<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY --
HARTFORD PATHMAKER VARIABLE ANNUITY
SEPARATE ACCOUNT SIX
P.O. Box 5085
Hartford, Connecticut 06102-5085
Telephone: 1-800-862-6668 (Contract Owners)
1-800-862-7155 (Registered Representatives)
- --------------------------------------------------------------------------------
This prospectus describes information you should know before you purchase
Hartford Pathmaker variable annuity. Please read it carefully.
The Hartford Pathmaker variable annuity is a contract between you and Hartford
Life and Annuity Insurance Company where you agree to make at least one Premium
Payment to us and we agree to make a series of Annuity Payouts at a later date.
This Annuity is a flexible premium, tax-deferred, variable annuity offered to
both individuals and groups. It is:
x Flexible, because you may add Premium Payments at any time.
x Tax-deferred, which means you don't pay taxes until you take money out or
until we start to make Annuity Payouts.
x Variable, because the value of your Annuity will fluctuate with the
performance of the underlying funds.
At the time you purchase your Annuity, you allocate your Premium Payment to
"Sub-Accounts." These are subdivisions of our Separate Account, an account that
keeps your Annuity assets separate from our company assets. The Sub-Accounts
then purchase shares of mutual funds set up exclusively for variable annuity or
variable life insurance products. These are not the same mutual funds that you
buy through your stockbroker or through a retail mutual fund. They may have
similar investment strategies and the same portfolio managers as retail mutual
funds. This Annuity offers you Funds with investment strategies ranging from
conservative to aggressive and you may pick those Funds that meet your
investment goals and risk tolerance. The Sub-Accounts and the Funds are listed
below:
- - ONE GROUP-REGISTERED TRADEMARK- INVESTMENT TRUST BOND PORTFOLIO SUB-ACCOUNT
which purchases shares of the One Group Investment Trust Bond Portfolio
- - ONE GROUP-REGISTERED TRADEMARK- INVESTMENT TRUST DIVERSIFIED EQUITY PORTFOLIO
SUB-ACCOUNT which purchases shares of the One Group Investment Trust
Diversified Equity Portfolio
- - ONE GROUP-REGISTERED TRADEMARK- INVESTMENT TRUST DIVERSIFIED MID CAP PORTFOLIO
SUB-ACCOUNT which purchases shares of the One Group Investment Trust
Diversified Mid Cap Portfolio
- - ONE GROUP-REGISTERED TRADEMARK- INVESTMENT TRUST LARGE CAP GROWTH PORTFOLIO
SUB-ACCOUNT which purchases shares of the One Group Investment Trust Large Cap
Growth Portfolio
- - ONE GROUP-REGISTERED TRADEMARK- INVESTMENT TRUST MID CAP VALUE PORTFOLIO
SUB-ACCOUNT which purchases shares of the One Group Investment Trust Mid Cap
Value Portfolio
- - PUTNAM DIVERSIFIED INCOME SUB-ACCOUNT which purchases Class IA shares of
Putnam VT Diversified Income Fund of Putnam Variable Trust
- - PUTNAM GLOBAL ASSET ALLOCATION SUB-ACCOUNT which purchases Class IA shares of
Putnam VT Global Asset Allocation Fund of Putnam Variable Trust
- - PUTNAM GLOBAL GROWTH SUB-ACCOUNT which purchases Class IA shares of Putnam VT
Global Growth Fund of Putnam Variable Trust
- - PUTNAM GROWTH AND INCOME SUB-ACCOUNT which purchases Class IA shares of Putnam
VT Growth and Income Fund of Putnam Variable Trust
- - PUTNAM INCOME SUB-ACCOUNT which purchases Class IA shares of Putnam VT Income
Fund of Putnam Variable Trust
- - PUTNAM INTERNATIONAL GROWTH SUB-ACCOUNT which purchases Class IA shares of
Putnam VT International Growth Fund of Putnam Variable Trust
- - PUTNAM MONEY MARKET SUB-ACCOUNT which purchases Class IA shares of Putnam VT
Money Market Fund of Putnam Variable Trust
- - PUTNAM NEW OPPORTUNITIES SUB-ACCOUNT which purchases Class IA shares of Putnam
VT New Opportunities Fund of Putnam Variable Trust
<PAGE>
You may also allocate some or all of your Premium Payment to the "Fixed
Accumulation Feature," which pays an interest rate guaranteed for a certain time
period from the time the Premium Payment is made. Premium Payments allocated to
the Fixed Accumulation Feature are not segregated from our company assets like
the assets of the Separate Account.
If you decide to buy this Annuity, you should keep this prospectus for your
records. You can also call us at 1-800-862-6668 to get a Statement of Additional
Information, free of charge. The Statement of Additional Information contains
more information about this Annuity and, like this prospectus, is filed with the
Securities and Exchange Commission ("SEC"). We have included the Table of
Contents for the Statement of Additional Information at the end of this
prospectus.
Although we file the prospectus and the Statement of Additional Information with
the SEC, the SEC doesn't approve or disapprove these securities or determine if
the Information is truthful or complete. Anyone who represents that the SEC does
these things may be guilty of a criminal offense. This Prospectus and the
Statement of Additional Information can also be obtained from the SEC's website
(HTTP://WWW.SEC.GOV).
This Annuity IS NOT:
- A bank deposit or obligation
- Federally insured
- Endorsed by any bank or governmental agency
This Annuity may not be available for sale in all states.
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Prospectus Dated: May 1, 2000
Statement of Additional Information Dated: May 1, 2000
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Definitions................................................. 4
Fee Table................................................... 6
Annual Fund Operating Expenses.............................. 7
Accumulation Unit Values.................................... 9
Highlights.................................................. 11
General Contract Information................................ 12
Hartford Life and Annuity Insurance Company............... 12
The Separate Account...................................... 12
The Funds................................................. 13
Performance Related Information............................. 15
The Fixed Accumulation Feature.............................. 16
The Contract................................................ 17
Purchases and Contract Value.............................. 17
Charges and Fees.......................................... 20
Death Benefit............................................. 22
Surrenders................................................ 24
Annuity Payouts............................................. 26
Other Programs Available.................................... 28
Other Information........................................... 29
Legal Matters and Experts................................. 29
More Information.......................................... 30
Federal Tax Considerations.................................. 30
Appendix I -- Information Regarding Tax-Qualified Retirement
Plans...................................................... 35
Table of Contents to Statement of Additional Information.... 39
</TABLE>
3
<PAGE>
DEFINITIONS
These terms are capitalized when used throughout this prospectus. Please
refer to these defined terms if you have any questions as you read your
prospectus.
ACCOUNT: Any of the Sub-Accounts or Fixed Accumulation Feature.
ACCUMULATION UNITS: If you allocate your Premium Payment to any of the
Sub-Accounts, we will convert those payments into Accumulation Units in the
selected Sub-Accounts. Accumulation Units are valued at the end of each
Valuation Day and are used to calculate the value of your Contract prior to
Annuitization.
ACCUMULATION UNIT VALUE: The daily price of Accumulation Units on any Valuation
Day.
ADMINISTRATIVE OFFICE OF THE COMPANY: Our location and overnight mailing address
is: 200 Hopmeadow Street, Simsbury, Connecticut 06089. Our standard mailing
address is: Investment Product Services, P.O. Box 5085, Hartford, Connecticut
06102-5085.
ANNIVERSARY VALUE: The value equal to the Contract Value as of a Contract
Anniversary, increased by the dollar amount of any Premium Payments made since
that anniversary and reduced by the dollar amount of any partial Surrenders
since that anniversary.
ANNUAL MAINTENANCE FEE: An annual $30 charge deducted on a Contract Anniversary
or upon full Surrender if the Contract Value at either of those times is less
than $50,000. The charge is deducted proportionately from each Account in which
you are invested.
ANNUAL WITHDRAWAL AMOUNT: This is the amount you can Surrender per Contract Year
without paying a Contingent Deferred Sales Charge. This amount is
non-cumulative, meaning that it cannot be carried over from one year to the
next.
ANNUITANT: The person on whose life the Contract is based. The Annuitant may not
be changed after your Contract is issued.
ANNUITY COMMENCEMENT DATE: The date we start to make Annuity Payouts.
ANNUITY PAYOUT: The money we pay out after the Annuity Commencement Date for the
duration and frequency you select.
ANNUITY PAYOUT OPTION: Any of the options available for payout after the Annuity
Commencement Date or death of the Contract Owner or Annuitant.
ANNUITY UNIT: The unit of measure we use to calculate the value of your Annuity
Payouts under a variable dollar amount Annuity Payout Option.
ANNUITY UNIT VALUE: The daily price of Annuity Units on any Valuation Day.
BENEFICIARY: The person(s) entitled to receive a Death Benefit upon the death of
the Contract Owner or Annuitant.
CHARITABLE REMAINDER TRUST: An irrevocable trust, where an individual donor
makes a gift to the trust, and in return receives an income tax deduction. In
addition, the individual donor has the right to receive a percentage of the
trust earnings for a specified period of time.
CODE: The Internal Revenue Code of 1986, as amended.
COMMUTED VALUE: The present value of any remaining guaranteed Annuity Payouts.
CONTINGENT ANNUITANT: The person you may designate to become the Annuitant if
the original Annuitant dies before the Annuity Commencement Date. You must name
a Contingent Annuitant before the original Annuitant's death.
CONTINGENT DEFERRED SALES CHARGE: The deferred sales charge that may apply when
you make a full or partial Surrender.
CONTRACT: The individual Annuity contract and any endorsements or riders. Group
participants and some individuals will receive a certificate rather than a
contract.
4
<PAGE>
CONTRACT ANNIVERSARY: The anniversary of the date we issued your Contract. If
the Contract Anniversary falls on a Non-Valuation Day, then the Contract
Anniversary will be the next Valuation Day.
CONTRACT VALUE: The total value of the Accounts on any Valuation Day.
CONTRACT YEAR: Any 12 month period between Contract Anniversaries, beginning
with the date the Contract was issued.
DEATH BENEFIT: The amount payable after the Contract Owner or the Annuitant
dies.
DOLLAR COST AVERAGING: A program that allows you to systematically make
transfers between Accounts available in your Contract.
FIXED ACCUMULATION FEATURE: Part of our General Account, where you may allocate
all or a portion of your Contract Value. In your Contract, this is defined as
the "Fixed Account."
GENERAL ACCOUNT: The General Account includes our company assets and any money
you have invested in the Fixed Accumulation Feature.
HARTFORD, WE OR OUR: Hartford Life and Annuity Insurance Company. Only Hartford
is a capitalized term in the prospectus.
JOINT ANNUITANT: The person on whose life Annuity Payouts are based if the
Annuitant dies after Annuitization. You may name a Joint Annuitant only if your
Annuity Payout Option provides for a survivor. The Joint Annuitant may not be
changed.
MAXIMUM ANNIVERSARY VALUE: This is the highest Anniversary Value prior to the
deceased's 81st birthday or the date of death, if earlier.
NET INVESTMENT FACTOR: This is used to measure the investment performance of a
Sub-Account from one Valuation Day to the next, and is also used to calculate
your Annuity Payout amount.
NON-VALUATION DAY: Any day the New York Stock Exchange is not open for trading.
PAYEE: The person or party you designate to receive Annuity Payouts.
PREMIUM PAYMENT: Money sent to us to be invested in your Annuity.
PREMIUM TAX: A tax charged by a state or municipality on Premium Payments.
REQUIRED MINIMUM DISTRIBUTION: A federal requirement that individuals age 70 1/2
and older must take a distribution from their tax-qualified retirement account
by December 31, each year. For employer sponsored Qualified Contracts, the
individual must begin taking distributions at the age of 70 1/2 or upon
retirement, whichever comes later.
SUB-ACCOUNT VALUE: The value on or before the Annuity Calculation Date, which is
determined on any day by multiplying the number of Accumulation Units by the
Accumulation Unit Value for that Sub-Account.
SURRENDER: A complete or partial withdrawal from your Contract.
SURRENDER VALUE: The amount we pay you if you terminate your Contract before the
Annuity Commencement Date. The Surrender Value is equal to the Contract Value
minus any applicable charges.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. Values
of the Separate Account are determined as of the close of the New York Stock
Exchange, generally 4:00 p.m. Eastern Time.
VALUATION PERIOD: The time span between the close of trading on the New York
Stock Exchange from one Valuation Day to the next.
5
<PAGE>
FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Charge Imposed on Purchases (as a percentage of
Premium Payments).......................................... None
Contingent Deferred Sales Charge (as a percentage of Premium
Payments) (1)
First Year (2)........................................ 6%
Second Year........................................... 6%
Third Year............................................ 5%
Fourth Year........................................... 5%
Fifth Year............................................ 4%
Sixth Year............................................ 3%
Seventh Year.......................................... 2%
Eighth Year........................................... 0%
Annual Maintenance Fee (3) $30
Separate Account Annual Expenses (as a percentage of average
daily Sub-Account Value)
Mortality and Expense Risk Charge..................... 1.25%
Administrative Fees................................... 0.15%
Total Separate Account Annual Expenses...................... 1.40%
</TABLE>
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(1) Each Premium Payment has its own Contingent Deferred Sales Charge schedule.
See "Charges and Fees -- The Contingent Deferred Sales Charge." The
Contingent Deferred Sales Charge is not assessed on partial Surrenders which
do not exceed the Annual Withdrawal Amount.
(2) Length of time from each Premium Payment.
(3) An annual $30 charge deducted on a Contract Anniversary or upon Surrender if
the Contract Value at either of those times is less than $50,000. It is
deducted proportionately from the Accounts in which you are invested at the
time of the charge.
The purpose of the Fee Table and Examples is to assist you in understanding
various costs and expenses that you will pay directly or indirectly. The Fee
Table and Examples reflect expenses of the Separate Account and underlying
Funds. We will deduct any Premium Taxes that apply.
The Examples should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown. The Annual
Maintenance Fee has been reflected in the Examples by a method intended to show
the "average" impact of the Annual Maintenance Fee on an investment in the
Separate Account. We do this by approximating an "average" 0.06% annual charge.
6
<PAGE>
ANNUAL FUND OPERATING EXPENSES
AS OF THE FUND'S YEAR END
(AS A PERCENTAGE OF NET ASSETS)
<TABLE>
<CAPTION>
TOTAL ANNUAL FUND
OPERATING EXPENSES
OTHER EXPENSES INCLUDING ANY
MANAGEMENT FEES INCLUDING ANY WAIVERS AND ANY
INCLUDING ANY WAIVERS REIMBURSEMENTS REIMBURSEMENTS
--------------------- -------------- ------------------
<S> <C> <C> <C>
One Group-Registered Trademark- Investment
Trust Bond Portfolio (1)(2)(3).............. 0.53% 0.22% 0.75%
One Group-Registered Trademark- Investment
Trust Diversified Equity Portfolio
(1)(2)(3)................................... 0.72% 0.23% 0.95%
One Group-Registered Trademark- Investment
Trust Diversified Mid Cap Portfolio
(1)(2)(3)................................... 0.68% 0.27% 0.95%
One Group-Registered Trademark- Investment
Trust Large Cap Growth Portfolio (3)........ 0.65% 0.23% 0.88%
One Group-Registered Trademark- Investment
Trust Mid Cap Value Portfolio (1)(2)(3)..... 0.67% 0.28% 0.95%
Putnam VT Diversified Income Fund............ 0.68% 0.10% 0.78%
Putnam VT Global Asset Allocation Fund....... 0.65% 0.12% 0.77%
Putnam VT Global Growth Fund................. 0.61% 0.12% 0.73%
Putnam VT Growth and Income Fund............. 0.46% 0.04% 0.50%
Putnam VT Income Fund........................ 0.60% 0.07% 0.67%
Putnam VT International Growth Fund.......... 0.80% 0.22% 1.02%
Putnam VT Money Market Fund.................. 0.41% 0.08% 0.49%
Putnam VT New Opportunities Fund............. 0.54% 0.05% 0.59%
</TABLE>
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(1) Figures reflect expenses which have been restated to reflect estimates of
current fees for the current fiscal year.
(2) In the absence of management fee waivers, management fees, other expenses
and total fund operating expenses would be as follows:
<TABLE>
<CAPTION>
TOTAL FUND
OPERATING
MANAGEMENT FEES OTHER EXPENSES EXPENSES
--------------- -------------- ----------
<S> <C> <C> <C>
One Group Investment Trust Bond Portfolio......... 0.60% 0.22% 0.82%
One Group Investment Trust Diversified Equity
Portfolio........................................ 0.74% 0.23% 0.97%
One Group Investment Trust Diversified Mid Cap
Portfolio........................................ 0.74% 0.27% 1.01%
One Group Investment Trust Mid Cap Value
Portfolio........................................ 0.74% 0.28% 1.02%
</TABLE>
(3) On March 31, 1999, the following portfolios of the Trust were substituted
for the following Pegasus Variable funds in the Contract:
<TABLE>
<S> <C>
ONE GROUP INVESTMENT TRUST
PORTFOLIO PEGASUS VARIABLE FUND
1. Bond Portfolio 1. Bond Fund
2. Large Cap Growth Portfolio 2. Growth Fund
3. Diversified Mid Cap Portfolio 3. Mid Cap Opportunity Fund
4. Mid Cap Value Portfolio 4. Intrinsic Value Fund
5. Diversified Equity Portfolio 5. Growth and Value Fund
</TABLE>
With the exception of the Large Cap Growth Portfolio, the Trust Portfolios
are the surviving funds for accounting purposes. The Pegasus Variable Bond
Fund, the Pegasus Variable Mid-Cap Opportunity Fund, the Pegasus Variable
Intrinsic Value Fund, and the Pegasus Growth and Value Fund are referred to
as the "Predecessor Funds" in the Trust's Statement of Additional
Information.
7
<PAGE>
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
If you Surrender your If you annuitize your If you do not Surrender
Contract at the end of the Contract at the end of the your Contract, you would
applicable time period you applicable time period you pay the following expenses
would pay the following would pay the following on a $1,000 investment,
expenses on a $1,000 expenses on a $1,000 assuming a 5% annual return
investment, assuming a 5% investment, assuming a 5% on assets:
annual return on assets: annual return on assets:
1 3 5 10 1 3 5 10 1 3 5 10
SUB-ACCOUNT YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS
One Group Investment Trust
Bond Portfolio $78 $119 $160 $257 $22 $69 $119 $256 $23 $70 $120 $257
One Group Investment Trust
Diversified Equity Portfolio 80 125 170 277 24 75 129 276 25 76 130 277
One Group Investment Trust
Diversified Mid Cap Portfolio 80 125 170 277 24 75 129 276 25 76 130 277
One Group Investment Trust
Large Cap Growth Portfolio 79 123 166 270 23 73 126 269 24 74 126 270
One Group Investment Trust
Mid Cap Value Portfolio 80 125 170 277 24 75 129 276 25 76 130 277
Putnam Diversified Income
Fund 78 120 161 260 22 70 120 259 23 71 121 260
Putnam Global Asset
Allocation Fund 78 119 161 259 22 70 120 258 23 70 121 259
Putnam Global Growth Fund 78 118 159 254 22 69 118 254 22 69 119 254
Putnam Growth and Income Fund 75 111 147 230 19 61 106 229 20 62 107 230
Putnam Income Fund 77 116 155 248 21 67 115 247 22 67 115 248
Putnam International Growth
Fund 81 127 174 284 25 78 133 283 25 78 134 284
Putnam Money Market Fund 75 111 146 229 19 61 105 228 20 62 106 229
Putnam New Opportunities Fund 76 114 151 240 20 64 111 239 21 65 111 240
</TABLE>
8
<PAGE>
ACCUMULATION UNIT VALUES
(FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE PERIOD)
The following information has been derived from the audited financial
statements of the Separate Account, which have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and should be read in conjunction with those statements which are
included in the Statement of Additional Information, which is incorporated by
reference in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
ONE GROUP INVESTMENT TRUST LARGE CAP GROWTH PORTFOLIO
SUB-ACCOUNT
Accumulation Unit Value at beginning of period......... $22.616 $16.381 $13.243 $11.430 $10.000
Accumulation Unit Value at end of period............... $27.966 $22.616 $16.381 $13.243 $11.430
Number Accumulation Units outstanding at end of period
(in thousands)......................................... 1,013 1,060 916 821 512,959
ONE GROUP INVESTMENT TRUST BOND PORTFOLIO SUB-ACCOUNT
(INCEPTION DATE MAY 1, 1997)
Accumulation Unit Value at beginning of period......... $11.490 $10.725 $10.000 -- --
Accumulation Unit Value at end of period............... $11.160 $11.490 $10.725 -- --
Number Accumulation Units outstanding at end of period
(in thousands)......................................... 5,503 5,095 2,990 -- --
ONE GROUP INVESTMENT TRUST DIVERSIFIED EQUITY PORTFOLIO
SUB-ACCOUNT
(INCEPTION DATE FEBRUARY 15, 1995)
Accumulation Unit Value at beginning of period......... $19.107 $17.128 $13.702 $11.700 $10.000
Accumulation Unit Value at end of period............... $20.563 $19.107 $17.128 $13.702 $11.700
Number Accumulation Units outstanding at end of period
(in thousands)......................................... 3,083 3,063 2,207 577 270,551
ONE GROUP INVESTMENT TRUST DIVERSIFIED MID CAP
PORTFOLIO SUB-ACCOUNT
(INCEPTION DATE FEBRUARY 15, 1995)
Accumulation Unit Value at beginning of period......... $17.421 $16.841 $13.485 $10.983 $10.000
Accumulation Unit Value at end of period............... $18.983 $17.421 $16.841 $13.485 $10.983
Number Accumulation Units outstanding at end of period
(in thousands)......................................... 971 989 641 632 402,309
ONE GROUP INVESTMENT TRUST MID CAP VALUE PORTFOLIO
SUB-ACCOUNT
(INCEPTION DATE MAY 1, 1997)
Accumulation Unit Value at beginning of period......... $11.048 $11.588 $10.000 -- --
Accumulation Unit Value at end of period............... $10.694 $11.048 $11.588 -- --
Number Accumulation Units outstanding at end of period
(in thousands)......................................... 2,196 1,984 1,151 -- --
PUTNAM NEW OPPORTUNITIES SUB-ACCOUNT
(INCEPTION DATE MAY 1, 1997)
Accumulation Unit Value at beginning of period......... $15.625 $12.739 $10.000 -- --
Accumulation Unit Value at end of period............... $26.094 $15.625 $12.739 -- --
Number Accumulation Units outstanding at end of period
(in thousands)......................................... 452 531 373 -- --
</TABLE>
9
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
PUTNAM INTERNATIONAL GROWTH SUB-ACCOUNT
(INCEPTION DATE MAY 1, 1997)
Accumulation Unit Value at beginning of period......... $12.861 $10.988 $10.000 -- --
Accumulation Unit Value at end of period............... $20.309 $12.861 $10.988 -- --
Number Accumulation Units outstanding at end of period
(in thousands)......................................... 1,230 1,638 1,191 -- --
PUTNAM GLOBAL GROWTH SUB-ACCOUNT
(INCEPTION DATE FEBRUARY 15, 1995)
Accumulation Unit Value at beginning of period......... $19.623 $15.341 $13.607 $11.773 $10.000
Accumulation Unit Value at end of period............... $31.928 $19.623 $15.341 $13.607 $11.733
Number Accumulation Units outstanding at end of period
(in thousands)......................................... 56 55 49 37 21,336
PUTNAM GLOBAL ASSET ALLOCATION SUB-ACCOUNT
(INCEPTION DATE FEBRUARY 15, 1995)
Accumulation Unit Value at beginning of period......... $17.611 $15.731 $13.330 $11.692 $10.000
Accumulation Unit Value at end of period............... $19.424 $17.611 $15.731 $13.330 $11.692
Number Accumulation Units outstanding at end of period
(in thousands)......................................... 104 116 115 554 332,770
PUTNAM GROWTH AND INCOME SUB-ACCOUNT
(INCEPTION DATE MAY 1, 1997)
Accumulation Unit Value at beginning of period......... $13.239 $11.632 $10.000 -- --
Accumulation Unit Value at end of period............... $13.262 $13.239 $11.632 -- --
Number Accumulation Units outstanding at end of period
(in thousands)......................................... 308 202 109 -- --
PUTNAM DIVERSIFIED SUB-ACCOUNT
(INCEPTION DATE FEBRUARY 15, 1995)
Accumulation Unit Value at beginning of period......... $12.358 $12.706 $12.000 $11.184 $10.000
Accumulation Unit Value at end of period............... $12.401 $12.358 $12.706 $12.000 $11.184
Number Accumulation Units outstanding at end of period
(in thousands)......................................... 77 74 64 255 91,387
PUTNAM INCOME SUB-ACCOUNT
(INCEPTION DATE FEBRUARY 15, 1995)
Accumulation Unit Value at beginning of period......... $13.097 $12.270 $11.453 $11.341 $10.000
Accumulation Unit Value at end of period............... $12.648 $13.097 $12.270 $11.453 $11.341
Number Accumulation Units outstanding at end of period
(in thousands)......................................... 107 93 57 215 115,951
PUTNAM MONEY MARKET SUB-ACCOUNT
(INCEPTION DATE MAY 1, 1997)
Accumulation Unit Value at beginning of period......... $ 1.064 $ 1.025 $10.000 -- --
Accumulation Unit Value at end of period............... $ 1.100 $ 1.064 $ 1.025 -- --
Number Accumulation Units outstanding at end of period
(in thousands)......................................... 2,224 1,570 752 -- --
</TABLE>
10
<PAGE>
HIGHLIGHTS
HOW DO I PURCHASE THIS ANNUITY?
You must complete our application or order request and submit it to us for
approval with your first Premium Payment. Your first Premium Payment must be at
least $1,000 and subsequent Premium Payments must be at least $500, unless you
take advantage of our InvestEase-Registered Trademark- Program or are part of
certain retirement plans.
- For a limited time, usually within ten days after you receive your Contract,
you may cancel your Annuity without paying a Contingent Deferred Sales
Charge. You may bear the investment risk for your Premium Payment prior to
our receipt of your request for cancellation.
WHAT TYPE OF SALES CHARGE WILL I PAY?
You don't pay a sales charge when you purchase your Annuity. We may charge
you a Contingent Deferred Sales Charge when you partially or fully Surrender
your Annuity. The Contingent Deferred Sales Charge will depend on the amount you
choose to Surrender and the length of time the Premium Payment you made has been
in your Annuity.
The percentage used to calculate the Contingent Deferred Sales Charge is
equal to:
<TABLE>
<CAPTION>
NUMBER OF YEARS FROM CONTINGENT DEFERRED
PREMIUM PAYMENT SALES CHARGE
- -------------------- -------------------
<S> <C>
1 6%
2 6%
3 5%
4 5%
5 4%
6 3%
7 2%
8 or more 0%
</TABLE>
You won't be charged a Contingent Deferred Sales Charge on:
- - The Annual Withdrawal Amount
- - Premium Payments or earnings that have been in your Annuity for more than
seven years
- - Distributions made due to death
- - Most payments we make to you as part of your Annuity Payout
IS THERE AN ANNUAL MAINTENANCE FEE?
We deduct this $30.00 fee each year on your Contract Anniversary or when you
fully Surrender your Annuity, if, on either of those dates, the value of your
Annuity is less than $50,000.
WHAT CHARGES WILL I PAY ON AN ANNUAL BASIS?
In addition to the Annual Maintenance Fee, you pay three other types of
charges each year. The first type of charge is the fee you pay for insurance.
This charge is:
A mortality and expense risk charge that is subtracted daily and is equal to
an annual charge of 1.25% of your Contract Value invested in the Funds.
The second type of charge is the fee you pay for administration. This charge
is:
An administration fee of .15% of the Contract Values held in the Separate
Account.
The third type of charge is the fee you pay for the Funds. See the Annual
Fund Operating Expenses table for more complete information and the Funds'
prospectuses accompanying this prospectus.
CAN I TAKE OUT ANY OF MY MONEY?
You may Surrender all or part of the amounts you have invested at any time
before we start making Annuity Payouts, or after Annuity Payouts begin under the
Payment for a Designated Period Annuity Payout Option.
11
<PAGE>
- - You may have to pay income tax on the money you take out and, if you Surrender
before you are age 59 1/2, you may have to pay an income tax penalty.
- - You may have to pay a Contingent Deferred Sales Charge on the money you
Surrender.
WILL HARTFORD PAY A DEATH BENEFIT?
There is a Death Benefit if the Contract Owner, joint owner or the Annuitant
die before we begin to make Annuity Payouts. The Death Benefit will be
calculated as of the date we receive a certified death certificate or other
legal document acceptable to us and will be the greater of:
- - The total Premium Payments you have made to us minus any amounts you have
Surrendered, or
- - The Contract Value of your Annuity, or
- - Your Maximum Anniversary Value, which is described below.
The Maximum Anniversary Value is based on a series of calculations on
Contract Anniversaries of Contract Values, Premium Payments and partial
Surrenders. We will calculate an Anniversary Value for each Contract Anniversary
prior to the deceased's 81st birthday or date of death, whichever is earlier.
The Anniversary Value is equal to the Contract Value as of a Contract
Anniversary, increased by the dollar amount of any Premium Payments made since
that anniversary and reduced by the dollar amount of any partial Surrenders
since that anniversary. The Maximum Anniversary Value is equal to the greatest
Anniversary Value attained from this series of calculations.
This Death Benefit amount will remain invested in the Sub-Accounts according
to your last instructions and will fluctuate with the performance of the
underlying Funds.
WHAT ANNUITY PAYOUT OPTIONS ARE AVAILABLE?
When it comes time for us to make payouts, you may choose one of the
following Annuity Payout Options: Life Annuity, Life Annuity with 120, 180 or
240 Monthly Payments Certain, Joint and Last Survivor Life Annuity and Payments
For a Designated Period. We may make other Annuity Payout Options available at
any time.
You must begin to take payouts by the Annuitant's 90th birthday. If you do
not tell us what Annuity Payout Option you want before that time, we will make
payments under Life Annuity with 120 Monthly Payments Certain.
GENERAL CONTRACT INFORMATION
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Hartford Life and Annuity Insurance Company 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, the District of
Columbia and Puerto Rico, except New York. On January 1, 1998, Hartford's name
changed from ITT Hartford Life and Annuity Insurance Company to Hartford Life
and Annuity Insurance Company. We were originally incorporated under the laws of
Wisconsin on January 9, 1956, and subsequently redomiciled to Connecticut. Our
offices are located in Simsbury, Connecticut; however, our mailing address is
P.O. Box 2999, Hartford, Connecticut 06104-2999. We are ultimately controlled by
The Hartford Financial Services Group, Inc., one of the largest financial
service providers in the United States.
HARTFORD'S RATINGS
<TABLE>
EFFECTIVE
DATE OF
RATING AGENCY RATING RATING BASIS OF RATING
<S> <C> <C> <C>
A.M. Best and
Company, Inc. 8/1/99 A+ Financial performance
Standard & Poor's 7/1/99 AA Insurer financial strength
Duff & Phelps 12/21/98 AA+ Claims paying ability
</TABLE>
THE SEPARATE ACCOUNT
The Separate Account is where we set aside and invest the assets of some of
our annuity contracts, including this Contract. The Separate Account was
established on November 11, 1994 and is registered as a unit investment
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trust under the Investment Company Act of 1940. This registration does not
involve supervision by the Commission of the management or the investment
practices of the Separate Account or Hartford. The Separate Account meets the
definition of "Separate Account" under federal securities law. This Separate
Account holds only assets for variable annuity contracts. The Separate Account:
- - Holds assets for the benefit of you and other Contract Owners, and the persons
entitled to the payments described in the Contract.
- - Is not subject to the liabilities arising out of any other business Hartford
may conduct.
- - Is not affected by the rate of return of Hartford's General Account or by the
investment performance of any of Hartford's other Separate Accounts.
- - May be subject to liabilities from a Sub-Account of the Separate Account which
holds assets of other variable annuity contracts offered by the Separate
Account which are not described in this Prospectus.
- - Is credited with income and gains, and takes losses, whether or not realized,
from the assets it holds.
We do not guarantee the investment results of the Separate Account. There is
no assurance that the value of your Annuity will equal the total of the payments
you make to us.
THE FUNDS
One Group-Registered Trademark- Sub-Accounts purchase shares of One Group
Investment Trust. Banc One Investment Advisors Corporation, an indirect wholly
owned subsidiary of Bank One Corporation, serves as investment adviser to One
Group Investment Trust.
Putnam Sub-Accounts purchase shares of Putnam Variable Trust, an open-end
series investment company with multiple portfolios. Putnam Investment
Management, Inc. ("Putnam Management") serves as the investment manager for the
Funds. Putnam Management is ultimately controlled by Marsh & McLennan
Companies, Inc., a publicly owned holding company whose principal businesses are
international insurance brokerage and employee benefit consulting.
We do not guarantee the investment results of any of the underlying Funds.
Since each underlying Fund has different investment objectives, each is subject
to different risks. These risks and the Funds' expenses are more fully described
in the accompanying prospectuses for the Funds, and the Statement of Additional
Information, which may be ordered from us. The Funds' prospectuses should be
read in conjunction with this Prospectus before investing.
The Funds may not be available in all states.
The investment goals of each of the Funds are as follows:
ONE GROUP-REGISTERED TRADEMARK- INVESTMENT TRUST BOND PORTFOLIO
Seeks to maximize total return by investing primarily in a diversified
portfolio of intermediate and long term debt securities.
ONE GROUP-REGISTERED TRADEMARK- INVESTMENT TRUST DIVERSIFIED EQUITY PORTFOLIO
Seeks long-term capital growth and growth of income with a secondary
objective of providing a moderate level of current income.
ONE GROUP-REGISTERED TRADEMARK- INVESTMENT TRUST DIVERSIFIED MID CAP PORTFOLIO
Seeks long term capital growth by investing primarily in equity securities
of companies with intermediate capitalizations.
ONE GROUP-REGISTERED TRADEMARK- INVESTMENT TRUST LARGE CAP GROWTH PORTFOLIO
Seeks long-term capital appreciation and growth of income by investing
primarily in equity securities.
ONE GROUP-REGISTERED TRADEMARK- INVESTMENT TRUST MID CAP VALUE PORTFOLIO
Seeks capital appreciation with the secondary goal of achieving current
income by investing primarily in equity securities.
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<PAGE>
PUTNAM VT DIVERSIFIED INCOME FUND
Seeks as high a level of current income as Putnam Management believes is
consistent with capital preservation. The Fund invests in higher-yielding,
lower-rated securities commonly referred to as "junk bonds." See the special
considerations for, and risks associated with, investments in these securities
described in the Fund prospectus.
PUTNAM VT GLOBAL ASSET ALLOCATION FUND
Seeks a high level of long-term total return consistent with preservation of
capital.
PUTNAM VT GLOBAL GROWTH FUND
Seeks capital appreciation.
PUTNAM VT GROWTH AND INCOME FUND
Seeks capital growth and current income.
PUTNAM VT INCOME FUND
Seeks high current income consistent with what Putnam Management believes to
be prudent risk.
PUTNAM VT INTERNATIONAL GROWTH FUND
Seeks capital appreciation.
PUTNAM VT MONEY MARKET FUND
Seeks as high a rate of current income as Putnam Management believes is
consistent with preservation of capital and maintenance of liquidity.
PUTNAM VT NEW OPPORTUNITIES FUND
Seeks long-term capital appreciation.
The Putnam VT Funds are generally managed in styles similar to other
open-end investment companies which are managed by Putnam Management and whose
shares are generally offered to the public. These other Putnam 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.
Subject to the general oversight of the Trustees of Putnam Variable Trust,
Putnam Management manages the Funds' portfolios 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 pay Putnam
Management a quarterly fee. See the accompanying Funds prospectus for a more
complete description of Putnam Management and the respective fees of the Funds.
MIXED AND SHARED FUNDING -- Shares of the Funds may be sold to our other
separate accounts and our insurance company affiliates or other unaffiliated
insurance companies to serve as the underlying investment for both variable
annuity contracts and variable life insurance policies, a practice known as
"mixed and shared funding." As a result, there is a possibility that a material
conflict may arise between the interests of Contract Owners, and of owners of
other contracts whose contract values are allocated to one or more of these
other separate accounts investing in any one of the Funds. In the event of any
such material conflicts, we will consider what action may be appropriate,
including removing the Fund from the Separate Account or replacing the Fund with
another underlying fund. There are certain risks associated with mixed and
shared funding, as disclosed in the Funds' prospectus.
VOTING RIGHTS -- We are the legal owners of all Fund shares held in the
Separate Account and we have the right to vote at the Fund's shareholder
meetings. To the extent required by federal securities laws or regulations, we
will:
- - Notify you of any Fund shareholders' meeting if the shares held for your
Contract may be voted.
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- - Send proxy materials and a form of instructions that you can use to tell us
how to vote the Fund shares held for your Contract.
- - Arrange for the handling and tallying of proxies received from Contract
Owners.
- - Vote all Fund shares attributable to your Contract according to instructions
received from you, and
- - Vote all Fund shares for which no voting instructions are received in the same
proportion as shares for which instructions have been received.
If any federal securities laws or regulations, or their present
interpretation, change to permit us to vote Fund shares on our own, we may
decide to do so. You may attend any Shareholder Meeting at which shares held for
your Contract may be voted. After we begin to make Annuity Payouts to you, the
number of votes you have will decrease.
SUBSTITUTIONS, ADDITIONS, OR DELETIONS OF FUNDS -- We reserve the right,
subject to any applicable law, to make certain changes to the Funds offered
under your contract. We may, in our sole discretion, establish new Funds. New
Funds will be made available to existing Contract Owners as we determine
appropriate. We may also close one or more Funds to additional Payments or
transfers from existing Sub-Accounts.
We reserve the right to eliminate the shares of any of the Funds for any
reason and to substitute shares of another registered investment company for the
shares of any Fund already purchased or to be purchased in the future by the
Separate Account. To the extent required by the Investment Company Act of 1940
(the "1940 Act"), substitutions of shares attributable to your interest in a
Fund will not be made until we have the approval of the Commission and we have
notified you of the change.
In the event of any substitution or change, we may, by appropriate
endorsement, make any changes in the Contract necessary or appropriate to
reflect the substitution or change. If we decide that it is in the best interest
of the Contracts Owners, the Separate Account may be operated as a management
company under the 1940 Act or any other form permitted by law, may be
de-registered under the 1940 Act in the event such registration is no longer
required, or may be combined with one or more other Separate Accounts.
ADMINISTRATIVE SERVICES -- Hartford has entered into agreements with the
investment advisers or distributors of many of the Funds. Under the terms of
these agreements, Hartford provides administrative services and the Funds pay a
fee to Hartford that is usually based on an annual percentage of the average
daily net assets of the Funds. These agreements may be different for each Fund
or each Fund family.
PERFORMANCE RELATED INFORMATION
The Separate Account may advertise certain performance-related information
concerning the 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.
When a Sub-Account advertises its STANDARDIZED 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 the
investment at the end of the period.
The Separate Account may also advertise NON-STANDARD TOTAL RETURNS THAT
PRE-DATE THE INCEPTION DATE OF THE SEPARATE ACCOUNT. These non-standardized
total returns are calculated by assuming that the Sub-Accounts have been in
existence for the same periods as the underlying Funds and by taking deductions
for charges equal to those currently assessed against the Sub-Accounts. These
non-standardized returns must be accompanied by standardized total returns.
If applicable, the 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 includes the recurring charges
at the Separate Account level including the Annual Maintenance Fee.
The 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
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<PAGE>
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 and effective yield
include the recurring charges at the Separate Account level including the Annual
Maintenance Fee.
We 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 systematic investing, Dollar Cost Averaging
and asset allocation), the advantages and disadvantages of investing in
tax-deferred 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.
THE FIXED ACCUMULATION FEATURE
Important information you should know: This portion of the Prospectus
relating to the Fixed Accumulation Feature is not registered under the
Securities Act of 1933 ("1933 Act") and the Fixed Accumulation Feature is not
registered as an Investment Company under the 1940 Act. The Fixed Accumulation
Feature or any of its interests are not subject to the provisions or
restrictions of the 1933 Act or the 1940 Act, and the staff of the Securities
and Exchange Commission has not reviewed the disclosure regarding the Fixed
Accumulation Feature. The following disclosure about the Fixed Accumulation
Feature may be subject to certain generally applicable provisions of the federal
securities laws regarding the accuracy and completeness of disclosure.
Premium Payments and Contract Values allocated to the Fixed Accumulation
Feature become a part of our General Account assets. We invest the assets of the
General Account according to the laws governing the investments of insurance
company General Accounts.
Currently, we guarantee that we will credit interest at a rate of not less
than 3% per year, compounded annually, to amounts you allocate to the Fixed
Accumulation Feature. We reserve the right to change the rate subject only to
applicable state insurance law. We may credit interest at a rate in excess of 3%
per year. We will periodically publish the Fixed Accumulation Feature interest
rates currently in effect. There is no specific formula for determining interest
rates. Some of the factors that we may consider in determining whether to credit
excess interest are; general economic trends, rates of return currently
available and anticipated on our investments, regulatory and tax requirements
and competitive factors. We will account for any deductions, Surrenders or
transfers from the Fixed Accumulation Feature on a "first-in first-out" basis.
Important: Any interest credited to amounts you allocate to the Fixed
Accumulation Feature in excess of 3% per year will be determined at our sole
discretion. You assume the risk that interest credited to the Fixed Accumulation
Feature may not exceed the minimum guarantee of 3% for any given year.
From time to time, we may credit increased interest rates under certain
programs established in our sole discretion.
DOLLAR COST AVERAGING PLUS ("DCA PLUS") PROGRAMS -- Currently, you may
enroll in a special pre-authorized transfer program known as our DCA Plus
Program (the "Program"). Under this Program, Contract Owners who enroll may
allocate a minimum of $5,000 of their Premium Payment into the Program (we may
allow a lower minimum Premium Payment for qualified plan transfers or rollovers,
including IRAs) and pre-authorize transfers to any of the Sub-Accounts under
either the 6-Month Transfer Program or 12-Month Transfer Program. The 6-Month
Transfer Program and the 12-Month Transfer Program will generally have different
credited interest rates. Under the 6-Month Transfer Program, the interest rate
can accrue up to 6 months and all Premium Payments and accrued interest must be
transferred from the Program to the selected Sub-Accounts in 3 to 6 months.
Under the 12-Month Transfer Program, the interest rate can accrue up to 12
months and all Premium Payments and accrued interest must be transferred to the
selected Sub-Accounts in 7 to 12 months. This will be accomplished by monthly
transfers for the period selected and a final transfer of the entire amount
remaining in the Program.
The pre-authorized transfers will begin within 15 days of receipt of the
Program payment provided we receive complete enrollment instructions. If we do
not receive complete Program enrollment instructions within 15 days of receipt
of the initial Program payment, the Program will be voided and the entire
balance in the Program will be
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<PAGE>
transferred to the Accounts designated by you. If you do not designate an
Account, you will receive the Fixed Accumulation Feature's current effective
interest rate. Any subsequent payments we receive within the Program period
selected will be allocated to the Sub-Accounts over the remainder of that
Program transfer period.
You may elect to terminate the pre-authorized transfers by calling or
writing us of your intent to cancel enrollment in the Program. Upon
cancellation, you will no longer receive the Program interest rate and unless we
receive instructions to the contrary, the amounts remaining in the Program may
accrue the interest rate currently in effect for the Fixed Accumulation Feature.
We reserve the right to discontinue, modify or amend the Program or any
other interest rate program we establish. Any change to the Program will not
affect Contract Owners currently enrolled in the Program.
You may only have one DCA program in place at one time. The Fixed
Accumulation Feature and Dollar Cost Averaging Plus Program are not available in
Oregon.
THE CONTRACT
PURCHASES AND CONTRACT VALUE
WHAT TYPES OF CONTRACTS ARE AVAILABLE?
The Contract is an individual or group tax-deferred variable annuity
contract. It is designed for retirement planning purposes and may be purchased
by any individual, group or trust, including:
- - Any trustee or custodian for a retirement plan qualified under
Sections 401(a) or 403(a) of the Code;
- - Annuity purchase plans adopted by public school systems and certain tax-exempt
organizations according to Section 403(b) of the Code;
- - Individual Retirement Annuities adopted according to Section 408 of the Code;
- - Employee pension plans established for employees by a state, a political
subdivision of a state, or an agency of either a state or a political
subdivision of a state, and
- - Certain eligible deferred compensation plans as defined in Section 457 of the
Code.
The examples above represent Qualified Contracts, as defined by the Code. In
addition, individuals and trusts can also purchase Contracts that are not part
of a tax qualified retirement plan. These are known as Non-Qualified Contracts.
If you are purchasing the Contract for use in an IRA or other qualified
retirement plan, you should consider other features of the Contract besides tax
deferral, since any investment vehicle used within an IRA or other qualified
plan receives tax deferred treatment under the Code.
HOW DO I PURCHASE A CONTRACT?
You may purchase a Contract by completing and submitting an application or
an order request along with an initial Premium Payment. For most Contracts, the
minimum Premium Payment is $1,000. For additional Premium Payments, the minimum
Premium Payment is $500. Under certain situations, we may allow smaller Premium
Payments, for example, if you enroll in our InvestEase Program or are part of
certain tax qualified retirement plans. Prior approval is required for Premium
Payments of $1,000,000 or more.
You and your Annuitant must not be older than age 85 on the date that your
Contract is issued.
You must be of legal age in the state where the Contract is being purchased
or a guardian must act on your behalf.
HOW ARE PREMIUM PAYMENTS APPLIED TO MY CONTRACT?
Your initial Premium Payment will be invested within two Valuation Days of
our receipt of a properly completed application or an order request and the
Premium Payment. If we receive your subsequent Premium Payment before the close
of the New York Stock Exchange, it will be priced on the same Valuation Day. If
we receive your Premium Payment after the close of the New York Stock Exchange,
it will be invested on the next Valuation
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Day. If we receive your subsequent Premium Payment on a Non-Valuation Day, the
amount will be invested on the next Valuation Day. Unless we receive new
instructions, we will invest the Premium Payment based on your last allocation
instructions. We will send you a confirmation when we invest your Premium
Payment.
If the request or other information accompanying the Premium Payment is
incomplete when received, we will hold the money in a non-interest bearing
account for up to five Valuation Days while we try to obtain complete
information. If we cannot obtain the information within five Valuation Days, we
will either return the Premium Payment and explain why the Premium Payment could
not be processed or keep the Premium Payment if you authorize us to keep it
until you provide the necessary information.
CAN I CANCEL MY CONTRACT AFTER I PURCHASE IT?
We want you to be satisfied with the Contract you have purchased. We urge
you to closely examine its provisions. If for any reason you are not satisfied
with your Contract, simply return it within ten days after you receive it with a
written request for cancellation that indicates your tax-withholding
instructions. In some states, you may be allowed more time to cancel your
Contract. We will not deduct any Contingent Deferred Sales Charges during this
time. We may require additional information, including a signature guarantee,
before we can cancel your Contract.
You bear the investment risk from the time the Contract is issued until we
receive your complete cancellation request.
The amount we pay you upon cancellation depends on the requirements of the
state where you purchased your Contract, the method of purchase, the type of
Contract you purchased and your age.
HOW IS THE VALUE OF MY CONTRACT CALCULATED BEFORE THE ANNUITY COMMENCEMENT DATE?
The Contract Value is the sum of all Accounts. There are two things that
affect your Sub-Account value: (1) the number of Accumulation Units and (2) the
Accumulation Unit Value. The Sub-Account value is determined by multiplying the
number of Accumulation Units by the Accumulation Unit Value. Therefore, on any
Valuation Day your Contract Value reflects the investment performance of the
Sub-Accounts and will fluctuate with the performance of the underlying Funds.
When Premium Payments are credited to your Sub-Accounts, they are converted
into Accumulation Units by dividing the amount of your Premium Payments, minus
any Premium Taxes, by the Accumulation Unit Value for that day. The more Premium
Payments you put into your Contract, the more Accumulation Units you will own.
You decrease the number of Accumulation Units you have by requesting Surrenders,
transferring money out of an Account, settling a Death Benefit claim or by
annuitizing your Contract.
To determine the current Accumulation Unit Value, we take the prior
Valuation Day's Accumulation Unit Value and multiply it by the Net Investment
Factor for the current Valuation Day.
The Net Investment Factor is used to measure the investment performance of a
Sub-Account from one Valuation Day to the next. The Net Investment Factor for
each Sub-Account equals:
- - The net asset value per share of each Fund held in the Sub-Account at the end
of the current Valuation Day divided by
- - The net asset value per share of each Fund held in the Sub-Account at the end
of the prior Valuation Day; minus
- - The daily mortality and expense risk charge adjusted for the number of days in
the period, and any other applicable charge.
We will send you a statement in each calendar quarter, which tells you how
many Accumulation Units you have, their value and your total Contract Value.
CAN I TRANSFER FROM ONE SUB-ACCOUNT TO ANOTHER?
TRANSFERS BETWEEN SUB-ACCOUNTS -- You may transfer from one Sub-Account to
another before and after the Annuity Commencement Date at no extra charge. Your
transfer request will be processed on the day that it is received as long as it
is received on a Valuation Day before the close of the New York Stock Exchange.
Otherwise,
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your request will be processed on the following Valuation Day. We will send you
a confirmation when we process your transfer. You are responsible for verifying
transfer confirmations and promptly advising us of any errors within 30 days of
receiving the confirmation.
SUB-ACCOUNT TRANSFER RESTRICTIONS -- We reserve the right to limit the
number of transfers to 12 per Contract Year, with no transfers occurring on
consecutive Valuation Days. We also have the right to restrict transfers if we
believe that the transfers could have an adverse effect on other Contract
Owners. In all states except Florida, Maryland and Oregon, we may:
- - Require a minimum time period between each transfer,
- - Limit the dollar amount that may be transferred on any one Valuation Day, and
- - Not accept transfer requests from an agent acting under a power of attorney
for more than one Contract Owner.
We also have a restriction in place that involves individuals who act under
a power of attorney for multiple Contract Owners. If the value of the Contract
Owners' Accounts add up to more than $2 million, we will not accept transfer
instructions from the power of attorney unless the power of attorney has entered
into a Third Party Transfer Services Agreement with us.
Some states may have different restrictions.
FIXED ACCUMULATION FEATURE TRANSFERS -- During each Contract Year, you may
make transfers out of the Fixed Accumulation Feature to Sub-Accounts. All
transfer allocations must be in whole numbers (e.g., 1%). You may transfer
either:
- - 30% of your total amount in the Fixed Accumulation Feature, or
- - An amount equal to the largest previous transfer.
These transfer limits do not include transfers done through Dollar Cost
Averaging or the DCA Plus Program.
If your interest rate renews at a rate at least 1% lower than your prior
interest rate, you may transfer an amount equal to up to 100% of the amount to
be invested at the renewal rate. You must make this transfer request within 60
days of being notified of the renewal rate.
FIXED ACCUMULATION FEATURE TRANSFER RESTRICTIONS -- We reserve the right to
defer transfers from the Fixed Accumulation Feature for up to 6 months from the
date of your request. After any transfer, you must wait six months before moving
Sub-Account Values back to the Fixed Accumulation Feature.
TELEPHONE AND INTERNET TRANSFERS -- In most states, you can make transfers:
- - By calling us at (800) 862-6668.
- - Electronically, when available, by the Internet through our website at
http://online.hartfordlife.com
Transfer instructions received by telephone on any Valuation Day before the
close of the New York Stock Exchange will be carried out that day. Otherwise,
the instructions will be carried out at the close of the New York Stock Exchange
on the next Valuation Day.
Transfer instructions you send electronically are considered to be received
by Hartford at the time and date stated on the electronic acknowledgement
Hartford returns to you. If the time and date indicated on the acknowledgement
is before the close of the New York Stock Exchange on a Valuation Day, the
instructions will be carried out that day. Otherwise, the instructions will be
carried out at the close of the New York Stock Exchange the next Valuation Day.
If you do not receive an electronic acknowledgement, you should telephone us as
soon as possible.
We will send you a confirmation when we process your transfer. You are
responsible for verifying transfer confirmations and promptly advising us of any
errors within 30 days of receiving the confirmation.
Telephone or Internet transfer requests may currently only be cancelled by
calling us at (800) 862-6668 before the close of the New York Stock Exchange.
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Hartford, our agents or our affiliates are NOT responsible for losses
resulting from telephone or electronic requests that we believe are genuine. We
will use reasonable procedures to confirm that instructions received by
telephone or through our website are genuine, including a requirement that
contract owners provide certain identification information, including a personal
identification number. We record all telephone transfer instructions. We reserve
the right to suspend, modify, or terminate telephone or electronic transfer
privileges at any time.
POWER OF ATTORNEY -- You may authorize another person to make transfers on
your behalf by submitting a completed Power of Attorney form. Once we have the
completed form on file, we will accept transfer instructions, subject to our
transfer restrictions, from your designated third party until we receive new
instructions in writing from you. You will not be able to make transfers or
other changes to your Contract if you have authorized someone else to act under
a Power of Attorney.
CHARGES AND FEES
There are 6 charges and fees associated with the Contract:
1. THE CONTINGENT DEFERRED SALES CHARGE
The Contingent Deferred Sales Charge covers some of the expenses relating to
the sale and distribution of the Contract, including commissions paid to
registered representatives and the cost of preparing sales literature and other
promotional activities.
We may assess a Contingent Deferred Sales Charge when you request a full or
partial Surrender. The Contingent Deferred Sales Charge is based on the amount
you choose to Surrender and how long your Premium Payments have been in the
Contract. The Contingent Deferred Sales Charge will not exceed the total amount
of the Premium Payments made. Each Premium Payment has its own Contingent
Deferred Sales Charge schedule. Premium Payments are Surrendered in the order in
which they were received. The longer you leave your Premium Payments in the
Contract, the lower the Contingent Deferred Sales Charge will be when you
Surrender. The amount assessed a Contingent Deferred Sales Charge will not
exceed your total Premium Payments.
The percentage used to calculate the Contingent Deferred Sales Charge is
equal to:
<TABLE>
<CAPTION>
NUMBER OF YEARS FROM CONTINGENT DEFERRED
PREMIUM PAYMENT SALES CHARGE
- -------------------- -------------------
<S> <C>
1 6%
2 6%
3 5%
4 5%
5 4%
6 3%
7 2%
8 or more 0%
</TABLE>
THE FOLLOWING SURRENDERS ARE NOT SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE:
- - ANNUAL WITHDRAWAL AMOUNT. During the first seven years from each Premium
Payment, you may, each Contract Year, take partial Surrenders up to 10% of the
total Premium Payments. If you do not take 10% one year, you may not take more
than 10% the next year. These amounts are different for group unallocated
Contracts and Contracts issued to a Charitable Remainder Trust.
UNDER THE FOLLOWING SITUATIONS, THE CONTINGENT DEFERRED SALES CHARGE IS WAIVED:
- - Upon eligible confinement as described in the Waiver of Sales Charge Rider.
For Contracts purchased on or after September 29, 1997, we will waive any
Contingent Deferred Sales Charge applicable to a partial or full Surrender if
you, the joint owner or the Annuitant, is confined for at least 180 calendar
days to a: (a) facility recognized as a general hospital by the proper
authority of the state in which it is located; or (b) facility recognized as a
general hospital by the Joint Commission on the Accreditation of Hospitals; or
(c) facility certified as a hospital or long-term care facility; or
(d) nursing home licensed by the state in which it is located and offers the
services of a registered nurse 24 hours a day. If you, the joint owner or the
Annuitant is confined when you purchase the
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Contract, this waiver is not available. For it to apply, you must: (a) have
owned the Contract continuously since it was issued, (b) provide written proof
of confinement satisfactory to us, and (c) request the Surrender within 90
calendar days of the last day of confinement. This waiver may not be available
in all states. Please contact your Registered Representative or us to
determine if it is available for you.
- - For Required Minimum Distributions. This allows Annuitants who are age 70 1/2
or older, with a Contract held under an Individual Retirement Account or
403(b) plan, to Surrender an amount equal to the Required Minimum Distribution
for the Contract without a Contingent Deferred Sales Charge. All requests for
Required Minimum Distributions must be in writing.
- - On or after the Annuitant's 90th birthday.
- - For disabled participants enrolled in a group unallocated, tax qualified
retirement plan. With our approval and under certain conditions, participants
who become disabled can receive Surrenders free of Contingent Deferred Sales
Charge.
THE FOLLOWING SITUATIONS ARE NOT SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE:
- - Upon death of the Annuitant or Contract Owner. No Contingent Deferred Sales
Charge will be deducted if the Annuitant or Contract Owner dies, unless the
Contract Owner is not a natural person (e.g. a trust).
- - Upon Annuitization. The Contingent Deferred Sales Charge is not deducted when
you annuitize the Contract. We will charge a Contingent Deferred Sales Charge
if the Contract is fully Surrendered during the Contingent Deferred Sales
Charge period under an Annuity Payout Option which allows Surrenders.
- - Upon cancellation during the Right to Cancel Period.
SURRENDER ORDER -- During the first seven Contract Years all Surrenders in
excess of the Annual Withdrawal Amount will be taken first from Premium
Payments, then from earnings. Surrenders from Premium Payments in excess of the
Annual Withdrawal Amount will be subject to a Contingent Deferred Sales Charge.
After the Seventh Contract Year, all Surrenders in excess of the Annual
Withdrawal Amount will be taken first from earnings, then from Premium Payments
held in your Contract for more than seven years and then from Premium Payments
invested for less than seven years. Only Premium Payments invested for less than
seven years are subject to a Contingent Deferred Sales Charge.
2. MORTALITY AND EXPENSE RISK CHARGE
For assuming mortality and expense risks under the Contract, we deduct a
daily charge at the rate of 1.25% per year of Sub-Account Value (estimated at
.90% for mortality and .35% for expenses). The mortality and expense risk charge
is broken into charges for mortality risks and for an expense risk:
- - MORTALITY RISK -- There are two types of mortality risks that we assume, those
made while your Premium Payments are accumulating and those made once Annuity
Payouts have begun.
During the period your Premium Payments are accumulating, we are required to
cover any difference between the Death Benefit paid and the Surrender Value.
These differences may occur during periods of declining value or in periods
where the Contingent Deferred Sales Charges would have been applicable. The
risk that we bear during this period is that actual mortality rates, in
aggregate, may exceed expected mortality rates.
Once Annuity Payouts have begun, we may be required to make Annuity Payouts
as long as the Annuitant is living, regardless of how long the Annuitant
lives. We would be required to make these payments if the Payout Option
chosen is the Life Annuity, Life Annuity With Payments for a Period Certain
or Joint and Last Survivor Life Annuity Payout Option. The risk that we bear
during this period is that the actual mortality rates, in aggregate, may be
lower than the expected mortality rates.
- - EXPENSE RISK -- We also bear an expense risk that the Contingent Deferred
Sales Charges and the Annual Maintenance Fee collected before the Annuity
Commencement Date may not be enough to cover the actual cost of selling,
distributing and administering the Contract.
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Although variable Annuity Payouts will fluctuate with the performance of the
underlying Fund selected, your Annuity Payouts will NOT be affected by (a) the
actual mortality experience of our Annuitants, or (b) our actual expenses if
they are greater than the deductions stated in the Contract. Because we cannot
be certain how long our Annuitants will live, we charge this percentage fee
based on the mortality tables currently in use. The mortality and expense risk
charge enables us to keep our commitments and to pay you as planned.
3. ANNUAL MAINTENANCE FEE
The Annual Maintenance Fee is a flat fee that is deducted from your Contract
Value to reimburse us for expenses relating to the administrative maintenance of
the Contract and the Accounts. The annual $30 charge is deducted on a Contract
Anniversary or when the Contract is fully Surrendered if the Contract Value at
either of those times is less than $50,000. The charge is deducted
proportionately from each Account in which you are invested.
WHEN IS THE ANNUAL MAINTENANCE FEE WAIVED?
We will waive the Annual Maintenance Fee if your Contract Value is $50,000
or more on your Contract Anniversary or when you fully Surrender your Contract.
In addition, we will waive one Annual Maintenance Fee for Contract Owners who
own more than one Contract with a combined Contract Value between $50,000 and
$100,000. If you have multiple Contracts with a combined Contract Value of
$100,000 or greater, we will waive the Annual Maintenance Fee on all Contracts.
However, we reserve the right to limit the number of waivers to a total of six
Contracts. We also reserve the right to waive the Annual Maintenance Fee under
certain other conditions.
4. ADMINISTRATIVE CHARGE
For administration, we apply a daily charge at the rate of .15% per year
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.
5. PREMIUM TAXES
We deduct Premium Taxes, if required, by a state or other government agency.
Some states collect the taxes when Premium Payments are made; others collect at
Annuitization. Since we pay Premium Taxes when they are required by applicable
law, we may deduct them from your Contract when we pay the taxes, upon
Surrender, or on the Annuity Commencement Date. The Premium Tax rate varies by
state or municipality. Currently, the maximum rate charged by any state is 3.5%
and 4% in Puerto Rico.
6. CHARGES AGAINST THE FUNDS
The Separate Account purchases shares of the Funds at net asset value. The
net asset value of the Fund reflects investment advisory fees and administrative
expenses already deducted from the assets of the Funds. These charges are
described in the Funds' prospectuses accompanying this prospectus.
We may offer, in our discretion, reduced fees and charges including, but not
limited to Contingent Deferred Sales Charges, the Mortality and Expense Risk
Charge, and the Annual Maintenance Fee, for certain contracts (including
employer sponsored savings plans) which may result in decreased costs and
expenses. Reductions in these fees and charges will not be unfairly
discriminatory against any Contract Owner.
DEATH BENEFIT
WHAT IS THE DEATH BENEFIT AND HOW IS IT CALCULATED?
The Death Benefit is the amount we will pay upon the death of the Contract
Owner or the Annuitant. The Death Benefit is calculated when we receive a
certified death certificate or other legal document acceptable to us.
The calculated Death Benefit will remain invested in the same Accounts,
according to the Contract Owner's last instructions until we receive complete
written settlement instructions from the Beneficiary. Therefore, the
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Death Benefit amount will fluctuate with the performance of the underlying
Funds. When there is more than one Beneficiary, we will calculate the
Accumulation Units for each Sub-account and the dollar amount for the Fixed
Accumulation Feature for each Beneficiary's portion of the proceeds.
If death occurs before the Annuity Commencement Date, the Death Benefit is
the greatest of:
- - The Contract Value on the date the death certificate or other legal document
acceptable to us is received; or
- - 100% of all Premium Payments paid into the Contract minus any partial
Surrenders; or
- - The Maximum Anniversary Value, which is described below.
The Maximum Anniversary Value is based on a series of calculations on
Contract Anniversaries of Contract Values, Premium Payments and partial
Surrenders. We will calculate an Anniversary Value for each Contract Anniversary
prior to the deceased's 81st birthday or date of death, whichever is earlier.
The Anniversary Value is equal to the Contract Value as of a Contract
Anniversary, increased by the dollar amount of any Premium Payments made since
that anniversary and reduced by the dollar amount of any partial Surrenders
since that anniversary. The Maximum Anniversary Value is equal to the greatest
Anniversary Value attained from this series of calculations.
The Maximum Anniversary Value is only calculated until the earlier of the
Contract Owner or Annuitant's 81st birthday or death.
HOW IS THE DEATH BENEFIT PAID?
The Death Benefit may be taken in one lump sum or under any of the Annuity
Payout Options then being offered by us. On the date we receive complete
instructions from the Beneficiary, we will compute the Death Benefit amount to
be paid out or applied to a selected Annuity Payout Option. When there is more
than one Beneficiary, we will calculate the Death Benefit amount for each
Beneficiary's portion of the proceeds and then pay it out or apply it to a
selected Annuity Payout Option according to each Beneficiary's instructions. If
we receive the complete instructions on a Non-Valuation Day, computations will
take place on the next Valuation Day.
The Beneficiary may elect under the Annuity Proceeds Settlement Option
"Death Benefit Remaining with the Company" to leave proceeds from the Death
Benefit with us for up to five years from the date of the Contract Owner's death
if the Contract Owner died before the Annuity Commencement Date. Once we receive
a certified death certificate or other legal documents acceptable to us, the
Beneficiary can: (a) make Sub-Account transfers and (b) take Surrenders without
paying Contingent Deferred Sales Charges.
REQUIRED DISTRIBUTIONS -- If the Contract Owner dies before the Annuity
Commencement Date, the Death Benefit must be distributed within five years after
death. The Beneficiary can choose any Annuity Payout Option that results in
complete Annuity Payout within five years.
If the Contract Owner dies on or after the Annuity Commencement Date under
an Annuity Payout Option with a Death Benefit, any remaining value must be
distributed at least as rapidly as under the payment method being used as of the
Contract Owner's death.
If the Contract Owner is not an individual (e.g. a trust), then the original
Annuitant will be treated as the Contract Owner in the situations described
above and any change in the original Annuitant will be treated as the death of
the Contract Owner.
WHAT SHOULD THE BENEFICIARY CONSIDER?
ALTERNATIVES TO THE REQUIRED DISTRIBUTIONS -- The selection of an Annuity
Payout Option and the timing of the selection will have an impact on the tax
treatment of the Death Benefit. To receive favorable tax treatment, the Annuity
Payout Option selected: (a) cannot extend beyond the Beneficiary's life or life
expectancy, and (b) must begin within one year of the date of death.
If these conditions are NOT met, the Death Benefit will be treated as a lump
sum payment for tax purposes. This sum will be taxable in the year in which it
is considered received.
SPOUSAL CONTRACT CONTINUATION -- If the Beneficiary is the Contract Owner's
spouse, the Beneficiary may elect to continue the Contract as the contract
owner, receive the death benefit in one lump sum payment or elect an Annuity
Payout Option. This is available only once for each Contract.
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WHO WILL RECEIVE THE DEATH BENEFIT?
The distribution of the Death Benefit is based on whether death is before,
on or after the Annuity Commencement Date.
IF DEATH OCCURS BEFORE THE ANNUITY COMMENCEMENT DATE:
<TABLE>
IF THE DECEASED IS
THE... AND... AND... THEN THE...
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Contract Owner There is a surviving The Annuitant is living Joint Contract Owner
joint Contract Owner or deceased receives the Death
Benefit.
- -------------------------------------------------------------------------------------------------
Contract Owner There is no surviving The Annuitant is living Designated Beneficiary
joint Contract Owner or deceased receives the Death
Benefit.
- -------------------------------------------------------------------------------------------------
Contract Owner There is no surviving The Annuitant is living Contract Owner's estate
joint Contract Owner or deceased receives the Death
and the Beneficiary Benefit.
predeceases the
Contract Owner
- -------------------------------------------------------------------------------------------------
Annuitant The Contract Owner is There is no named Death Benefit is paid
living Contingent Annuitant to the Contract Owner
and not the designated
Beneficiary.
- -------------------------------------------------------------------------------------------------
Annuitant The Contract Owner is The Contingent Contingent Annuitant
living Annuitant is living becomes the Annuitant,
and the Contract
continues.
</TABLE>
IF DEATH OCCURS ON OR AFTER THE ANNUITY COMMENCEMENT DATE:
<TABLE>
IF THE DECEASED IS
THE... AND... THEN THE...
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Contract Owner The Annuitant is living Designated Beneficiary becomes the
Contract Owner.
- --------------------------------------------------------------------------------------------------
Annuitant The Contract Owner is living Contract Owner receives the Death
Benefit.
- --------------------------------------------------------------------------------------------------
Annuitant The Annuitant is also the Contract Designated Beneficiary receives the
Owner Death Benefit.
</TABLE>
THESE ARE THE MOST COMMON DEATH BENEFIT SCENARIOS, HOWEVER, THERE ARE
OTHERS. SOME OF THE ANNUITY PAYOUT OPTIONS MAY NOT RESULT IN A DEATH BENEFIT
PAYOUT. IF YOU HAVE QUESTIONS ABOUT THESE AND ANY OTHER SCENARIOS, PLEASE
CONTACT YOUR REGISTERED REPRESENTATIVE OR US.
SURRENDERS
WHAT KINDS OF SURRENDERS ARE AVAILABLE?
FULL SURRENDERS BEFORE THE ANNUITY COMMENCEMENT DATE -- When you Surrender
your Contract before the Annuity Commencement Date, the Surrender Value of the
Contract will be made in a lump sum payment. The Surrender Value is the Contract
Value minus any applicable Premium Taxes, Contingent Deferred Sales Charges and
the Annual Maintenance Fee. The Surrender Value may be more or less than the
amount of the Premium Payments made to a Contract.
PARTIAL SURRENDERS BEFORE THE ANNUITY COMMENCEMENT DATE -- You may request a
partial Surrender of Contract Values at any time before the Annuity Commencement
Date. There are two restrictions:
- - The partial Surrender amount must be at least equal to $100, our current
minimum for partial Surrenders, and
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- - The Contract must have a minimum Contract Value of $500 after the Surrender.
We reserve the right to close your Contract and pay the full Surrender Value
if the Contract Value is under the minimum after the Surrender. If your
Contract was issued in Texas, a remaining value of $500 is not required to
continue the Contract if Premium Payments were made in the last two Contract
Years.
FULL SURRENDERS AFTER THE ANNUITY COMMENCEMENT DATE -- You may Surrender
your Contract on or after the Annuity Commencement Date only if you selected the
Payment For a Period Certain Annuity Payout Option. Under this option, we pay
you the Commuted Value of your Contract minus any applicable Contingent Deferred
Sales Charges. The Commuted Value is determined on the day we receive your
written request for Surrender.
PARTIAL SURRENDERS ARE PERMITTED AFTER THE ANNUITY COMMENCEMENT DATE IF YOU
ELECT THE PAYMENTS FOR PERIOD CERTAIN ANNUITY PAYOUT OPTION, BUT CHECK WITH YOUR
TAX ADVISOR BECAUSE THERE MAY BE ADVERSE TAX CONSEQUENCES.
HOW DO I REQUEST A SURRENDER?
Requests for full Surrenders must be in writing. Requests for partial
Surrenders can be made in writing or by telephone. We will send your money
within seven days of receiving complete instructions. However, we may postpone
payment of Surrenders whenever: (a) the New York Stock Exchange is closed, (b)
trading on the New York Stock Exchange is restricted by the SEC, (b) the SEC
permits and orders postponement or (c) the SEC determines that an emergency
exists to restrict valuation.
WRITTEN REQUESTS -- To request a full or partial Surrender, complete a
Surrender Form or send us a letter, signed by you, stating:
- - the dollar amount that you want to receive, either before or after we withhold
taxes and deduct for any applicable charges,
- - your tax withholding amount or percentage, if any, and
- - your mailing address.
If there are joint Contract Owners, both must authorize all Surrenders. For
a partial Surrender, specify the Accounts that you want your Surrender to come
from, otherwise, the Surrender will be taken in proportion to the value in each
Account.
TELEPHONE REQUESTS -- To request a partial Surrender by telephone, we must
have received your completed Telephone Redemption Program Enrollment Form. If
there are joint Contract Owners, both must sign this form. By signing the form,
you authorize us to accept telephone instructions for partial Surrenders from
either Contract Owner. Telephone authorization will remain in effect until we
receive a written cancellation notice from you or your joint Contract Owner, we
discontinue the program; or you are no longer the owner of the Contract. There
are some restrictions on telephone surrenders, please call us with any
questions.
We may record telephone calls and use other procedures to verify information
and confirm that instructions are genuine. We will not be liable for losses or
expenses arising from telephone instructions reasonably believed to be genuine.
WE MAY MODIFY THE REQUIREMENTS FOR TELEPHONE REDEMPTIONS AT ANY TIME.
Telephone Surrender instructions received before the close of the New York
Stock Exchange will be processed on that Valuation Day. Otherwise, your request
will be processed on the next Valuation Day.
COMPLETING A POWER OF ATTORNEY FORM FOR ANOTHER PERSON TO ACT ON YOUR BEHALF
MAY PREVENT YOU FROM MAKING SURRENDERS VIA TELEPHONE.
WHAT SHOULD BE CONSIDERED ABOUT TAXES?
There are certain tax consequences associated with Surrenders:
PRIOR TO AGE 59 1/2 -- If you make a Surrender prior to age 59 1/2, there
may be adverse tax consequences including a10% federal income tax penalty on the
taxable portion of the Surrender payment. Surrendering before age 59 1/2 may
also affect the continuing tax-qualified status of some Contracts.
WE DO NOT MONITOR SURRENDER REQUESTS. TO DETERMINE WHETHER A SURRENDER IS
PERMISSIBLE, WITH OR WITHOUT FEDERAL INCOME TAX PENALTY, PLEASE CONSULT YOUR
PERSONAL TAX ADVISOR.
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<PAGE>
MORE THAN ONE CONTRACT ISSUED IN THE SAME CALENDER YEAR:
If you own more than one contract issued by us or our affiliates in the same
calendar year, then these contracts may be treated as one contract for the
purpose of determining the taxation of distributions prior to the Annuity
Commencement Date. Please consult your tax adviser for additional information.
INTERNAL REVENUE CODE SECTION 403(b) ANNUITIES -- As of December 31, 1988,
all section 403(b) annuities have limits on full and partial Surrenders.
Contributions to your Contract made after December 31, 1988 and any increases in
cash value after December 31, 1988 may not be distributed unless you are:
(a) age 59 1/2, (b) no longer employed, (c) deceased, (d) disabled, or
(e) experiencing a financial hardship (cash value increases may not be
distributed for hardships prior to age 59 1/2). Distributions prior to age
59 1/2 due to financial hardship; unemployment or retirement may still be
subject to a penalty tax of 10%.
WE ENCOURAGE YOU TO CONSULT WITH YOUR QUALIFIED TAX ADVISER BEFORE MAKING
ANY SURRENDERS. PLEASE SEE THE "FEDERAL TAX CONSIDERATIONS" SECTION FOR MORE
INFORMATION.
ANNUITY PAYOUTS
THIS SECTION DESCRIBES WHAT HAPPENS WHEN WE BEGIN TO MAKE REGULAR ANNUITY
PAYOUTS FROM YOUR CONTRACT. YOU, AS THE CONTRACT OWNER, SHOULD ANSWER FIVE
QUESTIONS:
1. When do you want Annuity Payouts to begin?
2. Which Annuity Payout Option do you want to use?
3. How often do you want to receive Annuity Payouts?
4. What is the Assumed Investment Rate?
5. Do you want fixed dollar amount or variable dollar amount Annuity Payouts?
Please check with your financial advisor to select the Annuity Payout Option
that best meets your income needs.
1. WHEN DO YOU WANT ANNUITY PAYOUTS TO BEGIN?
You select an Annuity Commencement Date when you purchase your Contract or
at any time before you begin receiving Annuity Payouts. You may change the
Annuity Commencement Date by notifying us within thirty days prior to the date.
The Annuity Commencement Date cannot be deferred beyond the 15th day of the
month of the Annuitant's 90th birthday. If this Contract is issued to the
trustee of a Charitable Remainder Trust, the Annuity Commencement Date may be
deferred to the Annuitant's 100th birthday.
The Annuity Calculation Date is when the amount of your Annuity Payout is
determined. This occurs within five Valuation Days before your selected Annuity
Commencement Date.
All Annuity Payouts, regardless of frequency, will occur on the same day of
the month as the Annuity Commencement Date. After the initial payout, if an
Annuity Payout date falls on a Non-Valuation Day, the Annuity Payout is computed
on the prior Valuation Day. If the Annuity Payout date does not occur in a given
month due to a leap year or months with only 28 days (i.e. the 31st), the
Annuity Payout will be computed on the last Valuation Day of the month.
2. WHICH ANNUITY PAYOUT OPTION DO YOU WANT TO USE?
Your Contract contains the Annuity Payout Options described below. The
Annuity Proceeds Settlement Option is an option that can be elected by the
Beneficiary after the death of the Contract Owner and is described in the "Death
Benefit" section. We may at times offer other Annuity Payout Options. Once we
begin to make Annuity Payouts, the Annuity Payout Option cannot be changed.
LIFE ANNUITY -- We make Annuity Payouts as long as the Annuitant is living.
When the Annuitant dies, we stop making Annuity Payouts. A Payee would receive
only one Annuity Payout if the Annuitant dies after the first payout, two
Annuity Payouts if the Annuitant dies after the second payout, and so forth.
LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS CERTAIN -- We make
monthly Annuity Payouts during the lifetime of the Annuitant but Annuity Payouts
are at least guaranteed for a minimum of 120, 180 or 240
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<PAGE>
months, as you elect. If, at the death of the Annuitant, Annuity Payouts have
been made for less than the minimum elected number of months, then the Commuted
Value as of the date of the Annuitant's death will be paid in one sum to the
Beneficiary.
JOINT AND LAST SURVIVOR LIFE ANNUITY -- We will make Annuity Payouts as long
as the Annuitant and Joint Annuitant are living. When one Annuitant dies, we
continue to make Annuity Payouts to the other Annuitant until that second
Annuitant dies. When choosing this option, you must decide what will happen to
the Annuity Payouts; either fixed or variable, after the first Annuitant dies.
You must select Annuity Payouts that:
- - Remain the same at 100%, or
- - Decrease to 66.67%, or
- - Decrease to 50%.
For variable Annuity Payouts, these percentages represent Annuity Units; for
fixed Annuity Payouts, they represent actual dollar amounts. The percentage will
also impact the Annuity Payout amount we pay while both Annuitants are living.
If you pick a lower percentage, your original Annuity Payouts will be higher
while both Annuitants are alive.
PAYMENTS FOR A DESIGNATED PERIOD -- We will make Annuity Payouts for the
number of years that you select. You can select between 5 years and 30 years.
IMPORTANT INFORMATION:
- - YOU CANNOT SURRENDER YOUR CONTRACT ONCE ANNUITY PAYOUTS BEGIN, UNLESS YOU HAVE
SELECTED THE PAYMENTS FOR A DESIGNATED PERIOD ANNUITY PAYOUT OPTION. A
CONTINGENT DEFERRED SALES CHARGE MAY BE DEDUCTED.
- - For Non-Qualified Contracts, if you do not elect an Annuity Payout Option,
fixed Annuity Payouts will automatically begin on the Annuity Commencement
Date under the Life Annuity with 120 Monthly Payments Certain.
- - For Qualified Contracts and Contracts issued in Texas, if you do not elect an
Annuity Payout Option, fixed Annuity Payouts will begin automatically on the
Annuity Commencement Date, under the Life Annuity Payout Option.
3. HOW OFTEN DO YOU WANT THE PAYEE TO RECEIVE ANNUITY PAYOUTS?
In addition to selecting an Annuity Commencement Date and an Annuity Payout
Option, you must also decide how often you want the Payee to receive Annuity
Payouts. You may choose to receive Annuity Payouts:
- - monthly,
- - quarterly,
- - semi-annually, or
- - annually.
Once you select a frequency, it cannot be changed. If you do not make a
selection, the Payee will receive monthly Annuity Payouts. You must select a
frequency that results in an Annuity Payout of at least $50. If the amount falls
below $50, we have the right to change the frequency to bring the Annuity Payout
up to at least $50.
4. WHAT IS THE ASSUMED INVESTMENT RATE?
The Assumed Investment Return is the investment return used to calculate
variable Annuity Payouts. The Assumed Investment Return for your Annuity is 5%.
The first Annuity Payout will be based upon a 5% Assumed Investment Return. The
remaining Annuity Payouts will fluctuate based on the actual investment results
of the Sub-Accounts.
5. DO YOU WANT ANNUITY PAYOUTS TO BE FIXED-DOLLAR AMOUNT OR VARIABLE-DOLLAR
AMOUNT?
You may choose an Annuity Payout Option with fixed-dollar amounts or
variable-dollar amounts, depending on your income needs.
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<PAGE>
FIXED-DOLLAR AMOUNT ANNUITY PAYOUTS -- Once a fixed-dollar amount Annuity
Payout begins, you cannot change your selection to receive variable-dollar
amount Annuity Payout. You will receive equal fixed-dollar amount Annuity
Payouts throughout the Annuity Payout period. Fixed-dollar amount Annuity Payout
amounts are determined by multiplying the Contract Value, minus any applicable
Premium Taxes, by an Annuity rate. The annuity rate is set by us and is not less
than the rate specified in the Fixed Payment Annuity tables in your Contract.
VARIABLE-DOLLAR AMOUNT ANNUITY PAYOUTS -- A variable-dollar amount Annuity
Payout is based on the investment performance of the Sub-Accounts. The
variable-dollar amount Annuity Payouts may fluctuate with the performance of the
underlying Funds. To begin making variable-dollar amount Annuity Payouts, we
convert the first Annuity Payout amount to a set number of Annuity Units and
then price those units to determine the Annuity Payout amount. The number of
Annuity Units that determines the Annuity Payout amount remains fixed unless you
transfer units between Sub-Accounts.
The dollar amount of the first variable Annuity Payout depends on:
- - the Annuity Payout Option chosen,
- - the Annuitant's attained age and gender (if applicable), and,
- - the applicable annuity purchase rates based on the 1983a Individual Annuity
Mortality table
- - the Assumed Investment Return.
The total amount of the first variable-dollar amount Annuity Payout is
determined by dividing the Contract Value minus any applicable Premium Taxes, by
$1,000 and multiplying the result by the payment factor defined in the Contract
for the selected Annuity Payout Option.
The dollar amount of each subsequent variable-dollar amount Annuity Payout
is equal to the total of:
Annuity Units for each Sub-Account multiplied by Annuity Unit Value of each
Sub-Account.
The Annuity Unit Value of each Sub-Account for any Valuation Period is equal
to the Accumulation Unit Value Net Investment Factor for the current Valuation
Period multiplied by the Annuity Unit factor, multiplied by the Annuity Unit
Value for the preceding Valuation Period.
TRANSFER OF ANNUITY UNITS -- After the Annuity Calculation Date, you may
transfer dollar amounts of Annuity Units from one Sub-Account to another. On the
day you make a transfer, the dollar amounts are equal for both Sub-Accounts and
the number of Annuity Units will be different. We will transfer the dollar
amount of your Annuity Units the day we receive your written request if received
before the close of the New York Stock Exchange. Otherwise, the transfer will be
made on the next Valuation Day.
OTHER PROGRAMS AVAILABLE
INVESTEASE-REGISTERED TRADEMARK- PROGRAM -- InvestEase-Registered Trademark-
is an electronic transfer program that allows you to have money automatically
transferred from your checking or savings account, and invested in your
Contract. It is available for Premium Payments made after your initial Premium
Payment. The minimum amount for each transfer is $50. You can elect to have
transfers occur either monthly or quarterly, and they can be made into any
Account available in your Contract.
AUTOMATIC INCOME PROGRAM -- The Automatic Income Program allows you to
Surrender up to 10% of your total Premium Payments each Contract Year. We can
Surrender from the Accounts you select systematically on a monthly, quarterly,
semiannual, or annual basis. The Automatic Income Program may change based on
your instructions after your seventh Contract Year.
ASSET ALLOCATION PROGRAM -- Asset Allocation is a program that allows you to
choose an allocation for your Sub-Accounts to help you reach your investment
goals. Some Contracts offer model allocations with pre-selected Sub-Accounts and
percentages that have been established for each type of investor -- ranging from
conservative to aggressive. Over time, Sub-Account performance may cause your
Contract's allocation percentages to change, but under the Asset Allocation
Program, your Sub-Account allocations are rebalanced to the percentages in the
current model you have chosen. You can transfer freely between allocation models
up to twelve times per year. You can also allocate a portion of your investment
to Sub-Accounts that may not be part of the model. You can only participate in
one asset allocation model at a time.
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ASSET REBALANCING -- Asset Rebalancing is another type of asset allocation
program in which you customize your Sub-Accounts to meet your investment needs.
You select the Sub-Accounts and the percentages you want allocated to each
Sub-Account. Based on the frequency you select, your model will automatically
rebalance to the original percentages chosen. You can transfer freely between
models up to twelve times per year. You can also allocate a portion of your
investment to Sub-Accounts that are not part of the model. You can only
participate in one asset rebalancing model at a time.
OTHER INFORMATION
ASSIGNMENT -- Ownership of this Contract is generally assignable. However,
if the Contract is issued to a tax qualified retirement plan, it is possible
that the ownership of the Contract may not be transferred or assigned. An
assignment of a Non-Qualified Contract may subject the Contract Values or
Surrender Value to income taxes and certain penalty taxes.
CONTRACT MODIFICATION -- The Annuitant may not be changed. However, if the
Annuitant is still living, the Contingent Annuitant may be changed at any time
prior to the Annuity Commencement Date by sending us written notice. We may
modify the Contract, but no modification will effect the amount or term of any
Contract unless a modification is required to conform the Contract to applicable
Federal or State law. No modification will effect the method by which Contract
Values are determined.
HOW CONTRACTS ARE SOLD -- Hartford Securities Distribution Company, Inc.
("HSD") serves as Principal Underwriter for the securities issued with respect
to the Separate Account. 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. HSD is an
affiliate of ours. Both HSD and Hartford are ultimately controlled by The
Hartford Financial Services Group, Inc. The principal business address of HSD is
the same as ours. The securities will be sold by individuals who represent us as
insurance agents and who are registered representatives of Broker-Dealers that
have entered into distribution agreements with HSD.
Commissions will be paid by Hartford and will not be more than 7% of Premium
Payments. From time to time, Hartford may pay or permit other promotional
incentives, in cash or credit or other compensation.
Broker-dealers or financial institutions are compensated according to a
schedule set forth by HSD and any applicable rules or regulations for variable
insurance compensation. Compensation is generally based on Premium Payments made
by policyholders or Contract Owners. This compensation is usually paid from the
sales charges described in this Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not effect the amounts paid by the policyholders or Contract
Owners to purchase, hold or Surrender variable insurance products.
LEGAL MATTERS AND EXPERTS
There are no material legal proceedings pending to which the Separate
Account is a party.
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,
Senior Vice President, General Counsel and Corporate Secretary, Hartford Life
and Annuity Insurance Company, P.O. Box 2999, Hartford, Connecticut 06104-2999.
The audited financial statements included in this registration statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory financial statements of
Hartford Life and Annuity Insurance Company which states the statutory financial
statements are presented in accordance with statutory accounting practices
prescribed or permitted by the National Association of Insurance Commissioners
and the State of Connecticut Insurance Department, and are not presented in
accordance with generally accepted accounting principles. The principal business
address of Arthur Andersen LLP is One Financial Plaza, Hartford, Connecticut
06103.
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MORE INFORMATION
You may call your Representative if you have any questions or write or call
us at the address below:
Hartford Life and Annuity Insurance Company
Attn: Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Telephone: (800) 862-6668 (Contract Owners)
(800) 862-7155 (Registered Representatives)
FEDERAL TAX CONSIDERATIONS
What are some of the federal tax consequences which affect these Contracts?
A. GENERAL
Since federal tax law is complex, the tax consequences of purchasing this
contract will vary depending on your situation. You may need tax or legal advice
to help you determine whether purchasing this contract is right for you.
Our general discussion of the tax treatment of this contract is based on our
understanding of federal income tax laws as they are currently interpreted. A
detailed description of all federal income tax consequences regarding the
purchase of this contract cannot be made in the prospectus. We also do not
discuss state, municipal or other tax laws that may apply to this contract. For
detailed information, you should consult with a qualified tax adviser familiar
with your situation.
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"). 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. Code Section 72 contains
provisions for contract owners which are not natural persons. Non-natural
persons include corporations, trusts, limited liability companies,
partnerships and other types of legal entities. The tax rules for
contracts owned by non-natural persons are different from the rules for
contracts owned by individuals. For example, the annual net increase in
the value of the contract is currently includible 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 are additional exceptions 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.
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If the contract owner is a non-natural person, the primary annuitant is
treated as the contract owner in applying mandatory distribution rules.
These rules require that certain distributions be made upon the death of the
contract owner. A change in the primary annuitant is also 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 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 ten percent 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 (not less frequently than
annually) for the life (or life expectancy) of the recipient (or
the joint lives or life expectancies of the recipient and the
recipient's designated 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
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 5
years after such death; and
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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.
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. Distributions must be made and payments must begin
within a year of the Contract Owner's 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.
This spousal continuation shall apply only once for this contract.
3. DIVERSIFICATION REQUIREMENTS. The Code requires that investments supporting
your contract be adequately diversified. Code Section 817 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. If a contract is not treated
as an annuity contract, the contract owner will be subject to income tax on
annual increases in cash value.
The Treasury Department's diversification regulations 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
the case of government securities, each government agency or instrumentality
is 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 still 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.
We monitor the diversification of investments in the separate accounts and
test for diversification as required by the Code. We intend to 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 separate
accounts supporting the contract must be considered to be owned by the
insurance company and not by the contract owner. It is unclear under what
circumstances an investor is considered to have enough control over the
assets in the separate account to be considered the owner of the assets for
tax purposes.
The IRS has issued several rulings discussing investor control. These
rulings say that certain 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.
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In its explanation of the diversification regulations, the Treasury
Department recognized 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 did not provide guidance
regarding investor control, and as of the date of this prospectus, guidance
has yet to be issued. We do not know if additional guidance will be issued.
If guidance is issued, we do not know if it will have a retroactive effect.
Due to the lack of specific guidance on investor control, there is some
uncertainty about when a contract owner is considered the owner of the
assets for tax purposes. We reserve the right to modify the contract, as
necessary, to prevent you from being considered the owner of assets in the
separate account.
D. FEDERAL INCOME TAX WITHHOLDING
Any portion of a distribution that is (or is deemed to be) current taxable
income to the Contract Owner will be subject to federal income tax withholding
and reporting under the Code. Generally, however, a Contract Owner may elect not
to have income taxes withheld or to have income taxes withheld at a different
rate by filing a completed election form with us. 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 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.
G. GENERATION-SKIPPING TRANSFERS
Under certain circumstances, the Internal Revenue Code may impose a
"generation skipping transfer tax" when all or part of an annuity is transferred
to, or a death benefit is paid to, an individual two or more generations younger
than the owner. Federal tax law may require us to deduct the tax from your
contract, or from any applicable payment, and pay it directly to the Internal
Revenue Service.
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APPENDIX I
INFORMATION REGARDING TAX-QUALIFIED RETIREMENT PLANS
This summary does not attempt to provide more than general information about
the federal income tax rules associated with use of a Contract by a
tax-qualified retirement plan. Because of the complexity of the federal tax
rules, owners, participants and beneficiaries are encouraged to consult their
own tax advisors as to specific tax consequences.
The federal tax rules applicable to owners of Contracts under tax-qualified
retirement plans vary according to the type of plan as well as the terms and
conditions of the plan itself. Contract owners, plan participants and
beneficiaries are cautioned that the rights and benefits of any person may be
controlled by the terms and conditions of the tax-qualified retirement plan
itself, regardless of the terms and conditions of a Contract. We are not bound
by the terms and conditions of such plans to the extent such terms conflict with
a Contract, unless we specifically consent to be bound.
Some tax-qualified retirement plans are subject to distribution and other
requirements that are not incorporated into our administrative procedures.
Contract owners, participants and beneficiaries are responsible for determining
that contributions, distributions and other transactions comply with applicable
law. Tax penalties may apply to transactions with respect to tax-qualified
retirement plans if applicable federal income tax rules and restrictions are not
carefully observed.
We do not currently offer the Contracts in connection with all of the types
of tax-qualified retirement plans discussed below and may not offer the
Contracts for all types of tax-qualified retirement plans in the future.
1. TAX-QUALIFIED PENSION OR PROFIT-SHARING PLANS
Eligible employers can establish certain tax-qualified pension and
profit-sharing plans under section 401 of the Code. Rules under
section 401(k) of the Code govern certain "cash or deferred arrangements"
under such plans. Rules under section 408(k) govern "simplified employee
pensions." Tax-qualified pension and profit-sharing plans are subject to
limitations on the amount that may be contributed, the persons who may be
eligible to participate and the time when distributions must commence.
Employers intending to use the Contracts in connection with tax-qualified
pension or profit-sharing plans should seek competent tax and other legal
advice.
2. TAX SHELTERED ANNUITIES UNDER SECTION 403(b)
Public schools and certain types of charitable, educational and scientific
organizations, as specified in section 501(c)(3) of the Code, can purchase
tax-sheltered annuity contracts for their employees. Tax-deferred
contributions can be made to tax-sheltered annuity contracts under
section 403(b) of the Code, subject to certain limitations. Generally, such
contributions may not exceed the lesser of $10,500 (indexed) or 20% of the
employee's "includable compensation" for such employee's most recent full
year of employment, subject to other adjustments. Special provisions under
the Code may allow some employees to elect a different overall limitation.
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:
- after the participating employee attains age 59 1/2;
- upon separation from service;
- upon death or disability; or
- in the case of hardship (and in the case of hardship, any income
attributable to such contributions may not be distributed).
Generally, the above restrictions do not apply to distributions attributable
to cash values or other amounts held under a section 403(b) contract as of
December 31, 1988.
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3. DEFERRED COMPENSATION PLANS UNDER SECTION 457
A governmental employer or a tax-exempt employer other than a governmental
unit can establish a Deferred Compensation Plan under section 457 of the
Code. For these purposes, a "governmental employer" is a State, a political
subdivision of a State, or an agency or an instrumentality of a State or
political subdivision of a State. Employees and independent contractors
performing services for a governmental or tax-exempt employer can elect to
have contributions made to a Deferred Compensation Plan of their employer in
accordance with the employer's plan and section 457 of the Code.
Deferred Compensation Plans that meet the requirements of section 457(b) of
the Code are called "eligible" Deferred Compensation Plans. Section 457(b)
limits the amount of contributions that can be made to an eligible Deferred
Compensation Plan on behalf of a participant. Generally, the limitation on
contributions is 33 1/3% of a participant's includable compensation
(typically 25% of gross compensation) or, for 2000, $8,000 (indexed),
whichever is less. The plan may provide for additional "catch-up"
contributions during the three taxable years ending before the year in which
the participant attains normal retirement age.
All of the assets and income of an eligible Deferred Compensation Plan of a
governmental employer must be held in trust for the exclusive benefit of
participants and their beneficiaries. For this purpose, custodial accounts
and certain annuity contracts are treated as trusts. The requirement of a
trust does not apply to amounts under a Deferred Compensation Plan of a
tax-exempt (non-governmental) employer. In addition, the requirement of a
trust does not apply to amounts under a Deferred Compensation Plan of a
governmental employer if the Deferred Compensation Plan is not an eligible
plan within the meaning of section 457(b) of the Code. In the absence of
such a trust, amounts under the plan will be subject to the claims of the
employer's general creditors.
In general, distributions from an eligible Deferred Compensation Plan are
prohibited under section 457 of the Code unless made after the participating
employee:
- attains age 70 1/2,
- separates from service,
- dies, or
- suffers an unforeseeable financial emergency as defined in the Code.
Under present federal tax law, amounts accumulated in a Deferred
Compensation Plan under section 457 of the Code cannot be transferred or
rolled over on a tax-deferred basis except for certain transfers to other
Deferred Compensation Plans under section 457 in limited cases.
4. INDIVIDUAL RETIREMENT ANNUITIES ("IRAS") UNDER SECTION 408
TRADITIONAL IRAS -- Eligible individuals can establish individual
retirement programs under section 408 of the Code through the purchase of an
IRA. Section 408 imposes limits with respect to IRAs, including limits on
the amount that may be contributed to an IRA, the amount of such
contributions that may be deducted from taxable income, the persons who may
be eligible to contribute to an IRA, and the time when distributions
commence from an IRA. Distributions from certain tax-qualified retirement
plans may be "rolled-over" to an IRA on a tax-deferred basis.
SIMPLE IRAS -- Eligible employees may establish SIMPLE IRAs in connection
with a SIMPLE IRA plan of an employer under section 408(p) of the Code.
Special rollover rules apply to SIMPLE IRAs. Amounts can be rolled over from
one SIMPLE IRA to another SIMPLE IRA. However, amounts can be rolled over
from a SIMPLE IRA to a Traditional IRA only after two years have expired
since the employee first commenced participation in the employer's SIMPLE
IRA plan. Amounts cannot be rolled over to a SIMPLE IRA from a qualified
plan or a Traditional IRA. Hartford is a non-designated financial
institution for purposes of the SIMPLE IRA rules.
ROTH IRAS -- Eligible individuals may establish Roth IRAs under
section 408A of the Code. Contributions to a Roth IRA are not deductible.
Subject to special limitations, a Traditional IRA may be converted into a
Roth IRA or a distribution from a Traditional IRA may be rolled over to a
Roth IRA. However, a conversion or a rollover from a Traditional IRA to a
Roth IRA is not excludable from gross income. If certain conditions are met,
qualified distributions from a Roth IRA are tax-free.
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5. FEDERAL TAX PENALTIES AND WITHHOLDING
Distributions from tax-qualified retirement plans are generally taxed as
ordinary income 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 that bears the same ratio as the after-tax
contributions bear to the expected return.
(a) PENALTY TAX ON EARLY DISTRIBUTIONS
Section 72(t) of the Code imposes an additional penalty tax equal to 10%
of the taxable portion of a distribution from certain tax-qualified
retirement plans. However, the 10% penalty tax does not apply to a
distributions that is:
- Made on or after the date on which the employee reaches age 59 1/2;
- Made to a beneficiary (or to the estate of the employee) on or after
the death of the employee;
- Attributable to the employee's becoming disabled (as defined in the
Code);
- Part of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of
the employee or the joint lives (or joint life expectancies) of the
employee and his or her designated beneficiary;
- Except in the case of an IRA, made to an employee after separation
from service after reaching age 55; or
- Not greater than the amount allowable as a deduction to the employee
for eligible medical expenses during the taxable year.
In addition, the 10% penalty tax does not apply to a distribution from an
IRA that is:
- Made after separation from employment to an unemployed IRA owner for
health insurance premiums, if certain conditions are met;
- Not in excess of the amount of certain qualifying higher education
expenses, as defined by section 72(t)(7) of the Code; or
- A qualified first-time homebuyer distribution meeting the requirements
specified at section 72(t)(8) of the Code.
If you are a participant in a SIMPLE IRA plan, you should be aware that
the 10% penalty tax is increased to 25% with respect to non-exempt early
distributions made from your SIMPLE IRA during the first two years
following the date you first commenced participation in any SIMPLE IRA
plan of your employer.
(b) MINIMUM DISTRIBUTION PENALTY TAX
If the amount distributed is less than the minimum required distribution for
the year, the Participant is subject to a 50% penalty tax on the amount that
was not properly distributed.
An individual's interest in a tax-qualified retirement plan generally must
be distributed, or begin to be distributed, not later than the Required
Beginning Date. Generally, the Required Beginning Date is April 1 of the
calendar year following the later of:
- the calendar year in which the individual attains age 70 1/2; or
- the calendar year in which the individual retires from service with the
employer sponsoring the plan.
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 the Required Beginning Date over:
- the life of the Participant or the lives of the Participant and the
Participant's designated beneficiary, or
- over a period not extending beyond the life expectancy of the Participant
or the joint life expectancy of the Participant and the Participant's
designated beneficiary.
37
<PAGE>
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 and
distribution is over the life of such 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.
(c) WITHHOLDING
In general, regular wage withholding rules apply to distributions from IRAs
and plans described in section 457 of the Code. Periodic distributions from
other tax-qualified retirement plans that are made for a specified period of
10 or more years or for the life or life expectancy of the participant (or
the joint lives or life expectancies of the participant and beneficiary) are
generally subject to federal income tax withholding as if the recipient were
married claiming three exemptions. 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.
Mandatory federal income tax withholding at a flat rate of 20% will
generally apply to other distributions from such other tax-qualified
retirement plans unless such distributions are:
- the non-taxable portion of the distribution;
- required minimum distributions; or
- direct transfer distributions.
Direct transfer distributions are direct payments to an IRA or to another
eligible retirement plan under Code section 401(a)(31).
Certain states require withholding of state taxes when federal income tax is
withheld.
38
<PAGE>
TABLE OF CONTENTS TO
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
SECTION
- -------
<S> <C>
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE
COMPANY....................................................
SAFEKEEPING OF ASSETS.......................................
INDEPENDENT PUBLIC ACCOUNTANTS..............................
DISTRIBUTION OF CONTRACTS...................................
CALCULATION OF YIELD AND RETURN.............................
PERFORMANCE COMPARISONS.....................................
FINANCIAL STATEMENTS........................................
</TABLE>
39
<PAGE>
THIS FORM MUST BE COMPLETED FOR ALL TAX-SHELTERED ANNUITIES.
SECTION 403(b)(11) ACKNOWLEDGMENT FORM
The variable annuity contract that you have recently purchased is subject to
certain restrictions imposed by the Tax Reform Act of 1986. Contributions to the
Contract after December 31, 1988 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. Separated from service,
c. Died, or
d. Become disabled.
Distributions of post December 31, 1988 contributions (excluding any income
thereon) may also be made if you have experienced a financial hardship.
Also, there may be a 10% penalty tax for distributions made prior to age
59 1/2 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 Pathmaker Variable Annuity. Please refer to
your Plan.
Please complete the following and return to:
Hartford Life and Annuity Insurance Company
Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
- --------------------------------------------------------------------------------
Name of Contract Owner/Participant: ___________________________________________
Address: ______________________________________________________________________
City or Plan/School District: _________________________________________________
Date: _________________________________________________________________________
Contract No.: _________________________________________________________________
Signature: ____________________________________________________________________
<PAGE>
To obtain a Statement of Additional Information, please complete the form below
and mail to:
Hartford Life and Annuity Insurance Company
Attn: Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Please send a Statement of Additional Information to me at the following
address:
- -------------------------------------------------------
Name
- -------------------------------------------------------
Address
- -------------------------------------------------------
City/State Zip Code
<PAGE>
PART B
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT SIX
HARTFORD PATHMAKER VARIABLE ANNUITY
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 Hartford Life and Annuity
Insurance Company, Attn: Investment Product Services, P.O. Box 5085, Hartford,
Connecticut 06104-5085.
Date of Prospectus: May 1, 2000
Date of Statement of Additional Information: May 1, 2000
33-86330
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
DESCRIPTION OF HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY.......................................................................................
SAFEKEEPING OF ASSETS.....................................................................................
INDEPENDENT PUBLIC ACCOUNTANTS............................................................................
DISTRIBUTION OF CONTRACTS.................................................................................
CALCULATION OF YIELD AND RETURN...........................................................................
PERFORMANCE COMPARISONS...................................................................................
FINANCIAL STATEMENTS......................................................................................
</TABLE>
<PAGE>
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Hartford Life and Annuity Insurance Company 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, the District of Columbia and
Puerto Rico, except New York. On January 1, 1998, Hartford's name changed from
ITT Hartford Life and Annuity Insurance Company to Hartford Life and Annuity
Insurance Company. We were originally incorporated under the laws of Wisconsin
on January 9, 1956, and subsequently redomiciled to Connecticut. Our offices are
located in Simsbury, Connecticut; however, our mailing address is P.O. Box 2999,
Hartford, Connecticut 06104-2999. We are ultimately controlled by The
Hartford Financial Services Group, Inc., one of the largest financial service
providers in the United States.
HARTFORD'S RATINGS
<TABLE>
<CAPTION>
- ------------------------------------------- ---------------------- -------------- ------------------------------------
Rating Agency Effective Rating Basis of Rating
Date of Rating
- ------------------------------------------- ---------------------- -------------- ------------------------------------
<S> <C> <C> <C>
A.M. Best and Company, Inc. 1/1/99 A+ Financial performance
- ------------------------------------------- ---------------------- -------------- ------------------------------------
Standard & Poor's 8/1/99 AA Insurer financial strength
- ------------------------------------------- ---------------------- -------------- ------------------------------------
Duff & Phelps 7/1/99 AA+ Claims paying ability
- ------------------------------------------- ---------------------- -------------- ------------------------------------
</TABLE>
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 registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory financial statements of
Hartford Life and Annuity Insurance Company which states the statutory financial
statements are presented in accordance with statutory accounting practices
prescribed or permitted by the National Association of Insurance Commissioners
and the State of Connecticut Insurance Department, and are not presented in
accordance with generally accepted accounting principles. The principal business
address of Arthur Andersen LLP is One Financial Plaza, Hartford, Connecticut
06103.
<PAGE>
DISTRIBUTION OF CONTRACTS
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account. 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. HSD is an affiliate of ours. Both HSD
and Hartford are ultimately controlled by The Hartford Financial Services Group,
Inc. The principal business address of HSD is the same as ours. The securities
will be sold by individuals who represent us as insurance agents and who are
registered representatives of Broker-Dealers that have entered into distribution
agreements with HSD.
Commissions will be paid by Hartford and will not be more than 7% of Premium
Payments. From time to time, Hartford may pay or permit other promotional
incentives, in cash or credit or other compensation.
Broker-dealers or financial institutions are compensated according to a schedule
set forth by HSD and any applicable rules or regulations for variable insurance
compensation. Compensation is generally based on Premium Payments made by
policyholders or Contract Owners. This compensation is usually paid from the
sales charges described in the prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not effect the amounts paid by the policyholders or Contract
Owners to purchase, hold or Surrender variable insurance products.
The Contract may be sold directly to certain individuals under certain
circumstances that do not involve payment of any sales compensation to a
registered representative. In such case, Hartford will credit the Contract with
an additional 5.0% of the Premium Payment. This additional percentage of Premium
Payment in no way affects present or future charges, rights, benefits or current
values of other Contract Owners. The following class of individuals are eligible
for this feature: (1) current or retired officers, directors, trustees and
employees (and their families) of the ultimate parent and affiliates of
Hartford; and (2) employees and registered representatives (and their families)
of registered broker-dealers (or their financial institutions) that have a sales
agreement with Hartford and its principal underwriter to sell the Contracts.
Hartford currently pays HSD underwriting commissions for its role as Principal
Underwriter of all variable annuities associated with this Separate Account.
For the past three years, the aggregate dollar amount of underwriting
commissions paid to and
<PAGE>
retained by HSD in its role as Principal Underwriter has been: 1999: $776,371;
1998: $1,976,242; and 1997: $2,492,803. HSD has retained none of these
commissions.
CALCULATION OF YIELD AND RETURN
YIELD OF A MONEY MARKET SUB-ACCOUNT. As summarized in the prospectus under the
heading "Performance Related Information," the yield of a Money Market
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 is 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:
365/7
Effective Yield = [(Base Period Return + 1) ] - 1
A MONEY MARKET 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
CURRENT YIELD AND EFFECTIVE YIELD REFLECT RECURRING CHARGES ON THE SEPARATE
ACCOUNT LEVEL, INCLUDING THE MAXIMUM ANNUAL MAINTENANCE FEE.
YIELD AND EFFECTIVE YIELD FOR THE SEVEN DAY PERIOD ENDING DECEMBER 31, 1999
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------------------------- -------------------------------------
SUB-ACCOUNT YIELD EFFECTIVE YIELD
- ---------------------------------------- ------------------------------------- -------------------------------------
<S> <C> <C>
Putnam Money Market 4.09% 4.17%
- ---------------------------------------- ------------------------------------- -------------------------------------
</TABLE>
YIELDS OF SUB-ACCOUNTS. As summarized in the prospectus under the heading
"Performance Related Information," yields of Sub-Accounts will be computed by
annualizing a recent month's net investment income, divided by a Fund share's
net asset value on the last trading day of that month. Net changes in the value
of a hypothetical account will assume the change in the underlying mutual fund's
"net asset value per share" for the same period in addition to the daily expense
charge assessed, at the sub-account level for the respective period. The
Sub-Accounts' yields will vary from time to time depending upon market
conditions and, the composition of the underlying funds' portfolios. Yield
should also be considered relative to changes in the value of the Sub-Accounts'
shares and to the relative risks associated with the investment objectives and
policies of the underlying Fund.
<PAGE>
THE YIELD REFLECTS RECURRING CHARGES ON THE SEPARATE ACCOUNT LEVEL, INCLUDING
THE ANNUAL MAINTENANCE FEE.
Yield calculations of the Sub-Accounts used for illustration purposes reflect
the interest earned by the Sub-Accounts, less applicable asset charges assessed
against a Contract Owner's account over the base period. Yield quotations based
on a 30-day period were computed by dividing the dividends and interest earned
during the period by the maximum offering price per unit on the last day of the
period, according to the following formula:
Example:
6
Current Yield Formula for the Sub-Account 2[((A-B)/(CD) + 1) - 1]
Where A = Dividends and interest earned during the period.
B = Expenses accrued for the period (net of reimbursements).
C = The average daily number of units outstanding during the
period that were entitled to receive dividends.
D = The maximum offering price per unit on the last day of the
period.
YIELD QUOTATION BASED ON A 30 DAY PERIOD ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------- --------------------------------------
SUB-ACCOUNT YIELD
- ----------------------------------------------------------------------------- --------------------------------------
<S> <C>
Putnam Growth and Income 0.24%
- ----------------------------------------------------------------------------- --------------------------------------
Putnam Global Asset Allocation 0.73%
- ----------------------------------------------------------------------------- --------------------------------------
Putnam Income 5.67%
- ----------------------------------------------------------------------------- --------------------------------------
Putnam Diversified Income 7.27%
- ----------------------------------------------------------------------------- --------------------------------------
</TABLE>
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.
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. Standardized total return will be calculated since the inception of
the Separate Account 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.
The following are the standardized average annual total return quotations for
the Sub-Accounts.
<PAGE>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
INCEPTION
SUB-ACCOUNT DATE 1 YEAR 5 YEAR 10 YEAR SINCE INCEPTION
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
One Group Investment Trust Bond 5/1/97 -12.87% N/A N/A -1.30%
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
One Group Investment Trust 4/3/95 -2.38% N/A N/A 13.52%
Diversified Equity
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
One Group Investment Trust 4/3/95 13.66% N/A N/A 21.43%
Large Cap
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
One Group Investment Trust 5/1/97 -13.21% N/A N/A -2.91%
Mid-Cap Value
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
One Group Investment Trust 4/3/95 -1.03% N/A N/A 11.43%
Diversified Mid-Cap
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
Putnam Diversified Income 4/3/95 -9.65% N/A N/A 0.96%
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
Putnam Global Asset Allocation 4/3/95 0.30% N/A N/A 12.02%
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
Putnam Global Growth 4/3/95 52.71% N/A N/A 24.90%
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
Putnam Growth and Income 5/1/97 -9.83% N/A N/A 6.32%
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
Putnam International Growth 5/1/97 47.91% N/A N/A 25.95%
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
Putnam Money Market 5/1/97 -6.59% N/A N/A -2.00%
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
Putnam New Opportunities 5/1/97 57.00% N/A N/A 39.24%
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
Putnam Income 4/3/95 -13.43% N/A N/A 1.37%
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
</TABLE>
In addition to the standardized total return, the Sub-Account may advertise a
non-standardized total return. This figure will usually be calculated for one
year, five years, and ten years or other periods. Non-standardized total return
is measured in the same manner as the standardized total return described above,
except that the contingent deferred sales charge and the Annual Maintenance Fee
are not deducted. Therefore, non-standardized total return for a Sub-Account is
higher than standardized total return for a Sub-Account.
The following are the non-standardized average annual total return quotations
for the Sub-Accounts.
<PAGE>
NON-STANDARDIZED ANNUALIZED TOTAL RETURN THAT PRE-DATE THE INCEPTION DATE OF THE
SEPARATE ACCOUNT FOR YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
INCEPTION
SUB-ACCOUNT DATE 1 YEAR 5 YEAR 10 YEAR SINCE INCEPTION
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
One Group Investment Trust Bond 5/1/97 -2.87% N/A N/A 4.20%
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
One Group Investment Trust 4/3/95 7.62% N/A N/A 16.40%
Diversified Equity
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
One Group Investment Trust 4/3/95 23.66% N/A N/A 24.18%
Large Cap
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
One Group Investment Trust 5/1/97 -3.21% N/A N/A 2.55%
Mid-Cap Value
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
One Group Investment Trust 4/3/95 8.97% N/A N/A 14.45%
Diversified Mid-Cap
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
Putnam Diversified Income 4/3/95 0.35% N/A N/A 4.64%
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
Putnam Global Asset Allocation 4/3/95 10.30% N/A N/A 15.01%
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
Putnam Global Growth 4/3/95 62.71% N/A N/A 27.70%
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
Putnam Growth and Income 5/1/97 0.17% N/A N/A 11.16%
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
Putnam International Growth 5/1/97 57.91% N/A N/A 30.41%
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
Putnam Money Market 5/1/97 3.41% N/A N/A 3.64%
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
Putnam New Opportunities 5/1/97 67.00% N/A N/A 43.25%
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
Putnam Income 4/3/95 -3.43% N/A N/A 5.07%
- --------------------------------- -------------- -------------- --------------- ---------------- ------------------
</TABLE>
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.
<PAGE>
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 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
<PAGE>
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.
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>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT SIX AND TO THE
OWNERS OF UNITS OF INTEREST THEREIN:
We have audited the accompanying statements of assets and liabilities of
Hartford Life and Annuity Insurance Company Separate Account Six (Putnam Global
Growth, Putnam Growth and Income, Putnam Global Asset Allocation, Putnam Income,
Putnam New Opportunities, Putnam Money Market, Putnam Diversified Income, Putnam
International Growth, One Group Investment Trust Bond, One Group Investment
Trust Diversified Equity, One Group Investment Trust Diversified Mid Cap, One
Group Investment Trust Large Cap Growth, and One Group Investment Trust Mid Cap
Value sub-accounts), (collectively, the Account) as of December 31, 1999, and
the related statements of operations and the statements of changes in net assets
for the periods presented. These financial statements are the responsibility of
the Account's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Account as of December 31,
1999, and the results of its operations and the changes in its net assets for
the periods presented in conformity with generally accepted accounting
principles.
Hartford, Connecticut
February 17, 2000 ARTHUR ANDERSEN LLP
____________________________________ SA-1 ______________________________________
<PAGE>
SEPARATE ACCOUNT SIX
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
PUTNAM
PUTNAM GROWTH
GLOBAL GROWTH AND INCOME
SUB-ACCOUNT SUB-ACCOUNT
------------- -----------
<S> <C> <C>
ASSETS:
Investments:
Putnam VT Global
Growth Fund
Shares 58,363
Cost $978,520
Market Value....... $1,779,481 --
Putnam VT Growth and
Income Fund
Shares 152,685
Cost $4,203,492
Market Value....... -- $4,091,958
Putnam VT Global
Asset Allocation
Fund
Shares 102,690
Cost $1,506,670
Market Value....... -- --
Putnam VT Income Fund
Shares 107,882
Cost $1,401,981
Market Value....... -- --
Putnam VT New
Opportunities Fund
Shares 271,177
Cost $5,406,633
Market Value....... -- --
Putnam VT Money
Market Fund
Shares 2,446,311
Cost $2,446,311
Market Value....... -- --
Putnam VT Diversified
Income Fund
Shares 95,589
Cost $1,005,096
Market Value....... -- --
Putnam VT
International Growth
Fund
Shares 1,155,338
Cost $13,435,013
Market Value....... -- --
Due from Hartford Life
and Annuity Insurance
Company............... -- 4,844
Receivable for fund
shares sold........... 83 --
---------- ----------
Total Assets........... 1,779,564 4,096,802
---------- ----------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company............... 83 --
Payable for fund shares
purchased............. -- 4,844
---------- ----------
Total Liabilities...... 83 4,844
---------- ----------
Net Assets (variable
annuity contract
liabilities).......... $1,779,481 $4,091,958
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
____________________________________ SA-2 _____________________________________
<PAGE>
<TABLE>
<CAPTION>
PUTNAM PUTNAM PUTNAM PUTNAM PUTNAM
GLOBAL ASSET PUTNAM NEW MONEY DIVERSIFIED INTERNATIONAL
ALLOCATION INCOME OPPORTUNITIES MARKET INCOME GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Putnam VT Global
Growth Fund
Shares 58,363
Cost $978,520
Market Value....... -- -- -- -- -- --
Putnam VT Growth and
Income Fund
Shares 152,685
Cost $4,203,492
Market Value....... -- -- -- -- -- --
Putnam VT Global
Asset Allocation
Fund
Shares 102,690
Cost $1,506,670
Market Value....... $2,013,742 -- -- -- -- --
Putnam VT Income Fund
Shares 107,882
Cost $1,401,981
Market Value....... -- $1,350,688 -- -- -- --
Putnam VT New
Opportunities Fund
Shares 271,177
Cost $5,406,633
Market Value....... -- -- $11,807,028 -- -- --
Putnam VT Money
Market Fund
Shares 2,446,311
Cost $2,446,311
Market Value....... -- -- -- $2,446,311 -- --
Putnam VT Diversified
Income Fund
Shares 95,589
Cost $1,005,096
Market Value....... -- -- -- -- $949,201 --
Putnam VT
International Growth
Fund
Shares 1,155,338
Cost $13,435,013
Market Value....... -- -- -- -- -- $25,013,057
Due from Hartford Life
and Annuity Insurance
Company............... -- -- -- -- -- --
Receivable for fund
shares sold........... 77 52 11,296 126 36 32,728
---------- ---------- ----------- ---------- -------- -----------
Total Assets........... 2,013,819 1,350,740 11,818,324 2,446,437 949,237 25,045,785
---------- ---------- ----------- ---------- -------- -----------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company............... 76 52 11,298 -- 37 32,730
Payable for fund shares
purchased............. -- -- -- -- -- --
---------- ---------- ----------- ---------- -------- -----------
Total Liabilities...... 76 52 11,298 -- 37 32,730
---------- ---------- ----------- ---------- -------- -----------
Net Assets (variable
annuity contract
liabilities).......... $2,013,743 $1,350,688 $11,807,026 $2,446,437 $949,200 $25,013,055
========== ========== =========== ========== ======== ===========
</TABLE>
____________________________________ SA-3 _____________________________________
<PAGE>
SEPARATE ACCOUNT SIX
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
ONE GROUP
INVESTMENT TRUST
BOND
SUB-ACCOUNT
----------------
<S> <C>
ASSETS:
Investments:
One Group Investment
Trust Bond Portfolio
Shares 6,157,795
Cost $63,666,463
Market Value....... $61,454,794
One Group Investment
Trust Diversified
Equity Portfolio
Shares 3,610,027
Cost $55,398,533
Market Value....... --
One Group Investment
Trust Mid Cap
Portfolio
Shares 1,215,616
Cost $16,124,914
Market Value....... --
One Group Investment
Trust Large Cap
Growth Portfolio
Shares 1,067,080
Cost $18,023,031
Market Value....... --
One Group Investment
Trust Mid Cap Value
Portfolio
Shares 2,262,042
Cost $24,574,390
Market Value....... --
Due from Hartford Life
and Annuity Insurance
Company............... --
Receivable for fund
shares sold........... 79,583
-----------
Total Assets........... 61,534,377
-----------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company............... 80,118
Payable for fund shares
purchased............. --
-----------
Total Liabilities...... 80,118
-----------
Net Assets (variable
annuity contract
liabilities).......... $61,454,259
===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
____________________________________ SA-4 _____________________________________
<PAGE>
<TABLE>
<CAPTION>
ONE GROUP ONE GROUP ONE GROUP
ONE GROUP INVESTMENT TRUST INVESTMENT TRUST INVESTMENT TRUST
INVESTMENT TRUST DIVERSIFIED LARGE CAP MID CAP
DIVERSIFIED EQUITY MID CAP GROWTH VALUE
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------ ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
One Group Investment
Trust Bond Portfolio
Shares 6,157,795
Cost $63,666,463
Market Value....... -- -- --
One Group Investment
Trust Diversified
Equity Portfolio
Shares 3,610,027
Cost $55,398,533
Market Value....... $63,428,180 -- -- --
One Group Investment
Trust Mid Cap
Portfolio
Shares 1,215,616
Cost $16,124,914
Market Value....... -- $18,453,046 -- --
One Group Investment
Trust Large Cap
Growth Portfolio
Shares 1,067,080
Cost $18,023,031
Market Value....... -- -- $28,341,649 --
One Group Investment
Trust Mid Cap Value
Portfolio
Shares 2,262,042
Cost $24,574,390
Market Value....... -- -- -- $23,502,621
Due from Hartford Life
and Annuity Insurance
Company............... -- -- -- --
Receivable for fund
shares sold........... 92,192 21,496 34,879 32,284
----------- ----------- ----------- -----------
Total Assets........... 63,520,372 18,474,542 28,376,528 23,534,905
----------- ----------- ----------- -----------
LIABILITIES:
Due to Hartford Life
and Annuity Insurance
Company............... 82,044 21,492 31,008 32,289
Payable for fund shares
purchased............. -- -- -- --
----------- ----------- ----------- -----------
Total Liabilities...... 82,044 21,492 31,008 32,289
----------- ----------- ----------- -----------
Net Assets (variable
annuity contract
liabilities).......... $63,438,328 $18,453,050 $28,345,520 $23,502,616
=========== =========== =========== ===========
</TABLE>
____________________________________ SA-5 _____________________________________
<PAGE>
SEPARATE ACCOUNT SIX
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMEMBER 31, 1999
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------- ---------- ------------
<S> <C> <C> <C>
DEFERRED ANNUITY CONTRACTS IN THE
ACCUMULATION PERIOD:
Putnam VT Global Growth Fund..... 55,734 $31.928296 $ 1,779,481
Putnam VT Growth and Income
Fund............................ 308,369 13.262071 4,089,610
Putnam VT Global Asset Allocation
Fund............................ 103,542 19.423564 2,011,152
Putnam VT Income Fund............ 106,790 12.648066 1,350,688
Putnam VT New Opportunities
Fund............................ 452,194 26.094337 11,799,697
Putnam VT Money Market Fund...... 2,223,809 1.100111 2,446,437
Putnam VT Diversified Income
Fund............................ 76,542 12.401034 949,200
Putnam VT International Growth
Fund............................ 1,230,231 20.308624 24,984,299
One Group Investment Trust Bond
Portfolio....................... 5,503,251 11.160398 61,418,471
One Group Investment Trust
Diversified Equity Portfolio.... 3,082,782 20.562599 63,390,018
One Group Investment Trust
Diversified Mid Cap Portfolio... 971,492 18.982582 18,441,433
One Group Investment Trust Large
Cap Growth Portfolio............ 1,012,583 27.966253 28,318,143
One Group Investment Trust Mid
Cap Value Portfolio............. 2,196,338 10.694248 23,488,181
------------
SUB-TOTAL........................ 244,466,810
------------
ANNUITY CONTRACTS IN THE ANNUITY
PERIOD:
Putnam VT Growth and Income
Fund............................ 177 13.262071 2,348
Putnam VT Global Asset Allocation
Fund............................ 133 19.423564 2,591
Putnam VT New Opportunities
Fund............................ 281 26.094337 7,329
Putnam VT International Growth
Fund............................ 1,416 20.308624 28,756
One Group Investment Trust Bond
Portfolio....................... 3207 11.160398 35,788
One Group Investment Trust
Diversified Equity Portfolio.... 2,349 20.562599 48,310
One Group Investment Trust
Diversified Mid Cap Portfolio... 612 18.982582 11,617
One Group Investment Trust Large
Cap Growth Portfolio............ 979 27.966253 27,377
One Group Investment Trust Mid
Cap Value Portfolio............. 1350 10.694248 14,435
------------
SUB-TOTAL........................ 178,551
------------
GRAND TOTAL:....................... $244,645,361
============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
____________________________________ SA-6 _____________________________________
<PAGE>
[This page intentionally left blank]
<PAGE>
SEPARATE ACCOUNT SIX
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PUTNAM
GLOBAL GROWTH
SUB-ACCOUNT
-------------
<S> <C>
INVESTMENT INCOME:
Dividends.............. $ 4,510
EXPENSES:
Mortality and expense
undertakings.......... (14,752)
--------
Net investment (loss)
income.............. (10,242)
--------
CAPITAL GAINS INCOME..... 93,915
--------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 6,480
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 579,859
--------
Net gain (loss) on
investments......... 586,339
--------
Net increase
(decrease) in net
assets resulting
from operations..... $670,012
========
</TABLE>
* Formerly Putnam U.S. Government and High Quality Bond Sub-Account. Change
effective on April 9, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
____________________________________ SA-8 _____________________________________
<PAGE>
<TABLE>
<CAPTION>
PUTNAM PUTNAM PUTNAM PUTNAM PUTNAM PUTNAM
GROWTH GLOBAL ASSET PUTNAM NEW MONEY DIVERSIFIED INTERNATIONAL
AND INCOME ALLOCATION INCOME OPPORTUNITIES MARKET INCOME GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT * SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------ ------------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 41,815 $ 38,938 $ 68,431 $ -- $ 92,724 $ 73,752 $ --
EXPENSES:
Mortality and expense
undertakings.......... (43,722) (24,100) (16,437) (118,806) (24,375) (12,476) (287,999)
--------- -------- --------- ---------- -------- -------- -----------
Net investment (loss)
income.............. (1,907) 14,838 51,994 (118,806) 68,349 61,276 (287,999)
--------- -------- --------- ---------- -------- -------- -----------
CAPITAL GAINS INCOME..... 208,666 109,253 20,416 114,741 -- -- --
--------- -------- --------- ---------- -------- -------- -----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (2,649) 6,175 (1,066) 996,977 -- (7,289) 2,343,734
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (248,252) 64,903 (115,946) 4,543,031 -- (51,503) 9,012,331
--------- -------- --------- ---------- -------- -------- -----------
Net gain (loss) on
investments......... (250,901) 71,078 (117,012) 5,540,008 -- (58,792) 11,356,065
--------- -------- --------- ---------- -------- -------- -----------
Net increase
(decrease) in net
assets resulting
from operations..... $ (44,142) $195,169 $ (44,602) $5,535,943 $ 68,349 $ 2,484 $11,068,066
========= ======== ========= ========== ======== ======== ===========
</TABLE>
* Formerly Putnam U.S. Government and High Quality Bond Sub-Account. Change
effective on April 9, 1999.
____________________________________ SA-9 _____________________________________
<PAGE>
SEPARATE ACCOUNT SIX
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
ONE GROUP
INVESTMENT TRUST
BOND
SUB-ACCOUNT**
----------------
<S> <C>
INVESTMENT INCOME:
Dividends.............. $ 3,432,756
EXPENSES:
Mortality and expense
undertakings.......... (743,137)
-----------
Net investment income
(loss).............. 2,689,619
-----------
CAPITAL GAINS INCOME..... --
-----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized (loss)
gain on security
transactions.......... (18,051)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (4,262,648)
-----------
Net (loss) gain on
investments......... (4,280,699)
-----------
Net (decrease)
increase in net
assets resulting
from operations..... $(1,591,080)
===========
</TABLE>
** Formerly Pegasus Bond Fund Sub-Account, Pegasus Growth & Value Fund
Sub-Account, Pegasus Mid-Cap Opportunity Fund Sub-Account, Pegasus Growth
Fund Sub-Account, and Pegasus Intrinsic Value Fund Sub-Account, respectively.
Change effective on May 1, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
___________________________________ SA-10 _____________________________________
<PAGE>
<TABLE>
<CAPTION>
ONE GROUP ONE GROUP ONE GROUP
ONE GROUP INVESTMENT TRUST INVESTMENT TRUST INVESTMENT TRUST
INVESTMENT TRUST DIVERSIFIED LARGE CAP MID CAP
DIVERSIFIED EQUITY MID CAP GROWTH VALUE
SUB-ACCOUNT** SUB-ACCOUNT** SUB-ACCOUNT** SUB-ACCOUNT**
------------------ ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 325,763 $ 27,333 $ 34,528 $ 240,197
EXPENSES:
Mortality and expense
undertakings.......... (753,532) (213,881) (323,739) (274,716)
---------- ---------- ---------- ---------
Net investment income
(loss).............. (427,769) (186,548) (289,211) (34,519)
---------- ---------- ---------- ---------
CAPITAL GAINS INCOME..... 5,744,140 1,240,250 4,807,777 --
---------- ---------- ---------- ---------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized (loss)
gain on security
transactions.......... 148,991 225,565 369,717 136,211
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (816,410) 352,236 920,641 (552,866)
---------- ---------- ---------- ---------
Net (loss) gain on
investments......... (667,419) 577,801 1,290,358 (416,655)
---------- ---------- ---------- ---------
Net (decrease)
increase in net
assets resulting
from operations..... $4,648,952 $1,631,503 $5,808,924 $(451,174)
========== ========== ========== =========
</TABLE>
** Formerly Pegasus Bond Fund Sub-Account, Pegasus Growth & Value Fund
Sub-Account, Pegasus Mid-Cap Opportunity Fund Sub-Account, Pegasus Growth
Fund Sub-Account, and Pegasus Intrinsic Value Fund Sub-Account, respectively.
Change effective on May 1, 1999.
___________________________________ SA-11 _____________________________________
<PAGE>
SEPARATE ACCOUNT SIX
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PUTNAM
PUTNAM GROWTH
GLOBAL GROWTH AND INCOME
SUB-ACCOUNT SUB-ACCOUNT
------------- -----------
<S> <C> <C>
OPERATIONS:
Net investment (loss)
income................ $ (10,242) $ (1,907)
Capital gains income... 93,915 208,666
Net realized gain
(loss) on security
transactions.......... 6,480 (2,649)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 579,859 (248,252)
---------- ----------
Net increase (decrease)
in net assets
resulting from
operations............ 670,012 (44,142)
---------- ----------
UNIT TRANSACTIONS:
Purchases.............. 4,626 145,483
Net transfers.......... 89,406 1,497,903
Surrenders for benefit
payments and fees..... (61,383) (186,705)
Net annuity
transactions.......... -- (374)
---------- ----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 32,649 1,456,307
---------- ----------
Total increase
(decrease) in net
assets................ 702,661 1,412,165
NET ASSETS:
Beginning of Year...... 1,076,820 2,679,793
---------- ----------
End of Year............ $1,779,481 $4,091,958
========== ==========
</TABLE>
* Formerly Putnam U.S. Government and High Quality Bond Sub-Account. Change
effective on April 9, 1999.
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PUTNAM
PUTNAM GROWTH
GLOBAL GROWTH AND INCOME
SUB-ACCOUNT SUB-ACCOUNT
------------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 9,537 $ 218
Capital gains income... 111,701 185,466
Net realized gain
(loss) on security
transactions.......... 291 (452)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 102,969 66,310
---------- ----------
Net increase (decrease)
in net assets
resulting from
operations............ 224,498 251,542
---------- ----------
UNIT TRANSACTIONS:
Purchases.............. 46,437 793,410
Net transfers.......... 78,461 442,997
Surrenders for benefit
payments and fees..... (31,351) (83,110)
Net annuity
transactions.......... -- 2,449
---------- ----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 93,547 1,155,746
---------- ----------
Total increase
(decrease) in net
assets................ 318,045 1,407,288
NET ASSETS:
Beginning of Year...... 758,775 1,272,505
---------- ----------
End of Year............ $1,076,820 $2,679,793
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
___________________________________ SA-12 _____________________________________
<PAGE>
<TABLE>
<CAPTION>
PUTNAM PUTNAM PUTNAM PUTNAM PUTNAM
GLOBAL ASSET PUTNAM NEW MONEY DIVERSIFIED INTERNATIONAL
ALLOCATION INCOME OPPORTUNITIES MARKET INCOME GROWTH
SUB-ACCOUNT SUB-ACCOUNT * SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment (loss)
income................ $ 14,838 $ 51,994 $ (118,806) $ 68,349 $ 61,276 $ (287,999)
Capital gains income... 109,253 20,416 114,741 -- -- --
Net realized gain
(loss) on security
transactions.......... 6,175 (1,066) 996,977 -- (7,289) 2,343,734
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 64,903 (115,946) 4,543,031 -- (51,503) 9,012,331
---------- ---------- ----------- ---------- --------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 195,169 (44,602) 5,535,943 68,349 2,484 11,068,066
---------- ---------- ----------- ---------- --------- -----------
UNIT TRANSACTIONS:
Purchases.............. 33,517 16,795 202,431 192,372 10,402 443,861
Net transfers.......... (154,589) 257,986 (1,493,996) 1,163,173 130,929 (5,744,538)
Surrenders for benefit
payments and fees..... (110,974) (93,102) (748,227) (647,370) (109,661) (1,834,582)
Net annuity
transactions.......... 2,398 -- (525) -- -- (2,512)
---------- ---------- ----------- ---------- --------- -----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (229,648) 181,679 (2,040,317) 708,175 31,670 (7,137,771)
---------- ---------- ----------- ---------- --------- -----------
Total increase
(decrease) in net
assets................ (34,479) 137,077 3,495,626 776,524 34,154 3,930,295
NET ASSETS:
Beginning of Year...... 2,048,222 1,213,611 8,311,400 1,669,913 915,046 21,082,760
---------- ---------- ----------- ---------- --------- -----------
End of Year............ $2,013,743 $1,350,688 $11,807,026 $2,446,437 $949,200 $25,013,055
========== ========== =========== ========== ========= ===========
</TABLE>
* Formerly Putnam U.S. Government and High Quality Bond Sub-Account. Change
effective on April 9, 1999.
<TABLE>
<CAPTION>
PUTNAM PUTNAM PUTNAM PUTNAM PUTNAM
GLOBAL ASSET PUTNAM NEW MONEY DIVERSIFIED INTERNATIONAL
ALLOCATION INCOME OPPORTUNITIES MARKET INCOME GROWTH
SUB-ACCOUNT SUB-ACCOUNT * SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 14,578 $ 27,895 $ (89,174) $ 37,623 $ 25,963 $ (171,930)
Capital gains income... 177,309 1,038 75,909 -- 16,707 --
Net realized gain
(loss) on security
transactions.......... (2,963) 698 110,479 -- (3,176) 265,348
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 24,984 25,250 1,399,894 -- (70,486) 2,795,996
---------- ---------- ---------- ---------- -------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 213,908 54,881 1,497,108 37,623 (30,992) 2,889,414
---------- ---------- ---------- ---------- -------- -----------
UNIT TRANSACTIONS:
Purchases.............. 32,458 190,099 2,065,296 31,059 104,583 4,248,398
Net transfers.......... 67,284 375,196 294,750 1,049,744 80,334 1,667,912
Surrenders for benefit
payments and fees..... (69,394) (109,112) (301,272) (219,528) (55,847) (829,696)
Net annuity
transactions.......... -- -- 4,138 -- -- 17,813
---------- ---------- ---------- ---------- -------- -----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 30,348 456,183 2,062,912 861,275 129,070 5,104,427
---------- ---------- ---------- ---------- -------- -----------
Total increase
(decrease) in net
assets................ 244,256 511,064 3,560,020 898,898 98,078 7,993,841
NET ASSETS:
Beginning of Year...... 1,803,966 702,547 4,751,380 771,015 816,968 13,088,919
---------- ---------- ---------- ---------- -------- -----------
End of Year............ $2,048,222 $1,213,611 $8,311,400 $1,669,913 $915,046 $21,082,760
========== ========== ========== ========== ======== ===========
</TABLE>
___________________________________ SA-13 _____________________________________
<PAGE>
SEPARATE ACCOUNT SIX
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
ONE GROUP ONE GROUP
INVESTMENT TRUST INVESTMENT TRUST
BOND DIVERSIFIED EQUITY
SUB-ACCOUNT** SUB-ACCOUNT**
---------------- ------------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 2,689,619 $ (427,769)
Capital gains income... -- 5,744,140
Net realized (loss)
gain on security
transactions.......... (18,051) 148,991
Net unrealized
(depreciation)
appreciation of
investments during the
period................ (4,262,648) (816,410)
----------- -----------
Net (decrease) increase
in net assets
resulting from
operations............ (1,591,080) 4,648,952
----------- -----------
UNIT TRANSACTIONS:
Purchases.............. 959,882 1,197,812
Net transfers.......... 8,525,105 3,883,533
Surrenders for benefit
payments and fees..... (5,018,069) (4,856,376)
Net annuity
transactions.......... (2,587) (5,180)
----------- -----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 4,464,331 219,789
----------- -----------
Total increase in net
assets................ 2,873,251 4,868,741
NET ASSETS:
Beginning of Year...... 58,581,008 58,569,587
----------- -----------
End of Year............ $61,454,259 $63,438,328
=========== ===========
</TABLE>
** Formerly Pegasus Bond Fund Sub-Account, Pegasus Growth & Value Fund
Sub-Account, Pegasus Mid-Cap Opportunity Fund
Sub-Account, Pegasus Growth Fund Sub-Account, and Pegasus Intrinsic Value
Fund Sub-Account, respectively. Change effective on May 1, 1999.
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
ONE GROUP ONE GROUP
INVESTMENT TRUST INVESTMENT TRUST
BOND DIVERSIFIED EQUITY
SUB-ACCOUNT** SUB-ACCOUNT**
---------------- ------------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 1,844,611 $ (329,290)
Capital gains income... 54,563 1,305,090
Net realized gain
(loss) on security
transactions.......... 75,140 13,890
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 1,274,499 4,446,694
----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 3,248,813 5,436,384
----------- -----------
UNIT TRANSACTIONS:
Purchases.............. 13,411,848 11,774,494
Net transfers.......... 12,556,284 5,997,435
Surrenders for benefit
payments and fees..... (2,742,073) (2,489,809)
Net annuity
transactions.......... 37,197 46,105
----------- -----------
Net increase in net
assets resulting from
unit transactions..... 23,263,256 15,328,225
----------- -----------
Total increase in net
assets................ 26,512,069 20,764,609
NET ASSETS:
Beginning of Year...... 32,068,939 37,804,978
----------- -----------
End of Year............ $58,581,008 $58,569,587
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
___________________________________ SA-14 _____________________________________
<PAGE>
<TABLE>
<CAPTION>
ONE GROUP ONE GROUP ONE GROUP
INVESTMENT TRUST INVESTMENT TRUST INVESTMENT TRUST
DIVERSIFIED LARGE CAP MID CAP
MID CAP GROWTH VALUE
SUB-ACCOUNT** SUB-ACCOUNT** SUB-ACCOUNT**
---------------- ---------------- ----------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ (186,548) $ (289,211) $ (34,519)
Capital gains income... 1,240,250 4,807,777 --
Net realized (loss)
gain on security
transactions.......... 225,565 369,717 136,211
Net unrealized
(depreciation)
appreciation of
investments during the
period................ 352,236 920,641 (552,866)
----------- ----------- -----------
Net (decrease) increase
in net assets
resulting from
operations............ 1,631,503 5,808,924 (451,174)
----------- ----------- -----------
UNIT TRANSACTIONS:
Purchases.............. 319,684 514,206 431,923
Net transfers.......... 600,376 (25,110) 3,318,798
Surrenders for benefit
payments and fees..... (1,342,898) (1,945,281) (1,738,123)
Net annuity
transactions.......... (1,199) (2,916) (1,532)
----------- ----------- -----------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... (424,037) (1,459,101) 2,011,066
----------- ----------- -----------
Total increase in net
assets................ 1,207,466 4,349,823 1,559,892
NET ASSETS:
Beginning of Year...... 17,245,584 23,995,697 21,942,724
----------- ----------- -----------
End of Year............ $18,453,050 $28,345,520 $23,502,616
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
ONE GROUP ONE GROUP ONE GROUP
INVESTMENT TRUST INVESTMENT TRUST INVESTMENT TRUST
DIVERSIFIED LARGE CAP MID CAP
MID CAP GROWTH VALUE
SUB-ACCOUNT** SUB-ACCOUNT** SUB-ACCOUNT**
---------------- ---------------- ----------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ (193,150) $ (273,885) $ 91,019
Capital gains income... 336,801 42,400 433,762
Net realized gain
(loss) on security
transactions.......... 5,967 476,908 (822)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 464,536 6,521,570 (1,469,803)
----------- ----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 614,154 6,766,993 (945,844)
----------- ----------- -----------
UNIT TRANSACTIONS:
Purchases.............. 3,563,145 4,753,176 4,542,105
Net transfers.......... 2,904,407 (1,623,013) 5,818,595
Surrenders for benefit
payments and fees..... (644,796) (918,207) (832,038)
Net annuity
transactions.......... 12,144 19,094 17,963
----------- ----------- -----------
Net increase in net
assets resulting from
unit transactions..... 5,834,900 2,231,050 9,546,625
----------- ----------- -----------
Total increase in net
assets................ 6,449,054 8,998,043 8,600,781
NET ASSETS:
Beginning of Year...... 10,796,530 14,997,654 13,341,943
----------- ----------- -----------
End of Year............ $17,245,584 $23,995,697 $21,942,724
=========== =========== ===========
</TABLE>
___________________________________ SA-15 _____________________________________
<PAGE>
SEPARATE ACCOUNT SIX
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. ORGANIZATION:
Separate Account Six (the Account) is a separate investment account within
Hartford Life & Annuity Insurance Company (the Company) and is registered
with the Securities and Exchange Commission (SEC) as a unit investment trust
under the Investment Company Act of 1940, as amended. Both the Company and
the Account are subject to supervision and regulation by the Department of
Insurance of the State of Connecticut and the SEC. The Account invests
deposits by variable annuity contractowners of the Company in various mutual
funds (the Funds) as directed by the contractowners.
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). Realized gains and
losses on the sales of securities are computed on the basis of identified
cost of the fund shares sold. Dividend and capital gains income is
accrued as of the ex-dividend date. Capital gains income represents
dividends from the Funds which are characterized as capital gains under
tax regulations.
b) SECURITY VALUATION--The investments in shares of the Funds are valued at
the closing net asset value per share as determined by the appropriate
Fund as of December 31, 1999.
c) UNIT TRANSACTIONS--Unit transactions are executed based on the unit
values calculated at the close of the business day.
d) 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.
e) USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported
amounts of income and expenses during the period. Operating results in
the future could vary from the amounts derived from management's
estimates.
3. ASSET TRANSFER:
On May 1, 1999, the shares of Pegasus Bond Fund Sub-Account, Pegasus
Growth & Value Fund Sub-Account, Pegasus Mid-Cap Opportunity Fund Sub-
Account, Pegasus Growth Fund Sub-Account, and Pegasus Intrinsic Value Fund
Sub-Account were exchanged for shares of One Group Investment Trust Bond
Sub-Account, One Group Investment Trust Diversified Equity Sub-Account, One
Group Investment Trust Diversified Mid Cap Sub-Account, One Group Investment
Trust Large Cap Growth Sub-Account, and One Group Investment Trust Mid Cap
Value Sub-Account, respectively. As the exchange was dollar-for-dollar, no
gains or losses were recognized by the Account.
4. 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 contract owners'
accounts, in accordance with the terms of the contracts. These charges
are reflected in surrenders for benefit payments and fees on the
accompanying statements of changes in net assets.
___________________________________ SA-16 _____________________________________
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------------------
To the Board of Directors of
Hartford Life and Annuity Insurance Company:
We have audited the accompanying statutory balance sheets of Hartford Life and
Annuity Insurance Company (a Connecticut Corporation and wholly owned subsidiary
of Hartford Life Insurance Company) (the Company) as of December 31, 1999 and
1998, and the related statutory statements of operations, changes in capital and
surplus, and cash flows for each of the three years in the period ended December
31, 1999. These statutory financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
statutory financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 2 of notes to statutory financial
statements. When financial statements are presented for purposes other than for
filing with a regulatory agency, auditing standards generally accepted in the
United States require that an auditors' report on them state whether they are
presented in conformity with accounting principles generally accepted in the
United States. The accounting practices used by the Company vary from accounting
principles generally accepted in the United States as explained and quantified
in Note 2.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the statutory financial statements referred to above do not present
fairly, in conformity with accounting principles generally accepted in the
United States, the financial position of the Company as of December 31, 1999 and
1998, or the results of its operations or its cash flows for each of the three
years in the period ended December 31, 1999.
In our opinion, the statutory financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with statutory accounting practices as described in Note 2.
Hartford, Connecticut
January 31, 2000 ARTHUR ANDERSEN LLP
F-1
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
BALANCE SHEETS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
<S> <C> <C>
- ------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Bonds $ 1,465,815 $ 1,453,792
Common stocks 42,430 40,650
Mortgage loans 63,784 59,548
Policy loans 59,429 47,212
Cash and short-term investments 267,579 469,955
- ------------------------------------------------------------------------------------------------
Other invested assets 2,892 2,188
- ------------------------------------------------------------------------------------------------
Total cash and invested assets 1,901,929 2,073,345
Investment income due and accrued 21,069 20,126
Other assets 39,576 45,691
Separate account assets 44,865,042 32,876,278
- ------------------------------------------------------------------------------------------------
TOTAL ASSETS $46,827,616 $35,015,440
- ------------------------------------------------------------------------------------------------
LIABILITIES
Aggregate reserves for future benefits $ 591,621 $ 579,140
Policy and contract claim liabilities 7,677 5,667
Liability for premium and other deposit funds 1,969,262 2,011,672
Asset valuation reserve 4,935 21,782
Payable to affiliates 14,084 19,271
Accrued expense allowances and other amounts due from
separate accounts (1,377,927) (1,173,513)
Remittances and items not allocated 111,582 87,449
Other liabilities 118,464 111,182
Separate account liabilities 44,865,042 32,876,278
- ------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 46,304,740 34,538,928
- ------------------------------------------------------------------------------------------------
CAPITAL AND SURPLUS
Common stock 2,500 2,500
Gross paid-in and contributed surplus 226,043 226,043
Unassigned funds 294,333 247,969
- ------------------------------------------------------------------------------------------------
TOTAL CAPITAL AND SURPLUS 522,876 476,512
- ------------------------------------------------------------------------------------------------
TOTAL LIABILITIES, CAPITAL AND SURPLUS $46,827,616 $35,015,440
- ------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-2
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Premiums and annuity considerations $ 621,789 $ 469,343 $ 296,645
Annuity and other fund deposits 2,991,363 2,051,251 1,981,246
Net investment income 122,322 129,982 102,285
Commissions and expense allowances on reinsurance ceded 379,905 444,241 396,921
Reserve adjustment on reinsurance ceded 1,411,342 3,185,590 3,672,076
Fee income 647,565 448,260 290,675
Other revenues 842 9,930 (2,043)
- -------------------------------------------------------------------------------------------------------
TOTAL REVENUES 6,175,128 6,738,597 6,737,805
- -------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Death and annuity benefits 47,372 43,152 65,961
Disability and other benefits 6,270 6,352 7,532
Surrenders and other fund withdrawals 1,250,813 739,663 454,417
Commissions 467,338 435,994 470,334
Increase (Decrease) in aggregate reserves for future
benefits 12,481 (10,711) 33,213
(Decrease) Increase in liability for premium and other
deposit funds (47,852) 218,642 640,840
General insurance expenses 192,196 190,979 77,237
Net transfers to separate accounts 4,160,501 4,956,007 4,914,980
Other expenses 35,385 22,091 15,671
- -------------------------------------------------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES 6,124,504 6,602,169 6,680,185
- -------------------------------------------------------------------------------------------------------
NET GAIN FROM OPERATIONS
Before federal income tax (benefit) expense 50,624 136,428 57,620
Federal income tax (benefit) expense (10,231) 35,887 (14,878)
- -------------------------------------------------------------------------------------------------------
NET GAIN FROM OPERATIONS 60,855 100,541 72,498
Net realized capital (losses) gains, after tax (36,428) 2,085 1,544
- -------------------------------------------------------------------------------------------------------
NET INCOME $ 24,427 $ 102,626 $ 74,042
- -------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-3
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK
Beginning and end of year $ 2,500 $ 2,500 $ 2,500
- -------------------------------------------------------------------------------------------------
GROSS PAID-IN AND CONTRIBUTED SURPLUS
Beginning and end of year 226,043 226,043 226,043
- -------------------------------------------------------------------------------------------------
UNASSIGNED FUNDS
Balance, beginning of year 247,969 143,257 74,570
Net income 24,427 102,626 74,042
Change in net unrealized capital gains on common stocks
and other invested assets 2,258 1,688 2,186
Change in asset valuation reserve 16,847 (8,112) (6,228)
Change in non-admitted assets 6,557 (1,277) (1,313)
Credit on reinsurance ceded (3,725) 9,787 --
- -------------------------------------------------------------------------------------------------
Balance, end of year 294,333 247,969 143,257
- -------------------------------------------------------------------------------------------------
CAPITAL AND SURPLUS,
End of year $522,876 $476,512 $371,800
- -------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-4
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premiums and annuity considerations $3,613,217 $2,520,655 $2,277,874
Net investment income 122,998 127,425 101,991
Fee income 647,565 448,260 290,675
Other income 1,799,323 3,644,704 4,091,043
- -------------------------------------------------------------------------------------------------------
Total income 6,183,103 6,741,044 6,761,583
- -------------------------------------------------------------------------------------------------------
Benefits paid 1,303,801 790,051 529,733
Federal income tax (recoveries) payments (8,815) 25,780 (14,499)
Net transfers to separate accounts 4,364,914 5,222,144 5,199,354
Other expenses 669,525 626,240 547,692
- -------------------------------------------------------------------------------------------------------
Total benefits and expenses 6,329,425 6,664,215 6,262,280
- -------------------------------------------------------------------------------------------------------
NET CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES (146,322) 76,829 499,303
- -------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
PROCEEDS FROM INVESTMENTS SOLD
Bonds 753,358 633,926 614,413
Common stocks 939 34,010 11,481
Mortgage loans 53,704 85,275 --
Other 1,490 19,990 152
- -------------------------------------------------------------------------------------------------------
NET INVESTMENT PROCEEDS 809,491 773,201 626,046
- -------------------------------------------------------------------------------------------------------
COST OF INVESTMENTS ACQUIRED
Bonds 804,947 586,913 848,267
Common stocks 464 7,012 28,302
Mortgage loans 57,665 59,702 85,103
Other 14,211 11,847 26,227
- -------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS ACQUIRED 877,287 665,474 987,899
- -------------------------------------------------------------------------------------------------------
NET CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES $ (67,796) $ 107,727 $ (361,853)
- -------------------------------------------------------------------------------------------------------
FINANCING AND MISCELLANEOUS ACTIVITIES
Net other cash provided (used) 11,742 (24,033) (4,848)
- -------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) FINANCING
AND MISCELLANEOUS ACTIVITIES 11,742 (24,033) (4,848)
- -------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and short-term investments (202,376) 160,523 132,602
Cash and short-term investments, beginning of year 469,955 309,432 176,830
- -------------------------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS, END OF YEAR $ 267,579 $ 469,955 $ 309,432
- -------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(STATUTORY BASIS)
DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND DESCRIPTION OF BUSINESS:
Hartford Life and Annuity Insurance Company (the "Company") is a wholly owned
subsidiary of Hartford Life Insurance Company ("HLIC"), which is an indirect
subsidiary of Hartford Life, Inc. ("HLI"). HLI is indirectly majority owned by
The Hartford Financial Services Group, Inc. ("The Hartford"). On February 10,
1997, HLI filed a registration statement, as amended, with the Securities and
Exchange Commission relating to the initial public offering of HLI Class A
Common Stock (the "Offering"). Pursuant to the Offering on May 22, 1997, HLI
sold to the public 26 million shares, representing approximately 18.6% of the
equity ownership of HLI.
In 1998, the Company changed its name to Hartford Life and Annuity Insurance
Company from ITT Hartford Life and Annuity Insurance Company.
The Company offers a complete line of fixed and variable annuities, as well as
variable, universal and traditional individual life insurance.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying statutory basis financial statements of the Company 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. Certain reclassifications have
been made to prior year financial information to conform to the current year
presentation.
Current prescribed statutory accounting practices include accounting
publications of the NAIC, as well as state laws, regulations and general
administrative rules. Permitted statutory accounting practices encompass
accounting practices approved by state insurance departments. The Company does
not follow any permitted statutory accounting practices that have a material
effect on statutory surplus, statutory net income or risk-based capital.
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 periods. Actual results could
differ from those estimates. The most significant estimates include those used
in determining the liability for aggregate reserves for future benefits and the
liability for premium and other deposit funds. Although some variability is
inherent in these estimates, management believes the amounts provided are
adequate.
STATUTORY ACCOUNTING PRACTICES VERSUS GAAP
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, etc.) which are charged to expense when incurred for statutory
purposes rather than on a pro-rata basis over the expected life and gross
profit stream of the policy for GAAP purposes;
(2) recognition of premium revenues, which for statutory purposes are generally
recorded as collected or when due during the premium paying period of the
contract and which for GAAP purposes, for universal life policies and
investment products, generally only consist of charges assessed to policy
account balances for cost of insurance, policy administration and
surrenders. When policy charges received relate to coverage or services to
be provided in the future, the charges are recognized as revenue on a
pro-rata basis over the expected life and gross profit stream of the policy.
Also, for GAAP purposes, premiums for traditional life insurance policies
are recognized as revenues when they are due from policyholders;
(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 under GAAP;
(4) providing for income taxes based on current taxable income 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 or required under GAAP;
(5) excluding certain assets designated as non-admitted assets (e.g., negative
Interest Maintenance Reserve, and past due agents' balances) from the
balance sheet for statutory purposes by directly charging surplus;
(6) the calculation of post retirement benefits obligation which, for statutory
accounting, excludes non-vested employees whereas GAAP liabilities include a
provision for such employees; statutory and GAAP accounting permit either
immediate recognition of the liability or straight-line amortization of the
liability over a period not to exceed 20 years. For GAAP, The Hartford's
obligation was immediately recognized, whereas for statutory accounting, the
obligation is being recognized ratably over a 20 year period;
F-6
<PAGE>
(7) establishing a formula reserve for realized and unrealized losses due to
default and equity risk associated with certain invested assets (Asset
Valuation Reserve) for statutory purposes; as well as the deferral and
amortization of realized gains and losses, caused 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) for
statutory purposes; whereas on a GAAP basis, no such formula reserve is
required and realized gains and losses are recognized in the period the
asset is sold;
(8) the reporting of reserves and benefits net of reinsurance ceded for
statutory purposes; 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 for statutory purposes,
whereas GAAP requires that fixed maturities be classified as
"held-to-maturity," "available-for-sale" or "trading," based on the
Company's intentions with respect to the ultimate disposition of the
security and its ability to affect those intentions. The Company's bonds
were classified on a GAAP basis as available-for-sale and accordingly, those
investments and common stocks were reflected at fair value with the
corresponding impact included as a separate component of Stockholder's
Equity; as well as the change in the basis of the Company's other invested
assets, which consist primarily of limited partnership investments, which is
recognized as income under GAAP and as a change in surplus under statutory
accounting; and
(10) statutory accounting calculates separate account liabilities using
prescribed actuarial methodologies, which approximate the market value of
separate account assets less applicable surrender charges. The separate
account surplus generated by these reserving methods is recorded as an
amount due to or from the separate account on the statutory basis balance
sheet, with changes reflected in the statutory basis results of operations.
On a GAAP basis, separate account assets and liabilities are held at fair
value.
As of and for the years ended December 31, the significant differences between
Statutory and GAAP basis net income and capital and surplus for the Company are
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
----------------------------------------
GAAP Net Income $ 75,654 $ 74,525 $ 58,050
Deferral and amortization of policy
acquisition costs, net (272,171) (331,882) (345,657)
Change in unearned revenue reserve (64,915) 23,118 4,058
Deferred taxes 57,833 2,476 47,092
Separate account expense allowance 214,388 259,287 282,818
Asset impairments and write-downs (17,250) 17,250 --
Benefit reserve adjustment 11,491 5,360 24,666
Gain on commutation of reinsurance
(Note 4) -- 52,026 --
Prepaid reinsurance premium (3,524) -- --
Statutory voluntary reserve (6,286) -- --
Other, net 29,207 466 3,015
----------------------------------------
STATUTORY NET INCOME $ 24,427 $ 102,626 $ 74,042
----------------------------------------
GAAP Stockholder's Equity $ 676,428 $ 648,097 $ 570,469
Deferred policy acquisition costs (1,887,824) (1,615,653) (1,283,771)
Unearned revenue reserve 95,965 160,951 134,789
Deferred taxes 122,105 68,936 64,522
Separate account expense allowance 1,398,030 1,183,642 924,355
Asset impairments and write-downs -- 17,250 --
Unrealized losses (gains) on
investments 26,292 (24,955) (21,451)
Benefit reserve adjustment 81,111 69,233 16,378
Asset valuation reserve (4,935) (21,782) (13,670)
Adjustment relating to Lyndon
contribution (Note 4) -- -- (23,671)
Prepaid reinsurance premium (7,728) (4,204) --
Statutory voluntary reserve (6,286) -- --
Other, net 29,718 (5,003) 3,850
----------------------------------------
STATUTORY CAPITAL AND SURPLUS $ 522,876 $ 476,512 $ 371,800
----------------------------------------
</TABLE>
F-7
<PAGE>
AGGREGATE RESERVES FOR FUTURE BENEFITS AND LIABILITY FOR PREMIUM AND OTHER
DEPOSIT FUNDS
Aggregate reserves for payment of future life, health and annuity benefits were
computed in accordance with applicable actuarial standards. Reserves for life
insurance policies are generally based on the 1958 and 1980 Commissioner's
Standard Ordinary Mortality Tables and various valuation rates ranging from 2.5%
to 6%. Accumulation and on-benefit annuity reserves are based principally on
individual annuity tables at various rates ranging from
2.5% to 8.75% and using the Commissioners Annuity Reserve Valuation Method
("CARVM").
The Company has established separate accounts to segregate the assets and
liabilities of certain life insurance and annuity contracts that must be
segregated from the Company's general assets under the terms of its contracts.
The assets consist primarily of marketable securities and are reported at market
value. Premiums, benefits and expenses of these contracts are reported in the
statutory basis statements of operations.
An analysis of Annuity Actuarial Reserves and Deposit Liabilities by Withdrawal
Characteristics as of December 31, 1999 (including general and separate account
liabilities) is as follows:
<TABLE>
<CAPTION>
% of
Amount Total
<S> <C> <C>
--------------------
Subject to discretionary withdrawal:
--------------------
With market value adjustment $ 4,564 0.0%
At book value less current surrender charge of 5% or more 1,427,302 3.2%
At market value 42,431,996 95.4%
--------------------
Total with adjustment or at market value 43,863,862 98.6%
At book value without adjustment (minimal or no charge or
adjustment): 573,583 1.3%
Not subject to discretionary withdrawal: 34,816 0.1%
--------------------
Total, gross 44,472,261 100.0%
Reinsurance ceded --
------------
Total, net $44,472,261
------------
</TABLE>
INVESTMENTS
Investments in bonds are carried at amortized cost. Bonds that 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 reduction in
the value of a security is deemed to be unrecoverable, the decline in value is
reported as a realized loss and the carrying value is adjusted accordingly.
Short-term investments consist of money market funds and are stated at cost,
which approximates fair value. Common stocks are carried at fair value with the
current year change in the difference from cost reflected in surplus. Mortgage
loans, which are carried at cost and approximate fair value, include investments
in assets backed by mortgage loan pools. Other invested assets are generally
recorded at fair value.
The Asset Valuation Reserve ("AVR") is designed to provide a standardized
reserving process for realized and unrealized losses due to default and equity
risks associated with invested assets. The AVR balances were $4,935 and $21,782
as of December 31, 1999 and 1998, 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 life of the bond or
mortgage sold. The IMR balance as of December 31, 1999 is an asset balance of
$981 and is reflected as a component of non-admitted assets in Unassigned Funds
in accordance with statutory accounting practices. The IMR balance as of
December 31, 1998 is a liability balance of $452 and is reflected as an other
liability. The net capital (losses) gains transferred to the IMR in 1999, 1998
and 1997 were $(1,255), $852 and $(719), respectively. The amount of income
(expense) amortized from the IMR in 1999, 1998 and 1997 included in the
Company's Statements of Operations, was $178, $(207), and $(85), respectively.
Realized capital gains and losses, net of taxes, not included in the IMR are
reported in the statutory basis statements of operations. Realized investment
gains and losses are determined on a specific identification basis.
CODIFICATION
The NAIC adopted the Codification of Statutory Accounting Principles in March
1998. The proposed effective date for this statutory accounting guidance is
January 1, 2001. It is expected that Connecticut, the Company's domiciliary
state, will adopt these accounting standards and, therefore, the Company will
make the necessary accounting and reporting changes required for implementation.
The Company has not yet determined the impact that these new accounting
standards will have on its statutory basis financial statements.
F-8
<PAGE>
3. INVESTMENTS:
(a) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
-----------------------------
Interest income from bonds and short-term investments $113,646 $123,370 $100,475
Interest income from policy loans 3,494 3,133 1,958
Interest and dividends from other investments 6,371 4,482 1,005
-----------------------------
Gross investment income 123,511 130,985 103,438
Less: investment expenses 1,189 1,003 1,153
-----------------------------
NET INVESTMENT INCOME $122,322 $129,982 $102,285
-----------------------------
</TABLE>
(b) COMPONENTS OF NET UNREALIZED CAPITAL (LOSSES) GAINS ON BONDS AND
SHORT-TERM INVESTMENTS
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
-----------------------------
Gross unrealized capital gains $ 561 $ 10,905 $23,357
Gross unrealized capital losses (6,441) (833) (1,906)
-----------------------------
Net unrealized capital (losses) gains (5,880) 10,072 21,451
Balance, beginning of year 10,072 21,451 7,979
-----------------------------
CHANGE IN NET UNREALIZED CAPITAL (LOSSES) GAINS ON BONDS AND
SHORT-TERM INVESTMENTS $(15,952) $(11,379) $13,472
-----------------------------
</TABLE>
(c) COMPONENTS OF NET UNREALIZED CAPITAL GAINS (LOSSES) ON COMMON STOCKS
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
--------------------------
Gross unrealized capital gains $2,508 $ 2,204 $ 537
Gross unrealized capital losses (24) (1,871) (1,820)
--------------------------
Net unrealized capital gains (losses) 2,484 333 (1,283)
Balance, beginning of year 333 (1,283) (3,447)
--------------------------
CHANGE IN NET UNREALIZED CAPITAL GAINS ON COMMON STOCKS $2,151 $ 1,616 $ 2,164
--------------------------
</TABLE>
(d) COMPONENTS OF NET REALIZED CAPITAL (LOSSES) GAINS
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
--------------------------
Bonds and short-term investments $(37,959) $1,314 $ (120)
Common stocks 104 1,624 421
Other invested assets 172 (1) (307)
--------------------------
Realized capital (losses) gains (37,683) 2,937 (6)
Capital gains benefit -- -- (831)
--------------------------
Net realized capital (losses) gains (37,683) 2,937 825
Less: amounts transferred to the IMR (1,255) 852 (719)
--------------------------
NET REALIZED CAPITAL (LOSSES) GAINS $(36,428) $2,085 $1,544
--------------------------
</TABLE>
Sales and maturities of investments in bonds and short-term investments for the
years ended December 31, 1999, 1998 and 1997 resulted in proceeds of $1,367,027,
$1,354,563 and $1,435,820, gross realized capital gains of $1,106, $1,705, and
$964 and gross realized capital losses of $39,065, $391, and $1,084,
respectively, before transfers to the IMR. Sale of common stocks for the years
ended December 31, 1999, 1998 and 1997 resulted in proceeds of $939, $33,088,
and $10,168, gross realized capital gains of $115, $1,688, and $421 and gross
realized capital losses of $11, $64, and $0, respectively.
(e) DERIVATIVE INVESTMENTS
The Company had no significant derivative holdings as of December 31, 1999, 1998
or 1997.
(f) CONCENTRATION OF CREDIT RISK
Excluding U.S. government and government agency investments, the Company is not
exposed to any significant concentrations of credit risk in fixed maturities of
a single issuer greater than 10% of capital and surplus as of December 31, 1999.
F-9
<PAGE>
(g) BONDS, SHORT-TERM INVESTMENTS AND COMMON STOCKS
<TABLE>
<CAPTION>
1999
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
----------------------------------------------
U.S. government and government agencies and authorities:
-- Guaranteed and sponsored $ 4,768 $ 1 $ (37) $ 4,732
-- Guaranteed and sponsored -- asset backed 170,746 -- -- 170,746
States, municipalities and political subdivisions 10,401 -- (48) 10,353
International governments 7,351 94 (15) 7,430
Public utilities 18,413 92 (73) 18,432
All other corporate -- excluding asset-backed 592,233 374 (6,194) 586,413
All other corporate -- asset-backed 539,688 -- -- 539,688
Short-term investments 228,105 -- -- 228,105
Certificates of deposit 5,158 -- (74) 5,084
Parents, subsidiaries and affiliates 117,057 -- -- 117,057
----------------------------------------------
TOTAL BONDS AND SHORT-TERM INVESTMENTS $1,693,920 $561 $(6,441) $1,688,040
----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
--------------------------------------------
Common stock -- unaffiliated $ 4,562 $1,105 $ (24) $ 5,643
Common stock -- affiliated 35,384 1,403 -- 36,787
--------------------------------------------
TOTAL COMMON STOCKS $39,946 $2,508 $ (24) $42,430
--------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1999
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
----------------------------------------------
U.S. government and government agencies and authorities:
-- Guaranteed and sponsored $ 4,982 $ 35 $ (2) $ 5,015
-- Guaranteed and sponsored -- asset-backed 75,615 -- -- 75,615
States, municipalities and political subdivisions 10,402 415 -- 10,817
International governments 7,466 568 -- 8,034
Public utilities 94,475 1,330 (39) 95,766
All other corporate -- excluding asset-backed 607,679 8,473 (792) 615,360
All other corporate -- asset-backed 505,900 -- -- 505,900
Short-term investments 343,783 -- -- 343,783
Certificates of deposit 130,216 84 -- 130,300
Parents, subsidiaries and affiliates 117,057 -- -- 117,057
----------------------------------------------
TOTAL BONDS AND SHORT-TERM INVESTMENTS $1,897,575 $10,905 $(833) $1,907,647
----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
--------------------------------------------
Common stock -- unaffiliated $ 4,933 $ 290 $ (50) $ 5,173
Common stock -- affiliated 35,384 1,914 (1,821) 35,477
--------------------------------------------
TOTAL COMMON STOCKS $40,317 $2,204 $(1,871) $40,650
--------------------------------------------
</TABLE>
The amortized cost and estimated fair value of bonds and short-term investments
as of December 31, 1999 by estimated maturity year are shown below. Asset-backed
securities, including mortgage-backed securities and collaterialized mortgage
obligations, are distributed to maturity year based on the Company's estimates
of the rate of
F-10
<PAGE>
future prepayments of principal over the remaining lives of the securities.
Expected maturities differ from contractual maturities due to call or prepayment
provisions.
<TABLE>
<CAPTION>
Amortized Estimated
Maturity Cost Fair Value
<S> <C> <C>
--------------------------
One year or less $ 545,290 $ 543,397
Over one year through five years 692,881 690,476
Over five years through ten years 370,835 369,548
Over ten years 84,914 84,619
--------------------------
TOTAL $1,693,920 $1,688,040
--------------------------
</TABLE>
Bonds with a carrying value of $10,457 were on deposit as of December 31, 1999
with various regulatory authorities as required.
(h) FAIR VALUE OF FINANCIAL INSTRUMENTS-BALANCE SHEET ITEMS (IN MILLIONS):
<TABLE>
<CAPTION>
1999 1998
------------------------------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
<S> <C> <C> <C> <C>
------------------------------------------------------
ASSETS
Bonds and short-term investments $1,694 $1,688 $1,898 $1,908
Common stocks 42 42 41 41
Policy loans 59 59 47 47
Mortgage loans 64 64 60 60
Other invested assets 3 3 2 2
LIABILITIES
Deposit funds and other benefits $2,051 $2,017 $2,078 $2,053
</TABLE>
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments: fair value of bonds, short-term
investments, common stock, and other invested assets approximate those
quotations published by the NAIC; policy loans and mortgage loans carrying
amounts approximates fair value; and fair value of liabilities on deposit funds
and other benefits is determined by forecasting future cash flows and
discounting the forecasted cash flows at current market rates.
4. REINSURANCE:
The Company cedes insurance to other insurers in order to limit its maximum
losses. Such transfer does not relieve the Company of its primary liability to
the policyholder. Failure of reinsurers to honor their obligations could result
in losses to the Company. The Company reduces this risk by evaluating the
financial condition of reinsurers and monitoring for possible concentrations of
credit risk.
The Company cedes significant portions of its variable annuity business written
since 1994 to RGA Reinsurance Company ("RGA"). Certain core annuity products
were excluded from this reinsurance arrangement beginning in the second quarter
of 1999 and, as such, the amounts ceded to RGA have declined significantly.
In 1995, The Hartford was "spun-off" from ITT Industries, Inc. and became its
own, autonomous entity. In conjunction with this spin-off, the assets and
liabilities of Lyndon Insurance Company (Lyndon) were merged into the Company.
The statutory net assets contributed to the Company as a result of this
transaction were approximately $112 million and were reflected as an increase in
Gross Paid-In and Contributed Surplus at December 31, 1995. This amount was
approximately $41 million lower than the value of net assets contributed on a
GAAP basis.
The majority of the business written in Lyndon was assumed from an unaffiliated
insurer. In 1998, this unaffiliated insurer recaptured the inforce blocks of
business it had been ceding to the Company through Lyndon. In conjunction with
this commutation transaction, the Company transferred statutory basis reserves
of $26,404. Additionally, the Company received fair value consideration for the
bonds it transferred which exceeded the statutory statement value of these
assets by $25,622. As a result of this activity, the Company recognized a
pre-tax gain from this transaction of $52,026 in its 1998 Statements of
Operations.
There were no material reinsurance recoverables from reinsurers outstanding as
of and for the years ended, December 31, 1999 and 1998.
F-11
<PAGE>
The effect of reinsurance as of and for the years ended December 31, is
summarized as follows:
<TABLE>
<CAPTION>
1999 Direct Assumed Ceded Net
<S> <C> <C> <C> <C>
------------------------------------------------------
Aggregate Reserves for Future
Benefits $ 784,502 $ 53 $ (192,934) $ 591,621
Policy and Contract Claim
Liabilities $ 7,827 $ 203 $ (353) $ 7,677
Premium and Annuity Considerations $ 674,219 $ 1,261 $ (53,691) $ 621,789
Annuity and Other Fund Deposits $6,195,917 $ -- $(3,204,554) $2,991,363
Death, Annuity, Disability and
Other Benefits $ 65,251 $ 1,104 $ (12,713) $ 53,642
Surrenders $2,541,449 $ -- $(1,290,636) $1,250,813
</TABLE>
<TABLE>
<CAPTION>
1998 Direct Assumed Ceded Net
<S> <C> <C> <C> <C>
------------------------------------------------------
Aggregate Reserves for Future
Benefits $ 713,375 $ 50 $ (134,285) $ 579,140
Policy and Contract Claim
Liabilities $ 5,895 $ 85 $ (313) $ 5,667
Premium and Annuity Considerations $ 483,328 $24,954 $ (38,939) $ 469,343
Annuity and Other Fund Deposits $6,461,470 $ -- $(4,410,219) $2,051,251
Death, Annuity, Disability and
Other Benefits $ 64,331 $ 1,574 $ (16,401) $ 49,504
Surrenders $1,481,797 $ -- $ (742,134) $ 739,663
</TABLE>
<TABLE>
<CAPTION>
1997 Direct Assumed Ceded Net
<S> <C> <C> <C> <C>
------------------------------------------------------
Premium and Annuity Considerations $ 266,427 $51,630 $ (21,412) $ 296,645
Annuity and Other Fund Deposits $6,515,347 $ -- $(4,534,101) $1,981,246
Death, Annuity, Disability and
Other Benefits $ 79,779 $ 839 $ (7,126) $ 73,492
Surrenders $ 882,094 $ -- $ (427,677) $ 454,417
</TABLE>
5. RELATED PARTY TRANSACTIONS:
Transactions between the Company and its affiliates, relate principally to tax
settlements, reinsurance, insurance coverages, rental and service fees, capital
contributions and payments of dividends. In addition, certain affiliated
insurance companies purchased group annuity contracts from the Company to fund
pension costs and claim annuities to settle casualty claims. Substantially all
general insurance expenses related to the Company, including rent and benefit
plan expenses, are initially paid by The Hartford. Direct expenses are allocated
using specific identification and indirect expenses are allocated using other
applicable methods. Indirect expenses include those for corporate areas which,
depending on type, are allocated based on either a percentage of direct expenses
or on utilization.
The Company has also invested in bonds of its affiliates, Hartford Financial
Services Corporation and HL Investment Advisors, Inc., and common stock of its
subsidiary, Hartford Life, LTD.
For additional information, see Notes 4, 6, and 8.
6. 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 filing separate Federal, state and local
income tax returns.
As long as The Hartford continues to own at least 80% of the combined voting
power and 80% of the value of the outstanding capital stock of HLI, the Company
will be included for Federal income tax purposes in the affiliated group of
which The Hartford is the common parent. The Hartford and its non-life
subsidiaries filed a single consolidated Federal income tax return for 1998 and
1997 and intend to file a separate consolidated Federal income tax return for
1999. The life insurance companies filed a separate consolidated Federal income
tax return for 1998 and 1997 and intend to file a separate consolidated Federal
income tax return for 1999. Federal income taxes (received) paid by the Company
for operations and capital gains (losses) were $(8,815), $25,780, and $(14,499)
in 1999, 1998 and 1997, respectively. The effective tax rate was (73)%, 27%, and
(28)% in 1999, 1998 and 1997, respectively.
F-12
<PAGE>
The following schedule provides a reconciliation of the tax provision (including
realized capital gains(losses)) at the U.S. Federal Statutory rate to Federal
income tax (benefit) expense (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
------------------
Tax provision at U.S. Federal Statutory rate $ 5 $48 $ 20
Tax deferred acquisition costs 31 25 25
Statutory to tax reserve differences (7) 8 1
Investments (31) (60) (61)
Other (8) 15 (1)
------------------
FEDERAL INCOME TAX (BENEFIT) EXPENSE $(10) $36 $(16)
------------------
</TABLE>
7. CAPITAL AND SURPLUS AND SHAREHOLDER DIVIDEND RESTRICTIONS:
The maximum amount of dividends which can be paid to shareholders by Connecticut
domiciled insurance companies, without prior approval, is generally restricted
to the greater of 10% of surplus as of the preceding December 31st or the net
gain from operations for the previous year. Dividends are paid as determined by
the Board of Directors and are not cumulative. No dividends were paid in 1999,
1998 or 1997. The amount available for dividend in 2000 is approximately
$60,855.
8. PENSION, RETIREMENT, AND OTHER POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS:
All employees that work for The Hartford's life insurance companies 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 Hartford's funding
policy is to contribute annually an amount between the minimum funding
requirements set forth in the Employee Retirement Income Security Act of 1974,
as amended, and the maximum amount that can be deducted for U.S. Federal income
tax purposes. Generally, pension costs are funded through the purchase of group
pension contracts sold by affiliates. The costs that were allocated to the
Company for pension related expenses were $762, $1,045 and $840 for 1999, 1998
and 1997, respectively.
Employees of The Hartford's life insurance companies are also provided, through
The Hartford, certain health care and life insurance benefits for eligible
retired employees. The contribution for health care benefits depends on the
retiree's date of retirement and years of service. In addition, this benefit
plan has a defined dollar cap, which limits average company contributions. The
Hartford has prefunded a portion of the health care and life insurance
obligations through trust funds where such prefunding can be accomplished on a
tax effective basis. Postretirement health care and life insurance benefits
expense allocated to the Company was not material to the results of operations
for 1999, 1998 or 1997.
The assumed rate in the per capita cost of health care (the health care trend
rate) was 7.1% for 1999, decreasing ratably to 5.0% in the year 2003. Increasing
the health care trend rates by one percent per year would have an immaterial
impact on the accumulated postretirement benefit obligation and the annual
expense. To the extent that the actual experience differs from the inherent
assumptions, the effect will be amortized over the average future service of
covered employees.
Substantially all of The Hartford's life insurance companies' employees are
eligible to participate in The Hartford's Investment and Savings Plan. Under
this plan, designated contributions, which may be invested in Class A Common
Stock of HLI or certain other investments, are matched to a limit of 3% of
compensation.
9. SEPARATE ACCOUNTS:
The Company maintains separate account assets totaling $44.9 billion and $32.9
billion as of December 31, 1999 and 1998, respectively. Separate account assets
are segregated from other investments and reported at fair value. Separate
account liabilities are determined in accordance with prescribed actuarial
methodologies, which approximate the market value less applicable surrender
charges. The resulting surplus is recorded in the general account statement of
operations as a component of Net Transfers to Separate Accounts. The Company's
separate accounts are non-guaranteed, wherein the policyholder assumes
substantially all the investment risk and rewards. Investment income (including
investment gains and losses) and interest credited to policyholders on separate
account assets are not separately reflected in the statutory statements of
operations.
Separate account management fees, net of minimum guarantees, were $493 million,
$363 million, and $252 million in 1999, 1998 and 1997, respectively, and are
recorded as a component of fee income on the Company's statutory basis
Statements of Operations.
F-13
<PAGE>
10. COMMITMENTS AND CONTINGENT LIABILITIES:
(a) LITIGATION
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for alleged economic and punitive damages
have been asserted. Some of these cases have been filed as purported class
actions and some cases have been filed in certain jurisdictions that permit
punitive damage awards disproportionate to the actual damages incurred. Although
there can be no assurances, at the present time, the Company does not anticipate
that the ultimate liability, arising from such pending or threatened litigation,
will have a material adverse effect on the statutory capital and surplus of the
Company.
(b) GUARANTY FUNDS
Under insurance guaranty fund laws in each state, the District of Columbia and
Puerto Rico, insurers licensed to do business can be assessed by state insurance
guaranty associations for certain obligations of insolvent insurance companies
to policyholders and claimants. Recent regulatory actions against certain large
life insurers encountering financial difficulty have prompted various state
insurance guaranty associations to begin assessing life insurance companies for
the deemed losses. Most of these laws do provide, however, that an assessment
may be excused or deferred if it would threaten an insurer's solvency and
further provide annual limits on such assessments. Part of the assessments paid
by the Company pursuant to these laws may be used as credits for a portion of
the associated premium taxes. The Company paid guaranty fund assessments of
approximately $523, $1,043 and $1,544 in 1999, 1998, and 1997, respectively, of
which $318, $995, and $548 in 1999, 1998 and 1997, respectively were estimated
to be creditable against premium taxes.
(c) TAX MATTERS
The Company's Federal income tax returns are routinely audited by the Internal
Revenue Service ("IRS"). The Company's 1997 and 1996 Federal income tax returns
are currently under audit by the IRS. As of March 31, 2000, the audit was in its
initial stage and no material issues had been raised.
F-14
