<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 22, 1997
1933 ACT REGISTRATION NO. 33-84426
1940 ACT REGISTRATION NO. 811-8780
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
CG VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I
(EXACT NAME OF REGISTRANT)
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
900 Cottage Grove Road, Hartford, Connecticut 06152
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
Depositor's Telephone Number, including Area Code
(860) 726-6000
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Robert A. Picarello, Esquire COPY TO:
Connecticut General Life Insurance George N. Gingold,
Company Esquire
900 Cottage Grove Road 197 King Philip Drive
Hartford, Connecticut 06152 West Hartford, CT
(NAME AND ADDRESS OF AGENT FOR 06117-1409
SERVICE)
</TABLE>
Approximate date of proposed public offering: Continuous
INDEFINITE NUMBER OF UNITS OF INTEREST IN VARIABLE LIFE INSURANCE CONTRACTS
(TITLE AND AMOUNT OF SECURITIES BEING REGISTERED)
An indefinite amount of the securities being offered by this
Registration Statement has been registered pursuant to Rule
24f-2 under the Investment Company Act of 1940, and the
initial registration fee of $500 was paid with the Rule
24f-2 declaration. Form 24F-2 for Registrant's fiscal year,
which ended December 31, 1996, was filed February 26, 1997.
It is proposed that this filing will become effective:
----------------------------- immediately upon filing
pursuant to paragraph (b) of Rule 485
----------------------------- on May 1, 1997, pursuant to
paragraph (b) of Rule 485
X
----------------------------- 60 days after filing pursuant
to paragraph (a) of Rule 485
----------------------------- on
---------------------------, pursuant to paragraph (a) of
Rule 485
<PAGE>
CROSS REFERENCE SHEET
(RECONCILIATION AND TIE)
REQUIRED BY INSTRUCTION 4 TO FORM S-6
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ITEM OF FORM
N-8B-2 LOCATION IN PROSPECTUS
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1 Cover Page Highlights
2 Cover Page
3 *
4 Distribution of Policies
5 The Company
6(a) The Variable Account
6(b) *
9 Legal Proceedings
10(a)-(c) Short-Term Right to Cancel the Policy; Surrenders;
Accumulation Value; Reports to Policy Owners
10(d) Right to Exchange for a Fixed Benefit Policy; Policy Loans;
Surrenders; Allocation of Net Premium Payments
10(e) Lapse and Reinstatement
10(f) Voting Rights
10(g)-(h) Substitution of Securities
10(i) Premium Payments; Transfers; Death Benefit; Policy Values;
Settlement Options
11 The Funds
12 The Funds
13 Charges; Fees
14 Issuance
15 Premium Payments; Transfers
16 The Variable Account
17 Surrenders
18 The Variable Account
19 Reports to Policy Owners
20 *
21 Policy Loans
22 *
23 The Company
24 Incontestability; Suicide; Misstatement of Age or Sex
25 The Company
26 Fund Participation Agreements
27 The Variable Account
</TABLE>
<PAGE>
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<CAPTION>
ITEM OF FORM
N-8B-2 LOCATION IN PROSPECTUS
- ----------------- --------------------------------------------------------------
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28 Directors and Officers of the Company
29 The Company
30 *
31 *
32 *
33 *
34 *
35 *
37 *
38 Distribution of Policies
39 Distribution of Policies
40 *
41(a) Distribution of Policies
42 *
43 *
44 The Funds; Premium Payments
45 *
46 Surrenders
47 The Variable Account; Surrenders, Transfers
48 *
49 *
50 The Variable Account
51 Cover Page; Highlights; Premium Payments; Right to Exchange
for a Fixed Benefit Policy
52 Substitution of Securities
53 Tax Matters
54 *
55 *
</TABLE>
* Not Applicable
<PAGE>
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
[LOGO]
CG VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I
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HOME OFFICE LOCATION: MAILING ADDRESS:
900 COTTAGE GROVE ROAD CIGNA INDIVIDUAL INSURANCE
BLOOMFIELD, CONNECTICUT ANNUITY & VARIABLE LIFE SERVICES CENTER,
ROUTING S-249
HARTFORD, CT 06152-2249
(800)(552-9898)
</TABLE>
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THE FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
- --------------------------------------------------------------------------------
This prospectus describes a flexible premium variable life insurance
contract ("Policy") offered by Connecticut General Life Insurance Company ("the
Company"). This Policy is intended to provide life insurance benefits. It allows
flexible premium payments, a choice of underlying funding options, and a choice
of two death benefit options. Its value will vary with the investment
performance of the underlying funding options selected, as may the death benefit
payable by the Company upon the death of the Insured. Policy values may be used
to continue the Policy in force, may be borrowed within certain limits, and may
be fully or partially surrendered. Full surrenders are subject to a surrender
charge. Annuity settlement options equivalent to the Death Benefit are available
for payment to the Beneficiary upon the death of the Insured.
The Company offers sixteen funding vehicles under a Policy through the
Separate Account, each a diversified open-end management investment company
(commonly called a mutual fund) with a different investment objective: Alger
American Fund -- Alger American Growth Portfolio, Alger American Leveraged
AllCap Portfolio, Alger American MidCap Growth Portfolio, and Alger American
Small Capitalization Portfolio; Fidelity Variable Insurance Products Fund --
Equity-Income Portfolio; Fidelity Variable Insurance Products Fund II -- Asset
Manager Portfolio and Investment Grade Bond Portfolio; MFS-Registered Trademark-
Variable Insurance Trust -- MFS Total Return Series, MFS Utilities Series and
MFS World Governments Series; Neuberger & Berman Advisers Management Trust --
Balanced Portfolio, Limited Maturity Bond Portfolio and Partners Portfolio; OCC
Accumulation Trust -- Global Equity Portfolio, Managed Portfolio and Small Cap
Portfolio.
The fixed interest option offered under the Policy is the Fixed Account.
Amounts held in the Fixed Account are guaranteed and will earn a minimum
interest rate of 4% per year. Unless specifically mentioned, this prospectus
only describes the variable investment options.
It may not be advantageous to replace existing insurance or supplement an
existing flexible premium variable life insurance policy with this Policy. This
entire Prospectus, and those of the Funds, should be read carefully to
understand the Policy being offered.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES OF
THE MUTUAL FUNDS AVAILABLE AS FUNDING OPTIONS FOR THE POLICIES OFFERED BY THIS
PROSPECTUS. ALL PROSPECTUSES SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS DATED: MAY 1, 1997
<PAGE>
TABLE OF CONTENTS
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PAGE
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<S> <C>
Definitions..................................... 3
Highlights...................................... 5
Initial Choices............................... 5
Charges and Fees.............................. 6
The Company..................................... 6
The Variable Account............................ 7
The Funds....................................... 7
Expense Data/Fee Table........................ 10
General....................................... 12
Substitution of Securities.................... 12
Voting Rights................................. 12
Fund Participation Agreements................. 13
Death Benefit................................... 13
Death Benefit Options....................... 13
Changes in Death Benefit Option............. 13
Guaranteed Death Benefit Provision.......... 13
Payment of Death Benefit.................... 14
Changes in Specified Amount................. 15
Premium Payments; Transfers..................... 15
Premium Payments............................ 15
Allocation of Net Premium Payments.......... 16
Transfers................................... 17
Optional Variable Account Sub-Account
Allocation Programs........................ 17
Dollar Cost Averaging..................... 17
Automatic Rebalancing..................... 18
Charges; Fees................................... 18
Premium Load................................ 18
Monthly Deductions.......................... 19
Transaction Fee for Excess Transfers........ 20
Mortality and Expense Risk Charge........... 20
Surrender Charge............................ 20
The Fixed Account............................... 21
Policy Values................................... 21
Accumulation Value.......................... 21
Variable Accumulation Unit Value............ 22
Surrender Value............................. 22
Surrenders...................................... 23
Partial Surrenders.......................... 23
Full Surrenders............................. 23
Deferral of Payment and Transfers........... 23
Lapse and Reinstatement......................... 23
Lapse of a Policy; Effect of Guaranteed
Death Benefit Provision.................... 23
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PAGE
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Reinstatement of a Lapsed Policy............ 24
Policy Loans.................................... 24
Settlement Options.............................. 25
Other Policy Provisions......................... 25
Issuance.................................... 25
Short-Term Right to Cancel the Policy....... 25
Policy Owner................................ 26
Beneficiary................................. 26
Assignment.................................. 26
Right to Exchange for a Fixed Benefit
Policy..................................... 26
Incontestability............................ 27
Misstatement of Age or Sex.................. 27
Suicide..................................... 27
Nonparticipating Policies................... 27
Tax Matters..................................... 27
Policy Proceeds............................. 27
Taxation of the Company..................... 29
Section 848 Charges......................... 29
Other Considerations........................ 29
Other Matters................................... 29
Directors and Officers of the Company....... 29
Distribution of Policies.................... 30
Changes of Investment Policy................ 30
Other Contracts Issued by the Company....... 31
State Regulation............................ 31
Reports to Policy Owners.................... 31
Advertising................................. 31
Legal Proceedings........................... 32
Experts..................................... 32
Registration Statement...................... 32
Financial Statements............................ 32
Connecticut General Life Insurance
Company.................................... 33
CG Variable Life Insurance Separate Account
I.......................................... 53
Appendix 1...................................... 66
Illustration of Surrender Charges........... 66
Appendix 2...................................... 68
Illustration of Accumulation Values,
Surrender Values, and Death Benefits....... 68
Appendix 3...................................... 78
Tax Information............................. 78
</TABLE>
2
<PAGE>
DEFINITIONS
ACCUMULATION VALUE: The sum of the Fixed Account Value,
Variable Account Value and the Loan Account Value.
ACCUMULATION UNIT: A unit of measure used to calculate the
value of a Variable Account Sub-Account.
ADDITIONAL PREMIUMS: Any premium paid in addition to Planned
Premiums.
ANNUITY & VARIABLE LIFE SERVICES CENTER: The office of the
Company to which Premium Payments should be sent, notices
given and any customer service requests made. Mailing
address: CIGNA Individual Insurance, Annuity & Variable Life
Services Center, Routing S-249, Hartford, CT 06152-2249.
CODE: The Internal Revenue Code of 1986, as amended.
CORRIDOR DEATH BENEFIT: The Death Benefit calculated as a
percentage of the Accumulation Value rather than by
reference to the Specified Amount to satisfy the Internal
Revenue Service definition of "life insurance."
COST OF INSURANCE: The portion of the Monthly Deduction
designed to compensate the Company for the anticipated cost
of paying Death Benefits in excess of the Accumulation
Value, not including riders, supplemental benefits or
monthly expense charges.
DEATH BENEFIT: The amount payable to the beneficiary upon
the death of the Insured in accordance with the Death
Benefit Option elected, before deduction of the amount
necessary to repay any loans in full, and overdue
deductions.
DEATH BENEFIT OPTION: Either of two methods for determining
the Death Benefit.
FIXED ACCOUNT: The account under which principal is
guaranteed and interest is credited at a rate of not less
than 4% per year. Fixed Account assets are general assets of
the Company held in the Company's General Account.
FIXED ACCOUNT VALUE: The portion of the Accumulation Value,
other than the Loan Account Value, held in the Company's
General Account.
FUND(S): One or more of Alger American Fund -- Alger
American Growth Portfolio, Alger American Leveraged AllCap
Portfolio, Alger American MidCap Growth Portfolio and Alger
American Small Capitalization Portfolio; Fidelity Variable
Insurance Products Fund -- Equity-Income Portfolio; Fidelity
Variable Insurance Products Fund II -- Asset Manager
Portfolio and Investment Grade Bond Portfolio;
MFS-Registered Trademark- Variable Insurance Trust -- MFS
Total Return Series, MFS Utilities Series, MFS World
Governments Series; Neuberger & Berman Advisers Management
Trust -- Balanced Portfolio, Limited Maturity Bond Portfolio
and Partners Portfolio; OCC Accumulation Trust -- Global
Equity Portfolio, Managed Portfolio and Small Cap Portfolio.
Each of them is an open-end management investment company
(mutual fund) whose shares are available to fund the
benefits provided by the Policy.
GENERAL ACCOUNT: The Company's general asset account, in
which assets attributable to the non-variable portion of
Policies are held.
GRACE PERIOD: The 61-day period following a Monthly
Anniversary Day on which the Policy's Surrender Value is
insufficient to cover the current Monthly Deduction. The
Company will send notice at least 31 days before the end of
the Grace Period that the Policy will lapse without value
unless a sufficient payment (described in the notification
letter) is received by the Company.
GUARANTEED INITIAL DEATH BENEFIT PREMIUM: The Premium
Payment(s) which must be made to guarantee the Initial
Specified Amount for the first five Policy Years after
issue, regardless of investment performance, assuming there
will be no loans or partial surrenders.
3
<PAGE>
GUIDELINE ANNUAL PREMIUM: The level amount, calculated in
accordance with Rule 6e-3(T) under the Investment Company
Act of 1940, required to mature the Policy under guaranteed
mortality and expense charges and an annual interest rate of
5%.
INITIAL SPECIFIED AMOUNT: The amount (at least $50,000),
originally chosen by the Policy Owner, initially equal to
the Death Benefit. The Initial Specified Amount may be
increased or decreased as described in this Prospectus.
INSURED: The person on whose life the Policy is issued.
ISSUE AGE: The age of the insured, to the nearest birthday,
on the Issue Date.
ISSUE DATE: The date on which the Policy becomes effective,
as shown in the Policy Specifications.
LOAN ACCOUNT VALUE: An amount equal to the sum of all unpaid
Policy loans and loan interest.
MONTHLY ANNIVERSARY DAY: The day of the month, as shown in
the Policy Specifications, or the next Valuation Day if that
day is not a Valuation Day or is nonexistent for that month,
when the Company makes the Monthly Deduction.
MONTHLY DEDUCTION: The monthly deduction made from the Net
Accumulation Value; this deduction includes the cost of
insurance, an administrative expense charge, and charges for
supplemental riders or benefits, if applicable.
NET ACCUMULATION VALUE: The Accumulation Value less the Loan
Account Value.
NET AMOUNT AT RISK: The Death Benefit before subtraction of
outstanding loans, if any, minus the Accumulation Value.
NET PREMIUM PAYMENT: The portion of a Premium Payment, after
deduction of 3.5% for the premium load, available for
allocation to the Fixed Account and the Variable Account
Sub-Accounts.
OWNER: The Owner on the Date of Issue will be the person
designated in the Policy Specifications. If no person is
designated as Owner, the Insured will be the Owner.
PLANNED PREMIUMS: The amount of premium the Policy Owner
chooses to pay the Company on a scheduled basis. This is the
amount for which the Company sends a premium reminder
notice.
POLICY: The life insurance contract described in this
Prospectus, under which flexible premium payments are
permitted and the death benefit and contract values may vary
with the investment performance of the funding option(s)
selected.
POLICY YEAR: Each twelve-month period, beginning on the
Issue Date, during which the Policy is in effect.
PREMIUM PAYMENT: A premium payment made under the Policy.
RIGHT-TO-EXAMINE PERIOD: The period of time following the
issuance of the Policy during which the Owner may return the
Policy and receive a refund of premiums paid, the latest of
(a) 10 days after the Policy is received, unless otherwise
stipulated by state law requirements, (b) 10 days after the
Company mails or personally delivers a Notice of Withdrawal
Right to the Owner, or (c) 45 days after the application for
the Policy is signed.
SETTLEMENT OPTION(S): Several ways in which the Beneficiary
may receive a Death Benefit, or in which the Owner may
choose to receive payments upon surrender
of the Policy.
SUB-ACCOUNT: That portion of the Variable Account which is
invested in shares of a specific Fund.
SURRENDER CHARGE: The amount retained by the Company upon
the full surrender of the Policy.
4
<PAGE>
SURRENDER VALUE: The amount a Policy Owner can receive in
cash by surrendering the Policy. This equals the Net
Accumulation Value minus the applicable Surrender Charge.
All of the Surrender Value may be applied to one or more of
the Settlement Options.
VALUATION DAY: Every day on which Accumulation Units are
valued; any day on which the New York Stock Exchange is
open, except any day on which trading on the Exchange is
restricted, or on which an emergency exists, as determined
by the Securities and Exchange Commission, so that valuation
or disposal of securities is not practicable.
VALUATION PERIOD: The period of time beginning on the day
following a Valuation Day and ending on the next Valuation
Day. A Valuation Period may be more than one day in length.
VARIABLE ACCOUNT: CG Variable Life Insurance Separate
Account I. Consists of all Sub-Accounts invested in shares
of the Funds. Variable Account assets are kept separate from
the general assets of the Company and are not chargeable
with the general liabilities of the Company.
VARIABLE ACCOUNT VALUE: The portion of the Accumulation
Value attributable to the Variable Account.
<TABLE>
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HIGHLIGHTS
The Policy is a flexible premium variable life
insurance policy. Its values may be accumulated
on a fixed or variable basis or a combination
of fixed and variable bases. The Policy's
provisions may vary in some states.
INITIAL When purchasing a Policy, the Owner makes three
CHOICES important choices:
TO BE MADE 1) Selecting one of the two Death Benefit
Options;
2) Selecting the amount of Premium Payments to
make; and
3) Selecting how Net Premium Payments will be
allocated among the available funding options.
LEVEL OR At the time of purchase, the Policy Owner (also
VARYING called the "Owner" in this Prospectus) must
DEATH BENEFIT choose between the two Death Benefit Options.
The amount payable under either option will be
determined as of the date of the Insured's
death. Under the level Death Benefit Option,
the Death Benefit will be the greater of the
Specified Amount, or the Corridor Death
Benefit. Under the varying Death Benefit
Option, the Death Benefit will be the greater
of the Specified Amount plus the Accumulation
Value, or the Corridor Death Benefit (See
"Death Benefit").
The Policy also offers a Guaranteed Initial
Death Benefit Provision which ensures that for
the first five Policy Years the Death Benefit
will not be less than the Initial Specified
Amount, regardless of market performance,
assuming there have been no loans or
surrenders, even if the Surrender Value is
insufficient to cover the current Monthly
Deductions (See "Guaranteed Death Benefit
Provision").
AMOUNT OF At the time of purchase, the Policy Owner must
PREMIUM also choose the amount of premium to be paid.
PAYMENT The Owner may vary Premium Payments to some
extent and still keep the Policy in force.
Premium reminder notices will be sent for
Planned Premiums and for premiums required to
continue this Policy in force. If the Policy
lapses it may be reinstated (See "Reinstatement
of a Lapsed Policy"). Premium Payments are
refundable during the Right-to-Examine Period.
</TABLE>
5
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SELECTION OF The Policy Owner must choose how to allocate
FUNDING Net Premium Payments. Net Premium Payments
VEHICLE(S) allocated to the Variable Account may be
allocated to one or more Sub-Accounts of the
Variable Account, each of which invests in
shares of a particular Fund. The Initial
Premium Payment will not be allocated to the
Variable Account until three days following the
expiration of the Right-to-Examine Period. The
Fixed Account may also be elected as an
allocation option. Allocations to any
Sub-Account or to the Fixed Account must be in
whole percentages. No allocation can be made
which would result in a Sub-Account value of
less than $50 or a Fixed Account value of less
than $2,500. Further, at this time, no more
than 18 Sub-Accounts may be opened during the
life of the Policy. The Company may expand this
number at a future date. The variable portion
of a Policy is supported by the Fund(s)
selected as funding vehicle(s). The portion of
the Variable Account Value attributable to a
particular Fund through the Sub-Account of the
Variable Account is not guaranteed and will
vary with the investment performance of that
Fund.
</TABLE>
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<S> <C>
CHARGES There is a 3.5% premium load on all Premium Payments.
AND FEES Monthly deductions are made for the Cost of Insurance and any riders.
Monthly deductions ($15 per month during the first Policy Year and,
currently, $5 per month thereafter) are also made for administrative
expenses.
Daily deductions from Variable Account Value are made for the
mortality and expense risk, currently at the annual rate of .45%
during the first ten Policy Years and .25% thereafter.
Investment results for each Sub-Account are affected by each Fund's
daily charge for management fees; these charges vary by Fund and are
shown at pages 10 and 11 of this Prospectus.
</TABLE>
A transaction fee of $25 is imposed for each partial
surrender and for certain transfers in excess of 12 per
Policy Year.
A surrender charge will be deducted upon full surrender of a
Policy within the first ten Policy Years or within ten years
after an increase in Specified Amount.
Interest is charged on Policy loans. The net interest spread
(the amount by which interest charged exceeds interest
credited) is currently 1% per year in the first ten Policy
Years and .25% per year thereafter.
The Company may derive a profit from its charges except from
the monthly deduction for administrative expenses and the
transaction fee.
THE COMPANY
The Company is a stock life insurance company incorporated
in Connecticut in 1865. Its Home Office mailing address is
Hartford, Connecticut 06152, Telephone (203) 726-6000. It
has obtained authorization to do business in fifty states,
the District of Columbia and Puerto Rico. The Company issues
group and individual life and health insurance policies and
annuities. The Company has various wholly-owned subsidiaries
which are generally engaged in the insurance business. The
Company is a wholly-owned subsidiary of Connecticut General
Corporation, Bloomfield, Connecticut. Connecticut General
Corporation is wholly-owned by CIGNA Holdings Inc.,
Philadelphia, Pennsylvania which is in turn wholly-owned by
CIGNA Corporation, Philadelphia, Pennsylvania. Connecticut
General Corporation is the holding company of various
insurance companies, one of which is Connecticut General
Life Insurance Company.
6
<PAGE>
The Company markets the Policies through independent
insurance brokers, general agents, and registered
representatives of broker-dealers who are members of the
National Association of Securities Dealers, Inc.
The Company, in common with other insurance companies, is
subject to regulation and supervision by the regulatory
authorities of the states in which it is licensed to do
business. A license from the state insurance department is a
prerequisite to the transaction of insurance business in
that state. In general, all states have statutory
administrative powers. Such regulation relates, among other
things, to licensing of insurers and their agents, the
approval of policy forms, the methods of computing reserves,
the form and content of statutory financial statements, the
amount of policyholders' and stockholders' dividends, and
the type of distribution of investments permitted. A blanket
bond for $100 million covers all of the officers and
employees of the Company.
THE VARIABLE ACCOUNT
CG Variable Life Insurance Separate Account I was
established pursuant to a July 6, 1994 resolution of the
Board of Directors of the Company. Under Connecticut
insurance law, the income, gains or losses of the Variable
Account are credited without regard to the other income,
gains or losses of the Company. The Company serves as the
custodian of the assets of the Variable Account. These
assets are held for the Policies. Although the assets
maintained in the Variable Account will not be charged with
any liabilities arising out of any other business conducted
by the Company, all obligations arising under the Policies
are general corporate liabilities of the Company. Any and
all distributions made by the Funds with respect to shares
held by the Variable Account will be reinvested in
additional shares at net asset value. Deductions and
surrenders from the Variable Account will, in effect, be
made by surrendering shares of the Funds at net asset value.
On each Valuation Day of each Fund, the Variable Account
purchases or redeems Fund shares based on a netting of all
transactions for that day. Shares of the Funds held in the
Variable Account are held by the Company through an open
account system, which makes unnecessary the issuance and
delivery of stock certificates.
The Variable Account is registered with the Securities and
Exchange Commission ("Commission") as a unit investment
trust under the 1940 Act ("1940 Act"). Such registration
does not involve supervision of the Variable Account or the
Company's management or investment practices or policies by
the Commission. The Company does not guarantee the Variable
Account's investment performance.
The Company has several other separate accounts registered
as unit investment trusts with the Commission for the
purpose of funding the variable annuity contracts and
variable life insurance policies of the Company.
THE FUNDS
Each of the sixteen Sub-Accounts of the Variable Account is
invested solely in the shares of one of the sixteen Funds
available as funding vehicles under the Policies. Each of
the Funds is a series of one of six entities, all
Massachusetts or Delaware business trusts, each of which is
registered as an open-end, diversified management investment
company under the 1940 Act. These trusts are collectively
referred to herein as the "Trusts".
The six Trusts and their Investment advisers and
distributors are:
Alger American Fund ("Alger Trust"), managed by Fred
Alger Management, Inc., 75 Maiden Lane, New York, NY
10038; and distributed by Fred Alger & Company,
Incorporated, 30 Montgomery Street, Jersey City, NJ
07302;
Variable Insurance Products Fund ("Fidelity VIP"), and
Variable Insurance Products Fund II ("Fidelity VIP II"),
managed by Fidelity Management & Research Company and
distributed by Fidelity Distribution Corporation, 82
Devonshire Street, Boston, MA 02103;
7
<PAGE>
MFS-Registered Trademark- Variable Insurance Trust ("MFS
Trust"), managed by Massachusetts Financial Services
Company and distributed by MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116;
Neuberger & Berman Advisers Management Trust ("AMT
Trust"), managed and distributed by Neuberger & Berman
Management Incorporated, 605 Third Avenue, 2nd Floor,
New York, NY 10158-0006;
OCC Accumulation Trust ("OCC Trust") (formerly Quest for
Value Accumulation Trust), managed by OpCap Advisors
(formerly Quest for Value Advisors) and distributed by
OCC Distributors (formerly Quest for Value
Distributors), One World Financial Center, New York, NY
10281.
Four Funds of ALGER Trust are available under the Policies:
Alger American Growth Portfolio;
Alger American Leveraged AllCap Portfolio;
Alger American MidCap Growth Portfolio;
Alger American Small Capitalization Portfolio.
One Fund of FIDELITY VIP is available under the Policies:
Equity-Income Portfolio ("Fidelity VIP Equity-Income
Portfolio").
Two Funds of FIDELITY VIP II are available under the
Policies:
Asset Manager Portfolio ("Fidelity VIP II Asset Manager
Portfolio");
Investment Grade Bond Portfolio ("Fidelity VIP II
Investment Grade Bond Portfolio").
Three Funds of MFS Trust are available under the Policies:
MFS Total Return Series;
MFS Utilities Series;
MFS World Governments Series.
Three Funds of AMT Trust are available under the Policies:
Balanced Portfolio;
Limited Maturity Bond Portfolio;
Partners Portfolio.
Three Funds of OCC Trust are available under the Policies:
Global Equity Portfolio;
Managed Portfolio;
Small Cap Portfolio.
The investment advisory fees charged the Funds by their
advisers are shown on pages 10 and 11 of this Prospectus.
There follows a brief description of the investment
objective and program of each Fund. There can be no
assurance that any of the stated investment objectives will
be achieved.
ALGER AMERICAN GROWTH PORTFOLIO (Large Cap Stocks): Seeks
long-term capital appreciation by investing in a
diversified, actively managed portfolio of equity
securities, primarily of companies with total market
capitalization of $1 billion or greater.
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO (Large Cap
Stocks): Seeks long-term capital appreciation by investing
in a diversified, actively managed portfolio of equity
securities, with the ability to engage in leveraging (up to
one-third of assets) and options and futures transactions.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO (Midcap Cap Stocks):
Seeks long-term capital appreciation by investing in a
diversified, actively managed portfolio of equity
securities, primarily of companies whose total market
capitalization lies within the range of companies included
in the S & P MidCap 400 Index.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO (Small Cap
Stocks): Seeks long-term capital appreciation by investing
in a diversified, actively managed portfolio of equity
8
<PAGE>
securities, primarily of companies whose total market
capitalization lies within the range of companies included
in the Russell 2000 Growth Index or the S&P SmallCap 600
Index.
FIDELITY VIP II ASSET MANAGER PORTFOLIO (Balanced or Total
Return): Seeks high total return with reduced risk over the
long-term by allocating its assets among domestic and
foreign stocks, bonds and short-term fixed-income
instruments.
FIDELITY VIP II INVESTMENT GRADE BOND PORTFOLIO (Fixed
Income - Intermediate Term Bonds): Seeks as high a level of
current income as is consistent with the preservation of
capital by investing in a broad range of investment-grade
fixed-income securities.
FIDELITY VIP EQUITY-INCOME PORTFOLIO (Large Cap Stocks):
Seeks reasonable income by investing primarily in
income-producing equity securities, with some potential for
capital appreciation, seeking a yield that exceeds the
composite yield on the securities comprising the Standard
and Poor's Composite Index of 500 Stocks.
MFS TOTAL RETURN SERIES (Balanced or Total Return): Seeks
primarily to obtain above-average income (compared to a
portfolio invested entirely in equity securities),
consistent with the prudent employment of capital, and
secondarily to provide a reasonable opportunity for growth
of capital and income.
MFS UTILITIES SERIES (Specialty): Seeks capital growth and
current income (income above that available from a portfolio
invested entirely in equity securities) by investing, under
normal circumstances, at least 65% of its assets in equity
and debt securities of utility companies.
MFS WORLD GOVERNMENTS SERIES (International Fixed Income):
Seeks not only preservation, but also growth, of capital
together with moderate current income through a
professionally managed, internationally diversified
portfolio consisting primarily of debt securities and to a
lesser extent equity securities.
NEUBERGER&BERMAN AMT BALANCED PORTFOLIO (Balanced or Total
Return): Seeks long-term capital growth and reasonable
current income without undue risk to principal.
NEUBERGER&BERMAN AMT LIMITED MATURITY BOND PORTFOLIO (Short
to Intermediate Term Bonds): Seeks the highest current
income consistent with low risk to principal and liquidity;
and secondarily, total return.
NEUBERGER&BERMAN AMT PARTNERS PORTFOLIO (Large Cap Stocks):
Seeks capital growth. Invests principally in common stocks
of medium to large capitalization established companies,
using the value-oriented investment approach. The Portfolio
seeks capital growth through an investment approach that is
designed to increase capital with reasonable risk. The
portfolio manager seeks securities believed to be
undervalued based on strong fundamentals such as low
price-to-earnings ratios, consistent cash flow, and support
from asset values.
OCC GLOBAL EQUITY PORTFOLIO (International Stocks): Seeks
long-term capital appreciation through a global investment
strategy primarily involving equity securities.
OCC MANAGED PORTFOLIO (Balanced or Total Return): Seeks
growth of capital over time through investment in a
portfolio of common stocks, bonds and cash equivalents, the
percentage of which will vary based on management's
assessments of relative investment values.
OCC SMALL CAP PORTFOLIO (Small Cap Stocks): Seeks capital
appreciation through investments in a diversified portfolio
of equity securities of companies with market
capitalizations of under $1 billion.
The Neuberger&Berman AMT Partners Portfolio,
Neuberger&Berman Limited Maturity Bond Portfolio, Fidelity
VIP Equity-Income Portfolio, Fidelity VIP II Asset Manager
Portfolio, Fidelty VIP High Income Portfolio, Fidelity VIP
Overseas Portfolio, MFS Total Return Series, MFS Utilities
Series, MFS World Governments Series, OCC Global Equity
Portfolio, OCC Managed Portfolio, and the OCC Small Cap
Portfolio funds may invest in non-investment grade, high
yield, high-risk debt securities (commonly referred to as
"junk bonds"), as detailed in the individual Fund
prospectuses.
9
<PAGE>
EXPENSE DATA
The purpose of the following Table is to help Purchasers and prospective
purchasers understand the costs and expenses that are borne, directly and
indirectly, by Purchasers assuming that all Net Premium Payments are allocated
to the Variable Account. The table reflects expenses of the Variable Account as
well as of the individual Funds underlying the Variable Sub-Accounts. The
Mortality and Expense Risk Charge shown is the currently charged rate during the
first ten Policy Years. It currently declines to .25% per year thereafter and is
guaranteed not to exceed .90% per year.
FEE TABLE
<TABLE>
<CAPTION>
FIDELITY VARIABLE INSURANCE
PRODUCTS FUNDS
---------------------------------
ALGER AMERICAN FUND VIP II
---------------------------------------------------------------------- VIP II VIP INVESTMENT
ALGER AMERICAN ALGER AMERICAN ALGER AMERICAN ASSET EQUITY- GRADE
ALGER AMERICAN LEVERAGED MIDCAP GROWTH SMALL CAP MANAGER INCOME BOND
GROWTH PORTFOLIO ALLCAP PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------- ----------------- --------------- --------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT
ANNUAL EXPENSES
Mortality and
Expense Risk
Charge............. 0.45% 0.45% 0.45% 0.45% 0.45% 0.45% 0.45%
Total Separate
Account Annual
Expenses........... 0.45% 0.45% 0.45% 0.45% 0.45% 0.45% 0.45%
FUND PORTFOLIO
ANNUAL EXPENSES
Management Fees..... 0.75% 0.85% 0.80% 0.85% 0.64% 0.51% 0.45%
Other Expenses...... 0.04% 0.24% 0.04% 0.03% 0.10% 0.07% 0.13%
Total Fund Portfolio
Annual Expenses.... 0.79% 1.09%(1) 0.84% 0.88% 0.74%(2) 0.58%(2) 0.58%
</TABLE>
<TABLE>
<S> <C>
<FN>
- ------------------------
(1) Included in Other Expenses of the Alger American Leveraged AllCap Portfolio
is 0.03% of interest expense.
(2) A portion of the brokerage commissions that certain funds paid was used to
reduce funds expenses. In addition, certain funds have entered into
arrangements with their custodian and transfer agent whereby interest
earned on uninvested cash balances was used to reduce custodian and
transfer agent expenses. Including these reductions, Total Fund Portfolio
Annual Expenses would have been 0.73% for the VIP II Asset Manager
Portfolio and 0.56% for the VIP Equity-Income Portfolio.
</TABLE>
10
<PAGE>
The table does not reflect the monthly deductions for the cost of insurance and
any riders, nor does it reflect the monthly deduction of $15 during the first
Policy Year, and currently, $5 thereafter for administrative expenses. The
information set forth should be considered together with the information
provided in this Prospectus under the heading "Charges and Fees", and in each
Fund's Prospectus. All expenses are expressed as a percentage of average account
value.
<TABLE>
<CAPTION>
MFS VARIABLE INSURANCE TRUST NEUBERGER&BERMAN
- --------------------------------------- ADVISERS MANAGEMENT TRUST (5) OCC ACCUMULATION TRUST
MFS ------------------------------------- -------------------------------------
TOTAL MFS MFS WORLD LIMITED GLOBAL
RETURN UTILITIES GOVERNMENTS BALANCED MATURITY PARTNERS EQUITY MANAGED SMALL CAP
SERIES SERIES SERIES PORTFOLIO BOND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------- ----------- ----------- -------- --------------- -------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.45% 0.45% 0.45% 0.45% 0.45% 0.45% 0.45% 0.45% 0.45%
0.45% 0.45% 0.45% 0.45% 0.45% 0.45% 0.45% 0.45% 0.45%
0.75% 0.75% 0.75% 0.85%(6) 0.65%(6) 0.84%(6) 0.80% 0.80% 0.80%
0.25%(4) 0.25%(4) 0.25%(4) 0.24% 0.13% 0.11% 0.63% 0.10% 0.22%
1.00%(3) 1.00%(3) 1.00%(3) 1.09% 0.78% 0.95% 1.43%(7) 0.90%(7) 1.02%(7)
</TABLE>
<TABLE>
<S> <C>
- ------------------------
(3) The Adviser has agreed to bear expenses for each Series, subject to
reimbursement by each Series, such that each Series' "Other Expenses" shall
not exceed 0.25% of the average daily net assets of the Series during the
current fiscal year. Otherwise, "Other Expenses" for the Total Return
Series, Utilities Series and World Government Series would be 1.35%, 2.00%
and 1.28% respectively, and "Total Fund Portfolio Annual Expenses" would be
2.10% 2.75% and 2.03% respectively, for these Series. See "Information
Concerning Shares of Each Series--Expenses."
(4) Each Series has an expense offset arrangement which reduces the Series'
custodian fee based upon the amount of cash maintained by the Series with
its custodian and dividend disbursing agent, and may enter into other such
arrangements and directed brokerage arrangements (which would also have the
effect of reducing the Series' expenses). Any such fee reductions are not
reflected under "Other Expenses".
(5) Neuberger&Berman Advisers Management Trust is divided into portfolios
("Portfolios"), each of which invests all of its net investable assets in a
corresponding series ("Series") of Advisers Managers Trust.
(6) The figures reported here are "Management and Administration Fees" which
include the aggregate of the administration fees paid by the Portfolio and
the management fees paid by its corresponding Series. Similarly, "Other
Expenses" includes all other expenses of the Portfolio and its
corresponding Series.
(7) The annual expenses of OCC Accumulation Trust Portfolios (the "Portfolios")
as of December 31, 1996 have been restated to reflect new management fee
and expense limitation arrangements in effect as of May 1, 1996.
Additionally, Other Expenses are shown gross of certain expense offsets
afforded the Portfolios which effectively lowered overall custody expenses.
Effective May 1, 1996, the expenses of the Portfolios were contractually
limited by OpCap Advisors so that their respective annualized operating
expenses (net of any expense offsets) do not exceed 1.25% of their
respective average daily net assets. Furthermore, through December 31,
1997, the annualized operating expenses of the Managed and Small Cap
Portfolios will be voluntarily limited by OpCap Advisors so that annualized
operating expenses (net of any expense offsets) of these Portfolios do not
exceed 1.00% of their respective average daily net assets. Without such
contractual and voluntary expense limitations and without giving effect to
any expense offsets, the Management Fees, Other Expenses and Total
Portfolio Annual Expenses incurred for the fiscal year ended December 31,
1996 would have been: .80%, 1.04% and 1.84%, respectively, for the Global
Equity Portfolio; .80%, .10% and .90%, respectively, for the Managed
Portfolio; and .80%, .26% and 1.06%, respectively, for the Small Cap
Portfolio.
</TABLE>
11
<PAGE>
GENERAL
There is no assurance that the investment objective of any
of the Funds will be met. A Policy Owner bears the complete
investment risk for Accumulation Values allocated to a
Sub-Account. Each of the Sub-Accounts involves inherent
investment risk, and such risk varies significantly among
the Sub-Accounts. Policy Owners should read each Fund's
prospectus carefully and understand the Funds' relative
degrees of risk before making or changing investment
choices. Additional Funds may, from time to time, be made
available as investments to underlie the Policies. However,
the right to make such selections will be limited by the
terms and conditions imposed on such transactions by the
Company. (See "Premium Payments.")
Required premium levels will vary based on market
performance. In a prolonged market downturn, affecting all
Sub-Accounts, additional Premium Payments may be necessary
to maintain the level of coverage or to avoid lapsing of the
Policy. Review of periodic contract statements is strongly
suggested to determine appropriate premium requirements.
SUBSTITUTION OF SECURITIES
If the shares of any Fund should no longer be available for
investment by the Variable Account or if, in the judgment of
the Company, further investment in such shares should become
inappropriate in view of the purpose of the investment
objectives of the Policies, the Company may substitute
shares of another Fund. No substitution of securities in any
Sub-Account may take place without prior approval of the
Commission and under such requirements as it may impose.
VOTING RIGHTS
In accordance with its view of present applicable law, the
Company will vote the shares of each Fund held in the
Variable Account at special meetings of the shareholders of
the particular Trust in accordance with written instructions
received from persons having the voting interest in the
Variable Account. The Company will vote shares for which it
has not received instructions, as well as shares
attributable to it, in the same proportion as it votes
shares for which it has received instructions. The Trusts do
not hold regular meetings of shareholders.
The number of shares which a person has a right to vote will
be determined as of a date to be chosen by the appropriate
Trust not more than sixty (60) days prior to the meeting of
the particular Trust. Voting instructions will be solicited
by written communication at least fourteen (14) days prior
to the meeting.
The Funds' shares are issued and redeemed only in connection
with variable annuity contracts and variable life insurance
policies issued through separate accounts of the Company and
other life insurance companies. The Trusts do not foresee
any disadvantage to Policy Owners arising out of the fact
that shares may be made available to separate accounts which
are used in connection with both variable annuity and
variable life insurance products. Nevertheless, the Trusts'
Boards intend to monitor events in order to identify any
material irreconcilable conflicts which may possibly arise
and to determine what action, if any, should be taken in
response thereto. If such a conflict were to occur, one of
the separate accounts might withdraw its investment in a
Fund. This might force a Fund to sell portfolio securities
at disadvantageous prices.
12
<PAGE>
FUND PARTICIPATION AGREEMENTS
The Company has entered into agreements with the various
Trusts and their advisers or distributors under which the
Company makes the Funds available under the Policies and
performs certain administrative services. In some cases, the
advisers or distributors may compensate the Company
therefor.
DEATH BENEFIT
DEATH BENEFIT OPTIONS
Two different Death Benefit Options are available. The
amount payable under either option will be determined as of
the date of the Insured's death.
Under OPTION 1 the Death Benefit will be the greater of the
Specified Amount (a minimum of $50,000 as of the date of
this Prospectus), or the applicable percentage (the
"Corridor Percentage") of the Accumulation Value required to
maintain the Policy as a "life insurance contract" for tax
purposes (the "Corridor Death Benefit.") The Corridor
Percentage is 250% through the Insured's age 40 and
decreases in accordance with the table in "Payment of Death
Benefit" to 100% at the Insured's age 95. Option 1 provides
a level Death Benefit until the Corridor Death Benefit
exceeds the Specified Amount.
Under OPTION 2 the Death Benefit will be the greater of the
Specified Amount (a minimum of $50,000 as of the date of
this Prospectus), plus the Accumulation Value, or the
Corridor Death Benefit. Option 2 provides a varying Death
Benefit which increases or decreases over time, depending on
the amount of premium paid and the investment performance of
the underlying funding options chosen.
Under both Option 1 and Option 2, the proceeds payable upon
death will be the Death Benefit, reduced by partial
surrenders and by the amount necessary to repay any loans in
full. Option 1 will be in effect unless Option 2 has been
elected in the application for the Policy or unless a change
has been allowed.
CHANGES IN DEATH BENEFIT OPTION
A Death Benefit Option change will be allowed upon the
Owner's written request to the Annuity & Variable Life
Services Center in form satisfactory to the Company, subject
to the following conditions:
- The change will take effect on the Monthly Anniversary
Day or on the next Valuation Day following the date of
receipt of the request.
- There will be no change in the Surrender Charge, and
evidence of insurability may be required.
- No change in the Death Benefit Option may reduce the
Specified Amount below $50,000.
- For changes from Option 1 to Option 2, the new Specified
Amount will equal the Specified Amount less the
Accumulation Value at the time of the change.
- For changes from Option 2 to Option 1, the new Specified
Amount will equal the Specified Amount plus the
Accumulation Value at the time of the change.
GUARANTEED DEATH BENEFIT PROVISION
The Guaranteed Death Benefit Provision assures that, as long
as the Guaranteed Initial Death Benefit Premium is paid, the
Death Benefit will not be less than the Initial
13
<PAGE>
Specified Amount during the first five Policy Years even if
the Surrender Value is insufficient to cover the current
Monthly Deductions, assuming there have been no loans or
partial surrenders.
Changes in Initial Specified Amount, partial surrenders, and
Death Benefit Option changes during the first five Policy
Years may affect the Guaranteed Death Benefit Premium. These
events and loans may also affect the Policy's ability to
remain in force.
PAYMENT OF DEATH BENEFIT
The Death Benefit under the Policy will be paid in a lump
sum within seven days after receipt at the Annuity &
Variable Life Services Center of due proof of the Insured's
death (a certified copy of the death certificate), unless
the Owner or the Beneficiary has elected that it be paid
under one or more of the Settlement Options (See "Settlement
Options"). Payment of the Death Benefit may be delayed if
the Policy is being contested.
While the Insured is living, the Owner may elect a
Settlement Option for the Beneficiary and deem it
irrevocable, and may revoke or change a prior election. The
Beneficiary may make or change an election within 90 days of
the death of the Insured, unless the Owner has made an
irrevocable election.
All or a part of the Death Benefit may be applied under one
or more of the Settlement Options, or such other options as
the Company may make available in the future.
If the Policy is assigned as collateral security, the
Company will pay any amount due the assignee in one lump
sum. Any excess Death Benefit due will be paid as elected.
The Death Benefit under the Policy at any point in time must
be at least the following "Corridor Percentage" of the
Accumulation Value based on the Insured's attained age:
<TABLE>
<CAPTION>
INSURED'S CORRIDOR INSURED'S CORRIDOR
ATTAINED AGE PERCENTAGE ATTAINED AGE PERCENTAGE
- ------------- ------------- --------------- -------------
<S> <C> <C> <C>
0-40 250% 70 115%
41 243 71 113
42 236 72 111
43 229 73 109
44 222 74 107
-- - --
45 215 75 105
46 209 76 105
47 203 77 105
48 197 78 105
49 191 79 105
-- - --
50 185 80 105
51 178 81 105
52 171 82 105
53 164 83 105
54 157 84 105
-- - --
55 150 85 105
56 146 86 105
57 142 87 105
58 138 88 105
59 134 89 105
-- - --
60 130 90 105
61 128 91 104
62 126 92 103
63 124 93 102
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
INSURED'S CORRIDOR INSURED'S CORRIDOR
ATTAINED AGE PERCENTAGE ATTAINED AGE PERCENTAGE
- ------------- ------------- --------------- -------------
<S> <C> <C> <C>
64 122 94 101
-- - --
65 120 95 100
66 119 96 100
67 118 97 100
68 117 98 100
69 116 99 100
-- - --
</TABLE>
CHANGES IN SPECIFIED AMOUNT
Changes in the Specified Amount of a Policy can be made by
submitting a written request to the Annuity & Variable Life
Services Center in form satisfactory to the Company.
Changes in the Specified Amount are subject to the following
conditions:
- Satisfactory evidence of insurability and a supplemental
application may be required for an increase in the
Specified Amount.
- An increase in the Specified Amount will increase the
Surrender Charge.
- As of the date of this Prospectus, the minimum allowable
increase in Specified Amount is $1,000.
- No decrease may reduce the Specified Amount to less than
$50,000.
- No decrease may reduce the Specified Amount below the
minimum required to maintain the Policy's status under
the Code as a life insurance policy.
PREMIUM PAYMENTS; TRANSFERS
PREMIUM PAYMENTS
The Policies provide for flexible premium payments. Premium
Payments are payable in the frequency and in the amount
selected by the Policy Owner. The initial Premium Payment is
due on the Issue Date and is payable in advance. The minimum
payment is the amount necessary to maintain a positive
Surrender Value or Guaranteed Minimum Death Benefit. Each
subsequent Premium Payment must be at least $100. The
Company reserves the right to decline any application or
Premium Payment.
After the initial Premium Payment, all Premium Payments must
be sent directly to the Annuity & Variable Life Services
Center and will be deemed received when actually received
there.
The Policy Owner may elect to increase, decrease or change
the frequency of Premium Payments.
PLANNED PREMIUMS are Premium Payments scheduled when a
Policy is applied for. They can be billed annually,
semiannually or quarterly. Pre-authorized automatic monthly
check payments may also be arranged.
ADDITIONAL PREMIUMS are any Premium Payments made ($100
minimum) in addition to Planned Premiums.
GUARANTEED INITIAL DEATH BENEFIT PREMIUM, if paid during the
first five Policy Years, enables the Policy to remain in
force regardless of investment performance, assuming no
surrenders or loans during that time. The Guaranteed Initial
Death Benefit Premium is stated in the Policy
Specifications. An increase in Specified Amount would
require a recalculation of the Guaranteed Initial Death
Benefit Premium. If this premium is not paid, or there are
partial surrenders or loans taken during the first five
Policy Years, the
15
<PAGE>
Policy will lapse during the first five Policy Years if the
Surrender Value is less than the next Monthly Deduction,
just as it would after the first five Policy Years at any
time the Surrender Value is less than the next Monthly
Deduction.
Payment of Planned Premiums or Additional Premiums in any
amount will not, except as noted above, guarantee that the
Policy will remain in force. Conversely, failure to pay
Planned Premiums or Additional Premiums will not necessarily
cause a Policy to lapse (See "Guaranteed Death Benefit
Provision").
PREMIUM INCREASES. At any time, the Owner may increase
Planned Premiums, or pay Additional Premiums, but:
- Evidence of insurability may be required if the
Additional Premium or the new Planned Premium during the
current Policy Year would increase the difference between
the Death Benefit and the Accumulation Value. If
satisfactory evidence of insurability is requested and
not provided, the increase in premium will be refunded
without interest and without participation of such
amounts in any underlying funding options.
- In no event may the total of all Premium Payments exceed
the then-current maximum premium limitations established
by federal law for a Policy to qualify as life insurance.
If, at any time, a Premium Payment would result in total
premiums exceeding such maximum premium limitation, the
Company will only accept that portion of the Premium
Payment which will make total premiums equal the maximum.
Any part of the premium in excess of that amount will be
returned or applied as otherwise agreed and no further
Premium Payments will be accepted until allowed by the
then-current maximum premium limitations prescribed by
law.
- If there is any Policy indebtedness, any additional Net
Premium Payments will be used first as a loan repayment
with any excess applied as an additional Net Premium
Payment.
ALLOCATION OF NET PREMIUM PAYMENTS
At the time of purchase of the Policy, the Owner must decide
how to allocate Net Premium Payments among the Sub-Accounts
and the Fixed Account. Allocation to any one Variable
Account Sub-Account or to the Fixed Account must be in whole
percentages. No allocation can be made which would result in
a Sub-Account of less than $50 or a Fixed Account value of
less than $2,500. Further, at this time, no more than 18
Sub-Accounts may be opened during the life of the Policy.
The Company may expand this number at a future date. For
each Variable Account Sub-Account, the Net Premium Payments
are converted into Accumulation Units. The number of
Accumulation Units credited to the Policy is determined by
dividing the Net Premium Payment allocated to the
Sub-Account by the value of the Accumulation Unit for the
Sub-Account.
During the Right-To-Examine period, the Net Premium Payment
will be allocated to the Fixed Account, and interest
credited from the Issue Date if the Premium Payment was
received on or before the Issue Date. The Company will
allocate the initial Net Premium Payment directly to the
Sub-Account(s) selected by the Owner within three days after
expiration of the Right-To-Examine period.
Unless the Company is directed otherwise by the Policy
Owner, subsequent Net Premium Payments will be allocated on
the same basis as the most recent previous Net Premium
Payment. Such allocation will occur as of the next Valuation
Period after each payment is received.
The allocation for future Net Premium Payments may be
changed at any time free of charge. Any new allocation will
apply to Premium Payments made more than one week
16
<PAGE>
after the Company receives the notice of the new allocation.
Any new allocation is subject to the same requirements as
the initial allocation. The Company may, at its sole
discretion, waive minimum premium allocation requirements.
TRANSFERS
Before the Insured attains age 100, values may, at any time,
be transferred ($500 minimum) from one Sub-Account to
another, or from the Variable Account to the Fixed Account.
Within the 30 days after each Policy Anniversary, the Owner
may also transfer a portion of the Fixed Account Value to
one or more Sub-Accounts, until the Insured attains age 100.
Transfers from the Fixed Account are allowed in the 30-day
period after a Policy Anniversary and will be effective as
of the next Valuation Day after a request is received in
good order at the Annuity & Variable Life Services Center.
The cumulative amount of transfers from the Fixed Account
within any such 30-day period cannot exceed 20% of the Fixed
Account Value on the most recent Policy Anniversary. The
Company may further limit transfers from the Fixed Account
at any time.
Subject to the above restrictions, up to 12 transfers may be
made in any Policy Year without charge, and any value
remaining in the Fixed Account or a Sub-Account after a
transfer must be at least $500. Transfers may be made in
writing or by telephone unless the Policy Owner has
indicated in writing in the application or otherwise that
telephone transfers are not to be permitted. To make a
telephone transfer, the Policy Owner must call the Annuity &
Variable Life Services Center and provide, as
identification, his or her Policy Number and a requested
portion of his or her Social Security number. A customer
service representative will then come on the line and, upon
ascertaining that telephone transfers are permitted for that
Policy, take the transfer request, which will be processed
as of the next close of business and confirmed the day after
that. The Company disclaims all liability for losses
resulting from unauthorized or fraudulent telephone
transactions, but acknowledges that if it does not follow
these procedures, which it believes to be reasonable, it may
be liable for such losses.
Any transfer among the Sub-Accounts or to the Fixed Account
will result in the crediting and cancellation of
Accumulation Units based on the Accumulation Unit values
next determined after a written request is received at the
Annuity & Variable Services Center. Transfer requests must
be received by the Variable Products Center by 4:00 Eastern
Time in order to be effective that day. Any transfer made
which causes the remaining value of Accumulation Units for a
Sub-Account to be less than $500 will result in those
remaining Accumulation Units being cancelled and their
aggregate value reallocated proportionately among the other
funding options chosen. The Policy Owner should carefully
consider current market conditions and each Sub-Account's
investment policies and related risks before allocating
money to the Sub-Accounts. See pages 9-13 of this
Prospectus.
The Company, at its sole discretion, may waive minimum
balance requirements on the Sub-Accounts.
OPTIONAL VARIABLE ACCOUNT SUB-ACCOUNT ALLOCATION PROGRAM
The Owner may elect to enroll in either of the following
programs. However, both programs cannot be in effect at the
same time.
DOLLAR COST AVERAGING
Dollar Cost Averaging is a program which, if elected by the
Owner, systematically allocates specified dollar amounts
from the Fixed Account to one or more of the Contract's
Variable Account Sub-Accounts at regular intervals as
selected by the Owner.
17
<PAGE>
By allocating on a regularly scheduled basis as opposed to
allocating the total amount at one particular time, an Owner
may be less susceptible to the impact of market
fluctuations.
Dollar Cost Averaging may be elected by establishing a Fixed
Account value of at least $1,000. The minimum amount per
month to allocate is $50 (subject to the 18 Sub-Account
Limitation described under "Allocation of Net Premium
Payments" above). Enrollment in this program may occur at
any time by calling the Annuity & Variable Life Services
Center or by providing the information requested on the
Dollar Cost Averaging election form to the Company, and
provided that sufficient value is in the Fixed Account.
Transfers to the Fixed Account are not permitted under
Dollar Cost Averaging. The Company may, at its sole
discretion, waive Dollar Cost Averaging minimum deposit and
transfer requirements.
Dollar Cost Averaging will terminate when any of the
following occurs: (1) the number of designated transfers has
been completed; (2) the value of the Fixed Account is
insufficient to complete the next transfer; (3) the Owner
requests termination by telephone or in writing and such
request is received at least one week prior to the next
scheduled transfer date to take effect that month; or (4)
the Policy is surrendered.
There is no current charge for Dollar Cost Averaging but the
Company reserves the right to charge for this program.
AUTOMATIC REBALANCING
Automatic Rebalancing is an option which, if elected by the
Owner, on the initial application, or thereafter by calling
the Annuity Variable Life Services Center, periodically
restores to a pre-determined level the percentage of Policy
Value allocated to each Sub-Account (e.g. 20% Balanced, 50%
Growth, 30% Utilities). This pre-determined level will be
the allocation initially selected on the application, unless
subsequently changed. The Automatic Rebalancing allocation
may be changed at any time by submitting a written request
to the Company or by calling the Annuity & Variable Life
Services Center.
If Automatic Rebalancing is elected, all Net Premium
Payments allocated to the Sub-Accounts must be subject to
Automatic Rebalancing. The Fixed Account is not available
for Automatic Rebalancing.
Automatic Rebalancing may take place on either a quarterly,
semi-annual or annual basis, as selected by the Owner. Once
Automatic Rebalancing is activated, any Sub-Account
transfers executed outside of the rebalancing option will
terminate the Automatic Rebalancing. Any subsequent premium
payment or withdrawal that modifies the net account balance
within each Sub-Account may also cause termination of the
Automatic Rebalancing. Any such termination will be
confirmed to the Owner. The Owner may terminate the
Automatic Rebalancing or re-enroll at any time by calling or
writing the Annuity & Variable Life Services Center.
There is no current charge for Automatic Rebalancing but the
Company reserves the right to charge for this program.
CHARGES; FEES
PREMIUM LOAD
A deduction of 3.5% of each Premium Payment will be made to
cover the premium load. This load represents state taxes and
federal income tax liabilities. The 2.35% portion of this
deduction for premium taxes may be higher or lower than the
actual tax imposed by the applicable jurisdiction; it is in
the mid-range of state premium taxes,
18
<PAGE>
which range from 1.75% to 5.0%. The Company estimates 1.15%
of each Premium Payment will be used to meet federal income
tax liabilities attributable to the treatment of deferred
acquisition costs.
MONTHLY DEDUCTIONS
A Monthly Deduction is made from the Net Accumulation Value
for administrative expenses. The monthly administrative fee
is $15 during the first Policy Year and, currently, $5
during subsequent Policy Years. This charge is for items
such as premium billing and collection, policy value
calculation, confirmations and periodic reports and will not
exceed the Company's costs. For subsequent Policy Years,
this monthly fee will never exceed $10.
A Monthly Deduction is also made from the Net Accumulation
Value for the Cost of Insurance and any charges for
supplemental riders. The Cost of Insurance depends on the
attained age, risk class and gender classification (in
accordance with state law) of the Insured and the current
Net Amount at Risk.
The Cost of Insurance is determined by dividing the Death
Benefit at the previous Monthly Anniversary Day by
1.0032737, subtracting the Accumulation Value at the
previous Monthly Anniversary Day, and multiplying the result
(the Net Amount at Risk) by the applicable Cost of Insurance
Rate as determined by the Company. The Guaranteed Maximum
Cost of Insurance Rates, per $1,000 of Net Amount at Risk,
for standard risks are set forth in the following Table
based on the 1980 Commissioners Standard Ordinary Mortality
Tables, Age Nearest Birthday (1980 CSO); or, for unisex
rates, on the 1980 CSO-B Table.
<TABLE>
<CAPTION>
ATTAINED
AGE MALE FEMALE UNISEX
(NEAREST MONTHLY MONTHLY MONTHLY
BIRTHDAY) RATE RATE RATE
- ----------- --------- --------- ---------
<S> <C> <C> <C>
0 0.34845 0.24089 0.32677
1 0.08917 0.07251 0.08667
2 0.08251 0.06750 0.07917
3 0.08167 0.06584 0.07834
4 0.07917 0.06417 0.07584
5 0.07501 0.06334 0.07251
6 0.07167 0.06084 0.06917
7 0.06667 0.06000 0.06584
8 0.06334 0.05834 0.06250
9 0.06167 0.05750 0.06084
10 0.06084 0.05667 0.06000
11 0.06417 0.05750 0.06250
12 0.07084 0.06000 0.06917
13 0.08251 0.06250 0.07834
14 0.09584 0.06887 0.09001
15 0.11085 0.07084 0.10334
16 0.12585 0.07601 0.11585
17 0.13919 0.07917 0.12752
18 0.14836 0.08167 0.13502
19 0.15502 0.08501 0.14085
20 0.15836 0.08751 0.14502
21 0.15919 0.08917 0.14585
22 0.15752 0.09084 0.14419
23 0.15502 0.09251 0.14252
24 0.15189 0.09501 0.14085
25 0.14752 0.09668 0.13752
26 0.11419 0.09918 0.13585
27 0.14252 0.10168 0.13418
28 0.14169 0.10501 0.13418
29 0.14252 0.10635 0.13585
<CAPTION>
ATTAINED
AGE MALE FEMALE UNISEX
(NEAREST MONTHLY MONTHLY MONTHLY
BIRTHDAY) RATE RATE RATE
- ----------- --------- --------- ---------
<S> <C> <C> <C>
30 0.14419 0.11251 0.13752
31 0.14836 0.11668 0.14169
32 0.15252 0.12085 0.14585
33 0.15919 0.12502 0.15252
34 0.16889 0.13168 0.15919
35 0.17586 0.13752 0.16836
36 0.18670 0.14669 0.17837
37 0.20004 0.15752 0.19170
38 0.21505 0.17003 0.20588
39 0.23255 0.18503 0.22338
40 0.25173 0.20171 0.24173
41 0.27424 0.22005 0.26340
42 0.29675 0.23922 0.28508
43 0.32260 0.25757 0.31010
44 0.34929 0.27674 0.33428
45 0.37931 0.29675 0.36263
46 0.41017 0.31677 0.39182
47 0.44353 0.33761 0.42268
48 0.47856 0.36096 0.45437
49 0.51777 0.38598 0.49107
50 0.55948 0.41350 0.53028
51 0.60870 0.44270 0.57533
52 0.66377 0.47523 0.62539
53 0.72636 0.51276 0.68297
54 0.79730 0.55114 0.74722
55 0.87326 0.59118 0.81566
56 0.95591 0.63123 0.88996
57 1.04192 0.66961 0.96593
58 1.13378 0.70633 1.04609
59 1.23236 0.74556 1.13211
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
ATTAINED
AGE MALE FEMALE UNISEX
(NEAREST MONTHLY MONTHLY MONTHLY
BIRTHDAY) RATE RATE RATE
- ----------- --------- --------- ---------
<S> <C> <C> <C>
60 1.34180 0.78979 1.22817
61 1.46381 0.84488 1.33511
62 1.60173 0.91417 1.45796
63 1.75809 1.00267 1.59922
64 1.93206 1.10539 1.75725
65 2.12283 1.21731 1.92955
66 2.32623 1.33511 2.11195
67 2.54312 1.45461 2.30614
68 2.77350 1.57247 2.50878
69 3.02328 1.69955 2.72909
70 3.30338 1.84590 2.97466
71 3.62140 2.02325 3.25640
72 3.98666 2.24419 3.58279
73 4.40599 2.51548 3.95978
74 4.87280 2.83552 4.38330
75 5.37793 3.19685 4.84334
76 5.91225 3.59370 5.33245
77 6.46824 4.01942 5.84227
78 7.04089 4.47410 6.36948
79 7.64551 4.97042 6.92851
<CAPTION>
ATTAINED
AGE MALE FEMALE UNISEX
(NEAREST MONTHLY MONTHLY MONTHLY
BIRTHDAY) RATE RATE RATE
- ----------- --------- --------- ---------
<S> <C> <C> <C>
80 8.30507 5.52957 7.54229
81 9.03761 6.17118 8.22883
82 9.86724 6.91414 9.01216
83 10.80381 7.77075 9.90124
84 11.82571 8.72632 10.87533
85 12.91039 9.76952 11.92213
86 14.03509 10.89151 13.01471
87 15.18978 12.08770 14.15507
88 16.36948 13.35774 15.33494
89 17.57781 14.70820 16.56493
90 18.82881 16.15259 17.85746
91 20.14619 17.71416 19.23699
92 21.57655 19.43814 20.76665
93 23.20196 21.40786 22.49837
94 25.28174 23.63051 24.70915
95 28.27411 27.16158 27.82758
96 33.10577 32.32378 32.78845
97 41.68476 41.21204 41.45783
98 58.01259 57.81394 57.95663
99 90.90909 90.90909 90.90909
</TABLE>
These Monthly Deductions are deducted proportionately from
the value of each funding option. This is accomplished for
the Sub-Accounts by canceling Accumulation Units and
withdrawing the value of the canceled Accumulation Units
from each funding option in the same proportion as their
respective values have to the Net Accumulation Value. The
Monthly Deductions are made on the Monthly Anniversary Day.
If the Insured is still living at age 100 and the Policy has
not been surrendered, no further Monthly Deductions are
taken and any Variable Account Value is transferred to the
Fixed Account. The Policy will then remain in force until
surrender or the Insured's death.
TRANSACTION FEE FOR EXCESS TRANSFERS
There will be a $25 transaction fee for each transfer
between funding options in excess of 12 during any Policy
Year.
MORTALITY AND EXPENSE RISK CHARGE
For mortality and expense risks, a daily deduction,
currently equivalent to .45% per year during the first ten
Policy Years and .25% per year thereafter, is made from
amounts held in the Variable Account. This deduction is
guaranteed not to exceed .90% per year.
SURRENDER CHARGE
Upon surrender of a Policy, a surrender charge may apply, as
described below. This charge is in part a deferred sales
charge and in part a recovery of certain first year
administrative costs.
The initial Surrender Charge, as specified in the Policy, is
based on the Initial Specified Amount and the amount of
Premium Payments during the first two Policy Years. Once
determined, the Surrender Charge will remain the same dollar
amount during the third through fifth Policy Years.
Thereafter, it declines monthly at a rate of 20% per year so
that after the end of the tenth Policy Year (assuming no
increases in the Specified Amount) the Surrender Charge will
be zero. Thus, the Surrender Charge at the end of the sixth
Policy Year would be 80% of the Surrender Charge at the end
of the fifth Policy Year, at the end of the seventh Policy
Year would be 60% of the Surrender Charge at the end of the
fifth Policy Year, and so forth. However, in no event will
the Surrender Charge exceed the maximum allowed by state or
federal law.
20
<PAGE>
If the Specified Amount is increased, a new Surrender Charge
will be applicable, in addition to any existing Surrender
Charge. The Surrender Charge applicable to the increase will
be equal to the Surrender Charge on a new policy whose
Specified Amount equals the amount of the increase. As of
the date of this Prospectus, the minimum allowable increase
in Specified Amount is $1,000. The Company may change this
at any time.
If the Specified Amount is decreased while the Surrender
Charge applies, the Surrender Charge will remain the same.
No Surrender Charge is imposed on a partial surrender, but
an administrative fee of $25 is imposed, allocated pro-rata
among the Sub-Accounts (and, where applicable, the Fixed
Account) from which the partial surrender proceeds are taken
unless the Owner instructs the Company otherwise.
The portion of the Surrender Charge applied to reimburse the
Company for sales and promotional expense is at most 30% of
the sum of Premium Payments in the first two Policy Years up
to one Guideline Annual Premium, plus 10% of Premium
Payments in the first two Policy Years between one and two
times one Guideline Annual Premium plus 9% of Premium
Payments in the first two Policy Years in excess of two
times one Guideline Annual Premium. The portion applicable
to administrative expense is $6.00 per $1,000 of Initial
Specified Amount. Under certain circumstances involving the
payment of very large premiums during the first two Policy
Years, a lesser portion of the Surrender Charge will be
applied to reimburse the Company for sales and promotional
expense, to the extent required by federal or state law. Any
surrenders may result in tax implications. See "Tax
Matters".
Based on its actuarial determination, the Company does not
anticipate that the Surrender Charge will cover all sales
and administrative expenses which the Company will incur in
connection with the Policy. Any such shortfall, including
but not limited to payment of sales and distribution
expenses, would be available for recovery from the General
Account of the Company, which supports insurance and annuity
obligations.
THE FIXED ACCOUNT
The Fixed Account is funded by the assets of the Company's
General Account. Amounts held in the Fixed Account are
guaranteed and will be credited with interest at rates as
determined from time to time by the Company, but not less
than 4% per year.
THE FIXED ACCOUNT IS MADE UP OF THE GENERAL ASSETS OF THE
COMPANY OTHER THAN THOSE ALLOCATED TO ANY SEPARATE ACCOUNT.
THE FIXED ACCOUNT IS PART OF THE COMPANY'S GENERAL ACCOUNT.
BECAUSE OF APPLICABLE EXEMPTIVE AND EXCLUSIONARY PROVISIONS,
INTERESTS IN THE FIXED ACCOUNT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT"), AND
NEITHER THE FIXED ACCOUNT NOR THE COMPANY'S GENERAL ACCOUNT
HAS BEEN REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940
(THE "1940 ACT"). THEREFORE, NEITHER THE FIXED ACCOUNT NOR
ANY INTEREST THEREIN IS GENERALLY SUBJECT TO REGULATION
UNDER THE PROVISIONS OF THE 1933 ACT OR THE 1940 ACT.
ACCORDINGLY, THE COMPANY HAS BEEN ADVISED THAT THE STAFF OF
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT REVIEWED THE
DISCLOSURE IN THIS PROSPECTUS RELATING TO THE FIXED ACCOUNT.
POLICY VALUES
ACCUMULATION VALUE
Once a Policy has been issued, each Net Premium Payment
allocated to a Sub-Account of the Variable Account is
credited in the form of Accumulation Units, representing the
Fund in which assets of that Sub-Account are invested. Each
Net Premium Payment will
21
<PAGE>
be credited to the Policy as of the end of the Valuation
Period in which it is received at the Annuity & Variable
Life Services Center (or portion thereof allocated to a
particular Sub-Account). The number of Accumulation Units
credited is determined by dividing the Net Premium Payment
by the value of an Accumulation Unit next computed after
receipt. Since each Sub-Account has a unique Accumulation
Unit value, a Policy Owner who has elected a combination of
funding options will have Accumulation Units credited from
more than one source.
The Accumulation Value of a Policy is determined by: (a)
multiplying the total number of Accumulation Units credited
to the Policy for each applicable Sub-Account by its
appropriate current Accumulation Unit value; (b) if a
combination of Sub-Accounts is elected, totaling the
resulting values; and (c) adding any values attributable to
the General Account (i.e., the Fixed Account Value and the
Loan Account Value).
The number of Accumulation Units credited to a Policy will
not be changed by any subsequent change in the value of an
Accumulation Unit. Such value may vary from Valuation Period
to Valuation Period to reflect the investment experience of
the Fund used in a particular Sub-Account.
The Fixed Account Value reflects amounts allocated to the
General Account through payment of premiums or transfers
from the Variable Account. The Fixed Account Value is
guaranteed; however, there is no assurance that the Variable
Account Value of the Policy will equal or exceed the Net
Premium Payments allocated to the Variable Account.
Each Policy Owner will be advised at least annually as to
the number of Accumulation Units which remain credited to
the Policy, the current Accumulation Unit values, the
Variable Account Value, the Fixed Account Value and the Loan
Account Value.
Accumulation Value will be affected by Monthly Deductions.
VARIABLE ACCUMULATION UNIT VALUE
The value of a Variable Accumulation Unit for any Valuation
Period is determined by multiplying the value of that
Variable Accumulation Unit for the immediately preceding
Valuation Period by the Net Investment Factor for the
current period for the appropriate Sub-Account. The Net
Investment Factor is determined separately for each
Sub-Account by dividing (a) by (b) and subtracting (c) from
the results where (a) equals the net asset value per share
of the Fund held in the Sub-Account at the end of a
Valuation Period plus the per share amount of any
distribution declared by the Fund if the "ex-dividend" date
is during the Valuation Period plus or minus taxes or
provisions for taxes, if any, attributable to the operation
of the Sub-Account during the Valuation Period; (b) equals
the net asset value per share of the Fund held in the
Sub-Account at the beginning of that Valuation Period, and
(c) is the daily charge for mortality and expense risk
multiplied by the number of days in the Valuation Period.
SURRENDER VALUE
The Surrender Value of a Policy is the amount the Owner can
receive in cash by surrendering the Policy. All or part of
the Surrender Value may be applied to one or more of the
Settlement Options. See "Surrender Charge".
22
<PAGE>
SURRENDERS
PARTIAL SURRENDERS
A partial surrender may be made at any time by written
request to the Annuity & Variable Life Services Center
during the lifetime of the Insured and while the Policy is
in force. Such request may also be made by telephone if
telephone transfers have been previously authorized in
writing. A $25 transaction fee is charged.
The amount of a partial surrender may not exceed 90% of the
Surrender Value at the end of the Valuation Period in which
the election becomes or would become effective, and may not
be less than $500.
For an Option 1 Policy (See "Death Benefit"): A partial
surrender will reduce the Accumulation Value, Death Benefit,
and Specified Amount. The Specified Amount and Accumulation
Value will be reduced by equal amounts and will reduce any
past increases in the reverse order in which they occurred.
For an Option 2 Policy (See "Death Benefit"): A partial
surrender will reduce the Accumulation Value and the Death
Benefit, but it will not reduce the Specified Amount.
The Specified Amount remaining in force after a partial
surrender may not be less than $50,000. Any request for a
partial surrender that would reduce the Specified Amount
below this amount will not be granted. In addition, if,
following the partial surrender and the corresponding
decrease in the Specified Amount, the Policy would not
comply with the maximum premium limitations required by
federal tax law, the decrease may be limited to the extent
necessary to meet the federal tax law requirements.
If, at the time of a partial surrender, the Net Accumulation
Value is attributable to more than one funding option, the
$25 transaction charge and the amount paid upon the
surrender will be taken proportionately from the values in
each funding option, unless the Policy Owner and the Company
agree otherwise.
FULL SURRENDERS
A full surrender may be made at any time. The Company will
pay the Surrender Value next computed after receiving the
Owner's written request at the Annuity & Variable Life
Services Center in a form satisfactory to the Company.
Payment of any amount from the Variable Account on a full
surrender will usually be made within seven calendar days
thereafter.
DEFERRAL OF PAYMENT AND TRANSFERS
Payment of the surrendered amount from the Variable Account
may be postponed when the New York Stock Exchange is closed
and for such other periods as the Commission may require.
Payment or transfer from the Fixed Account may be deferred
up to six months at the Company's option. If the Company
exercises its right to defer such payment or transfer
interest will be added as required by law.
LAPSE AND REINSTATEMENT
LAPSE OF A POLICY; EFFECT OF GUARANTEED DEATH BENEFIT
PROVISION
A Policy will not lapse during the five-year period after
its Issue Date regardless of investment performance if, on
each Monthly Anniversary Day within that period the sum of
premiums paid equals or exceeds the required amount of the
Guaranteed Initial Death
23
<PAGE>
Benefit Premium for that period, assuming there have been no
loans or partial surrenders. If there have been any loans or
partial surrenders, the Policy may lapse unless there is
sufficient Surrender Value to cover the Monthly Deduction.
After the five-year period expires, and depending on the
investment performance of the funding options, the
Accumulation Value may be insufficient to keep this Policy
in force, and payment of an additional premium may be
necessary.
A lapse occurs if a Monthly Deduction is greater than the
Surrender Value and no payment to cover the Monthly
Deduction is made within the Grace Period. The Company will
send the Owner a lapse notice at least 31 days before the
Grace Period expires.
REINSTATEMENT OF A LAPSED POLICY
The Owner can apply for reinstatement at any time during the
Insured's lifetime. To reinstate a Policy, the Company will
require satisfactory evidence of insurability and an amount
sufficient to pay for the current Monthly Deduction plus two
additional Monthly Deductions.
If the Policy is reinstated within five years of the Issue
Date, all values including the Loan Account Value will be
reinstated to the point they were on the date of lapse.
However, the Guaranteed Initial Death Benefit Option will
not be reinstated.
If the Policy is reinstated after five years following the
Issue Date, it will be reinstated on the Monthly Anniversary
Day following the Company approval. The Accumulation Value
at reinstatement will be the Net Premium Payment then made
less the Monthly Deduction due that day.
If the Surrender Value is not sufficient to cover the full
Surrender Charge at the time of lapse, the remaining portion
of the Surrender Charge will also be reinstated at the time
of Policy reinstatement.
POLICY LOANS
A Policy loan requires that a loan agreement be executed and
that the Policy be assigned to the Company. The loan may be
for any amount up to 100% of the Surrender Value; however,
the Company may limit the amount of such loan so that total
Policy indebtedness will not exceed 90% of an amount equal
to the Accumulation Value less the Surrender Charge which
would be imposed on a full surrender. The amount of a loan,
together with subsequent accrued but not paid interest on
the loan, becomes part of the Loan Account Value. If Policy
values are held in more than one funding option, withdrawals
from each funding option will be made in proportion to the
assets in each funding option at the time of the loan for
transfer to the Loan Account, unless the Company is
instructed otherwise in writing at the Annuity & Variable
Life Services Center.
Interest on loans will accrue at an annual rate of 8%, and
net loan interest (interest charged less interest credited
as described below) is payable once a year in arrears on
each anniversary of the loan, or earlier upon full surrender
or other payment of proceeds of a Policy. Any interest not
paid when due becomes part of the loan and the net interest
will be withdrawn proportionately from the values in each
funding option.
The Company will credit interest on the Loan Account Value.
During the first ten Policy Years, the Company's current
practice is that interest will be credited at an annual rate
equal to the interest rate charged on the loan minus 1%
(guaranteed not to exceed 2%). Beginning with the eleventh
Policy Year, the Company's current practice is that interest
24
<PAGE>
will be credited at an annual rate equal to the interest
rate charged on the loan, less .25% annually (guaranteed not
to exceed 1%). In no case will the annual credited interest
rate be less than 6% in each of the first ten Policy Years
and 7% thereafter.
Repayments on the loan will be allocated among the funding
options according to current Net Premium Payment
allocations. The Loan Account Value will be reduced by the
amount of any loan repayment.
A Policy loan, whether or not repaid, will affect the
proceeds payable upon the Insured's death and the
Accumulation Value because the investment results of the
Variable Account or the Fixed Account will apply only to the
non-loaned portion of the Accumulation Value. The longer a
loan is outstanding, the greater the effect is likely to be.
Depending on the investment results of the Variable Account
or the Fixed Account while the loan is outstanding, the
effect could be favorable or unfavorable.
SETTLEMENT OPTIONS
Proceeds in the form of Settlement Options are payable by
the Company at the Beneficiary's election upon the Insured's
death, or while the Insured is alive upon election by the
Owner of one of the Settlement Options.
A written request may be made to elect, change, or revoke a
Settlement Option before payments begin under any Settlement
Option. This request must be in form satisfactory to the
Company, and will take effect upon its receipt at the
Annuity & Variable Life Services Center. Payments after the
first payment will be made on the first day of each month.
FIRST OPTION -- Payments for the lifetime of the payee.
SECOND OPTION -- Payments for the lifetime of the payee,
guaranteed for 60, 120, 180, or 240 months;
THIRD OPTION -- Payment for a stated number of years, at
least five but no more than thirty;
FOURTH OPTION -- Payment of interest annually on the sum
left with the Company at a rate of at least 3% per year, and
upon the payee's death the amount on deposit will be paid.
ADDITIONAL OPTIONS -- Policy proceeds may also be settled
under any other method of settlement offered by the Company
at the time the request is made.
OTHER POLICY PROVISIONS
ISSUANCE
A Policy may only be issued upon receipt of satisfactory
evidence of insurability, and generally only where the
Insured is below the age of 80.
SHORT-TERM RIGHT TO CANCEL THE POLICY
A Policy may be returned for cancellation and a full refund
of premium within 10 days after the Policy is received,
unless otherwise stipulated by state law requirements,
within 10 days after the Company mails or personally
delivers a Notice of Withdrawal Right to the Owner, or
within 45 days after the application for the Policy is
signed, whichever occurs latest. The Initial Premium Payment
made when the Policy is issued will be held in the Fixed
Account and not allocated to the Variable Account even if
the Policy Owner may have so directed until three business
days following the expiration of the Right-To-Examine
period. If the Policy is returned for cancellation in a
timely fashion, the refund
25
<PAGE>
of premiums paid, without interest, will usually occur
within seven days of notice of cancellation, although a
refund of premiums paid by check may be delayed until the
check clears.
POLICY OWNER
While the Insured is living, all rights in this Policy are
vested in the Policy Owner named in the application or as
subsequently changed, subject to assignment, if any.
The Policy Owner may name a new Policy Owner while the
Insured is living. Any such change in ownership must be in a
written form satisfactory to the Company and recorded at the
Annuity & Variable Life Services Center. Once recorded, the
change will be effective as of the date signed; however, the
change will not affect any payment made or action taken by
the Company before it was recorded. The Company may require
that the Policy be submitted for endorsement before making a
change.
If the Policy Owner is other than the Insured, names no
contingent Policy Owner and dies before the Insured, the
Policy Owner's rights in this Policy belong to the Policy
Owner's estate.
BENEFICIARY
The Beneficiary(ies) shall be as named in the application or
as subsequently changed, subject to assignment, if any.
The Policy Owner may name a new Beneficiary while the
Insured is living. Any change must be in a written form
satisfactory to the Company and recorded at the Annuity &
Variable Life Services Center. Once recorded, the change
will be effective as of the date signed; however, the change
will not affect any payment made or action taken by the
Company before it was recorded.
If any Beneficiary predeceases the Insured, that
Beneficiary's interest passes to any surviving
Beneficiary(ies), unless otherwise provided. Multiple
Beneficiaries will be paid in equal shares, unless otherwise
provided. If no named Beneficiary survives the Insured, the
death proceeds shall be paid to the Policy Owner or the
Policy Owner's executor(s), administrator(s) or assigns.
ASSIGNMENT
While the Insured is living, the Policy Owner may assign his
or her rights in the Policy. The assignment must be in
writing, signed by the Policy Owner and recorded at the
Annuity & Variable Life Services Center. No assignment will
affect any payment made or action taken by the Company
before it was recorded. The Company is not responsible for
any assignment not submitted for recording, nor is the
Company responsible for the sufficiency or validity of any
assignment. The assignment will be subject to any
indebtedness owed to the Company before it was recorded.
RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY
The Policy Owner may, within the first two Policy Years,
exchange the Policy for a permanent life insurance policy
then being offered by the Company. The benefits for the new
policy will not vary with the investment experience of a
separate account. The exchange must be elected within 24
months from the Issue Date. No evidence of insurability will
be required.
The Policy Owner, the Insured and the Beneficiary under the
new policy will be the same as those under the exchanged
Policy on the effective date of the exchange. The
26
<PAGE>
Accumulation Value under the new Policy will be equal to the
Accumulation Value under the old Policy on the date the
exchange request is received. The new policy will have a
Death Benefit on the exchange date not more than the Death
Benefit of the original Policy immediately prior to the
exchange date. If the Accumulation Value is insufficient to
support the Death Benefit, the Policy Owner will be required
to make additional Premium Payments in order to effect the
exchange. The new policy will have the same Issue Date and
Issue Age as the original Policy. The initial Specified
Amount and any increases in Specified Amount will have the
same rate class as those of the original Policy. Any
indebtedness may be transferred to the new policy.
The exchange may be subject to an equitable adjustment in
rates and values to reflect variances, if any, in the rates
and values between the two Policies. After adjustment, if
any excess is owed the Policy Owner, the Company will pay
the excess to the Policy Owner in cash. The exchange may be
subject to federal income tax withholding.
INCONTESTABILITY
The Company will not contest payment of the death proceeds
based on the Initial Specified Amount after the Policy has
been in force during the Insured's lifetime for two years
from the Issue Date. For any increase in Specified Amount
requiring evidence of insurability, the Company will not
contest payment of the death proceeds based on such an
increase after it has been in force during the Insured's
lifetime for two years from its effective date.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the Insured has been misstated, the
affected benefits will be adjusted. The amount of the Death
Benefit will be 1. multiplied by 2. and then the result
added to 3. where:
1. is the Net Amount at Risk at the time of the Insured's
death;
2. is the ratio of the monthly cost of insurance applied in
the policy month of death to the monthly cost of
insurance that should have been applied at the true age
and sex in the policy month of death; and
3. is the Accumulation Value at the time of the Insured's
death.
SUICIDE
If the Insured dies by suicide, while sane or insane, within
two years from the Issue Date, the Company will pay no more
than the sum of the premiums paid, less any indebtedness. If
the Insured dies by suicide, while sane or insane, within
two years from the date an application is accepted for an
increase in the Specified Amount, the Company will pay no
more than a refund of the monthly charges for the cost of
such additional benefit.
NONPARTICIPATING POLICIES
These are nonparticipating Policies on which no dividends
are payable. These Policies do not share in the profits or
surplus earnings of the Company.
TAX MATTERS
POLICY PROCEEDS
Section 7702 of the Code provides that if certain tests are
met, a Policy will be treated as a life insurance policy for
federal tax purposes. The Company will monitor compliance
with these tests. The Policy should thus receive the same
federal income
27
<PAGE>
tax treatment as fixed benefit life insurance. As a result,
the death proceeds payable under a Policy are excludable
from gross income of the Beneficiary under Section 101 of
the Code.
Section 7702A of the Code defines modified endowment
contracts as those policies issued or materially changed on
or after June 21, 1988 on which the total premiums paid
during the first seven years exceed the amount that would
have been paid if the policy provided for paid up benefits
after seven level annual premiums. The Code provides for
taxation of surrenders, partial surrenders, loans,
collateral assignments and other pre-death distributions
from modified endowment contracts in the same way annuities
are taxed. Modified endowment contract distributions are
defined by the Code as amounts not received as an annuity
and are taxable to the extent the cash value of the policy
exceeds, at the time of distribution, the premiums paid into
the policy. A 10% tax penalty generally applies to the
taxable portion of such distributions unless the Policy
Owner is over age 59 1/2 or disabled.
It may not be advantageous to replace existing insurance
with Policies described in this Prospectus. It may also be
disadvantageous to purchase a Policy to obtain additional
insurance protection if the purchaser already owns another
variable life insurance policy.
The Policies offered by this Prospectus may or may not be
issued as modified endowment contracts. The Company will
monitor premiums paid and will notify the Policy Owner when
the Policy's non-modified endowment contract status is in
jeopardy. If a Policy is not a modified endowment contract,
a cash distribution during the first 15 years after a Policy
is issued which causes a reduction in death benefits may
still become fully or partially taxable to the Owner
pursuant to Section 7702(f)(7) of the Code. The Policy Owner
should carefully consider this potential effect and seek
further information before initiating any changes in the
terms of the Policy. Under certain conditions, a Policy may
become a modified endowment contract as a result of a
material change or a reduction in benefits as defined by
Section 7702A(c) of the Code.
In addition to meeting the tests required under Section 7702
and Section 7702A, Section 817(h) of the Code requires that
the investments of separate accounts such as the Variable
Account be adequately diversified. Regulations issued by the
Secretary of the Treasury set the standards for measuring
the adequacy of this diversification. A variable life
insurance policy not adequately diversified under these
regulations would not be treated as life insurance under
Section 7702 of the Code. To be adequately diversified, each
Sub-Account of the Variable Account must meet certain tests.
The Company believes the Variable Account investments meet
the applicable diversification standards.
Should the Secretary of the Treasury issue additional rules
or regulations limiting the number of funds, transfers
between funds, exchanges of funds or changes in investment
objectives of funds such that the Policy would no longer
qualify as life insurance under Section 7702 of the Code,
the Company will take whatever steps are available to remain
in compliance.
The Company will monitor compliance with these regulations
and, to the extent necessary, will change the objectives or
assets of the Sub-Account investments to remain in
compliance.
A total surrender or termination of the Policy by lapse may
have adverse tax consequences. If the amount received by the
Policy Owner plus total Policy indebtedness exceeds the
premiums paid into the Policy, the excess will generally be
treated as taxable income, regardless of whether or not the
Policy is a modified endowment contract.
28
<PAGE>
Federal estate and 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.
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under the
Code. Since the Variable Account is not a separate entity
from the Company and its operations form a part of the
Company, it will not be taxed separately as a "regulated
investment company" under Sub-chapter M of the Code.
Investment income and realized capital gains on the assets
of the Variable Account are reinvested and taken into
account in determining the value of Accumulation Units.
The Company does not initially expect to incur any Federal
income tax liability that would be chargeable to the
Variable Account. Based upon these expectations, no charge
is currently being made against the Variable Account for
federal income taxes. If, however, the Company determines
that on a separate company basis such taxes may be incurred,
it reserves the right to assess a charge for such taxes
against the Variable Account.
The Company may also incur state and local taxes in addition
to premium taxes in several states. At present, these taxes
are not significant. If they increase, however, additional
charges for such taxes may be made.
SECTION 848 CHARGES
The 3.5% premium load is assessed to cover state taxes and
federal income tax liabilities incurred by the Company. This
load is made up of 2.35% for state taxes and 1.15% for the
additional federal income tax burden under Section 848 of
the Code relating to the tax treatment of deferred
acquisition costs. The 1.15% charge for federal income tax
liabilities is reasonable in relation to the Company's
increased taxes under this Section of the Code.
OTHER CONSIDERATIONS
The foregoing discussion is general and is not intended as
tax advice. Counsel and other competent advisers should be
consulted for more complete information. This discussion is
based on the Company's understanding of Federal income tax
laws as they are currently interpreted by the Internal
Revenue Service. No representation is made as to the
likelihood of continuation of these current laws and
interpretations.
OTHER MATTERS
DIRECTORS AND OFFICERS OF THE COMPANY
The following persons are Directors and officers of the
Company. The address of each is 900 Cottage Grove Road,
Hartford, CT 06152 and each has been employed by the Company
for more than five years except Mr. Jones, Mr. Pacy and Dr.
Schaffer. Prior to February 1994, Mr. Jones was Executive
Vice President, Chief Administrative Officer, Chief
Operating Officer and Director, NAC Re Corporation and NAC
Reinsurance Corporation (Chief Operating Officer of NAC Re
Corporation beginning June 1993). Prior to January 1995, Mr.
Pacy was Senior Manager - IT Infrastructure and Technology
Management Officer, Digital Equipment Corporation. Prior to
May 1993, Dr. Schaffer was Vice President, Professional
Affairs, Aetna Health Plans, Aetna Life & Casualty.
29
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND ADDRESS WITH THE COMPANY
- ------------------------------ -----------------------------------
<S> <C>
Thomas C. Jones President
(Principal Executive Officer)
Bradley K. Miller Assistant Vice President and
Actuary
(Principal Financial Officer)
Robert Moose Vice President
(Principal Accounting Officer)
David C. Kopp Corporate Secretary
Andrew G. Helming Secretary
Stephen C. Stachelek Vice President and Treasurer
H. Edward Hanway Director and Chairman of the Board
Harold W. Albert Director
Robert W. Burgess Director
John G. Day Director and Chief Counsel
Joseph M. Fitzgerald Director and Senior Vice President
Carol M. Olsen Director and Senior Vice President
John E. Pacy Director and Senior Vice President
Arthur C. Reeds, III Director and Senior Vice President
Patricia L. Rowland Director and Senior Vice President
W. Allen Schaffer, M.D. Director and Senior Vice President
Marc L. Preminger Director, Senior Vice President and
Chief Financial Officer
</TABLE>
DISTRIBUTION OF POLICIES
The Policies will be sold by licensed insurance agents in
those states where the Policies may lawfully be sold. Such
agents will be registered representatives of broker-dealers
registered under the Securities Exchange Act of 1934 who are
members of the National Association of Securities Dealers,
Inc. (NASD). The Policies will be distributed by the
Company's principal underwriter, CIGNA Financial Advisors,
Inc. ("CFA"), located at 900 Cottage Grove Road, Bloomfield,
CT 06002. CFA is a Connecticut corporation organized in
1967, and is the principal underwriter for the Company's
other registered separate accounts.
Gross first year commissions paid by the Company, including
expense reimbursement allowances, on the sale of these
Policies are not more than 12.6% of Premium Payments. Gross
renewal commissions paid by the Company will not exceed 5.4%
of Premium Payments, and will not be paid after the tenth
Policy Year.
CHANGES OF INVESTMENT POLICY
The Company may materially change the investment policy of
the Variable Account. The Company must inform the Policy
Owners and obtain all necessary regulatory approvals. Any
change must be submitted to the various state insurance
departments which shall disapprove it if deemed detrimental
to the interests of the Policy Owners or if it renders the
Company's operations hazardous to the public. If a Policy
Owner objects, the Policy may be converted to a
substantially comparable fixed benefit life insurance policy
offered by the Company on the life of the Insured. The
Policy Owner has the later of 60 days (6 months in
Pennsylvania) from the date of the investment policy change
or 60 days (6 months in Pennsylvania) from being informed of
such change to make this conversion. The Company will not
require evidence of insurability for this conversion.
30
<PAGE>
The new policy will not be affected by the investment
experience of any separate account. The new policy will be
for an amount of insurance not exceeding the Death Benefit
of the Policy converted on the date of such conversion.
OTHER CONTRACTS ISSUED BY THE COMPANY
The Company does presently and will, from time to time,
offer other variable annuity contracts and variable life
insurance policies with benefits which vary in accordance
with the investment experience of a separate account of the
Company.
STATE REGULATION
The Company is subject to the laws of Connecticut governing
insurance companies and to regulation by the Connecticut
Insurance Department. An annual statement in a prescribed
form is filed with the Insurance Department each year
covering the operation of the Company for the preceding year
and its financial condition as of the end of such year.
Regulation by the Insurance Department includes periodic
examination to determine the Company's contract liabilities
and reserves so that the Insurance Department may certify
the items are correct. The Company's books and accounts are
subject to review by the Insurance Department at all times
and a full examination of its operations is conducted
periodically by the Connecticut Department of Insurance.
Such regulation does not, however, involve any supervision
of management or investment practices or policies.
REPORTS TO POLICY OWNERS
The Company maintains Policy records and will mail to each
Policy Owner, at the last known address of record, an annual
statement showing the amount of the current Death Benefit,
the Accumulation Value, and Surrender Value, premiums paid
and monthly charges deducted since the last report, the
amounts invested in the Fixed Account and in the Variable
Account and in each Sub-Account of the Variable Account, and
any Loan Account Value.
Policy Owners will also be sent annual reports containing
financial statements for the Variable Account and annual and
semi-annual reports of the Funds as required by the 1940
Act.
In addition, Policy Owners will receive statements of
significant transactions, such as changes in Specified
Amount, changes in Death Benefit Option, changes in future
premium allocation, transfers among Sub-Accounts, Premium
Payments, loans, loan repayments, reinstatement and
termination.
ADVERTISING
The Company is also ranked and rated by independent
financial rating services, including Moody's, Standard &
Poor's, Duff & Phelps and A.M. Best Company. The purpose of
these ratings is to reflect the financial strength or
claims-paying ability of the Company. The ratings are not
intended to reflect the investment experience or financial
strength of the Variable Account. The Company may advertise
these ratings from time to time. In addition, the Company
may include in certain advertisements, endorsements in the
form of a list of organizations, individuals or other
parties which recommend the Company or the Policies.
Furthermore, the Company may occasionally include in
advertisements comparisons of currently taxable and tax
deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles
and general economic conditions.
31
<PAGE>
LEGAL PROCEEDINGS
There are no material legal or administrative proceedings
pending or known to be contemplated, other than ordinary
routine litigation incidental to the business, to which the
Company and the Variable Account are parties or to which any
of their property is subject. The principal underwriter,
CFA, is not engaged in any material litigation of any
nature.
EXPERTS
Actuarial opinions regarding Deferred Acquisition Cost Tax
(DAC Tax) and Mortality and Expense Charges included in this
Prospectus have been rendered by Michelle L. Kunzman, as
stated in the opinion filed as an Exhibit to the
Registration Statement given on the authority of Ms. Kunzman
as an expert in actuarial matters.
Legal matters in connection with the Policies described
herein are being passed upon by Robert A. Picarello, Esq.,
Chief Counsel, CIGNA Individual Insurance, 900 Cottage Grove
Road, Hartford, CT 06152 in the opinion filed as an Exhibit
to the Registration Statement given on his authority as an
expert in these matters.
The consolidated financial statements of Connecticut General
Life Insurance Company as of December 31, 1996 and 1995 and
for each of the three years in the period ended December 31,
1996 included in this Prospectus have been so included in
reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts
in auditing and accounting. Price Waterhouse LLP's consent
to this reference to the firm as an "expert" is filed as an
exhibit to the registration statement of which this
Prospectus is a part.
REGISTRATION STATEMENT
A Registration Statement has been filed with the Securities
and Exchange Commission under the Securities Act of 1933, as
amended, with respect to the Policies offered hereby. This
Prospectus does not contain all the information set forth in
the Registration Statement and amendments thereto and
exhibits filed as a part thereof, to all of which reference
is hereby made for further information concerning the
Variable Account, the Company, and the Policies offered
hereby. Statements contained in this Prospectus as to the
content of Policies and other legal instruments are
summaries. For a complete statement of the terms thereof,
reference is made to such instruments as filed.
FINANCIAL STATEMENTS
There follow consolidated balance sheets of the Company and
its subsidiaries as of December 31, 1996 and 1995 and
related consolidated statements of income and retained
earnings and cash flows for the years ended December 31,
1996, 1995 and 1994. There also follow, for the Variable
Account, statements of assets and liabilities as of December
31, 1996 and related statements of operations for the period
ended December 31, 1996 and the statements of changes in net
assets for the periods ended December 31, 1996 and 1995.
The most current financial statements of the Company are
those as of the end of the most recent fiscal year. The
Company represents that there have been no adverse changes
in the financial condition or operations of the Company
between the end of 1996 and the date of this Prospectus.
These financial statements should be considered only as
bearing upon the ability of the Company to meet its
obligations under the Policies.
32
<PAGE>
One Financial Plaza Telephone 860 240 2000
Hartford, CT 06103
PRICE WATERHOUSE LLP [LOGO]
REPORT OF INDEPENDENT ACCOUNTANTS
February 11, 1997
The Board of Directors and Shareholder of
Connecticut General Life Insurance Company
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and retained earnings and of cash flows
present fairly, in all material respects, the financial position of Connecticut
General Life Insurance Company and its subsidiaries at December 31, 1996 and
1995, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
[SIG]
33
<PAGE>
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
(IN MILLIONS)
- -----------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Premiums and fees................................................... $ 5,314 $ 4,998 $ 4,960
Net investment income............................................... 3,199 3,138 2,805
Realized investment gains (losses).................................. 37 (7) 27
Other revenues...................................................... 9 9 8
--------- --------- ---------
Total revenues.................................................. 8,559 8,138 7,800
--------- --------- ---------
BENEFITS, LOSSES AND EXPENSES
Benefits, losses and settlement expenses............................ 6,069 5,892 5,574
Policy acquisition expenses......................................... 143 127 89
Other operating expenses............................................ 1,477 1,358 1,363
--------- --------- ---------
Total benefits, losses and expenses............................. 7,689 7,377 7,026
--------- --------- ---------
INCOME BEFORE INCOME TAXES.......................................... 870 761 774
--------- --------- ---------
Income taxes (benefits):
Current........................................................... 394 301 220
Deferred.......................................................... (81) (44) 45
--------- --------- ---------
Total taxes..................................................... 313 257 265
--------- --------- ---------
NET INCOME.......................................................... 557 504 509
Dividends declared.................................................. (600) (252) (300)
Retained earnings, beginning of year................................ 3,220 2,968 2,759
- -----------------------------------------------------------------------------------------------------
RETAINED EARNINGS, END OF YEAR...................................... $ 3,177 $ 3,220 $ 2,968
- -----------------------------------------------------------------------------------------------------
-------------------------------
</TABLE>
THE NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE STATEMENTS.
34
<PAGE>
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
(IN MILLIONS)
- ------------------------------------------------------------------------------------------------
AS OF DECEMBER 31, 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost, $19,882; $20,147)...... $ 20,816 $ 22,162
Mortgage loans.......................................................... 10,152 10,218
Equity securities, at fair value (cost, $59; $54)....................... 41 66
Policy loans............................................................ 7,133 6,925
Real estate............................................................. 1,025 1,158
Other long-term investments............................................. 193 193
Short-term investments.................................................. 417 138
--------- ---------
Total investments................................................... 39,777 40,860
Cash and cash equivalents................................................. -- --
Accrued investment income................................................. 619 626
Premiums and accounts receivable.......................................... 817 991
Reinsurance recoverables.................................................. 1,303 1,258
Deferred policy acquisition costs......................................... 780 689
Property and equipment, net............................................... 276 319
Current income taxes...................................................... 12 21
Deferred income taxes, net................................................ 639 403
Goodwill.................................................................. 488 503
Other assets.............................................................. 249 149
Separate account assets................................................... 22,555 18,177
- ------------------------------------------------------------------------------------------------
Total assets........................................................ $ 67,515 $ 63,996
- ------------------------------------------------------------------------------------------------
--------------------
LIABILITIES
Contractholder deposit funds.............................................. $ 29,621 $ 29,762
Future policy benefits.................................................... 8,187 8,547
Unpaid claims and claim expenses.......................................... 1,170 1,151
Unearned premiums......................................................... 200 95
--------- ---------
Total insurance and contractholder liabilities...................... 39,178 39,555
Accounts payable, accrued expenses and other liabilities.................. 1,808 1,872
Separate account liabilities.............................................. 22,365 18,075
- ------------------------------------------------------------------------------------------------
Total liabilities................................................... 63,351 59,502
- ------------------------------------------------------------------------------------------------
CONTINGENCIES -- NOTE 11
SHAREHOLDER'S EQUITY
Common stock (6 shares outstanding)....................................... 30 30
Additional paid-in capital................................................ 766 766
Net unrealized appreciation on investments................................ 188 476
Net translation of foreign currencies..................................... 3 2
Retained earnings......................................................... 3,177 3,220
- ------------------------------------------------------------------------------------------------
Total shareholder's equity.......................................... 4,164 4,494
- ------------------------------------------------------------------------------------------------
Total liabilities and shareholder's equity.......................... $ 67,515 $ 63,996
- ------------------------------------------------------------------------------------------------
--------------------
</TABLE>
THE NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE STATEMENTS.
35
<PAGE>
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
(IN MILLIONS)
- ---------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................................................ $ 557 $ 504 $ 509
Adjustments to reconcile net income to net cash provided by
operating activities:
Insurance liabilities........................................... 57 (90) (249)
Reinsurance recoverables........................................ (11) 1,201 282
Premiums and accounts receivable................................ 77 32 (188)
Deferred income taxes, net...................................... (82) (44) 45
Other assets.................................................... 43 (14) 68
Accounts payable, accrued expenses, other liabilities and
current income taxes........................................... (113) 212 (192)
Other, net...................................................... (149) 22 (24)
--------- --------- ---------
Net cash provided by operating activities..................... 379 1,823 251
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from investments sold:
Fixed maturities -- available for sale.......................... 1,589 1,070 1,389
Fixed maturities -- held to maturity............................ -- -- 12
Mortgage loans.................................................. 640 383 496
Equity securities............................................... 13 119 41
Real estate..................................................... 345 299 242
Other (primarily short-term investments)........................ 3,613 2,268 1,005
Investment maturities and repayments:
Fixed maturities -- available for sale.......................... 2,634 478 686
Fixed maturities -- held to maturity............................ -- 1,756 1,764
Mortgage loans.................................................. 630 420 194
Investments purchased:
Fixed maturities -- available for sale.......................... (3,834) (3,054) (2,390)
Fixed maturities -- held to maturity............................ -- (1,385) (1,788)
Mortgage loans.................................................. (1,300) (1,908) (882)
Equity securities............................................... (3) (20) (12)
Policy loans.................................................... (207) (2,129) (1,614)
Other (primarily short-term investments)........................ (3,930) (2,334) (1,093)
Other, net........................................................ (94) (119) (129)
--------- --------- ---------
Net cash provided by (used in) investing activities........... 96 (4,156) (2,079)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Contractholder deposit funds:
Deposits and interest credited.................................. 7,260 7,489 6,388
Withdrawals and benefit payments................................ (7,135) (4,985) (4,216)
Dividends paid to Parent.......................................... (600) (252) (300)
Other, net........................................................ -- 1 36
--------- --------- ---------
Net cash (used in) provided by financing activities......... (475) 2,253 1,908
- ---------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents.............. -- (80) 80
Cash and cash equivalents, beginning of year...................... -- 80 --
- ---------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year............................ $ -- $ -- $ 80
- ---------------------------------------------------------------------------------------------------
-------------------------------
Supplemental Disclosure of Cash Information:
Income taxes paid, net of refunds............................... $ 385 $ 211 $ 411
Interest paid................................................... $ 7 $ 7 $ 5
- ---------------------------------------------------------------------------------------------------
</TABLE>
THE NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE STATEMENTS.
36
<PAGE>
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- DESCRIPTION OF BUSINESS
Connecticut General Life Insurance Company and its subsidiaries (the Company)
provide insurance and related financial services throughout the United States
and in many locations worldwide. Principal products and services include group
life and health insurance, individual life insurance and annuity products, and
retirement and investment products and services. The Company is a wholly-owned
subsidiary of Connecticut General Corporation, which is an indirect wholly-owned
subsidiary of CIGNA Corporation (CIGNA).
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of the Company and all significant subsidiaries. These consolidated
financial statements have been prepared in conformity with generally accepted
accounting principles, and reflect management's estimates and assumptions, such
as those regarding medical costs and interest rates, that affect the recorded
amounts. Significant estimates used in determining insurance and contractholder
liabilities, related reinsurance recoverables, and valuation allowances for
investment assets are discussed throughout the Notes to Financial Statements.
Certain reclassifications have been made to prior years' amounts to conform with
the 1996 presentation.
B) RECENT ACCOUNTING PRONOUNCEMENTS: In 1996, the Company implemented
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
SFAS No. 121 requires write-down to fair value when long-lived assets to be held
and used are impaired. Long-lived assets to be disposed of, including real
estate held for sale, must be carried at the lower of cost or fair value less
costs to sell. Depreciation of assets to be disposed of is prohibited. The
effect of implementing SFAS No. 121 was not material to the Company.
In 1993, the Company implemented SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," which required that debt and equity
securities be classified into different categories and carried at fair value if
they are not classified as held-to-maturity. During the fourth quarter of 1995,
the Financial Accounting Standards Board (FASB) issued a guide to implementation
of SFAS No. 115, which permitted a one-time opportunity to reclassify securities
subject to SFAS No. 115. Consequently, the Company reclassified all held-to-
maturity securities to available-for-sale as of December 31, 1995. The non-cash
reclassification of these securities, which had an aggregate amortized cost of
$9.2 billion and fair value of $10.1 billion, resulted in an increase of
approximately $396 million, net of policyholder-related amounts and deferred
income taxes, in net unrealized appreciation included in Shareholder's Equity as
of December 31, 1995.
In 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for Impairment
of a Loan," which provides guidance on the accounting and disclosure for
impaired loans. In 1994, the FASB issued SFAS No. 118, "Accounting by Creditors
for Impairment of a Loan -- Income Recognition and Disclosures," which
eliminates the income recognition requirements of SFAS No. 114. The Company
adopted SFAS Nos. 114 and 118 in the first quarter of 1995, which resulted in a
$6 million increase in net income.
C) FINANCIAL INSTRUMENTS: In the normal course of business, the Company
enters into transactions involving various types of financial instruments,
including investments such as fixed maturities and equity securities and off-
balance-sheet financial instruments such as investment and loan commitments and
financial guarantees. These instruments are subject to risk of loss due to
interest rate and market fluctuations and most have credit risk. The Company
evaluates and monitors each financial instrument individually and, where
appropriate, uses certain derivative instruments or obtains collateral or other
forms of security to minimize risk of loss.
Financial instruments that are subject to fair value disclosure requirements
(insurance contracts, real estate, goodwill and taxes are excluded) are carried
in the financial statements at amounts that approximate fair value, except for
Mortgage Loans and Contractholder Deposit Funds (non-insurance products). For
these financial instruments, the fair value was not materially different from
the carrying amount as of December 31, 1996 and 1995. Fair values of off-balance
sheet financial instruments as of December 31, 1996 and 1995 were not material.
37
<PAGE>
Fair values for financial instruments are estimates that, in many cases, may
differ significantly from the amounts that could be realized upon immediate
liquidation. In cases where market prices are not available, estimates of fair
value are based on discounted cash flow analyses which utilize current interest
rates for similar financial instruments with comparable terms and credit
quality. The fair value of liabilities for contractholder deposit funds was
estimated using the amount payable on demand, and for those not payable on
demand, discounted cash flow analyses.
D) INVESTMENTS: Investments in fixed maturities, which are classified as
available-for-sale, include bonds, asset-backed securities, including
collateralized mortgage obligations (CMOs), and redeemable preferred stocks.
Fixed maturities are carried at fair value, with unrealized appreciation or
depreciation included in Shareholder's Equity. Fixed maturities are considered
impaired and written down to fair value when a decline in value is considered to
be other than temporary.
Mortgage loans are carried principally at unpaid principal balances, net of
valuation reserves. Mortgage loans are considered impaired when it is probable
that the Company will not collect all amounts according to the contractual terms
of the loan agreement. If impaired, a valuation reserve is utilized to record
any change in the fair value of the underlying collateral below the carrying
value of the mortgage loan.
Fixed maturities and mortgage loans that are delinquent or restructured to
modify basic financial terms, typically to reduce the interest rate and, in
certain cases, extend the term, are placed on non-accrual status. Net investment
income on such investments is recognized only when payment is received.
Real estate investments are either held for the production of income or held
for sale. Real estate investments held for the production of income are carried
at depreciated cost less any write-downs to fair value. Depreciation is
generally calculated using the straight-line method based on the estimated
useful lives of these assets.
Real estate investments held for sale are generally those which are acquired
through the foreclosure of mortgage loans. The Company's policy is to
rehabilitate, re-lease and sell foreclosed properties, which generally takes two
to four years. At the time of foreclosure, properties are valued at fair value
less estimated costs to sell and reclassified from mortgage loans to real estate
held for sale. Subsequent to foreclosure, these investments are carried at the
lower of cost or current fair value less estimated costs to sell. Adjustments to
the carrying value as a result of changes in fair value subsequent to
foreclosure are recorded as valuation reserves, and reported in realized
investment gains and losses. The Company considers several methods in
determining fair value for real estate, with emphasis placed on the use of
discounted cash flow analyses and, in some cases, the use of third-party
appraisals. Effective with the implementation of SFAS No. 121, real estate held
for sale is no longer depreciated.
Equity securities, which include common and non-redeemable preferred stocks,
are carried at fair value, with unrealized appreciation or depreciation included
in Shareholder's Equity. Short-term investments are carried at fair value, which
approximates cost. Equity securities and short-term investments are classified
as available for sale.
Policy loans are generally carried at unpaid principal balances.
Realized investment gains and losses result from sales, investment asset
write-downs and changes in valuation reserves. Realized investment gains and
losses do not include amounts attributable to experience-rated pension
policyholders' contracts and participating life policies (policyholder share).
Realized investment gains and losses are based upon specific identification of
the investment assets.
Unrealized investment gains and losses for investments carried at fair value
are included in Shareholder's Equity net of policyholder-related amounts and
deferred income taxes.
See Note 3(F) for a discussion of the Company's accounting policies for
derivative financial instruments.
E) CASH AND CASH EQUIVALENTS: Short-term investments with a maturity of three
months or less at the time of purchase are reported as cash equivalents.
F) REINSURANCE RECOVERABLES: Reinsurance recoverables are estimates of
amounts to be received from reinsurers, including amounts under reinsurance
agreements with affiliated companies. Allowances are established for amounts
estimated to be uncollectible.
38
<PAGE>
G) DEFERRED POLICY ACQUISITION COSTS: Acquisition costs consist of
commissions, premium taxes and other costs, which vary with, and are primarily
related to, the production of revenues. Acquisition costs for universal life
products and contractholder deposit funds are deferred and amortized in
proportion to total estimated gross profits over the expected lives of the
contracts. Acquisition costs for annuity and other individual life insurance
products are deferred and amortized, generally in proportion to the ratio of
annual revenue to the estimated total revenues over the contract periods.
Deferred policy acquisition costs are reviewed to determine if they are
recoverable from future income, including investment income. If such costs are
estimated to be unrecoverable, they are expensed. If such costs are estimated to
be unrecoverable or are accelerated as a result of treating unrealized
investment gains and losses as though they had been realized, a deferred
acquisition cost valuation allowance may be established or adjusted, with a
comparable offset in net unrealized appreciation (depreciation).
H) PROPERTY AND EQUIPMENT: Property and equipment are carried at cost less
accumulated depreciation. When applicable, cost includes interest and real
estate taxes incurred during construction and other construction-related costs.
Depreciation is calculated principally on the straight-line method based on the
estimated useful lives of the assets. Accumulated depreciation was $427 million
and $387 million at December 31, 1996 and 1995, respectively.
I) OTHER ASSETS: Other Assets consists of various insurance-related assets,
principally ceded unearned premiums, reinsurance deposits and other amounts due
from affiliated companies.
J) GOODWILL: Goodwill represents the excess of the cost of businesses
acquired over the fair value of their net assets. Goodwill is amortized on
systematic bases over periods, not exceeding 40 years, that correspond with the
benefits estimated to be derived from the acquisitions. The Company evaluates
the carrying amount of goodwill by analyzing historical and estimated future
income and undiscounted estimated cash flows of the related businesses. Goodwill
is written down when impaired. Amortization periods are revised if it is
estimated that the remaining period of benefit of the goodwill has changed.
Accumulated amortization was $99 million and $84 million at December 31, 1996
and 1995, respectively.
K) SEPARATE ACCOUNTS: Separate account assets and liabilities are principally
carried at market value and represent policyholder funds maintained in accounts
having specific investment objectives. The investment income, gains and losses
of these accounts generally accrue to the policyholders and, therefore, are not
included in the Company's revenues and expenses.
L) CONTRACTHOLDER DEPOSIT FUNDS: Liabilities for Contractholder Deposit Funds
consist of deposits received from customers and investment earnings on their
fund balances, less administrative charges and, for universal life fund
balances, mortality charges.
M) FUTURE POLICY BENEFITS: Future policy benefits are liabilities for life,
health and annuity products. Such liabilities are established in amounts
adequate to meet the estimated future obligations of policies in force. These
liabilities are computed using premium assumptions for group annuity policies
and the net level premium method for individual life policies, and are based
upon estimates as to future investment yield, mortality and withdrawals that
include provisions for adverse deviation. Future policy benefits for individual
life insurance and annuity policies are computed using interest rates ranging
from 2% to 11%, generally graded down from 1 to 20 years. Mortality, morbidity,
and withdrawal assumptions are based on either the Company's own experience or
various actuarial tables.
N) UNPAID CLAIMS AND CLAIM EXPENSES: Liabilities for unpaid claims and claim
expenses are estimates of payments to be made on reported and incurred but not
reported insurance claims.
O) UNEARNED PREMIUMS: Premiums for group life, and accident and health
insurance are reported as earned on a pro rata basis over the contract period.
The unexpired portion of these premiums is recorded as Unearned Premiums.
P) OTHER LIABILITIES: Other Liabilities consist principally of postretirement
and postemployment benefits and various insurance-related liabilities, including
amounts related to reinsurance contracts. Also included in Other Liabilities are
liabilities for guaranty fund assessments that can be reasonably estimated.
39
<PAGE>
Q) TRANSLATION OF FOREIGN CURRENCIES: Foreign operations primarily utilize
the local currencies as their functional currencies, and assets and liabilities
are translated at the rates of exchange as of the balance sheet date. The
translation gain or loss on such functional currencies, net of applicable taxes,
is generally reflected in Shareholder's Equity. Revenues and expenses are
translated at the average rates of exchange prevailing during the year.
R) PREMIUM AND FEES, REVENUES AND RELATED EXPENSES: Premiums for group life
and accident and health insurance are recognized as revenue on a pro-rata basis
over their contract periods. Benefits, losses and settlement expenses are
recognized when incurred.
Premiums for individual life insurance as well as individual and group annuity
products, excluding universal life and investment-related products, are
recognized as revenue when due. Benefits, losses and settlement expenses are
matched with premiums.
Revenues for universal life products consist of net investment income and
mortality, administration and surrender fees assessed against the fund balances
during the period. Net investment income represents investment income on assets
supporting universal life products and is recognized as earned. Fees for
mortality are recognized ratably over the policy year. Administration fees are
recognized as services are provided, and surrender charges are recognized as
earned. Benefit expenses for universal life products consist of benefit claims
in excess of fund balances, which are recognized when claims are filed, and
interest credited in accordance with contract provisions.
Revenues for investment-related products consist of net investment income and
contract fees assessed against the fund balances during the period. Net
investment income represents investment income on assets supporting
investment-related products and is recognized as earned. Contract fees are based
upon related administrative expenses and are assessed ratably over the contract
year. Benefit expenses for investment-related products primarily consist of
interest credited in accordance with contract provisions.
S) PARTICIPATING BUSINESS: Certain life insurance policies contain dividend
payment provisions that enable the policyholder to participate in a portion of
the earnings of the Company's business. The participating insurance in force
accounted for approximately 7% of total insurance in force at December 31, 1996,
and 1995, and 5% at December 31, 1994.
T) INCOME TAXES: The Company and its domestic subsidiaries are included in
the consolidated United States federal income tax return filed by CIGNA. In
accordance with a tax sharing agreement with CIGNA, the provision for federal
income tax is computed as if the Company were filing a separate federal income
tax return, except that benefits arising from tax credits and net operating and
capital losses are allocated to those subsidiaries producing such attributes to
the extent they are utilized in CIGNA's consolidated federal income tax
provision.
Deferred income taxes are generally recognized when assets and liabilities
have different values for financial statement and tax reporting purposes. See
Note 6 for additional information.
NOTE 3 -- INVESTMENTS
A) FIXED MATURITIES: Fixed maturities are net of cumulative write-downs of
$95 million and $103 million, including policyholder share, as of December 31,
1996 and 1995, respectively.
The amortized cost and fair value by contractual maturity periods for fixed
maturities, including policyholder share, as of December 31, 1996 were as
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Amortized Fair
(IN MILLIONS) Cost Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less.................................................. $ 936 $ 955
Due after one year through five years.................................... 5,252 5,419
Due after five years through ten years................................... 4,591 4,773
Due after ten years...................................................... 3,301 3,702
Asset-backed securities.................................................. 5,802 5,967
- ------------------------------------------------------------------------------------------------
Total.................................................................... $ 19,882 $ 20,816
- ------------------------------------------------------------------------------------------------
---------------------
</TABLE>
40
<PAGE>
Actual maturities could differ from contractual maturities because issuers may
have the right to call or prepay obligations with or without call or prepayment
penalties. Also, the Company may extend maturities in some cases.
Gross unrealized appreciation (depreciation) for fixed maturities, including
policyholder share, by type of issuer was as follows:
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
December 31, 1996
- -----------------------------------------------------------------------------------------------------
<CAPTION>
Amortized Unrealized Unrealized Fair
(IN MILLIONS) Cost Appreciation Depreciation Value
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Federal government bonds......................... $ 475 $ 160 $ -- $ 635
State and local government bonds................. 174 13 (4) 183
Foreign government bonds......................... 121 6 -- 127
Corporate securities............................. 13,310 742 (148) 13,904
Asset-backed securities.......................... 5,802 226 (61) 5,967
- -----------------------------------------------------------------------------------------------------
Total............................................ $ 19,882 $ 1,147 $ (213) $ 20,816
- -----------------------------------------------------------------------------------------------------
<CAPTION>
--------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
December 31, 1995
- -----------------------------------------------------------------------------------------------------
<CAPTION>
Amortized Unrealized Unrealized Fair
(IN MILLIONS) Cost Appreciation Depreciation Value
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Federal government bonds......................... $ 503 $ 300 $ -- $ 803
State and local government bonds................. 207 24 (1) 230
Foreign government bonds......................... 131 9 (1) 139
Corporate securities............................. 13,773 1,427 (73) 15,127
Asset-backed securities.......................... 5,533 371 (41) 5,863
- -----------------------------------------------------------------------------------------------------
Total............................................ $ 20,147 $ 2,131 $ (116) $ 22,162
- -----------------------------------------------------------------------------------------------------
<CAPTION>
--------------------------------------------------
</TABLE>
Asset-backed securities include investments in CMOs as of December 31, 1996 of
$2.2 billion carried at fair value (amortized cost, $2.1 billion), compared with
$2.1 billion carried at fair value (amortized cost, $2.0 billion) as of December
31, 1995. Certain of these securities are backed by Aaa/AAA-rated government
agencies. All other CMO securities have high quality ratings through use of
credit enhancements provided by subordinated securities or mortgage insurance
from Aaa/AAA-rated insurance companies. CMO holdings are concentrated in
securities with limited prepayment, extension and default risk, such as planned
amortization class bonds. The Company's investments in interest-only and
principal-only CMOs, which are subject to interest rate risk due to accelerated
prepayments, represented approximately 0.1% and 1.9% of total CMO investments at
December 31, 1996 and 1995, respectively.
At December 31, 1996, contractual fixed maturity investment commitments were
$93 million. The majority of investment commitments are for the purchase of
investment grade fixed maturities, bearing interest at a fixed market rate, and
require no collateral. These commitments are diversified by issuer and maturity
date, and it is estimated that approximately 75% will be disbursed in 1997.
B) MORTGAGE LOANS AND REAL ESTATE: The Company's mortgage loans and real
estate investments are diversified by property type and location and, for
mortgage loans, by borrower. Mortgage loans are collateralized by the related
properties and generally approximate 75% of the property's value at the time the
original loan is made.
41
<PAGE>
At December 31, the carrying values of mortgage loans and real estate
investments, including policyholder share, were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
(IN MILLIONS) 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Mortgage Loans............................................................ $ 10,152 $ 10,218
--------- ---------
Real estate:
Held for sale........................................................... 586 671
Held for production of income........................................... 439 487
--------- ---------
Total real estate......................................................... 1,025 1,158
- ------------------------------------------------------------------------------------------------
Total..................................................................... $ 11,177 $ 11,376
- ------------------------------------------------------------------------------------------------
--------------------
</TABLE>
At December 31, mortgage loans and real estate investments comprised the
following property types and geographic regions:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
(IN MILLIONS) 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Property type:
Retail facilities....................................................... $ 4,453 $ 4,327
Office buildings........................................................ 4,241 4,493
Apartment buildings..................................................... 1,272 1,246
Hotels.................................................................. 665 711
Other................................................................... 546 599
- ------------------------------------------------------------------------------------------------
Total..................................................................... $ 11,177 $ 11,376
- ------------------------------------------------------------------------------------------------
--------------------
Geographic region:
Central................................................................. $ 3,452 $ 4,032
Pacific................................................................. 3,132 2,580
Middle Atlantic......................................................... 1,920 1,951
South Atlantic.......................................................... 1,526 1,647
New England............................................................. 1,147 1,166
- ------------------------------------------------------------------------------------------------
Total..................................................................... $ 11,177 $ 11,376
- ------------------------------------------------------------------------------------------------
--------------------
</TABLE>
MORTGAGE LOANS
At December 31, 1996, scheduled mortgage loan maturities were as follows: 1997
- -- $.9 billion; 1998 -- $.7 billion; 1999 -- $1.3 billion; 2000 -- $1.5 billion;
2001 -- $1.2 billion; and $4.7 billion thereafter. Actual maturities could
differ from contractual maturities because borrowers may have the right to
prepay obligations with or without prepayment penalties; the maturity date may
be extended; and loans may be refinanced. During 1996 and 1995, the Company
refinanced at current market rates approximately $477 million and $379 million,
respectively, of its mortgage loans relating to borrowers that were unable to
obtain alternative financing.
At December 31, 1996, contractual commitments to extend credit under
commercial mortgage loan agreements amounted to approximately $397 million, all
of which were at a fixed market rate of interest. These commitments expire
within six months, and are diversified by property type and geographic region.
At December 31, 1996, the Company's impaired mortgage loans were $814 million,
including $442 million before valuation reserves totaling $94 million, and $372
million which had no valuation reserves. At December 31, 1995, the Company's
impaired mortgage loans were $838 million, including $447 million before
valuation reserves totaling $82 million, and $391 million which had no valuation
reserves.
42
<PAGE>
During the year ended December 31, changes in reserves for impaired mortgage
loans, including policyholder share, were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
(IN MILLIONS) 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Reserve balance -- January 1................................................... $ 82 $ 127
Transfers to foreclosed real estate............................................ (29) (27)
Charge-offs upon sales......................................................... (19) (33)
Net increase in valuation reserves............................................. 60 15
- -----------------------------------------------------------------------------------------------------
Reserve balance -- December 31................................................. $ 94 $ 82
- -----------------------------------------------------------------------------------------------------
--------------------
</TABLE>
During 1996 and 1995, impaired mortgage loans, before valuation reserves,
averaged approximately $852 million and $935 million, respectively. Interest
income recorded and cash received on these loans was approximately $73 million
and $71 million in 1996 and 1995, respectively.
REAL ESTATE
During 1996, 1995 and 1994, non-cash investing activities included real estate
acquired through foreclosure of mortgage loans, which totaled $107 million, $144
million and $127 million, respectively.
Valuation reserves and cumulative write-downs related to real estate,
including policyholder share, were $273 million and $310 million as of December
31, 1996 and 1995, respectively.
Net income for 1996 included $19 million and $1 million for net investment
income and write-downs upon foreclosures, respectively, for real estate held for
sale.
C) SHORT-TERM INVESTMENTS AND CASH EQUIVALENTS: At December 31, 1996 and
1995, short-term investments and cash equivalents, in the aggregate, primarily
included debt securities, principally corporate securities of $418 million and
$203 million, respectively.
D) NET UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS: Unrealized
appreciation (depreciation) for investments carried at fair value as of December
31 was as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
(IN MILLIONS) 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Unrealized appreciation:
Fixed maturities.......................................................... $ 1,147 $ 2,131
Equity securities......................................................... 8 23
--------- ---------
1,155 2,154
--------- ---------
Unrealized depreciation:
Fixed maturities.......................................................... (213) (116)
Equity securities......................................................... (26) (11)
--------- ---------
(239) (127)
--------- ---------
Less policyholder-related amounts........................................... 610 1,279
--------- ---------
Shareholder net unrealized appreciation..................................... 306 748
Less deferred income taxes.................................................. 118 272
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation................................................. $ 188 $ 476
- --------------------------------------------------------------------------------------------------
--------------------
</TABLE>
Net unrealized appreciation for investments carried at fair value is included
as a separate component of Shareholder's Equity, net of policyholder-related
amounts and deferred income taxes. The net unrealized (depreciation)
appreciation for these investments, primarily fixed maturities, during 1996,
1995 and 1994 was ($288) million, $542 million and ($494) million, respectively.
During 1995 and 1994, certain fixed maturities were carried at amortized cost
in the financial statements. The change in net unrealized appreciation
(depreciation) for such investments was ($14) million and ($1.2) billion during
1995 and 1994, respectively.
43
<PAGE>
E) NON-INCOME PRODUCING INVESTMENTS: At December 31, the carrying values of
investments, including policyholder share, that were non-income producing during
the preceding 12 months were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
(IN MILLIONS) 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Fixed maturities............................................................... $ 52 $ 75
Mortgage loans................................................................. 14 17
Real estate.................................................................... 172 234
- -----------------------------------------------------------------------------------------------------
Total.......................................................................... $ 238 $ 326
- -----------------------------------------------------------------------------------------------------
--------------------
</TABLE>
F) DERIVATIVE FINANCIAL INSTRUMENTS: The Company's investment strategy is to
manage the characteristics of investment assets, such as liquidity, currency,
yield and duration, to reflect the underlying characteristics of the related
insurance and contractholder liabilities, which vary among the Company's
principal product lines. In connection with this investment strategy, the
Company's use of derivative instruments, including interest rate and currency
swaps, purchased options and futures contracts, is limited to hedging
applications to minimize market risk.
Hedge accounting treatment requires a probability of high correlation between
the changes in the market value or cash flows of the derivatives and the hedged
assets or liabilities. Under hedge accounting, the changes in market value or
cash flows of the derivatives and the hedged assets or liabilities are
recognized in net income in the same period. If the Company's use of derivatives
does not qualify for hedge accounting treatment, the derivative is recorded at
fair value and changes in its fair value are recognized in net income without
considering changes in the hedged asset or liability.
The Company routinely monitors, by individual counterparty, exposure to credit
risk associated with swap and option contracts and diversifies the portfolio
among approved dealers of high credit quality. Futures contracts are
exchange-traded and, therefore, credit risk is limited since the exchange
assumes the obligations. The Company manages legal risks by following industry
standardized documentation procedures and by monitoring legal developments.
Underlying contract, notional or principal amounts associated with derivatives
at December 31 were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
(IN MILLIONS) 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest rate swaps............................................................ $ 335 $ 508
Currency swaps................................................................. 275 335
Purchased options.............................................................. 632 --
Futures........................................................................ 45 22
- -----------------------------------------------------------------------------------------------------
</TABLE>
Under interest rate swaps, the Company agrees with other parties to
periodically exchange the difference between variable rate and fixed rate asset
cash flows to provide stable returns for related liabilities. The Company uses
currency swaps (primarily Canadian dollars, pounds sterling and Swiss francs) to
match the currency of investments to that of the associated liabilities. Under
currency swaps, the parties exchange principal and interest amounts in two
relevant currencies using agreed-upon exchange amounts.
The net interest cash flows from interest rate and currency swaps are
recognized currently as an adjustment to net investment income, and the fair
value of these swaps is reported as an adjustment to the related investments.
Using purchased options to reduce the effect of changes in interest rates or
equity indexes on liabilities, the Company pays an up-front fee to receive cash
flows from third parties when interest rates or equity indexes vary from
specified levels. Purchased options that qualify for hedge accounting are
recorded consistent with the related liabilities, at amortized cost plus
adjustments based on current equity indexes, and income is reported as an
adjustment to benefit expense. Purchased options are reported in other assets,
and fees paid are amortized to benefit expense over their contractual periods.
Purchased options with underlying notional amounts of $112 million at December
31, 1996 that are designated as hedges, but do not qualify for hedge accounting,
are reported in other long-term investments at fair value with changes in fair
value recognized as realized investment gains and losses.
44
<PAGE>
Interest rate futures are used to temporarily hedge against the changes in
market values of bonds and mortgage loans to be purchased or sold. Under futures
contracts, changes in the contract values are settled in cash daily with the
exchange on which the instrument is traded. These changes in contract values are
deferred and recorded as adjustments to the carrying value of the related bond
or mortgage loan. Deferred gains and losses are amortized into net investment
income over the life of the investments purchased or are recognized in full as
realized investment gains and losses if investments are sold. Gains and losses
on futures contracts deferred in anticipation of investment purchases were
immaterial at December 31, 1996 and 1995.
The effects of interest rate and currency swaps, purchased options and futures
on the components of net income for 1996, 1995 and 1994 were not material.
As of December 31, 1996 and 1995, the Company's variable interest rate
investments consisted of approximately $1.3 billion and $1.4 billion of fixed
maturities, respectively. As of December 31, 1996 and 1995, the Company's fixed
interest rate investments consisted of $19.5 billion and $20.6 billion,
respectively, of fixed maturities, and $10.2 billion and $10.0 billion,
respectively, of mortgage loans.
G) OTHER: As of December 31, 1996 and 1995, the Company had no concentration
of investments in a single investee exceeding 10% of Shareholder's Equity.
NOTE 4 -- INVESTMENT INCOME AND GAINS AND LOSSES
A) NET INVESTMENT INCOME: The components of net investment income, including
policyholder share, for the year ended December 31 were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
(IN MILLIONS) 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities.................................................... $ 1,647 $ 1,663 $ 1,596
Equity securities................................................... -- 15 20
Mortgage loans...................................................... 921 866 776
Policy loans........................................................ 548 499 365
Real estate......................................................... 227 301 291
Other long-term investments......................................... 23 33 23
Short-term investments.............................................. 35 46 8
--------- --------- ---------
3,401 3,423 3,079
Less investment expenses............................................ 202 285 274
- -----------------------------------------------------------------------------------------------------
Net investment income............................................... $ 3,199 $ 3,138 $ 2,805
- -----------------------------------------------------------------------------------------------------
-------------------------------
</TABLE>
Net investment income attributable to policyholder contracts, which is
included in the Company's revenues and is primarily offset by amounts included
in Benefits, Losses and Settlement Expenses, was approximately $1.8 billion for
1996 and 1995, and $1.5 billion for 1994 . Net investment income for separate
accounts, which is not reflected in the Company's revenues, was $1.1 billion,
$885 million and $693 million for 1996, 1995 and 1994, respectively.
As of December 31, 1996, fixed maturities and mortgage loans on non-accrual
status, including policyholder share, were $160 million and $360 million,
including restructured investments of $88 million and $304 million,
respectively. As of December 31, 1995, fixed maturities and mortgage loans on
non-accrual status, including policyholder share, were $149 million and $523
million, including restructured investments of $105 million and $447 million,
respectively. If interest on these investments had been recognized in accordance
with their original terms, net income would have been increased by $15 million,
$18 million and $14 million in 1996, 1995 and 1994, respectively.
45
<PAGE>
B) REALIZED INVESTMENT GAINS AND LOSSES: Realized gains and losses on
investments, excluding policyholder share, for the year ended December 31 were
as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
(IN MILLIONS) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Realized investment gains (losses):
Fixed maturities....................................................... $ 11 $ (10) $ 4
Equity securities...................................................... 1 5 2
Mortgage loans......................................................... (12) (5) --
Real estate............................................................ 15 4 15
Other.................................................................. 22 (1) 6
--- --- ---
37 (7) 27
Income tax expenses (benefits)........................................... 17 (2) 12
- ----------------------------------------------------------------------------------------------------------------
Net realized investment gains (losses)................................... $ 20 $ (5) $ 15
- ----------------------------------------------------------------------------------------------------------------
--------------------
</TABLE>
Realized investment gains and losses include impairments in the value of
investments, net of recoveries, of $40 million, $27 million and $33 million in
1996, 1995 and 1994, respectively.
Realized investment gains (losses) for separate accounts, which are not
reflected in the Company's revenues, were $305 million, $412 million and ($51)
million for the years ended December 31, 1996, 1995 and 1994, respectively.
Realized investment gains (losses) attributable to policyholder contracts, which
also are not reflected in the Company's revenues, were $82 million and ($6)
million for the years ended December 31, 1996 and 1995, respectively. There were
no realized investment gains (losses) attributable to policyholder contracts for
the year ended December 31, 1994.
Sales of available-for-sale fixed maturities and equity securities, including
policyholder share, for the year ended December 31 were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
(IN MILLIONS) 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Proceeds from sales................................................. $ 4,236 $ 1,667 $ 2,116
Gross gains on sales................................................ $ 146 $ 78 $ 73
Gross losses on sales............................................... $ (70) $ (53) $ (70)
- -----------------------------------------------------------------------------------------------------
</TABLE>
Prior to the SFAS No. 115 reclassification described in Note 2(B), $171
million of fixed maturities classified as held-to-maturity, including
policyholder share, were transferred to the available-for-sale category in 1995
with no material effect on Shareholder's Equity.
NOTE 5 -- SHAREHOLDER'S EQUITY AND DIVIDEND RESTRICTIONS
The Connecticut Insurance Department (the Department) recognizes as net income
and surplus (shareholder's equity) those amounts determined in conformity with
statutory accounting practices prescribed or permitted by the Department, which
differ in certain respects from generally accepted accounting principles. As of
December 31, 1996, there were no permitted accounting practices utilized by the
Company that were materially different from those prescribed by the Department.
Capital stock of the Company at December 31, 1996 and 1995 consisted of
5,978,322 shares of common stock authorized, issued and outstanding (par value
$5.00).
The Company's statutory net income was $611 million, $390 million and $428
million for 1996, 1995 and 1994, respectively. Statutory surplus was $2.1
billion at December 31, 1996 and 1995. The Connecticut Insurance Holding Company
Act limits the amount of annual dividends or other distributions available to
shareholders of Connecticut insurance companies without the Department's prior
approval. During 1996, the Company paid a total of $600 million in dividends to
its Parent, of which $200 million received prior approval from the Department in
accordance with requirements. Under current law, the maximum dividend
distribution that may be made by the Company during 1997 without prior approval
is $629 million. The amount of restricted net assets as of December 31, 1996 was
approximately $3.5 billion.
46
<PAGE>
NOTE 6 -- INCOME TAXES
The Company's net deferred tax asset of $639 million and $403 million as of
December 31, 1996 and 1995, respectively, reflects management's belief that the
Company's taxable income in future years will be sufficient to realize the net
deferred tax asset based on the Company's earnings history and its future
expectations. In determining the adequacy of future taxable income, management
considered the future reversal of its existing taxable temporary differences and
available tax planning strategies that could be implemented, if necessary.
In accordance with the Life Insurance Company Income Tax Act of 1959, a
portion of the Company's statutory income was not subject to current income
taxation but was accumulated in an account designated Policyholders' Surplus
Account. Under the Tax Reform Act of 1984, no further additions may be made to
the Policyholders' Surplus Account for tax years ending after December 31, 1983.
The balance in the account of approximately $450 million at December 31, 1996
would result in a tax liability of $158 million only if distributed to the
shareholder or if the account balance exceeded a prescribed maximum. No income
taxes have been provided on this amount because, in management's opinion, the
likelihood that these conditions will be met is remote.
CIGNA's federal income tax returns are routinely audited by the Internal
Revenue Service (IRS), and provisions are made in CIGNA's financial statements
in anticipation of the results of these audits.
In management's opinion, adequate tax liabilities have been established for
all years.
The tax effect of temporary differences which give rise to deferred income tax
assets and liabilities as of December 31 were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
(IN MILLIONS) 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Other insurance and contractholder liabilities............................... $ 387 $ 324
Employee and retiree benefit plans........................................... 177 176
Investments, net............................................................. 228 225
Other........................................................................ 74 72
--- ---
Total deferred tax assets.................................................... 866 797
--- ---
Deferred tax liabilities:
Policy acquisition expenses.................................................. 21 25
Depreciation................................................................. 88 97
Unrealized appreciation on investments....................................... 118 272
--- ---
Total deferred tax liabilities............................................... 227 394
- -----------------------------------------------------------------------------------------------------
Net deferred income tax asset.................................................. $ 639 $ 403
- -----------------------------------------------------------------------------------------------------
--------------------
</TABLE>
Total income taxes for the year ended December 31 were less than the amount
computed using the nominal federal income tax rate of 35% for the following
reasons:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
(IN MILLIONS) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax expense at nominal rate.............................................. $ 305 $ 266 $ 271
Tax-exempt interest income............................................... (5) (6) (7)
Dividends received deduction............................................. (7) (7) (3)
Amortization of goodwill................................................. 4 4 4
Resolved federal tax audit issues........................................ -- -- (2)
Other.................................................................... 16 -- 2
- ----------------------------------------------------------------------------------------------------------
Total income taxes....................................................... $ 313 $ 257 $ 265
- ----------------------------------------------------------------------------------------------------------
-------------------------------
</TABLE>
NOTE 7 -- PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS PLANS
A) PENSION PLANS: The Company provides retirement benefits to eligible
employees and agents. These benefits are provided through a plan sponsored by
CIGNA covering most domestic employees (the Plan) and by several separate
pension plans for various subsidiaries, agents and foreign employees.
47
<PAGE>
The Plan is a non-contributory, defined benefit, trusteed plan available to
eligible domestic employees. Benefits are based on employees' years of service
and compensation during the highest three or, if service commenced after
December 31, 1988, five consecutive years of employment, offset by a portion of
the Social Security benefit for which they are eligible. CIGNA funds at least
the minimum amount required by the Employee Retirement Income Security Act of
1974. Allocated pension cost for the Company was $26 million, $23 million and
$31 million in 1996, 1995 and 1994, respectively.
The Plan, and several separate pension plans for various subsidiaries and
agents, had deposits with the Company totalling approximately $2.2 billion and
$2.0 billion at December 31, 1996 and 1995, respectively.
B) OTHER POSTRETIREMENT BENEFITS PLANS: In addition to providing pension
benefits, the Company provides certain health care and life insurance benefits
to retired employees, spouses and other eligible dependents through various
plans sponsored by CIGNA. A substantial portion of the Company's employees may
become eligible for these benefits upon retirement. CIGNA's contributions for
health care benefits depend upon a retiree's date of retirement, age, years of
service and other cost-sharing features, such as deductibles and coinsurance.
Under the terms of the benefit plans, benefit provisions and cost-sharing
features can be adjusted. In general, retiree health care benefits are not
funded by CIGNA, but are paid as covered expenses are incurred. Retiree life
insurance benefits are paid from plan assets or as covered expenses are
incurred.
In 1996, CIGNA amended its health care plan for certain current and future
retirees effective January 1, 1997, whereby health benefits will be provided
primarily through CIGNA's managed care networks in exchange for a fixed
reimbursement amount per retiree from Medicare. The effect of the plan amendment
was to reduce CIGNA's other postretirement benefit liability by $110 million.
The reduction of the liability is being amortized into income over the average
remaining employee service period, approximately 17 years, through a reduction
of the expense for postretirement benefits other than pensions allocated to the
Company.
An employer's postretirement benefit liability is primarily measured by
determining the present value of the projected future costs of health benefits
based on an estimate of health care cost trend rates. Expense for postretirement
benefits other than pensions allocated to the Company totalled $16 million for
1996, $20 million for 1995 and $28 million for 1994. The other postretirement
benefit liability included in Accounts Payable, Accrued Expenses and Other
Liabilities as of December 31, 1996 and 1995 was $424 million and $427 million,
including net intercompany payables of $40 million and $28 million,
respectively, for services provided by affiliates' employees.
C) OTHER POSTEMPLOYMENT BENEFITS: The Company provides certain salary
continuation (severance and disability), health care and life insurance benefits
to inactive and former employees, spouses and other eligible dependents through
various employee benefit plans sponsored by CIGNA.
Although severance benefits accumulate with additional service, the Company
recognizes severance expense when severance is probable and the costs can be
reasonably estimated. Postemployment benefits other than severance generally do
not vest or accumulate; therefore, the estimated cost of benefits is accrued
when determined to be probable and estimable, generally upon disability or
termination. See Note 10 for additional information regarding severance accrued
as part of cost reduction initiatives.
D) CAPITAL ACCUMULATION PLANS: CIGNA sponsors various capital accumulation
plans in which employee contributions on a pre-tax basis (401(k)) are
supplemented by CIGNA matching contributions. Contributions are invested, at the
election of the employee, in one or more of the following investments: CIGNA
common stock fund, several non-CIGNA stock and bond portfolios and a
fixed-income fund. The Company's allocated expense for such plans totaled $16
million for 1996 and $14 million for each of 1995 and 1994.
NOTE 8 -- REINSURANCE
In the normal course of business, the Company enters into agreements,
primarily relating to short-duration contracts, to assume and cede reinsurance
with other insurance companies. Reinsurance is ceded primarily to limit losses
from large exposures and to permit recovery of a portion of direct losses,
although ceded reinsurance does not relieve the originating insurer of
liability. The Company evaluates the financial condition of its reinsurers and
monitors concentrations of credit risk arising from similar geographic regions,
activities, or economic characteristic of its reinsurers.
48
<PAGE>
Failure of reinsurers to indemnify the Company, as a result of reinsurer
insolvencies and disputes, could result in losses. As of December 31, 1996 and
1995 there were no allowances for uncollectible amounts. While future charges
for unrecoverable reinsurance may materially affect results of operations in
future periods, such amounts are not expected to have a material adverse effect
on the Company's liquidity or financial condition.
The effects of reinsurance on net earned premiums and fees for the year ended
December 31 were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
(IN MILLIONS) 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-DURATION CONTRACTS
Premiums and fees:
Direct............................................................ $ 3,709 $ 3,374 $ 3,419
Assumed........................................................... 571 818 716
Ceded............................................................. (193) (391) (291)
- -----------------------------------------------------------------------------------------------------
Net earned premiums and fees........................................ $ 4,087 $ 3,801 $ 3,844
- -----------------------------------------------------------------------------------------------------
-------------------------------
LONG-DURATION CONTRACTS
Premiums and fees:
Direct............................................................ $ 1,228 $ 1,189 $ 1,068
Assumed........................................................... 165 127 126
Ceded............................................................. (166) (119) (78)
- -----------------------------------------------------------------------------------------------------
Net earned premiums and fees........................................ $ 1,227 $ 1,197 $ 1,116
- -----------------------------------------------------------------------------------------------------
-------------------------------
</TABLE>
The effects of reinsurance on written premiums and fees for short-duration
contracts were not materially different from the amounts shown in the above
table. Benefits, losses and settlement expenses for 1996, 1995 and 1994 were net
of reinsurance recoveries of $359 million, $442 million and $415 million,
respectively.
NOTE 9 -- LEASES AND RENTALS
Rental expenses for operating leases, principally with respect to buildings,
amounted to $68 million, $60 million and $62 million in 1996, 1995 and 1994,
respectively.
As of December 31, 1996, future net minimum rental payments under
non-cancelable operating leases were $128 million, payable as follows: 1997 -
$42 million; 1998 - $31 million; 1999 - $27 million; 2000 - $13 million; 2001 -
$6 million; and $9 million thereafter.
NOTE 10 -- SEGMENT INFORMATION
The Company operates principally in three segments: Employee Life and Health
Benefits, Employee Retirement and Savings Benefits, and Individual Financial
Services. Other Operations consists principally of the results of the Company's
settlement annuity business.
49
<PAGE>
Summarized financial information with respect to the business segments for the
year ended and as of December 31 was as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
(IN MILLIONS) 1996 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Employee Life and Health Benefits................................ $ 4,510 $ 4,243 $ 4,194
Employee Retirement and Savings Benefits......................... 1,899 1,914 1,887
Individual Financial Services.................................... 1,950 1,800 1,546
Other Operations................................................. 200 181 173
- --------------------------------------------------------------------------------------------------
Total............................................................ $ 8,559 $ 8,138 $ 7,800
- --------------------------------------------------------------------------------------------------
-------------------------------
INCOME (LOSS) BEFORE INCOME TAXES
Employee Life and Health Benefits................................ $ 287 $ 294 $ 323
Employee Retirement and Savings Benefits......................... 293 232 258
Individual Financial Services.................................... 298 252 237
Other Operations................................................. (8) (17) (44)
- --------------------------------------------------------------------------------------------------
Total............................................................ $ 870 $ 761 $ 774
- --------------------------------------------------------------------------------------------------
-------------------------------
IDENTIFIABLE ASSETS
Employee Life and Health Benefits................................ $ 7,065 $ 7,629 $ 7,197
Employee Retirement and Savings Benefits......................... 40,122 37,609 33,588
Individual Financial Services.................................... 17,930 16,189 12,612
Other Operations................................................. 2,398 2,569 2,111
- --------------------------------------------------------------------------------------------------
Total............................................................ $ 67,515 $ 63,996 $ 55,508
- --------------------------------------------------------------------------------------------------
-------------------------------
</TABLE>
During 1995, the Company recorded a $13 million pre-tax charge, included in
Other Operating Expenses, for cost reduction initiatives in the Employee Life
and Health Benefits segment. The charge consisted primarily of severance-related
expenses representing costs associated with nonvoluntary employee terminations
covering approximately 1,100 employees. The cash outlays associated with the
restructuring initiatives began in the third quarter of 1995 and will continue
through 1997, with $6 million paid in 1996. As of December 31, 1996, $7 million
of severance was paid to 625 terminated employees. The Company has funded, and
will continue to fund, these costs through liquid assets, and such funding has
not and will not have a material adverse effect on its liquidity.
NOTE 11 -- CONTINGENCIES
A) FINANCIAL GUARANTEES: The Company is contingently liable for financial
guarantees provided in the ordinary course of business on the repayment of
principal and interest on certain industrial revenue bonds. The contractual
amounts of financial guarantees reflect the Company's maximum exposure to credit
loss in the event of nonperformance. To limit the Company's exposure in the
event of default of any guaranteed obligation, various programs are in place to
ascertain the creditworthiness of guaranteed parties and to monitor this status
on a periodic basis.
The industrial revenue bonds guaranteed directly by the Company have remaining
maturities of up to 19 years. The guarantees provide for payment of debt service
only as it becomes due; consequently, an event of default would not cause an
acceleration of scheduled principal and interest payments. The principal amount
of the bonds guaranteed by the Company at December 31, 1996 and 1995 was $234
million and $266 million, respectively. Revenues in connection with industrial
revenue bond guarantees are derived principally from equity participations in
the related projects and are included in Net Investment Income as earned. Loss
reserves for financial guarantees are established when a default has occurred or
when the Company believes that a loss has been incurred. During 1994, losses for
industrial revenue bonds were $1 million. There were no such losses in 1996 and
1995.
50
<PAGE>
The Company also guarantees a minimum level of benefits for certain separate
account contracts and, in the event that separate account assets are
insufficient to fund minimum policy benefits, the Company is obligated to fund
the difference. As of December 31, 1996 and 1995, the amount of minimum benefit
guarantees for separate account contracts was $4.9 billion and $5.1 billion,
respectively. Reserves in addition to the separate account liabilities are
established when the Company believes a payment will be required under one of
these guarantees. No such reserves were required as of December 31, 1996 and
1995. Guarantee fees are part of the overall management fee charged to separate
accounts and are recognized in income as earned.
Although the ultimate outcome of any loss contingencies arising from the
Company's financial guarantees may adversely affect results of operations in
future periods, they are not expected to have a material adverse effect on the
Company's liquidity or financial condition.
B) REGULATORY AND INDUSTRY DEVELOPMENTS: The Company's businesses are subject
to a changing social, economic, legal, legislative and regulatory environment
that could affect them. Some of the changes include initiatives to: change
certain federal corporate tax laws; restrict insurance pricing and the
application of underwriting standards; reform health care; and expand
regulation. Some of the more significant issues are discussed below.
In August 1996, Congress passed legislation that phases out over a three-year
period the tax deductibility of policy loan interest for most leveraged
corporate-owned life insurance (COLI) products. For 1996, 31% of revenues and
29% of operating income for the Individual Financial Services segment were from
leveraged COLI products that are affected by this legislation. The effect of the
legislation on this segment's income is not expected to be material through
1998. Beginning in 1999, the effect of the legislation is uncertain; however, it
could have a material adverse effect on the segment's income. The Company does
not expect this legislation to have a material effect on its consolidated
results of operations, liquidity or financial condition.
The Company expects proposals for federal and state legislation seeking some
health care insurance reforms. Due to uncertainties associated with the timing
and content of any health care legislation, the effect on the Company's future
results of operations, liquidity or financial condition cannot be reasonably
estimated at this time.
The National Association of Insurance Commissioners is currently developing
standardized statutory accounting principles, which are scheduled to take effect
in 1999. The effect on the Company's statutory net income, surplus and liquidity
cannot be reasonably estimated at this time.
In recent years, the number of insurance companies that are impaired or
insolvent has increased. This is expected to result in an increase in mandatory
assessments by state guaranty funds of, or voluntary payments by, solvent
insurance companies to cover losses to policyholders of insolvent or
rehabilitated companies. Mandatory assessments, which are subject to statutory
limits, can be partially recovered through a reduction in future premium taxes
in some states. The Company recorded pre-tax charges of $53.9 million, $37.0
million and $27.9 million for 1996, 1995 and 1994, respectively, for guaranty
fund assessments that can be reasonably estimated before giving effect to future
premium tax recoveries. Although future assessments and payments may adversely
affect results of operations in future periods, such amounts are not expected to
have a material adverse effect on the Company's liquidity or financial
condition.
The eventual effect on the Company of the changing environment in which it
operates remains uncertain.
C) LITIGATION: The Company is routinely engaged in litigation incidental to
its business. While the outcome of all litigation involving the Company,
including insurance-related litigation, cannot be determined, litigation is not
expected to result in losses that differ from recorded reserves by amounts that
would be material to results of operations, liquidity or financial condition.
NOTE 12 -- RELATED PARTY TRANSACTIONS
The Company has assumed the settlement annuity and group pension business
written by Life Insurance Company of North America (LINA), an affiliate.
Reserves held by the Company with respect to this business were $1.7 billion at
December 31, 1996 and 1995.
The Company cedes long-term disability business to LINA. Reinsurance
recoverables from LINA at December 31, 1996 and 1995 were $917 million and $973
million, respectively.
51
<PAGE>
The Company had lines of credit available from affiliates totaling $600
million at both December 31, 1996 and 1995. All borrowings are payable upon
demand with interest rates equivalent to CIGNA's average monthly short-term
borrowing rate plus 1/4 of 1%. Interest expense was $1 million for 1996, 1995
and 1994. As of December 31, 1996 and 1995, there were no borrowings outstanding
under such lines.
The Company extended lines of credit to affiliates totalling $600 million at
December 31, 1996 and 1995. All loans are payable upon demand with interest
rates equivalent to CIGNA's average monthly short-term borrowing rate. There
were no amounts outstanding as of December 31, 1996 or 1995.
The Company, together with other CIGNA subsidiaries, has entered into a
pooling arrangement known as the CIGNA Corporate Liquidity Account (the Account)
for the purpose of maximizing earnings on funds available for short-term
investments. Withdrawals from the Account, up to the total amount of the
participant's investment in the Account, are allowed on a demand basis. As of
December 31, 1996 and 1995, the Company had a balance in the Account of $80
million and $212 million, respectively.
CIGNA allocates to the Company its share of operating expenses incurred at the
corporate level. The Company also allocates a portion of its operating expenses
to affiliated companies on whose behalf it performs certain administrative
services.
52
<PAGE>
CG VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
FIDELITY
VIP
PORTFOLIO
ALGER AMERICAN PORTFOLIO SUB-ACCOUNTS SUB-ACCOUNT
-------------------------------------------------- -----------
LEVERAGED MIDCAP SMALL EQUITY-
GROWTH ALLCAP GROWTH CAPITALIZATION INCOME
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investment in variable insurance funds at value............ $ 339,597 $ 331,450 $ 92,436 $ 349,028 $ 357,046
Receivable from Connecticut General Life Insurance
Company................................................... -- -- -- -- 2,503
Receivable for fund shares sold............................ 5 5 -- -- --
----------- ----------- ----------- ----------- -----------
Total assets............................................. 339,602 331,455 92,436 349,028 359,549
----------- ----------- ----------- ----------- -----------
LIABILITIES:
Payable to Connecticut General Life Insurance Company...... 5 5 -- -- --
Payable for fund shares purchased.......................... -- -- -- -- 2,503
----------- ----------- ----------- ----------- -----------
Total liabilities........................................ 5 5 -- -- 2,503
----------- ----------- ----------- ----------- -----------
Net assets............................................... $ 339,597 $ 331,450 $ 92,436 $ 349,028 $ 357,046
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Accumulation units outstanding............................. 24,719 20,127 6,400 26,199 26,218
Net asset value per accumulation unit...................... $ 13.738238 $ 16.468026 $ 14.443889 $13.322001 $ 13.618095
<CAPTION>
FIDELITY VIP II
PORTFOLIO SUB-ACCOUNTS
------------------------
ASSET INVESTMENT
MANAGER GRADE BOND
----------- -----------
<S> <C> <C>
ASSETS:
Investment in variable insurance funds at value............ $ 73,156 $ 40,819
Receivable from Connecticut General Life Insurance
Company................................................... -- --
Receivable for fund shares sold............................ -- --
----------- -----------
Total assets............................................. 73,156 40,819
----------- -----------
LIABILITIES:
Payable to Connecticut General Life Insurance Company...... -- --
Payable for fund shares purchased.......................... -- --
----------- -----------
Total liabilities........................................ -- --
----------- -----------
Net assets............................................... $ 73,156 $ 40,819
----------- -----------
----------- -----------
Accumulation units outstanding............................. 6,111 3,890
Net asset value per accumulation unit...................... $ 11.971291 $ 10.493674
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
53
<PAGE>
CG VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
AMT PORTFOLIO SUB-ACCOUNTS
MFS SERIES SUB-ACCOUNTS --------------------------------------
------------------------------------- LIMITED
TOTAL WORLD MATURITY
RETURN UTILITIES GOVERNMENTS BALANCED BOND PARTNERS
----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investment in variable insurance funds at
value......................................... $ 154,030 $ 3,516 $ 30,035 $ 197,917 $ 260 $ 124,947
Receivable from Connecticut General Life
Insurance Company............................. -- -- -- -- -- --
Receivable for fund shares sold................. 5,091 5,227 -- -- -- 2
----------- ----------- ----------- ----------- ------------ -----------
Total assets.................................. 159,121 8,743 30,035 197,917 260 124,949
----------- ----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ----------- ------------ -----------
LIABILITIES:
Payable to Connecticut General Life Insurance
Company....................................... 5,091 5,227 -- -- -- 2
Payable for fund shares purchased............... -- -- -- -- -- --
----------- ----------- ----------- ----------- ------------ -----------
Total liabilities............................. 5,091 5,227 -- -- -- 2
----------- ----------- ----------- ----------- ------------ -----------
Net assets.................................... $ 154,030 $ 3,516 $ 30,035 $ 197,917 $ 260 $ 124,947
----------- ----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ----------- ------------ -----------
Accumulation units outstanding.................. 12,740 296 2,784 18,966 25 8,019
Net asset value per accumulation unit........... $ 12.090502 $ 11.880730 $ 10.788580 $ 10.435528 $10.256711 $ 15.580865
<CAPTION>
OCC ACCUMULATION TRUST SUB-ACCOUNTS *
-------------------------------------
GLOBAL
EQUITY MANAGED SMALL CAP
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investment in variable insurance funds at
value......................................... $ 231,510 $ 309,795 $ 25,597
Receivable from Connecticut General Life
Insurance Company............................. 2,490 5,086 --
Receivable for fund shares sold................. -- -- --
----------- ----------- -----------
Total assets.................................. 234,000 314,881 25,597
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES:
Payable to Connecticut General Life Insurance
Company....................................... -- -- --
Payable for fund shares purchased............... 2,490 5,086 --
----------- ----------- -----------
Total liabilities............................. 2,490 5,086 --
----------- ----------- -----------
Net assets.................................... $ 231,510 $ 309,795 $ 25,597
----------- ----------- -----------
----------- ----------- -----------
Accumulation units outstanding.................. 20,118 20,691 2,116
Net asset value per accumulation unit........... $ 11.507742 $ 14.972784 $ 12.096552
</TABLE>
- --------------------------
* Formerly Quest for Value Accumulation Trust
The Notes to Financial Statements are an integral part of these statements.
54
<PAGE>
CG VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I
FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
FIDELITY
VIP
PORTFOLIO
ALGER AMERICAN PORTFOLIO SUB-ACCOUNTS SUB-ACCOUNT
-------------------------------------------------- -----------
LEVERAGED MIDCAP SMALL EQUITY-
GROWTH ALLCAP GROWTH CAPITALIZATION INCOME
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.................................................. $ 163 $ -- $ -- $ -- $ 137
EXPENSES:
Mortality and expense risk and administrative charges...... 1,038 1,121 293 1,286 840
----------- ----------- ----------- ----------- -----------
Net investment gain (loss)............................... (875) (1,121) (293) (1,286) (703)
----------- ----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Capital distributions from portfolio sponsors.............. 6,806 2,823 1,079 1,247 3,936
Net realized gain on share transactions.................... 1,244 307 870 4,249 789
----------- ----------- ----------- ----------- -----------
Net realized gain........................................ 8,050 3,130 1,949 5,496 4,725
Net unrealized gain (loss)................................. 15,418 14,027 3,694 (3,892) 24,879
----------- ----------- ----------- ----------- -----------
Net realized and unrealized gain (loss) on investments... 23,468 17,157 5,643 1,604 29,604
----------- ----------- ----------- ----------- -----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........... $ 22,593 $ 16,036 $ 5,350 $ 318 $ 28,901
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
<CAPTION>
FIDELITY VIP II
PORTFOLIO SUB-ACCOUNTS
------------------------
ASSET INVESTMENT
MANAGER GRADE BOND
----------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.................................................. $ 887 $ 1,857
EXPENSES:
Mortality and expense risk and administrative charges...... 239 179
----------- -----------
Net investment gain (loss)............................... 648 1,678
----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Capital distributions from portfolio sponsors.............. 731 --
Net realized gain on share transactions.................... 6 26
----------- -----------
Net realized gain........................................ 737 26
Net unrealized gain (loss)................................. 6,123 (569)
----------- -----------
Net realized and unrealized gain (loss) on investments... 6,860 (543)
----------- -----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........... $ 7,508 $ 1,135
----------- -----------
----------- -----------
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
55
<PAGE>
CG VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
AMT PORTFOLIO SUB-ACCOUNTS
MFS SERIES SUB-ACCOUNTS ---------------------------------------
------------------------------------- LIMITED
TOTAL WORLD MATURITY BOND
RETURN UTILITIES GOVERNMENTS BALANCED * PARTNERS
----------- ----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends..................................... $ 2,327 $ 81 $ -- $ 3,401 $ -- $ 120
EXPENSES:
Mortality and expense risk and administrative
charges..................................... 243 14 118 658 1 344
----------- ----------- ----------- ----------- ------------- -----------
Net investment gain (loss).................. 2,084 67 (118) 2,743 (1) (224)
----------- ----------- ----------- ----------- ------------- -----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Capital distributions from portfolio
sponsors.................................... 1,012 211 -- 18,913 -- 1,502
Net realized gain (loss) on share
transactions................................ 1,484 (55) 7 (8,925) 1 1,028
----------- ----------- ----------- ----------- ------------- -----------
Net realized gain........................... 2,496 156 7 9,988 1 2,530
Net unrealized gain (loss).................... 3,315 126 1,294 (4,946) 6 19,615
----------- ----------- ----------- ----------- ------------- -----------
Net realized and unrealized gain on
investments............................... 5,811 282 1,301 5,042 7 22,145
----------- ----------- ----------- ----------- ------------- -----------
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.................................. $ 7,895 $ 349 $ 1,183 $ 7,785 $ 6 $ 21,921
----------- ----------- ----------- ----------- ------------- -----------
----------- ----------- ----------- ----------- ------------- -----------
<CAPTION>
OCC ACCUMULATION TRUST SUB-ACCOUNTS
**
-------------------------------------
GLOBAL
EQUITY MANAGED SMALL CAP
----------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends..................................... $ 853 $ 420 $ 249
EXPENSES:
Mortality and expense risk and administrative
charges..................................... 753 732 90
----------- ----------- -----------
Net investment gain (loss).................. 100 (312) 159
----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Capital distributions from portfolio
sponsors.................................... 1,218 268 640
Net realized gain (loss) on share
transactions................................ 2,064 1,805 312
----------- ----------- -----------
Net realized gain........................... 3,282 2,073 952
Net unrealized gain (loss).................... 19,438 33,259 2,743
----------- ----------- -----------
Net realized and unrealized gain on
investments............................... 22,720 35,332 3,695
----------- ----------- -----------
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.................................. $ 22,820 $ 35,020 $ 3,854
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
- --------------------------
* Period from September 13, 1996 (date deposits first received) to December
31, 1996
** Formerly Quest for Value Accumulation Trust
The Notes to Financial Statements are an integral part of these statements.
56
<PAGE>
CG VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
FIDELITY
VIP
PORTFOLIO
ALGER AMERICAN PORTFOLIO SUB-ACCOUNTS SUB-ACCOUNT
-------------------------------------------------- -----------
LEVERAGED MIDCAP SMALL EQUITY-
GROWTH ALLCAP GROWTH CAPITALIZATION INCOME
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment gain (loss)................................. $ (875) $ (1,121) $ (293) $ (1,286) $ (703)
Net realized gain.......................................... 8,050 3,130 1,949 5,496 4,725
Net unrealized gain (loss)................................. 15,418 14,027 3,694 (3,892) 24,879
----------- ----------- ----------- ----------- -----------
Net increase from operations............................. 22,593 16,036 5,350 318 28,901
----------- ----------- ----------- ----------- -----------
ACCUMULATION UNIT TRANSACTIONS:
Participant deposits, net of premium load.................. 15,142 7,761 8,317 11,813 27,075
Participant transfers...................................... 278,167 309,607 69,138 288,681 253,480
Participant withdrawals.................................... (10,736) (7,624) (3,232) (11,026) (8,466)
----------- ----------- ----------- ----------- -----------
Net increase from participant transactions............... 282,573 309,744 74,223 289,468 272,089
----------- ----------- ----------- ----------- -----------
Total increase in net assets........................... 305,166 325,780 79,573 289,786 300,990
NET ASSETS:
Beginning of period........................................ 34,431 5,670 12,863 59,242 56,056
----------- ----------- ----------- ----------- -----------
End of period.............................................. $ 339,597 $ 331,450 $ 92,436 $ 349,028 $ 357,046
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
PARTICIPANT ACCUMULATION UNIT
TRANSACTIONS (IN UNITS):
Participant deposits....................................... 3,090 492 602 2,156 1,170
Participant transfers...................................... 19,615 19,725 5,046 20,255 21,039
Participant withdrawals.................................... (814) (474) (240) (824) (674)
----------- ----------- ----------- ----------- -----------
Net increase in units from participant transactions...... 21,891 19,743 5,408 21,587 21,535
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
<CAPTION>
FIDELITY VIP II
PORTFOLIO SUB-ACCOUNTS
------------------------
ASSET INVESTMENT
MANAGER GRADE BOND
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment gain (loss)................................. $ 648 $ 1,678
Net realized gain.......................................... 737 26
Net unrealized gain (loss)................................. 6,123 (569)
----------- -----------
Net increase from operations............................. 7,508 1,135
----------- -----------
ACCUMULATION UNIT TRANSACTIONS:
Participant deposits, net of premium load.................. 2,107 85
Participant transfers...................................... 40,593 3,967
Participant withdrawals.................................... (1,711) (1,829)
----------- -----------
Net increase from participant transactions............... 40,989 2,223
----------- -----------
Total increase in net assets........................... 48,497 3,358
NET ASSETS:
Beginning of period........................................ 24,659 37,461
----------- -----------
End of period.............................................. $ 73,156 $ 40,819
----------- -----------
----------- -----------
PARTICIPANT ACCUMULATION UNIT
TRANSACTIONS (IN UNITS):
Participant deposits....................................... 195 9
Participant transfers...................................... 3,719 395
Participant withdrawals.................................... (153) (181)
----------- -----------
Net increase in units from participant transactions...... 3,761 223
----------- -----------
----------- -----------
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
57
<PAGE>
CG VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
AMT PORTFOLIO SUB-ACCOUNTS
MFS SERIES SUB-ACCOUNTS ---------------------------------------
------------------------------------- LIMITED
TOTAL WORLD MATURITY BOND
RETURN UTILITIES GOVERNMENTS BALANCED * PARTNERS
----------- ----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment gain (loss).................... $ 2,084 $ 67 $ (118) $ 2,743 $ (1) $ (224)
Net realized gain............................. 2,496 156 7 9,988 1 2,530
Net unrealized gain (loss).................... 3,315 126 1,294 (4,946) 6 19,615
----------- ----------- ----------- ----------- ------------- -----------
Net increase from operations................ 7,895 349 1,183 7,785 6 21,921
----------- ----------- ----------- ----------- ------------- -----------
ACCUMULATION UNIT TRANSACTIONS:
Participant deposits, net of premium load..... 26,898 772 4,010 8,958 194 10,029
Participant transfers......................... 113,853 1,355 5,048 137,877 148 73,338
Participant withdrawals....................... (3,122) (360) (666) (5,113) (88) (3,582)
----------- ----------- ----------- ----------- ------------- -----------
Net increase from participant
transactions.............................. 137,629 1,767 8,392 141,722 254 79,785
----------- ----------- ----------- ----------- ------------- -----------
Total increase in net assets.............. 145,524 2,116 9,575 149,507 260 101,706
NET ASSETS:
Beginning of period........................... 8,506 1,400 20,460 48,410 -- 23,241
----------- ----------- ----------- ----------- ------------- -----------
End of period................................. $ 154,030 $ 3,516 $ 30,035 $ 197,917 $ 260 $ 124,947
----------- ----------- ----------- ----------- ------------- -----------
----------- ----------- ----------- ----------- ------------- -----------
PARTICIPANT ACCUMULATION UNIT
TRANSACTIONS (IN UNITS):
Participant deposits.......................... 2,769 528 388 1,190 19 703
Participant transfers......................... 9,440 (338) 495 13,349 15 5,649
Participant withdrawals....................... (270) (33) (63) (509) (9) (257)
----------- ----------- ----------- ----------- ------------- -----------
Net increase in units from participant
transactions.............................. 11,939 157 820 14,030 25 6,095
----------- ----------- ----------- ----------- ------------- -----------
----------- ----------- ----------- ----------- ------------- -----------
<CAPTION>
OCC ACCUMULATION TRUST SUB-ACCOUNTS
**
-------------------------------------
GLOBAL
EQUITY MANAGED SMALL CAP
----------- ----------- -----------
<S> <C> <C> <C>
OPERATIONS:
Net investment gain (loss).................... $ 100 $ (312) $ 159
Net realized gain............................. 3,282 2,073 952
Net unrealized gain (loss).................... 19,438 33,259 2,743
----------- ----------- -----------
Net increase from operations................ 22,820 35,020 3,854
----------- ----------- -----------
ACCUMULATION UNIT TRANSACTIONS:
Participant deposits, net of premium load..... 30,836 12,038 1,946
Participant transfers......................... 123,949 266,908 16,958
Participant withdrawals....................... (8,380) (7,491) (1,306)
----------- ----------- -----------
Net increase from participant
transactions.............................. 146,405 271,455 17,598
----------- ----------- -----------
Total increase in net assets.............. 169,225 306,475 21,452
NET ASSETS:
Beginning of period........................... 62,285 3,320 4,145
----------- ----------- -----------
End of period................................. $ 231,510 $ 309,795 $ 25,597
----------- ----------- -----------
----------- ----------- -----------
PARTICIPANT ACCUMULATION UNIT
TRANSACTIONS (IN UNITS):
Participant deposits.......................... 3,565 860 1,637
Participant transfers......................... 11,134 20,102 191
Participant withdrawals....................... (778) (542) (117)
----------- ----------- -----------
Net increase in units from participant
transactions.............................. 13,921 20,420 1,711
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
- --------------------------
* Period from September 13, 1996 (date deposits first received) to December
31, 1996
** Formerly Quest for Value Accumulation Trust
The Notes to Financial Statements are an integral part of these statements.
58
<PAGE>
CG VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIODS FROM INCEPTION (DATE DEPOSITS
FIRST RECEIVED) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
FIDLELITY
VIP
ALGER AMERICAN PORTFOLIO SUB-ACCOUNTS PORTFOLIO
-------------------------------------------------------- SUB-ACCOUNT
SMALL -----------
LEVERAGED MIDCAP CAPITALIZATION EQUITY-
GROWTH ** ALLCAP ** GROWTH ** ** INCOME **
----------- ------------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Inception Date................................. May 5, 1995 May 5, 1995 May 5, 1995 May 5, 1995 May 5, 1995
OPERATIONS:
Net investment gain (loss)..................... $ (23) $ (8) $ (13) $ (52) $ 439
Net realized gain (loss)....................... (3) 12 1 (15) (2)
Net unrealized gain (loss)..................... 424 839 498 (4,213) 2,857
----------- ------ ----------- ------- -----------
Net increase (decrease) from operations...... 398 843 486 (4,280) 3,294
----------- ------ ----------- ------- -----------
ACCUMULATION UNIT TRANSACTIONS:
Participant deposits, net of premium load...... 3,930 3,178 3,910 2,938 2,731
Participant transfers.......................... 30,447 1,857 8,745 61,383 50,773
Participant withdrawals........................ (344) (208) (278) (799) (742)
----------- ------ ----------- ------- -----------
Net increase from participant transactions... 34,033 4,827 12,377 63,522 52,762
----------- ------ ----------- ------- -----------
Total increase in net assets............... 34,431 5,670 12,863 59,242 56,056
NET ASSETS:
Beginning of period............................ -- -- -- -- --
----------- ------ ----------- ------- -----------
End of period.................................. $ 34,431 $ 5,670 $ 12,863 $ 59,242 $ 56,056
----------- ------ ----------- ------- -----------
----------- ------ ----------- ------- -----------
PARTICIPANT ACCUMULATION UNIT TRANSACTIONS (IN
UNITS):
Participant deposits........................... 349 268 336 266 256
Participant transfers.......................... 2,508 131 678 4,408 4,492
Participant withdrawals........................ (29) (15) (22) (62) (65)
----------- ------ ----------- ------- -----------
Net increase in units from participant
transactions............................... 2,828 384 992 4,612 4,683
----------- ------ ----------- ------- -----------
----------- ------ ----------- ------- -----------
<CAPTION>
FIDELITY VIP II
PORTFOLIO SUB-ACCOUNTS
------------------------------------
ASSET INVESTMENT
MANAGER GRADE BOND
----------------- -----------------
<S> <C> <C>
Inception Date................................. November 16, 1995 November 16, 1995
OPERATIONS:
Net investment gain (loss)..................... $ (9) $ (14)
Net realized gain (loss)....................... -- --
Net unrealized gain (loss)..................... 794 606
------- -------
Net increase (decrease) from operations...... 785 592
------- -------
ACCUMULATION UNIT TRANSACTIONS:
Participant deposits, net of premium load...... -- --
Participant transfers.......................... 23,939 36,925
Participant withdrawals........................ (65) (56)
------- -------
Net increase from participant transactions... 23,874 36,869
------- -------
Total increase in net assets............... 24,659 37,461
NET ASSETS:
Beginning of period............................ -- --
------- -------
End of period.................................. $ 24,659 $ 37,461
------- -------
------- -------
PARTICIPANT ACCUMULATION UNIT TRANSACTIONS (IN
UNITS):
Participant deposits........................... -- --
Participant transfers.......................... 2,356 3,672
Participant withdrawals........................ (6) (5)
------- -------
Net increase in units from participant
transactions............................... 2,350 3,667
------- -------
------- -------
</TABLE>
- ------------------------------
** Premium load reduced by $22 due to waiver of 1.15% of premium load from May
5, 1995 to August 1, 1995
The Notes to Financial Statements are an integral part of these statements.
59
<PAGE>
CG VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIODS FROM INCEPTION (DATE DEPOSITS
FIRST RECEIVED) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
MFS SERIES SUB-ACCOUNTS
------------------------------------------------------- AMT PORTFOLIO SUB-ACCOUNTS
TOTAL WORLD --------------------------------
RETURN UTILITIES GOVERNMENTS ** BALANCED PARTNERS **
----------------- ------------------- --------------- ------------------- -----------
<S> <C> <C> <C> <C> <C>
Inception Date................... October 10, 1995 December 26, 1995 May 5, 1995 September 12, 1995 May 5, 1995
OPERATIONS:
Net investment gain (loss)....... $ 159 $ 25 $ 1,919 $ (55) $ (15)
Net realized gain................ 157 61 -- -- 8
Net unrealized gain (loss)....... 164 (76) (1,668) (621) 857
------ ------ ------- ------- -----------
Net increase (decrease) from
operations................... 480 10 251 (676) 850
------ ------ ------- ------- -----------
ACCUMULATION UNIT TRANSACTIONS:
Participant deposits, net of
premium load................... 2,123 -- 1,861 -- 2,943
Participant transfers............ 5,933 1,390 18,466 49,657 19,642
Participant withdrawals.......... (30) -- (118) (571) (194)
------ ------ ------- ------- -----------
Net increase from participant
transactions................. 8,026 1,390 20,209 49,086 22,391
------ ------ ------- ------- -----------
Total increase in net
assets..................... 8,506 1,400 20,460 48,410 23,241
NET ASSETS:
Beginning of period.............. -- -- -- -- --
------ ------ ------- ------- -----------
End of period.................... $ 8,506 $ 1,400 $ 20,460 $ 48,410 $ 23,241
------ ------ ------- ------- -----------
------ ------ ------- ------- -----------
PARTICIPANT ACCUMULATION UNIT
TRANSACTIONS (IN UNITS):
Participant deposits............. 213 -- 185 -- 273
Participant transfers............ 591 139 1,791 4,994 1,668
Participant withdrawals.......... (3) -- (12) (58) (17)
------ ------ ------- ------- -----------
Net increase in units from
participant transactions..... 801 139 1,964 4,936 1,924
------ ------ ------- ------- -----------
------ ------ ------- ------- -----------
<CAPTION>
OCC ACCUMULATION TRUST SUB-ACCOUNTS *
-------------------------------------------------------
GLOBAL
EQUITY MANAGED ** SMALL CAP
------------------- ------------- -------------------
<S> <C> <C> <C>
Inception Date................... September 12, 1995 May 5, 1995 September 26, 1995
OPERATIONS:
Net investment gain (loss)....... $ 123 $ (7) $ (3)
Net realized gain................ 1,262 3 1
Net unrealized gain (loss)....... (981) 413 186
------- ------ ------
Net increase (decrease) from
operations................... 404 409 184
------- ------ ------
ACCUMULATION UNIT TRANSACTIONS:
Participant deposits, net of
premium load................... -- 1,867 --
Participant transfers............ 62,563 1,268 4,095
Participant withdrawals.......... (682) (224) (134)
------- ------ ------
Net increase from participant
transactions................. 61,881 2,911 3,961
------- ------ ------
Total increase in net
assets..................... 62,285 3,320 4,145
NET ASSETS:
Beginning of period.............. -- -- --
------- ------ ------
End of period.................... $ 62,285 $ 3,320 $ 4,145
------- ------ ------
------- ------ ------
PARTICIPANT ACCUMULATION UNIT
TRANSACTIONS (IN UNITS):
Participant deposits............. -- 182 --
Participant transfers............ 6,245 108 419
Participant withdrawals.......... (48) (19) (14)
------- ------ ------
Net increase in units from
participant transactions..... 6,197 271 405
------- ------ ------
------- ------ ------
</TABLE>
- ------------------------------
* Formerly Quest for Value Accumulation Trust
** Premium load reduced by $22 due to waiver of 1.15% of premium load from May
5, 1995 to August 1, 1995
The Notes to Financial Statements are an integral part of these statements.
60
<PAGE>
CG VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION
CG Variable Life Insurance Separate Account I (the Account) is registered as
a Unit Investment Trust under the Investment Company Act of 1940, as amended.
The operations of the Account are part of the operations of Connecticut General
Life Insurance Company (CG Life). The assets and liabilities of the Account are
clearly identified and distinguished from other assets and liabilities of CG
Life. The assets of the Account are not available to meet the general
obligations of CG Life and are held for the exclusive benefit of the
participants.
The assets of the Account are divided into variable sub-accounts each of
which is invested in shares of one of sixteen portfolios (mutual funds) of six
diversified open-end management investment companies, each portfolio with its
own investment objective. The variable sub-accounts are:
ALGER AMERICAN FUND:--
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio
Alger American MidCap Growth Portfolio
Alger American Small Capitalization Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND:--
Equity-Income Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II:--
Asset Manager Portfolio
Investment Grade Bond Portfolio
MFS VARIABLE INSURANCE TRUST:--
MFS Total Return Series
MFS Utilities Series
MFS World Governments Series
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST:--
AMT Balanced Portfolio
AMT Limited Maturity Bond Portfolio
AMT Partners Portfolio
OCC (FORMERLY QUEST FOR VALUE) ACCUMULATION TRUST:--
OCC Global Equity Portfolio
OCC Managed Portfolio
OCC Small Cap Portfolio
2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in conformity with generally
accepted accounting principles. The following is a summary of significant
accounting policies consistently followed in the preparation of the Account's
financial statements.
A. INVESTMENT VALUATION:--Investments held by the sub-accounts are valued at
their respective closing net asset values per share as determined by the
mutual funds as of December 31, 1996. The change in the difference between
cost and value is reflected as unrealized gain (loss) in the Statements of
Operations.
B. INVESTMENT TRANSACTIONS:--Investment transactions are recorded on the trade
date (date the order to buy or sell is executed). Realized gains and losses
on sales of investments are determined by the last-in, first-out cost basis
of the investment sold. Dividend and capital gain distributions are recorded
on the ex-dividend date. Investment transactions are settled through CG
Life.
61
<PAGE>
CG VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. FEDERAL INCOME TAXES:--The operations of the Account form a part of, and are
taxed with, the total operations of CG Life, which is taxed as a life
insurance company. Under existing federal income tax law, investment income
(dividends) and capital gains attributable to the Account are not taxed.
3. INVESTMENTS
Total shares held and cost of investments as of December 31, 1996 were:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
SHARES COST OF
SUB-ACCOUNT HELD INVESTMENTS
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Alger American Growth Portfolio......................................... 9,892 $ 323,755
Alger American Leveraged AllCap Portfolio............................... 17,120 316,584
Alger American MidCap Growth Portfolio.................................. 4,330 88,244
Alger American Small Capitalization Portfolio........................... 8,532 357,133
Fidelity Equity-Income Portfolio........................................ 16,978 329,310
Fidelity Asset Manager Portfolio........................................ 4,321 66,239
Fidelity Investment Grade Bond Portfolio................................ 3,335 40,782
MFS Total Return Series................................................. 11,235 150,551
MFS Utilities Series.................................................... 257 3,466
MFS World Governments Series............................................ 2,839 30,409
AMT Balanced Portfolio.................................................. 12,432 203,484
AMT Limited Maturity Bond Portfolio..................................... 19 254
AMT Partners Portfolio.................................................. 7,582 104,475
OCC Global Equity Portfolio............................................. 17,499 213,053
OCC Managed Portfolio................................................... 8,556 276,123
OCC Small Cap Portfolio................................................. 1,132 22,668
- -------------------------------------------------------------------------------------------
Total purchases and sales of shares for each mutual fund, for the year ended December 31,
1996, amounted to:
<CAPTION>
-------------------------------------------------------------------------------------------
SUB-ACCOUNT PURCHASES SALES
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Alger American Growth Portfolio......................................... $ 399,891 $ 111,387
Alger American Leveraged AllCap Portfolio............................... 336,431 24,985
Alger American MidCap Growth Portfolio.................................. 158,606 83,597
Alger American Small Capitalization Portfolio........................... 392,149 102,720
Fidelity Equity-Income Portfolio........................................ 409,649 134,327
Fidelity Asset Manager Portfolio........................................ 44,235 1,867
Fidelity Investment Grade Bond Portfolio................................ 5,923 2,022
MFS Total Return Series................................................. 247,690 106,965
MFS Utilities Series.................................................... 20,495 18,450
MFS World Governments Series............................................ 9,039 765
AMT Balanced Portfolio.................................................. 281,549 118,171
AMT Limited Maturity Bond Portfolio*.................................... 48,118 47,865
AMT Partners Portfolio.................................................. 115,118 34,055
OCC Global Equity Portfolio............................................. 239,204 91,481
OCC Managed Portfolio................................................... 348,149 76,738
OCC Small Cap Portfolio................................................. 33,392 14,995
- -------------------------------------------------------------------------------------------
</TABLE>
* For the period from September 13, 1996 (date deposits first received) to
December 31, 1996.
62
<PAGE>
CG VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
4. CHARGES AND DEDUCTIONS
CG Life assumes the risk that policyholders may live longer than expected
and also assumes a mortality risk in connection with the death benefits of the
contract. CG Life also assumes a risk that its actual administrative expenses
may be higher than amounts deducted for such expenses. CG Life charges each
variable sub-account, for mortality and expense risks, a daily deduction,
equivalent to .45% per year during the first ten policy years and .25% per year
thereafter. The mortality and expense risk charges, for each sub-account, are
reported on the Statements of Operations.
CG Life deducts a premium load of 3.5% of each premium payment to cover
state taxes and federal income tax liabilities.
CG Life charges a monthly administrative fee of $15 in the first policy year
and $5 in subsequent policy years. This charge is for items such as premium
billing and collection, policy value calculation, confirmations and periodic
reports.
CG Life charges a monthly deduction for the cost of insurance and any
charges for supplemental riders. The cost of insurance charge depends on the
attained age, risk classification, gender classification (in accordance with
state law) and the current net amount at risk. On a monthly basis, the
administrative fee and the cost of insurance charge are deducted proportionately
from the value of each variable sub-account and/or the fixed account funding
option. The fixed account is part of the general account of CG Life and is not
included in these financial statements.
Under certain circumstances, CG Life reserves the right to charge a transfer
fee of up to $25 for transfers between sub-accounts. For the year ended December
31, 1996, no transfer fees were deducted from the variable sub-accounts.
The fees charged by CG Life for premium loads (deducted from premium
payments), administrative fees and the amount deducted for the cost of
insurance, both of which are included in participant withdrawals, for variable
sub-accounts for the year ended December 31, 1996, amounted to:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
COST OF
PREMIUM ADMINISTRATIVE INSURANCE
SUB-ACCOUNT LOADS FEES DEDUCTIONS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alger American Growth Portfolio................................ $ 578 $ 1,380 $ 9,297
Alger American Leveraged AllCap Portfolio...................... 282 857 6,744
Alger American MidCap Growth Portfolio......................... 306 525 2,690
Alger American Small Capitalization Portfolio.................. 478 1,281 9,725
Fidelity Equity-Income Portfolio............................... 1,003 816 7,645
Fidelity Asset Manager Portfolio............................... 81 300 1,412
Fidelity Investment Grade Bond Portfolio....................... 3 159 1,605
MFS Total Return Series........................................ 978 420 2,690
MFS Utilities Series........................................... 29 83 275
MFS World Governments Series................................... 145 82 584
AMT Balanced Portfolio......................................... 372 527 4,592
AMT Limited Maturity Bond Portfolio*........................... 7 60 28
AMT Partners Portfolio......................................... 356 558 2,999
OCC Global Equity Portfolio.................................... 1,124 1,163 7,214
OCC Managed Portfolio.......................................... 444 1,045 6,437
OCC Small Cap Portfolio........................................ 71 192 1,114
- -------------------------------------------------------------------------------------------
</TABLE>
* For the period from September 13, 1996 (date deposits first received) to
December 31, 1996.
63
<PAGE>
CG VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
4. CHARGES AND DEDUCTIONS (CONTINUED)
CG Life, upon full surrender of a policy, may charge a surrender charge.
This charge is in part a deferred sales charge and in part a recovery of certain
first year administrative costs. The amount of the surrender charge, if any,
will depend on the amount of the death benefit, the amount of premium payments
made during the first two policy years and the age of the policy. In no event
will the surrender charge exceed the maximum allowed by state or Federal law. No
surrender charge is imposed on a partial surrender, but an administrative fee of
$25 is imposed, allocated pro-rata among the variable sub-accounts (and, where
applicable, the fixed account) from which the partial surrender proceeds are
taken. No full surrender or partial surrender administrative charges were paid
to CG
Life, attributable to the variable sub-accounts, for the year ended December 31,
1996.
5. DISTRIBUTION OF NET INCOME
The Account does not expect to declare dividends to participants from
accumulated net income. The accumulated net income is distributed to
participants as part of death benefits, surrenders, and transfers to other fixed
or variable sub-accounts.
6. DIVERSIFICATION REQUIREMENTS
Under the provisions of Section 817(h) of the Internal Revenue Code of 1986
(the Code), a variable life insurance policy will not be treated as life
insurance under Section 7702 of the Code for any period for which the
investments of the segregated asset account, on which the policy is based, are
not adequately diversified. The Code provides that the "adequately diversified"
requirement may be met if the underlying investments satisfy either a statutory
safe harbor test or diversification requirements set forth in regulations issued
by the Secretary of Treasury. CG Life believes, based on assurances from the
mutual fund managers, that the mutual funds satisfy the requirements of the
regulations.
64
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Connecticut General
Life Insurance Company and Participants of the
CG Variable Life Insurance Separate Account I
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of each of the sub-accounts, Alger
American Fund--Alger American Growth Portfolio, Alger American Leveraged AllCap
Portfolio, Alger American MidCap Growth Portfolio, Alger American Small
Capitalization Portfolio; Fidelity Variable Insurance Products Fund--
Equity-Income Portfolio; Fidelity Variable Insurance Products Fund II--Asset
Manager Portfolio, Investment Grade Bond Portfolio; MFS Variable Insurance
Trust--MFS Total Return Series, MFS Utilities Series, MFS World Governments
Series; Neuberger & Berman Advisers Management Trust--AMT Balanced Portfolio,
AMT Limited Maturity Bond Portfolio, AMT Partners Portfolio; OCC (formerly Quest
for Value) Accumulation Trust--OCC Global Equity Portfolio, OCC Managed
Portfolio, OCC Small Cap Portfolio (constituting the CG Variable Life Insurance
Separate Account I, hereafter referred to as "the Account") at December 31,
1996, the results of each of their operations and the changes in each of their
net assets for the periods indicated, in conformity with generally accepted
accounting principles. 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 of these
financial statements in accordance with generally accepted auditing standards
which 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1996 by correspondence with the
custodians, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Hartford, Connecticut
February 20, 1997
65
<PAGE>
APPENDIX 1
ILLUSTRATION OF SURRENDER CHARGES
The Surrender Charge is calculated as (a) times (b), where
(a) is the sum of (i) a Deferred Sales Charge and (ii) a
Deferred Administrative Charge and (b) is the applicable
Surrender Charge Grading Factor. If the Specified Amount is
increased, a new Surrender Charge will be applicable, in
addition to any existing Surrender Charge.
Below are examples of Surrender Charge calculations, one
involving a level Specified Amount and one involving an
increase in the Specified Amount, followed by Definitions
and Tables used in the calculations.
EXAMPLE 1: A male nonsmoker, age 35, purchases a Policy with
a Specified Amount of $100,000 and a scheduled annual
premium of $1100. He now wants to surrender the Policy at
the end of the sixth Policy Year.
The Surrender Charge is as follows:
Sum of the premiums paid through the end of the second
Policy Year = $2200.00
Guideline Annual Premium Amount (Male, Age 35, $100,000
Specified Amount) = $1177.05
Surrender Charge =
(.3X$1177.05) + (.1X($2200-$1177.05)) = $353.12 +
$102.30 = $ 455.42(i)
$6.00 per $1000 of Specified Amount $ 600.00(ii)
---------------------------
$1055.42(a)
The total Surrender Charge is $1055.42(a) times the
surrender charge grading factor(b), ($1055.42 X 80%) =
$844.34.
EXAMPLE 2: A female nonsmoker, age 45, purchases a Policy
with an Initial Specified Amount of $200,000 and a scheduled
annual premium of $1500. She pays the scheduled annual
premium for the first five Policy Years. At the start of the
sixth Policy Year, she increases the Specified Amount to
$250,000 and continues to pay the scheduled annual premium
of $1500. She now wants to surrender the Policy at the end
of the eighth Policy Year. Separate Surrender Charges must
be calculated for the Initial Specified Amount and for the
increase in Specified Amount.
The Surrender Charges are as follows:
For the Initial Specified Amount,
Sum of the premiums paid through the end of the second
Policy Year = $3000.00
Guideline Annual Premium Amount (Female, Age 45, $200,000
Specified Amount = $2920.67
Surrender Charge for Initial Specified Amount =
(.3X$2920.67) + (.1X($3000.00-$2920.67)) = $876.20 +
$7.93 = $ 884.13(i)
$6.00 per $1000 of Initial Specified Amount $1200.00(ii)
---------------------------
$2084.13(a)
The total Surrender Charge for the Initial Specified Amount
is $2084.13(a) times the applicable surrender charge grading
factor(b), ($2084.13 X 40%) = $833.65.
For the increase in Specified Amount;
Sum of the premiums in the first two years following the
increase in Specified Amount, applicable to the increase in
Specified Amount =
($1500 X 2) X ($50,000 / $250,000) = $600.00.
Guideline Annual Premium Amount (Female, Age 50, $50,000
Specified Amount) = $978.23.
66
<PAGE>
Surrender Charge for the increase in Specified Amount =
(.3 X $600.00) $180.00(i)
$6.00 per $1000 of increase in Specified Amount $300.00(ii)
--------------------------
$480.00(a)
The total Surrender Charge for the increase in the Specified
Amount is $480.00(a) times the applicable surrender charge
grading factor(b), ($480.00 X 100%) = $480.00
The overall Surrender Charge for the Policy is ($833.65 +
$480.00) = $1313.65.
DEFINITIONS AND TABLES
(a)(i) The Deferred Sales Charge is based on the actual
premium paid and the applicable Guideline Annual
Premium Amount, and is calculated assuming the
following:
<TABLE>
<S> <C>
DURING POLICY YEAR:
1 and 2 30% of the sum of the premiums paid up to an
amount equal to the Guideline Annual Premium
Amount,* plus 10% of the sum of the premiums paid
between one and two times the Guideline Annual
Premium Amount, plus 9% of the sum of the premiums
paid in excess of two times the Guideline Annual
Premium Amount.
3 through 10 same dollar amount as of the end of Policy Year 2.
</TABLE>
In no event will the Deferred Sales Charge exceed the
maximum permitted under federal or state law.
(ii) The Deferred Administrative Charge is $6.00 per
$1,000 of Specified Amount.
(b) SURRENDER CHARGE GRADING FACTORS
<TABLE>
<S> <C>
Policy Years** 1-5 100%
Policy Year 6 80%
Policy Year 7 60%
Policy Year 8 40%
Policy Year 9 20%
Policy Year 10 0%
</TABLE>
If a Surrender Charge becomes effective at other than the
end of a Policy Year, any applicable surrender charge
grading factor will be applied on a pro rata basis as of
such effective date.
* Guideline Annual Premium Amount is the level annual
amount that would be payable through the latest maturity
date permitted under the policy but not less than 20
years after date of issue or (if earlier) age 95 for the
future benefits under the policy, subject to the
following provisions: (A) the payments were fixed by the
Life Insurer as to both timing and amount; and (B) the
payments were based on the 1980 Commissioners Standard
Ordinary Mortality Table, net investment earnings at the
greater of an annual effective of 5% or rate or rates
guaranteed at issue of the Policy, the sales load under
the policy, and the fees and charges specified in the
Policy. A new Guideline Annual Premium Amount is
determined for each increase in Specified Amount under
the policy; in such event, "Policy Years" are measured
from the effective date(s) of such increase(s).
** Number of Policy Years elapsed since the Date of Issue
and from the effective date(s) of any increase(s) in
Specified Amount.
67
<PAGE>
APPENDIX 2
ILLUSTRATIONS OF ACCUMULATION VALUES, SURRENDER VALUES,
AND DEATH BENEFITS
The illustrations in this Prospectus have been prepared to
help show how values under the Policies change with
investment performance. The illustrations illustrate how
Accumulation Values, Surrender Values and Death Benefits
under a Policy would vary over time if the hypothetical
gross investment rates of return were a uniform annual
effective rate of either 0%, 6% or 12%. If the hypothetical
gross investment rate of return averages 0%, 6%, or 12% over
a period of years, but fluctuates above or below those
averages for individual years, the Accumulation Values,
Surrender Values and Death Benefits may be different. The
illustrations also assume there are no Policy loans or
partial surrenders, no additional Premium Payments are made
other than shown, no Accumulation Values are allocated to
the Fixed Account, and there are no changes in the Specified
Amount or Death Benefit Option.
The amounts shown for the Accumulation Value, Surrender
Value and Death Benefit as of each Policy Anniversary
reflect the fact that the net investment return on the
assets held in the Sub-Accounts is lower than the gross
return. This is due to the daily charges made against the
assets of the Sub-Accounts for assuming mortality and
expense risks. The current mortality and expense risk
charges are equivalent to an annual effective rate of 0.45%
of the daily net asset value of the Variable Account. On
each Policy Anniversary beginning with the 11th, the
mortality and expense risk charge is reduced to 0.25% on an
annual basis of the daily net assets of the Variable
Account. In addition, the net investment returns also
reflect the deduction of Fund investment advisory fees and
other expenses which will vary depending on which funding
vehicle is chosen but which are assumed for purposes of
these illustrations to be equivalent to an annual effective
rate of 1.00% of the daily net asset value of the Variable
Account.
Considering current charges for mortality and expense risks
and the assumed Fund expenses, gross annual rates of return
of 0%, 6%, and 12% correspond to net investment experience
at constant annual rates of -1.45%, 4.55% and 10.55%. On
each Policy Anniversary beginning with the 11th, the gross
annual rates of return of 0%, 6%, and 12% correspond to net
investment experience at constant annual rates of -1.25%,
4.75%, and 10.75%. This is due to a current reduction in the
mortality and expense risk charge from an annual effective
rate of 0.45% to an annual effective rate of 0.25% after ten
Policy Years.
Considering guaranteed charges for mortality and expense
risks and assumed Fund expenses, gross annual rates of 0%,
6% and 12% correspond to net investment experience at
constant annual rates of -1.90%, 4.10% and 10.10%.
The illustrations also reflect the fact that the Company
makes monthly charges for providing insurance protection.
Current values reflect current Cost of Insurance charges and
guaranteed values reflect the maximum Cost of Insurance
charges guaranteed in the Policy. The values shown are for
Policies which are issued as standard. Policies issued on a
substandard basis would result in lower Accumulation Values
and Death Benefits than those illustrated.
The illustrations also reflect the fact that the Company
deducts a premium load from each Premium Payment. Current
and guaranteed values reflect a deduction of 3.5% of each
Premium Payment.
68
<PAGE>
The Surrender Values shown in the illustrations reflect the
fact that the Company will deduct a Surrender Charge from
the Policy's Accumulation Value for any Policy surrendered
in full during the first ten years.
In addition, the illustrations reflect the fact that the
Company deducts a monthly administrative charge at the
beginning of each Policy Month. This monthly administrative
expense charge is $15 per month in the first year. Current
values reflect a current monthly administrative expense
charge of $5 in renewal years, and guaranteed values reflect
the $10 maximum monthly administrative charge under the
Policy in renewal years.
Upon request, the Company will furnish a comparable
illustration based on the proposed insured's age, gender
classification, smoking classification, risk classification
and premium payment requested.
69
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NONSMOKER ISSUE AGE 35
$2,720 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
GUARANTEED BASIS
<TABLE>
<CAPTION>
PREMIUMS DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
ACCUMULATED ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
END OF AT GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
POLICY 5% INTEREST NET NET NET NET NET NET NET NET NET
YEAR PER YEAR -1.90% 4.10% 10.10% -1.90% 4.10% 10.10% -1.90% 4.10% 10.10%
----------- -------------------------------------
------ ---------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,856 500,000 500,000 500,000 1,360 1,478 1,597 0 0 0
2 5,855 500,000 500,000 500,000 2,693 3,015 3,354 0 0 0
3 9,004 500,000 500,000 500,000 3,925 4,539 5,209 0 0 577
4 12,310 500,000 500,000 500,000 5,049 6,038 7,164 417 1,406 2,532
5 15,781 500,000 500,000 500,000 6,052 7,497 9,213 1,420 2,865 4,581
6 19,426 500,000 500,000 500,000 6,926 8,905 11,357 3,221 5,199 7,652
7 23,254 500,000 500,000 500,000 7,656 10,240 13,587 4,877 7,461 10,808
8 27,272 500,000 500,000 500,000 8,243 11,500 15,913 6,390 9,647 14,060
9 31,492 500,000 500,000 500,000 8,671 12,663 18,325 7,745 11,736 17,399
10 35,922 500,000 500,000 500,000 8,938 13,719 20,831 8,938 13,719 20,831
15 61,628 500,000 500,000 500,000 7,457 16,739 34,646 7,457 16,739 34,646
20 94,436 -- 500,000 500,000 -- 13,283 49,735 -- 13,283 49,735
25 136,309 -- -- 500,000 -- -- 62,239 -- -- 62,239
30 189,749 -- -- 500,000 -- -- 64,388 -- -- 64,388
</TABLE>
All Amounts are in Dollars
If premiums are paid more frequently than annually,
the Death Benefits, Accumulation Values and
Surrender Values would be less than those
illustrated.
Assumes no policy loans or partial surrenders have
been made. Guaranteed cost of insurance rates,
mortality and expense risk charges, administrative
fees and premium load assumed.
These investment results are illustrative only and
should not be considered a representation of past
or future investment results. Actual investment
results may be more or less than those shown and
will depend on a number of factors, including the
Policy Owner's allocations and the Funds' rates of
return. Accumulation Values and Surrender Values
for a Policy would be different from those shown if
the actual investment rates of return averaged 0%,
6% and 12% over a period of years, but fluctuated
above or below those averages for individual Policy
Years. No representations can be made that these
rates of return will in fact be achieved for any
one year or sustained over a period of time.
The net rates of return referred to above reflect
the deduction of 0.90% per year for the mortality
and expense risk charge and Fund expenses assumed
to be 1.00% per year but which may be higher or
lower (see pages 10 and 11 of this prospectus).
70
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NONSMOKER ISSUE AGE 35
$2,720 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
CURRENT BASIS
<TABLE>
<CAPTION>
DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
NET NET NET NET NET NET NET NET NET
PREMIUMS -1.45% 4.55% 10.55% -1.45% 4.55% 10.55% -1.45% 4.55% 10.55%
ACCUMULATED IN YEARS 1-10 IN YEARS 1-10 IN YEARS 1-10
END OF AT NET NET NET NET NET NET NET NET NET
POLICY 5% INTEREST -1.25% 4.75% 10.75% -1.25% 4.75% 10.75% -1.25% 4.75% 10.75%
YEAR PER YEAR IN YEARS 11 AND AFTER IN YEARS 11 AND AFTER IN YEARS 11 AND AFTER
------ ----------- ------------------------------------- ---------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,856 500,000 500,000 500,000 1,561 1,685 1,810 0 0 0
2 5,855 500,000 500,000 500,000 3,217 3,568 3,936 0 0 0
3 9,004 500,000 500,000 500,000 4,841 5,531 6,280 209 899 1,648
4 12,310 500,000 500,000 500,000 6,430 7,570 8,861 1,798 2,938 4,229
5 15,781 500,000 500,000 500,000 7,975 9,682 11,693 3,343 5,050 7,061
6 19,426 500,000 500,000 500,000 9,466 11,858 14,794 5,760 8,153 11,088
7 23,254 500,000 500,000 500,000 10,894 14,094 18,182 8,115 11,314 15,403
8 27,272 500,000 500,000 500,000 12,252 16,381 21,881 10,399 14,528 20,028
9 31,492 500,000 500,000 500,000 13,530 18,713 25,912 12,604 17,787 24,986
10 35,922 500,000 500,000 500,000 14,721 21,084 30,305 14,721 21,084 30,305
15 61,628 500,000 500,000 500,000 19,259 33,556 59,415 19,259 33,556 59,415
20 94,436 500,000 500,000 500,000 20,436 46,037 104,975 20,436 46,037 104,975
25 136,309 500,000 500,000 500,000 17,225 57,440 178,163 17,225 57,440 178,163
30 189,749 500,000 500,000 500,000 8,080 66,011 299,511 8,080 66,011 299,511
</TABLE>
All Amounts are in Dollars
If premiums are paid more frequently than annually,
the Death Benefits, Accumulation Values and
Surrender Values would be less than those
illustrated.
Assumes no policy loans or partial surrenders have
been made. Current cost of insurance rates assumed.
Current mortality and expense risk charges,
administrative fees and premium load assumed.
These investment results are illustrative only and
should not be considered a representation of past
or future investment results. Actual investment
results may be more or less than those shown and
will depend on a number of factors, including the
Policy Owner's allocations and the Funds' rates of
return. Accumulation Values and Surrender Values
for a Policy would be different from those shown if
the actual investment rates of return averaged 0%,
6% and 12% over a period of years, but fluctuated
above or below those averages for individual Policy
Years. No representations can be made that these
rates of return will in fact be achieved for any
one year or sustained over a period of time.
The net rates of return referred to above reflect
the deduction of 0.45% per year in years 1-10 and
0.25% thereafter for the mortality and expense risk
charge and Fund expenses assumed to be 1.00% per
year but which may be higher or lower (see pages 10
and 11 of this prospectus).
71
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NONSMOKER ISSUE AGE 45
$4,685 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
GUARANTEED BASIS
<TABLE>
<CAPTION>
PREMIUMS DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
ACCUMULATED ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
END OF AT GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
POLICY 5% INTEREST NET NET NET NET NET NET NET NET NET
YEAR PER YEAR -1.90% 4.10% 10.10% -1.90% 4.10% 10.10% -1.90% 4.10% 10.10%
----------- ------------------------------------- ---------------------------------- ----------------------------------
------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,919 500,000 500,000 500,000 2,027 2,220 2,414 0 0 0
2 10,084 500,000 500,000 500,000 3,903 4,416 4,956 0 0 0
3 15,508 500,000 500,000 500,000 5,558 6,513 7,560 0 729 1,777
4 21,203 500,000 500,000 500,000 6,985 8,496 10,227 1,201 2,713 4,443
5 27,182 500,000 500,000 500,000 8,165 10,338 12,939 2,382 4,555 7,155
6 33,460 500,000 500,000 500,000 9,088 12,019 15,688 4,462 7,392 11,061
7 40,053 500,000 500,000 500,000 9,715 13,488 18,437 6,245 10,018 14,967
8 46,974 500,000 500,000 500,000 10,015 14,702 21,153 7,701 12,389 18,839
9 54,242 500,000 500,000 500,000 9,949 15,606 23,790 8,792 14,449 22,633
10 61,874 500,000 500,000 500,000 9,472 16,135 26,295 9,472 16,135 26,295
15 106,150 -- 500,000 500,000 -- 11,290 35,182 -- 11,290 35,182
20 162,660 -- -- 500,000 -- -- 29,787 -- -- 29,787
25 234,782 -- -- -- -- -- -- -- -- --
30 326,828 -- -- -- -- -- -- -- -- --
</TABLE>
All Amounts are in Dollars
If premiums are paid more frequently than annually,
the Death Benefits, Accumulation Values and
Surrender Values would be less than those
illustrated.
Assumes no policy loans or partial surrenders have
been made. Guaranteed cost of insurance rates,
mortality and expense risk charges, administrative
fees and premium load assumed.
These investment results are illustrative only and
should not be considered a representation of past
or future investment results. Actual investment
results may be more or less than those shown and
will depend on a number of factors, including the
Policy Owner's allocations and the Funds' rates of
return. Accumulation Values and Surrender Values
for a Policy would be different from those shown if
the actual investment rates of return averaged 0%,
6% and 12% over a period of years, but fluctuated
above or below those averages for individual Policy
Years. No representations can be made that these
rates of return will in fact be achieved for any
one year or sustained over a period of time.
The net rates of return referred to above reflect
the deduction of 0.90% per year for the mortality
and expense risk charge and Fund expenses assumed
to be 1.00% per year but which may be higher or
lower (see pages 10 and 11 of this prospectus).
72
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NONSMOKER ISSUE AGE 45
$4,685 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
CURRENT BASIS
<TABLE>
<CAPTION>
DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
NET NET NET NET NET NET NET NET NET
PREMIUMS -1.45% 4.55% 10.55% -1.45% 4.55% 10.55% -1.45% 4.55% 10.55%
ACCUMULATED IN YEARS 1-10 IN YEARS 1-10 IN YEARS 1-10
END OF AT NET NET NET NET NET NET NET NET NET
POLICY 5% INTEREST -1.25% 4.75% 10.75% -1.25% 4.75% 10.75% -1.25% 4.75% 10.75%
YEAR PER YEAR IN YEARS 11 AND AFTER IN YEARS 11 AND AFTER IN YEARS 11 AND AFTER
------ ----------- ------------------------------------- ---------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,919 500,000 500,000 500,000 3,025 3,250 3,476 0 0 0
2 10,084 500,000 500,000 500,000 6,041 6,685 7,357 257 901 1,574
3 15,508 500,000 500,000 500,000 8,919 10,180 11,551 3,136 4,396 5,768
4 21,203 500,000 500,000 500,000 11,653 13,731 16,084 5,869 7,947 10,300
5 27,182 500,000 500,000 500,000 14,235 17,332 20,985 8,452 11,548 15,201
6 33,460 500,000 500,000 500,000 16,660 20,977 26,286 12,033 15,351 21,659
7 40,053 500,000 500,000 500,000 18,921 24,662 32,025 15,451 21,192 28,554
8 46,974 500,000 500,000 500,000 21,011 28,380 38,243 18,697 26,067 35,929
9 54,242 500,000 500,000 500,000 22,924 32,126 44,988 21,767 30,970 43,831
10 61,874 500,000 500,000 500,000 24,653 35,895 52,313 24,653 35,895 52,313
15 106,150 500,000 500,000 500,000 30,617 55,389 100,953 30,617 55,389 100,953
20 162,660 500,000 500,000 500,000 30,599 74,543 178,543 30,599 74,543 178,543
25 234,782 500,000 500,000 500,000 20,949 90,039 306,538 20,949 30,039 306,538
30 326,829 500,000 500,000 565,097 0 91,616 528,128 0 91,616 528,128
</TABLE>
All Amounts are in Dollars
If premiums are paid more frequently than annually,
the Death Benefits, Accumulation Values and
Surrender Values would be less than those
illustrated.
Assumes no policy loans or partial surrenders have
been made. Guaranteed cost of insurance rates,
mortality and expense risk charges, administrative
fees and premium load assumed.
These investment results are illustrative only and
should not be considered a representation of past
or future investment results. Actual investment
results may be more or less than those shown and
will depend on a number of factors, including the
Policy Owner's allocations and the Funds' rates of
return. Accumulation Values and Surrender Values
for a Policy would be different from those shown if
the actual investment rates of return averaged 0%,
6% and 12% over a period of years, but fluctuated
above or below those averages for individual Policy
Years. No representations can be made that these
rates of return will in fact be achieved for any
one year or sustained over a period of time.
The net rates of return referred to above reflect
the deduction of 0.45% per year in years 1-10 and
0.25% thereafter for the mortality and expense risk
charge and Fund expenses assumed to be 1.00% per
year but which may be higher or lower (see pages 10
and 11 of this prospectus).
73
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE NONSMOKER ISSUE AGE 35
$2,075 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
GUARANTEED BASIS
<TABLE>
<CAPTION>
PREMIUMS DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
ACCUMULATED ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
END OF AT GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
POLICY 5% INTEREST NET NET NET NET NET NET NET NET NET
YEAR PER YEAR -1.90% 4.10% 10.10% -1.90% 4.10% 10.10% -1.90% 4.10% 10.10%
----------- ------------------------------------- ---------------------------------- ----------------------------------
------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,179 500,000 500,000 500,000 975 1,063 1,151 0 0 0
2 4,466 500,000 500,000 500,000 1,938 2,176 2,426 0 0 0
3 6,869 500,000 500,000 500,000 2,821 3,272 3,765 0 0 0
4 9,391 500,000 500,000 500,000 3,615 4,338 5,163 0 93 918
5 12,039 500,000 500,000 500,000 4,308 5,360 6,613 63 1,115 2,368
6 14,820 500,000 500,000 500,000 4,891 6,326 8,109 1,495 2,930 4,713
7 17,739 500,000 500,000 500,000 5,357 7,223 9,647 2,810 4,676 7,100
8 20,805 500,000 500,000 500,000 5,704 8,045 11,226 4,006 6,347 9,528
9 24,024 500,000 500,000 500,000 5,938 8,792 12,857 5,089 7,943 12,008
10 27,404 500,000 500,000 500,000 6,056 9,457 14,541 6,056 9,457 14,541
15 47,014 500,000 500,000 500,000 4,817 11,264 23,825 4,817 11,264 23,825
20 72,042 -- 500,000 500,000 -- 8,987 34,132 -- 8,987 34,132
25 103,985 -- -- 500,000 -- -- 44,484 -- -- 44,484
30 144,754 -- -- 500,000 -- -- 52,904 -- -- 52,904
</TABLE>
All Amounts are in Dollars
If premiums are paid more frequently than annually,
the Death Benefits, Accumulation Values and
Surrender Values would be less than those
illustrated.
Assumes no policy loans or partial surrenders have
been made. Guaranteed cost of insurance rates,
mortality and expense risk charges, administrative
fees and premium load assumed.
These investment results are illustrative only and
should not be considered a representation of past
or future investment results. Actual investment
results may be more or less than those shown and
will depend on a number of factors, including the
Policy Owner's allocations and the Funds' rates of
return. Accumulation Values and Surrender Values
for a Policy would be different from those shown if
the actual investment rates of return averaged 0%,
6% and 12% over a period of years, but fluctuated
above or below those averages for individual Policy
Years. No representations can be made that these
rates of return will in fact be achieved for any
one year or sustained over a period of time.
The net rates of return referred to above reflect
the deduction of 0.90% per year for the mortality
and expense risk charge and Fund expenses assumed
to be 1.00% per year but which may be higher or
lower (see pages 10 and 11 of this prospectus).
74
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE NONSMOKER ISSUE AGE 35
$2,075 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
CURRENT BASIS
<TABLE>
<CAPTION>
DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
GROSS GROSS GROSS
GROSS 0% GROSS 6% 12% GROSS 0% GROSS 6% 12% GROSS 0% GROSS 6% 12%
NET NET NET NET NET NET NET NET NET
PREMIUMS -1.45% 4.55% 10.55% -1.45% 4.55% 10.55% -1.45% 4.55% 10.55%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ACCUMULATED IN YEARS 1-10 IN YEARS 1-10 IN YEARS 1-10
END OF AT NET NET NET NET NET NET NET NET NET
POLICY 5% INTEREST -1.25% 4.75% 10.75% -1.25% 4.75% 10.75% -1.25% 4.75% 10.75%
YEAR PER YEAR IN YEARS 11 AND AFTER IN YEARS 11 AND AFTER IN YEARS 11 AND AFTER
- ------ ----------- ---------------------------- ---------------------------- ----------------------------
1 2,179 500,000 500,000 500,000 1,154 1,247 1,341 0 0 0
2 4,466 500,000 500,000 500,000 2,402 2,666 2,943 0 0 0
3 6,869 500,000 500,000 500,000 3,619 4,136 4,700 0 0 455
4 9,391 500,000 500,000 500,000 4,781 5,636 6,604 536 1,391 2,359
5 12,039 500,000 500,000 500,000 5,884 7,160 8,664 1,639 2,915 4,419
6 14,820 500,000 500,000 500,000 6,927 8,709 10,898 3,531 5,313 7,502
7 17,739 500,000 500,000 500,000 7,912 10,286 13,325 5,365 7,739 10,778
8 20,805 500,000 500,000 500,000 8,840 11,891 15,965 7,142 10,193 14,267
9 24,024 500,000 500,000 500,000 9,711 13,526 18,842 8,862 12,677 17,993
10 27,404 500,000 500,000 500,000 10,527 15,194 21,982 10,527 15,194 21,982
15 47,014 500,000 500,000 500,000 13,782 24,139 42,967 13,782 24,139 42,967
20 72,042 500,000 500,000 500,000 15,155 33,622 76,248 15,155 33,622 76,248
25 103,985 500,000 500,000 500,000 14,197 43,270 130,050 14,197 43,270 130,050
30 144,754 500,000 500,000 500,000 9,997 52,180 218,566 9,997 52,180 218,566
</TABLE>
All Amounts are in Dollars
If premiums are paid more frequently than annually,
the Death Benefits, Accumulation Values and
Surrender Values would be less than those
illustrated.
Assumes no policy loans or partial surrenders have
been made. Current cost of insurance rates assumed.
Current mortality and expense risk charges,
administrative fees and premium load assumed.
These investment results are illustrative only and
should not be considered a representation of past
or future investment results. Actual investment
results may be more or less than those shown and
will depend on a number of factors, including the
Policy Owner's allocations and the Funds' rates of
return. Accumulation Values and Surrender Values
for a Policy would be different from those shown if
the actual investment rates of return averaged 0%,
6% and 12% over a period of years, but fluctuated
above or below those averages for individual Policy
Years. No representations can be made that these
rates of return will in fact be achieved for any
one year or sustained over a period of time.
The net rates of return referred to above reflect
the deduction of 0.45% per year in years 1-10 and
0.25% thereafter for the mortality and expense risk
charge and Fund expenses assumed to be 1.00% per
year but which may be higher or lower (see pages 10
and 11 of this prospectus).
75
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE NONSMOKER ISSUE AGE 45
$3,550 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
GUARANTEED BASIS
<TABLE>
<CAPTION>
DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
PREMIUMS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
ACCUMULATED GROSS GROSS GROSS
END OF AT GROSS 0% GROSS 6% 12% GROSS 0% GROSS 6% 12% GROSS 0% GROSS 6% 12%
POLICY 5% INTEREST NET NET NET NET NET NET NET NET NET
YEAR PER YEAR -1.90% 4.10% 10.10% -1.90% 4.10% 10.10% -1.90% 4.10% 10.10%
----------- ----------------------------
- ------ ---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,728 500,000 500,000 500,000 1,435 1,578 1,722 0 0 0
2 7,641 500,000 500,000 500,000 2,789 3,166 3,562 0 0 0
3 11,751 500,000 500,000 500,000 4,001 4,699 5,466 0 0 336
4 16,066 500,000 500,000 500,000 5,057 6,161 7,426 0 1,031 2,296
5 20,597 500,000 500,000 500,000 5,952 7,539 9,438 822 2,409 4,308
6 25,354 500,000 500,000 500,000 6,673 8,815 11,495 2,569 4,711 7,391
7 30,349 500,000 500,000 500,000 7,214 9,975 13,591 4,136 6,897 10,513
8 35,594 500,000 500,000 500,000 7,558 10,994 15,712 5,506 8,942 13,660
9 41,102 500,000 500,000 500,000 7,679 11,838 17,833 6,653 10,812 16,807
10 45,884 500,000 500,000 500,000 7,575 12,492 19,950 7,575 12,492 19,950
15 80,434 500,000 500,000 500,000 3,692 12,535 30,446 3,692 12,535 30,446
20 123,253 -- 500,000 500,000 -- 4,013 38,841 -- 4,013 38,841
25 177,903 -- -- 500,000 -- -- 34,340 -- -- 34,340
30 247,651 -- -- -- -- -- -- -- -- --
</TABLE>
All Amounts are in Dollars
If premiums are paid more frequently than annually,
the Death Benefits, Accumulation Values and
Surrender Values would be less than those
illustrated.
Assumes no policy loans or partial surrenders have
been made. Guaranteed cost of insurance rates,
mortality and expense risk charges, administrative
fees and premium load assumed.
These investment results are illustrative only and
should not be considered a representation of past
or future investment results. Actual investment
results may be more or less than those shown and
will depend on a number of factors, including the
Policy Owner's allocations and the Funds' rates of
return. Accumulation Values and Surrender Values
for a Policy would be different from those shown if
the actual investment rates of return averaged 0%,
6% and 12% over a period of years, but fluctuated
above or below those averages for individual Policy
Years. No representations can be made that these
rates of return will in fact be achieved for any
one year or sustained over a period of time.
The net rates of return referred to above reflect
the deduction of 0.90% per year for the mortality
and expense risk charge and Fund expenses assumed
to be 1.00% per year but which may be higher or
lower (see pages 10 and 11 of this prospectus).
76
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE NONSMOKER ISSUE AGE 45
$3,550 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
CURRENT BASIS
<TABLE>
<CAPTION>
DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
GROSS GROSS GROSS
GROSS 0% GROSS 6% 12% GROSS 0% GROSS 6% 12% GROSS 0% GROSS 6% 12%
NET NET NET NET NET NET NET NET NET
PREMIUMS -1.45% 4.55% 10.55% -1.45% 4.55% 10.55% -1.45% 4.55% 10.55%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ACCUMULATED IN YEARS 1-10 IN YEARS 1-10 IN YEARS 1-10
AT
END OF 5% NET NET NET NET NET NET NET NET NET
POLICY INTEREST -1.25% 4.75% 10.75% -1.25% 4.75% 10.75% -1.25% 4.75% 10.75%
YEAR PER YEAR IN YEARS 11 AND AFTER IN YEARS 11 AND AFTER IN YEARS 11 AND AFTER
- ------ --------- ---------------------------- ---------------------------- ----------------------------
1 3,728 500,000 500,000 500,000 2,174 2,341 2,508 0 0 0
2 7,641 500,000 500,000 500,000 4,387 4,861 5,356 0 0 226
3 11,751 500,000 500,000 500,000 6,514 7,441 8,450 1,384 2,311 3,320
4 16,066 500,000 500,000 500,000 8,553 10,081 11,812 3,423 4,951 6,682
5 20,597 500,000 500,000 500,000 10,501 12,780 15,467 5,371 7,650 10,337
6 25,354 500,000 500,000 500,000 12,355 15,536 19,445 8,251 11,432 15,341
7 30,349 500,000 500,000 500,000 14,113 18,349 23,777 11,035 15,271 20,699
8 35,594 500,000 500,000 500,000 15,772 21,219 28,498 13,720 19,167 26,446
9 41,102 500,000 500,000 500,000 17,329 24,144 33,647 16,303 23,118 32,621
10 46,884 500,000 500,000 500,000 18,782 27,124 39,270 18,782 27,124 39,270
15 80,434 500,000 500,000 500,000 24,612 43,212 77,089 24,612 43,212 77,089
20 123,253 500,000 500,000 500,000 27,014 60,447 137,860 27,014 60,447 137,860
25 177,903 500,000 500,000 500,000 24,279 77,481 237,386 24,279 77,481 237,386
30 247,651 500,000 500,000 500,000 12,642 90,961 405,165 12,642 90,961 405,165
</TABLE>
All Amounts are in Dollars
If premiums are paid more frequently than annually,
the Death Benefits, Accumulation Values and
Surrender Values would be less than those
illustrated.
Assumes no policy loans or partial surrenders have
been made. Current cost of insurance rates assumed.
Current mortality and expense risk charges,
administrative fees and premium load assumed.
These investment results are illustrative only and
should not be considered a representation of past
or future investment results. Actual investment
results may be more or less than those shown and
will depend on a number of factors, including the
Policy Owner's allocations and the Funds' rates of
return. Accumulation Values and Surrender Values
for a Policy would be different from those shown if
the actual investment rates of return averaged 0%,
6% and 12% over a period of years, but fluctuated
above or below those averages for individual Policy
Years. No representations can be made that these
rates of return will in fact be achieved for any
one year or sustained over a period of time.
The net rates of return referred to above reflect
the deduction of 0.45% per year in years 1-10 and
0.25% thereafter for the mortality and expense risk
charge and Fund expenses assumed to be 1.00% per
year but which may be higher or lower (see pages 10
and 11 of this prospectus).
77
<PAGE>
APPENDIX 3
TAX INFORMATION
The Office of Tax Analysis of the U.S. Department of the
Treasury published a "Report to the Congress on the Taxation
of Life Insurance Company Products" in March 1990. Page 4 of
this report is Table 1.1, a "Comparison of Tax Treatment of
Life Insurance Products and Other Retirement Savings Plans".
Because it is a convenient summary of the relevant tax
characteristics of these products and plans, it is reprinted
here, with added footnotes to reflect exceptions to the
general rules.
------------------------
TABLE 1.1
COMPARISON OF TAX TREATMENT OF LIFE INSURANCE PRODUCTS AND
OTHER RETIREMENT SAVINGS PLANS
<TABLE>
<CAPTION>
CASH-VALUE
LIFE NON-QUALIFIED QUALIFIED
INSURANCE ANNUITIES IRA'S PENSION
--------------- ----------------- -------------- -----------
<S> <C> <C> <C> <C>
Annual Contribution Limits No No Yes Yes
Income Eligibility Limits No No Yes** No
Borrowing Treated as Distributions No* Yes Loans not Yes,
allowed beyond
$50,000
Income Ordering Rules (Income included in First No* Yes Yes Yes
Distribution)
Early Withdrawal Penalties No* Yes*** Yes*** Yes***
Minimum Distribution Rules by Age 70 1/2 No No Yes Yes
Maximum Annual Distribution Rules No No Yes Yes
Anti-discrimination Rules No No No Yes
</TABLE>
- ------------------------
Department of the Treasury March 1990
Office of Tax Analysis
*If the Policy is not a modified endowment contract.
**If amounts paid in to fund the IRA are deductible; once over the income
eligibility limits amounts paid into an IRA are permitted but not deductible.
***There are several exceptions to the application of the early withdrawal
penalties for annuities, IRAs and qualified pensions.
The foregoing information is not intended as tax advice. You
should consult with your own tax advisor for more complete
information.
78
<PAGE>
[LOGO]
(5/97)
<PAGE>
FEES AND CHARGES REPRESENTATION
The Company represents that the fees and charges deducted under the
Contracts, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by the
Company.
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.
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet;
A cross-reference sheet (reconciliation and tie);
The prospectus, consisting of 78 pages;
The undertaking to file reports;
The signatures;
Written consents of the following persons:
Robert A. Picarello
Michelle L. Kunzman (previously filed with Pre-Effective Amendment
No. 1)
Price Waterhouse LLP
Exhibit 1. Fund Participation Agreements.
Agreements between Connecticut General Life Insurance Company and
(a) Alger American Fund
(b) Fidelity Variable Products Fund*
(c) Fidelity Variable Products Fund II*
(d) MFS-Registered Trademark- Variable Insurance Trust*
(e) Neuberger & Berman Advisers Management Trust
(f) OCC Accumulation Trust*
*Incorporated by reference to Form S-6 Post-Effective Amendment No. 1
(File No. 83-89238) of CG Variable Life Insurance Separate Account II,
filed April 19, 1996.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the registrant has duly caused this Post-Effective Amendment No. 3 to this
registration statement on Form S-6 (File No. 33-84426) to be signed on its
behalf by the undersigned thereunto duly authorized, in the Town of Bloomfield
and State of Connecticut, on the 17th day of April, 1997.
CG VARIABLE LIFE INSURANCE SEPARATE
ACCOUNT I
(Registrant)
By: ________/s/_THOMAS C. JONES_______
Thomas C. Jones,
PRESIDENT
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
(Depositor)
By: ________/s/_THOMAS C. JONES_______
Thomas C. Jones,
PRESIDENT
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 3 to Registration Statement (File No. 33-84426) has
been signed below on April 17, 1997 by the following persons as officers and
directors of the Depositor, in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ------------------------------------------------------
<C> <S>
/s/THOMAS C. JONES
------------------------------------------- President
Thomas C. Jones (Principal Executive Officer)
/s/BRADLEY K MILLER*
------------------------------------------- Assistant Vice President and Actuary
Bradley K. Miller (Principal Financial Officer)
/s/ROBERT MOOSE*
------------------------------------------- Vice President
Robert Moose (Principal Accounting Officer)
/s/HAROLD W. ALBERT*
------------------------------------------- Director
Harold W. Albert
/s/ROBERT W. BURGESS*
------------------------------------------- Director
Robert W. Burgess
/s/JOHN G. DAY*
------------------------------------------- Director
John G. Day
/s/JOSEPH M. FITZGERALD*
------------------------------------------- Director
Joseph M. Fitzgerald
/s/H. EDWARD HANWAY*
------------------------------------------- Director
H. Edward Hanway
/s/CAROL M. OLSEN*
------------------------------------------- Director
Carol M. Olsen
/s/JOHN E. PACY*
------------------------------------------- Director
John E. Pacy
/s/MARC L. PREMINGER*
------------------------------------------- Director
Marc L. Preminger
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ------------------------------------------------------
<C> <S>
/s/ARTHUR C. REEDS, III*
------------------------------------------- Director
Arthur C. Reeds, III
/s/PATRICIA L. ROWLAND*
------------------------------------------- Director
Patricia L. Rowland
/s/W. ALLEN SCHAFFER, M.D.*
------------------------------------------- Director
W. Allen Schaffer, M.D.
*By: /s/ROBERT A. PICARELLO*
------------------------------------
Robert A. Picarello
ATTORNEY-IN-FACT
(A Majority of the Directors)
</TABLE>
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of Connecticut General Life
Insurance Company, hereby severally constitute and appoint David C. Kopp and
Robert A. Picarello, and each of them individually, our true and lawful
attorneys-in-fact, with full power to them and each of them to sign for us, in
our names and in the capacities indicated below, any and all amendments to
Registration Statement No. 33-84426 filed with the Securities and Exchange
Commission under the Securities Act of 1933, on behalf of the Company in its own
name or in the name of one of its Separate Accounts, hereby ratifying and
confirming our signatures as they may be signed by either of our
attorneys-in-fact to any such Registration Statement.
WITNESS our hands and common seal on this 15th day of April, 1997.
SIGNATURE TITLE
- ----------------------------------- -------------------------
THOMAS C. JONES President
- ----------------------------------- (Principal Executive
Thomas C. Jones Officer)
Assistant Vice President
BRADLEY K. MILLER and Actuary
- ----------------------------------- (Principal Financial
Bradley K. Miller Officer)
ROBERT MOOSE Vice President
- ----------------------------------- (Principal Accounting
Robert Moose Officer)
HAROLD W. ALBERT
- ----------------------------------- Director
Harold W. Albert
ROBERT W. BURGESS
- ----------------------------------- Director
Robert W. Burgess
JOHN G. DAY
- ----------------------------------- Director
John G. Day
JOSEPH M. FITZGERALD
- ----------------------------------- Director
Joseph M. Fitzgerald
H. EDWARD HANWAY
- ----------------------------------- Director
H. Edward Hanway
CAROL M. OLSEN
- ----------------------------------- Director
Carol M. Olsen
JOHN E. PACY
- ----------------------------------- Director
John E. Pacy
MARC L. PREMINGER
- ----------------------------------- Director
Marc L. Preminger
ARTHUR C. REEDS, III
- ----------------------------------- Director
Arthur C. Reeds, III
PATRICIA L. ROWLAND
- ----------------------------------- Director
Patricia L. Rowland
W. ALLEN SCHAFFER, M.D.
- ----------------------------------- Director
W. Allen Schaffer, M.D.
<PAGE>
ROBERT A. PICARELLO
CHIEF COUNSEL [LOGO]
Law Department
S-321
900 Cottage Grove
Road
Hartford, CT
06152-2321
Phone: 860.726.8064
Fax: 860.726.1778
April 17, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Connecticut General Life Insurance Company
CG Variable Life Insurance Separate Account I
File No. 33-84426
Post-Effective Amendment No. 3
Dear Sirs:
As Chief Counsel of the Individual Insurance Division of the CIGNA Companies, I
am familiar with the actions of the Board of Directors of Connecticut General
Life Insurance Company (the "Company"), establishing CG Variable Life Insurance
Separate Account I (the "Account") and its method of operation and authorizing
the filing of a registration statement under the Securities Act of 1933 for the
securities to be issued by the Account and the Investment Company Act of 1940
for the Account itself.
In the course of preparing this opinion, I have reviewed the Certificate of
Incorporation and the By-Laws of the Company, the Board actions with respect to
the Account, and such other matters as I deemed necessary or appropriate. Based
on such review, I am of the opinion that the variable life insurance policies
(and interests therein) which are the subject of the registration statement
under the Securities Act of 1933 filed for the Account will, when issued, be
legally issued and will represent binding obligations of the Company, the
depositor for the Account.
I further consent to the use of this opinion as an Exhibit to said Registration
Statement and to the reference to me under the heading "Experts" in said
Registration Statement.
Very truly yours,
/s/ ROBERT A. PICARELLO
Robert A. Picarello
Chief Counsel
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment No. 3 to the registration statement of the CG Variable
Life Insurance Separate Account I on Form S-6 of our reports dated February 11,
1997 and February 20, 1997, relating to the consolidated financial statements of
Connecticut General Life Insurance Company and of the CG Variable Life Insurance
Separate Account I of Connecticut General Life Insurance Company, respectively,
which appear in such Prospectus. We also consent to the reference to us under
the heading "Experts" in such Prospectus.
Price Waterhouse LLP
Hartford, Connecticut
April 22, 1997
<PAGE>
Insured JOHN DOE SPECIMEN Policy Number
Initial Specified Amount $100,000 October 15, 1994 Date of Issue
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
A Stock Company Home Office Location: 900 Cottage Grove Road
Bloomfield, Connecticut
MAILING ADDRESS: CIGNA INDIVIDUAL INSURANCE
VARIABLE PRODUCTS SERVICE CENTER - ROUTING S249
HARTFORD, CT 06152-2249
The Company agrees to pay the death benefit to the Beneficiary upon receipt of
due proof of the Insured's death during the continuance of the policy.
RIGHT TO EXAMINE THIS POLICY. The policy may be returned to the insurance agent
through whom it was purchased or to the Company within 45 days of the date the
application is signed by the Owner or within 10 days after receipt of the
policy, (20 days after its receipt where required by law for policies issued in
replacement of other insurance), whichever is later. During this period, the
premium paid will be placed in the Fixed Account, and if the policy is so
returned, it will be deemed void from the Date of Issue and the Company will
refund all premium paid. If the policy is not returned during the
right-to-examine period, the premium payment will be processed as set forth in
the "Allocation of Premium Payments" provision.
ALL BENEFITS AND VALUES PROVIDED BY THIS POLICY WHEN BASED ON THE INVESTMENT
EXPERIENCE OF THE VARIABLE ACCOUNT ARE VARIABLE AND ARE NOT GUARANTEED AS TO
DOLLAR AMOUNT.
THE DEATH BENEFIT AMOUNT ON THE DATE OF ISSUE EQUALS THE INITIAL SPECIFIED
AMOUNT OF THE POLICY. THEREAFTER, THE DEATH BENEFIT MAY VARY UNDER THE
CONDITIONS DESCRIBED UNDER THE "INSURANCE COVERAGE PROVISIONS".
The policy is issued and accepted subject to the terms set forth on the
following pages, which are made a part of the policy. In consideration of
the application and the payment of premiums as provided, this policy is
executed by Connecticut General Life Insurance Company as of its Date of
Issue.
/s/ Thomas C. Jones
Registrar PRESIDENT
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Variable life insurance payable upon death of Insured.
Flexible premiums. Non-participating. Investment results
reflected in policy benefits.
<PAGE>
TABLE OF CONTENTS
PAGE
POLICY SPECIFICATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
LIST OF VARIABLE ACCOUNT SUB-ACCOUNTS. . . . . . . . . . . . . . . . . . . . 4
SCHEDULE 1: SURRENDER CHARGES . . . . . . . . . . . . . . . . . . . . . . . 5
SCHEDULE 2: EXPENSE CHARGES AND FEES. . . . . . . . . . . . . . . . . . . . 6
SCHEDULE 3: TABLE OF GUARANTEED MAXIMUM COST OF INSURANCE RATES . . . . . . 7
SCHEDULE 4: CORRIDOR PERCENTAGES TABLE. . . . . . . . . . . . . . . . . . . 8
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PREMIUM AND REINSTATEMENT PROVISIONS . . . . . . . . . . . . . . . . . . . . 10
OWNERSHIP, ASSIGNMENT AND BENEFICIARY PROVISIONS . . . . . . . . . . . . . . 11
VARIABLE ACCOUNTS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . 12
POLICY VALUES PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 13
TRANSFER PRIVILEGE PROVISION . . . . . . . . . . . . . . . . . . . . . . . . 16
NONFORFEITURE AND SURRENDER VALUE PROVISIONS . . . . . . . . . . . . . . . . 17
LOAN PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
INSURANCE COVERAGE PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . 18
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
FOLLOWED BY OPTIONAL METHODS OF SETTLEMENT AND ANY RIDERS
NOTE: PAGES 4 AND 6 ARE INTENTIONALLY "BLANK".
2
<PAGE>
POLICY SPECIFICATIONS
Insured John Doe Specimen Policy Number
Initial Specified Amount $100,000 October 15, 1994 Date of Issue
Minimum Specified Amount $50,000 35 Issue Age
Monthly Anniversary Day 15 Nonsmoker Premium Class
LN605 FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT: The Death Benefit Option initially elected under this policy
is Death Benefit Option 1. (See "Insurance Coverage Provisions").
PREMIUM PAYMENTS: Initial premium paid with application $580.00 Additional
premium payments may vary by frequency or amount.
PAYMENT MODE: Annually
GUARANTEED INITIAL DEATH BENEFIT PREMIUM: $2,249.70, or cumulative premium
payments as of any Monthly
Anniversary Day during the first 5
Policy Years must be at least equal
to 1/60th of this amount times the
sum of 1 plus the number of full
months that have elapsed between the
Date of Issue and the applicable
Monthly Anniversary Day. (Such
payment(s) will guarantee a minimum
death benefit equal to the Initial
Specified Amount during the first 5
Policy Years, assuming there have
been no loans or surrenders. See
"Minimum Premiums" provision).
NOTE: This policy may terminate prior to age 100 if actual premiums paid,
interest credited and market performance are insufficient to maintain a
positive surrender value to continue coverage to that date.
GUIDELINE ANNUAL PREMIUM AMOUNT: $1,177.05
NOTE: A separate Guideline Annual Premium Amount will apply to
increases if any, in Specified Amount.
LIMITS ON ALLOCATION OF NET PREMIUM PAYMENTS: The minimum allocation
percentage to the Fixed Account or a Variable Account Sub-Account is 10%.
All allocations must be made in whole percentages and in aggregate must total
100%. Premium payments will be allocated net of the Premium Load specified
in Schedule 2.
LIMITS ON TRANSFERS: Transfer(s) from the Fixed Account may only be made
during the 30-day period following each Policy Anniversary and is (are)
subject to a maximum aggregate annual limit of 20% of the Fixed Account Value
as of that Policy Anniversary. Additionally, the Company has the right to
limit the dollar amount of such transfers.
GUARANTEED MINIMUM INTEREST RATES: The interest rate used to credit interest
on the Fixed Account Value may vary but will never be less than .010746%
compounded daily (4% compounded yearly).
The interest rate used to credit interest on the Loan Account Value may vary
but will never be less than the loan interest rate less 2% per year during
Policy Years 1 through 10 and less 1% per year thereafter. (As of the Date
of Issue, the difference between the loan interest rate charged and the
interest rate credited on the Loan Account Value is 1% per year for Policy
Years 1 through 10 and .25% per year thereafter.)
OWNER: THE INSURED
BENEFICIARY: MARY DOE, WIFE
3
<PAGE>
LIST OF VARIABLE ACCOUNT SUB-ACCOUNTS
FUND GROUPS FUNDS (SUB-ACCOUNTS)
FIDELITY INVESTMENTS
Variable Insurance Products Fund Equity-Income Portfolio
Variable Insurance Products Fund II Asset Manager Portfolio
Investment Grade Bond Portfolio
FRED ALGER MANAGEMENT, INC.
Alger American Fund Alger American Growth Portfolio
Alger American Leveraged AllCap
Portfolio
Alger American MidCap Growth Portfolio
Alger American Small Capitalization
Portfolio
MASSACHUSETTS FINANCIAL SERVICES
MFS Variable Insurance Trust MFS Total Return Series
MFS Utilities Series
MFS World Governments Series
NEUBERGER & BERMAN
Neuberger & Berman Advisers AMT Balanced Portfolio
Management Trust (AMT) AMT Limited Maturity Bond Portfolio
AMT Partners Portfolio
QUEST FOR VALUE
Quest for Value Accumulation Trust Quest Global Equity Portfolio
Quest Managed Portfolio
Quest Small Cap Portfolio
NOTE: NET PREMIUM PAYMENTS MAY ALSO BE ALLOCATED TO THE FIXED ACCOUNT.
VARIABLE ACCOUNT SEPARATE ACCOUNT: CG Variable Life Insurance Separate
Account I: A Connecticut General Life Insurance Company separate Investment
Account which was established on July 6, 1994.
4
<PAGE>
SCHEDULE 1: SURRENDER CHARGES
Surrender charges are used in the determination of the surrender value of the
policy and are assessed upon surrender of the policy. Such charges are
applicable within 10 years of the Date of Issue and within 10 years following
the date of any increase in Specified Amount. The surrender charge is
calculated as (a) times (b), where (a) is the sum of (i) a Deferred Sales
Charge and (ii) a Deferred Administrative Charge and (b) is the applicable
Surrender Charge Grading Factor from the table below, but in no event will
the surrender charge ever exceed the maximum surrender charge allowed by law.
(a) (i) The Deferred Sales Charge is based on the actual premium paid and the
applicable Guideline Annual Premium Amount, and is calculated as
follows:
DURING POLICY YEAR*:
1 and 2 30% of the sum of premiums paid up to an amount equal to the
Guideline Annual Premium Amount, plus 10% of the sum of
premiums paid between one and two times the Guideline Annual
Premium Amount, plus 9% of the sum of premiums paid in excess
of two times the Guideline Annual Premium Amount.
3 through 10 Same dollar amount as end of Policy Year* 2.
(ii) The Deferred Administrative Charge is $6.00 per $1,000 of Specified
Amount.
(b) SURRENDER CHARGE GRADING FACTORS
Policy Years* 1-5 100%
Policy Year 6 80%
Policy Year 7 60%
Policy Year 8 40%
Policy Year 9 20%
Policy Year 10 0%
If a surrender becomes effective at other than the end of a Policy
Year, any applicable surrender charge grading factor will be applied
on a pro rata basis as of such effective date.
*NUMBER OF POLICY YEARS ELAPSED SINCE THE DATE OF ISSUE OR FROM THE
EFFECTIVE DATE(S) OF ANY INCREASE(S) IN SPECIFIED AMOUNT.
No surrender charge is applied upon either a partial surrender or a decrease
in Specified Amount, however, a transaction fee of $25 is assessed for each
partial surrender and will be processed as set forth in the "Partial
Surrender" provision and for any decrease in Specified Amount effected while
surrender charges apply under the policy, there will be no change in the
surrender charge from that which was applicable before the decrease took effect.
5
<PAGE>
SCHEDULE 2: EXPENSE CHARGES AND FEES
PREMIUM LOAD. A charge equal to 3.5% of each premium payment will be
deducted to cover applicable state taxes and federal income tax liabilities.
MONTHLY ADMINISTRATIVE FEE. A monthly deduction is made on each Monthly
Anniversary Day. (See "Monthly Deduction" provision.) It includes an
administrative fee charge, cost of insurance charges and any charges for
supplemental riders or optional benefits.
The monthly administrative fee as of the Date of Issue of the policy is
$15.00 per month during the first Policy Year and $5.00 per month during
subsequent Policy Years. This fee may be changed by the Company after the
first Policy Year based on its expectations of future expenses, but the
amount of such fee is guaranteed not to exceed $10.00 per month.
CHARGES AND FEES ASSOCIATED WITH THE VARIABLE ACCOUNT SUB-ACCOUNTS. For
mortality and expense risk, an asset charge is deducted from each Variable
Account Sub-Account at the end of each Valuation Period. This charge may be
changed by the Company from time to time, but it is guaranteed not to exceed
a daily rate which is equivalent to .90% annually of a Sub-Account's Value.
As of the Date of Issue of the policy, this charge was equal to a daily rate
which is equivalent to .45% annually during Policy Years 1 through 10 and a
daily rate which is equivalent to .25% annually during the 11th and later
Policy Years.
In addition, Daily Fund Operating Expenses will be applied by each Fund as
set forth in the prospectus for the applicable Fund(s).
TRANSFER FEE. A transaction fee of $25 applies to each transfer in excess of
12 made during any Policy Year.
6
<PAGE>
SCHEDULE 3: TABLE OF GUARANTEED MAXIMUM COST OF INSURANCE RATES
(ATTAINED AGE MONTHLY RATES PER $1,000 OF NET AMOUNT
AT RISK)
SPECIAL NOTE: The actual monthly cost of insurance rates charged under this
policy will vary based on the sex, attained age (nearest
birthday) and Premium Class of the person insured; however, they
will not exceed the rates shown in the table below. In
determining the monthly cost of insurance, the Company will add
the amount of the Flat Extra Monthly Insurance Cost, if any,
shown in the Policy Specifications. If the person insured is in
a rated premium class, the Guaranteed Maximum Life Insurance
Rates will be those in the table multiplied by the Risk Factor,
if any, shown in the Policy Specifications. The rates below are
based on the 1980 CSO Tables (Male or Female as appropriate).
<TABLE>
<CAPTION>
ATTAINED ATTAINED ATTAINED
AGE MALE FEMALE AGE MALE FEMALE AGE MALE FEMALE
(NEAREST MONTHLY MONTHLY (NEAREST MONTHLY MONTHLY (NEAREST MONTHLY MONTHLY
BIRTHDAY) RATE RATE BIRTHDAY) RATE RATE BIRTHDAY) RATE RATE
- --------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0 0.34845 0.24089 35 0.17586 0.13752 70 3.30338 1.84590
1 0.08917 0.07251 36 0.18670 0.14669 71 3.62140 2.02325
2 0.08251 0.06750 37 0.20004 0.15752 72 3.98666 2.24419
3 0.08167 0.06584 38 0.21505 0.17003 73 4.40599 2.51548
4 0.07917 0.06417 39 0.23255 0.18503 74 4.87280 2.83552
- --------------------------- ---------------------------- -----------------------------
5 0.07501 0.06334 40 0.25173 0.20171 75 5.37793 3.19685
6 0.07167 0.06084 41 0.27424 0.22005 76 5.91225 3.59370
7 0.06667 0.06000 42 0.29675 0.23922 77 6.46824 4.01942
8 0.06334 0.05834 43 0.32260 0.25757 78 7.04089 4.47410
9 0.06167 0.05750 44 0.34929 0.27674 79 7.64551 4.97042
- --------------------------- ---------------------------- -----------------------------
10 0.06084 0.05667 45 0.37931 0.29675 80 8.30507 5.52957
11 0.06417 0.05750 46 0.41017 0.31677 81 9.03761 6.17118
12 0.07084 0.06000 47 0.44353 0.33761 82 9.86724 6.91414
13 0.08251 0.06250 48 0.47856 0.36096 83 10.80381 7.77075
14 0.09584 0.06667 49 0.51777 0.38598 84 11.82571 8.72632
- --------------------------- ---------------------------- -----------------------------
15 0.11085 0.07084 50 0.55948 0.41350 85 12.91039 9.76952
16 0.12585 0.07501 51 0.60870 0.44270 86 14.03509 10.89151
17 0.13919 0.07917 52 0.66377 0.47523 87 15.18978 12.08770
18 0.14836 0.08167 53 0.72636 0.51276 88 16.36948 13.35774
19 0.15502 0.08501 54 0.79730 0.55114 89 17.57781 14.70820
- --------------------------- ---------------------------- -----------------------------
20 0.15836 0.08751 55 0.87326 0.59118 90 18.82881 16.15259
21 0.15919 0.08917 56 0.95591 0.63123 91 20.14619 17.71416
22 0.15752 0.09084 57 1.04192 0.66961 92 21.57655 19.43814
23 0.15502 0.09251 58 1.13378 0.70633 93 23.20196 21.40786
24 0.15169 0.09501 59 1.23235 0.74556 94 25.28174 23.83051
- --------------------------- ---------------------------- -----------------------------
25 0.14752 0.09668 60 1.34180 0.78979 95 28.27411 27.16158
26 0.14419 0.09918 61 1.46381 0.84488 96 33.10677 32.32378
27 0.14252 0.10168 62 1.60173 0.91417 97 41.68475 41.21204
28 0.14169 0.10501 63 1.75809 1.00267 98 58.01259 57.81394
29 0.14252 0.10835 64 1.93206 1.10539 99 83.33333 83.33333
- --------------------------- ---------------------------- -----------------------------
30 0.14419 0.11251 65 2.12283 1.21731
31 0.14836 0.11668 66 2.32623 1.33511
32 0.15252 0.12085 67 2.54312 1.45461
33 0.15919 0.12502 68 2.77350 1.57247
34 0.16669 0.13168 69 3.02328 1.69955
- --------------------------- ----------------------------
</TABLE>
7
<PAGE>
SCHEDULE 4: CORRIDOR PERCENTAGES TABLE
As of the Date of Issue of this policy the formula in effect to determine the
amount under item (b) of both Death Benefit Option 1 and Death Benefit Option
2 is based on a percent of the Accumulation Value as determined from the
following table:
INSURED'S CORRIDOR INSURED'S CORRIDOR
ATTAINED AGE PERCENTAGE ATTAINED AGE PERCENTAGE
------------ ---------- ------------ -----------
0-40 250% 70 115%
41 243 71 113
42 236 72 111
43 229 73 109
44 222 74 107
----- ----- ------ -----
45 215 75 105
46 209 76 105
47 203 77 105
48 197 78 105
49 191 79 105
----- ----- ------ -----
50 185 80 105
51 178 81 105
52 171 82 105
53 164 83 105
54 157 84 105
----- ----- ------ -----
55 150 85 105
56 146 86 105
57 142 87 105
58 138 88 105
59 134 89 105
----- ----- ------ -----
60 130 90 105
61 128 91 104
62 126 92 103
63 124 93 102
64 122 94 101
----- ----- ------ -----
65 120 95 100
66 119 96 100
67 118 97 100
68 117 98 100
69 116 99 100
----- ----- ------ -----
8
<PAGE>
DEFINITIONS
ACCUMULATION VALUE. The sum of (i) the then current value of the Fixed
Account, (ii) all of the then current values of the Variable Account
Sub-Accounts (i.e. the Variable Account Value), and (iii) the Loan Account
Value.
DATE OF ISSUE. The date on which the policy becomes effective. The Date of
Issue is shown in the Policy Specifications.
DUE PROOF OF DEATH. An original certified copy of an official death
certificate, an original certified copy of a decree of a court of competent
jurisdiction as to the finding of death, or any other proof of death
satisfactory to the Company.
FIXED ACCOUNT. The account which provides for a guaranteed minimum interest
rate. The Company may, at its discretion, credit a higher current rate of
interest. Fixed Account assets are general assets of the Company and are
distinguishable from those allocated to a separate account of the Company.
FUND(S). The Portfolio(s) of Fund Groups whose shares are acquired for the
Variable Account Sub-Accounts in which Net Premium Payments or transfers may
be invested.
FUND GROUPS. The open-end management investment companies (mutual funds)
registered under the Investment Company Act of 1940, as amended, (hereinafter
referred as the "1940 Act"), one or more of whose Portfolio(s)' shares are
made available as investment vehicles for the policies through the Variable
Account Sub-Accounts.
HOME OFFICE. Connecticut General Life Insurance Company, the mailing
address of which for this policy is CIGNA Individual Insurance, Variable
Products Service Center - Routing S249, Hartford, Connecticut 06152-2249.
IN WRITING. In a written form satisfactory to the Company and received by
the Company at its Home Office.
LOAN ACCOUNT. The account in which policy indebtedness (outstanding loans
and interest) accrues once it is transferred out of the Fixed Account and
Variable Account Sub-Accounts. The Loan Account is part of the Company's
general account.
LOAN ACCOUNT VALUE. The value of the Loan Account, the amount of which
equals the indebtedness under the policy.
MONTHLY ANNIVERSARY DAY. The day of the month, as shown in the Policy
Specifications, when the Company deducts certain charges. If that day does
not occur on a Valuation Day or is nonexistent for that month, then such
charges will be deducted on the next Valuation Day.
NET ACCUMULATION VALUE. An amount equal to the Accumulation Value less the
amount of indebtedness, if any, in the Loan Account.
NET PREMIUM PAYMENT. The amount of a premium payment, less the premium load
shown in Schedule 2. A Net Premium Payment is the amount available for
allocation to the Fixed Account and the Variable Account Sub-Accounts.
POLICY ANNIVERSARIES AND POLICY YEARS. Twelve-month periods measured from
the Date of Issue.
SEC. The Securities and Exchange Commission.
SUB-ACCOUNT. That portion of the Variable Account which invests in shares of
a specific Fund.
VALUATION DAY. Every day on which the New York Stock Exchange ("NYSE") is
open for business, except any day on which trading on the NYSE is restricted,
or on which an emergency exists, as determined by the SEC, so that valuation
or disposal of securities is not practicable.
9
<PAGE>
DEFINITIONS (CONTINUED)
VALUATION PERIOD. The period of time for which a Fund determines its net
asset value; a Valuation Period begins on the day following a Valuation Day
and ends on the next Valuation Day. A Valuation Period may be more than one
day in length.
VARIABLE ACCOUNT. The account consisting of all Sub-Account(s) invested in
shares of the Fund(s). Variable Account assets are separate account assets
of the Company, the investment performance of which is kept separate from
that of the general assets of the Company and are not chargeable with the
general liability of the Company.
VARIABLE ACCUMULATION UNIT. A unit of measure used in the calculation of the
value of each Variable Account Sub-Account.
PREMIUM AND REINSTATEMENT PROVISIONS
PAYMENT OF PREMIUMS. All premiums are payable at the Home Office or to an
authorized representative of the Company. The first premium is due on the
Date of Issue and is payable in advance. Additional premiums may be paid
under the policy subject to the consent of the Company and the requirements
specified under the "Minimum Premiums" and "Additional Premiums"
provisions. Receipts signed by the President or Secretary and duly
countersigned will be furnished upon request.
MINIMUM PREMIUMS. The minimum premium for the policy is the amount necessary
to maintain a positive surrender value as set forth under the "Grace
Period" provision. The Guaranteed Initial Death Benefit Premium, as shown
in the Policy Specifications, is not mandatory but is the premium amount
necessary to guarantee that the death benefit will not be less than the
Initial Specified Amount during the first 5 Policy Years regardless of market
performance, assuming that there are no loans or partial surrenders under the
policy.
PLANNED PREMIUMS. If the Owner chooses to make periodic premium payments,
the Company will send premium reminder notices for the amounts and frequency
of payments established by the Owner. Changes in the amounts or frequency of
such planned periodic payments by the Owner will be subject to the consent of
the Company.
ADDITIONAL PREMIUMS. In addition to planned premiums, if any, additional
premium payments of at least $100.00 each may be made up to age 100 of the
Insured during the continuance of the policy. The Company reserves the right
to limit the amount or number of any such additional premium payments.
Unless otherwise specified by the Owner, if there is any policy indebtedness,
any additional premiums paid will be used first as a loan repayment with any
excess applied as an additional premium.
ALLOCATION OF NET PREMIUM PAYMENTS. Net Premium Payments may be allocated to
the Fixed Account and/or to Variable Account Sub-Accounts under the policy
subject to the "Limits on Allocation of Net Premium Payments" shown in the
Policy Specifications. The Net Premium Payment associated with the initial
premium payment will be allocated within 3 business days of the expiration of
the "Right to Examine Contract" period in accordance with the allocation
percentages specified in the application. Subsequent Net Premium Payments
will be allocated on the same basis as the most recent previous Net Premium
Payment unless the Company is otherwise instructed in writing to change the
allocation percentages.
GUIDELINE ANNUAL PREMIUM AMOUNT. The level annual amount as shown in the
Policy Specifications as of the Date of Issue is an amount calculated in
accordance with SEC Rule 6e-3(T) under the 1940 Act as in effect on such
date. The Guideline Annual Premium Amount under this policy is used in
determining the amount of the surrender charges if the policy is surrendered
during a period for which surrender charges are applicable.
GRACE PERIOD. If the surrender value on any Monthly Anniversary Day is less
than the required monthly deduction, a grace period of 61 days will be
granted to pay a premium sufficient to cover the required monthly deduction.
If, however, the Guaranteed Initial Death Benefit Premium requirement as set
forth in the Policy Specifications is met, the policy will not lapse during
the first 5 Policy Years and a minimum death benefit amount at least equal to
the Initial Specified Amount will be guaranteed during that period,
regardless of market performance (assuming that there are no loans or partial
surrenders under the policy).
10
<PAGE>
PREMIUM AND REINSTATEMENT PROVISIONS (CONTINUED)
At least 31 days before the end of the grace period the Company will send a
notice that there is insufficient value under the policy. The notice will
show the amount of premium required to cover the monthly deduction to prevent
the policy from lapsing and will be mailed to the last known addresses of the
Owner and the assignee of record with the Company, if any. If such premium,
as billed by the Company, is not paid within the grace period, all coverage
under the policy will terminate without value at the end of the grace period.
If the Insured dies during the grace period, the Company will deduct any
overdue monthly deductions from the benefits.
REINSTATEMENT. After the policy has lapsed due to the expiration of a grace
period, it may be reinstated any time during the Insured's lifetime provided:
(a) it has not been surrendered for cash, (b) a written application for
reinstatement is submitted to the Company, (c) evidence of insurability
satisfactory to the Company is furnished, (d) enough premium is paid to keep
the policy in force for at least 2 months, and (e) any indebtedness against
the policy increased by any loan interest is paid or reinstated.
The effective date of the reinstated policy will be the Monthly Anniversary
Day next following the date the application for reinstatement is approved by
the Company. The surrender charges set forth in Schedule 1 will be reinstated
as of the Policy Year in which the policy lapsed.
OWNERSHIP, ASSIGNMENT AND BENEFICIARY PROVISIONS
OWNER. The Owner on the Date of Issue will be the person designated in the
Policy Specifications. If no person is designated as Owner, the Insured will
be the Owner.
RIGHTS OF OWNER. While the Insured is alive, the Owner may exercise all
rights and privileges under the policy including the right to: (a) release
or surrender the policy to the Company, (b) agree with the Company to any
change in or amendment to the policy, (c) transfer all rights and privileges
to another person, (d) change the Beneficiary, and (e) assign the policy.
All rights and privileges of the Owner may be exercised without the consent
of any designated transferee, or any Beneficiary if the Owner has reserved
the right to change the Beneficiary. All such rights and privileges,
however, may be exercised only with the consent of any assignee recorded with
the Company.
Unless provided otherwise, if the Owner is a person other than the Insured
and dies before the Insured, all the rights and privileges of the Owner will
vest in the Owner's executors, administrators or assigns.
TRANSFER OF OWNERSHIP. The Owner may transfer all rights and privileges of
the Owner. On the effective date of transfer, the transferee will become the
Owner and will have all the rights and privileges of the Owner. The Owner
may revoke any transfer prior to its effective date.
Unless provided otherwise, a transfer will not affect the interest of any
Beneficiary designated prior to the effective date of transfer.
A transfer of Ownership, or a revocation of transfer, must be in writing on a
form satisfactory to the Company and filed at the Home Office. A transfer,
or a revocation, will not take effect until recorded in writing by the
Company. When a transfer or revocation has been so recorded, it will take
effect as of the effective date specified by the Owner. Any payment made or
any action taken or allowed by the Company before the transfer, or the
revocation, is recorded will be without prejudice to the Company.
ASSIGNMENT. The Company will not be affected by any assignment of the policy
until the original assignment or a certified copy of the assignment is filed
at the Home Office.
The Company does not assume responsibility for the validity or sufficiency of
any assignment. An assignment of the policy will operate so long as the
assignment remains in force.
11
<PAGE>
OWNERSHIP, ASSIGNMENT AND BENEFICIARY PROVISIONS (CONTINUED)
To the extent provided under the terms of the assignment, an assignment will
transfer the interest of any designated transferee or of any Beneficiary if
the Owner has reserved the right to change the Beneficiary.
BENEFICIARY. The Beneficiary on the Date of Issue will be the person
designated in the Policy Specifications.
Unless provided otherwise, the interest of any Beneficiary who dies before
the Insured will vest in the Owner or the Owner's executors, administrators
or assigns.
CHANGE OF BENEFICIARY. A new Beneficiary may be designated from time to time.
A request for change of Beneficiary must be in writing on a form satisfactory
to the Company and filed at the Home Office. The request must be signed by
the Owner. The request must also be signed by the Beneficiary if the right to
change the Beneficiary has not been reserved to the Owner.
A change of Beneficiary will not take effect until recorded in writing by the
Company. When a change of Beneficiary has been so recorded, whether or not
the Insured is then alive, it will take effect as of the date the request was
signed. Any payment made or any action taken or allowed by the Company before
the change of Beneficiary is recorded will be without prejudice to the
Company.
Unless provided otherwise, the right to change any Beneficiary is reserved to
the Owner.
VARIABLE ACCOUNT PROVISIONS
VARIABLE ACCOUNT AND SUB-ACCOUNTS. Assets accumulated on a variable basis
are held in the Variable Account Separate Account designated in this policy
on page 5 which was established by a resolution of the Company's Board of
Directors as a "separate account" under governing law of Connecticut, the
Company's state of domicile, and registered as a unit investment trust under
the 1940 Act. Under Connecticut law, the Variable Account assets (except
assets in excess of its reserves and other contract liabilities) cannot be
charged with the general liabilities of the Company. The Variable Account
assets are owned and controlled exclusively by the Company, and the Company
is not a trustee with respect to those assets.
The Variable Account is Divided Into Sub-Accounts. Each Sub-Account's assets
are invested in shares of a particular Fund of one of the Fund Groups made
available as funding vehicles under this policy. For each Sub-Account, the
Company maintains Variable Accumulation Units whose values reflect the
investment performance of the Fund whose shares are held in that Sub-Account.
Subject to any vote by persons having the right under the 1940 Act to vote
thereon, the Company may elect to operate the Variable Account as a
management company rather than a unit investment trust under the 1940 Act,
or, if registration is no longer required, to deregister the Variable
Account. In such event, the Company may endorse this policy to reflect such
change and any necessary or appropriate action taken to effect the change.
Any changes in Variable Account investment policy shall have been approved by
the Connecticut Insurance Commissioner and approved or filed, as required, in
the state or other jurisdiction where this policy was issued.
INVESTMENT RISK. Each Sub-Account's assets are always fully invested in the
shares of the particular Fund purchased for that Sub-Account. Each
Sub-Account's investment performance reflects the investment performance of
that Fund. Fund share values fluctuate, reflecting the risks of changing
economic conditions and the ability of a Fund Group's investment adviser or
sub-adviser to manage that Fund and anticipate changes in economic
conditions. As to the Variable Account assets, the Owner bears the entire
investment risk of gain or loss.
12
<PAGE>
VARIABLE ACCOUNT PROVISIONS (CONTINUED)
INVESTMENTS OF THE VARIABLE ACCOUNT SUB-ACCOUNTS. All amounts allocated to a
Variable Account Sub-Account will be used to purchase shares of the specific
Fund of a Fund Group used by that Sub-Account. Each Fund Group is registered
under the 1940 Act as an open-end management investment company, and each
Fund of that Fund Group is regulated as an open-end management investment
company.
All Funds available as funding vehicles under this policy as of the Date of
Issue are listed in the application for the policy and on page 5 of the
policy. The Company may add additional Fund Groups and additional Funds at
any time or may change Funds or Fund Groups in accordance with the
"Substituted Securities" provision.
Any and all distributions made by a Fund will be reinvested in additional
shares of that Fund at net asset value. Deductions by the Company from a
Sub-Account will be made by redeeming a number of Fund shares at net asset
value equal in total value to the amount to be deducted.
SUBSTITUTED SECURITIES. Shares corresponding to a particular Fund may not
always be available for purchase or the Company may decide that further
investment in such Fund is no longer appropriate in view of the purposes of
the Variable Account or in view of legal, regulatory or federal income tax
restrictions. In such event, shares of another registered open-end
investment company or unit investment trust may be substituted both for Fund
shares already purchased and/or as the securities to be purchased in the
future, provided that these substitutions meet applicable Internal Revenue
Service diversification guidelines and any necessary regulatory or other
approvals of such substitutions have been obtained. In the event of any
substitution pursuant to this provision, the Company may make appropriate
endorsement(s) to this policy to reflect the substitution.
POLICY VALUES PROVISIONS
ACCUMULATION VALUE. The Accumulation Value equals the sum of (i) the then
current value of the Fixed Account (ii) all of the then current values of the
Variable Account Sub-Accounts (i.e. the Variable Account Value), and (iii)
the Loan Account Value. At any point in time, therefore, the Accumulation
Value reflects (a) Net Premium Payments made, (b) interest credited under the
Fixed Account, (c) the amount of any partial surrenders, (d) interest charged
and credited under the Loan Account, (e) any transfer fees, (f) all monthly
and other deductions as specified below, (g) the daily mortality and expense
deduction specified under Schedule 2, and (h) any increases or decreases as a
result of market performance in the Variable Account Sub-Accounts.
CALCULATION OF ACCUMULATION VALUE. On each Valuation Day after the Date of
Issue, the Accumulation Value will be equal to (1), plus (2), plus (3), minus
(4), plus or minus (5) as the case may be, minus (6), minus (7), minus (8),
and if the Valuation Day is the same as a Monthly Anniversary Day, minus (9),
where;
(1) is the Accumulation Value on the preceding Valuation Day;
(2) is all premiums received since the preceding Valuation Day less the
premium load charges from Schedule 2;
(3) the interest credited under the Fixed Account and the Loan Account since
the preceding Valuation Day;
(4) the interest charged against the Loan Account since the preceding
Valuation Day;
(5) is the gain or loss in the Variable Account Value based on market
performance since the last Valuation Day;
13
<PAGE>
POLICY VALUES PROVISIONS (CONTINUED)
(6) the charges and fees associated with the Variable Account Sub-Accounts
from Schedule 2;
(7) the amount of any partial surrenders since the preceding Valuation Day;
(8) any transaction fees assessed since the preceding Valuation Day;
(9) is the monthly deduction for the month following the Monthly
Anniversary Day.
FIXED ACCOUNT VALUE. The Fixed Account Value, if any, with respect to this
policy, at any point in time, is equal to the sum of the Net Premium Payments
allocated or other amounts (net of any charges) transferred to the Fixed
Account plus interest credited to such account less the monthly deductions
applied to such account and less any partial surrenders or amounts
transferred from the Fixed Account.
INTEREST CREDITED UNDER FIXED ACCOUNT. The Company will credit interest to
the Fixed Account daily. The interest rate applied to the Fixed Account will
be the greater of: (a) .010746% compounded daily, (4% compounded yearly), or
(b) a rate determined by the Company from time to time. Such rate will be
established on a prospective basis and may vary by the policy issue year and
duration.
VARIABLE ACCOUNT VALUE. The Variable Account Value, if any, for any
Valuation Period is equal to the sum of the then current values of all
Variable Account Sub-Accounts under the policy. The value of each Variable
Account Sub-Account is determined by multiplying the number of Variable
Accumulation Units, if any, credited or debited to such Variable Account
Sub-Account with respect to this policy by the Variable Accumulation Unit
Value of the particular Variable Account Sub-Account for such Valuation
Period.
CREDITING AND CANCELLING VARIABLE ACCUMULATION UNITS. Upon receipt of a
premium payment or a request for transfer of funds from the Fixed Account,
all or that portion, if any, of the Net Premium Payment to be allocated to
the Variable Account Sub-Accounts and/or the net amount transferred will be
credited to the Variable Account in the form of Variable Accumulation Units.
The number of Variable Accumulation Units to be credited is determined by
dividing the dollar amount allocated to the particular Variable Account
Sub-Account by the Variable Accumulation Unit Value for the particular
Variable Account Sub-Account for the Valuation Period during which the
premium payment and/or the request for transfer is received by the Company.
The amount of monthly deduction allocated to each Variable Account
Sub-Account will result in the cancellation of Variable Accumulation Units
which have an aggregate value on the date of such deduction equal to the
total amount by which the Variable Account Sub-Account is reduced.
VARIABLE ACCUMULATION UNIT VALUE. The Variable Accumulation Unit Value for
each Variable Account Sub-Account was established at $10.00 for the first
Valuation Period of the particular Variable Account Sub-Account. The
Variable Accumulation Unit Value for the particular Variable Account
Sub-Account for any subsequent Valuation Period is determined by methodology
which is the mathematical equivalent of multiplying the Variable Accumulation
Unit Value for the particular Variable Account Sub-Account for the
immediately preceding Valuation Period by the Net Investment Factor for the
particular Variable Account Sub-Account for such subsequent Valuation Period.
The Variable Accumulation Unit Value for each Variable Account Sub-Account
for any Valuation Period is the value determined as of the end of the
particular Valuation Period and may increase, decrease or remain constant
from Valuation Period to Valuation Period.
NET INVESTMENT FACTOR. The Net Investment Factor is an index applied to
measure the investment performance of a Variable Account Sub-Account from one
Valuation Period to the next. The Net Investment Factor may be greater or
less than or equal to 1.0; therefore, the value of a Variable Accumulation
Unit may increase, decrease or remain the same.
14
<PAGE>
POLICY VALUES PROVISIONS (CONTINUED)
The Net Investment Factor for any Variable Account Sub-Account for any
Valuation Period is determined by dividing (a) by (b) and then subtracting
(c) from the result where:
(a) is the net result of:
(1) is the net asset value (as described in the prospectus for the
Fund) of a Fund share held in the Variable Account Sub-Account
determined as of the end of the Valuation Period, plus
(2) the per share amount of any dividend or other distribution
declared by the Fund on the shares held in the Variable Account
Sub-Account if the "ex-dividend" date occurs during the Valuation
Period, plus or minus
(3) a per share credit or charge with respect to any taxes paid or
reserved for by the Company during the Valuation Period which are
determined by the Company to be attributable to the operation of
the Variable Account Sub-Account;
(b) is the net asset value of a Fund share held in the Variable Account
Sub-Account determined as of the end of the preceding Valuation Period;
and
(c) is the asset charge factor determined by the Company for the Valuation
Period to reflect the charges for assuming the mortality and expense risks.
The asset charge factor for any Valuation Period is equal to the daily asset
charge factor multiplied by the number of 24-hour periods in the Valuation
Period. The daily asset charge factor will be determined annually by the
Company, but in no event may it exceed that specified in Schedule 2.
COST OF INSURANCE RATES. Monthly cost of insurance rates will be determined
from time to time by the Company based on its expectations of future
mortality. Any change in cost of insurance rates will apply to all
individuals of the same class as the Insured. Under no circumstance will the
cost of insurance rates ever be greater than those described in Schedule 3.
COST OF INSURANCE. The cost of insurance for the Insured is determined on a
monthly basis. Such cost is calculated as (1), multiplied by the result of
(2) minus (3), where:
1. is the cost of insurance rate as described in the "Cost of Insurance
Rates" provision,
2. is the death benefit at the beginning of the policy month, divided by
1.0032737, and
3. is the Accumulation Value at the beginning of the policy month prior to
the deduction for the monthly cost of insurance.
MONTHLY DEDUCTION. The monthly deduction for a policy month will be
calculated as Charge (1) plus Charge (2) where:
Charge (1) is the cost of insurance (as described in the "Cost of
Insurance" provision) and the cost of any supplemental riders or optional
benefits, and
Charge (2) is the Monthly Administrative Fee as described under Schedule 2.
15
<PAGE>
POLICY VALUES PROVISIONS (CONTINUED)
The amount of monthly deduction will be deducted from the Fixed Account and
each Variable Account Sub-Account in the same proportion that the value of
each account bears to the Net Accumulation Value as of the date on which the
deduction is made.
BASIS OF COMPUTATIONS. The minimum Fixed Account Value is guaranteed to be
no less than that calculated based on the applicable Commissioners 1980
Standard Ordinary Mortality Table (age nearest birthday) from Schedule 3 with
interest at 4% per year, compounded yearly.
All policy values are at least equal to that required by the jurisdiction in
which this policy is delivered. A detailed statement of the method of
computing values has been filed with the insurance supervisory official of
that jurisdiction.
TRANSFER PRIVILEGE PROVISION
TRANSFER PRIVILEGE. At any time while this policy is in effect, other than
during the "Right to Examine Contract" period, the Owner may transfer all
or part of the Variable Account Value to the Fixed Account and/or to one or
more of the Variable Account Sub-Accounts then available under the policy,
and/or transfer part of the Fixed Account Value to one or more Variable
Account Sub-Accounts, subject to the provisions set forth below. Transfers
may be made in writing, or by telephone if telephone transfers have been
previously authorized in writing. Transfer requests must be received at the
Company's Home Office prior to the time of day set forth in the prospectus
and provided the NYSE is open for business, in order to be processed as of
the close of business on the date the request is received; otherwise, the
transfer will be processed on the next business day the NYSE is open for
business. The Company will not be legally responsible for (a) any liability
for acting in good faith upon any transfer instructions given by telephone,
or (b) the authenticity of such instructions.
Transfers involving Variable Account Sub-Accounts will reflect the purchase
or cancellation of Variable Accumulation Units having an aggregate value
equal to the dollar amount being transferred to or from a particular Variable
Account Sub-Account. The purchase or cancellation of such units shall be
made using Variable Accumulation Unit Values of the applicable Variable
Account Sub-Account for the Valuation Period during which the transfer is
effective. Transfers to the Fixed Account will earn interest as specified
under the "Interest Credited Under Fixed Account" provision.
Unless otherwise changed by the Company to be less restrictive, transfers
shall be subject to the following conditions: (a) Up to 12 transfers may be
made during any Policy Year without charge, however, for each transfer in
excess of 12, a transfer fee as set forth in Schedule 2 will be deducted on a
pro-rata basis from the Fixed Account and/or Variable Account Sub-Accounts
from which the transfer is being made; (b) No partial surrender transaction
fee will be imposed on transferred amounts; (c) The amount being transferred
may not be less than $500 unless the entire value of the Fixed Account or a
Variable Account Sub-Account is being transferred; (d) The amount being
transferred may not exceed the Company's maximum amount limit then in effect;
(e) Transfers among the Variable Account Sub-Accounts or from a Variable
Account Sub-Account to the Fixed Account can be made at any time; (f)
Transfers from the Fixed Account are subject to the "Limits on Transfers"
as set forth in the Policy Specifications; (g) Any value remaining in the
Fixed Account or a Variable Account Sub-Account following a transfer may not
be less than $500; (h) Transfers involving Variable Account Sub-Account(s)
shall be subject to such additional terms and conditions as may be imposed by
the Funds.
16
<PAGE>
NONFORFEITURE AND SURRENDER VALUE PROVISIONS
SURRENDER AND SURRENDER VALUE. This policy may be surrendered on any day
during the lifetime of the Insured and during the continuance of the policy,
for its surrender value by returning it to the Company with a signed request
for surrender in a form satisfactory to the Company. The surrender will take
effect on the business day the policy and the request are received in the
Home Office. The amount payable on surrender of the policy (i.e., the
"surrender value") will be the Net Accumulation Value less any surrender
charges as determined from Schedule 1.
The surrender value will be paid in cash or under an elected optional mode of
settlement. Any deferment of payments will be subject to the "Deferment of
Payments" provision (See "General Provisions").
Any surrender from a Variable Account Sub-Account will result in the
cancellation of Variable Accumulation Units which have an aggregate value on
the effective date of the surrender equal to the total amount by which the
Variable Account Sub-Account is reduced. The cancellation of such units will
be based on the Variable Accumulation Unit Value of the Variable Account
Sub-Account determined at the close of the Valuation Period during which the
surrender is effective.
Unless otherwise agreed to by the Owner and the Company, if the Insured is
still living at age 100 and the policy has not been surrendered, the Variable
Account Value, if any, will be transferred to the Fixed Account on the next
Monthly Anniversary Day after the Insured becomes age 100 and the policy will
remain in force until it is surrendered or the death benefit proceeds become
payable.
INSUFFICIENT VALUE. If the surrender value, on the day preceding a Monthly
Anniversary Day is insufficient to cover the monthly deduction for the month
following such Monthly Anniversary Day, the policy will terminate as provided
in the "Grace Period" provision.
PARTIAL SURRENDER. A partial surrender of this policy may be elected on any
Valuation Day during the lifetime of the Insured and while the policy is in
force by submitting a written request to the Company. Such request may also
be made by telephone if telephone transfers have been previously authorized
in writing. The amount of each partial surrender (a) must be at least
$500.00 but (b) may not exceed 90% of the surrender value at the end of the
Valuation Period during which the election becomes or would become effective.
When a partial surrender is made, the Accumulation Value is reduced by (a)
the amount of the partial surrender and (b) the transaction fee as specified
in Schedule 1. Also, the death benefit will be reduced by the amount of the
partial surrender. The Specified Amount remaining in force after any partial
surrender may not be less than the Minimum Specified Amount shown in the
Policy Specifications.
When the partial surrender is processed, the amount of the partial surrender
and the transaction fee will be deducted from the applicable Fixed Account
and/or Variable Account Sub-Accounts in proportion to the then current
account values provided there are sufficient account values for making the
deduction(s); otherwise, the amount payable upon a partial surrender will be
net of any remaining transaction fee, unless the Owner and the Company agree
otherwise.
LOAN PROVISIONS
POLICY LOANS. After a surrender value is available, the Company will grant a
loan against the policy provided: (a) a proper loan agreement is executed and
(b) a satisfactory assignment of the policy to the Company is made. The loan
may be for any amount up to 100% of the then current surrender value;
however, the Company reserves the right to limit the amount of such loan so
that total indebtedness will not exceed 90% of an amount equal to the then
current Accumulation Value less surrender charge.
17
<PAGE>
LOAN PROVISIONS (CONTINUED)
The amount borrowed will be paid within seven days of the Company's receipt
of such request, except as the Company may be permitted to defer the payment
of amounts as specified under the "Deferment of Payments" provision. (See
"General Provisions.")
The minimum loan amount is $500. The Company reserves the right to modify
this amount in the future. The Company will effect such loan from the Fixed
Account and each Variable Account Sub-Account in proportion to the then
current account values, unless the Owner instructs the Company otherwise.
LOAN ACCOUNT AND LOAN ACCOUNT VALUE. The amount of any loan will be
transferred out of the Fixed Account and Variable Accounts Sub-Accounts as
described above. Such amount will become part of the Loan Account Value. The
outstanding loan balance at any time includes accrued interest on the loan.
The outstanding loan balance (i.e. Indebtedness) may be repaid at any time
during the lifetime of the Insured, however, the minimum loan repayment is
$100.00 or the amount of the outstanding indebtedness, if less. The Loan
Account Value will be reduced by the amount of any loan repayment. Loan
repayments will be allocated to the Fixed Account and each Variable Account
Sub-Account in the proportion in which current Net Premium Payment(s) are
being allocated, unless otherwise agreed to in writing by the Owner and the
Company.
Net loan interest, which equals the difference between interest charged and
interest credited on the Loan Account Value, is payable annually on each
policy anniversary or as otherwise agreed in writing by the Owner and the
Company. Such loan interest amount, if not paid when due, will be transferred
out of the Fixed Account and each Variable Account Sub-Account in proportion
to the then current account value, unless both the Owner and the Company
agree otherwise.
INTEREST RATE CHARGED ON LOAN ACCOUNT VALUE. Interest charged on the Loan
Account Value will be at a rate equivalent to 8% per year, payable in arrears.
INTEREST RATE CREDITED ON LOAN ACCOUNT VALUE. The interest rate used to
credit interest on the Loan Account Value may vary, but will not be less than
the loan interest rate less 2% per year during Policy Years 1 through 10 and
less 1% per year thereafter. (See Policy Specifications page for the rate in
effect as of the Date of Issue).
INDEBTEDNESS. The term "indebtedness" means money which is owed on this
policy due to an outstanding loan and interest accrued thereon. A loan,
whether or not repaid, will have a permanent effect on the Net Accumulation
Value and on the death benefits. Any indebtedness at time of settlement will
reduce the proceeds payable under the policy. A policy loan reduces the then
current Net Accumulation Value under the policy while repayment of a loan
will cause an increase in the then current Net Accumulation Value.
If at any time the total indebtedness against the policy, including interest
accrued but not due, equals or exceeds the then current Accumulation Value
less surrender charge, the policy will thereupon terminate without value
subject to the conditions in the "Grace Period" provision and a notice will
be sent at least 31 days before the end of the grace period to the Owner and
to assignees, if any, that this policy will terminate unless the indebtedness
is repaid.
INSURANCE COVERAGE PROVISIONS
EFFECTIVE DATE OF COVERAGE. The effective date of this policy will be the
Date of Issue provided the initial premium has been paid (1) while the
Insured is alive and (2) prior to any change in the health and insurability
of the Insured as represented in the application.
For any insurance that has been reinstated, the effective date will be the
Monthly Anniversary Day that coincides with or next follows the day the
application for reinstatement is approved by the Company, provided the
Insured is alive on such day.
18
<PAGE>
INSURANCE COVERAGE PROVISIONS (CONTINUED)
TERMINATION OF COVERAGE. All coverage under this policy will automatically
terminate upon whichever of the following occurs first:
1. The Owner surrenders the policy.
2. The Insured dies.
3. The grace period ends and the necessary premium payment has not been made
prior to such time.
Any monthly deduction made after termination of coverage will not, by itself,
be considered a reinstatement of the policy nor a waiver by the Company of
the termination. Any such deduction will be refunded.
DEATH BENEFIT. If the Insured dies while the policy is in force, the Company
will pay a death benefit based upon the Death Benefit Option in effect on the
date of death, less (a) any indebtedness against the policy and (b) the
amount of any partial surrenders.
The Death Benefit Options available under this policy are as follows:
DEATH Insured's Specified Amount includes the Accumulation Value. The
BENEFIT Insured's death benefit (before deduction of any indebtedness
OPTION 1 against the policy and the amount of any partial surrenders) will
equal the greater of:
(a) the Specified Amount on the date of death, or
(b) an amount determined by the Company equal to that required by
the Internal Revenue Code to maintain this contract as a life
insurance policy (See Schedule 4). Any amount so determined
will be set forth in the annual report which the Company
will send to the Owner.
DEATH The Insured's Specified Amount is in addition to the Accumulation
BENEFIT Value. The Insured's death benefit (before deduction of any
OPTION 2 indebtedness against the policy and the amount of any partial
surrenders) will equal the greater of:
(a) the Specified Amount on the date of death plus the Accumulation
Value on the date of death, or
(b) an amount determined by the Company equal to that required by
the Internal Revenue Code to maintain this contract as a life
insurance policy (See Schedule 4). Any amount so determined
will be set forth in the annual report which the Company
will send to the Owner.
Unless the application for the policy indicates otherwise, or a change in the
death benefit option is effected as provided below, the Company will consider
Death Benefit Option 1 to be the option in effect.
CHANGES IN SPECIFIED AMOUNT. Unless provided otherwise, a change in Specified
Amount may be effected any time while this policy is in force, subject to (a)
the consent of the Company and (b) the following conditions:
1. All such changes must be requested in writing on a form satisfactory to the
Company and filed at the Home Office.
19
<PAGE>
INSURANCE COVERAGE PROVISIONS (CONTINUED)
2. If a decrease in the Insured's Specified Amount is requested, the decrease
will become effective on the Monthly Anniversary Day that coincides with or
next follows receipt of the request provided any requirements as determined
by the Company are met.
In such event, the Company will reduce the existing Specified Amount against
the most recent increase first, then against the next most recent increases
successively, and finally, against insurance provided under the original
application; however, the Company reserves the right to limit the amount of
any decrease so that the Specified Amount will not be less than the Minimum
Specified Amount shown in the Policy Specifications.
3. If an increase in the Insured's Specified Amount is requested:
(a) a supplemental application must be submitted and evidence of
insurability satisfactory to the Company must be furnished; and
(b) any other requirements as determined by the Company must be met.
If the Company approves the request, the increase will become effective upon
(i) the Monthly Anniversary Day that coincides with or next follows the date
the request is approved by the Company and (ii) the deduction from the
Accumulation Value (in proportion to the then current account values of the
Fixed Account and/or Variable Account Sub-Accounts) of the first month's
cost of insurance for the increase, provided the Insured is alive on such
day.
4. If a request is made to change the death benefit from Death Benefit Option
1 to Death Benefit Option 2:
(a) the Specified Amount will be reduced to equal the death benefit, less
the Accumulation Value, as of the effective date of change; and
(b) the effective date will be the Monthly Anniversary Day that coincides
with or next follows the date of receipt of the request for change.
5. If a request is made to change the death benefit from Death Benefit Option
2 to Death Benefit Option 1:
(a) the Specified Amount will be increased to equal the death benefit as of
the effective date of change; and
(b) the effective date will be the Monthly Anniversary Day that coincides
with or next follows the date of receipt of the request for change.
The Company will not allow a decrease in the amount of insurance below the
minimum amount required to maintain this contract as a life insurance policy
under the Internal Revenue Code.
GENERAL PROVISIONS
THE POLICY. The policy and the application for the policy constitute the
entire contract between the parties. All statements made in the application
will, in the absence of fraud, be deemed representations and not warranties.
No statement will be used in defense of a claim under the policy unless it is
contained in the application, and a copy of the application is attached to
the policy when issued.
Only the President, a Vice President, a Secretary, a Director or an Assistant
Director of the Company may execute or modify this policy.
20
<PAGE>
GENERAL PROVISIONS (CONTINUED)
The policy is executed at the Home Office of the Company, the mailing address
of which for this policy is CIGNA Individual Insurance, Variable Products
Service Center - Routing S249, Hartford, Connecticut 06152-2249.
NON-PARTICIPATION. The policy is not entitled to share in surplus
distribution.
PAYMENT OF PROCEEDS. Proceeds, as used in this policy, means the amount
payable (a) upon the surrender of this policy, or (b) upon the death of the
Insured.
The proceeds payable to the Beneficiary upon receipt of due proof of the
Insured's death will be the Death Benefit as of the date of death which takes
into account (a) any indebtedness against the policy and (b) the amount of
any partial surrenders (See "Death Benefit" provision). If the Insured
dies during the grace period, the Company will pay the death benefit proceeds
in effect immediately prior to the grace period reduced by any overdue
monthly deductions.
If the policy is surrendered, the proceeds will be the surrender value
described in the "Nonforfeiture and Surrender Value Provisions" section.
The proceeds are subject to the adjustments described in the following
provisions:
1. Misstatement of Age or Sex;
2. Incontestability;
3. Suicide;
4. Grace Period;
5. Indebtedness; and
6. Partial Surrender
When settlement is made, the Company may require return of the policy.
DEFERMENT OF PAYMENTS. Any amounts payable as a result of loans, surrender,
or partial surrenders will be paid within 7 days of the Company's receipt of
such request. However, payment of amounts from the Variable Account
Sub-Accounts may be postponed when the NYSE is closed or when the SEC
declares an emergency. Additionally, the Company reserves the right to defer
the payment of such amounts from the Fixed Account for a period not to exceed
6 months from the date written request is received by the Company; during any
such deferred period, the amount payable will bear interest as required by
law.
MISSTATEMENT OF AGE OR SEX. If the age or sex of the Insured is misstated,
the Company will adjust all benefits to the amounts that would have been
purchased for the correct age and sex.
SUICIDE. If the Insured commits suicide, while sane or insane, within 2 years
from the Date of Issue, the death benefit will be limited to a refund of
premiums paid, less (a) any indebtedness against the policy and (b) the
amount of any partial surrenders. If the Insured commits suicide, while sane
or insane, within 2 years from the effective date of any increase in the
Specified Amount, the death benefit payment with respect to such increase
will be limited to a refund of the monthly charges for the cost of such
additional insurance.
21
<PAGE>
GENERAL PROVISIONS (CONTINUED)
INCONTESTABILITY. Except for nonpayment of monthly deductions, this policy
will be incontestable after it has been in force during the Insured's
lifetime for 2 years from its Date of Issue. This means that the Company will
not use any misstatement in the application to challenge a claim or avoid
liability after that time. Any increase in the Specified Amount effective
after the Date of Issue will be incontestable only after such increase has
been in force for 2 years during the Insured's lifetime.
The basis for contesting an increase in Specified Amount will be limited to
material misrepresentations made in the supplemental application for the
increase. The basis for contesting after reinstatement will be (a) limited
for a period of 2 years from the date of reinstatement and (b) limited to
material misrepresentations made in the reinstatement application.
ANNUAL REPORT. The Company will send a report to the Owner at least once a
year without charge. The report will show the Accumulation Value as of the
reporting date and the amounts deducted from or added to the Accumulation
Value since the last report. The report will also show (a) the current death
benefit, (b) the current policy values, (c) premiums paid and all deductions
made since the last report, and (d) outstanding policy loans.
PROJECTION OF BENEFITS AND VALUES. The Company will provide a projection of
illustrative future death benefits and values to the Owner at any time upon
written request and payment of a reasonable service fee.
CHANGE OF PLAN. Within the first 2 Policy Years the Owner may exchange this
policy without any evidence of insurability for any one of the permanent
insurance policies then being issued by the Company to the same class to
which this policy belongs. The request for the exchange must be received by
the Company within 24 months from the Date of Issue of this policy. Unless
otherwise agreed to between the Owner and the Company, the new policy shall
have the same amount of insurance and surrender value as this policy as of
the date of exchange, its Date of Issue shall be the date of exchange, and
the Insured's issue age under the new policy shall be the Insured's then
attained age (as of the date of exchange).
POLICY CHANGES - APPLICABLE LAW. This policy must qualify initially and
continue to qualify as life insurance under the Internal Revenue Code in
order for the Owner to receive the tax treatment accorded to life insurance
under Federal law. Therefore, to maintain this qualification to the maximum
extent permitted by law, the Company reserves the right to return any premium
payments that would cause this policy to fail to qualify as life insurance
under applicable tax law as interpreted by the Company. Further, the Company
reserves the right to make changes in this policy or to make distributions
from the policy to the extent it deems necessary, in its sole discretion, to
continue to qualify this policy as life insurance. Any such changes will
apply uniformly to all policies that are affected. The Owner will be given
advance written notice of such changes.
22
<PAGE>
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Death benefit payable upon death of Insured.
Flexible premiums. Non-participating. Investment results
reflected in policy benefits.
<PAGE>
<TABLE>
<S><C>
VARIABLE LIFE INSURANCE APPLICATION
PART I
CIGNA INDIVIDUAL INSURANCE
Connecticut General Life Insurance Company
Hartford, CT 06152
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
1. OWNER
Name
(FOR JOINT OR -----------------------------------------------------------------------------------------------------
MULTIPLE OWNER- First Middle Last
SHIP, ENTER "1," Address
"2," ETC. ALONG- -----------------------------------------------------------------------------------------------------
SIDE OWNERS' Number Street City State Zip Code
NAMES AND ALONG-
SIDE CORRESPOND- Date of / / SS# Sex / / M Telephone ( ) (HOME)
ING RESPONSES TO Birth ------------ --------------------- --------------------
EACH ITEM) Mo. Day Yr. (or Tax Iden. #) / / F ( ) (WORK)
--------------------
Full Name of Trust (If applicable)
-------------------------------------- --------------------------
(Also complete Address, Tax Iden. # and Telephone items above) (Date of Trust)
Name(s) of Trustee(s) (If applicable)
---------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
2. PROPOSED (If Proposed Insured is same as Owner, skip to Age Nearest Birthday, Place of Birth, and Occupation/Employment
INSURED items)
MAY NOT BE A Name
CORPORATION OR A -----------------------------------------------------------------------------------------------------
TRUST; MUST BE First Middle Last
A NATURAL PERSON) Address
-----------------------------------------------------------------------------------------------------
Number Street City State Zip Code
Date of / / SS# Sex / / M Telephone ( ) (HOME)
Birth ------------ --------------------- --------------------
Mo. Day Yr. / / F ( ) (WORK)
--------------------
Age Nearest Birthday Place of Birth
-------------------------- ------------------------------------
CITY, STATE
Regular Occupation: How long so employed?
-------------------------- -----------------------------
Name of employer and nature of business:
---------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
3. BENEFICIARY All Primary Beneficiaries shall share equally unless otherwise indicated. If no Primary Beneficiary is alive
at the time death benefits are payable, benefits will be paid in equal shares to the Contingent Beneficiaries,
if surviving the Insured, unless otherwise specified.
Primary Beneficiary(s) and relationship to Contingent Beneficiary(s) and relationship to
Proposed Insured Proposed Insured
-------------------------------------------------- --------------------------------------------------
-------------------------------------------------- --------------------------------------------------
-------------------------------------------------- --------------------------------------------------
If Beneficiary or Owner is other than an individual, indicate whether:
Beneficiary is a / / Corporation Owner is a / / Corporation
/ / Partnership / / Partnership
- ----------------------------------------------------------------------------------------------------------------------------------
4. PLAN Initial Specified Amount (Face Amount) $
INFORMATION ---------------
Death Benefit Option Waiver of Monthly Deduction Benefit
/ / Option 1: Specified Amount / / Yes
/ / Option 2: Specified Amount Plus / / No
Accumulation Value
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S><C>
- ----------------------------------------------------------------------------------------------------------------------------------
5. PREMIUM
PAYMENT(S) Initial Premium Payment $ (MAKE CHECK PAYABLE TO "CGLIC")
---------------
IF POLICY IS Planned Periodic Payments $ Payable / / Annually / / Quarterly
FOR USE WITH (FILL-INS OPTIONAL) --------------- / / Semi-Annually / / PAC
A QUALIFIED / / Other
PLAN, CHECK
HERE: ----------------------------------
To whom shall premium notices be sent? (MAY NOT CHECK MORE THAN 2)
/ / QUALIFIED
/ / Owner / / Insured / / Other
---------------------------------------
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6. INITIAL
PREMIUM
PAYMENT FIXED ACCOUNT %
ALLOCATION ----------
(Allocation to VARIABLE ACCOUNT - SUB-ACCOUNTS (FUNDS)
any one % line
must be 5% or
more. Use whole FIDELITY INVESTMENTS NEUBERGER & BERMAN
percentages ___% VIP Equity-Income Portfolio ___% AMT Balanced Portfolio
only. Grand ___% VIP II Asset Manager Portfolio ___% AMT Limited Maturity Bond Portfolio
Total of all ___% VIP II Investment Grade Bonds Portfolio ___% AMT Partners Portfolio
allocations
made in this FRED ALGER MANAGEMENT, INC. OPCAP
section of the ___% Alger American Growth Portfolio ___% OCC Global Equity Portfolio
application ___% Alger American Leveraged AllCap Portfolio ___% OCC Managed Portfolio
must equal 100%) ___% Alger American MidCap Growth Portfolio ___% OCC Small Cap Portfolio
___% Alger American Small Capitalization Portfolio
If DOLLAR COST
AVERAGING is MASSACHUSETTS FINANCIAL SERVICES OTHER (IF AVAILABLE FOR THESE PRODUCTS)
employed, an ___% MFS Total Return Series ___% _____________________________________
allocation must ___% MFS Utilities Series ___% _____________________________________
be made to the ___% MFS World Governments Series
Fixed Account
and the %
allocation must
result in at
least $12,000 to
such account.
Please complete NOTE: ALL PAYMENTS AND VALUES PROVIDED BY THE LIFE INSURANCE POLICY WHEN BASED ON THE INVESTMENT EXPERIENCE
Section 9. OF THE VARIABLE ACCOUNT ARE VARIABLE AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT.
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7. REPLACEMENT Will you discontinue, stop paying premiums or initiate a reduction in face amount/cash value on any Life
Insurance if this insurance is issued? / / Yes / / No
IF "YES," GIVE FULL DETAILS BELOW. FORWARD PROPER REPLACEMENT FORMS, IF REQUIRED.
Company Policy Number Amount
------------------------- ------------------------- -------------------------
------------------------- ------------------------- -------------------------
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</TABLE>
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<TABLE>
<S><C>
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8. TELEPHONE I(We) acknowledge that neither the Company nor any person authorized by the Company will be responsible for
TRANSFER any claim, loss, liability or expense in connection with a telephone transfer if the Company or such other
AUTHORIZATION person acted on telephone transfer instructions in good faith in reliance on this authorization.
Check here if you DO NOT wish to authorize telephone transfer instructions. / /
Check here if you DO wish to authorize your registered representative/agent to make telephone transfers. / /
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9. DOLLAR COST SELECT ONE TRANSFER OPTION ($1,000 MINIMUM PER TRANSFER):
AVERAGING
/ / $ monthly / / $ quarterly
(FOLLOW --------------- ---------------
INSTRUCTIONS IN Each amount transferred is to be applied to the following Fund(s) in these percentages (USE WHOLE
SECTION 6 BEFORE PERCENTAGES ONLY. TOTAL MUST EQUAL 100%).
COMPLETING THIS
SECTION) FIDELITY INVESTMENTS NEUBERGER & BERMAN
___% VIP Equity-Income Portfolio ___% AMT Balanced Portfolio
___% VIP II Asset Manager Portfolio ___% AMT Limited Maturity Bond Portfolio
___% VIP II Investment Grade Bonds Portfolio ___% AMT Partners Portfolio
FRED ALGER MANAGEMENT, INC. OPCAP
___% Alger American Growth Portfolio ___% OCC Global Equity Portfolio
___% Alger American Leveraged AllCap Portfolio ___% OCC Managed Portfolio
___% Alger American MidCap Growth Portfolio ___% OCC Small Cap Portfolio
___% Alger American Small Capitalization Portfolio
MASSACHUSETTS FINANCIAL SERVICES OTHER (IF AVAILABLE FOR THESE PRODUCTS)
___% MFS Total Return Series ___% _____________________________________
___% MFS Utilities Series ___% _____________________________________
___% MFS World Governments Series
I(We) understand that these transfers will be made on the 20th day of the month (or the next business day)
and will continue for the period specified or until the value of the Fund noted above with respect to the
policy/contract is exhausted or I(we) terminate the program, whichever occurs earlier. I(We) also
understand that I(we) may add to such Fund at any time to continue this program or may change the periodic
amounts.
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10. UNDERWRITING a. Do you contemplate flying, or have you flown during the past 2 years as a pilot,
INFORMATION student pilot or crew member? / / Yes / / No
IF YES, AN AVIATION SUPPLEMENT IS REQUIRED.
(IN THIS SECTION, ------------------------------------------------------------------------------------------------------------
"YOU" REFERS TO b. Do you plan to participate or have you participated within the past 2 years in
THE PROPOSED motor vehicle or boat racing, hang gliding or sky, skin, or scuba diving or
INSURED AND similar sports? / / Yes / / No
RESPONSES ARE TO IF YES, COMPLETE AVOCATION QUESTIONNAIRE.
BE PROVIDED BY ------------------------------------------------------------------------------------------------------------
THE PROPOSED c. Do you contemplate residence or travel outside of the United States or Canada
INSURED) for more than 30 days within the next year? / / Yes / / No
IF YES, COMPLETE FOREIGN TRAVEL OR RESIDENCE QUESTIONNAIRE.
------------------------------------------------------------------------------------------------------------
d. Have you ever been convicted of a felony? / / Yes / / No
Have you within the last 3 years had convictions for motor vehicle violations,
or had your license suspended, revoked or restricted? / / Yes / / No
IF YES, PROVIDE DETAILS BELOW.
------------------------------------------------------------------------------------------------------------
e. Have you within the last 12 months used tobacco in any form? / / Yes / / No
IF YES, DESCRIBE BELOW, THE FREQUENCY, QUANTITY AND KIND OF TOBACCO USED.
------------------------------------------------------------------------------------------------------------
f. Have you ever applied for any Life or Health Insurance which resulted in your
being turned down, asked to pay extra premium or issued a reduced face amount? / / Yes / / No
IF YES, PROVIDE DETAILS BELOW.
------------------------------------------------------------------------------------------------------------
g. Are you negotiating or have you within the past 6 months negotiated for Life
Insurance? / / Yes / / No
IF YES, INDICATE BELOW, THE COMPANY, AMOUNT, PLAN AND PURPOSE.
------------------------------------------------------------------------------------------------------------
h. What is the total amount of Life Insurance (Personal and Business) presently in
force on your life EXCLUDING ANY POLICIES BEING REPLACED? The amount shown for
each policy should also include coverage under any term riders, but Group or Health
Insurance policies should not be included. List each policy separately. IF NONE,
SO STATE.
Company When Issued Amount AI Amount
------------------------- ------------------------- ------------------------- ------------------------
------------------------- ------------------------- ------------------------- ------------------------
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</TABLE>
<PAGE>
<TABLE>
<S><C>
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11. ADDITIONAL
INFORMATION/
INSTRUCTIONS
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12. HOME OFFICE Changes or corrections made by the Company are ratified by the Owner upon acceptance of a life insurance
CHANGES OR policy containing this Application with the changes or corrections noted below. In those states where
CORRECTIONS written consent is required by statute or State Insurance Department regulation, amendments as to plan,
amount, age at issue, classification, or benefits will be made only with Owner's written consent.
(NOT APPLICABLE
IN WEST VIRGINIA)
- ----------------------------------------------------------------------------------------------------------------------------------
13. CERTIFICATIONS I (We) have read the above questions and answers and declare that they are complete and true to the best
of my (our) knowledge and belief. I (We) agree, a) that this Application Part I (and Part II, or Part
IIA, if required) shall form a part of any policy/contract issued, and b) that no Agent/Representative
of the Company shall have the authority to waive a complete answer to any question in this Application,
transfer insurability, make or alter any contract, or waive any of the Company's other rights or
requirements. I (We) further agree that no insurance shall take effect unless and until the
policy/contract has been delivered to and accepted by me (us) and the initial premium paid during the
lifetime of the Proposed Insured, and while the Proposed Insured is in the state of health and
insurability represented in this Application.
I(We) acknowledge receipt of a current prospectus. Under penalties of perjury, I (the Owner) certify
that the above Social Security and Taxpayer Identification numbers are correct and that I am of legal
age to enter into this agreement.
ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE COMPANY OR OTHER PERSON FILES AN
APPLICATION FORM OR STATEMENT OF CLAIM CONTAINING ANY MATERIALLY FALSE INFORMATION, OR CONCEALS FOR THE
PURPOSE OF MISLEADING, INFORMATION CONCERNING ANY FACT MATERIAL THERETO, COMMITS A FRAUDULENT INSURANCE
ACT, WHICH IS A CRIME, AS DETERMINED BY A COURT OF COMPETENT JURISDICTION.
- ----------------------------------------------------------------------------------------------------------------------------------
14. SIGNATURES
Signed at On / /
------------------------------------------------------------- ----- ----- -----
(CITY/STATE) MO. DAY YEAR
--------------------------------------------------------------------------------------------
SIGNATURE OF PROPOSED INSURED
--------------------------------------------------------------------------------------------
SIGNATURE(S) OF OWNER(S) IF OTHER THAN PROPOSED INSURED
--------------------------------------------------------------------------------------------
SIGNATURE OF WITNESS
- ----------------------------------------------------------------------------------------------------------------------------------
15. CERTIFICATION/ The Registered Representative hereby certifies that the contract / / IS / / IS NOT intended to replace or
REPORT BY change any existing annuity or life insurance.
REGISTERED
REPRESENTA- Print Name Signature
TIVE/ ---------------------------------------- -------------------------------------------
WITNESS SS# Telephone
----------------------------------------------- -------------------------------------------
Rep. Code/Percentage / % Field Office Code
------------------------------ -----------------------------------
Print Name Signature
---------------------------------------- -------------------------------------------
SS# Telephone
----------------------------------------------- -------------------------------------------
Rep. Code/Percentage / % Field Office Code
------------------------------ -----------------------------------
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16. BROKER/
DEALER Print Name Telephone
INFORMATION ---------------------------------------- -------------------------------------------
Address Broker Code
---------------------------------------- -----------------------------------------
Field Office Code
---------------------------------------- -----------------------------------
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</TABLE>
<PAGE>
SECRETARY'S CERTIFICATE
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
The following is certified to be a true and correct copy of certain
resolutions adopted by the Board of Directors of Connecticut General Life
Insurance Company at a meeting held on July 6, 1994, a quorum being
present; and such resolutions remain in full force and effect as of the
date of certification, not having been amended, modified or rescinded since
the date of their adoption.
ESTABLISHMENT OF CG VARIABLE LIFE INSURANCE SEPARATE ACCOUNT I
WHEREAS, Section 38a-433 of the Connecticut Insurance Laws permits a
domestic life insurance company to establish one or more separate accounts;
and
WHEREAS, it is desired that the Company create such a separate account to
house certain of its variable life insurance products;
NOW, THEREFORE, BE IT RESOLVED: That a separate account referred to herein
as "CG Variable Life Insurance Separate Account I" is hereby established.
FURTHER RESOLVED: That the assets of CG Variable Life Insurance Separate
Account I shall be derived solely from (a) sale of variable life insurance
products, (b) funds corresponding to dividend accumulation with respect to
investment of such assets, and (c) advances made by the Company in
connection with operation of CG Variable life Insurance Separate Account I.
FURTHER RESOLVED: That this Company shall maintain in CG Variable Life
Insurance Separate Account I assets with a fair market value at least equal
to the statutory valuation reserves for the variable life insurance policies.
FURTHER RESOLVED: That the officers of the Company be, and each of them
hereby is, authorized in his or her discretion, as the Company may deem
appropriate from time to time, in accordance with applicable laws and
regulations (a) to divide CG Variable Life Insurance Separate Account I into
divisions and subdivisions, with each division or subdivision investing in
shares of designated classes of designated investment companies or other
appropriate securities, (b) to modify or eliminate any such divisions or
subdivisions, (c) to designate
<PAGE>
further any division of subdivision thereof and (d) to change the
designation of CG Variable Life Insurance Separate Account I to another
designation.
FURTHER RESOLVED: That the officers of the Company be, and each of them
hereby is, authorized to invest cash from the Company's general account
in CG Variable Life Insurance Separate Account I or in any division or
subdivision thereof as may be deemed necessary or appropriate to
facilitate the commencement of the operations of CG Variable Life Insurance
Separate Account I or to meet any minimum capital requirements under the
Investment Company Act of 1940 and to transfer cash or securities from time
to time between the Company's general account and CG Variable Life Insurance
Separate Account I as deemed necessary or appropriate so long as such
transfers are not prohibited by law and are consistent with the terms of the
variable life insurance policies issued by the Company providing for
allocations to CG Variable Life Insurance Separate Account I.
FURTHER RESOLVED: That the income, gains, and losses (whether or not
realized) from assets allocated to CG Variable Life Insurance Separate
Account I shall, in accordance with any variable life insurance polices
issued by the Company providing for allocations to CG Variable Life Insurance
Separate Account I, be credited to or charged against CG Variable Life
Insurance Separate Account I without regard to the other income, gains, or
losses of the Company.
FURTHER RESOLVED: That authority is hereby delegated to the President of
the Company to adopt procedures regarding, among other things, criteria by
which the Company shall afford a pass-through of voting rights to the
owners of variable life insurance policies providing for allocation to CG
Variable Life Insurance Separate Account I with respect to the shares of any
investment companies which are held in CG Variable Life Insurance Separate
Account I.
FURTHER RESOLVED: That the officers of the Company be, and each of them hereby
is, authorized and directed to prepare and execute any necessary agreements
to enable CG Variable Life Insurance Separate Account I to invest or reinvest
the assets of CG Variable Life Insurance Separate Account I in securities
issued by investment companies registered under the Investment Company Act of
1940 or other appropriate securities as the officers of the Company may
designate pursuant to the provisions of the variable life insurance polices
providing for allocations to CG Variable Life Insurance Separate Account I.
<PAGE>
FURTHER RESOLVED: That the Company may register under the Securities Act of
1933 variable life insurance policies, or units of interest thereunder,
under which amounts will be allocated by the Company to CG Variable Life
Insurance Separate Account I to support reserves for such policies and, in
connection therewith, the officers of the Company be, and each of them hereby
is, authorized, to prepare, execute and file with the Securities and
Exchange Commission, in the name and on behalf of the Company, registration
statements under the Securities Act of 1933, including prospectuses,
supplements, exhibits and other documents relating thereto, and amendments
to the foregoing, in such form as the officer executing the same may deem
necessary or appropriate.
FURTHER RESOLVED: That the officers of the Company be, and each of them
hereby is, authorized to take all actions necessary to register CG Variable
Life Insurance Separate Account I as a unit investment trust under the
Investment Company Act of 1940 and to take such related actions as they deem
necessary and appropriate to carry out the foregoing.
FURTHER RESOLVED: That the officers of the Company be, and each of them
hereby is, authorized to prepare, execute and file with the Securities and
Exchange Commission, applications and amendments thereto for such
exemptions from or orders under the Investment Company Act of 1940 and the
Securities Act of 1933, and to request from the Securities and Exchange
Commission no action and interpretative letters as they may from time to
time deem necessary or desirable.
FURTHER RESOLVED: That the officers of the Company be, and each of them
hereby is, authorized to prepare, execute and file all periodic reports
required under the Investment Company Act of 1940 and the Securities Exchange
Act of 1934.
FURTHER RESOLVED: That the Chief Counsel of the Company, or the person as
is designated by him from time to time, is hereby appointed as agent for
service under any such registration statement and is duly authorized to
receive communications and notices from the Securities and Exchange
Commission with respect thereto, and to exercise powers given to such agent
by the Securities Act of 1933 and the Rules thereunder and any other
necessary Acts.
FURTHER RESOLVED: That the officers of the Company be, and each of them
hereby is, authorized to effect in the name and on behalf of the Company, all
such registrations, filings and qualifications under blue sky or other
applicable securities laws and regulations and
<PAGE>
under insurance securities laws and insurance laws and regulations of such
states and other jurisdictions as they may deem necessary or appropriate,
with respect to the Company, and with respect to any variable life insurance
polices under which amounts will be allocated by the Company to CG Variable
Life Insurance Separate Account I to support reserves for such policies; such
authorization shall include registration, filing and qualification of the
Company and of said policies, as well as registration, filing and
qualification of officers, employees and agents of the Company as brokers,
dealers, agents, salespersons, or otherwise; and such authorization shall
also include, in connection therewith, authority to prepare, execute,
acknowledge and file all such applications, applications for exemptions,
certificates, affidavits, covenants, consents to service of process and
other instruments, an to take all such action as the officer executing the
same or taking such action may deem necessary or desirable.
FURTHER RESOLVED: That the officers of the Company be, and each of them
hereby is, authorized to execute and deliver all such documents and papers
and to do or cause to be done all such acts and things as they may deem
necessary or desirable to carry out the foregoing resolutions an the intent
and purpose thereof.
Dated: 4/4/97 /s/ Pamela S. Williams
--------------------------- --------------------------------------
Pamela S. Williams
Assistant Corporate Secretary
(SEAL)
