<PAGE>
DIRECTOR LIFE SERIES II
MODIFIED SINGLE PREMIUM VARIABLE LIFE
INSURANCE POLICIES
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
P.O. BOX 2999
HARTFORD, CT 06104-2999
[LOGO] TELEPHONE (800) 231-5453
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This Prospectus describes Director Life Series II, 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 allows 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 26. 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 POLICY. ANY SURRENDER AMOUNTS THAT ARE TAXABLE 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 HLS Fund, Inc. 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 Contracts. Opposite each
Sub-Account is the name of the underlying investment for that Sub-Account.
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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")
Growth and Income Fund Sub-Account -- shares of Class IA of Hartford Growth and Income HLS Fund,
Inc. ("Hartford Growth and Income 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 received by Hartford.
The Policies provide for a Face Amount, which is the minimum death benefit under
the Policy. The death benefit ("Death Benefit") may be greater than the Face
Amount. The Account Value will, and under certain circumstances the Death
Benefit of the 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
POLICY.
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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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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 SEC'S WEB SITE AT HTTP://WWW.SEC.GOV.
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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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THE DATE OF THIS PROSPECTUS IS AUGUST 13, 1998.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 3
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TABLE OF CONTENTS
<TABLE>
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PAGE
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SPECIAL TERMS......................................................... 5
SUMMARY............................................................... 7
THE COMPANY........................................................... 9
THE SEPARATE ACCOUNT.................................................. 9
General............................................................. 9
Funds............................................................... 9
Investment Adviser.................................................. 11
THE POLICY............................................................ 11
Application for a Policy............................................ 11
Premiums............................................................ 11
Allocation of Premiums.............................................. 12
Accumulation Unit Values............................................ 12
DEDUCTIONS AND CHARGES................................................ 12
Chart of Deductions and Charges..................................... 13
Cost of Insurance Charge............................................ 13
Administrative Charge............................................... 14
Annual Maintenance Fee.............................................. 14
Surrender Charge.................................................... 14
Policy Owner Options................................................ 14
Option 1.......................................................... 14
Option 2.......................................................... 15
Other Deductions and Charges........................................ 15
POLICY BENEFITS AND RIGHTS............................................ 15
Death Benefit....................................................... 15
Account Value....................................................... 16
Transfer of Account Value........................................... 16
Policy Loans........................................................ 16
Amount Payable on Surrender of the Policy........................... 17
Partial Surrenders.................................................. 17
Benefits at Maturity................................................ 18
Lapse and Reinstatement............................................. 18
Cancellation and Exchange Rights.................................... 18
Suspension of Valuation, Payments and Transfers..................... 18
LAST SURVIVOR POLICIES................................................ 18
OTHER MATTERS......................................................... 19
Voting Rights....................................................... 19
Statements to Policy Owners......................................... 19
Limit on Right to Contest........................................... 19
Misstatement as to Age and Sex...................................... 19
Settlement Provisions............................................... 19
Beneficiary......................................................... 21
Assignment.......................................................... 21
Dividends........................................................... 21
EXECUTIVE OFFICERS AND DIRECTORS...................................... 21
DISTRIBUTION OF THE POLICIES.......................................... 25
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS.......................... 26
FEDERAL TAX CONSIDERATIONS............................................ 26
General............................................................. 26
Taxation of Hartford and the Separate Account....................... 26
Income Taxation of Policy Benefits.................................. 26
Last Survivor Policies.............................................. 27
Modified Endowment Contracts........................................ 27
Estate and Generation Skipping Taxes................................ 27
Diversification Requirements........................................ 28
Ownership of the Assets in the Separate Account..................... 28
Life Insurance Purchased for Use in Split Dollar Arrangements....... 28
Federal Income Tax Withholding...................................... 28
Non-Individual Ownership of Contracts............................... 29
</TABLE>
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4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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PAGE
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Other............................................................... 29
Life Insurance Purchases by Nonresident Aliens and Foreign
Corporations....................................................... 29
LEGAL PROCEEDINGS..................................................... 29
LEGAL MATTERS......................................................... 29
EXPERTS............................................................... 29
REGISTRATION STATEMENT................................................ 29
APPENDIX A -- ILLUSTRATIONS OF BENEFITS............................... 30
</TABLE>
THE POLICIES AND/OR POLICY OWNER OPTION 2 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 the Sub-Accounts 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 surrender that is
not subject to the Surrender Charge. This amount in any Policy Year is the
greater of 10% of premiums or 100% of cumulative earnings (Account Value less
premiums paid).
ANNUITY UNIT: An accounting unit of measure used to calculate the amount of
annuity payments.
ATTAINED AGE: The Issue Age plus the number of fully completed Policy Years.
CASH SURRENDER VALUE: The Cash Value less all Indebtedness.
CODE: The Internal Revenue Code of 1986, as amended.
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, Tax Expense charges under Option 1, 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 surrenders.
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, including all
outstanding loans on the Policy, any interest due or accrued and any unpaid
Deduction Amount or annual maintenance fee arising during a grace period.
INSURED: The person on whose life the Policy is issued.
ISSUE AGE: As of the Policy Date, the Insured's age on Insured's last birthday.
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 that is not based on the investment experience
of the Separate Account.
MONTHLY ACTIVITY DATE: The day of each month on which deductions and charges are
subtracted from the Account Value of the Policy. Monthly Activity Dates occur on
the same day of the month as the Policy Date.
POLICY: For a Policy issued to an individual, the Policy is the individual
Policy and any endorsements or riders. For a group Policy, the Policy is a
certificate evidencing a participatory interest in a group Policy and any
endorsements or riders. Any references in this Prospectus to a Policy includes
the certificate.
POLICY ANNIVERSARY: The anniversary of the Policy Date.
POLICY DATE: The date from which Policy Anniversaries and Policy Years are
measured.
POLICY OWNER: The owner of the Policy.
POLICY OWNER OPTIONS: The Policy Owner may elect one of two options offered by
Hartford to pay Mortality and Expense Risk charges and certain tax related
charges. The Policy Owner must elect the option at the time the Policy is issued
and the option cannot be changed once the Policy is issued. The following
options are available:
OPTION 1: ASSET BASED CHARGES: Under this option the Policy Owner elects to
pay a Mortality and Expense Risk charge that is deducted monthly from
Account Value at an annual rate of .90% in Policy Years I through 10 and at
an annual rate of .50% in Policy Years 11 and beyond; a Tax Expense charge
that is also deducted monthly at an annual rate of .40% for the first 10
Policy Years and an Unamortized Tax charge that is imposed during the first
9 Policy Years on surrenders or partial surrenders according to the rate set
forth in "Deductions and Charges -- Policy Owner Options -- Unamortized Tax
Charge," Page 15. See "Deductions and Charges -- Policy Owner Options," page
14.
OPTION 2: FRONTED CHARGES: Under this option the Policy Owner elects to pay
a Mortality and Expense Risk charge that is deducted monthly from Account
Value at an annual rate of .65% in Policy Years 1 through 10 and an annual
rate of .50% in Policy Years 11 and beyond and a Tax Expense charge that is
deducted from any Premium payment in all Policy Years at an annual rate of
4.0%. This option is not available in all states. See
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6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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"Deductions and Charges -- Policy Owner Options" page 14.
POLICY YEAR: The twelve months between Policy Anniversaries.
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.
SURRENDER CHARGE: A charge which may be assessed upon surrender of a Policy or
partial surrenders in excess of the Annual Withdrawal Amount.
VALUATION DAY: The date on which the Sub-Account is valued. The Valuation Day is
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.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 7
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SUMMARY
THE POLICIES
The Policies are life insurance Policies 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 premium payments have been allocated. The
Policies are credited with units ("Accumulation Units") to calculate Account
Values. The Policy Owner may transfer the Account 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 18.
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 investment trust
registered under the Investment Company Act of 1940. The Policies currently
offer Sub-Accounts, each investing exclusively in a Fund. The investment
objectives of the Funds are as set forth in "The Separate Account -- Funds,"
page 9. Applicants should read the Funds prospectus accompanying this Prospectus
in connection with the purchase of a Policy.
The following table shows annual Fund operating expenses for 1997:
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
<TABLE>
<CAPTION>
OTHER
MANAGEMENT EXPENSES
FEES (ABSENT ANY
(ABSENT ANY EXPENSE
FEE WAIVERS) REIMBURSMENTS)
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<S> <C> <C>
Hartford Bond Fund............................................................................ 0.490% 0.020%
Hartford Stock Fund........................................................................... 0.430% 0.020%
Hartford Money Market Fund.................................................................... 0.425% 0.015%
Hartford Advisers Fund........................................................................ 0.610% 0.020%
Hartford Capital Appreciation Fund............................................................ 0.620% 0.020%
Hartford Mortgage Securities Fund............................................................. 0.425% 0.025%
Hartford Index Fund........................................................................... 0.375% 0.015%
Hartford International Opportunities Fund..................................................... 0.680% 0.090%
Hartford Dividend & Growth Fund............................................................... 0.660% 0.090%
Hartford International Advisers Fund.......................................................... 0.750% 0.120%
Hartford Small Company Fund................................................................... 0.750% 0.020%
Hartford MidCap Fund (2)...................................................................... 0.750% 0.040%
Hartford Growth and Income Fund (2)........................................................... 0.750% 0.150%
<CAPTION>
TOTAL FUND
OPERATING
EXPENSES (1)
------------
<S> <C>
Hartford Bond Fund............................................................................ 0.510%
Hartford Stock Fund........................................................................... 0.450%
Hartford Money Market Fund.................................................................... 0.440%
Hartford Advisers Fund........................................................................ 0.630%
Hartford Capital Appreciation Fund............................................................ 0.640%
Hartford Mortgage Securities Fund............................................................. 0.450%
Hartford Index Fund........................................................................... 0.390%
Hartford International Opportunities Fund..................................................... 0.770%
Hartford Dividend & Growth Fund............................................................... 0.750%
Hartford International Advisers Fund.......................................................... 0.870%
Hartford Small Company Fund................................................................... 0.770%
Hartford MidCap Fund (2)...................................................................... 0.790%
Hartford Growth and Income Fund (2)........................................................... 0.900%
</TABLE>
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(1) Management Fees generally represent the fees paid to the investment adviser
or its affiliate 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 prospectuses.
(2) Hartford MidCap 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 the Hartford Growth and Income Fund
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" would be 0.520%, the "Other Expenses" would be
0.150% and "Total Fund Operating Expenses" would be 0.670%.
The investment adviser for all the Funds is HL Investment Advisors, Inc., an
affiliate of Hartford. HL Investment Advisors, Inc. retains a sub-investment
adviser with respect to some of the Funds, and has entered into an investment
services agreement with respect to some of the Funds. See "The Separate
Account," page 9.
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8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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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 35 and 80 may be eligible for
simplified underwriting without a medical examination if they meet simplified
underwriting standards. For applicants who are below age 35 or above age 80, or
who do not meet simplified underwriting eligibility, full underwriting applies,
except that substandard underwriting applies in those cases that represent
substandard risks according to customary underwriting guidelines.
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 from each Sub-Account. The Deduction Amount includes a cost of insurance
charge, a Tax Expense charge under Option 1, an administrative charge and a
mortality and expense risk charge. 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" page 12, and "Policy Benefits and Rights --
Lapse and Reinstatement," page 18.
If the Account Value on a Policy Anniversary or on any date the Policy is
surrendered is less than $50,000, Hartford will deduct an annual maintenance fee
of $30. See "Deductions and Charges -- Annual Maintenance Fee," page 14.
The Policy Owner may pay certain deductions and charges by electing one of
two available options at the time the Policy is issued. Once elected, the Policy
Owner Options cannot be changed:
Under Option 1:
- - a Mortality and Expense Risk charge is deducted monthly from Account Value at
an annual rate of .90% in Policy Years 1 through 10 and at an annual rate of
.50% in Policy Years 11 and beyond.
- - a Tax Expense charge is also deducted monthly at an annual rate of .40% for
the first ten Policy Years.
- - an Unamortized Tax charge is imposed during the first nine Policy Years on
surrenders or partial surrenders according to the rate set forth in
"Deductions and Charges -- Policy Owner Options -- Unamortized Tax Charge,"
Page 15.
Under Option 2: (May not be available in all states)
- - a Mortality and Expense Risk charge is deducted monthly from Account Value at
an annual rate of .65% in Policy Years 1 through 10 and an annual rate of .50%
in Policy Years 11 and beyond.
- - a Tax Expense charge is deducted from any Premium payment in all Policy Years
at an annual rate of 4.0%.
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 15, and "Federal Tax Considerations," page 26.
Applicants should review the Funds prospectuses accompanying this Prospectus
for a description of the charges assessed against the assets of the Funds.
Upon surrender of the Policy and partial surrenders in excess of the Annual
Withdrawal Amount, a Surrender Charge may be assessed. See "Deductions and
Charges -- Surrender Charge," page 14.
For a discussion of the tax consequences of surrender, or a partial
surrender, of the Policy see "Federal Tax Considerations," page 26.
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 of
the Policy. See "Policy Benefits and Rights -- Death Benefit," page 15.
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 16.
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 the difference of the Cash Value. See "Policy
Benefits and Rights -- Policy Loans," page 16.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 9
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LAPSE
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 16, and "-- Lapse and Reinstatement," page 18.
CANCELLATION AND EXCHANGE RIGHTS
An Policy Owner has a limited right to return the Policy for cancellation.
If the Policy Owner returns the Policy, by mail or hand 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 (in certain cases, this free-look period is
longer), Hartford will return to the Policy Owner, within seven days thereafter,
the greater of the premiums paid for the Policy, less any Indebtedness or the
sum of (1) the Account Value, less any Indebtedness, 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 force, it may be exchanged during the
first 24 months after its issuance for a permanent life insurance Policy on the
life of the Insured without submitting proof of insurability. See "Policy
Benefits and Rights -- Cancellation and Exchange Rights," page 18.
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 26.
THE 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 and it is 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.
FUNDS
The assets of each Sub-Account are invested exclusively in shares of Class
IA of 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. Policy Owners are
also advised to read the Funds prospectus accompanying this Prospectus for more
detailed information. There is no assurance that any of the Funds will achieve
its stated objectives.
The Funds may not be available in all states.
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.
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10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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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) pr, 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 -- 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 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 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.
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 Policies 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
Policy Owners or variable annuity contract owners, the Funds' Board of Directors
intends to monitor events in order to identify any material conflicts between
variable life Policy Owners 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 insurance 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
* "STANDARD & POOR'S-REGISTERED TRADEMARK-," "S&P-REGISTERED TRADEMARK-," S&P
500-REGISTERED TRADEMARK-," "STANDARD & POOR'S 500," AND "500" ARE TRADEMARKS
OF THE MCGRAW-HILL COMPANIES, INC. AND HAVE BEEN LICENSED FOR USE BY HARTFORD
LIFE INSURANCE COMPANY. THE HARTFORD INDEX FUND IS NOT SPONSORED, ENDORSED,
SOLD OR PROMOTED BY STANDARD & POOR'S ("S&P") AND S&P MAKES NO REPRESENTATION
REGARDING THE ADVISABILITY OF INVESTING IN THE HARTFORD INDEX FUND.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 11
- --------------------------------------------------------------------------------
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. 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 prospectuses 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 Funds.
Wellington Management Company, L.L.P. ("Wellington Management") serves as
sub-investment adviser for Hartford Advisers Fund, Hartford Capital Appreciation
Fund, Hartford Dividend and Growth Fund, Hartford Growth and Income Fund,
Hartford International Advisers Fund, Hartford International Opportunities Fund,
Hartford Small Company Fund, Hartford Stock Fund and Hartford MidCap Fund.
In addition, HL Advisors has entered an investment services agreement with
Hartford Investment Management Company, Inc. ("HIMCO"), pursuant to which HIMCO
will provide certain investment services to Hartford Bond Fund, Hartford Index
Fund, Hartford Mortgage Securities Fund and 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' prospectuses 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 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 POLICY IS
REJECTED, THEN YOUR INITIAL PREMIUM WILL BE RETURNED ALONG WITH AN ADDITIONAL
AMOUNT FOR INTEREST, BASED ON THE CURRENT RATE BEING CREDITED BY HARTFORD. No
change in the terms or conditions of a 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 conditional receipt established by Hartford. 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 35 and 80 may be eligible for simplified
underwriting without a medical examination if they meet simplified underwriting
standards as evidenced in their responses in the application. For applicants who
are below age 35 or above age 80, or who do not meet simplified underwriting
eligibility, full underwriting applies, except that substandard underwriting
applies only in those cases that represent substandard risks according to
customary underwriting guidelines.
<PAGE>
12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Additional premiums are allowed if they do not cause the Policy to fail to
meet the definition of a life insurance Policy under Section 7702 of the Code.
The amount and frequency of additional premium payments will affect the Cash
Value and the amount and duration of insurance. 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. Premium which does not
meet the tax qualification guidelines for life insurance under the Code will not
be applied to the Policy.
ALLOCATION OF PREMIUMS
Within three business days of receipt of a completed application and the
initial premium payment at Hartford's Home Office, Hartford will allocate the
entire premium payment to Hartford Money Market Fund, Inc. After the expiration
of the right to cancel period the Account Value in Hartford Money Market Fund,
Inc. 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, Inc.) will be determined first by
multiplying the premium by the percentage to be allocated to each Fund to
determine the portion to be invested in the Sub-Account. Each portion to be
invested in each Sub-Account is then divided by the Accumulation Unit Value of
that particular Sub-Account next computed after receipt of the payment.
ACCUMULATION UNIT VALUES
The Accumulation Unit Value for each Sub-Account will vary to reflect the
investment experience of the applicable Fund and will be determined on each
Valuation Day by multiplying the Accumulation Unit Value of the particular
Sub-Account on the preceding Valuation Day by a "Net Investment Factor" for that
Sub-Account for the Valuation Period then ended. The Net Investment Factor for
each Sub-Account is the net asset value per share of the corresponding Fund at
the end of the Valuation Period (plus the per share dividends or capital gains
by that Fund if the ex-dividend date occurs in the Valuation Period then ended)
divided by the net asset value per share of the corresponding Fund at the
beginning of the Valuation Period. Refer to the Funds' prospectuses 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 16.
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 determination will be made on the next succeeding date which is a
Valuation Day.
DEDUCTIONS AND CHARGES
The deduction or charges associated with this Policy are subtracted,
depending on the type of deduction or charge, from Premium payments as they are
made, upon surrender or partial surrender of the Policy, on the Policy
Anniversary Date or on a monthly pro rated basis from each Sub-Account
("Deduction Amount").
Deductions are taken from Premium payments before allocations to the
Sub-Accounts are made. Monthly Deduction Amounts are subtracted on the Policy
Date and on each Monthly Activity Date after the Policy Date to cover charges
and expenses incurred in connection with a Policy. Each Deduction Amount will be
subtracted pro rata from each Sub-Account 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 18.
The Policy Owner may elect one of two options offered by Hartford to pay the
Mortality and Expense Risk charge, the Tax Expense charge and any Unamortized
Tax charge. Once selected, the option may not be changed. Option 2 may not be
available in all states.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 13
- --------------------------------------------------------------------------------
The following chart illustrates the charges and deductions associated with
this Policy. For a more detailed discussion see the descriptions below:
<TABLE>
<CAPTION>
DEDUCTION OR CHARGE DEDUCTED FROM ALL POLICIES WHEN DEDUCTION IS MADE AMOUNT DEDUCTED
---------------------- ---------------------------------- ---------------------------------- ----------------------------------
<S> <C> <C> <C>
Cost of Insurance Yes Monthly Individualized depending on age,
sex and other factors
Administrative Charge Yes Monthly .25% of amounts allocated to the
Separate Account
Annual Maintenance Fee Only Policies with an Account On the Policy Anniversary Date or $30.00
Value of less than $50,000 on the upon surrender of the Policy
Policy Anniversary Date or date of
surrender
Surrender Charge Yes Upon surrender or partial A percentage of the amount
surrender of the Policy surrendered, depending on the
Policy Year, which is attributable
to premiums paid
Tax Expense Charge Yes Under Option 1: Monthly Under Option 1: .40% of Account
Under Option 2: Receipt of premium Value for Policy Years 1-10
payment Under Option 2: 4% of each premium
payment in all Policy Years
Mortality and Expense Yes Monthly Under Option 1: .90% of Account
Risk Charge Value in Policy Years 1-10 and
.50% for Policy Years 11 and
beyond.
Under Option 2: .65% of Account
Value in Policy Years 1-10 and
.50% for Policy years 11 and
beyond
Unamortized Tax Charge No, only under Option 1 Upon surrender or partial A percentage of the Account Value
surrender of the Policy depending on the Policy Year the
surrender takes place.
</TABLE>
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 at issue. 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 125% of the 1980 Commissioners Standard Ordinary Smoker/Non-
Smoker Mortality Table through age 90, grading down to 100% of the Commissioners
Standard Ordinary Smoker/ Non-Smoker Mortality Table at age 100 (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 and Policies issued employing simplified underwriting
procedures 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
Smoker/ Non-Smoker 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 Policies 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 = $70,000
Insured's attained age = 60
Minimum Coverage Amount percentage for age 60 = 30%
<PAGE>
14 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
On the Monthly Activity Date, the Coverage Amount is $30,000. This is
calculated by subtracting the Account Value on the Monthly Activity Date
($70,000) 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 $21,000 (30% of $70,000). Since $21,000 is less
than the Face Amount less the Account Value ($30,000), no adjustment is
necessary. Therefore, the Coverage Amount will be $30,000.
Assume that the Account Value in the above example was $90,000. The Minimum
Coverage Amount would be $27,000 (30% of $90,000). Since this is greater than
the Face Amount less the Account Value ($10,000), the Coverage Amount for the
Policy Month is $27,000. (For an explanation of the Death Benefit, see "Policy
Benefits and Rights -- Death Benefit," page 15.)
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.
ADMINISTRATIVE CHARGE
Hartford will deduct monthly from the Account Value attributable to the
Separate Account an administrative charge equal to an annual rate of 0.25%. This
charge compensates Hartford for administrative expenses incurred in the
administration of the Separate Account and the Policies.
ANNUAL MAINTENANCE FEE
If the Account Value on a Policy Anniversary or on the date the Policy is
surrendered 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. Hartford reserves the
right to waive the Annual Maintenance Fee under certain conditions.
SURRENDER CHARGE
Upon surrender of the Policy or partial surrenders in excess of the Annual
Withdrawal Amount, a Surrender 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 Surrender Charge and any Unamortized Tax charge discussed
below, any surrender or partial surrender 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 surrender
of the remaining Account Value.
The Surrender 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 17.
POLICY OWNER OPTIONS
In addition to the deductions and charges described above, the Policy Owner,
at the time the Policy is issued, will elect one of two options described below
to pay charges relating to certain taxes and mortality and expense risk charges.
The option selected by the Policy Owner may affect Policy Value.
OPTION 1: ASSET-BASED CHARGES:
Under this payment option, the Policy Owner will pay:
MORTALITY AND EXPENSE RISK CHARGE -- Hartford will deduct monthly from the
Account Value attributable to the Separate Account for Policy Years 1 through 10
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. In
Policy Years 11 and beyond, the charge drops to an annual rate of 0.50% 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 Surrender Charge. The mortality and expense risk charge
is deducted while the Policy is in force, including the duration of a payment
option.
TAX EXPENSE CHARGE -- Hartford will deduct monthly from the Account Value a
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 the capitalization of
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 15
- --------------------------------------------------------------------------------
certain policy acquisition expenses under Section 848 of the Code. The charge
includes a premium tax deduction of 0.25% and Section 848 cost 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.
UNAMORTIZED TAX CHARGE -- Under this option, during the first nine Policy
Years, an Unamortized Tax charge will be imposed on surrender or partial
surrenders. The Unamortized 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 Unamortized Tax charge will be imposed.
OPTION 2: FRONTED CHARGES:
Under this option, the Policy Owner will pay:
MORTALITY AND EXPENSE RISK CHARGE -- In Policy Years 1 through 10, Hartford
will deduct monthly from the Account Value attributable to the Separate Account
a charge equal to an annual rate of 0.65% for the mortality risks and expense
risks Hartford assumes in relation to the variable portion of the Policies. In
Policy Years 11 and beyond, the charge drops to an annual rate of 0.50%. 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 Surrender
Charge. The mortality and expense risk charge is deducted while the Policy is in
force, including the duration of a payment option.
TAX EXPENSE CHARGE -- Hartford will deduct from premium payments a tax
expense charge equal to an annual rate of 4.0% for all 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 2.5% and a Section 848 cost of 1.5%. The premium tax deduction
approximates Hartford's average expenses for state and local premium taxes.
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.
This Option may not be available in all states.
OTHER DEDUCTIONS OR CHARGES
CHARGES AGAINST THE FUNDS -- The Separate Account purchases shares of the
Funds at net asset value. The net asset value of 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.
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.
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 Insured 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
<PAGE>
16 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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 -- Settlement Provisions," page 19.
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 12.
TRANSFER OF ACCOUNT VALUE
While the Policy remains in force, 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.
Hartford will send the Policy Owner confirmation of the transfer within five
(5) days from the date of any instruction. 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 30 days of receipt of the
confirmation.
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 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
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 17
- --------------------------------------------------------------------------------
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 Surrender 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 18.
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 force, 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 Surrender
Charges and Unamortized 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 26.
If the Policy Owner chooses to apply the surrender proceeds to a payment
option (see "Other Matters -- Settlement Provisions," page 19), the Surrender
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 Surrender Charge. However, any Unamortized Tax charge, if
applicable, will be deducted from the surrender proceeds to be applied. In
addition, any amounts withdrawn from payment Option 1, Option 5 or Option 6 will
be subject to a Surrender Charge, if applicable.
PARTIAL SURRENDERS
While the Policy is in effect, a Policy Owner may elect, by written request,
to make partial surrender from the Cash Surrender Value. The Cash Surrender
Value, after partial surrender, 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 surrender 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 the Account Value due to the
partial surrender. Partial surrenders in excess of the Annual Withdrawal Amount
will be subject to a Surrender Charge and any Unamortized Tax charges. See
"Deductions and Charges -- Surrender Charge," page 14, and "Deductions and
Charges -- Policy Owner Option 1," page 14. For a discussion of the tax
consequences of partial surrenders, see "Federal Tax Considerations," page 26.
<PAGE>
18 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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 26.)
LAPSE AND REINSTATEMENT
The Policy will remain in force 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 15.
If the Policy lapses, the Policy Owner may apply for reinstatement of the
Policy by payment of the reinstatement premium and any applicable charges. 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
A Policy Owner 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 Policy Owner, within seven days, the greater of
premiums paid for the Policy, less any Indebtedness or the sum of (1) the
Account Value less any Indebtedness 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 Policy offered by Hartford (or an affiliated company) on the life of
the Insured. No evidence of insurability will be required. The new Policy 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 30.
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.
5. Additional tax disclosures applicable to last survivor Policies are provided
in Federal Tax Considerations, page 26.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 19
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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 16) 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 Policy 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.
SETTLEMENT PROVISIONS
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 payment Options 2, 3 and 4, no surrender or
partial surrenders are permitted after payments commence. Full or partial
surrenders may be made from payment Option 1 or Option 6, but they are subject
to a Surrender Charge, if applicable. Only a full surrender is allowed from
payment Option 5. A surrender from payment Option 5 will also be subject to the
Surrender Charge, if applicable.
Hartford will pay interest of at least 3 1/2% per year on the Death Proceeds
from the date of the Insured's death to the date payment is made or a payment
option is elected. At such times, the proceeds are not subject to the investment
experience of the Separate Account.
<PAGE>
20 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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 Policies
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 Settlement Option
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 Policies 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
Policies 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 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
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 21
- --------------------------------------------------------------------------------
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, Chief Vice President & Controller (1995-1997), Hartford;
Financial Officer & Director (1997-Present); Senior Vice President, Chief
Treasurer, 1997 Financial Officer & Treasurer (1997-Present); Vice
Director, 1997* 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>
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>
de Raismes, Ann M., 47 Senior Vice President, 1997 Vice President (1994-1997), Hartford; Senior Vice
Director of Human Resources, President (1997-Present); Vice President (1994-1997);
1994 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);
Actuary, 1997 Assistant 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 Vice President, 1998 Assistant Vice President (1995-1998), Hartford; 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
Assistant Treasurer, 1997 (1993-Present); 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 Senior Vice President - Individual Life and Annuity
and Director, Asset Division (1988-1994), Hartford; Director (1988-Present);
Management Director (1988-Present); Executive Vice President &
Services, 1994 Director, Asset Management Services (1994-Present);
Director, 1988 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 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>
Godkin, Lynda, 44 Senior Vice President, 1997 Assistant General Counsel and Secretary (1994-1995),
General Counsel, 1996 Hartford; Director (1997-Present); Senior Vice President
Corporate Secretary, 1996 (1997-Present); General Counsel (1996-Present);
Director, 1997* Corporate Secretary (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
Vice President, 1994 President (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>
24 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 Annuities (1991-1993), Hartford; Director
and Annuity Division, 1993 (1994-Present); Executive Vice President (1995-Present);
Director, 1994* Director, Individual 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 (1981-Present); President (1989-Present); Chief
Officer, 1997 Executive Officer (1997-Present); Chief Operating
Director, 1985* 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 25
- --------------------------------------------------------------------------------
<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
Director, Employee Benefit (1994-Present); Senior Vice President (1995-Present);
Division, 1994 Director, Employee Benefit Division (1997-Present); Vice
Director, 1994* President (1993-1995), 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
Director, 1998 (1997-Present), 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.
** The Hartford Financial Services Group, Inc. Affiliated Company.
Unless otherwise indicated, the principal business address of each the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
DISTRIBUTION OF THE 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 Policies under applicable federal and
state laws. Each broker-dealer is registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 and all are members of the
National Association of Securities Dealers, Inc.
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account. Both
HESCO and HSD are wholly-owned subsidiaries of Hartford Life Insurance Company.
The principal business address of HESCO and HSD is the same as that of Hartford.
<PAGE>
26 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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.
Broker-dealers or financial institutions are compensated according to a
schedule set forth by HSD and any applicable rules or regulations for variable
insurance compensation. Compensation is generally based on premium payments made
by policyholders or contract owners. This compensation is usually paid from the
sales charges described in this Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not effect the amounts paid by the policyholders or contract
owners to purchase, hold or surrender variable insurance products.
Hartford may provide information on various topics to Policy Owners and
prospective Policies 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 the Policy 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," page 16).
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 Policy should be treated as life
insurance Policies under Section 7702 of the Code. The death benefit under a
life insurance policy is
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 27
- --------------------------------------------------------------------------------
generally excluded from the gross income of the beneficiary. Also, a life
insurance Policy owner is generally not taxed on increments in the Policy value
until the Policies 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.
During the first 15 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 Policy 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 Policy 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 policy 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 Policy will meet the Section 7702 definition of a life
insurance Policy.
MODIFIED ENDOWMENT CONTRACTS
A life insurance Policy 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 Policy for federal income tax purposes. However, an exchange
under Section 1035 of the Code of a life insurance Policy issued before June 21,
1988 will not cause the new Policy to be treated as a modified endowment Policy
if no additional premiums are paid and there is no change in the death benefit
as the result of the exchange.
A Policy that is classified as modified endowment Policy 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 Policy during the life of the Insured will be
taxed to the extent of any accumulated income in the Policy (generally, the
excess of account value over premiums paid). Liquidations that are taxable 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 Policy 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.
Federal estate tax is integrated with federal gift tax under a unified rate
schedule. In general, estates less than $600,000 will not incur a federal estate
tax liability. In addition, an unlimited marital deduction may be available for
federal estate and gift tax purposes. The unlimited marital deduction permits
the deferral of taxes until the death of the surviving spouse (when the Death
Proceeds would be available to pay taxes due and other expenses incurred).
If the 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.
<PAGE>
28 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
DIVERSIFICATION REQUIREMENTS
Section 817 of the Code provides that a variable life insurance Policy
(other than a pension plan policy) will not be treated as a life insurance
Policy for any period during which the investments made by the separate account
or underlying fund are not adequately diversified in accordance with regulations
prescribed by the Treasury Department. If a Policy is not treated as a life
insurance Policy, 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 Policy is
represented by any one investment, no more than 70% is represented by any two
investments, no more than 80% is represented by any three investments, and no
more than 90% is represented by any four investments. In determining whether the
diversification standards are met, all securities of the same issuer, all
interests in the same real property project, and all interests in the same
commodity are each treated as a single investment. In addition, in the case of
government securities, each government agency or instrumentality shall be
treated as a separate issuer.
A separate account must be in compliance with the diversification standards
on the last day of each calendar quarter or within 30 days after the quarter
ends. If an insurance company inadvertently fails to meet the diversification
requirements, the company may comply within a reasonable period and avoid the
taxation of policy income on an ongoing basis. However, either the company or
the 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 Policies 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 Policy to qualify for tax deferral,
assets in the segregated asset accounts supporting the variable Policy must be
considered to be owned by the insurance company and not by the variable Policy
owner. The Internal Revenue Service ("IRS") has issued several rulings which
discuss investor control. The IRS has ruled that incidents of ownership by the
Policy owner, such as the ability to select and control investments in a
separate account, will cause the Policy 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 Policy." The final regulations issued under Section 817
do not provide guidance regarding investor control, and as of the date of this
Prospectus, no other such guidance has been issued. Further, Hartford does not
know if or in what form such guidance will be issued. In addition, although
regulations are generally issued with prospective effect, it is possible that
regulations may be issued with retroactive effect. Due to the lack of specific
guidance regarding the issue of investor control, there is necessarily some
uncertainty regarding whether a Policy Owner could be considered the owner of
the assets for tax purposes. Hartford reserves the right to modify the Policies,
as necessary, to prevent Policy owners from being considered the owners of the
assets in the Separate Account.
LIFE INSURANCE PURCHASED FOR USE IN
SPLIT DOLLAR ARRANGEMENTS
On January 26, 1996, the IRS released a technical advice memorandum ("TAM")
on the taxability of life insurance policies used in certain split dollar
arrangements. A TAM, issued by the National Office of the IRS, provides advice
as to the internal revenue laws, regulations, and related statutes with respect
to a specific set of facts and a specific taxpayer. In the TAM, among other
things, the IRS concluded that an employee was subject to current taxation on
the excess of the cash surrender value of the policy over the premiums to be
returned to the employer. Purchasers of life insurance policies to be used in
split dollar arrangements are strongly advised to consult with a qualified tax
adviser to determine the tax treatment resulting from such an arrangement.
FEDERAL INCOME TAX WITHHOLDING
If any amounts are deemed to be current taxable income to the Policy owner,
such amounts will be subject to federal income tax withholding and reporting,
pursuant to the Code.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 29
- --------------------------------------------------------------------------------
NON-INDIVIDUAL OWNERSHIP OF POLICIES
Legislation has recently been proposed which would limit certain of the tax
advantages now afforded non-individual owners of life insurance Policies.
Prospective Policy owners which are not individuals should consult a tax adviser
to determine the status of this proposed legislation and its potential impact on
the purchaser.
OTHER
Federal estate tax, state and local estate, inheritance and other tax
consequences of ownership or receipt of 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.
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-basis financial statements of
Hartford Life and Annuity Insurance Company (formerly ITT Hartford Life and
Annuity Insurance Company) which states the statutory-basis financial statements
are presented in accordance with statutory accounting practices prescribed or
permitted by the National Association of Insurance Commissioners and the State
of Connecticut Insurance Department, 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>
30 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
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 $44,053, $34,014 and $20,001, respectively, are illustrated for the
single life preferred Policy for both Policy Owner Option 1 and Policy Owner
Option 2. The illustrations for the last survivor preferred Policy assume male
and female of equal ages, including age 55 and 65 for Face Amounts of $45,872
and $28,491.
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 for Policy Owner
Option 1 and Policy Owner Option 2 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.
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 15).
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>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 31
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
POLICY OWNER OPTION: 1
$10,000 INITIAL PREMIUM
ISSUE AGE: 45 MALE PREFERRED
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 10,897 9,872 44,053 10,816 9,792 44,053
2 11,025 11,843 10,826 44,053 11,669 10,655 44,053
3 11,576 12,872 11,867 44,053 12,596 11,596 44,053
4 12,155 13,995 13,155 44,053 13,605 12,771 44,053
5 12,763 15,218 14,398 44,053 14,704 13,890 44,053
6 13,401 16,551 15,955 44,053 15,900 15,311 44,053
7 14,071 18,003 17,438 44,053 17,204 16,645 44,053
8 14,775 19,586 19,258 44,053 18,625 18,302 44,053
9 15,513 21,311 21,028 44,053 20,176 19,896 44,053
10 16,289 23,191 23,161 44,053 21,870 21,840 44,053
11 17,103 25,442 25,412 44,053 23,917 23,887 44,053
12 17,959 27,915 27,885 44,053 26,182 26,152 44,053
13 18,856 30,641 30,611 44,053 28,695 28,665 44,053
14 19,799 33,663 33,633 46,454 31,490 31,460 44,053
15 20,789 36,997 36,967 49,575 34,598 34,568 46,360
16 21,829 40,670 40,640 52,870 38,030 38,000 49,439
17 22,920 44,704 44,674 57,220 41,801 41,771 53,504
18 24,066 49,134 49,104 61,908 45,941 45,911 57,885
19 25,270 53,999 53,999 66,959 50,488 50,488 62,605
20 26,533 59,377 59,377 72,439 55,516 55,516 67,729
25 33,864 95,181 95,181 110,409 88,983 88,983 103,220
35 55,160 244,173 244,173 258,822 228,122 228,122 241,809
</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>
32 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
POLICY OWNER OPTION: 1
$10,000 INITIAL PREMIUM
ISSUE AGE: 45 MALE PREFERRED
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 10,310 9,298 44,053 10,228 9,218 44,053
2 11,025 10,600 9,608 44,053 10,423 9,434 44,053
3 11,576 10,898 9,927 44,053 10,613 9,647 44,053
4 12,155 11,205 10,407 44,053 10,797 10,005 44,053
5 12,763 11,522 10,748 44,053 10,973 10,206 44,053
6 13,401 11,848 11,300 44,053 11,140 10,599 44,053
7 14,071 12,185 11,664 44,053 11,295 10,780 44,053
8 14,775 12,533 12,240 44,053 11,434 11,147 44,053
9 15,513 12,891 12,628 44,053 11,553 11,295 44,053
10 16,289 13,260 13,230 44,053 11,650 11,620 44,053
11 17,103 13,750 13,720 44,053 11,815 11,785 44,053
12 17,959 14,260 14,230 44,053 11,955 11,925 44,053
13 18,856 14,790 14,760 44,053 12,066 12,036 44,053
14 19,799 15,340 15,310 44,053 12,143 12,113 44,053
15 20,789 15,913 15,883 44,053 12,178 12,148 44,053
16 21,829 16,507 16,477 44,053 12,165 12,135 44,053
17 22,920 17,125 17,095 44,053 12,095 12,065 44,053
18 24,066 17,768 17,738 44,053 11,953 11,923 44,053
19 25,270 18,436 18,406 44,053 11,727 11,697 44,053
20 26,533 19,130 19,100 44,053 11,402 11,372 44,053
25 33,864 23,031 23,001 44,053 7,575 7,545 44,053
35 55,160 33,502 33,472 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 33
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
POLICY OWNER OPTION: 1
$10,000 INITIAL PREMIUM
ISSUE AGE: 45 MALE PREFERRED
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 9,724 8,745 44,053 9,641 8,671 44,053
2 11,025 9,425 8,500 44,053 9,247 8,338 44,053
3 11,576 9,136 8,261 44,053 8,846 7,998 44,053
4 12,155 8,854 8,160 44,053 8,437 7,774 44,053
5 12,763 8,580 7,928 44,053 8,019 7,407 44,053
6 13,401 8,313 7,868 44,053 7,588 7,179 44,053
7 14,071 8,054 7,642 44,053 7,143 6,774 44,053
8 14,775 7,802 7,577 44,053 6,680 6,483 44,053
9 15,513 7,557 7,357 44,053 6,193 6,024 44,053
10 16,289 7,319 7,289 44,053 5,681 5,651 44,053
11 17,103 7,145 7,115 44,053 5,181 5,151 44,053
12 17,959 6,974 6,944 44,053 4,641 4,611 44,053
13 18,856 6,806 6,776 44,053 4,059 4,029 44,053
14 19,799 6,641 6,611 44,053 3,428 3,398 44,053
15 20,789 6,480 6,450 44,053 2,739 2,709 44,053
16 21,829 6,322 6,292 44,053 1,985 1,955 44,053
17 22,920 6,168 6,138 44,053 1,155 1,125 44,053
18 24,066 6,016 5,986 44,053 235 205 44,053
19 25,270 5,867 5,837 44,053 -- -- --
20 26,533 5,721 5,691 44,053 -- -- --
25 33,864 5,035 5,005 44,053 -- -- --
35 55,160 3,852 3,822 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>
34 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
POLICY OWNER OPTION: 2
$10,000 INITIAL PREMIUM
ISSUE AGE: 45 MALE PREFERRED
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 10,530 9,750 44,053 10,443 9,663 44,053
2 11,025 11,517 10,737 44,053 11,333 10,553 44,053
3 11,576 12,599 11,819 44,053 12,307 11,527 44,053
4 12,155 13,787 13,157 44,053 13,373 12,743 44,053
5 12,763 15,089 14,459 44,053 14,543 13,913 44,053
6 13,401 16,517 16,087 44,053 15,827 15,397 44,053
7 14,071 18,084 17,654 44,053 17,235 16,805 44,053
8 14,775 19,803 19,573 44,053 18,783 18,553 44,053
9 15,513 21,688 21,458 44,053 20,485 20,255 44,053
10 16,289 23,756 23,726 44,053 22,358 22,328 44,053
11 17,103 26,063 26,033 44,053 24,462 24,432 44,053
12 17,959 28,598 28,568 44,053 26,792 26,762 44,053
13 18,856 31,400 31,370 44,588 29,377 29,347 44,053
14 19,799 34,504 34,474 47,614 32,255 32,225 44,511
15 20,789 37,922 37,892 50,814 35,446 35,416 47,497
16 21,829 41,687 41,657 54,193 38,963 38,933 50,652
17 22,920 45,823 45,793 58,653 42,827 42,797 54,818
18 24,066 50,365 50,365 63,460 47,070 47,040 59,307
19 25,270 55,386 55,386 68,679 51,729 51,729 64,144
20 26,533 60,902 60,902 74,300 56,881 56,881 69,394
25 33,864 97,625 97,625 113,245 91,170 91,170 105,757
35 55,160 250,445 250,445 265,471 233,729 233,729 247,753
</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 35
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
POLICY OWNER OPTION: 2
$10,000 INITIAL PREMIUM
ISSUE AGE: 45 MALE PREFERRED
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 9,963 9,185 44,053 9,876 9,105 44,053
2 11,025 10,308 9,528 44,053 10,122 9,342 44,053
3 11,576 10,666 9,886 44,053 10,367 9,587 44,053
4 12,155 11,038 10,408 44,053 10,610 9,980 44,053
5 12,763 11,424 10,794 44,053 10,849 10,219 44,053
6 13,401 11,824 11,394 44,053 11,084 10,654 44,053
7 14,071 12,240 11,810 44,053 11,310 10,880 44,053
8 14,775 12,671 12,441 44,053 11,526 11,296 44,053
9 15,513 13,118 12,888 44,053 11,727 11,497 44,053
10 16,289 13,583 13,553 44,053 11,911 11,881 44,053
11 17,103 14,086 14,056 44,053 12,091 12,061 44,053
12 17,959 14,609 14,579 44,053 12,246 12,216 44,053
13 18,856 15,152 15,122 44,053 12,375 12,345 44,053
14 19,799 15,717 15,687 44,053 12,470 12,440 44,053
15 20,789 16,304 16,274 44,053 12,526 12,496 44,053
16 21,829 16,914 16,884 44,053 12,535 12,505 44,053
17 22,920 17,549 17,519 44,053 12,489 12,459 44,053
18 24,066 18,208 18,178 44,053 12,374 12,344 44,053
19 25,270 18,893 18,863 44,053 12,178 12,148 44,053
20 26,533 19,605 19,575 44,053 11,885 11,855 44,053
25 33,864 23,607 23,577 44,053 8,293 8,263 44,053
35 55,160 34,349 34,319 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>
36 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
POLICY OWNER OPTION: 2
$10,000 INITIAL PREMIUM
ISSUE AGE: 45 MALE PREFERRED
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 9,396 8,661 44,053 9,309 8,581 44,053
2 11,025 9,166 8,449 44,053 8,979 8,275 44,053
3 11,576 8,941 8,241 44,053 8,639 7,961 44,053
4 12,155 8,722 8,168 44,053 8,288 7,761 44,053
5 12,763 8,506 7,966 44,053 7,925 7,419 44,053
6 13,401 8,296 7,934 44,053 7,546 7,214 44,053
7 14,071 8,090 7,736 44,053 7,149 6,833 44,053
8 14,775 7,888 7,700 44,053 6,730 6,565 44,053
9 15,513 7,691 7,507 44,053 6,285 6,129 44,053
10 16,289 7,497 7,467 44,053 5,810 5,780 44,053
11 17,103 7,319 7,289 44,053 5,310 5,280 44,053
12 17,959 7,145 7,115 44,053 4,770 4,740 44,053
13 18,856 6,974 6,944 44,053 4,188 4,158 44,053
14 19,799 6,806 6,776 44,053 3,556 3,526 44,053
15 20,789 6,642 6,612 44,053 2,868 2,838 44,053
16 21,829 6,481 6,451 44,053 2,114 2,084 44,053
17 22,920 6,323 6,293 44,053 1,285 1,255 44,053
18 24,066 6,168 6,138 44,053 366 336 44,053
19 25,270 6,016 5,986 44,053 -- -- --
20 26,533 5,867 5,837 44,053 -- -- --
25 33,864 5,167 5,137 44,053 -- -- --
35 55,160 3,960 3,930 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>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 37
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
POLICY OWNER OPTION: 1
$10,000 INITIAL PREMIUM
ISSUE AGE: 55 FEMALE PREFERRED
INITIAL FACE AMOUNT: $34,014
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 10,897 9,872 34,014 10,770 9,748 34,014
2 11,025 11,843 10,826 34,014 11,575 10,563 34,014
3 11,576 12,872 11,867 34,014 12,452 11,454 34,014
4 12,155 13,995 13,155 34,014 13,410 12,579 34,014
5 12,763 15,218 14,398 34,014 14,458 13,647 34,014
6 13,401 16,551 15,955 34,014 15,603 15,017 34,014
7 14,071 18,003 17,438 34,014 16,857 16,300 34,014
8 14,775 19,586 19,258 34,014 18,228 17,906 34,014
9 15,513 21,311 21,028 34,014 19,729 19,449 34,014
10 16,289 23,191 23,161 34,014 21,376 21,346 34,014
11 17,103 25,443 25,413 34,014 23,380 23,350 34,014
12 17,959 27,944 27,914 34,014 25,617 25,587 34,014
13 18,856 30,739 30,709 36,272 28,126 28,096 34,014
14 19,799 33,820 33,790 39,569 30,935 30,905 36,194
15 20,789 37,209 37,179 43,162 34,033 34,003 39,478
16 21,829 40,937 40,907 47,077 37,439 37,409 43,055
17 22,920 45,049 45,019 50,905 41,197 41,167 46,552
18 24,066 49,587 49,557 55,042 45,345 45,315 50,332
19 25,270 54,603 54,603 59,517 49,928 49,898 54,421
20 26,533 60,135 60,135 65,546 54,953 54,953 59,899
25 33,864 97,305 97,305 103,143 88,921 88,921 94,256
35 55,160 250,325 250,325 262,841 225,387 225,387 236,656
</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>
38 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
POLICY OWNER OPTION: 1
$10,000 INITIAL PREMIUM
ISSUE AGE: 55 FEMALE PREFERRED
INITIAL FACE AMOUNT: $34,014
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 10,310 9,298 34,014 10,183 9,174 34,014
2 11,025 10,600 9,608 34,014 10,330 9,343 34,014
3 11,576 10,898 9,927 34,014 10,469 9,506 34,014
4 12,155 11,205 10,407 34,014 10,602 9,813 34,014
5 12,763 11,522 10,748 34,014 10,726 9,962 34,014
6 13,401 11,848 11,300 34,014 10,838 10,299 34,014
7 14,071 12,185 11,664 34,014 10,933 10,421 34,014
8 14,775 12,533 12,240 34,014 11,006 10,721 34,014
9 15,513 12,891 12,628 34,014 11,049 10,792 34,014
10 16,289 13,260 13,230 34,014 11,057 11,027 34,014
11 17,103 13,750 13,720 34,014 11,117 11,087 34,014
12 17,959 14,260 14,230 34,014 11,138 11,108 34,014
13 18,856 14,790 14,760 34,014 11,117 11,087 34,014
14 19,799 15,340 15,310 34,014 11,051 11,021 34,014
15 20,789 15,913 15,883 34,014 10,929 10,899 34,014
16 21,829 16,507 16,477 34,014 10,741 10,711 34,014
17 22,920 17,125 17,095 34,014 10,465 10,435 34,014
18 24,066 17,768 17,738 34,014 10,077 10,047 34,014
19 25,270 18,436 18,406 34,014 9,546 9,516 34,014
20 26,533 19,130 19,100 34,014 8,839 8,809 34,014
25 33,864 23,031 23,001 34,014 937 907 34,014
35 55,160 33,502 33,472 35,177 -- -- --
</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 39
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
POLICY OWNER OPTION: 1
$10,000 INITIAL PREMIUM
ISSUE AGE: 55 FEMALE PREFERRED
INITIAL FACE AMOUNT: $34,014
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 9,724 8,745 34,014 9,597 8,631 34,014
2 11,025 9,425 8,500 34,014 9,155 8,255 34,014
3 11,576 9,136 8,261 34,014 8,705 7,870 34,014
4 12,155 8,854 8,160 34,014 8,246 7,598 34,014
5 12,763 8,580 7,928 34,014 7,777 7,183 34,014
6 13,401 8,313 7,868 34,014 7,292 6,898 34,014
7 14,071 8,054 7,642 34,014 6,788 6,436 34,014
8 14,775 7,802 7,577 34,014 6,258 6,071 34,014
9 15,513 7,557 7,357 34,014 5,692 5,534 34,014
10 16,289 7,319 7,289 34,014 5,085 5,055 34,014
11 17,103 7,145 7,115 34,014 4,470 4,440 34,014
12 17,959 6,974 6,944 34,014 3,799 3,769 34,014
13 18,856 6,806 6,776 34,014 3,068 3,038 34,014
14 19,799 6,641 6,611 34,014 2,273 2,243 34,014
15 20,789 6,480 6,450 34,014 1,402 1,372 34,014
16 21,829 6,322 6,292 34,014 440 410 34,014
17 22,920 6,168 6,138 34,014 -- -- --
18 24,066 6,016 5,986 34,014 -- -- --
19 25,270 5,867 5,837 34,014 -- -- --
20 26,533 5,721 5,691 34,014 -- -- --
25 33,864 5,035 5,005 34,014 -- -- --
35 55,160 3,852 3,822 34,014 -- -- --
</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>
40 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
POLICY OWNER OPTION: 2
$10,000 INITIAL PREMIUM
ISSUE AGE: 55 FEMALE PREFERRED
INITIAL FACE AMOUNT: $34,014
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 10,530 9,750 34,014 10,396 9,616 34,014
2 11,025 11,517 10,737 34,014 11,235 10,455 34,014
3 11,576 12,599 11,819 34,014 12,156 11,376 34,014
4 12,155 13,787 13,157 34,014 13,169 12,539 34,014
5 12,763 15,089 14,459 34,014 14,284 13,654 34,014
6 13,401 16,517 16,087 34,014 15,513 15,083 34,014
7 14,071 18,084 17,654 34,014 16,867 16,437 34,014
8 14,775 19,803 19,573 34,014 18,359 18,129 34,014
9 15,513 21,688 21,458 34,014 20,007 19,777 34,014
10 16,289 23,756 23,726 34,014 21,830 21,800 34,014
11 17,103 26,068 26,038 34,014 23,890 23,860 34,014
12 17,959 28,648 28,618 34,091 26,193 26,163 34,014
13 18,856 31,520 31,490 37,193 28,776 28,746 34,014
14 19,799 34,680 34,650 40,575 31,657 31,627 37,038
15 20,789 38,156 38,126 44,261 34,827 34,797 40,399
16 21,829 41,980 41,950 48,276 38,314 38,284 44,061
17 22,920 46,197 46,167 52,202 42,160 42,130 47,641
18 24,066 50,852 50,852 56,446 46,406 46,376 51,510
19 25,270 56,030 56,030 61,072 51,097 51,097 55,696
20 26,533 61,706 61,706 67,259 56,274 56,274 61,338
25 33,864 99,848 99,848 105,838 91,058 91,058 96,521
35 55,160 256,866 256,866 269,709 230,803 230,803 242,343
</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 41
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
POLICY OWNER OPTION: 2
$10,000 INITIAL PREMIUM
ISSUE AGE: 55 FEMALE PREFERRED
INITIAL FACE AMOUNT: $34,014
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 9,963 9,185 34,014 9,830 9,062 34,014
2 11,025 10,308 9,528 34,014 10,026 9,246 34,014
3 11,576 10,666 9,886 34,014 10,218 9,438 34,014
4 12,155 11,038 10,408 34,014 10,408 9,778 34,014
5 12,763 11,424 10,794 34,014 10,592 9,962 34,014
6 13,401 11,824 11,394 34,014 10,768 10,338 34,014
7 14,071 12,240 11,810 34,014 10,932 10,502 34,014
8 14,775 12,671 12,441 34,014 11,078 10,848 34,014
9 15,513 13,118 12,888 34,014 11,200 10,970 34,014
10 16,289 13,583 13,553 34,014 11,291 11,261 34,014
11 17,103 14,086 14,056 34,014 11,366 11,336 34,014
12 17,959 14,609 14,579 34,014 11,403 11,373 34,014
13 18,856 15,152 15,122 34,014 11,401 11,371 34,014
14 19,799 15,717 15,687 34,014 11,355 11,325 34,014
15 20,789 16,304 16,274 34,014 11,256 11,226 34,014
16 21,829 16,914 16,884 34,014 11,092 11,062 34,014
17 22,920 17,549 17,519 34,014 10,844 10,814 34,014
18 24,066 18,208 18,178 34,014 10,487 10,457 34,014
19 25,270 18,893 18,863 34,014 9,993 9,963 34,014
20 26,533 19,605 19,575 34,014 9,326 9,296 34,014
25 33,864 23,607 23,577 34,014 1,772 1,742 34,014
35 55,160 34,349 34,319 36,066 -- -- --
</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>
42 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
POLICY OWNER OPTION: 2
$10,000 INITIAL PREMIUM
ISSUE AGE: 55 FEMALE PREFERRED
INITIAL FACE AMOUNT: $34,014
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 9,396 8,661 34,014 9,263 8,538 34,014
2 11,025 9,166 8,449 34,014 8,884 8,188 34,014
3 11,576 8,941 8,241 34,014 8,494 7,827 34,014
4 12,155 8,722 8,168 34,014 8,091 7,576 34,014
5 12,763 8,506 7,966 34,014 7,674 7,184 34,014
6 13,401 8,296 7,934 34,014 7,239 6,920 34,014
7 14,071 8,090 7,736 34,014 6,781 6,480 34,014
8 14,775 7,888 7,700 34,014 6,293 6,137 34,014
9 15,513 7,691 7,507 34,014 5,766 5,621 34,014
10 16,289 7,497 7,467 34,014 5,194 5,164 34,014
11 17,103 7,319 7,289 34,014 4,580 4,550 34,014
12 17,959 7,145 7,115 34,014 3,909 3,879 34,014
13 18,856 6,974 6,944 34,014 3,179 3,149 34,014
14 19,799 6,806 6,776 34,014 2,385 2,355 34,014
15 20,789 6,642 6,612 34,014 1,516 1,486 34,014
16 21,829 6,481 6,451 34,014 555 525 34,014
17 22,920 6,323 6,293 34,014 -- -- --
18 24,066 6,168 6,138 34,014 -- -- --
19 25,270 6,016 5,986 34,014 -- -- --
20 26,533 5,867 5,837 34,014 -- -- --
25 33,864 5,167 5,137 34,014 -- -- --
35 55,160 3,960 3,930 34,014 -- -- --
</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 43
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
POLICY OWNER OPTION: 1
$10,000 INITIAL PREMIUM
ISSUE AGE: 65 MALE PREFERRED
INITIAL FACE AMOUNT: $20,001
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 10,897 9,872 20,001 10,684 9,664 20,001
2 11,025 11,843 10,826 20,001 11,394 10,386 20,001
3 11,576 12,872 11,867 20,001 12,169 11,176 20,001
4 12,155 13,995 13,155 20,001 13,020 12,195 20,001
5 12,763 15,218 14,398 20,001 13,963 13,158 20,001
6 13,401 16,551 15,955 20,001 15,014 14,434 20,001
7 14,071 18,003 17,438 20,343 16,197 15,645 20,001
8 14,775 19,592 19,264 21,747 17,541 17,224 20,001
9 15,513 21,336 21,053 23,256 19,080 18,802 20,796
10 16,289 23,223 23,193 25,313 20,764 20,734 22,632
11 17,103 25,486 25,456 27,525 22,783 22,753 24,605
12 17,959 27,979 27,949 29,937 25,008 24,978 26,758
13 18,856 30,702 30,672 32,850 27,437 27,407 29,357
14 19,799 33,705 33,675 35,727 30,117 30,087 31,923
15 20,789 36,992 36,962 39,211 33,043 33,013 35,026
16 21,829 40,618 40,588 42,649 36,279 36,249 38,093
17 22,920 44,586 44,556 46,815 39,812 39,782 41,802
18 24,066 48,945 48,915 51,392 43,663 43,633 45,846
19 25,270 53,734 53,734 56,420 47,854 47,824 50,247
20 26,533 59,026 59,026 61,977 52,410 52,410 55,030
25 33,864 94,418 94,418 99,138 81,777 81,777 85,866
35 55,160 241,783 241,783 244,201 203,041 203,041 205,071
</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>
44 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
POLICY OWNER OPTION: 1
$10,000 INITIAL PREMIUM
ISSUE AGE: 65 MALE PREFERRED
INITIAL FACE AMOUNT: $20,001
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 10,310 9,298 20,001 10,095 9,088 20,001
2 11,025 10,600 9,608 20,001 10,134 9,151 20,001
3 11,576 10,898 9,927 20,001 10,143 9,185 20,001
4 12,155 11,205 10,407 20,001 10,117 9,335 20,001
5 12,763 11,522 10,748 20,001 10,050 9,294 20,001
6 13,401 11,848 11,300 20,001 9,932 9,406 20,001
7 14,071 12,185 11,664 20,001 9,752 9,259 20,001
8 14,775 12,533 12,240 20,001 9,494 9,226 20,001
9 15,513 12,891 12,628 20,001 9,138 8,902 20,001
10 16,289 13,260 13,230 20,001 8,662 8,632 20,001
11 17,103 13,750 13,720 20,001 8,110 8,080 20,001
12 17,959 14,260 14,230 20,001 7,383 7,353 20,001
13 18,856 14,790 14,760 20,001 6,439 6,409 20,001
14 19,799 15,340 15,310 20,001 5,222 5,192 20,001
15 20,789 15,913 15,883 20,001 3,654 3,624 20,001
16 21,829 16,507 16,477 20,001 1,627 1,597 20,001
17 22,920 17,125 17,095 20,001 -- -- --
18 24,066 17,768 17,738 20,001 -- -- --
19 25,270 18,436 18,406 20,001 -- -- --
20 26,533 19,130 19,100 20,086 -- -- --
25 33,864 23,031 23,001 24,183 -- -- --
35 55,160 33,530 33,500 33,865 -- -- --
</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 45
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
POLICY OWNER OPTION: 1
$10,000 INITIAL PREMIUM
ISSUE AGE: 65 MALE PREFERRED
INITIAL FACE AMOUNT: $20,001
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 9,724 8,745 20,001 9,505 8,549 20,001
2 11,025 9,425 8,500 20,001 8,946 8,066 20,001
3 11,576 9,136 8,261 20,001 8,345 7,543 20,001
4 12,155 8,854 8,160 20,001 7,694 7,087 20,001
5 12,763 8,580 7,928 20,001 6,985 6,449 20,001
6 13,401 8,313 7,868 20,001 6,204 5,863 20,001
7 14,071 8,054 7,642 20,001 5,332 5,049 20,001
8 14,775 7,802 7,577 20,001 4,347 4,209 20,001
9 15,513 7,557 7,357 20,001 3,222 3,120 20,001
10 16,289 7,319 7,289 20,001 1,925 1,895 20,001
11 17,103 7,145 7,115 20,001 428 398 20,001
12 17,959 6,974 6,944 20,001 -- -- 20,001
13 18,856 6,806 6,776 20,001 -- -- 20,001
14 19,799 6,641 6,611 20,001 -- -- 20,001
15 20,789 6,480 6,450 20,001 -- -- 20,001
16 21,829 6,322 6,292 20,001 -- -- 20,001
17 22,920 6,168 6,138 20,001 -- -- 20,001
18 24,066 6,016 5,986 20,001 -- -- 20,001
19 25,270 5,867 5,837 20,001 -- -- 20,001
20 26,533 5,721 5,691 20,001 -- -- 20,001
25 33,864 5,035 5,005 20,001 -- -- 20,001
35 55,160 3,852 3,822 20,001 -- -- 20,001
</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>
46 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
POLICY OWNER OPTION: 2
$10,000 INITIAL PREMIUM
ISSUE AGE: 65 MALE PREFERRED
INITIAL FACE AMOUNT: $20,001
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 10,530 9,750 20,001 10,302 9,522 20,001
2 11,025 11,517 10,737 20,001 11,035 10,255 20,001
3 11,576 12,599 11,819 20,001 11,841 11,061 20,001
4 12,155 13,787 13,157 20,001 12,732 12,102 20,001
5 12,763 15,089 14,459 20,001 13,724 13,094 20,001
6 13,401 16,517 16,087 20,001 14,840 14,410 20,001
7 14,071 18,084 17,654 20,435 16,104 15,674 20,001
8 14,775 19,809 19,579 21,988 17,551 17,321 20,001
9 15,513 21,714 21,484 23,667 19,216 18,986 20,945
10 16,289 23,789 23,759 25,930 21,049 21,019 22,943
11 17,103 26,108 26,078 28,196 23,097 23,067 24,944
12 17,959 28,662 28,632 30,668 25,353 25,323 27,127
13 18,856 31,452 31,422 33,653 27,816 27,786 29,762
14 19,799 34,530 34,500 36,601 30,534 30,504 32,365
15 20,789 37,898 37,868 40,171 33,501 33,471 35,511
16 21,829 41,614 41,584 43,694 36,782 36,752 38,621
17 22,920 45,680 45,650 47,964 40,364 40,334 42,382
18 24,066 50,147 50,147 52,654 44,269 44,239 46,482
19 25,270 55,086 55,086 57,840 48,519 48,489 50,945
20 26,533 60,513 60,513 63,538 53,139 53,139 55,795
25 33,864 96,795 96,795 101,634 82,914 82,914 87,060
35 55,160 247,871 247,871 250,349 205,864 205,864 207,922
</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 47
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
POLICY OWNER OPTION: 2
$10,000 INITIAL PREMIUM
ISSUE AGE: 65 MALE PREFERRED
INITIAL FACE AMOUNT: $20,001
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 9,963 9,185 20,001 9,733 8,973 20,001
2 11,025 10,308 9,528 20,001 9,812 9,046 20,001
3 11,576 10,666 9,886 20,001 9,864 9,094 20,001
4 12,155 11,038 10,408 20,001 9,883 9,260 20,001
5 12,763 11,424 10,794 20,001 9,864 9,242 20,001
6 13,401 11,824 11,394 20,001 9,797 9,375 20,001
7 14,071 12,240 11,810 20,001 9,670 9,253 20,001
8 14,775 12,671 12,441 20,001 9,469 9,249 20,001
9 15,513 13,118 12,888 20,001 9,174 8,960 20,001
10 16,289 13,583 13,553 20,001 8,764 8,734 20,001
11 17,103 14,086 14,056 20,001 8,226 8,196 20,001
12 17,959 14,609 14,579 20,001 7,515 7,485 20,001
13 18,856 15,152 15,122 20,001 6,590 6,560 20,001
14 19,799 15,717 15,687 20,001 5,397 5,367 20,001
15 20,789 16,304 16,274 20,001 3,859 3,829 20,001
16 21,829 16,914 16,884 20,001 1,868 1,838 20,001
17 22,920 17,549 17,519 20,001 -- -- --
18 24,066 18,208 18,178 20,001 -- -- --
19 25,270 18,893 18,863 20,001 -- -- --
20 26,533 19,605 19,575 20,584 -- -- --
25 33,864 23,607 23,577 24,787 -- -- --
35 55,160 34,378 34,348 34,721 -- -- --
</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>
48 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
SINGLE LIFE OPTION
POLICY OWNER OPTION: 2
$10,000 INITIAL PREMIUM
ISSUE AGE: 65 MALE PREFERRED
INITIAL FACE AMOUNT: $20,001
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 9,396 8,661 20,001 9,164 8,447 20,001
2 11,025 9,166 8,449 20,001 8,659 7,980 20,001
3 11,576 8,941 8,241 20,001 8,110 7,471 20,001
4 12,155 8,722 8,168 20,001 7,507 7,027 20,001
5 12,763 8,506 7,966 20,001 6,841 6,401 20,001
6 13,401 8,296 7,934 20,001 6,099 5,825 20,001
7 14,071 8,090 7,736 20,001 5,261 5,021 20,001
8 14,775 7,888 7,700 20,001 4,306 4,190 20,001
9 15,513 7,691 7,507 20,001 3,205 3,111 20,001
10 16,289 7,497 7,467 20,001 1,923 1,893 20,001
11 17,103 7,319 7,289 20,001 427 397 20,001
12 17,959 7,145 7,115 20,001 -- -- --
13 18,856 6,974 6,944 20,001 -- -- --
14 19,799 6,806 6,776 20,001 -- -- --
15 20,789 6,642 6,612 20,001 -- -- --
16 21,829 6,481 6,451 20,001 -- -- --
17 22,920 6,323 6,293 20,001 -- -- --
18 24,066 6,168 6,138 20,001 -- -- --
19 25,270 6,016 5,986 20,001 -- -- --
20 26,533 5,867 5,837 20,001 -- -- --
25 33,864 5,167 5,137 20,001 -- -- --
35 55,160 3,960 3,930 20,001 -- -- --
</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 49
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
LAST SURVIVOR OPTION
POLICY OWNER OPTION: 1
$10,000 INITIAL PREMIUM
ISSUE AGES: 55 MALE PREFERRED / 55 FEMALE PREFERRED
INITIAL FACE AMOUNT: $45,872
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 10,965 9,939 45,872 10,965 9,939 45,872
2 11,025 11,985 10,965 45,872 11,985 10,965 45,872
3 11,576 13,095 12,086 45,872 13,095 12,086 45,872
4 12,155 14,304 13,459 45,872 14,304 13,459 45,872
5 12,763 15,620 14,795 45,872 15,620 14,795 45,872
6 13,401 17,053 16,453 45,872 17,053 16,453 45,872
7 14,071 18,612 18,043 45,872 18,612 18,043 45,872
8 14,775 20,309 19,978 45,872 20,309 19,978 45,872
9 15,513 22,155 21,870 45,872 22,155 21,870 45,872
10 16,289 24,164 24,134 45,872 24,164 24,134 45,872
11 17,103 26,566 26,536 45,872 26,566 26,536 45,872
12 17,959 29,211 29,181 45,872 29,211 29,181 45,872
13 18,856 32,130 32,100 45,872 32,130 32,100 45,872
14 19,799 35,362 35,332 45,872 35,362 35,332 45,872
15 20,789 38,952 38,922 45,872 38,952 38,922 45,872
16 21,829 42,939 42,909 49,380 42,939 42,909 49,380
17 22,920 47,337 47,307 53,490 47,337 47,307 53,490
18 24,066 52,186 52,186 57,926 52,186 52,186 57,926
19 25,270 57,570 57,570 62,750 57,570 57,570 62,750
20 26,533 63,480 63,480 69,193 63,480 63,480 69,193
25 33,864 103,143 103,143 109,331 103,143 103,143 109,331
35 55,160 268,360 268,360 281,778 261,693 261,693 274,777
</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>
50 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
LAST SURVIVOR OPTION
POLICY OWNER OPTION: 1
$10,000 INITIAL PREMIUM
ISSUE AGES: 55 MALE PREFERRED / 55 FEMALE PREFERRED
INITIAL FACE AMOUNT: $45,872
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 10,375 9,361 45,872 10,375 9,361 45,872
2 11,025 10,726 9,731 45,872 10,726 9,731 45,872
3 11,576 11,082 10,108 45,872 11,082 10,108 45,872
4 12,155 11,442 10,640 45,872 11,442 10,640 45,872
5 12,763 11,804 11,027 45,872 11,804 11,027 45,872
6 13,401 12,167 11,615 45,872 12,167 11,615 45,872
7 14,071 12,532 12,008 45,872 12,526 12,002 45,872
8 14,775 12,910 12,615 45,872 12,880 12,585 45,872
9 15,513 13,299 13,036 45,872 13,222 12,959 45,872
10 16,289 13,702 13,672 45,872 13,547 13,517 45,872
11 17,103 14,231 14,201 45,872 13,961 13,931 45,872
12 17,959 14,782 14,752 45,872 14,354 14,324 45,872
13 18,856 15,355 15,325 45,872 14,720 14,690 45,872
14 19,799 15,952 15,922 45,872 15,049 15,019 45,872
15 20,789 16,573 16,543 45,872 15,333 15,303 45,872
16 21,829 17,220 17,190 45,872 15,558 15,528 45,872
17 22,920 17,893 17,863 45,872 15,706 15,676 45,872
18 24,066 18,593 18,563 45,872 15,753 15,723 45,872
19 25,270 19,322 19,292 45,872 15,669 15,639 45,872
20 26,533 20,081 20,051 45,872 15,419 15,389 45,872
25 33,864 24,368 24,338 45,872 9,959 9,929 45,872
35 55,160 36,008 35,978 45,872 -- -- --
</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 51
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
LAST SURVIVOR OPTION
POLICY OWNER OPTION: 1
$10,000 INITIAL PREMIUM
ISSUE AGES: 55 MALE PREFERRED / 55 FEMALE PREFERRED
INITIAL FACE AMOUNT: $45,872
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 9,784 8,800 45,872 9,784 8,800 45,872
2 11,025 9,537 8,601 45,872 9,537 8,601 45,872
3 11,576 9,286 8,397 45,872 9,286 8,397 45,872
4 12,155 9,031 8,323 45,872 9,031 8,323 45,872
5 12,763 8,768 8,103 45,872 8,768 8,103 45,872
6 13,401 8,509 8,054 45,872 8,496 8,042 45,872
7 14,071 8,257 7,835 45,872 8,212 7,792 45,872
8 14,775 8,012 7,782 45,872 7,910 7,682 45,872
9 15,513 7,773 7,568 45,872 7,584 7,384 45,872
10 16,289 7,540 7,510 45,872 7,229 7,199 45,872
11 17,103 7,372 7,342 45,872 6,893 6,863 45,872
12 17,959 7,207 7,177 45,872 6,509 6,479 45,872
13 18,856 7,046 7,016 45,872 6,067 6,037 45,872
14 19,799 6,887 6,857 45,872 5,559 5,529 45,872
15 20,789 6,731 6,701 45,872 4,969 4,939 45,872
16 21,829 6,578 6,548 45,872 4,282 4,252 45,872
17 22,920 6,428 6,398 45,872 3,472 3,442 45,872
18 24,066 6,280 6,250 45,872 2,506 2,476 45,872
19 25,270 6,135 6,105 45,872 1,344 1,314 45,872
20 26,533 5,993 5,963 45,872 -- -- --
25 33,864 5,321 5,291 45,872 -- -- --
35 55,160 4,150 4,120 45,872 -- -- --
</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>
52 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
LAST SURVIVOR OPTION
POLICY OWNER OPTION: 2
$10,000 INITIAL PREMIUM
ISSUE AGES: 55 MALE PREFERRED / 55 FEMALE PREFERRED
INITIAL FACE AMOUNT: $45,872
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 10,595 9,815 45,872 10,595 9,815 45,872
2 11,025 11,654 10,874 45,872 11,654 10,874 45,872
3 11,576 12,816 12,036 45,872 12,816 12,036 45,872
4 12,155 14,089 13,459 45,872 14,089 13,459 45,872
5 12,763 15,485 14,855 45,872 15,485 14,855 45,872
6 13,401 17,015 16,585 45,872 17,015 16,585 45,872
7 14,071 18,692 18,262 45,872 18,692 18,262 45,872
8 14,775 20,530 20,300 45,872 20,530 20,300 45,872
9 15,513 22,545 22,315 45,872 22,545 22,315 45,872
10 16,289 24,755 24,725 45,872 24,755 24,725 45,872
11 17,103 27,223 27,193 45,872 27,223 27,193 45,872
12 17,959 29,942 29,912 45,872 29,942 29,912 45,872
13 18,856 32,945 32,915 45,872 32,945 32,915 45,872
14 19,799 36,273 36,243 45,872 36,273 36,243 45,872
15 20,789 39,971 39,941 46,366 39,971 39,941 46,366
16 21,829 44,066 44,036 50,675 44,066 44,036 50,675
17 22,920 48,580 48,550 54,894 48,580 48,550 54,894
18 24,066 53,557 53,557 59,447 53,557 53,557 59,447
19 25,270 59,082 59,082 64,399 59,082 59,082 64,399
20 26,533 65,148 65,148 71,010 65,148 65,148 71,010
25 33,864 105,853 105,853 112,204 105,853 105,853 112,204
35 55,160 275,411 275,411 289,181 268,568 268,568 281,995
</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 53
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
LAST SURVIVOR OPTION
POLICY OWNER OPTION: 2
$10,000 INITIAL PREMIUM
ISSUE AGES: 55 MALE PREFERRED / 55 FEMALE PREFERRED
INITIAL FACE AMOUNT: $45,872
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 10,025 9,245 45,872 10,025 9,245 45,872
2 11,025 10,430 9,650 45,872 10,430 9,650 45,872
3 11,576 10,845 10,065 45,872 10,845 10,065 45,872
4 12,155 11,269 10,639 45,872 11,269 10,639 45,872
5 12,763 11,701 11,071 45,872 11,701 11,071 45,872
6 13,401 12,138 11,708 45,872 12,138 11,708 45,872
7 14,071 12,585 12,155 45,872 12,579 12,149 45,872
8 14,775 13,048 12,818 45,872 13,019 12,789 45,872
9 15,513 13,531 13,301 45,872 13,455 13,225 45,872
10 16,289 14,032 14,002 45,872 13,881 13,851 45,872
11 17,103 14,574 14,544 45,872 14,312 14,282 45,872
12 17,959 15,139 15,109 45,872 14,724 14,694 45,872
13 18,856 15,727 15,697 45,872 15,109 15,079 45,872
14 19,799 16,339 16,309 45,872 15,461 15,431 45,872
15 20,789 16,976 16,946 45,872 15,769 15,739 45,872
16 21,829 17,639 17,609 45,872 16,021 15,991 45,872
17 22,920 18,329 18,299 45,872 16,199 16,169 45,872
18 24,066 19,048 19,018 45,872 16,279 16,249 45,872
19 25,270 19,795 19,765 45,872 16,234 16,204 45,872
20 26,533 20,574 20,544 45,872 16,028 15,998 45,872
25 33,864 24,970 24,940 45,872 10,942 10,912 45,872
35 55,160 36,906 36,876 45,872 -- -- --
</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>
54 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
LAST SURVIVOR OPTION
POLICY OWNER OPTION: 2
$10,000 INITIAL PREMIUM
ISSUE AGES: 55 MALE PREFERRED / 55 FEMALE PREFERRED
INITIAL FACE AMOUNT: $45,872
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 9,454 8,715 45,872 9,454 8,715 45,872
2 11,025 9,274 8,548 45,872 9,274 8,548 45,872
3 11,576 9,087 8,376 45,872 9,087 8,376 45,872
4 12,155 8,894 8,330 45,872 8,894 8,330 45,872
5 12,763 8,691 8,140 45,872 8,691 8,140 45,872
6 13,401 8,489 8,120 45,872 8,476 8,107 45,872
7 14,071 8,291 7,930 45,872 8,245 7,886 45,872
8 14,775 8,098 7,906 45,872 7,995 7,805 45,872
9 15,513 7,908 7,720 45,872 7,719 7,534 45,872
10 16,289 7,721 7,691 45,872 7,410 7,380 45,872
11 17,103 7,550 7,520 45,872 7,073 7,043 45,872
12 17,959 7,382 7,352 45,872 6,687 6,657 45,872
13 18,856 7,217 7,187 45,872 6,245 6,215 45,872
14 19,799 7,055 7,025 45,872 5,735 5,705 45,872
15 20,789 6,896 6,866 45,872 5,146 5,116 45,872
16 21,829 6,740 6,710 45,872 4,458 4,428 45,872
17 22,920 6,587 6,557 45,872 3,649 3,619 45,872
18 24,066 6,437 6,407 45,872 2,684 2,654 45,872
19 25,270 6,289 6,259 45,872 1,524 1,494 45,872
20 26,533 6,144 6,114 45,872 122 92 45,872
25 33,864 5,459 5,429 45,872 -- -- --
35 55,160 4,264 4,234 45,872 -- -- --
</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 55
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
LAST SURVIVOR OPTION
POLICY OWNER OPTION: 1
$10,000 INITIAL PREMIUM
ISSUE AGES: 65 MALE PREFERRED / 65 FEMALE PREFERRED
INITIAL FACE AMOUNT: $28,491
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 10,959 9,933 28,491 10,959 9,933 28,491
2 11,025 11,958 10,939 28,491 11,958 10,939 28,491
3 11,576 13,032 12,024 28,491 13,032 12,024 28,491
4 12,155 14,190 13,347 28,491 14,187 13,344 28,491
5 12,763 15,454 14,631 28,491 15,431 14,608 28,491
6 13,401 16,833 16,235 28,491 16,774 16,176 28,491
7 14,071 18,339 17,771 28,491 18,227 17,660 28,491
8 14,775 19,982 19,652 28,491 19,804 19,475 28,491
9 15,513 21,775 21,490 28,491 21,525 21,241 28,491
10 16,289 23,732 23,702 28,491 23,417 23,387 28,491
11 17,103 26,092 26,062 28,491 25,726 25,696 28,491
12 17,959 28,737 28,707 30,748 28,328 28,298 30,310
13 18,856 31,641 31,611 33,855 31,190 31,160 33,373
14 19,799 34,839 34,809 36,929 34,343 34,313 36,403
15 20,789 38,344 38,314 40,644 37,796 37,766 40,064
16 21,829 42,208 42,178 44,318 41,605 41,575 43,685
17 22,920 46,437 46,407 48,758 45,773 45,743 48,061
18 24,066 51,058 51,058 53,610 50,328 50,328 52,844
19 25,270 56,172 56,172 58,980 55,329 55,329 58,095
20 26,533 61,798 61,798 64,887 60,777 60,777 63,815
25 33,864 99,595 99,595 104,575 95,804 95,804 100,594
35 55,160 258,688 258,688 261,274 238,971 238,971 241,361
</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>
56 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
LAST SURVIVOR OPTION
POLICY OWNER OPTION: 1
$10,000 INITIAL PREMIUM
ISSUE AGES: 65 MALE PREFERRED / 65 FEMALE PREFERRED
INITIAL FACE AMOUNT: $28,491
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 10,368 9,355 28,491 10,368 9,355 28,491
2 11,025 10,699 9,705 28,491 10,699 9,705 28,491
3 11,576 11,017 10,044 28,491 11,017 10,044 28,491
4 12,155 11,345 10,545 28,491 11,319 10,519 28,491
5 12,763 11,684 10,908 28,491 11,599 10,824 28,491
6 13,401 12,034 11,483 28,491 11,851 11,302 28,491
7 14,071 12,395 11,872 28,491 12,066 11,545 28,491
8 14,775 12,768 12,474 28,491 12,233 11,942 28,491
9 15,513 13,153 12,890 28,491 12,339 12,078 28,491
10 16,289 13,551 13,521 28,491 12,365 12,335 28,491
11 17,103 14,074 14,044 28,491 12,397 12,367 28,491
12 17,959 14,618 14,588 28,491 12,319 12,289 28,491
13 18,856 15,185 15,155 28,491 12,106 12,076 28,491
14 19,799 15,774 15,744 28,491 11,728 11,698 28,491
15 20,789 16,388 16,358 28,491 11,145 11,115 28,491
16 21,829 17,027 16,997 28,491 10,299 10,269 28,491
17 22,920 17,693 17,663 28,491 9,109 9,079 28,491
18 24,066 18,385 18,355 28,491 7,460 7,430 28,491
19 25,270 19,106 19,076 28,491 5,195 5,165 28,491
20 26,533 19,856 19,826 28,491 2,092 2,062 28,491
25 33,864 24,093 24,063 28,491 -- -- --
35 55,160 35,596 35,566 35,952 -- -- --
</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 57
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
LAST SURVIVOR OPTION
POLICY OWNER OPTION: 1
$10,000 INITIAL PREMIUM
ISSUE AGES: 65 MALE PREFERRED / 65 FEMALE PREFERRED
INITIAL FACE AMOUNT: $28,491
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 9,778 8,795 28,491 9,778 8,795 28,491
2 11,025 9,510 8,576 28,491 9,510 8,576 28,491
3 11,576 9,231 8,347 28,491 9,220 8,337 28,491
4 12,155 8,960 8,258 28,491 8,904 8,206 28,491
5 12,763 8,696 8,036 28,491 8,554 7,904 28,491
6 13,401 8,439 7,987 28,491 8,163 7,724 28,491
7 14,071 8,189 7,770 28,491 7,717 7,321 28,491
8 14,775 7,945 7,717 28,491 7,203 6,993 28,491
9 15,513 7,708 7,505 28,491 6,601 6,422 28,491
10 16,289 7,477 7,447 28,491 5,887 5,857 28,491
11 17,103 7,310 7,280 28,491 5,078 5,048 28,491
12 17,959 7,147 7,117 28,491 4,094 4,064 28,491
13 18,856 6,986 6,956 28,491 2,896 2,866 28,491
14 19,799 6,828 6,798 28,491 1,438 1,408 28,491
15 20,789 6,673 6,643 28,491 -- -- --
16 21,829 6,521 6,491 28,491 -- -- --
17 22,920 6,372 6,342 28,491 -- -- --
18 24,066 6,226 6,196 28,491 -- -- --
19 25,270 6,082 6,052 28,491 -- -- --
20 26,533 5,941 5,911 28,491 -- -- --
25 33,864 5,273 5,243 28,491 -- -- --
35 55,160 4,110 4,080 28,491 -- -- --
</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>
58 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
LAST SURVIVOR OPTION
POLICY OWNER OPTION: 2
$10,000 INITIAL PREMIUM
ISSUE AGES: 65 MALE PREFERRED / 65 FEMALE PREFERRED
INITIAL FACE AMOUNT: $28,491
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 10,589 9,809 28,491 10,589 9,809 28,491
2 11,025 11,627 10,847 28,491 11,627 10,847 28,491
3 11,576 12,750 11,970 28,491 12,750 11,970 28,491
4 12,155 13,973 13,343 28,491 13,968 13,338 28,491
5 12,763 15,317 14,687 28,491 15,289 14,659 28,491
6 13,401 16,793 16,363 28,491 16,726 16,296 28,491
7 14,071 18,414 17,984 28,491 18,294 17,864 28,491
8 14,775 20,195 19,965 28,491 20,010 19,780 28,491
9 15,513 22,151 21,921 28,491 21,899 21,669 28,491
10 16,289 24,301 24,271 28,491 23,995 23,965 28,491
11 17,103 26,735 26,705 28,873 26,385 26,355 28,495
12 17,959 29,450 29,420 31,511 29,063 29,033 31,097
13 18,856 32,427 32,397 34,696 32,000 31,970 34,239
14 19,799 35,706 35,676 37,848 35,236 35,206 37,349
15 20,789 39,298 39,268 41,655 38,780 38,750 41,106
16 21,829 43,259 43,229 45,421 42,688 42,658 44,822
17 22,920 47,594 47,564 49,973 46,966 46,936 49,314
18 24,066 52,331 52,331 54,947 51,640 51,640 54,222
19 25,270 57,573 57,573 60,451 56,772 56,772 59,610
20 26,533 63,339 63,339 66,505 62,362 62,362 65,480
25 33,864 102,079 102,079 107,183 98,303 98,303 103,217
35 55,160 265,140 265,140 267,790 245,203 245,203 247,655
</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 59
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
LAST SURVIVOR OPTION
POLICY OWNER OPTION: 2
$10,000 INITIAL PREMIUM
ISSUE AGES: 65 MALE PREFERRED / 65 FEMALE PREFERRED
INITIAL FACE AMOUNT: $28,491
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 10,018 9,238 28,491 10,018 9,238 28,491
2 11,025 10,402 9,622 28,491 10,402 9,622 28,491
3 11,576 10,780 10,000 28,491 10,779 9,999 28,491
4 12,155 11,173 10,543 28,491 11,143 10,513 28,491
5 12,763 11,581 10,951 28,491 11,490 10,860 28,491
6 13,401 12,006 11,576 28,491 11,814 11,384 28,491
7 14,071 12,447 12,017 28,491 12,108 11,678 28,491
8 14,775 12,905 12,675 28,491 12,359 12,129 28,491
9 15,513 13,382 13,152 28,491 12,555 12,325 28,491
10 16,289 13,877 13,847 28,491 12,680 12,650 28,491
11 17,103 14,413 14,383 28,491 12,737 12,707 28,491
12 17,959 14,972 14,942 28,491 12,688 12,658 28,491
13 18,856 15,553 15,523 28,491 12,509 12,479 28,491
14 19,799 16,158 16,128 28,491 12,173 12,143 28,491
15 20,789 16,787 16,757 28,491 11,641 11,611 28,491
16 21,829 17,442 17,412 28,491 10,856 10,826 28,491
17 22,920 18,125 18,095 28,491 9,743 9,713 28,491
18 24,066 18,835 18,805 28,491 8,193 8,163 28,491
19 25,270 19,574 19,544 28,491 6,054 6,024 28,491
20 26,533 20,343 20,313 28,491 3,115 3,085 28,491
25 33,864 24,688 24,658 28,491 -- -- --
35 55,160 36,485 36,455 36,849 -- -- --
</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>
60 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
LAST SURVIVOR OPTION
POLICY OWNER OPTION: 2
$10,000 INITIAL PREMIUM
ISSUE AGES: 65 MALE PREFERRED / 65 FEMALE PREFERRED
INITIAL FACE AMOUNT: $28,491
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 9,448 8,709 28,491 9,448 8,709 28,491
2 11,025 9,246 8,522 28,491 9,246 8,522 28,491
3 11,576 9,033 8,326 28,491 9,020 8,313 28,491
4 12,155 8,825 8,265 28,491 8,764 8,208 28,491
5 12,763 8,620 8,073 28,491 8,472 7,934 28,491
6 13,401 8,420 8,053 28,491 8,135 7,780 28,491
7 14,071 8,223 7,864 28,491 7,742 7,402 28,491
8 14,775 8,031 7,840 28,491 7,276 7,101 28,491
9 15,513 7,842 7,655 28,491 6,719 6,555 28,491
10 16,289 7,657 7,627 28,491 6,047 6,017 28,491
11 17,103 7,487 7,457 28,491 5,241 5,211 28,491
12 17,959 7,320 7,290 28,491 4,261 4,231 28,491
13 18,856 7,157 7,127 28,491 3,068 3,038 28,491
14 19,799 6,996 6,966 28,491 1,617 1,587 28,491
15 20,789 6,838 6,808 28,491 -- -- --
16 21,829 6,683 6,653 28,491 -- -- --
17 22,920 6,531 6,501 28,491 -- -- --
18 24,066 6,381 6,351 28,491 -- -- --
19 25,270 6,235 6,205 28,491 -- -- --
20 26,533 6,091 6,061 28,491 -- -- --
25 33,864 5,410 5,380 28,491 -- -- --
35 55,160 4,224 4,194 28,491 -- -- --
</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>
62
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT FIVE
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS & LIABILITIES (UNAUDITED)
MARCH 31, 1998
<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 3,575,408
Cost $ 3,630,304
Market Value......... $3,810,484 -- -- --
Hartford Stock Fund,
Inc.
Shares 6,820,510
Cost $28,292,487
Market Value......... -- $38,854,120 -- --
HVA Money Market Fund,
Inc.
Shares 10,533,630
Cost $10,533,630
Market Value......... -- -- $10,533,630 --
Hartford Advisers Fund,
Inc.
Shares 17,494,045
Cost $37,969,770
Market Value......... -- -- -- $47,198,671
Hartford Capital
Appreciation Fund,
Inc.
Shares 10,388,605
Cost $39,515,463
Market Value......... -- -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 1,568,407
Cost $ 1,678,299
Market Value......... -- -- -- --
Hartford Index Fund,
Inc.
Shares 3,964,277
Cost $ 9,362,935
Market Value......... -- -- -- --
Hartford International
Opportunities Fund,
Inc.
Shares 10,177,568
Cost $13,695,717
Market Value......... -- -- -- --
Hartford Dividend and
Growth Fund, Inc.
Shares 13,422,873
Cost $21,379,371
Market Value......... -- -- -- --
Hartford International
Advisers Fund, Inc.
Shares 2,463,104
Cost $ 2,828,231
Market Value......... -- -- -- --
Hartford Small Company
Shares 971,116
Cost $ 1,178,871
Market Value......... -- -- -- --
Hartford Mid Cap Fund
Shares 158,288
Cost $ 179,988
Market Value......... -- -- -- --
Due from Hartford Life
and Annuity Insurance
Company............... 9 10,110 50,657 234
Receivable from fund
shares sold...........
------------- ----------- ----------- -------------
Total Assets........... 3,810,493 38,864,230 10,584,287 47,198,905
------------- ----------- ----------- -------------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company............... -- -- -- --
Payable for fund shares
purchased............. -- 10,003 50,594 --
------------- ----------- ----------- -------------
Total Liabilities...... -- 10,003 50,594 --
------------- ----------- ----------- -------------
Net Assets (variable
life contract
liabilities).......... $3,810,493 $38,854,227 $10,533,693 $47,198,905
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
63
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND ADVISERS
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND 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 3,575,408
Cost $ 3,630,304
Market Value......... -- -- -- -- -- --
Hartford Stock Fund,
Inc.
Shares 6,820,510
Cost $28,292,487
Market Value......... -- -- -- -- -- --
HVA Money Market Fund,
Inc.
Shares 10,533,630
Cost $10,533,630
Market Value......... -- -- -- -- -- --
Hartford Advisers Fund,
Inc.
Shares 17,494,045
Cost $37,969,770
Market Value......... -- -- -- -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 10,388,605
Cost $39,515,463
Market Value......... $48,523,970 -- -- -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 1,568,407
Cost $ 1,678,299
Market Value......... -- $1,714,109 -- -- -- --
Hartford Index Fund,
Inc.
Shares 3,964,277
Cost $ 9,362,935
Market Value......... -- -- $12,676,258 -- -- --
Hartford International
Opportunities Fund,
Inc.
Shares 10,177,568
Cost $13,695,717
Market Value......... -- -- -- $13,962,453 -- --
Hartford Dividend and
Growth Fund, Inc.
Shares 13,422,873
Cost $21,379,371
Market Value......... -- -- -- -- $28,240,061 --
Hartford International
Advisers Fund, Inc.
Shares 2,463,104
Cost $ 2,828,231
Market Value......... -- -- -- -- -- $2,742,999
Hartford Small Company
Shares 971,116
Cost $ 1,178,871
Market Value......... -- -- -- -- -- --
Hartford Mid Cap Fund
Shares 158,288
Cost $ 179,988
Market Value......... -- -- -- -- -- --
Due from Hartford Life
and Annuity Insurance
Company............... 9,290 7 93 31 171 --
Receivable from fund
shares sold...........
----------------- --------------- ----------- ------------------ ------------ ------------
Total Assets........... 48,533,260 1,714,116 12,676,351 13,962,484 28,240,232 2,742,999
----------------- --------------- ----------- ------------------ ------------ ------------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company............... -- -- -- -- -- 16
Payable for fund shares
purchased............. 10,003 -- -- -- -- --
----------------- --------------- ----------- ------------------ ------------ ------------
Total Liabilities...... 10,003 -- -- -- -- 16
----------------- --------------- ----------- ------------------ ------------ ------------
Net Assets (variable
life contract
liabilities).......... $48,523,257 $1,714,116 $12,676,351 $13,962,484 $28,240,232 $2,742,983
----------------- --------------- ----------- ------------------ ------------ ------------
----------------- --------------- ----------- ------------------ ------------ ------------
<CAPTION>
SMALL
COMPANY MIDCAP
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 3,575,408
Cost $ 3,630,304
Market Value......... -- --
Hartford Stock Fund,
Inc.
Shares 6,820,510
Cost $28,292,487
Market Value......... -- --
HVA Money Market Fund,
Inc.
Shares 10,533,630
Cost $10,533,630
Market Value......... -- --
Hartford Advisers Fund,
Inc.
Shares 17,494,045
Cost $37,969,770
Market Value......... -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 10,388,605
Cost $39,515,463
Market Value......... -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 1,568,407
Cost $ 1,678,299
Market Value......... -- --
Hartford Index Fund,
Inc.
Shares 3,964,277
Cost $ 9,362,935
Market Value......... -- --
Hartford International
Opportunities Fund,
Inc.
Shares 10,177,568
Cost $13,695,717
Market Value......... -- --
Hartford Dividend and
Growth Fund, Inc.
Shares 13,422,873
Cost $21,379,371
Market Value......... -- --
Hartford International
Advisers Fund, Inc.
Shares 2,463,104
Cost $ 2,828,231
Market Value......... -- --
Hartford Small Company
Shares 971,116
Cost $ 1,178,871
Market Value......... $1,291,451 --
Hartford Mid Cap Fund
Shares 158,288
Cost $ 179,988
Market Value......... -- $ 203,704
Due from Hartford Life
and Annuity Insurance
Company............... -- --
Receivable from fund
shares sold...........
------------ ------------
Total Assets........... 1,291,451 203,704
------------ ------------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company............... 19 --
Payable for fund shares
purchased............. -- --
------------ ------------
Total Liabilities...... 19 --
------------ ------------
Net Assets (variable
life contract
liabilities).......... $1,291,432 $ 203,704
------------ ------------
------------ ------------
</TABLE>
<PAGE>
64
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT FIVE
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<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................ $ 9,181 $ 11,012 $ 144,609 $ 23,670
------------- ----------- ----------- -------------
Net investment income
(loss).............. 9,181 11,012 144,609 23,670
------------- ----------- ----------- -------------
CAPITAL GAINS INCOME..... -- 1,195,486 77 1,465,098
------------- ----------- ----------- -------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (167) 887 -- 2,628
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 51,712 3,780,034 -- 2,882,526
------------- ----------- ----------- -------------
Net gain (losses) on
investments......... 51,545 3,780,921 -- 2,885,154
------------- ----------- ----------- -------------
Net increase
(decrease) in net
assets resulting
from operations:.... $ 60,726 $ 4,987,419 $ 144,686 $4,373,922
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
65
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND ADVISERS
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND 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
----------------- ------- ----------- ------------------ ------------ ------------
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 AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 4,366 413 1,011 1,589 37 264
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 2,605,754 13,975 1,229,174 759,429 1,942,090 (121,435)
----------------- ------- ----------- ------------------ ------------ ------------
Net gain (losses) on
investments......... 2,610,120 14,388 1,230,185 761,018 1,942,127 (121,171)
----------------- ------- ----------- ------------------ ------------ ------------
Net increase
(decrease) in net
assets resulting
from operations:.... $5,380,011 $ 25,774 $ 1,511,940 $1,591,654 $2,860,468 $ 232,229
----------------- ------- ----------- ------------------ ------------ ------------
----------------- ------- ----------- ------------------ ------------ ------------
<CAPTION>
SMALL
COMPANY MIDCAP
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends................ $ -- $ 4
------------ ------------
Net investment income
(loss).............. -- 4
------------ ------------
CAPITAL GAINS INCOME..... 17,778 --
------------ ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 433 10
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 119,601 20,735
------------ ------------
Net gain (losses) on
investments......... 120,034 20,745
------------ ------------
Net increase
(decrease) in net
assets resulting
from operations:.... $ 137,812 $ 20,749
------------ ------------
------------ ------------
</TABLE>
<PAGE>
66
- --------------------------------------------------------------------------------
Separate Account Five
Hartford Life and Annuity Insurance Company
Statement of Changes in Net Assets (Unaudited)
For the Three Months Ended March 31, 1998
<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 $ 144,609 $ 23,670
Capital gains income... -- 1,195,486 77 1,465,098
Net realized gain
(loss) on security
transactions.......... (167) 887 -- 2,628
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 51,712 3,780,034 -- 2,882,526
------------- ----------- ----------- -------------
Net increase (decrease)
in net assets
resulting from
operations............ 60,726 4,987,419 144,686 4,373,922
------------- ----------- ----------- -------------
UNIT TRANSACTIONS:
Purchases.............. 606 -- 11,379,457 --
Net transfers.......... 516,404 2,034,072 (11,491,348) 2,591,027
Surrenders............. (14,533) (301,554) (42,632) (475,829)
Loan withdrawals....... 1,266 1,973 (440,280) 5,622
Cost of insurance...... (6,081) (52,638) (24,034) (69,467)
------------- ----------- ----------- -------------
Total increase
(decrease) in net
assets resulting from
unit transactions..... 497,662 1,681,853 (618,837) 2,051,353
------------- ----------- ----------- -------------
Total increase
(decrease) in net
assets................ 558,388 6,669,272 (474,151) 6,425,275
NET ASSETS:
Beginning of period.... 3,252,105 32,184,955 11,007,844 40,773,630
------------- ----------- ----------- -------------
End of period.......... $3,810,493 $38,854,227 $10,533,693 $47,198,905
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
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)
Loan withdrawals....... (15,758) (97,878) (2,491,658) (64,323)
Cost of insurance...... (16,113) (151,064) (109,762) (204,969)
------------- ----------- ----------- -------------
Total 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>
The accompanying notes are an integral part of these financial statements.
<PAGE>
67
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND ADVISERS
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ----------- ------------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 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.......... 4,366 413 1,011 1,589 37 264
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 2,605,754 13,975 1,229,174 759,429 1,942,090 (121,435)
----------------- --------------- ----------- ------------------ ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 5,380,011 25,774 1,511,940 1,591,654 2,860,468 232,229
----------------- --------------- ----------- ------------------ ------------ ------------
UNIT TRANSACTIONS:
Purchases.............. -- -- -- -- -- --
Net transfers.......... 2,451,916 62,075 720,365 541,629 2,207,193 80,774
Surrenders............. (379,593) (6,675) (213,381) (147,758) (134,303) (28,976)
Loan withdrawals....... (27,573) (5,417) (700) (12,981) (29,922) (171)
Cost of insurance...... (66,947) (2,903) (18,607) (19,954) (39,328) (4,354)
----------------- --------------- ----------- ------------------ ------------ ------------
Total increase
(decrease) in net
assets resulting from
unit transactions..... 1,977,803 47,080 487,677 360,936 2,003,640 47,273
----------------- --------------- ----------- ------------------ ------------ ------------
Total increase
(decrease) in net
assets................ 7,357,814 72,854 1,999,617 1,952,590 4,864,108 279,502
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.......... $48,523,257 $1,714,116 $12,676,351 $13,962,484 $28,240,232 $2,742,983
----------------- --------------- ----------- ------------------ ------------ ------------
----------------- --------------- ----------- ------------------ ------------ ------------
INTERNATIONAL
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND ADVISERS
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND 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)
Loan withdrawals....... (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)
----------------- --------------- ----------- ------------------ ------------ ------------
Total 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.......... 433 10
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 119,601 20,735
------------- ------------
Net increase (decrease)
in net assets
resulting from
operations............ 137,812 20,749
------------- ------------
UNIT TRANSACTIONS:
Purchases.............. -- --
Net transfers.......... 193,710 92,162
Surrenders............. (4,467) (567)
Loan withdrawals....... (22,959) --
Cost of insurance...... (1,957) (337)
------------- ------------
Total increase
(decrease) in net
assets resulting from
unit transactions..... 164,327 91,258
------------- ------------
Total increase
(decrease) in net
assets................ 302,139 112,007
NET ASSETS:
Beginning of period.... 989,293 91,697
------------- ------------
End of period.......... $1,291,432 $ 203,704
------------- ------------
------------- ------------
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)
Loan withdrawals....... (1,427) --
Cost of insurance...... (2,262) (80)
------------- ------------
Total 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>
69
- --------------------------------------------------------------------------------
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>
70
- --------------------------------------------------------------------------------
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>
71
- --------------------------------------------------------------------------------
<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>
72
- --------------------------------------------------------------------------------
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>
73
- --------------------------------------------------------------------------------
<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>
74
- --------------------------------------------------------------------------------
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>
75
- --------------------------------------------------------------------------------
<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>
76
- --------------------------------------------------------------------------------
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>
77
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
---------------
1998 1997
------ ------
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C>
Revenues
Premiums and other considerations............... $ 563 $ 310
Net investment income........................... 352 337
Net realized capital gains...................... -- 4
------ ------
Total revenues................................ 915 651
------ ------
Benefits, claims and expenses
Benefits, claims and claim adjustment
expenses....................................... 398 342
Amortization of deferred policy acquisition
costs.......................................... 94 81
Dividends to policyholders...................... 107 54
Other insurance expenses........................ 188 73
------ ------
Total benefits, claims and expenses........... 787 550
------ ------
Income before income tax expense................ 128 101
Income tax expense.............................. 45 38
------ ------
Net income...................................... $ 83 $ 63
------ ------
------ ------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
78
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
MARCH DECEMBER
31, 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 $14,336 and
$13,885)....................................... $14,609 $14,176
Equity securities, available for sale, at fair
value.......................................... 188 180
Policy loans, at outstanding balance............ 3,760 3,756
Other investments, at cost...................... 235 47
------- -------
Total investments............................. 18,792 18,159
Cash............................................ 52 54
Premiums and amounts receivable................. 23 18
Accrued investment income....................... 353 330
Reinsurance recoverable......................... 6,040 6,325
Deferred policy acquisition costs............... 3,430 3,315
Deferred income tax............................. 454 348
Other assets.................................... 207 352
Separate account assets......................... 77,457 69,055
------- -------
Total assets.................................. $106,808 $97,956
------- -------
------- -------
Liabilities
Future policy benefits.......................... $ 3,325 $3,270
Other policyholder funds........................ 20,980 21,034
Other liabilities............................... 2,622 2,254
Separate account liabilities.................... 77,457 69,055
------- -------
Total liabilities............................. 104,384 95,613
------- -------
Stockholder's Equity
Common stock - authorized 1,000; issued and
outstanding, par value $5,690.................. 6 6
Capital surplus................................. 1,045 1,045
Accumulated other comprehensive income
Net unrealized capital gains on securities, net
of tax......................................... 177 179
Total accumulated other comprehensive income... 177 179
Retained earnings.............................. 1,196 1,113
------- -------
Total stockholder's equity.................... 2,424 2,343
------- -------
Total liabilities and stockholder's equity...... $106,808 $97,956
------- -------
------- -------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
79
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDER'S EQUITY
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
ACCUMULATED OTHER
COMPREHENSIVE
INCOME
----------------------------------------------------------------------
NET UNREALIZED
CAPITAL GAINS
(LOSSES) ON TOTAL
COMMON CAPITAL SECURITIES, NET RETAINED STOCKHOLDERS'
STOCK SURPLUS OF 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............................ -- -- -- 83 83
Other comprehensive income, net of
tax:
Change in unrealized capital gains
(losses) on securities (1)(2)....... -- -- (2) -- (2)
Total other comprehensive income...... -- -- -- -- (2)
Total Comprehensive Income.............. 81
--
------ ------ ----------- ------
Balance, March 31, 1998................. $6 $1,045 $177 $1,196 $2,424
--
--
------ ------ ----------- ------
------ ------ ----------- ------
</TABLE>
THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
ACCUMULATED OTHER
COMPREHENSIVE
INCOME
----------------------------------------------------------------------
NET UNREALIZED
CAPITAL GAINS
(LOSSES) ON TOTAL
COMMON CAPITAL SECURITIES, NET RETAINED STOCKHOLDERS'
STOCK SURPLUS 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............................ -- -- -- 63 63
Other comprehensive income, net of
tax:
Change in unrealized capital gains
(losses) on securities (1)(2)....... -- -- (87) -- (87)
Total other comprehensive income...... -- -- -- -- (87)
Total Comprehensive Income.............. -- -- -- -- 24
--
------ ------ ----------- ------
Balance March 31, 1997.................. $6 $1,045 $(57) $ 874 $1,868
--
--
------ ------ ----------- ------
------ ------ ----------- ------
</TABLE>
- ---------
(1) Unrealized gain (loss) on securities is net of tax expense (benefit) of $95
and $(34) for March 31, 1998 and 1997, respectively.
(2) Net of reclassification adjustment for gains realized in net income of $0
and $4 for March 31, 1998 and 1997, respectively.
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
80
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1998 1997
-------- --------
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C>
Operating Activities
Net income............................ $ 83 $ 63
Adjustments to Net Income:
Depreciation and amortization......... (5) 5
Net realized capital gains............ -- (4)
(Increase) decrease in deferred income
taxes................................ (102) 21
Increase in deferred policy
acquisition costs.................... (115) (128)
(Increase) decrease in premiums
receivable and agents' balances...... (5) 32
(Increase) decrease in accrued
investment income.................... (23) 57
Decrease in other assets.............. 104 25
Decrease (increase) in reinsurance
recoverables......................... 23 (112)
Increase in liabilities for future
policy benefits...................... 55 158
Increase in other liabilities......... 74 227
-------- --------
Cash provided by operating
activities......................... 89 344
-------- --------
Investing Activities
Purchases of fixed maturity
investments.......................... (2,014) (1,525)
Sales of fixed maturity investments... 1,162 985
Maturities and principal paydowns of
fixed maturity investments........... 459 664
Net (purchases) sales of other
investments.......................... (118) 111
Net sales (purchases) of short-term
investments.......................... 211 (102)
-------- --------
Cash (used for) provided by
investing activities............... (300) 133
-------- --------
Financing Activities
Net receipts from (disbursements for)
investment and universal life-type
contracts credited to (charged
against) policyholder accounts....... 209 (447)
-------- --------
Cash provided by (used for) financing
activities........................... 209 (447)
-------- --------
(Decrease) increase in cash........... (2) 30
Cash -- beginning of period........... 54 43
-------- --------
Cash -- end of period................. $ 52 $ 73
-------- --------
-------- --------
Supplemental Disclosure of Cash Flow
Information:
Net Cash Paid During the Period for:
Income taxes.......................... $ 56 $ 41
-------- --------
-------- --------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
81
- --------------------------------------------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN MILLIONS EXCEPT FOR SHARE DATA UNLESS OTHERWISE STATED)
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Hartford Life Insurance Company (the "Company") have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures which are normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules and regulations, although
the Company believes that the disclosures made are adequate to make the
information presented not misleading. In the opinion of management, these
statements include all adjustments which were normal recurring adjustments
necessary to present fairly the financial position, results of operations and
cash flows for the periods presented.
For a description of accounting policies, see Note 2 of Notes to
Consolidated Financial Statements in the Company's 1997 Form 10-K Annual Report.
Certain reclassifications have been made to prior year financial information
to conform to the current year classification of transactions and accounts.
(B) CHANGES IN ACCOUNTING PRINCIPLES
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") No. 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use". The SOP provides guidance on
accounting for the costs of internal use software and in determining whether the
software is for internal use. The SOP defines internal use software as software
that is acquired, internally developed, or modified solely to meet internal
needs and identifies stages of software development and accounting for the
related costs incurred during the stages. This statement is effective for fiscal
years beginning after December 15, 1998 and is not expected to have a material
impact on the Company's financial condition or results of operations.
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income", which
establishes standards for reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. The objective
of this statement is to report a measure of all changes in equity of an
enterprise that result from transactions and other economic events of the period
other than transactions with owners. Comprehensive income is the total of net
income and all other nonowner changes in equity. Accordingly, the Company has
reported comprehensive income in the Condensed Consolidated Statement of Changes
in Stockholder's Equity.
2. INITIAL PUBLIC OFFERING ("IPO")
On February 10, 1997, the Company's indirect parent, Hartford Life, Inc.
("Hartford Life"), filed a registration statement, as amended, with the
Securities and Exchange Commission, relating to the IPO of Hartford Life's Class
A Common Stock. Pursuant to the IPO on May 22, 1997, Hartford Life sold to the
public 26 million shares at $28.25 per share and received proceeds, net of
offering expenses, of $687. Of the proceeds, $527 was used to retire debt
related to Hartford Life's promissory notes outstanding and line of credit. The
remaining $160 was contributed by Hartford Life to Hartford Life and Accident
Insurance Company, the Company's direct parent, to support growth in its core
businesses.
The 26 million shares sold in the IPO represent approximately 18.6% of the
equity ownership in Hartford Life and approximately 4.4% of the combined voting
power of Hartford Life's Class A and Class B Common Stock. The Hartford owns all
of the 114 million outstanding shares of Class B Common Stock of Hartford Life,
representing approximately 81.4% of the equity ownership in Hartford Life and
approximately 95.6% of the combined voting power of Hartford Life's Class A and
Class B Common Stock. Holders of Class A Common Stock generally have identical
rights to the holders of Class B Common Stock except that the holders of Class A
Common Stock are entitled to one vote per share while holders of Class B Common
Stock are entitled to five votes per share on all matters submitted to a vote of
Hartford Life's stockholders.
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.
<PAGE>
82
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLAR AMOUNTS IN MILLIONS EXCEPT FOR PER SHARE DATA UNLESS OTHERWISE
STATED)
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") addresses the financial condition of the Company as of March
31, 1998, compared with December 31, 1997, and its results of operations for the
three months ended March 31, 1998 compared with the equivalent 1997 period. This
discussion should be read in conjunction with the MD&A in the Company's 1997
Form 10-K Annual Report.
Certain statements contained in this discussion, other than statements of
historical fact, are forward-looking statements. These statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and include estimates and assumptions related to economic,
competitive and legislative developments. These forward-looking statements are
subject to change and uncertainty which are, in many instances, beyond the
Company's control and have been made based upon management's expectations and
beliefs concerning future developments and their potential effect on Hartford
Life Insurance Company and subsidiaries (the "Company"). There can be no
assurance that future developments will be in accordance with management's
expectations or that the effect of future developments on the Company will be
those anticipated by management. Actual results could differ materially from
those expected by the Company, depending on the outcome of certain factors,
including those described in the forward-looking statements.
Certain reclassifications have been made to prior year financial information
to conform to the current year presentation.
INDEX
<TABLE>
<S> <C>
Consolidated Results of
Operations:....................
Operating Summary............... 8
Annuity......................... 9
Individual Life Insurance....... 10
Employee Benefits............... 10
Guaranteed Investment
Contracts...................... 11
Accounting Standards............ 11
</TABLE>
CONSOLIDATED RESULTS OF OPERATIONS:
OPERATING SUMMARY
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
MARCH 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Revenues......................................... $ 915 $ 651
Expenses......................................... 832 588
--------- ---------
Net Income..................................... $ 83 $ 63
--------- ---------
--------- ---------
</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 Company's corporate owned life insurance ("COLI") business. The Guaranteed
Investment Contracts segment consists of guaranteed rate contract ("GRC")
business that is supported by assets held in either the Company's general
account or a guaranteed separate account and includes a closed block of
guaranteed rate contracts ("Closed Book GRC"). The Company decided in 1995,
after a thorough review of its GRC business, that it would significantly de-
emphasize general account GRC, choosing to focus its distribution efforts on
other products sold through other divisions. Management expects no material
income or loss from the Guaranteed Investment Contracts segment in the future.
Revenues increased $264, or 41%, to $915 for the first quarter of 1998 from
$651 for the comparable period in 1997. This was partially due to COLI revenues
which increased $161 due to renewal premium on leveraged COLI and increased fees
associated with variable COLI sales. Excluding COLI, revenues increased $103, or
22%, over the first quarter of 1997. This increase was driven by the Annuity
segment whose revenues increased $101, or 36%, for the first quarter of 1998 as
compared to the first quarter of 1997. This increase was due to higher fee
income earned on growing annuity account values where the average account
<PAGE>
83
- --------------------------------------------------------------------------------
value grew $18.9 billion, or 37%, to $70.6 billion at March 31, 1998 from $51.7
billion at March 31, 1997 due to market appreciation and new sales. Also,
Individual Life Insurance revenues increased $17, or 15%, for the first quarter
of 1998 as compared to the first quarter of 1997 due to increased cost of
insurance charges and other fee income on the Company's growing block of
variable life business. Partially offsetting the increases discussed above was a
$20 decline in revenues related to Closed Book GRC.
Expenses increased $244, or 41%, to $832 for the first quarter of 1998 from
$588 for the comparable period in 1997. The increase was partially driven by
COLI, whose expenses increased $160 as a result of increased operating expenses
associated with significant renewal premium and variable COLI sales for the
quarter ended March 31, 1998. Excluding COLI, expenses increased $84, or 20%,
over the first quarter of 1997. Annuity expenses grew $81 primarily due to
higher amortization of deferred policy acquisition costs and operating expenses.
Individual Life Insurance expenses increased $15 primarily due to higher
benefits, claims, and claim adjustment expenses, which is consistent with the
growth in this blocks of business. Partially offsetting the increases discussed
above was a $20 decline in expenses related to Closed Book GRC.
Net income increased $20, or 32%, to $83 for the first quarter of 1998 from
$63 for the first quarter of 1997 primarily due to growth in the Annuity and the
Individual Life Insurance segments. Annuity earnings increased $20, or 47%, due
to increasing account values resulting from significant stock market
appreciation and new sales, particularly in Individual Annuity. Individual Life
Insurance earnings increased $2, or 18%, as a result of strong sales and growing
account values. Guaranteed Investment Contracts had no net income in the first
quarter of 1998 or 1997, consistent with management's expectations.
SEGMENT RESULTS
The Company's reporting segments, which reflect the management structure of
the Company, consist of Annuity, Individual Life Insurance, Employee Benefits,
Guaranteed Investment Contracts and a Corporate Operation.
Below is a summary of net income by segment.
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
MARCH 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Annuity............................................ $63 $43
Individual Life Insurance.......................... 13 11
Employee Benefits.................................. 6 6
Guaranteed Investment Contracts.................... -- --
Corporate Operation................................ 1 3
--- ---
Net Income....................................... $83 $63
--- ---
--- ---
</TABLE>
The sections that follow analyze each segment's results.
ANNUITY
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
MARCH 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Revenues......................................... $ 381 $ 280
Expenses......................................... 318 237
--------- ---------
Net Income..................................... $ 63 $ 43
--------- ---------
--------- ---------
</TABLE>
Revenues increased $101, or 36%, to $381 as of March 31, 1998 from $280 as
of March 31, 1997. Individual Annuity revenues increased $90, or 50%, over the
first quarter of 1997 primarily due to higher fee income earned on growth in
individual variable annuity account values. Average individual variable annuity
account values grew $16.9 billion, or 51%, to $50.2 billion as of March 31, 1998
from $33.3 billion as of March 31, 1997. This growth was the result of
significant market appreciation as well as strong sales of $2.4 billion in the
first quarter of 1998. Also, Group Annuity revenues increased $11, or 11%, as of
March 31, 1998 as compared to March 31, 1997 due to higher net investment income
resulting from growth in assets under management. Group Annuity average account
values grew $2.0 billion, or 22%, to $11.1 billion as March 31, 1998 from $9.1
billion as of March 31, 1997 due to market appreciation and new deposits.
Expenses increased $81, or 34%, to $318 as of March 31, 1998 from $237 as of
March 31, 1997. Benefits, claims and claim adjustment expenses increased $14
primarily due to increased interest credited on Individual Annuity general
account values, which increased $1.3 billion, or 43%, to $4.2 billion at March
31, 1998 from $2.9 billion at March 31, 1997. Amortization of DPAC increased $20
as prior and current year sales remained strong. Also, other business expenses
increased $37 as a result of the growth in this segment. However, operating
expenses as a percentage of average account value declined from 1997 levels.
Annuity net income increased $20, or 47%, to $63 as of March 31, 1998 from
$43 as of March 31, 1997 as a result of growing average account values discussed
above and operating expense efficiencies.
INDIVIDUAL LIFE INSURANCE
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
MARCH 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Revenues......................................... $ 128 $ 111
Expenses......................................... 115 100
--------- ---------
Net Income..................................... $ 13 $ 11
--------- ---------
--------- ---------
</TABLE>
<PAGE>
84
- --------------------------------------------------------------------------------
Revenues increased $17, or 15%, to $128 as of March 31, 1998 from $111 as of
March 31, 1997. This increase was primarily due to higher cost of insurance
charges and other fee income earned on the Company's growing block of variable
life insurance. Variable life average account values increased $540, or 84%, to
$1.2 billion as of March 31, 1998 from $640 as of March 31, 1997 due to market
appreciation and strong sales. Variable life product sales constituted 75%, or
$24, of total Individual Life Insurance new sales in the first quarter of 1998,
an increased of $9, or 60%, compared to the same period in 1997.
Expenses increased $15, or 15%, to $115 as of March 31, 1998 from $100 as of
March 31, 1997. This increase was primarily the result of higher benefits,
claims, and claim adjustment expenses of $20 due to the growth in this segment
as well as increased mortality experience in the first quarter of 1998. Net
income increased $2, or 18%, to $13 as of March 31, 1998 from $11 as of March
31, 1997.
EMPLOYEE BENEFITS
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
MARCH 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Revenues......................................... $ 348 $ 179
Expenses......................................... 342 173
--------- ---------
Net Income..................................... $ 6 $ 6
--------- ---------
--------- ---------
</TABLE>
Revenues increased $169, or 94%, to $348 as of March 31, 1998 from $179 as
of March 31, 1997. This was primarily due to COLI whose revenues increased $161,
or 90%, for the first quarter of 1998 as compared to the first quarter of 1997.
This increase was due to $80 of renewal premium on leveraged COLI as well as
increase in fee income of $78 related to new sales of variable COLI.
Expenses increased $169, or 98%, to $342 as of March 31, 1998 from $173 as
of March 31, 1997. COLI expenses increased $160 primarily due to higher expenses
associated with the first quarter 1998 increased variable COLI sales and
leveraged COLI renewal premium. Net income was consistent with the prior year
results.
GUARANTEED INVESTMENT CONTRACTS
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
MARCH 31,
----------------------
1998 1997
----- -----
<S> <C> <C>
Revenues........................................... $52 $72
Expenses........................................... 52 72
--- ---
Net Income....................................... $-- $--
--- ---
--- ---
</TABLE>
This segment reported no net income for the first quarter of 1998 and 1997
consistent with management's expectations that net income (loss) from Closed
Book GRC in the years subsequent to 1996 will be immaterial based on the
Company's current projections for the performance of the assets and liabilities
associated with Closed Book GRC. However, no assurance can be given that, under
certain unanticipated economic circumstances which result in the Company's
assumptions being proven inaccurate, further losses in respect of Closed Book
GRC will not occur in the future.
ACCOUNTING STANDARDS
For a discussion of accounting standards, see Note 1 of Notes to Condensed
Consolidated Financial Statements.
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for monetary and punitive damages have
been asserted. Although there can be no assurances, management, at the present
time, does not anticipate that the ultimate liability arising from such pending
or threatened litigation will have a material effect on the financial condition
or operating results of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -- See Exhibits Index
(b) Reports on Form 8-K -- None
<PAGE>
85
- --------------------------------------------------------------------------------
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>
86
- --------------------------------------------------------------------------------
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>
87
- --------------------------------------------------------------------------------
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>
88
- --------------------------------------------------------------------------------
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>
89
- --------------------------------------------------------------------------------
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>
90
- --------------------------------------------------------------------------------
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>
91
- --------------------------------------------------------------------------------
(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>
92
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("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>
93
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(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>
94
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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>
95
- --------------------------------------------------------------------------------
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.
