<PAGE>
As filed with the Securities and Exchange Commission on February 17, 1999.
File No. 333-52637
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON
FORM N-8B-2
A. Exact name of trust: Separate Account Five
B. Name of depositor: Hartford Life and Annuity Insurance Company
C. Complete address of depositor's principal executive offices:
P.O. Box 2999
Hartford, CT 06104-2999
D. Name and complete address of agent for service:
Marianne O'Doherty, Esq.
Hartford Life Insurance Companies
P.O. Box 2999
Hartford, CT 06104-2999
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b) of Rule 485
___ on ________________, 1999 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on ________________, 1999 pursuant to paragraph (a)(1) of Rule 485
___ this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
E. Title and amount of securities being registered: Pursuant to Rule 24f-2
under the Investment Company Act of 1940, the Registrant has registered an
indefinite amount of securities.
F. Proposed maximum aggregate offering price to the public of the securities
being registered: Not yet determined.
G. Amount of filing fee: Not applicable.
H. Approximate date of proposed public offering: As soon as practicable after
the effective date of this registration statement.
The registrant hereby amends this Registration Statement on such dates as may
be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
RECONCILIATION AND TIE BETWEEN
FORM N-8B-2 AND PROSPECTUS
Item No. of
Form N-8B-2 CAPTION IN PROSPECTUS
- ----------- --------------------
1. Cover page
2. Cover page
3. Not applicable
4. The Company; Distribution of the Policies
5. Summary - The Separate Account; The Separate Account-
General
6. The Separate Account - General
7. Not required by Form S-6
8. Not required by Form S-6
9. Legal Proceedings
10. Summary; The Separate Account - The Portfolios; The
Policy-Application for a Policy; Policy Benefits and
Rights; Other Matters - Voting Rights; Dividends
11. Summary; The Separate Account - The Portfolios
12. Summary; The Separate Account- The Portfolios
13. Deductions and Charges; Distribution of the Policies;
Federal Tax Considerations
14. The Policy - Application for a Policy
15. The Policy - Allocation of Premiums
16. The Separate Account - The Portfolios; The Policy -
Allocation of Premiums
17. Summary; Policy Benefits and Rights - Account Value and
Amount Payable on Surrender of the Policy, Cancellation and
Exchange Rights
<PAGE>
Item no. of
Form N-8B-2 CAPTION IN PROSPECTUS
- ----------- ---------------------
18. The Separate Account - The Portfolios; Deduction and
Charges; Federal Tax Considerations
19. Other Matters - Statements to Policy Owners
20. Not applicable
21. Policy Benefits and Rights - Policy Loans
22. Not applicable
23. Safekeeping of the Separate Account's Assets
24. Other Matters - Assignment
25. The Company
26. Not applicable
27. The Company
28. The Company
29. The Company
30. Not applicable
31. Not applicable
32. Not applicable
33. Not applicable
34. Not applicable
35. Distribution of Policies
36. Not required by Form S-6
37. Not applicable
38. Distribution of the Policies
<PAGE>
Item no. of
Form N-8B-2 CAPTION IN PROSPECTUS
- ----------- ---------------------
39. The Company; Distribution of the Policies
40. Not applicable
41. The Company; Distribution of the Policies
42. Not applicable
43. Not applicable
44. The Policy - Allocation of Premiums
45. Not applicable
46. Policy Benefits and Rights - Account Value
47. The Separate Account - The Portfolios
48. Cover Page; The Company
49. Not applicable
50. The Separate Account - General
51. Summary; The Company; The Policy; Policy Benefits and
Rights; Other Matters - Beneficiary
52. The Separate Account - The Portfolios, Investment Adviser
53. Federal Tax Considerations
54. Not applicable
55. Not applicable
56. Not required by Form S-6
57. Not required by Form S-6
58. Not required by Form S-6
59. Not required by Form S-6
<PAGE>
SELECT DIMENSIONS LIFE SERIES II
MODIFIED SINGLE PREMIUM VARIABLE LIFE
INSURANCE POLICIES
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
P.O. Box 2999
Hartford, CT 06104-2999
Telephone (800) 231-5453
- --------------------------------------------------------------------------------
This Prospectus describes Select Dimensions 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 24. A
loan, distribution or other amount received from a Modified Endowment Contract
during the life of the insured will be taxed to the extent of any accumulated
income in the 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 the Money Market Portfolio. After the right
to cancel period has expired, the amount so allocated will be transferred to the
Portfolios specified in the Policy Owner's application. There are currently 18
Sub-Accounts available under the Policy. Underlying investment portfolios
("Portfolios") are available through the Morgan Stanley Dean Witter Select
Dimensions Investment Series (the "Fund"). The following Portfolios are
available under the Policy: the Money Market Portfolio, the North American
Government Securities Portfolio, the Diversified Income Portfolio, the Balanced
Growth Portfolio, the Utilities Portfolio, the Dividend Growth Portfolio, the
Value-Added Market Portfolio, the Growth Portfolio, the American Value
Portfolio, the Mid-Cap Growth Portfolio, the Global Equity Portfolio, the
Developing Growth Portfolio, and the Emerging Markets Portfolio of the Morgan
Stanley Dean Witter Select Dimensions Investment Series; the High Yield
Portfolio, the Mid-Cap Value Portfolio and the Emerging Markets Debt Portfolio
of the Morgan Stanley Dean Witter Universal Funds, Inc., the Strategic Stock
Portfolio and the Enterprise Portfolio of the Van Kampen American Capital Life
Investment Trust.
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
Portfolios to which premiums have been allocated. The Policy Owner bears the
investment risk for all amounts allocated to the Portfolios. 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 Portfolios 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.
This prospectus is one part of a Registration Statement that we file with the
Securities and Exchange Commission. The entire Registration Statement contains
this prospectus, financial statements and other exhibits and information
regarding the Separate Account, sales loads, administrative, management and
other fees. You may view the entire Registration Statement on the Securities and
Exchange Commission website (HTTP://WWW.SEC.GOV).
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.
THIS PROSPECTUS IS VALID ONLY IF ACCOMPANIED BY THE CURRENT PROSPECTUSES OF THE
APPLICABLE ELIGIBLE PORTFOLIOS WHICH CONTAIN A FULL DESCRIPTION OF THOSE
PORTFOLIOS. ALL PROSPECTUSES SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
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.
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.
THE DATE OF THIS PROSPECTUS IS MARCH 29, 1999.
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Special Terms 3
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Summary 5
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The Company 7
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The Separate Account 7
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General 7
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The Portfolios 8
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The Investment Advisers 10
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The Policy 10
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Application for a Policy 10
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Premiums 11
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Allocation of Premiums 11
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Accumulation Unit Values 11
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Deductions and Charges 11
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Chart of Deductions and Charges 12
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Cost of Insurance Charge 12
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Administrative Charge 13
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Annual Maintenance Fee 13
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Surrender Charge 13
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Policy Owner Options 13
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Option 1 13
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Option 2 14
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Other Deductions and Charges 14
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Policy Benefits and Rights 15
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Death Benefit 15
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Account Value 15
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Transfer of Account Value 15
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Policy Loans 16
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Amount Payable on Surrender of the Policy 16
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Partial Surrenders 16
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Benefits at Maturity 17
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Lapse and Reinstatement 17
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Cancellation and Exchange Rights 17
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Suspension of Valuation, Payments and Transfers 17
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Last Survivor Policies 17
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<CAPTION>
PAGE
<S> <C>
----------------------------------------------------------------------------
Other Matters 18
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Voting Rights 18
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Statements to Policy Owners 18
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Limit on Right to Contest 18
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Misstatement as to Age and Sex 18
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Settlement Provisions 18
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Beneficiary 20
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Assignment 20
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Dividends 20
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Executive Officers and Directors 21
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Distribution of the Policies 25
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Safekeeping of the Separate Account's Assets 26
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Federal Tax Considerations 26
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General 26
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Taxation of Hartford and the Separate Account 26
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Income Taxation of Policy Benefits 26
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Last Survivor Policies 26
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Modified Endowment Contracts 26
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Estate and Generation Skipping Taxes 27
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Diversification Requirements 27
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Ownership of the Assets in the Separate Account 27
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Life Insurance Purchased for Use in Split Dollar Arrangements 28
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Federal Income Tax Withholding 28
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Non-Individual Ownership of Contracts 28
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Other 28
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Life Insurance Purchases by Nonresident Aliens and Foreign
Corporations 28
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Legal Proceedings 28
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Legal Matters 28
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Experts 29
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Year 2000 29
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Appendix A -- Illustrations of Benefits 30
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</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.
2 - PROSPECTUS
<PAGE>
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 Anniversary 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 Anniversary.
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 yearly anniversary of the Policy Date.
POLICY DATE: The issue date of the Policy.
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 1 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 the
section entitled "Deductions and Charges -- Policy Owner Options --
Unamortized Tax Charge."
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 "Deductions and Charges -- Policy
Owner Options."
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.
3 - PROSPECTUS
<PAGE>
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.
4 - PROSPECTUS
<PAGE>
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 Portfolios 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 Portfolios.
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."
THE SEPARATE ACCOUNT AND
THE PORTFOLIOS
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 18 Sub-Accounts, each investing exclusively in a Portfolio. The investment
objectives of the Portfolios are as set forth in "The Separate Account -- The
Portfolios," page 7. Applicants should read the Fund's prospectus accompanying
this Prospectus in connection with the purchase of a Policy.
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 10, and "Policy Benefits and Rights --
Lapse and Reinstatement."
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."
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."
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" and "Federal Tax Considerations."
Applicants should review the Fund's prospectus accompanying this Prospectus for
a description of the charges assessed against the assets of the Portfolios.
5 - PROSPECTUS
<PAGE>
The following table shows annual Fund operating expenses of the Portfolios:
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
<TABLE>
<CAPTION>
OTHER
MANAGEMENT EXPENSES
FEES (BEFORE ANY TOTAL FUND
(BEFORE ANY EXPENSE OPERATING
FEE WAIVERS) REIMBURSEMENT) EXPENSES (1)
------------ --------------- ------------
<S> <C> <C> <C>
MORGAN STANLEY DEAN WITTTER SELECT DIMENSIONS INVESTMENT SERIES:
Money Market
Portfolio............. 0.500% 0.050% 0.550%
North American
Government Securities
Portfolio............. 0.650% 0.610% 1.260%
Diversified Income
Portfolio............. 0.400% 0.150% 0.550%
Balanced Growth
Portfolio (2)......... 0.620% 0.110% 0.730%
Utilities Portfolio.... 0.650% 0.110% 0.760%
Dividend Growth
Portfolio............. 0.625% 0.025% 0.650%
Value-Added Market
Portfolio............. 0.500% 0.080% 0.580%
Growth Portfolio (2)... 0.810% 0.160% 0.970%
American Value
Portfolio............. 0.625% 0.055% 0.680%
Mid-Cap Growth
Portfolio (3)......... 0.750% 0.370% 1.120%
Global Equity
Portfolio............. 1.000% 0.130% 1.130%
Developing Growth
Portfolio............. 0.500% 0.100% 0.600%
Emerging Markets
Portfolio............. 1.250% 0.460% 1.710%
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.:
High Yield Portfolio
(4)................... 0.500% 1.180% 1.680%
Mid-Cap Value Portfolio
(4)................... 0.750% 1.380% 2.130%
Emerging Markets Debt
Portfolio (4)......... 0.800% 1.260% 2.060%
VAN KAMPEN AMERICAN CAPITAL
LIFE INVESTMENT TRUST:
Strategic Stock
Portfolio (5)......... 0.500% 2.090% 2.590%
Enterprise Portfolio
(5)................... 0.500% 0.170% 0.670%
</TABLE>
- ------------------------
(1) Management Fees generally represent the fees paid to the investment adviser
or its affiliates for investment and administrative services provided. Other
Expenses are expenses (other than Management Fees) which are deducted from
the fund including legal, accounting and custodian fees. For a complete
description of the nature of the services provided in consideration of the
operating expenses deducted, please see the Fund prospectuses.
(2) On March 2, 1998, the Balanced Portfolio was renamed the Balanced Growth
Portfolio. As of that date, its Management Fee was lowered from 0.75% to
0.60%. Also, on March 2, 1998, the Core Equity Portfolio was renamed the
Growth Portfolio. As of that date, its Management Fee was lowered from 0.85%
to 0.80%.
(3) The Investment Manager has undertaken to assume all expenses of the Mid-Cap
Growth Portfolio and waive the compensation provided for that Portfolio in
its Management Agreement with the Portfolio until such time as the Portfolio
has $50 million of net assets or until April 20, 1999, whichever occurs
first.
(4) With respect to the High Yield, Mid-Cap Value and Emerging Markets Debt
Portfolios, the investment advisers have voluntarily agreed to waive their
investment advisory fees and to reimburse the Portfolios if such fees would
cause their respective "Total Fund Operating Expenses" to exceed those set
forth in the following table. Due to such waivers and reimbursements, the
actual Management Fees and Other Expenses paid by the Portfolios for the
fiscal year ended December 31, 1998 were as set forth below:
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER OPERATING
PORTFOLIO FEES EXPENSES EXPENSES
- ----------------------------- ------------ ----------- -----------
<S> <C> <C> <C>
High Yield................... 0.000% 0.800% 0.800%
Mid-Cap Value................ 0.000% 1.050% 1.050%
Emerging Markets Debt........ 0.090% 1.210% 1.300%
</TABLE>
(5) With respect to the Strategic Stock Portfolio and the Enterprise Portfolio,
the investment adviser, Van Kampen American Capital Asset Management, Inc.,
has voluntarily agreed to waive its investment advisory fees and to
reimburse the Portfolios if such fees would cause their respective "Total
Fund Operating Expenses" to exceed those set forth in the following table:
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER OPERATING
PORTFOLIO FEES EXPENSES EXPENSES
- ----------------------------- ------------ ----------- -----------
<S> <C> <C> <C>
Strategic Stock.............. 0.000% 0.650% 0.650%
Enterprise................... 0.430% 0.170% 0.600%
</TABLE>
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."
For a discussion of the tax consequences of surrender, or a partial surrender,
of the Policy see "Federal Tax Considerations."
6 - PROSPECTUS
<PAGE>
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."
ACCOUNT VALUE
The Account Value will increase or decrease to reflect the investment experience
of the Portfolios 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 Portfolios. See "Policy Benefits
and Rights -- Account Value."
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 Cash Value. See "Policy Benefits and Rights -- Policy
Loans."
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" and "Policy Benefits and Rights -- Lapse and Reinstatement."
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 Portfolios 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."
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."
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
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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
7 - PROSPECTUS
<PAGE>
the Policies. The assets of the Separate Account are not chargeable with
liabilities arising out of any other business which Hartford may conduct.
THE PORTFOLIOS
The underlying investment for the Policies are shares of the Morgan Stanley Dean
Witter Select Dimensions Investment Series, the Morgan Stanley Dean Witter
Universal Funds, Inc., and Van Kampen American Capital Life Investment Trust,
all open-ended management investment companies. The underlying Portfolios
corresponding to each Sub-Account and their investment objectives are described
below. Hartford reserves the right, subject to compliance with the law, to offer
additional portfolios with differing investment objectives. The Portfolios may
not be available in all states.
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES:
MONEY MARKET PORTFOLIO
Seeks high current income, preservation of capital and liquidity by investing in
the following money market instruments: U.S. Government securities, obligations
of U.S. regulated banks and savings institutions having total assets of more
than $1 billion, or less than $1 billion if such are fully federally insured as
to principal (the interest may not be insured) and high grade corporate debt
obligations maturing in thirteen months or less.
NORTH AMERICAN GOVERNMENT SECURITIES PORTFOLIO
Seeks to earn a high level of current income while maintaining relatively low
volatility of principal, by investing primarily in investment grade fixed-income
securities issued or guaranteed by the U.S., Canadian or Mexican governments.
DIVERSIFIED INCOME PORTFOLIO
Seeks, as a primary objective, to earn a high level of current income and, as a
secondary objective, to maximize total return, but only to the extent consistent
with its primary objective, by equally allocating its assets among three
separate groupings of fixed-income securities. Up to one-third of the securities
in which the Diversified Income Portfolio may invest will include securities
rated Baa/BBB or lower. See the Special Considerations for investments for high
yield securities disclosed in the Fund's prospectus.
BALANCED GROWTH PORTFOLIO
Seeks to provide capital growth with reasonable current income by investing,
under normal market conditions, at least 60% of its total assets in a
diversified portfolio of common stocks of companies which have a record of
paying dividends and, in the opinion of the Investment Manager, have the
potential for increasing dividends and in securities convertible into common
stock, and at least 20% of its total assets in investment grade fixed-income
(fixed-rate and adjustable-rate) securities such as corporate notes and bonds
and obligations issued or guaranteed by the U.S. Government, its agencies and
its instrumentalities.
UTILITIES PORTFOLIO
Seeks to provide current income and long-term growth of income and capital by
investing in equity and fixed-income securities of companies in the public
utilities industry.
DIVIDEND GROWTH PORTFOLIO
Seeks to provide reasonable current income and long-term growth of income and
capital by investing primarily in common stock of companies with a record of
paying dividends and the potential for increasing dividends.
VALUE-ADDED MARKET PORTFOLIO
Seeks to achieve a high level of total return on its assets through a
combination of capital appreciation and current income, by investing, on an
equally-weighted basis, in a diversified portfolio of common stocks of the
companies which are represented in the Standard & Poor's 500 Composite Stock
Price Index.
GROWTH PORTFOLIO
Seeks long-term growth of capital by investing primarily in common stocks and
securities convertible into common stocks issued by domestic and foreign
companies.
AMERICAN VALUE PORTFOLIO
Seeks long-term capital growth consistent with an effort to reduce volatility,
by investing principally in common stock of companies in industries which, at
the time of the investment, are believed to be attractively valued given their
above average relative earnings growth potential at that time.
MID-CAP GROWTH PORTFOLIO
Seeks long-term capital growth by investing primarily in equity securities of
"mid-cap" companies (that is, companies whose equity market capitalization falls
within the range of $250 million to $5 billion).
GLOBAL EQUITY PORTFOLIO
Seeks a high level of total return on its assets primarily through long-term
capital growth and, to a lesser extent, from income, through investments in all
types of common stocks and equivalents (such as convertible securities and
warrants), preferred stocks and bonds and other debt obligations of domestic and
foreign companies, governments and international organizations.
DEVELOPING GROWTH PORTFOLIO
Seeks long-term capital growth by investing primarily in common stocks of
smaller and medium-sized companies that, in the
8 - PROSPECTUS
<PAGE>
opinion of the Investment Manager, have the potential for growing more rapidly
than the economy and which may benefit from new products or services,
technological developments or changes in management.
EMERGING MARKETS PORTFOLIO
Seeks long-term capital appreciation by investing primarily in equity securities
of companies in emerging market countries. The Emerging Markets Portfolio may
invest up to 35% of its total assets in high risk fixed-income securities that
are rated below investment grade or are unrated (commonly referred to as "junk
bonds"). See the Special Considerations for investments in high yield securities
disclosed in the Fund's prospectus.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.:
HIGH YIELD PORTFOLIO
Seeks above-average total return over a market cycle of three to five years by
investing primarily in a diversified portfolio of high yield securities,
including corporate bonds and other fixed income securities and derivatives.
High yield securities are rated below investment grade and are commonly referred
to as "junk bonds". The Portfolio's average weighted maturity will ordinarily
exceed five years. See the Special Considerations for investments in high yield
securities disclosed in the Fund's prospectus.
MID-CAP VALUE PORTFOLIO
Seeks above-average total return over a market cycle of three to five years by
investing in common stocks and other equity securities of issuers with equity
capitalizations in the range of the companies represented in the S&P MidCap 400
Index.
EMERGING MARKETS DEBT PORTFOLIO
Seeks high total return by investing primarily in fixed income securities of
government and government related issuers located in emerging market countries.
Using macroeconomic and fundamental analysis, the adviser seeks to identify
developing countries that are undervalued and have attractive or improving
fundamentals. After the country allocation is determined, the sector and
security selection is made within each country.
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST:
STRATEGIC STOCK PORTFOLIO
Seeks to provide investors with an above average total return through a
combination of potential capital appreciation and dividend income, consistent
with the preservation of invested capital by investing primarily in a portfolio
of dividend paying equity securities included in the Dow Jones Industrial
Average or in the Morgan Stanley Capital International USA Index.
ENTERPRISE PORTFOLIO
Seeks capital appreciation through investments in securities believed by the
investment advisor to have above average potential for capital appreciation.
The Portfolios are available only to serve as the underlying investment for
variable annuity Policies and variable life policies. A full description of the
Portfolios, including their investment objectives, policies and restrictions,
risks, charges and expenses and other aspects of their operation, is contained
in the accompanying Fund prospectus which should be read in conjunction with
this Prospectus before investing, and in the Fund Statement of Additional
Information which may be ordered without charge from the Fund.
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 Portfolios simultaneously. Although Hartford and the Fund do not currently
foresee any such disadvantages either to variable life insurance Policy Owners
or variable annuity contract owners, the Fund's Board of Trustees intends to
monitor events in order to identify any material conflicts between variable life
Policy Owners and variable annuity Policy owners and to determine what action,
if any, should be taken in response thereto. If the Fund's Board of Trustees
were to conclude that separate Portfolios should be established for variable
life and variable annuity separate accounts, Hartford will bear the attendant
expenses.
All investment income of and other distributions to each Sub-Account of the
Separate Account arising from the applicable Portfolio are reinvested in shares
of that Portfolio at net asset value. The income and both realized gains or
losses on the assets of each Sub-Account of the Separate 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 Portfolios in connection with
premiums allocated to the applicable Sub-Account in accordance with Policy
Owners' directions and will redeem shares in the Portfolios to meet Policy
obligations or make adjustments in reserves, if any. The Portfolios are required
to redeem Portfolio 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. Hartford may substitute
shares of another Portfolio for shares already purchased, or to be purchased in
the future, under the Policies. No substitution of securities will take place
without notice to and consent of Policy Owners and without prior approval of the
Securities and Exchange Commission to the extent required by the Investment
Company Act of 1940. Subject to Policy Owner approval, Hartford also reserves
the right to end the registration under the Investment Company Act of 1940 of
the Separate Account or any other separate accounts of which it is the depositor
and which may fund the Policies.
9 - PROSPECTUS
<PAGE>
Each Portfolio is subject to investment restrictions which may not be changed
without the approval of a majority of the shareholders of the Fund. See the
Fund's prospectus accompanying this Prospectus.
THE INVESTMENT ADVISERS
Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors"), a Delaware
Corporation, whose address is Two World Trade Center, New York, New York 10048,
is the Investment Manager for the Money Market Portfolio, the North American
Government Securities Portfolio, the Diversified Income Portfolio, the Balanced
Growth Portfolio, the Utilities Portfolio, the Dividend Growth Portfolio, the
Value-Added Market Portfolio, the Growth Portfolio, the American Value
Portfolio, the Mid-Cap Growth Portfolio, the Global Equity Portfolio, the
Developing Growth Portfolio, and the Emerging Markets Portfolio of the Morgan
Stanley Dean Witter Select Dimensions Investment Series (the "Morgan Stanley
Dean Witter Portfolios"). MSDW Advisors was incorporated in July, 1992 and is a
wholly-owned subsidiary of Morgan Stanley Dean Witter & Co. ("MSDW")
MSDW Advisors provides administrative services, manages the Dean Witter
Portfolios' business affairs and manages the investment of the Morgan Stanley
Dean Witter Portfolios' assets, including the placing of orders for the purchase
and sales of portfolio securities. MSDW Advisors has retained Morgan Stanley
Dean Witter Services Company Inc., its wholly-owned subsidiary, to perform the
aforementioned administrative services for the Dean Witter Portfolios. For its
services, the Morgan Stanley Dean Witter Portfolios pay MSDW Advisors a monthly
fee. See the accompanying Fund prospectus for a more complete description of
MSDW Advisors and the respective fees of the Morgan Stanley Dean Witter
Portfolios.
With regard to the North American Government Securities Portfolio and the
Emerging Markets Portfolio, TCW Funds Management ("TCW"), under a Sub-Advisory
Agreement with MSDW Advisors, provides these Portfolios with investment advice
and portfolio management, in each case subject to the overall supervision of the
MSDW Advisors. TCW's address is 865 South Figueroa Street, Suite 1800, Los
Angeles, California 90017.
With regard to the Growth Portfolio, Morgan Stanley Dean Witter Investment
Management Inc. ("MSDW Investment Management"), under a Sub-Advisory Agreement
with MSDW Advisors, provides the Growth Portfolio with investment advice and
portfolio management, subject to the overall supervision of MSDW Advisors. MSDW
Investment Management, like MSDW Advisors, is a wholly-owned subsidiary of MSDW.
MSDW Investment Management's address is 1221 Avenue of the Americas, New York,
New York 10020.
In addition to acting as the Sub-Advisor for the Growth Portfolio, MSDW
Investment Management, pursuant to an Investment Advisory Agreement with the
Morgan Stanley Dean Witter Universal Funds, Inc., is the investment adviser for
the Emerging Markets Debt Portfolio. As the investment adviser, MSDW Investment
Management, provides investment advice and portfolio management services for the
Emerging Markets Debt Portfolio, subject to the supervision of the Morgan
Stanley Dean Witter Universal Fund's Board of Directors.
The investment adviser for the High Yield Portfolio and the Mid-Cap Value
Portfolio is Miller Anderson & Sherrerd, LLP ("MAS"). MAS is a Pennsylvania
limited liability partnership founded in 1969 with its principal offices at One
Tower Bridge, West Conshohocken, Pennsylvania 19428. MAS provides investment
advisory services to employee benefit plans, endowment funds, foundations and
other institutional investors and has served as an investment advisor to several
open-end investment companies. MAS is an indirect wholly-owned subsidiary of
MSDW.
The Investment Adviser with respect to the Strategic Stock Portfolio and the
Enterprise Portfolio is Van Kampen American Capital Asset Management, Inc., a
wholly-owned subsidiary of Van Kampen American Capital, Inc. Van Kampen American
Capital, Inc. is an indirect wholly-owned subsidiary of MSDW. Van Kampen
American Capital, Inc. is a diversified asset management company with more than
two million retail investor accounts, extensive capabilities for managing
institutional portfolios, and more than $60 billion under management or
supervision. Van Kampen American Capital, Inc.'s more than 50 open-end and 38
closed end funds and more than 2,500 unit investment trusts are professionally
distributed by leading financial advisers nationwide.
THE POLICY
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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
10 - PROSPECTUS
<PAGE>
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.
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 the Money Market Portfolio. After the expiration of the right
to cancel period the Account Value in the Money Market Portfolio will be
allocated among the Portfolios 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 the Money Market Portfolio.) 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 Fund's prospectus accompanying
this Prospectus for a description of how the assets of each Fund are valued
since such determination has a direct bearing on the Accumulation Unit Value of
the Sub-Account and therefore the Account Value of a Policy. See also, "Policy
Benefits and Rights -- Account Value."
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
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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
11 - PROSPECTUS
<PAGE>
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."
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.
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
Under Option 2: Receipt of premium Account Value for Policy
payment Years 1-10
Under Option 2: 4% of each
premium payment in all
Policy Years
Mortality and Expense Yes Monthly Under Option 1: .90% of
Risk Charge Account 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 surrender A percentage of the Account
of the Policy Value 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. The guaranteed cost of
insurance charge is a guaranteed maximum monthly rate, multiplied by the
Coverage Amount on the Policy Date or any Monthly Activity Date. A table of
guaranteed maximum 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. For standard risks that require full underwriting, the guaranteed
maximum cost of insurance rate is 100% of the 1980 Commissioner's Standard
Ordinary Smoker/Nonsmoker Sex Distinct Age Last Birthday Mortality Table (1980
CS0 Table). For standard risks eligible for simplified underwriting, the
guaranteed cost of insurance rate is
12 - PROSPECTUS
<PAGE>
125% of the 1980 CSO Table through age 90, grading to 100% of the 1980 CSO Table
at age 100. Substandard risks will be assessed a higher guaranteed maximum cost
of insurance rate that will not exceed rates based on a multiple of the 1980 CSO
Table. The multiple will be based on the insured's substandard rating. Unisex
rates may be required in some states.
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%
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.")
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."
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
13 - PROSPECTUS
<PAGE>
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 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.
This Option may not be available in all states.
OTHER DEDUCTIONS OR CHARGES
CHARGES AGAINST THE PORTFOLIOS: The Separate Account purchases shares of the
Portfolios at net asset value. The net asset value of Portfolio shares reflects
investment advisory fees and administrative expenses already deducted from the
assets of the Portfolios. These charges are described in the Fund's 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.
14 - PROSPECTUS
<PAGE>
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 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."
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 Portfolios,
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 Portfolios 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."
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
15 - PROSPECTUS
<PAGE>
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 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."
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."
If the Policy Owner chooses to apply the surrender proceeds to a payment option
(see "Other Matters -- Settlement Provisions"), 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" and "Deductions and Charges --
Policy Owner Option 1." For a discussion of the tax consequences of partial
surrenders, see "Federal Tax Considerations."
16 - PROSPECTUS
<PAGE>
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."
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."
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
Portfolios 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."
17 - PROSPECTUS
<PAGE>
OTHER MATTERS
--------------------------------------------------------------------
VOTING RIGHTS
In accordance with its interpretation of presently applicable law, Hartford will
vote the shares of the Portfolios at regular and special meetings of the
shareholders of the Portfolios 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 Portfolios. 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 Portfolios in its own
right, it may elect to do so.
The voting interests of the Policy Owner (or the assignee) in the Portfolios
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") will not be considered in determining the
voting interests of the Policy Owner. Policy Owners should review the Fund's
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 Portfolios or to approve or disapprove an
investment advisory Policy for the Portfolios.
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 Portfolios 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.
The following options are available under the Policies (Hartford may offer other
payment options):
18 - PROSPECTUS
<PAGE>
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 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
19 - PROSPECTUS
<PAGE>
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.
20 - PROSPECTUS
<PAGE>
EXECUTIVE OFFICERS AND DIRECTORS
--------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITION WITH HARTFORD, OTHER BUSINESS PROFESSION, VOCATION OR EMPLOYMENT
NAME, AGE YEAR OF ELECTION FOR PAST 5 YEARS; OTHER DIRECTORSHIPS
- ---------------------------------- ---------------------------------- ---------------------------------------------------
<S> <C> <C>
Bossen, Wendell J., 64 Vice President, 1995** Vice President (1992-Present), Hartford Life and
Accident Insurance Company; Vice President
(1992-Present), Hartford Life Insurance Company;
President (1992-Present), International Corporate
Marketing Group, Inc.
Boyko, Gregory A., 46 Senior Vice President, Vice President & Controller (1995-1997), Hartford;
Director, 1997* Director (1997-Present); Senior Vice President,
Chief Financial Officer & Treasurer
(1997-Present); Vice President & Controller
(1995-1997), Hartford Life and Accident Insurance
Company; Director (1997-Present); Senior Vice
President, Chief Financial Officer & Treasurer
(1997-Present); Vice President and Controller
(1995-1997), Hartford Life Insurance Company;
Senior Vice President, Chief Financial Officer &
Treasurer (1997-Present), Hartford Life, Inc.;
Chief Financial Officer (1994-1995), IMG American
Life; Senior Vice President (1992-1994),
Connecticut Mutual Life Insurance Company.
Cummins, Peter W., 60 Senior Vice President, 1997 Vice President (1993-1997), Hartford; Senior Vice
President, (1997-Present); Vice President
(1989-1997), Hartford Life and Accident Insurance
Company; Senior Vice President (1997-Present);
Vice President (1989-1997); Senior Vice President
(1997-Present); Vice President (1989-1997),
Hartford Life Insurance Company.
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 (1994-1997); Assistant Vice President
(1992-1994); Director of Human Resources
(1991-Present), Hartford Life and Accident
Insurance Company; Senior Vice President
(1997-Present); Vice President (1994-1997);
Assistant Vice President (1992-1994); Director of
Human Resources (1991-Present), Hartford Life
Insurance Company; Vice President, Human
Resources (1997-Present), Hartford Life, Inc.
Dooley, James R., 61 Vice President, 1993 Director, Information Services (1973-1997),
Hartford Life Insurance Company.
Fitch, Timothy M., 45 Vice President, 1995 Vice President (1995-Present); Actuary
Actuary, 1997 (1994-Present); 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.
</TABLE>
21 - PROSPECTUS
<PAGE>
<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>
Foy, David T., 31 Senior Vice President, 1998 Senior Vice President (1998-Present), Vice
President (1998), Assistant Vice President
(1995-1998), Hartford; Senior Vice President
(1998-Present), Hartford Life and Accident
Insurance Company; Director, Strategic Planning
Corporate Finance (1995-1996), IA Product
Development (1994-1995), Hartford; Various
Actuarial Roles (1989-1993), Milliman &
Robertson.
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-Present), Director
Sales & Marketing (1993-Present) Hartford Life
Insurance Company; Assistant Vice President
(1995-1997), Hartford Life and Accident Insurance
Company.
Godkin, Lynda, 44 Senior Vice President, 1997 Assistant General Counsel and Secretary
General Counsel, 1996 (1994-1995), Hartford; Director (1997-Present);
Corporate Secretary, 1996 Senior Vice President (1997-Present); General
Director, 1997* Counsel (1996-Present); 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 Vice President, Senior Vice President, New Business
and Claims (1993-1996), National Life of Vermont;
Vice President (1996-Present), Hartford.
</TABLE>
22 - PROSPECTUS
<PAGE>
<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>
Hunt, Mark E., 37 Vice President, 1998 Assistant Vice President (1997-1998), Hartford;
Vice President (1998-Present), Assistant Vice
President (1997-1998), Hartford Life and Accident
Insurance Company; Director Asset
Allocation/Asset Liability Management Senior
Investment Officer, Associate Actuary, Assistant
Actuary, Senior Actuary Associate (1987-1996),
Connecticut Mutual Life.
Joyce, Stephen T., 39 Vice President, 1997 Director of Annuity Bank Distribution
(1990-Present), Assistant Vice President
(1994-1997), Hartford; Assistant Vice President
(1994-1997), Hartford Life and Accident Insurance
Company.
Keeler, Michael D., 37 Vice President, 1998 Vice President (1998-Present); Hartford Life and
Accident Insurance Company; Vice President
(1995-1997), Providian Insurance; Supervisor/
Manager (1985-1995), U.S. West Communications.
Kerzner, Robert A., 46 Senior Vice President, 1998 Senior Vice President (1998-Present); Vice
Vice President, 1997 President (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 Director and Assistant Vice President
(1995-Present), Hartford; Vice President
(1994-1995), Fidelity Investments; Actuary
(1990-1994), Aetna Life and Casualty.
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.
Marra, Thomas M., 39 Executive Vice President, 1996 Senior Vice President (1993-1996); Director of
Director, Individual Life and Individual Annuities (1991-1993), Hartford;
Annuity Division, 1993 Director (1994-Present); Executive Vice President
Director, 1994* (1995-Present); 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.
</TABLE>
23 - PROSPECTUS
<PAGE>
<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>
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
Chief Actuary, 1994 President (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;
Chief Executive Director Chief Executive (1981-Present);
Officer, 1997 President (1989-Present); Chief Executive Officer
Director, 1985* (1997-Present); Chief Operating Officer
(1989-1997), Hartford Life and Accident Insurance
Company; Director (1981-Present); President
(1989-Present), Chief Executive Officer
(1997-Present); Chief Operating Officer
(1989-1997), Hartford Life Insurance Company;
Chief Executive Officer and President and
Director (1997-Present), Hartford Life, Inc.
Welnicki, Raymond P., 49 Senior Vice President & Vice President (1993-1994), Hartford; Director
Director, Employee Benefit (1994-Present); Senior Vice President
Division, 1994 (1995-Present); Director, Employee Benefit
Director, 1994* Division (1997-Present); Vice 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.
</TABLE>
24 - PROSPECTUS
<PAGE>
<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>
Zlatkus, Lizabeth H., 39 Senior Vice President, 1997 Vice President (1994-1997); Assistant Vice
Director, 1994* President (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
(1991-1996), 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.
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.
25 - PROSPECTUS
<PAGE>
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"). 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 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
26 - PROSPECTUS
<PAGE>
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.
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
27 - PROSPECTUS
<PAGE>
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.
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.
28 - PROSPECTUS
<PAGE>
EXPERTS
--------------------------------------------------------------------
The audited financial statements included in this registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory financial statements of
Hartford Life and Annuity Insurance Company (formerly ITT Hartford Life and
Annuity Insurance Company) which states the statutory financial statements are
presented in accordance with statutory accounting practices prescribed or
permitted by the National Association of Insurance Commissioners and the State
of Connecticut Insurance Department, and are not presented in accordance with
generally accepted accounting principles. The principal business address of
Arthur Andersen LLP is One Financial Plaza, Hartford, Connecticut 06103.
The hypothetical Policy illustrations included in this Prospectus and the
registration statement with respect to the Separate Account have been approved
by Michael Winterfield, FSA, MAAA, Assistant Vice President and Director,
Individual Annuity Product Management, for Hartford, and are included in
reliance upon his opinion as to their reasonableness.
YEAR 2000
--------------------------------------------------------------------
The Year 2000 issue relates to the ability or inability of computer systems to
properly process information and data containing or related to dates beginning
with the year 2000 and beyond. The Year 2000 issue exists because, historically,
many computer systems that are in use today were developed years ago when a year
was identified using a two-digit field rather than a four-digit field. As
information and data containing or related to the century date are introduced to
computer hardware, software and other systems, date sensitive systems may
recognize the year 2000 as 1900, or not at all, which may result in computer
systems processing information incorrectly. This, in turn, may significantly and
adversely affect the integrity and reliability of information databases and may
result in a wide variety of adverse consequences to a company. In addition, Year
2000 problems that occur with third parties with which a company does business,
such as suppliers, computer vendors and others, may also adversely affect any
given company.
As an insurance and financial services company, Hartford has thousands of
individual and business customers that have purchased or invested in insurance
policies, annuities, mutual funds and other financial products. Nearly all of
these policies and products contain date sensitive data, such as policy
expiration dates, birth dates, premium payments dates and the like. In addition,
Hartford has business relationships with numerous third parties that affect
virtually all aspects of its business, including, without limitation, suppliers,
computer hardware and software vendors, insurance agents and brokers, securities
broker-dealers and other distributors of financial products.
Beginning in 1990, Hartford began working on making its computer systems Year
2000 ready, either by installing new programs or by replacing systems. In
January 1998, Hartford commenced a company-wide program to further identify,
assess and remediate the impact of Year 2000 problems in all of Hartford's
business segments. Hartford currently anticipates that this internal program
will be substantially completed by the end of 1998, and testing of computer
systems will continue through 1999.
In addition, as part of its Year 2000 program, Hartford is identifying third
parties with which it has significant business relations in order to attempt to
assess any potential impact on Hartford as a result of such third-party Year
2000 issues and remediation plans. Hartford currently anticipates that it will
substantially complete this evaluation by the end of 1998, and will conduct
systems testing with certain third parties through 1999. Hartford does not have
control over these third parties and, as a result, Hartford cannot currently
determine to what extent future operating results may be adversely affected by
the failure of these third parties to successfully address their Year 2000
issues. Hartford will continue to assess Year 2000 risk exposures related to its
own operations and its third-party relationships and is in the process of
developing contingency plans.
The costs of addressing the Year 2000 issue that have been incurred through the
six months ended June 30, 1998 have not been material to Hartford's financial
condition or results of operations. Hartford will continue to incur costs
related to its Year 2000 efforts and does not anticipate that the costs to be
incurred will be material to its financial condition or results of operations.
29 - PROSPECTUS
<PAGE>
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 preferred age 55, a female preferred age 55 and a
male preferred age 65 with Face Amounts of $44,053, $34,014 and $20,000,
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 $45,454 and $28,329.
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 Portfolios for investment
advisory and administrative services fees. The gross annual investment return
rates of 0%, 6% and 12% on the Fund's assets are equal to net annual investment
return rates (net of the 0.80% average daily charge) of -0.80%, 5.20% and
11.20%, 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."
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.
30 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
SINGLE LIFE OPTION
POLICY OWNER OPTION: 1
$10,000 INITIAL PREMIUM
ISSUE AGE: 55 MALE PREFERRED
INITIAL FACE AMOUNT: $44,053
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.20% 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 10,809 9,816 44,053 10,749 9,757 44,053
2 11,025 11,687 10,703 44,053 11,560 10,579 44,053
3 11,576 12,638 11,667 44,053 12,438 11,470 44,053
4 12,155 13,669 12,864 44,053 13,388 12,588 44,053
5 12,763 14,787 14,002 44,053 14,419 13,639 44,053
6 13,401 15,998 15,438 44,053 15,537 14,982 44,053
7 14,071 17,311 16,781 44,053 16,750 16,224 44,053
8 14,775 18,734 18,441 44,053 18,066 17,775 44,053
9 15,513 20,277 20,027 44,053 19,495 19,246 44,053
10 16,289 21,950 21,950 44,053 21,049 21,049 44,053
11 17,103 24,002 24,002 44,053 22,926 22,926 44,053
12 17,959 26,249 26,249 44,053 24,993 24,993 44,053
13 18,856 28,710 28,710 44,053 27,276 27,276 44,053
14 19,799 31,412 31,412 44,053 29,803 29,803 44,053
15 20,789 34,400 34,400 46,097 32,607 32,607 44,053
16 21,829 37,691 37,691 48,999 35,718 35,718 46,434
17 22,920 41,294 41,294 52,856 39,130 39,130 50,087
18 24,066 45,237 45,237 56,999 42,865 42,865 54,010
19 25,270 49,552 49,552 61,445 46,953 46,953 58,222
20 26,533 54,308 54,308 66,256 51,459 51,459 62,780
25 33,864 85,630 85,630 99,332 81,130 81,130 94,111
35 55,160 212,545 212,545 225,298 201,239 201,239 213,314
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
31 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
SINGLE LIFE OPTION
POLICY OWNER OPTION: 1
$10,000 INITIAL PREMIUM
ISSUE AGE: 55 MALE PREFERRED
INITIAL FACE AMOUNT: $44,053
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.20% 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 10,225 9,245 44,053 10,163 9,184 44,053
2 11,025 10,455 9,496 44,053 10,320 9,364 44,053
3 11,576 10,692 9,754 44,053 10,471 9,538 44,053
4 12,155 10,934 10,170 44,053 10,613 9,854 44,053
5 12,763 11,182 10,443 44,053 10,746 10,011 44,053
6 13,401 11,437 10,923 44,053 10,866 10,358 44,053
7 14,071 11,699 11,211 44,053 10,972 10,490 44,053
8 14,775 11,967 11,707 44,053 11,059 10,804 44,053
9 15,513 12,242 12,011 44,053 11,124 10,896 44,053
10 16,289 12,523 12,523 44,053 11,162 11,162 44,053
11 17,103 12,942 12,942 44,053 11,262 11,262 44,053
12 17,959 13,375 13,375 44,053 11,332 11,332 44,053
13 18,856 13,824 13,824 44,053 11,368 11,368 44,053
14 19,799 14,289 14,289 44,053 11,364 11,364 44,053
15 20,789 14,770 14,770 44,053 11,314 11,314 44,053
16 21,829 15,269 15,269 44,053 11,208 11,208 44,053
17 22,920 15,786 15,786 44,053 11,037 11,037 44,053
18 24,066 16,321 16,321 44,053 10,788 10,788 44,053
19 25,270 16,875 16,875 44,053 10,445 10,445 44,053
20 26,533 17,449 17,449 44,053 9,992 9,992 44,053
25 33,864 20,644 20,644 44,053 5,320 5,320 44,053
35 55,160 28,994 28,994 44,053 -- -- --
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF NSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 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.
32 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
SINGLE LIFE OPTION
POLICY OWNER OPTION:1
$10,000 INITIAL PREMIUM
ISSUE AGE: 55 MALE PREFERRED
INITIAL FACE AMOUNT: $44,053
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.80% 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 9,718 8,749 44,053 9,655 8,688 44,053
2 11,025 9,443 8,504 44,053 9,302 8,366 44,053
3 11,576 9,175 8,265 44,053 8,941 8,034 44,053
4 12,155 8,914 8,180 44,053 8,569 7,841 44,053
5 12,763 8,659 7,951 44,053 8,186 7,484 44,053
6 13,401 8,411 7,927 44,053 7,789 7,311 44,053
7 14,071 8,169 7,708 44,053 7,374 6,919 44,053
8 14,775 7,933 7,693 44,053 6,939 6,704 44,053
9 15,513 7,703 7,484 44,053 6,479 6,263 44,053
10 16,289 7,479 7,479 44,053 5,991 5,991 44,053
11 17,103 7,334 7,334 44,053 5,515 5,515 44,053
12 17,959 7,191 7,191 44,053 4,999 4,999 44,053
13 18,856 7,050 7,050 44,053 4,437 4,437 44,053
14 19,799 6,912 6,912 44,053 3,824 3,824 44,053
15 20,789 6,775 6,775 44,053 3,152 3,152 44,053
16 21,829 6,641 6,641 44,053 2,412 2,412 44,053
17 22,920 6,509 6,509 44,053 1,593 1,593 44,053
18 24,066 6,379 6,379 44,053 681 681 44,053
19 25,270 6,251 6,251 44,053 -- -- --
20 26,533 6,124 6,124 44,053 -- -- --
25 33,864 5,522 5,522 44,053 -- -- --
35 55,160 4,449 4,449 44,053 -- -- --
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 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.
33 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
SINGLE LIFE OPTION
POLICY OWNER OPTION: 2
$10,000 INITIAL PREMIUM
ISSUE AGE: 55 MALE PREFERRED
INITIAL FACE AMOUNT: $44,053
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.20% 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 10,444 9,694 44,053 10,378 9,628 44,053
2 11,025 11,365 10,615 44,053 11,226 10,476 44,053
3 11,576 12,369 11,619 44,053 12,151 11,401 44,053
4 12,155 13,465 12,865 44,053 13,159 12,559 44,053
5 12,763 14,661 14,061 44,053 14,261 13,661 44,053
6 13,401 15,966 15,566 44,053 15,464 15,064 44,053
7 14,071 17,389 16,989 44,053 16,780 16,380 44,053
8 14,775 18,942 18,742 44,053 18,218 18,018 44,053
9 15,513 20,637 20,437 44,053 19,793 19,593 44,053
10 16,289 22,485 22,485 44,053 21,519 21,519 44,053
11 17,103 24,589 24,589 44,053 23,449 23,449 44,053
12 17,959 26,892 26,892 44,053 25,577 25,577 44,053
13 18,856 29,414 29,414 44,053 27,927 27,927 44,053
14 19,799 32,192 32,192 44,426 30,531 30,531 44,053
15 20,789 35,263 35,263 47,253 33,421 33,421 44,784
16 21,829 38,637 38,637 50,229 36,616 36,616 47,601
17 22,920 42,331 42,331 54,184 40,115 40,115 51,347
18 24,066 46,374 46,374 58,431 43,944 43,944 55,370
19 25,270 50,829 50,829 63,028 48,136 48,136 59,689
20 26,533 55,707 55,707 67,963 52,755 52,755 64,362
25 33,864 87,836 87,836 101,891 83,174 83,174 96,482
35 55,160 218,020 218,020 231,102 206,309 206,309 218,688
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
34 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
SINGLE LIFE OPTION
POLICY OWNER OPTION: 2
$10,000 INITIAL PREMIUM
ISSUE AGE: 55 MALE PREFERRED
INITIAL FACE AMOUNT: $44,053
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.20% 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 9,879 9,129 44,053 9,812 9,062 44,053
2 11,025 10,167 9,417 44,053 10,021 9,271 44,053
3 11,576 10,464 9,714 44,053 10,227 9,477 44,053
4 12,155 10,770 10,170 44,053 10,429 9,829 44,053
5 12,763 11,087 10,487 44,053 10,624 10,024 44,053
6 13,401 11,414 11,014 44,053 10,811 10,411 44,053
7 14,071 11,751 11,351 44,053 10,987 10,587 44,053
8 14,775 12,099 11,899 44,053 11,148 10,948 44,053
9 15,513 12,458 12,258 44,053 11,291 11,091 44,053
10 16,289 12,829 12,829 44,053 11,413 11,413 44,053
11 17,103 13,258 13,258 44,053 11,526 11,526 44,053
12 17,959 13,703 13,703 44,053 11,610 11,610 44,053
13 18,856 14,164 14,164 44,053 11,661 11,661 44,053
14 19,799 14,641 14,641 44,053 11,674 11,674 44,053
15 20,789 15,135 15,135 44,053 11,642 11,642 44,053
16 21,829 15,647 15,647 44,053 11,556 11,556 44,053
17 22,920 16,177 16,177 44,053 11,407 11,407 44,053
18 24,066 16,726 16,726 44,053 11,181 11,181 44,053
19 25,270 17,295 17,295 44,053 10,864 10,864 44,053
20 26,533 17,884 17,884 44,053 10,440 10,440 44,053
25 33,864 21,162 21,162 44,053 5,976 5,976 44,053
35 55,160 29,730 29,730 44,053 -- -- --
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 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.
35 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
SINGLE LIFE OPTION
POLICY OWNER OPTION: 2
$10,000 INITIAL PREMIUM
ISSUE AGE: 55 MALE PREFERRED
INITIAL FACE AMOUNT: $44,053
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.80% 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 9,389 8,639 44,053 9,321 8,571 44,053
2 11,025 9,182 8,432 44,053 9,032 8,282 44,053
3 11,576 8,979 8,229 44,053 8,732 7,982 44,053
4 12,155 8,780 8,180 44,053 8,418 7,818 44,053
5 12,763 8,585 7,985 44,053 8,090 7,490 44,053
6 13,401 8,393 7,993 44,053 7,745 7,345 44,053
7 14,071 8,205 7,805 44,053 7,380 6,980 44,053
8 14,775 8,021 7,821 44,053 6,992 6,792 44,053
9 15,513 7,839 7,639 44,053 6,575 6,375 44,053
10 16,289 7,662 7,662 44,053 6,128 6,128 44,053
11 17,103 7,514 7,514 44,053 5,652 5,652 44,053
12 17,959 7,368 7,368 44,053 5,136 5,136 44,053
13 18,856 7,225 7,225 44,053 4,575 4,575 44,053
14 19,799 7,084 7,084 44,053 3,963 3,963 44,053
15 20,789 6,945 6,945 44,053 3,291 3,291 44,053
16 21,829 6,808 6,808 44,053 2,552 2,552 44,053
17 22,920 6,673 6,673 44,053 1,735 1,735 44,053
18 24,066 6,540 6,540 44,053 824 824 44,053
19 25,270 6,410 6,410 44,053 -- -- --
20 26,533 6,281 6,281 44,053 -- -- --
25 33,864 5,667 5,667 44,053 -- -- --
35 55,160 4,573 4,573 44,053 -- -- --
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 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.
36 - PROSPECTUS
<PAGE>
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% (11.20% 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 10,809 9,816 34,014 10,704 9,713 34,014
2 11,025 11,687 10,703 34,014 11,466 10,487 34,014
3 11,576 12,638 11,667 34,014 12,293 11,328 34,014
4 12,155 13,669 12,864 34,014 13,193 12,395 34,014
5 12,763 14,787 14,002 34,014 14,173 13,396 34,014
6 13,401 15,998 15,438 34,014 15,239 14,687 34,014
7 14,071 17,311 16,781 34,014 16,401 15,878 34,014
8 14,775 18,734 18,441 34,014 17,665 17,376 34,014
9 15,513 20,277 20,027 34,014 19,041 18,794 34,014
10 16,289 21,950 21,950 34,014 20,544 20,544 34,014
11 17,103 24,002 24,002 34,014 22,372 22,372 34,014
12 17,959 26,252 26,252 34,014 24,402 24,402 34,014
13 18,856 28,750 28,750 34,014 26,668 26,668 34,014
14 19,799 31,527 31,527 36,887 29,206 29,206 34,171
15 20,789 34,572 34,572 40,104 32,025 32,025 37,149
16 21,829 37,911 37,911 43,598 35,115 35,115 40,382
17 22,920 41,581 41,581 46,987 38,512 38,512 43,520
18 24,066 45,620 45,620 50,639 42,251 42,251 46,899
19 25,270 50,069 50,069 54,576 46,369 46,369 50,543
20 26,533 54,960 54,960 59,907 50,898 50,898 55,480
25 33,864 87,477 87,477 92,726 81,012 81,012 85,873
35 55,160 217,739 217,739 228,626 198,674 198,674 208,608
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
37 - PROSPECTUS
<PAGE>
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% (5.20% 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 10,225 9,245 34,014 10,118 9,141 34,014
2 11,025 10,455 9,496 34,014 10,227 9,273 34,014
3 11,576 10,692 9,754 34,014 10,328 9,397 34,014
4 12,155 10,934 10,170 34,014 10,419 9,663 34,014
5 12,763 11,182 10,443 34,014 10,499 9,767 34,014
6 13,401 11,437 10,923 34,014 10,564 10,058 34,014
7 14,071 11,699 11,211 34,014 10,610 10,130 34,014
8 14,775 11,967 11,707 34,014 10,630 10,377 34,014
9 15,513 12,242 12,011 34,014 10,618 10,392 34,014
10 16,289 12,523 12,523 34,014 10,567 10,567 34,014
11 17,103 12,942 12,942 34,014 10,559 10,559 34,014
12 17,959 13,375 13,375 34,014 10,508 10,508 34,014
13 18,856 13,824 13,824 34,014 10,409 10,409 34,014
14 19,799 14,289 14,289 34,014 10,258 10,258 34,014
15 20,789 14,770 14,770 34,014 10,045 10,045 34,014
16 21,829 15,269 15,269 34,014 9,757 9,757 34,014
17 22,920 15,786 15,786 34,014 9,372 9,372 34,014
18 24,066 16,321 16,321 34,014 8,863 8,863 34,014
19 25,270 16,875 16,875 34,014 8,198 8,198 34,014
20 26,533 17,449 17,449 34,014 7,340 7,340 34,014
25 33,864 20,644 20,644 34,014 -- -- --
35 55,160 28,994 28,994 34,014 -- -- --
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 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.
38 - PROSPECTUS
<PAGE>
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% (-0.80% 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 9,718 8,749 34,014 9,611 8,644 34,014
2 11,025 9,443 8,504 34,014 9,211 8,276 34,014
3 11,576 9,175 8,265 34,014 8,800 7,896 34,014
4 12,155 8,914 8,180 34,014 8,378 7,653 34,014
5 12,763 8,659 7,951 34,014 7,944 7,244 34,014
6 13,401 8,411 7,927 34,014 7,492 7,017 34,014
7 14,071 8,169 7,708 34,014 7,018 6,566 34,014
8 14,775 7,933 7,693 34,014 6,516 6,283 34,014
9 15,513 7,703 7,484 34,014 5,976 5,761 34,014
10 16,289 7,479 7,479 34,014 5,393 5,393 34,014
11 17,103 7,334 7,334 34,014 4,802 4,802 34,014
12 17,959 7,191 7,191 34,014 4,153 4,153 34,014
13 18,856 7,050 7,050 34,014 3,443 3,443 34,014
14 19,799 6,912 6,912 34,014 2,665 2,665 34,014
15 20,789 6,775 6,775 34,014 1,809 1,809 34,014
16 21,829 6,641 6,641 34,014 859 859 34,014
17 22,920 6,509 6,509 34,014 -- -- --
18 24,066 6,379 6,379 34,014 -- -- --
19 25,270 6,251 6,251 34,014 -- -- --
20 26,533 6,124 6,124 34,014 -- -- --
25 33,864 5,522 5,522 34,014 -- -- --
35 55,160 4,449 4,449 34,014 -- -- --
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 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.
39 - PROSPECTUS
<PAGE>
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% (11.20% 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 10,444 9,694 34,014 10,332 9,582 34,014
2 11,025 11,365 10,615 34,014 11,129 10,379 34,014
3 11,576 12,369 11,619 34,014 12,000 11,250 34,014
4 12,155 13,465 12,865 34,014 12,955 12,355 34,014
5 12,763 14,661 14,061 34,014 14,002 13,402 34,014
6 13,401 15,966 15,566 34,014 15,150 14,750 34,014
7 14,071 17,389 16,989 34,014 16,410 16,010 34,014
8 14,775 18,942 18,742 34,014 17,792 17,592 34,014
9 15,513 20,637 20,437 34,014 19,309 19,109 34,014
10 16,289 22,486 22,486 34,014 20,980 20,980 34,014
11 17,103 24,589 24,589 34,014 22,861 22,861 34,014
12 17,959 26,901 26,901 34,014 24,952 24,952 34,014
13 18,856 29,479 29,479 34,786 27,287 27,287 34,014
14 19,799 32,328 32,328 37,825 29,901 29,901 34,985
15 20,789 35,452 35,452 41,125 32,788 32,788 38,035
16 21,829 38,876 38,876 44,708 35,953 35,953 41,346
17 22,920 42,641 42,641 48,185 39,432 39,432 44,559
18 24,066 46,784 46,784 51,930 43,261 43,261 48,020
19 25,270 51,377 51,377 56,001 47,478 47,478 51,752
20 26,533 56,396 56,396 61,472 52,116 52,116 56,807
25 33,864 89,762 89,762 95,149 82,950 82,950 87,927
35 55,160 223,428 223,428 234,599 203,426 203,426 213,598
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
40 - PROSPECTUS
<PAGE>
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% (5.20% 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 9,879 9,129 34,014 9,766 9,016 34,014
2 11,025 10,167 9,417 34,014 9,925 9,175 34,014
3 11,576 10,464 9,714 34,014 10,079 9,329 34,014
4 12,155 10,770 10,170 34,014 10,227 9,627 34,014
5 12,763 11,087 10,487 34,014 10,366 9,766 34,014
6 13,401 11,414 11,014 34,014 10,495 10,095 34,014
7 14,071 11,751 11,351 34,014 10,608 10,208 34,014
8 14,775 12,099 11,899 34,014 10,700 10,500 34,014
9 15,513 12,458 12,258 34,014 10,763 10,563 34,014
10 16,289 12,829 12,829 34,014 10,791 10,791 34,014
11 17,103 13,258 13,258 34,014 10,797 10,797 34,014
12 17,959 13,703 13,703 34,014 10,761 10,761 34,014
13 18,856 14,164 14,164 34,014 10,678 10,678 34,014
14 19,799 14,641 14,641 34,014 10,545 10,545 34,014
15 20,789 15,135 15,135 34,014 10,353 10,353 34,014
16 21,829 15,647 15,647 34,014 10,086 10,086 34,014
17 22,920 16,177 16,177 34,014 9,726 9,726 34,014
18 24,066 16,726 16,726 34,014 9,246 9,246 34,014
19 25,270 17,295 17,295 34,014 8,613 8,613 34,014
20 26,533 17,884 17,884 34,014 7,792 7,792 34,014
25 33,864 21,162 21,162 34,014 -- -- --
35 55,160 29,730 29,730 34,014 -- -- --
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 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.
41 - PROSPECTUS
<PAGE>
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% (-0.80% 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 9,389 8,639 34,014 9,275 8,525 34,014
2 11,025 9,182 8,432 34,014 8,937 8,187 34,014
3 11,576 8,979 8,229 34,014 8,586 7,836 34,014
4 12,155 8,780 8,180 34,014 8,221 7,621 34,014
5 12,763 8,585 7,985 34,014 7,839 7,239 34,014
6 13,401 8,393 7,993 34,014 7,438 7,038 34,014
7 14,071 8,205 7,805 34,014 7,011 6,611 34,014
8 14,775 8,021 7,821 34,014 6,553 6,353 34,014
9 15,513 7,839 7,639 34,014 6,055 5,855 34,014
10 16,289 7,662 7,662 34,014 5,509 5,509 34,014
11 17,103 7,514 7,514 34,014 4,919 4,919 34,014
12 17,959 7,368 7,368 34,014 4,272 4,272 34,014
13 18,856 7,225 7,225 34,014 3,562 3,562 34,014
14 19,799 7,084 7,084 34,014 2,786 2,786 34,014
15 20,789 6,945 6,945 34,014 1,933 1,933 34,014
16 21,829 6,808 6,808 34,014 985 985 34,014
17 22,920 6,673 6,673 34,014 -- -- --
18 24,066 6,540 6,540 34,014 -- -- --
19 25,270 6,410 6,410 34,014 -- -- --
20 26,533 6,281 6,281 34,014 -- -- --
25 33,864 5,667 5,667 34,014 -- -- --
35 55,160 4,573 4,573 34,014 -- -- --
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 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.
42 - PROSPECTUS
<PAGE>
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: $20,000
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.20% 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 10,809 9,816 20,000 10,618 9,629 20,000
2 11,025 11,687 10,703 20,000 11,284 10,309 20,000
3 11,576 12,638 11,667 20,000 12,007 11,047 20,000
4 12,155 13,669 12,864 20,000 12,796 12,004 20,000
5 12,763 14,787 14,002 20,000 13,664 12,893 20,000
6 13,401 15,998 15,438 20,000 14,625 14,079 20,000
7 14,071 17,312 16,782 20,000 15,699 15,181 20,000
8 14,775 18,765 18,471 20,830 16,911 16,626 20,000
9 15,513 20,369 20,118 22,203 18,294 18,049 20,000
10 16,289 22,099 22,099 24,088 19,844 19,844 21,631
11 17,103 24,173 24,173 26,107 21,704 21,704 23,440
12 17,959 26,450 26,450 28,302 23,745 23,745 25,408
13 18,856 28,930 28,930 30,955 25,967 25,967 27,785
14 19,799 31,656 31,656 33,556 28,410 28,410 30,115
15 20,789 34,629 34,629 36,708 31,069 31,069 32,934
16 21,829 37,899 37,899 39,795 34,000 34,000 35,700
17 22,920 41,465 41,465 43,539 37,188 37,188 39,048
18 24,066 45,370 45,370 47,638 40,651 40,651 42,684
19 25,270 49,644 49,644 52,127 44,407 44,407 46,628
20 26,533 54,355 54,355 57,073 48,474 48,474 50,898
25 33,864 85,523 85,523 89,799 74,397 74,397 78,117
35 55,160 211,899 211,899 214,018 178,715 178,715 180,502
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
43 - PROSPECTUS
<PAGE>
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: $20,000
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.20% 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 10,225 9,245 20,000 10,030 9,054 20,000
2 11,025 10,455 9,496 20,000 10,030 9,080 20,000
3 11,576 10,692 9,754 20,000 9,999 9,074 20,000
4 12,155 10,934 10,170 20,000 9,929 9,180 20,000
5 12,763 11,182 10,443 20,000 9,814 9,091 20,000
6 13,401 11,437 10,923 20,000 9,644 9,147 20,000
7 14,071 11,699 11,211 20,000 9,406 8,935 20,000
8 14,775 11,967 11,707 20,000 9,083 8,838 20,000
9 15,513 12,242 12,011 20,000 8,655 8,434 20,000
10 16,289 12,523 12,523 20,000 8,098 8,098 20,000
11 17,103 12,942 12,942 20,000 7,449 7,449 20,000
12 17,959 13,375 13,375 20,000 6,609 6,609 20,000
13 18,856 13,824 13,824 20,000 5,531 5,531 20,000
14 19,799 14,289 14,289 20,000 4,157 4,157 20,000
15 20,789 14,770 14,770 20,000 2,401 2,401 20,000
16 21,829 15,269 15,269 20,000 146 146 20,000
17 22,920 15,786 15,786 20,000 -- -- --
18 24,066 16,321 16,321 20,000 -- -- --
19 25,270 16,875 16,875 20,000 -- -- --
20 26,533 17,449 17,449 20,000 -- -- --
25 33,864 20,644 20,644 21,676 -- -- --
35 55,160 29,018 29,018 29,309 -- -- --
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 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.
44 - PROSPECTUS
<PAGE>
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: $20,000
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.80% 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 9,718 8,749 20,000 9,520 8,555 20,000
2 11,025 9,443 8,504 20,000 9,002 8,072 20,000
3 11,576 9,175 8,265 20,000 8,442 7,544 20,000
4 12,155 8,914 8,180 20,000 7,830 7,113 20,000
5 12,763 8,659 7,951 20,000 7,158 6,469 20,000
6 13,401 8,411 7,927 20,000 6,412 5,948 20,000
7 14,071 8,169 7,708 20,000 5,575 5,133 20,000
8 14,775 7,933 7,693 20,000 4,623 4,400 20,000
9 15,513 7,703 7,484 20,000 3,529 3,320 20,000
10 16,289 7,479 7,479 20,000 2,261 2,261 20,000
11 17,103 7,334 7,334 20,000 795 795 20,000
12 17,959 7,191 7,191 20,000 -- -- --
13 18,856 7,050 7,050 20,000 -- -- --
14 19,799 6,912 6,912 20,000 -- -- --
15 20,789 6,775 6,775 20,000 -- -- --
16 21,829 6,641 6,641 20,000 -- -- --
17 22,920 6,509 6,509 20,000 -- -- --
18 24,066 6,379 6,379 20,000 -- -- --
19 25,270 6,251 6,251 20,000 -- -- --
20 26,533 6,124 6,124 20,000 -- -- --
25 33,864 5,522 5,522 20,000 -- -- --
35 55,160 4,449 4,449 20,000 -- -- --
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 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.
45 - PROSPECTUS
<PAGE>
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: $20,000
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.20% 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 10,444 9,694 20,000 10,237 9,487 20,000
2 11,025 11,365 10,615 20,000 10,928 10,178 20,000
3 11,576 12,369 11,619 20,000 11,682 10,932 20,000
4 12,155 13,465 12,865 20,000 12,511 11,911 20,000
5 12,763 14,661 14,061 20,000 13,429 12,829 20,000
6 13,401 15,966 15,566 20,000 14,453 14,053 20,000
7 14,071 17,390 16,990 20,000 15,606 15,206 20,000
8 14,775 18,977 18,777 21,065 16,917 16,717 20,000
9 15,513 20,734 20,534 22,601 18,425 18,225 20,084
10 16,289 22,642 22,642 24,681 20,118 20,118 21,929
11 17,103 24,768 24,768 26,750 22,003 22,003 23,764
12 17,959 27,103 27,103 29,000 24,073 24,073 25,759
13 18,856 29,644 29,644 31,720 26,326 26,326 28,169
14 19,799 32,438 32,438 34,385 28,804 28,804 30,532
15 20,789 35,486 35,486 37,616 31,500 31,500 33,390
16 21,829 38,838 38,838 40,780 34,471 34,471 36,195
17 22,920 42,493 42,493 44,618 37,704 37,704 39,590
18 24,066 46,494 46,494 48,819 41,216 41,216 43,277
19 25,270 50,906 50,906 53,452 45,024 45,024 47,276
20 26,533 55,736 55,736 58,523 49,148 49,148 51,606
25 33,864 87,696 87,696 92,082 75,432 75,432 79,204
35 55,160 217,284 217,284 219,457 181,202 181,202 183,014
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
46 - PROSPECTUS
<PAGE>
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: $20,000
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.20% 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 9,879 9,129 20,000 9,669 8,919 20,000
2 11,025 10,167 9,417 20,000 9,711 8,961 20,000
3 11,576 10,464 9,714 20,000 9,722 8,972 20,000
4 12,155 10,770 10,170 20,000 9,698 9,098 20,000
5 12,763 11,087 10,487 20,000 9,630 9,030 20,000
6 13,401 11,414 11,014 20,000 9,510 9,110 20,000
7 14,071 11,751 11,351 20,000 9,324 8,924 20,000
8 14,775 12,099 11,899 20,000 9,057 8,857 20,000
9 15,513 12,458 12,258 20,000 8,687 8,487 20,000
10 16,289 12,829 12,829 20,000 8,191 8,191 20,000
11 17,103 13,258 13,258 20,000 7,554 7,554 20,000
12 17,959 13,703 13,703 20,000 6,728 6,728 20,000
13 18,856 14,164 14,164 20,000 5,667 5,667 20,000
14 19,799 14,641 14,641 20,000 4,314 4,314 20,000
15 20,789 15,135 15,135 20,000 2,584 2,584 20,000
16 21,829 15,647 15,647 20,000 362 362 20,000
17 22,920 16,177 16,177 20,000 -- -- --
18 24,066 16,726 16,726 20,000 -- -- --
19 25,270 17,295 17,295 20,000 -- -- --
20 26,533 17,884 17,884 20,000 -- -- --
25 33,864 21,162 21,162 22,220 -- -- --
35 55,160 29,755 29,755 30,053 -- -- --
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 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.
47 - PROSPECTUS
<PAGE>
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: $20,000
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.80% 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 9,389 8,639 20,000 9,177 8,427 20,000
2 11,025 9,182 8,432 20,000 8,713 7,963 20,000
3 11,576 8,979 8,229 20,000 8,204 7,454 20,000
4 12,155 8,780 8,180 20,000 7,640 7,040 20,000
5 12,763 8,585 7,985 20,000 7,011 6,411 20,000
6 13,401 8,393 7,993 20,000 6,305 5,905 20,000
7 14,071 8,205 7,805 20,000 5,504 5,104 20,000
8 14,775 8,021 7,821 20,000 4,583 4,383 20,000
9 15,513 7,839 7,639 20,000 3,514 3,314 20,000
10 16,289 7,662 7,662 20,000 2,265 2,265 20,000
11 17,103 7,514 7,514 20,000 799 799 20,000
12 17,959 7,368 7,368 20,000 -- -- --
13 18,856 7,225 7,225 20,000 -- -- --
14 19,799 7,084 7,084 20,000 -- -- --
15 20,789 6,945 6,945 20,000 -- -- --
16 21,829 6,808 6,808 20,000 -- -- --
17 22,920 6,673 6,673 20,000 -- -- --
18 24,066 6,540 6,540 20,000 -- -- --
19 25,270 6,410 6,410 20,000 -- -- --
20 26,533 6,281 6,281 20,000 -- -- --
25 33,864 5,667 5,667 20,000 -- -- --
35 55,160 4,573 4,573 20,000 -- -- --
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 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.
48 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
LAST SURVIVOR OPTION
POLICY OWNER OPITION: 1
$10,000 INITIAL PREMIUM
ISSUE AGES: 55 MALE/55 FEMALE
INITIAL FACE AMOUNT: $45,454
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.20% 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 10,899 9,904 45,454 10,899 9,904 45,454
2 11,025 11,875 10,888 45,454 11,875 10,888 45,454
3 11,576 12,935 11,959 45,454 12,935 11,959 45,454
4 12,155 14,085 13,273 45,454 14,085 13,273 45,454
5 12,763 15,332 14,540 45,454 15,332 14,540 45,454
6 13,401 16,684 16,118 45,454 16,684 16,117 45,454
7 14,071 18,151 17,614 45,454 18,151 17,614 45,454
8 14,775 19,740 19,441 45,454 19,740 19,441 45,454
9 15,513 21,461 21,208 45,454 21,461 21,208 45,454
10 16,289 23,327 23,327 45,454 23,327 23,327 45,454
11 17,103 25,575 25,575 45,454 25,556 25,556 45,454
12 17,959 28,041 28,041 45,454 28,000 28,000 45,454
13 18,856 30,749 30,749 45,454 30,685 30,685 45,454
14 19,799 33,723 33,723 45,454 33,643 33,643 45,454
15 20,789 37,004 37,004 45,454 36,915 36,915 45,454
16 21,829 40,644 40,644 46,741 40,544 40,544 46,626
17 22,920 44,659 44,659 50,466 44,549 44,549 50,341
18 24,066 49,073 49,073 54,471 48,952 48,952 54,337
19 25,270 53,957 53,957 58,814 53,824 53,824 58,669
20 26,533 59,301 59,301 64,638 59,155 59,155 64,479
25 33,864 94,779 94,779 100,466 94,543 94,543 100,216
35 55,160 240,620 240,620 252,652 232,087 232,087 243,691
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
49 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
LAST SURVIVOR OPTION
POLICY OWNER OPITION: 1
$10,000 INITIAL PREMIUM
ISSUE AGES: 55 MALE/55 FEMALE
INITIAL FACE AMOUNT: $45,454
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.20% 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 10,309 9,328 45,454 10,309 9,328 45,454
2 11,025 10,623 9,660 45,454 10,623 9,660 45,454
3 11,576 10,939 9,997 45,454 10,939 9,997 45,454
4 12,155 11,256 10,487 45,454 11,256 10,487 45,454
5 12,763 11,573 10,829 45,454 11,573 10,829 45,454
6 13,401 11,888 11,369 45,454 11,888 11,369 45,454
7 14,071 12,196 11,705 45,454 12,196 11,705 45,454
8 14,775 12,509 12,246 45,454 12,496 12,233 45,454
9 15,513 12,829 12,597 45,454 12,781 12,549 45,454
10 16,289 13,159 13,159 45,454 13,045 13,045 45,454
11 17,103 13,634 13,634 45,454 13,391 13,391 45,454
12 17,959 14,128 14,128 45,454 13,711 13,711 45,454
13 18,856 14,640 14,640 45,454 13,998 13,998 45,454
14 19,799 15,172 15,172 45,454 14,243 14,243 45,454
15 20,789 15,725 15,725 45,454 14,436 14,436 45,454
16 21,829 16,299 16,299 45,454 14,563 14,563 45,454
17 22,920 16,895 16,895 45,454 14,605 14,605 45,454
18 24,066 17,513 17,513 45,454 14,536 14,536 45,454
19 25,270 18,156 18,156 45,454 14,326 14,326 45,454
20 26,533 18,823 18,823 45,454 13,937 13,937 45,454
25 33,864 22,563 22,563 45,454 7,457 7,457 45,454
35 55,160 32,532 32,532 45,454 -- -- --
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 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 REATES 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.
50 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
LAST SURVIVOR OPTION
POLICY OWNER OPITION: 1
$10,000 INITIAL PREMIUM
ISSUE AGES: 55 MALE/55 FEMALE
INITIAL FACE AMOUNT: $45,454
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.80% 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 9,798 8,828 45,454 9,798 8,828 45,454
2 11,025 9,594 8,652 45,454 9,594 8,652 45,454
3 11,576 9,384 8,470 45,454 9,384 8,470 45,454
4 12,155 9,168 8,430 45,454 9,168 8,430 45,454
5 12,763 8,943 8,231 45,454 8,943 8,231 45,454
6 13,401 8,710 8,222 45,454 8,707 8,220 45,454
7 14,071 8,481 8,018 45,454 8,457 7,994 45,454
8 14,775 8,258 8,017 45,454 8,188 7,947 45,454
9 15,513 8,040 7,820 45,454 7,895 7,675 45,454
10 16,289 7,827 7,827 45,454 7,570 7,570 45,454
11 17,103 7,696 7,696 45,454 7,267 7,267 45,454
12 17,959 7,567 7,567 45,454 6,915 6,915 45,454
13 18,856 7,439 7,439 45,454 6,504 6,504 45,454
14 19,799 7,313 7,313 45,454 6,026 6,026 45,454
15 20,789 7,188 7,188 45,454 5,467 5,467 45,454
16 21,829 7,065 7,065 45,454 4,809 4,809 45,454
17 22,920 6,944 6,944 45,454 4,028 4,028 45,454
18 24,066 6,824 6,824 45,454 3,091 3,091 45,454
19 25,270 6,706 6,706 45,454 1,958 1,958 45,454
20 26,533 6,590 6,590 45,454 582 582 45,454
25 33,864 6,029 6,029 45,454 -- -- --
35 55,160 5,010 5,010 45,454 -- -- --
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 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.
51 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
LAST SURVIVOR OPTION
POLICY OWNER OPTION: 2
$10,000 INITIAL PREMIUM
ISSUE AGES: 55 MALE/55 FEMALE
INITIAL FACE AMOUNT: $45,454
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.20% 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 9,780 45,454 10,530 9,780 45,454
2 11,025 11,547 10,797 45,454 11,547 10,797 45,454
3 11,576 12,659 11,909 45,454 12,659 11,909 45,454
4 12,155 13,872 13,272 45,454 13,872 13,272 45,454
5 12,763 15,199 14,599 45,454 15,199 14,599 45,454
6 13,401 16,647 16,247 45,454 16,647 16,247 45,454
7 14,071 18,228 17,828 45,454 18,228 17,828 45,454
8 14,775 19,955 19,755 45,454 19,955 19,755 45,454
9 15,513 21,840 21,640 45,454 21,840 21,640 45,454
10 16,289 23,898 23,898 45,454 23,898 23,898 45,454
11 17,103 26,201 26,201 45,454 26,189 26,189 45,454
12 17,959 28,729 28,729 45,454 28,702 28,702 45,454
13 18,856 31,505 31,505 45,454 31,465 31,465 45,454
14 19,799 34,560 34,560 45,454 34,512 34,512 45,454
15 20,789 37,936 37,936 45,454 37,883 37,883 45,454
16 21,829 41,679 41,679 47,931 41,620 41,620 47,863
17 22,920 45,798 45,798 51,752 45,733 45,733 51,679
18 24,066 50,324 50,324 55,861 50,253 50,253 55,781
19 25,270 55,334 55,334 60,314 55,255 55,255 60,229
20 26,533 60,814 60,814 66,287 60,727 60,727 66,193
25 33,864 97,196 97,196 103,029 97,057 97,057 102,880
35 55,160 246,758 246,758 259,096 238,257 238,257 250,170
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
52 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
LAST SURVIVOR OPTION
POLICY OWNER OPTION: 2
$10,000 INITIAL PREMIUM
ISSUE AGES: 55 MALE/55 FEMALE
INITIAL FACE AMOUNT: $45,454
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.20% 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 9,961 9,211 45,454 9,961 9,211 45,454
2 11,025 10,329 9,579 45,454 10,329 9,579 45,454
3 11,576 10,705 9,955 45,454 10,705 9,955 45,454
4 12,155 11,086 10,486 45,454 11,086 10,486 45,454
5 12,763 11,472 10,872 45,454 11,472 10,872 45,454
6 13,401 11,860 11,460 45,454 11,860 11,460 45,454
7 14,071 12,248 11,848 45,454 12,248 11,848 45,454
8 14,775 12,643 12,443 45,454 12,631 12,431 45,454
9 15,513 13,053 12,853 45,454 13,007 12,807 45,454
10 16,289 13,477 13,477 45,454 13,367 13,367 45,454
11 17,103 13,964 13,964 45,454 13,729 13,729 45,454
12 17,959 14,470 14,470 45,454 14,066 14,066 45,454
13 18,856 14,996 14,996 45,454 14,370 14,370 45,454
14 19,799 15,542 15,542 45,454 14,635 14,635 45,454
15 20,789 16,108 16,108 45,454 14,850 14,850 45,454
16 21,829 16,697 16,697 45,454 15,001 15,001 45,454
17 22,920 17,308 17,308 45,454 15,070 15,070 45,454
18 24,066 17,943 17,943 45,454 15,031 15,031 45,454
19 25,270 18,602 18,602 45,454 14,855 14,855 45,454
20 26,533 19,286 19,286 45,454 14,505 14,505 45,454
25 33,864 23,122 23,122 45,454 8,359 8,359 45,454
35 55,160 33,346 33,346 45,454 -- -- --
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 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.
53 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
LAST SURVIVOR OPTION
POLICY OWNER OPTION: 2
$10,000 INITIAL PREMIUM
ISSUE AGES: 55 MALE/55 FEMALE
INITIAL FACE AMOUNT: $45,454
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.80% 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 9,467 8,717 45,454 9,467 8,717 45,454
2 11,025 9,328 8,578 45,454 9,328 8,578 45,454
3 11,576 9,183 8,433 45,454 9,183 8,433 45,454
4 12,155 9,029 8,429 45,454 9,029 8,429 45,454
5 12,763 8,864 8,264 45,454 8,864 8,264 45,454
6 13,401 8,689 8,289 45,454 8,686 8,286 45,454
7 14,071 8,517 8,117 45,454 8,492 8,092 45,454
8 14,775 8,347 8,147 45,454 8,277 8,077 45,454
9 15,513 8,181 7,981 45,454 8,035 7,835 45,454
10 16,289 8,017 8,017 45,454 7,760 7,760 45,454
11 17,103 7,883 7,883 45,454 7,456 7,456 45,454
12 17,959 7,751 7,751 45,454 7,103 7,103 45,454
13 18,856 7,621 7,621 45,454 6,693 6,693 45,454
14 19,799 7,492 7,492 45,454 6,215 6,215 45,454
15 20,789 7,366 7,366 45,454 5,657 5,657 45,454
16 21,829 7,240 7,240 45,454 5,000 5,000 45,454
17 22,920 7,117 7,117 45,454 4,220 4,220 45,454
18 24,066 6,995 6,995 45,454 3,286 3,286 45,454
19 25,270 6,875 6,875 45,454 2,156 2,156 45,454
20 26,533 6,756 6,756 45,454 784 784 45,454
25 33,864 6,184 6,184 45,454 -- -- --
35 55,160 5,147 5,147 45,454 -- -- --
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 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.
54 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
LAST SURVIVOR OPTION
POLICY OWNER OPTION: 1
$10,000 INITIAL PREMIUM
ISSUE AGES: 65 MALE/65 FEMALE
INITIAL FACE AMOUNT: $28,329
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.20% 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 10,893 9,898 28,329 10,893 9,898 28,329
2 11,025 11,849 10,862 28,329 11,849 10,862 28,329
3 11,576 12,872 11,897 28,329 12,872 11,897 28,329
4 12,155 13,968 13,159 28,329 13,968 13,159 28,329
5 12,763 15,149 14,360 28,329 15,143 14,354 28,329
6 13,401 16,432 15,868 28,329 16,405 15,841 28,329
7 14,071 17,826 17,293 28,329 17,763 17,230 28,329
8 14,775 19,342 19,045 28,329 19,229 18,933 28,329
9 15,513 20,988 20,736 28,329 20,818 20,566 28,329
10 16,289 22,777 22,777 28,329 22,554 22,554 28,329
11 17,103 24,971 24,971 28,329 24,669 24,669 28,329
12 17,959 27,398 27,398 29,316 27,051 27,051 28,945
13 18,856 30,068 30,068 32,174 29,687 29,687 31,766
14 19,799 33,000 33,000 34,981 32,582 32,582 34,537
15 20,789 36,201 36,201 38,373 35,741 35,741 37,886
16 21,829 39,719 39,719 41,705 39,214 39,214 41,175
17 22,920 43,566 43,566 45,745 43,001 43,001 45,152
18 24,066 47,789 47,789 50,179 47,125 47,125 49,482
19 25,270 52,455 52,455 55,078 51,638 51,638 54,220
20 26,533 57,576 57,576 60,455 56,535 56,535 59,362
25 33,864 91,732 91,732 96,319 87,658 87,658 92,042
35 55,160 232,852 232,852 235,181 211,550 211,550 213,666
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
55 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
LAST SURVIVOR OPTION
POLICY OWNER OPTION: 1
$10,000 INITIAL PREMIUM
ISSUE AGES: 65 MALE/65 FEMALE
INITIAL FACE AMOUNT: $28,329
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.20% 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 10,303 9,321 28,329 10,303 9,321 28,329
2 11,025 10,596 9,634 28,329 10,596 9,634 28,329
3 11,576 10,874 9,934 28,329 10,874 9,934 28,329
4 12,155 11,149 10,382 28,329 11,133 10,366 28,329
5 12,763 11,432 10,689 28,329 11,368 10,626 28,329
6 13,401 11,723 11,205 28,329 11,572 11,057 28,329
7 14,071 12,021 11,531 28,329 11,736 11,248 28,329
8 14,775 12,329 12,067 28,329 11,849 11,590 28,329
9 15,513 12,644 12,413 28,329 11,895 11,665 28,329
10 16,289 12,969 12,969 28,329 11,858 11,858 28,329
11 17,103 13,437 13,437 28,329 11,816 11,816 28,329
12 17,959 13,923 13,923 28,329 11,654 11,654 28,329
13 18,856 14,427 14,427 28,329 11,348 11,348 28,329
14 19,799 14,951 14,951 28,329 10,864 10,864 28,329
15 20,789 15,496 15,496 28,329 10,159 10,159 28,329
16 21,829 16,060 16,060 28,329 9,170 9,170 28,329
17 22,920 16,647 16,647 28,329 7,811 7,811 28,329
18 24,066 17,256 17,256 28,329 5,959 5,959 28,329
19 25,270 17,889 17,889 28,329 3,442 3,442 28,329
20 26,533 18,546 18,546 28,329 25 25 28,329
25 33,864 22,229 22,229 28,329 -- -- --
35 55,160 32,044 32,044 32,365 -- -- --
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 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.
56 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
LAST SURVIVOR OPTION
POLICY OWNER OPTION: 1
$10,000 INITIAL PREMIUM
ISSUE AGES: 65 MALE/65 FEMALE
INITIAL FACE AMOUNT: $28,329
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.80% 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 9,792 8,822 28,329 9,792 8,822 28,329
2 11,025 9,567 8,625 28,329 9,567 8,625 28,329
3 11,576 9,319 8,406 28,329 9,318 8,405 28,329
4 12,155 9,077 8,341 28,329 9,042 8,306 28,329
5 12,763 8,840 8,130 28,329 8,731 8,022 28,329
6 13,401 8,609 8,123 28,329 8,376 7,893 28,329
7 14,071 8,383 7,920 28,329 7,968 7,508 28,329
8 14,775 8,162 7,922 28,329 7,489 7,252 28,329
9 15,513 7,947 7,727 28,329 6,921 6,704 28,329
10 16,289 7,736 7,736 28,329 6,242 6,242 28,329
11 17,103 7,606 7,606 28,329 5,472 5,472 28,329
12 17,959 7,477 7,477 28,329 4,526 4,526 28,329
13 18,856 7,351 7,351 28,329 3,368 3,368 28,329
14 19,799 7,226 7,226 28,329 1,951 1,951 28,329
15 20,789 7,102 7,102 28,329 211 211 28,329
16 21,829 6,981 6,981 28,329 -- -- --
17 22,920 6,861 6,861 28,329 -- -- --
18 24,066 6,742 6,742 28,329 -- -- --
19 25,270 6,625 6,625 28,329 -- -- --
20 26,533 6,509 6,509 28,329 -- -- --
25 33,864 5,953 5,953 28,329 -- -- --
35 55,160 4,944 4,944 28,329 -- -- --
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 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.
57 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
LAST SURVIVOR OPTION
POLICY OWNER OPTION: 2
$10,000 INITIAL PREMIUM
ISSUE AGES: 65 MALE/65 FEMALE
INITIAL FACE AMOUNT: $28,329
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.20% 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 10,524 9,774 28,329 10,524 9,774 28,329
2 11,025 11,520 10,770 28,329 11,520 10,770 28,329
3 11,576 12,594 11,844 28,329 12,594 11,844 28,329
4 12,155 13,752 13,152 28,329 13,752 13,152 28,329
5 12,763 15,012 14,412 28,329 15,004 14,404 28,329
6 13,401 16,389 15,989 28,329 16,358 15,958 28,329
7 14,071 17,896 17,496 28,329 17,828 17,428 28,329
8 14,775 19,544 19,344 28,329 19,429 19,229 28,329
9 15,513 21,347 21,147 28,329 21,181 20,981 28,329
10 16,289 23,321 23,321 28,329 23,112 23,112 28,329
11 17,103 25,569 25,569 28,329 25,303 25,303 28,329
12 17,959 28,064 28,064 30,029 27,767 27,767 29,711
13 18,856 30,800 30,800 32,957 30,474 30,474 32,608
14 19,799 33,804 33,804 35,833 33,446 33,446 35,453
15 20,789 37,084 37,084 39,309 36,690 36,690 38,892
16 21,829 40,688 40,688 42,723 40,256 40,256 42,269
17 22,920 44,630 44,630 46,862 44,144 44,144 46,352
18 24,066 48,957 48,957 51,406 48,378 48,378 50,798
19 25,270 53,737 53,737 56,424 53,011 53,011 55,662
20 26,533 58,983 58,983 61,933 58,039 58,039 60,941
25 33,864 93,974 93,974 98,673 89,990 89,990 94,490
35 55,160 238,544 238,544 240,929 217,177 217,177 219,349
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
58 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
LAST SURVIVOR OPTION
POLICY OWNER OPTION: 2
$10,000 INITIAL PREMIUM
ISSUE AGES: 65 MALE/65 FEMALE
INITIAL FACE AMOUNT: $28,329
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.20% 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 9,954 9,204 28,329 9,954 9,204 28,329
2 11,025 10,302 9,552 28,329 10,302 9,552 28,329
3 11,576 10,638 9,888 28,329 10,638 9,888 28,329
4 12,155 10,978 10,378 28,329 10,960 10,360 28,329
5 12,763 11,330 10,730 28,329 11,262 10,662 28,329
6 13,401 11,693 11,293 28,329 11,537 11,137 28,329
7 14,071 12,070 11,670 28,329 11,777 11,377 28,329
8 14,775 12,460 12,260 28,329 11,971 11,771 28,329
9 15,513 12,863 12,663 28,329 12,104 11,904 28,329
10 16,289 13,280 13,280 28,329 12,161 12,161 28,329
11 17,103 13,760 13,760 28,329 12,141 12,141 28,329
12 17,959 14,258 14,258 28,329 12,007 12,007 28,329
13 18,856 14,775 14,775 28,329 11,732 11,732 28,329
14 19,799 15,313 15,313 28,329 11,287 11,287 28,329
15 20,789 15,871 15,871 28,329 10,628 10,628 28,329
16 21,829 16,450 16,450 28,329 9,696 9,696 28,329
17 22,920 17,052 17,052 28,329 8,408 8,408 28,329
18 24,066 17,677 17,677 28,329 6,645 6,645 28,329
19 25,270 18,325 18,325 28,329 4,244 4,244 28,329
20 26,533 18,999 18,999 28,329 978 978 28,329
25 33,864 22,776 22,776 28,329 -- -- --
35 55,160 32,842 32,842 33,170 -- -- --
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 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.
59 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
LAST SURVIVOR OPTION
POLICY OWNER OPTION: 2
$10,000 INITIAL PREMIUM
ISSUE AGES: 65 MALE/65 FEMALE
INITIAL FACE AMOUNT: $28,329
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.80% 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 9,460 8,710 28,329 9,460 8,710 28,329
2 11,025 9,301 8,551 28,329 9,301 8,551 28,329
3 11,576 9,118 8,368 28,329 9,116 8,366 28,329
4 12,155 8,939 8,339 28,329 8,900 8,300 28,329
5 12,763 8,763 8,163 28,329 8,647 8,047 28,329
6 13,401 8,589 8,189 28,329 8,349 7,949 28,329
7 14,071 8,418 8,018 28,329 7,993 7,593 28,329
8 14,775 8,251 8,051 28,329 7,565 7,365 28,329
9 15,513 8,085 7,885 28,329 7,046 6,846 28,329
10 16,289 7,923 7,923 28,329 6,412 6,412 28,329
11 17,103 7,791 7,791 28,329 5,645 5,645 28,329
12 17,959 7,660 7,660 28,329 4,704 4,704 28,329
13 18,856 7,531 7,531 28,329 3,553 3,553 28,329
14 19,799 7,404 7,404 28,329 2,144 2,144 28,329
15 20,789 7,278 7,278 28,329 415 415 28,329
16 21,829 7,154 7,154 28,329 -- -- --
17 22,920 7,031 7,031 28,329 -- -- --
18 24,066 6,911 6,911 28,329 -- -- --
19 25,270 6,791 6,791 28,329 -- -- --
20 26,533 6,674 6,674 28,329 -- -- --
25 33,864 6,107 6,107 28,329 -- -- --
35 55,160 5,079 5,079 28,329 -- -- --
</TABLE>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 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.
60 - PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT FIVE
- -----------------------------------------------------------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS & LIABILITIES
DECEMBER 31, 1998 - UNAUDITED
- -----------------------------------------------------------------------------------------------------------------------------------
NORTH AMERICAN
GOVERNMENT DIVIDEND
MONEY MARKET SECURITIES BALANCED UTILITIES AND GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- -------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in Morgan Stanley Dean Witter Universal Funds:
Money Market Portfolio
Shares 1,729,718
Cost $ 1,729,718
Market Value............................................ $ 1,729,718 - - - -
North American Government Securities
Portfolio
Shares 107
Cost $ 1,077
Market Value............................................ - $ 1,087 - - -
Balanced Portfolio
Shares 16,442
Cost $ 246,224
Market Value............................................ - - $ 269,324 - -
Utilities Portfolio
Shares 6,005
Cost $ 102,524
Market Value............................................ - - - $ 112,359 -
Dividend and Growth Portfolio
Shares 130,515
Cost $ 2,606,929
Market Value............................................ - - - - $ 2,877,866
Value-Added Market Portfolio
Shares 17,848
Cost $ 317,647
Market Value............................................ - - - - -
Growth Portfolio
Shares 6,752
Cost $ 110,612
Market Value............................................ - - - - -
American Value Portfolio
Shares 46,346
Cost $ 913,893
Market Value............................................ - - - - -
Global Equity Value Portfolio
Shares 40,370
Cost $ 520,724
Market Value............................................ - - - - -
Developing Growth Portfolio
Shares 7,671
Cost $ 147,781
Market Value............................................ - - - - -
Due from Hartford Life and Annuity
Insurance Company........................................ 105 - - - 16
Receivable from fund shares sold.......................... - - - - -
------------ ------------ ------------ ------------ ------------
Total Assets.............................................. 1,729,823 1,087 269,324 112,359 2,877,882
------------ ------------ ------------ ------------ ------------
LIABILITIES:
Due to Hartford Life and Annuity Insurance Company........ - - - - -
Payable for fund shares purchased......................... 108 - - - -
------------ ------------ ------------ ------------ ------------
Total Liabilities......................................... 108 - - - -
------------ ------------ ------------ ------------ ------------
Net Assets (variable life contract liabilities)........... 1,729,715 1,087 269,324 112,359 2,877,882
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
DEFERRED ANNUITY CONTRACTS IN THE ACCUMULATION PERIOD:
GROUP SUB-ACCOUNTS:
Units Owned by Contractholders............................ 1,593,267 100 21,012 7,465 215,358
Unit Values............................................... $ 1.085641 $ 10.866400 $ 12.817596 $ 15.051545 $ 13.363243
1,729,716 1,087 269,323 112,360 2,877,881
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT FIVE
- -----------------------------------------------------------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS & LIABILITIES
DECEMBER 31, 1998 - UNAUDITED
- -----------------------------------------------------------------------------------------------------------------------------------
VALUE-ADDED AMERICAN GLOBAL DEVELOPING
MARKET GROWTH VALUE EQUITY VALUE GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in Morgan Stanley Dean Witter Universal Funds:
Money Market Portfolio
Shares 1,729,718
Cost $ 1,729,718
Market Value............................................ - - - - -
North American Government Securities
Portfolio
Shares 107
Cost $ 1,077
Market Value............................................ - - - - -
Balanced Portfolio
Shares 16,442
Cost $ 246,224
Market Value............................................ - - - - -
Utilities Portfolio
Shares 6,005
Cost $ 102,524
Market Value............................................ - - - - -
Dividend and Growth Portfolio
Shares 130,515
Cost $ 2,606,929
Market Value............................................ - - - - -
Value-Added Market Portfolio
Shares 17,848
Cost $ 317,647
Market Value............................................ $ 342,509 - - - -
Growth Portfolio
Shares 6,752
Cost $ 110,612
Market Value............................................ - $ 123,081 - - -
American Value Portfolio
Shares 46,346
Cost $ 913,893
Market Value............................................ - - $ 1,080,324 - -
Global Equity Value Portfolio
Shares 40,370
Cost $ 520,724
Market Value............................................ - - - $ 593,041 -
Developing Growth Portfolio
Shares 7,671
Cost $ 147,781
Market Value............................................ - - - - $ 159,625
Due from Hartford Life and Annuity
Insurance Company........................................ 2 1 6 - -
Receivable from fund shares sold.......................... - - - - -
------------ ------------ ------------ ------------ ------------
Total Assets.............................................. 342,511 123,082 1,080,330 593,041 159,625
------------ ------------ ------------ ------------ ------------
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company........................................ - - - 5 -
Payable for fund shares purchased......................... - - - - -
------------ ------------ ------------ ------------ ------------
Total Liabilities......................................... - - - 5 -
------------ ------------ ------------ ------------ ------------
Net Assets (variable life contract
liabilities)....................... 342,511 123,082 1,080,330 593,036 159,625
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
DEFERRED ANNUITY CONTRACTS IN THE ACCUMULATION PERIOD:
GROUP SUB-ACCOUNTS:
Units Owned by Contractholders........................... 26,364 9,467 65,412 51,498 12,160
Unit Values.............................................. $ 12.991617 $ 13.001162 $ 16.515777 $ 11.515729 $ 13.127056
342,511 123,082 1,080,330 593,037 159,625
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
61
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT Five
- -----------------------------------------------------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS & LIABILITIES - ( CONTINUED )
DECEMBER 31, 1998 - UNAUDITED
- -----------------------------------------------------------------------------------------------------------------------------
EMERGING DIVERSIFIED MID-CAP MORGAN STANLEY
MARKETS INCOME GROWTH HIGH YIELD
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in Morgan Stanley Dean Witter
Universal Funds:
Emerging Market Portfolio
Shares 2,711
Cost $ 31,522
Market Value . . . . . . . . . . . . . . . . . . $ 21,444 - - -
Diversified Income Portfolio
Shares 44,837
Cost $ 459,908
Market Value . . . . . . . . . . . . . . . . . . - $ 445,233 - -
Mid-Cap Growth Portfolio
Shares 17,061
Cost $ 189,578
Market Value . . . . . . . . . . . . . . . . . . - - $ 202,346 -
Morgan Stanley High Yield Portfolio
Shares 3,741
Cost $ 39,540
Market Value . . . . . . . . . . . . . . . . . . - - - $ 38,722
Morgan Stanley Mid-Cap Portfolio
Shares 68
Cost $ 1,032
Market Value . . . . . . . . . . . . . . . . . . - - - -
Morgan Stanley Emerging Markets Debt Fund
Shares 111
Cost $ 1,081
Market Value . . . . . . . . . . . . . . . . . . - - - -
Van Kempen Strategic Stock Fund
Shares 87
Cost $ 1,000
Market Value . . . . . . . . . . . . . . . . . . - - - -
Van Kempen Enterprise Fund
Shares 458
Cost $ 8,456
Market Value . . . . . . . . . . . . . . . . . . - - - -
Due from Hartford Life and Annuity
Insurance Company . . . . . . . . . . . . . . . . - 1 -
Receivable from fund shares sold.. . . . . . . . . - - - -
----------- ----------- ----------- -----------
Total Assets . . . . . . . . . . . . . . . . . . . 21,444 445,233 202,347 38,722
----------- ----------- ----------- -----------
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company . . . . . . . . . . . . . . . . - 1 - -
Payable for fund shares purchased. . . . . . . . . - - - -
----------- ----------- ----------- -----------
Total Liabilities. . . . . . . . . . . . . . . . . - 1 - -
----------- ----------- ----------- -----------
Net Assets (variable life contract liabilities). . $ 21,444 $ 445,232 $ 202,347 $ 38,722
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
DEFERRED ANNUITY CONTRACTS IN THE ACCUMULATION PERIOD:
GROUP SUB-ACCOUNTS:
Units Owned by Contractholders . . . . . . . . . . 3,256 40,167 16,169 3,852
Unit Values. . . . . . . . . . . . . . . . . . . . $ 6.585995 $ 11.084591 $ 12.514503 $ 10.053100
21,444 445,235 202,347 38,725
6.585995 11.084522 12.514503 10.052440
21,444 202,347
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT FIVE
- -----------------------------------------------------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS & LIABILITIES - ( CONTINUED )
DECEMBER 31, 1998 - UNAUDITED
- -----------------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY
MORGAN STANLEY EMERGING VAN KEMPEN VAN KEMPEN
MID-CAP MARKETS DEBT STRATEGIC STOCK ENTERPRISE
PORTFOLIO FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------ --------------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments in Morgan Stanley Dean Witter
Universal Funds:
Emerging Market Portfolio
Shares 2,711
Cost $ 31,522
Market Value . . . . . . . . . . . . . . . . . - - - -
Diversified Income Portfolio
Shares 44,837
Cost $ 459,908
Market Value . . . . . . . . . . . . . . . . . - - - -
Mid-Cap Growth Portfolio
Shares 17,061
Cost $ 189,578
Market Value . . . . . . . . . . . . . . . . . - - - -
Morgan Stanley High Yield Portfolio
Shares 3,741
Cost $ 39,540
Market Value . . . . . . . . . . . . . . . . . - - - -
Morgan Stanley Mid-Cap Portfolio
Shares 68
Cost $ 1,032
Market Value . . . . . . . . . . . . . . . . . $ 1,006 - - -
Morgan Stanley Emerging Markets Debt Fund
Shares 111
Cost $ 1,081
Market Value . . . . . . . . . . . . . . . . . - $ 679 - -
Van Kempen Strategic Stock Fund
Shares 87
Cost $ 1,000
Market Value . . . . . . . . . . . . . . . . . - - $1,033 -
Van Kempen Enterprise Fund
Shares 458
Cost $ 8,456
Market Value . . . . . . . . . . . . . . . . . - - - $ 10,252
Due from Hartford Life and Annuity
Insurance Company . . . . . . . . . . . . . . . -
Receivable from fund shares sold . . . . . . . . - - - -
----------- ----------- ----------- -----------
Total Assets . . . . . . . . . . . . . . . . . . 1,006 679 1,033 10,252
----------- ----------- ----------- -----------
LIABILITIES:
Due to Hartford Life and Annuity
Insurance Company . . . . . . . . . . . . . . . - - -
Payable for fund shares purchased. . . . . . . . - - - -
----------- ----------- ----------- -----------
Total Liabilities. . . . . . . . . . . . . . . . - - - -
----------- ----------- ----------- -----------
Net Assets (variable life contract
liabilities). . . . . . . . . . . . . . . . . . $ 1,006 $ 679 $ 1,033 $ 10,252
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
DEFERRED ANNUITY CONTRACTS IN THE ACCUMULATION PERIOD:
GROUP SUB-ACCOUNTS:
Units Owned by Contractholders . . . . . . . . . 100 100 100 968
Unit Values. . . . . . . . . . . . . . . . . . . $ 10.058200 $ 6.783341 $ 10.329000 $ 10.596300
1,006 678 1,033 10,257
10.060000 6.790000 10.330000 10.590909
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
62
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT FIVE
- -----------------------------------------------------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998 - UNAUDITED
- -----------------------------------------------------------------------------------------------------------------------------
NORTH AMERICAN
GOVERNMENT DIVIDEND
MONEY MARKET SECURITIES BALANCED UTILITIES AND GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . . . . . . $ 61,978 $ 47 $ 5,437 $ 759 $ 44,248
----------- ----------- ----------- ----------- -----------
Net investment income (loss) . . . . . . . . . . 61,978 47 5,437 759 44,248
----------- ----------- ----------- ----------- -----------
CAPITAL GAINS INCOME . . . . . . . . . . . . . . . . - - 4,004 337 100,866
----------- ----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (loss)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions. . . . . . . . . . . . . . . . . . . - - 135 36 11,571
Net unrealized appreciation (depreciation)
of investments during the period. . . . . . . . . - (2) 20,528 9,408 254,099
----------- ----------- ----------- ----------- -----------
Net gain (loss) on investments . . . . . . . . . - (2) 20,663 9,444 265,670
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . . . . $ 61,978 $ 45 $ 30,104 $ 10,540 $ 410,784
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT FIVE
- -----------------------------------------------------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998 - UNAUDITED
- -----------------------------------------------------------------------------------------------------------------------------
VALUE-ADDED AMERICAN GLOBAL DEVELOPING
MARKET GROWTH VALUE EQUITY VALUE GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . . . . . . .$ 2,839 $ - $ 5,939 $ 8,325 $ 538
----------- ----------- ----------- ----------- -----------
Net investment income (loss) . . . . . . . . . . . 2,839 - 5,939 8,325 538
----------- ----------- ----------- ----------- -----------
CAPITAL GAINS INCOME . . . . . . . . . . . . . . . . . 3,121 4,218 72,714 2,380 428
----------- ----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (loss)
ON INVESTMENTS:
Net realized gain (loss) on security
transactions. . . . . . . . . . . . . . . . . . . . 57 (855) (392) (10,224) (8,135)
Net unrealized appreciation (depreciation)
of investments during the period. . . . . . . . . . 22,097 11,029 151,290 68,384 9,871
----------- ----------- ----------- ----------- -----------
Net gain (loss) on investments . . . . . . . . . . 22,154 10,174 150,898 58,160 1,736
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . . . . .$ 28,114 $ 14,392 $ 229,551 $ 68,865 $ 2,702
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
63
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT FIVE
- ----------------------------------------------------------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS - ( CONTINUED )
FOR THE YEAR ENDED DECEMBER 31, 1998 - UNAUDITED
- ----------------------------------------------------------------------------------------------------------------------------------
EMERGING DIVERSIFIED MID-CAP MORGAN STANLEY *
MARKETS INCOME GROWTH HIGH YIELD
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- ------------------- --------------- --------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.................................... $ 417 $ 36,443 $ 1,252 $ 2,177
----------------- ------------------- --------------- --------------------
Net investment income (loss)................. 417 36,443 1,252 2,177
----------------- ------------------- --------------- --------------------
CAPITAL GAINS INCOME 93 659 1,772 358
----------------- ------------------- --------------- --------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on
security transactions...................... (3,076) (3,330) (6,378) -
Net unrealized appreciation (depreciation)
of investments during the period........... (9,164) (14,655) 8,297 (818)
----------------- ------------------- --------------- --------------------
Net gain (loss) on investments............. (12,240) (17,985) 1,919 (818)
----------------- ------------------- --------------- --------------------
Net increase (decrease) in net
assets resulting from operations........ $ (11,730) $ 19,117 $ 4,943 $ 1,717
----------------- ------------------- --------------- --------------------
----------------- ------------------- --------------- --------------------
* From inception, April 1, 1998, to December 31, 1998.
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT FIVE
- -----------------------------------------------------------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS - ( CONTINUED )
FOR THE YEAR ENDED DECEMBER 31, 1998 - UNAUDITED
- -----------------------------------------------------------------------------------------------------------------------------------
ORGAN STANLEY *
MORGAN STANLEY * EMERGING VAN KEMPEN * VAN KEMPEN *
MID-CAP MARKETS DEBT STRATEGIC STOCK ENTERPRISE
PORTFOLIO FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- ------------------- --------------- --------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.................................... $ 2 $ 81 $ - $ -
----------------- ------------------- --------------- --------------------
Net investment income (loss)................. 2 81 - -
----------------- ------------------- --------------- --------------------
CAPITAL GAINS INCOME 29 - - -
----------------- ------------------- --------------- --------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on
security transactions...................... - - - 1
Net unrealized appreciation (depreciation)
of investments during the period........... (26) (402) 33 1,796
----------------- ------------------- --------------- --------------------
Net gain (loss) on investments............. (26) (402) 33 1,797
----------------- ------------------- --------------- --------------------
Net increase (decrease) in net
assets resulting from operations......... $ 5 $ (321) $ 33 $ 1,797
----------------- ------------------- --------------- --------------------
----------------- ------------------- --------------- --------------------
* From inception, April 1, 1998, to December 31, 1998.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
64
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT FIVE
- -----------------------------------------------------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 - UNAUDITED
-------------------------------------------------------------------
NORTH AMERICAN
GOVERNMENT DIVIDEND
MONEY MARKET SECURITIES BALANCED UTILITIES AND GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)......................... $ 61,978 $ 47 $ 5,437 $ 759 $ 44,248
Capital gains income ................................ - - 4,004 337 100,866
Net realized gain (loss) on security transactions.... - - 135 36 11,571
Net unrealized appreciation (depreciation) of
investments during the period.................... - (2) 20,528 9,408 254,099
------------ -------------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations........................ 61,978 45 30,104 10,540 410,784
------------ -------------- ----------- ----------- -----------
UNIT TRANSACTIONS:
Purchases............................................ 4,120,230 - - - -
Net transfers........................................ (2,500,521) - 80,467 96,911 1,259,474
Surrenders........................................... (28,583) - (3,478) (617) (186,767)
Loan withdrawals..................................... (705,994) - (1,939) (883) (168,807)
Cost of insurance.................................... (13,832) - (1,457) (279) (19,772)
------------ -------------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions 871,300 - 73,593 95,132 884,128
------------ -------------- ----------- ----------- -----------
Total increase (decrease) in net assets.............. 933,278 45 103,697 105,672 1,294,912
NET ASSETS:
Beginning of period.................................. 796,437 1,042 165,627 6,687 1,582,970
------------ -------------- ----------- ----------- -----------
End of period........................................ $ 1,729,715 $ 1,087 $ 269,324 $ 112,359 $ 2,877,882
------------ -------------- ----------- ----------- -----------
------------ -------------- ----------- ----------- -----------
<CAPTION>
-------------------------------------------------------------------
GLOBAL
VALUE-ADDED AMERICAN EQUITY DEVELOPING
MARKET GROWTH VALUE VALUE GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATIONS: $ 2,839 $ - $ 5,939 $ 8,325 $ 538
Net investment income (loss)......................... 3,121 4,218 72,714 2,380 428
Capital gains income ................................ 57 (855) (392) (10,224) (8,135)
Net realized gain (loss) on security transactions....
Net unrealized appreciation (depreciation) of
investments during the period.................... 22,097 11,029 151,290 68,384 9,871
------------ -------------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations........................ 28,114 14,392 229,551 68,865 2,702
------------ -------------- ----------- ----------- -----------
UNIT TRANSACTIONS:
Purchases............................................ - - - - -
Net transfers........................................ 189,519 29,229 289,585 215,976 38,891
Surrenders........................................... (4,266) (39,946) (113,881) (195,324) (89,310)
Loan withdrawals..................................... (533) (504) (836) (1,413) (13)
Cost of insurance.................................... (1,660) (959) (5,820) (4,229) (1,611)
------------ -------------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions 183,060 (12,180) 169,048 15,010 (52,043)
------------ -------------- ----------- ----------- -----------
Total increase (decrease) in net assets.............. 211,174 2,212 398,599 83,875 (49,341)
NET ASSETS:
Beginning of period.................................. 131,337 120,870 681,731 509,161 208,966
------------ -------------- ----------- ----------- -----------
End of period........................................ $ 342,511 $ 123,082 $ 1,080,330 $ 593,036 $ 159,625
------------ -------------- ----------- ----------- -----------
------------ -------------- ----------- ----------- -----------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM INCEPTION, MAY 20, 1997 TO DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------------------------------------
NORTH AMERICAN
GOV'T BALANCED DIVIDEND
MONEY MARKET SECURITIES GROWTH UTILITIES AND GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)......................... $ 12,586 $ 30 $ 238 $ 21 $ 3,650
Capital gains income ................................ - - 3 4 37
Net realized gain (loss) on security transactions.... - - 2 - 4
Net unrealized appreciation (depreciation) of
investments during the period.................... - 12 2,572 427 16,838
------------ -------------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations........................ 12,586 42 2,815 452 20,529
------------ -------------- ----------- ----------- -----------
UNIT TRANSACTIONS:
Purchases............................................ 5,462,868 1,000 1,000 1,000 1,000
Net transfers........................................ (3,978,866) - 162,221 5,243 1,566,768
Surrenders........................................... (4,968) - (294) (3) (3,663)
Loan withdrawals..................................... (691,140) - - - (2)
Cost of insurance.................................... (4,043) - (115) (5) (1,662)
------------ -------------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions 783,851 1,000 162,812 6,235 1,562,441
------------ -------------- ----------- ----------- -----------
Total increase (decrease) in net assets.............. 796,437 1,042 165,627 6,687 1,582,970
NET ASSETS:
Beginning of period.................................. - - - - -
------------ -------------- ----------- ----------- -----------
End of period........................................ $ 796,437 $ 1,042 $ 165,627 $ 6,687 $ 1,582,970
------------ -------------- ----------- ----------- -----------
------------ -------------- ----------- ----------- -----------
<CAPTION>
GLOBAL
VALUE-ADDED AMERICAN EQUITY DEVELOPING
MARKET GROWTH VALUE VALUE GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)......................... $ 185 $ 32 $ 318 $ 257 $ 10
Capital gains income ................................ 2 5 22 2 -
Net realized gain (loss) on security transactions.... (1) (3) 5 5 160
Net unrealized appreciation (depreciation) of
investments during the period.................... 2,765 1,440 15,141 3,933 1,973
------------ -------------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations........................ 2,951 1,474 15,486 4,197 2,143
------------ -------------- ----------- ----------- -----------
UNIT TRANSACTIONS:
Purchases............................................ 1,000 1,000 1,000 1,000 1,000
Net transfers........................................ 127,593 118,955 667,750 506,969 206,516
Surrenders........................................... (101) (397) (1,813) (2,610) (526)
Loan withdrawals..................................... - (1) (2) (1) (1)
Cost of insurance.................................... (106) (161) (690) (394) (166)
------------ -------------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from unit transactions 128,386 119,396 666,245 504,964 206,823
------------ -------------- ----------- ----------- -----------
Total increase (decrease) in net assets.............. 131,337 120,870 681,731 509,161 208,966
NET ASSETS:
Beginning of period.................................. - - - - -
------------ -------------- ----------- ----------- -----------
End of period........................................ $ 131,337 $ 120,870 $ 681,731 $ 509,161 $ 208,966
------------ -------------- ----------- ----------- -----------
------------ -------------- ----------- ----------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
65
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT FIVE
- -----------------------------------------------------------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS - ( CONTINUED )
FOR THEYEAR ENDED DECEMBER 31, 1998 - UNAUDITED
--------------------------------------------------------------------------------
EMERGING DIVERSIFIED MID-CAP MORGAN STANLEY *
MARKETS INCOME GROWTH HIGH YIELD
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- ------------------- --------------- --------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)................. $ 417 $ 36,443 $ 1,252 $ 2,177
Capital gains income ........................ 93 659 1,772 358
Net realized gain (loss) on
security transactions...................... (3,076) (3,330) (6,378) -
Net unrealized appreciation (depreciation)
of investments during the period........... (9,164) (14,655) 8,297 (818)
----------------- ------------------- --------------- --------------------
Net increase (decrease) in net assets
resulting from operations.................. (11,730) 19,117 4,943 1,717
----------------- ------------------- --------------- --------------------
UNIT TRANSACTIONS:
Purchases.................................... - - - 1,000
Net transfers................................ 7,343 102,041 147,383 36,207
Surrenders................................... (10,978) (126,211) (82,257) (146)
Loan withdrawals............................. - (1,348) (448) -
Cost of insurance............................ (204) (3,354) (1,305) (56)
----------------- ------------------- --------------- --------------------
Net increase (decrease) in net assets
resulting from unit transactions........... (3,839) (28,872) 63,373 37,005
----------------- ------------------- --------------- --------------------
Total increase (decrease) in net assets...... (15,569) (9,755) 68,316 38,722
NET ASSETS:
Beginning of period.......................... 37,013 454,987 134,031 -
----------------- ------------------- --------------- --------------------
End of period................................ $ 21,444 $ 445,232 $ 202,347 $ 38,722
----------------- ------------------- --------------- --------------------
----------------- ------------------- --------------- --------------------
* From inception, April 1, 1998, to December 31, 1998.
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT FIVE
- -----------------------------------------------------------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS - ( CONTINUED )
FOR THEYEAR ENDED DECEMBER 31, 1998 - UNAUDITED
--------------------------------------------------------------------------------
MORGAN STANLEY *
MORGAN STANLEY * EMERGING VAN KEMPEN * VAN KEMPEN *
MID-CAP MARKETS DEBT STRATEGIC STOCK ENTERPRISE
PORTFOLIO FUND FUND FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- ------------------- --------------- --------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)................. $ 2 $ 81 $ - $ -
Capital gains income ........................ 29 - - -
Net realized gain (loss) on
security transactions...................... - - - 1
Net unrealized appreciation (depreciation)
of investments during the period........... (26) (402) 33 1,796
----------------- ------------------- --------------- --------------------
Net increase (decrease) in net assets
resulting from operations.................. 5 (321) 33 1,797
----------------- ------------------- --------------- --------------------
UNIT TRANSACTIONS:
Purchases.................................... 1,001 1,000 1,000 1,000
Net transfers................................ - - - 7,500
Surrenders................................... - - - (43)
Loan withdrawals............................. - - - -
Cost of insurance............................ - - - (2)
----------------- ------------------- --------------- --------------------
Net increase (decrease) in net assets
resulting from unit transactions........... 1,001 1,000 1,000 8,455
----------------- ------------------- --------------- --------------------
Total increase (decrease) in net assets...... 1,006 679 1,033 10,252
NET ASSETS:
Beginning of period.......................... - - - -
----------------- ------------------- --------------- --------------------
End of period................................ $ 1,006 $ 679 $ 1,033 $ 10,252
----------------- ------------------- --------------- --------------------
----------------- ------------------- --------------- --------------------
* From inception, April 1, 1998, to December 31, 1998.
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM INCEPTION, MAY 20, 1997 TO DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------
EMERGING DIVERSIFIED MID-CAP
MARKETS INCOME GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- ------------------- ---------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss)................. $ 3 $ 4,938 $ 76
Capital gains income ........................ - 2 -
Net realized gain (loss) on
security transactions...................... (1) 15 -
Net unrealized appreciation (depreciation)
of investments during the period........... (914) (20) 4,470
----------------- ------------------- ---------------
Net increase (decrease) in net assets
resulting from operations.................. (912) 4,935 4,546
----------------- ------------------- ---------------
UNIT TRANSACTIONS:
Purchases.................................... 1,000 1,000 1,000
Net transfers................................ 37,031 451,162 128,658
Surrenders................................... (76) (1,494) (123)
Loan withdrawals............................. - - -
Cost of insurance............................ (30) (616) (50)
----------------- ------------------- ---------------
Net increase (decrease) in net assets
resulting from unit transactions........... 37,925 450,052 129,485
----------------- ------------------- ---------------
Total increase (decrease) in net assets...... 37,013 454,987 134,031
NET ASSETS:
Beginning of period.......................... - - -
----------------- ------------------- ---------------
End of period................................ $ 37,013 $ 454,987 $ 134,031
----------------- ------------------- ---------------
----------------- ------------------- ---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
66
<PAGE>
SEPARATE ACCOUNT FIVE
HARTFORD LIFE & ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 - UNAUDITED
1. ORGANIZATION:
Separate Account Five (the Account) is a separate investment account within
Hartford Life & Annuity Insurance Company (the Company) and is registered
with the Securities and Exchange Commission (SEC) as a unit investment
trust under the Investment Company Act of 1940, as amended. Both the
Company and the Account are subject to supervision and regulation by the
Department of Insurance of the State of Connecticut and the SEC. The
Account invests deposits by variable life contractholders of the Company in
various mutual funds (The Funds) as directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting
principles in the investment company industry:
a) SECURITY TRANSACTIONS - Security transactions are recorded on the
trade date (date the order to buy or sell is executed). Cost of
investments sold is determined on the basis of identified cost.
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 Dean Witter
Select Dimensions Series Mutual Funds are valued at the closing net
asset value per share as determined by the appropriate Fund as of
December 31, 1998.
c) FEDERAL INCOME TAXES - The operations of the Account form a part of,
and are taxed with, the total operations of the Company, which is
taxed as an insurance company under the Internal Revenue Code. Under
current law, no federal income taxes are payable with respect to the
operations of the Account.
d) USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the financial
statements and the reported amounts of income and expenses during the
period. Operating results in the future could vary from the amounts
derived from management's estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
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.
67
<PAGE>
SEPARATE ACCOUNT FIVE
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT FIVE AND TO THE
OWNERS OF UNITS OF INTEREST THEREIN:
We have audited the accompanying statement of assets and liabilities of the
Money Market Portfolio Sub-Account, North American Government Securities
Portfolio Sub-Account, Balanced Portfolio Sub-Account, Utilities Portfolio
Sub-Account, Dividend Growth Portfolio Sub-Account, Value-Added Market Portfolio
Sub-Account, Core-Equity Portfolio Sub-Account, American Value Portfolio
Sub-Account, Global Equity Value Portfolio Sub-Account, Developing Growth
Portfolio Sub-Account, Emerging Markets Portfolio Sub-Account, Diversified
Income Portfolio Sub-Account and Mid-Cap Growth Portfolio Sub-Account
(constituting ITT Hartford Life and Annuity Insurance Company Separate Account
Five) (the Account) as of December 31, 1997, and the related statement of
operations and statement of changes in net assets for the period from inception,
May 20, 1997, to December 31, 1997. 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 Money Market Portfolio
Sub-Account, North American Government Securities Portfolio Sub-Account,
Balanced Portfolio Sub-Account, Utilities Portfolio Sub-Account, Dividend Growth
Portfolio Sub-Account, Value-Added Market Portfolio Sub-Account, Core-Equity
Portfolio Sub-Account, American Value Portfolio Sub-Account, Global Equity Value
Portfolio Sub-Account, Developing Growth Portfolio Sub-Account, Emerging Markets
Portfolio Sub-Account, Diversified Income Portfolio Sub-Account and Mid-Cap
Growth Portfolio Sub-Account (constituting ITT Hartford Life and Annuity
Insurance Company Separate Account Five) as of December 31, 1997, the results of
its operations and the changes in its net assets for the period from inception,
May 20, 1997, to December 31, 1997, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 16, 1998
68
<PAGE>
SEPARATE ACCOUNT FIVE
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NORTH
AMERICAN
GOVERNMENT DIVIDEND
MONEY MARKET SECURITIES BALANCED UTILITIES AND GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in Dean
Witter Select
Dimensions Investment
Series:
Money Market Portfolio
Shares 796,437
Cost $ 796,437
Market Value......... $ 796,437 -- -- -- --
North American
Government Securities
Portfolio
Shares 102
Cost $ 1,030
Market Value......... -- $ 1,042 -- -- --
Balanced Portfolio
Shares 11,020
Cost $ 163,054
Market Value......... -- -- $ 165,626 -- --
Utilities Portfolio
Shares 422
Cost $ 6,260
Market Value......... -- -- -- $ 6,687 --
Dividend and Growth
Portfolio
Shares 80,887
Cost $1,566,131
Market Value......... -- -- -- -- $1,582,969
Value-Added Market
Portfolio
Shares 7,479
Cost $ 128,573
Market Value......... -- -- -- -- --
Core-Equity Portfolio
Shares 7,299
Cost $ 119,430
Market Value......... -- -- -- -- --
American Value
Portfolio
Shares 34,623
Cost $ 666,591
Market Value......... -- -- -- -- --
Global Equity Value
Portfolio
Shares 39,257
Cost $ 505,232
Market Value......... -- -- -- -- --
Developing Growth
Portfolio
Shares 10,906
Cost $ 206,994
Market Value......... -- -- -- -- --
Emerging Market
Portfolio
Shares 3,273
Cost $ 37,927
Market Value......... -- -- -- -- --
Diversified Income
Portfolio
Shares 44,216
Cost $ 455,007
Market Value......... -- -- -- -- --
Mid-Cap Growth
Portfolio
Shares 11,757
Cost $ 129,561
Market Value......... -- -- -- -- --
Due from ITT Hartford
Life and Annuity
Insurance Company..... -- -- 1 -- 1
Receivable from fund
shares sold........... -- -- -- -- --
------------- ----------- ----------- ----------- -----------
Total Assets........... 796,437 1,042 165,627 6,687 1,582,970
------------- ----------- ----------- ----------- -----------
LIABILITIES
Due to ITT Hartford
Life and Annuity
Insurance Company..... -- -- -- -- --
Payable for fund shares
purchased............. -- -- -- -- --
------------- ----------- ----------- ----------- -----------
Total Liabilities...... -- -- -- -- --
------------- ----------- ----------- ----------- -----------
Net Assets (variable
life contract
liabilities).......... $ 796,437 $ 1,042 $ 165,627 $ 6,687 $1,582,970
------------- ----------- ----------- ----------- -----------
------------- ----------- ----------- ----------- -----------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
Group Sub-Accounts:
Units Owned by
Contractholders....... 771,485 100 14,784 543 141,825
Unit Values............ $ 1.032342 $10.420600 $11.202964 $12.314200 $11.161390
</TABLE>
The accompanying notes are an integral part of these financial statements.
69
<PAGE>
<TABLE>
<CAPTION>
GLOBAL
VALUE-ADDED AMERICAN EQUITY DEVELOPING EMERGING DIVERSIFIED
MARKET CORE-EQUITY VALUE VALUE GROWTH MARKETS INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ------------ ----------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in Dean
Witter Select
Dimensions Investment
Series:
Money Market Portfolio
Shares 796,437
Cost $ 796,437
Market Value......... -- -- -- -- -- -- --
North American
Government Securities
Portfolio
Shares 102
Cost $ 1,030
Market Value......... -- -- -- -- -- -- --
Balanced Portfolio
Shares 11,020
Cost $ 163,054
Market Value......... -- -- -- -- -- -- --
Utilities Portfolio
Shares 422
Cost $ 6,260
Market Value......... -- -- -- -- -- -- --
Dividend and Growth
Portfolio
Shares 80,887
Cost $1,566,131
Market Value......... -- -- -- -- -- -- --
Value-Added Market
Portfolio
Shares 7,479
Cost $ 128,573
Market Value......... $ 131,338 -- -- -- -- -- --
Core-Equity Portfolio
Shares 7,299
Cost $ 119,430
Market Value......... -- $ 120,870 -- -- -- -- --
American Value
Portfolio
Shares 34,623
Cost $ 666,591
Market Value......... -- -- $ 681,732 -- -- -- --
Global Equity Value
Portfolio
Shares 39,257
Cost $ 505,232
Market Value......... -- -- -- $ 509,165 -- -- --
Developing Growth
Portfolio
Shares 10,906
Cost $ 206,994
Market Value......... -- -- -- -- 208,967 -- --
Emerging Market
Portfolio
Shares 3,273
Cost $ 37,927
Market Value......... -- -- -- -- -- $ 37,013 --
Diversified Income
Portfolio
Shares 44,216
Cost $ 455,007
Market Value......... -- -- -- -- -- -- $ 454,987
Mid-Cap Growth
Portfolio
Shares 11,757
Cost $ 129,561
Market Value......... -- -- -- -- -- -- --
Due from ITT Hartford
Life and Annuity
Insurance Company..... -- -- -- -- -- -- --
Receivable from fund
shares sold........... -- -- -- -- -- -- --
----------- ----------- ------------ ----------- ------------- ------------- -----------
Total Assets........... 131,338 120,870 681,732 509,165 208,967 37,013 454,987
----------- ----------- ------------ ----------- ------------- ------------- -----------
LIABILITIES
Due to ITT Hartford
Life and Annuity
Insurance Company..... 1 -- 1 4 1 -- --
Payable for fund shares
purchased............. -- -- -- -- -- -- --
----------- ----------- ------------ ----------- ------------- ------------- -----------
Total Liabilities...... 1 -- 1 4 1 -- --
----------- ----------- ------------ ----------- ------------- ------------- -----------
Net Assets (variable
life contract
liabilities).......... $ 131,337 $ 120,870 $ 681,731 $ 509,161 $ 208,966 $ 37,013 $ 454,987
----------- ----------- ------------ ----------- ------------- ------------- -----------
----------- ----------- ------------ ----------- ------------- ------------- -----------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
Group Sub-Accounts:
Units Owned by
Contractholders....... 11,342 10,527 53,983 50,897 17,358 3,988 42,778
Unit Values............ $11.579600 $11.482200 $ 12.628705 $10.003694 $12.038601 $ 9.281000 $10.635925
<CAPTION>
MID-CAP
GROWTH
PORTFOLIO
SUB-ACCOUNT
-----------
<S> <C>
ASSETS:
Investments in Dean
Witter Select
Dimensions Investment
Series:
Money Market Portfolio
Shares 796,437
Cost $ 796,437
Market Value......... --
North American
Government Securities
Portfolio
Shares 102
Cost $ 1,030
Market Value......... --
Balanced Portfolio
Shares 11,020
Cost $ 163,054
Market Value......... --
Utilities Portfolio
Shares 422
Cost $ 6,260
Market Value......... --
Dividend and Growth
Portfolio
Shares 80,887
Cost $1,566,131
Market Value......... --
Value-Added Market
Portfolio
Shares 7,479
Cost $ 128,573
Market Value......... --
Core-Equity Portfolio
Shares 7,299
Cost $ 119,430
Market Value......... --
American Value
Portfolio
Shares 34,623
Cost $ 666,591
Market Value......... --
Global Equity Value
Portfolio
Shares 39,257
Cost $ 505,232
Market Value......... --
Developing Growth
Portfolio
Shares 10,906
Cost $ 206,994
Market Value......... --
Emerging Market
Portfolio
Shares 3,273
Cost $ 37,927
Market Value......... --
Diversified Income
Portfolio
Shares 44,216
Cost $ 455,007
Market Value......... --
Mid-Cap Growth
Portfolio
Shares 11,757
Cost $ 129,561
Market Value......... $ 134,031
Due from ITT Hartford
Life and Annuity
Insurance Company..... --
Receivable from fund
shares sold........... --
-----------
Total Assets........... 134,031
-----------
LIABILITIES
Due to ITT Hartford
Life and Annuity
Insurance Company..... --
Payable for fund shares
purchased............. --
-----------
Total Liabilities...... --
-----------
Net Assets (variable
life contract
liabilities).......... $ 134,031
-----------
-----------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
Group Sub-Accounts:
Units Owned by
Contractholders....... 11,317
Unit Values............ $11.843234
</TABLE>
70
<PAGE>
SEPARATE ACCOUNT FIVE
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION MAY 20, 1997, TO DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NORTH
AMERICAN
GOVERNMENT DIVIDEND
MONEY MARKET SECURITIES BALANCED UTILITIES AND GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Investment income:
Dividends.............. $ 12,586 $30 $ 238 $ 21 $ 3,650
------------- --- ----------- ----- -----------
Net investment
income................ 12,586 30 238 21 3,650
------------- --- ----------- ----- -----------
Capital gains income..... -- -- 3 4 37
------------- --- ----------- ----- -----------
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on security
transactions.......... -- -- 2 -- 4
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 12 2,572 427 16,838
------------- --- ----------- ----- -----------
Net realized and
unrealized gain
(loss) on
investments......... -- 12 2,574 427 16,842
------------- --- ----------- ----- -----------
Net increase
(decrease) in net
assets resulting
from operations..... $ 12,586 $42 $2,815 $452 $20,529
------------- --- ----------- ----- -----------
------------- --- ----------- ----- -----------
</TABLE>
* From inception, January 21, 1997 to December 31, 1997.
The accompanying notes are an integral part of these financial statements.
71
<PAGE>
<TABLE>
<CAPTION>
GLOBAL
VALUE-ADDED AMERICAN EQUITY DEVELOPING EMERGING DIVERSIFIED MID-CAP
MARKET CORE-EQUITY VALUE VALUE GROWTH MARKETS INCOME GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
---------- ---------- ----------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends.............. $ 185 $ 32 $ 318 $ 257 $ 10 $ 3 $4,938 $ 76
---------- ---------- ----------- ---------- ---------- ----- ---------- ----------
Net investment
income................ 185 32 318 257 10 3 4,938 76
---------- ---------- ----------- ---------- ---------- ----- ---------- ----------
Capital gains income..... 2 5 22 2 -- -- 2 --
---------- ---------- ----------- ---------- ---------- ----- ---------- ----------
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on security
transactions.......... (1) (3) 5 5 160 (1) 15 --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 2,765 1,440 15,141 3,933 1,973 (914) (20) 4,470
---------- ---------- ----------- ---------- ---------- ----- ---------- ----------
Net realized and
unrealized gain
(loss) on
investments......... 2,764 1,437 15,146 3,938 2,133 (915) (5) 4,470
---------- ---------- ----------- ---------- ---------- ----- ---------- ----------
Net increase
(decrease) in net
assets resulting
from operations..... $2,951 $1,474 $15,486 $4,197 $2,143 $(912) $4,935 $4,546
---------- ---------- ----------- ---------- ---------- ----- ---------- ----------
---------- ---------- ----------- ---------- ---------- ----- ---------- ----------
</TABLE>
72
<PAGE>
SEPARATE ACCOUNT FIVE
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM INCEPTION MAY 20, 1997 TO DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NORTH
AMERICAN
MONEY GOVERNMENT DIVIDEND
MARKET SECURITIES BALANCED UTILITIES AND GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- -------- --------- -------- -----------
<S> <C> <C> <C> <C> <C>
Operations:
Net investment
income................ $ 12,586 $ 30 $ 238 $ 21 $ 3,650
Capital gains income... -- -- 3 4 37
Net realized gain
(loss) on security
transactions.......... -- -- 2 -- 4
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 12 2,572 427 16,838
----------- -------- --------- -------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 12,586 42 2,815 452 20,529
----------- -------- --------- -------- -----------
Unit transactions:
Purchases.............. 5,462,868 1,000 1,000 1,000 1,000
Net transfers.......... (3,978,866) -- 162,221 5,243 1,566,768
Surrenders............. (4,968) -- (294) (3) (3,663)
Loan withdrawals....... (691,140) -- -- -- (2)
Cost of insurance...... (4,043) -- (115) (5) (1,662)
----------- -------- --------- -------- -----------
Net increase in net
assets resulting from
unit transactions..... 783,851 1,000 162,812 6,235 1,562,441
----------- -------- --------- -------- -----------
Total increase in net
assets.............. 796,437 1,042 165,627 6,687 1,582,970
Net Assets:
Beginning of period.... -- -- -- -- --
----------- -------- --------- -------- -----------
End of period.......... $ 796,437 $1,042 $165,627 $6,687 $1,582,970
----------- -------- --------- -------- -----------
----------- -------- --------- -------- -----------
</TABLE>
* From inception, January 21, 1997 to December 31, 1997.
The accompanying notes are an integral part of these financial statements.
73
<PAGE>
<TABLE>
<CAPTION>
GLOBAL
VALUE-ADDED AMERICAN EQUITY DEVELOPING EMERGING DIVERSIFIED MID-CAP
MARKET CORE-EQUITY VALUE VALUE GROWTH MARKETS INCOME GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
--------- --------- --------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operations:
Net investment
income................ $ 185 $ 32 $ 318 257 $ 10 $ 3 $ 4,938 $ 76
Capital gains income... 2 5 22 2 -- -- 2 --
Net realized gain
(loss) on security
transactions.......... (1) (3) 5 5 160 (1) 15 --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 2,765 1,440 15,141 3,933 1,973 (914) (20) 4,470
--------- --------- --------- --------- ---------- --------- --------- ---------
Net increase (decrease)
in net assets
resulting from
operations............ 2,951 1,474 15,486 4,197 2,143 (912) 4,935 4,546
--------- --------- --------- --------- ---------- --------- --------- ---------
Unit transactions:
Purchases.............. 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Net transfers.......... 127,593 118,955 667,750 506,969 206,516 37,031 451,162 128,658
Surrenders............. (101) (397) (1,813) (2,610) (526) (76) (1,494) (123)
Loan withdrawals....... -- (1) (2) (1) (1) -- -- --
Cost of insurance...... (106) (161) (690) (394) (166) (30) (616) (50)
--------- --------- --------- --------- ---------- --------- --------- ---------
Net increase in net
assets resulting from
unit transactions..... 128,386 119,396 666,245 504,964 206,823 37,925 450,052 129,485
--------- --------- --------- --------- ---------- --------- --------- ---------
Total increase in net
assets.............. 131,337 120,870 681,731 509,161 208,966 37,013 454,987 134,031
Net Assets:
Beginning of period.... -- -- -- -- -- -- -- --
--------- --------- --------- --------- ---------- --------- --------- ---------
End of period.......... $131,337 $120,870 $681,731 $509,161 $208,966 $37,013 $454,987 $134,031
--------- --------- --------- --------- ---------- --------- --------- ---------
--------- --------- --------- --------- ---------- --------- --------- ---------
</TABLE>
74
<PAGE>
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 thirteen sub-accounts
which invest solely in Dean Witter Select Dimensions Portfolios (the Funds). The
twelve sub-accounts which invest in Hartford Mutual Funds and the sixteen
sub-accounts which invest in Putnam VT Mutual Funds 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 Dean Witter Select
Dimensions Investment Series Mutual 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.
75
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
THIRD QUARTER NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- ---------------
1998 1997 1998 1997
----- ----- ------ ------
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues
Premiums and other considerations............... $ 484 $ 360 $1,430 $ 993
Net investment income........................... 339 319 1,035 978
Net realized capital (losses) gains............. 3 -- (3) 4
----- ----- ------ ------
Total revenues................................ 826 679 2,462 1,975
----- ----- ------ ------
Benefits, claims and expenses
Benefits, claims and claim adjustment
expenses....................................... 353 318 1,100 970
Amortization of deferred policy acquisition
costs.......................................... 119 80 328 252
Dividends to policyholders...................... 61 47 177 119
Other insurance expenses........................ 155 105 461 295
----- ----- ------ ------
Total benefits, claims and expenses........... 688 550 2,066 1,636
----- ----- ------ ------
Income before income tax expense................ 138 129 396 339
Income tax expense.............................. 49 48 139 121
----- ----- ------ ------
Net income...................................... $ 89 $ 81 $ 257 $ 218
----- ----- ------ ------
----- ----- ------ ------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
76
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- -------------
(IN MILLIONS, EXCEPT
FOR SHARE DATA)
(UNAUDITED)
<S> <C> <C>
Assets
Investments
Fixed maturities, available for sale, at fair
value (amortized cost of $13,771 and
$13,885)....................................... $14,214 $14,176
Equity securities, at fair value................ 114 180
Policy loans, at outstanding balance............ 3,742 3,756
Other investments, at cost...................... 275 47
------------- -------------
Total investments............................. 18,345 18,159
Cash............................................ 86 54
Premiums and amounts receivable................. 22 18
Accrued investment income....................... 330 330
Reinsurance recoverables........................ 5,903 6,114
Deferred policy acquisition costs............... 3,674 3,315
Deferred income tax............................. 376 348
Other assets.................................... 332 352
Separate account assets......................... 76,725 69,055
------------- -------------
Total assets.................................. $105,793 $97,745
------------- -------------
------------- -------------
Liabilities
Future policy benefits.......................... $ 3,341 $ 3,059
Other policyholder funds........................ 20,684 21,034
Other liabilities............................... 2,331 2,254
Separate account liabilities.................... 76,725 69,055
------------- -------------
Total liabilities............................. 103,081 95,402
Stockholder's Equity
Common stock -- authorized, issued and
outstanding 1,000, 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......................................... 291 179
Total accumulated other comprehensive income... 291 179
Retained earnings.............................. 1,370 1,113
------------- -------------
Total stockholder's equity.................... 2,712 2,343
------------- -------------
Total liabilities and stockholder's equity...... $105,793 $97,745
------------- -------------
------------- -------------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
77
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDER'S EQUITY
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
ACCUMULATED OTHER
COMPREHENSIVE INCOME
-----------------------------------------------------------------------------
NET UNREALIZED
CAPITAL GAINS ON TOTAL
COMMON SECURITIES, NET OF RETAINED STOCKHOLDER'S
STOCK CAPITAL SURPLUS TAX EARNINGS EQUITY
------ --------------- --------------------- ---------- -------------
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997................... $6 $1,045 $ 179 $1,113 $2,343
Comprehensive income
Net income................................. -- -- -- 257 257
Other comprehensive income, net of tax (1):
Changes in net unrealized capital gains
on securities (2)........................ -- -- 112 -- 112
Total other comprehensive income........... 112
Total comprehensive income................... 369
--
------ ----- ---------- ------
Balance, September 30, 1998.................. $6 $1,045 $ 291 $1,370 $2,712
--
--
------ ----- ---------- ------
------ ----- ---------- ------
NINE MONTHS ENDED SEPTEMBER 30, 1997
<CAPTION>
ACCUMULATED OTHER
COMPREHENSIVE INCOME
-----------------------------------------------------------------------------
NET UNREALIZED
CAPITAL GAINS ON TOTAL
COMMON SECURITIES, NET OF RETAINED STOCKHOLDER'S
STOCK CAPITAL SURPLUS TAX EARNINGS EQUITY
------ --------------- --------------------- ---------- -------------
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996................... $6 $1,045 $ 30 $ 811 $1,892
Comprehensive income
Net income................................. -- -- -- 218 218
Other comprehensive income, net of tax (1):
Changes in net unrealized capital gains
on securities (2)........................ -- -- 105 -- 105
Total other comprehensive income........... 105
Total comprehensive income 323
--
------ ----- ---------- ------
Balance, September 30, 1997.................. $6 $1,045 $ 135 $1,029 $2,215
--
--
------ ----- ---------- ------
------ ----- ---------- ------
</TABLE>
- ---------
(1) Net unrealized gain on securities is reflected net of tax of $60 and $57 as
of September 30, 1998 and 1997, respectively.
(2) Net of reclassification adjustment for (losses) gains realized in net income
of $(2) and $3 for the nine months ended September 30, 1998 and 1997,
respectively.
See Notes to Condensed Consolidated Financial Statements.
78
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1998 1997
-------- --------
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C>
Operating Activities
Net income............................ $ 257 $ 218
Adjustments to net income:
Depreciation and amortization......... (15) 5
Net realized capital losses (gains)... 3 (4)
Increase in deferred income taxes..... (90) (14)
Increase in deferred policy
acquisition costs.................... (359) (396)
(Increase) decrease in premiums and
amounts receivable................... (4) 3
Decrease in accrued investment
income............................... -- 48
Decrease in other assets.............. 65 169
Decrease (increase) in reinsurance
recoverables......................... 39 (310)
Increase in liability for future
policy benefits...................... 282 650
(Decrease) increase in other
liabilities.......................... (55) 131
-------- --------
Cash provided by operating
activities......................... 123 500
-------- --------
Investing Activities
Purchases of fixed maturity
investments.......................... (4,530) (4,628)
Sales of fixed maturity investments... 2,848 3,039
Maturities and principal paydowns of
fixed maturity investments........... 1,387 1,643
Net (purchases) sales of other
investments.......................... (89) 32
Net sales (purchases) of short-term
investments.......................... 492 (70)
-------- --------
Cash provided by investing
activities......................... 108 16
-------- --------
Financing Activities
Net disbursements for investment and
universal life-type contracts charged
against policyholder accounts........ (199) (506)
-------- --------
Cash used for financing activities.... (199) (506)
-------- --------
Increase in cash...................... 32 10
Cash -- beginning of period........... 54 43
-------- --------
Cash -- end of period................. $ 86 $ 53
-------- --------
Supplemental Disclosure of Cash Flow
Information:
Net Cash paid during the period for:
Income taxes.......................... $ 241 $ 31
-------- --------
-------- --------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
79
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN MILLIONS EXCEPT FOR SHARE DATA UNLESS OTHERWISE STATED)
(UNAUDITED)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Hartford Life Insurance Company and subsidiaries (the "Company") have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and note disclosures which are normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to those rules and
regulations, although the Company believes that the disclosures made are
adequate to make the information presented not misleading. In the opinion of
management, these statements include all adjustments which were normal recurring
adjustments necessary to present fairly the financial position, results of
operations and cash flows for the periods presented. For a description of
significant accounting policies, see Note 2 of Notes to Consolidated Financial
Statements in the Company's 1997 Form 10-K Annual Report.
(B) CHANGES IN ACCOUNTING PRINCIPLES
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.
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.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". The new standard
establishes accounting and reporting guidance for derivative instruments,
including certain derivative instruments embedded in other contracts. The
standard requires, among other things, that all derivatives be carried on the
balance sheet at fair value. The standard also specifies hedge accounting
criteria under which a derivative can qualify for special accounting. In order
to receive special accounting, the derivative instrument must qualify as either
a hedge of the fair value or the variability of the cash flow of a qualified
asset or liability. Special accounting for qualifying hedges provides for
matching the timing of gain or loss recognition on the hedging instrument with
the recognition of the corresponding changes in value of the hedged item. SFAS
No. 133 will be effective for fiscal years beginning after June 15, 1999.
Initial application for the Company will begin for the first quarter of the year
2000. The Company is currently in the process of quantifying the impact of SFAS
No. 133.
In September 1998, the Securities and Exchange Commission stated that until
the Emerging Issues Task Force (EITF) concludes its discussion regarding the
accounting for combined structured notes, affected companies that entered into
these notes prior to September 25, 1998 are required to either restate prior
period financial statements to conform with the recently prescribed unit
accounting model or disclose the related impact on earnings for all periods
presented and cumulatively over the life of the instruments had the registrant
accounted for the structure as a unit. Included in net income for the nine
months ended September 30, 1998 was $32 of after-tax net realized capital losses
and approximately $2 of after-tax net investment income related to a combined
structured note transaction, which was accounted for in accordance with then
current generally accepted accounting principles (GAAP). Had the transaction
been accounted for as a unit, based upon recently prescribed GAAP for such types
of transactions entered into after September 24, 1998, net income would have
been approximately $2 lower for the third quarter and $30 higher for the nine
months ended September 30, 1998.
NOTE 2. INITIAL PUBLIC OFFERING (IPO)
On February 10, 1997, the Company's indirect parent, Hartford Life, Inc.
(Hartford Life), filed a registration statement, as amended, with the Securities
and Exchange Commission, relating to the IPO of Hartford Life's Class A Common
Stock. Pursuant to the IPO on May 22, 1997, Hartford Life sold to the public 26
million shares at $28.25
80
<PAGE>
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 represented approximately 18.6% of the
equity ownership in Hartford Life and approximately 4.4% of the combined voting
power of Hartford Life's Class A and Class B Common Stock. Hartford Financial
Services Group, Inc., an indirect parent of Hartford Life, owns all of the 114
million outstanding shares of Class B Common Stock of Hartford Life,
representing approximately 81.4% of the equity ownership in Hartford Life and
approximately 95.6% of the combined voting power of Hartford Life's Class A and
Class B Common Stock. Holders of Class A Common Stock generally have identical
rights to the holders of Class B Common Stock except that the holders of Class A
Common Stock are entitled to one vote per share while holders of Class B Common
Stock are entitled to five votes per share on all matters submitted to a vote of
Hartford Life's stockholders.
NOTE 3. COMMITMENTS AND CONTINGENCIES
(A) 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.
(B) INVESTMENTS
As of September 30, 1998, the Company held $110 of asset-backed securities
securitized and serviced by Commercial Finance Services, Inc. (CFS). In October
1998, the Company became aware of allegations of improper activities at CFS. CFS
has engaged an independent accounting firm and outside legal counsel to
investigate these allegations. Currently, these securities are performing in
line with expectations. Based upon information available at this time, the
Company is presently unable to determine the amount of potential loss, if any,
related to the securities.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLAR AMOUNTS IN MILLIONS UNLESS OTHERWISE STATED)
Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) addresses the financial condition of the Company as of
September 30, 1998, compared with December 31, 1997, and its results of
operations for the third quarter and nine months ended September 30, 1998
compared with the equivalent 1997 periods. 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.
INDEX
<TABLE>
<S> <C>
Consolidated Results of
Operations:
Operating Summary............... 9
Annuity......................... 10
Individual Life Insurance....... 11
Employee Benefits............... 11
Guaranteed Investment
Contracts...................... 11
Regulatory Initiatives and
Contingencies.................. 12
Accounting Standards............ 13
Other Matters................... 13
</TABLE>
CONSOLIDATED RESULTS OF OPERATIONS:
OPERATING SUMMARY
<TABLE>
<CAPTION>
THIRD QUARTER ENDED
NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues................ $ 826 $ 679 $ 2,462 $ 1,975
Expenses................ 737 598 2,205 1,757
--------- --------- --------- ---------
Net Income............ $ 89 $ 81 $ 257 $ 218
--------- --------- --------- ---------
--------- --------- --------- ---------
</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.
81
<PAGE>
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 $147, or 22%, and $487, or 25%, for the third quarter and
nine months ended September 30, 1998, respectively, compared to the equivalent
1997 periods. This increase was driven by higher fee income earned on growth in
separate account assets primarily related to the Annuity and Individual Life
Insurance segments, revenue growth due to new sales and renewals in the Employee
Benefits segment, as well as higher net investment income, partially offset by
decreasing revenues related to the declining block of Closed Book GRC. For a
discussion of combined structured note transactions and investment contingencies
see Notes 1 (b) and 3 (b), respectively, of Notes to Condensed Consolidated
Financial Statements.
Expenses increased $139, or 23%, and $448, or 25%, for the third quarter and
nine months ended September 30, 1998, respectively, compared to the same prior
year periods. This increase was due to higher benefits, claims, and claim
adjustment expenses, increased amortization of deferred policy acquisition costs
and increased operating expenses primarily related to growth in the Company's
principal operating segments.
Net income increased $8, or 10%, and $39, or 18%, for the third quarter and
nine months ended September 30, 1998, respectively, as compared to the same
periods in 1997 primarily due to revenue growth in both the Annuity and
Individual Life Insurance segments. These increases were partially offset by a
decrease in Employee Benefits earnings as a result of COLI.
SEGMENT RESULTS
The Company's reporting segments, 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>
THIRD QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ --------------------
1998 1997 1998 1997
----- ----- --------- ---------
<S> <C> <C> <C> <C>
Annuity....................... $ 67 $ 56 $ 197 $ 148
Individual Life Insurance..... 16 15 44 38
Employee Benefits............. 6 8 18 23
Guaranteed Investment
Contracts.................... -- -- -- --
Corporate Operation........... -- 2 (2) 9
--- --- --------- ---------
Net Income.................. $89 $81 $ 257 $ 218
--- --- --------- ---------
--- --- --------- ---------
</TABLE>
The sections that follow analyze each segment's results.
ANNUITY
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues.................. $ 410 $ 336 $ 1,208 $ 924
Expenses.................. 343 280 1,011 776
--------- --------- --------- ---------
Net Income.............. $ 67 $ 56 $ 197 $ 148
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Revenues for the third quarter and nine months ended September 30, 1998
increased $74, or 22%, and $284, or 31%, respectively, compared to the
equivalent prior year periods. This increase was driven by Individual Annuity
revenues which increased $72, or 31%, and $255, or 41%, for the third quarter
and nine months ended September 30, 1998, respectively, as compared to the same
periods in 1997 primarily due to higher fee income earned on growth in
individual variable annuity account values. Despite the fact that the equity
market did not experience significant appreciation during the third quarter of
1998, the segment's assets under management have increased from prior year
levels. Average individual variable annuity account values grew $11.0 billion,
or 29%, to $49.7 billion as of September 30, 1998 from $38.7 billion as of
September 30,
82
<PAGE>
1997. This growth was the result of strong individual variable annuity sales of
$2.4 billion and $7.6 billion for the third quarter and nine months ended
September 30, 1998, respectively, compared to sales of $2.5 billion and $7.2
billion for the third quarter and nine months ended September 30, 1997,
respectively. In addition, Group Annuity revenues increased $2, or 2%, and $29,
or 10%, for the third quarter and nine months ended September 30, 1998,
respectively, over the equivalent prior periods, primarily due to higher fee
income and net investment income resulting from growth in assets under
management. Group Annuity average total account values grew $1.3 billion, or
13%, to $11.1 billion as of September 30, 1998 from $9.8 billion as of September
30, 1997, due to new deposits.
Expenses increased $63, or 23%, and $235, or 30%, for the third quarter and
nine months ended September 30, 1998, respectively, as compared to the same
prior year periods. Benefits, claims and claim adjustment expenses increased $6
and $68 for the third quarter and nine months ended September 30, 1998,
respectively, compared to the same periods in 1997 primarily due to increased
interest credited on Individual Annuity general account values. Average
Individual Annuity general account values increased $975, or 31%, to $4.1
billion at September 30, 1998 from $3.1 billion at September 30, 1997.
Amortization of deferred policy acquisition costs increased $26 and $64 for the
third quarter and nine months ended September 30, 1998, respectively, compared
to the same periods in 1997 as prior and current year sales remained strong. In
addition, for the third quarter and nine months ended September 30, 1998, other
business expenses increased $23 and $75, respectively, compared to prior year
periods, as a result of the continued growth in this segment.
Annuity net income increased $11, or 20%, and $49, or 33%, for the third
quarter and nine months ended September 30, 1998, respectively, as compared to
the same prior year periods as a result of revenue growth and continued
operating efficiencies.
INDIVIDUAL LIFE INSURANCE
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues.................... $ 137 $ 122 $ 401 $ 358
Expenses 121 107 357 320
--------- --------- --------- ---------
Net Income................ $ 16 $ 15 $ 44 $ 38
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Revenues for the third quarter and nine months ended September 30, 1998
increased $15, or 12%, and $43, or 12%, respectively, as compared to the
equivalent periods in 1997. This increase was primarily due to higher cost of
insurance charges and other fee income earned on the Company's growing block of
variable life insurance. Variable life average account values increased $447, or
57%, to $1.2 billion as of September 30, 1998 from $786 as of September 30, 1997
due to strong sales. Variable life product sales constituted $82, or 75%, of
total Individual Life Insurance new sales as of September 30, 1998, an increase
of $21, or 34%, compared to the same period in 1997.
Expenses increased $14, or 13%, and $37, or 12%, for the third quarter and
nine months ended September 30, 1998, respectively, as compared to the
equivalent period in 1997. This increase was primarily the result of higher
benefits, claims, and claim adjustment expenses and amortization of deferred
acquisition costs associated with the growth in this segment as well as
increased mortality experience during 1998.
Net income increased $1, or 7%, and $6, or 16%, for the third quarter and
nine months ended September 30, 1998, respectively, as compared to the same
period in 1997 as a result of strong sales and revenue growth.
EMPLOYEE BENEFITS
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues.................... $ 219 $ 150 $ 697 $ 471
Expenses.................... 213 142 679 448
--------- --------- --------- ---------
Net Income................ $ 6 $ 8 $ 18 $ 23
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Revenues increased $69, or 46%, and $226, or 48%, for the third quarter and
nine months ended September 30, 1998, respectively, as compared to the same
periods in 1997, as a result of an increase in fee income related to new sales
of variable COLI, and renewal premium on leveraged COLI. Expenses increased $71,
or 50%, and $231, or 52%, for the third quarter and nine months ended September
30, 1998, respectively, as compared to the same prior year periods, due to
higher expenses associated with variable COLI sales and leveraged COLI renewal
premium. Net income decreased $2, or 25%, and $5, or 22%, for the third quarter
and nine months ended September 30, 1998, respectively, as compared to the same
prior periods in 1997.
GUARANTEED INVESTMENT CONTRACTS
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ --------------------
1998 1997 1998 1997
----- ----- --------- ---------
<S> <C> <C> <C> <C>
Revenues...................... $ 35 $ 62 $ 125 $ 196
Expenses...................... 35 62 125 196
--- --- --------- ---------
Net Loss.................... $ -- $ -- $ -- $ --
--- --- --------- ---------
--- --- --------- ---------
</TABLE>
83
<PAGE>
This segment reported no net income for the third quarter and nine months
ended September 30, 1998 and 1997 consistent with management's expectations that
net income from Closed Book GRC in the years subsequent to 1996 will be
immaterial based on the Company's current projections for the performance of the
assets and liabilities associated with Closed Book GRC. However, no assurance
can be given that, under certain unanticipated economic circumstances which
result in the Company's assumptions being proven inaccurate, further losses in
respect of Closed Book GRC will not occur in the future.
REGULATORY INITIATIVES AND CONTINGENCIES
NAIC PROPOSALS
The National Association of Insurance Commissioners ("NAIC") adopted the
Codification of Statutory Accounting Principles ("SAP") in March, 1998. The
proposed effective date for the statutory accounting guidance is January 1,
2001. It is expected that the Company's domiciliary state will adopt SAP and the
Company will make the necessary changes required for implementation. These
changes are not anticipated to have a material impact on the statutory financial
statements of the Company.
YEAR 2000
IN GENERAL
The Year 2000 issue relates to the ability or inability of computer hardware,
software and other information technology (IT) systems, as well as non-IT
systems, such as equipment and machinery with imbedded chips and
microprocessors, to properly process information and data containing or related
to dates beginning with the year 2000 and beyond. The Year 2000 issue exists
because, historically, many IT and non-IT systems that are in use today were
developed years ago when a year was identified using a two-digit date field
rather than a four-digit date field. As information and data containing or
related to the century date are introduced to date sensitive systems, these
systems may recognize the year 2000 as "1900", or not at all, which may result
in systems processing information incorrectly. This, in turn, may significantly
and adversely affect the integrity and reliability of information databases of
IT systems, may cause the malfunctioning of certain non-IT systems, and may
result in a wide variety of adverse consequences to a company. In addition, Year
2000 problems that occur with third parties with which a company does business,
such as suppliers, computer vendors, distributors and others, may also adversely
affect any given company.
The integrity and reliability of the Company's IT systems, as well as the
reliability of its non-IT systems, are integral aspects of the Company's
business. The Company has thousands of individual and business customers that
have insurance policies, annuities, mutual funds and other financial products of
the Company. Nearly all of these policies and products contain date sensitive
data, such as policy expiration dates, birth dates, premium payment dates, and
the like. In addition, various IT systems support communications and other
systems that integrate the Company's various business segments and field
offices. The Company also has business relationships with numerous third parties
that affect virtually all aspects of the Company's business, including, without
limitation, suppliers, computer hardware and software vendors, insurance agents
and brokers, securities broker-dealers and other distributors of financial
products, many of which provide date sensitive data to the Company, and whose
operations are important to the Company's business.
INTERNAL YEAR 2000 EFFORTS AND TIMETABLE
Beginning in 1990, the Company began working on making its IT systems Year 2000
ready, either through installing new programs or replacing systems. Since
January 1998, the Company's Year 2000 efforts have focused on the remaining Year
2000 issues related to IT and non-IT systems in all of the Company's business
segments. These Year 2000 efforts include the following five main initiatives:
(1) identifying and assessing Year 2000 issues; (2) taking actions to remediate
IT and non-IT systems so that they are Year 2000 ready; (3) testing and
certifying IT and non-IT systems as Year 2000 ready; (4) deploying such
remediated and tested systems back into their respective production
environments; and (5) conducting internal and external integrated testing of
such systems. The Company currently anticipates that initiatives (1) through (4)
of its internal Year 2000 efforts will be substantially complete by the end of
1998, and that initiative (5) testing will begin in early 1999 and continue
through the end of 1999.
THIRD PARTY YEAR 2000 EFFORTS AND TIMETABLE
The Company's Year 2000 efforts include assessing the potential impact on the
Company of third Year 2000 readiness. The Company's third party Year 2000
efforts include the following three main initiatives: (1) identifying third
parties which have significant business relationships with the Company and
inquiring of such third parties regarding their Year 2000 readiness; (2)
evaluating such third parties' responses to the Company's inquiries; and (3)
based on the evaluation of third party responses and the significance of the
business relationship, conducting additional activities with third parties as
determined to be necessary in each case, which activities may include integrated
IT systems testing. The Company has completed the first third party initiative
and is in the process of evaluating third party responses received. The Company
currently anticipates that it will substantially complete the response
evaluation in early 1999 and that it will conduct the additional activities
described in initiative (3) beginning in early 1999 and continue through the end
of 1999 as necessary. However, notwithstanding these third party Year 2000
efforts, the Company does not have control over these third parties and, as a
result, the Company cannot currently determine to what extent future operating
results may be adversely
84
<PAGE>
affected by the failure of these third parties to adequately address their Year
2000 issues.
YEAR 2000 COSTS
The costs of the Company's Year 2000 program that have been incurred through the
year ended December 31, 1997 have not been material to the Company's financial
condition or results of operations. Management estimates that after-tax costs
related to the Year 2000 program to be incurred in 1998 and 1999 will be $4 in
total, of which approximately $2 has been incurred as of September 30, 1998.
These costs are being expensed as incurred and have not had, and are not
currently expected to have, a material impact on Hartford Life's financial
condition or results of operations.
RISKS AND CONTINGENCY PLANS
If significant Year 2000 problems arise, including problems arising with third
parties, failures of IT and non-IT systems could occur, which in turn could
result in substantial interruptions in the Company's business. Given the
uncertain nature of Year 2000 problems that may arise, especially those related
to the readiness of third parties discussed above, the Company cannot determine
at this time whether the consequences of Year 2000 related problems that could
arise will have a material impact on the Company's financial condition or
results of operations.
The Company is in the process of developing certain contingency plans so
that if, despite its Year 2000 efforts, Year 2000 problems ultimately arise, the
impact of such problems may be minimized. These contingency plans are being
developed based on, among other things, known or reasonably anticipated
circumstances and potential vulnerabilities. The contingency planning also
includes assessing the dependency of the Company's business on third parties and
their Year 2000 readiness. The Company currently anticipates that internal and
external contingency plans will be substantially complete by the end of the
second quarter of 1999. However, in many contexts, Year 2000 issues are dynamic,
and ongoing assessments of business functions, vulnerabilities and risks must be
made. As such, new contingency plans may be needed in the future and/or then
existing plans may need to be modified as circumstances warrant.
ACCOUNTING STANDARDS
For a discussion of accounting standards, see Note 1 of Notes to Condensed
Consolidated Financial Statements.
OTHER MATTERS
SUBSEQUENT EVENT
On November 10, 1998, Hartford Life, Inc. (Hartford Life), an indirect parent of
the Company, recaptured an in-force block of COLI business from MBL Life
Assurance Co. of New Jersey (MBL Life), as well as purchased the outstanding
interest in International Corporate Marketing Group (ICMG), which was previously
40% owned by MBL Life. The transaction was consummated through the assignment of
a reinsurance arrangement between Hartford Life and MBL Life to a Hartford Life
subsidiary. Hartford Life originally assumed the life insurance block in 1992
from Mutual Benefit Life Insurance Company (Mutual Benefit Life), which was
placed in court-supervised rehabilitation in 1991, and reinsured a portion of
those polices back to MBL Life. MBL Life, previously a Mutual Benefit Life
subsidiary, operates under the Rehabilitation Plan for Mutual Benefit Life.
85
<PAGE>
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
86
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY STATEMENTS OF INCOME
<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.
87
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY BALANCE SHEETS
<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.
88
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
<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.
89
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATUTORY STATEMENTS OF CASH FLOWS
<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.
90
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
NOTES TO STATUTORY FINANCIAL STATEMENTS
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;
91
<PAGE>
(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
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<PAGE>
("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.
93
<PAGE>
(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
94
<PAGE>
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
95
<PAGE>
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.
96
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The prospectus consisting of 60 pages.
The undertaking to file reports.
The Rule 484 undertaking.
The signatures.
(1) The following exhibits included herewith correspond to those required by
paragraph A of the instructions for exhibits to Form N-8B-2.
(A1) Resolution of Board of Directors of Hartford Life and Annuity
Insurance Company ("Hartford") authorizing the establishment of
the Separate Account. (1)
(A2) Not Applicable.
(A3a) Principal Underwriting Agreement.(2)
(A3b) Forms of Selling Agreements.(2)
(A3c) Not applicable.
(A4) Not Applicable.
(A5) Form of Modified Single Premium Variable Life Insurance
Policy.(1)
(A6a) Certificate of Incorporation of Hartford.(3)
(A6b) Bylaws of Hartford.(2)
- -------------------------
(1) Incorporated by reference to Post Effective No. 2, to the Registration
State File No. 33-83650, dated May 1, 1995.
(2) Incorporated by reference to Post Effective Amendment No. 3, to the
Registration Statement File No. 33-83650, dated May 1, 1996.
(3) Incorporated by reference to the Initial Filing to the Registration
Statement File No. 333-52637, filed on May 14, 1998.
<PAGE>
(A7) Not Applicable.
(A8) Not Applicable.
(A9) Not Applicable.
(A10) Form of Application for Modified Single Premium Variable Life
Insurance Policies.1
(A11) Memorandum describing transfer and redemption procedures.(1)
(2) Opinion and consent of Lynda Godkin, Senior Vice President, General Counsel
and Corporate Secretary.
(3) No financial statement will be omitted from the Prospectus pursuant to
Instruction 1 (b) or (c) of Part I.
(4) Not Applicable.
(5) Opinion and Consent of Michael Winterfield, FSA, MAAA.
(6) Consent of Arthur Andersen LLP, Independent Public Accountants.
(7) Power of Attorney.
(8) Not applicable.
<PAGE>
REPRESENTATION OF REASONABLENESS OF FEES
Hartford Life and Annuity Insurance Company ("Hartford") hereby represents
that the aggregate fees and charges under the Policy are reasonable in relation
to the services rendered, the expenses expected to be incurred, and the risks
assumed by Hartford.
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
UNDERTAKINGS AND REPRESENTATIONS AS REQUIRED BY RULE 6E-3(T)
1. Separate Account Five meets the definition of "Separate Account" under Rule
6e-3(T).
2. Hartford undertakes to keep and make available to the Commission upon
request any documents used to support any representation as to the
reasonableness of fees.
UNDERTAKING ON INDEMNIFICATION
Under Section 33-772 of the Connecticut General Statutes, unless limited by its
certificate of incorporation, the Registrant must indemnify a director who was
wholly successful, on the merits or otherwise, in the defense of any proceeding
to which he was a party because he is or was a director of the corporation
against reasonable expenses incurred by him in connection with the proceeding.
The Registrant may indemnify an individual made a party to a proceeding because
he is or was a director against liability incurred in the proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Registrant, and, with respect to any criminal
proceeding, had no reason to believe his conduct was unlawful. Conn. Gen. Stat.
Section 33-771(a). Additionally, pursuant to Conn. Gen. Stat. Section 33-776,
the Registrant may indemnify officers and employees or agents for liability
incurred and for any expenses to which they becomes subject by reason of being
or having been an employees or officers of the Registrant. Connecticut law does
not prescribe standards for the indemnification of officers, employees and
agents and expressly states that their indemnification may be broader than the
right of indemnification granted to directors.
The foregoing statements are specifically made subject to the detailed
provisions of Section 33-770 et seq.
<PAGE>
Notwithstanding the fact that Connecticut law obligates the Registrant to
indemnify a only a director that was successful on the merits in a suit, under
Article III, Section 1 of the Registrant's bylaws, the Registrant must indemnify
both directors and officers of the Registrant for (1) any claims and liabilities
to which they become subject by reason of being or having been a directors or
officers of the company and legal and (2) other expenses incurred in defending
against such claims, in each case, to the extent such is consistent with
statutory provisions.
Additionally, the directors and officers of Hartford and Hartford Securities
Distribution Company, Inc. ("HSD") are covered under a directors and officers
liability insurance policy issued to The Hartford Financial Services Group, Inc.
and its subsidiaries. Such policy will reimburse the Registrant for any
payments that it shall make to directors and officers pursuant to law and will,
subject to certain exclusions contained in the policy, further pay any other
costs, charges and expenses and settlements and judgments arising from any
proceeding involving any director or officer of the Registrant in his past or
present capacity as such, and for which he may be liable, except as to any
liabilities arising from acts that are deemed to be uninsurable.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
INFORMATION REGARDING CERTAIN SALES LOADS, ADMINISTRATIVE, MANAGEMENT AND OTHER
FEES
Separate Account Five of ^ Hartford Life and Annuity Insurance Company was
established to separate the assets funding the Policies from other assets of
Hartford. In addition to the Policies described in this Prospectus the Separate
Account holds assets of several other Registration Statements. In 1995, the
Separate Account received approximately $33,918,567 in policyholder premiums.
In the same year it charged policyholders approximately $273,433 in sales load,
administrative, management and other fees ("Separate Account Charges"). In 1996
policyholder premium was $102,373,233 with the associated Separate Account
Charges equaled approximately $2,077,269. In 1997 policyholder premium for the
entire Separate Account equaled $94,278,990 with
<PAGE>
Separate Account Charges for the same time period being $4,874,894.
OFFICERS AND DIRECTORS
The principal underwriter for Hartford Life and Annuity Insurance Company
Separate Account Five is Hartford Securities Distribution Company, Inc. The
following is a list of Officers and Directors:
Name and Principal Positions and Offices
Business Address With Underwriter
------------------ ---------------------
Lowndes A. Smith President and Chief Executive Officer, Director
Thomas M. Marra Executive Vice President, Director
Peter W. Cummins Senior Vice President
Lynda Godkin Senior Vice President, General Counsel and
Corporate Secretary
Donald E. Waggaman, Jr. Treasurer
George R. Jay Controller
Unless otherwise indicated, the principal business address of each the
above individuals is P. O. Box 2999, Hartford, Connecticut 06104-2999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies under the Securities Act of 1933 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, and attested, all in the Town of Simbury, and
State of Connecticut, on the 12th of February, 1999.
HARTFORD LIFE AND ANNUITY INSURANCE
COMPANY - SEPARATE ACCOUNT FIVE (Registrant)
By: David T. Foy
-------------------------------------
David T. Foy, Senior Vice President and Treasurer
HARTFORD LIFE AND ANNUITY INSURANCE
COMPANY (Depositor)
By: David T. Foy
-------------------------------------
David T. Foy, Senior Vice President and Treasurer
By: /s/ Marianne O'Doherty
-----------------------
Marianne O'Doherty
Attorney-In-Fact
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons and in the capacities and on
the dates indicated.
Gregory A. Boyko, Senior Vice
President, Director*
Lynda Godkin, Senior Vice President
General Counsel and Corporate
Secretary, Director*
Thomas M. Marra, Executive Vice *By: /s/ Marianne O'Doherty
President and Director, Individual -----------------------
Life and Annuity Division, Director* Marianne O'Doherty
Lowndes A. Smith, President and Attorney-In-Fact
Chief Executive Officer,
Director* Dated: February 12, 1999
David M. Znamierowski, Senior ---------------
Vice President, Director*
<PAGE>
EXHIBIT INDEX
(2) Opinion and Consent of Lynda Godkin, Senior Vice President, General
Counsel, and Corporate Secretary.
(5) Opinion and Consent of Michael Winterfield, FSA, MAAA.
(6) Consent of Arthur Andersen LLP, Independent Public Accountants.
(7) Power of Attorney.
<PAGE>
EXHIBIT 2
[LOGO]
Hartford Life
February 12, 1999 LYNDA GODKIN
Senior Vice President, General
Counsel & Corporate Secretary
Board of Directors
Hartford Life and Annuity Insurance Company
200 Hopmeadow Street
Simsbury, CT 06089
RE: SEPARATE ACCOUNT FIVE
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
FILE NO. 333-52637
Dear Sir/Madam:
I have acted as General Counsel to Hartford Life and Annuity Insurance Company
(the "Company"), a Connecticut insurance company, and Hartford Life and Annuity
Insurance Company Separate Account Five (the "Account") in connection with the
registration of an indefinite amount of securities in the form of modified
single premium variable life insurance policies (the "Policies") with the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
I have examined such documents (including the Form S-6 Registration Statement)
and reviewed such questions of law as I considered necessary and appropriate,
and on the basis of such examination and review, it is my opinion that:
1. The Company is a corporation duly organized and validly existing as a stock
life insurance company under the laws of the State of Connecticut and is
duly authorized by the Insurance Department of the State of Connecticut to
issue the Policies.
2. The Account is a duly authorized and validly existing separate account
established pursuant to the provisions of Section 38a-433 of the
Connecticut Statutes.
3. To the extent so provided under the Policies, that portion of the assets
of the Account equal to the reserves and other contract liabilities with
respect to the Account will not be chargeable with liabilities arising out
of any other business that the Company may conduct.
4. The Policies, when issued as contemplated by the Form S-6 Registration
Statement, will constitute legal, validly issued and binding obligations of
the Company.
I hereby consent to the filing of this opinion as an exhibit to the Form S-6
Registration Statement for the Policies and the Account.
Sincerely,
/s/ Lynda Godkin
Lynda Godkin
<PAGE>
EXHIBIT 5
[LOGO]
Hartford Life
MICHAEL R. WINTERFIELD, FSA, MAAA
Assistant Vice President
Director, Individual Annuity Product Management
February 12, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sir:
This opinion is furnished in connection with the Form S-6 Registration Statement
under the Securities Act of 1933, as amended ("Securities Act"), of a certain
modified single premium variable life insurance policy (the "Policy") that will
be offered and sold by Hartford Life and Annuity Insurance Company and certain
units of interest to be issued in connection with the Policy.
The hypothetical illustrations of the Policy used in the Form S-6 Registration
Statement accurately reflect reasonable estimates of projected performance of
the Policy under the stipulated rates of investment return, the contractual
expense deductions and guaranteed cost-of-insurance rates, and utilize a
reasonable estimation for expected fund operating expenses.
I hereby consent to the use of this opinion as an exhibit to the Form S-6
Registration Statement and to the reference to my name under the heading
"Experts" in the Prospectus included as a part of such Form S-6 Registration
Statement.
Very truly yours,
/s/ Michael Winterfield
Michael Winterfield, FSA, MAAA
<PAGE>
EXHIBIT 6
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
Registration Statement File No. 333-52637 for Hartford Life and Annuity
Insurance Company Separate Account Five on Form S-6.
/s/ Arthur Andersen LLP
Hartford, Connecticut
February 15, 1999
<PAGE>
EXHIBIT 7
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
POWER OF ATTORNEY
Gregory A. Boyko
Lynda Godkin
Thomas M. Marra
Lowndes A. Smith
David M. Znamierowski
do hereby jointly and severally authorize Lynda Godkin, Marianne O'Doherty,
and Leslie T. Soler to sign as their agent, any Registration Statement,
pre-effective amendment, post-effective amendment and any application for
exemptive relief of the Hartford Life and Annuity Insurance Company under the
Securities Act of 1933 and/or the Investment Company Act of 1940.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney for the
purpose herein set forth.
/s/ Gregory A. Boyko Dated as of March 16, 1998
- ------------------------------ --------------------------
Gregory A. Boyko
/s/ Lynda Godkin Dated as of March 16, 1998
- ------------------------------ --------------------------
Lynda Godkin
/s/ Thomas M. Marra Dated as of March 16, 1998
- ------------------------------ --------------------------
Thomas M. Marra
/s/ Lowndes A. Smith Dated as of March 16, 1998
- ------------------------------ --------------------------
Lowndes A. Smith
/s/ David M. Znamierowski Dated as of March 16, 1998
- ------------------------------ --------------------------
David M. Znamierowski
