<PAGE>
As filed with the Securities and Exchange Commission on September 29, 1998
File No. 33-83650
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 7
TO FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON
FORM N-8B-2
A. Exact name of trust: Separate Account Five
B. Name of depositor: Hartford Life and Annuity Insurance Company
C. Complete address of depositor's principal executive offices:
P.O. Box 2999
Hartford, CT 06104-2999
D. Name and complete address of agent for service:
Marianne O'Doherty, Esq.
Hartford Life Insurance Companies
P.O. Box 2999
Hartford, CT 06104-2999
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b) of Rule 485
_X_ on September 30, 1998 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on ____________, 1998 pursuant to paragraph (a)(1) of Rule 485
___ this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
E. Title and amount of securities being registered: Pursuant to Rule
24f-2 under the Investment Company Act of 1940, the Registrant has
registered an indefinite amount of securities.
F. Proposed maximum aggregate offering price to the public of the
securities being registered: Not yet determined.
G. Amount of filing fee: Not applicable.
H. Approximate date of proposed public offering: As soon as practicable
after the effective date of this registration statement.
<PAGE>
RECONCILIATION AND TIE BETWEEN
FORM N-8B AND PROSPECTUS
ITEM NO. OF
FORM N-8B-2 CAPTION IN PROSPECTUS
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1. Cover page
2. Cover page
3. Not applicable
4. Hartford Life and Annuity Insurance Company;
Distribution of the Policies
5. Summary - The Separate Account and the Funds;
The Separate Account - General
6. The Separate Account - General
7. Not required by Form S-6
8. Not required by Form S-6
9. Legal Proceedings
10. Summary; The Separate Account - Funds; The Policy -
Application for a Policy; Policy Benefits and Rights;
Other Matters - Voting Rights, Dividends
11. Summary; The Separate Account - Funds
12. Summary; The Separate Account - Funds
13. Deductions and Charges; Distribution of the Policies;
Federal Tax Considerations
14. The Policy - Application for a Policy
15. The Policy - Allocation of Premiums
16. The Separate Account - Funds; The Policy - Allocation
of Premiums
17. Summary; Policy Benefits and Rights - Account Value,
Amount Payable on Surrender of the Policy, Cancellation and
Exchange Rights
<PAGE>
ITEM NO. OF
FORM N-8B-2 CAPTION IN PROSPECTUS
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18. The Separate Account - Funds; Deduction and Charges;
Federal Tax Considerations
19. Other Matters - Statements to Policy Owners
20. Not applicable
21. Policy Benefits and Rights - Policy Loans
22. Not applicable
23. Safekeeping of Separate Account's Assets
24. Other Matters - Assignment
25. Hartford Life and Annuity Insurance Company
26. Not applicable
27. Hartford Life and Annuity Insurance Company
28. Hartford Life and Annuity Insurance Company
29. Hartford Life and Annuity Insurance Company
30. Not applicable
31. Not applicable
32. Not applicable
33. Not applicable
34. Not applicable
35. Distribution of the Policies
36. Not required by Form S-6
37. Not applicable
38. Distribution of the Policies
<PAGE>
ITEM NO. OF
FORM N-8B-2 CAPTION IN PROSPECTUS
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39. Hartford Life and Annuity Insurance Company;
Distribution of the Policies
40. Not applicable
41. Hartford Life and Annuity Insurance Company;
Distribution of the Policies
42. Not applicable
43. Not applicable
44. The Policy - Allocation of Premiums
45. Not applicable
46. Policy Benefits and Rights - Account Value
47. The Separate Account - Portfolio
48. Cover Page; Hartford Life and Annuity Insurance Company
49. Not applicable
50. The Separate Account - General
51. Summary; Hartford Life and Annuity Insurance Company; The
Policy; Policy Benefits and Rights; Other Matters -
Beneficiary
52. The Separate Account - Portfolios, Investment Adviser
53. Federal Tax Considerations
54. Not applicable
55. Not applicable
56. Not required by Form S-6
57. Not required by Form S-6
58. Not required by Form S-6
59. Not required by Form S-6
<PAGE>
PART I
<PAGE>
DIRECTOR LIFE
MODIFIED SINGLE PREMIUM VARIABLE LIFE
INSURANCE POLICIES
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 policy ("Policy" or "Policies") offered to applicants age 90 and under
by Hartford Life and Annuity Insurance Company ("Hartford"). The Policy lets the
Policy Owner pay a single premium and, subject to restrictions, additional
premiums.
The Policy is a modified endowment contract for federal income tax purposes,
except in certain cases described under "Federal Tax Considerations," page 24. 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 Hartford Money Market Fund. After the right
to cancel period has expired, the amount so allocated will be transferred to the
Funds specified in the Policy Owner's application.
The following Sub-Accounts are available under the Policies. Opposite each
Sub-Account is the name of the underlying investment for that Sub-Account.
<TABLE>
<S> <C> <C>
Advisers Fund Sub-Account -- shares of Class IA of Hartford Advisers HLS Fund, Inc.
("Hartford Advisers Fund")
Bond Fund Sub-Account -- shares of Class IA of Hartford Bond HLS Fund, Inc.
("Hartford Bond Fund")
Capital Appreciation Fund Sub-Account -- shares of Class IA of Hartford Capital Appreciation HLS
Fund, Inc. ("Hartford Capital Appreciation Fund")
Dividend and Growth Fund Sub-Account -- shares of Class IA of Hartford Dividend and Growth HLS
Fund, Inc. ("Hartford Dividend and Growth Fund")
Global Leaders Fund Sub-Account -- shares of Class IA of Hartford Global Leaders HLS Fund,
Inc. ("Hartford Global Leaders Fund")
Growth and Income Fund Sub-Account -- shares of Class IA of Hartford Growth and Income HLS Fund,
Inc. ("Hartford Growth and Income Fund")
High Yield Fund Sub-Account -- shares of Class IA of Hartford High Yield HLS Fund, Inc.
("Hartford High Yield Fund")
Index Fund Sub-Account -- shares of Class IA of Hartford Index HLS Fund, Inc.
("Hartford Index Fund")
International Advisers Fund Sub-Account -- shares of Class IA of Hartford International Advisers HLS
Fund, Inc. ("Hartford International Advisers Fund")
International Opportunities Fund Sub-Account -- shares of Class IA of Hartford International Opportunities
HLS Fund, Inc. ("Hartford International Opportunities
Fund")
MidCap Fund Sub-Account -- shares of Class IA of Hartford MidCap HLS Fund, Inc.
("Hartford MidCap Fund")
Money Market Fund Sub-Account -- shares of Class IA of Hartford Money Market HLS Fund, Inc.
("Hartford Money Market Fund")
Mortgage Securities Fund Sub-Account -- shares of Class IA of Hartford Mortgage Securities HLS
Fund, Inc. ("Hartford Mortgage Securities Fund")
Small Company Fund Sub-Account -- shares of Class IA of Hartford Small Company HLS Fund,
Inc. ("Hartford Small Company Fund")
Stock Fund Sub-Account -- shares of Class IA of Hartford Stock HLS Fund, Inc.
("Hartford Stock Fund")
</TABLE>
There is no guaranteed minimum Account Value for a Policy. The Account Value of
a Policy will vary up or down to reflect the investment experience of the Funds
to which premiums have been allocated. The Policy Owner bears the investment
risk for all amounts so allocated. The Policy continues in effect while the Cash
Surrender Value is sufficient to pay the monthly charges under the Policy
("Deduction Amount"). The Policy 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 Policies provide for a Face Amount, which is the minimum death benefit under
the Policy. The Death Benefit may be greater than the Face Amount. The Account
<PAGE>
Value will, and under certain circumstances the Death Benefit of the Policy may,
increase or decrease based on the investment experience of the Funds to which
premiums have been allocated. However, while the Policy 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 to the beneficiary. The Death Proceeds
equal the Death Benefit less any Indebtedness under the Policy.
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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. THIS PROSPECTUS AND OTHER INFORMATION ABOUT THE SEPARATE
ACCOUNT REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION CAN BE
FOUND IN THE COMMISSION'S WEB SITE (HTTP://WWW.SEC.GOV).
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THE DATE OF THIS PROSPECTUS IS SEPTEMBER 30, 1998.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 3
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SPECIAL TERMS......................................................... 5
SUMMARY............................................................... 6
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY........................... 8
THE SEPARATE ACCOUNT.................................................. 8
General............................................................. 8
Funds............................................................... 9
Investment Adviser.................................................. 10
THE POLICY............................................................ 10
Application for a Policy............................................ 10
Premiums............................................................ 11
Allocation of Premiums.............................................. 11
Accumulation Unit Values............................................ 11
DEDUCTIONS AND CHARGES................................................ 12
Monthly Deductions.................................................. 12
Annual Maintenance Fee.............................................. 13
Taxes Charged Against the Separate Account.......................... 13
Charges Against the Funds........................................... 13
Contingent Deferred Sales Charge.................................... 13
Premium Tax Charge.................................................. 13
POLICY BENEFITS AND RIGHTS............................................ 13
Death Benefit....................................................... 13
Account Value....................................................... 14
Transfer of Account Value........................................... 14
Policy Loans........................................................ 15
Amount Payable on Surrender of the Policy........................... 15
Partial Withdrawals................................................. 15
Benefits at Maturity................................................ 16
Lapse and Reinstatement............................................. 16
Cancellation and Exchange Rights.................................... 16
Suspension of Valuation, Payments and Transfers..................... 16
LAST SURVIVOR POLICIES................................................ 16
OTHER MATTERS......................................................... 17
Voting Rights....................................................... 17
Statements to Policy Owners......................................... 17
Limit on Right to Contest........................................... 17
Misstatement as to Age and Sex...................................... 17
Payment Options..................................................... 17
Beneficiary......................................................... 19
Assignment.......................................................... 19
Dividends........................................................... 19
EXECUTIVE OFFICERS AND DIRECTORS...................................... 19
DISTRIBUTION OF THE POLICIES.......................................... 23
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS.......................... 24
FEDERAL TAX CONSIDERATIONS............................................ 24
General............................................................. 24
Taxation of Hartford and the Separate Account....................... 24
Income Taxation of Policy Benefits.................................. 24
Last Survivor Policies.............................................. 25
Modified Endowment Contracts........................................ 25
Estate and Generation Skipping Taxes................................ 25
Diversification Requirements........................................ 25
Ownership of the Assets in the Separate Account..................... 26
Life Insurance Purchased for Use in Split Dollar Arrangements....... 26
</TABLE>
<PAGE>
4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Federal Income Tax Withholding...................................... 26
Non-Individual Ownership of Policies................................ 26
Other............................................................... 27
Life Insurance Purchases by Nonresident Aliens and Foreign
Corporations....................................................... 27
LEGAL PROCEEDINGS..................................................... 27
LEGAL MATTERS......................................................... 27
YEAR 2000............................................................. 27
EXPERTS............................................................... 28
REGISTRATION STATEMENT................................................ 28
APPENDIX A ILLUSTRATIONS OF BENEFITS.................................. 29
</TABLE>
THE POLICIES 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.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 5
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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 Policy.
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
Policy Year is the greater of 10% of premiums or 100% of cumulative earnings
(Account Value less premiums paid).
CASH VALUE: The Account Value less any applicable contingent deferred sales
charges and premium tax charge due upon surrender.
CASH SURRENDER VALUE: The Cash Value less all Indebtedness.
CODE: The Internal Revenue Code of 1986, as amended.
POLICY ANNIVERSARY: The yearly anniversary of the Policy Date.
POLICY DATE: A date not later than three business days after receipt of the
initial premium at Hartford's Home Office.
POLICY OWNER: The person having rights to benefits under the Policy during the
lifetime of the Insured; the Policy Owner may or may not be the Insured.
POLICY YEARS: Annual periods computed from the Policy Date.
COVERAGE AMOUNT: The Death Benefit less the Account Value.
DEATH BENEFIT: The greater of (1) the Face Amount specified in the Policy or (2)
the Account Value on the date of death multiplied by a stated percentage as
specified in the Policy.
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 Policy 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 Policy Date, the initial Face Amount is the amount shown on
the Policy'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 Policy Owner. These monies
include all outstanding loans on the Policy, including any interest due or
accrued Deduction Amount or annual maintenance fee.
INSURED: The person on whose life the Policy 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 Policy. Monthly Activity Dates occur on
the same day of the month as the Policy Date.
SEPARATE ACCOUNT: Separate Account Five, an account established by Hartford to
separate the assets funding the Policies from other assets of Hartford.
SUB-ACCOUNT: The subdivisions of the Separate Account used to allocate a Policy
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 (generally 4:00 p.m. Eastern Time) on such days.
VALUATION PERIOD: The period between the close of business on successive
Valuation Days
<PAGE>
6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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SUMMARY
THE POLICIES
The Policies are life insurance contracts with death benefits, cash values
and other traditional life insurance features. The Policies 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 Policies are
credited with units ("Accumulation Units") to calculate cash values. The Policy
Owner may transfer the cash values among the Funds.
The Policies can be issued on either a single life or "last survivor" basis.
For a discussion of how last survivor Policies operate differently from single
life Policies, see "Last Survivor Policies," page 16.
THE SEPARATE ACCOUNT AND THE FUNDS
Separate Account Five ("Separate Account") funds the variable life insurance
Policies offered by this Prospectus. Hartford established the Separate Account
pursuant to Connecticut insurance law and organized as a unit invest-
ment trust registered under the Investment Company Act of 1940. The Policies
currently offer 15 sub-accounts ("Sub-Accounts"), each investing exclusively in
a Fund. If an initial premium is submitted with an application for a Policy, it
will be allocated, within three business days of receipt at Hartford's Home
Office, to Hartford Money Market Fund. After the expiration of the right to
cancel period, the values in Hartford Money Market Fund will be allocated to one
or more of the Funds as specified in the Policy Owner's application. See "The
Policy -- Allocation of Premiums," page 11.
Currently, the Funds are Hartford Advisers Fund, Hartford Bond Fund,
Hartford Capital Appreciation Fund, Hartford Dividend and Growth Fund, Hartford
Global Leaders Fund, Hartford Growth and Income Fund, Hartford High Yield Fund,
Hartford Index Fund, Hartford International Advisers Fund, Hartford
International Opportunities Fund, Hartford MidCap Fund, Hartford Mortgage
Securities Fund, Hartford Small Company Fund, Hartford Stock Fund, and Hartford
Money Market Fund. Applicants should read the Funds prospectus accompanying this
Prospectus in connection with the purchase of a Policy. The investment
objectives of the Funds are as set forth in "The Separate Account," page 8.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
<TABLE>
<CAPTION>
MANAGEMENT
FEES OTHER EXPENSES
(ABSENT (ABSENT ANY TOTAL FUND
ANY FEE EXPENSE OPERATING
WAIVERS) REIMBURSEMENTS) EXPENSES (1)
---------- --------------- ------------
<S> <C> <C> <C>
Hartford Bond Fund................................ 0.505% 0.017% 0.522%
Hartford Stock Fund............................... 0.458% 0.013% 0.471%
Hartford Money Market Fund........................ 0.450% 0.017% 0.467%
Hartford Advisers Fund............................ 0.635% 0.014% 0.648%
Hartford Capital Appreciation Fund................ 0.641% 0.015% 0.656%
Hartford Mortgage Securities Fund................. 0.450% 0.030% 0.480%
Hartford Index Fund............................... 0.400% 0.015% 0.415%
Hartford International Opportunities Fund......... 0.699% 0.081% 0.780%
Hartford Dividend & Growth Fund................... 0.662% 0.011% 0.673%
Hartford International Advisers Fund.............. 0.775% 0.094% 0.869%
Hartford MidCap Fund.............................. 0.775% 0.071% 0.846%
Hartford Small Company Fund....................... 0.772% 0.017% 0.789%
Hartford Growth and Income Fund (2)............... 0.750% 0.150% 0.900%
Hartford Global Leaders Fund (2).................. 0.750% 0.200% 0.950%
Hartford High Yield Fund (2)...................... 0.750% 0.150% 0.900%
</TABLE>
- ---------
(1) Management Fees generally represent the fees paid to the investment adviser
or its affiliates for investment and administrative services provided. Other
Expenses are expenses (other than Management Fees) which are deducted from
the fund including legal, accounting and custodian fees. For a complete
description of the nature of the services provided in consideration of the
operating expenses deducted, please see the Fund prospectus.
(2) Hartford Global Leaders Fund, Hartford High Yield Fund, and Hartford Growth
and Income Fund are new Funds. "Total Fund Operating Expenses" are based on
annualized estimates of such expenses to be incurred in the current fiscal
year. HL Investment Advisors, Inc. has agreed to waive its fees for these
until the assets of the Funds (excluding assets contributed by companies
affiliated with HL Investment Advisors, Inc.) reach $20 million. After this
waiver, the Management Fee and Total Fund Operating Expenses would be:
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT FEES OPERATING EXPENSES
---------------- ------------------
<S> <C> <C>
Hartford Growth and Income Fund....................................................... 0.200% 0.350%
Hartford Global Leaders Fund.......................................................... 0.200% 0.400%
Hartford High Yield Fund.............................................................. 0.200% 0.350%
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 7
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The investment manager 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 8.
PREMIUMS
The Policy permits the Policy Owner to pay a large single premium and,
subject to restrictions, additional premiums. The Policy 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 Policy 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 Policy 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.
DEDUCTIONS AND CHARGES
On the Policy 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 Policy. 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 Policy Years. This charge compensates
Hartford for premium taxes imposed by various states and local jurisdictions and
for the cost of capitalization of certain policy acquisition expenses under
Section 848 of the Code. The tax expense charge includes a premium tax deduction
of 0.25% and Section 848 costs 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 Policies. 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 Policies. If the Cash Surrender Value is
not sufficient to cover a Deduction Amount due on any Monthly Activity Date the
Policy may lapse. See "Deductions and Charges -- Monthly Deductions," page 12,
and "Policy Benefits and Rights -- Lapse and Reinstatement," page 16.
If the Account Value on a Policy 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 Policies. See
"Deductions and Charges -- Annual Maintenance Fee," page 13.
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 13, and "Federal Tax Considerations," page 24.
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 Policy and partial withdrawals in excess of the Annual
Withdrawal Amount, a contingent deferred sales charge may be assessed. In Policy
Years 1 through 3, this charge is 7.5% of surrendered Account Value attributable
to premiums paid. In Policy Years 4 through 5, this charge is 6%. In Policy
Years 6 through 7, this charge is 4%. In Policy Years 8 through 9, this charge
is 2%. After the ninth Policy 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 Policies. This expense includes agents commissions,
advertising and the printing of prospectuses. See "Deductions and Charges --
Contingent Deferred Sales Charge," page 13.
During the first nine Policy Years, an additional premium tax charge will be
imposed on surrender or partial withdrawals. See "Deductions and Charges --
Premium Tax Charge," page 13.
For a discussion of the tax consequences of surrender of the Policy or a
partial withdrawal, see "Federal Tax Considerations," page 24.
<PAGE>
8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
DEATH BENEFIT
The Policies provide for a Face Amount which is the minimum Death Benefit
under the Policy. 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
Policy. See "Policy Benefits and Rights -- Death Benefit," page 13.
ACCOUNT VALUE
The Account Value will increase or decrease to reflect the investment
experience of the Funds applicable to the Policy and deductions for the monthly
Deduction Amount. There is no minimum guaranteed Account Value and the Policy
Owner bears the risk of the investment in the Funds. See "Policy Benefits and
Rights -- Account Value," page 14.
POLICY LOANS
A Policy Owner may obtain one or both of two types of cash loans from
Hartford. Both types of loans are secured by the Policy. At the time a loan is
requested, the aggregate amount of all loans (including the currently applied
for loan) may not exceed 90% of Cash Value. See "Policy Benefits and Rights --
Policy Loans," page 15.
LAPSE
Under certain circumstances a Policy 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 Policy Owner and a 61-day grace
period during which additional amounts may be paid to continue the Policy. See
"Policy Benefits and Rights -- Policy Loans," page 15, and "Lapse and
Reinstatement," page 16.
CANCELLATION AND EXCHANGE RIGHTS
An applicant has a limited right to return his or her Policy for
cancellation. If the applicant returns the Policy, by mail or hand delivery, to
Hartford or to the agent who sold the Policy, to be cancelled within ten days
after receipt of the Policy 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 Policy or the sum of (1)
the Account Value on the date the returned Policy is received by Hartford or its
agent and (2) any deductions under the Policy or by the Funds for taxes, charges
or fees.
In addition, once the Policy 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 "Policy
Benefits and Rights -- Cancellation and Exchange Rights," page 16.
TAX CONSEQUENCES
The current federal tax law generally excludes all death benefit payments
from the gross income of the Policy beneficiary. The Policies generally will be
treated as modified endowment contracts. This status does not affect the
Policies' 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 Policy (generally, the excess of Account Value over
premiums paid) and may be subject to a 10% penalty tax. See "Federal Tax
Considerations," page 24.
HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY
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 and the
District of Columbia, except New York. Effective on January 1, 1998, Hartford's
name changed from ITT Hartford Life and Annuity Insurance Company 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 controlled by
The Hartford Financial Services Group, Inc., a Delaware corporation.
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.
THE SEPARATE ACCOUNT
GENERAL
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
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 9
- --------------------------------------------------------------------------------
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 Policy Owners and persons entitled to payments under the
Policies. The assets of the Separate Account are not chargeable with liabilities
arising out of any other business which Hartford may conduct.
THE FUNDS
The assets of each Sub-Account are invested exclusively in one of the Funds.
A Policy Owner may allocate premiums among the Funds. Policy 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. Policy Owners are also advised to read
the Funds prospectus accompanying this Prospectus for more detailed information.
HARTFORD ADVISERS FUND
Seeks maximum long-term total rate of return by investing in common stocks
and other equity securities, bonds and other debt securities, and money market
instruments.
HARTFORD BOND FUND
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 Funds
entitled "Hartford Bond Fund, Inc. -- Investment Policies."
HARTFORD CAPITAL APPRECIATION FUND
Seeks growth of capital by investing in equity securities selected solely on
the basis of potential for capital appreciation.
HARTFORD DIVIDEND AND GROWTH FUND
Seeks a high level of current income consistent with growth of capital and
reasonable investment risk.
HARTFORD GLOBAL LEADERS FUND
Seeks growth of capital by investing primarily in equity securities issued
by U.S. companies and non-U.S. companies.
HARTFORD GROWTH AND INCOME FUND
Seeks growth of capital and current income by investing primarily in equity
securities with earnings growth potential and steady or rising dividends.
HARTFORD HIGH YIELD FUND
Seeks high current income by investing in non-investment grade fixed-income
securities. Growth of capital is a secondary objective.
HARTFORD INDEX FUND
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
Seeks maximum long-term total 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
Seeks growth of capital by investing primarily in equity securities issued
by non-U.S. companies.
HARTFORD MIDCAP FUND
Seeks to achieve long-term capital growth through capital appreciation by
investing primarily in equity securities.
HARTFORD MORTGAGE SECURITIES FUND
Seeks maximum current income consistent with safety of principal and
maintenance of liquidity by investing primarily in mortgage-related securities,
including securities issued by the Government National Mortgage Association.
HARTFORD SMALL COMPANY FUND
Seeks growth of capital by investing primarily in equity securities selected
on the basis of potential for capital appreciation.
HARTFORD STOCK FUND
Seeks long-term growth by investing primarily in equity securities.
* "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.
THE INDEX FUND IS NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY STANDARD &
POOR'S AND STANDARD & POOR'S MAKES NO REPRESENTATION REGARDING THE
ADVISABILITY OF INVESTING IN THE INDEX FUND.
<PAGE>
10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
HARTFORD MONEY MARKET FUND
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 Policies 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 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 Policy Owners' directions and will redeem shares in the Funds to
meet Policy 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 Policies. 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 Policies, Hartford may substitute
shares of another Fund for shares already purchased, or to be purchased in the
future, under the Policies. No substitution of securities will take place
without notice to and consent of Policy Owners and without prior approval of the
Securities and Exchange Commission to the extent required by the Investment
Company Act of 1940. Subject to Policy 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 Policies.
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 manager to each of the Hartford Funds.
Wellington Management Company, LLP ("Wellington Management") serves as
sub-investment adviser for Hartford Advisers Fund, Hartford Capital Appreciation
Fund, Hartford Dividend and Growth Fund, Hartford Global Leaders Fund, Hartford
Growth and Income Fund, Hartford International Advisers Fund, Hartford
International Opportunities Fund, Hartford MidCap 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 High
Yield Fund, Hartford Index Fund, Hartford Mortgage Securities Fund and Hartford
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 POLICY
APPLICATION FOR A POLICY
Individuals wishing to purchase a Policy must submit an application to
Hartford. A Policy 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
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 11
- --------------------------------------------------------------------------------
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 Policy will be made without the consent of the Policy
Owner.
The Policy will be effective on the Policy Date only after Hartford has
received all outstanding delivery requirements and received the initial premium.
The Policy Date is the date used to determine all future cyclical transactions
on the Policy, e.g., Monthly Activity Date, Policy Months and Policy Years. The
Policy Date may be prior to, or the same as, the date the Policy 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 Policy delivery Hartford will require a sufficient
payment to place the insurance in force.
PREMIUMS
The Policy permits the Policy Owner to pay a large single premium and,
subject to restrictions, additional premiums. The Policy 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 simplified underwriting without a medical examination if they meet
simplified underwriting standards as evidenced in their responses in the
application. For Policy 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 Policy 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 Hartford Money Market Fund. After the expiration of the right to
cancel period the Account Value in Hartford Money Market Fund will be allocated
among the Funds in whole percentages to purchase Accumulation Units in the
applicable Sub-Accounts as the Policy 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 Policy 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 Policy (including the initial allocation to
Hartford Money Market Fund) 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
Policy. See also, "Policy Benefits and Rights -- Account Value," page 14.
All valuations in connection with a Policy, e.g., with respect to
determining Account Value and Cash Surrender Value and in connection with Policy
Loans, or calculation of Death Benefits, or with respect to determining the
number of Accumulation Units to be credited to a Policy 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
<PAGE>
12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
determination will be made on the next succeeding date which is a Valuation Day.
DEDUCTIONS AND CHARGES
MONTHLY DEDUCTIONS
On the Policy Date, and on each Monthly Activity Date after the Policy Date,
Hartford will deduct an amount ("Deduction Amount") to cover charges and
expenses incurred in connection with a Policy. Each monthly Deduction Amount
will be deducted pro rata from each Sub-Account attributable to the Policy such
that the proportion of Account Value of the Policy 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 Policy may lapse.
See "Policy Benefits and Rights -- Lapse and Reinstatement," page 16. 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 Policy 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 Policy 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 Policy; however, Hartford reserves the 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 Policy 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 Policies 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
Policy 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
Policy Month is $75,000. (For an explanation of the Death Benefit, see "Policy
Benefits and Rights -- Death Benefit," page 13.)
Because the Account Value and, as a result, the Coverage Amount under a
Policy 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 Policy
Years. This charge compensates Hartford for premium taxes imposed by various
states and local jurisdictions and for the cost of capitalization of certain
policy acquisition expenses under Section 848 of the Code. The charge includes a
premium tax deduction of 0.25% and Section 848 costs of 0.15%. The 0.25% premium
tax deduction over ten Policy 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% charge 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
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 13
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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 Policies.
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 Policies. The mortality risk assumed is
that the cost of insurance charges specified in the Policy 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 Policies
will exceed the administrative charges set in the Policy. 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 Policies and the proceeds of the contingent deferred sales
charge. The mortality and expense risk charge is deducted while the Policy is in
force, including the duration of a payment option.
ANNUAL MAINTENANCE FEE
If the Account Value on a Policy 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 Policies. 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 Policies.
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 Policy and partial withdrawals in excess of the Annual
Withdrawal Amount, a contingent deferred sales charge may be assessed. In Policy
Years 1 through 3, this charge is 7.5% of surrendered Account Value attributable
to premiums paid. In Policy Years 4 through 5, this charge is 6%. In Policy
Years 6 through 7, this charge is 4%. In Policy Years 8 through 9, this charge
is 2%. After the ninth Policy 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 Policy 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 Policies. This expense
includes agents' commissions, advertising and the printing of prospectuses.
See "Policy Benefits and Rights -- Amount Payable on Surrender of the
Policy," page 15.
PREMIUM TAX CHARGE
During the first nine Policy 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 Policy
Year:
<TABLE>
<CAPTION>
POLICY
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 Policy Year, no additional premium tax charge will be
imposed.
POLICY BENEFITS AND RIGHTS
DEATH BENEFIT
While in force, the Policy provides for the payment of the Death Proceeds to
the named beneficiary when the
<PAGE>
14 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Insured under the Policy 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 Policy. 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%).
All or part of the Death Proceeds may be paid in cash or applied under a
"Payment Option." See "Other Matters -- Payment Options," page 17.
ACCOUNT VALUE
The Account Value of a Policy 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 Policy is related to the net asset value
of the Funds to which premiums on the Policy have been allocated. The Account
Value on any Valuation Day is calculated by multiplying the number of
Accumulation Units credited to the Policy 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 Policy and the value
of the Loan Account. See "The Policy -- Accumulation Unit Values," page 11.
TRANSFER OF ACCOUNT VALUE
While the Policy remains in effect, and subject to Hartford's transfer rules
then in effect, the Policy 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 Policy 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 Policy Owner to verify the accuracy of all
confirmations of transfers and to promptly advise Hartford of any inaccuracies
within thirty (30) days of receipt of the confirmation. Hartford will send the
Policy 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 Policy Owners is, or would be, to the disadvantage
of other Policy 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 Policy 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 Policy 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
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 15
- --------------------------------------------------------------------------------
amount transferred by the Accumulation Unit Value of that Sub-Account on the
Valuation Day Hartford receives the transfer request.
POLICY LOANS
While the Policy is in effect, a Policy 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 Policy. The aggregate loans (including the currently
applied for loan) may not exceed, at the time a loan is requested, 90% of the
Cash Value.
The loan amount will be transferred pro rata from each Sub-Account
attributable to the Policy (unless the Policy Owner specifies otherwise) to the
Loan Account. The amounts allocated to the Loan Account will earn interest at a
rate of 4% per annum (6% for "Preferred Loans"). The amount of the Loan Account
that equals the difference between the Cash Value and the total of all premiums
paid under the Policy is considered a "Preferred Loan." For exchanges which take
place according to IRC Section 1035(a) that have an outstanding loan at the time
of transfer, the difference between the Account Value and the total of all
premiums paid under the Policy 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 Policy Owner
within seven business days of Hartford's receipt of the loan request.
If the aggregate outstanding loan(s) secured by the Policy exceeds the
Account Value of the Policy less any contingent deferred sales charges and due
and unpaid Deduction Amount, Hartford will give written notice to the Policy
Owner that, unless Hartford receives an additional payment within 61 days to
reduce the aggregate outstanding loan(s) secured by the Policy, the Policy may
lapse.
All or any part of any loan secured by a Policy may be repaid while the
Policy 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 Policy 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 Policy
will be reinstated. See "Policy Benefits and Rights -- Lapse and Reinstatement,"
page 16.
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 the annual interest rate for
amounts held in the Loan Account, a Policy 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 the annual interest rate for amounts held in the Loan Account,
the Policy 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 POLICY
While the Policy is in effect, a Policy Owner may elect, without the consent
of the beneficiary (provided the designation of beneficiary is not irrevocable),
to fully surrender the Policy. Upon surrender, the Policy Owner will receive the
Cash Surrender Value determined as of the day Hartford receives the Policy
Owner's written request or the date requested by the Policy 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 Policy within seven days of
receipt by Hartford of the written request or on the effective surrender date
requested by the Policy Owner, whichever is later. The Policy will terminate on
the date of receipt of the written request, or the date the Policy Owner
requests the surrender to be effective, whichever is later. For a discussion of
the tax consequences of surrendering the Policy, see "Federal Tax
Considerations," page 24.
If the Policy Owner chooses to apply the surrender proceeds to a payment
option (see "Other Matters -- Payment Options," page 17), 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 Policy is in effect, a Policy 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 Policy Owner instructs otherwise. The Face Amount will
be reduced proportionate to the reduction in
<PAGE>
16 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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 13, and "Deductions and Charges --
Premium Tax Charge," page 13. For a discussion of the tax consequences of
partial withdrawals, see "Federal Tax Considerations," page 24.
BENEFITS AT MATURITY
If the Insured is living on the "Maturity Date" (the anniversary of the
Policy Date on which the Insured is age 100), on surrender of the Policy to
Hartford, Hartford will pay to the Policy Owner the Cash Surrender Value. In
such case, the Policy will terminate and Hartford will have no further
obligations under the Policy. (The Maturity Date may be extended by rider where
approved, but see "Federal Tax Considerations -- Income Taxation of Policy
Benefits," page 24.)
LAPSE AND REINSTATEMENT
The Policy 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 Policy 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.
The Policy 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 Policy dies during the Grace Period, the Death
Proceeds payable under the Policy will be reduced by the Deduction Amount(s) due
and unpaid. See "Policy Benefits and Rights -- Death Benefit," page 13.
If the Policy lapses, the Policy Owner may apply for reinstatement of the
Policy by payment of the reinstatement premium (and any applicable charges)
shown in the Policy. 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 Policy for cancellation. If the
Policy is returned, by mail or personal delivery to Hartford or to the agent who
sold the Policy, to be canceled within ten days after delivery of the Policy to
the Policy 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 Policy or the sum of (1) the Account Value on the date the
returned Policy is received by Hartford or its agent and (2) any deductions
under Policy or by the Funds for taxes, charges or fees.
Once the Policy 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 Policy Owner, either the same Coverage Amount as
under the exchanged Policy 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 Policy. If a Policy 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 Policies be suspended
for the protection of Policy Owners, until such condition has ended.
LAST SURVIVOR POLICIES
The Policies are offered on both a single life and a "last survivor" basis.
Policies 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 Policies 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 29.
2. To qualify for simplified underwriting under a last survivor Policy, both
Insureds must meet the simplified underwriting standards.
3. For a last survivor Policy to be reinstated, both Insureds must be alive on
the date of reinstatement.
4. The Policy provisions regarding misstatement of age or sex, suicide and
incontestability apply to either Insured.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 17
- --------------------------------------------------------------------------------
5. Additional tax disclosures applicable to last survivor Policies are provided
in "Federal Tax Considerations," page 24.
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 Policy Owners (or
the assignee of the Policy, 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 Policy Owner is determined by dividing the Policy 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 Policy 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 to vote the shares of the Funds in its own right, it may elect to do
so.
The voting interests of the Policy Owner (or the assignee) in the Funds will
be determined as follows: Policy Owners may cast one vote for each full or
fractional Accumulation Unit owned under the Policy 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 Policy
Owner has taken a loan secured by the Policy, amounts transferred from the Sub-
Account(s) to the Loan Account in connection with the loan (see "Policy Benefits
and Rights -- Policy Loans," page 15) will not be considered in determining the
voting interests of the Policy Owner. Policy 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 Policy 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 Policy Owners' voting
instructions in favor of changes initiated by a Policy 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 Policy Owners.
STATEMENTS TO POLICY OWNERS
Hartford will maintain all records relating to the Separate Account and the
Sub-Accounts. At least once each Policy Year, Hartford will send to Policy
Owners a statement showing the Coverage Amount and the Account Value of the
Policy (indicating the number of Accumulation Units credited to the Policy in
each Sub-Account and the corresponding Accumulation Unit Value) and any
outstanding loan secured by the Policy as of the date of the statement. The
statement will also show premium paid, and Deduction Amounts under the Policy
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 Policy after it has been in
effect during the Insured's lifetime for two years from the Issue Date. If the
Policy 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 Policy.
PAYMENT OPTIONS
The surrender proceeds or Death Proceeds under the Policies 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
<PAGE>
18 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
such times, the proceeds are not subject to the investment experience of the
Separate Account.
The following options are available under the Policies (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.
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 Policy 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 Policy 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 Policy
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 Policy.
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
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 19
- --------------------------------------------------------------------------------
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
Policy. 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 Policy. The
Policy Owner may change the 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 Policy Owner if
living; otherwise to the Policy Owner's estate.
ASSIGNMENT
The Policy 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 Policies.
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>
Bossen, Wendell J., 64 Vice President, 1995** Vice President (1992-Present), Hartford Life and Accident
Insurance Company; Vice President (1992-Present), Hartford
Life Insurance Company; President (1992-Present),
International Corporate Marketing Group, Inc.
Boyko, Gregory A., 46 Senior Vice President, Vice President & Controller (1995-1997), Hartford; Director
Director, 1997 * (1997-Present); Senior Vice President, Chief Financial Officer
& Treasurer (1997-Present); Vice President & Controller
(1995-1997), Hartford Life and Accident Insurance Company;
Director (1997-Present); Senior Vice President, Chief
Financial Officer & Treasurer (1997-Present); Vice President
and Controller (1995-1997), Hartford Life Insurance Company;
Senior Vice President, Chief Financial Officer & Treasurer
(1997-Present), Hartford Life, Inc.; Chief Financial Officer
(1994-1995), IMG American Life; Senior Vice President
(1992-1994), Connecticut Mutual Life Insurance Company.
Cummins, Peter W., 60 Senior Vice President, 1997 Vice President (1993-1997), Hartford; Senior Vice President,
(1997-Present); Vice President (1989-1997), Hartford Life and
Accident Insurance Company; Senior Vice President
(1997-Present); Vice President (1989-1997); Senior Vice
President (1997-Present); Vice President (1989-1997), Hartford
Life Insurance Company.
</TABLE>
<PAGE>
20 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>
de Raismes, Ann M., 47 Senior Vice President, 1997 Vice President (1994-1997), Hartford; Senior Vice President
Director of Human Resources, 1994 (1997-Present); Vice President (1994-1997); Assistant Vice
President (1992-1994); Director of Human Resources
(1991-Present), Hartford Life and Accident Insurance Company;
Senior Vice President (1997-Present); Vice President
(1994-1997); Assistant Vice President (1992-1994); Director of
Human Resources (1991-Present), Hartford Life Insurance
Company; Vice President, Human Resources (1997-Present),
Hartford Life, Inc.
Dooley, James R., 61 Vice President, 1993 Director, Information Services (1973-1997), Hartford Life
Insurance Company.
Fitch, Timothy M., 45 Vice President, 1995 Vice President (1995-Present); Actuary (1994-Present); Assistant
Actuary, 1997 Vice President (1992-1995), Hartford Life and Accident
Insurance Company; Vice President (1995-Present); Actuary
(1994-Present); Assistant Vice President (1992-1995), Hartford
Life Insurance Company.
Foy, David T., 31 Senior Vice President, 1998 Vice President (1998), Assistant Vice President (1995-1998),
Treasurer, 1998 Hartford; Senior Vice President (1998-Present), Assistant Vice
President (1995-1998), Hartford Life Insurance Company.
Garrett, J. Richard, 53 Vice President, 1994 Treasurer (1994-1997), Hartford; Vice President (1993-Present);
Assistant Treasurer, 1997 Assistant Treasurer (1997-Present); Treasurer (1984-1997),
Hartford Life and Accident Insurance Company; Vice President,
(1993-Present); Assistant Treasurer (1997-Present); Treasurer
(1986-1997), Hartford Life Insurance Company; Vice President
(1997-Present), Hartford Life, Inc.
Gillette, Donald J., 52 Vice President, 1997 Assistant Vice President (1995-1997), Hartford; Assistant Vice
President (1995-1997), Hartford Life and Accident Insurance
Company; Assistant Vice President (1995-Present), Hartford
Life Insurance Company.
Ginnetti, John P., 52 Executive Vice President and Senior Vice President - Individual Life and Annuity Division
Director, Asset Management (1988-1994), Hartford; Director (1988-Present); Director
Services, 1994 (1988-Present); Executive Vice President & Director, Asset
Director, 1988 Management Services (1994-Present); Senior Vice President -
Individual Life and Annuity Division (1988-1994), Hartford
Life and Accident Insurance Company; Executive Vice President,
Asset Management, Hartford Life, Inc. (1997-Present).
Godfrey, III, William A., 41 Senior Vice President, 1997 Senior Vice President (1997- Present), Hartford; Senior Vice
President (1997-Present), Hartford Life and Accident Insurance
Company; Vice President Information Technology (1997-Present),
Hartford Life, Inc.
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 21
- --------------------------------------------------------------------------------
<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>
Godkin, Lynda, 44 Senior Vice President, 1997 Assistant General Counsel and Secretary (1994-1995), Hartford;
General Counsel, 1996 Director (1997-Present); Senior Vice President (1997-Present);
Corporate Secretary, 1996 General Counsel (1996-Present); Corporate Secretary
Director, 1997* (1995-Present); Associate General Counsel (1995-1996);
Assistant General Counsel and Secretary (1994-1995); Counsel
(1990-1994), Hartford Life and Accident Insurance Company;
Senior Vice President (1997-Present); General Counsel
(1996-Present); Corporate Secretary (1995-Present); Director
(1997-Present); Associate General Counsel (1995-1996);
Assistant General Counsel and Secretary (1994-1995); Counsel
(1990-1994), Hartford Life Insurance Company; Vice President
and General Counsel (1997-Present), Hartford Life, Inc.
Grady, Lois W., 53 Senior Vice President, 1998 Vice President (1994-1998), Hartford; Senior Vice President
Vice President, 1994 (1998-Present); Vice President (1993-1997); Assistant Vice
President (1987-1993), Hartford Life and Accident Insurance
Company; Senior Vice President (1998-Present); Vice President
(1994-1997); Assistant Vice President (1987-1994), Hartford
Life Insurance Company.
Graham, Christopher, 47 Vice President, 1997
Hunt, Mark E., 37 Vice President, 1998 Assistant Vice President (1997-1998), Hartford; Vice President
(1998-Present), Hartford Life and Accident Insurance Company.
Joyce, Stephen T., 39 Vice President, 1997 Assistant Vice President (1995-1997), Hartford; Assistant Vice
President (1994-1997), Hartford Life and Accident Insurance
Company; Vice President (1997-Present); Assistant Vice
President (1994-1997), Hartford Life Insurance Company.
Keeler, Michael D., 37 Vice President, 1998 Vice President (1998-Present); Hartford Life and Accident
Insurance Company.
Kerzner, Robert A., 46 Senior Vice President, 1998 Senior Vice President (1998-Present); Vice President
Vice President, 1997 (1994-1998), Hartford; Senior Vice President (1998-Present);
Vice President (1994-1997); Regional Vice President
(1991-1994), Hartford Life Insurance Company.
Levenson, David N., 31 Vice President, 1998 Assistant Vice President (1997-1998), Hartford.
Malchodi, Jr., William B., 50 Vice President, 1994 Vice President (1994-Present); Director of Taxes (1992-1998),
Hartford Life and Accident Insurance Company; Vice President
(1994-Present); Director of Taxes (1991-1998), Hartford Life
Insurance Company.
</TABLE>
<PAGE>
22 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>
Marra, Thomas M., 39 Executive Vice President, 1996 Senior Vice President (1993-1996); Director of Individual
Director, Individual Life and Annuities (1991-1993), Hartford; Director (1994-Present);
Annuity Division, 1993 Executive Vice President (1995-Present); Director, Individual
Director, 1994* Life and Annuity Division (1994-Present); Senior Vice
President (1994-1995); Vice President (1989-1994); Actuary
(1987-1997), Hartford Life and Accident Insurance Company;
Director (1994-Present); Executive Vice President
(1995-Present); Director, Individual Life and Annuity Division
(1994-Present); Senior Vice President (1994-1995); Vice
President (1989-1994); Actuary (1987-1995), Hartford Life
Insurance Company; Executive Vice President, Individual Life
and Annuities (1997-Present), Hartford Life, Inc.
Matthieson, Steven L., 53 Vice President, 1984 Director of New Business (1984-1997), Hartford.
O'Halloran, C. Michael, 51 Vice President, 1997 Vice President (1997-Present), Hartford Life and Accident
Insurance Company; Vice President (1997-Present), Hartford
Life Insurance Company; Corporate Secretary (1997-Present),
Hartford Life, Inc.; Senior Associate General Counsel
(1988-Present), Director of Corporate Law (1994-Present), The
Hartford Financial Services Group.
Raymond, Craig R., 37 Senior Vice President, 1997 Vice President (1993-1997); Assistant Vice President
Chief Actuary, 1994 (1992-1993); Actuary (1989-1994), Hartford; Senior Vice
President (1997-Present); Chief Actuary (1995-Present); Vice
President (1993-1997); Actuary (1990-1995), Hartford Life and
Accident Insurance Company; Senior Vice President
(1997-Present); Chief Actuary (1994-Present); Vice President
(1993-1997); Assistant Vice President (1992-1993); Actuary
(1989-1994), Hartford Life Insurance Company; Vice President
and Chief Actuary (1997-Present), Hartford Life, Inc.
Schrandt, David T., 50 Vice President, 1987 Treasurer (1987-1997); Controller (1987-1997), Hartford.
Smith, Lowndes A., 58 President, 1989 Chief Operating Officer (1989-1997), Hartford; Director
Chief Executive Officer, 1997 (1981-Present); President (1989-Present); Chief Executive
Director, 1985* Officer (1997-Present); Chief Operating Officer (1989-1997),
Hartford Life and Accident Insurance Company; Director
(1981-Present); President (1989-Present), Chief Executive
Officer (1997-Present); Chief Operating Officer (1989-1997),
Hartford Life Insurance Company; Chief Executive Officer and
President and Director (1997-Present), Hartford Life, Inc.
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 23
- --------------------------------------------------------------------------------
<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>
Welnicki, Raymond P., 49 Senior Vice President & Vice President (1993-1994), Hartford; Director (1994-Present);
Director, Employee Benefit Senior Vice President (1995-Present); Director, Employee
Division, 1994 Benefit Division (1997-Present); Vice President (1993-1995),
Director, 1994* Hartford Life and Accident Insurance Company; Senior Vice
President, Employee Benefits (1997-Present), Hartford Life,
Inc.; Board of Directors, Ethix Corp.
Welsh, Walter C., 51 Senior Vice President, 1997 Senior Vice President (1997-Present); Vice President
(1994-1997); Assistant Vice President (1992-1995), Hartford
Life and Accident Insurance Company; Senior Vice President
(1997-Present); Vice President (1995-1997); Assistant Vice
President (1992-1995), Hartford Life Insurance Company; Vice
President, Government Affairs (1997-Present), Hartford Life,
Inc.
Zlatkus, Lizabeth H., 39 Senior Vice President, 1997 Vice President (1994-1997); Assistant Vice President
Director, 1994* (1992-1994), Hartford; Director (1994-Present); Senior Vice
President (1997-Present); Vice President (1994-1997);
Assistant Vice President (1992-1994), Hartford Life and
Accident Insurance Company; Vice President, Group Life and
Disability (1997-Present), Hartford Life, Inc.
Znamierowski, David M., 38 Senior Vice President, 1997 Director (1998-Present); Senior Vice President (1997-Present),
Director, 1998 Hartford Life and Accident Insurance Company; Director
(1998-Present); Senior Vice President (1997-Present);
Director, Risk Management Strategy (1996-Present); Vice
President (1997), Hartford Life Insurance Company; Vice
President, Investment Strategy (1997-Present), Hartford Life,
Inc.; Vice President, Investment Strategy & Policy, Aetna Life
and Casualty Company.
</TABLE>
- ---------
* Denotes date of election to Board of Directors of Hartford.
** Affiliated Company of The Hartford Financial Services Group, Inc.
Unless otherwise indicated, the principal business address of each the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
DISTRIBUTION OF THE POLICIES
Hartford intends to sell the Policies in all jurisdictions where it is
licensed to do business. The Policies 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 affiliates 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.
Broker-dealers or financial institutions are compensated according
<PAGE>
24 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
to a schedule set forth by HSD and any applicable rules or regulations for
variable insurance compensation. Compensation is generally based on premium
payments made by policyholders or contract owners. This compensation is usually
paid from the sales charges described in this Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not affect the amounts paid by the policyholders or contract
owners to purchase, hold or surrender variable insurance products.
Hartford may provide information on various topics to Policy Owners and
prospective Policy 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
Policies 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.
FEDERAL TAX CONSIDERATIONS
GENERAL
SINCE THE TAX LAW IS COMPLEX AND SINCE TAX CONSEQUENCES WILL VARY ACCORDING
TO THE ACTUAL STATUS OF THE POLICY OWNER INVOLVED, LEGAL AND TAX ADVICE MAY BE
NEEDED BY A PERSON, EMPLOYER OR OTHER ENTITY CONTEMPLATING THE PURCHASE OF A
POLICY DESCRIBED HEREIN.
It should be understood that any detailed description of the federal income
tax consequences regarding the purchase of these Policies 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 "Policy Benefits and Rights -- Account Value," on page
14). As a result, such investment income and realized capital gains are
automatically applied to increase reserves under the Policy.
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 POLICY BENEFITS
For federal income tax purposes, the Policies 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 Policy Owner is generally not taxed on
increments in the contract value until the Policy is partially or completely
surrendered. Section 7702 limits the amount of premiums that may be invested in
a Policy that is treated as life insurance. Hartford intends to monitor premium
levels to assure compliance with the Section 7702 requirements.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 25
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During the first fifteen Policy 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 Policy.
The Maturity Date Extension Rider allows a Policy Owner to extend the
Maturity Date to the date of the Insured's death. If the Maturity Date of the
Policy is extended by rider, Hartford believes that the Policy 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 Policy 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 Policy Owner should consult a qualified tax adviser regarding the possible
adverse tax consequences resulting from an extension of the scheduled Maturity
Date.
LAST SURVIVOR POLICIES
Although Hartford believes that the last survivor Policies 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
Policy does not meet the specified computational rules for the "seven-pay test"
under Section 7702A(c). Therefore, the Policy 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 cause the new Policy 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 Policy 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 Policy Owner's estate for purposes of federal estate tax if the last
surviving Insured owned the Policy. If the Policy Owner was not the last
surviving Insured, the fair market value of the Policy would be included in the
Policy Owner's estate upon the Policy 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.
The federal estate tax is integrated with the federal gift tax under a
unified rate schedule and unified credit which shelters up to $625,000 (1998)
from the estate and gift tax. The Taxpayer Relief Act of 1997 gradually raises
the credit over the next eight years to $1,000,000. 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 Policy Owner (whether or not he or she is an Insured) transfers
ownership of the Policy 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 Policy. 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 Policy
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
<PAGE>
26 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Department. If a Policy is not treated as a life insurance contract, the Policy
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, Hartford Life and Annuity Insurance Company may comply within a
reasonable period and avoid the taxation of policy income on an ongoing basis.
However, either Hartford Life and Annuity Insurance Company or the Policy 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 certain incidents of ownership
by the contract owner, such as the ability to select and control investments in
a separate account, will cause the contract owner to be treated as the owner of
the assets for tax purposes.
Further, in the explanation to the temporary Section 817 diversification
regulations, the Treasury Department noted that the temporary regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor, rather
than the insurance company, to be treated as the owner of the assets in the
account." The explanation further indicates that "the temporary regulations
provide that in appropriate cases a segregated asset account may include
multiple sub-accounts, but do not specify the extent to which policyholders may
direct their investments to particular sub-accounts without being treated as the
owners of the underlying assets. Guidance on this and other issues will be
provided in regulations or revenue rulings under section 817(d), relating to the
definition of variable contract." The final regulations issued under Section 817
did not provide guidance regarding investor control, and as of the date of this
Prospectus, no other such guidance has been issued. Further, Hartford does not
know if or in what form such guidance will be issued. In addition, although
regulations are generally issued with prospective effect, it is possible that
regulations may be issued with retroactive effect. Due to the lack of specific
guidance regarding the issue of investor control, there is necessarily some
uncertainty regarding whether a Policy Owner could be considered the owner of
the assets for tax purposes. Hartford reserves the right to modify the
contracts, as necessary, to prevent Policy Owners from being considered the
owners of the assets in the separate accounts.
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 Policy Owner,
such amounts will be subject to federal income tax withholding and reporting,
pursuant to the Code.
NON-INDIVIDUAL OWNERSHIP OF POLICIES
In certain circumstances, the Code limits the application of specific tax
advantages to individual owners of life insurance contracts. Prospective Policy
Owners which are not individuals should consult a qualified tax adviser to
determine the potential impact on the purchaser.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 27
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OTHER
Federal estate tax, state and local estate, inheritance and other tax
consequences of ownership, or receipt of Policy proceeds depend on the
circumstances of each Policy 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 Policies described in this Prospectus and the
organization of Hartford, its authority to issue the Policies under Connecticut
law and the validity of the forms of the Policies under Connecticut law and
legal matters relating to the federal securities and income tax laws have been
passed on by Lynda Godkin, Senior Vice President, General Counsel and Corporate
Secretary of Hartford.
YEAR 2000
The Year 2000 issue relates to the ability or inability of computer systems
to properly process information and data containing or related to dates
beginning with the year 2000 and beyond. The Year 2000 issue exists because,
historically, many computer systems that are in use today were developed years
ago when a year was identified using a two-digit field rather than a four-digit
field. As information and data containing or related to the century date are
introduced to computer hardware, software and other systems, date sensitive
systems may recognize the year 2000 as 1900, or not at all, which may result in
computer systems processing information incorrectly. This, in turn, may
significantly and adversely affect the integrity and reliability of information
databases and may result in a wide variety of adverse consequences to a company.
In addition, Year 2000 problems that occur with third parties with which a
company does business, such as suppliers, computer vendors and others, may also
adversely affect any given company.
As an insurance and financial services company, Hartford has thousands of
individual and business customers that have purchased or invested in insurance
policies, annuities, mutual funds and other financial products. Nearly all of
these policies and products contain date sensitive data, such as policy
expiration dates, birth dates, premium payments dates and the like. In addition,
Hartford has business relationships with numerous third parties that affect
virtually all aspects of its business, including, without limitation, suppliers,
computer hardware and software vendors, insurance agents and brokers, securities
broker-dealers and other distributors of financial products.
Beginning in 1990, Hartford began working on making its computer systems
Year 2000 ready, either by installing new programs or by replacing systems. In
January 1998, Hartford commenced a company-wide program to further identify,
assess and remediate the impact of Year 2000 problems in all of Hartford's
business segments. Hartford currently anticipates that this internal program
will be substantially completed by the end of 1998, and testing of computer
systems will continue through 1999.
In addition, as part of its Year 2000 program, Hartford is identifying third
parties with which it has significant business relations in order to attempt to
assess any potential impact on Hartford as a result of such third-party Year
2000 issues and remediation plans. Hartford currently anticipates that it will
substantially complete this evaluation by the end of 1998, and will conduct
systems testing with certain third parties through 1999. Hartford does not have
control over these third parties and, as a result, Hartford cannot currently
determine to what extent future operating results may be adversely affected by
the failure of these third parties to successfully address their Year 2000
issues. Hartford will continue to assess Year 2000 risk exposures related to its
own operations and its third-party relationships and is in the process of
developing contingency plans.
The costs of addressing the Year 2000 issue that have been incurred through
the six months ended June 30, 1998 have not been material to Hartford's
financial condition or results of operations. Hartford will continue to incur
costs related to its Year 2000 efforts and does not anticipate that the costs to
be incurred will be material to its financial condition or results of
operations.
<PAGE>
28 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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EXPERTS
The audited financial statements included in this registration statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory financial statements of
Hartford Life and Annuity Insurance Company (formerly ITT Hartford Life and
Annuity Insurance Company) which states the statutory 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, and are not presented in accordance with
generally accepted accounting principles. The principal business address of
Arthur Andersen LLP is One Financial Plaza, Hartford, Connecticut 06103.
The hypothetical Policy illustrations included in this Prospectus and the
registration statement with respect to the Separate Account have been approved
by Michael Winterfield, FSA, MAAA, Assistant Vice President and Director,
Individual Annuity Product 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 Policies.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 29
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APPENDIX A
ILLUSTRATIONS OF BENEFITS
The tables in Appendix A illustrate the way in which a Policy 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 Policy. The illustrations for the last survivor Policy 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 Policy 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 Policy
Years. They would also differ if any Policy loan were made during the period of
time illustrated.
The tables reflect the deductions of current Policy charges and guaranteed
Policy 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 Policy 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 annual charge of 0.60% described above) of -0.60%,
5.40% and 11.40%, respectively.
In addition, the death benefit and surrender value as of the end of each
Policy Year take into account the (1) tax expense charge equal to an annual rate
of 0.40% of Account Value for the first ten Policy 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 Policy 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 13).
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>
30 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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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
POLICY 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 POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY 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 POLICY 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>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 31
- --------------------------------------------------------------------------------
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
POLICY 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 POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY 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 POLICY 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>
32 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
POLICY 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 POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY 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 POLICY 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>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 33
- --------------------------------------------------------------------------------
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
POLICY 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 11,584 10,603 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 53,468 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 POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY 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 POLICY 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>
34 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
POLICY 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 16,715 16,715 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 POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY 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 POLICY 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>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 35
- --------------------------------------------------------------------------------
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
POLICY 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 POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY 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 POLICY 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>
36 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
POLICY 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 POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY 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 POLICY 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>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 37
- --------------------------------------------------------------------------------
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
POLICY 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 POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY 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 POLICY 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>
38 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 0% (-0.60% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------- ------------------------------
END OF ACCUMULATED CASH CASH
POLICY 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 4,659 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 POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY 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 POLICY 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>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 39
- --------------------------------------------------------------------------------
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
POLICY 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 44,783 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 POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY 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 POLICY 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>
40 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
POLICY 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 POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY 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 POLICY 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>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 41
- --------------------------------------------------------------------------------
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
POLICY 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 POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY 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 POLICY 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>
42 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
POLICY 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 POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY 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 POLICY 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>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 43
- --------------------------------------------------------------------------------
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
POLICY 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 POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY 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 POLICY 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>
44 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
POLICY 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 8,918 8,184 27,778
5 12,763 8,730 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 POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY 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 POLICY 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>
This page intentionally left blank.
<PAGE>
46
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT FIVE
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS Fund,
Inc.
Shares 4,153,371
Cost $ 4,248,294
Market Value......... $4,535,216 -- -- --
Hartford Stock HLS
Fund, Inc.
Shares 7,173,600
Cost $30,349,379
Market Value......... -- $43,114,508 -- --
Hartford Money Market
HLS Fund, Inc.
Shares 9,426,462
Cost $ 9,426,462
Market Value......... -- -- $9,426,462 --
Hartford Advisers HLS
Fund, Inc.
Shares 18,498,618
Cost $40,722,897
Market Value......... -- -- -- $52,148,548
Hartford Capital
Appreciation HLS Fund,
Inc.
Shares 10,869,028
Cost $41,748,285
Market Value......... -- -- -- --
Hartford Mortgage
Securities HLS Fund,
Inc.
Shares 1,489,139
Cost $ 1,592,256
Market Value......... -- -- -- --
Hartford Index HLS
Fund, Inc.
Shares 4,213,451
Cost $10,161,888
Market Value......... -- -- -- --
Hartford International
Opportunities HLS
Fund, Inc.
Shares 10,805,538
Cost $14,579,294
Market Value......... -- -- -- --
Hartford Dividend and
Growth HLS Fund, Inc.
Shares 14,275,486
Cost $23,152,432
Market Value......... -- -- -- --
Hartford International
Advisers HLS Fund,
Inc.
Shares 2,595,263
Cost $ 2,979,730
Market Value......... -- -- -- --
Hartford Small Company
HLS Fund, Inc.
Shares 1,114,531
Cost $ 1,359,892
Market Value......... -- -- -- --
Hartford MidCap HLS
Fund, Inc.
Shares 217,438
Cost $ 255,435
Market Value......... -- -- -- --
Due from Hartford Life
and Annuity Insurance
Company............... 17 -- 356,382 --
Receivable from fund
shares sold........... -- 25,843 -- 18,833
------------- ------------ ----------- --------------
Total Assets........... 4,535,233 43,140,351 9,782,844 52,167,381
------------- ------------ ----------- --------------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company............... -- 25,663 -- 18,601
Payable for fund shares
purchased............. -- -- 356,225 --
------------- ------------ ----------- --------------
Total Liabilities...... -- 25,663 356,225 18,601
------------- ------------ ----------- --------------
Net Assets (variable
life contract
liabilities).......... $4,535,233 $43,114,688 $9,426,619 $52,148,780
------------- ------------ ----------- --------------
------------- ------------ ----------- --------------
Units Owned by
Participants.......... 3,186,602 16,385,312 7,851,668 24,403,449
Unit Values.............. $ 1.423219 $ 2.631301 $ 1.200588 $ 2.136943
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
47
- --------------------------------------------------------------------------------
<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>
ASSETS:
Investments:
Hartford Bond HLS Fund,
Inc.
Shares 4,153,371
Cost $ 4,248,294
Market Value......... -- -- -- -- -- --
Hartford Stock HLS
Fund, Inc.
Shares 7,173,600
Cost $30,349,379
Market Value......... -- -- -- -- -- --
Hartford Money Market
HLS Fund, Inc.
Shares 9,426,462
Cost $ 9,426,462
Market Value......... -- -- -- -- -- --
Hartford Advisers HLS
Fund, Inc.
Shares 18,498,618
Cost $40,722,897
Market Value......... -- -- -- -- -- --
Hartford Capital
Appreciation HLS Fund,
Inc.
Shares 10,869,028
Cost $41,748,285
Market Value......... $50,347,697 -- -- -- -- --
Hartford Mortgage
Securities HLS Fund,
Inc.
Shares 1,489,139
Cost $ 1,592,256
Market Value......... -- $1,656,843 -- -- -- --
Hartford Index HLS
Fund, Inc.
Shares 4,213,451
Cost $10,161,888
Market Value......... -- -- $13,904,526 -- -- --
Hartford International
Opportunities HLS
Fund, Inc.
Shares 10,805,538
Cost $14,579,294
Market Value......... -- -- -- $15,293,446 -- --
Hartford Dividend and
Growth HLS Fund, Inc.
Shares 14,275,486
Cost $23,152,432
Market Value......... -- -- -- -- $29,817,521 --
Hartford International
Advisers HLS Fund,
Inc.
Shares 2,595,263
Cost $ 2,979,730
Market Value......... -- -- -- -- -- $2,978,946
Hartford Small Company
HLS Fund, Inc.
Shares 1,114,531
Cost $ 1,359,892
Market Value......... -- -- -- -- -- --
Hartford MidCap HLS
Fund, Inc.
Shares 217,438
Cost $ 255,435
Market Value......... -- -- -- -- -- --
Due from Hartford Life
and Annuity Insurance
Company............... -- 6 100 -- -- --
Receivable from fund
shares sold........... 118,569 -- -- 620 103,182 1,814
------------------ --------------- ------------ ------------------- ------------- -------------
Total Assets........... 50,466,266 1,656,849 13,904,626 15,294,066 29,920,703 2,980,760
------------------ --------------- ------------ ------------------- ------------- -------------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company............... 119,282 -- -- 634 103,027 1,841
Payable for fund shares
purchased............. -- -- -- -- -- --
------------------ --------------- ------------ ------------------- ------------- -------------
Total Liabilities...... 119,282 -- -- 634 103,027 1,841
------------------ --------------- ------------ ------------------- ------------- -------------
Net Assets (variable
life contract
liabilities).......... $50,346,984 $1,656,849 $13,904,626 $15,293,432 $29,817,676 $2,978,919
------------------ --------------- ------------ ------------------- ------------- -------------
------------------ --------------- ------------ ------------------- ------------- -------------
Units Owned by
Participants........... 23,491,062 1,204,155 5,375,619 9,962,110 12,226,844 1,934,871
Unit Values.............. $ 2.143240 $ 1.375943 $ 2.586609 $ 1.535160 $ 2.438706 $ 1.539596
<CAPTION>
SMALL COMPANY MIDCAP
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- ------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Bond HLS Fund,
Inc.
Shares 4,153,371
Cost $ 4,248,294
Market Value......... -- --
Hartford Stock HLS
Fund, Inc.
Shares 7,173,600
Cost $30,349,379
Market Value......... -- --
Hartford Money Market
HLS Fund, Inc.
Shares 9,426,462
Cost $ 9,426,462
Market Value......... -- --
Hartford Advisers HLS
Fund, Inc.
Shares 18,498,618
Cost $40,722,897
Market Value......... -- --
Hartford Capital
Appreciation HLS Fund,
Inc.
Shares 10,869,028
Cost $41,748,285
Market Value......... -- --
Hartford Mortgage
Securities HLS Fund,
Inc.
Shares 1,489,139
Cost $ 1,592,256
Market Value......... -- --
Hartford Index HLS
Fund, Inc.
Shares 4,213,451
Cost $10,161,888
Market Value......... -- --
Hartford International
Opportunities HLS
Fund, Inc.
Shares 10,805,538
Cost $14,579,294
Market Value......... -- --
Hartford Dividend and
Growth HLS Fund, Inc.
Shares 14,275,486
Cost $23,152,432
Market Value......... -- --
Hartford International
Advisers HLS Fund,
Inc.
Shares 2,595,263
Cost $ 2,979,730
Market Value......... -- --
Hartford Small Company
HLS Fund, Inc.
Shares 1,114,531
Cost $ 1,359,892
Market Value......... $1,436,386 --
Hartford MidCap HLS
Fund, Inc.
Shares 217,438
Cost $ 255,435
Market Value......... -- $ 290,867
Due from Hartford Life
and Annuity Insurance
Company............... -- --
Receivable from fund
shares sold........... -- 19,113
------------- ------------
Total Assets........... 1,436,386 309,980
------------- ------------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company............... 22 19,114
Payable for fund shares
purchased............. -- --
------------- ------------
Total Liabilities...... 22 19,114
------------- ------------
Net Assets (variable
life contract
liabilities).......... $1,436,364 $ 290,866
------------- ------------
------------- ------------
Units Owned by
Participants........... 1,133,350 237,869
Unit Values.............. $ 1.267361 $ 1.222803
</TABLE>
<PAGE>
48
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT FIVE
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MONEY ADVISERS
BOND FUND STOCK FUND MARKET FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 9,181 $ 11,012 $271,270 $ 23,670
---------- ----------- ----------- -----------
CAPITAL GAINS INCOME..... -- 1,195,486 -- 1,465,098
---------- ----------- ----------- -----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (22) (74) -- 2,264
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 158,454 5,983,530 -- 5,079,275
---------- ----------- ----------- -----------
Net gain (loss) on
investments......... 158,432 5,983,456 -- 5,081,539
---------- ----------- ----------- -----------
Net increase
(decrease) in net
assets resulting
from operations..... $167,613 $ 7,189,954 $271,270 $6,570,307
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
49
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MORTGAGE
CAPITAL SECURITIES INTERNATIONAL DIVIDEND AND INTERNATIONAL
APPRECIATION FUND 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>
INVESTMENT INCOME:
Dividends.............. $ 8,629 $11,386 $ 9,208 $ 7,410 $ 46,599 $285,452
----------------- ------- ----------- ------------------ ------------ -------------
CAPITAL GAINS INCOME..... 2,761,262 -- 272,547 823,226 871,742 67,948
----------------- ------- ----------- ------------------ ------------ -------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 13,868 1,259 (428) 2,006 779 561
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 2,196,660 42,751 1,658,489 1,206,844 1,746,489 (36,987)
----------------- ------- ----------- ------------------ ------------ -------------
Net gain (loss) on
investments......... 2,210,528 44,010 1,658,061 1,208,850 1,747,268 (36,426)
----------------- ------- ----------- ------------------ ------------ -------------
Net increase
(decrease) in net
assets resulting
from operations..... $4,980,419 $55,396 $ 1,939,816 $2,039,486 $2,665,609 $316,974
----------------- ------- ----------- ------------------ ------------ -------------
----------------- ------- ----------- ------------------ ------------ -------------
<CAPTION>
SMALL
COMPANY MIDCAP
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ -----------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ -- $ 4
------------ -----------
CAPITAL GAINS INCOME..... 17,778 --
------------ -----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (923) 449
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 83,515 32,452
------------ -----------
Net gain (loss) on
investments......... 82,592 32,901
------------ -----------
Net increase
(decrease) in net
assets resulting
from operations..... $100,370 $32,905
------------ -----------
------------ -----------
</TABLE>
<PAGE>
50
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT FIVE
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<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)................ $ 9,181 $ 11,012 $ 271,270 $ 23,670
Capital gains income... -- 1,195,486 -- 1,465,098
Net realized gain
(loss) on security
transactions.......... (22) (74) -- 2,264
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 158,454 5,983,530 -- 5,079,275
------------- ------------ ------------- --------------
Net increase (decrease)
in net assets
resulting from
operations............ 167,613 7,189,954 271,270 6,570,307
------------- ------------ ------------- --------------
UNIT TRANSACTIONS:
Purchases.............. 606 -- 26,562,944 --
Net transfers.......... 1,164,470 4,565,965 (25,670,664) 5,910,800
Surrenders............. (30,821) (643,278) (1,660,074) (727,375)
Net loan activity...... (5,277) (69,727) (1,037,357) (230,561)
Cost of insurance...... (13,463) (113,181) (47,344) (148,021)
------------- ------------ ------------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,115,515 3,739,779 (1,852,495) 4,804,843
------------- ------------ ------------- --------------
Total increase
(decrease) in net
assets................ 1,283,128 10,929,733 (1,581,225) 11,375,150
NET ASSETS:
Beginning of period.... 3,252,105 32,184,955 11,007,844 40,773,630
------------- ------------ ------------- --------------
End of period.......... $4,535,233 $ 43,114,688 $ 9,426,619 $52,148,780
------------- ------------ ------------- --------------
------------- ------------ ------------- --------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------ ------------- --------------
OPERATIONS:
Net investment income
(loss)................ $ 156,755 $ 274,037 $ 632,382 $ 789,490
Capital gains income... -- 904,272 -- 1,045,984
Net realized gain
(loss) on security
transactions.......... 894 12,939 -- 3,344
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 118,897 4,902,064 -- 4,613,047
------------- ------------ ------------- --------------
Net increase (decrease)
in net assets
resulting from
operations............ 276,546 6,093,312 632,382 6,451,865
------------- ------------ ------------- --------------
UNIT TRANSACTIONS:
Purchases.............. 16 50,244 63,908,110 243,545
Net transfers.......... 1,318,984 12,296,285 (62,169,665) 13,868,301
Surrenders............. (43,171) (1,275,425) (393,227) (1,057,654)
Net loan activity...... (15,758) (97,878) (2,491,658) (64,323)
Cost of insurance...... (16,113) (151,064) (109,762) (204,969)
------------- ------------ ------------- --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,243,958 10,822,162 (1,256,202) 12,784,900
------------- ------------ ------------- --------------
Total increase
(decrease) in net
assets................ 1,520,504 16,915,474 (623,820) 19,236,765
NET ASSETS:
Beginning of period.... 1,731,601 15,269,481 11,631,664 21,536,865
------------- ------------ ------------- --------------
End of period.......... $3,252,105 $ 32,184,955 $ 11,007,844 $40,773,630
------------- ------------ ------------- --------------
------------- ------------ ------------- --------------
</TABLE>
* From inception, July 15, 1997 to December 31, 1997.
The accompanying notes are an integral part of these financial statements.
<PAGE>
51
- --------------------------------------------------------------------------------
<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)................ $ 8,629 $ 11,386 $ 9,208 $ 7,410 $ 46,599 $ 285,452
Capital gains income... 2,761,262 -- 272,547 823,226 871,742 67,948
Net realized gain
(loss) on security
transactions.......... 13,868 1,259 (428) 2,006 779 561
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 2,196,660 42,751 1,658,489 1,206,844 1,746,489 (36,987)
------------------ --------------- ------------ ------------------- ------------- -------------
Net increase (decrease)
in net assets
resulting from
operations............ 4,980,419 55,396 1,939,816 2,039,486 2,665,609 316,974
------------------ --------------- ------------ ------------------- ------------- -------------
UNIT TRANSACTIONS:
Purchases.............. -- -- -- -- -- --
Net transfers.......... 5,306,193 (11,640) 1,707,050 1,619,052 4,490,229 273,579
Surrenders............. (686,733) (15,288) (357,311) (287,163) (380,599) (40,275)
Net loan activity...... (276,591) (7,343) (22,141) (44,688) (248,930) (25,655)
Cost of insurance...... (141,747) (5,538) (39,522) (43,149) (84,757) (9,185)
------------------ --------------- ------------ ------------------- ------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 4,201,122 (39,809) 1,288,076 1,244,052 3,775,943 198,464
------------------ --------------- ------------ ------------------- ------------- -------------
Total increase
(decrease) in net
assets................ 9,181,541 15,587 3,227,892 3,283,538 6,441,552 515,438
NET ASSETS:
Beginning of period.... 41,165,443 1,641,262 10,676,734 12,009,894 23,376,124 2,463,481
------------------ --------------- ------------ ------------------- ------------- -------------
End of period.......... $50,346,984 $1,656,849 $ 13,904,626 $15,293,432 $29,817,676 $2,978,919
------------------ --------------- ------------ ------------------- ------------- -------------
------------------ --------------- ------------ ------------------- ------------- -------------
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)................ $ 190,756 $ 79,693 $ 116,095 $ 108,028 $ 324,234 $ 72,657
Capital gains income... 1,971,454 -- 474,812 587,257 328,863 4,846
Net realized gain
(loss) on security
transactions.......... 4,174 141 (3,017) (1,502) (3,678) 691
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 4,126,792 18,347 1,522,964 (918,735) 3,808,104 9,052
------------------ --------------- ------------ ------------------- ------------- -------------
Net increase (decrease)
in net assets
resulting from
operations............ 6,293,176 98,181 2,110,854 (224,952) 4,457,523 87,246
------------------ --------------- ------------ ------------------- ------------- -------------
UNIT TRANSACTIONS:
Purchases.............. 103,255 -- 27 40,040 156 136
Net transfers.......... 12,570,924 882,849 3,834,337 6,039,925 9,250,118 1,063,784
Surrenders............. (1,417,215) (17,802) (430,212) (433,918) (388,933) (57,314)
Net loan activity...... (35,024) 4,385 (42,196) (14,211) (126,702) (23,857)
Cost of insurance...... (204,886) (7,440) (51,934) (63,263) (107,665) (13,409)
------------------ --------------- ------------ ------------------- ------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 11,017,054 861,992 3,310,022 5,568,573 8,626,974 969,340
------------------ --------------- ------------ ------------------- ------------- -------------
Total increase
(decrease) in net
assets................ 17,310,230 960,173 5,420,876 5,343,621 13,084,497 1,056,586
NET ASSETS:
Beginning of period.... 23,855,213 681,089 5,255,858 6,666,273 10,291,627 1,406,895
------------------ --------------- ------------ ------------------- ------------- -------------
End of period.......... $41,165,443 $1,641,262 $ 10,676,734 $12,009,894 $23,376,124 $2,463,481
------------------ --------------- ------------ ------------------- ------------- -------------
------------------ --------------- ------------ ------------------- ------------- -------------
<CAPTION>
SMALL COMPANY MIDCAP
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ -- $ 4
Capital gains income... 17,778 --
Net realized gain
(loss) on security
transactions.......... (923) 449
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 83,515 32,452
------------- ------------
Net increase (decrease)
in net assets
resulting from
operations............ 100,370 32,905
------------- ------------
UNIT TRANSACTIONS:
Purchases.............. -- --
Net transfers.......... 476,445 168,495
Surrenders............. (91,302) (1,395)
Net loan activity...... (34,180) --
Cost of insurance...... (4,262) (836)
------------- ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 346,701 166,264
------------- ------------
Total increase
(decrease) in net
assets................ 447,071 199,169
NET ASSETS:
Beginning of period.... 989,293 91,697
------------- ------------
End of period.......... $1,436,364 $290,866
------------- ------------
------------- ------------
SMALL COMPANY MIDCAP
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT*
------------- ------------
OPERATIONS:
Net investment income
(loss)................ $ 449 $ 82
Capital gains income... 44,954 --
Net realized gain
(loss) on security
transactions.......... (415) (2)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (7,085) 2,981
------------- ------------
Net increase (decrease)
in net assets
resulting from
operations............ 37,903 3,061
------------- ------------
UNIT TRANSACTIONS:
Purchases.............. -- 1,000
Net transfers.......... 956,329 87,826
Surrenders............. (12,652) (110)
Net loan activity...... (1,427) --
Cost of insurance...... (2,262) (80)
------------- ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 939,988 88,636
------------- ------------
Total increase
(decrease) in net
assets................ 977,891 91,697
NET ASSETS:
Beginning of period.... 11,402 --
------------- ------------
End of period.......... $ 989,293 $ 91,697
------------- ------------
------------- ------------
</TABLE>
<PAGE>
This page intentionally left blank.
<PAGE>
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 the Bond
Fund Sub-Account, Stock Fund Sub-Account, Money Market Fund Sub-Account,
Advisers Fund Sub-Account, Capital Appreciation Fund Sub-Account, Mortgage
Securities Fund Sub-Account, Index Fund Sub-Account, International Opportunities
Fund Sub-Account, Dividend and Growth Fund Sub-Account, International Advisers
Fund Sub-Account, Small Company Fund Sub-Account and MidCap Fund Sub-Account
(constituting ITT Hartford Life and Annuity Insurance Company Separate Account
Five) (the Accounts) as of December 31, 1997, and the related statement of
operations for the year then ended and statements of changes in net assets for
each of the two years in the period then ended (except for the MidCap Fund
Sub-Account which reflects the period from inception, July 15, 1997, to December
31, 1997 and the Small Company Fund Sub-Account which reflects the year ended
December 31, 1997 and the period from inception, August 9, 1996, to December 31,
1996). These financial statements are the responsibility of the Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Bond Fund Sub-Account,
Stock Fund Sub-Account, Money Market Fund Sub-Account, Advisers Fund
Sub-Account, Capital Appreciation Fund Sub-Account, Mortgage Securities Fund
Sub-Account, Index Fund Sub-Account, International Opportunities Fund
Sub-Account, Dividend and Growth Fund Sub-Account, International Advisers Fund
Sub-Account, Small Company Fund Sub-Account and MidCap Fund Sub-Account
(constituting ITT Hartford Life and Annuity Insurance Company Separate Account
Five) as of December 31, 1997, the results of its operations for the year then
ended and the changes in its net assets for each of the two years in the period
then ended (except for the MidCap Fund Sub-Account which reflects the period
from inception, July 15, 1997, to December 31, 1997 and the Small Company Fund
Sub-Account which reflects the year ended December 31, 1997 and the period from
inception, August 9, 1996, to December 31, 1996) in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 16, 1998
<PAGE>
54
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT FIVE
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 3,097,966
Cost $ 3,123,634
Market Value......... $3,252,102 -- -- --
Hartford Stock Fund,
Inc.
Shares 6,282,012
Cost $25,403,204
Market Value......... -- $32,184,802 -- --
HVA Money Market Fund,
Inc.
Shares 11,007,872
Cost $11,007,872
Market Value......... -- -- $11,007,872 --
Hartford Advisers Fund,
Inc.
Shares 16,136,729
Cost $34,427,039
Market Value......... -- -- -- $40,773,414
Hartford Capital
Appreciation Fund,
Inc.
Shares 9,335,313
Cost $34,763,335
Market Value......... -- -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 1,514,384
Cost $ 1,619,425
Market Value......... -- -- -- --
Hartford Index Fund,
Inc.
Shares 3,710,121
Cost $ 8,592,499
Market Value......... -- -- -- --
Hartford International
Opportunities Fund,
Inc.
Shares 9,277,915
Cost $12,502,555
Market Value......... -- -- -- --
Hartford Dividend and
Growth Fund, Inc.
Shares 11,973,364
Cost $18,457,333
Market Value......... -- -- -- --
Hartford International
Advisers Fund, Inc.
Shares 2,096,953
Cost $ 2,427,278
Market Value......... -- -- -- --
Hartford Small Company,
Inc.
Shares 822,909
Cost $ 996,331
Market Value......... -- -- -- --
Hartford MidCap Fund,
Inc.
Shares 80,641
Cost $ 88,716
Market Value......... -- -- -- --
Due from ITT Hartford
Life and Annuity
Insurance Company..... 23,003 152 -- 23,216
Receivable from fund
shares sold........... -- 1 45,952 --
----------- ----------- ----------- -------------
Total Assets........... 3,275,105 32,184,955 11,053,824 40,796,630
----------- ----------- ----------- -------------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company..... -- -- 45,980 --
Payable for fund shares
purchased............. 23,000 -- -- 23,000
----------- ----------- ----------- -------------
Total Liabilities...... 23,000 -- 45,980 23,000
----------- ----------- ----------- -------------
Net Assets (variable
life contract
liabilities).......... $3,252,105 $32,184,955 $11,007,844 $40,773,630
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
Units Owned by
Participants.......... 2,382,821 14,843,994 9,409,604 22,025,977
Unit Values............ $ 1.364813 $ 2.168214 $ 1.169852 $ 1.851161
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
55
- --------------------------------------------------------------------------------
<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>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 3,097,966
Cost $ 3,123,634
Market Value......... -- -- -- -- -- --
Hartford Stock Fund,
Inc.
Shares 6,282,012
Cost $25,403,204
Market Value......... -- -- -- -- -- --
HVA Money Market Fund,
Inc.
Shares 11,007,872
Cost $11,007,872
Market Value......... -- -- -- -- -- --
Hartford Advisers Fund,
Inc.
Shares 16,136,729
Cost $34,427,039
Market Value......... -- -- -- -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 9,335,313
Cost $34,763,335
Market Value......... $41,166,087 -- -- -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 1,514,384
Cost $ 1,619,425
Market Value......... -- $1,641,260 -- -- -- --
Hartford Index Fund,
Inc.
Shares 3,710,121
Cost $ 8,592,499
Market Value......... -- -- $10,676,648 -- -- --
Hartford International
Opportunities Fund,
Inc.
Shares 9,277,915
Cost $12,502,555
Market Value......... -- -- -- $12,009,862 -- --
Hartford Dividend and
Growth Fund, Inc.
Shares 11,973,364
Cost $18,457,333
Market Value......... -- -- -- -- $23,375,933 --
Hartford International
Advisers Fund, Inc.
Shares 2,096,953
Cost $ 2,427,278
Market Value......... -- -- -- -- -- $2,463,481
Hartford Small Company,
Inc.
Shares 822,909
Cost $ 996,331
Market Value......... -- -- -- -- -- --
Hartford MidCap Fund,
Inc.
Shares 80,641
Cost $ 88,716
Market Value......... -- -- -- -- -- --
Due from ITT Hartford
Life and Annuity
Insurance Company..... -- 2 86 10,032 -- --
Receivable from fund
shares sold........... 4 -- -- -- 10,000 --
----------------- --------------- ----------- ------------------ ------------ -------------
Total Assets........... 41,166,091 1,641,262 10,676,734 12,019,894 23,385,933 2,463,481
----------------- --------------- ----------- ------------------ ------------ -------------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company..... 648 -- -- -- 9,809 --
Payable for fund shares
purchased............. -- -- -- 10,000 -- --
----------------- --------------- ----------- ------------------ ------------ -------------
Total Liabilities...... 648 -- -- 10,000 9,809 --
----------------- --------------- ----------- ------------------ ------------ -------------
Net Assets (variable
life contract
liabilities).......... $41,165,443 $1,641,262 $10,676,734 $12,009,894 $23,376,124 $2,463,481
----------------- --------------- ----------- ------------------ ------------ -------------
----------------- --------------- ----------- ------------------ ------------ -------------
Units Owned by
Participants.......... 21,477,473 1,232,805 4,848,574 9,132,125 10,632,862 1,802,863
Unit Values............ $ 1.916680 $ 1.331324 $ 2.202036 $ 1.315126 $ 2.198479 $ 1.366427
<CAPTION>
SMALL MIDCAP
COMPANY FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ -----------
<S> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 3,097,966
Cost $ 3,123,634
Market Value......... -- --
Hartford Stock Fund,
Inc.
Shares 6,282,012
Cost $25,403,204
Market Value......... -- --
HVA Money Market Fund,
Inc.
Shares 11,007,872
Cost $11,007,872
Market Value......... -- --
Hartford Advisers Fund,
Inc.
Shares 16,136,729
Cost $34,427,039
Market Value......... -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 9,335,313
Cost $34,763,335
Market Value......... -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 1,514,384
Cost $ 1,619,425
Market Value......... -- --
Hartford Index Fund,
Inc.
Shares 3,710,121
Cost $ 8,592,499
Market Value......... -- --
Hartford International
Opportunities Fund,
Inc.
Shares 9,277,915
Cost $12,502,555
Market Value......... -- --
Hartford Dividend and
Growth Fund, Inc.
Shares 11,973,364
Cost $18,457,333
Market Value......... -- --
Hartford International
Advisers Fund, Inc.
Shares 2,096,953
Cost $ 2,427,278
Market Value......... -- --
Hartford Small Company,
Inc.
Shares 822,909
Cost $ 996,331
Market Value......... $ 989,310 --
Hartford MidCap Fund,
Inc.
Shares 80,641
Cost $ 88,716
Market Value......... -- $ 91,697
Due from ITT Hartford
Life and Annuity
Insurance Company..... -- --
Receivable from fund
shares sold........... -- --
------------ -----------
Total Assets........... 989,310 91,697
------------ -----------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company..... 17 --
Payable for fund shares
purchased............. -- --
------------ -----------
Total Liabilities...... 17 --
------------ -----------
Net Assets (variable
life contract
liabilities).......... $ 989,293 $ 91,697
------------ -----------
------------ -----------
Units Owned by
Participants.......... 849,968 88,219
Unit Values............ $1.163918 $1.039425
</TABLE>
<PAGE>
56
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT FIVE
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $156,755 $ 274,037 $632,382 $ 789,490
EXPENSES:
Mortality and expense
undertakings.......... -- -- -- --
----------- ----------- ----------- -------------
Net investment
income.............. 156,755 274,037 632,382 789,490
----------- ----------- ----------- -------------
CAPITAL GAINS INCOME..... -- 904,272 -- 1,045,984
----------- ----------- ----------- -------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 894 12,939 -- 3,344
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 118,897 4,902,064 -- 4,613,047
----------- ----------- ----------- -------------
Net gain (loss) on
investments......... 119,791 4,915,003 -- 4,616,391
----------- ----------- ----------- -------------
Net increase
(decrease) in net
assets resulting
from operations..... $276,546 $ 6,093,312 $632,382 $6,451,865
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
</TABLE>
* From inception, July 15, 1997 to December 31, 1997.
The accompanying notes are an integral part of these financial statements.
<PAGE>
57
- --------------------------------------------------------------------------------
<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>
INVESTMENT INCOME:
Dividends.............. $ 190,756 $79,693 $ 116,095 $ 108,028 $ 324,234 $72,657
EXPENSES:
Mortality and expense
undertakings.......... -- -- -- -- -- --
----------------- ------- ----------- ---------- ------------ -------------
Net investment
income.............. 190,756 79,693 116,095 108,028 324,234 72,657
----------------- ------- ----------- ---------- ------------ -------------
CAPITAL GAINS INCOME..... 1,971,454 -- 474,812 587,257 328,863 4,846
----------------- ------- ----------- ---------- ------------ -------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 4,174 141 (3,017) (1,502) (3,678) 691
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 4,126,792 18,347 1,522,964 (918,735) 3,808,104 9,052
----------------- ------- ----------- ---------- ------------ -------------
Net gain (loss) on
investments......... 4,130,966 18,488 1,519,947 (920,237) 3,804,426 9,743
----------------- ------- ----------- ---------- ------------ -------------
Net increase
(decrease) in net
assets resulting
from operations..... $6,293,176 $98,181 $ 2,110,854 $(224,952) $4,457,523 $87,246
----------------- ------- ----------- ---------- ------------ -------------
----------------- ------- ----------- ---------- ------------ -------------
<CAPTION>
SMALL MIDCAP
COMPANY FUND FUND
SUB-ACCOUNT SUB-ACCOUNT*
------------ ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 449 $ 82
EXPENSES:
Mortality and expense
undertakings.......... -- --
------------ ------
Net investment
income.............. 449 82
------------ ------
CAPITAL GAINS INCOME..... 44,954 --
------------ ------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (415) (2)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (7,085) 2,981
------------ ------
Net gain (loss) on
investments......... (7,500) 2,979
------------ ------
Net increase
(decrease) in net
assets resulting
from operations..... $37,903 $3,061
------------ ------
------------ ------
</TABLE>
<PAGE>
58
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT FIVE
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<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................ $ 156,755 $ 274,037 $ 632,382 $ 789,490
Capital gains income... -- 904,272 -- 1,045,984
Net realized gain
(loss) on security
transactions.......... 894 12,939 -- 3,344
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 118,897 4,902,064 -- 4,613,047
----------- ------------ ------------- -------------
Net increase (decrease)
in net assets
resulting from
operations............ 276,546 6,093,312 632,382 6,451,865
----------- ------------ ------------- -------------
UNIT TRANSACTIONS:
Purchases.............. 16 50,244 63,908,110 243,545
Net transfers.......... 1,318,984 12,296,285 (62,169,665) 13,868,301
Surrenders............. (43,171) (1,275,425) (393,227) (1,057,654)
Net loan activity...... (15,758) (97,878) (2,491,658) (64,323)
Cost of insurance...... (16,113) (151,064) (109,762) (204,969)
----------- ------------ ------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,243,958 10,822,162 (1,256,202) 12,784,900
----------- ------------ ------------- -------------
Total increase
(decrease) in net
assets................ 1,520,504 16,915,474 (623,820) 19,236,765
NET ASSETS:
Beginning of period.... 1,731,601 15,269,481 11,631,664 21,536,865
----------- ------------ ------------- -------------
End of period.......... $3,252,105 $32,184,955 $ 11,007,844 $40,773,630
----------- ------------ ------------- -------------
----------- ------------ ------------- -------------
* From inception, July 15, 1997 to December 31, 1997.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------ ------------- -------------
OPERATIONS:
Net investment
income................ $ 61,277 $ 140,710 $ 404,912 $ 357,873
Capital gains income... -- 185,013 -- 116,357
Net realized (loss)
gain on security
transactions.......... (451) 524 -- 415
Net unrealized
appreciation of
investments during the
period................ 2,527 1,657,996 -- 1,542,513
----------- ------------ ------------- -------------
Net increase 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 activity...... -- (71,384) (1,787,588) (82,526)
Cost of insurance...... (5,636) (53,381) (82,442) (79,595)
----------- ------------ ------------- -------------
Net increase in net
assets resulting from
unit transactions..... 1,361,957 9,441,427 6,569,883 15,516,846
----------- ------------ ------------- -------------
Total increase 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
----------- ------------ ------------- -------------
----------- ------------ ------------- -------------
** From inception, August 9, 1996 to December 31, 1996.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
59
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- ----------------- --------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income................ $ 190,756 $ 79,693 $ 116,095 $ 108,028 $ 324,234
Capital gains income... 1,971,454 -- 474,812 587,257 328,863
Net realized gain
(loss) on security
transactions.......... 4,174 141 (3,017) (1,502) (3,678)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 4,126,792 18,347 1,522,964 (918,735) 3,808,104
----------------- ----------------- --------------- ------------------ ------------------
Net increase (decrease)
in net assets
resulting from
operations............ 6,293,176 98,181 2,110,854 (224,952) 4,457,523
----------------- ----------------- --------------- ------------------ ------------------
UNIT TRANSACTIONS:
Purchases.............. 103,255 -- 27 40,040 156
Net transfers.......... 12,570,924 882,849 3,834,337 6,039,925 9,250,118
Surrenders............. (1,417,215) (17,802) (430,212) (433,918) (388,933)
Net loan activity...... (35,024) 4,385 (42,196) (14,211) (126,702)
Cost of insurance...... (204,886) (7,440) (51,934) (63,263) (107,665)
----------------- ----------------- --------------- ------------------ ------------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 11,017,054 861,992 3,310,022 5,568,573 8,626,974
----------------- ----------------- --------------- ------------------ ------------------
Total increase
(decrease) in net
assets................ 17,310,230 960,173 5,420,876 5,343,621 13,084,497
NET ASSETS:
Beginning of period.... 23,855,213 681,089 5,255,858 6,666,273 10,291,627
----------------- ----------------- --------------- ------------------ ------------------
End of period.......... $41,165,443 $1,641,262 $10,676,734 $12,009,894 $23,376,124
----------------- ----------------- --------------- ------------------ ------------------
----------------- ----------------- --------------- ------------------ ------------------
* From inception, July 15, 1997 to December 31, 1997.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- ----------------- --------------- ------------------ ------------------
OPERATIONS:
Net investment
income................ $ 100,190 $ 24,643 $ 56,990 $ 75,641 $ 128,284
Capital gains income... 542,857 -- 18,617 46,012 41,509
Net realized (loss)
gain on security
transactions.......... (2,788) (687) 3,838 (26) (280)
Net unrealized
appreciation of
investments during the
period................ 2,060,719 577 523,283 366,466 967,296
----------------- ----------------- --------------- ------------------ ------------------
Net increase in net
assets resulting from
operations............ 2,700,978 24,533 602,728 488,093 1,136,809
----------------- ----------------- --------------- ------------------ ------------------
UNIT TRANSACTIONS:
Purchases.............. 29 -- -- -- --
Net transfers.......... 14,180,908 513,118 4,159,498 5,005,094 7,624,232
Surrenders............. (360,928) (14,119) (66,581) (107,782) (155,061)
Net loan activity...... (88,831) (1) (65,105) (24,312) (39,663)
Cost of insurance...... (88,601) (2,230) (18,114) (23,891) (32,690)
----------------- ----------------- --------------- ------------------ ------------------
Net increase in net
assets resulting from
unit transactions..... 13,642,577 496,768 4,009,698 4,849,109 7,396,818
----------------- ----------------- --------------- ------------------ ------------------
Total increase in net
assets................ 16,343,555 521,301 4,612,426 5,337,202 8,533,627
NET ASSETS:
Beginning of period.... 7,511,658 159,788 643,432 1,329,071 1,758,000
----------------- ----------------- --------------- ------------------ ------------------
End of period.......... $23,855,213 $ 681,089 $ 5,255,858 $ 6,666,273 $10,291,627
----------------- ----------------- --------------- ------------------ ------------------
----------------- ----------------- --------------- ------------------ ------------------
** From inception, August 9, 1996 to December 31, 1996.
<CAPTION>
INTERNATIONAL SMALL MIDCAP
ADVISERS FUND COMPANY FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
------------- ------------ -----------
<S> <C> <C> <C>
OPERATIONS:
Net investment
income................ $ 72,657 $ 449 $ 82
Capital gains income... 4,846 44,954 --
Net realized gain
(loss) on security
transactions.......... 691 (415) (2)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 9,052 (7,085) 2,981
------------- ------------ -----------
Net increase (decrease)
in net assets
resulting from
operations............ 87,246 37,903 3,061
------------- ------------ -----------
UNIT TRANSACTIONS:
Purchases.............. 136 -- 1,000
Net transfers.......... 1,063,784 956,329 87,826
Surrenders............. (57,314) (12,652) (110)
Net loan activity...... (23,857) (1,427) --
Cost of insurance...... (13,409) (2,262) (80)
------------- ------------ -----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 969,340 939,988 88,636
------------- ------------ -----------
Total increase
(decrease) in net
assets................ 1,056,586 977,891 91,697
NET ASSETS:
Beginning of period.... 1,406,895 11,402 --
------------- ------------ -----------
End of period.......... $2,463,481 $989,293 $91,697
------------- ------------ -----------
------------- ------------ -----------
* From inception, July 15
STATEMENT OF CHANGES IN N
FOR THE YEAR ENDED DECEMB
INTERNATIONAL SMALL
ADVISERS FUND COMPANY FUND
SUB-ACCOUNT SUB-ACCOUNT**
------------- ------------
OPERATIONS:
Net investment
income................ $ 33,540 $ 1
Capital gains income... 28,341 --
Net realized (loss)
gain on security
transactions.......... 38 --
Net unrealized
appreciation of
investments during the
period................ 22,219 64
------------- ------------
Net increase in net
assets resulting from
operations............ 84,138 65
------------- ------------
UNIT TRANSACTIONS:
Purchases.............. -- 1,000
Net transfers.......... 1,187,324 10,337
Surrenders............. (10,618) --
Net loan activity...... (7,147) --
Cost of insurance...... (4,435) --
------------- ------------
Net increase in net
assets resulting from
unit transactions..... 1,165,124 11,337
------------- ------------
Total increase in net
assets................ 1,249,262 11,402
NET ASSETS:
Beginning of period.... 157,633 --
------------- ------------
End of period.......... $1,406,895 $ 11,402
------------- ------------
------------- ------------
** From inception, August
</TABLE>
<PAGE>
60
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT FIVE
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
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. The Account consists of
forty-one sub-accounts. These financial statements include twelve sub-accounts
which invest solely in Hartford Mutual Funds (the Funds). The thirteen
sub-accounts which invest in Dean Witter Select Dimensions Portfolios and the
sixteen sub-accounts which invest in Putnam VT are presented in separate
financial statements. 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 the Funds as directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting principles
in the investment company industry:
a) SECURITY TRANSACTIONS -- Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments sold is
determined on the basis of identified cost. Dividend and capital gains income
are accrued as of the ex-dividend date. Capital gains income represents
dividends from the Funds which are characterized as capital gains under tax
regulations.
b) SECURITY VALUATION -- The investment in shares of The Funds are valued at
the closing net asset value per share as determined by the appropriate Fund as
of December 31, 1997.
c) FEDERAL INCOME TAXES -- The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as an
insurance company under the Internal Revenue Code. Under current law, no federal
income taxes are payable with respect to the operations of the Account.
d) USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported amounts
of income and expenses during the period. Operating results in the future could
vary from the amounts derived from management's estimates.
3. ADMINISTRATION OF THE ACCOUNT
AND RELATED CHARGES:
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 contract owners' accounts, in accordance with the
terms of the contracts.
<PAGE>
61
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
SECOND
SIX MONTHS
QUARTER ENDED ENDED
JUNE 30, JUNE 30,
------------- ---------------
1998 1997 1998 1997
----- ----- ------ ------
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues
Premiums and other considerations............... $ 383 $ 323 $ 946 $ 633
Net investment income........................... 344 322 696 659
Net realized capital (losses) gains............. (6) -- (6) 4
----- ----- ------ ------
Total revenues................................ 721 645 1,636 1,296
----- ----- ------ ------
Benefits, claims and expenses
Benefits, claims and claim adjustment
expenses....................................... 349 310 747 652
Amortization of deferred policy acquisition
costs.......................................... 115 91 209 172
Dividends to policyholders...................... 9 18 116 72
Other insurance expenses........................ 118 117 306 190
----- ----- ------ ------
Total benefits, claims and expenses........... 591 536 1,378 1,086
----- ----- ------ ------
Income before income tax expense................ 130 109 258 210
Income tax expense.............................. 45 35 90 73
----- ----- ------ ------
Net income...................................... $ 85 $ 74 $ 168 $ 137
----- ----- ------ ------
----- ----- ------ ------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
62
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
JUNE DECEMBER
30, 31,
1998 1997
------- -------
(IN MILLIONS,
EXCEPT FOR SHARE
DATA)
<S> <C> <C>
(UNAUDITED)
Assets
Investments
Fixed maturities, available for sale, at fair
value (amortized cost of $14,083 and
$13,885)....................................... $14,496 $14,176
Equity securities, at fair value................ 99 180
Policy loans, at outstanding balance............ 3,767 3,756
Other investments, at cost...................... 239 47
------- -------
Total investments............................. 18,601 18,159
Cash............................................ 62 54
Premiums and amounts receivable................. 22 18
Accrued investment income....................... 338 330
Reinsurance recoverable......................... 5,925 6,114
Deferred policy acquisition costs............... 3,573 3,315
Deferred income tax............................. 391 348
Other assets.................................... 169 352
Separate account assets......................... 80,673 69,055
------- -------
Total assets.................................. $109,754 $97,745
------- -------
------- -------
Liabilities
Future policy benefits.......................... $ 3,240 $3,059
Other policyholder funds........................ 20,950 21,034
Other liabilities............................... 2,310 2,254
Separate account liabilities.................... 80,673 69,055
------- -------
Total liabilities............................. 107,173 95,402
Stockholder's Equity
Common stock -- authorized 1,000; issued and
outstanding, par value $5,690.................. 6 6
Capital surplus................................. 1,045 1,045
Accumulated other comprehensive income
Net unrealized capital gains on securities, net
of tax......................................... 249 179
Total accumulated other comprehensive income... 249 179
Retained earnings.............................. 1,281 1,113
------- -------
Total stockholder's equity.................... 2,581 2,343
------- -------
Total liabilities and stockholder's equity...... $109,754 $97,745
------- -------
------- -------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
63
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDER'S EQUITY
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
ACCUMULATED OTHER
COMPREHENSIVE
INCOME
--------------------------------------------------------------------------
NET UNREALIZED
CAPITAL GAINS ON TOTAL
COMMON SECURITIES, NET OF RETAINED STOCKHOLDER'S
STOCK CAPITAL SURPLUS TAX EARNINGS EQUITY
------ --------------- ------------------ ---------- -------------
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997................... $6 $1,045 $ 179 $1,113 $2,343
Comprehensive income
Net income................................. -- -- -- 168 168
Other comprehensive income, net of tax (1):
Change in unrealized capital gains
on securities (2)........................ -- -- 70 -- 70
Total other comprehensive income........... 70
Total comprehensive income................... 238
--
------ ----- ---------- ------
Balance, June 30, 1998....................... $6 $1,045 $ 249 $1,281 $2,581
--
--
------ ----- ---------- ------
------ ----- ---------- ------
</TABLE>
SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
ACCUMULATED OTHER
COMPREHENSIVE
INCOME
----------------------------------------------------------------------
NET UNREALIZED
CAPITAL GAINS TOTAL
COMMON CAPITAL ON SECURITIES, RETAINED STOCKHOLDER'S
STOCK SURPLUS NET OF TAX EARNINGS EQUITY
------ -------------- --------------- ----------- -------------
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996.............. $6 $1,045 $ 30 $ 811 $1,892
Comprehensive income
Net income............................ -- -- -- 137 137
Other comprehensive income, net of tax
(1):
Change in unrealized capital gains
on securities (2)................... -- -- 3 -- 3
Total other comprehensive income...... 3
Total comprehensive income.............. 140
--
------ ------ ----------- ------
Balance, June 30, 1997.................. $6 $1,045 $ 33 $ 948 $2,032
--
--
------ ------ ----------- ------
------ ------ ----------- ------
</TABLE>
- ---------
(1) Unrealized gain on securities is reflected net of tax expense of $134 and
$18 for June 30, 1998 and 1997, respectively.
(2) Net of reclassification adjustment for (losses) gains realized in net income
of $(6) and $4 for June 30, 1998 and 1997, respectively.
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
64
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1998 1997
-------- --------
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C>
Operating Activities
Net income............................ $ 168 $ 137
Adjustments to net income:
Depreciation and amortization......... (12) 9
Net realized capital losses (gains)... 6 (4)
(Increase) decrease in deferred income
taxes................................ (83) 9
Increase in deferred policy
acquisition costs.................... (258) (229)
(Increase) decrease in premiums
receivable and agents' balances...... (4) 92
(Increase) decrease in accrued
investment income.................... (8) 48
Decrease in other assets.............. 129 41
Decrease (increase) in reinsurance
recoverables......................... 20 (40)
Increase in liabilities for future
policy benefits...................... 181 204
(Decrease) increase in other
liabilities.......................... (147) 146
-------- --------
Cash (used for) provided by
operating activities............... (8) 413
-------- --------
Investing Activities
Purchases of fixed maturity
investments.......................... (3,287) (3,801)
Sales of fixed maturity investments... 1,846 2,274
Maturities and principal paydowns of
fixed maturity investments........... 979 1,343
Net (purchases) sales of other
investments.......................... (86) 110
Net sales of short-term investments... 480 138
-------- --------
Cash (used for) provided by
investing activities............... (68) 64
-------- --------
Financing Activities
Net receipts from (disbursements for)
investment and universal life-type
contracts credited to (charged
against) policyholder accounts....... 84 (443)
-------- --------
Cash provided by (used for) financing
activities........................... 84 (443)
-------- --------
Increase in cash...................... 8 34
Cash -- beginning of period........... 54 43
-------- --------
Cash -- end of period................. $ 62 $ 77
-------- --------
Supplemental Disclosure of Cash Flow
Information:
Net Cash paid during the period for:
Income taxes.......................... $ 120 $ (12)
-------- --------
-------- --------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
65
- --------------------------------------------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN MILLIONS EXCEPT FOR SHARE DATA UNLESS OTHERWISE STATED)
(UNAUDITED)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Hartford Life Insurance Company and subsidiaries (the "Company") have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and note disclosures which are normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to those rules and
regulations, although the Company believes that the disclosures made are
adequate to make the information presented not misleading. In the opinion of
management, these statements include all adjustments which were normal recurring
adjustments necessary to present fairly the financial position, results of
operations and cash flows for the periods presented.
For a description of accounting policies, see Note 2 of Notes to
Consolidated Financial Statements in the Company's 1997 Form 10-K Annual Report.
Certain reclassifications have been made to prior year financial information
to conform to the current year classification of transactions and accounts.
(B) CHANGES IN ACCOUNTING PRINCIPLES
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The new standard establishes accounting and
reporting guidance for derivative instruments, including certain derivative
instruments embedded in other contracts. The standard requires, among other
things, that all derivatives be carried on the balance sheet at fair value. The
standard also specifies hedge accounting criteria under which a derivative can
qualify for special accounting. In order to receive special accounting, the
derivative instrument must qualify as either a hedge of the fair value or the
variability of the cash flow of a qualified asset or liability. Special
accounting for qualifying hedges provides for matching the timing of gain or
loss recognition on the hedging instrument with the recognition of the
corresponding changes in value of the hedged item. SFAS No. 133 will be
effective for fiscal years beginning after June 15, 1999. Initial application
for the Company will begin for the first quarter of the year 2000. The Company
is currently in the process of quantifying the impact of SFAS No. 133.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") No. 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use". The SOP provides guidance on
accounting for the costs of internal use software and in determining whether the
software is for internal use. The SOP defines internal use software as software
that is acquired, internally developed, or modified solely to meet internal
needs and identifies stages of software development and accounting for the
related costs incurred during the stages. This statement is effective for fiscal
years beginning after December 15, 1998 and is not expected to have a material
impact on the Company's financial condition or results of operations.
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income", which establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. The objective of this statement is to report a measure of
all changes in equity of an enterprise that result from transactions and other
economic events of the period other than transactions with owners. Comprehensive
income is the total of net income and all other nonowner changes in equity.
Accordingly, the Company has reported comprehensive income in the Condensed
Consolidated Statement of Changes in Stockholder's Equity.
NOTE 2. INITIAL PUBLIC OFFERING ("IPO")
On February 10, 1997, the Company's indirect parent, Hartford Life, Inc.
("Hartford Life"), filed a registration statement, as amended, with the
Securities and Exchange Commission, relating to the IPO of Hartford Life's Class
A Common Stock. Pursuant to the IPO on May 22, 1997, Hartford Life sold to the
public 26 million shares at $28.25 per share and received proceeds, net of
offering expenses, of $687. Of the proceeds, $527 was used to retire debt
related to Hartford Life's promissory notes outstanding and line of credit. The
remaining $160 was contributed by Hartford Life to Hartford Life and Accident
Insurance Company, the Company's direct parent, to support growth in its core
businesses.
The 26 million shares sold in the IPO represent approximately 18.6% of the
equity ownership in Hartford Life and approximately 4.4% of the combined voting
power of Hartford Life's Class A and Class B Common Stock. Hartford Financial
Services Group, Inc., an indirect parent of Hartford Life, owns all of the 114
million outstanding shares of Class B Common Stock of Hartford Life,
representing approximately 81.4% of the equity ownership in Hartford Life and
approximately 95.6% of the combined voting power of Hartford Life's Class A and
Class B Common Stock. Holders of Class A Common Stock generally have
<PAGE>
66
- --------------------------------------------------------------------------------
identical rights to the holders of Class B Common Stock except that the holders
of Class A Common Stock are entitled to one vote per share while holders of
Class B Common Stock are entitled to five votes per share on all matters
submitted to a vote of Hartford Life's stockholders.
NOTE 3. COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for monetary and punitive damages have
been asserted. Although there can be no assurances, management, at the present
time, does not anticipate that the ultimate liability arising from such pending
or threatened litigation will have a material effect on the financial condition
or operating results of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLAR AMOUNTS IN MILLIONS UNLESS OTHERWISE STATED)
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") addresses the financial condition of the Company as of June
30, 1998, compared with December 31, 1997, and its results of operations for the
second quarter and six months ended June 30, 1998 compared with the equivalent
1997 period. This discussion should be read in conjunction with the MD&A in the
Company's 1997 Form 10-K Annual Report.
Certain statements contained in this discussion, other than statements of
historical fact, are forward-looking statements. These statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and include estimates and assumptions related to economic,
competitive and legislative developments. These forward-looking statements are
subject to change and uncertainty which are, in many instances, beyond the
Company's control and have been made based upon management's expectations and
beliefs concerning future developments and their potential effect on Hartford
Life Insurance Company and subsidiaries (the "Company"). There can be no
assurance that future developments will be in accordance with management's
expectations or that the effect of future developments on the Company will be
those anticipated by management. Actual results could differ materially from
those expected by the Company, depending on the outcome of certain factors,
including those described in the forward-looking statements.
Certain reclassifications have been made to prior year financial information
to conform to the current year classification of transactions and accounts.
INDEX
<TABLE>
<S> <C>
Consolidated Results of
Operations:
Operating Summary............... 8
Annuity......................... 10
Individual Life Insurance....... 11
Employee Benefits............... 11
Guaranteed Investment
Contracts...................... 11
Regulatory Initiatives and
Contingencies.................. 12
Accounting Standards............ 12
Other Matters................... 12
</TABLE>
CONSOLIDATED RESULTS OF OPERATIONS:
OPERATING SUMMARY
<TABLE>
<CAPTION>
SECOND QUARTER ENDED
SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues.................... $ 721 $ 645 $ 1,636 $ 1,296
Expenses.................... 636 571 1,468 1,159
--------- --------- --------- ---------
Net Income................ $ 85 $ 74 $ 168 $ 137
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
The Company's insurance business operates in three principal segments:
Annuity, Individual Life Insurance, and Employee Benefits as well as a
Guaranteed Investments Contracts segment, which is primarily comprised of
business written prior to 1995. The Company also maintains a Corporate operation
through which it reports items that are not directly allocable to any of its
business segments.
The Annuity segment focuses on the savings and retirement needs of the
growing number of individuals who are preparing for retirement or have already
retired. This segment consists of two areas of operation: Individual Annuity and
Group Annuity. The variety of products sold within this segment reflects the
diverse nature of the market. These include, in the Individual Annuity area,
individual variable annuities, fixed market value adjusted ("MVA") annuities,
and mutual funds; and in the Group Annuity area, deferred compensation and
retirement plan services for municipal governments and corporations, structured
settlement contracts and other special purpose annuity contracts, and investment
management contracts. The Individual Life Insurance segment, which focuses on
the high end estate and business planning markets, sells a variety of life
insurance products, including variable life and universal life insurance. The
Employee Benefits segment consists of two areas of operation: Group Insurance
and Specialty Insurance. Through Group Insurance, the Company offers products
such as group life insurance, group short- and long-term disability and
accidental death and dismemberment. Substantially all of the Group Insurance
business directly written by the Company is ceded to its direct parent, Hartford
Life and Accident Insurance Company. Specialty Insurance primarily consists of
the
<PAGE>
67
- --------------------------------------------------------------------------------
Company's corporate owned life insurance ("COLI") business. The Guaranteed
Investment Contracts segment consists of guaranteed rate contract ("GRC")
business that is supported by assets held in either the Company's general
account or a guaranteed separate account and includes a closed block of
guaranteed rate contracts ("Closed Book GRC"). The Company decided in 1995,
after a thorough review of its GRC business, that it would significantly de-
emphasize general account GRC, choosing to focus its distribution efforts on
other products sold through other divisions. Management expects no material
income or loss from the Guaranteed Investment Contracts segment in the future.
Revenues increased $76, or 12%, and $340, or 26%, for the second quarter and
six months ended June 30, 1998, respectively, compared to the same periods in
1997. This increase was driven by the Annuity segment whose revenues increased
$109, or 35%, and $210, or 36%, for the second quarter and six months ended June
30, 1998, respectively, compared to the equivalent periods in 1997. This
increase was due to higher fee income earned on growing annuity account values
where the average account value grew $16.8 billion, or 30%, to $72.1 billion at
June 30, 1998 from $55.3 billion at June 30, 1997 due to market appreciation and
new sales. Also, Individual Life Insurance revenues increased $11, or 9%, and
$28, or 12%, for the second quarter and six months ended June 30, 1998,
respectively, as compared to the same prior year periods due to increased cost
of insurance charges and other fee income on the Company's growing block of
variable life business. COLI revenues increased $154 for the six months ended
June 30, 1998, primarily driven by first quarter 1998 activity, which was a
result of renewal premium on leveraged COLI and increased fees associated with
variable COLI sales, while revenues were consistent in the second quarter of
1998 as compared to the same period in prior year. Excluding COLI, revenues
increased $83, or 16%, and $186, or 19%, for the second quarter and six months
ended June 30, 1998, respectively, compared to the same prior year periods.
Partially offsetting the increases discussed above was a decline of Closed Book
GRC revenues of $24 and $44 for the second quarter and six months ended June 30,
1998, respectively, compared to the same periods in 1997.
Expenses increased $65, or 11%, and $309, or 27% for the second quarter and
six months ended June 30, 1998, respectively, compared to equivalent periods in
1997. Annuity expenses grew $91, or 35%, and $172, or 35%, for the second
quarter and six months ended June 30, 1998 compared to the same periods in the
prior year primarily due to higher benefits, claims, and claim adjustment
expenses as well as increased amortization of deferred policy acquisition costs
and operating expenses directly related to the growth in this segment.
Individual Life Insurance expenses increased $8 and $23 for the second quarter
and six months ended June 30, 1998, primarily due to higher benefits, claims,
and claim adjustment expenses, which is consistent with the growth in this block
of business. COLI expenses, primarily driven by first quarter activity,
increased $154 for the six months ended June 30, 1998 as a result of increased
operating expenses associated with significant renewal premium and variable COLI
sales and were consistent in the second quarter of 1998 as compared to the same
period in 1997. Excluding COLI, expenses increased $71, or 16%, and $155, or
18%, for the second quarter and six months ended June 30, 1998, respectively,
compared to equivalent periods in 1997. Partially offsetting the increases
discussed above was a decline in expenses related to Closed Book GRC of $24 and
$44 for the second quarter and six months ended June 30, 1998, respectively, as
compared to the same prior year periods.
Net income increased $11, or 15%, and $31, or 23%, for the second quarter
and six months ended June 30, 1998, respectively, compared to the same periods
in 1997 primarily due to growth in the Annuity and the Individual Life Insurance
segments. Annuity earnings increased $18, or 37%, and $38, or 41%, for the
second quarter and six months ended June 30, 1998, respectively, compared to the
same prior year periods due to higher fee income earned on increasing account
values resulting from stock market appreciation and new sales, particularly in
Individual Annuity. Individual Life Insurance earnings increased $3, or 25%, and
$5, or 22%, for the second quarter and six months ended June 30, 1998,
respectively, compared to equivalent periods in 1997 as a result of strong sales
and increased account values. Guaranteed Investment Contracts had no net income
for the second quarter or the six months ended June 30, 1998 or 1997, consistent
with management's expectations.
SEGMENT RESULTS
The Company's reporting segments, which reflect the management structure of
the Company, consist of Annuity, Individual Life Insurance, Employee Benefits,
Guaranteed Investment Contracts and a Corporate Operation.
Below is a summary of net income by segment.
<TABLE>
<CAPTION>
SECOND QUARTER ENDED
SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------- --------------------
1998 1997 1998 1997
----- ----- --------- ---------
<S> <C> <C> <C> <C>
Annuity........................... $ 67 $ 49 $ 130 $ 92
Individual Life Insurance......... 15 12 28 23
Employee Benefits................. 6 7 12 13
Guaranteed Investment Contracts... -- -- -- --
Corporate Operation............... (3) 6 (2) 9
--- --- --------- ---------
Net Income...................... $ 85 $ 74 $ 168 $ 137
--- --- --------- ---------
--- --- --------- ---------
</TABLE>
The sections that follow analyze each segment's results.
<PAGE>
68
- --------------------------------------------------------------------------------
ANNUITY
<TABLE>
<CAPTION>
SECOND QUARTER ENDED
SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues........................ $ 417 $ 308 $ 798 $ 588
Expenses........................ 350 259 668 496
--------- --------- --------- ---------
Net Income.................... $ 67 $ 49 $ 130 $ 92
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Revenues for the second quarter and six months ended June 30, 1998 increased
$109, or 35%, and $210, or 36%, respectively, compared to the same periods in
1997. This increase was driven by individual annuity revenues which increased
$93, or 44%, and $183, or 47%, for the second quarter and six months ended June
30, 1998, respectively, as compared to the same prior year periods primarily due
to higher fee income earned on growth in individual variable annuity account
values. Average individual variable annuity account values grew $15.3 billion,
or 42%, to $51.7 billion as of June 30, 1998 from $36.4 billion as of June 30,
1997. This growth was the result of market appreciation as well as strong
variable annuity sales of $2.8 billion and $5.1 billion for the second quarter
and six months ended June 30, 1998, respectively, as compared to sales of $2.3
billion and $4.7 billion for the second quarter and six months ended June 30,
1997, respectively. In addition, Group Annuity revenues increased $16, or 17%,
and $27, or 14%, for the second quarter and six months ended June 30, 1998
primarily due to higher net investment income resulting from growth in assets
under management. Group Annuity average account values grew $1.7 billion, or
19%, to $11.3 billion as of June 30, 1998 from $9.6 billion as of June 30, 1997
due to market appreciation and new deposits.
Expenses increased $91, or 35%, and $172, or 35%, for the second quarter and
six months ended June 30, 1998, respectively, as compared to the same periods in
1997. Benefits, claims and claim adjustment expenses increased $48 and $62 for
the second quarter and six months ended June 30, 1998, respectively, compared to
the same prior year periods primarily due to increased interest credited on
Individual Annuity general account values. Average Individual Annuity general
account values increased $1.2 billion, or 40%, to $4.2 billion at June 30, 1998
from $3.0 billion at June 30, 1997. Amortization of deferred policy acquisition
costs increased $18 and $38 for the second quarter and six months ended June 30,
1998, respectively, compared to prior year as prior and current year sales
remained strong. In addition, for the second quarter and six months ended June
30, 1998, other business expenses increased $15 and $52, respectively, as a
result of the continued growth in this segment.
Annuity net income increased $18, or 37%, and $38, or 41%, for the second
quarter and six months ended June 30, 1998, respectively, compared to the
equivalent periods in the prior year as a result of growing average account
values discussed above and operating expense efficiencies.
INDIVIDUAL LIFE INSURANCE
<TABLE>
<CAPTION>
SECOND QUARTER ENDED
SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues........................ $ 136 $ 125 $ 264 $ 236
Expenses........................ 121 113 236 213
--------- --------- --------- ---------
Net Income.................... $ 15 $ 12 $ 28 $ 23
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Revenues for the second quarter and six months ended June 30, 1998 increased
$11, or 9%, and $28, or 12%, respectively, as compared to the same period in
1997. This increase was primarily due to higher cost of insurance charges and
other fee income earned on the Company's growing block of variable life
insurance. Variable life average account values increased $516, or 72%, to $1.2
billion as of June 30, 1998 from $719 as of June 30, 1997 due to market
appreciation and strong sales. Variable life product sales constituted $54, or
76%, of total Individual Life Insurance new sales as of June 30, 1998, an
increase of $16, or 42%, compared to the same period in 1997.
Expenses increased $8, or 7%, and $23, or 11%, for the second quarter and
six months ended June 30 1998, respectively, as compared to the equivalent
periods of prior year. This increase was primarily the result of higher
benefits, claims, and claim adjustment expenses of $4 and $24 for the second
quarter and six months ended June 30, 1998, respectively, compared to the same
periods in prior year due to the growth in this segment as well as increased
mortality experience in 1998.
Net income increased $3, or 25%, and $5, or 22%, for the second quarter and
six months ended June 30, 1998, respectively, compared to the same periods in
1997 as a result of strong sales and growing account values.
EMPLOYEE BENEFITS
<TABLE>
<CAPTION>
SECOND QUARTER ENDED
SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues........................ $ 130 $ 142 $ 478 $ 321
Expenses........................ 124 135 466 308
--------- --------- --------- ---------
Net Income.................... $ 6 $ 7 $ 12 $ 13
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Revenues decreased $12, or 8%, for the second quarter of 1998 as compared to
the second quarter of 1997 as a result of a slight decline in account values
related to leveraged COLI compared to the same period in 1997. Revenues
increased $157, or 49%, as of June 30, 1998, compared to the same period in the
prior year, as a result of renewal
<PAGE>
69
- --------------------------------------------------------------------------------
premium on leveraged COLI, as well as an increase in fee income related to new
sales of variable COLI, which took place in the first quarter of 1998.
Expenses decreased $11, or 8% for the second quarter of 1998 as compared to
the second quarter of 1997 due to the factors described above. Expenses
increased $158, or 51%, as of June 30, 1998, compared to the equivalent periods
in 1997, primarily due to higher expenses associated with variable COLI sales
and leveraged COLI renewal premium in the first quarter of 1998. Net income was
consistent with the prior year.
GUARANTEED INVESTMENT CONTRACTS
<TABLE>
<CAPTION>
SECOND QUARTER ENDED
SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues........................ $ 38 $ 62 $ 90 $ 134
Expenses........................ 38 62 90 134
--------- --------- --------- ---------
Net Loss...................... $ -- $ -- $ -- $ --
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
This segment reported no net income for the second quarter and six months
ended June 30, 1998 and 1997 consistent with management's expectations that net
income from Closed Book GRC in the years subsequent to 1996 will be immaterial
based on the Company's current projections for the performance of the assets and
liabilities associated with Closed Book GRC. However, no assurance can be given
that, under certain unanticipated economic circumstances which result in the
Company's assumptions being proven inaccurate, further losses in respect of
Closed Book GRC will not occur in the future.
REGULATORY INITIATIVES AND CONTINGENCIES
NAIC PROPOSALS
The National Association of Insurance Commissioners ("NAIC") adopted the
Codification of Statutory Accounting Principles ("SAP") in March, 1998. The
proposed effective date for the statutory accounting guidance is January 1,
2001. It is expected that the Company's domiciliary state will adopt SAP and the
Company will make the necessary changes required for implementation. These
changes are not anticipated to have a material impact on the statutory financial
statements of the Company.
YEAR 2000
The Year 2000 issue relates to the ability or inability of computer systems
to properly process information and data containing or related to dates
beginning with the year 2000 and beyond. The Year 2000 issue exists because many
computer systems that are in use today were developed years ago when a year was
identified using a two-digit field rather than a four-digit field. As
information and data containing or related to the century date are introduced to
computer hardware, software and other systems, date sensitive systems may
recognize the year 2000 as 1900, or not at all, which may result in computer
systems processing information incorrectly. This, in turn, may significantly and
adversely affect the integrity and reliability of information databases and may
result in a wide variety of adverse consequences to a company. In addition, Year
2000 problems that occur with third parties with which a company does business,
such as suppliers, computer vendors and others, may also adversely affect any
given company.
As an insurance and financial services company, Hartford Life Insurance
Company has thousands of individual and business customers that have insurance
policies, annuities, mutual funds and other financial products from the Company.
Nearly all of these policies and products contain date sensitive data, such as
policy expiration dates, birth dates, premium payment dates, and the like. In
addition, the Company has business relationships with numerous third parties
that affect virtually all aspects of the Company's business, including, without
limitation, suppliers, computer hardware and software vendors, insurance agents
and brokers, securities broker-dealers and other distributors of financial
products.
Beginning in 1990, the Company began working on making its computer systems
Year 2000 ready, either by installing new programs or by replacing systems. In
January 1998, the Company commenced a company-wide program to further identify,
assess and remediate the impact of Year 2000 problems in all of the Company's
business segments. The Company currently anticipates that this internal program
will be substantially completed by the end of 1998, and testing of computer
systems will continue through 1999. The costs of addressing the Year 2000 issue
that have been incurred by the Company through the six months ended June 30,
1998 have not been material to the Company's financial condition or results of
operations. The Company will continue to incur costs related to its Year 2000
efforts and does not anticipate that the costs to be incurred will be material
to the Company's financial condition or results of operations.
In addition, as part of its Year 2000 program, the Company is identifying
third parties with which it has significant business relations in order to
attempt to assess the potential impact on the Company of their Year 2000 issues
and remediation plans. The Company currently anticipates that it will
substantially complete this evaluation by the end of 1998, and will conduct
systems testing with certain third parties through 1999. The Company does not
have control over these third parties and, as a result, the Company cannot
currently determine to what extent future operating results may be adversely
affected by the failure of these third parties to successfully address their
Year 2000 issues.
<PAGE>
70
- --------------------------------------------------------------------------------
ACCOUNTING STANDARDS
For a discussion of accounting standards, see Note 1 of Notes to Condensed
Consolidated Financial Statements.
OTHER MATTERS
SUBSEQUENT EVENT
On July 7, 1998, Hartford Life, Inc. ("Hartford Life"), an indirect parent
of the Company, announced that it will recapture an in-force block of COLI
business from MBL Life Assurance Co. of New Jersey ("MBL Life"), as well as
purchase the outstanding interest in International Corporate Marketing Group
("ICMG"), which is currently 60% owned by Hartford Life. The transaction is
expected to close by early in the fourth quarter of 1998, subject to court
approval. The transaction is being consummated through the assignment of a
reinsurance arrangement between Hartford Life and MBL Life to the Company's
direct parent, Hartford Life and Accident Insurance Company. Hartford Life
originally assumed the life insurance block in 1992 from Mutual Benefit Life
Insurance Company ("Mutual Benefit Life"), which was placed in court-supervised
rehabilitation in 1991, and reinsured a portion of those polices back to MBL
Life. MBL Life, previously a Mutual Benefit Life subsidiary, operates under the
Rehabilitation Plan for Mutual Benefit Life. Hartford Life is now recapturing
the reinsured portion of these policies ceded to MBL Life.
<PAGE>
71
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of ITT Hartford Life
and Annuity Insurance Company:
We have audited the accompanying statutory 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,
1997 and 1996, and the related statutory statements of income, changes in
capital and surplus, and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
statutory 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 financial
statements. When statutory 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 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, 1997 and 1996, and the
results of its operations and its cash flows for each of three years in the
period ended December 31, 1997.
However, in our opinion, the statutory financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 1997 and 1996, and the results of operations and its cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with statutory accounting practices as described in Note 1.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
January 27, 1998
<PAGE>
72
- --------------------------------------------------------------------------------
STATUTORY STATEMENTS OF INCOME
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
($000)
<S> <C> <C> <C>
Revenues
Premiums and annuity considerations............. $ 296,645 $ 250,244 $ 165,792
Annuity and other fund deposits................. 1,981,246 1,897,347 1,087,661
Net investment income........................... 102,285 98,441 78,787
Commissions and expense allowances on
reinsurance ceded.............................. 396,921 370,637 183,380
Reserve adjustment on reinsurance ceded......... 3,672,076 3,864,395 1,879,785
Other revenues.................................. 288,632 161,906 140,796
---------- ---------- ----------
Total Revenues................................ 6,737,805 6,642,970 3,536,201
---------- ---------- ----------
Benefits and Expenses
Death and annuity benefits...................... 66,013 60,111 53,029
Surrenders and other benefit payments........... 461,733 276,720 221,392
Commissions and other expenses.................. 564,240 491,720 236,202
Increase in aggregate reserves for future
benefits....................................... 33,213 27,351 94,253
Increase in liability for premium and other
deposit funds.................................. 640,006 207,156 460,124
Net transfers to Separate Accounts.............. 4,914,980 5,492,964 2,414,669
---------- ---------- ----------
Total Benefits and Expenses................... 6,680,185 6,556,022 3,479,669
---------- ---------- ----------
Net Gain from Operations Before Federal Income
Taxes............................................ 57,620 86,948 56,532
Federal income tax (benefit) expense............ (14,878) 19,360 14,048
---------- ---------- ----------
Net Gain from Operations.......................... 72,498 67,588 42,484
Net realized capital gains, after tax........... 1,544 407 374
---------- ---------- ----------
Net Income........................................ $ 74,042 $ 67,995 $ 42,858
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these statutory financial
statements.
<PAGE>
73
- --------------------------------------------------------------------------------
STATUTORY BALANCE SHEETS
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------
1997 1996
----------- -----------
($000)
<S> <C> <C>
Assets
Bonds........................................... $ 1,501,311 $ 1,268,480
Common stocks................................... 64,408 44,996
Mortgage loans.................................. 85,103 0
Policy loans.................................... 36,533 28,853
Cash and short-term investments................. 309,432 176,830
Other invested assets........................... 20,942 2,858
----------- -----------
Total cash and invested assets................ 2,017,729 1,522,017
----------- -----------
Investment income due and accrued............... 15,878 14,555
Premium balances receivable..................... 389 373
Receivables from affiliates..................... 1,269 257
Other assets.................................... 22,788 19,099
Separate Account assets......................... 23,208,728 14,619,324
----------- -----------
Total Assets.................................. $25,266,781 $16,175,625
----------- -----------
----------- -----------
Liabilities
Aggregate reserves for future benefits.......... $ 605,183 $ 571,970
Policy and contract claims...................... 5,672 6,806
Liability for premium and other deposit funds... 1,795,149 1,155,143
Asset valuation reserve......................... 13,670 7,442
Payable to affiliates........................... 20,972 10,022
Other liabilities............................... (754,393) (498,195)
Separate Account liabilities.................... 23,208,728 14,619,324
----------- -----------
Total liabilities............................. 24,894,981 15,872,512
----------- -----------
Capital and Surplus
Common stock.................................... 2,500 2,500
Gross paid-in and contributed surplus........... 226,043 226,043
Unassigned funds................................ 143,257 74,570
----------- -----------
Total capital and surplus..................... 371,800 303,113
----------- -----------
Total liabilities, capital and surplus.......... $25,266,781 $16,175,625
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these statutory financial
statements.
<PAGE>
74
- --------------------------------------------------------------------------------
STATUTORY STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
--------- --------- ---------
($000)
<S> <C> <C> <C>
Capital and surplus -- beginning of year $ 303,113 $ 238,334 $ 91,285
--------- --------- ---------
Net income...................................... 74,042 67,995 42,858
Change in net unrealized capital gains (losses)
on common stocks and other invested assets..... 2,186 (5,171) 1,709
Change in asset valuation reserve............... (6,228) 568 (5,588)
Change in non-admitted assets................... (1,313) 1,387 (1,944)
Aggregate write-ins for surplus (See Note 3).... 0 0 8,080
Dividends to shareholder........................ 0 0 (10,000)
Paid-in surplus................................. 0 0 111,934
--------- --------- ---------
Change in capital and surplus................... 68,687 64,779 147,049
--------- --------- ---------
Capital and surplus -- end of year.............. $ 371,800 $ 303,113 $ 238,334
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these statutory financial
statements.
<PAGE>
75
- --------------------------------------------------------------------------------
STATUTORY STATEMENTS OF CASH FLOWS
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
($000)
<S> <C> <C> <C>
Operations
Premiums, annuity considerations and fund
deposits....................................... $ 2,277,874 $ 2,147,627 $ 1,253,511
Investment income............................... 101,991 106,178 78,328
Other income.................................... 4,381,718 4,396,892 2,253,466
----------- ----------- -----------
Total income.................................. 6,761,583 6,650,697 3,585,305
----------- ----------- -----------
Benefits Paid................................... 529,733 338,998 277,965
Federal income taxes (received) paid on
operations..................................... (14,499) 28,857 208,423
Other expenses.................................. 5,754,725 6,254,139 2,664,385
----------- ----------- -----------
Total benefits and expenses..................... 6,269,959 6,621,994 3,150,773
----------- ----------- -----------
Net cash from operations........................ 491,624 28,703 434,532
----------- ----------- -----------
Proceeds from Investments
Bonds........................................... 614,413 871,019 287,941
Common stocks................................... 11,481 72,100 52
Other........................................... 152 10 28
----------- ----------- -----------
Net investment proceeds....................... 626,046 943,129 288,021
----------- ----------- -----------
Taxes Paid on Capital Gains....................... 0 936 226
Paid-In Surplus................................... 0 0 111,934
Other Cash Provided............................. 0 41,998 28,199
----------- ----------- -----------
Total Proceeds................................ 1,117,670 1,012,894 862,460
----------- ----------- -----------
Cost of Investments Acquired
Bonds........................................... 848,267 914,523 720,521
Common stocks................................... 28,302 82,495 35,794
Mortgage loans.................................. 85,103 0 0
Miscellaneous applications...................... 18,548 130 2,146
----------- ----------- -----------
Total Investments Acquired.................... 980,220 997,148 758,461
----------- ----------- -----------
Other Cash Applied
Dividends paid to stockholders.................. 0 0 10,000
Other........................................... 4,848 12,220 5,007
----------- ----------- -----------
Total other cash applied...................... 4,848 12,220 15,007
----------- ----------- -----------
Total applications.......................... 985,068 1,009,368 773,468
----------- ----------- -----------
Net Change in Cash and Short-Term Investments..... 132,602 3,526 88,992
Cash and Short-Term Investments, Beginning of
Year........................................... 176,830 173,304 84,312
----------- ----------- -----------
Cash and Short-Term Investments, End of Year.... $ 309,432 $ 176,830 $ 173,304
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these statutory financial
statements.
<PAGE>
76
- --------------------------------------------------------------------------------
NOTES TO STATUTORY FINANCIAL STATEMENTS
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
DECEMBER 31, 1997
(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. ("HLI"), which is majority owned by The Hartford Financial
Services Group, Inc. ("The Hartford"), formerly a wholly owned subsidiary of ITT
Corporation ("ITT"). On February 10, 1997, HLI filed a registration statement,
as amended, with the Securities and Exchange Commission relating to the initial
public offering of HLI Class A Common Stock (the "Offering"). Pursuant to the
Offering on May 22, 1997, HLI sold to the public 26 million shares, representing
18.6% of the equity ownership of HLI. 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 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. The most significant estimates are
for determining the liability for aggregate reserves for future benefits and the
liability for premium and other deposit funds. Although some variability is
inherent in these estimates, management believes the amounts provided are
adequate.
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, for universal life policies and
investment products, generally, 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 recorded upon adoption of the applicable standard;
<PAGE>
77
- --------------------------------------------------------------------------------
(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 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 bonds were classified on a GAAP basis
as "available-for-sale" and accordingly, those investments and common stocks
were reflected at fair value with the corresponding impact included as a
component of Stockholder's Equity designated as "Net unrealized capital
gains (losses) on securities net of tax". For statutory reporting purposes,
Change in Net Unrealized Capital Gains (Losses) on Common Stocks and Other
Invested Assets includes the change in unrealized gains (losses) 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, 1997, 1996 and 1995, the
significant differences between statutory and GAAP basis net income and capital
and surplus for the Company are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ---------- ----------
<S> <C> <C> <C>
GAAP Net Income............... $ 58,050 $ 41,202 $ 38,821
Amortization and
deferral of policy
acquisition costs............ (345,658) (341,572) (174,341)
Change in unearned revenue
reserve...................... 4,641 55,504 32,300
Deferred taxes................ 47,113 2,090 2,801
Separate accounts............. 282,818 306,978 146,635
Other, net.................... 27,078 3,793 (3,358)
------------ ---------- ----------
Statutory Net Income.......... $ 74,042 $ 67,995 $ 42,858
------------ ---------- ----------
------------ ---------- ----------
<CAPTION>
1997 1996 1995
------------ ---------- ----------
<S> <C> <C> <C>
GAAP Capital and
Surplus...................... $ 570,469 $ 503,887 $ 455,541
Deferred policy acquisition
costs........................ (1,283,771) (938,114) (596,542)
Unearned revenue reserve...... 134,789 130,148 74,644
Deferred taxes................ 64,522 12,823 1,493
Separate accounts............. 923,040 640,101 333,123
Asset valuation reserve....... (13,670) (7,442) (8,010)
Unrealized gains (losses) on
bonds........................ 13,943 5,112 (1,696)
Adjustment relating to Lyndon
contribution (see Note 3).... (41,277) (41,277) (41,277)
Other, net.................... 3,755 (2,125) 21,058
------------ ---------- ----------
Statutory Capital and
Surplus...................... $ 371,800 $ 303,113 $ 238,334
------------ ---------- ----------
------------ ---------- ----------
</TABLE>
AGGREGATE RESERVES FOR FUTURE BENEFITS AND LIABILITY 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 6%. 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 Statements of
Income.
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 fair value with the current year change in the
difference from cost reflected in surplus. Other invested assets are generally
recorded at fair value.
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 increased by $6,228 in 1997,
decreased by $568 in 1996 and increased by $5,588 in 1995. Additionally, the
Interest Maintenance Reserve
<PAGE>
78
- --------------------------------------------------------------------------------
("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 Statements of Income. Realized investment gains and losses are
determined on a specific identification basis. The amount of net capital losses
reclassified from the IMR was $719 in 1997 and the amount of net capital gains
reclassified was $1,413 and $39 in 1996 and 1995, respectively. The amount of
income amortized was $85, $392 and $256 in 1997, 1996 and 1995, respectively.
OTHER LIABILITIES
The amount reflected in other liabilities includes a receivable from the
separate accounts of $923 million and $640 million as of December 31, 1997 and
1996, respectively. The balances are classified in accordance with NAIC
accounting practices.
MORTGAGE LOANS
Mortgage loans, carried at cost, which approximates fair value, include
investments in assets backed by mortgage loan pools.
2. INVESTMENTS:
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- --------
<S> <C> <C> <C>
Interest income from bonds and
short-term investments....... $100,475 $89,940 $ 76,100
Interest income from policy
loans........................ 1,958 1,846 1,504
Interest and dividends from
other investments............ 1,005 7,864 2,288
-------- ------- --------
Gross investment income....... 103,438 99,650 79,892
Less: investment expenses..... 1,153 1,209 1,105
-------- ------- --------
Net investment income......... $102,285 $98,441 $ 78,787
-------- ------- --------
-------- ------- --------
</TABLE>
(B) COMPONENTS OF NET UNREALIZED CAPITAL GAINS (LOSSES) ON COMMON STOCKS
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- --------
<S> <C> <C> <C>
Gross unrealized capital gains at
end of year........................ $ 537 $ 713 $ 1,724
Gross unrealized capital losses at
end of year........................ (1,820) (4,160) 0
-------- ------- --------
Net unrealized capital (losses)
gains.............................. (1,283) (3,447) 1,724
Balance at beginning of year........ (3,447) 1,724 15
-------- ------- --------
Change in net unrealized capital
gains (losses) on common stocks.... $ 2,164 $(5,171) $ 1,709
-------- ------- --------
-------- ------- --------
</TABLE>
(C) COMPONENTS OF NET UNREALIZED CAPITAL GAINS (LOSSES) ON BONDS AND SHORT-TERM
INVESTMENTS
<TABLE>
<CAPTION>
1997 1996 1995
------- -------- --------
<S> <C> <C> <C>
Gross unrealized capital gains at
end of year........................ $23,357 $ 11,821 $ 22,251
Gross unrealized capital losses at
end of year........................ (1,906) (3,842) (1,374)
------- -------- --------
Net unrealized capital gains........ 21,451 7,979 20,877
Balance at beginning of year........ 7,979 20,877 33,732
------- -------- --------
Change in net unrealized capital
gains (losses) on bonds and
short-term investments............. $13,472 $(12,898) $ 54,609
------- -------- --------
------- -------- --------
</TABLE>
(D) COMPONENTS OF NET REALIZED CAPITAL GAINS
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- ------
<S> <C> <C> <C>
Bonds and short-term investments......... $ (120) $ 2,756 $ 56
Common stocks............................ 0 0 52
Real estate and other.................... 114 0 0
------- ------- ------
Realized capital (losses) gains.......... (6) 2,756 208
Capital gains (benefit) tax.............. (831) 936 (205)
------- ------- ------
Net realized capital gains, after tax.... 825 1,820 413
Less: IMR capital (losses) gains......... (719) 1,413 39
------- ------- ------
Net realized capital gains............... $ 1,544 $ 407 $ 374
------- ------- ------
------- ------- ------
</TABLE>
(E) OFF-BALANCE SHEET INVESTMENTS
The Company had no significant financial instruments with off-balance sheet
risk as of December 31, 1997 and 1996.
(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.
<PAGE>
79
- --------------------------------------------------------------------------------
(G) BONDS, SHORT-TERM INVESTMENTS AND COMMON STOCKS
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
1997 COST GAINS LOSSES VALUE
- --------------------------------------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. government and government agencies and
authorities:
Guaranteed and sponsored................... $ 11,114 $ 55 $ (51) $ 11,118
Guaranteed and sponsored -- asset-backed... 55,506 1,056 (269) 56,293
States, municipalities and political
subdivisions................................ 26,404 329 0 26,733
International governments.................... 7,609 500 0 8,109
Public utilities............................. 73,024 754 (132) 73,646
All other corporate.......................... 517,715 14,110 (704) 531,121
All other corporate -- asset-backed.......... 630,069 5,005 (739) 634,335
Short-term investments....................... 277,330 33 (8) 277,355
Certificates of deposit...................... 93,770 1,515 (3) 95,282
Parents, subsidiaries and affiliates......... 86,100 0 0 86,100
----------- ---------- ---------- -----------
Total bonds and short-term investments....... $ 1,778,641 $23,357 $(1,906) $ 1,800,092
----------- ---------- ---------- -----------
----------- ---------- ---------- -----------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED FAIR
1997 COST GAINS LOSSES VALUE
- --------------------------------------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Common stock -- unaffiliated................. $ 30,307 $ 537 $ 0 $ 30,844
Common stock -- affiliated................... 35,384 0 (1,820) 33,564
----------- ---------- ---------- -----------
Total common stocks.......................... $ 65,691 $ 537 $(1,820) $ 64,408
----------- ---------- ---------- -----------
----------- ---------- ---------- -----------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
1997 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 0 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 0 (66) 148,028
Certificates of deposit...................... 83,378 563 (110) 83,831
Parents, subsidiaries and affiliates......... 48,100 0 0 48,100
----------- ---------- ---------- -----------
Total bonds and short-term investments....... $ 1,416,574 $11,821 $(3,842) $ 1,424,553
----------- ---------- ---------- -----------
----------- ---------- ---------- -----------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED FAIR
1997 COST GAINS LOSSES VALUE
- --------------------------------------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
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>
The amortized cost and estimated fair value of bonds and short-term
investments at December 31, 1997 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>
80
- --------------------------------------------------------------------------------
over the remaining life of the securities. Expected maturities differ from
contractual maturities reflecting borrowers' rights to call or prepay their
obligations.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
MATURITY COST FAIR VALUE
- --------------------------------------------- ---------- -----------
<S> <C> <C>
Due in one year or less...................... $ 424,518 $ 696,203
Due after one year through five years........ 586,980 708,365
Due after five years through ten years....... 451,963 295,896
Due after ten years.......................... 315,180 99,628
---------- -----------
Total...................................... $1,778,641 $ 1,800,092
---------- -----------
---------- -----------
</TABLE>
Proceeds from sales of investments in bonds and short-term investments
during 1997, 1996 and 1995 were $367,626, $668,078 and $313,961, respectively,
resulting in gross realized gains of $964, $3,675 and $1,419, respectively, and
gross realized losses of $1,084, $919 and $1,263, 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>
1997 1996
------------------ ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- -------- -------
<S> <C> <C> <C> <C>
ASSETS
Bonds and short-term investments........... $1,778 $ 1,800 $1,417 $ 1,425
Common stocks.............................. 64 64 45 45
Policy loans............................... 37 37 29 29
Mortgage loans............................. 85 85 0 0
Other invested assets...................... 21 21 3 3
LIABILITIES
Liabilities on investment contracts........ $1,911 $ 1,835 $1,245 $ 1,191
</TABLE>
The carrying amounts for policy loans approximates fair value. The fair
value of liabilities on investment contracts 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. The Company has also invested in bonds
of its subsidiaries, Hartford Financial Services Corporation and HL Investment
Advisors, Inc., and common stock of its subsidiary, ITT Hartford Life, LTD.
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 HLI, 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 (received) paid by the Company were $(14,499), $29,792 and
$215,921 in 1997, 1996 and 1995, respectively. The effective tax rate was (26)%,
22% and 25% in 1997, 1996 and 1995, respectively. The following schedule
provides a reconciliation of the tax provision at the U.S. Federal Statutory
rate to Federal income tax (benefit) expense (in millions).
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Tax provision at U.S. Federal statutory
rate........................................ $ 20 $ 30 $ 20
Tax deferred acquisition costs............... 25 27 8
Statutory to tax reserve differences......... 1 0 3
Unrealized gain on separate accounts......... (44) (21) (13)
Investments and other........................ (17) (17) (4)
----- ----- -----
Federal income tax (benefit) expense......... $ (15) $ 19 $ 14
----- ----- -----
----- ----- -----
</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 1997 or
1996. 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 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
<PAGE>
81
- --------------------------------------------------------------------------------
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
$265, $358, and $1,034 in 1997, 1996 and 1995, 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 1997, 1996 and 1995.
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 8.5% for 1997, 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
1997, 1996 and 1995.
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 1997, 1996 and 1995.
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>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Direct premiums................... $266,427 $226,612 $159,918
Premiums assumed.................. 51,630 33,817 13,299
Premiums ceded.................... (21,412) (10,185) (7,425)
-------- -------- --------
Premiums and annuity
considerations................... $296,645 $250,244 $165,792
-------- -------- --------
-------- -------- --------
</TABLE>
The Company cedes to RGA Reinsurance Company, on a modified coinsurance
basis, 80% of the variable annuity business written since 1994.
8. SEPARATE ACCOUNTS:
The Company maintains separate account assets and liabilities totaling $23.2
billion and $14.6 billion at December 31, 1997 and 1996, 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 $252 million, $144
million and $72 million in 1997, 1996 and 1995, respectively, and are recorded
as a component of other revenues on the Statutory Statements of Income.
9. COMMITMENTS AND CONTINGENCIES:
As of December 31, 1997 and 1996, 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 $1,544, $1,262 and $1,684 in 1997, 1996 and 1995,
respectively. ILA incurred guaranteed fund expense of $548 in 1997 and 1996 and
$0 in 1995.
<PAGE>
PART II
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The prospectus consisting of 81 pages.
The undertaking to file reports.
The Rule 484 undertaking.
The signatures.
(1) The following exhibits included herewith correspond to those
required by paragraph A of the instructions for exhibits to Form
N-8B-2.
(A1) Resolution of Board of Directors of Hartford Life and Annuity
Insurance Company ("Hartford") authorizing the establishment of the
Separate Account. (1)
(A2) Not Applicable.
(A3a) Principal Underwriting Agreement. (2)
(A3b) Forms of Selling Agreements. (2)
(A3c) Not applicable.
(A4) Not Applicable.
(A5) Form of Modified Single Premium Variable Life Insurance Policy. (1)
(A6a) Certificate of Incorporation of Hartford. (3)
(A6b) Bylaws of Hartford. (2)
(A7) Not Applicable.
_________________
(1) Incorporated by reference to Post Effective No. 2, to the Registration
State File No. 33-83650, dated May 1, 1995.
(2) Incorporated by reference to Post Effective Amendment No. 3, to the
Registration Statement File No. 33-83650, dated May 1, 1996.
(3) Incorporated by reference to Post Effective Amendment No. 6, to the
Registration Statement File No. 33-83650, filed on August 4, 1998.
<PAGE>
(A8) Not Applicable.
(A9) Not Applicable.
(A10) Form of Application for Modified Single Premium Variable Life
Insurance Policies. (1)
(A11) Memorandum describing transfer and redemption procedures. (1)
(2) Opinion and consent of Lynda Godkin, Senior Vice President, General Counsel
and Corporate Secretary.
(3) No financial statement will be omitted from the Prospectus pursuant to
Instruction 1 (b) or (c) of Part I.
(4) Not Applicable.
(5) Opinion and Consent of Michael Winterfield, FSA, MAAA.
(6) Consent of Arthur Andersen LLP, Independent Public Accountants.
(7) Power of Attorney. (3)
(8) Not applicable.
<PAGE>
REPRESENTATION OF REASONABLENESS OF FEES
Hartford Life and Annuity Insurance Company ("Hartford") hereby represents that
the aggregate fees and charges under the Policy are reasonable in relation to
the services rendered, the expenses expected to be incurred, and the risks
assumed by Hartford.
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
UNDERTAKINGS AND REPRESENTATIONS AS REQUIRED BY RULE 6e-3(T)
1. Separate Account Five meets the definition of "Separate Account" under Rule
6e-3(T).
2. Hartford undertakes to keep and make available to the Commission upon
request any documents used to support any representation as to the
reasonableness of fees.
UNDERTAKING ON INDEMNIFICATION
Under Section 33-772 of the Connecticut General Statutes, unless limited by its
certificate of incorporation, the Registrant must indemnify a director who was
wholly successful, on the merits or otherwise, in the defense of any proceeding
to which he was a party because he is or was a director of the corporation
against reasonable expenses incurred by him in connection with the proceeding.
The Registrant may indemnify an individual made a party to a proceeding because
he is or was a director against liability incurred in the proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Registrant, and, with respect to any criminal
proceeding, had no reason to believe his conduct was unlawful. Conn. Gen. Stat.
Section 33-771(a). Additionally, pursuant to Conn. Gen. Stat. Section 33-776,
the Registrant may indemnify officers and employees or agents for liability
incurred and for any expenses to which they becomes subject by reason of being
or having been an employees or officers of the Registrant. Connecticut law does
not prescribe standards for the indemnification of officers, employees and
agents and expressly states that their indemnification may be broader than the
right of indemnification granted to directors.
The foregoing statements are specifically made subject to the detailed
provisions of Section 33-770 et seq.
Notwithstanding the fact that Connecticut law obligates the Registrant to
indemnify a only a director that was successful on the merits in a suit, under
Article VIII, Section 1 of the Registrant's bylaws,
<PAGE>
the Registrant must indemnify both directors and officers of the Registrant
for (1) any claims and liabilities to which they become subject by reason of
being or having been a directors or officers of the company and legal and (2)
other expenses incurred in defending against such claims, in each case, to
the extent such is consistent with statutory provisions.
Additionally, the directors and officers of Hartford and Hartford Securities
Distribution Company, Inc. ("HSD") are covered under a directors and officers
liability insurance policy issued to The Hartford Financial Services Group, Inc.
and its subsidiaries. Such policy will reimburse the Registrant for any
payments that it shall make to directors and officers pursuant to law and will,
subject to certain exclusions contained in the policy, further pay any other
costs, charges and expenses and settlements and judgments arising from any
proceeding involving any director or officer of the Registrant in his past or
present capacity as such, and for which he may be liable, except as to any
liabilities arising from acts that are deemed to be uninsurable.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Registration Statement to be signed on its behalf by
the undersigned thereunto duly authorized, and attested, all in the Town of
Simsbury, and State of Connecticut, on the 21st day of September, 1998.
HARTFORD LIFE AND ANNUITY INSURANCE
COMPANY - SEPARATE ACCOUNT FIVE (Registrant)
By: /s/ Gregory A. Boyko
-------------------------------------------------
Gregory A. Boyko, Senior Vice President
HARTFORD LIFE AND ANNUITY INSURANCE
COMPANY (Depositor)
By: /s/ Gregory A. Boyko
-------------------------------------------------
Gregory A. Boyko, Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons and in the capacities and on
the dates indicated.
Gregory A. Boyko, Senior Vice
President, Director*
Lynda Godkin, Senior Vice President
General Counsel and Corporate
Secretary, Director*
Thomas M. Marra, Executive Vice *By: /s/ Lynda Godkin
President and Director, Individual -------------------------
Life and Annuity Division, Director* Lynda Godkin
Lowndes A. Smith, President and Attorney-In-Fact
Chief Executive Officer,
Director* Dated: September 21, 1998
David M. Znamierowski, Senior -------------------
Vice President, Director*
<PAGE>
EXHIBIT INDEX
(2) Opinion and Consent of Lynda Godkin, Senior Vice President,
General Counsel and Corporate Secretary.
(5) Opinion and Consent of Michael Winterfield, FSA, MAAA.
(6) Consent of Arthur Andersen LLP, Independent Public
Accountants.
<PAGE>
EXHIBIT 2
[LOGO]
Hartford Life
September 21, 1998
LYNDA GODKIN
SENIOR VICE PRESIDENT, GENERAL
COUNSEL & CORPORATE SECRETARY
Law Department
Board of Directors
Hartford Life and Annuity Insurance Company
200 Hopmeadow Street
Simsbury, CT 06089
RE: SEPARATE ACCOUNT FIVE
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
FILE NO. 33-83650
Dear Sir/Madam:
I have acted as General Counsel to Hartford Life and Annuity Insurance Company
(the "Company"), a Connecticut insurance company, and Hartford Life and Annuity
Insurance Company Separate Account Five (the "Account") in connection with the
registration of an indefinite amount of securities in the form of modified
single premium variable life insurance contracts (the "Contracts") with the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
I have examined such documents (including the Form S-6 Registration Statement)
and reviewed such questions of law as I considered necessary and appropriate,
and on the basis of such examination and review, it is my opinion that:
1. The Company is a corporation duly organized and validly existing as a
stock life insurance company under the laws of the State of Connecticut
and is duly authorized by the Insurance Department of the State of
Connecticut to issue the Contracts.
2. The Account is a duly authorized and validly existing separate account
established pursuant to the provisions of Section 38a-433 of the
Connecticut Statutes.
3. To the extent so provided under the Contracts, that portion of the
assets of the Account equal to the reserves and other contract
liabilities with respect to the Account will not be chargeable with
liabilities arising out of any other business that the Company may
conduct.
4. The Contracts, when issued as contemplated by the Form S-6 Registration
Statement, will constitute legal, validly issued and binding obligations
of the Company.
I hereby consent to the filing of this opinion as an exhibit to the Form S-6
Registration Statement for the Contracts and the Account.
Sincerely,
/s/ Lynda Godkin
Lynda Godkin
<PAGE>
EXHIBIT 5
[Logo]
Hartford Life
MICHAEL R. WINTERFIELD, FSA, MAAA
Assistant Vice President
Individual Annuity Product Management
September 21, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sir:
This opinion is furnished in connection with the Form S-6 Registration Statement
under the Securities Act of 1933, as amended ("Securities Act"), of a certain
modified single premium variable life insurance policy (the "Policy") that will
be offered and sold by Hartford Life and Annuity Insurance Company and certain
units of interest to be issued in connection with the Policy.
The hypothetical illustrations of the Policy used in the Form S-6 Registration
Statement accurately reflect reasonable estimates of projected performance of
the Policy under the stipulated rates of investment return, the contractual
expense deductions and guaranteed cost-of-insurance rates, and utilizing a
reasonable estimation for expected fund operating expenses.
I hereby consent to the use of this opinion as an exhibit to the Form S-6
Registration Statement and to the reference to my name under the heading
"Experts" in the Prospectus included as a part of such Form S-6 Registration
Statement.
Very truly yours,
/s/ Michael Winterfield
Michael Winterfield, FSA, MAAA
Director Individual Annuity Product Management
<PAGE>
EXHIBIT 6
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of
this Registration Statement File No. 33-83650 for Hartford Life and Annuity
Insurance Company Separate Account Five on Form S-6.
/s/ Arthur Andersen LLP
Hartford, Connecticut
September 28, 1998
