 36,690 38,525
17 22,920 43,606 43,606 45,786 40,146 40,146 42,153
18 24,066 47,724 47,724 50,111 43,908 43,908 46,103
19 25,270 52,235 52,235 54,847 47,998 47,998 50,398
20 26,533 57,208 57,208 60,069 52,440 52,440 55,062
25 33,864 90,146 90,146 94,653 81,072 81,072 85,126
35 55,160 223,848 223,848 226,086 195,316 195,316 197,269
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 12%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 33
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE: 65 MALE
INITIAL FACE AMOUNT: $19,380
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.40% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ---------------------------------- --------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- -------------- ----------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,279 9,298 19,380 10,092 9,115 19,380
2 11,025 10,568 9,606 19,380 10,166 9,213 19,380
3 11,576 10,865 9,925 19,380 10,221 9,292 19,380
4 12,155 11,171 10,403 19,380 10,251 9,497 19,380
5 12,763 11,487 10,743 19,380 10,254 9,526 19,380
6 13,401 11,812 11,294 19,380 10,223 9,721 19,380
7 14,071 12,148 11,657 19,380 10,151 9,675 19,380
8 14,775 12,494 12,232 19,380 10,028 9,778 19,380
9 15,513 12,851 12,619 19,380 9,841 9,617 19,380
10 16,289 13,219 13,219 19,380 9,578 9,578 19,380
11 17,103 13,667 13,667 19,380 9,263 9,263 19,380
12 17,959 14,131 14,131 19,380 8,842 8,842 19,380
13 18,856 14,611 14,611 19,380 8,294 8,294 19,380
14 19,799 15,109 15,109 19,380 7,590 7,590 19,380
15 20,789 15,625 15,625 19,380 6,694 6,694 19,380
16 21,829 16,160 16,160 19,380 5,552 5,552 19,380
17 22,920 16,715 16,715 19,380 4,091 4,091 19,380
18 24,066 17,289 17,289 19,380 2,210 2,210 19,380
19 25,270 17,884 17,884 19,380 -- -- --
20 26,533 18,501 18,501 19,426 -- -- --
25 33,864 21,935 21,935 23,033 -- -- --
35 55,160 30,944 30,944 31,254 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 6%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
34 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE: 55 MALE
INITIAL FACE AMOUNT: $19,380
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.60% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------- ------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- -------------- ---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,694 8,726 19,380 9,504 8,540 19,380
2 11,025 9,397 8,459 19,380 8,980 8,051 19,380
3 11,576 9,108 8,199 19,380 8,424 7,527 19,380
4 12,155 8,827 8,095 19,380 7,830 7,112 19,380
5 12,763 8,554 7,847 19,380 7,190 6,500 19,380
6 13,401 8,288 7,805 19,380 6,494 6,030 19,380
7 14,071 8,030 7,569 19,380 5,731 5,288 19,380
8 14,775 7,778 7,540 19,380 4,883 5,659 19,380
9 15,513 7,534 7,315 19,380 3,931 3,721 19,380
10 16,289 7,297 7,297 19,380 2,853 2,853 19,380
11 17,103 7,101 7,101 19,380 1,634 1,634 19,380
12 17,959 6,910 6,910 19,380 232 232 19,380
13 18,856 6,723 6,723 19,380 -- -- --
14 19,799 6,541 6,541 19,380 -- -- --
15 20,789 6,363 6,363 19,380 -- -- --
16 21,829 6,188 6,188 19,380 -- -- --
17 22,920 6,018 6,018 19,380 -- -- --
18 24,066 5,852 5,852 19,380 -- -- --
19 25,270 5,689 5,689 19,380 -- -- --
20 26,533 5,530 5,530 19,380 -- -- --
25 33,864 4,789 4,789 19,380 -- -- --
35 55,160 3,538 3,538 19,380 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 0%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 35
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
LAST SURVIVOR OPTION
$10,000 INITIAL PREMIUM
ISSUE AGES: 55 MALE\55 FEMALE
INITIAL FACE AMOUNT: $44,053
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.40% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ------------------------------------- -----------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- -------------- ------------ ---------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,933 9,937 44,053 10,933 9,937 44,053
2 11,025 11,950 10,961 44,053 11,950 10,961 44,053
3 11,576 13,058 12,080 44,053 13,058 12,080 44,053
4 12,155 14,266 13,452 44,053 14,266 13,452 44,053
5 12,763 15,583 14,788 44,053 15,583 14,788 44,053
6 13,401 17,019 16,449 44,053 17,019 16,449 44,053
7 14,071 18,584 18,044 44,053 18,584 18,044 44,053
8 14,775 20,291 19,989 44,053 20,290 19,988 44,053
9 15,513 22,156 21,901 44,053 22,150 21,894 44,053
10 16,289 24,197 24,197 44,053 24,179 24,179 44,053
11 17,103 26,560 26,560 44,053 26,501 26,501 44,053
12 17,959 29,158 29,158 44,053 29,052 29,052 44,053
13 18,856 32,014 32,014 44,053 31,860 31,860 44,053
14 19,799 35,152 35,152 44,053 34,958 34,958 44,053
15 20,789 38,606 38,606 44,053 38,386 38,386 44,528
16 21,829 42,407 42,407 48,769 42,165 42,165 48,490
17 22,920 46,583 46,583 52,640 46,317 46,317 52,339
18 24,066 51,173 51,173 56,803 50,881 50,881 56,478
19 25,270 56,253 56,253 61,317 55,932 55,932 60,966
20 26,533 61,825 61,825 67,390 61,463 61,463 66,995
25 33,864 99,143 99,143 105,092 98,250 98,250 104,146
35 55,160 254,947 254,947 267,695 243,379 243,379 255,549
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 12%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
36 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
LAST SURVIVOR OPTION
$10,000 INITIAL PREMIUM
ISSUE AGES: 55 MALE\55 FEMALE
INITIAL FACE AMOUNT: $44,053
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.40% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ---------------------------------- --------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- -------------- ----------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,344 9,361 44,053 10,344 9,361 44,053
2 11,025 10,694 9,730 44,053 10,694 9,730 44,053
3 11,576 11,051 10,108 44,053 11,051 10,108 44,053
4 12,155 11,413 10,641 44,053 11,413 10,641 44,053
5 12,763 11,778 11,031 44,053 11,778 11,031 44,053
6 13,401 12,155 11,634 44,053 12,146 11,625 44,053
7 14,071 12,546 12,052 44,053 12,515 12,021 44,053
8 14,775 12,949 12,685 44,053 12,881 12,617 44,053
9 15,513 13,367 13,134 44,053 13,242 13,009 44,053
10 16,289 13,800 13,800 44,053 13,594 13,594 44,053
11 17,103 14,318 14,318 44,053 13,988 13,988 44,053
12 17,959 14,858 14,858 44,053 14,368 14,368 44,053
13 18,856 15,419 15,419 44,053 14,730 14,730 44,053
14 19,799 16,002 16,002 44,053 15,069 15,069 44,053
15 20,789 16,609 16,609 44,053 15,378 15,378 44,053
16 21,829 17,239 17,239 44,053 15,649 15,649 44,053
17 22,920 17,895 17,895 44,053 15,869 15,869 44,053
18 24,066 18,577 18,577 44,053 16,023 16,023 44,053
19 25,270 19,287 19,287 44,053 16,091 16,091 44,053
20 26,533 20,024 20,024 44,053 16,051 16,051 44,053
25 33,864 24,177 24,177 44,053 13,215 13,215 44,053
35 55,160 35,364 35,364 44,053 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 6%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 37
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
LAST SURVIVOR OPTION
$10,000 INITIAL PREMIUM
ISSUE AGES: 55 MALE\55 FEMALE
INITIAL FACE AMOUNT: $44,053
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.60% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------- ------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- -------------- ---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,755 8,785 44,053 9,755 8,785 44,053
2 11,025 9,509 8,569 44,053 9,509 8,569 44,053
3 11,576 9,260 8,348 44,053 9,260 8,348 44,053
4 12,155 9,008 8,273 44,053 9,008 8,273 44,053
5 12,763 8,761 8,051 44,053 8,751 8,042 44,053
6 13,401 8,519 8,034 44,053 8,486 8,002 44,053
7 14,071 8,283 7,821 44,053 8,212 7,750 44,053
8 14,775 8,053 7,813 44,053 7,924 7,685 44,053
9 15,513 7,829 7,609 44,053 7,619 7,400 44,053
10 16,289 7,610 7,610 44,053 7,291 7,291 44,053
11 17,103 7,433 7,433 44,053 6,964 6,964 44,053
12 17,959 7,260 7,260 44,053 6,602 6,602 44,053
13 18,856 7,090 7,090 44,053 6,199 6,199 44,053
14 19,799 6,924 6,924 44,053 5,749 5,749 44,053
15 20,789 6,760 6,760 44,053 5,242 5,242 44,053
16 21,829 6,600 6,600 44,053 4,667 4,667 44,053
17 22,920 6,443 6,443 44,053 4,007 4,007 44,053
18 24,066 6,289 6,289 44,053 3,239 3,239 44,053
19 25,270 6,138 6,138 44,053 2,337 2,337 44,053
20 26,533 5,990 5,990 44,053 1,268 1,268 44,053
25 33,864 5,291 5,219 44,053 -- -- --
35 55,160 4,082 4,082 44,053 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 0%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
38 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
LAST SURVIVOR OPTION
$10,000 INITIAL PREMIUM
ISSUE AGES: 65 MALE\65 FEMALE
INITIAL FACE AMOUNT: $27,778
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.40% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ------------------------------------- -----------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- -------------- ------------ ---------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,928 9,932 27,778 10,928 9,932 27,778
2 11,025 11,930 10,942 27,778 11,930 10,942 27,778
3 11,576 13,014 12,037 27,778 13,013 12,036 27,778
4 12,155 14,199 13,386 27,778 14,184 13,372 27,778
5 12,763 15,495 14,071 27,778 15,453 14,660 27,778
6 13,401 16,912 16,343 27,778 16,829 16,261 27,778
7 14,071 18,461 17,923 27,778 18,325 17,788 27,778
8 14,775 20,165 19,855 27,778 19,957 19,658 27,778
9 15,513 22,009 21,754 27,778 21,745 21,491 27,778
10 16,289 24,035 24,035 27,778 23,714 23,714 27,778
11 17,103 26,384 26,384 28,495 26,006 26,006 28,087
12 17,959 28,964 28,964 30,992 28,549 28,549 30,548
13 18,856 31,800 31,800 34,027 31,331 31,331 33,525
14 19,799 34,917 34,917 37,013 34,386 34,386 36,450
15 20,789 38,343 38,343 40,644 37,726 37,726 39,991
16 21,829 42,108 42,108 44,214 41,397 41,397 43,468
17 22,920 46,246 46,246 48,559 45,407 45,407 47,678
18 24,066 50,794 50,794 53,334 49,783 49,783 52,273
19 25,270 55,825 55,825 58,617 54,550 54,550 57,278
20 26,533 61,355 61,355 64,423 59,771 59,771 62,760
25 33,864 98,388 98,388 103,308 93,315 93,315 97,981
35 55,160 253,006 253,006 255,537 225,844 225,844 228,102
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 12%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 39
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
LAST SURVIVOR OPTION
$10,000 INITIAL PREMIUM
ISSUE AGES: 65 MALE\65 FEMALE
INITIAL FACE AMOUNT: $27,778
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.40% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ---------------------------------- --------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- -------------- ----------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,339 9,357 27,778 10,339 9,357 27,778
2 11,025 10,675 9,712 27,778 10,675 9,712 27,778
3 11,576 11,014 10,071 27,778 11,005 10,062 27,778
4 12,155 11,365 10,594 27,778 11,325 10,556 27,778
5 12,763 11,728 10,981 27,778 11,634 10,889 27,778
6 13,401 12,103 11,582 27,778 11,926 11,407 27,778
7 14,071 12,492 11,998 27,778 12,197 11,705 27,778
8 14,775 12,894 12,629 27,778 12,437 12,175 27,778
9 15,513 13,309 13,076 27,778 12,640 12,408 27,778
10 16,289 13,740 13,740 27,778 12,793 12,793 27,778
11 17,103 14,256 14,256 27,778 12,939 12,939 27,778
12 17,959 14,793 14,793 27,778 13,016 13,016 27,778
13 18,856 15,351 15,351 27,778 13,010 13,010 33,334
14 19,799 15,932 15,932 27,778 12,906 12,906 27,778
15 20,789 16,536 16,536 27,778 12,682 12,682 27,778
16 21,829 17,164 17,164 27,778 12,308 12,308 27,778
17 22,920 17,817 17,817 27,778 11,743 11,743 27,778
18 24,066 18,496 18,496 27,778 10,931 10,931 27,778
19 25,270 19,202 19,202 27,778 9,768 9,768 27,778
20 26,533 19,936 19,936 27,778 8,247 8,247 27,778
25 33,864 24,069 24,069 27,778 -- -- --
35 55,160 35,205 35,205 35,558 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 6%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
40 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
LAST SURVIVOR OPTION
$10,000 INITIAL PREMIUM
ISSUE AGES: 65 MALE\65 FEMALE
INITIAL FACE AMOUNT: $27,778
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.60% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------- ------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- -------------- ---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,750 8,781 27,778 9,750 8,781 27,778
2 11,025 9,489 8,549 27,778 9,489 8,549 27,778
3 11,576 9,230 8,318 27,778 9,213 8,302 27,778
4 12,155 8,977 8,242 27,778 8,919 8,184 27,778
5 12,763 8,830 8,021 27,778 8,599 7,892 27,778
6 13,401 8,489 8,004 27,778 8,251 7,768 27,778
7 14,071 8,254 7,792 27,778 7,865 7,406 27,778
8 14,775 8,025 7,785 27,778 7,430 7,193 27,778
9 15,513 7,801 7,582 27,778 6,933 6,716 27,778
10 16,289 7,583 7,583 27,778 6,359 6,359 27,778
11 17,103 7,407 7,407 27,778 5,712 5,712 27,778
12 17,959 7,234 7,234 27,778 4,946 4,946 27,778
13 18,856 7,065 7,065 27,778 4,038 4,038 27,778
14 19,799 6,899 6,899 27,778 2,959 2,959 27,778
15 20,789 6,736 6,736 27,778 1,672 1,672 27,778
16 21,829 6,576 6,576 27,778 125 125 27,778
17 22,920 6,419 6,419 27,778 -- -- --
18 24,066 6,266 6,266 27,778 -- -- --
19 25,270 6,115 6,115 27,778 -- -- --
20 26,533 5,968 5,968 27,778 -- -- --
25 33,864 5,271 5,271 27,778 -- -- --
35 55,160 4,066 4,066 27,778 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 0%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 41
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
ITT Hartford Life and Annuity Insurance Company:
We have audited the accompanying statutory-basis balance sheets of ITT Hartford
Life and Annuity Insurance Company (a Connecticut Corporation and wholly owned
subsidiary of Hartford Life Insurance Company) (the Company) as of December 31,
1996 and 1995, and the related statutory-basis statements of income, changes in
capital and surplus, and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
statutory-basis 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.
The Company presents its financial statements in conformity with statutory
accounting practices as described in Note 1 of notes to statutory-basis
financial statements. When statutory-basis financial statements are presented
for purposes other than for filing with a regulatory agency, generally accepted
auditing standards require that an auditors' report on them state whether they
are presented in conformity with generally accepted accounting principles. The
accounting practices used by the Company vary from generally accepted accounting
principles as explained and quantified in Note 1. In our opinion, because the
differences in accounting practices as described in Note 1 are material, the
statutory-basis financial statements referred to above do not present fairly, in
accordance with generally accepted accounting principles, the financial position
of the Company as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996.
However, in our opinion, the statutory-basis financial statements referred to
above present fairly, in all material respects, the financial position of the
Company as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 1996
in conformity with statutory accounting practices as described in Note 1.
As discussed in Note 1 of notes to statutory financial statements, during 1994,
the Company changed its valuation method in determining aggregate reserves for
future benefits.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 10, 1997
<PAGE>
42 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATUTORY BASIS STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
($000)
<S> <C> <C> <C>
Revenues
Premiums and Annuity Considerations.... $ 250,244 $ 165,792 $ 442,173
Annuity and Other Fund Deposits........ 1,897,347 1,087,661 608,685
Net Investment Income.................. 98,441 78,787 29,012
Commissions and Expense Allowances on
Reinsurance Ceded..................... 370,637 183,380 154,527
Reserve Adjustment on Reinsurance
Ceded................................. 3,864,395 1,879,785 1,266,926
Other Revenues......................... 161,906 140,796 41,857
---------- ---------- ----------
Total Revenues....................... 6,642,970 3,536,201 2,543,180
---------- ---------- ----------
Benefits and Expenses
Death and Annuity Benefits............. 60,111 53,029 7,948
Surrenders and Other Benefit
Payments.............................. 276,720 221,392 181,749
Commissions and Other Expenses......... 491,720 236,202 186,303
Increase in Reserves for Future
Benefits.............................. 27,351 94,253 416,748
Increase in Liability for Premium and
Other Deposit Funds................... 207,156 460,124 182,934
Net Transfers to Separate Accounts..... 5,492,964 2,414,669 1,541,419
---------- ---------- ----------
Total Benefits and Expenses.......... 6,556,022 3,479,669 2,517,101
---------- ---------- ----------
Net Gain from Operations Before Federal
Income Tax Expense...................... 86,948 56,532 26,079
Federal Income Tax Expense............. 19,360 14,048 24,038
---------- ---------- ----------
Net Gain from Operations................. 67,588 42,484 2,041
Net Realized Capital Gains (Losses).... 407 374 (2)
---------- ---------- ----------
Net Income............................... $ 67,995 $ 42,858 $ 2,039
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 43
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATUTORY BASIS BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------
1996 1995
----------- ----------
<S> <C> <C>
($000)
Assets
Bonds........................................... $ 1,268,480 $1,226,489
Common Stocks................................... 44,996 39,776
Policy Loans.................................... 28,853 22,521
Cash and Short-Term Investments................. 176,830 173,304
Other Invested Assets........................... 2,858 13,432
----------- ----------
Total Cash and Invested Assets................ 1,522,017 1,475,522
----------- ----------
Investment Income Due and Accrued............... 14,555 18,021
Premium Balances Receivable..................... 373 402
Receivables from Affiliates..................... 257 8,182
Other Assets.................................... 19,099 25,907
Separate Account Assets......................... 14,619,324 7,324,910
----------- ----------
Total Assets.................................. $16,175,625 $8,852,944
----------- ----------
----------- ----------
Liabilities
Aggregate Reserves for Future Benefits.......... $ 571,970 $ 542,082
Policy and Contract Claims...................... 6,806 8,223
Liability for Premium and Other Deposit Funds... 1,155,143 948,361
Asset Valuation Reserve......................... 7,442 8,010
Payable to Affiliates........................... 10,022 3,682
Other Liabilities............................... (498,195) (220,658)
Separate Account Liabilities.................... 14,619,324 7,324,910
----------- ----------
Total Liabilities............................. 15,872,512 8,614,610
----------- ----------
Capital and Surplus
Common Stock.................................... 2,500 2,500
Gross Paid-In and Contributed Surplus........... 226,043 226,043
Unassigned Funds................................ 74,570 9,791
----------- ----------
Total Capital and Surplus..................... 303,113 238,334
----------- ----------
Total Liabilities and Capital and Surplus....... $16,175,625 $8,852,944
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
44 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATUTORY BASIS STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
--------- --------- --------
<S> <C> <C> <C>
($000)
Capital and Surplus -- Beginning of
Year................................... $ 238,334 $ 91,285 $ 88,693
--------- --------- --------
Net Income............................ 67,995 42,858 2,039
Change in Net Unrealized Capital
(Losses) Gains on Common Stocks...... (5,171) 1,709 (133)
Change in Asset Valuation Reserve..... 568 (5,588) (1,356)
Change in Non-Admitted Assets......... 1,387 (1,944) (8,599)
Change in Reserve (Valuation Basis)... -- -- 10,659
Aggregate Write-ins for Surplus....... -- 8,080 (18)
Dividends to Shareholder.............. -- (10,000) --
Paid-In Surplus....................... -- 111,934 --
--------- --------- --------
Change in Capital and Surplus....... 64,779 147,049 2,592
--------- --------- --------
Capital and Surplus -- End of Year...... $ 303,113 $ 238,334 $ 91,285
--------- --------- --------
--------- --------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 45
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATUTORY BASIS STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
($000)
Operations
Premiums, Annuity Considerations and
Other Fund Deposits.................. $ 2,147,627 $ 1,253,511 $ 1,050,493
Net Investment Income................. 106,178 78,328 24,519
Other Revenues........................ 4,396,892 2,253,466 1,515,700
----------- ----------- -----------
Total Revenues...................... 6,650,697 3,585,305 2,590,712
----------- ----------- -----------
Benefits Paid......................... 338,998 277,965 181,205
Federal Income Taxes Paid on
Operations........................... 28,857 208,423 20,634
Other Expenses........................ 6,254,139 2,664,385 1,832,905
----------- ----------- -----------
Total Benefits and Expenses......... 6,621,994 3,150,773 2,034,744
----------- ----------- -----------
Net Cash from Operations............ 28,703 434,532 555,968
----------- ----------- -----------
Proceeds from Investments
Bonds................................. 871,019 287,941 87,747
Common Stocks......................... 72,100 52 --
Other................................. 10 28 40
----------- ----------- -----------
Total Investment Proceeds........... 943,129 288,021 87,787
----------- ----------- -----------
Taxes (Paid) Received on Capital (Gains)
Losses................................. (936) (226) 96
Paid-In Surplus......................... -- 111,934 --
Other Cash Provided..................... 41,998 28,199 30,554
----------- ----------- -----------
Total Proceeds...................... 1,012,894 862,460 674,405
----------- ----------- -----------
Cost of Investments Acquired
Bonds................................. 914,523 720,521 595,181
Common Stocks......................... 82,495 35,794 808
Miscellaneous Applications............ 130 2,146 2,523
----------- ----------- -----------
Total Investments Acquired.......... 997,148 758,461 598,512
----------- ----------- -----------
Other Cash Applied
Dividends Paid to Shareholders........ -- 10,000 --
Other................................. 12,220 5,007 24,813
----------- ----------- -----------
Total Other Cash Applied............ 12,220 15,007 24,813
----------- ----------- -----------
Total Applications................ 1,009,368 773,468 623,325
----------- ----------- -----------
Net Change in Cash and Short-Term
Investments............................ 3,526 88,992 51,080
Cash and Short-Term Investments,
Beginning of Year...................... 173,304 84,312 33,232
----------- ----------- -----------
Cash and Short-Term Investments, End of
Year................................... $ 176,830 $ 173,304 $ 84,312
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
46 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
- ---------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
ITT Hartford Life and Annuity Insurance Company ("ILA" or "the Company"),
formerly known as ITT Life Insurance Corporation, is a wholly owned subsidiary
of Hartford Life Insurance Company ("HLIC"), which is an indirect subsidiary of
Hartford Life, Inc. ("Hartford Life"), which is ultimately owned by ITT Hartford
Group, Inc. ("The Hartford"), formerly a wholly owned subsidiary of ITT
Corporation ("ITT"). On February 10, 1997, The Hartford announced its plans to
sell up to 20% of Hartford Life to the public. On December 19, 1995, ITT
Corporation distributed all the outstanding shares of The Hartford to ITT
shareholders of record in an action known herein as the "Distribution". As a
result of the Distribution, The Hartford became an independent, publicly traded
company. During 1996, ILA re-domesticated from the State of Wisconsin to the
State of Connecticut.
ILA offers a complete line of ordinary and universal life insurance,
individual annuities and certain supplemental accident and health benefit
coverages.
BASIS OF PRESENTATION
The accompanying ILA statutory-basis financial statements were prepared in
conformity with statutory accounting practices prescribed or permitted by the
National Association of Insurance Commissioners ("NAIC") and the State of
Connecticut Department of Insurance.
The preparation of financial statements in conformity with statutory
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.
Statutory accounting practices and generally accepted accounting principles
("GAAP") differ in certain significant respects. These differences principally
involve:
(1) treatment of policy acquisition costs (commissions, underwriting and
selling expenses, premium taxes, etc.) which are charged to expense when
incurred for statutory purposes rather than on a pro-rata basis over the
expected life of the policy;
(2) recognition of premium revenues, which for statutory purposes are
generally recorded as collected or when due during the premium paying period
of the contract and which for GAAP purposes, generally, for universal life
policies and investment products, are only recorded for policy charges for
the cost of insurance, policy administration and surrender charges assessed
to policy account balances. Also, for GAAP purposes, premiums for
traditional life insurance policies are recognized as revenues when they are
due from policyholders and the retrospective deposit method is used in
accounting for universal life and other types of contracts where the payment
pattern is irregular or surrender charges are a significant source of
profit. The prospective deposit method is used for GAAP purposes where
investment margins are the primary source of profit;
(3) development of liabilities for future policy benefits, which for
statutory purposes predominantly use interest rate and mortality assumptions
prescribed by the NAIC which may vary considerably from interest and
mortality assumptions used for GAAP financial reporting;
(4) providing for income taxes based on current taxable income (tax return)
only for statutory purposes, rather than establishing additional assets or
liabilities for deferred Federal income taxes to recognize the tax effect
related to reporting revenues and expenses in different periods for
financial reporting and tax return purposes;
(5) excluding certain GAAP assets designated as non-admitted assets (e.g.,
past due agents' balances and furniture and equipment) from the balance
sheet for statutory purposes by directly charging surplus;
(6) establishing accruals for post-retirement and post-employment health
care benefits on an option basis, using a twenty year phase-in approach,
whereas GAAP liabilities are required to be recorded;
(7) establishing a formula reserve for realized and unrealized losses due to
default and equity risk associated with certain invested assets (Asset
Valuation Reserve); as well as the deferral and amortization of realized
gains and losses, motivated by changes in interest rates during the period
the asset is held, into income over the remaining life to maturity of the
asset sold (Interest Maintenance Reserve); whereas on a GAAP basis, no such
formula reserve is required and
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 47
- --------------------------------------------------------------------------------
realized gains and losses are recognized in the period the asset is sold;
(8) the reporting of reserves and benefits net of reinsurance ceded, where
risk transfer has taken place; whereas on a GAAP basis, reserves are
reported gross of reinsurance with reserve credits presented as recoverable
assets;
(9) the reporting of fixed maturities at amortized cost, whereas GAAP
requires that fixed maturities be classified as "held-to-maturity",
"available-for-sale" or "trading", based on the Company's intentions with
respect to the ultimate disposition of the security and its ability to
affect those intentions. The Company's fixed maturities were classified on a
GAAP basis as "available-for- sale" and accordingly, those investments were
reflected at fair value with the corresponding impact included as a
component of Stockholder's Equity designated as "Net unrealized capital
(loss)/ gain on investments, net of tax". For statutory reporting purposes,
Net Unrealized Capital Losses (Gains) on Common Stocks represent unrealized
losses (gains) on common stock reported at fair value; and
(10) separate account liabilities are valued on the Commissioner's Annuity
Reserve Valuation Method ("CARVM"), with the surplus generated recorded as a
liability to the general account (and a contra liability on the balance
sheet of the general account), whereas GAAP liabilities are valued at
account value.
As of and for the years ended December 31, 1996, 1995 and 1994, the
significant differences between statutory and GAAP basis net income and capital
and surplus for the Company are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
GAAP Net Income................ $ 41,202 $ 38,821 $ 23,295
Amortization and deferral of
policy acquisition costs...... (341,572) (174,341) (117,863)
Change in unearned revenue
reserve....................... 55,504 32,300 24,494
Deferred taxes................. 2,090 2,801 (9,267)
Separate accounts.............. 306,978 146,635 75,941
Other, net..................... 3,793 (3,358) 5,439
----------- ----------- -----------
Statutory Net Income........... $ 67,995 $ 42,858 $ 2,039
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
GAAP Capital and Surplus....... $ 503,887 $ 455,541 $ 199,785
Deferred policy acquisition
costs......................... (938,114) (596,542) (422,201)
Unearned revenue reserve....... 130,148 74,644 42,344
Deferred taxes................. 12,823 1,493 13,257
Separate accounts.............. 640,101 333,123 186,488
Asset valuation reserve........ (7,442) (8,010) (2,422)
Unrealized gain (loss) on
bonds......................... 5,112 (1,696) 21,918
Adjustment relating to Lyndon
contribution (see Note 3)..... (41,277) (41,277) --
Other, net..................... (2,125) 21,058 52,116
----------- ----------- -----------
Statutory Capital and
Surplus....................... $ 303,113 $ 238,334 $ 91,285
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
AGGREGATE RESERVES AND LIABILITIES FOR PREMIUM AND OTHER DEPOSIT FUNDS
Aggregate reserves for payment of future life, health and annuity benefits
were computed in accordance with actuarial standards. Reserves for life
insurance policies are generally based on the 1958 and 1980 Commissioner's
Standard Ordinary Mortality Tables and various valuation rates ranging from 2.5%
to 5%. Accumulation and on-benefit annuity reserves are based principally on
individual annuity tables at various rates ranging from 2.5% to 8.75% and using
CARVM. Accident and health reserves are established using a two year preliminary
term method and morbidity tables based on Company experience.
ILA has established separate accounts to segregate the assets and
liabilities of certain annuity contracts that must be segregated from the
Company's general assets under the terms of the contracts. The assets consist
primarily of marketable securities reported at market value. Premiums, benefits
and expenses of these contracts are reported in the Statutory Basis Statements
of Income.
During 1994, the Company changed the valuation method on aggregate reserves
for future benefits resulting in a $10.7 million increase in surplus. The new
valuation method is in accordance with presently accepted actuarial standards.
INVESTMENTS
Investments in bonds are carried at amortized cost. Bonds which are deemed
ineligible to be held at amortized cost by the NAIC Securities Valuation Office
("SVO")are carried at the appropriate SVO published value. When a permanent
reduction in the value of publicly traded securities occurs, the decrease is
reported as a realized loss and the carrying value is adjusted accordingly.
Common stocks are carried at market value with the difference from cost
reflected in surplus. Other invested assets are generally recorded at fair
value.
<PAGE>
48 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Changes in net unrealized capital (losses)/gains on common stocks are
reported as (reductions)/additions of surplus. The Asset Valuation Reserve
("AVR") is designed to provide a standardized reserving process for realized and
unrealized losses due to default and equity risks associated with invested
assets. The reserve decreased by $568 in 1996 and increased by $5,588 and $1,356
in 1995 and 1994, respectively. Additionally, the Interest Maintenance Reserve
("IMR") captures net realized capital gains and losses, net of applicable income
taxes, resulting from changes in interest rates and amortizes these gains or
losses into income over the remaining life of the mortgage loan or bond sold.
Realized capital gains and losses, net of taxes not included in IMR are reported
in the Statutory Basis Statements of Income. Realized investment gains and
losses are determined on a specific identification basis. The amount of net
capital gains reclassified from the IMR was $1,413 and $39 in 1996 and 1995,
respectively, and the amount of net capital losses was $67 in 1994. The amount
of income amortized was $392, $256 and $114 in 1996, 1995 and 1994,
respectively.
OTHER LIABILITIES
The amount reflected in other liabilities includes a receivable from the
separate accounts of $640 million and $333 million as of December 31, 1996 and
1995, respectively. The balances are classified in accordance with NAIC
accounting practices.
- ---------------------------------------------------
2. INVESTMENTS
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Interest income from
bonds.................... $ 89,940 $ 76,100 $ 28,335
Interest income from
policy loans............. 1,846 1,504 454
Interest and dividends
from other investments... 7,864 2,288 1,069
--------- --------- ---------
Gross investment income... 99,650 79,892 29,858
Less: investment
expenses................. 1,209 1,105 846
--------- --------- ---------
Net investment income..... $ 98,441 $ 78,787 $ 29,012
--------- --------- ---------
--------- --------- ---------
</TABLE>
(B) COMPONENTS OF NET UNREALIZED CAPITAL (LOSSES) GAINS ON COMMON STOCKS
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Gross unrealized capital gains
at end of year............... $ 713 $ 1,724 $ 75
Gross unrealized capital
losses at end of year........ (4,160) -- (60)
--------- --------- ---------
Net unrealized capital
(losses) gains............... (3,447) 1,724 15
Balance at beginning of
year......................... 1,724 15 148
--------- --------- ---------
Change in net unrealized
capital (losses) gains on
common stocks................ $ (5,171) $ 1,709 $ (133)
--------- --------- ---------
--------- --------- ---------
</TABLE>
(C) COMPONENTS OF NET UNREALIZED CAPITAL (LOSSES) GAINS ON BONDS AND SHORT-TERM
INVESTMENTS
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Gross unrealized
capital gains at end
of year............... $ 11,821 $ 22,251 $ 986
Gross unrealized
capital losses at end
of year............... (3,842) (1,374) (34,718)
---------- ---------- ----------
Net unrealized capital
gains (losses) after
tax................... 7,979 20,877 (33,732)
Balance at beginning of
year.................. 20,877 (33,732) 5,232
---------- ---------- ----------
Change in net
unrealized capital
(losses) gains on
bonds and short-term
investments........... $ (12,898) $ 54,609 $ (38,964)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
(D) COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Bonds and short-term
investments.................... $ 2,756 $ 156 $ (101)
Common stocks................... 0 52 0
Real estate and other........... 0 0 34
--------- --------- ---------
Realized capital gains
(losses)....................... 2,756 208 (67)
Capital gains taxes (benefit)... 936 (205) 2
--------- --------- ---------
Net realized capital gains
(losses) after tax............. 1,820 413 (69)
Less: IMR capital gains
(losses)....................... 1,413 39 (67)
--------- --------- ---------
Net realized capital gains
(losses)....................... $ 407 $ 374 $ (2)
--------- --------- ---------
--------- --------- ---------
</TABLE>
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 49
- --------------------------------------------------------------------------------
(E) OFF-BALANCE SHEET INVESTMENTS
The Company had no significant financial instruments with off-balance sheet
risk as of December 31, 1996 and 1995.
(F) CONCENTRATION OF CREDIT RISK
Excluding U.S. government and government agency investments, the Company is
not exposed to any significant concentration of credit risk.
(G) BONDS, SHORT-TERM AND COMMON STOCK INVESTMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
------------------------------------------------
GROSS UNREALIZED
AMORTIZED -------------------- FAIR
COST GAINS LOSSES VALUE
------------ --------- --------- ------------
<S> <C> <C> <C> <C>
U.S. government and government agencies and authorities:
(Guaranteed and sponsored)............................................. $ 58,761 $ 6 $ (195) $ 58,572
(Guaranteed and sponsored) -- asset-backed............................. 78,237 1,477 (609) 79,105
States, municipalities and political subdivisions........................ 25,958 163 (2) 26,119
International governments................................................ 7,447 205 -- 7,652
Public utilities......................................................... 70,116 396 (424) 70,088
All other corporate...................................................... 410,530 6,357 (1,355) 415,532
All other corporate -- asset-backed...................................... 485,953 2,654 (1,081) 487,526
Short-term investments................................................... 148,094 -- (66) 148,028
Certificates of deposit.................................................. 83,378 563 (110) 83,831
Parents, subsidiaries and affiliates..................................... 48,100 -- -- 48,100
------------ --------- --------- ------------
Total bonds and short-term investments................................. $ 1,416,574 $ 11,821 $ (3,842) $ 1,424,553
------------ --------- --------- ------------
------------ --------- --------- ------------
Common stock -- unaffiliated............................................. $ 13,064 $ 713 $ 0 $ 13,777
Common stock -- affiliated............................................... 35,379 0 4,160 31,219
------------ --------- --------- ------------
Total common stocks...................................................... $ 48,443 $ 713 $ 4,160 $ 44,996
------------ --------- --------- ------------
------------ --------- --------- ------------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995
----------------------------------------------------
GROSS UNREALIZED
AMORTIZED ------------------------ FAIR
COST GAINS LOSSES VALUE
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
U.S. government and government agencies and authorities:
(Guaranteed and sponsored)........................................... $ 44,268 $ 14 $ (248) $ 44,034
(Guaranteed and sponsored) -- asset-backed........................... 176,160 4,644 (682) 180,122
States, municipalities and political subdivisions...................... 16,948 38 (6) 16,980
International governments.............................................. 5,402 441 -- 5,843
Public utilities....................................................... 108,083 1,652 (90) 109,645
All other corporate.................................................... 374,058 8,145 (248) 381,955
All other corporate -- asset-backed.................................... 410,197 5,841 (89) 415,949
Short-term investments................................................. 139,011 18 -- 139,029
Certificates of deposit................................................ 91,373 1,458 (11) 92,820
------------ ----------- ----------- ------------
Total bonds and short-term investments............................... $ 1,365,500 $ 22,251 $ (1,374) $ 1,386,377
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
Common stock -- unaffiliated........................................... $ 2,668 $ 555 $ -- $ 3,223
Common stock -- affiliated............................................. 35,384 1,169 -- 36,553
------------ ----------- ----------- ------------
Total common stocks.................................................. $ 38,052 $ 1,724 $ -- $ 39,776
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
</TABLE>
The amortized cost and estimated market value of bonds and short-term
investments at December 31, 1996 by management's anticipated maturity are shown
below. Asset-backed securities are distributed to maturity year based on ILA's
estimate of the rate of future prepayments of principal
<PAGE>
50 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
over the remaining life of the securities. Expected maturities differ from
contractual maturities reflecting borrowers' rights to call or prepay their
obligations.
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED FAIR
MATURITY COST VALUE
- ------------------------------ ------------ ------------
<S> <C> <C>
Due in one year or less....... $ 478,095 $ 478,852
Due after one year through
five years................... 622,805 623,105
Due after five years through
ten years.................... 259,479 265,681
Due after ten years........... 56,195 56,915
------------ ------------
Total....................... $ 1,416,574 $ 1,424,553
</TABLE>
Proceeds from sales of investments in bonds and short-term investments
during 1996, 1995 and 1994 were $668,078, $313,961 and $117,912, respectively,
resulting in gross realized gains of $3,675, $1,419 and $518, respectively, and
gross realized losses of $919, $1,263 and $619, respectively, before transfers
to IMR. The Company had realized gains of $52 during 1995 from a capital gain
distribution.
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS
BALANCE SHEET ITEMS (IN MILLIONS):
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Assets
Bonds and short-term
investments......... $ 1,417 $ 1,425 $ 1,366 $ 1,386
Common stocks........ 45 45 40 40
Policy loans......... 29 29 23 23
Other invested
assets.............. 3 3 13 13
Liabilities
Liabilities on
investment
contracts........... $ 1,245 $ 1,191 $ 1,031 $ 981
</TABLE>
The carrying amounts for policy loans approximates fair value. The
liabilities are determined by forecasting future cash flows and discounting the
forecasted cash flows at current market rates.
- ---------------------------------------------------
3. RELATED PARTY TRANSACTIONS
Transactions between the Company and its affiliates within The Hartford
relate principally to tax settlements, reinsurance, service fees, capital
contributions and payments of dividends.
On June 30, 1995, the assets of Lyndon Insurance Company were contributed to
ILA. As a result, ILA received approximately $365 million in bonds and short-
term investments, common stocks and cash, $28 million in policy reserves, $187
million of current tax liability, $26 million in IMR, $8 million in AVR (offset
by an aggregate write-in to surplus), and $4 million of other liabilities. The
assets in excess of liabilities of $112 million were recorded as an increase to
paid-in surplus.
For additional information, see Note 5.
- ---------------------------------------------------
4. FEDERAL INCOME TAXES
The Company 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 to file separate federal, state and local
income tax returns.
As long as The Hartford continues to beneficially own, directly or
indirectly, at least 80% of the combined voting power and 80% of the value of
the outstanding capital stock of Hartford Life, the Company will be included for
Federal income tax purposes in the consolidated group of which The Hartford is
the common parent. It is the current intention of The Hartford and its
subsidiaries to continue to file a single consolidated Federal income tax
return. The Company will continue to remit (receive from) The Hartford a current
income tax provision (benefit) computed in accordance with such tax sharing
agreement. Federal income taxes paid by the Company were $29,792, $215,921 and
$20,538 in 1996, 1995 and 1994, respectively. The effective tax rate was 22%,
25% and 92% in 1996, 1995 and 1994, respectively. The following schedule
provides a reconciliation of the tax provision at the U.S. Federal Statutory
rate to Federal income tax expense (in millions).
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- -----
<S> <C> <C> <C>
Tax provision at U.S. Federal statutory rate..... $ 30 $ 20 $ 9
Tax deferred acquisition costs................... 27 8 8
Statutory to tax reserve differences............. -- 3 5
Unrealized (gain)/loss on separate accounts...... (21) (13) 2
Investments and other............................ (17) (4) --
--------- --------- ---
Federal income tax expense....................... $ 19 $ 14 $ 24
--------- --------- ---
--------- --------- ---
</TABLE>
- ---------------------------------------------------
5. CAPITAL AND SURPLUS AND SHAREHOLDER
DIVIDEND RESTRICTIONS
The maximum amount of dividends which can be paid, without prior approval,
by State of Connecticut insurance companies to shareholders is subject to
restrictions relating to statutory surplus. Dividends are paid as determined by
the Board of Directors and are not cumulative. No dividends were paid in 1996 or
1994. ILA paid dividends of $10 million to its parent, HLIC, in 1995. As a
result of the Distribution by ITT, the assets of ITT Lyndon Insurance
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 51
- --------------------------------------------------------------------------------
Company (Lyndon) were contributed to ILA in June 1995. Substantially all the
business was removed from Lyndon prior to the contribution. The amount of assets
which exceeded liabilities at the contribution date ($112 million) was included
in paid-in surplus.
- ---------------------------------------------------
6. PENSION PLANS AND OTHER POST-RETIREMENT
AND POST-EMPLOYMENT BENEFITS
The Company's employees are included in The Hartford's non-contributory
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 and the maximum amount that can be
deducted for Federal income tax purposes. Generally, pension costs are funded
through the purchase of HLIC's group pension contracts. Pension expense was
$358, $1,034, and $1,211 in 1996, 1995 and 1994, respectively. Liabilities for
the plan are held by The Hartford.
The Company also participates in The Hartford's Investment and Savings Plan,
which includes a deferred compensation option under IRC section 401(k) and an
ESOP allocation under IRC section 404(k). The liabilities for these plans are
included in the financial statements of The Hartford. The cost to ILA was not
material in 1996, 1995 and 1994.
The Company's employees are included in The Hartford's contributory defined
health care and life insurance benefit plans. These plans provide health care
and life insurance benefits for retired employees. Substantially all employees
may become eligible for those benefits if they reach normal or early retirement
age while still working for the Company. 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. Amounts allocated by
The Hartford for post-retirement health care and life insurance benefits expense
(not including provisions for accrual of post-retirement benefit obligations)
are immaterial. The assumed rate of future increases in the per capita cost of
health care (the health care trend rate) was 9.3% for 1996, decreasing ratably
to 6% in the year 2001. Increasing the health care trend rates by one percent
per year would have an immaterial impact on the accumulated post-retirement
benefit obligation and the annual expense. The cost to ILA was not material in
1996, 1995 and 1994.
Post-employment benefits are primarily comprised of obligations to provide
medical and life insurance to employees on long-term disability. Post-employment
benefit expense was not material in 1996, 1995 and 1994.
- ---------------------------------------------------
7. REINSURANCE
The Company cedes insurance to non-affiliated insurers in order to limit its
maximum loss. Such transfer does not relieve ILA of its primary liability. ILA
also assumes insurance from other insurers.
Life insurance net retained premiums were comprised of the following:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Direct premiums................... $ 226,612 $ 159,918 $ 133,180
Premiums assumed.................. 33,817 13,299 960
Premiums ceded.................... (10,185) (7,425) 308,033
---------- ---------- ----------
Premiums and annuity
considerations................... $ 250,244 $ 165,792 $ 442,173
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The Company ceded to a third party, on a modified coinsurance basis, 80% of
the variable annuity business written in 1994. The ceded business includes both
general and separate account liabilities. As a result of the agreement, in
December 1994, ILA transferred approximately $1,352 million in assets and
liabilities. The financial impact of the cession was an increase of
approximately $15 million to net income and surplus in 1994.
In November 1994, the Company ceded, on a modified coinsurance basis, 30% of
the separate account variable annuity business distributed by Paine Webber to
Paine Webber Life Insurance Company ("PWLIC"). As a result of the agreement, ILA
transferred approximately $24 million in assets and liabilities to PWLIC. The
financial impact of the cession was an increase of approximately $765 to net
income and surplus in 1994.
In October 1994, the agreement, effective December 1990, which required ILA
to coinsure 90% of all existing and new business, excluding variable annuity
business, written by the Company to HLIC, was terminated. As a result of the
termination, ILA received approximately $430 million in assets and liabilities
from HLIC. The impact of the transaction was a decrease of approximately $15
million to net income and surplus in 1994.
In November 1993, ILA acquired, through an assumption reinsurance
transaction, substantially all of the individual fixed and variable annuity
business of Hartford Life and Accident, an affiliate. As a result of this
transaction, the assets and liabilities of the Company increased approximately
$1 billion, substantially all of which was transferred to the separate accounts
of the Company. The remaining assets and liabilities (approximately $41 million)
were transferred in October 1995. The impact of these transactions on net income
and surplus was not significant.
<PAGE>
52 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- ---------------------------------------------------
8. SEPARATE ACCOUNTS
The Company maintains separate account assets and liabilities totaling $14.6
billion and $7.3 billion at December 31, 1996 and 1995, respectively. Separate
account assets are reported at fair value and separate account liabilities are
determined in accordance with CARVM, which approximates the market value less
applicable surrender charges. Separate account assets are segregated from other
investments, the policyholder assumes the investment risk, and the investment
income and gains and losses accrue directly to the policyholder. Separate
account management fees, net of minimum guarantees, were $144 million, $72
million and $42 million in 1996, 1995 and 1994, respectively, and are recorded
as a component of other revenues on the Statutory Basis Statements of Income.
- ---------------------------------------------------
9. COMMITMENTS AND CONTINGENCIES
As of December 31, 1996 and 1995, the Company had no material contingent
liabilities, nor had the Company committed any surplus funds for any contingent
liabilities or arrangements. The Company is involved in various legal actions
which have arisen in the normal course of its business. In the opinion of
management, the ultimate liability with respect to such lawsuits as well as
other contingencies is not considered to be material in relation to the results
of operations and financial position of the Company.
Under insurance guaranty laws in most states, insurers doing business
therein can be assessed up to prescribed limits for policyholder losses incurred
by insolvent companies. The amount of any future assessments on ILA under these
laws cannot be reasonably estimated. Most of the laws do provide, however, that
an assessment may be excused or deferred if it would threaten an insurer's own
financial strength. Additionally, guaranty fund assessments are used to reduce
state premium taxes paid by the Company in certain states. ILA paid guaranty
fund assessments of $1,262, $1,684 and $583 in 1996, 1995 and 1994,
respectively. ILA incurred guaranteed fund expense of $548, $0 and $0 in 1996,
1995 and 1994, respectively.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 53
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ITT Hartford Life and Annuity Insurance Company
Separate Account Five and to the
Owners of Units of Interest Therein:
We have audited the accompanying statement of assets and liabilities of ITT
Hartford Life and Annuity Insurance Company Separate Account Five (the Account)
as of December 31, 1996, and the related statement of operations for the year
then ended and statements of changes in net assets for the year ended December
31, 1996 and the period from inception, January 10, 1995, to December 31, 1995.
These financial statements are the responsibility of the Account's management.
Our responsibility is to express an opinion on these financial statements based
on our 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 ITT Hartford Life and Annuity
Insurance Company Separate Account Five as of December 31, 1996, the results of
its operations for the year then ended and the changes in its net assets for the
year ended December 31, 1996 and the period from inception, January 10, 1995, to
December 31, 1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 14, 1997
<PAGE>
54 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT FIVE
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY ADVISERS
BOND FUND STOCK FUND MARKET FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 1,733,002
Cost $1,722,027
Market Value......... $1,731,599 -- -- --
Hartford Stock Fund,
Inc.
Shares 3,685,895
Cost $13,390,058
Market Value......... -- $15,269,591 -- --
HVA Money Market Fund,
Inc.
Shares 11,631,670
Cost $11,631,670
Market Value......... -- -- $11,631,670 --
Hartford Advisers Fund,
Inc.
Shares 9,927,031
Cost $19,803,664
Market Value......... -- -- -- $21,536,990
Hartford Capital
Appreciation Fund,
Inc.
Shares 6,094,455
Cost $21,579,746
Market Value......... -- -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 645,107
Cost $677,597
Market Value......... -- -- -- --
Hartford Index Fund,
Inc.
Shares 2,206,702
Cost $4,694,671
Market Value......... -- -- -- --
Hartford International
Opportunities Fund,
Inc.
Shares 4,738,342
Cost $6,240,236
Market Value......... -- -- -- --
Hartford Dividend and
Growth Fund, Inc.
Shares 6,650,828
Cost $9,181,128
Market Value......... -- -- -- --
Hartford International
Advisers Fund, Inc.
Shares 1,205,995
Cost $1,379,739
Market Value......... -- -- -- --
Hartford Small Company
Fund, Inc.
Shares 10,665
Cost $11,338
Market Value......... -- -- -- --
Due from ITT Hartford
Life and Annuity
Insurance Company..... -- -- 440,244 --
Receivable from fund
shares sold........... 2 -- -- 7
------------ ----------- ----------- ----------
Total Assets........... 1,731,601 15,269,591 12,071,914 21,536,997
------------ ----------- ----------- ----------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company..... -- 110 -- 132
Payable for fund shares
purchased............. -- -- 440,250 --
------------ ----------- ----------- ----------
Total Liabilities...... -- 110 440,250 132
------------ ----------- ----------- ----------
Net Assets (variable
life contract
liabilities).......... $1,731,601 $15,269,481 $11,631,664 $21,536,865
------------ ----------- ----------- ----------
------------ ----------- ----------- ----------
Units Outstanding...... 1,412,742 9,252,090 10,472,721 14,485,431
Accumulation Unit Value
at end of period...... $ 1.225702 $ 1.650382 $ 1.110663 $1.486795
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 55
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL INTERNATIONAL DIVIDEND
APPRECIATION MORTGAGE OPPORTUNITIES AND INTERNATIONAL
FUND SECURITIES FUND INDEX FUND FUND GROWTH FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- --------------- ---------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 1,733,002
Cost $1,722,027
Market Value......... -- -- -- -- -- --
Hartford Stock Fund,
Inc.
Shares 3,685,895
Cost $13,390,058
Market Value......... -- -- -- -- -- --
HVA Money Market Fund,
Inc.
Shares 11,631,670
Cost $11,631,670
Market Value......... -- -- -- -- -- --
Hartford Advisers Fund,
Inc.
Shares 9,927,031
Cost $19,803,664
Market Value......... -- -- -- -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 6,094,455
Cost $21,579,746
Market Value......... $23,855,706 -- -- -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 645,107
Cost $677,597
Market Value......... -- $ 681,088 -- -- -- --
Hartford Index Fund,
Inc.
Shares 2,206,702
Cost $4,694,671
Market Value......... -- -- $5,255,854 -- -- --
Hartford International
Opportunities Fund,
Inc.
Shares 4,738,342
Cost $6,240,236
Market Value......... -- -- -- $6,666,277 -- --
Hartford Dividend and
Growth Fund, Inc.
Shares 6,650,828
Cost $9,181,128
Market Value......... -- -- -- -- $10,291,624 --
Hartford International
Advisers Fund, Inc.
Shares 1,205,995
Cost $1,379,739
Market Value......... -- -- -- -- -- $1,406,891
Hartford Small Company
Fund, Inc.
Shares 10,665
Cost $11,338
Market Value......... -- -- -- -- -- --
Due from ITT Hartford
Life and Annuity
Insurance Company..... -- 1 4 -- 3 4
Receivable from fund
shares sold........... -- -- -- -- -- --
--------------- --------------- ---------- ---------------- ----------- -------------
Total Assets........... 23,855,706 681,089 5,255,858 6,666,277 10,291,627 1,406,895
--------------- --------------- ---------- ---------------- ----------- -------------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company..... 493 -- -- 4 -- --
Payable for fund shares
purchased............. -- -- -- -- -- --
--------------- --------------- ---------- ---------------- ----------- -------------
Total Liabilities...... 493 -- -- 4 -- --
--------------- --------------- ---------- ---------------- ----------- -------------
Net Assets (variable
life contract
liabilities).......... $23,855,213 $ 681,089 $5,255,858 $6,666,273 $10,291,627 $1,406,895
--------------- --------------- ---------- ---------------- ----------- -------------
--------------- --------------- ---------- ---------------- ----------- -------------
Units Outstanding...... 15,227,011 557,697 3,165,103 5,086,205 6,173,912 1,086,383
Accumulation Unit Value
at end of period...... $ 1.566638 $1.221248 $1.660565 $ 1.310658 $ 1.666954 $ 1.295024
<CAPTION>
SMALL
COMPANY FUND
SUB-ACCOUNT
------------
<S> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares
Cost
Market Value......... --
Hartford Stock Fund,
Inc.
Shares
Cost
Market Value......... --
HVA Money Market Fund,
Inc.
Shares
Cost
Market Value......... --
Hartford Advisers Fund,
Inc.
Shares
Cost
Market Value......... --
Hartford Capital
Appreciation Fund,
Inc.
Shares
Cost
Market Value......... --
Hartford Mortgage
Securities Fund, Inc.
Shares
Cost
Market Value......... --
Hartford Index Fund,
Inc.
Shares
Cost
Market Value......... --
Hartford International
Opportunities Fund,
Inc.
Shares
Cost
Market Value......... --
Hartford Dividend and
Growth Fund, Inc.
Shares
Cost
Market Value......... --
Hartford International
Advisers Fund, Inc.
Shares
Cost
Market Value......... --
Hartford Small Company
Fund, Inc.
Shares
Cost
Market Value......... $11,402
Due from ITT Hartford
Life and Annuity
Insurance Company..... --
Receivable from fund
shares sold........... --
------------
Total Assets........... 11,402
------------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company..... --
Payable for fund shares
purchased............. --
------------
Total Liabilities...... --
------------
Net Assets (variable
life contract
liabilities).......... $11,402
------------
------------
Units Outstanding...... --
Accumulation Unit Value
at end of period...... --
</TABLE>
<PAGE>
56 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT FIVE
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY
MARKET ADVISERS
BOND FUND STOCK FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $61,277 $ 140,710 $404,912 $ 357,873
---------- ----------- --------- -----------
Net investment income
(loss).............. 61,277 140,710 404,912 357,873
---------- ----------- --------- -----------
CAPITAL GAINS INCOME..... -- 185,013 -- 116,357
---------- ----------- --------- -----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (451) 524 -- 415
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 2,527 1,657,996 -- 1,542,513
---------- ----------- --------- -----------
Net realized and
unrealized gain
(loss) on
investments......... 2,076 1,658,520 -- 1,542,928
---------- ----------- --------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ $63,353 $ 1,984,243 $404,912 $2,017,158
---------- ----------- --------- -----------
---------- ----------- --------- -----------
</TABLE>
* From inception, August 9, 1996, to December 31, 1996.
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 57
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND INTERNATIONAL
APPRECIATION SECURITIES INDEX OPPORTUNITIES AND ADVISERS SMALL
FUND FUND FUND FUND GROWTH FUND FUND COMPANY FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
---------------- ----------- --------- -------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 100,190 $24,643 $ 56,990 $75,641 $ 128,284 $33,540 $ 1
---------------- ----------- --------- -------------- ----------- ------------ ---
Net investment income
(loss).............. 100,190 24,643 56,990 75,641 128,284 33,540 1
---------------- ----------- --------- -------------- ----------- ------------ ---
CAPITAL GAINS INCOME..... 542,857 -- 18,617 46,012 41,509 28,341 --
---------------- ----------- --------- -------------- ----------- ------------ ---
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (2,788) (687) 3,838 (26) (280) 38 --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 2,060,719 577 523,283 366,466 967,296 22,219 64
---------------- ----------- --------- -------------- ----------- ------------ ---
Net realized and
unrealized gain
(loss) on
investments......... 2,057,931 (110) 527,121 366,440 967,016 22,257 64
---------------- ----------- --------- -------------- ----------- ------------ ---
Net increase (decrease)
in net assets
resulting from
operations............ $2,700,978 $24,533 $602,728 $488,093 $1,136,809 $84,138 $65
---------------- ----------- --------- -------------- ----------- ------------ ---
---------------- ----------- --------- -------------- ----------- ------------ ---
</TABLE>
<PAGE>
58 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Separate Account Five
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 61,277 $ 140,710 $ 404,912 $ 357,873
Capital gains income... -- 185,013 -- 116,357
Net realized gain
(loss) on security
transactions.......... (451) 524 -- 415
Net unrealized
appreciation
(depreciation) of
investments during
the period............ 2,527 1,657,996 -- 1,542,513
----------- ------------ ------------- -------------
Net increase (decrease)
in net assets
resulting from
operations............ 63,353 1,984,243 404,912 2,017,158
----------- ------------ ------------- -------------
UNIT TRANSACTIONS:
Purchases.............. -- 29 68,474,293 17,409
Net transfers.......... 1,407,699 9,799,913 (59,831,330) 15,943,206
Surrenders............. (40,106) (233,750) (203,050) (281,648)
Net loan withdrawals... -- (71,384) (1,787,588) (82,526)
Cost of insurance and
other fees............ (5,636) (53,381) (82,442) (79,595)
----------- ------------ ------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,361,957 9,441,427 6,569,883 15,516,846
----------- ------------ ------------- -------------
Total increase
(decrease) in net
assets................ 1,425,310 11,425,670 6,974,795 17,534,004
NET ASSETS:
Beginning of period.... 306,291 3,843,811 4,656,869 4,002,861
----------- ------------ ------------- -------------
End of period.......... $1,731,601 $ 15,269,481 $ 11,631,664 $21,536,865
----------- ------------ ------------- -------------
----------- ------------ ------------- -------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM INCEPTION, JANUARY 10, 1995, TO DECEMBER 31,
1995
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------ ------------- -------------
OPERATIONS:
Net investment income
(loss)................ $ 5,592 $ 24,153 $ 74,755 $ 40,874
Capital gains income... -- 403 -- 120
Net realized gain
(loss) on security
transactions.......... 275 (94) -- (649)
Net unrealized
appreciation
(depreciation) of
investments during
the period............ 7,044 221,539 -- 190,815
----------- ------------ ------------- -------------
Net increase (decrease)
in net assets
resulting from
operations............ 12,911 246,001 74,755 231,160
----------- ------------ ------------- -------------
UNIT TRANSACTIONS:
Purchases.............. -- -- 23,888,562 --
Net transfers.......... 306,533 3,642,384 (18,864,634) 3,814,765
Surrenders............. (12,757) (33,294) (48,453) (36,276)
Net loan withdrawals... -- (5,495) (372,799) --
Cost of insurance and
other fees............ (396) (5,785) (20,562) (6,788)
----------- ------------ ------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 293,380 3,597,810 4,582,114 3,771,701
----------- ------------ ------------- -------------
Total increase
(decrease) in net
assets................ 306,291 3,843,811 4,656,869 4,002,861
NET ASSETS:
Beginning of period.... -- -- -- --
----------- ------------ ------------- -------------
End of period.......... $ 306,291 $ 3,843,811 $ 4,656,869 $ 4,002,861
----------- ------------ ------------- -------------
----------- ------------ ------------- -------------
</TABLE>
* From inception, August 1, 1996, to December 31, 1996.
** From inception, March 1, 1995, to December 31, 1995.
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 59
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND INTERNATIONAL
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ----------- ------------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 100,190 $ 24,643 $ 56,990 $ 75,641 $ 128,284 $ 33,540
Capital gains income... 542,857 -- 18,617 46,012 41,509 28,341
Net realized gain
(loss) on security
transactions.......... (2,788) (687) 3,838 (26) (280) 38
Net unrealized
appreciation
(depreciation) of
investments during
the period............ 2,060,719 577 523,283 366,466 967,296 22,219
----------------- --------------- ----------- ------------------ ------------ --------------
Net increase (decrease)
in net assets
resulting from
operations............ 2,700,978 24,533 602,728 488,093 1,136,809 84,138
----------------- --------------- ----------- ------------------ ------------ --------------
UNIT TRANSACTIONS:
Purchases.............. 29 -- -- -- -- --
Net transfers.......... 14,180,908 513,118 4,159,498 5,005,094 7,624,232 1,187,324
Surrenders............. (360,928) (14,119) (66,581) (107,782) (155,061) (10,618)
Net loan withdrawals... (88,831) (1) (65,105) (24,312) (39,663) (7,147)
Cost of insurance and
other fees............ (88,601) (2,230) (18,114) (23,891) (32,690) (4,435)
----------------- --------------- ----------- ------------------ ------------ --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 13,642,577 496,768 4,009,698 4,849,109 7,396,818 1,165,124
----------------- --------------- ----------- ------------------ ------------ --------------
Total increase
(decrease) in net
assets................ 16,343,555 521,301 4,612,426 5,337,202 8,533,627 1,249,262
NET ASSETS:
Beginning of period.... 7,511,658 159,788 643,432 1,329,071 1,758,000 157,633
----------------- --------------- ----------- ------------------ ------------ --------------
End of period.......... $23,855,213 $681,089 $5,255,858 $6,666,273 $10,291,627 $1,406,895
----------------- --------------- ----------- ------------------ ------------ --------------
----------------- --------------- ----------- ------------------ ------------ --------------
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND INTERNATIONAL
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT**
----------------- --------------- ----------- ------------------ ------------ --------------
OPERATIONS:
Net investment income
(loss)................ $ 17,693 $ 4,015 $ 4,467 $ 4,790 $ 13,879 $ 3,923
Capital gains income... 541 -- 4 92 -- --
Net realized gain
(loss) on security
transactions.......... 1,253 105 (49) 20 425 301
Net unrealized
appreciation
(depreciation) of
investments during
the period............ 215,241 2,911 37,902 59,577 143,200 4,932
----------------- --------------- ----------- ------------------ ------------ --------------
Net increase (decrease)
in net assets
resulting from
operations............ 234,728 7,031 42,324 64,479 157,504 9,156
----------------- --------------- ----------- ------------------ ------------ --------------
UNIT TRANSACTIONS:
Purchases.............. -- -- -- -- -- --
Net transfers.......... 7,349,141 165,306 617,882 1,282,924 1,624,852 160,888
Surrenders............. (45,663) (12,284) (15,806) (16,386) (21,482) (12,083)
Net loan withdrawals... (16,773) -- (36) -- (36) (34)
Cost of insurance and
other fees............ (9,775) (265) (932) (1,946) (2,838) (294)
----------------- --------------- ----------- ------------------ ------------ --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 7,276,930 152,757 601,108 1,264,592 1,600,496 148,477
----------------- --------------- ----------- ------------------ ------------ --------------
Total increase
(decrease) in net
assets................ 7,511,658 159,788 643,432 1,329,071 1,758,000 157,633
NET ASSETS:
Beginning of period.... -- -- -- -- -- --
----------------- --------------- ----------- ------------------ ------------ --------------
End of period.......... $ 7,511,658 $159,788 $ 643,432 $1,329,071 $ 1,758,000 $ 157,633
----------------- --------------- ----------- ------------------ ------------ --------------
----------------- --------------- ----------- ------------------ ------------ --------------
<CAPTION>
SMALL
COMPANY FUND
SUB-ACCOUNT*
------------
<S> <C>
OPERATIONS:
Net investment income
(loss)................ $ 1
Capital gains income... --
Net realized gain
(loss) on security
transactions.......... --
Net unrealized
appreciation
(depreciation) of
investments during
the period............ 64
------------
Net increase (decrease)
in net assets
resulting from
operations............ 65
------------
UNIT TRANSACTIONS:
Purchases.............. 1,000
Net transfers.......... 10,337
Surrenders............. --
Net loan withdrawals... --
Cost of insurance and
other fees............ --
------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 11,337
------------
Total increase
(decrease) in net
assets................ 11,402
NET ASSETS:
Beginning of period.... --
------------
End of period.......... $11,402
------------
------------
OPERATIONS:
Net investment income
(loss)................
Capital gains income...
Net realized gain
(loss) on security
transactions..........
Net unrealized
appreciation
(depreciation) of
investments during
the period............
Net increase (decrease)
in net assets
resulting from
operations............
UNIT TRANSACTIONS:
Purchases..............
Net transfers..........
Surrenders.............
Net loan withdrawals...
Cost of insurance and
other fees............
Net increase (decrease)
in net assets
resulting from unit
transactions..........
Total increase
(decrease) in net
assets................
NET ASSETS:
Beginning of period....
End of period..........
</TABLE>
<PAGE>
60 ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT FIVE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- ---------------------------------------------------
1. ORGANIZATION:
Separate Account Five (the Account) is a separate investment account within ITT
Hartford Life and Annuity 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 life
contractholders of the Company in various mutual funds (the Funds) as directed
by the contractholders.
- ---------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting principles
in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividends and
capital gains income are accrued as of the ex-dividend date. Capital
gains income represents dividends from the Funds which are characterized
as capital gains under tax regulations.
b) SECURITY VALUATION--The investment in shares of the Hartford mutual
funds are valued at the closing net asset value per share as determined
by the appropriate Fund as of December 31, 1996.
c) FEDERAL INCOME TAXES--The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as
an insurance company under the Internal Revenue Code. Under current law,
no federal income taxes are payable with respect to the operations of
the Account.
d) USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the financial statements and
the reported amounts of income and expenses during the period. Operating
results in the future could vary from the amounts derived from
management's estimates.
- ---------------------------------------------------
3.ADMINISTRATION OF THE ACCOUNT AND
RELATED CHARGES:
In accordance with the terms of the contracts, the Company makes deductions
for mortality and expense undertakings, cost of insurance, administrative fees,
and state premium taxes. These charges are deducted through termination of units
of interest from applicable contractholders' accounts in accordance with the
terms of the contracts.
<PAGE>
This page intentionally left blank.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ITT Hartford Life and Annuity Insurance Company
Separate Account Five and to the
Owners of Units of Interest Therein:
We have audited the accompanying statement of assets and liabilities of ITT
Hartford Life and Annuity Insurance Company Separate Account Five (the Account)
as of December 31, 1996, and the related statement of operations for the year
then ended and statements of changes in net assets for the year ended December
31, 1996 and the period from inception, January 10, 1995, to December 31, 1995.
These financial statements are the responsibility of the Account's management.
Our responsibility is to express an opinion on these financial statements based
on our 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 ITT Hartford Life and Annuity
Insurance Company Separate Account Five as of December 31, 1996, the results of
its operations for the year then ended and the changes in its net assets for the
year ended December 31, 1996 and the period from inception, January 10, 1995, to
December 31, 1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 14, 1997
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Separate Account Five
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY ADVISERS
BOND FUND STOCK FUND MARKET FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 1,733,002
Cost $1,722,027
Market Value......... $1,731,599 -- -- --
Hartford Stock Fund,
Inc.
Shares 3,685,895
Cost $13,390,058
Market Value......... -- $15,269,591 -- --
HVA Money Market Fund,
Inc.
Shares 11,631,670
Cost $11,631,670
Market Value......... -- -- $11,631,670 --
Hartford Advisers Fund,
Inc.
Shares 9,927,031
Cost $19,803,664
Market Value......... -- -- -- $21,536,990
Hartford Capital
Appreciation Fund,
Inc.
Shares 6,094,455
Cost $21,579,746
Market Value......... -- -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 645,107
Cost $677,597
Market Value......... -- -- -- --
Hartford Index Fund,
Inc.
Shares 2,206,702
Cost $4,694,671
Market Value......... -- -- -- --
Hartford International
Opportunities Fund,
Inc.
Shares 4,738,342
Cost $6,240,236
Market Value......... -- -- -- --
Hartford Dividend and
Growth Fund, Inc.
Shares 6,650,828
Cost $9,181,128
Market Value......... -- -- -- --
Hartford International
Advisers Fund, Inc.
Shares 1,205,995
Cost $1,379,739
Market Value......... -- -- -- --
Hartford Small Company
Fund, Inc.
Shares 10,665
Cost $11,338
Market Value......... -- -- -- --
Due from ITT Hartford
Life and Annuity
Insurance Company..... -- -- 440,244 --
Receivable from fund
shares sold........... 2 -- -- 7
------------ ----------- ----------- ----------
Total Assets........... 1,731,601 15,269,591 12,071,914 21,536,997
------------ ----------- ----------- ----------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company..... -- 110 -- 132
Payable for fund shares
purchased............. -- -- 440,250 --
------------ ----------- ----------- ----------
Total Liabilities...... -- 110 440,250 132
------------ ----------- ----------- ----------
Net Assets (variable
life contract
liabilities).......... $1,731,601 $15,269,481 $11,631,664 $21,536,865
------------ ----------- ----------- ----------
------------ ----------- ----------- ----------
Units Outstanding...... 1,412,742 9,252,090 10,472,721 14,485,431
Accumulation Unit Value
at end of period...... $ 1.225702 $ 1.650382 $ 1.110663 $1.486795
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL INTERNATIONAL DIVIDEND
APPRECIATION MORTGAGE OPPORTUNITIES AND INTERNATIONAL
FUND SECURITIES FUND INDEX FUND FUND GROWTH FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- --------------- ---------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 1,733,002
Cost $1,722,027
Market Value......... -- -- -- -- -- --
Hartford Stock Fund,
Inc.
Shares 3,685,895
Cost $13,390,058
Market Value......... -- -- -- -- -- --
HVA Money Market Fund,
Inc.
Shares 11,631,670
Cost $11,631,670
Market Value......... -- -- -- -- -- --
Hartford Advisers Fund,
Inc.
Shares 9,927,031
Cost $19,803,664
Market Value......... -- -- -- -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 6,094,455
Cost $21,579,746
Market Value......... $23,855,706 -- -- -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 645,107
Cost $677,597
Market Value......... -- $ 681,088 -- -- -- --
Hartford Index Fund,
Inc.
Shares 2,206,702
Cost $4,694,671
Market Value......... -- -- $5,255,854 -- -- --
Hartford International
Opportunities Fund,
Inc.
Shares 4,738,342
Cost $6,240,236
Market Value......... -- -- -- $6,666,277 -- --
Hartford Dividend and
Growth Fund, Inc.
Shares 6,650,828
Cost $9,181,128
Market Value......... -- -- -- -- $10,291,624 --
Hartford International
Advisers Fund, Inc.
Shares 1,205,995
Cost $1,379,739
Market Value......... -- -- -- -- -- $1,406,891
Hartford Small Company
Fund, Inc.
Shares 10,665
Cost $11,338
Market Value......... -- -- -- -- -- --
Due from ITT Hartford
Life and Annuity
Insurance Company..... -- 1 4 -- 3 4
Receivable from fund
shares sold........... -- -- -- -- -- --
--------------- --------------- ---------- ---------------- ----------- -------------
Total Assets........... 23,855,706 681,089 5,255,858 6,666,277 10,291,627 1,406,895
--------------- --------------- ---------- ---------------- ----------- -------------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company..... 493 -- -- 4 -- --
Payable for fund shares
purchased............. -- -- -- -- -- --
--------------- --------------- ---------- ---------------- ----------- -------------
Total Liabilities...... 493 -- -- 4 -- --
--------------- --------------- ---------- ---------------- ----------- -------------
Net Assets (variable
life contract
liabilities).......... $23,855,213 $ 681,089 $5,255,858 $6,666,273 $10,291,627 $1,406,895
--------------- --------------- ---------- ---------------- ----------- -------------
--------------- --------------- ---------- ---------------- ----------- -------------
Units Outstanding...... 15,227,011 557,697 3,165,103 5,086,205 6,173,912 1,086,383
Accumulation Unit Value
at end of period...... $ 1.566638 $1.221248 $1.660565 $ 1.310658 $ 1.666954 $ 1.295024
<CAPTION>
SMALL
COMPANY FUND
SUB-ACCOUNT
------------
<S> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares
Cost
Market Value......... --
Hartford Stock Fund,
Inc.
Shares
Cost
Market Value......... --
HVA Money Market Fund,
Inc.
Shares
Cost
Market Value......... --
Hartford Advisers Fund,
Inc.
Shares
Cost
Market Value......... --
Hartford Capital
Appreciation Fund,
Inc.
Shares
Cost
Market Value......... --
Hartford Mortgage
Securities Fund, Inc.
Shares
Cost
Market Value......... --
Hartford Index Fund,
Inc.
Shares
Cost
Market Value......... --
Hartford International
Opportunities Fund,
Inc.
Shares
Cost
Market Value......... --
Hartford Dividend and
Growth Fund, Inc.
Shares
Cost
Market Value......... --
Hartford International
Advisers Fund, Inc.
Shares
Cost
Market Value......... --
Hartford Small Company
Fund, Inc.
Shares
Cost
Market Value......... $11,402
Due from ITT Hartford
Life and Annuity
Insurance Company..... --
Receivable from fund
shares sold........... --
------------
Total Assets........... 11,402
------------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company..... --
Payable for fund shares
purchased............. --
------------
Total Liabilities...... --
------------
Net Assets (variable
life contract
liabilities).......... $11,402
------------
------------
Units Outstanding...... --
Accumulation Unit Value
at end of period...... --
</TABLE>
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT FIVE
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY
MARKET ADVISERS
BOND FUND STOCK FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $61,277 $ 140,710 $404,912 $ 357,873
---------- ----------- --------- -----------
Net investment income
(loss).............. 61,277 140,710 404,912 357,873
---------- ----------- --------- -----------
CAPITAL GAINS INCOME..... -- 185,013 -- 116,357
---------- ----------- --------- -----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (451) 524 -- 415
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 2,527 1,657,996 -- 1,542,513
---------- ----------- --------- -----------
Net realized and
unrealized gain
(loss) on
investments......... 2,076 1,658,520 -- 1,542,928
---------- ----------- --------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ $63,353 $ 1,984,243 $404,912 $2,017,158
---------- ----------- --------- -----------
---------- ----------- --------- -----------
</TABLE>
* From inception, August 9, 1996, to December 31, 1996.
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND INTERNATIONAL
APPRECIATION SECURITIES INDEX OPPORTUNITIES AND ADVISERS SMALL
FUND FUND FUND FUND GROWTH FUND FUND COMPANY FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
---------------- ----------- --------- -------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 100,190 $24,643 $ 56,990 $75,641 $ 128,284 $33,540 $ 1
---------------- ----------- --------- -------------- ----------- ------------ ---
Net investment income
(loss).............. 100,190 24,643 56,990 75,641 128,284 33,540 1
---------------- ----------- --------- -------------- ----------- ------------ ---
CAPITAL GAINS INCOME..... 542,857 -- 18,617 46,012 41,509 28,341 --
---------------- ----------- --------- -------------- ----------- ------------ ---
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (2,788) (687) 3,838 (26) (280) 38 --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 2,060,719 577 523,283 366,466 967,296 22,219 64
---------------- ----------- --------- -------------- ----------- ------------ ---
Net realized and
unrealized gain
(loss) on
investments......... 2,057,931 (110) 527,121 366,440 967,016 22,257 64
---------------- ----------- --------- -------------- ----------- ------------ ---
Net increase (decrease)
in net assets
resulting from
operations............ $2,700,978 $24,533 $602,728 $488,093 $1,136,809 $84,138 $65
---------------- ----------- --------- -------------- ----------- ------------ ---
---------------- ----------- --------- -------------- ----------- ------------ ---
</TABLE>
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Separate Account Five
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 61,277 $ 140,710 $ 404,912 $ 357,873
Capital gains income... -- 185,013 -- 116,357
Net realized gain
(loss) on security
transactions.......... (451) 524 -- 415
Net unrealized
appreciation
(depreciation) of
investments during
the period............ 2,527 1,657,996 -- 1,542,513
----------- ------------ ------------- -------------
Net increase (decrease)
in net assets
resulting from
operations............ 63,353 1,984,243 404,912 2,017,158
----------- ------------ ------------- -------------
UNIT TRANSACTIONS:
Purchases.............. -- 29 68,474,293 17,409
Net transfers.......... 1,407,699 9,799,913 (59,831,330) 15,943,206
Surrenders............. (40,106) (233,750) (203,050) (281,648)
Net loan withdrawals... -- (71,384) (1,787,588) (82,526)
Cost of insurance and
other fees............ (5,636) (53,381) (82,442) (79,595)
----------- ------------ ------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,361,957 9,441,427 6,569,883 15,516,846
----------- ------------ ------------- -------------
Total increase
(decrease) in net
assets................ 1,425,310 11,425,670 6,974,795 17,534,004
NET ASSETS:
Beginning of period.... 306,291 3,843,811 4,656,869 4,002,861
----------- ------------ ------------- -------------
End of period.......... $1,731,601 $ 15,269,481 $ 11,631,664 $21,536,865
----------- ------------ ------------- -------------
----------- ------------ ------------- -------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM INCEPTION, JANUARY 10, 1995, TO DECEMBER 31,
1995
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------ ------------- -------------
OPERATIONS:
Net investment income
(loss)................ $ 5,592 $ 24,153 $ 74,755 $ 40,874
Capital gains income... -- 403 -- 120
Net realized gain
(loss) on security
transactions.......... 275 (94) -- (649)
Net unrealized
appreciation
(depreciation) of
investments during
the period............ 7,044 221,539 -- 190,815
----------- ------------ ------------- -------------
Net increase (decrease)
in net assets
resulting from
operations............ 12,911 246,001 74,755 231,160
----------- ------------ ------------- -------------
UNIT TRANSACTIONS:
Purchases.............. -- -- 23,888,562 --
Net transfers.......... 306,533 3,642,384 (18,864,634) 3,814,765
Surrenders............. (12,757) (33,294) (48,453) (36,276)
Net loan withdrawals... -- (5,495) (372,799) --
Cost of insurance and
other fees............ (396) (5,785) (20,562) (6,788)
----------- ------------ ------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 293,380 3,597,810 4,582,114 3,771,701
----------- ------------ ------------- -------------
Total increase
(decrease) in net
assets................ 306,291 3,843,811 4,656,869 4,002,861
NET ASSETS:
Beginning of period.... -- -- -- --
----------- ------------ ------------- -------------
End of period.......... $ 306,291 $ 3,843,811 $ 4,656,869 $ 4,002,861
----------- ------------ ------------- -------------
----------- ------------ ------------- -------------
</TABLE>
* From inception, August 1, 1996, to December 31, 1996.
** From inception, March 1, 1995, to December 31, 1995.
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND INTERNATIONAL
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ----------- ------------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 100,190 $ 24,643 $ 56,990 $ 75,641 $ 128,284 $ 33,540
Capital gains income... 542,857 -- 18,617 46,012 41,509 28,341
Net realized gain
(loss) on security
transactions.......... (2,788) (687) 3,838 (26) (280) 38
Net unrealized
appreciation
(depreciation) of
investments during
the period............ 2,060,719 577 523,283 366,466 967,296 22,219
----------------- --------------- ----------- ------------------ ------------ --------------
Net increase (decrease)
in net assets
resulting from
operations............ 2,700,978 24,533 602,728 488,093 1,136,809 84,138
----------------- --------------- ----------- ------------------ ------------ --------------
UNIT TRANSACTIONS:
Purchases.............. 29 -- -- -- -- --
Net transfers.......... 14,180,908 513,118 4,159,498 5,005,094 7,624,232 1,187,324
Surrenders............. (360,928) (14,119) (66,581) (107,782) (155,061) (10,618)
Net loan withdrawals... (88,831) (1) (65,105) (24,312) (39,663) (7,147)
Cost of insurance and
other fees............ (88,601) (2,230) (18,114) (23,891) (32,690) (4,435)
----------------- --------------- ----------- ------------------ ------------ --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 13,642,577 496,768 4,009,698 4,849,109 7,396,818 1,165,124
----------------- --------------- ----------- ------------------ ------------ --------------
Total increase
(decrease) in net
assets................ 16,343,555 521,301 4,612,426 5,337,202 8,533,627 1,249,262
NET ASSETS:
Beginning of period.... 7,511,658 159,788 643,432 1,329,071 1,758,000 157,633
----------------- --------------- ----------- ------------------ ------------ --------------
End of period.......... $23,855,213 $681,089 $5,255,858 $6,666,273 $10,291,627 $1,406,895
----------------- --------------- ----------- ------------------ ------------ --------------
----------------- --------------- ----------- ------------------ ------------ --------------
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND INTERNATIONAL
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT**
----------------- --------------- ----------- ------------------ ------------ --------------
OPERATIONS:
Net investment income
(loss)................ $ 17,693 $ 4,015 $ 4,467 $ 4,790 $ 13,879 $ 3,923
Capital gains income... 541 -- 4 92 -- --
Net realized gain
(loss) on security
transactions.......... 1,253 105 (49) 20 425 301
Net unrealized
appreciation
(depreciation) of
investments during
the period............ 215,241 2,911 37,902 59,577 143,200 4,932
----------------- --------------- ----------- ------------------ ------------ --------------
Net increase (decrease)
in net assets
resulting from
operations............ 234,728 7,031 42,324 64,479 157,504 9,156
----------------- --------------- ----------- ------------------ ------------ --------------
UNIT TRANSACTIONS:
Purchases.............. -- -- -- -- -- --
Net transfers.......... 7,349,141 165,306 617,882 1,282,924 1,624,852 160,888
Surrenders............. (45,663) (12,284) (15,806) (16,386) (21,482) (12,083)
Net loan withdrawals... (16,773) -- (36) -- (36) (34)
Cost of insurance and
other fees............ (9,775) (265) (932) (1,946) (2,838) (294)
----------------- --------------- ----------- ------------------ ------------ --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 7,276,930 152,757 601,108 1,264,592 1,600,496 148,477
----------------- --------------- ----------- ------------------ ------------ --------------
Total increase
(decrease) in net
assets................ 7,511,658 159,788 643,432 1,329,071 1,758,000 157,633
NET ASSETS:
Beginning of period.... -- -- -- -- -- --
----------------- --------------- ----------- ------------------ ------------ --------------
End of period.......... $ 7,511,658 $159,788 $ 643,432 $1,329,071 $ 1,758,000 $ 157,633
----------------- --------------- ----------- ------------------ ------------ --------------
----------------- --------------- ----------- ------------------ ------------ --------------
<CAPTION>
SMALL
COMPANY FUND
SUB-ACCOUNT*
------------
<S> <C>
OPERATIONS:
Net investment income
(loss)................ $ 1
Capital gains income... --
Net realized gain
(loss) on security
transactions.......... --
Net unrealized
appreciation
(depreciation) of
investments during
the period............ 64
------------
Net increase (decrease)
in net assets
resulting from
operations............ 65
------------
UNIT TRANSACTIONS:
Purchases.............. 1,000
Net transfers.......... 10,337
Surrenders............. --
Net loan withdrawals... --
Cost of insurance and
other fees............ --
------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 11,337
------------
Total increase
(decrease) in net
assets................ 11,402
NET ASSETS:
Beginning of period.... --
------------
End of period.......... $11,402
------------
------------
OPERATIONS:
Net investment income
(loss)................
Capital gains income...
Net realized gain
(loss) on security
transactions..........
Net unrealized
appreciation
(depreciation) of
investments during
the period............
Net increase (decrease)
in net assets
resulting from
operations............
UNIT TRANSACTIONS:
Purchases..............
Net transfers..........
Surrenders.............
Net loan withdrawals...
Cost of insurance and
other fees............
Net increase (decrease)
in net assets
resulting from unit
transactions..........
Total increase
(decrease) in net
assets................
NET ASSETS:
Beginning of period....
End of period..........
</TABLE>
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT FIVE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- ---------------------------------------------------
1. ORGANIZATION:
Separate Account Five (the Account) is a separate investment account within ITT
Hartford Life and Annuity 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 life
contractholders of the Company in various mutual funds (the Funds) as directed
by the contractholders.
- ---------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting principles
in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are
recorded on the trade date (date the order to buy or sell is executed).
Cost of investments sold is determined on the basis of identified cost.
Dividends and capital gains income are accrued as of the ex-dividend
date. Capital gains income represents dividends from the Funds which are
characterized as capital gains under tax regulations.
b) SECURITY VALUATION--The investment in shares of the
Hartford mutual funds are valued at the closing net asset value per
share as determined by the appropriate Fund as of December 31, 1996.
c) FEDERAL INCOME TAXES--The operations of the
Account form a part of, and are taxed with, the total operations of the
Company, which is taxed as an insurance company under the Internal
Revenue Code. Under current law, no federal income taxes are payable
with respect to the operations of the Account.
d) USE OF ESTIMATES--The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the financial
statements and the reported amounts of income and expenses during the
period. Operating results in the future could vary from the amounts
derived from management's estimates.
- ---------------------------------------------------
3.ADMINISTRATION OF THE ACCOUNT AND
RELATED CHARGES:
In accordance with the terms of the contracts, the Company makes deductions
for mortality and expense undertakings, cost of insurance, administrative fees,
and state premium taxes. These charges are deducted through termination of units
of interest from applicable contractholders' accounts in accordance with the
terms of the contracts.
