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VUL-I
Variable Universal
Life Insurance
From Connecticut General
SEMI-ANNUAL REPORT
June 30, 1996
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CIGNA INDIVIDUAL
INSURANCE
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TABLE OF CONTENTS
PRESIDENT'S LETTER
ECONOMIC REVIEW AND OUTLOOK
SCHEDULE OF CHANGES IN UNIT VALUES
FUND REPORTS:
AIM VARIABLE INSURANCE FUNDS, INC. SEMI-ANNUAL REPORTS
AIM V.I. CAPITAL APPRECIATION FUND
AIM V.I. DIVERSIFIED INCOME FUND
AIM V.I. GROWTH FUND
AIM V.I. VALUE FUND
CIGNA VARIABLE PRODUCTS GROUP SEMI-ANNUAL
REPORT
CIGNA VARIABLE PRODUCTS MONEY MARKET FUND
FIDELITY INVESTMENTS
VARIABLE INSURANCE PRODUCTS FUNDS SEMI-ANNUAL REPORT*
EQUITY-INCOME PORTFOLIO
VARIABLE INSURANCE PRODUCTS FUNDS II
SEMI-ANNUAL REPORT*
INVESTMENT GRADE BOND PORTFOLIO
ASSET MANAGER PORTFOLIO
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST-SM-
SEMI-ANNUAL REPORTS
MFS TOTAL RETURN SERIES
MFS UTILITIES SERIES
MFS WORLD GOVERNMENT SERIES
OCC ACCUMULATION TRUST SEMI-ANNUAL REPORT
SMALL CAP PORTFOLIO
GLOBAL EQUITY PORTFOLIO
MANAGED PORTFOLIO
TEMPLETON VARIABLE PRODUCT SERIES FUND
SEMI-ANNUAL REPORTS
TEMPLETON STOCK FUND
TEMPLETON INTERNATIONAL FUND
TEMPLETON ASSET ALLOCATION FUND
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* PLEASE NOTE THAT THE FIDELITY MATERIAL CONTAINED IN THIS
SEMI-ANNUAL REPORT DISCUSSES FUNDS NOT AVAILABLE TO FUND VUL-I
VARIABLE UNIVERSAL LIFE CONTRACTS.
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[PHOTO] [LOGO]
THOMAS C. JONES
President
900 Cottage Grove Road
Routing S-249
Hartford, CT 06152-2249
Dear Client:
We are pleased to provide you with this report on the performance of the VUL-I
Variable Universal Life Insurance product for the six-month period ended June
30, 1996.
In addition to a summary of sub-account performances since inception, we've also
included reports for each of the portfolio options in the product, and we've
provided a wide-ranging interview with Edward Guay, CIGNA's chief economist. The
interview discusses significant national and international economic trends
affecting key financial markets, and I encourage you to take the time to read it
carefully.
Like the report itself, the interview reflects our commitment to meet your
expectations and needs -- a commitment we feel is especially important in
today's environment of continuous and rapid change.
Through your ownership of a VUL-I policy, you've shown great confidence in our
organization. We plan to honor that confidence by keeping you fully informed
about your purchase and by maintaining our focus on key priorities designed to
find superior solutions to today's complex financial planning problems. As an
organization, we're dedicated to:
- Providing COMPETITIVELY SUPERIOR PRODUCTS that will deliver outstanding
value and help assure our clients' long-term financial well-being.
- Adhering to the highest standards of ethical and professional conduct by
supplying COMPREHENSIVE PRODUCT DISCLOSURE that helps clients fully
understand their insurance and investment purchases and allows them to
intelligently evaluate the performance of our products.
- Providing CONSISTENTLY SUPERIOR SERVICE from the time of sale through the
life of the contract, making it as easy as possible to do business with
us.
- And committing ourselves to helping you achieve FINANCIAL SECURITY --
which has been a CIGNA tradition for more than 125 years.
These core priorities create a sense of common purpose and direction for our
organization, allowing us to concentrate our resources and efforts to
effectively and efficiently meet your long-term financial planning needs. We
appreciate your business and will continue to do our best to maintain your
loyalty and trust.
If you have any questions or comments about this report -- or if our client
services representatives can assist you in any way -- please feel free to call
our Annuity and Variable Life Services Center at 1.800.552.9898, Monday through
Friday, 8AM to 7PM Eastern time.
Thank you again for choosing CIGNA as your financial planning partner.
Sincerely,
[SIG]
Thomas C. Jones
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ECONOMIC REVIEW AND OUTLOOK
AN INTERVIEW WITH EDWARD GUAY, CHIEF ECONOMIST, CIGNA CORPORATION
WHAT MAJOR DEVELOPMENTS CHARACTERIZED THE U.S. ECONOMY IN THE FIRST HALF
OF 1996?
One key development was that the broad inventory correction that weakened
economic activity during 1995 appears to have ended for most industries during
the first half of this year. That is, having previously cut production below
normal levels in order to work off excess inventory, the majority of industries
raised production back to normal levels by mid-1996. This contributed to total
economic growth of slightly over 3% for the half, which was somewhat stronger
than we had been expecting and considerably stronger than the consensus view.
In addition, there was a reversal of the consumer slowdown that contributed to
weakened economic activity last year. Consumer and housing activity were strong
enough during the first half to lift production, employment and incomes. There
was a strong rebound in residential construction activity and auto sales,
accompanied by a similar rebound in general merchandise retailing. There were
signs of renewed labor market tightness, renewed food and energy inflation, and
a return of above-trend economic strength.
HOW DID THESE TRENDS TEND TO AFFECT FINANCIAL MARKETS?
As sentiment about real economic activity improved, inflation fears also
returned, as did concerns about an impending shift in Federal Reserve policy.
Between December and March, the change in market sentiment produced a large and
abrupt change in the fixed income markets. The yield curve steepened
significantly, meaning that long-term rates increased more than short-term
rates. Long Treasury bond yields rose from 6% last December to levels above 7%
by early June, which tended to drive down bond prices.
DID THE SITUATION IN FIXED INCOME MARKETS HAVE AN IMPACT ON EQUITY MARKETS?
Yes, which explains why equity market performance weakened as the first half
came to a conclusion. Following the trend of the past decade, equity markets
tended to move in concert with fixed income markets rather than being driven by
corporate profits. Rising interest rate concerns during the second quarter
limited equity market advances and increased fears of an impending market
correction. The Standard & Poor's Composite 500 Index appreciated by 3.9% during
the second quarter, while the Dow Jones Industrials rose by only 1.2%. Although
the performance of the NASDAQ Index was much more choppy because of technology
stock corrections, it managed a 7.6% gain during the quarter.
WHAT WERE SOME OF THE KEY DEVELOPMENTS ON THE INTERNATIONAL SCENE?
Foreign markets were somewhat variable because of certain technical factors and
concerns about policy shifts. The equity market in the United Kingdom was flat
in local currency while the Japanese and German equity markets were up slightly.
In dollar terms, the major foreign stock markets generally produced returns in
line with the S&P 500 and the Dow Jones Industrial Average. There are still
concerns about the strength of the economic recoveries in Japan and Europe. The
strengthening of these major foreign economies is important to the U.S. because
it can help boost our export sales, which have become an increasingly
significant component of U.S. economic growth in recent years.
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IN GENERAL, HOW WOULD YOU DESCRIBE THE ECONOMIC SITUATION AT THE CLOSE OF THE
FIRST HALF?
Although there was some turmoil in financial markets as the first half ended,
the range of economic and financial data was consistent with the "soft landing"
view. This means that the economy appears to be slowing from a growth rate that
is too high to a stable long-term growth rate without actually falling into a
recession. This is one of the few occasions in post-war history, along with 1962
and 1984, when the Federal Reserve apparently has been able to slow the economy
effectively without triggering a recession. On many other occasions, authorities
responded belatedly to inflation, to speculation and to other excesses in the
economy, and then responded in a very heavy-handed way so that the economy
shifted dramatically from boom to recession.
SINCE THE ECONOMY APPARENTLY HAS ACHIEVED A SOFT LANDING, DOES THIS MEAN THAT
THERE IS CLEAR SAILING AHEAD FOR FINANCIAL MARKETS IN THE SECOND HALF?
The outlook is generally positive, but the Fed and the financial markets still
face some significant challenges. The economy appears to be operating near
potential with respect to both capacity and skilled labor. Thus, "shocks" in
significant segments of the economy and foreign demands are more likely to move
the Fed to tighten policy somewhat -- that is, to raise interest rates rather
than to lower them. A potential agricultural shock is developing because of
adverse weather conditions in parts of the country, and energy shocks are also
possible during the coming year as world economic and trade growth accelerate
and stimulate world demand for refined product.
A key concern at the Fed is that food and energy price increases could translate
into wage increases in a tight labor market. Unlike food and energy price
increases, which tend to be temporary in nature, wage increases tend to be
permanent and become a base for further increases in succeeding years. The Fed
does not want to take the risk of supporting an excessively strong economy for
too long, because if wage inflation becomes a serious problem it's very
difficult to control and could lead to widespread inflation, which is bad for
almost everyone.
WHAT RATE OF GROWTH DO YOU FORESEE FOR THE U.S. ECONOMY IN THE SECOND HALF OF
1996 AND INTO 1997, AND HOW ARE THE FINANCIAL MARKETS LIKELY TO BE AFFECTED?
Growth is likely to slow somewhat in the second half, possibly holding at about
3% in the third quarter and then dropping to 2.75% or 2.5% in the fourth
quarter. Assuming that only modest changes occur in major "background" issues
such as food, energy, foreign growth, political shifts, and monetary policy in
Japan and Europe, the U.S. should experience at least another 12 to 18 months of
moderate economic growth with contained inflation. That should permit U.S.
financial markets to operate within a wide, but acceptable, trading range. But
it's important to note that the markets are likely to react with considerable
volatility to significant negative developments in any of the above background
issues.
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VUL-I VARIABLE UNIVERSAL LIFE
SCHEDULE OF CHANGES IN UNIT VALUES
PERIOD ENDED JUNE 30, 1996 (UNAUDITED)
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<CAPTION>
DATE
INITIALLY
FUNDED ACCUMULATION 6/30/96 % CHANGE
(INCEPTION UNIT VALUE ACCUMULATION SINCE
SUB-ACCOUNT DATE) AT INCEPTION UNIT VALUE INCEPTION
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund 5/6/96 10.000000 10.020903 0.2
AIM V.I. Diversified Income Fund 5/22/96 10.000000 10.110763 1.1
AIM V.I. Growth Fund 5/22/96 10.000000 9.706252 -2.9
AIM V.I. Value Fund 5/6/96 10.000000 10.436057 4.4
CIGNA Variable Products Money Market Fund 5/6/96 10.000000 10.062458 0.6
Fidelity VIP Equity-Income Portfolio 5/6/96 10.000000 10.187164 1.9
Fidelity VIP II: Asset Manager Portfolio * * * *
Fidelity VIP II: Investment Grade Bond Portfolio 5/6/96 10.000000 10.171317 1.7
MFS Total Return Series 5/28/96 10.000000 9.993234 -0.1
MFS Utilities Series * * * *
MFS World Government Series 5/6/96 10.000000 10.108543 1.1
OCC Global Equity Portfolio 5/6/96 10.000000 10.217309 2.2
OCC Managed Portfolio 5/28/96 10.000000 9.897678 -1.0
OCC Small Cap Portfolio 5/21/96 10.000000 9.686927 -3.1
Templeton Asset Accumulation Fund 5/6/96 10.000000 10.195653 2.0
Templeton International Fund 5/21/96 10.000000 10.139651 1.4
Templeton Stock Fund 5/22/96 10.000000 10.060100 0.6
</TABLE>
* As of 6/30/96, no premium payments had yet been allocated to these funds.
Accumulation Unit Values are net of charges against the assets of the Variable
Account for the assumption of mortality and expense risks and for administrative
expenses.
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The mutual fund semiannual reports are incorporated herein by reference. Each of
them has been electronically filed with the Securities and Exchange Commission
in connection with the named entity's status as a registered investment company
under the Investment Company Act of 1940.
1. AIM Variable Insurance Funds, Inc. SemiAnnual Report, June 30, 1996,
consisting of 56 partially numbered pages. Filed: September 4, 1996, Form type
N-30-D, Registration Statement 811-7452.
2. CIGNA Variable Products Group Money Market Fund SemiAnnual Report, June
30, 1996, consisting of 8 partially numbered pages. Filed: August 22, 1996,
Form Type N-30B-2, Registration Statement 811-5480.
3. Variable Insurance Products Fund SemiAnnual Report, June 30, 1996,
consisting of 50 partially numbered pages. Filed: August 29, 1996, Form Type N-
30D, Registration Statement 811-3329
and
Variable Insurance Products Fund II SemiAnnual Report, June 30, 1996,
consisting of 62 partially numbered pages. Filed August 29, 1996, For Type
N-30D, Registration Statement 811-5511.
4. MFS-Registered Trademark-Variable Insurance Trust
3(a)MFS-Registered Trademark-Total Return Series SemiAnnual Report,
June 30, 1996, consisting of 19 partially numbered pages
3(b)MFS-Registered Trademark-Utilities Series SemiAnnual Report,
June 30, 1996, consisting of 16 partially numbered pages
3(c)MFS-Registered Trademark-World Governments Series SemiAnnual
Report, June 30, 1996, consisting of 18 partially numbered pages
Filed August 29, 1996, Form Type N-30D, Registration Statement 811-
8326
5. OCC Accumulation Trust SemiAnnual Report, June 30, 1996, consisting of 40
unnumbered pages. Filed September 3, 1996, Form Type N-30D, Registration
Statement 811-8512
6. Templeton Variable Product Series Fund SemiAnnual Report, June 30, 1996,
consisting of 35 partially numbered pages. Filed August 27, 1996, Form Type
N-30D, Registration Statement 811-5479.
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This report may be distributed only to current contract holders or to persons
who have received a current VUL-I Variable Life Prospectus.
[LOGO] National Distributor:
CIGNA Financial Advisors
900 Cottage Grove Road
Bloomfield, CT 06002
CIGNA Individual Insurance is a
division of CIGNA Corporation
#556567 6/96
