<PAGE>
As filed with the Securities and Exchange Commission on April 30, 1998.
File No. 333-00245
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 3
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 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 Company
P.O. Box 2999
Hartford, 06104-2999
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
---
X on May 1, 1998 pursuant to paragraph (b) of Rule 485
---
60 days after filing pursuant to paragraph (a)(1) of Rule 485
---
on May 1, 1998 pursuant to paragraph (a)(1) of Rule 485
---
this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
---
E. Title and amount of securities being registered: Pursuant to Rule 24f-2
under the Investment Company Act of 1940, the Registrant has registered an
indefinite amount of securities.
F. Proposed maximum aggregate offering price to the public of the securities
being registered:
Not yet determined.
G. Amount of filing fee: Not applicable.
H. Approximate date of proposed public offering: As soon as practicable after
the effective date of this registration statement.
<PAGE>
RECONCILIATION AND TIE BETWEEN
FORM N-8B AND PROSPECTUS
<TABLE>
<CAPTION>
Item No. of
Form N-8B-2 CAPTION IN PROSPECTUS
<S> <C>
1. Cover page
2. Cover page
3. Not applicable
4. Hartford Life Insurance 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 - Portfolios; The Policy-
Application for a Policy; Policy Benefits and Rights;
Other Matters - Voting Rights, Dividends
11. Summary; The Separate Account - Portfolios
12. Summary; The Separate Account - Portfolios
13. Deductions and Charges; Distribution of the Policies; Federal
Tax Considerations
14. The Policy - Application for a Policy
15. The Policy - Allocation of Premium
16. The Separate Account - Portfolios; The Policy - Allocation of
Premium
<PAGE>
Item No. of
Form N-8B-2 CAPTION IN PROSPECTUS
17. Summary; Policy Benefits and Rights - Account Value and Amount
Payable on Surrender of the Policy, Cancellation and Examine
Rights
18. The Separate Account - Portfolios; Deduction and Charges; Federal
Tax Considerations
19. Other Matters - Statement to Policy Owners
20. Not applicable
21. Policy Benefits and Rights - Policy Loans
22. Not applicable
23. Safekeeping of Separate Account Assets
24. Other Matters - Assignment
25. Hartford Life Insurance Company
26. Not applicable
27. Hartford Life Insurance Company
28. Hartford Life Insurance Company
29. Hartford Life Insurance 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
<PAGE>
Item no. of
Form N-8B-2 CAPTION IN PROSPECTUS
38. Distribution of the Policies
39. Hartford Life Insurance Company; Distribution of the Policies
40. Not applicable
41. Hartford Life Insurance Company; Distribution of the Policies
42. Not applicable
43. Not applicable
44. The Policy - Allocation of Premium
45. Not applicable
46. Policy Benefits and Rights - Account Value
47. The Separate Account - Portfolio
48. Cover Page; Hartford Life Insurance Company
49. Not applicable
50. The Separate Account - General
51. Summary; Hartford Life Insurance Company; The Policy; Policy
Benefits and Rights; Other Matters - Beneficiary
52. The Separate Account - Portfolios, Investment Adviser
53. Federal Tax Considerations
54. Not applicable
55. Not applicable
56. Not required by Form S-6
57. Not required by Form S-6
58. Not required by Form S-6
59. Not required by Form S-6
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY -
SELECT DIMENSIONS LIFE
MODIFIED SINGLE PREMIUM
VARIABLE LIFE INSURANCE POLICIES
P.O. Box 2999
Hartford, CT 06104-2999
Telephone: (800) 231-5453 (Policy Owner)
(800) 862-4397 (Account Executive)
- --------------------------------------------------------------------------------
This Prospectus describes Select Dimensions Life, a modified single premium
variable life insurance policy ("Policy" or "Policies") offered by Hartford Life
Insurance Company ("Hartford") to applicants age 90 and under. The Policy lets
the Policy Owner pay a single premium, and subject to restrictions, additional
premiums.
The Policy is a modified endowment Policy for federal income tax purposes,
except in certain cases described under "Federal Tax Considerations," page 22. A
LOAN, DISTRIBUTION OR OTHER AMOUNT 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. ANY AMOUNTS THAT ARE TAXABLE WITHDRAWALS WILL BE SUBJECT
TO A 10% ADDITIONAL TAX, WITH CERTAIN EXCEPTIONS.
Generally, the minimum initial premium Hartford will accept is $10,000. The
initial premium will be allocated to 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
thirteen Sub-Accounts available under the Policy. Underlying investment
portfolios ("Portfolios") are available through the Dean Witter Select
Dimensions Investment Series. 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 Dean Witter Select Dimensions
Investment Series.
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 so allocated. The Policy continues in effect
while the Cash Surrender Value is sufficient to pay the monthly charges under
the Policy ("Deduction Amount"). The Policy may terminate if the cash surrender
value is insufficient to cover a Deduction Amount, and after expiration of a
specified period, no additional premium payments are made.
The Policies provide for a Face Amount, which is the minimum death benefit under
the Policy. The Death Benefit may be greater than the Face Amount. The Account
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.
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.
THE PRODUCTS DESCRIBED HEREIN ARE NOT DEPOSITS OF, OR GUARANTEED BY ANY BANK,
NOR ARE THEY 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 PRINCIPLE AMOUNT INVESTED.
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 date of this Prospectus is May 1, 1998
1 - PROSPECTUS
<PAGE>
TABLE OF CONTENTS
--------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----------------------------------------------------------------------------
<S> <C>
Special Terms 3
----------------------------------------------------------------------------
Summary 4
----------------------------------------------------------------------------
Hartford Life Insurance Company 6
----------------------------------------------------------------------------
The Separate Account 7
----------------------------------------------------------------------------
General 7
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Portfolios 7
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The Investment Advisers 8
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The Policy 9
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Application for a Policy 9
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Premiums 9
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Allocation of Premiums 9
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Accumulation Unit Values 9
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Deductions and Charges 10
----------------------------------------------------------------------------
Monthly Deductions 10
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Annual Maintenance Fee 11
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Taxes Charged Against the Separate Account 11
----------------------------------------------------------------------------
Charges Against the Portfolios 11
----------------------------------------------------------------------------
Contingent Deferred Sales Charge 11
----------------------------------------------------------------------------
Premium Tax Charge 11
----------------------------------------------------------------------------
Policy Benefits and Rights 12
----------------------------------------------------------------------------
Death Benefit 12
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Account Value 12
----------------------------------------------------------------------------
Transfer of Account Value 12
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Policy Loans 13
----------------------------------------------------------------------------
Amount Payable on Surrender of the Policy 13
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Partial Surrenders 13
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Benefits at Maturity 13
----------------------------------------------------------------------------
Lapse and Reinstatement 14
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Cancellation and Exchange Rights 14
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Suspension of Valuation, Payments and Transfers 14
----------------------------------------------------------------------------
Last Survivor Policies 14
----------------------------------------------------------------------------
Other Matters 14
----------------------------------------------------------------------------
<CAPTION>
PAGE
<S> <C>
----------------------------------------------------------------------------
Voting Rights 14
----------------------------------------------------------------------------
Statements to Policy Owners 15
----------------------------------------------------------------------------
Limit on Right to Contest 15
----------------------------------------------------------------------------
Misstatement as to Age and Sex 15
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Payment Options 15
----------------------------------------------------------------------------
Beneficiary 16
----------------------------------------------------------------------------
Assignment 16
----------------------------------------------------------------------------
Dividends 16
----------------------------------------------------------------------------
Executive Officers and Directors 17
----------------------------------------------------------------------------
Distribution of the Policies 21
----------------------------------------------------------------------------
Safekeeping of the Separate Account's Assets 22
----------------------------------------------------------------------------
Federal Tax Considerations 22
----------------------------------------------------------------------------
General 22
----------------------------------------------------------------------------
Taxation of Hartford and the Separate Account 22
----------------------------------------------------------------------------
Income Taxation of Policy Benefits 22
----------------------------------------------------------------------------
Last Survivor Policies 22
----------------------------------------------------------------------------
Modified Endowment Policies 23
----------------------------------------------------------------------------
Estate and Generation Skipping Taxes 23
----------------------------------------------------------------------------
Diversification Requirements 23
----------------------------------------------------------------------------
Ownership of the Assets in the Separate Account 23
----------------------------------------------------------------------------
Life Insurance Purchased for Use in Split Dollar Arrangements 24
----------------------------------------------------------------------------
Federal Income Tax Withholding 24
----------------------------------------------------------------------------
Non-Individual Ownership of Policies 24
----------------------------------------------------------------------------
Other 24
----------------------------------------------------------------------------
Life Insurance Purchases by Nonresident Aliens and Foreign
Corporations 24
----------------------------------------------------------------------------
Legal Proceedings 24
----------------------------------------------------------------------------
Legal Matters 24
----------------------------------------------------------------------------
Experts 25
----------------------------------------------------------------------------
Registration Statement 25
----------------------------------------------------------------------------
Appendix A Special Information for Policies Purchased in New York 26
----------------------------------------------------------------------------
Appendix B Illustrations of Benefits 28
----------------------------------------------------------------------------
</TABLE>
THE POLICIES MAY NOT BE AVAILABLE IN ALL STATES.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER OR OTHER PERSON IS AUTHORIZED
TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED ON.
2 - PROSPECTUS
<PAGE>
SPECIAL TERMS
--------------------------------------------------------------------
As used in this Prospectus, the following terms have the indicated meanings:
ACCOUNT VALUE: The current value of Accumulation Units plus the value of the
Loan Account under the Policy.
ACCUMULATION UNIT: An accounting unit of measure used to calculate the value of
a Sub-Account.
ADMINISTRATIVE OFFICE: Currently located at 200 Hopmeadow Street, Simsbury,
Connecticut; however, the mailing address is P.O. Box 2999, Hartford,
Connecticut 06104-2999.
ANNUAL WITHDRAWAL AMOUNT: The amount of a surrender or partial surrender that is
not subject to the contingent deferred sales charge. This amount in any Policy
Year is the greater of 10% of Premiums Paid or 100% of cumulative earnings
(Account Value less premiums paid).
CASH VALUE: The Account Value less any Surrender Charge and any Unamortized Tax
charge due upon surrender.
CASH SURRENDER VALUE: The Cash Value less all Indebtedness.
CODE: The Internal Revenue Code of 1986, as amended.
COVERAGE AMOUNT: The Death Benefit less the Account Value.
DEATH BENEFIT: The greater of (1) the Face Amount specified in the Policy or (2)
the Account Value on the date of death multiplied by a stated percentage as
specified in the Policy.
DEATH PROCEEDS: The amount that Hartford will pay on the death of the Insured.
This equals the Death Benefit less any Indebtedness.
DEDUCTION AMOUNT: A deduction on the Policy Date and on each Monthly Activity
Date for the cost of insurance, a tax expense charge, an administrative charge,
and a mortality and expense risk charge.
FACE AMOUNT: On the Policy Date, the initial Face Amount is the amount shown on
the Policy's Specifications page. Thereafter, the Face Amount is reduced by any
partial withdrawals.
FUND: Currently, the Dean Witter Select Dimensions Investment Series.
GUIDELINE SINGLE PREMIUM: The "Guideline Single Premium" as defined in Section
7702 of the Code.
INDEBTEDNESS: All monies owed to Hartford by the Policy Owner. These monies
include all outstanding loans on the Policy, including any interest due or
accrued Deduction Amount or Annual Maintenance Fee.
INSURED: The person on whose life the Policy is issued.
LOAN ACCOUNT: An account in Hartford's General Account, established for any
amounts transferred from the Sub-Accounts for requested loans. The Loan Account
credits a fixed rate of interest of 4% per annum that is not based on the
investment experience of the Separate Account.
MONTHLY ACTIVITY DATE: The day of each month on which the Deduction Amount is
deducted from the Account Value of the Policy. Monthly Activity Dates occur on
the same day of the month as the Policy Date.
POLICY ANNIVERSARY: The yearly anniversary of the Policy Date.
POLICY DATE: A date not later than three business days after receipt of the
initial premium at Hartford's Home Office.
POLICY OWNER: The person having rights to benefits under the Policy during the
lifetime of the Insured; the Policy Owner may or may not be the Insured.
POLICY YEARS: Annual periods computed from the Policy Date.
PORTFOLIOS: Currently, the portfolios of Dean Witter Select Dimensions
Investment Series.
PREFERRED LOAN: The amount of the Loan Account that equals the difference
between the Account Value and the total of all premiums paid under the Policy.
SEPARATE ACCOUNT: Separate Account Five, an account established by Hartford to
separate the assets funding the Policies from other assets of Hartford.
SUB-ACCOUNT: The subdivisions of the Separate Account used to allocate a Policy
Owner's Account Value, less Indebtedness, among the Portfolios.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. The
value of the Separate Account is determined at the close of the New York Stock
Exchange (generally 4:00 p.m. Eastern Time) on such days.
VALUATION PERIOD: The period between the close of business on successive
Valuation Days.
3 - 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 premiums have been allocated. The Policies are
credited with units ("Accumulation Units") to calculate cash values. The Policy
Owner may transfer the cash values among the Portfolios. The Policies can be
issued on a single life or "last survivor" basis. For a discussion of how last
survivor Policies operate differently from single life Policies, see "Last
Survivor Policies," page 14.
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 13 sub-accounts ("Sub-Accounts"), each investing exclusively in a
Portfolio. If an initial premium is submitted with an application for a Policy,
it will be allocated, within three business days of receipt at Hartford's
Administrative Office, to the Money Market Portfolio. After the expiration of
the right to cancel period, the values in the Money Market Portfolio will be
allocated to one or more of the Portfolios as specified in the Policy Owner's
application. See "The Policy -- Allocation of Premiums," page 9.
Currently, the Portfolios available under the Policies are: 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 Dean Witter Select Dimensions Investment Series.
Applicants should read the prospectus for the Portfolios accompanying this
Prospectus in connection with the purchase of a Policy. The investment
objectives of the Portfolios are as set forth in "The Separate Account," page 7.
The following table shows Total Annual Operating Expenses of the Portfolios:
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
<TABLE>
<CAPTION>
OTHER
MANAGEMENT EXPENSES
FEES (ABSENT ANY TOTAL FUND
(ABSENT ANY EXPENSE OPERATING
FEE WAIVERS) REIMBURSEMENT) EXPENSES (1)
------------ --------------- ------------
<S> <C> <C> <C>
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 (3)......... 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 (4)......... 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%
</TABLE>
- ------------------------
(1) Management Fees generally represent the fees paid to the investment adviser
or its affiliates for investment and adminstrative 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) On April 30, 1998, the Trustees of Dean Witter Select Dimensions Investment
Series intend to amend the Investment Management Agreement such that,
effective May 1, 1998, Management Fees for the Dividend Growth Portfolio
will be 0.625% on assets up to $500 million, and 0.500% on assets over $500
million.
4 - PROSPECTUS
<PAGE>
(4) 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 July 31, 1998, whichever occurs
first.
PREMIUMS
The Policy permits the Policy Owner to pay a large single premium, and subject
to restrictions, additional premiums. The Policy Owner may choose a minimum
initial premium of 80%, 90% or 100% of the Guideline Single Premium (based on
the Face Amount). Under current underwriting rules, which are subject to change,
applicants between the ages of 45 and 80 who pay an initial premium of 100% of
the Guideline Single Premium are eligible for simplified underwriting without a
medical examination if they meet simplified underwriting standards as evidenced
in their responses in the application. For Policy Owners who pay an initial
premium of 80% or 90% of the Guideline Single Premium or who are below age 45 or
above age 80, standard underwriting applies, except that substandard
underwriting applies only in those cases that represent substandard risks
according to customary underwriting guidelines. Additional premiums are allowed
if they do not cause the Policy to fail to meet the definition of a life
insurance Policy under Section 7702 of the Code. Hartford may require evidence
of insurability for any additional premiums which increase the Coverage Amount.
Generally, the minimum initial premium Hartford will accept is $10,000. Hartford
may accept less than $10,000 under certain circumstances. No premium will be
accepted which does not meet the tax qualification guidelines for life insurance
under the Code.
DEDUCTIONS AND CHARGES
On the Policy Date and on each Monthly Activity Date, Hartford will deduct a
Deduction Amount from the Account Value. The Deduction Amount will be made pro
rata respecting each Sub-Account attributable to the Policy. The Deduction
Amount includes a cost of insurance charge, tax expense charge, administrative
charge, and a mortality and expense risk charge. The monthly cost of insurance
charge is to cover Hartford's anticipated mortality costs. In addition, Hartford
will deduct monthly from the Account Value a tax expense charge equal to an
annual rate of 0.40% for the first ten Policy Years. This charge compensates
Hartford for premium taxes imposed by various states and local jurisdictions and
for the cost of capitalization of certain policy acquisition expenses under
Section 848 of the Code. The charge includes a premium tax deduction of 0.25%
and Section 848 costs of 0.15%. The premium tax deduction represents an average
premium tax of 2.5% of premiums over ten years. Hartford will deduct from the
Account Value attributable to the Separate Account a monthly administrative
charge equal to an annual rate of 0.40%. This charge compensates Hartford for
administrative expenses incurred in the administration of the Separate Account
and the Policies. Hartford will also deduct from the Account Value attributable
to the Separate Account a monthly charge equal to an annual rate of 0.90% for
the mortality risks and expense risks Hartford assumes in relation to the
variable portion of the Policies. If the Cash Surrender Value is not sufficient
to cover a Deduction Amount due on any Monthly Activity Date the Policy may
lapse. See "Deductions and Charges -- Monthly Deductions," page 10 and "Policy
Benefits and Rights -- Lapse and Reinstatement," page 14.
The following table shows the monthly deductions discussed above:
<TABLE>
<CAPTION>
MONTHLY DEDUCTION AMOUNT
(as an annual percentage of Account Value)
<S> <C>
Cost of Insurance
Not to exceed the guaranteed cost of
insurance charge, see "Deductions and
Charges -- Monthly Deductions," page 11.
Tax Expense Charge........................ 0.40%
Administrative Charge..................... 0.40%
Mortality and Expense Risk Charge......... 0.90%
</TABLE>
If the Account Value on a Policy Anniversary is less than $50,000, Hartford will
deduct on such date or any surrender dates an Annual Maintenance Fee of $30.
This fee will help reimburse Hartford for administrative and maintenance costs
of the Policies. See "Deductions and Charges -- Annual Maintenance Fee," page
11.
Hartford may set up a provision for income taxes against the assets of the
Separate Account. See "Deductions and Charges -- Taxes Charged Against the
Separate Account," page 11, and "Federal Tax Considerations," page 22.
Applicants should review the prospectus for the Portfolios which accompanies
this Prospectus for a description of the charges assessed against the assets of
the Portfolios.
Upon surrender of the Policy or partial surrenders in excess of the Annual
Withdrawal Amount, a contingent deferred sales charge may be assessed:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
(% of Account Value
attributable to
POLICY YEAR premiums paid)
- ------------ ---------------------
<S> <C>
1 7.5%
2 7.5%
3 7.5%
4 6.0%
5 6.0%
6 4.0%
7 4.0%
8 2.0%
9 2.0%
10+ 0.0%
</TABLE>
The contingent deferred sales charge is imposed to cover a portion of the sales
expense incurred by Hartford in distributing
5 - PROSPECTUS
<PAGE>
the Policies. This expense includes agents commissions, advertising and the
printing of prospectuses. See "Deductions and Charges -- Contingent Deferred
Sales Charge," page 11.
During the first nine Policy Years, a premium tax charge will be imposed on
surrender or partial surrenders at a maximum of 2.25%. See "Deductions and
Charges -- Premium Tax Charge," page 11.
For a discussion of the tax consequences of surrender of the Policy or a partial
surrender, see "Federal Tax Considerations," page 22.
DEATH BENEFIT
The Policies provide for a Face Amount which is the minimum Death Benefit under
the Policy. The Death Benefit may be greater than the Face Amount. At the death
of the Insured, Hartford will pay the Death Proceeds to the beneficiary. The
Death Proceeds equal the Death Benefit less any Indebtedness under the Policy.
See "Policy Benefits and Rights -- Death Benefit," page 12.
ACCOUNT VALUE
The Account Value of the Policy 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," page 12.
POLICY LOANS
A Policy Owner may obtain 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.
LAPSE
Under certain circumstances a Policy may terminate if the Cash Surrender Value
on any Monthly Activity Date is less than the required Monthly Deduction Amount.
Hartford will give written notice to the Policy Owner and a 61 day grace period
during which additional amounts may be paid to continue the Policy. See "Policy
Benefits and Rights -- Policy Loans," page 13, and "Lapse and Reinstatement,"
page 14.
CANCELLATION AND
EXCHANGE RIGHTS
A Policy Owner has a limited right to return the Policy for cancellation. If the
applicant returns the Policy, by mail or hand delivery, to Hartford or to the
agent who sold the Policy, to be cancelled within ten days after delivery of the
Policy to the Policy Owner (in certain cases, this free-look period is longer),
Hartford will return to the Poloicy Owner within seven days thereafter the
greater of the premiums paid for the Policy or the sum of (1) the Account Value
on the date the returned Policy is received by Hartford or its agent and (2) any
deductions under the Policy or by the Portfolios for taxes, charges or fees.
In addition, once the Policy is in effect it may be exchanged during the first
24 months after its issuance for a permanent life insurance Policy on the life
of the Insured without submitting proof of insurability. See "Policy Benefits
and Rights -- Cancellation and Exchange Rights," page 14.
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 Policies. 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 POLICY ARE TAXED TO THE EXTENT OF
ACCUMULATED INCOME IN THE POLICY (GENERALLY, THE EXCESS OF ACCOUNT VALUE OVER
PREMIUMS PAID) AND MAY BE SUBJECT TO A 10% PENALTY TAX. SEE "FEDERAL TAX
CONSIDERATIONS," PAGE 22.
HARTFORD LIFE INSURANCE COMPANY
--------------------------------------------------------------------
Hartford Life Insurance Company ("Hartford") is a stock life insurance company
engaged in the business of writing health and life insurance, both individual
and group, in all states of the United States and the District of Columbia.
Hartford was originally incorporated under the laws of Massachusetts on June 5,
1902, 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.
6 - PROSPECTUS
<PAGE>
THE SEPARATE ACCOUNT
--------------------------------------------------------------------
GENERAL
Separate Account Five ("Separate Account") is a separate account of Hartford
established on August 17, 1994 pursuant to the insurance laws of the State of
Connecticut and organized as a unit investment trust registered with the
Securities and Exchange Commission under the Investment Company Act of 1940. The
Separate Account meets the definition of "separate account" under federal
securities law. Under Connecticut law, the assets of the Separate Account are
held exclusively for the benefit of Policy Owners and persons entitled to
payments under the Policies. The assets of the Separate Account are not
chargeable with liabilities arising out of any other business which Hartford may
conduct.
PORTFOLIOS
The underlying investment for the Policies are shares of the Dean Witter Select
Dimensions Investment Series, an open-end management investment company. 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.
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 Funds prospectuses.
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).
7 - PROSPECTUS
<PAGE>
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 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 prospectus.
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.
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
Funds' prospectuses accompanying this Prospectus.
THE INVESTMENT ADVISERS
Dean Witter InterCapital Inc. ("InterCapital"), 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 Dean Witter Select Dimensions
Investment Series (the "Dean Witter Portfolios"). InterCapital was incorporated
in July, 1992 and is a wholly-owned subsidiary of Morgan Stanley, Dean Witter,
Discover, Co. ("MSDWD").
InterCapital provides administrative services, manages the Dean Witter
Portfolios' business affairs and manages the investment of the Dean Witter
Portfolios' assets, including the placing of orders for the purchase and sales
of portfolio securities. InterCapital has retained Dean Witter Services Company
Inc., its wholly-owned subsidiary, to perform the aforementioned administrative
services for the Dean Witter Portfolios. For its services, the Dean Witter
Portfolios pay InterCapital a monthly fee. See the accompanying Fund prospectus
for a more complete description of InterCapital and the respective fees of the
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 InterCapital, provides these Portfolios with investment advice
8 - PROSPECTUS
<PAGE>
and portfolio management, in each case subject to the overall supervision of the
InterCapital. TCW's address is 865 South Figueroa Street, Suite 1800, Los
Angeles, California 90017.
9 - PROSPECTUS
<PAGE>
THE POLICY
--------------------------------------------------------------------
APPLICATION FOR A POLICY
Individuals wishing to purchase a Policy must submit an application to Hartford.
A Policy will be issued only on the lives of Insureds age 90 at the time of
application and under who supply evidence of insurability satisfactory to
Hartford. Acceptance is subject to Hartford's underwriting rules and Hartford
reserves the right to reject an application for any reason. IF AN APPLICATION
FOR A POLICY IS REJECTED, THEN YOUR INITIAL PREMIUM WILL BE RETURNED ALONG WITH
AN ADDITIONAL AMOUNT FOR INTEREST, BASED ON THE CURRENT RATE BEING CREDITED BY
HARTFORD. No change in the terms or conditions of a Policy will be made without
the consent of the Policy Owner.
The Policy will be effective on the Policy Date only after Hartford has received
all outstanding delivery requirements and received the initial premium. The
Policy Date is the date used to determine all future cyclical transactions on
the Policy, e.g., Monthly Activity Date, Policy Months and Policy Years. The
Policy Date may be prior to, or the same as, the date the Policy is issued
("Issue Date").
If the Coverage Amount is over then-current limits established by Hartford, the
initial payment will not be accepted with the application. In other cases where
Hartford receives the initial payment with the application, Hartford will
provide fixed conditional insurance during underwriting according to the terms
of a conditional receipt. The fixed conditional insurance will be the insurance
applied for, up to a maximum that varies by age. If no fixed conditional
insurance was in effect, on Policy delivery Hartford will require a sufficient
payment to place the insurance in force.
PREMIUMS
The Policy permits the Policy Owner to pay a large single premium and, subject
to restrictions, additional premiums. The Policy Owner may choose a minimum
initial premium of 80%, 90% or 100% of the Guideline Single Premium (based on
the Face Amount). Under current underwriting rules, which are subject to change,
applicants between ages 45 and 80 who pay an initial premium of 100% of the
Guideline Single Premium (subject to then current premium limits) are eligible
for simplified underwriting without a medical examination if they meet
simplified underwriting standards as evidenced in their responses in the
application. For Policy Owners who pay an initial premium of 80% or 90% of the
Guideline Single Premium or who are below age 45 or above age 80, standard
underwriting applies, except that substandard underwriting applies only in those
cases that represent substandard risks according to customary underwriting
guidelines. Additional premiums are allowed if they do not cause the Policy to
fail to meet the definition of a life insurance Policy under Section 7702 of the
Code. Hartford may require evidence of insurability for any additional premiums
which increase the Coverage Amount. Generally, the minimum initial premium
Hartford will accept is $10,000. Hartford may accept less than $10,000 under
certain circumstances. No premium will be accepted which does not meet the tax
qualification guidelines for life insurance under the Code.
ALLOCATION OF PREMIUMS
Within three business days of receipt of a completed application and the initial
premium at Hartford's Administrative Office, Hartford will allocate the entire
premium 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 Portfolio 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 Portfolio 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 Portfolio
at the end of the Valuation Period (plus the per share dividends or capital
gains by that Portfolio if the ex-dividend date occurs in the Valuation Period
then ended) divided by the net asset value per share of the corresponding
Portfolio at the beginning of the Valuation Period. Applicants should refer to
the prospectus for the Portfolios which accompany this Prospectus for a
description of how the assets of each Portfolio are valued since such
determination has a direct bearing on the Accumulation Unit Value of the Sub-
Account and therefore the Account Value of a Policy. See also, "Policy Benefits
and Rights -- Account Value," page 12.
10 - PROSPECTUS
<PAGE>
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
--------------------------------------------------------------------
MONTHLY DEDUCTIONS
On the Policy Date, and on each Monthly Activity Date after the Policy Date,
Hartford will deduct an amount ("Deduction Amount") to cover charges and
expenses incurred in connection with a Policy. Each monthly Deduction Amount
will be deducted pro rata from each Sub-Account attributable to the Policy such
that the proportion of Account Value of the Policy attributable to each
Sub-Account remains the same before and after the deduction. The Deduction
Amount will vary from month to month. The Deduction Amount reduces the number of
Accumulation Units credited to the Policy. If the Cash Surrender Value is not
sufficient to cover a Deduction Amount due on any Monthly Activity Date, the
Policy may lapse. See "Policy Benefits and Rights -- Lapse and Reinstatement,"
page 14. The following is a summary of the monthly deductions and charges which
constitute the Deduction Amount:
COST OF INSURANCE CHARGE: The cost of insurance charge covers Hartford's
anticipated mortality costs for standard and substandard risks. Current cost of
insurance rates are lower after the 10th Policy Year and are based on whether
100%, 90% or 80% of the Guideline Single Premium has been paid. The current cost
of insurance charge will not exceed the guaranteed cost of insurance charge.
This charge is a guaranteed maximum monthly rate multiplied by the Coverage
Amount on the Policy Date or any Monthly Activity Date. For standard risks, the
guaranteed cost of insurance rate is based on the 1980 Commissioners Standard
Ordinary Mortality Table, age last birthday. (Unisex rates may be required in
some states.) A table of guaranteed cost of insurance rates per $1,000 will be
included in each Policy; however, Hartford reserves the right to use rates less
than those shown in the table. Substandard risks will be charged at a higher
cost of insurance rate that will not exceed rates based on a multiple of the
1980 Commissioners Standard Ordinary Mortality Table, age last birthday. The
multiple will be based on the insured's substandard rating.
The Coverage Amount is first set on the Policy Date and then on each Monthly
Activity Date. On such days, it is the Face Amount less the Account Value
subject to a Minimum Coverage Amount. The Coverage Amount remains level between
the Monthly Activity Dates.
The Coverage Amount may be adjusted to continue to qualify the Policies as life
insurance 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 = $30,000
Insured's attained age = 40
Minimum Coverage Amount percentage for age 40 = 150%
On the Monthly Activity Date, the Coverage Amount is $70,000. This is calculated
by subtracting the Account Value on the Monthly Activity Date ($30,000) from the
Face Amount ($100,000), subject to a possible Minimum Coverage Amount
adjustment. This Minimum Coverage Amount is determined by taking a percentage of
the Account Value on the Monthly Activity Date. In this case, the Minimum
Coverage Amount is $45,000 (150% of $30,000). Since $45,000 is less than the
Face Amount less the Account Value ($70,000), no adjustment is necessary.
Therefore, the Coverage Amount will be $70,000.
Assume that the Account Value in the above example was $50,000. The Minimum
Coverage Amount would be $75,000 (150% of $50,000). Since this is greater than
the Face Amount less the Account Value ($50,000), the Coverage Amount for the
Policy Month is $75,000. (For an explanation of the Death Benefit, see "Policy
Benefits and Rights," page 12.)
Because the Account Value, and as a result, the Coverage Amount under a Policy
may vary from month to month, the cost of insurance charge may also vary on each
Monthly Activity Date.
TAX EXPENSE CHARGE: Hartford will deduct monthly from the Account Value a tax
expense charge equal to an annual rate of 0.40% for the first ten Policy Years.
This charge compensates Hartford for premium taxes imposed by various states and
local jurisdictions and the cost of capitalization of certain policy acquisition
expenses under Section 848 of the Code. The charge includes a premium tax
deduction of 0.25% and a federal tax deduction 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% Section 848 cost 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.
10 - PROSPECTUS
<PAGE>
ADMINISTRATIVE CHARGE: Hartford will deduct monthly from the Account Value
attributable to the Separate Account an administrative charge equal to an annual
rate of 0.40%. This charge compensates Hartford for administrative expenses
incurred in the administration of the Separate Account and the Policies.
MORTALITY AND EXPENSE RISK CHARGE: Hartford will deduct monthly from the Account
Value attributable to the Separate Account a charge equal to an annual rate of
0.90% for the mortality risks and expense risks Hartford assumes in relation to
the variable portion of the Policies. The mortality risk assumed is that the
cost of insurance charges specified in the Policy will be insufficient to meet
claims. Hartford also assumes a risk that the Face Amount (the minimum Death
Benefit) will exceed the Coverage Amount on the date of death plus the Account
Value on the date Hartford receives written notice of death. The expense risk
assumed is that expenses incurred in issuing and administering the Policies will
exceed the administrative charges set in the Policy. Hartford may profit from
the mortality and expense risk charge and may use any profits for any proper
purpose, including any difference between the cost it incurs in distributing the
Policies and the proceeds of the contingent deferred sales charge.
ANNUAL MAINTENANCE FEE
If the Account Value on a Policy Anniversary is less than $50,000, Hartford will
deduct on such date an Annual Maintenance Fee of $30. This fee will help
reimburse Hartford for administrative and maintenance costs of the Policies. The
sum of the monthly administrative charges and the annual maintenance fee will
not exceed the cost Hartford incurs in providing administrative services under
the Policies.
TAXES CHARGED AGAINST
THE SEPARATE ACCOUNT
Currently, no charge is made to the Separate Account for federal income taxes
that may be attributable to the Separate Account. Hartford may, however, make
such a charge in the future. Charges for other taxes, if any, attributable to
the Separate Account may also be made.
CHARGES AGAINST THE PORTFOLIOS
The Separate Account purchases shares of the Portfolios at net asset value. The
net asset value of the Portfolio shares reflects investment advisory fees and
administrative expenses already deducted from the assets of the Portfolios.
These charges are described in the prospectus for the Portfolios.
CONTINGENT DEFERRED
SALES CHARGE
Upon surrender of the Policy and partial surrenders in excess of the Annual
Withdrawal Amount, a contingent deferred sales charge may be assessed:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
(% of Account Value
attributable to
POLICY YEAR premiums paid)
------------- -------------------
<S> <C>
1 7.5%
2 7.5%
3 7.5%
4 6.0%
5 6.0%
6 4.0%
7 4.0%
8 2.0%
9 2.0%
10+ 0.0%
</TABLE>
In determining the contingent deferred sales charge and the premium tax charge
discussed below, any surrender or partial withdrawal during the first ten Policy
Years will be deemed first from premiums paid and then from earnings. If an
amount equal to all premiums paid has been withdrawn, no charge will be assessed
on a withdrawal of the remaining Account Value.
The contingent deferred sales charge is imposed to cover a portion of the sales
expense incurred by Hartford in distributing the Policies. This expense includes
agents commissions, advertising and the printing of prospectuses. See "Policy
Benefits and Rights -- Amount Payable on Surrender of the Policy," page 13.
PREMIUM TAX CHARGE
During the first nine Policy Years, a premium tax charge will be imposed on
surrender or partial withdrawals. The premium tax charge is shown below, as a
percent 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 premium tax charge will be imposed.
11 - 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 under the Policy dies. The Death Proceeds
payable to the beneficiary equal the Death Benefit less any loans outstanding.
The Death Benefit equals the greater of (1) the Face Amount or (2) the Account
Value multiplied by a specified percentage. The percentages vary according to
the attained age of the Insured and are specified in the Policy. Therefore, an
increase in Account Value may increase the Death Benefit. However, because the
Death Benefit will never be less than the Face Amount, a decrease in Account
Value may decrease the Death Benefit but never below the Face Amount.
EXAMPLES:
<TABLE>
<CAPTION>
A B
-------- --------
<S> <C> <C>
Face Amount........................ $100,000 $100,000
Insured's Age...................... 40 40
Account Value on Date of Death..... 46,500 34,000
Specified Percentage............... 250% 250%
Account Value on Date of Death X
Specified Percentage.............. $116,250 $ 85,000
</TABLE>
In Example A, the Death Benefit equals $116,250, i.e., the greater of $100,000
(the Face Amount) or $116,250 (the Account Value at the Date of Death of
$46,500, multiplied by the specified percentage of 250%). This amount less any
outstanding loans constitutes the Death Proceeds which Hartford would pay to the
beneficiary.
In Example B, the death benefit is $100,000, i.e., the greater of $100,000 (the
Face Amount) or $85,000 (the Account Value of $34,000, multiplied by the
specified percentage of 250%).
All or part of the Death Proceeds may be paid in cash or applied under a
"Payment Option." See "Other Matters -- Payment Options," page 15.
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," page 9.
TRANSFER OF ACCOUNT VALUE
While the Policy remains in effect and subject to Hartford's transfer rules then
in effect, the Policy Owner may request that part or all of the Account Value of
a particular Sub-Account be transferred to other Sub-Accounts. Hartford reserves
the right to restrict the number of such transfers to no more than 12 per Policy
Year with no two transfers being made on consecutive Valuation Days. However,
there are no restrictions on the number of transfers at the present time.
Transfers may be made by written request or by calling toll free 1-800-231-5453.
Telephone transfers may not be permitted in some states. The policy of Hartford
and its agents and affiliates is that they will not be responsible for losses
resulting from acting upon telephone requests reasonably believed to be genuine.
Hartford will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine; otherwise, Hartford may be liable for any
losses due to unauthorized or fraudulent instructions. The procedures Hartford
follows for transactions initiated by telephone include requirements that
callers provide certain information for identification purposes. All transfer
instructions by telephone are tape recorded.
It is the responsibility of the Policy Owner to verify the accuracy of all
confirmations of transfers and to promptly advise Hartford of any inaccuracies
within 30 days of receipt of the confirmation. Hartford will send the Policy
Owner a confirmation of the transfer within five days from the date of any
instruction.
Hartford may modify the right to reallocate Account Value among the Sub-Accounts
if Hartford determines, in its sole discretion, that the exercise of that right
by one or more Policy Owners is, or would be, to the disadvantage of other
Policy Owners. Any modification could be applied to transfers to or from some or
all of the Sub-Accounts and could include, but not be limited to, the
requirement of a minimum period between each transfer, not accepting transfer
requests of an agent acting under the power of attorney on behalf of more than
one Policy Owner, or limiting the dollar amount that may be transferred among
the Sub-Accounts at one time. These restrictions may be applied in any manner
reasonably designed to prevent any use of the transfer right that Hartford
considered to be disadvantageous to other Policy Owners.
As a result of a transfer, the number of Accumulation Units credited to the
Sub-Account from which the transfer is made will be reduced by the number
obtained by dividing the amount transferred by the Accumulation Unit Value of
that Sub-Account on the Valuation Day Hartford receives the transfer request.
The number of Accumulation Units credited to the Sub-Account to which the
transfer is made will be increased by the number obtained by dividing the amount
transferred by the Accumulation Unit Value of that Sub-Account on the Valuation
Day Hartford receives the transfer request.
12 - PROSPECTUS
<PAGE>
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 ("Regular Loans" or
"Preferred Loans"). Both types of loans are secured by the Policy. The aggregate
loans (including the currently applied for loan) may not exceed at the time a
loan is requested 90% of the Cash Value.
The loan amount will be transferred pro rata from each Sub-Account attributable
to the Policy (unless the Policy Owner specifies otherwise) to the Loan Account.
The amounts allocated to the Loan Account will earn interest at a rate of 4% per
annum (6% for "Preferred Loans"). The amount of the Loan Account that equals the
difference between the Cash Value and the total of all premiums paid under the
Policy is considered a "Preferred Loan." For exchanges which take place
according to IRC section 1035(a) that have an outstanding loan at the time of
transfer, the difference between the Account Value and the total of all premiums
paid under the Policy is considered a Preferred Loan. The loan interest rate
that Hartford will charge on all loans is 6% per annum. The difference between
the value of the Loan Account and the Indebtedness will be transferred on a
pro-rata basis from the Sub-Accounts to the Loan Account on each Monthly
Activity Date. The proceeds of a loan will be delivered to the Policy Owner
within seven business days of Hartford's receipt of the loan request.
If the aggregate outstanding loan(s) secured by the Policy exceeds the Account
Value of the Policy less any contingent deferred sales charges and due and
unpaid Deduction Amount, Hartford will give written notice to the Policy Owner
that unless Hartford receives an additional payment within 61 days to reduce the
aggregate outstanding loan(s) secured by the Policy, the Policy may lapse.
All or any part of any loan secured by a Policy may be repaid while the Policy
is still in effect. When loan repayments or interest payments are made, they
will be allocated among the Sub-Account(s), in the same percentage as premiums
are allocated (unless the Policy Owner requests a different allocation) and an
amount equal to the payment will be deducted from the Loan Account. Any
outstanding loan at the end of a grace period must be repaid before the Policy
will be reinstated. See "Policy Benefits and Rights -- Lapse and Reinstatement,"
page 14.
A loan, whether or not repaid, will have a permanent effect on the Account Value
because the Loan Account does not participate in the investment results of the
Sub-Accounts. The longer a loan is outstanding, the greater the effect is likely
to be. The effect could be favorable or unfavorable. If the Sub-Accounts earn
more than the annual interest rate for amounts held in the Loan Account, a
Policy Owner's Account Value will not increase as rapidly as it would have had
no loan been made. If the Sub-Accounts earn less than the annual interest rate
for amounts held in the Loan Account, the Policy Owner's Account Value will be
greater than it would have been had no loan been made. Also, if not repaid, the
aggregate outstanding loan(s) will reduce the Death Proceeds and Cash Surrender
Value otherwise payable.
AMOUNT PAYABLE ON SURRENDER
OF THE POLICY
While the Policy is in effect, a Policy Owner may elect, without the consent of
the beneficiary (provided the designation of beneficiary is not irrevocable), to
fully surrender the Policy. Upon surrender, the Policy Owner will receive the
Cash Surrender Value determined as of the day Hartford receives the Policy
Owner's written request or the date requested by the Policy Owner whichever is
later. The Cash Surrender Value equals the Account Value less any contingent
deferred sales charges and premium tax charge and all Indebtedness. Hartford
will pay the Cash Surrender Value of the Policy within seven days of receipt by
Hartford of the written request or on the effective surrender date requested by
the Policy Owner, whichever is later. The Policy will terminate on the date of
receipt of the written request, or the date the Policy Owner requests the
surrender to be effective, whichever is later. For a discussion of the tax
consequences of surrendering the Policy, see "Federal Tax Considerations," page
22.
If the Policy Owner chooses to apply the surrender proceeds to a payment option
(see "Other Matters -- Payment Options," page 17), the contingent deferred sales
charge will not be imposed to the surrender proceeds applied to the option. In
other words, the surrender proceeds will equal the Cash Surrender Value without
reduction for the contingent deferred sales charge. However, the premium tax
charge, if applicable, will be deducted from the surrender proceeds to be
applied, and amounts withdrawn from Options 1, 5 or Policy Proceeds Settlement
Amount will be subject to the contingent deferred sales charge, if applicable.
PARTIAL SURRENDERS
While the Policy is in effect, a Policy Owner may elect, by written request, to
make partial surrenders 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 the contingent deferred sales charge and any premium tax
charges. See "Deductions and Charges -- Contingent Deferred Sales Charge,
Premium Tax Charge," page 11. For a discussion of the tax consequences of
partial surrenders, see "Federal Tax Considerations," page 22.
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
13 - PROSPECTUS
<PAGE>
and Hartford will have no further obligations under the Policy. (The Maturity
Date may be extended by rider where approved, but see "Income Taxation of Policy
Benefits," page 22.)
LAPSE AND REINSTATEMENT
The Policy will remain in effect until the Cash Surrender Value is insufficient
to cover a Deduction Amount due on a Monthly Activity Date. Hartford will notify
the Policy Owner of the deficiency in writing and will provide a 61 day period
("Grace Period") to pay an amount sufficient to cover the Deduction Amounts due.
The Notice will indicate the amount that must be paid. The Policy will continue
through the Grace Period, but if no additional premium payment is made, it will
terminate at the end of the Grace Period. If the person insured under the Policy
dies during the Grace Period, the Death Proceeds payable under the Policy will
be reduced by the Deduction Amount(s) due and unpaid. See "Policy Benefits and
Rights -- Death Benefit," page 12.
If the Policy lapses, the Policy Owner may apply for reinstatement of the Policy
by payment of the reinstatement premium (and any applicable charges) shown in
the Policy. A request for reinstatement may be made within five years of lapse.
If a loan was outstanding at the time of lapse, Hartford will require repayment
of the loan before permitting reinstatement. In addition, Hartford reserves the
right to require evidence of insurability satisfactory to Hartford.
CANCELLATION AND
EXCHANGE RIGHTS
An applicant has a limited right to return a Policy for cancellation. If the
Policy is returned, by mail or personal delivery to Hartford or to the agent who
sold the Policy, to be cancelled within ten days after receipt of the Policy by
the Policy Owner (a longer free-look period is provided in certain cases),
Hartford will return to the applicant within seven days the greater of premiums
paid for the Policy or the sum of (1) the Account Value on the date the returned
Policy is received by Hartford or its agent and (2) any deductions under Policy
or by the 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 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 26.
2. To qualify for simplified underwriting under a last survivor Policy, both
Insureds must meet the simplified underwriting standards.
3. For a last survivor Policy to be reinstated, both Insureds must be alive on
the date of reinstatement.
4. The Policy provisions regarding misstatement of age or sex, suicide and
incontestability apply to either Insured.
5. Additional tax disclosures applicable to last survivor Policies are provided
in "Federal Tax Considerations," page 22.
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
14 - PROSPECTUS
<PAGE>
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 Portfolio on the
record date for the shareholder meeting for that Portfolio. If, however, a
Policy Owner has taken a loan secured by the Policy, amounts transferred from
the Sub-Account(s) to the Loan Account in connection with the loan (see "Policy
Benefits and Rights -- Policy Loans," page 13) will not be considered in
determining the voting interests of the Policy Owner. Policy Owners should
review the prospectus for the Portfolios accompanying this Prospectus to
determine matters on which shareholders may vote.
Hartford may, when required by state insurance regulatory authorities, disregard
voting instructions if the 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 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.
PAYMENT OPTIONS
The surrender proceeds or Death Proceeds under the Policies may be paid in a
lump sum or may be applied to one of Hartford's payment options. The minimum
amount that may be applied under a payment option is $5,000, unless Hartford
consents to a lesser amount. Under Options 2, 3 and 4, no surrender or partial
surrender are permitted after payments commence. Full surrender or partial
withdrawals may be made from Option 1 or Policy Proceeds Settlement Option, but
they are subject to the contingent deferred sales charge, if applicable. Only a
full surrender is allowed from Option 5. A surrender from Option 5 will also be
subject to the contingent deferred sales charge, if applicable.
Hartford will pay interest of at least 3 1/2% per year on the Death Proceeds
from the date of the Insured's death to the date payment is made or a payment
option is elected. At such times, the proceeds are not subject to the investment
experience of the Separate Account.
The following options are available under the Policies (Hartford may offer other
payment options):
OPTION 1: INTEREST INCOME
This option offers payments of interest, at the rate Hartford declares, on the
amount applied under this option. The interest rate will never be less than
3 1/2% per year.
OPTION 2: LIFE ANNUITY
A life annuity is an annuity payable during the lifetime of the payee and
terminating with the last payment preceding the death of the payee. This option
offers the largest payment amount of any of the life annuity options since there
is no guarantee of a minimum number of payments nor a provision for a death
benefit payable to a beneficiary.
It would be possible under this option for a payee to receive only one annuity
payment if he died prior to the due date of the second annuity payment, two if
he died before the date of the third annuity payment, etc.
15 - PROSPECTUS
<PAGE>
OPTION 3: LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS CERTAIN
This annuity option is an annuity payable monthly during the lifetime of the
payee with the provision that payments will be made for a minimum of 120, 180 or
240 months, as elected. If, at the death of the payee, payments have been made
for less than the minimum elected number of months, then the present value, as
of the date of the payee's death, of any remaining guaranteed payments will be
paid in one sum to the beneficiary or beneficiaries designated, unless other
provisions have been made and approved by Hartford.
OPTION 4: JOINT AND LAST SURVIVOR ANNUITY
An annuity payable monthly during the joint lifetime of the payee and a
designated second person, and thereafter during the remaining lifetime of the
survivor, ceasing with the last payment prior to the death of the survivor.
Based on the options currently offered by Hartford, the payee may elect that the
payment to the survivor be less than the payment made during the joint lifetime
of the payee and a designated second person.
It would be possible under this option for a payee and designated second person
to receive only one payment in the event of the common or simultaneous death of
the parties prior to the due date for the second payment and so on.
OPTION 5: PAYMENTS FOR A DESIGNATED PERIOD
An amount payable monthly for the number of years selected which may be from
five to 30 years. Under this option, you may, at any time, request a full
surrender and receive, within seven days, the termination value of the Policy as
determined by Hartford.
In the event of the payee's death prior to the end of the designated period, the
present value, as of the date of the payee's death, of any remaining guaranteed
payments will be paid in one sum to the beneficiary or beneficiaries designated,
unless other provisions have been made and approved by Hartford.
Option 5 is an option that does not involve life contingencies.
OPTION 6: POLICY 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 surrenders may be
made at any time.
VARIABLE AND FIXED ANNUITY PAYMENTS: When an annuity is effected, unless
otherwise specified, the surrender proceeds or Death Proceeds held in the
Sub-Accounts will be applied to provide a variable annuity based on the pro rata
amount in the various Sub-Accounts. Fixed annuities options are also available.
YOU SHOULD CONSIDER WHETHER THE ALLOCATION OF PROCEEDS AMONG SUB-ACCOUNTS OF THE
SEPARATE ACCOUNT FOR YOUR ANNUITY PAYMENTS ARE BASED ON THE INVESTMENT
ALTERNATIVE BEST SUITED TO YOUR RETIREMENT NEEDS.
VARIABLE ANNUITY: The Policy contains tables indicating the minimum dollar
amount of the first monthly payment under the optional variable forms of annuity
for each $1,000 of value of a Sub-Account. The first monthly payment varies
according to the form and type of variable payment annuity selected. The Policy
contains variable payment annuity tables derived from the 1983(a) 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 Policies.
The amount of the first monthly variable annuity payment is divided by the value
of an annuity unit (an accounting unit of measure used to calculate the value of
annuity payments) for the appropriate Sub-Account no earlier than the close of
business on the fifth Valuation Day preceding the day on which the payment is
due in order to determine the number of annuity units represented by the first
payment. This number of annuity units remains fixed during the annuity payment
period, and in each subsequent month the dollar amount of the variable annuity
payment is determined by multiplying this fixed number of annuity units by the
current annuity unit value.
LEVEL VARIABLE ANNUITY PAYMENTS WOULD BE PRODUCED IF THE INVESTMENT RATE
REMAINED CONSTANT AND EQUAL TO THE A.I.R. IN FACT, PAYMENTS WILL VARY UP OR DOWN
AS THE INVESTMENT RATE VARIES UP OR DOWN RELATIVE TO THE A.I.R.
FIXED ANNUITY: Fixed annuity payments are determined by multiplying the amount
applied to the annuity by a rate to be determined by Hartford which is no less
than the rate specified in the fixed payment annuity tables in the 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.
16 - PROSPECTUS
<PAGE>
EXECUTIVE OFFICERS AND DIRECTORS
--------------------------------------------------------------------
<TABLE>
<CAPTION>
OTHER BUSINESS PROFESSION,
VOCATION OR EMPLOYMENT
POSITION WITH HARTFORD; FOR PAST 5 YEARS;
NAME, AGE YEAR OF ELECTION OTHER DIRECTORSHIPS
- ---------------------------------- ---------------------------------- ---------------------------------------------------
<S> <C> <C>
Dong H. Ahn, 37 Vice President, 1998 Vice President (1998-Present), Hartford Life and
Accident Insurance Company.
Wendell J. Bossen, 64 Vice President, 1992** Vice President (1992-Present), Hartford Life and
Accident Insurance Company; President
(1992-Present), International Corporate Marketing
Group, Inc.; Executive Vice President
(1984-1992), Mutual Benefit.
Gregory A. Boyko, 46 Senior Vice President, Chief Vice President and Controller (1995-1997),
Financial Officer and Hartford; Director (1997-Present); Senior Vice
Treasurer, 1997 President, Chief Financial Officer & Treasurer
Director, 1997 (1997-Present); Vice President & Controller
(1995-1997), Hartford Life and Accident 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.
Peter W. Cummins, 60 Senior Vice President, 1997 Vice President (1989-1997); Director of Broker
Dealer Sales-ILAD (1989-1992), Hartford; Senior
Vice President (1997-Present) Vice President
(1989-1997); Director of Broker Dealer Sales-ILAD
(1989-1991), Hartford Life and Accident Insurance
Company.
Ann M. de Raismes, 47 Senior Vice President, 1997 Vice President (1994-1997); Assistant Vice
Director of Human Resources, President (1992-1994); Hartford; Senior Vice
1991 President (1997-Present); Director of Human
Resources (1991-Present); Vice President
(1994-1997); Assistant Vice President
(1992-1994); Hartford Life and Accident Insurance
Company; Vice President, Human Resources
(1997-Present), Hartford Life, Inc.
Timothy M. Fitch, 45 Vice President, 1995 Assistant Vice President (1992-1995), Hartford;
Actuary, 1994 Vice President (1995-Present); Actuary
(1994-Present); Assistant Vice President
(1992-1995), Hartford Life and Accident Insurance
Company.
David T. Foy, 31 Vice President, 1998 Assistant Vice President (1995-1998), Hartford;
Vice President (1998-Present), Hartford Life and
Accident Insurance Company.
Bruce D. Gardner, 47 Vice President, 1995 Director (1994-1997); General Counsel & Corporate
Secretary (1991-1995), Hartford; Vice President
(1995-1997); Director (1995-1997); General
Counsel & Corporate Secretary (1991-1995),
Hartford Life and Accident Insurance Company.
</TABLE>
17 - PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
OTHER BUSINESS PROFESSION,
VOCATION OR EMPLOYMENT
POSITION WITH HARTFORD; FOR PAST 5 YEARS;
NAME, AGE YEAR OF ELECTION OTHER DIRECTORSHIPS
- ---------------------------------- ---------------------------------- ---------------------------------------------------
<S> <C> <C>
J. Richard Garrett, 53 Vice President, 1993 Treasurer (1986-1997), Hartford; Vice President
Assistant Treasurer, 1997 (1993-Present); Assistant Treasurer
(1997-Present); Treasurer (1983-1997); Hartford
Life and Accident Insurance Company; Treasurer
(1977), The Hartford Financial Services Group.
John P. Ginnetti, 52 Executive Vice President and Senior Vice President, Individual Life and Annuity
Director, Asset Management Division (1988-1994), Hartford; Director
Services, 1994 (1988-Present); Director (1988-Present);
Director, 1988 Executive Vice President & Director, Asset
Management Services (1994-Present); Senior Vice
President, Individual Life and Annuity Division
(1988-1994), Hartford Life and Accident Insurance
Company; Executive Vice President, Asset
Management, Hartford Life, Inc. (1997-Present).
William A. Godfrey, III, 41 Senior Vice President, 1997 Senior Vice President (1997-Present), Hartford;
Senior Vice President (1997-Present), Hartford
Life and Accident Insurance Company; Vice
President Information Technology (1997-Present),
Hartford Life, Inc.
Lynda Godkin, 44 Senior Vice President, 1997 Associate General Counsel (1995-1996); Assistant
General Counsel, 1996 General Counsel and Secretary (1994-1995);
Corporate Secretary, 1995 Counsel (1990-1994), Hartford; Director
Director, 1997 (1997-Present); Senior Vice President
(1997-Present); General 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; Vice President and General Counsel
(1997-Present), Hartford Life, Inc.
Lois W. Grady, 53 Senior Vice President, 1998 Vice President (1993-1998); Assistant Vice
Vice President, 1993 President (1987-1993), Hartford; Senior Vice
President, 1998); Vice President (1993-1997);
Assistant Vice President (1987-1993), Hartford
Life and Accident Insurance Company.
Christopher Graham, 47 Vice President, 1997
Mark E. Hunt, 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.
Stephen T. Joyce, 39 Vice President, 1997 Assistant Vice President (1994-1997), Hartford;
Assistant Vice President (1994-1997), Hartford
Life and Accident Insurance Company.
Michael D. Keeler, 37 Vice President, 1998 Vice President (1998-Present), Hartford Life and
Accident Insurance Company.
Robert A. Kerzner, 46 Senior Vice President, 1998 Vice President, (1995-1998); Regional Vice
Vice President, 1995 President (1991-1994), Hartford; Vice President
(1994-1997), Hartford Life and Accident Insurance
Company.
</TABLE>
18 - PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
OTHER BUSINESS PROFESSION,
VOCATION OR EMPLOYMENT
POSITION WITH HARTFORD; FOR PAST 5 YEARS;
NAME, AGE YEAR OF ELECTION OTHER DIRECTORSHIPS
- ---------------------------------- ---------------------------------- ---------------------------------------------------
<S> <C> <C>
David N. Levenson, 31 Vice President, 1998 Assistant Vice President (1995-Present), Hartford.
Steven M. Maher, 43 Vice President, 1992 Assistant Vice President (1987-1992), Hartford;
Actuary, 1987 Vice President (1993-Present); Actuary
(1987-Present); Assistant Vice President
(1987-1993), Hartford Life and Accident Insurance
Company.
William B. Malchodi, Jr., 50 Vice President, 1994 Director of Taxes, Hartford (1991-1998); Director
of Taxes (1992-1998), Hartford Life and Accident
Insurance Company.
Raymond J. Marra, 37 Vice President, 1998 Assistant Vice President (1997-Present), Hartford;
Vice President (1998-Present), Assistant Vice
President (1994-1997), Hartford Life and Accident
Insurance Company.
Thomas M. Marra, 39 Executive Vice President, 1995 Senior Vice President (1994-1995); Vice President
Director, Individual Life and (1989-1994); Actuary (1987-1995), Hartford;
Annuity Division, 1994 Director (1994-Present); Executive Vice President
Director, 1994* (1995-Present); Senior Vice President
(1994-1995); Director, Individual Life and
Annuity Division (1994-Present); Actuary
(1987-1997), Hartford Life and Accident Insurance
Company; Executive Vice President, Individual
Life and Annuities (1997-Present), Hartford Life,
Inc.
Robert F. Nolan, Jr., 43 Senior Vice President, 1997 Vice President (1995-1997); Assistant Vice
President (1992-1995), Hartford; Vice President
(1995-1997); Assistant Vice President
(1992-1995), Hartford Life and Accident Insurance
Company; Vice President, Corporate Relations
(1997-Present), Hartford Life, Inc.; Manager,
Public Relations (1986), Aetna Life and Casualty
Insurance Company.
Joseph J. Noto, 46 Vice President, 1989 Executive Vice President & Chief Operating Officer
(1997-Present); Director (1994-Present);
President (1994-1997), American Maturity Life
Insurance Company; Vice President (1989-1997),
Hartford Life and Accident Insurance Company.
C. Michael O'Halloran, 51 Vice President, 1994 Senior Associate General Counsel (1988-1997),
Hartford; Vice President (1994-Present); Senior
Associate General Counsel (1988-1997), Hartford
Life and Accident Insurance Company; Corporate
Secretary (1997-Present), Hartford Life, Inc.;
Vice President (1994-Present); Senior Associate
General Counsel (1988-Present); Director of
Corporate Law (1994-Present), The Hartford
Financial Services Group.
Lawrence M. O'Rourke, 44 Vice President, 1998 Vice President, (1998-Present), Hartford Life and
Accident Insurance Company.
Daniel E. O'Sullivan, 43 Vice President, 1998 Vice President (1998-Present), Hartford Life and
Accident Insurance Company.
</TABLE>
19 - PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
OTHER BUSINESS PROFESSION,
VOCATION OR EMPLOYMENT
POSITION WITH HARTFORD; FOR PAST 5 YEARS;
NAME, AGE YEAR OF ELECTION OTHER DIRECTORSHIPS
- ---------------------------------- ---------------------------------- ---------------------------------------------------
<S> <C> <C>
Craig R. Raymond, 37 Senior Vice President, 1997 Vice President (1993-1997); Assistant Vice
Chief Actuary, 1994 President (1992-1993); Actuary (1990-1994),
Hartford; Senior Vice President (1997-Present);
Chief Actuary (1995-Present); Vice President
(1993-1997); Actuary (1990-1995), Hartford Life
and Accident Insurance Company; Vice President
and Chief Actuary (1997-Present), Hartford Life,
Inc.
Mary P. Robinson, 38 Vice President, 1998 Assistant Vice President (1995-1998), Hartford;
Assistant Vice President (1995-1998), Hartford
Life and Accident Insurance Company.
Donald A. Salama, 50 Vice President, 1997 Vice President (1997-Present), Hartford Life and
Accident Insurance Company.
Timothy P. Schiltz, 37 Vice President, 1997 Assistant Vice President (1994-1997), Hartford;
Vice President (1997-Present); Assistant Vice
President (1994-1997), Hartford Life and Accident
Insurance Company; Consulting Actuary
(1992-1993), Milliman & Robertson, Inc.;
Consulting Actuary (1988-1992) Chalke
Incorporated.
Lowndes A. Smith, 58 President, 1989 Chief Operating Officer (1989-1997), Hartford;
Chief Executive Officer, 1997 Director (1981-Present); President
Director, 1981* (1989-Present); Chief Executive Officer
(1997-Present); Chief Operating Officer
(1989-1997), Hartford Life and Accident Insurance
Company; Chief Executive Officer and President
and Director (1997-Present), Hartford Life, Inc.
Keith A. Stevenson, 44 Vice President, 1998
Edward A. Sweeney, 51 Vice President, 1993 Chicago Regional Manager (1985-1993), Hartford;
Vice President (1993-Present), Hartford Life and
Accident Insurance Company.
Judith V. Tilbor, 46 Vice President, 1998 Assistant Vice President (1994-1998), Hartford;
Vice President (1998-Present), Assistant Vice
President (1994-1998), Hartford Life and Accident
Insurance Company.
Raymond P. Welnicki, 49 Senior Vice President and 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.
Walter C. Welsh, 51 Senior Vice President, 1997 Vice President (1995-1997); Assistant Vice
President (1992-1995), Hartford; Senior Vice
President (1997-Present); Vice President
(1995-1997); Assistant Vice President
(1992-1995), Hartford Life and Accident Insurance
Company; Vice President, Government Affairs
(1997-Present), Hartford Life, Inc.
</TABLE>
20 - PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
OTHER BUSINESS PROFESSION,
VOCATION OR EMPLOYMENT
POSITION WITH HARTFORD; FOR PAST 5 YEARS;
NAME, AGE YEAR OF ELECTION OTHER DIRECTORSHIPS
- ---------------------------------- ---------------------------------- ---------------------------------------------------
<S> <C> <C>
Lizabeth H. Zlatkus, 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.
David M. Znamierowski, 38 Senior Vice President, 1997 Vice President (1997), Hartford; Director
Director, Risk Management (1998-Present) Senior Vice President
Strategy, 1996 (1997-Present), Hartford Life and Accident
Director, 1998* Insurance Company; Vice President, Investment
Strategy (1997-Present), Hartford Life, Inc.;
Vice President, Investment Strategy & Policy,
Aetna Life and Casualty.
</TABLE>
- ------------------------
* Denotes date of election to Board of Directors of Hartford.
** Affiliated Company of The Hartford Financial Services Group, Inc.
Unless otherwise indicated, the principal business address of each the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
DISTRIBUTION OF THE POLICIES
--------------------------------------------------------------------
Hartford intends to sell the Policies in all jurisdictions where it is licensed
to do business. The Policies will be sold by life insurance sales
representatives who represent Hartford and who are registered representatives of
Dean Witter Reynolds, Inc. ("Dean Witter"). Any sales representative will have
been qualified to sell variable life insurance Policies under applicable federal
and state laws. Dean Witter is registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 and is a member 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. HSD
is a wholly-owned subsidiary of Hartford. The principal business address of 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 7.0% of initial and
subsequent premiums. From time to time, Hartford may pay or permit other
promotional incentives, in cash or credit or other compensation. Broker-dealers
or financial institutions are compensated according to a schedule set forth by
HSD and any applicable rules or regulations for variable insurance compensation.
Compensation is generally based on premium payments made by policyholders or
contract owners. This compensation is usually paid from the sales charges
described in this Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not effect the amounts paid by the policyholders or contract
owners to purchase, hold or surrender variable insurance products.
Hartford may provide information on various topics to Policy Owners and
prospective Policy Owners in advertising, sales literature or other materials.
These topics may include the relationship between sectors of the economy and the
economy as a whole and its effect on various securities markets, investment
strategies and techniques (such as value investing, dollar cost averaging and
asset allocation), the advantages and disadvantages of investing in
tax-advantaged and taxable instruments, customer profiles and hypothetical
purchase scenarios, financial management and tax and retirement planning, and
variable annuities and other investment alternatives, including comparisons
between the Policies and the characteristics of, and market for, such
alternatives.
21 - 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 Portfolio. Additional protection for the assets of
the Separate Account is afforded by Hartford's blanket fidelity bond issued by
Aetna Casualty and Surety Company, in the aggregate of $50 million, covering all
of the officers and employees of Hartford.
FEDERAL TAX CONSIDERATIONS
--------------------------------------------------------------------
GENERAL
SINCE THE TAX LAW IS COMPLEX AND SINCE TAX CONSEQUENCES WILL VARY ACCORDING TO
THE ACTUAL STATUS OF THE POLICY OWNER INVOLVED, LEGAL AND TAX ADVICE MAY BE
NEEDED BY A PERSON, EMPLOYER OR OTHER ENTITY CONTEMPLATING THE PURCHASE OF A
POLICY DESCRIBED HEREIN.
It should be understood that any detailed description of the federal income tax
consequences regarding the purchase of these Policies cannot be made in this
Prospectus and that special tax rules may be applicable with respect to certain
purchase situations not discussed herein. In addition, no attempt is made here
to consider any applicable state or other tax laws. For detailed information, a
qualified tax adviser should always be consulted. This discussion of federal tax
considerations is based upon Hartford's understanding of existing Federal income
tax laws as they are currently interpreted.
TAXATION OF HARTFORD
AND THE SEPARATE ACCOUNT
The Separate Account is taxed as a part of Hartford which is taxed as a life
insurance company under Subchapter L of the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, the Separate Account will not be taxed as a
"regulated investment company" under Subchapter M of the Code. Investment income
and realized capital gains on the assets of the Separate Account (the underlying
Funds) are reinvested and are taken into account in determining the value of the
Accumulation Units (see "Policy Benefits and Right -- Account Value," on page
12). As a result, such investment income and realized capital gains are
automatically applied to increase reserves under the Policy.
Hartford does not expect to incur any federal income tax on the earnings or
realized capital gains attributable to the Separate Account. Based upon this
expectation, no charge is currently being made to the Separate Account for
federal income taxes. If Hartford incurs income taxes attributable to the
Separate Account or determines that such taxes will be incurred, it may assess a
charge for such taxes against the Separate Account.
INCOME TAXATION OF POLICY BENEFITS
For federal income tax purposes, the Policies should be treated as life
insurance 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 Policy is partially or completely
surrendered. Section 7702 limits the amount of premiums that may be invested in
a Policy that is treated as life insurance. Hartford intends to monitor premium
levels to assure compliance with the Section 7702 requirements.
During the first fifteen Policy Years, an "income first" rule generally applies
to distributions of cash required to be made under Code Section 7702 because of
a reduction in benefits under the Policy.
The Maturity Date Extension Rider allows a Policy Owner to extend the Maturity
Date to the date of the Insured's death. If the Maturity Date of the Policy is
extended by rider, Hartford believes that the Policy will continue to be treated
as a life insurance 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
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 meets the Section 7702 definition of a life insurance policy.
22 - PROSPECTUS
<PAGE>
MODIFIED ENDOWMENT POLICIES
A life insurance policy is treated as a "modified endowment Policy" under
Section 7702A of the Code if it meets the definition of life insurance in
Section 7702 but fails the "seven-pay" test of Section 7702A. The seven-pay test
provides that premiums cannot be paid at a rate more rapidly than that allowed
by the payment of seven annual premiums using specified computational rules
provided in Section 7702A(c). The large single premium permitted under the
Policy does not meet the specified computational rules for the "seven-pay test"
under Section 7702A(c). Therefore, the Policy will generally be treated as a
modified endowment Policy for federal income tax purposes. However, an exchange
under Section 1035 of the Code of a life insurance policy issued before June 21,
1988 will not cause the new Policy to be treated as a modified endowment Policy
if no additional premiums are paid and there is no change in the death benefit
as the result of the exchange.
A policy that is classified as modified endowment Policy is generally eligible
for the beneficial tax treatment accorded to life insurance. That is, the death
benefit is excluded from income and increments in value are not subject to
current taxation. However, loans, distributions or other amounts received from a
modified endowment Policy during the life of the Insured will be taxed to the
extent of any accumulated income in the policy (generally, the excess of account
value over premiums paid). Amounts that are taxable withdrawals will be subject
to a 10% additional tax, with certain exceptions.
All modified endowment Policies 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.
The federal estate tax is integrated with the federal gift tax under a unified
rate schedule and unified credit which shelters up to $625,000 (1998) from the
estate and gift tax. The Taxpayer Relief Act of 1997 gradually raises the credit
over the next eight years to $1,000,000. In addition, an unlimited marital
deduction may be available for federal estate and gift tax purposes. The
unlimited marital deduction permits the deferral of taxes until the death of the
surviving spouse (when the Death Proceeds would be available to pay taxes due
and other expenses incurred).
If the Policy Owner (whether or not he or she is an Insured) transfers ownership
of the Policy to someone two or more generations younger, the transfer may be
subject to the generation-skipping transfer tax, the taxable amount being the
value of the Policy. The generation-skipping transfer tax provisions generally
apply to transfers which would be subject to the gift and estate tax rules.
Individuals are generally allowed an aggregate generation skipping transfer
exemption of $1 million. Because these rules are complex, the Policy Owner
should consult with a qualified tax adviser for specific information if
ownership is passing to younger generations.
DIVERSIFICATION REQUIREMENTS
Section 817 of the Code provides that a variable life insurance 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, Hartford Life Insurance Company may comply within a reasonable
period and avoid the taxation of policy income on an ongoing basis. However,
either Hartford Life Insurance Company or the Policy Owner must agree to pay the
tax due for the period during which the diversification requirements were not
met.
Hartford monitors the diversification of investments in the separate accounts
and tests for diversification as required by the Code. Hartford intends to
administer all 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
23 - PROSPECTUS
<PAGE>
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 certain
incidents of ownership by the Policy Owner , such as the ability to select and
control investments in a separate account, will cause the Policy Owner to be
treated as the owner of the assets for tax purposes.
Further, in the explanation to the temporary Section 817 diversification
regulations, the Treasury Department noted that the temporary regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor, rather
than the insurance company, to be treated as the owner of the assets in the
account." The explanation further indicates that "the temporary regulations
provide that in appropriate cases a segregated asset account may include
multiple sub-accounts, but do not specify the extent to which policyholders may
direct their investments to particular sub-accounts without being treated as the
owners of the underlying assets. Guidance on this and other issues will be
provided in regulations or revenue rulings under section 817(d), relating to the
definition of variable Policy." The final regulations issued under Section 817
did not provide guidance regarding investor control, and as of the date of this
Prospectus, no other such guidance has been issued. Further, Hartford does not
know if or in what form such guidance will be issued. In addition, although
regulations are generally issued with prospective effect, it is possible that
regulations may be issued with retroactive effect. Due to the lack of specific
guidance regarding the issue of investor control, there is necessarily some
uncertainty regarding whether a Policy Owner could be considered the owner of
the assets for tax purposes. Hartford reserves the right to modify the Policies,
as necessary, to prevent Policy Owners from being considered the owners of the
assets in the separate accounts.
LIFE INSURANCE PURCHASED FOR
USE IN SPLIT DOLLAR
ARRANGEMENTS
On January 26, 1996, the IRS released a technical advice memorandum ("TAM") on
the taxability of life insurance policies used in certain split dollar
arrangements. A TAM, issued by the National Office of the IRS, provides advice
as to the internal revenue laws, regulations, and related statutes with respect
to a specific set of facts and a specific taxpayer. In the TAM, among other
things, the IRS concluded that an employee was subject to current taxation on
the excess of the cash surrender value of the policy over the premiums to be
returned to the employer. Purchasers of life insurance policies to be used in
split dollar arrangements are strongly advised to consult with a qualified tax
adviser to determine the tax treatment resulting from such an arrangement.
FEDERAL INCOME TAX WITHHOLDING
If any amounts are deemed to be current taxable income to the Policy Owner, such
amounts will be subject to federal income tax withholding and reporting,
pursuant to the Code.
NON-INDIVIDUAL OWNERSHIP
OF POLICIES
In certain circumstances, the Code limits the application of specific tax
advantages to individual owners of life insurance policies. Prospective Policy
Owners which are not individuals should consult a qualified tax adviser to
determine the 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 modified single 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
24 - PROSPECTUS
<PAGE>
forms of the Policies under Connecticut law and legal matters relating to the
federal securities and income tax laws have been passed on by Lynda Godkin,
Senior Vice President, General Counsel and Corporate Secretary of Hartford.
EXPERTS
--------------------------------------------------------------------
The audited financial statements and financial statement schedules included in
this prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports. The principal business
address of Arthur Andersen LLP is One Financial Plaza, Hartford, Connecticut
06103.
The hypothetical Policy illustrations included in this Prospectus and the
registration statement with respect to the Separate Account have been approved
by Michael Winterfield, FSA, MAAA, Assistant Vice President and Director,
Individual Annuity Product Management, for Hartford, and are included in
reliance upon his opinion as to their reasonableness.
REGISTRATION STATEMENT
--------------------------------------------------------------------
A registration statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933 as amended. This Prospectus does not
contain all information set forth in the registration statement, its amendments
and exhibits, to all of which reference is made for further information
concerning the Separate Account, the Portfolios, Hartford and the Policies.
25 - PROSPECTUS
<PAGE>
APPENDIX A
--------------------------------------------------------------------
SPECIAL INFORMATION FOR POLICIES PURCHASED IN NEW YORK
If the Policy is purchased in the State of New York, the following provisions of
the Prospectus are amended as follows:
In the Special Terms subsection of the Prospectus, the definition of Account
Value is deleted and the following definition is substituted:
ACCOUNT VALUE: The current value of Accumulation Units plus the value of the
Loan Account under the Policy. In the case of a Policy Owner who purchases
the Policy in the State of New York (the "New York Policy Owner") and who
elects to transfer into the Fixed Account, Account Value is the current
value of the Fixed Account plus the value of the Loan Account under the
Policy.
The following definition is added:
FIXED ACCOUNT: Part of the General Account of Hartford to which a New York
Policy Owner may allocate the entire Account Value.
The definition of Loan Account is deleted and the following definition is
substituted:
LOAN ACCOUNT: An account in Hartford's General Account, established for any
amounts transferred from the Sub-Accounts or, if a New York Policy Owner,
from the Fixed Account for requested loans. The Loan Account credits a fixed
rate of interest of 4% per annum that is not based on the investment
experience of the Separate Account.
The following is added to the Prospectus as a separate section following the
section entitled "The Separate Account":
THE FIXED ACCOUNT
THAT PORTION OF THE POLICY RELATING TO THE FIXED ACCOUNT IS NOT REGISTERED
UNDER THE SECURITIES ACT OF 1933 ("1933 ACT") AND THE FIXED ACCOUNT IS NOT
REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940
("1940 ACT"). ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTERESTS
THEREIN ARE SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE
1940 ACT, AND THE DISCLOSURE REGARDING THE FIXED ACCOUNT HAS NOT BEEN
REVIEWED BY THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION. THE
FOLLOWING DISCLOSURE ABOUT THE FIXED ACCOUNT MAY BE SUBJECT TO CERTAIN
GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS REGARDING THE
ACCURACY AND COMPLETENESS OF DISCLOSURE.
Under the circumstances described under the heading "Transfer of Entire
Account Value to the Fixed Account," below, New York Policy Owners may
transfer no less than the entire Account Value to the Fixed Account. Account
Value transferred to the Fixed Account becomes part of the general assets of
Hartford. Hartford invests the assets of the General Account in accordance
with applicable laws governing the investment of insurance company general
accounts.
Hartford currently credits interest to the Account Value transferred to the
Fixed Account under the Policy at the Minimum Credited Rate of 3% per year,
compounded annually. Hartford reserves the right to credit a lower minimum
interest rate according to state law. Hartford may also credit interest at
rates greater than the minimum Fixed Account interest rate. There is no
specific formula for determining the interest credited to the Account Value
in the Fixed Account.
The following language is added to the section of the Prospectus entitled
"Deductions and Charges -- Administrative Charge," page 11:
No Administrative Charge is deducted from Account Value in the Fixed
Account.
The following language is added to the section of the Prospectus entitled
"Deductions and Charges -- Mortality and Expense Risk Charge," page 11:
No Mortality and Expense Risk Charge is deducted from Account Value in the
Fixed Account.
26 - PROSPECTUS
<PAGE>
The following separate sections are added to the section of the Prospectus
entitled "Policy Benefits and Rights," page 12:
TRANSFER OF ENTIRE ACCOUNT VALUE TO THE FIXED ACCOUNT
New York Policy Owners may transfer no less than the entire Account Value
into the Fixed Account under the following circumstances: (i) during the
first 18 months following the Date of Issue, (ii) within 30 days following a
Policy Anniversary, or (iii) within 60 days following the effective date of
a material change in the investment policy of the Separate Account which the
New York Policy Owner objects to.
A TRANSFER TO THE FIXED ACCOUNT MUST BE FOR THE ENTIRE ACCOUNT VALUE AND
ONCE THE ACCOUNT VALUE HAS BEEN TRANSFERRED TO THE FIXED ACCOUNT, IT MAY
NOT, UNDER ANY CIRCUMSTANCES, BE TRANSFERRED BACK TO THE SEPARATE ACCOUNT.
For New York Policy Owners who elect to invest in the Fixed Account,
Hartford will transfer the entire Account Value from the Separate Account to
the Fixed Account on the Monthly Activity Date next following the date on
which Hartford received the transfer request. The Account Value in the Fixed
Account on the date of transfer equals the entire Account Value; plus the
value of the Loan Account; minus the Monthly Deduction Amount applicable to
the Fixed Account and minus the Annual Maintenance Fee, if applicable. On
each subsequent Monthly Activity Date, the Account Value in the Fixed
Account equals the Account Value on the previous Monthly Activity Date; plus
any premiums received since the last Monthly Activity Date; plus interest
credited since the last Monthly Activity Date; minus the Monthly Deduction
Amount applicable to the Fixed Account; minus any partial surrenders taken
since the last Monthly Activity Date and minus any Surrender Charges
deducted since the last Monthly Deduction Date. On each Valuation Date
(other than a Monthly Activity Date), the Account Value of the Fixed Account
equals the Account Value on the previous Monthly Activity Date; plus any
premiums received since the last Monthly Activity Date; plus any interest
credited since the last Monthly Activity Date; minus any partial surrenders
taken since the last Monthly Activity Date and minus any surrender charges
deducted since the last Monthly Activity Date.
DEFERRED PAYMENTS
Hartford reserves the right to defer payment of any Cash Surrender Values
and loan amounts which are attributable to the Fixed Account for up to six
months from the date of request. If payment is deferred for more than ten
days, Hartford will pay interest at the Fixed Account Minimum Credited
Interest Rate.
27 - PROSPECTUS
<PAGE>
APPENDIX B
--------------------------------------------------------------------
ILLUSTRATIONS OF BENEFITS
The tables in Appendix B illustrate the way in which a Contract operates. They
show how the death benefit and surrender value could vary over an extended
period of time assuming hypothetical gross rates of return equal to constant
after tax annual rates of 0%, 6% and 12%. The tables are based on an initial
premium of $10,000. A male age 45, a female age 55 and a male age 65 with Face
Amounts of $40,161, $33,334 and $19,380, respectively, are illustrated for the
single life Contract. The illustrations for the last survivor Contract assume
male and female of equal ages, including age 55 and 65 for Face Amounts of
$44,053 and $27,778.
The death benefit and surrender value for a Contract would be different from
those shown if the rates of return averaged 0%, 6% and 12% over a period of
years, but also fluctuated above or below those averages for individual Contract
Years. They would also differ if any contract loan were made during the period
of time illustrated.
The tables reflect the deductions of current Contract charges and guaranteed
Contract charges for a single gross interest rate. The death benefits and
surrender values would change if the current cost of insurance charges change.
The amounts shown for the death benefit and surrender value as of the end of
each Contract Year take into account an average daily charge equal to an annual
charge of 0.75% 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 Portfolio's assets are equal to net annual
investment return rates (net of the 0.75% average daily charge) of -0.75%, 5.25%
and 11.25%, respectively.
In addition the death benefit and surrender value as of the end of each Contract
Year take into account the (1) tax expense charge equal to an annual rate of
0.40% of Account Value for the first ten Contract Years; (2) administrative
charge equal to an annual rate of 0.40% of Account Value attributable to the
Separate Account; (3) mortality and expense risk charge equal to an annual rate
of 0.90% of Account Value attributable to the Separate Account; and (4) any
Contingent Deferred Sales Charge and Premium Tax Charge which may be applicable
in the first nine Contract Years.
The hypothetical returns shown in the tables are without any tax charges that
may be attributable to the Separate Account in the future. In order to produce
after tax returns of 0%, 6%, and 12%, the Separate Account would have to earn a
sufficient amount in excess of 0% or 6% or 12% to cover any tax charges (see
"Deductions and Charges -- Taxes Charged Against the Separate Account," page
11).
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.
28 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 45 MALE
INITIAL FACE AMOUNT: $40,161
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.25% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,834 9,840 40,161 10,756 9,764 40,161
2 11,025 11,740 10,755 40,161 11,575 10,593 40,161
3 11,576 12,724 11,751 40,161 12,463 11,495 40,161
4 12,155 13,794 12,987 40,161 13,427 12,626 40,161
5 12,763 14,956 14,169 40,161 14,474 13,693 40,161
6 13,401 16,219 15,657 40,161 15,613 15,057 40,161
7 14,071 17,592 17,060 40,161 16,851 16,324 40,161
8 14,775 19,083 18,788 40,161 18,198 17,907 40,161
9 15,513 20,704 20,452 40,161 19,666 19,417 40,161
10 16,289 22,465 22,465 40,161 21,268 21,268 40,161
11 17,103 24,501 24,501 40,161 23,113 23,113 40,161
12 17,959 26,724 26,724 40,161 25,145 25,145 40,161
13 18,856 29,153 29,153 41,398 27,386 27,386 40,161
14 19,799 31,808 31,808 43,896 29,864 29,864 41,213
15 20,789 34,714 34,714 46,517 32,590 32,590 43,670
16 21,829 37,895 37,895 49,264 35,574 35,574 46,247
17 22,920 41,367 41,367 52,951 38,832 38,832 49,705
18 24,066 45,156 45,156 56,897 42,386 42,386 53,407
19 25,270 49,292 49,292 61,122 46,266 46,266 57,371
20 26,533 53,807 53,807 65,645 50,502 50,502 61,613
25 33,864 83,601 83,601 96,978 78,372 78,372 90,912
35 55,160 201,997 201,997 214,118 180,092 189,092 200,438
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 12%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
29 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 45 MALE
INITIAL FACE AMOUNT: $40,161
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.25% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,249 9,269 40,161 10,171 9,192 40,161
2 11,025 10,506 9,546 40,161 10,337 9,380 40,161
3 11,576 10,769 9,831 40,161 10,497 9,564 40,161
4 12,155 11,040 10,275 40,161 10,651 9,891 40,161
5 12,763 11,319 10,577 40,161 10,796 10,061 40,161
6 13,401 11,605 11,089 40,161 10,930 10,421 40,161
7 14,071 11,900 11,411 40,161 11,052 10,569 40,161
8 14,775 12,202 11,941 40,161 11,158 10,902 40,161
9 15,513 12,514 12,282 40,161 11,244 11,016 40,161
10 16,289 12,833 12,833 40,161 11,309 11,309 40,161
11 17,103 13,228 13,228 40,161 11,394 11,394 40,161
12 17,959 13,636 13,636 40,161 11,455 11,455 40,161
13 18,856 14,058 14,058 40,161 11,486 11,486 40,161
14 19,799 14,494 14,494 40,161 11,486 11,486 40,161
15 20,789 14,944 14,944 40,161 11,450 11,450 40,161
16 21,829 15,409 15,409 40,161 11,370 11,370 40,161
17 22,920 15,889 15,889 40,161 11,239 11,239 40,161
18 24,066 16,385 16,385 40,161 11,048 11,048 40,161
19 25,270 16,898 16,898 40,161 10,787 10,787 40,161
20 26,533 17,428 17,428 40,161 10,442 10,442 40,161
25 33,864 20,353 20,353 40,161 6,987 6,987 40,161
35 55,160 27,852 27,852 40,161 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 6%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
30 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 45 MALE
INITIAL FACE AMOUNT: $40,161
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.75% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,665 8,698 40,161 9,586 8,649 40,161
2 11,025 9,340 8,404 40,161 9,169 8,291 40,161
3 11,576 9,026 8,118 40,161 8,747 7,925 40,161
4 12,155 8,721 7,990 40,161 8,319 7,699 40,161
5 12,763 8,425 7,720 40,161 7,883 7,312 40,161
6 13,401 8,138 7,657 40,161 7,438 7,113 40,161
7 14,071 7,860 7,401 40,161 6,980 6,696 40,161
8 14,775 7,591 7,353 40,161 6,506 6,461 40,161
9 15,513 7,330 7,111 40,161 6,013 6,002 40,161
10 16,289 7,076 7,076 40,161 5,498 5,717 40,161
11 17,103 6,865 6,865 40,161 4,978 5,211 40,161
12 17,959 6,659 6,659 40,161 4,427 4,673 40,161
13 18,856 6,459 6,459 40,161 3,843 4,100 40,161
14 19,799 6,264 6,264 40,161 3,221 3,488 40,161
15 20,789 6,073 6,073 40,161 2,558 2,833 40,161
16 21,829 5,888 5,888 40,161 1,845 2,127 40,161
17 22,920 5,707 5,707 40,161 1,075 1,361 40,161
18 24,066 5,531 5,531 40,161 237 526 40,161
19 25,270 5,360 5,360 40,161 -- -- --
20 26,533 5,193 5,193 40,161 -- -- --
25 33,864 4,420 4,420 40,161 -- -- --
35 55,160 3,145 3,145 40,161 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 0%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
31 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 55 FEMALE
INITIAL FACE AMOUNT: $33,334
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.25% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,834 9,840 33,334 10,727 9,736 33,334
2 11,025 11,740 10,755 33,334 11,517 10,537 33,334
3 11,576 12,724 11,751 33,334 12,378 11,411 33,334
4 12,155 13,794 12,987 33,334 13,317 12,517 33,334
5 12,763 14,956 14,169 33,334 14,343 13,564 33,334
6 13,401 16,219 15,657 33,334 15,464 14,909 33,334
7 14,071 17,592 17,060 33,334 16,688 16,163 33,334
8 14,775 19,083 18,788 33,334 18,025 17,735 33,334
9 15,513 20,704 20,452 33,334 19,487 19,238 33,334
10 16,289 22,465 22,465 33,334 21,088 21,088 33,334
11 17,103 24,501 24,501 33,334 22,940 22,940 33,334
12 17,959 26,736 26,736 33,334 24,991 24,991 33,334
13 18,856 29,218 29,218 34,478 27,270 27,270 33,334
14 19,799 31,946 31,946 37,377 29,804 29,804 34,891
15 20,789 34,928 34,928 40,517 32,585 32,585 37,799
16 21,829 38,190 38,190 43,919 35,625 35,625 40,969
17 22,920 41,765 41,765 47,195 38,958 38,958 44,023
18 24,066 45,686 45,686 50,712 42,614 42,614 47,301
19 25,270 49,992 49,992 54,492 46,627 46,627 50,824
20 26,533 54,687 54,687 59,609 51,004 51,004 55,594
25 33,864 85,841 85,841 90,992 80,060 80,060 84,864
35 55,160 208,273 208,273 218,687 192,260 192,260 201,873
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 12%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
32 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 55 FEMALE
INITIAL FACE AMOUNT: $33,334
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.25% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,249 9,269 33,334 10,142 9,164 33,334
2 11,025 10,506 9,546 33,334 10,279 9,324 33,334
3 11,576 10,769 9,831 33,334 10,412 9,480 33,334
4 12,155 11,040 10,275 33,334 10,539 9,781 33,334
5 12,763 11,319 10,577 33,334 10,661 9,928 33,334
6 13,401 11,605 11,089 33,334 10,774 10,266 33,334
7 14,071 11,900 11,411 33,334 10,875 10,394 33,334
8 14,775 12,202 11,941 33,334 10,959 10,704 33,334
9 15,513 12,514 12,282 33,334 11,021 10,793 33,334
10 16,289 12,833 12,833 33,334 11,055 11,055 33,334
11 17,103 13,228 13,228 33,334 11,106 11,106 33,334
12 17,959 13,636 13,636 33,334 11,127 11,127 33,334
13 18,856 14,058 14,058 33,334 11,117 11,117 33,334
14 19,799 14,494 14,494 33,334 11,073 11,073 33,334
15 20,789 14,944 14,944 33,334 10,988 10,988 33,334
16 21,829 15,409 15,409 33,334 10,854 10,854 33,334
17 22,920 15,889 15,889 33,334 10,656 10,656 33,334
18 24,066 16,385 16,385 33,334 10,375 10,375 33,334
19 25,270 16,898 16,898 33,334 9,991 9,991 33,334
20 26,533 17,428 17,428 33,334 9,479 9,479 33,334
25 33,864 20,353 20,353 33,334 3,955 3,955 33,334
35 55,160 27,852 27,852 33,334 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 6%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
33 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 55 FEMALE
INITIAL FACE AMOUNT: $33,334
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.75 NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,665 8,698 33,334 9,558 8,593 33,334
2 11,025 9,340 8,404 33,334 9,112 8,179 33,334
3 11,576 9,026 8,118 33,334 8,662 7,761 33,334
4 12,155 8,721 7,990 33,334 8,209 7,486 33,334
5 12,763 8,425 7,720 33,334 7,750 7,053 33,334
6 13,401 8,138 7,657 33,334 7,283 6,810 33,334
7 14,071 7,860 7,401 33,334 6,803 6,352 33,334
8 14,775 7,591 7,353 33,334 6,305 6,073 33,334
9 15,513 7,330 7,111 33,334 5,782 5,568 33,334
10 16,289 7,076 7,076 33,334 5,230 5,230 33,334
11 17,103 6,865 6,865 33,334 4,665 4,665 33,334
12 17,959 6,659 6,659 33,334 4,061 4,061 33,334
13 18,856 6,459 6,459 33,334 3,419 3,419 33,334
14 19,799 6,264 6,264 33,334 2,733 2,733 33,334
15 20,789 6,073 6,073 33,334 1,997 1,997 33,334
16 21,829 5,888 5,888 33,334 1,200 1,200 33,334
17 22,920 5,707 5,707 33,334 324 324 33,334
18 24,066 5,531 5,531 33,334 -- -- --
19 25,270 5,360 5,360 33,334 -- -- --
20 26,533 5,193 5,193 33,334 -- -- --
25 33,864 4,420 4,420 33,334 -- -- --
35 55,160 3,145 3,145 33,334 -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 0%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
34 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 65 MALE
INITIAL FACE AMOUNT: $19,380
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.25% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,834 9,840 19,380 10,650 9,660 19,380
2 11,025 11,740 10,755 19,380 11,357 10,380 19,380
3 11,576 12,724 11,751 19,380 12,131 11,169 19,380
4 12,155 13,794 12,987 19,380 12,984 12,190 19,380
5 12,763 14,956 14,169 19,380 13,930 13,156 19,380
6 13,401 16,219 15,657 19,380 14,986 14,436 19,380
7 14,071 17,595 17,063 19,883 16,172 15,650 19,380
8 14,775 19,106 18,810 21,208 17,516 17,228 19,443
9 15,513 20,760 20,508 22,629 19,027 18,780 20,740
10 16,289 22,549 22,549 24,578 20,664 20,664 22,524
11 17,103 24,595 24,595 26,563 22,536 22,536 24,340
12 17,959 26,837 26,837 28,716 24,587 24,587 26,309
13 18,856 29,275 29,275 31,325 26,816 26,816 28,693
14 19,799 31,947 31,947 33,864 29,260 29,260 31,016
15 20,789 34,856 34,856 36,948 31,916 31,916 33,831
16 21,829 38,046 38,046 39,949 34,834 34,834 36,576
17 22,920 41,517 41,517 43,594 38,005 38,005 39,906
18 24,066 45,308 45,308 47,574 41,447 41,447 43,520
19 25,270 49,448 49,448 51,921 45,177 45,177 47,436
20 26,533 53,969 53,969 56,667 49,215 49,215 51,677
25 33,864 83,837 83,837 88,030 74,965 74,965 78,714
35 55,160 202,335 202,335 204,358 175,528 175,528 177,284
</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
CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 12%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
35 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 65 MALE
INITIAL FACE AMOUNT: $19,380
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.25% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,249 9,269 19,380 10,062 9,086 19,380
2 11,025 10,506 9,546 19,380 10,104 9,152 19,380
3 11,576 10,769 9,831 19,380 10,123 9,196 19,380
4 12,155 11,040 10,275 19,380 10,116 9,364 19,380
5 12,763 11,319 10,577 19,380 10,077 9,351 19,380
6 13,401 11,605 11,089 19,380 10,002 9,502 19,380
7 14,071 11,900 11,411 19,380 9,880 9,406 19,380
8 14,775 12,202 11,941 19,380 9,703 9,454 19,380
9 15,513 12,514 12,282 19,380 9,455 9,232 19,380
10 16,289 12,833 12,833 19,380 9,124 9,124 19,380
11 17,103 13,228 13,228 19,380 8,730 8,730 19,380
12 17,959 13,636 13,636 19,380 8,217 8,217 19,380
13 18,856 14,058 14,058 19,380 7,564 7,564 19,380
14 19,799 14,494 14,494 19,380 6,738 6,738 19,380
15 20,789 14,944 14,944 19,380 5,699 5,699 19,380
16 21,829 15,409 15,409 19,380 4,387 4,387 19,380
17 22,920 15,889 15,889 19,380 2,723 2,723 19,380
18 24,066 16,385 16,385 19,380 595 595 19,380
19 25,270 16,898 16,898 19,380 -- -- --
20 26,533 17,428 17,428 19,380 -- -- --
25 33,864 20,353 20,353 21,371 -- -- --
35 55,160 27,854 27,854 28,133 -- -- --
</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
CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 6%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
36 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
SINGLE LIFE OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 65 MALE
INITIAL FACE AMOUNT: $19,380
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.75% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,665 8,698 19,380 9,475 8,512 19,380
2 11,025 9,340 8,404 19,380 8,923 7,994 19,380
3 11,576 9,026 8,118 19,380 8,340 7,444 19,380
4 12,155 8,721 7,990 19,380 7,720 7,004 19,380
5 12,763 8,425 7,720 19,380 7,056 6,368 19,380
6 13,401 8,138 7,657 19,380 6,338 5,875 19,380
7 14,071 7,869 7,401 19,380 5,553 5,111 19,380
8 14,775 7,591 7,353 19,380 4,684 4,461 19,380
9 15,513 7,330 7,111 19,380 3,712 3,503 19,380
10 16,289 7,076 7,076 19,380 2,616 2,616 19,380
11 17,103 6,865 6,865 19,380 1,379 1,379 19,380
12 17,959 6,659 6,659 19,380 -- -- --
13 18,856 6,459 6,459 19,380 -- -- --
14 19,799 6,264 6,264 19,380 -- -- --
15 20,789 6,073 6,073 19,380 -- -- --
16 21,829 5,888 5,888 19,380 -- -- --
17 22,920 5,707 5,707 19,380 -- -- --
18 24,066 5,531 5,531 19,380 -- -- --
19 25,270 5,360 5,360 19,380 -- -- --
20 26,533 5,193 5,193 19,380 -- -- --
25 33,864 4,420 4,420 19,380 -- -- --
35 55,160 3,145 3,145 19,380 -- -- --
</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
CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 0%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
37 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
LAST SURVIVOR OPTION
$10,000 INITIAL PREMIUM
ISSUE AGES: 55 MALE\55 FEMALE
INITIAL FACE AMOUNT: $44,053
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.25% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,902 9,906 44,053 10,902 9,906 44,053
2 11,025 11,882 10,894 44,053 11,882 10,894 44,053
3 11,576 12,946 11,970 44,053 12,946 11,970 44,053
4 12,155 14,103 13,292 44,053 14,103 13,292 44,053
5 12,763 15,360 14,568 44,053 15,360 14,568 44,053
6 13,401 16,726 16,159 44,053 16,726 16,159 44,053
7 14,071 18,210 17,674 44,053 18,210 17,674 44,053
8 14,775 19,825 19,526 44,053 19,822 19,523 44,053
9 15,513 21,585 21,331 44,053 21,574 21,320 44,053
10 16,289 23,505 23,505 44,053 23,477 23,477 44,053
11 17,103 25,727 25,727 44,053 25,652 25,652 44,053
12 17,959 28,162 28,162 44,053 28,031 28,031 44,053
13 18,856 30,830 30,830 44,053 30,640 30,640 44,053
14 19,799 33,755 33,755 44,053 33,507 33,507 44,053
15 20,789 36,960 36,960 44,053 36,667 36,667 44,053
16 21,829 40,479 40,479 46,551 40,154 40,154 46,177
17 22,920 44,337 44,337 50,102 43,981 43,981 49,699
18 24,066 48,565 48,565 53,908 48,175 48,175 53,475
19 25,270 53,202 53,202 57,991 52,774 52,774 57,524
20 26,533 58,305 58,305 63,553 57,828 57,828 63,033
25 33,864 92,176 92,176 97,707 91,132 91,132 96,600
35 55,160 230,373 230,373 241,893 219,404 219,404 230,374
</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
CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 12%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
38 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
LAST SURVIVOR OPTION
$10,000 INITIAL PREMIUM
ISSUE AGES: 55 MALE\ 55 FEMALE
INITIAL FACE AMOUNT: $44,053
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.25% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,314 9,332 44,053 10,314 9,332 44,053
2 11,025 10,632 9,669 44,053 10,632 9,669 44,053
3 11,576 10,954 10,012 44,053 10,954 10,012 44,053
4 12,155 11,279 10,509 44,053 11,279 10,509 44,053
5 12,763 11,605 10,860 44,053 11,605 10,860 44,053
6 13,401 11,941 11,422 44,053 11,931 11,412 44,053
7 14,071 12,288 11,796 44,053 12,255 11,763 44,053
8 14,775 12,646 12,383 44,053 12,574 12,311 44,053
9 15,513 13,015 12,782 44,053 12,885 12,652 44,053
10 16,289 13,396 13,396 44,053 13,182 13,182 44,053
11 17,103 13,858 13,858 44,053 13,517 13,517 44,053
12 17,959 14,337 14,337 44,053 13,834 13,834 44,053
13 18,856 14,834 14,834 44,053 14,127 14,127 44,053
14 19,799 15,349 15,349 44,053 14,393 14,393 44,053
15 20,789 15,883 15,883 44,053 14,624 14,624 44,053
16 21,829 16,436 16,436 44,053 14,809 14,809 44,053
17 22,920 17,010 17,010 44,053 14,938 14,938 44,053
18 24,066 17,606 17,606 44,053 14,991 14,991 44,053
19 25,270 18,223 18,223 44,053 14,949 14,949 44,053
20 26,533 18,863 18,863 44,053 14,787 14,787 44,053
25 33,864 22,433 22,433 44,053 11,078 11,078 44,053
35 55,160 31,836 31,836 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
CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 6%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
39 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
LAST SURVIVOR OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 55 MALE\ 55 FEMALE
INITIAL FACE AMOUNT: $44,053
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.75% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,726 8,757 44,053 9,726 8,757 44,053
2 11,025 9,452 8,512 44,053 9,451 8,512 44,053
3 11,576 9,177 8,266 44,053 9,177 8,266 44,053
4 12,155 8,899 8,166 44,053 8,899 8,166 44,053
5 12,763 8,628 7,920 44,053 8,618 7,910 44,053
6 13,401 8,365 7,881 44,053 8,331 7,848 44,053
7 14,071 8,108 7,647 44,053 8,035 7,575 44,053
8 14,775 7,859 7,619 44,053 7,727 7,489 44,053
9 15,513 7,616 7,397 44,053 7,403 7,185 44,053
10 16,289 7,380 7,380 44,053 7,058 7,058 44,053
11 17,103 7,186 7,186 44,053 6,713 6,713 44,053
12 17,959 6,996 6,996 44,053 6,334 6,334 44,053
13 18,856 6,811 6,811 44,053 5,916 5,916 44,053
14 19,799 6,630 6,630 44,053 5,451 5,451 44,053
15 20,789 6,453 6,453 44,053 4,932 4,932 44,053
16 21,829 6,280 6,280 44,053 4,345 4,345 44,053
17 22,920 6,110 6,110 44,053 3,673 3,673 44,053
18 24,066 5,945 5,945 44,053 2,896 2,896 44,053
19 25,270 5,783 5,783 44,053 1,985 1,985 44,053
20 26,533 5,625 5,625 44,053 910 910 44,053
25 33,864 4,885 4,885 44,053 0 0 0
35 55,160 3,633 3,633 44,053 0 0 0
</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
CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 0%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
40 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
LAST SURVIVOR OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 65 MALE\ 65 FEMALE
INITIAL FACE AMOUNT: $27,778
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.25% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,897 9,902 27,778 10,897 9,902 27,778
2 11,025 11,862 10,875 27,778 11,862 10,875 27,778
3 11,576 12,903 11,927 27,778 12,902 11,926 27,778
4 12,155 14,037 13,227 27,778 14,021 13,211 27,778
5 12,763 15,274 14,483 27,778 15,229 14,439 27,778
6 13,401 16,623 16,057 27,778 16,535 15,969 27,778
7 14,071 18,094 17,558 27,778 17,948 17,413 27,778
8 14,775 19,698 19,399 27,778 19,482 19,185 27,778
9 15,513 21,447 21,193 27,778 21,155 20,902 27,778
10 16,289 23,354 23,354 27,778 22,988 22,988 27,778
11 17,103 25,561 25,561 27,778 25,115 25,115 27,778
12 17,959 27,981 27,981 29,940 27,485 27,485 29,409
13 18,856 30,632 30,632 32,776 30,076 30,076 32,182
14 19,799 33,537 33,537 35,550 32,914 32,914 34,889
15 20,789 36,721 36,721 38,925 36,007 36,007 38,168
16 21,829 40,211 40,211 42,222 39,396 39,396 41,367
17 22,920 44,035 44,035 46,238 43,088 43,088 45,243
18 24,066 48,227 48,227 50,639 47,104 47,104 49,460
19 25,270 52,820 52,820 55,462 51,466 51,466 54,040
20 26,533 57,887 57,887 60,782 56,231 56,231 59,043
25 33,864 91,514 91,514 96,090 86,546 86,546 90,874
35 55,160 228,720 228,720 231,007 203,577 203,577 205,613
</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
CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTACT 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.
41 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
LAST SURVIVOR OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 65 MALE\ 65 FEMALE
INITIAL FACE AMOUNT: $27,778
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.25% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,309 9,327 27,778 10,309 9,327 27,778
2 11,025 10,612 9,650 27,778 10,612 9,650 27,778
3 11,576 10,917 9,976 27,778 10,907 9,967 27,778
4 12,155 11,232 10,463 27,778 11,191 10,423 27,778
5 12,763 11,556 10,812 27,778 11,460 10,717 27,778
6 13,401 11,891 11,372 27,778 11,710 11,193 27,778
7 14,071 12,236 11,744 27,778 11,935 11,445 27,778
8 14,775 12,592 12,329 27,778 12,126 11,866 27,778
9 15,513 12,960 12,727 27,778 12,275 12,045 27,778
10 16,289 13,339 13,339 27,778 12,370 12,370 27,778
11 17,103 13,799 13,799 27,778 12,451 12,451 27,778
12 17,959 14,276 14,276 27,778 12,455 12,455 27,778
13 18,856 14,770 14,770 27,778 12,368 12,368 27,778
14 19,799 15,283 15,283 27,778 12,172 12,172 27,778
15 20,789 15,815 15,815 27,778 11,843 11,843 27,778
16 21,829 16,366 16,366 27,778 11,347 11,347 27,778
17 22,920 16,937 16,937 27,778 10,641 10,641 27,778
18 24,066 17,530 17,530 27,778 9,661 9,661 27,778
19 25,270 18,144 18,144 27,778 8,326 8,326 27,778
20 26,533 18,781 18,781 27,778 6,527 6,527 27,778
25 33,864 22,335 22,335 27,778 0 0 0
35 55,160 31,696 31,696 32,014 0 0 0
</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
CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 6%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
42 - PROSPECTUS
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
--------------------------------------------------------------------
LAST SURVIVOR OPTION
$10,000 INITIAL PREMIUM
ISSUE AGE 65 MALE\ 65 FEMALE
INITIAL FACE AMOUNT: $27,778
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.75% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -------------------------------------- --------------------------------------
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
------- ---------------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,721 8,752 27,778 9,721 8,752 27,778
2 11,025 9,432 8,493 27,778 9,432 8,493 27,778
3 11,576 9,147 8,236 27,778 9,129 8,220 27,778
4 12,155 8,869 8,136 27,778 8,809 8,077 27,778
5 12,763 8,599 7,891 27,778 8,466 7,760 27,778
6 13,401 8,336 7,852 27,778 8,095 7,614 27,778
7 14,071 8,080 7,619 27,778 7,687 7,230 27,778
8 14,775 7,831 7,592 27,778 7,232 6,996 27,778
9 15,513 7,589 7,370 27,778 6,716 6,499 27,778
10 16,289 7,354 7,354 27,778 6,122 6,122 27,778
11 17,103 7,161 7,161 27,778 5,457 5,457 27,778
12 17,959 6,972 6,972 27,778 4,673 4,673 27,778
13 18,856 6,787 6,787 27,778 3,747 3,747 27,778
14 19,799 6,606 6,606 27,778 2,652 2,652 27,778
15 20,789 6,430 6,430 27,778 1,349 1,349 27,778
16 21,829 6,257 6,257 27,778 0 0 0
17 22,920 6,088 6,088 27,778 0 0 0
18 24,066 5,923 5,923 27,778 0 0 0
19 25,270 5,762 5,762 27,778 0 0 0
20 26,533 5,604 5,604 27,778 0 0 0
25 33,864 4,866 4,866 27,778 0 0 0
35 55,160 3,619 3,619 27,778 0 0 0
</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
CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE CONTRACT AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH
BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A CONTRACT WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE CONTRACT AVERAGED 0%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE
MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
43 - PROSPECTUS
<PAGE>
SEPARATE ACCOUNT FIVE
HARTFORD LIFE INSURANCE COMPANY
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO HARTFORD LIFE 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 Hartford Life 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 Hartford Life 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
44 - PROSPECTUS
<PAGE>
This page intentionally left blank.
<PAGE>
SEPARATE ACCOUNT FIVE
HARTFORD LIFE 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 22,367
Cost $ 22,367
Market Value......... $ 22,367 -- -- -- --
North American
Government Securities
Portfolio
Shares 102
Cost $ 1,030
Market Value......... -- $ 1,042 -- -- --
Balanced Portfolio
Shares 248
Cost $ 3,515
Market Value......... -- -- $ 3,723 -- --
Utilities Portfolio
Shares 78
Cost $ 1,022
Market Value......... -- -- -- $ 1,232 --
Dividend and Growth
Portfolio
Shares 5,414
Cost $102,239
Market Value......... -- -- -- -- $ 105,958
Value-Added Market
Portfolio
Shares 66
Cost $ 1,012
Market Value......... -- -- -- -- --
Core-Equity Portfolio
Shares 69
Cost $ 1,006
Market Value......... -- -- -- -- --
American Value
Portfolio
Shares 2,332
Cost $ 43,243
Market Value......... -- -- -- -- --
Global Equity Value
Portfolio
Shares 4,454
Cost $ 57,976
Market Value......... -- -- -- -- --
Developing Growth
Portfolio
Shares 1,040
Cost $ 18,386
Market Value......... -- -- -- -- --
Emerging Market
Portfolio
Shares 82
Cost $ 1,003
Market Value......... -- -- -- -- --
Diversified Income
Portfolio
Shares 856
Cost $ 8,748
Market Value......... -- -- -- -- --
Mid-Cap Growth
Portfolio
Shares 518
Cost $ 5,495
Market Value......... -- -- -- -- --
Due from Hartford Life
Insurance Company..... -- -- -- -- --
Receivable from fund
shares sold........... -- -- -- -- --
------------- ----------- ----------- ----------- -----------
Total Assets........... 22,367 1,042 3,723 1,232 105,958
------------- ----------- ----------- ----------- -----------
LIABILITIES
Due to Hartford Life
Insurance Company..... -- -- -- -- --
Payable for fund shares
purchased............. -- -- -- -- --
------------- ----------- ----------- ----------- -----------
Total Liabilities...... -- -- -- -- --
------------- ----------- ----------- ----------- -----------
Net Assets (variable
life contract
liabilities).......... $ 22,367 $ 1,042 $ 3,723 $ 1,232 $ 105,958
------------- ----------- ----------- ----------- -----------
------------- ----------- ----------- ----------- -----------
Units Owned by
Contractholders....... 21,667 100 332 100 9,493
Unit Values............ $ 1.032342 $10.420600 $11.202964 $12.314200 $11.161390
</TABLE>
The accompanying notes are an integral part of these financial statements.
46 - PROSPECTUS
<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 22,367
Cost $ 22,367
Market Value......... -- -- -- -- -- -- --
North American
Government Securities
Portfolio
Shares 102
Cost $ 1,030
Market Value......... -- -- -- -- -- -- --
Balanced Portfolio
Shares 248
Cost $ 3,515
Market Value......... -- -- -- -- -- -- --
Utilities Portfolio
Shares 78
Cost $ 1,022
Market Value......... -- -- -- -- -- -- --
Dividend and Growth
Portfolio
Shares 5,414
Cost $102,239
Market Value......... -- -- -- -- -- -- --
Value-Added Market
Portfolio
Shares 66
Cost $ 1,012
Market Value......... $ 1,158 -- -- -- -- -- --
Core-Equity Portfolio
Shares 69
Cost $ 1,006
Market Value......... -- $ 1,149 -- -- -- -- --
American Value
Portfolio
Shares 2,332
Cost $ 43,243
Market Value......... -- -- $ 45,925 -- -- -- --
Global Equity Value
Portfolio
Shares 4,454
Cost $ 57,976
Market Value......... -- -- -- $ 57,762 -- -- --
Developing Growth
Portfolio
Shares 1,040
Cost $ 18,386
Market Value......... -- -- -- -- 19,932 -- --
Emerging Market
Portfolio
Shares 82
Cost $ 1,003
Market Value......... -- -- -- -- -- $ 928 --
Diversified Income
Portfolio
Shares 856
Cost $ 8,748
Market Value......... -- -- -- -- -- -- $ 8,807
Mid-Cap Growth
Portfolio
Shares 518
Cost $ 5,495
Market Value......... -- -- -- -- -- -- --
Due from Hartford Life
Insurance Company..... -- -- -- -- -- -- --
Receivable from fund
shares sold........... -- -- -- -- -- -- --
----------- ----------- ------------ ----------- ------------- ------------- -----------
Total Assets........... 1,158 1,149 45,925 57,762 19,932 928 8,807
----------- ----------- ------------ ----------- ------------- ------------- -----------
LIABILITIES
Due to Hartford Life
Insurance Company..... -- -- -- -- -- -- --
Payable for fund shares
purchased............. -- -- -- -- -- -- --
----------- ----------- ------------ ----------- ------------- ------------- -----------
Total Liabilities...... -- -- -- -- -- -- --
----------- ----------- ------------ ----------- ------------- ------------- -----------
Net Assets (variable
life contract
liabilities).......... $ 1,158 $ 1,149 $ 45,925 $ 57,762 $ 19,932 $ 928 $ 8,807
----------- ----------- ------------ ----------- ------------- ------------- -----------
----------- ----------- ------------ ----------- ------------- ------------- -----------
Units Owned by
Contractholders....... 100 100 3,637 5,774 1,656 100 828
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 22,367
Cost $ 22,367
Market Value......... --
North American
Government Securities
Portfolio
Shares 102
Cost $ 1,030
Market Value......... --
Balanced Portfolio
Shares 248
Cost $ 3,515
Market Value......... --
Utilities Portfolio
Shares 78
Cost $ 1,022
Market Value......... --
Dividend and Growth
Portfolio
Shares 5,414
Cost $102,239
Market Value......... --
Value-Added Market
Portfolio
Shares 66
Cost $ 1,012
Market Value......... --
Core-Equity Portfolio
Shares 69
Cost $ 1,006
Market Value......... --
American Value
Portfolio
Shares 2,332
Cost $ 43,243
Market Value......... --
Global Equity Value
Portfolio
Shares 4,454
Cost $ 57,976
Market Value......... --
Developing Growth
Portfolio
Shares 1,040
Cost $ 18,386
Market Value......... --
Emerging Market
Portfolio
Shares 82
Cost $ 1,003
Market Value......... --
Diversified Income
Portfolio
Shares 856
Cost $ 8,748
Market Value......... --
Mid-Cap Growth
Portfolio
Shares 518
Cost $ 5,495
Market Value......... $ 5,906
Due from Hartford Life
Insurance Company..... --
Receivable from fund
shares sold........... --
-----------
Total Assets........... 5,906
-----------
LIABILITIES
Due to Hartford Life
Insurance Company..... --
Payable for fund shares
purchased............. --
-----------
Total Liabilities...... --
-----------
Net Assets (variable
life contract
liabilities).......... $ 5,906
-----------
-----------
Units Owned by
Contractholders....... 499
Unit Values............ $11.843234
</TABLE>
47 - PROSPECTUS
<PAGE>
SEPARATE ACCOUNT FIVE
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION MAY 20, 1997, TO DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NORTH
AMERICAN
GOVERNMENT DIVIDEND AND
MONEY MARKET SECURITIES BALANCED UTILITIES 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.............. $ 950 $30 $ 17 $ 18 $ 729
----- --- ----- ----- ------
Net investment
income................ 950 30 17 18 729
----- --- ----- ----- ------
Capital gains income..... -- -- 3 4 37
----- --- ----- ----- ------
Net realized and
unrealized gain (loss)
on investments:
Net realized gain on
security
transactions.......... -- -- -- -- 49
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 12 208 210 3,719
----- --- ----- ----- ------
Net realized and
unrealized gain
(loss) on
investments......... -- 12 208 210 3,768
----- --- ----- ----- ------
Net increase
(decrease) in net
assets resulting
from operations..... $ 950 $42 $ 228 $232 $ 4,534
----- --- ----- ----- ------
----- --- ----- ----- ------
</TABLE>
* From inception, January 21, 1997 to December 31, 1997.
The accompanying notes are an integral part of these financial statements.
48 - PROSPECTUS
<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>
Investment income:
Dividends.............. $ 10 $ 1 $ 33 $ 111 $ 7 $ 3 $ 348
----- ----- ------ ----- ---------- --- -----
Net investment
income................ 10 1 33 111 7 3 348
----- ----- ------ ----- ---------- --- -----
Capital gains income..... -- -- -- -- -- -- --
----- ----- ------ ----- ---------- --- -----
Net realized and
unrealized gain (loss)
on investments:
Net realized gain on
security
transactions.......... 2 5 22 2 -- -- 2
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- -- 64 58 8 -- --
----- ----- ------ ----- ---------- --- -----
Net realized and
unrealized gain
(loss) on
investments......... 146 143 2,682 (214) 1,546 (75) 59
----- ----- ------ ----- ---------- --- -----
146 143 2,746 (156) 1,554 (75) 59
------- ------- -------- ------ ------- ------- --------
Net increase
(decrease) in net
assets resulting
from operations..... $ 158 $ 149 $ 2,801 $ (43) $1,561 $ (72) $ 409
----- ----- ------ ----- ---------- --- -----
----- ----- ------ ----- ---------- --- -----
<CAPTION>
MID-CAP
GROWTH
PORTFOLIO
SUB-ACCOUNT*
------------
<S> <C>
Investment income:
Dividends.............. $ 23
-----
Net investment
income................ 23
-----
Capital gains income..... --
-----
Net realized and
unrealized gain (loss)
on investments:
Net realized gain on
security
transactions.......... --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ --
-----
Net realized and
unrealized gain
(loss) on
investments......... 411
-----
411
--------
Net increase
(decrease) in net
assets resulting
from operations..... $ 434
-----
-----
</TABLE>
49 - PROSPECTUS
<PAGE>
SEPARATE ACCOUNT FIVE
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
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>
Operations:
Net investment income
(loss)................ $ 950 $ 30 $ 17 $ 18 $ 729
Capital gains income... -- -- 3 4 37
Net realized gain
(loss) on security
transactions.......... -- -- -- -- 49
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 12 208 210 3,719
------------- ----------- --------- ---------- ----------
Net increase (decrease)
in net assets
resulting from
operations............ 950 42 228 232 4,534
------------- ----------- --------- ---------- ----------
Unit transactions:
Purchases.............. 259,950 1,000 1,000 1,000 1,000
Net transfers.......... (237,803) -- 2,500 -- 102,911
Surrenders............. (491) -- (4) -- (607)
Loan withdrawals....... -- -- -- -- (1,647)
Cost of insurance...... (239) -- (1) -- (233)
------------- ----------- --------- ---------- ----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 21,417 1,000 3,495 1,000 101,424
------------- ----------- --------- ---------- ----------
Total increase
(decrease) in net
assets.............. 22,367 1,042 3,723 1,232 105,958
Net Assets:
Beginning of period.... -- -- -- -- --
------------- ----------- --------- ---------- ----------
End of period.......... $ 22,367 $1,042 $3,723 $1,232 $105,958
------------- ----------- --------- ---------- ----------
------------- ----------- --------- ---------- ----------
</TABLE>
* From inception, January 21, 1997 to December 31, 1997.
The accompanying notes are an integral part of these financial statements.
50 - PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
VALUE-ADDED AMERICAN GLOBAL DEVELOPING EMERGING DIVERSIFIED
MARKET CORE-EQUITY VALUE EQUITY 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>
Operations:
Net investment income
(loss)................ $ 10 $ 1 $ 33 111 $ 7 $ 3 $ 348
Capital gains income... 2 5 22 2 -- -- 2
Net realized gain
(loss) on security
transactions.......... -- -- 64 58 8 -- --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 146 143 2,682 (214) 1,546 (75) 59
----------- ----------- ---------- ------------ ------------ ------------ -----------
Net increase (decrease)
in net assets
resulting from
operations............ 158 149 2,801 (43) 1,561 (72) 409
----------- ----------- ---------- ------------ ------------ ------------ -----------
Unit transactions:
Purchases.............. 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Net transfers.......... -- -- 43,968 58,859 17,580 -- 7,487
Surrenders............. -- -- (138) (256) (151) -- --
Loan withdrawals....... -- -- (1,653) (1,700) -- -- (66)
Cost of insurance...... -- -- (53) (98) (58) -- (23)
----------- ----------- ---------- ------------ ------------ ------------ -----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 1,000 1,000 43,124 57,805 18,371 1,000 8,398
----------- ----------- ---------- ------------ ------------ ------------ -----------
Total increase
(decrease) in net
assets.............. 1,158 1,149 45,925 57,762 19,932 928 8,807
Net Assets:
Beginning of period.... -- -- -- -- -- -- --
----------- ----------- ---------- ------------ ------------ ------------ -----------
End of period.......... $1,158 $1,149 $45,925 $57,762 $19,932 $ 928 $8,807
----------- ----------- ---------- ------------ ------------ ------------ -----------
----------- ----------- ---------- ------------ ------------ ------------ -----------
<CAPTION>
MID-CAP
GROWTH
PORTFOLIO
SUB-ACCOUNT*
-----------
<S> <C>
Operations:
Net investment income
(loss)................ $ 23
Capital gains income... --
Net realized gain
(loss) on security
transactions.......... --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 411
-----------
Net increase (decrease)
in net assets
resulting from
operations............ 434
-----------
Unit transactions:
Purchases.............. 1,000
Net transfers.......... 4,498
Surrenders............. --
Loan withdrawals....... (19)
Cost of insurance...... (7)
-----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 5,472
-----------
Total increase
(decrease) in net
assets.............. 5,906
Net Assets:
Beginning of period.... --
-----------
End of period.......... $5,906
-----------
-----------
</TABLE>
51 - PROSPECTUS
<PAGE>
SEPARATE ACCOUNT FIVE
HARTFORD LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION:
Separate Account Five (the Account) is a separate investment account with
Hartford Life Insurance Company (the Company) and is registered with the
Securities and Exchange Commission (SEC) as a unit investment trust under the
Investment Company Act of 1940, as amended. 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.
52 - PROSPECTUS
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To Hartford Life Insurance Company:
We have audited the accompanying Consolidated Balance Sheets of Hartford Life
Insurance Company (the "Company") and subsidiaries as of December 31, 1997 and
1996, and the related Consolidated Statements of Income, Stockholder's Equity
and Cash Flows for each of the three years in the period ended December 31,
1997. These consolidated financial statements and the schedules referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedules based on our
audits.
We conducted our audits in accordance with 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Hartford Life
Insurance Company and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in Index to
Consolidated Financial Statements and Schedules are presented for the purpose of
complying with the Securities and Exchange Commission's rules and are not part
of the basic financial statements. These schedules have been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
January 27, 1998
53 - PROSPECTUS
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1997 1996 1995
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Premiums and other considerations............... $1,637 $1,705 $1,487
Net investment income........................... 1,368 1,397 1,328
Net realized capital gains (losses)............. 4 (213) (11)
------ ------ ------
Total revenues................................ 3,009 2,889 2,804
------ ------ ------
Benefits, claims and expenses
Benefits, claims and claim adjustment
expenses....................................... 1,379 1,535 1,422
Amortization of deferred policy acquisition
costs.......................................... 335 234 199
Dividends to policyholders...................... 240 635 675
Other expenses.................................. 586 427 317
------ ------ ------
Total benefits, claims and expenses........... 2,540 2,831 2,613
------ ------ ------
Income before income tax expense................ 469 58 191
Income tax expense.............................. 167 20 62
------ ------ ------
Net income........................................ $ 302 $ 38 $ 129
------ ------ ------
------ ------ ------
</TABLE>
See Notes to Consolidated Financial Statements.
54 - PROSPECTUS
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS OF DECEMBER
31,
-----------------
1997 1996
------- -------
<S> <C> <C>
(IN MILLIONS,
EXCEPT FOR SHARE
DATA)
Assets
Investments
Fixed maturities, available for sale, at fair
value (amortized cost of $13,885 and
$13,579)....................................... $14,176 $13,624
Equity securities, at fair value................ 180 119
Policy loans, at outstanding balance............ 3,756 3,836
Other investments, at cost...................... 47 56
------- -------
Total investments............................. 18,159 17,635
Cash............................................ 54 43
Premiums receivable and agents' balances........ 18 137
Accrued investment income....................... 330 407
Reinsurance recoverables........................ 6,325 6,259
Deferred policy acquisition costs............... 3,315 2,760
Deferred income tax............................. 348 474
Other assets.................................... 352 357
Separate account assets......................... 69,055 49,690
------- -------
Total assets.................................. $97,956 $77,762
------- -------
------- -------
Liabilities
Future policy benefits.......................... $ 3,270 $ 2,474
Other policyholder funds........................ 21,034 22,134
Other liabilities............................... 2,254 1,572
Separate account liabilities.................... 69,055 49,690
------- -------
Total liabilities............................. 95,613 75,870
------- -------
Stockholder's Equity
Common stock -- 1,000 shares authorized, issued
and outstanding, par value $5,690.............. 6 6
Additional paid in capital...................... 1,045 1,045
Net unrealized capital gains on securities, net
of tax......................................... 179 30
Retained earnings............................... 1,113 811
------- -------
Total stockholder's equity.................... 2,343 1,892
------- -------
Total liabilities and stockholder's equity...... $97,956 $77,762
------- -------
------- -------
</TABLE>
See Notes to Consolidated Financial Statements.
55 - PROSPECTUS
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET UNREALIZED
CAPITAL GAINS
ADDITIONAL (LOSSES) ON TOTAL
COMMON PAID IN SECURITIES, RETAINED STOCKHOLDER'S
STOCK CAPITAL NET OF TAX EARNINGS EQUITY
------ -------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
Balance, December 31, 1994.............. $6 $ 826 $(654) $ 644 $ 822
Net income............................ -- -- -- 129 129
Capital contribution.................. -- 181 -- -- 181
Change in net unrealized capital gains
(losses) on securities, net of tax... -- -- 597 -- 597
--
------ ----- ----------- ------
Balance, December 31, 1995.............. 6 1,007 (57) 773 1,729
Net income............................ -- -- -- 38 38
Capital contribution.................. -- 38 -- -- 38
Change in net unrealized capital gains
(losses) on securities, net of tax... -- -- 87 -- 87
--
------ ----- ----------- ------
Balance, December 31, 1996.............. 6 1,045 30 811 1,892
Net income............................ -- -- -- 302 302
Change in net unrealized capital gains
(losses) on securities, net of tax... -- -- 149 -- 149
--
------ ----- ----------- ------
Balance, December 31, 1997.............. $6 $1,045 $179 $1,113 $2,343
--
--
------ ----- ----------- ------
------ ----- ----------- ------
</TABLE>
See Notes to Consolidated Financial Statements.
56 - PROSPECTUS
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
------------------------------
1997 1996 1995
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Operating Activities
Net income............................ $ 302 $ 38 $ 129
Adjustments to reconcile net income to
cash provided by operating activities
Depreciation and amortization......... 8 14 21
Net realized capital (gains) losses... (4) 213 11
Decrease (increase) in deferred income
taxes................................ 40 (102) (172)
Increase in deferred policy
acquisition costs.................... (555) (572) (379)
Decrease (increase) in premiums
receivable and agents' balances...... 119 10 (81)
Decrease (increase) in accrued
investment income.................... 77 (13) (16)
Decrease (increase) in other assets... 52 (132) (177)
(Increase) decrease in reinsurance
recoverables......................... (416) 179 (35)
Increase (decrease) in liabilities for
future policy benefits............... 796 (92) 483
Increase in other liabilities......... 379 477 281
-------- -------- --------
Cash provided by operating
activities......................... 798 20 65
-------- -------- --------
Investing Activities
Purchases of fixed maturity
investments.......................... (6,231) (5,747) (6,228)
Sales of fixed maturity investments... 4,232 3,459 4,845
Maturities and principal paydowns of
fixed maturity investments........... 2,329 2,693 1,741
Net sales (purchases) of other
investments.......................... 24 (107) (871)
Net (purchases) sales of short-term
investments.......................... (638) 84 (24)
-------- -------- --------
Cash (used for) provided by
investing activities............... (284) 382 (537)
-------- -------- --------
Financing Activities
Capital contribution.................. -- 38 --
Net (disbursements for) receipts from
investment and universal life-type
contracts (charged against) credited
to policyholder accounts............. (503) (443) 498
-------- -------- --------
Cash (used for) provided by
financing activities............... (503) (405) 498
-------- -------- --------
Increase (decrease) in cash........... 11 (3) 26
Cash -- beginning of year............. 43 46 20
-------- -------- --------
Cash -- end of year................... $ 54 $ 43 $ 46
-------- -------- --------
-------- -------- --------
Supplemental Disclosure of Cash Flow
Information:
Net Cash Paid During the Year for:
Income taxes.......................... $ 9 $ 189 $ 162
Noncash Financing Activities:
Capital contribution.................. $ -- $ -- $ 181
-------- -------- --------
-------- -------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
57 - PROSPECTUS
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN MILLIONS EXCEPT PER SHARE DATA UNLESS OTHERWISE STATED)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
These consolidated financial statements include Hartford Life Insurance Company
and its wholly-owned subsidiaries (the "Company"), ITT Hartford Life and Annuity
Insurance Company ("ILA") and ITT Hartford International Life Reassurance
Corporation ("HLRe"), formerly American Skandia Life Reinsurance Corporation.
The Company is a wholly-owned subsidiary of Hartford Life and Accident Insurance
Company ("HLA"), a wholly-owned subsidiary of Hartford Life, Inc. ("Hartford
Life"). Hartford Life is a direct subsidiary of Hartford Accident and Indemnity
Company ("HA&I"), an indirect subsidiary of The Hartford Financial Services
Group, Inc. ("The Hartford"). On February 10, 1997, Hartford Life filed a
registration statement, as amended, with the Securities and Exchange Commission
relating to an Initial Public Offering ("IPO") of the Hartford Life's Class A
Common Stock. Pursuant to the IPO on May 22, 1997, Hartford Life sold to the
public 26 million shares at $28.25 per share and received net proceeds of $687.
Of the proceeds, $527 was used to retire debt related to Hartford Life's
outstanding promissory notes and line of credit with the remaining $160
contributed by Hartford Life to HLA to support growth in its core businesses.
On December 19, 1995, ITT Industries, Inc. (formerly ITT Corporation) ("ITT")
distributed all the outstanding shares of capital stock of The Hartford to ITT
stockholders of record on such date. As a result, The Hartford became an
independent, publicly traded company.
Along with its parent, the Company is a leading insurance and financial services
company which provides (a) investment products such as individual variable
annuities and fixed market value adjusted annuities, deferred compensation and
retirement plan services and mutual funds for savings and retirement needs; (b)
life insurance for income protection and estate planning; and (c) employee
benefits products such as group life and group disability insurance and
corporate owned life insurance.
2. SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
These consolidated financial statements present the financial position, results
of operations and cash flows of the Company. All material intercompany
transactions and balances between the Company, its subsidiaries and affiliates
have been eliminated. The consolidated financial statements are prepared on the
basis of generally accepted accounting principles which differ materially from
the statutory accounting practices prescribed by various insurance regulatory
authorities.
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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The most significant estimates
include those used in determining deferred policy acquisition costs and the
liability for future policy benefits and other policyholder funds. Although some
variability is inherent in these estimates, management believes the amounts
provided are adequate.
Certain reclassifications have been made to prior year financial information to
conform to the current year presentation.
(B) CHANGES IN ACCOUNTING PRINCIPLES
In December 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") No. 97-3 "Accounting by Insurance
and Other Enterprises for Insurance Related Assessments". This SOP provides
guidance on accounting by insurance and other enterprises for assessments
related to insurance activities. Specifically, the SOP provides guidance on when
a guaranty fund or other assessment should be recognized, how to measure the
liability, and what information should be disclosed. This SOP will be effective
for fiscal years beginning after December 15, 1998. Adoption of SOP 97-3 is not
expected to have a material impact on the Company's financial condition or
results of operations.
On November 14, 1996, the Emerging Issues Task Force ("EITF") reached a
consensus on Issue No. 96-12, "Recognition of Interest Income and Balance Sheet
Classification of Structured Notes". This EITF issue requires companies to
record income on certain structured securities on a retrospective interest
method. The Company adopted EITF No. 96-12 for structured securities acquired
after November 14, 1996. Adoption of EITF No. 96-12 did not have a material
effect on the Company's financial condition or results of operations.
In June 1996, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of Liabilities" which is
effective for transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996. This statement established
criteria for determining whether transferred assets should be accounted for as
sales or secured borrowings. Subsequently, in December 1996, the FASB issued
SFAS No. 127, "Deferral of Effective Date of Certain Provisions of FASB
Statement No. 125", which defers the effective date of certain provisions of
SFAS No. 125 for one year. Adoption of SFAS No. 125 is not expected to have a
material effect on the Company's financial condition or results of operations.
Effective January 1, 1996, the Company adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for
58 - PROSPECTUS
<PAGE>
Long-Lived Assets to be Disposed Of". This statement establishes accounting
standards for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used and for
long-lived assets and certain identifiable intangibles to be disposed of.
Adoption of SFAS No. 121 did not have a material effect on the Company's
financial condition or results of operations.
The Company's cash flows were not impacted by these changes in accounting
principles.
(C) REVENUE RECOGNITION
Revenues for universal life-type policies and investment products consist of
policy charges for the cost of insurance, policy administration and surrender
charges assessed to policy account balances and are recognized in the period in
which services are provided. Premiums for traditional life insurance and
disability policies are recognized as revenues when they are due from
policyholders.
(D) FUTURE POLICY BENEFITS AND OTHER POLICYHOLDER FUNDS
Liabilities for future policy benefits are computed by the net level premium
method using interest rate assumptions varying from 3% to 11% and withdrawal and
mortality assumptions appropriate at the time the policies were issued. Health
reserves, which are the result of sales of group long-term and short-term
disability, stop loss, Medicare Supplement and individual disability products,
are stated at amounts determined by estimates on individual cases and estimates
of unreported claims based on past experience. Liabilities for universal life-
type and investment contracts are stated at policyholder account values before
surrender charges.
(E) POLICYHOLDER REALIZED CAPITAL GAINS AND LOSSES
Realized capital gains and losses on security transactions associated with the
Company's immediate participation guaranteed contracts are excluded from
revenues and deferred over the expected maturity of the securities, since under
the terms of the contracts the realized gains and losses will be credited to
policyholders in future years as they are entitled to receive them.
(F) INVESTMENTS
The Company's investments in fixed maturities include bonds and commercial paper
which are considered "available for sale" and accordingly are carried at fair
value with the after-tax difference from cost reflected as a component of
Stockholder's Equity designated "Net unrealized capital gains (losses) on
securities, net of tax". Equity securities, which include common and non-
redeemable preferred stocks, are carried at fair values with the after-tax
difference from cost reflected in Stockholder's Equity. Policy loans are carried
at outstanding balance which approximates fair value. Net realized capital gains
and losses, after deducting pension policyholders' share, are reported as a
component of revenue and are determined on a specific identification basis.
The Company's accounting policy for impairment requires recognition of an other
than temporary impairment charge on a security if it is determined that the
Company is unable to recover all amounts due under the contractual obligations
of the security. In addition, for securities expected to be sold, an other than
temporary impairment charge is recognized if the Company does not expect the
fair value of a security to recover to cost or amortized cost prior to the
expected date of sale. Once an impairment charge has been recorded, the Company
then continues to review the other than temporarily impaired securities for
appropriate valuation on an on-going basis.
During 1996, it was determined that certain individual securities within the
investment portfolio supporting the Company's block of guaranteed rate contract
business written prior to 1995 ("Closed Book GRC") could not recover to
amortized cost prior to sale. Therefore, an other than temporary impairment loss
of $88, after-tax, was recorded.
(G) DERIVATIVE INSTRUMENTS
The Company uses a variety of derivative instruments including swaps, caps,
floors, forwards and exchange traded financial futures and options as part of an
overall risk management strategy. These instruments are used as a means of
hedging exposure to price, foreign currency and/or interest rate risk on planned
investment purchases or existing assets and liabilities. The Company does not
hold or issue derivative instruments for trading purposes. The Company's
accounting for derivative instruments used to manage risk is in accordance with
the concepts established in SFAS No. 80, "Accounting for Futures Contracts",
SFAS No. 52, "Foreign Currency Translation", AICPA SOP 86-2, "Accounting for
Options" and various EITF pronouncements. Written options are used, in all cases
in conjunction with other assets and derivatives, as part of the Company's asset
and liability management strategy. Derivative instruments are carried at values
consistent with the asset or liability being hedged. Derivative instruments used
to hedge fixed maturities or equity securities are carried at fair value with
the after-tax difference from cost reflected in Stockholder's Equity. Derivative
instruments used to hedge other invested assets or liabilities are carried at
cost.
Derivative instruments must be designated at inception as a hedge and measured
for effectiveness both at inception and on an on-going basis. The Company's
minimum correlation threshold for hedge designation is 80%. If correlation,
which is assessed monthly and measured based on a rolling three month average,
falls below 80%, hedge accounting will be terminated. Derivative instruments
used to create a synthetic asset must meet synthetic accounting criteria
including designation at inception and consistency of terms between the
synthetic and the instrument being replicated. Consistent with industry
practice, synthetic instruments are accounted for like the financial instrument
it is intended to replicate. Derivative instruments which fail to meet risk
management criteria, subsequent to acquisition,
59 - PROSPECTUS
<PAGE>
are marked to market with the impact reflected in the Consolidated Statements of
Income.
Gains or losses on financial futures contracts entered into in anticipation of
the investment of future receipt of product cash flows are deferred and, at the
time of the ultimate investment purchase, reflected as an adjustment to the cost
basis of the purchased asset. Gains or losses on futures used in invested asset
risk management are deferred and adjusted into the cost basis of the hedged
asset when the contract futures are closed, except for futures used in duration
hedging which are deferred and basis adjusted on a quarterly basis. The basis
adjustments are amortized into net investment income over the remaining asset
life.
Open forward commitment contracts are marked to market through Stockholder's
Equity. Such contracts are accounted for at settlement by recording the purchase
of the specified securities at the previously committed price. Gains or losses
resulting from the termination of forward commitment contracts before the
delivery of the securities are recognized immediately in the Consolidated
Statements of Income as a component of net investment income.
The cost of options entered into as part of a risk management strategy are basis
adjusted to the underlying asset or liability and amortized over the remaining
life of the option. Gains or losses on expiration or termination are adjusted
into the basis of the underlying asset or liability and amortized over the
remaining asset life.
Interest rate swaps involve the periodic exchange of payments without the
exchange of underlying principal or notional amounts. Net receipts or payments
are accrued and recognized over the life of the swap agreement as an adjustment
to investment income. Should the swap be terminated, the gain or loss is
adjusted into the basis of the asset or liability and amortized over the
remaining life. Should the hedged asset be sold or liability terminated without
terminating the swap position, any swap gains or losses are immediately
recognized in net investment income. Interest rate swaps purchased in
anticipation of an asset purchase ("anticipatory transaction") are recognized
consistent with the underlying asset components such that the settlement
component is recognized in the Consolidated Statements of Income while the
change in market value is recognized as an unrealized capital gain or loss.
Premiums paid on purchased floor or cap agreements and the premium received on
issued cap or floor agreements (used for risk management) are adjusted into the
basis of the applicable asset and amortized over the asset life. Gains or losses
on termination of such positions are adjusted into the basis of the asset or
liability and amortized over the remaining asset life. Net payments are
recognized as an adjustment to income or basis adjusted and amortized depending
on the specific hedge strategy.
Forward exchange contracts and foreign currency swaps are accounted for in
accordance with SFAS No. 52. Changes in the spot rate of instruments designated
as hedges of the net investment in a foreign subsidiary are reflected in the
cumulative translation adjustments component of Stockholder's Equity. Cash flows
from futures, options, and swaps, accounted for as hedges, are included with the
cash flows of the item being hedged.
(H) SEPARATE ACCOUNTS
The Company maintains separate account assets and liabilities which are reported
at fair value. Separate account assets are segregated from other investments,
and investment income and gains and losses accrue directly to the policyholders.
Separate accounts reflect two categories of risk assumption: non-guaranteed
separate accounts, wherein the policyholder assumes the investment risk, and
guaranteed separate account assets, wherein the Company contractually guarantees
either a minimum return or account value to the policyholder.
(I) DEFERRED POLICY ACQUISITION COSTS
Policy acquisition costs, which include commissions and certain underwriting
expenses associated with acquiring business, are deferred and amortized over the
estimated lives of the contracts, generally 20 years. Generally, acquisition
costs are deferred and amortized using the retrospective deposit method. Under
the retrospective deposit method, acquisition costs are amortized in proportion
to the present value of expected gross profits from surrender charges,
investment, mortality and expense margins. Actual gross profits can vary from
management's estimates resulting in increases or decreases in the rate of
amortization. Management periodically updates these estimates, when appropriate,
and evaluates the recoverability of the deferred acquisition cost asset. When
appropriate, management revises its assumptions on the estimated gross profits
of these contracts and the cumulative amortization for the books of business are
reestimated and adjusted by a cumulative charge or credit to income.
The Company's other expenses include the following:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Commissions.......................... $ 976 $ 848 $ 619
Deferred acquisition costs........... (862) (823) (618)
Other................................ 472 402 316
--------- --------- ---------
Total other expenses............. $ 586 $ 427 $ 317
--------- --------- ---------
--------- --------- ---------
</TABLE>
(J) DIVIDENDS TO POLICYHOLDERS
Certain life insurance policies contain dividend payment provisions that enable
the policyholder to participate in the earnings of the life insurance
subsidiaries of the Company. The participating insurance in force accounted for
55%, 44%, and 41% in 1997, 1996, and 1995, respectively, of total insurance in
force.
60 - PROSPECTUS
<PAGE>
3. INITIAL PUBLIC OFFERING
On February 10, 1997, Hartford Life filed a registration statement, as amended,
with the Securities and Exchange Commission, relating to the IPO of Hartford
Life's Class A Common Stock. Pursuant to the IPO on May 22, 1997, Hartford Life
sold to the public 26 million shares at $28.25 per share and received proceeds,
net of offering expenses, of $687. Of the proceeds, $527 was used to retire debt
related to Hartford Life's promissory notes outstanding and line of credit. The
remaining $160 was contributed by Hartford Life to HLA to support growth in its
core businesses. The 26 million shares sold in the Offering represent
approximately 18.6% of the equity ownership in Hartford Life and approximately
4.4% of the combined voting power of Hartford Life's Class A and Class B Common
Stock. The Hartford owns all of the 114 million outstanding shares of Class B
Common Stock of Hartford Life, representing approximately 81.4% of the equity
ownership in Hartford Life and approximately 95.6% of the combined voting power
of Hartford Life's Class A and Class B Common Stock. Holders of Class A Common
Stock generally have identical rights to the holders of Class B Common Stock
except that the holders of Class A Common Stock are entitled to one vote per
share while holders of Class B Common Stock are entitled to five votes per share
on all matters submitted to a vote of Hartford Life's stockholders.
4. INVESTMENTS AND DERIVATIVE INSTRUMENTS
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Interest income from fixed
maturities....................... $ 932 $ 918 $ 996
Interest income from policy
loans............................ 425 477 342
Income from other investments..... 26 15 1
--------- --------- ---------
Gross investment income........... 1,383 1,410 1,339
Less: Investment expenses......... 15 13 11
--------- --------- ---------
Net investment income............. $ 1,368 $ 1,397 $ 1,328
--------- --------- ---------
--------- --------- ---------
</TABLE>
(B) COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------------------
1997 1996 1995
----- --------- -----
<S> <C> <C> <C>
Fixed maturities...................... $ (7) $ (201) $ 23
Equity securities..................... 12 2 (6)
Real estate and other................. (1) (4) (25)
Less: Increase in liability to
policyholders for realized capital
gains................................ -- (10) (3)
--
--------- ---
Net realized capital gains (losses) $ 4 $ (213) $ (11)
--
--
--------- ---
--------- ---
</TABLE>
(C) NET UNREALIZED CAPITAL GAINS (LOSSES) ON EQUITY SECURITIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Gross unrealized capital gains......... $ 14 $ 13 $ 4
Gross unrealized capital losses........ -- (1) (2)
--
--- ---
Net unrealized capital gains........... 14 12 2
Deferred income tax expense............ 5 4 1
--
--- ---
Net unrealized capital gains, net of
tax................................... 9 8 1
Balance -- beginning of year........... 8 1 (6)
--
--- ---
Net change in unrealized capital gains
(losses) on equity securities......... $ 1 $ 7 $ 7
--
--
--- ---
--- ---
</TABLE>
(D) NET UNREALIZED CAPITAL GAINS (LOSSES) ON FIXED MATURITIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Gross unrealized capital gains................................... $371 $ 386 $ 529
Gross unrealized capital losses.................................. (80) (341) (569)
Unrealized capital (gains) losses credited to policyholders...... (30) (11) (52)
----- ----- -----
Net unrealized capital gains (losses)............................ 261 34 (92)
Deferred income tax expense (benefit)............................ 91 12 (34)
----- ----- -----
Net unrealized capital gains (losses), net of tax................ 170 22 (58)
Balance -- beginning of year..................................... 22 (58) (648)
----- ----- -----
Net change in unrealized capital gains (losses) on fixed
maturities...................................................... $148 $ 80 $ 590
----- ----- -----
----- ----- -----
</TABLE>
61 - PROSPECTUS
<PAGE>
(E) FIXED MATURITY INVESTMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U.S. gov't and gov't agencies and authorities
(guaranteed and sponsored)...................................... $ 217 $ 3 $ (1) $ 219
U.S. gov't and gov't agencies and authorities
(guaranteed and sponsored) -- asset backed...................... 1,175 64 (35) 1,204
States, municipalities and political subdivisions................ 211 7 (1) 217
International governments........................................ 376 20 (3) 393
Public utilities................................................. 871 26 (3) 894
All other corporate including international...................... 5,033 200 (25) 5,208
All other corporate -- asset backed.............................. 4,091 41 (8) 4,124
Short-term investments........................................... 1,318 -- -- 1,318
Certificates of deposit.......................................... 593 10 (4) 599
---------- ----- --- ----------
Total fixed maturities....................................... $13,885 $371 $(80) $14,176
---------- ----- --- ----------
---------- ----- --- ----------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U.S. gov't and gov't agencies and authorities
(guaranteed and sponsored)...................................... $ 166 $ 12 $ (3) $ 175
U.S. gov't and gov't agencies and authorities
(guaranteed and sponsored) -- asset backed...................... 1,970 161 (128) 2,003
States, municipalities and political subdivisions................ 373 6 (11) 368
International governments........................................ 281 12 (4) 289
Public utilities................................................. 877 12 (8) 881
All other corporate including international...................... 4,656 120 (107) 4,669
All other corporate -- asset backed.............................. 3,601 49 (59) 3,591
Short-term investments........................................... 1,655 14 (21) 1,648
---------- ----- ----- ----------
Total fixed maturities....................................... $13,579 $386 $(341) $13,624
---------- ----- ----- ----------
---------- ----- ----- ----------
</TABLE>
The amortized cost and estimated fair value of fixed maturity investments at
December 31, 1997 by estimated maturity year are shown below. Expected
maturities differ from contractual maturities due to call or prepayment
provisions. Asset backed securities, including MBS and CMO's, are distributed to
maturity year based on the Company's estimates of the rate of future prepayments
of principal over the remaining lives of the securities. These estimates are
developed using prepayment speeds provided in broker consensus data. Such
estimates are derived from prepayment speeds experienced at the interest rate
levels projected for the applicable underlying collateral and can be expected to
vary from actual experience.
MATURITY
<TABLE>
<CAPTION>
AMORTIZED
COST FAIR VALUE
----------- -----------
<S> <C> <C>
One year or less...................... $ 2,838 $ 2,867
Over one year through five years...... 5,528 5,595
Over five years through ten years..... 3,094 3,156
Over ten years........................ 2,425 2,558
----------- -----------
Total............................. $ 13,885 $ 14,176
----------- -----------
----------- -----------
</TABLE>
Sales of fixed maturities, excluding short-term fixed maturities, for the years
ended December 31, 1997, 1996 and 1995 resulted in proceeds of $4.2 billion,
$3.5 billion and $4.8 billion, gross realized capital gains of $169, $87 and
$91, gross realized capital losses (including writedowns) of $176, $298 and $72,
respectively. Sales of equity security investments for the years ended December
31, 1997, 1996 and 1995 resulted in proceeds of $132, $74 and $64, gross
realized capital gains of $12, $2 and $28 and gross realized capital losses of
$0, $0 and $59, respectively.
(F) CONCENTRATION OF CREDIT RISK
Excluding investments in U.S. government and agencies, the Company has not
invested in the securities of a single issuer in amounts greater than 10% of
stockholder's equity at December 31, 1997.
(G) DERIVATIVE INSTRUMENTS
The Company utilizes a variety of derivative instruments, including swaps, caps,
floors, forwards and exchange traded futures and options, in accordance with
Company policy and in order to achieve one of three Company approved objectives:
to hedge risk arising from interest rate, price or currency exchange rate
volatility; to manage liquidity; or, to control transactions costs. The Company
utilizes derivative instruments to manage market risk through four principal
risk management strategies: hedging anticipated transactions, hedging liability
instruments,
62 - PROSPECTUS
<PAGE>
hedging invested assets and hedging portfolios of assets and/or liabilities. The
Company does not trade in these instruments for the express purpose of earning
trading profits.
The Company maintains a derivatives counterparty exposure policy which
establishes market-based credit limits, favors long-term financial stability and
creditworthiness, and typically requires credit enhancement/credit risk reducing
agreements. Credit risk is measured as the amount owed to the Company based on
current market conditions and potential payment obligations between the Company
and its counterparties. Credit exposures are quantified weekly and netted, and
collateral is pledged to or held by the Company to the extent the current value
of derivatives exceed exposure policy thresholds.
The Company's derivative program is monitored by an internal compliance unit and
is reviewed by senior management and Hartford Life's Finance Committee. Notional
amounts, which represent the basis upon which pay or receive amounts are
calculated and are not reflective of credit risk, pertaining to derivative
financial instruments (excluding the Company's guaranteed separate account
derivative investments), totaled $6.5 billion and $9.9 billion ($4.6 billion and
$7.4 billion related to the Company's investments, $1.9 billion and $2.5 billion
on the Company's liabilities) at December 31, 1997 and 1996, respectively.
The table below provides a summary of derivative instruments held by the Company
at December 31, 1997 and 1996, segregated by major investment and liability
category:
<TABLE>
<CAPTION>
1997 -- AMOUNT HEDGED (NOTIONAL AMOUNTS)
----------------------------------------------------------------------------------
PURCHASED
CAPS, FOREIGN
TOTAL ISSUED FLOORS INTEREST CURRENCY TOTAL
CARRYING CAPS & AND FUTURES RATE SWAPS NOTIONAL
ASSETS HEDGED VALUE FLOORS OPTIONS (2) SWAPS (3) AMOUNT
- ----------------------------------- -------- -------- ---------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset backed securities (excluding
inverse floaters and
anticipatory)..................... $ 5,253 $ 500 $ 1,404 $ 28 $ 221 $-- $ 2,153
Inverse floaters (1)............... 75 47 80 -- 25 -- 152
Anticipatory (4)................... -- -- -- -- -- -- --
Other bonds and notes.............. 7,531 462 460 22 1,258 91 2,293
Short-term investments............. 1,317 -- -- -- -- -- --
-------- -------- ---------- --- ---------- --- ----------
Total fixed maturities......... 14,176 1,009 1,944 50 1,504 91 4,598
Equity securities, policy loans and
other investments................. 3,983 -- -- -- -- -- --
-------- -------- ---------- --- ---------- --- ----------
Total investments.............. $18,159 $ 1,009 $ 1,944 $ 50 $ 1,504 $91 $ 4,598
Long term debt................. -- -- -- -- -- -- --
Other policy claims............ -- 10 150 -- 1,747 -- 1,907
-------- -------- ---------- --- ---------- --- ----------
Total derivatives -- notional
value........................... $ -- $ 1,019 $ 2,094 $ 50 $ 3,251 $91 $ 6,505
-------- -------- ---------- --- ---------- --- ----------
Total derivatives -- fair value.... $ -- $ (8) $ 23 $ -- $ 19 $(6) $ 28
-------- -------- ---------- --- ---------- --- ----------
-------- -------- ---------- --- ---------- --- ----------
</TABLE>
<TABLE>
<CAPTION>
1996 --AMOUNT HEDGED (NOTIONAL AMOUNTS)
--------------------------------------------------------------------------
FOREIGN
TOTAL ISSUED PURCHASED INTEREST CURRENCY TOTAL
CARRYING CAPS & CAPS, FLOORS RATE SWAPS NOTIONAL
ASSETS HEDGED VALUE FLOORS AND OPTIONS FUTURES (2) SWAPS (3) AMOUNT
- ----------------------------------- -------- ------- ------------ ----------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset backed securities (excluding
inverse floaters and
anticipatory)..................... $ 5,242 $ 500 $ 2,454 $ -- $ 941 $ -- $3,895
Inverse floaters (1)............... 352 98 856 -- 346 -- 1,300
Anticipatory (4)................... -- -- -- 132 -- -- 132
Other bonds and notes.............. 7,369 425 440 5 1,079 125 2,074
Short-term investments............. 661 -- -- -- -- -- --
-------- ------- ------ ----- --------- -------- -------
Total fixed maturities......... 13,624 1,023 3,750 137 2,366 125 7,401
Equity securities, policy loans and
other investments................. 4,011 -- -- -- 19 -- 19
-------- ------- ------ ----- --------- -------- -------
Total investments.............. $17,635 $1,023 $ 3,750 $ 137 $ 2,385 $ 125 $7,420
Long term debt................. -- -- -- -- -- -- --
Other policy claims............ -- 10 150 -- 2,351 -- 2,511
-------- ------- ------ ----- --------- -------- -------
Total derivatives -- notional
value......................... $ -- $1,033 $ 3,900 $ 137 $ 4,736 $ 125 $9,931
-------- ------- ------ ----- --------- -------- -------
Total derivatives -- fair
value......................... $ -- $ (10 ) $ 38 $ -- $ 2 $ (9 ) $ 21
-------- ------- ------ ----- --------- -------- -------
-------- ------- ------ ----- --------- -------- -------
</TABLE>
- ------------------------
(1) Inverse floaters are variations of collateralized mortgage obligations
("CMO's") for which the coupon rates move inversely with an index rate such as
the London interbank offered rate ("LIBOR"). The risk to principal is considered
negligible as the underlying collateral for the securities is guaranteed or
sponsored by government agencies. To address the volatility risk created by the
coupon variability, the Company uses a variety of derivative instruments,
primarily interest rate swaps, caps and floors.
63 - PROSPECTUS
<PAGE>
(2) As of December 31, 1997 and 1996, over 44% and 39% , respectively, of
the notional futures contracts expire within one year.
(3) As of December 31, 1997 and 1996, over 16% and 42%, respectively, of
foreign currency swaps expire within one year; the balance matures over the
succeeding 9 years.
(4) Deferred gains and losses on anticipatory transactions are included in
the carrying value of fixed maturities in the Consolidated Balance Sheets. At
the time of the ultimate purchase, they are reflected as a basis adjustment to
the purchased asset. At December 31, 1997, the Company had $0 deferred gains and
losses. At December 31, 1996, the Company had $0.9 in net deferred gains for
futures, interest rate swaps and purchased options of which $2.0 was basis
adjusted in 1997.
The following is a reconciliation of notional amounts by derivative type and
strategy as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 MATURITIES/ DECEMBER 31, 1997
NOTIONAL AMOUNT ADDITIONS TERMINATIONS (1) NOTIONAL AMOUNT
----------------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
BY DERIVATIVE TYPE
Caps......................................... $1,755 $ 14 $ 530 $1,239
Floors....................................... 3,168 28 1,332 1,864
Swaps/Forwards............................... 4,861 941 2,460 3,342
Futures...................................... 137 131 218 50
Options...................................... 10 -- -- 10
------ -------- ------ ------
Total.................................... $9,931 $1,114 $4,540 $6,505
------ -------- ------ ------
BY STRATEGY
Liability.................................... $2,511 $ 191 $ 795 $1,907
Anticipatory................................. 132 4 136 --
Asset........................................ 2,112 739 1,046 1,805
Portfolio.................................... 5,176 180 2,563 2,793
------ -------- ------ ------
Total.................................... $9,931 $1,114 $4,540 $6,505
------ -------- ------ ------
------ -------- ------ ------
</TABLE>
- ------------------------
(1) During 1997, the Company had no significant gains or losses on terminations
of hedge positions using derivative financial instruments.
64 - PROSPECTUS
<PAGE>
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 "Disclosure about Fair Value
of Financial Instruments" requires disclosure of fair value information of
financial instruments. For certain financial instruments where quoted market
prices are not available, other independent valuation techniques and assumptions
are used. Because considerable judgment is used, these estimates are not
necessarily indicative of amounts that could be realized in a current market
exchange. SFAS No. 107 excludes certain financial instruments from disclosure,
including insurance contracts.
For cash, short-term investments, accounts receivable, policy loans, mortgage
loans and other liabilities, carrying amounts on the Consolidated Balance Sheets
approximate fair value.
Fair value for fixed maturities and marketable equity securities are based upon
quoted market prices. Fair value for securities that are not publicly traded are
analytically determined. These amounts are disclosed in Note 4 of Notes to
Consolidated Financial Statements.
The fair value of derivative financial instruments, including swaps, caps,
floors, futures, options and forward commitments, is determined using a pricing
model which is validated through quarterly comparison to dealer quoted prices.
Amounts are disclosed in Note 4 of Notes to Consolidated Financial Statements.
Fair value for partnerships and trusts are based on external market valuations
from partnership and trust management.
Other policy claims and benefits payable fair value information is determined by
estimating future cash flows, discounted at the current market rate.
The carrying amount and fair values of the Company's financial instruments at
December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------ ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- ------- --------- -------
<S> <C> <C> <C> <C>
ASSETS
Fixed maturities..................................... $14,176 $14,176 $13,624 $13,624
Equity securities.................................... 180 180 119 119
Policy loans......................................... 3,756 3,756 3,836 3,836
Mortgage loans....................................... -- -- 2 2
Investments in partnerships, trusts and other........ 47 91 54 104
LIABILITIES
Other policy benefits................................ $11,769 $11,755 $11,707 $11,469
</TABLE>
6. SEPARATE ACCOUNTS
The Company maintained separate account assets and liabilities totaling $69.1
billion and $49.7 billion at December 31, 1997 and 1996, respectively, which are
reported at fair value. Separate account assets are segregated from other
investments and net investment income and net realized capital gains and losses
accrue directly to the policyholder. Separate accounts reflect two categories of
risk assumption: non-guaranteed separate accounts totaling $58.6 billion and
$39.4 billion at December 31, 1997 and 1996, respectively, wherein the
policyholder assumes the investment risk, and guaranteed separate accounts
totaling $10.5 and $10.3 billion at December 31, 1997 and 1996, respectively,
wherein the Company contractually guarantees either a minimum return or account
value to the policyholder. Included in the non-guaranteed category were policy
loans totaling $1.9 billion and $2.0 billion at December 31, 1997 and 1996,
respectively. Net investment income (including net realized capital gains and
losses) and interest credited to policyholders on separate account assets are
not reflected in the Consolidated Statements of Income.
Separate account management fees were $699, $538 and $387 in 1997, 1996 and
1995, respectively. The guaranteed separate accounts include fixed market value
adjusted individual annuity and modified guaranteed life insurance. The average
credited interest rate on these contracts was 6.52% at December 31, 1997. The
assets that support these liabilities were comprised of $10.2 billion in fixed
maturities as of December 31, 1997. The portfolios are segregated from other
investments and are managed to minimize liquidity and interest rate risk. In
order to minimize the risk of disintermediation associated with early
withdrawals, fixed MVA annuity and modified guaranteed life insurance contracts
carry a graded surrender charge as well as a market value adjustment. Additional
investment risk is hedged using a variety of derivatives which totaled $119 in
carrying value and $3.0 billion in notional amounts as of December 31, 1997.
7. INCOME TAX
Hartford Life and The Hartford have entered into a tax sharing agreement under
which each member in the consolidated U.S. Federal income tax return will make
payments between them such that, with respect to any period, the amount of taxes
to be paid by the Company, subject to certain adjustments, generally will be
determined as though the Company were filing separate Federal, state and local
income tax returns.
65 - PROSPECTUS
<PAGE>
As long as The Hartford continues to beneficially own, directly or indirectly,
at least 80% of the combined voting power and 80% of the value of the
outstanding capital stock of Hartford Life, the Company will be included for
Federal income tax purposes in the affiliated group of which The Hartford is the
common parent. To the extent allowed by law, it is the 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. The Company's effective tax rate was 36%, 35% and 32% in
1997, 1996 and 1995, respectively.
Income tax expense is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------
1997 1996 1995
---- ------ ------
<S> <C> <C> <C>
Current...................................... $119 $ 122 $ 211
Deferred..................................... 48 (102) (149)
---- ------ ------
Income tax expense......................... $167 $ 20 $ 62
---- ------ ------
---- ------ ------
</TABLE>
A reconciliation of the tax provision at the U.S. Federal statutory rate to the
provision for income taxes is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Tax provision at the U.S. Federal
statutory rate........................ $ 164 $ 20 $ 67
Tax-exempt income...................... -- -- (3)
Foreign tax credit..................... -- -- (4)
Other.................................. 3 -- 2
----- --- ---
Total................................ $ 167 $ 20 $ 62
----- --- ---
----- --- ---
</TABLE>
Deferred tax assets include the following at December 31:
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Tax return deferred acquisition costs......... $ 639 $ 514
Financial statement deferred acquisition costs
and reserves................................. (366) (242)
Employee benefits............................. 5 8
Net unrealized capital gains on securities.... (96) (16)
Investments and other......................... 166 210
----- -----
Total....................................... $ 348 $ 474
----- -----
----- -----
</TABLE>
Income taxes paid were $9, $189 and $162 in 1997, 1996 and 1995, respectively.
The Company had a current tax payment of $27 due to The Hartford at December 31,
1997 and a tax refund due from The Hartford of $72 at December 31, 1996.
Prior to the Tax Reform Act of 1984, the Life Insurance Company Income Tax Act
of 1959 permitted the deferral from taxation of a portion of statutory income
under certain circumstances. In these situations, the deferred income was
accumulated in a "Policyholders' Surplus Account" and will be taxable in the
future only under conditions which management considers to be remote; therefore,
no Federal income taxes have been provided on this deferred income. The balance
for tax return purposes of the Policyholders' Surplus Account as of December 31,
1997 was $37.
8. POSTRETIREMENT BENEFIT AND SAVINGS PLANS
(A) PENSION PLANS
The Company's employees are included in The Hartford's noncontributory defined
benefit pension plans. These plans provide pension benefits that are based on
years of service and the employee's compensation during the last ten years of
employment. The Company's funding policy is to contribute annually an amount
between the minimum funding requirements set forth in the Employee Retirement
Income Security Act of 1974, as amended, and the maximum amount that can be
deducted for U.S. Federal income tax purposes. Generally, pension costs are
funded through the purchase of the Company's group pension contracts. The cost
to the Company was approximately $5, $5 and $2 in 1997, 1996 and 1995,
respectively.
The Company also provides, through The Hartford, certain health care and life
insurance benefits for eligible retired employees. A substantial portion of the
Company's employees may become eligible for these benefits upon retirement. The
Company's contribution for health care benefits will depend on the retiree's
date of retirement and years of service. In addition, the plan has a defined
dollar cap which limits average Company contributions. The Company has prefunded
a portion of the health care and life insurance obligations through trust funds
where such prefunding can be accomplished on a tax effective basis.
Postretirement health care and life insurance benefits expense, allocated by The
Hartford, was immaterial to the results of operations for 1997, 1996 and 1995,
respectively.
The assumed rate in the per capita cost of health care (the health care trend
rate) was 8.5% for 1997, decreasing ratably to 6.0% in the year 2001. Increasing
the health care trend rates by one percent per year would have an immaterial
impact on the accumulated postretirement benefit obligation and the annual
expense. To the extent that the actual experience differs from the inherent
assumptions, the effect will be amortized over the average future service of
covered employees.
(B) INVESTMENT AND SAVINGS PLAN
Substantially all employees of the Company are eligible to participate in The
Hartford's Investment and Savings Plan. Under this plan, designated
contributions, which may be invested in Class A Common Stock of Hartford Life or
certain other investments, are matched, up to 3% of compensation, by the
Company. The cost to the Company for the above-mentioned plans was approximately
$2 in 1997.
9. STOCK COMPENSATION PLANS
During the second quarter of 1997, Hartford Life adopted the 1997 HLI Incentive
Stock Plan (the "Plan"). Under the Plan, options granted may be either
non-qualified options or incentive stock options qualifying under Section 422A
of the Internal Revenue Code. The aggregate number of shares of Class A Common
Stock which may be awarded in any one year shall be subject to an annual limit.
The maximum number of shares of Class A Common Stock which may be granted under
the Plan in each year shall be 1.5% of the total issued and outstanding shares
of Hartford Life Class A Common Stock and treasury stock as reported in the
Annual Report on Hartford Life's Form 10-K for the preceding year plus unused
portions of such limit
66 - PROSPECTUS
<PAGE>
from prior years. In addition, no more than 5,000,000 shares of Class A Common
Stock shall be cumulatively available for awards of incentive stock options
under the Plan, and no more than 20% of the total number of shares on a
cumulative basis shall be available for restricted stock and performance shares.
All options granted have an exercise price equal to the market price of Hartford
Life's stock on the date of grant and an option's maximum term is ten years.
Certain nonperformance based options become exercisable upon the attainment of
specified market price appreciation of Hartford Life's common shares or at seven
years after the date of grant, while the remaining nonperformance based options
become exercisable over a three year period commencing with the date of grant.
Also included in the Plan are long term performance awards which become payable
upon the attainment of specific performance goals achieved over a three year
period.
During the second quarter of 1997, Hartford Life established the HLI Employee
Stock Purchase Plan ("ESPP"). Under this plan, eligible employees of Hartford
Life and the Company may purchase Class A Common Stock of Hartford Life at a 15%
discount from the lower of the market price at the beginning or end of the
quarterly offering period. Hartford Life may sell up to 2,700,000 shares of
stock to eligible employees. Hartford Life sold 54,316 shares under the ESPP in
1997.
10. REINSURANCE
The Company cedes insurance to other insurers, including its parent HLA, in
order to limit its maximum loss. Such transfer does not relieve the Company of
its primary liability. The Company also assumes insurance from other insurers.
Failure of reinsurers to honor their obligations could result in losses to the
Company. The Company evaluates the financial condition of its reinsurers and
monitors concentration of credit risk.
Net premiums and other considerations were comprised of the following:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Gross premiums............................... $ 2,164 $ 2,138 $ 1,545
Assumed...................................... 159 190 591
Ceded........................................ (686) (623) (649)
--------- --------- ---------
Net premiums and other considerations...... $ 1,637 $ 1,705 $ 1,487
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company ceded approximately $76, $100 and $101 of group life premium in
1997, 1996 and 1995, respectively, representing $33.6 billion, $33.3 billion and
$32.3 billion of insurance in force, respectively. The Company ceded $339, $318
and $320 of accident and health premium to HLA in 1997, 1996 and 1995,
respectively. The Company assumed $89, $101 and $103 of premium in 1997, 1996
and 1995, respectively, representing $8.2 billion, $8.5 billion and $8.5 billion
of individual life insurance in force, respectively, from HLA.
Life reinsurance recoveries, which reduce death and other benefits, approximated
$158, $140 and $220 for the years ended December 31, 1997, 1996 and 1995,
respectively.
As of December 31, 1997, the Company had reinsurance recoverables of $5.0
billion from Mutual Benefit Life Assurance Corporation ("Mutual Benefit"),
supported by assets in a security trust of $5.0 billion (including policy loans
and accrued interest of $4.5 billion). The risk of Mutual Benefit becoming
insolvent is mitigated by the reinsurance agreement's requirement that the
assets be kept in a security trust with the Company as sole beneficiary. The
Company has no other significant reinsurance-related concentrations of credit
risk.
11. RELATED PARTY TRANSACTIONS
Transactions of the Company with HA&I and its affiliates relate principally to
tax settlements, reinsurance, insurance coverage, rental and service fees,
payment of dividends and capital contributions. In addition, certain affiliated
insurance companies purchased group annuity contracts from the Company to fund
pension costs and claim annuities to settle casualty claims. Substantially all
general insurance expenses related to the Company, including rent and employee
benefit plan expenses, are initially paid by The Hartford. Direct expenses are
allocated to the Company using specific identification, and indirect expenses
are allocated using other applicable methods. Indirect expenses include those
for corporate areas which, depending on type, are allocated based on either a
percentage of direct expenses or on utilization. Indirect expenses allocated to
the Company by The Hartford were $34, $40, and $45 in 1997, 1996 and 1995,
respectively. Management believes that the methods used are reasonable.
The rent paid to Hartford Fire for space occupied by the Company was $7 in 1997,
and $3 in 1996 and 1995. The Company expects to pay annual rent of $7 in 1998
and 1999, respectively, $12 in 2000 and 2001, respectively, $13 in 2002 and $87
thereafter, over the remaining term of the sublease, which expires on December
31, 2009. Rental expense is recognized over a level basis over the term of the
sublease and amounted to approximately $9 in 1997 and $8 in 1996 and 1995.
12. STATUTORY RESULTS
The domestic insurance subsidiaries of Hartford Life prepare their statutory
financial statements in accordance with accounting practices prescribed by the
State of Connecticut Insurance Department. Prescribed statutory accounting
practices include publications of the National Association of Insurance
Commissioners ("NAIC"), as well as state laws, regulations, and general
administrative rules.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Statutory net income......................... $ 214 $ 144 $ 112
------ ------ ------
Statutory surplus............................ $1,441 $1,207 $1,125
------ ------ ------
------ ------ ------
</TABLE>
67 - PROSPECTUS
<PAGE>
A significant percentage of the consolidated statutory surplus is permanently
reinvested or is subject to various state regulatory restrictions which limit
the payment of dividends without prior approval. The total amount of statutory
dividends which may be paid by the insurance subsidiaries of the Company in 1998
is estimated to be $144.
13. COMMITMENTS AND CONTINGENT LIABILITIES
(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) GUARANTY FUNDS
Under insurance guaranty fund laws in each state, the District of Columbia and
Puerto Rico, insurers licensed to do business can be assessed by state insurance
guaranty associations for certain obligations of insolvent insurance companies
to policyholders and claimants. Recent regulatory actions against certain large
life insurers encountering financial difficulty have prompted various state
insurance guaranty associations to begin assessing life insurance companies for
the deemed losses. Most of these laws do provide, however, that an assessment
may be excused or deferred if it would threaten an insurer's solvency and
further provide annual limits on such assessments. A large part of the
assessments paid by the Company's insurance subsidiaries pursuant to these laws
may be used as credits for a portion of the Company's insurance subsidiaries'
premium taxes. The Company paid guaranty fund assessments of approximately $15,
$11 and $10 in 1997, 1996 and 1995, respectively, of which $4, $5, and $6 were
estimated to be creditable against premium taxes.
14. BUSINESS SEGMENT INFORMATION
The Company, along with its parent, sells financial products such as fixed and
variable annuities, retirement plan services, and life and disability insurance
on both an individual and a group basis. The Company divides its core businesses
into three segments: Annuity, Individual Life Insurance, and Employee Benefits.
The Company also maintains a Guaranteed Investment Contracts segment, which is
primarily comprised of guaranteed rate contract business written prior to 1995
and a Corporate Operation. The Annuity segment offers individual variable
annuities and fixed market value adjusted annuities, deferred compensation and
retirement plan services, mutual funds, investment management services and other
financial products. The Individual Life Insurance segment sells a variety of
individual life insurance products, including variable life, universal life,
interest-sensitive whole life, and term life policies. The Employee Benefits
segment sells group insurance products, including group life, group short and
long-term disability and corporate owned life insurance, and engages in certain
international operations. The Guaranteed Investment Contracts segment sells a
limited amount of guaranteed investment contracts and contains Closed Book GRC.
Through its Corporate Operation, the Company reports items that are not directly
allocable to any of its business segments. Included in the Corporate Operation
are unallocated income and expense and certain other items not directly
allocable to any segment. Net realized capital gains and losses are recognized
in the period of realization, but are allocated to the segments utilizing
durations of the segment portfolios.
The following table outlines revenues, operating income and assets by business
segment:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Annuity.............................................. $ 1,269 $ 968 $ 759
Individual Life Insurance............................ 487 440 383
Employee Benefits.................................... 972 1,366 1,273
Guaranteed Investment Contracts...................... 241 34 337
Corporate Operation.................................. 40 81 52
-------- -------- --------
Total revenues..................................... $ 3,009 $ 2,889 $ 2,804
-------- -------- --------
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)
Annuity.............................................. $ 317 $ 226 $ 171
Individual Life Insurance............................ 85 68 56
Employee Benefits.................................... 53 44 37
Guaranteed Investment Contracts...................... -- (346) (103)
Corporate Operation.................................. 14 66 30
-------- -------- --------
Total income before income tax expense............. $ 469 $ 58 $ 191
-------- -------- --------
-------- -------- --------
ASSETS
Annuity $ 69,152 $ 52,877 $ 39,732
Individual Life Insurance............................ 4,918 3,753 3,173
Employee Benefits.................................... 18,196 14,708 13,494
Guaranteed Investment Contracts...................... 3,347 4,533 6,069
Corporate Operation.................................. 2,343 1,891 1,729
-------- -------- --------
Total assets....................................... $ 97,956 $ 77,762 $ 64,197
-------- -------- --------
-------- -------- --------
</TABLE>
68 - PROSPECTUS
<PAGE>
SCHEDULE I -- SUMMARY OF INVESTMENTS OTHER THAN INVESTMENTS IN AFFILIATES
AS OF DECEMBER 31, 1997
- --------------------------------------------------------------------------------
(IN MILLIONS)
<TABLE>
<CAPTION>
AMOUNT AT
WHICH
FAIR SHOWN ON
TYPE OF INVESTMENT COST VALUE BALANCE SHEET
- --------------------------------------------- ------- ------- --------------
<S> <C> <C> <C>
Fixed Maturities
Bonds and Notes
U. S. gov't and gov't agencies and
authorities (guaranteed and sponsored) $ 217 $ 219 $ 219
U. S. gov't and gov't agencies and
authorities (guaranteed and sponsored) --
asset-backed.............................. 1,175 1,204 1,204
States, municipalities and political
subdivisions.............................. 211 217 217
International governments.................. 376 393 393
Public utilities........................... 871 894 894
All other corporate including
international............................. 5,033 5,208 5,208
All other corporate -- asset-backed........ 4,091 4,124 4,124
Short-term investments..................... 1,318 1,318 1,318
Certificates of deposit...................... 593 599 599
------- ------- -------
Total fixed maturities....................... 13,885 14,176 14,176
------- ------- -------
Equity Securities
Common Stocks
Public utilities........................... -- -- --
Banks, trusts and insurance companies...... -- -- --
Industrial and miscellaneous............... 166 180 180
Nonredeemable preferred stocks............. -- -- --
------- ------- -------
Total equity securities...................... 166 180 180
------- ------- -------
Total fixed maturities and equity
securities.................................. 14,051 14,356 14,356
------- ------- -------
Real Estate.................................. -- -- --
Other Investments
Mortgage loans on real estate.............. -- -- --
Policy loans............................... 3,756 3,756 3,756
Investments in partnerships, trusts and
other..................................... 47 91 47
------- ------- -------
Total other investments...................... 3,803 3,847 3,803
------- ------- -------
Total investments............................ $17,854 $18,203 $18,159
------- ------- -------
------- ------- -------
</TABLE>
69 - PROSPECTUS
<PAGE>
SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
(IN MILLIONS)
<TABLE>
<CAPTION>
FUTURE
POLICY
BENEFITS,
UNPAID OTHER
DEFERRED CLAIMS POLICY
POLICY AND CLAIM CLAIMS AND PREMIUMS NET
ACQUISITION ADJUSTMENT BENEFITS AND OTHER INVESTMENT
SEGMENT COSTS EXPENSES PAYABLE CONSIDERATIONS INCOME
- --------------------------------------------- ----------- --------- ---------- --------------- ---------
<S> <C> <C> <C> <C> <C>
1997
Annuity...................................... $2,478 $2,070 $ 6,838 $ 769 $ 500
Individual Life Insurance.................... 837 392 2,182 323 164
Employee Benefits............................ -- 780 9,232 541 431
Guaranteed Investment Contracts.............. -- -- 2,782 2 239
Corporate Operation.......................... -- 28 -- 2 34
----------- --------- ---------- ------ ---------
Consolidated operations...................... $3,315 $3,270 $21,034 $1,637 $1,368
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
1996
Annuity...................................... $2,030 $1,526 $ 6,016 $ 535 $ 433
Individual Life Insurance.................... 730 346 2,160 287 153
Employee Benefits............................ -- 574 9,834 881 485
Guaranteed Investment Contracts.............. -- -- 4,124 2 251
Corporate Operation.......................... -- 28 -- -- 75
----------- --------- ---------- ------ ---------
Consolidated operations...................... $2,760 $2,474 $22,134 $1,705 $1,397
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
1995
Annuity...................................... $1,561 $1,314 $ 5,661 $ 319 $ 400
Individual Life Insurance.................... 615 706 1,932 246 137
Employee Benefits............................ 12 325 9,285 922 351
Guaranteed Investment Contracts.............. -- 28 5,720 -- 377
Corporate Operation.......................... -- -- -- -- 63
----------- --------- ---------- ------ ---------
Consolidated operations...................... $2,188 $2,373 $22,598 $1,487 $1,328
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
<CAPTION>
NET BENEFITS, AMORTIZATION
REALIZED CLAIMS AND OF DEFERRED
CAPITAL CLAIM POLICY
GAINS ADJUSTMENT ACQUISITION DIVIDENDS TO OTHER
SEGMENT (LOSSES) EXPENSES COSTS POLICYHOLDERS EXPENSES
- --------------------------------------------- ----------- ----------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
1997
Annuity...................................... $ -- $ 445 $250 $ -- $ 257
Individual Life Insurance.................... -- 242 83 -- 77
Employee Benefits............................ -- 425 2 240 252
Guaranteed Investment Contracts.............. -- 232 -- -- 9
Corporate Operation.......................... 4 35 -- -- (9)
----- ----------- ----- ----- -----
Consolidated operations...................... $ 4 $1,379 $335 $240 $ 586
----- ----------- ----- ----- -----
----- ----------- ----- ----- -----
1996
Annuity...................................... $ -- $ 412 $174 $ -- $ 156
Individual Life Insurance.................... -- 245 59 -- 68
Employee Benefits............................ -- 546 -- 635 141
Guaranteed Investment Contracts.............. (219) 332 1 -- 47
Corporate Operation.......................... 6 -- -- -- 15
----- ----------- ----- ----- -----
Consolidated operations...................... $(213) $1,535 $234 $635 $ 427
----- ----------- ----- ----- -----
----- ----------- ----- ----- -----
1995
Annuity...................................... $ -- $ 317 $117 $ -- $ 114
Individual Life Insurance.................... -- 203 70 -- 54
Employee Benefits............................ -- 424 -- 675 137
Guaranteed Investment Contracts.............. -- 453 12 -- 15
Corporate Operation.......................... (11) 25 -- -- (3)
----- ----------- ----- ----- -----
Consolidated operations...................... $ (11) $1,422 $199 $675 $ 317
----- ----------- ----- ----- -----
----- ----------- ----- ----- -----
</TABLE>
70 - PROSPECTUS
<PAGE>
SCHEDULE IV -- REINSURANCE
- --------------------------------------------------------------------------------
(IN MILLIONS)
<TABLE>
<CAPTION>
CEDED TO ASSUMED FROM PERCENTAGE
GROSS OTHER OTHER NET OF AMOUNT
AMOUNT COMPANIES COMPANIES AMOUNT ASSUMED TO NET
-------- -------------- -------------- -------- ---------------
<S> <C> <C> <C> <C> <C>
For the year ended December 31, 1997
Life insurance in force........................... $245,487 $ 178,771 $ 33,156 $ 99,872 33.2%
Insurance revenues
Life insurance and annuities.................... 1,818 340 157 1,635 9.6%
Accident and health insurance................... 346 346 2 2 100.0%
-------- -------------- ------- --------
Total insurance revenues.......................... $ 2,164 $ 686 $ 159 $ 1,637 9.7%
-------- -------------- ------- --------
-------- -------------- ------- --------
For the year ended December 31, 1996
Life insurance in force......................... $177,094 $ 106,146 $ 31,957 $102,905 31.1%
Insurance revenues
Life insurance and annuities.................... 1,801 298 169 1,672 10.1%
Accident and health insurance................... 337 325 21 33 63.6%
-------- -------------- ------- --------
Total insurance revenues.......................... $ 2,138 $ 623 $ 190 $ 1,705 11.1%
-------- -------------- ------- --------
-------- -------------- ------- --------
For the year ended December 31, 1995
Life insurance in force......................... $182,716 $ 112,774 $ 26,996 $ 96,938 27.8%
Insurance revenues
Life insurance and annuities.................... 1,232 325 574 1,481 38.8%
Accident and health insurance................... 313 324 17 6 283.3%
-------- -------------- ------- --------
Total insurance revenues.......................... $ 1,545 $ 649 $ 591 $ 1,487 39.7%
-------- -------------- ------- --------
-------- -------------- ------- --------
</TABLE>
71 - PROSPECTUS
<PAGE>
PART II
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The prospectus consisting of 45 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 Insurance Company
("Hartford") authorizing the establishment of the Separate Account.
(1)
(A2) Not applicable.
(A3a) Principal Underwriting Agreement. (2)
(A3b) Form of Selling Agreement. (2)
(A3c) Not applicable.
(A4) Not applicable.
(A5) Forms of Modified Single Premium Variable Life Insurance Policy and
Last Survivor Modified Single Premium Variable Life Insurance
Policy. (1)
(A6a) Certificate of Incorporation of Hartford.(3)
- -------------------------------------------------------------------------------
(1) Incorporated by reference to the Initial Submission, to the Registration
Statement File No. 333-00245 filed on January 17, 1996.
(2) Incorporated by reference to the Pre-Effective Amendment No. 1, to the
Registration Statement File No. 333-00245 filed on November 1, 1996.
(3) Incorporated by reference to the Post-Effective Amendment No. 1, to the
Registration Statement File No. 333-00245 filed on April 16, 1997.
<PAGE>
(A6b) Bylaws of Hartford. (1)
(A7) Not applicable.
(A8) Not applicable.
(A9) Not applicable.
(A10) Form of Application for Modified Single Premium Variable Life
Insurance Policies and Last Survivor Modified Single Premium
Variable Life Insurance Policy. (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 Insurance Company ("Hartford") hereby represents that the
aggregate fees and charges under the Contract are reasonable in relation to
the services rendered, the expenses expected to be incurred, and the risks
assumed by Hartford.
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 become subject by
reason of being or having been an employee or officer of the Registrant.
Connecticut law does not prescribe standards for the indemnification of
officers, employees and agents and expressly states that their
indemnification may be broader than the right of indemnification granted to
directors.
The foregoing statements are specifically made subject to the detailed
provisions of Section 33-770 et seq.
Notwithstanding the fact that Connecticut law obligates the Registrant to
indemnify only a director that was successful on the merits in a suit, under
Article VIII, Section 1 of the
<PAGE>
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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized, and attested, all in the
Town of Simsbury, and State of Connecticut, on the 28th day of April, 1998.
HARTFORD LIFE INSURANCE COMPANY -
SEPARATE ACCOUNT FIVE (Registrant)
By: /s/ Gregory A. Boyko
-----------------------------------------------
Gregory A. Boyko, Senior Vice President, Chief
Financial Officer and Treasurer, Director
HARTFORD LIFE INSURANCE COMPANY (Depositor)
By: /s/ Gregory A. Boyko
-----------------------------------------------
Gregory A. Boyko, Senior Vice President, Chief
Financial Officer and Treasurer, Director
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,
Chief Financial Officer, and Treasurer,
Director*
John P. Ginnetti, Executive Vice
President, Director*
Lynda Godkin, Senior Vice President,
General Counsel, and Corporate
Secretary, Director*
Thomas M. Marra, Executive Vice *By: /s/ Lynda Godkin
President, Director* -------------------------
Lowndes A. Smith, President, Lynda Godkin
Chief Executive Officer, Director* Attorney-In-Fact
Raymond P. Welnicki, Senior Vice
President, Director*
Lizabeth H. Zlatkus, Senior Vice President Dated: April 28, 1998
Director* ------------------------
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) Copy of Power of Attorney.
<PAGE>
EXHIBIT 2
[LOGO]
Hartford Life
April 28, 1998 LYNDA GODKIN
SENIOR VICE PRESIDENT, GENERAL
COUNSEL AND CORPORATE SECRETARY
Board of Directors
Hartford Life Insurance Company
200 Hopmeadow Street
Simsbury, CT 06089
RE: SEPARATE ACCOUNT FIVE
HARTFORD LIFE INSURANCE COMPANY
FILE NO. 333-00245
Dear Sir/Madam:
I have acted as General Counsel to Hartford Life Insurance Company (the
"Company"), a Connecticut insurance company, and Hartford Life 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 contract (the "Contracts") with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended. I have examined such documents (including the Form S-6 Registration
Statement) and reviewed such questions of law as I considered necessary and
appropriate, and on the basis of such examination and review, it is my
opinion that:
1. The Company is a corporation duly organized and validly existing as a stock
life insurance company under the laws of the State of Connecticut and is
duly authorized by the Insurance Department of the State of Connecticut to
issue the Contracts.
2. The Account is a duly authorized and validly existing separate account
established pursuant to the provisions of Section 38a-433 of the
Connecticut Statutes.
3. To the extent so provided under the Contracts, that portion of the assets
of the Account equal to the reserves and other contract liabilities with
respect to the Account will not be chargeable with liabilities arising out
of any other business that the Company may conduct.
4. The Contracts, when issued as contemplated by the Form S-6 Registration
Statement, will constitute legal, validly issued and binding obligations of
the Company.
I hereby consent to the filing of this opinion as an exhibit to the Form S-6
Registration Statement for the Contracts and the Account.
Sincerely,
/s/ Lynda Godkin
Lynda Godkin
<PAGE>
EXHIBIT 5
[LOGO]
Hartford Life
MICHAEL R. WINTERFIELD, FSA, MAAA
Assistant Vice President
Director Individual Annuity Product Management
April 28, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sir:
This opinion is furnished in connection with the Form S-6 Registration
Statement under the Securities Act of 1933, as amended ("Securities Act"), of
a certain modified single premium variable life insurance policy (the
"Policy") that will be offered and sold by Hartford Life Insurance Company
and certain units of interest to be issued in connection with the Policy.
The hypothetical illustrations of the Policy used in the Form S-6
Registration Statement accurately reflect reasonable estimates of projected
performance of the Policy under the stipulated rates of investment return,
the contractual expense deductions and guaranteed cost-of-insurance rates,
and utilizing a reasonable estimation for expected fund operating expenses.
I hereby consent to the use of this opinion as an exhibit to the Form S-6
Registration Statement and to the reference to my name under the heading
"Experts" in the Prospectus included as a part of such Form S-6 Registration
Statement.
Very truly yours,
/s/ Michael Winterfield
Michael Winterfield, FSA, MAAA
<PAGE>
EXHIBIT 6
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of
this Registration Statement File No. 333-00245 for Hartford Life Insurance
Company Separate Account Five on Form S-6.
/s/ Arthur Andersen LLP
Hartford, Connecticut
April 29, 1998
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
POWER OF ATTORNEY
-----------------
Gregory A. Boyko
John P. Ginnetti
Lynda Godkin
Thomas M. Marra
Lowndes A. Smith
Raymond P. Welnicki
Lizabeth H. Zlatkus
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 Insurance Company and Hartford Life and
Accident 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/ John P. Ginnetti Dated as of March 16, 1998
- --------------------------------------- --------------------------
John P. Ginnetti
/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/ Raymond P. Welnicki Dated as of March 16, 1998
- --------------------------------------- --------------------------
Raymond P. Welnicki
/s/ Lizabeth H. Zlatkus Dated as of March 16, 1998
- --------------------------------------- --------------------------
Lizabeth H. Zlatkus
/s/ David M. Znamierowski Dated as of March 16, 1998
- --------------------------------------- --------------------------
David M. Znamierowski
