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THE BUSINESS OF LIFE
VUL-I
VARIABLE UNIVERSAL
LIFE INSURANCE
FROM CONNECTICUT GENERAL
SEMI-ANNUAL REPORT
JUNE 30, 1997
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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 FUND, INC. SEMI-ANNUAL REPORT
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 REPORTS
CIGNA VP MONEY MARKET FUND
CIGNA VP S&P 500 INDEX FUND
FIDELITY INVESTMENTS
VARIABLE INSURANCE PRODUCTS FUND SEMI-ANNUAL REPORT
EQUITY-INCOME PORTFOLIO
VARIABLE INSURANCE PRODUCTS FUND II
SEMI-ANNUAL REPORTS
ASSET MANAGER PORTFOLIO
INVESTMENT GRADE BOND PORTFOLIO
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST-SM-
SEMI-ANNUAL REPORTS
MFS EMERGING GROWTH SERIES
MFS TOTAL RETURN SERIES
MFS UTILITIES SERIES
MFS WORLD GOVERNMENTS SERIES
OCC ACCUMULATION TRUST SEMI-ANNUAL REPORTS
GLOBAL EQUITY PORTFOLIO
MANAGED PORTFOLIO
SMALL CAP PORTFOLIO
TEMPLETON VARIABLE PRODUCTS SERIES FUND
SEMI-ANNUAL REPORT
TEMPLETON STOCK FUND
TEMPLETON INTERNATIONAL FUND
TEMPLETON ASSET ALLOCATION FUND
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[PHOTO] [LOGO]
THOMAS C. JONES
President
900 Cottage Grove Road
Routing S-249
Hartford, CT 06152-2249
Dear Client:
It is a pleasure 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, 1997.
The report includes a summary of sub-account performance for the past six months
and financial data for each of the portfolio options. We are also including an
informative interview with Edward Guay, CIGNA's chief economist, which discusses
the results for the first half of the year and an outlook for the remainder of
the year. I hope you will take a few minutes to read it carefully.
I would also like to inform you that Lincoln National Corporation (LNC) agreed
in late July to purchase CIGNA's individual life insurance and annuities
businesses. We expect that transaction, which is subject to regulatory approval,
to close by the end of the year.
As a current VUL-I policy holder, we recognize that you may have questions about
this agreement and how it will affect your policy and your relationship with
CIGNA. I want to assure you that this is a positive step forward for both
organizations -- and an exciting development for our clients.
First and foremost, your life insurance policy will continue to be honored by
Connecticut General in accordance with the policy terms. You will always have
the right to remain a Connecticut General policyholder, and your policy will
continue to be backed by the financial strength and integrity of Connecticut
General.
In addition, you will continue to receive the same level of exceptional service.
And because the combination brings together CIGNA's premier life insurance and
financial planning expertise with Lincoln National Life Insurance Company's
leadership position in annuities and investment products, you will have access
to a broader range of product and service solutions to meet your complex estate
and financial planning needs.
I firmly believe this is an outstanding development for clients. If you have
questions about the agreement, or about your contract, you may call our Annuity
and Variable Life Service Center at 1.800.552.9898, Monday through Friday, 8
a.m. to 7 p.m. Eastern time.
As always, I want to thank you for your business, and I look forward to working
with you to develop the appropriate customized plan to meet your changing
financial planning needs.
Sincerely,
[SIGNATURE]
Thomas C. Jones
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ECONOMIC REVIEW AND OUTLOOK
AN INTERVIEW WITH EDWARD GUAY, CHIEF ECONOMIST, CIGNA CORPORATION
WHAT WERE THE MAJOR DEVELOPMENTS THAT CHARACTERIZED THE ECONOMIC SCENE IN THE
FIRST HALF OF 1997?
After six months of very strong growth, the economy slowed abruptly midway
through the first half. Both consumers and domestic businesses paused almost
simultaneously. Retail sales stagnated after strong gains during both the fourth
quarter of 1996 and the first quarter of this year. Housing construction also
paused in most of the country. Consumers appeared to be reacting prudently to
higher levels of debt incurred previously. The strong use of credit evident in
earlier periods was suspended during the second quarter as consumers paused for
income gains to catch up with spending, and to restore savings rates.
Business also appeared to respond quickly and effectively to the slowing
economy. After consumer sales eased in March and April, business cut consumer
goods production in April and May to maintain inventory at levels close to
recent lows relative to sales. Business equipment production continued to steam
ahead, but the production of intermediate products such as office supplies also
flattened during the spring and early summer.
WHAT IS THE EMPLOYMENT SITUATION IN THE U.S. AT THIS TIME?
Because overall production remained strong, with exports and capital goods still
pulling the economy upward, employment also remained strong. At one point during
the second quarter, employment gains slowed to rates of growth in line with
long-term potential economic growth of 2.75%. But as the first half ended,
employment gains had picked up enough to suggest an underlying rate of growth
modestly above potential moving into the second half. If, as we suspect, the
consumer pause was a pause to refresh rather than a sign of consumer burnout,
both the consumer and business sectors should re-accelerate during the second
half.
A resumption of normal sales growth in coming months should lead quickly to
rising orders and to strong demand for workers. The labor market remained
relatively tight through the second quarter and the demand for new graduates was
the strongest in almost 10 years.
YOU MENTIONED THE ROLE OF EXPORTS IN PULLING THE ECONOMY UPWARD. CAN YOU
ELABORATE ON THAT POINT?
The limited data available suggest that exports played a strong role during the
second quarter. Stronger growth in Latin America and a modest recovery in Europe
appear to have been important to that outcome. The export recovery appeared to
have been broadly based across industries and across regions, with key roles
played by technology equipment and both technology and entertainment software.
World liquidity growth and recoveries from past regional problems or from
national austerity programs aided the export expansion.
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WHAT WERE THE KEY TRENDS IN FINANCIAL MARKETS?
The financial markets, including the currency market, were somewhat volatile
during the second quarter. Stock market weakness carried over from the first
quarter in the first two weeks of April. Then, the market surged by 20% through
the remaining weeks of the first half to successive new highs. The catalyst for
the market turnaround was an interest rate decline. Rates fell from the April
peaks as slower growth and lower inflation deferred further tightening by the
Federal Reserve. At its rate-setting session in July the Fed showed continued
satisfaction with economic conditions and refrained from boosting rates, which
could help to sustain stock market growth.
The volatility in the currency market was primarily focused on the yen - dollar
rate. Comments by Japanese Ministry of Finance spokesmen tended to weaken the
dollar relative to the yen, but the dollar remained strong relative to many
other currencies, particularly those in continental Europe. The strength of the
dollar relative to most currencies reflects widespread confidence in the
underlying strength of the U.S. economy.
HOW WERE RESULTS IN INVESTMENT MARKETS OUTSIDE THE U.S.?
Results were mixed in other investment markets. European stocks generally
improved and were reasonably competitive with U.S. stocks. Japanese stocks
remained bound within a fairly narrow range, while emerging markets performance
varied from very weak to very strong. Real estate continued to improve nearly
everywhere outside of Southeast Asia. It was generally a good period for
investors in the U.S. and around the world.
WHAT IS THE ECONOMIC OUTLOOK HEADING INTO THE SECOND HALF OF 1997?
The outlook is quite positive. The economy has adjusted better than we thought
it would to stronger growth in the U.S. and in the world. Inflation has remained
low and the economy has responded fairly efficiently to temporary market
disruptions in almost any market, from grains and oil through consumer finished
goods, traditional capital goods, and technology products.
The efficient adjustment has been aided by the continuing slack in other
economies in the industrial world, by deregulation of many domestic and foreign
industries, and by the technological progress of recent years. With the
exception of economic slack, all of these factors should remain important for
the foreseeable future.
During the past year, the U.S. growth rate has been more than a percentage point
above the 2.75% that we estimate to be the long-term potential growth rate. This
has been done without increasing inflation because the U.S. has been able to
"rent" spare capacity and labor from countries operating below potential,
including Canada (our largest trading partner), Europe and Japan. During the
next 18 months we expect the industrial countries to significantly close the
gaps between actual and potential output. That should produce strong export
gains for the U.S. and offset sluggish consumer and housing performance over the
same period.
In general, it would appear that the next year or two should be good for
business and for prudent, diversified investors.
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VUL-I VARIABLE UNIVERSAL LIFE
SCHEDULE OF CHANGES IN UNIT VALUES
PERIOD ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
DATE INITIALLY 12/31/96 6/30/97
FUNDED ACCUMULATION ACCUMULATION
SUB-ACCOUNT (INCEPTION DATE) UNIT VALUE UNIT VALUE % CHANGE
<S> <C> <C> <C> <C>
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AIM V.I. Capital Appreciation Fund 5/6/96 $ 10.486698 $ 11.316233 7.9
AIM V.I. Diversified Income Fund 5/22/96 10.868038 11.129086 2.4
AIM V.I. Growth Fund 5/22/96 10.546548 12.134057 15.1
AIM V.I. Value Fund 5/6/96 11.316054 13.070500 15.5
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CIGNA VP Money Market Fund 5/6/96 10.274144 10.490954 2.1
CIGNA VP S&P 500 Index Fund 5/23/97 10.000000* 10.453511 4.5
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Fidelity VIP Equity-Income Portfolio 5/6/96 10.953184 12.698637 15.9
Fidelity VIP II Asset Manager Portfolio 7/1/96 10.747301 11.904414 10.8
Fidelity VIP II Investment Grade Bond
Portfolio 5/6/96 10.615798 10.870962 2.4
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MFS Total Return Series 5/28/96 10.818148 12.001615 10.9
MFS Utilities Series 8/19/96 11.210158 12.465683 11.2
MFS World Government Series 5/6/96 10.546056 10.324840 -2.1
MFS Emerging Growth Series 5/23/97 10.000000* 10.522512 5.2
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OCC Global Equity Portfolio 5/6/96 10.865525 12.343240 13.6
OCC Managed Portfolio 5/28/96 11.116268 12.620828 13.5
OCC Small Cap Portfolio 5/21/96 10.558285 12.056121 14.2
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Templeton Asset Allocation Fund 5/6/96 11.154447 12.812156 14.9
Templeton International Fund 5/21/96 11.295688 12.872029 14.0
Templeton Stock Fund 5/22/96 11.095968 12.679937 14.3
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</TABLE>
* Accumulation Unit Value as of Inception Date, which was later than 12/31/96
Accumulation Unit Values are net of charges against the assets of the Variable
Account for the assumption of mortality and expense risks.
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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, 1997,
consisting of 49 partially numbered pages. Filed: September 4, 1997, Form
Type N-30-D, Registration Statement 811-7452.
2. CIGNA Variable Products Group
2(a) Money Market Fund SemiAnnual Report, June 30, 1997, consisting of 9
partially numbered pages.
2(b) S&P 500 Index Fund SemiAnnual Report, June 30, 1997, consisting of 18
partially numbered pages.
Filed: August 21, 1997, Form Type N-30D, Registration Statement 811-5480.
3. Variable Insurance Products Fund
3(a) Equity-Income Portfolio SemiAnnual Report, June 30, 1997, consisting
of 16 partially numbered pages.
Filed: August 21, 1997, Form Type N-30D, Registration Statement 811-3329.
4. Variable Insurance Products Fund II
4(a) Asset Manager Portfolio SemiAnnual Report, June 30, 1997, consisting
of 24 partially numbered pages.
4(b) Investment Grade Bond Portfolio SemiAnnual Report, June 30, 1997,
consisting of 14 partially numbered pages.
Filed: August 21, 1997, Form Type N-30D, Registration Statement 811-5511
5. MFS - Registered Trademark - Variable Insurance Trust
5(a) MFS - Registered Trademark - Emerging Growth Series Series
SemiAnnual Report, June 30, 1997, consisting of 18 partially numbered
pages.
5(b) MFS - Registered Trademark - Total Return Series SemiAnnual
Report, June 30, 1997, consisting of 22 partially numbered
pages.
5(c) MFS - Registered Trademark - Utilities Series SemiAnnual Report,
June 30, 1997, consisting of 19 partially numbered pages.
5(d) MFS - Registered Trademark - World Governments Series SemiAnnual
Report, June 30, 1997, consisting of 18 partially numbered pages.
Filed: August 28, 1997, Form Type N-30D, Registration Statement 811-8326
6. OCC Accumulation Trust SemiAnnual Report, June 30, 1997, consisting of 46
unnumbered pages. Filed August 27, 1997, Form Type N-30-D, Registration
Statement 811-8512.
7. Templeton Variable Product Series Fund SemiAnnual Report, June 30, 1997,
consisting of 48 partially numbered pages. Filed September 04, 1997, 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
Hartford, CT 06152
CIGNA Individual Insurance
is a division of CIGNA.
544060 8/97
