<PAGE>
As filed with the Securities and Exchange Commission on April 15, 1997
File No. 33-86330
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
-----
Post-Effective Amendment No. 3 [X]
-----
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 4 [X]
-----
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT SIX
(Exact Name of Registrant)
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
(Name of Depositor)
P.O. BOX 2999
HARTFORD, CT 06104-2999
(Address of Depositor's Principal Offices)
(860) 843-6733
(Depositor's Telephone Number, Including Area Code)
MARIANNE O'DOHERTY, ESQ.
HARTFORD LIFE INSURANCE COMPANIES
P.O. BOX 2999
HARTFORD, CT 06104-2999
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
---
X on May 1, 1997 pursuant to paragraph (b) of Rule 485
---
60 days after filing pursuant to paragraph (a)(1) of Rule 485
---
on May 1, 1997 pursuant to paragraph (a)(1) of Rule 485
---
this post-effective amendment designates a new effective date for a
--- previously filed post-effective amendment.
PURSUANT TO RULE 24F-2(a)(1) UNDER THE INVESTMENT COMPANY ACT OF 1940, THE
REGISTRANT HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES. THE RULE 24F-2
NOTICE FOR THE REGISTRANT'S MOST RECENT FISCAL YEAR WAS FILED ON OR ABOUT
FEBRUARY 28, 1997.
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
N-4 Item No. Prospectus Heading
- --------------------------------------- ----------------------------
1. Cover Page Cover Page
2. Definitions Glossary of Special Terms
3. Synopsis or Highlights Summary
4. Condensed Financial Information Statement of Additional Information
5. General Description of Registrant, The Contract;
Depositor, and Portfolio Companies The Separate Account;
The Fixed Account;
The Company;
The Funds; General Matters
6. Deductions Charges Under the Contract
7. General Description of Operation of the Contract/
Annuity Contracts Accumulation Period;
Death Benefit; The Contract;
The Separate Account;
General Matters
8. Annuity Period Annuity Benefits
9. Death Benefit Death Benefit
10. Purchases and Contract Value Operation of the Contract/
Accumulation Period
11. Redemptions Operation of the Contract/
Accumulation Period
12. Taxes Federal Tax Considerations
13. Legal Proceedings General Matters - Legal
Proceedings
14. Table of Contents of the State- Table of Contents to Statement
ment of Additional Information of Additional Information
<PAGE>
15. Cover Page Part B; Statement of Additional
Information
16. Table of Contents Tables of Contents
17. General Information and Introduction
History
18. Services None
19. Purchase of Securities being Distribution of Contracts
Offered
20. Underwriters Distribution of Contracts
21. Calculation of Performance Calculation of Yield and
Data Return
22. Annuity Payments Annuity Benefits
23. Financial Statements Financial Statements
24. Financial Statements and Financial Statements and
Exhibits Exhibits
25. Directors and Officers of the Directors and Officers of the
Depositor Depositor
26. Persons Controlled by or Under Persons Controlled by or Under
Common Control with the Depositor Common Control with the Depositor
or Registrant or Registrant
27. Number of Contract Owners Number of Contract Owners
28. Indemnification Indemnification
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Records Location of Accounts and Records
31. Management Services Management Services
32. Undertakings Undertakings
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY-
SEPARATE ACCOUNT SIX
P.O. Box 5085 PEGASUS PATHMAKER VARIABLE ANNUITY
Hartford, Connecticut 06102-5085
Telephone: 1-800-862-6668 (Contract Owners)
1-800-862-7155 (Investment Representatives)
- --------------------------------------------------------------------------------
This Prospectus describes the Pegasus Pathmaker Variable Annuity Contract
("Contract"), a tax deferred variable annuity issued by ITT Hartford Life and
Annuity Insurance Company ("Hartford"). On January 1, 1998, Hartford's name
will change to Hartford Life and Annuity Insurance Company. Payments for the
Contract will be held in the Fixed Account and/or a series of Sub-Accounts of
ITT Hartford Life and Annuity Insurance Company Separate Account Six (the
"Separate Account").
The following Sub-Accounts are available under the Contracts. Opposite each
Sub-Account is the name of the underlying investment for that Sub-Account.
Pegasus Mid-Cap Opportunity Fund - shares of the Mid-Cap Opportunity
Sub-Account Fund of the Pegasus Variable Annuity
Fund ("Pegasus Mid-Cap Fund")
Pegasus Growth Fund Sub-Account - shares of the Growth Fund of the
Pegasus Variable Annuity Fund
("Pegasus Growth Fund")
Pegasus Growth and Value Fund - shares of the Growth and Value Fund
Sub-Account of the Pegasus Variable Annuity Fund
("Pegasus Growth and Value Fund")
Pegasus Intrinsic Value Fund - shares of the Intrinsic Value Fund
Sub-Account of the Pegasus Variable Annuity Fund
("Pegasus Intrinsic Value Fund")
Pegasus Bond Fund Sub-Account - shares of the Bond Fund of the
Pegasus Variable Annuity Fund
("Pegasus Bond Fund")
PCM New Opportunities Fund - shares of the Putnam VT New
Sub-Account Opportunities Fund of Putnam
Variable Trust ("Putnam VT New
Opportunities Fund")
PCM International Growth Fund - shares of the Putnam VT International
Sub-Account Growth Fund of Putnam Variable
Trust ("Putnam VT International Growth
Fund")
PCM Global Growth Fund - shares of the Putnam VT Global Growth
Sub-Account Fund of Putnam Variable Trust
("Putnam VT Global Growth Fund")
<PAGE>
-2-
PCM Global Asset Allocation - shares of the Putnam VT Global Asset
Sub-Account Allocation Fund of Putnam Variable
Trust ("Putnam VT Global Asset
Allocation Fund")
PCM Growth and Income Fund - shares of the Putnam VT Growth and
Sub-Account Income Fund of Putnam Variable
Trust ("Putnam VT Growth and Income
Fund")
PCM Diversified Income Fund - shares of the Putnam VT Diversified
Sub-Account Income Fund of Putnam Variable
Trust ("Putnam VT Diversified Income
Fund")
PCM U.S. Government and - shares of the Putnam VT U.S.
High Quality Bond Fund Sub-Account Government and High Quality Bond
Fund of Putnam Variable Trust
("Putnam VT U.S. Government and High
Quality Bond Fund")
PCM Money Market Fund - shares of the Putnam VT Money Market
Sub-Account Fund of Putnam Variable Trust
("Putnam VT Money Market Fund")
The Pegasus Managed Assets Balanced Fund Sub-Account, which invested in shares
of the Managed Assets Balanced Fund of the Pegasus Variable Annuity Fund and the
Pegasus Money Market Fund Sub-Account, which invested in shares of the Money
Market Fund of the Pegasus Variable Annuity Fund, are closed to new investors
and to transfers and additional premium payments from current investors.
This Prospectus sets forth the information concerning the Separate Account and
the Fixed Account that investors should know before investing. This Prospectus
should be kept for future reference. Additional information about the Separate
Account and the Fixed Account has been filed with the Securities and Exchange
Commission and is available without charge upon request. To obtain the
Statement of Additional Information write or call ITT Hartford Life and Annuity
Insurance Company, Attn: Annuity Marketing Services, P.O. Box 5085, Hartford,
CT 06102-5085. The Table of Contents for the Statement of Additional
Information may be found on page ____ of this Prospectus. The Statement of
Additional Information is incorporated by reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
<PAGE>
-3-
CONTRARY IS A CRIMINAL OFFENSE.
VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED
BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY; THEY ARE SUBJECT
TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THIS PROSPECTUS IS ACCOMPANIED BY CURRENT PROSPECTUSES FOR THE PEGASUS VARIABLE
ANNUITY FUND AND PUTNAM VARIABLE TRUST AND IS VALID ONLY WHEN SO ACCOMPANIED.
Prospectus Dated: May 1, 1997
Statement of Additional Information Dated: May 1, 1997
<PAGE>
-4-
TABLE OF CONTENTS
Page
----
GLOSSARY OF SPECIAL TERMS. . . . .. . . . . . . . . . . . . . . . . . . .
FEE TABLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PERFORMANCE RELATED INFORMATION. . . . . . . . . . . . . . . . . . . . . .
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
THE CONTRACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Right to Cancel Period. . . . . . . . . . . . . . . . . . . . . . . .
THE SEPARATE ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . .
THE FIXED ACCOUNT. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
THE FUNDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OPERATION OF THE CONTRACT/ACCUMULATION/ PERIOD.. . . . . . . . . . . . . .
Premium Payments. . . . . . . . . . . . . . . . . . . . . . . . . . .
Value of Accumulation Units . . . . . . . . . . . . . . . . . . . . .
Value of the Fixed Account. . . . . . . . . . . . . . . . . . . . . .
Value of the Contract . . . . . . . . . . . . . . . . . . . . . . . .
Transfers Among Sub-Accounts. . . . . . . . . . . . . . . . . . . . .
Transfers Between the Fixed Account and the Sub-Accounts. . . . . . .
Redemption/Surrender of a Contract. . . . . . . . . . . . . . . . . .
DEATH BENEFIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
-5-
CHARGES UNDER THE CONTRACT.. . . . . . . . . . . . . . . . . . . . . . . .
CONTINGENT DEFERRED SALES CHARGES. . . . . . . . . . . . . . . . . . . . .
During the First Seven Contract Years . . . . . . . . . . . . . . . .
After the Seventh Contract Year . . . . . . . . . . . . . . . . . . .
Mortality and Expense Risk Charge . . . . . . . . . . . . . . . . . .
Administration and Maintenance Fees . . . . . . . . . . . . . . . . .
Premium Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ANNUITY BENEFITS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Annuity Options . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Annuity Unit and Valuation. . . . . . . . . . . . . . . . . . . .
Determination of Payment Amount . . . . . . . . . . . . . . . . . . .
FEDERAL TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . .
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxation of Hartford and the Separate Account. . . . . . . . . . . .
Taxation of Annuities -- General Provisions Affecting
Purchasers Other Than Qualified Retirement Plans. . . . . . . . . . .
Federal Income Tax Withholding. . . . . . . . . . . . . . . . . . . .
General Provisions Affecting Qualified Retirement Plans . . . . . . .
Annuity Purchases by Nonresident Aliens and Foreign Corporations. . .
GENERAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Modification. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Delay of Payments . . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
-6-
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution of the Contracts . . . . . . . . . . . . . . . . . . . .
Other Contracts Offered . . . . . . . . . . . . . . . . . . . . . . .
Custodian of Separate Account Assets. . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional Information. . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION.. . . . . . . . .
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT: An accounting unit of measure used to calculate values
before Annuity payments begin.
ANNUAL WITHDRAWAL AMOUNT: The amount which can be withdrawn in any Contract
year
<PAGE>
-7-
without surrender charges.
ANNUITANT: The person or participant upon whose life the Contract is issued.
ANNUITY: A series of payments for life, or for life with a minimum number of
payments or a determinable sum guaranteed, or for a joint lifetime and
thereafter during the lifetime of the survivor, or for a designated period.
ANNUITY COMMENCEMENT DATE: The date on which Annuity payments are to commence.
Under a group unallocated Contract, the date for each participant is determined
by the Contract Owner in accordance with the terms of the Plan.
ANNUITY UNIT: An accounting unit of measure used to calculate the value of
Annuity payments.
BENEFICIARY: The person(s) who receive Contract Values in the event of the
Annuitant's or Contract Owner's death under certain conditions. Under a group
unallocated Contract, the person named within the Plan documents/enrollment
forms by each Participant entitled to receive benefits as per the terms of the
Contract in case of the death of the Participant.
CODE: The Internal Revenue Code of 1986, as amended.
COMMISSION: Securities and Exchange Commission.
CONTINGENT ANNUITANT: The person so designated by the Contract Owner, who upon
the Annuitant's death, prior to the Annuity Commencement Date, becomes the
Annuitant.
CONTRACT ANNIVERSARY: The anniversary of the Contract Date.
CONTRACT OWNER(S): The owner(s) of the Contract, trustee or other entity,
sometimes herein referred to as "you".
CONTRACT VALUE: The aggregate value of any Sub-Account Accumulation Units held
under the Contract plus the value of the Fixed Account.
CONTRACT YEAR: A period of 12 months commencing with the Contract Date or any
anniversary thereof.
DEATH BENEFIT: The amount payable upon the death of a Contract Owner,
Annuitant, or Participant, in the case of group contracts, prior to age 90 and
before annuity payments have started.
FIXED ACCOUNT: Part of the General Account of Hartford to which a Contract
Owner may allocate all or a portion of his Premium Payment or Contract Value.
<PAGE>
-8-
FIXED ANNUITY: An Annuity providing for guaranteed payments which remain fixed
in amount throughout the payment period and which do not vary with the
investment experience of a separate account.
FUNDS: Currently, the portfolios of the Pegasus Variable Annuity Fund and
Putnam Variable Trust described on page ___ of this Prospectus.
GENERAL ACCOUNT: The General Account of Hartford which consists of all assets
of Hartford other than those allocated to the separate accounts of Hartford.
HARTFORD: ITT Hartford Life and Annuity Insurance Company. On January 1, 1998,
ITT Hartford Life and Annuity Insurance Company's name will change to Hartford
Life and Annuity Insurance Company.
HOME OFFICE OF THE COMPANY: Currently located at 200 Hopmeadow Street,
Simsbury, Connecticut. All correspondence concerning the Contract should be
sent to P.O. Box 5085, Hartford, CT 06102-5085, Attn: Individual Annuity
Services.
MAXIMUM ANNIVERSARY VALUE : A value used in determining the death benefit. It
is based on a series of calculations of Contract Values on Contract
Anniversaries, premium payments and partial surrenders, as described on
page ___.
NON-QUALIFIED CONTRACT: A Contract which is not classified as a tax-qualified
retirement plan using pre-tax dollars under the Internal Revenue Code.
PARTICIPANT: (For Group Unallocated Contracts Only). Any eligible employee of
an employer/Contract Owner participating in the Plan.
PLAN: A voluntary Plan of an Employer which qualifies for special tax treatment
under a section of the Internal Revenue Code.
PREMIUM PAYMENT: A payment made to Hartford pursuant to the terms of the
Contract.
PREMIUM TAX: A tax charged by a state or municipality on Premium Payments or
Contract Values.
QUALIFIED CONTRACT: A Contract which qualifies as a tax-qualified retirement
plan using pre-tax dollars under the Internal Revenue Code, such as an
employer-sponsored Section 401(k) plan or an Individual Retirement Annuity
(IRA).
SEPARATE ACCOUNT: The Hartford separate account entitled "ITT Hartford Life
and Annuity Insurance Company - Separate Account Six."
SUB-ACCOUNT: Accounts established within the Separate Account with respect to a
Fund.
<PAGE>
-9-
TERMINATION VALUE: The Contract Value upon termination of the Contract prior to
the Annuity Commencement Date, less any applicable Premium Taxes, the Annual
Maintenance Fee and any applicable contingent deferred sales charges.
UNALLOCATED CONTRACTS - Contracts issued to employers or such other entities as
Contract Owners with no allocation to a specific Participant, as defined herein.
The Plans will be responsible for the individual allocations.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. The
value of the Separate Account is determined at the close of the New York Stock
Exchange (currently 4:00 p.m. Eastern Time) on such days.
VALUATION PERIOD: The period between the close of business on successive
Valuation Days.
VARIABLE ANNUITY: An Annuity providing for payments varying in amount in
accordance with the investment experience of the assets of the Separate Account.
<PAGE>
-10-
FEE TABLE
SUMMARY
CONTRACT OWNER TRANSACTION EXPENSES
(ALL SUB-ACCOUNTS)
Sales Load Imposed on Purchases (as a percentage of premium payments) None
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0
Deferred Sales Load (as a percentage of amounts withdrawn)
First Year (1). . . . . . . . . . . . . . . . . . . . . . . . . . 6%
Second Year . . . . . . . . . . . . . . . . . . . . . . . . . . . 6%
Third Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5%
Fourth Year . . . . . . . . . . . . . . . . . . . . . . . . . . . 5%
Fifth Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4%
Sixth Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3%
Seventh Year. . . . . . . . . . . . . . . . . . . . . . . . . . . 2%
Eighth Year . . . . . . . . . . . . . . . . . . . . . . . . . . . 0%
Annual Contract Fee (2). . . . . . . . . . . . . . . . . . . . . . . . $30
Annual Expenses-Separate Account
(as percentage of average account value)
Mortality and Expense Risk. . . . . . . . . . . . . . . . . . . . 1.250%
Administrative Fees . . . . . . . . . . . . . . . . . . . . . . . 0.150%
------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.400%
(1) Length of time from premium payment.
(2) The annual contract fee is a single $30 charge on a Contract. It is
deducted proportionally from the investment options in use at the time of
the charge. Pursuant to requirements of the 1940 Act, the policy fees
have been reflected in the Examples by a method intended to show the
"average" impact of the policy fee on an investment in the Separate
Account. The Policy Fee is deducted only when the accumulated value is
$50,000 or less. In the Example, the annual contract fee is approximated
as a 0.08% annual asset charge based on the experience of the Contracts.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
Total Fund
Management Other Operating
Fees Expenses Expenses
- --------------------------------------------------------------------------------
Pegasus Mid-Cap Opportunity Fund (1) 0.60% 0.25% 0.85%
- --------------------------------------------------------------------------------
Pegasus Growth Fund (1) 0.60% 0.25% 0.85%
- --------------------------------------------------------------------------------
Pegasus Growth and Value Fund (1) 0.60% 0.25% 0.85%
- --------------------------------------------------------------------------------
Pegasus Intrinsic Value Fund (1)(2) 0.60% 0.25% 0.85%
- --------------------------------------------------------------------------------
Pegasus Bond Fund (1)(2) 0.40% 0.25% 0.65%
- --------------------------------------------------------------------------------
Pegasus Managed Assets Balanced Fund (1)(3) 0.65% 0.20% 0.85%
- --------------------------------------------------------------------------------
Pegasus Money Market Fund (1)(3) 0.30% 0.20% 0.50%
- --------------------------------------------------------------------------------
Putnam VT New Opportunities Fund 0.63% 0.09% 0.72%
- --------------------------------------------------------------------------------
<PAGE>
-11-
Total Fund
Management Other Operating
Fees Expenses Expenses
- --------------------------------------------------------------------------------
Putnam VT International Growth Fund 0.80% 0.18% 0.98%
- --------------------------------------------------------------------------------
Putnam VT Global Growth Fund 0.60% 0.16% 0.76%
- --------------------------------------------------------------------------------
Putnam VT Global Asset Allocation Fund 0.68% 0.15% 0.83%
- --------------------------------------------------------------------------------
Putnam VT Growth and Income Fund 0.49% 0.05% 0.54%
- --------------------------------------------------------------------------------
Putnam VT Diversified Income Fund 0.70% 0.13% 0.83%
- --------------------------------------------------------------------------------
Putnam VT U.S. Government and High Quality Bond 0.62% 0.07% 0.69%
Fund
- --------------------------------------------------------------------------------
Putnam VT Money Market Fund (4) 0.45% 0.10% 0.55%
- --------------------------------------------------------------------------------
(1) Operating expenses of these Funds of the Pegasus Variable Annuity Fund
reflect the management fee schedule that will be in effect for future periods
combined with the historic expense levels for the Funds. The Investment Adviser
has agreed to waive portions of the management fee in order to keep total Fund
operating expenses at the level shown in the table.
(2) These Fund expenses reflect the anticipated expenses for 1997. The Funds
had no actual expenses in 1996 because as of December 31, 1996, they had not
commenced operations.
(3) These Funds are closed to new investors and to transfers and additional
premium payments from current investors effective May 1, 1997
(4) Other expenses for Putnam VT Money Market Fund have been restated to
reflect the cost of certain insurance purchased by the Fund. See "Putnam VT
Money Market Fund -- Insurance" in the Fund's prospectus. Actual other expenses
and total Fund operating expenses were 0.08% and 0.53%, respectively.
<PAGE>
-12-
EXAMPLE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
If you surrender your If you annuitize your
Contract at the end of Contract at the end of the If you do not surrender
the applicable time period, applicable time period, you your Contract, you would
you would pay the following would pay the following pay the following expenses
expenses on a $1,000 expenses on a $1,000 on a $1,000 investment,
investment, assuming a 5% investment, assuming a 5% assuming a 5% annual return
annual return on assets: annual return on assets: on assets:
- -----------------------------------------------------------------------------------------------------------------
Sub-Account 1 3 5 10 1 3 5 10 1 3 5 10
year years years years year years years years year years years years
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Pegasus Mid-Cap 84 124 166 269 23 71 122 261 24 74 126 269
Opportunity Fund
- -----------------------------------------------------------------------------------------------------------------
Pegasus Growth Fund 84 124 166 269 23 71 122 261 24 74 126 269
- -----------------------------------------------------------------------------------------------------------------
Pegasus Growth and 84 124 166 269 23 71 122 261 24 74 126 269
Value Fund
- -----------------------------------------------------------------------------------------------------------------
Pegasus Intrinsic 84 124 166 269 23 71 122 261 24 74 126 269
Value Fund
- -----------------------------------------------------------------------------------------------------------------
Pegasus Bond Fund 82 117 155 248 21 65 111 240 22 67 115 248
- -----------------------------------------------------------------------------------------------------------------
Pegasus Managed Assets 84 124 166 269 23 71 122 261 24 74 126 269
Balanced Fund (1)
- -----------------------------------------------------------------------------------------------------------------
Pegasus Money Market 80 113 148 232 19 60 104 224 20 63 108 232
Fund (1)
- -----------------------------------------------------------------------------------------------------------------
PCM New
Opportunities Fund 83 120 159 255 22 67 115 247 23 70 119 255
- -----------------------------------------------------------------------------------------------------------------
PCM International
Growth Fund 85 127 171 280 24 74 127 272 25 77 131 280
- -----------------------------------------------------------------------------------------------------------------
PCM Global Growth Fund 83 121 161 260 22 68 117 251 23 71 121 260
- -----------------------------------------------------------------------------------------------------------------
PCM Global Asset 84 123 165 267 23 70 121 254 24 73 125 267
Allocation Fund
- -----------------------------------------------------------------------------------------------------------------
PCM Growth and
Income Fund 80 117 155 247 21 65 111 239 22 67 115 247
- -----------------------------------------------------------------------------------------------------------------
PCM Diversified
Income Fund 84 123 165 267 23 70 121 259 24 73 125 267
- -----------------------------------------------------------------------------------------------------------------
PCM U.S. Government 82 119 158 252 21 66 113 244 22 69 118 252
and High Quality Bond
Fund
- -----------------------------------------------------------------------------------------------------------------
PCM Money Market Fund 81 114 150 238 20 62 106 229 21 64 110 238
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) These Funds are closed to new investors and to transfers and additional
premium payments from current
<PAGE>
-13-
investors.
The purpose of this table is to assist the Contract Owner in understanding
various costs and expenses that a Contract Owner will bear directly or
indirectly. The table reflects expenses of the Separate Account and underlying
Funds. Premium taxes may also be applicable.
This EXAMPLE should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.
ACCUMULATION UNIT VALUES
(For an accumulation unit outstanding throughout the period)
The following information, insofar as it relates to the period ended December
31, 1996, has been examined by Arthur Andersen LLP, independent public
accountants, whose report thereon is included in the Statement of Additional
information, which is incorporated by reference to this Prospectus. No
information is shown with respect to Pegasus Intrinsic Value Fund, Pegasus Bond
Fund, PCM New Opportunities Fund, PCM International Growth Fund, PCM Growth and
Income Fund, PCM Money Market Fund Sub-Accounts because such Sub-Accounts had
not commenced operations as of December 31, 1996.
YEAR ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
1996 1995
---- ----
PEGASUS MID-CAP OPPORTUNITY FUND SUB-ACCOUNT
Accumulation unit value at beginning of period . . $ 10.983 $ 10.000
Accumulation unit value at end of period . . . . . $ 13.485 $ 10.983
Number accumulation units outstanding at
end of period (in thousands) . . . . . . . . . . . 632 402,309
PEGASUS GROWTH FUND SUB-ACCOUNT
Accumulation unit value at beginning of period . . $ 11.430 $ 10.000
Accumulation unit value at end of period . . . . . $ 13.243 $ 11.430
Number accumulation units outstanding at
end of period (in thousands) . . . . . . . . . . . 821 512,959
PEGASUS GROWTH AND VALUE FUND SUB-ACCOUNT
Accumulation unit value at beginning of period . . $ 11,700 $ 10.000
Accumulation unit value at end of period . . . . . $ 13,702 $ 11.700
Number accumulation units outstanding at
end of period (in thousands) . . . . . . . . . . . 577 270,551
PEGASUS MONEY MARKET FUND SUB-ACCOUNT
Accumulation unit value at beginning of period . . $ 1.030 $ 10.000
Accumulation unit value at end of period . . . . . $ 1.066 $ 1.030
Number accumulation units outstanding at
end of period (in thousands) . . . . . . . . . . . 1,261 637,117
PEGASUS MANAGED ASSETS BALANCED FUND SUB-ACCOUNT
Accumulation unit value at beginning of period . . $ 11.422 $ 10.000
Accumulation unit value at end of period . . . . . $ 12.628 $ 11.422
Number accumulation units outstanding at
end of period (in thousands) . . . . . . . . . . . 1,457 678,687
PCM GLOBAL GROWTH FUND SUB-ACCOUNT
Accumulation unit value at beginning of period . . $ 11.773 $ 10.000 (a)
Accumulation unit value at end of period . . . . . $ 13.607 $ 11.773
Number accumulation units outstanding at
end of period (in thousands) . . . . . . . . . . . 37 21,336
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PCM GLOBAL ASSET ALLOCATION FUND SUB-ACCOUNT
Accumulation unit value at beginning of period . . $ 11.692 $ 10.000 (a)
Accumulation unit value at end of period . . . . . $ 13.330 $ 11.692
Number accumulation units outstanding at
end of period (in thousands) . . . . . . . . . . . 554 332,770
PCM DIVERSIFIED INCOME FUND SUB-ACCOUNT
Accumulation unit value at beginning of period . . $ 11.184 $ 10.000 (a)
Accumulation unit value at end of period . . . . . $ 12.000 $ 11.184
Number accumulation units outstanding at
end of period (in thousands) . . . . . . . . . . . 255 91,387
PCM U.S. GOVERNMENT AND HIGH QUALITY
BOND FUND SUB-ACCOUNT
Accumulation unit value at beginning of period . . $ 11.341 $ 10.000 (a)
Accumulation unit value at end of period . . . . . $ 11.453 $ 11.341
Number accumulation units outstanding at
end of period (in thousands) . . . . . . . . . . . 215 115,951
(a) Inception date February 15, 1995
SUMMARY
WHAT IS THE CONTRACT AND HOW MAY I PURCHASE ONE?
The Contract offered is a tax deferred Variable Annuity Contract (the
"Contract") (see "Taxation of Annuities in General," page _____). Generally,
the Contract is purchased by completing an application or an order to purchase a
Contract and submitting it, along with the initial Premium Payments, to
Hartford for its approval. The minimum initial Premium Payment is $1,000 with a
minimum allocation to any Fund of $500. Certain plans may make smaller initial
and subsequent periodic premium payments. Subsequent Premium Payments, if made,
must be a minimum of $500. Generally, a Contract Owner may exercise the right
to cancel the Contract within 10 days of delivery of the Contract by returning
the Contract to Hartford at its Home Office. If the Contract Owner exercises
the right to cancel, Hartford will return either the Contract Value or the
original Premium Payments to the Contract Owner. The duration of the right to
cancel period and Hartford's obligation to either return the Contract Value or
the original Premium will depend on state law (see "Right to Cancel Period,
page _____").
WHO MAY PURCHASE THE CONTRACT?
Any individual or group may purchase the Contract, including any trustee or
custodian for a retirement plan which qualifies for special Federal tax
treatment under the Internal Revenue Code ("Qualified Contract"). The Contract
is also available for IRAs. (See "Federal Tax Considerations" commencing on
page _____ and Appendix I commencing on page _____).
WHAT TYPES OF INVESTMENTS ARE AVAILABLE UNDER THE CONTRACT?
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The underlying investments for the Contract are shares of the Pegasus Variable
Annuity Fund and Putnam Variable Trust, open-end diversified series investment
companies with multiple portfolios ("Funds") as follows: Pegasus Mid-Cap
Opportunity Fund, Pegasus Growth Fund, Pegasus Growth and Value Fund, Pegasus
Intrinsic Value Fund and Pegasus Bond Fund of the Pegasus Variable Annuity Fund;
and Putnam VT New Opportunities Fund, Putnam VT International Growth Fund,
Putnam VT Global Growth Fund, Putnam VT Global Asset Allocation Fund, Putnam VT
Growth and Income Fund, Putnam VT Diversified Income Fund , Putnam VT U.S.
Government and High Quality Bond Fund and Putnam VT Money Market Fund of Putnam
Variable Trust ; and such other Funds as shall be offered from time to time,
and the Fixed Account, or a combination of the Funds and the Fixed Account.
(See "The Funds" commencing on page __ and "The Fixed Account" commencing on
page __).
The Pegasus Managed Assets Balanced Fund Sub-Account, which invested in shares
of the Managed Assets Balanced Fund of the Pegasus Variable Annuity Fund and the
Pegasus Money Market Fund Sub-Account, which invested in shares of the Money
Market Fund of the Pegasus Variable Annuity Fund, are closed to new investors
and to transfers and additional premium payments from current investors.
WHAT ARE THE CHARGES UNDER THE CONTRACTS?
SALES EXPENSES
There is no deduction for sales expenses from Premium Payments when made.
However, a contingent deferred sales charge may be assessed against Contract
Value when the Contract is surrendered. (See "Contingent Deferred Sales
Charges" commencing on page ).
The length of time from receipt of a Premium Payment to the time of surrender
determines the contingent deferred sales charge. For this purpose, Premium
Payments will be deemed to be surrendered in the order in which they are
received and all surrenders will be first from Premium Payments and then from
other Contract values. The charge is a percentage of the amount withdrawn (not
to exceed the aggregate amount of the Premium Payments made). The charge is as
follows:
Length of Time
Charge from Premium Payment
------ --------------------
(Number of Years)
6% 1
6% 2
5% 3
5% 4
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4% 5
3% 6
2% 7
0% 8 or more
No contingent deferred sales charge will be assessed in the event of death of
the Annuitant or Contract Owner, or upon the exercise of the withdrawal
privilege or if Contract Value is applied to an Annuity option provided for
under the Contract (except that a surrender out of Annuity Option Four will be
subject to a contingent deferred sales charge where applicable). (See
"Contingent Deferred Sales Charges" commencing on page _______.)
FREE WITHDRAWAL PRIVILEGE.
Withdrawals of up to 10% per Contract Year, on a noncumulative basis, of the
Premium Payments made to a Contract may be made without the imposition of the
contingent deferred sales charge during the first seven contract years. (See
"Contingent Deferred Sales Charges" commencing on page _____). Certain plans or
programs may have different withdrawal privileges.
MORTALITY AND EXPENSE RISKS
For assuming the mortality and expense risks under the Contract, Hartford will
impose a 1.25% per annum charge against Contract Value held in the
Sub-Accounts, (see "Mortality and Expense Risk Charge," page _____).
ANNUAL ADMINISTRATION AND MAINTENANCE FEE
The Contract provides for administration and Contract maintenance charges. For
administration, the charge is 0.15% per annum against Contract Value held in
the Separate Account. For Contract maintenance, the charge is $30 annually.
(See "Administration and Maintenance Fees," page _____). Contracts with a
Contract Value of $50,000 or more at time of Contract Anniversary will not be
assessed this charge. Hartford reserves the right to waive the maintenance fee
under certain circumstances.
PREMIUM TAXES
A deduction will be made for Premium Taxes for a Contract sold in certain
states. (See "Premium Taxes," page _____.)
CHARGES BY THE FUNDS
The Funds are subject to certain fees, charges and expenses. (See the
Prospectuses for the Pegasus Variable Annuity Fund and Putnam Variable Trust
accompanying this Prospectus.)
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CAN I GET MY MONEY IF I NEED IT?
Subject to any applicable charges, the Contract may be surrendered, or portions
of the value of such Contract may be withdrawn, at any time prior to the Annuity
Commencement Date. However, if less than $500 remains in a Contract as a result
of a withdrawal, Hartford may terminate the Contract in its entirety. (See
"Redemption/Surrender of a Contract," page ____; see also "Federal Tax
Considerations" commencing on page ____ for a discussion of federal tax
consequences, including a 10% penalty tax that may apply upon surrender or
withdrawal.)
DOES THE CONTRACT PAY ANY DEATH BENEFITS?
A Death Benefit is provided in the event of death of the Annuitant or Contract
Owner or Joint Contract Owner before Annuity payments have commenced. (See
"Death Benefit," page ____.)
WHAT ARE THE AVAILABLE ANNUITY OPTIONS UNDER THE CONTRACT?
There are four available Annuity options under the Contract (See "Annuity
Options" on page ____.) The Annuity Commencement Date may not be deferred beyond
the Annuitant's 90th birthday (85th birthday in some states, 100th birthday if
sold as a charitable remainder trust). If a Contract Owner does not elect
otherwise, the Contract Value less applicable premium taxes will be applied on
the Annuity Commencement Date under the second option to provide a life annuity
with 120 monthly payments certain.
DOES THE CONTRACT OWNER HAVE ANY VOTING RIGHTS UNDER THE CONTRACT?
Contract Owners will have the right to vote on matters affecting an underlying
Fund to the extent that proxies are solicited by such Fund. If a Contract Owner
does not vote, Hartford shall vote such interests in the same proportion as
shares of the Fund for which instructions have been received by Hartford. (See
"Voting Rights," page ____.)
PERFORMANCE RELATED INFORMATION
The Separate Account may advertise certain performance related information
concerning its Sub-Accounts. Performance information about a Sub-Account is
based on the Sub-Account's past performance only and is no indication of future
performance.
Each Fund may include its total return in advertisements or other sales
material. When a Sub-Account advertises its total return, it will usually be
calculated for one year, five years, and ten years or some other relevant
periods if the Sub-Account has not been in existence for at least ten years.
Total return is measured by comparing the value of an investment in the
Sub-Account at the beginning of the relevant period to the value of
<PAGE>
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the investment at the end of the period (assuming the deduction of any
contingent deferred sales charge which would be payable if the investment were
redeemed at the end of the period).
The Pegasus Bond Fund, PCM Diversified Income Fund, PCM Global Asset Allocation
Fund, PCM Growth and Income Fund and PCM U.S. Government and High Quality Bond
Fund Sub-Accounts may advertise yield in addition to total return. The yield
will be computed in the following manner: The net investment income per unit
earned during a recent one month period is divided by the unit value on the last
day of the period. This figure reflects the recurring charges at the Separate
Account level including the Contract maintenance fee.
The PCM Money Market Fund Sub-Account may advertise yield and effective yield.
The yield of a Sub-Account is based upon the income earned by the Sub-Account
over a seven-day period and then annualized, i.e. the income earned in the
period is assumed to be earned every seven days over a 52-week period and stated
as a percentage of the investment. Effective yield is calculated similarly but
when annualized, the income earned by the investment is assumed to be reinvested
in Sub-Account units and thus compounded in the course of a 52-week period.
Yield reflects the recurring charges at the Separate Account level including the
Contract maintenance fee.
Total return at the Separate Account level includes all Contract charges: sales
charges, mortality and expense risk charges, and the Contract maintenance fee,
and is therefore lower than total return at the Fund level, with no comparable
charges. Likewise, yield at the Separate Account level includes all recurring
charges (except sales charges), and is therefore lower than yield at the Fund
level, with no comparable charges.
Hartford may provide information on various topics to Contract Owners and
prospective Contract Owners in advertising, sales literature or other materials.
These topics may include the relationship between sectors of the economy and the
economy as a whole and its effect on various securities markets, investment
strategies and techniques (such as value investing, dollar cost averaging and
asset allocation), the advantages and disadvantages of investing in tax-
advantaged and taxable instruments, customer profiles and hypothetical purchase
scenarios, financial management and tax and retirement planning, and other
investment alternatives, including comparisons between the Contract and the
characteristics of and market for such alternatives.
INTRODUCTION
This Prospectus has been designed to provide you with the necessary information
to make a decision on purchasing a tax deferred Variable Annuity contract
offered by Hartford and funded by the Fixed Account and/or the Funds offered
through the Separate Account. Please read the Glossary of Special Terms on
pages _____ and _____
<PAGE>
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prior to reading this Prospectus to familiarize yourself with the terms being
used.
THE CONTRACT
The Pegasus Pathmaker Variable Annuity is a tax deferred Variable Annuity
contract (the "Contract"). Payments for the Contract will be held in the Fixed
Account and/or a Sub-Account of the Separate Account. Initially there are no
deductions from your Premium Payments (except for Premium Taxes, if applicable)
so your entire Premium Payment is put to work in the investment Sub-Account(s)
of your choice or the Fixed Account. Each Sub-Account invests in a different
Fund with its own distinct investment objectives. You pick the Sub-Account(s)
with the investment objectives that meet your needs. You may select one or more
Sub-Accounts and/or the Fixed Account and determine the percentage of your
Premium Payment that is put into a Sub-Account or the Fixed Account. You may
also transfer assets among the Sub-Accounts and the Fixed Account so that your
investment program meets your specific needs over time. There are minimum
requirements for investing in each Sub-Account and the Fixed Account which are
described later in this Prospectus. In addition, there are certain other
limitations on withdrawals and transfers of amounts in the Sub-Accounts and the
Fixed Account as described in this Prospectus. See "Charges Under the Contract"
for a description of the charges for redeeming a Contract and other charges made
under the Contract.
Generally, the Contract contains the four Annuity Options described later in
this Prospectus. Options 2 and 4 are available with respect to Tax Qualified
Plans only if the guaranteed payment period is less than the life expectancy of
the Annuitant at the time the option becomes effective. Such life expectancy
shall be computed on the basis of the mortality table prescribed by the IRS, or
if none is prescribed, the mortality table then in use by Hartford.
The Contract Owner may select an Annuity Commencement Date and an Annuity option
which may be on a fixed or variable basis, or a combination thereof. The
Annuity Commencement Date may not be deferred beyond the Annuitant's 90th
birthday in most states except Pennsylvania where the Annuity Commencement Date
may not be deferred beyond the Annuitant's 85th birthday.
The Annuity Commencement Date and/or the Annuity option may be changed from time
to time, but any such change must be made at least 30 days prior to the date on
which payments are scheduled to begin. If you do not elect otherwise, payments
will begin at the Annuitant's age 90 under Option 2 with 120 monthly payments
certain (Option 1 for contracts issued in Texas).
After the Annuity Commencement Date, unless otherwise specified, Contract
Values held in the Sub-Accounts will be applied to provide a Variable Annuity
based on the pro rata amount in the various Sub-Accounts. Fixed Account
Contract Values will be applied to provide a Fixed Annuity. Variable Annuity
payments will vary in accordance
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with the investment performance of the Sub-Accounts you have selected. The
Contract allows the Contract Owner to change the Sub-Accounts on which Variable
Annuity payments are based after payments have commenced once every three (3)
months. Any Fixed Annuity allocation may not be changed.
The Contract offered under this Prospectus may be purchased by any individual
("Non-Qualified Contract") or by an individual, trustee or custodian for a
retirement plan qualified under Sections 401(a) or 403(a) of the Internal
Revenue Code; annuity purchase plans adopted by public school systems and
certain tax-exempt organizations according to Section 403(b) of the Internal
Revenue Code; Individual Retirement Annuities adopted according to Section 408
of the Internal Revenue Code; employee pension plans established for employees
by a state, a political subdivision of a state, or an agency or instrumentality
of either a state or a political subdivision of a state, and certain eligible
deferred compensation plans as defined in Section 457 of the Internal Revenue
Code ("Qualified Contracts").
RIGHT TO CANCEL PERIOD
If you are not satisfied with your purchase you may cancel the Contract by
returning it within ten days (or longer in some states) of the date you
received it. A written request for cancellation must accompany the Contract.
In such event, Hartford will, without deduction for any charges normally
assessed thereunder, pay you an amount equal to the sum of (i) the difference
between the Premium Payment and the amounts allocated to the Sub-Account(s)
and/or the Fixed Account under the Contract and (ii) the Contract Value on the
date of surrender attributable to the amounts so allocated. You bear only the
investment risk during the period prior to the Company's receipt of request for
cancellation. Hartford will refund the premium paid only for individual
retirement annuities (if returned within seven days of receipt) and in those
states where required by law.
THE SEPARATE ACCOUNT
The Separate Account was established on October 28, 1994, in accordance with
authorization by the Board of Directors of Hartford. It is the Separate
Account in which Hartford sets aside and invests the assets attributable to
Variable Annuity contracts, including the contracts sold through this
Prospectus. Although the Separate Account is an integral part of Hartford, it
is registered as a unit investment trust under the Investment Company Act of
1940. This registration does not, however, involve supervision by the
Commission of the management or the investment practices or policies of the
Separate Account or Hartford. The Separate Account meets the definition of
"separate account" under Federal Securities law.
Under Connecticut law, the assets of the Separate Account attributable to the
Contract offered through this Prospectus are held for the benefit of the owners
of, and the persons entitled to payments under, those Contracts. Income, gains,
and losses,
<PAGE>
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whether or not realized, from assets allocated to the Separate Account, are, in
accordance with the Contract, credited to or charged against the Separate
Account. Also, the assets in the Separate Account are not chargeable with
liabilities arising out of any other business Hartford may conduct. So
Contract Value allocated to the Sub-Accounts will not be affected by the rate of
return of Hartford's General Account, nor by the investment performance of any
of Hartford's other separate accounts. However, the obligations arising under
the Contract are general obligations of Hartford.
Your investment in the Separate Account is allocated to one or more Sub-Accounts
as per your specifications. Each Sub-Account is invested exclusively in the
shares of one Fund. Net Premium Payments and proceeds of transfers between
Funds are applied to purchase shares in the appropriate Fund at net asset value
determined as of the end of the Valuation Period during which the payments were
received or the transfer made. All distributions from the Funds are reinvested
at net asset value. The value of your investment will therefore vary in
accordance with the net income and the market value of the portfolios of the
Funds. During the Variable Annuity payout period, both your Annuity payments
and reserve values will vary in accordance with these factors.
Hartford does not guarantee the investment results of the Funds or any of the
underlying investments. There is no assurance that the value of a Contract
during the years prior to retirement or the aggregate amount of the Variable
Annuity payments will equal the total of Premium Payments made under the
Contract. Since each Fund has different investment objectives and policies,
each is subject to different risks. These risks are more fully described in the
accompanying Prospectuses for the Pegasus Variable Annuity Fund and Putnam
Variable Trust.
Hartford reserves the right, subject to compliance with the law, to substitute
the shares of any other registered investment company for the shares of any Fund
held by the Separate Account. Substitution may occur only if shares of the
Fund(s) become unavailable or if there are changes in applicable law or
interpretations of law. Current law requires notification to you of any such
substitution and approval of the Commission.
THE SEPARATE ACCOUNT MAY BE SUBJECT TO LIABILITIES ARISING FROM A SUB-ACCOUNT
OF THE SEPARATE ACCOUNT WHOSE ASSETS ARE ATTRIBUTABLE TO OTHER VARIABLE ANNUITY
CONTRACTS OR VARIABLE LIFE INSURANCE POLICIES OFFERED BY THE SEPARATE ACCOUNT
WHICH ARE NOT DESCRIBED IN THIS PROSPECTUS.
THE FIXED ACCOUNT
THAT PORTION OF THE CONTRACT RELATING TO THE FIXED ACCOUNT IS NOT REGISTERED
UNDER THE SECURITIES ACT OF 1933 ("1933 ACT") AND THE FIXED ACCOUNT IS NOT
REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940
("1940 ACT"). ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTERESTS THEREIN
ARE SUBJECT
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TO THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT, AND THE
DISCLOSURE REGARDING THE FIXED ACCOUNT HAS NOT BEEN REVIEWED BY THE STAFF OF
THE SECURITIES AND EXCHANGE COMMISSION. THE FOLLOWING DISCLOSURE ABOUT THE
FIXED ACCOUNT MAY BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF THE
FEDERAL SECURITIES LAWS REGARDING THE ACCURACY AND COMPLETENESS OF DISCLOSURE.
Premium Payments and Contract Value allocated to the Fixed Account become a
part of the general assets of Hartford. Hartford invests the assets of the
General Account in accordance with applicable laws governing investments of
insurance company General Accounts.
Currently, Hartford guarantees that it will credit interest at a rate of not
less than 3% per year, compounded annually, to amounts allocated to the Fixed
Account under the Contract. However, Hartford reserves the right to change the
rate according to state insurance law. Hartford may credit interest at a rate
in excess of 3% per year; however, Hartford is not obligated to credit any
interest in excess of 3% per year. There is no specific formula for the
determination of excess interest credit. Some of the factors that the Company
may consider in determining whether to credit excess interest to amounts
allocated to the Fixed Account and the amount thereof, are general economic
trends, rates of return currently available and anticipated on the Company's
investments, regulatory and tax requirements and competitive factors.
ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN EXCESS OF 3%
PER YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF THE COMPANY. THE OWNER
ASSUMES THE RISK THAT INTEREST CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT
EXCEED THE MINIMUM GUARANTEE OF 3% FOR ANY GIVEN YEAR.
THE COMPANY
ITT Hartford Life and Annuity Insurance Company ("Hartford") is a stock life
insurance company engaged in the business of writing life insurance and
annuities, both individual and group, in all states of the United States and
the District of Columbia, except New York. On January 1, 1998, Hartford's name
will change to Hartford Life and Annuity Insurance Company. Hartford was
originally incorporated under the laws of Wisconsin on January 9, 1956, and was
subsequently redomiciled to Connecticut. Its offices are located in Simsbury,
Connecticut; however, its mailing address is P.O. Box 2999, Hartford, CT
06104-2999. Hartford is a subsidiary of Hartford Fire Insurance Company, one
of the largest multiple lines insurance carriers in the United States. Hartford
is ultimately owned by ITT Hartford Group, Inc., a Delaware corporation.
Subject to shareholder approval, on May 2, 1997, ITT Hartford Group Inc. will
change its name to The Hartford Financial Services Group, Inc.
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Hartford is rated A+ (superior) by A.M. Best and Company, Inc., on the basis of
its financial soundness and operating performance. Hartford is rated AA by
Standard & Poor's and AA+ by Duff and Phelps on the basis of its claims paying
ability. These ratings do not apply to the investment performance of the Sub-
Accounts of the Separate Account. The ratings apply to Hartford's ability to
meet its insurance obligations , including those described in this Prospectus.
THE FUNDS
The underlying investments for the Contracts are shares of the Pegasus Variable
Annuity Fund and Putnam Variable Trust, open-end diversified series investment
companies with multiple portfolios. Each Fund and its investment objective is
described below. Hartford reserves the right, subject to compliance with the
law, to offer additional portfolios with differing investment objectives. The
Funds may not be available in all states.
PEGASUS MID-CAP OPPORTUNITY FUND
Seeks long-term capital appreciation. Pegasus Mid-Cap Opportunity Fund seeks
to achieve this objective by investing primarily in equity securities of
companies with intermediate market capitalizations.
PEGASUS GROWTH FUND
Seeks long-term capital appreciation. Pegasus Growth Fund seeks to achieve
this objective by investing primarily in equity securities of domestic issuers
believed by its investment adviser to have above-average growth characteristics.
PEGASUS GROWTH AND VALUE FUND
Seeks long-term capital growth, with income a secondary consideration. Pegasus
Growth and Value Fund seeks to achieve this objective by investing primarily in
equity securities of larger companies that are attractively priced relative to
their growth potential.
PEGASUS INTRINSIC VALUE FUND
Seeks to provide long-term capital appreciation. In seeking to achieve its
objective, this Fund will invest primarily in equity securities believed by its
investment adviser to represent a value or potential worth which is not fully
recognized by prevailing market prices.
PEGASUS BOND FUND
Seeks to maximize total rate of return by investing predominantly in
intermediate and
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long-term debt securities.
PEGASUS MANAGED ASSETS BALANCED FUND
Seeks long-term total return through a combination of capital appreciation and
current income. The Managed Assets Balanced Fund follows an asset allocation
strategy by investing in equity securities, debt securities and cash
equivalents. This Fund is closed to new investors and transfers and new premium
payments from current investors.
PEGASUS MONEY MARKET FUND
Seeks to provide a high level of current income consistent with the preservation
of capital and liquidity. Pegasus Money Market Fund seeks to achieve this
objective by investing in high quality money market instruments. This Fund is
closed to new investors and transfers and additional premium payments from
current investors.
PUTNAM VT NEW OPPORTUNITIES FUND
Seeks long-term capital appreciation by investing principally in common stocks
of companies in sectors of the economy which Putnam Investment Management, Inc.
("Putnam Management") believes possess above-average long-term growth
potential.
PUTNAM VT INTERNATIONAL GROWTH FUND
Seeks capital appreciation by investing primarily in equity securities of
companies located in a country other than the United States.
PUTNAM VT GLOBAL GROWTH FUND
Seeks capital appreciation through a globally diversified portfolio of common
stocks.
PUTNAM VT GLOBAL ASSET ALLOCATION FUND
Seeks a high level of long-term total return consistent with preservation of
capital by investing in U.S. equities, international equities, U.S. fixed income
securities, and international fixed income securities.
PUTNAM VT GROWTH AND INCOME FUND
Seeks capital growth and current income by investing primarily in common stocks
that offer potential for capital growth, current income or both.
PUTNAM VT DIVERSIFIED INCOME FUND
Seeks high current income consistent with capital preservation by investing in
the
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following three sectors of the fixed income securities markets: a U.S.
Government Sector, a High Yield Sector (which invests primarily in securities
commonly known as "junk bonds"), and an International Sector. See the special
considerations for investments in high yield securities described in the Fund
prospectus.
PUTNAM VT U.S. GOVERNMENT AND HIGH QUALITY BOND FUND
Seeks current income consistent with preservation of capital by investing
primarily in securities issued or guaranteed as to principal and interest by the
U.S. Government or by its agencies or instrumentalities and in other debt
obligations rated at least A by a nationally recognized securities rating agency
such as Standard & Poor's or Moody's Investor Services, Inc. or, if not rated,
determined by Putnam Management to be of comparable quality.
PUTNAM VT MONEY MARKET FUND
Seeks to achieve as high a rate of current income as Putnam Management believes
is consistent with preservation of capital and maintenance of liquidity by
investing in high-quality money market instruments.
The Funds are available only to serve as the underlying investment for
Variable Annuity contracts. A full description of the Funds, their
investment objectives, policies and restrictions, risks, charges and expenses
and other aspects of their operation is contained in the accompanying
prospectuses for the Pegasus Variable Annuity Fund and Putnam Variable
Trust, which should be read in conjunction with this Prospectus before
investing. Not all funds described in the Putnam Variable Trust Prospectus
are AVAILABLE IN THIS CONTRACT. Statements of Additional Information may
also be ordered, without charge, from the Pegasus Variable Annuity Fund and
Putnam Variable Trust.
The Funds are generally managed in styles similar to the funds of other
open-end investment companies which are managed by the same investment
advisers and whose shares are generally offered to the public. These other
funds may, however, employ different investment practices and may invest in
securities different from those in which their counterpart Funds invest, and
consequently will not have identical portfolios or experience identical
investment results.
First Chicago NBD Investment Management Company ("FCNIMCO"), located at Three
First National Plaza, Chicago, Illinois 60670, is the investment adviser to
Pegasus Variable Annuity Fund. FCNIMCO is a wholly-owned subsidiary of The
First National Bank of Chicago, which, in turn, is a wholly-owned subsidiary of
First Chicago NBD Corporation, a registered bank holding company . Included
among FCNIMCO's accounts are pension and profit-sharing funds for major
corporations and state and local governments, commingled trust funds and a
variety of institutional and personal advisory accounts, estates and trusts.
FCNIMCO also acts as investment adviser for other registered investment
companies and investment company portfolios.
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Putnam Management, One Post Office Square, Boston, MA, 02109, serves as the
investment manager for the Funds of Putnam Variable Trust. An affiliate, The
Putnam Advisory Company, Inc., manages domestic and foreign institutional
accounts and mutual funds. Another affiliate, Putnam Fiduciary Trust Company,
provides investment advice to institutional clients under its banking and
fiduciary policies. Putnam Management and its affiliates are wholly-owned
subsidiaries of Marsh & McLennan Companies, Inc., a publicly owned holding
company whose principal businesses are international insurance brokerage and
employee benefit consulting.
Subject to the general oversight of the Trustees of Putnam Variable Trust,
Putnam Management manages the Funds of Putnam Variable Trust in accordance with
their stated investment objectives and policies, makes investment decisions for
the Funds, places orders to purchase and sell securities on behalf of the
Funds, and administers the affairs of the Funds. For its services, the Funds of
Putnam Variable Trust pay Putnam Management a quarterly fee. See the
accompanying Putnam Variable Trust Prospectus for a more complete description
of Putnam Management and the respective fees of the Putnam Funds.
OPERATION OF THE CONTRACT/ACCUMULATION PERIOD
PREMIUM PAYMENTS
The balance of the initial Premium Payment remaining after the deduction of any
applicable Premium Tax is credited to your Contract within two business days of
receipt of a properly completed application or an order to purchase a Contract
and the initial Premium Payment by Hartford at its Home Office, P.O. Box 5085,
Hartford, CT 06102-5085. It will be credited to the Sub-Account(s) and/or the
Fixed Account in accordance with your election. If the application or other
information is incomplete when received, the balance of each initial Premium
Payment, after deduction of any applicable Premium Tax, will be credited to the
Sub-Account(s) or the Fixed Account within five business days of receipt or the
entire Premium Payment will be immediately returned unless you have been
informed of the delay and request that the Premium Payment not be returned.
Subsequent Premium Payments are priced on the Valuation Day received by
Hartford in its Home Office or other designated administrative office.
The number of Accumulation Units in each Sub-Account to be credited to a
Contract will be determined by dividing the portion of the Premium Payment being
credited to each Sub-Account by the value of an Accumulation Unit in that
Sub-Account on that date.
The minimum initial Premium Payment is $1,000. Subsequent Premium Payments, if
made, must be a minimum of $500. Certain plans may make smaller initial and
subsequent periodic payments. Each Premium Payment may be split among the
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various Sub-Accounts and the Fixed Account subject to minimum amounts then in
effect.
VALUE OF ACCUMULATION UNITS
The Accumulation Unit value for each Sub-Account will vary to reflect the
investment experience of the applicable Fund and will be determined on each
Valuation Day by multiplying the Accumulation Unit value of the particular
Sub-Account on the preceding Valuation Day by a "Net Investment Factor" for that
Sub-Account for the Valuation Period then ended. The "Net Investment Factor"
for each of the Sub-Accounts is equal to the net asset value per share of the
corresponding Fund at the end of the Valuation Period (plus the per share amount
of any dividends or capital gains distributed by that Fund if the ex-dividend
date occurs in the Valuation Period then ended) divided by the net asset value
per share of the corresponding Fund at the beginning of the Valuation Period and
subtracting from that amount the amount of any mortality and expense risk and
administration charges assessed during the Valuation Period then ending. You
should refer to the Fund Prospectus which accompanies this Prospectus for a
description of how the assets of each Fund are valued since each determination
has a direct bearing on the Accumulation Unit value of the Sub-Account and
therefore the value of a Contract. The Accumulation Unit value is affected by
the performance of the Fund(s), expenses and deduction of the charges described
in this Prospectus.
The shares of the Fund are valued at net asset value on each Valuation Day. A
description of the valuation methods used in valuing Fund shares may be found in
the accompanying Prospectus of the Fund.
VALUE OF THE FIXED ACCOUNT
Hartford will determine the value of the Fixed Account by crediting interest to
amounts allocated to the Fixed Account. The minimum Fixed Account interest rate
is 3%, compounded annually. Hartford may credit a lower minimum interest rate
according to state law. Hartford also may credit interest at rates greater
than the minimum Fixed Account interest rate.
VALUE OF THE CONTRACT
The value of the Sub-Account investments under your Contract at any time prior
to the commencement of Annuity payments can be determined by multiplying the
total number of Accumulation Units credited to your Contract in each Sub-Account
by the then current Accumulation Unit values for the applicable Sub-Account.
The value of the Fixed Account under your Contract will be the amount allocated
to the Fixed Account plus interest credited. You will be advised at least
semi-annually of the number of Accumulation Units credited to each Sub-Account,
the current Accumulation Unit values, the Fixed Account Value, and the total
value of your Contract.
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TRANSFERS AMONG SUB-ACCOUNTS
You may transfer the values of your Sub-Account allocations from one or more
Sub-Accounts to another free of charge. However, Hartford reserves the right
to limit the number of transfers to twelve (12) per Contract Year, with no two
(2) transfers occurring on consecutive Valuation Days. Transfers by telephone
may be made by a Contract Owner or by the attorney-in-fact pursuant to a power
of attorney by calling (800) 862-6668 or by the agent of record by calling (800)
862-7155. Telephone transfers may not be permitted by some states for their
residents who purchase variable annuities.
The policy of Hartford and its agents and affiliates is that they will not be
responsible for losses resulting from acting upon telephone requests reasonably
believed to be genuine. Hartford will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine; otherwise, Hartford
may be liable for any losses due to unauthorized or fraudulent instructions.
The procedures Hartford follows for transactions initiated by telephone include
requirements that callers provide certain information for identification
purposes. All transfer instructions by telephone are tape recorded.
Hartford may permit the Contract Owner to preauthorize transfers between the
Sub-Accounts and the Fixed Account under certain circumstances. Transfers
between the Sub-Accounts may be made both before and after Annuity payments
commence (limited to once a quarter) provided that the minimum allocation to any
Sub-Account may not be less than $500. No minimum balance is presently required
in any Sub-Account.
The right to reallocate Contract Values between the Sub-Accounts is subject to
modification if Hartford determines, in its sole discretion, that the exercise
of that right by one or more Contract Owners is, or would be, to the
disadvantage of other Contract Owners. Any modification could be applied to
transfers to or from some or all of the Sub-Accounts and could include, but not
be limited to, the requirement of a minimum time period between each transfer,
not accepting transfer requests of an agent acting under a power of attorney on
behalf of more than one Contract Owner, or limiting the dollar amount that may
be transferred between the Sub-Accounts and the Fixed Account by a Contract
Owner at any one time. Such restrictions may be applied in any manner
reasonably designed to prevent any use of the transfer right which is considered
by Hartford to be to the disadvantage of other Contract Owners.
TRANSFERS BETWEEN THE FIXED ACCOUNT AND THE SUB-ACCOUNTS
Subject to the restrictions set forth above, transfers from the Fixed Account
into a Sub-Account may be made at any time during the Contract Year. The
maximum amount which may be transferred from the Fixed Account during any
Contract Year is the greater of 30% of the Fixed Account balance as of the last
Contract Anniversary or
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the greatest amount of any prior transfer from the Fixed Account. If Hartford
permits preauthorized transfers from the Fixed Account to the Sub-Accounts, this
restriction is inapplicable. However, if any interest rate is renewed at a rate
at least one percentage point less than the previous rate, the Contract Owner
may elect to transfer up to 100% of the Funds receiving the reduced rate within
sixty days of notification of the interest rate decrease. Generally, transfers
may not be made from any Sub-Account into the Fixed Account for the six-month
period following any transfer from the Fixed Account into one or more of the
Sub-Accounts. Hartford reserves the right to modify the limitations on
transfers from the Fixed Account and to defer transfers from the Fixed Account
for up to six months from the date of request.
REDEMPTION/SURRENDER OF A CONTRACT
At any time prior to the Annuity Commencement Date, you have the right, subject
to any IRS provisions applicable thereto, to surrender the value of the Contract
in whole or in part. Surrenders are not permitted after Annuity payments
commence EXCEPT that a full surrender is allowed when payments for a designated
period (Option 4) are selected as the Annuity option.
FULL SURRENDERS.
At any time prior to the Annuity Commencement Date (and after the Annuity
Commencement Date with respect to values applied to Option 4), the Contract
Owner has the right to terminate the Contract. In such event, the Termination
Value of the Contract may be taken in the form of a lump sum cash settlement.
The Termination Value of the Contract is equal to the Contract Value less any
applicable Premium Taxes, the Contract Maintenance Fee, if applicable, and any
applicable contingent deferred sales charges. The Termination Value may be more
or less than the amount of the Premium Payments made to a Contract.
PARTIAL SURRENDERS.
The Contract Owner may make a partial surrender of Contract Values at any time
prior to the Annuity Commencement Date so long as the amount surrendered is at
least equal to the minimum amount rules then in effect. Currently, there is no
minimum amount rule in effect. However, Hartford may institute minimum amount
rules at some future time. Additionally, if the remaining Contract Value
following a surrender is less than $500 (and, for Texas contracts, there were no
Premium Payments made during the preceding two contract years), Hartford may
terminate the Contract and pay the Termination Value.
Certain plans or programs may have different withdrawal privileges. Hartford
may permit the Contract Owner to preauthorize partial surrenders subject to
certain limitations then in effect.
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THERE ARE CERTAIN RESTRICTIONS ON SECTION 403(B) TAX SHELTERED ANNUITIES. AS OF
DECEMBER 31, 1988, ALL SECTION 403(B) ANNUITIES HAVE LIMITS ON FULL AND PARTIAL
SURRENDERS. CONTRIBUTIONS TO THE CONTRACT MADE AFTER DECEMBER 31, 1988 AND ANY
INCREASES IN CASH VALUE AFTER DECEMBER 31, 1988 MAY NOT BE DISTRIBUTED UNLESS
THE CONTRACT OWNER/EMPLOYEE HAS A) ATTAINED AGE 59-1/2, B) TERMINATED
EMPLOYMENT, C) DIED, D) BECOME DISABLED OR E) EXPERIENCED FINANCIAL HARDSHIP.
DISTRIBUTIONS DUE TO FINANCIAL HARDSHIP OR SEPARATION FROM SERVICE MAY STILL BE
SUBJECT TO A PENALTY TAX OF 10%.
HARTFORD WILL NOT ASSUME ANY RESPONSIBILITY IN DETERMINING WHETHER A WITHDRAWAL
IS PERMISSIBLE, WITH OR WITHOUT TAX PENALTY, IN ANY PARTICULAR SITUATION; OR IN
MONITORING WITHDRAWAL REQUESTS REGARDING PRE OR POST JANUARY 1, 1989 ACCOUNT
VALUES.
ANY SUCH FULL OR PARTIAL SURRENDER DESCRIBED ABOVE MAY RESULT IN ADVERSE TAX
CONSEQUENCES TO THE CONTRACT OWNER. THE CONTRACT OWNER, THEREFORE, SHOULD
CONSULT WITH HIS TAX ADVISER BEFORE UNDERTAKING ANY SUCH SURRENDER. (SEE
"FEDERAL TAX CONSIDERATIONS" COMMENCING ON PAGE ____.)
Payment on any request for a full or partial surrender from the Sub-Accounts
and/or the Fixed Account will be made as soon as possible and in any event no
later than seven days after the written request is received by Hartford at its
Home Office, Attn: Individual Annuity Services, P.O. Box 5085, Hartford, CT
06102-5085. Hartford may defer payment of any amounts from the Fixed Account
for up to six months from the date of the request for surrender. If Hartford
defers payment for more than 30 days, Hartford will pay interest of at least 3%
per annum on the amount deferred. In requesting a partial withdrawal you should
specify the Fixed Account and/or the Sub-Account(s) from which the partial
withdrawal is to be taken. Otherwise, such withdrawal and any applicable
contingent deferred sales charges will be effected on a pro rata basis according
to the value in the Fixed Account and each Sub-Account under a Contract. Within
this context, the contingent deferred sales charges are taken from the Premium
Payments in the order in which they were received: from the earliest Premium
Payments to the latest Premium Payments. (See "Contingent Deferred Sales
Charges,"
page ____.)
DEATH BENEFIT
The Contracts provide that in the event the Annuitant dies before the Annuity
Commencement Date, the Contingent Annuitant will become the Annuitant. If the
Annuitant dies before the Annuity Commencement Date and there is no designated
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Contingent Annuitant, or the Contingent Annuitant predeceases the Annuitant, or
if any Contract Owner dies before the Annuity Commencement Date, the Beneficiary
as determined under the Contract Control Provisions will receive the Death
Benefit as determined on the date of receipt of due proof of death by Hartford
in its Home Office. With regard to Joint Contract Owners, after the death of a
Joint Contract Owner prior to the Annuity Commencement Date, the Beneficiary
will be the surviving Contract Owner notwithstanding that the beneficiary
designation may be different.
GUARANTEED DEATH BENEFIT
If, upon death prior to the Annuity Commencement Date, the Annuitant or Contract
Owner, as applicable, had not attained his 90th birthday, the Beneficiary will
receive the greatest of (a) the Contract Value determined as of the day written
proof of death of such person is received by Hartford, or (b) 100% of the total
Premium Payments made to such Contract, reduced by any prior surrenders, or (c)
the Maximum Anniversary Value immediately preceding the date of death. The
Maximum Anniversary Value is equal to the greatest Anniversary Value attained
from the following:
As of receipt of due proof of death, Hartford will calculate an Anniversary
Value for each Contract Anniversary prior to the deceased's attained age 81.
The Anniversary Value is equal to the Contract Value on a Contract Anniversary,
increased by the dollar amount of any premium payment made since that
anniversary and reduced by the dollar amount of any partial surrenders since
that anniversary.
If the deceased, the Annuitant or Contract Owner, as applicable, had attained
age 90, then the Death Benefit will equal the Contract Value.
PAYMENT OF DEATH BENEFIT
Death Benefit proceeds will remain invested in the Separate Account in
accordance with the allocation instructions given by the Contract Owner until
the proceeds are paid or Hartford receives new instruction from the
Beneficiary. The Death Benefit may be taken in one sum, payable within 7 days
after the date Due Proof of Death is received, or under any of the settlement
options then being offered by the Company provided, however, that: (a) in the
event of the death of any Contract Owner prior to the Annuity Commencement Date,
the entire interest in the Contract will be distributed within 5 years after the
death of the Contract Owner and (b) in the event of the death of any Contract
Owner or Annuitant which occurs on or after the Annuity Commencement Date, any
remaining interest in the Contract will be paid at least as rapidly as under the
method of distribution in effect at the time of death, or, if the benefit is
payable over a period not extending beyond the life expectancy of the
Beneficiary or over the life of the Beneficiary, such distribution must commence
within one year of the date of death. The proceeds due on the death may be
applied to provide variable payments, fixed payments, or a combination of
variable and fixed payments. However, in the event of the Contract Owner's
death where the sole Beneficiary is the spouse of the Contract
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Owner and the Annuitant or Contingent Annuitant is living, such spouse may
elect, in lieu of receiving the death benefit, to be treated as the Contract
Owner. The Contract Value and the Maximum Anniversary Value of the Contract
will be unaffected by treating the spouse as the Contract Owner.
If the Contract is owned by a corporation or other non-individual, the Death
Benefit payable upon the death of the Annuitant prior to the Annuity
Commencement Date will be payable only as one sum or under the same settlement
options and in the same manner as if an individual Contract Owner died on the
date of the Annuitant's death.
There may be postponement in the payment of Death Benefits whenever (a) the New
York Stock Exchange is closed, except for holidays or weekends, or trading on
the New York Stock Exchange is restricted as determined by the Securities and
Exchange Commission; (b) the Securities and Exchange Commission permits
postponement and so orders; or (c) the Securities and Exchange Commission
determines that an emergency exists making valuation of the amounts or disposal
of securities not reasonably practicable.
GROUP UNALLOCATED CONTRACTS
For Group Unallocated Contracts Hartford requires that detailed accounting of
cumulative purchase payments, cumulative gross surrenders, and current Contract
Value attached to each Plan Participant be submitted on an annual basis by the
Contract Owner. Failure to submit accurate data satisfactory to Hartford will
give Hartford the right to terminate this extension of benefits.
CHARGES UNDER THE CONTRACT
CONTINGENT DEFERRED SALES CHARGES
There is no deduction for sales expenses from Premium Payments when made.
However, a contingent deferred sales charge may be assessed against Contract
Values when they are surrendered.
The length of time from receipt of a Premium Payment to the time of surrender
determines the contingent deferred sales charge. Premium payments will be
deemed to be surrendered in the order in which they were received.
A Contract Owner who chooses to surrender a Contract in full who has not yet
withdrawn the Annual Withdrawal Amount during the current Contract Year (as
described at page __ below under the sub-heading "Payments Not Subject to
Sales Charges") may, depending upon the amount of investment gain experienced
under the Contract, reduce the amount of any contingent deferred sales charge
paid by first withdrawing the Annual Withdrawal Amount and then requesting a
full surrender of the Contract. Currently, regardless of whether a Contract
Owner first requests a partial withdrawal of the Annual Withdrawal Amount,
upon receiving a request for a full surrender of a Contract, Hartford
assesses any applicable contingent deferred sales charge against the surrender
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proceeds representing the lesser of: (1) aggregate Premium Payments under the
Contract not previously withdrawn; and (2) the Contract Value, less the Annual
Withdrawal Amount available at the time of the full surrender, less the Annual
Maintenance Fee.
DURING THE FIRST SEVEN CONTRACT YEARS
During the first seven contract years, all surrenders will be first from Premium
Payments and then from other Contract Values. If an amount equal to all premium
payments has been surrendered, a contingent deferred sales charge will not be
assessed against the surrender of the remaining Contract Value.
AFTER THE SEVENTH CONTRACT YEAR
After the seventh contract year, all surrenders will first be from earnings and
then from premium payments. A contingent deferred sales charge will not be
assessed against the surrender of earnings. If an amount equal to all earnings
has been surrendered, a contingent deferred sales charge will not be assessed
against premium payments received more than seven years prior to surrender, but
will be assessed against premium payments received less than seven years prior
to surrender. The charge is a percentage of the amount withdrawn (not to exceed
the aggregate amount of the Premium Payments made) and equals:
Charge Length of Time From Premium Payment
------ -----------------------------------
(Number of Years)
6% 1
6% 2
5% 3
5% 4
4% 5
3% 6
2% 7
0% 8 or more
The contingent deferred sales charges are used to cover expenses relating to the
sale and distribution of the Contracts, including commissions paid to any
distribution organization and its sales personnel, the cost of preparing sales
literature and other promotional activities. To the extent that these charges
do not cover such distribution expenses, the expenses will be borne by Hartford
from its general assets, including surplus. The surplus might include profits
resulting from unused mortality and expense risk charges.
During the first seven Contract Years, on a non-cumulative basis, a Contract
Owner may make a partial surrender of Contract Values of up to 10% of the
aggregate Premium Payments made to the contract (as determined on the date of
the requested withdrawal) without the application of the contingent deferred
sales charge. After the
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seventh Contract year, the Contract Owner may make a partial surrender of 10% of
premium payments made during the seven years prior to the surrender and 100% of
the Contract Value less the premium payments made during the seven years prior
to the surrender. The amount which can be withdrawn in any Contract Year prior
to incurring surrender charges is the "Annual Withdrawal Amount." An Extended
Withdrawal Privilege rider allows an Annuitant who attains age 70 1/2 under a
Qualified Plan to withdraw an amount in excess of the Annual Withdrawal Amount
to comply with IRS minimum distribution rules.
The contingent deferred sales charges which cover expenses relating to the sale
and distribution of the Contracts may be reduced for certain sales of the
Contracts under circumstances which may result in savings of such sales and
distribution expenses. Therefore, the contingent deferred sales charges may be
reduced if the Contracts are sold to certain employee and professional groups.
In addition, there may be other circumstances of which Hartford is not
presently aware which could result in reduced sales or distribution expenses.
Reductions in these charges will not be unfairly discriminatory against any
Contract Owner.
Hartford may offer certain employer sponsored savings plans in its discretion
reduced fees and charges including, but not limited to, the contingent deferred
sales charges, the mortality and expense risk charge and the maintenance fee for
certain sales under circumstances which may result in savings of certain costs
and expenses. Reductions in these fees and charges will not be unfairly
discriminatory against any Contract Owner.
MORTALITY AND EXPENSE RISK CHARGE
Although Variable Annuity payments made under the Contracts will vary in
accordance with the investment performance of the Fund shares held in the
Sub-Account(s), the payments will not be affected by (a) Hartford's actual
mortality experience among Annuitants before or after the Annuity Commencement
Date or (b) Hartford's actual expenses, if greater than the deductions provided
for in the Contracts because of the expense and mortality undertakings by
Hartford.
For assuming these risks under the Contracts, Hartford will make a daily charge
at the rate of 1.25% per annum against all Contract Values held in the
Sub-Accounts during the life of the Contract, including the payout period,
(estimated at .90% for mortality and .35% for expense).
The mortality undertaking provided by Hartford under the Contracts, assuming
the selection of one of the forms of life Annuities, is to make monthly Annuity
payments (determined in accordance with the 1983a Individual Annuity Mortality
Table and other provisions contained in the Contract) to Annuitants regardless
of how long an Annuitant may live, and regardless of how long all Annuitants as
a group may live. Hartford also assumes the liability for payment of a minimum
Death Benefit under the Contract.
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The mortality undertakings are based on Hartford's determination of expected
mortality rates among all Annuitants. If actual experience among Annuitants
during the Annuity payment period deviates from Hartford's actuarial
determination of expected mortality rates among
Annuitants because, as a group, their longevity is longer than anticipated,
Hartford must provide amounts from its general funds to fulfill its Contract
obligations. Hartford will bear the loss in such a situation. Also, in the
event of the death of an Annuitant or Contract Owner prior to age 85 or the
commencement of Annuity payments, whichever is earlier, Hartford can, in
periods of declining value, experience a loss resulting from the assumption of
the mortality risk relative to the minimum Death Benefit.
In providing an expense undertaking, Hartford assumes the risk that the
contingent deferred sales charges and the Administration and Maintenance Fees
for maintaining the Contracts prior to the Annuity Commencement Date may be
insufficient to cover the actual cost of providing such items.
ADMINISTRATION AND MAINTENANCE FEES
Hartford will deduct certain fees from Contract Values to reimburse it for
expenses relating to the administration and maintenance of the Contract and the
Fixed Account. For Contract maintenance, Hartford will deduct an annual fee of
$30 on each Contract Anniversary on or before the Annuity Commencement Date.
The deduction will be made pro rata according to the value in each Sub-Account
and the Fixed Account under a Contract. If during a Contract Year the Contract
is surrendered for its full value, Hartford will deduct the Contract
Maintenance Fee at the time of such surrender. For administration, Hartford
makes a daily charge at the rate of .15% per annum against all Contract Values
held in the Separate Account during both the accumulation and annuity phases of
the Contract. There is not necessarily a relationship between the amount of
administrative charge imposed on a given Contract and the amount of expenses
that may be attributable to that Contract; expenses may be more or less than the
charge.
The types of expenses incurred by the Separate Account include, but are not
limited to, expenses of issuing the Contract and expenses for confirmations,
Contract quarterly statements, processing of transfers and surrenders,
responding to Contract Holder inquiries, reconciling and depositing cash
receipts, calculation and monitoring daily Sub-Account unit values, Separate
Account reporting, including semiannual and annual reports and mailing and
tabulation of shareholder proxy solicitations.
You should refer to the Prospectuses for the Pegasus Variable Annuity Fund and
Putnam Variable Trust for a description of deductions and expenses paid out of
the assets of the respective Funds.
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PREMIUM TAXES
A deduction is also made for Premium Tax, if applicable, imposed by a state or
other governmental entity. Certain states impose a Premium Tax, currently
ranging up to 3.5%. Some states assess the tax at the time purchase payments
are made; others assess the tax at the time of annuitization. Hartford will
pay Premium Taxes at the time imposed under applicable law. At its sole
discretion, Hartford may deduct Premium Taxes at the time the taxes are paid,
the Contract is surrendered, or the Contract annuitizes.
ANNUITY BENEFITS
You select an Annuity Commencement Date and an Annuity option which may be on a
fixed or variable basis, or a combination thereof. The Annuity Commencement
Date will not be deferred beyond the Annuitant's 90th birthday (85th birthday in
some states, 100th birthday if sold as a charitable remainder trust). The
Annuity Commencement Date and/or the Annuity option may be changed from time to
time, but any change must be at least 30 days prior to the date on which Annuity
payments are scheduled to begin. The contract allows the Contract Owner to
change the Sub-Accounts on which variable payments are based after payments have
commenced once every three (3) months. Any Fixed Annuity allocation may not be
changed.
ANNUITY OPTIONS
The contract contains the four optional Annuity forms described below. Options
2 and 4 are available to Qualified Plans only if the guaranteed payment period
is less than the life expectancy of the Annuitant at the time the option becomes
effective. Such life expectancy shall be computed on the basis of the mortality
table prescribed by the IRS, or if none is prescribed, the mortality table then
in use by Hartford. With respect to Non-Qualified Contracts, if you do not
elect otherwise, payments in most states will automatically begin at the
Annuitant's age 90 (with the exception of states that do not allow deferral past
age 85) under Option 2 with 120 monthly payments certain. For Qualified
Contracts and contracts issued in Texas, if you do not elect otherwise, payments
will begin automatically at the Annuitant's age 90 under Option 1 to provide a
life Annuity.
Under any of the Annuity options excluding Options 4 and 5, no surrenders are
permitted after Annuity payments commence. Only full surrenders are allowed out
of Option 4 and any such surrender will be subject to contingent deferred sales
charges, if applicable. Full or partial withdrawals may be made from Option 5
at any time and contingent deferred sales charges will not be applied.
Option 1: Life Annuity
A life Annuity is an Annuity payable during the lifetime of the Annuitant and
terminating
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with the last payment preceding the death of the Annuitant. This option offers
the largest payment amount of any of the life Annuity options since there is no
guarantee of a minimum number of payments nor a provision for a death benefit
payable to a Beneficiary.
It would be possible under this option for an Annuitant to receive only one
Annuity payment if he died prior to the due date of the second Annuity payment,
two if he died before the date of the third Annuity payment, etc.
Option 2: Life Annuity with 120, 180 or 240 Monthly Payments Certain
This Annuity option is an Annuity payable monthly during the lifetime of an
Annuitant with the provision that payments will be made for a minimum of 120,
180 or 240 months, as elected. If, at the death of the Annuitant, payments have
been made for less than the minimum elected number of months, then the present
value as of the date of the Annuitant's death, of any remaining guaranteed
payments will be paid in one sum to the Beneficiary or Beneficiaries designated
unless other provisions have been made and approved by the company. If the
Annuitant was also the Contract Owner, any method of distribution must provide
that any amount payable as a death benefit will be distributed at least as
rapidly as under the method of distribution in effect at the Contract Owner's
death.
Option 3: Joint and Last Survivor Annuity
An Annuity payable monthly during the joint lifetime of the Annuitant and a
designated second person, and thereafter during the remaining lifetime of the
survivor, ceasing with the last payment prior to the death of the survivor.
Based on the options currently offered by Hartford, the Annuitant may elect
that the payment to the survivor be less than the payment made during the joint
lifetime of the Annuitant and a designated second person.
It would be possible under this option for an Annuitant and designated second
person to receive only one payment in the event of the common or simultaneous
death of the parties prior to the due date for the second payment and so on.
Option 4: Payments for a Designated Period
An amount payable monthly for the number of years selected which may be from 5
to 30 years. Under this option, you may, at any time, surrender the contract
and receive, within seven days, the Termination Value of the Contract as
determined by Hartford.
In the event of the Annuitant's death prior to the end of the designated period,
the present value as of the date of the Annuitant's death, of any remaining
guaranteed
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payments will be paid in one sum to the Beneficiary or Beneficiaries designated
unless other provisions have been made and approved by the Company. If the
Annuitant was also the Contract Owner, any method of distribution must provide
that any amount payable as a death benefit will be distributed at least as
rapidly as under the method of distribution in effect at the Contract Owner's
death.
Option 4 is an option that does not involve life contingencies and thus no
mortality guarantee. Charges made for the mortality undertaking under the
contracts thus provide no real benefit to a Contract Owner.
Option 5: Death Benefit Remaining with Hartford
Proceeds from the Death Benefit left with Hartford for a period not to exceed
five years from the date of the Contract Owner's death prior to the Annuity
Commencement Date. These proceeds will remain in the Sub-Account(s) to which
they were allocated at the time of death unless the Beneficiary elects to
reallocate them. Full or partial withdrawals may be made at any time. In the
event of withdrawals, the remaining value will equal the Contract Value of the
proceeds left with Hartford, minus any withdrawals.
Hartford may offer other annuity options from time to time.
THE ANNUITY UNIT AND VALUATION
The value of the Annuity Unit for each Sub-Account in the Separate Account for
any day is determined by multiplying the value for the preceding day by the
product of (1) the net investment factor (See "Valuation of Accumulation Units,"
commencing on page ____) for the day for which the Annuity Unit value is being
calculated and (2) a factor to neutralize the assumed investment rate of 5.00%
per annum discussed below.
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DETERMINATION OF PAYMENT AMOUNT
When Annuity payments are to commence, the value of the Contract is determined
as the sum of the value of the Fixed Account no earlier than the close of
business on the fifth Valuation Day preceding the date the first Annuity payment
is due plus the product of the value of the Accumulation Unit of each
Sub-Account on that same day, and the number of Accumulation Units credited to
each Sub-Account as of the date the Annuity is to commence.
The Contract contains tables indicating the minimum dollar amount of the first
monthly payment under the optional forms of Annuity for each $1,000 of value of
a Sub-Account under a Contract. The first monthly payment varies according to
the form and type of Annuity selected. The Contract contains Annuity tables
derived from the 1983a Individual Annuity Mortality Table with ages set back one
year and with an assumed investment rate ("A.I.R.") of 3% per annum for the
Fixed Annuity and 5% per annum for the Variable Annuity.
The total first monthly Variable Annuity payment is determined by multiplying
the value (expressed in thousands of dollars) of a Sub-Account (less any
applicable Premium Taxes) by the amount of the first monthly payment per $1,000
of value obtained from the tables in the Contracts.
Fixed Annuity payments are determined at annuitization by multiplying the values
allocated to the Fixed Account (less applicable Premium Taxes) by a rate to be
determined by Hartford which is no less than the rate specified in the Annuity
tables in the Contract. The Annuity payment will remain level for the duration
of the Annuity.
The amount of the first monthly Variable Annuity payment, determined as
described above, is divided by the value of an Annuity Unit for the appropriate
Sub-Account no earlier than the close of business on the fifth Valuation Day
preceding the day on which the payment is due in order to determine the number
of Annuity Units represented by the first payment. This number of Annuity Units
remains fixed during the Annuity payment period, and in each subsequent month
the dollar amount of the Variable Annuity payment is determined by multiplying
this fixed number of Annuity Units by the then current Annuity Unit value.
THE A.I.R. ASSUMED IN THE MORTALITY TABLES WOULD PRODUCE LEVEL VARIABLE ANNUITY
PAYMENTS IF THE INVESTMENT RATE REMAINED CONSTANT. IN FACT, PAYMENTS WILL VARY
UP OR DOWN AS THE INVESTMENT RATE VARIES UP OR DOWN FROM THE A.I.R.
The Annuity Unit value used in calculating the amount of the Variable Annuity
payments will be based on an Annuity Unit value determined as of the close of
business on a day no earlier than the fifth Valuation Day preceding the date of
the Annuity payment.
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FEDERAL TAX CONSIDERATIONS
What are some of the federal tax consequences which affect these Contracts?
A. GENERAL
SINCE THE TAX LAW IS COMPLEX AND SINCE TAX CONSEQUENCES WILL VARY ACCORDING TO
THE ACTUAL STATUS OF THE CONTRACT OWNER INVOLVED AND THE TYPE OF PLAN UNDER
WHICH THE CONTRACT IS PURCHASED, LEGAL AND TAX ADVICE MAY BE NEEDED BY A PERSON,
TRUSTEE, OR OTHER ENTITY CONTEMPLATING THE PURCHASE OF A CONTRACT DESCRIBED
HEREIN.
It should be understood that any detailed description of the federal income tax
consequences regarding the purchase of these Contracts cannot be made in this
Prospectus and that special tax rules may be applicable with respect to certain
purchase situations not discussed herein. In addition, no attempt is made here
to consider any applicable state or other tax laws. For detailed information, a
qualified tax adviser should always be consulted. The discussion here and in
Appendix I commencing on page ____ is based on Hartford's understanding of
existing federal income tax laws as they are currently interpreted.
B. TAXATION OF HARTFORD AND THE SEPARATE ACCOUNT
The Separate Account is taxed as part of Hartford which is taxed as a life
insurance company in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, the Separate Account will not be taxed as a
"regulated investment company" under subchapter M of Chapter 1 of the Code.
Investment income and any realized capital gains on the assets of the Separate
Account are reinvested and are taken into account in determining the value of
the Accumulation and Annuity Units (See "Value of Accumulation Units" commencing
on page ____). As a result, such investment income and realized capital gains
are automatically applied to increase reserves under the Contract.
No taxes are due on interest, dividends and short-term or long-term capital
gains earned by the Separate Account with respect to Qualified or Non-Qualified
Contracts.
C. TAXATION OF ANNUITIES -- GENERAL PROVISIONS AFFECTING PURCHASERS OTHER THAN
QUALIFIED RETIREMENT PLANS
Section 72 of the Code governs the taxation of annuities in general.
1. NON-NATURAL PERSONS, CORPORATIONS, ETC. Section 72 contains
provisions for Contract Owners which are non-natural persons.
Non-natural persons include
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corporations, trusts, and partnerships. The annual net increase in
the value of the Contract is currently includable in the gross income
of a non-natural person unless the non-natural person holds the
Contract as an agent for a natural person. There is an exception from
current inclusion for certain annuities held by structured settlement
companies, certain annuities held by an employer with respect to a
terminated qualified retirement plan, and certain immediate annuities.
A non-natural person which is a tax-exempt entity for federal tax
purposes will not be subject to income tax as a result of this
provision.
If the Contract Owner is not an individual, the primary Annuitant
shall be treated as the Contract Owner for purposes of making
distributions which are required to be made upon the death of the
Contract Owner. If there is a change in the primary Annuitant, such
change shall be treated as the death of the Contract Owner.
2. OTHER CONTRACT OWNERS (NATURAL PERSONS). A Contract Owner is not
taxed on increases in the value of the Contract until an amount is
received or deemed received, e.g., in the form of a lump sum payment
(full or partial value of a Contract) or as Annuity payments under the
settlement option elected.
The provisions of Section 72 of the Code concerning distributions are
summarized briefly below. Also summarized are special rules affecting
distributions from Contracts obtained in a tax-free exchange for other
annuity contracts or life insurance contracts which were purchased
prior to August 14, 1982.
a. DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
i. Total premium payments less amounts received which were not
includable in gross income equal the "investment in the
contract" under Section 72 of the Code.
ii. To the extent that the value of the Contract (ignoring any
surrender charges except on a full surrender) exceeds the
"investment in the contract," such excess constitutes the
"income on the contract."
iii. Any amount received or deemed received prior to the Annuity
Commencement Date (e.g., upon a partial surrender) is
deemed to come first from any such "income on the contract"
and then from "investment in the contract," and for these
purposes such "income on the contract" shall be computed by
reference to any aggregation rule in subparagraph 2.c.,
below. As a result, any such amount received or deemed
received (1) shall be includable in gross income to the
extent that such amount does not exceed any such "income on
the contract," and (2) shall not be includable in gross
income to the extent that such amount does exceed
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any such "income on the contract." If at the time that any
amount is received or deemed received there is no "income
on the contract" (e.g., because the gross value of the
Contract does not exceed the "investment in the contract"
and no aggregation rule applies), then such amount received
or deemed received will not be includable in gross income,
and will simply reduce the "investment in the contract."
iv. The receipt of any amount as a loan under the Contract or
the assignment or pledge of any portion of the value of the
Contract shall be treated as an amount received for
purposes of this subparagraph a. and the next subparagraph
b.
v. In general, the transfer of the Contract, without full and
adequate consideration, will be treated as an amount
received for purposes of this subparagraph a. and the next
subparagraph b. This transfer rule does not apply, however,
to certain transfers of property between spouses or
incident to divorce.
b. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE. Annuity payments
made periodically after the Annuity Commencement Date are
includable in gross income to the extent the payments exceed the
amount determined by the application of the ratio of the
"investment in the contract" to the total amount of the payments
to be made after the Annuity Commencement Date (the "exclusion
ratio").
i. When the total of amounts excluded from income by
application of the exclusion ratio is equal to the
investment in the contract as of the Annuity Commencement
Date, any additional payments (including surrenders) will
be entirely includable in gross income.
ii. If the annuity payments cease by reason of the death of the
Annuitant and, as of the date of death, the amount of
annuity payments excluded from gross income by the
exclusion ratio does not exceed the investment in the
contract as of the Annuity Commencement Date, then the
remaining portion of unrecovered investment shall be
allowed as a deduction for the last taxable year of the
Annuitant.
iii. Generally, nonperiodic amounts received or deemed received
after the Annuity Commencement Date are not entitled to any
exclusion ratio and shall be fully includable in gross
income. However, upon a full surrender after such date,
only the excess of the amount received (after any surrender
charge) over the remaining "investment in the contract"
shall be includable in gross income (except to the extent
that the aggregation rule referred to in the next
subparagraph c. may apply).
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c. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS. Contracts issued
after October 21, 1988 by the same insurer (or affiliated
insurer) to the same Contract Owner within the same calendar year
(other than certain contracts held in connection with a
tax-qualified retirement arrangement) will be treated as one
annuity Contract for the purpose of determining the taxation of
distributions prior to the Annuity Commencement Date. An annuity
contract received in a tax-free exchange for another annuity
contract or life insurance contract may be treated as a new
Contract for this purpose. Hartford believes that for any
annuity subject to such aggregation, the values under the
Contracts and the investment in the contracts will be added
together to determine the taxation under subparagraph 2.a.,
above, of amounts received or deemed received prior to the
Annuity Commencement Date. Withdrawals will first be treated as
withdrawals of income until all of the income from all such
Contracts is withdrawn. As of the date of this Prospectus, there
are no regulations interpreting this provision.
d. 10% PENALTY TAX -- APPLICABLE TO CERTAIN WITHDRAWALS AND ANNUITY
PAYMENTS.
i. If any amount is received or deemed received on the
Contract (before or after the Annuity Commencement Date),
the Code applies a penalty tax equal to 10% of the portion
of the amount includable in gross income, unless an
exception applies.
ii. The 10% penalty tax will not apply to the following
distributions (exceptions vary based upon the precise plan
involved):
1. Distributions made on or after the date the recipient
has attained the age of 59 1/2.
2. Distributions made on or after the death of the holder
or where the holder is not an individual, the death of
the primary annuitant.
3. Distributions attributable to a recipient's becoming
disabled.
4. A distribution that is part of a scheduled series of
substantially equal periodic payments for the life (or
life expectancy) of the recipient (or the joint lives
or life expectancies of the recipient and the
recipient's Beneficiary).
5. Distributions of amounts which are allocable to the
"investment in the contract" prior to August 14, 1982
(see next subparagraph e.).
e. SPECIAL PROVISIONS AFFECTING CONTRACTS OBTAINED THROUGH A
TAX-FREE
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EXCHANGE OF OTHER ANNUITY OR LIFE INSURANCE CONTRACTS PURCHASED
PRIOR TO AUGUST 14, 1982. If the Contract was obtained by a
tax-free exchange of a life insurance or annuity Contract
purchased prior to August 14, 1982, then any amount received or
deemed received prior to the Annuity Commencement Date shall be
deemed to come (1) first from the amount of the "investment in
the contract" prior to August 14, 1982 ("pre-8/14/82 investment")
carried over from the prior Contract, (2) then from the portion
of the "income on the contract" (carried over to, as well as
accumulating in, the successor Contract) that is attributable to
such pre-8/14/82 investment, (3) then from the remaining "income
on the contract," and (4) last from the remaining "investment in
the contract." As a result, to the extent that such amount
received or deemed received does not exceed such pre-8/14/82
investment, such amount is not includable in gross income., In
addition, to the extent that such amount received or deemed
received does not exceed the sum of (a) such pre-8/14/82
investment and (b) the "income on the contract" attributable
thereto, such amount is not subject to the 10% penalty tax. In
all other respects, amounts received or deemed received from such
post-exchange Contracts are generally subject to the rules
described in this subparagraph 3.
f. REQUIRED DISTRIBUTIONS
i. Death of Contract Owner or Primary Annuitant
Subject to the alternative election or spouse beneficiary
provisions in ii. or iii., below:
1. If any Contract Owner dies on or after the Annuity
Commencement Date and before the entire interest in
the Contract has been distributed, the remaining
portion of such interest shall be distributed at least
as rapidly as under the method of distribution being
used as of the date of such death;
2. If any Contract Owner dies before the Annuity
Commencement Date, the entire interest in the Contract
will be distributed within five years after such
death; and
3. If the Contract Owner is not an individual, then for
purposes of 1. or 2., above, the primary annuitant
under the Contract shall be treated as the Contract
Owner, and any change in the primary annuitant shall
be treated as the death of the Contract Owner. The
primary annuitant is the individual, the events in the
life of whom are of primary importance in affecting
the timing or amount of the payout under the Contract.
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ii. Alternative Election to Satisfy Distribution Requirements
If any portion of the interest of a Contract Owner
described in i., above, is payable to or for the benefit of
a designated beneficiary, such beneficiary may elect to
have the portion distributed over a period that does not
extend beyond the life or life expectancy of the
beneficiary. The election and payments must begin within a
year of the death.
iii. Spouse Beneficiary
If any portion of the interest of a Contract Owner is
payable to or for the benefit of his or her spouse, and the
Annuitant or Contingent Annuitant is living, such spouse
shall be treated as the Contract Owner of such portion for
purposes of section i., above.
3. DIVERSIFICATION REQUIREMENTS. Section 817 of the Code provides that a
variable annuity contract will not be treated as an annuity contract
for any period during which the investments made by the separate
account or underlying fund are not adequately diversified in
accordance with regulations prescribed by the Treasury Department. If
a Contract is not treated as an annuity contract, the Contract Owner
will be subject to income tax on the annual increases in cash value.
The Treasury Department has issued diversification regulations which
generally require, among other things, that no more than 55% of the
value of the total assets of the segregated asset account underlying a
variable contract is represented by any one investment, no more than
70% is represented by any two investments, no more than 80% is
represented by any three investments, and no more than 90% is
represented by any four investments. In determining whether the
diversification standards are met, all securities of the same issuer,
all interests in the same real property project, and all interests in
the same commodity are each treated as a single investment. In
addition, in the case of government securities, each government agency
or instrumentality shall be treated as a separate issuer.
A separate account must be in compliance with the diversification
standards on the last day of each calendar quarter or within 30 days
after the quarter ends. If an insurance company inadvertently fails
to meet the diversification requirements, the company may comply
within a reasonable period and avoid the taxation of contract income
on an ongoing basis. However, either the company or the Contract
Owner must agree to pay the tax due for the period during which the
diversification requirements were not met.
Hartford monitors the diversification of investments in the separate
accounts and tests for diversification as required by the Code.
Hartford intends to
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administer all contracts subject to the diversification requirements
in a manner that will maintain adequate diversification.
4. OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT. In order for a
variable annuity contract to qualify for tax deferral, assets in the
segregated asset accounts supporting the variable contract must be
considered to be owned by the insurance company and not by the
variable contract owner. The Internal Revenue Service ("IRS") has
issued several rulings which discuss investor control. The IRS has
ruled that incidents of ownership by the contract owner, such as the
ability to select and control investments in a separate account, will
cause the contract owner to be treated as the owner of the assets for
tax purposes.
Further, in the explanation to the temporary Section 817
diversification regulations, the Treasury Department noted that the
temporary regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a
segregated asset account may cause the investor, rather than the
insurance company, to be treated as the owner of the assets in the
account." The explanation further indicates that "the temporary
regulations provide that in appropriate cases a segregated asset
account may include multiple sub-accounts, but do not specify the
extent to which policyholders may direct their investments to
particular sub-accounts without being treated as the owners of the
underlying assets. Guidance on this and other issues will be provided
in regulations or revenue rulings under Section 817(d), relating to
the definition of variable contract." The final regulations issued
under Section 817 do not provide guidance regarding investor control,
and as of the date of this Prospectus, no other such guidance has
been issued. Further, Hartford does not know if or in what form such
guidance will be issued. In addition, although regulations are
generally issued with prospective effect, it is possible that
regulations may be issued with retroactive effect. Due to the lack of
specific guidance regarding the issue of investor control, there is
necessarily some uncertainty regarding whether a Contract Owner could
be considered the owner of the assets for tax purposes. Hartford
reserves the right to modify the contracts, as necessary, to prevent
Contract Owners from being considered the owners of the assets in the
separate accounts.
D. FEDERAL INCOME TAX WITHHOLDING
The portion of a distribution which is taxable income to the recipient will
be subject to federal income tax withholding, pursuant to Section 3405 of
the Code. The application of this provision is summarized below:
1. NON-PERIODIC DISTRIBUTIONS. The portion of a non-periodic
distribution which constitutes taxable income will be subject to
federal income tax withholding unless the recipient elects not to have
taxes withheld. If an election not to have
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taxes withheld is not provided, 10% of the taxable distribution will
be withheld as federal income tax. Election forms will be provided
at the time distributions are requested. If the necessary election
forms are not submitted to Hartford, Hartford will automatically
withhold 10% of the taxable distribution.
2. PERIODIC DISTRIBUTIONS (DISTRIBUTIONS PAYABLE OVER A PERIOD GREATER
THAN ONE YEAR). The portion of a periodic distribution which
constitutes taxable income will be subject to federal income tax
withholding as if the recipient were married claiming three
exemptions. A recipient may elect not to have income taxes withheld
or have income taxes withheld at a different rate by providing a
completed election form. Election forms will be provided at the time
distributions are requested.
E. GENERAL PROVISIONS AFFECTING QUALIFIED RETIREMENT PLANS
The Contract may be used for a number of qualified retirement plans.
If the Contract is being purchased with respect to some form of
qualified retirement plan, please refer to Appendix I, commencing on
page ____, for information relative to the types of plans for which it
may be used and the general explanation of the tax features of such
plans.
F. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal
income tax consequences to annuity purchasers that are U.S. citizens or
residents. Purchasers that are not U.S. citizens or residents will generally
be subject to U.S. federal income tax and withholding on annuity
distributions at a 30% rate, unless a lower treaty rate applies. In
addition, purchasers may be subject to state premium tax, other state and/or
municipal taxes, and taxes that may be imposed by the purchaser's country of
citizenship or residence. Prospective purchasers are advised to consult with
a qualified tax adviser regarding U.S., state, and foreign taxation with
respect to an annuity purchase.
GENERAL MATTERS
ASSIGNMENT
Ownership of a Contract described herein is generally assignable. However, if
the Contracts are issued pursuant to some form of Qualified Plan, it is possible
that the ownership of the Contracts may not be transferred or assigned depending
on the type of qualified retirement plan involved. An assignment of a
Non-Qualified Contract may subject the assignment proceeds to income taxes and
certain penalty taxes. (See "Taxation of Annuities in General - Non-Tax
Qualified Purchasers," page ____.)
MODIFICATION
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Hartford reserves the right to modify the Contract, but only if such
modification: (i) is necessary to make the Contract or the Separate Account
comply with any law or regulation issued by a governmental agency to which
Hartford is subject; or (ii) is necessary to assure continued qualification of
the Contract under the Code or other federal or state laws relating to
retirement annuities or annuity Contracts; or (iii) is necessary to reflect a
change in the operation of the Separate Account or the Sub-Account(s) or (iv)
provides additional Separate Account options or (v) withdraws Separate Account
options. In the event of any such modification Hartford will provide notice to
the Contract Owner or to the payee(s) during the Annuity period. Hartford may
also make appropriate endorsement in the Contract to reflect such modification.
DELAY OF PAYMENTS
There may be postponement of a surrender payment or death benefit whenever (a)
the New York Stock Exchange is closed, except for holidays or weekends, or
trading on the New York Stock Exchange is restricted as determined by the
Commission; (b) the Commission permits postponement and so orders; or (c) the
Commission determines that an emergency exists making valuation or disposal of
securities not reasonably practicable.
VOTING RIGHTS
Hartford is the legal owner of all Fund shares held in the Separate Account. As
the owner, Hartford has the right to vote at the Funds' shareholder meetings.
However, to the extent required by federal securities laws or regulations,
Hartford will:
1. Vote all Fund shares attributable to a Contract according to
instructions received from the Contract Owner, and
2. Vote shares attributable to a Contract for which no voting
instructions are received in the same proportion as shares for
which instructions are received.
If any federal securities laws or regulations, or their present interpretation
change to permit Hartford to vote Fund shares in its own right, Hartford may
elect to do so.
Hartford will notify you of any Fund shareholders' meeting if the shares held
for your account may be voted at such meetings. Hartford will also send proxy
materials and a form of instruction by means of which you can instruct Hartford
with respect to the voting of the Fund shares held for your account.
In connection with the voting of Fund shares held by it, Hartford will arrange
for the handling and tallying of voting instructions received from Contract
Owners. Hartford as such, shall have no right, except as hereinafter provided,
to vote any Fund shares held by it hereunder which may be registered in its name
or the names of its
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nominees. Hartford will, however, vote the Fund shares held by it in accordance
with the instructions received from the Contract Owners for whose accounts the
Fund shares are held. If a Contract Owner desires to attend any meeting at
which shares held for the Contract Owner's benefit may be voted, the Contract
Owner may request Hartford to furnish a proxy or otherwise arrange for the
exercise of voting rights with respect to the Fund shares held for such Contract
Owner's account. In the event that the Contract Owner gives no instructions or
leaves the manner of voting discretionary, Hartford will vote such shares of
the appropriate Fund in the same proportion as shares of that Fund for which
instructions have been received. During the Annuity period under a Contract the
number of votes will decrease as the assets held to Fund Annuity benefits
decrease.
DISTRIBUTION OF THE CONTRACTS
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account. HSD
is a wholly-owned subsidiary of Hartford Life Insurance Company. HSD is
registered with the Commission under the Securities and Exchange Act of 1934 as
a Broker-Dealer and is a member of the National Association of Securities
Dealers, Inc. ("NASD").
The securities will be sold by insurance and variable annuity agents of
Hartford who are registered representatives of independent Broker-Dealers who
have entered into distribution agreements with HSD. These Broker-Dealers are
registered with the Commission under the Securities Exchange Act of 1934 as a
Broker-Dealer and are members of NASD.
Commissions will be paid by Hartford and will not be more than 6% of Premium
Payments.
From time to time, Hartford may pay or permit other promotional incentives, in
cash or credit or other compensation.
OTHER CONTRACTS OFFERED
In addition to the Contracts described in this Prospectus, it is contemplated
that other forms of group or individual Variable Annuities may be sold providing
benefits which vary in accordance with the investment experience of the Separate
Account.
CUSTODIAN OF SEPARATE ACCOUNT ASSETS
The assets of the Separate Account are held by Hartford under a safekeeping
arrangement.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party .
LEGAL COUNSEL
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Counsel with respect to Federal laws and regulations applicable to the issue and
sale of the Contracts and with respect to Connecticut law is Lynda Godkin,
Esquire, General Counsel and Secretary, Hartford Life Insurance Companies, P.O.
Box 2999, Hartford, Connecticut 06104-2999.
EXPERTS
The audited financial statements included in this prospectus and elsewhere in
the registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said reports. Reference is made to said report on the statutory-basis
financial statements of ITT Hartford Life and Annuity Insurance Company which
states the statutory-basis financial statements are presented in accordance with
statutory accounting practices prescribed or permitted by the National
Association of Insurance Commissioners and the State of Connecticut Insurance
Department, not presented in accordance with generally accepted accounting
principles. Reference is made to said report on the statutory-basis financial
statements of ITT Hartford Life and Annuity Insurance Company (the Depositor),
which includes an explanatory paragraph with respect to the change in valuation
method in determining aggregate reserves for future benefits in 1994, as
discussed in Note 1 of Notes to Statutory Financial Statements. The principal
business address of Arthur Andersen LLP is One Financial Plaza, Hartford,
Connecticut 06103.
ADDITIONAL INFORMATION
Inquiries will be answered by calling your representative or by writing:
ITT Hartford Life and Annuity Insurance Company
Attn: Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
Telephone: (800) 862-6668 (Contract Owners)
(800) 862-7155 (Investment Representatives)
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APPENDIX I
INFORMATION REGARDING TAX-QUALIFIED PLANS
The tax rules applicable to tax qualified contract owners, including
restrictions on contributions and distributions, taxation of distributions,
and tax penalties, vary according to the type of plan as well as the terms
and conditions of the plan itself. Various tax penalties may apply to
contributions in excess of specified limits, to distributions in excess of
specified limits, distributions which do not satisfy certain requirements
and certain other transactions with respect to qualified plans.
Accordingly, this summary provides only general information about the tax
rules associated with use of the Contract by a qualified plan. Contract
owners, plan participants, and beneficiaries are cautioned that the rights
and benefits of any person to benefits are controlled by the terms and
conditions of the plan regardless of the terms and conditions of the
Contract. Some qualified plans are subject to distribution and other
requirements which are not incorporated into Hartford's administrative
procedures. Owners, participants and beneficiaries are responsible for
determining that contributions, distributions and other transactions comply
with applicable law. Because of the complexity of these rules, owners,
participants and beneficiaries are encouraged to consult their own tax
advisers as to specific tax consequences.
A. QUALIFIED PENSION PLANS
Provisions of the Code permit eligible employers to establish pension or
profit sharing plans (described in Section 401(a) and 401(k), if
applicable, and exempt from taxation under Section 501(a) of the Code), and
Simplified Employee Pension Plans (described in Section 408(k)). Such
plans are subject to limitations on the amount that may be contributed, the
persons who may be eligible and the time when distributions must commence.
Corporate employers intending to use these contracts in connection with
such plans should seek competent advice.
B. TAX SHELTERED ANNUITIES UNDER SECTION 403(b)
Section 403(b) of the Code permits public school employees and employees of
certain types of charitable, educational and scientific organizations
specified in Section 501(c)(3) of the Code to purchase annuity contracts,
and, subject to certain limitations, exclude such contributions from gross
income. Generally, such contributions may not exceed the lesser of $9,500
or 20% of the employees "includable compensation" for his most recent full
year of employment, subject to other adjustments. Special provisions may
allow some employees to elect a different overall limitation.
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Tax-sheltered annuity programs under Section 403(b) are subject to a
PROHIBITION AGAINST DISTRIBUTIONS FROM THE CONTRACT ATTRIBUTABLE TO
CONTRIBUTIONS MADE PURSUANT TO A SALARY REDUCTION AGREEMENT unless such
distribution is made:
(1) after the participating employee attains age 59 1/2;
(2) upon separation from service;
(3) upon death or disability; or
(4) in the case of hardship.
The above restrictions apply to distributions of employee contributions
made after December 31, 1988, earnings on those contributions, and earnings
on amounts attributable to employee contributions held as of December 31,
1988. They do not apply to distributions of any employer or other
after-tax contributions, employee contributions made on or before December
31, 1988, and earnings credited to employee contributions before December
31, 1988.
C. DEFERRED COMPENSATION PLANS UNDER SECTION 457
Employees and independent contractors performing services for such
employers may contribute on a before tax basis to the Deferred Compensation
Plan of their employer in accordance with the employer's plan and Section
457 of the Code. Section 457 places limitations on contributions to
Deferred Compensation Plans maintained by a State ("State" means a State, a
political sub-division of a State, and an agency or instrumentality of a
State or political sub-division of a State) or other tax-exempt
organization. Generally, the limitation is 33 1/3% of includable
compensation (typically 25% of gross compensation) or $7,500 (indexed),
whichever is less. The plan may also provide for additional "catch-up"
deferrals during the three taxable years ending before a Participant
attains normal retirement age.
An employee electing to participate in a Deferred Compensation Plan should
understand that his or her rights and benefits are governed strictly by the
terms of the plan and that the employer is the legal owner of any contract
issued with respect to the plan . The employer, as owner of the
contract(s), retains all voting and redemption rights which may accrue to
the contract(s) issued with respect to the plan. The participating
employee should look to the terms of his or her plan for any charges in
regard to participating therein other than those disclosed in this
Prospectus. Participants should also be aware that effective August 20,
1996, the Small Business Job Protection Act of 1996 requires that all
assets and income of an eligible Deferred Compensation Plan established by
a governmental employer which is a State, a political subdivision of a
State, or any agency or instrumentality of a State or political subdivision
of a State, must be held in trust (or under certain specified annuity
contracts or custodial accounts) for the exclusive benefit of Participants
and their Beneficiaries. Special transition rules apply to such
<PAGE>
-53-
governmental Deferred Compensation Plans already in existence on August 20,
1996, and provide that such plans need not establish a trust before January
1, 1999. However, this requirement does not apply to amounts under a
Deferred Compensation Plan of a tax-exempt (non-governmental) organization
and such amounts will be subject to the claims of such tax-exempt
employer's general creditors.
In general, distributions from a Section 457 Deferred Compensation Plan
are prohibited unless made after the participating employee attains the age
specified in the plan, separates from service, dies, or suffers an
unforeseeable financial emergency. Present federal tax law does not allow
tax-free transfers or rollovers for amounts accumulated in a Section 457
plan except for transfers to other Section 457 plans in limited cases.
D. INDIVIDUAL RETIREMENT ANNUITIES UNDER SECTION 408
Section 408 of the Code permits eligible individuals to establish
individual retirement programs through the purchase of Individual
Retirement Annuities ("IRAs"). IRAs are subject to limitations on the
amount that may be contributed, the contributions that may be deducted from
taxable income, the persons who may be eligible and the time when
distributions may commence. Also, distributions from certain qualified
plans may be "rolled-over" on a tax-deferred basis into an IRA.
E. TAX PENALTIES
Distributions from retirement plans are generally taxed under Section 72 of
the Code. Under these rules, a portion of each distribution may be
excludable from income. The excludable amount is the portion of the
distribution which bears the same ratio as the after-tax contributions bear
to the expected return.
1. PREMATURE DISTRIBUTION
Distributions from a qualified plan before the Participant attains age
59 1/2 are generally subject to an additional tax equal to 10% of the
taxable portion of the distribution. The 10% penalty does not apply
to distributions made after the employee's death, on account of
disability, for eligible medical expenses and distributions in the
form of a life annuity and, except in the case of an IRA, certain
distributions after separation from service at or after age 55 . A
life annuity is defined as a scheduled series of substantially equal
periodic payments for the life or life expectancy of the Participant
(or the joint lives or life expectancies of the Participant and
Beneficiary).
2. MINIMUM DISTRIBUTION TAX
<PAGE>
-54-
If the amount distributed is less than the minimum required
distribution for the year, the Participant is subject to a 50% tax on
the amount that was not properly distributed.
An individual's interest in a retirement plan must generally be
distributed, or begin to be distributed, not later than April 1 of the
calendar year following the later of (i) the calendar year in which
the individual attains age 70 1/2 or (ii) the calendar year in which
the individual retires from service with the employer sponsoring the
plan ("required beginning date"). However, the required beginning
date for an individual who is a five (5) percent owner (as defined in
the Code), or who is the owner of an IRA, is April 1 of the calendar
year following the calendar year in which the individual attains age
70 1/2. The entire interest of the Participant must be distributed
beginning no later than this required beginning date over a period
which may not extend beyond a maximum of the life expectancy of the
Participant and a designated Beneficiary. Each annual distribution
must equal or exceed a "minimum distribution amount" which is
determined by dividing the account balance by the applicable life
expectancy. This account balance is generally based upon the account
value as of the close of business on the last day of the previous
calendar year. In addition, minimum distribution incidental benefit
rules may require a larger annual distribution.
If an individual dies before reaching his or her required beginning
date, the individual's entire interest must generally be distributed
within five years of the individual's death. However, this rule will
be deemed satisfied, if distributions begin before the close of the
calendar year following the individual's death to a designated
Beneficiary (or over a period not extending beyond the life expectancy
of the beneficiary). If the Beneficiary is the individual's surviving
spouse, distributions may be delayed until the individual would have
attained age 70 1/2.
If an individual dies after reaching his or her required beginning
date or after distributions have commenced, the individual's interest
must generally be distributed at least as rapidly as under the method
of distribution in effect at the time of the individual's death.
3. EXCESS DISTRIBUTION TAX
If the aggregate distributions from all IRAs and certain other
qualified plans in a calendar year exceed the greater of (i) $150,000,
or (ii) $112,500 as indexed for inflation, a penalty tax of 15% is
generally imposed on the excess portion of the distribution.
4. WITHHOLDING
<PAGE>
-55-
Periodic distributions from a qualified plan lasting for a period of
ten or more years are generally subject to voluntary income tax
withholding. The recipient of periodic distributions may generally
elect not to have withholding apply or to have income taxes withheld
at a different rate by providing a completed election form.
Otherwise, the amount withheld on such distributions is determined at
the rate applicable to wages as if the recipient were married claiming
three exemptions.
Nonperiodic distributions from an IRA are subject to income tax
withholding at a flat 10% rate. The recipient may elect not to have
withholding apply.
Nonperiodic distributions from other qualified plans are generally
subject to mandatory income tax withholding at the flat rate of 20%
unless such distributions are:
(1) the non-taxable portion of the distribution;
(2) required minimum distributions;
(3) eligible rollover distributions.
Eligible rollover distributions are direct payments to an IRA or to
another qualified employer plan.
In general, distributions from plans described in Section 457 of the
Code are subject to regular wage withholding rules.
<PAGE>
-56-
THIS FORM MUST BE COMPLETED FOR ALL TAX SHELTERED ANNUITIES.
SECTION 403(b)(11) ACKNOWLEDGMENT FORM
The Hartford Variable Annuity Contract which you have recently purchased is
subject to certain restrictions imposed by the Tax Reform Act of 1986.
Contributions to the Contract after December 31, 1989 and any increases in cash
value after December 31, 1988 may not be distributed to you unless you have:
a. attained age 59-1/2
b. terminated employment
c. died, or
d. become disabled.
Distributions of post December 31, 1988 contributions may also be made if you
have experienced a financial hardship.
Also, there may be a 10% penalty tax for distributions made because of financial
hardship or separation from service.
Also, please be aware that your 403(b) Plan may also offer other financial
alternatives other than the Hartford Variable Annuity. Please refer to your
Plan.
Please complete the following and return to:
ITT Hartford Life and Annuity Insurance Company
Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
- ----------------------------------------------------
Name of Contract Owner/Participant
Address
City or Plan/School District
Date:
<PAGE>
-57-
TABLE OF CONTENTS TO
STATEMENT OF ADDITIONAL INFORMATION
Section Page No.
- ------- --------
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . .
DESCRIPTION OF ITT HARTFORD LIFE AND
ANNUITY INSURANCE COMPANY. . . . . . . . . . . . . . . . . . . .
SAFEKEEPING OF ASSETS. . . . . . . . . . . . . . . . . . . . . . .
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . .
DISTRIBUTION OF CONTRACTS. . . . . . . . . . . . . . . . . . . . .
ANNUITY/PAYOUT PERIOD . . . . . . . . . . . . . . . . . . . . . .
Annuity Payments. . . . . . . . . . . . . . . . . . . . . . . .
The Annuity Unit and Valuation . . . . . . . . . . . . . . . .
Determination of Payment Amount . . . . . . . . . . . . . . . .
CALCULATION OF YIELD AND RETURN. . . . . . . . . . . . . . . . . .
PERFORMANCE COMPARISONS. . . . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
-58-
------------------------------------
To Obtain a Statement of Additional Information, please complete the form below
and mail to:
ITT Hartford Life and Annuity Insurance Company
Attn: Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
Please send a Statement of Additional Information for Separate Account Six to me
at the following address:
- --------------------------------------
Name
- --------------------------------------
Street
- -------------------------------------------
City/State Zip Code
------------------------------------
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT SIX
This Statement of Additional Information is not a Prospectus. The information
contained herein should be read in conjunction with the Prospectus.
To obtain a Prospectus, send a written request to ITT Hartford Life and Annuity
Insurance Company, Attn: Annuity Marketing Services, P.O. Box 5085, Hartford,
CT 06104-5085.
Date of Prospectus: May 1, 1997
Date of Statement of Additional Information: May 1, 1997
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
INTRODUCTION .....................................................
DESCRIPTION OF ITT HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY ..............................................
SAFEKEEPING OF ASSETS ............................................
INDEPENDENT PUBLIC ACCOUNTANTS ...................................
DISTRIBUTION OF CONTRACTS ........................................
CALCULATION OF YIELD AND RETURN ..................................
PERFORMANCE COMPARISONS ..........................................
FINANCIAL STATEMENTS .............................................
<PAGE>
INTRODUCTION
The tax deferred Woodward Variable Annuity Contracts described in the Prospectus
are designed to provide Annuity benefits to individuals who have established or
wish to establish retirement programs which may or may not qualify for special
Federal income tax treatment. The Annuitant under these Contracts may receive
Annuity benefits in accordance with the Annuity option selected and the
retirement program, if any, under which the Contracts have been purchased.
Annuity payments under a Contract will begin on a particular future date which
may be selected at any time under the Contract or automatically when the
Annuitant reaches age 90 except in certain states where deferral past age 85 is
not permitted. There are several alternative annuity payment options available
under the Contract (see "Optional Forms of Annuity," page ___ of the
prospectus).
The Premium Payments under a Contract, less any applicable Premium Taxes,
will be applied to the Separate Account and/or the Fixed Account.
Accordingly, the net Premium Payment under the Contract will be applied to
purchase interests in one or more of the following Portfolios of the Pegasus
Variable Annuity Fund and the Putnam Capital Manager Trust, open-end
diversified series investment companies: Pegasus Bond Fund, Pegasus Mid Cap
Opportunity Fund, Pegasus Growth and Value Fund, Pegasus Growth Fund, Pegasus
Intrinsic Value Fund, Putnam VT Global Growth Fund, Putnam VT Global Asset
Allocation Fund, Putnam VT Diversified Income Fund, Putnam VT Growth and
Income Fund, Putnam VT International Growth Fund, Putnam VT Money Market
Fund, Putnam VT New Opportunities Fund, and Putnam VT U.S. Government and
High Quality Bond Fund.
Shares of the Portfolios are purchased by the Separate Account without the
imposition of any additional sales charge. The value of a Contract depends on
the value of the shares of the Portfolio held by the Separate Account pursuant
to that Contract. As a result, the Contract Owner bears the investment risk
since market value of the shares may increase or decrease.
The Contracts provide that in the event the Annuitant dies before the selected
Annuity Commencement Date, the Contingent Annuitant will become the Annuitant.
If the Annuitant dies before the Annuity Commencement Date and there is no
designated Contingent Annuitant, or the Contingent Annuitant predeceases the
Annuitant, or if the Contract Owner dies before the Annuity Commencement Date,
the Beneficiary will receive the Contract Value determined on the date of
receipt of due proof of death by ITT Hartford Life and Annuity Insurance Company
("Hartford") in its Home Office. If, upon death prior to the Annuity
Commencement Date, the Annuitant or Contract Owner, as applicable, had not
attained his 90th birthday, the Beneficiary will receive the greater of (a) the
Contract Value determined as of the day written proof of death of such person is
received by Hartford, or (b) 100% of the total Premium Payments made to such
Contract, reduced by any prior surrenders, or (c) the Contract Value on the
Specified Contract Anniversary immediately preceding the date of death,
increased by the dollar amount of any Premium Payments made and reduced by the
dollar amount of any partial surrenders since the immediately preceding
Specified Contract Anniversary.
<PAGE>
-2-
DESCRIPTION OF ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
ITT Hartford Life and Annuity Insurance Company ("Hartford") is a stock life
insurance company engaged in the business of writing life insurance and
annuities, both individual and group, in all states of the United States and
the District of Columbia, except New York. On January 1, 1998, Hartford's
name will change to Hartford Life and Annuity Insurance Company. Hartford was
originally incorporated under the laws of Wisconsin on January 9, 1956, and was
subsequently redomiciled to Connecticut. Its offices are located in Simsbury,
Connecticut; however, its mailing address is P.O. Box 2999, Hartford, CT
06104-2999. Hartford is a subsidiary of Hartford Fire Insurance Company, one
of the largest multiple lines insurance carriers in the United States. Hartford
is ultimately owned by ITT Hartford Group, Inc., a Delaware corporation.
Subject to shareholder approval on May 2, 1997, the name of ITT Hartford Group,
Inc. will change to The Hartford Financial Services Group, Inc.
Hartford is rated A+ (superior) by A.M. Best and Company, Inc., on the basis of
its financial soundness and operating performance. Hartford is rated AA by
Standard & Poor's and AA+ by Duff and Phelps on the basis of its claims paying
ability. These ratings do not apply to the investment performance of the Sub-
Accounts of the Separate Account. The ratings apply to Hartford's ability to
meet its insurance obligations, including those described in this Prospectus.
SAFEKEEPING OF ASSETS
Title to the assets of the Separate Account is held by Hartford. These
assets are kept physically segregated and are held separate and apart from
Hartford's general corporate assets. Records are maintained of all purchases
and redemptions of Fund shares held in each of the Sub-Accounts.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited financial statements included in this prospectus and elsewhere in
the registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm
as experts in giving said reports. Reference is made to said report on the
statutory-basis financial statements of ITT Hartford Life & Annuity Insurance
Company which states the statutory-basis financial statements are presented in
accordance with statutory accounting practices prescribed or permitted by the
National Association of Insurance Commissioners and the State of Connecticut
Insurance Department, not presented in accordance with generally accepted
accounting principles. Reference is made to said report on the statutory-basis
financial statements of ITT Hartford Life & Annuity Insurance Company (the
Depositor), which includes an explanatory paragraph with respect to the change
in valuation method in determining aggregate reserves for future benefits in
1994, as discussed in Note 1 of Notes to Statutory Financial Statements. The
principal business address of Arthur Andersen LLP is One Financial Plaza,
Hartford, Connecticut 06103.
<PAGE>
-3-
DISTRIBUTION OF CONTRACTS
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account and
will offer the Contracts on a continous basis. HSD is a wholly-owned subsidiary
of Hartford Life Insurance Company. The principal business address of HSD is
the same as Hartford.
The securities will be sold by insurance and Variable Annuity agents of
Hartford who are registered representatives of independent Broker-Dealers who
have entered into distribution agreements with HSD. HSD is registered with the
Securities and Exchange Commission under the Securities Exchange Act of 1934 as
a Broker-Dealer and is a member of the National Association of Securities
Dealers, Inc. ("NASD").
CALCULATION OF YIELD AND RETURN
YIELD OF THE PCM MONEY MARKET FUND SUB-ACCOUNT. As summarized in the
Prospectus under the heading "Performance Related Information," the yield of the
PCM Money Market Fund Sub-Account for a seven-day period (the "base period")
will be computed by determining the "net change in value" of a hypothetical
account having a balance of one unit at the beginning of the period, dividing
the net change in account value by the value of the account at the beginning of
the base period to obtain the base period return, and multiplying the base
period return by 365/7 with the resulting yield figure carried to the nearest
hundredth of one percent. Net changes in value of a hypothetical account will
include net investment income of the account (accrued dividends as declared by
the underlying funds, less expense and Contract charges of the account) for the
period, but will not include realized gains or losses or unrealized appreciation
or depreciation on the underlying fund shares.
The effective yield will be calculated by compounding the base period return
by adding 1, raising the sum to a power equal to 365/7 and subtracting 1 from
the result, according to the following formula:
Effective Yield = [(Base Period Return + 1) 365/7] - 1
The PCM Money Market Fund Sub-Account's yield and effective yield will vary in
response to fluctuations in interest rates and in the expenses of the
Sub-Account.
The PCM Diversified Income Fund and the PCM U.S. Government and High Quality
Bond Fund Sub-Accounts may advertise yield in addition to total return. The
yield will be computed in the following manner: The net investment income per
unit earned during a recent one month period is divided by the unit value on the
first day of the period. This figure reflects the recurring charges at the
Separate Account level including the Contract Maintenance Fee. For the fiscal
year ended December 31, 1996 the 30 day yield quotations for these Sub-Accounts
were as follows: 5.91% for the PCM Diversified Income Fund Sub-Account and 4.55%
for the PCM U.S. Government and High Quality Bond Fund Sub-Account,
respectively.
<PAGE>
-4-
CALCULATION OF TOTAL RETURN. As summarized in the Prospectus under the heading
"Performance Related Information", total return is a measure of the change in
value of an investment in a Sub-Account over the period covered. The formula
for total return used herein includes three steps: (1) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of units owned at the end of the period by the unit
value per unit on the last trading day of the period; (2) assuming redemption at
the end of the period and deducting any applicable contingent deferred sales
charge and (3) dividing this account value for the hypothetical investor by the
initial $1,000 investment and annualizing the result for periods of less than
one year. Total return will be calculated for one year, five years, and ten
years or some other relevant periods if a Sub-Account has not been in existence
for at least ten years.
For the fiscal year ended December 31, 1996, the standardized average annual
total return quotations for the Sub-Accounts listed below were as follows:
Since
Sub-Accounts Inception 1 Year 5 Year 1 Year
- -------------------------------------------------------------------------------
Pegasus Growth and Value Fund 13.42% 8.11% n/a n/a
Pegasus Mid Cap Opportunity Fund 12.24% 13.78% n/a n/a
Pegasus Growth Fund 11.06% 6.86% n/a n/a
PCM Global Growth Fund 5.42% 6.58% 7.24% n/a
PCM Global Asset Allocation Fund 7.27% 5.01% 7.01% n/a
PCM Diversified Income Fund 0.88% (1.70)% n/a n/a
PCM U.S. Government and High Quality Bond Fund 4.70% (8.01)% 2.35% n/a
<PAGE>
-5-
For the fiscal year ended December 31, 1996, the non-standardized annualized
total return quotations for the Sub-Accounts listed below were as follows:
Since
Sub-Accounts Inception 1 Year 5 Year 10 Year
- --------------------------------------------------------------------------------
Pegasus Growth and Value Fund 19.72% 17.11% n/a n/a
Pegasus Mid Cap Opportunity Fund 18.63% 22.78% n/a n/a
Pegasus Growth Fund 17.41% 15.86% n/a n/a
PCM Global Growth Fund 8.56% 15.58% 10.55% n/a
PCM Global Asset Allocation Fund 9.74% 14.01% 10.36% n/a
PCM Diversified Income Fund 5.96% 7.30% n/a n/a
PCM U.S. Government and High Quality Bond Fund 7.23% 0.99% n/a n/a
At any time in the future, yields and total return may be higher or lower than
past yields and there can be no assurance that any historical results will
continue.
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. The total return and yield may also be used to compare
the performance of the Sub-Accounts against certain widely acknowledged outside
standards or indices for stock and bond market performance. Index performance
is not representative of the performance of the Sub-Account to which it is
compared and is not adjusted for commissions and other costs. Portfolio
holdings of the Sub-Account will differ from those of the index to which it is
compared. Performance comparison indices include the following:
The Consumer Price Index, prepared by the U.S. Bureau of Labor Statistics, is a
commonly used measure of the rate of inflation. The index shows the average
change in the cost of selected consumer goods and services and does not
represent a return on an investment vehicle.
The Dow Jones Industrial Average is an unmanaged list of 30 common stocks
frequently used as a general measure of stock market performance. Its
performance figures reflect changes of market prices and reinvestment of all
distributions.
Lehman Brothers Corporate Bond Index is an unmanaged list of publicly issued,
fixed-rate, non-convertible investment-grade domestic corporate debt securities
frequently used as a general measure of the performance of fixed-income
securities. The average quality of bonds included in the index may be higher
than the average quality of those bonds in which High Yield Fund customarily
invests. The index does not include bonds
<PAGE>
-6-
in certain of the lower rating classifications in which the Fund may invest.
The performance figures of the index reflect changes in market prices and
reinvestment of all interest payments.
The Lehman Brothers Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted
issues are not included in the SL Government Index.
The Lehman Brothers Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized rating
agency. The index does not include bonds in certain of the lower-rating
classifications in which High Yield Fund invests. Its performance figures
reflect changes in market prices and reinvestment of all interest payments.
Morgan Stanley Capital International World Index is an unmanaged list of
approximately 1,450 equity securities listed on the stock exchanges of the
United States, Europe, Canada, Australia, New Zealand and the Far East, with all
values expressed in U.S. dollars. Performance figures reflect changes in market
prices and reinvestment of distributions net of withholding taxes. The
securities in the index change over time to maintain representativeness.
The NASDAQ-OTC Industrial Average (The "NASDAQ Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of approximately 3,500 stocks relative to the base measure of 100.00 on
February 5, 1971. The NASDAQ Index is composed entirely of common stocks of
companies traded over-the-counter and often through the National Association of
Securities Dealers Automated Quotations ("NASDAQ") system. Only those
over-the-counter stocks having only one market maker or traded on exchanges are
excluded. Its performance figures reflect changes of market prices but do not
reflect reinvestment of cash dividends.
Salomon Brothers Long-Term High-Grade Corporate Bond Index is an unmanaged list
of publicly traded corporate bonds having a rating of at least AA by Standard &
Poor's or Aa by Moody's and is frequently used as general measure of the
performance of fixed-income securities. The average quality of bonds included
in the index may be higher than the average quality of those bonds in which a
Fund may customarily invests. The index does not include bonds in certain of
the lower rating classifications in which the Fund may invest. Performance
figures for the index reflect changes of market prices and reinvestment of all
distributions.
<PAGE>
The Salomon Brothers 7-10 Year Government Bond Index is an unmanaged list of
U.S. Government and government agency securities with maturities of 7 to 10
years. Performance figures for the index reflect changes of market prices and
reinvestment of all interest payments.
The Standard & Poor's Composite Index of 500 stocks (the "S&P 500") is a market
value-weighted and unmanaged index showing changes in the aggregate market value
of 500 stocks relative to the base period 1941-43. The S&P 500 is composed
almost entirely of common stocks of companies listed on the New York Stock
Exchange, although the common stocks of a few companies listed on the American
Stock Exchange or traded over-the-counter are included. The 500 companies
represented include 400 industrial, 60 transportation and 40 financial services
concerns. The S&P 500 represents about 80% of the market value of all issues
traded on the New York Stock Exchange. Its performance figures reflect changes
of market prices and reinvestment of all regular cash dividends.
The Standard & Poor's 40 Utilities Index is unmanaged list of 40 utility stocks.
The Index assumes reinvestment of all distributions and reflects changes in
market prices but does not take into account brokerage commissions or other
fees.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
ITT Hartford Life and Annuity Insurance Company:
We have audited the accompanying statutory-basis balance sheets of ITT Hartford
Life and Annuity Insurance Company (a Connecticut Corporation and wholly owned
subsidiary of Hartford Life Insurance Company) (the Company) as of December 31,
1996 and 1995, and the related statutory-basis statements of income, changes in
capital and surplus, and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
statutory-basis financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The Company presents its financial statements in conformity with statutory
accounting practices as described in Note 1 of notes to statutory-basis
financial statements. When statutory-basis financial statements are presented
for purposes other than for filing with a regulatory agency, generally accepted
auditing standards require that an auditors' report on them state whether they
are presented in conformity with generally accepted accounting principles. The
accounting practices used by the Company vary from generally accepted accounting
principles as explained and quantified in Note 1. In our opinion, because the
differences in accounting practices as described in Note 1 are material, the
statutory-basis financial statements referred to above do not present fairly, in
accordance with generally accepted accounting principles, the financial position
of the Company as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996.
However, in our opinion, the statutory-basis financial statements referred to
above present fairly, in all material respects, the financial position of the
Company as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 1996
in conformity with statutory accounting practices as described in Note 1.
As discussed in Note 1 of notes to statutory financial statements, during 1994,
the Company changed its valuation method in determining aggregate reserves for
future benefits.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 10, 1997
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATUTORY BASIS STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
($000)
<S> <C> <C> <C>
Revenues
Premiums and Annuity Considerations.... $ 250,244 $ 165,792 $ 442,173
Annuity and Other Fund Deposits........ 1,897,347 1,087,661 608,685
Net Investment Income.................. 98,441 78,787 29,012
Commissions and Expense Allowances on
Reinsurance Ceded..................... 370,637 183,380 154,527
Reserve Adjustment on Reinsurance
Ceded................................. 3,864,395 1,879,785 1,266,926
Other Revenues......................... 161,906 140,796 41,857
---------- ---------- ----------
Total Revenues....................... 6,642,970 3,536,201 2,543,180
---------- ---------- ----------
Benefits and Expenses
Death and Annuity Benefits............. 60,111 53,029 7,948
Surrenders and Other Benefit
Payments.............................. 276,720 221,392 181,749
Commissions and Other Expenses......... 491,720 236,202 186,303
Increase in Reserves for Future
Benefits.............................. 27,351 94,253 416,748
Increase in Liability for Premium and
Other Deposit Funds................... 207,156 460,124 182,934
Net Transfers to Separate Accounts..... 5,492,964 2,414,669 1,541,419
---------- ---------- ----------
Total Benefits and Expenses.......... 6,556,022 3,479,669 2,517,101
---------- ---------- ----------
Net Gain from Operations Before Federal
Income Tax Expense...................... 86,948 56,532 26,079
Federal Income Tax Expense............. 19,360 14,048 24,038
---------- ---------- ----------
Net Gain from Operations................. 67,588 42,484 2,041
Net Realized Capital Gains (Losses).... 407 374 (2)
---------- ---------- ----------
Net Income............................... $ 67,995 $ 42,858 $ 2,039
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATUTORY BASIS BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------
1996 1995
----------- ----------
<S> <C> <C>
($000)
Assets
Bonds........................................... $ 1,268,480 $1,226,489
Common Stocks................................... 44,996 39,776
Policy Loans.................................... 28,853 22,521
Cash and Short-Term Investments................. 176,830 173,304
Other Invested Assets........................... 2,858 13,432
----------- ----------
Total Cash and Invested Assets................ 1,522,017 1,475,522
----------- ----------
Investment Income Due and Accrued............... 14,555 18,021
Premium Balances Receivable..................... 373 402
Receivables from Affiliates..................... 257 8,182
Other Assets.................................... 19,099 25,907
Separate Account Assets......................... 14,619,324 7,324,910
----------- ----------
Total Assets.................................. $16,175,625 $8,852,944
----------- ----------
----------- ----------
Liabilities
Aggregate Reserves for Future Benefits.......... $ 571,970 $ 542,082
Policy and Contract Claims...................... 6,806 8,223
Liability for Premium and Other Deposit Funds... 1,155,143 948,361
Asset Valuation Reserve......................... 7,442 8,010
Payable to Affiliates........................... 10,022 3,682
Other Liabilities............................... (498,195) (220,658)
Separate Account Liabilities.................... 14,619,324 7,324,910
----------- ----------
Total Liabilities............................. 15,872,512 8,614,610
----------- ----------
Capital and Surplus
Common Stock.................................... 2,500 2,500
Gross Paid-In and Contributed Surplus........... 226,043 226,043
Unassigned Funds................................ 74,570 9,791
----------- ----------
Total Capital and Surplus..................... 303,113 238,334
----------- ----------
Total Liabilities and Capital and Surplus....... $16,175,625 $8,852,944
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATUTORY BASIS STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
--------- --------- --------
<S> <C> <C> <C>
($000)
Capital and Surplus -- Beginning of
Year................................... $ 238,334 $ 91,285 $ 88,693
--------- --------- --------
Net Income............................ 67,995 42,858 2,039
Change in Net Unrealized Capital
(Losses) Gains on Common Stocks...... (5,171) 1,709 (133)
Change in Asset Valuation Reserve..... 568 (5,588) (1,356)
Change in Non-Admitted Assets......... 1,387 (1,944) (8,599)
Change in Reserve (Valuation Basis)... -- -- 10,659
Aggregate Write-ins for Surplus....... -- 8,080 (18)
Dividends to Shareholder.............. -- (10,000) --
Paid-In Surplus....................... -- 111,934 --
--------- --------- --------
Change in Capital and Surplus....... 64,779 147,049 2,592
--------- --------- --------
Capital and Surplus -- End of Year...... $ 303,113 $ 238,334 $ 91,285
--------- --------- --------
--------- --------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATUTORY BASIS STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
($000)
Operations
Premiums, Annuity Considerations and
Other Fund Deposits.................. $ 2,147,627 $ 1,253,511 $ 1,050,493
Net Investment Income................. 106,178 78,328 24,519
Other Revenues........................ 4,396,892 2,253,466 1,515,700
----------- ----------- -----------
Total Revenues...................... 6,650,697 3,585,305 2,590,712
----------- ----------- -----------
Benefits Paid......................... 338,998 277,965 181,205
Federal Income Taxes Paid on
Operations........................... 28,857 208,423 20,634
Other Expenses........................ 6,254,139 2,664,385 1,832,905
----------- ----------- -----------
Total Benefits and Expenses......... 6,621,994 3,150,773 2,034,744
----------- ----------- -----------
Net Cash from Operations............ 28,703 434,532 555,968
----------- ----------- -----------
Proceeds from Investments
Bonds................................. 871,019 287,941 87,747
Common Stocks......................... 72,100 52 --
Other................................. 10 28 40
----------- ----------- -----------
Total Investment Proceeds........... 943,129 288,021 87,787
----------- ----------- -----------
Taxes (Paid) Received on Capital (Gains)
Losses................................. (936) (226) 96
Paid-In Surplus......................... -- 111,934 --
Other Cash Provided..................... 41,998 28,199 30,554
----------- ----------- -----------
Total Proceeds...................... 1,012,894 862,460 674,405
----------- ----------- -----------
Cost of Investments Acquired
Bonds................................. 914,523 720,521 595,181
Common Stocks......................... 82,495 35,794 808
Miscellaneous Applications............ 130 2,146 2,523
----------- ----------- -----------
Total Investments Acquired.......... 997,148 758,461 598,512
----------- ----------- -----------
Other Cash Applied
Dividends Paid to Shareholders........ -- 10,000 --
Other................................. 12,220 5,007 24,813
----------- ----------- -----------
Total Other Cash Applied............ 12,220 15,007 24,813
----------- ----------- -----------
Total Applications................ 1,009,368 773,468 623,325
----------- ----------- -----------
Net Change in Cash and Short-Term
Investments............................ 3,526 88,992 51,080
Cash and Short-Term Investments,
Beginning of Year...................... 173,304 84,312 33,232
----------- ----------- -----------
Cash and Short-Term Investments, End of
Year................................... $ 176,830 $ 173,304 $ 84,312
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
- ---------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
ITT Hartford Life and Annuity Insurance Company ("ILA" or "the Company"),
formerly known as ITT Life Insurance Corporation, is a wholly owned subsidiary
of Hartford Life Insurance Company ("HLIC"), which is an indirect subsidiary of
Hartford Life, Inc. ("Hartford Life"), which is ultimately owned by ITT Hartford
Group, Inc. ("The Hartford"), formerly a wholly owned subsidiary of ITT
Corporation ("ITT"). On February 10, 1997, The Hartford announced its plans to
sell up to 20% of Hartford Life to the public. On December 19, 1995, ITT
Corporation distributed all the outstanding shares of The Hartford to ITT
shareholders of record in an action known herein as the "Distribution". As a
result of the Distribution, The Hartford became an independent, publicly traded
company. During 1996, ILA re-domesticated from the State of Wisconsin to the
State of Connecticut.
ILA offers a complete line of ordinary and universal life insurance,
individual annuities and certain supplemental accident and health benefit
coverages.
BASIS OF PRESENTATION
The accompanying ILA statutory-basis financial statements were prepared in
conformity with statutory accounting practices prescribed or permitted by the
National Association of Insurance Commissioners ("NAIC") and the State of
Connecticut Department of Insurance.
The preparation of financial statements in conformity with statutory
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.
Statutory accounting practices and generally accepted accounting principles
("GAAP") differ in certain significant respects. These differences principally
involve:
(1) treatment of policy acquisition costs (commissions, underwriting and
selling expenses, premium taxes, etc.) which are charged to expense when
incurred for statutory purposes rather than on a pro-rata basis over the
expected life of the policy;
(2) recognition of premium revenues, which for statutory purposes are
generally recorded as collected or when due during the premium paying period
of the contract and which for GAAP purposes, generally, for universal life
policies and investment products, are only recorded for policy charges for
the cost of insurance, policy administration and surrender charges assessed
to policy account balances. Also, for GAAP purposes, premiums for
traditional life insurance policies are recognized as revenues when they are
due from policyholders and the retrospective deposit method is used in
accounting for universal life and other types of contracts where the payment
pattern is irregular or surrender charges are a significant source of
profit. The prospective deposit method is used for GAAP purposes where
investment margins are the primary source of profit;
(3) development of liabilities for future policy benefits, which for
statutory purposes predominantly use interest rate and mortality assumptions
prescribed by the NAIC which may vary considerably from interest and
mortality assumptions used for GAAP financial reporting;
(4) providing for income taxes based on current taxable income (tax return)
only for statutory purposes, rather than establishing additional assets or
liabilities for deferred Federal income taxes to recognize the tax effect
related to reporting revenues and expenses in different periods for
financial reporting and tax return purposes;
(5) excluding certain GAAP assets designated as non-admitted assets (e.g.,
past due agents' balances and furniture and equipment) from the balance
sheet for statutory purposes by directly charging surplus;
(6) establishing accruals for post-retirement and post-employment health
care benefits on an option basis, using a twenty year phase-in approach,
whereas GAAP liabilities are required to be recorded;
(7) establishing a formula reserve for realized and unrealized losses due to
default and equity risk associated with certain invested assets (Asset
Valuation Reserve); as well as the deferral and amortization of realized
gains and losses, motivated by changes in interest rates during the period
the asset is held, into income over the remaining life to maturity of the
asset sold (Interest Maintenance Reserve); whereas on a GAAP basis, no such
formula reserve is required and
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
realized gains and losses are recognized in the period the asset is sold;
(8) the reporting of reserves and benefits net of reinsurance ceded, where
risk transfer has taken place; whereas on a GAAP basis, reserves are
reported gross of reinsurance with reserve credits presented as recoverable
assets;
(9) the reporting of fixed maturities at amortized cost, whereas GAAP
requires that fixed maturities be classified as "held-to-maturity",
"available-for-sale" or "trading", based on the Company's intentions with
respect to the ultimate disposition of the security and its ability to
affect those intentions. The Company's fixed maturities were classified on a
GAAP basis as "available-for- sale" and accordingly, those investments were
reflected at fair value with the corresponding impact included as a
component of Stockholder's Equity designated as "Net unrealized capital
(loss)/ gain on investments, net of tax". For statutory reporting purposes,
Net Unrealized Capital Losses (Gains) on Common Stocks represent unrealized
losses (gains) on common stock reported at fair value; and
(10) separate account liabilities are valued on the Commissioner's Annuity
Reserve Valuation Method ("CARVM"), with the surplus generated recorded as a
liability to the general account (and a contra liability on the balance
sheet of the general account), whereas GAAP liabilities are valued at
account value.
As of and for the years ended December 31, 1996, 1995 and 1994, the
significant differences between statutory and GAAP basis net income and capital
and surplus for the Company are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
GAAP Net Income................ $ 41,202 $ 38,821 $ 23,295
Amortization and deferral of
policy acquisition costs...... (341,572) (174,341) (117,863)
Change in unearned revenue
reserve....................... 55,504 32,300 24,494
Deferred taxes................. 2,090 2,801 (9,267)
Separate accounts.............. 306,978 146,635 75,941
Other, net..................... 3,793 (3,358) 5,439
----------- ----------- -----------
Statutory Net Income........... $ 67,995 $ 42,858 $ 2,039
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
GAAP Capital and Surplus....... $ 503,887 $ 455,541 $ 199,785
Deferred policy acquisition
costs......................... (938,114) (596,542) (422,201)
Unearned revenue reserve....... 130,148 74,644 42,344
Deferred taxes................. 12,823 1,493 13,257
Separate accounts.............. 640,101 333,123 186,488
Asset valuation reserve........ (7,442) (8,010) (2,422)
Unrealized gain (loss) on
bonds......................... 5,112 (1,696) 21,918
Adjustment relating to Lyndon
contribution (see Note 3)..... (41,277) (41,277) --
Other, net..................... (2,125) 21,058 52,116
----------- ----------- -----------
Statutory Capital and
Surplus....................... $ 303,113 $ 238,334 $ 91,285
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
AGGREGATE RESERVES AND LIABILITIES FOR PREMIUM AND OTHER DEPOSIT FUNDS
Aggregate reserves for payment of future life, health and annuity benefits
were computed in accordance with actuarial standards. Reserves for life
insurance policies are generally based on the 1958 and 1980 Commissioner's
Standard Ordinary Mortality Tables and various valuation rates ranging from 2.5%
to 5%. Accumulation and on-benefit annuity reserves are based principally on
individual annuity tables at various rates ranging from 2.5% to 8.75% and using
CARVM. Accident and health reserves are established using a two year preliminary
term method and morbidity tables based on Company experience.
ILA has established separate accounts to segregate the assets and
liabilities of certain annuity contracts that must be segregated from the
Company's general assets under the terms of the contracts. The assets consist
primarily of marketable securities reported at market value. Premiums, benefits
and expenses of these contracts are reported in the Statutory Basis Statements
of Income.
During 1994, the Company changed the valuation method on aggregate reserves
for future benefits resulting in a $10.7 million increase in surplus. The new
valuation method is in accordance with presently accepted actuarial standards.
INVESTMENTS
Investments in bonds are carried at amortized cost. Bonds which are deemed
ineligible to be held at amortized cost by the NAIC Securities Valuation Office
("SVO")are carried at the appropriate SVO published value. When a permanent
reduction in the value of publicly traded securities occurs, the decrease is
reported as a realized loss and the carrying value is adjusted accordingly.
Common stocks are carried at market value with the difference from cost
reflected in surplus. Other invested assets are generally recorded at fair
value.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Changes in net unrealized capital (losses)/gains on common stocks are
reported as (reductions)/additions of surplus. The Asset Valuation Reserve
("AVR") is designed to provide a standardized reserving process for realized and
unrealized losses due to default and equity risks associated with invested
assets. The reserve decreased by $568 in 1996 and increased by $5,588 and $1,356
in 1995 and 1994, respectively. Additionally, the Interest Maintenance Reserve
("IMR") captures net realized capital gains and losses, net of applicable income
taxes, resulting from changes in interest rates and amortizes these gains or
losses into income over the remaining life of the mortgage loan or bond sold.
Realized capital gains and losses, net of taxes not included in IMR are reported
in the Statutory Basis Statements of Income. Realized investment gains and
losses are determined on a specific identification basis. The amount of net
capital gains reclassified from the IMR was $1,413 and $39 in 1996 and 1995,
respectively, and the amount of net capital losses was $67 in 1994. The amount
of income amortized was $392, $256 and $114 in 1996, 1995 and 1994,
respectively.
OTHER LIABILITIES
The amount reflected in other liabilities includes a receivable from the
separate accounts of $640 million and $333 million as of December 31, 1996 and
1995, respectively. The balances are classified in accordance with NAIC
accounting practices.
- ---------------------------------------------------
2. INVESTMENTS
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Interest income from
bonds.................... $ 89,940 $ 76,100 $ 28,335
Interest income from
policy loans............. 1,846 1,504 454
Interest and dividends
from other investments... 7,864 2,288 1,069
--------- --------- ---------
Gross investment income... 99,650 79,892 29,858
Less: investment
expenses................. 1,209 1,105 846
--------- --------- ---------
Net investment income..... $ 98,441 $ 78,787 $ 29,012
--------- --------- ---------
--------- --------- ---------
</TABLE>
(B) COMPONENTS OF NET UNREALIZED CAPITAL (LOSSES) GAINS ON COMMON STOCKS
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Gross unrealized capital gains
at end of year............... $ 713 $ 1,724 $ 75
Gross unrealized capital
losses at end of year........ (4,160) -- (60)
--------- --------- ---------
Net unrealized capital
(losses) gains............... (3,447) 1,724 15
Balance at beginning of
year......................... 1,724 15 148
--------- --------- ---------
Change in net unrealized
capital (losses) gains on
common stocks................ $ (5,171) $ 1,709 $ (133)
--------- --------- ---------
--------- --------- ---------
</TABLE>
(C) COMPONENTS OF NET UNREALIZED CAPITAL (LOSSES) GAINS ON BONDS AND SHORT-TERM
INVESTMENTS
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Gross unrealized
capital gains at end
of year............... $ 11,821 $ 22,251 $ 986
Gross unrealized
capital losses at end
of year............... (3,842) (1,374) (34,718)
---------- ---------- ----------
Net unrealized capital
gains (losses) after
tax................... 7,979 20,877 (33,732)
Balance at beginning of
year.................. 20,877 (33,732) 5,232
---------- ---------- ----------
Change in net
unrealized capital
(losses) gains on
bonds and short-term
investments........... $ (12,898) $ 54,609 $ (38,964)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
(D) COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Bonds and short-term
investments.................... $ 2,756 $ 156 $ (101)
Common stocks................... 0 52 0
Real estate and other........... 0 0 34
--------- --------- ---------
Realized capital gains
(losses)....................... 2,756 208 (67)
Capital gains taxes (benefit)... 936 (205) 2
--------- --------- ---------
Net realized capital gains
(losses) after tax............. 1,820 413 (69)
Less: IMR capital gains
(losses)....................... 1,413 39 (67)
--------- --------- ---------
Net realized capital gains
(losses)....................... $ 407 $ 374 $ (2)
--------- --------- ---------
--------- --------- ---------
</TABLE>
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
(E) OFF-BALANCE SHEET INVESTMENTS
The Company had no significant financial instruments with off-balance sheet
risk as of December 31, 1996 and 1995.
(F) CONCENTRATION OF CREDIT RISK
Excluding U.S. government and government agency investments, the Company is
not exposed to any significant concentration of credit risk.
(G) BONDS, SHORT-TERM AND COMMON STOCK INVESTMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
------------------------------------------------
GROSS UNREALIZED
AMORTIZED -------------------- FAIR
COST GAINS LOSSES VALUE
------------ --------- --------- ------------
<S> <C> <C> <C> <C>
U.S. government and government agencies and authorities:
(Guaranteed and sponsored)............................................. $ 58,761 $ 6 $ (195) $ 58,572
(Guaranteed and sponsored) -- asset-backed............................. 78,237 1,477 (609) 79,105
States, municipalities and political subdivisions........................ 25,958 163 (2) 26,119
International governments................................................ 7,447 205 -- 7,652
Public utilities......................................................... 70,116 396 (424) 70,088
All other corporate...................................................... 410,530 6,357 (1,355) 415,532
All other corporate -- asset-backed...................................... 485,953 2,654 (1,081) 487,526
Short-term investments................................................... 148,094 -- (66) 148,028
Certificates of deposit.................................................. 83,378 563 (110) 83,831
Parents, subsidiaries and affiliates..................................... 48,100 -- -- 48,100
------------ --------- --------- ------------
Total bonds and short-term investments................................. $ 1,416,574 $ 11,821 $ (3,842) $ 1,424,553
------------ --------- --------- ------------
------------ --------- --------- ------------
Common stock -- unaffiliated............................................. $ 13,064 $ 713 $ 0 $ 13,777
Common stock -- affiliated............................................... 35,379 0 4,160 31,219
------------ --------- --------- ------------
Total common stocks...................................................... $ 48,443 $ 713 $ 4,160 $ 44,996
------------ --------- --------- ------------
------------ --------- --------- ------------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995
----------------------------------------------------
GROSS UNREALIZED
AMORTIZED ------------------------ FAIR
COST GAINS LOSSES VALUE
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
U.S. government and government agencies and authorities:
(Guaranteed and sponsored)........................................... $ 44,268 $ 14 $ (248) $ 44,034
(Guaranteed and sponsored) -- asset-backed........................... 176,160 4,644 (682) 180,122
States, municipalities and political subdivisions...................... 16,948 38 (6) 16,980
International governments.............................................. 5,402 441 -- 5,843
Public utilities....................................................... 108,083 1,652 (90) 109,645
All other corporate.................................................... 374,058 8,145 (248) 381,955
All other corporate -- asset-backed.................................... 410,197 5,841 (89) 415,949
Short-term investments................................................. 139,011 18 -- 139,029
Certificates of deposit................................................ 91,373 1,458 (11) 92,820
------------ ----------- ----------- ------------
Total bonds and short-term investments............................... $ 1,365,500 $ 22,251 $ (1,374) $ 1,386,377
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
Common stock -- unaffiliated........................................... $ 2,668 $ 555 $ -- $ 3,223
Common stock -- affiliated............................................. 35,384 1,169 -- 36,553
------------ ----------- ----------- ------------
Total common stocks.................................................. $ 38,052 $ 1,724 $ -- $ 39,776
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
</TABLE>
The amortized cost and estimated market value of bonds and short-term
investments at December 31, 1996 by management's anticipated maturity are shown
below. Asset-backed securities are distributed to maturity year based on ILA's
estimate of the rate of future prepayments of principal
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
over the remaining life of the securities. Expected maturities differ from
contractual maturities reflecting borrowers' rights to call or prepay their
obligations.
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED FAIR
MATURITY COST VALUE
- ------------------------------ ------------ ------------
<S> <C> <C>
Due in one year or less....... $ 478,095 $ 478,852
Due after one year through
five years................... 622,805 623,105
Due after five years through
ten years.................... 259,479 265,681
Due after ten years........... 56,195 56,915
------------ ------------
Total....................... $ 1,416,574 $ 1,424,553
</TABLE>
Proceeds from sales of investments in bonds and short-term investments
during 1996, 1995 and 1994 were $668,078, $313,961 and $117,912, respectively,
resulting in gross realized gains of $3,675, $1,419 and $518, respectively, and
gross realized losses of $919, $1,263 and $619, respectively, before transfers
to IMR. The Company had realized gains of $52 during 1995 from a capital gain
distribution.
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS
BALANCE SHEET ITEMS (IN MILLIONS):
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Assets
Bonds and short-term
investments......... $ 1,417 $ 1,425 $ 1,366 $ 1,386
Common stocks........ 45 45 40 40
Policy loans......... 29 29 23 23
Other invested
assets.............. 3 3 13 13
Liabilities
Liabilities on
investment
contracts........... $ 1,245 $ 1,191 $ 1,031 $ 981
</TABLE>
The carrying amounts for policy loans approximates fair value. The
liabilities are determined by forecasting future cash flows and discounting the
forecasted cash flows at current market rates.
- ---------------------------------------------------
3. RELATED PARTY TRANSACTIONS
Transactions between the Company and its affiliates within The Hartford
relate principally to tax settlements, reinsurance, service fees, capital
contributions and payments of dividends.
On June 30, 1995, the assets of Lyndon Insurance Company were contributed to
ILA. As a result, ILA received approximately $365 million in bonds and short-
term investments, common stocks and cash, $28 million in policy reserves, $187
million of current tax liability, $26 million in IMR, $8 million in AVR (offset
by an aggregate write-in to surplus), and $4 million of other liabilities. The
assets in excess of liabilities of $112 million were recorded as an increase to
paid-in surplus.
For additional information, see Note 5.
- ---------------------------------------------------
4. FEDERAL INCOME TAXES
The Company and The Hartford have entered into a tax sharing agreement under
which each member in the consolidated U.S. Federal income tax return will make
payments between them such that, with respect to any period, the amount of taxes
to be paid by the Company, subject to certain adjustments, generally will be
determined as though the Company were to file separate federal, state and local
income tax returns.
As long as The Hartford continues to beneficially own, directly or
indirectly, at least 80% of the combined voting power and 80% of the value of
the outstanding capital stock of Hartford Life, the Company will be included for
Federal income tax purposes in the consolidated group of which The Hartford is
the common parent. It is the current intention of The Hartford and its
subsidiaries to continue to file a single consolidated Federal income tax
return. The Company will continue to remit (receive from) The Hartford a current
income tax provision (benefit) computed in accordance with such tax sharing
agreement. Federal income taxes paid by the Company were $29,792, $215,921 and
$20,538 in 1996, 1995 and 1994, respectively. The effective tax rate was 22%,
25% and 92% in 1996, 1995 and 1994, respectively. The following schedule
provides a reconciliation of the tax provision at the U.S. Federal Statutory
rate to Federal income tax expense (in millions).
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- -----
<S> <C> <C> <C>
Tax provision at U.S. Federal statutory rate..... $ 30 $ 20 $ 9
Tax deferred acquisition costs................... 27 8 8
Statutory to tax reserve differences............. -- 3 5
Unrealized (gain)/loss on separate accounts...... (21) (13) 2
Investments and other............................ (17) (4) --
--------- --------- ---
Federal income tax expense....................... $ 19 $ 14 $ 24
--------- --------- ---
--------- --------- ---
</TABLE>
- ---------------------------------------------------
5. CAPITAL AND SURPLUS AND SHAREHOLDER
DIVIDEND RESTRICTIONS
The maximum amount of dividends which can be paid, without prior approval,
by State of Connecticut insurance companies to shareholders is subject to
restrictions relating to statutory surplus. Dividends are paid as determined by
the Board of Directors and are not cumulative. No dividends were paid in 1996 or
1994. ILA paid dividends of $10 million to its parent, HLIC, in 1995. As a
result of the Distribution by ITT, the assets of ITT Lyndon Insurance
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Company (Lyndon) were contributed to ILA in June 1995. Substantially all the
business was removed from Lyndon prior to the contribution. The amount of assets
which exceeded liabilities at the contribution date ($112 million) was included
in paid-in surplus.
- ---------------------------------------------------
6. PENSION PLANS AND OTHER POST-RETIREMENT
AND POST-EMPLOYMENT BENEFITS
The Company's employees are included in The Hartford's non-contributory
defined benefit pension plans. These plans provide pension benefits that are
based on years of service and the employee's compensation during the last ten
years of employment. The Company's funding policy is to contribute annually an
amount between the minimum funding requirements set forth in the Employee
Retirement Income Security Act of 1974 and the maximum amount that can be
deducted for Federal income tax purposes. Generally, pension costs are funded
through the purchase of HLIC's group pension contracts. Pension expense was
$358, $1,034, and $1,211 in 1996, 1995 and 1994, respectively. Liabilities for
the plan are held by The Hartford.
The Company also participates in The Hartford's Investment and Savings Plan,
which includes a deferred compensation option under IRC section 401(k) and an
ESOP allocation under IRC section 404(k). The liabilities for these plans are
included in the financial statements of The Hartford. The cost to ILA was not
material in 1996, 1995 and 1994.
The Company's employees are included in The Hartford's contributory defined
health care and life insurance benefit plans. These plans provide health care
and life insurance benefits for retired employees. Substantially all employees
may become eligible for those benefits if they reach normal or early retirement
age while still working for the Company. The Company has prefunded a portion of
the health care and life insurance obligations through trust funds where such
prefunding can be accomplished on a tax effective basis. Amounts allocated by
The Hartford for post-retirement health care and life insurance benefits expense
(not including provisions for accrual of post-retirement benefit obligations)
are immaterial. The assumed rate of future increases in the per capita cost of
health care (the health care trend rate) was 9.3% for 1996, decreasing ratably
to 6% in the year 2001. Increasing the health care trend rates by one percent
per year would have an immaterial impact on the accumulated post-retirement
benefit obligation and the annual expense. The cost to ILA was not material in
1996, 1995 and 1994.
Post-employment benefits are primarily comprised of obligations to provide
medical and life insurance to employees on long-term disability. Post-employment
benefit expense was not material in 1996, 1995 and 1994.
- ---------------------------------------------------
7. REINSURANCE
The Company cedes insurance to non-affiliated insurers in order to limit its
maximum loss. Such transfer does not relieve ILA of its primary liability. ILA
also assumes insurance from other insurers.
Life insurance net retained premiums were comprised of the following:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Direct premiums................... $ 226,612 $ 159,918 $ 133,180
Premiums assumed.................. 33,817 13,299 960
Premiums ceded.................... (10,185) (7,425) 308,033
---------- ---------- ----------
Premiums and annuity
considerations................... $ 250,244 $ 165,792 $ 442,173
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The Company ceded to a third party, on a modified coinsurance basis, 80% of
the variable annuity business written in 1994. The ceded business includes both
general and separate account liabilities. As a result of the agreement, in
December 1994, ILA transferred approximately $1,352 million in assets and
liabilities. The financial impact of the cession was an increase of
approximately $15 million to net income and surplus in 1994.
In November 1994, the Company ceded, on a modified coinsurance basis, 30% of
the separate account variable annuity business distributed by Paine Webber to
Paine Webber Life Insurance Company ("PWLIC"). As a result of the agreement, ILA
transferred approximately $24 million in assets and liabilities to PWLIC. The
financial impact of the cession was an increase of approximately $765 to net
income and surplus in 1994.
In October 1994, the agreement, effective December 1990, which required ILA
to coinsure 90% of all existing and new business, excluding variable annuity
business, written by the Company to HLIC, was terminated. As a result of the
termination, ILA received approximately $430 million in assets and liabilities
from HLIC. The impact of the transaction was a decrease of approximately $15
million to net income and surplus in 1994.
In November 1993, ILA acquired, through an assumption reinsurance
transaction, substantially all of the individual fixed and variable annuity
business of Hartford Life and Accident, an affiliate. As a result of this
transaction, the assets and liabilities of the Company increased approximately
$1 billion, substantially all of which was transferred to the separate accounts
of the Company. The remaining assets and liabilities (approximately $41 million)
were transferred in October 1995. The impact of these transactions on net income
and surplus was not significant.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- ---------------------------------------------------
8. SEPARATE ACCOUNTS
The Company maintains separate account assets and liabilities totaling $14.6
billion and $7.3 billion at December 31, 1996 and 1995, respectively. Separate
account assets are reported at fair value and separate account liabilities are
determined in accordance with CARVM, which approximates the market value less
applicable surrender charges. Separate account assets are segregated from other
investments, the policyholder assumes the investment risk, and the investment
income and gains and losses accrue directly to the policyholder. Separate
account management fees, net of minimum guarantees, were $144 million, $72
million and $42 million in 1996, 1995 and 1994, respectively, and are recorded
as a component of other revenues on the Statutory Basis Statements of Income.
- ---------------------------------------------------
9. COMMITMENTS AND CONTINGENCIES
As of December 31, 1996 and 1995, the Company had no material contingent
liabilities, nor had the Company committed any surplus funds for any contingent
liabilities or arrangements. The Company is involved in various legal actions
which have arisen in the normal course of its business. In the opinion of
management, the ultimate liability with respect to such lawsuits as well as
other contingencies is not considered to be material in relation to the results
of operations and financial position of the Company.
Under insurance guaranty laws in most states, insurers doing business
therein can be assessed up to prescribed limits for policyholder losses incurred
by insolvent companies. The amount of any future assessments on ILA under these
laws cannot be reasonably estimated. Most of the laws do provide, however, that
an assessment may be excused or deferred if it would threaten an insurer's own
financial strength. Additionally, guaranty fund assessments are used to reduce
state premium taxes paid by the Company in certain states. ILA paid guaranty
fund assessments of $1,262, $1,684 and $583 in 1996, 1995 and 1994,
respectively. ILA incurred guaranteed fund expense of $548, $0 and $0 in 1996,
1995 and 1994, respectively.
<PAGE>
Separate Account Six
ITT Hartford Life and Annuity Insurance Company
Report of Independent Public Accountants
To ITT Hartford Life and Annuity Insurance Company Separate Account Six and
to the Owners of Units of Interest Therein:
We have audited the accompanying statement of assets and liabilities of ITT
Hartford Life and Annuity Insurance Company Separate Account Six (the
Account) as of December 31, 1996, and the related statement of operations for
the year then ended and the statements of changes in net assets for the year
ended December 31, 1996 and the period from inception, February 15, 1995, to
December 31, 1995. These financial statements are the responsibility of the
Account's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ITT Hartford Life and
Annuity Insurance Company Separate Account Six as of December 31, 1996, the
results of its operations for the year then ended and the changes in its net
assets for the year ended December 31, 1996 and the period from inception,
February 15, 1995, to December 31, 1995, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut,
February 14, 1997.
1
<PAGE>
<TABLE>
<CAPTION>
Separate Account Six
ITT Hartford Life and Annuity Insurance Company
Statement of Assets and Liabilities
December 31, 1996
<S> <C>
Assets:
Investments:
Putman VT Global
Growth Fund
Shares 30,112
Cost $ 442,625
Market Value $ 508,298
Putman VT
Global Asset
Allocation Fund
Shares 428,120
Cost $ 6,619,011
Market Value $ 7,385,069
Putman VT U.S.
Government
and High
Quality
Bond Fund
Shares 186,123
Cost $ 2,414,473
Market Value $ 2,458,677
Putman VT
Diversified
Income Fund
Shares 272,035
Cost $ 2,913,759
Market Value $ 3,065,837
Pegasus Managed
Assets
Balanced
Fund
Shares 1,535,563
Cost $17,309,757
Market Value $18,396,043
Pegasus
Growth and
Value Fund
Shares 598,199
Cost $ 7,051,100
Market Value $ 7,890,240
Pegasus
Mid-Cap
Opportunity
Fund
Shares 633,469
Cost $ 7,204,296
Market Value $ 8,526,488
Pegasus
Growth Fund
Shares 818,474
Cost $ 9,154,103
Market Value $10,869,336
Pegasus
Money
Market Fund
Shares 1,343,040
Cost $ 1,343,040
Market Value $ 1,343,040
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PCM U.S. Pegasus
PCM Global Government Managed Pegasus Pegasus
Asset and High PCM Assets Pegasus Mid-Cap Pegasus Money
PCM Global Allocation Quality Diversified Balanced Growth/Value Opportunity Growth Market
Growth Fund Fund Bond Fund Income Fund Fund Fund Fund Fund Fund
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Value $ 508,298 $7,385,069 $2,458,677 $3,065,837 $18,396,043 $7,890,240 $ 8,526,488 $10,869,336 $1,343,040
Dividends
receivable 0 0 0 0 0 0 0 0 201
Due from ITT
Hartford Life
and Annuity
Insurance Co. 0 12,586 3,086 0 36,208 3,510 12,434 9,345 1,222
Receivable
from ITT
fund shares
sold 19 0 0 117 0 6,233 0 0 0
--------- ---------- ---------- ---------- ----------- ---------- ---------- ----------- -----------
Total Assets 508,317 7,397,655 2,461,763 3,065,954 18,432,251 7,899,893 8,538,922 10,878,681 1,344,463
--------- ---------- ---------- ---------- ----------- ---------- ---------- ----------- -----------
Liabilities:
Due to ITT
Hartford
Life and Annuity
Insurance
Company 20 0 0 117 0 0 0 0 0
Payable for
fund shares
purchased 0 12,586 3,086 0 35,984 0 12,449 6,100 1,090
--------- ---------- ---------- ---------- ----------- ---------- ---------- ----------- -----------
Total
Liabilities 20 12,586 3,086 117 35,984 0 12,449 6,100 1,090
--------- ---------- ---------- ---------- ----------- ---------- ---------- ----------- -----------
Net Assets
(Variable
annuity
contract
liabilities) $ 508,297 $7,385,069 $2,458,677 $3,065,837 $18,396,267 $7,899,983 $8,526,473 $10,872,581 $ 1,343,373
========= ========== ========== ========== =========== ========== ========== =========== ===========
<FN>
The accompanying notes are an integral part of this financial statement.
</TABLE>
3
<PAGE>
Separate Account Six
ITT Hartford Life and Annuity Insurance Company
Statement of Assets and Liabilities-(Continued)
December 31, 1996
<TABLE>
<CAPTION>
Units
Owned by Unit Contract
Participants Price Liability
------------ ---------- -----------
<S> <C> <C> <C>
Deferred variable annuity contracts in the
accumulation period:
Group Sub-Accounts:
PCM Global Growth Fund Sub-Account 37,356 $13.606797 $ 508,297
PCM Global Asset Allocation Fund Sub-Account 554,009 13.330241 7,385,069
PCM U.S. Government and High Quality Bond Fund
Sub-Account 214,672 11.453183 2,458,677
PCM Diversified Income Fund Sub-Account 255,483 12.000177 3,065,837
Pegasus Managed Assets Balanced Fund Sub-Account 1,456,776 12.628072 18,396,267
Pegasus Growth and Value Fund Sub-Account 576,577 13.701521 7,899,983
Pegasus Mid-Cap Opportunity Fund Sub-Account 632,279 13.485304 8,526,473
Pegasus Growth Fund Sub-Account 821,023 13.242721 10,872,581
Pegasus Money Market Fund Sub-Account 1,260,731 1.065551 1,343,373
--------- ---------- -----------
Grand Total $60,456,557
========= ========== ===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
4
<PAGE>
Separate Account Six
ITT Hartford Life and Annuity Insurance Company
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
PCM
PCM U.S. Pegasus
PCM Global Government PCM Managed
Global Asset and High Diversified Assets
Growth Allocation Quality Income Balanced
Fund Fund Bond Fund Fund Fund
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Investment income:
Dividends $ 6,372 $204,195 $ 99,711 $ 84,920 $ 628,389
Expenses:
Mortality and expense undertakings (5,142) (72,421) (24,928) (25,479) (162,712)
------- -------- -------- -------- ----------
Net investment income (loss) 1,230 131,774 74,783 59,441 465,677
Capital gains income 9,282 133,995 -- -- 109,290
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) on security transactions 20 478 (316) 32 (169)
Net unrealized appreciation (depreciation) of
investments during the period 44,333 460,827 (43,356) 91,892 676,435
------- -------- -------- -------- ----------
Net gain (loss) on investments 44,353 461,305 (43,672) 91,924 676,266
------- -------- -------- -------- ----------
Net increase in net assets from operations $54,865 $727,074 $ 31,111 $151,365 $1,251,233
======= ======== ======== ======== ==========
<CAPTION>
Pegasus Pegasus Pegasus
Growth Mid-Cap Pegasus Money
and Value Opportunity Growth Market
Fund Fund Fund Fund
Sub-Account Sub-Account Sub-Account Sub-Account
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investment Income:
Dividends $242,813 $ 42,629 $ 24,380 $ 41,028
Expenses:
Mortality and expense undertakings (70,800) (82,779) (109,374) (11,899)
-------- ---------- ---------- --------
Net investment income (loss) 172,013 (40,150) (84,994) 29,129
Capital gains income 58,564 95,175 21,919 --
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) on security transactions 2,671 2,433 1,567 --
Net unrealized appreciation (depreciation) of
investments during the period 592,332 1,189,616 1,282,106 --
-------- ---------- ---------- --------
Net gain (loss) on investments 595,003 1,192,049 1,283,673 --
-------- ---------- ---------- --------
Net increase in net assets from operations $825,580 $1,247,074 $1,220,598 $ 29,129
======== ========== ========== ========
</TABLE>
The accompanying notes are an integral part of this financial statement.
5
<PAGE>
Separate Account Six
ITT Hartford Life and Annuity Insurance Company
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
PCM
PCM U.S. Pegasus
PCM Global Government PCM Managed
Global Asset and High Diversified Assets
Growth Allocation Quality Income Balanced
Fund Fund Bond Fund Fund Fund
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 1,230 $ 131,774 $ 74,783 $ 59,441 $ 465,677
Capital gains income 9,282 133,995 -- -- 109,290
Net realized gain (loss) on security
transactions 20 478 (316) 32 (169)
Net unrealized appreciation (depreciation)
of investments during the period 44,333 460,827 (43,356) 91,892 676,435
--------- ----------- ----------- ----------- ------------
Net increase in net assets resulting from
operations 54,865 727,074 31,111 151,365 1,251,233
--------- ----------- ----------- ----------- ------------
Unit transactions:
Purchases 66,395 2,475,962 1,175,062 1,646,339 8,868,728
Net transfers 138,183 541,687 2,174 346,797 1,130,362
Surrenders (2,343) (250,295) (64,629) (100,736) (605,871)
--------- ----------- ----------- ----------- ------------
Net increase in net assets resulting from
unit transactions 202,235 2,767,354 1,112,607 1,892,400 9,393,219
--------- ----------- ----------- ----------- ------------
Total increase in net assets 257,100 3,494,428 1,143,718 2,043,765 10,644,452
Net assets:
Beginning of Year 251,197 3,890,641 1,314,959 1,022,072 7,751,815
--------- ----------- ----------- ----------- ------------
End of Year $ 508,297 $ 7,385,069 $ 2,458,677 $ 3,065,837 $ 18,396,267
========= =========== =========== =========== ============
For the period from inception, February 15,
1995, to December 31, 1995
Operations:
Net investment income (loss) $ (1,539) $ (21,635) $ (7,716) $ (5,681) $ 76,181
Net realized gain (loss) on security
transactions (83) 220 149 14 (38)
Net unrealized appreciation
of investments during the period 21,338 305,231 87,562 60,185 424,298
--------- ----------- ----------- ----------- ------------
Net increase in net assets
resulting from operations 19,716 283,816 79,995 54,518 500,441
--------- ----------- ----------- ----------- ------------
Unit transactions:
Purchases 153,142 3,409,768 1,236,786 913,625 6,886,652
Net transfers 78,454 232,158 13,399 81,213 427,840
Surrenders (115) (35,101) (15,221) (27,284) (63,118)
--------- ----------- ----------- ----------- ------------
Net increase in net assets
resulting from unit transactions 231,481 3,060,825 1,234,964 967,554 7,251,374
--------- ----------- ----------- ----------- ------------
Total increase in net assets 251,197 3,890,641 1,314,959 1,022,072 7,751,815
Net assets:
Beginning of Period -- -- -- -- --
--------- ----------- ----------- ----------- ------------
End of Period $ 251,197 $ 3,890,641 $ 1,314,959 $ 1,022,072 $ 7,751,815
========= =========== =========== =========== ============
<CAPTION>
Pegasus Pegasus Pegasus
Growth Mid-Cap Pegasus Money
and Value Opportunity Growth Market
Fund Fund Fund Fund
Sub-Account Sub-Account Sub-Account Sub-Account
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 172,013 $ (40,150) $ (84,994) $ 29,129
Capital gains income 58,564 95,175 21,919 --
Net realized gain (loss) on security
transactions 2,671 2,433 1,567 --
Net unrealized appreciation (depreciation)
of investments during the period 592,332 1,189,616 1,282,106 --
---------- ---------- ----------- ----------
Net increase in net assets resulting from
operations 825,580 1,247,074 1,220,598 29,129
---------- ---------- ----------- ----------
Unit transactions:
Purchases 3,856,399 2,978,256 3,671,953 660,650
Net transfers 281,626 147,979 452,544 29,045
Surrenders (228,985) (265,422) (335,723) (31,505)
---------- ---------- ----------- ----------
Net increase in net assets resulting from
unit transactions 3,909,040 2,860,813 3,788,774 658,190
---------- ---------- ----------- ----------
Total increase in net assets 4,734,620 4,107,887 5,009,372 687,319
Net Assets:
Beginning of Year 3,165,363 4,418,586 5,863,209 656,054
---------- ---------- ----------- ----------
End of Year $7,899,983 $8,526,473 $10,872,581 $1,343,373
========== ========== =========== ==========
For the period from inception, February 15,
1995, to December 31, 1995
Operations:
Net investment income (loss) $ 8,682 $ (11,731) $ (10,045) $ 8,439
Capital gains income -- -- -- --
Net realized gain (loss) on security
transactions (301) 22 (153) --
Net unrealized appreciation
of investments during the period 261,174 146,983 446,890 --
---------- ---------- ----------- ----------
Net increase in net assets
resulting from operations 269,555 135,274 436,692 8,439
---------- ---------- ----------- ----------
Unit transactions:
Purchases 2,785,446 3,995,211 5,237,946 607,825
Net transfers 142,382 322,557 243,179 44,272
Surrenders (32,020) (34,456) (54,608) (4,482)
---------- ---------- ----------- ----------
Net increase in net assets
resulting from unit transactions 2,895,808 4,283,312 5,426,517 647,615
---------- ---------- ----------- ----------
Total increase in net assets 3,165,363 4,418,586 5,863,209 656,054
Net assets:
Beginning of Period -- -- -- --
---------- ---------- ----------- ----------
End of Period $3,165,363 $4,418,586 $ 5,863,209 $ 656,054
========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
Separate Account Six
ITT Hartford Life and Annuity Insurance Company
NOTES TO FINANCIAL STATEMENTS
1. Organization:
Separate Account Six (the Account) is a separate investment account within
ITT Hartford Life and Annuity Insurance Company (the Company) and is
registered with the Securities and Exchange Commission (SEC) as a unit
investment trust under the Investment Company Act of 1940, as amended.
Both the Company and the Account are subject to supervision and regulation
by the Department of Insurance of the State of Connecticut and the SEC.
The Account invests deposits by variable life contractholders of the
Company in various mutual funds (the Funds) as directed by the
contractholders. The account commenced operations on February 15, 1995.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting
principles in the investment company industry:
a) Security Transactions--
Security transactions are recorded on the trade date (date the order
to buy or sell is executed). The cost of investments sold is
determined on the basis of identified cost. Dividend and capital
gains income are accrued as of the ex-dividend date. Capital gains
income represents dividends from the Funds which are characterized
as capital gains under current tax regulations.
b) Security Valuation--
The investment in shares of the Putnam Variable Trust Funds (Putnam
VT Global Growth Fund, Putnam VT Global Asset Allocation Fund,
Putnam VT U.S. Government and High Quality Bond Fund and Putnam VT
Diversified Income Fund) or the Pegasus (formerly Woodward) Variable
Annuity Funds (Managed Assets Balanced Fund, Growth and Value Fund,
Mid-Cap Opportunity Fund, Growth Fund and Money Market Fund) are
valued at the closing net asset value per share as determined by
each Fund as of December 31, 1996.
c) Federal Income Taxes--
The operations of the Account form a part of, and are taxed with,
the total operations of the Company, which is taxed as an insurance
company under the Internal Revenue Code. Under current law, no
federal income taxes are payable with respect to the operations of
the Account.
d) Uses of Estimates--
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the
reported amounts of income and expenses during the period. Operating
results in the future could vary from the amounts derived from
management's estimates.
3. Administration of the Account and Related Charges:
a) Mortality and Expense Undertakings--
The Company, as issuer of variable annuity contracts, provides the
mortality and expense undertakings and, with respect to the Account,
receives a maximum annual fee of up to 1.25% of the Account's
average daily net assets. The Company also provides administrative
services and receives an annual fee of 0.15% of the Account's
average daily net assets.
b) Deduction of Annual Maintenance Fee--
Annual maintenance fees are deducted through termination of units of
interest from applicable contractholder's accounts, in accordance
with the terms of the contracts.
7
<PAGE>
PART C
<PAGE>
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) All financial statements are included in Part A and Part B of the
Registration Statement.
(b) (1) Resolution of the Board of Directors of the ITT Hartford Life
and Annuity Insurance Company ("Hartford") authorizing the
establishment of the Separate Account. (1)
(2) Not applicable.
(3) (a) Principal Underwriter Agreement. (2)
(b) Form of Dealer Agreement. (2)
(4) Form of Individual Flexible Premium Variable Annuity Contract.
(1)
(5) Form of Application. (2)
(6) (a) Certificate of Incorporation of Hartford.
(6) (b) Bylaws of Hartford. (2)
(7) Not applicable.
(8) Form of Share Purchase Agreement by the Registrant and Woodward
Variable Annuity Fund. (1)
(9) Opinion and Consent of Lynda Godkin, General Counsel & Corporate
Secretary.
(10) Consent of Arthur Andersen LLP, Independent Public Accountants.
(11) No financial statements are omitted.
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) Copy of Power of Attorney.
- --------------------
(1) Incorporated by reference to Post-Effective Amendment No.1, to the
Registration Statement File No.33-86330, dated May 1, 1995.
(2) Incorporated by reference to Post-Effective Amendment No.2, to the
Registration Statement File No.33-86330, dated May 1, 1996.
<PAGE>
-2-
(16) Organizational Chart.
Item 25. Directors and Officers of the Depositor
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NAME, AGE POSITION WITH HARTFORD
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Wendell J. Bossen Vice President
Gregory A. Boyko Vice President and Controller
Peter W. Cummins Vice President
Ann M. deRaismes Vice President
James R. Dooley Vice President
Timothy M. Fitch Vice President and Actuary
Bruce D. Gardner Director*
Joseph H. Gareau Executive Vice President and Chief Investment
Officer, Director*
Donald J. Gillette Vice President
Lynda Godkin General Counsel and Corporate Secretary
Lois W. Grady Vice President
David A. Hall Senior Vice President and Actuary
Robert A. Kerzner Vice President
William B. Malchodi, Jr. Vice President and Director of Taxes
Thomas M. Marra Executive Vice President and Director Individual
Life and Annuity Division, Director*
Steven L. Mattieson Vice President
Joseph J. Noto Vice President
Craig D. Raymond Vice President and Chief Actuary
David T. Schrandt Vice President and Treasurer
Lowndes A. Smith President, Chief Executive Officer, Director*
Lizabeth H. Zlatkus Vice President, Director*
Unless otherwise indicated, the principal business address of each the
above individuals
<PAGE>
-3-
is P.O. Box 2999, Hartford, CT 06104-2999.
*Denotes date of election to Board of Directors.
Item 26. Persons Controlled By or Under Common Control with the Depositor or
Registrant
Filed herewith as Exhibit 16.
Item 27. Number of Contract Owners
As of December 31, 1996 there were 2,037 Contract Owners.
Item 28. Indemnification
Under Section 33-320a of the Connecticut General Statutes, the
Registrant must indemnify a director or officer against
judgments, fines, penalties, amounts paid in settlement
reasonable expenses, including attorney's fees, for actions
brought or threatened to be brought against him in his capacity
as a director or officer when it is determined by certain
disinterested parties that he is acting in good faith and in a
manner he reasonably believed to be in the best interests of the
Registrant. In any criminal action or proceeding, it also must
be determined that the director or officer had no reason to
believe his conduct was unlawful. The director or officer must
also be indemnified when he is successful on the merits in
defense of a proceeding or in circumstances where the a court
determines that he is fairly and reasonably entitled to be
indemnified, and the court approves the amount. In shareholder
derivative suits, the director or officer must be fully adjudged
not to have breached his duty to the Registrant or a court must
determine that he is fairly and reasonably entitled to be
indemnified and must approve the amount. In a claim based upon
the director's or officer's purchase or sale of the Registrant's
securities. the director or officer may obtain indemnification
only if a court determines that, in view of all the
circumstances, he is fairly and reasonably entitled to be
indemnified, and then for such amount as the court shall
determine.
The foregoing statements are specifically made subject to the
detailed provisions of Section 33-320a.
The directors and officers of Hartford and Hartford Securities
Distribution Company, Inc. ("HSD") are covered under a directors
and officers liability insurance policy issued to ITT Hartford
Group, Inc. and its subsidiaries. Such policy will reimburse the
Registrant for any payments that it shall make to directors and
officers pursuant to law and will, subject to certain exclusions
contained in the policy, further pay any other costs, charges and
expenses and settlements and judgments arising from any
proceeding involving any director or officer of the Registrant in
his past or present capacity as
<PAGE>
-4-
such, and for which he may be liable, except as to any liabilities
arising from acts that are deemed to be uninsurable.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to
the foregoing provisions, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. Principal Underwriters
(a) HSD acts as principal underwriter for the following
investment companies:
Hartford Life Insurance Company - Separate Account One
Hartford Life Insurance Company - Separate Account Two
Hartford Life Insurance Company - Separate Account Two (DC Variable
Account I)
Hartford Life Insurance Company - Separate Account Two (DC Variable
Account II)
Hartford Life Insurance Company - Separate Account Two (QP Variable
Account)
Hartford Life Insurance Company - Separate Account Two (Variable
Account "A")
Hartford Life Insurance Company - Separate Account Two (NQ Variable
Account)
Hartford Life Insurance Company - Putnam Capital Manager Trust
Separate Account
Hartford Life Insurance Company - Separate Account Three
Hartford Life Insurance Company - Separate Account Five
ITT Hartford Life and Annuity Insurance Company - Separate Account One
ITT Hartford Life and Annuity Insurance Company - Putnam Capital
Manager Trust Separate Account Two
ITT Hartford Life and Annuity Insurance Company - Separate Account
Three
ITT Hartford Life and Annuity Insurance Company - Separate Account
Five
ITT Hartford Life and Annuity Insurance Company - Separate Account Six
American Maturity Life Insurance Company - Separate Account AMLVA
(b) Directors and Officers of HSD
Name and Principal Positions and Offices
Business Address With Underwriter
---------------- ----------------
<PAGE>
-5-
Lowndes A. Smith President, Director
John P. Ginnetti Executive Vice President, Director
Thomas M. Marra Executive Vice President, Director
Peter W. Cummins Vice President
Donald E. Waggaman, Jr. Treasurer
Lynda Godkin Secretary
George R. Jay Controller
Michael Wilder Director
Unless otherwise indicated, the principal business address of
each of the above individuals is P. O. Box 2999, Hartford,
Connecticut 06104-2999.
Item 30. Location of Accounts and Records
All of the accounts, books, records or other documents required
to be kept by Section 31(a) of the Investment Company Act of 1940
and rules thereunder are maintained by Hartford at 200 Hopmeadow
Street, Simsbury, Connecticut 06089.
Item 31. Management Services
All management contracts are discussed in Part A and Part B of
this Registration Statement.
Item 32. Undertakings
(a) The Registrant hereby undertakes to file a post-effective
amendment to this Registration Statement as frequently as
is necessary to ensure that the audited financial statements
in the Registration Statement are never more than 16
months old so long as payments under the Variable Annuity
Contracts may be accepted.
(b) The Registrant hereby undertakes to include either (1) as
part of any application to purchase a Contract offered by
the Prospectus, a space that an applicant can check to
request a Statement of Additional Information, or (2) a post
card or similar written communication affixed to or included
in the Prospectus that the applicant can remove to send for
a Statement of Additional Information.
<PAGE>
-6-
(c) The Registrant hereby undertakes to deliver any Statement of
Additional Information and any financial statements required
to be made available under this Form promptly upon written
or oral request.
(d) Hartford hereby represents that the aggregate fees and
charges under the Contracts are reasonable in relation to
the services rendered, the expenses expected to be incurred,
and the risks assumed by Hartford.
The Registrant is relying on the no-action letter issued by
the Division of Investment Management to American Council of
Life Insurance, Ref. No. IP-6-88, November 28, 1988. The
Registrant has complied with the provisions one through four
of the no-action letter.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets all the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and duly caused this Registration Statement to be signed
on its behalf, in the City of Hartford, and State of Connecticut on this 10
day of April, 1997.
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY -
SEPARATE ACCOUNT SIX
(Registrant)
*By: /s/ Thomas M. Marra *By: /s/ Lynda Godkin
----------------------------------------- -----------------------
Thomas M. Marra, Executive Vice President Lynda Godkin
Attorney-in-Fact
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
(Depositor)
*By: /s/ Thomas M. Marra
-----------------------------------------
Thomas M. Marra, Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons and in the capacities and on
the dates indicated.
Bruce D. Gardner, Director *
Joseph H. Gareau, Executive Vice
President & Chief Investment By: /s/ Lynda Godkin
Officer, Director * ---------------------------
Thomas M. Marra, Executive Vice Lynda Godkin
President, Director * Attorney-In-Fact
Lowndes A. Smith, President &
Chief Operating Officer, Director * Dated: April 10, 1997
Lizabeth H. Zlatkus, Vice President,
Director *
<PAGE>
EXHIBIT INDEX
(6)(a) Certificate of Incorporation of Hartford
(9) Opinion and Consent of Lynda Godkin, General Counsel and Corporate
Secretary
(10) Consent of Arthur Andersen LLP
(15) Copy of Power of Attorney
(16) Organizational Chart
<PAGE>
EXHIBIT 6(a)
FILING #0001681641 PG 04 OF 05 VOL B-00105
FILED 12/31/1996 10:00 AM PAGE 00897
SECRETARY OF STATE
CONNECTICUT SECRETARY OF THE STATE
CERTIFICATE AMENDING
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
BY ACTIONS OF THE BOARD OF DIRECTORS AND THE SOLE SHAREHOLDER
1. The name of the Corporation is ITT HARTFORD LIFE AND ANNUITY INSURANCE
COMPANY.
2. The Amended and Restated Certificate of Incorporation is amended by the
following resolution of each of the Board of Directors and the Sole
Shareholder:
RESOLVED, that the Amended and Restated Certificate of
Incorporation of the Company, as supplemented and amended to
date, is hereby amended by striking out Section 9 in its entirety
and adding the following Sections 9 and 10. All other sections
of the Amended and Restated Certificate of Incorporation shall
remain unchanged and continue in full force and effect.
"Section 9. The Board of Directors may, at any time, appoint
from among its own members such committees as it
may deem necessary for the proper conduct of the
business of the Company. The Board of Directors
shall be unrestricted as to the powers it may
confer upon such committees."
"Section 10. So much of the charter of said corporation, as
amended, as is inconsistent herewith is repealed,
provided that such repeal shall not invalidate or
otherwise affect any action taken pursuant to the
charter of the corporation, in accordance with its
terms, prior to the effective date of such
repeal."
3. The above resolutions were passed by the Board of Directors and the Sole
Shareholder of the Corporation. The number of shares of the Corporation's
common capital stock entitled to vote thereon was 3,000 and the vote
required for adoption was 2,000 shares. The vote favoring adoption was
3,000 shares, which was the greatest vote required to pass the resolution.
<PAGE>
2
Dated at Simsbury, Connecticut this 30th day of December, 1996.
We hereby declare, under penalty of false statement, that the statements made in
the foregoing Certificate are true.
ITT HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY
/s/Thomas M. Marra
------------------------------------
Thomas M. Marra, Executive Vice
President and Director - Individual
Life and Annuity Division
/s/Lynda Godkin
------------------------------------
Lynda Godkin, General Counsel and
Corporate Secretary
<PAGE>
CERTIFICATE AMENDING AND RESTATING
THE CERTIFICATE OF INCORPORATION BY
ACTION OF THE BOARD OF DIRECTORS AND SHAREHOLDERS
The name of the Corporation is ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY.
2. The Certificate of Incorporation is amended and restated by the following
resolution of the Board of Directors and Shareholder of the Corporation.
RESOLVED, that the Certificate of Incorporation of the Corporation, as
supplemented and amended to date, is further amended and restated to read
as follows:
Section 1. The name of the Corporation is ITT HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY.
Section 2. The address of the Registered Office of the Corporation is
Hartford Plaza, Hartford, Connecticut 06104-2999.
Section 3. The Corporation is a body politic and corporate and shall
have all the powers granted by the general statutes, as now
enacted or hereinafter amended, to corporations formed under
the Stock Corporation Act.
Section 4. The Corporation shall have the purposes and powers to write
any and all forms of insurance which any other corporation
now or hereafter chartered in Connecticut and empowered to
do an insurance business may now or hereafter lawfully do;
to accept and to cede reinsurance; to issue policies and
contracts for any kind or combination of kinds of insurance;
to issue policies or contracts either with or without
participation in profits; to acquire and hold any or all of
the shares or other securities of any insurance corporation
or any other kind of corporation; and to engage in any
lawful act or activity for which corporations may be formed
under the Stock Corporation Act. The corporation is
authorized to exercise the powers herein granted in any
state, territory or jurisdiction of the United States or
in any foreign country.
Section 5. The Corporation shall obtain a license from the insurance
commissioner prior to the commencement of business and
shall be subject to all general statutes applicable to
insurance companies.
Section 6. The aggregate number of shares which the corporation shall
have authority to issue is 3,000 shares consisting of one
class only, designated as Common Shares, of the par value
of $1,250.
Section 7. No shareholder shall, because of his ownership of shares,
have a preemptive or other right to purchase, subscribe for,
or take any part of any shares or any
<PAGE>
2
part of the notes, debentures, bonds, or other securities
convertible into or carrying options or warrants to purchase
shares of this corporation issued, optioned, or sold by it
after its incorporation.
Section 8. The minimum amount of stated capital with which the
corporation shall commence business is One Thousand
Dollars ($1,000.00).
Section 9. So much of the charter of said corporation is amended, as is
inconsistent herewith is repealed, provided such repeal shall
not invalidate or otherwise affect any action taken pursuant
to the charter of the corporation, in accordance with its
terms, prior to the effective date of such repeal.
3. The above resolution was passed by the Board of Directors and the
Shareholder of the Corporation. The number of shares entitled to vote
thereon was 3,000 and the vote required for adoption was 2,000 shares.
The vote favoring adoption was 3,000 which was the greatest vote needed to
pass the resolution.
Dated at Simsbury, Connecticut this 30th day of April, 1996.
We hereby declare, under the penalties of false statement, that the
statements made in the foregoing Certificate are true.
ITT HARTFORD LIFE AND
ANNUITY INSURANCE COMPANY
/s/ Lowndes A. Smith
---------------------------------
Lowndes A. Smith, President
/s/ Lynda Godkin
----------------------------------
Lynda Godkin, General Counsel
and Corporate Secretary
<PAGE>
THE [LOGO]
HARTFORD
April 10, 1997 Lynda Godkin
General Counsel & Secretary
Law Department
Board of Directors
ITT Hartford Life and Annuity Insurance Company
200 Hopmeadow Street
Simsbury, CT 06089
RE: SEPARATE ACCOUNT SIX
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
FILE NO. 33-86330
Dear Sir/Madam:
I have acted as General Counsel to ITT Hartford Life and Annuity Insurance
Company (the "Company"), a Connecticut insurance company, and ITT Hartford Life
and Annuity Insurance Company Separate Account Six (the "Account") in connection
with the registration of an indefinite amount of securities in the form of
variable annuity contracts (the "Contracts") with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. I have examined such
documents (including the Form N-4 Registration Statement) and reviewed such
questions of law as I considered necessary and appropriate, and on the basis of
such examination and review, it is my opinion that:
1. The Company is a corporation duly organized and validly existing as a stock
life insurance company under the laws of the State of Connecticut and is
duly authorized by the Insurance Department of the State of Connecticut to
issue the Contracts.
2. The Account is a duly authorized and validly existing separate account
established pursuant to the provisions of Section 38a-433 of the
Connecticut Statutes.
3. To the extent so provided under the Contracts, that portion of the assets
of the Account equal to the reserves and other contract liabilities with
respect to the Account will not be chargeable with liabilities arising out
of any other business that the Company may conduct.
Hartford Life Insurance Companies
200 Hopmeadow Street
Simsbury, CT 06089
860 843 3153
860 843 8665 Fax
Mailing Address: P.O. Box 2999
Hartford, CT 06104-2999
<PAGE>
Board of Directors
ITT Hartford Life and Annuity Insurance Company
April 10, 1997
Page 2
4. The Contracts, when issued as contemplated by the Form N-4 Registration
Statement, will constitute legal, validly issued and binding obligations of
the Company.
I hereby consent to the filing of this opinion as an exhibit to the Form N-4
Registration Statement for the Contracts and the Account.
Sincerely,
Lynda Godkin
<PAGE>
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
Registration Statement File No.33-86330 for ITT Hartford Life and Annuity
Insurance Company Separate Account Six on Form N-4.
/s/ Arthur Andersen LLP
Hartford, Connecticut
April 14, 1997
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
POWER OF ATTORNEY
Donald R. Frahm
Bruce D. Gardner
Joseph H. Gareau
Joseph Kanarek
Thomas M. Marra
Lowndes A. Smith
Lizabeth H. Zlatkus
do hereby jointly and severally authorize Lynda Godkin and/or Margaret E.
Hankard and Marianne O'Doherty to sign as their agent, any Registration
Statement, pre-effective amendment, post-effective amendment and any application
for exemptive relief of the ITT Hartford Life and Annuity Insurance Company
under the Securities Act of 1933 and/or the Investment Company Act of 1940.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney for the
purpose herein set forth.
/s/Donald R. Frahm /s/Lowndes A. Smith
- -------------------------------------- -----------------------------------
Donald R. Frahm Lowndes A. Smith
/s/Bruce D. Gardner /s/Lizabeth H. Zlatkus
- -------------------------------------- -----------------------------------
Bruce D. Gardner Lizabeth H. Zlatkus
/s/Joseph H. Gareau
- --------------------------------------
Joseph H. Gareau
/s/Joseph Kanarek
- --------------------------------------
Joseph Kanarek
/s/Thomas M. Marra
- --------------------------------------
Thomas M. Marra
Dated: December 3, 1996
-----------------------
<PAGE>
EXHIBIT 16
<TABLE>
<CAPTION>
<S><C>
ITT Hartford Group, Inc..
(Delaware)
|
- ----------------------------------------------------------------------------------------------------
Nutmeg Insurance Company The Hartford Investment
(Connecticut) Management Company
| (Delaware)
|
Hartford Fire Insurance Company
(Connecticut)
|
Hartford Accident and Indemnity Company
(Connecticut)
|
Hartford Life, Inc.
(Delaware)
|
Hartford Life and Accident Insurance Company
(Connecticut)
|
|
|
- -------------------------------------------------------------------------------------------------------------------
Alpine Life Hartford Financial Hartford Life American Maturity ITT Hartford Canada
Insurance Company Services Life Insurance Company Life Insurance Holdings, Inc.
(New Jersey) Insurance Co. (Connecticut) Company (Canada)
(Connecticut) | (Connecticut) |
| |
| |
| ITT Hartford Life
| Insurance Company
| of Canada
| (Canada)
|
|
- ------------------------------------------------------------------------------------------------------------------
ITT Hartford Life and Annuity ITT Hartford International Hartford Financial Services
Insurance Company Life Reassurance Corporation Corporation
(Connecticut) (Connecticut) (Delaware)
| |
| |
| |
ITT Hartford Life, Ltd. |
(Bermuda) |
|
|
- -----------------------------------------------------------------------------------------------------------------
MS Fund HL Funding HL Investment Hartford Hartford Securities ITT Comp. Emp.
America, Inc. Company, Inc. Advisors, Inc. Equity Sales Distribution Benefits Service
(Delaware) (Connecticut) (Connecticut) Company, Inc. Company, Inc. Company
(Connecticut) (Connecticut) (Connecticut)
</TABLE>
