<PAGE> 1
Registration No. 33-88578
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Post-Effective Amendment No. 1
to
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
THE TRAVELERS VARIABLE LIFE INSURANCE SEPARATE ACCOUNT ONE
----------------------------------------------------------
(Exact Name of Trust)
THE TRAVELERS LIFE AND ANNUITY COMPANY
--------------------------------------
(Name of Depositor)
One Tower Square, Hartford, Connecticut 06183
----------------------------------------------
(Complete Address of Depositor's Principal Executive Offices)
Ernest J. Wright
Assistant Secretary
The Travelers Life and Annuity Company
One Tower Square
Hartford, Connecticut 06183
----------------------------
(Name and address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
____ immediately upon filing pursuant to paragraph (b) of Rule 485
X on May 1, 1996 pursuant to paragraph (b) of Rule 485
____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
____ on __________ pursuant to paragraph (a)(1) of Rule 485
Check the box if it is proposed that this filing will become effective in
_______ at _____ pursuant to Rule 487. ______
AN INDEFINITE AMOUNT OF VARIABLE UNIVERSAL LIFE INSURANCE CONTRACTS WAS
REGISTERED PURSUANT TO RULE 24f-2 OF THE INVESTMENT COMPANY ACT OF 1940. A RULE
24f-2 NOTICE FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 WAS FILED ON FEBRUARY
29, 1996.
<PAGE> 2
RECONCILIATION AND TIE BETWEEN
FORM N-8B-2 AND PROSPECTUS
<TABLE>
<CAPTION>
Item No. of
Form N-8B-2 CAPTION IN PROSPECTUS
- ----------- ---------------------
<S> <C>
1 Cover page
2 Cover page
3 Safekeeping of the Separate Account's Assets
4 Distribution of the Policy
5 The Separate Account
6 The Separate Account
7 Not applicable
8 Not applicable
9 Legal Proceedings and Opinion
10 Prospectus Summary; The Insurance Company; The Separate Account;
The Investment Options; The Policy; Transfers of Cash Value;
Policy Surrenders and Cash Surrender Value; Voting Rights;
Dividends
11 The Separate Account; The Investment Options
12 The Investment Options
13 Charges and Deductions; Distribution of the Policies
14 The Policy
15 The Policy
16 The Separate Account; The Investment Options; Allocation of Premium
Payments
17 Prospectus Summary; Right to Cancel Period; Policy Surrenders and Cash
Surrender Value; Policy Loans; Exchange Rights
18 The Investment Options; Charges and Deductions; Federal Tax
Considerations
19 Reports to Policy Owners
20 The Insurance Company
21 Policy Loans
22 Not applicable
23 Not applicable
24 Not applicable
25 The Insurance Company
26 Not applicable
27 The Insurance Company
28 The Insurance Company; Management
29 The Insurance Company
30 Not applicable
31 Not applicable
32 Not applicable
33 Not applicable
34 Not applicable
35 Distribution of the Policy
36 Not applicable
37 Not applicable
38 Distribution of the Policy
39 Distribution of the Policy
40 Not applicable
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Item No. of
Form N-8B-2 CAPTION IN PROSPECTUS
- ----------- ---------------------
<S> <C>
41 Distribution of the Policy
42 Not applicable
43 Not applicable
44 Valuation of the Separate Account
45 Not applicable
46 The Policy; Valuation of the Separate Account; Transfers of Cash Value;
Policy Surrenders and Cash Surrender Value
47 The Separate Account; The Investment Options
48 The Insurance Company
49 Safekeeping of the Separate Account's Assets
50 Not applicable
51 Prospectus Summary; The Insurance Company; The Policy; Death
Benefits; Policy Lapse and Reinstatement
52 The Separate Account; The Investment Options; Investment Managers
53 Federal Tax Considerations
54 Not applicable
55 Not applicable
56 Not applicable
57 Not applicable
58 Not applicable
59 Financial Statements
</TABLE>
<PAGE> 4
PROSPECTUS
This Prospectus describes a modified single premium individual variable life
insurance policy (the "Policy") offered by The Travelers Life and Annuity
Company (the "Company") and funded by The Travelers Variable Life Insurance
Separate Account One ("Separate Account One"). Separate Account One invests in
certain mutual funds that are referred to in this Prospectus as "Investment
Options." Although the Policy can operate as a single premium policy, additional
premium payments may be made under certain circumstances provided there are no
outstanding policy loans. The minimum Initial Premium required to issue a Policy
is $25,000.
The Policy provides for the payment of a Death Benefit upon the death of the
Insured, and for a Cash Value that can be obtained through policy loans or full
or partial surrenders of the Policy. The Death Benefit and Cash Value of a
Policy will vary based on the performance of underlying investment options.
There is no guaranteed minimum Cash Value for a Policy. Additionally, the Cash
Value is reduced by the various fees and charges assessed under the Policy, as
described in this Prospectus. Regardless of the performance of the Investment
Options, so long as the Policy is in force, the Death Benefit can never be less
than the current Stated Amount (with proceeds payable reduced by outstanding
policy loans and unpaid interest). The Policy will remain in force for as long
as the Cash Surrender Value is sufficient to pay the monthly charges imposed
under the Policy.
From the Issue Date through the end of the Right to Cancel Period, the Initial
Premium will be allocated to the Smith Barney Money Market Portfolio.
Thereafter, the Cash Value and any premium payments made under the Policy may be
allocated to one or more of the following Investment Options available under
Separate Account One where they will accumulate on a
(Continued on the following page)
THE POLICY WILL OR MAY BE A MODIFIED ENDOWMENT CONTRACT. CERTAIN POLICY LOANS,
PARTIAL WITHDRAWALS OR SURRENDERS WILL OR MAY RESULT IN ADVERSE TAX CONSEQUENCES
OR PENALTIES.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES FOR
THE UNDERLYING INVESTMENT OPTIONS. THESE PROSPECTUSES SHOULD BE READ AND
RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESMAN, OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
THE PURPOSE OF THIS VARIABLE LIFE INSURANCE POLICY IS TO PROVIDE INSURANCE
PROTECTION. LIFE INSURANCE IS A LONG-TERM INVESTMENT. PROSPECTIVE POLICY OWNERS
SHOULD CONSIDER THEIR NEED FOR INSURANCE COVERAGE AND THE POLICY'S LONG-TERM
INVESTMENT POTENTIAL. NO CLAIM IS MADE THAT THE POLICY IS IN ANY WAY SIMILAR OR
COMPARABLE TO AN INVESTMENT IN A MUTUAL FUND.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1996
<PAGE> 5
variable basis: Smith Barney Income and Growth, Alliance Growth, American
Capital Enterprise, Smith Barney International Equity, TBC Managed Income,
Putnam Diversified Income, Smith Barney High Income, MFS Total Return, Smith
Barney Money Market and AIM Capital Appreciation Portfolios of The Smith
Barney/Travelers Series Fund Inc.; Smith Barney Total Return Portfolio of the
Smith Barney Series Fund; three Zero Coupon Bond Fund Portfolios (Series 1998,
2000, 2005) of The Travelers Series Trust. The Policy Owner bears the investment
risk for all amounts allocated to the underlying Investment Options.
The Policy has a Right to Cancel Period during which the applicant may return
the Policy to the Company for a refund. The Right to Cancel Period expires on
the latest of ten days after the Owner receives the Policy, ten days after we
mail or deliver a written Notice of Right to Cancel to the Owner, or 45 days
after the applicant signs the application for insurance (or later, if state law
requires).
It may not be advantageous to purchase this Policy as a replacement for another
type of life insurance or as a means to obtain additional insurance protection
if you already own a variable life insurance policy. Because the Policy is
designed to operate generally as a single premium policy, in all but very
limited circumstances the Policy will be treated as a modified endowment
contract for federal income tax purposes. As a modified endowment contract, any
loan, partial withdrawal, or surrender may result in adverse tax consequences,
including possible penalties. However, as with any life insurance contract, (1)
a Policy Owner generally should not be considered in constructive receipt of the
Policy's Cash Value, including incremental increases therein, unless and until
he or she is in actual receipt of distributions from the Policy, and (2) Death
Benefit payments should generally be excluded from the gross income of the
Policy beneficiary. A prospective Policy Owner who wants to purchase a Policy
that is not a modified endowment contract should consult his or her personal tax
adviser.
2
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF SPECIAL TERMS............................................................. 5
PROSPECTUS SUMMARY.................................................................... 7
THE INSURANCE COMPANY................................................................. 13
THE SEPARATE ACCOUNT.................................................................. 13
Separate Account One................................................................ 13
Addition, Deletion or Substitution of Investments................................... 13
THE INVESTMENT OPTIONS................................................................ 14
Investment Managers................................................................. 16
Mixed and Shared Funding............................................................ 16
THE POLICY............................................................................ 17
The Policy Application.............................................................. 17
Eligible Purchasers................................................................. 17
Payments Made Under the Policy...................................................... 17
Allocation of Premium Payments...................................................... 18
Right to Cancel Period.............................................................. 19
CHARGES AND DEDUCTIONS................................................................ 19
Monthly Deduction Amount............................................................ 19
Cost of Insurance Charge......................................................... 19
State Premium Tax Charge......................................................... 20
Charges for Supplemental Benefit Provisions...................................... 20
CHARGES AGAINST THE INVESTMENT OPTIONS OF SEPARATE ACCOUNT ONE...................... 20
Mortality and Expense Risk Charge................................................ 20
Administrative Expense Charge.................................................... 21
Income Taxes..................................................................... 21
Investment Option Expenses............................................................ 21
Surrender Charges..................................................................... 21
Transfer Charge....................................................................... 22
Reduction or Elimination of Charge.................................................... 22
VALUATION OF THE SEPARATE ACCOUNT..................................................... 23
How the Cash Value Varies........................................................... 23
How the Investment Experience is Determined......................................... 23
Accumulation Unit Value............................................................. 23
Net Investment Factor............................................................... 23
Valuation Periods and Valuation Dates............................................... 23
TRANSFERS OF CASH VALUE............................................................... 24
Telephone Transfers................................................................. 24
Automated Transfers (Dollar Cost Averaging)......................................... 24
DEATH BENEFIT......................................................................... 25
Changes in Death Benefit Option..................................................... 25
Changes in Stated Amount............................................................ 26
Maturity and Maturity Extension Benefits............................................ 26
</TABLE>
3
<PAGE> 7
<TABLE>
<S> <C>
Policy Lapse and Reinstatement...................................................... 27
Exchange Rights..................................................................... 27
POLICY SURRENDERS AND CASH SURRENDER VALUE............................................ 27
Right to Surrender.................................................................. 27
Full Surrenders..................................................................... 28
Partial Surrenders.................................................................. 28
POLICY LOANS.......................................................................... 28
Risks Associated with Loans Taken Against a Variable Life Insurance Policy.......... 29
PAYMENT OPTIONS....................................................................... 29
OTHER MATTERS......................................................................... 30
Voting Rights....................................................................... 30
Reports to Policy Owners............................................................ 30
Limit on Right to Contest and Suicide Exclusion..................................... 31
Misstatement as to Sex and Age...................................................... 31
Suspension of Valuation............................................................. 31
Beneficiary......................................................................... 31
Assignment.......................................................................... 31
Dividends........................................................................... 31
FEDERAL TAX CONSIDERATIONS............................................................ 32
General............................................................................. 32
TAX STATUS OF THE POLICY............................................................ 32
Definition of Life Insurance........................................................ 32
Diversification..................................................................... 32
Investor Control.................................................................... 33
TAX TREATMENT OF POLICY BENEFITS.................................................... 33
In General.......................................................................... 33
Modified Endowment Contracts........................................................ 33
Exchanges........................................................................... 34
Treatment of Loan Interest.......................................................... 34
Aggregation of Modified Endowment Contracts......................................... 34
THE COMPANY'S INCOME TAXES.......................................................... 35
MANAGEMENT............................................................................ 36
SENIOR OFFICERS OF THE TRAVELERS LIFE AND ANNUITY COMPANY............................. 37
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS.......................................... 37
DISTRIBUTION OF THE POLICY............................................................ 37
LEGAL PROCEEDINGS AND OPINION......................................................... 38
REGISTRATION STATEMENT................................................................ 38
INDEPENDENT ACCOUNTANTS............................................................... 38
ILLUSTRATIONS......................................................................... 39
APPENDIX A -- PERFORMANCE INFORMATION................................................. 44
APPENDIX B -- DEATH BENEFIT EXAMPLES.................................................. 46
APPENDIX C -- REPRESENTATIVE STATED AMOUNTS........................................... 48
FINANCIAL STATEMENTS.................................................................. F-1
</TABLE>
4
<PAGE> 8
GLOSSARY OF SPECIAL TERMS
- --------------------------------------------------------------------------------
The following terms are used throughout the Prospectus, and have the indicated
meanings:
ACCUMULATION UNIT -- a standard of measurement used to calculate the values
allocated to the investment options.
AVERAGE NET GROWTH RATE -- an annual measurement of growth, used to determine
the next year's mortality and expense risk charge. For each Policy Owner, the
rate is determined each Policy Year as follows: total daily earnings of the
Investment Option(s) you select, divided by the average amount you allocated
during the Policy Year. The daily earnings are measured using the net asset
value per share of the Investment Options.
BENEFICIARY(IES) -- the person(s) named to receive the benefits of this Policy
at the Insured's death.
CASH SURRENDER VALUE -- the Cash Value less any outstanding policy loan and
surrender charges.
CASH VALUE -- the current value of Accumulation Units credited to each of the
Investment Options available under the Policy, plus the value of the Loan
Account.
COMPANY'S HOME OFFICE -- the principal executive offices of The Travelers Life
and Annuity Company located at One Tower Square, Hartford, Connecticut 06183.
COVERAGE AMOUNT -- an amount equal to the Death Benefit minus the Cash Value.
DEATH BENEFIT -- the amount payable to the Beneficiary if the Insured dies while
the Policy is in force.
DEDUCTION DATE -- the day in each Policy Month on which the Monthly Deduction
Amount is deducted from the Policy's Cash Value.
GRACE PERIOD -- the period during which the Policy remains in force after the
Company has given notice to the Policy Owner that the Cash Surrender Value of
the Policy is insufficient to pay the Monthly Deduction Amount due.
INITIAL PREMIUM -- the Premium Payment made in connection with the issuance of a
Policy.
INSURED -- the person on whose life the Policy is issued.
INVESTMENT OPTIONS -- the open-end management investment companies or portfolios
thereof to which you may allocate premiums under Separate Account One.
ISSUE DATE -- the date on which the Policy is issued by the Company for delivery
to the Policy Owner.
LOAN ACCOUNT -- an account in the Company's general account to which we transfer
the amount of any policy loan, and to which we credit a fixed rate of interest.
LOAN ACCOUNT VALUE -- the amount of any policy loan, plus capitalized loan
interest, plus the net rate of return credited to the Loan Account.
MATURITY DATE -- the anniversary of the Policy Date on which the Insured is age
100.
MINIMUM AMOUNT INSURED -- a percentage of Cash Value required to qualify this
Policy as life insurance under federal tax law.
MONTHLY DEDUCTION AMOUNT -- a monthly charge, deducted from the Policy's Cash
Value, which is comprised of the Cost of Insurance charge, the deduction for
premium tax, and any charge for supplemental benefits.
POLICY DATE -- the date on which the Policy becomes effective, which date is
used to determine all future cyclical transactions under the Policy (i.e.,
Deduction Dates, Policy Months, Policy Years).
5
<PAGE> 9
POLICY MONTH -- monthly periods computed from the Policy Date.
POLICY OWNER (YOU, YOUR OR OWNER) -- the person(s) having rights to benefits
under the Policy during the lifetime of the Insured; the Policy Owner may or may
not be the Insured.
POLICY YEARS -- annual periods computed from the Policy Date.
SEPARATE ACCOUNT ONE -- The Travelers Variable Life Insurance Separate Account
One, a separate account established by The Travelers Life and Annuity Company
for the purpose of funding this Policy.
STATED AMOUNT -- the amount used to determine the Death Benefit under the
Policy.
VALUATION DATE -- a day on which Accumulation Units are valued. A Valuation Date
is any day on which the New York Stock Exchange is open for trading. The value
of Accumulation Units will be determined as of the close of trading on the New
York Stock Exchange.
VALUATION PERIOD -- the period between the close of business on successive
Valuation Dates.
6
<PAGE> 10
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
INTRODUCTION
The Policy described in this Prospectus is an individual variable life insurance
contract which provides for a premium payment to be allocated to one or more of
the Investment Options available under Separate Account One. The Policy is
credited with Accumulation Units of the applicable Investment Options.
The Policy has a death benefit, cash surrender value and other features
traditionally associated with a fixed benefit whole life insurance policy. The
Policy is "variable" because unlike the fixed benefits of an ordinary whole life
insurance contract, the Cash Value and, under certain circumstances, the Death
Benefit of the Policy may increase or decrease depending on the investment
experience of the Investment Options to which the premium payment(s) have been
allocated. The Cash Value will also vary to reflect partial cash surrenders and
Monthly Deduction Amounts. In accordance with the Continuation of Insurance
provision of the Policy, the Policy will remain in effect until the Cash
Surrender Value is insufficient to cover the Monthly Deduction Amount due. There
is no minimum guaranteed Cash Value or Cash Surrender Value and the Policy Owner
bears the investment risk associated with an investment in the Investment
Options. (See "Valuation of the Separate Account," page 23.)
WHAT TYPES OF VARIABLE INVESTMENT OPTIONS ARE AVAILABLE UNDER THE POLICY?
The Policy is funded by The Travelers Variable Life Insurance Separate Account
One ("Separate Account One"), a registered unit investment trust separate
account established by The Travelers Life and Annuity Company (the "Company"). A
Policy Owner allocated premium payments to one or more of the investment options
(the "Investment Options") available through Separate Account One. The following
Investment Options are currently available under the Policy:
Smith Barney Income and Growth Portfolio
Alliance Growth Portfolio
American Capital Enterprise Portfolio
Smith Barney International Equity Portfolio
TBC Managed Income Portfolio
Putnam Diversified Income Portfolio
Smith Barney High Income Portfolio
MFS Total Return Portfolio
Smith Barney Money Market Portfolio
AIM Capital Appreciation Portfolio
Smith Barney Total Return Portfolio
Travelers Zero Coupon Bond Fund Portfolio 1998
Travelers Zero Coupon Bond Fund Portfolio 2000
Travelers Zero Coupon Bond Fund Portfolio 2005
Further information regarding the investment objectives for each Investment
Option (including the investment manager) is contained under "The Investment
Options" on page 14 of this Prospectus. Refer to each Investment Option's
prospectus for a complete description of the investment objectives, restrictions
and other material information.
WHAT ARE THE REQUIRED AND PERMISSIBLE PREMIUM PAYMENTS?
The minimum Initial Premium is $25,000. Although the Policy can operate as a
single premium policy, additional payments may be made under certain
circumstances, provided there are no outstanding policy loans. If there are any
outstanding loans, any payment received will be treated first as a repayment of
the loan rather than an additional premium payment. (See "Additional Premium
Payments," page 18.) No premiums can be accepted if they would disqualify the
Policy as life insurance under federal tax law.
The Initial Premium purchases a Death Benefit initially equal to the Policy's
Stated Amount (if Option 1 is selected), or to the Stated Amount plus the Cash
Value (if Option 2 is selected). The relationship between the Initial Premium
and the Stated Amount depends on the age and sex of the Insured (as permitted by
state law). Generally, the same Initial Premium will purchase a
7
<PAGE> 11
slightly higher stated amount for a female Insured than for a male Insured of
the same age. Representative Stated Amounts per dollar of Initial Premium are
set forth in Appendix C.
HOW WILL PREMIUM PAYMENTS BE ALLOCATED?
During the Right to Cancel Period (as described below), the Initial Premium will
be allocated to the Smith Barney Money Market Portfolio. After the expiration of
the Right to Cancel Period, the values in the Money Market Portfolio will be
allocated to the Investment Options selected on the Policy Application, and the
Policy will be credited with the applicable Accumulation Units. (See "Allocation
of Premium Payments," page 18.)
AFTER THE INITIAL ALLOCATION, MAY I CHANGE THE ALLOCATION OF MY CASH VALUE?
As long as the Policy remains in force, you may transfer all or a portion of
your Policy's Cash Value (not including the Loan Account Value) among any of the
Investment Options. Currently, transfers may be made at any time without charge.
You may request a reallocation of your investment either through written
request, or by telephone in accordance with the Company's telephone transfer
procedures. (See "Transfers of Cash Value," page 24.)
You may also request that the Company establish automated transfers of Cash
Values from any Investment Option to any other Investment Option through written
request or other method acceptable to the Company. The minimum automated
transfer amount is $100 per month. (See "Automated Transfers," page 24.)
DOES THIS POLICY HAVE A RIGHT TO CANCEL PERIOD?
You have a limited right to return the Policy for cancellation and receive a
full refund. You must return the Policy, by mail or hand delivery, to the
Company or to the agent who sold the Policy during the Right to Cancel Period,
which ends 10 days after the Policy has been delivered to you, 45 days after
completion of the application, or 10 days after the Notice of Right to Cancel
has been mailed or delivered to you, whichever is latest. Within seven (7) days
following our receipt of your request for a refund, we will refund to you the
greater of (1) any premium paid, or (2) the Cash Value of the Policy on the date
we receive the returned policy, plus any charges and expenses which may have
been deducted, less any Loan Account Value. (See "Right to Cancel Period," page
19.)
WHAT TYPES OF CHARGES ARE DEDUCTED UNDER THE POLICY?
MONTHLY DEDUCTION AMOUNT. Beginning on the Policy Date, the Company will make
monthly deductions from the Policy's Cash Value on a pro rata basis from amounts
allocated to the Investment Options. The Deduction Amount may vary from month to
month and includes the cost of insurance charges, the deduction for premium tax,
and any charges for supplemental benefits. (See "Monthly Deduction Amount," page
19.)
CHARGES AGAINST THE INVESTMENT OPTIONS UNDER SEPARATE ACCOUNT ONE. In order to
cover the Company's assumption of mortality and expense risks under the Policy,
the Company assesses a daily charge against the assets of each of the Investment
Options on a pro rata basis at an annual rate of 0.90% of such assets. This rate
will be reduced to 0.75% for the current Policy Year if the Average Net Growth
Rate of the investment options which you have selected under your Policy was
6.5% or greater for the previous Policy Year. This determination will be made on
an annual basis.
The Company also assesses a daily charge against the amounts allocated to the
Investment Options at an annual rate of 0.40% to cover administrative expenses
assumed by the Company. This administrative expense charge does not exceed the
expected cost of administrative services provided by the Company under the
Policy. (See "Charges Against the Investment Options of Separate Account One,"
page 20.)
Currently, the Company makes no charge against the Separate Account for federal
income taxes since the Company does not expect to incur federal income taxes
attributable to the Separate
8
<PAGE> 12
Account. However, if the Company incurs federal income taxes attributable to the
Separate Account in future years, it may charge for those taxes.
SUMMARY OF ASSET BASED POLICY CHARGES:
<TABLE>
<CAPTION>
STATE MORTALITY &
POLICY PREMIUM EXPENSE ADMINISTRATIVE
YEARS TAX RISK CHARGE CHARGE TOTAL
<S> <C> <C> <C> <C>
1-10 .20% .90% .40% 1.50%
11+ N/A .90% .40% 1.30%
</TABLE>
SUMMARY OF ASSET BASED POLICY CHARGES IF THE AVERAGE NET GROWTH RATE IS 6.50% OR
MORE:
<TABLE>
<CAPTION>
STATE MORTALITY &
POLICY PREMIUM EXPENSE ADMINISTRATIVE
YEARS TAX RISK CHARGE CHARGE TOTAL
<S> <C> <C> <C> <C>
2-10 .20% .70% .40% 1.35%
11+ N/A .70% .40% 1.15%
</TABLE>
Note: The Separate Account purchases shares of the underlying funds at net asset
value. The net asset values reflect investment advisory fees and other expenses
already deducted. Applicants should review the prospectuses for each fund for a
description of the charges assessed. (See "Charges Against the Investment
Options of Separate Account One," page 20.)
SURRENDER CHARGES. A percent of premium surrender charge will be assessed upon
a full surrender of the Policy during the first nine years after a Premium
Payment is received by the Company. For the first two years following a Premium
Payment, the surrender charge will be 7.5% of such Premium Payment. Thereafter,
the charge will decline in years three (3) through nine (9), respectively, as
follows: 7%, 7%, 6.5%, 6%, 5%, 4% and 3%. The surrender charge will be 0%
starting in the tenth year following a Premium Payment. Partial surrenders will
also be subject to a surrender charge, except that after the first Policy Year
the Company will permit partial surrenders of the Policy's earnings in an amount
of up to 10% of the Policy's Cash Value as of the beginning of the current
Policy Year. For partial surrenders in excess of the free withdrawal amount, a
charge equal to a percentage of the amount surrendered, not to exceed the charge
that would apply to a full surrender, will apply. (See "Surrender Charges," page
21.)
TRANSFER CHARGES. The Company reserves the right to charge a reasonable
administrative fee (up to $10) for each transfer in excess of four (4) per
Policy Year, and reserves the right to assess a processing fee for the Automated
Transfer (Dollar Cost Averaging) service.
WHAT IS THE DEATH BENEFIT UNDER THE POLICY?
The Policy provides for a death benefit upon the death of the Insured. You may
choose one of two options to be used for the calculation of the Death Benefit
payable under the Policy. Under Option 1 (the Level Option), the Death Benefit
will be equal to the greater of the Stated Amount of the Policy or the Minimum
Amount Insured. Under Option 2 (the Variable Option), the Death Benefit will be
equal to the greater of the Stated Amount of the Policy plus the Cash Value
(determined as of the date of the Insured's death) or the Minimum Amount
Insured. Under both options, the Death Benefit will be reduced by any applicable
Loan Account Value, unpaid Monthly Deduction Amount, and any amount payable to
an assignee pursuant to a collateral assignment of the Policy. You may change
the Death Benefit option or the Stated Amount subject to certain conditions.
(See "Death Benefit," page 25.)
9
<PAGE> 13
MAY I TAKE A POLICY LOAN AGAINST THE CASH VALUE OF MY POLICY?
You may request a Policy Loan in an amount not to exceed 90% of the Policy's
Cash Value minus surrender penalties (determined at the time the Company
receives the written loan request). If there is a loan outstanding at the time a
subsequent loan request is made, the amount of the outstanding loan will be
added to the new loan amount. The Company will charge interest on the
outstanding amounts of the loan, which interest must be paid in advance by the
Policy Owner.
The amount of the loan will be transferred on a pro rata basis from each of the
Investment Options (unless the Owner states otherwise in writing) to the Loan
Account, which is part of the Company's general account. The Loan Account is
credited with a fixed annual rate of interest set forth in the Policy. The Loan
Account Value does not vary with the performance of the Investment Options;
therefore, the Policy's Death Benefit and Cash Value will be permanently
affected by a loan. Additionally, any outstanding Loan Account Value will be
subtracted from any Death Benefit or surrender proceeds payable under the
Policy. Subject to state law, no loan requests may be made for amounts of less
than $500. Policy loans may have federal income tax consequences. (See "Policy
Loans," page 28, and "Federal Tax Considerations," page 32.)
WHAT ARE THE CONDITIONS UNDER WHICH MY POLICY MIGHT LAPSE?
If the Cash Surrender Value of a Policy on any Deduction Date is insufficient to
cover the Monthly Deduction Amount due, the Company will send you a written
notice of the required premium. If the required premium is not paid within 61
days, the Policy may lapse. In addition, outstanding loans decrease the Cash
Surrender Value and could, therefore, cause the Policy to lapse. (See "Policy
Loans," page 28, and "Policy Lapse and Reinstatement," page 27.) If a Policy
lapses with a loan outstanding, adverse tax consequences may result. (See
"Federal Tax Considerations," page 32.)
ARE THERE ANY OTHER POLICY PROVISIONS THAT I SHOULD KNOW ABOUT?
SURRENDERS AND PARTIAL WITHDRAWALS. The Policy may be surrendered at any time
for its Cash Surrender Value. In addition, partial withdrawals may be made.
Surrenders or partial withdrawals made within nine years of a premium payment
may be subject to a surrender charge. (See "Policy Surrenders and Cash Surrender
Value," page 27.)
RIGHT TO EXCHANGE THE POLICY. Once the Policy is in effect, you may exchange it
at any time during the first two Policy Years for a fixed life insurance policy
issued by the Company (or one of its affiliates, if allowed) on the life of the
Insured without submitting proof of insurability. (See "Exchange Rights," page
27.)
PAYMENT OF POLICY BENEFITS. Surrender and death benefits under the Policy may
be paid in a lump sum or under one of the payment options set forth in the
Policy. (See "Payment Options," page 29.)
SPECIAL TAX CONSIDERATIONS. The Company believes that a Policy issued on a
standard rate class basis generally should meet the Section 7702 definition of a
life insurance contract. With respect to a Policy issued on a substandard basis,
there is insufficient guidance to determine if such a Policy would satisfy the
Section 7702 definition of a life insurance contract, particularly if you pay
the full amount of premiums permitted under such a Policy. Assuming that a
Policy qualifies as a life insurance contract for federal income tax purposes,
you should not be deemed to be in constructive receipt of Cash Value under a
Policy until there is a distribution from the Policy. Moreover, death benefits
payable under a Policy should be completely excludable from the gross income of
the Beneficiary. As a result, the Beneficiary generally should not be taxed on
these proceeds. (See "Tax Status of the Policy," page 32.)
In almost all cases, the Policy will be a modified endowment contract ("MEC").
If a Policy is a MEC, certain distributions made during an Insured's lifetime,
such as loans and partial withdrawals from, and collateral assignments of, the
Policy, are taxable to you on an income-first basis. A 10% penalty tax may be
imposed on income distributed before you attain age 59 1/2. Policies that are
not
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<PAGE> 14
MECs receive preferential tax treatment with respect to certain distributions.
For a discussion of the tax issues associated with this Policy, see "Federal Tax
Considerations" on page 32.
WRITTEN REQUESTS
Certain changes and elections must be made in writing to the Company. Where the
term "written request" is used, it means that written information must be sent
to the Company's Home Office in a form and content satisfactory to the Company.
11
<PAGE> 15
[This Page Intentionally Left Blank]
12
<PAGE> 16
THE INSURANCE COMPANY
- --------------------------------------------------------------------------------
The Travelers Life and Annuity Company is a stock insurance company which has
been continuously engaged in the insurance business since its incorporation in
the state of Connecticut in 1973. The Company writes individual life insurance
and individual and group annuity contracts on a nonparticipating basis, and acts
as the depositor for Separate Account One. The Company is licensed to conduct
life insurance business in a majority of the states of the United States, and
intends to seek licensure in the remaining states, except New York. The
Company's obligations as depositor for Separate Account One may not be
transferred without notice to and consent of Policy Owners.
The Company is a wholly owned subsidiary of The Travelers Insurance Company,
which is an indirect wholly owned subsidiary of Travelers Group Inc. The
Company's principal executive offices are located at One Tower Square, Hartford,
Connecticut 06183, telephone number (860) 277-0111.
The Company is subject to Connecticut law governing insurance companies and is
regulated and supervised by the Connecticut Insurance Commissioner. An annual
statement in a prescribed form must be filed with the Commissioner on or before
March 1 in each year covering the operations of the Company for the preceding
year and its financial condition on December 31 of such year. The Company's
books and assets are subject to review or examination by the Commissioner or his
agents at all times, and a full examination of its operations is conducted by
the National Association of Insurance Commissioners at least once every four
years. In addition, the Company is subject to the insurance laws and regulations
of any jurisdiction in which it sells its insurance contracts, as well as to
various federal and state securities laws and regulations.
THE SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT ONE
The Travelers Variable Life Insurance Separate Account One was established on
September 23, 1994 pursuant to the insurance laws of the state of Connecticut,
and is registered with the Securities and Exchange Commission ("SEC") as a unit
investment trust under the Investment Company Act of 1940, as amended (the "1940
Act"). Separate Account One meets the definition of a separate account under the
federal securities laws. Registration of Separate Account One with the SEC does
not involve supervision by the SEC of the management or investment policies of
Separate Account One. Additionally, the operations of Separate Account One are
subject to the provisions of Section 38a-433 of the Connecticut General Statutes
which authorizes the Connecticut Insurance Commissioner to adopt regulations
under it. Section 38a-433 contains no restrictions on the investments of
Separate Account One.
Connecticut law provides that the assets of Separate Account One will be held
for the exclusive benefit of Policy Owners and the persons entitled to payments
under the Policy offered by this Prospectus and other policies that may be
funded through Separate Account One. The Policies provide that the assets of
Separate Account One are not chargeable with liabilities arising out of any
other business which the Company may conduct. Any obligations arising under the
Policy are general corporate obligations of the Company.
There are currently fourteen Investment Options available under Separate Account
One.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
The Company reserves the right, subject to state and federal laws, to make
additions to, deletions from, or substitutions for Separate Account One and the
Investment Options which fund the Policy. The Company can substitute shares or
units of another mutual fund or unit investment trust for shares or units of
another Investment Option if: (a) it is determined that an Investment Option no
longer suits the purpose of the Policy due to a change in its investment
objectives or
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<PAGE> 17
restrictions; (b) the shares or units of an Investment Option are no longer
available for investment; (c) in the Company's view, it has become inappropriate
to continue investing in the shares or units of an Investment Option.
Substitution may be made with respect to both existing investments and the
investment of any future Premium Payments. However, no substitution of
securities will be made without prior notice to you, and without prior approval
of the SEC or such other regulatory authorities as may be necessary, all to the
extent required by the 1940 Act or other applicable law.
Subject to Policy Owner approval and applicable law, the Company reserves the
right to end Separate Account One's registration under the 1940 Act.
THE INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
You may allocate Premium Payments to one or more of the available Investment
Options. Each Investment Option is a series of an open-end management investment
company registered with the SEC under the 1940 Act. Such registration does not
involve supervision by the SEC of the investments or investment policy of an
Investment Option.
The investments of each funding option are subject to the risks of changing
economic conditions and the ability of each Investment Option's investment
manager or sub-adviser to anticipate such changes. There is no assurance that
the Investment Options will achieve their stated objectives. Please read
carefully the complete risk disclosure in each Portfolio's prospectus before
investing.
The Investment Options and their investment objectives are as follows:
SMITH BARNEY/TRAVELERS SERIES FUND, INC.
SMITH BARNEY INCOME AND GROWTH PORTFOLIO. The objectives of the Income and
Growth Portfolio are current income and long-term growth of income and capital
by investing primarily, but not exclusively, in common stocks.
ALLIANCE GROWTH PORTFOLIO. The objective of the Growth Portfolio is long-term
growth of capital by investing predominantly in equity securities of companies
with a favorable outlook for earnings and whose rate of growth is expected to
exceed that of the U.S. economy over time. Current income is only an incidental
consideration.
AMERICAN CAPITAL ENTERPRISE PORTFOLIO. The Enterprise Portfolio's objective is
capital appreciation through investment in securities believed to have
above-average potential for capital appreciation Any income received on such
securities is incidental to the objective of capital appreciation.
SMITH BARNEY INTERNATIONAL EQUITY PORTFOLIO. The objective of the International
Equity Portfolio is total return on assets from growth of capital and income by
investing at least 65% of its assets in a diversified portfolio of equity
securities of established non-U.S. issuers.
TBC MANAGED INCOME PORTFOLIO. The objective of the Managed Income Portfolio is
to seek high current income consistent with prudent risk of capital through
investments in corporate debt obligations, preferred stocks, and obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
PUTNAM DIVERSIFIED INCOME PORTFOLIO. The objective of the Diversified Income
Portfolio is to seek high current income consistent with preservation of
capital. The Portfolio will allocate its investments among the U.S. Government
Sector, the High Yield Sector, and the International Sector of the fixed income
securities markets.
SMITH BARNEY HIGH INCOME PORTFOLIO. The investment objective of the High Income
Portfolio is high current income. Capital appreciation is a secondary objective.
The Portfolio will invest at least 65% of its assets in high-yielding corporate
debt obligations and preferred stock.
MFS TOTAL RETURN PORTFOLIO (a balanced portfolio). The Total Return Portfolio's
objective is to obtain above-average income (compared to a portfolio entirely
invested in equity securities) consistent with the prudent employment of
capital. While current income is the primary objective,
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<PAGE> 18
the Portfolio believes that there should also be a reasonable opportunity for
growth of capital and income since many securities offering a better than
average yield may also possess growth potential. Thus, in selecting securities
for its portfolio, the Portfolio considers each of these objectives. Generally,
at least 40% of the Portfolio's assets will be invested in equity securities.
SMITH BARNEY MONEY MARKET PORTFOLIO. The investment objective of the Money
Market Portfolio is maximum current income and preservation of capital by
investing in high quality, short-term money market instruments.
AIM CAPITAL APPRECIATION PORTFOLIO. The investment objective of the AIM Capital
Appreciation Portfolio is to seek capital appreciation by investing principally
in common stock, with emphasis on medium sized and smaller emerging growth
companies.
SMITH BARNEY SERIES FUND
SMITH BARNEY TOTAL RETURN PORTFOLIO (an equity portfolio). The investment
objective of the Smith Barney Total Return Portfolio is total return, consisting
of long-term capital appreciation and income. The Portfolio will seek to achieve
its goal by investing primarily in a diversified portfolio of dividend-paying
common stocks.
THE TRAVELERS SERIES TRUST
TRAVELERS ZERO COUPON BOND FUND PORTFOLIOS (THREE PORTFOLIOS: SERIES 1998, 2000,
2005). The investment objectives of each of the Zero Coupon Bond Fund Portfolios
is to provide as high an investment return as is consistent with the
preservation of capital investing in primarily zero coupon securities that pay
cash income but are acquired by the Portfolio at substantial discounts from
their values at maturity. THE ZERO COUPON BOND FUND PORTFOLIOS MAY NOT BE
APPROPRIATE FOR POLICY OWNERS WHO DO NOT PLAN TO HAVE THEIR PREMIUMS INVESTED IN
SHARES OF THE PORTFOLIOS FOR THE LONG-TERM OR UNTIL MATURITY.
15
<PAGE> 19
INVESTMENT MANAGERS
The Investment Options receive investment management and advisory services from
the following investment professionals:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT MANAGER SUB-ADVISER
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Smith Barney Income and Smith Barney Mutual Funds
Growth Management. Inc. ("SBMFM")
- ----------------------------------------------------------------------------------------------
Alliance Growth SBMFM Alliance Capital Management
L.P.
- ----------------------------------------------------------------------------------------------
American Capital Enterprise SBMFM American Capital Asset
Management, Inc.
- ----------------------------------------------------------------------------------------------
Smith Barney International SBMFM
Equity
- ----------------------------------------------------------------------------------------------
TBC Managed Income SBMFM The Boston Company Asset
Management Inc.
- ----------------------------------------------------------------------------------------------
Putnam Diversified Income SBMFM Putnam Investment Management,
Inc.
- ----------------------------------------------------------------------------------------------
Smith Barney High Income SBMFM
- ----------------------------------------------------------------------------------------------
MFS Total Return SBMFM Massachusetts Financial
Services Company
- ----------------------------------------------------------------------------------------------
Smith Barney Money Market SBMFM
- ----------------------------------------------------------------------------------------------
AIM Capital Appreciation SBMFM AIM Capital Management, Inc.
- ----------------------------------------------------------------------------------------------
Smith Barney Total Return SBMFM
- ----------------------------------------------------------------------------------------------
Zero Coupon Bond Fund Travelers Asset Management
(Series 1998, 2000, 2005) International Corp.
- ----------------------------------------------------------------------------------------------
</TABLE>
Smith Barney Mutual Funds Management Inc. ("SBMFM"), an affiliate of the
Company, receives an investment advisory fee from each applicable Investment
Option pursuant to the terms of an investment advisory agreement between the
Investment Option and SBMFM. SBMFM then pays each Sub-Adviser a sub-advisory fee
pursuant to the terms of a sub-advisory agreement among the Investment Options,
SBMFM and the sub-advisor. For the Travelers Zero Coupon Bond Fund Portfolios,
Travelers Asset Management International Corporation ("TAMIC"), an affiliate of
the Company, receives an investment advisory fee pursuant to an agreement
between the Portfolios and TAMIC. More detailed information regarding the
Investment Options and the investment managers may be found in the current
prospectuses for the Investment Options; these prospectuses are included with
and must accompany this Prospectus. You are urged to read these documents
carefully before investing.
MIXED AND SHARED FUNDING
It is conceivable that in the future it may not be advantageous for Separate
Account One and other variable life insurance or variable annuity separate
accounts to invest in the Investment Options simultaneously (called "mixed" and
"shared" funding). Although neither the Company nor the Investment Options
currently foresees any such disadvantages either to variable life insurance or
to variable annuity Policy Owners, the Investment Options' Boards of Directors
intends to monitor events to identify any material conflicts between such policy
owners and to determine what action, if any, should be taken in response
thereto. Conflicts could arise due to changes in the law (such as insurance law
or federal tax law) that affect the different variable life insurance and
variable annuity separate accounts investing in the Investment Options. They
could also arise by reason of differences in voting instructions from the Policy
Owners and owners of other variable life insurance policies and variable annuity
contracts, or for other reasons.
16
<PAGE> 20
If an Investment Option's Boards of Directors concludes that separate mutual
funds should be established for variable life insurance and variable annuity
separate accounts, the Company will bear the attendant expenses, but variable
life insurance and variable annuity Policy Owners would no longer have the
economies of scale resulting from a larger combined fund. Please consult the
prospectuses of the Investment Options for additional information.
THE POLICY
- --------------------------------------------------------------------------------
The Policy described in this Prospectus is a variable life insurance policy
which is both an insurance product and a security. The Policy has a Death
Benefit, cash surrender value and other features traditionally associated with a
fixed benefit whole life policy. The Policy is deemed to be "variable" because
unlike the fixed benefits of an ordinary whole life insurance contract, the
Policy's Cash Value and, under certain circumstances, the Death Benefit may
increase or decrease depending on the investment experience of the Investment
Option(s) to which the Premium Payment has been allocated.
As an insurance product, the Policy is subject to the insurance laws and
regulations of each state or jurisdiction in which it is available for
distribution. There may be differences between the Policy issued and the general
policy description contained in this Prospectus because of requirements of the
state where your Policy is issued. Any such differences will be included in your
Policy.
THE POLICY APPLICATION
Individuals wishing to purchase a Policy must submit an application to the
Company. As with traditional insurance contracts, you pay an initial premium,
which must be at least $25,000. You may request an increase or decrease in the
Stated Amount of the Policy in writing from time to time. (See "Changes in
Stated Amount," page 26.) No change in the terms or conditions of the Policy
will be made without your consent.
ELIGIBLE PURCHASERS
A person can purchase a Policy to insure the life of another person provided
that the Policy Owner has an insurable interest in the life of the Insured, and
the Insured consents to such purchase. In most states, any person between the
ages of 20 and 80 is eligible to be insured subject to the submission of a
Policy Application to the Company. In some states, the maximum issue age may be
lower. Insurance coverage under a Policy will begin only after the applicant has
satisfied all outstanding underwriting delivery requirements, and after the
Company has received the Initial Premium. Acceptance of an application is
subject to the Company's underwriting rules. The Company reserves the right to
reject an application for any lawful reason, provided that such rejection is
made in a manner consistent with that with which similarly situated risks are
treated and provided that unfair discrimination is avoided.
The Company assigns Insureds to risk classes which determine the current cost of
insurance rates used in calculating the cost of insurance charge under the
Policy. Policies may be issued on Insureds either in the standard non-smoker or
smoker risk class. To the extent permitted by state law, Policies may also be
issued on the basis of the sex of the Insured. Policies may also be issued on
insureds in a sub-standard underwriting class. (For a discussion of the effect
of risk class on the cost of insurance charge, see "Cost of Insurance Charge" on
page 19.)
PAYMENTS MADE UNDER THE POLICY
INITIAL PREMIUM. The Initial Premium is due on or before the Policy Date and is
payable in full at the Company's Home Office. The Initial Premium is the
guideline single premium for the life insurance coverage provided under the
Policy, as determined in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"). The minimum Initial Premium is $25,000. Additional Premium
Payments may be made under the Policy, as described below. However, if there are
any outstanding policy loans, any payment received will be treated first as
repayment of loans rather than as an additional Premium Payment.
17
<PAGE> 21
The Initial Premium purchases a Death Benefit equal to the Policy's Stated
Amount (if Option 1 is selected), or to the Policy's Stated Amount plus the Cash
Value (if Option 2 is selected). The relationship between the Initial Premium
and the Stated Amount depends on the age, sex (where permitted by state law) and
risk class of the Insured. Generally, the same Initial Premium will purchase a
higher Stated Amount for a younger insured than for an older insured. Likewise,
the same Initial Premium will purchase a slightly higher Stated Amount for a
female insured than for a male insured of the same age. Also, the same Initial
Premium will purchase a higher Stated Amount for a standard Insured than for a
substandard Insured. Representative Stated Amounts per dollar of Initial Premium
are set forth in Appendix C.
ADDITIONAL PREMIUM PAYMENTS. Although the Policy can operate as a single
premium policy, additional Premium Payments may be made under certain
circumstances, provided there are no outstanding loans. If there are any
outstanding loans, any payment received by the Company will be considered
repayment of that debt. The circumstances under which additional Premium
Payments can be made under the Policy are as follows:
1. Increases in Stated Amount -- You may request an increase in Stated
Amount at any time. If your request is approved, the Company will
require you to make an additional Premium Payment in order for an
increase in Stated Amount to become effective. The minimum additional
Premium Payment permitted by the Company in connection with an increase
in Stated Amount is $1,000. (See "Changes in Stated Amount," page 26.)
2. To Prevent Lapse -- If the Cash Surrender Value on any Deduction Day is
insufficient to cover the Monthly Deduction Amount due on that day, then
you must make an additional Premium Payment during the Grace Period
sufficient to cover the Monthly Deduction Amount in order to prevent
lapse. The minimum amount of any payment that may be required to be made
in this circumstance will be stated in the Notice mailed to you in
accordance with the Policy; payments in excess of the amount required to
prevent lapse will be considered a payment "at your discretion" and
consequently subject to the rules described below. If you do not make a
sufficient payment, the Policy will lapse and terminate without value.
(See "Policy Lapse and Reinstatement," page 27.)
3. At Your Discretion -- Additional Premium Payments may be made at your
discretion so long as the payment plus the total of all premiums
previously paid does not exceed the maximum premium limitation derived
from the guideline premium test for life insurance prescribed by the
Internal Revenue Code. Because of the test, the maximum premium
limitation will ordinarily equal the Initial Premium for a number of
years after the Policy has been issued. Therefore, discretionary
additional Premium Payments normally will not be permitted during the
early years of the Policy. Discretionary additional Premium Payments
must be at least $250, and may not be paid on or after the Maturity
Date.
Any Additional Premium Payments made under the Policy may be subject to new
evidence of insurability. Payments received in excess of any Loan Account Value
will be treated as an additional Premium Payment.
ALLOCATION OF PREMIUM PAYMENTS
You specify on the Policy Application how the Initial Premium will be allocated
among the Investment Options of Separate Account One. You may allocate premium
to one or more Investment Options, provided that such allocation is made in
whole percentages of 5% or more.
Regardless of the allocation made in the application, during the period between
premium receipt and policy issuance (the "Underwriting Period"), the Initial
Premium will be held by the Company in a general suspense account established
for such purposes. At the time a Policy is issued, the Initial Premium
attributable to such Policy will be credited with interest comparable to the
effective yield during the Underwriting Period of the Money Market Portfolio
(e.g., as if the Policy had been issued and the premium allocated to the Money
Market Portfolio on the date the premium was
18
<PAGE> 22
received in good order by the Company), which amount will become the initial
Cash Value of the Policy. The Cash Value will then be allocated to the Money
Market Portfolio until the expiration of the Right to Cancel Period. At the end
of the Right to Cancel Period, the Cash Value in the Money Market Portfolio will
be allocated (in whole percentages of 5% or more) among the Investment Options
designated on the Policy Application. The number of Accumulation Units to be
credited to the Policy once a Premium Payment has been received by the Company
will be determined by dividing the amount of Premium Payment applied to each
Investment Option by the Accumulation Unit Value of that Investment Option, as
computed on the next valuation date following receipt of the payment.
You may change the allocation of Cash Value or any Additional Premiums received
on or after the expiration of the Right to Cancel Period among any of the
Investment Options then available under the Policy. (See "Transfers of Cash
Value," page 24.) You should periodically review the allocation of Cash Value in
light of market conditions and overall financial planning requirements to ensure
that such allocation continues to be consistent with your investment objectives.
RIGHT TO CANCEL PERIOD
A Policy may be returned to the Company for cancellation by mailing or
delivering it to the Company or to the agent who sold the Policy within the
latest of (1) 10 days after delivery of the Policy to you, (2) 45 days of
completion of the policy application, or (3) 10 days after the Notice of Right
to Cancel has been mailed or delivered to you (or later, if state law requires).
Within seven days following the Company's receipt of your request for a refund,
the Company will refund the greater of (1) any premium paid, or (2) the Cash
Value of the Policy on the date we receive the returned policy, plus any charges
or expenses which may have been deducted less any Loan Account Value. After the
Policy is returned, it will be considered as if it were never in effect.
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
MONTHLY DEDUCTION AMOUNT
The Company will deduct a Monthly Deduction Amount from the Policy's Cash Value
attributable to the Investment Options to cover certain charges and expenses
incurred in connection with the Policy. The Monthly Deduction Amount will be
deducted pro rata from each of the Investment Options attributable to the Policy
on the first day of each Policy Month (the "Deduction Date"), commencing on the
Policy Date. The dollar amount of the Deduction Amount may vary from month to
month.
The following is a summary of monthly charges and expenses which make up the
Monthly Deduction Amount.
COST OF INSURANCE CHARGE
The cost of insurance charge is to cover the Company's expected mortality cost
for basic insurance coverage, not including supplemental benefit provisions. The
cost of insurance charge is deducted monthly, and is equal to the difference
between the Death Benefit payable under the Policy (discounted at the rate set
forth in the Policy) and the Cash Value of the Policy (each determined on the
Deduction Date) (the "Coverage Amount"), multiplied by a monthly "cost of
insurance rate," i.e., a monthly rate charged for each dollar of insurance
coverage. The cost of insurance rate varies annually and is based on the
attained age, sex (where permitted by state law) and risk class of the Insured.
The cost of insurance rate for standard risks will not exceed those based on the
1980 Commissioners Standard Ordinary Mortality Tables ("1980 Tables").
Substandard risks will have monthly deductions based on cost of insurance rates
which may be higher than those set forth in the 1980 Tables. A table of
guaranteed cost of insurance rates per $1,000 will be included in each Policy;
however, the Company reserves the right to use rates less than those shown in
the Policy.
19
<PAGE> 23
Any changes in the cost of insurance rates will be made uniformly for all
Insureds in the same class.
Because the Cash Value and, under certain conditions, the Death Benefit of a
Policy may vary from month to month, the cost of insurance charge may also vary
on each Deduction Date. In addition, you should note that the cost of insurance
charge is based on the difference between the Death Benefit payable under the
Policy and the Cash Value of the Policy. An increase in the Cash Value or a
decrease in the Death Benefit would result in a smaller cost of insurance charge
assuming that everything else remains the same; while a decrease in the Cash
Value or an increase in the Death Benefit would result in a larger cost of
insurance charge.
Changes in the Policy's Death Benefit option and in the Stated Amount will
affect how the cost of insurance charge is calculated. See "Changes in Death
Benefit Option," page 25 and "Changes in Stated Amount," page 26 for a
discussion of the effect of changes in the Stated Amount on the cost of
insurance.
STATE PREMIUM TAX CHARGE
Premium tax charges are not deducted at the time that a premium payment is made,
although the Company does pay state premium taxes attributable to a particular
Policy when those taxes are incurred. To reimburse the Company for the payment
of such taxes, during the first ten years following the Policy Date, the Company
will deduct a premium tax charge of 0.0166667% from the Policy's Cash Value on
each Deduction Date, irrespective of whether additional Premium Payments have
been made. If an additional Premium Payment is made during the first ten Policy
Years, then after Policy Year 10, the Company will deduct a premium tax charge
of 0.0166667% of the portion of the Cash Value attributable to the additional
Premium Payment. The portion of the Cash Value attributable to the additional
Premium Payment is calculated by dividing (a) by (b), where (a) is the amount of
the additional Premium Payment, and (b) is the Policy's Cash Value immediately
after receipt of the additional Premium Payment. Each additional Premium Payment
made during the first ten Policy Years has a portion of the Cash Value
attributable to it, as defined above. These deductions will continue until ten
years following the date(s) on which an additional Premium Payment was made. If
no additional Premium Payments are made during the first ten Policy Years,
deductions for the premium tax charge will not be made after Policy Year 10. The
premium tax charge is equivalent to an annual rate of 0.20%.
Premium taxes vary from state to state and currently range from 0.75% to 3.5%.
Because there is a range of premium tax rates, you may pay premium tax charges
in total that are higher or lower than the premium tax actually assessed in your
jurisdiction.
CHARGES FOR SUPPLEMENTAL BENEFIT PROVISIONS
Although there are no supplemental benefits provisions available under the
Policy as of the date of this Prospectus, the Company may, at some time in the
future, offer supplemental benefits to be purchased under the Policy for an
additional charge. If you elect any such supplemental benefits provisions, the
Company will include the supplemental benefits charge in the Monthly Deduction
Amount. The amount of this charge will vary depending upon the actual
supplemental benefits selected.
CHARGES AGAINST THE INVESTMENT OPTIONS OF SEPARATE ACCOUNT ONE
MORTALITY AND EXPENSE RISK CHARGE
A mortality and expense risk charge will be deducted from amounts allocated to
each Investment Option to compensate the Company for mortality and expense risks
assumed in connection with the Policy. The charge will be deducted daily and
equals 0.002466% for each day in the Valuation Period. The annual rate of the
charge is 0.90%. The annual rate of the mortality and expense risk charge will
be reduced to 0.75% for the current Policy Year if the Average Net Growth Rate
is
20
<PAGE> 24
6.5% or greater during the previous Policy Year. This determination will be made
on an annual basis.
The mortality risk assumed is that Insureds may live for a shorter period of
time than estimated and, therefore, a greater amount of Death Benefit proceeds
than expected will be payable. The expense risk assumed is that expenses
incurred in issuing and administering the Policy will be greater than estimated
and, therefore, will exceed the administrative expense charge imposed by the
Policy. If all money collected by the Company from this charge is not needed to
cover the mortality and expense costs, the excess will be contributed to the
Company's general account.
ADMINISTRATIVE EXPENSE CHARGE
A charge will be deducted from amounts allocated to each Investment Option to
compensate the Company for certain administrative expenses incurred in
connection with the Policy. The charge will be deducted daily and equals
0.001096% for each day in a Valuation Period. The annual rate of this charge is
0.40%. The administrative expense charge will compensate the Company for the
issuance, underwriting, processing, start-up and ongoing administrative expenses
of the Policy and the Separate Account. These expenses include the cost of
processing applications; conducting medical examinations; determining
insurability; establishing and maintaining policy and Separate Account records;
processing death benefit claims, surrenders, transfers, policy loans and
changes; and reporting and overhead costs. The Company has set this charge at a
level which is intended to recover no more than the actual expected costs of the
administrative services to be provided while the Policies are in force.
INCOME TAXES
Although the Company does not currently incur any charge for income taxes as a
result of the operations of the Investment Options, the Company reserves the
right to assess a charge for such taxes if it determines that such taxes will be
incurred. (See "Federal Tax Considerations," page 32.)
INVESTMENT OPTION EXPENSES
Separate Account One purchases shares of the Investment Options at net asset
value. The net asset value of the Investment Option shares reflects investment
advisory fees and other expenses already deducted. The investment advisory fees
and other expenses applicable to each of the Investment Options are described in
the individual Investment Option prospectuses.
SURRENDER CHARGES
A percent of premium surrender charge will be imposed upon full surrenders of
the Policy that occur within nine (9) years after the Company has received any
Premium Payments under the Policy. For partial surrenders a percentage of amount
surrendered will be charged. This charge is intended to cover certain expenses
relating to the sale of the Policy, including commissions to registered
representatives and other promotional expenses. To the extent that the surrender
charges assessed under the Policy are less than the sales commissions paid with
respect to the Policy, the Company will pay the shortfall from its general
account assets, which will include any
21
<PAGE> 25
profits it may derive from charges imposed under the Policy. (See also "Policy
Surrenders and Cash Surrender Value," page 27.) Surrenders charges are
determined as follows:
<TABLE>
<CAPTION>
LENGTH OF TIME FROM FULL SURRENDERS PARTIAL SURRENDERS
PREMIUM PAYMENT (% OF PREMIUM) (% OF AMOUNT SURRENDERED)
<S> <C> <C>
- -----------------------------------------------------------------------------
1-2 years 7.5% 7.5%
3-4 7% 7%
5 6.5% 6.5%
6 6% 6%
7 5% 5%
8 4% 4%
9 3% 3%
Year 10 and Thereafter 0% 0%
</TABLE>
PARTIAL SURRENDERS. The Company will impose a surrender charge equal to a
percentage of the amount surrendered for partial surrenders in excess of the
free withdrawal amount described below. The surrender charge will be limited so
that the total charge for partial surrenders will not exceed the charge that
would apply to a full surrender of the Policy.
For purposes of determining the surrender charge percentage that will apply to a
partial surrender, surrender charges are calculated on a "last-in, first-out
basis." This means that any partial withdrawal in excess of the free withdrawal
amount will be taken against premiums in the reverse order in which they were
made, if more than one premium was paid under the Policy. Surrender charges will
be assessed only against that portion of the partial withdrawal taken from
premium payment(s).
FREE WITHDRAWAL ALLOWANCE. The Company will permit partial surrenders of the
Policy's earnings in an amount of up to 10% of the Policy's Cash Value each year
(beginning with the Second Policy Year) without the imposition of a surrender
charge. The amount of Cash Value available for free withdrawal will be
determined on the Policy Anniversary on or immediately prior to the date that
the partial surrender request is received. The amount of earnings available for
withdrawal will be determined on the date the request for such withdrawal is
received by the Company.
TRANSFER CHARGE
Although there are currently no charges for transfers among the investment
alternatives provided under this Policy, the Company reserves the right to limit
the number of transfers to no more than four in any Policy Year, and to charge a
reasonable administrative fee (up to $10) for any transfer request in excess of
four in any Policy Year. The Company also reserves the right to assess a
processing fee for the Automated Transfer (Dollar Cost Averaging) service. (See
"Transfers of Cash Value," page 24.)
REDUCTION OR ELIMINATION OF CHARGES
The Company may offer the Policy in arrangements where an employer or trustee
will own a group of policies on the lives of certain employees, or in other
situations where groups of policies will be purchased at one time. The Company
may reduce or eliminate sales charges and administrative charges in such
arrangements to reflect the reduced sales expenses and administrative costs
expected as a result of sales to a particular group. The Company makes any
reductions according to rules in effect when an application for a Policy or
additional Premium Payment is approved. While it may change these rules from
time to time, reductions in charges will not discriminate unfairly against any
person.
22
<PAGE> 26
VALUATION OF THE SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
HOW THE CASH VALUE VARIES
The Policy's Cash Value is determined daily. A Policy's Cash Value will vary to
reflect a number of factors, including Premium Payments made, partial
withdrawals, loans, charges assessed in connection with the Policy, and the
investment experience of each Investment Option to which Cash Value is
allocated. The Policy's total Cash Value on a Valuation Date equals the
Accumulation Unit Value(s) for each applicable Investment Option, plus the Loan
Account Value, on that date.
The shares of each Investment Option are purchased by Separate Account One at
net asset value (i.e., without a sales charge). All dividends and capital gains
distributions received from an Investment Option are reinvested by Separate
Account One in that Fund's shares at net asset value and will increase the
associated Accumulation Unit Value. Investment Option shares will be redeemed by
Separate Account One at their net asset value to the extent necessary to make
payments under the Policy.
All valuations made under the Policy (e.g., the determination of Cash Value or
Cash Surrender Value, policy loans, and the determination of the number of
Accumulation Units to be credited to a Policy), will be determined as of the
Valuation Date on which the Company receives the Policy Owner's written request
for a transaction under the Policy, or on which the Company is assessing charges
under the Policy.
HOW THE INVESTMENT EXPERIENCE IS DETERMINED
The Cash Value is related to the rate of return of the Investment Option(s) to
which Premium Payments made under the Policy have been allocated. The Cash Value
on any Valuation Date is calculated by multiplying the number of Accumulation
Units credited to the Policy for each Investment Option by the corresponding
Accumulation Unit Value, then adding the result for each Investment Option
credited to the Policy, and adding any value of the Loan Account.
ACCUMULATION UNIT VALUE
The value of an Accumulation Unit for each Investment Option of Separate Account
One (the "Accumulation Unit Value") is established on each Valuation Date. For
each Investment Option, the Accumulation Unit Value for a Valuation Period is
determined by multiplying the Accumulation Unit Value on the preceding Valuation
Period by the Net Investment Factor for the Investment Option during the
subsequent Valuation Period.
The Accumulation Unit Value may increase or decrease from Valuation Period to
Valuation Period. The number of Accumulation Units credited to your Policy will
not change as a result of the investment experience of the Investment Options.
The Accumulation Unit Value of the Investment Options reflects the reinvestment
of any dividends or capital gains distributions declared by the Investment
Option.
NET INVESTMENT FACTOR
For each Investment Option, the value of an Accumulation Unit for each
subsequent Valuation Period fluctuates based upon the net rate of return for
that period. The Company determines the net rate of return of an Investment
Option at the end of each Valuation Period. The net rate of return reflects the
investment performance of the Investment Option for the Valuation Period and is
net of the charges to Separate Account One described above.
VALUATION PERIODS AND VALUATION DATES
A Valuation Period is the period commencing at the close of business of the New
York Stock Exchange on any Valuation Date and ending at the close of business on
the next succeeding
23
<PAGE> 27
Valuation Date. A Valuation Date is each day that the New York Stock Exchange is
open for trading.
TRANSFERS OF CASH VALUE
- --------------------------------------------------------------------------------
As long as the Policy remains in effect, the Policy Owner may transfer all or a
portion of the Cash Value (less the Loan Account) among any of the Investment
Option(s). Although there are currently no charges, penalties or restrictions on
the amount or frequency of transfers between the Investment Options, the Company
reserves the right to limit the number of transfers to no more than four in any
Policy Year, and to charge a reasonable fee (up to $10) for any transfer request
in excess of four per Policy Year.
Some Investment Options have higher investment advisory fees and/or other
expenses than others; therefore, a transfer from one Investment Option to
another could result in a Policy becoming subject to higher or lower fees and
expenses. A transfer between Investment Options has no other effect on the
amount or timing of any of the other charges under the Policy.
The number of Accumulation Units credited to the Investment Options involved in
the transfer
will be adjusted by dividing the amount transferred from or to that Investment
Option by the Accumulation Unit Value of that Investment Option. The
Accumulation Unit Values will be determined on the Valuation Date on which the
Company receives the written request for a transfer.
TELEPHONE TRANSFERS
You may request a transfer of Cash Value either in writing or by telephone. The
telephone transfer privilege is available automatically; no special election is
necessary for a Policy Owner to have this privilege available. All transfers
must be in accordance with the terms of the Policy. Transfer instructions are
currently accepted on each Valuation Date between 9:00 a.m. and 4:00 p.m.,
Eastern time, by calling 1-800-334-4298. Once instructions have been accepted,
they may not be rescinded; however, new telephone instructions may be given the
following day. If the transfer instructions are not in good order, the Company
will not execute the transfer and will promptly notify the caller.
AUTOMATED TRANSFERS (DOLLAR COST AVERAGING)
You may establish automated transfers of Cash Value on a monthly basis from any
Investment Option to any other Investment Option through a written request or
other method acceptable to the Company. You must have a minimum Cash Value of
$5,000 allocated to the Investment Option(s) from which the transfers are to be
made in order to enroll in the Dollar Cost Averaging Program. The minimum
automated transfer amount is $100 per month.
You may start or stop participation in the Dollar Cost Averaging Program at any
time, but you must give the Company at least 30 days' notice to change any
automated transfer instructions that are currently in place. Automated transfers
are subject to all of the provisions and terms of the Policy, including
provisions relating to the transfer of money between Investment Options. The
Company reserves the right to suspend or modify automated transfers at any time
and to assess a processing fee for this service.
Before transferring any part of the Cash Value, Policy Owners should consider
the risks involved in switching between investments available under the Policy.
Dollar cost averaging requires regular investments regardless of fluctuating
price levels, and does not guarantee profits or prevent losses in a declining
market. A potential investor should consider his or her financial ability to
continue purchases through periods of low price levels.
24
<PAGE> 28
DEATH BENEFIT
- --------------------------------------------------------------------------------
As long as the Policy remains in force, the Policy provides a Death Benefit upon
the death of the Insured. The death benefit proceeds will be paid to a named
Beneficiary. The amount of the death benefit proceeds will be determined on the
date on which the Insured's death occurred. The death benefit proceeds may be
paid in a lump sum or under any optional payment plan.
Death Benefits are payable within seven days of the Company's receipt of
satisfactory proof of the Insured's death. To the extent permitted by state law,
the amount of Death Benefit actually paid to the Policy beneficiary may be
adjusted to reflect any policy loan, suicide by the Insured within two years
after the Issue Date of the Policy, any material misstatements in the policy
application as to age or sex of the Insured, and any amounts payable to an
assignee under a collateral assignment of the Policy. (See "Assignment," page
31.) In addition, if the Insured dies during the Grace Period, the Death Benefit
actually paid to the Policy Owner's beneficiary will be reduced by the amount of
the Deduction Amount that is due and unpaid, and by the amount of any
outstanding Policy Loan. (See "Policy Surrenders and Cash Surrender Value," page
27, for the effects of partial cash surrenders on Death Benefits.)
The Policy provides for two Death Benefit options. Under Option 1 (the Level
Option), the Death Benefit will be equal to the Policy's Stated Amount or, if
greater, a specified multiple of Cash Value determined as of the date of the
Insured's death (the "Minimum Amount Insured"). Under Option 2 (the Variable
Option), the Death Benefit will be equal to the Policy's Stated Amount plus the
Cash Value (determined as of the date of the Insured's death) or, if greater,
the Minimum Amount Insured. The Minimum Amount Insured is the amount required to
qualify the Policy as a life insurance contract under the current federal tax
law. Under that law, the Minimum Amount Insured is equal to a stated percentage
of the Cash Value of the Policy determined daily. The percentages, which differ
according to the attained age of the Insured, are set forth in the Policy and
may change as federal income tax laws or regulations change. The percentages
used to calculate the Minimum Amount Insured decrease after the Insured is age
40. The following is a schedule of the applicable percentages:
<TABLE>
<CAPTION>
% SHALL DECREASE
BY A RATABLE
PORTION
ATTAINED AGE FOR EACH FULL
- ------------------------ YEAR:
MORE BUT NOT ------------------
THAN MORE THAN FROM TO
- ---- --------- ---- ---
<S> <C> <C> <C>
0 40 250 250
40 45 250 215
45 50 215 185
50 55 185 150
55 60 150 130
60 65 130 120
65 70 120 115
70 75 115 105
75 90 105 105
90 95 105 100
</TABLE>
Federal tax law imposes another cash funding limitation on cash value life
insurance policies that, when applicable, may increase the Minimum Amount
Insured in excess of the figures shown in the schedule above. (See Appendix B
for examples demonstrating the relationship between the Death Benefit, the Cash
Surrender Value and the Minimum Amount Insured under the Level and Variable
Options of the Policy.)
CHANGES IN DEATH BENEFIT OPTION
You may change the Death Benefit option at any time prior to the Insured's death
by sending a written request to the Company. There is no direct consequence of
changing a Death Benefit option, except as described under "Modified Endowment
Contracts" on page 33. However, the
25
<PAGE> 29
change could affect future values of the Coverage Amount, and with some Variable
Option to Level Option changes involving substantially funded policies, there
may be a cash distribution which is included in the gross income of the Policy
Owner. The cost of insurance charge, which is based on the Coverage Amount, may
be different in the future. A change from the Level Option to the Variable
Option will not be permitted if the change would result in a Stated Amount of
less than the minimum amount of $25,000. (See "Changes in Stated Amount" below.)
Contact your registered representative for more information.
CHANGES IN STATED AMOUNT
A Policy Owner may request in writing that the Stated Amount of the Policy be
increased or decreased. An increase may only be requested prior to the earlier
of the Insured's attaining age 80 and the date of the Insured's death, and the
Stated Amount after any decrease may not be less than the minimum amount of
$25,000.
A decrease in Stated Amount in a substantially funded Policy may cause a cash
distribution that is includable in the gross income of the Policy Owner. (See
"Federal Tax Considerations," page 32.)
For increases in the Stated Amount, the Company will generally require a new
application and satisfactory evidence of insurability, as well as an additional
Premium Payment. The effective date of any increase will be as shown on the new
Policy Summary Page which the Company will send to the Policy Owner. The
effective date of any increase in the Stated Amount will generally be the
Deduction Date next following either the date of a new application or, if
different, the date requested by the Policy Owner. There is no additional charge
for a decrease in Stated Amount.
For purposes of determining the cost of insurance charge, a decrease in the
Stated Amount will reduce the Stated Amount in the following order:
1) against the most recent increase in the Stated Amount;
2) to other increases in the reverse order in which they occurred;
3) to the initial Stated Amount.
MATURITY AND MATURITY EXTENSION BENEFITS
If the Insured is living on the Maturity Date (the anniversary of the Policy
Date on which the Insured is age 100), the Company will pay the Policy Owner the
Cash Value of the Policy as of the Maturity Date, less any outstanding policy
loan, amounts payable to an assignee under a collateral assignment of the
Policy, and any Deduction Amount due and unpaid. The Policy Owner must surrender
the Policy to the Company before such payment can be made, at which point the
Policy will terminate and the Company will have no further obligations under the
Policy.
Where permitted by state law, the Policy provides for a Maturity Extension
Benefit which effectively allows the Policy Owner to request that coverage be
extended beyond the Maturity Date. Such request may only be made during the
twelve months following the Insured's attainment of age 99. If the Maturity
Extension Benefit is elected, any past due Monthly Deduction Amounts must first
be paid in order for the benefit to become effective on the Maturity Date. After
the Company receives a request for the Maturity Extension Benefit, the Policy
will continue in force until the earlier of the death of the Insured or the date
on which the Policy Owner surrenders the Policy for its Cash Surrender Value. On
the Maturity Date, the Death Benefit will be the Cash Value less any Loan
Account Value and less any Deduction Amounts due but not paid. After the
Maturity Date, the Death Benefit will be the Cash Value less any Loan Account
Value. The Death Benefit is based on the experience of the Investment Options
selected and is variable and is not guaranteed. After the Maturity Date, the
Monthly Deduction Amount will no longer be charged against the Cash Value, and
additional premiums will not be accepted.
26
<PAGE> 30
Any loan outstanding need not be extinguished as of the Maturity Date. The loan
may be continued into the maturity extension period. New loans may also be
initiated during the maturity extension period. Restrictions on loans prior to
the maturity date of the contract are still valid.
The Company intends that the Policy and the Maturity Extension Benefit be
considered life insurance for tax purposes. The Death Benefit is designed to
comply with Section 7702 of the Code, or other equivalent section of the Code.
However, the Company does not give tax advice, and cannot guarantee that the
Death Benefit and Cash Value will be exempt from any future tax liability. The
tax results of any benefits under the Maturity Extension provision depend upon
interpretation of the Internal Revenue Code. The Policy Owner should consult his
or her own personal tax adviser prior to the exercise of the Maturity Extension
Benefit to assess any potential tax liability.
POLICY LAPSE AND REINSTATEMENT
The Policy will remain in effect until the Cash Surrender Value of the Policy is
insufficient to cover the Monthly Deduction Amount. If such event occurs, the
Company will give written notice to the Policy Owner indicating that if the
amount shown in the notice (which will be sufficient to cover the Deduction
Amount due) is not paid within 61 days (the "Grace Period"), the Policy will
lapse. The Policy will continue through the Grace Period, but if no payment is
received, the Policy will terminate without value at the end of the Grace
Period. If the person insured under the Policy dies during the Grace Period, the
Death Benefit payable under the Policy will be reduced by the Monthly Deduction
Amount due plus the amount of any outstanding loan and any interest accrued
thereon. (See "Death Benefit," page 25.) If the Policy is surrendered during the
Grace Period, the Policy's Cash Surrender Value will be reduced by the Monthly
Deduction Amount due. (See "Policy Surrenders and Cash Surrender Value," page
27.)
If the Policy lapses, the Policy Owner may reinstate the Policy upon payment of
the reinstatement premium (and any applicable charges) shown in the Policy. A
request for reinstatement may be made at any time within three years of lapse
(five years for policies issued in Missouri), provided that (1) the Policy was
not surrendered for cash; (2) satisfactory evidence of insurability is provided;
(3) all Monthly Deduction Amounts past due are paid; (4) premium at least equal
to three Monthly Deduction Amounts is paid; and (5) all Loan Account Value is
repaid or restored. The Cash Value of the Policy upon reinstatement will be
equal to the amount provided by the premium paid.
The tax consequences of a lapse may not be reversible by a reinstatement. Policy
Owners should also refer to "Risks Associated with Loans Taken Against a
Variable Life Insurance Policy" (on page 29) to consider the effects of loans on
their Policy.
EXCHANGE RIGHTS
Once the Policy is in effect, it may be exchanged at any time during the first
24 months after its issuance for a general account life insurance policy issued
by the Company (or an affiliated company, if allowed) on the life of the
Insured. Benefits under the new life insurance policy will be as described in
that policy. No evidence of insurability will be required. The Policy Owner has
the right to select the same Death Benefit or Coverage Amount as the former
Policy had at the time of the exchange. Cost of insurance rates will be based on
the same risk classification as those of the former Policy. Any outstanding
policy loan must be repaid before the Company will make an exchange. In
addition, there may be an adjustment for the difference in Cash Value between
the two policies.
POLICY SURRENDERS AND CASH SURRENDER VALUE
- --------------------------------------------------------------------------------
RIGHT TO SURRENDER
At any time during the lifetime of the Insured and while the Policy is in force,
the Policy Owner may make a written request for a full or partial surrender of
the Policy, without the consent of the
27
<PAGE> 31
beneficiary (provided the designation of beneficiary is not irrevocable). In the
case of full surrenders, the Policy should be returned to the Company. The
amount available upon surrender is the Cash Surrender Value (i.e., the Cash
Value of the Policy determined as of the Valuation Date on which the Company
receives the Policy Owner's written request, less any outstanding policy loan,
and less any applicable Surrender Charges). (See "Surrender Charges," page 21.)
Upon full or partial surrender, the Company will generally pay the Cash
Surrender Value of the Policy within seven days following its receipt of the
written request, or on the date requested by the Policy Owner, whichever is
later.
FULL SURRENDERS
If the Policy is fully surrendered, the Policy will terminate on the surrender
effective date. The Policy must be returned to the Company along with a written
release and surrender of all claims under the Policy in a form satisfactory to
the Company. The Policy Owner may elect to have the surrender amount paid in a
lump sum or under a payment option.
PARTIAL SURRENDERS
The Company will permit partial surrenders of the Cash Value in the Policy at
any time during the lifetime of the Insured and while the Policy is in effect. A
partial surrender reduces the Policy's Cash Value by the amount of the partial
surrender requested, plus the amount of the surrender charge imposed in
connection with the partial surrender. The deduction from Cash Value for a
partial surrender will be made on a pro rata basis against the Cash Value of
each of the Investment Options attributable to the Policy (unless the Policy
Owner states otherwise in writing).
In addition to reducing the Cash Value of the Policy, partial cash surrenders
will reduce the Death Benefit payable under the Policy and may reduce the Stated
Amount. The Company may require return of the Policy to record such reduction.
After a partial surrender, the remaining Stated Amount must be no less than
$25,000. Partial surrenders will not be permitted if they would cause the Policy
to fail to qualify as "life insurance" under applicable federal income tax laws.
Reductions in Stated Amount will be processed as described under "Changes in
Stated Amount."
POLICY LOANS
- --------------------------------------------------------------------------------
A Policy Owner may obtain a cash loan from the Company secured by the Policy not
to exceed 90% of the Policy's Cash Value minus surrender charges (determined on
the day on which the Company receives the written loan request). The Company
will make the loan to the Policy Owner within seven days after receipt of the
written request. No loan requests may be made for amounts of less than $500
(subject to state law). If there is a loan outstanding at the time a subsequent
loan request is made, the amount of the outstanding loan will be added to the
new loan request. The amount of the loan will be transferred as of the date the
loan is made on a pro rata basis from the Investment Options (unless the Policy
Owner states otherwise) to another temporary account (the "Loan Account").
The Company will charge interest on the outstanding amounts of the loan, which
interest must be paid in advance by the Policy Owner at the beginning of each
Policy Year. Interest not paid when due will be capitalized, and an amount equal
to such interest will be transferred to the Loan Account pro rata from the
Investment Options. Loans made during the first ten Policy Years will be made at
a 2% net cost on principal, and a 1% net cost on earnings. Loans made after the
tenth Policy Year will be made at 2% net cost on principal and 0% net cost on
earnings. Additionally, loans may be taken at any time at 0% net cost for the
purchase of a Travelers long-term care policy, where permitted by state law. For
these purposes, "earnings" represents any unloaned Cash Value, minus the total
premiums paid under the Policy. Loans will be taken from earnings first, and
then from premium. Loans taken against earnings will be charged an interest rate
of 4.75% during the first ten Policy Years, and 3.85% for Policy Year 11 and
thereafter. Loans taken against principal will be charged an interest rate of
5.65% in all Policy Years. Amounts in the Loan
28
<PAGE> 32
Account will be credited by the Company with a fixed annual rate of return of
4%, and will not be affected by the investment performance of the Investment
Options. The rate of return credited to amounts held in the Loan Account will be
transferred back to the Investment Options on a pro rata basis after each Policy
Year. The Policy's "Loan Account Value" is equal to amounts transferred from the
Investment Options to the Loan Account when a loan is taken, plus capitalized
loan interest, plus the net rate of return credited to the Loan Account that has
not yet been transferred back to the Investment Options. Loan repayments reduce
the Loan Account Value, and increase the Cash Value in the Investment Options.
While the Insured is living and the Policy is in effect, loans may be repaid.
Loan repayments will be first applied to that portion of the loan comprised of
premiums paid. The amount of the repayment will be transferred from the Loan
Account and will be allocated among the Investment Options in proportion to the
outstanding loan amount associated with each Investment Option.
RISKS ASSOCIATED WITH LOANS TAKEN AGAINST A VARIABLE LIFE INSURANCE POLICY
An outstanding loan amount decreases the Cash Surrender Value. If a loan is not
repaid, it permanently decreases the Cash Surrender Value, which could cause the
Policy to lapse (see "Policy Lapse and Reinstatement," page 27). For example, if
a Policy has a Cash Surrender Value of $100,000, the Policy Owner may take a
loan of 90% or $90,000, leaving a new Cash Surrender Value of $10,000. In
addition, the Death Benefit actually payable would be decreased because of the
outstanding loan. Furthermore, even if the loan is repaid, the Death Benefit and
Cash Surrender Value may be permanently affected since the Policy Owner was not
credited with the investment experience of an Investment Option on the amount in
the Loan Account while the loan was outstanding. All or any part of a loan
secured by a Policy may be repaid while the Policy is still in force. Any
payment received while there is an outstanding loan on the Policy will be
considered a loan repayment rather than an additional Premium Payment. A loan
outstanding at the end of the Grace Period cannot be repaid unless the Policy is
reinstated. Loans from a modified endowment contract are treated as
distributions to the Policy Owner (see "Federal Tax Considerations, Tax
Treatment of Policy Benefits -- Modified Endowment Contracts," page 33).
PAYMENT OPTIONS
- --------------------------------------------------------------------------------
Proceeds payable upon the death of the Insured or upon surrender of the Policy,
and the benefits payable upon maturity, may be paid in a lump sum, or in whole
or in part under any of the payment options available under the Policy. Payment
of proceeds which exceed the Death Benefit may be deferred for up to six months
from the date of the request for the payment. A combination of options may be
used. The minimum amount that may be placed under a payment option is $5,000
unless the Company consents to a lesser amount. Proceeds applied under an option
will no longer be affected by the investment experience of the Investment
Options or Trusts. Once in effect, some of the payment options may not provide
any surrender rights.
The following payment options are available under the Policy:
OPTION 1 -- Payments of a Fixed Amount
OPTION 2 -- Payments for a Fixed Period
OPTION 3 -- Amounts Held at Interest
OPTION 4 -- Monthly Life Income
OPTION 5 -- Joint and Survivor Level Amount Monthly Life Income
OPTION 6 -- Joint and Survivor Monthly Life Income -- Two-thirds to
Survivor
OPTION 7 -- Joint and Last Survivor Monthly Life Income -- Monthly Payment
Reduces on Death of First Person Named
OPTION 8 -- Other Options
29
<PAGE> 33
The Company will make any other arrangements for periodic payments as may be
agreed upon. If any periodic payment due any payee is less than $100, the
Company may make payments less often. If the Company has declared a higher rate
under an option at the date the first payment under an option is due, the
Company will base the payments on the higher rate.
OTHER MATTERS
- --------------------------------------------------------------------------------
VOTING RIGHTS
VOTING RIGHTS OF THE INVESTMENT OPTIONS. In accordance with its view of present
applicable law, the Company will vote the shares of the Investment Options at
regular and special meetings of the shareholders of the Investment Options in
accordance with instructions from Policy Owners having a voting interest in
Separate Account One. The Company will vote shares for which no instructions
have been given or shares which are not otherwise attributable to Policy Owners
in the same proportion as it votes shares for which it has received
instructions. If the 1940 Act or any rule promulgated thereunder should be
amended, however, or if the Company's present interpretation should change and,
as a result, the Company determines it is permitted to vote the shares of the
Investment Options in its own right, it may elect to do so.
The voting interests of the Policy Owner in the Investment Options will be
determined as follows: Policy Owners may cast one vote for each $100 of Cash
Value of the Policy allocated to the Investment Option, the assets of which are
invested in the particular Investment Option on the record date for the
shareholder meeting for that Fund. Fractional votes are counted. If, however, a
Policy Owner has taken a loan secured by the Policy, amounts transferred from
the Investment Option(s) to the Loan Account in connection with the loan will
not be considered in determining the voting interests of the Policy Owner.
Policy Owners should review the prospectuses for the Investment Options to
determine matters on which shareholders may vote and the definition of a
majority vote required on some matters.
DISREGARD OF VOTING INSTRUCTIONS. When permitted by state insurance regulatory
authorities, the Company may disregard voting instructions if the instructions
require that the shares be voted so as to cause a change in the investment
objective or policies of Separate Account One or one of the Investment Options,
or to approve or disapprove an investment advisory contract of one of the
Investment Options. In addition, the Company may disregard voting instructions
in favor of changes in the investment policies or the investment adviser of any
of the Investment Options which are initiated by a Policy Owner if the Company
reasonably disapproves of such changes. A change would be disapproved only if
the proposed change is contrary to state law or prohibited by state regulatory
authorities, or if the Company determines that the change would have an adverse
effect on its general account in that the proposed investment policy for an
Investment Option may result in overly speculative or unsound investments.
Should the Company disregard voting instructions, a summary of that action and
the reasons for such action would be included in the next annual report to
Policy Owners.
REPORTS TO POLICY OWNERS
The Company will maintain all records relating to Separate Account One and the
Investment Options. At least once in each Policy Year, the Company will send to
Policy Owners a statement containing the following information: (1) the Stated
Amount and the Cash Value of the Policy (indicating the number of Accumulation
Units credited to the Policy in each Investment Option and the corresponding
Accumulation Unit Value); (2) the date and amount of each Premium Payment; (3)
the date and amount of each Monthly Deduction; (4) the amount of any outstanding
policy loan as of the date of the statement, and the amount of any loan interest
charged on the Loan Account; (5) the date and amount of any partial cash
surrenders and the amount of any partial surrender charges; (6) the annualized
cost of any supplemental benefits purchased under the Policy; and (7) a
reconciliation since the last report of any change in Cash
30
<PAGE> 34
Value and Cash Surrender Value. The Company will also send any other reports
required by any applicable state or federal laws or regulations.
Each Policy Owner will also receive semiannual and annual reports containing
financial statements for each of the Investment Options in which premium
payments are allocated at the time of the report.
LIMIT ON RIGHT TO CONTEST AND SUICIDE EXCLUSION
The Company may not contest the validity of the Policy after it has been in
effect during the Insured's lifetime for two years from the Issue Date. If the
Policy is reinstated, the two-year period will be measured from the date of
reinstatement (subject to state regulation). Each requested increase in Stated
Amount is contestable for two years from its effective date.
In addition, if the Insured commits suicide during the two-year period following
issue, subject to state law, the Death Benefit will be limited to the premiums
paid less the amount of any partial surrender and the amount of any outstanding
policy loan. During the two-year period following an increase, the Death Benefit
in the case of suicide will be limited to an amount equal to the premium paid
for such increase (subject to state law).
MISSTATEMENT AS TO SEX AND AGE
If there has been a misstatement with regard to sex or age in the Policy
Application, benefits payable will be adjusted to what the Policy would have
provided with the correct information based on the most recent cost of insurance
charge. A misstatement with regard to sex or age in a substantially funded
Policy may cause a cash distribution that is includable in whole or in part in
the gross income of the Policy Owner.
SUSPENSION OF VALUATION
The Company reserves the right to suspend or postpone the date of any payment of
any benefit or values for any Valuation Period (1) when the New York Stock
Exchange is closed (except holidays or weekends); (2) when trading on the
Exchange is restricted; (3) when an emergency exists as determined by the SEC so
that disposal of the securities held in the Investment Options is not reasonably
practicable or it is not reasonably practicable to determine the value of the
Investment Options' net assets; or (4) during any other period when the SEC, by
order, so permits for the protection of security holders.
BENEFICIARY
The Applicant names the beneficiary in the application for the Policy. The
Policy Owner may change the beneficiary (unless irrevocably named) during the
Insured's lifetime, and while the Policy is in force, by sending a written
request to the Company. Any change will be effective from the date the written
request was signed. The Company has no responsibility for payments made or
actions taken prior to receipt of the written request. If no beneficiary is
living when the Insured dies, the Death Benefit will be paid to the Policy
Owner, if living; otherwise, the Death Benefit will be paid to the Policy
Owner's estate.
The rights of any collateral assignee may affect the interest of the
Beneficiary.
ASSIGNMENT
The Policy Owner is specified in the Policy Application. The Policy may be
assigned as collateral for a loan or other obligation. The Company is not
responsible for any payment made or action taken before receipt of written
notice of such assignment, and is not responsible for determining the validity
of any assignment. Proof of interest must be filed with any claim under a
collateral assignment.
DIVIDENDS
No dividends will be paid under the Policy.
31
<PAGE> 35
FEDERAL TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
GENERAL
The following is a general discussion of the federal income tax considerations
relating to the Policies. This discussion is based upon the Company's
understanding of the federal income tax laws as they are currently interpreted
by the Internal Revenue Service ("IRS"). These laws are complex, and tax results
may vary among individuals. A person contemplating the purchase of or the
exercise of elections under a Policy should seek competent tax advice.
IT SHOULD BE UNDERSTOOD THAT THIS IS NOT AN EXHAUSTIVE DISCUSSION OF ALL TAX
QUESTIONS THAT MIGHT ARISE UNDER THE POLICIES. NO ATTEMPT HAS BEEN MADE TO
ADDRESS ANY FEDERAL ESTATE TAX OR STATE AND LOCAL TAX CONSIDERATIONS WHICH MAY
ARISE IN CONNECTION WITH A POLICY. FOR COMPLETE INFORMATION, A QUALIFIED TAX
ADVISOR SHOULD BE CONSULTED.
THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF ANY POLICY AND THE FOLLOWING
TAX DISCUSSION IS BASED ON THE COMPANY'S UNDERSTANDING OF FEDERAL INCOME TAX
LAWS AS THEY ARE CURRENTLY INTERPRETED. THE COMPANY CANNOT GUARANTEE THAT THOSE
LAWS OR INTERPRETATIONS WILL REMAIN UNCHANGED.
TAX STATUS OF THE POLICY
- --------------------------------------------------------------------------------
DEFINITION OF LIFE INSURANCE
Section 7702 of the Code sets forth a definition of a life insurance contract
for federal tax purposes. Guidance as to how Section 7702 is to be applied,
however, is limited. Although the Secretary of the Treasury (the "Treasury") is
authorized to prescribe regulations implementing Section 7702, and while
proposed regulations and other limited, interim guidance has been issued, final
regulations have not been adopted. If a Policy were determined not to be a life
insurance contract for purposes of Section 7702, such Policy would not provide
the tax advantages normally provided by a life insurance policy.
With respect to a Policy issued on the basis of a standard rate class, the
Company believes (largely in reliance on IRS Notice 88-128 and the proposed
regulations under Section 7702) that such a Policy should meet the Section 7702
definition of a life insurance contract. With respect to a Policy that is issued
on a substandard basis (i.e., a premium class involving higher than standard
mortality risk), there is less guidance. Thus, it is not clear whether such a
Policy would satisfy Section 7702, particularly if the Policy Owner pays the
full amount of premiums permitted under the Policy.
The Company reserves the right to make changes in the Policy if such changes are
deemed necessary to attempt to assure its qualification as a life insurance
contract for tax purposes.
DIVERSIFICATION
Section 817(h) of the Code provides that separate account investments (or the
investments of a mutual fund, the shares of which are owned by separate accounts
of insurance companies) underlying the Policy must be "adequately diversified"
in accordance with Treasury regulations in order for the Policy to qualify as
life insurance. The Treasury Department has issued regulations prescribing the
diversification requirements in connection with variable contracts. Separate
Account One, through the Investment Options, intends to comply with these
requirements. Although the Company does not control the Investment Options, it
intends to monitor the investments of the Investment Options to ensure
compliance with the requirements prescribed by the Treasury Department.
32
<PAGE> 36
INVESTOR CONTROL
In certain circumstances, owners of variable life insurance contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate accounts used to support their contract. In those circumstances, income
and gains from the separate account assets would be includable in the variable
contract owner's gross income. The IRS has stated in published rulings that a
variable contract owner will be considered the owner of separate account assets
if the contract owner possesses incidents of ownership in those assets, such as
the ability to exercise investment control over the assets. The Treasury has
also announced, in connection with the issuance of regulations concerning
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated asset
account may cause the investor (i.e., the Policy Owner), rather than the
insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular Investment Options without being treated as owners of
the underlying assets." As of the date of this prospectus, no such guidance has
been issued.
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it determined that
the owners were not owners of separate account assets. For example, a Policy
Owner of this Policy has additional flexibility in allocating payments and cash
values. These differences could result in the Policy Owner being treated as the
owner of the assets of Separate Account One. In addition, the Company does not
know what standard will be set forth in the regulations or rulings which the
Treasury is expected to issue, nor does the Company know if such guidance will
be issued. The Company therefore reserves the right to modify the Policy as
necessary to attempt to prevent the Policy Owner from being considered the owner
of a pro rata share of the assets of Separate Account One.
The remaining tax discussion assumes that the Policy qualifies as a life
insurance contract for federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
- --------------------------------------------------------------------------------
IN GENERAL
The Company believes that the proceeds and cash value increases of a Policy
should be treated in a manner consistent with a fixed-benefit life insurance
policy for federal income tax purposes. Thus, the Death Benefit under the Policy
should be excludable from the gross income of the Beneficiary.
In addition, the Policy Owner will generally not be deemed to be in constructive
receipt of the Cash Value, including increments thereof, until there is a
distribution. The tax consequences of distribution from, and loans taken from or
secured by, a Policy depend on whether the Policy is classified as a "Modified
Endowment Contract." However, whether a Policy is or is not a Modified Endowment
Contract, upon a complete surrender or lapse of a Policy or when benefits are
paid at a Policy's maturity date, if the amount received plus the amount of
indebtedness exceeds the total investment in the Policy, the excess will
generally be treated as ordinary income subject to tax.
Depending on the circumstances, the exchange of a Policy, a change in the
Policy's Death Benefit Option, a Policy loan, a partial withdrawal, a surrender,
a change in ownership, or an assignment of the Policy may have federal income
tax consequences. In addition, federal, state and local transfer, and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Owner or beneficiary.
MODIFIED ENDOWMENT CONTRACTS
In light of Policy premium requirements, a Policy will, in almost all cases, be
a modified endowment contract. (See, however, the discussion below on a Policy
issued in exchange for another life insurance contract.)
33
<PAGE> 37
Loans and partial withdrawals from, as well as collateral assignments of,
Policies that are modified endowment contracts will be treated as distributions
to the Policy Owner. All pre-death distributions (including loans, partial
withdrawals and collateral assignments) from these Policies will be included in
gross income on an income-first basis to the extent of any income in the Policy
(the cash value less the Policy Owner's investment in the Policy) immediately
before the distribution.
The law also imposes a 10% penalty tax on pre-death distributions (including
loans, collateral assignments, partial withdrawals and complete surrenders) from
modified endowment contracts to the extent they are included in income, unless
such amounts are distributed on or after the date on which the taxpayer attains
age 59 1/2, because the taxpayer is disabled, or as substantially equal periodic
payments over the taxpayer's life (or life expectancy) or over the joint lives
(or joint life expectancies) of the taxpayer and his or her beneficiary.
Furthermore, if the loan interest is capitalized by adding the amount due to the
balance of the loan, the amount of the capitalized interest will be treated as
an additional distribution subject to income tax as well as the 10% penalty tax,
if applicable, to the extent of income in the Policy.
EXCHANGES
Any Policy issued in exchange for a modified endowment contract will be subject
to the tax treatment accorded to modified endowment contracts. However, the
Company believes that any Policy received in exchange for a life insurance
contract that is not a modified endowment contract will generally not be treated
as a modified endowment contract if the face amount of the Policy is greater
than or equal to the death benefit of the policy being exchanged. The payment of
any premiums at the time of or after the exchange may, however, cause the Policy
to become a modified endowment contract. A prospective purchaser should consult
a qualified tax advisor before authorizing the exchange of his or her current
life insurance contract for a Policy.
Unlike loans from modified endowment contracts, a loan from a Policy that is not
a modified endowment contract will be considered indebtedness of the owner and
no part of a loan will constitute income to the owner. However, the treatment of
loans taken on earnings after the tenth Policy Year, or of loans taken to
acquire a Travelers long-term care policy is unclear; such loans might be
considered a withdrawal instead of indebtedness for federal tax purposes.
Pre-death distributions from a Policy that is not a modified endowment contract
will generally not be included in gross income to the extent that the amount
received does not exceed the Policy Owner's investment in the Policy. (An
exception to this general rule may occur in the case of a decrease or change
that reduces the benefits provided under a Policy in the first 15 years after
the Policy is issued and that results in a cash distribution to the Policy
Owner. Such a cash distribution may be taxed in whole or in part as ordinary
income to the extent of any gain in the Policy.) Further, the 10% penalty tax on
pre-death distributions does not apply to Policies that are not modified
endowment contracts.
Certain changes to Policies that are not modified endowment contracts may cause
such Policies to be treated as modified endowment contracts. A Policy Owner
should therefore consult a tax advisor before effecting any change to a Policy
that is not a modified endowment contract.
TREATMENT OF LOAN INTEREST
If there is any borrowing against the Policy, the interest paid on loans may not
be tax deductible.
AGGREGATION OF MODIFIED ENDOWMENT CONTRACTS
In the case of a pre-death distribution (including a loan, partial withdrawal,
collateral assignment or complete surrender) from a Policy that is treated as a
modified endowment contract, a special aggregation requirement may apply for
purposes of determining the amount of the income on the Policy. Specifically, if
the Company or any of its affiliates issues to the same Policy Owner more than
one modified endowment contract within a calendar year, then for purposes of
measuring the
34
<PAGE> 38
income on the Policy with respect to a distribution from any of those Policies,
the income on the Policy for all those Policies will be aggregated and
attributed to that distribution.
THE COMPANY'S INCOME TAXES
- --------------------------------------------------------------------------------
The Company currently makes no charge to Separate Account One for any federal,
state or local taxes that it incurs that may be attributable to Separate Account
One or to the Policies. The Company reserves the right, however, to make a
charge for any tax or other economic burden responsibility from the application
of tax laws that it determines to be properly attributable to Separate Account
One or to the Policies.
35
<PAGE> 39
MANAGEMENT
- --------------------------------------------------------------------------------
DIRECTORS OF THE TRAVELERS LIFE AND ANNUITY COMPANY
The following are the Directors and Executive Officers of The Travelers Life and
Annuity Company. Unless otherwise indicated, the principal business address for
all individuals is the Company's Home Office at One Tower Square, Hartford,
Connecticut 06183. References to Travelers Group Inc. include, prior to December
31, 1993, Primerica Corporation or its predecessors.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND POSITION SINCE PRINCIPAL BUSINESS
- ----------------------------- -------- -----------------------------------------------------
<S> <C> <C>
Michael A. Carpenter......... 1995 Chairman (since January 1995), President and Chief
Director Executive Officer since June 1995 of The Travelers
Life and Annuity Company; Executive Vice President of
Travelers Group Inc. since January 1995; Chairman,
President and Chief Executive Officer (1989-1994),
Kidder Peabody Group Inc.
Robert I. Lipp............... 1992 Chairman, President and Chief Executive Officer since
Director April 1996 of Travelers/Aetna Property Casualty
Corp.; Chief Executive Officer and Director since
December 1993 of The Travelers Insurance Group Inc.;
Vice Chairman and Director of Travelers Group Inc.
since 1991; Chairman and Chief Executive Officer of
Commercial Credit Company (1991-1993); Executive Vice
President (1986-1991), Primerica Corporation.
Jay S. Fishman............... 1994 Director, Vice Chairman, Chief Financial Officer
Director since April 1996 of Travelers/Aetna Property Casualty
Corp.; Director and Chief Financial Officer since
December 1993 of The Travelers Insurance Group Inc.;
Senior Vice President since 1991 and Treasurer
(1991-1994) of Travelers Group Inc.; Executive Vice
President and Chief Financial Officer (1989-1991),
Consumer Services Group, Commercial Credit Company.
Charles O. Prince III*....... 1994 Director, Vice President and Secretary since April
Director 1996 of Travelers/Aetna Property Casualty Corp.;
Executive Vice President (1995), Senior Vice
President General Counsel and Secretary of Travelers
Group Inc. since 1985.
Marc P. Weill................ 1994 Senior Vice President -- Investments since 1993 and
Director Chief Investment Officer since 1995 of The Travelers
Insurance Group Inc.; Senior Vice President and Chief
Investment Officer of Travelers Group Inc. since
1992; Vice President (1990-1992), Primerica
Corporation; Vice President (1989-1990), Smith Barney
Inc.
Irwin R. Ettinger*........... 1994 Executive Vice President (1995) Senior Vice President
Director (1987-1995) and Chief Accounting Officer (1990-
present) Travelers Group Inc.
Donald T. DeCarlo............ 1995 General Counsel and Secretary of The Travelers Life
Director and Annuity Company since October 1994; Deputy
General Counsel since June 1989 of Travelers Group
Inc.; Executive Vice President since August 1987 of
Gulf Insurance Group
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
* Principal business Address: Travelers Group Inc., 388 Greenwich Street, New York, New York
</TABLE>
36
<PAGE> 40
SENIOR OFFICERS OF THE TRAVELERS LIFE AND ANNUITY COMPANY
- --------------------------------------------------------------------------------
The following are the Senior Officers of The Travelers Life and Annuity Company,
other than the Directors listed above, as of the date of this Prospectus. Unless
otherwise indicated, the principal business address for all individuals listed
is One Tower Square, Hartford, Connecticut 06183.
<TABLE>
<CAPTION>
NAME POSITION WITH INSURANCE COMPANY
- ---------------------- -----------------------------------------
<S> <C>
Stuart Baritz Senior Vice President
Jay S. Benet Senior Vice President
George C. Kokulis Senior Vice President
Warren H. May Senior Vice President
Barry L. Mannes* Senior Vice President
Richard F. Morrison Senior Vice President
Thompson Shea Senior Vice President -- Audit
David A. Tyson Senior Vice President
F. Denney Voss Senior Vice President
W. Douglas Willet Senior Vice President
Ian R. Stuart Vice President, Chief Financial Officer,
Chief Accounting Officer and Controller
William H. White Vice President and Treasurer
</TABLE>
Information relating to the management of the Investment Options is contained in
the Investment Option prospectuses.
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS
- --------------------------------------------------------------------------------
The assets of Separate Account One are held by the Company and are kept
physically segregated and held separate and apart from the Company's general
account. The Company maintains records of all of Separate Account One's
purchases and redemptions of shares of the Investment Options.
DISTRIBUTION OF THE POLICY
- --------------------------------------------------------------------------------
The Company intends to sell the Policy in all jurisdictions where it is licensed
to do business and where the Policy is approved. The Company does not intend to
conduct business in the state of New York.
Policies may be purchased from agents who are licensed by state insurance
authorities to sell variable life insurance policies issued by the Company, and
who are also registered representatives of broker-dealers which have Selling
Agreements with Tower Square Securities, Inc. ("Tower Square"). Tower Square,
whose principal business address is One Tower Square, Hartford, Connecticut,
serves as the principal underwriter for the variable life insurance policies
described herein. Tower Square is registered as a broker-dealer with the
Securities and Exchange Commission under the Securities Exchange Act of 1934,
and is a member of the National Association of Securities Dealers, Inc.
("NASD"). Tower Square is an affiliate of the Company and an indirect wholly
owned subsidiary of Travelers Group Inc., and serves as principal underwriter
pursuant to an Underwriting Agreement to which Separate Account One, the
Company, and Tower Square are parties. No amounts have been or will be retained
by Tower Square for acting as principal underwriter for the Policies.
Agents will be compensated for sales of the Policies on a commission and service
fee basis. The maximum sales commissions to be paid under the Policy will be
6.5% of premiums. In addition, certain production, persistency and managerial
bonuses may be paid.
37
<PAGE> 41
LEGAL PROCEEDINGS AND OPINION
- --------------------------------------------------------------------------------
There are no pending material legal proceedings affecting the Policy, Separate
Account One or any of the Investment Options.
Legal matters in connection with federal laws and regulations affecting the
issue and sale of the Policy described in this Prospectus and the organization
of the Company, its authority to issue the Policy under Connecticut law and the
validity of the forms of the Policy under Connecticut law have been passed on by
the General Counsel of the Life and Annuities Division of The Travelers Life and
Annuity Company.
REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
A Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. This Prospectus does
not contain all information set forth in the Registration Statement, its
amendments and exhibits, to which reference is made for further information
concerning Separate Account One, the Company and the Policy.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Coopers & Lybrand L.L.P., certified public accountants, 100 Pearl Street,
Hartford, Connecticut, are the independent auditors for Separate Account One.
The services provided to Separate Account One include primarily the examination
of Separate Account One's financial statements. The financial statements of
Separate Account One have been audited by Coopers & Lybrand L.L.P., as indicated
in their report thereon and are included herein in reliance upon the authority
of said firm as experts in accounting and auditing.
The balance sheet of The Travelers Life and Annuity Company (the "Company") as
of December 31, 1995 and 1994 and the statements of operations and retained
earnings and cash flows for the years then ended, have been included herein in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, and upon the authority of said firm as experts in accounting and
auditing. The report of KPMG Peat Marwick LLP, covering the December 31, 1995
financial statements of the Company refers to a change in the accounting for
investments in accordance with provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," in 1994.
The statements of operations and retained earnings and cash flows of the Company
for the year ended December 31, 1993, have been included herein in reliance upon
the report dated September 16, 1994 of Coopers & Lybrand L.L.P. certified public
accountants, and upon the authority of said firm as experts in accounting and
auditing.
38
<PAGE> 42
ILLUSTRATIONS
- --------------------------------------------------------------------------------
The following pages are intended to illustrate hypothetically how the Cash
Value, Cash Surrender Value and Death Benefit can change over time for Policies
issued to a 45-year old male. The difference between the Cash Value and the Cash
Surrender Value in these illustrations reflects the Surrender Charge that would
be incurred upon a full surrender of the Policy.
Two pages of values are shown for each Death Benefit Option (Level and
Variable). One page illustrates the assumption that the maximum Guaranteed Cost
of Insurance Rates allowable under the Policy are charged in all years. The
other page illustrates the assumption that the current scale of Cost of
Insurance Rates are charged in all years. The Cost of Insurance Rates charged
vary by age, sex (where permitted by state law) and underwriting classification.
The illustrations also reflect a monthly deduction of 0.016667% for the first
ten years following the Initial Premium for premium taxes.
The values shown in these illustrations vary according to assumptions used for
charges, and gross rates of investment returns. The charges consist of 0.90% for
mortality and expense risks, 0.40% for administrative expenses, and 0.75% for
Investment Option expenses. The 12% illustration will assume that the mortality
and expense risk charge has been reduced to 0.75% in the second policy year and
thereafter. The charge for Investment Option expenses reflected in the
illustrations assumes that Cash Value is allocated equally among all Investment
Options and that no Policy Loans are outstanding, and is an average of the
investment advisory fees and other expenses charged by each of the Investment
Options during 1994. After deduction of these amounts, the illustrated gross
annual investment rates of return of 0% and 6% correspond to approximate net
annual rates of -2.05% and 3.95%, respectively. The illustrated gross annual
investment rate of return of 12% corresponds to an approximate net annual rate
of return of 9.95% in the first Policy Year, and 10.10% thereafter. The actual
charges under a Policy for expenses of the Investment Options will depend on the
actual allocation of Cash Value and may be higher or lower than those
illustrated.
As stated above, the examples illustrate values that would result based upon
hypothetical uniform gross investment rates of return of 0%, 6% and 12%. The
values would be different from those shown if the gross rates averaged 0%, 6%,
and 12% over a period of years, but fluctuated above and below those averages.
The illustrations also assume that premiums are paid as indicated, no policy
loans are made, no increases or decreases to the Stated Amount are requested, no
partial surrenders are made, and no charges for transfers between funds are
incurred.
The illustrations do not reflect any charges for federal income taxes against
Separate Account One, since the Company is not currently deducting such charges
from Separate Account One. However, such charges may be made in the future, and
in that event, the gross annual investment rates of return would have to exceed
0%, 6% and 12% by an amount sufficient to cover the tax charges in order to
produce the Death Benefits, Cash Values and Cash Surrender Values illustrated.
The second column of each Illustration shows the amount that would accumulate if
an amount equal to the Premium Payment was invested to earn interest (after
taxes) at 5%, compounded annually.
Upon request, the Company will provide a comparable personalized illustration
based upon the proposed Insured's age, sex, underwriting classification, the
specified insurance benefits, and the premium requested. The hypothetical gross
annual investment return assumed in such an illustration will not exceed 12%.
39
<PAGE> 43
VINTAGE LIFE
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH CURRENT COST OF INSURANCE CHARGES
Male, Issue Age 45 Face Amount $106,918
Non Smoker Single Premium $25,000
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% ------------------------------- ----------------------------- -----------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ---- -------- ------- ------- ------- ------ ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250 106,918 106,918 106,918 24,202 25,693 27,185 22,327 23,818 25,310
2 27,562 106,918 106,918 106,918 23,400 26,395 29,609 21,525 24,520 27,734
3 28,941 106,918 106,918 106,918 22,593 27,104 32,262 20,843 25,354 30,512
4 30,388 106,918 106,918 106,918 21,778 27,820 35,165 20,028 26,070 33,415
5 31,907 106,918 106,918 106,918 20,954 28,542 38,344 19,329 26,917 36,719
6 33,502 106,918 106,918 106,918 20,117 29,268 41,828 18,617 27,768 40,328
7 35,178 106,918 106,918 106,918 19,263 29,993 45,646 18,013 28,743 44,396
8 36,936 106,918 106,918 106,918 18,386 30,715 49,834 17,386 29,715 48,834
9 38,783 106,918 106,918 106,918 17,489 31,437 54,435 16,739 30,687 53,685
10 40,722 106,918 106,918 106,918 16,560 32,149 59,490 16,560 32,149 59,490
15 51,973 106,918 106,918 126,655 11,635 36,032 94,519 11,635 36,032 94,519
20 66,332 106,918 106,918 183,824 5,180 39,436 150,675 5,180 39,436 150,675
</TABLE>
These hypothetical rates of return are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representations can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
40
<PAGE> 44
VINTAGE LIFE
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH GUARANTEED COST OF INSURANCE CHARGES
Male, Issue Age 45 Face Amount $106,918
Non Smoker Single Premium $25,000.00
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% ------------------------------- ----------------------------- -----------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ---- -------- ------- ------- ------- ------ ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250 106,918 106,918 106,918 24,051 25,539 27,027 22,176 23,664 25,152
2 27,562 106,918 106,918 106,918 23,088 26,069 29,270 21,213 24,194 27,395
3 28,941 106,918 106,918 106,918 22,107 26,588 31,714 20,357 24,838 29,964
4 30,388 106,918 106,918 106,918 21,106 27,093 34,379 19,356 25,343 32,629
5 31,907 106,918 106,918 106,918 20,079 27,579 37,288 18,454 25,954 35,663
6 33,502 106,918 106,918 106,918 19,022 28,044 40,466 17,522 26,544 38,966
7 35,178 106,918 106,918 106,918 17,927 28,478 43,940 16,677 27,228 42,690
8 36,936 106,918 106,918 106,918 16,785 28,876 47,739 15,785 27,876 46,739
9 38,783 106,918 106,918 106,918 15,587 29,227 51,900 14,837 28,477 51,150
10 40,722 106,918 106,918 106,918 14,325 29,525 56,464 14,325 29,525 56,464
15 51,973 106,918 106,918 118,177 6,869 30,272 88,192 6,869 30,272 88,192
20 66,332 0* 106,918 169,538 0* 28,031 138,966 0* 28,031 138,966
</TABLE>
These hypothetical rates of return are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representations can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
* Insufficient cash value would be developed to continue the contract without
additional premium payments.
41
<PAGE> 45
VINTAGE LIFE
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
VARIABLE DEATH BENEFIT OPTION
ILLUSTRATED WITH CURRENT COST OF INSURANCE CHARGES
Male, Issue Age 45 Face Amount $106,918
Non Smoker Single Premium $25,000.00
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% ------------------------------- ----------------------------- -----------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ---- -------- ------- ------- ------- ------ ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250 131,049 132,536 134,023 24,131 25,618 27,105 22,256 23,743 25,230
2 27,562 130,175 133,152 136,348 23,257 26,234 29,430 21,382 24,359 27,555
3 28,941 129,295 133,763 138,873 22,377 26,845 31,955 20,627 25,095 30,205
4 30,388 128,405 134,368 141,617 21,487 27,450 34,699 19,737 25,700 32,949
5 31,907 127,504 134,963 144,598 20,586 28,045 37,680 18,961 26,420 36,055
6 33,502 126,588 135,543 147,836 19,670 28,625 40,918 18,170 27,125 39,418
7 35,178 125,653 136,104 151,350 18,735 29,186 44,432 17,485 27,936 43,182
8 36,936 124,693 136,638 155,163 17,775 29,720 48,245 16,775 28,720 47,245
9 38,783 123,713 137,149 159,307 16,795 30,231 52,389 16,045 29,481 51,639
10 40,722 122,698 137,621 163,800 15,780 30,703 56,882 15,780 30,703 56,882
15 51,973 117,354 139,798 193,854 10,436 32,880 86,936 10,436 32,880 86,936
20 66,332 110,573 140,182 239,853 3,655 33,264 132,935 3,655 33,264 132,935
</TABLE>
These hypothetical rates of return are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representations can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
42
<PAGE> 46
VINTAGE LIFE
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
VARIABLE DEATH BENEFIT OPTION
ILLUSTRATED WITH GUARANTEED COST OF INSURANCE CHARGES
Male, Issue Age 45 Face Amount $106,918
Non Smoker Single Premium $25,000.00
<TABLE>
<CAPTION>
TOTAL
PREMIUMS DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE
WITH 5% ------------------------------- ----------------------------- -----------------------------
YEAR INTEREST 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ---- -------- ------- ------- ------- ------ ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250 130,854 132,335 133,816 23,936 25,417 26,898 22,061 23,542 25,023
2 27,562 129,774 132,726 135,895 22,856 25,808 28,977 20,981 23,933 27,102
3 28,941 128,675 133,086 138,133 21,757 26,168 31,215 20,007 24,418 29,465
4 30,388 127,554 133,412 140,542 20,636 26,494 33,624 18,886 24,744 31,874
5 31,907 126,406 133,696 143,134 19,488 26,778 36,216 17,863 25,153 34,591
6 33,502 125,227 133,931 145,920 18,309 27,013 39,002 16,809 25,513 37,502
7 35,178 124,008 134,107 148,910 17,090 27,189 41,992 15,840 25,939 40,742
8 36,936 122,741 134,212 152,116 15,823 27,294 45,198 14,823 26,294 44,198
9 38,783 121,419 134,234 155,548 14,501 27,316 48,630 13,751 26,566 47,880
10 40,722 120,033 134,160 159,219 13,115 27,242 52,301 13,115 27,242 52,301
15 51,973 112,042 132,249 182,580 5,124 25,331 75,662 5,124 25,331 75,662
20 66,332 0* 125,652 215,424 0* 18,734 108,506 0* 18,734 108,506
</TABLE>
These hypothetical rates of return are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representations can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
* Insufficient cash value would be developed to continue the contract without
additional premium payments.
43
<PAGE> 47
APPENDIX A -- PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, Separate Account One's Investment Options may show the
percentage change in the value of an Accumulation Unit based on the performance
of the Investment Option over a period of time, determined by dividing the
increase (decrease) in value for that unit by the Accumulation Unit Value at the
beginning of the period. Separate Account One commenced operations on September
5, 1995. All Investment Options of Separate Account One invest in Investment
Options that were in existence prior to the date on which the Investment Options
became available under the Policy. Average annual rates of return include
periods prior to the inception of the Investment Option, and are calculated by
adjusting the actual returns of the Investment Options to reflect the charges
that would have been assessed under the Investment Options had the Investment
Option been available under Separate Account One during the period shown.
The following performance information represents the percentage change in the
value of an Accumulation Unit of the Investment Options for the periods
indicated, and reflects all expenses of the Investment Options, as well as the
0.90% mortality and expense risk charge and the 0.40% administrative expense
charge assessed against the Investment Options. The rates of return do not
reflect surrender charges or Monthly Deduction Amounts (which are depicted in
the Example following the Rates of Return), nor do they reflect a reduction in
mortality and expense risk charges which may apply under certain circumstances.
For information about the Charges and Deductions assessed under the Policy, see
page 19. For illustrations of how these charges affect Cash Values and Death
Benefits, see the Illustrations beginning on page 39.
AVERAGE RATES OF RETURN (SINCE INCEPTION)
FOR PERIODS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
AVERAGE ANNUAL
INVESTMENT OPTION RATE OF RETURN INCEPTION DATE
-------------------------------------------------------- -------------- --------------
<S> <C> <C>
Smith Barney Income and Growth Portfolio................ 18.28% 6/20/94
Alliance Growth Portfolio............................... 23.94% 6/20/94
American Capital Enterprise Portfolio................... 22.65% 6/21/94
Smith Barney International Equity Portfolio............. 1.44% 6/20/94
TBC Managed Income Portfolio............................ 8.00% 6/28/94
Putnam Diversified Income Portfolio..................... 10.25% 6/20/94
Smith Barney High Income Portfolio...................... 10.21% 6/22/94
MFS Total Return Portfolio.............................. 14.13% 6/20/94
Smith Barney Money Market Portfolio..................... 3.47% 6/20/94
AIM Capital Appreciation Portfolio...................... (4.24)% 10/10/95
Smith Barney Total Return Portfolio..................... 13.63% 11/21/94
Travelers Zero Coupon Bond Fund Portfolio 1998.......... 1.98% 10/11/95
Travelers Zero Coupon Bond Fund Portfolio 2000.......... 2.78% 10/11/95
Travelers Zero Coupon Bond Fund Portfolio 2005.......... 5.00% 10/11/95
</TABLE>
44
<PAGE> 48
EXAMPLE OF POLICY CHARGES
- --------------------------------------------------------------------------------
The following chart illustrates the surrender charges and Monthly Deduction
Amounts (including the Cost of Insurance charges and the deduction for premium
tax) that would apply under a Policy based on the assumptions listed below.
Surrender charges and Monthly Deduction Amounts generally will be higher for an
Insured who is older than the assumed Insured, and lower for an Insured who is
younger (assuming the Insureds have the same risk classification). Cost of
insurance rates increase each year as the Insured becomes a year older.
Male, Age 35, Non-Smoker Face Amount: $167,193
$25,000 Single Premium Level Death Benefit Option
Hypothetical Gross Annual Investment Current Charges
Rate of Return: 10%*
<TABLE>
<CAPTION>
MONTHLY DEDUCTION AMOUNTS
SURRENDER CHARGE -----------------------------
POLICY CUMULATIVE AS % OF COST OF PREMIUM
YEAR PREMIUMS CUM. PREM. INSURANCE CHARGES TAX
- ------ ---------- ---------------- ----------------- -------
<S> <C> <C> <C> <C>
1 $ 25,000 7.5% $214.78 $51.55
2 $ 25,000 7.5% $222.97 $55.11
3 $ 25,000 7.0% $232.58 $58.98
5 $ 25,000 6.5% $255.05 $67.60
10 $ 25,000 0% $323.22 $95.26
</TABLE>
* Hypothetical investment results shown above are illustrative only and should
not be deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown. Hypothetical
investment results may be different from those shown if the actual rates of
return averaged 10%, but fluctuated above or below that average for individual
policy years. No representations can be made that the hypothetical rates
assumed can be achieved for any one year or sustained over any period of time.
45
<PAGE> 49
APPENDIX B -- DEATH BENEFIT EXAMPLES
- --------------------------------------------------------------------------------
The following examples demonstrate the relationship between the Death Benefit,
the Cash Surrender Value and the Minimum Amount Insured under the Level and
Variable Death Benefit Options available under the Policy. Both sets of examples
assume an Insured of age 40, a Minimum Amount Insured of 250% of Cash Value (in
accordance with the table on page 25 of this Prospectus), and no outstanding
policy loans.
OPTION 1 -- LEVEL DEATH BENEFIT
- --------------------------------------------------------------------------------
Under a "Level" Death Benefit, the Death Benefit under the Policy is generally
equal to the Stated Amount of $25,000. Since the Policy is designed to qualify
as a life insurance contract, the Death Benefit cannot be less than the Minimum
Amount Insured (or, in this example, 250% of the Cash Value).
EXAMPLE ONE. If the Cash Value of the Policy equals $8,000, the Minimum Amount
Insured would be $20,000 ($8,000 X 250%). If the Death Benefit in the Policy is
the greater of the Stated Amount ($25,000) or the Minimum Amount Insured
($20,000), then the Death Benefit would be $25,000.
EXAMPLE TWO. If the Cash Value of the Policy equals $40,000, the Minimum Amount
Insured would be $100,000 ($40,000 X 250%). The resulting Death Benefit would be
$100,000 since the Death Benefit is the greater of the Stated Amount ($25,000)
or the Minimum Amount Insured ($100,000).
EXAMPLE THREE. If the Insured is age 41, and the Cash Value of the Policy
equals $44,000, the Minimum Amount Insured would be $106,920 ($44,000 X 243%)
(243% is the applicable percentage for a 41-year old insured). The Death Benefit
would be equal to $106,920 which is the greater of the Stated Amount ($25,000)
and the Minimum Amount Insured ($106,920).
EXAMPLE FOUR. The Death Benefit may also increase or decrease with the
investment experience of the applicable Underlying Funds to the extent the
Minimum Amount Insured exceeds the Stated Amount. Consequently, if the 41-year
old Insured has a Cash Value equal to $35,000 instead of $44,000, the Death
Benefit would be $85,050 ($35,000 X 243%).
OPTION 2 -- VARIABLE DEATH BENEFIT
- --------------------------------------------------------------------------------
Under a "Variable" Death Benefit, the Death Benefit under the Policy will vary
with the investment experience of the Investment Option(s) to which Premium
Payments are allocated under the Policy. The Variable Death Benefit will
generally be equal to the Stated Amount ($25,000) plus the Cash Value of the
Policy (determined on the date of the Insured's death). The Death Benefit
cannot, however, be less than the Minimum Amount Insured (or, in this example,
250% of the Cash Value).
EXAMPLE ONE. If the Cash Value of the Policy equals $10,000, the Minimum Amount
Insured would be $25,000 ($10,000 X 250%). The Death Benefit ($35,000) would be
equal to the Stated Amount ($25,000) plus the Cash Value ($10,000), unless the
Minimum Amount Insured ($25,000) was greater.
EXAMPLE TWO. If the Cash Value of the Policy equals $60,000, then the Minimum
Amount Insured would be $150,000 ($60,000 X 250%). The resulting Death Benefit
would be $150,000 because the Minimum Amount Insured ($150,000) is greater than
the Stated Amount plus the Cash Value ($25,000 + $60,000 = $85,000).
EXAMPLE THREE. If the Insured is age 41, and the Cash Value of the Policy
equals $65,000, the Minimum Amount Insured would be $157,950 ($65,000 X 243%)
(243% is the applicable percentage for a 41-year old insured). The resulting
Death Benefit under the Policy would be
46
<PAGE> 50
equal to $157,950 because the Minimum Amount Insured ($157,950) is greater than
the Stated Amount plus the Cash Value ($25,000 + $65,000 = $90,000).
As long as the Policy remains in effect, the Company guarantees that the Death
Benefit under either option will not be less than the current Stated Amount of
the Policy less any outstanding policy loan, Deduction Amount due but unpaid,
and any amount payable pursuant to a collateral assignment of the Policy. The
Death Benefit under either option may vary with the Cash Value of the Policy.
Under Option 1, the Death Benefit equals the Stated Amount and will vary only
when the Minimum Amount Insured exceeds the Stated Amount of the Policy. Under
Option 2, the Death Benefit equals the greater of the Stated Amount plus the
Cash Value, and the Minimum Amount Insured.
47
<PAGE> 51
APPENDIX C -- REPRESENTATIVE STATED AMOUNTS
- --------------------------------------------------------------------------------
The following table represents the Single Premium Factors for the determination
of the Stated Amount per dollar of Gross Premium, varying by Male and Female
(applicable to standard lives).
<TABLE>
<CAPTION>
MALE FEMALE
- ------------------------------------- -------------------------------------
AGE SP FAC AGE SP FAC AGE SP FAC AGE SP FAC
- --- --------- --- -------- --- --------- --- --------
<S> <C> <C> <C> <C> <C> <C> <C>
20 12.65742 51 3.32670 20 16.15463 51 4.13678
21 12.20773 52 3.19482 21 15.48558 52 3.97060
22 11.76323 53 3.06987 22 14.83810 53 3.81237
23 11.32222 54 2.95167 23 14.21155 54 3.66170
24 10.88482 55 2.83985 24 13.60662 55 3.51803
25 10.45123 56 2.73405 25 13.02272 56 3.38078
26 10.02300 57 2.63380 26 12.45932 57 3.24928
27 9.60257 58 2.53865 27 11.91653 58 3.12290
28 9.19198 59 2.44827 28 11.39430 59 3.00125
29 8.79287 60 2.36238 29 10.89240 60 2.88420
30 8.40647 61 2.28087 30 10.41067 61 2.77188
31 8.03383 62 2.20360 31 9.94865 62 2.66457
32 7.67547 63 2.13053 32 9.50535 63 2.56258
33 7.33157 64 2.06153 33 9.08002 64 2.46607
34 7.00238 65 1.99645 34 8.67288 65 2.37482
35 6.68772 66 1.93500 35 8.28367 66 2.28843
36 6.38750 67 1.87688 36 7.91217 67 2.20637
37 6.10155 68 1.82180 37 7.55883 68 2.12805
38 5.82963 69 1.76950 38 7.22327 69 2.05307
39 5.57132 70 1.71990 39 6.90517 70 1.98132
40 5.32610 71 1.67297 40 6.60400 71 1.91287
41 5.09358 72 1.62875 41 6.31898 72 1.84795
42 4.87303 73 1.58733 42 6.04912 73 1.78683
43 4.66378 74 1.54873 43 5.79305 74 1.72965
44 4.46520 75 1.51285 44 5.54958 75 1.67632
45 4.27672 76 1.47945 45 5.31792 76 1.62663
46 4.09775 77 1.44823 46 5.09715 77 1.58023
47 3.92765 78 1.41890 47 4.88652 78 1.53675
48 3.76588 79 1.39115 48 4.68553 79 1.49587
49 3.61205 80 1.36485 49 4.49387 80 1.45742
50 2.46573 50 4.31108
</TABLE>
48
<PAGE> 52
THE TRAVELERS VARIABLE LIFE INSURANCE
SEPARATE ACCOUNT ONE
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments in eligible funds at market value:
Smith Barney/Travelers Series Fund Inc.:
Alliance Growth Portfolio, 7,249 shares (cost $97,826).................. $ 97,577
American Capital Enterprise Portfolio, 4,013 shares (cost $52,308)...... 51,762
Smith Barney High Income Portfolio, 442 shares (cost $4,972)............ 4,897
Smith Barney International Equity Portfolio, 4,626 shares (cost $48,290) 49,408
Smith Barney Income and Growth Portfolio, 2,861 shares (cost $37,140)... 36,787
Smith Barney Money Market Portfolio, 1,468,093 shares (cost $1,468,093). 1,468,093
MFS Total Return Portfolio, 2,443 shares (cost $29,533)................. 29,067
AIM Capital Appreciation Portfolio, 5,854 shares (cost $55,188)......... 56,198
Smith Barney Series Fund:
Total Return Portfolio, 1,757 shares (cost $21,874)..................... 22,379
----------
Total Investments (cost $1,815,224).................................... 1,816,168
----------
Dividends receivable...................................................... 7,708
----------
Total Assets............................................................ 1,823,876
----------
LIABILITIES:
Accrued liabilities....................................................... 333
----------
Total Liabilities....................................................... 333
----------
NET ASSETS................................................................. $1,823,543
==========
</TABLE>
See Notes to Financial Statements
-1-
<PAGE> 53
THE TRAVELERS VARIABLE LIFE INSURANCE
SEPARATE ACCOUNT ONE
STATEMENT OF OPERATIONS
FOR THE PERIOD OCTOBER 10, 1995 (DATE OPERATIONS COMMENCED)
TO DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends........................................... $11,018
EXPENSES:
Insurance charges................................... $1,018
Administrative fees................................. 453
-------
Total expenses..................................... 1,471
-------
Net investment income............................. 9,547
-------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN ON
INVESTMENTS:
Realized gain from investment transactions:
Proceeds from investments sold..................... 151,311
Cost of investments sold........................... 151,309
-------
Net realized gain................................. 2
Unrealized gain on investments:
December 31, 1995.................................. 944
-------
Net realized gain and change in unrealized gain... 946
-------
Net increase in net assets resulting from operations $10,493
=======
</TABLE>
See Notes to Financial Statements
-2-
<PAGE> 54
THE TRAVELERS VARIABLE LIFE INSURANCE
SEPARATE ACCOUNT ONE
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD OCTOBER 10, 1995 (DATE OPERATIONS COMMENCED)
TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
1995
----
<S> <C>
OPERATIONS:
Net investment income....................................... $ 9,547
Net realized gain from investment transactions.............. 2
Net change in unrealized gain on investments................ 944
----------
Net increase in net assets resulting from operations....... 10,493
----------
UNIT TRANSACTIONS:
Participant premium payments
(applicable to 1,807,237 units)............................ 1,818,712
Participant transfers from other Travelers accounts
(applicable to 348,619 units).............................. 349,129
Contract surrenders
(applicable to 5,623 units)................................ (5,661)
Participant transfers to other Travelers accounts
(applicable to 346,689 units).............................. (349,130)
----------
Net increase in net assets resulting from unit transactions 1,813,050
----------
Net increase in net assets................................ 1,823,543
NET ASSETS:
Beginning of period......................................... -
----------
End of period............................................... $1,823,543
==========
</TABLE>
See Notes to Financial Statements
-3-
<PAGE> 55
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Travelers Variable Life Insurance Separate Account One ("Separate Account
One") is a separate account of The Travelers Life and Annuity Company
("Travelers Life"), which is a wholly owned subsidiary of The Travelers
Insurance Company, an indirect wholly owned subsidiary of Travelers Group Inc.,
and is available for funding certain variable life insurance contracts issued
by Travelers Life. Separate Account One is registered under the Investment
Company Act of 1940, as amended, as a unit investment trust.
Participant premium payments applied to Separate Account One are invested in
one or more eligible funds in accordance with the selection made by the
contract owner. As of December 31, 1995, the eligible funds available under
Separate Account One are: Zero Coupon Bond Fund Portfolio Series 1998, Zero
Coupon Bond Fund Portfolio Series 2000 and Zero Coupon Bond Fund Portfolio
Series 2005 of The Travelers Series Trust; Alliance Growth Portfolio, American
Capital Enterprise Portfolio, TBC Managed Income Portfolio, Smith Barney High
Income Portfolio, Smith Barney International Equity Portfolio, Smith Barney
Income and Growth Portfolio, Smith Barney Money Market Portfolio, Putnam
Diversified Income Portfolio, MFS Total Return Portfolio and AIM Capital
Appreciation Portfolio of Smith Barney/Travelers Series Fund Inc.; and Total
Return Portfolio of Smith Barney Series Fund. All the funds are Massachusetts
business trusts except for Smith Barney/Travelers Series Fund Inc. which is
incorporated under Maryland law. Smith Barney/Travelers Series Fund Inc. and
Smith Barney Series Fund are managed by Smith Barney Mutual Funds Management
Inc., an indirect wholly owned subsidiary of Travelers Group Inc. Not all
funds are available in all states.
The following is a summary of significant accounting policies consistently
followed by Separate Account One in the preparation of its financial
statements.
SECURITY VALUATION. Investments are valued daily at the net asset values per
share of the underlying funds.
FEDERAL INCOME TAXES. The operations of Separate Account One form a part of
the total operations of Travelers Life and are not taxed separately. Travelers
Life is taxed as a life insurance company under the Internal Revenue Code of
1986, as amended (the "Code"). Under existing federal income tax law, no taxes
are payable on the investment income of Separate Account One. Separate Account
One is not taxed as a "regulated investment company" under Subchapter M of the
Code.
OTHER. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Security transactions are accounted for on the trade date. Dividend income is
recorded on the ex-dividend date.
2. INVESTMENTS
Purchases and sales of investments aggregated $1,966,533 and $151,311,
respectively, for the period ended December 31, 1995. Realized gains and
losses from investment transactions are reported on an identified-cost basis.
The cost of investments in eligible funds was $1,815,224 at December 31, 1995.
Gross unrealized appreciation for all investments at December 31, 1995 was
$2,633. Gross unrealized depreciation for all investments at December 31, 1995
was $1,689.
3. CONTRACT CHARGES
Insurance charges are paid to Travelers Life for the mortality and expense
risks assumed by Travelers Life. These charges are equivalent to 0.90% of the
average net assets of Separate Account One on an annual basis. This charge
will be reduced to 0.75% for any calendar year that follows a calendar year in
which the average participant's net fund growth rate (as described in the
prospectus) is 6.5% or greater.
Administrative fees are paid to Travelers Life for administrative expenses
incurred by Travelers Life. This charge is equivalent to 0.40% of the average
net assets of Separate Account One on an annual basis.
-4-
<PAGE> 56
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. NET CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------------
UNIT NET
UNITS VALUE ASSETS
----- ----- ------
<S> <C> <C> <C>
Smith Barney/Travelers Series Fund Inc.:
Alliance Growth Portfolio.................... 97,238 $1.033 $ 100,444
American Capital Enterprise Portfolio........ 52,649 1.014 53,373
Smith Barney High Income Portfolio........... 4,983 1.027 5,116
Smith Barney International Equity Portfolio.. 48,081 1.029 49,454
Smith Barney Income and Growth Portfolio..... 37,525 0.997 37,400
Smith Barney Money Market Portfolio.......... 1,456,818 1.009 1,469,195
MFS Total Return Portfolio................... 29,676 1.007 29,891
AIM Capital Appreciation Portfolio........... 55,096 1.021 56,242
Smith Barney Series Fund:
Total Return Portfolio....................... 21,478 1.044 22,428
----------
Net Contract Owners' Equity....................................... $1,823,543
==========
</TABLE>
-5-
<PAGE> 57
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. SCHEDULE OF SEPARATE ACCOUNT ONE OPERATIONS AND CHANGES IN NET ASSETS
FOR THE PERIOD OCTOBER 10, 1995 (DATE OPERATIONS COMMENCED) TO DECEMBER 31,
1995
<TABLE>
<CAPTION>
SMITH SMITH SMITH
AMERICAN BARNEY BARNEY BARNEY
ALLIANCE CAPITAL HIGH INTERNATIONAL INCOME
GROWTH ENTERPRISE INCOME EQUITY AND GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ---------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................................. $ 2,884 $ 1,621 $ 220 $ 55 $ 632
--------- ---------- --------- ------------- ----------
EXPENSES:
Insurance charges..................................... 42 15 8 14 15
Administrative fees................................... 19 7 4 6 7
--------- ---------- --------- ------------- ----------
Net investment income................................ 2,823 1,599 208 35 610
--------- ---------- --------- ------------- ----------
REALIZED GAIN AND CHANGE IN UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain from investment transactions:
Proceeds from investments sold....................... 60 - 23 - 21
Cost of investments sold............................. 59 - 23 - 21
--------- ---------- --------- ------------- ----------
Net realized gain................................... 1 - - - -
--------- ---------- --------- ------------- ----------
Change in unrealized gain (loss) on investments:
Unrealized gain (loss) beginning of period........... - - - - -
Unrealized gain (loss) end of period................. (249) (546) (75) 1,118 (353)
--------- ---------- --------- ------------- ----------
Net change in unrealized gain (loss) for the period. (249) (546) (75) 1,118 (353)
--------- ---------- --------- ------------- ----------
Net increase in net assets resulting from operations 2,575 1,053 133 1,153 257
--------- ---------- --------- ------------- ----------
UNIT TRANSACTIONS:
Participant premium payments......................... - - - - -
Participant transfers from other Travelers accounts... 97,916 52,343 4,995 48,301 37,186
Contract surrenders................................... (47) (23) (12) - (43)
Participant transfers to other Travelers accounts..... - - - - -
--------- ---------- --------- ------------- ----------
Net increase in net assets resulting from
unit transactions.................................... 97,869 52,320 4,983 48,301 37,143
--------- ---------- --------- ------------- ----------
Net increase in net assets......................... 100,444 53,373 5,116 49,454 37,400
NET ASSETS:
Beginning of period.................................. - - - - -
--------- ---------- --------- ------------- ----------
End of period........................................ $ 100,444 $ 53,373 $ 5,116 $ 49,454 $ 37,400
========= ========== ========= ============= ==========
</TABLE>
-6-
<PAGE> 58
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
SMITH
BARNEY
MONEY MFS AIM CAPITAL
MARKET TOTAL RETURN APPRECIATION TOTAL RETURN
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO COMBINED
- ---------- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
$ 4,637 $ 838 $ 54 $ 77 $ 11,018
- ---------- ------------ ------------ ------------ ----------
878 11 16 19 1,018
390 5 7 8 453
- ---------- ------------ ------------ ------------ ----------
3,369 822 31 50 9,547
- ---------- ------------ ------------ ------------ ----------
151,146 21 - 40 151,311
151,146 21 - 39 151,309
- ---------- ------------ ------------ ------------ ----------
- - - 1 2
- ---------- ------------ ------------ ------------ ----------
- - - - -
- (466) 1,010 505 944
- ---------- ------------ ------------ ------------ ----------
- (466) 1,010 505 944
- ---------- ------------ ------------ ------------ ----------
3,369 356 1,041 556 10,493
- ---------- ------------ ------------ ------------ ----------
1,818,712 - - - 1,818,712
1,711 29,556 55,224 21,897 349,129
(5,467) (21) (23) (25) (5,661)
(349,130) - - - (349,130)
- ---------- ------------ ------------ ------------ ----------
1,465,826 29,535 55,201 21,872 1,813,050
- ---------- ------------ ------------ ------------ ----------
1,469,195 29,891 56,242 22,428 1,823,543
- - - - -
- ---------- ------------ ------------ ------------ ----------
$1,469,195 $ 29,891 $ 56,242 $ 22,428 $1,823,543
========== ============ ============ ============ ==========
</TABLE>
-7-
<PAGE> 59
NOTES TO FINANCIAL STATEMENTS - CONTINUED
6. SCHEDULE OF UNITS FOR SEPARATE ACCOUNT ONE
FOR THE PERIOD OCTOBER 10, 1995 (DATE OPERATIONS COMMENCED) TO
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SMITH
AMERICAN SMITH BARNEY
ALLIANCE CAPITAL BARNEY INTERNATIONAL
GROWTH ENTERPRISE HIGH INCOME EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ---------- ------------ -------------
<S> <C> <C> <C> <C>
Units beginning of period................. - - - -
Units purchased and
transferred from other Travelers accounts 97,284 52,672 4,995 48,081
Units redeemed and
transferred to other Travelers accounts.. (46) (23) (12) -
------------ ---------- ------------ -------------
Units end of period....................... 97,238 52,649 4,983 48,081
============ ========== ============ =============
<CAPTION>
SMITH SMITH
BARNEY BARNEY
INCOME MONEY MFS AIM CAPITAL
AND GROWTH MARKET TOTAL RETURN APPRECIATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ---------- ------------ -------------
<S> <C> <C> <C> <C>
Units beginning of period................. - - - -
Units purchased and
transferred from other Travelers accounts 37,568 1,808,939 29,697 55,118
Units redeemed and
transferred to other Travelers accounts.. (43) (352,121) (21) (22)
------------ ---------- ------------ -------------
Units end of period....................... 37,525 1,456,818 29,676 55,096
============ ========== ============ =============
<CAPTION>
TOTAL RETURN
PORTFOLIO
------------
<S> <C>
Units beginning of period................. -
Units purchased and
transferred from other Travelers accounts 21,502
Units redeemed and
transferred to other Travelers accounts.. (24)
------------
Units end of period....................... 21,478
============
</TABLE>
-8-
<PAGE> 60
REPORT OF INDEPENDENT ACCOUNTANTS
To the Owners of Variable Life Insurance Contracts of
The Travelers Variable Life Insurance Separate Account One:
We have audited the accompanying statement of assets and liabilities of The
Travelers Variable Life Insurance Separate Account One as of December 31, 1995,
and the related statements of operations and changes in net assets for the
period October 10, 1995 (date operations commenced) to December 31, 1995.
These financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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. Our
procedures included confirmation of shares owned as of December 31, 1995, by
correspondence with underlying funds. 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 audit provides 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 Travelers Variable Life
Insurance Separate Account One as of December 31, 1995, the results of its
operations and the changes in its net assets for the period October 10, 1995
(date operations commenced) to December 31, 1995, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 20, 1996
-9-
<PAGE> 61
Independent Accountants
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
This report is prepared for the general information of contract owners and is
not an offer of shares of The Travelers Variable Life Insurance Separate
Account One or Separate Account One's underlying funds. It should not be used
in connection with any offer except in conjunction with the Prospectuses for
the Variable Universal Life Insurance products offered by The Travelers Life
and Annuity Company and the Prospectuses for the underlying funds, which
collectively contain all pertinent information, including the applicable sales
commissions.
<PAGE> 62
Independent Auditors' Report
The Board of Directors and Shareholder of
The Travelers Life and Annuity Company:
We have audited the accompanying balance sheet of The Travelers Life and
Annuity Company as of December 31, 1995 and 1994, and the related statements of
operations and retained earnings and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits 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 Travelers Life and Annuity
Company as of December 31, 1995 and 1994, and the results of its operations and
its cash flows for the years then ended, in conformity with generally accepted
accounting principles.
As discussed in note 3 to the financial statements, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," in 1994.
/s/KPMG Peat Marwick LLP
Hartford, Connecticut
January 16, 1996
7
<PAGE> 63
Report of Independent Accountants
To the Board of Directors and Shareholder of
The Travelers Life and Annuity Company:
We have audited the statements of operations and retained earnings and cash
flows of The Travelers Life and Annuity Company for the year ended December 31,
1993. These financial statements are the responsibility of Company
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of The
Travelers Life and Annuity Company for the year ended December 31, 1993 in
conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
September 16, 1994
8
<PAGE> 64
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
(for the year ended December 31, in thousands) 1995 1994 | 1993
- --------------------------------------------------------------------------------------------|-----------
<S> <C> <C> | <C>
REVENUES |
Premiums $ 2,652 $ 3,498 | $ 4,524
Net investment income 63,209 66,093 | 58,044
Realized investment gains (losses) 18,713 (2,074) | 11,955
Other 17,466 18,702 | 9,102
- --------------------------------------------------------------------------------------------|-----------
102,040 86,219 | 83,625
- --------------------------------------------------------------------------------------------|-----------
|
BENEFITS AND EXPENSES |
Current and future insurance benefits 52,390 55,596 | 67,489
Amortization of deferred acquisition costs |
and value of insurance in force 1,563 - | -
Other operating expenses 4,651 2,758 | 3,075
- --------------------------------------------------------------------------------------------|-----------
58,604 58,354 | 70,564
- --------------------------------------------------------------------------------------------|-----------
|
Income before federal income taxes 43,436 27,865 | 13,061
- --------------------------------------------------------------------------------------------|-----------
|
Federal income taxes: |
Current 2,555 4,742 | 22,124
Deferred 11,964 4,798 | (22,672)
- --------------------------------------------------------------------------------------------|-----------
14,519 9,540 | (548)
- --------------------------------------------------------------------------------------------|-----------
Net income 28,917 18,325 | 13,609
Retained earnings beginning of year 128,990 110,665 | 97,034
Preference stock tax benefit allocated by parent - - | 22
- --------------------------------------------------------------------------------------------|-----------
Retained earnings end of year $ 157,907 $ 128,990 | $ 110,665
- --------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
9
<PAGE> 65
THE TRAVELERS LIFE AND ANNUITY COMPANY
BALANCE SHEET
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
(at December 31, in thousands) 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Fixed maturities, available for sale at market
(cost, $678,293; $624,347) $ 724,639 $ 559,142
Equity securities, at market (cost, $9,453; $14,252) 13,099 16,064
Mortgage loans 125,813 152,359
Real estate held for sale, net of accumulated depreciation of $524; $337 8,995 6,810
Short-term securities 51,381 44,472
Other investments 65,805 72,190
- ---------------------------------------------------------------------------------------------------------------
Total investments 989,732 851,037
- ---------------------------------------------------------------------------------------------------------------
Cash - 296
Investment income accrued 11,030 10,211
Premium balances receivable 2,277 -
Reinsurance recoverables 718 573
Deferred acquisition costs and value of insurance in force 22,560 21,014
Deferred federal income taxes 41,158 94,315
Separate accounts 886,688 820,384
Current federal income taxes 6,691 -
Other assets 3,785 3,539
- ---------------------------------------------------------------------------------------------------------------
Total assets $ 1,964,639 $ 1,801,369
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES
Future policy benefits $ 671,027 $ 691,108
Contractholder funds 11,947 -
Current federal income taxes - 26,071
Separate accounts 856,867 808,181
Other liabilities 61,247 17,889
- ---------------------------------------------------------------------------------------------------------------
Total liabilities 1,601,088 1,543,249
- ---------------------------------------------------------------------------------------------------------------
SHAREHOLDER'S EQUITY
Common stock, par value $100; 100,000
shares authorized, 30,000 issued and outstanding 3,000 3,000
Additional paid-in capital 167,314 167,354
Retained earnings 157,907 128,990
Unrealized investment gains (losses), net of taxes 35,330 (41,224)
- ---------------------------------------------------------------------------------------------------------------
Total shareholder's equity 363,551 258,120
- ---------------------------------------------------------------------------------------------------------------
Total liabilities and shareholder's equity $ 1,964,639 $ 1,801,369
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
10
<PAGE> 66
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
(for the year ended December 31, in thousands) 1995 1994 | 1993
- ------------------------------------------------------------------------------------------|-------------
<S> <C> <C> | <C>
CASH FLOWS FROM OPERATING ACTIVITIES |
Premiums collected $ 1,950 $ 3,498 | $ 4,524
Net investment income received 66,219 57,240 | 53,944
Benefits and claims paid (71,710) (72,298) | (74,660)
Operating expenses paid (3,013) (4,400) | (3,249)
Income taxes refunded (paid) (35,305) 1,030 | (10,661)
Trading account investments, (purchases) sales, net - - | 35,093
Other (6,772) 22,507 | (683)
- ------------------------------------------------------------------------------------------|-------------
Net cash provided by (used in) operating activities (48,631) 7,577 | 4,308
- ------------------------------------------------------------------------------------------|-------------
CASH FLOWS FROM INVESTING ACTIVITIES |
Investment repayments |
Fixed maturities 11,752 29,043 | 29,479
Mortgage loans 24,137 60,260 | 53,835
Proceeds from investments sold, including real estate |
held for sale |
Fixed maturities 459,971 41,671 | 46,001
Equity securities 11,823 9,373 | 7,676
Mortgage loans 7,013 23,327 | 11,835
Real estate held for sale - 34,181 | 26,014
Investments in |
Fixed maturities (515,098) (204,412) | (206,682)
Equity securities (156) (375) | (5,280)
Mortgage loans (4,890) (5,607) | -
Short-term securities, (purchases) sales, net (5,051) (1,146) | (16,430)
Other investments, (purchases) sales, net 9,274 682 | 46,595
Securities transactions in course of settlement 45,727 5,722 | 1,133
- ------------------------------------------------------------------------------------------|-------------
Net cash provided by (used in) investing activities 44,502 (7,281) | (5,824)
- ------------------------------------------------------------------------------------------|-------------
CASH FLOWS FROM FINANCING ACTIVITIES |
Contractholder fund deposits 5,707 - | -
Contractholder fund withdrawals (1,874) - | -
- ------------------------------------------------------------------------------------------|-------------
Net cash provided by financing activities 3,833 - | -
- ------------------------------------------------------------------------------------------|-------------
Net increase (decrease) in cash $ (296) $ 296 | $ (1,516)
- --------------------------------------------------------------------------------------------------------
Cash at December 31 $ - $ 296 $ -
- --------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
11
<PAGE> 67
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
The Travelers Life and Annuity Company (the Company) is a wholly owned
subsidiary of The Travelers Insurance Company (TIC), which is an
indirect, wholly owned subsidiary of Travelers Group Inc. (Travelers).
The Company primarily writes single premium group annuity close-out
contracts and individual structured settlement annuities. The single
premium group annuity contracts are typically purchased by
employer-sponsored pension plans upon termination of the plan, asset
reversion or other significant plan changes. The individual structured
settlement contracts are purchased by affiliates, The Travelers
Indemnity Company and its subsidiaries, in connection with the
settlement of certain of its policyholder obligations. In 1995, the
Company also commenced writing individual life and deferred annuity
business.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies used in the preparation of the
accompanying financial statements follow.
Basis of presentation
In December 1992, Primerica Corporation (Primerica) acquired
approximately 27% of The Travelers Corporation's common stock (the 27%
Acquisition). The 27% Acquisition was accounted for as a purchase.
Effective December 31, 1993, Primerica acquired the approximately 73% of
The Travelers Corporation common stock which it did not already own, and
The Travelers Corporation was merged into Primerica, which was renamed
Travelers Group Inc. This was effected through the exchange of .80423
shares of Travelers common stock for each share of The Travelers
Corporation common stock (the Merger). All subsidiaries of The
Travelers Corporation were contributed to The Travelers Insurance Group
Inc. (TIGI).
The 27% Acquisition and the Merger were accounted for as a "step
acquisition", and the purchase accounting adjustments were "pushed down"
as of December 31, 1993 to the subsidiaries of TIGI, including the
Company, and reflect adjustments of assets and liabilities of the
Company to their fair values determined at each acquisition date (i.e.,
27% of values at December 31, 1992 as carried forward and 73% of the
values at December 31, 1993). These assets and liabilities were
recorded at December 31, 1993 based upon management's then best estimate
of their fair values at the respective dates. Evaluation and appraisal
of assets and liabilities, including investments, the value of insurance
in force, other insurance assets and liabilities and related deferred
federal income taxes was completed during 1994. The excess of the 27%
share of assigned value of identifiable net assets over cost at December
31, 1992, which was allocated to the Company through "pushdown"
accounting, was approximately $1.3 million and is being amortized over
ten years on a straight-line basis.
The statements of operations and retained earnings and of cash flows and
the related accompanying notes for the years ended December 31, 1995 and
1994, which are presented on a purchase accounting basis, are separated
from the corresponding 1993 information, which is presented on a
historical accounting basis, to indicate the difference in valuation
bases.
12
<PAGE> 68
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and benefits
and expenses during the reporting period. Actual results could differ
from those estimates.
Certain prior year amounts have been reclassified to conform with the
1995 presentation.
Investments
Fixed maturities include bonds, notes and redeemable preferred stocks.
Fixed maturities are valued based upon quoted market prices, or if
quoted market prices are not available, discounted expected cash flows
using market rates commensurate with the credit quality and maturity of
the investment. Fixed maturities are classified as "available for sale"
and are reported at fair value, with unrealized gains and losses, net of
income taxes, charged or credited directly to shareholder's equity.
Equity securities, which include common and nonredeemable preferred
stocks, are carried at market values that are based primarily on quoted
market prices. Changes in market values of equity securities are
charged or credited directly to shareholder's equity, net of applicable
income taxes.
Mortgage loans are carried at amortized cost. For mortgage loans that
are determined to be impaired, a reserve is established for the
difference between the amortized cost and fair market value of the
underlying collateral. Impaired loans were insignificant at December
31, 1995.
Real estate held for sale is carried at the lower of cost or fair value
less estimated costs to sell. Fair value was established at time of
foreclosure by appraisers, either internal or external, using discounted
cash flow analyses and other acceptable techniques. Thereafter, an
allowance for losses on real estate held for sale is established if the
carrying value of the property exceeds its current fair value less
estimated costs to sell. There was no such allowance at December 31,
1995.
Accrual of income is suspended on fixed maturities or mortgage loans
that are in default, or on which it is likely that future payments will
not be made as scheduled. Interest income on investments in default is
recognized only as payment is received.
Investment Gains and Losses
Realized investment gains and losses are included as a component of
pretax revenues based upon specific identification of the investments
sold on the trade date and, prior to the Merger, included adjustments to
investment valuation reserves. These adjustments reflected changes
considered to be other than temporary in the net realizable value of
investments. Also included are gains and losses arising from the
remeasurement of the local currency value of foreign investments to U.S.
dollars, the functional currency of the Company.
13
<PAGE> 69
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Separate Accounts
Separate account liabilities primarily represent structured settlement
annuity obligations, which provide guaranteed levels of return or
benefits to contractholders. The separate account assets supporting
these obligations, which are legally segregated and are not subject to
claims that arise out of any other business of the Company, are carried
at amortized cost. Earnings on structured settlement contracts,
generally net investment income less policyholder benefits and operating
expenses, are included in other revenues.
In addition, the Company has other separate accounts, representing funds
for which investment income and investment gains and losses accrue
directly to, and investment risk is borne by, the contractholders. Each
of these accounts have specific investment objectives. The assets and
liabilities of these accounts are carried at market value, and amounts
assessed to the contractholders for management services are included in
revenues. Deposits, net investment income and realized investment gains
and losses for these accounts are excluded from revenues, and related
liability increases are excluded from benefits and expenses.
Deferred Acquisition Costs and Value of Insurance In Force
Costs of acquiring individual life insurance and annuity business,
principally commissions and certain expenses related to policy issuance,
underwriting and marketing, all of which vary with and are primarily
related to the production of new business, are deferred. Acquisition
costs relating to traditional life insurance are amortized over the
period of anticipated premiums; universal life in relation to estimated
gross profits; and annuity contracts employing a level yield method. A
10- to 25-year amortization period is used for life insurance, and a 10-
to 15-year period is employed for annuities. Deferred acquisition costs
are reviewed periodically for recoverability to determine if any
adjustment is required.
The value of insurance in force represents the actuarially determined
present value of anticipated profits to be realized from annuities
contracts at the date of the Merger using the same assumptions that were
used for computing related liabilities where appropriate. The value of
insurance in force was the actuarially determined present value of the
projected future profits discounted at an interest rate of 16% for the
business acquired. The value of the business in force is amortized over
the contract period using current interest crediting rates to accrete
interest and using an amortization method based on a level yield method.
The value of insurance in force is reviewed periodically for
recoverability to determine if any adjustment is required.
Future Policy Benefits
Benefit reserves represent liabilities for future insurance policy
benefits. Benefit reserves for life insurance and annuity policies have
been computed based upon mortality, morbidity, persistency and interest
assumptions applicable to these coverages, which range from 4.5% to
7.5%, including a provision for adverse deviation. These assumptions
consider Company experience and industry standards and may be revised if
it is determined that the future experience will differ substantially
from that previously assumed. The assumptions vary by plan, age at
issue, year of issue and duration.
14
<PAGE> 70
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Contractholder Funds
Contractholder funds represent receipts from the issuance of universal
life and certain individual annuity contracts. Such receipts are
considered deposits on investment contracts that do not have substantial
mortality or morbidity risk. Account balances are also increased by
interest credited and reduced by withdrawals, mortality charges and
administrative expenses charged to the contractholders. Calculations of
contractholder account balances reflect lapse, withdrawal and interest
rate assumptions based on contract provisions, the Company's experience
and industry standards. Interest rates credited to contractholder funds
range from 4.2% to 6.5%.
Permitted Statutory Accounting Practices
The Company, domiciled in the State of Connecticut, prepares statutory
financial statements in accordance with the accounting practices
prescribed or permitted by the State of Connecticut Insurance
Department. Prescribed statutory accounting practices include a variety
of publications of the National Association of Insurance Commissioners
as well as state laws, regulations, and general administrative rules.
Permitted statutory accounting practices encompass all accounting
practices not so prescribed. The impact of any permitted accounting
practices on the statutory surplus of the Company is not material.
Premiums
Premiums are recognized as revenues when due. Reserves are established
for the portion of premiums that will be earned in future periods.
Other Revenues
Other revenues include surrender, mortality and administrative charges
and fees as earned on investment and other insurance contracts. Other
revenues also include structured settlement policyholder revenues, which
relate to contracts issued through a separate account of the Company,
net of the related policyholder benefits and expenses.
Federal Income Taxes
The provision for federal income taxes is comprised of two components,
current income taxes and deferred income taxes. Deferred federal income
taxes arise from changes during the year in cumulative temporary
differences between the tax basis and book basis of assets and
liabilities. The deferred federal income tax asset is recognized to the
extent that future realization of the tax benefit is more likely than
not, with a valuation allowance for the portion that is not likely to be
recognized.
15
<PAGE> 71
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Accounting Standards not yet Adopted
Statement of Financial Accounting Standards No. 121, "Accounting for
Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those
assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. This statement requires the
write down to fair value when long-lived assets to be held and used are
impaired. It also requires long-lived assets to be disposed of (e.g.,
real estate held for sale) to be carried at the lower of cost or fair
value less cost to sell and does not allow such assets to be
depreciated. The adoption of this statement, effective January 1, 1996,
did not have a material effect on results of operations, financial
condition or liquidity.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (FAS 123). This statement addresses
alternative accounting treatments for stock-based compensation, such as
stock options and restricted stock. FAS 123 permits either expensing
the value of stock-based compensation over the period earned or
disclosing in the financial statement footnotes the pro forma impact to
net income as if the value of stock-based compensation awards had been
expensed. The value of awards would be measured at the grant date based
upon estimated fair value, using option pricing models. The
requirements of this statement will be effective for 1996 financial
statements, although earlier adoption is permissible if an entity elects
to expense the cost of stock-based compensation. The Company, along
with affiliated companies, participates in stock option and incentive
plans sponsored by Travelers. The Company is currently evaluating the
disclosure requirements and expense recognition alternatives addressed
by this statement.
3. CHANGES IN ACCOUNTING PRINCIPLES
Accounting by Creditors for Impairment of a Loan
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of
a Loan," and Statement of Financial Accounting Standards No. 118,
"Accounting by Creditors for Impairment of a Loan - Income Recognition
and Disclosures," which describe how impaired loans should be measured
when determining the amount of a loan loss accrual. These statements
amended existing guidance on the measurement of restructured loans in a
troubled debt restructuring involving a modification of terms. Their
adoption did not have a material impact on the Company's financial
condition, results of operations or liquidity.
Accounting for Certain Debt and Equity Securities
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" (FAS 115), which addresses accounting and
reporting for investments in equity securities that have a readily
determinable fair value and for all debt securities. Investment
securities have been classified as "available for sale" and are reported
at fair value, with unrealized gains and losses, net of income taxes,
charged or credited directly to shareholder's equity. Previously,
securities classified as available for sale were carried at the lower of
aggregate cost or market value. Initial adoption of this standard
resulted in an increase of approximately $530 thousand (net of taxes) to
net unrealized gains in shareholder's equity. See note 12 for
additional disclosures.
16
<PAGE> 72
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
4. REINSURANCE
The Company participates in reinsurance in order to limit losses,
minimize exposure to large risks, provide capacity for future growth and
to effect business-sharing arrangements. The Company remains primarily
liable as the direct insurer on all risks reinsured.
Life insurance in force ceded to affiliates at December 31, 1995 and
1994 was $97.7 million and $106.0 million, respectively. At December
31, 1995 and 1994, $601.2 million and $0, respectively, was ceded to
non-affiliates.
5. SHAREHOLDER'S EQUITY
Unrealized Investment Gains (Losses)
An analysis of the change in unrealized gains and losses on investments
is shown in note 12.
Additional Paid-in Capital
As a result of the finalization of the evaluations and appraisals used
to assign fair value to assets and liabilities under purchase
accounting, additional paid-in capital was increased by $1.3 million in
1994. It was decreased by $70.4 million in 1993 based upon the initial
evaluations and appraisals.
Shareholder's Equity and Dividend Availability
Statutory net income was $23.0 million and $5.7 million for the years
ended December 31, 1995 and 1994, respectively. Statutory net loss was
$23.0 million for the year ended December 31, 1993.
Statutory capital and surplus was $257.8 million and $233.0 million at
December 31, 1995 and 1994, respectively.
The Company is currently subject to various regulatory restrictions that
limit the maximum amount of dividends available to be paid to its parent
without prior approval of insurance regulatory authorities. Statutory
surplus of $16.4 million is available in 1996 for dividend payments by
the Company without prior approval of the Connecticut Insurance
Department.
17
<PAGE> 73
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
6. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has, in the normal course of business, provided fixed rate
loan commitments and commitments to partnerships. The Company does not
hold or issue derivative instruments for trading purposes.
The off-balance-sheet risks of fixed rate loan commitments, commitments
to partnerships and forward contracts were not significant at December
31, 1995 and 1994.
Fair Value of Certain Financial Instruments
The Company uses various financial instruments in the normal course of
its business. Fair values of financial instruments which are considered
insurance contracts are not required to be disclosed and are not
included in the amounts discussed.
At December 31, 1995, investments in fixed maturities had a carrying
value and a fair value of $724.6 million, compared with a carrying value
and a fair value of $559.1 million at December 31, 1994. See note 12.
At December 31, 1995 and 1994, mortgage loans had a carrying value of
$125.8 million and $152.4 million, respectively, which approximates fair
value. In estimating fair value, the Company used interest rates
reflecting the higher returns required in the real estate financing
market.
The carrying values of $1.9 million and $2.4 million of financial
instruments classified as other assets approximated their fair values at
December 31, 1995 and 1994, respectively. The carrying values of $55.3
million and $14.2 million of financial instruments classified as other
liabilities also approximated their fair values at December 31, 1995 and
1994, respectively. Fair value is determined using various methods
including discounted cash flows, as appropriate for the various
financial instruments.
The assets of separate accounts providing a guaranteed return had a
carrying value and a fair value of $869.1 million and $923.0 million,
respectively, at December 31, 1995, compared to a carrying value and a
fair value of $820.4 million and $757.2 million, respectively, at
December 31, 1994. The liabilities of separate accounts providing a
guaranteed return had a carrying value and a fair value of $839.1
million and $766.3 million, respectively, at December 31, 1995, compared
to a carrying value and a fair value of $808.2 million and $681.4
million, respectively, at December 31, 1994.
The carrying values of short-term securities and investment income
accrued approximated their fair values.
18
<PAGE> 74
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
7. COMMITMENTS AND CONTINGENCIES
Financial Instruments with Off-Balance-Sheet Risk
See note 6 for a discussion of financial instruments with off-balance-
sheet risk.
Litigation
The Company is a defendant in various litigation matters. Although
there can be no assurances, as of December 31, 1995, the Company
believes, based on information currently available, that the ultimate
resolution of these legal proceedings would not be likely to have a
material adverse effect on its results of operations, financial
condition or liquidity.
8. BENEFIT PLANS
Pension Plans
The Company participates in qualified and nonqualified, noncontributory
defined benefit pension plans sponsored by an affiliate. Benefits for
the qualified plan are based on an account balance formula. Under this
formula, each employee's accrued benefit can be expressed as an account
that is credited with amounts based upon the employee's pay, length of
service and a specified interest rate, all subject to a minimum benefit
level. This plan is funded in accordance with the Employee Retirement
Income Security Act of 1974 and the Internal Revenue Code. For the
nonqualified plan, contributions are based on benefits paid. The
Company's share of net pension expense was not significant for 1995,
1994 or 1993.
Other Benefit Plans
In addition to pension benefits, the Company provides certain health
care and life insurance benefits for retired employees through a plan
sponsored by TIGI. Covered employees may become eligible for these
benefits if they reach retirement age while working for the Company.
These retirees may elect certain prepaid health care benefit plans.
Life insurance benefits generally are set at a fixed amount. The cost
recognized by the Company for these benefits represents its allocated
share of the total costs of the plan, net of employee contributions.
The Company's share of the total cost of the plan for 1995, 1994 and
1993 was not significant.
The Merger resulted in a change in control of The Travelers Corporation
as defined in the applicable plans, and provisions of some employee
benefit plans secured existing compensation and benefit entitlements
earned prior to the change in control, and provided a salary and benefit
continuation floor for employees whose employment was affected. These
merger-related costs were assumed by TIGI.
19
<PAGE> 75
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
8. BENEFIT PLANS
Savings, Investment and Stock Ownership Plan
Under the savings, investment and stock ownership plan available to
substantially all employees of TIGI, the Company matches a portion of
employee contributions. Effective April 1, 1993, the match decreased
from 100% to 50% of an employee's first 5% contribution and a variable
match based on the profitability of TIGI and its subsidiaries was added.
The Company's matching obligation was not significant for 1995, 1994 or
1993.
9. RELATED PARTY TRANSACTIONS
The principal banking functions, including payment of salaries and
expenses, for certain subsidiaries and affiliates of TIGI, including the
Company, are handled by TIC. Settlements for these functions between
TIC and its affiliates are made regularly. TIC provides various
employee benefit coverages to certain subsidiaries of TIGI. The
premiums for these coverages were charged in accordance with cost
allocation procedures based upon salaries or census. In addition,
investment advisory and management services, data processing services
and claims processing services are provided by affiliated companies.
Charges for these services are shared by the companies on cost
allocation methods based generally on estimated usage by department.
TIGI and its subsidiaries maintain a short-term investment pool in which
the Company participates. The position of each company participating in
the pool is calculated and adjusted daily. At December 31, 1995 and
1994, the pool totaled approximately $2.2 billion and $1.5 billion,
respectively. The Company's share of the pool amounted to $49.5 million
and $44.5 million at December 31, 1995 and 1994, respectively, and is
included in short-term securities in the balance sheet.
The Company's TTM Modified Guaranteed Annuity Contracts are subject to a
limited guarantee agreement by TIC in a principal amount of up to $100
million. TIC's obligation is to pay in full to any owner or beneficiary
of the TTM Modified Guaranteed Annuity Contracts principal and interest
as and when due under the annuity contract to the extent that the
Company fails to make such payment. In addition, TIC guarantees that
the Company will maintain a minimum statutory capital and surplus level.
The Company sells structured settlement annuities to its affiliates, The
Travelers Indemnity Company and its subsidiaries. Such deposits were
$36.6 million, $37.6 million and $48.4 million for 1995, 1994 and 1993,
respectively.
The Company began marketing variable annuity products through its
affiliate, Smith Barney, Inc., in 1995. Deposits related to these
products were $20.5 million in 1995.
Most leasing functions for TIGI and its subsidiaries are handled by TIC.
Leasing expenses are shared by the companies on a cost allocation method
based generally on estimated usage by department.
20
<PAGE> 76
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
10. FEDERAL INCOME TAXES
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
(in thousands) 1995 1994 | 1993
----------------------------------------------------------------------------|-------------
<S> <C> <C> | <C>
Effective tax rate |
------------------ |
|
Income before federal income taxes $ 43,436 $ 27,865 | $ 13,061
Statutory tax rate 35% 35% | 35%
----------------------------------------------------------------------------|-------------
|
Expected federal income taxes $ 15,203 $ 9,753 | $ 4,571
Tax effect of: |
Nontaxable investment income (13) (90) | (85)
Adjustments to benefit and other reserves - (117) | (4,705)
Adjustment to deferred tax asset for |
enacted change in tax rates from |
34% to 35% - - | (255)
Other, net (671) (6) | (74)
----------------------------------------------------------------------------|-------------
Federal income taxes $ 14,519 $ 9,540 | $ (548)
----------------------------------------------------------------------------|-------------
|
Effective tax rate 33% 34% | (4)%
----------------------------------------------------------------------------|-------------
|
Composition of federal income taxes |
----------------------------------- |
Current: |
United States $ 2,555 $ 4,742 | $ 22,124
----------------------------------------------------------------------------|-------------
|
Deferred: |
United States 11,964 4,798 | (22,672)
----------------------------------------------------------------------------|-------------
Federal income taxes $ 14,519 $ 9,540 | $ (548)
------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 77
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
10. FEDERAL INCOME TAXES, Continued
The net deferred tax assets at December 31, 1995 and 1994 were comprised
of the tax effects of temporary differences related to the following
assets and liabilities:
<TABLE>
<CAPTION>
(in thousands) 1995 1994
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Benefit, reinsurance and other reserves $ 67,104 $ 70,729
Investments - 30,908
Other 2,570 2,766
-----------------------------------------------------------------------------------------------
Total 69,674 104,403
-----------------------------------------------------------------------------------------------
Deferred tax liabilities:
Investments 19,625 -
Deferred acquisition costs and
value of insurance in force 6,285 7,355
Other 536 663
-----------------------------------------------------------------------------------------------
Total 26,446 8,018
-----------------------------------------------------------------------------------------------
Net deferred tax asset before valuation allowance 43,228 96,385
Valuation allowance for deferred tax assets (2,070) (2,070)
-----------------------------------------------------------------------------------------------
Net deferred tax asset after valuation allowance $ 41,158 $ 94,315
-----------------------------------------------------------------------------------------------
</TABLE>
Starting in 1994 and continuing for at least five years, TIC and its
life insurance subsidiaries, including the Company, will file a
consolidated federal income tax return. Federal income taxes are
allocated to each member on a separate return basis adjusted for credits
and other amounts required by the consolidation process. Any resulting
liability will be paid currently to TIC. Any credits for losses will be
paid by TIC to the extent that such credits are for tax benefits that
have been utilized in the consolidated federal income tax return.
A net deferred tax asset valuation allowance of $2.1 million has been
established to reduce the deferred tax asset on investment losses to the
amount that, based upon available evidence, is more likely than not to
be realized. Reversal of the valuation allowance is contingent upon the
recognition of future capital gains in the Company's consolidated life
insurance company federal income tax return through 1998, and the
consolidated federal income tax return of Travelers commencing in 1999,
or a change in circumstances which causes the recognition of the
benefits to become more likely than not. There was no change in the
valuation allowance during 1995. The initial recognition of any benefit
provided by the reversal of the valuation allowance will be recognized
by reducing goodwill.
22
<PAGE> 78
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
10. FEDERAL INCOME TAXES, Continued
In management's judgment, the $41.2 million "net deferred tax asset after
valuation allowance" as of December 31, 1995, is fully recoverable
against expected future years' taxable ordinary income and capital gains.
At December 31, 1995, the Company has no ordinary or capital loss
carryforwards.
The "policyholders surplus account", which arose under prior tax law, is
generally that portion of the gain from operations that has not been
subjected to tax, plus certain deductions. The balance of this account,
which, under provisions of the Tax Reform Act of 1984, will not increase
after 1983, is estimated to be $2.0 million. This amount has not been
subjected to current income taxes but, under certain conditions that
management considers to be remote, may become subject to income taxes in
future years. At current rates, the maximum amount of such tax (for
which no provision has been made in the financial statements) would be
approximately $700 thousand.
11. NET INVESTMENT INCOME
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
(For the year ended December 31, in thousands) 1995 1994 | 1993
---------------------------------------------------------------------------------|--------------
<S> <C> <C> | <C>
Gross investment income |
----------------------- |
Fixed maturities $ 49,486 $ 44,354 | $ 39,189
Equity securities 497 827 | 930
Mortgage loans 11,644 17,178 | 25,258
Real estate held for sale 2,476 6,299 | 19,028
Other 2,552 4,480 | (4,062)
---------------------------------------------------------------------------------|--------------
66,655 73,138 | 80,343
---------------------------------------------------------------------------------|--------------
|
Investment expenses 3,446 7,045 | 22,299
---------------------------------------------------------------------------------|--------------
Net investment income $ 63,209 $ 66,093 | $ 58,044
------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 79
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) for the periods were as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
(For the year ended December 31, in thousands) 1995 1994 | 1993
----------------------------------------------------------------------------------|-------------
<S> <C> <C> | <C>
Realized |
-------- |
|
Fixed maturities $ (4,240) $ (908) | $ 8,659
Equity securities 6,138 1,675 | 1,580
Mortgage loans 725 36 | (1,564)
Real estate held for sale (35) - | (8,310)
Other 16,125 (2,877) | 11,590
----------------------------------------------------------------------------------|-------------
Realized investment gains (losses) $ 18,713 $ (2,074) | $ 11,955
------------------------------------------------------------------------------------------------
</TABLE>
Changes in net unrealized investment gains (losses) that are included
as a separate component of shareholder's equity were as follows:
<TABLE>
<CAPTION>
(For the year ended December 31, in thousands) 1995 1994 1993
------------------------------------------------------------------------------------------------
<S> <C> <C> | <C>
Unrealized |
---------- |
|
Fixed maturities $ 111,551 $ (65,205) | $ (20,059)
Equity securities 1,834 (27) | (1,389)
Other 4,390 (28) | 8,524
----------------------------------------------------------------------------------|-------------
117,775 (65,260) | (12,924)
Related taxes 41,221 (22,841) | (3,445)
----------------------------------------------------------------------------------|-------------
Change in unrealized investment gains (losses) 76,554 (42,419) | (9,479)
Balance beginning of year (41,224) 1,195 | 10,674
------------------------------------------------------------------------------------------------
Balance end of year $ 35,330 $ (41,224) $ 1,195
------------------------------------------------------------------------------------------------
</TABLE>
The initial adoption of FAS 115 resulted in an increase of approximately
$530 thousand (net of taxes) to net unrealized investment gains in 1994.
Fixed Maturities
Proceeds from sales of fixed maturities classified as available for sale
were $460.0 million and $41.7 million in 1995 and 1994, respectively.
Gross gains of $7.9 million and $869 thousand and gross losses of $10.3
million and $1.9 million in 1995 and 1994, respectively, were realized
on those sales.
24
<PAGE> 80
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
Prior to December 31, 1993, fixed maturities that were intended to be
held to maturity were recorded at amortized cost and classified as held
for investment. Proceeds from sales of such securities were $16.4
million in 1993, resulting in gross realized gains of $617 thousand.
Prior to December 31, 1993, the carrying values of the trading portfolio
fixed maturities were adjusted to market value as it was likely they
would be sold prior to maturity. Sales of trading portfolio fixed
maturities were $96.6 million in 1993, resulting in gross realized gains
of $12.4 million.
The amortized cost and market values of investments in fixed maturities
were as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
December 31, 1995
------------------------------------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Market
(in thousands) cost gains losses value
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
Mortgage-backed securities -
CMOs and pass through
securities $ 89,044 $ 2,545 $ 378 $ 91,211
U.S. Treasury securities
and obligations of U.S.
Government and
government agencies
and authorities 160,988 24,267 1 185,254
Obligations of states and
political subdivisions 3,500 499 - 3,999
All other corporate bonds 424,676 21,576 2,162 444,090
Redeemable preferred stock 85 - - 85
------------------------------------------------------------------------------------------------
Total $ 678,293 $ 48,887 $ 2,541 $ 724,639
------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 81
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
December 31, 1994
------------------------------------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Market
(in thousands) cost gains losses value
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
Mortgage-backed securities -
CMOs and pass through
securities $ 60,102 $ 14 $ 4,624 $ 55,492
U.S. Treasury securities
and obligations of U.S.
Government and
government agencies
and authorities 188,043 25 24,301 163,767
Obligations of states and
political subdivisions 3,000 - 184 2,816
Debt securities issued by
foreign governments 20,076 - 2,157 17,919
All other corporate bonds 352,197 1,140 35,055 318,282
Redeemable preferred stock 929 13 76 866
------------------------------------------------------------------------------------------------
Total $ 624,347 $ 1,192 $ 66,397 $ 559,142
------------------------------------------------------------------------------------------------
</TABLE>
The amortized cost and market value of fixed maturities available for
sale at December 31, 1995, by contractual maturity, are shown below.
Actual maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
Maturity Amortized Market
(in thousands) cost value
------------------------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 7,858 $ 8,245
Due after 1 year through 5 years 28,392 29,022
Due after 5 years through 10 years 172,831 178,526
Due after 10 years 380,168 417,635
------------------------------------------------------------------------------------------------
589,249 633,428
Mortgage-backed securities 89,044 91,211
------------------------------------------------------------------------------------------------
Total $ 678,293 $ 724,639
------------------------------------------------------------------------------------------------
</TABLE>
The Company makes significant investments in collateralized mortgage
obligations (CMOs). CMOs typically have high credit quality, offer good
liquidity, and provide a significant advantage in yield and total return
compared to U.S. Treasury securities. The Company's investment strategy
is to purchase CMO tranches which are protected against prepayment risk,
primarily planned amortization class (PAC) tranches. Prepayment
protected tranches are preferred because they provide stable cash flows
in a variety of scenarios. The Company does invest in other types of
CMO tranches if a careful assessment indicates a favorable risk/return
tradeoff. The Company does not purchase residual interests in CMOs.
26
<PAGE> 82
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
At December 31, 1995 and 1994, the Company held CMOs with a market value
of $68.6 million and $55.5 million, respectively. Approximately 94% and
96% of the Company's CMO holdings are fully collateralized by
GNMA, FNMA or FHLMC securities at December 31, 1995 and 1994,
respectively. Virtually all of these securities are rated AAA.
Equity Securities
The cost and market values of investments in equity securities were as
follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
December 31, 1995
------------------------------------------------------------------------------------------------
Gross Gross
unrealized unrealized Market
(in thousands) Cost gains losses value
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks $ 3,310 $ 3,374 $ 68 $ 6,616
Nonredeemable preferred stocks 6,143 340 - 6,483
------------------------------------------------------------------------------------------------
Total $ 9,453 $ 3,714 $ 68 $ 13,099
------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
December 31, 1994
------------------------------------------------------------------------------------------------
Gross Gross
unrealized unrealized Market
(in thousands) Cost gains losses value
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks $ 6,141 $ 3,177 $ 654 $ 8,664
Nonredeemable preferred stocks 8,111 7 718 7,400
------------------------------------------------------------------------------------------------
Total $ 14,252 $ 3,184 $ 1,372 $ 16,064
------------------------------------------------------------------------------------------------
</TABLE>
Proceeds from sales of equity securities were $11.8 million and $9.4
million in 1995 and 1994, respectively. Gross gains of $4.9 million and
$2.8 million and gross losses of $474 thousand and $369 thousand in
1995 and 1994, respectively, were realized on those sales.
Mortgage loans and real estate held for sale
Underperforming assets include delinquent mortgage loans, loans in the
process of foreclosure, foreclosed loans and loans modified at interest
rates below market. The Company continues its strategy, adopted in
conjunction with the Merger, to dispose of these real estate assets and
some of the mortgage loans and to reinvest the proceeds to obtain
current market yields.
27
<PAGE> 83
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
At December 31, 1995 and 1994, the Company's mortgage loan and real
estate held for sale portfolios consisted of the following:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
(in thousands) 1995 1994
------------------------------------------------------------------------------
<S> <C> <C>
Current mortgage loans $ 108,142 $ 134,868
Underperforming mortgage loans 17,671 17,491
------------------------------------------------------------------------------
Total 125,813 152,359
------------------------------------------------------------------------------
Real estate held for sale 8,995 6,810
------------------------------------------------------------------------------
Total $ 134,808 $ 159,169
------------------------------------------------------------------------------
</TABLE>
Aggregate annual maturities on mortgage loans at December 31, 1995 are
as follows:
<TABLE>
<CAPTION>
(in thousands)
-----------------------------------------------------
<S> <C>
Past maturity $ 3,437
1996 21,927
1997 5,966
1998 21,237
1999 9,700
2000 6,016
Thereafter 57,530
-----------------------------------------------------
Total $ 125,813
-----------------------------------------------------
</TABLE>
Concentrations
At December 31, 1995 and 1994, the Company had no concentration of
credit risk in a single investee exceeding 10% of shareholder's equity.
The Company participates in a short-term investment pool maintained by
TIGI and its subsidiaries. See note 9.
Included in fixed maturities are below investment grade assets totaling
$59.0 million and $51.1 million at December 31, 1995 and 1994,
respectively. The Company defines its below investment grade assets as
those securities rated "Ba1" or below by external rating agencies, or
the equivalent by internal analysts when a public rating does not exist.
Such assets include publicly traded below investment grade bonds and
certain other privately issued bonds that are classified as below
investment grade loans.
28
<PAGE> 84
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
The Company also had significant concentrations of investments,
primarily fixed maturities, in the following industries:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
(in thousands) 1995 1994
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Oil and gas $ 63,835 $ 39,749
Transportation 44,119 38,523
Banking 33,168 42,191
Chemical manufacturing 16,032 27,326
--------------------------------------------------------------------------------------------------
</TABLE>
Below investment grade assets included in the totals of the previous
table were as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
(in thousands) 1995 1994
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Oil and gas $ 3,469 $ 4,002
Transportation 18,648 2,678
Banking 632 5,124
--------------------------------------------------------------------------------------------------
</TABLE>
Concentrations of mortgage loans by property type at December 31, 1995
and 1994 were as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
(in thousands) 1995 1994
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Office $ 32,024 $ 40,559
Agricultural 29,820 32,890
Retail 27,870 31,712
-------------------------------------------------------------------------------------------------
</TABLE>
The Company monitors creditworthiness of counterparties to all financial
instruments by using controls that include credit approvals, limits and
other monitoring procedures. Collateral for fixed maturities often
includes pledges of assets, including stock and other assets, guarantees
and letters of credit. The Company's underwriting standards with
respect to new mortgage loans generally require loan to value ratios of
75% or less at the time of mortgage origination.
29
<PAGE> 85
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
Investment Valuation Reserves
There were no investment valuation reserves at December 31, 1995, 1994
and 1993. Investment valuation reserve activity during 1993 was as
follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
(in thousands) 1993
------------------------------------------------------------------------------------------------
<S> <C>
Beginning of year $ 41,443
Increase 8,355
Impairments, net of gains/recoveries (6,887)
Purchase accounting adjustment (42,911)
------------------------------------------------------------------------------------------------
End of year $ -
------------------------------------------------------------------------------------------------
</TABLE>
Increases in the investment valuation reserves were reflected as
realized investment losses.
Nonincome Producing
Investments included in the balance sheets that were nonincome producing
for the preceding 12 months were insignificant.
Restructured Investments
The Company had mortgage loan and debt securities which were restructured
at below market terms totaling approximately $17.7 million and $17.4
million at December 31, 1995 and 1994, respectively. At December 31,
1993, the Company's restructured assets were recorded at purchase
accounting value. The new terms typically defer a portion of contract
interest payments to varying future periods. The accrual of interest is
suspended on all restructured assets, and interest income is reported
only as payment is received. Gross interest income on restructured
assets that would have been recorded in accordance with the original
terms of such assets amounted to $4.9 million in 1995 and $5.2 million in
1994. Interest on these assets, included in net investment income,
aggregated $2.0 million in 1995 and $1.4 million in 1994.
30
<PAGE> 86
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
13. LIFE AND ANNUITY DEPOSIT FUNDS AND RESERVES
At December 31, 1995, the Company had $683.0 million of life and annuity
deposit funds and reserves. Of that total, $671.2 million were not
subject to discretionary withdrawal based on contract terms. The
remaining $11.8 million were life and annuity products that were subject
to discretionary withdrawal by the contractholders. Included in the
amount that is subject to discretionary withdrawal were $8.2 million of
liabilities that are surrenderable with market value adjustments. An
additional $3.6 million of the life insurance and individual annuity
liabilities are subject to discretionary withdrawals with an average
surrender charge of 6.6%. The life insurance risks would have to be
underwritten again if transferred to another carrier, which is considered
a significant deterrent for long-term policyholders. Insurance
liabilities that are surrendered or withdrawn from the Company are
reduced by outstanding policy loans and related accrued interest prior to
payout.
14. RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES
The following table reconciles net income to net cash provided by (used
in) operating activities:
<TABLE>
<CAPTION>
(For the year ended December 31, in thousands) 1995 1994 1993
-------------------------------------------------------------------------------------------------------
<S> <C> <C> | <C>
Net income $ 28,917 $ 18,325 | $ 13,609
Reconciling adjustments |
Realized (gains) losses (18,713) 2,074 | (11,955)
Deferred federal income taxes 11,964 4,798 | (22,672)
Amortization of deferred policy acquisition costs and |
value of insurance in force 1,563 - | -
Deferred policy acquisition costs (3,109) (21,014) | -
Investment income accrued (819) 1,085 | (9,607)
Insurance reserves (20,081) (16,062) | 80,238
Trading account investments, (purchases) sales, net - - | 35,093
Other (48,353) 18,371 | (80,398)
-----------------------------------------------------------------------------------------|-------------
|
Net cash provided by (used in) operating activities $ (48,631) $ 7,577 | $ 4,308
-------------------------------------------------------------------------------------------------------
</TABLE>
15. NONCASH INVESTING AND FINANCING ACTIVITIES
Significant noncash investing and financing activities include: a) the
transfer of $2.6 million and $5.6 million of mortgage loans and real
estate held for sale from one of the Company's separate accounts to the
general account in 1995 and 1994, respectively; b) acquisition of real
estate through foreclosures of mortgage loans amounting to $10.3 million
and $7.7 million in 1994 and 1993, respectively; and c) increases in
investment valuation reserves in 1993 for mortgage loans and real estate
held for sale (see note 12).
31
<PAGE> 87
VINTAGELIFE
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
PROSPECTUS
INDIVIDUAL VARIABLE LIFE INSURANCE POLICIES
ISSUED BY
THE TRAVELERS LIFE AND ANNUITY COMPANY
HARTFORD, CONNECTICUT 06183
L-12415 May, 1996
<PAGE> 88
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
RULE 484 UNDERTAKING
Section 33-320a of the Connecticut General Statutes regarding indemnification
of directors and officers of Connecticut corporations provides in general that
Connecticut corporations shall indemnify their officers, directors and certain
other defined individuals against judgments, fines, penalties, amounts paid in
settlement and reasonable expenses actually incurred in connection with
proceedings against the corporation. The corporation's obligation to provide
such indemnification generally does not apply unless (1) the individual is
successful on the merits in the defense of any such proceeding; or (2) a
determination is made (by persons specified in the statute) that the individual
acted in good faith and in the best interests of the corporation; or (3) the
court, upon application by the individual, determines in view of all of the
circumstances that such person is fairly and reasonably entitled to be
indemnified, and then for such amount as the court shall determine. With
respect to proceedings brought by or in the right of the corporation, the
statute provides that the corporation shall indemnify its officers, directors
and certain other defined individuals, against reasonable expenses actually
incurred by them in connection with such proceedings, subject to certain
limitations.
C.G.S. Section 33-320a provides an exclusive remedy; a Connecticut corporation
cannot indemnify a director or officer to an extent either greater or less than
that authorized by the statute, e.g., pursuant to its certificate of
incorporation, by-laws, or any separate contractual arrangement. However, the
statute does specifically authorize a corporation to procure indemnification
insurance to provide greater indemnification rights. The premiums for such
insurance may be shared with the insured individuals on an agreed basis.
Travelers Group Inc. also provides liability insurance for its directors and
officers and the directors and officers of its subsidiaries, including the
Depositor. This insurance provides for coverage against loss from claims made
against directors and officers in their capacity as such, including, subject to
certain exceptions, liabilities under the federal securities laws.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE> 89
RULE 6e-3 (T) REPRESENTATIONS
A. With regard to the maximum sales load deductions permitted
under the Rule, the Registrant hereby elects to be governed by
subparagraph (b)(13)(i)(B) of the Rule.
B. With regard to the deduction from the Separate Account of a
charge to cover the mortality risk and expense risk, the
Registrant is relying on subparagraph (b)(13)(iii)(F) to permit such
deduction. Furthermore, the depositor does hereby represent that the
level of the risk charge is within the range of industry practice for
comparable flexible contracts.
C. With regard to explicit sales loads not covering the expected
costs of distributing the flexible contracts, the Registrant hereby
represents that the distribution financing arrangement of the Separate
Account will benefit the Separate Account and Policy Owners.
Furthermore, the Depositor hereby represents that the Separate Account
will invest only in management investment companies which have
undertaken to have a board of directors, a majority of whom are not
interested persons of the company, formulate and approve any plan under
Rule 12b-1 to finance distribution expenses.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
- - The facing sheet.
- - The Prospectus.
- - The undertaking to file reports.
- - The signatures.
- - Written consents of the following persons:
A. Consent of Ernest J. Wright, General Counsel, to the filing of
his opinion as an exhibit to this Registration Statement and to
the reference to his opinion under the caption "Legal
Proceedings and Opinion" in the Prospectus. (See Exhibit 11
below.)
B. Consent and Actuarial Opinion of Bennett D. Kleinberg, ASA,
pertaining to the illustrations contained in the Prospectus.
C. Consent of Coopers & Lybrand L.L.P., Independent Accountants, to
the inclusion in this Form S-6 of their report on the audited
financial statements of the Registrant and their report on the
financial statements of The Travelers Life and Annuity Company
contained in this Registration Statement, and to the reference
to such firm as "Experts" in accounting and auditing.
D. Consent of KPMG Peat Marwick LLP, Independent Certified Public
Accountants to the inclusion in this Form S-6 of their report
on the financial statements of The Travelers Life and Annuity
Company contained in this Registration Statement, and to the
reference to such firm as experts under the heading
"Independent Accountants."
<PAGE> 90
- - The following Exhibits:
1. Resolution of the Board of Directors of The Travelers Life and
Annuity Company authorizing the establishment of the
Registrant. (Incorporated herein by reference to Exhibit 1 to
Pre-Effective Amendment No. 1 to the Registration Statement on
Form S-6, filed August 21, 1995.)
2. Not applicable.
3(a). Form of Distribution Agreement among the Registrant, The
Travelers Life and Annuity Company and Tower Square Securities,
Inc. (Incorporated herein by reference to Exhibit 3(a) to
Pre-Effective Amendment No. 1 to the Registration Statement on
Form S-6, filed August 21, 1995.)
3(b). Specimen Form of Selling Agreement.
4. None
5. Variable Life Insurance Policy. (Incorporated herein by
reference to Exhibit 1 to Pre-Effective Amendment No. 5 to the
Registration Statement on Form S-6, filed August 21, 1995.)
6(a). Charter of The Travelers Life and Annuity Company, as amended
on April 10, 1990. (Incorporated herein by reference to
Exhibit 3(a) to the Registration Statement on Form N-4, File
No. 33-58131, filed via Edgar on March 17, 1995.)
6(b). By-Laws of The Travelers Life and Annuity Company, as amended
on October 20, 1994. (Incorporated herein by reference to
Exhibit 3(b) to the Registration Statement on Form N-4, File
No. 33-58131, filed via Edgar on March 17, 1995.)
7. None
8. None
9. None
10. Application for Variable Life Insurance Policy.
11. Opinion of Ernest J. Wright, General Counsel, regarding the
legality of securities being registered.
12. Powers of Attorney authorizing Jay S. Fishman or Ernest J.
Wright as signatory for Michael A. Carpenter, Robert I. Lipp,
Charles O. Prince, III, Marc P. Weill, Irwin R. Ettinger,
Donald T. DeCarlo and Christine B. Mead. (Incorporated herein
by reference to Exhibit 12 to Pre-Effective Amendment No. 1 to
the Registration Statement on Form S-6, filed August 21, 1995.)
12(b). Powers of Attorney authorizing Ernest J. Wright or Kathleen A.
McGah as signatory for Jay S. Fishman and Ian R. Stuart.
13. Memorandum concerning transfer and redemption procedures, as
required by Rule 6e-3(T)(b)(12)(ii). (Incorporated herein by
reference to Exhibit 12 to Pre-Effective Amendment No. 1 to the
Registration Statement on Form S-6, filed August 21, 1995.)
<PAGE> 91
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant, The
Travelers Variable Life Insurance Separate Account One, has duly caused this
post-effective Amendment No. 1 to this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Hartford, State of Connecticut, on the 25th day of April, 1996.
THE TRAVELERS VARIABLE LIFE INSURANCE SEPARATE ACCOUNT ONE
(Registrant)
By: *IAN R. STUART
----------------------------------------
Ian R. Stuart
Vice President, Chief Financial Officer
Chief Accounting Officer and Controller
The Travelers Life and Annuity Company
Attest:
/s/ Ernest J. Wright
Ernest J. Wright
Assistant Secretary
The Travelers Life and Annuity Company
<PAGE> 92
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Depositor, The
Travelers Life and Annuity Company, has duly caused this post-effective
amendment to this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Hartford, State of
Connecticut, on the 25th day of April, 1996.
THE TRAVELERS LIFE AND ANNUITY COMPANY
(Depositor)
By: *IAN R. STUART
----------------------------------------
Ian R. Stuart
Vice President, Chief Financial Officer
Chief Accounting Officer and Controller
Pursuant to the requirements of the Securities Act of 1933, this post-effective
amendment to this Registration Statement has been signed by the following
persons in the capacities indicated on April 25, 1996.
<TABLE>
<S> <C>
*MICHAEL A. CARPENTER Director and Chairman of the Board,
- ---------------------------------- President and Chief Executive Officer
(Michael A. Carpenter)
*ROBERT I. LIPP Director
- ----------------------------------
(Robert I. Lipp)
*JAY S. FISHAMN Director
- ----------------------------------
(Jay S. Fishman)
*CHARLES O. PRINCE, III Director
- ----------------------------------
(Charles O. Prince, III)
*MARC P. WEILL Director
- ----------------------------------
(Marc P. Weill)
*IRWIN R. ETTINGER Director
- ----------------------------------
(Irwin R. Ettinger)
*DONALD T. DeCARLO Director
- ----------------------------------
(Donald T. DeCarlo)
*IAN R. STUART Vice President, Chief Financial Officer
- ---------------------------------- Chief Accounting Officer and Controller
(Ian R. Stuart)
By: /s/ Ernest J. Wright
----------------------------------
Ernest J. Wright, Attorney-in-Fact
</TABLE>
<PAGE> 93
EXHIBIT INDEX
<TABLE>
<CAPTION>
Attachment
or
Exhibit
No. Description Method of Filing
- ---------- ----------- ----------------
<S> <C>
OPINIONS AND CONSENTS:
A. Consent of Ernest J. Wright, General Counsel, to the
filing of his opinion as an exhibit to this Registration
Statement and to the reference to his opinion under
the caption "Legal Proceedings and Opinion" in the
Prospectus.
B. Consent and Actuarial Opinion of Bennett D. Electronically
Kleinberg, ASA, pertaining to the illustrations
contained in the Prospectus.
C. Consent of Coopers & Lybrand L.L.P., Independent Electronically
Accountants, to the inclusion in this Form S-6 of their
report on the audited financial statements of the Registrant
and their report on the financial statements of The
Travelers Life and Annuity Company contained in this
Registration Statement, and to the reference to such firm
as "Experts" in accounting and auditing.
D. Consent of KPMG Peat Marwick LLP, Independent Certified Public Electronically
Accountants, to the inclusion in this Form S-6 of their
report on the financial statements of The Travelers Life
and Annuity Company contained in this Registration Statement,
and to the reference to such firm as experts under the heading
"Independent Accountants."
The following Exhibits:
1. Resolution of the Board of Directors of The Travelers
Life and Annuity Company authorizing the establishment
of the Registrant. (Incorporated herein by reference to
Exhibit 1 to Pre-Effective Amendment No. 1 to the
Registration Statement on Form S-6, filed August 21, 1995.)
3(a). Form of Distribution Agreement between the Registrant,
The Travelers Life and Annuity Company and Tower
Square Securities, Inc. (Incorporated herein by reference to
Exhibit 3(a) to Pre-Effective Amendment No. 1 to the
Registration Statement on Form S-6, filed August 21, 1995.)
</TABLE>
<PAGE> 94
<TABLE>
<S> <C> <C>
3(b). Specimen Form of Selling Agreement.
5. Variable Life Insurance Policy. (Incorporated herein
by reference to Exhibit 5 to Pre-Effective Amendment
No. 1 to the Registration Statement on Form S-6, filed
August 21, 1995.)
6(a). Charter of The Travelers Life and Annuity Company,
as amended on April 10, 1990. (Incorporated herein
by reference to Exhibit 3(a) to the Registration
Statement on Form N-4, File No. 33-58131, filed via
Edgar on March 17, 1995.)
6(b). By-Laws of The Travelers Life and Annuity Company,
as amended on October 20, 1994. (Incorporated
herein by reference to Exhibit 3(b) to the Registration
Statement on Form N-4, File No. 33-58131, filed via
Edgar on March 17, 1995.)
10. Application for Variable Life Insurance Policy
(to be filed by amendment)
11. Opinion of Ernest J. Wright, General Counsel, regarding Electronically
the legality of securities being registered.
12. Powers of Attorney authorizing Jay S. Fishman or
Ernest J. Wright as signatory for Michael A. Carpenter,
Robert I. Lipp, Charles O. Prince, III, Marc P. Weill,
Irwin R. Ettinger, Donald T. DeCarlo and Christine B.
Mead. (Incorporated herein by reference to Exhibit 12
to Pre-Effective Amendment No. 1 to the Registration
Statement on Form S-6, filed August 21, 1995.)
12(b). Powers of Attorney authorizing Ernest J. Wright or Electronically
Kathleen A. McGah as signatory for Jay S. Fishman and
Ian R. Stuart.
13. Memorandum concerning transfer and redemption
procedures, as required by Rule 6e-3(T)(b)(12)(ii)
(Incorporated herein by reference to Exhibit 13 to Pre-
Effective Amendment No. 1 to the Registration
Statement on Form S-6, filed August 21, 1995.)
</TABLE>
<PAGE> 1
ATTACHMENT B
April 18, 1996
ACTUARIAL OPINION
The illustrations included in the prospectus have been based on assumptions and
charges which are consistent with the provisions of the Vintage Life contract.
The rate structure of the contract has not been designed to make the
relationship between premiums and benefits, as shown in the illustrations,
appear more favorable for contract owners at the ages illustrated than for
contract owners at other ages.
/s/Bennett D. Kleinberg. ASA
Bennett D. Kleinberg, ASA
Actuarial Assistant
<PAGE> 1
ATTACHMENT C
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Post-Effective Amendment No. 1 of the
Registration Statement on Form S-6 of our report dated February 20, 1996, on
our audit of the financial statements of The Travelers Variable Life Insurance
Separate Account One as of December 31, 1995 and for the period October 10,
1995 (date operations commenced) to December 31, 1995, and of our report dated
September 16, 1994, relating to our audit of the statements of operations and
retained earnings and cash flows of The Travelers Life and Annuity Company for
the year ended December 31, 1993. We also consent to the reference to our Firm
as experts in accounting and auditing under the caption "Independent
Accountants''.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
April 18, 1996
<PAGE> 1
ATTACHMENT D
Consent of Independent Certified Public Accountants
The Board of Directors
The Travelers Life and Annuity Company
We consent to the use of our report included herein and to the reference to our
Firm as experts under the heading "Independent Accountants" in the Prospectus.
Our report refers to a change in accounting for investments in accordance with
the provisions of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," in 1994.
/s/ KPMG Peat Marwick
April 18, 1996
<PAGE> 1
EXHIBIT 11
April 23, 1996
The Travelers Life and Annuity Company
The Travelers Variable Life Insurance
Separate Account One
One Tower Square
Hartford, Connecticut 06183
Gentlemen:
With reference to Post-Effective No. 1 to the Registration Statement on
Form S-6 filed by The Travelers Life and Annuity Company and The Travelers
Variable Life Insurance Separate Account One with the Securities and Exchange
Commission covering modified single premium individual variable life insurance
policies, I have examined such documents and such law as I have considered
necessary and appropriate, and on the basis of such examination, it is my
opinion that:
1. The Travelers Life and Annuity Company is duly organized and
existing under the laws of the State of Connecticut and has been
duly authorized to do business and to issue variable life
insurance policies by the Insurance Commissioner of the State of
Connecticut.
2. The Travelers Variable Life Insurance Separate Account One is a
duly authorized and validly existing separate account established
pursuant to Section 38a-433 of the Connecticut General Statutes.
3. The variable life insurance policies covered by the above
Registration Statement, and all pre- and post-effective amendments
relating thereto, have been or will be approved and authorized by
the Insurance Commissioner of the State of Connecticut and when
issued will be valid, legal and binding obligations of The
Travelers Life and Annuity Company and of The Travelers Variable
Life Insurance Separate Account One.
4. Assets of The Travelers Variable Life Insurance Separate Account
One are not chargeable with liabilities arising out of any other
business The Travelers Life and Annuity Company may conduct.
I hereby consent to the filing of this opinion as an exhibit to the
above-referenced Registration Statement and to the reference to this opinion
under the caption "Legal Proceedings and Opinion" in the Prospectus
constituting a part of the Registration Statement.
Very truly yours,
/s/Ernest J. Wright
Ernest J. Wright
General Counsel
Life and Annuities Division
The Travelers Life and Annuity Company
<PAGE> 1
Exhibit 12(b)
THE TRAVELERS VARIABLE LIFE INSURANCE SEPARATE ACCOUNT ONE
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, JAY S. FISHMAN of Haworth, New Jersey, Director of The
Travelers Life and Annuity Company (hereafter the "Company"), do hereby make,
constitute and appoint ERNEST J. WRIGHT, Assistant Secretary of said Company,
and KATHLEEN A. McGAH, Assistant Secretary of said Company, or either one of
them acting alone, my true and lawful attorney-in-fact, for me, and in my name,
place and stead to sign registration statements on behalf of said Company on
Form S-6 or other appropriate Form under the securities Act of 1933 for The
Travelers Variable Life Insurance Separate Account One, a separate account of
the Company dedicated specifically to the funding of variable life insurance
contracts to be offered by said Company, and further, to sign any and all
amendments thereto, including post-effective amendments, that may be filed by
the Company on behalf of said registrant.
IN WITNESS WHEREOF I have hereunto set my hand this 1st day of
April, 1996.
/s/Jay S. Fishman
Director
The Travelers Life and Annuity Company
<PAGE> 2
EXHIBIT 12(b)
THE TRAVELERS VARIABLE LIFE INSURANCE SEPARATE ACCOUNT ONE
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, IAN R. STUART of East Hampton, Connecticut, Vice
President, Chief Financial Officer, Chief Accounting Officer and Controller of
The Travelers Life and Annuity Company (hereafter the "Company"), do hereby
make, constitute and appoint ERNEST J. WRIGHT, Director and Chief Financial
Officer of said Company, and KATHLEEN A. McGAH, Assistant Secretary of said
Company, or either one of them acting alone, my true and lawful
attorney-in-fact, for me, and in my name, place and stead to sign registration
statements on behalf of said Company on Form S-6 or other appropriate Form
under the securities Act of 1933 for The Travelers Variable Life Insurance
Separate Account One, a separate account of the Company dedicated specifically
to the funding of variable life insurance contracts to be offered by said
Company, and further, to sign any and all amendments thereto, including
post-effective amendments, that may be filed by the Company on behalf of said
registrant.
IN WITNESS WHEREOF I have hereunto set my hand this 1st day of
April, 1996.
/s/Ian R. Stuart
Vice President, Chief Financial Officer,
Chief Accounting Officer and Controller
The Travelers Life and Annuity Company
